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SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Federal Response to Energy 
Emergencies Act of 2005''.

SEC. 2. UNCONSCIONABLE PRICING OF GASOLINE, OIL, NATURAL GAS, AND 
              PETROLEUM DISTILLATES DURING EMERGENCIES.

    (a) Unconscionable Pricing.--
            (1) In general.--During any energy emergency declared by 
        the President under section 3, it is unlawful for any person to 
        sell crude oil, gasoline, natural gas, or petroleum distillates 
        in, or for use in, the area to which that declaration applies 
        at a price that--
                    (A) is unconscionably excessive; or
                    (B) indicates the seller is taking unfair advantage 
                of the circumstances to increase prices unreasonably.
            (2) Factors considered.--In determining whether a violation 
        of paragraph (1) has occurred, there shall be taken into 
        account, among other factors, whether--
                    (A) the amount charged represents a gross disparity 
                between the price of the crude oil, gasoline, natural 
                gas, or petroleum distillate sold and the price at 
                which it was offered for sale in the usual course of 
                the seller's business immediately prior to the energy 
                emergency; or
                    (B) the amount charged grossly exceeds the price at 
                which the same or similar crude oil, gasoline, natural 
                gas, or petroleum distillate was readily obtainable by 
                other purchasers in the area to which the declaration 
                applies.
            (3) Mitigating factors.--In determining whether a violation 
        of paragraph (1) has occurred, there also shall be taken into 
        account, among other factors, whether the price at which the 
        crude oil, gasoline, natural gas, or petroleum distillate was 
        sold reasonably reflects additional costs, not within the 
        control of the seller, that were paid or incurred by the 
        seller.
    (b) False Pricing Information.--It is unlawful for any person to 
report information related to the wholesale price of crude oil, 
gasoline, natural gas, or petroleum distillates to the Federal Trade 
Commission if--
            (1) that person knew, or reasonably should have known, the 
        information to be false or misleading;
            (2) the information was required by law to be reported; and
            (3) the person intended the false or misleading data to 
        affect data compiled by that department or agency for 
        statistical or analytical purposes with respect to the market 
        for crude oil, gasoline, natural gas, or petroleum distillates.
    (c) Market Manipulation.--It is unlawful for any person, directly 
or indirectly, to use or employ, in connection with the purchase or 
sale of crude oil, gasoline, natural gas, or petroleum distillates at 
wholesale, any manipulative or deceptive device or contrivance, in 
contravention of such rules and regulations as the Federal Trade 
Commission may prescribe as necessary or appropriate in the public 
interest or for the protection of United States citizens.
    (d) Rulemaking.--Not later than 180 days after the date of the 
enactment of this Act, the Federal Trade Commission shall promulgate 
rules necessary and appropriate to enforce this section.

SEC. 3. DECLARATION OF ENERGY EMERGENCY.

    (a) In General.--If the President finds that the health, safety, 
welfare, or economic well-being of the citizens of the United States is 
at risk because of a shortage or imminent shortage of adequate supplies 
of crude oil, gasoline, natural gas, or petroleum distillates due to a 
disruption of the national distribution system for crude oil, gasoline, 
natural gas, or petroleum distillates (including such a shortage 
related to a major disaster (as defined in section 102(2) of the Robert 
T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 
5122))), or significant pricing anomalies in national or regional 
energy markets for crude oil, gasoline, natural gas, or petroleum 
distillates of a more than transient nature, the President may declare 
that a Federal energy emergency exists.
    (b) Scope and Duration.--The declaration shall apply to the Nation, 
a geographical region, or 1 or more States, as determined by the 
President, but may not be in effect for a period of more than 45 days.
    (c) Extensions.--The President may--
            (1) extend a declaration under subsection (a) for a period 
        of not more than 45 days; and
            (2) extend such a declaration more than once.

SEC. 4. ENFORCEMENT BY THE FEDERAL TRADE COMMISSION.

    (a) Enforcement by FTC.--A violation of section 2 shall be treated 
as a violation of a rule defining an unfair or deceptive act or 
practice prescribed under section 18(a)(1)(B) of the Federal Trade 
Commission Act (15 U.S.C. 57a(a)(1)(B)). The Federal Trade Commission 
shall enforce this Act in the same manner, by the same means, and with 
the same jurisdiction as though all applicable terms and provisions of 
the Federal Trade Commission Act were incorporated into and made a part 
of this Act. In enforcing section 2(a) of this Act, the Commission 
shall give priority to enforcement actions concerning companies with 
total United States wholesale or retail sales of crude oil, gasoline, 
and petroleum distillates in excess of $500,000,000 per year.
    (b) Civil Penalties.--
            (1) In general.--Notwithstanding the penalties set forth 
        under the Federal Trade Commission Act, any person who violates 
        this Act shall be subject to the following penalties:
                    (A) Price gouging; unjust profits.--Any person who 
                violates section 2(a) of this Act shall be subject to--
                            (i) a fine of not more than 3 times the 
                        amount of profits gained by such person through 
                        such violation; or
                            (ii) a fine of not more than $3,000,000.
                    (B) False information; market manipulation.--Any 
                person who violates section 2(b) or 2(c) of this Act 
                shall be subject to a civil penalty of not more than 
                $1,000,000.
            (2) Method of assessment.--The penalties provided by 
        paragraph (1) shall be assessed in the same manner as civil 
        penalties imposed under section 5 of the Federal Trade 
        Commission Act (15 U.S.C. 45).
            (3) Multiple offenses; mitigating factors.--In assessing 
        the penalty provided by subsection (a)--
                    (A) each day of a continuing violation shall be 
                considered a separate violation; and
                    (B) the Federal Trade Commission shall take into 
                consideration the seriousness of the violation and the 
                efforts of the person committing the violation to 
                remedy the harm caused by the violation in a timely 
                manner.

