[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2491 Public Print (PP)]

             October 28 (legislative day, October 26), 1995

                    Ordered to be printed as passed

  
  
  
  
  

                  In the Senate of the United States,

                        October 28 (legislative day, October 26), 1995.
      Resolved, That the bill from the House of Representatives (H.R. 
2491) entitled ``An Act to provide for reconciliation pursuant to 
section 105 of the concurrent resolution on the budget for fiscal year 
1996'', do pass with the following

                               AMENDMENT:

            Strike out all after the enacting clause and insert:

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Balanced Budget Reconciliation Act 
of 1995''.

SEC. 2. TABLE OF TITLES.

    The table of titles for this Act is as follows:

Title I. Committee on Agriculture, Nutrition, and Forestry.
Title II. Committee on Armed Services.
Title III. Committee on Banking, Housing, and Urban Affairs.
Title IV. Committee on Commerce, Science, and Transportation.
Title V. Committee on Energy and Natural Resources.
Title VI. Committee on Environment and Public Works.
Title VII. Committee on Finance--Spending Control Provisions.
Title VIII. Committee on Governmental Affairs.
Title IX. Committee on the Judiciary.
Title X. Committee on Labor and Human Resources.
Title XI. Committee on Veterans' Affairs.
Title XII. Committee on Finance--Revenue Provisions.
Title XIII. Miscellaneous Provisions.

       TITLE I--COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

SEC. 1001. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This title may be cited as the ``Agricultural 
Reconciliation Act of 1995''.
    (b) Table of Contents.--The table of contents of this title is as 
follows:

Sec. 1001. Short title; table of contents.

                     Subtitle A--Commodity Programs

Sec. 1101. Eligibility for enrollment in annual programs.
Sec. 1102. Rice program.
Sec. 1103. Cotton program.
Sec. 1104. Feed grain program.
Sec. 1105. Wheat program.
Sec. 1106. Milk program.
Sec. 1107. Oilseeds program.
Sec. 1108. Sugar program.
Sec. 1109. Acreage base and yield system.
Sec. 1110. Extension of related price support provisions.
Sec. 1111. Repeal of miscellaneous authorities.
Sec. 1112. Commodity Credit Corporation interest rate.
Sec. 1113. Peanut program.
Sec. 1114. Catastrophic crop insurance coverage.
Sec. 1115. Savings adjustment.
Sec. 1116. Sense of the Senate regarding tax provisions relating to 
                            ethanol.
Sec. 1117. Effective date.

                        Subtitle B--Conservation

Sec. 1201. Conservation.

         Subtitle C--Agricultural Promotion and Export Programs

Sec. 1301. Market promotion program.
Sec. 1302. Export enhancement program.
Sec. 1303. Export of sunflowerseed oil and cottonseed oil.

                    Subtitle D--Nutrition Assistance

                     Chapter 1--Food Stamp Program

Sec. 1401. Treatment of children living at home.
Sec. 1402. Optional additional criteria for separate household 
                            determinations.
Sec. 1403. Adjustment of thrifty food plan.
Sec. 1404. Definition of homeless individual.
Sec. 1405. State options in regulations.
Sec. 1406. Energy assistance.
Sec. 1407. Deductions from income.
Sec. 1408. Amount of vehicle asset limitation.
Sec. 1409. Benefits for aliens.
Sec. 1410. Disqualification.
Sec. 1411. Employment and training.
Sec. 1412. Income calculation.
Sec. 1413. Comparable treatment for disqualification.
Sec. 1414. Cooperation with child support agencies.
Sec. 1415. Disqualification for child support arrears.
Sec. 1416. Permanent disqualification for participating in 2 or more 
                            States.
Sec. 1417. Work requirement.
Sec. 1418. Disqualification of fleeing felons.
Sec. 1419. Electronic benefit transfers.
Sec. 1420. Minimum benefit.
Sec. 1421. Benefits on recertification.
Sec. 1422. Failure to comply with other welfare and public assistance 
                            programs.
Sec. 1423. Allotments for households residing in institutions.
Sec. 1424. Collection of overissuances.
Sec. 1425. Termination of Federal match for optional information 
                            activities.
Sec. 1426. Work supplementation or support program.
Sec. 1427. Private sector employment initiatives.
Sec. 1428. Reauthorization of appropriations.
Sec. 1429. Optional State food assistance block grant.
Sec. 1430. Effective date.

                  Chapter 2--Child Nutrition Programs

                      Part I--Reimbursement Rates

Sec. 1441. Termination of additional payment for lunches served in high 
                            free and reduced price participation 
                            schools.
Sec. 1442. Lunches, breakfasts, and supplements.
Sec. 1443. Free and reduced price breakfasts.
Sec. 1444. Conforming reimbursement for paid breakfasts and lunches.

                        Part II--Grant Programs

Sec. 1451. School breakfast startup grants.

                       Part III--Other Amendments

Sec. 1461. Child and adult care food program.

                     Chapter 3--Additional Savings

Sec. 1471. Earnings of students.
Sec. 1472. Standard deduction.
Sec. 1473. Vendor payments for transitional housing counted as income.
Sec. 1474. Extending claims retention rates.
Sec. 1475. Reauthorization of Puerto Rico nutrition assistance program.
Sec. 1476. Value of food assistance.
Sec. 1477. Commodity assistance.
Sec. 1478. Summer food service program for children.
Sec. 1479. Special milk program.
Sec. 1480. Nutrition education and training programs.
Sec. 1481. Effective date.

                       Chapter 4--Effective Date

Sec. 1491. Effective date.

                     Subtitle A--Commodity Programs

SEC. 1101. ELIGIBILITY FOR ENROLLMENT IN ANNUAL PROGRAMS.

    (a) In General.--Title III of the Agricultural Act of 1949 (7 
U.S.C. 1447 et seq.) is amended to read as follows:

        ``TITLE III--ANNUAL PROGRAMS FOR 1996 THROUGH 2002 CROPS

``SEC. 301. ELIGIBILITY FOR ENROLLMENT IN ANNUAL PROGRAMS.

    ``(a) In General.--To be eligible for enrollment in 1 or more of 
the annual programs established under this title, the land on a farm 
must have been enrolled in 1 or more of the annual programs established 
under this Act for rice, upland cotton, feed grains, or wheat for a 
total of at least 3 of the 1991 through 1995 crop years, as determined 
by the Secretary.
    ``(b) Additional Criteria.--In addition to the requirements of 
subsection (a), for the purpose of determining the eligibility of land 
for enrollment in 1 or more of the annual programs established under 
this title, the Secretary shall include acreage on the farm considered 
planted under section 503(c), including a certification of crop acreage 
base filed with the Secretary in order to preserve base history, for 
any of the 1991 through 1995 crops.
    ``(c) Eligibility to Receive Payments and Loans.--Enrollment in the 
annual program for a program crop shall be required as a condition of 
the receipt of any payment or loan under this title for the program 
crop.''.
    (b) Conforming Amendments.--The Agricultural Act of 1949 is 
amended--
            (1) in title I (7 U.S.C. 1441 et seq.)--
                    (A) by striking all sections other than sections 
                101B, 103B, 104(d), 105B, 106, 106A, 106B, 107B, 108B, 
                111, 114, and 115; and
                    (B) by moving sections 101B, 103B, 105B, and 107B 
                to the end of title III (as amended by subsection (a)) 
                and redesignating the sections as sections 302, 303, 
                304, and 305, respectively;
            (2) in title II (7 U.S.C. 1446 et seq.), by striking all 
        sections other than sections 202, 204, 205, and 206; and
            (3) by striking title VI (7 U.S.C. 1471 et seq.).

SEC. 1102. RICE PROGRAM.

    Section 302 of the Agricultural Act of 1949 (as redesignated by 
section 1101(b)(1)(B)) is amended--
            (1) by striking the section heading and inserting the 
        following:

``SEC. 302. LOANS AND PAYMENTS FOR THE 1991 THROUGH 2002 CROPS OF 
              RICE.'';

            (2) in subsection (a)--
                    (A) in paragraph (1), by striking ``1995'' and 
                inserting ``2002'';
                    (B) in paragraph (3), by striking ``1995'' and 
                inserting ``2002''; and
                    (C) in paragraph (5)(D)(i), by striking ``August 1, 
                1991, and ending July 31, 1996'' and inserting ``August 
                1, 1996, and ending July 31, 2003'';
            (3) in subsection (b)(1), by striking ``1995'' and 
        inserting ``2002'';
            (4) in subsection (c)(1)--
                    (A) in subparagraph (A), by striking ``1995'' and 
                inserting ``2002'';
                    (B) in subparagraph (B)--
                            (i) in clause (ii)--
                                    (I) in the clause heading, by 
                                striking ``and 1995'' and inserting 
                                ``through 2002''; and
                                    (II) by striking ``and 1995'' and 
                                inserting ``through 2002'';
                            (ii) by redesignating clause (iii) as 
                        clause (iv);
                            (iii) by inserting after clause (ii) the 
                        following:
                            ``(iii) Maximum payment rate.--The payment 
                        rate for rice under this subsection shall not 
                        exceed (per hundredweight) $4.21 for the 1996 
                        crop, $4.19 for the 1997 crop, $3.86 for the 
                        1998 crop, $3.48 for the 1999 crop, $3.23 for 
                        the 2000 crop, $2.89 for the 2001 crop, and 
                        $2.66 for the 2002 crop.''; and
                            (iv) in clause (iv) (as so redesignated), 
                        by striking ``1995'' and inserting ``2002'';
                    (C) in subparagraph (C)--
                            (i) in clause (i), by striking ``within the 
                        permitted acreage''; and
                            (ii) in clause (ii)--
                                    (I) by striking ``85 percent'' and 
                                inserting ``70 percent''; and
                                    (II) by striking ``less the 
                                quantity'' and all that follows through 
                                ``(e)(2)(D))'';
                    (D) in subparagraph (D)--
                            (i) in the subparagraph heading, by 
                        striking ``50/85'' and inserting ``25/75'';
                            (ii) in clause (i)--
                                    (I) by striking ``an acreage'' and 
                                all that follows through ``rice and'';
                                    (II) by striking ``15 percent'' 
                                each place it appears and inserting 
                                ``25 percent'';
                                    (III) by striking ``1997 crops 
                                (except as provided in clause 
                                (v)(II))'' each place it appears and 
                                inserting ``2002 crops'';
                                    (IV) by striking ``(except as 
                                provided in subparagraph (E))'' each 
                                place it appears and inserting ``or 
                                alternative crops described in 
                                subparagraph (E)''; and
                                    (V) in subclause (I), by striking 
                                ``for the purpose'' and all that 
                                follows through ``(e)(2)(D)'';
                            (iii) in clause (ii), by striking ``50 
                        percent'' and inserting ``25 percent'';
                            (iv) in clause (iii), by striking ``(or 
                        other uses as provided in subparagraph (E))'' 
                        and inserting ``or alternative crops described 
                        in subparagraph (E)'';
                            (v) in clause (v)--
                                    (I) in the clause heading, by 
                                striking ``Prevented planting and 
                                reduced'' and inserting ``Reduced'';
                                    (II) in the first sentence of 
                                subclause (I), by striking ``under 
                                subsection (e)''; and
                                    (III) in subclause (II)--
                                            (aa) in the subclause 
                                        heading, by striking ``1997'' 
                                        and inserting ``2002'';
                                            (bb) by striking ``1997'' 
                                        and inserting ``2002'';
                                            (cc) by striking ``if an 
                                        acreage limitation'' and all 
                                        that follows through ``(aa) 
                                        the'' and inserting ``if the'';
                                            (dd) by striking ``be 
                                        prevented from planting the 
                                        crop or'';
                                            (ee) by striking ``8 
                                        percent'' the first place it 
                                        appears and inserting ``25 
                                        percent''; and
                                            (ff) by striking ``uses; 
                                        or'' and all that follows 
                                        through the period at the end 
                                        of the subclause and inserting 
                                        ``uses.'';
                            (vi) in clause (vi), by striking 
                        ``permitted rice'' and all that follows through 
                        ``this subparagraph'' and inserting ``rice 
                        payment acres of the farm was devoted to 
                        conserving uses or alternative crops described 
                        in subparagraph (E)''; and
                            (vii) by striking clause (viii); and
                    (E) in the first sentence of subparagraph (E)(ii), 
                by inserting before the period at the end the 
                following: ``or other oilseeds as determined by the 
                Secretary'';
            (5) by striking subsection (e) and inserting the following:
    ``(e) Haying and Grazing.--
            ``(1) In general.--Except as provided in paragraph (2), 
        haying and grazing of acreage under subsection (c)(1)(C) shall 
        be permitted, except during any consecutive 5-month period that 
        is established by the State committee established under section 
        8(b) of the Soil Conservation and Domestic Allotment Act (16 
        U.S.C. 590h(b)) for a State. The 5-month period shall be 
        established during the period beginning April 1, and ending 
        October 31, of a year.
            ``(2) Natural disasters.--In the case of a natural 
        disaster, the Secretary may permit unlimited haying and grazing 
        on the acreage. The Secretary may not exclude irrigated or 
        irrigable acreage not planted to alfalfa when exercising the 
        authority under this paragraph.'';
            (6) in subsection (f)--
                    (A) in paragraph (1), by striking ``1995'' and 
                inserting ``2002''; and
                    (B) in paragraph (4)(C), by striking ``reduced by'' 
                and all that follows through ``subsection (e)''; and
            (7) in subsection (n), by striking ``1995'' and inserting 
        ``2002''.

SEC. 1103. COTTON PROGRAM.

    Section 303 of the Agricultural Act of 1949 (as redesignated by 
section 1101(b)(1)(B)) is amended--
            (1) by striking the section heading and inserting the 
        following:

``SEC. 303. LOANS AND PAYMENTS FOR THE 1991 THROUGH 2002 CROPS OF 
              UPLAND COTTON.'';

            (2) in subsection (a)--
                    (A) in paragraph (1), by striking ``1997'' and 
                inserting ``2002'';
                    (B) by striking paragraph (4) and inserting the 
                following:
            ``(4) Storage payments.--The producer shall pay the cost of 
        all storage payments incurred for a 10-month nonrecourse 
        loan.''; and
                    (C) in paragraph (5)--
                            (i) by striking ``August 1, 1991, and 
                        ending July 31, 1998'' each place it appears 
                        and inserting ``August 1, 1996, and ending July 
                        31, 2003'';
                            (ii) in subparagraph (E), by striking 
                        ``1.25 cents'' each place it appears and 
                        inserting ``2.50 cents''; and
                            (iii) in subparagraph (F)(i), by striking 
                        ``August 1991 and ending July 31, 1998'' and 
                        inserting ``August 1, 1996, and ending July 31, 
                        2003'';
            (3) in subsection (b)(1), by striking ``1997'' and 
        inserting ``2002'';
            (4) in subsection (c)(1)--
                    (A) in subparagraph (A), by striking ``1997'' and 
                inserting ``2002'';
                    (B) in subparagraph (B)--
                            (i) by redesignating clause (ii) as clause 
                        (iii);
                            (ii) by inserting after clause (i) the 
                        following:
                            ``(ii) Maximum payment rate.--The payment 
                        rate for upland cotton under this subsection 
                        shall not exceed (per pound) 8.6 cents for the 
                        1996 crop, 12.1 cents for the 1997 crop, 13.1 
                        cents for the 1998 crop, 13.6 cents for the 
                        1999 crop, 13.0 cents for the 2000 crop, 12.0 
                        cents for the 2001 crop, and 11.5 cents for the 
                        2002 crop.''; and
                            (iii) in clause (iii) (as so redesignated), 
                        by striking ``1997'' and inserting ``2002'';
                    (C) in subparagraph (C)--
                            (i) in clause (i), by striking ``within the 
                        permitted acreage''; and
                            (ii) in clause (ii)--
                                    (I) by striking ``85 percent'' and 
                                inserting ``70 percent''; and
                                    (II) by striking ``less the 
                                quantity'' and all that follows through 
                                ``(e)(2)(D))'';
                    (D) in subparagraph (D)--
                            (i) in the subparagraph heading, by 
                        striking ``50/85'' and inserting ``0/85'';
                            (ii) in clause (i)--
                                    (I) by striking ``an acreage'' and 
                                all that follows through ``cotton 
                                and'';
                                    (II) by striking ``1997 crops 
                                (except as provided in clause 
                                (v)(II))'' each place it appears and 
                                inserting ``2002 crops'';
                                    (III) by striking ``(except as 
                                provided in subparagraph (E))'' each 
                                place it appears and inserting ``or 
                                alternative crops described in 
                                subparagraph (E)'';
                                    (IV) in subclause (I), by striking 
                                ``for the purpose'' and all that 
                                follows through ``(e)(2)(D)''; and
                                    (V) in subclause (II), by striking 
                                ``, subject to the compliance of the 
                                producers with clause (ii)'';
                            (iii) by striking clauses (ii) and (viii);
                            (iv) by redesignating clauses (iii) through 
                        (vii) and clause (ix) as clauses (ii) through 
                        (vi) and clause (vii), respectively;
                            (v) in clause (ii) (as so redesignated), by 
                        striking ``(or other uses as provided in 
                        subparagraph (E))'' and inserting ``or 
                        alternative crops described in subparagraph 
                        (E)'';
                            (vi) in clause (iii) (as so redesignated), 
                        by striking ``, without regard to the 
                        requirement imposed under clause (ii),'';
                            (vii) in clause (iv) (as so redesignated)--
                                    (I) in the clause heading, by 
                                striking ``Prevented planting and 
                                reduced'' and inserting ``Reduced'';
                                    (II) in the first sentence of 
                                subclause (I)--
                                            (aa) by striking ``under 
                                        subsection (e)''; and
                                            (bb) by striking ``without 
                                        regard to the requirement 
                                        imposed under clause (ii)''; 
                                        and
                                    (III) in subclause (II)--
                                            (aa) in the subclause 
                                        heading, by striking ``1997'' 
                                        and inserting ``2002'';
                                            (bb) by striking ``1997'' 
                                        and inserting ``2002'';
                                            (cc) by striking ``clause 
                                        (iii) without regard'' and all 
                                        that follows through ``(aa) 
                                        the'' and inserting ``clause 
                                        (ii) if the'';
                                            (dd) by striking ``be 
                                        prevented from planting the 
                                        crop or'';
                                            (ee) by striking ``8 
                                        percent'' the first place it 
                                        appears and inserting ``15 
                                        percent''; and
                                            (ff) by striking ``uses; 
                                        or'' and all that follows 
                                        through the period at the end 
                                        of the subclause and inserting 
                                        ``uses.'';
                            (viii) in clause (v) (as so redesignated), 
                        by striking ``permitted cotton'' and all that 
                        follows through ``this subparagraph'' and 
                        inserting ``cotton payment acres of the farm 
                        was devoted to conserving uses or alternative 
                        crops described in subparagraph (E)''; and
                            (ix) in clause (vi) (as so redesignated), 
                        by striking ``(vi)'' and inserting ``(v)''; and
                    (E) in the first sentence of subparagraph (E)(ii), 
                by inserting before the period at the end the 
                following: ``or other oilseeds as determined by the 
                Secretary'';
            (5) by striking subsection (e) and inserting the following:
    ``(e) Haying and Grazing.--
            ``(1) In general.--Except as provided in paragraph (2), 
        haying and grazing of acreage under subsection (c)(1)(C) shall 
        be permitted, except during any consecutive 5-month period that 
        is established by the State committee established under section 
        8(b) of the Soil Conservation and Domestic Allotment Act (16 
        U.S.C. 590h(b)) for a State. The 5-month period shall be 
        established during the period beginning April 1, and ending 
        October 31, of a year.
            ``(2) Natural disasters.--In the case of a natural 
        disaster, the Secretary may permit unlimited haying and grazing 
        on the acreage. The Secretary may not exclude irrigated or 
        irrigable acreage not planted to alfalfa when exercising the 
        authority under this paragraph.'';
            (6) in subsection (f)--
                    (A) in paragraph (1), by striking ``1995'' and 
                inserting ``2002''; and
                    (B) in paragraph (4)(C), by striking ``reduced by'' 
                and all that follows through ``subsection (e)''; and
            (7) in subsection (o), by striking ``1997'' and inserting 
        ``2002''.

SEC. 1104. FEED GRAIN PROGRAM.

    Section 304 of the Agricultural Act of 1949 (as redesignated by 
section 1101(b)(1)(B)) is amended--
            (1) by striking the section heading and inserting the 
        following:

``SEC. 304. LOANS AND PAYMENTS FOR THE 1991 THROUGH 2002 CROPS OF FEED 
              GRAINS.'';

            (2) in subsection (a)--
                    (A) in paragraph (1), by striking ``1995'' and 
                inserting ``2002'';
                    (B) in paragraph (4)--
                            (i) in subparagraph (A)--
                                    (I) by striking ``may'' and 
                                inserting ``shall'';
                                    (II) in clause (i), by inserting 
                                ``or'' after the semicolon; and
                                    (III) in clause (iii), by striking 
                                ``(iii) the'' and inserting the 
                                following:
                                    ``(III) the''; and
                            (ii) in subparagraph (C), by striking 
                        ``1995'' and inserting ``2002''; and
                    (C) in paragraph (6), by striking ``1995'' and 
                inserting ``2002'';
            (3) in subsection (b)(1), by striking ``1995'' and 
        inserting ``2002'';
            (4) in subsection (c)(1)--
                    (A) in subparagraph (A), by striking ``1995'' and 
                inserting ``2002'';
                    (B) in subparagraph (B)--
                            (i) in clause (ii)--
                                    (I) in the clause heading, by 
                                striking ``and 1995'' and inserting 
                                ``through 2002''; and
                                    (II) by striking ``and 1995'' and 
                                inserting ``through 2002'';
                            (ii) by redesignating clause (iii) as 
                        clause (iv);
                            (iii) by inserting after clause (ii) the 
                        following:
                            ``(iii) Maximum payment rate.--The payment 
                        rates under this subsection shall not exceed 
                        (per bushel)--
                                    ``(I) in the case of corn, $.53 for 
                                the 1996 crop, $.53 for the 1997 crop, 
                                $.57 for the 1998 crop, $.56 for the 
                                1999 crop, $.53 for the 2000 crop, $.54 
                                for the 2001 crop, and $.55 for the 
                                2002 crop;
                                    ``(II) in the case of grain 
                                sorghums, $.59 for the 1996 crop, $.59 
                                for the 1997 crop, $.63 for the 1998 
                                crop, $.61 for the 1999 crop, $.59 for 
                                the 2000 crop, $.60 for the 2001 crop, 
                                and $.61 for the 2002 crop;
                                    ``(III) in the case of oats, $.12 
                                for the 1996 crop, $.11 for the 1997 
                                crop, $.12 for the 1998 crop, $.11 for 
                                the 1999 crop, $.09 for the 2000 crop, 
                                $.09 for the 2001 crop, and $.10 for 
                                the 2002 crop; and
                                    ``(IV) in the case of barley, $.45 
                                for the 1996 crop, $.43 for the 1997 
                                crop, $.44 for the 1998 crop, $.42 for 
                                the 1999 crop, $.39 for the 2000 crop, 
                                $.39 for the 2001 crop, and $.40 for 
                                the 2002 crop.''; and
                            (iv) in clause (iv) (as so redesignated), 
                        by striking ``1995'' each place it appears and 
                        inserting ``2002'';
                    (C) in subparagraph (C)--
                            (i) in clause (i)--
                                    (I) by inserting after ``crop'' the 
                                following: ``or to a commodity 
                                permitted under section 504(b)''; and
                                    (II) by striking ``within the 
                                permitted acreage''; and
                            (ii) in clause (ii)--
                                    (I) by striking ``85 percent'' and 
                                inserting ``70 percent''; and
                                    (II) by striking ``less the 
                                quantity'' and all that follows through 
                                ``(e)(2)(D))'';
                    (D) in subparagraph (D)(i), by striking 
                ``Notwithstanding the foregoing provisions of this 
                section, if'' and inserting ``If''; and
                    (E) in subparagraph (E)--
                            (i) in clause (i)--
                                    (I) by striking ``an acreage'' and 
                                all that follows through ``grains 
                                and'';
                                    (II) by striking ``1997 crops 
                                (except as provided in clause (vii))'' 
                                each place it appears and inserting 
                                ``2002 crops'';
                                    (III) by striking ``(except as 
                                provided in subparagraph (F))'' each 
                                place it appears and inserting ``or 
                                alternative crops described in 
                                subparagraph (F)''; and
                                    (IV) in subclause (I), by striking 
                                ``for the purpose'' and all that 
                                follows through ``(e)(2)(D)'';
                            (ii) in clause (ii), by striking ``(or 
                        other uses as provided in subparagraph (F))'' 
                        and inserting ``or alternative crops described 
                        in subparagraph (F)'';
                            (iii) in clause (iv), by striking 
                        ``permitted feed grain'' and all that follows 
                        through ``this subparagraph'' and inserting 
                        ``feed grain payment acres of the farm was 
                        devoted to conserving uses or alternative crops 
                        described in subparagraph (F)'';
                            (iv) by striking clause (vi);
                            (v) by redesignating clause (vii) as clause 
                        (vi); and
                            (vi) in clause (vi) (as so redesignated)--
                                    (I) in the clause heading, by 
                                striking ``Exceptions to 0/85'' and 
                                inserting ``Reduced yields'';
                                    (II) by striking ``an acreage'' and 
                                all that follows through ``crop and'';
                                    (III) by striking subclause (II);
                                    (IV) in subclause (I)(aa)--
                                            (aa) by striking ``(aa)''; 
                                        and
                                            (bb) by striking ``be 
                                        prevented from planting the 
                                        crop or''; and
                                    (V) in subclause (I)(bb)--
                                            (aa) by striking ``(bb)'' 
                                        and inserting ``(II)'';
                                            (bb) by striking ``8 
                                        percent'' and inserting ``15 
                                        percent''; and
                                            (cc) by striking ``; or'' 
                                        and inserting a period;
            (5) by striking subsection (e) and inserting the following:
    ``(e) Haying and Grazing.--
            ``(1) In general.--Except as provided in paragraph (2), 
        haying and grazing of acreage under subsection (c)(1)(C) shall 
        be permitted, except during any consecutive 5-month period that 
        is established by the State committee established under section 
        8(b) of the Soil Conservation and Domestic Allotment Act (16 
        U.S.C. 590h(b)) for a State. The 5-month period shall be 
        established during the period beginning April 1, and ending 
        October 31, of a year.
            ``(2) Natural disasters.--In the case of a natural 
        disaster, the Secretary may permit unlimited haying and grazing 
        on the acreage. The Secretary may not exclude irrigated or 
        irrigable acreage not planted to alfalfa when exercising the 
        authority under this paragraph.'';
            (6) in subsection (f)--
                    (A) in paragraph (1), by striking ``1995'' and 
                inserting ``2002''; and
                    (B) in paragraph (4)(C), by striking ``reduced by'' 
                and all that follows through ``subsection (e)'';
            (7) in subsection (g)(1), by striking ``under subsection 
        (e)'';
            (8) in subsection (o)(1), by striking ``and acreage 
        reduction'';
            (9) in subsection (p)(1), by striking ``1995'' and 
        inserting ``2002'';
            (10) in subsection (q)(1)--
                    (A) by striking ``1995'' and inserting ``2002'';
                    (B) in subparagraph (C), by inserting ``and'' after 
                the semicolon at the end;
                    (C) in subparagraph (D), by striking ``; and'' and 
                inserting a period; and
                    (D) by striking subparagraph (E); and
            (11) in subsection (r), by striking ``1995'' and inserting 
        ``2002''.

SEC. 1105. WHEAT PROGRAM.

    Section 305 of the Agricultural Act of 1949 (as redesignated by 
section 1101(b)(1)(B)) is amended--
            (1) by striking the section heading and inserting the 
        following:

``SEC. 305. LOANS AND PAYMENTS FOR THE 1991 THROUGH 2002 CROPS OF 
              WHEAT.'';

            (2) in subsection (a)--
                    (A) in paragraph (1), by striking ``1995'' and 
                inserting ``2002''; and
                    (B) in paragraph (4)--
                            (i) in subparagraph (A)--
                                    (I) by striking ``may'' and 
                                inserting ``shall'';
                                    (II) in clause (i), by inserting 
                                ``or'' after the semicolon; and
                                    (III) in clause (iii), by striking 
                                ``(iii) the'' and inserting the 
                                following:
                                    ``(III) the''; and
                            (ii) in subparagraph (C), by striking 
                        ``1995'' and inserting ``2002'';
            (3) in subsection (b)(1), by striking ``1995'' and 
        inserting ``2002'';
            (4) in subsection (c)(1)--
                    (A) in subparagraph (A), by striking ``1995'' and 
                inserting ``2002'';
                    (B) in subparagraph (B)--
                            (i) in clause (ii)--
                                    (I) in the clause heading, by 
                                striking ``and 1995'' and inserting 
                                ``through 2002''; and
                                    (II) by striking ``and 1995'' and 
                                inserting ``through 2002'';
                            (ii) by redesignating clause (iii) as 
                        clause (iv);
                            (iii) by inserting after clause (ii) the 
                        following:
                            ``(iii) Maximum payment rate.--The payment 
                        rate for wheat under this subsection shall not 
                        exceed (per bushel) $.89 for the 1996 crop, 
                        $.94 for the 1997 crop, $.95 for the 1998 crop, 
                        $.89 for the 1999 crop, $.79 for the 2000 crop, 
                        $.78 for the 2001 crop, and $.71 for the 2002 
                        crop.''; and
                            (iv) in clause (iv) (as so redesignated), 
                        by striking ``1995'' and inserting ``2002'';
                    (C) in subparagraph (C)--
                            (i) in clause (i)--
                                    (I) by inserting after ``crop'' the 
                                following: ``or to a commodity 
                                permitted under section 504(b)''; and
                                    (II) by striking ``within the 
                                permitted acreage''; and
                            (ii) in clause (ii)--
                                    (I) by striking ``85 percent'' and 
                                inserting ``70 percent''; and
                                    (II) by striking ``less the 
                                quantity'' and all that follows through 
                                ``(e)(2)(D))'';
                    (D) in subparagraph (D)(i), by striking 
                ``Notwithstanding the foregoing provisions of this 
                section, if'' and inserting ``If''; and
                    (E) in subparagraph (E)--
                            (i) in clause (i)--
                                    (I) by striking ``an acreage'' and 
                                all that follows through ``wheat and'';
                                    (II) by striking ``1997 crops 
                                (except as provided in clause (vii))'' 
                                each place it appears and inserting 
                                ``2002 crops'';
                                    (III) by striking ``(except as 
                                provided in subparagraph (F))'' each 
                                place it appears and inserting ``or 
                                alternative crops described in 
                                subparagraph (F)''; and
                                    (IV) in subclause (I), by striking 
                                ``for the purpose'' and all that 
                                follows through ``(e)(2)(D)'';
                            (ii) in clause (ii), by striking ``(or 
                        other uses as provided in subparagraph (F))'' 
                        and inserting ``or alternative crops described 
                        in subparagraph (F)'';
                            (iii) in clause (iv), by striking 
                        ``permitted wheat'' and all that follows 
                        through ``this subparagraph'' and inserting 
                        ``wheat grain payment acres of the farm was 
                        devoted to conserving uses or alternative crops 
                        described in subparagraph (F)'';
                            (iv) by striking clause (vi);
                            (v) by redesignating clause (vii) as clause 
                        (vi); and
                            (vi) in clause (vi) (as so redesignated)--
                                    (I) in the clause heading, by 
                                striking ``Exceptions to 0/85'' and 
                                inserting ``Reduced yields'';
                                    (II) by striking ``an acreage'' and 
                                all that follows through ``crop and'';
                                    (III) by striking subclause (II);
                                    (IV) in subclause (I)(aa)--
                                            (aa) by striking ``(aa)''; 
                                        and
                                            (bb) by striking ``be 
                                        prevented from planting the 
                                        crop or''; and
                                    (V) in subclause (I)(bb)--
                                            (aa) by striking ``(bb)'' 
                                        and inserting ``(II)'';
                                            (bb) by striking ``8 
                                        percent'' and inserting ``15 
                                        percent''; and
                                            (cc) by striking ``; or'' 
                                        and inserting a period;
            (5) by striking subsection (e) and inserting the following:
    ``(e) Haying and Grazing.--
            ``(1) In general.--Except as provided in paragraph (2), 
        haying and grazing of acreage under subsection (c)(1)(C) shall 
        be permitted, except during any consecutive 5-month period that 
        is established by the State committee established under section 
        8(b) of the Soil Conservation and Domestic Allotment Act (16 
        U.S.C. 590h(b)) for a State. The 5-month period shall be 
        established during the period beginning April 1, and ending 
        October 31, of a year.
            ``(2) Natural disasters.--In the case of a natural 
        disaster, the Secretary may permit unlimited haying and grazing 
        on the acreage. The Secretary may not exclude irrigated or 
        irrigable acreage not planted to alfalfa when exercising the 
        authority under this paragraph.'';
            (6) in subsection (f)--
                    (A) in paragraph (1), by striking ``1995'' and 
                inserting ``2002''; and
                    (B) in paragraph (4)(C), by striking ``reduced by'' 
                and all that follows through ``subsection (e)'';
            (7) in subsection (g)(1), by striking ``under subsection 
        (e)'';
            (8) in subsection (o)(1), by striking ``and acreage 
        reduction'';
            (9) in subsection (p)(2)(B), by striking ``less the 
        quantity'' and all that follows through ``(e)(2)(D))''; and
            (10) in subsection (q), by striking ``1995'' and inserting 
        ``2002''.

SEC. 1106. MILK PROGRAM.

    (a) In General.--Section 204 of the Agricultural Act of 1949 (7 
U.S.C. 1446e) is amended to read as follows:

``SEC. 204. MILK PRICE SUPPORT PROGRAM FOR CALENDAR YEARS 1996 THROUGH 
              2002.

    ``(a) In General.--During the period beginning January 1, 1996, and 
ending December 31, 2002, the price of milk produced in the 48 
contiguous States shall be supported as provided in this section.
    ``(b) Support Price.--
            ``(1) In general.--During the period referred to in 
        subsection (a), the price of milk used for cheese shall be 
        supported at a rate equal to $10.00 per hundredweight for 
        calendar year 1996, subject to subsection (d). Milk used for 
        nonfat dry milk or butter shall not be supported under this 
        section.
            ``(2) Annual reduction.--For each of calendar years 1997 
        through 2002, the Secretary shall reduce the rate of price 
        support for milk used for cheese by 10 cents per hundredweight.
    ``(c) Purchases.--
            ``(1) In general.--The price of milk used for cheese shall 
        be supported through the purchase of cheese and based on the 
        support price in effect during the applicable calendar year.
            ``(2) Sales through deip.--All sales for export under the 
        dairy export incentive program established under section 153 of 
        the Food Security Act of 1985 (15 U.S.C. 713a-14) shall be 
        considered as total purchases under subsection (d).
    ``(d) Support Rate Adjustments.--Effective January 1 of each of the 
calendar years 1996 through 2002, if the level of purchases of milk and 
the products of milk by the Commodity Credit Corporation under this 
section (less sales under section 407 for unrestricted use), through 
direct purchases or through sales under the dairy export incentive 
program established under section 153 of the Food Security Act of 1985 
(15 U.S.C. 713a-14), as estimated by the Secretary by November 20 of 
the preceding calendar year, will exceed 1,500,000,000 pounds (milk 
equivalent, total milk solids basis), the Secretary shall decrease by 
25 cents per hundredweight, in addition to the annual reduction under 
subsection (b)(2), the rate of price support for milk used for cheese 
in effect for the calendar year. The support rate adjustment provided 
under this subsection shall be effective only for the calendar year 
applicable to the estimate of the Secretary. After the support rate 
adjustment terminates, the support price shall be the level provided 
under subsection (b)(2).
    ``(e) Commodity Credit Corporation.--The Secretary shall carry out 
the program authorized by this section through the Commodity Credit 
Corporation.
    ``(f) Period.--This section shall be effective only during the 
period beginning January 1, 1996, and ending December 31, 2002.''.
    (b) Milk Manufacturing Marketing Adjustment.--Section 102 of the 
Food, Agriculture, Conservation, and Trade Act of 1990 (7 U.S.C. 1446e-
1) is repealed.
    (c) Class IV Account.--Effective January 1, 1996, section 8c(5) of 
the Agricultural Adjustment Act (7 U.S.C. 608c(5)), reenacted with 
amendments by the Agricultural Marketing Agreement Act of 1937, is 
amended--
            (1) in paragraph (A), by adding at the end the following: 
        ``Each marketing order issued pursuant to this section for milk 
        and milk products shall include all skim milk and butterfat 
        used to produce butter, nonfat dry milk, and dry whole milk as 
        part of a Class IV classification.''; and
            (2) by adding at the end the following:
                    ``(M) Class iv account.--
                            ``(i) Definitions.--In this paragraph:
                                    ``(I) Account.--The term `Account' 
                                means the Account for Class IV final 
                                products established under clause (ii).
                                    ``(II) Administrator.--The term 
                                `Administrator' means the Administrator 
                                of the Account appointed under clause 
                                (vii).
                                    ``(III) Class iv final product.--
                                The term `Class IV final product' means 
                                butter, nonfat dry milk, and dry whole 
                                milk.
                                    ``(IV) Milk marketing order.--The 
                                term `milk marketing order' means a 
                                milk marketing order issued pursuant to 
                                this section and any comparable State 
                                milk marketing order or system.
                            ``(ii) Establishment of account.--
                        Notwithstanding any other provision of law, the 
                        Secretary shall establish an Account for Class 
                        IV final products to equalize returns from all 
                        milk used in the 48 contiguous States to 
                        produce Class IV final products among all milk 
                        marketed by producers for commercial use.
                            ``(iii) Class iv price and differential; 
                        proration.--
                                    ``(I) Price.--The Secretary shall 
                                determine a milk equivalent value per 
                                hundredweight for Class IV final 
                                products each month based on the 
                                average wholesale market prices during 
                                the month for Class IV final products. 
                                The milk equivalent value at 3.67 
                                percent milkfat shall be the per 
                                hundredweight Class IV price under the 
                                Account.
                                    ``(II) Differential.--The 
                                Administrator of the Account shall 
                                announce, on the first business day of 
                                each month, the per hundredweight Class 
                                IV differential applicable to the 
                                preceding month. The monthly Class IV 
                                differential shall be the amount, if 
                                any, by which the support rate for milk 
                                in effect under section 204 of the 
                                Agricultural Act of 1949 (7 U.S.C. 
                                1446e) exceeds the Class IV price 
                                established pursuant to subclause (I).
                                    ``(III) Proration.--On or before 
                                the twentieth day after the end of each 
                                month, the Administrator of the Account 
                                shall--
                                            ``(aa) determine the 
                                        quantity of milk produced in 
                                        the 48 contiguous States of the 
                                        United States and marketed for 
                                        commercial use in producing 
                                        Class IV final products during 
                                        the preceding month;
                                            ``(bb) calculate the 
                                        quantity equal to the number of 
                                        hundredweights of milk used for 
                                        Class IV final products during 
                                        the preceding month (as 
                                        determined under item (aa)) 
                                        multiplied by the Class IV 
                                        differential for the month 
                                        established under subclause 
                                        (II), and add to that amount 
                                        the cost of administering the 
                                        Account during the current 
                                        month; and
                                            ``(cc) prorate the amount 
                                        established under item (bb) 
                                        among the total amount, in 
                                        hundredweights, of milk 
                                        produced in the 48 contiguous 
                                        States and marketed for 
                                        commercial use during the 
                                        preceding month.
                            ``(iv) Account obligations.--On or before 
                        the twenty-fifth day after the end of each 
                        month:
                                    ``(I) Each person making payment to 
                                a producer for milk produced in any of 
                                the 48 contiguous States of the United 
                                States and marketed for commercial use 
                                shall collect from each producer the 
                                amount determined by multiplying the 
                                quantity of milk handled for the 
                                account of the producer during the 
                                preceding month by the Class IV 
                                differential proration established 
                                pursuant to clause (iii)(III)(ccc). The 
                                amount shall be remitted to the 
                                Administrator of the Account.
                                    ``(II) Any producer marketing milk 
                                of the producer's own production in the 
                                form of milk or dairy products to 
                                consumers, either directly or through 
                                retail or wholesale outlets, shall 
                                remit to the Administrator of the 
                                Account the amount determined by 
                                multiplying the quantity of the milk 
                                marketed by the producer by the Class 
                                IV differential proration established 
                                under clause (iii)(III)(ccc).
                            ``(v) Distribution of account proceeds.--On 
                        or before the thirtieth day after the end of 
                        each month, the Administrator of the Account 
                        shall pay to each person that used skim milk 
                        and butterfat to produce Class IV final 
                        products during the preceding month a 
                        proportionate share of the total Account 
                        proceeds for the month. The proportion of the 
                        total proceeds payable to each person shall be 
                        the same proportion that the skim milk and 
                        butterfat used by the person to produce Class 
                        IV final products during the preceding month is 
                        of the total skim milk and butterfat used by 
                        all persons during the preceding month to 
                        produce Class IV final products.
                            ``(vi) Effect on blend prices.--Producer 
                        blend prices under a milk marketing order shall 
                        be adjusted to account for revenue 
                        distributions required under clauses (iv) and 
                        (v).
                            ``(vii) Administration of class iv 
                        account.--The Secretary shall appoint a person 
                        to serve as the Administrator of the Account 
                        and shall delegate to the Administrator such 
                        powers as are needed to carry out the duties of 
                        Administrator.
                            ``(viii) Enforcement.--
                                    ``(I) Collection.--The amounts 
                                specified in clause (iv) shall be 
                                collected and remitted to the 
                                Administrator in the manner prescribed 
                                by the Secretary.
                                    ``(II) Penalties.--If any person 
                                fails to remit the amounts required 
                                under clause (iv) or fails to comply 
                                with such requirements for 
                                recordkeeping or otherwise as are 
                                required by the Secretary to carry out 
                                this subparagraph, the person shall be 
                                liable to the Secretary for a civil 
                                penalty up to, as determined by the 
                                Secretary, an amount determined by 
                                multiplying--
                                            ``(i) the quantity of milk 
                                        involved in the violation; by
                                            ``(ii) the support rate for 
                                        milk in effect under section 
                                        204 of the Agricultural Act of 
                                        1949 (7 U.S.C. 1446e) for the 
                                        applicable calendar year.
                                    ``(III) Enforcement.--The Secretary 
                                may enforce this clause in the courts 
                                of the United States.
                            ``(ix) Regulations.--The Secretary shall 
                        issue regulations to establish the Account 
                        without regard to the notice and comment 
                        requirements of section 553 of title 5, United 
                        States Code.''.
    (d) Northeast Interstate Dairy Compact.--Congress consents to the 
Northeast Interstate Dairy Compact entered into among the States of 
Vermont, New Hampshire, Maine, Connecticut, Rhode Island, and 
Massachusetts, subject to the following conditions:
            (1) Compensation of ccc.--Before the end of each fiscal 
        year that a Compact price regulation is in effect, the Compact 
        Commission shall compensate the Commodity Credit Corporation 
        for the cost of any purchases of milk and milk products by the 
        Corporation that result from projected fluid milk production 
        for the fiscal year within the Compact region in excess of the 
        national average rate of purchases of milk and milk products by 
        the Corporation.
            (2) Milk market order administrator.--By agreement among 
        the States and the Secretary of Agriculture, the Administrator 
        shall provide technical assistance to the compact Commission, 
        and be reimbursed for the assistance, with respect to the 
        applicable milk marketing order issued under section 8c(5) of 
        the Agricultural Adjustment Act (7 U.S.C. 608c(5)), reenacted 
        with amendments by the Agricultural Marketing Agreement Act of 
        1937.
            (3) Termination and renewal.--The consent for the Compact 
        shall--
                    (A) terminate on the date that is 7 years after the 
                date of enactment of this Act, subject to subparagraph 
                (B); and
                    (B) may be renewed by Congress, without prior 
                ratification by the States' legislatures.
    (e) Agricultural Competitiveness Grants.--The Secretary of 
Agriculture (referred to in this subtitle as the ``Secretary'') shall, 
in accordance with this subtitle, award a grant to a grantee eligible 
under section 1502 to promote a purpose of this subtitle.
    (f) Eligible Grantee.--The Secretary may make a grant under section 
1501 to--
            (1) a college or university;
            (2) a State agricultural experiment station;
            (3) a State Cooperative Extension Service;
            (4) a research institution or organization;
            (5) a private organization or person; or
            (6) a Federal agency.
    (g) Use of Grant.--A grant made under section 1501 may be used by a 
grantee for 1 or more of the following uses:
            (1) Research, ranging from discovery to principles of 
        application.
            (2) Extension and related private-sector activities.
            (3) Education.
    (h) Priority.--In administering this subtitle, the Secretary 
shall--
            (1) establish priorities for allocating grants, based on 
        needs and opportunities of the food and agriculture system in 
        the United States;
            (2) seek and accept proposals for grants;
            (3) determine the relevance and merit of proposals through 
        a system of peer review; and
            (4) award grants on the basis of merit and quality.
    (i) Administration.--
            (1) Competitive grant.--A grant under section 1501 shall be 
        awarded on a competitive basis.
            (2) Term.--A grant under section 1501 shall have a term 
        that does not exceed 5 years.
            (3) Matching funds.--As a condition of receipt of a grant 
        under section 1501, the Secretary shall require the funding of 
        the grant with equal matching funds from a non-Federal source 
        if the grant is--
                    (A) for applied research that is commodity-
                specific; and
                    (B) not of national scope.
            (4) Administrative costs.--The Secretary may use not more 
        than 4 percent of the funds made available under section 1506 
        for administrative costs incurred by the Secretary in carrying 
        out this subtitle.
            (5) Construction costs.--None of the funds made available 
        under section 1507 may be used for the construction of a new 
        building or the acquisition, expansion, remodeling, or 
        alteration of an existing building (including site grading and 
        improvement and architect fees).
    (j) Regulations.--The Secretary shall issue such regulations as are 
necessary to carry out this subtitle.
    (k) Use of commodity credit corporation funds.--
            (1) In general.--Subject to subsection (b), the Secretary 
        shall use $30,000,000 of the funds of the Commodity Credit 
        Corporation for each of fiscal years 1996 through 2002 to carry 
        out this title.
            (2) Limitation.--The Secretary may use less than 
        $30,000,000 of the funds of the Commodity Credit Corporation 
        for any fiscal year if the Secretary determines that the full 
        funding level is not necessary to fund all qualifying 
        applications for agricultural competitiveness grants that 
        satisfy the priority criteria established under section 1504.
            (3) Powers of the Corporation.--Section 5 of the Commodity 
        Credit Corporation Charter Act (15 U.S.C. 714c) (as amended by 
        section 1201(c)(1)) is amended by inserting after subsection 
        (g) the following:
    ``(h) Carry out research, extension, and education related to 
agriculture by using not more than $30,000,000 of the funds of the 
Corporation in any fiscal year for any function or activity relating to 
agricultural research, extension, or education.''.
    (l) Effective date.--This subtitle and the amendment made by this 
subtitle shall become effective upon enactment.

SEC. 1107. OILSEEDS PROGRAM.

    Section 205 of the Agricultural Act of 1949 (7 U.S.C. 1446f) is 
amended--
            (1) in the section heading, by striking ``1995'' and 
        inserting ``2002'';
            (2) in subsections (b), (c), (e)(1), and (n), by striking 
        ``1995'' each place it appears and inserting ``2002''; and
            (3) in subsections (c) and (h)(2), by striking ``1997'' 
        each places it appears and inserting ``2002''.

SEC. 1108. SUGAR PROGRAM.

    (a) In General.--Section 206 of the Agricultural Act of 1949 (7 
U.S.C. 1446g) is amended--
            (1) in the section heading, by striking ``1997'' and 
        inserting ``2002'';
            (2) in subsection (a), by striking ``1997'' and inserting 
        ``2002'';
            (3) in subsection (b), by striking ``nonrecourse'';
            (4) in subsection (c)--
                    (A) by striking ``1997'' and inserting ``2002''; 
                and
                    (B) by striking ``nonrecourse'';
            (5) by redesignating subsections (d) through (j) as 
        subsections (f) through (l), respectively;
            (6) by inserting after subsection (c) the following:
    ``(d) Loans.--
            ``(1) In general.--Subject to paragraph (2), the Secretary 
        shall carry out this section through the use of recourse loans.
            ``(2) Import trigger for nonrecourse loans.--If in any 
        fiscal year the tariff rate quota for imports of sugar into the 
        United States is established at a level equal to 1,340,000 or 
        more short tons, raw value, the Secretary shall for the 
        duration of the fiscal year make available nonrecourse loans 
        under this section. A recourse loan made during the fiscal year 
        prior to the tariff rate quota being established at 1,340,000 
        or more short tons, raw value, under this section shall be 
        modified by the Secretary into a nonrecourse loan for the 
        remainder of the term of the loan.
            ``(3) Processor assurances.--The Secretary shall obtain 
        from each processor that obtains either a recourse or 
        nonrecourse loan under this section such assurances as the 
        Secretary considers necessary to ensure that producers of 
        sugarcane and sugar beets will receive payments that are 
        proportional to the value of the loan received by the 
        processor, as determined by the Secretary.
    ``(e) Forfeitures.--A penalty shall be assessed on the forfeiture 
of any sugar pledged as collateral for a nonrecourse loan. The penalty 
for cane sugar shall be equivalent to 1 cent per pound. The penalty for 
beet sugar shall bear the same relation to the penalty for cane sugar 
as the marketing assessment for sugar beets bears to the marketing 
assessment for sugarcane.'';
            (7) in subsection (f)(1) (as so redesignated), by striking 
        ``1997'' and inserting ``2002'';
            (8) in subsection (h) (as so redesignated), by striking 
        ``subsection (g)'' and inserting ``subsection (i)'';
            (9) in subsection (i) (as so redesignated)--
                    (A) in the subsection heading, by striking 
                ``Nonrecourse''; and
                    (B) by striking ``price support'' each place it 
                appears;
            (10) in subsection (k) (as so redesignated)--
                    (A) in the subsection heading, by striking 
                ``Marketing Assessment'' and inserting ``Assessments on 
                All Marketed Sugar'';
                    (B) in paragraph (1)--
                            (i) by striking ``1996'' and inserting 
                        ``2002'';
                            (ii) in subparagraph (A)--
                                    (I) by striking ``each of fiscal 
                                years 1992 through 1994, 1.0'' and 
                                inserting ``fiscal year 1996, 1.1''; 
                                and
                                    (II) by striking ``(but'' and all 
                                that follows through ``sugar),''; and
                            (iii) in subparagraph (B)--
                                    (I) by striking ``1995 through 
                                1998, 1.1'' and inserting ``1997 
                                through 2003, 1.375''; and
                                    (II) by striking ``(but'' and all 
                                that follows through ``sugar),''; and
                    (C) in paragraph (2)--
                            (i) by striking ``1996'' and inserting 
                        ``2002'';
                            (ii) in subparagraph (A)--
                                    (I) by striking ``each of fiscal 
                                years 1992 through 1994, 1.0722'' and 
                                inserting ``fiscal year 1996, 1.1794''; 
                                and
                                    (II) by striking ``(but'' and all 
                                that follows through ``sugar),''; and
                            (iii) in subparagraph (B)--
                                    (I) by striking ``1995 through 
                                1998, 1.1794'' and inserting ``1997 
                                through 2003, 1.47425''; and
                                    (II) by striking ``(but'' and all 
                                that follows through ``sugar),''; and
                    (D) by striking paragraph (6); and
            (11) in subsection (l) (as so redesignated), by striking 
        ``1997'' and inserting ``2002''.
    (b) Loan Provisions.--Section 401(e)(1) of the Agricultural Act of 
1949 (7 U.S.C. 1421(e)(1)) is amended by adding at the end the 
following: ``In the case of price support for sugarcane or sugar beets, 
the payment owed producers by a processor shall be reduced in 
proportion to the loan forfeiture penalty amounts incurred by the 
processor as provided in section 206(e).''.
    (c) Marketing Allotments.--Part VII of subtitle B of title III of 
the Agricultural Adjustment Act of 1938 (7 U.S.C. 1359aa et seq.) is 
repealed.

SEC. 1109. ACREAGE BASE AND YIELD SYSTEM.

    Title V of the Agricultural Act of 1949 (7 U.S.C. 1461 et seq.) is 
amended--
            (1) in section 503 (7 U.S.C. 1463)--
                    (A) in subsection (a)--
                            (i) in paragraph (2), by adding ``and 
                        historical soybean acreage'' after ``crop 
                        acreage bases''; and
                            (ii) by adding at the end the following:
            ``(4) Historical soybean acreage.--
                    ``(A) In general.--The Secretary shall provide for 
                the establishment and maintenance of an historical 
                soybean acreage for each farm.
                    ``(B) Quantity.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), the historical soybean acreage for 
                        a farm for a crop year shall be equal to the 
                        average of the acreage planted to soybeans for 
                        harvest on the farm in each of the previous 5 
                        crop years.
                            ``(ii) Exception.--In determining the 
                        historical soybean acreage for a farm for a 
                        crop year, the Secretary shall exclude from the 
                        acreage any soybean plantings that were 
                        considered planted to a program crop or are 
                        planted for harvest on a crop acreage base.'';
                    (B) in subsection (b)--
                            (i) by striking ``Calculation.--'' and all 
                        that follows through ``paragraph (2), the'' in 
                        paragraph (1) and inserting ``Calculation.--
                        The''; and
                            (ii) by striking paragraph (2);
                    (C) in subsection (c)--
                            (i) in paragraph (1), by inserting ``in the 
                        case of each of the 1991 through 1995 crops,'' 
                        after ``(1)'';
                            (ii) in paragraph (3), by striking ``1997'' 
                        and inserting ``1995'';
                            (iii) in paragraph (4)--
                                    (I) by inserting ``in the case of 
                                the 1991 through 1995 crops, and base 
                                acreage in the case of the 1996 through 
                                2002 crops,'' after ``permitted 
                                acreage''; and
                                    (II) by inserting ``or conservation 
                                uses or related commodity production 
                                permitted by the Secretary'' after 
                                ``section 504''; and
                            (iv) in paragraph (6), by inserting ``in 
                        the case of each of the 1991 through 1995 
                        crops,'' after ``(6)''; and
                    (D) by striking subsection (h);
            (2) in section 504 (7 U.S.C. 1464)--
                    (A) in subsection (b)--
                            (i) in paragraph (1)--
                                    (I) in the paragraph heading, by 
                                striking ``Permitted crops'' and 
                                inserting ``Payment acres'';
                                    (II) by striking ``for purposes of 
                                this section,'';
                                    (III) by striking ``a crop acreage 
                                base'' and inserting ``the payment 
                                acres of a crop acreage base'';
                                    (IV) in subparagraph (D), by 
                                striking ``and'' at the end;
                                    (V) in subparagraph (E), by 
                                striking the period at the end and 
                                inserting ``; and''; and
                                    (VI) by adding at the end the 
                                following:
                    ``(F) peas and lentils.''; and
                            (ii) by adding at the end the following:
            ``(4) Crop acreage base not eligible for payment.--Any crop 
        or conserving crop that is planted on the acres of a crop 
        acreage base that are not eligible for payments shall be 
        eligible for loans. Haying and grazing on the acres shall not 
        be restricted.'';
                    (B) by striking subsection (c) and inserting the 
                following:
    ``(c) Limitations on Acreage and Payments.--
            ``(1) In general.--Except as otherwise provided in this 
        section, the planting of a program crop may exceed 100 percent 
        of the crop acreage base of the program crop. The program crop 
        shall be eligible for loans.
            ``(2) Upland cotton and rice.--In the case of upland cotton 
        and rice, any crop other than upland cotton or rice that is 
        planted on an upland cotton or rice crop acreage base shall not 
        be eligible for payments.
            ``(3) Wheat and feed grains.--In the case of wheat and feed 
        grains, except as provided in paragraph (4), any crop planted 
        on a wheat or feed grain crop acreage base shall be eligible 
        for payments that are attributable to the payment acres of the 
        wheat or feed grain crop acreage base.
            ``(4) Exceptions.--
                    ``(A) Payments on multiple crop acreage bases.--
                Producers on a farm with wheat or feed grain crop 
                acreage base and upland cotton or rice crop acreage 
                base may not receive payments with respect to the rice 
                or upland cotton planted on the wheat or feed grain 
                crop acreage base.
                    ``(B) Upland cotton or rice payments.--Upland 
                cotton or rice shall not be eligible for payments if 
                planted in excess of the respective crop acreage base, 
                except that--
                            ``(i) upland cotton or rice planted on 
                        acreage not eligible for payments under 
                        subsection (b)(4) shall not affect the 
                        eligibility for payments under this 
                        subparagraph, but shall be eligible for loans; 
                        and
                            ``(ii) acreage described in subsection 
                        (e)(1) shall be eligible for loans, but not for 
                        payments.'';
                    (C) by striking subsection (d);
                    (D) by redesignating subsection (e) as subsection 
                (d);
                    (E) in subsection (d)(2) (as so redesignated)--
                            (i) by striking ``the producers--'' and all 
                        that follows through ``(A) plant'' and 
                        inserting ``the producers plant'';
                            (ii) by striking ``25 percent'' and 
                        inserting ``100 percent''; and
                            (iii) by striking ``crop; and'' all that 
                        follows through the period at the end and 
                        inserting ``crop.''; and
                    (F) by adding at the end the following:
    ``(e) Two-Way Flexibility.--Producers of a crop of upland cotton or 
rice on a farm who are participating in the annual program for upland 
cotton or rice may plant the crop without losing eligibility for loans 
with respect to the crop if the acreage planted to the crop on the farm 
does not exceed the sum of--
            ``(1) 25 percent of the historical soybean acreage on the 
        farm; and
            ``(2) 100 percent of the crop acreage base.'';
            (3) in section 505 (7 U.S.C. 1465)--
                    (A) in subsection (a), by striking ``or (c)'';
                    (B) in subsection (b)--
                            (i) in paragraph (1)--
                                    (I) by striking ``paragraphs (2) 
                                and (3)'' and inserting ``paragraph 
                                (2)''; and
                                    (II) by striking ``1997'' and 
                                inserting ``2002'';
                            (ii) in paragraph (2), by striking ``1997'' 
                        and inserting ``2002''; and
                            (iii) by striking paragraphs (3), (4), and 
                        (5); and
                    (C) by striking subsections (c), (d), and (e); and
            (4) in section 509 (7 U.S.C. 1469), by striking ``1997'' 
        and inserting ``2002''.

SEC. 1110. EXTENSION OF RELATED PRICE SUPPORT PROVISIONS.

    Title X of the Food Security Act of 1985 (Public Law 99-198; 99 
Stat. 1444) is amended--
            (1) in section 1001 (7 U.S.C. 1308), by striking ``1997'' 
        each place it appears in paragraphs (1)(A), (1)(B), and (2)(A) 
        and inserting ``2002''; and
            (2) in section 1001C(a) (7 U.S.C. 1308-3(a)), by striking 
        ``1997'' each place it appears and inserting ``2002''.

SEC. 1111. REPEAL OF MISCELLANEOUS AUTHORITIES.

    (a) Agricultural Adjustment Act of 1938.--Title III of the 
Agricultural Adjustment Act of 1938 is amended--
            (1) in subtitle B--
                    (A) by striking parts II through V (7 U.S.C. 1326 
                et seq.); and
                    (B) in part VI, by striking sections 358, 358a, and 
                358d (7 U.S.C. 1358, 1358a, and 1359); and
            (2) by striking subtitle D (7 U.S.C. 1379a et seq.).
    (b) Tree Assistance Program.--The Secretary of Agriculture shall 
terminate the tree assistance program established under part 1478 of 
title 7, Code of Federal Regulations.

SEC. 1112. COMMODITY CREDIT CORPORATION INTEREST RATE.

    Notwithstanding any other provision of law, the monthly Commodity 
Credit Corporation interest rate applicable to loans provided for 
agricultural commodities by the Corporation shall be 100 basis points 
greater than the rate determined under the applicable interest rate 
formula in effect on October 1, 1995.

SEC. 1113. PEANUT PROGRAM.

    (a) Price Support.--Section 108B of the Agricultural Act of 1949 (7 
U.S.C. 1445c-3) is amended--
            (1) in the section heading, by striking ``1997'' and 
        inserting ``2000'';
            (2) in subsection (a)--
                    (A) in paragraph (1), by striking ``1997'' and 
                inserting ``2000''; and
                    (B) by striking paragraph (2) and inserting the 
                following:
            ``(2) Support rate.--The national average quota support 
        rate for each of the 1996 through 2000 crops of quota peanuts 
        shall be $628 per ton.'';
            (3) in subsection (b)(1), by striking ``1997'' and 
        inserting ``2000'';
            (4) in the first sentence of subsection (c)(2)(A), by 
        inserting before the period at the end the following: ``and 
        that, in the case of the 1996 and subsequent crops, Valencia 
        peanuts not produced in the State shall not be eligible to 
        participate in the pools of the State'';
            (5) in subsection (g)--
                    (A) in paragraphs (1) and (2)(A)(ii)(II), by 
                striking ``1997 crops'' each place it appears and 
                inserting ``2000 crops''; and
                    (B) by striking ``the 1997 crop'' each place it 
                appears and inserting ``each of the 1997 through 2000 
                crops''; and
            (6) in subsection (h), by striking ``1997'' and inserting 
        ``2000''.
    (b) Poundage Quotas.--Section 358-1 of the Agricultural Adjustment 
Act of 1938 (7 U.S.C. 1358-1) is amended--
            (1) in the section heading, by striking ``1997'' and 
        inserting ``2000'';
            (2) in subsection (a)--
                    (A) by redesignating paragraphs (2) and (3) as 
                paragraphs (3) and (4), respectively;
                    (B) by striking paragraph (1) and inserting the 
                following:
            ``(1) Establishment.--The Secretary shall establish the 
        national poundage quota for peanuts for each of the 1991 
        through 2000 marketing years.
            ``(2) Level.--The Secretary shall establish the national 
        poundage quota at a level that is equal to the quantity of 
        peanuts (in tons) that the Secretary estimates will be devoted 
        in each marketing year to domestic edible and related uses, 
        excluding seed, plus a reasonable quantity of peanuts for 
        carryover to ensure continuity of supply between marketing 
        years. Undermarketings of quota peanuts from the previous year 
        shall not be considered. In establishing the quota, the 
        Secretary shall take into account--
                    ``(A) any stocks of peanuts on hand in the 
                inventory of the Commodity Credit Corporation; and
                    ``(B) peanuts or products of peanuts imported into 
                the United States;''; and
                    (C) in paragraph (4) (as so redesignated), by 
                striking ``established under paragraph (1)'';
            (3) in subsection (b)--
                    (A) by striking ``1997'' each place it appears and 
                inserting ``2000'';
                    (B) in paragraph (2), by striking subparagraph (B) 
                and inserting the following:
                    ``(B) Temporary quota allocation.--
                            ``(i) In general.--Subject to clause (iv), 
                        temporary allocation of a poundage quota for 
                        the marketing year in which a crop of peanuts 
                        is planted shall be made to producers for each 
                        of the 1991 through 2000 marketing years in 
                        accordance with this subparagraph.
                            ``(ii) Quantity.--The temporary quota 
                        allocation shall be equal to the quantity of 
                        seed peanuts (in pounds) planted on a farm, as 
                        determined in accordance with regulations 
                        issued by the Secretary.
                            ``(iii) Allocation.--The allocation of 
                        quota pounds to producers under this 
                        subparagraph shall be performed in such a 
                        manner as will not result in a net decrease in 
                        quota pounds on a farm in excess of 3 percent, 
                        after the temporary seed quota is added, from 
                        the basic farm quota for the 1995 marketing 
                        year. A decrease shall occur only once, and 
                        shall be applicable only to the 1996 marketing 
                        year.
                            ``(iv) No increased costs.--The Secretary 
                        may carry out this subparagraph only if this 
                        subparagraph does not result in--
                                    ``(I) an increased cost to the 
                                Commodity Credit Corporation through 
                                displacement of quota peanuts by 
                                additional peanuts in the domestic 
                                market;
                                    ``(II) an increased loss in a loan 
                                pool of an area marketing association 
                                designated pursuant to section 
                                108B(c)(1) of the Agricultural Act of 
                                1949 (7 U.S.C. 1445c-3(c)(1)); or
                                    ``(III) other increased costs.
                            ``(v) Use of quota and additional 
                        peanuts.--Nothing in this subparagraph affects 
                        the requirements of section 358b(b).
                            ``(vi) Additional allocation.--The 
                        temporary allocation of quota pounds under this 
                        subparagraph shall be in addition to the farm 
                        poundage quota established under this 
                        subsection and shall be credited to the 
                        producers of the peanuts on the farm in 
                        accordance with regulations issued by the 
                        Secretary.''; and
                    (C) by striking paragraphs (8) and (9); and
            (4) in subsection (f), by striking ``1997'' and inserting 
        ``2000''.
    (c) Sale, Lease, or Transfer.--Section 358b of the Agricultural 
Adjustment Act of 1938 (7 U.S.C. 1358b) is amended to read as follows:

``SEC. 358b. SALE, LEASE, OR TRANSFER OF FARM POUNDAGE QUOTA FOR 1991 
              THROUGH 2000 CROPS OF PEANUTS.

    ``(a) In General.--
            ``(1) Authority.--
                    ``(A) In general.--Subject to such terms, 
                conditions, or limitations as the Secretary may 
                prescribe, the owner, or operator with the permission 
                of the owner, of any farm for which a farm poundage 
                quota has been established under this Act may sell or 
                lease all or any part of the poundage quota to any 
                other owner or operator of a farm within counties of a 
                State for transfer to the farm, except that any such 
                lease of poundage quota may be entered into in the fall 
                or after the normal planting season--
                            ``(i) if not less than 90 percent of the 
                        basic quota (consisting of the farm quota and 
                        temporary quota transfers), plus any poundage 
                        quota transferred to the farm under this 
                        subsection, has been planted or considered 
                        planted on the farm from which the quota is to 
                        be leased; and
                            ``(ii) under such terms and conditions as 
                        the Secretary may prescribe by regulation.
                    ``(B) Fall transfers.--
                            ``(i) No transfer authorization.--In the 
                        case of a fall transfer or a transfer after the 
                        normal planting season by a cash lessee, the 
                        landowner shall not be required to sign the 
                        transfer authorization.
                            ``(ii) Time limitation.--A fall transfer or 
                        a transfer after the normal planting season may 
                        be made not later than 72 hours after the 
                        peanuts that are the subject of the transfer 
                        are inspected and graded.
                            ``(iii) Lessees.--In the case of a fall 
                        transfer, poundage quota from a farm may be 
                        leased to an owner or operator of another farm 
                        within the same county or to an owner or 
                        operator of another farm in any other county 
                        within the State.
                            ``(iv) Effect of transfer.--A fall transfer 
                        of poundage quota shall not affect the farm 
                        quota history for the transferring or receiving 
                        farm and shall not result in the reduction of 
                        the farm poundage quota on the transferring 
                        farm.
            ``(2) Transfers to other self-owned farms.--The owner or 
        operator of a farm may transfer all or any part of the farm 
        poundage quota for the farm to any other farm owned or 
        controlled by the owner or operator that is in the same State 
        and that had a farm poundage quota for the crop of the 
        preceding year, if both the transferring and receiving farms 
        were under the control of the owner or operator for at least 3 
        crop years prior to the crop year in which the farm poundage 
        quota is to be transferred. Any farm poundage quota transferred 
        under this paragraph shall not result in any reduction in the 
        farm poundage quota for the transferring farm if sufficient 
        acreage is planted on the receiving farm to produce the quota 
        pounds transferred.
            ``(3) Transfers in states with small quotas.--In the case 
        of any State for which the poundage quota allocated to the 
        State was less than 10,000 tons for the crop of the preceding 
        year, all or any part of a farm poundage quota may be 
        transferred by sale or lease or otherwise from a farm in 1 
        county to a farm in another county in the State.
            ``(4) Transfers by sale in states having quotas of 10,000 
        tons or more.--
                    ``(A) In general.--Subject to the other provisions 
                of this paragraph and such terms and conditions as the 
                Secretary may prescribe, the owner, or operator with 
                the permission of the owner, of any farm for which a 
                farm quota has been established under this Act in a 
                State for which the poundage quota allocated to the 
                State was 10,000 tons or more may sell poundage quota 
                to any other eligible owner or operator of a farm 
                within the State.
                    ``(B) Limitations based on total poundage quota.--
                            ``(i) 1996 marketing year.--Not more than 
                        15 percent of the total poundage quota within a 
                        county as of January 1, 1996, may be sold and 
                        transferred under this paragraph during the 
                        1996 marketing year.
                            ``(ii) 1997-2000 marketing years.--
                                    ``(I) In general.--Except as 
                                provided in subclause (II), not more 
                                than 5 percent of the quota pounds 
                                remaining in a county as of January 1, 
                                1997, and each January 1 thereafter 
                                through January 1, 2000, may be sold 
                                and transferred under this paragraph 
                                during the applicable marketing year.
                                    ``(II) Carryover.--Any eligible 
                                quota that is not sold or transferred 
                                under clause (i) shall be eligible for 
                                sale or transfer under subclause (I).
                    ``(C) County limitation.--Not more than 35 percent 
                of the total poundage quota within a county may be sold 
                and transferred under this paragraph.
                    ``(D) Subsequent leases or sales.--Quota pounds 
                sold and transferred to a farm under this paragraph may 
                not be leased or sold by the farm to another owner or 
                operator of a farm within the same State for a period 
                of 5 years following the date of the original transfer 
                to the farm.
                    ``(E) Application.--This paragraph shall not apply 
                to a sale within the same county or to any sale, lease, 
                or transfer described in paragraph (1).
    ``(b) Conditions.--Transfers (including transfer by sale or lease) 
of farm poundage quotas under this section shall be subject to all of 
the following conditions:
            ``(1) Lienholders.--No transfer of the farm poundage quota 
        from a farm subject to a mortgage or other lien shall be 
        permitted unless the transfer is agreed to by the lienholders.
            ``(2) Tillable cropland.--No transfer of the farm poundage 
        quota shall be permitted if the county committee established 
        under section 8(b) of the Soil Conservation and Domestic 
        Allotment Act (16 U.S.C. 590h(b)) determines that the receiving 
        farm does not have adequate tillable cropland to produce the 
        farm poundage quota.
            ``(3) Record.--No transfer of the farm poundage quota shall 
        be effective until a record of the transfer is filed with the 
        county committee of each county to, and from, which the 
        transfer is made and each committee determines that the 
        transfer complies with this section.
            ``(4) Other terms.--The Secretary may establish by 
        regulation other terms and conditions.
    ``(c) Crops.--This section shall be effective only for the 1991 
through 2000 crops of peanuts.''.
    (d) Experimental and Research Programs for Peanuts.--Section 
358c(d) of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1358c(d)) 
is amended by striking ``1995'' and inserting ``2000''.
    (e) Marketing Penalties and Disposition of Additional Peanuts.--
Section 358e of the Agricultural Adjustment Act of 1938 (7 U.S.C. 
1359a) is amended--
            (1) in the section heading, by striking ``1997'' and 
        inserting ``2000''; and
            (2) in subsection (i), by striking ``1997'' and inserting 
        ``2000''.

SEC. 1114. CATASTROPHIC CROP INSURANCE COVERAGE.

    (a) In General.--Section 427 of the Agricultural Act of 1949 (7 
U.S.C. 1433f) is amended by striking ``subsequent'' and inserting 
``1996''.
    (b) Conforming Amendments.--Section 508(b) of the Federal Crop 
Insurance Act (7 U.S.C. 1508(b)) is amended--
            (1) by striking paragraph (6); and
            (2) by redesignating paragraphs (7) through (10) as 
        paragraphs (6) through (9), respectively.
    (c) Crops.--The amendments made by subsection (b) shall apply 
beginning with the 1997 crop of an insurable commodity.

SEC. 1115. SAVINGS ADJUSTMENT.

    (a) Payment Rates.--If the Director estimates that total direct 
spending savings described in subsection (a)(1) are less than 
$13,400,000,000, the Secretary of Agriculture shall reduce the maximum 
payment rates for deficiency payments for rice, upland cotton, feed 
grains, and wheat provided in sections 302, 303, 304, and 305 of the 
Agricultural Act of 1949 (as amended by this subtitle) by an equal 
percentage for each of the 1996 through 2002 crops of the commodity, to 
acheive total direct spending savings described in subsection (a)(1) of 
$13,400,000,000.
    (b) Maximum Reduction.--The maximum deficiency payment rate 
reduction under subsection (a) shall not exceed 2 percent.

SEC. 1116. SENSE OF THE SENATE REGARDING TAX PROVISIONS RELATING TO 
              ETHANOL.

    (a) In General.--The Senate finds that--
            (1) ethanol and its derivative ethyl tertiary butyl ether 
        (ETBE) are used as fuels or additives to fuels for motor 
        vehicles;
            (2) ethanol and ETBE have been shown to improve air quality 
        when used as fuels or fuel additives;
            (3) ethanol and ETBE are primarily made from renewable 
        resources and produced domestically;
            (4) studies, including a study very recently released by 
        the Department of Agriculture, have shown that when used as 
        fuel, ethanol and ETBE yield more energy than is required to 
        produce them;
            (5) the use of domestically produced ethanol and ETBE can 
        thus reduce our nation's reliance on energy imports and improve 
        our energy security;
            (6) the use of ethanol and ETBE adds significantly to 
        market opportunities for corn, which constitutes about 95 
        percent of the feedstock for ethanol production, thereby 
        improving corn prices and farm income;
            (7) the production of ethanol and ETBE contributes 
        substantially to improved economic and job growth, particularly 
        in rural communities;
            (8) ethanol and ETBE currently qualify for tax incentives 
        which facilitate and promote the use of these clean-burning, 
        renewable, and domestically-produced fuels; and
            (9) a recently-released report from the General Accounting 
        Office confirmed the results of numerous previous reports 
        demonstrating that the ethanol tax incentives result in net 
        savings to the Federal Government as farm program costs are 
        reduced through improved grain prices.
    (b) Sense of the Senate.--It is the sense of the Senate that any 
legislation enacted by Congress should not eliminate or in any way 
weaken or diminish incentives under Federal tax laws or regulations 
that facilitate or promote the production, blending, or use of ethanol 
and ETBE.

SEC. 1117. EFFECTIVE DATE.

    (a) Effective Date.--
            (1) In general.--Except as provided in this subsection and 
        as otherwise specifically provided in this subtitle, this 
        subtitle and the amendments made by this subtitle shall apply 
        beginning with the earlier of--
                    (A) the 1996 crop of an agricultural commodity; or
                    (B) November 1, 1995.
            (2) Milk.--This subtitle and the amendments made by this 
        subtitle shall apply to milk and dairy products beginning on 
        January 1, 1996.
    (b) Prior Crops.--
            (1) In general.--Except as otherwise specifically provided 
        and notwithstanding any other provision of law, this subtitle 
        and the amendments made by this subtitle shall not affect the 
        authority of the Secretary of Agriculture to carry out a price 
        support or production adjustment program for any of the 1991 
        through 1995 crops of an agricultural commodity established 
        under a provision of law in effect immediately before the 
        applicable effective date specified in subsection (a).
            (2) Liability.--A provision of this subtitle or an 
        amendment made by this subtitle shall not affect the liability 
        of any person under any provision of law as in effect before 
        the application of the provision in accordance with subsection 
        (a).

                        Subtitle B--Conservation

SEC. 1201. CONSERVATION.

    (a) Funding.--Subtitle E of title XII of the Food Security Act of 
1985 (16 U.S.C. 3841 et seq.) is amended to read as follows:

                         ``Subtitle E--Funding

``SEC. 1241. FUNDING.

    ``(a) Mandatory Expenses.--For each of fiscal years 1996 through 
2002, the Secretary shall use the funds of the Commodity Credit 
Corporation to carry out the programs authorized by--
            ``(1) subchapter B of chapter 1 of subtitle D (including 
        contracts extended by the Secretary pursuant to section 1437 of 
        the Food, Agriculture, Conservation, and Trade Act of 1990 
        (Public Law 101-624; 16 U.S.C. 3831 note));
            ``(2) subchapter C of chapter 1 of subtitle D; and
            ``(3) chapter 2 of subtitle D for practices related to 
        livestock production.
    ``(b) Environmental Quality Incentives Program.--For each of fiscal 
years 1996 through 2002, $100,000,000 of the funds of the Commodity 
Credit Corporation shall be available for providing technical 
assistance, cost-sharing payments, and incentive payments for practices 
relating to livestock production under the environmental quality 
incentives program.
    ``(c) Wetlands Reserve Program.--Spending to carry out the wetlands 
reserve program under subchapter C of chapter 1 of subtitle D shall be 
not greater than $614,000,000 for fiscal years 1996 through 2002.
    ``(d) Conservation Reserve Program.--Spending for the conservation 
reserve program (including contracts extended by the Secretary pursuant 
to section 1437 of the Food, Agriculture, Conservation, and Trade Act 
of 1990 (Public Law 101-624; 16 U.S.C. 3831 note)) shall be not greater 
than--
            ``(1) $1,787,000,000 for fiscal year 1996;
            ``(2) $1,784,000,000 for fiscal year 1997;
            ``(3) $1,445,000,000 for fiscal year 1998;
            ``(4) $1,246,000,000 for fiscal year 1999;
            ``(5) $1,101,000,000 for fiscal year 2000;
            ``(6) $999,000,000 for fiscal year 2001; and
            ``(7) $974,000,000 for fiscal year 2002.''.
    (b) Environmental Quality Incentives Program.--To carry out the 
programs funded under the amendment made by subsection (a), subtitle D 
of title XII of the Food Security Act of 1985 (16 U.S.C. 3830 et seq.) 
is amended by striking chapter 2 (16 U.S.C. 3838 et seq.) and inserting 
the following:

         ``CHAPTER 2--ENVIRONMENTAL QUALITY INCENTIVES PROGRAM

``SEC. 1238. DEFINITIONS.

    ``In this chapter:
            ``(1) Land management practice.--The term `land management 
        practice' means a site-specific nutrient or manure management, 
        integrated pest management, irrigation management, tillage or 
        residue management, grazing management, or other land 
        management practice that the Secretary determines is needed to 
        protect soil, water, or related resources in the most cost 
        effective manner.
            ``(2) Large confined livestock operation.--The term `large 
        confined livestock operation' means a farm or ranch that--
                    ``(A) is a confined animal feeding operation; and
                    ``(B) has more than--
                            ``(i) 700 mature dairy cattle;
                            ``(ii) 1,000 beef cattle;
                            ``(iii) 30,000 laying hens or broilers (if 
                        the facility has continuous overflow watering);
                            ``(iv) 100,000 laying hens or broilers (if 
                        the facility has a liquid manure system);
                            ``(v) 55,000 turkeys;
                            ``(vi) 2,500 swine; or
                            ``(vii) 10,000 sheep or lambs.
            ``(3) Livestock.--The term `livestock' means mature dairy 
        cows, beef cattle, laying hens, broilers, turkeys, swine, 
        sheep, or lambs.
            ``(4) Operator.--The term `operator' means a person who is 
        engaged in crop or livestock production (as defined by the 
        Secretary).
            ``(5) Structural practice.--The term `structural practice' 
        means the establishment of an animal waste management facility, 
        terrace, grassed waterway, contour grass strip, filterstrip, 
        permanent wildlife habitat, or other structural practice that 
        the Secretary determines is needed to protect soil, water, or 
        related resources in the most cost effective manner.

``SEC. 1238A. ESTABLISHMENT AND ADMINISTRATION OF ENVIRONMENTAL QUALITY 
              INCENTIVES PROGRAM.

    ``(a) Establishment.--
            ``(1) In general.--During the 1996 through 2002 fiscal 
        years, the Secretary shall provide technical assistance, cost-
        sharing payments, and incentive payments to operators who enter 
        into contracts with the Secretary, through an environmental 
        quality incentives program that replaces the functions of the 
        agricultural conservation program, the Great Plains 
        conservation program, the water quality incentives program, and 
        the Colorado River Basin salinity control program.
            ``(2) Eligible practices.--
                    ``(A) Structural practices.--An operator who 
                implements a structural practice shall be eligible for 
                technical assistance or cost-sharing payments, or both.
                    ``(B) Land management practices.--An operator who 
                performs a land management practice shall be eligible 
                for technical assistance or incentive payments, or 
                both.
            ``(3) Eligible lands.--Land on which structural and land 
        management practices may be performed under this chapter 
        includes agricultural land (including cropland, rangeland, 
        pasture, and other land on which crops or livestock are 
        produced) that the Secretary determines poses a serious threat 
        to soil, water, or related resources by reason of the soil 
        types, terrain, climatic, soil, topographic, flood, or saline 
        characteristics, or other factors or natural hazards.
            ``(4) Priorities.--The Secretary shall provide technical 
        assistance, cost-sharing payments, and incentive payments to 
        operators in a region, watershed, or conservation priority area 
        in which an agricultural operation is located, as determined by 
        the Secretary, based on national and regional priorities that 
        include--
                    ``(A) the significance of the soil, water, and 
                related natural resource problems;
                    ``(B) structural or land management practices for 
                which State or local governments have provided, or will 
                provide, financial or technical assistance to the 
                operators;
                    ``(C) structural practices or land management 
                practices on lands on which agricultural production has 
                been determined to contribute to, or create, the 
                potential for failure to meet applicable water quality 
                standards or other environmental objectives of a 
                Federal or State law; and
                    ``(D) maximization of environmental benefits per 
                dollar expended.
    ``(b) Application and Term.--
            ``(1) In general.--A contract between an operator and the 
        Secretary under this chapter may--
                    ``(A) apply to 1 or more structural practices or 1 
                or more land management practices, or both; and
                    ``(B) have a term of not less than 5, nor more than 
                10, years, as determined appropriate by the Secretary, 
                depending on the practice or practices that are the 
                basis of the contract.
            ``(2) Duties of operators and secretary.--To receive cost 
        sharing or incentive payments, or technical assistance, 
        participating operators shall comply with all terms and 
        conditions of the contract and a plan, as established by the 
        Secretary.
    ``(c) Structural Practices.--
            ``(1) Competitive offer.--The Secretary shall administer a 
        competitive offer system for operators proposing to receive 
        cost-sharing payments in exchange for the implementation of 1 
        or more structural practices by the operator. The competitive 
        offer system shall consist of--
                    ``(A) the submission of a competitive offer by the 
                operator in such manner as the Secretary may prescribe; 
                and
                    ``(B) evaluation of the offer in light of the 
                priorities established by subsection (a)(4) and the 
                projected cost of the proposal, as determined by the 
                Secretary.
            ``(2) Concurrence of owner.--If the operator making an 
        offer to implement a structural practice is a tenant of the 
        land involved in agricultural production, for the offer to be 
        acceptable, the operator shall obtain the concurrence of the 
        owner of the land with respect to the offer.
    ``(d) Land Management Practices.--The Secretary shall establish an 
application and evaluation process for awarding technical assistance or 
incentive payments, or both, to an operator in exchange for the 
performance of 1 or more land management practices by the operator.
    ``(e) Cost-Sharing, Incentive Payments, and Technical Assistance.--
            ``(1) Cost-sharing payments.--
                    ``(A) In general.--The Federal share of cost-
                sharing payments to an operator proposing to implement 
                1 or more structural practices shall not be greater 
                than 75 percent of the projected cost of each practice, 
                as determined by the Secretary, taking into 
                consideration any payment received by the operator from 
                a State or local government.
                    ``(B) Limitation.--An operator of a large confined 
                livestock operation shall not be eligible for cost-
                sharing payments to construct an animal waste 
                management facility.
                    ``(C) Other payments.--An operator shall not be 
                eligible for cost-sharing payments for structural 
                practices on eligible land under this chapter if the 
                operator receives cost-sharing payments or other 
                benefits for the same land under chapter 1 or 3.
            ``(2) Incentive payments.--The Secretary shall make 
        incentive payments in an amount and at a rate determined by the 
        Secretary to be necessary to encourage an operator to perform 1 
        or more land management practices.
            ``(3) Technical assistance.--
                    ``(A) Funding.--The Secretary shall allocate 
                funding under this chapter for the provision of 
                technical assistance according to the purpose and 
                projected cost for which the technical assistance is 
                provided for a fiscal year. The allocated amount may 
                vary according to the type of expertise required, 
                quantity of time involved, and other factors as 
                determined appropriate by the Secretary. Funding shall 
                not exceed the projected cost to the Secretary of the 
                technical assistance provided for a fiscal year.
                    ``(B) Other authorities.--The receipt of technical 
                assistance under this chapter shall not affect the 
                eligibility of the operator to receive technical 
                assistance under other authorities of law available to 
                the Secretary.
    ``(f) Limitation on Payments.--
            ``(1) In general.--The total amount of cost-sharing and 
        incentive payments paid to a person under this chapter may not 
        exceed--
                    ``(A) $10,000 for any fiscal year; or
                    ``(B) $50,000 for any multiyear contract.
            ``(2) Regulations.--The Secretary shall issue regulations 
        that are consistent with section 1001 for the purpose of--
                    ``(A) defining the term `person' as used in 
                paragraph (1); and
                    ``(B) prescribing such rules as the Secretary 
                determines necessary to ensure a fair and reasonable 
                application of the limitations established under this 
                subsection.
    ``(g) Regulations.--Not later than 180 days after the effective 
date of this subsection, the Secretary shall issue regulations to 
implement the environmental quality incentives program established 
under this chapter.

``SEC. 1238B. TEMPORARY ADMINISTRATION OF ENVIRONMENTAL QUALITY 
              INCENTIVES PROGRAM.

    ``(a) Interim Administration.--
            ``(1) In general.--During the period beginning on the date 
        of enactment of the Agricultural Reconciliation Act of 1995 and 
        ending on the later of the dates specified in paragraph (2), to 
        ensure that technical assistance, cost-sharing payments, and 
        incentive payments continue to be administered in an orderly 
        manner until such time as assistance can be provided through 
        final regulations issued to implement the environmental quality 
        incentives program established under this chapter, the 
        Secretary shall continue to provide technical assistance, cost-
        sharing payments, and incentive payments under the terms and 
        conditions of the agricultural conservation program, the Great 
        Plains conservation program, the water quality incentives 
        program, and the Colorado River Basin salinity control program, 
        to the extent that the terms and conditions of the programs are 
        consistent with the environmental quality incentives program.
            ``(2) Expiration of authority.--The authority of the 
        Secretary to carry out paragraph (1) shall terminate on the 
        later of--
                    ``(A) the date that is 180 days after the date of 
                enactment of the Agricultural Reconciliation Act of 
                1995; or
                    ``(B) March 31, 1996.
    ``(b) Permanent Administration.--Effective beginning on the later 
of the dates specified in subsection (a)(2), the Secretary shall 
provide technical assistance, cost-sharing payments, and incentive 
payments for structural practices and land management practices related 
to crop and livestock production in accordance with final regulations 
issued to carry out the environmental quality incentives program.''.
    (c) Conforming Amendments.--
            (1) Commodity credit corporation charter act.--Section 5(g) 
        of the Commodity Credit Corporation Charter Act (15 U.S.C. 
        714c(g)) is amended to read as follows:
    ``(g) Carry out conservation functions and programs.''.
            (2) Wetlands reserve program.--
                    (A) In general.--Section 1237 of the Food Security 
                Act of 1985 (16 U.S.C. 3837) is amended--
                            (i) in subsection (b)(2)--
                                    (I) by striking ``not less'' and 
                                inserting ``not more''; and
                                    (II) by striking ``2000'' and 
                                inserting ``2002''; and
                            (ii) in subsection (c), by striking 
                        ``2000'' and inserting ``2002''.
                    (B) Length of easement.--Section 1237A(e) of the 
                Food Security Act of 1985 (16 U.S.C. 3837a(e)) is 
                amended by striking paragraph (2) and inserting the 
                following:
            ``(2) shall be for 20 or 30 years, but in no case shall be 
        a permanent easement.''.
            (3) Conservation reserve program.--
                    (A) In general.--Section 1231 of the Food Security 
                Act of 1985 (16 U.S.C. 3831) is amended--
                            (i) in subsections (a) and (b)(3), by 
                        striking ``1995'' each place it appears and 
                        inserting ``2002''; and
                            (ii) in subsection (d), by striking ``total 
                        of'' and all that follows through the period at 
                        the end of the subsection and inserting ``total 
                        of 36,400,000 acres during the 1986 through 
                        2002 calendar years (including contracts 
                        extended by the Secretary pursuant to section 
                        1437 of the Food, Agriculture, Conservation, 
                        and Trade Act of 1990 (Public Law 101-624; 16 
                        U.S.C. 3831 note), except that in no case may 
                        total spending for the conservation reserve 
                        exceed the spending limitations in section 
                        1241(d).''.
                    (B) Conforming amendment.--Section 1232(c) of the 
                Food Security Act of 1985 (16 U.S.C. 3832(c)) is 
                amended by striking ``1995'' and inserting ``2002''.
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), this 
        section and the amendments made by this section shall become 
        effective on the later of--
                    (A) the date of enactment of this Act; or
                    (B) November 1, 1995.
            (2) Transition provisions.--
                    (A) In general.--Section 1238B of the Food Security 
                Act of 1985 (as added by subsection (b)) shall become 
                effective on the date of enactment of this Act.
                    (B) 1991 through 1995 calendar years.--
                Notwithstanding any other provision of law, this 
                section and the amendments made by this section shall 
                not affect the authority of the Secretary of 
                Agriculture to carry out a program for any of the 1991 
                through 1995 calendar years under a provision of law in 
                effect immediately before the effective dates specified 
                in this subsection.

         Subtitle C--Agricultural Promotion and Export Programs

SEC. 1301. MARKET PROMOTION PROGRAM.

    Effective October 1, 1995, section 211(c)(1) of the Agricultural 
Trade Act of 1978 (7 U.S.C. 5641(c)(1)) is amended--
            (1) by striking ``and'' after ``1991 through 1993,''; and
            (2) by striking ``through 1997,'' and inserting ``through 
        1995, and not more than $75,000,000 for each of fiscal years 
        1996 through 2002,''.

SEC. 1302. EXPORT ENHANCEMENT PROGRAM.

    Effective October 1, 1995, section 301(e)(1) of the Agricultural 
Trade Act of 1978 (7 U.S.C. 5651(e)(1)) is amended to read as follows:
            ``(1) In general.--The Commodity Credit Corporation shall 
        make available to carry out the program established under this 
        section not more than--
                    ``(A) $767,200,000 for fiscal year 1996;
                    ``(B) $705,600,000 for fiscal year 1997;
                    ``(C) $624,800,000 for fiscal year 1998;
                    ``(D) $544,000,000 for fiscal year 1999;
                    ``(E) $463,200,000 for fiscal year 2000;
                    ``(F) $382,400,000 for fiscal year 2001; and
                    ``(G) $382,400,000 for fiscal year 2002.''.

SEC. 1303. EXPORT OF SUNFLOWERSEED OIL AND COTTONSEED OIL.

    (a) In General.--Effective September 30, 1995, section 301 of the 
Disaster Assistance Act of 1988 (Public Law 100-387; 7 U.S.C. 1464 
note) is repealed.
    (b) Funding.--Notwithstanding any other provision of law, the 
Secretary of Agriculture shall not spend any funds made available under 
section 32 of the Act entitled ``An Act to amend the Agricultural 
Adjustment Act, and for other purposes'', approved August 24, 1935 (7 
U.S.C. 612c), to carry out the programs established under section 
301(b) of the Disaster Assistance Act of 1988 (Public Law 100-387; 7 
U.S.C. 1464 note) (as in effect prior to the amendment made by 
subsection (a)).

                    Subtitle D--Nutrition Assistance

                     CHAPTER 1--FOOD STAMP PROGRAM

SEC. 1401. TREATMENT OF CHILDREN LIVING AT HOME.

    The second sentence of section 3(i) of the Food Stamp Act of 1977 
(7 U.S.C. 2012(i)) is amended by striking ``(who are not themselves 
parents living with their children or married and living with their 
spouses)''.

SEC. 1402. OPTIONAL ADDITIONAL CRITERIA FOR SEPARATE HOUSEHOLD 
              DETERMINATIONS.

    Section 3(i) of the Food Stamp Act of 1977 (7 U.S.C. 2012(i)) is 
amended by inserting after the third sentence the following: 
``Notwithstanding the preceding sentences, a State may establish 
criteria that prescribe when individuals who live together, and who 
would be allowed to participate as separate households under the 
preceding sentences, shall be considered a single household, without 
regard to the common purchase of food and preparation of meals.''.

SEC. 1403. ADJUSTMENT OF THRIFTY FOOD PLAN.

    The second sentence of section 3(o) of the Food Stamp Act of 1977 
(7 U.S.C. 2012(o)) is amended--
            (1) by striking ``and (11)'' and inserting ``(11)'';
            (2) by inserting ``through October 1, 1994'' after ``1990, 
        and each October 1 thereafter''; and
            (3) by inserting before the period at the end the 
        following: ``, and (12) on October 1, 1995, and each October 1 
        thereafter, adjust the cost of the diet to reflect the cost of 
        the diet, in the preceding June, and round the result to the 
        nearest lower dollar increment for each household size, except 
        that on October 1, 1995, the Secretary may not reduce the cost 
        of the diet in effect on September 30, 1995''.

SEC. 1404. DEFINITION OF HOMELESS INDIVIDUAL.

    Section 3(s)(2)(C) of the Food Stamp Act of 1977 (7 U.S.C. 
2012(s)(2)(C)) is amended by inserting ``for not more than 90 days'' 
after ``temporary accommodation''.

SEC. 1405. STATE OPTIONS IN REGULATIONS.

    Section 5(b) of the Food Stamp Act of 1977 (7 U.S.C. 2014(b)) is 
amended--
            (1) by striking ``(b) The Secretary'' and inserting the 
        following:
    ``(b) Uniform Standards.--Except as otherwise provided in this Act, 
the Secretary''; and
            (2) by striking ``No plan'' and inserting ``Except as 
        otherwise provided in this Act, no plan''.

SEC. 1406. ENERGY ASSISTANCE.

    (a) In General.--Section 5(d) of the Food Stamp Act of 1977 (7 
U.S.C. 2014(d)) is amended--
            (1) by striking paragraph (11); and
            (2) by redesignating paragraphs (12) through (15) as 
        paragraphs (11) through (14), respectively.
    (b) Conforming Amendments.--
            (1) Section 5(k) of the Act (7 U.S.C. 2014(k)) is amended--
                    (A) in paragraph (1)--
                            (i) in subparagraph (A), by striking ``plan 
                        for aid to families with dependent children 
                        approved'' and inserting ``program funded''; 
                        and
                            (ii) in subparagraph (B), by striking ``, 
                        not including energy or utility-cost 
                        assistance,'';
                    (B) in paragraph (2)--
                            (i) by striking subparagraph (C); and
                            (ii) by redesignating subparagraphs (D) 
                        through (H) as subparagraphs (C) through (G), 
                        respectively; and
                    (C) by adding at the end the following:
            ``(4) Third party energy assistance payments.--
                    ``(A) Energy assistance payments.--For purposes of 
                subsection (d)(1), a payment made under a Federal or 
                State law to provide energy assistance to a household 
                shall be considered money payable directly to the 
                household.
                    ``(B) Energy assistance expenses.--For purposes of 
                subsection (e), an expense paid on behalf of a 
                household under a Federal or State law to provide 
                energy assistance shall be considered an out-of-pocket 
                expense incurred and paid by the household.''.
            (2) Section 2605(f) of the Low-Income Home Energy 
        Assistance Act of 1981 (42 U.S.C. 8624(f)) is amended--
                    (A) by striking ``(f)(1) Notwithstanding'' and 
                inserting ``(f) Notwithstanding'';
                    (B) by striking ``food stamps,''; and
                    (C) by striking paragraph (2).

SEC. 1407. DEDUCTIONS FROM INCOME.

    (a) In General.--Section 5(e) of the Food Stamp Act of 1977 (7 
U.S.C. 2014(e)) is amended--
            (1) in the second sentence--
                    (A) by striking ``and (4)'' and inserting ``(4)'';
                    (B) by inserting ``through October 1, 1994'' after 
                ``October 1 thereafter''; and
                    (C) by inserting before the period at the end the 
                following: ``, and (5) on October 1, 2002, and each 
                October 1 thereafter, the Secretary shall adjust the 
                standard deduction to the nearest lower dollar 
                increment to reflect changes in the Consumer Price 
                Index for all urban consumers published by the Bureau 
                of Labor Statistics, for items other than food, for the 
                12-month period ending the preceding June 30'';
            (2) in the third sentence, by striking ``willfully or 
        fraudulently'' and all that follows through ``to report'' and 
        inserting ``has not reported'';
            (3) in the seventh sentence, by striking ``may use a 
        standard'' and all that follows through ``except that a'' and 
        inserting ``may make the use of a standard utility allowance 
        mandatory for all households with qualifying utility costs if 
        the State agency has developed 1 or more standards that include 
        the cost of heating and cooling and 1 or more standards that do 
        not include the cost of heating and cooling and the Secretary 
        finds that the standards will not result in an increased cost 
        to the Secretary. A State agency that has not made the use of a 
        standard utility allowance mandatory under the preceding 
        sentence shall allow a household to switch, at the end of a 
        certification period, between the standard utility allowance 
        and a deduction based on the actual utility costs of the 
        household. A''; and
            (4) by striking ``A State agency shall allow a household to 
        switch'' and all that follows through ``twelve-month period.''.
    (b) Homeless Shelter Deduction.--Section 11(e)(3) of the Act (7 
U.S.C. 2020(e)(3)) is amended by striking the last 3 sentences and 
inserting the following: ``A State agency may develop a standard 
homeless shelter deduction, which shall not exceed $139 per month, for 
such expenses as may reasonably be expected to be incurred by 
households in which all members are homeless individuals but are not 
receiving free shelter throughout the month. A State agency that 
develops the deduction may use the deduction in determining eligibility 
and allotments for the households, except that the State agency may 
prohibit the use of the deduction for households with extremely low 
shelter costs;''.

SEC. 1408. AMOUNT OF VEHICLE ASSET LIMITATION.

    The first sentence of section 5(g)(2) of the Food Stamp Act of 1977 
(7 U.S.C. 2014(g)(2)) is amended by striking ``through September 30, 
1995'' and all that follows through ``such date and on'' and inserting 
``and shall be adjusted on October 1, 1996, and''.

SEC. 1409. BENEFITS FOR ALIENS.

    Section 5(i) of the Food Stamp Act of 1977 (7 U.S.C. 2014(i)) is 
amended--
            (1) in the first sentence of paragraph (1)--
                    (A) by inserting ``or who executed such an 
                affidavit or similar agreement to enable the individual 
                to lawfully remain in the United States,'' after 
                ``respect to such individual,''; and
                    (B) by striking ``for a period'' and all that 
                follows through the period at the end of the sentence 
                and inserting ``until the end of the period ending on 
                the later of the date agreed to in the affidavit or 
                agreement or the date that is 5 years after the date on 
                which the individual was first lawfully admitted into 
                the United States following the execution of the 
                affidavit or agreement.'';
            (2) in paragraph (2)--
                    (A) in the first sentence of subparagraph (C)(i), 
                by striking ``of three years after entry into the 
                United States'' and inserting ``determined under 
                paragraph (1)'';
                    (B) in the first sentence of subparagraph (D), by 
                striking ``of three years after such alien's entry into 
                the United States'' and inserting ``determined under 
                paragraph (1)''; and
                    (C) by adding at the end the following:
                    ``(F) Limitation on measurement of attributed 
                income and resources.--
                            ``(i) In general.--Notwithstanding any 
                        other provision of this subsection, if a 
                        determination described in clause (ii) is made, 
                        the amount of income and resources of the 
                        sponsor or the sponsor's spouse that shall be 
                        attributed to the sponsored individual shall 
                        not exceed the amount actually provided to the 
                        individual, for--
                                    ``(I) the 12-month period beginning 
                                on the date of the determination; or
                                    ``(II) if the address of the 
                                sponsor is unknown to the sponsored 
                                individual on the date of the 
                                determination, the 12-month period 
                                beginning on the date the address 
                                becomes known to the sponsored 
                                individual or to the Secretary (who 
                                shall inform the individual of the 
                                address not later than 7 days after 
                                learning the address).
                            ``(ii) Determination.--The determination 
                        described in this clause shall be a 
                        determination by the Secretary that a sponsored 
                        individual would, in the absence of the 
                        assistance provided by this Act, be unable to 
                        obtain food, taking into account the 
                        individual's own income, plus any cash, food, 
                        housing, or other assistance provided by other 
                        individuals, including the sponsor.''; and
            (3) by adding at the end the following:
            ``(3) Treatment of noncitizens.--
                    ``(A) In general.--Notwithstanding any other 
                provision of law, a noncitizen who has entered into the 
                United States on or after the date of the enactment of 
                this paragraph shall not, during the 5-year period 
                beginning on the date of the noncitizen's entry into 
                the United States, be eligible to receive any benefits 
                under this Act.
                    ``(B) Exceptions.--Subparagraph (A) shall not apply 
                to any individual who is--
                            ``(i) a noncitizen granted asylum under 
                        section 208 of the Immigration and Nationality 
                        Act (8 U.S.C. 1158) or whose deportation has 
                        been withheld under section 243(h) of the Act 
                        (8 U.S.C. 1253(b)) for a period of not more 
                        than 5 years after the date the noncitizen 
                        arrived in the United States;
                            ``(ii) a noncitizen admitted to the United 
                        States as a refugee under section 207 of the 
                        Act (8 U.S.C. 1157) for not more than 5 years 
                        after the date the noncitizen arrived in the 
                        United States; or
                            ``(iii) a noncitizen, lawfully present in 
                        any State (or any territory or possession of 
                        the United States), who is--
                                    ``(I) a veteran (as defined in 
                                section 101 of title 38, United States 
                                Code) with a discharge characterized as 
                                an honorable discharge and not on 
                                account of alienage; or
                                    ``(II) the spouse or unmarried 
                                dependent child of a veteran described 
                                in subclause (I).''.

SEC. 1410. DISQUALIFICATION.

    (a) In General.--Section 6(d) of the Food Stamp Act of 1977 (7 
U.S.C. 2015(d)) is amended--
            (1) by striking ``(d)(1) Unless otherwise exempted by the 
        provisions'' and all that follows through ``shall be ninety 
        days. The'' and inserting the following:
    ``(d) Conditions of Participation.--
            ``(1) Work requirements.--
                    ``(A) In general.--No physically and mentally fit 
                individual over the age of 15 and under the age of 60 
                shall be eligible to participate in the food stamp 
                program if the individual--
                            ``(i) refuses, at the time of application 
                        and every 12 months thereafter, to register for 
                        employment in a manner prescribed by the 
                        Secretary;
                            ``(ii) refuses without good cause to 
                        participate in an employment and training 
                        program under paragraph (4), to the extent 
                        required by the State agency;
                            ``(iii) refuses without good cause to 
                        accept an offer of employment, at a site or 
                        plant not subject to a strike or lockout at the 
                        time of the refusal, at a wage not less than 
                        the higher of--
                                    ``(I) the applicable Federal or 
                                State minimum wage; or
                                    ``(II) 80 percent of the wage that 
                                would have governed had the minimum 
                                hourly rate under section 6(a)(1) of 
                                the Fair Labor Standards Act of 1938 
                                (29 U.S.C. 206(a)(1)) been applicable 
                                to the offer of employment;
                            ``(iv) refuses without good cause to 
                        provide a State agency with sufficient 
                        information to allow the State agency to 
                        determine the employment status or the job 
                        availability of the individual;
                            ``(v) voluntarily and without good cause--
                                    ``(I) quits a job; or
                                    ``(II) reduces work effort and, 
                                after the reduction, the individual is 
                                working less than 30 hours per week; or
                            ``(vi) fails to comply with section 20.
                    ``(B) Household ineligibility.--If an individual 
                who is the head of a household becomes ineligible to 
                participate in the food stamp program under 
                subparagraph (A), the household shall, at the option of 
                the State agency, become ineligible to participate in 
                the food stamp program for a period, determined by the 
                State agency, that does not exceed the lesser of--
                            ``(i) the duration of the ineligibility of 
                        the individual determined under subparagraph 
                        (C); or
                            ``(ii) 180 days.
                    ``(C) Duration of ineligibility.--
                            ``(i) First violation.--The first time that 
                        an individual becomes ineligible to participate 
                        in the food stamp program under subparagraph 
                        (A), the individual shall remain ineligible 
                        until the later of--
                                    ``(I) the date the individual 
                                becomes eligible under subparagraph 
                                (A);
                                    ``(II) the date that is 1 month 
                                after the date the individual became 
                                ineligible; or
                                    ``(III) a date determined by the 
                                State agency that is not later than 3 
                                months after the date the individual 
                                became ineligible.
                            ``(ii) Second violation.--The second time 
                        that an individual becomes ineligible to 
                        participate in the food stamp program under 
                        subparagraph (A), the individual shall remain 
                        ineligible until the later of--
                                    ``(I) the date the individual 
                                becomes eligible under subparagraph 
                                (A);
                                    ``(II) the date that is 3 months 
                                after the date the individual became 
                                ineligible; or
                                    ``(III) a date determined by the 
                                State agency that is not later than 6 
                                months after the date the individual 
                                became ineligible.
                            ``(iii) Third or subsequent violation.--The 
                        third or subsequent time that an individual 
                        becomes ineligible to participate in the food 
                        stamp program under subparagraph (A), the 
                        individual shall remain ineligible until the 
                        later of--
                                    ``(I) the date the individual 
                                becomes eligible under subparagraph 
                                (A);
                                    ``(II) the date that is 6 months 
                                after the date the individual became 
                                ineligible;
                                    ``(III) a date determined by the 
                                State agency; or
                                    ``(IV) at the option of the State 
                                agency, permanently.
                    ``(D) Other conditions.--The''; and
            (2) in paragraph (1), by striking ``Any period of 
        ineligibility'' and all that follows through ``violated.''.
    (b) Conforming Amendment.--
            (1) The second sentence of section 17(b)(2) of the Act (7 
        U.S.C. 2026(b)(2)) is amended by striking ``6(d)(1)(i)'' and 
        inserting ``6(d)(1)(A)(i)''.
            (2) Section 20 of the Act (7 U.S.C. 2029) is amended by 
        striking subsection (f) and inserting the following:
    ``(f) Disqualification.--An individual or a household may become 
ineligible under section 6(d)(1) to participate in the food stamp 
program for failing to comply with this section.''.

SEC. 1411. EMPLOYMENT AND TRAINING.

    (a) In General.--Section 6(d)(4) of the Food Stamp Act of 1977 (7 
U.S.C. 2015(d)(4)) is amended by adding at the end the following:
                    ``(O) Limitation on funding.--Notwithstanding any 
                other provision of this paragraph, the amount of funds 
                a State agency uses to carry out this paragraph 
                (including under subparagraph (I)) for participants who 
                are receiving benefits under a State program funded 
                under part A of title IV of the Social Security Act (42 
                U.S.C. 601 et seq.) shall not exceed the amount of 
                funds the State agency used in fiscal year 1995 to 
                carry out this paragraph for participants who were 
                receiving benefits in fiscal year 1995 under a State 
                program funded under part A of title IV of the Act (42 
                U.S.C. 601 et seq.).''.
    (b) Funding.--Section 16(h) of the Act (7 U.S.C. 2025(h)) is 
amended by striking ``(h)(1)(A) The Secretary'' and all that follows 
through the end of paragraph (1) and inserting the following:
    ``(h) Funding of Employment and Training Programs.--
            ``(1) In general.--
                    ``(A) Amounts.--To carry out employment and 
                training programs, the Secretary shall reserve for 
                allocation to State agencies from funds made available 
                for each fiscal year under section 18(a)(1) the amount 
                of--
                            ``(i) for fiscal year 1996, $77,000,000;
                            ``(ii) for fiscal year 1997, $80,000,000;
                            ``(iii) for fiscal year 1998, $83,000,000;
                            ``(iv) for fiscal year 1999, $86,000,000;
                            ``(v) for fiscal year 2000, $89,000,000;
                            ``(vi) for fiscal year 2001, $92,000,000; 
                        and
                            ``(vii) for fiscal year 2002, $95,000,000.
                    ``(B) Allocation.--The Secretary shall allocate the 
                amounts reserved under subparagraph (A) among the State 
                agencies using a reasonable formula (as determined by 
                the Secretary) that gives consideration to the 
                population in each State affected by section 6(n).
                    ``(C) Reallocation.--
                            ``(i) Notification.--A State agency shall 
                        promptly notify the Secretary if the State 
                        agency determines that the State agency will 
                        not expend all of the funds allocated to the 
                        State agency under subparagraph (B).
                            ``(ii) Reallocation.--On notification under 
                        clause (i), the Secretary shall reallocate the 
                        funds that the State agency will not expend as 
                        the Secretary considers appropriate and 
                        equitable.
                    ``(D) Minimum allocation.--Notwithstanding 
                subparagraphs (A) through (C), the Secretary shall 
                ensure that each State agency operating an employment 
                and training program shall receive not less than 
                $50,000 for each fiscal year.''.

SEC. 1412. INCOME CALCULATION.

    Section 6(f) of the Food Stamp Act of 1977 (7 U.S.C. 2015(f)) is 
amended by striking the third sentence and inserting the following: 
``The State agency may consider either all income and financial 
resources of the individual rendered ineligible to participate in the 
food stamp program under this subsection, or the income, less a pro 
rata share, and the financial resources of the ineligible individual, 
to determine the eligibility and the value of the allotment of the 
household of which the individual is a member.''.

SEC. 1413. COMPARABLE TREATMENT FOR DISQUALIFICATION.

    (a) In General.--Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 
2015) is amended by adding at the end the following:
    ``(i) Comparable Treatment for Disqualification.--
            ``(1) In general.--If a disqualification is imposed on a 
        member of a household for a failure of the member to perform an 
        action required under a Federal, State, or local law relating 
        to a welfare or public assistance program, the State agency may 
        impose the same disqualification on the member of the household 
        under the food stamp program.
            ``(2) Application after disqualification period.--A member 
        of a household disqualified under paragraph (1) may, after the 
        disqualification period has expired, apply for benefits under 
        this Act and shall be treated as a new applicant, except that a 
        prior disqualification under subsection (d) shall be considered 
        in determining eligibility.''.
    (b) Conforming Amendment.--Section 6(d)(2)(A) of the Act (7 U.S.C. 
2015(d)(2)(A)) is amended by striking ``that is comparable to a 
requirement of paragraph (1)''.

SEC. 1414. COOPERATION WITH CHILD SUPPORT AGENCIES.

    Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015) (as amended 
by section 1413) is further amended by adding at the end the following:
    ``(j) Custodial Parent's Cooperation With Child Support Agencies.--
            ``(1) In general.--At the option of a State agency, subject 
        to paragraphs (2) and (3), no natural or adoptive parent or 
        other individual (collectively referred to in this subsection 
        as `the individual') who is living with and exercising parental 
        control over a child under the age of 18 who has an absent 
        parent shall be eligible to participate in the food stamp 
        program unless the individual cooperates with the State agency 
        administering the program established under part D of title IV 
        of the Social Security Act (42 U.S.C. 651 et seq.)--
                    ``(A) in establishing the paternity of the child 
                (if the child is born out of wedlock); and
                    ``(B) in obtaining support for--
                            ``(i) the child; or
                            ``(ii) the individual and the child.
            ``(2) Good cause for noncooperation.--Paragraph (1) shall 
        not apply to the individual if good cause is found for refusing 
        to cooperate, as determined by the State agency in accordance 
        with standards prescribed by the Secretary in consultation with 
        the Secretary of Health and Human Services. The standards shall 
        take into consideration circumstances under which cooperation 
        may be against the best interests of the child.
            ``(3) Fees.--Paragraph (1) shall not require the payment of 
        a fee or other cost for services provided under part D of title 
        IV of the Social Security Act (42 U.S.C. 651 et seq.).''.

SEC. 1415. DISQUALIFICATION FOR CHILD SUPPORT ARREARS.

    Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015) (as amended 
by section 1414) is further amended by adding at the end the following:
    ``(k) Disqualification for Child Support Arrears.--
            ``(1) In general.--At the option of a State agency, except 
        as provided in paragraph (2), no individual shall be eligible 
        to participate in the food stamp program as a member of any 
        household during any month that the individual is delinquent in 
        any payment due under a court order for the support of a child 
        of the individual.
            ``(2) Exceptions.--Paragraph (1) shall not apply if--
                    ``(A) a court is allowing the individual to delay 
                payment; or
                    ``(B) the individual is complying with a payment 
                plan approved by a court or the State agency designated 
                under part D of title IV of the Social Security Act (42 
                U.S.C. 651 et seq.) to provide support for the child of 
                the individual.''.

SEC. 1416. PERMANENT DISQUALIFICATION FOR PARTICIPATING IN 2 OR MORE 
              STATES.

    Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015) (as amended 
by section 1415) is further amended by adding at the end the following:
    ``(l) Permanent Disqualification for Participating in 2 or More 
States.--An individual shall be permanently ineligible to participate 
in the food stamp program as a member of any household if the 
individual is found by a State agency to have made, or is convicted in 
Federal or State court of having made, a fraudulent statement or 
representation with respect to the place of residence of the individual 
in order to receive benefits simultaneously from 2 or more States under 
the food stamp program.''.

SEC. 1417. WORK REQUIREMENT.

    (a) In General.--Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 
2015) (as amended by section 1416) is further amended by adding at the 
end the following:
    ``(m) Work Requirement.--
            ``(1) Definition of work program.--In this subsection, the 
        term `work program' means--
                    ``(A) a program under the Job Training Partnership 
                Act (29 U.S.C. 1501 et seq.);
                    ``(B) a program under section 236 of the Trade Act 
                of 1974 (19 U.S.C. 2296); or
                    ``(C) a program of employment or training operated 
                or supervised by a State or political subdivision of a 
                State that meets standards approved by the Governor of 
                the State, including a program under subsection (d)(4) 
                other than a job search program or a job search 
                training program under clause (i) or (ii) of subsection 
                (d)(4)(B).
            ``(2) Work requirement.--Except as otherwise provided in 
        this subsection, no individual shall be eligible to participate 
        in the food stamp program as a member of any household if, 
        during the preceding 12-month period, the individual received 
        food stamp benefits for not less than 6 months during which the 
        individual did not--
                    ``(A) work 20 hours or more per week, averaged 
                monthly; or
                    ``(B) participate in and comply with the 
                requirements of a work program for 20 hours or more per 
                week, as determined by the State agency.
            ``(3) Exceptions.--Paragraph (2) shall not apply to an 
        individual if the individual is--
                    ``(A) under 18 or over 50 years of age;
                    ``(B) medically certified as physically or mentally 
                unfit for employment;
                    ``(C) a parent or other member of a household with 
                responsibility for a dependent child; or
                    ``(D) otherwise exempt under subsection (d)(2).
            ``(4) Waiver.--On the request of a State agency, the 
        Secretary may waive the applicability of paragraph (2) to any 
        group of individuals in the State if the Secretary makes a 
        determination that the area in which the individuals reside--
                    ``(A) has an unemployment rate of over 8 percent; 
                or
                    ``(B) does not have a sufficient number of jobs to 
                provide employment for the individuals.''.
    (b) Transition Provision.--Prior to October 1, 1996, the term 
``preceding 12-month period'' in section 6(m)(2) of the Food Stamp Act 
of 1977 (as added by subsection (a)) means the preceding period that 
begins on October 1, 1995.

SEC. 1418. DISQUALIFICATION OF FLEEING FELONS.

    Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015) (as amended 
by section 1417) is further amended by adding at the end the following:
    ``(n) Disqualification of Fleeing Felons.--No member of a household 
who is otherwise eligible to participate in the food stamp program 
shall be eligible to participate in the program as a member of that or 
any other household during any period during which the individual is--
            ``(1) fleeing to avoid prosecution, or custody or 
        confinement after conviction, under the laws of the place from 
        which the individual flees, for a crime, or attempt to commit a 
        crime, which is a felony under the laws of the place from which 
        the individual flees, or which, in the case of the State of New 
        Jersey, is a high misdemeanor under the laws of the State; or
            ``(2) violating a condition of probation or parole imposed 
        under a Federal or State law.''.

SEC. 1419. ELECTRONIC BENEFIT TRANSFERS.

    Section 7 of the Food Stamp Act of 1977 (7 U.S.C. 2016) is amended 
by adding at the end the following:
    ``(j) Electronic Benefit Transfers.--
            ``(1) Applicable law.--
                    ``(A) In general.--Disclosures, protections, 
                responsibilities, and remedies established by the 
                Federal Reserve Board under section 904 of the 
                Electronic Fund Transfer Act (15 U.S.C. 1693b) shall 
                not apply to benefits under this Act delivered through 
                any electronic benefit transfer system.
                    ``(B) Definition of electronic benefit transfer 
                system.--In this paragraph, the term `electronic 
                benefit transfer system' means a system under which a 
                governmental entity distributes benefits under this Act 
                or other benefits or payments by establishing accounts 
                to be accessed by recipients of the benefits 
                electronically, including through the use of an 
                automated teller machine, a point-of-sale terminal, or 
                an intelligent benefit card.
            ``(2) Charging for electronic benefit transfer card 
        replacement.--
                    ``(A) In general.--A State agency may charge an 
                individual for the cost of replacing a lost or stolen 
                electronic benefit transfer card.
                    ``(B) Reducing allotment.--A State agency may 
                collect a charge imposed under subparagraph (A) by 
                reducing the monthly allotment of the household of 
                which the individual is a member.''.

SEC. 1420. MINIMUM BENEFIT.

    The proviso in section 8(a) of the Food Stamp Act of 1977 (7 U.S.C. 
2017(a)) is amended by striking ``, and shall be adjusted'' and all 
that follows through ``$5''.

SEC. 1421. BENEFITS ON RECERTIFICATION.

    Section 8(c)(2)(B) of the Food Stamp Act of 1977 (7 U.S.C. 
2017(c)(2)(B)) is amended by striking ``of more than one month''.

SEC. 1422. FAILURE TO COMPLY WITH OTHER WELFARE AND PUBLIC ASSISTANCE 
              PROGRAMS.

    Section 8 of the Food Stamp Act of 1977 (7 U.S.C. 2017) is amended 
by striking subsection (d) and inserting the following:
    ``(d) Reduction of Public Assistance Benefits.--If the benefits of 
a household are reduced under a Federal, State, or local law relating 
to a welfare or public assistance program for the failure to perform an 
action required under the law or program, for the duration of the 
reduction--
            ``(1) the household may not receive an increased allotment 
        as the result of a decrease in the income of the household to 
        the extent that the decrease is the result of the reduction; 
        and
            ``(2) the State agency may reduce the allotment of the 
        household by not more than 25 percent.''.

SEC. 1423. ALLOTMENTS FOR HOUSEHOLDS RESIDING IN INSTITUTIONS.

    Section 8 of the Food Stamp Act of 1977 (7 U.S.C. 2017) is amended 
by adding at the end the following:
    ``(f) Allotments for Households Residing in Institutions.--In the 
case of an individual who resides in a homeless shelter, or in an 
institution or center for the purpose of a drug or alcoholic treatment 
program, described in the last sentence of section 3(i), a State agency 
may provide an allotment for the individual to--
            ``(1) the institution as an authorized representative for 
        the individual for a period that is less than 1 month; and
            ``(2) the individual, if the individual leaves the 
        institution.''.

SEC. 1424. COLLECTION OF OVERISSUANCES.

    (a) In General.--Section 13 of the Food Stamp Act of 1977 (7 U.S.C. 
2022) is amended--
            (1) by striking subsection (b) and inserting the following:
    ``(b) Collection of Overissuances.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, a State agency shall collect any overissuance of 
        coupons issued to a household by--
                    ``(A) reducing the allotment of the household;
                    ``(B) withholding unemployment compensation from a 
                member of the household under subsection (c);
                    ``(C) recovering from Federal pay or a Federal 
                income tax refund under subsection (d); or
                    ``(D) any other means.
            ``(2) Cost effectiveness.--Paragraph (1) shall not apply if 
        the State agency demonstrates to the satisfaction of the 
        Secretary that all of the means referred to in paragraph (1) 
        are not cost effective.
            ``(3) Hardships.--A State agency may not use an allotment 
        reduction under paragraph (1)(A) as a means of collecting an 
        overissuance from a household if the allotment reduction would 
        cause a hardship on the household, as determined by the State 
        agency.
            ``(4) Maximum reduction absent fraud.--If a household 
        received an overissuance of coupons without any member of the 
        household being found ineligible to participate in the program 
        under section 6(b)(1) and a State agency elects to reduce the 
        allotment of the household under paragraph (1)(A), the State 
        agency shall reduce the monthly allotment of the household 
        under paragraph (1)(A) by the greater of--
                    ``(A) 10 percent of the monthly allotment of the 
                household; or
                    ``(B) $10.
            ``(5) Procedures.--A State agency shall collect an 
        overissuance of coupons issued to a household under paragraph 
        (1) in accordance with requirements established by the State 
        agency for providing notice, electing a means of payment, and 
        establishing a time schedule for payment.''; and
            (2) in subsection (d)--
                    (A) by striking ``as determined under subsection 
                (b) and except for claims arising from an error of the 
                State agency,'' and inserting ``, as determined under 
                subsection (b)(1),''; and
                    (B) by inserting before the period at the end the 
                following: ``or a Federal income tax refund as 
                authorized by section 3720A of title 31, United States 
                Code''.
    (b) Conforming Amendment.--Section 11(e)(8) of the Act (7 U.S.C. 
2020(e)(8)) is amended--
            (1) by striking ``and excluding claims'' and all that 
        follows through ``such section''; and
            (2) by inserting before the semicolon at the end the 
        following: ``or a Federal income tax refund as authorized by 
        section 3720A of title 31, United States Code''.

SEC. 1425. TERMINATION OF FEDERAL MATCH FOR OPTIONAL INFORMATION 
              ACTIVITIES.

    (a) In General.--Section 16(a) of the Food Stamp Act of 1977 (7 
U.S.C. 2025(a)) is amended--
            (1) by striking paragraph (4); and
            (2) by redesignating paragraphs (5) through (8) as 
        paragraphs (4) through (7), respectively.
    (b) Conforming Amendment.--Section 16(g) of the Act (7 U.S.C. 
2025(g)) is amended by striking ``an amount equal to'' and all that 
follows through ``1991, of'' and inserting ``the amount provided under 
subsection (a)(5) for''.

SEC. 1426. WORK SUPPLEMENTATION OR SUPPORT PROGRAM.

    Section 16 of the Food Stamp Act of 1977 (7 U.S.C. 2025) is amended 
by adding at the end the following:
    ``(k) Work Supplementation or Support Program.--
            ``(1) Definition.--In this subsection, the term `work 
        supplementation or support program' means a program in which, 
        as determined by the Secretary, public assistance (including 
        any benefits provided under a program established by the State 
        and the food stamp program) is provided to an employer to be 
        used for hiring and employing a new employee who is a public 
        assistance recipient.
            ``(2) Program.--A State agency may elect to use amounts 
        equal to the allotment that would otherwise be allotted to a 
        household under the food stamp program, but for the operation 
        of this subsection, for the purpose of subsidizing or 
        supporting jobs under a work supplementation or support program 
        established by the State.
            ``(3) Procedure.--If a State agency makes an election under 
        paragraph (2) and identifies each household that participates 
        in the food stamp program that contains an individual who is 
        participating in the work supplementation or support program--
                    ``(A) the Secretary shall pay to the State agency 
                an amount equal to the value of the allotment that the 
                household would be eligible to receive but for the 
                operation of this subsection;
                    ``(B) the State agency shall expend the amount paid 
                under subparagraph (A) in accordance with the work 
                supplementation or support program in lieu of providing 
                the allotment that the household would receive but for 
                the operation of this subsection;
                    ``(C) for purposes of--
                            ``(i) sections 5 and 8(a), the amount 
                        received under this subsection shall be 
                        excluded from household income and resources; 
                        and
                            ``(ii) section 8(b), the amount received 
                        under this subsection shall be considered to be 
                        the value of an allotment provided to the 
                        household; and
                    ``(D) the household shall not receive an allotment 
                from the State agency for the period during which the 
                member continues to participate in the work 
                supplementation or support program.
            ``(4) Maximum length of participation.--A work 
        supplementation or support program may not allow the 
        participation of any individual for longer than 1 year, unless 
        the Secretary approves a longer period.''.

SEC. 1427. PRIVATE SECTOR EMPLOYMENT INITIATIVES.

    Section 17 of the Food Stamp Act of 1977 (7 U.S.C. 2026) is amended 
by adding at the end the following:
    ``(m) Private Sector Employment Initiatives.--
            ``(1) Election to participate.--
                    ``(A) In general.--Subject to the other provisions 
                of this subsection, a State may elect to carry out a 
                private sector employment initiative program under this 
                subsection.
                    ``(B) Requirement.--A State shall be eligible to 
                carry out a private sector employment initiative under 
                this subsection only if not less than 50 percent of the 
                households that received food stamp benefits during the 
                summer of 1993 also received benefits under a State 
                program funded under part A of title IV of the Social 
                Security Act (42 U.S.C. 601 et seq.) during the summer 
                of 1993.
            ``(2) Procedure.--A State that has elected to carry out a 
        private sector employment initiative under paragraph (1) may 
        use amounts equal to the food stamp allotments that would 
        otherwise be allotted to a household under the food stamp 
        program, but for the operation of this subsection, to provide 
        cash benefits in lieu of the food stamp allotments to the 
        household if the household is eligible under paragraph (3).
            ``(3) Eligibility.--A household shall be eligible to 
        receive cash benefits under paragraph (2) if an adult member of 
        the household--
                    ``(A) has worked in unsubsidized employment in the 
                private sector for not less than the preceding 90 days;
                    ``(B) has earned not less than $350 per month from 
                the employment referred to in subparagraph (A) for not 
                less than the preceding 90 days;
                    ``(C)(i) is eligible to receive benefits under a 
                State program funded under part A of title IV of the 
                Social Security Act (42 U.S.C. 601 et seq.); or
                    ``(ii) was eligible to receive benefits under a 
                State program funded under part A of title IV of the 
                Social Security Act (42 U.S.C. 601 et seq.) at the time 
                the member first received cash benefits under this 
                subsection and is no longer eligible for the State 
                program because of earned income;
                    ``(D) is continuing to earn not less than $350 per 
                month from the employment referred to in subparagraph 
                (A); and
                    ``(E) elects to receive cash benefits in lieu of 
                food stamp benefits under this subsection.''.

