Omnibus Reconciliation Act of 1980
PL 96-499 (H.R.7765), enacted 12/05/1980

PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2599 
Public Law 96-499 
96th Congress 
An Act 
To provide for reconciliation pursuant to section 3 of the First Concurrent Resolu- 
Dec. 5, 1980 
tion on the Budget for the fiscal year 1981. 
[H.R. 7765] 
Be it enacted by the Senate and House of Representatives of the 
United States of 
A 
merica in Congress assembled, 
2™"'''",^ . 
Keconciliation 
TITLE I-SHORT TITLE AND DECLARATION ^' °' ''' 
OF PURPOSE 
SHORT TITLE 
SECTION 101. This Act may be cited as the "Omnibus Reconciliation 
Act of 1980". 
PURPOSE 
SEC. 102. It is the purpose of this Act to implement the recommen-
dations which were made by specified committees of the House of 
Representatives and the Senate pursuant to directions contained in 
section 3 of the First Concurrent Resolution on the Budget for the 
fiscal year 1981 (H. Con. Res. 307,96th Congress), and pursuant to the 
reconciliation requirements which were imposed by such concurrent 
resolution as provided in section 310 of the Congressional Budget Act 3i use I33i. 
of 1974. 
TITLE II—SCHOOL LUNCH AND CHILD 
NUTRITION PROGRAMS 
Subtitle A—Savings Under the School Lunch and 
Child Nutrition Programs 
REDUCTION IN GENERAL REIMBURSEMENT 
SEC. 201. (a) Notwithstanding section 4 of the National School 42 use 1753 
Lunch Act, for the fiscal year ending September 30,1981, the national "
°
^
® 
average payment per lunch under such Act for such fiscal year, after 
being adjusted under section 11(a) of such Act, shall be reduced by 2 Vz 42 use i759a. 
cents for any school food authority under which less than 60 percent 
of the lunches served in the school lunch program were served free or 
at reduced price during the second preceding school year. The 
amount of State administrative expense funds to be made available to 
the States by the Secretary of Agriculture under section 7 of the Child 
Nutrition Act of 1966 for the fiscal year ending September 30, 1983, 42 use 1776. 
and the amount of State revenues appropriated or used for meeting 
the requirements under section 7 of the National School Lunch Act 42 use 1756. 
for the school year ending June 30,1982, shall not be reduced because 
of a reduction in the amount of Federal funds expended as a result of 
94 STAT. 2600 
PUBLIC LAW 96-499—DEC. 5, 1980 
"School food 
authority.". 
42 u s e 1776. 
the preceding sentence. For the purpose of this section, the term 
"school food authority" means the governing body that is responsible 
for the administration of one or more schools and has the legal 
authority to operate a school lunch or school breakfast program, 
(b) Section 7 of the Child Nutrition Act of 1966 is amended by— 
(1) in subsection (e), striking out "and the succeeding fiscal 
year" and inserting in lieu thereof "and for the five succeeding 
fiscal years"; and 
(2) in subsection (i), striking out "September 30, 1980" and 
inserting in lieu thereof "September 30,1984". 
42 u s e 1755 
note. 
42 u s e 1755. 
42 u s e 1755. 
42 u s e 1773. 
42 u s e 1762a. 
REDUCTION IN COMMODITY ASSISTANCE 
SEC. 202. (a) For the fiscal year ending September 30, 1981, the 
national average value of donated foods, or cash payments in lieu 
thereof, as determined under section 6(e) of the National School 
Lunch Act, shall be reduced by 2 cents. 
(b) Section 6 of the National School Lunch Act is amended by 
adding at the end thereof a new subsection (f) as follows: 
"(f) Beginning with the school year ending June 30, 1981, the 
Secretary shall not offer commodity assistance based upon the 
number of breakfasts served to children under section 4 of the Child 
Nutrition Act of 1966.". 
(c) Section 14(a) of the National School Lunch Act is amended by 
striking out "September 30, 1982" and inserting in lieu thereof 
"September 30,1984.". 
42 u s e 1758 
note. 
42 u s e 1758. 
Household 
income 
computation. 
INCOME ELIGIBILITY GUIDELINES 
SEC. 203. (a) During the fiscal year ending September 30, 1981, the 
income poverty guidelines for the purposes of section 9 of the 
National School Lunch Act shall be the nonfarm income poverty 
guidelines prescribed by the Office of Management and Budget 
adjusted annually pursuant to section 625 of the Economic Opportu-
nity Act of 1964 (42 U.S.C 297Id) for the forty-eight States. 
(b) In computing household income under section 9(b) of the 
National School Lunch Act for the fiscal year ending September 30, 
1981— 
(1) in States other than Alaska, Hawaii, and Guam, the 
Secretary shall allow a standard deduction of $60 each month for 
each household, which shall be adjusted to the nearest $5 on July 
1, 1980, to reflect changes in the Consumer Price Index for All 
Urban Consumers, published by the Bureau of Labor Statistics, 
Department of Labor, for items other than food for the period 
beginning September 1977 and ending March 1980; 
(2) the monthly standard deduction allowed in Alaska shall 
bear the same ratio to the standard deduction allowed in the 
contiguous States as the applicable income poverty guidelines for 
Alaska bear to the applicable income poverty guidelines for such 
States; and 
(3) the monthly standard deduction allowed in Hawaii and 
Guam shall bear the same ratio to the standard deduction 
allowed in the contiguous States as the applicable income 
poverty guidelines for Hawaii bear to the applicable income 
poverty guidelines for such States. 
(c) For the school year ending June 30, 1981, the Secretary may 
prescribe procedures for implementing the revisions in the income 
poverty guidelines for free and reduced price lunches contained in 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2601 
this section that may allow school food authorities to (1) use applica-
tions distributed at the beginning of the school year when making 
eligibility determinations based on the revised income poverty guide-
lines or (2) distribute new applications containing the revised income 
poverty guidelines and make eligibility determinations using the new 
applications, 
(d) Section 17 of the Child Nutrition Act of 1966 is amended by— 42 USC 1786. 
(1) in subsection (c)(2), striking out "for the fiscal years ending 
September 30, 1981, and September 30, 1982" and inserting in 
lieu thereof "for the fiscal year ending September 30, 1981, and 
for each succeeding fiscal year ending on or before September 30, 
1984"; 
(2) in the first sentence of subsection (g), striking out 
"$950,000,000 for the fiscal year ending September 30,1982" and 
inserting in lieu thereof "such sums as may be necessary for the 
three subsequent fiscal years"; and 
(3) in subsection (h)(2), striking out "1982" and inserting in lieu 
thereof"1984". 
SPECIAL ASSISTANCE 
SEC. 204. (a) Section 11(a) of the National School Lunch Act is 42 USC 1759a 
amended by striking out in the fifth sentence ": Provided, That if in 
any State all schools charge students a uniform price for reduced-
price lunches, and such price is less than 20 cents, the special 
assistance factor prescribed for reduced-price lunches in such State 
shall be equal to the special assistance factor for free lunches reduced 
by either 10 cents or the price charged for reduced-price lunches in 
such State, whichever is greater". 
(b) During the fiscal year ending September 30,1981— 
(1) no semiannual adjustment required under the sixth sen-
tence of section 11(a) of the National School Lunch Act shall be 
made on January 1 of such fiscal year; and 
(2) the adjustment required under the second proviso in the 
sixth sentence of section 11(a) of the National School Lunch Act 
which is to be made on July 1 of such fiscal year shall reflect the 
changes in the Consumer Price Index for All Urban Consumers, 
published by the Bureau of Labor Statistics, Department of 
Labor, for lunches served during the preceding 12-month period. 
42 USC 1759a 
note. 
42 USC 1759a. 
MISCELLANEOUS PROVISIONS AND DEFINITIONS, NATIONAL SCHOOL 
LUNCH ACT 
SEC. 205. Section 12(d) of the National School Lunch Act is amended 42 USC 1760. 
by inserting in paragraph (6) ", but excluding Job Corps Centers 
funded by the Department of Labor" after "retarded". 
SUMMER FOOD SERVICE PROGRAM FOR CHILDREN 
SEC. 206. Section 13 of the National School Lunch Act is amended 42 use 1761. 
b y -
(1) amending subsection (b)(2) to read as follows: 
"(2) Any service institution may only serve lunch and either 
breakfast or a meal supplement during each day of operation, except 
that any service institution that is a camp or that serves meals 
primarily to migrant children may serve up to four meals during each 
day of operation, if (A) the service institution has the administrative 
capability and the food preparation and food holding capabilities 
(where applicable) to serve more than one meal per day, and (B) the 
94 STAT. 2602 
PUBLIC LAW 96-499—DEC. 5, 1980 
service period of different meals does not coincide or overlap. The 
meals that camps and migrant programs may serve shall include a 
breakfast, a lunch, a supper, and meal supplements."; and 
(2) in subsection (p), striking out 'September 30, 1980" and 
inserting in lieu thereof "September 30,1984". 
AMENDMENT TO THE CHILD CARE FOOD PROGRAM 
42 use 1766. 
SEC. 207. (a) Section 17(a) of the National School Lunch Act is 
amended in the second sentence by inserting before the period at the 
end thereof the following: "; and such term shall also mean any other 
private organization providing nonresidential day care services for 
which it receives compensation from amounts granted to the States 
42 use 1397. 
under title XX of the Social Security Act". 
42 use 1766 
(b) The amendment made by subsection (a) of this section shall 
note. 
apply with respect to all fiscal years beginning on or after October 1, 
1980. 
ADJUSTMENTS 
42 use 1766 
SEC. 208. (a) During the fiscal year ending September 30, 1981, in 
"°*®- 
determining the national average payment rate for supplements 
served in institutions (other than family or group day care home 
sponsoring organizations) participating in the child care food pro-
gram under paragraphs (1) through (3) of section 17(c) of the National 
School Lunch Act— 
(1) no adjustment under such paragraphs shall be made on 
January 1 of such fiscal year; and 
(2) the adjustment under such paragraphs required to be made 
on July 1 of such fiscal year shall be computed to the nearest one-
fourth cent based on changes, measured over the preceding 
twelve-month period for which data are available, in the series 
for food away from home of the Consumer Price Index for All 
Urban Consumers, published by the Bureau of Labor Statistics, 
Department of Labor. 
42 use 1766. 
(b) Section 17(c) of the National School lunch Act is amended by 
inserting the following at the end of paragraphs (1), (2), and (3): "The 
average payment rate for supplements served in such institutions 
shall be 3 cents lower than the adjusted rate prescribed by the 
Secretary in accordance with the adjustment formula contained in 
this paragraph.". 
(c) Section 17(n)(l) of the National School Lunch Act is amended by 
striking out "$6,000,000" and inserting in lieu thereof "$4,000,000'\ 
SPECIAL MILK PROGRAM 
42 use 1772. 
SEC. 209. Section 3 of the Child Nutrition Act of 1966 is amended by 
inserting the following after the seventh sentence: "Notwithstanding 
the preceding two sentences, the rate of reimbursement per half-pint 
of milk, which is served to children who are not eligible for free milk 
in schools, child care institutions, and summer camps participating in 
meal service programs under the National School Lunch Act and this 
Act, shall be 5 cents.". 
PAYMENTS FOR FREE BREAKFASTS 
42 use 1773 
SEC. 210. Notwithstanding section 4(b)(2)(B)(ii) of the Child Nutri-
^°^- 
tion Act of 1966, in determining the maximum payment for free 
breakfasts under such section for the fiscal year ending September 
30,1981— 
authorization. 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2603 
(1) no adjustment under such section shall be made on January 
1 of such fiscal year; and 
(2) the adjustment under such section required to be made on 
July 1 of such fiscal year shall be computed to the nearest one-
fourth cent based on changes, measured over the preceding 
twelve-month period for which data are available, in the series 
for food away from home of the Consumer Price Index for All 
Urban Consumers, published by the Bureau of Labor Statistics, 
Department of Labor. 
FOOD SERVICE EQUIPMENT ASSISTANCE 
SEC. 211. Section 5 of the Child Nutrition Act of 1966 is amended 42 use 1774. 
b y -
(1) amending subsection (a) to read as follows: 
"(a) There is authorized to be appropriated $15,000,000 for the fiscal Appropriation 
year ending September 30,1981, $30,000,000 for the fiscal year ending ' ' 
" 
September 30,1982, $35,000,000 for the fiscal year ending September 
30,1983, and $40,000,000 for each succeeding fiscal year, to enable the 
Secretary to formulate and carry out a program to assist the States 
through grants-in-aid and other means to supply schools drawing 
attendance from areas in which poor economic conditions exist with 
equipment, other than land or buildings, for the storage, preparation, 
transportation, and serving of food to enable such schools to establish, 
maintain, and expand school food service programs. In the case of a 
nonprofit private school, such equipment shall be for use of such 
school principally in connection with child feeding programs author-
ized in this Act and in the National School Lunch Act."; and 42 USC 1751 
(2) in subsection (e), striking out "fiscal years ending Septem- "°'^" 
ber 30, 1978, September 30, 1979, and September 30, 1980" and 
inserting in lieu thereof "fiscal year ending September 30, 1978, 
and for each succeeding fiscal year ending on or before Septem-
ber 30,1984"; 
MISCELLANEOUS PROVISIONS AND DEFINITIONS, CHILD NUTRITION ACT OF 
1966 
SEC. 212. Section 15(c) of the Child Nutrition Act of 1966 is amended 42 use 1784. 
by inserting ", but excluding Job Corps Centers funded by the 
Department of Labor" after "retarded". 
NUTRITION EDUCATION AND TRAINING 
SEC. 213. Section 190')(2) of the Child Nutrition Act of 1966 is 42 use 1788. 
amended by— 
(1) striking out "For the fiscal year beginning October 1, 1979" 
and inserting in lieu thereof "For the fiscal year ending Septem-
ber 30, 1980, and for each succeeding fiscal year ending on or 
before September 30,1984"; 
(2) inserting after the first sentence the following: "For the 
fiscal year beginning October 1, 1980, and subsequent fiscal 
years, there is authorized to be appropriated for the grants 
referred 
to in the preceding sentence not more 
than 
$15,000,000."; and 
(3) striking out "preceding sentence" and inserting in lieu 
thereof "second preceding sentence". 
94 STAT. 2604 
PUBLIC LAW 96-499—DEC. 5, 1980 
TITLE III—STUDENT LOAN PROGRAMS 
SAVINGS ACHIEVED 
SEC. 301. For other provisions of law which reduce spending for 
fiscal year 1981 in satisfaction of the reconciliation requirements 
imposed by sections 3(a)(2) and 3(a)(18) of H. Con. Res. 307 (96th 
Congress), see the Education Amendments of 1980 (Public Law 
Ante, p. 1367. 
96-374). 
DISCLOSURE OF LOCATION OF BORROWERS WHO HAVE DEFAULTED ON 
STUDENT LOANS 
2
6 use 6103. 
SEC. 302. (a) Paragraph (4) of section 6103(m) of the Internal 
Revenue Code of 1954 (relating to individuals who have defaulted on 
student loans) is amended to read as follows: 
"(4) INDIVIDUALS WHO HAVE DEFAULTED ON STUDENT LOANS.— 
"(A) IN GENERAL.—Upon written request by the Secretary 
of Education, the Secretary may disclose the mailing address 
of 
any taxpayer who has defaulted on a loan— 
"(i) made under part B or E of title IV of the Higher 
20 use 1071, 
Education Act of 1965, or 
"(ii) made pursuant to section 3(aXl) of the Migration 
22 use 2602. 
and Refugee Assistance Act of 1962 to a student at an 
institution of 
higher education, 
for use only by officers, employees, or agents of the Depart-
ment of Education for purposes of locating such taxpayer for 
purposes of 
collecting such loan. 
"(B) DISCLOSURE TO EDUCATIONAL INSTITUTIONS, ETC.—Any 
mailing address disclosed under subparagraph (AXi) may be 
disclosed by the Secretary of Education to— 
"(i) any lender, or any State or nonprofit guarantee 
agency, which is participating under part B of title IV of 
20 use 1071. 
the Higher Education Act of 1965, or 
"(ii) any educational institution with which the Secre-
tary of Education has an agreement under part E of title 
20 use 1088. 
IV of such Act, 
for use only by officers, employees, or agents of such lender, 
guarantee agency, or institution whose duties relate to the 
collection of student loans for purposes of locating individ-
uals who have defaulted on student loans made under such 
loan programs for purposes of collecting such loans.'*. 
26 use 7213. 
(b) The first sentence of section 7213(aX2) of such Code (relating to 
unauthorized disclosure of information by State and other employees) 
is amended to read as follows^ "It shall be unlawful for any person 
(not described in paragraph (1)) willfully to disclose to any person, 
except as authorized in this title, any return or return information 
26 use 6103. 
(as defined in section 6103(b)) acquired by him or another person 
under subsection (d), (1) (6) or (7), or (mX4) of section 6103.". 
Effective date. 
(g) The amendments made by subsections (a) and (b) of this section 
26 use 6103 
gjjj^ii i ^ g gfpegt Qn ^jje date of the enactment of this Act. 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2605 
TITLE IV—CIVIL SERVICE, POSTAL 
SERVICE, AND RELATED PROGRAMS 
Subtitle A—Savings Under the Civil Service Program 
ELIMINATION OP RETROACTIVE ANNUITY ADJUSTMENT; PRORATION OP 
INITIAL ADJUSTMENT 
SEC. 401. (a) Section 8340(c) of title 5, United States Code, relating to 
cost-of-living adjustments, is amended— 
(1) by striking out paragraph (1) thereof; and 
(2) by inserting in lieu thereof the following new paragraph; 
"(1) The first increase (if any) made under subsection (b) of this 
section to an annuity which is payable from the Fund to an 
employee or Member who retires, or to the widow or widower of a 
deceased employee or Member, shall be equal to the product 
(adjusted to the nearest Vio of 1 percent) of— 
"(A) V
e of the applicable percent change computed under 
subsection Ob) of this section, multiplied by 
"(B) the number of full months for which the annuity was 
payable from the Fund before the effective date of the 
increase (counting any portion of a month as a full month).". 
Ob)(l) The amendment made by subsection (a)(1) shall apply with 5 use 8340 note. 
respect to annuities commencing after the 45th day after the date of 
the enactment of this Act, 
(2) The amendment made by subsection (a)(2) shall take effect with 
respect to any annuity increase which takes effect after the date of 
the enactment of this Act. 
ELIMINATION OF CREDIT FOR HOLIDAYS IN CALCULATING LUMP-SUM 
LEAVE PAYMENTS 
SEC. 402. (a) Section 5551(a) of title 5, United States Code, relating 
to lump-sum payment at separation for accumulated leave, is amend-
ed by adding at the end thereof the following new sentence: "The 
period of leave used for calculating the lump-sum payment shall not 
be extended due to any holiday occurring after separation.". 
(b) The amendment made by subsection (a) shall take effect on the Effective date. 
date of the enactment of this Act and shall apply to employees ^ ^^^ ^^^^ ^°*^-
separating from the service on or after such date. 
DISABILITY RETIREMENT ELIGIBIUTY 
SEC. 403. (a) Section 8337(a) of title 5, United States Code, relating 
to disability retirement, is amended to read as follows: 
"(a) An employee who completes 5 years of civilian service and has 
become disabled shall be retired on the employee's own application or 
on application by the employee's agency. Any employee shall be 
considered to be disabled only if the employee if found by the Office of 
Personnel Management to be unable, because of disease or injury, to 
render useful and efficient service in the employee's position and is 
not qualified for reassignment, under procedures prescribed by the 
Office, to a vacant position which is in the agency at the same grade 
or level and in which the employee would be able to render useful and 
efficient service. For the purpose of the preceding sentence, an 
employee of the United States Postal Service shall be considered not 
qualified for a reassignment described in that sentence if the reas-
94 STAT. 2606 
PUBLIC LAW 96-499—DEC. 5, 1980 
Infra. 
Effective date. 
5 u s e 8331 note. 
signment is to a position in a different craft or is inconsistent with the 
terms of a collective bargaining agreement covering the employee. A 
Member who completes 5 years of Member service and is found by the 
Office to be disabled for useful and efficient service as a Member 
because of disease or injury shall be retired on the Member's own 
application. An annuity authorized by this section is computed under 
section 8339(g) of this title, unless the employee or Member is eligible 
for a higher annuity computed under section 8339(a)-(e) or (n).'*. 
(b) Section 8331 of title 5, United States Code, is amended by 
striking out paragraph (6). 
(c) The amendments made by this section shall take effect on the 
90th day after the date of the enactment of this Act. 
MINIMUM DISABILITY RETIREMENT ANNUITY 
SEC. 404. (a) Section 8339(g) of title 5, United States Code, is 
amended by adding at the end thereof the following: "However, if an 
5 use 8337. 
employee or Member retiring under section 8337 of this title is 
receiving retired pay or retainer pay for military service (except that 
5 use 8332. 
specified in section 8332(c) (1) or (2) of this title) or Veterans' 
Administration pension or compensation in lieu of such retired or 
retainer pay, the annuity of that employee or Member shall be 
computed under subsection (a), (b), or (c) of this section, as appropri-
ate, excluding credit for military service from that computation. If 
the amount of the annuity so computed, plus the retired or retainer 
pay which is received, or which would be received but for the 
5 use 5532. 
application of the limitation in section 5532 of this title, or the 
Veterans' Administration pension or compensation in lieu of such 
retired or retainer pay, is less than the smaller of the annuity 
otherwise payable under paragraph (1) or (2) of this subsection, an 
amount equal to the difference shall be added to the annuity payable 
under subsection (a), (b), or (c) of this section, as appropriate.", 
(b) Section 8347 of title 5, United States Code, is amended by adding 
at the end thereof the following new subsection: 
"(m) Notwithstanding any other provision of law, for the purpose of 
ensuring the accuracy of information used in the administration of 
this chapter, at the request of the Director of the Office of Personnel 
Management— 
"(1) the Secretary of Defense or the Secretary's designee shall 
provide information on retired or retainer pay provided under 
10 use 101. 
title 10; and 
"(2) the Administrator of Veterans Affairs shall provide infor-
38 use 101. 
mation on pensions or compensation provided under title 38. 
Information, 
The Director shall request only such information as the Director 
safeguards. 
determines is necessary. The Director, in consultation with the 
officials from whom information is requested, shall establish, by 
regulation and otherwise, such safeguards as are necessary to ensure 
that information made available under this subsection is used only 
for the purpose authorized.". 
Effective date. 
(c) The amendments made by this section shall take effect on the 
5 use 8839 note, date of the enactment of this Act. 
EXEMPTION OF LIFE INSURANCE PREMIUMS FROM STATE TAXATION 
SEC. 405. (a) Section 8714 of title 5, United States Code, relating to 
Employees' Life Insurance Fund, is amended by adding at the end 
thereof the following new subsection: 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2607 
"(c)(1) No tax, fee, or other monetary payment may be imposed or 
collected by any State, the District of Columbia, or the Common-
wealth of Puerto Rico, or by any political subdivision or other 
governmental authority thereof, on, or with respect to, any premium 
paid under an insurance policy purchased under this chapter. 
"(2) Paragraph (1) of this subsection shall not be construed to 
exempt any company issuing a policy of insurance under this chapter 
from the imposition, payment, or collection of a tax, fee, or other 
monetary payment on the net income or profit accruing to or realized 
by that company from business conducted under this chapter, if that 
tax, fee, or payment is applicable to a broad range of business 
activity.". 
(b) The amendment made by subsection (a) shall take effect on the Effective date. 
date of the enactment of this Act, and shall apply with respect to ^ ^^ ^'^^^ "°*®-
premiums paid on or after such date. 
Subtitle B—Savings Under the Postal Service Program 
AUTHORIZATIONS FOR PUBLIC SERVICE APPROPRIATIONS 
SEC. 411. Section 2401(b)(1)(C) of title 39, United States Code, is 
amended by striking out "an amount equal to 8 percent of such sum 
for fiscal year 1971" and inserting in lieu thereof "$486,000,000". 
CONTINUATION OF SIX-DAY MAIL DELIVERY 
SEC. 412. During the period from the date of enactment of this Act 
until October 1,1981, the Postal Service shall take no action to reduce 
or to plan to reduce during that period of time the number of days 
each week for regular mail delivery. 
AUTHORIZATION FOR REVENUE FOREGONE APPROPRIATIONS 
SEC. 413. (a) Notwithstanding the provisions of sections 2401(c) and 
3626 of title 39, United States Code, the authorization for appropri-
ations for fiscal year 1981 for revenue foregone for mail matter 
described in former sections 4452 (b) and (c) of title 39, United States 
Code, shall be $50,000,000 less than would be authorized if this section 
were not enacted. 
(b) The reduction in authorization made by subsection (a) of this 
section may be deemed a failure of appropriation for the purposes of 
section 3627 of title 39, United States Code. 
RECONCILIATION APPROPRIATIONS 
SEC. 414. (a) Section 2401(c) of title 39, United States Code, is 
amended by adding at the end thereof the following new sentence: 
"In requesting an appropriation under this subsection for a fiscal 
year, the Postal Service shall include an amount to reconcile sums 
authorized to be appropriated for prior fiscal years on the basis of 
estimated mail volume with sums which would have been authorized 
to be appropriated if based on the final audited mail volume.". 
(b) The request for a reconciliation appropriation described in 
subsection (a) of this section which was submitted by the Postal 
Service for fiscal year 1981 shall be resubmitted for fiscal year 1982. 
79-194 O—81—pt. 2 
84 : QL3 
94 STAT. 2608 
PUBLIC LAW 96-499—DEC. 5, 1980 
EFFECTIVE DATE 
39 use 2401 
SEC. 415. The provisions of this subtitle, including the amendments 
^°^^- 
made by this subtitle, shall take effect on the date of the enactment of 
this Act. 
Subtitle C—Savings Under the Federal Employees' 
Compensation Act 
AMENDMENTS 
SEC. 421. (a) Subsection (a) of section 8146a of title 5, United States 
Code, is amended to read as follows: 
"(a) Compensation payable on account of disability or death which 
occurred more than one year before March 1 of each year shall be 
annually increased on that date by the amount determined by the 
Secretary of Labor to represent the percent change in the price index 
published for December of the preceding year over the price index 
published for the December of the year prior to the preceding year, 
adjusted to the nearest one-tenth of 1 percent.". 
(b) Section 8101 of title 5, United States Code, is amended by 
striking out paragraph (19), and by redesignating paragraphs (20) and 
(21) as paragraphs (19) and (20), respectively. 
EFFECTIVE DATE 
5 use 8101 note. 
SEC. 422. The amendments made by section 421 shall take effect on 
the date of the enactment of this Act with respect to any adjustments 
which are to be made on or after that date; except that the period 
specified in such section as extending from December to December 
shall, with respect to the adjustment to be made on March 1, 1981, 
extend instead from the last month in which the price index resulted 
in an adjustment prior to enactment to December of 1980. 
TITLE V—HIGHWAY, RAIL, AND RELATED 
PROGRAMS 
Subtitle A—Highway Programs 
SEC. 501. Notwithstanding any other provision of law, the total of 
all obligations for "State and Community Highway Safety" (23 U.S.C. 
402) for the fiscal year ending September 30, 1981, shall not exceed 
$150,405,000. 
Subtitle B—Other Programs 
SEC. 511. If the Senate and the House of Representatives approve a 
conference report on the bill (S. 1159) to authorize appropriations for 
15 use 1381 
the National Traffic and Motor Vehicle Safety Act of 1966 and the 
?5*use 1901 
Motor Vehicle Information and Cost Savings Act, and for other 
note. 
purposes, which includes an authorization for fiscal year 1981 pursu-
ant to section 121 of the National Traffic and Motor Vehicle Safety 
15 use 1409. 
Act of 1966 that exceeds $53,800,000, then the Secretary of the Senate 
is directed to include the following provision in the enrolled copy of 
Appropriation 
such bill: "Of the funds authorized to be appropriated pursuant to 
authorization. 
section 121 of the National Traffic Motor Vehicle Safety Act of 1966 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2609 
(15 U.S.C. 1409) not more than $53,800,000 is authorized to be 
appropriated in fiscal year 1981.". 
SEC. 512. (a) For provisions of law which reduce spending for fiscal 
year 1981 under the railroad rehabilitation and improvement financ-
ing program established under title V of the Railroad Revitalization 
and Regulatory Reform Act of 1976 in satisfaction of the reconcili-
ation requirements imposed by sections 3(a)(3) and 3(a)(13) of H. Con. 
Res. 307 (96th Congress), see the Staggers Rail Act of 1980 (Public 
Law 96-448). 
(b) For provisions of law which further reduce spending for fiscal 
year 1981 in satisfaction of the reconciliation requirements imposed 
by sections 3(a)(3) and 3(a)(13) of H. Con. Res. 307 (96th Congress), see 
the Passenger Railroad Rebuilding Act of 1980 (Public Law 96-254). 
TITLE VI—AIRPORT AND AIRWAY 
IMPROVEMENT ACT 
SEC. 601. Notwithstanding any other provision of law, the total 
amount of grants which the Secretary is authorized to make from the 
Airport and Airway Trust Fund for airport development and airport 
planning and for grants under section 104(e) of the Airport Safety and 
Noise Abatement Act of 1979, as amended, for the fiscal year ending 
September 30,1981, shall not exceed $725,000,000. 
TITLE VII—VETERANS' PROGRAMS 
45 u s e 821. 
Ante, p. 1895. 
Ante, p. 410. 
SEC. 701. For provisions of law which reduce spending for fiscal 
year 1981 in veterans' programs in satisfaction of the reconciliation 
requirements imposed by sections 3(a)(7) and 3(a)(20) of H. Con. Res. 
307 (96th Congress), see section 401 of the Veterans' Administration 
Health-Care Amendments of 1980 (Public Law 96-330), section 504 of 
the Veterans' Disability Compensation and Housing Benefits Amend-
ments of 1980 (Public Law 96-385), and sections 201, 202,211, 212, and 
802(b), and title VI, of the Veterans' Rehabilitation and Education 
Amendments of 1980 (Public Law 96-466). 
TITLE VIII—SMALL BUSINESS PROGRAMS 
Ante, p. 1051. 
Ante, p. 1534. 
Ante, pp. 
2187-2190, 2217, 
2208. 
SEC. 801. For provisions of law which reduce spending for fiscal 
1981 in small business programs in satisfaction of the reconciliation 
requirements imposed by sections 3(a)(6) and 3(a)(19) of H. Con. Res. 
307 (96th Congress), see Public Law 96-302 (the Small Business 
Development Act of 1980). 
TITLE IX—MEDICARE AND MEDICAID 
RELATED PROVISIONS 
Ante, p. 833. 
Medicare and 
Medicaid 
Amendments of 
1980. 
SHORT TITLE; TABLE OF CONTENTS OF TITLE 
SEC. 900. This title may be cited as the "Medicare and Medicaid 
Amendments of 1980". 
42 u s e 1305 
note. 
TABLE OF CONTENTS OF TITLE 
Sec. 900. Short title; table of contents of title. 
94 STAT. 2610 
PUBLIC LAW 96-499—DEC. 5, 1980 
PART A—PROVISIONS RELATING TO MEDICARE AND MEDICAID 
Subpart I—Provider Reimbursement Changes 
Sec. 901. Nonprofit hospital philanthropy. 
Sec. 902. Reimbursement for inappropriate inpatient hospital services. 
Sec. 903. Continued use of demonstration project reimbursement systems. 
Sec. 904. Hospital providers of long-term care services ("swing-beds"). 
Sec. 905. Withholding of Federal share of payments to medicaid providers to recover 
medicare overpayments. 
Subpart II—Other Administrative Provisions 
Sec. 911. Quality assurance programs for clinical laboratories. 
Sec. 912. Requirements concerning reporting of financial interest. 
Sec. 913. Exclusion of health care professionals convicted of medicare- or medicaid-
related crimes. 
Sec. 914. Coordinated audits under the Social Security Act. 
Sec. 915. Life safety code requirements. 
Sec. 916. Alternative to decertification of long-term care facilities out of compliance 
with conditions of participation; look behind authority. 
Sec. 917. Criminal standards for certain medicare- and medicaid-related crimes. 
Sec. 918. Reimbursement of clinical laboratories. 
Sec. 919. Study of need for dual participation of skilled nursing facilities. 
Subpart III—Provisions Relating to Professional Standards Review Organizations 
(PSRO's) 
Sec. 921. Expanded membership of professional standards review organizations. 
Sec. 922. Registered nurse and dentist membership on statewide council advisory 
group. 
Sec. 923. Nonphysician membership on national professional standards review 
council. 
Sec. 924. Required activities of professional standards review organizations. 
Sec. 925. Efficiency in delegated review. 
Sec. 926. Review of routine hospital admission services and preoperative hospital 
stays by professional standards review organizations. 
Sec. 927. Consultation by professional standards review organizations with health 
care practitioners. 
Sec. 928. Response of professional standards review organizations to freedom of in-
formation act requests. 
Sec. 929. Study of professional standards review organizations norms, standards, 
and criteria. 
PART B—PROVISIONS RELATING TO MEDICARE 
Subpart I—Changes in Services or Benefits 
Sec. 930. Home health services. 
Sec. 931. Alcohol detoxification facility services. 
Sec. 932. Preadmission diagnostic testing. 
Sec. 933. Comprehensive outpatient rehabilitation facility services. 
Sec. 934. Outpatient surgery. 
Sec. 935. Outpatient physical therapy services. 
Sec. 936. Dentists' services. 
Sec. 937. Optometrists' services. 
Sec. 938. Antigens. 
Sec. 939. Treatment of plantar warts. 
Subpart II—Administrative Changes and Miscellaneous Provisions 
Sec. 941. Presumed coverage provisions. 
Sec. 942. Payment to providers of services. 
Sec. 943. Limitation on payments to radiologists and pathologists. 
Sec. 944. Physician treatment plan for speech pathology. 
Sec. 945. Reenrollment and open enrollment in part B. 
Sec. 946. Determination of reasonable charge. 
Sec. 947. Shortened part B termination period for certain individuals whose premi-
ums medicaid has ceased to pay. 
Sec. 948. Reimbursement of physicians' services in teaching hospitals. 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2611 
Sec. 949. Flexibility in application of standards to rural hospitals. 
Sec, 950. Hospital transfer requirement for skilled nursing facility coverage. 
Sec, 951. Certification and utilization review by podiatrists. 
Sec. 952. Access to books and records of subcontractors. 
Sec. 953. Medicare liability secondary where payment can be made under liability 
or no fault insurance. 
Sec. 954. Payment for physicians' services where beneficiary has died. 
Sec. 955. Provider reimbursement review board. 
Sec. 956. Payment where beneficiary not at fault. 
Sec. 957. Technical renal disease amendments. 
Sec. 958. Studies and demonstration projects. 
Sec. 959. Temporary delay in periodic interim payments. 
PART C—PROVISIONS RELATING TO MEDICAID 
Sec. 961. Disputed medicaid claims. 
Sec. 962. Reimbursement rates under medicaid for skilled nursing and intermediate 
care facility services. 
Sec. 963. Extension of increased funding for State medicaid fraud control units. 