SEC. 5. CRIMINAL PENALTIES.

    Any person who violates section 2 or any rule or order issued 
thereunder shall be fined under title 18, United States Code--
            (1) if a corporation, not to exceed $100,000,000; or
            (2) if any other person, not to exceed $1,000,000, or 
        imprisoned for not more than 10 years, or both.

SEC. 6. ENFORCEMENT AT RETAIL LEVEL BY STATE ATTORNEYS GENERAL.

    (a) In General.--A State, as parens patriae, may bring a civil 
action on behalf of its residents in an appropriate district court of 
the United States to enforce the provisions of section 2(a) of this 
Act, or to impose the civil penalties authorized by section 4(b)(1)(B), 
whenever the attorney general of the State has reason to believe that 
the interests of the residents of the State have been or are being 
threatened or adversely affected by a violation of this Act or a 
regulation under this Act.
    (b) Notice.--The State shall serve written notice to the Federal 
Trade Commission of any civil action under subsection (a) prior to 
initiating such civil action. The notice shall include a copy of the 
complaint to be filed to initiate such civil action, except that if it 
is not feasible for the State to provide such prior notice, the State 
shall provide such notice immediately upon instituting such civil 
action.
    (c) Authority to Intervene.--Upon receiving the notice required by 
subsection (b), the Federal Trade Commission may intervene in such 
civil action and upon intervening--
            (1) be heard on all matters arising in such civil action; 
        and
            (2) file petitions for appeal of a decision in such civil 
        action.
    (d) Construction.--For purposes of bringing any civil action under 
subsection (a), nothing in this section shall prevent the attorney 
general of a State from exercising the powers conferred on the attorney 
general by the laws of such State to conduct investigations or to 
administer oaths or affirmations or to compel the attendance of 
witnesses or the production of documentary and other evidence.
    (e) Venue; Service of Process.--In a civil action brought under 
subsection (a)--
            (1) the venue shall be a judicial district in which--
                    (A) the defendant operates;
                    (B) the defendant was authorized to do business; or
                    (C) where the defendant in the civil action is 
                found;
            (2) process may be served without regard to the territorial 
        limits of the district or of the State in which the civil 
        action is instituted; and
            (3) a person who participated with the defendant in an 
        alleged violation that is being litigated in the civil action 
        may be joined in the civil action without regard to the 
        residence of the person.
    (f) Limitation on State Action While Federal Action Is Pending.--If 
the Federal Trade Commission has instituted a civil action or an 
administrative action for violation of this Act, no State attorney 
general, or official or agency of a State, may bring an action under 
this subsection during the pendency of that action against any 
defendant named in the complaint of the Federal Trade Commission or the 
other agency for any violation of this Act alleged in the complaint.
    (g) Enforcement of State Law.--Nothing contained in this section 
shall prohibit an authorized State official from proceeding in State 
court to enforce a civil or criminal statute of such State.

SEC. 7. LOW INCOME ENERGY ASSISTANCE.

    Amounts collected in fines and penalties under sections 4 or 5 of 
this Act shall be deposited in a separate fund in the treasury to be 
known as the Consumer Relief Trust Fund. To the extent provided for in 
advance in appropriations Acts fund shall be used to provide assistance 
under the Low Income Home Energy Assistance Program administered by the 
Secretary of Health and Human Services.

SEC. 8. EFFECT ON OTHER LAWS.

    (a) Other Authority of Federal Trade Commission.--Nothing in this 
Act shall be construed to limit or affect in any way the Federal Trade 
Commission's authority to bring enforcement actions or take any other 
measure under the Federal Trade Commission Act (15 U.S.C. 41 et seq.) 
or any other provision of law.
    (b) State Law.--Nothing in this Act preempts any State law.

SEC. 9. MARKET TRANSPARENCY FOR CRUDE OIL, GASOLINE, AND PETROLEUM 
              DISTILLATES.

