207 
Survey estimates (in lieu of, or in combination with 
the Current Population Survey estimates, as rec-
ommended), provided that any such transition is im-
plemented in a manner that is designed to avoid ad-
verse impacts upon States with approved State child 
health plans under this title.’’. 
SEC. 605. DEFICIT REDUCTION ACT TECHNICAL CORREC-
TIONS. 
(a) DETERMINATION OF MEDICAID PATIENT DAYS 
FOR DSH COMPUTATION.— 
(1) IN GENERAL.—Section 5002 of the Deficit 
Reduction Act of 2005 (Public Law 109–171, 120 
Stat. 31) is amended by adding at the end the fol-
lowing new subsection: 
‘‘(c) DETERMINATION OF MEDICAID PATIENT DAYS 
FOR DISCHARGES OCCURRING ON OR AFTER THE DATE 
OF ENACTMENT OF THIS SUBSECTION.—For discharges 
occurring on or after the date of enactment of this sub-
section, 
in 
determining 
under 
section 
1886(d)(5)(F)(vi)(II) of the Social Security Act (42 
U.S.C. 1395ww(d)(5)(F)(vi)(II)) the number of the hos-
pital’s patient days for the applicable cost reporting period 
which consist of patients who (for such days) were eligible 
for medical assistance under a State plan approved under 
title XIX, the Secretary shall include patient days of pa-
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208 
tients who are eligible to receive inpatient hospital benefits 
under a demonstration project approved under title XI 
and shall not include patient days under such a project 
if the patient is not eligible to receive inpatient hospital 
benefits under the project.’’. 
(2) CONFORMING AMENDMENT.—The last sen-
tence of section 1886(d)(5)(F)(vi) of the Social Se-
curity Act (42 U.S.C. 1395ww(d)(5)(F)(vi)), as 
added by section 5002(a) of the Deficit Reduction 
Act of 2005 (Public Law 109–171), is amended by 
striking ‘‘In determining under subclause (II)’’ and 
inserting ‘‘Subject to section 5002(c) of the Deficit 
Reduction Act of 2005, in determining under sub-
clause (II)’’. 
(3) EFFECTIVE DATE.—The amendments made 
by this subsection shall take effect on the date of en-
actment of this Act. 
(b) STATE FLEXIBILITY IN BENEFIT PACKAGES.— 
(1) CLARIFICATION OF REQUIREMENT TO PRO-
VIDE
EPSDT
SERVICES
FOR
ALL
CHILDREN
IN 
BENCHMARK
BENEFIT
PACKAGES.—Section 
1937(a)(1) (42 U.S.C. 1396u–7(a)(1)), as inserted 
by section 6044(a) of the Deficit Reduction Act of 
2005 (Public Law 109–171, 120 Stat. 88), is 
amended— 
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209 
(A) in subparagraph (A)— 
(i) in the matter before clause (i), by 
striking ‘‘enrollment in coverage that pro-
vides’’ and inserting ‘‘coverage that’’; 
(ii) in clause (i), by inserting ‘‘pro-
vides’’ after ‘‘(i)’’; and 
(iii) by striking clause (ii) and insert-
ing the following: 
‘‘(ii) for any individual described in 
section 1905(a)(4)(B) who is eligible under 
the State plan in accordance with para-
graphs (10) and (17) of section 1902(a), 
consists of the items and services described 
in section 1905(a)(4)(B) (relating to early 
and periodic screening, diagnostic, and 
treatment 
services 
defined 
in 
section 
1905(r)) and provided in accordance with 
the requirements of section 1902(a)(43).’’; 
(B) in subparagraph (C)— 
(i) in the heading, by striking ‘‘WRAP- 
AROUND’’ and inserting ‘‘ADDITIONAL’’; 
and 
(ii) by striking ‘‘wrap-around or’’; and 
(C) by adding at the end the following new 
subparagraph: 
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210 
‘‘(E) RULE OF CONSTRUCTION.—Nothing 
in this paragraph shall be construed as— 
‘‘(i) requiring a State to offer all or 
any of the items and services required by 
subparagraph (A)(ii) through an issuer of 
benchmark coverage described in sub-
section (b)(1) or benchmark equivalent 
coverage described in subsection (b)(2); or 
‘‘(ii) preventing a State from offering 
all or any of the items and services re-
quired by subparagraph (A)(ii) through an 
issuer of benchmark coverage described in 
subsection (b)(1) or benchmark equivalent 
coverage described in subsection (b)(2).’’. 
