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Q: 67, and approved by
Congress, allow for such further authorizations.

TITLE II--GENERAL PROVISIONS

SEC. 201. ANNUAL REPORT.

Section 3(f) of the National Science Foundation Act of 1950 (42
U.S.C. 1862(f)) is amended to read as follows:
''(f) The Foundation shall provide an annual report to the
President which shall be submitted by the Director to the Congress at
the time of the President's annual budget submission. The report
shall--
''(1) contain a strategic plan, or an update to a previous
strategic plan, which--
''(A) defines for a three-year period the overall
goals for the Foundation and specific goals for each
major activity of the Foundation, including each
scientific directorate, the education directorate, and
the polar programs office; and
''(B) describe how the identified goals relate to
national needs and will exploit new opportunities in
science and technology;
''(2) identify the criteria and describe the procedures
which the Foundation will use to assess progress toward
achieving the goals identified in accordance with paragraph
(1);
''(3) review the activities of the Foundation during the
preceding year which have contributed toward achievement of
goals identified in accordance with paragraph (1) and summarize
planned activities for the coming three years in the context of
the identified goals, with particular emphasis on the
Foundation's planned contributions to major multi-agency
research and education initiatives;
''(4) contain such recommendations as the Foundation
considers appropriate; and
''(5) include information on the acquisition and
disposition by the Foundation of any patents and patent
rights.''.

SEC. 202. NATIONAL RESEARCH FACILITIES.

(a) Facilities Plan.--The Director shall provide to Congress
annually, as a part of the report required under section 3(f) of the
National Science Foundation Act of 1950, a plan for the proposed
construction of, and repair and upgrades to, national research
facilities. The plan shall include estimates of the cost for such
construction, repairs, and upgrades, and estimates of the cost for the
operation and maintenance of existing and proposed new facilities. For
proposed new construction and for major upgrades to existing
facilities, the plan shall include funding profiles by fiscal year and
milestones for major phases of the construction. The plan shall include
cost estimates in the categories of construction, repair, and upgrades
for the year in which the plan is submitted to Congress and for not
fewer than the succeeding 4 years.
(b) Limitation on Obligation of Unauthorized Appropriations.--No
funds appropriated for any project which involves construction of new
national research facilities or construction necessary for upgrading
the capabilities of existing national research facilities shall be
obligated unless the funds are specifically authorized for such purpose
by this Act or any other Act which is not an appropriations Act, or
unless the total estimated cost to the Foundation of the construction
project is less than $50,000,000. This subsection shall not apply to
construction projects approved by the National Science Board prior to
June 30, 1994.

SEC. 203. ELIGIBILITY FOR RESEARCH FACILITY AWARDS.

Section 203(b) of the Academic Research Facilities Modernization
Act of 1988 is amended by striking the final sentence of paragraph (3)
and inserting in lieu thereof the following: ''The Director shall give
priority to institutions or consortia that have not received such funds
in the preceding 5 years, except that this sentence shall not apply to
previous funding received for the same multiyear project.''.

SEC. 204. ADMINISTRATIVE AMENDMENTS.

(a) National Science Foundation Act of 1950 Amendments.--The
National Science Foundation Act of 1950 (42 U.S.C. 1861 et seq.) is
amended--
(1) by redesignating the subsection (k) of section 4 (42
U.S.C. 1863(k)) that was added by section 108 of the National
Science Foundation Authorization Act of 1988 as subsection (l);
(2) in section 5(e) (42 U.S.C. 1864(e)) by amending
paragraph (2) to read as follows:
''(2) Any delegation of authority or imposition of conditions under
paragraph (1) shall be promptly published in the Federal Register and
reported to the Committees on Labor and Human Resources and Commerce,
Science, and Transportation of the Senate and the Committee on Science
of the House of Representatives.'';
(3) by inserting ''be entitled to'' between ''shall'' and
''receive'', and by inserting '', including traveltime,'' after
''Foundation'' in section 14(c) (42 U.S.C. 1873(c));
(4) by striking section 14(j) (42 U.S.C. 1873(j)); and
(5) by striking ''Atomic Energy Commission'' in section
15(a) (42 U.S.C. 1874(a)) and inserting in lieu thereof
''Secretary of Energy''.
(b) National Science Foundation Authorization Act, 1976
Amendments.--Section 6(a) of the National Science Foundation
Authorization Act, 1976 (42 U.S.C. 1881a(a)) is amended by striking
''social,'' the first place it appears.
(c) National Science Foundation Authorization Act of 1988
Amendments.--(1) Section 117(a)(1)(B)(v) of the National Science
Foundation Authorization Act of 1988 (42 U.S.C. 1881b(1)(B)(v)) is
amended to read as follows:
''(v) from schools established outside the several States
and the District of Columbia by any agency of the Federal
Government for dependents of its employees.''.
(2) Section 117(a)(3)(A) of such Act (42 U.S.C. 1881b(3)(A)) is
amended by striking ''Science and Engineering Education'' and inserting
in lieu thereof ''Education and Human Resources''.
(d) Education for Economic Security Act Amendments.--Section 107 of
Education for Economic Security Act (20 U.S.C. 3917) is repealed.
(e) Technical Amendment.--The second subsection (g) of section 3 of
the National Science Foundation Act of 1950 is repealed.