    (a) In General.--The Federal Trade Commission shall facilitate 
price transparency in markets for the sale of crude oil and essential 
petroleum products at wholesale, having due regard for the public 
interest, the integrity of those markets, fair competition, and the 
protection of consumers.
    (b) Marketplace Transparency.--
            (1) Dissemination of information.--In carrying out this 
        section the Federal Trade Commission shall provide by rule for 
        the dissemination, on a timely basis, of information about the 
        availability and prices of wholesale crude oil, gasoline, and 
        petroleum distillates to the Federal Trade Commission, States, 
        wholesale buyers and sellers, and the public.
            (2) Protection of public from anticompetitive activity.--In 
        determining the information to be made available under this 
        section and time to make the information available, the Federal 
        Trade Commission shall seek to ensure that consumers and 
        competitive markets are protected from the adverse effects of 
        potential collusion or other anticompetitive behaviors that can 
        be facilitated by untimely public disclosure of transaction-
        specific information.
            (3) Protection of market mechanisms.--The Federal Trade 
        Commission shall withhold from public disclosure under this 
        section any information the Commission determines would, if 
        disclosed, be detrimental to the operation of an effective 
        market or jeopardize system security.
    (c) Information Sources.--
            (1) In general.--In carrying out subsection (b), the 
        Federal Trade Commission may--
                    (A) obtain information from any market participant; 
                and
                    (B) rely on entities other than the Commission to 
                receive and make public the information, subject to the 
                disclosure rules in subsection (b)(3).
            (2) Published data.--In carrying out this section, the 
        Federal Trade Commission shall consider the degree of price 
        transparency provided by existing price publishers and 
        providers of trade processing services, and shall rely on such 
        publishers and services to the maximum extent possible.
            (3) Electronic information systems.--The Federal Trade 
        Commission may establish an electronic information system if it 
        determines that existing price publications are not adequately 
        providing price discovery or market transparency. Nothing in 
        this section, however, shall affect any electronic information 
        filing requirements in effect under this Act as of the date of 
        enactment of this section.
            (4) De minimus exception.--The Federal Trade Commission may 
        not require entities who have a de minimus market presence to 
        comply with the reporting requirements of this section.
    (d) Cooperation With Other Federal Agencies.--
            (1) Memorandum of understanding.--Within 180 days after the 
        date of enactment of this Act, the Federal Trade Commission 
        shall conclude a memorandum of understanding with the Commodity 
        Futures Trading Commission and other appropriate agencies (if 
        applicable) relating to information sharing, which shall 
        include provisions--
                    (A) ensuring that information requests to markets 
                within the respective jurisdiction of each agency are 
                properly coordinated to minimize duplicative 
                information requests; and
                    (B) regarding the treatment of proprietary trading 
                information.
            (2) CFTC jurisdiction.--Nothing in this section may be 
        construed to limit or affect the exclusive jurisdiction of the 
        Commodity Futures Trading Commission under the Commodity 
        Exchange Act (7 U.S.C. 1 et seq.).
    (e) Rulemaking.--Within 180 days after the date of enactment of 
this Act, the Federal Trade Commission shall initiate a rulemaking 
proceeding to establish such rules as the Commission determines to be 
necessary and appropriate to carry out this section.

SEC. 10. REPORT ON UNITED STATES ENERGY EMERGENCY PREPAREDNESS.

    (a) Potential Impacts Report.--Within 30 days after the date of 
enactment of this Act, the Federal Trade Commission shall transmit to 
the Congress a confidential report describing the potential impact on 
domestic prices of crude oil, residual fuel oil, and refined petroleum 
products that would result from the disruption for periods of 1 week, 1 
year, and 5 years, respectively, of not less than--
            (1) 30 percent of United States oil production;
            (2) 20 percent of United States refinery capacity; and
            (3) 5 percent of global oil supplies.
    (b) Projections and Possible Remedies.--The President shall include 
in the report--
            (1) projections of the impact any such disruptions would be 
        likely to have on the United States economy; and
            (2) detailed and prioritized recommendations for remedies 
        under each scenario covered by the report.

SEC. 11. PROTECTIVE ACTION TO PREVENT FUTURE DISRUPTIONS OF SUPPLY.

    The Secretary of Energy and the Energy Information Administration 
shall review expenditures by, and activities undertaken by, companies 
with total United States wholesale or retail sales of crude oil, 
gasoline, and petroleum distillates in excess of $500,000,000 per year 
to protect the energy supply system from terrorist attacks, 
international supply disruptions, and natural disasters, and ensure a 
stable and reasonably priced supply of such products to consumers in 
the United States, and, not later than 180 days after the date of the 
enactment of this title, shall transmit a report of their findings to 
Congress. Such report shall include an assessment of the companies' 
preparations for the forecasted period of more frequent and more 
intense hurricane activity in the Gulf of Mexico and other vulnerable 
coastal areas.

SEC. 12. AUTHORIZATION OF APPROPRIATIONS.

    There are authorized to be appropriated such sums as may be 
necessary to carry out the provisions of this Act.
Federal Response to Energy Emergencies Act of 2005 - Declares unlawful: (1) unconscionable pricing of gasoline, oil, natural gas, and petroleum distillates during emergencies; (2) intentional reporting of false price information concerning wholesale prices of such products; and (3) market manipulation regarding the purchase or sale at wholesale of such products.

Authorizes the President to declare a federal energy emergency upon finding that the national health, safety, welfare, or economic well-being is at risk because of an actual or imminent shortage of such products due to a disruption of the national distribution system, or significant pricing anomalies in national or regional energy markets for the products.

Empowers the Federal Trade Commission (FTC) and State Attorneys General to enforce this Act.

Sets forth civil and criminal penalties for violations of this Act.

Requires fines and penalties collected under this Act to be deposited in a separate fund in the treasury to be known as the Consumer Relief Trust Fund to provide assistance under the Low Income Home Energy Assistance Program.

Directs the FTC to facilitate price transparency in wholesale markets for the sale of crude oil and essential petroleum products.

Instructs the FTC to transmit a confidential report to Congress on the potential impact on domestic prices of crude oil, residual fuel oil, and refined petroleum products that would result from the disruption for periods of one week, one year, and five years, respectively.