SEC. 1428. REAUTHORIZATION OF APPROPRIATIONS.

    The first sentence of section 18(a)(1) of the Food Stamp Act of 
1977 (7 U.S.C. 2027(a)(1)) is amended by striking ``1995'' and 
inserting ``2002''.

SEC. 1429. OPTIONAL STATE FOOD ASSISTANCE BLOCK GRANT.

    The Food Stamp Act of 1977 (7 U.S.C. 2011 et seq.) is amended by 
adding at the end the following:

``SEC. 24. OPTIONAL STATE FOOD ASSISTANCE BLOCK GRANT.

    ``(a) Establishment.--The Secretary shall establish a program to 
make grants to States in accordance with this section to provide--
            ``(1) food assistance to needy individuals and families 
        residing in the State;
            ``(2) at the option of a State, wage subsidies and payments 
        in return for work for needy individuals under the program;
            ``(3) funds to operate an employment and training program 
        under subsection (g)(2) for needy individuals under the 
        program; and
            ``(4) funds for administrative costs incurred in providing 
        the assistance.
    ``(b) Election.--
            ``(1) In general.--A State may elect to participate in the 
        program established under subsection (a).
            ``(2) Election revocable.--A State that elects to 
        participate in the program established under subsection (a) may 
        subsequently reverse the election of the State only once 
        thereafter. Following the reversal, the State shall only be 
        eligible to participate in the food stamp program in accordance 
        with the other sections of this Act and shall not receive a 
        block grant under this section.
            ``(3) Program exclusive.--A State that is participating in 
        the program established under subsection (a) shall not be 
        subject to, or receive any benefit under, this Act except as 
        provided in this section.
    ``(c) Lead Agency.--
            ``(1) Designation.--A State desiring to participate in the 
        program established under this section shall designate, in an 
        application submitted to the Secretary under subsection (d)(1), 
        an appropriate State agency that complies with paragraph (2) to 
        act as the lead agency for the State.
            ``(2) Duties.--The lead agency shall--
                    ``(A) administer, either directly, through other 
                State agencies, or through local agencies, the 
                assistance received under this section by the State;
                    ``(B) develop the State plan to be submitted to the 
                Secretary under subsection (d)(1); and
                    ``(C) coordinate the provision of food assistance 
                under this section with other Federal, State, and local 
                programs.
    ``(d) Application and Plan.--
            ``(1) Application.--To be eligible to receive assistance 
        under this section, a State shall prepare and submit to the 
        Secretary an application at such time, in such manner, and 
        containing such information as the Secretary shall by 
        regulation require, including--
                    ``(A) an assurance that the State will comply with 
                the requirements of this section;
                    ``(B) a State plan that meets the requirements of 
                paragraph (3); and
                    ``(C) an assurance that the State will comply with 
                the requirements of the State plan under paragraph (3).
            ``(2) Annual plan.--The State plan contained in the 
        application under paragraph (1) shall be submitted for approval 
        annually.
            ``(3) Requirements of plan.--
                    ``(A) Lead agency.--The State plan shall identify 
                the lead agency.
                    ``(B) Use of block grant funds.--The State plan 
                shall provide that the State shall use the amounts 
                provided to the State for each fiscal year under this 
                section--
                            ``(i) to provide food assistance to needy 
                        individuals and families residing in the State, 
                        other than residents of institutions who are 
                        ineligible for food stamps under section 3(i);
                            ``(ii) at the option of a State, to provide 
                        wage subsidies or workfare under section 20(a) 
                        (except that any reference in section 20(a) to 
                        an allotment shall be considered a reference to 
                        the food assistance or benefits in lieu of food 
                        assistance received by an individual or family 
                        during a month under this section) for needy 
                        individuals and families participating in the 
                        program;
                            ``(iii) to administer an employment and 
                        training program under subsection (g)(2) for 
                        needy individuals under the program and to 
                        provide reimbursements to needy individuals and 
                        families as would be allowed under section 
                        16(h)(3); and
                            ``(iv) to pay administrative costs incurred 
                        in providing the assistance.
                    ``(C) Assistance for entire state.--The State plan 
                shall provide that benefits under this section shall be 
                available throughout the entire State.
                    ``(D) Notice and hearings.--The State plan shall 
                provide that an individual or family who applies for, 
                or receives, assistance under this section shall be 
                provided with notice of, and an opportunity for a 
                hearing on, any action under this section that 
                adversely affects the individual or family.
                    ``(E) Other assistance.--
                            ``(i) Coordination.--The State plan may 
                        coordinate assistance received under this 
                        section with assistance provided under the 
                        State program funded under part A of title IV 
                        of the Social Security Act (42 U.S.C. 601 et 
                        seq.).
                            ``(ii) Penalties.--If an individual or 
                        family is penalized for violating part A of 
                        title IV of the Act, the State plan may reduce 
                        the amount of assistance provided under this 
                        section or otherwise penalize the individual or 
                        family.
                    ``(F) Eligibility limitations.--The State plan 
                shall describe the income and resource eligibility 
                limitations that are established for the receipt of 
                assistance under this section.
                    ``(G) Receiving benefits in more than 1 
                jurisdiction.--The State plan shall establish a system 
                to verify and otherwise ensure that no individual or 
                family shall receive benefits under this section in 
                more than 1 jurisdiction within the State.
                    ``(H) Privacy.--The State plan shall provide for 
                safeguarding and restricting the use and disclosure of 
                information about any individual or family receiving 
                assistance under this section.
                    ``(I) Other information.--The State plan shall 
                contain such other information as may be required by 
                the Secretary.
            ``(4) Approval of application and plan.--The Secretary 
        shall approve an application and State plan that satisfies the 
        requirements of this section.
    ``(e) Limitations on State Allotments.--
            ``(1) No individual or family entitlement to assistance.--
        Nothing in this section--
                    ``(A) entitles any individual or family to 
                assistance under this section; or
                    ``(B) limits the right of a State to impose 
                additional limitations or conditions on assistance 
                under this section.
            ``(2) Construction of facilities.--No funds made available 
        under this section shall be expended for the purchase or 
        improvement of land, or for the purchase, construction, or 
        permanent improvement of any building or facility.
    ``(f) Benefits for Aliens.--
            ``(1) Eligibility.--No individual shall be eligible to 
        receive benefits under a State plan approved under subsection 
        (d)(4) if the individual is not eligible to participate in the 
        food stamp program under section 6(f).
            ``(2) Income.--The State plan shall provide that the income 
        of an alien shall be determined in accordance with section 
        5(i).
    ``(g) Employment and Training.--
            ``(1) Work requirements.--No individual or member of a 
        family shall be eligible to receive benefits under a State plan 
        funded under this section if the individual is not eligible to 
        participate in the food stamp program under subsection (d) or 
        (m) of section 6.
            ``(2) Work programs.--Each State shall implement an 
        employment and training program described in section 6(d)(4) 
        for needy individuals under the program.
    ``(h) Enforcement.--
            ``(1) Review of compliance with state plan.--The Secretary 
        shall review and monitor State compliance with this section and 
        the State plan approved under subsection (d)(4).
            ``(2) Noncompliance.--
                    ``(A) In general.--If the Secretary, after 
                reasonable notice to a State and opportunity for a 
                hearing, finds that--
                            ``(i) there has been a failure by the State 
                        to comply substantially with any provision or 
                        requirement set forth in the State plan 
                        approved under subsection (d)(4); or
                            ``(ii) in the operation of any program or 
                        activity for which assistance is provided under 
                        this section, there is a failure by the State 
                        to comply substantially with any provision of 
                        this section;
                the Secretary shall notify the State of the finding and 
                that no further payments will be made to the State 
                under this section (or, in the case of noncompliance in 
                the operation of a program or activity, that no further 
                payments to the State will be made with respect to the 
                program or activity) until the Secretary is satisfied 
                that there is no longer any failure to comply or that 
                the noncompliance will be promptly corrected.
                    ``(B) Other sanctions.--In the case of a finding of 
                noncompliance made pursuant to subparagraph (A), the 
                Secretary may, in addition to, or in lieu of, imposing 
                the sanctions described in subparagraph (A), impose 
                other appropriate sanctions, including recoupment of 
                money improperly expended for purposes prohibited or 
                not authorized by this section and disqualification 
                from the receipt of financial assistance under this 
                section.
                    ``(C) Notice.--The notice required under 
                subparagraph (A) shall include a specific 
                identification of any additional sanction being imposed 
                under subparagraph (B).
            ``(3) Issuance of regulations.--The Secretary shall 
        establish by regulation procedures for--
                    ``(A) receiving, processing, and determining the 
                validity of complaints concerning any failure of a 
                State to comply with the State plan or any requirement 
                of this section; and
                    ``(B) imposing sanctions under this section.
            ``(4) Income and eligibility verification system.--The 
        Secretary may withhold not more than 5 percent of the amount 
        allotted to a State under subsection (l)(2) if the State does 
        not use an income and eligibility verification system 
        established under section 1137 of the Social Security Act (42 
        U.S.C. 1320b-7).
    ``(i) Payments.--
            ``(1) In general.--For each fiscal year, the Secretary 
        shall pay to a State that has an application approved by the 
        Secretary under subsection (d)(4) an amount that is equal to 
        the allotment of the State under subsection (l)(2) for the 
        fiscal year.
            ``(2) Method of payment.--The Secretary shall make payments 
        to a State for a fiscal year under this section by issuing 1 or 
        more letters of credit for the fiscal year, with necessary 
        adjustments on account of overpayments or underpayments, as 
        determined by the Secretary.
            ``(3) Spending of funds by state.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), payments to a State from an allotment 
                under subsection (l)(2) for a fiscal year may be 
                expended by the State only in the fiscal year.
                    ``(B) Carryover.--The State may reserve up to 10 
                percent of an allotment under subsection (l)(2) for a 
                fiscal year to provide assistance under this section in 
                subsequent fiscal years, except that the reserved funds 
                may not exceed 30 percent of the total allotment 
                received under this section for a fiscal year.
            ``(4) Food assistance and administrative expenditures.--In 
        each fiscal year, of the Federal funds expended by a State 
        under this section--
                    ``(A) not less than 80 percent shall be for food 
                assistance; and
                    ``(B) not more than 6 percent shall be for 
                administrative expenses.
            ``(5) Provision of food assistance.--A State may provide 
        food assistance under this section in any manner determined 
        appropriate by the State to provide food assistance to needy 
        individuals and families in the State, such as electronic 
        benefits transfer limited to food purchases, coupons limited to 
        food purchases, or direct provision of commodities.
            ``(6) Definition of food assistance.--In this section, the 
        term `food assistance' means assistance that may be used only 
        to obtain food, as defined in section 3(g).
    ``(j) Audits.--
            ``(1) Requirement.--After the close of each fiscal year, a 
        State shall arrange for an audit of the expenditures of the 
        State during the program period from amounts received under 
        this section.
            ``(2) Independent auditor.--An audit under this section 
        shall be conducted by an entity that is independent of any 
        agency administering activities that receive assistance under 
        this section and be in accordance with generally accepted 
        auditing principles.
            ``(3) Payment accuracy.--Each annual audit under this 
        section shall include an audit of payment accuracy under this 
        section that shall be based on a statistically valid sample of 
        the caseload in the State.
            ``(4) Submission.--Not later than 30 days after the 
        completion of an audit under this section, the State shall 
        submit a copy of the audit to the legislature of the State and 
        to the Secretary.
            ``(5) Repayment of amounts.--Each State shall repay to the 
        United States any amounts determined through an audit under 
        this section to have not been expended in accordance with this 
        section or to have not been expended in accordance with the 
        State plan, or the Secretary may offset the amounts against any 
        other amount paid to the State under this section.
    ``(k) Nondiscrimination.--
            ``(1) In general.--The Secretary shall not provide 
        financial assistance for any program, project, or activity 
        under this section if any person with responsibilities for the 
        operation of the program, project, or activity discriminates 
        with respect to the program, project, or activity because of 
        race, religion, color, national origin, sex, or disability.
            ``(2) Enforcement.--The powers, remedies, and procedures 
        set forth in title VI of the Civil Rights Act of 1964 (42 
        U.S.C. 2000d et seq.) may be used by the Secretary to enforce 
        paragraph (1).
    ``(l) Allotments.--
            ``(1) Definition of state.--In this section, the term 
        `State' means each of the 50 States, the District of Columbia, 
        Guam, and the Virgin Islands of the United States.
            ``(2) State allotment.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), from the amounts made available under 
                section 18 of this Act for each fiscal year, the 
                Secretary shall allot to each State participating in 
                the program established under this section an amount 
                that is equal to the sum of--
                            ``(i) the greater of, as determined by the 
                        Secretary--
                                    ``(I) the total dollar value of all 
                                benefits issued under the food stamp 
                                program established under this Act by 
                                the State during fiscal year 1994; or
                                    ``(II) the average per fiscal year 
                                of the total dollar value of all 
                                benefits issued under the food stamp 
                                program by the State during each of 
                                fiscal years 1992 through 1994; and
                            ``(ii) the greater of, as determined by the 
                        Secretary--
                                    ``(I) the total amount received by 
                                the State for administrative costs and 
                                the employment and training program 
                                under subsections (a) and (h), 
                                respectively, of section 16 of this Act 
                                for fiscal year 1994; or
                                    ``(II) the average per fiscal year 
                                of the total amount received by the 
                                State for administrative costs and the 
                                employment and training program under 
                                subsections (a) and (h), respectively, 
                                of section 16 of this Act for each of 
                                fiscal years 1992 through 1994.
                    ``(B) Insufficient funds.--If the Secretary finds 
                that the total amount of allotments to which States 
                would otherwise be entitled for a fiscal year under 
                subparagraph (A) will exceed the amount of funds that 
                will be made available to provide the allotments for 
                the fiscal year, the Secretary shall reduce the 
                allotments made to States under this subsection, on a 
                pro rata basis, to the extent necessary to allot under 
                this subsection a total amount that is equal to the 
                funds that will be made available.''.

SEC. 1430. EFFECTIVE DATE.

    Except as otherwise provided in this chapter, this chapter and the 
amendments made by this chapter shall become effective on October 1, 
1995.

                  CHAPTER 2--CHILD NUTRITION PROGRAMS

                      PART I--REIMBURSEMENT RATES

SEC. 1441. TERMINATION OF ADDITIONAL PAYMENT FOR LUNCHES SERVED IN HIGH 
              FREE AND REDUCED PRICE PARTICIPATION SCHOOLS.

    (a) In General.--Section 4(b)(2) of the National School Lunch Act 
(42 U.S.C. 1753(b)(2)) is amended by striking ``except that'' and all 
that follows through ``2 cents more''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
become effective on July 1, 1996.

SEC. 1442. LUNCHES, BREAKFASTS, AND SUPPLEMENTS.

    (a) In General.--Section 11(a)(3)(B) of the National School Lunch 
Act (42 U.S.C. 1759a(a)(3)(B)) is amended--
            (1) by designating the second and third sentences as 
        subparagraphs (C) and (D), respectively; and
            (2) by striking subparagraph (D) (as so designated) and 
        inserting the following:
                    ``(D) Rounding.--Except as otherwise provided in 
                this paragraph, in the case of each school year, the 
                Secretary shall--
                            ``(i) base the adjustment made under this 
                        paragraph on the amount of the unrounded 
                        adjustment for the preceding school year;
                            ``(ii) adjust the resulting amount in 
                        accordance with subparagraphs (B) and (C); and
                            ``(iii) round the result to the nearest 
                        lower cent increment.
                    ``(E) Adjustment on january 1, 1996.--On January 1, 
                1996, the Secretary shall adjust the rates and factor 
                for the remainder of the school year by rounding the 
                previously established rates and factor to the nearest 
                lower cent increment.
                    ``(F) Adjustment for 24-month period beginning july 
                1, 1996.--In the case of the 24-month period beginning 
                July 1, 1996, the national average payment rates for 
                paid lunches, paid breakfasts, and paid supplements 
                shall be the same as the national average payment rate 
                for paid lunches, paid breakfasts, and paid 
                supplements, respectively, for the school year 
                beginning July 1, 1995, rounded to the nearest lower 
                cent increment.
                    ``(G) Adjustment for school year beginning july 1, 
                1998.--In the case of the school year beginning July 1, 
                1998, the Secretary shall--
                            ``(i) base the adjustments made under this 
                        paragraph for--
                                    ``(I) paid lunches and paid 
                                breakfasts on the amount of the 
                                unrounded adjustment for paid lunches 
                                for the school year beginning July 1, 
                                1995; and
                                    ``(II) paid supplements on the 
                                amount of the unrounded adjustment for 
                                paid supplements for the school year 
                                beginning July 1, 1995;
                            ``(ii) adjust each resulting amount in 
                        accordance with subparagraph (C); and
                            ``(iii) round each result to the nearest 
                        lower cent increment.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
become effective on January 1, 1996.

SEC. 1443. FREE AND REDUCED PRICE BREAKFASTS.

    (a) In General.--Section 4(b) of the Child Nutrition Act of 1966 
(42 U.S.C. 1773(b)) is amended--
            (1) in paragraph (1)(B)--
                    (A) in the first sentence, by striking ``section 
                11(a)'' and inserting ``subparagraphs (B) through (E) 
                of section 11(a)(3)''; and
                    (B) in the second sentence, by striking ``, 
                adjusted to the nearest one-fourth cent'' and inserting 
                ``(as adjusted pursuant to subparagraphs (B) through 
                (E) of section 11(a)(3) of the National School Lunch 
                Act (42 U.S.C. 1759a(a)(3)))''; and
            (2) in paragraph (2)(B)(ii)--
                    (A) by striking ``nearest one-fourth cent'' and 
                inserting ``nearest lower cent increment for the 
                applicable school year''; and
                    (B) by inserting before the period at the end the 
                following: ``, and the adjustment required by this 
                clause shall be based on the unrounded adjustment for 
                the preceding school year''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
become effective on July 1, 1996.

SEC. 1444. CONFORMING REIMBURSEMENT FOR PAID BREAKFASTS AND LUNCHES.

    (a) In General.--The last sentence of section 4(b)(1)(B) of the 
Child Nutrition Act of 1966 (42 U.S.C. 1773(b)(1)(B)) is amended by 
striking ``8.25 cents'' and all that follows through ``Act)'' and 
inserting ``the same as the national average lunch payment for paid 
meals established under section 4(b) of the National School Lunch Act 
(42 U.S.C. 1753(b))''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
become effective on January 1, 1996.

                        PART II--GRANT PROGRAMS

SEC. 1451. SCHOOL BREAKFAST STARTUP GRANTS.

    (a) In General.--Section 4 of the Child Nutrition Act of 1966 (42 
U.S.C. 1773) is amended by striking subsection (g).
    (b) Effective Date.--The amendment made by subsection (a) shall 
become effective on October 1, 1996.

                       PART III--OTHER AMENDMENTS

SEC. 1461. CHILD AND ADULT CARE FOOD PROGRAM.

    (a) Improved Targeting of Day Care Home Reimbursements.--
            (1) Restructured day care home reimbursements.--Section 
        17(f)(3) of the National School Lunch Act (42 U.S.C. 
        1766(f)(3)) is amended by striking ``(3)(A) Institutions'' and 
        all that follows through the end of subparagraph (A) and 
        inserting the following:
            ``(3) Reimbursement of family or group day care home 
        sponsoring organizations.--
                    ``(A) Reimbursement factor.--
                            ``(i) In general.--An institution that 
                        participates in the program under this section 
                        as a family or group day care home sponsoring 
                        organization shall be provided, for payment to 
                        a home sponsored by the organization, 
                        reimbursement factors in accordance with this 
                        subparagraph for the cost of obtaining and 
                        preparing food and prescribed labor costs 
                        involved in providing meals under this section.
                            ``(ii) Tier i family or group day care 
                        homes.--
                                    ``(I) Definition.--In this 
                                paragraph, the term `tier I family or 
                                group day care home' means--
                                            ``(aa) a family or group 
                                        day care home that is located 
                                        in a geographic area, as 
                                        defined by the Secretary based 
                                        on census data, in which at 
                                        least 50 percent of the 
                                        children residing in the area 
                                        are members of households whose 
                                        incomes meet the income 
                                        eligibility guidelines for free 
                                        or reduced price meals under 
                                        section 9;
                                            ``(bb) a family or group 
                                        day care home that is located 
                                        in an area served by a school 
                                        enrolling elementary students 
                                        in which at least 50 percent of 
                                        the total number of children 
                                        enrolled are certified as 
                                        eligible to receive free or 
                                        reduced price school meals 
                                        under this Act or the Child 
                                        Nutrition Act of 1966 (42 
                                        U.S.C. 1771 et seq.); or
                                            ``(cc) a family or group 
                                        day care home that is operated 
                                        by a provider whose household 
                                        meets the income eligibility 
                                        guidelines for free or reduced 
                                        price meals under section 9 and 
                                        whose income is verified by the 
                                        sponsoring organization of the 
                                        home under regulations 
                                        established by the Secretary.
                                    ``(II) Reimbursement.--Except as 
                                provided in subclause (III), a tier I 
                                family or group day care home shall be 
                                provided reimbursement factors under 
                                this clause without a requirement for 
                                documentation of the costs described in 
                                clause (i), except that reimbursement 
                                shall not be provided under this 
                                subclause for meals or supplements 
                                served to the children of a person 
                                acting as a family or group day care 
                                home provider unless the children meet 
                                the income eligibility guidelines for 
                                free or reduced price meals under 
                                section 9.
                                    ``(III) Factors.--Except as 
                                provided in subclause (IV), the 
                                reimbursement factors applied to a home 
                                referred to in subclause (II) shall be 
                                the factors in effect on the date of 
                                enactment of this subclause.
                                    ``(IV) Adjustments.--The 
                                reimbursement factors under this 
                                subparagraph shall be adjusted on 
                                August 1, 1996, July 1, 1997, and each 
                                July 1 thereafter, to reflect changes 
                                in the Consumer Price Index for food at 
                                home for the most recent 12-month 
                                period for which the data are 
                                available. The reimbursement factors 
                                under this subparagraph shall be 
                                rounded to the nearest lower cent 
                                increment and based on the unrounded 
                                adjustment in effect on June 30 of the 
                                preceding school year.
                            ``(iii) Tier ii family or group day care 
                        homes.--
                                    ``(I) In general.--
                                            ``(aa) Factors.--Except as 
                                        provided in subclause (II), 
                                        with respect to meals or 
                                        supplements served under this 
                                        clause by a family or group day 
                                        care home that does not meet 
                                        the criteria set forth in 
                                        clause (ii)(I), the 
                                        reimbursement factors shall be 
                                        $1 for lunches and suppers, 30 
                                        cents for breakfasts, and 15 
                                        cents for supplements.
                                            ``(bb) Adjustments.--The 
                                        factors shall be adjusted on 
                                        July 1, 1997, and each July 1 
                                        thereafter, to reflect changes 
                                        in the Consumer Price Index for 
                                        food at home for the most 
                                        recent 12-month period for 
                                        which the data are available. 
                                        The reimbursement factors under 
                                        this item shall be rounded down 
                                        to the nearest lower cent 
                                        increment and based on the 
                                        unrounded adjustment for the 
                                        preceding 12-month period.
                                            ``(cc) Reimbursement.--A 
                                        family or group day care home 
                                        shall be provided reimbursement 
                                        factors under this subclause 
                                        without a requirement for 
                                        documentation of the costs 
                                        described in clause (i), except 
                                        that reimbursement shall not be 
                                        provided under this subclause 
                                        for meals or supplements served 
                                        to the children of a person 
                                        acting as a family or group day 
                                        care home provider unless the 
                                        children meet the income 
                                        eligibility guidelines for free 
                                        or reduced price meals under 
                                        section 9.
                                    ``(II) Other factors.--A family or 
                                group day care home that does not meet 
                                the criteria set forth in clause 
                                (ii)(I) may elect to be provided 
                                reimbursement factors determined in 
                                accordance with the following 
                                requirements:
                                            ``(aa) Children eligible 
                                        for free or reduced price 
                                        meals.--In the case of meals or 
                                        supplements served under this 
                                        subsection to children who are 
                                        members of households whose 
                                        incomes meet the income 
                                        eligibility guidelines for free 
                                        or reduced price meals under 
                                        section 9, the family or group 
                                        day care home shall be provided 
                                        reimbursement factors set by 
                                        the Secretary in accordance 
                                        with clause (ii)(III).
                                            ``(bb) Ineligible 
                                        children.--In the case of meals 
                                        or supplements served under 
                                        this subsection to children who 
                                        are members of households whose 
                                        incomes do not meet the income 
                                        eligibility guidelines, the 
                                        family or group day care home 
                                        shall be provided reimbursement 
                                        factors in accordance with 
                                        subclause (I).
                                    ``(III) Information and 
                                determinations.--
                                            ``(aa) In general.--If a 
                                        family or group day care home 
                                        elects to claim the factors 
                                        described in subclause (II), 
                                        the family or group day care 
                                        home sponsoring organization 
                                        serving the home shall collect 
                                        the necessary income 
                                        information, as determined by 
                                        the Secretary, from any parent 
                                        or other caretaker to make the 
                                        determinations specified in 
                                        subclause (II) and shall make 
                                        the determinations in 
                                        accordance with rules 
                                        prescribed by the Secretary.
                                            ``(bb) Categorical 
                                        eligibility.--In making a 
                                        determination under item (aa), 
                                        a family or group day care home 
                                        sponsoring organization may 
                                        consider a child participating 
                                        in or subsidized under, or a 
                                        child with a parent 
                                        participating in or subsidized 
                                        under, a federally or State 
                                        supported child care or other 
                                        benefit program with an income 
                                        eligibility limit that does not 
                                        exceed the eligibility standard 
                                        for free or reduced price meals 
                                        under section 9 to be a child 
                                        who is a member of a household 
                                        whose income meets the income 
                                        eligibility guidelines under 
                                        section 9.
                                            ``(cc) Factors for children 
                                        only.--A family or group day 
                                        care home may elect to receive 
                                        the reimbursement factors 
                                        prescribed under clause 
                                        (ii)(III) solely for the 
                                        children participating in a 
                                        program referred to in item 
                                        (bb) if the home elects not to 
                                        have income statements 
                                        collected from parents or other 
                                        caretakers.
                                    ``(IV) Simplified meal counting and 
                                reporting procedures.--The Secretary 
                                shall prescribe simplified meal 
                                counting and reporting procedures for 
                                use by a family or group day care home 
                                that elects to claim the factors under 
                                subclause (II) and by a family or group 
                                day care home sponsoring organization 
                                that sponsors the home. The procedures 
                                the Secretary prescribes may include 1 
                                or more of the following:
                                            ``(aa) Setting an annual 
                                        percentage for each home of the 
                                        number of meals served that are 
                                        to be reimbursed in accordance 
                                        with the reimbursement factors 
                                        prescribed under clause 
                                        (ii)(III) and an annual 
                                        percentage of the number of 
                                        meals served that are to be 
                                        reimbursed in accordance with 
                                        the reimbursement factors 
                                        prescribed under subclause (I), 
                                        based on the family income of 
                                        children enrolled in the home 
                                        in a specified month or other 
                                        period.
                                            ``(bb) Placing a home into 
                                        1 of 2 or more reimbursement 
                                        categories annually based on 
                                        the percentage of children in 
                                        the home whose households have 
                                        incomes that meet the income 
                                        eligibility guidelines under 
                                        section 9, with each such 
                                        reimbursement category carrying 
                                        a set of reimbursement factors 
                                        such as the factors prescribed 
                                        under clause (ii)(III) or 
                                        subclause (I) or factors 
                                        established within the range of 
                                        factors prescribed under clause 
                                        (ii)(III) and subclause (I).
                                            ``(cc) Such other 
                                        simplified procedures as the 
                                        Secretary may prescribe.
                                    ``(V) Minimum verification 
                                requirements.--The Secretary may 
                                establish any necessary minimum 
                                verification requirements.''.
            (2) Grants to states to provide assistance to family or 
        group day care homes.--Section 17(f)(3) of the Act is amended 
        by adding at the end the following:
                    ``(D) Grants to states to provide assistance to 
                family or group day care homes.--
                            ``(i) In general.--
                                    ``(I) Reservation.--From amounts 
                                made available to carry out this 
                                section, the Secretary shall reserve 
                                $5,000,000 of the amount made available 
                                for fiscal year 1996.
                                    ``(II) Purpose.--The Secretary 
                                shall use the funds made available 
                                under subclause (I) to provide grants 
                                to States for the purpose of 
                                providing--
                                            ``(aa) assistance, 
                                        including grants, to family and 
                                        day care home sponsoring 
                                        organizations and other 
                                        appropriate organizations, in 
                                        securing and providing 
                                        training, materials, automated 
                                        data processing assistance, and 
                                        other assistance for the staff 
                                        of the sponsoring 
                                        organizations; and
                                            ``(bb) training and other 
                                        assistance to family and group 
                                        day care homes in the 
                                        implementation of the 
                                        amendments to subparagraph (A) 
                                        made by section 1461(a)(1) of 
                                        the Agricultural Reconciliation 
                                        Act of 1995.
                            ``(ii) Allocation.--The Secretary shall 
                        allocate from the funds reserved under clause 
                        (i)(I)--
                                    ``(I) $30,000 in base funding to 
                                each State; and
                                    ``(II) any remaining amount among 
                                the States, based on the number of 
                                family day care homes participating in 
                                the program in a State during fiscal 
                                year 1994 as a percentage of the number 
                                of all family day care homes 
                                participating in the program during 
                                fiscal year 1994.
                            ``(iii) Retention of funds.--Of the amount 
                        of funds made available to a State for fiscal 
                        year 1996 under clause (i), the State may 
                        retain not to exceed 30 percent of the amount 
                        to carry out this subparagraph.
                            ``(iv) Additional payments.--Any payments 
                        received under this subparagraph shall be in 
                        addition to payments that a State receives 
                        under subparagraph (A) (as amended by section 
                        1461(a)(1) of the Agricultural Reconciliation 
                        Act of 1995).''.
            (3) Provision of data.--Section 17(f)(3) of the Act (as 
        amended by paragraph (2)) is further amended by adding at the 
        end the following:
                    ``(E) Provision of data to family or group day care 
                home sponsoring organizations.--
                            ``(i) Census data.--The Secretary shall 
                        provide to each State agency administering a 
                        child and adult care food program under this 
                        section data from the most recent decennial 
                        census survey or other appropriate census 
                        survey for which the data are available showing 
                        which areas in the State meet the requirements 
                        of subparagraph (A)(ii)(I)(aa). The State 
                        agency shall provide the data to family or 
                        group day care home sponsoring organizations 
                        located in the State.
                            ``(ii) School data.--
                                    ``(I) In general.--A State agency 
                                administering the school lunch program 
                                under this Act or the school breakfast 
                                program under the Child Nutrition Act 
                                of 1966 (42 U.S.C. 1771 et seq.) shall 
                                provide to approved family or group day 
                                care home sponsoring organizations a 
                                list of schools serving elementary 
                                school children in the State in which 
                                not less than \1/2\ of the children 
                                enrolled are certified to receive free 
                                or reduced price meals. The State 
                                agency shall collect the data necessary 
                                to create the list annually and provide 
                                the list on a timely basis to any 
                                approved family or group day care home 
                                sponsoring organization that requests 
                                the list.
                                    ``(II) Use of data from preceding 
                                school year.--In determining for a 
                                fiscal year or other annual period 
                                whether a home qualifies as a tier I 
                                family or group day care home under 
                                subparagraph (A)(ii)(I), the State 
                                agency administering the program under 
                                this section, and a family or group day 
                                care home sponsoring organization, 
                                shall use the most current available 
                                data at the time of the determination.
                            ``(iii) Duration of determination.--For 
                        purposes of this section, a determination that 
                        a family or group day care home is located in 
                        an area that qualifies the home as a tier I 
                        family or group day care home (as the term is 
                        defined in subparagraph (A)(ii)(I)), shall be 
                        in effect for 3 years (unless the determination 
                        is made on the basis of census data, in which 
                        case the determination shall remain in effect 
                        until more recent census data are available) 
                        unless the State agency determines that the 
                        area in which the home is located no longer 
                        qualifies the home as a tier I family or group 
                        day care home.''.
            (4) Conforming amendments.--Section 17(c) of the Act is 
        amended by inserting ``except as provided in subsection 
        (f)(3),'' after ``For purposes of this section,'' each place it 
        appears in paragraphs (1), (2), and (3).
    (b) Elimination of State Paperwork and Outreach Burden.--Section 17 
of the Act is amended by striking subsection (k) and inserting the 
following:
    ``(k) Training and Technical Assistance.--A State participating in 
the program established under this section shall provide sufficient 
training, technical assistance, and monitoring to facilitate effective 
operation of the program. The Secretary shall assist the State in 
developing plans to fulfill the requirements of this subsection.''.
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall become effective on the 
        date of enactment of this Act.
            (2) Improved targeting of day care home reimbursements.--
        The amendments made by paragraphs (1), (3), and (4) of 
        subsection (a) shall become effective on August 1, 1996.

                     CHAPTER 3--ADDITIONAL SAVINGS

SEC. 1471. EARNINGS OF STUDENTS.

    Section 5(d)(7) of the Food Stamp Act of 1977 (7 U.S.C. 2014(d)(7)) 
is amended by striking ``21'' and inserting ``17''.

SEC. 1472. STANDARD DEDUCTION.

    Section 5(e) of the Food Stamp Act of 1977 (7 U.S.C. 2014(e)) is 
amended by adding at the end the following: ``Notwithstanding any other 
provision of this subsection, the Secretary shall allow a standard 
deduction of $134 for fiscal year 1995, $132 for the period consisting 
of October 1, 1995, through December 31, 1995, and $116 for the period 
consisting of January 1, 1996, through fiscal year 2002, except that 
households in Alaska, Hawaii, Guam, and the Virgin Islands of the 
United States shall be allowed a standard deduction of $229, $189, 
$269, and $118, respectively, for fiscal year 1995; $225, $186, $265, 
and $116, respectively, for the period consisting of October 1, 1995, 
through December 31, 1995; and $198, $164, $233, and $102, 
respectively, for the period consisting of January 1, 1996, through 
fiscal year 2002.''.

SEC. 1473. VENDOR PAYMENTS FOR TRANSITIONAL HOUSING COUNTED AS INCOME.

    Section 5(k)(2) of the Food Stamp Act of 1977 (7 U.S.C. 2014(k)(2)) 
(as amended by section 1406(b)(1)(B)) is amended--
            (1) by striking subparagraph (E); and
            (2) by redesignating subparagraphs (F) and (G) as 
        subparagraphs (E) and (F), respectively.

SEC. 1474. EXTENDING CLAIMS RETENTION RATES.

    The first sentence of section 16(a) of the Food Stamp Act of 1977 
(7 U.S.C. 2025(a)) is amended by striking ``1995'' each place it 
appears and inserting ``2002''.

SEC. 1475. REAUTHORIZATION OF PUERTO RICO NUTRITION ASSISTANCE PROGRAM.

    The first sentence of section 19(a)(1)(A) of the Food Stamp Act of 
1977 (7 U.S.C. 2028(a)(1)(A)) is amended by striking ``$974,000,000'' 
and all that follows through ``fiscal year 1995'' and inserting 
``$1,143,000,000 for each of fiscal years 1995 and 1996, $1,171,000,000 
for fiscal year 1997, $1,212,000,000 for fiscal year 1998, 
$1,255,000,000 for fiscal year 1999, $1,299,000,000 for fiscal year 
2000, $1,342,000,000 for fiscal year 2001, and $1,376,000,000 for 
fiscal year 2002''.

SEC. 1476. VALUE OF FOOD ASSISTANCE.

    (a) In General.--Section 6(e)(1) of the National School Lunch Act 
(42 U.S.C. 1755(e)(1)) is amended by striking subparagraph (B) and 
inserting the following:
                    ``(B) Adjustments.--
                            ``(i) In general.--The value of food 
                        assistance for each meal shall be adjusted each 
                        July 1 by the annual percentage change in a 3-
                        month average value of the Price Index for 
                        Foods Used in Schools and Institutions for 
                        March, April, and May each year.
                            ``(ii) Adjustments.--Except as otherwise 
                        provided in this subparagraph, in the case of 
                        each school year, the Secretary shall--
                                    ``(I) base the adjustment made 
                                under clause (i) on the amount of the 
                                unrounded adjustment for the preceding 
                                school year;
                                    ``(II) adjust the resulting amount 
                                in accordance with clause (i); and
                                    ``(III) round the result to the 
                                nearest lower cent increment.
                            ``(iii) Adjustment on january 1, 1996.--On 
                        January 1, 1996, the Secretary shall adjust the 
                        value of food assistance for the remainder of 
                        the school year by rounding the previously 
                        established value of food assistance to the 
                        nearest lower cent increment.
                            ``(iv) Adjustment for 24-month period 
                        beginning july 1, 1996.--In the case of the 24-
                        month period beginning July 1, 1996, the value 
                        of food assistance shall be the same as the 
                        value of food assistance in effect on June 30, 
                        1996.
                            ``(v) Adjustment for school year beginning 
                        july 1, 1998.--In the case of the school year 
                        beginning July 1, 1998, the Secretary shall--
                                    ``(I) base the adjustment made 
                                under clause (i) on the amount of the 
                                unrounded adjustment for the value of 
                                food assistance for the school year 
                                beginning July 1, 1995;
                                    ``(II) adjust the resulting amount 
                                to reflect the annual percentage change 
                                in a 3-month average value of the Price 
                                Index for Foods Used in Schools and 
                                Institutions for March, April, and May 
                                for the most recent 12-month period for 
                                which the data are available; and
                                    ``(III) round the result to the 
                                nearest lower cent increment.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
become effective on January 1, 1996.

SEC. 1477. COMMODITY ASSISTANCE.

    (a) In General.--Section 6(g) of the National School Lunch Act (42 
U.S.C. 1755(g)) is amended by striking ``12 percent'' and inserting 
``10 percent''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
become effective on July 1, 1996.

SEC. 1478. SUMMER FOOD SERVICE PROGRAM FOR CHILDREN.

    (a) In General.--Section 13(b) of the National School Lunch Act (42 
U.S.C. 1761(b)) is amended--
            (1) by striking ``(b)(1)'' and all that follows through the 
        end of paragraph (1) and inserting the following:
    ``(b) Service Institutions.--
            ``(1) Payments.--
                    ``(A) In general.--Except as otherwise provided in 
                this paragraph, payments to service institutions shall 
                equal the full cost of food service operations (which 
                cost shall include the costs of obtaining, preparing, 
                and serving food, but shall not include administrative 
                costs).
                    ``(B) Maximum amounts.--Subject to subparagraph 
                (C), payments to any institution under subparagraph (A) 
                shall not exceed--
                            ``(i) $1.82 for each lunch and supper 
                        served;
                            ``(ii) $1.13 for each breakfast served; and
                            ``(iii) 46 cents for each meal supplement 
                        served.
                    ``(C) Adjustments.--Amounts specified in 
                subparagraph (B) shall be adjusted each January 1 to 
                the nearest lower cent increment in accordance with the 
                changes for the 12-month period ending the preceding 
                November 30 in the series for food away from home of 
                the Consumer Price Index for All Urban Consumers 
                published by the Bureau of Labor Statistics of the 
                Department of Labor. Each adjustment shall be based on 
                the unrounded adjustment for the prior 12-month 
                period.'';
            (2) in the second sentence of paragraph (3), by striking 
        ``levels determined'' and all that follows through ``this 
        subsection'' and inserting ``level determined by the 
        Secretary''; and
            (3) by striking paragraph (4).
    (b) Effective Date.--The amendments made by subsection (a) shall 
become effective on January 1, 1996.

SEC. 1479. SPECIAL MILK PROGRAM.

    (a) In General.--Section 3(a) of the Child Nutrition Act of 1966 
(42 U.S.C. 1772(a)) is amended by striking paragraph (8) and inserting 
the following:
            ``(8) Adjustments.--
                    ``(A) In general.--Except as otherwise provided in 
                this paragraph, in the case of each school year, the 
                Secretary shall--
                            ``(i) base the adjustment made under 
                        paragraph (7) on the amount of the unrounded 
                        adjustment for the preceding school year;
                            ``(ii) adjust the resulting amount in 
                        accordance with paragraph (7); and
                            ``(iii) round the result to the nearest 
                        lower cent increment.
                    ``(B) Adjustment on january 1, 1996.--On January 1, 
                1996, the Secretary shall adjust the minimum rate for 
                the remainder of the school year by rounding the 
                previously established minimum rate to the nearest 
                lower cent increment.
                    ``(C) Adjustment for 24-month period beginning july 
                1, 1996.--In the case of the 24-month period beginning 
                July 1, 1996, the minimum rate shall be the same as the 
                minimum rate in effect on June 30, 1996.
                    ``(D) Adjustment for school year beginning july 1, 
                1998.--In the case of the school year beginning July 1, 
                1998, the Secretary shall--
                            ``(i) base the adjustment made under 
                        paragraph (7) on the amount of the unrounded 
                        adjustment for the minimum rate for the school 
                        year beginning July 1, 1995;
                            ``(ii) adjust the resulting amount to 
                        reflect changes in the Producer Price Index for 
                        Fresh Processed Milk published by the Bureau of 
                        Labor Statistics of the Department of Labor for 
                        the most recent 12-month period for which the 
                        data are available; and
                            ``(iii) round the result to the nearest 
                        lower cent increment.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
become effective on January 1, 1996.

SEC. 1480. NUTRITION EDUCATION AND TRAINING PROGRAMS.

    (a) In General.--Section 19(i)(2)(A) of the Child Nutrition Act of 
1966 (42 U.S.C. 1788(i)(2)(A)) is amended by striking ``$10,000,000'' 
and inserting ``$7,000,000''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
become effective on October 1, 1996.

SEC. 1481. EFFECTIVE DATE.

    Except as otherwise provided in this chapter, this chapter and the 
amendments made by this chapter shall become effective on October 1, 
1995.

                       CHAPTER 4--EFFECTIVE DATE

SEC. 1491. EFFECTIVE DATE.

    Notwithstanding any other provision of this subtitle, if the Act 
entitled ``An Act to restore the American family, reduce illegitimacy, 
control welfare spending and reduce welfare dependence'' is enacted on 
or before December 31, 1996, the amendments made by chapters 1 and 2 of 
this subtitle shall be effective only during the period prior to the 
date of enactment of such Act.

                 TITLE II--COMMITTEE ON ARMED SERVICES

SEC. 2001. DISPOSAL OF OBSOLETE AND EXCESS MATERIALS CONTAINED IN THE 
              NATIONAL DEFENSE STOCKPILE.

    (a) Disposal Authorized.--During the 7-year period beginning on 
October 1, 1995, the President shall sell in accordance with this 
section such quantities of materials currently contained in the 
National Defense Stockpile (within the limits of subsection (c)) as are 
necessary to achieve proceeds in the total amount of $649,000,000.
    (b) Minimum Sales Each Year.--The President shall sell materials 
under subsection (a) as necessary in a fiscal year to ensure that, by 
the end of that fiscal year, the total amount of the proceeds received 
by the United States from such sales and from the sales under 
subsection (a) during preceding fiscal years equals or exceeds the 
amount indicated for that fiscal year as follows:
            (1) By the end of fiscal year 1996, $71,000,000.
            (2) By the end of fiscal year 1997, $115,000,000.
            (3) By the end of fiscal year 1998, $181,000,000.
            (4) By the end of fiscal year 1999, $272,000,000.
            (5) By the end of fiscal year 2000, $388,000,000.
            (6) By the end of fiscal year 2001, $530,000,000.
            (7) By the end of fiscal year 2002, $649,000,000.
    (c) Materials Covered.-- The materials subject to sale under this 
section and the maximum quantity of each material authorized to be sold 
by the President are set forth in the following table:
      

                     Authorized Stockpile Disposals                     
------------------------------------------------------------------------
                     Material for disposal              Quantity        
------------------------------------------------------------------------
              Aluminum...........................  20,000 short tons    
              Chromium Metal.....................  2,000 short tons     
              Cobalt.............................  30,000,000 pounds of 
                                                    contained cobalt    
              Columbium Carbide..................  10,000 pounds of     
                                                    contained columbium 
              Columbium Ferro....................  500,000 pounds of    
                                                    contained columbium 
              Diamond, Bort......................  40,000 carats        
              Diamond Stones.....................  2,500,000 carats     
              Germanium Metal....................  40,000 kilograms     
              Indium.............................  35,000 troy ounces   
              Mica, Phlogopite Block.............  65,000 pounds        
              Platinum...........................  25,000 troy ounces   
              Palladium..........................  55,000 troy ounces   
              Rubber, Natural....................  75,000 long tons     
              Tantalum, Carbide Powder...........  6,000 pounds of      
                                                    contained tantalum  
              Tantalum, Minerals.................  750,000 pounds of    
                                                    contained tantalum  
              Tantalum, Oxide....................  40,000 pounds of     
                                                    contained tantalum  
              Titanium Sponge....................  15,000 short tons    
              Tungsten, Ore and Concentrate......  19,850,000 pounds of 
                                                    contained tungsten  
              Tungsten Carbide...................  50,000 pounds of     
                                                    contained tungsten  
              Tungsten Metal Powder..............  50,000 pounds of     
                                                    contained tungsten  
              Tungsten Ferro.....................  50,000 pounds of     
                                                    contained tungsten  
              Vegetable Tannin, Chestnut.........  2,500 long tons      
              Vegetable Tannin, Quebracho........  35,000 long tons     
              Vegetable Tannin, Wattle...........  3,000 long tons      
                                                                        
------------------------------------------------------------------------

    (d) Relationship to Other Disposal Authority.--(1) The disposal 
authority provided in this section is in addition to any other disposal 
authority provided by law.
    (2) The President may not sell materials under this section before 
disposing of the maximum quantities of materials in the National 
Defense Stockpile that the President is authorized to dispose of under 
laws enacted before the date of the enactment of this Act (except the 
Strategic and Critical Materials Stock Piling Act).
    (e) Disposition of Proceeds.--Proceeds of sales under this section 
shall be credited to the general fund of the Treasury for reduction of 
budget deficits.

      TITLE III--COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

SEC. 3001. STABILIZATION OF THE SAVINGS ASSOCIATION INSURANCE FUND.

    (a) Special Assessment To Capitalize SAIF.--
            (1) In general.--Except as provided in paragraph (6), the 
        Board of Directors shall impose a special assessment on the 
        SAIF-assessable deposits of each insured depository institution 
        at a rate that the Board of Directors, in its sole discretion, 
        determines will cause the Savings Association Insurance Fund to 
        achieve the designated reserve ratio on the first business day 
        of January 1996.
            (2) Factors to be considered.--In carrying out paragraph 
        (1), the Board of Directors shall base its determination on--
                    (A) the monthly Savings Association Insurance Fund 
                balance most recently calculated;
                    (B) data on insured deposits reported in the most 
                recent reports of condition filed not later than 70 
                days before the date of enactment of this Act by 
                insured depository institutions; and
                    (C) any other factors that the Board of Directors 
                deems appropriate.
            (3) Date of determination.--For purposes of paragraph (1), 
        the amount of the SAIF-assessable deposits of an insured 
        depository institution shall be determined as of March 31, 
        1995.
            (4) Date payment due.--The special assessment imposed under 
        this section shall be--
                    (A) due on the first business day of January 1996; 
                and
                    (B) paid to the Corporation on the later of--
                            (i) the first business day of January 1996; 
                        or
                            (ii) such other date as the Corporation 
                        shall prescribe, but not later than 60 days 
                        after the date of enactment of this Act.
            (5) Assessment deposited in saif.--Notwithstanding any 
        other provision of law, the proceeds of the special assessment 
        imposed under this subsection shall be deposited in the Savings 
        Association Insurance Fund.
            (6) Discretion to exempt weak institutions.--
                    (A) In general.--The Board of Directors may, by 
                order, in its sole discretion, exempt any insured 
                depository institution that the Board of Directors 
                determines to be weak from paying the special 
                assessment imposed under this subsection if the Board 
                of Directors determines that the exemption would reduce 
                risk to the Savings Association Insurance Fund.
                    (B) Guidelines required.--Not later than 30 days 
                after the date of enactment of this Act, the Board of 
                Directors shall prescribe guidelines setting forth the 
                criteria that the Board of Directors will use in 
                exempting institutions under subparagraph (A). Such 
                guidelines shall be published in the Federal Register.
                    (C) Exemption for certain newly chartered 
                institutions.--
                            (i) In general.--In addition to the 
                        institutions exempted from paying the special 
                        assessment under subparagraph (A), the Board of 
                        Directors shall, by order, exempt any insured 
                        depository institution from payment of the 
                        special assessment if the institution was in 
                        existence on October 1, 1995, and held no 
                        Savings Association Insurance Fund insured 
                        deposits prior to January 1, 1993.
                            (ii) Definition.--For purposes of this 
                        subparagraph, an institution shall be deemed to 
                        have held Savings Association Insurance Fund 
                        insured deposits prior to January 1, 1993, if 
                        it directly held Savings Association Insurance 
                        Fund insured deposits prior to that date, or it 
                        succeeded to, acquired, purchased, or otherwise 
                        holds any Savings Association Insurance Fund 
                        insured deposits as of the date of enactment of 
                        this Act that were Savings Association 
                        Insurance Fund insured prior to January 1, 
                        1993.
                    (D) Exempt institutions required to pay assessments 
                at former rates.--
                            (i) Payments to saif and dif.--Any insured 
                        depository institution that the Board of 
                        Directors exempts under this paragraph from 
                        paying the special assessment imposed under 
                        this subsection shall pay semiannual 
                        assessments--
                                    (I) into the Savings Association 
                                Insurance Fund during calendar years 
                                1996 and 1997, based on SAIF-assessable 
                                deposits of that institution, at 
                                assessment rates calculated under the 
                                schedule in effect for Savings 
                                Association Insurance Fund members on 
                                June 30, 1995; and
                                    (II) into the Deposit Insurance 
                                Fund during the period beginning on 
                                January 1, 1998 and ending on December 
                                31, 1999, based on SAIF-assessable 
                                deposits of that institution, at 
                                assessment rates calculated under the 
                                schedule in effect for Savings 
                                Association Insurance Fund members on 
                                June 30, 1995, except that subclause 
                                (I) shall continue to apply if and only 
                                so long as the Bank Insurance Fund and 
                                the Savings Association Insurance Fund 
                                are not merged into the Deposit 
                                Insurance Fund.
                            (ii) Optional pro rata payment of special 
                        assessment.--This subparagraph shall not apply 
                        with respect to any insured depository 
                        institution (or successor insured depository 
                        institution) that has paid, during any calendar 
                        year from 1997 through 1999, upon such terms as 
                        the Corporation may announce, an amount equal 
                        to the product of--
                                    (I) 12.5 percent of the special 
                                assessment that the institution would 
                                have been required to pay under 
                                paragraph (1), if the Board of 
                                Directors had not exempted the 
                                institution; and
                                    (II) the number of full semiannual 
                                periods remaining between the date of 
                                the payment and December 31, 1999.
            (7) Adjustment of special assessment for certain bank 
        insurance fund member banks.--
                    (A) In general.--For purposes of computing the 
                special assessment imposed under this subsection with 
                respect to a Bank Insurance Fund member bank, the 
                amount of any deposits which section 5(d)(3) of the 
                Federal Deposit Insurance Act treats as insured by the 
                Savings Association Insurance Fund shall be reduced by 
                5 percent, if the adjusted attributable deposit amount 
                of the Bank Insurance Fund member bank is less than 50 
                percent of the total deposits of that member bank as of 
                June 30, 1995.
                    (B) Adjusted attributable deposit amount.--For 
                purposes of this paragraph, the ``adjusted attributable 
                deposit amount'' shall be determined in accordance with 
                section 5(d)(3)(C) of the Federal Deposit Insurance 
                Act.
            (8) Adjustment to the adjusted attributable deposit amount 
        for certain bank insurance fund member banks.--Section 5(d)(3) 
        of the Federal Deposit Insurance Act (12 U.S.C. 1815(d)(3)) is 
        amended--
                    (A) in subparagraph (C), by striking ``The adjusted 
                attributable deposit amount'' and inserting ``Except as 
                provided in subparagraph (K), the adjusted attributable 
                deposit amount''; and
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(K) Adjustment of adjusted attributable deposit 
                amount.--The amount determined under subparagraph 
                (C)(i) for deposits acquired by March 31, 1995, shall 
                be reduced by 10 percent for purposes of computing the 
                adjusted attributable deposit amount for the payment of 
                any assessment for any semiannual period after December 
                31, 1995 (other than the special assessment imposed 
                under section 3001(a) of the Balanced Budged 
                Reconciliation Act of 1995), for a Bank Insurance Fund 
                member bank that had an adjusted attributable deposit 
                amount that was less than 50 percent of the total 
                deposits of that member bank as of June 30, 1995.''.
            (9) Adjustment of special assessment for certain savings 
        associations.--
                    (A) Special assessment reduction.--For purposes of 
                computing the special assessment imposed under this 
                subsection, in the case of any converted association, 
                the amount of any deposits of such association which 
                were insured by the Savings Association Insurance Fund 
                as of March 31, 1995, shall be reduced by 10 percent.
                    (B) Converted association.--For purposes of this 
                paragraph, the term ``converted association'' means--
                            (i) any Federal savings association that is 
                        a member of the Savings Association Insurance 
                        Fund and that had been, or has acquired by 
                        merger, consolidation, or otherwise the 
                        deposits of an institution that had been, a 
                        State savings bank, the deposits of which were 
                        insured under the Federal Deposit Insurance Act 
                        prior to August 9, 1989; and
                            (ii) a State depository institution that is 
                        a member of the Savings Association Insurance 
                        Fund that had been a State savings bank prior 
                        to October 1, 1992, and was a Federal savings 
                        association on August 9, 1989.
    (b) Financing Corporation Assessments Shared Proportionally by All 
Insured Depository Institutions.--
            (1) In general.--Section 21 of the Federal Home Loan Bank 
        Act (12 U.S.C. 1441) is amended--
                    (A) in subsection (f)(2)--
                            (i) in the matter immediately preceding 
                        subparagraph (A)--
                                    (I) by striking ``Savings 
                                Association Insurance Fund member'' and 
                                inserting ``insured depository 
                                institution''; and
                                    (II) by striking ``members'' and 
                                inserting ``institutions''; and
                            (ii) in subparagraph (A), by striking 
                        ``against Savings Association Insurance Fund 
                        members'' and inserting ``against insured 
                        depository institutions'';
                    (B) in subsection (k)--
                            (i) by striking ``section--'' and inserting 
                        ``section, the following definitions shall 
                        apply:'';
                            (ii) by striking paragraph (1);
                            (iii) by redesignating paragraphs (2) and 
                        (3) as paragraphs (1) and (2), respectively; 
                        and
                            (iv) by adding at the end the following new 
                        paragraph:
            ``(3) Insured depository institution.--The term `insured 
        depository institution' has the same meaning as in section 3 of 
        the Federal Deposit Insurance Act.''.
            (2) Conforming amendment.--Section 7(b)(2)(D) of the 
        Federal Deposit Insurance Act (12 U.S.C. 1817(b)(2)(D)) is 
        amended by striking ``against Savings Association Insurance 
        Fund members'' and inserting ``against insured depository 
        institutions''.
            (3) Effective date.--This subsection and the amendments 
        made by this subsection shall become effective on January 1, 
        1996.
    (c) Insurance Premiums for Capitalized Insurance Funds.--
            (1) Rebates for capitalized fund.--Section 7 of the Federal 
        Deposit Insurance Act (12 U.S.C. 1817) is amended--
                    (A) by redesignating subsections (d) through (n) as 
                subsections (e) through (o), respectively; and
                    (B) by inserting after subsection (c) the following 
                new subsection:
    ``(d) Bank Insurance Fund Assessment Credits.--
            ``(1) Credit amount.--
                    ``(A) In general.--Notwithstanding any other 
                provision of law, if the Corporation determines, after 
                considering the operating costs and expenses, case 
                resolution expenditures, investment income, and 
                assessment income of the Bank Insurance Fund, that the 
                reserve ratio of the Bank Insurance Fund is expected to 
                exceed the designated reserve ratio during the 
                succeeding semiannual period, the Board of Directors 
                may, in its sole discretion, provide an assessment 
                credit with respect to Bank Insurance Fund assessments 
                (for that succeeding semiannual period)--
                            ``(i) in an amount that the Corporation 
                        determines will reduce the reserve ratio of the 
                        Bank Insurance Fund to the designated reserve 
                        ratio; or
                            ``(ii) in a lesser amount, as determined by 
                        the Corporation.
                    ``(B) Limit.--The amount of assessment credit under 
                subparagraph (A) shall not exceed 100 percent of the 
                net assessment income to be received with respect to 
                the Bank Insurance Fund in the succeeding semiannual 
                period.
            ``(2) Definitions.--For purposes of this subsection, the 
        terms `net assessment income', `operating costs and expenses', 
        `insurance costs', and `investment income' shall have the same 
        meanings as in paragraphs (4) and (5) of section 7(d) of the 
        Federal Deposit Insurance Act, as in effect on the day before 
        the date of enactment of the Federal Deposit Insurance 
        Corporation Improvement Act of 1991, except that the term 
        `semiannual period' shall be substituted for the term `calendar 
        year' wherever that term appears.''.
            (2) Stabilizing premiums for bif and saif.--Section 7(b) of 
        the Federal Deposit Insurance Act (12 U.S.C. 1817(b)) is 
        amended by adding at the end the following new paragraph:
            ``(8) Rate comparability.--Notwithstanding any other 
        provision of law, assessment rates for members of the Savings 
        Association Insurance Fund shall not be lower than assessment 
        rates for members of the Bank Insurance Fund of comparable risk 
        until the first full semiannual period following the last 
        maturity date of all obligations issued by the Financing 
        Corporation pursuant to section 21(c) of the Federal Home Loan 
        Bank Act.''.
    (d) Merger of BIF and SAIF.--
            (1) In general.--Effective as provided in paragraph (4)--
                    (A) the Bank Insurance Fund and the Savings 
                Association Insurance Fund shall be merged into the 
                Deposit Insurance Fund established by section 11(a)(4) 
                of the Federal Deposit Insurance Act, as amended by 
                this subsection;
                    (B) all assets and liabilities of the Bank 
                Insurance Fund and the Savings Association Insurance 
                Fund shall be transferred to the Deposit Insurance 
                Fund; and
                    (C) the separate existence of the Bank Insurance 
                Fund and the Savings Association Insurance Fund shall 
                cease.
            (2) Special reserve of the deposit insurance fund.--
        Effective as provided in paragraph (4), if, immediately before 
        the merger of the Bank Insurance Fund and the Savings 
        Association Insurance Fund, the reserve ratio of the Savings 
        Association Insurance Fund exceeds the designated reserve 
        ratio, the amount by which that reserve ratio exceeds the 
        designated reserve ratio shall be placed in the Special Reserve 
        of the Deposit Insurance Fund, established under section 
        11(a)(5) of the Federal Deposit Insurance Act, as amended by 
        this subsection.
            (3) Conforming amendments.--
                    (A) Deposit insurance fund.--Section 11(a)(4) of 
                the Federal Deposit Insurance Act (12 U.S.C. 
                1821(a)(4)) is amended--
                            (i) by redesignating subparagraph (B) as 
                        subparagraph (C);
                            (ii) by striking subparagraph (A) and 
                        inserting the following:
                    ``(A) Establishment.--There is established the 
                Deposit Insurance Fund, which the Corporation shall--
                            ``(i) maintain and administer;
                            ``(ii) use to carry out its insurance 
                        purposes in the manner provided by this 
                        subsection; and
                            ``(iii) invest in accordance with section 
                        13(a).
                    ``(B) Uses.--The Deposit Insurance Fund shall be 
                available to the Corporation for use with respect to 
                Deposit Insurance Fund members.''; and
                            (iii) by striking ``(4) General provisions 
                        relating to funds.--'' and inserting the 
                        following:
            ``(4) Deposit insurance fund.--''.
                    (B) Other references.--Section 11(a)(4)(C) of the 
                Federal Deposit Insurance Act (12 U.S.C. 1821(a)(4)(C) 
                (as redesignated by subparagraph (A) of this 
                paragraph)) is amended by striking ``Bank Insurance 
                Fund and the Savings Association Insurance Fund'' and 
                inserting ``Deposit Insurance Fund''.
                    (C) Deposits into fund.--Section 11(a)(4) of the 
                Federal Deposit Insurance Act (12 U.S.C. 1821(a)(4)) is 
                amended by adding at the end the following new 
                subparagraph:
                    ``(D) Deposits.--All amounts assessed against 
                insured depository institutions by the Corporation 
                shall be deposited in the Deposit Insurance Fund.''.
                    (D) Special reserve of deposits.--Section 11(a)(5) 
                of the Federal Deposit Insurance Act (12 U.S.C. 
                1821(a)(5)) is amended to read as follows:
            ``(5) Special reserve of deposit insurance fund.--
                    ``(A) Special reserve of deposit insurance fund 
                established.--
                            ``(i) Establishment.--There is established 
                        a Special Reserve of the Deposit Insurance 
                        Fund, which shall be administered by the 
                        Corporation and shall be invested in accordance 
                        with section 13(a).
                            ``(ii) Limitation.--The Corporation shall 
                        not provide any assessment credit, refund, or 
                        other payment from any amount in the Special 
                        Reserve.
                    ``(B) Emergency use of special reserve.--
                Notwithstanding subparagraph (A)(ii), the Corporation 
                may, in its sole discretion, transfer amounts from the 
                Special Reserve to the Deposit Insurance Fund, for the 
                purposes set forth in paragraph (4), only if--
                            ``(i) the reserve ratio of the Deposit 
                        Insurance Fund is less than 50 percent of the 
                        designated reserve ratio; and
                            ``(ii) the Corporation expects the reserve 
                        ratio of the Deposit Insurance Fund to remain 
                        less than 50 percent of the designated reserve 
                        ratio for each of the next 4 calendar quarters.
                    ``(C) Exclusion of special reserve in calculating 
                reserve ratio.--Notwithstanding any other provision of 
                law, any amounts in the Special Reserve shall be 
                excluded in calculating the reserve ratio of the 
                Deposit Insurance Fund under section 7.''.
                    (E) Federal home loan bank act.--Section 
                21B(f)(2)(C)(ii) of the Federal Home Loan Bank Act (12 
                U.S.C. 1441b(f)(2)(C)(ii)) is amended--
                            (i) in subclause (I), by striking ``to 
                        Savings Associations Insurance Fund members'' 
                        and inserting ``to insured depository 
                        institutions, and their successors, which were 
                        Savings Association Insurance Fund members on 
                        September 1, 1995''; and
                            (ii) in subclause (II), by striking ``to 
                        Savings Associations Insurance Fund members'' 
                        and inserting ``to insured depository 
                        institutions, and their successors, which were 
                        Savings Association Insurance Fund members on 
                        September 1, 1995''.
                    (F) Repeals.--
                            (i) Section 3.--Section 3 of the Federal 
                        Deposit Insurance Act (12 U.S.C. 1813) is 
                        amended--
                                    (I) by striking subsection (y); and
                                    (II) by redesignating subsection 
                                (z) as subsection (y).
                            (ii) Section 7.--Section 7 of the Federal 
                        Deposit Insurance Act (12 U.S.C. 1817) is 
                        amended--
                                    (I) by striking subsection (l);
                                    (II) by redesignating subsections 
                                (m) and (n) as subsections (l) and (m), 
                                respectively;
                                    (III) in subsection (b)(2), by 
                                striking subparagraph (B); and
                                    (IV) in subsection (b)(2), by 
                                redesignating subparagraphs (C) through 
                                (H) as subparagraphs (B) through (G), 
                                respectively.
                            (iii) Section 11.--Section 11(a) of the 
                        Federal Deposit Insurance Act (12 U.S.C. 
                        1121(a)) is amended--
                                    (I) by striking paragraphs (6) and 
                                (7); and
                                    (II) by redesignating paragraph (8) 
                                as paragraph (6).
                            (iv) Rate comparability.--Section 7(b) of 
                        the Federal Deposit Insurance Act (12 U.S.C. 
                        1817(b)) is amended by striking paragraph (8) 
                        (as added by subsection (c) of this section).
            (4) Effective date.--This subsection and the amendments 
        made by this subsection and subsection (e) shall become 
        effective on January 1, 1998, if no insured depository 
        institution is a savings association on that date.
    (e) Other Technical and Conforming Amendments.--
            (1) Section 5136 of the revised statutes.--Paragraph 
        Eleventh of section 5136 of the Revised Statutes (12 U.S.C. 24) 
        is amended in the fifth sentence by striking ``affected deposit 
        insurance fund'' and inserting ``Deposit Insurance Fund''.
            (2) Investments promoting public welfare; limitations on 
        aggregate investments.--The 23d undesignated paragraph of 
        section 9 of the Federal Reserve Act (12 U.S.C. 338a) is 
        amended in the fourth sentence, by striking ``affected deposit 
        insurance fund'' and inserting ``Deposit Insurance Fund''.
            (3) Advances to critically undercapitalized depository 
        institutions.--Section 10B(b)(3)(A)(ii) of the Federal Reserve 
        Act (12 U.S.C. 347b(b)(3)(A)(ii)) is amended by striking ``any 
        deposit insurance fund in'' and inserting ``the Deposit 
        Insurance Fund of''.
            (4) Amendments to the balanced budget and emergency deficit 
        control act of 1985.--Section 255(g)(1)(A) of the Balanced 
        Budget and Emergency Deficit Control Act of 1985 (2 U.S.C. 
        905(g)(1)(A)) is amended--
                    (A) by striking ``Bank Insurance Fund'' and 
                inserting ``Deposit Insurance Fund''; and
                    (B) by striking ``Federal Deposit Insurance 
                Corporation, Savings Association Insurance Fund;''.
            (5) Amendments to the federal home loan bank act.--The 
        Federal Home Loan Bank Act (12 U.S.C. 1421 et seq.) is 
        amended--
                    (A) in section 11(k) (12 U.S.C. 1431(k))--
                            (i) in the subsection heading, by striking 
                        ``SAIF'' and inserting ``the Deposit Insurance 
                        Fund''; and
                            (ii) by striking ``Savings Association 
                        Insurance Fund'' each place such term appears 
                        and inserting ``Deposit Insurance Fund'';
                    (B) in section 21A(b)(4)(B) (12 U.S.C. 
                1441a(b)(4)(B)), by striking ``affected deposit 
                insurance fund'' and inserting ``Deposit Insurance 
                Fund'';
                    (C) in section 21A(b)(6)(B) (12 U.S.C. 
                1441a(b)(6)(B))--
                            (i) in the subparagraph heading, by 
                        striking ``SAIF-insured banks'' and inserting 
                        ``Charter conversions''; and
                            (ii) by striking ``Savings Association 
                        Insurance Fund member'' and inserting ``savings 
                        association'';
                    (D) in section 21A(b)(10)(A)(iv)(II) (12 U.S.C. 
                1441a(b)(10)(A)(iv)(II)), by striking ``Savings 
                Association Insurance Fund'' and inserting ``Deposit 
                Insurance Fund'';
                    (E) in section 21B(e) (12 U.S.C. 1441b(e))--
                            (i) in paragraph (5), by inserting ``as of 
                        the date of funding'' after ``Savings 
                        Association Insurance Fund members'' each place 
                        such term appears;
                            (ii) by striking paragraph (7); and
                            (iii) by redesignating paragraph (8) as 
                        paragraph (7); and
                    (F) in section 21B(k) (12 U.S.C. 1441b(k))--
                            (i) by striking paragraph (8); and
                            (ii) by redesignating paragraphs (9) and 
                        (10) as paragraphs (8) and (9), respectively.
            (6) Amendments to the home owners' loan act.--The Home 
        Owners' Loan Act (12 U.S.C. 1461 et seq.) is amended--
                    (A) in section 5 (12 U.S.C. 1464)--
                            (i) in subsection (c)(5)(A), by striking 
                        ``that is a member of the Bank Insurance 
                        Fund'';
                            (ii) in subsection (c)(6), by striking ``As 
                        used in this subsection--'' and inserting ``For 
                        purposes of this subsection, the following 
                        definitions shall apply:'';
                            (iii) in subsection (o)(1), by striking 
                        ``that is a Bank Insurance Fund member'';
                            (iv) in subsection (o)(2)(A), by striking 
                        ``a Bank Insurance Fund member until such time 
                        as it changes its status to a Savings 
                        Association Insurance Fund member'' and 
                        inserting ``insured by the Deposit Insurance 
                        Fund'';
                            (v) in subsection (t)(5)(D)(iii)(II), by 
                        striking ``affected deposit insurance fund'' 
                        and inserting ``Deposit Insurance Fund'';
                            (vi) in subsection (t)(7)(C)(i)(I), by 
                        striking ``affected deposit insurance fund'' 
                        and inserting ``Deposit Insurance Fund''; and
                            (vii) in subsection (v)(2)(A)(i), by 
                        striking ``, the Savings Association Insurance 
                        Fund'' and inserting ``or the Deposit Insurance 
                        Fund''; and
                    (B) in section 10 (12 U.S.C. 1467a)--
                            (i) in subsection (e)(1)(A)(iii)(VII), by 
                        adding ``or'' at the end;
                            (ii) in subsection (e)(1)(A)(iv), by adding 
                        ``and'' at the end;
                            (iii) in subsection (e)(1)(B), by striking 
                        ``Savings Association Insurance Fund or Bank 
                        Insurance Fund'' and inserting ``Deposit 
                        Insurance Fund'';
                            (iv) in subsection (e)(2), by striking 
                        ``Savings Association Insurance Fund or the 
                        Bank Insurance Fund'' and inserting ``Deposit 
                        Insurance Fund''; and
                            (v) in subsection (m)(3), by striking 
                        subparagraph (E), and by redesignating 
                        subparagraphs (F), (G), and (H) as 
                        subparagraphs (E), (F), and (G), respectively.
            (7) Amendments to the national housing act.--The National 
        Housing Act (12 U.S.C. 1701 et seq.) is amended--
                    (A) in section 317(b)(1)(B) (12 U.S.C. 
                1723i(b)(1)(B)), by striking ``Bank Insurance Fund for 
                banks or through the Savings Association Insurance Fund 
                for savings associations'' and inserting ``Deposit 
                Insurance Fund''; and
                    (B) in section 526(b)(1)(B)(ii) (12 U.S.C. 1735f-
                14(b)(1)(B)(ii)), by striking ``Bank Insurance Fund for 
                banks and through the Savings Association Insurance 
                Fund for savings associations'' and inserting ``Deposit 
                Insurance Fund''.
            (8) Amendments to the federal deposit insurance act.--The 
        Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is 
        amended--
                    (A) in section 3(a)(1) (12 U.S.C. 1813(a)(1)), by 
                striking subparagraph (B) and inserting the following:
                    ``(B) includes any former savings association.'';
                    (B) in section 5(b)(5) (12 U.S.C. 1815(b)(5)), by 
                striking ``the Bank Insurance Fund or the Savings 
                Association Insurance Fund;'' and inserting ``Deposit 
                Insurance Fund,'';
                    (C) in section 5(d) (12 U.S.C. 1815(d)), by 
                striking paragraphs (2) and (3);
                    (D) in section 5(d)(1) (12 U.S.C. 1815(d)(1))--
                            (i) in subparagraph (A), by striking 
                        ``reserve ratios in the Bank Insurance Fund and 
                        the Savings Association Insurance Fund'' and 
                        inserting ``the reserve ratio of the Deposit 
                        Insurance Fund'';
                            (ii) by striking subparagraph (B) and 
                        inserting the following:
            ``(2) Fee credited to the deposit insurance fund.--The fee 
        paid by the depository institution under paragraph (1) shall be 
        credited to the Deposit Insurance Fund.'';
                            (iii) by striking ``(1) Uninsured 
                        institutions.--''; and
                            (iv) by redesignating subparagraphs (A) and 
                        (C) as paragraphs (1) and (3), respectively and 
                        moving the margins 2 ems to the left;
                    (E) in section 5(e) (12 U.S.C. 1815(e))--
                            (i) in paragraph (5)(A), by striking ``Bank 
                        Insurance Fund or the Savings Association 
                        Insurance Fund'' and inserting ``Deposit 
                        Insurance Fund'';
                            (ii) by striking paragraph (6); and
                            (iii) by redesignating paragraphs (7), (8), 
                        and (9) as paragraphs (6), (7), and (8), 
                        respectively;
                    (F) in section 6(5) (12 U.S.C. 1816(5)), by 
                striking ``Bank Insurance Fund or the Savings 
                Association Insurance Fund'' and inserting ``Deposit 
                Insurance Fund'';
                    (G) in section 7(b) (12 U.S.C. 1817(b))--
                            (i) in paragraph (1)(D), by striking ``each 
                        deposit insurance fund'' and inserting ``the 
                        Deposit Insurance Fund'';
                            (ii) in clauses (i)(I) and (iv) of 
                        paragraph (2)(A), by striking ``each deposit 
                        insurance fund'' each place such term appears 
                        and inserting ``the Deposit Insurance Fund'';
                            (iii) in paragraph (2)(A)(iii), by striking 
                        ``a deposit insurance fund'' and inserting 
                        ``the Deposit Insurance Fund'';
                            (iv) in paragraph (2)(D) (as redesignated 
                        by section 3001(d)(3)(F)(ii)(IV) of this Act)--
                                    (I) by striking ``any deposit 
                                insurance fund'' and inserting ``the 
                                Deposit Insurance Fund''; and
                                    (II) by striking ``that fund'' each 
                                place such term appears and inserting 
                                ``the Deposit Insurance Fund'';
                            (v) by striking paragraph (2)(E) (as 
                        redesignated by section 3001(d)(3)(F)(ii)(IV) 
                        of this Act);
                            (vi) in paragraph (2)(F) (as redesignated 
                        by section 3001(d)(3)(F)(ii)(IV) of this Act)--
                                    (I) in the subparagraph heading, by 
                                striking ``funds achieve'' and 
                                inserting ``fund achieves''; and
                                    (II) by striking ``a deposit 
                                insurance fund'' and inserting ``the 
                                Deposit Insurance Fund'';
                            (vii) in paragraph (3)--
                                    (I) in the paragraph heading, by 
                                striking ``funds'' and inserting 
                                ``fund'';
                                    (II) by striking ``that fund'' each 
                                place such term appears and inserting 
                                ``the Deposit Insurance Fund'';
                                    (III) in subparagraph (A), by 
                                striking ``Except as provided in 
                                paragraph (2)(F), if'' and inserting 
                                ``If'';
                                    (IV) in subparagraph (A), by 
                                striking ``any deposit insurance fund'' 
                                and inserting ``the Deposit Insurance 
                                Fund''; and
                                    (V) by striking subparagraphs (C) 
                                and (D) and inserting the following:
                    ``(C) Amending schedule.--The Corporation may, by 
                regulation, amend a schedule promulgated under 
                subparagraph (B).''; and
                            (viii) in paragraph (6)--
                                    (I) by striking ``any such 
                                assessment'' and inserting ``any such 
                                assessment is necessary'';
                                    (II) by striking ``(A) is 
                                necessary--'';
                                    (III) by striking subparagraph (B);
                                    (IV) by redesignating clauses (i), 
                                (ii), and (iii) as subparagraphs (A), 
                                (B), and (C), respectively, and moving 
                                the margins 2 ems to the left; and
                                    (V) in subparagraph (C) (as 
                                redesignated), by striking ``; and'' 
                                and inserting a period;
                    (H) in section 7(d) (12 U.S.C. 1817(d)) (as added 
                by section 3001(c)(1) of this Act)--
                            (i) in the subsection heading, by striking 
                        ``Bank'' and inserting ``Deposit''; and
                            (ii) by striking ``Bank Insurance Fund'' 
                        each place such term appears and inserting 
                        ``Deposit Insurance Fund'';
                    (I) in section 11(f)(1) (12 U.S.C. 1821(f)(1)), by 
                striking ``, except that--'' and all that follows 
                through the end of the paragraph and inserting a 
                period;
                    (J) in section 11(i)(3) (12 U.S.C. 1821(i)(3))--
                            (i) by striking subparagraph (B);
                            (ii) by redesignating subparagraph (C) as 
                        subparagraph (B); and
                            (iii) in subparagraph (B) (as 
                        redesignated), by striking ``subparagraphs (A) 
                        and (B)'' and inserting ``subparagraph (A)'';
                    (K) in section 11A(a) (12 U.S.C. 1821a(a))--
                            (i) in paragraph (2), by striking 
                        ``liabilities.--'' and all that follows through 
                        ``Except'' and inserting ``liabilities.--
                        Except'';
                            (ii) by striking paragraph (2)(B); and
                            (iii) in paragraph (3), by striking ``the 
                        Bank Insurance Fund, the Savings Association 
                        Insurance Fund,'' and inserting ``the Deposit 
                        Insurance Fund'';
                    (L) in section 11A(b) (12 U.S.C. 1821a(b)), by 
                striking paragraph (4);
                    (M) in section 11A(f) (12 U.S.C. 1821a(f)), by 
                striking ``Savings Association Insurance Fund'' and 
                inserting ``Deposit Insurance Fund'';
                    (N) in section 13 (12 U.S.C. 1823)--
                            (i) in subsection (a)(1), by striking 
                        ``Bank Insurance Fund, the Savings Association 
                        Insurance Fund,'' and inserting ``Deposit 
                        Insurance Fund, the Special Reserve of the 
                        Deposit Insurance Fund,'';
                            (ii) in subsection (c)(4)(E)--
                                    (I) in the subparagraph heading, by 
                                striking ``funds'' and inserting 
                                ``fund''; and
                                    (II) in clause (i), by striking 
                                ``any insurance fund'' and inserting 
                                ``the Deposit Insurance Fund'';
                            (iii) in subsection (c)(4)(G)(ii)--
                                    (I) by striking ``appropriate 
                                insurance fund'' and inserting 
                                ``Deposit Insurance Fund'';
                                    (II) by striking ``the members of 
                                the insurance fund (of which such 
                                institution is a member)'' and 
                                inserting ``insured depository 
                                institutions'';
                                    (III) by striking ``each member's'' 
                                and inserting ``each insured depository 
                                institution's''; and
                                    (IV) by striking ``the member's'' 
                                each place such term appears and 
                                inserting ``the institution's'';
                            (iv) in subsection (c), by striking 
                        paragraph (11);
                            (v) in subsection (h), by striking ``Bank 
                        Insurance Fund'' and inserting ``Deposit 
                        Insurance Fund'';
                            (vi) in subsection (k)(4)(B)(i), by 
                        striking ``Savings Association Insurance Fund'' 
                        and inserting ``Deposit Insurance Fund''; and
                            (vii) in subsection (k)(5)(A), by striking 
                        ``Savings Association Insurance Fund'' and 
                        inserting ``Deposit Insurance Fund'';
                    (O) in section 14(a) (12 U.S.C. 1824(a)) in the 
                fifth sentence--
                            (i) by striking ``Bank Insurance Fund or 
                        the Savings Association Insurance Fund'' and 
                        inserting ``Deposit Insurance Fund''; and
                            (ii) by striking ``each such fund'' and 
                        inserting ``the Deposit Insurance Fund'';
                    (P) in section 14(b) (12 U.S.C. 1824(b)), by 
                striking ``Bank Insurance Fund or Savings Association 
                Insurance Fund'' and inserting ``Deposit Insurance 
                Fund'';
                    (Q) in section 14(c) (12 U.S.C. 1824(c)), by 
                striking paragraph (3);
                    (R) in section 14(d) (12 U.S.C. 1824(d))--
                            (i) by striking ``BIF'' each place such 
                        term appears and inserting ``DIF''; and
                            (ii) by striking ``Bank Insurance Fund'' 
                        each place such term appears and inserting 
                        ``Deposit Insurance Fund'';
                    (S) in section 15(c)(5) (12 U.S.C. 1825(c)(5))--
                            (i) by striking ``the Bank Insurance Fund 
                        or Savings Association Insurance Fund, 
                        respectively'' each place such term appears and 
                        inserting ``the Deposit Insurance Fund''; and
                            (ii) in subparagraph (B), by striking ``the 
                        Bank Insurance Fund or the Savings Association 
                        Insurance Fund, respectively'' and inserting 
                        ``the Deposit Insurance Fund'';
                    (T) in section 17(a) (12 U.S.C. 1827(a))--
                            (i) in the subsection heading, by striking 
                        ``BIF, SAIF,'' and inserting ``the Deposit 
                        Insurance Fund''; and
                            (ii) in paragraph (1), by striking ``the 
                        Bank Insurance Fund, the Savings Association 
                        Insurance Fund,'' each place such term appears 
                        and inserting ``the Deposit Insurance Fund'';
                    (U) in section 17(d) (12 U.S.C. 1827(d)), by 
                striking ``the Bank Insurance Fund, the Savings 
                Association Insurance Fund,'' each place such term 
                appears and inserting ``the Deposit Insurance Fund'';
                    (V) in section 18(m)(3) (12 U.S.C. 1828(m)(3))--
                            (i) by striking ``Savings Association 
                        Insurance Fund'' each place such term appears 
                        and inserting ``Deposit Insurance Fund''; and
                            (ii) in subparagraph (C), by striking ``or 
                        the Bank Insurance Fund'';
                    (W) in section 18(p) (12 U.S.C. 1828(p)), by 
                striking ``deposit insurance funds'' and inserting 
                ``Deposit Insurance Fund'';
                    (X) in section 24 (12 U.S.C. 1831a) in subsections 
                (a)(1) and (d)(1)(A), by striking ``appropriate deposit 
                insurance fund'' each place such term appears and 
                inserting ``Deposit Insurance Fund'';
                    (Y) in section 28 (12 U.S.C. 1831e), by striking 
                ``affected deposit insurance fund'' each place such 
                term appears and inserting ``Deposit Insurance Fund'';
                    (Z) by striking section 31 (12 U.S.C. 1831h);
                    (AA) in section 36(i)(3) (12 U.S.C. 1831m(i)(3)) by 
                striking ``affected deposit insurance fund'' and 
                inserting ``Deposit Insurance Fund'';
                    (BB) in section 38(a) (12 U.S.C. 1831o(a)) in the 
                subsection heading, by striking ``Funds'' and inserting 
                ``Fund'';
                    (CC) in section 38(k) (12 U.S.C. 1831o(k))--
                            (i) in paragraph (1), by striking ``a 
                        deposit insurance fund'' and inserting ``the 
                        Deposit Insurance Fund''; and
                            (ii) in paragraph (2)(A)--
                                    (I) by striking ``A deposit 
                                insurance fund'' and inserting ``The 
                                Deposit Insurance Fund''; and
                                    (II) by striking ``the deposit 
                                insurance fund's outlays'' and 
                                inserting ``the outlays of the Deposit 
                                Insurance Fund''; and
                    (DD) in section 38(o) (12 U.S.C. 1831o(o))--
                            (i) by striking ``Associations.--'' and all 
                        that follows through ``Subsections (e)(2)'' and 
                        inserting ``Associations.--Subsections 
                        (e)(2)'';
                            (ii) by redesignating subparagraphs (A), 
                        (B), and (C) as paragraphs (1), (2), and (3), 
                        respectively; and
                            (iii) in paragraph (1) (as redesignated), 
                        by redesignating clauses (i) and (ii) as 
                        subparagraphs (A) and (B), respectively.
            (9) Amendments to the financial institutions reform, 
        recovery, and enforcement act of 1989.--The Financial 
        Institutions Reform, Recovery, and Enforcement Act (Public Law 
        101-73; 103 Stat. 183) is amended--
                    (A) in section 951(b)(3)(B) (12 U.S.C. 
                1833a(b)(3)(B)), by striking ``Bank Insurance Fund, the 
                Savings Association Insurance Fund,'' and inserting 
                ``Deposit Insurance Fund''; and
                    (B) in section 1112(c)(1)(B) (12 U.S.C. 
                3341(c)(1)(B)), by striking ``Bank Insurance Fund, the 
                Savings Association Insurance Fund,'' and inserting 
                ``Deposit Insurance Fund''.
            (10) Amendment to the bank enterprise act of 1991.--Section 
        232(a)(1) of the Bank Enterprise Act of 1991 (12 U.S.C. 
        1834(a)(1)) is amended by striking ``section 7(b)(2)(H)'' and 
        inserting ``section 7(b)(2)(G)''.
            (11) Amendment to the bank holding company act.--Section 
        2(j)(2) of the Bank Holding Company Act (12 U.S.C. 1841(j)(2)) 
        is amended by striking ``Savings Association Insurance Fund'' 
        and inserting ``Deposit Insurance Fund''.
    (f) Definitions.--For purposes of this section--
            (1) the term ``Bank Insurance Fund'' means the fund 
        established pursuant to section (11)(a)(5)(A) of the Federal 
        Deposit Insurance Act, as that section existed on the day 
        before the date of enactment of this Act;
            (2) the terms ``Board of Directors'', ``Corporation'', 
        ``insured depository institution'', ``Federal savings 
        association'', ``savings association'', ``State savings bank'', 
        and ``State depository institution'' have the same meanings as 
        in section 3 of the Federal Deposit Insurance Act;
            (3) the term ``Deposit Insurance Fund'' means the fund 
        established under section 11(a)(4) of the Federal Deposit 
        Insurance Act, as amended by subsection (d) of this section;
            (4) the term ``designated reserve ratio'' has the same 
        meaning as in section 7(b)(2)(A)(iv) of the Federal Deposit 
        Insurance Act;
            (5) the term ``Savings Association Insurance Fund'' means 
        the fund established pursuant to section 11(a)(6)(A) of the 
        Federal Deposit Insurance Act, as that section existed on the 
        day before the date of enactment of this Act; and
            (5) the term ``SAIF-assessable deposit'' means--
                    (A) a deposit that is subject to assessment for 
                purposes of the Savings Association Insurance Fund 
                under the Federal Deposit Insurance Act; and
                    (B) a deposit that section 5(d)(3) of the Federal 
                Deposit Insurance Act treats as insured by the Savings 
                Association Insurance Fund.

SEC. 3002. ANNUAL ADJUSTMENT FACTORS FOR OPERATING COSTS ONLY; 
              RESTRAINT ON SECTION 8 RENT INCREASES FOR STAYERS IN THE 
              CERTIFICATE PROGRAM.

    (a) Annual Adjustment Factors For Operating Costs Only.--Section 
8(c)(2)(A) of the United States Housing Act of 1937 (42 U.S.C. 
1437f(c)(2)(A)) is amended--
            (1) by striking ``(2)(A)'' and inserting ``(2)(A)(i)'';
            (2) by striking the second sentence and all that follows 
        through the end of the subparagraph; and
            (3) by adding at the end the following new clause:
    ``(ii)(I) Except as provided in subclause (II), if the maximum 
monthly rent for a unit in a new construction or substantial 
rehabilitation project to be adjusted using an annual adjustment factor 
exceeds 100 percent of the fair market rent for an existing dwelling 
unit in the market area, the Secretary shall adjust the rent using an 
operating costs factor that increases the rent to reflect increases in 
operating costs in the market area.
    ``(II) If the owner of a unit in a project described in subclause 
(I) demonstrates that the adjusted rent determined under subclause (I) 
would not exceed the rent for an unassisted unit of similar quality, 
type, and age in the same market area, as determined by the Secretary, 
the Secretary shall use the otherwise applicable annual adjustment 
factor.''.
    (b) Restraint on Section 8 Rent Increases for Stayers in the 
Certificate Program.--Section 8(c)(2)(A) of the United States Housing 
Act of 1937 (42 U.S.C. 1437f(c)(2)(A)), as amended by subsection (a), 
is amended by adding at the end the following new clause:
    ``(iii) In the case of assistance under the certificate program 
under this section, 0.01 shall be subtracted from the amount of the 
annual adjustment factor, except that the annual adjustment factor 
shall not be reduced to less than 1.0.''.
    (c) Applicability.--The amendments made by subsection (a) shall 
apply to all contracts for new construction or substantial 
rehabilitation projects under which rents are adjusted under section 
8(c)(2)(A) of the United States Housing Act of 1937, by applying an 
annual adjustment factor.
    (d) Effective Date.--The amendments made by subsections (a) and (b) 
shall become effective on October 1, 1996.

SEC. 3003. WORKING FAMILY PREFERENCE FOR ADMISSION TO ASSISTED HOUSING.

    Section 8(d)(1)(A)(i) of the United States Housing Act of 1937 (42 
U.S.C. 1437f(d)(1)(A)(i)) is amended to read as follows:
                            ``(i) provide that not less than 50 percent 
                        of the units shall be made available for 
                        occupancy by families that include one or more 
                        adult members who are employed on a full- or 
                        part-time basis;''.

SEC. 3004. AMENDMENTS TO THE CIVIL WAR BATTLEFIELD COMMEMORATIVE COIN 
              ACT OF 1992.

    (a) Distribution and Use of Surcharges.--
            (1) In general.--Section 6 of the Civil War Battlefield 
        Commemorative Coin Act of 1992 (31 U.S.C. 5112 note) is amended 
        to read as follows:

``SEC. 6. DISTRIBUTION AND USE OF SURCHARGES.

    ``(a) Distribution.--An amount equal to $5,300,000 of the 
surcharges received by the Secretary from the sale of coins issued 
under this Act shall be promptly paid by the Secretary to the 
Association for the Preservation of Civil War Sites, Incorporated 
(hereafter in this Act referred to as the `Association'), to be used 
for the acquisition of historically significant and threatened Civil 
War sites selected by the Association.
    ``(b) Civil war sites included.--In using amounts paid to the 
Association under subsection (a), the Association may spend--
            ``(1) not more than $500,000 to acquire sites at Malvern 
        Hill, Virginia;
            ``(2) not more than $1,000,000 to acquire sites at Cornith, 
        Mississippi;
            ``(3) not more than $300,000 to acquire sites at Spring 
        Hill, Tennessee;
            ``(4) not more than $1,000,000 to acquire sites at 
        Winchester, Virginia;
            ``(5) not more than $500,000 to acquire sites at Resaca, 
        Georgia;
            ``(6) not more than $250,000 to acquire sites at Brice's 
        Cross Roads, Mississippi;
            ``(7) not more than $250,000 to acquire sites at 
        Perryville, Kentucky;
            ``(8) not more than $1,000,000 to acquire sites at Brandy 
        Station, Virginia;
            ``(9) not more than $250,000 to acquire sites at Kernstown, 
        Virginia; and
            ``(10) not more than $250,000 to acquire sites at Glendale, 
        Virginia.''.
          (2) Transfer of surcharges.--
                    (A) To treasury.--Not later than 10 days after the 
                date of enactment of this Act, the Civil War Trust, 
                formerly called the Civil War Battlefield Foundation 
                (hereafter in this section referred to as the 
                ``Foundation'') shall transfer to the Secretary of the 
                Treasury an amount equal to $5,300,000.
                    (B) To the association.--Not later than 10 days 
                after the transfer under subparagraph (A) is completed, 
                the Secretary of the Treasury shall transfer to the 
                Association an amount equal to the amount transferred 
                under subparagraph (A).

      TITLE IV--COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                       Subtitle A--Communications

SEC. 4001. SPECTRUM AUCTIONS.

    (a) Extension and Expansion of Auction Authority.--
            (1) Amendments.--Section 309(j) of the Communications Act 
        of 1934 (47 U.S.C. 309(j)) is amended--
                    (A) by striking paragraphs (1) and (2) and 
                inserting the following:
            ``(1) General authority.--If, consistent with the 
        obligations described in paragraph (6)(E), mutually exclusive 
        applications are accepted for any initial license or 
        construction permit which will involve an exclusive use of the 
        electromagnetic spectrum, then the Commission shall grant such 
        license or permit to a qualified applicant through a system of 
        competitive bidding that meets the requirements of this 
        subsection.
            ``(2) Exceptions.--The competitive bidding authority 
        granted by this subsection shall not apply to licenses or 
        construction permits issued by the Commission--
                    ``(A) that, as the result of the Commission 
                carrying out the obligations described in paragraph 
                (6)(E), are not mutually exclusive;
                    ``(B) for public safety radio services, including 
                non-Government uses that protect the safety of life, 
                health, and property and that are not made commercially 
                available to the public; or
                    ``(C) for initial licenses or construction permits 
                for new terrestrial digital television services 
                assigned by the Commission to existing terrestrial 
                broadcast licensees to replace their existing 
                television licenses, unless the Commission--
                            ``(i) not later than 180 days after the 
                        date of enactment of the Omnibus Budget 
                        Reconciliation Act of 1995, after notice and 
                        public comment, submits to Congress a proposal 
                        to use the authority provided in this 
                        subsection for the assignment of initial 
                        licenses or construction permits for use of the 
                        electromagnetic spectrum allocated but not 
                        assigned as of the date of enactment of that 
                        Act for television broadcast services; and
                            ``(ii) the Congress takes action to approve 
                        the plan or to authorize the use of the 
                        authority provided by this subsection for such 
                        licenses or permits.
                Except as provided in this subparagraph, the Commission 
                may not assign initial licenses or construction permits 
                under this title to terrestrial commercial television 
                broadcast licensees to replace their existing broadcast 
                licenses before January 1, 1998.''; and
                    (B) by striking ``1998'' in paragraph (11) and 
                inserting ``2002''.
            (2) Conforming amendment.--Subsection (i) of section 309 of 
        such Act is repealed.
    (b) Commission Obligation To Make Additional Spectrum Available by 
Auction.--
            (1) In general.--The Federal Communications Commission 
        shall complete all actions necessary to permit the assignment, 
        by September 30, 2002, by competitive bidding pursuant to 
        section 309(j) of the Communications Act of 1934 (47 U.S.C. 
        309(j)) of licenses for the use of bands of frequencies that--
                    (A) individually span not less than 25 megahertz, 
                unless a combination of smaller bands can, 
                notwithstanding the provisions of paragraph (7) of such 
                section, reasonably be expected to produce greater 
                receipts;
                    (B) in the aggregate span not less than 100 
                megahertz;
                    (C) are located below 3 gigahertz; and
                    (D) have not, as of the date of enactment of this 
                Act--
                            (i) been assigned or designated by 
                        Commission regulation for assignment pursuant 
                        to such section;
                            (ii) been identified by the Secretary of 
                        Commerce pursuant to section 113 of the 
                        National Telecommunications and Information 
                        Administration Organization Act (47 U.S.C. 
                        923); or
                            (iii) reserved for Federal Government use 
                        pursuant to section 305 of the Communications 
                        Act of 1934 (47 U.S.C. 305).
                The Commission shall conduct the competitive bidding 
                for not less than one-half of such aggregate spectrum 
                by September 30, 2000.
            (2) Criteria for reassignment.--In making available bands 
        of frequencies for competitive bidding pursuant to paragraph 
        (1), the Commission shall--
                    (A) seek to promote the most efficient use of the 
                spectrum;
                    (B) take into account the cost to incumbent 
                licensees of relocating existing uses to other bands of 
                frequencies or other means of communication;
                    (C) take into account the needs of public safety 
                radio services;
                    (D) comply with the requirements of international 
                agreements concerning spectrum allocations; and
                    (E) take into account the costs to satellite 
                service providers that could result from multiple 
                auctions of like spectrum internationally for global 
                satellite systems.
            (3) Notification to ntia.--The Commission shall notify the 
        Secretary of Commerce if--
                    (A) the Commission is not able to provide for the 
                effective relocation of incumbent licensees to bands of 
                frequencies that are available to the Commission for 
                assignment; and
                    (B) the Commission has identified bands of 
                frequencies that are--
                            (i) suitable for the relocation of such 
                        licensees; and
                            (ii) allocated for Federal Government use, 
                        but that could be reallocated pursuant to part 
                        B of the National Telecommunications and 
                        Information Administration Organization Act (47 
                        U.S.C. 921 et seq.), as amended by this Act.
    (c) Identification and Reallocation of Frequencies; Relocation of 
Federal Government Stations.--The National Telecommunications and 
Information Administration Organization Act (47 U.S.C. 901 et seq.) is 
amended--
            (1) by adding at the end of section 113 the following:
    ``(f) Additional Reallocation Report.--If the Secretary receives a 
notice from the Commission pursuant to section 4001(b)(3) of the 
Omnibus Budget Reconciliation Act of 1995, the Secretary shall prepare 
and submit to the President and the Congress a report recommending for 
reallocation for use other than by Federal Government stations under 
section 305 of the 1934 Act (47 U.S.C. 305), bands of frequencies that 
are suitable for the uses identified in the Commission's notice.
    ``(g) Relocation of Federal Government Stations.--
            ``(1) In general.--In order to expedite the efficient use 
        of the electromagnetic spectrum and notwithstanding section 
        3302(b) of title 31, United States Code, any Federal entity 
        which operates a Federal Government station may accept payment 
        in advance or in-kind reimbursement of costs, or a combination 
        of payment in advance and in-kind reimbursement, from any 
        person to defray entirely the expenses of relocating the 
        Federal entity's operations from one or more radio spectrum 
        frequencies to any other frequency or frequencies, including, 
        without limitation, the costs of any modification, replacement, 
        or reissuance of equipment, facilities, operating manuals, 
        regulations, or other expenses incurred by that entity. Any 
        such payment shall be deposited in the account of such Federal 
        entity in the Treasury of the United States. Funds deposited 
        according to this section shall be available, without 
        appropriation or fiscal year limitation, only for the 
        operations of the Federal entity for which such funds were 
        deposited under this section.
            ``(2) Process for relocation.--Any person seeking to 
        relocate a Federal Government station that has been assigned a 
        frequency within a band allocated for mixed Federal and non-
        Federal use may submit a petition for such relocation to NTIA. 
        The NTIA shall limit the Federal Government station's operating 
        license to secondary status when the following requirements are 
        met--
                    ``(A) the person seeking relocation of the Federal 
                Government station has guaranteed to defray entirely, 
                through payment in advance, in-kind reimbursement of 
                costs, or a combination thereof, all relocation costs 
                incurred by the Federal entity, including all 
                engineering, equipment, site acquisition and 
                construction, and regulatory fee costs;
                    ``(B) the person seeking relocation completes all 
                activities necessary for implementing the relocation, 
                including construction of replacement facilities (if 
                necessary and appropriate) and identifying and 
                obtaining on the Federal entity's behalf new 
                frequencies for use by the relocated Federal Government 
                station (where such station is not relocating to 
                spectrum reserved exclusively for Federal use);
                    ``(C) any necessary replacement facilities, 
                equipment modifications, or other changes have been 
                implemented and tested to ensure that the Federal 
                Government station is able to successfully accomplish 
                its purposes; and
                    ``(D) NTIA has determined that the proposed use of 
                the spectrum frequency band to which the Federal entity 
                will relocate its operations is--
                            ``(i) consistent with obligations 
                        undertaken by the United States in 
                        international agreements and with United States 
                        national security and public safety interests; 
                        and
                            ``(ii) suitable for the technical 
                        characteristics of the band and consistent with 
                        other uses of the band.
                In exercising its authority under subparagraph (D) with 
                respect to issues that could have national security or 
                foreign relations implications, NTIA shall consult with 
                the Secretary of Defense or the Secretary of State, or 
                both, as appropriate.
            ``(3) Right to reclaim.--If within one year after the 
        relocation the Federal Government station demonstrates to the 
        Commission that the new facilities or spectrum are not 
        comparable to the facilities or spectrum from which the Federal 
        Government station was relocated, the person seeking such 
        relocation must take reasonable steps to remedy any defects or 
        pay the Federal entity for the costs of returning the Federal 
        Government station to the spectrum from which such station was 
        relocated.
    ``(h) Federal Action To Expedite Spectrum Transfer.--Any Federal 
Government station which operates on electromagnetic spectrum that has 
been identified for reallocation for mixed Federal and non-Federal use 
in the Spectrum Reallocation Final Report shall, to the maximum extent 
practicable through the use of the authority granted under subsection 
(g) and any other applicable provision of law, take action to relocate 
its spectrum use to other frequencies that are reserved for Federal use 
or to consolidate its spectrum use with other Federal Government 
stations in a manner that maximizes the spectrum available for non-
Federal use. Subsection (c)(4) of this section shall not apply to the 
extent that a non-Federal user seeks to relocate or relocates a Federal 
power agency under subsection (g).
    ``(i) Definitions.--For purposes of this section--
            ``(1) Federal entity.--The term `Federal entity' means any 
        Department, agency, or other element of the Federal Government 
        that utilizes radio frequency spectrum in the conduct of its 
        authorized activities, including a Federal power agency.
            ``(2) Spectrum reallocation final report.--The term 
        `Spectrum Reallocation Final Report' means the report submitted 
        by the Secretary to the President and Congress in compliance 
        with the requirements of subsection (a).''; and
            (2) by striking ``(a) or (d)(1)'' in section 114(a)(1) and 
        inserting ``(a), (d)(1), or (f)''.
    (d) Identification and Reallocation of Auctionable Frequencies.--
The National Telecommunications and Information Administration 
Organization Act (47 U.S.C. 901 et seq.), as amended by this Act, is 
amended--
            (1) by striking the heading of paragraph (1) of section 
        113(b) and inserting ``Initial reallocation report.--'';
            (2) by inserting ``in the first report required by 
        subsection (a)'' after ``recommend for reallocation'' in such 
        paragraph;
            (3) by inserting ``or (3)'' after ``paragraph (1)'' each 
        place it appears in paragraph (2) of section 113(b);
            (4) by adding at the end of section 113(b) the following:
            ``(3) Second reallocation report.--In accordance with the 
        provisions of this section, the Secretary shall recommend for 
        reallocation for use other than by Federal Government stations 
        under section 305 of the 1934 Act (47 U.S.C. 305), a single 
        frequency band that spans not less than an additional 20 
        megahertz, that is located below 3 gigahertz, and that meets 
        the criteria specified in paragraphs (1) through (5) of 
        subsection (a).'';
            (5) by striking ``the report required by section 113(a)'' 
        in section 115(b) and inserting ``the initial reallocation 
        report required by section 113(a)''; and
            (6) by adding at the end of section 115 the following:
    ``(c) Allocation and Assignment of Frequencies Identified in the 
Second Reallocation Report.--With respect to the frequencies made 
available for reallocation pursuant to section 113(b)(3), the 
Commission shall, not later than 1 year after receipt of the second 
reallocation report required by such section, prepare, submit to the 
President and the Congress, and implement, a plan for the allocation 
and assignment under the 1934 Act of such frequencies. Such plan shall 
propose the immediate allocation and assignment of all such frequencies 
in accordance with section 309(j) of the 1934 Act (47 U.S.C. 
309(j)).''.

                    Subtitle B--Oceans and Fisheries

SEC. 4021. LIMITS ON COAST GUARD USER FEES.

    Section 10401(g) of the Omnibus Budget Reconciliation Act of 1990 
(46 U.S.C. 2110(a)(2)) is amended by adding after ``annually.'' the 
following: ``The Secretary may not establish a fee or charge under 
paragraph (1) for inspection or examination of a small passenger vessel 
under this title that is more than $300 annually for such vessels under 
65 feet in length, or more than $600 annually for such vessels 65 feet 
in length and greater. The Secretary may not establish a fee or charge 
under paragraph (1) for inspection or examination under this title for 
any publicly-owned ferry.''.

SEC. 4022. OIL SPILL RECOVERY INSTITUTE.

    (a) Funding.--Section 5006 of the Oil Pollution Act of 1990 (33 
U.S.C. 2736) is amended by--
            (1) striking subsection (a), redesignating subsection (b) 
        as subsection ``(a)'';
            (2) striking ``5003'' in the caption of subsection (a), as 
        redesignated, and inserting ``5001, 5003,'';
            (3) inserting ``to carry out section 5001 in the amount as 
        determined in section 5006(b), and'' after ``limitation,'' in 
        the text of subsection (a), as redesignated; and
            (4) adding at the end thereof the following:
    ``(b) Use of Interest Only.--The amount of funding to be made 
available annually to carry out section 5001 shall be the interest 
produced by the Fund's investment of the $22,500,000 remaining funding 
authorized for the Prince William Sound Oil Spill Recovery Institute 
and currently deposited in the Fund and invested by the Secretary of 
the Treasury in income producing securities along with other funds 
comprising the Fund.
    ``(c) Use for Section 1012.--Beginning with the eleventh year 
following the date of enactment of the Coast Guard Authorization Act of 
1995, the funding authorized for the Prince William Sound Oil Spill 
Recovery Institute and deposited in the Fund shall thereafter be made 
available for purposes of section 1012 in Alaska.''.
    (b) Conforming Amendments.--
            (1) Section 6002(b) of the Oil Pollution Act of 1990 (33 
        U.S.C. 2752(b)) is amended by striking ``5006(b)'' and 
        inserting ``5006''.
            (2) Section 7001(c)(9) the Oil Pollution Act of 1990 (33 
        U.S.C. 2761(c)(9)) is amended by striking the period at the end 
        thereof and inserting ``until the authorization for funding 
        under section 5006(b) expires''.

                    Subtitle C--Rail Infrastructure

SEC. 4031. RAILROAD REHABILITATION AND IMPROVEMENT PROGRAM.

    (a) Issuance of Obligations.--The Secretary of Transportation shall 
issue to the Secretary of the Treasury notes or other obligations 
pursuant to section 512 of the Railroad Revitalization and Regulatory 
Reform Act of 1976 (45 U.S.C. 832) in such amounts and at such times as 
may be necessary to pay any amounts required pursuant to the guarantee 
of the principal amount of obligations under sections 511 through 513 
of that Act (45 U.S.C. 831 through 833) as long as any such guaranteed 
obligation is outstanding.
    (b) Limitation.--Notwithstanding any other provision of law, the 
Secretary of Transportation may not make loan guarantee commitments 
under section 511 of that Act (45 U.S.C. 831) in excess of $100,000,000 
during each fiscal year from 1996 through 2002, and $10,000,000 is 
hereby made available for loan guarantee commitments made during each 
of those fiscal years.

SEC. 4032. LOCAL RAIL FREIGHT ASSISTANCE.

    Section 22108(a) of title 49, United States Code, is amended--
            (1) by adding at the end of paragraph (1) the following:
                    ``(C) $25,000,000 for each of the fiscal years 
                ending September 30, 1995, 1996, and 1997, which is 
                authorized and hereby made available.''; and
            (2) by striking ``1994,'' in paragraph (3) and inserting 
        ``1997,''.

SEC. 4033. DISASTER FUNDING FOR RAILROADS.

    Section 22101 of title 49, United States Code, is amended by 
redesignating subsection (d) as (e), and by inserting after subsection 
(c) the following:
    ``(d) Disaster Funding for Railroads.--
            ``(1) The Secretary may declare that a disaster has 
        occurred and that it is necessary to repair and rebuild rail 
        lines damaged as a result of such disaster. If the Secretary 
        makes a declaration under this paragraph, the Secretary may--
                    ``(A) waive the requirements of this section;
                    ``(B) consider the extent to which the State has 
                available unexpended local rail freight assistance 
                funds or available repaid loans; and
                    ``(C) prescribe the form and time for applications 
                for assistance made available herein.
            ``(2) The Secretary may not provide assistance under this 
        subsection unless emergency disaster relief funds are 
        appropriated for that purpose.
            ``(3) Funds provided under this subsection shall remain 
        available until expended.''.

SEC. 4034. GRADE-CROSSING ELIGIBILITY.

    Section 22101(a) of title 49, United States Code, is amended--
            (1) by striking ``and'' after the semicolon in paragraph 
        (2);
            (2) by striking the period at the end of paragraph (3) and 
        inserting a semicolon; and
            (3) by adding at the end thereof the following new 
        paragraphs:
            ``(4) closing or improving a railroad grade crossing or 
        series of railroad grade crossings; and
            ``(5) creating a State supervised grain car pool.''.

           TITLE V--COMMITTEE ON ENERGY AND NATURAL RESOURCES

            Subtitle A--United States Enrichment Corporation

SEC. 5001. SHORT TITLE.

    This subtitle may be cited as the ``USEC Privatization Act''.

SEC. 5002. PURPOSE.

    The purpose of this subtitle is to transfer the interest of the 
United States in the United States Enrichment Corporation to the 
private sector in a manner that provides for the long-term viability of 
the Corporation, provides for the continuation by the Corporation of 
the operation of the Department of Energy's gaseous diffusion plants, 
provides for the protection of the public interest in maintaining a 
reliable and economical domestic source of uranium mining and 
enrichment services, and, to the extent not inconsistent with such 
purposes, secures the maximum proceeds to the United States.

SEC. 5003. DEFINITIONS.

    For purposes of this subtitle:
            (1) The term ``AVLIS'' means atomic vapor laser isotope 
        separation technology.
            (2) The term ``Corporation'' means the United States 
        Enrichment Corporation and, unless the context otherwise 
        requires, includes the private corporation and any successor 
        thereto following privatization.
            (3) The term ``gaseous diffusion plants'' means the Paducah 
        Gaseous Diffusion Plant at Paducah, Kentucky and the Portsmouth 
        Gaseous Diffusion Plant at Piketon, Ohio.
            (4) The term ``highly enriched uranium'' means uranium 
        enriched to 20 percent or more of the uranium-235 isotope.
            (5) The term ``low-enriched uranium'' means uranium 
        enriched to less than 20 percent of the uranium-235 isotope, 
        including that which is derived from highly enriched uranium.
            (6) The term ``low-level radioactive waste'' has the 
        meaning given such term in section 2(9) of the Low-Level 
        Radioactive Waste Policy Act (42 U.S.C. 2021b(9)).
            (7) The term ``private corporation'' means the corporation 
        established under section 5005.
            (8) The term ``privatization'' means the transfer of 
        ownership of the Corporation to private investors.
            (9) The term ``privatization date'' means the date on which 
        100 percent of the ownership of the Corporation has been 
        transferred to private investors.
            (10) The term ``public offering'' means an underwritten 
        offering to the public of the common stock of the private 
        corporation pursuant to section 5004.
            (11) The ``Russian HEU Agreement'' means the Agreement 
        Between the Government of the United States of America and the 
        Government of the Russian Federation Concerning the Disposition 
        of Highly Enriched Uranium Extracted from Nuclear Weapons, 
        dated February 18, 1993.
            (12) The term ``Secretary'' means the Secretary of Energy.
            (13) The ``Suspension Agreement'' means the Agreement to 
        Suspend the Antidumping Investigation on Uranium from the 
        Russian Federation, as amended.
            (14) The term ``uranium enrichment'' means the separation 
        of uranium of a given isotopic content into 2 components, 1 
        having a higher percentage of a fissile isotope and 1 having a 
        lower percentage.

SEC. 5004. SALE OF THE CORPORATION.

    (a) Authorization.--The Board of Directors of the Corporation, with 
the approval of the Secretary of the Treasury, shall transfer ownership 
of the assets and obligations of the Corporation to the private 
corporation established under section 5005 (which may be consummated 
through a merger or consolidation effected in accordance with, and 
having the effects provided under, the laws of the state of 
incorporation of the private corporation, as if the Corporation were 
incorporated thereunder).
    (b) Board Determination.--The Board, with the approval of the 
Secretary of the Treasury, shall select the method of transfer and 
establish terms and conditions for the transfer that will provide the 
maximum proceeds to the Treasury of the United States and will provide 
for the long-term viability of the private corporation, the continued 
operation of the gaseous diffusion plants, and the public interest in 
maintaining a reliable and economical domestic uranium mining and 
enrichment industries.
    (c) Application of Securities Laws.--Any offering or sale of 
securities by the private corporation shall be subject to the 
Securities Act of 1933 (15 U.S.C. 77a et seq.), the Securities Exchange 
Act of 1934 (15 U.S.C. 78a et seq.), and the provisions of the 
Constitution and laws of any State, territory, or possession of the 
United States relating to transactions in securities.
    (d) Proceeds.--Proceeds from the sale of the United States' 
interest in the Corporation shall be--
            (1) deposited in the general fund of the Treasury;
            (2) included in the budget baseline required by the 
        Balanced Budget and Emergency Deficit Control Act of 1985; and
            (3) counted as an offset to direct spending for purposes of 
        section 252 of such Act, notwithstanding section 257(e) of such 
        Act.
    (e) Expenses.--Expenses of privatization shall be paid from 
Corporation revenue accounts in the United States Treasury.

SEC. 5005. ESTABLISHMENT OF PRIVATE CORPORATION.

    (a) Incorporation.--(1) The directors of the Corporation shall 
establish a private for-profit corporation under the laws of a State 
for the purpose of receiving the assets and obligations of the 
Corporation at privatization and continuing the business operations of 
the Corporation following privatization.
    (2) The directors of the Corporation may serve as incorporators of 
the private corporation and shall take all steps necessary to establish 
the private corporation, including the filing of articles of 
incorporation consistent with the provisions of this subtitle.
    (3) Employees and officers of the Corporation (including members of 
the Board of Directors) acting in accordance with this section on 
behalf of the private corporation shall be deemed to be acting in their 
official capacities as employees or officers of the Corporation for 
purposes of 18 U.S.C. 205.
    (b) Status of the Private Corporation.--(1) The private corporation 
shall not be an agency, instrumentality, or establishment of the United 
States, a Government corporation, or a Government-controlled 
corporation.
    (2) Except as otherwise provided by this Subtitle, financial 
obligations of the private corporation shall not be obligations of, or 
guaranteed as to principal or interest by, the Corporation or the 
United States, and the obligations shall so plainly state.
    (3) No action under section 1491 of title 28, United States Code, 
shall be allowable against the United States based on actions of the 
private corporation.
    (c) Application of Post-Government Employment Restrictions.--
Beginning on the privatization date, the restrictions of 18 U.S.C. 
207(a), (b), (c), and (d) shall not apply to the acts of an individual 
done in carrying out official duties as a director, officer, or 
employee of the private corporation, if the individual was an officer 
or employee of the Corporation (including a director) continuously 
during the 45 days prior to the privatization date.
    (d) Dissolution.--In the event that the privatization does not 
occur, the Corporation will provide for the dissolution of the private 
corporation within 1 year of the private corporation's incorporation 
unless the Secretary of the Treasury or his delegate, upon the 
Corporation's request, agrees to delay any such dissolution for an 
additional year.

SEC. 5006. TRANSFERS TO THE PRIVATE CORPORATION.

    Concurrent with privatization, the Corporation shall transfer to 
the private corporation--
            (1) the lease of the gaseous diffusion plants in accordance 
        with section 5007,
            (2) all personal property and inventories of the 
        Corporation,
            (3) all contracts, agreements, and leases under section 
        5008(a),
            (4) the Corporation's right to purchase power from the 
        Secretary under section 5008(b),
            (5) such funds in accounts of the Corporation held by the 
        Treasury or on deposit with any bank or other financial 
        institution as approved by the Secretary of the Treasury, and
            (6) all of the Corporation's records, including all of the 
        papers and other documentary materials, regardless of physical 
        form or characteristics, made or received by the Corporation.

SEC. 5007. LEASING OF GASEOUS DIFFUSION FACILITIES.

    (a) Transfer of Lease.--Concurrent with privatization, the 
Corporation shall transfer to the private corporation the lease of the 
gaseous diffusion plants and related property for the remainder of the 
term of such lease in accordance with the terms of such lease.
    (b) Renewal.--The private corporation shall have the exclusive 
option to lease the gaseous diffusion plants and related property for 
additional periods following the expiration of the initial term of the 
lease.
    (c) Exclusion of Facilities for Production of Highly Enriched 
Uranium.--The Secretary shall not lease to the private corporation any 
facilities necessary for the production of highly enriched uranium but 
may, subject to the requirements of the Atomic Energy Act of 1954 (42 
U.S.C. 2011 et seq.), grant the Corporation access to such facilities 
for purposes other than the production of highly enriched uranium.
    (d) DOE Responsibility for Preexisting Conditions.--The payment of 
any costs of decontamination and decommissioning, response actions, or 
corrective actions with respect to conditions existing before July 1, 
1993, at the gaseous diffusion plants shall remain the sole 
responsibility of the Secretary.
    (e) Environmental Audit.--For purposes of subsection (d), the 
conditions existing before July 1, 1993, at the gaseous diffusion 
plants shall be determined from the environmental audit conducted 
pursuant to section 1403(e) of the Atomic Energy Act of 1954 (42 U.S.C. 
2297c-2(e)).
    (f) Treatment Under Price-Anderson Provisions.--Any lease executed 
between the Secretary and the Corporation or the private corporation, 
and any extension or renewal thereof, under this section shall be 
deemed to be a contract for purposes of section 170d. of the Atomic 
Energy Act of 1954 (42 U.S.C. 2210(d)).
    (g) Waiver of EIS Requirement.--The execution or transfer of the 
lease between the Secretary and the Corporation or the private 
corporation, and any extension or renewal thereof, shall not be 
considered a major Federal action significantly affecting the quality 
of the human environment for purposes of section 102 of the National 
Environmental Policy Act of 1969 (42 U.S.C. 4332).

SEC. 5008. TRANSFER OF CONTRACTS.

    (a) Transfer of Contracts.--Concurrent with privatization, the 
Corporation shall transfer to the private corporation all contracts, 
agreements, and leases, including all uranium enrichment contracts, 
that were--
            (1) transferred by the Secretary to the Corporation 
        pursuant to section 1401(b) of the Atomic Energy Act of 1954 
        (42 U.S.C. 2297c(b)), or
            (2) entered into by the Corporation before the 
        privatization date.
    (b) Nontransferable Power Contracts.--The Corporation shall 
transfer to the private corporation the right to purchase power from 
the Secretary under the power purchase contracts for the gaseous 
diffusion plants executed by the Secretary before July 1, 1993. The 
Secretary shall continue to receive power for the gaseous diffusion 
plants under such contracts and shall continue to resell such power to 
the private corporation at cost during the term of such contracts.
    (c) Effect of Transfer.--(1) Notwithstanding subsection (a), the 
United States shall remain obligated to the parties to the contracts, 
agreements, and leases transferred under subsection (a) for the 
performance of its obligations under such contracts, agreements, or 
leases during their terms. Performance of such obligations by the 
private corporation shall be considered performance by the United 
States.
    (2) If a contract, agreement, or lease transferred under subsection 
(a) is terminated, extended, or materially amended after the 
privatization date--
            (A) the private corporation shall be responsible for any 
        obligation arising under such contract, agreement, or lease 
        after any extension or material amendment, and
            (B) the United States shall be responsible for any 
        obligation arising under the contract, agreement, or lease 
        before the termination, extension, or material amendment.
    (3) The private corporation shall reimburse the United States for 
any amount paid by the United States under a settlement agreement 
entered into with the consent of the private corporation or under a 
judgment, if the settlement or judgment--
            (A) arises out of an obligation under a contract, 
        agreement, or lease transferred under subsection (a), and
            (B) arises out of actions of the private corporation 
        between the privatization date and the date of a termination, 
        extension, or material amendment of such contract, agreement, 
        or lease.
    (d) Pricing.--The Corporation may establish prices for its 
products, materials, and services provided to customers on a basis that 
will allow it to attain the normal business objectives of a profit 
making corporation.

SEC. 5009. LIABILITIES.

    (a) Liability of the United States.--(1) Except as otherwise 
provided in this Subtitle, all liabilities arising out of the operation 
of the uranium enrichment enterprise before July 1, 1993, shall remain 
the direct liabilities of the Secretary.
    (2) Except as provided in subsection (a)(3) or otherwise provided 
in a memorandum of agreement entered into by the Corporation and the 
Office of Management and Budget prior to the privatization date, all 
liabilities arising out of the operation of the Corporation between 
July 1, 1993, and the privatization date shall remain the direct 
liabilities of the United States.
    (3) All liabilities arising out of the disposal of depleted uranium 
generated by the Corporation between July 1, 1993, and the 
privatization date shall become the direct liabilities of the 
Secretary.
    (4) Any stated or implied consent for the United States, or any 
agent or officer of the United States, to be sued by any person for any 
legal, equitable, or other relief with respect to any claim arising out 
of, or resulting from, the privatization of the Corporation is hereby 
withdrawn.
    (5) To the extent that any claim against the United States under 
this section is of the type otherwise required by Federal statute or 
regulation to be presented to a Federal agency or official for 
adjudication or review, such claim shall be presented to the Department 
of Energy in accordance with procedures to be established by the 
Secretary. Nothing in this paragraph shall be construed to impose on 
the Department of Energy liability to pay any claim presented pursuant 
to this paragraph.
    (6) The Attorney General shall represent the United States in any 
action seeking to impose liability under this subsection.
    (b) Liability of the Corporation.--Notwithstanding any provision of 
any agreement to which the Corporation is a party, the Corporation 
shall not be considered in breach, default, or violation of any 
agreement because of the transfer of such agreement to the private 
corporation under section 5008 or any other action the Corporation is 
required to take under this subtitle.
    (c) Liability of the Private Corporation.--Except as provided in 
this subtitle, the private corporation shall be liable for any 
liabilities arising out of its operations after the privatization date.
    (d) Liability of Officers and Directors.--(1) No officer, director, 
employee, or agent of the Corporation shall be liable in any civil 
proceeding to any party in connection with any action taken in 
connection with the privatization if, with respect to the subject 
matter of the action, suit, or proceeding, such person was acting 
within the scope of his employment.
    (2) This subsection shall not apply to claims arising under the 
Securities Act of 1933 (15 U.S.C. 77a. et seq.), the Securities 
Exchange Act of 1934 (15 U.S.C. 78a. et seq.), or under the 
Constitution or laws of any State, territory, or possession of the 
United States relating to transactions in securities.

SEC. 5010. EMPLOYEE PROTECTIONS.

