(B) by inserting after clause (iii) the fol-
lowing: 
‘‘(iv) For any local educational agency 
that is providing a program of distant 
learning to children not residing within the 
legally defined boundaries of the agency, 
the Secretary shall disregard such children 
from such agency’s total enrollment when 
calculating the percentage under subclause 
(I) of clause (i) and shall disregard any 
funds received for such children when cal-
culating the total current expenditures at-
tributed to the operation of such agency 
when calculating the percentage under sub-
clause (II) of clause (i).’’; 
(4) in subsection (b)(3)(C), by striking ‘‘or (E) 
of paragraph (2), as the case may be’’ and inserting 
‘‘of paragraph (2)’’; 
(5) by amending subsection (b)(3)(D) to read 
as follows: 
‘‘(D) RATABLE
DISTRIBUTION.—For any 
fiscal year described in subparagraph (A) for 
which the sums available exceed the amount re-
quired to pay each local educational agency 100 
percent of its threshold payment the Secretary 
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shall distribute the excess sums to each eligible 
local educational agency that has not received 
its full amount computed under paragraph (1) 
or (2) (as the case may be) by multiplying— 
‘‘(i) a percentage, the denominator of 
which is the difference between the full 
amount computed under paragraph (1) or 
(2) (as the case may be) for all local edu-
cational agencies and the amount of the 
threshold payment as calculated under sub-
paragraphs (B) and (C) of all local edu-
cational agencies, and the numerator of 
which is the aggregate amount of the ex-
cess sums by— 
‘‘(ii) the difference between the full 
amount computed under paragraph (1) or 
(2) (as the case may be) for the agency 
and the amount of the threshold payment 
as calculated under subparagraphs (B) and 
(C) of the agency.’’; 
(6) in subsection (c), by amending paragraph 
(2) to read as follows: 
‘‘(2) EXCEPTION.—Calculation of payments for 
a local educational agency shall be based on data 
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from the fiscal year for which the agency is making 
an application for payment if such agency— 
‘‘(A) is newly established by a State, for 
the first year of operation of such agency only; 
‘‘(B) was eligible to receive a payment 
under this section for the previous fiscal year 
and has had an overall increase in enrollment 
(as determined by the Secretary in consultation 
with the Secretary of Defense, the Secretary of 
Interior or other Federal agencies)— 
‘‘(i) of not less than 10 percent, or 
100 students, of children described in— 
‘‘(I) subparagraph (A), (B), (C), 
or (D) of subsection (a)(1); or 
‘‘(II) subparagraph (F) or (G) of 
subsection (a)(1), but only to the ex-
tent such children are civilian depend-
ents of employees of the Department 
of Defense or the Department of Inte-
rior; and 
‘‘(ii) that is the direct result of closure 
or realignment of military installations 
under the base closure process or the relo-
cation of members of the Armed Forces 
and civilian employees of the Department 
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of Defense as part of force structure 
changes or movements of units or per-
sonnel between military installations or be-
cause of actions initiated by the Secretary 
of Interior or head of another Federal 
agency; and 
‘‘(C) was eligible to receive a payment 
under this section for the previous fiscal year 
and has had an overall increase in enrollment 
(as determined by the Secretary)— 
‘‘(i) of not less than 10 percent, or 
100 students, of children described in sub-
section (a)(1); and 
‘‘(ii) that is the direct result of the 
closure of a local educational agency that 
received a payment under subsection (b)(1) 
or (b)(2) in the previous fiscal year.’’; 
(7) by amending subsection (e) to read as fol-
lows: 
‘‘(e) HOLD HARMLESS.— 
‘‘(1) IN GENERAL.—Subject to paragraph (2) 
the total amount the Secretary shall pay a local edu-
cation agency under subsection (b)— 
‘‘(A) for fiscal year 2014 shall not be less 
than 95percent of the total amount that the 
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local educational agency received under sub-
section (b)(1), (b)(2) or (b)(2)(B)(ii) for fiscal 
year 2013; 
‘‘(B) for fiscal year 2015 shall not be less 
than 90 percent of the total amount that the 
local educational agency received under sub-
section (b)(1), (b)(2) or (b)(2)(B)(ii) for fiscal 
year 2013; and 
‘‘(C) for fiscal year 2016 shall not be less 
than 85 percent of the total amount that the 
local educational agency received under sub-
section (b)(1), (b)(2) or (b)(2)(B)(ii) for fiscal 
year 2013. 
‘‘(2) MAXIMUM PAYMENT.—The total amount 
provided to a local educational agency under sub-
paragraph (A), (B), or (C) of paragraph (1) for a 
fiscal year shall not exceed the maximum basic sup-
port amount for such agency determined under 
paragraph (1) or (2) of subsection (b), as the case 
may be. 
‘‘(3) RATABLE REDUCTION.— 
‘‘(A) IN
GENERAL.—If the sums made 
available under this title for any fiscal year are 
insufficient to pay the full amounts that all 
local educational agencies in all States are eligi-
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ble to receive under paragraph (1) for such 
year, then the Secretary shall ratably reduce 
the payments to all such agencies for such year. 
‘‘(B) ADDITIONAL
FUNDS.—If additional 
funds become available for making payments 
under paragraph (1) for such fiscal year, pay-
ments that were reduced under subparagraph 
(A) shall be increased on the same basis as 
such payments were reduced.’’; and 
(8) by striking subsection (g). 
SEC. 6. APPLICATION FOR PAYMENTS UNDER SECTIONS 
8002 AND 8003. 
Section 8005 of that Act (20 U.S.C. 7705) is amend-
ed by adding at the end the following: 
‘‘(e) STUDENT COUNT.—For the purpose of meeting 
the requirements of section 222.35 of the Code of the Fed-
eral Regulations, the Secretary shall establish a third op-
tion for an applicant when counting its federally connected 
children by using the date established by the applicant to 
register the students of such applicant for the fiscal year 
for which the application is filed.’’. 
SEC. 7. CONSTRUCTION. 
Section 8007 of that Act (20 U.S.C. 7707) is amend-
ed— 
(1) in subsection (a)— 
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