Directs the Secretary of Energy and the Energy Information Administration to review and report to Congress on expenditures and activities undertaken by certain size companies to protect the energy supply system from terrorist attacks, international supply disruptions, and natural disasters, and ensure a stable and reasonably priced supply of such products to consumers in the United States.

Requires such report to assess the companies' preparations for the forecasted period of more frequent and more intense hurricane activity in the Gulf of Mexico and other vulnerable coastal areas.

SECTION 1. SHORT TITLE.

    This Act may be cited as ``State Business Law Conformity Act of 
2004''.

SEC. 2. REFERENCES TO GENERAL PARTNERS.

    (a) Exclusion of Certain Active Businesses From at Risk Rules.--
Subclause (I) of section 465(c)(7)(D)(ii) of the Internal Revenue Code 
of 1986 (defining qualified corporate partner) is amended to read as 
follows:
                                    ``(I) such corporation is not 
                                prohibited or limited under State law 
                                from participation in the management or 
                                business of the partnership.''.
    (b) Payments to Retiring Partners.--Subparagraph (B) of section 
736(b)(3) of such Code (relating to limitation on application of 
paragraph (2)) is amended to read as follows:
                    ``(B) any portion of the retiring or deceased 
                partner's distributive share of partnership income was 
                subject to tax under section 1401.''.
    (c) Foreign Currency Transactions.--Subclause (I) of section 
988(c)(1)(E)(v) of such Code is amended to read as follows:
                                    ``(I) Certain general partners.--
                                The interest of a partner in the 
                                partnership shall not be treated as 
                                failing to meet the 20-percent 
                                ownership requirements of clause 
                                (iii)(I) for any taxable year of the 
                                partnership if for the taxable year of 
                                the partner in which such partnership 
                                taxable year ends--
                                            ``(aa) the partner is not 
                                        limited as to participation in 
                                        the management or activity of 
                                        the qualified fund, and
                                            ``(bb) such partner (and 
                                        each corporation filing a 
                                        consolidated return with such 
                                        partner) had no ordinary income 
                                        or loss from a section 988 
                                        transaction which is foreign 
                                        currency gain or loss (as the 
                                        case may be).''.
    (d) Special Valuation Rules for Generation-Skipping Tax.--Clause 
(ii) of section 2701(b)(2)(B) of such Code (relating to partnerships) 
is amended to read as follows:
                            ``(ii) in the case of a limited 
                        partnership, the holding of any interest as a 
                        partner who is not limited as to participation 
                        in management or activity of the 
                        partnership.''.
    (e) Tax Matters Partner.--Paragraph (7) of section 6231(a) of such 
Code (defining tax matters partner) is amended to read as follows:
            ``(7) Tax matters partner.--
                    ``(A) In general.--The tax matters partner of any 
                partnership is--
                            ``(i) the partner designated as the tax 
                        matters partner as provided in regulations, or
                            ``(ii) if there is no partner who has been 
                        so designated, the partner having the largest 
                        profits interest in the partnership at the 
                        close of the taxable year involved (or, where 
                        there is more than 1 such partner, the 1 of 
                        such partners whose name would appear first in 
                        an alphabetical listing).
                    ``(B) Selection by secretary.--If there is no 
                partner designated under subparagraph (A)(i) and the 
                Secretary determines that it is impracticable to apply 
                subparagraph (A)(ii), the partner selected by the 
                Secretary shall be treated as the tax matters partner. 
                The Secretary shall, within 30 days of selecting a tax 
                matters partner under the preceding sentence, notify 
                all partners required to receive notice under section 
                6223(a) of the name and address of the person selected.
                    ``(C) Restriction on designation of partner.--A 
                partner may not be designated as a tax matters partner 
                under subparagraph (A)(i) unless such partner is not 
                limited as to participation in management or activity 
                of the partnership.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.

SEC. 3. REFERENCES TO LIMITED PARTNERS.

    (a) Limited Entrepreneur.--
            (1) In general.--Subparagraph (A) of section 464(e)(2) of 
        the Internal Revenue Code of 1986 (defining limited 
        entrepreneur) is amended by striking ``other than as a limited 
        partner''.
            (2) Conforming amendments.--
                    (A) Section 464(c) of such Code is amended--
                            (i) by striking ``limited partners or'' in 
                        paragraph (1)(B),
                            (ii) by striking ``a limited partner or'' 
                        in paragraph (2).
                    (B) Section 1256 of such Code is amended--
                            (i) by striking ``limited partners or'' 
                        each place it appears in subsections (e)(3)(B) 
                        and (f)(4),
                            (ii) by striking ``a limited partner or'' 
                        in subsection (e)(3)(C), and
                            (iii) by striking ``limited partner or'' 
                        both places it appears in the heading and text 
                        of subsection (e)(4)(A)(i).
                    (C) Section 1258(d)(5)(C) of such Code is amended--
                            (i) by striking ``limited partner or'' in 
                        the matter preceding subclause (i),
                            (ii) by striking ``limited partner's (or 
                        limited entrepreneur's) in subclause (i) and 
                        inserting ``limited entrepreneur's'', and
                            (iii) by striking ``partners and limited'' 
                        in the heading.
    (b) Passive Loss Rules.--
            (1) Subsection (h) of section 469 of such Code is amended 
        by striking paragraph (2) and by redesignating paragraphs (3), 
        (4), and (5) as paragraphs (2), (3), and (4), respectively.
            (2) Subparagraph (A) of section 469(c)(7) of such Code is 
        amended by striking the last sentence.
            (3) Paragraph (6) of section 469(i) of such Code is amended 
        by striking subparagraph (C) and by redesignating subparagraph 
        (D) as subparagraph (C).
            (4) Subsection (f) of section 772 of such Code (relating to 
        special rules for applying passive loss limitations) is amended 
        to read as follows:
    ``(f) Special Rules for Applying Passive Loss Limitations.--
            ``(1) In general.--If any person holds an interest in an 
        electing large partnership other than as a partner described in 
        paragraph (3)--
                    ``(A) paragraph (2) of subsection (c) shall not 
                apply to such partner, and
                    ``(B) such partner's distributive share of the 
                partnership items allocable to passive loss limitation 
                activities shall be taken into account separately to 
                the extent necessary to comply with the provisions of 
                section 469.
            ``(2) Exception.--Paragraph (1) shall not apply to any 
        items allocable to an interest held as a partner described in 
        paragraph (3).
            ``(3) Partner described.--For purposes of this subsection, 
        a partner is described in this paragraph if the partner is a 
        person whose participation in the management or business 
        activity of the partnership is limited under applicable State 
        law.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.