Sec. 964. Change in calendar quarter for which satisfactory utilization review must 
be shown to receive waiver of medicaid reduction. 
Sec. 965. Reimbursement under medicaid for services furnished by nurse-midwives. 
Sec. 966. Demonstration projects relating to the training of AFDC recipients as 
home health aides. 
PART A—PROVISIONS RELATING TO MEDICARE AND MEDICAID 
Subpart I—Provider Reimbursement Changes 
NONPROFIT HOSPITAL PHILANTHROPY 
SEC. 901. (a) Part A of title XI of the Social Security Act is amended 
by adding at the end thereof the following new section: 
NONPROFIT HOSPITAL PHILANTHROPY 
"SEC. 1134. For purposes of determining, under titles V, XVIII, and 
XIX of this Act, the reasonable costs of services provided by nonprofit 
hospitals, the following items shall not be deducted from the operat-
ing costs of such hospitals: 
"(1) A grant, gift, or endowment, or income therefrom, which is 
to or for such a hospital and which has not been designated by 
the donor for paying any specific operating costs. 
"(2) A grant or similar payment which is to such a hospital, 
which was made by a governmental entity, and which is not 
available under the terms of the grant or payment for use as 
operating funds. 
"(3) Those types of donor designated grants and gifts (including 
grants and similar payments which are made by a governmental 
entity), and income therefrom, which the Secretary determines, 
in the best interests of needed health care, should be encouraged. 
"(4) The proceeds from the scale or mortgage of any real estate 
or other capital asset of such a hospital, which real estate or asset 
the hospital acquired through gift or grant, if such proceeds are 
not available for use as operating funds under the terms of the 
gift or grant. 
Paragraph (4) shall not apply to the recovery of the appropriate share 
of depreciation when gains or losses are realized from the disposal of 
depreciable assets.", 
(b) The amendment made by subsection (a) shall apply to grants, 
gifts, and endowments, and income therefrom, made or established 
after the date of the enactment of this Act. 
42 u s e 1320b-4. 
42 u s e 701, 
1395, 1396. 
42 u s e 1320b-
note. 
94 STAT. 2612 
PUBLIC LAW 96-499—DEC. 5, 1980 
REIMBURSEMENT FOR INAPPROPRIATE INPATIENT HOSPITAL SERVICES 
42 use 1395X. 
SEC. 902. (a)(1) Section 1861(v)(l) of the Social Security Act is 
amended by adding at the end thereof the following new subpara-
graph: 
"(G)(i) In any case in which a hospital provides inpatient services to 
an individual that would constitute post-hospital extended care 
services if provided by a skilled nursing facility and a Professional 
Standards Review Organization (or, in the absence of such a qualified 
organization, an organization or agency with review responsibility as 
42 use 1301. 
is otherwise provided for under part A of title XI) determines that 
inpatient hospital services for the individual are not medically 
necessary but post-hospital extended care services for the individual 
are medically necessary and such extended care services are not 
otherwise available to the individual (as determined in accordance 
with criteria established by the Secretary) at the time of such 
determination, payment for such services provided to the individual 
shall continue to be made under this title at the payment rate 
described in clause (ii) during the period in which— 
"(I) such post-hospital extended care services for the individual 
are medically necessary and not otherwise available to the 
individual (as so determined), 
"(II) inpatient hospital services for the individual are not 
medically necessary, and 
"(III) the individual is entitled to have payment made for post-
hospital extended care services under this title, 
except that if the Secretary determines that the hospital had (during 
the immediately preceding calendar year) an average daily occu-
pancy rate of 80 percent or more, such payment shall be made (during 
such period) on the basis of the reasonable cost of inpatient hospital 
services. 
"(ii)(I) Except as provided in subclause (II), the payment rate 
referred to in clause (i) is a rate equal to the estimated adjusted State-
wide average rate per patient-day paid for services provided in skilled 
42 use 1396. 
nursing facilities under the State plan approved under title XIX for 
the State in which such hospital is located, or, if the State in which 
the hospital is located does not have a State plan approved under title 
XIX, the estimated adjusted State-wide average allowable costs per 
patient-day for extended care services under this title in that State. 
"(II) If a hospital has a unit which is a skilled nursing facility, the 
payment rate referred to in clause (i) for the hospital is a rate equal to 
the lesser of the rate described in subclause (I) or the allowable costs 
in effect under this title for extended care services provided to 
patients of such unit. 
"(iii) Any day on which an individual receives inpatient services for 
which payment is made under this subparagraph shall, for purposes 
of this Act (other than this subparagraph), be deemed to be a day on 
which the individual received inpatient hospital services. 
Occupancy rate. 
"(iv) For the purpose of determining the occupancy rate with 
respect to hospitals under clause (i)— 
"(I) public hospitals under common ownership may elect (with 
the approval of the Secretary) to be treated as a single hospital, 
and 
"(II) beginning two years after the date this subparagraph is 
first applied with respect to a hospital, the Secretary, to the 
extent feasible, shall not treat as an inpatient an individual with 
respect to whom payment is made to the hospital only because of 
42 use 1396a. 
this subparagraph or section 1902(h).". 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2613 
(2) For amendment to section 1158(a) of the Social Security Act 
relating to these provisions, see section 931(h) of this title. 
(3) Section 1158(d) of such Act is amended by adding at the end the 
following new sentence: "In the case of disapproval of inpatient 
hospital services where payment for inpatient services is continued 
under section 1861(v)(l)(G) or section 1902(h), the previous sentence 
shall not apply with respect to such disapproval,". 
(b)(1) Section 1902(a)(13)(D) of such Act is amended— 
(A) by inserting "(i)" after "(D)", 
(B) by striking out the semicolon and inserting in lieu thereof a 
comma, and 
(C) by inserting at the end thereof the following new clause: 
"(ii) for payment of the reasonable cost of inappropriate 
inpatient services (described in subsection (h)(1)) for which pay-
ment is provided only because of subsection (h) at the rate of 
payment for such services provided for under such subsection, 
and". 
(2) Section 1902 of such Act is further amended by adding at the end 
the following new subsection: 
"(h)(1) In any case in which a hospital provides inpatient services to 
an individual that would constitute skilled nursing facility services if 
provided by a skilled nursing facility or that would constitute 
intermediate care facility services if provided by an intermediate 
care facility and a Professional Standards Review Organization (or, in 
the absence of such a qualified organization, an organization or 
agency with review responsibility as is otherwise provided for under 
part A of title XI) determines that inpatient hospital services for the 
individual are not medically necessary but skilled nursing facility 
services or intermediate care facility services, respectively, for the 
individual are medically necessary and such type of facility services 
are not otherwise available to the individual (as determined in 
accordance with criteria established by the Secretary) at the time of 
such determination, payment for inpatient hospital services shall 
continue to be made under the State plan approved under this title at 
the payment rate described in paragraph (2) for such type of services 
during the period in which— 
"(A) such skilled nursing facility services or intermediate care 
facility services (as the case may be) for the individual are 
medically necessary and not otherwise available to the individ-
ual (as so determined), 
"(B) inpatient hospital services for the individual are not 
medically necessary, and 
"(C) the individual is entitled to receive medical assistance 
with respect to such facility services under the State plan, 
except that if the Secretary determines that the hospital had (during 
the immediately preceding calendar year) an average daily occu-
pancy rate of 80 percent or more, such payment shall be made (during 
such period) on the same basis as otherwise used under the State's 
plan for payments for providing inpatient hospital services. 
"(2)(A) Except as provided in subparagraph (B), the payment rate 
referred to in paragraph (1), in the case of skilled nursing facility 
services or intermediate care facility services, is the estimated 
adjusted State-wide average rate per patient-day paid for such 
respective type of services provided under the State plan. 
(B) If a hospital has a unit which is a skilled nursing facility or 
intermediate care facility, the payment rate referred to in paragraph 
(1), in the case of inpatient services which constitute skilled nursing 
facility services or intermediate care facility services, is a rate equal 
to the lesser of the rate described in subparagraph (A) or the 
Post, p. 2633. 
42 use 1320-7. 
Ante, p. 2612, 
infra.. 
42 use 1396a. 
42 use 1396a. 
42 use 1301. 
94 STAT. 2614 
PUBLIC LAW 96-499—DEC. 5, 1980 
Effective date. 
42 u s e 1320C-7 
note. 
allowable costs in effect under the State plan for such type of 
inpatient services provided to patients of such unit. 
"(3) Any day on which an individual receives inpatient services for 
which payment is made under this subsection shall, for purposes of 
this Act (other than this subsection), be deemed to be a day on which 
the individual received inpatient hospital services. 
"(4) For the purpose of determining the occupancy rate with 
respect to hospitals under paragraph (2)— 
"(A) public hospitals under common ownership may elect (with 
the approval of the Secretary) to be treated as a single hospital, 
and 
"(B) beginning two years after the date this subsection is first 
applied with respect to a hospital, the Secretary, to the extent 
feasible, shall not treat as an inpatient an individual with respect 
to whom payment is made to the hospital only because of this 
subsection or section 1861(v)(l)(G).". 
(c) The amendments made by this section shall become effective on 
the date of which final regulations, promulgated by the Secretary to 
implement such amendments, are first issued; and those regulations 
shall be issued not later than the first day of the sixth month 
following the month in which this Act is enacted. 
42 u s e 1395f. 
42 u s e 1395b-l, 
1395ZZ. 
42 u s e 1395b-l 
and note, 1395ZZ. 
CONTINUED USE OF DEMONSTRATION PROJECT REIMBURSEMENT SYSTEMS 
SEC. 903. (a) Section 181403) of the Social Security Act is amended— 
(1) by inserting "except as provided in paragraph (3)," in 
paragraph (1) before "the lesser", 
(2) by striking out "or" at the end of paragraph (1), 
(3) by striking out the period at the end of paragraph (2) and 
inserting in lieu thereof "; or", and 
(4) by adding at the end thereof the following new paragraph: 
"(3) if some or all of the hospitals in a State have been 
reimbursed for services (for which payment may be made under 
this part) pursuant to a reimbursement system approved as a 
demonstration project under section 402 of the Social Security 
Amendments of 1967 or section 222 of the Social Security 
Amendments of 1972, if the rate of increase in such hospitals in 
their costs per hospital inpatient admission of individuals enti-
tled to benefits under this part over the duration of such project 
was equal to or less than such rate of increase for admissions of 
such individuals with respect to all hospitals in the United States 
during such period, and if either the State has legislative 
authority to operate such system and the State elects to have 
reimbursement to such hospitals made in accordance with this 
paragraph or the system is operated through a voluntary agree-
ment of hospitals and such hospitals elect to have reimburse-
ment to those hospitals made in accordance with this paragraph, 
then the Secretary may provide for continuation of reimburse-
ment to such hospitals under such system until the Secretary 
determines that— 
"(A) a third-party payor reimburses such a hospital on a 
basis other than under such system, or 
"(B) the rate of increase for the previous three-year period 
in such hospitals in costs per hospital inpatient admission of 
individuals entitled to benefits under this part is greater 
than such rate of increase for admissions of such individuals 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2615 
with respect to all hospitals in the United States for such 
period. 
In the case of any State which has had such a demonstration project 
reimbursement system in continuous operation since July 1,1977, the 
Secretary shall provide under paragraph (3) for continuation of 
reimbursement to hospitals in the State under such system until the 
Secretary determines that either of the conditions described in 
subparagraph (A) or (B) of such paragraph has occurred.". 
(b) Section 1902(a)(13)(D)(i) of such Act, as amended by section 
902(b)(1) of this title, is amended by inserting after "title XVIII" the 
following: ", except that in the case of hospitals reimbursed for 
services under part A of title XVIII in accordance with section 
1814(b)(3), the plan must provide for payment of inpatient hospital 
services provided in such hospitals under the plan in accordance with 
the reimbursement system used under such section". 
(c) Notwithstanding any other provision of law, the Secretary of 
Health and Human Services (hereinafter in this title referred to as 
the "Secretary") may not provide for more than a total of six 
Statewide medicare hospital reimbursement demonstration projects 
under the authority of section 402 of the Social Security Amendments 
of 1967 or of section 222 of the Social Security Amendments of 1972, 
including any such projects provided for before the date of the 
enactment of this Act. 
42 u s e 1396a. 
42 u s e 1395. 
Ante, p. 2614. 
42 u s e 1395b-l 
note. 
42 u s e 1395b-l 
and note, 1395/Z. 
HOSPITAL PROVIDERS OF LONG-TERM CARE SERVICES (SWING-BEDS ) 
SEC. 904. (a)(1) Title XVIII of the Social Security Act is amended by 
adding after section 1882 the following new section: 
Post, p. 2645, 42 
u s e 1395CC. 
HOSPITAL PROVIDERS OF EXTENDED CARE SERVICES 
"SEC. 1883. (a)(1) Any hospital (other than a hospital which has in 42 use 1395 tt. 
effect a waiver under subparagraph (A) of the last sentence of section 
1861(e)) which has an agreement under section 1866 may (subject to 
subsection (b)) enter into an agreement with the Secretary under 
which its inpatient hospital facilities may be used for the furnishing 
of services of the type which, if furnished by a skilled nursing facility, 
would constitute extended care services. 
"(2)(A) Notwithstanding any other provision of this title, payment 
to any hospital for services furnished under an agreement entered 
into under this section shall be based upon the reasonable cost of the 
services as determined under subparagraph (B). 
"(B)(i) The reasonable cost of the services consists of the reasonable 
cost of routine services (determined under clause (ii)) and the reason-
able cost of ancillary services (determined under clause (iii)). 
"(ii) The reasonable cost of routine services furnished during any 
calendar year by a hospital under an agreement under this section is 
equal to the product of— 
"(I) the number of patient-days during the year for which the 
services were furnished, and 
"(II) the average reasonable cost per patient-day, such average 
reasonable cost per patient-day being the average rate per 
patient-day paid for routine services during the previous calen-
dar year under the State plan (of the State in which the hospital 
is located) under title XIX to skilled nursing facilities located in 
the State and which meet the requirements specified in section 
1902(a)(28), or, in the case of a hospital located in a State which 
does not have such a State plan, the average rate per patient-day 
42 u s e 1396. 
42 u s e 1396a. 
94 STAT. 2616 
PUBLIC LAW 96-499—DEC. 5, 1980 
42 use 300m. 
42 use 1395CC. 
Post, p. 2645. 
42 use 1395, 
1396. 
42 use 1395x. 
paid for routine services during the previous calendar year under 
this title to skilled nursing facilities in such State. 
"(iii) The reasonable cost of ancillary services shall be determined 
in the same manner as the reasonable cost of ancillary services 
provided for inpatient hospital services. 
"(b) The Secretary may not enter into an agreement under this 
section with any hospital unless— 
"(1) except as provided under subsection (g), the hospital is 
located in a rural area and has less than 50 beds, and 
"(2) the hospital has been granted a certificate of need for the 
provision of long-term care services from the State health plan-
ning and development agency (designated under section 1521 of 
the Public Health Service Act) for the State in which the hospital 
is located. 
"(c) An agreement with a hospital under this section shall, except 
as otherwise provided under regulations of the Secretary, be of the 
same duration and subject to termination on the same conditions as 
are agreements with skilled nursing facilities under section 1866 and 
shall, where not inconsistent with any provision of this section, 
impose the same duties, responsibilities, conditions, and limitations, 
as those imposed under such agreements entered into under section 
1866; except that no such agreement with any hospital shall be in 
effect for any period during which the hospital does not have in effect 
an agreement under section 1866, or during which there is in effect 
for the hospital a waiver under subparagraph (A) of the last sentence 
of section 1861(e). A hospital with respect to which an agreement 
under this section has been terminated shall not be eligible to enter 
into a new agreement until a two-year period has elapsed from the 
termination date. 
"(d) Any agreement with a hospital under this section shall provide 
that payment for services will be made only for services for which 
payment would be made as post-hospital extended care services if 
those services had been furnished by a skilled nursing facility under 
an agreement entered into under section 1866; and any individual 
who is furnished services, for which payment may be made under an 
agreement under this section, shall, for purposes of this title (other 
than this section), be deemed to have received post-hospital extended 
care services in like manner and to the same extent as if the services 
furnished to him had been post-hospital extended care services 
furnished by a skilled nursing facility under an agreement under 
section 1866. 
"(e) During a period for which a hospital has in effect an agreement 
under this section, in order to allocate routine costs between hospital 
and long-term care services for purposes of determining payment for 
inpatient hospital services, the total reimbursement due for routine 
services from all classes of long-term care patients (including title 
XVIII, title XIX, and private pay patients) shall be subtracted from 
the hospital's total routine costs before calculations are made to 
determine title XVIII reimbursement for routine hospital services. 
"(f) A hospital which enters into an agreement with the Secretary 
under this section shall be required to meet those conditions applica-
ble to skilled nursing facilities relating to discharge planning and the 
social services function (and staffing requirements to satisfy it) which 
are promulgated by the Secretary under section 1861(j)(15). Services 
furnished by such a hospital which would otherwise constitute post-
hospital extended care services if furnished by a skilled nursing 
facility shall be subject to the same requirements applicable to such 
services when furnished by a skilled nursing facility except for those 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2617 
requirements the Secretary determines are inappropriate in the case 
of these services being furnished by a hospital under this section. 
"(g) The Secretary may enter into an agreement under this section 
on a demonstration basis with any hospital which does not meet the 
requirement of subsection (b)(1), if the hospital otherwise meets the 
requirements of this section.". 
(b) Title XIX of such Act is amended by adding after section 1912 
the following new section: 
HOSPITAL PROVIDERS OF SKILLED NURSING AND INTERMEDIATE CARE 
SERVICES 
"SEC. 1913. (a) Notwithstanding any other provision of this title, 
payment may be made, in accordance with this section, under a State 
plan approved under this title for skilled nursing facility services and 
intermediate care facility services furnished by a hospital which has 
in effect an agreement under section 1883. 
"(b)(1) Payment to any such hospital, for any skilled nursing or 
intermediate care facility services furnished pursuant to subsection 
(a), shall be at a rate equal to the average rate per patient-day paid for 
routine services during the previous calendar year under the State 
plan to skilled nursing and intermediate care facilities, respectively, 
located in the State in which the hospital is located. The reasonable 
cost of ancillary services shall be determined in the same manner as 
the reasonable cost of ancillary services provided for inpatient 
hospital services. 
"(2) With respect to any period for which a hospital has an 
agreement under section 1883, in order to allocate routine costs 
between hospital and long-term care services, the total reimburse-
ment for routine services due from all classes of long-term care 
patients (including title XVIII, title XIX, and private pay patients) 
shall be subtracted from the hospital total routine costs before 
calculations are made to determine reimbursement for routine hos-
pital services under the State plan.". 
(c) Within three years after the date of the enactment of this Act, 
the Secretary of Health and Human Services shall submit to the 
Congress a report evaluating the programs established by the amend-
ments made by this section and shall include in such report an 
analysis of— 
(1) the extent and effect of the agreements under such pro-
grams on availability and effective and economical provision of 
long-term care services, 
(2) whether such programs should be continued, 
(3) the results of any demonstration projects conducted under 
such programs, and 
(4) whether eligibility to participate in such programs should 
be extended to other hospitals, regardless of bed size or 
geographic location, where there is a shortage of long-term care 
beds. 
(d) The amendments made by this section shall become effective on 
the date on which final regulations, promulgated by the Secretary to 
implement such amendments, are first issued; and those regulations 
shall be issued not later than the first day of the sixth month 
following the month in which this Act is enacted. 
42 u s e 1396Z. 
Ante, p. 2615. 
42 u s e 1395, 
1396. 
Report to 
Congress. 
42 u s e 1395tt 
note. 
42 u s e 1395tt 
note. 
94 STAT. 2618 
PUBLIC LAW 96-499—DEC. 5, 1980 
42 u s e 1396a. 
Post, p. 2650. 
Infra. 
42 u s e 1396b. 
Infra, 
WITHHOLDING OF FEDERAL SHARE OF PAYMENTS TO MEDICAID PROVIDERS 
TO RECOVER MEDICARE OVERPAYMENTS 
SEC. 905. (a) Subparagraphs (D)(i) and (E) of section 1902(a)(13) of 
the Social Security Act are each amended by inserting "(except where 
the State agency is subject to an order under section 1914)" after 
"payment". 
03) Section 1903(a)(1) of such Act is amended by striking out 
"subject to subsections (g) and (h)" and inserting in lieu thereof 
"subject to subsections (g), (h), and (j)". 
(c)(1) Section 1903(j) of such Act is amended to read a follows: 
"(j) Notwithstanding the preceding provisions of this section, the 
amount determined under subsection (a)(1) for any State for any 
quarter shall be adjusted in accordance with section 1914.". 
(2) Section 1903(n) of such Act is amended by striking out "or is 
subject to a suspension of payment order issued under subsection (j)". 
(d) Title XIX of such Act is amended by adding after section 1913 
(added by section 904(b) of this title) the following new section: 
42 u s e 1396m. 
42 u s e 1395CC. 
42 u s e 1395. 
42 u s e 1395u. 
Notice. 
Implementation 
procedures. 
WITHHOLDING OF FEDERAL SHARE OF PAYMENTS FOR CERTAIN 
MEDICARE PROVIDERS 
"SEC 1914. (a) The Secretary may adjust, in accordance with this 
section, the Federal matching payment to a State with respect to 
expenditures for medical assistance for care or services furnished in 
any quarter by— 
"(1) an institution (A) which has or previously had in effect an 
agreement with the Secretary under section 1866; and (B)(i) from 
which the Secretary has been unable to recover overpayments 
made under title XVIII, or (ii) from which the Secretary has been 
unable to collect the information necessary to enable him to 
determine the amount (if any) of the overpayments made to such 
institution under title XVIII; and 
"(2) any person (A) who (i) has previously accepted payment on 
the basis of an assignment under section 1842(b)(3)(B)(ii), and (ii) 
during the annual period immediately preceding such quarter 
submitted no claims for payment under title XVIII, or submitted 
claims for payment under title XVIII which aggregated less than 
the amount of overpayments made to him, and (B)(i) from whom 
the Secretary has been unable to recover overpayments received 
in violation of the terms of such assignment, or (ii) from whom 
the Secretary has been unable to collect the information neces-
sary to enable him to determine the amount (if any) of the 
overpayments made to such person under title XVIII. 
"(b) The Secretary may (subject to the remaining provisions of this 
section) reduce payment to a State under this title for any quarter by 
an amount equal to the lesser of the Federal matching share of 
payments to any institution or person specified in subsection (a), or 
the total overpayments to such institution or person under title 
XVIII, and may require the State to reduce its payment to such 
institution or person by such amount. 
"(c) The Secretary shall not make any adjustment in the payment 
to a State, nor require any adjustment in the payment to an 
institution or person, pursuant to subsection (b) until after he has 
provided adequate notice (which shall be not less than 60 days) to the 
State agency and the institution or person. 
"(d) The Secretary shall by regulation provide procedures for 
implementation of this section, which procedures shall (1) determine 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2619 
42 u s e 1395. 
42 u s e 13951, 
1395t. 
the amount of 
the Federal payment to which the institution or person 
would otherwise be entitled under this section which shall be treated 
as a setoff against overpayments under title XVIII, and (2) assure the 
restoration to the institution or person of amounts withheld under 
this section which are ultimately determined to be in excess of 
overpayments under title XVIII and to which the institution or 
person would otherwise be entitled under this title. 
"(e) The Secretary shall restore to the trust funds established under 
sections 1817 and 1841, as appropriate, amounts recovered under this 
section as setoffs against overpayments under title XVIII. 
"(f) Notwithstanding any other provision of this title, an institution 
or person shall not be entitled to recover from any State any amount 
in payment for medical care and services under this title which is 
withheld by the State agency pursuant to an order by the Secretary 
under subsection (b).". 
Subpart II—Other Administrative Provisions 
QUAUTY ASSURANCE PROGRAMS FOR CLINICAL LABORATORIES 
SEC. 911. Section 1123(a) of the Social Security Act is amended by 42 use i320a-2. 
striking out "1977" and inserting in lieu thereof "1981". 
REQUIREMENTS CONCERNING REPORTING OF FINANCIAL INTEREST 
SEC. 912. (a) Section 1124(a)(3)(A)(ii) of the Social Security Act is 42 use i320a-3. 
amended to read as follows: 
"(ii) is the owner of a whole or part interest in any mortgage, 
deed of trust, note, or other obligation secured (in whole or in 
part) by the entity or any of the property or assets thereof, which 
whole or part interest is equal to or exceeds $25,000 or 5 per 
centum of the total property and assets of the entity; or", 
(b) Section 1902(a)(35) of such Act is amended to read as follows: 42 use I396a. 
"(35) provide that any disclosing entity (as defined in section 
1124(a)(2)) receiving payments under such plan complies with the 4
2 use i320a-3. 
requirements of section 1124;". 
EXCLUSION OF HEALTH CARE PROFESSIONALS CONVICTED OF MEDICARE-
OR MEDICAID-RELATED CRIMES 
SEC 913. (a) Part A of title XI of the Social Security Act is amended 
by inserting after section 1127 the following new section: 
EXCLUSION OF CERTAIN INDIVIDUALS CONVICTED OF MEDICARE- OR 
MEDICAID-RELATED CRIMES 
"SEC. 1128. (a) Whenever the Secretary determines that a physician 
or other individual has been convicted (on or after October 25,1977, 
or within such period prior to that date as the Secretary shall specify 
in regulations) of a criminal offense related to such individual's 
participation in the delivery of medical care or services under title 
XVIII, XIX, or XX, the Secretary— 
"(1) shall bar from participation in the program under title 
XVIII, for such period as he may deem appropriate, each such 
individual otherwise eligible to participate in such program; 
"(2)(A) shall promptly notify each appropriate State agency 
administering or supervising the administration of a State plan Notice. 
approved under title XIX or title XX, of the fact and circum-
stances of such determination, and (except as provided in subpar-
42 u s e 1320a-7. 
42 u s e 1395, 
1396, 1397. 
94 STAT. 2620 
PUBLIC LAW 96-499—DEC. 5, 1980 
Waiver. 
42 u s e 1396, 
1397. 
Notice. 
42 u s e 1395. 
42 u s e 1395CC. 
Notice and 
hearing. 
42 u s e 405. 
42 u s e 1395y. 
Ante, p. 2619. 
42 u s e 1396a. 
Repeal. 
42 u s e 1396a. 
42 u s e 1397b. 
agraph (B)) require each such agency to bar such individual from 
participation in such plan for such period as he shall specify, 
which in the case of an individual specified in paragraph (1) shall 
be the period established pursuant to paragraph (1); 
"(B) may waive the requirement under subparagraph (A) to 
bar an ind.ividual from participation in a State plan under title 
XIX or title XX, where he receives and approves a request for 
such a waiver with respect to that individual from the State 
agency administering or supervising the administration of such 
plan; and 
"(3) shall promptly notify the appropriate State or local agency 
or authority having responsibility for the licensing or certifica-
tion of such individual of the fact and circumstances of such 
determination, request that appropriate investigations be made 
and sanctions invoked in accordance with applicable State law 
and policy, and request that such State or local agency or 
authority keep the Secretary and the Inspector General of the 
Department of Health and Human Services fully and currently 
informed with respect to any actions taken in response to such 
request. 
"(b) A determination made by the Secretary under this section 
shall be effective at such time and upon such reasonable notice to the 
public and to the person furnishing the services involved as may be 
specified in regulations. Such determination shall be effective with 
respect to services furnished to an individual on or after the effective 
date of such determination (except that in the case of inpatient 
hospital services, post-hospital extended care services, and home 
health services furnished under title XVIII, such determination shall 
be effective in the manner provided in paragraphs (3) and (4) of 
section 1866(b) with respect to terminations of agreements), and shall 
remain in effect until the Secretary finds and gives reasonable notice 
to the public that the basis for such determination has been removed 
and that there is reasonable assurance that it will not recur. 
"(c) Any person who is the subject of an adverse determination 
made by the Secretary under subsection (a) shall be entitled to 
reasonable notice and opportunity for a hearing thereon by the 
Secretary to the same extent as is provided in section 205(b), and to 
judicial review of the Secretary's final decision after such hearing as 
is provided in section 205(g).". 
(b) Section 1862(e) of such Act is amended to read as follows: 
"(e) No payment may be made under this title with respect to any 
item or service furnished by a physician or other individual during 
the period when he is barred pursuant to section 1128 from participa-
tion in the program under this title.". 
(c) Section 1902(a)(39) of such Act is amended to read as follows: 
"(39) provide that the State agency shall bar any specified 
individual from participation in the program under the State 
plan for the period specified by the Secretary, when required by 
him to do so pursuant to section 1128, and provide that no 
payment may be made under the plan with respect to any item or 
service furnished by such individual during such period;". 
(d) Section 1902(g) of such Act is repealed. 
(e) Section 2003(d)(1) of such Act is amended— 
(1) by striking out "and" at the end of subparagraph (I), 
(2) by striking out the period at the end of subparagraph (J) and 
inserting in lieu thereof "; and", and 
(3) by inserting after subparagraph (J) the following new 
subparagraph: 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2621 
"(K) provides that the State will bar any specified individual 
from participation in the program for the period specified by the 
Secretary when required by him to do so pursuant to section 
1128, and provides that no payment may be made under the Ante, p. 2619. 
program with respect to any item or service furnished by such 
individual during such period.". 
COORDINATED AUDITS UNDER THE SOCIAL SECURITY ACT 
SEC. 914. (a) Title XI of the Social Security Act is amended by 
inserting after section 1128 (added by section 913(a) of this title the 
following new section: 
COORDINATED AUDITS 
"SEC 1129. (a) If an entity provides services reimbursable on a cost-
related basis under title V or XIX, as well as services reimbursable on 
such a basis under title XVIII, the Secretary shall require, as a 
condition for payment to any State under title V or XIX with respect 
to administrative costs incurred in the performance of audits of the 
books, accounts, and records of that entity, that these audits be 
coordinated through common audit procedures with audits per-
formed with respect to the entity for purposes of title XVIII. The 
Secretary shall specify by regulation such methods as he finds 
feasible and equitable for the apportionment of the cost of coordinat-
ed audits between the program established under title V or XIX and 
the program established under title XVIII. Where the Secretary finds 
that a State has declined to participate in such a common audit with 
respect to title V or XIX, he shall reduce the payments otherwise due 
such State under such title by an amount which he estimates to be in 
excess of the amount that would have been apportioned to the State 
under the title (for the expenses of the Sate incurred in the common 
audit) if it had participated in the common audit. 
"(b)(1) In the case of entities which have audits coordinated under 
subsection (a), the Secretary shall establish one or more projects to 
demonstrate the feasibility of creating a single coordinated appeal 
hearing to adjudicate those administrative cost items which are 
determined under such a coordinated audit and which such entities 
dispute and appeal. 
"(2) In the case of a demonstration project under this subsection, 
the Secretary may waive such requirements of title V, XVIII, or XIX 
as would prevent carrying out the project or would require duplica-
tive activity or otherwise create unnecessary administrative burdens 
in carrying out the project. 
"(3) The Secretary shall report to Congress not later than Decem-
ber 31,1982, with respect to demonstration projects conducted under 
this subsection, including the reaction of the entities involved and 
estimates of any savings effected through reduction of duplication of 
appeal hearings, and shall include in such report recommendations 
for such legislation as the Secretary deems appropriate to insure the 
maximum feasible coordination of such appeal hearings. 
"(4) The Secretary shall also provide for the review of the feasibility 
of establishing a single coordinated process for the collection of 
overpayments established in a coordinated audit under subsection (a). 
The Secretary shall report to Congress not later than December 31, 
1981, on such review and on such recommendations for changes in 
legislation as the Secretary deems appropriate.". 
(b)(1) Section 1902(a) of such Act is amended— 
42 u s e 1320a-
42 u s e 701, 
1396. 
42 u s e 1395. 
Demonstration 
projects. 
Waiver. 
Report to 
eongress. 
Review, report to 
eongress. 
42 u s e 1396a. 
94 STAT. 2622 
PUBLIC LAW 96-499—DEC. 5, 1980 
42 u s e 1395. 
Ante, p. 2621. 
42 u s e 1396a 
note. 
42 u s e 1396. 
42 u s e 705. 
42 u s e 1395. 
42 u s e 705 note. 
42 u s e 701. 
Report to 
eongress. 
42 u s e 1320a-
note. 
42 u s e 701, 
1395, 1396. 
(A) by striking out "and" at the end of paragraph (40); 
(B) by striking out the period at the end of paragraph (41) and 
inserting in lieu thereof "; and"; and 
(C) by inserting after paragraph (41) the following new 
paragraph: 
"(42) provide (A) that the records of any entity participating in 
the plan and providing services reimbursable on a cost-related 
basis will be audited as the Secretary determines to be necessary 
to insure that proper payments are made under the plan, (B) that 
such audits, for such entities also providing services under title 
XVIII, will be coordinated and conducted jointly (to such extent 
and in such manner as the Secretary shall prescribe) with audits 
conducted for purposes of such part, and (C) for payment of such 
proportion of costs of each such common audit as is determined 
under methods specified by the Secretary under section 1129(a).". 
(2)(A) The amendments made by paragraph (1) shall (except as 
provided under subparagraph (B)) apply to medical assistance pro-
vided, under a State plan approved under title XIX of the Social 
Security Act, on and after the first day of the first calendar quarter 
beginning more than 30 days after the date of the enactment of this 
Act. 
(B) In the case of a State plan for medical assistance under title XIX 
of the Social Security Act which the Secretary determines requires 
State legislation in order for the plan to meet the additional require-
ments imposed by the amendments made by paragraph (1), the State 
plan shall not be regarded as failing to comply with the requirements 
of such title 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 
legislature that begins after the date of the enactment of this Act. 
(c)(1) Section 505(a) of such Act is amended— 
(A) by striking out "and" at the end of paragraph (14); 
(B) by striking out the period at the end of paragraph (15) and 
inserting in lieu thereof "; and"; and 
(C) by inserting after paragraph (15) the following new 
paragraph: 
"(16) provides (A) that the records of any entity participating in 
the plan and providing services reimbursable on a cost-related 
basis will be audited as the Secretary determines to be necessary 
to insure that proper payments are made under the plan, (B) that 
such audits, for entities also providing services under title XVIII, 
will be coordinated and conducted jointly (to such extent and in 
such manner as the Secretary shall prescribe) with audits con-
ducted for purposes of such part, and (C) for payment of such 
proportion of costs of each such common audit as is determined 
under methods specified by the Secretary under section 1129(a).". 
(2) The amendments made by paragraph (1) shall apply to services 
provided, under a State plan approved under title V of the Social 
Security Act, on and after the first day of the first calendar quarter 
beginning more than 30 days after the date of the enactment of this 
Act. 
(d) The Secretary shall report to the Congress, not later than 
December 31, 1981, on actions the Secretary has taken (1) to coordi-
nate the conduct of institutional audits and inspections which are 
required under the programs funded under title V, XVIII, or XIX of 
the Social Security Act, and (2) to coordinate such audits and 
inspections with those conducted by other cost payers, and he shall 
include in such report recommendations for such legislation as he 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2623 
deems appropriate to assure the maximum feasible coordination of 
such institutional audits and inspections. 
