An act to amend the Internal Revenue Code of 1954 to reduce the rate of certain taxes paid to the Virgin Islands on Virgin Islands source income, to amend the Social Security Act to provide for a temporary period that payment of disability benefits may continue through the hearing stage of the appeals process, and for other purposes.
PL 97-455 (H.R.7093), enacted 01/12/1983

PUBLIC LAW 97-455—JAN. 12, 1983 
96 STAT. 2497 
Public Law 97-455 
97th Congress 
An Act 
Jan.12, 1983 
[H.R. 7093] 
Internal 
Revenue Code of 
1954 and Socifd 
Security Act, 
amendments. 
To amend the Internal Revenue Code of 1954 to reduce the rate of certain taxes paid 
to the Virgin Islands on Virgin Islands source income, to amend the Social Security 
Act to provide for a temporary period that payment of disability benefits may 
continue through the heeu-ing stage of the appeals process, and for other purposes. 
Be it enacted by the Senate and House of Representatives of the 
United States of 
America in Congress assembled, 
SECTION 1. INCOME TAX RATE ON VIRGIN ISLANDS SOURCE INCOME. 
(a) IN GENERAL.—Subpart D of part in of subchapter N of chapter 
1 of the Internal Revenue Code of 1954 (relatmg to possessions) is 
amended by inserting after section 934 the following new section: 
"SEC. 934A. INCOME TAX RATE ON VIRGIN ISLANDS SOURCE INCOME. 26 USC 934A. 
"(a) GENERAL RULE.—For purposes of determining the tax liability 
incurred by citizens and resident alien individusds of the United 
States, and corporations organized in the United States, to the 
Virgin Islands pursuant to this title with respect to amounts 
received from sources within the Virgin Islands— 
"(1) the taxes imposed by sections 871(a)(1) and 881 (as made 
applicable to the Virgin Islands) shall apply except that '10 
percent' shall be substituted for '30 percent', and 
"(2) subsection (a) of section 934 shall not apply to such taxes. 
"(b) SUBSECTION (a) RATES NOT TO APPLY TO PRE-EPFECTIVE DATE 
EARNINGS.— 
"(1) IN GENERAL.—Any change under subsection (a)(1), and 
any reduction under section 934 pursuant to subsection (aX2), in 
a rate of tax imposed by section 871(aXl) or 881 shall not apply 
to dividends paid out of earnings and profits accumulated for 
taxable years beginning before the effective date of the change 
or reduction. 
"(2) ORDERING RULE.—For purposes of paragraph (1), divi-
dends shall be treated as first being paid out of earnings and 
profits accumulated for taxable years beginning before the 
effective date of the change or reduction (to the extent thereof)." 
(b) WITHHOLDING.—Subchapter A of chapter 3 of such Code (relat-
ing to withholding of tax on nonresident aliens and foreign corpora-
tions) is amended by adding at the end thereof the following new 
section: 
Daii 
<^EC. 1444. WITHHOLDING ON VIRGIN ISLANDS SOURCE INCOME. 
"For purposes of determining the withholding tax liability in-
curred in the Virgin Islands pursuant to this title (as made applica-
ble to the Virgin Islands) with respect to amounts received from 
sources within the Virgin Islands by citizens and resident alien 
individuals of the United States, and corporations organized in the 
United States, the rate of withholding tax under sections 1441 and 
1442 on income subject to tax under section 871(aXl) or 881 (as 
26 USC 1444. 
96 STAT. 2498 
PUBLIC LAW 97-455—JAN. 12, 1983 
modified by section 934A) shall not exceed the rate of tax on such 
income under section 871(aXl) or 881, as the case may be." 
(c) TECHNICAL AMENDMENT.—Subsection (a) of section 934 of such 
26 use 934. 
Code is amended by inserting before the period at the end thereof 
"or in section 934A'*. 
(d) CLERICAL AMENDMENTS.— 
(1) The table of sections for subpart D of part III of subchapter 
N of chapter 1 of such Code is amended by inserting after the 
item relating to section 934 the following new item: 
"Sec. 934A. Income tax rate on Virgin Islands source income." 
(2) The table of sections for subchapter A of chapter 3 of such 
Code is £unended by adding at the end thereof the following new 
item: 
"Sec. 1444. Withholding on Virgin Islands source income." 