SEC. 4. PARTNERSHIP INCOME ATTRIBUTABLE TO CAPITAL EXCLUDED FROM NET 
              EARNINGS FROM SELF-EMPLOYMENT.

    (a) In General.--Paragraph (13) of section 1402(a) of the Internal 
Revenue Code of 1986 is amended to read as follows:
            ``(13) there shall be excluded the distributive share of 
        net income of a partner attributable to capital;''.
    (b) Partnership Income Attributable to Capital.--Section 1402 of 
such Code is amended by adding at the end the following new subsection:
    ``(l) Partnership Income Attributable to Capital.--
            ``(1) In general.--For purposes of subsection (a)(13), the 
        following amounts shall be treated as income attributable to 
        capital--
                    ``(A) the amount, if any, in excess of what would 
                constitute reasonable compensation for services 
                rendered by such partner to the partnership, and
                    ``(B) an amount equal to a reasonable rate of 
                return on unreturned capital of the partner determined 
                as of the beginning of the taxable year.
            ``(2) Definitions.--For purposes of paragraph (1)--
                    ``(A) Unreturned capital.--The term `unreturned 
                capital' means the excess of the aggregate amount of 
                money and the fair market value as of the date of 
                contribution of other consideration (net of 
                liabilities) contributed by the partner over the 
                aggregate amount of money and the fair market value as 
                of the date of distribution of other consideration (net 
                of liabilities) distributed by the partnership to the 
                partner, increased or decreased for the partner's 
                distributive share of all reportable items as 
                determined in section 702. If the partner acquires a 
                partnership interest and the partnership makes an 
                election under section 754, the partner's unreturned 
                capital shall take into account appropriate adjustments 
                under section 743.
                    ``(B) Reasonable rate of return.--A reasonable rate 
                of return on unreturned capital shall equal 150 percent 
                (or such higher rate as is established in regulations) 
                of the highest applicable Federal rate, as determined 
                under section 1274(d)(1), at the beginning of the 
                partnership's taxable year.
            ``(3) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary to carry out the purposes of 
        this subsection.''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to services performed in taxable years beginning 
after December 31, 2004.

SEC. 5. REPEAL OF ABILITY TO ELECT LARGE PARTNERSHIP REPORTING RULES.

    (a) In General.--Paragraph (2) of section 775(a) of the Internal 
Revenue Code of 1986 (relating to election) is amended by adding at the 
end the following: ``No election under this subsection shall be made 
after December 31, 2004.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to partnership taxable years beginning after December 31, 2004.
State Business Law Conformity Act of 2004 - Amends the Internal Revenue Code to: (1) revise certain partnership tax definitions and rules relating to general and limited partners; (2) exclude from net earnings from self-employment partnership income attributable to capital; and (3) repeal, after 2004, the election to apply large partnership (100 partners or more) tax rules.

SECTION 1. SHORT TITLE AND REFERENCE.

    (a) Short Title.--This Act may be cited as the ``Medical 
Technology, Public Health, and Innovation Act of 1997''.
    (b) Reference.--Whenever in this Act an amendment or repeal is 
expressed in terms of an amendment to, or a repeal of, a section or 
other provision, the reference shall be considered to be made to a 
section or other provision of the Federal Food, Drug, and Cosmetic Act 
(21 U.S.C. 321 et seq.).

SEC. 2. FINDINGS; MISSIONS STATEMENT.