    (a) Contractor Employees.--(1) Privatization shall not diminish the 
accrued, vested pension benefits of employees of the Corporation's 
operating contractor at the two gaseous diffusion plants.
    (2) In the event that the private corporation terminates or changes 
the contractor at either or both of the gaseous diffusion plants, the 
plan sponsor or other appropriate fiduciary of the pension plan 
covering employees of the prior operating contractor shall arrange for 
the transfer of all plan assets and liabilities relating to accrued 
pension benefits of such plans participants and beneficiaries from such 
plant to a pension plan sponsored by the new contractor or the private 
corporation or a joint labor-management plan, as the case may be.
    (3) In addition to any obligations arising under the National Labor 
Relations Act, any employer (including the private corporation if it 
operates a gaseous diffusion plant without a contractor or any 
contractor of the private corporation) at a gaseous diffusion plant 
shall--
            (A) abide by the terms of any unexpired collective 
        bargaining agreement covering employees in bargaining units at 
        the plant and in effect on the privatization date until the 
        stated expiration or termination date of the agreement; or
            (B) in the event a collective bargaining agreement is not 
        in effect upon the privatization date, have the same bargaining 
        obligations under section 8(d) of the National Labor Relations 
        Act (29 U.S.C. 158(d)) as it had immediately before the 
        privatization date.
    (4) If the private corporation replaces its operating contractor at 
a gaseous diffusion plant, the new employer (including the new 
contractor or the private corporation if it operates a gaseous 
diffusion plant without a contractor) shall--
            (A) offer employment to non-management employees of the 
        predecessor contractor to the extent that their jobs still 
        exist or they are qualified for new jobs, and
            (B) abide by the terms of the predecessor contractor's 
        collective bargaining agreement until the agreement expires or 
        a new agreement is signed.
    (5) In the event of a plant closing or mass layoff (as such terms 
are defined in section 2101(a) (2) and (3) of title 29, United States 
Code) at either of the gaseous diffusion plants, the Secretary of 
Energy shall treat any adversely affected employee of an operating 
contractor at either plant who was an employee at such plant on July 1, 
1993, as a Department of Energy employee for purposes of sections 3161 
and 3162 of the National Defense Authorization Act for Fiscal Year 1993 
(42 U.S.C. 7274h-7274i).
    (6)(A) The Secretary and the private corporation shall cause the 
post-retirement health benefits plan provider (or its successor) to 
continue to provide benefits for persons employed by an operating 
contractor at either of the gaseous diffusion plants in an economically 
efficient manner and at substantially the same level of coverage as 
eligible retirees are entitled to receive on the privatization date.
    (B) Persons eligible for coverage under subparagraph (A) shall be 
limited to:
            (i) Persons who retired from active employment at one of 
        the gaseous diffusion plants on or before the privatization 
        date as vested participants in a pension plan maintained either 
        by the Corporation's operating contractor or by a contractor 
        employed prior to July 1, 1993, by the Department of Energy to 
        operate a gaseous diffusion plant.
            (ii) Persons who are employed by the Corporation's 
        operating contractor on or before the privatization date and 
        are vested participants in a pension plan maintained either by 
        the Corporation's operating contractor or by a contractor 
        employed prior to July 1, 1993, by the Department of Energy to 
        operate a gaseous diffusion plant.
    (C) The Secretary shall fund the entire cost of post-retirement 
health benefits for persons who retired from employment with an 
operating contractor prior to July 1, 1993.
    (D) The Secretary and the Corporation shall fund the cost of post-
retirement health benefits for persons who retire from employment with 
an operating contractor after July 1, 1993, in proportion to the 
retired person's years and months of service at a gaseous diffusion 
plant under their respective management.
    (7)(A) Any suit under this subsection alleging a violation of an 
agreement between an employer and a labor organization shall be brought 
in accordance with section 301 of the Labor Management Relations Act 
(29 U.S.C. 185).
    (B) Any charge under this subsection alleging an unfair labor 
practice violative of section 8 of the National Labor Relations Act (29 
U.S.C. 158) shall be pursued in accordance with section 10 of the 
National Labor Relations Act (29 U.S.C. 160).
    (C) Any suit alleging a violation of any provision of this 
subsection, to the extent it does not allege a violation of the 
National Labor Relations Act, may be brought in any district court of 
the United States having jurisdiction of the parties, without regard to 
the amount in controversy or the citizenship of the parties.
    (b) Former Federal Employees.--(1)(A) Employees of the Corporation 
who were subject to either the Civil Service Retirement System (CSRS) 
or the Federal Employees' Retirement System (FERS) on the day 
immediately preceding the privatization date shall elect--
            (i) to retain their coverage under either CSRS or FERS, as 
        applicable, in lieu of coverage by the Corporation's retirement 
        system, or
            (ii) to receive a deferred annuity or lump-sum benefit 
        payable to a terminated employee under CSRS or FERS, as 
        applicable.
    (B) Those employees electing subparagraph (A)(ii) shall have the 
option to transfer the balance in their Thrift Savings Plan account to 
a defined contribution plan under the Corporation's retirement system, 
consistent with applicable law and the terms of the Corporation's 
defined contribution plan.
    (2) The Corporation shall pay to the Civil Service Retirement and 
Disability Fund--
            (A) such employee deductions and agency contributions as 
        are required by sections 8334, 8422, and 8423 of title 5, 
        United States Code, for those employees who elect to retain 
        their coverage under either CSRS or FERS pursuant to paragraph 
        (1);
            (B) such additional agency contributions as are determined 
        necessary by the Office of Personnel Management to pay, in 
        combination with the sums under subparagraph (A), the ``normal 
        cost'' (determined using dynamic assumptions) of retirement 
        benefits for those employees who elect to retain their coverage 
        under CSRS pursuant to paragraph (1), with the concept of 
        ``normal cost'' being used consistent with generally accepted 
        actuarial standards and principles; and
            (C) such additional amounts, not to exceed two percent of 
        the amounts under subparagraphs (A) and (B), as are determined 
        necessary by the Office of Personnel Management to pay the cost 
        of administering retirement benefits for employees who retire 
        from the Corporation after the privatization date under either 
        CSRS or FERS, for their survivors, and for survivors of 
        employees of the Corporation who die after the privatization 
        date (which amounts shall be available to the Office of 
        Personnel Management as provided in section 8348(a)(1)(B) of 
        title 5, United States Code).
    (3) The Corporation shall pay to the Thrift Savings Fund such 
employee and agency contributions as are required by section 8432 of 
title 5, United States Code, for those employees who elect to retain 
their coverage under FERS pursuant to paragraph (1).
    (4) Any employee of the Corporation who was subject to the Federal 
Employee Health Benefits Program (FEHBP) on the day immediately 
preceding the privatization date and who elects to retain coverage 
under either CSRS or FERS pursuant to paragraph (1) shall have the 
option to receive health benefits from a health benefit plan 
established by the Corporation or to continue without interruption 
coverage under the FEHBP, in lieu of coverage by the Corporation's 
health benefit system.
    (5) The Corporation shall pay to the Employees Health Benefits 
Fund--
            (A) such employee deductions and agency contributions as 
        are required by section 8906(a)-(f) of title 5, United States 
        Code, for those employees who elect to retain their coverage 
        under FEHBP pursuant to paragraph (4); and
            (B) such amounts as are determined necessary by the Office 
        of Personnel Management under paragraph (6) to reimburse the 
        Office of Personnel Management for contributions under section 
        8906(g)(1) of title 5, United States Code, for those employees 
        who elect to retain their coverage under FEHBP pursuant to 
        paragraph (4).
    (6) The amounts required under paragraph (5)(B) shall pay the 
Government contributions for retired employees who retire from the 
Corporation after the privatization date under either CSRS or FERS, for 
survivors of such retired employees, and for survivors of employees of 
the Corporation who die after the privatization date, with said amounts 
prorated to reflect only that portion of the total service of such 
employees and retired persons that was performed for the Corporation 
after the privatization date.

SEC. 5011. OWNERSHIP LIMITATIONS.

    No director, officer, or employee of the Corporation may acquire 
any securities, or any rights to acquire any securities of the private 
corporation on terms more favorable than those offered to the general 
public--
            (1) in a public offering designed to transfer ownership of 
        the Corporation to private investors,
            (2) pursuant to any agreement, arrangement, or 
        understanding entered into before the privatization date, or
            (3) before the election of the directors of the private 
        corporation.

SEC. 5012. URANIUM TRANSFERS AND SALES.

    (a) Transfers and Sales by the Secretary.--The Secretary shall not 
provide enrichment services or transfer or sell any uranium (including 
natural uranium concentrates, natural uranium hexafluoride, or enriched 
uranium in any form) to any person except as consistent with this 
section.
    (b) Russian HEU.--(1) On or before December 31, 1996, the United 
States Executive Agent under the Russian HEU Agreement shall transfer 
to the Secretary without charge title to an amount of uranium 
hexafluoride equivalent to the natural uranium component of low-
enriched uranium derived from at least 18 metric tons of highly 
enriched uranium purchased from the Russian Executive Agent under the 
Russian HEU Agreement. The quantity of such uranium hexafluoride 
delivered to the Secretary shall be based on a tails assay of 0.30 
U235. Uranium hexafluoride transferred to the Secretary pursuant to 
this paragraph shall be deemed under U.S. law for all purposes to be of 
Russian origin.
    (2) Within 7 years of the date of enactment of this subtitle, the 
Secretary shall sell, and receive payment for, the uranium hexafluoride 
transferred to the Secretary pursuant to paragraph (1). Such uranium 
hexafluoride shall be sold--
            (A) at any time for use in the United States for the 
        purpose of overfeeding;
            (B) at any time for end use outside the United States; or
            (C) in calendar year 2001 for consumption by end users in 
        the United States not prior to January 1, 2002, in volumes not 
        to exceed 3 million pounds U3O8 equivalent per year.
    (3) With respect to all enriched uranium delivered to the United 
States Executive Agent under the Russian HEU Agreement on or after 
January 1, 1997, the United States Executive Agent shall, upon request 
of the Russian Executive Agent, enter into an agreement to deliver 
concurrently to the Russian Executive Agent an amount of uranium 
hexafluoride equivalent to the natural uranium component of such 
uranium. An agreement executed pursuant to a request of the Russian 
Executive Agent, as contemplated in this paragraph, may pertain to any 
deliveries due during any period remaining under the Russian HEU 
Agreement. The quantity of such uranium hexafluoride delivered to the 
Russian Executive Agent shall be based on a tails assay of 0.30 U235. 
Title to uranium hexafluoride delivered to the Russian Executive Agent 
pursuant to this paragraph shall transfer to the Russian Executive 
Agent upon delivery of such material to the Russian Executive Agent, 
with such delivery to take place at a North American facility 
designated by the Russian Executive Agent. Uranium hexafluoride 
delivered to the Russian Executive Agent pursuant to this paragraph 
shall be deemed under U.S. law for all purposes to be of Russian 
origin. Such uranium hexafluoride may be sold to any person or entity 
for delivery and use in the United States only as permitted in 
subsections (b)(5), (b)(6), and (b)(7) of this section.
    (4) In the event that the Russian Executive Agent does not exercise 
its right to enter into an agreement to take delivery of the natural 
uranium component of any low-enriched uranium, as contemplated in 
paragraph (3), within 90 days of the date such low-enriched uranium is 
delivered to the United States Executive Agent, then the United States 
Executive Agent shall engage an independent entity through a 
competitive selection process to auction an amount of uranium 
hexafluoride or U3O8 (in the event that the conversion component of 
such hexafluoride has previously been sold) equivalent to the natural 
uranium component of such low-enriched uranium. Such independent entity 
shall sell such uranium hexafluoride in one or more lots to any person 
or entity to maximize the proceeds from such sales, for disposition 
consistent with the limitations set forth in this subsection. The 
independent entity shall pay to the Russian Executive Agent the 
proceeds of any such auction less all reasonable transaction and other 
administrative costs. The quantity of such uranium hexafluoride 
auctioned shall be based on a tails assay of 0.30 U235. Title to 
uranium hexafluoride auctioned pursuant to this paragraph shall 
transfer to the buyer of such material upon delivery of such material 
to the buyer. Uranium hexafluoride auctioned pursuant to this paragraph 
shall be deemed under U.S. law for all purposes to be of Russian 
origin.
    (5) Except as provided in paragraphs (6) and (7), uranium 
hexafluoride delivered to the Russian Executive Agent under paragraph 
(3) or auctioned pursuant to paragraph (4), may not be delivered for 
consumption by end users in the United States either directly or 
indirectly prior to January 1, 1998, and thereafter only in accordance 
with the following schedule:

                                      Annual maximum deliveries to end 
                                                                  users
Year:                                   (millions lbs. U3O8 equivalent)
    1998..........................................                   2 
    1999..........................................                   4 
    2000..........................................                   6 
    2001..........................................                   8 
    2002..........................................                  10 
    2003..........................................                  12 
    2004..........................................                  14 
    2005..........................................                  16 
    2006..........................................                  17 
    2007..........................................                  18 
    2008..........................................                  19 
    2009 and each year thereafter.................                  20.
    (6) Uranium hexafluoride delivered to the Russian Executive Agent 
under paragraph (3) or auctioned pursuant to paragraph (4) may be sold 
at any time as Russian-origin natural uranium in a matched sale 
pursuant to the Suspension Agreement, and in such case shall not be 
counted against the annual maximum deliveries set forth in paragraph 
(5).
    (7) Uranium hexafluoride delivered to the Russian Executive Agent 
under paragraph (3) or auctioned pursuant to paragraph (4) may be sold 
at any time for use in the United States for the purpose of overfeeding 
in the operations of enrichment facilities.
    (8) Nothing in this subsection (b) shall restrict the sale of the 
conversion component of such uranium hexafluroide. Material sold 
pursuant to paragraph 5 shall not be swapped, exchanged or loaned.
    (9) The Secretary of Commerce shall have responsibility for the 
administration and enforcement of the limitations set forth in this 
subsection. The Secretary of Commerce may require any person to provide 
any certifications, information, or take any action that may be 
necessary to enforce these limitations. The U.S. Customs Service shall 
maintain and provide any information required by the Secretary of 
Commerce and shall take any action requested by the Secretary of 
Commerce which is necessary for the administration and enforcement of 
the uranium delivery limitations set forth in this section.
    (10) The President shall monitor the actions of the United States 
Executive Agent under the Russian HEU Agreement and shall report to the 
Congress not later than December 31 of each year on the effect the low-
enriched uranium delivered under the Russian HEU Agreement is having on 
the domestic uranium mining, conversion, and enrichment industries, and 
the operation of the gaseous diffusion plants. Such report shall 
include a description of actions taken or proposed to be taken by the 
President to prevent or mitigate any material adverse impact on such 
industries or any loss of employment at the gaseous diffusion plants as 
a result of the Russian HEU Agreement.
    (c) Transfers to the Corporation.--(1) The Secretary shall transfer 
to the Corporation without charge up to 50 metric tons of enriched 
uranium and up to 7,000 metric tons of natural uranium from the 
Department of Energy's stockpile, subject to the restrictions in 
subsection (c)(2).
    (2) The Corporation shall not deliver for commercial end use in the 
United States--
            (A) any of the uranium transferred under this subsection 
        before January 1, 1998;
            (B) more than 10 percent of the uranium (by uranium 
        hexafluoride equivalent content) transferred under this 
        subsection or more than 4 million pounds, whichever is less, in 
        any calendar year after 1997; or
            (C) more than 800,000 separative work units contained in 
        low-enriched uranium transferred under this subsection in any 
        calendar year.
    (d) Inventory Sales.--(1) In addition to the transfers authorized 
under subsections (c) and (e), the Secretary may, from time to time, 
sell natural and low-enriched uranium (including low-enriched uranium 
derived from highly enriched uranium) from the Department of Energy's 
stockpile.
    (2) Except as provided in subsections (b), (c), and (e) no sale or 
transfer of natural or low-enriched uranium shall be made unless--
            (A) the President determines that the material is not 
        necessary to national security needs,
            (B) the Secretary determines that the sale of the material 
        will not have an adverse material impact on the domestic 
        uranium mining, conversion, or enrichment industry, taking into 
        account the sales of uranium under the Russian HEU Agreement 
        and the Suspension Agreement, and
            (C) the price paid to the Secretary will not be less than 
        the fair market value of the material.
    (e) Government Transfers.--Notwithstanding subsection (d)(2), the 
Secretary may transfer or sell enriched uranium--
            (1) to a Federal agency if the material is transferred for 
        the use of the receiving agency without any resale or transfer 
        to another entity and the material does not meet commercial 
        specifications;
            (2) to any person for national security purposes, as 
        determined by the Secretary; or
            (3) to any State or local agency or nonprofit, charitable, 
        or educational institution for use other than the generation of 
        electricity for commercial use.
    (f) Savings Provision.--Nothing in this subtitle shall be read to 
modify the terms of the Russian HEU Agreement.

SEC. 5013. LOW-LEVEL WASTE.

    (a) Responsibility of DOE.--(1) The Secretary, at the request of 
the generator, shall accept for disposal low-level radioactive waste, 
including depleted uranium if it were ultimately determined to be low-
level radioactive waste, generated by--
            (A) the Corporation as a result of the operations of the 
        gaseous diffusion plants or as a result of the treatment of 
        such wastes at a location other than the gaseous diffusion 
        plants, or
            (B) any person licensed by the Nuclear Regulatory 
        Commission to operate a uranium enrichment facility under 
        sections 53, 63, and 193 of the Atomic Energy Act of 1954 (42 
        U.S.C. 2073, 2093, and 2243).
    (2) Except as provided in paragraph (3), the generator shall 
reimburse the Secretary for the disposal of low-level radioactive waste 
pursuant to paragraph (1) in an amount equal to the Secretary's costs, 
including a pro rata share of any capital costs, but in no event more 
than an amount equal to that which would be charged by commercial, 
State, regional, or interstate compact entities for disposal of such 
waste.
    (3) In the event depleted uranium were ultimately determined to be 
low-level radioactive waste, the generator shall reimburse the 
Secretary for the disposal of depleted uranium pursuant to paragraph 
(1) in an amount equal to the Secretary's costs, including a pro rata 
share of any capital costs.
    (b) Agreements With Other Persons.--The generator may also enter 
into agreements for the disposal of low-level radioactive waste subject 
to subsection (a) with any person other than the Secretary that is 
authorized by applicable laws and regulations to dispose of such 
wastes.
    (c) State or Interstate Compacts.--Notwithstanding any other 
provision of law, no State or interstate compact shall be liable for 
the treatment, storage, or disposal of any low-level radioactive waste 
(including mixed waste) attributable to the operation, decontamination, 
and decommissioning of any uranium enrichment facility.

SEC. 5014. AVLIS.

    (a) Exclusive Right To Commercialize.--The Corporation shall have 
the exclusive commercial right to deploy and use any AVLIS patents, 
processes, and technical information owned or controlled by the 
Government, upon completion of a royalty agreement with the Secretary.
    (b) Transfer of Related Property to Corporation.--
            (1) In general.--To the extent requested by the Corporation 
        and subject to the requirements of the Atomic Energy Act of 
        1954, the President shall transfer without charge to the 
        Corporation all of the right, title, or interest in and to 
        property owned by the United States under control or custody of 
        the Secretary that is directly related to and materially useful 
        in the performance of the Corporation's purposes regarding 
        AVLIS and alternative technologies for uranium enrichment, 
        including--
                    (A) facilities, equipment, and materials for 
                research, development, and demonstration activities; 
                and
                    (B) all other facilities, equipment, materials, 
                processes, patents, technical information of any kind, 
                contracts, agreements, and leases.
            (2) Exception.--Facilities, real estate, improvements, and 
        equipment related to the gaseous diffusion, and gas centrifuge, 
        uranium enrichment programs of the Secretary shall not transfer 
        under paragraph (1)(B).
            (3) Expiration of transfer authority.--The President's 
        authority to transfer property under this subsection shall 
        expire upon the privatization date.
    (c) Liability for Patent and Related Claims.--With respect to any 
right, title, or interest provided to the Corporation under subsection 
(a) or (b), the Corporation shall have sole liability for any payments 
made or awards under section 157 b. (3) of the Atomic Energy Act of 
1954 (42 U.S.C. 2187(b)(3)), or any settlements or judgments involving 
claims for alleged patent infringement. Any royalty agreement under 
subsection (a) of this section shall provide for a reduction of royalty 
payments to the Secretary to offset any payments, awards, settlements, 
or judgments under this subsection.

SEC. 5015. GASEOUS DIFFUSION TECHNOLOGY.

    (a) Transfer of Rights.--The Corporation shall have the exclusive 
commercial rights for both uranium enrichment and non-uranium 
enrichment uses of any patents, patent applications, trade secrets, and 
other technical information related to the gaseous diffusion technology 
owned or controlled by the Department of Energy, or by the United 
States but under control or custody of the Department of Energy. The 
Corporation shall enter into an exclusive licensing agreement with the 
Department of Energy providing for--
            (1) the payment of royalties of 3 percent of the gross, 
        pre-tax revenues realized by the Corporation from its non-
        uranium enrichment commercial uses of such patents, patent 
        applications, trade secrets, and other technical information,
            (2) the reduction of such royalties to offset any payments, 
        awards, settlements, or judgments rendered against the 
        Corporation in its deployment or licensing of the exclusive 
        commercial rights under this section, and
            (3) the reservation of a non-exclusive, royalty-free right 
        to the United States Government to use such patents, patent 
        applications, trade secrets, and other technical information 
        solely for Governmental purposes.
    (b) Improvements.--New patents, trade secrets, and other technical 
information developed for commercial applications that derive from the 
gaseous diffusion technology initially licensed by the Corporation 
shall be at the Corporation's expense and shall be free from royalties 
to the Department of Energy.

SEC. 5016. APPLICATION OF CERTAIN LAWS.

    (a) OSHA.--(1) As of the privatization date, the private 
corporation shall be subject to and comply with the Occupational Safety 
and Health Act of 1970 (29 U.S.C. 651 et seq.).
    (2) The Nuclear Regulatory Commission and the Occupational Safety 
and Health Administration shall, within 90 days after the enactment of 
this subtitle, enter into a memorandum of agreement to govern the 
exercise of their authority over occupational safety and health hazards 
at the gaseous diffusion plants, including inspection, investigation, 
enforcement, and rulemaking relating to such hazards.
    (b) Antitrust Laws.--For purposes of the antitrust laws, the 
performance by the private corporation of a ``matched import'' contract 
under the Suspension Agreement shall be considered to have occurred 
prior to the privatization date, if at the time of privatization, such 
contract had been agreed to by the parties in all material terms and 
confirmed by the Secretary of Commerce under the Suspension Agreement.
    (c) Energy Reorganization Act Requirements.--(1) The private 
corporation and its contractors shall be subject to the provisions of 
section 211 of the Energy Reorganization Act of 1974 (42 U.S.C. 5851) 
to the same extent as an employer subject to such section.
  (2) With respect to the operation of the facilities leased by the 
private corporation, section 206 of the Energy Reorganization Act of 
1974 (42 U.S.C. 5846) shall apply to the directors and officers of the 
private corporation.

SEC. 5017. AMENDMENTS TO THE ATOMIC ENERGY ACT.

    (a) Repeal.--(1) Chapters 22 through 26 of the Atomic Energy Act of 
1954 (42 U.S.C. 1201-1608) are repealed as of the privatization date.
  (2) The table of contents of such Act is amended as of the 
privatization date by striking the items referring to sections repealed 
by paragraph (1).
    (b) NRC Licensing.--(1) Section 11v. of the Atomic Energy Act of 
1954 (42 U.S.C. 2014v.) is amended by striking ``or the construction 
and operation of a uranium enrichment facility using Atomic Vapor Laser 
Isotope Separation technology''.
    (2) Section 193 of the Atomic Energy Act of 1954 (42 U.S.C. 2243) 
is amended by adding at the end the following:
    ``(f) Limitation.--No license or certificate of compliance may be 
issued to the United States Enrichment Corporation or its successor 
under section 53, 63, 193, or 1701, if in the opinion of the 
Commission, the issuance of such a license or certificate of 
compliance--
            ``(1) would be inimical to the common defense and security 
        of the United States; or
            ``(2) would be inimical to the maintenance of a reliable 
        and economical domestic source of enrichment services because 
        of the nature and extent of the ownership, control, or 
        domination of the Corporation by a foreign corporation or a 
        foreign government or any other relevant factors or 
        circumstances.''.
    (3) Section 1701(c)(2) of the Atomic Energy Act of 1954 (42 U.S.C. 
2297f(c)(2)) is amended to read as follows:
            ``(2) Periodic application for certificate of compliance.--
        The Corporation shall apply to the Nuclear Regulatory 
        Commission for a certificate of compliance under paragraph (1) 
        periodically, as determined by the Commission, but not less 
        than every 5 years. The Commission shall review any such 
        application and any determination made under subsection (b)(2) 
        shall be based on the results of any such review.''.
    (4) Section 1702(a) of the Atomic Energy Act of 1954 (42 U.S.C. 
2297f-1(a)) is amended--
            (1) by striking ``other than'' and inserting ``including'', 
        and
            (2) by striking ``sections 53 and 63'' and inserting 
        ``sections 53, 63, and 193''.
    (c) Judicial Review of NRC Actions.--Section 189b. of the Atomic 
Energy Act of 1954 (42 U.S.C. 2239(b)) is amended to read as follows:
    ``b. The following Commission actions shall be subject to judicial 
review in the manner prescribed in chapter 158 of title 28, United 
States Code and chapter 7 of title 5, United States Code:
            ``(1) Any final order entered in any proceeding of the kind 
        specified in subsection (a).
            ``(2) Any final order allowing or prohibiting a facility to 
        begin operating under a combined construction and operating 
        license.
            ``(3) Any final order establishing by regulation standards 
        to govern the Department of Energy's gaseous diffusion uranium 
        enrichment plants, including any such facilities leased to a 
        corporation established under the USEC Privatization Act.
            ``(4) Any final determination relating to whether the 
        gaseous diffusion plants, including any such facilities leased 
        to a corporation established under the USEC Privatization Act, 
        are in compliance with the Commission's standards governing the 
        gaseous diffusion plants and all applicable laws.''.
    (d) Civil Penalties.--Section 234 a. of the Atomic Energy Act of 
1954 (42 U.S.C. 2282(a)) is amended by--
            (1) striking ``any licensing provision of section 53, 57, 
        62, 63, 81, 82, 101, 103, 104, 107, or 109'' and inserting: 
        ``any licensing or certification provision of section 53, 57, 
        62, 63, 81, 82, 101, 103, 104, 107, 109, or 1701''; and
            (2) by striking ``any license issued thereunder'' and 
        inserting: ``any license or certification issued thereunder''.
    (e) References to the Corporation.--Following the privatization 
date, all references in the Atomic Energy Act of 1954 to the United 
States Enrichment Corporation shall be deemed to be references to the 
private corporation.

SEC. 5018. AMENDMENTS TO OTHER LAWS.

    (a) Definition of Government Corporation.--As of the privatization 
date, section 9101(3) of title 31, United States Code, is amended by 
striking subparagraph (N).
    (b) Definition of the Corporation.--Section 1018 (1) of the Energy 
Policy Act of 1992 (42 U.S.C. 2296b-7(1)) is amended by adding at the 
end ``or its successor.''.

           Subtitle B--Department of the Interior Conveyances

SEC. 5101. SHORT TITLE.

    This subtitle may be cited as the ``Helium Act of 1995''.

SEC. 5102. AMENDMENT OF HELIUM ACT.

    Except as otherwise expressly provided, whenever in this part an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of the Helium Act (50 U.S.C. 
167 to 167n).

SEC. 5103. AUTHORITY OF SECRETARY.

    Sections 3, 4, and 5 are amended to read as follows:

``SEC. 3. AUTHORITY OF SECRETARY.

    ``(a) Extraction and Disposal of Helium on Federal Lands.--
            ``(1) In general.--The Secretary may enter into agreements 
        with private parties for the recovery and disposal of helium on 
        Federal lands upon such terms and conditions as the Secretary 
        deems fair, reasonable, and necessary.
            ``(2) Leasehold rights.--The Secretary may grant leasehold 
        rights to any such helium.
            ``(3) Limitation.--The Secretary may not enter into any 
        agreement by which the Secretary sells such helium other than 
        to a private party with whom the Secretary has an agreement for 
        recovery and disposal of helium.
            ``(4) Regulations.--Agreements under paragraph (1) may be 
        subject to such regulations as may be prescribed by the 
        Secretary.
            ``(5) Existing rights.--An agreement under paragraph (1) 
        shall be subject to any rights of any affected Federal oil and 
        gas lessee that may be in existence prior to the date of the 
        agreement.
            ``(6) Terms and conditions.--An agreement under paragraph 
        (1) (and any extension or renewal of an agreement) shall 
        contain such terms and conditions as the Secretary may consider 
        appropriate.
            ``(7) Prior agreements.--This subsection shall not in any 
        manner affect or diminish the rights and obligations of the 
        Secretary and private parties under agreements to dispose of 
        helium produced from Federal lands in existence on the date of 
        enactment of the Helium Act of 1995 except to the extent that 
        such agreements are renewed or extended after that date.
    ``(b) Storage, Transportation and Sale.--The Secretary may store, 
transport, and sell helium only in accordance with this Act.

``SEC. 4. STORAGE, TRANSPORTATION, AND WITHDRAWAL OF CRUDE HELIUM.

    ``(a) Storage, Transportation and Withdrawal.--The Secretary may 
store, transport and withdraw crude helium and maintain and operate 
crude helium storage facilities, in existence on the date of enactment 
of the Helium Act of 1995 at the Bureau of Mines Cliffside Field, and 
related helium transportation and withdrawal facilities.
    ``(b) Cessation of Production, Refining, and Marketing.--Not later 
than 18 months after the date of enactment of the Helium Act of 1995, 
the Secretary shall cease producing, refining, and marketing refined 
helium and shall cease carrying out all other activities relating to 
helium which the Secretary was authorized to carry out under this Act 
before the date of enactment of the Helium Act of 1995, except 
activities described in subsection (a).
    ``(c) Disposal of Facilities.--
            ``(1) In general.--Subject to paragraph (5), not later than 
        18 months after the cessation of activities referred to in 
        section (b) of this section, the Secretary shall designate as 
        excess property and dispose of all facilities, equipment, and 
        other real and personal property, and all interests therein, 
        held by the United States for the purpose of producing, 
        refining and marketing refined helium.
            ``(2) Applicable law.--The disposal of such property shall 
        be in accordance with the Federal Property and Administrative 
        Services Act of 1949.
            ``(3) Proceeds.--All proceeds accruing to the United States 
        by reason of the sale or other disposal of such property shall 
        be treated as moneys received under this chapter for purposes 
        of section 6(f).
            ``(4) Costs.--All costs associated with such sale and 
        disposal (including costs associated with termination of 
        personnel) and with the cessation of activities under 
        subsection (b) shall be paid from amounts available in the 
        helium production fund established under section 6(f).
            ``(5) Exception.--Paragraph (1) shall not apply to any 
        facilities, equipment, or other real or personal property, or 
        any interest therein, necessary for the storage, transportation 
        and withdrawal of crude helium or any equipment, facilities, or 
        other real or personal property, required to maintain the 
        purity, quality control, and quality assurance of crude helium 
        in the Bureau of Mines Cliffside Field.
    ``(d) Existing Contracts.--
            ``(1) In general.--All contracts that were entered into by 
        any person with the Secretary for the purchase by the person 
        from the Secretary of refined helium and that are in effect on 
        the date of the enactment of the Helium Act of 1995 shall 
        remain in force and effect until the date on which the refining 
        operations cease, as described in subsection (b).
            ``(2) Costs.--Any costs associated with the termination of 
        contracts described in paragraph (1) shall be paid from the 
        helium production fund established under section 6(f).

``SEC. 5. FEES FOR STORAGE, TRANSPORTATION AND WITHDRAWAL.

    ``(a) In General.--Whenever the Secretary provides helium storage 
withdrawal or transportation services to any person, the Secretary 
shall impose a fee on the person to reimburse the Secretary for the 
full costs of providing such storage, transportation, and withdrawal.
    ``(b) Treatment.--All fees received by the Secretary under 
subsection (a) shall be treated as moneys received under this Act for 
purposes of section 6(f).''.

SEC. 5104. SALE OF CRUDE HELIUM.

    (a) Subsection 6(a) is amended by striking ``from the Secretary'' 
and inserting ``from persons who have entered into enforceable 
contracts to purchase an equivalent amount of crude helium from the 
Secretary''.
    (b) Subsection 6(b) is amended--
            (1) by inserting ``crude'' before ``helium''; and
            (2) by adding the following at the end: ``Except as may be 
        required by reason of subsection (a), sales of crude helium 
        under this section shall be in amounts as the Secretary 
        determines, in consultation with the helium industry, necessary 
        to carry out this subsection with minimum market disruption.''.
    (c) Subsection 6(c) is amended--
            (1) by inserting ``crude'' after ``Sales of''; and
            (2) by striking ``together with interest as provided in 
        this subsection'' and all that follows through the end of the 
        subsection and inserting ``all funds required to be repaid to 
        the United States as of October 1, 1994 under this section 
        (referred to in this subsection as `repayable amounts'). The 
        price at which crude helium is sold by the Secretary shall not 
        be less than the amount determined by the Secretary by--
                    ``(i) dividing the outstanding amount of such 
                repayable amounts by the volume (in million cubic feet) 
                of crude helium owned by the United States and stored 
                in the Bureau of Mines Cliffside Field at the time of 
                the sale concerned, and
                    ``(ii) adjusting the amount determined under 
                paragraph (1) by the Consumer Price Index for years 
                beginning after December 31, 1994.''.
    (d) Subsection 6(d) is amended to read as follows:
    ``(d) Extraction of Helium From Deposits on Federal Lands.--All 
moneys received by the Secretary from the sale or disposition of helium 
on Federal lands shall be paid to the Treasury and credited against the 
amounts required to be repaid to the Treasury under subsection (c).''.
    (e) Subsection 6(e) is repealed.
    (f) Subsection (f) is amended--
                    (A) by striking ``(f)'' and inserting ``(e)(1)''; 
                and
                    (B) by adding the following at the end:
    ``(2)(A) Within 7 days after the commencement of each fiscal year 
after the disposal of the facilities referred to in section 4(c), all 
amounts in such fund in excess of $2,000,000 (or such lesser sum as the 
Secretary deems necessary to carry out this Act during such fiscal 
year) shall be paid to the Treasury and credited as provided in 
paragraph (1).
    ``(B) On repayment of all amounts referred to in subsection (c), 
the fund established under this section shall be terminated and all 
moneys received under this Act shall be deposited in the general fund 
of the Treasury.''.

SEC. 5105. ELIMINATION OF STOCKPILE.

    Section 8 is amended to read as follows:

``SEC. 8. ELIMINATION OF STOCKPILE.

    ``(a) Stockpile Sales.--
            ``(1) Commencement.--Not later than January 1, 2005, the 
        Secretary shall commence offering for sale crude helium from 
        helium reserves owned by the United States in such amounts as 
        may be necessary to dispose of all such helium reserves in 
        excess of 600,000,000 cubic feet by January 1, 2015.
            ``(2) Times of sale.--The sales shall be at such times 
        during each year and in such lots as the Secretary determines, 
        in consultation with the helium industry, to be necessary to 
        carry out this subsection with minimum market disruption.
            ``(3) Price.--The price for all sales under paragraph (1), 
        as determined by the Secretary in consultation with the helium 
        industry, shall be such price as will ensure repayment of the 
        amounts required to be repaid to the Treasury under section 
        6(c).
    ``(b) Discovery of Additional Reserves.--The discovery of 
additional helium reserves shall not affect the duty of the Secretary 
to make sales of helium under subsection (a).''.

SEC. 5106. REPEAL OF AUTHORITY TO BORROW.

    Sections 12 and 15 are repealed.

        Subtitle C--Arctic Coastal Plain Leasing and Revenue Act

SEC. 5201. SHORT TITLE.

    This subtitle may be cited as the ``Arctic Coastal Plain Leasing 
and Revenue Act of 1995''.

SEC. 5202. PURPOSE AND POLICY.

    The Congress hereby declares that it is the purpose and policy of 
this subtitle to authorize competitive oil and gas leasing and 
development to proceed on the Coastal Plain in a manner consistent with 
protection of the environment, maintenance of fish and wildlife and 
their habitat, and the interests of the area's subsistence users, and 
in a manner that will reduce the Federal deficit by an estimated $1.3 
billion over the next seven years.

SEC. 5203. DEFINITIONS.

    When used in this subtitle the term--
            (1) ``Coastal Plain'' means that area identified as such in 
        the map entitled ``Arctic National Wildlife Refuge'', dated 
        August 1980, as referenced in section 1002(b) of the Alaska 
        National Interest Lands Conservation Act of 1980 (16 U.S.C. 
        3142(b)(1)) comprising approximately 1,549,000 ACRES acres; and
            (2) ``Secretary'' means the Secretary of the Interior or 
        the Secretary's designee.

SEC. 5204. LEASING PROGRAM FOR LANDS WITHIN THE COASTAL PLAIN.

    (a) Authorization.--The Congress hereby authorizes and directs the 
Secretary and other appropriate Federal officers and agencies to take 
such actions as are necessary to establish and implement a competitive 
oil and gas leasing program that will result in an environmentally 
sound program for the exploration, development, and production of the 
oil and gas resources of the Coastal Plain, and no further findings or 
decisions shall be required to implement this authorization. The 
Secretary shall administer the provisions of this subtitle through 
regulations, lease terms, conditions, restrictions, prohibitions, 
stipulations and other provisions that ensure the oil and gas 
exploration, development, and production activities on the Coastal 
Plain will result in no significant adverse effect on fish and 
wildlife, their habitat, and the environment, and shall require the 
application of the best commercially available technology for oil and 
gas exploration, development, and production, on all new exploration, 
development, and production operations, and whenever practicable, on 
existing operations, and in a manner to ensure the receipt of fair 
market value by the public for the mineral resources to be leased.
    (b) Repeal.--The prohibitions and limitations contained in section 
1003 of the Alaska National Interest Lands Conservation Act of 1980 (16 
U.S.C. 3143) are hereby repealed.
    (c) Sole Authority.--This subtitle shall be the sole authority for 
leasing on the Coastal Plain.
    (d) Federal Land.--The Coastal Plain shall be considered ``Federal 
land'' for the purposes of the Federal Oil and Gas Royalty Management 
Act of 1982.

SEC. 5205. RULES AND REGULATIONS.

    (a) Promulgation.--The Secretary shall prescribe such rules and 
regulations as may be necessary to carry out the purposes and 
provisions of this subtitle, including rules and regulations relating 
to protection of the fish and wildlife, their habitat, and the 
environment of the Coastal Plain. Such rules and regulations shall be 
promulgated within eighteen months after the date of enactment of this 
subtitle and shall, as of their effective date, apply to all operations 
conducted under a lease issued or maintained under the provisions of 
this subtitle and all operations on the Coastal Plain related to the 
leasing, exploration, development and production of oil and gas.
    (b) Revision of Regulations.--The Secretary shall periodically 
review and, if appropriate, revise the rules and regulations issued 
under subsection (a) of this section to reflect any significant 
biological, environmental, or engineering data which come to the 
Secretary's attention.

SEC. 5206. ADEQUACY OF THE DEPARTMENT OF THE INTERIOR'S LEGISLATIVE 
              ENVIRONMENTAL IMPACT STATEMENT.

    The ``Final Legislative Environmental Impact Statement'' (April 
1987) on the Coastal Plain prepared pursuant to section 1002 of the 
Alaska National Interest Lands Conservation Act of 1980 (16 U.S.C. 
3142) and section 102(2)(C) of the National Environmental Policy Act of 
1969 (42 U.S.C. 4332(2)(C)) is hereby found by the Congress to be 
adequate to satisfy the legal requirements under the National 
Environmental Policy Act of 1969 with respect to actions authorized to 
be taken by the Secretary to develop and promulgate the regulations for 
the establishment of a leasing program authorized by this subtitle and 
to conduct the first lease sale authorized by this subtitle.

SEC. 5207. LEASE SALES.

    (a) Lease Sales.--Lands may be leased pursuant to the provisions of 
this subtitle to any person qualified to obtain a lease for deposits of 
oil and gas under the Mineral Leasing Act, as amended (30 U.S.C. 181).
    (b) Procedures.--The Secretary shall, by regulation, establish 
procedures for--
            (1) receipt and consideration of sealed nominations for any 
        area in the Coastal Plain for inclusion in, or exclusion (as 
        provided in subsection (d)) from, a lease sale; and
            (2) public notice of and comment on designation of areas to 
        be included in, or excluded per subsection (d) from, a lease 
        sale.
    (c) Lease Sales on Coastal Plain.--The Secretary shall, by 
regulation, provide for lease sales of lands on the Coastal Plain. When 
lease sales are to be held, they shall occur after the nomination 
process provided for in subsection (b) of this section. For the first 
lease sale, the Secretary shall offer for lease those acres receiving 
the greatest number of nominations, but not to exceed a total of three 
hundred thousand acres. If the total acreage nominated is less than 
three hundred thousand acres, the Secretary shall include in such sale 
any other acreage which he believes has the highest resource potential, 
but in no event shall more than three hundred thousand acres of the 
Coastal Plain be offered in such sale. Thereafter, no more than three 
hundred thousand acres of the Coastal Plain may be leased in any one 
lease sale. The initial lease sale shall be held within twenty-four 
months of the date of enactment of this subtitle. The second lease sale 
shall be held twenty-four months after the initial sale, with 
additional sales conducted every twenty-four months thereafter so long 
as sufficient interest in development exists to warrant, in the 
Secretary's judgment, the conduct of such sales.
    (d) Special Areas.--The Secretary, after consultation with the 
State of Alaska, City of Kaktovik, and the North Slope Borough, is 
authorized to designate up to a total of 60,000 acres of the Coastal 
Plain as Special Areas and close it to leasing if the Secretary 
determines that these lands are of such unique character and interest 
so as to require special management and regulatory protection. The 
Secretary shall notify the Committee on Energy and Natural Resources of 
the Senate and the Committee on Resources of the House of 
Representatives ninety days in advance of making such designations. The 
Secretary may permit leasing of all or portions of any lands within the 
Coastal Plain designated as Special Areas by setting lease terms that 
limit or condition surface use and occupancy by lessees of such lands 
but permit the use of horizontal drilling technology from sites on 
leases located outside the designated Special Areas.

SEC. 5208. GRANT OF LEASES BY THE SECRETARY.

    (a) In General.--The Secretary is authorized to grant to the 
highest responsible qualified bidder by sealed competitive cash bonus 
bid any lands to be leased on the Coastal Plain upon payment by the 
lessee of such bonus as may be accepted by the Secretary and of such 
royalty as may be fixed in the lease, which shall be not less than 
12\1/2\ per centum in amount or value of the production removed or sold 
from the lease.
    (b) Antitrust Review.--Following each notice of a proposed lease 
sale and before the acceptance of bids and the issuance of leases based 
on such bids, the Secretary shall allow the Attorney General, in 
consultation with the Federal Trade Commission, thirty days to perform 
an antitrust review of the results of such lease sale on the likely 
effects the issuance of such leases would have on competition and shall 
advise the Secretary with respect to such review, including any 
recommendation for the nonacceptance of any bid or the imposition of 
terms or conditions on any lease, as may be appropriate to prevent any 
situation inconsistent with the antitrust laws.
    (c) Subsequent Transfers.--No lease issued under this subtitle may 
be sold, exchanged, assigned, or otherwise transferred except with the 
approval of the Secretary. Prior to any such approval the Secretary 
shall consult with, and give due consideration to the views of, the 
Attorney General.
    (d) Immunity.--Nothing in this subtitle shall be deemed to convey 
to any person, association, corporation, or other business organization 
immunity from civil or criminal liability, or to create defenses to 
actions, under any antitrust law.
    (e) Definitions.--As used in this section, the term--
            (1) ``antitrust review'' shall be deemed an ``antitrust 
        investigation'' for the purposes of the Antitrust Civil Process 
        Act (15 U.S.C. 1311); and
            (2) ``antitrust laws'' means those Acts set forth in 
        section 1 of the Clayton Act (15 U.S.C. 12) as amended.

SEC. 5209. LEASE TERMS AND CONDITIONS.

    An oil or gas lease issued pursuant to this subtitle shall--
            (1) be for a tract consisting of a compact area not to 
        exceed five thousand seven hundred sixty acres, or nine 
        surveyed or protracted sections which shall be as compact in 
        form as possible;
            (2) be for an initial period of ten years and shall be 
        extended for so long thereafter as oil or gas is produced in 
        paying quantities from the lease or unit area to which the 
        lease is committed or for so long as drilling or reworking 
        operations, as approved by the Secretary, are conducted on the 
        lease or unit area;
            (3) require the payment of royalty as provided for in 
        section 5208 of this subtitle;
            (4) require that exploration activities pursuant to any 
        lease issued or maintained under this subtitle shall be 
        conducted in accordance with an exploration plan or a revision 
        of such plan approved by the Secretary;
            (5) require that all development and production pursuant to 
        a lease issued or maintained pursuant to this subtitle shall be 
        conducted in accordance with a development and production plan 
        approved by the Secretary;
            (6) require posting of bond as required by section 5210 of 
        this subtitle;
            (7) forbid the flaring of natural gas from any well unless 
        the Secretary finds that such flaring is necessary to alleviate 
        a temporary emergency situation or to conduct testing or work-
        over operations;
            (8) contain such rental and other provisions as the 
        Secretary may prescribe at the time of offering the area for 
        lease;
            (9) provide that the Secretary may direct or assent to the 
        suspension of operations and production under any lease granted 
        under the terms of this subtitle in the interest of 
        conservation of the resource or where there is no available 
        system to transport the resource. If such a suspension is 
        directed or assented to by the Secretary, any payment of rental 
        prescribed by such lease shall be suspended during such period 
        of suspension of operations and production, and the term of the 
        lease shall be extended by adding any such suspension period 
        thereto;
            (10) provide that whenever the owner of a nonproducing 
        lease fails to comply with any of the provisions of this 
        subtitle, or of any applicable provision of Federal or State 
        environmental law, or of the lease, or of any regulation issued 
        under this subtitle, such lease may be canceled by the 
        Secretary if such default continues for more than thirty days 
        after mailing of notice by registered letter to the lease owner 
        at the lease owner's record post office address of record;
            (11) provide that whenever the owner of any producing lease 
        fails to comply with any of the provisions of this subtitle, or 
        of any applicable provision of Federal or State environmental 
        law, or of the lease, or of any regulation issued under this 
        subtitle, such lease may be forfeited and canceled by any 
        appropriate proceeding brought by the Secretary in any United 
        States district court having jurisdiction under the provisions 
        of this subtitle;
            (12) provide that cancellation of a lease under this 
        subtitle shall in no way release the owner of the lease from 
        the obligation to provide for reclamation of the lease site;
            (13) require that no lease issued under the authority of 
        this subtitle shall be assigned or sublet, except with the 
        consent of the Secretary;
            (14) allow the lessee, at the discretion of the Secretary, 
        to make written relinquishment of all rights under any lease 
        issued pursuant to this subtitle, and the Secretary shall 
        accept the relinquishment by the lessee of any lease issued 
        under this subtitle where there has not been surface 
        disturbance on the lands covered by the lease;
            (15) provide that for the purpose of conserving the natural 
        resources of any oil or gas pool, field, or like area, or any 
        part thereof, and in order to avoid the unnecessary duplication 
        of facilities, to protect the environment of the Coastal Plain, 
        and to protect correlative rights, the Secretary shall require 
        that, to the greatest extent practicable, lessees unite with 
        each other in collectively adopting and operating under a 
        cooperative or unit plan of development for operation of such 
        pool, field, or like area, or any part thereof, and the 
        Secretary is also authorized and directed to enter into such 
        agreements as are necessary or appropriate for the protection 
        of the United States against drainage;
            (16) require that the holder of a lease or leases on lands 
        within the Coastal Plain shall be fully responsible and liable 
        for the reclamation of lands within the Coastal Plain and any 
        other Federal lands adversely affected in connection with 
        exploration, development, production or transportation 
        activities on a lease within the Coastal Plain by the holder of 
        a lease or as a result of activities conducted on the lease by 
        any of the leaseholder's subcontractors or agents;
            (17) provide that the holder of a lease may not delegate or 
        convey, by contract or otherwise, the reclamation 
        responsibility and liability to another party without the 
        express written approval of the Secretary;
            (18) provide that the standard of reclamation for lands 
        required to be reclaimed under this subtitle be, as nearly as 
        practicable, a condition capable of supporting the uses which 
        the lands were capable of supporting prior to any exploration, 
        development, or production activities, or upon application by 
        the lessee, to a higher or better use as approved by the 
        Secretary;
            (19) contain the terms and conditions relating to 
        protection of fish and wildlife, their habitat, and the 
        environment, as required by section 5204 (a) of this subtitle; 
        and
            (20) contain such other provisions as the Secretary 
        determines necessary to ensure compliance with the provisions 
        of this subtitle and the regulations issued thereunder.

SEC. 5210. BONDING REQUIREMENTS TO ENSURE FINANCIAL RESPONSIBILITY OF 
              LESSEE AND AVOID FEDERAL LIABILITY.

    (a) Requirement.--The Secretary shall, by rule or regulation, 
establish such standards as may be necessary to ensure that an adequate 
bond, surety, or other financial arrangement will be established prior 
to the commencement of surface disturbing activities on any lease, to 
ensure the complete and timely reclamation of the lease tract, and the 
restoration of any lands or surface waters adversely affected by lease 
operations after the abandonment or cessation of oil and gas operations 
on the lease. Such bond, surety, or financial arrangement is in 
addition to, and not in lieu, of any bond, surety, or financial 
arrangement required by any other regulatory authority or required by 
any other provision of law.
    (b) Amount.--The bond, surety, or financial arrangement shall be in 
an amount--
            (1) to be determined by the Secretary to provide for 
        reclamation of the lease site in accordance with an approved or 
        revised exploration or development and production plan; plus
            (2) an amount set by the Secretary consistent with the type 
        of operations proposed, to provide the means for rapid and 
        effective cleanup, and to minimize damages resulting from an 
        oil spill, the escape of gas, refuse, domestic wastewater, 
        hazardous or toxic substances, or fire caused by oil and gas 
        activities.
    (c) Adjustment.--In the event that an approved exploration or 
development and production plan is revised, the Secretary may adjust 
the amount of the bond, surety, or other financial arrangement to 
conform to such modified plan.
    (d) Duration.--The responsibility and liability of the lessee and 
its surety under the bond, surety, or other financial arrangement shall 
continue until such time as the Secretary determines that there has 
been compliance with the terms and conditions of the lease and all 
applicable law.
    (e) Termination.--Within sixty days after determining that there 
has been compliance with the terms and conditions of the lease and all 
applicable laws, the Secretary, after consultation with affected 
Federal and State agencies, shall notify the lessee that the period of 
liability under the bond, surety, or other financial arrangement has 
been terminated.

SEC. 5211. OIL AND GAS INFORMATION.

    (a) In General.--(1) Any lessee or permittee conducting any 
exploration for, or development or production of, oil or gas pursuant 
to this subtitle shall provide the Secretary access to all data and 
information from any lease granted pursuant to this subtitle (including 
processed and analyzed) obtained from such activity and shall provide 
copies of such data and information as the Secretary may request. Such 
data and information shall be provided in accordance with regulations 
which the Secretary shall prescribe.
    (2) If processed and analyzed information provided pursuant to 
paragraph (1) of this subsection is provided in good faith by the 
lessee or permittee, such lessee or permittee shall not be responsible 
for any consequence of the use or of reliance upon such processed and 
analyzed information.
    (3) Whenever any data or information is provided to the Secretary, 
pursuant to paragraph (1) of this subsection--
            (A) by a lessee or permittee, in the form and manner of 
        processing which is utilized by such lessee or permittee in the 
        normal conduct of business, the Secretary shall pay the 
        reasonable cost of reproducing such data and information; or
            (B) by a lessee or permittee, in such other form and manner 
        of processing as the Secretary may request, the Secretary shall 
        pay the reasonable cost of processing and reproducing such data 
        and information.
    (b) Regulations.--The Secretary shall prescribe regulations to:
            (1) assure that the confidentiality of privileged or 
        proprietary information received by the Secretary under this 
        section will be maintained; and
            (2) set forth the time periods and conditions which shall 
        be applicable to the release of such information.

SEC. 5212. EXPEDITED JUDICIAL REVIEW.

    Any complaint seeking judicial review of an action of the Secretary 
in promulgating any regulation under this subtitle may be filed only in 
the United States Court of Appeals for the District of Columbia, and 
such complaint shall be filed within ninety days from the date of such 
promulgation, or after such date if such complaint is based solely on 
grounds arising after such ninetieth day, in which case the complaint 
must be filed within ninety days after the complainant knew or 
reasonably should have known of the grounds for the complaint. Any 
complaint seeking judicial review of any other actions of the Secretary 
under this subtitle may be filed in any appropriate district court of 
the United States, and such complaint must be filed within ninety days 
from the date of the action being challenged, or after such date if 
such complaint is based solely on grounds arising after such ninetieth 
day, in which case the complaint must be filed within ninety days after 
the complainant knew or reasonably should have known of the grounds for 
the complaint. Actions of the Secretary with respect to which review 
could have been obtained under this section shall not be subject to 
judicial review in any civil or criminal proceeding for enforcement.

SEC. 5213. RIGHTS-OF-WAY ACROSS THE COASTAL PLAIN.

    Notwithstanding title XI of the Alaska National Interest Lands 
Conservation Act of 1980 (16 U.S.C. 3161 et seq.), the Secretary is 
authorized and directed to grant, in accordance with the provisions of 
section 28 (c) through (t) and (v) through (y) of the Mineral Leasing 
Act of 1920 (30 U.S.C. 185), rights-of-way and easements across the 
Coastal Plain for the transportation of oil and gas under such terms 
and conditions as may be necessary so as not to result in a significant 
adverse effect on the fish and wildlife, their habitat, and the 
environment of the Coastal Plain. Such terms and conditions shall 
include requirements that facilities be sited or modified so as to 
avoid unnecessary duplication of roads and pipelines. The regulations 
issued pursuant to this subtitle shall include provisions granting of 
rights-of-way across the Coastal Plain.

SEC. 5214. ENFORCEMENT OF SAFETY AND ENVIRONMENTAL REGULATIONS TO 
              ENSURE COMPLIANCE WITH TERMS AND CONDITIONS OF LEASE.

    (a) Responsibility of the Secretary.--The Secretary shall 
diligently enforce all regulations, lease terms, conditions, 
restrictions, prohibitions, and stipulations promulgated pursuant to 
this subtitle.
    (b) Responsibility of Holders of Lease.--It shall be the 
responsibility of any holder of a lease under this subtitle to--
            (1) maintain all operations within such lease area in 
        compliance with regulations intended to protect persons and 
        property on, and fish and wildlife, their habitat, and the 
        environment of, the Coastal Plain; and
            (2) allow prompt access at the site of any operations 
        subject to regulation under this subtitle to any appropriate 
        Federal or State inspector, and to provide such documents and 
        records which are pertinent to occupational or public health, 
        safety, or environmental protection, as may be requested.
    (c) On-Site Inspection.--The Secretary shall promulgate regulations 
to provide for--
            (1) scheduled onsite inspection by the Secretary, at least 
        twice a year, of each facility on the Coastal Plain which is 
        subject to any environmental or safety regulation promulgated 
        pursuant to this subtitle or conditions contained in any lease 
        issued pursuant to this subtitle to assure compliance with such 
        environmental or safety regulations or conditions; and
            (2) periodic onsite inspection by the Secretary at least 
        once a year without advance notice to the operator of such 
        facility to assure compliance with all environmental or safety 
        regulations.

SEC. 5215. NEW REVENUES.

    (a) Distribution of Revenues.--Notwithstanding any other provision 
of law, all revenues received by the Federal Government from 
competitive bids, sales, bonuses, royalties, rents, fees, interest or 
other income derived from the leasing of oil and gas resources within 
the Coastal Plain shall be deposited into the Treasury of the United 
States: Provided, That 50 per centum of all such revenues shall be paid 
by the Secretary of the Treasury semiannually, on March 30th and on 
September 30th of each year, to the State of Alaska: Provided further, 
That the Secretary of the Treasury shall monitor the total amount of 
bonus bid revenue deposited into the Treasury from oil and gas leases 
issued under the authority of this subtitle. All bonus bid revenue 
deposited in the Treasury in excess of $2,600,000,000 shall be 
distributed as follows: 50 per centum to the State of Alaska in the 
manner provided in this subsection and 50 per centum into a special 
fund established in the Treasury of the United States known as the 
``National Park and Wildlife Refuge Renewal Fund'' (Renewal Fund).
    (b) Use of Renewal Fund.--Funds from the Renewal Fund shall be made 
available to the Secretary of the Interior, without further 
appropriation, at the beginning of each fiscal year in which funds are 
available, and may be expended by the Secretary for infrastructure 
needs at units of the National Park and Wildlife Refuge Systems, 
including but not limited to facility refurbishment, repair and 
replacement, interpretive media and exhibit repair and replacement and 
infrastructure projects associated with park and wildlife refuge 
resource protection: Provided, That such amounts shall remain available 
until expended, and that the Secretary shall develop procedures for the 
use of the Renewal Fund that ensure accountability and demonstrated 
results. Such procedures shall not take effect until 90 days after 
transmittal to the Committees on Energy and Natural Resources and 
Environment and Public Works of the Senate and the appropriate 
Committees of the House of Representatives: Provided further, That 
beginning the first full fiscal year after funds are deposited in the 
Renewal Fund, the Secretary shall submit an annual report to the 
Congress, on a unit-by-unit basis, detailing the expenditures of such 
receipts, and that any revenues made available pursuant to this section 
shall be in addition to funds appropriated in the preceding fiscal year 
for the Park Service and Fish and Wildlife Service and shall not result 
in a reduction or offset of such appropriated funds.

                     Subtitle D--Park Entrance Fees

SEC. 5300. FEES.

    (a) Admission Fees.--Section 4(a) of the Land and Water 
Conservation Fund Act of 1965 (16 U.S.C. 460l-6a(a)) is amended:
            (1) By deleting ``fee-free travel areas'' and ``lifetime 
        admission permit'' from the subsection.
            (2) By striking ``$25'' in the first sentence of paragraph 
        (1)(a)(i), and inserting ``$50''.
            (3) By adding at the end of clause (ii) of paragraph (1)(A) 
        the following: ``Such receipts shall be made available, subject 
        to appropriation, for authorized resource protection, 
        rehabilitation and conservation projects as provided for by 
        subsection (I), including projects to be carried out by the 
        Public Land Corps or any other conservation corps pursuant to 
        the Youth Conservation Corps Act of 1970 (16 U.S.C. 1701 and 
        following), or other related programs or authorities, on lands 
        administered by the Secretary of the Interior and the Secretary 
        of Agriculture.''.
            (4) By striking ``$15'' in paragraph (a)(1)(B), and 
        inserting ``$25''.
            (5) By striking the fifth and sixth sentences in paragraph 
        (a)(2), and by amending the fourth sentence to read as follows: 
        ``The fee for a single-visit permit at any designated area 
        shall be collected on a per person basis, not to exceed $6 per 
        person, including for those entering by private, noncommercial 
        vehicle.''.
            (6) By inserting the word ``Great'' before ``Smoky'' in the 
        third sentence of paragraph (a)(3), and by striking the last 
        sentence.
            (7) By striking the second sentence in paragraph (a)(4), in 
        its entirety and inserting: ``Such permit shall be 
        nontransferable, shall be issued for a one-time charge of $10, 
        and shall entitle the permittee to free admission into any area 
        designated pursuant to this subsection.''.
            (8) By amending the third sentence in paragraph (a)(4), to 
        read as follows: ``No fees of any kind shall be collected from 
        any persons who have a right of access for hunting or fishing 
        privileges under a specific provision of law or treaty or who 
        are engaged in the conduct of official Federal, State, or local 
        government business.''.
            (9) By striking paragraph (a)(5), in its entirety and 
        inserting: ``The Secretary of the Interior and the Secretary of 
        Agriculture shall establish procedures providing for the 
        issuance of a lifetime admission permit to any citizen of, or 
        person legally domiciled in, the United States, if such citizen 
        or person applies for such permit and is permanently disabled. 
        Such procedures shall assure that such permit shall be issued 
        only to persons who have been medically determined to be 
        permanently disabled. Such permit shall be nontransferable, 
        shall be issued without charge, and shall entitle the permittee 
        and one accompanying individual to general admission into any 
        area designated pursuant to this subsection, notwithstanding 
        the method of travel.''.
            (10) By striking subparagraph (a)(6)(A), in its entirety 
        and inserting: ``No later than 30 days after the enactment date 
        of this sentence, the Secretary of the Interior shall submit to 
        the Committee on Energy and Natural Resources of the United 
        States Senate and the Committee on Resources of the House of 
        Representatives a report on the admission fees proposed to be 
        charged at units of the National Park System. The report shall 
        include a list of units of the National Park System and the 
        admission fee proposed to be charged at each unit. The 
        Secretary of the Interior shall also identify areas where such 
        fees are authorized but not collected, including an explanation 
        of the reasons that such fees are not collected.''.
            (11) By striking paragraph (a)(9) in its entirety and by 
        renumbering current paragraph (10) as ``(9)''.
            (12) By striking all but the last sentence in paragraph 
        (a)(11), and renumbering the remaining sentence as ``(a)(10)''.
            (13) By renumbering paragraph (a)(12) as ``(a)(11)''.
    (b) Recreation Fees.--Section 4(b) of the Land and Water 
Conservation Fund Act of 1965; 16 U.S.C. 460l-6a(b)), is amended:
            (1) By striking ``fees for Golden Age Passport permittees'' 
        from the heading.
            (2) By striking ``personal collection of the fee by an 
        employee or agent of the Federal agency operating the 
        facility,''.
            (3) By striking ``Any Golden Age Passport permittee, or'' 
        and inserting ``Any''.
    (c) Criteria, Posting and Uniformity of Fees.--Section 4(d) of the 
Land and Water Conservation Fund Act of 1965 (16 U.S.C. 460l-6a(d)) is 
amended by striking from the first sentence, ``recreation fees charged 
by non-Federal public agencies,'' and inserting: ``fees charged by 
other public and private entities,''.
    (d) Penalty.--Section 4(e) of the Land and Water Conservation Fund 
Act of 1965 (16 U.S.C. 460l-6a(e)) is amended by deleting ``of not more 
than $100.'' and inserting: ``as provided by law.''.
    (e) Technical Amendments.--Section 4(h) of the Land and Water 
Conservation Fund Act of 1965 (16 U.S.C. 460l-6a(h)), is amended--
            (1) by striking ``Bureau of Outdoor Recreation'' and 
        inserting: ``National Park Service'';
            (2) by striking ``Natural'' in the phrase ``Committee on 
        Natural Resources of the House of Representatives''; and
            (3) by striking ``Bureau'' and inserting: ``National Park 
        Service'';
    (f) Use of Fees.--Section 4(i) of the Land and Water Conservation 
Fund Act of 1965 (16 U.S.C. 460l-6a(i)) is amended:
            (1) By amending the subsection heading to read as follows: 
        ``Use of Fees.--''.
            (2) By striking ``fee collection costs for that fiscal 
        year'' in the first sentence of subparagraph (B) and inserting: 
        ``fee collection costs for the immediately preceding fiscal 
        year'' and by striking ``section in that fiscal year'' and 
        inserting in lieu thereof, ``section in such immediately 
        preceding fiscal year.''.
            (3) By striking ``in that fiscal year'' in the second 
        sentence of subparagraph (B).
            (4) By striking paragraph (4), and subparagraphs (A) and 
        (B) in their entirety and inserting: ``Amounts covered into the 
        special account for the National Park Service shall be 
        allocated among park system units in accordance with subsection 
        (j) of this section for obligation or expenditure by the 
        Director of the National Park Service for park operations.''.
    (g) Time of Reimbursement.--Section 4(k) of the Land and Water 
Conservation Fund Act of 1965 (16 U.S.C. 460l-6a(k)) is amended by 
striking the last sentence in its entirety.
    (h) Charges for Transportation Provided by the National Park 
Service.--Section 4(l)(1) of the Land and Water Conservation Fund Act 
of 1965 (16 U.S.C. 460l-6a(1)) is amended--
            (1) by striking the word ``viewing'' from the section 
        heading and inserting ``visiting'', and
            (2) by striking the word ``view'' from the first sentence 
        of subparagraph (1) and inserting ``visit''.
    (i) Commercial Tour Use Fees.--Section 4(n) of the Land and Water 
Conservation Fund Act of 1965 (16 U.S.C. 460l-6a(n)) is further 
amended--
            (1) By striking the first sentence of subsection (n)(1) and 
        inserting: ``In the case of each unit of the National Park 
        System for which an admission fee is charged under this 
        section, the Secretary of the Interior shall establish, by 
        October 1, 1995, a commercial tour use fee in lieu of a per 
        person admission fee to be imposed on each vehicle entering the 
        unit for the purpose of providing commercial tour services 
        within the unit.''.
            (2) By striking the period at the end of subsection (n)(3) 
        and inserting: ``with written notification of such adjustments 
        provided to commercial tour operators twelve months in advance 
        of implementation.''.
    (j) Fees for Special Uses.--Section 4 of the Land and Water 
Conservation Fund Act of 1965 (16 U.S.C. 460l-6a)), is further amended 
by adding at the end the following:
    ``(o) Fees for Commercial/Non-Recreational Uses.--The Secretary of 
the Interior shall establish reasonable fees for uses of National Park 
System units that require special arrangements, including permits. Such 
fees shall be set at a level as the Secretary deems necessary to ensure 
that the United States will receive fair market value for such use, and 
shall, at a minimum, cover all costs of providing necessary services 
associated with such use, except that at the Secretary's discretion, 
the Secretary may waive or reduce such fees in the case of any 
nonprofit organization or any organization using an area within the 
National Park System for educational purposes. That portion of such fee 
which exceeds the cost of providing necessary services associated with 
such use shall be deposited into the Park Renewal Fund.''.
    (k) Conforming Amendments.--
            (1) Section 3 of Public Law 70-805 (45 Stat. 1300), is 
        amended by striking the last sentence.
            (2) Section 5(e) of Public Law 87-657 (76 Stat. 540; 16 
        U.S.C. 459c-5), is repealed.
            (3) Section 3(b) of Public Law 87-750 (76 Stat. 747; 16 
        U.S.C. 398e(b)) is repealed.
            (4) Section 4(e) of Public Law 92-589 (86 Stat. 1299; 16 
        U.S.C. 460bb-3), is amended by striking the first sentence.
            (5) Section 6(j) of Public Law 95-348 (92 Stat. 487; 16 
        U.S.C. 410dd(j)) is repealed.
            (6) Section 207 of Public Law 96-199 (94 Stat. 77; 16 
        U.S.C. 410ff-6) is repealed.
            (7) Section 106 of Public Law 96-287 (94 Stat. 600; 16 
        U.S.C. 410gg-5) is amended by striking the last sentence.
            (8) Section 204 of Public Law 96-287 (94 Stat. 601) is 
        amended by striking the last sentence.
            (9) Section 5 of Public Law 96-428 (94 Stat. 1843; 16 
        U.S.C. 461 note) is repealed.
            (10) Public Law 100-55 (101 Stat. 371; U.S.C. 460l-6a note) 
        is repealed.

SEC. 5301. CHALLENGE COST-SHARE AGREEMENTS.

    The Secretary of the Interior is authorized to negotiate and enter 
into challenge cost-share agreements with any State or local 
government, public or private agency, organization, institution, 
corporation, individual, or other entity for the purpose of sharing 
costs or services in carrying out any authorized functions and 
responsibilities of the Secretary with respect to any unit of the 
National Park System (as defined in section 2(a) of the Act of August 
8, 1953 (16 U.S.C. 1c(a)), any affiliated area, or designated National 
Scenic or Historic Trail.

SEC. 5302. COST RECOVERY FOR DAMAGE TO NATIONAL PARK RESOURCES.

    (a) Definition of Park System Resource.--Section 1 (d) of the 
National Park System Visitor Facilities Fund Act (16 U.S.C. 19jj(d)) is 
amended to read as follows:
    ``(d) `Park system resource' means any living or nonliving resource 
that is located within the boundaries of a unit of the National Park 
System, except for resources owned by a non-Federal entity.''.
    (b) Definition of Marine or Aquatic Park System Resource.--Section 
1 of the National Park System Visitor Facilities Fund Act (16 U.S.C. 
19jj) is amended by adding at the end the following:
    ``(g) `Marine or aquatic park system resource' means any living or 
non-living resource that is located within or is a living part of a 
marine or aquatic regimen within the boundaries of a unit of the 
National Park System, except for resources owned by a non-Federal 
entity.''.
    (c) Liability in REM.--Section 2(b) of the National Park System 
Visitor Facilities Fund Act (16 U.S.C. 19jj-1(b)) is amended by 
striking ``any park'' and inserting ``any marine or aquatic park''.

SEC. 5303. SPECIAL ACCOUNT.

    A special account is hereby established in the Treasury of the 
United States that shall be called the Park Renewal Fund (hereinafter 
referred to in this subtitle as ``the fund'').

SEC. 5304. COVERING OF FEES INTO PARK RENEWAL FUND.

    Notwithstanding section 4(i) of the Land and Water Conservation 
Fund Act of 1965 (16 U.S.C. 460l-6a(i)), beginning in fiscal year 1996, 
there shall be deposited into the fund eighty percent of all revenues 
received from admission, recreation use, commercial tour use, and 
commercial/non-recreational use fees collected by units of the National 
Park System in excess of:
            (1) $82,000,000 for fiscal year 1996;
            (2) $85,000,000 for fiscal year 1997;
            (3) $88,000,000 for fiscal year 1998;
            (4) $91,000,000 for fiscal year 1999;
            (5) $94,000,000 for fiscal year 2000;
            (6) $97,000,000 for fiscal year 2001; and
            (7) $100,000,000 for fiscal year 2002.

SEC. 5305. ALLOCATION AND USE OF FEES.

    (a) Allocation.--Beginning in fiscal year 1997, receipts in the 
fund from the previous fiscal year shall be available to the Secretary 
without further appropriation and shall be allocated as follows (except 
that all amounts in excess of $20,000,000 in fiscal year 2003 and all 
amounts in fiscal year 2004 shall not be available for obligation until 
fiscal year 2006):
            (1) Seventy-five percent shall be allocated among the units 
        of the National Park System in the same proportion as 
        admission, recreation use, commercial tour use and commercial/
        non-recreational use fees collected from a specific unit bears 
        to the total amount of such fees collected from all units of 
        the National Park System for each fiscal year.
            (2) Twenty-five percent shall be allocated among the units 
        of the National Park System on the basis of need, as determined 
        by the Secretary.
    (b) Use.--Expenditures from the fund shall be used solely for 
infrastructure and operational needs by units of the National Park 
System. By January 1 of each year, the Secretary shall provide to the 
Committee on Energy and Natural Resources of the United States Senate 
and the Committee on Resources of the House of Representatives a list 
of proposed expenditures from the fund for each unit for that fiscal 
year and a report detailing expenditures, by unit, for the previous 
fiscal year.

                       Subtitle E--Water Projects

SEC. 5400. AUTHORIZATION FOR PREPAYMENT OF CONSTRUCTION CHARGES.

    Subsection 213(a) of the Reclamation Reform Act of 1982 (96 
Stat.1269, 43 U.S.C. 390mm(a)) is amended:
    (a) By adding at the beginning:
``Notwithstanding any provision of Reclamation law or limitation 
contained in any repayment or water service contract, any person or 
district holding such a contract or receiving water under such a 
contract with the United States may prepay the construction costs 
referred to in this section either through accelerated or lump sum 
payments. For the purposes of such prepayment only, the project to 
which such contract applies is declared to be complete and the 
Secretary shall determine the repayment obligations associated with the 
construction costs of the project facilities so that accelerated 
payments or a lump sum payment may be made. The amount of any 
prepayment shall be calculated by discounting the remaining payments 
due under a contract in accordance with the guidelines set forth in 
Circular A-129 issued by the Office of Management and Budget: Provided, 
That the discount shall be adjusted by any amounts necessary to 
compensate the Federal Government for the direct or indirect loss of 
future tax revenues if the individual or district plans to use 
federally tax-exempt financing for such prepayment.''.
    (b) By deleting ``lands in a district'' and inserting: ``lands in a 
district, or lands owned or leased by a person''.
    (c) By deleting ``obligation of a district'' and inserting: 
``obligation of a district or a person''.
    (d) By deleting ``enactment of this Act.'' and inserting: 
``enactment of this Act or as otherwise provided for in this section. 
Any additional capital costs incurred after the date of such prepayment 
shall be recoverable as a separate obligation and shall not be 
considered to be a new or supplemental benefit for the purposes of this 
act nor cause the full cost pricing limitation of this act or the 
ownership limitations contained in any provision of Federal reclamation 
law to apply to the lands to which such capital costs apply.''.

SEC. 5401. CONFORMING AMENDMENT.

    Subsection 213(c) of the Reclamation Reform Act of 1982 (43 U.S.C. 
390mm(c)) is repealed.

SEC. 5410. HETCH HETCHY DAM.

    Section 7 of the Act of December 13, 1913 (38 Stat. 242), is 
amended--
            (1) By striking ``pay the sum of $30,000'' and all that 
        follows in the first sentence and inserting ``pay an amount 
        determined annually by the Secretary in accordance with the 
        formula used by the Federal Energy Regulatory Commission for 
        application to licenses of hydroelectric projects under the 
        Federal Power Act (16 U.S.C. 791 et seq.), provided that, in no 
        event shall such amount be less than $597,000.00. Said amount 
        to be paid on the first day of July of each year.''.
            (2) By amending the second and third sentences to read as 
        follows: ``These funds shall be placed in a separate fund by 
        the United States and, notwithstanding any other provision of 
        law, shall not be available for obligation or expenditure until 
        appropriated by Congress. The highest priority use of the funds 
        shall be for annual operation of Yosemite National Park, with 
        the remainder of any funds to be used to fund operations of 
        other national parks in the State of California.''.

SEC. 5420. COLLBRAN PROJECT.

    (a) Short Title.--This section may be cited as the ``Collbran 
Project Unit Conveyance Act''.
    (b) Definitions.--For purposes of this section:
            (1) Districts.--The term ``Districts'' means the Ute Water 
        Conservancy District and the Collbran Conservancy District 
        (including their successors and assigns).
            (2) Federal reclamation laws.--The term ``Federal 
        reclamation laws'' means the Act of June 17, 1902, and Acts 
        amendatory thereof or supplementary thereto (32 Stat. 388, 
        chapter 1093; 43 U.S.C. 371 et seq.) (including regulations 
        adopted pursuant to those Acts).
            (3) Project.--The term ``Project'' means the Collbran 
        Reclamation Project, as constructed and operated under the Act 
        of July 3, 1952 (66 Stat. 325, chapter 565), including all 
        property, equipment, and assets of or relating to the Project 
        that are owned by the United States, including--
                    (A) Vega Dam and Reservoir (but not including 
                recreation facilities owned by the United States or the 
                State of Colorado);
                    (B) Leon-Park Dams and Feeder Canal;
                    (C) Southside Canal;
                    (D) East Fork Diversion Dam and Feeder Canal;
                    (E) Bonham-Cottonwood Pipeline;
                    (F) Snowcat Shed and Diesel Storage;
                    (G) Upper Molina Penstock and Power Plant;
                    (H) Lower Molina Penstock and Power Plant;
                    (I) the diversion structure in the tailrace of the 
                Lower Molina Power Plant;
                    (J) all substations and switchyards;
                    (K) a perpetual, non-exclusive easement for the use 
                of easements or rights-of-way owned by the United 
                States on or across non-Federal lands which are 
                necessary for access to Project facilities;
                    (L) a perpetual, non-exclusive easement on and 
                across National Forest lands for access to existing 
                Project facilities and access to and the operation, use 
                repair, and replacement of the existing storage 
                reservoirs on the Grand Mesa which are operated as a 
                part of the Project;
                    (M) title to lands reasonably necessary for all 
                Project facilities except for those described in 
                subparagraphs (3)(K) and (3)(L);
                    (N) all permits and contract rights;
                    (O) all equipment, parts inventories, and tools;
                    (P) all additions, replacements, betterments, and 
                appurtenances to any of the above; and
                    (Q) a copy of all data, plans designs, reports, 
                records, or other materials, whether in writing or in 
                any form of electronic storage relating specifically to 
                the Project.
            (4) Secretary.--The term ``Secretary'' means the Secretary 
        of the Interior.
    (c) Conveyance of the Collbran Project.--
            (1) In general.--The Secretary shall convey to the 
        Districts all right, title, and interest of the United States 
        in and to the Project, as described in this section, by 
        quitclaim deed and bill of sale, without warranties, during the 
        last quarter of fiscal year 2000, subject only to the 
        requirements of this section: Provided, That such conveyance 
        shall reserve to the United States all minerals, including 
        hydrocarbons, and a perpetual right of public access over, 
        across, under, and to the portions of the Project which on the 
        date of enactment of this Act were open to public use for 
        purposes such as grazing, mineral development and logging: 
        Provided further, That the United States may allow for the 
        continued public use and enjoyment of such portions of the 
        Project for recreational activities and other public uses 
        conducted as of the date of enactment of this Act.
            (2) Payment.--
                    (A) In general.--At the time of transfer, the 
                Districts shall pay to the United States $12,900,000 
                ($12,300,000 of which represents the net present value 
                of the outstanding repayment obligations of the 
                Districts), of which--
                            (i) $12,300,000 shall be deposited in the 
                        general fund of the United States Treasury; and
                            (ii) $600,000 shall be deposited in a 
                        special account in the United States Treasury 
                        and shall be available to the United States 
                        Fish and Wildlife Service, region 6, without 
                        further appropriation, for use in funding 
                        Colorado operations and capital expenditures 
                        associated with the Recovery Implementation 
                        Program for Endangered Fish Species in the 
                        Upper Colorado River Basin.
                    (B) Source of funds.--Funds for the payment to the 
                extent of the amount specified in the paragraph (1)(A) 
                shall not be derived from the issuance or sale, prior 
                to the conveyance, of State or local bonds the interest 
                on which is exempt from taxation under section 103 of 
                the Internal Revenue Code of 1986 (26 U.S.C. 103).
            (3) Operation of project.--
                    (A) In general.--The Project shall be operated and 
                used by the Districts for a period of 40 years after 
                the date of enactment of this section for the purposes 
                for which the Project was authorized under the Act of 
                July 3, 1952 (66 Stat. 325, chapter 565).
                    (B) Requirements.--During the 40-year period 
                described in paragraph (1)--
                            (i) the Districts shall annually submit to 
                        the Secretary a plan for operation of the 
                        Project, which plan shall--
                                    (I) report on Project operations 
                                for the previous year;
                                    (II) provide a description of the 
                                manner of Project operations 
                                anticipated for the forthcoming year; 
                                and
                                    (III) certify that the Districts 
                                have operated and will operate and 
                                maintain the Project facilities in 
                                accordance with sound engineering 
                                practices; and
                            (ii) provide that, subject to subsection 
                        (d), all electric power generated by operation 
                        of the Project shall be made available to and 
                        be marketed by the Western Area Power 
                        Administration (including its successors and 
                        assigns).
            (4) Agreements.--Conveyance of the Project shall be subject 
        to the agreements between the United States and the State of 
        Colorado dated August 22, 1994, and September 23, 1994, 
        relating to the construction and operation of recreational 
        facilities at Vega Reservoir, which agreements shall continue 
        to be performed by the parties thereto according to the terms 
        of the agreements.
    (d) Operation.--
            (1) Conformity to historic operations.--The power component 
        and facilities of the Project shall be operated in substantial 
        conformity with the historic operations of the power component 
        and facilities (including recent operations in a peaking mode).
            (2) Power marketing.--
                    (A) Under existing agreements.--The Districts shall 
                be bound by the agreements between the Bureau of 
                Reclamation and the Western Area Power Administration 
                in existence on the date of enactment of this section, 
                which provide for the marketing of power generated by 
                the power component of the Project as part of the 
                output of the Salt Lake City Area Integrated Projects 
                under the Post 1989 Operating Criteria, until those 
                agreements expire or are terminated.
                    (B) After expiration of existing agreement.--
                            (i) After the agreements described in 
                        paragraph (1) expire or are terminated, the 
                        Districts shall offer all power produced by the 
                        power component of the Project to the Western 
                        Area Power Administration or its successors or 
                        assigns (``Western''), which, in consultation 
                        with its affected preference customers, shall 
                        have the first right to purchase such power at 
                        the rates established in accordance with 
                        Subparagraph (ii) of this paragraph. If Western 
                        declines to purchase the power after 
                        consultation with its affected preference 
                        customers, such power shall then be offered at 
                        the same rates first to Western's preference 
                        customers located in the Salt Lake City Area 
                        Integrated Projects marketing area (``SLCAIP 
                        preference customers''). Thereafter, such power 
                        may be sold to any other party: Provided, 
                        however, That no such sale may occur at rates 
                        less than established in accordance with 
                        subparagraph (ii) of this paragraph unless such 
                        power is first offered at such lesser rate 
                        first to Western and then to its SLCAIP 
                        preference customers.
                            (ii) The rate for power initially offered 
                        to Western and its SLCAIP preference customers 
                        under this paragraph shall not exceed that 
                        required to produce revenues sufficient to 
                        provide for
                                    (I) annual debt service and/or 
                                recoupment of the cost of capital for 
                                the amount specified in subsection 
                                (c)(2) of this section, less the sum of 
                                $220,000 (which is the net present 
                                value of the outstanding repayment 
                                obligation of the Collbran Conservancy 
                                District), and
                                    (II) the cost of operation, 
                                maintenance and replacement of the 
                                power component of the Project.
                            (iii) Such costs and rate shall be 
                        determined in a manner consistent with the 
                        current principles followed by the Secretary of 
                        the Interior and by Western in its annual power 
                        and repayment study.
            (3) License.--The Districts are by this section granted a 
        license under the Federal Power Act (16 U.S.C. 791a et seq.) 
        for the operation of the Project in accordance with the 
        requirement of subsection (c)(3) of this section, for a period 
        of 40 years after the date of conveyance of the Project, after 
        which period the license may be renewed in accordance with 
        applicable law.
    (e) Inapplicability of NEPA.--The conveyance of the Project does 
not constitute a major Federal action within the meaning of the 
National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.), 
including any regulations issued under such Act.
    (f) Inapplicability of Prior Agreements and of Federal Reclamation 
Laws.--On conveyance of the Project to the Districts--
            (1) the Repayment Contract dated May 27, 1957, as amended 
        April 12, 1962, between the Collbran Conservancy District and 
        the United States, and the Contract for use of Project 
        facilities for Diversion of Water dated January 11, 1962, as 
        amended November 10, 1977, between the Ute Water Conservancy 
        District and the United States, shall be terminated and of no 
        further force or effect; and
            (2) the Project shall no longer be subject to or governed 
        by the Federal reclamation laws.
    (g) Districts' Liability.--The Districts shall be liable for all 
acts or omissions relating to the operation and use of the Project that 
occur subsequent to the conveyance.

               Subtitle F--Federal Oil and Gas Royalties

SEC. 5500. SHORT TITLE.

    This subtitle may be cited as the ``Federal Oil and Gas Royalty 
Simplification and Fairness Act of 1995''.

SEC. 5501. DEFINITIONS.

    Section 3 of the Federal Oil and Gas Royalty Management Act of 1982 
(30 U.S.C. 1701 et seq.) is amended by striking ``and'' at the end of 
paragraph (15), by striking the period at the end of paragraph (16) and 
inserting a semicolon, and by adding at the end the following:
            ``(17) `adjustment' means an amendment to a previously 
        filed report on an obligation, and any additional payment or 
        credit, if any, applicable thereto, to rectify an underpayment 
        or overpayment on a lease;
            ``(18) `administrative proceeding' means any agency process 
        in which a demand, decision or order issued by the Secretary is 
        subject to appeal or has been appealed;
            ``(19) `assessment' means any fee or charge levied or 
        imposed by the Secretary or the United States other than--
                    ``(A) the principal amount of any royalty, minimum 
                royalty, rental, bonus, Net profit share or proceed of 
                sale;
                    ``(B) any interest; or
                    ``(C) any civil or criminal penalty;
            ``(20) `commence' means--
                    ``(A) with respect to a judicial proceeding, the 
                service of a complaint, petition, counterclaim, 
                crossclaim, or other pleading seeking affirmative 
                relief or seeking credit or recoupment; or
                    ``(B) with respect to a demand, the receipt by the 
                Secretary or a lessee of the demand;
            ``(21) `credit' means the application of an overpayment (in 
        whole or in part) against an obligation which has become due to 
        discharge, cancel or reduce the obligation;
            ``(22) `demand' means--
                    ``(A) an order to pay issued by the Secretary; or
                    ``(B) a separate written request by a lessee which 
                asserts an obligation due the lessee, but does not mean 
                any royalty or production report, or any information 
                contained therein, required by the Secretary;
            ``(23) `obligation' means--
                    ``(A) any duty of the Secretary or the United 
                States--
                            ``(i) to take oil or gas royalty in kind; 
                        or
                            ``(ii) to pay, refund, offset, or credit 
                        monies including but not limited to--
                                    ``(I) the principal amount of any 
                                royalty, minimum royalty, rental, 
                                bonus, net profit share or proceed of 
                                sale; or
                                    ``(II) any interest;
                    ``(B) any duty of a lessee--
                            ``(i) to deliver oil or gas royalty in 
                        kind; or
                            ``(ii) to pay, offset or credit monies 
                        including but not limited to--
                                    ``(I) the principal amount of any 
                                royalty, minimum royalty, rental, 
                                bonus, net profit share or proceed of 
                                sale;
                                    ``(II) any interest;
                                    ``(III) any penalty; or
                                    ``(IV) any assessment,
        which arises from or relates to any lease administered by the 
        Secretary for, or any mineral leasing law related to, the 
        exploration, production and development of oil or gas on 
        Federal lands or the Outer Continental Shelf;
            ``(24) `order to pay' means a written order issued by the 
        Secretary or the United States which--
                    ``(A) asserts a definite and quantified obligation 
                due the Secretary or the United States; and
                    ``(B) specifically identifies the obligation by 
                lease, production month and amount of such obligation 
                ordered to be paid, as well as the reason or reasons 
                such obligation is claimed to be due, but such term 
                does not include any other communication or action by 
                or on behalf of the Secretary or the United States;
            ``(25) `order to perform a restructured accounting' means a 
        written order issued by the Secretary during a full and 
        complete audit of a lessee to recalculate royalty due on an 
        obligation based upon the Secretary's finding that the lessee 
        has made identified underpayments or overpayments which are 
        demonstrated by the Secretary to be based upon repeated, 
        systemic reporting errors for a significant number of leases 
        for a significant number of reporting months with the same type 
        of error which constitutes a pattern of violations and which 
        are likely to result in either a significant underpayment or 
        overpayment. The term `order to perform a restructured 
        accounting' shall not include any other communication or action 
        by or on behalf of the Secretary or the United States;
            ``(26) `overpayment' means any payment by a lessee in 
        excess of an amount legally required to be paid on an 
        obligation and includes the portion of any estimated payment 
        for a production month that is in excess of the royalties due 
        for that month;
            ``(27) `payment' means satisfaction, in whole or in part, 
        of an obligation due the Secretary or the United States;
            ``(28) `penalty' means a statutorily authorized civil fine 
        levied or imposed by the Secretary or the United States for a 
        violation of this Act, any mineral leasing law, or a term or 
        provision of a lease administered by the Secretary;
            ``(29) `refund' means the return of an overpayment by the 
        Secretary or the United States by the drawing of funds from the 
        United States Treasury;
            ``(30) `State concerned' means, with respect to a lease, a 
        State which receives a portion of royalties under this Act from 
        such lease;
            ``(31) `underpayment' means any payment or nonpayment by a 
        lessee that is less than the amount legally required to be paid 
        on an obligation; and
            ``(32) `United States' means the United States Government 
        and any department, agency, or instrumentality thereof, and the 
        several States, the District of Columbia, Puerto Rico, and the 
        territories and possessions of the United States.''.

SEC. 5502. LIMITATION PERIODS.

    (a) In General.--The Federal Oil and Gas Royalty Management Act of 
1982 (30 U.S.C. 1701 et seq.) is amended by adding after section 114 
the following new section:

``SEC. 115. LIMITATION PERIODS AND AGENCY ACTIONS.

    ``(a) In General.--A judicial proceeding or demand which arises 
from, or relates to an obligation, shall be commenced within six years 
from the date on which the obligation becomes due and if not so 
commenced shall be barred, except as otherwise provided by this 
section.
    ``(b) Obligation Becomes Due.--
            ``(1) In general.--For purposes of this Act, an obligation 
        becomes due when the right to enforce the obligation is fixed.
            ``(2) Royalty obligations.--The right to enforce the 
        royalty obligation for a production month for a lease is fixed 
        for purposes of this Act on the last day of the calendar month 
        following the month in which oil or gas is produced.
    ``(c) Tolling Limitations Period.--The running of the limitation 
period under subsection (a) shall not be suspended, tolled, extended, 
or enlarged for any obligation for any reason by any action, including 
an action by the Secretary or the United States, other than the 
following:
            ``(1) Tolling agreement.--A written agreement executed 
        during the limitation period between the Secretary and a lessee 
        which tolls the limitation period for the amount of time during 
        which the agreement is in effect.
            ``(2) Subpoena.--(A) The issuance of a subpoena in 
        accordance with the provisions of section 107(c) shall toll the 
        limitation period with respect to the obligation which is the 
        subject of a subpoena only for the period beginning on the date 
        the lessee receives the subpoena and ending on the date on 
        which--
                    ``(i) the lessee has produced such subpoenaed 
                records for the subject obligation,
                    ``(ii) the Secretary receives written notice that 
                the subpoenaed records for the subject obligation are 
                not in existence or are not in the lessee's possession 
                or control, or
                    ``(iii) a court has determined in a final decision 
                that such records are not required to be produced, 
                whichever occurs first.
            ``(B) If a State has been delegated authority pursuant to 
        section 205 and pursuant to said delegation executes a 
        cooperative agreement under section 202, the Secretary shall 
        issue a subpoena hereunder upon the request of the highest 
        ranking State official having ultimate authority over the 
        collection of royalties on State owned lands.
            ``(3) Fraud or concealment.--Any fraud or concealment by a 
        lessee in an attempt to defeat or evade an obligation in which 
        case the limitation period shall be tolled for the period of 
        such fraud or such concealment.
            ``(4) Tolling request.--A written tolling request from a 
        lessee based upon the lessee's representation that the lessee's 
        entitlement to an overpayment has not been finally determined. 
        The limitation period shall be tolled pursuant to this 
        paragraph from the date the Secretary receives the tolling 
        request until the earlier of the end of the requested period or 
        12 months after the date the Secretary receives the tolling 
        request, but is subject to successive 12-month renewals by the 
        lessee made prior to the expiration of the then applicable 12-
        month period. The tolling request shall be sufficient if it 
        identifies--
                    ``(A) the person who made the potential 
                overpayment;
                    ``(B) the leases and production months involved in 
                the potential overpayment; and
                    ``(C) the reasons the lessee believes that it may 
                later be entitled to a refund of the overpayment.
            ``(5) Order to perform a restructured accounting.--
                    ``(A) The issuance of an order to perform a 
                restructured accounting by the Secretary necessary for 
                an audit. The limitation period under subsection (a) 
                shall be tolled for the obligation which is the subject 
                of the order only for the time period commencing on the 
                date the lessee receives such order until--
                            ``(i) 120 days after the Secretary has 
                        received written notice that the accounting (or 
                        other requirement) has been performed, or
                            ``(ii) the issuance of a final decision 
                        that the lessee is not required to perform the 
                        accounting, whichever is earlier.
                    ``(B) The Secretary is not precluded during a full 
                and complete audit from issuing an order to perform a 
                restructured accounting by the Secretary for a single 
                lease upon a finding that the lessee has made 
                identified underpayments or overpayments which are 
                demonstrated to be based upon repeated, systemic 
                reporting errors on that lease for a significant number 
                of reporting months with the same type of error which 
                constitutes a pattern of violations and which are 
                likely to result in either a significant underpayment 
                or overpayment. The power of the Secretary to issue an 
                order to perform a restructured accounting may not be 
                delegated below the most senior career professional 
                position having responsibility for the royalty 
                management program, which position is currently 
                designated as the `Associate Director for Royalty 
                Management'. An order to perform a restructured 
                accounting shall--
                            ``(i) be issued within a reasonable period 
                        of time from when the audit identifies the 
                        systemic, reporting errors;
                            ``(ii) specify the reasons and factual 
                        bases for such order; and
                            ``(iii) be specifically identified as an 
                        `order to perform a restructured accounting'.
    ``(d) Termination of Limitations Period.--The limitations period 
shall be terminated in the event--
            ``(1) the Secretary has notified the lessee in writing that 
        a time period is closed to further audit; or
            ``(2) the Secretary and a lessee have so agreed in writing.
    ``(e) Final Agency Action.--
            ``(1) 3-year period.--The Secretary shall issue a final 
        decision in any administrative proceeding, including any 
        administrative proceedings pending on the date of enactment of 
        the Federal Oil and Gas Royalty Simplification and Fairness Act 
        of 1995, within three years from the date such proceeding was 
        initiated or three years from the date of such enactment, 
        whichever is later. The three-year period may be extended by 
        any period of time agreed upon in writing by the Secretary and 
        the lessee.
            ``(2) Effect of failure to issue decision.--
                    ``(A) In general.--If no such decision has been 
                issued by the Secretary within the three-year period 
                referred to in paragraph (1)--
                            ``(i) the Secretary shall be deemed to have 
                        issued and granted a decision in favor of the 
                        lessee or lessees as to any nonmonetary 
                        obligation and any monetary obligation the 
                        principal amount of which is less than $2,500; 
                        and
                            ``(ii) the Secretary shall be deemed to 
                        have issued a final decision in favor of the 
                        Secretary, which decision shall be deemed to 
                        affirm those issues for which the agency 
                        rendered a decision prior to the end of such 
                        period, as to any monetary obligation the 
                        principal amount of which is $2,500 or more, 
                        and the lessee shall have a right to a de novo 
                        judicial review of such deemed final decision.
                    ``(B) No precedential effect on other 
                proceedings.--Deemed decisions under subparagraph (A) 
                shall have no precedential effect in any judicial or 
                administrative proceeding or for any other purpose.
    ``(f) Administrative Settlement.--During the pendency of any 
administrative proceeding, the parties shall hold at least one 
settlement consultation for the purpose of discussing disputed matters 
between the parties. For purposes of settlement, the Secretary may 
waive interest required and may allow offsetting of obligations among 
leases. The Secretary and the State concerned shall seek to resolve 
disputes with a lessee in as expeditious a manner as possible, through 
settlement negotiations and other alternative dispute resolution 
processes methods. If any dispute involving an obligation due is not 
resolved by the end of the six-year period beginning on the date the 
obligation became due, the amount of interest otherwise payable with 
respect to the obligation shall accrue after such six-year period at 
the rate--
            ``(1) for purposes of section 111(h), reduced each year 
        thereafter by two additional percentage points from the rate in 
        effect under this subsection for the previous year (but not 
        less than zero); and
            ``(2) for purposes of section 111(a), reduced each year 
        thereafter by one additional percentage point from the rate in 
        effect under this subsection for the previous year (but not 
        less than zero).
    ``(g) Limitation on Certain Actions by the United States.--When an 
action on or enforcement of an obligation under the mineral leasing 
laws is barred under this section the United States or an officer or 
agency thereof may not take any other or further action regarding that 
obligation, including (but not limited to) the issuance of any order, 
request, demand or other communication seeking any document, 
accounting, determination, calculation, recalculation, payment, 
principal, interest, assessment, or penalty or the initiation, pursuit 
or completion of an audit with respect to that obligation.
    ``(h) Judicial Review.--In the event a demand subject to this 
section is timely commenced, a judicial proceeding challenging the 
final agency action with respect to such demand shall be deemed timely 
so long as such judicial proceeding is commenced within 180 days from 
receipt of notice by the lessee of the final agency action.
    ``(i) Implementation of Final Decision.--In the event a judicial 
proceeding or demand subject to this section is timely commenced and 
thereafter the limitation period in this section lapses during the 
pendency of such proceeding, any party to such proceeding shall not be 
barred from taking such action as is required or necessary to implement 
a final unappealable judicial or administrative decision, including any 
action required or necessary to implement such decision by the recovery 
or recoupment of an underpayment or overpayment by means of refund or 
credit.
    ``(j) Stay of Payment Obligation Pending Review.--Any party ordered 
by the Secretary or the United States to pay any obligation (other than 
an assessment) shall be entitled to a stay of such payment without bond 
or other surety instrument pending an administrative or judicial 
proceeding if the party periodically demonstrates to the satisfaction 
of the Secretary that such party is financially solvent or otherwise 
able to pay the obligation. In the event the party is not able to so 
demonstrate, the Secretary may require a bond or other surety 
instrument satisfactory to cover the obligation. Any party ordered by 
the Secretary to pay an assessment shall be entitled to a stay without 
bond or other surety instrument.
    ``(k) Inapplicability of the Other Statutes of Limitation.--The 
limitations set forth in sections 2401, 2415, 2416, and 2462 of title 
28, United States Code, and section 42 of the Mineral Leasing Act (30 
U.S.C. 226-2) shall not apply to any obligation to which this Act 
applies.''.
    (b) Subpoena.--Section 107 of the Federal Oil and Gas Royalty 
Management Act of 1982 (30 U.S.C. 1717) is amended by adding at the end 
the following:
    ``(c) Rules Regarding Issuance of Subpoena Relating to Reporting 
and Payment of an Obligation Due.--
            ``(1) In general.--A subpoena which requires a lessee to 
        produce records necessary to determine the proper reporting and 
        payment of an obligation due the Secretary may be issued under 
        this section only by the Solicitor, an Assistant Secretary of 
        the Interior, or an acting Assistant Secretary of the Interior 
        who is a schedule C employee (as defined by section 213.3301 of 
        title 5, Code of Federal Regulations) and may not be delegated.
            ``(2) Prior written request required.--A subpoena described 
        in paragraph (1) may only be issued against a lessee during the 
        limitation period provided in section 115 and only after the 
        Secretary has in writing requested the records from the lessee 
        related to the obligation which is the subject of the subpoena 
        and has determined that--
                    ``(A) the lessee has failed to respond within a 
                reasonable period of time to the Secretary's written 
                request for such records necessary for an audit, 
                investigation or other inquiry made in accordance with 
                the Secretary's responsibilities under this Act;
                    ``(B) the lessee has in writing denied the 
                Secretary's written request to produce such records in 
                the lessee's possession or control necessary for an 
                audit, investigation or other inquiry made in 
                accordance with the Secretary's responsibilities under 
                this Act; or
                    ``(C) the lessee has unreasonably delayed in 
                producing records necessary for an audit, investigation 
                or other inquiry made in accordance with the 
                Secretary's responsibilities under this Act after the 
                Secretary's written request.
            ``(3) Reasonable period for compliance with written 
        request.--In seeking records, the Secretary shall afford the 
        lessee a reasonable period of time after a written request by 
        the Secretary in which to provide such records prior to the 
        issuance of any subpoena.''.
    (c) Clerical Amendment.--The table of contents in section 1 of such 
Act (30 U.S.C. 1701) is amended by adding after the item relating to 
section 114 the following new item:

``Sec. 115. Limitation periods and agency actions.''.

SEC. 5503. ADJUSTMENT AND REFUNDS.

    (a) In General.--The Federal Oil and Gas Royalty Management Act of 
1982 (30 U.S.C. 1701 et seq.) is amended by adding after section 111 
the following new section:

``SEC. 111A. ADJUSTMENTS AND REFUNDS.

    ``(a) Adjustments.--
            ``(1) If, during the adjustment period, a lessee determines 
        that an adjustment or refund request is necessary to correct an 
        underpayment or overpayment of an obligation, the lessee shall 
        make such adjustment or request a refund within a reasonable 
        period of time and only during the adjustment period. Any such 
        adjustment shall not require prior notice to or approval of the 
        Secretary.
            ``(2)(A) For any adjustment, the lessee shall calculate and 
        report the interest due attributable to such adjustment at the 
        same time the lessee adjusts the principal amount of the 
        subject obligation, except as provided by subparagraph (B).
            ``(B) In the case of a lessee on whom the Secretary 
        determines that subparagraph (A) would impose a hardship, the 
        Secretary shall calculate the interest due and notify the 
        lessee within a reasonable time of the amount of interest due, 
        unless such lessee elects to calculate and report interest in 
        accordance with subparagraph (A).
            ``(3) An adjustment or a request for a refund for an 
        obligation may be made after the adjustment period only upon 
        written notice to and approval by the Secretary during an audit 
        of the period which includes the production month for which the 
        adjustment is being made. If an overpayment is identified 
        during an audit, then the Secretary shall allow a credit or 
        refund in the amount of the overpayment.
            ``(4) For purposes of this section, the adjustment period 
        for any obligation shall be the five-year period following the 
        date on which an obligation became due. The adjustment period 
        shall be suspended, tolled, extended, enlarged, or terminated 
        by the same actions as the limitation period in section 115.
    ``(b) Refunds.--
            ``(1) In general.--A request for refund is sufficient if 
        it--
                    ``(A) is made in writing to the Secretary and, for 
                purposes of section 115, is specifically identified as 
                a demand;
                    ``(B) identifies the person entitled to such 
                refund;
                    ``(C) provides the Secretary information that 
                reasonably enables the Secretary to identify the 
                overpayment for which such refund is sought; and
                    ``(D) provides the reasons why the payment was an 
                overpayment.
            ``(2) Payment by secretary of the treasury.--The Secretary 
        shall certify the amount of the refund to be paid under 
        paragraph (1) to the Secretary of the Treasury who shall make 
        such refund. Such refund shall be paid from amounts received as 
        current receipts from sales, bonuses, royalties (including 
        interest charges collected under this section) and rentals of 
        the public lands and the Outer Continental Shelf under the 
        provisions of the Mineral Leasing Act and the Outer Continental 
        Shelf Lands Act, which are not payable to a State or the 
        Reclamation Fund. The portion of any such refund attributable 
        to any amounts previously disbursed to a State, the Reclamation 
        Fund, or any recipient prescribed by law shall be deducted from 
        the next disbursements to that recipient made under the 
        applicable law. Such amounts deducted from subsequent 
        disbursements shall be credited to miscellaneous receipts in 
        the Treasury.
            ``(3) Payment period.--A refund under this subsection shall 
        be paid or denied (with an explanation of the reasons for the 
        denial) within 120 days of the date on which the request for 
        refund is received by the Secretary. Such refund shall be 
        subject to later audit by the Secretary and subject to the 
        provisions of this Act.
            ``(4) Prohibition against reduction of refunds or 
        credits.--In no event shall the Secretary directly or 
        indirectly claim any amount or amounts against, or reduce any 
        refund or credit (or interest accrued thereon) by the amount of 
        any obligation the enforcement of which is barred by section 
        115.''.
    (b) Clerical Amendment.--The table of contents in section 1 of Act 
(30 U.S.C. 1701) is amended by adding after the item relating to 
section 111 the following new item:

``Sec. 111A. Adjustments and refunds.''.

SEC. 5504. REQUIRED RECORDKEEPING.

    Section 103 of the Federal Oil and Gas Royalty Management Act of 
1982 (30 U.S.C. 1713(b)) is amended by adding at the end the following:
    ``(c) records required by the Secretary for the purpose of 
determining compliance with any applicable mineral leasing law, lease 
provision, regulation or order with respect to oil and gas leases from 
Federal lands or the Outer Continental Shelf shall be maintained for 
the same period of time during which a judicial proceeding or demand 
may be commenced under section 115(a). If a judicial proceeding or 
demand is timely commenced, the record holder shall maintain such 
records until the final nonappealable decision in such judicial 
proceeding is made, or with respect to that demand is rendered, unless 
the Secretary authorizes in writing an earlier release of the 
requirement to maintain such records. Notwithstanding anything herein 
to the contrary, under no circumstance shall a record holder be 
required to maintain or produce any record relating to an obligation 
for any time period which is barred by the applicable limitation in 
section 115.''.

SEC. 5505. ROYALTY INTEREST, PENALTIES, AND PAYMENTS.

    (a) Period.--Section 111(f) of the Federal Oil and Gas Royalty 
Management Act of 1982 (30 U.S.C. 1721(f)) is amended to read as 
follows:
    ``(f) The Secretary may waive or forego such interest in whole or 
in part. Interest shall be charged under this section only for the 
number of days a payment is late.''.
    (b) Lessee Interest.--Section 111 of the Federal Oil and Gas 
Royalty Management Act of 1982 (30 U.S.C. 1721) is amended by adding 
after subsection (g) the following:
    ``(h) Interest shall be allowed and the Secretary shall pay or 
credit such interest on any overpayment, with such interest to accrue 
from the date such overpayment was made, at the rate applicable under 
section 6621(a)(2) of the Internal Revenue Code of 1986. Interest which 
has accrued on any overpayment may be applied to reduce an 
underpayment. This subsection applies to overpayments made later than 
six months after the date of enactment of this subsection or September 
1, 1996, whichever is later. Such interest shall be paid from amounts 
received as current receipts from sales, bonuses, royalties (including 
interest charges collected under this section) and rentals of the 
public lands and the Outer Continental Shelf under the provisions of 
the Mineral Leasing Act, and the Outer Continental Shelf Lands Act, 
which are not payable to a State or the Reclamation Fund. The portion 
of any such interest payment attributable to any amounts previously 
disbursed to a State, the Reclamation Fund, or any other recipient 
designated by law shall be deducted from the next disbursements to that 
recipient made under the applicable law. Such amounts deducted from 
subsequent disbursements shall be credited to miscellaneous receipts in 
the Treasury.''.
    (c) Limitation on Interest.--Section 111 of the Federal Oil and Gas 
Royalty Management Act, as amended by subsection (b) of this Act, is 
further amended by adding at the end the following:
    ``(i) Upon a determination by the Secretary that an excessive 
overpayment (based upon all obligations of a lessee for a given 
reporting month) was made for the sole purpose of receiving interest, 
interest shall not be paid on the excessive amount of such overpayment. 
For purposes of this Act, an `excessive overpayment' shall be the 
amount that any overpayment a lessee pays for a given reporting month 
(excluding payments for demands for obligations as a result of judicial 
or administrative proceedings for settlement agreements and for other 
similar payments) for the aggregate of all of its Federal leases 
exceeds 25 percent of the total royalties paid that month for those 
leases.''.
    (d) Estimated Payment.--Section 111 of the Federal Oil and Gas 
Royalty Management Act, as amended by subsections (b) and (c) of this 
Act, is further amended by adding at the end the following:
    ``(j) A lessee may make a payment for the approximate amount of 
royalties (hereinafter in this subsection ``estimated payment') that 
would otherwise be due to the Secretary for such lease to avoid 
underpayment or nonpayment interest charges. When an estimated payment 
is made, actual royalties become due at the end of the month following 
the period covered by the estimated payment. If the lessee makes a 
payment for such actual royalties, the lessee may apply the estimated 
payment to future royalties. Any estimated payment may be adjusted, 
recouped, or reinstated at any time by the lessee.''.
    (e) Volume Allocation of Oil and Gas Production.--Section 111 of 
the Federal Oil and Gas Royalty Management Act (30 U.S.C. 1721), as 
amended by subsections (b) through (d) of this Act, is amended by 
adding at the end the following:
    ``(k)(1) Except as otherwise provided by this subsection--
            ``(A) a lessee of a lease in a unit or communitization 
        agreement which contains only Federal leases with the same 
        royalty rate and funds distribution must report and pay 
        royalties on oil and gas production for each production month 
        based on the actual volume of production sold by or on behalf 
        of that lessee;
            ``(B) a lessee of a lease in any other unit or 
        communitization agreement must report and pay royalties on oil 
        and gas production for each production month based on the 
        volume of oil and gas produced from such agreement and 
        allocated to the lease in accordance with the terms of the 
        agreement; and
            ``(C) a lessee of a lease that is not contained in a unit 
        or communitization agreement must report and pay royalties on 
        oil and gas production for each production month based on the 
        actual volume of production sold by or on behalf of that 
        lessee.
    ``(2) This subsection applies only to requirements for reporting 
and paying royalties. Nothing in this subsection is intended to alter a 
lessee's liability for royalties on oil or gas production based on the 
share of production allocated to the lease in accordance with the terms 
of the lease, a unit or communitization agreement, or any other 
agreement.
    ``(3) For any unit or communitization agreement, if all lessees 
contractually agree to an alternative method of royalty reporting and 
payment, the lessees may submit such alternative method to the 
Secretary for approval and make payments in accordance with such 
approved alternative method so long as such alternative method does not 
reduce the amount of the royalty obligation.
    ``(4) The Secretary shall grant an exception from the reporting and 
payment requirements for marginal properties by allowing for any 
calendar year or portion thereof royalties to be paid each month based 
on the volume of production sold. Interest shall not accrue on the 
difference for the entire calendar year or portion thereof between the 
amount of oil and gas actually sold and the share of production 
allocated to the lease until the beginning of the month following 
calendar year or portion thereof. Any additional royalties due or 
overpaid royalties and associated interest shall be paid, refunded, or 
credited within six months after the end of each calendar year in which 
royalties are paid based on volumes of production sold. For the purpose 
of this subsection, the term ``marginal property' means a lease that 
produces on average the combined equivalent of less than 15 barrels of 
oil per day or 90 thousand cubic feet of gas per day, or a combination 
thereof, determined by dividing the average daily production of 
domestic crude oil and domestic natural gas from producing wells on 
such lease by the number of such wells, unless the Secretary, together 
with the State concerned, determines that an amount which is a 
nonsubstantive variation thereof is more appropriate.
    ``(5) Not later than two years after the date of the enactment of 
this subsection, the Secretary shall issue any appropriate demand for 
all outstanding royalty payment disputes regarding who is required to 
report and pay royalties on production from units and communitization 
agreements outstanding on the date of the enactment of this subsection, 
and collect royalty amounts owed on such production.''.
    (f) Production Allocation.--Section 111 of the Federal Oil and Gas 
Royalty Management Act (30 U.S.C. 1721), as amended by subsections (b) 
through (e) of this Act, is further amended by adding at the end the 
following:
    ``(l) The Secretary shall issue all determinations of allocations 
of production for units and communitization agreements within 120 days 
of a request for determination. If the Secretary fails to issue a 
determination within such 120-day period, the Secretary shall waive 
interest due on obligations subject to the determination until the end 
of the month following the month in which the determination is made.''.

SEC. 5506. LIMITATION ON ASSESSMENTS.

    Section 111 of the Federal Oil and Gas Royalty Management Act of 
1982 (30 U.S.C. 1721), as amended by section 5505 of this Act, is 
further amended by adding at the end the following:
    ``(l)(1) After the date of enactment of this subsection, the 
Secretary shall not impose any assessment for any late payment or 
underpayment. After the date of enactment of this subsection, the 
Secretary may impose an assessment only for erroneous reports submitted 
by lessees subject to the limitations of paragraph (2). Nothing in this 
section shall prohibit the Secretary from imposing penalties or 
interest under other sections of this Act for late payments or 
underpayments.
    ``(2) No assessment for erroneous reports shall be imposed for 18 
months following the date of enactment of this subsection, or until the 
Secretary issues a final rule which provides for imposition of an 
assessment only on a lessee who chronically submits erroneous reports 
and which establishes what constitutes chronic errors for a lessee, 
whichever is later. However, if the Secretary determines during that 
18-month period that the reporting error rate for all reporters for all 
Federal leases has increased by one-third for three consecutive report 
months for either production reporting or royalty reporting over the 12 
months preceding the date of enactment of this subsection, the 
Secretary may impose an assessment for erroneous reports only for the 
increased category of report under regulations in effect on the date of 
enactment of this subsection.''.

SEC. 5507. ALTERNATIVES FOR MARGINAL PROPERTIES.

    (a) In General.--The Federal Oil and Gas Royalty Management Act of 
1982 (30 U.S.C. 1701 et seq.), as amended by section 5502 of this Act, 
is further amended by adding at the end the following:

``SEC. 116. ALTERNATIVES FOR MARGINAL PROPERTIES.

    ``(a) Selling Revenue Stream.--
            ``(1) In general.--Notwithstanding the provisions of any 
        lease to the contrary, upon request of the lessee and a State 
        under section 205(g), the Secretary shall authorize a lessee 
        for a marginal property and for a lease, the administration of 
        which is not cost-effective for the Secretary to administer, to 
        make a prepayment in lieu of royalty payments under the lease 
        for the remainder of the lease term. For the purposes of this 
        section, the term `marginal property' has the same meaning 
        given such term in section 111(k)(4), unless the Secretary, 
        together with each State in which such marginal production 
        occurs, determines otherwise to better achieve the purpose of 
        this section.
            ``(2) Marginal properties.--For marginal properties, 
        prepayments under paragraph (1) shall begin--
                    ``(A) in the case of those properties producing on 
                average $500 or less per month in total royalties to 
                the United States, two years after the date of the 
                enactment of this section;
                    ``(B) in the case of those properties producing on 
                average more than $500 but $1,000 or less per month in 
                total royalties to the United States, three years after 
                the date of the enactment of this section;
                    ``(C) in the case of those properties producing on 
                average more than $1,000 but $1,500 or less per month 
                in total royalties to the United States, four years 
                after the date of the enactment of this section; and
                    ``(D) in the case of those properties not described 
                in subparagraphs (A) through (C), five years after the 
                date of the enactment of this section.
            ``(3) Administration not cost-effective.--For a lease, the 
        administration of which is not cost-effective for the Secretary 
        to administer, prepayments under paragraph (1) shall begin on 
        the date of the enactment of this section.
            ``(4) Satisfaction of royalty obligation.--A lessee who 
        makes a prepayment under this section shall have satisfied in 
        full its obligation to pay royalty on production from the lease 
        or a portion of a lease and shall not be required to submit any 
        royalty reports to the Secretary. The prepayment shall be 
        shared by the Secretary with any State or other recipient to 
        the same extent as any royalty payment for such lease.
            ``(5) Valuation.--The prepayment authorized under this 
        section shall only occur if the Secretary, the State concerned, 
        and the lessee determine that such prepayment is based on the 
        present value of the projected remaining royalties from the 
        production from the lease, based on appropriate nominal 
        discount rate for a comparable term, as provided in Office of 
        Management and Budget Circular A-94.
    ``(b) Alternative Accounting and Alternative Accounting and 
Auditing Requirements.--
            ``(1) In general.--Within one year after the date of the 
        enactment of this section, for the marginal properties 
        referenced in subsection (a)(1), the Secretary shall provide 
        accounting, reporting, and auditing relief that will encourage 
        lessees to continue to produce and develop such properties: 
        Provided, That such relief will only be available to lessees in 
        a State that concurs.
            ``(2) Payment date.--For leases subject to this section, 
        the Secretary may allow royalties to be paid later than the 
        time specified in the lease.''.
    (b) Clerical Amendment.--The table of contents in section 1 of the 
Federal Oil and Gas Royalty Management Act (30 U.S.C. 1701) is amended 
by adding after the item relating to section 115 the following new 
item:

``Sec. 116. Alternatives for marginal properties.''.

SEC. 5508. NOTICE REQUIREMENT.

    Section 23(a)(2) of the Outer Continental Shelf Lands Act (43 
U.S.C. 1349(a)(2)) is amended to read as follows:
            ``(2) Except as provided in paragraph (3) of this 
        subsection, no action may be commenced under subsection (a)(1) 
        of this section if the Attorney General has commenced and is 
        diligently prosecuting a civil action in a court of the United 
        States with respect to such matter, but in any such action in a 
        court of the United States any person having a legal interest 
        which is or may be adversely affected may intervene as a matter 
        of right.''.

SEC. 5509. REPEALS.

    (a) FOGRMA.--Section 307 of the Federal Oil and Gas Royalty 
Management Act of 1982 (30 U.S.C. 1755), is repealed. Section 1 of such 
Act (relating to the table of contents) is amended by striking out the 
item relating to section 307.
    (b) OCSLA.--Effective on the date of the enactment of this Act, 
section 10 of the Outer Continental Shelf Lands Act (43 U.S.C. 1339) is 
repealed.

SEC. 5510. PERFORMANCE STANDARD.

    Section 109 of the Federal Oil and Gas Royalty Management Act of 
1982 (30 U.S.C. 1719) is amended in subsections (c) and (d), by 
striking ``knowingly or willfully'' and inserting ``by willful 
misconduct or gross negligence'' each place it appears.

SEC. 5511. INDIAN LANDS.

    The amendments made by this subtitle shall not apply with respect 
to Indian lands, and the provisions of the Federal Oil and Gas Royalty 
Management Act of 1982 as in effect on the day before the date of 
enactment of this Act shall continue to apply after such date with 
respect to Indian lands. The provisions of the Federal Oil and Gas 
Royalty Management Act of 1982, as amended by this subtitle, shall 
apply as of the date of enactment with respect to Federal lands and the 
Outer Continental Shelf.

SEC. 5512. PRIVATE LANDS.

    This subtitle shall not apply to any privately owned minerals.

SEC. 5513. EFFECTIVE DATE.

    Except as provided by section 115(e), section 111(h), section 
111(k)(5), and section 116 of the Federal Oil and Gas Royalty 
Management Act of 1982 (as added by this subtitle), this subtitle, and 
the amendments made by this subtitle, shall apply with respect to the 
production of oil and gas after the first day of the month following 
the date of the enactment of this Act.

                    Subtitle G--Department of Energy

SEC. 5600. SALE OF DOE ASSETS.

    (a) In General.--
            (1) In order to maximize the use of Department of Energy 
        assets and to reduce overhead and other costs related to asset 
        management at the Department's facilities and laboratories, the 
        Secretary of Energy shall conduct an asset management and 
        disposition program that will result in no less than $225 
        million in receipts and savings by October 1, 2000.
            (2) The program shall include an inventory of assets in the 
        care of the Department and its contractors; the recovery, 
        reuse, and stewardship of assets; and disposition of a minimum 
        of 1,139,000,000 pounds of fuel, 136,000 tons of chemicals and 
        industrial gases, 557,000 tons of scrap metal, 14,000 radiation 
        sources, 17,000 pieces of major equipment, 11,000 pounds of 
        precious metals (not including the Research Materials 
        Collection), and 91,000,000 pounds of base metals.
    (b) Exemptions.--The disposition of assets under this section is 
not subject to sections 202 and 203 of the Federal Property and 
Administrative Services Act of 1949 (40 U.S.C. secs. 483 and 484) or 
section 13 of the Surplus Property Act of 1944 (50 U.S.C. App. sec. 
1622). In order to avoid market disruptions, the Secretary shall 
consult with appropriate executive agencies with respect to 
dispositions under this section.
    (c) Disposition of Proceeds.--After deduction of administrative 
costs of disposition under this section not to exceed $7 million per 
year, the remainder of the proceeds from dispositions under this 
section shall be returned to the Treasury as miscellaneous receipts. 
There shall be established a new receipt account in the Treasury for 
proceeds of asset sales under this section.

SEC. 5651. WEEKS ISLAND.

    Notwithstanding section 161 of the Energy Policy and Conservation 
Act, the Secretary of Energy shall draw down and sell 32 million 
barrels of oil contained in the Weeks Island Strategic Petroleum 
Reserve Facility.

SEC. 5652. LEASE OF EXCESS SPRO CAPACITY.

    The Energy Policy and Conservation Act (42 U.S.C. 6201 to 6422) is 
amended by adding the following new section after section 167:

``SEC. 168. USE OF UNDERUTILIZED FACILITIES.

    ``(a) Notwithstanding any other provision of this title, the 
Secretary, by lease or otherwise, for any term and under such other 
conditions as the Secretary considers necessary or appropriate, may 
store in underutilized Strategic Petroleum Reserve facilities petroleum 
product owned by a foreign government or its representative.
    ``(b) Petroleum product stored under this section is not part of 
the Reserve and may be exported from the United States.''.
    ``(c) Beginning in fiscal year 2001 and in each fiscal year 
thereafter, except for fiscal years 2003 and 2004, 50 percent of the 
funds resulting from the leasing of Strategic Petroleum Reserve 
facilities authorized by subsection (a) shall be available to the 
Secretary of Energy without further appropriation for the purchase of 
oil for the Strategic Petroleum Reserve.''.

                           Subtitle H--Mining

SEC. 5700. SHORT TITLE.

    This subtitle may be cited as ``The Mining Law Revenue Act of 
1995''.

SEC. 5701. DEFINITIONS.

    When used in this subtitle:
            (1) ``Assessment year'' means the annual period commencing 
        at 12 o'clock noon on the 1st day of September and ending at 12 
        o'clock noon on the 1st day of September of the following year.
            (2) ``Federal lands'' means lands and interests in lands 
        owned by the United States that are open to mineral location, 
        or that were open to mineral location when a mining claim or 
        site was located and which have not been patented under the 
        general mining laws.
            (3) ``General mining laws'' means those Acts which 
        generally comprise chapters 2, 11, 12, 12A, 15, and 16, and 
        sections 161 and 162, of Title 30 of the United States Code, 
        all Acts heretofore enacted which are amendatory of or 
        supplementary to any of the foregoing Acts, and the judicial 
        and administrative decisions interpreting such Acts.
            (4) ``Locatable minerals'' means those minerals owned by 
        the United States and subject to location and disposition under 
        the general mining laws on or after the effective date of this 
        Subtitle, but not including any mineral held in trust by the 
        United States for any Indian or Indian tribe, as defined in 
        section 2 of the Indian Mineral Development Act of 1982 (25 
        U.S.C. 2101), or any mineral owned by any Indian or Indian 
        tribe, as defined in that section, that is subject to a 
        restriction against alienation imposed by the United States, or 
        any mineral owned by any incorporated Native group, village 
        corporation, or regional corporation and acquired by the group 
        or corporation under the provisions of the Alaska Native Claims 
        Settlement Act (43 U.S.C. 1601 et seq.).
            (5) ``Mineral activities'' means any activity on Federal 
        lands related to, or incidental to, exploration for or 
        development, mining, production, beneficiation, or processing 
        of any locatable mineral, or reclamation of the impacts of such 
        activities.
            (6) ``Mining claim or site'', except where provided 
        otherwise, means a lode mining claim, placer mining claim, mill 
        site or tunnel site.
            (7) ``Operator'' means any person conducting mineral 
        activities subject to this Subtitle.
            (8) ``Person'' means an individual, Indian tribe, 
        partnership, association, society, joint venture, joint stock 
        company, firm, company, limited liability company, corporation, 
        cooperative or other organization, and any instrumentality of 
        State or local government, including any publicly owned utility 
        or publicly owned corporation of State or local government.
            (9) ``Processing and treatment cost'' means any activity 
        following mining including but not limited to, crushing, 
        milling, leaching, flotation, grinding, solvent extraction, 
        electrolytic deposition, roasting, calcining thermal or 
        electric smelting, refining, treatment effecting a chemical 
        change, or product fabrication. Direct and indirect cost such 
        as maintenance, depreciation, environmental, labor and 
        consumable cost associated with these activities shall be 
        included in this definition.
            (10) ``Secretary'' means the Secretary of the Interior.

SEC. 5702. CLAIM MAINTENANCE REQUIREMENTS.

    (a) Maintenance Fee.--After the date of enactment of this Subtitle, 
the owner of each unpatented mining claim or site located pursuant to 
the general mining laws, whether located before or after the enactment 
of this Subtitle, shall pay in advance to the Secretary annually on or 
before September 1, and until a patent has been issued therefor, a 
maintenance fee of $100 per mining claim or site. The owner of each 
unpatented mining claim or site located after the date of enactment of 
this Subtitle pursuant to the general mining laws shall pay to the 
Secretary, at the time the copy of the notice or certificate of 
location is filed with the Bureau of Land Management pursuant to 
section 314(b) of the Federal Land Policy and Management Act of 1976 
(43 U.S.C. 1744(b)), in addition to the location fee required under 
subsection (c) of this section, an initial maintenance fee of $100 per 
mining claim or site for the assessment year which includes the date of 
location of such mining claim or site. If a mining claim or site is 
located within 90 days before September 1 and the copy of the notice or 
certificate of location is timely filed with the Bureau of Land 
Management under subsection 314(b) of the Federal Land Policy and 
Management Act of 1976 after September 1, the annual maintenance fee 
payable under the first sentence of this subsection shall be paid at 
the time such notice or certificate of location is filed, in addition 
to the location fee and the initial $100 maintenance fee. No 
maintenance fee shall be required if the fee is waived or the owner of 
the mining claim or site is exempt as provided in section 5703 of this 
Subtitle.
    (b) Maintenance Fee Statement.--Each payment under subsection (a) 
of this section shall be accompanied by a statement which reasonably 
identifies the mining claim or site for which the maintenance fee is 
being paid. Such statement may include the name of the mining claim or 
site, the serial number assigned by the Secretary to such mining claim 
or site, the description of the book and page in which the notice or 
certificate of location for such mining claim or site is recorded under 
State law, any combination of the foregoing, or any other information 
that reasonably identifies the mining claim or site for which the 
maintenance fee is being paid. The statement required under this 
subsection shall be in lieu of any annual filing requirements for 
mining claims or sites, under any other Federal law, but shall not 
supersede any such filing requirement under applicable State law.
    (c) Location Fee.--The owner of each unpatented mining claim or 
site located on or after the date of enactment of this Subtitle 
pursuant to the general mining laws shall pay to the Secretary, at the 
time the notice or certificate of location is filed with the Bureau of 
Land Management pursuant to subsection 314(b) of the Federal Land 
Policy and Management Act of 1976 (43 U.S.C. 1744(b)), a location fee 
of $25.00 per claim.
    (d) Credit Against Royalty.--The annual claim maintenance fee paid 
for any unpatented mining claim or site on or before September 1 of any 
year shall be credited against the amount of royalty required to be 
paid under Section 5705 for such mining claim or site during the 
following assessment year.
    (e) Failure To Comply.--The failure of the owner of the mining 
claim or site to pay the claim maintenance fee or location fee for a 
mining claim or site on or before the date such payment is due under 
subsection (a) or subsection (c) of this section shall constitute 
forfeiture of the mining claim or site and such mining claim or site 
shall be null and void, effective as of the day after the date such 
payment is due: Provided, however, That, if such maintenance fee or 
location fee is paid or tendered on or before the 30th day after such 
payment was due under subsection (a) or subsection (c) of this section, 
such mining claim or site shall not be forfeited or null or void, and 
such maintenance fee or location fee shall be deemed timely paid.
    (f) Repeal of Omnibus Budget Reconciliation Act Fee Requirements.--
Sections 10101 through 10106 of the Omnibus Budget Reconciliation Act 
of 1993 (30 U.S.C. 28f through 28k) are hereby repealed.
    (g) Amendment of FLPMA Filing Requirements.--Section 314 (a) of the 
Federal Land Policy and Management Act of 1976 (43 U.S.C. 1744 (a)) is 
hereby repealed.

SEC. 5703. WAIVER AND EXEMPTION.

    (a) Waiver of Fee.--The maintenance fee provided for in subsection 
5702(a) shall be waived for the owner of a mining claim or site who 
certifies in writing to the Secretary, on or before the date the 
payment is due, that, as of the date such payment is due, such owner 
and all related persons own not more than twenty-five unpatented mining 
claims or sites. Any owner of a mining claim or site that is not 
required to pay a maintenance fee under this subsection shall continue 
to be subject to the assessment work requirements of the general mining 
laws or of any other State or Federal law, subject to any suspension or 
deferment of annual assessment work provided by law, for the assessment 
year following the filing of the certification required by this 
subsection.
    (b) Related Persons.--As used in subsection (a), the term ``related 
persons'' includes--
            (1) the spouse and dependent children (as defined in 
        section 152 of the Internal Revenue Code of 1986), of the owner 
        of the mining claim or site; and
            (2) a person controlled by, controlling, or under common 
        control with the owner of the mining claim or site.
    (c) Exemption.--The owner of any mining claim or site who certifies 
in writing to the Secretary on or before the first day of any 
assessment year that access to such mining claim or site was denied or 
impeded during the prior assessment year by the action or inaction of 
any local, State, or Federal Governmental officer, agency, or court, or 
by any Indian tribal authority, shall be exempt from the maintenance 
fee requirement of subsection (a) of section 5702 for the assessment 
year following the filing of the certification.

SEC. 5704. PATENTS.