(2) CORRECTION OF REFERENCE TO CHILDREN 
IN FOSTER CARE RECEIVING CHILD WELFARE SERV-
ICES.—Section 
1937(a)(2)(B)(viii) 
(42 
U.S.C. 
1396u–7(a)(2)(B)(viii), 
as 
inserted 
by 
section 
6044(a) of the Deficit Reduction Act of 2005, is 
amended by striking ‘‘aid or assistance is made 
available under part B of title IV to children in fos-
ter care and individuals’’ and inserting ‘‘child wel-
fare services are made available under part B of title 
IV on the basis of being a child in foster care or’’. 
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211 
(3) TRANSPARENCY.—Section 1937 (42 U.S.C. 
1396u–7), as inserted by section 6044(a) of the Def-
icit Reduction Act of 2005, is amended by adding at 
the end the following: 
‘‘(c) PUBLICATION OF PROVISIONS AFFECTED.—Not 
later than 30 days after the date the Secretary approves 
a State plan amendment to provide benchmark benefits 
in accordance with subsections (a) and (b), the Secretary 
shall publish in the Federal Register and on the Internet 
website of the Centers for Medicare & Medicaid Services, 
a list of the provisions of this title that the Secretary has 
determined do not apply in order to enable the State to 
carry out such plan amendment and the reason for each 
such determination.’’. 
(4) EFFECTIVE DATE.—The amendments made 
by this subsection shall take effect as if included in 
the amendment made by section 6044(a) of the Def-
icit Reduction Act of 2005. 
SEC. 606. ELIMINATION OF CONFUSING PROGRAM REF-
ERENCES. 
Section 704 of the Medicare, Medicaid, and SCHIP 
Balanced Budget Refinement Act of 1999, as enacted into 
law by division B of Public Law 106–113 (113 Stat. 
1501A–402) is repealed. 
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212 
SEC. 607. MENTAL HEALTH PARITY IN CHIP PLANS. 
(a) ASSURANCE OF PARITY.—Section 2103(c) (42 
U.S.C. 1397cc(c)) is amended— 
(1) by redesignating paragraph (5) as para-
graph (6); and 
(2) by inserting after paragraph (4), the fol-
lowing: 
‘‘(5) MENTAL HEALTH SERVICES PARITY.— 
‘‘(A) IN GENERAL.—In the case of a State 
child health plan that provides both medical 
and surgical benefits and mental health or sub-
stance abuse benefits, such plan shall ensure 
that the financial requirements and treatment 
limitations applicable to such mental health or 
substance abuse benefits are no more restrictive 
than the financial requirements and treatment 
limitations applied to substantially all medical 
and surgical benefits covered by the plan. 
‘‘(B) DEEMED COMPLIANCE.—To the ex-
tent that a State child health plan includes cov-
erage with respect to an individual described in 
section 1905(a)(4)(B) and covered under the 
State plan under section 1902(a)(10)(A) of the 
services described in section 1905(a)(4)(B) (re-
lating to early and periodic screening, diag-
nostic, and treatment services defined in section 
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213 
1905(r)) and provided in accordance with sec-
tion 1902(a)(43), such plan shall be deemed to 
satisfy the requirements of subparagraph (A).’’. 
(b) CONFORMING AMENDMENTS.—Section 2103 (42 
U.S.C. 1397cc) is amended— 
(1) in subsection (a), in the matter preceding 
paragraph (1), by striking ‘‘subsection (c)(5)’’ and 
inserting ‘‘paragraphs (5) and (6) of subsection (c)’’; 
and 
(2) in subsection (c)(2), by striking subpara-
graph (B) and redesignating subparagraphs (C) and 
(D) as subparagraphs (B) and (C), respectively. 
SEC. 608. DENTAL HEALTH GRANTS. 
Title XXI (42 U.S.C. 1397aa et seq.), as amended 
by section 201, is amended by adding at the end the fol-
lowing: 
‘‘SEC. 2114. DENTAL HEALTH GRANTS. 