    (a) Findings.--The Congress finds the following:
            (1) While the United States appropriately puts a top 
        priority on the regulation of medical technologies to ensure 
        the safety and efficacy of medical technologies that are 
        introduced into the marketplace, the administration of such 
        regulatory effort is causing the United States to lose its 
        leadership role in producing innovative, top-quality medical 
        devices.
            (2) One of the key components of the medical device 
        regulatory process that contributes to the United States losing 
        its leadership role in medical device development is the 
        inordinate amount of time it takes for medical technologies to 
        be reviewed by the Food and Drug Administration.
            (3) The most important result of the United States losing 
        its leadership role is that patients in the United States do 
        not have access to new medical technology in a timely manner.
            (4) Delayed patient access to new medical technology 
        results in lost opportunities to save lives, to reduce 
        hospitalization and recovery time, and to improve the quality 
        of life of patients.
            (5) The economic benefits that the United States medical 
        device industry, which is composed principally of smaller 
        companies, has provided through growth in jobs and global trade 
        are threatened by the slow and unpredictable regulatory process 
        at the Food and Drug Administration.
            (6) The pace and predictability of the medical device 
        regulatory process are in part responsible for the increasing 
        tendency of United States medical device companies to shift 
        research, product development, and manufacturing offshore, at 
        the expense of American jobs, patients, and leading edge 
        clinical research.
    (b) Mission Statement.--This legislation seeks to improve the 
timeliness, effectiveness, and predictability of the medical device 
approval process for the benefit of United States patients and the 
United States economy by--
            (1) providing for the use of nationally and internationally 
        recognized performance standards to assist the Food and Drug 
        Administration in determining the safety and effectiveness of 
        medical devices;
            (2) facilitating communication between medical device 
        companies and the Food and Drug Administration;
            (3) targeting the use of Food and Drug Administration 
        resources on medical devices that are likely to have serious 
        adverse health consequences; and
            (4) requiring the Food and Drug Administration to determine 
        the least costly, most efficient approach to reasonably 
        assuring the safety and effectiveness of devices.

SEC. 3. DEVICE PERFORMANCE STANDARDS.

    (a) Alternative Procedure.--Section 514 (21 U.S.C. 360d) is amended 
by adding at the end the following:

                ``recognition of a performance standard

    ``(c)(1)(A) The Secretary may, through publication in the Federal 
Register, issue notices identifying and listing nationally and 
internationally recognized performance standards for which persons may 
provide a certification of a device's conformity under paragraph (3) in 
order to meet the premarket submission requirements or other 
requirements under the Act to which the standards are applicable.
    ``(B) Any person may elect to utilize data other than data required 
by the standards described in subparagraph (A) to meet any requirement 
under the Act to which the standards are applicable.
    ``(2) The Secretary may remove from the list of standards described 
in paragraph (1) a standard that the Secretary determines is no longer 
appropriate for making determinations with respect to the regulation of 
devices.
    ``(3)(A) A person may provide a certification that a device 
conforms to an applicable standard listed under paragraph (1) to meet 
the requirements described in paragraph (1) and the Secretary shall 
accept such certification.
    ``(B) The Secretary may, at any time, request a person who submits 
a certification described in subparagraph (A) to submit the data or 
information that the person relied on in making the certification.
    ``(C) A person who submits a certification described in 
subparagraph (A) shall maintain the data and information upon which the 
certification was made for a period of 2 years after the submission of 
the certification or a time equal to the expected design life of a 
device, whichever is longer.''.
    (b) Section 301.--Section 301 (21 U.S.C. 331) is amended by adding 
at the end the following:
    ``(x) The falsification of a certification submitted under section 
514(c)(3) or the failure or refusal to provide data or information 
requested by the Secretary under such section.''.
    (c) Section 501.--Section 501(e) (21 U.S.C. 351(e)) is amended by 
striking ``established'' and inserting ``established or listed''.

SEC. 4. PREMARKET APPROVAL.