LIFE SAFETY CODE REQUIREMENTS 
SEC. 915. (a) Section 1861(j)(13) of the Social Security Act is 
amended by striking out "the Life Safety Code of the National Fire 
Protection Association (23d edition, 1973)" and inserting in lieu 
thereof "such edition (as is specified by the Secretary in regulations) 
of the Life Safety Code of the National Fire Protection Association". 
(b) Any institution (or part of an institution) which complied with 
the requirements of section 1861(j)(13) of the Social Security Act on 
the day before the date of the enactment of this Act shall, so long as 
such compliance is maintained (either by meeting the applicable 
provisions of the Life Safety Code (21st edition, 1967, or 23d edition, 
1973), with or without waivers of specific provisions, or by meeting 
the applicable provisions of a fire and safety code imposed by State 
law as provided for in such section 1861(j)(13)), be considered (for 
purposes of titles XVIII or XIX of such Act) to be in compliance with 
the requirements of such section 1861(j)(13), as it is amended by 
subsection (a) of this section. 
42 u s e 1395x. 
42 u s e 1395x 
note. 
42 u s e 1395, 
1396. 
ALTERNATIVE TO DECERTIFICATION OF LONG-TERM CARE FACILITIES OUT 
OF COMPLIANCE WITH CONDITIONS OF PARTICIPATION; LOOK BEHIND 
AUTHORITY 
SEC. 916. (a) Section 1866 of the Social Security Act is amended by 42 use I395cc. 
adding at the end thereof the following new subsection: 
"(f)(1) Where the Secretary determines that a skilled nursing 
facility which has filed an agreement pursuant to subsection (a)(1) or 
which has been certified for participation in a plan approved under 
title XIX no longer substantially meets the provisions of section 42 use 1396. 
1861(j), and further determines that the facility's deficiencies— 
42 use I395x. 
"(A) immediately jeopardize the health and safety of its 
patients, the Secretary shall provide for the termination of the 
agreement or of the certification of the facility and shall provide, 
or 
"(B) do not immediately jeopardize the health and safety of its 
patients, the Secretary may, in lieu of terminating the agree-
ment or certification of the facility, provide 
that no payment shall be made under this title (and order a State 
agency established or designated pursuant to section 1902(a)(5) of this 
Act to administer or supervise the administration of the State plan 
under title XIX of this Act to deny payment under such title XIX) 
with respect to any individual admitted to such facility after a date 
specified by him. 
"(2) The Secretary shall not make such a decision with respect to a 
facility until such facility has had a reasonable opportunity, follow-
ing the Initial determination that it no longer substantially meets the 
provisions of section 1861(j), to correct its deficiencies, and, following 
this period, has been given reasonable notice and opportunity for a 
hearing. 
"(3) The Secretary's decision to deny payment may be made Notice. 
effective only after such notice to the public and to the facility as may 
be prescribed in regulations, and its effectiveness shall terminate (A) 
when the Secretary finds that the facility is in substantial compliance 
(or is making good faith efforts to achieve substantial compliance) 
with the provisions of section 1861(j), or (B) in the case described in 
42 u s e 1396a. 
Notice and 
hearing. 
79-194 
O—81—pt. 2 
85 : QL3 
94 STAT. 2624 
PUBLIC LAW 96-499—DEC. 5, 1980 
42 use 1395x. 
42 use 1396a. 
42 use 1396d. 
Notice and 
hearing. 
42 use 13961. 
paragraph (1)(B), with the end of the eleventh month following the 
month such decision is made effective, whichever occurs first. If a 
facility to which clause (B) of the previous sentence applies still fails 
to substantially meet the provisions of section 1861(j) on the date 
specified in such clause, the Secretary shall terminate such facility's 
agreement or provide for termination of such facility's certification, 
notwithstanding the provisions of paragraph (2) of subsection (b), 
effective with the first day of the first month following the month 
specified in such clause.". 
G))(1)(A) Section 1902 of such Act is amended by adding after 
subsection (h) (added by section 9020t))(2) of this title) the following 
new subsection: 
"(i)(l) In addition to any other authority under State law, where a 
State determines that a skilled nursing facility or intermediate care 
facility which is certified for participation under its plan no longer 
substantially meets the provisions of section 1861(j) or section 1905(c), 
respectively, and further determines that the facility's deficiencies— 
"(A) immediately jeopardize the health and safety of its 
patients, the State shall provide for the termination of the 
facility's certification for participation under the plan and may 
provide, or 
"(B) do not immediately jeopardize the health and safety of its 
patients, the State may, in lieu of providing for terminating the 
facility's certification for participation under the plan, provide 
that no payment will be made under the State plan with respect to 
any individual admitted to such facility after a date specified by the 
State. 
"(2) The State shall not make such a decision with respect to a 
facility until the facility has had a reasonable opportunity, following 
the initial determination that it no longer substantially meets the 
provisions of section 1861(j) or section 1905(c) (as the case may be), to 
correct its deficiencies, and, following this period, has been given 
reasonable notice and opportunity for a hearing. 
"(3) The State's decision to deny payment may be made effective 
only after such notice to the public and to the facility as may be 
provided for by the State, and its effectiveness shall terminate (A) 
when the State finds that the facility is in substantial compliance (or 
is making good faith efforts to achieve substantial compliance) with 
the provisions of section 1861(j) or section 1905(c) (as the case may be), 
or (B) in the case described in paragraph (1)(B), with the end of the 
eleventh month following the month such decision is made effective, 
whichever occurs first. If a facility to which clause (B) of the previous 
sentence applies still fails to substantially meet the provisions of the 
respective section on the date specified in such clause, the State shall 
terminate such facility's certification for participation under the 
plan effective with the first day of the first month following the 
month specified in such clause.". 
(B) Such section is further amended by inserting before the semi-
colon at the end of subsection (a)(33)(B) the following: ", except that, if 
the Secretary has cause to question the adequacy of such determina-
tions, the Secretary is authorized to validate State determinations 
and, on that basis, make independent and binding determinations 
concerning the extent to which individual institutions and agencies 
meet the requirements for participation". 
(2) Section 1910 of such Act is amended by adding at the end thereof 
the following new subsection: 
"(c)(1) The Secretary may cancel approval of any skilled nursing or 
intermediate care facility at any time if he finds on the basis of a 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2625 
determination made by him as provided in section 1902(a)(33)(B) that 42 use I396a. 
a facility fails to meet the requirements contained in section 
1902(a)(28) or section 1905(c), or if he finds grounds for termination of 
his agreement with the facility pursuant to section 18660b). In that 
event the Secretary shall notify the State agency and the skilled 
nursing facility or intermediate care facility that approval of eligibil-
ity of the facility to participate in the programs established by this 
title and title XVIII shall be terminated at a time specified by the 
Secretary. The approval of eligibility of any such facility to partici-
pate in such programs may not be reinstated unless the Secretary 
finds that the reason for termination has been removed and there is 
reasonable assurance that it will not recur. 
"(2) Any skilled nursing facility or intermediate care facility which 
is dissatisfied with a determination by the Secretary that it no longer 
qualifies as a skilled nursing facility or intermediate care facility for 
purposes of this title, shall be entitled to a hearing by the Secretary to 
the same extent as is provided in section 2050t)) and to judicial review 
of the Secretary's final decision after such hearing as is provided in 
section 205(g). Any agreement between such facility and the State 
agency shall remain in effect until the period for filing a request for a 
hearing has expired or, if a request has been filed, until a decision has 
been made by the Secretary; except that the agreement shall not be 
extended if the Secretary makes a written determination, specifying 
the reasons therefor, that the continuation of provider status consti-
tutes an immediate and serious threat to the health and safety of 
patients, and the Secretary certifies that the facility has been notified 
of its deficiencies and has failed to correct them.". 
42 u s e 1396d. 
42 u s e 1395CC. 
42 u s e 1395. 
Hearing and 
judicial review. 
42 u s e 405. 
CRIMINAL STANDARDS FOR CERTAIN MEDICARE- AND MEDICAID-RELATED 
CRIMES 
SEC 917. Paragraphs (1) and (2) of section 1877(b) of the Social 
Security Act and of section 19090b) of such Act are each amended by 
inserting "knowingly and willfully" after "Whoever". 
42 u s e 1395nn, 
1396h. 
REIMBURSEMENT OF CUNICAL LABORATORIES 
SEC 918. (a)(1) Section 1842 of the Social Security Act is amended by 42 use I395u. 
inserting at the end the following new subsection: 
"(h) If a physician's bill or request for payment for a physician's 
services includes a charge to a patient for a laboratory test for which 
payment may be made under this part, the amount payable with 
respect to the test shall be determined as follows: 
"(1) If the bill or request for payment indicates that the 
physician who submitted the bill or for whose services the 
request for payment was made personally performed or super-
vised the performance of the test or that another physician with 
whom the physician shares his practice personally performed or 
supervised the test, the payment shall be the reasonable charge 
for the test (less the applicable deductible and coinsurance 
amounts). 
"(2) If the bill or request for payment indicates that the test 
was performed by a laboratory, identifies the laboratory, and 
indicates the amount the laboratory charged the physician who 
submitted the bill or for whose services the request for payment 
was made, payment for the test shall be the lower o
f
— 
"(A) the laboratory's reasonable charge to individuals 
enrolled under this part for the test, or 
94 STAT. 2626 
PUBLIC LAW 96-499—DEC. 5, 1980 
Publication in 
Federal 
Register. 
42 u s e 1395u 
note. 
Report to 
Congress. 
42 u s e 1395u 
note. 
42 u s e 1395. 
Ante, p. 2625. 
42 u s e 1395Z. 
42 u s e 1396a. 
42 u s e 1396a 
note. 
"(B) the amount the laboratory charged the physician for 
the test, 
plus a nominal fee (where the physician bills for such a service) to 
cover the physician's costs in collecting and handling the sample 
on which the test was performed (less the applicable deductible 
and coinsurance amounts). 
"(3) If the bill or request for payment (A) does not indicate who 
performed the test, or (B) indicates that the test was performed 
by a laboratory but does not identify the laboratory or include 
the amount charged by the laboratory, payment shall be the 
lowest charged at which the carrier estimates the test could have 
been secured by a physician from a laboratory serving the 
locality 
(less the 
applicable 
deductible 
and 
coinsurance 
amounts).". 
(2) The amendment made by paragraph (1) shall apply to bills 
submitted and requests for payment made on or after such date (not 
later than April 1, 1981) as the Secretary of Health and Human 
Services prescribes by a notice published in the Federal Register. 
(3) Not later than 24 months after the effective date specified in 
paragraph (2), the Secretary shall report to the Congress— 
(A) the proportion of bills and requests for payment submitted 
(during the 18-month period beginning on such effective date) 
under title XVIII of the Social Security Act for laboratory tests 
which did not identify who performed the tests, 
(B) the proportion of bills and requests for payment submitted 
during such period for laboratory tests with respect to which the 
amount paid under such title was less than the amount that 
would otherwise have been payable in the absence of section 
1842(h) of such Act, 
(C) with respect to requests for payment described in 
subparagraph (B) which were submitted by patients, the average 
additional cost per laboratory test to patients resulting from 
reductions in payment that would otherwise have been made for 
such tests in the absence of such section 1842(h), and 
(D) with respect to bills described in subparagraph (B) which 
were submitted by physicians, the average reduction in payment 
per laboratory test to physicians resulting from the application 
of such section 1842(h). 
(4) Section 1833(a)(1)(D) of the Social Security Act is amended by 
striking out "subsection (g)" and inserting in lieu thereof "subsection 
(h)". 
(b)(1) Section 1902(a) of the Social Security Act (as amended by 
section 914(b)(1) of this Act) is further amended— 
(A) by striking out "and" at the end of paragraph (41); 
(B) by striking out the period at the end of paragraph (42) and 
inserting in lieu thereof"; and"; and 
(C) by adding after paragraph (42) the following new para-
graph: 
"(43) if the State plan makes provision for payment to a 
physician for laboratory services the performance of which such 
physician (or any other physician with whom he shares his 
practice) did not personally perform or supervise, include provi-
sion to insure that payment under the State plan for such 
laboratory services not exceed the payment authorized for such 
services by section 1842(h).". 
(2)(A) The amendments made by paragraph (1) shall (except as 
otherwise provided in subparagraph (B)) apply to medical assistance 
provided, under a State plan approved under title XIX of the Social 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2627 
42 u s e 1395b-l 
note. 
42 u s e 1395c. 
42 u s e 1396. 
eontents. 
Security Act, on and after the first day of the first calendar quarter 42 use 1396. 
that begins more than six months after the date of the enactment of 
this Act. 
(B) In the case of a State plan for medical assistance under title XIX 
of the Social Security Act which the Secretary of Health and Human 
Services determines requires State legislation in order for the plan to 
meet the additional requirements imposed by the amendments made 
by paragraph (1)^ the State plan shall not be regarded as failing to 
comply with the requirements of such title 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 legislature that begins after the date of the 
enactment of this Act. 
STUDY OF NEED FOR DUAL PARTICIPATION OF SKILLED NURSING 
FACILITIES 
SEC. 919. (a)(1) The Secretary of Health and Human Services shall 
conduct a study of the availability and need for skilled nursing 
facility services covered under part A of title XVIII of the Social 
Security Act and under State plans approved under title XIX of such 
Act. 
(2) Such study shall include— 
(A) an investigation of the desirability and feasibility of impos-
ing a requirement that skilled nursing facilities (i) which furnish 
services to patients covered under State plans approved under 
title XIX of the Social Security Act also furnish such services to 
patients covered under part A of title XVIII of such Act, and (ii) 
which furnish services to patients covered under such title XVIII 
also furnish such services to patients covered under such State 
plans, 
(B) an evaluation of the impact of existing laws and regulations 
on skilled nursing facilities and individuals covered under such 
State plans and under part A of such title XVIII, and an 
evaluation of the extent to which existing laws and regulations 
encourage skilled nursing facilities to accept only title XVIII 
beneficiaries or title XIX recipients, and 
(C) an investigation of possible changes in regulations and 
legislation which would result in encouraging a greater availabil-
ity of skilled nursing facility services. 
(3) In developing such study, the Secretary shall consult with 
professional organizations, health experts, private insurers, nursing 
home providers, and consumers of skilled nursing facility services. 
(b) Within one year after the date of the enactment of this Act, the 
Secretary shall complete such study and shall submit to the Congress 
a full and complete report thereon, together with recommendations 
with respect to the matters covered by such study (including any 
recommendations for administrative or legislative changes). 
eonsultation. 
Report to 
eongress. 
Subpart III—Provisions Relating to Professional Standards Review 
Organizations (PSROs) 
EXPANDED MEMBERSHIP OF PROFESSIONAL STANDARDS REVIEW 
ORGANIZATIONS 
SEC. 921. Section 1152(b)(1)(A) of the Social Security Act is 42 use I320c-i. 
amended— 
94 STAT. 2628 
PUBLIC LAW 96-499—DEC. 5, 1980 
42 u s e 1320C-4. 
(1) by inserting "and, if the organization so elects, of other 
health care practitioners engaged in the practice of their profes-
sions in such area who hold independent hospital admitting 
privileges," after the comma at the end of clause (ii); and 
(2) by inserting "(except as otherwise provided under section 
1155(c))" after "does not" in clause (vi). 
42 use 
Effective date. 
42 u s e 1320C-11 
note. 
42 use 
1320C-12. 
42 u s e 1395x. 
42 use 
1320C-22. 
42 u s e 1320C-4, 
1320C-12. 
42 u s e 1320C-12 
note. 
REGISTERED NURSE AND DENTIST MEMBERSHIP ON STATEWIDE COUNCIL 
ADVISORY GROUP 
SEC. 922. (a) Section 1162(e)(1) of the Social Security Act is amended 
by inserting "(including at least one registered professional nurse 
and at least one doctor of dental surgery or of dental medicine)" after 
"representatives". 
(b) The amendment made by this section shall become effective 180 
days after the date of the enactment of this Act. 
NONPHYSICIAN MEMBERSHIP ON NATIONAL PROFESSIONAL STANDARDS 
REVIEW COUNCIL 
SEC. 923. (a) Section 1163(a)(1) of the Social Security Act is amended 
by inserting "one doctor of dental surgery or of dental medicine, one 
registered professional nurse, and one other health practitioner 
(other than a physician as defined in section 1861(r)(l))," after 
"physicians,". 
(b) Section 1163(a)(2) of such Act is amended by striking out "four 
members" and inserting in lieu thereof "five members". 
(c) Section 1163(a)(3) of such Act is amended by inserting "physi-
cian" before "members". 
(d) Section 11630b) of such Act is amended by striking out "Mem-
bers" and inserting in lieu thereof "Physician members", 
(e) Section 1173 of such Act is amended by striking out "(except 
sections 1155(c) and 1163)" and inserting in lieu thereof "(except 
section 1155(c))". 
(f) The amendments made by this section shall become effective 180 
days after the date of the enactment of this Act. 
REQUIRED ACTIVITIES OF PROFESSIONAL STANDARDS REVIEW 
ORGANIZATIONS 
42 use 1320C-3. 
SEC. 924. (a)(1) Subsection (b) of section 1154 of the Social Security 
Act is amended— 
(A) by striking out "in addition to review of health care 
services provided by or in institutions, only such of the duties and 
functions required under this part of Professional Standards 
Review Organization as he determines such organization to be 
capable of performing" in the first sentence and inserting in lieu 
thereof "in addition to review of health care services (other than 
ancillary, ambulatory care, and long-term care services) provided 
by or in hospitals and to review of alcohol detoxification facility 
services, only such of the duties and functions as he requires the 
organization to perform under subsection (f)(2) or subsection (f)(4) 
and which the organization is capable of performing"; and 
(B) by striking out "only if the Secretary finds that it is 
substantially carrying out in a satisfactory manner, the activities 
and functions required of Professional Standards Review Organi-
zations under this part with respect to the review of health care 
services provided by or in institutions (including ancillary serv-
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2629 
ices) and, in addition, review of such other health care services as 
the Secretary may require" in the second sentence and inserting 
in lieu thereof "only if the Secretary finds that it is substantially 
carrying out in a satisfactory manner the activities and functions 
required of that Professional Standards Review Organization 
under this part". 
(2) Subsection (c) of such section is amended by inserting "of that 
organization" after "required under this part". 
(3) Such section if further amended by adding at the end the 
following new subsection: 
"(0(1) The Secretary shall establish a program (hereinafter in this Review program 
subsection referred to as the 'program') for the evaluation of the cost-
effectiveness of review of particular health care services by Profes-
sional Standards Review Organizations. 
"(2) In order to demonstrate the cost-effectiveness of requiring 
review of particular health care services before such review is 
generally required, the program shall be designed in a manner so 
that the Secretary will require particular Professional Standards 
Review Organizations, chosen by a statistically valid method that 
will permit a valid evaluation of the cost-effectiveness of such review, 
to review particular health care services. 
"(3) The program shall provide for the evaluation of cost-effective-
ness of the review of particular health care services under the 
program, particularly in comparison with areas in which such review 
was not required or performed. 
"(4) Based upon such evaluation, or upon an evaluation of compara-
ble statistical validity, and a finding that review of particular health 
care services is cost-effective or yields other significant benefits, the 
Secretary shall specify such particular health care services which 
Professional Standards Review Organizations (either generally or 
under such conditions and circumstances as the Secretary may 
specify) have the duty and function of reviewing under this part. 
"(5) For purposes of this subsection, the term 'particular health 
care services' does not include health care services (other than 
ancillary, ambulatory care, and long-term care services) provided by 
or in hospitals or alcohol detoxification facility services.". 
(b) Section 1155(a) of such Act is amended— 
(1) by striking out "at the earliest date practicable" in para-
graph (1) and inserting in lieu thereof "to the extent and at the 
time specified by the Secretary under section 1154(f)"; 
(2) by inserting ", consistent with section 1154(f)," in paragraph 
(7)(A) after "only"; and 
(3) by inserting "(consistent with section 1154(f))" in paragraph 
(7)(B) after "to the extent". 
(c) Subsection (g) of section 1155 of such Act is repealed. 
(d) Section 1155 of such Act is amended by adding at the end thereof 
the following new subsection: 
"(h) If the Secretary has designated an organization (other than 
under section 1154) as a Professional Standards Review Organization, 
but that organization has not assumed responsibility for the review of 
particular activities in its area included in subsection (a)(1), the 
Secretary may designate another qualified Professional Standards 
Review Organization (in reasonable proximity to the providers and 
practitioners whose services are to be reviewed) to assume the 
responsibility for the review of some or all of those particular 
activities.". 
"Particular 
health care 
services." 
42 u s e 1320C-4. 
Ante, p. 2628. 
Repeal. 
42 u s e 1320C-4. 
42 u s e 1320C-3. 
94 STAT. 2630 
PUBLIC LAW 96-499—DEC. 5, 1980 
EFFICIENCY IN DELEGATED REVIEW 
42 use 1320C-4. 
SEC. 925. Section 1155(e) of the Social Security Act is amended by 
striking out "effectively and in timely fashion" and inserting in lieu 
thereof "effectively, efficiently, and in timely fashion". 
REVIEW OF ROUTINE HOSPITAL ADMISSION SERVICES AND PREOPERATIVE 
HOSPITAL STAYS BY PROFESSIONAL STANDARDS REVIEW ORGANIZA-
TIONS 
42 use 1320C-4. 
SEC. 926. Section 1155(a)(2) of the Social Security Act is amended to 
read as follows: 
"(2) Each Professional Standards Review Organization shall have 
the authority to determine, in advance, in the case o
f
— 
"(A) any elective admission to a hospital or other health care 
facility (including admissions occurring on weekends), and 
"(B) any routine diagnostic services furnished in connection 
with such an admission, 
whether such service, if provided, or if provided by a particular 
health care practitioner or by a particular hospital or other health 
care facility, organization, or agency, would meet the criteria speci-
fied in subparagraphs (A) and (C) of paragraph (1). Each such 
Organization may be directed by the Secretary to excercise such 
Ante, p. 2628. 
authority where the Secretary finds (consistent with section 1154(f)) 
that such determinations can be made on a timely basis by the 
Organization and appropriate procedures will be applied to assure 
prompt notification of such determinations to providers, physicians, 
practitioners, and persons on whose behalf payment may be made 
under this Act for services and items.". 
42 u s e 1320C-4. 
42 u s e 1395x. 
42 use 
1320C-11. 
Effective date. 
42 u s e 1320C-4 
note. 
42 u s e 1320C-15 
note. 
42 u s e 1320c. 
CONSULTATION BY PROFESSIONAL STANDARDS REVIEW ORGANIZATIONS 
WITH HEALTH CARE PRACTITIONERS 
SEC 927. (a) Section 1155(a) of the Social Security Act is amended 
by adding at the end thereof the following new paragraph: 
"(8) Each Professional Standards Review Organization shall con-
sult (with such frequency and in such manner as may be prescribed 
by the Secretary) with representatives of health care practitioners 
(other than physicians described in section 1861(r)(l)) and of institu-
tional and noninstitutional providers of health care services, in 
relation to the Professional Standards Review Organization's respon-
sibility for the review under paragraph (1) of the professional activi-
ties of such practitioners and providers.". 
(b) Section 1162(e) of such Act is amended by striking out the first 
parenthetical material in paragraph (1) and the parenthetical mate-
rial in paragraph (2). 
(c) The amendments made by this section shall become effective 180 
days after the date of the enactment of this Act. 
RESPONSE OF PROFESSIONAL STANDARDS REVIEW ORGANIZATIONS TO 
FREEDOM OF INFORMATION ACT REQUESTS 
SEC. 928. No Professional Standards Review Organization desig-
nated (conditionally or otherwise) under part B of title XI of the 
Social Security Act shall be required to make available any records 
pursuant to a request made under section 552 of title 5, United States 
Code, until the later of (1) one year after the date of entry of a final 
court order requiring that such records be made available, or (2) the 
last date of the Congress during which the court order was entered. 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2631 
STUDY OF PROFESSIONAL STANDARDS REVIEW ORGANIZATIONS NORMS, 
STANDARDS, AND CRITERIA 
SEC. 929. The Secretary of Health and Human Services shall, in 
consultation with the National Professional Standards Review Coun-
cil, conduct a nationwide study of the differences in medical criteria 
and length-of-stay norms utilized by Professional Standards Review 
Organizations in the various regions of the country. The study shall 
include an assessment of the rationale that contributes to these 
regional differences. The Secretary shall report the findings and 
conclusions made with respect to the study to the Congress within 
one year after the date of the enactment of this Act. 
PART B—PROVISIONS RELATING TO MEDICARE 
Subpart I—Changes in Services or Benefits 
42 u s e 1320c 
note. 
Report to 
Congress. 
HOME HEALTH SERVICES 
SEC. 930. (a) Section 1811 of the Social Security Act is amended by 
striking out **and related post-hospital services" and inserting in lieu 
thereof ", related post-hospital, and home health services". 
(b) Section 1812(a)(3) of such Act is amended to read as follows: 
"(3) home health services.". 
(c) Section 1812(d) of such Act is repealed. 
(d) Section 1812(e) of such Act is amended— 
(1) by striking out "(b), (c), and (d)" and inserting in lieu thereof 
"(b) and (c)"; and 
(2) by striking out "post-hospital extended care services, and 
post-hospital home health services" and inserting in lieu thereof 
"and post-hospital extended care services". 
(e) Sections 1814(a) and 1835(a) of such Act are amended by adding 
the following new sentence at the end of each such section: "With 
respect to the physician certification required by paragraph (2) for 
home health services furnished to any individual by a home health 
agency (other than an agency which is a governmental entity) and 
with respect to the establishment and review of a plan for such 
services, the Secretary shall prescribe regulations which shall 
become effective no later than July 1, 1981, and which prohibit a 
physician who has a significant ownership interest in, or a significant 
financial or contractural relationship with, such home health agency 
from performing such certification and from establishing or review-
ing such plan.". 
(0 Section 1814(a)(2)(D) of such Act is amended— 
(1) by striking out "post-hospital home health services'* and 
inserting in lieu thereof "home health services"; 
(2) by inserting ", occupational," after "or physical"; and 
(3) by striking out ", for any of the conditions" and all that 
follows through "extended care services". 
(g) Section 1832(a)(2)(A) of such Act is amended by striking out "for 
up to 100 visits during a calendar year", 
(h) Section 1833(b) of such Act is amended— 
(1) by striking out "and" at the end of clause (1) in the first 
sentence; and 
(2) by inserting before the period at the end of the first sentence 
the following: ", (3) such deductible shall not apply with respect 
to home health services". 
(i) Section 1834 of such Act is repealed. 
42 u s e 1395c. 
42 u s e 1395d. 
Repeal. 
Regulations. 
42 u s e 1395f, 
1395n. 
42 u s e 1395f. 
42 u s e 1395k. 
42 u s e 1395/. 
Repeal. 
42 u s e 1395m. 
94 STAT. 2632 
PUBLIC LAW 96-499—DEC. 5, 1980 
42 u s e 1395n. 
42 u s e 1395x. 
Repeal. 
42 u s e 1395h. 
42 u s e 1395x. 
Reasonable 
costs, 
determination. 
(j) Section 1835(a)(2)(A) of such Act is amended by inserting 
", occupational," after "or physical", 
(k) Section 1861(e) of such Act is amended— 
(1) by striking out "subsections (i) and (n)" in the material 
preceding paragraph (1) and inserting in lieu thereof "subsection 
(i)", and 
(2) by striking out "subsections (i) and (n)" in the third sentence 
and inserting in lieu thereof "subsection (i)". 
(1) Section 1861(m)(4) of such Act is amended by inserting the 
following before the semicolon: "who has successfully completed a 
training program approved by the Secretary". 
(m) Section 1861(n) of such Act is repealed. 
(n) Section 1861(o) of such Act is amended— 
(1) by striking out "and" at the end of paragraph (5), by 
inserting "and" at the end of paragraph (6), and by adding the 
following new paragraph after paragraph (6): 
"(7) meets such additional requirements (including conditions 
relating to bonding or establishing of escrow accounts as the 
Secretary finds necessary for the financial security of the pro-
gram) as the Secretary finds necessary for the effective and 
efficient operation of the program;"; and 
(2) by striking out "except that" the first place it appears in the 
material following paragraph (6) and all that follows through 
"regulations; and" 
(o) Section 1816(e) of such Act is amended— 
(1) by inserting "(subject to the provisions of paragraph (4))" 
after "the Secretary may" in paragraph (2); and 
(2) by adding the following new paragraph at the end thereof: 
"(4) Notwithstanding subsections (a) and (d) and paragraphs (1), (2), 
and (3) of this subsection, the Secretary shall designate regional 
agencies or organizations which have entered into an agreement with 
him under this section to perform functions under such agreement 
with respect to home health agencies (as defined in section 1861(o)) in 
the region, except that in assigning such agencies to such designated 
regional agencies or organizations the Secretary shall assign a home 
health agency which is a subdivision of a hospital (and such agency 
and hospital are affiliated or under common control) only if, after 
applying such criteria relating to administrative efficiency and 
effectiveness as he shall promulgate, he determines that such assign-
ment would result in the more effective and efficient administration 
of this title.". 
(p) Section 1861(v)(l) of such Act is amended by adding after 
subparagraph (G) (as added by section 902(a)(1) of this title) the 
following new subparagraph: 
"(H) In determining such reasonable cost with respect to home 
health agencies, the Secretary may not include— 
"(i) any costs incurred in connection with bonding or establish-
ing an escrow account by any such agency as a result of the 
financial security requirement described in subsection (o)(7); 
"(ii) in the case of home health agencies to which the financial 
security requirement described in subsection (o)(7) applies, any 
costs attributed to interest charged such an agency in connection 
with amounts borrowed by the agency to repay overpayments 
made under this title to the agency, except that such costs may be 
included in reasonable cost if the Secretary determines that the 
agency was acting in good faith in borrowing the amounts; 
"(iii) in the case of contracts entered into by a home health 
agency after the date of the enactment of this subparagraph for 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2633 
the purpose of having services furnished for or on behalf of such 
agency, any cost incurred by such agency pursuant to any such 
contract (I) which is entered into for a period exceeding five 
years, or (II) which determines the amount payable by the home 
health agency on the basis of a percentage of the agency's 
reimbursement or claim for reimbursement for services fur-
nished by the agency; and 
"(iv) in the case of contracts entered into by a home health 
agency before the date of the enactment of this subparagraph for 
the purpose of having services furnished for or on behalf of such 
agency, any cost incurred by such agency pursuant to any such 
contract, which determines the amount payable by the home 
health agency on the basis of a percentage of the agency's 
reimbursement or claim for reimbursement for services fur-
nished by the agency, to the extent that such cost exceeds the 
reasonable value of the services furnished on behalf of such 
agency.", 
(q) Section 226(c)(1) of such Act is amended— 
(1) by striking out "and post-hospital home health services" 
and inserting in lieu thereof "and home health services''; and 
(2) by striking out "or post-hospital home health services" in 
clause (B). 
(r) Section 7(d)(1) of the Railroad Retirement Act of 1974 is 
amended by striking out "posthospital home health services" and 
inserting in lieu thereof "home health services". 
(s)(l) the amendments made by this section shall become effective 
with respect to services furnished on or after July 1,1981, except that 
the amendments made by subsections (n)(l) and (o) shall become 
effective on the date of the enactment of this Act. 
(2) The Secretary of Health and Human Services shall take admin-
istrative action to assure that improvements, in accordance with the 
amendment made by subsection (n)(l), will be made not later than 
June 30,1981. 
42 u s e 426. 
45 u s e 231f. 
42 u s e 1395x 
note. 
ALCOHOL DETOXIFICATION FACILITY SERVICES 
SEC. 931. (a) Section 1812(a) of the Social Security Act is amended 42 use I395d. 
by striking out "and" at the end of paragraph (2), by striking out the 
period at the end of paragraph (3) and inserting in lieu thereof 
"; and", and by adding after paragraph (3) the following new 
paragraph: 
"(4) alcohol detoxification facility services.". 
(b) Section 1814(a)(2) of such Act is amended by striking out "or" at 42 USC I395f. 
the end of subparagraph (D), by inserting "or" at the end of subpara-
graph (E), and by adding after subparagraph (E) the following new 
subparagraph: 
"(F) in the case of alcohol detoxification facility services, such 
services are required on an inpatient basis (based upon an 
examination by such certifying physician made prior to initi-
ation of alcohol detoxification);". 
(c) Section 1861(u) of such Act is amended by inserting "detoxifica- 42 use I395x. 
tion facility," after "home health agency,". 
(d) Section 1861 of such Act is further amended by adding after 
subsection (aa) the following new subsection: 
"Alcohol Detoxification Facility Services 
"(bb)(l) The term 'alcohol detoxification facility services' means 
services provided by a detoxification facility in order to reduce or 
94 STAT. 2634 
PUBLIC LAW 96-499—DEC. 5, 1980 
eliminate the amount of alcohol in the body, but only to the extent 
that such services would be covered under subsection (b) if furnished 
as inpatient services by a hospital, or are physicians' services covered 
under subsection (s). 
"(2) The term 'detoxification facility' means a public or voluntary 
community-based nonprofit facility, other than a hospital, which— 
"(A) is engaged in furnishing to inpatients the services 
described in paragraph (1); 
"(B) is accredited by the Joint Commission on the Accredita-
tion of Hospitals as meeting the Accreditation Program for 
Psychiatric Facilities standards (1979 edition), or is found by the 
Secretary to meet such standards; 
"(C) has arrangements with one or more hospitals, having 
42 use 1
3
9
5
C
C
. 
agreements in effect under section 1866, for the referral and 
admission of patients requiring services not available at the 
facility; and 
"(D) meets such other requirements as the Secretary may find 
necessary in the interest of the health and safety of individuals 
who are furnished services by the facility.". 
(e) The amendments made by subsections (a) through (d) of this 
section shall become effective on April 1,1981. 
(f) The Secretary of Health and Human Services shall conduct a 
study and make recommendations, within 18 months after the date of 
the enactment of this Act, concerning the appropriateness of extend-
ing medicare coverage to drug detoxification, postdetoxification reha-
bilitation, and to outpatient detoxification and concerning incentives 
for the use of lower-cost detoxification facilities. 
(g) Section 1155 of the Social Security Act is amended by adding 
after subsection (h) (added by section 924(d) of this title) the following 
new subsection: 
"(i) Any Professional Standards Review Organization which has 
assumed responsibility under this section for review of inpatient 
hospital services in an area shall also assume responsibility in such 
area for review of detoxification facility services.". 
42 use 1320C-7. 
(h) Section 1158 of such Act is amended— 
(1) by striking out "section 1159 and subsection (d)" in subsec-
tion (a) and inserting in lieu thereof "subsections (d) and (e) of 
this section and in sections 1159, 1861(v)(l)(G), and 1902(h)", and 
(2) by adding after subsection (d) the following new subsection: 
"(e) Subsection (a) of this section shall not apply to a determination 
by a Professional Standards Review Organization under section 
42 use 1320C-4. 1155(a)(1)(C) that detoxification services provided or proposed to be 
provided in a hospital on an inpatient basis could be more economi-
cally provided in a detoxification facility.". 