    (a) In General.--Except as provided in subsection (c), any patent 
issued by the United States under the general mining laws after the 
date of enactment of this Subtitle shall be issued only--
            (1) upon payment by the owner of the claim of the fair 
        market value for the interest in the land owned by the United 
        States exclusive of and without regard to the mineral deposits 
        in the land or the use of the land for mineral activities; and
            (2) subject to reservation by the United States of the 
        royalty provided in section 5705.
    (b) Right of Reentry.--
            (1) Except as provided in subsection 5704(c), and 
        notwithstanding any other provision of law, a patent issued 
        pursuant to this section shall be subject to a right of reentry 
        by the United States if the patented estate is used by the 
        patentee for any purpose other than for conducting mineral 
        activities in good faith and such unauthorized use is not 
        discontinued as provided in this subsection.
            (2) If the surface of the patented estate is used by the 
        patentee, or any subsequent owners, for any purpose other than 
        for conducting mineral activities in good faith, the Secretary 
        shall serve on all owners of interests in such patented estate, 
        in the manner prescribed for service of a summons and complaint 
        under the Federal Rules of Civil Procedure, notice specifying 
        such unauthorized use and providing not more than 90 days in 
        which such unauthorized use must be terminated. The giving of 
        such notice shall constitute final agency action appealable by 
        any owner of an interest in such patented estate. The Secretary 
        may exercise the right of reentry as provided in paragraph (3) 
        of this subsection if such unauthorized use has not been 
        terminated in the time provided in this paragraph, and only 
        after all appeal rights have expired and any appeals of such 
        notice have been finally determined.
            (3) The Secretary may exercise the right of the United 
        States to reenter such patented estate by filing a declaration 
        of reentry in the office of the Bureau of Land Management 
        designated by the Secretary and recording such declaration 
        where the notice or certificate of location for the patented 
        claim or site is recorded under State law. Upon the filing and 
        recording of such declaration, all right, title and interest in 
        such patented estate shall revert to the United States. Lands 
        and interests in lands for which the United States exercises 
        its right of reentry under this section shall remain open to 
        the location of mining claims and mill sites, unless withdrawn 
        under other applicable law.
    (c) Patent Transition.--Notwithstanding any other provision of law, 
the requirements of this subtitle (except the payment of maintenance 
and location fees in accordance with sections 5702 and 5703) shall not 
apply to those patent applications pending at the Department of the 
Interior as of September 30, 1995. Such patents shall be issued under 
or subject to the general mining laws in effect prior to the date of 
enactment of this subtitle.

SEC. 5705. ROYALTY.

    (a) Reservation of Royalty.--
            (1) In general.--Production of locatable minerals 
        (including associated minerals) from any unpatented mining 
        claim (other than those from Federal lands to which subsection 
        5704(c) applies) or any mining claim patented under subsection 
        5704(a), including mineral concentrates and products derived 
        from locatable minerals, shall be subject to the payment of a 
        royalty of 2.5 percent on the Net Smelter Return of all ores, 
        minerals, metals, and materials mined and removed and sold.
            (2) Waiver.--If the Secretary determines that the 
        Secretary's cost of accounting for and collecting a royalty for 
        any mineral exceeds or is likely to exceed the amount of 
        royalty to be collected, the Secretary shall waive such 
        royalty. The obligation to pay royalties hereunder shall accrue 
        only upon the sale of locatable minerals or mineral products 
        produced from a mining claim subject to such royalty, and not 
        upon the stockpiling of the same for future processing.
            (3) Exemption.--Any mine with an annual Revenues Received 
        of less than $500,000 shall be exempt from the requirement to 
        pay a royalty under this section.
            (4) Definition.--
                    (A) ``Net Smelter Return'' means the ``Revenues 
                Received'' for such ores, minerals, metals or 
                materials, less the ``Allowable Deductions'' for any 
                calendar year.
                    (B) ``Revenues Received'' means the proceeds from 
                the sale of ores mined from the claims or patents 
                before subtracting the ``Allowable Deductions'', or, in 
                the case of sales of beneficiated products from 
                locatable minerals such as cathode, anode or copper rod 
                or wire, or other products fabricated from the 
                locatable minerals, the gross income from mining 
                derived from the first commercially marketable product 
                determined in the same manner as under Section 613 of 
                the Internal Revenue Code, before subtracting the 
                ``Allowable Deductions.'' Sales or transfers of ores to 
                affiliates shall be valued at the fair market value of 
                the products sold or transferred. Without limiting the 
                foregoing, the profits or losses incurred in connection 
                with forward sales, futures or commodity options 
                trading, metal loans, or any other price hedging or 
                speculative activity or arrangement shall not be 
                included in Revenues Received.
                    (C) ``Allowable Deductions'' means the following 
                costs and expenses actually incurred or paid to third 
                parties by the royalty payor: processing and treatment 
                cost, costs for all transportation and insurance for 
                ores or products produced from ores mined from the 
                claim, group of claims or patents comprising an 
                operation, between the mine and processing facilities, 
                from one processing facility to another, and from 
                processing facilities to the point of delivery of said 
                ores or products; assaying charges, umpire charges, 
                independent representative charges; all charges by 
                purchasers of said ores or products; all taxes (except 
                income taxes) measured by or valued upon production.
            (5) Revenues received.--All Revenues Received and Allowable 
        Deductions shall be determined in accordance with generally 
        accepted accounting principles and practices consistently 
        applied. Revenues Received and Allowable Deductions shall be 
        determined by the accrual method.
            (6) Allowable deductions.--Where any Allowable Deductions 
        are incurred in conjunction with like costs for mineral 
        products from other properties controlled by the payor such 
        costs shall be fairly allocated and apportioned in accordance 
        with generally accepted practices in the mining industry.
            (7) Commingling.--The payor shall have the right to 
        commingle ore and minerals from the claim, group of claims, or 
        patent comprising an operation, with ore from other lands and 
        properties: Provided, however, That the payor shall calculate 
        from representative samples the average grade of the ore before 
        commingling. If concentrates are produced from the commingled 
        ores, the payor shall calculate from representative samples 
        calculating the average grade of the ore, and calculating 
        average recovery percentages the payor shall use procedures 
        accepted in the mining and metallurgical industry suitable for 
        the type of mining and processing activity being conducted.
            (8) Effective date.--
                    (A) In general.--The royalty required under this 
                section shall take effect with respect to production on 
                or after the first day of the first month following the 
                date of enactment of this subtitle.
                    (B) Phase-in.--The royalty payments required under 
                this section shall be reduced--
                            (i) by 66 2/3 percent for the first 12 
                        months following the date of enactment of this 
                        subtitle for which royalties are due on 
                        production pursuant to this subtitle; and
                            (ii) by 33 1/3 percent for the second 12 
                        months that royalties are due on production 
                        pursuant to this subtitle.
                    (C) Time for payment.--Any royalty payment 
                attributable to production during the first 15 calendar 
                months after the date of enactment of this subtitle, 
                after any reduction under paragraph (B), shall be due 
                on the date that is 12 months after the date of 
                enactment of this subtitle.
                    (D) No marketable quantity prior to date of 
                enactment.--For a claim, group of claims, or patents 
                comprising an operation that has not produced a 
                marketable quantity prior to the date of enactment of 
                this subtitle, the royalty payments required pursuant 
                to this section shall be reduced--
                            (i) by 66 2/3 percent for the first 12 
                        months following the date of enactment of this 
                        subtitle for which royalties are due on 
                        production pursuant to this subtitle; and
                            (ii) by 33 1/3 percent for the second 12 
                        months that royalties are due on production 
                        pursuant to this subtitle.
            (9) Royalty reduction for marginal operations.--
                    (A) Application.--A person that is required to make 
                a royalty payment under this section may file for a 
                reduction or waiver of the royalty by demonstrating 
                that payment of the royalty would preclude recovery of 
                costs of production, including invested capital, for a 
                claim, group of claims or patents comprising an 
                operation for the remaining reasonable life of the 
                operation: Provided, That the Secretary shall not 
                consider royalty reduction effective during the phase-
                in periods under paragraph (8). For purposes of this 
                initial application, ``Projected Revenues'' shall be 
                calculated using the operator's current and projected 
                rates of production at the average price for the 
                preceding 12 months.
                    (B) Definition.--For purposes of an application 
                under subparagraph (A)--
                            (i) ``Projected Revenues'' shall be the net 
                        present value of the expected revenues for the 
                        remaining reasonable life of the operation 
                        calculated using the average mineral price 
                        received for the preceding 12 month calendar 
                        year.
                            (ii) ``Costs of Production'' shall mean the 
                        net present value of the following costs based 
                        on the expected rate of production for the 
                        remaining reasonable life of the operation--
                                    (I) the projected cost of 
                                extracting the locatable mineral;
                                    (II) the projected cost of 
                                transporting the locatable mineral to 
                                the place or places of reduction, 
                                beneficiation, refining and sale;
                                    (III) the projected cost of 
                                reduction, beneficiation, refining and 
                                sale of the locatable mineral;
                                    (IV) the projected cost of 
                                marketing and delivering the locatable 
                                mineral and the conversion of the 
                                locatable mineral into money;
                                    (V) the projected cost of 
                                maintenance and repairs of all 
                                machinery, equipment, apparatus, and 
                                facilities used in the mine; all 
                                crushing, milling, leaching, refining, 
                                smelting, and reduction works, plants, 
                                and facilities; and all facilities and 
                                equipment for transportation;
                                    (VI) the projected cost for support 
                                personnel and support services at the 
                                mine site, including without 
                                limitation, accounting, assaying, 
                                drafting, and mapping, computer 
                                services, surveying, housing, camp and 
                                office expenses, safety and security;
                                    (VII) the projected cost of 
                                engineering, sampling, and assaying 
                                pertaining to development and 
                                production;
                                    (VIII) the projected cost of 
                                permitting, reclamation, environmental 
                                compliance and monitoring;
                                    (IX) the projected cost of fire and 
                                other insurance on the machinery, 
                                equipment, apparatus, works, plants and 
                                facilities mentioned in subclause 
                                (B)(ii)(V);
                                    (X) depreciation of the original 
                                capitalized cost of the machinery, 
                                equipment, apparatus, works, plants, 
                                and facilities listed in subclause 
                                (B)(ii)(V), considering the probable 
                                life of the property in computing the 
                                annual depreciation charge;
                                    (XI) all money expended for 
                                premiums for industrial insurance, and 
                                the owner-paid cost of hospital and 
                                medical attention and accident benefits 
                                and group insurance for all employees 
                                engaged in the production or processing 
                                of locatable minerals;
                                    (XII) all money paid as 
                                contributions or payments under State 
                                unemployment compensation law, all 
                                money paid as contributions under the 
                                Federal Social Security Act, and all 
                                money paid to State government in real 
                                property taxes measured or levied on 
                                production, or Federal excise tax 
                                payments and payments as fees or 
                                charges for use of the Federal lands 
                                from which the locatable minerals are 
                                produced; and
                                    (XIII) the projected cost of 
                                developmental work in or about the mine 
                                or upon a group of mines when operated 
                                as a unit.
                    (C) For purposes of the annual depreciation charge 
                under paragraph (B)(ii)X)--
                            (i) Any expenditure not otherwise described 
                        in this clause which is not deductible in the 
                        year paid or incurred pursuant to the Internal 
                        Revenue Code of 1986, and which is:
                                    (I) attributable to the direct 
                                acquisition of mining claims purchased 
                                separately or as part of a group of 
                                assets, or
                                    (II) attributable to the indirect 
                                acquisition of mining property or 
                                mining claims by reason of being a 
                                portion of the consideration for an 
                                interest in a corporation, partnership 
                                or trust (in connection with an 
                                ownership change of such entity 
                                determined under the principles of 
                                Section 382(g) of the Internal Revenue 
                                Code of 1986) allocable to such 
                                property or claims of such entity, 
                                shall be allowable as a depreciation 
                                deduction to the purchaser in the case 
                                of an expenditure described in (I) or 
                                to the acquired corporation, 
                                partnership or trust in the case of an 
                                expenditure described in (II), ratably 
                                over a period based on the probable 
                                life of the property, beginning with 
                                the taxable year in which such 
                                expenditure was made.
                            (ii) The deduction allowed for costs 
                        attributable to mining property or claims is 
                        available only at the election of the purchaser 
                        in the case of expenditures described in 
                        (i)(I), or at the election of both the 
                        purchaser and acquired corporation, partnership 
                        or trust in the case of expenditures described 
                        in (i)(II), and is in lieu of any other 
                        deduction otherwise allowable under this 
                        section with respect to such expenditure.
                    (D) If the Costs of Production for the operation 
                exceed the Projected Revenues, the Secretary shall 
                waive in full the royalty obligation. If the Projected 
                Revenues exceed the Costs of Production by less than 
                the full royalty obligation under subsection (a), the 
                Secretary shall reduce the royalty rate to a level 
                allowing the recovery of the Costs of Production, 
                including invested capital, over the remaining 
                reasonable life of the operation.
            (10) Split estates.--For circumstances where a claim, group 
        of claims or patent is subject to this section but does not 
        comprise the entirety of a mine, the Annual Revenues and Costs 
        of Production shall be allocated for royalty purposes in 
        proportion to the value of production recovered from the claim, 
        group of claims or patent.
            (11) Judicial review.--A determination by the Secretary 
        under paragraph (9) shall be judicially reviewable under 
        section 702 of title 5, United States Code, only for actions 
        filed within 180 days of the Secretary's determination.
            (12) Annual filing of data.--If a reduction in royalty is 
        provided under this paragraph, the royalty payor shall file 
        cost and revenue data with the Secretary annually during the 
        period of royalty waiver or reduction.
    (b) Duties of Claim Holders, Operators and Transporters.--A person 
that is required to make a royalty payment under this section shall 
make quarterly estimates of the royalty obligation and shall make the 
payment to the United States annually in such manner as the Secretary 
of the Interior may by rule prescribe. The owner or co-owners of a 
mining claim shall be liable for royalty on locatable minerals produced 
and sold during the period of ownership to the extent of the interest 
in such claim owned. As used in this subsection, ``owner'' or ``co-
owner'' shall mean the person or persons owning the right to mine 
locatable minerals from such claim and receiving the revenues of sale. 
Any person who makes any royalty payment attributable to the interest 
of the owner or co-owners liable therefor shall not become liable to 
the United States for such royalty as a result.
    (c) Manner of Payment.--
            (1) Each royalty payment or adjustment shall be accompanied 
        by a statement containing:
                    (A) the name and Bureau of Land Management serial 
                number of the mining claim or claims from which ores, 
                concentrates, solutions or beneficiated products of 
                locatable minerals subject to the royalty required in 
                this section were produced and sold for the period 
                covered by such payment or adjustment;
                    (B) the estimated (or actual, if determined) 
                quantity of such ore, concentrates, solutions or 
                beneficiated or fabricated products produced and sold 
                from such mining claim or claims for such period;
                    (C) the estimated (or actual, if determined) Gross 
                Yield from the production and sale of such ore, 
                concentrates, solutions or beneficiated products for 
                such period;
                    (D) the estimated (or actual, if determined) Net 
                Smelter Return from the production and sale of such 
                ores, concentrates, solutions or beneficiated products 
                for such period, including an itemization of the 
                applicable deductions described in paragraph 
                20(a)(4)(A); and
                    (E) the estimated (or actual, if determined) 
                royalty due to the United States, or adjustment due to 
                the United States or such owner or co-owners, for such 
                period.
            (2) In lieu of receiving a refund under subsection (e), the 
        owner or co-owners may elect to apply any adjustment due to 
        such owner or co-owners as an offset against royalties due from 
        such owner or co-owners to the United States under this 
        Subtitle, regardless of whether such royalties are due for 
        production and sale from the same mining claim or claims.
    (d) Recordkeeping and Reporting Requirements.--
            (1) An owner, operator, or other person directly involved 
        in the conduct of mineral activities, transportation, purchase, 
        or sale of locatable minerals, concentrates, or products 
        derived therefrom, subject to the royalty required in this 
        section, through the point of royalty computation, shall 
        establish and maintain any records, make any reports, and 
        provide any information that the Secretary may reasonably 
        require for the purposes of implementing this section or 
        determining compliance with regulations or orders under this 
        section. Upon the request of the Secretary when conducting an 
        audit or investigation pursuant to subsection (f), the 
        appropriate records, reports, or information which may be 
        required by this section shall be made available for inspection 
        and duplication by the Secretary.
            (2) Records required by the Secretary under this section 
        shall be maintained for three years after the records are 
        generated unless the Secretary notifies the record holder that 
        he or she has initiated an audit or investigation specifically 
        identifying and involving such records and that such records 
        must be maintained for a longer period. When an audit or 
        investigation is under way, such records shall be maintained 
        until the earlier of the date that the Secretary releases the 
        record holder of the obligation to maintain such records or the 
        date that the limitations period applicable to such audit or 
        investigation under subsection (f) expires.
    (e) Interest Assessments.--In any case in which royalty payments 
are not received by the Secretary on the date that such payments are 
due, or when such payments are less than the amount due, the Secretary 
shall charge interest on such late payments computed at the rate 
published by the Department of the Treasury as the ``Treasury Current 
Value of Funds Rate.'' In the case of an underpayment or partial 
payment, interest shall be computed and charged only on the amount of 
the deficiency and not on the total amount, and only for the number of 
days such payment is late. No other late payment or underpayment charge 
or penalty shall be charged. In any case in which royalty payments are 
made in excess of the amount due, or amounts are held by the Secretary 
pending the outcome of any appeal in which the Secretary does not 
prevail, the Secretary shall promptly refund such overpayments or pay 
such amounts to the person or persons entitled thereto, together with 
interest thereon for the number of days such overpayment or amounts 
were held by the Secretary, with the addition of interest charged 
against the United States computed at the rate published by the 
Department of the Treasury as the ``Treasury Current Value of Funds 
Rate''.
    (f) Audits, Payment Demands and Limitations.--
            (1) The Secretary may conduct, after notice, any audit 
        reasonably necessary and appropriate to verify the payments 
        required under this section.
            (2) Any billing or demand letter for royalty due on 
        locatable minerals produced and sold from any mining claim 
        subject to royalty required by this section must be sent or 
        issued not later than three years after the date such royalty 
        was due and must specifically identify the production involved, 
        the royalty allegedly due and the basis for the claim. No 
        action, proceeding or claim for royalty due on locatable 
        minerals produced and sold, or relating to such production, may 
        be brought by the United States, including but not limited to 
        any claim for additional royalties or claim of the right to 
        offset the amount of such additional royalties against amounts 
        owed to any person by the United States, unless judicial suit 
        or administrative proceedings are commenced to recover specific 
        amounts claimed to be due prior to the expiration of three 
        years from the date such royalty is alleged to have been due.
    (g) Penalties.--Any person who withholds payment of royalties under 
this section after a final, nonappealable determination of liability 
may be liable for civil penalties of up to $5,000 per day that payment 
is withheld after becoming due.
    (h) Disbursement of Revenues.--The receipts from royalties 
collected under this section shall be disbursed as follows:
            (1) One-half of such receipts shall be paid into the 
        Treasury of the United States and deposited as miscellaneous 
        receipts; and
            (2) One-half of such receipts shall be paid into a State 
        Fund or the Federal Fund in accordance with section 5706; until 
        termination as provided in section 5710.

SEC. 5706. ABANDONED LOCATABLE MINERALS MINE RECLAMATION FUND.

    (a) State Fund.--Any State within which royalties are collected 
pursuant to section 5705 from a mining claim and which wishes to become 
eligible to receive such proceeds allocated by paragraph 5705(h)(2) 
shall establish and maintain an interest-bearing abandoned locatable 
mineral mine reclamation fund (hereinafter referred to in this subtitle 
as ``State Fund'') to accomplish the purposes of this subtitle.
    (b) Federal Fund.--There is established on the books of the 
Treasury of the United States an interest-bearing fund to be known as 
the Abandoned Locatable Minerals Mine Reclamation Fund (hereinafter 
referred to in this subtitle as ``Federal Fund'') which shall consist 
of royalty proceeds allocated by paragraph 5705(h)(2) from mining 
claims in a State where a State Fund has not been established or 
maintained under subsection (a).

SEC. 5707. ALLOCATION AND PAYMENTS.

    (a) State Fund.--Royalties collected pursuant to section 5705 and 
allocated by paragraph 5705(h)(2) shall be paid by the Secretary of the 
Treasury to the State Fund established pursuant to subsection 5706(a) 
for the State where the mining claim from which the production occurred 
is located. Payments to States under this subsection with respect to 
any royalties received by the United States, shall be made not later 
than the last business day of the month in which such royalties are 
warranted by the United States Treasury to the Secretary of the 
Interior as having been received, except for any portion of such 
royalties which is under challenge, which shall be placed in a suspense 
account pending resolution of such challenge. Such warrants shall be 
issued by the United States Treasury not later than 10 days after 
receipt of such royalties by the Treasury. Royalties placed in a 
suspense account which are determined to be due the United States shall 
be payable to a State Fund not later than fifteen days after such 
challenge is resolved. Any such amount placed in a suspense account 
pending resolution shall bear interest until the challenge is resolved. 
In determining the amount of payments to State Funds under this 
section, the amount of such payments shall not be reduced by any 
administrative or other costs incurred by the United States.
    (b) Federal Fund.--Royalties collected pursuant to section 5705, 
and allocated by paragraph 5705(h)(2), from mining claims located in a 
State which has not established or maintained a State Fund, and such 
royalties from mining claims located in a State for which the 
Secretary's authority has expired under subsection 5710(a), shall be 
credited to the Federal Fund and distributed in accordance with 
subsection (c).
    (c) Transition.--Prior to the time a State establishes a State Fund 
pursuant to subsection 5706(a), any royalties collected from a mining 
claim within such State shall be deposited into the Federal Fund and 
allocated to such State. Once a State establishes a State Fund under 
subsection 5706(a), the State allocation in the Federal Fund with 
accrued interest shall be paid by the Secretary of the Treasury to the 
State Fund in accordance with subsection (a). Commencing three years 
after the date of enactment of this subtitle, the Secretary of the 
Treasury shall distribute royalty proceeds then accrued or which are 
thereafter credited to the Federal Fund equally among all States which 
maintain a State Fund established under subsection 5706(a), and for 
which the Secretary of the Treasury's authority has not expired under 
subsection 5710(a).

SEC. 5708. ELIGIBLE AREA.

    (a) In General.--Subject to subsection (b), lands and water 
eligible for reclamation under this subtitle shall be Federal lands or 
private lands patented under the general mining laws that--
            (1) have been adversely affected by past mineral activities 
        on lands abandoned and left inadequately reclaimed prior to the 
        date of enactment of this Subtitle; and
            (2) for which the State determines there is no identifiable 
        party with a continuing reclamation responsibility under State 
        or Federal laws.
    (b) Specific Sites and Areas Not Eligible.--The following areas 
shall not be eligible for expenditures from a State Fund:
            (1) Any area subject to a plan of operations submitted or 
        approved prior to, on or after the date of enactment of this 
        subtitle which includes remining or reclamation of the area 
        adversely affected by past locatable mineral activities.
            (2) Any area affected by coal mining eligible for 
        reclamation expenditures pursuant to section 404 of the Surface 
        Mining Control and Reclamation Act (30 U.S.C. 1234).
            (3) Any area designated for remedial action pursuant to the 
        Uranium Mill Tailings Radiation Control Act of 1978 (42 U.S.C. 
        7912).
            (4) Any area that was listed on the National Priorities 
        List pursuant to the Comprehensive Environmental Response, 
        Compensation and Liability Act of 1980 (42 U.S.C. 9605) prior 
        to the date of enactment of this subtitle, or where the 
        Environmental Protection Agency has initiated or caused to be 
        initiated a response action pursuant to that Act.

SEC. 5709. USES AND OBJECTIVES OF FUNDS.

    (a) Use of Funds.--Royalty proceeds in a State Fund shall be used 
for the reclamation of eligible areas. For purposes of this section, 
reclamation includes--
            (1) backfilling, fencing, sealing, or otherwise controlling 
        abandoned underground mine entries to protect public health and 
        safety;
            (2) abatement, treatment or control of water pollution;
            (3) shaping, grading, contouring and revegetation of land 
        to prevent erosion and sedimentation, or to enhance fish and 
        wildlife habitat;
            (4) removal or control of toxic or hazardous materials; and
            (5) control or reclamation of surface subsidence due to 
        abandoned underground mines.
    (b) Priorities.--Expenditures of royalty proceeds from a State Fund 
shall reflect the following priorities in the order stated, but shall 
not preclude, where feasible and appropriate, a combination of these 
priorities for cost-effective reclamation:
            (1) The protection of public health, safety, general 
        welfare and property from extreme danger from the adverse 
        effects of past mineral activities.
            (2) The protection of public health, safety, and general 
        welfare from the adverse effects of past mineral activities.

SEC. 5710. SUNSET PROVISIONS.

    (a) Termination of Authority.--The Secretary of the Treasury's 
authority to allocate funds to a State Fund under section 5707 shall 
expire on the date that the State submits a report to the Congress 
which states that there are no areas in the State which remain to be 
reclaimed.
    (b) Termination of Fund.--Upon the termination of authority as 
provided in subsection (a) with respect to all State Funds, the Federal 
Fund shall also be terminated, and all royalty proceeds thereafter 
remaining in the Federal Fund shall be paid into the Treasury of the 
United States and deposited as miscellaneous receipts.

SEC. 5711. EFFECT ON THE GENERAL MINING LAWS.

    The provisions of this Subtitle shall supersede the general mining 
laws only to the extent such laws conflict with the requirements of 
this Subtitle. Where no such conflict exists, the general mining laws, 
including all judicial and administrative decisions interpreting them, 
shall remain in full force and effect.

SEC. 5712. SEVERABILITY.

    If any provision of this subtitle or the applicability thereof to 
any person or circumstances is held invalid, the remainder of this 
Subtitle and the application of such provision to other persons or 
circumstances shall not be affected thereby.

                 Subtitle I--Department of the Interior

SEC. 5800. AIRCRAFT SERVICES.

    (a) Use of Private Contractors.--By not later than October 1, 1996, 
the Secretary of the Interior shall contract with private entities for 
the provision of all aircraft services required by the Department of 
the Interior, other than those available from existing DOI aircraft 
whose primary purpose is fire suppression.
    (b) Sale of Federal Aircraft.--By September 30, 1998, the Secretary 
of the Interior is authorized and directed to sell all aircraft owned 
by the Department of the Interior, and all associated equipment and 
facilities, other than those whose primary purpose is fire suppression.
    (c) Exemptions.--The disposition of assets under this section is 
not subject to section 202 and 203 of the Federal Property and 
Administrative Services Act of 1949 (40 U.S.C. 483 and 484) or section 
13 of the Surplus Property Act of 1944 (50 U.S.C. App. 1622).
    (d) Disposition of Proceeds.--The proceeds from dispositions under 
this section shall be returned to the Treasury as miscellaneous 
receipts and all savings from reduced overhead and other costs related 
to the management of the assets sold shall be returned to the Treasury.

              Subtitle J--Power Marketing Administrations

          PART I--BONNEVILLE POWER ADMINISTRATION REFINANCING

SEC. 5900. DEFINITIONS.

    For the purposes of this subtitle--
            (1) ``Administrator'' means the Administrator of the 
        Bonneville Power Administration;
            (2) ``capital investment'' means a capitalized cost funded 
        by Federal appropriations that--
                    (A) is for a project, facility, or separable unit 
                or feature of a project or facility;
                    (B) is a cost for which the Administrator is 
                required by law to establish rates to repay to the 
                United States Treasury through the sale of electric 
                power, transmission, or other services;
                    (C) excludes a Federal irrigation investment; and
                    (D) excludes an investment financed by the current 
                revenues of the Administrator or by bonds issued and 
                sold, or authorized to be issued and sold, by the 
                Administrator under section 13 of the Federal Columbia 
                River Transmission System Act (16 U.S.C.838(k));
            (3) ``new capital investment'' means a capital investment 
        for a project, facility, or separable unit or feature of a 
        project, facility, or separable unit or feature of a project or 
        facility, placed in service after September 30, 1995;
            (4) ``old capital investment'' means a capital investment 
        whose capitalized cost--
                    (A) was incurred, but not repaid, before October 1, 
                1995, and
                    (B) was for a project, facility, or separable unit 
                or feature of a project or facility, placed in service 
                before October 1, 1995;
            (5) ``repayment date'' means the end of the period within 
        which the Administrator's rates are to assure the repayment of 
        the principal amount of a capital investment; and
            (6) ``Treasury rate'' means--
                    (A) for an old capital investment, a rate 
                determined by the Secretary of the Treasury, taking 
                into consideration prevailing market yields, during the 
                month preceding October 1, 1995, on outstanding 
                interest-bearing obligations of the United States with 
                periods to maturity comparable to the period between 
                October 1, 1995, and the repayment date for the old 
                capital investment; and
                    (B) for a new capital investment, a rate determined 
                by the Secretary of the Treasury, taking into 
                consideration prevailing market yields, during the 
                month preceding the beginning of the fiscal year in 
                which the related project, facility, or separable unit 
                or feature is placed in service, on outstanding 
                interest-bearing obligations of the United States with 
                periods to maturity comparable to the period between 
                the beginning of the fiscal year and the repayment date 
                for the new capital investment.

SEC. 5901. NEW PRINCIPAL AMOUNTS.

    (a) Principal Amount.--Effective October 1, 1995, an old capital 
investment has a new principal amount that is the sum of--
            (1) the present value of the old payment amounts for the 
        old capital investment, calculated using a discount rate equal 
        to the Treasury rate for the old capital investment; and
            (2) an amount equal to $100,000,000 multiplied by a 
        fraction whose numerator is the principal amount of the old 
        payment amounts for the old capital investment and whose 
        denominator is the sum of the principal amounts of the old 
        payment amounts for all old capital investments.
    (b) Determination.--With the approval of the Secretary of the 
Treasury based solely on consistency with this part the Administrator 
shall determine the new principal amounts under section 5901 and the 
assignment of interest rates to the new principal amounts under section 
5902.
    (c) Old Payment Amount.--For the purposes of this section, ``old 
payment amounts'' means, for an old capital investment, the annual 
interest and principal that the Administrator would have paid to the 
United States Treasury from October 1, 1995, if this part were not 
enacted, assuming that--
            (1) the principal were repaid--
                    (A) on the repayment date the Administrator 
                assigned before October 1, 1993, to the old capital 
                investment, or
                    (B) with respect to an old capital investment for 
                which the Administrator has not assigned a repayment 
                date before October 1, 1993, on a repayment date the 
                Administrator shall assign to the old capital 
                investment in accordance with paragraph 10(d)(1) of the 
                version of Department of Energy Order RA 6120.2 in 
                effect on October 1, 1993; and
            (2) interest were paid--
                    (A) at the interest rate the Administrator assigned 
                before October 1, 1993, to the old capital investment, 
                or
                    (B) with respect to an old capital investment for 
                which the Administrator has not assigned an interest 
                rate before October 1, 1993, at a rate determined by 
                the Secretary of the Treasury, taking into 
                consideration prevailing market yields, during the 
                month preceding the beginning of the fiscal year in 
                which the related project, facility, or separable unit 
                or feature is placed in service, on outstanding 
                interest-bearing obligations of the United States with 
                periods to maturity comparable to the period between 
                the beginning of the fiscal year and the repayment date 
                for the old capital investment.

SEC. 5902. INTEREST RATE FOR NEW PRINCIPAL AMOUNTS.

    As of October 1, 1995, the unpaid balance on the new principal 
amount established for an old capital investment under section 5901 
bears interest annually at the Treasury rate for the old capital 
investment until the earlier of the date that the new principal amount 
is repaid or the repayment date for the new principal amount.

SEC. 5903. REPAYMENT DATES.

    As of October 1, 1995, the repayment date for the new principal 
amount established for an old capital investment under section 5901 is 
no earlier than the repayment date for the old capital investment 
assumed in section 5901(c)(1).

SEC. 5904. PREPAYMENT LIMITATIONS.

    During the period October 1, 1995, through September 30, 2000, the 
total new principal amounts of old capital investments, as established 
under section 5901, that the Administrator may pay before their 
respective repayment dates shall not exceed $100,000,000.

SEC. 5905. INTEREST RATES FOR NEW CAPITAL INVESTMENTS DURING 
              CONSTRUCTION.

    (a) New Capital Investment.--The principal amount of a new capital 
investment includes interest in each fiscal year of construction of the 
related project, facility, or separable unit or feature at a rate equal 
to the one-year rate for the fiscal year on the sum of--
            (1) construction expenditures that were made from the date 
        construction commenced through the end of the fiscal year, and
            (2) accrued interest during construction.
    (b) Payment.--The Administrator is not required to pay, during 
construction of the project, facility, or separable unit or feature, 
the interest calculated, accrued, and capitalized under subsection (a).
    (c) One-Year Rate.--For the purposes of this section, ``one-year 
rate'' for a fiscal year means a rate determined by the Secretary of 
the Treasury, taking into consideration prevailing market yields, 
during the month preceding the beginning of the fiscal year, on 
outstanding interest-bearing obligations of the United States with 
periods to maturity of approximately one year.

SEC. 5906. INTEREST RATES FOR NEW CAPITAL INVESTMENTS.

    The unpaid balance on the principal amount of a new capital 
investment bears interest at the Treasury rate for the new capital 
investment from the date the related project, facility, or separable 
unit or feature is placed in service until the earlier of the date the 
new capital investment is repaid or the repayment date for the new 
capital investment.

SEC. 5907. APPROPRIATED AMOUNTS.

    The Confederated Tribe of the Colville Reservation Grand Coulee Dam 
Settlement Act (Public Law No. 103-436) is amended by striking section 
6 and its catchline and inserting the following:

``SEC. 6. APPROPRIATED AMOUNTS.

    ``(a) Appropriated Amounts.--Without fiscal year limitation, there 
are appropriated to the Administrator $15.25 million in fiscal year 
1996, $15.86 million in fiscal year 1997, $16.49 million in fiscal year 
1998, $17.15 million in fiscal year 1999, $17.84 million in fiscal year 
2000, and $4.10 million in each succeeding fiscal year so long as the 
Administrator makes annual payments to the Tribes under the settlement 
agreement.
    ``(b) Definitions.--For the purposes of this section--
            ``(1) `settlement agreement' means that settlement 
        agreement between the United States of America and the 
        Confederated Tribes of the Colville Reservation signed by the 
        Tribes on April 16, 1994, and by the United States of America 
        on April 21, 1994, which settlement agreement resolves claims 
        of the Tribes in Docket 181-D of the Indian Claims Commission, 
        which docket has been transferred to the United States Court of 
        Federal Claims; and
            ``(2) `Tribes' means the Confederated Tribes of the 
        Colville Reservation, a federally recognized Indian Tribe.''.

SEC. 5908. CONTRACT PROVISIONS.

    In each contract of the Administrator that provides for the 
Administrator to sell electric power, transmission, or related 
services, and that is in effect after September 30, 1995, the 
Administrator shall offer to include, or as the case may be, shall 
offer to amend to include, provisions specifying that after September 
30, 1995--
            (1) the Administrator shall establish rates and charges on 
        the basis that--
                    (A) the principal amount of an old capital 
                investment shall be no greater than the new principal 
                amount established under section 5901 of this part;
                    (B) the interest rate applicable to the unpaid 
                balance of the new principal amount of an old capital 
                investment shall be no greater than the interest rate 
                established under section 5902 of this part;
                    (C) any payment of principal of an old capital 
                investment shall reduce the outstanding principal 
                balance of the old capital investment in the amount of 
                the payment at the time the payment is tendered; and
                    (D) any payment of interest on the unpaid balance 
                of the new principal amount of an old capital 
                investment shall be a credit against the appropriate 
                interest account in the amount of the payment at the 
                time the payment is tendered;
            (2) apart from charges necessary to repay the new principal 
        amount of an old capital investment as established under 
        section 5901 of this part and to pay the interest on the 
        principal amount under section 5902 of this part, no amount may 
        be charged for return to the United States Treasury as 
        repayment for or return on an old capital investment, whether 
        by way of rate, rent, lease payment, assessment, user charge, 
        or any other fee;
            (3) amounts provided under section 1304 of title 31, United 
        States Code, shall be available to pay, and shall be the sole 
        source for payment of, a judgment against or settlement by the 
        Administrator or the United States on a claim for a breach of 
        the contract provisions required by this part; and
            (4) the contract provisions specified in this part do not--
                    (A) preclude the Administrator from recovering, 
                through rates or other means, any tax that is generally 
                imposed on electric utilities in the United States, or
                    (B) affect the Administrator's authority under 
                applicable law, including section 7(g) of the Pacific 
                Northwest Electric Power Planning and Conservation Act 
                (16 U.S.C. 839e(g)), to--
                            (i) allocate costs and benefits, including 
                        but not limited to fish and wildlife costs, to 
                        rates or resources, or
                            (ii) design rates.

SEC. 5909. SAVINGS PROVISIONS.

    (a) Repayment.--This part does not affect the obligation of the 
Administrator to repay the principal associated with each capital 
investment, and to pay interest on the principal, only from the 
``Administrator's net proceeds,'' as defined in section 13 of the 
Federal Columbia River Transmission System Act (16 U.S.C. 838k(b)).
    (b) Payment of Capital Investment.--Except as provided in section 
5904 of this part, this part does not affect the authority of the 
Administrator to pay all or a portion of the principal amount 
associated with a capital investment before the repayment date for the 
principal amount.

          PART II--ALASKA POWER MARKETING ADMINISTRATION SALE

SEC. 5910. SALE OF SNETTISHAM AND EKLUTNA HYDROELECTRIC PROJECTS.

    (a) Sale of Snettisham.--The Secretary of Energy is authorized and 
directed to sell the Snettisham Hydroelectric Project (referred to in 
this part as ``Snettisham'') to the State of Alaska in accordance with 
the terms of this part and the February 10, 1989, Snettisham Purchase 
Agreement, as amended, between the Alaska Power Administration of the 
United States Department of Energy and the Alaska Power Authority and 
the Authority's successors.
    (b) Sale of Eklutna.--The Secretary of Energy is authorized and 
directed to sell the Eklutna Hydroelectric Project (referred to in this 
part as ``Eklutna'') to the Municipality of Anchorage doing business as 
Municipal Light and Power, the Chugach Electric Association, Inc., and 
the Matanuska Electric Association, Inc. (referred to in this part as 
``Eklutna Purchasers''), in accordance with the terms of this part and 
the August 2, 1989, Eklutna Purchase Agreement, as amended, between the 
Alaska Power Administration of the United States Department of Energy 
and the Eklutna Purchasers.
    (c) Federal Sale Assistance.--The heads of other Federal 
departments and agencies, including the Secretary of the Interior, 
shall assist the Secretary of Energy in implementing the sales 
authorized and directed by this part.
    (d) Disposition of Proceeds.--Proceeds from the sales required by 
this part shall be deposited in the Treasury of the United States to 
the credit of miscellaneous receipts.
    (e) Preparation of Eklutna and Snettisham for Sale.--The Secretary 
of Energy is authorized and directed to use such funds from the sale of 
electric power by the Alaska Power Administration as may be necessary 
to prepare, survey and acquire Eklutna and Snettisham assets for sale 
and conveyance. Such preparations and acquisitions shall provide 
sufficient title to ensure the beneficial use, enjoyment, and occupancy 
by the purchaser.

SEC. 5911. EXEMPTION AND OTHER PROVISIONS.

    (a) Federal Power Act Exemption.--
            (1) After the sales authorized by this part occur, Eklutna 
        and Snettisham, including future modifications, shall continue 
        to be exempt from the requirements of the Federal Power Act (16 
        U.S.C. 791a et seq.) as amended.
            (2) The exemption provided by paragraph (1) does not affect 
        the Memorandum of Agreement entered into among the State of 
        Alaska, the Eklutna Purchasers, the Alaska Energy Authority, 
        and Federal fish and wildlife agencies regarding the 
        protection, mitigation of, damages to, and enhancement of fish 
        and wildlife, dated August 7, 1991, which remains in full force 
        and effect.
            (3) Nothing in this part or the Federal Power Act preempts 
        the State of Alaska from carrying out the responsibilities and 
        authorities of the Memorandum of Agreement.
    (b) Judicial Review.--
            (1) The United States District Court for the District of 
        Alaska shall have jurisdiction to review decisions made under 
        the Memorandum of Agreement and to enforce the provisions of 
        the Memorandum of Agreement, including the remedy of specific 
        performance.
            (2) An action seeking review of a Fish and Wildlife Program 
        (``Program'') of the Governor of Alaska under the Memorandum of 
        Agreement or challenging actions of any of the parties to the 
        Memorandum of Agreement prior to the adoption of the Program 
        shall be brought not later than ninety days after the date on 
        which the Program is adopted by the Governor of Alaska, or be 
        barred.
            (3) An action seeking review of implementation of the 
        Program shall be brought not later than ninety days after the 
        challenged act implementing the Program, or be barred.
    (c) Transfer of Eklutna.--With respect to Eklutna lands described 
in Exhibit A of the Eklutna Purchase Agreement:
            (1) The Secretary of the Interior shall issue rights-of-way 
        to the Alaska Power Administration for subsequent reassignment 
        to the Eklutna Purchasers--
                    (A) at no cost to the Eklutna Purchasers;
                    (B) to remain effective for a period equal to the 
                life of Eklutna as extended by improvements, repairs, 
                renewals, or replacements; and
                    (C) sufficient for the operation of, maintenance 
                of, repair to, and replacement of, and access to, 
                Eklutna facilities located on military lands and lands 
                managed by the Bureau of Land Management, including 
                lands selected by the State of Alaska.
            (2) If the Eklutna Purchasers subsequently sell or transfer 
        Eklutna to private ownership, the Bureau of Land Management may 
        assess reasonable and customary fees for continued use of the 
        rights-of-way on lands managed by the Bureau of Land Management 
        and military lands in accordance with existing law.
            (3) Fee title to lands at Anchorage Substation shall be 
        transferred to Eklutna Purchasers at no additional cost if the 
        Secretary of the Interior determines that pending claims to, 
        and selections of, those lands are invalid or relinquished.
            (4) With respect to the Eklutna lands identified in 
        paragraph 1 of Exhibit A of the Eklutna Purchase Agreement, the 
        State of Alaska may select, and the Secretary of the Interior 
        shall convey to the State, improved lands under the selection 
        entitlements in section 6 of the Act of July 7, 1958 (commonly 
        referred to as the Alaska Statehood Act, Public Law 85-508, 72 
        Stat. 339, as amended), and the North Anchorage Land Agreement 
        dated January 31, 1983. This conveyance shall be subject to the 
        rights-of-way provided to the Eklutna Purchasers under 
        paragraph (1).
    (d) Transfer of Snettisham.--With respect to the Snettisham lands 
identified in paragraph 1 of Exhibit A of the Snettisham Purchase 
Agreement and Public Land Order No. 5108, the State of Alaska may 
select, and the Secretary of the Interior shall convey to the State of 
Alaska, improved lands under the selection entitlements in section 6 of 
the Act of July 7, 1958 (commonly referred to as the Alaska Statehood 
Act, Public Law 85-508, 72 Stat. 339, as amended).
    (e) APA Termination.--Not later than one year after both of the 
sales authorized in section 102 have occurred, as measured by the 
Transaction Dates stipulated in the Purchase Agreements, the Secretary 
of Energy shall--
            (1) complete the business of, and close out, the Alaska 
        Power Administration;
            (2) submit to Congress a report documenting the sales; and
            (3) return unobligated balances of funds appropriated for 
        the Alaska Power Administration to the Treasury of the United 
        States.
    (f) Repeal.--The Act of July 31, 1950 (64 Stat. 382) is repealed 
effective on the date, as determined by the Secretary of Energy, that 
all Eklutna assets have been conveyed to the Eklutna Purchasers.
    (g) Repeal.--Section 204 of the Flood Control Act of 1962 (76 Stat. 
1193) is repealed effective on the date, as determined by the Secretary 
of Energy, that all Snettisham assets have been conveyed to the State 
of Alaska.
    (h) Conformity Changes to the Department of Energy Organization 
Act.--As of the later of the two dates determined in subsections (f) 
and(g), section 302(a) of the Department of Energy Organization Act (42 
U.S.C. 7152(a)) is amended--
            (1) in paragraph (1)--
                    (A) by striking subparagraph (C); and
                    (B) by redesignating subparagraphs (D), (E), and 
                (F) as subparagraphs (C), (D), and (E) respectively; 
                and
            (2) in paragraph (2) by striking out ``and the Alaska Power 
        Administration'' and by inserting ``and'' after ``Southwestern 
        Power Administration,''.
    (i) Repeal.--The Act of August 9, 1955, concerning water resources 
investigation in Alaska (69 Stat. 618), is repealed.
    (j) Asset Disposal.--The sales of Eklutna and Snettisham under this 
part are not considered disposal of Federal surplus property under the 
Federal Property and Administrative Services Act of 1949 (40 U.S.C. 
484) or the Act of October 3, 1944, popularly referred to as the 
``Surplus Property Act of 1944'' (50 U.S.C. App. 1622).
    (k) For purposes of section 147(d) of the Internal Revenue Code, 
``1st use'' of Snettisham shall be considered to occur upon acquisition 
of the property by or on behalf of the State of Alaska.

        Subtitle K--Radio and Television Communication Site Fees

SEC. 5920. RADIO AND TELEVISION COMMUNICATION SITE FEES.

    (a) Additional Users of Communication Sites.--(1) If the radio or 
television communications site user is permitted under the terms of its 
site use authorization from the Bureau of Land Management or the Forest 
Service to grant access to the site to additional users, then the radio 
or television communications site user shall pay annually to the Bureau 
of Land Management or the Forest Service an amount equal to 25 percent 
of the gross income it receives from each such additional user during 
that year.
    (2) Authorizations to radio and television communications site 
users shall require such site users to provide the Bureau of Land 
Management or the Forest Service with a certified list which identifies 
all additional users of such sites and all gross revenues received from 
such additional users. The Bureau of Land Management and the Forest 
Service shall not require any additional user of a radio or television 
communications site to obtain a separate authorization to use such a 
site.
    (b) Regulations.--(1) The Secretaries shall prescribe appropriate 
rules and regulations to carry out the provisions of this section.
    (2) Ten years after the date of enactment of this section, the 
Secretaries shall establish a broad-based advisory group, including 
representatives from the radio and television broadcast industry, to 
review the schedule of charges and other acceptable criteria for 
determining fair market value for radio and television communications 
site users. The advisory group shall report its findings to the 
Congress no later than 1 year after it is established.
    (c) Initial Schedule of Charges.--(1) Until modified pursuant to 
subsection (b) of this section, the schedule of charges for television 
communications site users which the Secretaries shall prescribe 
pursuant to subsection (a) of this section shall be as listed in 
exhibit 3, (television rental fee schedule) in the report of the radio 
and television broadcast use fee advisory committee dated December 
1992.
    (2) Until modified pursuant to subsection (b) of this section, the 
schedule of charges for radio communications site users which the 
Secretaries shall prescribe pursuant to subsection (a) of this section 
shall be as listed in exhibit 4, (radio rental fee schedule) in the 
report of the radio and television broadcast use fee advisory committee 
dated December 1992.
    (d) Advisory Group.--(1) The Secretaries are directed to jointly 
establish a broad-based advisory group comprised of representatives 
from the non-broadcast communications industry (users of both private 
and public communication sites) and the two agencies to review 
recommendations on acceptable criteria for determining fair market 
values and next best alternative use.
    (2) The advisory group shall review the methodology used in any 
previous studies and reach concurrence on such methodology.
    (3) The advisory group shall also assess the validity of the 
results of such studies, taking into account all reasonable options for 
the establishment of fair market values and next best alternative use.
    (4) The advisory group shall report its findings to the Committee 
on Energy and Natural Resources of the United States Senate and the 
Committee on Natural Resources of the United States House of 
Representatives within one year after the enactment of this Act.

      Subtitle L--Amendments to Outer Continental Shelf Lands Act

SEC. 5930. AMENDMENTS TO THE OUTER CONTINENTAL SHELF LANDS ACT.

    Section 8(a) of the Outer Continental Shelf Lands Act, (43 U.S.C. 
1337(a)(3)), is amended by striking paragraph (3) in its entirety and 
inserting the following:
            ``(3)(A) The Secretary may through primary, secondary, or 
        tertiary recovery means, reduce or eliminate any royalty or net 
        profit share set forth in the lease(s). With the lessee's 
        consent, the Secretary may make other modifications to the 
        royalty or net profit share terms of the lease in order to--
                    ``(i) promote development or increased production 
                on producing or non-producing leases; or
                    ``(ii) encourage production of marginal resources 
                on producing or non-producing leases;
            ``(B)(i) Notwithstanding any other provision of this Act, 
        with respect to any lease or unit in existence on the date of 
        enactment of the Outer Continental Shelf Deep Water Royalty 
        Relief Act meeting the requirements of this subparagraph, no 
        royalty payments shall be due on new production, as defined in 
        clause (iv) of this subparagraph, from any lease or unit 
        located in water depths of 200 meters or greater in the Western 
        and Central Planning Areas of the Gulf of Mexico, including 
        that portion of the Eastern Planning Area of the Gulf of Mexico 
        encompassing whole lease blocks lying west of 87 degrees, 30 
        minutes West longitude, until such volume of production as 
        determined pursuant to clause (ii) has been produced by the 
        lessee.
            ``(ii) Upon submission of a complete application by the 
        lessee, the Secretary shall determine within 180 days of such 
        application whether new production from such lease or unit 
        would be economic in the absence of the relief from the 
        requirement to pay royalties provided for by clause (i) of this 
        subparagraph. In making such determination, the Secretary shall 
        consider the increased technological and financial risk of deep 
        water development and all costs associated with exploring, 
        developing, and producing from the lease. The lessee shall 
        provide information required for a complete application to the 
        Secretary prior to such determination. The Secretary shall 
        clearly define the information required for a complete 
        application under this section. Such application may be made on 
        the basis of an individual lease or unit. If the Secretary 
        determines that such new production would be economic in the 
        absence of the relief from the requirement to pay royalties 
        provided for by clause (i) of this subparagraph, the provisions 
        of clause (i) shall not apply to such production. If the 
        Secretary determines that such new production would not be 
        economic in the absence of the relief from the requirement to 
        pay royalties provided for by clause (i), the Secretary must 
        determine the volume of production from the lease or unit on 
        which no royalties would be due in order to make such new 
        production economically viable; except that for new production 
        as defined in clause (iv)(aa), in no case will that volume be 
        less than 17.5 million barrels of oil equivalent in water 
        depths of 200 to 400 meters, 52.5 million barrels of oil 
        equivalent in 400-800 meters of water, and 87.5 million barrels 
        of oil equivalent in water depths greater than 800 meters. 
        Redetermination of the applicability of clause (i) shall be 
        undertaken by the Secretary when requested by the lessee prior 
        to the commencement of the new production and upon significant 
        change in the factors upon which the original determination was 
        made. The Secretary shall make such redetermination within 120 
        days of submission of a complete application. The Secretary may 
        extend the time period for making any determination or 
        redetermination under this clause for 30 days, or longer if 
        agreed to by the applicant, if circumstances so warrant. The 
        lessee shall be notified in writing of any determination or 
        redetermination and the reasons for and assumptions used for 
        such determination. Any determination or redetermination under 
        this clause shall be a final agency action. The Secretary's 
        determination or redetermination shall be judicially reviewable 
        under section 10 (a) of the Administrative Procedures Act, 5 
        U.S.C. Sec. 702, only for actions filed within 30 days of the 
        Secretary's determination or redetermination.
            ``(iii) In the event that the Secretary fails to make the 
        determination or redetermination called for in clause (ii) upon 
        application by the lessee within the time period, together with 
        any extension thereof, provided for by clause (ii), no royalty 
        payments shall be due on new production as follows:
                    ``(I) For new production, as defined in clause 
                (iv)(aa) of this subparagraph, no royalty shall be due 
                on such production according to the schedule of minimum 
                volumes specified in clause (ii) of this subparagraph.
                    ``(II) For new production, as defined in clause 
                (iv)(bb) of this subparagraph, no royalty shall be due 
                on such production for one year following the start of 
                such production.
            ``(iv) For purposes of this subparagraph, the term `new 
        production' is--
                    ``(I) any production from a lease from which no 
                royalties are due on production, other than test 
                production, prior to the date of enactment of the Outer 
                Continental Shelf Deep Water Royalty Relief Act; or
                    ``(II) any production resulting from lease 
                development activities pursuant to a Development 
                Operations Coordination Document, or supplement thereto 
                that would expand production significantly beyond the 
                level anticipated in the Development Operations 
                Coordination Document, approved by the Secretary after 
                the date of enactment of the Outer Continental Shelf 
                Deep Water Royalty Relief Act.
            ``(v) During the production of volumes determined pursuant 
        to clause (ii) or (iii) of this subparagraph, in any year 
        during which the arithmetic average of the closing prices on 
        the New York Mercantile Exchange for Light Sweet crude oil 
        exceeds $28.00 per barrel, any production of oil will be 
        subject to royalties at the lease stipulated royalty rate. Any 
        production subject to this clause shall be counted toward the 
        production volume determined pursuant to clause (ii) or (iii). 
        Estimated royalty payments will be made if such average of the 
        closing prices for the previous year exceeds $28.00. After the 
        end of the calendar year, when the new average price can be 
        calculated, lessees will pay any royalties due, with interest 
        but without penalty, or can apply for a refund, with interest, 
        of any overpayment.
            ``(vi) During the production of volumes determined pursuant 
        to clause (ii) or (iii) of this subparagraph, in any year 
        during which the arithmetic average of the closing prices on 
        the New York Mercantile Exchange for natural gas exceeds $3.50 
        per million British thermal units, any production of natural 
        gas will be subject to royalties at the lease stipulated 
        royalty rate. Any production subject to this clause shall be 
        counted toward the production volume determined pursuant to 
        clauses (ii) or (iii). Estimated royalty payments will be made 
        if such average of the closing prices for the previous year 
        exceeds $3.50. After the end of the calendar year, when the new 
        average price can be calculated, lessees will pay any royalties 
        due, with interest but without penalty, or can apply for a 
        refund, with interest, of any overpayment.
            ``(vii) The prices referred to in clauses (v) and (vi) of 
        this subparagraph shall be changed during any calendar year 
        after 1994 by the percentage, if any, by which the implicit 
        price deflator for the gross domestic product changed during 
        the preceding calendar year.''.

SEC. 5931. NEW LEASES.

    (a) Amendments.--Section 8(a)(1) of the Outer Continental Shelf 
Lands Act (43 U.S.C. 1337(a)(1)) is amended as follows:
            (1) Redesignate section 8(a)(1)(H) as section 8(a)(1)(I);
            (2) Add a new section 8(a)(1)(H) as follows:
                    ``(H) cash bonus bid with royalty at no less than 
                12 and 1/2 per centum fixed by the Secretary in amount 
                or value of production saved, removed, or sold, and 
                with suspension of royalties for a period, volume, or 
                value of production determined by the Secretary. Such 
                suspensions may vary based on the price of production 
                from the lease.''.
    (b) Production.--For all tracts located in water depths of 200 
meters or greater in the Western and Central Planning Ares of the Gulf 
of Mexico, including that portion of the Eastern Planning Area of the 
Gulf of Mexico encompassing whole lease blocks lying west of 87 
degrees, 30 minutes West longitude, any lease sale within seven years 
of the date of enactment of this Act, shall use the bidding system 
authorized in section 8(a)(1)(H) of the Outer Continental Shelf Lands 
Act, as amended by this Act, except that the suspension of royalties 
shall be set at a volume of not less than the following:
            (1) 17.5 million barrels of oil equivalent for leases in 
        water depths of 200 to 400 meters;
            (2) 52.5 million barrels of oil equivalent for leases in 
        400 to 800 meters of water; and
            (3) 87.5 million barrels of oil equivalent for leases in 
        water depths greater than 800 meters.

SEC. 5932. REGULATIONS.

    The Secretary shall promulgate such rules and regulations as are 
necessary to implement the provisions of this Act within 180 days after 
the enactment of this Act.

          TITLE VI--COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

SEC. 6001. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This title may be cited as the ``Public Works 
Reconciliation Act of 1995''.
    (b) Table of Contents.--The table of contents of this title is as 
follows:

Sec. 6001. Short title; table of contents.
Sec. 6002. Highway demonstration projects.
Sec. 6003. Technical correction concerning minimum allocation.
Sec. 6004. Nuclear Regulatory Commission annual charges.
Sec. 6005. Radiological emergency preparedness fees.

SEC. 6002. HIGHWAY DEMONSTRATION PROJECTS.

    (a) Projects Authorized for Fiscal Years 1996 and 1997.--
            (1) Reductions.--Subject to paragraph (2), notwithstanding 
        any other law, for each of fiscal years 1996 and 1997 and with 
        respect to each State, the total of the amounts authorized, 
        allocated, or unallocated to the State for highway 
        demonstration projects under sections 1103 through 1108 of the 
        Intermodal Surface Transportation Efficiency Act of 1991 
        (Public Law 102-240; 105 Stat. 2027) shall be reduced by 15 
        percent.
            (2) Order of reductions.--For fiscal year 1996, the 
        reductions required by paragraph (1) shall be made after any 
        reduction required for the fiscal year under section 1003(c) of 
        the Act (Public Law 102-240; 105 Stat. 1921).
    (b) Projects Previously Authorized Under Certain Transportation 
Laws.--
            (1) Reductions.--Subject to paragraph (2), notwithstanding 
        any other law, with respect to each State, the total 
        unobligated balance as of September 30, 1995, of the amounts 
        authorized, allocated, unallocated, or otherwise provided to 
        the State for highway demonstration projects under all of the 
        following laws shall be reduced by 15 percent:
                    (A) For each of fiscal years 1992 through 1995, 
                sections 1103 through 1108 of the Intermodal Surface 
                Transportation Efficiency Act of 1991 (Public Law 102-
                240; 105 Stat. 2027).
                    (B) Section 149 of the Surface Transportation and 
                Uniform Relocation Assistance Act of 1987 (Public Law 
                100-17; 101 Stat. 181).
                    (C) Section 131 of the Surface Transportation 
                Assistance Act of 1982 (Public Law 97-424; 96 Stat. 
                2119).
            (2) Effect on other reductions.--A reduction under 
        paragraph (1) made with respect to a law described in paragraph 
        (1)(A) shall not affect any reduction required for a fiscal 
        year under section 1003(c) of the Intermodal Surface 
        Transportation Efficiency Act of 1991 (Public Law 102-240; 105 
        Stat. 1921).

SEC. 6003. TECHNICAL CORRECTION CONCERNING MINIMUM ALLOCATION.

    (a) Findings.--Congress finds that--
            (1) under the amendments made by section 1013(a) of the 
        Intermodal Surface Transportation Efficiency Act of 1991 
        (Public Law 102-240; 105 Stat. 1940), each State receives back 
        from the Federal-aid highway program not less than 90 percent 
        of the State's percentage of all contributions to the Highway 
        Account of the Highway Trust Fund established by section 9503 
        of the Internal Revenue Code of 1986;
            (2) for fiscal year 1995, the amount apportioned under 
        section 157(a)(4) of title 23, United States Code, was 
        $1,427,000,000;
            (3) in fiscal year 1996, the Interstate construction 
        program under the title will be terminated and replaced with a 
        new reimbursement program; and
            (4) as a result of the termination of the Interstate 
        construction program, the number of States receiving funds 
        under section 157(a)(4) of the title for fiscal year 1996 may 
        decrease and the amount of funds some States will require will 
        decrease, and, therefore, the amount of funds necessary to 
        ensure that each State receives not less than 90 percent will 
        be reduced from $1,427,000,000 to an estimated $565,000,000.
    (b) Correction.--
            (1) In general.--With respect to the first fiscal year 
        beginning after September 30, 1995--
                    (A) the Secretary of Transportation shall 
                determine, in accordance with the policies established 
                by the Intermodal Surface Transportation Efficiency Act 
                of 1991 (Public Law 102-240; 105 Stat. 1914)--
                            (i) which of the States will no longer 
                        require an apportionment under section 
                        157(a)(4) of title 23, United States Code; and
                            (ii) which of the States will require 
                        decreased funding under section 157(a)(4) of 
                        the title;
                as a result of the termination of the Interstate 
                construction program; and
                    (B) as a result of the reduced number of States 
                that may require an apportionment under section 
                157(a)(4) of the title, and the decrease in the amount 
                of funds some States will require under section 
                157(a)(4) of the title, the amount apportioned under 
                section 157(a)(4) of the title shall be reduced from 
                the amount apportioned for fiscal year 1995 by 60.4 
                percent.
            (2) Effect on certain calculations.--The correction made by 
        paragraph (1) shall not be taken into account in making the 
        calculations required under sections 1003(c), 1013(c), and 1015 
        of the Intermodal Surface Transportation Efficiency Act of 1991 
        (Public Law 102-240; 105 Stat. 1921, 1940, and 1943).

SEC. 6004. NUCLEAR REGULATORY COMMISSION ANNUAL CHARGES.

    Section 6101(a)(3) of the Omnibus Budget Reconciliation Act of 1990 
(42 U.S.C. 2214(a)(3)) is amended by striking ``September 30, 1998'' 
and inserting ``September 30, 2005''.

SEC. 6005. RADIOLOGICAL EMERGENCY PREPAREDNESS FEES.

    The first paragraph of the matter under the heading 
``administrative provisions'' under the heading ``Federal Emergency 
Management Agency'' in title III of the Departments of Veterans Affairs 
and Housing and Urban Development, and Independent Agencies 
Appropriations Act, 1995 (Public Law 103-327; 108 Stat. 2325), is 
amended--
            (1) in the first and second sentences, by striking ``fiscal 
        year 1995'' each place it appears and inserting ``each of 
        fiscal years 1995 through 2005''; and
            (2) in the last sentence, by striking ``only authorized 
        during fiscal year 1995'' and inserting ``authorized only 
        during fiscal years 1995 through 2005''.

      TITLE VII--COMMITTEE ON FINANCE--SPENDING CONTROL PROVISIONS

SEC. 7000. REFERENCES; TABLE OF CONTENTS.

    (a) Amendments to Social Security Act.--Except as otherwise 
specifically provided, whenever in subtitles A through G of this title 
an amendment is expressed in terms of an amendment to or repeal of a 
section or other provision, the reference shall be considered to be 
made to that section or other provision of the Social Security Act.
    (b) References to OBRA.--In this title, the terms ``OBRA-1986'', 
``OBRA-1987'', ``OBRA-1990'', and ``OBRA-1993'' refer to the Omnibus 
Budget Reconciliation Act of 1986 (Public Law 99-509), the Omnibus 
Budget Reconciliation Act of 1987 (Public Law 100-203), the Omnibus 
Budget Reconciliation Act of 1989 (Public Law 101-239), the Omnibus 
Budget Reconciliation Act of 1990 (Public Law 101-508), and the Omnibus 
Budget Reconciliation Act of 1993 (Public Law 103-66), respectively.
    (c) Table of Contents of Subtitles A Through J.--The table of 
contents of subtitles A through J of this title is as follows:

      TITLE VII--COMMITTEE ON FINANCE--SPENDING CONTROL PROVISIONS

Sec. 7000. References; table of contents.

                          Subtitle A--Medicare

                    Chapter 1--Medicare Choice Plans

          subchapter a--establishment of medicare choice plans
Sec. 7001. Medicare choice plans.
Sec. 7002. Treatment of 1876 organizations.
Sec. subchapter b--tax provisions relating to medicare choice plans
Sec. 7006. Medicare Choice Accounts.
Sec. 7007. Certain rebates included in gross income.

                Chapter 2--Provisions Relating to Part A

          subchapter a--general provisions relating to part a
Sec. 7011. PPS hospital payment update.
Sec. 7012. PPS-exempt hospital payments.
Sec. 7013. Capital payments for PPS hospitals.
Sec. 7014. Disproportionate share hospital payments.
Sec. 7015. Indirect medical education payments.
Sec. 7016. Graduate medical education and disproportionate share 
                            payment adjustments for medicare choice.
Sec. 7017. Payments for hospice services.
Sec. 7018. Extending medicare coverage of, and application of hospital 
                            insurance tax to, all State and local 
                            government employees.
Sec. 7019. Nurse aide training in skilled nursing facilities subject to 
                            extended survey and certain other 
          subchapter b--payments to skilled nursing facilities

                   Part I--Prospective Payment System

Sec. 7025. Prospective payment system for skilled nursing facilities.

                    Part II--Interim Payment System

Sec. 7031. Payments for routine service costs.
Sec. 7032. Cost-effective management of covered non-routine services.
Sec. 7033. Payments for routine service costs.
Sec. 7034. Reductions in payment for capital-related costs.
Sec. 7035. Treatment of items and services paid for under part B.
Sec. 7036. Medical review process.
Sec. 7037. Revised salary equivalence limits.
Sec. 7038. Report by Prospective Payment Assessment Commission.
Sec. 7039. Effective date.

                Chapter 3--Provisions Relating to Part B

Sec. 7041. Payments for physicians' services.
Sec. 7042. Elimination of formula-driven overpayments for certain 
                            outpatient hospital services.
Sec. 7043. Payment for clinical laboratory diagnostic services.
Sec. 7044. Durable medical equipment.
Sec. 7045. Updates for orthotics and prosthetics.
Sec. 7046. Payments for capital-related costs of outpatient hospital 
                            services.
Sec. 7047. Payments for non-capital costs of outpatient hospital 
                            services.
Sec. 7048. Updates for ambulatory surgical services.
Sec. 7049. Payment for ambulance services.
Sec. 7050. Physician supervision of nurse anesthetists.
Sec. 7051. Part B deductible.
Sec. 7052. Part B premium.
Sec. 7053. Increase in medicare part B premium for high income 
                            individuals.

            Chapter 4--Provisions Relating to Parts A and B

       subchapter a--general provisions relating to parts a and b
Sec. 7055. Secondary payor provisions.
Sec. 7056. Treatment of assisted suicide.
Sec. 7057. Administrative provisions.
Sec. 7058. Sense of Senate regarding coverage for treatment of breast 
            subchapter b--payments for home health servicesare.
Sec. 7061. Payment for home health services.
Sec. 7062. Maintaining savings resulting from temporary freeze on 
                            payment increases for home health services.
Sec. 7063. Extension of waiver of presumption of lack of knowledge of 
                            exclusion from coverage for home health 
                            agencies.

                         Chapter 5--Rural Areas

Sec. 7071. Medicare-dependent, small, rural hospital payment extension.
Sec. 7072. Medicare rural hospital flexibility program.
Sec. 7073. Establishment of rural emergency access care hospitals.
Sec. 7074. Additional payments for physicians' services furnished in 
                            shortage areas.
Sec. 7075. Payments to physician assistants and nurse practitioners for 
                            services furnished in outpatient or home 
                            settings.
Sec. 7076. Demonstration projects to promote telemedicine.
Sec. 7077. PROPAC recommendations on urban medicare dependent 
                            hospitals.

           Chapter 6--Health Care Fraud and Abuse Prevention

Sec. 7100. Shsubchapter a--fraud and abuse control program
Sec. 7101. Fraud and abuse control program.
Sec. 7102. Application of certain health anti-fraud and abuse sanctions 
                            to fraud and abuse against Federal health 
                            programs.
Sec.subchapter b--revisions to current sanctions for fraud and abuse
Sec. 7111. Mandatory exclusion from participation in medicare and State 
                            health care programs.
Sec. 7112. Establishment of minimum period of exclusion for certain 
                            individuals and entities subject to 
                            permissive exclusion from medicare and 
                            State health care programs.
Sec. 7113. Permissive exclusion of individuals with ownership or 
                            control interest in sanctioned entities.
Sec. 7114. Sanctions against practitioners and persons for failure to 
                            comply with statutory obligations.
Sec. 7115. Intermediate sanctions for medicare health maintenance 
                            organizations.
Sec. 7116. Clarification of and additions to exceptions to anti-
                            kickback penalties.
Sec. 71subchapter c--administrative and miscellaneous provisions
Sec. 7121. Establishment of the health care fraud and abuse data 
                            collection program.
Sec. 7122. Elimination of reasonable cost reimbursement for certain 
                 subchapter d--civil monetary penalties
Sec. 7131. Sociasubchapter e--amendments to criminal law
Sec. 7141. Health care fraud.
Sec. 7142. Forfeitures for Federal health care offenses.
Sec. 7143. Injunctive relief relating to Federal health care offenses.
Sec. 7144. Grand jury disclosure.
Sec. 7145. False statements.
Sec. 7146. Obstruction of criminal investigations of Federal health 
                            care offenses.
Sec. 7147. Theft or embezzlement.
Sec. 7148. Laundering of monetary instruments.
Sec. 7149.subchapter f--state health care fraud control units
Sec. 7151. State health care fraud control units.
Sec. 7152. Beneficiary incentive programs.

          Chapter 7--Other Provisions for Trust Fund Solvency

Sec. 7171. Nondischargeability of certain medicare debts.
Sec. 7172. Transfers of certain part B savings to hospital insurance 
                            trust fund.

           Subtitle B--Transformation of the Medicaid Program

Sec. 7190. Short title.
Sec. 7191. Transformation of medicaid program.
Sec. 7192. Medicaid drug rebate program.
Sec. 7193. Waivers.
Sec. 7194. Children with special health care needs.
Sec. 7195. CBO reports.
Sec. 7196. Adjustments of pool amounts.
Sec. 7197. State review of mentally ill or retarded nursing facility 
                            residents upon change in physical or mental 
                            condition.
Sec. 7198. Nurse aide training in nursing facilities subject to 
                            extended survey and under certain other 
                            conditions.
Sec. 7199. Nurse aide training in nursing facilities subject to 
                            extended survey and under certain other 
                            conditions.

  Subtitle C--Block Grants for Temporary Assistance for Needy Families

Sec. 7200. Short title.
Sec. 7201. Block grants to States.
Sec. 7202. Limitations on use of funds for certain purposes.
Sec. 7203. Census data on grandparents as primary caregivers for their 
                            grandchildren.
Sec. 7204. Study of effect of welfare reform on grandparents as primary 
                            caregivers.
Sec. 7205. Development of prototype of counterfeit-resistant social 
                            security card required.
Sec. 7206. Modifications to the job opportunities for certain low-
                            income individuals program.
Sec. 7207. Demonstration projects for school utilization.
Sec. 7208. Corrective compliance plan.
Sec. 7209. Parental responsibility contracts.
Sec. 7210. Expenditure of Federal funds in accordance with laws and 
                            procedures applicable to expenditure of 
                            State funds.
Sec. 7211. Conforming amendments to the Social Security Act.
Sec. 7212. Conforming amendments to the Food Stamp Act of 1977 and 
                            related provisions.
Sec. 7213. Conforming amendments to other laws.
Sec. 7214. Secretarial submission of legislative proposal for technical 
                            and conforming amendments.
Sec. 7215. Effective date; transition rule.

                Subtitle D--Supplemental Security Income

                  Chapter 1--Eligibility Restrictions

Sec. 7251. Denial of supplemental security income benefits by reason of 
                            disability to drug addicts and alcoholics.
Sec. 7252. Denial of SSI benefits for 10 years to individuals found to 
                            have fraudulently misrepresented residence 
                            in order to obtain benefits simultaneously 
                            in 2 or more States.
Sec. 7253. Denial of SSI benefits for fugitive felons and probation and 
                            parole violators.
Sec. 7254. Effective dates; application to current recipients.

               Chapter 2--Benefits for Disabled Children

Sec. 7261. Definition and eligibility rules.
Sec. 7262. Eligibility redeterminations and continuing disability 
                            reviews.
Sec. 7263. Additional accountability requirements.

   Chapter 3--Studies Regarding Supplemental Security Income Program

Sec. 7271. Annual report on the supplemental security income program.
Sec. 7272. Improvements to disability evaluation.
Sec. 7273. Study of disability determination process.
Sec. 7274. Study by General Accounting Office.

       Chapter 4--National Commission on the Future of Disability

Sec. 7281. Establishment.
Sec. 7282. Duties of the Commission.
Sec. 7283. Membership.
Sec. 7284. Staff and support services.
Sec. 7285. Powers of Commission.
Sec. 7286. Reports.
Sec. 7287. Termination.

                       Subtitle E--Child Support

     Chapter 1--Eligibility for Services; Distribution of Payments

Sec. 7301. State obligation to provide child support enforcement 
                            services.
Sec. 7302. Distribution of child support collections.
Sec. 7303. Rights to notification and hearings.
Sec. 7304. Privacy safeguards.

                  Chapter 2--Locate and Case Tracking

Sec. 7311. State case registry.
Sec. 7312. Collection and disbursement of support payments.
Sec. 7313. State directory of new hires.
Sec. 7314. Amendments concerning income withholding.
Sec. 7315. Locator information from interstate networks.
Sec. 7316. Expansion of the Federal parent locator service.
Sec. 7317. Collection and use of social security numbers for use in 
                            child support enforcement.

          Chapter 3--Streamlining and Uniformity of Procedures

Sec. 7321. Adoption of uniform State laws.
Sec. 7322. Improvements to full faith and credit for child support 
                            orders.
Sec. 7323. Administrative enforcement in interstate cases.
Sec. 7324. Use of forms in interstate enforcement.
Sec. 7325. State laws providing expedited procedures.

                   Chapter 4--Paternity Establishment

Sec. 7331. State laws concerning paternity establishment.
Sec. 7332. Outreach for voluntary paternity establishment.
Sec. 7333. Cooperation by applicants for and recipients of temporary 
                            family assistance.

             Chapter 5--Program Administration and Funding

Sec. 7341. Performance-based incentives and penalties.
Sec. 7342. Federal and State reviews and audits.
Sec. 7343. Required reporting procedures.
Sec. 7344. Automated data processing requirements.
Sec. 7345. Technical assistance.
Sec. 7346. Reports and data collection by the Secretary.

      Chapter 6--Establishment and Modification of Support Orders

Sec. 7351. National Child Support Guidelines Commission.
Sec. 7352. Simplified process for review and adjustment of child 
                            support orders.
Sec. 7353. Furnishing consumer reports for certain purposes relating to 
                            child support.
Sec. 7354. Nonliability for depository institutions providing financial 
                            records to State child support enforcement 
                            agencies in child support cases.

                Chapter 7--Enforcement of Support Orders

Sec. 7361. Internal Revenue Service collection of arrearages.
Sec. 7362. Authority to collect support from Federal employees.
Sec. 7363. Enforcement of child support obligations of members of the 
                            armed forces.
Sec. 7364. Voiding of fraudulent transfers.
Sec. 7365. Work requirement for persons owing child support.
Sec. 7366. Definition of support order.
Sec. 7367. Reporting arrearages to credit bureaus.
Sec. 7368. Liens.
Sec. 7369. State law authorizing suspension of licenses.
Sec. 7370. Denial of passports for nonpayment of child support.
Sec. 7371. International child support enforcement.
Sec. 7372. Denial of means-tested Federal benefits to noncustodial 
                            parents who are delinquent in paying child 
                            support.
Sec. 7373. Child support enforcement for Indian tribes.
Sec. 7374. Financial institution data matches.
Sec. 7375. Enforcement of orders against paternal grandparents in cases 
                            of minor parents.
Sec. 7376. Sense of the Senate regarding the inability of the non-
                            custodial parent to pay child support.

                       Chapter 8--Medical Support

Sec. 7378. Technical correction to ERISA definition of medical child 
                            support order.
Sec. 7379. Enforcement of orders for health care coverage.

Chapter 9--Enhancing Responsibility and Opportunity for Nonresidential 
                                Parents

Sec. 7381. Grants to States for access and visitation programs.

                    Chapter 10--Effect of Enactment

Sec. 7391. Effective dates.

                        Subtitle F--Noncitizens

Sec. 7401. State option to prohibit assistance for certain aliens.
Sec. 7402. Deemed income requirement for Federal and federally funded 
                            programs.
Sec. 7403. Requirements for sponsor's affidavit of support.
Sec. 7404. Limited eligibility of noncitizens for SSI benefits.
Sec. 7405. Treatment of noncitizens.
Sec. 7406. Information reporting.
Sec. 7407. Prohibition on payment of Federal benefits to certain 
                            persons.

      Subtitle G--Additional Provisions Relating To Welfare Reform

         Chapter 1--Reductions in Federal Government Positions

Sec. 7411. Reductions.
Sec. 7412. Reducing personnel in Washington, D.C. area.

              Chapter 2--Block Grant for Social Services.

Sec. 7421. Reduction in block grant for social services.
Sec. 7422. Establishing national goals to prevent teenage pregnancies.

          Chapter 3--Foster Care Maintenance Payments Program

Sec. 7431. Limitation on growth of administrative expenses for foster 
                            care maintenance payments program.

                  Chapter 4--Miscellaneous Provisions

Sec. 7441. Exemption of battered individuals from certain requirements.
Sec. 7442. Sense of the Senate on legislative accountability for 
                            unfunded mandates in welfare reform 
                            legislation.
Sec. 7443. Sense of the Senate regarding enforcement of statutory rape 
                            laws.
Sec. 7444. Sanctioning for testing positive for controlled substances.
Sec. 7445. Fraud under means-tested welfare and public assistance 
                            programs.

           Subtitle H--Reform of the Earned Income Tax Credit

Sec. 7460. Amendment of 1986 code.
Sec. 7461. Earned income credit denied to individuals not authorized to 
                            be employed in the United States.
Sec. 7462. Repeal of earned income credit for individuals without 
                            children.
Sec. 7463. Modification of earned income credit amount and phaseout.
Sec. 7464. Rules relating to denial of earned income credit on basis of 
                            disqualified income.
Sec. 7465. Modification of adjusted gross income definition for earned 
                            income credit.
Sec. 7466. Provisions to improve tax compliance.

               Subtitle I--Increase in Public Debt Limit

Sec. 7471. Increase in public debt limit.

                          Subtitle A--Medicare

                    CHAPTER 1--MEDICARE CHOICE PLANS

          Subchapter A--Establishment of Medicare Choice Plans

SEC. 7001. MEDICARE CHOICE PLANS.

    (a) Title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) 
is amended by adding at the end the following new part:

                    ``PART D--MEDICARE CHOICE PLANS

                        ``subpart 1--definitions
````subpart 2--entitlement of medicare choice eligible individuals to 
                          health care choices
``Sec. 1895B. Entitlement to medicare choices.
``Sec. 1895C. Enrollment procedures.
``Sec. 1895D.``subpart 3--medicare choice plan requirements
``Sec. 1895G. Availability and enrollment.
``Sec. 1895H. Benefits provided to individuals.
``Sec. 1895I. Licensing and financial requirements.
``S``subpart 4--determination of medicare payment amounts and rebates
``Sec. 1895M. Medicare payment amounts.
``Sec. 1895N. Premiums and rebates.
``Sec``subpart 5--contractual authority; temporary certification; 
                              regulations
``Sec. 1895P. General permission to contract.
``Sec. 1895Q. Renewal and termination of contract.
``Sec. 1895R. Temporary certification process for coordinated care 
                            plans.
``Sec. 1895S. Regulations.

                        ``Subpart 1--Definitions

``SEC. 1895A. DEFINITIONS.

    ``(a) Medicare Choice Plan.--In this part--
            ``(1) In general.--The term `medicare choice plan' means an 
        eligible health plan with respect to which there is a contract 
        in effect under this part to provide health benefits coverage 
        to medicare choice eligible individuals.
            ``(2) Medicare choice plan sponsor.--The terms `medicare 
        choice plan sponsor' and `plan sponsor' mean a public or 
        private entity which establishes or maintains a medicare choice 
        plan.
    ``(b) Terms Relating to Health Plans.--In this part:
            ``(1) Eligible health plan.--
                    ``(A) In general.--The term `eligible health plan' 
                means a policy, contract, or plan which is capable of 
                providing health benefits coverage of items and 
                services provided under the traditional medicare 
                program to medicare choice eligible individuals.
                    ``(B) Types of insurance.--The term `eligible 
                health plan' shall include any of the following types 
                of plans of health insurance:
                            ``(i) Indemnity or fee-for-service plans.--
                        Private indemnity plans that reimburse 
                        hospitals, physicians, and other providers on 
                        the basis of a privately determined fee 
                        schedule.
                            ``(ii) Coordinated care plans.--Private 
                        managed or coordinated care plans which provide 
                        health care services through an integrated 
                        network of providers, including--
                                    ``(I) qualified health maintenance 
                                organizations as defined in section 
                                1310(d) of the Public Health Service 
                                Act; and
                                    ``(II) preferred provider 
                                organization plans, point of service 
                                plans, provider-sponsored network 
                                plans, or other coordinated care plans.
                            ``(iii) Other health care plans.--Any other 
                        private plan for the delivery of health care 
                        items and services that is not described in 
                        clause (i), or (ii).
            ``(2) Union or association plan.--
                    ``(A) In general.--The term `union or association 
                plan' means an eligible health plan with a union 
                sponsor, a Taft-Hartley sponsor, or a qualified 
                association sponsor that--
                            ``(i) is organized for purposes other than 
                        to market a health plan;
                            ``(ii) may not condition its membership on 
                        health status, health claims experience, 
                        receipt of health care, medical history, or 
                        lack of evidence of insurability of a potential 
                        member;
                            ``(iii) may not exclude a member or spouse 
                        of a member from health plan coverage based on 
                        factors described in clause (ii);
                            ``(iv) is a permanent entity which receives 
                        a substantial majority of its financial support 
                        from active members; and
                            ``(v) may not be owned or controlled by an 
                        insurance company.
                    ``(B) Union sponsor.--The term `union sponsor' 
                means an employee organization that establishes or 
                maintains an eligible health plan other than pursuant 
                to a collective bargaining agreement.
                    ``(C) Taft-hartley sponsor.--The term `Taft-Hartley 
                sponsor' means, with respect to a group health plan 
                established or maintained by 2 or more employees or 
                jointly by 1 or more employees and 1 or more employee 
                organizations, the association, committee, joint board 
                of trustees, or other similar group of representatives 
                of parties who establish or maintain the plan.
                    ``(D) Qualified association sponsor.--The term 
                `qualified association sponsor' means an association, 
                religious fraternal organization, or other organization 
                (which may be a trade, industry, or professional 
                association, a chamber of commerce, or a public entity 
                association) which establishes or maintains an eligible 
                health plan.
                    ``(E) Terms.--In this paragraph, the terms 
                `employee', `employee organization', and `group health 
                plan' have the meanings given such terms for purposes 
                of part 6 of subtitle B of title I of the Employee 
                Retirement Income Security Act of 1974.
    ``(c) Other Definitions.--In this part:
            ``(1) Areas.--
                    ``(A) Medicare payment area.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), the term `medicare payment area' 
                        means--
                                    ``(I) a metropolitan statistical 
                                area (whether or not such area is in a 
                                single State) or in the case of a 
                                consolidated metropolitan statistical 
                                area, each primary metropolitan 
                                statistical area within the 
                                consolidated area; or
                                    ``(II) one area within each State 
                                composed of all areas that do not fall 
                                within a metropolitan statistical area.
                            ``(ii) Geographic adjustment.--Upon request 
                        of a State, the Secretary may make a geographic 
                        adjustment to a medicare payment area otherwise 
                        determined under clause (i).
                            ``(iii) Areas.--In this subparagraph, the 
                        terms `metropolitan statistical area', 
                        `consolidated metropolitan statistical area', 
                        and `primary metropolitan statistical area' 
                        mean any area designated as such by the 
                        Secretary of Commerce.
                    ``(B) Medicare service area.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), the term `medicare service area' 
                        means a medicare payment area.
                            ``(ii) Geographic adjustment.--The 
                        Secretary may designate a medicare service area 
                        other than a medicare payment area for a 
                        medicare choice plan if the Secretary 
                        determines that such designation would not 
                        result in the enrollment of enrollees in the 
                        plan in such area which are substantially 
                        nonrepresentative, as determined in accordance 
                        with regulations of the Secretary, of the 
                        population in the medicare payment area.
            ``(2) Medicare choice eligible individual.--
                    ``(A) In general.--The term `medicare choice 
                eligible individual' means an individual who is 
                entitled to benefits under part A and enrolled under 
                part B.
                    ``(B) Special rule for end-stage renal disease.--
                Such term shall not include an individual medically 
                determined to have end-stage renal disease, except that 
                an individual who develops end-stage renal disease 
                while enrolled in a medicare choice plan may continue 
                to be enrolled in that plan. Not later than December 
                31, 1999, the Secretary shall submit to the Congress 
                recommendations on expanding the definition of 
                `medicare choice eligible individual' to include 
                individuals with end-stage renal disease and the 
                enrollment of such individuals in medicare choice 
                plans.
            ``(3) Traditional medicare program.--The term `traditional 
        medicare program' means the program of benefits available to 
        individuals entitled to benefits under part A and enrolled 
        under part B of this title, other than enrollment in a medicare 
        choice plan under this part.

  ``Subpart 2--Entitlement of Medicare Choice Eligible Individuals to 
                          Health Care Choices

``SEC. 1895B. ENTITLEMENT TO MEDICARE CHOICES.

    ``Each medicare choice eligible individual is entitled to choose to 
receive health care items and services covered under parts A and B--
            ``(1) through the traditional medicare program; or
            ``(2) by receiving payments toward the individual's 
        enrollment in a medicare choice plan under this part.

``SEC. 1895C. ENROLLMENT PROCEDURES.

    ``(a) In General.--Except as provided in section 1895G(a)(2), each 
medicare choice eligible individual shall be entitled to enroll in any 
medicare choice plan with a medicare service area including the 
geographic area in which the individual resides during--
            ``(1) the annual open enrollment period described in 
        section 1895G(b)(1); or
            ``(2) any other enrollment period described in section 
        1895G(b)(2) applicable to the individual.
    ``(b) Method of Enrollment and Disenrollment.--
            ``(1) Notice provided to the secretary.--Each medicare 
        choice eligible individual desiring to enroll or terminate 
        enrollment in a medicare choice plan shall provide the 
        Secretary with notice of such enrollment or disenrollment 
        during any enrollment period applicable to the individual. The 
        Secretary shall, to the extent feasible, provide for the 
        receipt of such notice by telephone, through the mail, and in 
        person at local social security offices.
            ``(2) Information forwarded to the plan.--The Secretary 
        shall promptly provide each medicare choice plan with notice of 
        an individual's enrollment or disenrollment with the plan.
    ``(c) Notices to Individuals To Assist in Enrollment.--
            ``(1) Open season notification.--
                    ``(A) Mailing of notice.--By September 30 of each 
                year beginning after 1995, the Secretary shall mail a 
                notice of eligibility to each medicare choice eligible 
                individual and each individual entitled to benefits 
                under part A prior to the end of the annual open 
                enrollment period described in section 1895G(b)(1).
                    ``(B) Notice described.--The notice described in 
                subparagraph (A) shall include an informational 
                brochure that includes the information described in 
                this section, and any other information that the 
                Secretary determines will assist the individual's 
                enrollment decision.
            ``(2) Notification to newly medicare choice eligible 
        individuals.--With respect to an individual who becomes 
        eligible to enroll in a medicare choice plan during the period 
        described in section 1895G(b)(2)(A) and to whom paragraph (1) 
        does not apply, the Secretary shall, not later than 2 months 
        before the date on which the individual becomes eligible, mail 
        to the individual the notice of eligibility described in 
        paragraph (1).
    ``(d) Secretary's Materials; Contents.--The notice and 
informational materials mailed by the Secretary under subsection (c) 
shall be written and formatted in the most easily understandable manner 
possible, and shall include, at a minimum, the following:
            ``(1) General information.--General information with 
        respect to coverage under this part during the next calendar 
        year, including--
                    ``(A) the part B premium rates that will be charged 
                for part B coverage,
                    ``(B) the deductible, copayment, and coinsurance 
                amounts for coverage under the traditional medicare 
                program,
                    ``(C) a description of the coverage under the 
                traditional medicare program and any changes in 
                coverage under the program from the prior year,
                    ``(D) a description of the individual's medicare 
                payment area, and the standardized medicare payment 
                amount available with respect to such individual,
                    ``(E) information and instructions on how to enroll 
                in a medicare choice plan,
                    ``(F) the right of each medicare choice plan 
                sponsor by law to terminate or refuse to renew its 
                contract and the effect the termination or nonrenewal 
                of its contract may have on individuals enrolled with 
                the medicare choice plan under this part, and
                    ``(G) to the extent available, quality indicators 
                for the traditional medicare program and each medicare 
                choice plan, including--
                            ``(i) disenrollment rates for medicare 
                        enrollees for the previous 2 years (excluding 
                        disenrollment due to death or moving outside 
                        the plan's medicare service area), and
                            ``(ii) information on medicare enrollee 
                        satisfaction and health outcomes.
            ``(2) Plan-specific information.--Information for the next 
        calendar year for each medicare choice plan in the individual's 
        medicare payment area, including--
                    ``(A) the plan's medicare service area,
                    ``(B) the enrollee's rights to benefits under the 
                plan, including--
                            ``(i) covered items and services,
                            ``(ii) deductible, coinsurance, and 
                        copayment amounts, and
                            ``(iii) the enrollee's liability for 
                        payment amounts billed in excess of the plan's 
                        fee schedule,
                    ``(C) the extent to which enrollees may select the 
                providers of their choice (from within or outside the 
                plan's network of providers if applicable) and the 
                restrictions (if any) on the plan's payment for 
                services furnished to the enrollees by other than the 
                plan's participating providers,
                    ``(D) out-of-area coverage provided by the plan,
                    ``(E) coverage of emergency services and urgently 
                needed care,
                    ``(F) appeal rights of enrollees, including the 
                right to address grievances to the Secretary or the 
                applicable external review entity,
                    ``(G) whether the plan is out-of-compliance with 
                any requirements of this part (as determined by the 
                Secretary),
                    ``(H) the plan's premium price submitted under 
                section 1895N(a)(1) and an indication of the difference 
                between such premium price and the standardized 
                medicare payment amount, and
                    ``(I) optional supplemental coverage available from 
                the plan, including--
                            ``(i) the supplemental items and services 
                        covered, and
                            ``(ii) the premium price for the optional 
                        supplemental benefits.
    ``(e) Assistance.--
            ``(1) Agreements with commissioner of social security.--In 
        order to promote the efficient administration of this section 
        and this part, the Secretary may enter into an agreement with 
        the Commissioner of Social Security under which the 
        Commissioner performs administrative responsibilities relating 
        to enrollment and disenrollment under this section.
            ``(2) Use of non-federal entities.--The Secretary shall, to 
        the maximum extent feasible, enter into contracts with 
        appropriate non-Federal entities to carry out activities under 
        subsection (d).
            ``(3) Plans.--Each medicare choice plan sponsor shall 
        provide such information as the Secretary requests with respect 
        to a medicare choice plan in order to carry out activities 
        under subsection (d).

``SEC. 1895D. EFFECT OF ENROLLMENT.

    ``(a) Premium Differentials.--If a medicare choice eligible 
individual enrolls in a medicare choice plan, the individual--
            ``(1) shall receive a rebate in the amount determined under 
        section 1895N(b) if the plan's premium is less than the 
        standardized medicare payment amount; and
            ``(2) shall be required to pay the plan's premium in excess 
        of the standardized medicare payment amount.
    ``(b) Period of Enrollment.--
            ``(1) Annual enrollment period.--An individual enrolling in 
        a medicare choice plan during the annual open enrollment period 
        under section 1895G(b)(1) shall be enrolled in the plan for the 
        calendar year following the open enrollment period.
            ``(2) Special enrollment periods.--An individual enrolling 
        in a plan under section 1895G(b)(2) shall be enrolled in the 
        plan for the portion of the calender year on and after the date 
        on which the enrollment becomes effective (as specified by the 
        Secretary).
            ``(3) Terminations.--
                    ``(A) In general.--Except as otherwise provided in 
                this subsection, an individual may not terminate 
                enrollment in a medicare choice plan before the next 
                annual open enrollment period applicable to the 
                individual.
                    ``(B) Qualifying events.--Notwithstanding 
                subparagraph (A), an individual may terminate 
                enrollment in a medicare choice plan if--
                            ``(i) the individual moves to a new 
                        medicare service area, or
                            ``(ii) the individual has experienced a 
                        qualifying event (as determined by the 
                        Secretary).
                    ``(C) For cause.--Notwithstanding subparagraph (A), 
                an individual may terminate enrollment in a medicare 
                choice plan if the plan fails to meet quality or 
                capacity standards or for other cause as determined by 
                the Secretary.
                    ``(D) Termination after initial enrollment.--An 
                individual may terminate enrollment in a medicare 
                choice plan within 90 days of the individual's initial 
                enrollment in such medicare choice plan and enroll in 
                another medicare choice plan or the traditional 
                medicare program.
            ``(4) Seamless enrollment.--If a medicare choice eligible 
        individual is enrolled in a medicare choice plan under this 
        part and such individual fails to provide the Secretary with 
        notice of the individual's enrollment or disenrollment under 
        section 1895C(b)(1) during any open enrollment period 
        applicable to the individual, the individual shall be deemed to 
        have reenrolled in the plan.
            ``(5) Special rules for high deductible plans.--In the case 
        of a high deductible plan described in section 
        1895A(b)(1)(B)(iii) operated in connection with a medicare 
        choice account, an individual may not terminate enrollment in 
        the plan (other than under paragraph (3) (B), (C), or (D)) 
        without at least 12 months notice given during the annual open 
        enrollment period under section 1895G(b)(1).
            ``(6) Special rules for union, Taft-Hartley, or association 
        plans.--The Secretary shall establish special enrollment rules 
        for the enrollment of individuals in medicare choice plans that 
        are union or association-sponsored health plans described in 
        section 1895A(b)(2).
    ``(c) Sole Payments.--Subject to subsections (d)(2) and (e) of 
section 1895H, payments under a contract to a medicare choice plan 
under section 1895O and for rebates under section 1895N(b) shall be 
instead of the amounts which (in the absence of the contract) would be 
otherwise payable under the traditional medicare program for items or 
services furnished to individuals enrolled with the plan under this 
section.

             ``Subpart 3--Medicare Choice Plan Requirements

``SEC. 1895G. AVAILABILITY AND ENROLLMENT.

    ``(a) General Availability.--
            ``(1) In general.--Except as provided in paragraph (2), 
        each medicare choice plan sponsor shall provide that each 
        medicare choice eligible individual shall be eligible to enroll 
        under this part in a medicare choice plan of the sponsor during 
        an enrollment period applicable to such individual if the 
        plan's medicare service area includes the geographic area in 
        which the individual resides.
            ``(2) Exceptions.--
                    ``(A) Acceptance to limits of capacity.--Each 
                medicare choice plan sponsor shall provide that, at any 
                time during which enrollments are accepted, the plan 
                sponsor will accept medicare choice eligible 
                individuals in the order in which they apply for 
                enrollment up to the limits of the medicare choice 
                plan's capacity (as determined by the Secretary) and 
                without restrictions, except as may be authorized in 
                regulations. The preceding sentence shall not apply if 
                it would result in the enrollment of enrollees 
                substantially nonrepresentative, as determined in 
                accordance with regulations of the Secretary, of the 
                medicare population in the medicare service area of the 
                plan.
                    ``(B) Union, taft-hartley, or association health 
                plan.--A medicare choice plan sponsor of a union or 
                association plan described in section 1895A(b)(2) shall 
                limit its enrollment to members of the sponsoring group 
                who are entitled to all rights and privileges of any 
                other members of the group and spouses of such members. 
                An association plan which is sponsored by a religious 
                fraternal benefit society may limit membership to 
                individuals who share the same religious convictions as 
                the society.
            ``(3) Point-of-service coverage.--If a Medicare Choice 
        sponsor offers a Medicare Choice plan that limits benefits to 
        items and services furnished only by providers in a network of 
        providers which have entered into a contract with the sponsor, 
        the sponsor must also offer at the time of enrollment, a 
        Medicare Choice plan that permits payment to be made under the 
        plan for covered items and services when obtained out-of-
        network by the individual.
    ``(b) Enrollment Periods.--
            ``(1) Annual open enrollment period.--Each medicare choice 
        plan sponsor shall offer an annual open enrollment period in 
        November of each year for the enrollment and termination of 
        enrollment of medicare choice eligible individuals for the next 
        year.
            ``(2) Additional periods.--Each medicare choice plan 
        sponsor shall accept the enrollment of an individual in the 
        medicare choice plan--
                    ``(A) during the initial medicare enrollment period 
                specified by section 1837 that applies to the 
                individual (effective as specified by section 1838), 
                and
                    ``(B) during the period specified by the Secretary 
                following any termination of the enrollment of the 
                individual in a medicare choice plan under subparagraph 
                (B), (C), or (D) of section 1895D(b)(3).
    ``(c) Plan Participation in Enrollment Process.--
            ``(1) In general.--In addition to any informational 
        materials distributed by the Secretary under section 1895C(c), 
        a medicare choice plan sponsor may develop and distribute 
        marketing materials and engage in marketing strategies in 
        accordance with this subsection.
            ``(2) Plan marketing and advertising standards.--Any 
        marketing material developed or distributed by a medicare 
        choice plan sponsor and any marketing strategy developed by 
        such plan sponsor--
                    ``(A) shall accurately describe differences between 
                health care coverage available under the plan and the 
                health care coverage available under the traditional 
                medicare program,
                    ``(B) shall be pursued in a manner not intended to 
                violate the nondiscrimination requirement of section 
                1895J(e)(1), and
                    ``(C) shall not contain false or materially 
                misleading information, and shall conform to any other 
                fair marketing and advertising standards and 
                requirements applicable to such plans under law.
            ``(3) Prior approval by secretary.--
                    ``(A) In general.--No marketing materials may be 
                distributed by a medicare choice plan sponsor to (or 
                for the use of) individuals eligible to enroll with the 
                plan under this part unless--
                            ``(i) at least 45 days before its 
                        distribution, the plan has submitted the 
                        material to the Secretary for review, and
                            ``(ii) the Secretary has not disapproved 
                        the distribution of the material.
                    ``(B) Review.--The Secretary shall review all 
                marketing materials submitted under guidelines 
                established by the Secretary and shall disapprove such 
                material if the Secretary determines, in the 
                Secretary's discretion, that the material is materially 
                inaccurate or misleading or otherwise makes a material 
                misrepresentation.
                    ``(C) Deemed approval.--If marketing material has 
                been submitted under subparagraph (A) to the Secretary 
                or a regional office of the Department of Health and 
                Human Services and the Secretary or the office has not 
                disapproved the distribution of the materials under 
                subparagraph (B) with respect to an area, the Secretary 
                is deemed not to have disapproved such distribution in 
                all areas covered by the plan.

``SEC. 1895H. BENEFITS PROVIDED TO INDIVIDUALS.

    ``(a) Basic Benefits.--Each medicare choice plan shall provide to 
members enrolled under this part, through providers and other persons 
that meet the applicable requirements of this title and part A of title 
XI--
            ``(1) those items and services covered under parts A and B 
        of this title which are available to individuals residing in 
        the medicare service area of the plan, and
            ``(2) additional health services as the Secretary may 
        approve.
The Secretary shall approve any such additional health care services 
which the plan proposes to offer to such members, unless the Secretary 
determines that including such additional services will substantially 
discourage enrollment by medicare choice eligible individuals with the 
plan.
    ``(b) Supplemental Benefits.--Each medicare choice plan may offer 
optional supplemental benefits to each individual enrolled in the plan 
under this part for an additional premium amount. If the supplemental 
benefits are offered only to individuals enrolled in the sponsor's plan 
under this part, the additional premium amount shall be the same for 
all enrolled individuals in the medicare payment area. Such benefits 
may be marketed and sold by the medicare choice plan sponsor outside of 
the enrollment process described in section 1895D(b).
    ``(c) Cost-Sharing.--
            ``(1) Enrollee cost-sharing under choice plan may not 
        exceed medicare enrollee cost.--Except as provided in paragraph 
        (2), in no event may the average total amount of deductibles, 
        coinsurance, and copayments charged an individual under a 
        medicare choice plan with respect to basic benefits described 
        in subsection (a)(1) for a year exceed the average total amount 
        of deductibles, coinsurance, and copayments charged an 
        individual under the traditional medicare program for a year.
            ``(2) High deductible plans.--Subparagraph (A) shall not 
        apply to a high deductible plan described in section 
        1895A(b)(1)(B)(iii).
            ``(3) Determination on other basis.--If the Secretary 
        determines that adequate data are not available to determine 
        the average amount under paragraph (1), the Secretary may 
        determine such amount with respect to all individuals in the 
        medicare payment area, the State, or in the United States, 
        eligible to enroll in such plan under this part or on the basis 
        of other appropriate data.
    ``(d) National Coverage Determination.--If there is a national 
coverage determination made in the period beginning on the date of an 
announcement under section 1895M(a) and ending on the date of the next 
announcement under such section and the Secretary projects that the 
determination will result in a significant change in the costs to the 
medicare choice plan of providing the benefits that are the subject of 
such national coverage determination and that such change in costs was 
not incorporated in the determination of the medicare payment amount 
included in the announcement made at the beginning of such period--
            ``(1) such determination shall not apply to contracts under 
        this part until the first contract year that begins after the 
        end of such period, and
            ``(2) if such coverage determination provides for coverage 
        of additional benefits or coverage under additional 
        circumstances, section 1895I(b)(2) shall not apply to payment 
        for such additional benefits or benefits provided under such 
        additional circumstances until the first contract year that 
        begins after the end of such period,
unless otherwise required by law.
    ``(e) Overlapping Periods of Coverage.--A contract under this part 
shall provide that in the case of an individual who is receiving 
inpatient hospital services from a subsection (d) hospital (as defined 
in section 1886(d)(1)(B)) as of the effective date of the 
individual's--
            ``(1) enrollment with a medicare choice plan under this 
        part--
                    ``(A) payment for such services until the date of 
                the individual's discharge shall be made under this 
                title as if the individual were not enrolled with the 
                plan,
                    ``(B) the plan sponsor shall not be financially 
                responsible for payment for such services until the 
                date after the date of the individual's discharge, and
                    ``(C) the plan sponsor shall nonetheless be paid 
                the full amount otherwise payable to the plan under 
                this part, or
            ``(2) termination of enrollment with a medicare choice plan 
        under this part--
                    ``(A) the plan sponsor shall be financially 
                responsible for payment for such services after such 
                date and until the date of the individual's discharge,
                    ``(B) payment for such services during the stay 
                shall not be made under section 1886(d), and
                    ``(C) the plan sponsor shall not receive any 
                payment with respect to the individual under this part 
                during the period the individual is not enrolled.
    ``(f) Organization as Secondary Payer.--Notwithstanding any other 
provision of law, a medicare choice plan sponsor may (in the case of 
the provision of services to an individual under this part under 
circumstances in which payment is made secondary pursuant to section 
1862(b)(2)) charge or authorize the provider of such services to 
charge, in accordance with the charges allowed under the law, plan, or 
policy which is the primary payer under such circumstances--
            ``(1) the insurance carrier, employer, or other entity 
        which under such law, plan, or policy is to pay for the 
        provision of such services, or
            ``(2) such individual to the extent that the individual has 
        been paid under such law, plan, or policy for such services.

``SEC. 1895I. LICENSING AND FINANCIAL REQUIREMENTS.

    ``(a) Licensing Requirement.--
            ``(1) In general.--A medicare choice plan sponsor shall be 
        organized and licensed under applicable State law as a risk-
        bearing entity eligible to offer health insurance or health 
        benefits coverage in each State in which the medicare choice 
        plan enrolls individuals under this part.
            ``(2) Exception for union, taft-hartley, or association 
        plans.--Paragraph (1) shall not apply to a union or association 
        plan described in section 1895A(b)(2) if such plan is exempt 
        from such requirements under the Employee Retirement Income 
        Security Act of 1974.
            ``(3) Coordinated care plans.--Paragraph (1) shall apply to 
        a coordinated care plan except to the extent provided in 
        section 1895R.
    ``(b) Assumption of Full Financial Risk.--A medicare choice plan 
sponsor shall assume full financial risk on a prospective basis for the 
provision of health care services for which benefits are required to be 
provided under section 1895H(a)(1), except that such plan sponsor may--
            ``(1) obtain insurance or make other arrangements for the 
        cost of such health care services the aggregate value of which 
        exceeds $5,000 in any year,
            ``(2) obtain insurance or make other arrangements for the 
        cost of such health care services provided to its enrolled 
        members other than through the plan sponsor because medical 
        necessity required their provision before they could be secured 
        through the plan sponsor,
            ``(3) obtain insurance or make other arrangements for not 
        more than 90 percent of the amount by which its costs for any 
        of its fiscal years exceed 115 percent of its income for such 
        fiscal year, and
            ``(4) make arrangements with physicians or other health 
        professionals, health care institutions, or any combination of 
        such individuals or institutions to assume all or part of the 
        financial risk on a prospective basis for the provision of 
        basic health services by the physicians or other health 
        professionals or through the institutions.
    ``(c) Protection Against Risk of Insolvency.--
            ``(1) In general.--A medicare choice plan sponsor shall 
        make adequate provision against the risk of insolvency 
        (including provision to prevent enrollees from being held 
        liable to any person or entity for the plan sponsor's debts in 
        the event of the plan sponsor's insolvency)--
                    ``(A) as determined by the Secretary, or
                    ``(B) as determined by a State which the Secretary 
                determines requires solvency standards at least as 
                stringent as the standards under subparagraph (A).
            ``(2) Factors to consider.--In establishing standards under 
        paragraph (1) for coordinated care plans described in section 
        1895A(b)(1)(B)(ii), the Secretary shall consult with interested 
        parties and shall take into account--
                    ``(A) a coordinated care plan sponsor's delivery 
                system assets and its ability to provide services 
                directly to enrollees through affiliated providers, and
                    ``(B) alternative means of protecting against 
                insolvency, including reinsurance, unrestricted 
                surplus, letters of credit, guarantees, organizational 
                insurance coverage, and partnerships with other 
                licensed entities.
        The Secretary is not required to include alternative means 
        described in subparagraph (B) in the standards but may consider 
        such alternatives where consistent with the standards.
    ``(d) Payments to the Plan.--
            ``(1) Prepaid payment.--A medicare choice plan sponsor 
        shall be compensated (except for deductibles, coinsurance, and 
        copayments) for the provision of health care services to 
        individuals enrolled under this part by a payment by the 
        Secretary (and if applicable, the individual) which is paid on 
        a periodic basis without regard to the date the health care 
        services are provided and which is fixed without regard to the 
        frequency, extent, or kind of health care service actually 
        provided to a member.
            ``(2) Sole payments.--Subject to subsections (d)(2) and (e) 
        of section 1895H, if an individual is enrolled under this part 
        with a medicare choice plan, only the plan sponsor shall be 
        entitled to receive payments from the Secretary under this 
        title for services furnished to the individual.

``SEC. 1895J. HEALTH PLAN STANDARDS.

    ``(a) In General.--Each medicare choice plan sponsor shall meet the 
requirements of this section.
    ``(b) Quality Assurance and Accreditation.--
            ``(1) Internal review.--
                    ``(A) In general.--Each medicare choice plan 
                sponsor must establish an ongoing quality assurance 
                program (in accordance with regulations established by 
                the Secretary) for health care services it provides to 
                such individuals.
                    ``(B) Elements of program.--The quality assurance 
                program established under subparagraph (A) shall--
                            ``(i) stress health outcomes,
                            ``(ii) provide for the establishment of 
                        written protocols for utilization review, based 
                        on current standards of medical practice,
                            ``(iii) provide review by physicians and 
                        other health care professionals of the process 
                        followed in the provision of such health care 
                        services,
                            ``(iv) monitor and evaluate high-volume and 
                        high-risk services and the care of acute and 
                        chronic conditions,
                            ``(v) evaluate the continuity and 
                        coordination of care that enrollees receive,
                            ``(vi) have mechanisms to detect both 
                        underutilization and overutilization of 
                        services,
                            ``(vii) after identifying areas for 
                        improvement, establish or alter practice 
                        parameters,
                            ``(viii) take action to improve quality and 
                        assess the effectiveness of such action through 
                        systematic followup,
                            ``(ix) make available information on 
                        quality and outcomes measures to facilitate 
                        beneficiary comparison and choice of health 
                        coverage options (in such form and on such 
                        quality and outcomes measures as the Secretary 
                        determines to be appropriate), and
                            ``(x) provide that the program is evaluated 
                        on an ongoing basis as to its effectiveness.
            ``(2) External review.--
                    ``(A) In general.--Each medicare choice plan 
                sponsor shall, for each medicare choice plan it 
                operates, have an agreement with an independent quality 
                review and improvement organization approved by the 
                Secretary.
                    ``(B) Functions of organization.--Each independent 
                quality review and improvement organization with an 
                agreement under subparagraph (A) shall--
                            ``(i) provide an alternative mechanism for 
                        addressing enrollee grievances,
                            ``(ii) review plan performance based on 
                        accepted quality performance criteria,
                            ``(iii) promote and make plans accountable 
                        for improved plan performance,
                            ``(iv) integrate into ongoing external 
                        quality assurance activities a new set of 
                        quality indicators and standards developed 
                        specifically for the medicare population that 
                        would be used to determine whether a plan is 
                        providing quality care and appropriate 
                        continuity and coordination of care, and
                            ``(v) report to the Secretary on those 
                        plans that have demonstrated unwillingness or 
                        inability to improve their performance.
            ``(3) Accreditation.--Each medicare choice plan sponsor 
        shall be required--
                    ``(A) to meet accreditation standards established 
                by the Secretary, or
                    ``(B) to be accredited by an external independent 
                accrediting organization, recognized by the Secretary 
                as requiring standards at least as stringent as the 
                standards established under subparagraph (A).
            ``(4) Encounter data.--The Secretary shall create 
        incentives for medicare choice plan sponsors to report 
        aggregate encounter data, including data on physician visits, 
        nursing home days, home health days, hospital inpatient days, 
        and rehabilitation services.
    ``(c) Access.--Each medicare choice plan sponsor shall--
            ``(1) make the services described in section 1895H(a) (and 
        such other health care services as such individuals have 
        contracted for) available and accessible to each such 
        individual, within the medicare service area of the plan, with 
        reasonable promptness, and in a manner which assures 
        continuity,
            ``(2) provide for reimbursement with respect to such 
        services which are provided to such an individual other than 
        through the plan's providers, if--
                    ``(A) the services were medically necessary and 
                immediately required because of an unforeseen illness, 
                injury, or condition, and
                    ``(B) it was not reasonable given the circumstances 
                to obtain the services through the plan's providers,
            ``(3) provide access to appropriate providers, including 
        credentialed specialists, for all medically necessary treatment 
        and services, and
            ``(4) except as provided by the Secretary on a case-by-case 
        basis, in the case of a coordinated care plan described in 
        section 1895A(b)(1)(B)(ii), provide primary care services 
        within 30 minutes or 30 miles from an enrollee's place of 
        residence if the enrollee resides in a rural area.
    ``(d) Capacity.--Each medicare choice plan sponsor shall provide 
the Secretary with a demonstration of the plan's capacity to adequately 
service the plan's expected enrollment of individuals under this part.
    ``(e) Consumer Protections.--
            ``(1) Nondiscrimination.--Each medicare choice plan sponsor 
        shall provide assurances to the Secretary that it will not deny 
        enrollment to, expel, or refuse to reenroll any such individual 
        because of the individual's health status or requirements for 
        health care services, and that it will notify each such 
        individual of such fact at the time of the individual's 
        enrollment. A medicare choice plan sponsor may not cancel or 
        refuse to renew a beneficiary except in the case of fraud or 
        nonpayment of premium amounts due the plan.
            ``(2) Grievance procedures.--
                    ``(A) In general.--Each medicare choice plan 
                sponsor shall provide meaningful procedures for hearing 
                and resolving grievances between the plan (including 
                any entity or individual through which the plan 
                provides health care services) and members enrolled 
                with the plan under this part.
                    ``(B) Hearing requirement.--A member enrolled with 
                a medicare choice plan under this part who is 
                dissatisfied by reason of his failure to receive any 
                health service to which he believes he is entitled and 
                at no greater charge than he believes he is required to 
                pay is entitled, if the amount in controversy is $100 
                or more, to a hearing before the Secretary to the same 
                extent as is provided in section 205(b), and in any 
                such hearing the Secretary shall make the plan sponsor 
                a party. If the amount in controversy is $1,000 or 
                more, the individual or plan sponsor shall, upon 
                notifying the other party, be entitled to judicial 
                review of the Secretary's final decision as provided in 
                section 205(g), and both the individual and the plan 
                sponsor shall be entitled to be parties to that 
                judicial review. In applying sections 205(b) and 205(g) 
                as provided in this subparagraph, and in applying 
                section 205(l) thereto, any reference therein to the 
                Commissioner of Social Security or the Social Security 
                Administration shall be considered a reference to the 
                Secretary or the Department of Health and Human 
                Services, respectively.
                    ``(C) Expedited review.--The Secretary shall 
                provide an expedited review procedure under 
                subparagraph (B) where a failure to receive any health 
                care service or payment for such service would result 
                in significant harm.
            ``(3) Supplemental coverage if plan terminates the 
        contract.--Each medicare choice plan sponsor that provides 
        items and services pursuant to a contract under this part shall 
        provide assurances to the Secretary that in the event the 
        contract is terminated, the sponsor shall provide or arrange 
        for supplemental coverage of benefits under this title related 
        to a preexisting condition with respect to any exclusion 
        period, to all individuals enrolled with the entity who receive 
        benefits under this title, for the lesser of 6 months or the 
        duration of such period.
    ``(f) Prompt Payment.--
            ``(1) In general.--Each medicare choice plan sponsor shall 
        provide prompt payment (consistent with the provisions of 
        sections 1816(c)(2) and 1842(c)(2)) of claims submitted for 
        services and supplies furnished to individuals pursuant to such 
        contract, if the services or supplies are not furnished under a 
        contract between the plan and the provider or supplier.
            ``(2) Direct payment.--In the case of a medicare choice 
        plan sponsor which the Secretary determines, after notice and 
        opportunity for a hearing, has failed to make payments of 
        amounts in compliance with paragraph (1), the Secretary may 
        provide for direct payment of the amounts owed to providers and 
        suppliers for such covered services furnished to individuals 
        enrolled under this part under the contract. If the Secretary 
        provides for such direct payments, the Secretary shall provide 
        for an appropriate reduction in the amount of payments 
        otherwise made to the plan sponsor under this part to reflect 
        the amount of the Secretary's payments (and costs incurred by 
        the Secretary in making such payments).
    ``(g) Advance Directives.--A contract under this part shall provide 
that a medicare choice plan sponsor shall meet the requirement of 
section 1866(f) (relating to maintaining written policies and 
procedures respecting advance directives).
    ``(h) Timely Authorization for Promptly Needed Care Identified as a 
Result of Required Screening Evaluation.--
            ``(1) Access to process.--A medicare choice plan sponsor 
        shall provide access 24 hours a day, 7 days a week to such 
        persons as may be authorized to make any prior authorizations 
        required by the plan sponsor for coverage of items and services 
        (other than emergency services) that a treating physician or 
        other emergency department personnel identify, pursuant to a 
        screening evaluation required under section 1867(a), as being 
        needed promptly by an individual enrolled with the organization 
        under this part.
            ``(2) Deemed approval.--A medicare choice plan sponsor is 
        deemed to have approved a request for such promptly needed 
        items and services if the physician or other emergency 
        department personnel involved--
                    ``(A) has made a reasonable effort to contact such 
                a person for authorization to provide an appropriate 
                referral for such items and services or to provide the 
                items and services to the individual and access to the 
                person has not been provided (as required in paragraph 
                (1)), or
                    ``(B) has requested such authorization from the 
                person and the person has not denied the authorization 
                within 30 minutes after the time the request is made.
            ``(3) Effect of approval.--Approval of a request for a 
        prior authorization determination (including a deemed approval 
        under paragraph (2)) shall be treated as approval of a request 
        for any items and services that are required to treat the 
        medical condition identified pursuant to the required screening 
        evaluation.
            ``(4) Definition of emergency services.--In this 
        subsection, the term `emergency services' means--
                    ``(A) health care items and services furnished in 
                the emergency department of a hospital (including a 
                trauma center), and
                    ``(B) ancillary services routinely available to 
                such department,
        to the extent they are required to evaluate and treat an 
        emergency medical condition (as defined in paragraph (5)) until 
        the condition is stabilized.
            ``(5) Emergency medical condition.--In paragraph (4), the 
        term `emergency medical condition' means a medical condition, 
        the onset of which is sudden, that manifests itself by symptoms 
        of sufficient severity, including severe pain, that a prudent 
        layperson, who possesses an average knowledge of health and 
        medicine, could reasonably expect the absence of immediate 
        medical attention to result in--
                    ``(A) placing the person's health in serious 
                jeopardy,
                    ``(B) serious impairment to bodily functions, or
                    ``(C) serious dysfunction of any bodily organ or 
                part.

   ``Subpart 4--Determination of Medicare Payment Amounts and Rebates

``SEC. 1895M. MEDICARE PAYMENT AMOUNTS.

    ``(a) In General.--Not later than July 31 of each calendar year 
(beginning with 1996), the Secretary shall determine, and announce in a 
manner intended to provide notice to interested parties, a standardized 
medicare payment amount determined in accordance with this section for 
the following calendar year for each medicare payment area.
    ``(b) Calculation of Standardized Medicare Payment Amounts.--For 
purposes of this part--
            ``(1) 1997.--
                    ``(A) In general.--The standardized medicare 
                payment amount for calendar year 1997 for a medicare 
                payment area shall be equal to the sum of--
                            ``(i) 50 percent of the modified per capita 
                        rate for calendar year 1996, and
                            ``(ii) 50 percent of the adjusted average 
                        national per capita rate for calendar year 
                        1996,
                increased by the percentage increase in the gross 
                domestic product per capita for the 12-month period 
                ending on June 30, 1996.
                    ``(B) Modified per capita rate.--For purposes of 
                subparagraph (A)(i), the modified per capita rate for 
                calendar year 1996 for a medicare payment area shall be 
                equal to the per capita rate which would have been 
                determined (without regard to class) under section 
                1876(a)(1)(C) for 1995 if--
                            ``(i) the applicable geographic area were 
                        the medicare payment area, and
                            ``(ii) 50 percent of any payments 
                        attributable to sections 1886(d)(5)(B), 
                        1886(h), and 1886(d)(5)(F) (relating to IME, 
                        GME, and DSH payments) were not taken into 
                        account,
                increased by the percentage increase which the 
                Secretary estimates will occur in medicare expenditures 
                per capita for 1996 over medicare expenditures per 
                capita for 1995.
                    ``(C) Adjusted average national per capita rate.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A)(ii), the adjusted average 
                        national per capita rate for a medicare payment 
                        area for calendar year 1996 shall be equal to 
                        the sum, for all types of medicare services (as 
                        classified by the Secretary), of the product 
                        for each such type of--
                                    ``(I) the average national per 
                                capita rate for 1996,
                                    ``(II) the proportion of such rate 
                                for the year which is attributable to 
                                such type of services, and
                                    ``(III) an index that reflects for 
                                1996 and that type of service the 
                                relative input price of such services 
                                in the medicare payment area as 
                                compared to the national average input 
                                price of such services.
                        In applying subclause (III), the Secretary 
                        shall apply those indices that are used in 
                        applying (or updating) medicare payment rates 
                        for specific areas and localities.
                            ``(ii) Average national per capita rate.--
                        For purposes of clause (i), the average 
                        national per capita rate for 1996 is the 
                        weighted average of the modified per capita 
                        rates determined under subparagraph (B) for all 
                        medicare payment areas for 1996.
            ``(2) Succeeding years.--
                    ``(A) In general.--The standardized medicare 
                payment amount for any calendar year after 1997 in a 
                medicare payment area shall be an amount equal to the 
                standardized medicare payment amount determined for 
                such area for the preceding year, increased by the 
                percentage increase in the gross domestic product per 
                capita for the 12-month period ending on June 30 of the 
                preceding calendar year.
                    ``(B) Special rule for 1998.--In applying 
                subparagraph (A) for 1998, the standardized medicare 
                payment amount for the preceding calendar year shall be 
                the amount which would have been determined if clause 
                (ii) of paragraph (1)(B) had been applied by 
                substituting `100 percent' for `50 percent'.
            ``(3) Special rule for individuals with end-stage renal 
        disease.--In computing the standardized medicare payment amount 
        for any medicare payment area, there shall not be taken into 
        account any individuals with end-stage renal disease or any 
        medicare expenditures for such individuals.
    ``(c) Adjustments for Payments to Plan Sponsors.--
            ``(1) In general.--The rate of payment under section 1895O 
        to a medicare choice plan sponsor with respect to any 
        individual enrolled in a medicare choice plan of the sponsor 
        shall be equal to the standardized medicare payment amount for 
        the medicare payment area, adjusted for such risk factors as 
        age, disability status, gender, institutional status, health 
        status, and such other factors as the Secretary determines to 
        be appropriate, so as to ensure actuarial equivalence. The 
        Secretary may add to, modify, or substitute for such classes, 
        if such changes will improve the determination of actuarial 
        equivalence.
            ``(2) Special rule for end-stage renal disease.--The 
        Secretary shall establish a separate rate of payment under 
        section 1895O to a medicare choice plan sponsor with respect to 
        any individual with end-stage renal disease enrolled in a 
        medicare choice plan of the sponsor. Such rate of payment shall 
        be actuarially equivalent to rates paid to other enrollees in 
        the medicare payment area (or such other area as specified by 
        the Secretary).
    ``(d) Geographical Adjustments.--
            ``(1) Annual adjustments.--
                    ``(A) In general.--Unless Congress provides 
                otherwise, beginning with calendar years after 1999, 
                the Secretary shall, based on the analysis under 
                paragraph (2) and to the extent the Secretary 
                determines necessary, make annual differential 
                adjustments to the standardized medicare payment 
                amounts determined under subsection (b)(2) for calendar 
                years 2000 and 2001 in a manner designed to achieve 
                appropriate and equitable variation in standardized 
                medicare payment amounts across medicare payment areas 
                by calendar year 2002. Such variation shall be 
                reasonably related to measurable geographic differences 
                in medicare payment areas.
                    ``(B) Budget neutrality.--The Secretary shall 
                adjust the standardized medicare payment amounts under 
                subsection (b) in a manner that ensures that total 
                payments under this section for a year are not greater 
                or less than total payments under this section would 
                have been but for the application of subparagraph (A).
            ``(2) Analysis.--The Secretary, in consultation with 
        interested parties, shall conduct an analysis of the measurable 
        input cost differences across medicare payment areas, including 
        wage differentials, and other measurable variables identified 
        by the Secretary. The Secretary shall also determine the degree 
        to which medicare beneficiaries, including beneficiaries in 
        rural and underserved areas, have access to more health plan 
        choices by calendar year 2000 under this part, and the extent 
        to which standardized medicare payment amounts have limited or 
        enhanced such choices.
            ``(3) Report to congress.--Not later than March 1, 1999, 
        the Secretary shall submit a report to the appropriate 
        committees of Congress that includes the results of the 
        analysis described in paragraph (2) and the annual differential 
        adjustments that the Secretary intends to implement under 
        paragraph (1) for calendar years 2000 and 2001.
    ``(e) Notice in Changes to Benefit Assumptions.--
            ``(1) In general.--At least 45 days before making the 
        announcement under subsection (a) for a year (beginning with 
        the announcement for 1998), the Secretary shall provide for 
        notice to medicare choice plans of proposed changes to be made 
        in the methodology or benefit coverage assumptions from the 
        methodology and assumptions used in the previous announcement 
        and shall provide such plans an opportunity to comment on such 
        proposed changes.
            ``(2) Explanation.--In each announcement made under 
        subsection (a) for a year (beginning with the announcement for 
        1998), the Secretary shall include an explanation of the 
        assumptions (including any benefit coverage assumptions) and 
        changes in methodology used in the announcement in sufficient 
        detail so that medicare choice plans can compute medicare 
        payment rates under subsection (d) for classes of individuals 
        located in each medicare payment area which is in whole or in 
        part within the medicare service area of such a plan.
    ``(f) Demonstration Project on Market-Based Reimbursement and 
Competitive Pricing.--The Secretary shall establish 1 or more 
demonstration projects to determine the standardized medicare payment 
amounts described in subsection (b) through competitive bidding by 
medicare choice plans in a medicare payment area. Not later than 
December 31, 2001, the Secretary shall submit a report to the Congress 
on the success of such projects in determining standardized medicare 
payment amounts that are reflective of market price.

``SEC. 1895N. PREMIUMS AND REBATES.

    ``(a) Submission and Charging of Premiums.--
            ``(1) In general.--Each medicare choice plan sponsor shall 
        file with the Secretary each year, in a form and manner and at 
        a time specified by the Secretary, the amount of the monthly 
        premium for coverage under each medicare choice plan it offers 
        under this part in each medicare payment area in which the plan 
        is being offered.
            ``(2) Uniform premium.--The premiums charged by a medicare 
        choice plan sponsor under this part may not vary among 
        individuals who reside in the same medicare payment area.
            ``(3) Terms and conditions of imposing premiums.--Each 
        medicare choice plan sponsor shall permit the payment of 
        monthly premiums on a monthly basis.
    ``(b) Rebates.--
            ``(1) In general.--If the standardized medicare payment 
        amount for the medicare payment area in which an individual 
        resides exceeds the amount of the monthly premium for the plan 
        in which the individual is enrolled (as submitted under 
        subsection (a)(1)), the Secretary shall--
                    ``(A) in the case of an individual--
                            ``(i) who is enrolled in a high deductible 
                        health plan described in section 
                        1895A(b)(1)(B)(iii), deposit 100 percent of 
                        such excess in the medicare choice account 
                        specified by the individual, or
                            ``(ii) who is not so enrolled but who 
                        elects the application of this clause, deposit 
                        100 percent of such excess in the medicare 
                        choice account specified by the individual; or
                    ``(B)(i) pay to the medicare choice plan sponsor on 
                behalf of such individual the monthly amount equal to 
                100 percent of such excess up to the amount of the 
                premium amount of such individual for supplemental 
                benefits described in section 1895H(b),
                    ``(ii) pay to such individual an amount equal to 75 
                percent of the remainder of such excess, and
                    ``(iii) deposit the remainder of such excess in the 
                Federal Hospital Insurance Trust Fund.
            ``(2) Time for payment.--
                    ``(A) In general.--A rebate under paragraph 
                (1)(B)(ii) shall be paid as of the close of the 
                calendar year to which the enrollment applied.
                    ``(B) Deposits in medicare choice accounts.--
                Deposits described in paragraph (1)(A) shall be made on 
                a monthly basis.
                    ``(C) Other payments and deposits.--Payments and 
                deposits described in subparagraphs (B)(i) and (iii) 
                shall be made on a monthly basis.
            ``(3) Source of rebates.--Deposits and payments described 
        in paragraph (1) shall be made in the same manner as payments 
        are made under section 1895O(b).

``SEC. 1895O. PAYMENTS TO PLAN SPONSORS.

    ``(a) Monthly Payments.--
            ``(1) In general.--For each individual enrolled with a plan 
        under this part, the Secretary shall make monthly payments in 
        advance to the medicare choice plan sponsor of the medicare 
        choice plan with which the individual is enrolled in an amount 
        equal to the medicare payment rate determined with respect to 
        such individual under section 1895M(c).
            ``(2) Retroactive adjustments.--The amount of payment under 
        this paragraph may be retroactively adjusted to take into 
        account any difference between the actual number of individuals 
        enrolled in the plan under this section and the number of such 
        individuals estimated to be so enrolled in determining the 
        amount of the advance payment.
    ``(b) Payments From Trust Funds.--The payment to a medicare choice 
plan sponsor under this section for a medicare-eligible individual 
shall be made from the Federal Hospital Insurance Trust Fund and the 
Federal Supplementary Medical Insurance Trust Fund in such proportion 
as the Secretary determines reflects the relative weight that benefits 
under parts A and B are representative of the actuarial value of the 
total benefits under this part.

     ``Subpart 5--Contractual Authority; Temporary Certification; 
                              Regulations

``SEC. 1895P. GENERAL PERMISSION TO CONTRACT.

    ``The Secretary shall enter into a contract with any medicare 
choice plan sponsor in a medicare payment area if the requirements of 
this part are met with respect to the medicare choice plan and the plan 
sponsor.

``SEC. 1895Q. RENEWAL AND TERMINATION OF CONTRACT.

    ``(a) In General.--Except as provided in subsection (b), each 
contract under this part may be made automatically renewable from term 
to term in the absence of notice by either party of intention to 
terminate at the end of the current term.
    ``(b) Termination for Cause.--
            ``(1) In general.--In accordance with procedures 
        established under paragraph (2), the Secretary may terminate 
        any contact with a medicare choice plan sponsor at any time or 
        may impose the intermediate sanctions described in paragraph 
        (2) or (3) or subsection (f) (whichever is applicable) on the 
        plan sponsor, if the Secretary finds that the plan sponsor--
                    ``(A) has failed substantially to carry out the 
                contract,
                    ``(B) is carrying out the contract in a manner 
                substantially inconsistent with the efficient and 
                effective administration of this part, or
                    ``(C) no longer substantially meets the applicable 
                conditions of this part.
            ``(2) Procedures.--The Secretary may terminate a contract 
        with a medicare choice plan sponsor under this part or may 
        impose the intermediate sanctions described in subsection 
        (f)(3) on the plan in accordance with formal investigation and 
        compliance procedures established by the Secretary under 
        which--
                    ``(A) the Secretary first provides the medicare 
                choice plan sponsor with the reasonable opportunity to 
                develop and implement a corrective action plan to 
                correct the deficiencies that were the basis of the 
                Secretary's determination under paragraph (1) and the 
                medicare choice plan sponsor fails to develop or 
                implement such a corrective action plan,
                    ``(B) in deciding whether to impose sanctions, the 
                Secretary considers aggravating factors such as whether 
                a plan sponsor has a history of deficiencies or has not 
                taken action to correct deficiencies the Secretary has 
                brought to the plan sponsor's attention,
                    ``(C) there are no unreasonable or unnecessary 
                delays between the finding of a deficiency and the 
                imposition of sanctions, and
                    ``(D) the Secretary provides the plan sponsor with 
                reasonable notice and opportunity for hearing 
                (including the right to appeal an initial decision) 
                before imposing any sanction or terminating the 
                contract.
    ``(c) Terms of Contract.--Each contract under this part--
            ``(1) shall provide that the Secretary, or any person or 
        organization designated by the Secretary--
                    ``(A) shall have the right to inspect or otherwise 
                evaluate--
                            ``(i) the quality, appropriateness, and 
                        timeliness of services performed under the 
                        contract, and
                            ``(ii) the facilities of the plan sponsor 
                        when there is reasonable evidence of some need 
                        for such inspection,
                    ``(B) shall have the right to audit and inspect any 
                books and records of the plan sponsor that pertain--
                            ``(i) to the ability of the plan sponsor to 
                        bear the risk of potential financial losses, 
                        and
                            ``(ii) shall require the plan sponsor with 
                        a contract to provide (and pay for) written 
                        notice in advance of the contract's 
                        termination, as well as a description of 
                        alternatives for obtaining benefits under this 
                        title, to each individual enrolled under this 
                        part with the plan sponsor,
                    ``(C)(i) except as provided by the Secretary, shall 
                require the plan sponsor to comply with requirements 
                similar to the requirements of subsections (a) and (c) 
                of section 1318 of the Public Health Service Act 
                (relating to disclosure of certain financial 
                information) and section 1301(c)(8) of such Act 
                (relating to liability arrangements to protect 
                members),
                    ``(ii) shall require the plan sponsor to provide 
                and supply information (described in section 
                1866(b)(2)(C)(ii)) in the manner such information is 
                required to be provided or supplied under that section, 
                and
                    ``(iii) shall require the plan sponsor to notify 
                the Secretary of loans and other special financial 
                arrangements which are made between the plan sponsor 
                and subcontractors, affiliates, and related parties, 
                and
                    ``(D) shall contain such other terms and conditions 
                not inconsistent with this part (including requiring 
                the plan sponsor to provide the Secretary with such 
                information) as the Secretary may find necessary and 
                appropriate.
    ``(d) 5-Year Lockout.--The Secretary may not enter into a contract 
under this part with a medicare choice plan sponsor if a previous 
contract with that plan sponsor under this part was terminated at the 
request of the plan sponsor within the preceding 5-year period, except 
in circumstances which warrant special consideration, as determined by 
the Secretary.
    ``(e) Application of Other Federal Laws.--The authority vested in 
the Secretary by this part may be performed without regard to such 
provisions of law or regulations relating to the making, performance, 
amendment, or modification of contracts of the United States as the 
Secretary may determine to be inconsistent with the furtherance of the 
purpose of this title.
    ``(f) Remedies for Failure To Comply.--
            ``(1) Failure of plan sponsor to comply with contract.--If 
        the Secretary determines that a medicare choice plan sponsor--
                    ``(A) fails substantially to provide medically 
                necessary items and services that are required (under 
                law or under the contract) to be provided to an 
                individual covered under the contract, and the failure 
                has adversely affected (or has substantial likelihood 
                of adversely affecting) the individual,
                    ``(B) imposes cost sharing on individuals enrolled 
                under this part in excess of the cost sharing 
                permitted,
                    ``(C) acts to expel or to refuse to re-enroll an 
                individual in violation of the provisions of this part,
                    ``(D) engages in any practice that would reasonably 
                be expected to have the effect of denying or 
                discouraging enrollment (except as permitted by this 
                part) by eligible individuals with the plan whose 
                medical condition or history indicates a need for 
                substantial future medical services,
                    ``(E) misrepresents or falsifies information that 
                is furnished--
                            ``(i) to the Secretary under this section, 
                        or
                            ``(ii) to an individual or to any other 
                        entity under this section,
                    ``(F) fails to comply with the requirements of 
                section 1895J(f), or
                    ``(G) employs or contracts with any individual or 
                entity that is excluded from participation under this 
                title under section 1128 or 1128A for the provision of 
                health care, utilization review, medical social work, 
                or administrative services or employs or contracts with 
                any entity for the provision (directly or indirectly) 
                through such an excluded individual or entity of such 
                services,
        the Secretary may provide, in addition to any other remedies 
        authorized by law, for any of the remedies described in 
        paragraph (2).
            ``(2) Remedies.--The remedies described in this paragraph 
        are--
                    ``(A) civil money penalties of not more than 
                $25,000 for each determination under paragraph (1) or, 
                with respect to a determination under subparagraph (D) 
                or (E)(i) of such paragraph, of not more than $100,000 
                for each such determination, plus, with respect to a 
                determination under paragraph (1)(B), double the excess 
                amount charged in violation of such subparagraph (and 
                the excess amount charged shall be deducted from the 
                penalty and returned to the individual concerned), and 
                plus, with respect to a determination under paragraph 
                (1)(D), $15,000 for each individual not enrolled as a 
                result of the practice involved,
                    ``(B) suspension of enrollment of individuals under 
                this section after the date the Secretary notifies the 
                plan sponsor of a determination under paragraph (1) and 
                until the Secretary is satisfied that the basis for 
                such determination has been corrected and is not likely 
                to recur, or
                    ``(C) suspension of payment to the plan sponsor 
                under this section for individuals enrolled after the 
                date the Secretary notifies the plan sponsor of a 
                determination under paragraph (1) and until the 
                Secretary is satisfied that the basis for such 
                determination has been corrected and is not likely to 
                recur.
            ``(3) Intermediate sanctions.--In the case of a medicare 
        choice plan sponsor for which the Secretary makes a 
        determination under subsection (b)(1) the basis of which is not 
        described in subparagraph (A) thereof, the Secretary may apply 
        the following intermediate sanctions:
                    ``(A) Civil money penalties of not more than 
                $25,000 for each determination under subsection (b)(1) 
                if the deficiency that is the basis of the 
                determination has directly adversely affected (or has 
                the substantial likelihood of adversely affecting) an 
                individual covered under the plan's contract.
                    ``(B) Civil money penalties of not more than 
                $10,000 for each week beginning after the initiation of 
                procedures by the Secretary under subsection (b)(2) 
                during which the deficiency that is the basis of a 
                determination under subsection (b)(1) exists.
                    ``(C) Suspension of enrollment of individuals under 
                this section after the date the Secretary notifies the 
                plan sponsor of a determination under subsection (b)(1) 
                and until the Secretary is satisfied that the 
                deficiency that is the basis for the determination has 
                been corrected and is not likely to recur.
            ``(4) Proceedings.--The provisions of section 1128A (other 
        than subsections (a) and (b)) shall apply to a civil money 
        penalty under paragraph (2)(A) or (3)(A) in the same manner as 
        they apply to a civil money penalty or proceeding under section 
        1128A(a).

``SEC. 1895R. TEMPORARY CERTIFICATION PROCESS FOR COORDINATED CARE 
              PLANS.

    ``(a) Federal Action on Certification.--
            ``(1) In general.--If--
                    ``(A) a State fails to substantially complete 
                action on a licensing application of a coordinated care 
                plan sponsor within 90 days of receipt of the completed 
                application, or
                    ``(B) a State denies a licensing application and 
                the Secretary determines that the State's licensing 
                standards or review process create an unreasonable 
                barrier to market entry,
        the Secretary shall evaluate such application pursuant to the 
        procedures established under subsection (b).
            ``(2) Unreasonable barriers to market entry.--A State's 
        licensing standards and review process shall not be treated as 
        unreasonable barriers to market entry under paragraph (1) if--
                    ``(A) they are applied consistently to all 
                coordinated care medicare choice plan applications,
                    ``(B) are not directly in conflict, or inconsistent 
                with, the Federal standards.
    ``(b) Federal Certification Procedures.--
            ``(1) In general.--The Secretary shall establish a process 
        for certification of a coordinated care plan and its sponsor as 
        meeting the requirements of this part in cases described in 
        subsection (a)(1).
            ``(2) Requirements.--Such process shall--
                    ``(A) set forth the standards for certification,
                    ``(B) provide that final action will be taken on an 
                application for certification within 120 business days 
                of receipt of the completed application,
                    ``(C) provide that State law and regulations shall 
                apply to the extent they have not been found to be an 
                unreasonable barrier to market entry under subsection 
                (a)(1)(B), and
                    ``(D) require any person receiving a certificate to 
                provide the Secretary with all reasonable information 
                in order to ensure compliance with the certification.
            ``(3) Effect of certifications.--
                    ``(A) In general.--A certificate under this section 
                shall be issued for not more than 36 months and may not 
                be renewed.
                    ``(B) Coordination with state.--A person receiving 
                a certificate under this section shall continue to seek 
                State licensure under subsection (a) during the period 
                the certificate is in effect.
                    ``(C) Sunset.--No certificate shall be issued under 
                this section after December 31, 2000, and no 
                certificate under this section shall remain in effect 
                after December 31, 2001.
    ``(c) Report.--Not later than December 31, 1998, the Secretary 
shall report to Congress on the temporary Federal certification system 
under subsection (b), including an analysis of State efforts to adopt 
licensing standards and review processes that take into account the 
fact that coordinated care plan sponsors provide services directly to 
enrollees through affiliated providers.
    ``(d) Coordinated Care Plan.--In this section, the term 
`coordinated care plan' means a plan described in section 
1895A(b)(1)(B)(ii).
    ``(e) Transition Rule for Certain Risk Contractors.--A medicare 
choice plan sponsor that is an eligible organization (as defined in 
section 1876(b)) and that--
            ``(1) has a risk-sharing contract in effect under section 
        1876 as of the date of the enactment of this part, or
            ``(2) has an application for such a contract filed before 
        such date and the contract is entered into before July 1, 1996,
shall be treated as meeting the Federal standards in effect under this 
section for any contract year beginning before January 1, 2000.
    ``(f) Partial Capitation Demonstration.--The Secretary shall 
conduct a demonstration on alternative partial risk-sharing 
arrangements between the Secretary and health care providers. The 
Secretary shall report to Congress no later than December 31, 1998, on 
the administrative feasibility of such partial capitation methods and 
the information necessary to implement such arrangements.

``SEC. 1895S. REGULATIONS.

    ``(a) In General.--The Secretary shall establish such regulations 
as may be necessary to carry out the purposes of this part, including 
regulations setting forth the requirements to meet all quality, access, 
and solvency standards specified in sections 1895I and 1895J.
    ``(b) Use of Interim, Final Regulations.--In order to carry out the 
provisions of this part in a timely manner, the Secretary may, within 
120 days after the date of the enactment of this part, promulgate 
regulations described in subsection (a) that take effect on an interim 
basis, after notice and opportunity for public comment.''.
    (b) Coordination with FEHBP.--Notwithstanding any provision of part 
D of title XVIII of the Social Security Act (as added by subsection 
(a)), individuals who are enrolled in a health benefit plan under 
chapter 89 of title 5, United States Code, shall not be eligible to 
enroll in high deductible medicare choice plans described in section 
1895A(b)(1)(B)(iii) of such Act until such time as the Director of the 
Office of Management and Budget certifies to the Secretary of Health 
and Human Services that the Office of Personnel Management has adopted 
policies which will ensure that the enrollment of such individuals in 
such plans will not result in increased expenditures for the Federal 
Government for health benefit plans under such chapter.
    (c) Conforming Amendments.--
            (1) In general.--Not later than 90 days after the date of 
        the enactment of this Act, the Secretary of Health and Human 
        Services shall submit to the appropriate committees of Congress 
        a legislative proposal providing for such technical and 
        conforming amendments in the law as are required by the 
        provisions of this chapter.
            (2) Other amendments.--(A) Section 1866(a)(1)(O) (42 U.S.C. 
        1395cc(a)(1)(O)) is amended--
                    (i) in the matter preceding clause (i), by 
                inserting ``or medicare choice plan under part D'' 
                after ``eligible organization'', and
                    (ii) in clause (i), by inserting ``or under a 
                contract under part D, '' after ``1972,''.
            (B) Section 1882(g)(1) (42 U.S.C. 1395ww(g)(1)) is amended 
        in the first sentence by inserting ``, or under a medicare 
        choice plan under part D'' before the end period.
    (d) Effective Date.--The amendments made by this section shall 
apply with respect to contracts effective on and after January 1, 1997.

SEC. 7002. TREATMENT OF 1876 ORGANIZATIONS.

    (a) Termination of  1876 Risk-Sharing Organizations.--Section 1876 
(42 U.S.C. 1395mm) is amended by adding at the end the following new 
subsection:
    ``(k)(1) Except as provided in paragraph (2), this section shall 
not apply to risk-sharing contracts effective for contract years 
beginning on or after January 1, 1997.
    ``(2) An individual who is enrolled in part B only and is enrolled 
in an eligible organization with a risk-sharing contract under this 
section on December 31, 1996, may continue enrollment in such 
organization. Not later then July 1, 1996, the Secretary shall issue 
regulations relating to such individuals and such organizations.''.
    (b) HMO Limits Lifted.--Section 1301(b) of the Public Health 
Service Act (42 U.S.C. 300e(b)) is amended by adding at the end the 
following new paragraph:
            ``(6)(A) Effective January 1, 1997, if a member certifies 
        that a medicare choice account has been established for the 
        benefit of such member, a health maintenance organization may 
        reduce the basic health services payment otherwise determined 
        under paragraph (1) by requiring the payment of a deductible by 
        the member for basic health services.
            ``(B) For purposes of this paragraph, the term `medicare 
        choice account' has the meaning given such term by section 7705 
        of the Internal Revenue Code of 1986.''.

SEC. 7003. SPECIAL RULE FOR CALCULATION OF PAYMENT RATES FOR 1996.

    (a) In General.--Notwithstanding any other provision of law, the 
per capita rate under section 1876 of the Social Security Act for 1996 
for any class for a geographic area shall be equal to the sum of--
            (1) 75 percent of the updated per capita rate for such 
        class for such area, and
            (2) 25 percent of the weighted average of the updated per 
        capita rates for such class for all geographic areas, adjusted 
        in the same manner as under section 1895M(b)(1)(C)(i) of the 
        Social Security Act (as added by section 7001 of this Act) to 
        reflect differences in input prices in the geographic area as 
        compared to the national average input prices.
In no event shall any average per capita rate in a geographic area 
determined under the preceding sentence be less than such rate 
determined under section 1876 of such Act for 1995.
    (b) Updated Per Capita Rates.--For purposes of subsection (a), the 
updated per capita rate for any class is the per capita rate of payment 
for 1995 determined under section 1876(a)(1)(C) of the Social Security 
Act for a county (or equivalent area), increased by the percentage 
increase which the Secretary estimates will occur in medicare 
expenditures per capita for 1996 over medicare expenditures per capita 
for 1995.
    (c) Publication.--The Secretary shall publish the rates determined 
under subsection (a) no later than 30 days after the date of the 
enactment of this Act.

     Subchapter B--Tax Provisions Relating to Medicare Choice Plans

SEC. 7006. MEDICARE CHOICE ACCOUNTS.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to amounts specifically 
excluded from gross income) is amended by redesignating section 137 as 
section 138 and by inserting after section 136 the following new 
section:

``SEC. 137. MEDICARE CHOICE ACCOUNTS.

    ``(a) Exclusion.--
            ``(1) In general.--Gross income shall not include any 
        payment to the medicare choice account of an individual by the 
        Secretary of Health and Human Services under section 
        1895N(b)(1) of the Social Security Act.
            ``(2) No constructive receipt.--No amount shall be included 
        in the gross income of an individual solely because the 
        individual may choose between--
                    ``(A) the payment described in paragraph (1) or a 
                rebate under section 1895N(b) of the Social Security 
                Act, or
                    ``(B) the payment of the individual's premium for 
                supplemental benefits described in section 1895H(b) of 
                such Act or such a rebate.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Medicare choice account.--The term `medicare choice 
        account' means a trust created or organized in the United 
        States exclusively for the purpose of paying qualified medical 
        expenses, but only if the written governing instrument creating 
        the trust meets the following requirements:
                    ``(A) Except in the case of a trustee-to-trustee 
                transfer described in subsection (d)(4), no 
                contribution will be accepted unless it is made by the 
                Secretary of Health and Human Services under section 
                1895N(b)(1) of the Social Security Act.
                    ``(B) The trustee is a bank (as defined in section 
                408(n)), an insurance company (as defined in section 
                816), or another person who demonstrates to the 
                satisfaction of the Secretary that the manner in which 
                such person will administer the trust will be 
                consistent with the requirements of this section.
                    ``(C) No part of the trust assets will be invested 
                in life insurance contracts.
                    ``(D) The assets of the trust will not be 
                commingled with other property except in a common trust 
                fund or common investment fund.
                    ``(E) The interest of an individual in the balance 
                in his account is nonforfeitable.
                    ``(F) Trustee-to-trustee transfers described in 
                subsection (d)(4) may be made to and from the trust.
            ``(2) Qualified medical expenses.--
                    ``(A) In general.--The term `qualified medical 
                expenses' means, with respect to an account 
                beneficiary, amounts paid by such beneficiary--
                            ``(i) for medical care (as defined in 
                        section 213(d)) for--
                                    ``(I) the account beneficiary, or
                                    ``(II) the spouse of the account 
                                beneficiary if the spouse is entitled 
                                to benefits under part A of title XVIII 
                                of the Social Security Act and enrolled 
                                under part B of such title,
                        but only to the extent such amounts are not 
                        compensated for by insurance or otherwise, or
                            ``(ii) for qualified long-term care 
                        services for the account beneficiary or such 
                        spouse.
                    ``(B) Health insurance may not be purchased from 
                account.--Subparagraph (A) shall not apply to any 
                payment for insurance other than insurance providing 
                coverage for qualified long-term care services.
                    ``(C) Qualified long-term care services.--The term 
                `qualified long-term care services' means necessary 
                diagnostic, preventive, therapeutic, rehabilitative, 
                and maintenance (including personal care) services 
                which are required by an individual during any period 
                during which such individual is a functionally impaired 
                individual (as determined in the manner prescribed by 
                the Secretary).
            ``(3) Account beneficiary.--
                    ``(A) In general.--The term `account beneficiary' 
                means the individual on whose behalf the medicare 
                choice account is maintained.
                    ``(B) Joint accounts.--If married individuals are 
                both enrolled in a medicare choice plan, they may 
                establish a joint account and each spouse shall be 
                treated as an account beneficiary.
            ``(4) Medicare choice plan.--The term `medicare choice 
        plan' has the meaning given such term by section 1895A(a) of 
        the Social Security Act.
            ``(5) Certain rules to apply.--Rules similar to the rules 
        of subsections (g) and (h) of section 408 shall apply for 
        purposes of this section.
    ``(c) Tax Treatment of Accounts.--
            ``(1) In general.--A medicare choice account is exempt from 
        taxation under this subtitle unless such account has ceased to 
        be a medicare choice account by reason of paragraph (2). 
        Notwithstanding the preceding sentence, any such account is 
        subject to the taxes imposed by section 511 (relating to 
        imposition of tax on unrelated business income of charitable, 
        etc. organizations).
            ``(2) Account assets treated as distributed in the case of 
        prohibited transactions or account pledged as security for 
        loan.--Rules similar to the rules of paragraphs (2) and (4) of 
        section 408(e) shall apply to medicare choice accounts, and any 
        amount treated as distributed under such rules shall be treated 
        as not used to pay qualified medical expenses.
    ``(d) Tax Treatment of Distributions.--
            ``(1) In general.--Any amount paid or distributed out of a 
        medicare choice account to an account beneficiary which is used 
        exclusively to pay qualified medical expenses shall not be 
        includible in gross income. Any amount paid or distributed out 
        of a medicare choice account to an account beneficiary which is 
        not used exclusively to pay qualified medical expenses shall be 
        included in the gross income of the account beneficiary.
            ``(2) Penalty for distributions not used for qualified 
        medical expenses.--
                    ``(A) In general.--The tax imposed by this chapter 
                on an account beneficiary for any taxable year in which 
                there is a payment or distribution to the account 
                beneficiary from a medicare choice account which is not 
                used exclusively to pay the qualified medical expenses 
                shall be increased by 10 percent of the amount of such 
                payment or distribution.
                    ``(B) Exceptions.--Subparagraph (A) shall not apply 
                if the payment or distribution is made on or after the 
                date the account beneficiary--
                            ``(i) becomes disabled within the meaning 
                        of section 72(m)(7), or
                            ``(ii) dies.
                    ``(C) Special rules.--For purposes of subparagraph 
                (A)--
                            ``(i) all medicare choice accounts of the 
                        account beneficiary shall be treated as 1 
                        account,
                            ``(ii) all payments and distributions not 
                        used exclusively to pay qualified medical 
                        expenses during any taxable year shall be 
                        treated as 1 distribution, and
                            ``(iii) any distribution of property shall 
                        be taken into account at its fair market value 
                        on the date of the distribution.
            ``(3) Withdrawal of erroneous contributions.--Paragraphs 
        (1) and (2) shall not apply to any payment or distribution from 
        a medicare choice account to the Secretary of Health and Human 
        Services of an erroneous contribution to such account and of 
        the net income attributable to such contribution.
            ``(4) Trustee-to-trustee transfers.--Paragraphs (1) and (2) 
        shall not apply to any trustee-to-trustee transfer from a 
        medicare choice account of an account beneficiary to another 
        medicare choice account of such account beneficiary.
            ``(5) Coordination with medical expense deduction.--For 
        purposes of section 213, any payment or distribution out of a 
        medicare choice account for qualified medical expenses shall 
        not be treated as an expense paid for medical care.
    ``(e) Treatment of Account After Death of Account Beneficiary.--
            ``(1) Treatment if designated beneficiary is spouse.--
                    ``(A) In general.--In the case of an account 
                beneficiary's interest in a medicare choice account 
                which is payable to (or for the benefit of) such 
                beneficiary's spouse upon the death of such 
                beneficiary, such account shall be treated as a 
                medicare choice account of such spouse as of the date 
                of such death.
                    ``(B) Special rules if spouse not medicare 
                eligible.--If, as of the date of such death, such 
                spouse is not entitled to benefits under title XVIII of 
                the Social Security Act, then after the date of such 
                death--
                            ``(i) the Secretary of Health and Human 
                        Services may not make any payments to such 
                        account, other than payments attributable to 
                        periods before such date, and
                            ``(ii) in applying subsection (b)(2) with 
                        respect to such account, references to the 
                        account beneficiary shall be treated as 
                        including references to any dependent (as 
                        defined in section 152) of such spouse and any 
                        subsequent spouse of such spouse.
            ``(2) Treatment if designated beneficiary is not spouse.--
        In the case of an account beneficiary's interest in a medicare 
        choice account which is payable to (or for the benefit of) any 
        person other than such beneficiary's spouse upon the death of 
        such beneficiary--
                    ``(A) such account shall cease to be a medicare 
                choice account as of the date of death, and
                    ``(B) an amount equal to the fair market value of 
                the assets in such account on such date shall be 
                includible--
                            ``(i) if such person is not the estate of 
                        such beneficiary, in such person's gross income 
                        for the taxable year which includes such date, 
                        or
                            ``(ii) if such person is the estate of such 
                        beneficiary, in such beneficiary's gross income 
                        for last taxable year of such beneficiary.
    ``(f) Reports.--
            ``(1) In general.--The trustee of a medicare choice account 
        shall make such reports regarding such account to the Secretary 
        and to the account beneficiary with respect to--
                    ``(A) the fair market value of the assets in such 
                account as of the close of each calendar year, and
                    ``(B) contributions, distributions, and other 
                matters,
        as the Secretary may require by regulations.
            ``(2) Time and manner of reports.--The reports required by 
        this subsection--
                    ``(A) shall be filed at such time and in such 
                manner as the Secretary prescribes in such regulations, 
                and
                    ``(B) shall be furnished to the account 
                beneficiary--
                            ``(i) not later than January 31 of the 
                        calendar year following the calendar year to 
                        which such reports relate, and
                            ``(ii) in such manner as the Secretary 
                        prescribes in such regulations.''.
    (b) Exclusion of Medicare Choice Accounts From Estate Tax.--Part IV 
of subchapter A of chapter 11 of such Code is amended by adding at the 
end the following new section:

``SEC. 2057. MEDICARE CHOICE ACCOUNTS.

    ``For purposes of the tax imposed by section 2001, the value of the 
taxable estate shall be determined by deducting from the value of the 
gross estate an amount equal to the value of any medicare choice 
account (as defined in section 137(b)) included in the gross estate.''.
    (c) Tax on Prohibited Transactions.--
            (1) Section 4975 of such Code (relating to tax on 
        prohibited transactions) is amended by adding at the end of 
        subsection (c) the following new paragraph:
            ``(5) Special rule for medicare choice accounts.--An 
        individual for whose benefit a medicare choice account (within 
        the meaning of section 137(b)) is established shall be exempt 
        from the tax imposed by this section with respect to any 
        transaction concerning such account (which would otherwise be 
        taxable under this section) if, with respect to such 
        transaction, the account ceases to be a medicare choice account 
        by reason of the application of section 137(c)(2) to such 
        account.''.
            (2) Paragraph (1) of section 4975(e) of such Code is 
        amended to read as follows:
            ``(1) Plan.--For purposes of this section, the term `plan' 
        means--
                    ``(A) a trust described in section 401(a) which 
                forms a part of a plan, or a plan described in section 
                403(a), which trust or plan is exempt from tax under 
                section 501(a),
                    ``(B) an individual retirement account described in 
                section 408(a),
                    ``(C) an individual retirement annuity described in 
                section 408(b),
                    ``(D) a medicare choice account described in 
                section 137(b), or
                    ``(E) a trust, plan, account, or annuity which, at 
                any time, has been determined by the Secretary to be 
                described in any preceding subparagraph of this 
                paragraph.''.
    (d) Failure To Provide Reports on Medicare Choice Accounts.--
            (1) Subsection (a) of section 6693 of such Code (relating 
        to failure to provide reports on individual retirement accounts 
        or annuities) is amended to read as follows:
    ``(a) Reports.--
            ``(1) In general.--If a person required to file a report 
        under a provision referred to in paragraph (2) fails to file 
        such report at the time and in the manner required by such 
        provision, such person shall pay a penalty of $50 for each 
        failure unless it is shown that such failure is due to 
        reasonable cause.
            ``(2) Provisions.--The provisions referred to in this 
        paragraph are--
                    ``(A) subsections (i) and (l) of section 408 
                (relating to individual retirement plans), and
                    ``(B) section 137(f) (relating to medicare choice 
                accounts).''.
            (2) The section heading for section 6693 of such Code is 
        amended to read as follows:

``SEC. 6693. FAILURE TO FILE REPORTS ON INDIVIDUAL RETIREMENT PLANS AND 
              CERTAIN OTHER TAX-FAVORED ACCOUNTS; PENALTIES RELATING TO 
              DESIGNATED NONDEDUCTIBLE CONTRIBUTIONS.''.

    (e) Exception from Capitalization of Policy Acquisition Expenses.--
Subparagraph (B) of section 848(e)(1) of such Code (defining specified 
insurance contract) is amended by striking ``and'' at the end of clause 
(ii), by striking the period at the end of clause (iii) and inserting 
``, and'', and by adding at the end the following new clause:
                            ``(iv) any contract which is a medicare 
                        choice account (as defined in section 
                        137(b)).''.
    (f) Clerical Amendments.--
            (1) The table of sections for part III of subchapter B of 
        chapter 1 of such Code is amended by striking the last item and 
        inserting the following:

``Sec. 137. Medicare choice accounts.
``Sec. 138. Cross references to other Acts.''.
            (2) The table of sections for subchapter B of chapter 68 of 
        such Code is amended by striking the item relating to section 
        6693 and inserting the following new item:

``Sec. 6693. Failure to file reports on individual retirement plans and 
                            certain other tax-favored accounts; 
                            penalties relating to designated 
                            nondeductible contributions.''.
            (3) The table of sections for part IV of subchapter A of 
        chapter 11 of such Code is amended by adding at the end the 
        following new item:

``Sec. 2057. Medicare choice accounts.''.
    (g) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1996.

SEC. 7007. CERTAIN REBATES INCLUDED IN GROSS INCOME.

    (a) In General.--Section 61(a) of the Internal Revenue Code of 1986 
(defining gross income) is amended by striking ``and'' at the end of 
paragraph (14), by striking the period at the end of paragraph (15) and 
inserting ``; and'', and by adding at the end the following new 
paragraph:
            ``(16) Payments under section 1895N(b)(1)(B)(ii) of the 
        Social Security Act.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to amounts received after the date of the enactment of this Act.

                CHAPTER 2--PROVISIONS RELATING TO PART A

          Subchapter A--General Provisions Relating to Part A

SEC. 7011. PPS HOSPITAL PAYMENT UPDATE.

    Section 1886(b)(3)(B)(i) (42 U.S.C. 1395ww(b)(3)(B)(i)) is amended 
by striking subclauses (XI), (XII), and (XIII) and inserting the 
following new subclauses:
            ``(XI) for fiscal years 1996 through 2002 for hospitals in 
        all areas, the greater of--
                    ``(aa) the market basket percentage increase minus 
                2.5 percentage points, or
                    ``(bb) 1.1 percent (1.3 percent for discharges 
                during fiscal year 1996 and 1.2 percent for discharges 
                during fiscal year 1997), and
            ``(XII) for fiscal year 2003 and each subsequent fiscal 
        year for hospitals in all areas, the market basket percentage 
        increase.''.

SEC. 7012. PPS-EXEMPT HOSPITAL PAYMENTS.

    (a) Update.--
            (1) In general.--Section 1886(b)(3)(B)(ii) (42 U.S.C. 
        1395ww(b)(3)(B)(ii)) is amended--
                    (A) in subclause (V)--
                            (i) by striking ``1997'' and inserting 
                        ``1995'', and
                            (ii) by striking ``and'' at the end,
                    (B) by redesignating subclause (VI) as subclause 
                (VII); and
                    (C) by inserting after subclause (V), the following 
                subclause:
            ``(VI) for fiscal years 1996 through 2002--
                    ``(aa) the market basket percentage increase minus 
                the applicable reduction (as defined in clause 
                (vi)(II)),
                    ``(bb) in the case of a hospital for a fiscal year 
                for which the hospital's update adjustment percentage 
                (as defined in clause (vi)(I)) is at least 10 percent, 
                the market basket percentage increase, or
                    ``(cc) in the case of a hospital for which 150 
                percent of the hospital's allowable operating costs of 
                inpatient hospital services recognized under this title 
                for the most recent cost reporting period for which 
                information is available is less than the hospital's 
                target amount (as determined under subparagraph (A)) 
                for such cost reporting period, 0 percent,
        except that the applicable percentage increase determined under 
        item (aa) or (bb) may not be less than 1.4 percent for fiscal 
        year 1996, 1.3 percent for fiscal year 1997, and 1.1 percent 
        for fiscal years 1998 through 2002, and''.
            (2) Definitions.--Section 1886(b)(3)(B) (42 U.S.C. 
        1395ww(b)(3)(B)) is amended by adding at the end the following 
        new clause:
    ``(vi) For purposes of clause (ii)(VI)--
            ``(I) a hospital's `update adjustment percentage' for a 
        fiscal year is the percentage by which the hospital's allowable 
        operating costs of inpatient hospital services recognized under 
        this title for the most recent cost reporting period for which 
        information is available exceeds the hospital's target amount 
        (as determined under subparagraph (A)) for such cost reporting 
        period, and
            ``(II) the `applicable reduction' with respect to a 
        hospital for a fiscal year is 2.5 percentage points, reduced by 
        0.25 percentage point for each percentage point (if any) the 
        hospital's update adjustment percentage for the fiscal year is 
        less than 10 percentage points.''.
            (3) Effect of payment reduction on exceptions and 
        adjustments.--Section 1886(b)(4)(A)(ii) (42 U.S.C. 
        1395ww(b)(4)(A)(ii)) is amended by striking ``paragraph 
        (3)(B)(ii)(V)'' and inserting ``subclause (V) or (VI) of 
        paragraph (3)(B)(ii)''.
    (b) Target Amounts for New Rehabilitation Hospitals and Long-Term 
Care Hospitals.--Section 1886(b)(3)(A) (42 U.S.C. 1395ww(b)(3)(A)) is 
amended--
            (1) by redesignating clauses (i) and (ii) as subclauses (I) 
        and (II), respectively;
            (2) by inserting ``(i)'' after ``(3)(A)''; and
            (3) by adding at the end the following new clauses:
    ``(ii) Notwithstanding clause (i), in the case of a rehabilitation 
hospital (or unit thereof) which first receives payments under this 
section--
            ``(I) on or before October 1, 1995, the target amount 
        determined under this subparagraph for such hospital or unit 
        for a cost reporting period beginning during a fiscal year 
        shall not be less than 50 percent of the national mean of the 
        target amounts determined under this paragraph for all 
        rehabilitation hospitals (and units thereof) for cost reporting 
        periods beginning during such fiscal year (determined without 
        regard to this clause); and
            ``(II) on or after October 1, 1995, such target amount may 
        not be greater than 130 percent of the national mean of the 
        target amounts for such hospitals (and units thereof) for cost 
        reporting periods beginning during fiscal year 1991.
    ``(iii) Notwithstanding clause (i), in the case of a hospital which 
has an average inpatient length of stay of greater than 25 days--
            ``(I) which first receives payments under this section as a 
        hospital that is not a subsection (d) hospital (as defined in 
        section 1886(d)(1)(B)) or a subsection (d) Puerto Rico hospital 
        (as defined in section 1886(d)(9)(A)) on or before October 1, 
        1995, the target amount determined under this subparagraph for 
        such hospital for a cost reporting period beginning during a 
        fiscal year shall not be less than 50 percent of the national 
        mean of the target amounts determined under this paragraph for 
        all such hospitals for cost reporting periods beginning during 
        such fiscal year (determined without regard to this clause); 
        and
            ``(II) which first receives payment under this section as a 
        hospital described in subclause (I) on or after October 1, 
        1995, such target amount may not be greater than 130 percent of 
        such national mean of the target amounts for such hospitals for 
        cost reporting periods beginning during fiscal year 1991.
    ``(iv) The Secretary shall, if the Secretary determines it is 
appropriate, calculate and implement a separate ceiling under clause 
(iii)(II) based on case-mix and DRG category.''.
    (c) Development National Prospective Payment Rates for Current Non-
PPS Hospitals.--
            (1) In general.--The Secretary of Health and Human 
        Services, in consultation with the Prospective Payment 
        Assessment Commission, appropriate providers of services, 
        health plans, and other experts, shall develop a proposal to 
        replace the current system under which hospitals that are not 
        subsection (d) hospitals (as defined in section 1886(d)(1)(B) 
        of the Social Security Act) receive payment for the operating 
        and capital-related costs of inpatient hospital services under 
        part A of the medicare program with a prospective payment 
        system.
            (2) Development of system for rehabilitation and long term 
        care hospitals.--
                    (A) In general.--Not later then June 1, 1996, the 
                Secretary of Health and Human Services shall submit a 
                report to the Congress providing recommendations on a 
                prospective payment system for rehabilitation hospitals 
                (and units thereof) and hospitals which have an average 
                inpatient length of stay of greater than 25 days.
                    (B) Matters included.--The report submitted under 
                subparagraph (A) shall include--
                            (i) the available and preferred systems of 
                        classifying rehabilitation patients relative to 
                        duration and intensity of inpatient services;
                            (ii) the means of calculating medicare 
                        program payments to reflect such patient 
                        requirements;
                            (iii) other adjustments deemed appropriate 
                        such as geographic variations in wages and 
                        other costs and outliers;
                            (iv) a schedule upon which it is deemed 
                        feasible to introduce a prospective payment 
                        system for such providers and whether any such 
                        system should be applied to other types of 
                        providers of rehabilitation services; and
                            (v) any other matters the Secretary 
                        determines are relevant including 
                        recommendations for other types of hospitals 
                        that are not subsection (d) hospitals (as 
                        defined in section 1886(d)(1)(B) of the Social 
                        Security Act).
    (d) Capital Payments for PPS-Exempt Hospitals.--Section 1886(g) (42 
U.S.C. 1395ww(g)) is amended by adding at the end the following new 
paragraph:
    ``(4) In determining the amount of the payments that may be made 
under this title with respect to all the capital-related costs of 
inpatient hospital services furnished during fiscal years 1996 through 
2002 of a hospital which is not a subsection (d) hospital or a 
subsection (d) Puerto Rico hospital, the Secretary shall reduce the 
amounts of such payments otherwise determined under this title by 15 
percent.''.

SEC. 7013. CAPITAL PAYMENTS FOR PPS HOSPITALS.

    (a) In General.--Section 1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A)) 
is amended by adding at the end the following new sentence: ``In 
addition to the reduction described in the preceding sentence, for 
discharges occurring after September 30, 1995, the Secretary shall 
reduce by 7.47 percent the unadjusted standard Federal capital payment 
rate (as described in 42 CFR 412.308(c), as in effect on the date of 
the enactment of the Balanced Budget Reconciliation Act of 1995) and 
shall reduce by 8.27 percent the unadjusted hospital-specific rate (as 
described in 42 CFR 412.328(e)(1), as in effect on the date of the 
enactment of such Act).''.
    (b) Budget Neutrality Adjustment.--
            (1) In general.--The second sentence of section 
        1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A)) is amended--
                    (A) by striking ``fiscal years 1992 through 1995'' 
                and inserting ``fiscal years 1996 through 2002''; and
                    (B) by striking ``10 percent'' and inserting ``15 
                percent''.
            (2) Effective date.--The amendments made by paragraph (1) 
        shall apply on and after October 1, 1995.
    (c) Hospital-Specific Adjustment for Capital-Related Tax Costs.--
Section 1886(g)(1) (42 U.S.C. 1395ww(g)(1)) is amended--
            (1) by redesignating subparagraph (C) as subparagraph (D), 
        and
            (2) by inserting after subparagraph (B) the following 
        subparagraph:
                    ``(C)(i) For discharges occurring after September 
                30, 1995, such system shall provide for an adjustment 
                in an amount equal to the amount determined under 
                clause (iv) for capital-related tax costs for each 
                hospital that is eligible for such adjustment.
                    ``(ii) Subject to clause (iii), a hospital is 
                eligible for an adjustment under this subparagraph, 
                with respect to discharges occurring in a fiscal year, 
                if the hospital--
                            ``(I) is a hospital that may otherwise 
                        receive payments under this subsection,
                            ``(II) is not a public hospital, and
                            ``(III) incurs capital-related tax costs 
                        for the fiscal year.
                    ``(iii)(I) In the case of a hospital that first 
                incurs capital-related tax costs in a fiscal year after 
                fiscal year 1992 because of a change from 
                nonproprietary to proprietary status or because the 
                hospital commenced operation after such fiscal year, 
                the first fiscal year for which the hospital shall be 
                eligible for such adjustment is the second full fiscal 
                year following the fiscal year in which the hospital 
                first incurs such costs.
                    ``(II) In the case of a hospital that first incurs 
                capital-related tax costs in a fiscal year after fiscal 
                year 1992 because of a change in State or local tax 
                laws, the first fiscal year for which the hospital 
                shall be eligible for such adjustment is the fourth 
                full fiscal year following the fiscal year in which the 
                hospital first incurs such costs.
                    ``(iv) The per discharge adjustment under this 
                clause shall be equal to the hospital-specific capital-
                related tax costs per discharge of a hospital for 
                fiscal year 1992 (or, in the case of a hospital that 
                first incurs capital-related tax costs for a fiscal 
                year after fiscal year 1992, for the first full fiscal 
                year for which such costs are incurred), updated to the 
                fiscal year to which the adjustment applies. Such per 
                discharge adjustment shall be added to the Federal 
                capital rate, after such rate has been adjusted as 
                described in 42 CFR 412.312 (as in effect on the date 
                of the enactment of the Balanced Budget Reconciliation 
                Act of 1995), and before such rate is multiplied by the 
                applicable Federal rate percentage.
                    ``(v) For purposes of this subparagraph, capital-
                related tax costs include--
                            ``(I) the costs of taxes on land and 
                        depreciable assets owned by a hospital and used 
                        for patient care,
                            ``(II) payments in lieu of such taxes (made 
                        by hospitals that are exempt from taxation), 
                        and
                            ``(III) the costs of taxes paid by a 
                        hospital as lessee of land, buildings, or fixed 
                        equipment from a lessor that is unrelated to 
                        the hospital under the terms of a lease that 
                        requires the lessee to pay all expenses 
                        (including mortgage, interest, and 
                        amortization) and leaves the lessor with an 
                        amount free of all claims (sometimes referred 
                        to as a `net net net' or `triple net' lease).
                In determining the adjustment required under clause 
                (i), the Secretary shall not take into account any 
                capital-related tax costs of a hospital to the extent 
                that such costs are based on tax rates and assessments 
                that exceed those for similar commercial properties.
                    ``(vi) The system shall provide that the Federal 
                capital rate for any fiscal year after September 30, 
                1995, shall be reduced by a percentage sufficient to 
                ensure that the adjustments required to be paid under 
                clause (i) for a fiscal year neither increase nor 
                decrease the total amount that would have been paid 
                under this system but for the payment of such 
                adjustments for such fiscal year.''.
    (d) Revision of Exceptions Process Under Prospective Payment System 
for Certain Projects.--
            (1) In general.--Section 1886(g)(1) (42 U.S.C. 
        1395ww(g)(1)), as amended by subsection (c), is amended--
                    (A) by redesignating subparagraph (D) as 
                subparagraph (E), and
                    (B) by inserting after subparagraph (C) the 
                following subparagraph:
    ``(D) The exceptions under the system provided by the Secretary 
under subparagraph (B)(iii) shall include the provision of exception 
payments under the special exceptions process provided under 42 CFR 
412.348(g) (as in effect on September 1, 1995), except that the 
Secretary shall revise such process as follows:
            ``(i) A hospital with at least 100 beds which is located in 
        an urban area shall be eligible under such process without 
        regard to its disproportionate patient percentage under 
        subsection (d)(5)(F) or whether it qualifies for additional 
        payment amounts under such subsection.
            ``(ii) The minimum payment level for qualifying hospitals 
        shall be 80 percent.
            ``(iii) A hospital shall be considered to meet the 
        requirement that it completes the project involved no later 
        than the end of the hospital's last cost reporting period 
        beginning after October 1, 2001, if--
                    ``(I) the hospital has obtained a certificate of 
                need for the project approved by the State or a local 
                planning authority by September 1, 1995, and
                    ``(II) by September 1, 1995, the hospital has 
                expended on the project at least $750,000 or 10 percent 
                of the estimated cost of the project.
            ``(iv) Offsetting amounts, as described in 42 CFR 
        412.348(g)(8)(ii), shall apply except that subparagraph (B) of 
        such section shall be revised to require that the additional 
        payment that would otherwise be payable for the cost reporting 
        period shall be reduced by the amount (if any) by which the 
        hospital's current year medicare capital payments (excluding, 
        if applicable, 75 percent of the hospital's capital-related 
        disproportionate share payments) exceeds its medicare capital 
        costs for such year.''.
            (2) Limit to additional payments.--The amendment made by 
        subsection (a) shall not result in aggregate additional 
        payments under the special exception process described in 
        section 1886(b)(1)(D) for fiscal years 1996 through 2000 in 
        excess of an amount equal to the sum of $50,000,000 per year 
        more than would have been paid in such fiscal years if such 
        amendment had not been enacted.
            (3) Conforming amendment.--Section 1886(g)(1)(B) (42 U.S.C. 
        1395ww(g)(1)(B)) is amended by striking ``may provide'' and 
        inserting ``shall provide (in accordance with subparagraph 
        (D)''.

SEC. 7014. DISPROPORTIONATE SHARE HOSPITAL PAYMENTS.

    (a) In General.--Section 1886(d)(5)(F)(ii) (42 U.S.C. 
1395ww(d)(5)(F)(ii)) is amended--
            (1) by striking ``The'' and inserting ``Subject to clause 
        (ix), the'';
            (2) by redesignating subclauses (I) and (II) as items (aa) 
        and (bb), respectively;
            (3) by inserting ``(I)'' after ``(ii)'';
            (4) by inserting ``the applicable percentage determined 
        under subclause (II) of the amount'' after ``discharge shall 
        be'';
            (5) by adding at the end the following new subclause:
                    ``(II) For purposes of subclause (I), the 
                applicable percentage for discharges occurring during a 
                fiscal year is 95 percent in fiscal year 1996, 90 
                percent in fiscal year 1997, 85 percent in fiscal year 
                1998, 80 percent in fiscal year 1999, and 75 percent in 
                fiscal years 2000, 2001, and 2002.''; and
            (6) by adding at the end the following new clause:
            ``(ix) With respect to discharges occurring on or after 
        October 1, 1995, the Secretary shall adjust the additional 
        payment amounts provided in accordance with this subparagraph 
        for each discharge such that the total amount of such 
        additional payment amounts for discharges occurring over the 7-
        year period beginning on October 1, 1995, does not exceed an 
        average 5 percent of the sum of the total estimated payments 
        under this subsection over such 7-year period (other than 
        payments under subparagraph (B) or this subparagraph).''.
    (b) No Restandardization of Payment Amounts Required.--Section 
1886(d)(2)(C)(iv) (42 U.S.C. 1395ww(d)(2)(C)(iv)) is amended by 
striking ``1990'' and inserting ``, 1990, and the modifications made to 
such paragraph by section 7014(a) of the Balanced Budget Reconciliation 
Act of 1995.''.
    (c) Effective Date.--The amendments made by subsections (a) and (b) 
shall apply to discharges occurring on or after October 1, 1995.

SEC. 7015. INDIRECT MEDICAL EDUCATION PAYMENTS.

    (a) In General.--Section 1886(d)(5)(B)(ii) (42 U.S.C. 
1395ww(d)(5)(B)(ii)) is amended to read as follows:
            ``(ii) For purposes of clause (i)(II), the indirect 
        teaching adjustment factor is equal to c  x  (((1+r) to the nth 
        power) - 1), where `r' is the ratio of the hospital's full-time 
        equivalent interns and residents to beds and `n' equals .405. 
        For discharges occurring on or after--
                    ``(I) May 1, 1986, and before October 1, 1995, `c' 
                is equal to 1.89;
                    ``(II) October 1, 1995, and before October 1, 1996, 
                `c' is equal to 1.65;
                    ``(III) October 1, 1996, and before October 1, 
                1997, `c' is equal to 1.48;
                    ``(IV) October 1, 1997, and before October 1, 1998, 
                `c' is equal to 1.33; and
                    ``(V) October 1, 1998, and before October 1, 2002, 
                `c' is equal to 1.23.''.
    (b) No Restandardization of Payment Amounts Required.--Section 
1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is amended by striking 
``of 1985'' and inserting ``of 1985, but not taking into account the 
amendments made by section 7015(a) of the Balanced Budget 
Reconciliation Act of 1995''.

SEC. 7016. GRADUATE MEDICAL EDUCATION AND DISPROPORTIONATE SHARE 
              PAYMENT ADJUSTMENTS FOR MEDICARE CHOICE.

    Section 1886 (42 U.S.C. 1395ww) is amended by adding at the end the 
following new subsection:
    ``(j) Graduate Medical Education and Disproportionate Share Payment 
Adjustments for Medicare Choice.--
            ``(1) In general.--For discharges occurring on or after 
        January 1, 1997, a subsection (d) hospital shall receive 
        payment for each discharge of an individual enrolled under part 
        D with a medicare choice plan in an amount equal to the 
        applicable percentage of the amount that the hospital would 
        have received for such discharge under subsections (d)(5)(B), 
        (relating to indirect medical education), (d)(5)(F) (relating 
        to disproportionate share), and (h) (relating to direct 
        graduate medical education), if such individual was enrolled in 
        the traditional medicare program (as defined in section 
        1895A(c)(3)).
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the applicable percentage is--
                    ``(A) for calendar year 1997, 50 percent; and
                    ``(B) for calendar years after 1997, 100 
                percent.''.

SEC. 7017. PAYMENTS FOR HOSPICE SERVICES.

    Section 1814(i)(1)(C)(ii) (42 U.S.C. 1395f(i)(1)(C)(ii)) is amended 
by striking subclauses (IV), (V), and (VI), and inserting the following 
subclauses:
            ``(IV) for each of fiscal years 1996 through 2002, the 
        greater of--
                    ``(aa) the market basket percentage increase for 
                the fiscal year minus 2.5 percentage points, or
                    ``(bb) 1.1 percent (1.3 percent in fiscal year 1996 
                and 1.2 percent in fiscal year 1997); and
            ``(V) for a subsequent fiscal year, the market basket 
        percentage increase for the fiscal year.''.

SEC. 7018. EXTENDING MEDICARE COVERAGE OF, AND APPLICATION OF HOSPITAL 
              INSURANCE TAX TO, ALL STATE AND LOCAL GOVERNMENT 
              EMPLOYEES.

    (a) In General.--
            (1) Application of hospital insurance tax.--Section 
        3121(u)(2) of the Internal Revenue Code of 1986 is amended by 
        striking subparagraphs (C) and (D).
            (2) Coverage under medicare.--Section 210(p) (42 U.S.C. 
        410(p)) is amended by striking paragraphs (3) and (4).
            (3) Effective date.--The amendments made by this subsection 
        shall apply to services performed after December 31, 1995.
    (b) Transition in Benefits for State and Local Government Employees 
and Former Employees.--
            (1) In general.--
                    (A) Employees newly subject to tax.--For purposes 
                of sections 226, 226A, and 1811 of the Social Security 
                Act, in the case of any individual who performs 
                services during the calendar quarter beginning January 
                1, 1996, the wages for which are subject to the tax 
                imposed by section 3101(b) of the Internal Revenue Code 
                of 1986 only because of the amendments made by 
                subsection (a), the individual's medicare qualified 
                State or local government employment (as defined in 
                subparagraph (B)) performed before January 1, 1996, 
                shall be considered to be ``employment'' (as defined 
                for purposes of title II of such Act), but only for 
                purposes of providing the individual (or another 
                person) with entitlement to hospital insurance benefits 
                under part A of title XVIII of such Act for months 
                beginning with January 1996.
                    (B) Medicare qualified state or local government 
                employment defined.--In this paragraph, the term 
                ``medicare qualified State or local government 
                employment'' means medicare qualified government 
                employment described in section 210(p)(1)(B) of the 
                Social Security Act (determined without regard to 
                section 210(p)(3) of such Act, as in effect before its 
                repeal under subsection (a)(2)).
            (2) Authorization of appropriations.--There are authorized 
        to be appropriated to the Federal Hospital Insurance Trust Fund 
        from time to time such sums as the Secretary of Health and 
        Human Services deems necessary for any fiscal year on account 
        of--
                    (A) payments made or to be made during such fiscal 
                year from such Trust Fund with respect to individuals 
                who are entitled to benefits under title XVIII of the 
                Social Security Act solely by reason of paragraph (1),
                    (B) the additional administrative expenses 
                resulting or expected to result therefrom, and
                    (C) any loss in interest to such Trust Fund 
                resulting from the payment of those amounts, in order 
                to place such Trust Fund in the same position at the 
                end of such fiscal year as it would have been in if 
                this subsection had not been enacted.
            (3) Information to individuals who are prospective medicare 
        beneficiaries based on state and local government employment.--
        Section 226(g) (42 U.S.C. 426(g)) is amended--
                    (A) by redesignating paragraphs (1) through (3) as 
                subparagraphs (A) through (C), respectively,
                    (B) by inserting ``(1)'' after ``(g)'', and
                    (C) by adding at the end the following new 
                paragraph:
    ``(2) The Secretary, in consultation with State and local 
governments, shall provide procedures designed to assure that 
individuals who perform medicare qualified government employment by 
virtue of service described in section 210(a)(7) are fully informed 
with respect to (A) their eligibility or potential eligibility for 
hospital insurance benefits (based on such employment) under part A of 
title XVIII, (B) the requirements for, and conditions of, such 
eligibility, and (C) the necessity of timely application as a condition 
of becoming entitled under subsection (b)(2)(C), giving particular 
attention to individuals who apply for an annuity or retirement benefit 
and whose eligibility for such annuity or retirement benefit is based 
on a disability.''.
    (c) Technical Amendments.--
            (1) Subparagraph (A) of section 3121(u)(2) of the Internal 
        Revenue Code of 1986 is amended by striking ``subparagraphs (B) 
        and (C),'' and inserting ``subparagraph (B),''.
            (2) Subparagraph (B) of section 210(p)(1) (42 U.S.C. 
        410(p)(1)) is amended by striking ``paragraphs (2) and (3).'' 
        and inserting ``paragraph (2).''.
            (3) Section 218 (42 U.S.C. 418) is amended by striking 
        subsection (n).
            (4) The amendments made by this subsection shall apply 
        after December 31, 1995.

SEC. 7019. NURSE AIDE TRAINING IN SKILLED NURSING FACILITIES SUBJECT TO 
              EXTENDED SURVEY AND CERTAIN OTHER CONDITIONS.

    Section 1819(f)(2)(B)(iii)(I) (42 U.S.C. 1395i-3(f)(2)(B)(iii)(I)) 
is amended, in the matter preceding item (a), by striking ``by or in a 
skilled nursing facility'' and inserting ``by a skilled nursing 
facility (or in such a facility, unless the State determines that there 
is no other such program offered within a reasonable distance, provides 
notice of the approval to the State long term care ombudsman, and 
assures, through an oversight effort, that an adequate environment 
exists for such a program)''.

          Subchapter B--Payments to Skilled Nursing Facilities

                   PART I--PROSPECTIVE PAYMENT SYSTEM

SEC. 7025. PROSPECTIVE PAYMENT SYSTEM FOR SKILLED NURSING FACILITIES.

    Title XVIII (42 U.S.C. 1395 et seq.) is amended by adding the 
following new section after section 1888:

      ``prospective payment system for skilled nursing facilities

    ``Sec. 1889. (a) Establishment of System.--Notwithstanding any 
other provision of this title, the Secretary shall establish a 
prospective payment system under which fixed payments for episodes of 
care shall be made, instead of payments determined under section 
1861(v), section 1888, or section 1888A, to skilled nursing facilities 
for all extended care services furnished during the benefit period 
established under section 1812(a)(2). Such payments shall constitute 
payment for capital costs and all routine and non-routine service costs 
covered under this title that are furnished to individuals who are 
inpatients of skilled nursing facilities during such benefit period, 
except for physicians' services. The payment amounts shall vary 
depending on case-mix, patient acuity, and such other factors as the 
Secretary determines are appropriate. The prospective payment system 
shall apply for cost reporting periods (or portions of cost reporting 
periods) beginning on or after October 1, 1997.
    ``(b) 90 Percent of Levels Otherwise In Effect.--The Secretary 
shall establish the prospective payment amounts under subsection (a) at 
levels such that, in the Secretary's estimation, the amount of total 
payments under this title shall not exceed 90 percent of the amount of 
payments that would have been made under this title for all routine and 
non-routine services and capital expenditures if this section had not 
been enacted.
    ``(c) Adjustment in Rates to Take Into Account Beneficiary Cost-
Sharing.--The Secretary shall reduce the prospective payment rates 
established under this section to take into account the beneficiary 
coinsurance amount required under section 1813(a)(3).''.

                    PART II--INTERIM PAYMENT SYSTEM

SEC. 7031. PAYMENTS FOR ROUTINE SERVICE COSTS.

    (a) Clarification of Definition of Routine Service Costs.--Section 
1888 (42 U.S.C. 1395yy) is amended by adding at the end the following 
new subsection:
    ``(e) For purposes of this section, the `routine service costs' of 
a skilled nursing facility are all costs which are attributable to 
nursing services, room and board, administrative costs, other overhead 
costs, and all other ancillary services (including supplies and 
equipment), excluding costs attributable to covered non-routine 
services subject to payment amounts under section 1888A.''.
    (b) Conforming Amendment.--Section 1888 (42 U.S.C. 1395yy) is 
amended in the heading by inserting ``and certain ancillary'' after 
``service''.

SEC. 7032. COST-EFFECTIVE MANAGEMENT OF COVERED NON-ROUTINE SERVICES.

    (a) In General.--Title XVIII (42 U.S.C. 1395 et seq.), as amended 
by section 7025, is amended by inserting after section 1888 the 
following new section:

``cost-effective management of covered non-routine services of skilled 
                           nursing facilities

    ``Sec. 1888A. (a) Definitions.--For purposes of this section:
            ``(1) Covered non-routine services.--The term `covered non-
        routine services' means post-hospital extended care services 
        consisting of any of the following:
                    ``(A) Physical or occupational therapy or speech-
                language pathology services, or respiratory therapy.
                    ``(B) Prescription drugs.
                    ``(C) Complex medical equipment.
                    ``(D) Intravenous therapy and solutions (including 
                enteral and parenteral nutrients, supplies, and 
                equipment).
                    ``(E) Radiation therapy.
                    ``(F) Diagnostic services, including laboratory, 
                radiology (including computerized tomography services 
                and imaging services), and pulmonary services.
            ``(2) SNF market basket percentage increase.--The term `SNF 
        market basket percentage increase' for a fiscal year means a 
        percentage equal to input price changes in routine service 
        costs for the year under section 1888(a).
            ``(3) Stay.--The term `stay' means, with respect to an 
        individual who is a resident of a skilled nursing facility, a 
        period of continuous days during which the facility provides 
        extended care services for which payment may be made under this 
        title for the individual during the individual's spell of 
        illness.
    ``(b) New Payment Method for Covered Non-Routine Services Beginning 
in Fiscal Year 1996.--
            ``(1) In general.--The payment method established under 
        this section shall apply with respect to covered non-routine 
        services furnished during cost reporting periods (or portions 
        of cost reporting periods) beginning on or after October 1, 
        1995.
            ``(2) Interim payments.--Subject to subsection (c), a 
        skilled nursing facility shall receive interim payments under 
        this title for covered non-routine services furnished to an 
        individual during cost reporting periods (or portions of cost 
        reporting periods) described in paragraph (1) in an amount 
        equal to the reasonable cost of providing such services in 
        accordance with section 1861(v). The Secretary may adjust such 
        payments if the Secretary determines (on the basis of such 
        estimated information as the Secretary considers appropriate) 
        that payments to the facility under this paragraph for a cost 
        reporting period would substantially exceed the cost reporting 
        period amount determined under subsection (c)(2).
            ``(3) Responsibility of skilled nursing facility to manage 
        billings.--
                    ``(A) Clarification relating to part a billing.--In 
                the case of a covered non-routine service furnished to 
                an individual who (at the time the service is 
                furnished) is a resident of a skilled nursing facility 
                who is entitled to coverage under section 1812(a)(2) 
                for such service, the skilled nursing facility shall 
                submit a claim for payment under this title for such 
                service under part A (without regard to whether or not 
                the item or service was furnished by the facility, by 
                others under arrangement with them made by the 
                facility, under any other contracting or consulting 
                arrangement, or otherwise).
                    ``(B) Part b billing.--In the case of a covered 
                non-routine service furnished to an individual who (at 
                the time the service is furnished) is a resident of a 
                skilled nursing facility who is not entitled to 
                coverage under section 1812(a)(2) for such service but 
                is entitled to coverage under part B for such service, 
                the skilled nursing facility shall submit a claim for 
                payment under this title for such service under part B 
                (without regard to whether or not the item or service 
                was furnished by the facility, by others under 
                arrangement with them made by the facility, under any 
                other contracting or consulting arrangement, or 
                otherwise).
                    ``(C) Maintaining records on services furnished to 
                residents.--Each skilled nursing facility receiving 
                payments for extended care services under this title 
                shall document on the facility's cost report all 
                covered non-routine services furnished to all residents 
                of the facility to whom the facility provided extended 
                care services for which payment was made under part A 
                during a fiscal year (beginning with fiscal year 1996) 
                (without regard to whether or not the services were 
                furnished by the facility, by others under arrangement 
                with them made by the facility, under any other 
                contracting or consulting arrangement, or otherwise).
    ``(c) No Payment in Excess of Product of Per Stay Amount and Number 
of Stays.--
            ``(1) In general.--If a skilled nursing facility has 
        received aggregate payments under subsection (b) for covered 
        non-routine services during a cost reporting period beginning 
        during a fiscal year in excess of an amount equal to the cost 
        reporting period amount determined under paragraph (2), the 
        Secretary shall reduce the payments made to the facility with 
        respect to such services for cost reporting periods beginning 
        during the following fiscal year in an amount equal to such 
        excess. The Secretary shall reduce payments under this 
        subparagraph at such times and in such manner during a fiscal 
        year as the Secretary finds necessary to meet the requirement 
        of this subparagraph.
            ``(2) Cost reporting period amount.--The cost reporting 
        period amount determined under this subparagraph is an amount 
        equal to the product of--
                    ``(A) the per stay amount applicable to the 
                facility under subsection (d) for the period; and
                    ``(B) the number of stays beginning during the 
                period for which payment was made to the facility for 
                such services.
            ``(3) Prospective reduction in payments.--In addition to 
        the process for reducing payments described in paragraph (1), 
        the Secretary may reduce payments made to a facility under this 
        section during a cost reporting period if the Secretary 
        determines (on the basis of such estimated information as the 
        Secretary considers appropriate) that payments to the facility 
        under this section for the period will substantially exceed the 
        cost reporting period amount for the period determined under 
        this paragraph.
    ``(d) Determination of Facility Per Stay Amount.--
            ``(1) Amount for fiscal year 1996.--
                    ``(A) In general.--
                            ``(i) Establishment.--Except as provided in 
                        subparagraph (B) and clause (ii), the Secretary 
                        shall establish a per stay amount for each 
                        nursing facility for the 12-month cost 
                        reporting period beginning during fiscal year 
                        1996 that is the facility-specific stay amount 
                        for the facility (as determined under 
                        subsection (e)) for the last 12-month cost 
                        reporting period ending on or before September 
                        30, 1994, increased (in a compounded manner) by 
                        the SNF market basket percentage increase (as 
                        defined in subsection (a)(2)) for each fiscal 
                        year through fiscal year 1996.
                            ``(ii) Adjustment if implementation 
                        delayed.--If the amount under clause (i) is not 
                        established prior to the cost reporting period 
                        described in clause (i), the Secretary shall 
                        adjust such amount for stays after such amount 
                        is established in such a manner so as to 
                        recover any amounts in excess of the amounts 
                        which would have been paid for stays before 
                        such date if the amount had been in effect for 
                        such stays.
                    ``(B) Facilities not having 1994 cost reporting 
                period.--In the case of a skilled nursing facility for 
                which payments were not made under this title for 
                covered non-routine services for the last 12-month cost 
                reporting period ending on or before September 30, 
                1994, the per stay amount for the 12-month cost 
                reporting period beginning during fiscal year 1996 
                shall be the average of all per stay amounts determined 
                under subparagraph (A).
            ``(2) Amount for fiscal year 1997 and subsequent fiscal 
        years.--The per stay amount for a skilled nursing facility for 
        a 12-month cost reporting period beginning during a fiscal year 
        after 1996 is equal to the per stay amount established under 
        this subsection for the 12-month cost reporting period 
        beginning during the preceding fiscal year (without regard to 
        any adjustment under paragraph (1)(A)(ii)), increased by the 
        greater of--
                    ``(A) the SNF market basket percentage increase for 
                such subsequent fiscal year minus 2.5 percentage 
                points; or
                    ``(B) 1.2 percent (1.1 percent for fiscal years 
                after 1997).
    ``(e) Determination of Facility-Specific Stay Amounts.--The 
`facility-specific stay amount' for a skilled nursing facility for a 
cost reporting period is--
            ``(1) the sum of--
                    ``(A) the amount of payments made to the facility 
                under part A during the period which are attributable 
                to covered non-routine services furnished during a 
                stay; and
                    ``(B) the Secretary's best estimate of the amount 
                of payments made under part B during the period for 
                covered non-routine services furnished to all residents 
                of the facility to whom the facility provided extended 
                care services for which payment was made under part A 
                during the period (without regard to whether or not the 
                services were furnished by the facility, by others 
                under arrangement with them made by the facility under 
                any other contracting or consulting arrangement, or 
                otherwise), as estimated by the Secretary; divided by
            ``(2) the average number of days per stay for all residents 
        of the skilled nursing facility.
    ``(f) Intensive Nursing or Therapy Needs.--
            ``(1) In general.--In applying subsection (b) to covered 
        non-routine services furnished during a stay beginning during a 
        cost reporting period to a resident of a skilled nursing 
        facility who requires intensive nursing or therapy services, 
        the per stay amount for such resident shall be the per stay 
        amount developed under paragraph (2) instead of the per stay 
        amount determined under subsection (d)(1)(A).
            ``(2) Per stay amount for intensive need residents.--The 
        Secretary, after consultation with the Prospective Payment 
        Assessment Commission and skilled nursing facility experts, 
        shall develop and publish a per stay amount for residents of a 
        skilled nursing facility who require intensive nursing or 
        therapy services.
            ``(3) Budget neutrality.--The Secretary shall adjust 
        payments under subsection (b) in a manner that ensures that 
        total payments for covered non-routine services under this 
        section are not greater or less than total payments for such 
        services would have been but for the application of paragraph 
        (1).
    ``(g) Exceptions and Adjustments to Amounts.--
            ``(1) In general.--The Secretary may make exceptions and 
        adjustments to the cost reporting period amounts applicable to 
        a skilled nursing facility under subsection (c)(2) for a cost 
        reporting period, except that the total amount of any 
        additional payments made under this section for covered non-
        routine services during the cost reporting period as a result 
        of such exceptions and adjustments may not exceed 5 percent of 
        the aggregate payments made to all skilled nursing facilities 
        for covered non-routine services during the cost reporting 
        period (determined without regard to this paragraph).
            ``(2) Budget neutrality.--The Secretary shall adjust 
        payments under subsection (b) in a manner that ensures that 
        total payments for covered non-routine services under this 
        section are not greater or less than total payments for such 
        services would have been but for the application of paragraph 
        (1).
    ``(h) Special Treatment for Medicare Low Volume Skilled Nursing 
Facilities.--The Secretary shall determine an appropriate manner in 
which to apply this section, taking into account the purposes of this 
section, to non-routine costs of a skilled nursing facility for which 
payment is made for routine service costs during a cost reporting 
period on the basis of prospective payments under section 1888(d).
    ``(i) Maintaining Savings From Payment System.--The prospective 
payment system established under section 1889 shall reflect the payment 
methodology established under this section for covered non-routine 
services.''.
    (b) Conforming Amendment.--Section 1814(b) (42 U.S.C. 1395f(b)) is 
amended in the matter preceding paragraph (1) by striking ``1813 and 
1886'' and inserting ``1813, 1886, 1888, 1888A, and 1889''.

SEC. 7033. PAYMENTS FOR ROUTINE SERVICE COSTS.

    (a) Maintaining Savings Resulting From Temporary Freeze on Payment 
Increases.--
            (1) Basing updates to per diem cost limits on limits for 
        fiscal year 1993.--
                    (A) In general.--The last sentence of section 
                1888(a) (42 U.S.C. 1395yy(a)) is amended by adding at 
                the end the following: ``(except that such updates may 
                not take into account any changes in the routine 
                service costs of skilled nursing facilities occurring 
                during cost reporting periods which began during fiscal 
                year 1994 or fiscal year 1995).''.
                    (B) No exceptions permitted based on amendment.--
                The Secretary of Health and Human Services shall not 
                consider the amendment made by subparagraph (A) in 
                making any adjustments pursuant to section 1888(c) of 
                the Social Security Act.
            (2) Payments to low medicare volume skilled nursing 
        facilities.--Any change made by the Secretary of Health and 
        Human Services in the amount of any prospective payment paid to 
        a skilled nursing facility under section 1888(d) of the Social 
        Security Act for cost reporting periods beginning on or after 
        October 1, 1995, may not take into account any changes in the 
        costs of services occurring during cost reporting periods which 
        began during fiscal year 1994 or fiscal year 1995.
    (b) Basing 1996 Limits on New Definition of Routine Costs.--The 
Secretary of Health and Human Services shall take into account the new 
definition of routine service costs under section 1888(e) of the Social 
Security Act, as added by section 7031, in determining the routine per 
diem cost limits under section 1888(a) for fiscal year 1996 and each 
fiscal year thereafter.
    (c) Establishment of Schedule for Making Adjustments to Limits.--
Section 1888(c) (42 U.S.C. 1395yy(c)) is amended by striking the period 
at the end of the second sentence and inserting ``, and may only make 
adjustments under this subsection with respect to a facility which 
applies for an adjustment during an annual application period 
established by the Secretary.''.
    (d) Limitation to Exceptions Process of the Secretary.--Section 
1888(c) (42 U.S.C. 1395yy(c)) is amended--
            (1) by striking ``(c) The Secretary'' and inserting 
        ``(c)(1) Subject to paragraph (2), the Secretary''; and
            (2) by adding at the end the following new paragraph:
    ``(2) The Secretary may not make any adjustments under this 
subsection in the limits set forth in subsection (a) for a cost 
reporting period beginning during a fiscal year to the extent that the 
total amount of the additional payments made under this title as a 
result of such adjustments is greater than an amount equal to--
            ``(A) for cost reporting periods beginning during fiscal 
        year 1996, the total amount of the additional payments made 
        under this title as a result of adjustments under this 
        subsection for cost reporting periods beginning during fiscal 
        year 1994 increased (on a compounded basis) by the SNF market 
        basket percentage increase (as defined in section 1888A(a)(2)) 
        for each fiscal year; and
                    ``(B) for cost reporting periods beginning during a 
                subsequent fiscal year, the amount determined under 
                this paragraph for the preceding fiscal year, increased 
                by the SNF market basket percentage increase (as 
                defined in section 1888A(a)(2)) for each fiscal 
                year.''.
    (e) Maintaining Savings From Payment System.--The prospective 
payment system established under section 1889 of the Social Security 
Act, as added by section 7025, shall reflect the routine per diem cost 
limits under section 1888(a) of such Act.

SEC. 7034. REDUCTIONS IN PAYMENT FOR CAPITAL-RELATED COSTS.

    (a) In General.--Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)) is 
amended by adding at the end the following new subparagraph:
    ``(T) Such regulations shall provide that, in determining the 
amount of the payments that may be made under this title with respect 
to all the capital-related costs of skilled nursing facilities, the 
Secretary shall reduce the amounts of such payments otherwise 
established under this title by 15 percent for payments attributable to 
portions of cost reporting periods occurring beginning in fiscal years 
1996 through 2002.''.
    (b) Maintaining Savings Resulting From 15 Percent Capital 
Reduction.--The prospective payment system established under section 
1889 of the Social Security Act, as added by section 7025 of the 
Balanced Budget Reconciliation Act of 1995, shall reflect the 15 
percent reduction in payments for capital-related costs of skilled 
nursing facilities as such reduction is in effect under section 
1861(v)(1)(T) of such Act, as added by subsection (a).

SEC. 7035. TREATMENT OF ITEMS AND SERVICES PAID FOR UNDER PART B.

    (a) Requiring Payment for All Items and Services To Be Made to 
Facility.--
            (1) In general.--The first sentence of section 1842(b)(6) 
        (42 U.S.C. 1395u(b)(6)) is amended--
                    (A) by striking ``and (D)'' and inserting ``(D)''; 
                and
                    (B) by striking the period at the end and inserting 
                the following: ``, and (E) in the case of an item or 
                service furnished to an individual who (at the time the 
                item or service is furnished) is a resident of a 
                skilled nursing facility, payment shall be made to the 
                facility (without regard to whether or not the item or 
                service was furnished by the facility, by others under 
                arrangement with them made by the facility, under any 
                other contracting or consulting arrangement, or 
                otherwise), except that this subparagraph shall not 
                preclude a physician from providing evaluation and 
                management services to patients under the physician's 
                care.''.
            (2) Exclusion for items and services not billed by 
        facility.--Section 1862(a) (42 U.S.C. 1395y(a)) is amended--
                    (A) by striking ``or'' at the end of paragraph 
                (14);
                    (B) by striking the period at the end of paragraph 
                (15) and inserting ``; or''; and
                    (C) by inserting after paragraph (15) the following 
                new paragraph:
            ``(16) where such expenses are for covered non-routine 
        services (as defined in section 1888A(a)(1)) furnished to an 
        individual who is a resident of a skilled nursing facility and 
        for which the claim for payment under this title is not 
        submitted by the facility.''.
            (3) Conforming amendment.--Section 1832(a)(1) (42 U.S.C. 
        1395k(a)(1)) is amended by striking ``(2);'' and inserting 
        ``(2) and section 1842(b)(6)(E);''.
    (b) Reduction in Payments for Items and Services Furnished by or 
Under Arrangements With Facilities.--Section 1861(v)(1) (42 U.S.C. 
1395x(v)(1)), as amended by section 7034, is amended by adding at the 
end the following new subparagraph:
    ``(U) In the case of an item or service furnished by a skilled 
nursing facility (or by others under arrangement with them made by a 
skilled nursing facility or under any other contracting or consulting 
arrangement or otherwise) for which payment is made under part B in an 
amount determined in accordance with section 1833(a)(2)(B), the 
Secretary shall reduce the reasonable cost for such item or service 
otherwise determined under clause (i)(I) of such section by 5.8 percent 
for payments attributable to portions of cost reporting periods 
occurring during fiscal years 1996 through 2002.''.

SEC. 7036. MEDICAL REVIEW PROCESS.

    In order to ensure that medicare beneficiaries are furnished 
appropriate extended care services, the Secretary of Health and Human 
Services shall establish and implement a thorough medical review 
process to examine the effects of the amendments made by this 
subchapter on the quality of extended care services furnished to 
medicare beneficiaries. In developing such a medical review process, 
the Secretary shall place a particular emphasis on the quality of non-
routine covered services for which payment is made under section 1888A 
of the Social Security Act.

SEC. 7037. REVISED SALARY EQUIVALENCE LIMITS.

    The Secretary of Health and Human Services shall determine the non-
routine per stay payment amounts for each skilled nursing facility 
established under section 1888A of the Social Security Act, as added by 
section 7032, as if salary equivalence guidelines were in effect for 
occupational, physical, respiratory, and speech pathology therapy 
services for the last 12-month cost reporting period of the facility 
ending on or before September 30, 1994.

SEC. 7038. REPORT BY PROSPECTIVE PAYMENT ASSESSMENT COMMISSION.

    Not later than October 1, 1997, the Prospective Payment Assessment 
Commission shall submit to Congress a report on the system under which 
payment is made under the medicare program for extended care services 
furnished by skilled nursing facilities, and shall include in the 
report the following:
            (1) An analysis of the effect of the methodology 
        established under section 1888A of the Social Security Act (as 
        added by section 7032) on the payments for, and the quality of, 
        extended care services under the medicare program.
            (2) An analysis of the advisability of determining the 
        amount of payment for covered non-routine services of 
        facilities (as described in such section) on the basis of the 
        amounts paid for such services when furnished by suppliers 
        under part B of the medicare program.
            (3) An analysis of the desirability of maintaining separate 
        routine cost-limits for hospital-based and freestanding 
        facilities in the costs of extended care services recognized as 
        reasonable under the medicare program.
            (4) An analysis of the quality of services furnished by 
        skilled nursing facilities.
            (5) An analysis of the adequacy of the process and 
        standards used to provide exceptions to the limits described in 
        paragraph (3).
            (6) An analysis of the effect of the prospective payment 
        methodology established under section 1889 of the Social 
        Security Act (as added by section 7025) on the payments for, 
        and the quality of, extended care services under the medicare 
        program, including an evaluation of the baseline used in 
        establishing a system for payment for extended care services 
        furnished by skilled nursing facilities.

SEC. 7039. EFFECTIVE DATE.

    Except as otherwise provided in this part, the amendments made by 
this part shall apply to services furnished during cost reporting 
periods (or portions of cost reporting periods) beginning on or after 
October 1, 1996.

                CHAPTER 3--PROVISIONS RELATING TO PART B

SEC. 7041. PAYMENTS FOR PHYSICIANS' SERVICES.

    (a) Establishing Update to Conversion Factor To Match Spending 
Under Sustainable Growth Rate.--
            (1) Section 1848(d)(2) (42 U.S.C. 1395ww(d)(2)) is amended 
        to read as follows:
            ``(2) Recommendation of update.--
                    ``(A) In general.--Not later than April 15 of each 
                year (beginning with 1996), the Secretary shall 
                transmit to the Congress a report that includes a 
                recommendation on the appropriate update in the 
                conversion factor for all physicians' services (as 
                defined in subsection (f)(3)(A)) in the following year. 
                In making the recommendation, the Secretary shall 
                consider--
                            ``(i) the percentage change in the medicare 
                        economic index (described in the fourth 
                        sentence of section 1842(b)(3)) for that year;
                            ``(ii) such factors as enter into the 
                        calculation of the update adjustment factor as 
                        described in paragraph (3)(B); and
                            ``(iii) access to services.
                    ``(B) Additional considerations.--In making 
                recommendations under subparagraph (A), the Secretary 
                may also consider--
                            ``(i) unexpected changes by physicians in 
                        response to the implementation of the fee 
                        schedule;
                            ``(ii) unexpected changes in outlay 
                        projections;
                            ``(iii) changes in the quality or 
                        appropriateness of care;
                            ``(iv) any other relevant factors not 
                        measured in the resource-based payment 
                        methodology; and
                            ``(v) changes in volume or intensity of 
                        services.
                    ``(C) Commission review.--The Physician Payment 
                Review Commission shall review the report submitted 
                under subparagraph (A) in a year and shall submit to 
                the Congress, by not later than May 15 of the year, a 
                report including its recommendations respecting the 
                update in the conversion factor for the following 
                year.''.
            (2) Update.--Section 1848(d)(3) (42 U.S.C. 1395w-4(d)(3)) 
        is amended to read as follows:
            ``(3) Update.--
                    ``(A) In general.--Unless Congress otherwise 
                provides, subject to subparagraph (E), for purposes of 
                this section the update for a year (beginning with 
                1997) is equal to the product of--
                            ``(i) 1 plus the Secretary's estimate of 
                        the percentage increase in the medicare 
                        economic index (described in the fourth 
                        sentence of section 1842(b)(3)) for the year 
                        (divided by 100), and
                            ``(ii) 1 plus the Secretary's estimate of 
                        the update adjustment factor for the year 
                        (divided by 100),
                minus 1 and multiplied by 100.
                    ``(B) Update adjustment factor.--The `update 
                adjustment factor' for a year is equal to the quotient 
                of--
                            ``(i) the difference between (I) the sum of 
                        the allowed expenditures for physicians' 
                        services furnished during each of the years 
                        1995 through the year involved and (II) the sum 
                        of the amount of actual expenditures for 
                        physicians' services furnished during each of 
                        the years 1995 through the previous year; 
                        divided by
                            ``(ii) the Secretary's estimate of allowed 
                        expenditures for physicians' services furnished 
                        during the year.
                    ``(C) Determination of allowed expenditures.--For 
                purposes of subparagraph (B), allowed expenditures for 
                physicians' services shall be determined as follows (as 
                estimated by the Secretary):
                            ``(i) In the case of allowed expenditures 
                        for 1995, such expenditures shall be equal to 
                        actual expenditures for services furnished 
                        during the 12-month period ending with June 30, 
                        1995.
                            ``(ii) In the case of allowed expenditures 
                        for 1996 and each subsequent year, such 
                        expenditures shall be equal to allowed 
                        expenditures for the previous year, increased 
                        by the sustainable growth rate under subsection 
                        (f) for the fiscal year which begins during the 
                        year.
                    ``(D) Determination of actual expenditures.--For 
                purposes of subparagraph (B), the amount of actual 
                expenditures for physicians' services furnished during 
                a year shall be equal to the amount of expenditures for 
                such services during the 12-month period ending with 
                June of the previous year.
                    ``(E) Restriction on variation from medicare 
                economic index.--Notwithstanding the amount of the 
                update adjustment factor determined under subparagraph 
                (B) for a year, the update in the conversion factor 
                under this paragraph for the year may not be--
                            ``(i) greater than 103 percent of 1 plus 
                        the Secretary's estimate of the percentage 
                        increase in the medicare economic index 
                        (described in the fourth sentence of section 
                        1842(b)(3)) for the year (divided by 100), 
                        minus 1 and multiplied by 100; or
                            ``(ii) less than 93 percent of 1 plus the 
                        Secretary's estimate of the percentage increase 
                        in the medicare economic index (described in 
                        the fourth sentence of section 1842(b)(3)) for 
                        the year (divided by 100), minus 1 and 
                        multiplied by 100.''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to physicians' services furnished on or after 
        January 1, 1997.
    (b) Replacement of Volume Performance Standard With Sustainable 
Growth Rate.--Section 1848(f) (42 U.S.C. 1395w-4(f)) is amended to read 
as follows:
    ``(f) Sustainable Growth Rate.--
            ``(1) Process for establishing sustainable growth rate of 
        increase.--
                    ``(A) Secretary's recommendation.--By not later 
                than April 15 of each year (beginning with 1996), the 
                Secretary shall transmit to the Congress a 
                recommendation on the sustainable growth rate for the 
                fiscal year beginning in such year. In making the 
                recommendation, the Secretary shall confer with 
                organizations representing physicians and shall 
                consider--
                            ``(i) inflation,
                            ``(ii) changes in numbers of enrollees 
                        (other than private plan enrollees) under this 
                        part,
                            ``(iii) changes in the age composition of 
                        enrollees (other than private plan enrollees) 
                        under this part,
                            ``(iv) changes in technology,
                            ``(v) evidence of inappropriate utilization 
                        of services,
                            ``(vi) evidence of lack of access to 
                        necessary physicians' services, and
                            ``(vii) such other factors as the Secretary 
                        considers appropriate.
                    ``(B) Commission review.--The Physician Payment 
                Review Commission shall review the recommendation 
                transmitted during a year under subparagraph (A) and 
                shall make its recommendation to Congress, by not later 
                than May 15 of the year, respecting the sustainable 
                growth rate for the fiscal year beginning in that year.
                    ``(C) Publication of sustainable growth rate.--The 
                Secretary shall cause to have the sustainable growth 
                rate published in the Federal Register, in the last 15 
                days of October of each calendar year (beginning with 
                1997), for the fiscal year beginning in that year. The 
                Secretary shall cause to have published in the Federal 
                Register, by not later than January 1, 1997, the 
                paragraph (2) for fiscal year 1997.
            ``(2) Specification of growth rate.--
                    ``(A) Fiscal year 1996.--The sustainable growth 
                rate for all physicians' services for fiscal year 1996 
                shall be equal to the product of--
                            ``(i) 1 plus the Secretary's estimate of 
                        the percentage change in the medicare economic 
                        index for 1996 (described in the fourth 
                        sentence of section 1842(b)(3)) (divided by 
                        100),
                            ``(ii) 1 plus the Secretary's estimate of 
                        the percentage change (divided by 100) in the 
                        average number of individuals enrolled under 
                        this part (other than private plan enrollees) 
                        from fiscal year 1995 to fiscal year 1996,
                            ``(iii) 1 plus the Secretary's estimate of 
                        the projected percentage growth in real gross 
                        domestic product per capita (divided by 100) 
                        from fiscal year 1995 to fiscal year 1996, plus 
                        2 percentage points, and
                            ``(iv) 1 plus the Secretary's estimate of 
                        the percentage change (divided by 100) in 
                        expenditures for all physicians' services in 
                        fiscal year 1996 (compared with fiscal year 
                        1995) which will result from changes in law 
                        (including the Balanced Budget Reconciliation 
                        Act of 1995), determined without taking into 
                        account estimated changes in expenditures due 
                        to changes in the volume and intensity of 
                        physicians' services or changes in expenditures 
                        resulting from changes in the update to the 
                        conversion factor under subsection (d),
                minus 1 and multiplied by 100.
                    ``(B) Subsequent fiscal years.--The sustainable 
                growth rate for all physicians' services for fiscal 
                year 1997 and each subsequent fiscal year shall be 
                equal to the product of--
                            ``(i) 1 plus the Secretary's estimate of 
                        the percentage change in the medicare economic 
                        index for the fiscal year involved (described 
                        in the fourth sentence of section 1842(b)(3)) 
                        (divided by 100),
                            ``(ii) 1 plus the Secretary's estimate of 
                        the percentage change (divided by 100) in the 
                        average number of individuals enrolled under 
                        this part (other than private plan enrollees) 
                        from the previous fiscal year to the fiscal 
                        year involved,
                            ``(iii) 1 plus the Secretary's estimate of 
                        the projected percentage growth in real gross 
                        domestic product per capita (divided by 100) 
                        from the previous fiscal year to the fiscal 
                        year involved, plus 2 percentage points, and
                            ``(iv) 1 plus the Secretary's estimate of 
                        the percentage change (divided by 100) in 
                        expenditures for all physicians' services in 
                        the fiscal year (compared with the previous 
                        fiscal year) which will result from changes in 
                        law, determined without taking into account 
                        estimated changes in expenditures due to 
                        changes in the volume and intensity of 
                        physicians' services or changes in expenditures 
                        resulting from changes in the update to the 
                        conversion factor under subsection (d)(3),
                minus 1 and multiplied by 100.
            ``(3) Definitions.--In this subsection:
                    ``(A) Services included in physicians' services.--
                The term `physicians' services' includes other items 
                and services (such as clinical diagnostic laboratory 
                tests and radiology services), specified by the 
                Secretary, that are commonly performed or furnished by 
                a physician or in a physician's office, but does not 
                include services furnished to a private plan enrollee.
                    ``(B) Private plan enrollee.--The term `private 
                plan enrollee' means, with respect to a fiscal year, an 
                individual enrolled under this part who has elected to 
                receive benefits under this title for the fiscal year 
                through a medicare choice plan offered under part D or 
                through enrollment with an eligible organization with a 
                risk-sharing contract under section 1876.''.
    (c) Establishment of Single Conversion Factor for 1996.--
            (1) In general.--Section 1848(d)(1) (42 U.S.C. 1395w-
        4(d)(1)) is amended--
                    (A) by redesignating subparagraph (C) as 
                subparagraph (D); and
                    (B) by inserting after subparagraph (B) the 
                following new subparagraph:
                    ``(C) Special rule for 1996.--For 1996, the 
                conversion factor under this subsection shall be $35.42 
                for all physicians' services.''.
            (2) Conforming amendments.--Section 1848 (42 U.S.C. 1395w-
        4) is amended--
                    (A) by striking ``(or factors)'' each place it 
                appears in subsection (d)(1)(A) and (d)(1)(C)(ii);
                    (B) in subsection (d)(1)(A), by striking ``or 
                updates'';
                    (C) in subsection (d)(1)(C)(ii), by striking ``(or 
                updates)''; and
                    (D) in subsection (i)(1)(C), by striking 
                ``conversion factors'' and inserting ``the conversion 
                factor''.

SEC. 7042. ELIMINATION OF FORMULA-DRIVEN OVERPAYMENTS FOR CERTAIN 
              OUTPATIENT HOSPITAL SERVICES.

    (a) Ambulatory Surgical Center Procedures.--Section 
1833(i)(3)(B)(i)(II) (42 U.S.C. 1395l(i)(3)(B)(i)(II)) is amended--
            (1) by striking ``of 80 percent''; and
            (2) by striking the period at the end and inserting the 
        following: ``, less the amount a provider may charge as 
        described in clause (ii) of section 1866(a)(2)(A).''.
    (b) Radiology Services and Diagnostic Procedures.--Section 
1833(n)(1)(B)(i)(II) (42 U.S.C. 1395l(n)(1)(B)(i)(II)) is amended--
            (1) by striking ``of 80 percent''; and
            (2) by striking the period at the end and inserting the 
        following: ``, less the amount a provider may charge as 
        described in clause (ii) of section 1866(a)(2)(A).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to services furnished during portions of cost reporting periods 
occurring on or after October 1, 1995.

SEC. 7043. PAYMENTS FOR CLINICAL LABORATORY DIAGNOSTIC SERVICES.

    (a) Freeze in Update.--Section 1833(h)(2)(A)(ii)(IV) (42 U.S.C. 
1395l(h)(2)(A)(ii)(IV)) is amended by striking ``and 1995'' and 
inserting ``through 2002''.
    (b) Reduction of National Caps.--Section 1833(h)(4)(B) (42 U.S.C. 
1395l(h)(4)(B)) is amended--
            (1) by striking ``and'' at the end of clause (vi);
            (2) in clause (vii)--
                    (A) by inserting ``and before January 1, 1997,'' 
                after ``December 31, 1995,''; and
                    (B) by striking the period and inserting ``, and''; 
                and
            (3) by adding at the end the following new clause:
            ``(viii) after December 31, 1996, is equal to 65 percent of 
        such median.''.
    (c) Study and Report to Congress.--
            (1) Study.--The Secretary of Health and Human Services 
        shall conduct a study of--
                    (A) the fee schedule determined under section 
                1833(h)(1) of the Social Security Act (42 U.S.C. 
                1395l(h)(1)) relating to clinical laboratory services; 
                and
                    (B) options for rebasing or otherwise revising the 
                amounts payable for such services under such fee 
                schedule, taking into account the amounts paid for such 
                services by other large volume purchasers.
            (2) Report.--Not later then 1 year after the date of the 
        enactment of the Balanced Budget Reconciliation Act of 1995, 
        the Secretary shall submit to Congress a report on the study 
        conducted under paragraph (1).

SEC. 7044. DURABLE MEDICAL EQUIPMENT.

    (a) Freeze in Updates.--Section 1834(a)(14) (42 U.S.C. 
1395m(a)(14)) is amended--
            (1) in subparagraph (A), by striking ``and'' at the end;
            (2) by redesignating subparagraph (B) as subparagraph (C); 
        and
            (3) by inserting after subparagraph (A), the following 
        subparagraph:
                    ``(B) for 1996 through 2002, the percentage 
                increase is 0 percent; and''.
    (b) Oxygen Equipment.--
            (1) In general.--Section 1834(a)(5)(A) (42 U.S.C. 
        1395m(a)(5)(A)) is amended to read as follows:
                    ``(A) In general.--Subject to subparagraphs (B), 
                (C), and (E), payment for--
                            ``(i) oxygen shall be made on a monthly 
                        basis in the monthly payment amount recognized 
                        under paragraph (9) for oxygen; and