26 use 934A 
(e) EFFECTIVE DATES.— 
°°*®- 
(1) I N GENERAL.—Except as provided in paragraph (2), the 
amendments made by this section shall apply to amounts 
received after the date of the enactment of this Act in taxable 
years ending after such date. 
(2) WITHHOLDING.—The amendment made by subsection (b) 
shall apply to payments made after the date of the enactment of 
this Act. 
SEC. 2. CONTINUED PAYMENT OF DISABILITY BENEFITS DURING APPEAL. 
42 use 423. 
Section 223 of the Social Security Act is amended by adding at the 
end thereof the following new subsection: 
"Continued Payment of Disability Benefits During Appeal 
"(gXD In any case where— 
"(A) an individual is a recipient of disability insurance bene-
fits, or of child's, widow's, or widower's insurance benefits based 
on disability, 
"(6) the phjrsical or menteil impairment on the basis of which 
such benents are payable is found to have ceased, not to have 
existed, or to no longer be disabling, and as a consequence such 
individual is determined not to be entitled to such benefits, and 
42 use 421. 
"(C) a timely request for a hearing under section 221(d), or for 
an administrative review prior to such hearing, is pending with 
respect to the determination that he is not so entitled, 
such individual may elect (in such manner and form and within 
such time as the Secretary shall by regulations prescribe) to have 
the payment of such benefits, and the pajrment of any other benefits 
under this Act based on such individual's wages and self-employ-
42 use 1895. 
ment income (including benefits under title XVIII), continued for an 
additional period beginning with the first month beginning after the 
date of the enactment of this subsection for which (under such 
determination) such benefits are no longer otherwise payable, and 
ending with the earlier of (i) the month preceding the month in 
which a decision is made after such a hearing, (ii) the month 
preceding the month in which no such request for a hearing or an 
administrative review is pending, or (iii) June 1984. 
Overpayments. 
"(2XA) If an individual elects to have the payment of his benefits 
continued for an additional period under paragraph (1), and the 
final decision of the Secretary affirms the determination that he is 
PUBLIC LAW 97-455—JAN. 12, 1983 
96 STAT. 2499 
Waiver 
consideration. 
42 use 404. 
42 use 421. 
42 use 421. 
not entitled to such benefits, any benefits paid under this title 
pursuant to such election (for months in such additional period) 
shall be considered overpayments for all purposes of this title, 
except as otherwise provided in subparagraph (B). 
"(B) If the Secretary determines that the individual's appeal of his 
termination of benefits was made in good faith, all of the benefits 
paid pursuant to such individual's election under paragraph (1) shall 
be subject to waiver consideration under the provisions of section 
204. 
"(3) The provisions of paragraphs (1) and (2) shall apply with 
respect to determinations (that individuals are not entitled to bene-
fits) which are made— 
"(A) on or after the date of the enactment of this subsection, 
or prior to such date but only on the basis of a timely request for 
a hearing under section 221(d), or for an administrative review 
prior to such hearing, and 
"(B) prior to October 1,1983.". 
SEC. 3. PERIODIC REVIEWS OF DISABILITY CASES. 
Section 221(i) of the Social Security Act is amended— 
(1) by inserting "(1)" after "(i)*^; 
(2) by inserting ", subject to paragraph (2)" after "at least 
every 3 years"; and 
(3) by adding at the end thereof the following new paragraph: 
"(2) The requirement of paragraph (1) that cases be reviewed at 
least every 3 years shall not apply to the extent that the Secretary 
determines, on a State-by-State basis, that such requirement should 
be waived to insure that only the appropriate number of such cases 
are reviewed. The Secretary shall determine the appropriate 
number of cases to be reviewed in each State after consultation with 
the State agency performing such reviews, based upon the backlog 
of pending reviews, the projected number of new applications for 
disability insurance benefits, and the current and projected staffing 
levels of the State agency, but the Secretary shall provide for a 
waiver of such requirement only in the case of a State which makes 
a good faith effort to meet proper staffing requirements for the State 
agency and to process case reviews in a timely fashion. The Secre-
tary shall report annually to the Committee on Finance of the 
Senate and the Committee on Ways and Means of the House of 
Representatives with respect to the determinations made by the 
Secretary under the preceding sentence.". 