‘‘(a) AUTHORITY TO AWARD GRANTS.— 
‘‘(1) IN GENERAL.—From the amount appro-
priated under subsection (e), the Secretary shall 
award grants from amounts to eligible States for the 
purpose of carrying out programs and activities that 
are designed to improve the availability of dental 
services and strengthen dental coverage for targeted 
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214 
low-income children enrolled in State child health 
plans. 
‘‘(2) ELIGIBLE
STATE.—In this section, the 
term ‘eligible State’ means a State with an approved 
State child health plan under this title that submits 
an application under subsection (b) that is approved 
by Secretary. 
‘‘(b) APPLICATION.—An eligible State that desires to 
receive a grant under this paragraph shall submit an ap-
plication to the Secretary in such form and manner, and 
containing such information, as the Secretary may re-
quire. Such application shall include— 
‘‘(1) a detailed description of the programs and 
activities proposed to be conducted with funds 
awarded under the grant; 
‘‘(2) quality and outcomes performance meas-
ures to evaluate the effectiveness of such activities; 
and 
‘‘(3) an assurance that the State shall— 
‘‘(A) conduct an assessment of the effec-
tiveness of such activities against such perform-
ance measures; and 
‘‘(B) cooperate with the collection and re-
porting of data and other information deter-
mined as a result of conducting such assess-
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215 
ments to the Secretary, in such form and man-
ner as the Secretary shall require. 
‘‘(c) MAINTENANCE
OF
EFFORT
FOR
STATES 
AWARDED GRANTS; NO STATE MATCH REQUIRED.—In 
the case of a State that is awarded a grant under this 
section— 
‘‘(1) the State share of funds expended for den-
tal services under the State child health plan shall 
not be less than the State share of such funds ex-
pended in the fiscal year preceding the first fiscal 
year for which the grant is awarded; and 
‘‘(2) no State matching funds shall be required 
for the State to receive a grant under this section. 
‘‘(d) ANNUAL REPORT.—The Secretary shall submit 
an annual report to the appropriate committees of Con-
gress regarding the grants awarded under this section that 
includes— 
‘‘(1) State specific descriptions of the programs 
and activities conducted with funds awarded under 
such grants; and 
‘‘(2) information regarding the assessments re-
quired of States under subsection (b)(3). 
‘‘(e) APPROPRIATION.—Out of any funds in the 
Treasury not otherwise appropriated, there is appro-
priated, $200,000,000 for the period of fiscal years 2008 
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216 
through 2012, to remain available until expended, for the 
purpose of awarding grants to States under this section. 
Amounts appropriated and paid under the authority of 
this section shall be in addition to amounts appropriated 
under section 2104 and paid to States in accordance with 
section 2105.’’. 
SEC. 609. APPLICATION OF PROSPECTIVE PAYMENT SYS-
TEM FOR SERVICES PROVIDED BY FEDER-
ALLY-QUALIFIED 
HEALTH 
CENTERS 
AND 
RURAL HEALTH CLINICS. 
(a) APPLICATION OF PROSPECTIVE PAYMENT SYS-
TEM.— 
(1) IN
GENERAL.—Section 2107(e)(1) (42 
U.S.C. 1397gg(e)(1)), as amended by sections 
204(b) and 503, is amended by inserting after sub-
paragraph (A) the following new subparagraph (and 
redesignating the succeeding subparagraphs accord-
ingly): 
‘‘(B) Section 1902(bb) (relating to pay-
ment for services provided by Federally-quali-
fied health centers and rural health clinics).’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall apply to services provided on 
or after October 1, 2008. 
(b) TRANSITION GRANTS.— 
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217 
(1) APPROPRIATION.—Out of any funds in the 
Treasury not otherwise appropriated, there is appro-
priated to the Secretary for fiscal year 2008, 
$5,000,000, to remain available until expended, for 
the purpose of awarding grants to States with State 
child health plans under CHIP that are operated 
separately from the State Medicaid plan under title 
XIX of the Social Security Act (including any waiver 
of such plan), or in combination with the State Med-
icaid plan, for expenditures related to transitioning 
to compliance with the requirement of section 
2107(e)(1)(B) of the Social Security Act (as added 
by subsection (a)) to apply the prospective payment 
system established under section 1902(bb) of the 
such Act (42 U.S.C. 1396a(bb)) to services provided 
by Federally-qualified health centers and rural 
health clinics. 