SEC. 205. INDIRECT COSTS.

(a) Matching Funds.--Matching funds required pursuant to section
204(a)(2)(C) of the Academic Research Facilities Modernization Act of
1988 (42 U.S.C. 1862c(a)(2)(C)) shall not be considered facilities
costs for purposes of determining indirect cost rates.
(b) Report.--The Director of the Office of Science and Technology
Policy, in consultation with other relevant agencies, shall prepare a
report analyzing what steps would be needed to--
(1) reduce by 10 percent the proportion of Federal
assistance to institutions of higher education that are
allocated for indirect costs; and
(2) reduce the variance among indirect cost rates of
different institutions of higher education,
including an evaluation of the relative benefits and burdens of each
option on institutions of higher education. Such report shall be
transmitted to the Congress no later than December 31, 1995.
SEC. 206. RESEARCH INSTRUMENTATION AND FACILITIES.

The Foundation shall incorporate the guidelines set forth in
Important Notice No. 91, dated March 11, 1983 (48 Fed. Reg. 15754,
April 12, 1983), relating to the use and operation of Foundation-
supported research instrumentation and facilities, in its notice of
Grant General Conditions, and shall examine more closely the adherence
of grantee organizations to such guidelines.

SEC. 207. FINANCIAL DISCLOSURE.

Persons temporarily employed by or at the Foundation shall be
subject to the same financial disclosure requirements and related
sanctions under the Ethics in Government Act of 1978 as are permanent
employees of the Foundation in equivalent positions.

SEC. 208. EDUCATIONAL LEAVE OF ABSENCE FOR ACTIVE DUTY.

In order to be eligible to receive funds from the Foundation after
September 30, 1995, an institution of higher education must provide
that whenever any student of the institution who is a member of the
National Guard, or other reserve component of the Armed Forces of the
United States, is called or ordered to active duty, other than active
duty for training, the institution shall grant the member a military
leave of absence from their education. Persons on military leave of
absence from their institution shall be entitled, upon release from
military duty, to be restored to the educational status they had
attained prior to their being ordered to military duty without loss of
academic credits earned, scholarships or grants awarded, or tuition and
other fees paid prior to the commencement of the military duty. It
shall be the duty of the institution to refund tuition or fees paid or
to credit the tuition and fees to the next semester or term after the
termination of the educational military leave of absence at the option
of the student.
SEC. 209. PROHIBITION OF LOBBYING ACTIVITIES.

None of the funds authorized by this Act shall be available for any
activity whose purpose is to influence legislation pending before the
Congress, provided that this shall not prevent officers or employees of
the United States or of its departments or agencies from communicating
to Members of Congress on the request of any Member or to Congress,
through the proper channels, requests for legislation or appropriations
which they deem necessary for the efficient conduct of the public
business.
SEC. 210. SCIENCE STUDIES INSTITUTE.