    (a) Application.--Section 515(c) (21 U.S.C. 360e(c)) is amended--
            (1) in paragraph (1)--
                    (A) in subparagraph (F), by striking ``; and'' and 
                inserting a semicolon;
                    (B) in subparagraph (G), by striking ``require.'' 
                and inserting ``require; and''; and
                    (C) by adding at the end the following:
            ``(H) an identifying reference to any performance standard 
        listed under section 514(c) that is applicable to such 
        device.''.
            (2) by adding at the end the following:
    ``(3) The Secretary shall accept historical clinical data as a 
control for use in determining whether there is a reasonable assurance 
of safety and effectiveness of a device in a case in which the effects 
of the progression of a disease are clearly defined and well 
understood.
    ``(4) The Secretary may not require the sponsor of an application 
to conduct clinical trials for a device using randomized controls 
unless the controls--
            ``(A) are necessary;
            ``(B) are scientifically and ethically feasible; and
            ``(C) other less burdensome and controls, such as 
        historical controls, are not available to permit a 
        determination of a reasonable assurance of safety and 
        effectiveness.''.
    (b) Action on Application.--Section 515(d) (21 U.S.C. 360e(d)) is 
amended--
            (1) in paragraph (1)(A)--
                    (A) by striking ``paragraph (2) of this 
                subsection'' each place it appears and inserting 
                ``paragraph (8)''; and
                    (B) by adding at the end the following flush 
                paragraph:
``In making a determination to approve or deny an application, the 
Secretary shall rely on the conditions of use proposed in the labeling 
of device as the basis for determining whether or not there is a 
reasonable assurance of safety and effectiveness. If, based on a fair 
evaluation of all material facts, the proposed labeling of the device 
is neither false nor misleading in any particular, the Secretary shall 
not consider conditions of use not included in such labeling in making 
the determination.'';
            (2) by redesignating paragraphs (2) and (3) as paragraphs 
        (8) and (9), respectively; and
            (3) by inserting after paragraph (1) the following:
    ``(2) Each application received under subsection (c) shall be 
reviewed in a manner to achieve final action within the 180-day period 
described in subparagraph (A), and the 180-day period may not be 
altered for any reason without the written consent of an applicant.
    ``(3)(A) Not later than 100 days after the receipt of an 
application that has been filed by the Secretary because the 
application satisfies the content requirements of subsection (c)(1), 
the Secretary shall meet with the applicant and disclose each 
deficiency relating to the application that would preclude approval of 
the application under paragraph (1).
    ``(B) The applicant shall have the right to be informed in writing 
with respect to the information communicated to the applicant during 
the meeting.
    ``(4) To permit better treatment or better diagnoses of life-
threatening or irreversibly debilitating diseases or conditions, the 
Secretary shall expedite the review for devices--
            ``(A) representing breakthrough technologies;
            ``(B) offering significant advantages over existing 
        approved alternatives; or
            ``(C) for which accelerated availability is in the best 
        interest of the public health.
    ``(5) The Secretary shall complete the review of all supplemental 
applicants to an application approved under paragraph (1) that do not 
contain clinical data within 90 days after the receipt of a 
supplemental that has been accepted for filing.''
    ``(6)(A) A supplemental application shall be required for any 
change to a device subject to an approved application under this 
subsection if the change affects safety or effectiveness, unless the 
change is a modification in a manufacturing procedures or method of 
manufacturing and the holder of an approved application submits a 
notice to the Secretary that describes the change and informs the 
Secretary that the change has been made under the requirements of 
section 520(f).
    ``(B)(i) In reviewing a supplement to an approved application for 
an incremental change to the design of a device that affects safety or 
effectiveness, the Secretary shall approve the supplement if--
            ``(I) nonclinical data demonstrate that a design 
        modification creates the intended additional capacity, 
        function, or performance of the device; and
            ``(II) clinical data from the approved application and any 
        supplements to the approved application provide a reasonable 
        assurance of safety and effectiveness.
    ``(ii) The Secretary may require, when necessary, additional 
clinical data to evaluate the design modification to provide a 
reasonable assurance of safety and effectiveness.
    ``(7) Any representation in promotional materials for a device 
subject to an approved application under this subsection shall not be 
subject to premarket approval under this section, unless such 
representations establish new conditions of use. Any representations 
made in promotional materials for devices subject to an approved 
application shall be supported by appropriate data or information that 
can substantiate the representations at the time such representations 
are made.''.
    (c) Withdrawal or Temporary Suspension of Approval of 
Application.--Section 5155(e)(1) (21 U.S.C. 360e(1)) is amended in 
subparagraph (G) by inserting after the word ``effect'' the words ``or 
listed.''

SEC. 5. PREMARKET NOTIFICATION.

    (a) Exemption of Certain Devices.--Section 510 (21 U.S.C. 360) is 
amended--
            (1) in subsection (k), by striking ``intended for human 
        use'' and inserting ``intended for human use (except a device 
        that is classified into class I under section 513 or 520 or a 
        device that is classified into class II under section 513 or 
        520, and is exempt from the requirements of this subsection 
        under subsection (l))'';
            (2) by adding at the end of subsection (k) (as amended by 
        paragraph (1)) the following flush sentence:
``The Secretary shall review the notification required by this 
subsection and make a determination under section 513(f)(1)(A) within 
90 days after receiving the notification.''; and
            (3) by adding at the end the following:
    ``(1)(A) Within 30 days after the date of enactment of this 
subsection, the Secretary shall develop and publish in the Federal 
Register a list of each type of class II device that does not require a 
report under subsection (k) to provide reasonable assurance of safety 
and effectiveness. Each type of class II device identified by the 
Secretary not to require the report shall be exempt from the 
requirement to file a report under subsection (k) as of the date of the 
publication of the list in the Federal Register.
    ``(B) Beginning on the date that is 1 day after the date of the 
publication of a list under this subsection, any person may petition 
the Secretary to exempt a type of class II device from the requirement 
of subsection (k). The Secretary shall respond to the petition within 
120 days after the receipt of the petition and determine whether or not 
to grant the petition in whole or in part.''.
    (b) Special Rule Relating to Exemption of Class I Devices From 
510(k) Notifications.--The exemption of a class I device from the 
notification requirement of section 510(k) shall not apply to a class I 
device that is life sustaining or life saving or that is intended to be 
implanted into the human body.

SEC. 6. INVESTIGATIONAL DEVICE EXEMPTION.

    (a) Regulations.--Section 520(g) (21 U.S.C. 360j(g)) is amended--
            (1) by redesignating paragraphs (4) and (5) as paragraphs 
        (5) and (6), respectively; and
            (2) by inserting after paragraph (3) the following:
    ``(4) The Secretary shall, within 120 days after the date of 
enactment of this paragraph, by regulation, amending the content of 
part 812 of title 21 of the Code of Federal Regulations, amend the 
procedures with respect to the approval of clinical studies under this 
subsection as follows:
            ``(A) The Secretary shall permit the sponsor of an 
        investigation to meet with the Secretary prior to the 
        submission of an application to develop a protocol for a 
        clinical study subject to the regulation and require that the 
        protocol be agreed upon in writing by the sponsor and the 
        Secretary.
            ``(B)(i) The Secretary shall permit developmental changes 
        to devices in response to information gathered during the 
        course of an investigation without requiring an additional 
        approval of an application for an investigational device 
        exemption, or the approval of a supplement to the application, 
        if the changes meet the following requirements:
                    ``(I) The changes do not constitute a significant 
                change in the design of the product or a significant 
                change in basic principles of operation.
                    ``(II) The changes do not adversely affect patient 
                safety.
            ``(ii) The Secretary shall require that each such change 
        shall be documented with information describing the change and 
        the basis of the sponsor of application for concluding that the 
        change does not constitute a significant change in design or 
        operating principles, and that the change does not adversely 
        affect patient safety.''.
    (b) Conforming Amendments.--Section 517(a)(7) (21 U.S.C. 
360g(a)(7)) is amended--
            (1) by striking ``section 520(g)(4)'' and inserting 
        ``section 520(g)(5)''; and
            (2) by striking ``section 520(g)(5)'' and inserting 
        ``section 520(g)(6)''.