Effective date. 
42 u s e 1395d 
note. 
Study. 
42 u s e 1395// 
note. 
42 u s e 1320C-4. 
42 u s e 1395/. 
42 u s e 1395U. 
PREADMISSION DIAGNOSTIC TESTING 
SEC. 932. (a)(1) Section 1833(a)(1) of the Social Security Act is 
amended— 
(A) by striking out "and (E)" and inserting in lieu thereof "(E)", 
and 
(B) by inserting the following after "section 1881," at the end of 
clause (E): "(F) with respect to expenses incurred for physicians' 
services (furnished by a physician who has an agreement in effect 
with the Secretary by which the physician agrees to accept an 
assignment described in section 1842(b)(3)(B)(ii) with respect to 
payment for all physicians' services which are preadmission 
diagnostic services furnished by the physician to individuals 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2635 
enrolled under this part) which are preadmission diagnostic 
services for which payment may be made under this part and 
which are furnished (i) in the outpatient department of a hospital 
within seven days of such individual's admission to the same 
hospital as an inpatient or, to the extent practicable as deter-
mined by regulations prescribed by the Secretary, to another 
hospital, or (ii) to the extent practicable as determined by 
regulations prescribed by the Secretary, in a physician's office 
within seven days of such individual's admission to a hospital as 
an inpatient, the amounts paid shall be equal to the reasonable 
charges for such services,". 
(2) For amendment to section 1833(a) of the Social Security Act, 
with respect to the amount of payment for hospital outpatient 
preadmission diagnostic services, see section 942 of this title. 
(b) The Secretary of Health and Human Services shall transmit to 
the Congress, no later than one year after the date of the enactment 
of this Act, a report describing the policy which has been developed 
and is being or will be implemented with respect to the amendments 
made by subsection (a)(1) of this section and by section 942 of this title 
as they concern expenses incurred for preadmission diagnostic test-
ing furnished to an individual at a hospital within seven days of an 
individual's admission to another hospital. 
Report to 
Congress. 
42 u s e 1395Z 
note. 
COMPREHENSIVE OUTPATIENT REHABILITATION FACILITY SERVICES 
SEC. 933. (a) Section 1832(a)(2) of the Social Security Act is amended 42 USC 1395k. 
by striking out "and" at the end of subparagraph (C), by striking out 
the period at the end of subparagraph (D) and inserting in lieu thereof 
a semicolon, and by adding the following new subparagraph at the 
end thereof: 
"(E) comprehensive outpatient rehabilitation facility serv-
ices; and". 
(b) Section 1835(a)(2) of such Act is amended by striking out the 42 USC I395n. 
period at the end of subparagraph (D) and inserting in lieu thereof a 
semicolon, and by inserting the following new subparagraph after 
subparagraph (D): 
"(E) in the case of comprehensive outpatient rehabilita-
tion facility services, (i) such services are or were required 
because the individual needed skilled rehabilitation services, 
(ii) a plan for furnishing such services has been established 
and is periodically reviewed by a physician, and (iii) such 
services are or were furnished while the individual is or was 
under the care of a physician; and". 
(c) Section 1861(u) of such Act is amended by inserting "comprehen- 42 USC I395x. 
sive outpatient rehabilitation facility," immediately after "skilled 
nursing facility,". 
(d) Section 1861(z) of such Act is amended by striking out "extended 
care facility," and inserting in lieu thereof "skilled nursing facility, 
comprehensive outpatient rehabilitation facility,". 
(e) Section 1861 of such Act is amended by adding after subsection 
(bb) (added by section 931(d) of this title) the following new subsection: 
"Comprehensive Outpatient Rehabilitation Facility Services 
"(cc)(l) The term 'comprehensive outpatient rehabilitation facility 
services' means the following items and services furnished by a 
physician or other qualified professional personnel (as defined in 
regulations by the Secretary) to an individual who is an outpatient of 
94 STAT. 2636 
PUBLIC LAW 96-499—DEC. 5, 1980 
a comprehensive outpatient rehabilitation facility under a plan (for 
furnishing such items and services to such individual) established 
and periodically reviewed by a physician— 
"(A) physicians' services; 
"(B) physical therapy, occupational therapy, speech pathology 
services, and respiratory therapy; 
"(C) prosthetic and orthotic devices, including testing, fitting, 
or training in the use of prosthetic and orthotic devices; 
"(D) social and psychological services; 
"(E) nursing care provided by or under the supervision of a 
registered professional nurse; 
(F) drugs and biologicals which cannot, as determined in 
accordance with regulations, be self administered; 
"(G) supplies, appliances, and equipment, including the pur-
chase or rental of equipment; and 
"(H) such other items and services as are medically necessary 
for the rehabilitation of the patient and are ordinarily furnished 
by comprehensive outpatient rehabilitation facilities, 
excluding, however, any item or service if it would not be included 
under subsection (b) if furnished to an outpatient of a hospital. 
"(2) The term 'comprehensive outpatient rehabilitation facility' 
means a facility which— 
"(A) is primarily engaged in providing (by or under the 
supervision of physicians) diagnostic, therapeutic, and restor-
ative services to outpatients for the rehabilitation of injured, 
disabled, or sick persons; 
"(B) provides at least the following comprehensive outpatient 
rehabilitation services: (i) physicians' services (rendered by phy-
42 use I395x. 
sicians, as defined in section 1861(r)(l), who are available at the 
facility on a full- or part-time basis); (ii) physical therapy; and (iii) 
social or psychological services; 
"(C) maintains clinical records on all patients; 
"(D) has policies established by a group of professional person-
nel (associated with the facility), including one or more physi-
cians defined in subsection (r)(l) to govern the comprehensive 
outpatient rehabilitation services it furnishes, and provides for 
the carrying out of such policies by a full- or part-time physician 
referred to in subparagraph (B)(i); 
"(E) has a requirement that every patient must be under the 
care of a physician; 
"(F) in the case of a facility in any State in which State or 
applicable local law provides for the licensing of facilities of this 
nature (i) is licensed pursuant to such law, or (ii) is approved by 
the agency of such State or locality, responsible for licensing 
facilities of this nature, as meeting the standard establishment 
for such licensing; 
"(G) has in effect a utilization review plan in accordance with 
regulations prescribed by the Secretary; 
(H) has in effect an overall plan and budget that meets the 
requirements of subsection (z); and 
(I) meets such other conditions of participation as the Secre-
tary may find necessary in the interest of the health and safety of 
individuals who are furnished services by such facility, including 
conditions concerning qualifications of personnel in these facili-
ties.". 
4
2 use 1
3
9
5
Z
. 
(f) Section 1863 of such Act is amended by striking out "and (o)(6)" 
in the first sentence and inserting in lieu thereof "(o)(6), and 
(cc)(2)(I)". 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2637 
(g) Section 1864(a) of such Act is amended— 
(1) by inserting "or a comprehensive outpatient rehabilitation 
facility as defined 
in section 
1861(ccX2)" after 
"section 
1861(aaX2)" in the first sentence; and 
(2) by inserting "comprehensive outpatient rehabilitation 
facility," after "rural health clinic," each place it appears in the 
second and fifth sentences. 
(h) The amendments made by this section shall become effective 
with respect to a comprehensive outpatient rehabilitation facility's 
first accounting period which begins on or after July 1,1981. 
42 u s e 1395aa. 
Ante, p. 2635. 
42 u s e 1395k 
note. 
OUTPATIENT SURGERY 
SEC. 934. (a) Section 1832(aX2) of the Social Security Act is amended 42 use I395k. 
by adding after subparagraph (E) (added by section 933(a) of this title) 
the following new subparagraph: 
"(F) facility services furnished in connnection with surgi-
cal procedures specified by the Secretary— 
"(i) pursuant to section 1833(iXlXA) and performed in Infra. 
an ambulatory surgical center (which meets health, 
safety, and other standards specified by the Secretary in 
regulations) if the center has an agreement in effect 
with the Secretary by which the center agrees to accept 
the amount determined under section 1833(iX2XA) as 
full payment for such services and to accept an assign-
ment described in section 1842(bX3XBXii) with respect to 42 use I395u. 
payment for all such services furnished by the center to 
individuals enrolled under this part, or 
"(ii) pursuant to section 1833(iXlXB) and performed by 
a physician, described in section 1861(rXl), in his office, 42 use I395x. 
if the Secretary has determined that— 
"(I) a Professional Standards Review Organiza-
tion (designated, conditionally or otherwise, under 
part B of title XI of this Act) is willing, able, and has 42 use I320c. 
agreed to carry out a review (on a sample or other 
reasonable basis) of the physician's performing such 
procedures in the physician's office, 
"(II) the particular physician involved has agreed 
to make available to such Organization such records 
as the Secretary determines to be necessary to carry 
out the review, and 
"(III) the physician is authorized to perform the 
procedure in a hospital located in the area in which 
the office is located, 
and if the physician agrees to accept the amount deter-
mined under section 1833(iX2XB) as full payment for W^a. 
such services and to accept an assignment described in 
section 1842(bX3XBXii) with respect to payment for all 42 use I395u. 
services (including all pre- and post-operative services) 
described in paragraphs (1) and (2XA) of section 1861(s) 42 use I395x. 
and furnished in connection with such surgical proce-
dure to individuals enrolled under this part.", 
(b) Section 1833 of such Act is amended by adding at the end the 42 use 1395Z. 
following new subsection: 
"(iXD The Secretary shall, in consultation with the National 
Professional Standards Review Council and appropriate medical 
organizations— 
94 STAT. 2638 
PUBLIC LAW 96-499—DEC. 5, 1980 
Ante, p. 2637. 
42 u s e 1395x. 
42 u s e 1395u. 
"(A) specify those surgical procedures which are appropriately 
(when considered in terms of the proper utilization of hospital 
inpatient facilities) performed on an inpatient basis in a hospital 
but which also can be performed safely on an ambulatory basis in 
an ambulatory surgical center (meeting the standards specified 
under section 1882(a)(2)(F)(i)) or hospital outpatient department, 
and 
"(B) specify those surgical procedures which are appropriately 
(when considered in terms of the proper utilization of hospital 
inpatient facilities) performed on an inpatient basis in a hospital 
but which also can be performed safely on an ambulatory basis in 
a physician's office. 
"(2)(A) The amount of payment to be made for facility services 
furnished in connection with a surgical procedure specified pursuant 
to paragraph (1)(A) and furnished to an individual in an ambulatory 
surgical center described in such paragraph shall be equal to a 
standard overhead amount established by the Secretary (with respect 
to each such procedure) on the basis of the Secretary's estimate of a 
fair fee which— 
"(i) takes into account the costs incurred by such centers, or 
classes of centers, generally in providing services furnished in 
connection with the performance of such procedure, and 
"(ii) takes such costs into account in such a manner as will 
assure that the performance of the procedure in such a center 
will result in substantially less amounts paid under this title 
than would have been paid if the procedure had been performed 
on an inpatient basis in a hospital. 
Each amount so established shall be reviewed periodically and may 
be adjusted by the Secretary, when appropriate, to take account of 
varying conditions in different areas. 
"(B) The amount of payment to be made under this part for facility 
services furnished, in connection with a surgical procedure specified 
pursuant to paragraph (1)(B), in a physician's office shall be equal to a 
standard overhead amount established by the Secretary (with respect 
to each such procedure) on the basis of the Secretary's estimate of a 
fair fee which— 
"(i) takes into account additional costs, not usually included in 
the professional fee, incurred by physicians in securing, main-
taining, and staffing the facilities and ancillary services appro-
priate for the performance of such procedure in the physician's 
office, and 
"(ii) takes such items into account in such a manner which will 
assure that the performance of such procedure in the physician's 
office will result in substantially less amounts paid under this 
title than would have been paid if the services had been fur-
nished on an inpatient basis in a hospital. 
Each amount so established shall be reviewed periodically and may 
be adjusted by the Secretary, when appropriate, to take account of 
varying conditions in different areas. 
"(3) In the case of services (including all pre- and post-operative 
services) described in paragraphs (1) and (2)(A) of section 1861(s) and 
furnished in connection with surgical procedures (specified pursuant 
to paragraph (1) of this subsection) in a physician's office, an ambula-
tory surgical center described in such paragraph, or a hospital 
outpatient department, payment for such services shall be deter-
mined in accordance with subsection (a)(1)(G) if the physician accepts 
an assignment described in section 1842(b)(3)(B)(ii) with respect to 
payment for such services. 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2639 
"(4)(A) The Secretary is authorized to provide by regulations that in 
the case of a surgical procedure, specified by the Secretary pursuant 
to paragraph (1)(A), performed in an ambulatory surgical center 
described in such paragraph, there shall be paid (in lieu of any 
amounts otherwise payable under this part) with respect to the 
facility services furnished by such center and with respect to all 
related services (including physicians' services, laboratory, X-ray, 
and diagnostic services) a single all-inclusive fee established pursuant 
to subparagraph (B), if all parties furnishing all such services agree to 
accept such fee (to be divided among the parties involved in such 
manner as they shall have previously agreed upon) as full payment 
for the services furnished. 
"(B) In implementing this paragraph, the Secretary shall establish 
with respect to each surgical procedure specified pursuant to para-
graph (1)(A) the amount of the all-inclusive fee for such procedure, 
taking into account such factors as may be appropriate. The amount 
so established with respect to any surgical procedure shall be 
reviewed periodically and may be adjusted by the Secretary, when 
appropriate, to take account of varying conditions in different 
areas.". 
(c)(1) Section 1863 of the Social Security Act is amended by 
inserting "or by ambulatory surgical centers under section 
1832(a)(2)(F)(i)," after "section 1861,". 
(2) Section 1864(a) of such Act is amended— 
(A) by inserting before the period at the end of the first 
sentence the following: ", or whether an ambulatory surgical 
center 
meets 
the 
standards 
specified 
under 
section 
1832(a)(2)(F)(i)"; and 
(B) by inserting "ambulatory surgical center," in the fifth 
sentence after "health care facility," each place it appears. 
(d)(1) Section 1833(a)(1) of such Act, as amended by section 932(a)(1) 
of this title, is further amended by inserting after the comma at the 
end of clause (F) the following new clause: "and (G) with respect to 
expenses incurred for services described in subsection (i)(3) under the 
conditions specified in such subsection, the amounts paid shall be the 
reasonable charge for such services,". 
(2) For an additional amendment to section 1833(a) of the Social 
Security Act with respect to the amount of payment for outpatient 
surgical procedures, see section 942 of this title. 
(3) The first sentence of section 1833(b) of such Act, as amended by 
section 930(h) of this title, is further amended by adding before the 
period at the end the following: ", and (4) such total amount shall not 
include expenses incurred for services the amount of payment for 
which is determined under subsection (a)(1)(G) or under subsection 
(i)(2) or (i)(4)". 
42 u s e 1395z. 
Ante, p. 2637, 42 
u s e 1395x. 
42 u s e 1395aa. 
Ante, p. 2637. 
42 u s e 1395/. 
OUTPATIENT PHYSICAL THERAPY SERVICES 
SEC. 935. (a) Section 1833(g) of the Social Security Act is amended by 42 use 1395Z. 
striking out "$100" and inserting in lieu thereof "$500", 
(b) The amendment made by subsection (a) shall apply to expenses 42 USC 1395/ 
incurred in calendar years beginning with calendar year 1982. note. 
DENTISTS 
SERVICES 
SEC. 936. (a) Clause (2) of the first sentence of section 1861(r) of the 42 USe 1395x. 
Social Security Act is amended to read as follows: "(2) a doctor of 
dental surgery or of dental medicine who is legally authorized to 
79-194 O—81—pt. 2 
86 : QL3 
94 STAT. 2640 
PUBLIC LAW 96-499—DEC. 5, 1980 
42 u s e 1395f. 
42 u s e 1395y. 
42 u s e 1395f 
note. 
practice dentistry by the State in which he performs such function 
and who is acting within the scope of his Hcense when he performs 
such functions,". 
(b) Section 1814(a)(2)(E) of such Act is amended to read as follows: 
"(E) in the case of inpatient hospital services in connection 
with the care, treatment, filling, removal, or replacement of 
teeth or structures directly supporting teeth, the individual, 
because of his underlying medical condition and clinical status or 
because of the severity of the dental procedure, requires hospital-
ization in connection with the provision of such services; or". 
(c) Section 1862(a)(12) of such Act is amended by inserting "or 
because of the severity of the dental procedure," after "clinical 
status". 
(d) The amendments made by this section shall apply with respect 
to services provided on or after July 1,1981. 
42 u s e 1395x. 
Recommendations, 
submittal to 
eongress. 
42 u s e 1395ZZ 
note. 
42 u s e 1395. 
42 u s e 1395x 
note. 
OPTOMETRISTS SERVICES 
SEC. 937. (a) Clause (4) of the first sentence of section 1861(r) of the 
Social Security Act is amended by striking out "but only with respect 
to establishing the necessity for prosthetic lenses," and inserting in 
lieu thereof "but only with respect to services related to the condition 
of aphakia,". 
(b) The Secretary of Health and Human Services shall submit to 
the Congress by January 1, 1982, legislative recommendations with 
respect to reimbursement under title XVIII of the Social Security Act 
for services furnished by optometrists in connection with cataracts 
and such other services which they are legally authorized to perform. 
(c) The amendment made by subsection (a) shall apply to services 
furnished on on after July 1,1981. 
42 u s e 1395x. 
42 u s e 1395x 
note. 
ANTIGENS 
SEC. 938 (a). Section 1861(s)(2) of the Social Security Act is amended 
by striking out "and" at the end of subparagraph (E), by adding "and" 
after the semicolon at the end of subparagraph (F), and by inserting 
the following new subparagraph after subparagraph (F): 
"(G) antigens (subject to quantity limitations prescribed in 
regulations by the Secretary) prepared by a physician, as defined 
in section 1861(r)(l), for a particular patient, including antigens 
so prepared which are forwarded to another qualified person 
(including a rural health clinic) for administration to such 
patient, from time to time, by or under the supervision of another 
such physician;", 
(b) The amendments made by subsection (a) shall apply to services 
furnished on or after January 1,1981. 
TREATMENT OF PLANTAR WARTS 
42 u s e 1395y. 
42 u s e 1395y 
note. 
SEC. 939. (a) Section 1862(a)(13)(C) of the Social Security Act is 
amended by striking out ", warts,". 
(b) The amendment made by subsection (a) shall apply with respect 
to services furnished on or after July 1,1981. 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2641 
42 u s e 1395f 
note. 
Subpart II—Administrative Changes and Miscellaneous Provisions 
PRESUMED COVERAGE PROVISIONS 
SEC. 941. (a) Section 1814 of the Social Security Act is amended by 42 use I395f. 
striking out subsections (h) and (i) and by redesignating subsection (j) 
as subsection (h). 
(b) Section 1814(c) of such Act is amended by striking out "subsec-
tion (j)" and inserting in lieu thereof "subsection (h)". 
(c) The amendments made by this section shall take effect on 
January 1,1981. 
PAYMENT TO PROVIDERS OP SERVICES 
SEC. 942. Section 1833(a) of such Act is amended by striking out 42 use 1395/. 
paragraphs (2) and (3) and inserting in lieu thereof the following: 
"(2) in the case of services described in section 1832(a)(2) 42 use I395k. 
(except those services described in subparagraphs (D), (E), and (F) 
of such section and in paragraph (5) of this subsection and unless 
otherwise specified in section 1881)— 
42 use I395rr. 
"(A) with respect to home health services, the reasonable 
cost of such services, as determined under section 1861(v); 42 use I395x. 
"(B) with respect to other services (except those described 
in subparagraph (C) of this paragraph), the reasonable costs 
of such services, as so determined, less the amount a pro-
vider may charge as described in clause (ii) of section 
1866(a)(2)(A), but in no case may the payment for such other 42 use I395cc. 
services exceed 80 percent of such costs; and 
"(C) with respect to services described in the second 
sentence of section 1861(p), 80 percent of the reasonable 42 use I395x. 
charges for such services; 
"(3) in the case of services described in subparagraphs (D) and 
(E) of section 1832(a)(2), the costs which are reasonable and 42 use I395k. 
related to the cost of furnishing such services or which are based 
on such other tests of reasonableness as the Secretary may 
prescribe in regulations, including those authorized under sec-
tion 1861(v)(l)(A), less the amount a provider may charge as 42 use I395x. 
described in clause (ii) of section 1866(a)(2)(A), but in no case may 42 use I395cc. 
the payment for such services exceed 80 percent of such costs; 
"(4) in the case of facility services described in subparagraph 
(F) of section 1832(a)(2), the applicable amount described in 42 use I395k. 
paragraph (2) of section 1833(i); and 
^^^e, p. 2637. 
"(5) in the case of preadmission diagnostic services described in 
section 1861(s)(2)(C) which are furnished to an individual by the 42 use I395x. 
outpatient department of a hospital within 7 days of such 
individual's admission to the same hospital as an inpatient or (to 
the extent practicable as determined by regulations prescribed 
by the Secretary) to another hospital, the reasonable costs for 
such services.". 
LIMITATION ON PAYMENTS TO RADIOLOGISTS AND PATHOLOGISTS 
SEC. 943. (a) Subsections (a)(1)(B) and (b)(2) of section 1833 of the 42 use 1395/. 
Social Security Act are each amended by inserting after "pathology" 
the following: "who has in effect an agreement with the Secretary by 
which the physician agrees to accept an assignment (as provided for 
in section 1842(b)(3)(B)(ii)) for all physicians' services furnished by 42 use I395u. 
him to hospital inpatients enrolled under this part". 
94 STAT. 2642 
PUBLIC LAW 96-499—DEC. 5, 1980 
42 u s e 1395/ 
note. 
(b) The amendments made by subsection (a) shall apply to services 
furnished after the sixth calendar month beginning after the date of 
the enactment of this Act. 
42 u s e 1395n. 
42 u s e 1395n 
note. 
PHYSICIAN TREATMENT PLAN FOR SPEECH PATHOLOGY 
SEC. 944. (a) Section 1835(a)(2)(D)(ii) of the Social Security Act is 
amended by inserting after "established" the following: "by a physi-
cian or by the speech pathologist providing such services". 
(b) The amendment made by subsection (a) shall apply to plans for 
furnishing services established on or after January 1,1981. 
Repeal. 
42 u s e 1395p. 
42 u s e 1395q. 
42 u s e 1395r. 
42 u s e 1395p 
note. 
42 u s e 1395v. 
REENROLLMENT AND OPEN ENROLLMENT IN PART B 
SEC. 945. (a) Subsection (b) of section 1837 of the Social Security Act 
is repealed. 
(b)(1) Subsection (e) of such section is amended to read as follows: 
"(e) There shall be a general enrollment period which is any period 
after the period described in subsection (d).". 
(2) Subsection (g)(3) of such section is amended by striking out "the 
earlier of the then current" and all that follows through "subsection 
(e) of this section)" and inserting in lieu thereof "the month in which 
the individual files an application establishing such entitlement". 
(c)(1) Section 1838(a)(2)(E) of such Act is amended by striking out 
"the July 1" and inserting in lieu thereof "the first day of the third 
month". 
(2) The second sentence of subsection (d) of section 1839 of such Act 
is amended by striking out "who enrolls for the second time) (2)" and 
all that follows through "in which he enrolled for the second time" 
and inserting in lieu therof "who reenrolls) (2) the months which 
elapsed between the date of termination of a previous coverage period 
and the month after the month in which he reenrolled". 
(d) The amendments made by subsections (a), (b), and (c) shall apply 
to enrollments occurring on or after April 1,1981. 
(e) Section 1843 of the Social Security Act is amended by inserting 
"or during 1981," in subsections (a), (g)(1), and (h)(1) after "January 1, 
1970," each place it appears. 
DETERMINATION OF REASONABLE CHARGE 
42 use 1395U. 
SEC. 946. (a) The third sentence of section 1842(b)(3) of the Social 
Security Act is amended by striking out "in which the bill is 
submitted or the request for payment is made" and inserting in lieu 
thereof "in which the service is rendered". 
(b) Such section is further amended by striking out "and" at the 
end of subparagraph (D), by inserting "and" after the semicolon at 
the end of subparagraph (E), and by inserting after subparagraph (E) 
the following new subparagraph: 
"(F) will take such action as may be necessary to assure that 
where payment under this part for a service rendered is on a 
charge basis, such payment shall be determined on the basis of 
the charge that is determined in accordance with this section on 
the basis of customary and prevailing charge levels in effect at 
the time the service was rendered or, in the case of services 
rendered more than 12 months before the year (ending on June 
30) in which the bill is submitted or request for payment is made, 
on the basis of such levels in effect for the 12-month period 
preceding such year;". 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2643 
(c) The amendments made by subsections (a) and (b) shall become 
effective with respect to bills submitted or requests for payment made 
on or after July 1,1981. 
SHORTENED PART B TERMINATION PERIOD FOR CERTAIN INDIVIDUALS 
WHOSE PREMIUMS MEDICAID HAS CEASED TO PAY 
SEC. 947. (a) Section 1843(e) of the Social Security Act is amended by 
adding at the end thereof the following: "The coverage period under 
this part of any such individual who (in the last month of his coverage 
period attributable to the State agreement or in any of the following 
six months) files notice that he no longer wishes to participate in the 
insurance program established by this part, shall terminate at the 
close of the month in which the notice is filed.". 
(b) The second sentence of section 1838(b) of such Act is amended by 
inserting "(except as otherwise provided in section 1843(e))" after 
"shall". 
(c) Section 1843(g)(2) of such Act is amended— 
(1) by adding "and" at the end of clause (A); 
(2) by striking out ", and" at the end of clause (B) and inserting 
in lieu thereof a period; and 
(3) by striking out clause (C). 
(d) The amendments made by this section apply to notices filed 
after the third calendar month beginning after the date of the 
enactment of this Act. 
(e) The coverage period under part B of title XVIII of the Social 
Security Act of an individual whose coverage period attributable to a 
State agreement under section 1843 of such Act is terminated and 
who has filed notice before the end of the third calendar month 
beginning after the date of the enactment of this Act that he no 
longer wishes to participate in the insurance program established by 
part B of title XVIII shall terminate on the earlier of (1) the day 
specified in section 1838 without the amendments made by this 
section, or (2) (unless the individual files notice before the day 
specified in this clause that he wishes his coverage period to termi-
nate as provided in clause (1)) the day on which his coverage period 
would terminate if the individual filed notice in the fourth calendar 
month beginning after the date of the enactment of this Act. 
42 use 1395u 
note. 
42 use 1395v. 
42 use 1395q. 
42 use 1395v. 
42 use 1395v 
note. 
42 use 1395v 
note. 
42 use 1395J. 
42 use 1395v. 
42 use 1395J. 
42 use 1395q. 
REIMBURSEMENT OF PHYSICIANS SERVICES IN TEACHING HOSPITALS 
SEC 948. (a)(1) Paragraph (7) of section 1861(b) of the Social Security 42 use I395x. 
Act is amended to read as follows: 
"(7) a physician where the hospital has a teaching program 
approved as specified in paragraph (6), if (A) the hospital elects to 
receive any payment due under this title for reasonable costs of 
such services, and (B) all physicians in such hospital agree not to 
bill charges for professional services rendered in such hospital to 
individuals covered under the insurance program established by 
this title.". 
(2) Section 1832(a)(2)(B)(i)(II) of such Act is amended by striking out 42 use 1395k. 
", unless either clause (A) or (B) of paragraph (7) of such section is 
met" and inserting in lieu thereof "where the conditions specified in 
paragraph (7) of such section are met". 
(b) Section 1842(b) of the Social Security Act is amended by adding 42 USC 1895u. 
at the end the following new paragraph: 
"(6)(A) In the case of physicians' services furnished to a patient in a 
hospital with a teaching program approved as specified in section 
94 STAT. 2644 
PUBLIC LAW 96-499—DEC. 5, 1980 
42 u s e 1395x. 
Ante, p. 2643. 
42 u s e 1395x 
note. 
Ante, p. 2643. 
42 u s e 1395k, 
1395x and note. 
1861(b)(6) but which does not meet the conditions described in section 
1861(b)(7), the carrier shall not provide (except on the basis described 
in subparagraph (O) for payment for such services under this part— 
"(i) unless— 
"(I) the physician renders sufficient personal and identifi-
able physicians' services to the patient to exercise full, 
personal control over the management of the portion of the 
case for which the payment is sought, 
"(II) the services are of the same character as the services 
the physician furnishes to patients not entitled to benefits 
under this title, and 
"(III) at least 25 percent of the hospital's patients (during a 
representative past period, as determined by the Secretary) 
who were not entitled to benefits under this title and who 
were furnished services described in subclauses (I) and (II) 
paid all or a substantial part of charges (other than nominal 
charges) imposed for such services; and 
"(ii) to the extent that the amount of the payment exceeds the 
reasonable charge for the services (with the customary charge 
determined consistent with subparagraph (B)). 
"(B) The customary charge for such services in a hospital shall be 
determined in accordance with regulations issued by the Secretary 
and taking into account the following factors: 
"(i) In the case of a physician who has a substantial practice 
outside the teaching setting, the carrier shall take into account 
the amounts the physician charges for similar services in the 
physician's outside practice. 
"(ii) In the case of a physician who does not have a practice 
described in clause (i), if the hospital, its physicians, or other 
appropriate billing entity has established one or more schedules 
of charges which are collected for medical and surgical services, 
the carrier shall base payment under this title on the greater 
of— 
"(I) the charges (other than nominal charges) which are 
most frequently collected in full or substantial part with 
respect to patients who were not entitled to benefits under 
this title and who were furnished services described in 
subclauses (I) and (II) of subparagraph (A)(i), or 
"(II) the mean of the charges (other than nominal charges) 
which were collected in full or substantial part with respect 
to such patients. 
"(C) In the case of physicians' services furnished to a patient in a 
hospital with a teaching program approved as specified in section 
1861(b)(6) but which does not meet the conditions described in section 
1861(b)(7), if the conditions described in subclauses (I) and (II) of 
subparagraph (A)(i) are met and if the physician elects payment to be 
determined under this subparagraph, the carrier shall provide for 
payment for such services under this part on the basis of regulations 
of the Secretary governing reimbursement for the services of hospi-
tal-based physicians (and not on any other basis).". 
(c)(1) The amendments made by subsection (a) shall apply with 
respect to cost accounting periods beginning on or after October 1, 
1978. A hospital's election under section 1861(b)(7)(A) of the Social 
Security Act (as administered in accordance with section 15 of Public 
Law 93-233) as of September 30, 1978, shall constitute such hospital's 
election under such section (as amended by subsection (a)(1)) on and 
after October 1, 1978, until otherwise provided by the hospital. 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2645 
(2) The amendment made by subsection (b) shall apply with respect 
to cost accounting periods beginning on or after January 1, 1981. 
42 u s e 1395u 
note. 
FLEXIBILITY IN APPLICATION OF STANDARDS TO RURAL HOSPITALS 
SEC. 949. Section 1861(e) of the Social Security Act is amended by 42 USC I395x. 
adding the following new sentence at the end thereof: "The term 
'hospital' also includes a facility of fifty beds or less which is located 
in an area determined by the Secretary to meet the definition 
relating to a rural area described in subparagraph (A) of paragraph (5) 
of this subsection and which meets the other requirements of this 
subsection, except that— 
"(A) with respect to the requirements for nursing services 
applicable after December 31, 1978, such requirements shall 
provide for temporary waiver of the requirements, for such 
period as the Secretary deems appropriate, where (i) the facility's 
failure to fully comply with the requirements is attributable to a 
temporary shortage of qualified nursing personnel in the area in 
which the facility is located, (ii) a registered professional nurse is 
present on the premises to render or supervise the nursing 
service provided during at least the regular daj^ime shift, and 
(iii) the Secretary determines that the employment of such 
nursing personnel as are available to the facility during such 
temporary period will not adversely affect the health and safety 
of patients; 
"(B) with respect to the health and safety requirements pro-
mulgated under paragraph (9), such requirements shall be 
applied by the Secretary to a facility herein defined in such 
manner as to assure that personnel requirements take into 
account the availability of technical personnel and the educa-
tional opportunities for technical personnel in the area in which 
such facility is located, and the scope of services rendered by such 
facility; and the Secretary, by regulations, shall provide for the 
continued participation of such a facility where such personnel 
requirements are not fully met, for such period as the Secretary 
determines that (i) the facility is making good faith efforts to 
fully comply with the personnel requirements, (ii) the employ-
ment by the facility of such personnel as are available to the 
facility will not adversely affect the health and safety of patients, 
and (iii) if the Secretary has determined that because of the 
facility's waiver under this subparagraph the facility should 
limit its scope of services in order not to adversely affect the 
health and safety of the facility's patients, the facility is so 
limiting the scope of services it provides; and 
"(C) with respect to the fire and safety requirements promul-
gated under paragraph (9), the Secretary may (i), waive, for such 
period as he deems appropriate, specific provisions of such 
requirements which if rigidly applied would result in unreason-
able hardship for such a facility and which, if not applied, would 
not jeopardize the health and safety of patients, and (ii) may 
accept a facility's compliance with all applicable State codes 
relating to fire and safety in lieu of compliance with the fire and 
safety requirements promulgated under paragraph (9), if he 
determines that such State has in effect fire and safety codes, 
imposed by State law, which adequately protect patients." 
94 STAT. 2646 
PUBLIC LAW 96-499—DEC. 5, 1980 
HOSPITAL TRANSFER REQUIREMENT FOR SKILLED NURSING FACILITY 
COVERAGE 
42 use I395x. 
SEC. 950. Section 1861(i) of the Social Security Act is amended— 
(1) by striking out "14 days" each place it appears and insert-
ing in lieu thereof "30 days"; and 
(2) by striking out ", or (B) within 28 days" and all that follows 
through "he resides, or (C)" and inserting in lieu thereof ", or 
(B)". 
42 u s e 1395x. 
Ante, p. 
2631, 
42 
use 
1395n. 
42 
use 
1395x. 
Effective date. 
42 u s e 1395x 
note. 
42 u s e 1395x. 
CERTIFICATION AND UTILIZATION REVIEW BY PODIATRISTS 
SEC. 951. (a) Section 1861(r)(3) of the Social Security Act is amended 
to read as follows: "(3) a doctor of podiatric medicine for the purposes 
of subsection (s) of this section but only with respect to functions 
which he is legally authorized to perforrn as such by the State in 
which he performs them; and for the purposes of subsections (k) and 
(m) of this section and sections 1814(a) and 1835 but only if his 
performance of functions under subsections (k) and (m) and sections 
1814(a) and 1835 is consistent with the policy of the institution or 
agency with respect to which he performs them and with the 
functions which he is legally authorized to perform,". 
(b) Section 1861(k)(2)(A) of such Act is amended by inserting after 
"two or more physicians" the following: "(of which at least two must 
be physicians described in subsection (r)(l) of this section)". 
(c) The amendments made by this section shall take effect on 
January 1,1981. 