(a) Amendment.--Section 822 of the National Defense Authorization
Act for Fiscal 1991 (42 U.S.C. 6686) is amended--
(1) by striking ''Critical Technologies Institute'' in the
section heading and in subsection (a), and inserting in lieu
thereof ''Science Studies Institute'';
(2) in subsection (b) by striking ''As determined by the
chairman of the committee referred to in subsection (c), the''
and inserting in lieu thereof ''The'';
(3) by striking subsection (c), and redesignating
subsections (d), (e), (f), and (g) as subsections (c), (d),
(e), and (f), respectively;
(4) in subsection (c), as so redesignated by paragraph (3)
of this subsection--
(A) by inserting ''science and'' after
''developments and trends in'' in paragraph (1);
(B) by striking ''with particular emphasis'' in
paragraph (1) and all that follows through the end of
such paragraph and inserting in lieu thereof ''and
developing and maintaining relevant informational and
analytical tools.'';
(C) by striking ''to determine'' and all that
follows through ''technology policies'' in paragraph
(2) and inserting in lieu thereof ''with particular
attention to the scope and content of the Federal
science and technology research and develop portfolio
as it affects interagency and national issues'';
(D) by amending paragraph (3) to read as follows:
''(3) Initiation of studies and analysis of alternatives
available for ensuring the long-term strength of the United
States in the development and application of science and
technology, including appropriate roles for the Federal
Government, State governments, private industry, and
institutions of higher education in the development and
application of science and technology.'';
(E) by inserting ''science and'' after ''Executive
branch on'' in paragraph (4)(A); and
(F) by amending paragraph (4)(B) to read as
follows:
''(B) to the interagency committees and panels of
the Federal Government concerned with science and
technology.'';
(5) in subsection (d), as so redesignated by paragraph (3)
of this subsection, by striking ''subsection (d)'' and
inserting in lieu thereof ''subsection (c)''; and
(6) by amending subsection (f), as so redesignated by
paragraph (3) of this subsection, to read as follows:
''(f) Sponsorship.--The Director of the Office of Science and
Technology Policy shall be the sponsor of the Institute.''.
(b) Conforming Usage.--All references in Federal law or regulations
to the Critical Technologies Institute shall be considered to be
references to the Science Studies Institute.
SEC. 211. EDUCATIONAL IMPACT.

(a) Findings.--The Congress finds that--
(1) Federal research funds made available to institutions
of higher education often create incentives for such
institutions to emphasize research over undergraduate teaching
and to narrow the focus of their graduate programs; and
(2) National Science Foundation funds for Research and
Related Activities should be spent in the manner most likely to
improve the quality of undergraduate and graduate education in
institutions of higher education.
(b) Educational Impact.--(1) The impact that a grant or cooperative
agreement by the National Science Foundation would have on
undergraduate and graduate education at an institution of higher
education shall be a factor in any decision whether to award such grant
or agreement to that institution.
(2) Paragraph (1) shall be effective with respect to any grant or
cooperative agreement awarded after September 30, 1996.
(c) Report.--The Director shall provide a plan for the
implementation of subsection (b) of this section, no later than
December 31, 1995, to the Committee on Science of the House of
Representatives and the Committee on Commerce, Science, and
Transportation and the Committee on Labor and Human Resources of the
Senate.
SEC. 212. DIVISIONS OF THE FOUNDATION.

(a) Amendment.--Section 8 of the National Science Foundation Act of
1950 (42 U.S.C. 1866) is amended by inserting ''The Director may
appoint, in consultation with the Board, not more than 6 Assistant
Directors to assist in managing the Divisions.'' after ''time to time
determine.''.
(b) Report.--By November 15, 1995, the Director shall transmit to
the Congress a report on the reorganization of the National Science
Foundation required as a result of the amendment made by subsection
(a).
SEC. 213. LIMITATION ON APPROPRIATIONS.

(a) Exclusive Authorization for Fiscal Year 1996.--Notwithstanding
any other provision of law, no sums are authorized to be appropriated
for fiscal year 1996 for the activities of the National Science
Foundation unless such sums are specifically authorized to be
appropriated by this Act.
(b) Subsequent Fiscal Years.--No sums are authorized to be
appropriated for any fiscal year after fiscal year 1996 for the
activities of the National Science Foundation unless such sums are
specifically authorized to be appropriated by Act of Congress with
respect to such fiscal year.

SEC. 214. ELIGIBILITY FOR AWARDS.