                            ``(ii) oxygen equipment (other than 
                        portable oxygen equipment) shall be made on a 
                        monthly basis in an amount equal to 60 percent 
                        of the monthly payment amount recognized under 
                        paragraph (9) for oxygen equipment.''.
            (2) Portable oxygen equipment.--Section 1834(a)(5)(B) (42 
        U.S.C. 1395m(a)(5)(B)) is amended by inserting ``60 percent 
        of'' after ``increased by''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to items and services furnished on or after January 
        1, 1996.
    (c) Upgraded Durable Medical Equipment.--Section 1834(a) (42 U.S.C. 
1395m(a)) is amended by inserting after paragraph (15) the following 
new paragraph:
            ``(16) Certain upgraded items.--
                    ``(A) Individual's right to choose upgraded item.--
                Notwithstanding any other provision of law, effective 
                on the date on which the Secretary issues regulations 
                under subparagraph (C), an individual may purchase or 
                rent from a supplier an item of upgraded durable 
                medical equipment for which payment would be made under 
                this subsection if the item were a standard item.
                    ``(B) Payments to supplier.--In the case of the 
                purchase or rental of an upgraded item under 
                subparagraph (A)--
                            ``(i) the supplier shall receive payment 
                        under this subsection with respect to such item 
                        as if such item were a standard item; and
                            ``(ii) the individual purchasing or renting 
                        the item shall pay the supplier an amount equal 
                        to the difference between the supplier's charge 
                        and the amount under clause (i).
                In no event may the supplier's charge for an upgraded 
                item exceed the applicable fee schedule amount (if any) 
                for such item.
                    ``(C) Consumer protection safeguards.--The 
                Secretary shall issue regulations providing for 
                consumer protection standards with respect to the 
                furnishing of upgraded equipment under subparagraph 
                (A). Such regulations shall provide for--
                            ``(i) determination of fair market prices 
                        with respect to an upgraded item;
                            ``(ii) full disclosure of the availability 
                        and price of standard items and proof of 
                        receipt of such disclosure information by the 
                        beneficiary before the furnishing of the 
                        upgraded item;
                            ``(iii) conditions of participation for 
                        suppliers in the simplified billing 
                        arrangement;
                            ``(iv) sanctions of suppliers who are 
                        determined to engage in coercive or abusive 
                        practices, including exclusion; and
                            ``(v) such other safeguards as the 
                        Secretary determines are necessary.''.

SEC. 7045. UPDATES FOR ORTHOTICS AND PROSTHETICS.

    (a) In General.--Section 1834(h)(4)(A)(iii) (42 U.S.C. 
1395m(h)(4)(A)(iii)) is amended by striking ``1994 and 1995'' and 
inserting ``1994 through 2002''.
    (b) Extension of Freeze on Parenteral and Enteral Nutrients, 
Supplies, and Equipment.--In determining the amount of payment under 
part B of title XVIII of the Social Security Act with respect to 
parenteral and enteral nutrients, supplies, and equipment during 1996 
through 2002, the charges determined to be reasonable with respect to 
such nutrients, supplies, and equipment may not exceed the charges 
determined to be reasonable with respect to such nutrients, supplies, 
and equipment during 1995 (as such charges were determined in 
accordance with section 13541 of OBRA--1993).

SEC. 7046. PAYMENTS FOR CAPITAL-RELATED COSTS OF OUTPATIENT HOSPITAL 
              SERVICES.

    Section 1861(v)(1)(S)(ii)(I) (42 U.S.C. 1395x(v)(1)(S)(ii)(I)) is 
amended by striking ``, and by 10 percent for payments attributable to 
portions of cost reporting periods occurring during fiscal years 1992 
through 1998'' and inserting ``by 10 percent for payments attributable 
to portions of cost reporting periods occurring during fiscal years 
1992 through 1995, and by 15 percent for payments attributable to 
portions of cost reporting periods occurring during fiscal years 1996 
through 2002.''.

SEC. 7047. PAYMENTS FOR NON-CAPITAL COSTS OF OUTPATIENT HOSPITAL 
              SERVICES.

    Section 1861(v)(1)(S)(ii)(II) (42 U.S.C. 1395x(v)(1)(S)(ii)(II)) is 
amended by striking ``through 1998'' and inserting ``through 2002''.

SEC. 7048. UPDATES FOR AMBULATORY SURGICAL SERVICES.

    Section 1833(i)(2)(C) (42 U.S.C. 1395l(i)(2)(C)) is amended--
            (1) by striking ``1996'' and inserting ``2003''; and
            (2) by inserting before the first sentence the following 
        new sentence: ``Notwithstanding the second sentence of 
        subparagraph (A) or the second sentence of subparagraph (B), 
        the Secretary shall not update amounts established under such 
        subparagraphs for fiscal years 1996 through 2002.''

SEC. 7049. PAYMENTS FOR AMBULANCE SERVICES.

    Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)), as amended by sections 
7034 and 7035(b), is amended by adding at the end the following new 
subparagraph:
            ``(V) In determining the reasonable cost or charge of 
        ambulance services for fiscal years 1996 through 2002, the 
        Secretary shall not recognize anycosts in excess of costs 
        recognized as reasonable for fiscal year 1995.''.

SEC. 7050. PHYSICIAN SUPERVISION OF NURSE ANESTHETISTS.

    (a) Promulgation of Revised Regulations.--The Secretary of Health 
and Human Services shall revise any regulations describing the 
conditions under which payment may be made for anesthesia services 
under the medicare program under title XVIII of the Social Security Act 
(42 U.S.C. 1395 et seq.) to provide that payment may be made under the 
medicare program for anesthesia services furnished in a hospital or an 
ambulatory surgical center by a certified registered nurse anesthetist 
who, under the law of the State in which the service is furnished, is 
permitted to administer anesthesia services without supervision by the 
physician performing the operation or the anesthesiologist.
    (b) Effective Date.--The revisions to the regulations referred to 
in subsection (a) shall apply with respect to anesthesia services 
furnished on or after January 1, 1996.

SEC. 7051. PART B DEDUCTIBLE.

    Section 1833(b) (42 U.S.C. 1395l(b)) is amended in the first 
sentence by striking ``and $100 for 1991 and subsequent years'' and 
inserting ``, $100 for calendar years 1991 through 1995, $150 for 
calendar year 1996, and for calendar years after 1996, an amount equal 
to the deductible amount determined under this subsection in the prior 
calendar year, increased by $10.00''.

SEC. 7052. PART B PREMIUM.

    Section 1839(e)(1) (42 U.S.C. 1395r(e)(1)) is amended--
            (1) in subparagraph (A), by striking ``after December 1995 
        and prior to January 1999'' and inserting ``after December 
        2002''; and
            (2) in subparagraph (B)--
                    (A) by striking ``and'' at the end of clause (iv),
                    (B) in clause (v), by striking the period and 
                inserting a comma, and
                    (C) by adding at the end the following new clauses:
            ``(vi) 1996 shall be $53.00,
            ``(vii) 1997 shall be $57.00,
            ``(viii) 1998 shall be $61.00,
            ``(ix) 1999 shall be $66.00,
            ``(x) 2000 shall be $74.00,
            ``(xi) 2001 shall be $80.00, and
            ``(xii) 2002 shall be $89.00.''.

SEC. 7053. INCREASE IN MEDICARE PART B PREMIUM FOR HIGH-INCOME 
              INDIVIDUALS.

    (a) In General.--Part B of title XVIII is amended by inserting 
after section 1839 the following new section:

           ``increase in premium for high-income individuals

    ``Sec. 1839A. (a) Increase in Premium.--
            ``(1) In general.--If this section applies to an individual 
        for any calendar year, the monthly premium otherwise applicable 
        under section 1839 for each month during the calendar year 
        shall be increased by an amount equal to the supplemental 
        Medicare part B premium.
            ``(2) Individuals to whom section applies.--This section 
        shall apply to any individual for a calendar year if--
                    ``(A) the individual is covered under this part for 
                any month during the calendar year, and
                    ``(B) the modified adjusted gross income of the 
                taxpayer for the taxable year beginning in the calendar 
                year exceeds the threshold amount.
    ``(b) Premiums To Be Deducted Based on Estimated Amounts.--
            ``(1) In general.--Each individual shall--
                    ``(A) during the medicare open enrollment period 
                under section 1895G(b)(1), or
                    ``(B) during any other medicare enrollment period 
                applicable to the individual under section 1895G(b)(2),
        include with the medicare enrollment an estimate of the 
        taxpayer's modified adjusted gross income for the following 
        calendar year.
            ``(2) Individuals not filing enrollment form.--If an 
        individual does not file a medicare enrollment form for any 
        enrollment period applicable to the individual and the 
        individual's coverage under this part continues without 
        modification by reason of the failure to file, the individual's 
        modified adjusted gross income shall be determined on the basis 
        of the most recent information available to the Secretary from 
        prior enrollment forms, the Secretary of the Treasury under 
        section 6103(l)(15), or otherwise.
            ``(3) Individuals filing incorrect enrollment forms.--If, 
        on the basis of information obtained from the Secretary of the 
        Treasury under section 6103(l)(15), the Secretary determines 
        that the information included with a medicare enrollment form 
        under paragraph (1) is incorrect, the individual's modified 
        adjusted gross income shall be determined on the basis of the 
        information obtained from the Secretary of the Treasury.
            ``(4) Transfer of information.--The Secretary shall notify 
        the applicable agency under section 1840 of--
                    ``(A) the estimates received under paragraph (1) or 
                the determinations under paragraph (2) or (3), and
                    ``(B) the amount of the premiums to be deducted 
                under section 1840.
        The premiums under subparagraph (B) shall be effective with 
        respect to months beginning with the later of the month for 
        which the enrollment is effective or the month following the 
        month in which the notice is received. Such premium shall 
        remain in effect until another premium takes effect under this 
        subsection or there is an increase in the premium determined 
        without regard to this section.
    ``(c) Supplemental Medicare Part B Premium.--For purposes of 
subsection (a)--
            ``(1) In general.--The supplemental Medicare part B premium 
        for any month is an amount equal to the excess of--
                    ``(A) 200 percent of the monthly actuarial rate for 
                enrollees age 65 and over determined under subsection 
                1839(a)(1) for such month, over
                    ``(B) the total monthly premium under section 1839 
                (determined without regard to subsections (b) and (f) 
                of section 1839).
            ``(2) Phasein of supplemental premium.--
                    ``(A) In general.--If the modified adjusted gross 
                income of the taxpayer for any taxable year exceeds the 
                threshold amount by less than $50,000, the supplemental 
                Medicare part B premium under this section for months 
                in the calendar year in which the taxable year begins 
                shall be an amount which bears the same ratio to the 
                amount of the premium (without regard to this 
                paragraph) as such excess bears to $50,000. The 
                preceding sentence shall not apply to any individual 
                whose threshold amount is zero.
                    ``(B) Phasein range for joint returns.--In the case 
                of a joint return under section 6013 of the Internal 
                Revenue Code of 1986, subparagraph (A) shall be applied 
                by substituting `$75,000' for `$50,000' each place it 
                appears.
    ``(d) Verification and Adjustments of Supplemental Premiums.--
            ``(1) Verification.--Each individual to whom this section 
        applies shall, on the basis of information shown on the return 
        of tax imposed by chapter 1 of the Internal Revenue Code of 
        1986 for any taxable year, determine the difference (if any) 
        between--
                    ``(A) the aggregate supplemental Medicare part B 
                premiums imposed by this section for months during the 
                calendar year in which the taxable year begins, and
                    ``(B) the aggregate amount of premiums deducted and 
                paid under section 1840 for such months with respect to 
                the individual.
        Such determination shall be included on a form prescribed by 
        the Secretary and the form shall be submitted to the Secretary 
        at such time and in such manner as the Secretary shall 
        prescribe.
            ``(2) Deficiency adjustments.--
                    ``(A) In general.--If the amount under paragraph 
                (1)(A) exceeds the amount under paragraph (1)(B), the 
                individual shall include with the form required to be 
                filed under paragraph (1) a separate check made payable 
                to the Secretary in an amount equal to such excess plus 
                interest determined under subparagraph (B).
                    ``(B) Interest on underpayments.--For purposes of 
                subparagraph (A)--
                            ``(i) In general.--The amount of interest 
                        taken into account shall be the sum of the 
                        amounts determined under clause (ii) for each 
                        of the months in the taxable year.
                            ``(ii) Monthly interest.--Interest shall be 
                        computed for any month in an amount determined 
                        by applying the underpayment rate established 
                        under section 6621 of the Internal Revenue Code 
                        of 1986 to any portion of the underpayment for 
                        the period beginning on the first day of the 
                        following month and ending on the date the 
                        portion is paid. For purposes of this clause, 
                        payments shall be applied to months in order, 
                        beginning with the earliest.
                            ``(iii) Safe-harbor exception.--No interest 
                        shall be imposed for any month if the 
                        individual's estimate of modified adjusted 
                        gross income under subsection (b) on which the 
                        supplemental Medicare part B premium for the 
                        month was based was not less than the 
                        individual's modified adjusted gross income 
                        determined on the basis of information shown on 
                        the return of tax imposed by chapter 1 of such 
                        Code for the taxable year ending with or within 
                        the calendar year preceding the calendar year 
                        in which the estimate was made.
            ``(3) Overpayment adjustments.--If the amount under 
        paragraph (1)(B) exceeds the amount under paragraph (1)(A), the 
        Secretary shall, at the Secretary's discretion--
                    ``(A) credit such excess against any supplemental 
                premium required under this section, or
                    ``(B) make a payment to the individual in the 
                amount of such excess.
            ``(4) Adjustments by secretary.--If the Secretary 
        determines, on the basis of information received from the 
        Secretary of the Treasury under section 6103(l)(15), that there 
        was an underpayment or overpayment of the aggregate 
        supplemental Medicare part B premiums for months during any 
        taxable year (after any other adjustment under this 
        subsection), the Secretary shall--
                    ``(A) notify the individual of such underpayment or 
                overpayment,
                    ``(B) in the case of an underpayment, give such 
                individual an opportunity for a hearing with respect to 
                such underpayment and a reasonable time for payment of 
                such underpayment and interest determined under 
                paragraph (2)(B), and
                    ``(C)(i) collect the amount of any underpayment and 
                interest not paid under subparagraph (B) in such manner 
                as the Secretary may prescribe, and
                    ``(ii) take the actions described in paragraph (3) 
                with respect to any overpayment.
            ``(5) Transfers to trust fund.--Amounts equal to amounts 
        paid under paragraphs (2)(A), (4)(B), and (4)(C)(i) shall be 
        deposited into the Federal Supplementary Medical Insurance 
        Trust Fund.
    ``(e) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Threshold amount.--The term `threshold amount' 
        means--
                    ``(A) except as otherwise provided in this 
                paragraph, $50,000,
                    ``(B) $75,000 in the case of a joint return, and
                    ``(C) zero in the case of a taxpayer who--
                            ``(i) is married at the close of the 
                        taxable year but does not file a joint return 
                        for such year, and
                            ``(ii) does not live apart from his spouse 
                        at all times during the taxable year.
            ``(2) Modified adjusted gross income.--The term `modified 
        adjusted gross income' means adjusted gross income determined 
        under section 62 of the Internal Revenue Code of 1986--
                    ``(A) determined without regard to sections 135, 
                911, 931, and 933 of such Code, and
                    ``(B) increased by the amount of interest received 
                or accrued by the taxpayer during the taxable year 
                which is exempt from tax.
            ``(3) Joint returns.--In the case of a joint return under 
        section 6013 of such Code, this section shall be applied by 
        taking into account the combined modified adjusted gross income 
        of the spouses.
            ``(4) Married individual.--The determination of whether an 
        individual is married shall be made in accordance with section 
        7703 of such Code.
            ``(5) Agreements.--In order to promote the efficient 
        administration of this section, the Secretary may enter into 
        agreements with the Commissioner of the Social Security 
        Administration or the head of any other appropriate Federal 
        agency under which such agency performs administrative 
        responsibilities under this section.''.
    (b) Disclosure of Information.--Section 6103(l) of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
paragraph:
            ``(15) Disclosure of taxpayer return information to social 
        security administration for purposes of collecting supplemental 
        part b premiums.--
                    ``(A) In general.--The Secretary shall, upon 
                written request from the Secretary of Health and Human 
                Services, disclose to the Secretary with respect to any 
                medicare beneficiary (as defined in paragraph 
                (12)(E)(i)) identified in the request whether or not 
                (and the amount by which) the individual's modified 
                adjusted gross income for any taxable year specified in 
                the request exceeded the threshold amount.
                    ``(B) Restriction on use.--Return information 
                disclosed under subparagraph (A) may be used by 
                officers and employees of the Department of Health and 
                Human Services (or of any other Federal agency if an 
                agreement under section 1839A(e)(5) of the Social 
                Security Act is in effect) only for the purposes of, 
                and to the extent necessary in, establishing an 
                individual's correct supplemental Medicare part B 
                premium under section 1839A of the such Act.
                    ``(C) Definitions.--For purposes of this paragraph, 
                any term used which is also used in section 1839A of 
                the Social Security Act shall have the meaning given 
                such term by such section.''.
    (c) Conforming Amendments.--
            (1) Paragraph (2) of section 1839(a) (42 U.S.C. 
        1395r(a)(2)) is amended by inserting ``or section 1839A'' after 
        ``subsections (b) and (e)''.
            (2) Paragraph (3) of section 1839(a) (42 U.S.C. 
        1395r(a)(3)) is amended by inserting ``or section 1839A'' after 
        ``subsection (e)''.
            (3) Section 1839(b) (42 U.S.C. 1395r(b)) is amended by 
        inserting ``(and as increased under section 1839A)'' after 
        ``subsection (a) or (e)''.
            (4) Section 1839(f) (42 U.S.C. 1395r(f)) is amended by 
        adding at the end the following new sentence: ``This subsection 
        shall not apply to the portion of the premium attributable to 
        the supplemental premium under section 1839A.''.
            (5) Section 1840(c) (42 U.S.C. 1395r(c)) is amended by 
        inserting ``or an individual determines that the estimate of 
        modified adjusted gross income used in determining the 
        supplemental premium under section 1839A is too low and results 
        in a portion of the premium not being deducted,'' before ``he 
        may''.
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to months after December 1996.
            (2) Information for prior years.--The Secretary of Health 
        and Human Services may request information under section 
        6013(l)(15) of the Social Security Act (as added by subsection 
        (b)) for taxable years beginning after December 31, 1993.

            CHAPTER 4--PROVISIONS RELATING TO PARTS A AND B

       Subchapter A--General Provisions Relating to Parts A and B

SEC. 7055. SECONDARY PAYOR PROVISIONS.

    (a) Permanent Extension of Application to Disabled Beneficiaries.--
Section 1862(b)(1)(B)(iii) (42 U.S.C. 1395y(b)(1)(B)(iii)) is amended 
by striking ``, and before October 1, 1998''.
    (b) Individuals With End Stage Renal Disease.--Section 
1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)) is amended--
            (1) in the last sentence by striking ``October 1, 1998'' 
        and inserting ``the date of the enactment of the Balanced 
        Budget Reconciliation Act of 1995''; and
            (2) by adding at the end the following new sentence: 
        ``Effective for items and services furnished on or after the 
        date of the enactment of the Balanced Budget Reconciliation Act 
        of 1995, (with respect to periods beginning on or after the 
        date that is 18 months prior to such date), clauses (i) and 
        (ii) shall be applied by substituting `30-month' for `12-month' 
        each place it appears.''.
    (c) Extension of Transfer of Data.--
            (1) Elimination of sunset.--Section 1862(b)(5)(C) (42 
        U.S.C. 1395y(b)(5)(C)) is amended by striking clause (iii).
            (2) Elimination of termination.--Section 6103(l)(12) of the 
        Internal Revenue Code of 1986 is amended by striking 
        subparagraph (F).
    (d) No Retroactive Application of ESRD Secondary Payer 
Interpretation.--Notwithstanding any other provision of law, the April 
1995 interpretation of section 1862(b)(1)(C) of the Social Security Act 
(42 U.S.C. 1395y(b)(1)(C)) issued by the Health Care Financing 
Administration shall not apply retroactively to a group health plan 
that paid benefits primary to title XVIII of such Act (42 U.S.C. 1395 
et seq.) (but would have paid benefits secondary to such title in the 
absence of such section) on or after August 10, 1993, and before April 
24, 1995, on behalf of an individual who, during such period--
            (1) was entitled to benefits under such title under 
        subsection (a) or (b) of section 226 of such Act (42 U.S.C. 
        426); and
            (2) subsequently became entitled or eligible for benefits 
        under such title under section 226A of such Act (42 U.S.C. 426-
        1).

SEC. 7056. TREATMENT OF ASSISTED SUICIDE.

    (a) Prohibition of Payment.--Section 1862(a) (42 U.S.C. 1395y(a)) 
is amended--
            (1) by striking ``or'' at the end of paragraph (14);
            (2) by striking the period at the end of paragraph (15) and 
        inserting ``; or''; and
            (3) by inserting after paragraph (15) and before the flush 
        language at the end the following new paragraph:
            ``(16) where such expenses are for items and services, or 
        to assist in the purchase in whole or in part of health benefit 
        coverage that includes items or services, for the purpose of 
        causing, or assisting in causing, the death, suicide, 
        euthanasia, or mercy killing of an individual.''.
    (b) No Requirement That Health Care Providers Inform Patients 
Concerning Assisting Suicide.--Section 1866(f)(1)(A)(i) (42 U.S.C. 
1395cc(f)(1)(A)(i)) is amended by striking ``paragraph (3))'' and 
inserting ``paragraph (3)), except that no health care provider or 
employee of a health care provider be required under this section to 
inform or counsel a patient regarding assisted suicide, euthanasia, 
mercy killing, or other service which purposefully causes the death of 
a person''.

SEC. 7057. ADMINISTRATIVE PROVISIONS.

    (a) Indian Health Service Facilities.--Nothing in this Act shall be 
construed to change the status under title XVIII of the Social Security 
Act (42 U.S.C. 1395 et seq.) of--
            (1) a Federally qualified health center (as defined in 
        section 1861(aa)(4) of such Act) which is an outpatient health 
        program or facility operated by a tribe or tribal organization 
        under the Indian Self-Determination Act or by an urban Indian 
        organization receiving funds under title V of the Indian Health 
        Care Improvement Act; or
            (2) hospitals or skilled nursing facilities of the Indian 
        Health Service, whether operated by such Service or by an 
        Indian tribe or tribal organization (as those terms are defined 
        in section 4 of the Indian Health Care Improvement Act), that 
        are eligible for payments under title XVIII of the Social 
        Security Act, in accordance with section 1880 of such Act (42 
        U.S.C. 1395qq).
    (b) Conforming Amendment to Certification of Christian Science 
Providers.--
            (1) Hospitals.--Section 1861(e) (42 U.S.C. 1395x(e)) is 
        amended in the sixth sentence by striking ``the First Church of 
        Christ, Scientist, Boston, Massachusetts,'' and inserting ``the 
        Commission for Accreditation of Christian Science Nursing 
        Organizations/Facilities, Inc.,''.
            (2) Skilled nursing facilities.--Section 1861(y)(1) (42 
        U.S.C. 1395x(y)(1)) is amended by striking ``the First Church 
        of Christ, Scientist, Boston, Massachusetts,'' and inserting 
        ``the Commission for Accreditation of Christian Science Nursing 
        Organizations/Facilities, Inc.,''.
            (3) General provisions.--
                    (A) Uniform reporting systems.--Section 1122(h) (42 
                U.S.C. 1320a-1(h)) is amended by striking ``the First 
                Church of Christ, Scientist, Boston, Massachusetts'' 
                and inserting ``the Commission for Accreditation of 
                Christian Science Nursing Organizations/Facilities, 
                Inc.''.
                    (B) Peer review.--Section 1162 (42 U.S.C. 1320c-11) 
                is amended by striking ``the First Church of Christ, 
                Scientist, Boston, Massachusetts'' and inserting ``the 
                Commission for Accreditation of Christian Science 
                Nursing Organizations/Facilities, Inc.''.
            (4) Effective date.--The amendments made by this subsection 
        shall take effect on January 1, 1997.

SEC. 7058. SENSE OF SENATE REGARDING COVERAGE FOR TREATMENT OF BREAST 
              AND PROSTATE CANCER UNDER MEDICARE.

    (a) Findings.--The Senate finds that--
            (1) breast and prostate cancer each strike about 200,000 
        persons annually, and each claims the lives of over 40,000 
        annually;
            (2) medicare covers treatments of breast and prostate 
        cancer including surgery, chemotherapy, and radiation therapy;
            (3) the Omnibus Budget Reconciliation Act of 1993 (OBRA) 
        expanded medicare to cover self-administered chemotherapeutic 
        oral-cancer drugs which have the same active ingredients as 
        drugs previously available in injectable or intravenous form;
            (4) half of all women with breast cancer, and thousands of 
        men with prostate cancer which has spread beyond the prostate, 
        need hormonal therapy administered through oral cancer drugs 
        which have never been available in injectable or intravenous 
        form; and
            (5) medicare's failure to cover oral cancer drugs for 
        hormonal therapy makes the covered treatments less effective.
    (b) Sense of Senate.--It is the sense of the Senate that medicare 
should not discriminate among breast and prostate cancer victims by 
providing drug treatment coverage for some but not all such cancers, 
and that the budget reconciliation conferees should amend medicare to 
provide coverage for these important cancer drug treatments.

            Subchapter B--Payments for Home Health Services

SEC. 7061. PAYMENT FOR HOME HEALTH SERVICES.

    (a) In General.--Part C of title XVIII (42 U.S.C. 1395x et seq.) is 
amended by adding at the end the following new section:

                   ``payment for home health services

    ``Sec. 1893. (a) In General.--
            ``(1) Per visit payments.--Subject to subsection (c), the 
        Secretary shall make per visit payments beginning with fiscal 
        year 1997 to a home health agency in accordance with this 
        section for each type of home health service described in 
        paragraph (2) furnished to an individual who at the time the 
        service is furnished is under a plan of care by the home health 
        agency under this title (without regard to whether or not the 
        item or service was furnished by the agency or by others under 
        arrangement with them made by the agency, under any other 
        contracting or consulting arrangement, or otherwise).
            ``(2) Types of services.--The types of home health services 
        described in this paragraph are the following:
                    ``(A) Part-time or intermittent nursing care 
                provided by or under the supervision of a registered 
                professional nurse.
                    ``(B) Physical therapy.
                    ``(C) Occupational therapy.
                    ``(D) Speech-language pathology services.
                    ``(E) Medical social services under the direction 
                of a physician.
                    ``(F) To the extent permitted in regulations, part-
                time or intermittent services of a home health aide who 
                has successfully completed a training program approved 
                by the Secretary.
    ``(b) Establishment of Per Visit Rate for Each Type of Services.--
            ``(1) In general.--The Secretary shall, subject to 
        paragraph (3), establish a per visit payment rate for a home 
        health agency in an area (which shall be the same area used to 
        determine the area wage index applicable to hospitals under 
        section 1886(d)(3)(E)) for each type of home health service 
        described in subsection (a)(2). Such rate shall be equal to the 
        national per visit payment rate determined under paragraph (2) 
        for each such type, except that the labor-related portion of 
        such rate shall be adjusted by the area wage index applicable 
        under section 1886(d)(3)(E) for the area in which the agency is 
        located.
            ``(2) National per visit payment rate.--The national per 
        visit payment rate for each type of service described in 
        subsection (a)(2)--
                    ``(A) for fiscal year 1997, is an amount equal to 
                the national average amount paid per visit under this 
                title to home health agencies for such type of service 
                during the most recent 12-month cost reporting period 
                ending on or before June 30, 1994; and
                    ``(B) for each subsequent fiscal year, is an amount 
                equal to the national per visit payment rate in effect 
                for the preceding fiscal year, increased by the greater 
                of--
                            ``(i) the home health market basket 
                        percentage increase for such subsequent fiscal 
                        year minus 2.5 percentage points; or
                            ``(ii) 1.1 percent (1.2 percent in fiscal 
                        year 1997).
            ``(3) Rebasing of rates.--The Secretary shall adjust the 
        national per visit payment rates under this subsection for cost 
        reporting periods beginning on or after October 1, 1999, and 
        every 2 years thereafter, to reflect the most recent available 
        data.
            ``(4) Home health market basket percentage increase.--For 
        purposes of this subsection, the term `home health market 
        basket percentage increase' means, with respect to a fiscal 
        year, a percentage (estimated by the Secretary before the 
        beginning of the fiscal year) determined and applied with 
        respect to the types of home health services described in 
        subsection (a)(2) in the same manner as the market basket 
        percentage increase under section 1886(b)(3)(B)(iii) is 
        determined and applied to inpatient hospital services for the 
        fiscal year.
    ``(c) Per Episode Limit.--
            ``(1) Aggregate limit.--
                    ``(A) In general.--Except as provided in paragraph 
                (2), a home health agency may not receive aggregate per 
                visit payments under subsection (a) for a fiscal year 
                in excess of an amount equal to the sum of the 
                following products determined for each case-mix 
                category for which the agency receives payments:
                            ``(i) The number of episodes of each such 
                        case-mix category during the fiscal year; 
                        multiplied by
                            ``(ii) the per episode limit determined for 
                        such case-mix category for such fiscal year.
                    ``(B) Establishment of per episode limits.--
                            ``(i) In general.--The per episode limit 
                        for a fiscal year for any case-mix category for 
                        the area in which a home health agency is 
                        located (which shall be the same area used to 
                        determine the area wage index applicable to 
                        hospitals under section 1886(d)(3)(E)) is equal 
                        to--
                                    ``(I) the mean number of visits for 
                                each type of home health service 
                                described in subsection (a)(2) 
                                furnished during an episode of such 
                                case-mix category in such area during 
                                fiscal year 1994, adjusted by the case-
                                mix adjustment factor determined in 
                                clause (ii) for the fiscal year 
                                involved; multiplied by
                                    ``(II) the per visit payment rate 
                                established under subsection (b) for 
                                such type of home health service for 
                                the fiscal year for which the 
                                determination is being made.
                            ``(ii) Case-mix adjustment factor.--For 
                        purposes of clause (i), the case-mix adjustment 
                        factor for--
                                    ``(I) each of fiscal years 1997 
                                through 2000 is the factor determined 
                                by the Secretary to assure that 
                                aggregate payments for home health 
                                services under this section during the 
                                year will not exceed the payment for 
                                such services during the previous year 
                                as a result of changes in the number 
                                and type of home health visits within 
                                case-mix categories over the previous 
                                year; and
                                    ``(II) each subsequent fiscal year, 
                                is the factor determined by the 
                                Secretary to necessary remove the 
                                effects of case-mix increases due to 
                                reporting improvements instead of real 
                                changes in patients' resource usage.
                            ``(iii) Rebasing of per episode limits.--
                        Beginning with fiscal year 1999 and every 2 
                        years thereafter, the Secretary shall revise 
                        the mean number of home health visits 
                        determined under clause (i)(I) for each type of 
                        home health service visit described in 
                        subsection (a)(2) furnished during an episode 
                        in a case-mix category to reflect the most 
                        recently available data on the number of 
                        visits.
                            ``(iv) Determination of area.--In the case 
                        of an area which the Secretary determines has 
                        insufficient number of home health agencies to 
                        establish an appropriate per episode limit, the 
                        Secretary may establish an area other than the 
                        area used to determine the area wage under 
                        section 1886(d)(3)(E)) for purposes of 
                        establishing an appropriate per episode limit.
                    ``(C) Case-mix category.--For purposes of this 
                paragraph, the term `case-mix category' means each of 
                the 18 case-mix categories established under the Home 
                Health Agency Prospective Payment Demonstration Project 
                conducted by the Health Care Financing Administration. 
                The Secretary may develop an alternate methodology for 
                determining case-mix categories.
                    ``(D) Episode.--For purposes of this paragraph, the 
                term `episode' means, with respect to a cost reporting 
                period, the continuous 120-day period that--
                            ``(i) begins on the date of an individual's 
                        first visit for a type of home health service 
                        described in subsection (a)(2) for a case-mix 
                        category, and
                            ``(ii) is immediately preceded by a 60-day 
                        period in which the individual did not receive 
                        visits for a type of home health service 
                        described in subsection (a)(2).
                    ``(E) Exemptions and exceptions.--The Secretary may 
                provide for exemptions and exceptions to the limits 
                established under this paragraph for a fiscal year as 
                the Secretary deems appropriate, to the extent such 
                exemptions and exceptions do not result in greater 
                payments under this section than the exemptions and 
                exceptions provided under section 1861(v)(1)(L)(ii) in 
                fiscal year 1994, increased by the home health market 
                basket percentage increase for the fiscal year involved 
                (as defined in subsection (b)(4)).
            ``(2) Reconciliation of amounts.--
                    ``(A) Payments in excess of limits.--Subject to 
                subparagraph (B), if a home health agency has received 
                aggregate per visit payments under subsection (a) for a 
                fiscal year in excess of the amount determined under 
                paragraph (1) with respect to such home health agency 
                for such fiscal year, the Secretary shall, in such 
                manner as the Secretary considers appropriate, reduce 
                the payments under this section to the home health 
                agency in the following fiscal year by the amount of 
                such excess.
                    ``(B) Exception for home health services furnished 
                over a period greater than 165 days.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A), the amount of aggregate per 
                        visit payments determined under subsection (a) 
                        shall not include payments for home health 
                        visits furnished to an individual on or after a 
                        continuous period of more than 165 days after 
                        an individual begins an episode described in 
                        subsection (c)(1)(D) (if such period is not 
                        interrupted by the beginning of a new episode).
                            ``(ii) Requirement of certification.--
                        Clause (i) shall not apply if the agency has 
                        not obtained a physician's certification with 
                        respect to the individual requiring such visits 
                        that includes a statement that the individual 
                        requires such continued visits, the reason for 
                        the need for such visits, and a description of 
                        such services furnished during such visits.
                    ``(C) Share of savings.--
                            ``(i) Bonus payments.--If a home health 
                        agency has received aggregate per visit 
                        payments under subsection (a) for a fiscal year 
                        in an amount less than the amount determined 
                        under paragraph (1) with respect to such home 
                        health agency for such fiscal year, the 
                        Secretary shall pay such home health agency a 
                        bonus payment equal to 50 percent of the 
                        difference between such amounts in the 
                        following fiscal year, except that the bonus 
                        payment may not exceed 5 percent of the 
                        aggregate per visit payments made to the agency 
                        for the prior year without regard to clause 
                        (ii).
                            ``(ii) Installment bonus payments.--The 
                        Secretary may make installment payments during 
                        a fiscal year to a home health agency based on 
                        the estimated bonus payment that the agency 
                        would be eligible to receive with respect to 
                        such fiscal year.
    ``(d) Medical Review Process.--
            ``(1) In general.--The Secretary shall implement a medical 
        review process (with a particular emphasis on fiscal years 1997 
        and 1998) for the system of payments described in this section 
        that shall provide an assessment of the pattern of care 
        furnished to individuals receiving home health services for 
        which payments are made under this section to ensure that such 
        individuals receive appropriate home health services. Such 
        review process shall focus on low-cost cases described in 
        subsection (e)(3) and cases described in subsection (c)(2)(B) 
        and shall require recertification by intermediaries at 30, 60, 
        90, 120, and 165 days into an episode described in subsection 
        (c)(1)(D).
            ``(2) Using of organizations to conduct reviews.--The 
        Secretary may use public or private organizations to conduct 
        medical reviews in accordance with this subsection.
    ``(e) Adjustment of Payments to Avoid Circumvention of Limits.--
            ``(1) In general.--The Secretary shall provide for 
        appropriate adjustments to payments to home health agencies 
        under this section to ensure that agencies do not circumvent 
        the purpose of this section by--
                    ``(A) discharging patients to another home health 
                agency or similar provider;
                    ``(B) altering corporate structure or name to avoid 
                being subject to this section or for the purpose of 
                increasing payments under this title; or
                    ``(C) undertaking other actions considered 
                unnecessary for effective patient care and intended to 
                achieve maximum payments under this title.
            ``(2) Tracking of patients that switch home health agencies 
        during episode.--
                    ``(A) Development of system.--The Secretary shall 
                develop a system that tracks home health patients that 
                receive home health services described in subsection 
                (a)(2) from more than 1 home health agency during an 
                episode described in subsection (c)(1)(D).
                    ``(B) Adjustment of payments.--The Secretary shall 
                adjust payments under this section to each home health 
                agency that furnishes an individual with a type of home 
                health service described in subsection (a)(2) to ensure 
                that aggregate payments on behalf of such individual 
                during such episode do not exceed the amount that would 
                be paid under this section if the individual received 
                such services from a single home health agency.
            ``(3) Low-cost cases.--
                    ``(A) In general.--The Secretary shall develop and 
                implement a system designed to adjust payments to a 
                home health agency for a fiscal year to eliminate any 
                increase in growth of the percentage distribution of 
                low-cost episodes for which home health services are 
                furnished by the agency over such percentage 
                distribution determined for the agency under 
                subparagraph (B).
                    ``(B) Distribution.--The Secretary shall profile 
                each home health agency to determine the distribution 
                of all episodes by length of stay for each agency 
                during the agency's first 12-month cost reporting 
                period beginning during fiscal year 1994. The Secretary 
                shall calculate the 25th percentile distribution for 
                each agency for low-cost episodes.
                    ``(C) Low-cost episode.--For purposes of this 
                paragraph, the Secretary shall define a low-cost 
                episode in a manner that provides that a home health 
                agency has an incentive to be cost efficient in 
                delivering home health services and that the volume of 
                such services does not increase as a result of factors 
                other than patient needs.
    ``(f) Report by Prospective Payment Assessment Commission.--During 
the first 3 years in which payments are made under this section, the 
Prospective Payment Assessment Commission shall annually submit a 
report to Congress on the effectiveness of the payment methodology 
established under this section that shall include recommendations 
regarding the following:
            ``(1) Case-mix and volume increases.
            ``(2) Quality monitoring of home health agency practices.
            ``(3) Whether a capitated payment for home care patients 
        receiving care during a continuous period exceeding 165 days is 
        warranted.
            ``(4) Whether public providers of service are adequately 
        reimbursed.
            ``(5) On the adequacy of the exemptions and exceptions to 
        the limits provided under subsection (c)(1)(E).
            ``(6) The appropriateness of the methods provided under 
        this section to adjust the per episode limits and annual 
        payment updates to reflect changes in the mix of services, 
        number of visits, and assignment to case categories to reflect 
        changing patterns of home health care.
            ``(7) The geographic areas used to determine the per 
        episode limits.''.
    (b) Payment for Prosthetics and Orthotics Under Part A.--Section 
1814(k) (42 U.S.C. 1395f(k)) is amended--
            (1) by inserting ``and prosthetics and orthotics'' after 
        ``durable medical equipment''; and
            (2) by inserting ``and 1834(h), respectively'' after 
        ``1834(a)(1)''.
    (c) Conforming Amendments.--
            (1) Payments under part a.--Section 1814(b) (42 U.S.C. 
        1395f(b)), as amended by section 7032(b), is amended in the 
        matter preceding paragraph (1) by striking ``1888 and 1888A'' 
        and inserting ``1888, 1888A, and 1893''.
            (2) Treatment of items and services paid under part b.--
                    (A) Payments under part b.--Section 1833(a)(2) (42 
                U.S.C. 1395l(a)(2)) is amended--
                            (i) by amending subparagraph (A) to read as 
                        follows:
                    ``(A) with respect to home health services--
                            ``(i) that are a type of home health 
                        service described in section 1893(a)(2), and 
                        which are furnished to an individual who (at 
                        the time the item or service is furnished) is 
                        under a plan of care of a home health agency, 
                        the amount determined under section 1893;
                            ``(ii) that are not described in clause (i) 
                        (other than a covered osteoporosis drug) (as 
                        defined in section 1861(kk)), the lesser of--
                                    ``(I) the reasonable cost of such 
                                services, as determined under section 
                                1861(v), or
                                    ``(II) the customary charges with 
                                respect to such services;''.
                            (ii) by striking ``and'' at the end of 
                        subparagraph (E);
                            (iii) by adding ``and'' at the end of 
                        subparagraph (F); and
                            (iv) by adding at the end the following new 
                        subparagraph:
                    ``(G) with respect to items and services described 
                in section 1861(s)(10)(A), the lesser of--
                            ``(i) the reasonable cost of such services, 
                        as determined under section 1861(v), or
                            ``(ii) the customary charges with respect 
                        to such services,
                or, if such services are furnished by a public provider 
                of services, or by another provider which demonstrates 
                to the satisfaction of the Secretary that a significant 
                portion of its patients are low-income (and requests 
                that payment be made under this provision), free of 
                charge or at nominal charges to the public, the amount 
                determined in accordance with section 1814(b)(2);''.
                    (B) Requiring payment for all items and services to 
                be made to agency.--
                            (i) In general.--The first sentence of 
                        section 1842(b)(6), as amended by section 
                        7035(a)(1), (42 U.S.C. 1395u(b)(6)) is 
                        amended--
                                    (I) by striking ``and (E)'' and 
                                inserting ``(E)''; and
                                    (II) by striking the period at the 
                                end and inserting the following: ``, 
                                and (F) in the case of types of home 
                                health services described in section 
                                1893(a)(2) furnished to an individual 
                                who (at the time the item or service is 
                                furnished) is under a plan of care of a 
                                home health agency, payment shall be 
                                made to the agency (without regard to 
                                whether or not the item or service was 
                                furnished by the agency, by others 
                                under arrangement with them made by the 
                                agency, or when any other contracting 
                                or consulting arrangement, or 
                                otherwise).''.
                            (ii) Conforming amendment.--Section 
                        1832(a)(1) (42 U.S.C. 1395k(a)(1)) is amended 
                        by striking ``(2);'' and inserting ``(2) and 
                        section 1842(b)(6)(F);''.
                    (C) Exclusions from coverage.--Section 1862(a) (42 
                U.S.C. 1395y(a)), as amended by section 7035(a)(2)(C), 
                is amended--
                            (i) by striking ``or'' at the end of 
                        paragraph (15);
                            (ii) by striking the period at the end of 
                        paragraph (16) and inserting ``or''; and
                            (iii) by adding at the end the following 
                        new paragraph:
            ``(17) where such expenses are for home health services 
        furnished to an individual who is under a plan of care of the 
        home health agency if the claim for payment for such services 
        is not submitted by the agency.''.
            (3) Sunset of reasonable cost limitations.--Section 
        1861(v)(1)(L) (42 U.S.C. 1395x(v)(1)(L)) is amended by adding 
        at the end the following new clause:
    ``(iv) This subparagraph shall apply only to services furnished by 
home health agencies during cost reporting periods ending on or before 
September 30, 1996.''.
    (d) Effective Date.--The amendments made by subsections (a), (b), 
and (c) shall apply to cost reporting periods beginning on or after 
October 1, 1996.

SEC. 7062. MAINTAINING SAVINGS RESULTING FROM TEMPORARY FREEZE ON 
              PAYMENT INCREASES FOR HOME HEALTH SERVICES.

    (a) Basing Updates to Per Visit Cost Limits on Limits for Fiscal 
Year 1993.--Section 1861(v)(1)(L)(iii) (42 U.S.C. 1395x(v)(1)(L)(iii)) 
is amended by adding at the end the following sentence: ``In 
establishing limits under this subparagraph, the Secretary may not take 
into account any changes in the costs of the provision of services 
furnished by home health agencies with respect to cost reporting 
periods which began on or after July 1, 1994, and before July 1, 
1996.''.
    (b) No Exceptions Permitted Based on Amendment.--The Secretary of 
Health and Human Services shall not consider the amendment made by 
subsection (a) in making any exemptions and exceptions pursuant to 
section 1861(v)(1)(L)(ii) of the Social Security Act.

SEC. 7063. EXTENSION OF WAIVER OF PRESUMPTION OF LACK OF KNOWLEDGE OF 
              EXCLUSION FROM COVERAGE FOR HOME HEALTH AGENCIES.

    Section 9305(g)(3) of OBRA--1986, as amended by section 426(d) of 
the Medicare Catastrophic Coverage Act of 1988 and section 4207(b)(3) 
of the OBRA--1990 (as renumbered by section 160(d)(4) of the Social 
Security Act Amendments of 1994), is amended by striking ``December 31, 
1995'' and inserting ``September 30, 1996.''.

                         CHAPTER 5--RURAL AREAS

SEC. 7071. MEDICARE-DEPENDENT, SMALL, RURAL HOSPITAL PAYMENT EXTENSION.

    (a) Special Treatment Extended.--
            (1) Payment methodology.--Section 1886(d)(5)(G)(i) (42 
        U.S.C. 1395ww(d)(5)(G)) is amended--
                    (A) in clause (i), by striking ``October 1, 1994,'' 
                and inserting ``October 1, 1994, or beginning on or 
                after September 1, 1995, and before October 1, 2000,''; 
                and
                    (B) in clause (ii)(II), by striking ``October 1, 
                1994'' and inserting ``October 1, 1994, or beginning on 
                or after September 1, 1995, and before October 1, 
                2000,''.
            (2) Extension of target amount.--Section 1886(b)(3)(D) (42 
        U.S.C. 1395ww(b)(3)(D)) is amended--
                    (A) in the matter preceding clause (i), by striking 
                ``September 30, 1994,'' and inserting ``September 30, 
                1994, and for cost reporting periods beginning on or 
                after September 1, 1995, and before October 1, 2000,'';
                    (B) in clause (ii), by striking ``and'' at the end;
                    (C) in clause (iii), by striking the period at the 
                end and inserting ``, and''; and
                    (D) by adding at the end the following new clause:
            ``(iv) with respect to discharges occurring during 
        September 1995 through fiscal year 1999, the target amount for 
        the preceding year increased by the applicable percentage 
        increase under subparagraph (B)(iv).''.
            (3) Permitting hospitals to decline reclassification.--
        Section 13501(e)(2) of OBRA-93 (42 U.S.C. 1395ww note) is 
        amended by striking ``or fiscal year 1994'' and inserting ``, 
        fiscal year 1994, fiscal year 1995, fiscal year 1996, fiscal 
        year 1997, fiscal year 1998, or fiscal year 1999''.
            (4) Technical correction.--Section 1886(d)(5)(G)(i) (42 
        U.S.C. 1395ww(d)(5)(G)(i)), as in effect before the amendment 
        made by paragraph (1), is amended by striking all that follows 
        the first period.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply with respect to discharges occurring on or after September 1, 
1995.

SEC. 7072. MEDICARE RURAL HOSPITAL FLEXIBILITY PROGRAM.

    (a) Medicare Rural Hospital Flexibility Program.--Section 1820 (42 
U.S.C. 1395i-4) is amended to read as follows:

             ``medicare rural hospital flexibility program

    ``Sec. 1820. (a) Purpose.--The purpose of this section is to--
            ``(1) ensure access to health care services for rural 
        communities by allowing hospitals to be designated as critical 
        access hospitals if such hospitals limit the scope of available 
        inpatient acute care services;
            ``(2) provide more appropriate and flexible staffing and 
        licensure standards;
            ``(3) enhance the financial security of critical access 
        hospitals by requiring that medicare reimburse such facilities 
        on a reasonable cost basis; and
            ``(4) promote linkages between critical access hospitals 
        designated by the State under this section and broader programs 
        supporting the development of and transition to integrated 
        provider networks.
    ``(b) Establishment.--Any State that submits an application in 
accordance with subsection (c) may establish a medicare rural hospital 
flexibility program described in subsection (d).
    ``(c) Application.--A State may establish a medicare rural hospital 
flexibility program described in subsection (d) if the State submits to 
the Secretary at such time and in such form as the Secretary may 
require an application containing--
            ``(1) assurances that the State--
                    ``(A) has developed, or is in the process of 
                developing, a State rural health care plan that--
                            ``(i) provides for the creation of one or 
                        more rural health networks (as defined in 
                        subsection (e)) in the State,
                            ``(ii) promotes regionalization of rural 
                        health services in the State, and
                            ``(iii) improves access to hospital and 
                        other health services for rural residents of 
                        the State;
                    ``(B) has developed the rural health care plan 
                described in subparagraph (A) in consultation with the 
                hospital association of the State, rural hospitals 
                located in the State, and the State Office of Rural 
                Health (or, in the case of a State in the process of 
                developing such plan, that assures the Secretary that 
                the State will consult with its State hospital 
                association, rural hospitals located in the State, and 
                the State Office of Rural Health in developing such 
                plan);
            ``(2) assurances that the State has designated (consistent 
        with the rural health care plan described in paragraph (1)(A)), 
        or is in the process of so designating, rural nonprofit or 
        public hospitals or facilities located in the State as critical 
        access hospitals; and
            ``(3) such other information and assurances as the 
        Secretary may require.
    ``(d) Medicare Rural Hospital Flexibility Program Described.--
            ``(1) In general.--A State that has submitted an 
        application in accordance with subsection (c), may establish a 
        medicare rural hospital flexibility program that provides 
        that--
                    ``(A) the State shall develop at least one rural 
                health network (as defined in subsection (e)) in the 
                State; and
                    ``(B) at least one facility in the State shall be 
                designated as a critical access hospital in accordance 
                with paragraph (2).
            ``(2) State designation of facilities.--
                    ``(A) In general.--A State may designate one or 
                more facilities as a critical access hospital in 
                accordance with subparagraph (B).
                    ``(B) Criteria for designation as critical access 
                hospital.--A State may designate a facility as a 
                critical access hospital if the facility--
                            ``(i) is located in a county (or equivalent 
                        unit of local government) in a rural area (as 
                        defined in section 1886(d)(2)(D)) that--
                                    ``(I) is located more than a 35-
                                mile drive from a hospital, or another 
                                facility described in this subsection, 
                                or
                                    ``(II) is certified by the State as 
                                being a necessary provider of health 
                                care services to residents in the area;
                            ``(ii) makes available 24-hour emergency 
                        care services that a State determines are 
                        necessary for ensuring access to emergency care 
                        services in each area served by a critical 
                        access hospital;
                            ``(iii) provides not more than 6 acute care 
                        inpatient beds (meeting such standards as the 
                        Secretary may establish) for providing 
                        inpatient care for a period not to exceed 72 
                        hours (unless a longer period is required 
                        because transfer to a hospital is precluded 
                        because of inclement weather or other emergency 
                        conditions), except that a peer review 
                        organization or equivalent entity may, on 
                        request, waive the 72-hour restriction on a 
                        case-by-case basis;
                            ``(iv) meets such staffing requirements as 
                        would apply under section 1861(e) to a hospital 
                        located in a rural area, except that--
                                    ``(I) the facility need not meet 
                                hospital standards relating to the 
                                number of hours during a day, or days 
                                during a week, in which the facility 
                                must be open and fully staffed, except 
                                insofar as the facility is required to 
                                make available emergency care services 
                                as determined under clause (ii) and 
                                must have nursing services available on 
                                a 24-hour basis, but need not otherwise 
                                staff the facility except when an 
                                inpatient is present,
                                    ``(II) the facility may provide any 
                                services otherwise required to be 
                                provided by a full-time, on-site 
                                dietitian, pharmacist, laboratory 
                                technician, medical technologist, and 
                                radiological technologist on a part-
                                time, off-site basis under arrangements 
                                as defined in section 1861(w)(1), and
                                    ``(III) the inpatient care 
                                described in clause (iii) may be 
                                provided by a physician's assistant, 
                                nurse practitioner, or clinical nurse 
                                specialist subject to the oversight of 
                                a physician who need not be present in 
                                the facility; and
                            ``(v) meets the requirements of 
                        subparagraph (I) of paragraph (2) of section 
                        1861(aa).
    ``(e) Rural Health Network Defined.--
            ``(1) In general.--For purposes of this section, the term 
        `rural health network' means, with respect to a State, an 
        organization consisting of--
                    ``(A) at least 1 facility that the State has 
                designated or plans to designate as a critical access 
                hospital, and
                    ``(B) at least 1 hospital that furnishes acute care 
                services.
            ``(2) Agreements.--
                    ``(A) In general.--Each critical access hospital 
                that is a member of a rural health network shall have 
                an agreement with respect to each item described in 
                subparagraph (B) with at least 1 hospital that is a 
                member of the network.
                    ``(B) Items described.--The items described in this 
                subparagraph are the following:
                            ``(i) Patient referral and transfer.
                            ``(ii) The development and use of 
                        communications systems including (where 
                        feasible)--
                                    ``(I) telemetry systems, and
                                    ``(II) systems for electronic 
                                sharing of patient data.
                            ``(iii) The provision of emergency and non-
                        emergency transportation among the facility and 
                        the hospital.
                    ``(C) Credentialing and quality assurance.--Each 
                critical access hospital that is a member of a rural 
                health network shall have an agreement with respect to 
                credentialing and quality assurance with at least 1--
                            ``(i) hospital that is a member of the 
                        network;
                            ``(ii) peer review organization or 
                        equivalent entity; or
                            ``(iii) other appropriate and qualified 
                        entity identified in the State rural health 
                        care plan.
    ``(f) Certification by the Secretary.--The Secretary shall certify 
a facility as a critical access hospital if the facility--
            ``(1) is located in a State that has established a medicare 
        rural hospital flexibility program in accordance with 
        subsection (d);
            ``(2) is designated as a critical access hospital by the 
        State in which it is located; and
            ``(3) meets such other criteria as the Secretary may 
        require.
    ``(g) Permitting Maintenance of Swing Beds.--Nothing in this 
section shall be construed to prohibit a State from designating or the 
Secretary from certifying a facility as a critical access hospital 
solely because, at the time the facility applies to the State for 
designation as a critical access hospital, there is in effect an 
agreement between the facility and the Secretary under section 1883 
under which the facility's inpatient hospital facilities are used for 
the furnishing of extended care services, except that the number of 
beds used for the furnishing of such services may not exceed 12 beds 
(minus the number of inpatient beds used for providing inpatient care 
in the facility pursuant to subsection (d)(2)(B)(iii)). For purposes of 
the previous sentence, the number of beds of the facility used for the 
furnishing of extended care services shall not include any beds of a 
unit of the facility that is licensed as a distinct-part skilled 
nursing facility at the time the facility applies to the State for 
designation as a critical access hospital.
    ``(h) Grants.--
            ``(1) Medicare rural hospital flexibility program.--The 
        Secretary may award grants to States that have submitted 
        applications in accordance with subsection (c) for--
                    ``(A) engaging in activities relating to planning 
                and implementing a rural health care plan;
                    ``(B) engaging in activities relating to planning 
                and implementing rural health networks; and
                    ``(C) designating facilities as critical access 
                hospitals.
            ``(2) Rural emergency medical services.--
                    ``(A) In general.--The Secretary may award grants 
                to States that have submitted applications in 
                accordance with subparagraph (B) for the establishment 
                or expansion of a program for the provision of rural 
                emergency medical services.
                    ``(B) Application.--An application is in accordance 
                with this subparagraph if the State submits to the 
                Secretary at such time and in such form as the 
                Secretary may require an application containing the 
                assurances described in subparagraphs (A)(ii), 
                (A)(iii), and (B) of subsection (c)(1) and paragraph 
                (3) of such subsection.
    ``(i) Treatment of Rural Primary Care Hospitals.--A rural primary 
care hospital designated by the Secretary under this section prior to 
the date of the enactment of the Balanced Budget Reconciliation Act of 
1995 shall receive payment under this title in the same manner and 
amount as critical access hospital certified by the Secretary under 
subsection (f) receives payment for such services.
    ``(j) Waiver of Conflicting Part A Provisions.--The Secretary is 
authorized to waive such provisions of this part and part C as are 
necessary to conduct the program established under this section.
    ``(k) Authorization of Appropriations.--There are authorized to be 
appropriated from the Federal Hospital Insurance Trust Fund for making 
grants to all States under subsection (h), $25,000,000 in each of the 
fiscal years 1996 through 2000.''.
    (b) Report on Alternative to 72-Hour Rule.--Not later than January 
1, 1996, the Administrator of the Health Care Financing Administration 
shall submit to the Congress a report on the feasibility of, and 
administrative requirements necessary to establish an alternative for 
certain medical diagnoses (as determined by the Administrator) to the 
72-hour limitation for inpatient care in critical access hospitals 
required by section 1820(d)(2)(B)(iii).
    (c) Continuation of MAF's.--Notwithstanding any other provision of 
law, the Secretary of Health and Human Services shall extend the 
Montana Medical Assistance Facility Demonstration Project until 
December 31, 2002. The demonstration project shall provide that new 
medical assistance facilities may be designated and that all medical 
assistance facilities shall receive reasonable cost reimbursement under 
title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) for 
services provided to medicare beneficiaries.
    (d) Part A Amendments Relating to Rural Primary Care Hospitals and 
Critical Access Hospitals.--
            (1) Definitions.--Section 1861(mm) (42 U.S.C. 1395x(mm)) is 
        amended to read as follows:

     ``critical access hospital; critical access hospital services

    ``(mm)(1) The term `critical access hospital' means a facility 
certified by the Secretary as a critical access hospital under section 
1820(f).
    ``(2) The term `inpatient critical access hospital services' means 
items and services, furnished to an inpatient of a critical access 
hospital by such facility, that would be inpatient hospital services if 
furnished to an inpatient of a hospital by a hospital.''.
            (2) Coverage and payment.--(A) Section 1812(a)(1) (42 
        U.S.C. 1395d(a)(1)) is amended by striking ``or inpatient rural 
        primary care hospital services'' and inserting ``or inpatient 
        critical access hospital services''.
            (B) Sections 1813(a) and section 1813(b)(3)(A) (42 U.S.C. 
        1395e(a), 1395e(b)(3)(A)) are each amended by striking 
        ``inpatient rural primary care hospital services'' each place 
        it appears, and inserting ``inpatient critical access hospital 
        services''.
            (C) Section 1813(b)(3)(B) (42 U.S.C. 1395e(b)(3)(B)) is 
        amended by striking ``inpatient rural primary care hospital 
        services'' and inserting ``inpatient critical access hospital 
        services''.
            (D) Section 1814 (42 U.S.C. 1395f) is amended--
                    (i) in subsection (a)(8) by striking ``rural 
                primary care hospital'' each place it appears and 
                inserting ``critical access hospital''; and
                    (ii) in subsection (b), by striking ``other than a 
                rural primary care hospital providing inpatient rural 
                primary care hospital services,'' and inserting ``other 
                than a critical access hospital providing inpatient 
                critical access hospital services,''; and
                    (iii) by amending subsection (l) to read as 
                follows:
    ``(l) Payment for Inpatient Critical Access Hospital Services.--The 
amount of payment under this part for inpatient critical access 
hospital services is the reasonable costs of the critical access 
hospital in providing such services.''.
            (3) Treatment of critical access hospitals as providers of 
        services.--(A) Section 1861(u) (42 U.S.C. 1395x(u)) is amended 
        by striking ``rural primary care hospital'' and inserting 
        ``critical access hospital''.
            (B) The first sentence of section 1864(a) (42 U.S.C. 
        1395aa(a)) is amended by striking ``a rural primary care 
        hospital'' and inserting ``a critical access hospital''.
            (4) Conforming amendments.--(A) Section 1128A(b)(1) (42 
        U.S.C. 1320a-7a(b)(1)) is amended by striking ``rural primary 
        care hospital'' each place it appears and inserting ``critical 
        access hospital''.
            (B) Section 1128B(c) (42 U.S.C. 1320a-7b(c)) is amended by 
        striking ``rural primary care hospital'' and inserting 
        ``critical access hospital''.
            (C) Section 1134 (42 U.S.C. 1320b-4) is amended by striking 
        ``rural primary care hospitals'' each place it appears and 
        inserting ``critical access hospitals''.
            (D) Section 1138(a)(1) (42 U.S.C. 1320b-8(a)(1)) is 
        amended--
                    (i) in the matter preceding subparagraph (A), by 
                striking ``rural primary care hospital'' and inserting 
                ``critical access hospital''; and
                    (ii) in the matter preceding clause (i) of 
                subparagraph (A), by striking ``rural primary care 
                hospital'' and inserting ``critical access hospital''.
            (E) Section 1816(c)(2)(C) (42 U.S.C. 1395h(c)(2)(C)) is 
        amended by striking ``rural primary care hospital'' and 
        inserting ``critical access hospital''.
            (F) Section 1833 (42 U.S.C. 1395l) is amended--
                    (i) in subsection (h)(5)(A)(iii), by striking 
                ``rural primary care hospital'' and inserting 
                ``critical access hospital'';
                    (ii) in subsection (i)(1)(A), by striking ``rural 
                primary care hospital'' and inserting ``critical access 
                hospital'';
                    (iii) in subsection (i)(3)(A), by striking ``rural 
                primary care hospital services'' and inserting 
                ``critical access hospital services'';
                    (iv) in subsection (l)(5)(A), by striking ``rural 
                primary care hospital'' each place it appears and 
                inserting ``critical access hospital''; and
                    (v) in subsection (l)(5)(B), by striking ``rural 
                primary care hospital'' each place it appears and 
                inserting ``critical access hospital''.
            (G) Section 1835(c) (42 U.S.C. 1395n(c)) is amended by 
        striking ``rural primary care hospital'' each place it appears 
        and inserting ``critical access hospital''.
            (H) Section 1842(b)(6)(A)(ii) (42 U.S.C. 
        1395u(b)(6)(A)(ii)) is amended by striking ``rural primary care 
        hospital'' and inserting ``critical access hospital''.
            (I) Section 1861 (42 U.S.C. 1395x) is amended--
                    (i) in subsection (a)--
                            (I) in paragraph (1), by striking 
                        ``inpatient rural primary care hospital 
                        services'' and inserting ``inpatient critical 
                        access hospital services''; and
                            (II) in paragraph (2), by striking ``rural 
                        primary care hospital'' and inserting 
                        ``critical access hospital'';
                    (ii) in the last sentence of subsection (e), by 
                striking ``rural primary care hospital'' and inserting 
                ``critical access hospital'';
                    (iii) in subsection (v)(1)(S)(ii)(III), by striking 
                ``rural primary care hospital'' and inserting 
                ``critical access hospital'';
                    (iv) in subsection (w)(1), by striking ``rural 
                primary care hospital'' and inserting ``critical access 
                hospital''; and
                    (v) in subsection (w)(2), by striking ``rural 
                primary care hospital'' each place it appears and 
                inserting ``critical access hospital''.
            (J) Section 1862(a)(14) (42 U.S.C. 1395y(a)(14)) is amended 
        by striking ``rural primary care hospital'' each place it 
        appears and inserting ``critical access hospital''.
            (K) Section 1866(a)(1) (42 U.S.C 1395cc(a)(1)) is amended--
                    (i) in subparagraph (F)(ii), by striking ``rural 
                primary care hospitals'' and inserting ``critical 
                access hospitals'';
                    (ii) in subparagraph (H), in the matter preceding 
                clause (i), by striking ``rural primary care 
                hospitals'' and ``rural primary care hospital 
                services'' and inserting ``critical access hospitals'' 
                and ``critical access hospital services'', 
                respectively;
                    (iii) in subparagraph (I), in the matter preceding 
                clause (i), by striking ``rural primary care hospital'' 
                and inserting ``critical access hospital''; and
                    (iv) in subparagraph (N)--
                            (I) in the matter preceding clause (i), by 
                        striking ``rural primary care hospitals'' and 
                        inserting ``critical access hospitals'', and
                            (II) in clause (i), by striking ``rural 
                        primary care hospital'' and inserting 
                        ``critical access hospital''.
            (L) Section 1866(a)(3) (42 U.S.C 1395cc(a)(3)) is amended--
                    (i) by striking ``rural primary care hospital'' 
                each place it appears in subparagraphs (A) and (B) and 
                inserting ``critical access hospital''; and
                    (ii) in subparagraph (C)(ii)(II), by striking 
                ``rural primary care hospitals'' each place it appears 
                and inserting ``critical access hospitals''.
            (M) Section 1867(e)(5) (42 U.S.C. 1395dd(e)(5)) is amended 
        by striking ``rural primary care hospital'' and inserting 
        ``critical access hospital''.
    (e) Payment Continued to Designated EACHs.--Section 1886(d)(5)(D) 
(42 U.S.C. 1395ww(d)(5)(D)) is amended--
            (1) in clause (iii)(III), by inserting ``as in effect on 
        September 30, 1995'' before the period at the end; and
            (2) in clause (v)--
                    (A) by inserting ``as in effect on September 30, 
                1995'' after ``1820(i)(1)''; and
                    (B) by striking ``1820(g)'' and inserting 
                ``1820(e)''.
    (f) Part B Amendments Relating to Critical Access Hospitals.--
            (1) Coverage.--(A) Section 1861(mm) (42 U.S.C. 1395x(mm)) 
        as amended by subsection (d)(1), is amended by adding at the 
        end the following new paragraph:
    ``(3) The term `outpatient critical access hospital services' means 
medical and other health services furnished by a critical access 
hospital on an outpatient basis.''.
            (B) Section 1832(a)(2)(H) (42 U.S.C. 1395k(a)(2)(H)) is 
        amended by striking ``rural primary care hospital services'' 
        and inserting ``critical access hospital services''.
            (2) Payment.--(A) Section 1833(a) (42 U.S.C. 1395l(a)) is 
        amended in paragraph (6), by striking ``outpatient rural 
        primary care hospital services'' and inserting ``outpatient 
        critical access hospital services''.
            (B) Section 1834(g) (42 U.S.C. 1395m(g)) is amended to read 
        as follows--
    ``(g) Payment for Outpatient Critical Access Hospital Services.--
The amount of payment under this part for outpatient critical access 
hospital services is the reasonable costs of the critical access 
hospital in providing such services.''.
    (g) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after October 1, 1995.

SEC. 7073. ESTABLISHMENT OF RURAL EMERGENCY ACCESS CARE HOSPITALS.

    (a) In General.--Section 1861 (42 U.S.C. 1395x) is amended by 
adding at the end the following new subsection:

  ``Rural Emergency Access Care Hospital; Rural Emergency Access Care 
                           Hospital Services

    ``(oo)(1) The term `rural emergency access care hospital' means, 
for a fiscal year, a facility with respect to which the Secretary finds 
the following:
            ``(A) The facility is located in a rural area (as defined 
        in section 1886(d)(2)(D)).
            ``(B) The facility was a hospital under this title at any 
        time during the 5-year period that ends on the date of the 
        enactment of this subsection.
            ``(C) The facility is in danger of closing due to low 
        inpatient utilization rates and operating losses, and the 
        closure of the facility would limit the access to emergency 
        services of individuals residing in the facility's service 
        area.
            ``(D) The facility has entered into (or plans to enter 
        into) an agreement with a hospital with a participation 
        agreement in effect under section 1866(a), and under such 
        agreement the hospital shall accept patients transferred to the 
        hospital from the facility and receive data from and transmit 
        data to the facility.
            ``(E) There is a practitioner who is qualified to provide 
        advanced cardiac life support services (as determined by the 
        State in which the facility is located) on-site at the facility 
        on a 24-hour basis.
            ``(F) A physician is available on-call to provide emergency 
        medical services on a 24-hour basis.
            ``(G) The facility meets such staffing requirements as 
        would apply under section 1861(e) to a hospital located in a 
        rural area, except that--
                    ``(i) the facility need not meet hospital standards 
                relating to the number of hours during a day, or days 
                during a week, in which the facility must be open, 
                except insofar as the facility is required to provide 
                emergency care on a 24-hour basis under subparagraphs 
                (E) and (F); and
                    ``(ii) the facility may provide any services 
                otherwise required to be provided by a full-time, on-
                site dietitian, pharmacist, laboratory technician, 
                medical technologist, or radiological technologist on a 
                part-time, off-site basis.
            ``(H) The facility meets the requirements applicable to 
        clinics and facilities under subparagraphs (C) through (J) of 
        paragraph (2) of section 1861(aa) and of clauses (ii) and (iv) 
        of the second sentence of such paragraph (or, in the case of 
        the requirements of subparagraph (E), (F), or (J) of such 
        paragraph, would meet the requirements if any reference in such 
        subparagraph to a `nurse practitioner' or to `nurse 
        practitioners' were deemed to be a reference to a `nurse 
        practitioner or nurse' or to `nurse practitioners or nurses'); 
        except that in determining whether a facility meets the 
        requirements of this subparagraph, subparagraphs (E) and (F) of 
        that paragraph shall be applied as if any reference to a 
        `physician' is a reference to a physician as defined in section 
        1861(r)(1).
    ``(2) The term `rural emergency access care hospital services' 
means the following services provided by a rural emergency access care 
hospital and furnished to an individual over a continuous period not to 
exceed 24 hours (except that such services may be furnished over a 
longer period in the case of an individual who is unable to leave the 
hospital because of inclement weather):
            ``(A) An appropriate medical screening examination (as 
        described in section 1867(a)).
            ``(B) Necessary stabilizing examination and treatment 
        services for an emergency medical condition and labor (as 
        described in section 1867(b)).''.
    (b) Requiring Rural Emergency Access Care Hospitals To Meet 
Hospital Anti-Dumping Requirements.--Section 1867(e)(5) (42 U.S.C. 
1395dd(e)(5)) is amended by striking ``1861(mm)(1))'' and inserting 
``1861(mm)(1)) and a rural emergency access care hospital (as defined 
in section 1861(oo)(1))''.
    (c) Coverage and Payment for Services.--
            (1) Coverage.--Section 1832(a)(2) (42 U.S.C. 1395k(a)(2)) 
        is amended--
                    (A) by striking ``and'' at the end of subparagraph 
                (I);
                    (B) by striking the period at the end of 
                subparagraph (J) and inserting ``; and''; and
                    (C) by adding at the end the following new 
                subparagraph:
                    ``(K) rural emergency access care hospital services 
                (as defined in section 1861(oo)(2)).''.
            (2) Payment based on payment for outpatient critical access 
        hospital services.--
                    (A) In general.--Section 1833(a)(6) (42 U.S.C. 
                1395l(a)(6)), as amended by section 7072(f)(2), is 
                amended by striking ``services,'' and inserting 
                ``services and rural emergency access care hospital 
                services,''.
                    (B) Payment methodology described.--Section 1834(g) 
                (42 U.S.C. 1395m(g)), as amended by section 
                7072(f)(2)(B), is amended--
                            (i) in the heading, by striking 
                        ``Services'' and inserting ``Services and Rural 
                        Emergency Access Care Hospital Services''; and
                            (ii) by adding at the end the following new 
                        sentence: ``The amount of payment for rural 
                        emergency access care hospital services 
                        provided during a year shall be determined 
                        using the applicable method provided under this 
                        subsection for determining payment for 
                        outpatient rural primary care hospital services 
                        during the year.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to fiscal years beginning on or after October 1, 1995.

SEC. 7074. ADDITIONAL PAYMENTS FOR PHYSICIANS' SERVICES FURNISHED IN 
              SHORTAGE AREAS.

    (a) Increase in Amount of Additional Payment.--Section 1833(m) (42 
U.S.C. 1395l(m)) is amended by striking ``10 percent'' and inserting 
``20 percent''.
    (b) Restriction to Primary Care Services.--Section 1833(m) (42 
U.S.C. 1395l(m)) is amended by inserting after ``physicians' services'' 
the following: ``consisting of primary care services (as defined in 
section 1842(i)(4))''.
    (c) Extension of Payment for Former Shortage Areas.--
            (1) In general.--Section 1833(m) (42 U.S.C. 1395l(m)) is 
        amended by striking ``area,'' and inserting ``area (or, in the 
        case of an area for which the designation as a health 
        professional shortage area under such section is withdrawn, in 
        the case of physicians' services furnished to such an 
        individual during the 3-year period beginning on the effective 
        date of the withdrawal of such designation),''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to physicians' services furnished in an area for 
        which the designation as a health professional shortage area 
        under section 332(a)(1)(A) of the Public Health Service Act is 
        withdrawn on or after January 1, 1996.
    (d) Requiring Carriers to Report on Services Provided.--Section 
1842(b)(3) (42 U.S.C. 1395u(b)(3)) is amended--
            (1) by striking ``and'' at the end of subparagraph (I); and
            (2) by inserting after subparagraph (I) the following new 
        subparagraph:
            ``(J) will provide information to the Secretary (on such 
        periodic basis as the Secretary may require) on the types of 
        providers to whom the carrier makes additional payments for 
        certain physicians' services pursuant to section 1833(m), 
        together with a description of the services furnished by such 
        providers; and''.
    (e) Study.--
            (1) In general.--The Physician Payment Review Commission 
        shall conduct a study analyzing the effectiveness of the 
        provision of additional payments under part B of the medicare 
        program for physicians' services provided in health 
        professional shortage areas in recruiting physicians to provide 
        services in such areas.
            (2) Report.--Not later than 1 year after the date of the 
        enactment of this Act, the Secretary shall submit to Congress a 
        report on the study conducted under paragraph (1), and shall 
        include in the report such recommendations as the Secretary 
        considers appropriate.
    (f) Effective Date.--The amendments made by subsections (a), (b), 
and (d) shall apply to physicians' services furnished on or after 
October 1, 1995.

SEC. 7075. PAYMENTS TO PHYSICIAN ASSISTANTS AND NURSE PRACTITIONERS FOR 
              SERVICES FURNISHED IN OUTPATIENT OR HOME SETTINGS.

    (a) Coverage in Outpatient or Home Settings for Physician 
Assistants and Nurse Practitioners.--Section 1861(s)(2)(K) (42 U.S.C. 
1395x(s)(2)(K)) is amended--
            (1) in clause (i)--
                    (A) by striking ``or'' at the end of subclause 
                (II); and
                    (B) by inserting ``or (IV) in an outpatient or home 
                setting as defined by the Secretary'' following 
                ``shortage area,''; and
            (2) in clause (ii)--
                    (A) by striking ``in a skilled'' and inserting ``in 
                (I) a skilled''; and
                    (B) by inserting ``, or (II) in an outpatient or 
                home setting (as defined by the Secretary),'' after 
                ``(as defined in section 1919(a))''.
    (b) Payments to Physician Assistants and Nurse Practitioners in 
Outpatient or Home Settings.--
            (1) In general.--Section 1833(r)(1) (42 U.S.C. 1395l(r)(1)) 
        is amended--
                    (A) by inserting ``services described in section 
                1861(s)(2)(K)(ii)(II) (relating to nurse practitioner 
                services furnished in outpatient or home settings), and 
                services described in section 1861(s)(2)(K)(i)(IV) 
                (relating to physician assistant services furnished in 
                an outpatient or home setting'' after ``rural area),''; 
                and
                    (B) by striking ``or clinical nurse specialist'' 
                and inserting ``clinical nurse specialist, or physician 
                assistant''.
            (2) Conforming amendment.--Section 1842(b)(6)(C) (42 U.S.C. 
        1395u(b)(6)(C)) is amended by striking ``clauses (i), (ii), or 
        (iv)'' and inserting ``subclauses (I), (II), or (III) of clause 
        (i), clause (ii)(I), or clause (iv)''.
    (c) Payment Under the Fee Schedule to Physician Assistants and 
Nurse Practitioners in Outpatient or Home Settings.--
            (1) Physician assistants.--Section 1842(b)(12) (42 U.S.C. 
        1395u(b)(12)) is amended by adding at the end the following new 
        subparagraph:
    ``(C) With respect to services described in clauses (i)(IV), 
(ii)(II), and (iv) of section 1861(s)(2)(K) (relating to physician 
assistants and nurse practitioners furnishing services in outpatient or 
home settings)--
            ``(i) payment under this part may only be made on an 
        assignment-related basis; and
            ``(ii) the amounts paid under this part shall be equal to 
        80 percent of (I) the lesser of the actual charge or 85 percent 
        of the fee schedule amount provided under section 1848 for the 
        same service provided by a physician who is not a specialist; 
        or (II) in the case of services as an assistant at surgery, the 
        lesser of the actual charge or 85 percent of the amount that 
        would otherwise be recognized if performed by a physician who 
        is serving as an assistant at surgery.''.
            (2) Conforming amendment.--Section 1842(b)(12)(A) (42 
        U.S.C. 1395u(b)(12)(A)) is amended in the matter preceding 
        clause (i) by striking ``(i), (ii),'' and inserting 
        ``subclauses (I), (II), or (III) of clause (i), or subclause 
        (I) of clause (ii)''.
            (3) Technical amendment.--Section 1842(b)(12)(A) (42 U.S.C. 
        1395u(b)(12)(A)) is amended in the matter preceding clause (i) 
        by striking ``a physician assistants'' and inserting 
        ``physician assistants''.
    (d) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after October 1, 1995.

SEC. 7076. DEMONSTRATION PROJECTS TO PROMOTE TELEMEDICINE.

    (a) Definitions.--For purposes of this section:
            (1) Rural health care provider.--The term ``rural health 
        care provider'' means any public or private health care 
        provider located in a rural area.
            (2) Nonhealth care entity.--The term ``nonhealth care 
        entity'' means any entity that is not involved in the provision 
        of health care, including a business, educational institution, 
        library, and prison.
    (b) Establishment.--The Secretary, acting through the Office of 
Rural Health, shall award grants to eligible entities to establish 
demonstration projects under which an eligible entity establishes a 
rural-based consortium that enables members of the consortium to 
utilize the telecommunications network--
            (1) to strengthen the delivery of health care services in 
        the rural area through the use of telemedicine;
            (2) to provide for consultations involving transmissions of 
        detailed data about the patient that serves as a reasonable 
        substitute for face-to-face interaction between the patient and 
        consultant; and
            (3) to make outside resources or business interaction more 
        available to the rural area.
    (c) Eligible Entity.--To be eligible to receive a grant under this 
section an applicant entity shall propose a consortium that includes as 
members at least--
            (1) one rural health care provider; and
            (2) one nonhealth care entity located in the same rural 
        area as the rural health care provider described in paragraph 
        (1).
The Secretary may waive the membership requirement under paragraph (2) 
if the members described in paragraph (1) are unable to locate a 
nonhealth care entity located in the same rural area to participate in 
the demonstration project.
    (d) Application.--To be eligible to receive a grant under this 
section, an eligible entity described in subsection (c) shall prepare 
and submit to the Secretary an application at such time, in such 
manner, and containing such information as the Secretary may require, 
including a description of the use to which the eligible entity would 
apply any amounts received under such grant, the source and amount of 
non-Federal funds the entity would pledge for the project, and a 
showing of the long-term sustainability of the project.
    (e) Grants.--Grants under this section shall be distributed in 
accordance with the following requirements:
            (1) Grant limit.--The Secretary may not make a grant to an 
        eligible entity under this section in excess of $500,000 for 
        each fiscal year in which an eligible entity conducts a project 
        under this section.
            (2) Matching funds.--
                    (A) In general.--The Secretary may not make a grant 
                to an eligible entity under this section unless the 
                eligible entity agrees to provide non-Federal funds in 
                an amount equal to not less than 20 percent of the 
                total amount to be expended by the eligible entity in 
                any fiscal year for the purpose of conducting the 
                project under this section.
                    (B) Adjustments.--The Secretary shall make 
                necessary adjustments to the amount that an eligible 
                entity may receive in a subsequent fiscal year if the 
                eligible entity does not meet the requirements of 
                subparagraph (A) in the preceding fiscal year.
    (f) Use of Grant Amounts.--
            (1) In general.--Amounts received under a grant awarded 
        under this section shall be utilized for the development and 
        operation of telemedicine systems that serve rural areas. All 
        such grant funds must be used to further the provision of 
        health services to rural areas.
            (2) Rules of use.--
                    (A) Permissible usages.--Grant funds awarded under 
                this section--
                            (i) shall primarily be used to support the 
                        costs of establishing and operating a 
                        telemedicine system that provides specialty 
                        consultations to rural communities;
                            (ii) may be used to demonstrate the 
                        application of telemedicine for preceptorship 
                        of medical students, residents, and other 
                        health professions students in rural training 
                        sites;
                            (iii) may be used for transmission costs, 
                        salaries, maintenance of equipment, and 
                        compensation of specialists and referring 
                        practitioners;
                            (iv) may be used to pay the fees of 
                        consultants, but only to the extent that the 
                        total of such fees does not exceed 5 percent of 
                        the amount of the grant;
                            (v) may be used to demonstrate the use of 
                        telemedicine to facilitate collaboration 
                        between nonphysician primary care practitioners 
                        (including physician assistants, nurse 
                        practitioners, certified nurse-midwives, and 
                        clinical nurse specialists) and physicians; and
                            (vi) may be used to test reimbursement 
                        methodologies under the medicare program under 
                        title XVIII of the Social Security Act for 
                        practitioners participating in telemedicine 
                        activities.
                    (B) Prohibited use of funds.--Grant funds shall not 
                be used by members of a rural-based consortium for any 
                of the following:
                            (i) Expenditures to purchase or lease 
                        equipment.
                            (ii) In the case of a member of a 
                        consortium that is an isolated rural facility, 
                        purchase of high-cost telecommunications 
                        technologies for the furnishing of telemedicine 
                        services that--
                                    (I) incur high cost per minute of 
                                usage charges; or
                                    (II) require consultants to be 
                                available at the same time as the 
                                patient and the referring physician.
                            (iii) Purchase or installation of 
                        transmission equipment or establishment or 
                        operation of a telecommunications common 
                        carrier network.
                            (iv) Expenditures for indirect costs (as 
                        determined by the Secretary) to the extent the 
                        expenditures would exceed more than 20 percent 
                        of the total grant funds.
                            (v) Construction (except for minor 
                        renovations related to the installation of 
                        equipment), or the acquisition or building of 
                        real property.
    (g) Maintenance of Effort.--Any funds available for the activities 
covered by a demonstration project conducted under this section shall 
supplement, and shall not supplant, funds that are expended for similar 
purposes under any State, regional, or local program.
    (h) Evaluations.--Each eligible entity that conducts a 
demonstration project under this section shall submit to the Secretary 
such information and interim evaluations as the Secretary may require.
    (i) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section, $10,000,000 for each of the 
fiscal years 1996 through 1998.

SEC. 7077. PROPAC RECOMMENDATIONS ON URBAN MEDICARE DEPENDENT 
              HOSPITALS.

    Section 1886(e)(3)(A) (42 U.S.C. 1395ww(e)(3)(A)) is amended by 
adding at the end the following new sentence: ``The Commission shall, 
beginning in 1996, report its recommendations to Congress on an 
appropriate update to be used for urban hospitals with a high 
proportion of medicare patient days and on actions to ensure that 
medicare beneficiaries served by such hospitals retain the same access 
and quality of care as medicare beneficiaries nationwide.''.

           CHAPTER 6--HEALTH CARE FRAUD AND ABUSE PREVENTION

SEC. 7100. SHORT TITLE.

    This chapter may be cited as the ``Health Care Fraud and Abuse 
Prevention Act of 1995''.

             Subchapter A--Fraud and Abuse Control Program

SEC. 7101. FRAUD AND ABUSE CONTROL PROGRAM.

    (a) Establishment of Program.--Title XI (42 U.S.C. 1301 et seq.) is 
amended by inserting after section 1128B the following new section:

                   ``fraud and abuse control program

    ``Sec. 1128C. (a) Establishment of Program.--
            ``(1) In general.--Not later than January 1, 1996, the 
        Secretary, acting through the Office of the Inspector General 
        of the Department of Health and Human Services, and the 
        Attorney General shall establish a program--
                    ``(A) to coordinate Federal, State, and local law 
                enforcement programs to control fraud and abuse with 
                respect to the delivery of and payment for health care 
                in the United States,
                    ``(B) to conduct investigations, audits, 
                evaluations, and inspections relating to the delivery 
                of and payment for health care in the United States,
                    ``(C) to facilitate the enforcement of the 
                provisions of sections 1128, 1128A, and 1128B and other 
                statutes applicable to health care fraud and abuse, and
                    ``(D) to provide for the modification and 
                establishment of safe harbors and to issue 
                interpretative rulings and special fraud alerts 
                pursuant to section 1128D.
            ``(2) Coordination with health plans.--In carrying out the 
        program established under paragraph (1), the Secretary and the 
        Attorney General shall consult with, and arrange for the 
        sharing of data with representatives of health plans.
            ``(3) Guidelines.--
                    ``(A) In general.--The Secretary and the Attorney 
                General shall issue guidelines to carry out the program 
                under paragraph (1). The provisions of sections 553, 
                556, and 557 of title 5, United States Code, shall not 
                apply in the issuance of such guidelines.
                    ``(B) Information guidelines.--
                            ``(i) In general.--Such guidelines shall 
                        include guidelines relating to the furnishing 
                        of information by health plans, providers, and 
                        others to enable the Secretary and the Attorney 
                        General to carry out the program (including 
                        coordination with health plans under paragraph 
                        (2)).
                            ``(ii) Confidentiality.--Such guidelines 
                        shall include procedures to assure that such 
                        information is provided and utilized in a 
                        manner that appropriately protects the 
                        confidentiality of the information and the 
                        privacy of individuals receiving health care 
                        services and items.
                            ``(iii) Qualified immunity for providing 
                        information.--The provisions of section 1157(a) 
                        (relating to limitation on liability) shall 
                        apply to a person providing information to the 
                        Secretary or the Attorney General in 
                        conjunction with their performance of duties 
                        under this section.
            ``(4) Ensuring access to documentation.--The Inspector 
        General of the Department of Health and Human Services is 
        authorized to exercise such authority described in paragraphs 
        (3) through (9) of section 6 of the Inspector General Act of 
        1978 (5 U.S.C. App.) as necessary with respect to the 
        activities under the fraud and abuse control program 
        established under this subsection.
            ``(5) Authority of inspector general.--Nothing in this Act 
        shall be construed to diminish the authority of any Inspector 
        General, including such authority as provided in the Inspector 
        General Act of 1978 (5 U.S.C. App.).
    ``(b) Additional Use of Funds by Inspector General.--
            ``(1) Reimbursements for investigations.--The Inspector 
        General of the Department of Health and Human Services is 
        authorized to receive and retain for current use reimbursement 
        for the costs of conducting investigations and audits and for 
        monitoring compliance plans when such costs are ordered by a 
        court, voluntarily agreed to by the payer, or otherwise.
            ``(2) Crediting.--Funds received by the Inspector General 
        under paragraph (1) as reimbursement for costs of conducting 
        investigations shall be deposited to the credit of the 
        appropriation from which initially paid, or to appropriations 
        for similar purposes currently available at the time of 
        deposit, and shall remain available for obligation for 1 year 
        from the date of the deposit of such funds.
    ``(c) Health Plan Defined.--For purposes of this section, the term 
`health plan' means a plan or program that provides health benefits, 
whether directly, through insurance, or otherwise, and includes--
            ``(1) a policy of health insurance;
            ``(2) a contract of a service benefit organization; and
            ``(3) a membership agreement with a health maintenance 
        organization or other prepaid health plan.''.
    (b) Establishment of Health Care Fraud and Abuse Control Account in 
Federal Hospital Insurance Trust Fund.--Section 1817 (42 U.S.C. 1395i) 
is amended by adding at the end the following new subsection:
    ``(k) Health Care Fraud and Abuse Control Account.--
            ``(1) Establishment.--There is hereby established in the 
        Trust Fund an expenditure account to be known as the `Health 
        Care Fraud and Abuse Control Account' (in this subsection 
        referred to as the `Account').
            ``(2) Appropriated amounts to trust fund.--
                    ``(A) In general.--There are hereby appropriated to 
                the Trust Fund--
                            ``(i) such gifts and bequests as may be 
                        made as provided in subparagraph (B);
                            ``(ii) such amounts as may be deposited in 
                        the Trust Fund as provided in sections 7141(b) 
                        and 7142(c) of the Balanced Budget 
                        Reconciliation Act of 1995, and title XI; and
                            ``(iii) such amounts as are transferred to 
                        the Trust Fund under subparagraph (C).
                    ``(B) Authorization to accept gifts.--The Trust 
                Fund is authorized to accept on behalf of the United 
                States money gifts and bequests made unconditionally to 
                the Trust Fund, for the benefit of the Account or any 
                activity financed through the Account.
                    ``(C) Transfer of amounts.--The Managing Trustee 
                shall transfer to the Trust Fund, under rules similar 
                to the rules in section 9601 of the Internal Revenue 
                Code of 1986, an amount equal to the sum of the 
                following:
                            ``(i) Criminal fines recovered in cases 
                        involving a Federal health care offense (as 
                        defined in section 982(a)(6)(B) of title 18, 
                        United States Code).
                            ``(ii) Civil monetary penalties and 
                        assessments imposed in health care cases, 
                        including amounts recovered under titles XI, 
                        XVIII, and XXI, and chapter 38 of title 31, 
                        United States Code (except as otherwise 
                        provided by law).
                            ``(iii) Amounts resulting from the 
                        forfeiture of property by reason of a Federal 
                        health care offense.
                            ``(iv) Penalties and damages obtained and 
                        otherwise creditable to miscellaneous receipts 
                        of the general fund of the Treasury obtained 
                        under sections 3729 through 3733 of title 31, 
                        United States Code (known as the False Claims 
                        Act), in cases involving claims related to the 
                        provision of health care items and services 
                        (other than funds awarded to a relator, for 
                        restitution or otherwise authorized by law).
            ``(3) Appropriated amounts to account.--
                    ``(A) In general.--There are hereby appropriated to 
                the Account from the Trust Fund such sums as the 
                Secretary and the Attorney General certify are 
                necessary to carry out the purposes described in 
                subparagraph (B), to be available without further 
                appropriation, in an amount--
                            ``(i) with respect to activities of the 
                        Office of the Inspector General of the 
                        Department of Health and Human Services and the 
                        Federal Bureau of Investigations in carrying 
                        out such purposes, not less than--
                                    ``(I) for fiscal year 1996, 
                                $110,000,000,
                                    ``(II) for fiscal year 1997, 
                                $140,000,000,
                                    ``(III) for fiscal year 1998, 
                                $160,000,000,
                                    ``(IV) for fiscal year 1999, 
                                $185,000,000,
                                    ``(V) for fiscal year 2000, 
                                $215,000,000,
                                    ``(VI) for fiscal year 2001, 
                                $240,000,000, and
                                    ``(VII) for fiscal year 2002, 
                                $270,000,000; and
                            ``(ii) with respect to all activities 
                        (including the activities described in clause 
                        (i)) in carrying out such purposes, not more 
                        than--
                                    ``(I) for fiscal year 1996, 
                                $200,000,000, and
                                    ``(II) for each of the fiscal years 
                                1997 through 2002, the limit for the 
                                preceding fiscal year, increased by 15 
                                percent; and
                            ``(iii) for each fiscal year after fiscal 
                        year 2002, within the limits for fiscal year 
                        2002 as determined under clauses (i) and (ii).
                    ``(B) Use of funds.--The purposes described in this 
                subparagraph are as follows:
                            ``(i) General use.--To cover the costs 
                        (including equipment, salaries and benefits, 
                        and travel and training) of the administration 
                        and operation of the health care fraud and 
                        abuse control program established under section 
                        1128C(a), including the costs of--
                                    ``(I) prosecuting health care 
                                matters (through criminal, civil, and 
                                administrative proceedings);
                                    ``(II) investigations;
                                    ``(III) financial and performance 
                                audits of health care programs and 
                                operations;
                                    ``(IV) inspections and other 
                                evaluations; and
                                    ``(V) provider and consumer 
                                education regarding compliance with the 
                                provisions of title XI.
                    ``(ii) Use by state medicaid fraud control units 
                for investigation reimbursements.--To reimburse the 
                various State medicaid fraud control units upon request 
                to the Secretary for the costs of the activities 
                authorized under section 2134(b).
            ``(4) Annual report.--The Secretary and the Attorney 
        General shall submit jointly an annual report to Congress on 
        the amount of revenue which is generated and disbursed, and the 
        justification for such disbursements, by the Account in each 
        fiscal year.''.

SEC. 7102. APPLICATION OF CERTAIN HEALTH ANTI-FRAUD AND ABUSE SANCTIONS 
              TO FRAUD AND ABUSE AGAINST FEDERAL HEALTH PROGRAMS.

    (a) Crimes.--
            (1) Social security act.--Section 1128B (42 U.S.C. 1320a-
        7b) is amended as follows:
                    (A) In the heading, by striking ``medicare or state 
                health care programs'' and inserting ``federal health 
                care programs''.
                    (B) In subsection (a)(1), by striking ``a program 
                under title XVIII or a State health care program (as 
                defined in section 1128(h))'' and inserting ``a Federal 
                health care program''.
                    (C) In subsection (a)(5), by striking ``a program 
                under title XVIII or a State health care program'' and 
                inserting ``a Federal health care program''.
                    (D) In the second sentence of subsection (a)--
                            (i) by striking ``a State plan approved 
                        under title XIX'' and inserting ``a Federal 
                        health care program'', and
                            (ii) by striking ``the State may at its 
                        option (notwithstanding any other provision of 
                        that title or of such plan)'' and inserting 
                        ``the administrator of such program may at its 
                        option (notwithstanding any other provision of 
                        such program)''.
                    (E) In subsection (b), by striking ``title XVIII or 
                a State health care program'' each place it appears and 
                inserting ``a Federal health care program''.
                    (F) In subsection (c), by inserting ``(as defined 
                in section 1128(h))'' after ``a State health care 
                program''.
                    (G) By adding at the end the following new 
                subsection:
    ``(f) For purposes of this section, the term `Federal health care 
program' means--
            ``(1) any plan or program that provides health benefits, 
        whether directly, through insurance, or otherwise, which is 
        funded, in whole or in part, by the United States Government; 
        or
            ``(2) any State health care program, as defined in section 
        1128(h).''.
            (2) Identification of community service opportunities.--
        Section 1128B (42 U.S.C. 1320a-7b) is further amended by adding 
        at the end the following new subsection:
    ``(g) The Secretary may--
            ``(1) in consultation with State and local health care 
        officials, identify opportunities for the satisfaction of 
        community service obligations that a court may impose upon the 
        conviction of an offense under this section, and
            ``(2) make information concerning such opportunities 
        available to Federal and State law enforcement officers and 
        State and local health care officials.''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1996.

SEC. 7103. HEALTH CARE FRAUD AND ABUSE GUIDANCE.

    Title XI (42 U.S.C. 1301 et seq.), as amended by section 7101, is 
amended by inserting after section 1128C the following new section:

                 ``health care fraud and abuse guidance

    ``Sec. 1128D. (a) Solicitation and Publication of Modifications to 
Existing Safe Harbors and New Safe Harbors.--
            ``(1) In general.--
                    ``(A) Solicitation of proposals for safe harbors.--
                Not later than January 1, 1996, and not less than 
                annually thereafter, the Secretary shall publish a 
                notice in the Federal Register soliciting proposals, 
                which will be accepted during a 60-day period, for--
                            ``(i) modifications to existing safe 
                        harbors issued pursuant to section 14(a) of the 
                        Medicare and Medicaid Patient and Program 
                        Protection Act of 1987 (42 U.S.C. 1320a-7b 
                        note);
                            ``(ii) additional safe harbors specifying 
                        payment practices that shall not be treated as 
                        a criminal offense under section 1128B(b) and 
                        shall not serve as the basis for an exclusion 
                        under section 1128(b)(7);
                            ``(iii) interpretive rulings to be issued 
                        pursuant to subsection (b); and
                            ``(iv) special fraud alerts to be issued 
                        pursuant to subsection (c).
                    ``(B) Publication of proposed modifications and 
                proposed additional safe harbors.--After considering 
                the proposals described in clauses (i) and (ii) of 
                subparagraph (A), the Secretary, in consultation with 
                the Attorney General, shall publish in the Federal 
                Register proposed modifications to existing safe 
                harbors and proposed additional safe harbors, if 
                appropriate, with a 60-day comment period. After 
                considering any public comments received during this 
                period, the Secretary shall issue final rules modifying 
                the existing safe harbors and establishing new safe 
                harbors, as appropriate.
                    ``(C) Report.--The Inspector General of the 
                Department of Health and Human Services (in this 
                section referred to as the `Inspector General') shall, 
                in an annual report to Congress or as part of the year-
                end semiannual report required by section 5 of the 
                Inspector General Act of 1978 (5 U.S.C. App.), describe 
                the proposals received under clauses (i) and (ii) of 
                subparagraph (A) and explain which proposals were 
                included in the publication described in subparagraph 
                (B), which proposals were not included in that 
                publication, and the reasons for the rejection of the 
                proposals that were not included.
            ``(2) Criteria for modifying and establishing safe 
        harbors.--In modifying and establishing safe harbors under 
        paragraph (1)(B), the Secretary may consider the extent to 
        which providing a safe harbor for the specified payment 
        practice may result in any of the following:
                    ``(A) An increase or decrease in access to health 
                care services.
                    ``(B) An increase or decrease in the quality of 
                health care services.
                    ``(C) An increase or decrease in patient freedom of 
                choice among health care providers.
                    ``(D) An increase or decrease in competition among 
                health care providers.
                    ``(E) An increase or decrease in the ability of 
                health care facilities to provide services in medically 
                underserved areas or to medically underserved 
                populations.
                    ``(F) An increase or decrease in the cost to 
                Federal health care programs (as defined in section 
                1128B(f)).
                    ``(G) An increase or decrease in the potential 
                overutilization of health care services.
                    ``(H) The existence or nonexistence of any 
                potential financial benefit to a health care 
                professional or provider which may vary based on their 
                decisions of--
                            ``(i) whether to order a health care item 
                        or service; or
                            ``(ii) whether to arrange for a referral of 
                        health care items or services to a particular 
                        practitioner or provider.
                    ``(I) Any other factors the Secretary deems 
                appropriate in the interest of preventing fraud and 
                abuse in Federal health care programs (as so defined).
    ``(b) Interpretive Rulings.--
            ``(1) In general.--
                    ``(A) Request for interpretive ruling.--Any person 
                may present, at any time, a request to the Inspector 
                General for a statement of the Inspector General's 
                current interpretation of the meaning of a specific 
                aspect of the application of sections 1128A and 1128B 
                (in this section referred to as an `interpretive 
                ruling').
                    ``(B) Issuance and effect of interpretive ruling.--
                            ``(i) In general.--If appropriate, the 
                        Inspector General shall in consultation with 
                        the Attorney General, issue an interpretive 
                        ruling not later than 90 days after receiving a 
                        request described in subparagraph (A). 
                        Interpretive rulings shall not have the force 
                        of law and shall be treated as an interpretive 
                        rule within the meaning of section 553(b) of 
                        title 5, United States Code. All interpretive 
                        rulings issued pursuant to this clause shall be 
                        published in the Federal Register or otherwise 
                        made available for public inspection.
                            ``(ii) Reasons for denial.--If the 
                        Inspector General does not issue an 
                        interpretive ruling in response to a request 
                        described in subparagraph (A), the Inspector 
                        General shall notify the requesting party of 
                        such decision not later than 60 days after 
                        receiving such a request and shall identify the 
                        reasons for such decision.
            ``(2) Criteria for interpretive rulings.--
                    ``(A) In general.--In determining whether to issue 
                an interpretive ruling under paragraph (1)(B), the 
                Inspector General may consider--
                            ``(i) whether and to what extent the 
                        request identifies an ambiguity within the 
                        language of the statute, the existing safe 
                        harbors, or previous interpretive rulings; and
                            ``(ii) whether the subject of the requested 
                        interpretive ruling can be adequately addressed 
                        by interpretation of the language of the 
                        statute, the existing safe harbor rules, or 
                        previous interpretive rulings, or whether the 
                        request would require a substantive ruling (as 
                        defined in section 552 of title 5, United 
                        States Code) not authorized under this 
                        subsection.
                    ``(B) No rulings on factual issues.--The Inspector 
                General shall not give an interpretive ruling on any 
                factual issue, including the intent of the parties or 
                the fair market value of particular leased space or 
                equipment.
    ``(c) Special Fraud Alerts.--
            ``(1) In general.--
                    ``(A) Request for special fraud alerts.--Any person 
                may present, at any time, a request to the Inspector 
                General for a notice which informs the public of 
                practices which the Inspector General considers to be 
                suspect or of particular concern under section 1128B(b) 
                (in this subsection referred to as a `special fraud 
                alert').
                    ``(B) Issuance and publication of special fraud 
                alerts.--Upon receipt of a request described in 
                subparagraph (A), the Inspector General shall 
                investigate the subject matter of the request to 
                determine whether a special fraud alert should be 
                issued. If appropriate, the Inspector General shall 
                issue a special fraud alert in response to the request. 
                All special fraud alerts issued pursuant to this 
                subparagraph shall be published in the Federal 
                Register.
            ``(2) Criteria for special fraud alerts.--In determining 
        whether to issue a special fraud alert upon a request described 
        in paragraph (1), the Inspector General may consider--
                    ``(A) whether and to what extent the practices that 
                would be identified in the special fraud alert may 
                result in any of the consequences described in 
                subsection (a)(2); and
                    ``(B) the volume and frequency of the conduct that 
                would be identified in the special fraud alert.''.

    Subchapter B--Revisions to Current Sanctions for Fraud and Abuse

SEC. 7111. MANDATORY EXCLUSION FROM PARTICIPATION IN MEDICARE AND STATE 
              HEALTH CARE PROGRAMS.

    (a) Individual Convicted of Felony Relating to Health Care Fraud.--
            (1) In general.--Section 1128(a) (42 U.S.C. 1320a-7(a)) is 
        amended by adding at the end the following new paragraph:
            ``(3) Felony conviction relating to health care fraud.--Any 
        individual or entity that has been convicted after the date of 
        the enactment of the Health Care Fraud and Abuse Prevention Act 
        of 1995, under Federal or State law, in connection with the 
        delivery of a health care item or service or with respect to 
        any act or omission in a health care program (other than those 
        specifically described in paragraph (1)) operated by or 
        financed in whole or in part by any Federal, State, or local 
        government agency, of a criminal offense consisting of a felony 
        relating to fraud, theft, embezzlement, breach of fiduciary 
        responsibility, or other financial misconduct.''.
            (2) Conforming amendment.--Paragraph (1) of section 1128(b) 
        (42 U.S.C. 1320a-7(b)) is amended to read as follows:
            ``(1) Conviction relating to fraud.--Any individual or 
        entity that has been convicted after the date of the enactment 
        of the Health Care Fraud and Abuse Prevention Act of 1995, 
        under Federal or State law--
                    ``(A) of a criminal offense consisting of a 
                misdemeanor relating to fraud, theft, embezzlement, 
                breach of fiduciary responsibility, or other financial 
                misconduct--
                            ``(i) in connection with the delivery of a 
                        health care item or service, or
                            ``(ii) with respect to any act or omission 
                        in a health care program (other than those 
                        specifically described in subsection (a)(1)) 
                        operated by or financed in whole or in part by 
                        any Federal, State, or local government agency; 
                        or
                    ``(B) of a criminal offense relating to fraud, 
                theft, embezzlement, breach of fiduciary 
                responsibility, or other financial misconduct with 
                respect to any act or omission in a program (other than 
                a health care program) operated by or financed in whole 
                or in part by any Federal, State, or local government 
                agency.''.
    (b) Individual Convicted of Felony Relating to Controlled 
Substance.--
            (1) In general.--Section 1128(a) (42 U.S.C. 1320a-7(a)), as 
        amended by subsection (a), is amended by adding at the end the 
        following new paragraph:
            ``(4) Felony conviction relating to controlled substance.--
        Any individual or entity that has been convicted after the date 
        of the enactment of the Health Care Fraud and Abuse Prevention 
        Act of 1995, under Federal or State law, of a criminal offense 
        consisting of a felony relating to the unlawful manufacture, 
        distribution, prescription, or dispensing of a controlled 
        substance.''.
            (2) Conforming amendment.--Section 1128(b)(3) (42 U.S.C. 
        1320a-7(b)(3)) is amended--
                    (A) in the heading, by striking ``Conviction'' and 
                inserting ``Misdemeanor conviction''; and
                    (B) by striking ``criminal offense'' and inserting 
                ``criminal offense consisting of a misdemeanor''.

SEC. 7112. ESTABLISHMENT OF MINIMUM PERIOD OF EXCLUSION FOR CERTAIN 
              INDIVIDUALS AND ENTITIES SUBJECT TO PERMISSIVE EXCLUSION 
              FROM MEDICARE AND STATE HEALTH CARE PROGRAMS.

    Section 1128(c)(3) (42 U.S.C. 1320a-7(c)(3)) is amended by adding 
at the end the following new subparagraphs:
    ``(D) In the case of an exclusion of an individual or entity under 
paragraph (1), (2), or (3) of subsection (b), the period of the 
exclusion shall be 3 years, unless the Secretary determines in 
accordance with published regulations that a shorter period is 
appropriate because of mitigating circumstances or that a longer period 
is appropriate because of aggravating circumstances.
    ``(E) In the case of an exclusion of an individual or entity under 
subsection (b)(4) or (b)(5), the period of the exclusion shall not be 
less than the period during which the individual's or entity's license 
to provide health care is revoked, suspended, or surrendered, or the 
individual or the entity is excluded or suspended from a Federal or 
State health care program.
    ``(F) In the case of an exclusion of an individual or entity under 
subsection (b)(6)(B), the period of the exclusion shall be not less 
than 1 year.''.

SEC. 7113. PERMISSIVE EXCLUSION OF INDIVIDUALS WITH OWNERSHIP OR 
              CONTROL INTEREST IN SANCTIONED ENTITIES.

    Section 1128(b) (42 U.S.C. 1320a-7(b)) is amended by adding at the 
end the following new paragraph:
            ``(15) Individuals controlling a sanctioned entity.--Any 
        individual who has a direct or indirect ownership or control 
        interest of 5 percent or more, or an ownership or control 
        interest (as defined in section 1124(a)(3)) in, or who is an 
        officer or managing employee (as defined in section 1126(b)) 
        of, an entity--
                    ``(A) that has been convicted of any offense 
                described in subsection (a) or in paragraph (1), (2), 
                or (3) of this subsection; or
                    ``(B) that has been excluded from participation 
                under a program under title XVIII or under a State 
                health care program.''.

SEC. 7114. SANCTIONS AGAINST PRACTITIONERS AND PERSONS FOR FAILURE TO 
              COMPLY WITH STATUTORY OBLIGATIONS.

    (a) Minimum Period of Exclusion for Practitioners and Persons 
Failing To Meet Statutory Obligations.--
            (1) In general.--The second sentence of section 1156(b)(1) 
        (42 U.S.C. 1320c-5(b)(1)) is amended by striking ``may 
        prescribe)'' and inserting ``may prescribe, except that such 
        period may not be less than 1 year)''.
            (2) Conforming amendment.--Section 1156(b)(2) (42 U.S.C. 
        1320c-5(b)(2)) is amended by striking ``shall remain'' and 
        inserting ``shall (subject to the minimum period specified in 
        the second sentence of paragraph (1)) remain''.
    (b) Repeal of ``Unwilling or Unable'' Condition for Imposition of 
Sanction.--Section 1156(b)(1) (42 U.S.C. 1320c-5(b)(1)) is amended--
            (1) in the second sentence, by striking ``and determines'' 
        and all that follows through ``such obligations,''; and
            (2) by striking the third sentence.

SEC. 7115. INTERMEDIATE SANCTIONS FOR MEDICARE HEALTH MAINTENANCE 
              ORGANIZATIONS.

    (a) Application of Intermediate Sanctions for Any Program 
Violations.--
            (1) In general.--Section 1876(i)(1) (42 U.S.C. 
        1395mm(i)(1)) is amended by striking ``the Secretary may 
        terminate'' and all that follows and inserting ``in accordance 
        with procedures established under paragraph (9), the Secretary 
        may at any time terminate any such contract or may impose the 
        intermediate sanctions described in paragraph (6)(B) or (6)(C) 
        (whichever is applicable) on the eligible organization if the 
        Secretary determines that the organization--
                    ``(A) has failed substantially to carry out the 
                contract;
                    ``(B) is carrying out the contract in a manner 
                substantially inconsistent with the efficient and 
                effective administration of this section; or
                    ``(C) no longer substantially meets the applicable 
                conditions of subsections (b), (c), (e), and (f).''.
            (2) Other intermediate sanctions for miscellaneous program 
        violations.--Section 1876(i)(6) (42 U.S.C. 1395mm(i)(6)) is 
        amended by adding at the end the following new subparagraph:
    ``(C) In the case of an eligible organization for which the 
Secretary makes a determination under paragraph (1) the basis of which 
is not described in subparagraph (A), the Secretary may apply the 
following intermediate sanctions:
            ``(i) Civil money penalties of not more than $25,000 for 
        each determination under paragraph (1) if the deficiency that 
        is the basis of the determination has directly adversely 
        affected (or has the substantial likelihood of adversely 
        affecting) an individual covered under the organization's 
        contract.
            ``(ii) Civil money penalties of not more than $10,000 for 
        each week beginning after the initiation of procedures by the 
        Secretary under paragraph (9) during which the deficiency that 
        is the basis of a determination under paragraph (1) exists.
            ``(iii) Suspension of enrollment of individuals under this 
        section after the date the Secretary notifies the organization 
        of a determination under paragraph (1) and until the Secretary 
        is satisfied that the deficiency that is the basis for the 
        determination has been corrected and is not likely to recur.''.
            (3) Procedures for imposing sanctions.--Section 1876(i) (42 
        U.S.C. 1395mm(i)) is amended by adding at the end the following 
        new paragraph:
    ``(9) The Secretary may terminate a contract with an eligible 
organization under this section or may impose the intermediate 
sanctions described in paragraph (6) on the organization in accordance 
with formal investigation and compliance procedures established by the 
Secretary under which--
            ``(A) the Secretary first provides the organization with 
        the reasonable opportunity to develop and implement a 
        corrective action plan to correct the deficiencies that were 
        the basis of the Secretary's determination under paragraph (1) 
        and the organization fails to develop or implement such a plan;
            ``(B) in deciding whether to impose sanctions, the 
        Secretary considers aggravating factors such as whether an 
        organization has a history of deficiencies or has not taken 
        action to correct deficiencies the Secretary has brought to the 
        organization's attention;
            ``(C) there are no unreasonable or unnecessary delays 
        between the finding of a deficiency and the imposition of 
        sanctions; and
            ``(D) the Secretary provides the organization with 
        reasonable notice and opportunity for hearing (including the 
        right to appeal an initial decision) before imposing any 
        sanction or terminating the contract.''.
            (4) Conforming amendments.--Section 1876(i)(6)(B) (42 
        U.S.C. 1395mm(i)(6)(B)) is amended by striking the second 
        sentence.
    (b) Agreements With Peer Review Organizations.--Section 
1876(i)(7)(A) (42 U.S.C. 1395mm(i)(7)(A)) is amended by striking ``an 
agreement'' and inserting ``a written agreement''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to contract years beginning on or after January 1, 
1996.

SEC. 7116. CLARIFICATION OF AND ADDITIONS TO EXCEPTIONS TO ANTI-
              KICKBACK PENALTIES.

    (a) Study.--The Secretary of Health and Human Services (in this 
subsection referred to as the ``Secretary'') shall conduct a study 
evaluating the benefits of volume and combination discounts to the 
medicare program under title XVIII of the Social Security Act.
    (b) Contents of study.--
            (1) In general.--The Secretary, in consultation with health 
        care providers and manufacturers, shall specifically examine 
        the issues associated with the discounting or other reductions 
        in price (including reductions in price applied to combinations 
        of items or services or both, and reductions made available as 
        part of capitation, risk sharing, decrease management or 
        similar programs) obtained by a provider of services or other 
        entity under title XVIII of the Social Security Act or a State 
        health care program (as defined in section 1128(h) of such 
        Act).
            (2) Specific evaluation and identification.--The Secretary 
        shall evaluate the provision of discounts on the medicare 
        program under title XVIII of the Social Security Act and 
        specifically identify mechanisms to assure that the medicare 
        program benefits from such discounts.
    (c) Report.--Not later than 6 months after the date of the 
enactment of this Act, the Secretary shall report the findings of the 
study to the Committees on Finance and the Judiciary of the Senate and 
the Committees on Ways and Means, Commerce, and the Judiciary of the 
House of Representatives.
    (d) Regulations.--The Secretary shall develop regulations regarding 
the acceptability of such discounts based on the findings of the study 
described in this subsection. Such regulations shall not become 
effective unless such regulations are budget neutral.

SEC. 7117. EFFECTIVE DATE.

    The amendments made by this subchapter shall take effect January 1, 
1996.

       Subchapter C--Administrative and Miscellaneous Provisions

SEC. 7121. ESTABLISHMENT OF THE HEALTH CARE FRAUD AND ABUSE DATA 
              COLLECTION PROGRAM.

    (a) In General.--Title XI (42 U.S.C. 1301 et seq.), as amended by 
sections 7101 and 7103, is amended by inserting after section 1128D the 
following new section:

         ``health care fraud and abuse data collection program

    ``Sec. 1128E. (a) General Purpose.--Not later than January 1, 1996, 
the Secretary shall establish a national health care fraud and abuse 
data collection program for the reporting of final adverse actions (not 
including settlements in which no findings of liability have been made) 
against health care providers, suppliers, or practitioners as required 
by subsection (b), with access as set forth in subsection (c).
    ``(b) Reporting of Information.--
            ``(1) In general.--Each government agency and health plan 
        shall report any final adverse action (not including 
        settlements in which no findings of liability have been made) 
        taken against a health care provider, supplier, or 
        practitioner.
            ``(2) Information to be reported.--The information to be 
        reported under paragraph (1) includes:
                    ``(A) The name and TIN (as defined in section 
                7701(a)(41) of the Internal Revenue Code of 1986) of 
                any health care provider, supplier, or practitioner who 
                is the subject of a final adverse action.
                    ``(B) The name (if known) of any health care entity 
                with which a health care provider, supplier, or 
                practitioner is affiliated or associated.
                    ``(C) The nature of the final adverse action and 
                whether such action is on appeal.
                    ``(D) A description of the acts or omissions and 
                injuries upon which the final adverse action was based, 
                and such other information as the Secretary determines 
                by regulation is required for appropriate 
                interpretation of information reported under this 
                section.
            ``(3) Confidentiality.--In determining what information is 
        required, the Secretary shall include procedures to assure that 
        the privacy of individuals receiving health care services is 
        appropriately protected.
            ``(4) Timing and form of reporting.--The information 
        required to be reported under this subsection shall be reported 
        regularly (but not less often than monthly) and in such form 
        and manner as the Secretary prescribes. Such information shall 
        first be required to be reported on a date specified by the 
        Secretary.
            ``(5) To whom reported.--The information required to be 
        reported under this subsection shall be reported to the 
        Secretary.
    ``(c) Disclosure and Correction of Information.--
            ``(1) Disclosure.--With respect to the information about 
        final adverse actions (not including settlements in which no 
        findings of liability have been made) reported to the Secretary 
        under this section respecting a health care provider, supplier, 
        or practitioner, the Secretary shall, by regulation, provide 
        for--
                    ``(A) disclosure of the information, upon request, 
                to the health care provider, supplier, or licensed 
                practitioner, and
                    ``(B) procedures in the case of disputed accuracy 
                of the information.
            ``(2) Corrections.--Each Government agency and health plan 
        shall report corrections of information already reported about 
        any final adverse action taken against a health care provider, 
        supplier, or practitioner, in such form and manner that the 
        Secretary prescribes by regulation.
    ``(d) Access to Reported Information.--
            ``(1) Availability.--The information in this database shall 
        be available to Federal and State government agencies and 
        health plans pursuant to procedures that the Secretary shall 
        provide by regulation.
            ``(2) Fees for disclosure.--The Secretary may establish or 
        approve reasonable fees for the disclosure of information in 
        this database (other than with respect to requests by Federal 
        agencies). The amount of such a fee shall be sufficient to 
        recover the full costs of operating the database. Such fees 
        shall be available to the Secretary or, in the Secretary's 
        discretion to the agency designated under this section to cover 
        such costs.
    ``(e) Protection From Liability for Reporting.--No person or 
entity, including the agency designated by the Secretary in subsection 
(b)(5) shall be held liable in any civil action with respect to any 
report made as required by this section, without knowledge of the 
falsity of the information contained in the report.
    ``(f) Definitions and Special Rules.--For purposes of this section:
            ``(1) Final adverse action.--
                    ``(A) In general.--The term `final adverse action' 
                includes:
                            ``(i) Civil judgments against a health care 
                        provider, supplier, or practitioner in Federal 
                        or State court related to the delivery of a 
                        health care item or service.
                            ``(ii) Federal or State criminal 
                        convictions related to the delivery of a health 
                        care item or service.
                            ``(iii) Actions by Federal or State 
                        agencies responsible for the licensing and 
                        certification of health care providers, 
                        suppliers, and licensed health care 
                        practitioners, including--
                                    ``(I) formal or official actions, 
                                such as revocation or suspension of a 
                                license (and the length of any such 
                                suspension), reprimand, censure or 
                                probation,
                                    ``(II) any other loss of license or 
                                the right to apply for, or renew, a 
                                license of the provider, supplier, or 
                                practitioner, whether by operation of 
                                law, voluntary surrender, non-
                                renewability, or otherwise, or
                                    ``(III) any other negative action 
                                or finding by such Federal or State 
                                agency that is publicly available 
                                information.
                            ``(iv) Exclusion from participation in 
                        Federal or State health care programs.
                            ``(v) Any other adjudicated actions or 
                        decisions that the Secretary shall establish by 
                        regulation.
                    ``(B) Exception.--The term does not include any 
                action with respect to a malpractice claim.
            ``(2) Practitioner.--The terms `licensed health care 
        practitioner', `licensed practitioner', and `practitioner' 
        mean, with respect to a State, an individual who is licensed or 
        otherwise authorized by the State to provide health care 
        services (or any individual who, without authority holds 
        himself or herself out to be so licensed or authorized).
            ``(3) Health care provider.--The term `health care 
        provider' means a provider of services as defined in section 
        1861(u), and any entity, including a health maintenance 
        organization, group medical practice, or any other individual 
        or entity listed by the Secretary in regulation, that provides 
        health care services.
            ``(4) Supplier.--The term `supplier' means a supplier of 
        health care items and services described in subsections (a) and 
        (b) of section 1819 and section 1861.
            ``(5) Government agency.--The term `Government agency' 
        shall include:
                    ``(A) The Department of Justice.
                    ``(B) The Department of Health and Human Services.
                    ``(C) Any other Federal agency that either 
                administers or provides payment for the delivery of 
                health care services, including, but not limited to the 
                Department of Defense and the Veterans' Administration.
                    ``(D) State law enforcement agencies.
                    ``(E) State medicaid fraud control units.
                    ``(F) Federal or State agencies responsible for the 
                licensing and certification of health care providers 
                and licensed health care practitioners.
            ``(6) Health plan.--The term `health plan' has the meaning 
        given such term by section 1128C(c).
            ``(7) Determination of conviction.--For purposes of 
        paragraph (1), the existence of a conviction shall be 
        determined under paragraph (4) of section 1128(j).''.
    (b) Improved Prevention in Issuance of Medicare Provider Numbers.--
Section 1842(r) (42 U.S.C. 1395u(r)) is amended by adding at the end 
the following new sentence: ``Under such system, the Secretary may 
impose appropriate fees on such physicians to cover the costs of 
investigation and recertification activities with respect to the 
issuance of the identifiers.''.

SEC. 7122. ELIMINATION OF REASONABLE COST REIMBURSEMENT FOR CERTAIN 
              LEGAL FEES.

    Section 1861(v)(1)(R) (42 U.S.C. 1395x(v)(1)(R)) is amended by 
striking ``section 1869(b)'' and inserting ``section 1869(a) or (b)''.

                 Subchapter D--Civil Monetary Penalties

SEC. 7131. SOCIAL SECURITY ACT CIVIL MONETARY PENALTIES.

    (a) General Civil Monetary Penalties.--Section 1128A (42 U.S.C. 
1320a-7a) is amended as follows:
            (1) In the third sentence of subsection (a), by striking 
        ``programs under title XVIII'' and inserting ``Federal health 
        care programs (as defined in section 1128B(f)(1))''.
            (2) In subsection (f)--
                    (A) by redesignating paragraph (3) as paragraph 
                (4); and
                    (B) by inserting after paragraph (2) the following 
                new paragraph:
            ``(3) With respect to amounts recovered arising out of a 
        claim under a Federal health care program (as defined in 
        section 1128B(f)), the portion of such amounts as is determined 
        to have been paid by the program shall be repaid to the 
        program, and the portion of such amounts attributable to the 
        amounts recovered under this section by reason of the 
        amendments made by the Health Care Fraud and Abuse Prevention 
        Act of 1995 (as estimated by the Secretary) shall be deposited 
        into the Federal Hospital Insurance Trust Fund pursuant to 
        section 1817(k)(2)(C).''.
            (3) In subsection (i)--
                    (A) in paragraph (2), by striking ``title V, XVIII, 
                XIX, or XX of this Act'' and inserting ``a Federal 
                health care program (as defined in section 1128B(f))'',
                    (B) in paragraph (4), by striking ``a health 
                insurance or medical services program under title XVIII 
                or XIX of this Act'' and inserting ``a Federal health 
                care program (as so defined)'', and
                    (C) in paragraph (5), by striking ``title V, XVIII, 
                XIX, or XX'' and inserting ``a Federal health care 
                program (as so defined)''.
            (4) By adding at the end the following new subsection:
    ``(m)(1) For purposes of this section, with respect to a Federal 
health care program not contained in this Act, references to the 
Secretary in this section shall be deemed to be references to the 
Secretary or Administrator of the department or agency with 
jurisdiction over such program and references to the Inspector General 
of the Department of Health and Human Services in this section shall be 
deemed to be references to the Inspector General of the applicable 
department or agency.
    ``(2)(A) The Secretary and Administrator of the departments and 
agencies referred to in paragraph (1) may include in any action 
pursuant to this section, claims within the jurisdiction of other 
Federal departments or agencies as long as the following conditions are 
satisfied:
            ``(i) The case involves primarily claims submitted to the 
        Federal health care programs of the department or agency 
        initiating the action.
            ``(ii) The Secretary or Administrator of the department or 
        agency initiating the action gives notice and an opportunity to 
        participate in the investigation to the Inspector General of 
        the department or agency with primary jurisdiction over the 
        Federal health care programs to which the claims were 
        submitted.
    ``(B) If the conditions specified in subparagraph (A) are 
fulfilled, the Inspector General of the department or agency initiating 
the action is authorized to exercise all powers granted under the 
Inspector General Act of 1978 with respect to the claims submitted to 
the other departments or agencies to the same manner and extent as 
provided in that Act with respect to claims submitted to such 
departments or agencies.''.
    (b) Excluded Individual Retaining Ownership or Control Interest in 
Participating Entity.--Section 1128A(a) (42 U.S.C. 1320a-7a(a)) is 
amended--
            (1) by striking ``or'' at the end of paragraph (1)(D);
            (2) by striking ``, or'' at the end of paragraph (2) and 
        inserting a semicolon;
            (3) by striking the semicolon at the end of paragraph (3) 
        and inserting ``; or''; and
            (4) by inserting after paragraph (3) the following new 
        paragraph:
            ``(4) in the case of a person who is not an organization, 
        agency, or other entity, is excluded from participating in a 
        program under title XVIII or a State health care program in 
        accordance with this subsection or under section 1128 and who, 
        at the time of a violation of this subsection, retains a direct 
        or indirect ownership or control interest of 5 percent or more, 
        or an ownership or control interest (as defined in section 
        1124(a)(3)) in, or who is an officer or managing employee (as 
        defined in section 1126(b)) of, an entity that is participating 
        in a program under title XVIII or a State health care 
        program;''.
    (c) Modifications of Amounts of Penalties and Assessments.--Section 
1128A(a) (42 U.S.C. 1320a-7a(a)), as amended by subsection (b), is 
amended in the matter following paragraph (4)--
            (1) by striking ``$2,000'' and inserting ``$10,000'';
            (2) by inserting ``; in cases under paragraph (4), $10,000 
        for each day the prohibited relationship occurs'' after ``false 
        or misleading information was given''; and
            (3) by striking ``twice the amount'' and inserting ``3 
        times the amount''.
    (d) Claim for Item or Service Based on Incorrect Coding or 
Medically Unnecessary Services.--Section 1128A(a)(1) (42 U.S.C. 1320a-
7a(a)(1)) is amended--
            (1) in subparagraph (A) by striking ``claimed,'' and 
        inserting ``claimed, including any person who engages in a 
        pattern or practice of presenting or causing to be presented a 
        claim for an item or service that is based on a code that the 
        person knows or has reason to know will result in a greater 
        payment to the person than the code the person knows or has 
        reason to know is applicable to the item or service actually 
        provided,'';
            (2) in subparagraph (C), by striking ``or'' at the end;
            (3) in subparagraph (D), by striking ``; or'' and inserting 
        ``, or''; and
            (4) by inserting after subparagraph (D) the following new 
        subparagraph:
                    ``(E) is for a medical or other item or service 
                that a person knows or has reason to know is not 
                medically necessary; or''.
    (e) Permitting Secretary To Impose Civil Monetary Penalty.--Section 
1128A(b) (42 U.S.C. 1320a-7a(a)) is amended by adding the following new 
paragraph:
            ``(3) Any person (including any organization, agency, or 
        other entity, but excluding a beneficiary as defined in 
        subsection (i)(5)) who the Secretary determines has violated 
        section 1128B(b) of this title shall be subject to a civil 
        monetary penalty of not more than $10,000 for each such 
        violation. In addition, such person shall be subject to an 
        assessment of not more than twice the total amount of the 
        remuneration offered, paid, solicited, or received in violation 
        of section 1128B(b). The total amount of remuneration subject 
        to an assessment shall be calculated without regard to whether 
        some portion thereof also may have been intended to serve a 
        purpose other than one proscribed by section 1128B(b).''.
    (f) Sanctions Against Practitioners and Persons for Failure To 
Comply With Statutory Obligations.--Section 1156(b)(3) (42 U.S.C. 
1320c-5(b)(3)) is amended by striking ``the actual or estimated cost'' 
and inserting ``up to $10,000 for each instance''.
    (g) Procedural Provisions.--Section 1876(i)(6) (42 U.S.C. 
1395mm(i)(6)), as amended by section 7115(a)(2), is amended by adding 
at the end the following new subparagraph:
    ``(D) The provisions of section 1128A (other than subsections (a) 
and (b)) shall apply to a civil money penalty under subparagraph (B)(i) 
or (C)(i) in the same manner as such provisions apply to a civil money 
penalty or proceeding under section 1128A(a).''.
    (h) Prohibition Against Offering Inducements to Individuals 
Enrolled Under Programs or Plans.--
            (1) Offer of remuneration.--Section 1128A(a) (42 U.S.C. 
        1320a-7a(a)) is amended--
                    (A) by striking ``or'' at the end of paragraph 
                (1)(D);
                    (B) by striking ``, or'' at the end of paragraph 
                (2) and inserting a semicolon;
                    (C) by striking the semicolon at the end of 
                paragraph (3) and inserting ``; or''; and
                    (D) by inserting after paragraph (3) the following 
                new paragraph:
            ``(4) offers to or transfers remuneration to any individual 
        eligible for benefits under title XVIII of this Act, or under a 
        State health care program (as defined in section 1128(h)) that 
        such person knows or should know is likely to influence such 
        individual to order or receive from a particular provider, 
        practitioner, or supplier any item or service for which payment 
        may be made, in whole or in part, under title XVIII, or a State 
        health care program;''.
            (2) Remuneration defined.--Section 1128A(i) (42 U.S.C. 
        1320a-7a(i)) is amended by adding the following new paragraph:
            ``(6) The term `remuneration' includes the waiver of 
        coinsurance and deductible amounts (or any part thereof), and 
        transfers of items or services for free or for other than fair 
        market value. The term `remuneration' does not include--
                    ``(A) the waiver of coinsurance and deductible 
                amounts by a person, if--
                            ``(i) the waiver is not offered as part of 
                        any advertisement or solicitation;
                            ``(ii) the person does not routinely waive 
                        coinsurance or deductible amounts; and
                            ``(iii) the person--
                                    ``(I) waives the coinsurance and 
                                deductible amounts after determining in 
                                good faith that the individual is in 
                                financial need;
                                    ``(II) fails to collect coinsurance 
                                or deductible amounts after making 
                                reasonable collection efforts; or
                                    ``(III) provides for any 
                                permissible waiver as specified in 
                                section 1128B(b)(3) or in regulations 
                                issued by the Secretary;
                    ``(B) differentials in coinsurance and deductible 
                amounts as part of a benefit plan design as long as the 
                differentials have been disclosed in writing to all 
                beneficiaries, third party payers, and providers, to 
                whom claims are presented and as long as the 
                differentials meet the standards as defined in 
                regulations promulgated by the Secretary not later than 
                180 days after the date of the enactment of the Health 
                Care Fraud and Abuse Prevention Act of 1995; or
                    ``(C) incentives given to individuals to promote 
                the delivery of preventive care as determined by the 
                Secretary in regulations so promulgated.''.
    (i) Effective Date.--The amendments made by this section shall take 
effect January 1, 1996.

                Subchapter E--Amendments to Criminal Law

SEC. 7141. HEALTH CARE FRAUD.

    (a) In General.--
            (1)  Fines and imprisonment for health care fraud 
        violations.--Chapter 63 of title 18, United States Code, is 
        amended by adding at the end the following new section:
``Sec. 1347. Health care fraud
    ``(a) Whoever knowingly and willfully executes, or attempts to 
execute, a scheme or artifice--
            ``(1) to defraud any health plan or other person, in 
        connection with the delivery of or payment for health care 
        benefits, items, or services; or
            ``(2) to obtain, by means of false or fraudulent pretenses, 
        representations, or promises, any of the money or property 
        owned by, or under the custody or control of, any health plan, 
        or person in connection with the delivery of or payment for 
        health care benefits, items, or services;
shall be fined under this title or imprisoned not more than 10 years, 
or both. If the violation results in serious bodily injury (as defined 
in section 1365(g)(3) of this title), such person may be imprisoned for 
any term of years.
    ``(b) For purposes of this section, the term `health plan' has the 
same meaning given such term in section 1128C(c) of the Social Security 
Act.''.
            (2) Clerical amendment.--The table of sections at the 
        beginning of chapter 63 of title 18, United States Code, is 
        amended by adding at the end the following:

``1347. Health care fraud.''.
    (b) Criminal Fines Deposited in Federal Hospital Insurance Trust 
Fund.--The Secretary of the Treasury shall deposit into the Federal 
Hospital Insurance Trust Fund pursuant to section 1817(k)(2)(C) of the 
Social Security Act, as added by section 7101(b), an amount equal to 
the criminal fines imposed under section 1347 of title 18, United 
States Code (relating to health care fraud).

SEC. 7142. FORFEITURES FOR FEDERAL HEALTH CARE OFFENSES.

    (a) In General.--Section 982(a) of title 18, United States Code, is 
amended by adding after paragraph (5) the following new paragraph:
    ``(6)(A) The court, in imposing sentence on a person convicted of a 
Federal health care offense, shall order the person to forfeit 
property, real or personal, that constitutes or is derived, directly or 
indirectly, from gross proceeds traceable to the commission of the 
offense.
    ``(B) For purposes of this paragraph, the term `Federal health care 
offense' means a violation of, or a criminal conspiracy to violate--
            ``(i) section 1347 of this title;
            ``(ii) section 1128B of the Social Security Act; and
            ``(iii) sections 287, 371, 664, 666, 669, 1001, 1027, 1341, 
        1343, 1920, or 1954 of this title if the violation or 
        conspiracy relates to health care fraud.''.
    (b) Conforming Amendment.--Section 982(b)(1)(A) of title 18, United 
States Code, is amended by inserting ``or (a)(6)'' after ``(a)(1)''.
    (c) Property Forfeited Deposited in Federal Hospital Insurance 
Trust Fund.--
            (1) In general.--After the payment of the costs of asset 
        forfeiture has been made, and notwithstanding any other 
        provision of law, the Secretary of the Treasury shall deposit 
        into the Federal Hospital Insurance Trust Fund pursuant to 
        section 1817(k)(2)(C) of the Social Security Act, as added by 
        section 7101(b), an amount equal to the net amount realized 
        from the forfeiture of property by reason of a Federal health 
        care offense pursuant to section 982(a)(6) of title 18, United 
        States Code.
            (2) Costs of asset forfeiture.--For purposes of paragraph 
        (1), the term ``payment of the costs of asset forfeiture'' 
        means--
                    (A) the payment, at the discretion of the Attorney 
                General, of any expenses necessary to seize, detain, 
                inventory, safeguard, maintain, advertise, sell, or 
                dispose of property under seizure, detention, or 
                forfeited, or of any other necessary expenses incident 
                to the seizure, detention, forfeiture, or disposal of 
                such property, including payment for--
                            (i) contract services,
                            (ii) the employment of outside contractors 
                        to operate and manage properties or provide 
                        other specialized services necessary to dispose 
                        of such properties in an effort to maximize the 
                        return from such properties; and
                            (iii) reimbursement of any Federal, State, 
                        or local agency for any expenditures made to 
                        perform the functions described in this 
                        subparagraph;
                    (B) at the discretion of the Attorney General, the 
                payment of awards for information or assistance leading 
                to a civil or criminal forfeiture involving any Federal 
                agency participating in the Health Care Fraud and Abuse 
                Control Account;
                    (C) the compromise and payment of valid liens and 
                mortgages against property that has been forfeited, 
                subject to the discretion of the Attorney General to 
                determine the validity of any such lien or mortgage and 
                the amount of payment to be made, and the employment of 
                attorneys and other personnel skilled in State real 
                estate law as necessary;
                    (D) payment authorized in connection with remission 
                or mitigation procedures relating to property 
                forfeited; and
                    (E) the payment of State and local property taxes 
                on forfeited real property that accrued between the 
                date of the violation giving rise to the forfeiture and 
                the date of the forfeiture order.

SEC. 7143. INJUNCTIVE RELIEF RELATING TO FEDERAL HEALTH CARE OFFENSES.

    (a) In General.--Section 1345(a)(1) of title 18, United States 
Code, is amended--
            (1) by striking ``or'' at the end of subparagraph (A);
            (2) by inserting ``or'' at the end of subparagraph (B); and
            (3) by adding at the end the following new subparagraph:
                    ``(C) committing or about to commit a Federal 
                health care offense (as defined in section 982(a)(6)(B) 
                of this title);''.
    (b) Freezing of Assets.--Section 1345(a)(2) of title 18, United 
States Code, is amended by inserting ``or a Federal health care offense 
(as defined in section 982(a)(6)(B))'' after ``title)''.

SEC. 7144. GRAND JURY DISCLOSURE.

    Section 3322 of title 18, United States Code, is amended--
            (1) by redesignating subsections (c) and (d) as subsections 
        (d) and (e), respectively; and
            (2) by inserting after subsection (b) the following new 
        subsection:
    ``(c) A person who is privy to grand jury information concerning a 
Federal health care offense (as defined in section 982(a)(6)(B))--
            ``(1) received in the course of duty as an attorney for the 
        Government; or
            ``(2) disclosed under rule 6(e)(3)(A)(ii) of the Federal 
        Rules of Criminal Procedure;
may disclose that information to an attorney for the Government to use 
in any investigation or civil proceeding relating to health care 
fraud.''.

SEC. 7145. FALSE STATEMENTS.

    (a) In General.--Chapter 47 of title 18, United States Code, is 
amended by adding at the end the following new section:
``Sec. 1033. False statements relating to health care matters
    ``(a) Whoever, in any matter involving a health plan, knowingly and 
willfully falsifies, conceals, or covers up by any trick, scheme, or 
device a material fact, or makes any false, fictitious, or fraudulent 
statements or representations, or makes or uses any false writing or 
document knowing the same to contain any false, fictitious, or 
fraudulent statement or entry, shall be fined under this title or 
imprisoned not more than 5 years, or both.
    ``(b) For purposes of this section, the term `health plan' has the 
same meaning given such term in section 1128C(c) of the Social Security 
Act.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 47 of title 18, United States Code, in amended by adding at the 
end the following:

``1033. False statements relating to health care matters.''.

SEC. 7146. OBSTRUCTION OF CRIMINAL INVESTIGATIONS OF FEDERAL HEALTH 
              CARE OFFENSES.

    (a) In General.--Chapter 73 of title 18, United States Code, is 
amended by adding at the end the following new section:
``Sec. 1518. Obstruction of criminal investigations of Federal health 
              care offenses
    ``(a) Whoever willfully prevents, obstructs, misleads, delays or 
attempts to prevent, obstruct, mislead, or delay the communication of 
information or records relating to a Federal health care offense to a 
criminal investigator shall be fined under this title or imprisoned not 
more than 5 years, or both.
    ``(b) As used in this section the term `Federal health care 
offense' has the same meaning given such term in section 982(a)(6)(B) 
of this title.
    ``(c) As used in this section the term `criminal investigator' 
means any individual duly authorized by a department, agency, or armed 
force of the United States to conduct or engage in investigations for 
prosecutions for violations of health care offenses.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 73 of title 18, United States Code, is amended by adding at the 
end the following:

``1518. Obstruction of Criminal Investigations of Federal Health Care 
                            Offenses.''.

SEC. 7147. THEFT OR EMBEZZLEMENT.

    (a) In General.--Chapter 31 of title 18, United States Code, is 
amended by adding at the end the following new section:
``Sec. 669. Theft or embezzlement in connection with health care
    ``(a) Whoever willfully embezzles, steals, or otherwise willfully 
and unlawfully converts to the use of any person other than the 
rightful owner, or intentionally misapplies any of the moneys, funds, 
securities, premiums, credits, property, or other assets of a health 
plan, shall be fined under this title or imprisoned not more than 10 
years, or both.
    ``(b) As used in this section the term `health plan' has the same 
meaning given such term in section 1128C(c) of the Social Security 
Act.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 31 of title 18, United States Code, is amended by adding at the 
end the following:

``669. Theft or Embezzlement in Connection with Health Care.''.

SEC. 7148. LAUNDERING OF MONETARY INSTRUMENTS.

    Section 1956(c)(7) of title 18, United States Code, is amended by 
adding at the end the following new subparagraph:
                    ``(F) Any act or activity constituting an offense 
                involving a Federal health care offense as that term is 
                defined in section 982(a)(6)(B) of this title.''.

SEC. 7149. AUTHORIZED INVESTIGATIVE DEMAND PROCEDURES.

    (a) In General.--Chapter 233 of title 18, United States Code, is 
amended by adding after section 3485 the following new section:
``Sec. 3486. Authorized investigative demand procedures
    ``(a)(1)(A) In any investigation relating to functions set forth in 
paragraph (2), the Attorney General or designee may issue in writing 
and cause to be served a subpoena compelling production of any records 
(including any books, papers, documents, electronic media, or other 
objects or tangible things), which may be relevant to an authorized law 
enforcement inquiry, that a person or legal entity may possess or have 
care, custody, or control.
    ``(B) A custodian of records may be required to give testimony 
concerning the production and authentication of such records.
    ``(C) The production of records may be required from any place in 
any State or in any territory or other place subject to the 
jurisdiction of the United States at any designated place; except that 
such production shall not be required more than 500 miles distant from 
the place where the subpoena is served.
    ``(D) Witnesses summoned under this section shall be paid the same 
fees and mileage that are paid witnesses in the courts of the United 
States.
    ``(E) A subpoena requiring the production of records shall describe 
the objects required to be produced and prescribe a return date within 
a reasonable period of time within which the objects can be assembled 
and made available.
    ``(2) Investigative demands utilizing an administrative subpoena 
are authorized for any investigation with respect to any act or 
activity constituting or involving health care fraud, including a 
scheme or artifice--
            ``(A) to defraud any health plan or other person, in 
        connection with the delivery of or payment for health care 
        benefits, items, or services; or
            ``(B) to obtain, by means of false or fraudulent pretenses, 
        representations, or promises, any of the money or property 
        owned by, or under the custody or control or, any health plan, 
        or person in connection with the delivery of or payment for 
        health care benefits, items, or services.
    ``(b)(1) A subpoena issued under this section may be served by any 
person designated in the subpoena to serve it.
    ``(2) Service upon a natural person may be made by personal 
delivery of the subpoena to such person.
    ``(3) Service may be made upon a domestic or foreign association 
which is subject to suit under a common name, by delivering the 
subpoena to an officer, to a managing or general agent, or to any other 
agent authorized by appointment or by law to receive service of 
process.
    ``(4) The affidavit of the person serving the subpoena entered on a 
true copy thereof by the person serving it shall be proof of service.
    ``(c)(1) In the case of contumacy by or refusal to obey a subpoena 
issued to any person, the Attorney General may invoke the aid of any 
court of the United States within the jurisdiction of which the 
investigation is carried on or of which the subpoenaed person is an 
inhabitant, or in which such person carries on business or may be 
found, to compel compliance with the subpoena.
    ``(2) The court may issue an order requiring the subpoenaed person 
to appear before the Attorney General to produce records, if so 
ordered, or to give testimony required under subsection (a)(1)(B).
    ``(3) Any failure to obey the order of the court may be punished by 
the court as a contempt thereof.
    ``(4) All process in any such case may be served in any judicial 
district in which such person may be found.
    ``(d) Notwithstanding any Federal, State, or local law, any person, 
including officers, agents, and employees, receiving a subpoena under 
this section, who complies in good faith with the subpoena and thus 
produces the materials sought, shall not be liable in any court of any 
State or the United States to any customer or other person for such 
production or for nondisclosure of that production to the customer.
    ``(e)(1) Health information about an individual that is disclosed 
under this section may not be used in, or disclosed to any person for 
use in, any administrative, civil, or criminal action or investigation 
directed against the individual who is the subject of the information 
unless the action or investigation arises out of and is directly 
related to receipt of health care or payment for health care or action 
involving a fraudulent claim related to health; or if authorized by an 
appropriate order of a court of competent jurisdiction, granted after 
application showing good cause therefore.
    ``(2) In assessing good cause, the court shall weigh the public 
interest and the need for disclosure against the injury to the patient, 
to the physician-patient relationship, and to the treatment services.
    ``(3) Upon the granting of such order, the court, in determining 
the extent to which any disclosure of all or any part of any record is 
necessary, shall impose appropriate safeguards against unauthorized 
disclosure.
    ``(f) As used in this section the term `health plan' has the same 
meaning given such term in section 1128C(c) of the Social Security 
Act.''.
    (b) Clerical Amendment.--The table of sections for chapter 223 of 
title 18, United States Code, is amended by inserting after the item 
relating to section 3405 the following new item:
``Sec. 3486. Authorized investigative demand procedures''.
    (c) Conforming Amendment.--Section 1510(b)(3)(B) of title 18, 
United States Code, is amended by inserting ``or a Department of 
Justice subpoena (issued under section 3486),'' after ``subpoena''.

          Subchapter F--State Health Care Fraud Control Units

SEC. 7151. STATE HEALTH CARE FRAUD CONTROL UNITS.

    (a) Extension of Concurrent Authority To Investigate and Prosecute 
Fraud in Other Federal Programs.--Paragraph (3) of section 2134(b), as 
added by section 7191(a) of this Act, is amended--
            (1) by inserting ``(A)'' after ``in connection with''; and
            (2) by striking ``plan.'' and inserting ``plan; and (B) 
        upon the approval of the relevant Federal agency, any aspect of 
        the provision of health care services and activities of 
        providers of such services under any Federal health care 
        program (as defined in section 1128B(f)(1)).''.
    (b) Extension of Authority To Investigate and Prosecute Patient 
Abuse in Non-Medicaid Board and Care Facilities.--Paragraph (4) of 
section 2134(b), as added by section 7191(a) of this Act, is amended to 
read as follows:
            ``(4)(A) The entity has--
                    ``(i) procedures for reviewing complaints of abuse 
                or neglect of patients in health care facilities which 
                receive payments under the medicaid plan under this 
                title;
                    ``(ii) at the option of the entity, procedures for 
                reviewing complaints of abuse or neglect of patients 
                residing in board and care facilities; and
                    ``(iii) where appropriate, procedures for acting 
                upon such complaints under the criminal laws of the 
                State or for referring such complaints to other State 
                agencies for action.
            ``(B) For purposes of this paragraph, the term `board and 
        care facility' means a residential setting which receives 
        payment from or on behalf of two or more unrelated adults who 
        reside in such facility, and for whom one or both of the 
        following is provided:
                    ``(i) Nursing care services provided by, or under 
                the supervision of, a registered nurse, licensed 
                practical nurse, or licensed nursing assistant.
                    ``(ii) Personal care services that assist residents 
                with the activities of daily living, including personal 
                hygiene, dressing, bathing, eating, toileting, 
                ambulation, transfer, positioning, self-medication, 
                body care, travel to medical services, essential 
                shopping, meal preparation, laundry, and housework.''.

SEC. 7152. BENEFICIARY INCENTIVE PROGRAMS.

    (a) Program to Collect Information on Fraud and Abuse.--
            (1) Establishment of program.--Not later than 3 months 
        after the date of the enactment of this Act, the Secretary of 
        Health and Human Services (hereinafter in this section referred 
        to as the ``Secretary'') shall establish a program under which 
        the Secretary shall encourage individuals to report to the 
        Secretary information on individuals and entities who are 
        engaging or who have engaged in acts or omissions which 
