SECTION 1. SHORT TITLE.

    This Act may be cited as the ``State Accountability and Identity 
Fraud Elimination Act of 2004''.

SEC. 2. WITHHOLDING FUNDS FOR ENACTMENT OF A LAW ALLOWING ISSUANCE OF 
              IDENTIFICATION CARDS OR DRIVERS' LICENSES FOR CERTAIN 
              INDIVIDUALS.

    (a) In General.--Subchapter I of chapter 1 of title 23, United 
States Code, is amended by adding at the end the following:
``Sec. 165. Withholding funds for enactment of a law allowing issuance 
              of identification cards or drivers' licenses for certain 
              individuals.
    ``(a) Withholding of Apportionments.--
            ``(1) Fiscal year 2006.--The Secretary shall withhold 5 
        percent of the amount required to be apportioned to any State 
        under each of paragraphs (1), (3), and (4) of section 104(b) on 
        October 1, 2005, if the State has enacted a law described in 
        paragraph (7) on or before that date.
            ``(2) Fiscal year 2007.--The Secretary shall withhold 10 
        percent (including any amounts withheld under paragraph (1)) of 
        the amount required to be apportioned to any State under each 
        of paragraphs (1), (3), and (4) of section 104(b) on October 1, 
        2006 , if the State has enacted a law described in paragraph 
        (7) on or before that date.
            ``(3) Fiscal year 2008.--The Secretary shall withhold 15 
        percent of the amount required to be apportioned to any State 
        under each of paragraphs (1), (3), and (4) of section 104(b) on 
        October 1, 2007, if the State has enacted a law described in 
        paragraph (7) on or before that date.
            ``(4) Fiscal year 2009.--The Secretary shall withhold 20 
        percent of the amount required to be apportioned to any State 
        under each of paragraphs (1), (3), and (4) of section 104(b) on 
        October 1, 2008, if the State has enacted a law described in 
        paragraph (7) on or before that date.
            ``(5) Fiscal year 2010.--The Secretary shall withhold 25 
        percent of the amount required to be apportioned to any State 
        under each of paragraphs (1), (3), and (4) of section 104(b) on 
        October 1, 2009, if the State has enacted a law described in 
        paragraph (7) on or before that date.
            ``(6) Therafter.--The Secretary shall withhold 25 percent 
        of the amount required to be apportioned to any State under 
        each of paragraphs (1), (3), and (4) of section 104(b) on 
        October 1 of each fiscal year thereafter if the State has 
        enacted a law described in paragraph (7) on or before that 
        date.
            ``(7) Requirement.--A State shall have funds withheld under 
        this subsection if the State has enacted a law that allows the 
        issuance of an identification card or a driver's license to an 
        alien who is not legally authorized to be in the United States.
    ``(b) Period of Availability; Effect of Compliance and 
Noncompliance.--
            ``(1) Period of availability of withheld funds.--
                    ``(A) Funds withheld on or before september 30, 
                2007.--Any funds withheld under subsection (a) from 
                apportionment to any State on or before September 30, 
                2005, shall remain available until the end of the third 
                fiscal year following the fiscal year for which the 
                funds are authorized to be appropriated.
                    ``(B) Funds withheld after september 30, 2007.--No 
                funds withheld under this section from apportionment to 
                any State after September 30, 2007, shall be available 
                for apportionment to the State.
            ``(2) Apportionment of withheld funds after compliance.--
        If, before the last day of the period for which funds withheld 
        under subsection (a) from apportionment are to remain available 
        for apportionment to a State under paragraph (1), the State has 
        repealed a law described in subsection (a)(7), the Secretary 
        shall, on the first day on which the State repeals such law, 
        apportion to the State the funds withheld under subsection (a) 
        that remain available for apportionment to the State.
            ``(3) Period of availability of subsequently apportioned 
        funds.--Any funds apportioned pursuant to paragraph (2) shall 
        remain available for expenditure until the end of the third 
        fiscal year following the fiscal year in which the funds are so 
        apportioned. Sums not obligated at the end of that period shall 
        lapse.
            ``(4) Effect of noncompliance.--If, at the end of the 
        period for which funds withheld under subsection (a) from 
        apportionment are available for apportionment to a State under 
        paragraph (1), the State does not repeal a law described 
        subsection (a)(7), the funds shall lapse.''.
    (b) Conforming Amendment.--The analysis for such chapter is amended 
by inserting after the item relating to section 164 the following:

``165. Withholding of funds for enactment of a law allowing issuance of 
                            identification cards or drivers' licenses 
                            for certain individuals''.
Output: State Accountability and Identity Fraud Elimination Act of 2004 - Directs the Secretary of Transportation to withhold specified Federal highway funds in increasing percentages starting in FY 2006 from any State that has enacted a law that allows the issuance of an identification card or a driver's license to an alien who is not legally authorized to be in the United States. Provides that funds withheld from apportionment to any State: (1) on or before September 30, 2005, shall remain available until the end of the third fiscal year following the fiscal year for which the funds are authorized to be appropriated; and (2) after September 30, 2007, shall not be available for apportionment to the State.