(a) In General.--The Director shall exclude from consideration for
awards of financial assistance made by the National Science Foundation
after fiscal year 1995 any person who received funds, other than those
described in subsection (b), appropriated for a fiscal year after
fiscal year 1995, from any Federal funding source for a project that
was not subjected to a competitive, merit-based award process. Any
exclusion from consideration pursuant to this section shall be
effective for a period of 5 years after the person receives such
Federal funds.
(b) Exception.--Subsection (a) shall not apply to awards to persons
who are members of a class specified by law for which assistance is
awarded to members of the class according to a formula provided by law.
HR 1852 RH----2

A: TABLE OF CONTENTS:
Title I: National Science Foundation Authorization
Title II: General Provisions
National Science Foundation Authorization Act of 1995 -
Title I: National Science Foundation Authorization
- Authorizes appropriations to the National Science Foundation (NSF) for FY 1996 and 1997.
(Sec. 104) Provides for reprogramming of appropriations.
(Sec. 105) States that nothing in this Act shall preclude additional FY 1996 authorization of appropriations for NSF.
Title II: General Provisions
- Amends the National Science Foundation Act of 1950 to direct NSF to include in its annual report to the President a strategic plan defining its goals, criteria, and procedures.
(Sec. 202) Requires NSF to submit to the Congress an annual upgrade and maintenance plan for national research facilities.
(Sec. 203) Amends the Academic Research Facilities Modernization Act of 1988 to give research facility grant priority to institutions or consortia that have not received such funds in the preceding five years.
(Sec. 204) Makes administrative amendments to the National Science Foundation Act of 1950, the National Science Foundation Authorization Act, 1976, the National Science Foundation Authorization Act of 1988, and the Education for Economic Security Act.
(Sec. 206) Requires certain research instrumentation and facilities guidelines to be incorporated in NSF grant notices.
(Sec. 207) Subjects NSF temporary employees to the same financial disclosure requirements as apply to permanent employees.
(Sec. 208) Requires an institution of higher education receiving NSF funds to grant a military-educational leave of absence to a student on active military duty (other than training).
(Sec. 209) Prohibits the use of any funds authorized under this Act from being used for any lobbying activity.
(Sec. 210) Renames the Critical Technologies Institute as the Science Studies Institute.
(Sec. 211) Requires NSF to consider the impact of a grant on undergraduate and graduate education before its award.
(Sec. 212) Authorizes the Director of NSF to appoint up to six Assistant Directors.
(Sec. 214) Excludes from NSF awards for five years any person who received project funds not subject to competitive merit-based awards. (Exempts persons who are members of a law-specified class.)
****
Q: SECTION 1. SHORT TITLE; REFERENCES TO HIGHER EDUCATION ACT OF 1965.

(a) Short Title.--This Act may be cited as the ''Higher Education
Assistance Improvement Act''.
(b) References to Higher Education Act of 1965.--Except as
otherwise expressly provided, whenever in this Act an amendment or
reference is expressed in terms of an amendment to, or reference to, a
section or other provision, the reference shall be considered to be
made to a section or other provision of the Higher Education Act of
1965.

SEC. 2. ADDITIONAL PROGRAM FUNDING AUTHORIZATIONS.

(a) Pell Grants.--Section 401(b)(2)(A) (20 U.S.C. 1070(b)(2)(A)) is
amended by striking clauses (iv) and (v) and inserting the following:
''(iv) $7,500 for academic year 2002-2003; and
''(v) $7,900 for academic year 2003-2004,''.
(b) TRIO.--Section 402A(f) (20 U.S.C. 1070a-11(f)) is amended by
striking ''$700,000,000 for fiscal year 1999, and such sums as may be
necessary for each of the 4 succeeding fiscal years'' and inserting
''$1,460,000,000 for fiscal year 2002 and such sums as may be necessary
for the succeeding fiscal year''.
(c) GEAR UP.--Section 404H (20 U.S.C. 1070a-28) is amended by
striking ''$200,000,000 for fiscal year 1999 and such sums as may be
necessary for each of the 4 succeeding fiscal years'' and inserting
''$590,000,000 for fiscal year 2002 and such sums as may be necessary
for the succeeding fiscal year''.
(d) Supplemental Education Opportunity Grants.--Section 413A(b) (20
U.S.C. 1070b(b)) is amended by striking ''$675,000,000 for fiscal year
1999 and such sums as may be necessary for the 4 succeeding fiscal
years'' and inserting ''$1,300,000,000 for fiscal year 2002 and such
sums as may be necessary for the succeeding fiscal year''.
(e) Graduate Assistance in Areas of National Need.--Section 716 (20
U.S.C. 1135e) is amended by striking ''$35,000,000 for fiscal year 1999
and such sums as may be necessary for each of the 4 succeeding fiscal
years'' and inserting ''$62,000,000 for fiscal year 2002 and such sums
as may be necessary for the succeeding fiscal year''.
(f) Thurgood Marshall.--Section 721(h) (20 U.S.C. 1136(h)) is
amended by striking ''$5,000,000 for fiscal year 1999 and each of the 4
succeeding fiscal years'' and inserting ''$8,000,000 for fiscal year
2002 and such sums as may be necessary for the succeeding fiscal
year''.