ACCESS TO BOOKS AND RECORDS OF SUBCONTRACTORS 
SEC. 952. Section 1861(v)(l) of the Social Security Act is amended by 
adding after subparagraph (H) (added by section 930(p) of this title) 
the following new subparagraph: 
"(I) In determining such reasonable cost, the Secretary may not 
include any costs incurred by a provider with respect to any services 
furnished in connection with matters for which payment may be 
made under this title and furnished pursuant to a contract between 
the provider and any of its subcontractors which is entered into after 
the date of the enactment of this subparagraph and the value or cost 
of which is $10,000 or more over a twelve-month period unless the 
contract contains a clause to the effect that— 
"(i) until the expiration of four years after the furnishing of 
such services pursuant to such contract, the subcontractor shall 
make available, upon written request to the Secretary, or upon 
request to the Comptroller General, or any of their duly author-
ized representatives, the contract, and books, documents and 
records of such subcontractor that are necessary to certify the 
nature and extent of such costs, and 
"(ii) if the subcontractor carries out any of the duties of the 
contract through a subcontract, with a value or cost of $10,000 or 
more over a twelve-month period, with a related organization, 
such subcontract shall contain a clause to the effect that until 
the expiration of four years after the furnishing of such services 
pursuant to such subcontract, the related organization shall 
make available, upon written request to the Secretary, or upon 
request to the Comptroller General, or any of their duly author-
ized representatives, the subcontract, and books, documents and 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2647 
records of such organization that are necessary to verify the 
nature and extent of such costs. 
The Secretary shall prescribe in regulation criteria and procedures 
which the Secretary shall use in obtaining access to books, docu-
ments, and records under clauses required in contracts and subcon-
tracts under this subparagraph.". 
MEDICARE LIABILITY SECONDARY WHERE PAYMENT CAN BE MADE UNDER 
LIABILITY OR NO FAULT INSURANCE 
SEC 953. Section 1862(b) of the Social Security Act is amended— 42 use I395y. 
(1) by inserting "or under an automobile or liability insurance 
policy or plan (including a self-insured plan) or under no fault 
insurance" before the period at the end of the first sentence; 
(2) by inserting ", policy, plan, or insurance" before the period 
at the end of the second sentence; and 
(3) by adding at the end the following new sentence: "The 
Secretary may waive the provisions of this subsection in the case 
of an individual claim if he determines that the probability of 
recovery or amount involved in such claim does not warrant the 
pursuing of the claim.". 
PAYMENT FOR PHYSICIANS' SERVICES WHERE BENEFICIARY HAS DIED 
SEC. 954. (a) Section 1870(0 of the Social Security Act is amended to 42 USC I395gg. 
read as follows: 
"(f) If an individual who received medical and other health services 
for which payment may be made under section 1832(a)(1) dies, and no 42 USC I395k. 
assignment of the right to payment for such services was made by 
such individual before his death, and payment for such services has 
not been made— 
"(1) if the person or persons who furnished the services agree 
that the reasonable charge is the full charge for the services, 
payment for such services shall be made to such person or 
persons, and 
"(2) if the person or persons who furnished the services do not 
agree that the reasonable charge is the full charge for the 
services, payment for such services shall be made on the basis of 
an itemized bill to the person who has agreed to assume the legal 
obligation to make payment for such services and files a request 
for payment (with such accompanying evidence of such legal 
obligation as may be required in regulations), 
but only in such amount and subject to such conditions as would be 
applicable if the individual who received the services had not died.". 
(b) The amendment made by this section shall apply only to claims ^2 USC I395gg 
filed on or after January 1,1981. 
note. 
PROVIDER REIMBURSEMENT REVIEW BOARD 
SEC. 955. Section 1878(f)(1) of the Social Security Act is amended by 42 use l395oo. 
inserting the following after the second sentence thereof: "Providers 
shall also have the right to obtain judicial review of any action of the 
fiscal intermediary which involves a question of law or regulations 
relevant to the matters in controversy whenever the Board deter-
mines (on its own motion or at the request of a provider of services as 
described in the following sentence) that it is without authority to 
decide the question, by a civil action commenced within sixty days of 
the date on which such determination is rendered. If a provider of 
94 STAT. 2648 
PUBLIC LAW 96-499—DEC. 5, 1980 
services may obtain a hearing under subsection (a) and has filed a 
request for such a hearing, such provider may file a request for a 
determination by the Board of its authority to decide the question of 
law or regulations relevant to the matters in controversy (accompa-
nied by such documents and materials as the Board shall require for 
purposes of rendering such determination). The Board shall render 
such determination in writing within thirty days after the Board 
receives the request and such accompanying documents and materi-
als, and the determination shall be considered a final decision and not 
subject to review by the Secretary. If the Board fails to render such 
determination within such period, the provider may bring a civil 
action (within sixty days of the end of such period) with respect to the 
matter in controversy contained in such request for a hearing.". 
PAYMENT WHERE BENEFICIARY NOT AT FAULT 
42 use 1395pp. 
SEC. 956. (a) Section 1879 of the Social Security Act is amended by 
adding the following new subsection at the end thereof: 
"(e) Where payment for inpatient hospital services or extended 
care services may not be made under part A of this title on behalf of 
an individual entitled to benefits under such part solely because of an 
unintentional, inadvertent, or erroneous action with respect to the 
transfer of such individual from a hospital or skilled nursing facility 
that meets the requirements of section 1861 (e) or (j) by such a 
provider of services acting in good faith in accordance with the advice 
of a utilization review committee, professional standards review 
organization, or fiscal intermediary, or on the basis of a clearly 
erroneous administrative decision by a provider of services, the 
Secretary shall take such action with respect to the payment of such 
benefits as he determines may be necessary to correct the effects of 
such unintentional, inadvertent, or erroneous action.". 
(b) The amendment made by subsection (a) shall take effect on 
January 1,1981. 
T E C H N I C A L RENAL DISEASE AMENDMENTS 
SEC. 957. (a) Section 1881(e) of the Social Security Act is amended— 
(1) by striking out "and" the first place it appears in paragraph 
(1) and inserting a comma in lieu thereof; 
(2) by inserting "and nonprofit entities which the Secretary 
finds can furnish equipment economically and efficiently," after 
"renal dialysis facilities," in paragraph (1); 
(3) by striking out "such providers and facilities" and inserting 
in lieu thereof "such providers, facilities, and nonprofit entities"; 
and 
(4) by striking out "or facility will—" in paragraph (2) and 
inserting in lieu thereof ", facility, or other entity will—". 
42 use 1395rr. 
(b) Section 1881(g) of such Act is amended by striking out "April" 
each place it appears and inserting in lieu thereof "July". 
Effective date. 
42 u s e 1395pp 
note. 
42 u s e 1395rr. 
42 u s e 1395// 
note. 
STUDIES AND DEMONSTRATION PROJECTS 
SEC. 958. (a) The Secretary of Health and Human Services shall 
develop and carry out a demonstration project to determine (1) the 
extent to which the commencement of nutritional therapy in early 
renal failure, utilizing (but not limited to) controlled protein sub-
stances, can retard or arrest the progression of the disease with a 
resultant substantive deferment of dialysis, and (2) the administra-
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2649 
42 u s e 1395. 
Report to 
Congress. 
tive, financial, and other aspects of making such nutritional therapy 
generally available as part of the benefits received under title XVIII 
of the Social Security Act. 
(b) The Secretary shall submit, to the Congress, within one year 
after the date of the enactment of this Act, a report on the demonstra-
tion projects being conducted by the Secretary with respect to 
waiving the applicable cost sharing amounts which beneficiaries 
under title XVIII of the Social Security Act have to pay for obtaining 
a second opinion on having surgery performed. Such report shall 
include any recommendations for legislative changes in such title 
which the Secretary finds desirable as a result of such demonstration 
projects. 
(c) The Secretary shall conduct a study of the circumstances and 
conditions under which services furnished by registered dietitians 
should be covered as a home health benefit under title XVIII of the 
Social Security Act. 
(d) The Secretary shall develop and carry out demonstration 
projects to determine the administrative, financial, and other aspects 
of making the services of clinical social workers more generally 
available as part of the benefits received under title XVIII of the 
Social Security Act. 
(e) The Secretary shall, in consultation with appropriate profes-
sional organizations, conduct a comprehensive study of methods for 
providing coverage under part B of title XVIII of the Social Security 
Act for orthopedic shoes for individuals with disabling or deforming 42 use I395j. 
conditions who require special fitting considerations to help protect 
against increasing disability or serious medical complications or who 
require special shoes in conjunction with the use of an orthosis or foot 
support. The Secretary shall submit to the Congress, no later than 
July 1, 1981, a report on the findings of this study and such specific 
legislative recommendations as is appropriate with respect to the 
utilization, cost control, quality of care, and equitable and efficient 
administration of such an extension of 
coverage. 
(f) The Secretary shall conduct a study of the circumstances and 
conditions under which services furnished with respect to respiratory 
therapy should be covered as a home health benefit under title XVIII 
of the Social Security Act. 
(g) The Secretary shall conduct a study involving a comprehensive 
analysis of the cost effects of alternative approaches to improving 
coverage under title XVIII of the Social Security Act for the treat-
ment of various types of 
foot conditions. 
(h) The Secretary shall submit a report on each of the demonstra-
tion projects and studies described in subsections (a), (c), (d), (f), and 
(g). Each such report shall be submitted within twenty-four months of 
the date of the enactment of this Act and shall contain any recom-
mendations for legislative changes which the Secretary finds desir-
able as a result of conducting the demonstration project or study with 
respect to which the report is submitted. 
(i) Where any study or demonstration project conducted under this 
section relates to payments with respect to services furnished by 
independent practitioners, such study or project shall include an 
evaluation of the effect of such payments on coordination of care, 
cost, quality, and the organization in the provision of services and the 
utilization of services. 
(j) Grants, payments under contracts, and other expenditures made 
for studies and demonstration projects under this section shall be 
made in appropriate part from the Federal Hospital Insurance Trust 
Fund (established by section 1817 of the Social Security Act) and the 42 use I395i. 
Report to 
Congress. 
Report. 
94 STAT. 2650 
PUBLIC LAW 96-499—DEC. 5, 1980 
Federal Supplementary Medical Insurance Trust Fund (established 
42 use I395t. 
by section 1841 of the Social Security Act). Grants and payments 
under contracts may be made either in advance or by way of 
reimbursement, as may be determined by the Secretary, and shall be 
made in such installments and on such conditions as the Secretary 
finds necessary to carry out the purpose of this section. With respect 
to any such grant, payment, or other expenditure, the amount to be 
paid from each of such trust funds shall be determined by the 
Secretary, giving due regard to the purposes of the experiment or 
project involved. 
42 u s e 1395g 
note. 
TEMPORARY DELAY IN PERIODIC INTERIM PAYMENTS 
SEC. 959. Notwithstanding section 1815(a) of the Social Security 
Act, in the case of a hospital which is paid periodic interim payments 
under such section, the Secretary of Health and Human Services 
shall provide that with respect to the last twenty-one days for which 
such payments would otherwise be made during fiscal year 1981, such 
payments shall be deferred until fiscal year 1982. 
PART C—PROVISIONS RELATING TO MEDICAID 
42 u s e 1396b. 
42 u s e 1316. 
42 u s e 1396b 
note. 
DISPUTED MEDICAID CLAIMS 
SEC. 961. (a) Section 1903(d) of the Social Security Act is amended 
by adding at the end thereof the following new paragraph: 
"(5) In any case in which the Secretary estimates that there has 
been an overpayment under this section to a State on the basis of a 
claim by such State that has been disallowed by the Secretary under 
section 1116(d), and such State disputes such disallowance, the 
amount of the Federal payment in controversy shall, at the option of 
the State, be retained by such State or recovered by the Secretary 
pending a final determination with respect to such payment amount. 
If such final determination is to the effect that any amount was 
properly disallowed, and the State chose to retain payment of the 
amount in controversy, the Secretary shall offset, from any subse-
quent payments made to such State under this title, an amount equal 
to the proper amount of the disallowance plus interest on such 
amount disallowed for the period beginning on the date such amount 
was disallowed and ending on the date of such final determination 
(but not to exceed a period of twelve months with respect to disallow-
ances made prior to October 1, 1981, or six months with respect to 
disallowances made thereafter) at a rate (determined by the Secre-
tary) based on the average of the bond equivalent of the weekly 
90-day treasury bill auction rates during such period.". 
(b) The amendment made by subsection (a) shall be effective with 
respect to expenditures for services furnished on or after October 1, 
1980. 
REIMBURSEMENT RATES UNDER MEDICAID FOR SKILLED NURSING AND 
INTERMEDIATE CARE FACILITY SERVICES 
42 use 1396a. 
SEC. 962. (a) Section 1902(a)(13)(E) of the Social Security Act is 
amended to read as follows: 
"(E) for payment of the skilled nursing facility and intermedi-
ate care facility services provided under the plan through the use 
of rates (determined in accordance with methods and standards 
developed by the State) which the State finds, and makes 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2651 
assurances satisfactory to the Secretary, are reasonable and 
adequate to meet the costs which must be incurred by efficiently 
and economically operated facilities in order to provide care and 
services in conformity with applicable State and Federal laws, 
regulations, and quality and safety standards; and such State 
makes further assurances, satisfactory to the Secretary, for the 
filing of uniform cost reports by each skilled nursing or interme-
diate care facility and periodic audits by the State of such 
reports; and", 
(b) The amendment made by subsection (a) shall become effective 
on October 1,1980. 
42 u s e 1396a 
note. 
EXTENSION OP INCREASED FUNDING FOR STATE MEDICAID FRAUD 
CONTROL UNITS 
SEC. 963. Section 1903(a)(6) of the Social Security Act is amended by 42 use I396b. 
striking out "an amount equal to" and all that follows through "with 
respect to costs incurred" and inserting in lieu thereof the following: 
"an amount equal to— 
"(A) 90 per centum of the sums expended during such a 
quarter within the twelve-quarter period beginning with the 
first quarter in which a payment is made to the State 
pursuant to this paragraph, and 
"(B) 75 per centum of the sums expended during each 
succeeding calendar quarter, 
with respect to costs incurred". 
CHANGE IN CALENDAR QUARTER FOR WHICH SATISFACTORY UTILIZA-
TION REVIEW MUST BE SHOWN TO RECEIVE WAIVER OF MEDICAID 
REDUCTION 
SEC. 964. Section 1903(gX3)(B) of the Social Security Act is 42 use i396b. 
amended— 
(1) by striking out "October 1, 1977" and inserting in lieu 
thereof "January 1,1978"; and 
(2) by striking out "the calendar quarter ending on December 
31, 1977" and inserting in lieu thereof "any calendar quarter 
ending on or before December 31,1978". 
REIMBURSEMENT UNDER MEDICAID FOR SERVICES FURNISHED BY 
NURSE-MIDWIVES 
SEC 965. (a)(1) Subsection (a) of section 1905 of the Social Security 
Act is amended— 
(A) by striking out "and" at the end of paragraph (16); 
(B) by redesignating paragraph (17) as paragraph (18); and 
(C) by inserting after paragraph (16) the following new para-
graph: 
"(17) services furnished by a nurse-midwife (as defined in 
subsection (m)) which he is legally authorized to perform under 
State law (or the State regulatory mechanism provided by State 
law), whether or not he is under the supervision of, or associated 
with, a physician or other health care provider; and". 
(2) Such section is further amended by adding at the end thereof the 
following new subsection: 
"(m) The term 'nurse-midwife' means a registered nurse who has 
successfully completed a program of study and clinical experience 
meeting guidelines prescribed by the Secretary, or has been certified 
42 u s e 1396d. 
"Nurse-
midwife." 
94 STAT. 2652 
PUBLIC LAW 96-499—DEC. 5, 1980 
42 u s e 1396a. 
42 u s e 1396a 
note. 
42 u s e 1396. 
by an organization recognized by the Secretary, and performs serv-
ices in the area of management of the care of mothers and babies 
(throughout the maternity cycle) which he is legally authorized to 
perform in the State in which he performs such services.", 
(b) Section 1902(a) of 
such Act is amended— 
(1) by striking out "clauses (1) through (5)" in paragraph (13)(B) 
and inserting in lieu thereof "paragraphs (1) through (5) and 
(17)"; 
(2) by striking out "clauses (1) through (5)" in paragraph 
(13)(C)(i) and inserting in lieu thereof "paragraphs (1) through (5) 
and (17)"; 
(3) by striking out "clauses numbered (1) through (16)" in 
paragraph (13)(C)(ii) and inserting in lieu thereof "paragraphs 
numbered (1) through (17)"; and 
(4) by striking out "clauses (1) through (5) and (7)" in paragraph 
(14)(A)(i) and inserting in lieu thereof "paragraphs (1) through 
(5), (7), and (17)". 
(c)(1) The amendments made by this section shall (except as 
provided under paragraph (2)) be effective with respect to payments 
under title XIX of the Social Security Act for calendar quarters 
beginning more than one hundred and twenty days after the date of 
the enactment of this Act. 
(2) In the case of a State plan for medical assistance under title XIX 
of the Social Security Act which the Secretary of Health and Human 
Services determines requires State legislation in order for the plan to 
meet the additional requirements imposed by the amendments made 
by this section, the State plan shall not be regarded as failing to 
comply with the requirements of such title 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 legislature that begins after the date of 
the enactment of this Act. 
42 u s e 632a. 
"Eligible 
participant.' 
42 u s e 601. 
DEMONSTRATION PROJECTS RELATING TO THE TRAINING OF AFDC 
RECIPIENTS AS HOME HEALTH AIDES 
SEC. 966. (a) The Secretary of Health and Human Services shall 
enter into agreements with States, selected at his discretion, for the 
purpose of conducting demonstration projects for the training and 
employment of eligible participants as homemsikers or home health 
aides, who shall provide authorized services to elderly or disabled 
individuals, or other individuals in need of such services, to whom 
such services, are not otherwise reasonably and actually available or 
provided, and who would, without the availability of such services, be 
reasonably anticipated to require institutional care. 
(b) For purposes of this section, the term "eligible participant" 
means an individual who has voluntarily applied for participation 
and who, at the time such individual enters the project established 
under this section, has been certified by the appropriate agency of 
State or local government as being eligible for financial assistance 
under a State plan approved under part A of title IV of the Social 
Security Act and as having continuously received such financial 
assistance during the ninety-day period which immediately precedes 
the date on which such individual enters such project and who, 
within such ninety-day period, had not been employed as a home-
maker or home health aide. 
(c)(1) The Secretary shall enter into agreements under this section 
with no more than twelve States. Priority shall be given to States 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2653 
which have demonstrated interest in providing services of the type 
authorized under this section. 
(2) A State may apply to enter into an agreement under this section 
in such manner and at such time as the Secretary may prescribe. 
(3) Any State entering into an agreement with the Secretary under 
this section must— 
(A) provide that the demonstration project shall be adminis-
tered by a State health services agency designated for this 
purpose by the Governor (which may be the State agency 
administering or responsible for the administration of the State 
plan for medical assistance under title XIX of the Social Security 42 USC 1396. 
Act); 
(B) provide that the agency designated pursuant to subpara-
graph (A) shall, to the maximum extent feasible, arrange for 
coordinating its activities under the agreement with activities of 
other State agencies having related responsibilities; 
(C) establish a formal training program, which meets such 
standards as the Secretary may establish to assure the adequacy 
of such program, to prepare eligible participants to provide part-
time and intermittent homemaker services or home health aide 
services to individuals who are elderly, disabled, or otherwise in 
need of such services; 
(D) provide for the full-time employment of those eligible 
participants who successfully complete the training program 
with one or more public agencies (or, by contract, with private 
bona fide nonprofit agencies) as homemakers or home health 
aides, rendering authorized services, under the supervision of 
persons determined by the State to be qualified to supervise the 
performance of such services, to individuals described in subsec-
tion (a) at wage levels comparable to the prevailing wage levels in 
the area for similar work; 
(E) provide that such services provided under subparagraph (D) 
shall be made available without regard to income of the individ-
ual requiring such services, but that a reasonable fee will be 
charged (on a sliding scale basis) for such services provided to 
individuals who have income in excess of 200 percent of the needs 
standard in such State under the State plan approved under part 
A of title IV of the Social Security Act for a household of the 42 USC 601. 
same size as such individual's household; 
(F) provide for a system of continuing independent professional 
review by an appropriate panel, which is not affiliated with the 
entity providing the services involved, to assure that services are 
provided only to individuals reasonably determined to be in need 
of such supportive services; 
(G) provide for evaluation of the project and review of all 
agencies providing services under the project; 
(H) submit periodic reports to the Secretary as he may require; 
and 
(I) meet such other requirements as the Secretary may estab-
lish for the proper and efficient implementation of the project. 
(4) The number of participants in any project shall not exceed that 
number which the Secretary determines to be reasonable, based upon 
the capability of the agencies involved to train, employ, and properly 
utilize eligible participants. Such number may be appropriately 
modified, subsequently, with the approval of the Secretary. 
(5) Any contract with a private bona fide nonprofit agency entered 
into pursuant to paragraph (3)(D) shall provide for reasonable reim-
bursement of such agencies for services on a basis proportionate to 
94 STAT. 2654 
PUBLIC LAW 96-499—DEC. 5, 1980 
the amount of time allocated to individuals eligible to receive such 
services under this section (and, in case such agency is an institution, 
the amount of the reimbursement shall not exceed the amount of 
reimbursement which would have been payable if the services 
involved had been provided by a free-standing agency). 
(6) For purposes of this section, a facility of the Veterans' Adminis-
tration shall, at the request of the Administrator of Veterans' Affairs, 
be considered to be a public agency. In the case of any such facility 
which is so considered to be a public agency, of the costs determined 
under this section which are attributable to such facility, 90 percent 
shall be paid by the State and 10 percent by the Veterans' Adminis-
tration. 
(d)(1) For purposes of this section, authorized homemaker and home 
health aide services include part-time or intermittent— 
(A) personal care, such as bathing, grooming, and toilet care; 
(B) assisting patients having limited mobility; 
(C) feeding and diet assistance; 
(D) home management, housekeeping, and shopping; 
(E) health-oriented recordkeeping; 
(F) family planning services; and 
(G) simple procedures for identifying potential health prob-
lems. 
(2) Such authorized services do not include any services performed 
in an institution, or any services provided under circumstances 
where institutionalization would be substantially more efficient as a 
means of providing such services. 
(e)(1) Agreements shall be entered into under this section between 
the Secretary and the State agency designated by the Governor. 
Under such agreement the Secretary shall pay to the State, as an 
42 use 1396b. 
additional payment under section 1903 of the Social Security Act for 
each quarter, an amount equal to 90 percent of the reasonable costs 
incurred (less the Federal share of any related fees collected) by such 
State during such quarter in carrying out a demonstration project 
under this section, including reasonable wages and other employ-
ment costs of eligible participants employed full time under such 
project (and, for purposes of determining the amount of such addi-
tional payment, the 10 percent referred to in subsection (c)(6), paid by 
the Veterans' Administration, shall be deemed to be a cost incurred 
by the State in carrying out such a project). 
(2) Demonstration projects under this section shall be of a maxi-
mum duration of four years, plus an additional time period of up to 
six months for planning and development, and up to six months for 
final evaluation and reporting. Federal funding under this subsection 
shall not be available for the employment of any eligible participant 
under the project after such participant has been employed for a 
period of three years. 
42 use 601. 
(f) For purposes of title IV of the Social Security Act, any eligible 
participant taking part in a training program under a project 
authorized under this section shall be deemed to be participating in a 
42 use 630. 
work incentive program established by part C of such title. 
(g) For the first year (and such additional immediately succeeding 
period as the State may specify) during which an eligible participant 
is employed under the project established under this section, such 
participant shall, notwithstanding any other provision of law, retain 
any eligibility for medical assistance under a State plan approved 
42 use 1396. 
under title XIX of the Social Security Act, and any eligibility for 
social and supportive services provided under the State plan ap-
42 use 601. 
proved under part A of title IV of such Act, which such participant 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2655 
had at the time such participant entered the training program 
established under this section. 
(h) The Secretary shall submit annual reports to the Congress 
evaluating the demonstration projects carried out under this section, 
and shall submit a final report to the Congress not more than six 
months after he has received the final reports fi*om all States 
participating in such projects. 
(i) The Secretary shall, and is hereby authorized to, waive such 
requirements, including formal solicitation and approval require-
ments, as will further expeditious and effective implementation of 
this section, 
TITLE X—OTHER SOCIAL SECURITY ACT 
PROGRAMS; UNEMPLOYMENT COMPEN-
SATION 
Subtitle A—Public Assistance 
FEDERAL DAY CARE REGULATIONS 
SEC. 1001. (a) Section 2002(a)(9) of the Social Security Act is 
amended by adding at the end thereof the following new subpara-
graph: 
"(D) The requirements imposed by this paragraph or by any 
regulations promulgated by the Department of Health and Human 
Services to carry out this paragraph shall be inapplicable to child day 
care services provided after June 30, 1980, and prior to July 1, 1981, 
which meet applicable standards of State and local law.". 
(b) The provisions of section 3(f) of Public Law 93-647 shall not 
apply with respect to child day care services provided after June 30, 
1980, and prior to July 1, 1981, which meet applicable standards of 
State and local law. 
(c) The Department of Health and Human Services shall assist each 
State in conducting a systematic assessment of current practices in 
day care programs funded under title XX of the Social Security Act. 
Upon completion of such assessments, but not later than June 1, 
1981, the Secretary shall provide a summary report of the results of 
such assessments to the Congress. 
42 u s e 1397a. 
42 u s e 1397a 
note. 
42 u s e 1397. 
ADDITIONAL SAVINGS 
SEC. 1002. For provisions of law which reduce spending for fiscal 
year 1981 under public assistance programs under the Social Security 
Act in satisfaction of reconciliation requirements imposed by sections 
3(a)(8) and 3(a)(15) of H. Con. Res. 307 (96th Congress), see the Social ^os<, p. 3655 
Security Disability Amendments of 1980 (Public Law 96-265) and the ^^te, p. 441. 
Adoption Assistance and Child Welfare Act of 1980 (Public Law 
96-272). 
Ante, p. 500. 
Subtitle B—Old-Age, Survivors, and Disability 
Insurance Program 
LIMIT ON RETROACTIVE BENEFITS 
SEC. 1011. (a) The first sentence of section 2020*)(1) of the Social 
Security Act is amended by striking out "prior to the end of the 42 use 402. 
79-194 O—81—pt. 2 
87 : QL3 
94 STAT. 2656 
PUBLIC LAW 96-499—DEC. 5, 1980 
twelfth month immediately succeeding such month." and inserting in 
lieu thereof the following: "prior to— 
"(A) the end of the twelfth month immediately succeeding such 
month in any case where the individual (i) is filing application for 
a benefit under subsection (e) or (f), and satisfies paragraph (1)(B) 
of such subsection by reason of clause (ii) thereof, or (ii) is filing 
application for a benefit under subsection (b), (c), or (d) on the 
basis of the wages and self-employment income of a person 
entitled to disability insurance benefits, or 
"(B) the end of the sixth month immediately succeeding such 
month in any case where subparagraph (A) does not apply.". 
42 use 402 note. 
(b) The amendment made by subsection (a) shall be effective with 
respect to applications filed on or after the first day of the first month 
which begins 60 days or more after the date of the enactment of this 
Act. 
ADDITIONAL SAVINGS 
SEC. 1012. For provisions of law which reduce spending for fiscal 
year 1981 under the old-age, survivors, and disability insurance 
program in satisfaction of reconciliation requirements imposed by 
Post, p. 3655 
sections 3(a)(8) and 3(a)(15) of H. Con. Res. 307 (96th Congress), see 
Ante, p. 2264. 
section 5 of Public Law 96-473, and the Social Security Disability 
Ante, p. 441. 
Amendments of 1980 (Public Law 96-265). 
Subtitle C—Unemployment Compensation Provisions 
TERMINATION OF PROVISIONS PROVIDING REIMBURSEMENT FOR UNEM-
PLOYMENT BENEFITS PAID ON THE BASIS OF PUBLIC SERVICE EMPLOY-
MENT 
SEC. 1021. Part B of title II of the Emergency Jobs and Unemploy-
ment Assistance Act of 1974 is amended by adding at the end thereof 
the following new section: 
"TERMINATION 
"Public service 
wages." 
26 use 3304 
note. 
"SEC. 224. Notwithstanding any other provision of this part, the 
term 'public service wages' shall not include remuneration for 
services performed in weeks which begin after the date of the 
enactment of this section." 
26 use 3304 
note. 
26 use 3304 
note. 
WAITING PERIOD FOR BENEFITS 
SEC. 1022. (a) Section 204(a)(2) of the Federal-State Extended 
Unemployment Compensation Act of 1970 is amended— 
(1) by inserting "(A)" after "compensation", and 
(2) by inserting immediately before the period the following: ", 
or (B) paid for the first week in an individual's eligibility period 
for which extended compensation or sharable regular compensa-
tion is paid, if the State law of such State provides for payment 
(at any time or under any circumstances) of regular compensa-
tion to an individual for his first week of otherwise compensable 
unemployment". 
(b)(1) Except as provided in paragraph (2), the amendments made 
by this section shall apply in the case of compensation paid to 
individuals during eligibility periods beginning on or after the date of 
the enactment of this Act. 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2657 
(2) In the case of a State with respect to which the Secretary of 
Labor has determined that State legislation is required in order to 
eliminate its current policy of paying regular compensation to an 
individual for his first week of otherwise compensable unemploy-
ment, the amendments made by this section shall apply in the case of 
compensation paid to individuals during eligibility periods beginning 
after the end of the first regularly scheduled session of the State 
legislature ending more than thirty days after the date of the 
enactment of this Act. 
BENEFITS ON ACCOUNT OF FEDERAL SERVICE TO BE PAID BY EMPLOYING 
FEDERAL AGENCY 
SEC. 1023. (a) Title IX of the Social Security Act is amended by 
adding at the end thereof the following new section: 
" F E D E R A L E M P L O Y E E S COMPENSATION ACCOUNT 
"SEC. 909. There is hereby established in the Unemployment Trust 42 use 1109. 
Fund a Federal Employees Compensation Account which shall be 
used for the purposes specified in section 8509 of title 5, United States 
Code. For the purposes provided for in section 904(e), such account 42 USC 1104. 
shall be maintained as a separate book account.". 
(h) Subchapter I of chapter 85, title 5, United States Code, is 
amended by adding at the end thereof the following new section: 
"§ 8509. Federal Employees Compensation Account 
5 use 8509. 
"(a) The Federal Employees Compensation Account (as established 
by section 909 of the Social Security Act, and hereafter in this section Supra. 
referred to as the 'Account') in the Unemployment Trust Fund (as 
established by section 904 of such Act) shall consist of^ 
42 use 1104. 
"(1) funds appropriated to or transferred thereto, and 
"(2) amounts deposited therein pursuant to subsection (c). 
"(b) Moneys in the Account shall be available only for the purpose 
of making payments to States pursuant to agreements entered into 
under this subchapter and making payments of compensation under 
this subchapter in States which do not have in effect such an 
agreement. 
"(c)(1) Each employing agency shall deposit into the Account 
amounts equal to the expenditures incurred under this subchapter on 
account of Federal service performed by employees and former 
employees of that agency. 
"(2) Deposits required by paragraph (1) shall be made during each 
calendar quarter and the amount of the deposit to be made by any 
employing agency during any quarter shall be based on a determina-
tion by the Secretary of Labor as to the amounts of payments, made 
prior to such quarter from the Account based on Federal service 
performed by employees of such agency after December 31,1980, with 
respect to which deposit has not previously been made. The amount 
to be deposited by any employing agency during any calendar quarter 
shall be adjusted to take account of any overpayment or underpay-
ment of deposit during any previous quarter for which adjustment 
has not already been made. 
"(d) The Secretary of Labor shall certify to the Secretary of the 
Treasury the amount of the deposit which each employing agency is 
required to make to the Account during any calendar quarter, and 
the Secretary of the Treasury shall notify the Secretary of Labor as to 
94 STAT. 2658 
PUBLIC LAW 96-499—DEC. 5, 1980 
the date and amount of any deposit made to such Account by any 
such agency. 
"(e) Prior to the beginning of each fiscal year (commencing with the 
fiscal year which begins October 1,1981) the Secretary of Labor shall 
estimate— 
"(1) the amount of expenditures which will be made from the 
Account during such year, and 
"(2) the amount of funds which will be available during such 
year for the making of such expenditures, 
and if, on the basis of such estimate, he determines that the amount 
described in paragraph (2) is in excess of the amount necessary— 
"(3) to meet the expenditures described in paragraph (1), and 
"(4) to provide a reasonable contingency fund so as to assure 
that there will, during all times in such year, be sufficient sums 
available in the Account to meet the expenditures described in 
paragraph (1), 
he shall certify the amount of such excess to the Secretary of the 
Treasury and the Secretary of the Treasury shall transfer, from the 
Account to the general fund of the Treasury, an amount equal to such 
excess. 
"(f) The Secretary of Labor is authorized to establish such rules and 
regulations as may be necessary or appropriate to carry out the 
provisions of this section. 
"(g) Any funds appropriated after the establishment of the 
Account, for the making of payments for which expenditures are 
authorized to be made from moneys in the Account, shall be made to 
the Account; and there are hereby authorized to be appropriated to 
the Account, from time to time, such sums as may be necessary to 
assure that there will, at all times, be sufficient sums available in the 
Account to meet the expenditures authorized to be made from 
moneys therein.". 
5 use 8509 note. 
(c) AH funds appropriated which are available for the making of 
payments to States after December 31,1980, pursuant to agreements 
entered into under subchapter I of chapter 85 of title 5, United States 
5 use 8501. 
Code, or for the making of payments after such date of compensation 
under such subchapter in States which do not have in effect such an 
agreement, shall be transferred on January 1, 1981, to the Federal 
Employees Compensation Account established by section 909 of the 
Ante, p. 2657. 
Social Security Act. On and after such date, all payments described in 
the preceding sentence shall be made from such Account as provided 
by section 8509 of title 5, United States Code. 
LIMITATION ON EXTENDED UNEMPLOYMENT COMPENSATION PROGRAM 
26 use 3304 
SEC. 1024. (a) Section 202(a) of the Federal-State Extended Unem-
^°^^- 
ployment Compensation Act of 1970 is amended by adding at the end 
thereof the following new paragraphs: 
"(3)(A) Notwithstanding the provisions of paragraph (2), payment of 
extended compensation under this Act shall not be made to any 
individual for any week of unemployment in his eligibility period— 
"(i) during which he fails to accept any offer of suitable work 
(as defined in subparagraph (c)) or fails to apply for any suitable 
work to which he was referred by the State agency; or 
"(ii) during which he fails to actively engage in seeking work. 
"(B) If any individual is ineligible for extended compensation for 
any week by reason of a failure described in clause (i) or (ii) of 
subparagraph (A), the individual shall be ineligible to receive 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2659 
extended compensation for any week which begins during a period 
which— 
"(i) begins with the week following the week in which such 
failure occurs, and 
"(ii) does not end until such individual has been employed 
during at least 4 weeks which begin after such failure and the 
total of the remuneration earned by the individual for being so 
employed is not less than the product of 4 multiplied by the 
individual's average weekly benefit amount (as determined for 
purposes of subsection (b)(1)(c)) for his benefit year. 