(2) MONITORING AND REPORT.—The Secretary 
shall monitor the impact of the application of such 
prospective payment system on the States described 
in paragraph (1) and, not later than October 1, 
2010, shall report to Congress on any effect on ac-
cess to benefits, provider payment rates, or scope of 
benefits offered by such States as a result of the ap-
plication of such payment system. 
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218 
TITLE VII—REVENUE 
PROVISIONS 
SEC. 701. INCREASE IN EXCISE TAX RATE ON TOBACCO 
PRODUCTS. 
(a) CIGARS.—Section 5701(a) of the Internal Rev-
enue Code of 1986 is amended— 
(1) by striking ‘‘$1.828 cents per thousand 
($1.594 cents per thousand on cigars removed dur-
ing 2000 or 2001)’’ in paragraph (1) and inserting 
‘‘$50.00 per thousand’’, 
(2) by striking ‘‘20.719 percent (18.063 percent 
on cigars removed during 2000 or 2001)’’ in para-
graph (2) and inserting ‘‘53.13 percent’’, and 
(3) by striking ‘‘$48.75 per thousand ($42.50 
per thousand on cigars removed during 2000 or 
2001)’’ in paragraph (2) and inserting ‘‘$10.00 per 
cigar’’. 
(b) CIGARETTES.—Section 5701(b) of such Code is 
amended— 
(1) by striking ‘‘$19.50 per thousand ($17 per 
thousand on cigarettes removed during 2000 or 
2001)’’ in paragraph (1) and inserting ‘‘$50.00 per 
thousand’’, and 
(2) by striking ‘‘$40.95 per thousand ($35.70 
per thousand on cigarettes removed during 2000 or 
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220 
cents on roll-your-own tobacco removed during 2000 or 
2001)’’ and inserting ‘‘$8.8889 cents’’. 
(h) FLOOR STOCKS TAXES.— 
(1) IMPOSITION OF TAX.—On tobacco products 
and cigarette papers and tubes manufactured in or 
imported into the United States which are removed 
before January 1, 2008, and held on such date for 
sale by any person, there is hereby imposed a tax in 
an amount equal to the excess of— 
(A) the tax which would be imposed under 
section 5701 of the Internal Revenue Code of 
1986 on the article if the article had been re-
moved on such date, over 
(B) the prior tax (if any) imposed under 
section 5701 of such Code on such article. 
(2) CREDIT AGAINST TAX.—Each person shall 
be allowed as a credit against the taxes imposed by 
paragraph (1) an amount equal to $500. Such credit 
shall not exceed the amount of taxes imposed by 
paragraph (1) on January 1, 2008, for which such 
person is liable. 
(3) LIABILITY FOR TAX AND METHOD OF PAY-
MENT.— 
(A) LIABILITY FOR TAX.—A person hold-
ing tobacco products, cigarette papers, or ciga-
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221 
rette tubes on January 1, 2008, to which any 
tax imposed by paragraph (1) applies shall be 
liable for such tax. 
(B) METHOD OF PAYMENT.—The tax im-
posed by paragraph (1) shall be paid in such 
manner as the Secretary shall prescribe by reg-
ulations. 
(C) TIME
FOR
PAYMENT.—The tax im-
posed by paragraph (1) shall be paid on or be-
fore April 1, 2008. 
(4) ARTICLES
IN
FOREIGN
TRADE
ZONES.— 
Notwithstanding the Act of June 18, 1934 (com-
monly known as the Foreign Trade Zone Act, 48 
Stat. 998, 19 U.S.C. 81a et seq.) or any other provi-
sion of law, any article which is located in a foreign 
trade zone on January 1, 2008, shall be subject to 
the tax imposed by paragraph (1) if— 
(A) internal revenue taxes have been deter-
mined, or customs duties liquidated, with re-
spect to such article before such date pursuant 
to a request made under the 1st proviso of sec-
tion 3(a) of such Act, or 
(B) such article is held on such date under 
the supervision of an officer of the United 
States Customs and Border Protection of the 
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222 
Department of Homeland Security pursuant to 
the 2d proviso of such section 3(a). 