(b) The amendments made by subsection (a) shall become effective 
on the date of the enactment of this Act. 
SEC. 4. EVIDENTIARY HEARINGS IN RECONSIDERATIONS OF DISABILITY 
BENEFIT TERMINATIONS. 
(a) IN GENERAL.—Section 205(b) of the Social Security Act is 42USC405. 
amended— 
(1) by inserting "(1)" after "(b)"; and 
(2) by adding at the end thereof the following new paragraph: 
"(2) In any case where— 
"(A) an individual is a recipient of disability insurance bene-
fits, or of child's, widow's, or widower's insurance benefits based 
on disability, 
"(B) the physical or mental impairment on the basis of which 
such benefits are payable is found to have ceased, not to have 
existed, or to no longer be disabling, and 
Case number 
determination. 
Report to 
congressional 
committees. 
Effective date. 
42 use 421 note. 
96 STAT. 2500 
PUBLIC LAW 97-455—JAN. 12, 1983 
"(C) as a consequence of the finding described in subpara-
graph (B), such individual is determined by the Secretary not to 
be entitled to such benefits, 
any reconsideration of the finding described in subparagraph (B), in 
connection with a reconsideration by the Secretary (before any 
rri>r<, -',.,) 
hearing under paragraph (1) on the issue of such entitlement) of his 
determination described in subparagraph (C), shall be made only 
after opportunity for an evidentiary hearing, with regard to the 
• 
finding 
described in subparagraph (B), which is reasonably acces-
sible to such individual. Any reconsideration of a finding described 
in subparagraph (B) may be made either by the State agency or the 
Secretary where the finding was originally made by the State 
agency, and shall be made by the Secretary where the finding was 
originally made by the Secretary. In the case of a reconsideration by 
'S 
a State agency of a finding described in subparagraph (B) which was 
originally made by such State agency, the evidentiary hearing shall 
be held by an adjudicatory unit of tJne State agency other than the 
unit that made the finding described in subparagraph (B). In the 
case of a reconsideration by the Secretary of a finding described in 
.m «
? ;i 
subparagraph (B) which was originally made by the Secretary, the 
evidentiary hearing shall be held by a person other than the person 
or persons who made the finding described in subparagraph (B).". 
42 use 405 note. 
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 
shall apply with respect to reconsiderations (of findings described in 
Ante, p. 2499. 
section 205(bX2XB) of the Social Security Act) which are requested 
on or after such date as the Secretary of Health and Human 
Services may specify, but in any event not later than January 1, 
1984. 
42 use 405 note. 
SEC. 5. CONDUCT OF FACE-TO-FACE RECONSIDERATIONS IN DISABILITY 
CASES. 
The Secretary of Health and Human Services shall take such 
steps as may be necessary or appropriate to assure public under-
standing of the importance the Congress attaches to the face-to-face 
reconsiderations provided for in section 205(bX2) of the Social Secu-
rity Act (as added by section 4 of this Act). For this purpose the 
Secretary shall— 
^ "
"
^ 
(1) provide for the establishment and implementation of pro-
"
"
^ 
cedures for the conduct of such reconsiderations in a manner 
which assures that beneficiaries will receive reasonable notice 
and information with respect to the time and place of reconsid-
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f
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f
- -y^i eration and the opportunities afforded to introduce evidence 
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and be represented by counsel; and 
-,^,^ (2) advise beneficiaries who request or are entitled to request 
such reconsiderations of the procedures so established, of their 
opportunities to introduce evidence and be represented by 
Mi- agiJ St ;i 
counsel at such reconsiderations, and of the importance of 
submitting all evidence that relates to the question before the 
Secretary or the State agency at such reconsiderations. 
SEC. 6. REPORT BY SECRETARY. 
Ante, p. 2499. 
Section 221(i) of the Social Security Act (as amended by section 3 
of this Act) is further amended by adding at the end thereof the 
following new paragraph: 
"(3) The Secretary shall report semiannually to the Committee on 
Finance of the Senate and the Committee on Ways and Means of the 
House of Representatives with respect to the number of reviews of 
PUBLIC LAW 97-455—JAN. 12, 1983 
96 STAT. 2501 
continuing disability carried out under paragraph (1), the number of 
such reviews which result in an initial termination of benefits, the 
number of requests for reconsideration of such initial termination or 
for a hearing with respect to such termination under subsection (d), 
or both, and the number of such initial terminations which are 
overturned as the result of a reconsideration or hearing,". 