"(C) For purposes of this paragraph, the term 'suitable work' "Suitable work." 
means, with respect to any individual, any work which is within such 
individual's capabilities; except that, if the individual furnishes 
evidence satisfactory to the State agency that such individual's 
prospects for obtaining work in his customary occupation within a 
reasonably short period are good, the determination of whether any 
work is suitable work with respect to such individual shall be made in 
accordance with the applicable State law. 
"(D) Extended compensation shall not be denied under clause (i) of 
subparagraph (A) to any individual for any week by reason of a 
failure to accept an offer of, or apply for, suitable work— 
"(i) if the gross average weekly remuneration payable to such 
individual for the position does not exceed the sum o
f
— 
"(I) the individual's average weekly benefit amount (as 
determined for purposes of subsection (b)(1)(C)) for his bene-
fit year, plus 
"(II) the amount (if any) of supplemental unemployment 
compensation benefits (as defined in section 501(c)(17)(D) of 
the Internal Revenue Code of 1954) payable to such indi- 26 USC 501. 
vidual for such week; 
"(ii) if the position was not offered to such individual in writing 
and was not listed with the State employment service; 
"(iii) if such failure would not result in a denial of compensa-
tion under the provisions of the applicable State law to the extent 
that such provisions are not inconsistent with the provisions of 
subparagraphs (C) and (E); or 
"(iv) if the position pays wages less than the higher of— 
"(I) the minimum wage provided by section 6(aXl) of the 
Fair Labor Standards Act of 1938, without regard to any 29 USC 206. 
exemption; or 
"(II) any applicable State or local minimum wage. 
"(E) For purposes of this paragraph, an individual shall be treated 
as actively engaged in seeking work during any week if— 
"(i) the individual has engaged in a systematic and sustained 
effort to obtain work during such week, and 
"(ii) the individual provides tangible evidence to the State 
agency that he has engaged in such an effort during such week. 
"(F) For purposes of section 3304(a)(ll) of the Internal Revenue 
Code of 1954, a State law shall provide for referring applicants for 26 USC 3304. 
benefits under this Act to any suitable work to which clauses (i), (ii), 
(iii), and (iv) of subparagraph (D) would not apply. 
"(4) No provision of State law which terminates a disqualification 
for voluntarily leaving employment, being discharged for miscon-
duct, or refusing suitable employment shall apply for purposes of 
determining eligiblity for extended compensation unless such termi-
nation is based upon employment subsequent to the date of such 
disqualification. 
94 STAT. 2660 
PUBLIC LAW 96-499—DEC. 5, 1980 
26 u s e 3304 
note. 
"(5) No payment shall be made under this Act to any State in 
respect of any sharable regular compensation paid to any individual 
for any week if, under the rules of paragraphs (3) and (4), extended 
compensation would not have been payable to such individual for 
such week.". 
(b) The amendment made by this section shall apply with respect to 
weeks of unemployment beginning after March 31,1981. 
26 u s e 3304 
note. 
26 u s e 3304. 
CERTIFICATION OF STATE UNEMPLOYMENT LAWS 
SEC. 1025. On October 31 of any taxable year after 1980, the 
Secretary of Labor shall not certify any State, as provided in section 
3304(c) of the Internal Revenue Code of 1954, which, after reasonable 
notice and opportunity for a hearing to the State agency, the 
Secretary of Labor finds has failed to amend its law so that it contains 
each of the provisions required by reason of the enactment of the 
preceding provisions of this subtitle to be included therein, or has with 
respect to the 12-month period ending on such October 31, failed to 
comply substantially with any such provision. 
Post, p. 3655 
Ante, p. 1310. 
Revenue 
Adjustments Act 
of 1980. 
26 u s e 1 note. 
Mortgage 
Subsidy Bond 
Tax Act of 1980. 
26 u s e 1 note. 
26 u s e 103A. 
26 u s e 103. 
ADDITIONAL SAVINGS 
SEC. 1026. For provisions of law which reduce spending for fiscal 
year 1981 under the unemployment compensation program in satis-
faction of reconciliation requirements imposed by sections 3(a)(8) and 
3(a)(15) of H. Con. Res. 307 (96th Congress), see sections 415 and 416 of 
the Multiemployer Pension Plan Amendments Act of 1980 (Public 
Law 96-364). 
TITLE XI—REVENUE MEASURES 
SEC. 1100. SHORT TITLE. 
This title may be cited as the "Revenue Adjustments Act of 1980". 
Subtitle A—Housing Bonds 
SEC. 1101. SHORT TITLE. 
This subtitle may be cited as the "Mortgage Subsidy Bond Tax Act 
of 1980". 
SEC. 1102. MORTGAGE SUBSIDY BONDS. 
(a) IN GENERAL.—Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1954 (relating to items specifically excluded 
from gross income) is amended by inserting after section 103 the 
following new section: 
"SEC. 103A. MORTGAGE SUBSIDY BONDS. 
"(a) GENERAL RULE.—Except as otherwise provided in this section, 
any mortgage subsidy bond shall be treated as an obligation not 
described in subsection (a) (1) or (2) of section 103. 
"Qo) MORTGAGE SUBSIDY BOND DEFINED.— 
"(1) IN GENERAL.—For purposes of this title, the term 'mort-
gage subsidy bond' means any obligation which is issued as part 
of an issue a significant portion of the proceeds of which are to be 
used directly or indirectly for mortgages on owner-occupied 
residences. 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2661 
"(2) EXCEPTIONS.—The following shall not be treated as mort-
gage subsidy bonds: 
"(A) any qualified mortgage bond; and 
"(B) any qualified veterans' mortgage bond. 
"(c) 
QUALIFIED MORTGAGE BOND; QUALIFIED MORTGAGE ISSUE; 
QUALIFIED VETERANS' MORTGAGE BOND.— 
"(1) QUALIFIED MORTGAGE BOND DEFINED.— 
(A) IN GENERAL.—For purposes of this title, the term 
'qualified mortgage bond' means an obligation which is 
issued as part of a qualified mortgage issue. 
"(B) TERMINATION DECEMBER 31, 1983.—No obligation 
issued after December 31,1983, may be treated as a qualified 
mortgage bond. 
"(2) QUALIFIED MORTGAGE ISSUE DEFINED.— 
(A) DEFINITION.—For purposes of this title, the term 
'qualified mortgage issue means an issue by a State or 
political subdivision thereof of 1 or more obligations, but 
only i
f
— 
"(i) all proceeds of such issue (exclusive of issuance 
costs and a reasonably required reserve) are to be used 
to finance owner-occupied residences, and 
"(ii) such issue meets the requirements of subsections 
(d),(e),(a(g),(h),(i),andO). 
"(B) GOOD FAITH EFFORT TO COMPLY WITH MORTGAGE ELIGI-
BILITY REQUIREMENTS.—An issue which fails to meet 1 or 
more of the requirements of subsections (d), (e), and (f) and 
paragraphs (2) and (3) of subsection (j) shall be treated as 
meeting such requirements i
f
— 
' (i) the issuer in good faith attempted to meet all such 
requirements before the mortgages were executed, 
(ii) 95 percent or more of the proceeds devoted to 
owner-financing was devoted to residences with respect 
to which (at the time the mortgages were executed) all 
such requirements were met, and 
"(iii) any failure to meet the requirements of such 
subsections and paragraphs is corrected within a reason-
able period after such failure is first discovered. 
"(C) GOOD FAITH EFFORT TO COMPLY WITH OTHER REQUIRE-
MENTS.—An issue which fails to meet 1 or more of the 
requirements of subsections (g), (h), and (i), and paragraph (1) 
of subsection (j) shall be treated as meeting such require-
ments i
f
— 
"(i) the issuer in good faith attempted to meet all such 
requirements, and 
' (ii) any failure to meet such requirements is due to 
inadvertent error after taking reasonable steps to 
comply with such requirements. 
"(3) QUALIFIED VETERANS' MORTGAGE BOND DEFINED.—For pur-
poses of this section, the term 'qualified veterans' mortgage bond' 
means any obligation— 
"(A) which is issued in registered form as part of an issue 
substantially all of the proceeds of which are to be used to 
provide residences for veterans, 
"(B) the payment of the principal and interest on which is 
secured by the general obligation of a State, and 
"(C) which is part of an issue which meets the require-
ments of subsection 0)(2). 
"(d) RESIDENCE REQUIREMENTS.— 
94 STAT. 2662 
PUBLIC LAW 96-499—DEC. 5, 1980 
"(1) FOR A RESIDENCE.—A residence meets the requirements of 
this subsection only if— 
"(A) it is a single-family residence which can reasonably be 
expected to become the principal residence of the mortgagor 
within a reasonable time after the financing is provided, and 
"(B) it is located within the jurisdiction of the authority 
issuing the obligation. 
"(2) FOR AN ISSUE.—An issue meets the requirements of this 
subsection only if all of the residences for which owner-financing 
is provided under the issue meet the requirements of paragraph 
(1). 
"(e) 3-YEAR REQUIREMENT.— 
"(1) IN GENERAL.—An issue meets the requirements of this 
subsection only if each mortgagor to whom financing is provided 
under the issue had a present ownership interest in a principal 
residence of such mortgagor at no time during the 3-year period 
ending on the date the mortgage is executed. For purposes of the 
preceding sentence, the mortgagor's interest in the residence 
with respect to which the financing is being provided shall not be 
taken into account. 
"(2) EXCEPTIONS.—Paragraph (1) shall not apply with respect 
to— 
"(A) any financing provided with respect to a targeted 
area residence, 
"(B) any qualified home improvement loan, and 
"(C) any qualified rehabilitation loan. 
"(f) PURCHASE PRICE REQUIREMENT.— 
"(1) IN GENERAL.—An issue meets the requirements of this 
subsection only if the acquisition cost of each residence the 
owner-financing of which is to be provided under the issue does 
not exceed 90 percent of the average area purchase price applic-
able to such residence. 
"(2) AVERAGE AREA PURCHASE PRICE.—For purposes of para-
graph (1), the term 'average area purchase price' means, with 
respect to any residence, the average purchase price of single 
family residences (in the statistical area in which the residence is 
located) which were purchased during the most recent 12-month 
period for which sufficient statistical information is available. 
The determination under the preceding sentence shall be made 
as of the date on which the commitment to provide the financing 
is made (or, if earlier, the date of the purchase of the residence). 
"(3) SEPARATE APPUCATION TO NEW RESIDENCES AND OLD RESI-
DENCES.—For purposes of this subsection, the determination of 
average area purchase price shall be made separately with 
respect to— 
"(A) residences which have not been previously occupied, 
and 
"(B) residences which have been previously occupied. 
"(4) SPECIAL RULE FOR 2 TO 4 FAMILY RESIDENCES.—For purposes 
of this subsection, to the extent provided in regulations, the 
average area purchase price shall be made separately with 
respect to 1 family, 2 family, 3 family, and 4 family residences. 
(5) SPECIAL RULE FOR TARGETED AREA RESIDENCES.—In the case 
of a targeted area residence, paragraph (1) shall be applied by 
substituting '110 percent' for '90 percent'. 
"(6) EXCEPTION FOR QUAUFIED HOME IMPROVEMENT LOANS.— 
Paragraph (1) shall not apply with respect to any qualified home 
improvement loan. 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2663 
"(g) LIMITATION ON AGGREGATE AMOUNT OF QUALIFIED MORTGAGE 
BONDS ISSUED DURING ANY CALENDAR YEAR.— 
"(1) IN GENERAL.—An issue meets the requirements of this 
subsection only if the aggregate amount of bonds issued pursuant 
thereto, when added to the aggregate amount of quahfied mort-
gage bonds previously issued by the issuing authority during the 
calendar year, does not exceed the applicable limit for such 
authority for such calendar year. 
"(2) APPLICABLE LIMIT FOR STATE HOUSING AGENCY.—For pur-
poses of this subsection— 
"(A) IN GENERAL.—The applicable limit for any State 
housing finance agency for any calendar year shall be 50 
percent of the State ceiling for such year. 
"(B) SPECIAL RULE WHERE MORE THAN i AGENCY.—If any 
State has more than 1 State housing finance agency, all such 
agencies shall be treated as a single agency. 
"(3) APPLICABLE LIMIT FOR OTHER ISSUERS.—For purposes of this 
subsection— 
"(A) IN GENERAL.—The applicable limit for any issuing 
authority (other than a State housing finance agency) for 
any calendar year is an amount which bears the same ratio 
to 50 percent of the State ceiling for such year as— 
"(i) the average annual aggregate principal amount of 
mortgages executed during the immediately preceding 3 
calendar years for single-family owner-occupied resi-
dences located within the jurisdiction of such issuing 
authority, bears to 
"(ii) an average determined in the same way for the 
entire State. 
"(B) OVERLAPPING JURISDICTIONS.—For purposes of sub-
paragraph (A)(i), if an area is within the jurisdiction of 2 or 
more governmental units, such area shall be treated as only 
within the jurisdiction of the unit having jurisdiction over 
the smallest geographical area unless such unit agrees to 
surrender all or part of such jurisdiction for such calendar 
year to the unit with overlapping jurisdiction which has the 
next smallest geographical area. 
"(4) STATE CEILING.—For purposes of this subsection, the State 
ceiling applicable to any State for any calendar year shall be the 
greater of— 
"(A) 9 percent of the average annual aggregate principal 
amount of mortgages executed during the immediately pre-
ceding 3 calendar years for single-family owner-occupied 
residences located within the jurisdiction of such State, or 
"(B) $200,000,000. 
"(5) SPECIAL RULE FOR STATES WITH CONSTITUTIONAL HOME RULE 
CITIES.—For purposes of this subsection— 
"(A) IN GENERAL.—The applicable limit for any constitu-
tional home rule city for any calendar year shall be 
determined under subparagraph (A) of paragraph (3) by 
substituting '100 percent' for '50 percent'. 
"(B) COORDINATION WITH PARAGRAPHS (2) AND (3).—In the 
case of any State which contains 1 or more constitutional 
home rule cities, for purposes of applying paragraphs (2) and 
(3) with respect to issuing authorities in such State other 
than constitutional home rule cities, the State ceiling for any 
calendar year shall be reduced by the aggregate applicable 
94 STAT. 2664 
PUBLIC LAW 96-499—DEC. 5, 1980 
limits determined for such year for all constitutional home 
rule cities in such State. 
"(C) CONSTITUTIONAL HOME RULE CITY.—For purposes of 
this subsection, the term 'constitutional home rule city' 
means, with respect to any calendar year, any political 
subdivision of a State which, under a State constitution 
which was adopted in 1970 and effective on July 1,1971, had 
home rule powers on the first day of the calendar year. 
"(6) STATE MAY PROVIDE FOR DIFFERENT ALLOCATION.— 
"(A) IN GENERAL.—Except as provided in subparagraph 
(C), a State may, by law enacted after the date of the 
enactment of this section, provide a different formula for 
allocating the State ceiling among the governmental units in 
such State having authority to issue qualified mortgage 
bonds. 
"(B) INTERIM AUTHORITY FOR GOVERNOR.— 
"(i) IN GENERAL.—Except as otherwise provided in 
subparagraph (C), the Governor of any State may pro-
claim a different formula for allocating the State ceiling 
among the governmental units in such State having 
authority to issue qualified mortgage bonds. 
"(ii) TERMINATION OF AUTHORITY.—The authority pro-
vided in clause (i) shall not apply after the earlier o
f
—
• 
"(I) the first day of the first calendar year begin-
ning after the first calendar year after 1980 during 
which the legislature of the State met in regular 
session, or 
"(II) the effective date of any State legislation 
with respect to the allocation of the State ceiling 
enacted after the date of the enactment of this 
section. 
"(C) STATE MAY NOT ALTER ALLOCATION TO CONSTITUTIONAL 
HOME RULE CITIES.—Except as otherwise provided in a State 
constitutional amendment (or law changing the home rule 
provision adopted in the manner provided by the State 
constitution), the authority provided in this paragraph shall 
not apply to that portion of the State ceiling which is 
allocated to any constitutional home rule city in the State 
unless such city agrees to such different allocation. 
"(7) TRANSITIONAL RULES.—In applying this subsection to any 
calendar year, there shall not be taken into account any bond 
which, by reason of section 1104 of the Mortgage Subsidy Bond 
Ante, p. 2660. 
Tax Act of 1980, receives the same tax treatment as bonds issued 
on or before April 24,1979. 
"(h) PORTION OF LOANS REQUIRED TO BE PLACED IN TARGETED 
AREAS.— 
"(1) IN GENERAL.—An issue meets the requirements of this 
subsection only if at least 20 percent of the proceeds of the issue 
which are devoted to providing owner-financing is made availa-
ble (with reasonable diligence) for owner-financing of targeted 
area residences for at least 1 year after the date on which owner-
financing is first made available with respect to targeted area 
residences. 
"(2) LIMITATION.—Nothing in paragraph (1) shall be treated as 
requiring the making available of an amount which exceeds 40 
percent of the average annual aggregate principal amount of 
mortgages executed during the immediately preceding 3 
calendar years for single-family owner-occupied residences 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2665 
located in targeted areas within the jurisdiction of the issuing 
authority. 
*(i) REQUIREMENTS RELATED TO ARBITRAGE.— 
"(1) IN GENERAL.—An issue meets the requirements of this 
subsection only if such issue meets the requirements of para-
graphs (2), (3), and (4) of this subsection. Such requirements shall 
be in addition to the requirements of section 103(c). 
26 USC 103. 
"(2) EFFECTIVE RATE OF MORTGAGE INTEREST CANNOT EXCEED 
BOND YIELD BY MORE THAN 1 PERCENTAGE POINT.— 
"(A) IN GENERAL.—An issue shall be treated as meeting 
the requirements of this paragraph only if the excess of— 
(i) the effective rate of interest on the mortgages 
provided under the issue, over 
"(ii) the yield on the issue, 
is not greater than 1 percentage point. 
"(B) EFFECTIVE RATE OF MORTGAGE INTEREST.— 
"(i) IN GENERAL.—In determining the effective rate of 
interest on any mortgage for purposes of this paragraph, 
there shall be taken into account all fees, charges, and 
other amounts borne by the mortgagor which are attrib-
utable to the mortgage or to the bond issue. 
"(ii) SPECIFICATION OF SOME OF THE AMOUNTS TO BE 
TREATED AS BORNE BY THE MORTGAGOR.—For purposes of 
clause (i), the following items (among others) shall be 
treated as borne by the mortgagor: 
"(I) all points or similar charges paid by the seller 
of the property, and 
"(II) the excess of the amounts received from any 
person other than the mortgagor by any person in 
connection with the acquisition of the mortgagor's 
interest in the property over the usual and reason-
able acquisition costs of a person acquiring like 
property where owner-financing is not provided 
through the use of qualified mortgage bonds, 
"(iii) SPECIFICATION OF SOME OF THE AMOUNTS TO BE 
TREATED AS NOT BORNE BY THE MORTGAGOR.—For pur-
poses of clause (i), the following items shall not be taken 
into account: 
"(I) any expected rebate of arbitrage profits, and 
"(II) any application fee, survey fee, credit report 
fee, insurance charge, or similar amount to the 
extent such amount does not exceed amounts 
charged in such area in cases where owner-financ-
ing is not provided through the use of qualified 
mortgage bonds. 
Subclause (II) shall not apply to origination fees, points, 
or similar amounts. 
"(iv) PREPAYMENT ASSUMPTION.—In determining the 
effective rate of interest, it shall be assumed that the 
mortgage prepayment rate will be the rate set forth in 
the most recent mortgage maturity experience table 
published by the Federal Housing Administration for 
the State (or, if available, the area within the State) in 
which the residences are located. 
"(C) YIELD ON THE ISSUE.—For purposes of this subsection, 
the yield on the issue shall be determined on the basis o
f
— 
"(i) the issue price (within the meaning of section 
1232(b)(2)), and 
26 use 1232. 
94 STAT. 2666 
PUBLIC LAW 96-499—DEC. 5, 1980 
"(ii) an expected maturity for the bonds which is 
consistent with the assumption required under subpara-
graph (B)(iv). 
"(3) NON-MORTGAGE INVESTMENT REQUIREMENTS.— 
"(A) IN GENERAL.—An issue meets the requirements of 
this paragraph only i
f
— 
"(i) at no time during any bond year may the amount 
invested in non-mortgage investments with a yield 
higher than the yield on the issue exceed 150 percent of 
the debt service on the issue for the bond year, and 
"(ii) the aggregate amount invested as provided in 
clause (i) is promptly and appropriately reduced as 
mortgages are repaid. 
"(B) EXCEPTION FOR TEMPORARY PERIODS.—Subparagraph 
(A) shall not apply to— 
"(i) proceeds of the issue invested for an initial tempo-
rary period until such proceeds are needed for mort-
gages, and 
(ii) temporary investment periods related to debt 
service. 
"(C) DEBT SERVICE DEFINED.—For purposes of subpara-
graph (A), the debt service on the issue for any bond year is 
the scheduled amount of interest and amortization of princi-
pal payable for such year with respect to such issue. For 
purposes of the preceding sentence, there shall not be taken 
into account amounts scheduled with respect to any bond 
which has been retired before the beginning of the bond 
year. 
"(4) ARBITRAGE AND INVESTMENT GAINS TO BE USED TO REDUCE 
COSTS OF OWNER-FINANCING.— 
"(A) IN GENERAL.—An issue shall be treated as meeting 
the requirements of this paragraph only if an amount equal 
to the sum of— 
"(i) the excess of— 
"(I) the amount earned on all non-mortgage in-
vestments (other than investments attributable to 
an excess described in this clause), over 
"(II) the amount which would have been earned if 
the investments were invested at a rate equal to the 
yield on the issue, plus 
"(ii) any income attributable to the excess described in 
clause (i), 
shall be paid or credited to the mortgagors as rapidly as may 
be practicable. 
(B) INVESTMENT GAINS AND LOSSES.—For purposes of sub-
paragraph (A), in determining the amount earned on all non-
mortgage investments, any gain or loss on the disposition of 
such investments shall be taken into account, 
"(j) OTHER REQUIREMENTS.— 
"(1) OBLIGATIONS MUST BE REGISTERED.—An issue meets the 
requirements of this subsection only if each obligation issued 
pursuant to such issue is in registered form. 
"(2) MORTGAGES MUST BE NEW MORTGAGES.— 
"(A) IN GENERAL.—An issue meets the requirements of 
this subsection only if no part of the proceeds of such issue is 
to be used to acquire or replace existing mortgages. 
"(B) EXCEPTIONS.—Under regulations prescribed by the 
Secretary, the replacement of— 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2667 
"(i) construction period loans, 
"(ii) bridge loans or similar temporary initial financ-
ing, and 
(iii) in the case of a qualified rehabilitation, an 
existing mortgage, 
shall not be treated as the acquisition or replacement of an 
existing mortgage for purposes of subparagraph (A). 
"(3) CERTAIN REQUIREMENTS MUST BE MET WHERE MORTGAGE IS 
ASSUMED.—An issue meets the requirements of this subsection 
only if a mortgage with respect to which owner-financing has 
been provided under such issue may be assumed only if the 
requirements of subsections (d), (e), and (f), are met with respect 
to such assumption, 
"(k) TARGETED AREA RESIDENCES.— 
"(1) IN GENERAL.—For purposes of this section, the term 
'targeted area residence' means a residence in an area which is 
either— 
"(A) a qualified census tract, or 
"(B) an area of chronic economic distress. 
"(2) QUALIFIED CENSUS TRACT.— 
(A) IN GENERAL.—For purposes of paragraph (1), the term 
'qualified census tract' means a census tract in which 70 
percent or more of the families have income which is 80 
percent or less of the statewide median family income. 
"(B) DATA USED.—The determination under subparagraph 
(A) shall be made on the basis of the most recent decennial 
census for which data are available. 
"(3) AREA OF CHRONIC ECONOMIC DISTRESS.— 
"(A) IN GENERAL.—For purposes of paragraph (1), the term 
'area of chronic economic distress' means an area of chronic 
economic distress— 
"(i) designated by the State as meeting the standards 
established by the State for purposes of this subsection, 
and 
"(ii) the designation of which has been approved by 
the Secretary and the Secretary of Housing and Urban 
Development. 
"(B) CRITERIA TO BE USED IN APPROVING STATE DESIGNA-
TIONS.—The criteria used by the Secretary and the Secretary 
of Housing and Urban Development in evaluating any 
proposed designation of an area for purposes of this subsec-
tion shall be— 
"(i) the condition of the housing stock, including the 
age of the housing and the number of abandoned and 
substandard residential units, 
"(ii) the need of area residents for owner-financing 
under this section, as indicated by low per capita 
income, a high percentage of families in poverty, a high 
number of welfare recipients, and high unemployment 
rates, 
"(iii) the potential for use of owner-financing under 
this section to improve housing conditions in the area, 
and 
"(iv) the existence of a housing assistance plan which 
provides a displacement program and a public improve-
ments and services program. 
"(1) OTHER DEFINITIONS AND SPECIAL RULES.—For purposes of this 
section— 
94 STAT. 2668 
PUBLIC LAW 96-499—DEC. 5, 1980 
"(1) MORTGAGE.—The term 'mortgage' includes any other 
owner-financing. 
"(2) BOND.—The term 'bond' includes any obligation. 
"(3) STATE.—The term 'State' includes a possession of the 
United States and the District of Columbia. 
"(4) STATISTICAL AREA.— 
"(A) IN GENERAL.—The term 'statistical area' means— 
"(i) a standard metropolitan statistical area, and 
"(ii) any county (or the portion thereof) which is not 
within a standard metropolitan statistical area. 
"(B) 
STANDARD METROPOLITAN STATISTICAL AREA.—The 
term 'standard metropolitan statistical area' means the area 
in and around a city of 50,000 inhabitants or more (or 
equivalent area) as defined by the Secretary of Commerce. 
"(C) DESIGNATION WHERE ADEQUATE STATISTICAL INFORMA-
TION NOT AVAILABLE.—For purposes of this paragraph, if 
there is insufficient recent statistical information with 
respect to a county (or portion thereof) described in subpara-
graph (A)(ii), the Secretary may substitute for such county 
(or portion thereof) another area for which there is sufficient 
recent statistical information. 
"(D) DESIGNATION WHERE NO COUNTY.—In the case of any 
portion of a State which is not within a county, subpara-
graphs (A)(ii) and (C) shall be applied by substituting for 
'county' an area designated by the Secretary which is the 
equivalent of a county. 
"(5) ACQUISITION COST.— 
"(A) IN GENERAL.—The term 'acquisition cost' means the 
cost of acquiring the residence as a completed residential 
unit. 
"(B) EXCEPTIONS.—The term 'acquisition cost' does not 
include— 
"(i) usual and reasonable settlement or financing 
costs, 
"(ii) the value of services performed by the mortgagor 
or members of his family in completing the residence, 
and 
"(iii) the cost of land which has been owned by the 
mortgagor for at least 2 years before the date on which 
construction of the residence begins. 
"(C) SPECIAL RULE FOR QUALIFIED REHABILITATION LOANS.— 
In the case of a qualified rehabilitation loan, for purposes of 
subsection (f), the term 'acquisition cost' includes the cost of 
the rehabilitation. 
"(6) QUALIFIED HOME IMPROVEMENT LOAN.—The term 'qualified 
home improvement loan' means the financing (in an amount 
which does not exceed $15,000)— 
"(A) of alterations, repairs, and improvements on or in 
connection with an existing residence by the owner thereof, 
but 
"(B) only of such items as substantially protect or improve 
the basic livability or energy efficiency of the property. 
"(7) QUALIFIED REHABILITATION LOAN.— 
' (A) IN GENERAL.—The term 'qualified rehabilitation loan' 
means any owner-financing provided in connection with— 
"(i) a qualified rehabilitation, or 
"(ii) the acquisition of a residence with respect to 
which there has been a qualified rehabilitation, 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2669 
but only if the mortgagor to whom such financing is provided 
is the first resident of the residence after the completion of 
the rehabilitation. 
"(B) QuAUFiED REHABiUTATiON.—For purposos of subpara-
graph (A), the term 'qualified rehabilitation' means any 
rehabilitation of 
a building i
f
— 
"(i) there is a period of at least 20 years between the 
date on which the building was first used and the date 
on which the physical work on such rehabilitation 
begins, 
(ii) 75 percent or more of the existing external walls 
of such building are retained in place as external walls 
in the rehabilitation process, and 
"(iii) the expenditures for such rehabilitation are 25 
percent or more of the mortgagor's adjusted basis in the 
residence. 
For purposes of clause (iii), the mortgagor's adjusted basis 
shall be determined as of the completion of the rehabilita-
tion or, if later, the date on which the mortgagor acquires 
the residence. 
"(8) DETERMINATIONS ON ACTUARIAL BASIS.—All determina-
tions of 
yield, effective interest rates, and amounts required to be 
paid or credited to mortgagors under subsection (i)(4)(A) shall be 
made on an actuarial basis taking into account the present value 
of money. 
"(9) SINGLE-FAMILY AND OWNER-OCCUPIED RESIDENCES INCLUDE 
C
E
R
T
A
I
N RESIDENCES W
I
T
H 2 T
O 4 UNITS.—Except for purposes of 
subsections (g) and (hX2), the terms 'single-family' and 'owner-
occupied', when used with respect to residences, include 2,3, or 4 
family residences— 
"(A) one unit of which is occupied by the owner of the 
units, and 
"(B) which were first occupied at least 5 years before the 
mortgage is executed, 
"(m) SPECIAL RULE FOR ISSUE USED FOR OWNER-OCCUPIED HOUSING 
AND RENTAL HOUSING.—In the case of an issue— 
"(1) part of the proceeds of which are to be used for mortgages 
on owner-occupied residences in a manner which meets the 
requirements of this section, and 
(2) part of the proceeds of which are to be used for rental 
housing which meets the requirements of section 103(b)(4)(A), 
under regulations prescribed by the Secretary, each such part shall 
be treated as a separate issue. 
"(n) ADVANCE REFUNDING OF MORTGAGE SUBSIDY BONDS NOT PER-
MITTED.—On and after the date of the enactment of this section, no 
obligation may be issued for the advance refunding of a mortgage 
subsidy bond (determined without regard to subsection (b)(2))." 
(b) CLERICAL AMENDMENT.—The table of sections for part III of 
subchapter B of chapter 1 of such Code is amended by inserting after 
the item relating to section 103 the following new item: 
"Sec. 103A. Mortgage subsidy bonds." 
SEC. 1103. INDUSTRIAL DEVELOPMENT BONDS FOR HOUSING PURPOSES 
LIMITED TO LOW- OR MODERATE-INCOME RENTAL HOUSING. 
(a) IN GENERAL.—Subparagraph (A) of paragraph (4) of section 26 use 103. 
103(b) of the Internal Revenue Code of 1954 (relating to industrial 
development bonds) is amended to read as follows: 
94 STAT. 2670 
PUBLIC LAW 96-499—DEC. 5, 1980 
"(A) projects for residential rental property if each obliga-
tion issued pursuant to the issue is in registered form and 
if— 
"(i) 15 percent or more in the case of targeted area 
projects, or 
"(ii) 20 percent or more in the case of any other 
project, 
of the units in each project are to be occupied by individuals 
of low or moderate income (within the meaning of section 
26 use 167. 
167(k)(3)(B)),". 
26 use 103. 
(b) TARGETED AREA PROJECT DEFINED.—Paragraph (4) of section 
103(b) of such Code is amended by inserting before the last sentence 
the following new sentence: 
"For purposes of subparagraph (A), the term 'targeted area 
project' means a project located in a qualified census tract 
Ante, p. 2660. 
(within the meaning of section 103A(k)(2)) or an area of chronic 
economic distress (within the meaning of section 103A(k)(3))." 
26 use 103. 
(c) TECHNICAL AMENDMENT.—Paragraph (6) of section 103(b) of such 
Code (relating to exemption for certain small issues) is amended by 
adding at the end thereof the following new subparagraph: 
"(J) ISSUES FOR RESIDENTIAL PURPOSES.—This paragraph 
shall not apply to any obligation which is issued as a part of 
an issue a significant portion of the proceeds of which are to 
be used directly or indirectly to provide residential real 
property for family units." 
SEC. 1104. EFFECTIVE DATES FOR BOND PROVISIONS. 
26 u s e 103A 
(a) GENERAL R U L E . — 
"°*®- 
(1) IN GENERAL.—Except as otherwise provided in this section, 
the amendments made by sections 1102 and 1103 shall apply to 
obligations issued after April 24,1979. 
(2) EXCEPTIONS FOR CERTAIN OBLIGATIONS ISSUED BEFORE JANU-
ARY 1, 1981.—The amendments made by sections 1102 and 1103 
shall not apply to obligations issued before January 1, 1981, if 
such obligations are part of an issue substantially all the pro-
ceeds of which (exclusive of issuance costs and a reasonably 
required reserve) are, before the date which is 1 year after the 
date of issue of the obligations, committed— 
(A) except as provided in subparagraph (B), by firm com-
mitment letters (similar to those used in financing not 
provided with tax-exempt bonds), and 
(B) in the case of rental housing, by the commencement 
of construction of the project or by the acquisition of the 
project. 
O
b
) EXCEPTION FOR OFFICIAL ACTION TAKEN BEFORE APRIL 25, 
1979.— 
(1) IN GENERAL.—The amendments made by sections 1102 and 
1103 shall not apply to obligations if official action before April 
25, 1979, of the governing body of the unit having authority to 
issue such obligations indicated an intent to issue such 
obligations. 
(2) ACTION BY STAFF OF HOUSING AUTHORITY TREATED AS ACTION 
OF AUTHORITY IN CERTAIN CASES.—For purposes of paragraph (It, 
if, before April 25,1979— 
(A) the permanent professional staff of a State or local 
housing authority performed substantial work on a bond 
issue, and 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2671 
(B) it was reasonable to expect that the bond issue, as 
developed by the staff, would be promptly approved by the 
governing body of the housing authority, 
then such action by such staff shall be treated as the official 
action of such governing body. 
(3) SPECIAL RULES RELATING TO SIZE OF ISSUE.— 
(A) IN GENERAL.—Except as provided in subparagraph (B), 
an issue does not qualify for the exception provided by 
paragraph (1) if the issue size exceeds the intended issue size. 
(B) EXCEPTION.—In the case of an issue to provide owner-
financing for residences for which as of April 24, 1979, there 
was no documentation relating to intended issue size, para-
graph (1) shall not apply unless— 
(i) substantially all of the proceeds of the issue (exclu-
sive of issuance costs and a reasonably required reserve) 
are to be used to provide owner-financing for one to four 
family residences (one unit of which is owner occupied) 
and not to acquire or replace existing mortgages (within 
the meaning of section 103A(j)(2) of the Internal Reve-
nue Code of 1954), and 
Ante, p. 2660. 