        constitute grounds for the imposition of a sanction under 
        section 1128, section 1128A, or section 1128B of the Social 
        Security Act, or who have otherwise engaged in fraud and abuse 
        against the medicare program for which there is a sanction 
        provided under law. The program shall discourage provision of, 
        and not consider, information which is frivolous or otherwise 
        not relevant or material to the imposition of such a sanction.
            (2) Payment of portion of amounts collected.--If an 
        individual reports information to the Secretary under the 
        program established under paragraph (1) which serves as the 
        basis for the collection by the Secretary or the Attorney 
        General of any amount of at least $100 (other than any amount 
        paid as a penalty under section 1128B of the Social Security 
        Act), the Secretary may pay a portion of the amount collected 
        to the individual (under procedures similar to those applicable 
        under section 7623 of the Internal Revenue Code of 1986 to 
        payments to individuals providing information on violations of 
        such Code).
    (b) Program to Collect Information on Program Efficiency.--
            (1) Establishment of program.--Not later than 3 months 
        after the date of the enactment of this Act, the Secretary 
        shall establish a program under which the Secretary shall 
        encourage individuals to submit to the Secretary suggestions on 
        methods to improve the efficiency of the medicare program.
            (2) Payment of portion of program savings.--If an 
        individual submits a suggestion to the Secretary under the 
        program established under paragraph (1) which is adopted by the 
        Secretary and which results in savings to the program, the 
        Secretary may make a payment to the individual of such amount 
        as the Secretary considers appropriate.

          CHAPTER 7--OTHER PROVISIONS FOR TRUST FUND SOLVENCY

SEC. 7171. NONDISCHARGEABILITY OF CERTAIN MEDICARE DEBTS.

    Section 523(a) of title 11, United States Code, is amended--
            (1) by striking ``; or'' at the end of paragraph (12);
            (2) by inserting ``or'' at the end of paragraph (15)(B);
            (3) by striking the period at the end of paragraph (16) and 
        inserting ``or''; and
            (4) by adding at the end the following new paragraph:
            ``(17) for an overpayment to a provider or supplier made 
        from the Federal Hospital Insurance Trust Fund or the Federal 
        Supplementary Medical Insurance Trust Fund.''.

SEC. 7172. TRANSFERS OF CERTAIN PART B SAVINGS TO HOSPITAL INSURANCE 
              TRUST FUND.

    Section 1841 (42 U.S.C. 1395t) is amended by adding at the end the 
following new subsection:
    ``(j) There are hereby appropriated for each fiscal year to the 
Federal Hospital Insurance Trust Fund amounts equal to the estimated 
savings to the general fund of the Treasury for such year resulting 
from the amendments made by sections 7051 (relating to the part B 
deductible), 7052 (relating to the part B premium), and 7053 (relating 
to the part B premium for high-income individuals) of the Balanced 
Budget Reconciliation Act of 1995. The Secretary of the Treasury shall 
from time to time transfer from the general fund of the Treasury to the 
Federal Hospital Insurance Trust Fund amounts equal to such estimated 
savings in the form of public-debt obligations issued exclusively to 
the Federal Hospital Insurance Trust Fund.''.

           Subtitle B--Transformation of the Medicaid Program

SEC. 7190. SHORT TITLE.

    This subtitle may be cited as the ``Medicaid Transformation Act of 
1995''.

SEC. 7191. TRANSFORMATION OF MEDICAID PROGRAM.

    (a) In General.--The Social Security Act is amended by adding at 
the end the following new title:

 ``TITLE XXI--MEDICAID PROGRAM FOR LOW-INCOME INDIVIDUALS AND FAMILIES

                      ``table of contents of title

        ``Sec. 2100. Purpose; State medicaid plans.

     ``Part A--Objectives, Goals, and Performance Under State Plans

        ``Sec. 2101. Description of strategic objectives and 
                            performance goals.
        ``Sec. 2102. Annual reports.
        ``Sec. 2103. Periodic, independent evaluations.
        ``Sec. 2104. Description of process for medicaid plan 
                            development.
        ``Sec. 2105. Consultation in medicaid plan development.

            ``Part B--Eligibility, Benefits, and Set-asides

        ``Sec. 2111. Eligibility and benefits.
        ``Sec. 2112. Set-asides of funds for population groups.
        ``Sec. 2113. Premiums and cost-sharing.
        ``Sec. 2114. Description of process for developing capitation 
                            payment rates.
        ``Sec. 2115. Construction.
        ``Sec. 2116. Treatment of income and resources for certain 
                            institutionalized spouses.

                      ``Part C--Payments to States

        ``Sec. 2121. Allotment of funds among States.
        ``Sec. 2122. Payments to States.
        ``Sec. 2123. Limitation on use of funds; disallowance.
        ``Sec. 2124. Grant program for community health centers and 
                            rural health clinics.

                ``Part D--Program Integrity and Quality

        ``Sec. 2131. Use of audits to achieve fiscal integrity.
        ``Sec. 2132. Fraud prevention program.
        ``Sec. 2133. Information concerning sanctions taken by State 
                            licensing authorities against health care 
                            practitioners and providers.
        ``Sec. 2134. State medicaid fraud control units.
        ``Sec. 2135. Recoveries from third parties and others.
        ``Sec. 2136. Assignment of rights of payment.
        ``Sec. 2137. Requirements for nursing facilities.
        ``Sec. 2138. Other provisions promoting program integrity.

        ``Part E--Establishment and Amendment of Medicaid Plans

        ``Sec. 2151. Submittal and approval of medicaid plans.
        ``Sec. 2152. Submittal and approval of plan amendments.
        ``Sec. 2153. Sanctions for substantial noncompliance.
        ``Sec. 2154. Secretarial authority.

                      ``Part F--General Provisions

        ``Sec. 2171. Definitions.
        ``Sec. 2172. Treatment of territories.
        ``Sec. 2173. Description of treatment of Indian health 
                            programs.
        ``Sec. 2174. Application of certain general provisions.

``SEC. 2100. PURPOSE; STATE MEDICAID PLANS.

    ``(a) Purpose.--The purpose of this title is to provide funds to 
States to enable them to provide medical assistance to low-income 
individuals and families in a more effective, efficient, and responsive 
manner.
    ``(b) State Plan Required.--A State is not eligible for payment 
under section 2122 of this title unless the State has submitted to the 
Secretary under part E a plan (in this title referred to as a `medicaid 
plan') that--
            ``(1) sets forth how the State intends to use the funds 
        provided under this title to provide medical assistance to 
        needy individuals and families consistent with the provisions 
        of this title; and
            ``(2) is approved under such part.
    ``(c) Continued Approval.--An approved medicaid plan shall continue 
in effect unless and until--
            ``(1) the State amends the plan under section 2152;
            ``(2) the State terminates participation under this title; 
        or
            ``(3) the Secretary finds substantial noncompliance of the 
        plan with the requirements of this title under section 2153.
    ``(d) State Entitlement.--This title constitutes budget authority 
in advance of appropriations Acts, and represents the obligation of the 
Federal Government to provide for the payment to States of amounts 
provided under part C.

     ``Part A--Objectives, Goals, and Performance Under State Plans

``SEC. 2101. DESCRIPTION OF STRATEGIC OBJECTIVES AND PERFORMANCE GOALS.

    ``(a) Description.--A medicaid plan shall include a description of 
the strategic objectives and performance goals the State has 
established for providing health care services to low-income 
populations under this title, including a general description of the 
manner in which the plan is designed to meet these objectives and 
goals.
    ``(b) Certain Objectives and Goals Required.--A medicaid plan shall 
include strategic objectives and performance goals relating to--
            ``(1) rates of childhood immunizations;
            ``(2) reductions in infant mortality and morbidity; and
            ``(3) standards of care and access to services for children 
        with special health care needs as defined by the State.
    ``(c) Considerations.--In specifying these objectives and goals the 
State may consider factors such as the following:
            ``(1) The State's priorities with respect to providing 
        assistance to low-income populations.
            ``(2) The State's priorities with respect to the general 
        public health and the health status of individuals eligible for 
        assistance under the medicaid plan.
            ``(3) The State's financial resources, the particular 
        economic conditions in the State, and relative adequacy of the 
        health care infrastructure in different regions of the State.
    ``(d) Performance Measures.--To the extent practicable--
            ``(1) one or more performance goals shall be established by 
        the State for each strategic objective identified in the 
        medicaid plan; and
            ``(2) the medicaid plan shall describe how program 
        performance will be--
                    ``(A) measured through objective, independently 
                verifiable means, and
                    ``(B) compared against performance goals, in order 
                to determine the State's performance under this title.
    ``(e) Period Covered.--
            ``(1) Strategic objectives.--The strategic objectives shall 
        cover a period of not less than 5 years and shall be updated 
        and revised at least every 3 years.
            ``(2) Performance goals.--The performance goals shall be 
        established for dates that are not more than 3 years apart.

``SEC. 2102. ANNUAL REPORTS.

    ``(a) In General.--In the case of a State with a medicaid plan that 
is in effect for part or all of a fiscal year, no later than March 31 
following such fiscal year (or March 31, 1998, in the case of fiscal 
year 1996) the State shall prepare and submit to the Secretary and the 
Congress a report on program activities and performance under this 
title for such fiscal year.
    ``(b) Contents.--Each annual report under this section for a fiscal 
year shall include the following:
            ``(1) Expenditure and beneficiary summary.--
                    ``(A) Initial summary.--For the report for fiscal 
                year 1997 (and, if applicable, fiscal year 1996), a 
                summary of all expenditures under the medicaid plan 
                during the fiscal year (and during any portions of 
                fiscal year 1996 during which the medicaid plan was in 
                effect under this title) as follows:
                            ``(i) Aggregate medical assistance 
                        expenditures, disaggregated to the extent 
                        required to determine compliance with the set-
                        aside requirements of subsections (a) through 
                        (c) of section 2112 and to compute the case mix 
                        index under section 2121(d)(3).
                            ``(ii) For each general category of 
                        eligible individuals specified in subsection 
                        (c)(1), aggregate medical assistance 
                        expenditures and the total and average number 
                        of eligible individuals under the medicaid 
                        plan.
                            ``(iii) By each general category of 
                        eligible individuals, total expenditures for 
                        each of the categories of health care items and 
                        services specified in subsection (c)(2) which 
                        are covered under the medicaid plan and 
                        provided on a fee-for-service basis.
                            ``(iv) By each general category of eligible 
                        individuals, total expenditures for payments to 
                        capitated health care organizations (as defined 
                        in section 2114(c)(1)).
                            ``(v) Total administrative expenditures.
                    ``(B) Subsequent summaries.--For reports for each 
                succeeding fiscal year, a summary of--
                            ``(i) all expenditures under the medicaid 
                        plan consistent with the reporting format 
                        specified by the Medicaid Task Force under 
                        section 2106(d)(1); and
                            ``(ii) the total and average number of 
                        eligible individuals under the medicaid plan 
                        for each general category of eligible 
                        individuals.
            ``(2) Utilization summary.--
                    ``(A) Initial summary.--For the report for fiscal 
                year 1997 (and, if applicable, fiscal year 1996), 
                summary statistics on the utilization of health care 
                services under the medicaid plan during the year (and 
                during any portions of fiscal year 1996 during which 
                the medicaid plan was in effect under this title) as 
                follows:
                            ``(i) For each general category of eligible 
                        individuals and for each of the categories of 
                        health care items and services which are 
                        covered under the medicaid plan and provided on 
                        a fee-for-service basis, the number and 
                        percentage of persons who received such a type 
                        of service or item during the period covered by 
                        the report.
                            ``(ii) Summary of health care utilization 
                        data reported to the State by capitated health 
                        care organizations.
                    ``(B) Subsequent summaries.--For reports for each 
                succeeding fiscal year, summary statistics on the 
                utilization of health care services under the medicaid 
                plan consistent with the reporting format specified by 
                the Medicaid Task Force under section 2106(d)(1).
            ``(3) Achievement of performance goals.--With respect to 
        each performance goal established under section 2101 and 
        applicable to the year involved--
                    ``(A) a brief description of the goal;
                    ``(B) a description of the methods to be used to 
                measure the attainment of such goal;
                    ``(C) data on the actual performance with respect 
                to the goal;
                    ``(D) a review of the extent to which the goal was 
                achieved, based on such data; and
                    ``(E) if a performance goal has not been met--
                            ``(i) why the goal was not met, and
                            ``(ii) actions to be taken in response to 
                        such performance, including adjustments in 
                        performance goals or program activities for 
                        subsequent years.
            ``(4) Program evaluations.--A summary of the findings of 
        evaluations under section 2103 completed during the fiscal year 
        covered by the report.
            ``(5) Fraud and abuse and quality control activities.--A 
        general description of the State's activities under part D to 
        detect and deter fraud and abuse and to assure quality of 
        services provided under the program.
            ``(6) Plan administration.--
                    ``(A) A description of the administrative roles and 
                responsibilities of entities in the State responsible 
                for administration of this title.
                    ``(B) Organizational charts for each entity in the 
                State primarily responsible for activities under this 
                title.
                    ``(C) An estimate of the percentage of expenditures 
                to be used for plan administration.
                    ``(D) A brief description of each interstate 
                compact (if any) the State has entered into with other 
                States with respect to activities under this title.
                    ``(E) General citations to the State statutes and 
                administrative rules governing the State's activities 
                under this title.
            ``(7) Inpatient hospital payments.--With respect to 
        inpatient hospital services provided under the medicaid plan on 
        a fee-for-service basis, a description of the average amount 
        paid per discharge in the fiscal year compared either to the 
        average charge for such services or to the State's estimate of 
        the average amount paid per discharge by commercial health 
        insurers in the State.
    ``(c) Special Rules.--For purposes of this section:
            ``(1) Identification of general categories of 
        individuals.--Each of the following is a general category of 
        eligible individuals:
                    ``(A) Pregnant women.
                    ``(B) Children.
                    ``(C) Blind or disabled adults under retirement 
                age.
                    ``(D) Persons who have attained retirement age.
                    ``(E) Other adults.
            ``(2) Treatment of health care items and services.--The 
        health care items and services described in each subparagraph 
        of section 2171(a)(1) shall be considered a separate category 
        of health care items and services.

``SEC. 2103. PERIODIC, INDEPENDENT EVALUATIONS.

    ``(a) In General.--During fiscal year 1998 and every third fiscal 
year thereafter, each State shall provide for an evaluation of the 
operation of its medicaid plan approved under this title.
    ``(b) Independent.--Each such evaluation with respect to an 
activity under the medicaid plan shall be conducted by an entity that 
is neither responsible under State law for the submission of the State 
plan (or part thereof) nor responsible for administering (or 
supervising the administration of) the activity. If consistent with the 
previous sentence, such an entity may be a college or university, a 
State agency, a legislative branch agency in a State, or an independent 
contractor.
    ``(c) Research Design.--Each such evaluation shall be conducted in 
accordance with a research design that is based on generally accepted 
models of survey design and sampling and statistical analysis.

``SEC. 2104. DESCRIPTION OF PROCESS FOR MEDICAID PLAN DEVELOPMENT.

    ``Each medicaid plan shall include a description of the process 
under which the plan shall be developed and implemented in the State 
(consistent with section 2105).

``SEC. 2105. CONSULTATION IN MEDICAID PLAN DEVELOPMENT.

    ``(a) Public Process.--
            ``(1) In general.--Before submitting a medicaid plan or a 
        plan amendment described in paragraph (3) to the Secretary 
        under part E, a State shall provide--
                    ``(A) public notice respecting the submittal of the 
                proposed plan or amendment, including a general 
                description of the plan or amendment;
                    ``(B) a means for the public to inspect or obtain a 
                copy (at reasonable charge) of the proposed plan or 
                amendment; and
                    ``(C) an opportunity for submittal and 
                consideration of public comments on the proposed plan 
                or amendment.
        The previous sentence shall not apply to a revision of a 
        medicaid plan (or revision of an amendment to a plan) made by a 
        State under section 2153(c)(1) or to a plan amendment 
        withdrawal described in section 2153(c)(4).
            ``(2) Contents of notice.--A notice under paragraph (1)(A) 
        for a proposed plan or amendment shall include a description 
        of--
                    ``(A) the general purpose of the proposed plan or 
                amendment, including applicable effective dates;
                    ``(B) where the public may inspect the proposed 
                plan or amendment;
                    ``(C) how the public may obtain a copy of the 
                proposed plan or amendment and the applicable charge 
                (if any) for the copy; and
                    ``(D) how the public may submit comments on the 
                proposed plan or amendment, including any deadlines 
                applicable to consideration of such comments.
            ``(3) Amendments described.--An amendment to a medicaid 
        plan described in this paragraph is an amendment which makes a 
        material and substantial change in eligibility under the 
        medicaid plan or the benefits provided under the plan.
            ``(4) Publication.--Notices under this subsection may be 
        published (as selected by the State) in one or more daily 
        newspapers of general circulation in the State or in any 
        publication used by the State to publish State statutes or 
        rules.
            ``(5) Comparable process.--A separate notice, or notices, 
        shall not be required under this subsection for a State if 
        notice of the medicaid plan or an amendment to the plan will be 
        provided under a process specified in State law that is 
        substantially equivalent to the notice process specified in 
        this subsection.
    ``(b) Advisory Committee.--
            ``(1) In general.--Each State with a medicaid plan shall 
        establish and maintain an advisory committee.
            ``(2) Consultation.--The State shall periodically consult 
        with the advisory committee in the development, revision, and 
        monitoring the performance of the medicaid plan, including--
                    ``(A) the development of strategic objectives and 
                performance goals under section 2101;
                    ``(B) the annual report under section 2102; and
                    ``(C) the research design under section 2103(c).
            ``(3) Geographic diversity.--The composition of the 
        advisory committee shall be chosen in a manner that assures 
        some representation on the advisory committee of the different 
        general geographic regions of the State. Nothing in the 
        previous sentence shall be construed as requiring proportional 
        representation of geographic areas in a State.
            ``(4) Construction.--Nothing in this title shall be 
        construed as preventing a State from establishing more than 1 
        advisory committee, including specialized advisory committees 
        that focus on specific population groups, provider groups, or 
        geographic areas.

            ``Part B--Eligibility, Benefits, and Set-asides

``SEC. 2111. ELIGIBILITY AND BENEFITS.

    ``(a) In General.--Each medicaid plan shall--
            ``(1) be designed to serve all political subdivisions in 
        the State;
            ``(2) provide for making medical assistance available 
        (subject to the State flexibility described in section 2115) to 
        any pregnant woman or child under the age of 13 whose family 
        income does not exceed 100 percent of the poverty line 
        applicable to a family of the size involved;
            ``(3) provide for making medical assistance available to 
        any individual receiving cash benefits under title XVI by 
        reason of disability (including blindness) or receiving medical 
        assistance under section 1902(f) (as in effect on the day 
        before the date of enactment of this Act); and
            ``(4) describe how the State will provide medical 
        assistance to any other population group.
    ``(b) Description of General Elements.--Each medicaid plan shall 
include a description (consistent with this title) of the following:
            ``(1) Elements relating to eligibility.--The general 
        eligibility standards of the plan, including--
                    ``(A) any limitations as to the duration of 
                eligibility;
                    ``(B) any eligibility standards relating to age, 
                income and resources (including any standards relating 
                to spenddowns), residency, disability status, 
                immigration status, or employment status of 
                individuals;
                    ``(C) methods of establishing and continuing 
                eligibility and enrollment, including the methodology 
                for computing family income;
                    ``(D) the eligibility standards in the plan that 
                protect the income and resources of a married 
                individual who is living in the community and whose 
                spouse is residing in an institution in order to 
                prevent the impoverishment of the community spouse; and
                    ``(E) any other standards relating to eligibility 
                for medical assistance under the plan.
            ``(2) Scope of assistance.--The amount, duration, and scope 
        of health care services and items covered under the plan, 
        including differences among different eligible population 
        groups.
            ``(3) Delivery method.--The State's approach to delivery of 
        medical assistance, including a general description of--
                    ``(A) the use (or intended use) of vouchers, fee-
                for-service, or managed care arrangements (such as 
                capitated health care plans, case management, and case 
                coordination); and
                    ``(B) utilization control systems.
            ``(4) Fee-for-service benefits.--To the extent that medical 
        assistance is furnished on a fee-for-service basis--
                    ``(A) how the State determines the qualifications 
                of health care providers eligible to provide such 
                assistance; and
                    ``(B) how the State determines rates of 
                reimbursement for providing such assistance.
            ``(5) Cost-sharing.--Beneficiary cost-sharing (if any), 
        including variations in such cost-sharing by population group 
        or type of service and financial responsibilities of parents of 
        recipients under 19 years of age and the spouses of recipients.
            ``(6) Utilization incentives.--Incentives or requirements 
        (if any) to encourage the appropriate utilization of services.
            ``(7) Support for certain hospitals.--
                    ``(A) In general.--With respect to hospitals 
                described in subparagraph (B) located in the State, as 
                reported to the State by the Secretary, the medicaid 
                plan shall include a description of the extent to which 
                provisions have been made for expenditures for items 
                and services furnished by such hospitals and covered 
                under the plan.
                    ``(B) Hospitals described.--
                            ``(i) In general.--Except as provided in 
                        clause (iii), a hospital described in this 
                        subparagraph is a hospital determined to be 
                        eligible for purposes of this title in 
                        accordance with the criteria described in 
                        clause (ii) and such procedures as the 
                        Secretary may require, including such reporting 
                        requirements as the Secretary determines 
                        necessary to ensure continuing eligibility.
                            ``(ii) Criteria for eligibility.--A 
                        hospital meets the criteria described in this 
                        clause if the hospital is a short-term acute 
                        care general hospital or a children's hospital 
                        and the hospital's low-income utilization rate 
                        exceeds the lesser of--
                                    ``(I) 1 standard deviation above 
                                the mean low-income utilization rate 
                                for hospitals receiving payments under 
                                a medicaid plan in the State in which 
                                such hospital is located; or
                                    ``(II) 1\1/4\ standard deviation 
                                above the mean low-income utilization 
                                rate for hospitals receiving such 
                                payments in all States.
                            ``(iii) Special eligibility.--A hospital 
                        not described in clause (i) may be eligible for 
                        purposes of this title, if upon application to 
                        the Secretary, such hospital is determined by 
                        the Secretary to be a hospital which provides 
                        essential access to vulnerable populations, 
                        offers special services to such populations, or 
                        meets other criteria consistent with this title 
                        as determined by the Secretary.
                            ``(iv) Low-income utilization rate.--For 
                        purposes of clause (i), the term `low-income 
                        utilization rate' means, for a hospital, a 
                        fraction (expressed as a percentage), the 
                        numerator of which is the hospital's number of 
                        patient days attributable to patients who (for 
                        such days) were eligible for medical assistance 
                        under a medicaid plan or were uninsured in a 
                        period, and the denominator of which is the 
                        total number of the hospital's patient days in 
                        that period.
                            ``(v) Patient days.--For purposes of clause 
                        (iv), the term `patient day' includes each day 
                        in which--
                                    ``(I) an individual, including a 
                                newborn, is an inpatient in the 
                                hospital, whether or not the individual 
                                is in a specialized ward and whether or 
                                not the individual remains in the 
                                hospital for lack of suitable placement 
                                elsewhere; or
                                    ``(II) an individual makes one or 
                                more outpatient visits to the hospital.
    ``(c) Immunizations for Children.--The medicaid plan shall provide 
medical assistance for immunizations for children eligible for any 
medical assistance under the medicaid plan, in accordance with a 
schedule for immunizations established by the Health Department of the 
State in consultation with the individuals and entities in the State 
responsible for the administration of the plan.
    ``(d) Family Planning Services.--The medicaid plan shall provide 
prepregnancy planning services and supplies as specified by the State.
    ``(e) Preexisting Condition Exclusions.--Notwithstanding any other 
provision of this title--
            ``(1) a medicaid plan may not deny or exclude coverage of 
        any item or service for an eligible individual for benefits 
        under the medicaid plan for such item or service on the basis 
        of a preexisting condition; and
            ``(2) if a State contracts or makes other arrangements 
        (through the eligible individual or through another entity) 
        with a capitated health care organization, insurer, or other 
        entity, for the provision of items or services to eligible 
        individuals under the medicaid plan and the State permits such 
        organization, insurer, or other entity to exclude coverage of a 
        covered item or service on the basis of a preexisting 
        condition, the State shall provide, through its medicaid plan, 
        for such coverage (through direct payment or otherwise) for any 
        such covered item or service denied or excluded on the basis of 
        a preexisting condition.
    ``(f) Mental Health Services.--A medicaid plan shall not impose 
treatment limits or financial requirements on mental illness services 
which are not imposed on services for other illnesses or diseases. The 
plan may require pre-admission screening, prior authorization of 
services, or other mechanisms limiting coverage of mental illness 
services to services that are medically necessary.
    ``(g) Solvency Standards.--A medicaid plan shall provide that any 
State law solvency requirements that apply to private sector health 
plans and providers shall apply to the State medicaid plan and 
providers under such plan.

``SEC. 2112. SET-ASIDES OF FUNDS FOR POPULATION GROUPS.

    ``(a) For Targeted Low-Income Families.--
            ``(1) In general.--Subject to subsection (e), a medicaid 
        plan shall provide that the amount of funds expended under the 
        plan for medical assistance for targeted low-income families 
        (as defined in paragraph (3)) for a fiscal year shall be not 
        less than the minimum low-income-family amount specified in 
        paragraph (2).
            ``(2) Minimum low-income-family amount.--The minimum low-
        income-family amount specified in this paragraph for a State is 
        equal to 85 percent of the expenditures under title XIX for 
        medical assistance in the State during Federal fiscal year 1995 
        which were attributable to expenditures for medical assistance 
        for mandated benefits (as defined in subsection (h)) furnished 
        to individuals--
                    ``(A) who (at the time of furnishing the 
                assistance) were under 65 years of age;
                    ``(B) whose coverage (at such time) under a State 
                plan under title XIX was required under Federal law; 
                and
                    ``(C) whose eligibility for such coverage (at such 
                time) was not on a basis directly related to disability 
                status, including being blind.
            ``(3) Targeted low-income family defined.--For purposes of 
        this subsection, the term `targeted low-income family' means a 
        family (which may be an individual)--
                    ``(A) which includes a child or a pregnant woman; 
                and
                    ``(B) the income of which does not exceed 185 
                percent of the poverty line applicable to a family of 
                the size involved.
    ``(b) For Low-Income Elderly.--
            ``(1) Set-asides.--Subject to subsection (e)--
                    ``(A) General set-aside.--A medicaid plan shall 
                provide that the amount of funds expended under the 
                plan for medical assistance for eligible low-income 
                individuals who have attained retirement age for a 
                fiscal year shall be not less than the minimum low-
                income-elderly percentage specified in paragraph (2)(A) 
                of the total funds expended under the plan for all 
                medical assistance for the fiscal year.
                    ``(B) Set-aside for medicare premium assistance.--A 
                medicaid plan shall provide that the amount of funds 
                expended under the plan for medical assistance for 
                medicare cost-sharing described in section 2171(c)(1) 
                for a fiscal year shall be not less than the minimum 
                medicare premium assistance percentage specified in 
                paragraph (2)(B) of the total funds expended under the 
                plan for all medical assistance for the fiscal year. 
                The medicaid plan shall provide priority for making 
                such assistance available for targeted low-income 
                elderly individuals (as defined in paragraph (3)).
            ``(2) Minimum percentages.--
                    ``(A) For general set-aside.--The minimum low-
                income-elderly percentage specified in this 
                subparagraph for a State is equal to 85 percent of the 
                expenditures under title XIX for medical assistance in 
                the State during Federal fiscal year 1995 (not 
                including expenditures for such fiscal year taken into 
                account under subparagraph (B)) which was attributable 
                to expenditures for medical assistance for mandated 
                benefits furnished to individuals--
                            ``(i) whose eligibility for such assistance 
                        was based on their being 65 years of age or 
                        older; and
                            ``(ii)(I) whose coverage (at such time) 
                        under a State plan under title XIX was required 
                        under Federal law, or (II) who (at such time) 
                        were residents of a nursing facility.
                    ``(B) For set-aside for medicare premium 
                assistance.--The minimum medicare premium assistance 
                percentage specified in this subparagraph for a State 
                is equal to 90 percent of the average percentage of the 
                expenditures under title XIX for medical assistance in 
                the State during Federal fiscal years 1993 through 1995 
                which was attributable to expenditures for medical 
                assistance for medicare premiums described in section 
                1905(p)(3)(A) for individuals whose coverage (at such 
                time) for such assistance for such premiums under a 
                State plan under title XIX was required under Federal 
                law.
            ``(3) Targeted low-income elderly individual defined.--For 
        purposes of this subsection, the term `targeted low-income 
        elderly individual' means an individual who has attained 
        retirement age and whose income does not exceed 100 percent of 
        the poverty line applicable to a family of the size involved.
    ``(c) For Low-Income Disabled Persons.--
            ``(1) In general.--Subject to subsection (e), a medicaid 
        plan shall provide that the amount of funds expended under the 
        plan for medical assistance for eligible low-income individuals 
        who have not attained retirement age and are eligible for such 
        assistance on the basis of a disability, including being blind, 
        for a fiscal year is not less than the minimum low-income-
        disabled amount specified in paragraph (2).
            ``(2) Minimum low-income-disabled amount.--The minimum low-
        income-disabled amount specified in this paragraph for a State 
        is equal to 85 percent of the expenditures under title XIX for 
        medical assistance in the State during Federal fiscal year 1995 
        which were attributable to expenditures for medical assistance 
        for mandated benefits furnished to individuals--
                    ``(A) whose coverage (at such time) under a State 
                plan under title XIX was required under Federal law; 
                and
                    ``(B) whose coverage (at such time) was on a basis 
                directly related to disability status, including being 
                blind, and not to age status.
    ``(d) Use of Residual Funds.--
            ``(1) In general.--Subject to limitations on payment under 
        section 2123, any funds not required to be expended under the 
        set-asides under the previous subsections may only be expended 
        under the medicaid plan for any of the following:
                    ``(A) Additional medical assistance.--Medical 
                assistance for eligible low-income individuals (as 
                defined in section 2171(b)), in addition to any medical 
                assistance made available under a previous subsection.
                    ``(B) Medically-related services.--Payment for 
                medically-related services (as defined in paragraph 
                (2)).
                    ``(C) Administration.--Payment for the 
                administration of the medicaid plan.
            ``(2) Medically-related services defined.--For purposes of 
        this title, the term `medically-related services' means 
        services reasonably related to, or in direct support of, the 
        State's attainment of one or more of the strategic objectives 
        and performance goals established under section 2101, but does 
        not include items and services included on the list under 
        section 2171(a)(1) (relating to the definition of medical 
        assistance).
    ``(e) Computations.--
            ``(1) Minimum amounts.--States shall calculate the minimum 
        amounts under subsections (a)(2), (b)(2), and (c)(2) in a 
        reasonable manner consistent with reports submitted to the 
        Secretary for the fiscal years involved.
            ``(2) Exclusion of payments for certain aliens.--For 
        purposes of this section, medical assistance attributable to 
        the exception provided under section 1903(v)(2) shall not be 
        considered to be expenditures for medical assistance.
    ``(f) Benefits Included for Purposes of Computing Set Asides.--For 
purposes of this section, the term `mandated benefits'--
            ``(1) means medical assistance for items and services 
        described in section 1905(a) to the extent such assistance with 
        respect to such items and services was required to be provided 
        under title XIX; and
            ``(2) does not include expenditures attributable to 
        disproportionate share payment adjustments described in section 
        1923.

``SEC. 2113. PREMIUMS AND COST-SHARING.

    ``(a) In General.--Subject to subsection (b), if any charges are 
imposed under the medicaid plan for cost-sharing (as defined in 
subsection (d)), such cost-sharing shall be pursuant to a public cost-
sharing schedule.
    ``(b) Limitation on Premium and Certain Cost-Sharing for Low-Income 
Families Including Children or Pregnant Women.--
            ``(1) In general.--In the case of a family described in 
        paragraph (2)--
                    ``(A) the plan shall not impose any premium; and
                    ``(B) the plan shall not (except as provided in 
                subsection (c)(1)) impose any cost-sharing with respect 
                to primary and preventive care services (as defined by 
                the State) covered under the medicaid plan for children 
                or pregnant women unless such cost-sharing is nominal 
                in nature.
            ``(2) Family described.--A family described in this 
        paragraph is a family (which may be an individual) which--
                    ``(A) includes a child or a pregnant woman;
                    ``(B) is made eligible for medical assistance under 
                the medicaid plan; and
                    ``(C) the income of which does not exceed 100 
                percent of the poverty line applicable to a family of 
                the size involved.
    ``(c) Certain Cost-Sharing Permitted.--Nothing in this section 
shall be construed as preventing a medicaid plan (consistent with 
subsection (b))--
            ``(1) from imposing cost-sharing to discourage the 
        inappropriate use of emergency medical services delivered 
        through a hospital emergency room, a medical transportation 
        provider, or otherwise;
            ``(2) from imposing premiums and cost-sharing 
        differentially in order to encourage the use of primary and 
        preventive care and discourage unnecessary or less economical 
        care;
            ``(3) from scaling cost-sharing in a manner that reflects 
        economic factors, employment status, and family size;
            ``(4) from scaling cost-sharing based on the availability 
        to the individual or family of other health insurance coverage; 
        or
            ``(5) from scaling cost-sharing based on participation in 
        employment training program, drug or alcohol abuse treatment, 
        counseling programs, or other programs promoting personal 
        responsibility.
    ``(d) Cost-Sharing Defined.--For purposes of this section, the term 
`cost-sharing' includes copayments, deductibles, coinsurance, and other 
charges for the provision of health care services.

``SEC. 2114. DESCRIPTION OF PROCESS FOR DEVELOPING CAPITATION PAYMENT 
              RATES.

    ``(a) In General.--If a State contracts (or intends to contract) 
with a capitated health care organization (as defined in subsection 
(c)(1)) under which the State makes a capitation payment (as defined in 
subsection (c)(2)) to the organization for providing or arranging for 
the provision of medical assistance under the medicaid plan for a group 
of services, including at least inpatient hospital services and 
physicians' services, the plan shall include a description of the 
following:
            ``(1) Use of actuarial science.--The extent and manner in 
        which the State uses actuarial science--
                    ``(A) to analyze and project health care 
                expenditures and utilization for individuals enrolled 
                (or to be enrolled) in such an organization under the 
                medicaid plan; and
                    ``(B) to develop capitation payment rates, 
                including a brief description of the general 
                methodologies used by actuaries.
            ``(2) Qualifications of organizations.--The general 
        qualifications, including any accreditation, State licensure or 
        certification, or provider network standards, required by the 
        State for participation of capitated health care organizations 
        under the medicaid plan.
            ``(3) Dissemination process.--The process used by the State 
        under subsection (b) and otherwise to disseminate, before 
        entering into contracts with capitated health care 
        organizations, actuarial information to such organizations on 
        the historical fee-for-service costs (or, if not available, 
        other recent financial data associated with providing covered 
        services) and utilization associated with individuals described 
        in paragraph (1)(A).
            ``(4) Identification of enrollees in capitated health care 
        organizations.--The method used by the State by which hospitals 
        may identify enrollees in capitated health care organizations 
        for the purposes of qualifying and billing for disproportionate 
        share payments under the medicaid plan approved under this 
        title as described in section 2111(b)(7).
    ``(b) Public Notice and Comment.--Under the medicaid plan the State 
shall provide a process for providing, before the beginning of each 
contract year--
            ``(1) public notice of--
                    ``(A) the amounts of the capitation payments (if 
                any) made under the plan for the contract year 
                preceding the public notice, and
                    ``(B)(i) the information described under subsection 
                (a)(1) with respect to capitation payments for the 
                contract year involved or (ii) the amounts of the 
                capitation payments the State expects to make for the 
                contract year involved,
        unless such information is designated as proprietary and not 
        subject to public disclosure under State law; and
            ``(2) an opportunity for receiving public comment on the 
        amounts and information for which notice is provided under 
        paragraph (1).
    ``(c) Definitions.--For purposes of this title:
            ``(1) Capitated health care organization.--The term 
        `capitated health care organization' means a health maintenance 
        organization or any other entity (including a health insuring 
        organization, managed care organization, prepaid health plan, 
        integrated service network, or similar entity) which under 
        State law is permitted to accept capitation payments for 
        providing (or arranging for the provision of) a group of items 
        and services including at least inpatient hospital services and 
        physicians' services.
            ``(2) Capitation payment.--The term `capitation payment' 
        means, with respect to payment, payment on a prepaid capitation 
        basis or any other risk basis to an entity for the entity's 
        provision (or arranging for the provision) of a group of items 
        and services, including at least inpatient hospital services 
        and physicians' services.

``SEC. 2115. CONSTRUCTION.

    ``(a) State Flexibility in Benefits, Provider Payments, 
Geographical Coverage Area, and Selection of Providers.--Nothing in 
this title (other than subsections (c) and (d) of section 2111) shall 
be construed as requiring a State--
            ``(1) to provide medical assistance for any particular 
        items or services;
            ``(2) to provide for any payments with respect to any 
        specific health care providers or any level of payments for any 
        services;
            ``(3) to provide for the same medical assistance in all 
        geographical areas or political subdivisions of the State;
            ``(4) to provide that the medical assistance made available 
        to any individual eligible for medical assistance must not be 
        less in amount, duration, or scope than the medical assistance 
        made available to any other such individual; or
            ``(5) to provide that any individual eligible for medical 
        assistance with respect to an item or service may choose to 
        obtain such assistance from any institution, agency, or person 
        qualified to provide the item or service.
    ``(b) State Flexibility with Respect to Managed Care.--Nothing in 
this title shall be construed--
            ``(1) to limit a State's ability to contract with, on a 
        capitated basis or otherwise, health care plans or individual 
        health care providers for the provision or arrangement of 
        medical assistance;
            ``(2) to limit a State's ability to contract with health 
        care plans or other entities for case management services or 
        for coordination of medical assistance; or
            ``(3) to restrict a State from establishing capitation 
        rates on the basis of competition among health care plans or 
        negotiations between the State and one or more health care 
        plans.

``SEC. 2116. TREATMENT OF INCOME AND RESOURCES FOR CERTAIN 
              INSTITUTIONALIZED SPOUSES.

    ``(a) Special Treatment for Institutionalized Spouses.--
            ``(1) Supersedes other provisions.--In determining the 
        eligibility for medical assistance of an institutionalized 
        spouse (as defined in subsection (h)(1)), the provisions of 
        this section supersede any other provision of this title which 
        is inconsistent with them.
            ``(2) No comparable treatment required.--Any different 
        treatment provided under this section for institutionalized 
        spouses shall not require such treatment for other individuals.
            ``(3) Does not affect certain determinations.--Except as 
        this section specifically provides, this section does not apply 
        to--
                    ``(A) the determination of what constitutes income 
                or resources; or
                    ``(B) the methodology and standards for determining 
                and evaluating income and resources.
    ``(b) Rules for Treatment of Income.--
            ``(1) Separate treatment of income.--During any month in 
        which an institutionalized spouse is in the institution, except 
        as provided in paragraph (2), no income of the community spouse 
        shall be deemed available to the institutionalized spouse.
            ``(2) Attribution of income.--In determining the income of 
        an institutionalized spouse or community spouse for purposes of 
        the post-eligibility income determination described in 
        subsection (d), except as otherwise provided in this section 
        and regardless of any State laws relating to community property 
        or the division of marital property, the following rules apply:
                    ``(A) Non-trust property.--Subject to subparagraphs 
                (C) and (D), in the case of income not from a trust, 
                unless the instrument providing the income otherwise 
                specifically provides--
                            ``(i) if payment of income is made solely 
                        in the name of the institutionalized spouse or 
                        the community spouse, the income shall be 
                        considered available only to that respective 
                        spouse;
                            ``(ii) if payment of income is made in the 
                        names of the institutionalized spouse and the 
                        community spouse, \1/2\ of the income shall be 
                        considered available to each of them; and
                            ``(iii) if payment of income is made in the 
                        names of the institutionalized spouse or the 
                        community spouse, or both, and to another 
                        person or persons, the income shall be 
                        considered available to each spouse in 
                        proportion to the spouse's interest (or, if 
                        payment is made with respect to both spouses 
                        and no such interest is specified, \1/2\ of the 
                        joint interest shall be considered available to 
                        each spouse).
                    ``(B) Trust property.--In the case of a trust--
                            ``(i) except as provided in clause (ii), 
                        income shall be attributed in accordance with 
                        the provisions of this title; and
                            ``(ii) income shall be considered available 
                        to each spouse as provided in the trust, or, in 
                        the absence of a specific provision in the 
                        trust--
                                    ``(I) if payment of income is made 
                                solely to the institutionalized spouse 
                                or the community spouse, the income 
                                shall be considered available only to 
                                that respective spouse,
                                    ``(II) if payment of income is made 
                                to both the institutionalized spouse 
                                and the community spouse, \1/2\ of the 
                                income shall be considered available to 
                                each of them, and
                                    ``(III) if payment of income is 
                                made to the institutionalized spouse or 
                                the community spouse, or both, and to 
                                another person or persons, the income 
                                shall be considered available to each 
                                spouse in proportion to the spouse's 
                                interest (or, if payment is made with 
                                respect to both spouses and no such 
                                interest is specified, \1/2\ of the 
                                joint interest shall be considered 
                                available to each spouse).
                    ``(C) Property with no instrument.--In the case of 
                income not from a trust in which there is no instrument 
                establishing ownership, subject to subparagraph (D), 
                \1/2\ of the income shall be considered to be available 
                to the institutionalized spouse and \1/2\ to the 
                community spouse.
                    ``(D) Rebutting ownership.--The rules of 
                subparagraphs (A) and (C) are superseded to the extent 
                that an institutionalized spouse can establish, by a 
                preponderance of the evidence, that the ownership 
                interests in income are other than as provided under 
                such subparagraphs.
    ``(c) Rules for Treatment of Resources.--
            ``(1) Computation of spousal share at time of 
        institutionalization.--
                    ``(A) Total joint resources.--There shall be 
                computed (as of the beginning of the first continuous 
                period of institutionalization (beginning on or after 
                September 30, 1989) of the institutionalized spouse)--
                            ``(i) the total value of the resources to 
                        the extent either the institutionalized spouse 
                        or the community spouse has an ownership 
                        interest; and
                            ``(ii) a spousal share which is equal to 
                        \1/2\ of such total value.
                    ``(B) Assessment.--At the request of an 
                institutionalized spouse or community spouse, at the 
                beginning of the first continuous period of 
                institutionalization (beginning on or after September 
                30, 1989) of the institutionalized spouse and upon the 
                receipt of relevant documentation of resources, the 
                State shall promptly assess and document the total 
                value described in subparagraph (A)(i) and shall 
                provide a copy of such assessment and documentation to 
                each spouse and shall retain a copy of the assessment 
                for use under this section. If the request is not part 
                of an application for medical assistance under a 
                medicaid plan approved under this title, the State may, 
                at its option as a condition of providing the 
                assessment, require payment of a fee not exceeding the 
                reasonable expenses of providing and documenting the 
                assessment. At the time of providing the copy of the 
                assessment, the State shall include a notice indicating 
                that the spouse will have a right to a fair hearing 
                under subsection (e)(2).
            ``(2) Attribution of resources at time of initial 
        eligibility determination.--In determining the resources of an 
        institutionalized spouse at the time of application for 
        benefits under a medicaid plan approved under this title, 
        regardless of any State laws relating to community property or 
        the division of marital property--
                    ``(A) except as provided in subparagraph (B), all 
                the resources held by either the institutionalized 
                spouse, community spouse, or both, shall be considered 
                to be available to the institutionalized spouse; and
                    ``(B) resources shall be considered to be available 
                to an institutionalized spouse, but only to the extent 
                that the amount of such resources exceeds the amount 
                computed under subsection (f)(2)(A) (as of the time of 
                application for benefits).
            ``(3) Assignment of support rights.--The institutionalized 
        spouse shall not be ineligible by reason of resources 
        determined under paragraph (2) to be available for the cost of 
        care where--
                    ``(A) the institutionalized spouse has assigned to 
                the State any rights to support from the community 
                spouse;
                    ``(B) the institutionalized spouse lacks the 
                ability to execute an assignment due to physical or 
                mental impairment but the State has the right to bring 
                a support proceeding against a community spouse without 
                such assignment; or
                    ``(C) the State determines that denial of 
                eligibility would work an undue hardship.
            ``(4) Separate treatment of resources after eligibility for 
        benefits established.--During the continuous period in which an 
        institutionalized spouse is in an institution and after the 
        month in which an institutionalized spouse is determined to be 
        eligible for benefits under a medicaid plan approved under this 
        title, no resources of the community spouse shall be deemed 
        available to the institutionalized spouse.
            ``(5) Resources defined.--For purposes of this section, the 
        term `resources' does not include--
                    ``(A) resources excluded under subsection (a) or 
                (d) of section 1613; and
                    ``(B) resources that would be excluded under 
                section 1613(a)(2)(A) but for the limitation on total 
                value described in such section.
    ``(d) Protecting Income for Community Spouse.--
            ``(1) Allowances to be offset from income of 
        institutionalized spouse.--After an institutionalized spouse is 
        determined or redetermined to be eligible for medical 
        assistance under a medicaid plan approved under this title, in 
        determining the amount of the spouse's income that is to be 
        applied monthly to payment for the costs of care in the 
        institution, there shall be deducted from the spouse's monthly 
        income the following amounts in the following order:
                    ``(A) A personal needs allowance (described in 
                paragraph (2)(A)), in an amount not less than the 
                amount specified in paragraph (2)(B).
                    ``(B) A community spouse monthly income allowance 
                (as defined in subparagraph (3)), but only to the 
                extent income of the institutionalized spouse is made 
                available to, or for the benefit of, the community 
                spouse.
                    ``(C) A family allowance, for each family member, 
                equal to at least \1/3\ of the amount by which the 
                amount described in paragraph (4)(A)(i) exceeds the 
                amount of the monthly income of that family member.
                    ``(D) Amounts for incurred expenses for medical or 
                remedial care for the institutionalized spouse as 
                provided under paragraph (6).
        For purposes of subparagraph (C), the term `family member' only 
        includes minor or dependent children, dependent parents, or 
        dependent siblings of the institutionalized or community spouse 
        who are residing with the community spouse.
            ``(2) Personal needs allowance.--
                    ``(A) In general.--For purposes of this section, 
                the term `personal needs allowance' means an 
                allowance--
                            ``(i) which is reasonable in amount for 
                        clothing and other personal needs of the 
                        individual (or couple) while in an institution; 
                        and
                            ``(ii) which is not less (and may be 
                        greater) than the minimum monthly personal 
                        needs allowance described in subparagraph (B).
                    ``(B) Minimum monthly personal needs allowance.--
                The minimum monthly personal needs allowance described 
                in this subparagraph is $30 for an institutionalized 
                individual and $60 for an institutionalized couple (if 
                both are aged, blind, or disabled, and their incomes 
                are considered available to each other in determining 
                eligibility).
            ``(3) Community spouse monthly income allowance defined.--
                    ``(A) In general.--For purposes of this section 
                (except as provided in subparagraph (B)), the community 
                spouse monthly income allowance for a community spouse 
                is an amount by which--
                            ``(i) except as provided in subsection (e), 
                        the minimum monthly maintenance needs allowance 
                        (established under and in accordance with 
                        paragraph (4)) for the spouse; exceeds
                            ``(ii) the amount of monthly income 
                        otherwise available to the community spouse 
                        (determined without regard to such an 
                        allowance).
                    ``(B) Court ordered support.--If a court has 
                entered an order against an institutionalized spouse 
                for monthly income for the support of the community 
                spouse, the community spouse monthly income allowance 
                for the spouse shall be not less than the amount of the 
                monthly income so ordered.
            ``(4) Establishment of minimum monthly maintenance needs 
        allowance.--
                    ``(A) In general.--Each State shall establish a 
                minimum monthly maintenance needs allowance for each 
                community spouse which, subject to subparagraph (C), is 
                equal to or exceeds--
                            ``(i) the applicable percent (described in 
                        subparagraph (B)) of \1/12\ of the poverty line 
                        applicable to a family unit of 2 members); plus
                            ``(ii) an excess shelter allowance (as 
                        defined in paragraph (5)).
                A revision of the poverty line referred to in clause 
                (i) shall apply to medical assistance furnished during 
                and after the second calendar quarter that begins after 
                the date of publication of the revision.
                    ``(B) Applicable percent.--For purposes of 
                subparagraph (A)(i), the applicable percent described 
                in this paragraph, effective as of July 1, 1992, is 150 
                percent.
                    ``(C) Cap on minimum monthly maintenance needs 
                allowance.--The minimum monthly maintenance needs 
                allowance established under subparagraph (A) may not 
                exceed $1,500 (subject to adjustment under subsections 
                (e) and (g)).
            ``(5) Excess shelter allowance defined.--For purposes of 
        paragraph (4)(A)(ii), the term `excess shelter allowance' 
        means, for a community spouse, the amount by which the sum of--
                    ``(A) the spouse's expenses for rent or mortgage 
                payment (including principal and interest), taxes and 
                insurance and, in the case of a condominium or 
                cooperative, required maintenance charge, for the 
                community spouse's principal residence; and
                    ``(B) the standard utility allowance (used by the 
                State under section 5(e) of the Food Stamp Act of 1977) 
                or, if the State does not use such an allowance, the 
                spouse's actual utility expenses,
        exceeds 30 percent of the amount described in paragraph 
        (4)(A)(i), except that, in the case of a condominium or 
        cooperative, for which a maintenance charge is included under 
        subparagraph (A), any allowance under subparagraph (B) shall be 
        reduced to the extent the maintenance charge includes utility 
        expenses.
            ``(6) Incurred expenses.--For purposes of this section, 
        with respect to the post-eligibility treatment of income of 
        individuals who are institutionalized or who would otherwise 
        require institutionalization but for the provision of home or 
        community-based services, there shall be disregarded reparation 
        payments made by the Federal Republic of Germany and, there 
        shall be taken into account amounts for incurred expenses for 
        medical or remedial care that are not subject to payment by a 
        third party, including--
                    ``(A) medicare and other health insurance premiums, 
                deductibles, or coinsurance; and
                    ``(B) necessary medical or remedial care recognized 
                under State law but not covered under the medicaid plan 
                approved under this title, subject to reasonable limits 
                the State may establish on the amount of these 
                expenses.
    ``(e) Notice and Fair Hearing.--
            ``(1) Notice.--Upon--
                    ``(A) a determination of eligibility for medical 
                assistance under a medicaid plan approved under this 
                title of an institutionalized spouse; or
                    ``(B) a request by either the institutionalized 
                spouse, or the community spouse, or a representative 
                acting on behalf of either spouse;
        each State shall notify both spouses (in the case described in 
        subparagraph (A)) or the spouse making the request (in the case 
        described in subparagraph (B)) of the amount of the community 
        spouse monthly income allowance (described in subsection 
        (d)(1)(B)), of the amount of any family allowances (described 
        in subsection (d)(1)(C)), of the method for computing the 
        amount of the community spouse resources allowance permitted 
        under subsection (f), and of the spouse's right to a fair 
        hearing under this subsection respecting ownership or 
        availability of income or resources, and the determination of 
        the community spouse monthly income or resource allowance.
            ``(2) Fair hearing.--
                    ``(A) In general.--If either the institutionalized 
                spouse or the community spouse is dissatisfied with a 
                determination of--
                            ``(i) the community spouse monthly income 
                        allowance;
                            ``(ii) the amount of monthly income 
                        otherwise available to the community spouse (as 
                        applied under subsection (d)(2)(B));
                            ``(iii) the computation of the spousal 
                        share of resources under subsection (c)(1);
                            ``(iv) the attribution of resources under 
                        subsection (c)(2); or
                            ``(v) the determination of the community 
                        spouse resource allowance (as determined under 
                        subsection (f)(2));
                such spouse is entitled to a fair hearing with respect 
                to such determination if an application for benefits 
                under a medicaid plan approved under this title has 
                been made on behalf of the institutionalized spouse. 
                Any such hearing respecting the determination of the 
                community spouse resource allowance shall be held 
                within 30 days of the date of the request for the 
                hearing.
                    ``(B) Revision of minimum monthly maintenance needs 
                allowance.--If either such spouse establishes that the 
                community spouse needs income, above the level 
                otherwise provided by the minimum monthly maintenance 
                needs allowance, due to exceptional circumstances 
                resulting in significant financial duress, there shall 
                be substituted, for the minimum monthly maintenance 
                needs allowance in subsection (d)(2)(A), an amount 
                adequate to provide such additional income as is 
                necessary.
                    ``(C) Revision of community spouse resource 
                allowance.--If either such spouse establishes that the 
                community spouse resource allowance (in relation to the 
                amount of income generated by such an allowance) is 
                inadequate to raise the community spouse's income to 
                the minimum monthly maintenance needs allowance, there 
                shall be substituted, for the community spouse resource 
                allowance under subsection (f)(2), an amount adequate 
                to provide such a minimum monthly maintenance needs 
                allowance.
    ``(f) Permitting Transfer of Resources to Community Spouse.--
            ``(1) In general.--An institutionalized spouse may transfer 
        an amount equal to the community spouse resource allowance (as 
        determined under paragraph (2)), but only to the extent the 
        resources of the institutionalized spouse are transferred to, 
        or for the sole benefit of, the community spouse. The transfer 
        under the preceding sentence shall be made as soon as 
        practicable after the date of the initial determination of 
        eligibility, taking into account such time as may be necessary 
        to obtain a court order under paragraph (3).
            ``(2) Community spouse resource allowance determined.--For 
        purposes of paragraph (1), the community spouse resource 
        allowance for a community spouse is an amount (if any) by 
        which--
                    ``(A) the greatest of--
                            ``(i) $12,000 (subject to adjustment under 
                        subsection (g)), or, if greater (but not to 
                        exceed the amount specified in clause (ii)(II)) 
                        an amount specified under the State plan,
                            ``(ii) the lesser of (I) the spousal share 
                        computed under subsection (c)(1), or (II) 
                        $60,000 (subject to adjustment under subsection 
                        (g)),
                            ``(iii) the amount established under 
                        subsection (e)(2); or
                            ``(iv) the amount transferred under a court 
                        order under paragraph (3);
                exceeds
                    ``(B) the amount of the resources otherwise 
                available to the community spouse (determined without 
                regard to such an allowance).
    ``(g) Indexing Dollar Amounts.--For services furnished during a 
calendar year after 1989, the dollar amounts specified in subsections 
(d)(3)(C), (f)(2)(A)(i), and (f)(2)(A)(ii)(II) shall be increased by 
the same percentage as the percentage increase in the consumer price 
index for all urban consumers (all items; U.S. city average) between 
September 1988 and the September before the calendar year involved.
    ``(h) Definitions.--For purposes of this section:
            ``(1) Institutionalized spouse.--The term 
        `institutionalized spouse' means an individual who is in a 
        medical institution or nursing facility and is married to a 
        spouse who is not in a medical institution or nursing facility. 
        The term does not include any such individual who is not likely 
        to meet the requirements of the preceding sentence for at least 
        30 consecutive days.
            ``(2) Community spouse.--The term `community spouse' means 
        the spouse of an institutionalized spouse.

                      ``Part C--Payments to States

``SEC. 2121. ALLOTMENT OF FUNDS AMONG STATES.

    ``(a) Allotments.--
            ``(1) Computation.--The Secretary shall provide for the 
        computation of State obligation and outlay allotments in 
        accordance with this section for each fiscal year beginning 
        with fiscal year 1996.
            ``(2) Limitation on obligations.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                Secretary shall not enter into obligations with any 
                State under this title for a fiscal year in excess of 
                the obligation allotment for that State for the fiscal 
                year under paragraph (4). The sum of such obligation 
                allotments for all States in any fiscal year (excluding 
                amounts carried over under subparagraph (B) and 
                excluding changes in allotments effected under 
                paragraph (4)(D)) shall not exceed the aggregate limit 
                on new obligation authority specified in paragraph (3) 
                for that fiscal year.
                    ``(B) Adjustments.--
                            ``(i) Carryover of allotment permitted.--If 
                        the amount of obligations entered into under 
                        this part with a State for quarters in a fiscal 
                        year is less than the amount of the obligation 
                        allotment under this section to the State for 
                        the fiscal year, the amount of the difference 
                        shall be added to the amount of the State 
                        obligation allotment otherwise provided under 
                        this section for the succeeding fiscal year.
                            ``(ii) Reduction for post-enactment new 
                        obligations under title xix in fiscal year 
                        1996.--The amount of the obligation allotment 
                        otherwise provided under this section for 
                        fiscal year 1996 for a State shall be reduced 
                        by the amount of the obligations entered into 
                        with respect to the State under section 1903(a) 
                        after the date of the enactment of this title.
            ``(3) Aggregate limit on new obligation authority.--
                    ``(A) In general.--For purposes of this subsection, 
                subject to subparagraph (C), the aggregate limit on new 
                obligation authority, for a fiscal year, is the pool 
                amount under subsection (b) for the fiscal year, 
                divided by the payout adjustment factor (described in 
                subparagraph (B)) for the fiscal year.
                    ``(B) Payout adjustment factor.--For purposes of 
                this subsection, the payout adjustment factor--
                            ``(i) for fiscal year 1996 is .950;
                            ``(ii) for fiscal year 1997 is .986; and
                            ``(iii) for a subsequent fiscal year is 
                        .998.
                    ``(C) Transitional adjustment for pre-enactment-
                obligation outlays.--In order to account for pre-
                enactment-obligation outlays described in paragraph 
                (4)(C)(iv), in determining the aggregate limit on new 
                obligation authority under subparagraph (A) for fiscal 
                year 1996, the pool amount for such fiscal year is 
                equal to--
                            ``(i) the pool amount for such year; 
                        reduced by
                            ``(ii) $24.624 billion.
            ``(4) Obligation allotments.--
                    ``(A) General rule for 50 states and the district 
                of columbia.--Except as provided in this paragraph, the 
                obligation allotment for any of the 50 States or the 
                District of Columbia for a fiscal year (beginning with 
                fiscal year 1997) is an amount that bears the same 
                ratio to the outlay allotment under subsection (c)(2) 
                for such State or District (not taking into account any 
                adjustment due to an election under paragraph (4)) for 
                the fiscal year as the ratio of--
                            ``(i) the aggregate limit on new obligation 
                        authority (less the total of the obligation 
                        allotments under subparagraph (B)) for the 
                        fiscal year; to
                            ``(ii) the pool amount (less the sum of the 
                        outlay allotments for the territories) for such 
                        fiscal year.
                    ``(B) Territories.--The obligation allotment for 
                each of the Commonwealths and territories for a fiscal 
                year is the outlay allotment for such Commonwealth or 
                territory (as determined under subsection (c)(5)) for 
                the fiscal year divided by the payout adjustment factor 
                for the fiscal year (as defined in paragraph (3)(B)).
                    ``(C) Transitional rule for fiscal year 1996.--
                            ``(i) In general.--The obligation amount 
                        for fiscal year 1996 for any State, including 
                        the District of Columbia, a Commonwealth, or 
                        territory, is determined according to the 
                        formula: A=(B-C)/D, where--
                                    ``(I) `A' is the obligation amount 
                                for such State;
                                    ``(II) `B' is the outlay allotment 
                                of such State for fiscal year 1996 (as 
                                determined under subsection (c));
                                    ``(III) `C' is the amount of the 
                                pre-enactment-obligation outlays (as 
                                established for such State under clause 
                                (ii)); and
                                    ``(IV) `D' is the payout adjustment 
                                factor for such fiscal year (as defined 
                                in paragraph (3)(B)).
                            ``(ii) Pre-enactment-obligation outlay 
                        amounts.--Within 30 days after the date of the 
                        enactment of this title, the Secretary shall 
                        estimate (based on the best data available) and 
                        publish in the Federal Register the amount of 
                        the pre-enactment-obligation outlays (as 
                        defined in clause (iv)) for each State, 
                        including the District of Columbia, 
                        Commonwealths, and territories. The total of 
                        such amounts shall equal the dollar amount 
                        specified in paragraph (3)(C)(ii).
                            ``(iii) Agreement.--The submission of a 
                        medicaid plan by a State under this title is 
                        deemed to constitute the State's acceptance of 
                        the obligation allotment limitations under this 
                        subsection, including the formula for computing 
                        the amount of such obligation allotment.
                            ``(iv) Pre-enactment-obligation outlays 
                        defined.--For purposes of this subsection, the 
                        term `pre-enactment-obligation outlays' means, 
                        for a State, the outlays of the Federal 
                        Government that result from obligations that 
                        have been incurred under title XIX with respect 
                        to the State before the date of the enactment 
                        of this title, but for which payments to States 
                        have not been made as of such date of 
                        enactment.
                    ``(D) Adjustment to reflect adoption of alternative 
                growth formula.--Any State that has elected an 
                alternative growth formula under subsection (c)(4) 
                which increases or decreases the dollar amount of an 
                outlay allotment for a fiscal year is deemed to have 
                increased or decreased, respectively, its obligation 
                amount for such fiscal year by the amount of such 
                increase or decrease.
    ``(b) Pool of Available Funds.--
            ``(1) In general.--For purposes of this section and subject 
        to section 2124, the pool amount under this subsection for--
                    ``(A) fiscal year 1996 is $97,245,440,000;
                    ``(B) fiscal year 1997 is $102,607,730,702;
                    ``(C) fiscal year 1998 is $106,712,039,930;
                    ``(D) fiscal year 1999 is $110,980,521,527;
                    ``(E) fiscal year 2000 is $115,419,742,389;
                    ``(F) fiscal year 2001 is $120,036,532,084;
                    ``(G) fiscal year 2002 is $124,837,993,367; and
                    ``(H) each subsequent fiscal year is the pool 
                amount under this paragraph for the previous fiscal 
                year increased by the lesser of 4 percent or the annual 
                percentage increase in the gross domestic product for 
                the 12-month period ending in June before the beginning 
                of that subsequent fiscal year.
            ``(2) National medicaid growth percentage.--For purposes of 
        this section for a fiscal year (beginning with fiscal year 
        1997), the national medicaid growth percentage is the 
        percentage by which--
                    ``(A) the pool amount under paragraph (1) for the 
                fiscal year; exceeds
                    ``(B) such pool amount for the previous fiscal 
                year.
    ``(c) State Outlay Allotments.--
            ``(1) Fiscal year 1996.--
                    ``(A) In general.--Except as provided in paragraph 
                (6), for each of the 50 States and the District of 
                Columbia, the amount of the State outlay allotment 
                under this subsection for fiscal year 1996, subject to 
                paragraph (4), is 109 percent of--
                            ``(i) the greatest of--
                                    ``(I) the total amount of Federal 
                                expenditures (minus the amount paid 
                                under section 1923) made to such State 
                                or District under title XIX for the 4 
                                quarters in fiscal year 1995,
                                    ``(II) 103.379859 percent of the 
                                total amount of Federal expenditures 
                                made to such State or District under 
                                title XIX for the 4 quarters in fiscal 
                                year 1994, or
                                    ``(III) 95 percent of the total 
                                amount of Federal expenditures (minus 
                                the amount paid under section 1923) 
                                made to such State or District under 
                                title XIX for the 4 quarters in fiscal 
                                year 1993; multiplied by
                            ``(ii) the scalar factor described in 
                        subparagraph (D).
                    ``(B) Computation of expenditures.--The amount of 
                Federal expenditures described in subparagraph (A)(i) 
                shall be computed, using data reported for the 
                appropriate fiscal year on line 11 of the HCFA Form 64.
                    ``(C) Limitation on adjustment.--The amount 
                computed under subparagraph (B) shall not be subject to 
                adjustment (based on any subsequent disallowances or 
                otherwise).
                    ``(D) Scalar factor.--The scalar factor under this 
                subparagraph for fiscal year 1996 is the ratio of 
                $89,216,000,000 to the total amount of Federal 
                expenditures (minus the amount paid under section 1923) 
                made to all States and the District of Columbia for the 
                4 quarters in fiscal year 1995.
            ``(2) Computation of state outlay allotments.--
                    ``(A) In general.--Subject to the succeeding 
                provisions of this subsection, the amount of the State 
                outlay allotment under this subsection for each of the 
                50 States and the District of Columbia for a fiscal 
                year (beginning with fiscal year 1997) is equal to the 
                product of--
                            ``(i) the needs-based amount determined 
                        under subparagraph (B) for such State or 
                        District for the fiscal year; and
                            ``(ii) the scalar factor described in 
                        subparagraph (C) for the fiscal year.
                    ``(B) Needs-based amount.--The needs-based amount 
                under this subparagraph for a State or the District of 
                Columbia for a fiscal year is equal to the product of--
                            ``(i) the State's or District's aggregate 
                        expenditure need for the fiscal year (as 
                        determined under subsection (d)); and
                            ``(ii) the State's or District's Federal 
                        medical assistance percentage (as determined 
                        under section 2122(c) (without regard to 
                        paragraph (3)(A)(i) thereof)) for the previous 
                        fiscal year (or, in the case of fiscal year 
                        1997, the Federal medical assistance percentage 
                        determined under section 1905(b) for fiscal 
                        year 1996).
                    ``(C) Scalar factor.--The scalar factor under this 
                subparagraph for a fiscal year is such proportion so 
                that, when it is applied under subparagraph (A)(ii) for 
                the fiscal year (taking into account the floors and 
                ceilings under paragraph (3)), the total of the outlay 
                allotments under this subsection for all the 50 States 
                and the District of Columbia for the fiscal year (not 
                taking into account any increase or decrease in an 
                outlay allotment for a fiscal year attributable to the 
                election of an alternative growth formula under 
                paragraph (4)) is equal to the amount by which (i) the 
                pool amount for the fiscal year (as determined under 
                subsection (b)), exceeds (ii) the sum of the outlay 
                allotments provided under paragraph (5) for the 
                Commonwealths and territories for the fiscal year.
            ``(3) Floors and ceilings.--
                    ``(A) Floor.--
                            ``(i) In general.--In no case shall the 
                        amount of the State outlay allotment under 
                        paragraph (2) for a fiscal year be less than 
                        the greatest of--
                                    ``(I) 102 percent of the amount of 
                                the State outlay allotment under this 
                                subsection for the preceding fiscal 
                                year;
                                    ``(II) .26 percent of the pool 
                                amount for such fiscal year; or
                                    ``(III) in the case of a State or 
                                District with an outlay allotment under 
                                this subsection for fiscal year 1998 
                                that exceeds 103.8 percent of such 
                                State's or District's outlay allotment 
                                for 1997, the applicable percentage, as 
                                determined under clause (ii), of the 
                                amount of the State outlay allotment 
                                under this subsection for the preceding 
                                fiscal year.
                            ``(ii) Applicable percentage.--The 
                        applicable percentage determined under this 
                        clause is as follows:
                                    ``(I) For fiscal year 1999, 104.25 
                                percent.
                                    ``(II) For fiscal years 2000 and 
                                2001, 104 percent.
                                    ``(III) For fiscal year 2002, 103.4 
                                percent.
                    ``(B) Ceiling.--
                            ``(i) In general.--In no case shall the 
                        amount of the State outlay allotment under 
                        paragraph (2) for a fiscal year be greater than 
                        the product of--
                                    ``(I) the State outlay allotment 
                                under this subsection for the State or 
                                the District of Columbia for the 
                                preceding fiscal year; and
                                    ``(II) the applicable percentage of 
                                the national medicaid growth percentage 
                                (as determined under subsection (b)(2)) 
                                for the fiscal year involved.
                            ``(ii) Applicable percentage.--For purposes 
                        of clause (i)(II), the applicable percentage 
                        is--
                                    ``(I) for fiscal year 1997, 125.5 
                                percent;
                                    ``(II) for fiscal year 1998, 132 
                                percent;
                                    ``(III) for fiscal year 1999, 151 
                                percent;
                                    ``(IV) for fiscal year 2000, 156 
                                percent;
                                    ``(V) for fiscal year 2001, 144 
                                percent;
                                    ``(VI) for fiscal year 2002, 146 
                                percent.
            ``(4) Election of alternative growth formula.--
                    ``(A) Election.--In order to reduce variations in 
                increases or decreases in outlay allotments over time, 
                any of the 50 States or the District of Columbia may 
                elect (by notice provided to the Secretary by not later 
                than April 1, 1996) to adopt an alternative growth rate 
                formula under this paragraph for the determination of 
                such State's or District's outlay allotment in fiscal 
                year 1996 and for the increase or decrease in the 
                amount of such allotment in subsequent fiscal years.
                    ``(B) Formula.--The alternative growth formula 
                under this paragraph may be any formula under which--
                            ``(i) a portion of the State outlay 
                        allotment for fiscal year 1996 under paragraph 
                        (1) is deferred and applied to increase the 
                        amount of its outlay allotment for one or more 
                        subsequent fiscal years, so long as the total 
                        amount of such increases for all such 
                        subsequent fiscal years does not exceed the 
                        amount of the outlay allotment deferred from 
                        fiscal year 1996; or
                            ``(ii) a portion of the State outlay 
                        allotment for one or more of the 3 fiscal years 
                        immediately following fiscal year 1996 under 
                        paragraph (2) is applied to increase the amount 
                        of its outlay allotment for fiscal year 1996, 
                        so long as the total amount of such increase 
                        does not exceed 25 percent of the amount of the 
                        outlay allotment for fiscal year 1996 otherwise 
                        determined under paragraph (1).
            ``(5) Commonwealths and territories.--The outlay allotment 
        for each of the Commonwealths and territories for a fiscal year 
        is the maximum amount that could have been certified under 
        section 1108(c) with respect to the Commonwealth or territory 
        for the fiscal year with respect to title XIX, if the national 
        medicaid growth percentage (as determined under subsection 
        (b)(2)) for the fiscal year had been substituted (beginning 
        with fiscal year 1997) for the percentage increase referred to 
        in section 1108(c)(1)(B).
            ``(6) Special rule.--
                    ``(A) In general.--Notwithstanding the preceding 
                paragraphs of this subsection, the State outlay 
                allotment for--
                            ``(i) New Hampshire for each of the fiscal 
                        years 1996 through 2000, is $360,000,000; and
                            ``(ii) Louisiana for each of the fiscal 
                        years 1996 through 2000, is $2.622 billion.
                    ``(B) Exception.--A State described in subparagraph 
                (A) may apply to the Secretary for use of the State 
                outlay allotment otherwise determined under this 
                subsection for any fiscal year, if such State notifies 
                the Secretary not later than March 1 preceding such 
                fiscal year that such State will be able to expend 
                sufficient State funds in such fiscal year to qualify 
                for such allotment.
    ``(d) Aggregate Expenditure Need Determined.--
            ``(1) In general.--For purposes of subsection (c), the 
        aggregate expenditure need for a State or the District of 
        Columbia for a fiscal year is equal to the product of the 
        following 4 factors:
                    ``(A) Residents in poverty.--The average annual 
                number of residents in poverty of such State or 
                District with respect to the fiscal year (as determined 
                under paragraph (2)).
                    ``(B) Case mix index.--The average of the case mix 
                indexes for such State or District (as determined under 
                paragraph (3)) for the 3 most recent fiscal years for 
                which data are available.
                    ``(C) Input cost index.--The average of the input 
                cost indexes for such State or District (as determined 
                under paragraph (4)) for the 3 most recent fiscal years 
                for which data are available.
                    ``(D) National average spending per resident in 
                poverty.--The national average spending per resident in 
                poverty (as determined under paragraph (5)).
            ``(2) Residents in poverty.--For purposes of this section:
                    ``(A) In general.--The term `average annual number 
                of residents in poverty' means, with respect to a State 
                or the District of Columbia and a fiscal year, the 
                average annual number of residents in poverty (as 
                defined in subparagraph (B)) in such State or District 
                (based on data made generally available by the Bureau 
                of the Census from the Current Population Survey) for 
                the most recent 3-calendar-year period (ending before 
                the fiscal year) for which such data are available.
                    ``(B) Resident in poverty defined.--The term 
                `resident in poverty' means an individual described in 
                section 1614(a)(1)(B)(i) whose family income does not 
                exceed 100 percent of the poverty line for the year 
                involved applicable to a family of the size involved 
                threshold.
            ``(3) Case mix index.--
                    ``(A) In general.--For purposes of this subsection, 
                the case mix index for a State or the District of 
                Columbia for a fiscal year is equal to--
                            ``(i) the sum of--
                                    ``(I) the per recipient 
                                expenditures with respect to elderly 
                                individuals in such State or District 
                                for the fiscal year (determined under 
                                subparagraph (B)),
                                    ``(II) the per recipient 
                                expenditures with respect to the blind 
                                and disabled individuals in such State 
                                or District for the fiscal year 
                                (determined under subparagraph (C)), 
                                and
                                    ``(III) the per recipient 
                                expenditures with respect to other 
                                individuals in such State or District 
                                (determined under subparagraph (D));
                divided by--
                            ``(ii) the national average spending per 
                        recipient determined under subparagraph (E) for 
                        the fiscal year involved.
                    ``(B) Per recipient expenditures for the elderly.--
                For purposes of subparagraph (A)(I)(i), the per 
                recipient expenditures with respect to elderly 
                individuals in a State or the District of Columbia for 
                a fiscal year is equal to the product of--
                            ``(i) the national average per recipient 
                        expenditures under this title in the 50 States 
                        and the District of Columbia for the most 
                        recent fiscal year for which data are available 
                        for individuals who have attained retirement 
                        age; and
                            ``(ii) the proportion, of all individuals 
                        who received medical assistance under this 
                        title in such State or District in the most 
                        recent fiscal year referred to in clause (i), 
                        that were individuals described in such clause.
                    ``(C) Per recipient expenditures for the blind and 
                disabled.--For purposes of subparagraph (A)(i)(II), the 
                per recipient expenditures with respect to blind and 
                disabled individuals in a State or the District of 
                Columbia for a fiscal year is equal to the product of--
                            ``(i) the national average per recipient 
                        expenditures under this title in the 50 States 
                        and the District of Columbia for the most 
                        recent fiscal year for which data are available 
                        for individuals who are eligible for medical 
                        assistance because such individuals are blind 
                        or disabled and under retirement age; and
                            ``(ii) the proportion, of all individuals 
                        who received medical assistance under this 
                        title in such State or District in the most 
                        recent fiscal year referred to in clause (i), 
                        that were individuals described in such clause.
                    ``(D) Per recipient expenditures for other 
                individuals.--For purposes of subparagraph (A)(i)(III), 
                the per recipient expenditures with respect to other 
                individuals in a State or the District of Columbia for 
                a fiscal year is equal to the product of--
                            ``(i) the national average per recipient 
                        expenditures under this title in the 50 States 
                        and the District of Columbia for the most 
                        recent fiscal year for which data are available 
                        for individuals who are not described in 
                        subparagraph (B)(i) or (C)(i); and
                            ``(ii) the proportion, of all individuals 
                        who received medical assistance under this 
                        title in such State or District in the most 
                        recent fiscal year referred to in clause (i), 
                        that were individuals described in such clause.
                    ``(E) National average spending per recipient.--For 
                purposes of this paragraph, the national average 
                expenditures per recipient for a fiscal year is equal 
                to the sum of--
                            ``(i) the product of (I) the national 
                        average described in subparagraph (B)(i), and 
                        (II) the proportion, of all individuals who 
                        received medical assistance under this title in 
                        any of the 50 States or the District of 
                        Columbia in the fiscal year referred to in such 
                        subparagraph, who are described in such 
                        subparagraph;
                            ``(ii) the product of (I) the national 
                        average described in subparagraph (C)(i), and 
                        (II) the proportion, of all individuals who 
                        received medical assistance under this title in 
                        any of the 50 States or the District of 
                        Columbia in the fiscal year referred to in such 
                        subparagraph, who are described in such 
                        subparagraph; and
                            ``(iii) the product of (I) the national 
                        average described in subparagraph (D)(i), and 
                        (II) the proportion, of all individuals who 
                        received medical assistance under this title in 
                        any of the 50 States or the District of 
                        Columbia in the fiscal year referred to in such 
                        subparagraph, who are described in such 
                        subparagraph.
                    ``(F) Determination of national averages and 
                proportions.--
                            ``(i) In general.--The national averages 
                        per recipient and the proportions referred to 
                        in clauses (i) and (ii), respectively, of 
                        subparagraphs (B), (C), and (D) and 
                        subparagraph (E) shall be determined by the 
                        Secretary using the most recent data available.
                            ``(ii) Use of medicaid data.--If for a 
                        fiscal year there is inadequate data to compute 
                        such averages and proportions based on 
                        expenditures and numbers of individuals 
                        receiving medical assistance under this title, 
                        the Secretary may compute such averages based 
                        on expenditures and numbers of such individuals 
                        under title XIX for the most recent fiscal year 
                        for which data are available and, for this 
                        purpose--
                                    ``(I) any reference in subparagraph 
                                (B)(i) to `individuals who have 
                                attained retirement age' is deemed a 
                                reference to `individuals whose 
                                eligibility for medical assistance is 
                                based on having attained retirement 
                                age';
                                    ``(II) the reference in 
                                subparagraph (C)(i) to `and under 
                                retirement age' shall be considered to 
                                be deleted; and
                                    ``(III) individuals whose basis for 
                                eligibility for medical assistance was 
                                reported as unknown shall not be 
                                counted as individuals under 
                                subparagraph (D)(i).
                            ``(iii) Expenditure defined.--For purposes 
                        of this paragraph, the term `expenditure' means 
                        expenditures for medical assistance under the 
                        medicaid plan, other than medical assistance 
                        attributable to disproportionate share payment 
                        adjustments described in section 2111(b)(7) (or 
                        section 1923, in the case of fiscal year 1995).
            ``(4) Input cost index.--
                    ``(A) In general.--For purposes of this section, 
                the input cost index for a State or the District of 
                Columbia for a fiscal year is the sum of--
                            ``(i) 0.15; and
                            ``(ii) 0.85 multiplied by the ratio of (I) 
                        the annual average wages for hospital employees 
                        in such State or District for the fiscal year 
                        (as determined under subparagraph (B)), to (II) 
                        the annual average wages for hospital employees 
                        in the 50 States and the District of Columbia 
                        for such year (as determined under such 
                        subparagraph).
                    ``(B) Determination of annual average wages of 
                hospital employees.--The Secretary shall provide for 
                the determination of annual average wages for hospital 
                employees in a State or the District of Columbia and, 
                collectively, in the 50 States and the District of 
                Columbia for a fiscal year based on the area wage data 
                applicable to hospitals under 1886(d)(2)(E) (or, if 
                such data no longer exists, comparable data of hospital 
                wages) for the fiscal year involved.
            ``(5) National average spending per resident in poverty.--
        For purposes of this subsection, the national average spending 
        per resident in poverty--
                    ``(A) for fiscal year 1997 is equal to--
                            ``(i) the sum (for each of the 50 States 
                        and the District of Columbia) of the total of 
                        the Federal and State expenditures under title 
                        XIX for medical assistance for calendar 
                        quarters in fiscal year 1995 (other than such 
                        expenditures under section 1923), increased by 
                        the percentage specified in subsection 
                        (c)(1)(A)(ii), divided by
                            ``(ii) the average of the sum of the number 
                        of residents in poverty (as defined in 
                        paragraph (2)(A)) for all of the 50 States and 
                        the District of Columbia for the 3 most recent 
                        fiscal years for which data are available, and 
                        increased by
                            ``(iii) the national medicaid growth 
                        percentage (as defined in subsection (b)(2)) 
                        for fiscal year 1997;
                    ``(B) for a succeeding fiscal year is equal to the 
                national average spending per resident in poverty under 
                this paragraph for the preceding fiscal year increased 
                by the national medicaid growth percentage (as so 
                defined) for the fiscal year involved.
    ``(e) Publication of Obligation and Outlay Allotments.--
            ``(1) Notice of preliminary allotments.--Not later than 
        April 1 before the beginning of each fiscal year (beginning 
        with fiscal year 1997), the Secretary shall initially compute 
        and publish in the Federal Register notice of the proposed 
        obligation and outlay allotments for each State and the 
        District of Columbia under this section (not taking into 
        account subsection (a)(2)(B)) for the fiscal year. The 
        Secretary shall include in the notice a description of the 
        methodology and data used in deriving such allotments for the 
        year.
            ``(2) Review by gao.--The Comptroller General shall submit 
        to Congress by not later than May 15 of each such fiscal year, 
        a report analyzing such allotments and the extent to which such 
        allotments comply with the precise requirements of this 
        section.
            ``(3) Notice of final allotments.--Not later than July 1 
        before the beginning of each such fiscal year, the Secretary, 
        taking into consideration the analysis contained in the report 
        of the Comptroller General under paragraph (2), shall compute 
        and publish in the Federal Register notice of the final 
        allotments under this section (both taking into account and not 
        taking into account subsection (a)(2)(B)) for the fiscal year. 
        The Secretary shall include in the notice a description of any 
        changes in such allotments from the initial allotments 
        published under paragraph (1) for the fiscal year and the 
        reasons for such changes. Once published under this paragraph, 
        the Secretary is not authorized to change such allotments.
            ``(4) GAO report on final allotments.--The Comptroller 
        General shall submit to Congress by not later than August 1 of 
        each such fiscal year, a report analyzing the final allotments 
        under paragraph (3) and the extent to which such allotments 
        comply with the precise requirements of this section.

``SEC. 2122. PAYMENTS TO STATES.

    ``(a) Amount of Payment.--From the allotment of a State under 
section 2121, plus any additional amount available to such State under 
subsection (g) or (h), for a fiscal year, subject to the succeeding 
provisions of this title, the Secretary shall pay to each State which 
has a medicaid plan approved under part E, for each quarter in the 
fiscal year--
            ``(1) an amount equal to the Federal medical assistance 
        percentage (as defined in subsection (c)) of the total amount 
        expended during such quarter as medical assistance under the 
        plan; plus
            ``(2) an amount equal to the Federal medical assistance 
        percentage of the total amount expended during such quarter for 
        medically-related services (as defined in section 2112(d)(2)); 
        plus
            ``(3) an amount equal to--
                    ``(A) 90 percent of the amounts expended during 
                such quarter for the design, development, and 
                installation of information systems and for providing 
                incentives to promote the enforcement of medical 
                support orders, plus
                    ``(B) 75 percent of the amounts expended during 
                such quarter for medical personnel, administrative 
                support of medical personnel, operation and maintenance 
                of information systems, modification of information 
                systems, quality assurance activities, utilization 
                review, medical and peer review, anti-fraud activities, 
                independent evaluations, coordination of benefits, and 
                meeting reporting requirements under this title, plus
                    ``(C) 50 percent of so much of the remainder of the 
                amounts expended during such quarter as are expended by 
                the State in the administration of the State plan.
    ``(b) Payment Process.--
            ``(1) Quarterly estimates.--Prior to the beginning of each 
        quarter, the Secretary shall estimate the amount to which a 
        State will be entitled under subsection (a) for such quarter, 
        such estimates to be based on (A) a report filed by the State 
        containing its estimate of the total sum to be expended in such 
        quarter in accordance with the provisions of such subsections, 
        and stating the amount appropriated or made available by the 
        State and its political subdivisions for such expenditures in 
        such quarter, and if such amount is less than the State's 
        proportionate share of the total sum of such estimated 
        expenditures, the source or sources from which the difference 
        is expected to be derived, and (B) such other investigation as 
        the Secretary may find necessary.
            ``(2) Payment.--
                    ``(A) In general.--The Secretary shall then pay to 
                the State, in such installments as the Secretary may 
                determine and in accordance with section 6503(a) of 
                title 31, United States Code, the amount so estimated, 
                reduced or increased to the extent of any overpayment 
                or underpayment which the Secretary determines was made 
                under this section (or section 1903) to such State for 
                any prior quarter and with respect to which adjustment 
                has not already been made under this subsection (or 
                under section 1903(d)).
                    ``(B) Treatment as overpayments.--Expenditures for 
                which payments were made to the State under subsection 
                (a) shall be treated as an overpayment to the extent 
                that the State or local agency administering such plan 
                has been reimbursed for such expenditures by a third 
                party pursuant to the provisions of its plan in 
                compliance with section 2135.
                    ``(C) Recovery of overpayments.--For purposes of 
                this subsection, when an overpayment is discovered, 
                which was made by a State to a person or other entity, 
                the State shall have a period of 60 days in which to 
                recover or attempt to recover such overpayment before 
                adjustment is made in the Federal payment to such State 
                on account of such overpayment. Except as otherwise 
                provided in subparagraph (D), the adjustment in the 
                Federal payment shall be made at the end of the 60 
                days, whether or not recovery was made.
                    ``(D) No adjustment for uncollectables.--In any 
                case where the State is unable to recover a debt which 
                represents an overpayment (or any portion thereof) made 
                to a person or other entity on account of such debt 
                having been discharged in bankruptcy or otherwise being 
                uncollectable, no adjustment shall be made in the 
                Federal payment to such State on account of such 
                overpayment (or portion thereof).
            ``(3) Federal share of recoveries.--The pro rata share to 
        which the United States is equitably entitled, as determined by 
        the Secretary, of the net amount recovered during any quarter 
        by the State or any political subdivision thereof with respect 
        to medical assistance furnished under the State plan shall be 
        considered an overpayment to be adjusted under this subsection.
            ``(4) Timing of obligation of funds.--Upon the making of 
        any estimate by the Secretary under this subsection, any 
        appropriations available for payments under this section shall 
        be deemed obligated.
            ``(5) Disallowances.--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 
        subsequent 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 at a rate (determined by the 
        Secretary) based on the average of the bond equivalent of the 
        weekly 90-day treasury bill auction rates during such period.
    ``(c) Federal Medical Assistance Percentage Defined.--
            ``(1) In general.--For purposes of this section, except as 
        provided in subsection (f), the Federal medical assistance 
        percentage, with respect to each of the 50 States or the 
        District of Columbia, is 100 percent less the State percentage.
            ``(2) State percentage.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the State percentage is that 
                percentage which bears the same ratio to 45 percent as 
                the square of the per capita income of such State bears 
                to the square of the per capita income of the 
                continental United States (including Alaska) and 
                Hawaii.
                    ``(B) Exception.--For purposes of this title only, 
                for Alaska, the State percentage is that percentage 
                which bears the same ratio to 45 percent as the square 
                of the adjusted per capita income of such State bears 
                to the square of the per capita income of the 
                continental United States. For purposes of the 
                preceding sentence, the adjusted per capita income for 
                Alaska shall be determined by dividing the State's most 
                recent 3-year average per capita by the input cost 
                index for such State (as determined in section 
                2121(d)(4)).
            ``(3) Limitation on range.--In no case shall the Federal 
        medical assistance percentage be--
                    ``(A) less than--
                            ``(i) 60 percent, or
                            ``(ii) 50 percent, in the case of any other 
                        provision of law other than this title; or
                    ``(B) more than 83 percent.
            ``(4) Promulgation.--The Federal medical assistance 
        percentage for any State shall be determined and promulgated in 
        accordance with the provisions of section 1101(a)(8)(B).
    ``(d) Provider-Related Donations and Health Care Related Taxes.--
            ``(1) General limitations.--
                    ``(A) Reduction in medical assistance 
                expenditures.--Notwithstanding the previous provisions 
                of this section, for purposes of determining the amount 
                to be paid to a State (as defined in paragraph (5)(D)) 
                under this section for quarters in any fiscal year, the 
                total amount expended during such fiscal year as 
                medical assistance under the medicaid plan (as 
                determined without regard to this subsection) shall be 
                reduced by the sum of any revenues received by the 
                State (or by a unit of local government in the State) 
                during the fiscal year--
                            ``(i) from provider-related donations (as 
                        defined in paragraph (2)(A)), other than--
                                    ``(I) bona fide provider-related 
                                donations (as defined in paragraph 
                                (2)(B)), and
                                    ``(II) donations described in 
                                paragraph (2)(C);
                            ``(ii) from health care related taxes (as 
                        defined in paragraph (3)(A)), other than broad-
                        based health care related taxes (as defined in 
                        paragraph (3)(B)); or
                            ``(iii) from a broad-based health care 
                        related tax, if there is in effect a hold 
                        harmless provision (described in paragraph (4)) 
                        with respect to the tax.
                    ``(B) Reduction in administrative expenditures.--
                Notwithstanding the previous provisions of this 
                section, for purposes of determining the amount to be 
                paid to a State under this section for all quarters in 
                a Federal fiscal year (beginning with fiscal year 
                1996), the total amount expended during the fiscal year 
                for administrative expenditures under the medicaid plan 
                (as determined without regard to this subsection) shall 
                be reduced by the sum of any revenues received by the 
                State (or by a unit of local government in the State) 
                during such quarters from donations described in 
                paragraph (2)(C), to the extent the amount of such 
                donations exceeds 10 percent of the amounts expended 
                under the medicaid plan approved under this title 
                during the fiscal year for purposes described in 
                subsection (a)(3).
            ``(2) Provider-related donations.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `provider-related donation' means any donation 
                or other voluntary payment (whether in cash or in kind) 
                made (directly or indirectly) to a State or unit of 
                local government by--
                            ``(i) a health care provider (as defined in 
                        paragraph (5)(B));
                            ``(ii) an entity related to a health care 
                        provider (as defined in paragraph (5)(C)); or
                            ``(iii) an entity providing goods or 
                        services under the State plan for which payment 
                        is made to the State under subsection (a)(3).
                    ``(B) Bona fide provider-related donations.--For 
                purposes of paragraph (1)(A)(i)(I), the term `bona fide 
                provider-related donation' means a provider-related 
                donation that has no direct or indirect relationship 
                (as determined by the Secretary) to payments made under 
                this title to that provider, to providers furnishing 
                the same class of items and services as that provider, 
                or to any related entity, as established by the State 
                to the satisfaction of the Secretary. The Secretary may 
                by regulation specify types of provider-related 
                donations described in the previous sentence that will 
                be considered to be bona fide provider-related 
                donations.
                    ``(C) Donations described.--For purposes of 
                paragraph (1)(A)(i)(II), donations described in this 
                subparagraph are funds expended by a hospital, clinic, 
                or similar entity for the direct cost (including costs 
                of training and of preparing and distributing outreach 
                materials) of State or local agency personnel who are 
                stationed at the hospital, clinic, or entity to 
                determine the eligibility of individuals for medical 
                assistance under a medicaid plan approved under this 
                title and to provide outreach services to eligible or 
                potentially eligible individuals.
            ``(3) Health care related taxes.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `health care related tax' means a tax (as 
                defined in paragraph (5)(F)) that--
                            ``(i) is related to health care items or 
                        services, or to the provision of, the authority 
                        to provide, or payment for, such items or 
                        services; or
                            ``(ii) is not limited to such items or 
                        services but provides for treatment of 
                        individuals or entities that are providing or 
                        paying for such items or services that is 
                        different from the treatment provided to other 
                        individuals or entities.
                In applying clause (i), a tax is considered to relate 
                to health care items or services if at least 85 percent 
                of the burden of such tax falls on health care 
                providers.
                    ``(B) Broad-based health care related tax.--For 
                purposes of this subsection, the term `broad-based 
                health care related tax' means a health care related 
                tax which is imposed with respect to a class of health 
                care items or services (as described in paragraph 
                (5)(A)) or with respect to providers of such items or 
                services and which, except as provided in subparagraphs 
                (D) and (E)--
                            ``(i) is imposed at least with respect to 
                        all items or services in the class furnished by 
                        all non-Federal, nonpublic providers in the 
                        State (or, in the case of a tax imposed by a 
                        unit of local government, the area over which 
                        the unit has jurisdiction) or is imposed with 
                        respect to all non-Federal, nonpublic providers 
                        in the class; and
                            ``(ii) is imposed uniformly (in accordance 
                        with subparagraph (C)).
                    ``(C) Uniform imposition of tax.--
                            ``(i) In general.--Subject to clause (ii), 
                        for purposes of subparagraph (B)(ii), a tax is 
                        considered to be imposed uniformly if--
                                    ``(I) in the case of a tax 
                                consisting of a licensing fee or 
                                similar tax on a class of health care 
                                items or services (or providers of such 
                                items or services), the amount of the 
                                tax imposed is the same for every 
                                provider providing items or services 
                                within the class;
                                    ``(II) in the case of a tax 
                                consisting of a licensing fee or 
                                similar tax imposed on a class of 
                                health care items or services (or 
                                providers of such services) on the 
                                basis of the number of beds (licensed 
                                or otherwise) of the provider, or the 
                                number of patient days or other unit of 
                                service, the amount of the tax is the 
                                same for each bed, or each unit of 
                                service, of each provider of such items 
                                or services in the class;
                                    ``(III) in the case of a tax based 
                                on revenues or receipts with respect to 
                                a class of items or services (or 
                                providers of items or services) the tax 
                                is imposed at a uniform rate for all 
                                items and services (or providers of 
                                such items of services) in the class on 
                                all the gross revenues or receipts, or 
                                net operating revenues, relating to the 
                                provision of all such items or services 
                                (or all such providers) in the State 
                                (or, in the case of a tax imposed by a 
                                unit of local government within the 
                                State, in the area over which the unit 
                                has jurisdiction); or
                                    ``(IV) in the case of any other 
                                tax, the State establishes to the 
                                satisfaction of the Secretary that the 
                                tax is imposed uniformly.
                            ``(ii) Determination of nonuniformity.--
                        Subject to subparagraphs (D) and (E), a tax 
                        imposed with respect to a class of health care 
                        items and services is not considered to be 
                        imposed uniformly if the tax provides for any 
                        credits, exclusions, or deductions which have 
                        as their purpose or effect the return to 
                        providers of all or a portion of the tax paid 
                        in a manner that is inconsistent with 
                        subclauses (I) and (II) of subparagraph (E)(ii) 
                        or provides for a hold harmless provision 
                        described in paragraph (4).
                    ``(D) Exceptions to nonuniformity determinations.--
                A tax imposed with respect to a class of health care 
                items and services is considered to be imposed 
                uniformly--
                            ``(i) notwithstanding that the tax is not 
                        imposed with respect to items or services (or 
                        the providers thereof) for which payment is 
                        made under a medicaid plan approved under this 
                        title or title XVIII; or
                            ``(ii) in the case of a tax described in 
                        subparagraph (C)(i)(III), notwithstanding that 
                        the tax provides for exclusion (in whole or in 
                        part) of revenues or receipts from a medicaid 
                        plan approved under this title or title XVIII.
                    ``(E) Waiver application for treatments as broad-
                based tax.--
                            ``(i) In general.--A State may submit an 
                        application to the Secretary requesting that 
                        the Secretary treat a tax as a broad-based 
                        health care related tax, notwithstanding that 
                        the tax does not apply to all health care items 
                        or services in class (or all providers of such 
                        items and services), provides for a credit, 
                        deduction, or exclusion, is not applied 
                        uniformly, or otherwise does not meet the 
                        requirements of subparagraph (B) or (C). 
                        Permissible waivers may include exemptions for 
                        rural or sole-community providers.
                            ``(ii) Waiver approval requirements.--The 
                        Secretary shall approve such an application if 
                        the State establishes to the satisfaction of 
                        the Secretary that--
                                    ``(I) the net impact of the tax and 
                                associated expenditures under the 
                                medicaid plan approved under this title 
                                as proposed by the State is generally 
                                redistributive in nature; and
                                    ``(II) the amount of the tax is not 
                                directly correlated to payments under 
                                such plan for items or services with 
                                respect to which the tax is imposed.
                            ``(iii) Determination of redistributive 
                        nature.--In determining whether a tax for which 
                        a waiver is sought is generally redistributive 
                        in nature, the Secretary shall, if requested by 
                        the State--
                                    ``(I) compare the tax to a tax that 
                                meets any of the uniformity 
                                requirements of subparagraphs (C) or 
                                (D); and
                                    ``(II) consider in the aggregate 
                                all classes (or providers) of health 
                                care items or services that are subject 
                                to the same tax.
                            ``(iv) Term of waiver.--A tax for which the 
                        Secretary has approved an application for 
                        waiver shall not be subject to the requirements 
                        of a further waiver application solely because 
                        a change in the rate of tax.
                    ``(F) Treatment of managed care premiums.--No tax 
                on the payment or receipt of premiums or similar 
                periodic payments to health maintenance organizations 
                or health care insurers shall be treated as a health 
                care related tax unless and until the Secretary, after 
                consultation with the States pursuant to section 5(c) 
                of the Medicaid Voluntary Contribution and Provider-
                Specific Tax Amendments of 1991, adopts a final 
                regulation specifically subjecting such taxes, or any 
                of such taxes, to the provisions of this subsection.
            ``(4) Hold harmless determination.--For purposes of 
        paragraph (1)(A)(iii), there is in effect a hold harmless 
        provision with respect to a broad-based health care related tax 
        imposed with respect to a class of items or services if the 
        Secretary determines that any of the following applies:
                    ``(A) The State or other unit of government 
                imposing the tax provides (directly or indirectly) for 
                a payment (other than under a medicaid plan approved 
                under this title) to taxpayers and the amount of such 
                payment is positively correlated either to the amount 
                of such tax or to the difference between the amount of 
                the tax and the amount of payment under the medicaid 
                plan.
                    ``(B) All or any portion of the payment made under 
                this title to the taxpayer varies based only upon the 
                amount of the total tax paid.
                    ``(C) The State or other unit of government 
                imposing the tax provides (directly or indirectly) for 
                any payment, offset, or waiver that guarantees to hold 
                taxpayers harmless for any portion of the costs of the 
                tax.
        Notwithstanding the provisions of this paragraph, no hold 
        harmless shall be found to be in effect with respect to a tax 
        enacted or extended prior to October 1, 1995, because of the 
        existence in the State of a program of financial aid or of tax 
        credits for recipients of health care items or services from 
        providers that are subject to an otherwise valid health care 
        related tax.
            ``(5) Definitions and special rules.--For purposes of this 
        subsection:
                    ``(A) Classes of health care items and services.--
                Each of the following shall be considered a separate 
                class of health care items and services:
                            ``(i) Inpatient hospital services.
                            ``(ii) Outpatient hospital services.
                            ``(iii) Nursing facility services (other 
                        than services of intermediate care facilities 
                        for the mentally retarded).
                            ``(iv) Services of intermediate care 
                        facilities for the mentally retarded.
                            ``(v) Physicians' services.
                            ``(vi) Home health care services.
                            ``(vii) Outpatient prescription drugs.
                            ``(viii) Services of health maintenance 
                        organizations (and other organizations with 
                        contracts under section 2114) not otherwise 
                        subject to a tax described in this subsection.
                            ``(ix) Such other classification of health 
                        care items and services consistent with this 
                        subparagraph as the Secretary may establish by 
                        regulation.
                    ``(B) Health care provider.--The term `health care 
                provider' means an individual or person that receives 
                payments for the provision of health care items or 
                services.
                    ``(C) Related entities.--An entity is considered to 
                be `related' to a health care provider if the entity--
                            ``(i) is an organization, association, 
                        corporation or partnership formed by or on 
                        behalf of health care providers;
                            ``(ii) is a person with an ownership or 
                        control interest (as defined in section 
                        1124(a)(3)) in the provider;
                            ``(iii) is the employee, spouse, parent, 
                        child, or sibling of the provider (or of a 
                        person described in clause (ii)); or
                            ``(iv) has a similar, close relationship 
                        (as defined in regulations) to the provider.
                    ``(D) State.--The term `State' means only the 50 
                States and the District of Columbia.
                    ``(E) State fiscal year.--The `State fiscal year' 
                means, with respect to a specified year, a State fiscal 
                year ending in that specified year.
                    ``(F) Tax.--The term `tax' includes any licensing 
                fee, assessment, or other mandatory payment, but does 
                not include any fee or charge associated with a State 
                regulatory, authorizing, financial assistance, or other 
                program in which health care providers are eligible to 
                participate, or payment of a criminal or civil fine or 
                penalty (other than a fine or penalty imposed in lieu 
                of or instead of a fee, assessment, or other mandatory 
                payment).
                    ``(G) Unit of local government.--The term `unit of 
                local government' means, with respect to a State, a 
                city, county, special purpose district, or other 
                governmental unit in the State.
            ``(6) Certain imposition of health care related taxes 
        prohibited.--No payment may be made to a State under this 
        section with respect to State expenditures attributable to 
        health care related taxes or broad-based health care related 
        taxes imposed on hospitals described in section 501(c)(3) of 
        the Internal Revenue Code of 1986 which do not accept 
        reimbursement under a medicaid plan.
    ``(e) Treatment of State Expenditures.--
            ``(1) In general.--No payment may be made to a State under 
        this section unless such State provides not less than 40 
        percent of the non-Federal share of the expenditures under the 
        medicaid plan.
            ``(2) Treatment of certain expenditures.--In determining 
        State expenditures under this section:
                    ``(A) Transfers from other state and local 
                programs.--Such expenditures shall not include funding 
                supplanted by transfers from other State and local 
                programs.
                    ``(B) Exclusion of federal amounts.--Such 
                expenditures shall not include amounts made available 
                by the Federal Government and any State funds which are 
                used to match Federal funds or are expended as a 
                condition of receiving Federal funds under Federal 
                programs other than under this title.
    ``(f) Special Rules.--For purposes of this title:
            ``(1) Commonwealths and territories.--In the case of Puerto 
        Rico, the Virgin Islands, Guam, the Northern Mariana Islands, 
        and American Samoa, the Federal medical assistance percentages 
        are 50 percent.
            ``(2) Indian health programs.--The Federal medical 
        assistance percentages shall be 100 percent with respect to the 
        amounts expended as medical assistance for services which are 
        provided by--
                    ``(A) the Indian Health Service;
                    ``(B) an Indian health program operated by an 
                Indian tribe or tribal organization pursuant to a 
                contract, grant, cooperative agreement, or compact with 
                the Indian Health Service under authority of the Indian 
                Self-Determination Act (25 U.S.C. 450 et seq.); or
                    ``(C) an urban Indian health program operated by an 
                urban Indian organization pursuant to a grant or 
                contract with the Indian Health Service under authority 
                of title V of the Indian Health Care Improvement Act 
                (25 U.S.C. 1601 et seq.).
            ``(3) No state matching required for certain 
        expenditures.--In applying subsection (a)(1) with respect to 
        medical assistance provided to unlawful aliens pursuant to the 
        exception specified in section 2123(f)(2), payment shall be 
        made for the amount of such assistance without regard to any 
        need for a State match.
            ``(4) Special rule.--
                    ``(A) In general.--Notwithstanding subsection (a), 
                in order to receive the full State outlay allotment 
                described in section 2121(c)(6), a State shall expend 
                State funds in a fiscal year under a medicaid plan 
                approved under this title in an amount not less than 
                the adjusted base year State expenditures, plus an 
                applicable percentage of the difference between such 
                expenditures and the amount necessary to qualify for 
                the full State outlay allotment so described in such 
                fiscal year as determined under this section without 
                regard to this paragraph.
                    ``(B) Reduction in allotment if expenditure limit 
                not met.--In the event a State fails to expend State 
                funds in an amount required by subparagraph (A) for a 
                fiscal year, the outlay allotment described in section 
                2121(c)(6) for such year shall be reduced by an amount 
                which bears the same ratio to such outlay allotment as 
                the State funds expended in such fiscal year bears to 
                the amount required by subparagraph (A).
                    ``(C) Adjusted base year state expenditures.--For 
                purposes of this paragraph, the term `adjusted base 
                year State expenditures' means--
                            ``(i) for New Hampshire, $203,000,000; and
                            ``(ii) for Louisiana, $355,000,000.
                    ``(D) Applicable percentage.--For purposes of this 
                paragraph, the applicable percentage for any fiscal 
                year is specified in the following table:

                                                             Applicable
``Fiscal year:                                              Percentage:
    1996..........................................                  20 
    1997..........................................                  40 
    1998..........................................                  60 
    1999..........................................                  80 
    2000..........................................                 100.
    ``(g) Carryover Amounts Available for Payment.--
            ``(1) Carryover of allotment permitted.--
                    ``(A) In general.--If the amount of the payment to 
                a State under this section for a fiscal year does not 
                exceed--
                            ``(i) the amount of the allotment provided 
                        to such State under section 2121 for such 
                        fiscal year, plus
                            ``(ii) subject to subparagraph (B), the 
                        amount available to the State for such fiscal 
                        year (other than amounts available under 
                        paragraph (2)) resulting from the application 
                        of this subparagraph in the preceding fiscal 
                        year,
        then the amount of the difference shall be added to the amount 
        of the allotment otherwise provided under section 2121 for the 
        succeeding fiscal year.
                    ``(B) Maximum carryover amount.--With respect to 
                each fiscal year, the maximum amount of the difference 
                described in subparagraph (A) which may be added to the 
                allotment otherwise provided under section 2121 to a 
                State may not exceed the total amount for the 2 
                immediately preceding fiscal years of the difference in 
                each such fiscal year between the payment to a State 
                under this section and the amount of the allotment 
                provided under section 2121.
            ``(2) Excess amounts reallocated.--
                    ``(A) In general.--The sum of the amounts in excess 
                of the maximum carryover amounts determined under 
                paragraph (1)(B) for any fiscal year for all of the 50 
                States and the District of Columbia shall be available 
                for payment in such fiscal year to qualified States on 
                a quarterly basis as otherwise determined under this 
                section.
                    ``(B) Qualified state.--For purposes of 
                subparagraph (A), in the case of any fiscal year, a 
                qualified State is a State--
                            ``(i) with a State outlay allotment under 
                        section 2121 which is--
                                    ``(I) subject to the ceiling 
                                determined under section 2121(c)(3)(B) 
                                for the fiscal year,
                                    ``(II) not subject to such ceiling 
                                or to the floor determined under 
                                section 2121(c)(3)(A), or
                                    ``(III) subject to such floor;
                            ``(ii) which has no amount of difference as 
                        determined under paragraph (1) for any 
                        preceding fiscal year which may be added to the 
                        amount of the allotment provided under section 
                        2121 for the fiscal year; and
                            ``(iii) which applies for payments under 
                        subparagraph (A) in such manner as the 
                        Secretary determines.
                    ``(C) Allocation rules.--For any fiscal year, in 
                the event the total amount of payments applied for by 
                all qualified States under subparagraph (B) exceeds the 
                excess amount available for such fiscal year under 
                subparagraph (A), the Secretary shall allocate such 
                payments among groups of qualified States in the 
                following order:
                            ``(i) All qualified States described in 
                        subparagraph (B)(i)(I).
                            ``(ii) All qualified States described in 
                        subparagraph (B)(i)(II).
                            ``(iii) All qualified States described in 
                        subparagraph (B)(i)(III).
                If such excess amount is not sufficient with respect to 
                any group of qualified States, the Secretary shall 
                allocate such payments proportionately among the 
                qualified States in such group.
    ``(h) Additional Amounts Available for Payment.--
            ``(1) Appropriation.--There is hereby authorized to be 
        appropriated and there are appropriated additional amounts 
        described in paragraph (2) which shall be paid to the States 
        described in such paragraph and may be used without fiscal year 
        limitation.
            ``(2) Additional amounts described.--The additional amounts 
        described in this paragraph are as follows:
                    ``(A) For Arizona, $63,000,000.
                    ``(B) For Florida, $250,000,000.
                    ``(C) For Georgia, $34,000,000.
                    ``(D) For Kentucky, $76,500,000.
                    ``(E) For South Carolina, $181,000,000.
                    ``(F) For Washington, $250,000,000.
                    ``(G) For Vermont, $50,000,000.

``SEC. 2123. LIMITATION ON USE OF FUNDS; DISALLOWANCE.

    ``(a) In General.--Funds provided to a State under this title shall 
only be used to carry out the purposes of this title.
    ``(b) Disallowances for Excluded Providers.--
            ``(1) In general.--No payment shall be made to a State 
        under this part for expenditures for items and services 
        furnished--
                    ``(A) by a provider who was excluded from 
                participation under title V, XVIII, or XX or under this 
                title pursuant to section 1128, 1128A, 1156, or 
                1842(j)(2); or
                    ``(B) under the medical direction or on the 
                prescription of a physician who was so excluded, if the 
                provider of the services knew or had reason to know of 
                the exclusion.
            ``(2) Exception for emergency services.--Paragraph (1) 
        shall not apply to emergency items or services, not including 
        hospital emergency room services.
    ``(c) Limitation.--No Federal financial assistance is available for 
expenditures under the medicaid plan for medically-related services for 
a quarter to the extent such expenditures exceed 5 percent of the total 
expenditures under the plan for the quarter.
    ``(d) Treatment of Third Party Liability.--No payment shall be made 
to a State under this part for expenditures for medical assistance 
provided for an individual under its medicaid plan to the extent that a 
private insurer (as defined by the Secretary by regulation and 
including a group health plan (as defined in section 607(1) of the 
Employee Retirement Income Security Act of 1974), a service benefit 
plan, and a health maintenance organization) would have been obligated 
to provide such assistance but for a provision of its insurance 
contract which has the effect of limiting or excluding such obligation 
because the individual is eligible for or is provided medical 
assistance under the plan.
    ``(e) Medicaid as Secondary Payer.--Except as otherwise provided by 
law, no payment shall be made to a State under this part for 
expenditures for medical assistance provided for an individual under 
its medicaid plan to the extent that payment has been made or can 
reasonably be expected to be made promptly (as determined in accordance 
with regulations) under any other federally operated or financed health 
care program, other than a program operated or financed by the Indian 
Health Service, as identified by the Secretary. For purposes of this 
subsection, rules similar to the rules for overpayments under section 
2122(b) shall apply.
    ``(f) Limitation on Payments to Emergency Services for Nonlawful 
Aliens.--
            ``(1) In general.--Notwithstanding the preceding provisions 
        of this section, except as provided in paragraph (2), no 
        payment shall be made to a State under this part for medical 
        assistance furnished to an alien who is not lawfully admitted 
        for permanent residence or otherwise permanently residing in 
        the United States under color of law.
            ``(2) Exception for emergency services.--Payment may be 
        made under this section for care and services that are 
        furnished to an alien described in paragraph (1) only if--
                    ``(A) such care and services are necessary for the 
                treatment of an emergency medical condition of the 
                alien;
                    ``(B) such alien otherwise meets the eligibility 
                requirements for medical assistance under the medicaid 
                plan (other than a requirement of the receipt of aid or 
                assistance under title IV, supplemental security income 
                benefits under title XVI, or a State supplementary 
                payment); and
                    ``(C) such care and services are not related to an 
                organ transplant procedure.
            ``(3) Emergency medical condition defined.--For purposes of 
        this subsection, the term `emergency medical condition' means a 
        medical condition (including emergency labor and delivery) 
        manifesting itself by acute symptoms of sufficient severity 
        (including severe pain) such that the absence of immediate 
        medical attention could reasonably be expected to result in--
                    ``(A) placing the patient's health in serious 
                jeopardy;
                    ``(B) serious impairment to bodily functions; or
                    ``(C) serious dysfunction of any bodily organ or 
                part.
    ``(g) Unauthorized Use of Funds.--No payment shall be made to a 
State under this part with respect to State expenditures--
            ``(1) to purchase or improve land or construct or remodel 
        buildings;
            ``(2) to pay basic room and board costs, except when 
        provided as part of a temporary, respite care service in a 
        facility approved by the State which is not a private 
        residence;
            ``(3) to provide educational services which the State makes 
        generally available to its residents without cost and without 
        regard to income; or
            ``(4) to provide vocational rehabilitation or other 
        employment training and related services which are available to 
        eligible individuals through other Federal, State or local 
        programs and funding sources.

``SEC. 2124. GRANT PROGRAM FOR COMMUNITY HEALTH CENTERS AND RURAL 
              HEALTH CLINICS.

    ``(a) In General.--From the pool amount determined under section 
2121(b)(1) for a fiscal year, the Secretary shall set aside an amount 
equal to 1 percent of such amount.
    ``(b) Use of Funds.--Fifty percent of the amount set aside by the 
Secretary under subsection (a) shall only be used for grants for 
primary and preventive health care services provided at rural health 
clinics (as defined in section 1861(aa)(2)) and 50 percent of such 
amount shall only be used for grants for such services provided at 
Federally-qualified health centers (as defined in section 1861(aa)(4)).
    ``(c) Grant Amounts.--The Secretary shall provide the methodology 
for determining the amount of each grant made under subsection (b).

                ``Part D--Program Integrity and Quality

``SEC. 2131. USE OF AUDITS TO ACHIEVE FISCAL INTEGRITY.

    ``(a) Financial Audits of Program.--
            ``(1) In general.--Each medicaid plan shall provide for an 
        annual audit of the State's expenditures from amounts received 
        under this title, in compliance with chapter 75 of title 31, 
        United States Code.
            ``(2) Verification audits.--If, after consultation with the 
        State and the Comptroller General and after a fair hearing, the 
        Secretary determines that a State's audit under paragraph (1) 
        was performed in substantial violation of chapter 75 of title 
        31, United States Code, the Secretary may--
                    ``(A) require that the State provide for a 
                verification audit in compliance with such chapter; or
                    ``(B) conduct such a verification audit.
            ``(3) Availability of audit reports.--Within 30 days after 
        completion of each audit or verification audit under this 
        subsection, the State shall--
                    ``(A) provide the Secretary with a copy of the 
                audit report, including the State's response to any 
                recommendations of the auditor; and
                    ``(B) make the audit report available for public 
                inspection in the same manner as proposed medicaid plan 
                amendments are made available under section 2105.
    ``(b) Fiscal Controls.--
            ``(1) In general.--With respect to the accounting and 
        expenditure of funds under this title, each State shall adopt 
        and maintain such fiscal controls, accounting procedures, and 
        data processing safeguards as the State deems reasonably 
        necessary to assure the fiscal integrity of the State's 
        activities under this title.
            ``(2) Consistency with generally accepted accounting 
        principles.--Such controls and procedures shall be generally 
        consistent with generally accepted accounting principles as 
        recognized by the Governmental Accounting Standards Board or 
        the Comptroller General.
    ``(c) Audits of Providers.--Each medicaid plan shall provide that 
the records of any entity providing items or services for which payment 
may be made under the plan may be audited as necessary to ensure that 
proper payments are made under the plan.

``SEC. 2132. FRAUD PREVENTION PROGRAM.

    ``(a) Establishment.--Each medicaid plan shall provide for the 
establishment and maintenance of an effective program for the detection 
and prevention of fraud and abuse by beneficiaries, providers, and 
others in connection with the operation of the program.
    ``(b) Program Requirements.--The program established pursuant to 
subsection (a) shall include at least the following requirements:
            ``(1) Disclosure of information.--Any disclosing entity (as 
        defined in section 1124(a)) receiving payments under the 
        medicaid plan shall comply with the requirements of section 
        1124.
            ``(2) Supply of information.--An entity (other than an 
        individual practitioner or a group of practitioners) that 
        furnishes, or arranges for the furnishing of, an item or 
        service under the medicaid plan shall supply upon request 
        specifically addressed to the entity by the Secretary or the 
        State agency the information described in section 1128(b)(9).
            ``(3) Exclusion.--
                    ``(A) In general.--The medicaid plan shall exclude 
                any specified individual or entity from participation 
                in the plan for the period specified by the Secretary 
                when required by the Secretary to do so pursuant to 
                section 1128 or section 1128A, and provide that no 
                payment may be made under the plan with respect to any 
                item or service furnished by such individual or entity 
                during such period.
                    ``(B) Authority.--In addition to any other 
                authority, a State may exclude any individual or entity 
                for purposes of participating under the medicaid plan 
                for any reason for which the Secretary could exclude 
                the individual or entity from participation in a 
                program under title XVIII or under section 1128, 1128A, 
                or 1866(b)(2).
            ``(4) Notice.--The medicaid plan shall provide that 
        whenever a provider of services or any other person is 
        terminated, suspended, or otherwise sanctioned or prohibited 
        from participating under the plan, the State agency responsible 
        for administering the plan shall promptly notify the Secretary 
        and, in the case of a physician, the State medical licensing 
        board of such action.
            ``(5) Access to information.--The medicaid plan shall 
        provide that the State will provide information and access to 
        certain information respecting sanctions taken against health 
        care practitioners and providers by State licensing authorities 
        in accordance with section 2133.

``SEC. 2133. INFORMATION CONCERNING SANCTIONS TAKEN BY STATE LICENSING 
              AUTHORITIES AGAINST HEALTH CARE PRACTITIONERS AND 
              PROVIDERS.

    ``(a) Information Reporting Requirement.--The requirement referred 
to in section 2132(b)(5) is that the State must provide for the 
following:
            ``(1) Information reporting system.--The State must have in 
        effect a system of reporting the following information with 
        respect to formal proceedings (as defined by the Secretary in 
        regulations) concluded against a health care practitioner or 
        entity by any authority of the State (or of a political 
        subdivision thereof) responsible for the licensing of health 
        care practitioners (or any peer review organization or private 
        accreditation entity reviewing the services provided by health 
        care practitioners) or entities:
                    ``(A) Any adverse action taken by such licensing 
                authority as a result of the proceeding, including any 
                revocation or suspension of a license (and the length 
                of any such suspension), reprimand, censure, or 
                probation.
                    ``(B) Any dismissal or closure of the proceedings 
                by reason of the practitioner or entity surrendering 
                the license or leaving the State or jurisdiction.
                    ``(C) Any other loss of the license of the 
                practitioner or entity, whether by operation of law, 
                voluntary surrender, or otherwise.
                    ``(D) Any negative action or finding by such 
                authority, organization, or entity regarding the 
                practitioner or entity.
            ``(2) Access to documents.--The State must provide the 
        Secretary (or an entity designated by the Secretary) with 
        access to such documents of the authority described in 
        paragraph (1) as may be necessary for the Secretary to 
        determine the facts and circumstances concerning the actions 
        and determinations described in such paragraph for the purpose 
        of carrying out this Act.
    ``(b) Form of Information.--The information described in subsection 
(a)(1) shall be provided to the Secretary (or to an appropriate private 
or public agency, under suitable arrangements made by the Secretary 
with respect to receipt, storage, protection of confidentiality, and 
dissemination of information) in such a form and manner as the 
Secretary determines to be appropriate in order to provide for 
activities of the Secretary under this Act and in order to provide, 
directly or through suitable arrangements made by the Secretary, 
information--
            ``(1) to agencies administering Federal health care 
        programs, including private entities administering such 
        programs under contract;
            ``(2) to licensing authorities described in subsection 
        (a)(1);
            ``(3) to State agencies administering or supervising the 
        administration of State health care programs (as defined in 
        section 1128(h));
            ``(4) to utilization and quality control peer review 
        organizations described in part B of title XI and to 
        appropriate entities with contracts under section 1154(a)(4)(C) 
        with respect to eligible organizations reviewed under the 
        contracts;
            ``(5) to State medicaid fraud control units (as defined in 
        section 2134(b));
            ``(6) to hospitals and other health care entities (as 
        defined in section 431 of the Health Care Quality Improvement 
        Act of 1986), with respect to physicians or other licensed 
        health care practitioners that have entered (or may be 
        entering) into an employment or affiliation relationship with, 
        or have applied for clinical privileges or appointments to the 
        medical staff of, such hospitals or other health care entities 
        (and such information shall be deemed to be disclosed pursuant 
        to section 427 of, and be subject to the provisions of, that 
        Act);
            ``(7) to the Attorney General and such other law 
        enforcement officials as the Secretary deems appropriate; and
            ``(8) upon request, to the Comptroller General,
        in order for such authorities to determine the fitness of 
        individuals to provide health care services, to protect the 
        health and safety of individuals receiving health care through 
        such programs, and to protect the fiscal integrity of such 
        programs.
    ``(c) Confidentiality of Information Provided.--The Secretary shall 
provide for suitable safeguards for the confidentiality of the 
information furnished under subsection (a). Nothing in this subsection 
shall prevent the disclosure of such information by a party which is 
otherwise authorized, under applicable State law, to make such 
disclosure.
    ``(d) Appropriate Coordination.--The Secretary shall provide for 
the maximum appropriate coordination in the implementation of 
subsection (a) of this section and section 422 of the Health Care 
Quality Improvement Act of 1986 and section 1128E.

``SEC. 2134. STATE MEDICAID FRAUD CONTROL UNITS.

    ``(a) In General.--Each medicaid plan shall provide for a State 
medicaid fraud control unit that effectively carries out the functions 
and requirements described in such subsection, unless the State 
demonstrates to the satisfaction of the Secretary that the effective 
operation of such a unit in the State would not be cost-effective 
because minimal fraud exists in connection with the provision of 
covered services to eligible individuals under the plan, and that 
beneficiaries under the plan will be protected from abuse and neglect 
in connection with the provision of medical assistance under the plan 
without the existence of such a unit.
    ``(b) Units Described.--For purposes of this section, the term 
`State medicaid fraud control unit' means a single identifiable entity 
of the State government which meets the following requirements:
            ``(1) Organization.--The entity--
                    ``(A) is a unit of the office of the State Attorney 
                General or of another department of State government 
                which possesses statewide authority to prosecute 
                individuals for criminal violations;
                    ``(B) is in a State the constitution of which does 
                not provide for the criminal prosecution of individuals 
                by a statewide authority and has formal procedures 
                that--
                            ``(i) assure its referral of suspected 
                        criminal violations relating to the program 
                        under this title to the appropriate authority 
                        or authorities in the State for prosecution, 
                        and
                            ``(ii) assure its assistance of, and 
                        coordination with, such authority or 
                        authorities in such prosecutions; or
                    ``(C) has a formal working relationship with the 
                office of the State Attorney General and has formal 
                procedures (including procedures for its referral of 
                suspected criminal violations to such office) which 
                provide effective coordination of activities between 
                the entity and such office with respect to the 
                detection, investigation, and prosecution of suspected 
                criminal violations relating to the program under this 
                title.
            ``(2) Independence.--The entity is separate and distinct 
        from any State agency that has principal responsibilities for 
        administering or supervising the administration of the medicaid 
        plan.
            ``(3) Function.--The entity's function is conducting a 
        statewide program for the investigation and prosecution of 
        violations of all applicable State laws regarding any and all 
        aspects of fraud in connection with any aspect of the provision 
        of medical assistance and the activities of providers of such 
        assistance under the medicaid plan.
            ``(4) Review of complaints.--The entity has procedures for 
        reviewing complaints of the abuse and neglect of patients of 
        health care facilities which receive payments under the 
        medicaid plan approved under this title, and, where 
        appropriate, for acting upon such complaints under the criminal 
        laws of the State or for referring them to other State agencies 
        for action.
            ``(5) Overpayments.--
                    ``(A) In general.--The entity provides for the 
                collection, or referral for collection to a single 
                State agency, of overpayments that are made under the 
                medicaid plan to health care providers and that are 
                discovered by the entity in carrying out its 
                activities.
                    ``(B) Treatment of certain overpayments.--If an 
                overpayment is the direct result of the failure of the 
                provider (or the provider's billing agent) to adhere to 
                a change in the State's billing instructions, the 
                entity may recover the overpayment only if the entity 
                demonstrates that the provider (or the provider's 
                billing agent) received reasonable written or 
                electronic notice of the change in the billing 
                instructions before the submission of the claims on 
                which the overpayment is based.
            ``(6) Personnel.--The entity employs such auditors, 
        attorneys, investigators, and other necessary personnel and is 
        organized in such a manner as is necessary to promote the 
        effective and efficient conduct of the entity's activities.

``SEC. 2135. RECOVERIES FROM THIRD PARTIES AND OTHERS.

    ``(a) Third Party Liability.--Each medicaid plan shall provide for 
reasonable steps--
            ``(1) to ascertain the legal liability of third parties to 
        pay for care and services available under the plan, including 
        the collection of sufficient information to enable States to 
        pursue claims against third parties; and
            ``(2) to seek reimbursement for medical assistance provided 
        to the extent legal liability is established if the amount 
        expected to be recovered exceeds the costs of the recovery.
    ``(b) Beneficiary Protection.--
            ``(1) In general.--Each medicaid plan shall provide that in 
        the case of a person furnishing services under the plan for 
        which a third party may be liable for payment--
                    ``(A) the person may not seek to collect from the 
                individual (or financially responsible relative) 
                payment of an amount for the service more than could be 
                collected under the plan in the absence of such third 
                party liability; and
                    ``(B) may not refuse to furnish services to such an 
                individual because of a third party's potential 
                liability for payment for the service.
            ``(2) Penalty.--A medicaid plan may provide for a reduction 
        of any payment amount otherwise due with respect to a person 
        who furnishes services under the plan in an amount equal to up 
        to 3 times the amount of any payment sought to be collected by 
        that person in violation of paragraph (1)(A).
    ``(c) General Liability.--The State shall prohibit any health 
insurer, including a group health plan as defined in section 607 of the 
Employee Retirement Income Security Act of 1974, a service benefit 
plan, or a health maintenance organization, in enrolling an individual 
or in making any payments for benefits to the individual or on the 
individual's behalf, from taking into account that the individual is 
eligible for or is provided medical assistance under a medicaid plan 
for any State.
    ``(d) Acquisition of Rights of Beneficiaries.--To the extent that 
payment has been made under a medicaid plan in any case where a third 
party has a legal liability to make payment for such assistance, the 
State shall have in effect laws under which, to the extent that payment 
has been made under the plan for health care items or services 
furnished to an individual, the State is considered to have acquired 
the rights of such individual to payment by any other party for such 
health care items or services.
    ``(e) Assignment of Medical Support Rights.--The medicaid plan 
shall provide for mandatory assignment of rights of payment for medical 
support and other medical care owed to recipients in accordance with 
section 2136.
    ``(f) Required Laws Relating to Medical Child Support.--
            ``(1) In general.-- Each State with a medicaid plan shall 
        have in effect the following laws:
                    ``(A) A law that prohibits an insurer from denying 
                enrollment of a child under the health coverage of the 
                child's parent on the ground that--
                            ``(i) the child was born out of wedlock;
                            ``(ii) the child is not claimed as a 
                        dependent on the parent's Federal income tax 
                        return; or
                            ``(iii) the child does not reside with the 
                        parent or in the insurer's service area.
                    ``(B) In any case in which a parent is required by 
                a court or administrative order to provide health 
                coverage for a child and the parent is eligible for 
                family health coverage through an insurer, a law that 
                requires such insurer--
                            ``(i) to permit such parent to enroll under 
                        such family coverage any such child who is 
                        otherwise eligible for such coverage (without 
                        regard to any enrollment season restrictions);
                            ``(ii) if such a parent is enrolled but 
                        fails to make application to obtain coverage of 
                        such child, to enroll such child under such 
                        family coverage upon application by the child's 
                        other parent or by the State agency 
                        administering the program under this title or 
                        part D of title IV; and
                            ``(iii) not to disenroll, or eliminate 
                        coverage of, such a child unless the insurer is 
                        provided satisfactory written evidence that--
                                    ``(I) such court or administrative 
                                order is no longer in effect, or
                                    ``(II) the child is or will be 
                                enrolled in comparable health coverage 
                                through another insurer which will take 
                                effect not later than the effective 
                                date of such disenrollment.
                    ``(C) In any case in which a parent is required by 
                a court or administrative order to provide health 
                coverage for a child and the parent is eligible for 
                family health coverage through an employer doing 
                business in the State, a law that requires such 
                employer--
                            ``(i) to permit such parent to enroll under 
                        such family coverage any such child who is 
                        otherwise eligible for such coverage (without 
                        regard to any enrollment season restrictions);
                            ``(ii) if such a parent is enrolled but 
                        fails to make application to obtain coverage of 
                        such child, to enroll such child under such 
                        family coverage upon application by the child's 
                        other parent or by the State agency 
                        administering the program under this title or 
                        part D of title IV; and
                            ``(iii) not to disenroll, or eliminate 
                        coverage of, any such child unless--
                                    ``(I) the employer is provided 
                                satisfactory written evidence that such 
                                court or administrative order is no 
                                longer in effect, or the child is or 
                                will be enrolled in comparable health 
                                coverage which will take effect not 
                                later than the effective date of such 
                                disenrollment, or
                                    ``(II) the employer has eliminated 
                                family health coverage for all of its 
                                employees; and
                            ``(iv) to withhold from such employee's 
                        compensation the employee's share (if any) of 
                        premiums for health coverage (except that the 
                        amount so withheld may not exceed the maximum 
                        amount permitted to be withheld under section 
                        303(b) of the Consumer Credit Protection Act), 
                        and to pay such share of premiums to the 
                        insurer, except that the Secretary may provide 
                        by regulation for appropriate circumstances 
                        under which an employer may withhold less than 
                        such employee's share of such premiums.
                    ``(D) A law that prohibits an insurer from imposing 
                requirements on a State agency, which has been assigned 
                the rights of an individual eligible for medical 
                assistance under a medicaid plan approved under this 
                title and covered for health benefits from the insurer, 
                that are different from requirements applicable to an 
                agent or assignee of any other individual so covered.
                    ``(E) A law that requires an insurer, in any case 
                in which a child has health coverage through the 
                insurer of a noncustodial parent--
                            ``(i) to provide such information to the 
                        custodial parent as may be necessary for the 
                        child to obtain benefits through such coverage;
                            ``(ii) to permit the custodial parent (or 
                        provider, with the custodial parent's approval) 
                        to submit claims for covered services without 
                        the approval of the noncustodial parent; and
                            ``(iii) to make payment on claims submitted 
                        in accordance with clause (ii) directly to such 
                        custodial parent, the provider, or the State 
                        agency.
                    ``(F) A law that permits the State agency under the 
                medicaid plan approved under this title to garnish the 
                wages, salary, or other employment income of, and 
                requires withholding amounts from State tax refunds to, 
                any person who--
                            ``(i) is required by court or 
                        administrative order to provide coverage of the 
                        costs of health services to a child who is 
                        eligible for medical assistance under a 
                        medicaid plan approved under this title;
                            ``(ii) has received payment from a third 
                        party for the costs of such services to such 
                        child; but
                            ``(iii) has not used such payments to 
                        reimburse, as appropriate, either the other 
                        parent or guardian of such child or the 
                        provider of such services,
                to the extent necessary to reimburse the State agency 
                for expenditures for such costs under its plan under 
                this title, but any claims for current or past-due 
                child support shall take priority over any such claims 
                for the costs of such services.
            ``(2) Definition.--For purposes of this subsection, the 
        term `insurer' includes a group health plan, as defined in 
        section 607(1) of the Employee Retirement Income Security Act 
        of 1974, a health maintenance organization, and an entity 
        offering a service benefit plan.
    ``(g) Estate Recoveries and Liens Permitted.--
            ``(1) In general.--Except as provided in paragraph (2), a 
        State may take such actions as it considers appropriate to 
        adjust or recover from the individual or the individual's 
        estate any amounts paid as medical assistance to or on behalf 
        of the individual under the medicaid plan, including through 
        the imposition of liens against the property or estate of the 
        individual.
            ``(2) No lien on homes or family farms.--For purposes of 
        paragraph (1), a State may not impose a lien on the principal 
        residence (within the meaning of section 1034 of the Internal 
        Revenue Code of 1986) of moderate value or the family farm 
        owned by the individual as a condition of the spouse of the 
        individual receiving nursing facility or other long term care 
        benefits under its medicaid plan.