SEC. 3. ADDITIONAL APPROPRIATIONS MANDATE.

It is the sense of Congress that the appropriations for the
following higher education programs should be increased as follows:
(1) LEAP.--The appropriations under section 415A(b)(1) (20
U.S.C. 1070c(b)(1)) should be doubled to at least $110,000,000
for fiscal year 2002 and such sums as may be necessary for the
succeeding fiscal year.
(2) CAMPIS.--The appropriations under section 419N(g) (20
U.S.C. 1070e(g)) should be doubled to at least $50,000,000 for
fiscal year 2002 and such sums as may be necessary for the
succeeding fiscal year.
(3) Work-study.--The appropriations under section 441(b)
(42 U.S.C. 2751(b)) should be increased to at least
$1,050,000,000 for fiscal year 2002 and such sums as may be
necessary for the succeeding fiscal year.
(4) National health service corps scholarship and loan
repayment programs.--The appropriations under sections 338A and
338B of the Public Health Service Act (42 U.S.C. 254l, 254l-1)
should be doubled to at least $175,850,000 for fiscal year 2002
and such sums as may be necessary for the succeeding fiscal
year.
(5) Perkins loans.--The appropriations under section
461(b)(1) (20 U.S.C. 1087aa(b)(1)) should be doubled to at
least $200,000,000 for fiscal year 2002 and such sums as may be
necessary for the succeeding fiscal year, and the amount
available under section 465 for loan cancellation should be
doubled to at least $120,000,000 for fiscal year 2002 and such
sums as may be necessary for the succeeding fiscal year.
(6) Javits fellowships.--The appropriations under section
705 (20 U.S.C. 1134d) should be increased to at least
$20,000,000 for fiscal year 2002 and such sums as may be
necessary for the succeeding fiscal year.

SEC. 4. LOAN FORGIVENESS.

(a) Expansion of Eligibility.--
(1) Elimination of new borrower restrictions.--
(A) FFEL program.--Section 428J(b) (20 U.S.C. 1078-
10(b)) is amended by striking ''for any new borrower on
or after October 1, 1998, who'' and inserting ''for any
borrower who performs the qualifying service on or
after October 1, 1998, and who''.
(B) Federal direct loan program.--Section 460(b)(1)
of such Act (20 U.S.C. 1087j(b)(1)) is amended by
striking ''for any new borrower on or after October 1,
1998, who'' and inserting ''for any borrower who
performs the qualifying service on or after October 1,
1998, and who''.
(2) Expansion of eligible service; eliminating delay in
service benefit.--
(A) FFEL program.--Section 428J(b)(1) is amended to
read as follows:
''(1) has been engaged--
''(A) in any service that qualifies for
cancellation of Federal Perkins Loans under section
465(a)(2);
''(B) in full-time employment in service to
economically disadvantaged individuals or communities,
child and elder care services, social work, public
prosecutors and defenders, and police, fire, and rescue
services, as defined by the Secretary; or
''(C) in full-time employment in any service that
the Secretary recognizes by regulation as providing
public service that is comparable to the services
described in subparagraph (A) or (B); and''.
(B) Federal direct loan program.--Section
460(b)(1)(A) (20 U.S.C. 1087j(b)(1)(A)) is amended to
read as follows:
''(A) has been engaged--
''(i) in any service that qualifies for
cancellation of Federal Perkins Loans under
section 465(a)(2); or
''(ii) in full-time employment in service
to economically disadvantaged individuals or
communities, child and elder care services,
social work, public prosecutors and defenders,
and police, fire, and rescue services, as
defined by the Secretary;
''(iii) in full-time employment in any
service that the Secretary recognizes by
regulation as providing public service that is
comparable to the services described in clause
(i) or (ii); and''.
(C) Perkins loans.--Section 465(a)(2) is amended by
adding after the last sentence thereof the following
new sentence: ''Whenever the Secretary acts pursuant to
section 428J(b)(1)(B) or (C) or 460(b)(1)(A)(ii) or
(iii) to recognize by regulation or define additional
services as comparable qualifying services under such
sections, the Secretary shall, by regulation, recognize
such services as qualifying services for purposes of
this section.''.
(b) Amount and Rate of Repayment.--
(1) FFEL program.--Section 428J(c) (20 U.S.C. 1078-10(c))
is amended by striking paragraph (1) and inserting the
following:
''(1) Amount and rate of repayment.--The Secretary shall
repay the aggregate of the loan obligation on a loan made under
section 428 or 428H that is outstanding after the completion of
the first complete year of qualifying service described in
subsection (b)(1) for which the borrower seeks repayment under
this section. Such amount shall be repaid at the rate of one-
third of such amount for each of the first three years of such
service.''.
(2) Federal direct loan program.--Section 460(c) of such
Act (20 U.S.C. 1087j(c)) is amended by striking paragraph (1)
and inserting the following:
''(1) Amount and rate of repayment.--The Secretary shall
cancel the aggregate of the loan obligation on a loan made
under section 428 or 428H that is outstanding after the
completion of the first complete year of qualifying service
described in subsection (b)(1)(A). Such amount shall be
canceled at the rate of one-third of such amount for each of
the first three years of such service.''.
(3) Perkins loans.--Section 465(a) (20 U.S.C. 1087ee(a)) is
amended by striking paragraph (3)(A) and inserting the
following:
''(3)(A) The percent of a loan which shall be canceled under
paragraph (1) of this subsection is at the rate of 33/3\ percent for
each of 3 years of service described in paragraph (2).''.