(ii) substantially all of the proceeds referred to in 
clause (i) are committed by firm commitment letters 
(similar to those used in owner-financing not provided 
with tax-exempt bonds) to such owner-financing before 
the day which is 9 months after the date of issue of the 
obligations. 
(C) ISSUE SIZE DEFINED.—For purposes of this paragraph, 
the term "issue size" means the aggregate face amount of 
obligations issued pursuant to the issue. 
(D) INTENDED ISSUE SIZE.—For purposes of this paragraph, 
the term "intended issue size" means the aggregate face 
amount of obligations which a reasonable individual would 
reasonably conclude from the documentation before April 
25, 1979, was the issue size which the governing body of the 
issuing authority intended to issue. 
(4) LOCAL REFERENDUM HELD BEFORE JUNE 13, 1979.— 
(A) IN GENERAL.—For purposes of paragraph (1), if— 
(i) on April 25,1979, legislation was pending in a State 
legislature, 
(ii) on April 27, 1979, such legislation was amended to 
authorize local governmental units to issue tax-exempt 
obligations, 
(iii) before June 13,1979, such legislation was enacted 
and a local governmental unit in such State held a 
referendum with respect to the issuance of obligations to 
finance owner-occupied residences, and 
(iv) any action with respect to the issuance of such 
obligations by the governing body of such local govern-
mental unit would have met the requirements of para-
graph (1) if such legislation had been in effect, and such 
referendum had been held, when that action was taken, 
then such legislation shall be treated as in effect, and such 
referendum shall be treated as having been held, at the time 
when such action was taken. 
(B) DOLLAR LIMIT FOR LOCAL GOVERNMENTAL UNITS.—The 
aggregate amount of obligations which may be issued by 
local governmental units with respect to the area comprising 
79-194 
O—81—pt. 2 
88 : QL3 
94 STAT. 2672 
PUBLIC LAW 96-499—DEC. 5, 1980 
any local governmental area by reason of subparagraph (A) 
may not exceed— 
(i) $35,000,000, reduced by 
(ii) the aggregate amount of obligations which are 
issued (before, on, or after the issue under this para-
graph) by local governmental units with respect to such 
area after April 24,1979, and to which the amendments 
made by this subtitle do not apply solely by reason of 
this subsection (determined without regard to the appli-
cation of subparagraph (A) of this paragraph). 
(C) MORTGAGE REQUIREMENTS.—Subparagraph (A) shall 
not apply with respect to any issue unless such issue meets 
the requirements of paragraph (3)(A) of subsection (c). 
(5) CERTAIN LOCAL ACTION PURSUANT TO LEGISLATION ENACTED 
BEFORE SEPTEMBER 29, 1979.— 
(A) IN GENERAL.—For purposes of paragraph (1), if^ 
(i) on April 25,1979, legislation was pending in a State 
legislature authorizing a local governmental unit to 
issue 
tax-exempt 
obligations 
for 
owner-occupied 
residences, 
(ii) before September 29, 1979, such legislation was 
enacted, and 
(iii) any action with respect to the issuance of such 
obligations by the local governing body would have met 
the requirements of paragraph (1) if such legislation had 
been in effect when that action was taken, 
then such legislation shall be treated as in effect at the time 
when such action was taken. 
(B) DOLLAR LIMIT FOR LOCAL GOVERNMENTAL UNITS.—The 
aggregate amount of obligations which may be issued by 
local governmental units with respect to the area comprising 
any local governmental area by reason of subparagraph (A) 
may not exceed the lesser o
f
— 
(i) the aggregate amount authorized by the legislation 
referred to in subparagraph (A), or 
(ii) $150,000,000. 
(C) MORTGAGE REQUIREMENTS.—Subparagraph (A) shall 
not apply with respect to any issue unless such issue meets 
the requirements of paragraph (3)(A) of subsection (c). 
(c) $150,000,000 
EXCEPTION 
FOR 
STATE 
HOUSING 
FINANCE 
AGENCIES.— 
(1) IN GENERAL.—To the extent of the limit set forth in 
paragraph (2), the amendments made by this subtitle shall not 
apply to obligations issued by a State housing finance agency. 
(2) DOLLAR LIMIT FOR STATE HOUSING FINANCE AGENCIES.—The 
aggregate amount of obligations which may be issued by State 
housing finance agencies with respect to any State by reason of 
paragraph (1) may not exceed— 
(A) $150,000,000, reduced by 
(B) the aggregate amount of obligations which are issued 
(before, on, or after the issue under this subsection) by the 
housing finance agencies of such State after April 24, 1979, 
to finance owner-occupied residences and to which the 
amendments made by this subtitle do not apply solely by 
reason of subsection (b). 
(3) COMMITMENTS.—Paragraph (1) shall not apply with respect 
to any issue unless substantially all of the proceeds of such issue 
(exclusive of issuance costs and a reasonably required reserve)— 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2673 
(A) are to be used to provide owner-financing for 1 to 4 
family residences (1 unit of which is owner-occupied) and not 
to acquire or replace existing mortgages (within the meaning 
of section 103A(j)(2) of the Internal Revenue Code of 1954), Ante, p. 2660. 
and 
(B) are committed by firm commitment letters (similar to 
those used in owner-financing not provided by tax-exempt 
bonds) to owner-financing before January 1,1981. 
(4) SPECIAL RULE FOR ACTION IN 1978 PURSUANT TO MORTGAGE 
PROGRAM ESTABLISHED IN 1970.— 
(A) IN GENERAL.—If— 
(i) in 1970 State legislation established a program to 
issue tax-exempt obligations to finance the purchase of 
existing mortgages from financial institutions, 
(ii) in August 1978, as a step toward issuing obliga-
tions under such program, the governing body of the 
housing agency administering the program made a 
finding that there was a shortage of mortgage funds 
within the State, 
(iii) moneys received by any financial institution on 
the purchase of mortgages will be reinvested within 90 
days in new mortgages, and 
(iv) the issue meets the requirements of subpara-
graphs (B) and (C), 
then paragraph (3) shall not apply with respect to an issue of 
obligations pursuant to the program referred to in clause (i) 
and the finding referred to in clause (ii). 
(B) DowNPAYMENT REQUIREMENT.—An issue meets the 
requirements of this subparagraph only if 75 percent or 
more of the financing provided under the issue is financing 
for residences where such financing constitutes 95 percent or 
more of the acquisition cost of the residences. 
(C) TARGETED AREA REQUIREMENT.—An issue meets the 
requirements of this subparagraph only if at least 20 percent 
of the financing provided under the issue is owner-financ-
ing of targeted area residences. For purposes of the preced-
ing sentence, the term "targeted area residence" means a 
residence in an area which is a census tract in which 70 
percent or more of the families have income which is 80 
percent or less of the statewide median family income 
(determined on the basis of the most recent decennial census 
for which data are available). 
(D) DOLLAR LIMIT.—The aggregate amount of obligations 
which may be issued by a State housing authority by reason 
of subparagraph (A) may not exceed $125,000,000. 
(d) SPECIAL RULES.— 
(1) COURT ACTION WAS PENDING TO DETERMINE SCOPE OF AUTHOR-
IZING LEGISLATION.— 
(A) I N GENERAL.—If— 
(i) before April 25, 1979, a State had enacted a law 
under which counties were authorized to establish 
public trusts to issue tax-exempt obligations for public 
purposes, 
(ii) on such date the question of whether or not that 
law authorized the issuance of obligations to finance 
certain owner-occupied residences was being litigated in 
a court of competent jurisdiction. 
94 STAT. 2674 
PUBLIC LAW 96-499—DEC. 5, 1980 
(iii) before July 31, 1979, the Supreme Court of such 
State held that the counties were so authorized, and 
(iv) there is written evidence (which was in existence 
before April 25, 1979) that before April 25, 1979, the 
governing body of a county in such State had taken 
action indicating an intent to issue (or to establish a 
program for issuing) tax-exempt obligations to finance 
owner-occupied residences, 
then the amendments made by section 1102 shall not apply 
to obligations issued by the public trust for such county. 
(B) DOLLAR LIMIT.—The aggregate amount of obligations 
which may be issued with respect to any county by reason of 
subparagraph (A) may not exceed $50,000,000. 
(2) STATE LEGISLATION ENACTED BEFORE JUNE 8, 1979, 
WHERE 
LOCALITY HAD ESTABLISHED INCOME LIMITATIONS BEFORE APRIL 25, 
1979.— 
(A) I N GENERAL.—If— 
(i) on April 25,1979, legislation was pending in a State 
legislature authorizing a local governmental unit to 
issue tax-exempt obligations for owner-occupied resi-
dences, 
(ii) there is written evidence (which was in existence 
before April 25, 1979) that before April 25, 1979, the 
governing body of the local governmental unit had 
taken action indicating to its delegation to the State 
legislature what the income limitation would be for 
individuals who would be eligible for mortgages under 
the program, and 
(iii) before June 8, 1979, the legislation referred to in 
clause (i) was enacted, 
then the amendments made by section 1102 shall not apply 
to obligations issued by the local governmental unit. 
(B) DOLLAR LIMIT.—The aggregate amount of obligations 
which may be issued with respect to any local governmental 
area by reason of subparagraph (A) may not exceed 
$150,000,000. 
(3) RESOLUTIONS BEFORE CITY COUNCIL BEFORE ENACTMENT OF 
STATE AUTHORIZING LEGISLATION.— 
(A) IN GENERAL.—If^ 
(i) before April 25, 1979, 2 resolutions were submitted 
to a city council the first of which would create an urban 
residential finance authority and the second of which 
would authorize the appointment of the members of 
such authority, 
(ii) at the time such resolutions were submitted. State 
authorizing legislation had not been enacted, 
(iii) before April 25, 1979, the State authorizing legis-
lation was enacted, and 
(iv) after April 24, 1979, and before May 17, 1979, a 
resolution was adopted by the city council which 
created an urban residential finance authority and 
which authorized the appointment of members of the 
authority, 
then the amendments made by section 1102 shall not apply 
with respect to obligations issued on behalf of such city. 
(B) DOLLAR LIMIT.—The aggregate amount of obligations 
which may be issued with respect to any city by reason of 
subparagraph (A) may not exceed $50,000,000. 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2675 
(4) SPECIAL RULE WHERE CITY POSTPONED SECOND HALF OF 
AUTHORIZED ISSUE TO SAVE INTEREST.—IF— 
(A) on March 28, 1979, the council of a city adopted a 
resolution authorizing the issuance of not to exceed 
$30,000,000 of mortgage revenue bonds, 
(B) on or about August 1, 1979, approximately one-half of 
the obligations authorized by such resolution were issued, 
and 
(C) the reason why the remaining obligations were not 
issued at that time was to save interest payments until the 
money was actually needed, 
then the amendments made by section 1102 shall not apply with 
respect to the issuance of the remaining obligations which were 
authorized by such March 28,1979, resolution. 
(5) STATE WAS IN PROCESS OF PERMITTING LOCALITIES TO ESTAB-
LISH NONPROFIT CORPORATIONS.— 
(A) IN GENERAL.—If— 
(i) a State law enacted after April 24,1979, and before 
June 16, 1979, provides that local governments may 
establish nonprofit corporations to issue tax-exempt 
obligations to finance owner-occupied residences, 
(ii) pursuant to such State law, a local government 
estaljlishes such a nonprofit corporation and designates 
it for purposes of this subsection, and 
(iii) on November 7 or 14, 1979, an amount was 
specified by or for the local government as the maxi-
mum amount of obligations which the local government 
expected the nonprofit corporation to issue with respect 
to the area under any transitional authority provided by 
this subtitle, 
then the amendments made by section 1102 shall not apply 
to obligations issued by the nonprofit corporation with 
respect to the area for which such local government has 
jurisdiction. 
(B) DOLLAR LIMITS.—The aggregate amount of obligations 
which may be issued with respect to any area by reason of 
subparagraph (A) may not exceed the amount referred to in 
subparagraph (AXiii) which was specified on November 7 or 
14,1979, by or for the local government. 
(C) SUBSTITUTION OF HOUSING AUTHORITIES, ETC.—For pur-
poses of applying so much of paragraph (7) as relates to 
subparagraph (A)— 
(i) if the local housing authority had the intent 
referred to in paragraph (7), such local housing author-
ity shall be substituted for the local government, and 
(ii) if the governing body of the local government is a 
commissioners court, the county judge who was on April 
24, 1979, the presiding officer of such court shall be 
treated as the governing body of such government. 
(6) OBLIGATIONS ISSUED UNDER THIS SUBSECTION MUST MEET THE 
REQUIREMENTS OF SUBSECTION (c)(3).—No obligation may be 
issued under this subsection unless the issue meets the require-
ments of subsection (c)(3). 
(7) GOVERNING BODY MUST FILE AFFIDAVITS SHOWING INTENT ON 
APRIL 24, 1979.—No obligation may be issued under this subsec-
tion with respect to any area unless a majority of the members of 
the governing body of the local governmental unit having juris-
diction over that area file affidavits with the Secretary of the 
94 STAT. 2676 
PUBLIC LAW 96-499—DEC. 5, 1980 
Treasury (or his delegate) indicating that it was their intent on 
April 24, 1979, either that tax-exempt obligations be issued to 
provide financing for owner-occupied residences or that a pro-
gram be established to issue such obligations. 
(8) LIMITATIONS REDUCED BY CERTAIN OTHER ISSUES.—Any limi-
tation on the amount of obligations which may be issued by any 
issuer by reason of any paragraph of this subsection shall be 
reduced by the aggregate amount of obligations which are issued 
(before, on, or after the issue under this subsection) by local 
governmental units with respect to the area within the jurisdic-
tion of such issuer after April 24, 1979, and to which the 
amendments made by this subtitle do not apply solely by reason 
of subsection (b). 
(e) ONGOING LOCAL PROGRAMS FOR REHABILITATION LOANS.— 
(1) IN GENERAL.—If before April 25,1979, a local governmental 
unit had a qualified rehabilitation loan program, then the 
amendments made by this subtitle shall not apply to obligations 
issued by such governmental unit for qualified loans if substan-
tially all of the proceeds of such issue (exclusive of issuance costs 
and a reasonably required reserve) are committed by firm 
commitment letters (similar to those used in owner financing not 
provided by tax-exempt bonds) to qualified loans before January 
1,1981. 
(2) LIMITATION.—The aggregate amount of obligations which 
may be issued by reason of paragraph (1) by local governmental 
units with respect to the area comprising any local governmental 
area may not exceed the lesser of— 
(A) $10,000,000, or 
(B) the aggregate amount of loans made with respect to 
that area under the qualified rehabilitation loan program 
during the period beginning on January 1, 1977, and ending 
on April 24,1979. 
The limitation established by the preceding sentence shall be 
reduced by the aggregate amount of obligations (if any) which are 
issued (before, on, or after the issue under this subsection) under 
the qualified rehabilitation loan program after April 24, 1979, 
with respect to the same local governmental area and to which 
the amendments made by this subtitle do not apply solely by 
reason of subsection (b). 
(3) QUALIFIED REHABILITATION LOAN PROGRAM.—For purposes 
of this subsection, the term "qualified rehabilitation loan pro-
gram" means a program for the financing— 
(A) of alterations, repairs, and improvements on or in 
connection with an existing residence by the owner thereof, 
but 
(B) only of such items as substantially protect or improve 
the basic livability of the property. 
(4) QUALIFIED LOAN.—For purposes of this subsection, the term 
"qualified loan" means the financing— 
(A) of alterations, repairs, and improvements on or in 
connection with an existing 1 to 4 family residence (1 unit of 
which is owner-occupied) by the owner thereof, but 
(B) only of such items as substantially protect or improve 
the basic livability of the property. 
(5) DOLLAR LIMIT ON QUALIFIED LOANS.—For purposes of this 
sulasection, a loan shall not be treated as a qualified loan if the 
financing is in an amount which exceeds $20,000 plus $2,500 for 
each unit in excess of 1. 
note. 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2677 
(f) $50 PER CAPITA EXCEPTION FOR LOCAL GOVERNMENTS.— 
(1) IN GENERAL.—To the extent of the limit set forth in 
paragraph (2), the amendments made by section 1102 shall not 
apply to mortgage subsidy bonds issued by local governmental 
units after April 24,1979. 
(2) LIMIT.— 
(A) IN GENERAL.—The aggregate amount of obligations 
issued with respect to any area by reason of paragraph (1) 
shall not exceed— 
(i) the amount equal to the product of $50 and the 
population of that area, reduced by 
(ii) the aggregate amount of obligations which are 
issued Ot)efore, on, or after the issue under this subsec-
tion) by local governmental units after April 24, 1979, 
with respect to that area and to which the amendments 
made by this subtitle do not apply solely by reason of 
subsections Qa), (d), and (e). 
(B) DETERMINATION OF POPULATION.—For purposes of sub-
paragraph (A), the population of any area shall be the 
population as of July 1, 1976, as determined for purposes of 
the State and Local Fiscal Assistance Act of 1972. 
31 use 1221 
(3) UNIT MUST ESTABLISH THAT ACTION WAS TAKEN BEFORE APRIL 
25, 1979.—Paragraph (1) shall not apply with respect to any 
obligation issued by any local governmental unit unless— 
(A) there is written evidence (which was in existence 
before April 25, 1979) that before April 25, 1979, the govern-
ing body of such local governmental unit had taken action 
indicating an intent to issue (or to establish a program for 
issuing) tax-exempt obligations to finance owner-occupied 
residences, 
(B) on October 30, 1979, such local governmental unit had 
authority to issue obligations to finance owner-occupied 
residences, and 
(C) a majority of the members of the governing body of the 
local governmental unit file with the Secretary of the Treas-
ury (or his delegate) affidavits that the requirement of such 
subparagraph (A) is met. 
For purposes of subparagraph (A), action of the governing body of 
a second local governmental unit with respect to the same area 
shall be treated as action of the issuing governmental unit. 
(4) COMMITMENTS.—Paragraph (1) shall not apply with respect 
to any issue unless such issue meets the requirements of para-
graph (3) of subsection (c). 
(5) OVERLAPPING JURISDICTIONS.—For purposes of this subsec-
tion, if 2 or more local governmental units meet the require-
ments of paragraph (3) and have authority to issue mortgage 
subsidy bonds with respect to residences in the same area, only 
the unit having jurisdiction over the smallest geographical area 
shall be treated as having issuing authority with respect to such 
area unless such unit agrees to surrender part or all of the 
amount permitted under this subsection to the local governmen-
tal unit with overlappirtg jurisdiction which has the next small-
est geographical area. 
(g) ROLLOVER OF EXISTING TAX-EXEMPT OBLIGATIONS.— 
(1) IN GENERAL.—The amendments made by sections 1102 and 
1103 shall not apply to the issuance of obligations to refinance for 
the same purpose tax-exempt indebtedness which was outstand-
94 STAT. 2678 
PUBLIC LAW 96-499—DEC. 5, 1980 
ing on April 24, 1979 (or indebtedness which had previously been 
refinanced pursuant to this subsection), but only i
f
— 
(A) on April 24,1979, there was an agreed on period for the 
maturity of the mortgages or other financing, and 
(B) the new obligations have a maturity date which does 
not exceed by more than 2 years the agreed on period 
referred to in subparagraph (A). 
(2) AMOUNTS FOR RESERVES, ISSUE COSTS, ETC.—An issue which 
otherwise meets the requirements of paragraph (1) shall not be 
treated as failing to meet such requirements solely because the 
amount of the new indebtedness exceeds the amount of the old 
indebtedness by such amount as is reasonably necessary to cover 
construction period interest, reserves, and the costs of issuing the 
new indebtedness, 
(h) SPECIAL RULES FOR PROJECTS UNDER DEVELOPMENT.— 
(1) RENTAL HOUSING.—The amendment made by section 1103 
shall not apply to a project which was in the development stage 
on April 24,1979, if— 
(A) a plan specifying the number and location of rental 
units was approved on or before such date by a governing 
body of a State or local government or by a State or local 
housing agency or similar agency, and 
(B) substantial expenditures for site improvement for the 
project had been incurred on or before such date. 
(2) RENTAL HOUSING PROJECTS APPROVED BY SECRETARY OF 
HUD.—The amendment made by section 1103 shall not apply to a 
project which was in the development stage on April 24, 1979, 
i
f
— 
(A) a plan specifying the number and location of rental 
units was preliminarily approved by the Secretary of Hous-
ing and Urban Development pursuant to section 221(d)(4) or 
12 use 1715/, 
section 232 of the National Housing Act on or before such 
date, and 
(B) fees for processing the project with the Department of 
Housing and Urban Development and other expenditures 
for the project had been incurred on or before such date. 
(3) OWNER-OCCUPIED HOUSING.—The amendments made by 
section 1102 shall not apply to a project which was in the 
development stage on April 24, 1979, if on or before such date— 
(A) substantial expenditures had been made for detailed 
plans and specifications, and 
(B) either tax-exempt construction financing had been 
issued with respect to the project or there is written evidence 
that a governmental unit intended to issue tax-exempt 
obligations to finance the acquisition of the units by home 
buyers. 
The amendment made by section 1103 shall not apply to con-
struction or other initial temporary financing issued with respect 
to a project which meets the requirements of the preceding 
sentence if substantially all of the dwelling units in such project 
are to be owner-occupied residences. 
(4) 
CERTAIN 
REDEVELOPMENT MORTGAGE BOND FINANCING 
PROJECTS.—Subparagraph (B) of paragraph (3) shall be treated as 
satisfied if, before April 25,1979— 
(A) the developer of a project acquired the land for such 
prmect, 
(B) there was approval by the mayor's advisory committee 
of a city of a comprehensive proposal (under a State law 
1715w. 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2679 
authorizing tax-exempt obligations for use only in redevelop-
ment areas) for such project, subject to revisions to be made, 
and 
(C) a revised proposal was submitted to the redevelopment 
agency and city council containing the revisions. 
The aggregate amount of obligations which may be issued by 
local governmental units with respect to the area comprising any 
local governmental area by reason of this paragraph may not 
exceed $20,000,000. 
(i) REGISTRATION REQUIREMENTS.— 
(1) IN GENERAL.—Notwithstanding any other provision of this 
section, the amendments made by sections 1102 and 1103, insofar 
as they require obligations to be in registered form, shall apply to 
obligations issued after December 31,1981. 
(2) BONDS UNDER TRANSITIONAL RULES.—Any obligation issued 
after December 31, 1981, by reason of this section shall be in 
registered form. 
(j) ADVANCE REFUNDING.—Notwithstanding any other provision of 
this section— 
(1) subsection (n) of section 103A of the Internal Revenue Code 
of 1954 (as added by section 1102) shall apply to obligations issued 
after the date of the enactment of this Act to refund obligations 
issued before, on, or after such date of enactment, and 
(2) this section shall not apply to obligations issued after such 
date of enactment for the advance refunding of obligations issued 
before, on, or after such date of enactment. 
(k) TRANSITIONAL RULE FOR LOW- AND MODERATE-INCOME REQUIRE-
MENT.—In the case of obligations issued after April 24, 1979, and 
before January 1, 1984, the period for which the low- and moderate-
income requirements of section 103(b)(4)(A) of the Internal Revenue 
Code of 1954 (as amended by section 1103 of this subtitle) is required 
to be met shall be 20 years. 
(1) SUBSTITUTION OF GOVERNMENTAL INSTRUMENTALITY FOR CITY.— 
(1) IN GENERAL.—If— 
(A) a corporation was created on June 17, 1971, pursuant 
to State law to provide financing for the construction and 
rehabilitation of low-income housing, 
(B) pursuant to a State law enacted in 1955 a city has made 
loans to housing developers from the proceeds of short-term 
bonds and notes issued by the city, and has secured 50-year 
inortgages from the developers, and 
(C) the corporation agrees to acquire from the city certain 
of the loans referred to in subparagraph (B) by issuing 
obligations which will be secured by mortgages referred to in 
subparagraph (B) on 12 projects (11 of which projects are 
subsidized with interest-reduction subsidies under section 
236 of the National Housing Act), 
12 USC I7l5z-i. 
then the amendments made by this subtitle shall not apply to 
obligations issued by the corporation to acquire the loans (and 
mortgages) referred to in subparagraph (C). 
(2) DOLLAR LIMIT.—The aggregate amount of obligations to 
which paragraph (1) applies shall not exceed $135,000,000. 
(3) TIME LIMIT.—Paragraph (1) shall not apply to any obligation 
issued after December 31,1980. 
(m) STATE LEGISLATION WAS PENDING ON APRIL 1, 1979, AND 
ENACTED ON APRIL 26, 1979, WHERE LOCALITY HAD TAKEN ACTION TO 
UNDERTAKE A STUDY OF LOCAL MORTGAGE MARKET.— 
(1) IN GENERAL.—If— 
94 STAT. 2680 
PUBLIC LAW 96-499—DEC. 5, 1980 
(A) on April 1, 1979, legislation was pending in a State 
legislature limiting the authority of local governments 
within such State to issue tax-exempt obligations for owner-
occupied residence under existing home rule authority, and 
such legislation was enacted on April 26,1979, 
(B) there is written evidence (which was in existence 
before April 25,1979) that not earlier than June 1,1978, but 
before April 25, 1979, the governing body of a local 
government in such State had taken action authorizing the 
undertaking of a demographic or related study of the local 
mortgage market, which study was intended to serve as a 
basis for issuance of tax exempt obligations for owner-
occupied residences, 
(C) on December 20, 1979, an amount was specified by or 
for the local government as the range of obligations which it 
expected to issue with respect to the area under any transi-
tional authority provided by the Act, and 
(D) a majority of the members of the governing body of the 
local government certify that the city or county was waiting 
enactment of the legislation described in subparagraph (A) 
prior to determining to proceed towards the issuance of tax-
exempt obligations for owner-occupied residences. 
then the amendments made by section 1102 shall not apply to 
obligations issued by such city or county. 
(2) DOLLAR LIMITS.—The aggregate amount of obligations 
which may be issued with respect to any area by reason of 
paragraph (1) may not exceed the maximum amount referred to 
in paragraph (1)(C) which was specified on December 20,1979, by 
or for such local government. 
(3) TIME UMITS.—Paragraph (1) shall not apply with respect to 
any issue unless substantially all of the proceeds of such issue 
(exclusive of issuance costs and a reasonably required reserve) 
are committed by firm commitment letters (similar to those used 
in owner-financing not provided by tax-exempt bonds) to owner-
financing before January 1,1982. 
(n) CERTAIN ADDITIONAL TRANSITIONAL AUTHORITY.— 
(1) IN GENERAL.—The amendments made by sections 1102 and 
1103 shall not apply to issues described in the following table: 
City or county 
Ceiling amount 
Purpose of issue 
Baltimore, Maryland 
$100,000,000 
Port Arthur, Texas 
175,000,000 
Minneapolis, Minnesota 
25,000,000 
Minneapolis-St. Paul, Min- 
235,000,000 
nesota. 
Detroit, Michigan 
50,000,000 
Brevard County, Florida 
150,000,000 
Chicago, Illinois 
235,000,000 
Financing owner-occupied resi-
dences. 
For financing on New Town In 
Town project. 
Financing owner-occupied resi-
dences. 
Joint program for 
financing 
owner-occupied residences in-
volving some UDAG grants 
and private financing. 
To issue obligations maturing 
before 1986 for construction 
on the Riverfront West proj-
ect. 
Financing owner-occupied resi-
dences. 
For financing on the Presiden-
tial Towers project. 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2681 
(2) ISSUING AUTHORITY.—The authority granted by this subsec-
tion with respect to any city or county may be used only by the 
appropriate issuing authority for that city or county. 
(3) CEILING AMOUNT.—The ceiUng amount specified in para-
graph (1) with respect to any item shall be the maximum 
aggregate amount of obligations which may be issued by the 
appropriate issuing authority under the authority granted by 
such item. 
(4) PURPOSE.—The authority under any item may be used to 
issue obligations only for the purpose set forth in paragraph (1) 
for such item. 
(0) SPECIAL RULE FOR LOANS TO LENDERS PROGRAM.— 
(1) IN GENERAL.—In the case of any obligations issued during 
1981 or 1982 pursuant to a qualified loans to lender program— 
(A) the amendments made by section 1103 shall not apply, 
(B) subsection (i) of section 103A of the Internal Revenue 
Code of 1954 (other than the last sentence of paragraph (1) of ^"^e, p. 2660. 
such subsection) shall not apply, and 
(C) the determination of whether the requirements of 
subsections (d), (e), (f), (h), (j)(2), and (j)(3) of such section 103A 
are met with respect to such issue shall be made by taking 
into account the loans made by the financial institutions 
with the funds provided by the issue (in lieu of the mortgages 
acquired from the financial institutions with the proceeds of 
the issue). 
(2) QUALIFIED LOANS TO LENDER PROGRAM.—For purposes of 
paragraph (1), the term "qualified loans to lender program" 
means any program established pursuant to legislation enacted 
by New York State in 1970 which finances the purchase of 
existing mortgages from financial institutions and requires any 
money received by a financial institution on the purchase of a 
mortgage to be reinvested within 90 days in new mortgages. 
Subtitle B—Cash Management 
SEC. n i l . ESTIMATED INCOME TAX PAYMENTS BY CORPORATIONS. 
(a) GENERAL RULE.—Section 6655 of the Internal Revenue Code of 26 USC 6655. 
1954 (relating to failure by corporation to pay estimated income 
tax) is amended by adding at the end thereof the following new 
subsection: 
"(h) LARGE CORPORATIONS REQUIRED TO PAY AT LEAST 60 PERCENT 
OF CURRENT YEAR TAX.— 
"(1) IN GENERAL.—In the case of a large corporation, the 
amount treated as the estimated tax for the taxable year under 
paragraphs (1) and (2) of subsection (d) shall in no event be less 
than 60 percent o
f
— 
"(A) the tax shown on the return for the taxable year, or 
"(B) if no return was filed, the tax for such year. 
"(2) LARGE CORPORATION.—For purposes of this subsection, the 
term 'large corporation' means any corporation if such corpora-
tion (or any predecessor corporation) had taxable income of 
$1,000,000 or more for any taxable year during the testing period. 
"(3) RULES FOR APPLYING PARAGRAPH (2).— 
"(A) TESTING PERIOD.—For purposes of this subsection, the 
term 'testing period' means the 3 taxable years immediately 
preceding the taxable year involved. 
94 STAT. 2682 
PUBLIC LAW 96-499—DEC. 5, 1980 
"(B) MEMBERS OF CONTROLLED GROUPS.—For purposes of 
applying paragraph (2) to any taxable year in the testing 
period with respect to corporations which are component 
members of a controlled group of corporations for such 
taxable year, the $1,000,000 amount specified in paragraph 
(2) shall be divided among such members under rules similar 
to the rules of section 1561." 
26 use 6655. 
(b) TECHNICAL AMENDMENT.—Subscction (e) of section 6655 of such 
Code is amended by striking out "subsections (h) and (d)" and 
inserting in lieu thereof "subsections 0)), (d), and (h)". 
26 use 6655 
(c) EFFECTIVE DATE.—The amendments made by this section shall 
^°^- 
apply to taxable years beginning after December 31,1980. 
Foreign 
SubtUlc C—TaxatioH of Foreign Investment in United 
Investment in 
"^ 
Real Property 
Stdtes Real Prooertv 
Tax Act of 1980. 
26 use 1 note. 
SEC. 1121. SHORT TITLE. 
This subtitle may be cited as the "Foreign Investment in Real 
Property Tax Act of 1980". 
SEC. 1122. TAX ON DISPOSITION OF FOREIGN INVESTMENT IN UNITED 
STATES REAL PROPERTY. 
(a) IN GENERAL.—Subpart C of part II of subchapter N of chapter 1 
of the Internal Revenue Code of 1954 (relating to miscellaneous 
provisions with respect to nonresident aliens and foreign corpora-
tions) is amended by adding at the end thereof the following new 
section: 
26 use 897. 
"SEC. 897. DISPOSITION OF INVESTMENT IN UNITED STATES REAL 
PROPERTY. 
"(a) GENERAL RULE.— 
"(1) TREATMENT AS EFFECTIVELY CONNECTED WITH UNITED 
STATES TRADE OR BUSINESS.—For purposes of this title, gain or loss 
of a nonresident alien individual or a foreign corporation from 
the disposition of a United States real property interest shall be 
taken into account— 
"(A) in the case of a nonresident alien individual, under 
26 use 871. 
section 871(B)(1), or 
"(B) in the case of a foreign corporation, under section 
26 use 882. 
882(a)(1), 
as if the taxpayer were engaged in a trade or business within the 
United States during the taxable year and as if such gain or loss 
were effectively connected with such trade or business. 
"(2) 20-PERCENT MINIMUM TAX ON NONRESIDENT ALIEN INDIVID-
UALS.— 
"(A) IN GENERAL.—In the case of any nonresident alien 
26 use 55. 
individual, the amount determined under section 55(a)(1)(A) 
for the taxable year shall not be less than 20 percent of 
whichever of the following is the least: 
"(i) the individual's alternative minimum taxable 
income (as defined in section 55(b)(1)) for the taxable 
year, 
"(ii) the individual's net United States real property 
gain for the taxable year, or 
"(iii) $60,000. 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2683 
"(B) NET UNITED STATES REAL PROPERTY GAIN.—For pur-
poses of subparagraph (A), the term 'net United States real 
property gain' means the excess of— 
"(i) the aggregate of the gains for the taxable year 
from dispositions of United States real property inter-
ests, over 
"(ii) the aggregate of the losses for the taxable year 
from dispositions of such interests, 
"(b) LIMITATION ON LOSSES OF INDIVIDUALS.—In the case of an 
individual, a loss shall be taken into account under subsection (a) only 
to the extent such loss would be taken into account under section 
165(c) (determined without regard to subsection (a) of this section). 26 USC 165. 
"(c) UNITED STATES REAL PROPERTY INTEREST.—For purposes of this 
section— 
"(1) UNITED STATES REAL PROPERTY INTEREST.— 
"(A) IN GENERAL.—Except as provided in subparagraph 
(B), the term 'United States real property interest' means— 
"(i) an interest in real property (including an interest 
in a mine, well, or other natural deposit) located in the 
United States, and 
"(ii) any interest (other than an interest solely as a 
creditor) in any domestic corporation unless the tax-
payer establishes (at such time and in such manner as 
the Secretary by regulations prescribes) that such corpo-
ration was at no time a United States real property 
holding corporation during the shorter of— 
"(I) the period after June 18, 1980, during which 
the taxpayer held such interest, or 
"(II) the 5-year period ending on the date of the 
disposition of such interest. 
"(B) EXCLUSION FOR INTEREST IN CERTAIN CORPORATIONS.— 
The term 'United States real property interest' does not 
include any interest in a corporation if— 
"(i) as of the date of the disposition of such interest, 
such corporation did not hold any United States real 
property interests, and 
"(ii) all of the United States real property interests 
held by such corporation at any time during the shorter 
of the periods described in subparagraph (A)(ii)— 
"(I) were disposed of in transactions in which the 
full amount of the gain (if any) was recognized, or 
"(II) ceased to be United States real property 
interests by reason of the application of this subpar-
agraph to 1 or more other corporations. 