SEC. 7 PRODUCT REVIEW.

    Section 513 (21 U.S.C. 360c) is amended by--
            (1) in subsection (a)(3)(A)--
                    (A) by striking ``including clinical investigations 
                where appropriate'' and inserting ``including 1 or more 
                clinical investigations where appropriate'';
                    (B) by adding at the end the following: ``When 
                evaluating the type and amount of data necessary to 
                find a reasonable assurance of device effectiveness for 
                an approval under section 515, the Secretary shall 
                consider the extent to which reliance on postmarket 
                controls may contribute to such assurance and expedite 
                effectiveness determinations without increasing 
                regulatory burdens on persons who submit applications 
                under section 515(c).'';
            (2) in subsection (a)(3), by adding at the end the 
        following:
    ``(C)(i) The Secretary upon the request of any person intending to 
submit an application under section 515 shall meet with the person to 
determine the type of valid scientific evidence within the meaning of 
subparagraphs (A) and (B) that will be necessary to demonstrate the 
effectiveness of a device for the conditions of use proposed by such 
person to support an approval of an application.
    ``(ii) Within 30 days after such meeting, the Secretary shall 
specify in writing the type of valid scientific evidence that will 
provide a reasonable assurance that a device is effective under the 
conditions of use proposed by the person.
    ``(iii) Any clinical data, including 1 or more well-controlled 
investigations, specified by the Secretary for demonstrating a 
reasonable assurance of device effectiveness shall reflect the 
Secretary's determination that such data are necessary to establish 
device effectiveness and that no other less burdensome means of 
evaluating device effectiveness are available which would have a 
reasonable likelihood of resulting in an approval.
    ``(2) The determination of the Secretary with respect to the 
specification of the valid scientific evidence under clause (ii) shall 
be binding upon the Secretary, unless such determination by the 
Secretary would be contrary to the public health''; and
            (3) in subsection (i), by adding at the end the following:
    ``(C) To facilitate reviews of reports submitted to the Secretary 
under section 510(k), the Secretary shall consider the extent to which 
reliance on postmarket controls may expedite the classification of 
devices under subsection (f)(1).
    ``(D) Whenever the Secretary requests information to demonstrate 
that devices with differing technological characteristics are 
substantially equivalent, the Secretary shall only request information 
that is necessary to making substantial equivalence determinations. In 
making such requests, the Secretary shall consider the least burdensome 
means of demonstrating substantial equivalence and request information 
accordingly.
    ``(E) Any determinations of substantial equivalence by the 
Secretary shall be based upon the intended uses proposed in labeling 
submitted in a report under section 510(k).
    ``(F) Any representations made in promotional materials for devices 
shall not require a report under section 510(k), unless such 
representations establish new intended uses for a legally marketed 
device.''.

Medical Technology, Public Health, and Innovation Act of 1997 - Amends the Federal Food, Drug, and Cosmetic Act (FDCA) to authorize the Secretary of Health and Human Services to identify and list nationally and internationally recognized performance standards for which persons may self-certify a device's conformity in order to meet FDCA requirements.  Allows use of data other than that required by the standards to meet any FDCA requirement.  Adds to the list of prohibited acts certification falsification or the failure or refusal to provide the data or information relied on in the certification. 
(Sec. 4) Requires that premarket approval applications include an identifying reference to any such performance standard.  Directs the Secretary to accept historical clinical data as a control for use in determining safety and effectiveness when a disease's progression is clearly defined and well understood.  Limits requiring clinical trials using randomized controls.  Modifies requirements regarding action on premarket approval applications. 
(Sec. 5) Exempts from premarket notification requirements certain class I and class II devices.  Directs the Secretary to develop and publish a list of each type of class II device not requiring premarket notification.  Allows petitioning for exemption of a class II type from the notification requirement. 
(Sec. 6) Changes clinical study approval procedures, allowing:  (1) the investigation sponsor to meet with the Secretary before application submission to develop a protocol; and (2) device developmental changes during an investigation without requiring an additional approval or an application supplement, if certain requirements are met. 
(Sec. 7) Allows device effectiveness to be determined on the basis of one or more clinical investigations (currently, by well-controlled investigations).  Requires the Secretary:  (1) to consider the extent to which postmarket controls may contribute to the assurance of effectiveness and expedite effectiveness determinations without increasing regulatory burdens; (2) on request, to meet with an intended applicant to determine the type of effectiveness evidence that will be necessary; (3) to consider the extent to which postmarket controls may expedite device classification; (4) when requesting information demonstrating substantial equivalence, to only request information necessary to make substantial equivalence determinations; and (5) base substantial equivalence determinations on the intended uses in submitted labeling.