A: Higher Education Assistance Improvement Act - Amends the Higher Education Act of 1965 (HEA) to increase funds available for the provision of student financial assistance.Increases the maximum individual Pell grant amount to: (1) $7,500 for academic year 2002-2003; and (2) $7,900 for academic year 2003-2004.Increases amounts authorized to be appropriated for FY 2002 and 2003 under the HEA student assistance provisions: (1) Federal TRIO programs; (2) Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR UP); (3) supplemental education opportunity grants; (4) graduate assistance in areas of national need; and (5) Thurgood Marshall legal educational opportunity program.Expresses the sense of Congress that appropriations for the following higher education programs should be increased by specified amounts for FY 2002 and as necessary for FY 2003: (1) Leveraging Educational Assistance Partnership (LEAP); (2) Child Care Access Means Parents in School (CAMPIS); (3) work-study; (4) National Health Service Corps scholarship and loan repayment programs; (5) Perkins loans; and (6) Javits fellowships.Expands eligibility under the Federal Family Education Loan (FFEL), Federal direct loan, and Federal Perkins loan programs by: (1) eliminating certain new borrower restrictions; (2) expanding eligible service; and (3) eliminating delays in service benefit. Directs the Secretary of Education to repay or cancel certain amounts of loan obligations under those HEA student loan programs.
****
Q: SECTION 1. SHORT TITLE.

This Act may be cited as the ''Retirement Security for Life Act of
2004''.

SEC. 2. EXCLUSION FOR LIFETIME ANNUITY PAYMENTS.