"(2) UNITED STATES REAL PROPERTY HOLDING CORPORATION.— 
The term 'United States real property holding corporation' 
means any corporation if— 
"(A) the fair market value of its United States real 
property interests equals or exceeds 50 percent of 
"(B) the fair market value of— 
"(i) its United States real property interests, 
"(ii) its interests in real property located outside the 
United States, plus 
"(iii) any other of its assets which are used or held for 
use in a trade or business. 
"(3) EXCEPTION FOR STOCK REGULARLY TRADED ON ESTABLISHED 
SECURITIES MARKETS.—If any class of stock of a corporation is 
regularly traded on an established securities market, stock of 
94 STAT. 2684 
PUBLIC LAW 96-499—DEC. 5, 1980 
such class shall be treated as a United States real property 
interest only in the case of a person who, at some time during the 
shorter of the periods described in paragraph (l)(A)(ii), held more 
than 5 percent of such class of stock. 
"(4) INTERESTS HELD BY FOREIGN CORPORATIONS AND BY PART-
NERSHIPS, TRUSTS, AND ESTATES.—For purposes of determining 
whether any corporation is a United States real property holding 
corporation— 
"(A) FOREIGN CORPORATIONS.—Paragraph (l)(A)(ii) shall be 
applied by substituting 'any corporation (whether foreign or 
domestic)' for 'any domestic corporation'. 
"(B) INTERESTS HELD BY PARTNERSHIPS, ETC.—United States 
real property interests held by a partnership, trust, or estate 
shall be treated as owned proportionately by its partners or 
beneficiaries. 
"(5) TREATMENT OF CONTROLLING INTERESTS.— 
"(A) IN GENERAL.—Under regulations, for purposes of 
determining whether any corporation is a United States real 
property holding corporation, if any corporation (hereinafter 
in this paragraph referred to as the 'first corporation') holds 
a controlling interest in a second corporation— 
"(i) the stock which the first corporation holds in the 
second corporation shall not be taken into account, 
"(ii) the first corporation shall be treated as holding a 
portion of each asset of the second corporation equal to 
the percentage of the fair market value of the stock of 
the second corporation represented by the stock held by 
the first corporation, and 
"(iii) any asset treated as held by the first corporation 
by reason of clause (ii) which is used or held for use by 
the second corporation in a trade or business shall be 
treated as so used or held by the first corporation. 
Any asset treated as held by the first corporation by reason 
of the preceding sentence shall be so treated for purposes of 
applying the preceding sentence successively to corporations 
which are above the first corporation in a chain of 
corporations. 
"(B) CONTROLLING INTEREST.—For purposes of subpara-
graph (A), the term 'controlling interest' means 50 percent 
or more of the fair market value of all classes of stock of a 
corporation. 
"(6) OTHER SPECIAL RULES.— 
"(A) INTEREST IN REAL PROPERTY.—The term 'interest in 
real property' includes fee ownership and co-ownership of 
land or improvements thereon, leaseholds of land or 
improvements thereon, options to acquire land or improve-
ments thereon, and options to acquire leaseholds of land or 
improvements thereon. 
"(B) REAL PROPERTY INCLUDES ASSOCIATED PERSONAL PROP-
ERTY.—The term 'real property' includes movable walls, 
furnishings, and other personal property associated with the 
use of the real property. 
"(C) CONSTRUCTIVE OWNERSHIP RULES.—For purposes of 
determining under paragraph (3) whether any person holds 
more than 5 percent of any class of stock and of determining 
under paragraph (5) whether a person holds a controlling 
interest in any corporation, section 318(a) shall apply (except 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2685 
that paragraphs (2)(C) and (3)(C) of section 318(a) shall be 26 USC 318. 
applied by substituting '5 percent' for '50 percent'). 
"(d) TREATMENT OF DISTRIBUTIONS, ETC., BY FOREIGN CORPORA-
TIONS.— 
"(1) DISTRIBUTIONS.— 
"(A) IN GENERAL.—Except to the extent otherwise pro-
vided in regulations, notwithstanding any other provision of 
this chapter, gain shall be recognized by a foreign corpora-
tion on the distribution (including a distribution in liquida-
tion or redemption) of a United States real property interest 
in an amount equal to the excess of the fair market value of 
such interest (as of the time of the distribution) over its 
adjusted basis. 
(B) EXCEPTION WHERE THERE IS A CARRYOVER BASIS.— 
Subparagraph (A) shall not apply if the basis of the distrib-
uted property in the hands of the distributee is the same as 
the adjusted basis of such property before the distribution 
increased by the amount of any gain recognized by the 
distributing corporation. 
"(2) SECTION 337 NOT TO APPLY.—Section 337 shall not apply to 26 USC 337. 
any sale or exchange of a United States real property interest by 
a foreign corporation. 
"(e) COORDINATION WITH NONRECOGNITION PROVISIONS.— 
"(1) IN GENERAL.—Except to the extent otherwise provided in 
subsection (d) and paragraph (2) of this subsection, any nonrecog-
nition provision shall apply for purposes of this section to a 
transaction only in the case of an exchange of a United States 
real property interest for an interest the sale of which would be 
subject to taxation under this chapter. 
"(2) REGULATIONS.—The Secretary shall prescribe regulations 
(which are necessary or appropriate to prevent the avoidance of 
Federal income taxes) providing— 
"(A) the extent to which nonrecognition provisions shall, 
and shall not, apply for purposes of this section, and 
"(B) the extent to which— 
"(i) transfers of property in reorganization, and 
"(ii) changes in interests in, or distributions from, a 
f
artnership, trust, or estate, 
be treated as sales of property at fair market value. 
"(3) NONRECOGNITION PROVISION DEFINED.—For purposes of 
this subsection, the term 'nonrecognition provision' means any 
provision of this title for not recognizing gain or loss. 
"(f) DISTRIBUTIONS BY DOMESTIC CORPORATIONS TO FOREIGN SHARE-
HOLDERS.—If a domestic corporation distributes a Unted States real 
property interest to a nonresident alien individual or a foreign 
corporation in a distribution to which section 301 applies, notwith- 26 USC 301. 
standing any other provision of this chapter, the basis of such United 
States real property interest in the hands of such nonresident alien 
individual or foreign corporation shall not exceed— 
"(1) the adjusted basis of such property before the distribution, 
increased by 
"(2) the sum o
f
— 
"(A) any gain recognized by the distributing corporation 
on the distribution, and 
"(B) any tax paid under this chapter by the distributee on 
such distribution. 
"(g) SPECIAL RULE FOR SALES OF INTEREST IN PARTNERSHIPS, TRUSTS, 
AND ESTATES.—Under regulations prescribed by the Secretary, the 
94 STAT. 2686 
PUBLIC LAW 96-499—DEC. 5, 1980 
"United States 
real property 
interest." 
Post, p. 2687. 
amount of any money, and the fair market value of any property, 
received by a nonresident alien individual or foreign corporation in 
exchange for all or part of its interest in a partnership, trust, or estate 
shall, to the extent attributable to United States real property 
interests, be considered as an amount received from the sale or 
exchange in the United States of such property. 
"(h) SPECIAL RULES FOR REITS.—For purposes of this section— 
"(1) LOOK-THROUGH OF DISTRIBUTIONS.—Any distribution by a 
REIT to a nonresident alien individual or a foreign corporation 
shall, to the extent attributable to gain from sales or exchanges 
by the REIT of United States real property interests, be treated 
as gain recognized by such nonresident alien individual or 
foreign corporation from the sale or exchange of a United States 
real property interest. 
"(2) SALE OF STOCK IN DOMESTICALLY-CONTROLLED REIT NOT 
TAXED.—The term 'United States real property interest' does not 
include any interest in a domestically-controlled REIT. 
"(3) DISTRIBUTIONS BY DOMESTICALLY-CONTROLLED REITS.—In 
the case of a domestically-controlled REIT, rules similar to the 
rules of subsection (d) shall apply to the foreign ownership 
percentage of any gain. 
"(4) DEFINITIONS.— 
"(A) REIT.—The term 'REIT' means a real estate invest-
ment trust. 
"(B) DOMESTICALLY-CONTROLLED REIT.—The term 'domesti-
cally-controlled REIT' means a REIT in which at all times 
during the testing period less than 50 percent in value of the 
stock was held directly or indirectly by foreign persons. 
"(C) FOREIGN OWNERSHIP PERCENTAGE.—The term 'foreign 
ownership percentage' means that percentage of the stock of 
the REIT which was held (directly or indirectly) by foreign 
persons at the time during the testing period during which 
the direct and indirect ownership of stock by foreign persons 
was greatest. 
"(D) TESTING PERIOD.—The term 'testing period' means 
whichever of the following periods is the shortest: 
"(i) the period beginning on June 19, 1980, and ending 
on the date of the disposition or of the distribution, as 
the case may be, 
"(ii) the 5-year period ending on the date of the 
disposition or of the distribution, as the case may be, or 
"(iii) the period during which the REIT was in 
existence, 
"(i) ELECTION BY FOREIGN CORPORATION TO BE TREATED AS DOMES-
TIC CORPORATION.— 
"(1) IN GENERAL.—If—-
"(A) a foreign corporation has a permanent establishment 
in the United States, and 
"(B) under any treaty, such permanent establishment may 
not be treated less favorably than domestic corporations 
carrying on the same activities, 
then such foreign corporation may make an election to be treated 
as a domestic corporation for purposes of this section and section 
6039C. 
"(2) REVOCATION ONLY WITH CONSENT.—Any election under 
paragraph (1), once made, may be revoked only with the consent 
of the Secretary. 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2687 
"(3) MAKING OF ELECTION.—An election under paragraph (1) 
may be made only subject to such conditions as may be pre-
scribed by the Secretary." 
(b) CLERICAL AMENDMENT.—The table of sections for such subpart C 
is amended by adding at the end thereof the following new item: 
"SEC. 897. Disposition of investment in United States real property." 
(c) CROSS REFERENCES.— 
26 use 87i. 
(1) Subsection (g) of section 871 of such Code (relating to tax on 
income of nonresident alien individuals) is amended by adding at 
the end thereof the following new paragraph: 
"(8) For special tax treatment of gain or loss from the disposition by a 
nonresident alien individual of a United States real property interest, see 
section 897." 
(2) Subsection (a) of section 882 of such Code (relating to tax on 26 USC 882. 
income of foreign corporation connected with United States 
business) is amended by adding at the end thereof the following 
new paragraph: 
"(3) For special tax treatment of gain or loss from the dispositi<m by a 
foreign corporation of a United States real property interest, see section 
897." 
SEC. 1123. REPORTING RKQl'lREMKNTS. 
(a) GENERAL RULE.—Subpart A of part III of chapter 61 of the 
Internal Revenue Code of 1954 (relating to information returns 
concerning persons subject to special provisions) is amended by 
inserting after section 6039B the following new section: 
"SEC. 6039C. RETURNS WITH RESPECT TO UNITED STATES REAL PROP- 
26 USC 6039C. 
ERTY INTERESTS, 
"(a) RETURN OF CERTAIN DOMESTIC CORPORATIONS HAVING FOREIGN 
SHAREHOLDERS.— 
"(1) G E N E R A L RULE.— 
"(A) RETURN REQUIREMENT.—If this subsection applies to a 
domestic corporation for the calendar year, such corporation 
shall make a return for the calendar year setting forth— 
"(i) the name and address (if known by the corpora-
tion) of each person who was a shareholder at any time 
during the calendar year and who is known by the 
corporation to be a foreign person, 
"(ii) such information with respect to transfers of 
stock in such corporation to or from foreign persons 
during the calendar year as the Secretary may by 
regulations prescribe, and 
"(iii) such other information as the Secretary may by 
regulations prescribe. 
"(B) CORPORATIONS TO WHICH SUBSECTION APPLIES.—This 
subsection applies to any domestic corporation for the calen-
dar year i
f
— 
"(i) at any time during the calendar year 1 or more of 
the shareholders of such corporation is a foreign person, 
and 
"(ii) at any time during the calendar year or during 
any of the 4 immediately preceding calendar years, such 
corporation was a United States real property holding 
corporation (as defined in section 897(c)(2)). 
Ante, p. 2682. 
79-194 O—81—pt. 2 
89 : QL3 
94 STAT. 2688 
PUBLIC LAW 96-499—DEC. 5, 1980 
"(2) SUBSECTION DOES NOT APPLY TO PUBLICLY TRADED CORPORA-
TIONS.—This subsection shall not apply to a corporation the stock 
of which is regularly traded on an established securities market 
at all times during the calendar year. 
"STOCK HELD BY NOMINEES.—If— 
"(A) a nominee holds stock in a domestic corporation for a 
foreign person, and 
"(B) such foreign person does not furnish the information 
required to be furnished pursuant to paragraph (1)(A) with 
respect to such stock, 
the nominee shall file a return under this subsection with respect 
to such stock. 
"(b) RETURN OF CERTAIN PERSONS HOLDING UNITED STATES REAL 
PROPERTY INTERESTS.— 
"(1) RETURN REQUIREMENT.—If any entity to which this subsec-
tion applies has at any time during the calendar year a substan-
tial investor in United States real property, such entity shall 
make a return for the calendar year setting forth— 
"(A) the name and address of each such substantial 
investor, 
"(B) such information with respect to the assets of the 
entity during the calendar year as the Secretary may by 
regulations prescribe, and 
(C) such other information as the Secretary may by 
regulations prescribe. 
"(2) EXCEPTION WHERE SECURITY FURNISHED.—This subsection 
shall not apply to any entity for the calendar year if such entity 
furnishes to the Secretary such security as the Secretary deter-
mines to be necessary to ensure that any tax imposed by chapter 
1 with respect to United States real property interests held by 
such entity will be paid. 
"(3) STATEMENTS TO BE FURNISHED TO SUBSTANTIAL INVESTOR IN 
UNITED STATES REAL PROPERTY.—Every entity making a return 
under paragraph (1) shall furnish to each substantial investor in 
United States real property a statement showing— 
"(A) the name and address of the entity making such 
return, 
"(B) such substantial investor's pro rata share of the 
United States real property interests held by such entity, 
and 
"(C) such other information as the Secretary shall by 
regulations prescribe. 
"(4) DEFINITIONS.—For purpose of this subsection— 
"(A) ENTITIES TO WHICH THIS SUBSECTION APPLIES.—This 
subsection shall apply to any foreign corporation and to any 
partnership, trust, or estate (whether foreign or domestic). 
"(B) 
SUBSTANTIAL INVESTOR IN 
UNITED STATES REAL 
PROPERTY.— 
"(i) IN GENERAL.—The term 'substantial investor in 
United States real property' means any foreign person 
who at any time during the calendar year held an 
interest in the entity but only if the fair market value of 
such person's pro rata share of the United States real 
property interests held by such entity exceeded $50,000. 
"(ii) SPECIAL RULE FOR CORPORATIONS.—In the case of 
any foreign corporation, clause (i) shall be applied by 
substituting 'person (whether foreign or domestic)' for 
'foreign person'. 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2689 
"(C) INDIRECT HOLDINGS.—The assets of any entity to 
which this subsection applies shall include its pro rata share 
of the United States real property interests held by any 
corporation in which the entity is a substantial investor in 
United States real property. 
"(c) RETURN OF CERTAIN FOREIGN PERSONS HOLDING DIRECT INVEST-
MENTS IN UNITED STATES REAL PROPERTY INTERESTS.— 
"(1) RETURN REQUIREMENT.—If this subsection applies to any 
foreign person for the calendar year, such person shall make a 
return for the calendar year setting forth— 
"(A) the name and address of such person, 
"(B) a description of all United States real property inter-
ests held by such person at any time during the calendar 
year, and 
"(C) such other information as the Secretary may by 
regulations prescribe. 
"(2) PERSONS TO WHOM THIS SUBSECTION APPLIES.—This subsec-
tion applies to any foreign person for the calendar year i
f
— 
'(A) such person did not engage in a trade or business in 
the United States at any time during the calendar year, 
"(B) the fair market value of the United States real 
property interests held by such person at any time during 
such year equals or exceeds $50,000, and 
"(C) such person is not required to file a return under 
subsection (b) of such year. 
"(d) DEFINITIONS.—For purposes of this section— 
"(1) UNITED STATES REAL PROPERTY INTEREST.—The term 
'United States real property interest' has the meaning given to 
such term by section 897(c). 
Ante, p. 2682. 
"(2) FOREIGN PERSON.—The term 'foreign person' means any 
person who is not a Uh|ted States person." 
"(e) SPECIAL RULES.— 
"(1) ATTRIBUTION OF OWNERSHIP.—For purposes of subsections 
(b)(4) and (c)(2)(B)— 
"(A) INTERESTS HELD BY PARTNERSHIPS, ETC.—United States 
real property interests held by a partnership, trust, or estate 
shall be treated as owned proportionately by its partners or 
beneficiaries. 
"(B) INTERESTS HELD BY FAMILY MEMBERS.—United States 
real property interests held by the spouse or any minor child 
of an individual shall be treated as owned by such individual. 
"(2) RETURNS, ETC.—All returns, statements, and information 
required to be made or furnished under this section shall be 
made or furnished at such time and in such manner as the 
Secretary shall by regulations prescribe." 
(b) PENALTY FOR FAILURE TO FILE RETURN, ETC.—Section 6652 of 26 use 6652. 
such Code (relating to failure to file certain information returns, 
registration statements, etc.) is amended by redesignating subsection 
(g) as subsection (h) and by inserting after subsection (f) the following 
new subsection: 
"(g) RETURNS, ETC., REQUIRED UNDER SECTION 6039C.— 
Ante, p. 2687. 
"(1) IN GENERAL.—In the case of each failure— 
"(A) to make a return required by section 6039C which 
contains the information required by such section, or 
"(B) to furnish a statement required by section 6039C(b)(3), 
on the date prescribed therefor (determined with regard to any 
extension of time for filing), unless it is shown that such failure is 
due to reasonable cause and not to willful neglect, the amount 
94 STAT. 2690 
PUBLIC LAW 96-499—DEC. 5, 1980 
determined under paragraph (2) shall be paid (upon notice and 
demand by the Secretary and in the same manner as tax) by the 
person failing to make such return or furnish such statement. 
"(2) AMOUNT OF PENALTY.—For purposes of paragraph (1), the 
amount determined under this paragraph with respect to any 
failure shall be $25 for each day during which such failure 
continues. 
"(3) LIMITATIONS.— 
"(A) FOR FAILURE TO MEET REQUIREMENTS OF SUBSECTION (A) 
Ante, p. 2687. 
QR (B) OF SECTION 6039C.—The amount determined under 
paragraph (2) with respect to any person for failing to meet 
the requirements of subsection (a) or (b) of section 6039C for 
any calendar year shall not exceed $25,000 with respect to 
each such subsection. 
"(B) FOR FAILURE TO MEET REQUIREMENTS OF SECTION 
6039C(C).—The amount determined under paragraph (2) with 
respect to any person for failing to meet the requirements of 
subsection (c) of section 6039C for any calendar year shall 
not exceed the lesser of $25,000 or 5 percent of the aggregate 
of the fair market value of the United States real property 
interests owned by such person at any time during such 
year. For purposes of the preceding sentence, fair market 
value shall be determined as of the end of the calendar year 
(or, in the case of any property disposed of during the 
calendar year, as of the date of such disposition)." 
(c) CLERICAL AMENDMENT.—The table of sections for subpart A of 
part III of chapter 61 of such Code is amended by inserting after the 
item relating to section 6039B the following new item: 
"Sec. 
6039C. Returns with respect to United States real property 
interests." 
SEC. 1124. SOURCES WITHIN UNITED STATES. 
26 use 861. 
Paragraph (5) of subsection (a) of section 861 of the Internal 
Revenue Code of 1954 (relating to income from sources within the 
United States) is amended to read as follows: 
"(5) DISPOSITION OF UNITED STATES REAL PROPERTY INTEREST.— 
Gains, profits, and income from the disposition of a United States 
Ante, p. 2682. 
real property interest (as defined in section 897(c))." 
SEC. 1125. EFFECTIVE DATE. 
26 use 897 note. 
(a) IN GENERAL.—Except as provided in subsection O
t
>
)
, the amend-
ments made by this subtitle shall apply to dispositions after June 18, 
1980. 
O
t
>
) REPORTING.—The amendments made by section 1123 shall apply 
to 1980 and subsequent calendar years. In applying such amendments 
to 1980, such calendar year shall be treated as beginning on June 19, 
1980, and ending on December 31,1980. 
(c) SPECIAL RULE FOR TREATIES.— 
(1) IN GENERAL.—Except as provided in paragraph (2), after 
December 31, 1984, nothing in section 894(a) or 7852(d) of the 
26 use 894, 
Internal Revenue Code of 1954 or in any other provision of law 
shall be treated as requiring, by reason of any treaty obligation of 
the United States, an exemption from (or reduction oD any tax 
26 use 871, 882. 
imposed by section 871 or 882 of such Code on a gain described in 
Ante, p. 2682. 
section 897 of such Code. 
(2) SPECIAL RULE FOR TREATIES RENEGOTIATED BEFORE I985.— 
If— 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2691 
(A) any treaty (hereinafter in this paragraph referrred to 
as the "old treaty") is renegotiated to resolve conflicts 
between such treaty and the provisions of section 897 of the 
Internal Revenue Code of 1954, and 
Ante, p. 2682. 
(B) the new treaty is signed before January 1, 1985, 
then paragraph (1) shall be applied with respect to obligations 
under the old treaty by substituting for "December 31, 1984" the 
date (not later than 2 years after the new treaty was signed) 
specified in the new treaty (or accompanying exchange of notes). 
(d) ADJUSTMENT IN BASIS FOR CERTAIN TRANSACTIONS BETWEEN 
RELATED PERSONS.— 
(1) IN GENERAL.—In the case of any disposition after December 
31, 1979, of a United States real property interest (as defined in 
section 897(c) of the Internal Revenue Code of 1954) to a related Ante, p. 2682. 
person (within the meaning of section 453(f)(1) of such Code), the 26 use 453. 
basis of the interest in the hands of the person acquiring it shall 
be reduced by the amount of any nontaxed gain. 
(2) NONTAXED GAIN.—For purposes of paragraph (1), the term 
"nontaxed gain" means any gain which is not subject to tax 
under section 871(b)(1) or 882(a)(1) of such Code— 
26 USC 871, 882. 
(A) because the disposition occurred before June 19, 1980, 
or 
(B) because of any treaty obligation of the United States. 
Subtitle D—Credit Against Crude Oil Windfall Profit 
Tax for Royalty Owners 
SEC. 1131. CREDIT AGAINST CRUDE OIL WINDFALL PROFIT TAX FOR ROY-
ALTY OWNERS. 
(a) CREDIT AGAINST WINDFALL PROFIT TAX FOR ROYALTY OWNERS.— 
(1) IN GENERAL.—Subchapter B of chapter 65 of the Internal 
Revenue Code of 1954 (relating to rules of special application for 
abatements, credits, and refunds) is amended by adding at the 
end thereof the following new section: 
"SEC. 6429. CREDIT AND REFUND OF CHAPTER 45 TAXES PAID BY 26 USC 6429. 
ROYALTY OWNERS. 
"(a) TREATMENT AS OVERPAYMENT.—In the case of a qualified 
royalty owner, that portion of the tax imposed by section 4986 which 26 USC 4986. 
is paid in connection with qualified royalty production shall be 
treated as an overpayment of the tax imposed by section 4986. 
"(b) CREDITS AND REFUNDS.— 
"(1) IN GENERAL.—Under regulations prescribed by the Secre-
tary, any amount treated as an overpayment of tax under 
subsection (a) shall be credited against the tax imposed by section 
4986 or refunded to the qualified royalty owner. 
"(2) CLAIM FOR CREDIT OR REFUND.—Any claim for credit or 
refund under this section shall be filed in such form and manner, 
and at such time, as the Secretary may prescribe by regulations. 
"(c) $1,000 LIMITATION O
N CREDIT O
R REFUND.— 
"(1) IN GENERAL.—The aggregate amount which may be 
treated as an overpayment under subsection (a) with respect to 
any qualified royalty owner shall not exceed $1,000. 
"(2) ALLOCATION WITHIN A FAMILY.—In the case of individuals 
who are members of the same family (within the meaning of 
section 4992(e)(3)(C)) at any time during the qualified period, the 26 USC 4992. 
$1,000 amount in paragraph (1) shall be reduced for each such 
94 STAT. 2692 
PUBLIC LAW 96-499—DEC. 5, 1980 
individual by allocating such amount among all such individuals 
in proportion to their respective qualified royalty production. 
"(3) ALLOCATION BETWEEN CORPORATIONS AND INDIVIDUALS.— 
"(A) IN GENERAL.—In the case of an individual who owns 
at any time during the qualified period stock in a qualified 
family farm corporation, the $1,000 amount in paragraph (1) 
applicable to such individual shall be reduced by the amount 
which bears the same ratio to the credit or refund allowable 
to the corporation under this section (determined after the 
application of paragraph (4)) as the fair market value of the 
shares owned by such individual during such period bears to 
the fair market value of all shares of the corporation. 
"(B) SPECIAL RULE FOR FAMILY MEMBERS.—In the case of 
individuals who are members of the same family (within the 
26 use 4992. 
meaning of section 4992(eX3)(C)) at any time during the 
qualified period— 
"(i) for purposes of subparagraph (A), all such individ-
uals shall be treated as 1 individual, and 
"(ii) the amount allocated among such individuals 
under paragraph (2) shall be $1,000, reduced by the 
amount determined under subparagraph (A). 
"(4) ALLOCATION BETWEEN CORPORATIONS.—If at any time after 
June 24,1980, any individual owns stock in two or more qualified 
family farm corporations, the $1,000 amount in paragraph (1) 
shall be reduced for each such corporation by allocating such 
amount among all such corporations in proportion to their 
respective qualified royalty production. 
"(d) DEFINITIONS AND SPECIAL RULES.—For purposes of this sec-
tion— 
"(1) QUALIFIED ROYALTY OWNER.—The term 'qualified royalty 
owner' means a producer (within the meaning of section 
26 use 4996. 
4996(a)(1)), but only if such producer is an individual, an estate, 
or a qualified family farm corporation. 
"(2) QUALIFIED ROYALTY PRODUCTION.—The term 'qualified roy-
alty production' means, with respect to any qualified royalty 
owner, taxable crude oil which— 
"(A) is attributable to an economic interest of such royalty 
owner other than an operating mineral interest (within the 
26 use 614. 
meaning of section 614(d)), and 
"(B) is removed from the premises during the qualified 
period. 
"(3) QUALIFIED PERIOD.—The term 'qualified period' means the 
period beginning March 1, 1980, and ending December 31, 1980. 
"(4) QUALIFIED FAMILY FARM CORPORATION.—The term 'quali-
fied family farm corporation' means a corporation— 
"(A) which was in existence on June 25,1980, 
"(B) all of the outstanding shares of stock of which at all 
times after June 24, 1980, and before January 1, 1981, were 
held by members of the same family (within the meaning of 
26 use 2032A. 
scction 2032A(e)(2)), and 
"(C) 80 percent in value of the assets of which (other than 
royalty interests described in paragraph (2)(A)) were held by 
the corporation on such date for use for farming purposes 
(within the meaning of section 2032A(e)(5)). 
"(e) CROSS REFERENCE.— 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2693 
"For the holder of the economic interest in the case of a production 
payment, see section 636." 
(2) TECHNICAL AND CONFORMING AMENDMENTS.—The table of 
sections for subpart B of chapter 65 of such code is amended by 
adding at the end thereof the following new item: 
"Sec. 6429. Credit and refund of chapter 45 taxes paid by royalty owners." 
(d) DENIAL OF DEDUCTION.— 
(1) I N GENERAL.—Part IX of subchapter B of chapter 1 of such 
Code (relating to items not deductible) is amended by adding at 
the end thereof the following new section: 
"SEC. 280D. PORTION OF CHAPTER 45 TAXES FOR WHICH CREDIT OR 26 USC 280D. 
REFUND IS ALLOWABLE UNDER SECTION 6429. 
"No deduction shall be allowed for that portion of the tax imposed 
by section 4986 for which a credit or refund is allowable under section 
26 USC 4986. 
6429." 
26 use 6429. 
(2) CONFORMING AMENDMENT.—The table of sections for part 
IX of subchapter B of chapter 1 of such Code is amended by 
adding at the end thereof the following new item: 
"Sec. 280D. Portion of chapter 45 taxes for which credit or refund is allow-
able under section 6429." 
(3) EFFECTIVE DATE.—The amendments made by this subsection 
26 USC 280D 
shall apply to taxable years ending after February 29, 1980. "°*®-
Subtitle E—Inclusion in Wages for Purposes of Social 
Security and Unemployment Taxes of Employer 
SEC. 
n4L INCLUSION IN WAGES OF EMPLOYEE TAXES PAID BY 
EMPLOYER. 
(a) SOCIAL SECURITY T A X . — 
(1) AMENDMENT OF INTERNAL REVENUE CODE OF 1954.—Para- 
26 u s e 3121. 
graph (6) of section 3121(a) of the Internal Revenue Code of 1954 
(defining wages) is amended to read as follows: 
"(6) the payment by an employer (without deduction from the 
remuneration of the employee)— 
"(A) of the tax imposed upon an employee under section 
3101, or 
26 USC 3101. 
"(B) of any payment required from an employee under a 
State unemployment compensation law, 
with respect to remuneration paid to an employee for domestic 
service in a private home of the employer or for agricultural 
labor;". 
(2) AMENDMENT OF SOCIAL SECURITY ACT.—Subsection (f) of 
42 use 409. 
section 209 of the Social Security Act is amended to read as 
follows: 
"(0 The payment by an employer (without deduction from the 
remuneration of the employee)— 
"(1) of the tax imposed upon an employee under section 3101 of 
the Internal Revenue Code of 1954, or 
26 USC 3101. 
"(2) of any payment required from an employee under a State 
unemployment compensation law, 
with respect to remuneration paid to an employee for domestic 
service in a private home of the employer or for agricultural labor;". 
94 STAT. 2694 
PUBLIC LAW 96-499—DEC. 5, 1980 
26 use 3306. 
26 use 3101. 
26 use 3121 
note. 
42 use 418. 
"Social security 
employee taxes.' 
42 use 418. 
26 use 3101. 
"Governmental 
unit." 
26 use 418. 
26 use 4251. 
(b) FEDERAL UNEMPLOYMENT TAx.—Paragraph (6) of section 3306(b) 
of the Internal Revenue Code of 1954 (defining wages) is amended to 
read as follows: 
"(6) the payment by an employer (without deduction from the 
remuneration of the employee)— 
"(A) of the tax imposed upon an employee under section 
3101, or 
"(B) of any payment required from an employee under a 
State unemployment compensation law, 
with respect to remuneration paid to an employee for domestic 
service in a private home of the employer or for agricultural 
labor;". 
(c) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as provided in paragraph (2), the 
amendments made by this section shall apply with respect to 
remuneration paid after December 31,1980. 
(2) EXCEPTION FOR STATE AND LOCAL GOVERNMENTS.— 
(A) The amendments made by this section (insofar as they 
affect the application of section 218 of the Social Security 
Act) shall not apply to any payment made before January 1, 
1984, by any governmental unit for positions of a kind for 
which all or a substantial portion of the social security 
employee taxes were paid by such governmental unit (with-
out deduction from the remuneration of the employee) under 
the practices of such governmental unit in effect on October 
1,1980. 
(B) For purposes of subparagraph (A), the term "social 
security employee taxes" means the amount required to be 
paid under section 218 of the Social Security Act as the 
equivalent of the taxes imposed by section 3101 of the 
Internal Revenue Code of 1954. 
(C) For purposes of subparagraph (A), the term "Govern-
mental unit" means a State or political subdivision thereof 
within the meaning of section 218 of the Social Security Act. 
Subtitle F—Telephone Tax 
SEC. 1151. TELEPHONE TAX CONTINUED AT 2 PERCENT FOR 1981. 
(a) IN GENERAL.—The table contained in paragraph (2) of section 
4251(a) of the Internal Revenue Code of 1954 (relating to imposition of 
tax on communication services) is amended by striking out the last 2 
lines of such table and inserting in lieu thereof the following: 
"During 1980 or 1981 
2 
During 1982.. 
1". 
O
b
) CONFORMING AMENDMENT.—Subsection O
b
) of section 4251 of 
such Code is amended by striking out "January 1,1982" and inserting 
in lieu thereof "January 1,1983 . 
Subtitle G—Increase Until 1993 in the Duties on Certain 
Imports of Ethyl Alcohol 
SEC. 1161. INCREASE UNTIL 1993 IN THE DUTIES ON ETHYL ALCOHOL 
IMPORTED FOR FUEL USE. 
(a) AMENDMENTS TO APPENDIX TO TSUS.— 
PUBLIC LAW 96-499—DEC. 5, 1980 
94 STAT. 2695 
(1) FOR 1981.—Effective with respect to articles entered on or 
after January 1,1981, subpart A of part 1 of the Appendix to the 
Tariff Schedules of the United States (19 U.S.C. 1202) is amended 
by inserting in numerical sequence the following new item: 
901.50 
Ethyl alcohol (provided for in item 
427.88, part 2D, schedule 4) when 
imported to be used in producing a 
mixture of gasoline and alcohol or a 
mixture of a special fuel and alcohol 
for use as fuel, or when imported to 
be used otherwise as fuel 
10* per gal. 10(t per gal. On or before 
12/31/81 
(2) FOR 1982.—Effective with respect to articles entered on or 
after January 1, 1982, item 901.50 of the Tariff Schedules of the 
United States (as added by paragraph (1)) is amended by striking 
out "10" in columns numbered 1 and 2 and inserting in lieu 
thereof "20"; and by striking out "12/31/81" and inserting in lieu 
thereof"12/31/82". 
(3) AFTER 1982 AND UNTIL 1993.—Effective with respect to 
articles entered on or after January 1, 1983, such item 901.50 is 
amended by striking out "20" in columns numbered 1 and 2 and 
inserting in lieu thereof "40", and by striking out "12/31/82" and 
inserting in lieu thereof "12/31/92". 
(b) DEFINITION.—For purposes of subsection (a), the term "entered" 
means entered, or withdrawn from warehouse, for consumption in 
the customs territory of the United States. 
Approved December 5, 1980. 
LEGISLATIVE HISTORY: 
HOUSE REPORTS: No. 96-1167 (Comm. on the Budget) and No. 96-1479 (Comm. of 
Conference). 
CONGRESSIONAL RECORD, Vol. 126 (1980): 
June 30, S. 2885 considered and passed Senate. 
July 23, S. 2939 considered and passed Senate. 
Sept. 4, H.R. 7765 considered and passed House. 
Sept. 17, passages of S. 2885 and S. 2939 vacated in Senate; H.R. 7765, amended, 
passed in lieu. 
Sept. 18, House disagreed to Senate amendment and agreed to a conference. 
Dec. 3, House and Senate agreed to conference report. 
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 16, No. 49: 
Dec. 5, Presidential remarks. 
79-194 O—81—pt. 2 
90 : QL3