SEC. 7. OFFSET AGAINST SPOUSES' BENEFITS ON ACCOUNT OF PUBLIC 
PENSIONS. 
(a) ADDITIONAL EXEMPTION.— 
(1) Section 334 of the Social Security Amendments of 1977 
(Public Law 95-216) is amended by adding at the end thereof the 
42 use 402 note, 
following new subsection: 
"(h) In addition, the amendments made by the preceding provi-
sions of this section shall not apply with respect to any monthly 
insurance benefit payable, under subsection (b), (c), (e), (f), or (g) (as 
the case may be) of section 202 of the Social Security Act, to an 42 USC 402. 
individual— 
"(1) to whom there is payable for any month prior to July 
1983 (or who is eligible in any such month for) a monthly 
periodic benefit (within the meaning of such provisions) based 
upon such individual's earnings while in the service of the 
Federal Government or any State (or political subdivision 
thereof, as defined in section 218(b)(2) of the Social Security 
Act); and 
42 USC 418. 
"(2) who at the time of application for or initial entitlement to 
such monthly insurance benefit under such subsection (b), (c), 
(e),(aor(g)— 
"(A) meets the dependency test of one-half support set 
forth in paragraph (IXC) of such subsection (c) as it read 
prior to the enactment of the amendments made by this 
section, or an equivalent dependency test (if the individual 
is a woman), in the case of an individual applying for or 
becoming entitled to benefits under such subsection (b) or 
(c), or 
"(B) meets the dependency test of one-half support set 
forth in paragraph (IXD) of such subsection (f) as it read 
prior to the enactment of the amendments made by this 
section, or an equivalent dependency test (if the individual 
is a woman), in the case of an individual applying for or 
becoming entitled to benefits under such subsection (e), (f), 
or(g).". 
(2) Section 334(f) of such Act is amended by striking out "The 
42 USC 402 note. 
amendments" and inserting in lieu thereof "Subject to subsec-
tions (g) and (h), the amendments". 
(b) REPORT BY SECRETARY.—The Secretary of Health and Human 
Study. 
Services shall conduct a study of the provisions of title II of the 
Social Security Act which require an offset against spouses' and 42 USC 401. 
surviving spouses' benefits on account of public pensions, as added 
by section 334 of the Social Security Amendments of 1977 (taking 
91 Stat. 1544. 
into account the amendment made by subsection (a) of this section 
as well as the provisions of such section 334), and shall report to the 
Congress, no later than May 15, 1983, his recommendations for any 
permanent legislative changes in such provisions (or in the applica-
bility of such provisions) which he may consider appropriate. 
(c) 
TECHNICAL 
AMENDMENTS.—Subsections 
(bX4)(A), (cX2)(A), 
(eX8)(A), (f)(2XA) and (gX4XA) of section 202 of the Social Security Act 
42 USC 402. 
96 STAT. 2502 
PUBLIC LAW 97-455—JAN. 12, 1983 
are each amended by inserting "for purposes of this title" after "as 
defined in section 210". 
42 use 402 note. 
(d) EFFECTIVE DATE.—The amendments made by subsections (a) 
and (c) of this section shall be effective with respect to monthly 
insurance benefits for months after November 1982. 
Approved January 12, 1983. 
.SQ'fe '')€ 
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LEGISLATIVE HISTORY-H.R. 7093: 
HOUSE REPORTS: No. 97-833 (Comm. on Ways and Means) and No. 97-985 (Comm. 
of Conference). 
SENATE REPORT No. 97-648 (Comm. on Finance). 
CONGRESSIONAL RECORD, Vol. 128 (1982): 
Sept. 20, considered and paissed House. 
Dec. 3, considered and passed Senate, amended. 
Dec. 14, House concurred in Senate amendment, in another with an amend-
ment, and disagreed to certain amendments. 
Dec. 21, Senate and House agreed to conference report. 
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 19, No. 2 (1983): 
Jan. 12, Presidential statement. 
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