(a) Lifetime Annuity Payments Under Annuity Contracts.--Section
72(b) of the Internal Revenue Code of 1986 (relating to exclusion
ratio) is amended by adding at the end the following new paragraph:
''(5) Exclusion for lifetime annuity payments.--
''(A) In general.--In the case of lifetime annuity
payments received under one or more annuity contracts
in any taxable year, gross income shall not include 50
percent of the portion of lifetime annuity payments
otherwise includible (without regard to this paragraph)
in gross income under this section. For purposes of the
preceding sentence, the amount excludible from gross
income in any taxable year shall not exceed $20,000.
''(B) Cost-of-living adjustment.--In the case of
taxable years beginning after December 31, 2005, the
$20,000 amount in subparagraph (A) shall be increased
by an amount equal to--
''(i) such dollar amount, multiplied by
''(ii) the cost-of-living adjustment
determined under section 1(f)(3) for the
calendar year in which the taxable year begins,
determined by substituting 'calendar year 2004'
for 'calendar year 1992' in subparagraph (B)
thereof.
If any amount as increased under the preceding sentence
is not a multiple of $500, such amount shall be rounded
to the next lower multiple of $500.
''(C) Application of paragraph.--Subparagraph (A)
shall not apply to--
''(i) any amount received under an eligible
deferred compensation plan (as defined in
section 457(b)) or under a qualified retirement
plan (as defined in section 4974(c)),
''(ii) any amount paid under an annuity
contract that is received by the beneficiary
under the contract--
''(I) after the death of the
annuitant in the case of payments
described in subsection
(c)(5)(A)(ii)(III), unless the
beneficiary is the surviving spouse of
the annuitant, or
''(II) after the death of the
annuitant and joint annuitant in the
case of payments described in
subsection (c)(5)(A)(ii)(IV), unless
the beneficiary is the surviving spouse
of the last to die of the annuitant and
the joint annuitant, or
''(iii) any annuity contract that is a
qualified funding asset (as defined in section
130(d)), but without regard to whether there is
a qualified assignment.
''(D) Investment in the contract.--For purposes of
this section, the investment in the contract shall be
determined without regard to this paragraph.''.
(b) Definitions.--Subsection (c) of section 72 of the Internal
Revenue Code of 1986 is amended by adding at the end the following new
paragraph:
''(5) Lifetime annuity payment.--
''(A) In general.--For purposes of subsection
(b)(5), the term 'lifetime annuity payment' means any
amount received as an annuity under any portion of an
annuity contract, but only if--
''(i) the only person (or persons in the
case of payments described in subclause (II) or
(IV) of clause (ii)) legally entitled (by
operation of the contract, a trust, or other
legally enforceable means) to receive such
amount during the life of the annuitant or
joint annuitant is such annuitant or joint
annuitant, and
''(ii) such amount is part of a series of
substantially equal periodic payments made not
less frequently than annually over--
''(I) the life of the annuitant,
''(II) the lives of the annuitant
and a joint annuitant, but only if the
annuitant is the spouse of the joint
annuitant as of the annuity starting
date or the difference in age between
the annuitant and joint annuitant is 15
years or less,
''(III) the life of the annuitant
with a minimum period of payments or
with a minimum amount that must be paid
in any event, or
''(IV) the lives of the annuitant
and a joint annuitant with a minimum
period of payments or with a minimum
amount that must be paid in any event,
but only if the annuitant is the spouse
of the joint annuitant as of the
annuity starting date or the difference
in age between the annuitant and joint
annuitant is 15 years or less.
''(iii) Exceptions.--For purposes of clause
(ii), annuity payments shall not fail to be
treated as part of a series of substantially
equal periodic payments--
''(I) because the amount of the
periodic payments may vary in
accordance with investment experience,
reallocations among investment options,
actuarial gains or losses, cost of
living indices, a constant percentage
applied not less frequently than
annually, or similar fluctuating
criteria,
''(II) due to the existence of, or
modification of the duration of, a
provision in the contract permitting a
lump sum withdrawal after the annuity
starting date, or
''(III) because the period between
each such payment is lengthened or
shortened, but only if at all times
such period is no longer than one
calendar year.
''(B) Annuity contract.--For purposes of
subparagraph (A) and subsections (b)(5) and (w), the
term 'annuity contract' means a commercial annuity (as
defined by section 3405(e)(6)), other than an endowment
or life insurance contract.
''(C) Minimum period of payments.--For purposes of
subparagraph (A), the term 'minimum period of payments'
means a guaranteed term of payments that does not
exceed the greater of 10 years or--
''(i) the life expectancy of the annuitant
as of the annuity starting date, in the case of
lifetime annuity payments described in
subparagraph (A)(ii)(III), or
''(ii) the life expectancy of the annuitant
and joint annuitant as of the annuity starting
date, in the case of lifetime annuity payments
described in subparagraph (A)(ii)(IV).
For purposes of this subparagraph, life expectancy
shall be computed with reference to the tables
prescribed by the Secretary under paragraph (3). For
purposes of subsection (w)(1)(C)(ii), the permissible
minimum period of payments shall be determined as of
the annuity starting date and reduced by one for each