(5) DEFINITIONS.—For purposes of this sub-
section— 
(A) IN GENERAL.—Any term used in this 
subsection which is also used in section 5702 of 
the Internal Revenue Code of 1986 shall have 
the same meaning as such term has in such 
section. 
(B) SECRETARY.—The term ‘‘Secretary’’ 
means the Secretary of the Treasury or the 
Secretary’s delegate. 
(6) CONTROLLED
GROUPS.—Rules similar to 
the rules of section 5061(e)(3) of such Code shall 
apply for purposes of this subsection. 
(7) OTHER LAWS APPLICABLE.—All provisions 
of law, including penalties, applicable with respect to 
the taxes imposed by section 5701 of such Code 
shall, insofar as applicable and not inconsistent with 
the provisions of this subsection, apply to the floor 
stocks taxes imposed by paragraph (1), to the same 
extent as if such taxes were imposed by such section 
5701. The Secretary may treat any person who bore 
the ultimate burden of the tax imposed by para-
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223 
graph (1) as the person to whom a credit or refund 
under such provisions may be allowed or made. 
(i) EFFECTIVE DATE.—The amendments made by 
this section shall apply to articles removed (as defined in 
section 5702(j) of the Internal Revenue Code of 1986) 
after December 31, 2007. 
SEC. 702. ADMINISTRATIVE IMPROVEMENTS. 
(a) PERMIT, REPORT, AND RECORD REQUIREMENTS 
FOR MANUFACTURERS AND IMPORTERS OF PROCESSED 
TOBACCO.— 
(1) PERMITS.— 
(A) APPLICATION.—Section 5712 of the 
Internal Revenue Code of 1986 is amended by 
inserting ‘‘or processed tobacco’’ after ‘‘tobacco 
products’’. 
(B) ISSUANCE.—Section 5713(a) of such 
Code is amended by inserting ‘‘or processed to-
bacco’’ after ‘‘tobacco products’’. 
(2) INVENTORIES AND REPORTS.— 
(A) INVENTORIES.—Section 5721 of such 
Code is amended by inserting ‘‘, processed to-
bacco,’’ after ‘‘tobacco products’’. 
(B) REPORTS.—Section 5722 of such Code 
is amended by inserting ‘‘, processed tobacco,’’ 
after ‘‘tobacco products’’. 
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224 
(3) RECORDS.—Section 5741 of such Code is 
amended by inserting ‘‘, processed tobacco,’’ after 
‘‘tobacco products’’. 
(4) 
MANUFACTURER
OF
PROCESSED
TO-
BACCO.—Section 5702 of such Code is amended by 
adding at the end the following new subsection: 
‘‘(p) MANUFACTURER OF PROCESSED TOBACCO.— 
‘‘(1) IN GENERAL.—The term ‘manufacturer of 
processed tobacco’ means any person who processes 
any tobacco other than tobacco products. 
‘‘(2) PROCESSED TOBACCO.—The processing of 
tobacco shall not include the farming or growing of 
tobacco or the handling of tobacco solely for sale, 
shipment, or delivery to a manufacturer of tobacco 
products or processed tobacco.’’. 
(5) 
CONFORMING
AMENDMENT.—Section 
5702(k) of such Code is amended by inserting ‘‘, or 
any processed tobacco,’’ after ‘‘nontaxpaid tobacco 
products or cigarette papers or tubes’’. 
(6) EFFECTIVE DATE.—The amendments made 
by this subsection shall take effect on January 1, 
2008. 
(b) BASIS FOR DENIAL, SUSPENSION, OR REVOCA-
TION OF PERMITS.— 
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225 
(1) DENIAL.—Paragraph (3) of section 5712 of 
such Code is amended to read as follows: 
‘‘(3) such person (including, in the case of a 
corporation, any officer, director, or principal stock-
holder and, in the case of a partnership, a part-
ner)— 
‘‘(A) is, by reason of his business experi-
ence, financial standing, or trade connections or 
by reason of previous or current legal pro-
ceedings involving a felony violation of any 
other provision of Federal criminal law relating 
to tobacco products, cigarette paper, or ciga-
rette tubes, not likely to maintain operations in 
compliance with this chapter, 
‘‘(B) has been convicted of a felony viola-
tion of any provision of Federal or State crimi-
nal law relating to tobacco products, cigarette 
paper, or cigarette tubes, or 
‘‘(C) has failed to disclose any material in-
formation required or made any material false 
statement in the application therefor.’’. 