subsequent year.
''(D) Minimum amount that must be paid in any
event.--For purposes of subparagraph (A), the term
'minimum amount that must be paid in any event' means
an amount payable to the designated beneficiary under
an annuity contract that is in the nature of a refund
and does not exceed the greater of the amount applied
to produce the lifetime annuity payments under the
contract or the amount, if any, available for
withdrawal under the contract on the date of death.''.
(c) Recapture Tax for Lifetime Annuity Payments.--Section 72 of the
Internal Revenue Code of 1986 is amended by redesignating subsection
(w) as subsection (x) and by inserting after subsection (v) the
following new subsection:
''(w) Recapture Tax for Modifications to or Reductions in Lifetime
Annuity Payments.--
''(1) In general.--If any amount received under an annuity
contract is excluded from income by reason of subsection (b)(5)
(relating to lifetime annuity payments), and--
''(A) the series of payments under such contract is
subsequently modified so any future payments are not
lifetime annuity payments,
''(B) after the date of receipt of the first
lifetime annuity payment under the contract an
annuitant receives a lump sum and thereafter is to
receive annuity payments in a reduced amount under the
contract, or
''(C) after the date of receipt of the first
lifetime annuity payment under the contract the dollar
amount of any subsequent annuity payment is reduced and
a lump sum is not paid in connection with the
reduction, unless such reduction is--
''(i) due to an event described in
subsection (c)(5)(A)(iii), or
''(ii) due to the addition of, or increase
in, a minimum period of payments within the
meaning of subsection (c)(5)(C) or a minimum
amount that must be paid in any event (within
the meaning of subsection (c)(5)(D)),
then gross income for the first taxable year in which such
modification or reduction occurs shall be increased by the
recapture amount.
''(2) Recapture amount.--
''(A) In general.--For purposes of this subsection,
the recapture amount shall be the amount, determined
under rules prescribed by the Secretary, equal to the
amount that (but for subsection (b)(5)) would have been
includible in the taxpayer's gross income if the
modification or reduction described in paragraph (1)
had been in effect at all times, plus interest for the
deferral period at the underpayment rate established by
section 6621.
''(B) Deferral period.--For purposes of this
subsection, the term 'deferral period' means the period
beginning with the taxable year in which (without
regard to subsection (b)(5)) the payment would have
been includible in gross income and ending with the
taxable year in which the modification described in
paragraph (1) occurs.
''(3) Exceptions to recapture tax.--Paragraph (1) shall not
apply in the case of any modification or reduction that occurs
because an annuitant--
''(A) dies or becomes disabled (within the meaning
of subsection (m)(7)),
''(B) becomes a chronically ill individual within
the meaning of section 7702B(c)(2), or
''(C) encounters hardship.''.
(d) Lifetime Distributions of Life Insurance Death Benefits.--
(1) In general.--Section 101(d) of the Internal Revenue
Code of 1986 (relating to payment of life insurance proceeds at
a date later than death) is amended by adding at the end the
following new paragraph:
''(4) Exclusion for lifetime annuity payments.--
''(A) In general.--In the case of amounts to which
this subsection applies, gross income shall not include
the lesser of--
''(i) 50 percent of the portion of lifetime
annuity payments otherwise includible in gross
income under this section (determined without
regard to this paragraph), or
''(ii) the amount in effect under section
72(b)(5).
''(B) Rules of section 72(b)(5) to apply.--For
purposes of this paragraph, rules similar to the rules
of section 72(b)(5) and section 72(w) shall apply,
substituting the term 'beneficiary of the life
insurance contract' for the term 'annuitant' wherever
it appears, and substituting the term 'life insurance
contract' for the term 'annuity contract' wherever it
appears.''.
(2) Conforming amendment.--Section 101(d)(1) of such Code
is amended by inserting ''or paragraph (4)'' after ''to the
extent not excluded by the preceding sentence''.
(e) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to amounts received in calendar years beginning after the
date of the enactment of this Act.
(2) Special rule for existing contracts.--In the case of a
contract in force on the date of the enactment of this Act that
does not satisfy the requirements of section 72(c)(5)(A) of the
Internal Revenue Code of 1986 (as added by this section), or
requirements similar to such section 72(c)(5)(A) in the case of
a life insurance contract), any modification to such contract
(including a change in ownership) or to the payments thereunder
that is made to satisfy the requirements of such section (or
similar requirements) shall not result in the recognition of
any gain or loss, any amount being included in gross income, or
any addition to tax that otherwise might result from such
modification, but only if the modification is completed prior
to the date that is 2 years after the date of the enactment of
this Act.

A:
Retirement Security for Life Act of 2004 - Amends the Internal Revenue Code to allow an exclusion from gross income for 50 percent of the amount otherwise includible in gross income as guaranteed payments from certain annuity or life insurance contracts. Limits the amount of such exclusion to $20,000 in any taxable year. Provides for an inflation adjustment of the $20,000 limitation beginning in 2006.
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