(2) SUSPENSION OR REVOCATION.—Subsection 
(b) of section 5713 of such Code is amended to read 
as follows: 
‘‘(b) SUSPENSION OR REVOCATION.— 
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227 
the Secretary shall issue an order, stating the facts 
charged, citing such person to show cause why his 
permit should not be suspended or revoked. 
‘‘(2) ACTION FOLLOWING HEARING.—If, after 
hearing, the Secretary finds that such person has 
not shown cause why his permit should not be sus-
pended or revoked, such permit shall be suspended 
for such period as the Secretary deems proper or 
shall be revoked.’’. 
(c) APPLICATION
OF INTERNAL REVENUE CODE 
STATUTE OF LIMITATIONS FOR ALCOHOL AND TOBACCO 
EXCISE TAXES.—Section 514(a) of the Tariff Act of 1930 
(19 U.S.C. 1514(a)) is amended by striking ‘‘and section 
520 (relating to refunds)’’ and inserting ‘‘section 520 (re-
lating to refunds), and section 6501 of the Internal Rev-
enue Code of 1986 (but only with respect to taxes imposed 
under chapters 51 and 52 of such Code)’’. 
(d) EXPANSION OF DEFINITION OF ROLL-YOUR-OWN 
TOBACCO.— 
(1) IN GENERAL.—Section 5702(o) of the In-
ternal Revenue Code of 1986 is amended by insert-
ing ‘‘or cigars, or for use as wrappers thereof’’ be-
fore the period at the end. 
(2) EFFECTIVE DATE.—The amendment made 
by this subsection shall apply to articles removed (as 
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228 
defined in section 5702(j) of the Internal Revenue 
Code of 1986) after December 31, 2007. 
(e) TIME
OF TAX
FOR UNLAWFULLY MANUFAC-
TURED TOBACCO PRODUCTS.—Section 5703(b)(2) of such 
Code is amended by adding at the end the following new 
subparagraph: 
‘‘(F) SPECIAL
RULE
FOR
UNLAWFULLY 
MANUFACTURED TOBACCO PRODUCTS.—In the 
case of any tobacco products, cigarette paper, 
or cigarette tubes produced in the United 
States at any place other than the premises of 
a manufacturer of tobacco products, cigarette 
paper, or cigarette tubes that has filed the bond 
and obtained the permit required under this 
chapter, tax shall be due and payable imme-
diately upon manufacture.’’. 
SEC. 703. TIME FOR PAYMENT OF CORPORATE ESTIMATED 
TAXES. 
Subparagraph (B) of section 401(1) of the Tax In-
crease Prevention and Reconciliation Act of 2005 is 
amended by striking ‘‘114.50 percent’’ and inserting 
‘‘113.25 percent’’. 
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229 
TITLE VIII—EFFECTIVE DATE 
SEC. 801. EFFECTIVE DATE. 
(a) IN GENERAL.—Unless otherwise provided in this 
Act, subject to subsection (b), the amendments made by 
this Act shall take effect on October 1, 2007, and shall 
apply to child health assistance and medical assistance 
provided on or after that date without regard to whether 
or not final regulations to carry out such amendments 
have been promulgated by such date. 
(b) EXCEPTION FOR STATE LEGISLATION.—In the 
case of a State plan under title XIX or XXI of the Social 
Security Act, which the Secretary determines requires 
State legislation in order for the plan to meet the addi-
tional requirements imposed by an amendment made by 
this Act, the State plan shall not be regarded as failing 
to comply with the requirements of such Act solely on the 
basis of its failure to meet these additional requirements 
before the first day of the first calendar quarter beginning 
after the close of the first regular session of the State leg-
islature that begins after the date of enactment of this 
Act. For purposes of the preceding sentence, in the case 
of a State that has a 2-year legislative session, each year 
of the session shall be considered to be a separate regular 
session of the State legislature. 
Æ 
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