``SEC. 2136. ASSIGNMENT OF RIGHTS OF PAYMENT.

    ``(a) In General.--For the purpose of assisting in the collection 
of medical support payments and other payments for medical care owed to 
recipients of medical assistance under the medicaid plan, each medicaid 
plan shall--
            ``(1) provide that, as a condition of eligibility for 
        medical assistance under the plan to an individual who has the 
        legal capacity to execute an assignment for himself, the 
        individual is required--
                    ``(A) to assign the State any rights, of the 
                individual or of any other person who is eligible for 
                medical assistance under the plan and on whose behalf 
                the individual has the legal authority to execute an 
                assignment of such rights, to support (specified as 
                support for the purpose of medical care by a court or 
                administrative order) and to payment for medical care 
                from any third party,
                    ``(B) to cooperate with the State (i) in 
                establishing the paternity of such person (referred to 
                in subparagraph (A)) if the person is a child born out 
                of wedlock, and (ii) in obtaining support and payments 
                (described in subparagraph (A)) for himself and for 
                such person, unless (in either case) the individual is 
                a pregnant woman or the individual is found to have 
                good cause for refusing to cooperate as determined by 
                the State, and
                    ``(C) to cooperate with the State in identifying, 
                and providing information to assist the State in 
                pursuing, any third party who may be liable to pay for 
                care and services available under the plan, unless such 
                individual has good cause for refusing to cooperate as 
                determined by the State; and
            ``(2) provide for entering into cooperative arrangements, 
        including financial arrangements, with any appropriate agency 
        of any State (including, with respect to the enforcement and 
        collection of rights of payment for medical care by or through 
        a parent, with a State's agency established or designated under 
        section 454(3)) and with appropriate courts and law enforcement 
        officials, to assist the agency or agencies administering the 
        plan with respect to--
                    ``(A) the enforcement and collection of rights to 
                support or payment assigned under this section, and
                    ``(B) any other matters of common concern.
    ``(b) Use of Amounts Collected.--Such part of any amount collected 
by the State under an assignment made under the provisions of this 
section shall be retained by the State as is necessary to reimburse it 
for medical assistance payments made on behalf of an individual with 
respect to whom such assignment was executed (with appropriate 
reimbursement of the Federal Government to the extent of its 
participation in the financing of such medical assistance), and the 
remainder of such amount collected shall be paid to such individual.
    ``(c) Effective Date.--Notwithstanding any other provision of law, 
subsection (b) shall be effective on and after January 1, 1996.

``SEC. 2137. REQUIREMENTS FOR NURSING FACILITIES.

    ``(a) Requirements for Nursing Facilities.--
            ``(1) In general.--Subject to paragraph (2), the provisions 
        of section 1919, as in effect on the day after the date of the 
        enactment of this title shall apply to nursing facilities which 
        furnish services under the State plan.
            ``(2) Waiver for states with stricter requirements.--
                    ``(A) Authority to seek waiver.--Any State with 
                State law requirements for nursing facilities that, as 
                determined by the Secretary--
                            ``(i) are equivalent to or stricter than 
                        the requirements imposed under paragraph (1); 
                        and
                            ``(ii) contain State oversight and 
                        enforcement authority over nursing facilities, 
                        including penalty provisions, that are 
                        equivalent to or stricter than such oversight 
                        and enforcement authority in section 1919, as 
                        so in effect,
                may apply to the Secretary for a waiver of the 
                requirements imposed under paragraph (1).
                    ``(B) 120-day approval period.--The Secretary shall 
                approve or deny an application submitted under 
                subparagraph (A) not later than 120 days after the date 
                the application is submitted.
                    ``(C) Approval after public comment.--The Secretary 
                shall approve or deny an application for a waiver under 
                subparagraph (A) after providing for public comment on 
                such application during the 120-day approval period.
                    ``(D) No waiver of enforcement.--A State granted a 
                waiver under subparagraph (A) shall be subject to--
                            ``(i) the penalty described in subsection 
                        (b);
                            ``(ii) suspension or termination, as 
                        determined by the Secretary, of the waiver 
                        granted under subparagraph (A); and
                            ``(iii) any other authority available to 
                        the Secretary to enforce the requirements of 
                        section 1919, as so in effect.
    ``(b) Penalty for Noncompliance.--For any fiscal year, the 
Secretary shall withhold up to but not more than 2 percent of the State 
outlay allotment under section 2121(c) for such fiscal year if the 
Secretary makes a determination that a State medicaid plan has failed 
to comply with a provision of section 1919, as so in effect, or any 
State law requirements applicable to such plan under a waiver granted 
under subsection (a)(2)(A).

``SEC. 2138. OTHER PROVISIONS PROMOTING PROGRAM INTEGRITY.

    ``(a) Public Access to Survey Results.--Each medicaid plan shall 
provide that upon completion of a survey of any health care facility or 
organization by a State agency to carry out the plan, the agency shall 
make public in readily available form and place the pertinent findings 
of the survey relating to the compliance of the facility or 
organization with requirements of law.
    ``(b) Record Keeping.--Each medicaid plan shall provide for 
agreements with persons or institutions providing services under the 
plan under which the person or institution agrees--
            ``(1) to keep such records, including ledgers, books, and 
        original evidence of costs, as are necessary to fully disclose 
        the extent of the services provided to individuals receiving 
        assistance under the plan; and
            ``(2) to furnish the State agency with such information 
        regarding any payments claimed by such person or institution 
        for providing services under the plan, as the State agency may 
        from time to time request.

        ``Part E--Establishment and Amendment of Medicaid Plans

``SEC. 2151. SUBMITTAL AND APPROVAL OF MEDICAID PLANS.

    ``(a) Submittal.--As a condition of receiving funding under part C, 
each State shall submit to the Secretary a medicaid plan that meets the 
applicable requirements of this title.
    ``(b) Approval.--Except as the Secretary may provide under section 
2153, a medicaid plan submitted under subsection (a)--
            ``(1) shall be approved for purposes of this title; and
            ``(2) shall be effective beginning with a calendar quarter 
        that is specified in the plan, but in no case earlier than the 
        first calendar quarter that begins at least 60 days after the 
        date the plan is submitted.

``SEC. 2152. SUBMITTAL AND APPROVAL OF PLAN AMENDMENTS.

    ``(a) Submittal of Amendments.--A State may amend, in whole or in 
part, its medicaid plan at any time through transmittal of a plan 
amendment under this section.
    ``(b) Approval.--Except as the Secretary may provide under section 
2153, an amendment to a medicaid plan submitted under subsection (a)--
            ``(1) shall be approved for purposes of this title; and
            ``(2) shall be effective as provided in subsection (c).
    ``(c) Effective Dates for Amendments.--
            ``(1) In general.--Subject to the succeeding provisions of 
        this subsection, an amendment to medicaid plan shall take 
        effect on one or more effective dates specified in the 
        amendment.
            ``(2) Amendments relating to eligibility or benefits.--
        Except as provided in paragraph (4):
                    ``(A) Notice requirement.--Any plan amendment that 
                eliminates or restricts eligibility or benefits under 
                the plan may not take effect unless the State certifies 
                that it has provided prior or contemporaneous public 
                notice of the change, in a form and manner provided 
                under applicable State law.
                    ``(B) Timely transmittal.--Any plan amendment that 
                eliminates or restricts eligibility or benefits under 
                the plan shall not be effective for longer than a 60-
                day period unless the amendment has been transmitted to 
                the Secretary before the end of such period.
            ``(3) Other amendments.--Subject to paragraph (4), any plan 
        amendment that is not described in paragraph (2) that becomes 
        effective in a State fiscal year may not remain in effect after 
        the end of such fiscal year (or, if later, the end of the 90-
        day period on which it becomes effective) unless the amendment 
        has been transmitted to the Secretary.
            ``(4) Exception.--The requirements of paragraphs (2) and 
        (3) shall not apply to a plan amendment that is submitted on a 
        timely basis pursuant to a court order or an order of the 
        Secretary.

``SEC. 2153. SANCTIONS FOR SUBSTANTIAL NONCOMPLIANCE.

    ``(a) Prompt Review of Plan Submittals.--The Secretary shall 
promptly review medicaid plans and plan amendments submitted under this 
part to determine if they substantially comply with the requirements of 
this title.
    ``(b) Determinations of Substantial Noncompliance.--
            ``(1) At time of plan or amendment submittal.--
                    ``(A) In general.--If the Secretary, during the 30-
                day period beginning on the date of submittal of a 
                medicaid plan or plan amendment--
                            ``(i) determines that the plan or amendment 
                        substantially violates (within the meaning of 
                        subsection (c)) a requirement of this title; 
                        and
                            ``(ii) provides written notice of such 
                        determination to the State,
                the Secretary shall issue an order specifying that the 
                plan or amendment, insofar as it is in substantial 
                violation of such a requirement, shall not be 
                effective, except as provided in subsection (c), 
                beginning at the end of a period of not less than 30 
                days (or 120 days in the case of the initial submission 
                of the medicaid plan) specified in the order beginning 
                on the date of the notice of the determination.
                    ``(B) Extension of time periods.--The time periods 
                specified in subparagraph (A) may be extended by 
                written agreement of the Secretary and the State 
                involved.
            ``(2) Violations in administration of plan.--
                    ``(A) In general.--If the Secretary determines, 
                after reasonable notice and opportunity for a hearing 
                for the State, that in the administration of a medicaid 
                plan there is a substantial violation of a requirement 
                of this title, the Secretary shall provide the State 
                with written notice of the determination and with an 
                order to remedy such violation. Such an order shall 
                become effective prospectively, as specified in the 
                order, after the date of receipt of such written 
                notice. Such an order may include the withholding of 
                funds, consistent with subsection (f), for parts of the 
                medicaid plan affected by such violation, until the 
                Secretary is satisfied that the violation has been 
                corrected.
                    ``(B) Effectiveness.--If the Secretary issues an 
                order under paragraph (1), the order shall become 
                effective, except as provided in subsection (c), 
                beginning at the end of a period (of not less than 30 
                days) specified in the order beginning on the date of 
                the notice of the determination to the State.
                    ``(C) Timeliness of determinations relating to 
                report-based compliance.--The Secretary shall make 
                determinations under this paragraph respecting 
                violations relating to information contained in an 
                annual report under section 2102, an independent 
                evaluation under section 2103, or an audit report under 
                section 2131 not later than 30 days after the date of 
                transmittal of the report or evaluation to the 
                Secretary.
            ``(3) Consultation with state.--Before making a 
        determination adverse to a State under this section, the 
        Secretary shall (within any time periods provided under this 
        section)--
                    ``(A) reasonably consult with the State involved;
                    ``(B) offer the State a reasonable opportunity to 
                clarify the submission and submit further information 
                to substantiate compliance with the requirements of 
                this title; and
                    ``(C) reasonably consider any such clarifications 
                and information submitted.
            ``(4) Justification of any inconsistencies in 
        determinations.--If the Secretary makes a determination under 
        this section that is, in whole or in part, inconsistent with 
        any previous determination issued by the Secretary under this 
        title, the Secretary shall include in the determination a 
        detailed explanation and justification for any such difference.
            ``(5) Substantial violation defined.--For purposes of this 
        title, a medicaid plan (or amendment to such a plan) or the 
        administration of the medicaid plan is considered to 
        `substantially violate' a requirement of this title if a 
        provision of the plan or amendment (or an omission from the 
        plan or amendment) or the administration of the plan--
                    ``(A) is material and substantial in nature and 
                effect; and
                    ``(B) is inconsistent with an express requirement 
                of this title.
        A failure to meet a strategic objective or performance goal (as 
        described in section 2101) shall not be considered to 
        substantially violate a requirement of this title.
    ``(c) State Response to Orders.--
            ``(1) State response by revising plan.--
                    ``(A) In general.--Insofar as an order under 
                subsection (b)(1) relates to a substantial violation by 
                a medicaid plan or plan amendment, a State may respond 
                (before the date the order becomes effective) to such 
                an order by submitting a written revision of the plan 
                or plan amendment to substantially comply with the 
                requirements of this part.
                    ``(B) Review of revision.--In the case of 
                submission of such a revision, the Secretary shall 
                promptly review the submission and shall withhold any 
                action on the order during the period of such review.
                    ``(C) Secretarial response.--The revision shall be 
                considered to have corrected the deficiency (and the 
                order rescinded insofar as it relates to such 
                deficiency) unless the Secretary determines and 
                notifies the State in writing, within 15 days after the 
                date the Secretary receives the revision, that the plan 
                or amendment, as proposed to be revised, still 
                substantially violates a requirement of this title. In 
                such case the State may respond by seeking 
                reconsideration or a hearing under paragraph (2).
                    ``(D) Revision retroactive.--If the revision 
                provides for substantial compliance, the revision may 
                be treated, at the option of the State, as being 
                effective either as of the effective date of the 
                provision to which it relates or such later date as the 
                State and Secretary may agree.
            ``(2) State response by seeking reconsideration or an 
        administrative hearing.--A State may respond to an order under 
        subsection (b) by filing a request with the Secretary for--
                    ``(A) a reconsideration of the determination, 
                pursuant to subsection (d)(1); or
                    ``(B) a review of the determination through an 
                administrative hearing, pursuant to subsection (d)(2).
        In such case, the order shall not take effect before the 
        completion of the reconsideration or hearing.
            ``(3) State response by corrective action plan.--
                    ``(A) In general.--In the case of an order 
                described in subsection (b)(2) that relates to a 
                substantial violation in the administration of the 
                medicaid plan, a State may respond to such an order by 
                submitting a corrective action plan with the Secretary 
                to correct deficiencies in the administration of the 
                plan which are the subject of the order.
                    ``(B) Review of corrective action plan.--In such 
                case, the Secretary shall withhold any action on the 
                order for a period (not to exceed 30 days) during which 
                the Secretary reviews the corrective action plan.
                    ``(C) Secretarial response.--The corrective action 
                plan shall be considered to have corrected the 
                deficiency (and the order rescinded insofar as it 
                relates to such deficiency) unless the Secretary 
                determines and notifies the State in writing, within 15 
                days after the date the Secretary receives the 
                corrective action plan, that the State's administration 
                of the medicaid plan, as proposed to be corrected in 
                the plan, will still substantially violate a 
                requirement of this title. In such case the State may 
                respond by seeking reconsideration or a hearing under 
                paragraph (2).
            ``(4) State response by withdrawal of plan amendment; 
        failure to respond.--Insofar as an order relates to a 
        substantial violation in a plan amendment submitted, a State 
        may respond to such an order by withdrawing the plan amendment 
        and the medicaid plan shall be treated as though the amendment 
        had not been made.
    ``(d) Administrative Review and Hearing.--
            ``(1) Reconsideration.--Within 30 days after the date of 
        receipt of a request under subsection (b)(2)(A), the Secretary 
        shall notify the State of the time and place at which a hearing 
        will be held for the purpose of reconsidering the Secretary's 
        determination. The hearing shall be held not less than 20 days 
        nor more than 60 days after the date notice of the hearing is 
        furnished to the State, unless the Secretary and the State 
        agree in writing to holding the hearing at another time. The 
        Secretary shall affirm, modify, or reverse the original 
        determination within 60 days of the conclusion of the hearing.
            ``(2) Administrative hearing.--Within 30 days after the 
        date of receipt of a request under subsection (b)(2)(B), an 
        administrative law judge shall schedule a hearing for the 
        purpose of reviewing the Secretary's determination. The hearing 
        shall be held not less than 20 days nor more than 60 days after 
        the date notice of the hearing is furnished to the State, 
        unless the Secretary and the State agree in writing to holding 
        the hearing at another time. The administrative law judge shall 
        affirm, modify, or reverse the determination within 60 days of 
        the conclusion of the hearing.
    ``(e) Judicial Review.--
            ``(1) In general.--A State which is dissatisfied with a 
        final determination made by the Secretary under subsection 
        (d)(1) or a final determination of an administrative law judge 
        under subsection (d)(2) may, within 60 days after it has been 
        notified of such determination, file with the United States 
        court of appeals for the circuit in which the State is located 
        a petition for review of such determination. A copy of the 
        petition shall be forthwith transmitted by the clerk of the 
        court to the Secretary and, in the case of a determination 
        under subsection (d)(2), to the administrative law judge 
        involved. The Secretary (or judge involved) thereupon shall 
        file in the court the record of the proceedings on which the 
        final determination was based, as provided in section 2112 of 
        title 28, United States Code.
            ``(2) Standard for review.--The findings of fact by the 
        Secretary or administrative law judge, if supported by 
        substantial evidence, shall be conclusive, but the court, for 
        good cause shown, may remand the case to the Secretary or judge 
        to take further evidence, and the Secretary or judge may 
        thereupon make new or modified findings of fact and may modify 
        a previous determination, and shall certify to the court the 
        transcript and record of the further proceedings. Such new or 
        modified findings of fact shall likewise be conclusive if 
        supported by substantial evidence.
            ``(3) Jurisdiction of appellate court.--The court shall 
        have jurisdiction to affirm the action of the Secretary or 
        judge or to set it aside, in whole or in part. The judgment of 
        the court shall be subject to review by the Supreme Court of 
        the United States upon certiorari or certification as provided 
        in section 1254 of title 28, United States Code.
    ``(f) Withholding of Funds.--
            ``(1) In general.--Any order under this section relating to 
        the withholding of funds shall be effective not earlier than 
        the effective date of the order and shall only relate to the 
        portions of a medicaid plan or administration thereof which 
        substantially violate a requirement of this title. In the case 
        of a failure to meet a set-aside requirement under section 
        2112, any withholding shall only apply to the extent of such 
        failure.
            ``(2) Suspension of withholding.--The Secretary may suspend 
        withholding of funds under paragraph (1) during the period 
        reconsideration or administrative and judicial review is 
        pending under subsection (d) or (e).
            ``(3) Restoration of funds.--Any funds withheld under this 
        subsection under an order shall be immediately restored to a 
        State--
                    ``(A) to the extent and at the time the order is--
                            ``(i) modified or withdrawn by the 
                        Secretary upon reconsideration,
                            ``(ii) modified or reversed by an 
                        administrative law judge, or
                            ``(iii) set aside (in whole or in part) by 
                        an appellate court; or
                    ``(B) when the Secretary determines that the 
                deficiency which was the basis for the order is 
                corrected;
                    ``(C) when the Secretary determines that violation 
                which was the basis for the order is resolved or the 
                amendment which was the basis for the order is 
                withdrawn; or
                    ``(D) at any time upon the initiative of the 
                Secretary.

``SEC. 2154. SECRETARIAL AUTHORITY.

    ``(a) Negotiated Agreement and Dispute Resolution.--
            ``(1) Negotiations.--Nothing in this part shall be 
        construed as preventing the Secretary and a State from at any 
        time negotiating a satisfactory resolution to any dispute 
        concerning the approval of a medicaid plan (or amendments to a 
        medicaid plan) or the compliance of a medicaid plan (including 
        its administration) with requirements of this title.
            ``(2) Cooperation.--The Secretary shall act in a 
        cooperative manner with the States in carrying out this title. 
        In the event of a dispute between a State and the Secretary, 
        the Secretary shall, whenever practicable, engage in informal 
        dispute resolution activities in lieu of formal enforcement or 
        sanctions under section 2153.
    ``(b) Limitations on Delegation of Decision-making Authority.--The 
Secretary may not delegate (other than to the Administrator of the 
Health Care Financing Administration) the authority to make 
determinations or reconsiderations respecting the approval of medicaid 
plans (or amendments to such plans) or the compliance of a medicaid 
plan (including its administration) with requirements of this title. 
Such Administrator may not further delegate such authority to any 
individual, including any regional official of such Administration.
    ``(c) Requiring Formal Rulemaking for Changes in Secretarial 
Administration.--The Secretary shall carry out the administration of 
the program under this title only through a prospective formal 
rulemaking process, including issuing notices of proposed rule making, 
publishing proposed rules or modifications to rules in the Federal 
Register, and soliciting public comment.

                      ``Part F--General Provisions

``SEC. 2171. DEFINITIONS.

    ``(a) Medical Assistance.--
            ``(1) In general.--For purposes of this title, except as 
        provided in paragraphs (2) and (3), the term `medical 
        assistance' means payment of part or all the cost of any of the 
        following for eligible low-income individuals (as defined in 
        subsection (b)) as specified under the medicaid plan:
                    ``(A) Inpatient hospital services.
                    ``(B) Outpatient hospital services.
                    ``(C) Physician services.
                    ``(D) Surgical services.
                    ``(E) Clinic services and other ambulatory health 
                care services.
                    ``(F) Nursing facility services.
                    ``(G) Intermediate care facility services for the 
                mentally retarded.
                    ``(H) Prescription drugs and biologicals.
                    ``(I) Over-the-counter medications.
                    ``(J) Laboratory and radiological services.
                    ``(K) Family planning services and supplies.
                    ``(L) Acute inpatient mental health services, 
                including services furnished in a State-operated mental 
                hospital and including residential or other 24-hour 
                therapeutically planned structured services in the case 
                of a child.
                    ``(M) Outpatient and intensive community-based 
                mental health services, including psychiatrist 
                rehabilitation, day treatment, intensive in-home 
                services for children, and partial hospitalization.
                    ``(N) Durable medical equipment and other 
                medically-related or remedial devices (such as 
                prosthetic devices, implants, eyeglasses, hearing aids, 
                dental devices, and adaptive devices).
                    ``(O) Disposable medical supplies.
                    ``(P) Home and community-based services and related 
                supportive services (such as home health nursing 
                services, home health aide services, personal care, 
                assistance with activities of daily living, chore 
                services, day care services, respite care services, 
                training for family members, and minor modifications to 
                the home).
                    ``(Q) Community supported living arrangements.
                    ``(R) Nursing care services (such as nurse 
                practitioner services, nurse midwife services, advanced 
                practice nurse services, private duty nursing care, 
                pediatric nurse services, and respiratory care 
                services) in a home, school, or other setting.
                    ``(S) Dental services.
                    ``(T) Inpatient substance abuse treatment services 
                and residential substance abuse treatment services.
                    ``(U) Outpatient substance abuse treatment 
                services.
                    ``(V) Case management services.
                    ``(W) Care coordination services.
                    ``(X) Physical therapy, occupational therapy, and 
                services for individuals with speech, hearing, and 
                language disorders.
                    ``(Y) Hospice care.
                    ``(Z) Any other medical, diagnostic, screening, 
                preventive, restorative, remedial, therapeutic, or 
                rehabilitative services (whether in a facility, home, 
                school, or other setting) if recognized by State law 
                and if the service is--
                            ``(i) prescribed by or furnished by a 
                        physician or other licensed or registered 
                        practitioner within the scope of practice as 
                        defined by State law,
                            ``(ii) performed under the general 
                        supervision or at the direction of a physician, 
                        or
                            ``(iii) furnished by a health care facility 
                        that is operated by a State or local government 
                        or is licensed under State law and operating 
                        within the scope of the license.
                    ``(AA) Premiums for private health care insurance 
                coverage, including private long-term care insurance 
                coverage.
                    ``(BB) Medical transportation.
                    ``(CC) Medicare cost-sharing (as defined in 
                subsection (c)).
                    ``(DD) Enabling services (such as transportation, 
                translation, and outreach services) designed to 
                increase the accessibility of primary and preventive 
                health care services for eligible low-income 
                individuals.
                    ``(EE) Any other health care services or items 
                specified by the Secretary.
            ``(2) Exclusion of certain payments.--Such term does not 
        include the payment with respect to care or services for--
                    ``(A) any individual who is an inmate of a public 
                institution (except as a patient in a State psychiatric 
                hospital); and
                    ``(B) any individual who is not an eligible low-
                income individual.
            ``(3) Clarification of vaccine purchases.--Such term 
        includes, for any fiscal year, payment for the purchase of 
        vaccines through contracts negotiated with the Centers for 
        Disease Control and Prevention under section 317 of the Public 
        Health Service Act, but only if--
                    ``(A) the State has expended all grant funds 
                available for such purchase under such section 317 for 
                all fiscal years preceding such fiscal year; and
                    ``(B) the total number of doses of each vaccine 
                purchased during such year does not exceed--
                            ``(i) the number of doses of each vaccine 
                        sufficient to immunize, according to the 
                        immunization schedule specified by the State, 
                        the annual birth cohort of children in targeted 
                        low-income families (as defined in section 
                        2112(a)(3)), less
                            ``(ii) 75 percent of the number of doses of 
                        each vaccine purchased by the State during the 
                        preceding fiscal year with funds available 
                        under such section 317.
    ``(b) Eligible Low-Income Individual.--For purposes of this title, 
the term `eligible low-income individual' means an individual who has 
been determined eligible by the State for medical assistance under the 
medicaid plan and whose family income (as determined under the plan) 
does not exceed a percentage (specified in the medicaid plan and not to 
exceed 250 percent) of the poverty line applicable to a family of the 
size involved. In determining the amount of income under the previous 
sentence, a State may exclude costs incurred for medical care or other 
types of remedial care recognized by the State. The Secretary may waive 
this section at the request of the State for any category of 
individuals who, as of the date of enactment of this title, would have 
qualified for coverage under section 1915(c) and 1902(e)(3).
    ``(c) Medicare Cost-Sharing.--For purposes of this title, the term 
`medicare cost-sharing' means any of the following:
            ``(1)(A) Premiums under section 1839.
            ``(B) Premiums under section 1818 or 1818A.
            ``(2) Coinsurance under title XVIII, including coinsurance 
        described in section 1813.
            ``(3) Deductibles established under title XVIII, including 
        those described in section 1813 and section 1833(b).
            ``(4) The difference between the amount that is paid under 
        section 1833(a) and the amount that would be paid under such 
        section if any reference to `80 percent' therein were deemed a 
        reference to `100 percent'.
            ``(5) Premiums for enrollment of an individual with an 
        eligible organization under section 1876 or with a Medicare 
        Choice organization under part D of title XVIII.
    ``(d) Additional Definitions.--For purposes of this title:
            ``(1) Child.--The term `child' means an individual under 19 
        years of age.
            ``(2) Poverty line defined.--The term `poverty line' has 
        the meaning given such term in section 673(2) of the Community 
        Services Block Grant Act (42 U.S.C. 9902(2)), including any 
        revision required by such section).
            ``(3) Pregnant woman.--The term `pregnant woman' includes a 
        woman during the 60-day period beginning on the last day of the 
        pregnancy.
            ``(4) Retirement age.--The term `retirement age' has the 
        meaning given such term by section 216(l)(1).

``SEC. 2172. TREATMENT OF TERRITORIES.

    ``Notwithstanding any other requirement of this title, the 
Secretary may waive or modify any requirement of this title with 
respect to the medical assistance program for a State other than the 50 
States and the District of Columbia, other than a waiver of--
            ``(1) the Federal medical assistance percentage;
            ``(2) the limitation on total payments in a fiscal year to 
        the amount of the allotment under section 2121(c); or
            ``(3) the requirement that payment may be made for medical 
        assistance only with respect to amounts expended by the State 
        for care and services described in paragraph (1) of section 
        2171(a) and medically-related services (as defined in section 
        2112(d)(2)).

``SEC. 2173. DESCRIPTION OF TREATMENT OF INDIAN HEALTH PROGRAMS.

    ``In the case of a State in which one or more Indian health 
programs described in section 2122(f)(2) are operated, the medicaid 
plan shall include a description of--
            ``(1) what provision (if any) has been made for payment for 
        items and services furnished by such programs; and
            ``(2) the manner in which medical assistance for low-income 
        eligible individuals who are Indians will be provided, as 
        determined by the State in consultation with the appropriate 
        Indian tribes and tribal organizations.

``SEC. 2174. APPLICATION OF CERTAIN GENERAL PROVISIONS.

    ``The following sections in part A of title XI shall apply to 
States under this title in the same manner as they applied to a State 
under title XIX:
            ``(1) Section 1101(a)(1) (relating to definition of State).
            ``(2) Section 1116 (relating to administrative and judicial 
        review), but only insofar as consistent with the provisions of 
        part C.
            ``(3) Section 1124 (relating to disclosure of ownership and 
        related information).
            ``(4) Section 1126 (relating to disclosure of information 
        about certain convicted individuals).
            ``(5) Section 1132 (relating to periods within which claims 
        must be filed).''.
    (b) Anti-Fraud Provisions.--
            (1) In general.--Section 1128(h)(1) (42 U.S.C. 1320a-
        7(h)(1)) is amended by inserting ``or a medicaid plan under 
        title XXI'' after ``title XIX''.
            (2) Penalties for the fraudulent conversion of assets in 
        order to obtain medicaid benefits.--Section 1128B(b) (42 U.S.C. 
        1320a-7b(b)) is amended by striking ``or'' at the end of 
        paragraph (4), by inserting ``or'' at the end of paragraph (5), 
        and by inserting after paragraph (5) the following new 
        paragraph:
            ``(6) knowingly and willfully converts assets, by transfer 
        (including any transfer in trust), aiding in such a transfer, 
        or otherwise, in order for an individual to become eligible for 
        benefits under a State health care program,''.
            (3) Continued role of inspector general.--The Inspector 
        General in the Department of Health and Human Services shall 
        have the same responsibilities and duties in relation to fraud 
        and abuse and related matters under the medicaid program under 
        title XXI of the Social Security Act as such Inspector General 
        has had in relation to the medicaid program under title XIX of 
        such Act before the date of the enactment of this Act.
    (c) Certified Amount for Puerto Rico.--Paragraph (1) of section 
1108(c) (42 U.S.C. 1308(c)) is amended by striking ``$116,500,000 for 
fiscal year 1994'' and inserting ``$200,000,000 for fiscal year 1996''.
    (d) Termination of Program for Distribution of Pediatric Vaccines
            (1) In general.--Subject to paragraph (2), section 1928 (42 
        U.S.C. 1396s) is repealed, effective on the date of the 
        enactment of this Act.
            (2) Transition.--
                    (A) No effect on certain distributions.--Such 
                repeal shall not affect the distribution of vaccines 
                purchased and delivered to the States before the date 
                of the enactment of this Act.
                    (B) No purchases after enactment.--No vaccine may 
                be purchased after the date of the enactment of this 
                Act by the Federal Government or any State under 
                section 1928(d) of the Social Security Act.
    (e) Termination of Current Program; Limitation on Medicaid Payments 
in Fiscal Year 1996.--
            (1) In general.--Title XIX is amended--
                    (A) by redesignating section 1931 as section 1932; 
                and
                    (B) by inserting after section 1930 the following 
                new section:

    ``termination of program; limitation on new obligation authority

    ``Sec. 1931. (a) Limitation on Obligation Authority.--
Notwithstanding any other provision of this title--
            ``(1) After enactment, before new medicaid.--Subject to 
        paragraph (2), the Secretary is authorized to enter into 
        obligations with any State under this title for expenses 
        incurred after the date of the enactment of this section and 
        during fiscal year 1996, but not in excess of the obligation 
        allotment for that State for fiscal year 1996 under section 
        2121(a)(4)(C).
            ``(2) None after new medicaid.--The Secretary is not 
        authorized to enter into any obligation with any State under 
        this title for expenses incurred on or after the earlier of--
                    ``(A) October 1, 1996; or
                    ``(B) the first day of the first quarter on which 
                the State plan under title XXI is first effective.
            ``(3) Agreement.--A State's submission of claims for 
        payment under section 1903 after the date of the enactment of 
        this section with respect to which the limitation described in 
        paragraph (1) applies is deemed to constitute the State's 
        acceptance of the obligation limitation under such paragraph, 
        including the formula for computing the amount of such 
        obligation limitation.
    ``(b) Requirement for Timely Submittal of Claims.--No payment shall 
be made to a State under this title with respect to an obligation 
incurred before the date of the enactment of this section, unless the 
State has submitted to the Secretary, by not later than June 30, 1996, 
a claim for Federal financial participation for expenses paid by the 
State with respect to such obligations. Nothing in subsection (a) or 
(b) shall be construed as affecting the obligation of the Federal 
Government to pay claims described in the previous sentence.''.
            (2) Repeal of title.--Title XIX is repealed effective 
        October 1, 1996.
    (f) Medicaid Transition.--
            (1) Treatment of certain causes of action.--No cause of 
        action under title XIX of the Social Security Act which seeks 
        to require a State to establish or maintain minimum payment 
        rates under such title or claim which seeks reimbursement for 
        any period before the date of the enactment of this Act based 
        on the alleged failure of the State to comply with title XIX 
        and which has not become final as of such date shall be brought 
        or continued.
            (2) Treatment of certain disallowances.--Notwithstanding 
        any provision of law, in the case where payment has been made 
        under section 1903(a) of the Social Security Act to a State 
        before October 1, 1995, and for which a disallowance has not 
        been taken as of such date (or, if so taken, has not been 
        completed (including judicial review) by such date), the 
        Secretary of Health and Human Services shall discontinue the 
        disallowance proceeding and, if such disallowance has been 
        taken as of the date of the enactment of this Act, any payment 
        reductions effected shall be rescinded and the payments 
        returned to the State.
            (3) Extension of moratorium.--Section 6408(a)(3) of the 
        Omnibus Budget Reconciliation Act of 1989, as amended by 
        section 13642 of the Omnibus Budget Reconciliation Act of 1993, 
        is amended by striking ``December 31, 1995'' and inserting 
        ``the first day of the first quarter on which the medicaid plan 
        for the State of Michigan is first effective under title XXI of 
        such Act''.
    (g) No Application of Prior Medicaid Judgments to New Medicaid 
Program.--No judicial or administrative decision rendered regarding 
requirements imposed under title XIX of the Social Security Act with 
respect to a State shall have any application to the medicaid plan of 
the State title XXI of such Act. A State may, pursuant to the previous 
sentence, seek the abrogation or modification of any such decision 
after the date of termination of the State plan under title XIX of such 
Act.
    (h) Technical and Conforming Amendments.--
            (1) Secretarial submission of legislative proposal.--Not 
        later than 90 days after the date of the enactment of this Act, 
        the Secretary of Health and Human Services, in consultation, as 
        appropriate, with the heads of other Federal agencies, shall 
        submit to the appropriate committees of Congress a legislative 
        proposal providing for such technical and conforming amendments 
        in the law as are required by the provisions of, and amendments 
        made by, sections 7191 and 7192.
            (2) Transitional rule.--Any reference in any provision of 
        law to title XIX of the Social Security Act or any provision 
        thereof shall be deemed to be a reference to such title or 
        provision as in effect on the day before the date of the 
        enactment of this Act.

SEC. 7192. MEDICAID DRUG REBATE PROGRAM.

    (a) In General.--Title XXI, as added by section 7191, is amended--
            (1) in section 2123, by adding at the end the following new 
        subsection:
    ``(j) Limitation on Payment for Certain Outpatient Prescription 
Drugs.--
            ``(1) In general.--No payment shall be made to a State 
        under this part for medical assistance for covered outpatient 
        drugs (as defined in section 2175(j)(2)) of a manufacturer 
        provided under the medicaid plan unless the manufacturer (as 
        defined in section 2175(j)(5)) of the drug--
                    ``(A) has entered into a medicaid rebate agreement 
                with the Secretary under section 2175; and
                    ``(B) is otherwise complying with the provisions of 
                such section.
            ``(2) Construction.--Nothing in this subsection shall be 
        construed as requiring a State to participate in the medicaid 
        rebate agreement under section 2175.
            ``(3) Use of supplemental rebates prohibited.--No payment 
        shall be made under this part to a State that requires 
        manufacturer rebates for covered outpatient drugs (as so 
        defined) in excess of the rebate amount payable under section 
        2175.''; and
            (2) by adding at the end the following new section:

``SEC. 2175. MEDICAID DRUG REBATE AGREEMENTS.

    ``(a) Requirement for Rebate Agreement.--
            ``(1) In general.--Pursuant to section 2123(j), in order 
        for payment to be made to a State under part C for medical 
        assistance for covered outpatient drugs of a manufacturer, the 
        manufacturer must have entered into and have in effect a rebate 
        agreement described in subsection (b) with the Secretary, on 
        behalf of States (except that, the Secretary may authorize a 
        State to enter directly into agreements with a manufacturer), 
        and must meet the requirements of paragraph (5) (with respect 
        to drugs purchased by a covered entity on or after the first 
        day of the first month that begins after the date of the 
        enactment of title VI of the Veterans Health Care Act of 1992 
        and paragraph (6). Any such agreement entered into prior to May 
        1, 1991, shall be deemed to have been entered into on January 
        1, 1991, and the amount of the rebate to be paid by the 
        manufacturer under such agreement shall be calculated as if the 
        agreement had been entered into on January 1, 1991. If a 
        manufacturer has not entered into such an agreement before May 
        1, 1991, such an agreement, subsequently entered into, shall 
        not be effective until the first day of the calendar quarter 
        that begins more than 60 days after the date the agreement is 
        entered into.
            ``(2) Effective date.--Paragraph (1) shall apply to drugs 
        dispensed under this title on or after January 1, 1991, except 
        that such paragraph shall not apply to drugs dispensed before 
        May 1, 1991, if the Secretary determines that there were 
        extenuating circumstances with respect to the first calendar 
        quarter of 1991.
            ``(3) Authorizing payment for drugs not covered under 
        rebate agreements.--Paragraph (1) shall not apply to the 
        dispensing of a covered outpatient drug if--
                    ``(A) the State has made a determination that the 
                availability of such drug is essential to the health of 
                beneficiaries under the medicaid plan;
                    ``(B) the drug has been given a rating of 1-A or 1-
                P by the Food and Drug Administration; and
                    ``(C)(i) the physician has obtained approval for 
                the use of the drug in advance of dispensing such drug 
                in accordance with a prior authorization program 
                described in subsection (d)(5), or
                    ``(ii) the Secretary has reviewed and approved the 
                State's determination under subparagraph (A).
            ``(3) Authorizing payment for drugs not covered under 
        rebate agreements.--Paragraph (1) shall not apply to the 
        dispensing of a covered outpatient drug if (A)(i) the State has 
        made a determination that the availability of the drug is 
        essential to the health of beneficiaries under the medicaid 
        plan for medical assistance; (ii) such drug has been given a 
        rating of 1-A by the Food and Drug Administration; and (iii)(I) 
        the physician has obtained approval for use of the drug in 
        advance of its dispensing in accordance with a prior 
        authorization program described in subsection (d), or (II) the 
        Secretary has reviewed and approved the State's determination 
        under subparagraph (A); or (B) the Secretary determines that in 
        the first calendar quarter of 1991, there were extenuating 
        circumstances.
            ``(4) Effect on existing agreements.--
                    ``(A) In general.--In the case of a rebate 
                agreement in effect between a State and a manufacturer 
                on the date of the enactment of title IV of the Omnibus 
                Budget Reconciliation Act of 1990, such agreement, for 
                the initial agreement period specified therein, shall 
                be considered to be a rebate agreement in effect under 
                this section with respect to that State, if the State 
                agrees to report to the Secretary any rebates paid 
                pursuant to the agreement and such agreement provides 
                for a minimum aggregate rebate of 10 percent of the sum 
                of the amounts determined under subparagraph (B) for 
                all of the manufacturer's drugs paid for by the State 
                under the agreement. If, after the initial agreement 
                period, the State establishes to the satisfaction of 
                the Secretary that an agreement in effect on the date 
                of the enactment of title IV of the Omnibus Budget 
                Reconciliation Act of 1990 provides for rebates that 
                are at least as large as the rebates otherwise required 
                under this section, and the State agrees to report any 
                rebates under the agreement to the Secretary, the 
                agreement shall be considered to be a rebate agreement 
                in compliance with the section for the renewal periods 
                of such agreement.
                    ``(B) Amount determined.--The amount determined 
                under this subparagraph with respect to a 
                manufacturer's drug paid for by a State under an 
                agreement described in the first sentence of 
                subparagraph (A) is an amount equal to the product of--
                    ``(i) the average manufacturer's price for such 
                drug; and
                    ``(ii) the number of dosage units of such drug paid 
                for by the State under such agreement.
            ``(5) Limitation on prices of drugs purchased by covered 
        entities.--
                    ``(A) Agreement with secretary.--A manufacturer 
                meets the requirements of this paragraph if the 
                manufacturer has entered into an agreement with the 
                Secretary that meets the requirements of section 340B 
                of the Public Health Service Act with respect to 
                covered outpatient drugs purchased by a covered entity 
                on or after the first day of the first month that 
                begins after the date of the enactment of title VI of 
                the Veterans Health Care Act of 1992.
                    ``(B) Covered entity defined.--In this subsection, 
                the term `covered entity' means an entity described in 
                section 340B(a)(4) of the Public Health Service Act.
                    ``(C) Establishment of alternative mechanism to 
                ensure against duplicate discounts or rebates.--If the 
                Secretary does not establish a mechanism under section 
                340B(a)(5)(A) of the Public Health Service Act within 
                12 months of the date of the enactment of such section, 
                the following requirements shall apply:
                            ``(i) Each covered entity shall inform the 
                        single State agency under this title when it is 
                        seeking reimbursement from the medicaid plan 
                        for medical assistance with respect to a unit 
                        of any covered outpatient drug which is subject 
                        to an agreement under section 340B(a) of such 
                        Act.
                            ``(ii) Each such single State agency shall 
                        provide a means by which a covered entity shall 
                        indicate on any drug reimbursement claims form 
                        (or format, where electronic claims management 
                        is used) that a unit of the drug that is the 
                        subject of the form is subject to an agreement 
                        under section 340B of such Act, and not submit 
                        to any manufacturer a claim for a rebate 
                        payment under subsection (b) with respect to 
                        such a drug.
                    ``(D) Effect of subsequent amendments.--In 
                determining whether an agreement under subparagraph (A) 
                meets the requirements of section 340B of the Public 
                Health Service Act, the Secretary shall not take into 
                account any amendments to such section that are enacted 
                after the enactment of title VI of the Veterans Health 
                Care Act of 1992.
                    ``(E) Determination of compliance.--A manufacturer 
                is deemed to meet the requirements of this paragraph if 
                the manufacturer establishes to the satisfaction of the 
                Secretary that the manufacturer would comply (and has 
                offered to comply) with the provisions of section 340B 
                of the Public Health Service Act (as in effect 
                immediately after the enactment title VI of the 
                Veterans Health Care Act of 1992, and would have 
                entered into an agreement under such section (as such 
                section was in effect at such time), but for a 
                legislative change in such section after such 
                enactment.
            ``(6) Requirements relating to master agreements for drugs 
        procured by department of veterans affairs and certain other 
        federal agencies.--
                    ``(A) In general.--A manufacturer meets the 
                requirements of this paragraph if the manufacturer 
                complies with the provisions of section 8126 of title 
                38, United States Code, including the requirement of 
                entering into a master agreement with the Secretary of 
                Veterans Affairs under such section.
                    ``(B) Effect of subsequent amendments.--In 
                determining whether a master agreement described in 
                subparagraph (A) meets the requirements of section 8126 
                of title 38, United States Code, the Secretary shall 
                not take into account any amendments to such section 
                that are enacted after the enactment of title VI of the 
                Veterans Health Care Act of 1992.
                    ``(C) Determination of compliance.--A manufacturer 
                is deemed to meet the requirements of this paragraph if 
                the manufacturer establishes to the satisfaction of the 
                Secretary that the manufacturer would comply (and has 
                offered to comply) with the provisions of section 8126 
                of title 38, United States Code (as in effect 
                immediately after the enactment of title VI of the 
                Veterans Health Care Act of 1992) and would have 
                entered into an agreement under such section (as such 
                section was in effect at such time), but for a 
                legislative change in such section after such 
                enactment.
    ``(b) Terms of Rebate Agreement.--
            ``(1) Periodic rebates.--
                    ``(A) In general.--A rebate agreement under this 
                subsection shall require the manufacturer to provide, 
                to each medicaid plan approved under this title, a 
                rebate for a rebate period in an amount specified in 
                subsection (c) for covered outpatient drugs of the 
                manufacturer dispensed after December 31, 1990, for 
                which payment was made under the medicaid plan for such 
                period. Such rebate shall be paid by the manufacturer 
                not later than 30 days after the date of receipt of the 
                information described in paragraph (2) for the period 
                involved.
                    ``(B) Offset against medical assistance.--Amounts 
                received by a State under this section (or under an 
                agreement authorized by the Secretary under subsection 
                (a)(1) or an agreement described in subsection (a)(4)) 
                in any quarter shall be considered to be a reduction in 
                the amount expended under the medicaid plan in the 
                quarter for medical assistance for purposes of this 
                title.
            ``(2) State provision of information.--
                    ``(A) State responsibility.--Each State agency 
                under this title shall report to each manufacturer not 
                later than 60 days after the end of each rebate period 
                and in a form consistent with a standard reporting 
                format established by the Secretary, information on the 
                total number of units of each dosage form and strength 
                and package size of each covered outpatient drug 
                dispensed after December 31, 1990, for which payment 
                was made under the plan for the period, and shall 
                promptly transmit a copy of such report to the 
                Secretary.
                    ``(B) Audits.--A manufacturer may audit the 
                information provided (or required to be provided) under 
                subparagraph (A). Adjustments to rebates shall be made 
                to the extent that information indicates that 
                utilization was greater or less than the amount 
                previously specified.
            ``(3) Manufacturer provision of price information.--
                    ``(A) In general.--Each manufacturer with an 
                agreement in effect under this section shall report to 
                the Secretary--
                            ``(i) not later than 30 days after the last 
                        day of each rebate period under the agreement 
                        (beginning on or after January 1, 1991), on the 
                        average manufacturer price (as defined in 
                        subsection (j)(1)) and, for single source drugs 
                        and innovator multiple source drugs, the 
                        manufacturer's best price (as defined in 
                        subsection (c)(1)(C)) for each covered 
                        outpatient drug for the rebate period under the 
                        agreement; and
                            ``(ii) not later than 30 days after the 
                        date of entering into an agreement under this 
                        section on the average manufacturer price (as 
                        defined in subsection (j)(1)) as of October 1, 
                        1990, for each of the manufacturer's covered 
                        outpatient drugs.
                    ``(B) Verification surveys of average manufacturer 
                price.--The Secretary may survey wholesalers and 
                manufacturers that directly distribute their covered 
                outpatient drugs, when necessary, to verify 
                manufacturer prices reported under subparagraph (A). 
                The Secretary may impose a civil monetary penalty in an 
                amount not to exceed $10,000 on a wholesaler, 
                manufacturer, or direct seller, if the wholesaler, 
                manufacturer, or direct seller of a covered outpatient 
                drug refuses a request for information by the Secretary 
                in connection with a survey under this subparagraph. 
                The provisions of section 1128A (other than subsections 
                (a) (with respect to amounts of penalties or additional 
                assessments) and (b)) shall apply to a civil money 
                penalty under this subparagraph in the same manner as 
                such provisions apply to a penalty or proceeding under 
                section 1128A(a).
                    ``(C) Penalties.--
                            ``(i) Failure to provide timely 
                        information.--In the case of a manufacturer 
                        with an agreement under this section that fails 
                        to provide information required under 
                        subparagraph (A) on a timely basis, the amount 
                        of the penalty shall be $10,000 for each day in 
                        which such information has not been provided 
                        and such amount shall be paid to the Treasury. 
                        If such information is not reported within 90 
                        days of the deadline imposed, the agreement 
                        shall be suspended for services furnished after 
                        the end of such 90-day period and until the 
                        date such information is reported (but in no 
                        case shall such suspension be for a period of 
                        less than 30 days).
                            ``(ii) False information.--Any manufacturer 
                        with an agreement under this section, or a 
                        wholesaler or direct seller, that knowingly 
                        provides false information under subparagraph 
                        (A) or (B) is subject to a civil money penalty 
                        in an amount not to exceed $100,000 for each 
                        item of false information. Any such civil money 
                        penalty shall be in addition to other penalties 
                        as may be prescribed by law. The provisions of 
                        section 1128A (other than subsections (a) and 
                        (b)) shall apply to a civil money penalty under 
                        this subparagraph in the same manner as such 
                        provisions apply to a penalty or proceeding 
                        under section 1128A(a).
                    ``(D) Confidentiality of information.--
                Notwithstanding any other provision of law, information 
                disclosed by manufacturers or wholesalers under this 
                paragraph or under an agreement with the Secretary of 
                Veterans Affairs described in subsection (a)(6)(A)(ii) 
                is confidential and shall not be disclosed by the 
                Secretary or the Secretary of Veterans Affairs or a 
                State agency (or contractor therewith) in a form which 
                discloses the identity of a specific manufacturer or 
                wholesaler or the prices charged for drugs by such 
                manufacturer or wholesaler, except--
                            ``(i) as the Secretary determines to be 
                        necessary to carry out this section;
                            ``(ii) to permit the Comptroller General to 
                        review the information provided; and
                            ``(iii) to permit the Director of the 
                        Congressional Budget Office to review the 
                        information provided.
            ``(4) Length of agreement.--
                    ``(A) In general.--A rebate agreement shall be 
                effective for an initial period of not less than 1 year 
                and shall be automatically renewed for a period of not 
                less than 1 year unless terminated under subparagraph 
                (B).
                    ``(B) Termination.--
                            ``(i) By the secretary.--The Secretary may 
                        provide for termination of a rebate agreement 
                        for violation of the requirements of the 
                        agreement or other good cause shown. Such 
                        termination shall not be effective earlier than 
                        60 days after the date of notice of such 
                        termination. The Secretary shall provide, upon 
                        request, a manufacturer with a hearing 
                        concerning such a termination, but such hearing 
                        shall not delay the effective date of the 
                        termination. Failure of a State to provide any 
                        advance notice of such a termination as 
                        required by regulation shall not affect the 
                        State's right to terminate coverage of the 
                        drugs affected by such termination as of the 
                        effective date of such termination.
                            ``(ii) By a manufacturer.--A manufacturer 
                        may terminate a rebate agreement under this 
                        section for any reason. Any such termination 
                        shall not be effective until the calendar 
                        quarter beginning at least 60 days after the 
                        date the manufacturer provides notice to the 
                        Secretary.
                            ``(iii) Effectiveness of termination.--Any 
                        termination under this subparagraph shall not 
                        affect rebates due under the agreement before 
                        the effective date of its termination.
                            ``(iv) Notice to states.--In the case of a 
                        termination under this subparagraph, the 
                        Secretary shall provide notice of such 
                        termination to the States within not less than 
                        30 days before the effective date of such 
                        termination.
                            ``(v) Application to terminations of other 
                        agreements.--The provisions of this 
                        subparagraph shall apply to the terminations of 
                        agreements described in section 340B(a)(1) of 
                        the Public Health Service Act and master 
                        agreements described in section 8126(a) of 
                        title 38, United States Code.
                    ``(C) Delay before reentry.--In the case of any 
                rebate agreement with a manufacturer under this section 
                which is terminated, another such agreement with the 
                manufacturer (or a successor manufacturer) may not be 
                entered into until a period of 1 calendar quarter has 
                elapsed since the date of the termination, unless the 
                Secretary finds good cause for an earlier reinstatement 
                of such an agreement.
            ``(5) Settlement of disputes.--
                    ``(A) Secretary.--The Secretary shall have the 
                authority to resolve, settle, and compromise disputes 
                regarding the amounts of rebates owed under this 
                section.
                    ``(B) State.--Each State, with respect to covered 
                outpatient drugs paid for under the State's medicaid 
                plan, shall have authority, independent of the 
                Secretary' authority under subparagraph (A), to 
                resolve, settle, and compromise disputes regarding the 
                amounts of rebates owed under this section. Any such 
                action shall be deemed to comply with the requirements 
                of this title, and such covered outpatient drugs shall 
                be eligible for payment under the medicaid plan 
                approved under this title.
                    ``(C) Amount of rebate.--The Secretary shall limit 
                the amount of the rebate payable in any case in which 
                the Secretary determines that, because of unusual 
                circumstances or questionable data, the provisions of 
                subsection (c) result in a rebate amount that is 
                inequitable or otherwise inconsistent with the purposes 
                of this section.
    ``(c) Determination of Amount of Rebate.--
            ``(1) Basic rebate for single source drugs and innovator 
        multiple source drugs.--
                    ``(A) In general.--Except as provided in paragraph 
                (2), the amount of the rebate specified in this 
                subsection for a rebate period (as defined in 
                subsection (j)(8)) with respect to each dosage form and 
                strength of a single source drug or an innovator 
                multiple source drug shall be equal to the product of--
                            ``(i) the total number of units of each 
                        dosage form and strength paid for under the 
                        medicaid plan in the rebate period (as reported 
                        by the State); and
                            ``(ii) subject to subparagraph (B)(ii), the 
                        greater of--
                                    ``(I) the difference between the 
                                average manufacturer price and the best 
                                price (as defined in subparagraph (C)) 
                                for the dosage form and strength of the 
                                drug, or
                                    ``(II) the minimum rebate 
                                percentage (specified in subparagraph 
                                (B)(i)) of such average manufacturer 
                                price,
                        of or the rebate period.
                    ``(B) Minimum rebate percentage.--For purposes of 
                subparagraph (A)(ii)(II), the minimum rebate percentage 
                for rebate periods beginning after December 31, 1995, 
                is 15.1 percent.
                    ``(C) Best price defined.--For purposes of this 
                section:
                            ``(i) In general.--The term `best price' 
                        means, with respect to a single source drug or 
                        innovator multiple source drug of a 
                        manufacturer, the lowest price available from 
                        the manufacturer during the rebate period to 
                        any wholesaler, retailer, provider, health 
                        maintenance organization, nonprofit entity, or 
                        governmental entity within the United States, 
                        excluding--
                                    ``(I) any prices charged on or 
                                after October 1, 1992, to the Indian 
                                Health Service, the Department of 
                                Veterans Affairs, a State home 
                                receiving funds under section 1741 of 
                                title 38, United States Code, the 
                                Department of Defense, the Public 
                                Health Service, or a covered entity 
                                described in subsection (a)(5)(B);
                                    ``(II) any prices charged under the 
                                Federal Supply Schedule of the General 
                                Services Administration;
                                    ``(III) any prices used under a 
                                State pharmaceutical assistance 
                                program; and
                                    ``(IV) any depot prices and single 
                                award contract prices, as defined by 
                                the Secretary, of any agency of the 
                                Federal Government.
                            ``(ii) Special rules.--The term `best 
                        price'--
                                    ``(I) shall be inclusive of cash 
                                discounts, free goods that are 
                                contingent on any purchase requirement, 
                                volume discounts, and rebates (other 
                                than rebates under this section);
                                    ``(II) shall be determined without 
                                regard to special packaging, labeling, 
                                or identifiers on the dosage form or 
                                product or package; and
                                    ``(III) shall not take into account 
                                prices that are merely nominal in 
                                amount.
            ``(2) Additional rebate for single source and innovator 
        multiple source drugs.--
                    ``(A) In general.--The amount of the rebate 
                specified in this subsection for a rebate period, with 
                respect to each dosage form and strength of a single 
                source drug or an innovator multiple source drug, shall 
                be increased by an amount equal to the product of--
                            ``(i) the total number of units of such 
                        dosage form and strength dispensed after 
                        December 31, 1990, for which payment was made 
                        under the medicaid plan for the rebate period; 
                        and
                            ``(ii) the amount (if any) by which--
                                    ``(I) the average manufacturer 
                                price for the dosage form and strength 
                                of the drug for the period, exceeds
                                    ``(II) the average manufacturer 
                                price for such dosage form and strength 
                                for the calendar quarter beginning July 
                                1, 1990 (without regard to whether or 
                                not the drug has been sold or 
                                transferred to an entity, including a 
                                division or subsidiary of the 
                                manufacturer, after the first day of 
                                such quarter), increased by the 
                                percentage by which the consumer price 
                                index for all urban consumers (United 
                                States city average) for the month 
                                before the month in which the rebate 
                                period begins exceeds such index for 
                                September 1990.
                    ``(B) Treatment of subsequently approved drugs.--In 
                the case of a covered outpatient drug approved by the 
                Food and Drug Administration after October 1, 1990, 
                clause (ii)(II) of subparagraph (A) shall be applied by 
                substituting `the first full calendar quarter after the 
                day on which the drug was first marketed' for `the 
                calendar quarter beginning July 1, 1990' and `the month 
                prior to the first month of the first full calendar 
                quarter after the day on which the drug was first 
                marketed' for `September 1990'.
            ``(3) Rebate for other drugs.--
                    ``(A) In general.--The amount of the rebate paid to 
                a State for a rebate period with respect to each dosage 
                form and strength of covered outpatient drugs (other 
                than single source drugs and innovator multiple source 
                drugs) shall be equal to the product of--
                            ``(i) the applicable percentage (as 
                        described in subparagraph (B)) of the average 
                        manufacturer price for the dosage form and 
                        strength for the rebate period; and
                            ``(ii) the total number of units of such 
                        dosage form and strength dispensed after 
                        December 31, 1990, for which payment was made 
                        under the medicaid plan for the rebate period.
                    ``(B) Applicable percentage defined.--For purposes 
                of subparagraph (A)(i), the `applicable percentage' is 
                11 percent.
            ``(4) Rebate limited to amount of state payment if drug 
        primarily dispensed to nursing facility patients.--
                    ``(A) In general.--Upon request of the manufacturer 
                of a covered outpatient drug, the Secretary shall 
                limit, in accordance with subparagraph (B), the amount 
                of the rebate under this subsection with respect to a 
                dosage form and strength of such drug if the majority 
                of the estimated number of units of such dosage form 
                and strength that are subject to rebates under this 
                section were dispensed to inpatients of nursing 
                facilities.
                    ``(B) Amount of rebate.--In the case of a covered 
                outpatient drug subject to subparagraph (A), the amount 
                of the rebate specified in this subsection for a rebate 
                period, with respect to each dosage form and strength 
                of such drug, shall not exceed the amount paid under 
                the medicaid plan with respect to such dosage form and 
                strength of the drug in the rebate period (without 
                consideration of any dispensing fees paid).
            ``(5) Supplemental rebates prohibited.--No rebates shall be 
        required to be paid by manufacturers with respect to covered 
        outpatient drugs furnished to individuals in any State that 
        provides for the collection of such rebates in excess of the 
        rebate amount payable under this section.
    ``(d) Limitations on Coverage of Drugs.--
            ``(1) Permissible restrictions.--
                    ``(A) In general.--A State may subject to prior 
                authorization any covered outpatient drug. Any such 
                prior authorization program shall comply with the 
                requirements of paragraph (5).
                    ``(B) Additional restrictions.--A State may exclude 
                or otherwise restrict coverage of a covered outpatient 
                drug if--
                            ``(i) the drug is contained in the list 
                        referred to in paragraph (2);
                            ``(ii) the drug is subject to such 
                        restrictions pursuant to an agreement between a 
                        manufacturer and a State authorized by the 
                        Secretary under subsection (a)(1) or in effect 
                        pursuant to subsection (a)(4); or
                            ``(iii) the State has excluded coverage of 
                        the drug from its formulary established in 
                        accordance with paragraph (4).
            ``(2) List of drugs subject to restriction.--The following 
        drugs or classes of drugs, or their medical uses, may be 
        excluded from coverage or otherwise restricted:
                    ``(A) Agents when used for anorexia, weight loss, 
                or weight gain.
                    ``(B) Agents when used to promote fertility.
                    ``(C) Agents when used for cosmetic purposes or 
                hair growth.
                    ``(D) Agents when used for the symptomatic relief 
                of cough and colds.
                    ``(E) Agents when used to promote smoking 
                cessation.
                    ``(F) Prescription vitamins and mineral products, 
                except prenatal vitamins and fluoride preparations.
                    ``(G) Nonprescription drugs.
                    ``(H) Covered outpatient drugs which the 
                manufacturer seeks to require as a condition of sale 
                that associated tests or monitoring services be 
                purchased exclusively from the manufacturer or its 
                designee.
                    ``(I) Barbiturates.
                    ``(J) Benzodiazepines.
            ``(3) Additions to drug listings.--The Secretary shall, by 
        regulation, periodically add to the list of drugs or classes of 
        drugs described in paragraph (2), or their medical uses, which 
        the Secretary has determined to be subject to clinical abuse or 
        inappropriate use.
            ``(4) Requirements for formularies.--A State may establish 
        a formulary if the formulary meets the following requirements:
                    ``(A) The formulary is developed by a committee 
                consisting of physicians, pharmacists, and other 
                appropriate individuals appointed by the Governor of 
                the State (or, at the option of the State, the State's 
                drug use review board established under subsection 
                (f)(3)).
                    ``(B) Except as provided in subparagraph (C), the 
                formulary includes the covered outpatient drugs of any 
                manufacturer which has entered into and complies with 
                an agreement under subsection (a) (other than any drug 
                excluded from coverage or otherwise restricted under 
                paragraph (2)).
                    ``(C) A covered outpatient drug may be excluded 
                with respect to the treatment of a specific disease or 
                condition for an identified population (if any) only 
                if, based on the drug's labeling (or, in the case of a 
                drug the prescribed use of which is not approved under 
                the Federal Food, Drug, and Cosmetic Act but is a 
                medically accepted indication, based on information 
                from the appropriate compendia described in subsection 
                (j)(6)), the excluded drug does not have a significant, 
                clinically meaningful therapeutic advantage in terms of 
                safety, effectiveness, or clinical outcome of such 
                treatment for such population over other drugs included 
                in the formulary and there is a written explanation 
                (available to the public) of the basis for the 
                exclusion.
                    ``(D) The medicaid plan permits coverage of a drug 
                excluded from the formulary (other than any drug 
                excluded from coverage or otherwise restricted under 
                paragraph (2)) pursuant to a prior authorization 
                program that is consistent with paragraph (5).
                    ``(E) The formulary meets such other requirements 
                as the Secretary may impose in order to achieve program 
                savings consistent with protecting the health of 
                program beneficiaries.
        A prior authorization program established by a State under 
        paragraph (5) is not a formulary subject to the requirements of 
        this paragraph.
            ``(5) Requirements of prior authorization programs.--A 
        medicaid plan approved under this title may require, as a 
        condition of coverage or payment for a covered outpatient drug 
        for which Federal financial participation is available in 
        accordance with this section, with respect to drugs dispensed 
        on or after July 1, 1991, the approval of the drug before its 
        dispensing for any medically accepted indication (as defined in 
        subsection (j)(6)) only if the system providing for such 
        approval--
                    ``(A) provides response by telephone or other 
                telecommunication device within 24 hours of a request 
                for prior authorization; and
                    ``(B) except with respect to the drugs on the list 
                referred to in paragraph (2), provides for the 
                dispensing of at least 72-hour supply of a covered 
                outpatient prescription drug in an emergency situation 
                (as defined by the Secretary).
            ``(6) Other permissible restrictions.--A State may impose 
        limitations, with respect to all such drugs in a therapeutic 
        class, on the minimum or maximum quantities per prescription or 
        on the number of refills, if such limitations are necessary to 
        discourage waste, and may address instances of fraud or abuse 
        by individuals in any manner authorized under this Act.
    ``(e) Establishment of Upper Payment Limits.--The Health Care 
Financing Administration shall establish a Federal upper reimbursement 
limit for each multiple source drug for which the FDA has rated three 
or more products therapeutically and pharmaceutically equivalent, 
regardless of whether all such additional formulations are rated as 
such and shall use only such formulations when determining any such 
upper limit.
    ``(f) Drug Use Review.--
            ``(1) In general.--A State participating in the medicaid 
        rebate agreement may provide for a drug use review program to 
        educate physicians and pharmacists to identify and reduce the 
        frequency of patterns of fraud, abuse, gross overuse, or 
        inappropriate or medically unnecessary care, among physicians, 
        pharmacists, and patients, or associated with specific drugs or 
        groups of drugs, as well as potential and actual severe adverse 
        reactions to drugs.
            ``(2) Application of state standards.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), a State with a drug use review 
                program under this subsection shall establish and 
                operate the program under such standards as it may 
                establish.
                    ``(B) Data on drug use.--The program shall assess 
                data on drug use against predetermined standards, 
                consistent with--
                            ``(i) compendia which shall consist of--
                                    ``(I) American Hospital Formulary 
                                Service Drug Information,
                                    ``(II) United States Pharmacopeia-
                                Drug Information,
                                    ``(III) the DRUGDEX Information 
                                System, and
                                    ``(IV) American Medical Association 
                                Drug Evaluations; and
                            ``(ii) the peer-reviewed medical 
                        literature.
    ``(g) Electronic Claims Management.--In accordance with chapter 35 
of title 44, United States Code (relating to coordination of Federal 
information policy), the Secretary shall encourage each State to 
establish, as its principal means of processing claims for covered 
outpatient drugs under its medicaid plan, a point-of-sale electronic 
claims management system, for the purpose of performing on-line, real 
time eligibility verifications, claims data capture, adjudication of 
claims, and assisting pharmacists (and other authorized persons) in 
applying for and receiving payment.
    ``(h) Annual Report.--
            ``(1) In general.--Not later than May 1 of each year, the 
        Secretary shall transmit to the Committee on Finance of the 
        Senate and the Committee on Commerce of the House of 
        Representatives a report on the operation of this section in 
        the preceding fiscal year.
            ``(2) Details.--Each report shall include information on--
                    ``(A) ingredient costs paid under this title for 
                single source drugs, multiple source drugs, and 
                nonprescription covered outpatient drugs;
                    ``(B) the total value of rebates received and 
                number of manufacturers providing such rebates;
                    ``(C) the effect of inflation on the value of 
                rebates required under this section;
                    ``(D) trends in prices paid under this title for 
                covered outpatient drugs; and
                    ``(E) Federal and State administrative costs 
                associated with compliance with the provisions of this 
                title.
    ``(i) Exemption for Capitated Health Care Organizations, Hospitals, 
and Nursing Facilities.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        requirements of the medicaid rebate agreement under this 
        section shall not apply with respect to covered outpatient 
        drugs dispensed by or through--
                    ``(A) a capitated health care organization (as 
                defined in section 2114(c)(1)); or
                    ``(B) a hospital or nursing facility that dispenses 
                covered outpatient drugs using a drug formulary system 
                and bills the State no more than the hospital's 
                purchasing costs for covered outpatient drugs.
            ``(2) Construction in determining best price.--Nothing in 
        paragraph (1) shall be construed as excluding amounts paid by 
        the entities described in such paragraph for covered outpatient 
        drugs from the determination of the best price (as defined in 
        subsection (c)(1)(C)) for such drugs.
    ``(j) Definitions.--For purposes of this section:
            ``(1) Average manufacturer price.--The term `average 
        manufacturer price' means, with respect to a covered outpatient 
        drug of a manufacturer for a rebate period, the average price 
        paid to the manufacturer for the drug in the United States by 
        wholesalers for drugs distributed to the retail pharmacy class 
        of trade, after deducting customary prompt pay discounts.
            ``(2) Covered outpatient drug.--Subject to the exceptions 
        in paragraph (3), the term `covered outpatient drug' means--
                    ``(A) of those drugs which are treated as 
                prescribed drugs for purposes of this title, a drug 
                which may be dispensed only upon prescription (except 
                as provided in subparagraph (D)); and--
                            ``(i) which is approved as a prescription 
                        drug under section 505 or 507 of the Federal 
                        Food, Drug, and Cosmetic Act,
                            ``(ii)(I) which was commercially used or 
                        sold in the United States before the date of 
                        the enactment of the Drug Amendments of 1962 or 
                        which is identical, similar, or related (within 
                        the meaning of section 310.6(b)(1) of title 21 
                        of the Code of Federal Regulations) to such a 
                        drug, and (II) which has not been the subject 
                        of a final determination by the Secretary that 
                        it is a `new drug' (within the meaning of 
                        section 201(p) of the Federal Food, Drug, and 
                        Cosmetic Act) or an action brought by the 
                        Secretary under section 301, 302(a), or 304(a) 
                        of such Act to enforce section 502(f) or 505(a) 
                        of such Act, or
                            ``(iii)(I) which is described in section 
                        107(c)(3) of the Drug Amendments of 1962 and 
                        for which the Secretary has determined there is 
                        a compelling justification for its medical 
                        need, or is identical, similar, or related 
                        (within the meaning of section 310.6(b)(1) of 
                        title 21 of the Code of Federal Regulations) to 
                        such a drug, and (II) for which the Secretary 
                        has not issued a notice of an opportunity for a 
                        hearing under section 505(e) of the Federal 
                        Food, Drug, and Cosmetic Act on a proposed 
                        order of the Secretary to withdraw approval of 
                        an application for such drug under such section 
                        because the Secretary has determined that the 
                        drug is less than effective for some or all 
                        conditions of use prescribed, recommended, or 
                        suggested in its labeling;
                    ``(B) a biological product, other than a vaccine 
                which--
                            ``(i) may only be dispensed upon 
                        prescription,
                            ``(ii) is licensed under section 351 of the 
                        Public Health Service Act, and
                            ``(iii) is produced at an establishment 
                        licensed under such section to produce such 
                        product;
                    ``(C) insulin certified under section 506 of the 
                Federal Food, Drug, and Cosmetic Act; and
                    ``(D) a drug which may be sold without a 
                prescription (commonly referred to as an `over-the-
                counter drug'), if the drug is prescribed by a 
                physician (or other person authorized to prescribe 
                under State law).
            ``(3) Limiting definition.--The term `covered outpatient 
        drug' does not include any drug, biological product, or insulin 
        provided as part of, or as incident to and in the same setting 
        as, any of the following (and for which payment may be made 
        under this title as part of payment for the following and not 
        as direct reimbursement for the drug):
                    ``(A) Inpatient hospital services.
                    ``(B) Hospice services.
                    ``(C) Dental services, except that drugs for which 
                the medicaid plan authorizes direct reimbursement to 
                the dispensing dentist are covered outpatient drugs.
                    ``(D) Physicians' services.
                    ``(E) Outpatient hospital services.
                    ``(F) Nursing facility services and services 
                provided by an intermediate care facility for the 
                mentally retarded.
                    ``(G) Other laboratory and x-ray services.
                    ``(H) Renal dialysis services.
        Such term also does not include any such drug or product for 
        which a National Drug Code number is not required by the Food 
        and Drug Administration or a drug or biological used for a 
        medical indication which is not a medically accepted 
        indication. Any drug, biological product, or insulin excluded 
        from the definition of such term as a result of this paragraph 
        shall be treated as a covered outpatient drug for purposes of 
        determining the best price (as defined in subsection (c)(1)(C)) 
        for such drug, biological product, or insulin.
            ``(4) Over-the-counter drug.--The term `over-the-counter 
        drug' means a drug that may be sold without a prescription.
            ``(5) Manufacturer.--The term `manufacturer' means, with 
        respect to a covered outpatient drug, the entity holding legal 
        title to or possession of the National Drug Code number for 
        such drug.
            ``(6) Medically accepted indication.--The term `medically 
        accepted indication' means any use for a covered outpatient 
        drug which is approved under the Federal Food, Drug, and 
        Cosmetic Act, or the use of which is supported by one or more 
        citations included or approved for inclusion in any of the 
        compendia described in subsection (f)(2)(B)(i).
            ``(7) Multiple source drug; innovator multiple source drug; 
        noninnovator multiple source drug; single source drug.--
                    ``(A) Defined.--
                            ``(i) Multiple source drug.--The term 
                        `multiple source drug' means, with respect to a 
                        rebate period, a covered outpatient drug (not 
                        including any drug described in paragraph 
                        (2)(D)) for which there are 2 or more drug 
                        products which--
                                    ``(I) are rated as therapeutically 
                                equivalent (under the Food and Drug 
                                Administration's most recent 
                                publication of `Approved Drug Products 
                                with Therapeutic Equivalence 
                                Evaluations');
                                    ``(II) except as provided in 
                                subparagraph (B), are pharmaceutically 
                                equivalent and bioequivalent, as 
                                defined in subparagraph (C) and as 
                                determined by the Food and Drug 
                                Administration; and
                                    ``(III) are sold or marketed in the 
                                State during the period.
                            ``(ii) Innovator multiple source drug.--The 
                        term `innovator multiple source drug' means a 
                        multiple source drug that was originally 
                        marketed under a new drug application or 
                        product licensing application approved by the 
                        Food and Drug Administration.
                            ``(iii) Noninnovator multiple source 
                        drug.--The term `noninnovator multiple source 
                        drug' means a multiple source drug that is not 
                        an innovator multiple source drug.
                            ``(iv) Single source drug.--The term 
                        `single source drug' means a covered outpatient 
                        drug (not including any drug described in 
                        paragraph (2)(D)) which is produced or 
                        distributed under a new drug application or 
                        product licensing application approved by the 
                        Food and Drug Administration, including a drug 
                        product marketed by any cross-licensed 
                        producers or distributors operating under the 
                        new drug application or product licensing 
                        application.
                    ``(B) Exception.--Subparagraph (A)(i)(II) shall not 
                apply if the Food and Drug Administration changes by 
                regulation the requirement that, for purposes of the 
                publication described in subparagraph (A)(i)(I), in 
                order for drug products to be rated as therapeutically 
                equivalent, they must be pharmaceutically equivalent 
                and bioequivalent, as defined in subparagraph (C).
                    ``(C) Special rules.--For purposes of this 
                paragraph--
                            ``(i) drug products are pharmaceutically 
                        equivalent if the products contain identical 
                        amounts of the same active drug ingredient in 
                        the same dosage form and meet compendial or 
                        other applicable standards of strength, 
                        quality, purity, and identity;
                            ``(ii) drugs are bioequivalent if they do 
                        not present a known or potential bioequivalence 
                        problem, or, if they do present such a problem, 
                        they are shown to meet an appropriate standard 
                        of bioequivalence; and
                            ``(iii) a drug product is considered to be 
                        sold or marketed in a State if it appears in a 
                        published national listing of average wholesale 
                        prices selected by the Secretary, if the listed 
                        product is generally available to the public 
                        through retail pharmacies in that State.
            ``(8) Rebate period.--The term `rebate period' means, with 
        respect to an agreement under subsection (a), a calendar 
        quarter or other period specified by the Secretary with respect 
        to the payment of rebates under such agreement.
            ``(9) State agency.--The term `State agency' means the 
        agency designated under this title to administer or supervise 
        the administration of the medicaid plan for medical 
        assistance.''.
    (b) Medicaid Drug Rebate Program Task Force.--
            (1) In general.--Not later than June 1, 1998, the Secretary 
        of Health and Human Services (in this subsection referred to as 
        the ``Secretary'') shall provide for the establishment of a 
        Medicaid Drug Rebate Program Task Force (in this subsection 
        referred to as the ``Task Force'').
            (2) Composition.--The Task Force shall consist of volunteer 
        representatives appointed by--
                    (A) the chair and vice chair of the National 
                Governors Association (NGA);
                    (B) the National Association of State Medicaid 
                Directors;
                    (C) associations representing the prescription and 
                generic drug industries;
                    (D) an association representing pharmacies; and
                    (E) an association representing the interests of 
                medicaid recipients.
            (3) Duties.--The Task Force shall study whether the 
        medicaid drug rebate program under section 2175 of the Social 
        Security Act, as added by this section, should be retained or 
        repealed. The study shall assess--
                    (A) the extent to which State medicaid programs 
                rely on the drug rebate program to manage prescription 
                drug expenditures;
                    (B) the impact of repealing the program on 
                recipient access to prescription drugs and pharmacy 
                services;
                    (C) the impact of retaining the program on the 
                prescription and generic drug industries; and
                    (D) the likely actions States would take to manage 
                prescription drug expenditures in the absence of drug 
                rebate revenue.
            (4) Administrative assistance.--Administrative support for 
        the Task Force shall be provided by the Agency for Health Care 
        Policy and Research (or, in the absence of such Agency, the 
        Secretary).
            (5) Report.--Not later than October 1, 1998, the Task Force 
        shall report the results of the study to the Secretary. The 
        report shall be transmitted to the Committee on Finance and 
        Special Committee on Aging of the Senate and the Committee on 
        Commerce of the House of Representatives.
    (c) Clerical Amendment.--The table of sections for title XXI, as 
added by section 7191(a), is amended by adding at the end the following 
new item:

        ``Sec. 2175. Medicaid drug rebate agreements.''.
    (d) Special Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall take effect as if 
        included in the amendment made by section 7191.
            (2) Retroactive application of certain provisions.--
        Subsections (b)(5), (c)(4), and (c)(5) of section 2175 of the 
        Social Security Act, as added by this section, shall take 
        effect as if included in the enactment of the Omnibus Budget 
        Reconciliation Act of 1990.

SEC. 7193. WAIVERS.

    (a) Continuation of Waivers.--
            (1) In general.--Except as provided in paragraph (2), if 
        any waiver granted to a State under section 1115 of the Social 
        Security Act (42 U.S.C. 1315) or otherwise which relates to the 
        provision of assistance under a State plan under title XIX of 
        such Act has been implemented as of September 1, 1995, the 
        waiver may continue, at the option of the State, subject to the 
        terms and conditions of such waiver.
            (2) Financing limitation.--Notwithstanding any other 
        provision of law, beginning with fiscal year 1996, a State 
        operating under a waiver described in paragraph (1) shall 
        receive the payment provided for in the waiver to the extent 
        such payment does not exceed the payment under title XXI of the 
        Social Security Act, as added by section 7191(a), such State 
        would otherwise receive for the fiscal year.
    (b) State Option To Terminate Waiver.--
            (1) In general.--A State may terminate a waiver described 
        in subsection (a) before the expiration of the waiver.
            (2) Report.--A State which terminates a waiver under 
        paragraph (1) shall submit a report to the Secretary of Health 
        and Human Services summarizing the waiver and any available 
        information concerning the result or effect of such waiver.
            (3) Hold harmless provision.--
                    (A) In general.--Notwithstanding any other 
                provision of law, a State that, not later than the date 
                described in subparagraph (B), submits a written 
                request to terminate a waiver described in subsection 
                (a) shall be held harmless for accrued cost neutrality 
                liabilities incurred under the terms and conditions of 
                such waiver.
                    (B) Date described.--The date described in this 
                subparagraph is the later of--
                            (i) January 1, 1996; or
                            (ii) 90 days following the adjournment of 
                        the first regular session of the State 
                        legislature that begins after the date of the 
                        enactment of this Act.
    (c) Continuation of Individual Waivers.--A State may elect to 
continue one or more individual waivers described in subsection (a)(1).

SEC. 7194. CHILDREN WITH SPECIAL HEALTH CARE NEEDS.

    (a) Classification System To Identify Children With Special Health 
Care Needs.--
            (1) In general.--Not later than 18 months after the date of 
        the enactment of this Act, the Secretary of Health and Human 
        Services (in this section referred to as the ``Secretary'') 
        shall, through the Health Care Financing Administration, 
        develop a national, quantifiable classification system to 
        identify children with special health care needs.
            (2) Children with special health care needs.--For purposes 
        of this section, children with special health care needs are 
        children--
                    (A) with conditions which are, or can be 
                anticipated to be, of at least a year's duration, and
                    (B) who require services significantly greater than 
                well children.
            (3) Requirements of classification system.--The 
        classification system developed in accordance with this 
        section--
                    (A) shall be based on commonly recognized 
                diagnostic codes;
                    (B) shall be compatible with State and health plan 
                data systems;
                    (C) shall be capable of serving as a basis for 
                identifying such children and their medical 
                expenditures and monitoring the quality of care 
                received; and
                    (D) shall incorporate the consideration of the 
                severity status, prognosis, and desired outcome for 
                each such child, including tertiary prevention, 
                maintenance of function, or improvement of function.
    (b) Demonstration Projects To Use Classification System and To 
Provide Methods of Assuring Quality Care for Children With Special 
Health Care Needs.--
            (1) In general.--Upon completion of the development of the 
        classification system under subsection (a), the Secretary shall 
        make grants to not more than 5 States to conduct 5-year 
        demonstration projects in accordance with this subsection for 
        the purpose of--
                    (A) testing the reliability and validity of such 
                classification system;
                    (B) developing methods of assuring quality care for 
                children with special health care needs; and
                    (C) providing for initial methods for identifying 
                children with special health care needs based on 
                diagnoses accounting for the majority of the chronic 
                conditions affecting children in the State which are 
                likely to require significant medical interventions 
                whether in number of interventions or costs.
        Each State grant may be used without fiscal year limitation.
            (2) Requirements of project.--
                    (A) In general.--A project conducted in accordance 
                with this subsection shall provide that the State in 
                developing methods described in paragraph (1)(B), shall 
                develop--
                            (i) adequate capitation rates specific to 
                        children with special health care needs; and
                            (ii) quality indicators, including system 
                        performance standards, care guidelines for 
                        specific populations, outcomes measures, and 
                        patient and parent satisfaction.
                    (B) Appropriate representatives.--The design and 
                implementation of such a project shall include 
                representatives of providers of services to such 
                children and appropriate State agencies and programs.
            (3) Applications.--Each State desiring to conduct a 
        demonstration project under this subsection, including projects 
        which are statewide, substate, or regional in cooperation with 
        a contiguous State or States, shall prepare and submit to the 
        Secretary an application at such time, in such manner, and 
        containing such information as the Secretary may require.
            (4) Reports.--A State that conducts a demonstration project 
        under this section shall prepare and submit to the Secretary 
        annual and final reports in such form and containing such 
        information as the Secretary may require.
            (5) Authorization of appropriations.--There are authorized 
        to be appropriated $2,000,000 for each of fiscal years 1997, 
        1998, 1999, 2000, and 2001 for the purpose of conducting 
        demonstration projects in accordance with this subsection.

SEC. 7195. CBO REPORTS.

    (a) Study.--The Director of the Congressional Budget Office shall 
prepare an annual analysis of the effects of the amendments made by 
section 7191 on the health insurance status of children, individuals 
who have attained retirement age, and the disabled.
    (b) Report.--The Director of the Congressional Budget Office shall 
submit a report of the results of the analysis required under 
subsection (a) by May 15 of each year to the Committee on Finance of 
the Senate and the Committee on Commerce of the House of 
Representatives.

SEC. 7196. ADJUSTMENTS OF POOL AMOUNTS.

    Notwithstanding any other provision in law, the Secretary shall 
adjust Medicaid pool amounts in fiscal year 1996, fiscal year 1997, 
fiscal year 2000, and fiscal year 2001 for each State by a 
proportionate amount such that total Medicaid pool amounts in fiscal 
year 1996, fiscal year 1997, fiscal year 2000, and fiscal year 2001 
shall not exceed the amounts provided in section 2121(b)(1) of the 
Social Security Act as added by section 7191(a) of this Act--
            (1) reduced by $1,900,000,000 in fiscal year 1996, and 
        increased by a similar amount in the subsequent fiscal year; 
        and
            (2) reduced by $2,300,000,000 in fiscal year 2000, and 
        increased by a similar amount in the subsequent fiscal year.

SEC. 7197. STATE REVIEW OF MENTALLY ILL OR RETARDED NURSING FACILITY 
              RESIDENTS UPON CHANGE IN PHYSICAL OR MENTAL CONDITION.

    (a) State Review on Change in Resident's Condition.--Section 
1919(e)(7)(B)(iii) (42 U.S.C. 1396r(e)(7)(B)(iii)) is amended to read 
as follows:
                            ``(iii) Review required upon change in 
                        resident's condition.--A review and 
                        determination under clause (i) or (ii) shall be 
                        conducted promptly after a nursing facility has 
                        notified the State mental health authority or 
                        State mental retardation or developmental 
                        disability authority, as applicable, with 
                        respect to a mentally ill or mentally retarded 
                        resident that there has been a significant 
                        change in the resident's physical or mental 
                        condition.''.
    (b) Conforming Amendments.--
            (1) Section 1919(b)(3)(E) (42 U.S.C. 1396r(b)(3)(E)) is 
        amended by adding at the end the following new sentence: ``In 
        addition, a nursing facility shall notify the State mental 
        health authority or State mental retardation or developmental 
        disability authority, as applicable, promptly after a 
        significant change in the physical or mental condition of a 
        resident who is mentally ill or mentally retarded.''.
            (2) The heading for section 1919(e)(7)(B) (42 U.S.C. 
        1396r(e)(7)(B)) is amended by striking ``annual''.
            (3) The heading for section 1919(e)(7)(D)(i) (42 U.S.C. 
        1396r(e)(7)(D)(i)) is amended by striking ``annual''.

SEC. 7198. NURSE AIDE TRAINING IN NURSING FACILITIES SUBJECT TO 
              EXTENDED SURVEY AND UNDER CERTAIN OTHER CONDITIONS.

    Section 1919(f)(2)(B)(iii)(I) (42 U.S.C. 1396r(f)(2)(B)(iii)(I)) is 
amended in the matter preceding item (a), by striking ``by or in a 
nursing facility'' and inserting ``by a nursing facility (or in such a 
facility, unless the State determines that there is no other such 
program offered within a reasonable distance, provides notice of the 
approval to the State long term care ombudsman, and assures, through an 
oversight effort, that an adequate environment exists for such a 
program)''.

SEC. 7199. MEDICARE/MEDICAID INTEGRATION DEMONSTRATION PROJECT.

    (a) Description of Projects.--
            (1) In general.--The Secretary of Health and Human Services 
        (in this section referred to as the ``Secretary'') shall 
        conduct demonstration projects under this section to 
        demonstrate the manner in which States may use funds from the 
        medicare program under title XVIII of the Social Security Act 
        and the medicaid program under title XXI of such Act (in this 
        section referred to as the ``medicare and medicaid programs'') 
        for the purpose of providing a more cost-effective full 
        continuum of care for delivering services to meet the needs of 
        chronically-ill elderly and disabled beneficiaries who are 
        eligible for items and services under such programs, through 
        integrated systems of care, with an emphasis on case 
        management, prevention, and interventions designed to avoid 
        institutionalization whenever possible. The Secretary shall use 
        funds from the amounts appropriated for the medicare and 
        medicaid programs to make the payments required under 
        subsection (d)(1).
            (2) Option to participate.--A State, or a coalition of 
        States, may not require an individual eligible to receive items 
        and services under the medicare and medicaid programs to 
        participate in a demonstration project under this section.
    (b) Establishment.--The Secretary shall make payments in accordance 
with subsection (d) to not more than 10 States, or coalitions of 
States, for the conduct of demonstration projects that provide for 
integrated systems of care in accordance with subsection (a).
    (c) Applications.--Each State, or a coalition of States, desiring 
to conduct a demonstration project under this section shall prepare and 
submit to the Secretary an application at such time, in such manner, 
and containing such information as the Secretary may require, including 
an explanation of a plan for evaluating the project. The Secretary 
shall approve or deny an application not later than 90 days after the 
receipt of such application.
    (d) Payments.--
            (1) In general.--For each fiscal year quarter occurring 
        during a demonstration project conducted under this section, 
        the Secretary shall pay to each entity designated under 
        paragraph (3) an amount equal to the Federal capitated payment 
        rate determined under paragraph (2).
            (2) Federal capitated payment rate.--The Secretary shall 
        determine the Federal capitated payment rate for purposes of 
        this section based on the anticipated Federal quarterly cost of 
        providing care to chronically-ill elderly and disabled 
        beneficiaries who are eligible for items and services under the 
        medicare and medicaid programs and who have opted to 
        participate in a demonstration project under this section.
            (3) Designation of entity.--
                    (A) In general.--Each State, or coalition of 
                States, shall designate entities to directly receive 
                the payments described in paragraph (1).
                    (B) Requirement.--A State, or a coalition of 
                States, may not designate an entity under subparagraph 
                (A) unless such entity meets the quality, solvency, and 
                coverage standards applicable to providers of items and 
                services under the medicare and medicaid programs.
            (4) State payments.--Each State conducting, or in the case 
        of a coalition of States, participating in a demonstration 
        project under this section shall pay to the entities designated 
        under paragraph (3) the State percentage, as defined in section 
        1905(b) of the Social Security Act (42 U.S.C. 1396d(b)) (as 
        such section is in effect on the day before the date of the 
        enactment of this Act), of any items and services provided to 
        chronically-ill elderly and disabled beneficiaries who have 
        opted to participate in a demonstration project under this 
        section.
            (5) Budget neutrality.--The aggregate amount of Federal 
        payments to entities designated by a State, or coalition of 
        States, under paragraph (3) for a fiscal year shall not exceed 
        the aggregate amount of such payments that would otherwise have 
        been made under the medicare and medicaid programs for such 
        fiscal year for items and services provided to beneficiaries 
        under such programs but for the election of such beneficiaries 
        to participate in a demonstration project under this section.
    (e) Duration.--
            (1) In general.--The demonstration projects conducted under 
        this section shall be conducted for a 5-year period, subject to 
        annual review and approval by the Secretary.
            (2) Termination.--The Secretary may, with 90 days' notice, 
        terminate any demonstration project conducted under this 
        section that is not in substantial compliance with the terms of 
        the application approved by the Secretary under this section.
    (f) Oversight.--The Secretary shall establish quality standards for 
evaluating and monitoring the demonstration projects conducted under 
this section.
    (g) Reports.--Not later than 90 days after the conclusion of a 
demonstration project conducted under this section, the Secretary shall 
submit to the Congress a report containing the following:
            (1) A description of the demonstration project.
            (2) An analysis of beneficiary satisfaction under such 
        project.
            (3) An analysis of the quality of the services delivered 
        under the project.
            (4) A description of the savings to the medicaid and 
        medicare programs as a result of the demonstration project.

  Subtitle C--Block Grants for Temporary Assistance for Needy Families

SEC. 7200. SHORT TITLE.

    This subtitle may be cited as the ``Work Opportunity Act of 1995''.

SEC. 7201. BLOCK GRANTS TO STATES.

    (a) Repeals.--
            (1) In general.--Parts A and F of title IV (42 U.S.C. 601 
        et seq. and 682 et seq.) are hereby repealed.
            (2) Rules and regulations.--The Secretary of Health and 
        Human Services shall ensure that any rules and regulations 
        relating to the provisions of law repealed in paragraph (1) 
        shall cease to have effect on and after the date of the repeal 
        of such provisions.
    (b) Block Grants to States for Temporary Assistance for Needy 
Families With Minor Children.--Title IV (42 U.S.C. 601 et seq.) is 
amended by inserting before part B the following:

  ``PART A--BLOCK GRANTS TO STATES FOR TEMPORARY ASSISTANCE FOR NEEDY 
                      FAMILIES WITH MINOR CHILDREN

``SEC. 400. NO INDIVIDUAL ENTITLEMENT.

    ``Notwithstanding any other provision of law, no individual is 
entitled to any assistance under this part.

``SEC. 401. PURPOSE.

    ``The purpose of this part is to increase the flexibility of States 
in operating a program designed to--
            ``(1) provide assistance to needy families with minor 
        children;
            ``(2) provide job preparation and opportunities for such 
        families; and
            ``(3) prevent and reduce the incidence of out-of-wedlock 
        pregnancies, with a special emphasis on teenage pregnancies, 
        and establish annual goals for preventing and reducing such 
        pregnancies with respect to fiscal years 1996 through 2000.

``SEC. 402. ELIGIBLE STATES; STATE PLAN.

    ``(a) In General.--As used in this part, the term `eligible State' 
means, with respect to a fiscal year, a State that has submitted to the 
Secretary a plan that includes the following:
            ``(1) Outline of family assistance program.--A written 
        document that outlines how the State intends to do the 
        following:
                    ``(A) Conduct a program designed to serve all 
                political subdivisions in the State to--
                            ``(i) provide assistance to needy families 
                        with not less than 1 minor child (or any 
                        expectant family); and
                            ``(ii) provide a parent or caretaker in 
                        such families with work experience, assistance 
                        in finding employment, and other work 
                        preparation activities and support services 
                        that the State considers appropriate to enable 
                        such families to leave the program and become 
                        self-sufficient.
                    ``(B) Require a parent or caretaker receiving 
                assistance under the program to engage in work (as 
                defined by the State) when the State determines the 
                parent or caretaker is ready to engage in work, or 
                after 24 months (whether or not consecutive) of 
                receiving assistance under the program, whichever is 
                earlier.
                    ``(C) Satisfy the minimum participation rates 
                specified in section 404.
                    ``(D) Treat--
                            ``(i) families with minor children moving 
                        into the State from another State; and
                            ``(ii) noncitizens of the United States.
                    ``(E) Safeguard and restrict the use and disclosure 
                of information about individuals and families receiving 
                assistance under the program.
                    ``(F) Establish goals and take action to prevent 
                and reduce the incidence of out-of-wedlock pregnancies, 
                with special emphasis on teenage pregnancies.
                    ``(G) Community service.--Not later than 2 years 
                after the date of the enactment of this Act, consistent 
                with the exception provided in section 404(d), require 
                participation by, and offer to, unless the State opts 
                out of this provision by notifying the Secretary, a 
                parent or caretaker receiving assistance under the 
                program, after receiving such assistance for 3 months--
                            ``(i) is not exempt from work requirements; 
                        and
                            ``(ii) is not engaged in work as determined 
                        under section 404(c),
                in community service employment, with minimum hours per 
                week and tasks to be determined by the State.
            ``(2) Family assistance program strategic plan.--
                    ``(A) In general.--A single comprehensive State 
                Family Assistance Program Strategic Plan (hereafter 
                referred to in this section as the `State Plan') 
                describing a 3-year strategic plan for the statewide 
                program designed to meet the State goals and reach the 
                State benchmarks for program activities of the family 
                assistance program.
                    ``(B) Contents of the state plan.--The State plan 
                shall include:
                            ``(i) State goals.--A description of the 
                        goals of the 3-year plan, including outcome 
                        related goals of and benchmarks for program 
                        activities of the family assistance program.
                            ``(ii) Current year plan.--A description of 
                        how the goals and benchmarks described in 
                        clause (i) will be achieved, or how progress 
                        toward the goals and benchmarks will be 
                        achieved, during the fiscal year in which the 
                        plan has been submitted.
                            ``(iii) Performance indicators.--A 
                        description of performance indicators to be 
                        used in measuring or assessing the relevant 
                        output service levels and outcomes of relevant 
                        program activities.
                            ``(iv) External factors.--Information on 
                        those key factors external to the program and 
                        beyond the control of the State that could 
                        significantly affect the attainment of the 
                        goals and benchmarks.
                            ``(v) Evaluation mechanisms.--Information 
                        on a mechanism for conducting program 
                        evaluation, to be used to compare actual 
                        results with the goals and benchmarks and 
                        designate the results on a scale ranging from 
                        highly successful to failing to reach the goals 
                        and benchmarks of the program.
                            ``(vi) Minimum participation rates.--
                        Information on how the minimum participation 
                        rates specified in section 404 will be 
                        satisfied.
                            ``(vii) Estimate of expenditures.--An 
                        estimate of the total amount of State or local 
                        expenditures under the program for the fiscal 
                        year in which the plan is submitted.
            ``(3) Certification that the state will operate a child 
        support enforcement program.--A certification by the chief 
        executive officer of the State that, during the fiscal year, 
        the State will operate a child support enforcement program 
        under the State plan approved under part D.
            ``(4) Certification that the state will operate a child 
        protection program.--A certification by the chief executive 
        officer of the State that, during the fiscal year, the State 
        will operate a child protection program under the State plan 
        approved under part B.
            ``(5) Certification that the state will operate a foster 
        care and adoption assistance program.--A certification by the 
        chief executive officer of the State that, during the fiscal 
        year, the State will operate a foster care and adoption 
        assistance program under the State plan approved under part E.
            ``(6) Certification that the state will participate in the 
        income and eligibility verification system.--A certification by 
        the chief executive officer of the State that, during the 
        fiscal year, the State will participate in the income and 
        eligibility verification system required by section 1137.
            ``(7) Certification of the administration of the program.--
        A certification by the chief executive officer of the State 
        specifying which State agency or agencies are responsible for 
        the administration and supervision of the State program for the 
        fiscal year and ensuring that local governments and private 
        sector organizations have been consulted regarding the plan and 
        design of welfare services in the State so that services are 
        provided in a manner appropriate to local populations.
            ``(8) Certification that required reports will be 
        submitted.--A certification by the chief executive officer of 
        the State that the State shall provide the Secretary with any 
        reports required under this part.
    ``(b) Certification That the State Will Provide Access to 
Indians.--
            ``(1) In general.--In recognition of the Federal 
        Government's trust responsibility to, and government-to-
        government relationship with, Indian tribes, the Secretary 
        shall ensure that Indians receive at least their equitable 
        share of services under the State program, by requiring a 
        certification by the chief executive officer of each State 
        described in paragraph (2) that, during the fiscal year, the 
        State shall provide Indians in each Indian tribe that does not 
        have a tribal family assistance plan approved under section 414 
        for a fiscal year with equitable access to assistance under the 
        State program funded under this part.
            ``(2) State described.--For purposes of paragraph (1), a 
        State described in this paragraph is a State in which there is 
        an Indian tribe that does not have a tribal family assistance 
        plan approved under section 414 for a fiscal year.
    ``(c) Distribution of State Plan.--
            ``(1) Public availability of summary.--The State shall make 
        available to the public a summary of the State plan submitted 
        under this section.
            ``(2) Copy to auditor.--The State shall provide the 
        approved entity conducting the audit under section 408 with a 
        copy of the State plan submitted under this section.
    ``(d) Definitions.--For purposes of this part, the following 
definitions shall apply:
            ``(1) Adult.--The term `adult' means an individual who is 
        not a minor child.
            ``(2) Minor child.--The term `minor child' means an 
        individual--
                    ``(A) who--
                            ``(i) has not attained 18 years of age; or
                            ``(ii) has not attained 19 years of age and 
                        is a full-time student in a secondary school 
                        (or in the equivalent level of vocational or 
                        technical training); and
                    ``(B) who resides with such individual's custodial 
                parent or other caretaker relative.
            ``(3) Fiscal year.--The term `fiscal year' means any 12-
        month period ending on September 30 of a calendar year.
            ``(4) Indian, indian tribe, and tribal organization.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the terms `Indian', `Indian tribe', 
                and `tribal organization' have the meaning given such 
                terms by section 4 of the Indian Self-Determination and 
                Education Assistance Act (25 U.S.C. 450b).
                    ``(B) In alaska.--For purposes of making tribal 
                family assistance grants under section 414 on behalf of 
                Indians in Alaska, the term `Indian tribe' shall mean 
                only the following Alaska Native regional nonprofit 
                corporations:
                            ``(i) Arctic Slope Native Association.
                            ``(ii) Kawerak, Inc.
                            ``(iii) Maniilaq Association.
                            ``(iv) Association of Village Council 
                        Presidents.
                            ``(v) Tanana Chiefs Conference.
                            ``(vi) Cook Inlet Tribal Council.
                            ``(vii) Bristol Bay Native Association.
                            ``(viii) Aleutian and Pribilof Island 
                        Association.
                            ``(ix) Chugachmuit.
                            ``(x) Tlingit Haida Central Council.
                            ``(xi) Kodiak Area Native Association.
                            ``(xii) Copper River Native Association.
            ``(5) State.--Except as otherwise specifically provided, 
        the term `State' includes the several States, the District of 
        Columbia, the Commonwealth of Puerto Rico, the United States 
        Virgin Islands, Guam, and American Samoa.

``SEC. 403. PAYMENTS TO STATES AND INDIAN TRIBES.

    ``(a) Grant Amount.--
            ``(1) In general.--Subject to the provisions of paragraphs 
        (3) and (5), section 407 (relating to penalties), and section 
        414(g), for each of fiscal years 1996, 1997, 1998, 1999, and 
        2000, the Secretary shall pay--
                    ``(A) each eligible State a grant in an amount 
                equal to the State family assistance grant for the 
                fiscal year, for each of fiscal years 1998 and 1999, 
                the amount of the State's job placement performance 
                bonus determined under subsection (f)(1) for the fiscal 
                year, and for fiscal year 2000, the amount of the 
                State's share of the performance bonus and high 
                performance bonus determined under section 418 for such 
                fiscal year; and
                    ``(B) each Indian tribe with an approved tribal 
                family assistance plan a tribal family assistance grant 
                in accordance with section 414.
            ``(2) State family assistance grant.--
                    ``(A) In general.--
                            ``(i) Basic amount.--For purposes of 
                        paragraph (1)(A), a State family assistance 
                        grant for any State for a fiscal year is an 
                        amount equal to the sum of--
                                    ``(I) the total amount of the 
                                Federal payments to the State under 
                                section 403 (other than Federal 
                                payments to the State described in 
                                subparagraphs (A), (B) and (C) of 
                                section 418(a)(2)) for fiscal year 1994 
                                (as such section 403 was in effect 
                                during such fiscal year), plus
                                    ``(II) the total amount of the 
                                Federal payments to the State under 
                                subparagraphs (A), (B) and (C) of 
                                section 418(a)(2),
                as such payments were reported by the State on February 
                14, 1995, and as adjusted under clause (ii).
                            ``(ii) Adjustments.--The payments described 
                        in clause (i) shall be--
                                    ``(I) reduced by the amount, if 
                                any, determined under subparagraph (B);
                                    ``(II) reduced by the amount 
                                determined under subsection (f)(2)(B);
                                    ``(III) reduced by the amount, if 
                                any, determined under subsection 
                                (i)(3)(C)(iii);
                                    ``(IV) for fiscal year 2000, 
                                reduced by the amount determined under 
                                section 418(a)(3); and
                                    ``(V) increased by the amount, if 
                                any, determined under subparagraph (D).
                    ``(B) Amount attributable to certain indian 
                families served by indian tribes.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A), the amount determined under 
                        this subparagraph is an amount equal to the 
                        Federal payments to the State under this 
                        section for fiscal year 1994 (as in effect 
                        during such fiscal year) attributable to 
                        expenditures by the State under parts A and F 
                        of this title (as so in effect) for Indian 
                        families described in clause (ii).
                            ``(ii) Indian families described.--For 
                        purposes of clause (i), Indian families 
                        described in this clause are Indian families 
                        who reside in a service area or areas of an 
                        Indian tribe receiving a tribal family 
                        assistance grant under section 414.
                    ``(C) Notification.--Not later than 3 months prior 
                to the payment of each quarterly installment of a State 
                grant under subsection (a)(1), the Secretary shall 
                notify the State of the amount of the reduction 
                determined under subparagraph (B) with respect to the 
                State.
                    ``(D) Amount attributable to state plan 
                amendments.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A) and subject to the limitation 
                        in clause (ii), the amount determined under 
                        this subparagraph is an amount equal to the 
                        Federal payment under section 403(a)(5) to the 
                        State for emergency assistance in fiscal year 
                        1995 under any State plan amendment made under 
                        section 402 during fiscal year 1994 (as such 
                        sections were in effect before the date of the 
                        enactment of the Work Opportunity Act of 1995).
                            ``(ii) Limitation.--Amounts made available 
                        under clause (i) to all States shall not exceed 
                        $800,000,000 for the 5-fiscal year period 
                        beginning in fiscal year 1996. If amounts 
                        available under this subparagraph are less than 
                        the total amount of emergency assistance 
                        payments referred to in clause (i), the amount 
                        payable to a State shall be equal to an amount 
                        which bears the same relationship to the total 
                        amount available under this clause as the State 
                        emergency assistance payment bears to the total 
                        amount of such payments.
                            ``(iii) Budget scoring.--Notwithstanding 
                        section 257(b)(2) of the Balanced Budget and 
                        Emergency Deficit Control Act of 1985, the 
                        baseline shall assume that no grant shall be 
                        made under this subparagraph after fiscal year 
                        2000.
            ``(3) Appropriation.--
                    ``(A) States.--There are authorized to be 
                appropriated and there are appropriated $16,803,769,000 
                for each fiscal year described in paragraph (1) for the 
                purpose of paying--
                            ``(i) grants to States under paragraph 
                        (1)(A); and
                            ``(ii) tribal family assistance grants 
                        under paragraph (1)(B).
                    ``(B) Adjustment for qualifying states.--For the 
                purpose of increasing the amount of the grant payable 
                to a State under paragraph (1) in accordance with 
                paragraph (3), there are authorized to be appropriated 
                and there are appropriated--
                            ``(i) for fiscal year 1997, $85,860,000;
                            ``(ii) for fiscal year 1998, $173,276,000;
                            ``(iii) for fiscal year 1999, $263,468,000; 
                        and
                            ``(iv) for fiscal year 2000, $355,310,000.
            ``(4) Welfare partnership.--
                    ``(A) In general.--The amount of the grant 
                otherwise determined under paragraph (1) for fiscal 
                year 1997, 1998, 1999, or 2000 shall be reduced by the 
                amount by which State expenditures under the State 
                program funded under this part for the preceding fiscal 
                year is less than 80 percent of historic State 
                expenditures.
                    ``(B) Historic state expenditures.--For purposes of 
                this paragraph--
                            ``(i) In general.--The term `historic State 
                        expenditures' means expenditures by a State 
                        under parts A and F of title IV for fiscal year 
                        1994, as in effect during such fiscal year.
                            ``(ii) Hold harmless.--In no event shall 
                        the historic State expenditures applicable to 
                        any fiscal year exceed the amount which bears 
                        the same ratio to the amount determined under 
                        clause (i) as--
                                    ``(I) the grant amount otherwise 
                                determined under paragraph (1) for the 
                                preceding fiscal year (without regard 
                                to section 407), bears to
                                    ``(II) the total amount of Federal 
                                payments to the State under section 403 
                                for fiscal year 1994 (as in effect 
                                during such fiscal year).
                    ``(C) Determination of state expenditures for 
                preceding fiscal year.--
                            ``(i) In general.--For purposes of this 
                        paragraph, the expenditures of a State under 
                        the State program funded under this part for a 
                        preceding fiscal year shall be equal to the sum 
                        of the State's expenditures under the program 
                        in the preceding fiscal year for--
                                    ``(I) cash assistance;
                                    ``(II) child care assistance;
                                    ``(III) education, job training, 
                                and work;
                                    ``(IV) administrative costs; and
                                    ``(V) any other use of funds 
                                allowable under section 403(b)(1).
                            ``(ii) Transfers from other state and local 
                        programs.--In determining State expenditures 
                        under clause (i), such expenditures shall not 
                        include funding supplanted by transfers from 
                        other State and local programs.
                    ``(D) Exclusion of federal amounts.--For purposes 
                of this paragraph, State expenditures shall not include 
                any expenditures from amounts made available by the 
                Federal Government, State funds expended for the 
                medicaid program under title XIX of this Act or any 
                successor to such program, and any State funds which 
                are used to match Federal funds or are expended as a 
                condition of receiving Federal funds under Federal 
                programs other than under this part.
    ``(b) Use of Grant.--
            ``(1) In general.--Subject to this part, a State to which a 
        grant is made under this section may use the grant--
                    ``(A) in any manner that is reasonably calculated 
                to accomplish the purpose of this part; or
                    ``(B) in any manner that such State used amounts 
                received under part A or F of this title, as such parts 
                were in effect before October 1, 1995;
        except that not more than 15 percent of the grant may be used 
        for administrative purposes.
            ``(2) Authority to reserve certain amounts for 
        assistance.--A State may reserve amounts paid to the State 
        under this part for any fiscal year for the purpose of 
        providing, without fiscal year limitation, assistance under the 
        State program operated under this part. In the case of amounts 
        paid to the State that are set aside in accordance with section 
        418(a), the State may reserve such amounts for any fiscal year 
        only for the purpose of providing without fiscal year 
        limitation child care assistance under this part.
            ``(3) Authority to operate employment placement program.--A 
        State to which a grant is made under this section may use a 
        portion of the grant to make payments (or provide job placement 
        vouchers) to State-approved public and private job placement 
        agencies that provide employment placement services to 
        individuals who receive assistance under the State program 
        funded under this part.
            ``(4) Transferability of grant amounts.--A State may use up 
        to 30 percent of amounts received from a grant under this part 
        for a fiscal year to carry out State activities under the Child 
        Care and Development Block Grant Act of 1990 (42 U.S.C. 9858 et 
        seq.) (relating to child care block grants).
    ``(c) Timing of Payments.--The Secretary shall pay each grant 
payable to a State under this section in quarterly installments.
    ``(d) Federal Loan Fund for State Welfare Programs.--
            ``(1) Establishment.--There is hereby established in the 
        Treasury of the United States a revolving loan fund which shall 
        be known as the `Federal Loan Fund for State Welfare Programs' 
        (hereafter for purposes of this section referred to as the 
        `fund').
            ``(2) Deposits into fund.--
                    ``(A) Appropriation.--Out of any money in the 
                Treasury of the United States not otherwise 
                appropriated, $1,700,000,000 are hereby appropriated 
                for fiscal year 1996 for payment to the fund.
                    ``(B) Loan repayments.--The Secretary shall deposit 
                into the fund any principal or interest payment 
                received with respect to a loan made under this 
                subsection.
            ``(3) Availability.--Amounts in the fund are authorized to 
        remain available without fiscal year limitation for the purpose 
        of making loans and receiving payments of principal and 
        interest on such loans, in accordance with this subsection.
            ``(4) Use of fund.--
                    ``(A) Loans to states.--The Secretary shall make 
                loans from the fund to any loan-eligible State, as 
                defined in subparagraph (D), for a period to maturity 
                of not more than 3 years.
                    ``(B) Rate of interest.--The Secretary shall charge 
                and collect interest on any loan made under 
                subparagraph (A) at a rate equal to the current average 
                market yield on outstanding marketable obligations of 
                the United States with remaining periods to maturity 
                comparable to the period to maturity of the loan.
                    ``(C) Maximum loan.--The cumulative amount of any 
                loans made to a State under subparagraph (A) during 
                fiscal years 1996 through 2000 shall not exceed 10 
                percent of the State family assistance grant under 
                subsection (a)(2) for a fiscal year.
                    ``(D) Loan-eligible state.--For purposes of 
                subparagraph (A), a loan-eligible State is a State 
                which has not had a penalty described in section 
                407(a)(1) imposed against it at any time prior to the 
                loan being made.
            ``(5) Limitation on use of loan.--A State shall use a loan 
        received under this subsection only for any purpose for which 
        grant amounts received by the State under subsection (a) may be 
        used including--
                    ``(A) welfare anti-fraud activities; and
                    ``(B) the provision of assistance under the State 
                program to Indian families that have moved from the 
                service area of an Indian tribe with a tribal family 
                assistance plan approved under section 414.
    ``(e) Special Rule for Indian Tribes That Received JOBS Funds.--
            ``(1) In general.--The Secretary shall pay to each eligible 
        Indian tribe for each of fiscal years 1996, 1997, 1998, 1999, 
        and 2000 a grant in an amount equal to the amount received by 
        such Indian tribe in fiscal year 1994 under section 482(i) (as 
        in effect during such fiscal year) for the purpose of operating 
        a program to make work activities available to members of the 
        Indian tribe.
            ``(2) Eligible indian tribe.--For purposes of paragraph 
        (1), the term `eligible Indian tribe' means an Indian tribe or 
        Alaska Native organization that conducted a job opportunities 
        and basic skills training program in fiscal year 1995 under 
        section 482(i) (as in effect during such fiscal year).
            ``(3) Appropriation.--There are authorized to be 
        appropriated and there are hereby appropriated $7,638,474 for 
        each fiscal year described in paragraph (1) for the purpose of 
        paying grants in accordance with such paragraph.
    ``(f) Job Placement Performance Bonus.--
            ``(1) In general.--The job placement performance bonus 
        determined with respect to a State and a fiscal year is an 
        amount equal to the amount of the State's allocation of the job 
        placement performance fund determined in accordance with the 
        formula developed under paragraph (2).
            ``(2) Allocation formula; bonus fund.--
                    ``(A) Allocation formula.--
                            ``(i) In general.--Not later than September 
                        30, 1996, the Secretary of Health and Human 
                        Services shall develop and publish in the 
                        Federal Register a formula for allocating 
                        amounts in the job placement performance bonus 
                        fund to States based on the number of families 
                        that received assistance under a State program 
                        funded under this part in the preceding fiscal 
                        year that became ineligible for assistance 
                        under the State program as a result of 
                        unsubsidized employment during such year.
                            ``(ii) Factors to consider.--In developing 
                        the allocation formula under clause (i), the 
                        Secretary shall--
                                    ``(I) provide a greater financial 
                                bonus for individuals in families 
                                described in clause (i) who remain 
                                employed for greater periods of time or 
                                are at greater risk of long-term 
                                welfare dependency; and
                                    ``(II) take into account the 
                                unemployment conditions of each State 
                                or geographic area.
                    ``(B) Job placement performance bonus fund.--
                            ``(i) In general.--The amount in the job 
                        placement performance bonus fund for a fiscal 
                        year shall be an amount equal to the applicable 
                        percentage of the amount appropriated under 
                        section 403(a)(2)(A)(i) for such fiscal year.
                            ``(ii) Applicable percentage.--For purposes 
                        of clause (i)(I), the applicable percentage 
                        shall be determined in accordance with the 
                        following table:

                                                         The applicable
``For fiscal year:                                       percentage is:
    1998..........................................                   3 
    1999..........................................                   4.
    ``(g) Secretary.--For purposes of this section, the term 
`Secretary' means the Secretary of the Treasury.
    ``(h) Contingency Fund.--
            ``(1) Establishment.--There is hereby established in the 
        Treasury of the United States a fund which shall be known as 
        the `Contingency Fund for State Welfare Programs' (hereafter in 
        this section referred to as the `Fund').
            ``(2) Deposits into fund.--Out of any money in the Treasury 
        of the United States not otherwise appropriated, there are 
        hereby appropriated for fiscal years 1996, 1997, 1998, 1999, 
        2000, 2001, and 2002 such sums as are necessary for payment to 
        the Fund in a total amount not to exceed $1,000,000,000.
            ``(3) Computation of grant.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                Secretary of the Treasury shall pay to each eligible 
                State in a fiscal year an amount equal to the Federal 
                medical assistance percentage for such State for such 
                fiscal year (as defined in section 2122(c)) of so much 
                of the expenditures by the State in such year under the 
                State program funded under this part as exceed the 
                historic State expenditures for such State.
                    ``(B) Limitation.--The total amount paid to a State 
                under subparagraph (A) for any fiscal year shall not 
                exceed an amount equal to 20 percent of the annual 
                amount determined for such State under the State 
                program funded under this part (without regard to this 
                subsection) for such fiscal year.
                    ``(C) Method of computation, payment, and 
                reconciliation.--
                            ``(i) Method of computation.--The method of 
                        computing and paying such amounts shall be as 
                        follows:
                                    ``(I) The Secretary of Health and 
                                Human Services shall estimate the 
                                amount to be paid to the State for each 
                                quarter under the provisions of 
                                subparagraph (A), such estimate to be 
                                based on a report filed by the State 
                                containing its estimate of the total 
                                sum to be expended in such quarter and 
                                such other information as the Secretary 
                                may find necessary.
                                    ``(II) The Secretary of Health and 
                                Human Services shall then certify to 
                                the Secretary of the Treasury the 
                                amount so estimated by the Secretary of 
                                Health and Human Services.
                            ``(ii) Method of payment.--The Secretary of 
                        the Treasury shall thereupon, through the 
                        Fiscal Service of the Department of the 
                        Treasury and prior to audit or settlement by 
                        the General Accounting Office, pay to the 
                        State, at the time or times fixed by the 
                        Secretary of Health and Human Services, the 
                        amount so certified.
                            ``(iii) Method of reconciliation.--If at 
                        the end of each fiscal year, the Secretary of 
                        Health and Human Services finds that a State 
                        which received amounts from the Fund in such 
                        fiscal year did not meet the maintenance of 
                        effort requirement under paragraph (5)(B) for 
                        such fiscal year, the Secretary shall reduce 
                        the State family assistance grant for such 
                        State for the succeeding fiscal year by such 
                        amounts.
            ``(4) Use of grant.--
                    ``(A) In general.--An eligible State may use the 
                grant--
                            ``(i) in any manner that is reasonably 
                        calculated to accomplish the purpose of this 
                        part; or
                            ``(ii) in any manner that such State used 
                        amounts received under part A or F of this 
                        title, as such parts were in effect before 
                        October 1, 1995.
                    ``(B) Refund of unused portion.--Any amount of a 
                grant under this subsection not used during the fiscal 
                year shall be returned to the Fund.
            ``(5) Eligible state.--
                    ``(A) In general.--For purposes of this subsection, 
                a State is an eligible State with respect to a fiscal 
                year, if--
                            ``(i)(I) the average rate of total 
                        unemployment in such State (seasonally 
                        adjusted) for the period consisting of the most 
                        recent 3 months for which data for all States 
                        are published equals or exceeds 6.5 percent, 
                        and
                            ``(II) the average rate of total 
                        unemployment in such State (seasonally 
                        adjusted) for the 3-month period equals or 
                        exceeds 110 percent of such average rate for 
                        either (or both) of the corresponding 3-month 
                        periods ending in the 2 preceding calendar 
                        years; and
                            ``(ii) has met the maintenance of effort 
                        requirement under subparagraph (B) for the 
                        State program funded under this part for the 
                        fiscal year.
                    ``(B) Maintenance of effort.--The maintenance of 
                effort requirement for any State under this 
                subparagraph for any fiscal year is the expenditure of 
                an amount at least equal to 100 percent of the level of 
                historic State expenditures for such State (as 
                determined under subsection (a)(5)).
            ``(6) Annual reports.--The Secretary of the Treasury shall 
        annually report to the Congress on the status of the Fund.

``SEC. 404. MANDATORY WORK REQUIREMENTS.

    ``(a) Participation Rate Requirements.--A State to which a grant is 
made under section 403 for a fiscal year shall achieve the minimum 
participation rate specified in the following tables for the fiscal 
year with respect to--
            ``(1) all families receiving assistance under the State 
        program funded under this part:

                    
                                                            The minimum
                    
                                                          participation
                    ``If the fiscal year is:
                                              rate for all families is:
                          1996.......................             25   
                          1997.......................             30   
                          1998.......................             35   
                          1999.......................             40   
                          2000 or thereafter.........             50;  
        and
            ``(2) with respect to 2-parent families receiving such 
        assistance:

                    
                                                            The minimum
                    
                                                          participation
                    ``If the fiscal year is:
                                                               rate is:
                          1996.......................             60   
                          1997 or 1998...............             75   
                          1999 or thereafter.........             90.  

    ``(b) Calculation of Participation Rates.--
            ``(1) For all families.--
                    ``(A) Average monthly rate.--For purposes of 
                subsection (a)(1), the participation rate for all 
                families of a State for a fiscal year is the average of 
                the participation rates for all families of the State 
                for each month in the fiscal year.
                    ``(B) Monthly participation rates.--The 
                participation rate of a State for all families of the 
                State for a month, expressed as a percentage, is--
                            ``(i) the sum of--
                                    ``(I) the number of all families 
                                receiving assistance under the State 
                                program funded under this part that 
                                include an adult who is engaged in work 
                                for the month;
                                    ``(II) the number of all families 
                                receiving assistance under the State 
                                program funded under this part that are 
                                subject in such month to a penalty 
                                described in paragraph (1)(A) or (2)(A) 
                                of subsection (d) but have not been 
                                subject to such penalty for more than 3 
                                months within the preceding 12-month 
                                period (whether or not consecutive); 
                                and
                                    ``(III) the number of all families 
                                that received assistance under the 
                                State program under this part during 
                                the previous 6-month period that have 
                                become ineligible to receive assistance 
                                during such period because of 
                                employment and which include an adult 
                                who is employed for the month; divided 
                                by
                            ``(ii) the total number of all families 
                        receiving assistance under the State program 
                        funded under this part during the month that 
                        include an adult receiving assistance.
            ``(2) 2-parent families.--
                    ``(A) Average monthly rate.--For purposes of 
                subsection (a)(2), the participation rate for 2-parent 
                families of a State for a fiscal year is the average of 
                the participation rates for 2-parent families of the 
                State for each month in the fiscal year.
                    ``(B) Monthly participation rates.--The 
                participation rate of a State for 2-parent families of 
                the State for a month, expressed as a percentage, is--
                            ``(i) the total number of 2-parent families 
                        described in paragraph (1)(B)(i); divided by
                            ``(ii) the total number of 2-parent 
                        families receiving assistance under the State 
                        program funded under this part during the month 
                        that include an adult.
            ``(3) Pro rata reduction of participation rate due to 
        caseload reductions not required by federal law.--
                    ``(A) In general.--The Secretary shall prescribe 
                regulations for reducing the minimum participation rate 
                otherwise required by this section for a fiscal year by 
                the number of percentage points equal to the number of 
                percentage points (if any) by which--
                            ``(i) the number of families receiving 
                        assistance during the fiscal year under the 
                        State program funded under this part is less 
                        than
                            ``(ii) the number of families that received 
                        aid under the State plan approved under part A 
                        of this title (as in effect before October 1, 
                        1995) during the fiscal year immediately 
                        preceding such effective date.
                The minimum participation rate shall not be reduced to 
                the extent that the Secretary determines that the 
                reduction in the number of families receiving such 
                assistance is required by Federal law.
                    ``(B) Eligibility changes not counted.--The 
                regulations described in subparagraph (A) shall not 
                take into account families that are diverted from a 
                State program funded under this part as a result of 
                differences in eligibility criteria under a State 
                program funded under this part and eligibility criteria 
                under such State's plan under the aid to families with 
                dependent children program, as such plan was in effect 
                on the day before the date of the enactment of the Work 
                Opportunity Act of 1995.
            ``(4) State option to include individuals receiving 
        assistance under a tribal family assistance plan.--For purposes 
        of paragraphs (1)(B) and (2)(B), a State may, at its option, 
        include families receiving assistance under a tribal family 
        assistance plan approved under section 414. For purposes of the 
        previous sentence, an individual who receives assistance under 
        a tribal family assistance plan approved under section 414 
        shall be treated as being engaged in work if the individual is 
        participating in work under standards that are comparable to 
        State standards for being engaged in work.
            ``(5) State option for participation requirement 
        exemptions.--For any fiscal year, a State may, at its option, 
        not require an individual who is the parent or caretaker 
        relative of a minor child who is less than 12 months of age to 
        engage in work and may exclude such an individual from the 
        determination of the minimum participation rate specified for 
        such fiscal year in subsection (a).
    ``(c) Engaged in Work.--
            ``(1) All families.--For purposes of subsection 
        (b)(1)(B)(i)(I), an adult is engaged in work for a month in a 
        fiscal year if the adult is participating in work for at least 
        the minimum average number of hours per week specified in the 
        following table during the month, not fewer than 20 hours per 
        week of which are attributable to a work activity:

                         
                                                            The minimum
                         ``If the month is
                                                      average number of
                           in fiscal year:
                                                     hours per week is:
                               1996..................             20   
                               1997..................             20   
                               1998..................             20   
                               1999..................             25   
                               2000..................             30   
                               2001..................             30   
                               2002..................             35   
                               2003 or thereafter....             35.  

            ``(2) 2-parent families.--For purposes of subsection 
        (b)(2)(A), an adult is engaged in work for a month in a fiscal 
        year if the adult is participating in work for at least 35 
        hours per week during the month, not fewer than 30 hours per 
        week of which are attributable to work activities described in 
        paragraph (3).
            ``(3) Definition of work activities.--For purposes of this 
        subsection, the term `work activities' means--
                    ``(A) unsubsidized employment;
                    ``(B) subsidized employment;
                    ``(C) on-the-job training;
                    ``(D) community service programs;
                    ``(E) job search (only for the first 4 weeks in 
                which an individual is required to participate in work 
                activities under this section); and
                    ``(F) vocational educational training (not to 
                exceed 12 months with respect to any individual).
            ``(4) Limitation on vocational education activities counted 
        as work.--For purposes of determining monthly participation 
        rates under paragraphs (1)(B)(i)(I) and (2)(B)(i) of subsection 
        (b), not more than 25 percent of adults in all families and in 
        2-parent families determined to be engaged in work in the State 
        for a month may meet the work activity requirement through 
        participation in vocational educational training.
    ``(d) Penalties Against Individuals.--
            ``(1) In general.--Except as provided in paragraph (2), if 
        an adult in a family receiving assistance under the State 
        program funded under this part refuses to engage in work 
        required under subsection (c)(1) or (c)(2), a State to which a 
        grant is made under section 403 shall--
                    ``(A) reduce the amount of assistance otherwise 
                payable to the family pro rata (or more, at the option 
                of the State) with respect to any period during a month 
                in which the adult so refuses; or
                    ``(B) terminate such assistance,
        subject to such good cause and other exceptions as the State 
        may establish.
            ``(2) Exception.--Notwithstanding paragraph (1), a State 
        may not reduce or terminate assistance under the State program 
        based on a refusal of an adult to work if such adult is a 
        single custodial parent caring for a child age 5 or under and 
        has a demonstrated inability (as determined by the State) to 
        obtain needed child care, for one or more of the following 
        reasons:
                    ``(A) Unavailability of appropriate child care 
                within a reasonable distance of the individual's home 
                or work site.
                    ``(B) Unavailability or unsuitability of informal 
                child care by a relative or under other arrangements.
                    ``(C) Unavailability of appropriate and affordable 
                formal child care arrangements.
    ``(e) Nondisplacement in Work Activities.--
            ``(1) In general.--Subject to paragraph (2), an adult in a 
        family receiving assistance under this part may fill a vacant 
        employment position in order to engage in a work activity 
        described in subsection (c)(3).
            ``(2) No filling of certain vacancies.--No adult in a work 
        activity described in subsection (c)(3) shall be employed or 
        assigned--
                    ``(A) when any other individual is on layoff from 
                the same or any substantially equivalent job; or
                    ``(B) when the employer has terminated the 
                employment of any regular employee or otherwise caused 
                an involuntary reduction of its workforce in order to 
                fill the vacancy so created with an adult described in 
                paragraph (1).
            ``(3) No preemption.--Nothing in this subsection shall 
        preempt or supersede any provision of State or local law that 
        provides greater protection for employees from displacement.
    ``(f) Sense of the Congress.--It is the sense of the Congress that 
in complying with this section, each State that operates a program 
funded under this part is encouraged to assign the highest priority to 
requiring adults in 2-parent families and adults in single-parent 
families that include older preschool or school-age children to be 
engaged in work activities.
    ``(g) Encouragement To Provide Child Care Services.--An individual 
participating in a State community service program may be treated as 
being engaged in work under subsection (c) if such individual provides 
child care services to other individuals participating in the community 
service program in the manner, and for the period of time each week, 
determined appropriate by the State.

``SEC. 405. REQUIREMENTS AND LIMITATIONS.

    ``(a) State Required To Enter Into a Personal Responsibility 
Contract With Each Family Receiving Assistance.--
            ``(1) In general.--Each State to which a grant is made 
        under section 403 shall require each family receiving 
        assistance under the State program funded under this part to 
        enter into--
                    ``(A) a personal responsibility contract (as 
                developed by the State) with the State; or
                    ``(B) a limited benefit plan.
            ``(2) Personal responsibility contract.--For purposes of 
        this subsection, the term `personal responsibility contract' 
        means a binding contract between the State and each family 
        receiving assistance under the State program funded under this 
        part that--
                    ``(A) outlines the steps each family and the State 
                will take to get the family off of welfare and to 
                become self-sufficient;
                    ``(B) specifies a negotiated time-limited period of 
                eligibility for receipt of assistance that is 
                consistent with unique family circumstances and is 
                based on a reasonable plan to facilitate the transition 
                of the family to self-sufficiency;
                    ``(C) provides that the family will automatically 
                enter into a limited benefit plan if the family is out 
                of compliance with the personal responsibility 
                contract; and
                    ``(D) provides that the contract shall be invalid 
                if the State agency fails to comply with the contract.
            ``(3) Limited benefit plan.--For purposes of this 
        subsection, the term `limited benefit plan' means a plan which 
        provides for a reduced level of assistance and later 
        termination of assistance to a family that has entered into the 
        plan in accordance with a schedule to be determined by the 
        State.
            ``(4) Assessment.--The State agency shall provide, through 
        a case manager, an initial and thorough assessment of the 
        skills, prior work experience, and employability of each parent 
        for use in developing and negotiating a personal responsibility 
        contract.
            ``(5) Dispute resolution.--The State agency described in 
        section 402(a)(7) shall establish a dispute resolution 
        procedure for disputes related to participation in the personal 
        responsibility contract that provides the opportunity for a 
        hearing.
    ``(b) No Assistance for More Than 5 Years.--
            ``(1) Minor child exception.--If an individual received 
        assistance under the State program operated under this part as 
        a minor child in a needy family, any period during which such 
        individual's family received assistance shall not be counted 
        for purposes of applying the limitation described in paragraph 
        (1) to an application for assistance under such program by such 
        individual as the head of a household of a needy family with 
        minor children.
            ``(2) Hardship exception.--
                    ``(A) In general.--The State may exempt a family 
                from the application of paragraph (1) by reason of 
                hardship.
                    ``(B) Limitation.--The number of families with 
                respect to which an exemption made by a State under 
                subparagraph (A) is in effect for a fiscal year shall 
                not exceed 20 percent of the average monthly number of 
                families to which the State is providing assistance 
                under the program operated under this part.
    ``(c) Denial of Assistance for 10 Years to a Person Found To Have 
Fraudulently Misrepresented Residence in Order To Obtain Assistance in 
2 or More States.--An individual shall not be considered an eligible 
individual for the purposes of this part during the 10-year period that 
begins on the date the individual is convicted in Federal or State 
court of having made a fraudulent statement or representation with 
respect to the place of residence of the individual in order to receive 
assistance simultaneously from 2 or more States under programs that are 
funded under this title, title XXI, or the Food Stamp Act of 1977, or 
benefits in 2 or more States under the supplemental security income 
program under title XVI.
    ``(d) Denial of Assistance for Fugitive Felons and Probation and 
Parole Violators.--
            ``(1) In general.--An individual shall not be considered an 
        eligible individual for the purposes of this part if such 
        individual is--
                    ``(A) fleeing to avoid prosecution, or custody or 
                confinement after conviction, under the laws of the 
                place from which the individual flees, for a crime, or 
                an attempt to commit a crime, which is a felony under 
                the laws of the place from which the individual flees, 
                or which, in the case of the State of New Jersey, is a 
                high misdemeanor under the laws of such State; or
                    ``(B) violating a condition of probation or parole 
                imposed under Federal or State law.
            ``(2) Exchange of information with law enforcement 
        agencies.--Notwithstanding any other provision of law, a State 
        shall furnish any Federal, State, or local law enforcement 
        officer, upon the request of the officer, with the current 
        address, Social Security number, and photograph (if applicable) 
        of any recipient of assistance under this part, if the officer 
        furnishes the agency with the name of the recipient and 
        notifies the agency that--
                    ``(A) such recipient--
                            ``(i) is described in subparagraph (A) or 
                        (B) of paragraph (1); or
                            ``(ii) has information that is necessary 
                        for the officer to conduct the officer's 
                        official duties; and
                    ``(B) the location or apprehension of the recipient 
                is within such officer's official duties.
    ``(e) State Option to Require Assignment of Support.--At the option 
of the State, a State to which a grant is made under section 403 may 
provide that an individual applying for or receiving assistance under 
the State program funded under this part shall be required to assign to 
the State any rights to support from any other person the individual 
may have in such individual's own behalf or in behalf of any other 
family member for whom the individual is applying for or receiving 
assistance.
    ``(f) Denial of Assistance for Absent Child.--Each State to which a 
grant is made under section 403--
            ``(1) may not use any part of the grant to provide 
        assistance to a family with respect to any minor child who has 
        been, or is expected by the caretaker relative in the family to 
        be, absent from the home for a period of 45 consecutive days 
        or, at the option of the State, such period of not less than 30 
        and not more than 90 consecutive days as the State may provide 
        for in the State plan;
            ``(2) at the option of the State, may establish such good 
        cause exceptions to paragraph (1) as the State considers 
        appropriate if such exceptions are provided for in the State 
        plan; and
            ``(3) shall provide that a caretaker relative shall not be 
        considered an eligible individual for purposes of this part if 
        the caretaker relative fails to notify the State agency of an 
        absence of a minor child from the home for the period specified 
        in or provided for under paragraph (1), by the end of the 5-day 
        period that begins on the date that it becomes clear to the 
        caretaker relative that the minor child will be absent for the 
        period so specified or provided for in paragraph (1).

``SEC. 406. PROMOTING RESPONSIBLE PARENTING.

    ``(a) Findings.--The Congress makes the following findings:
            ``(1) Marriage is the foundation of a successful society.
            ``(2) Marriage is an essential institution of a successful 
        society which promotes the interests of children.
            ``(3) Promotion of responsible fatherhood and motherhood is 
        integral to successful child rearing and the wellbeing of 
        children.
            ``(4) In 1992, only 54 percent of single-parent families 
        with children had a child support order established and, of 
        that 54 percent, only about one half received the full amount 
        due. Of the cases enforced through the public child support 
        enforcement system, only 18 percent of the caseload has a 
        collection.
            ``(5) The number of individuals receiving aid to families 
        with dependent children (hereafter in this subsection referred 
        to as `AFDC') has more than tripled since 1965. More than two-
        thirds of these recipients are children. Eighty-nine percent of 
        children receiving AFDC benefits now live in homes in which no 
        father is present.
                    ``(A)(i) The average monthly number of children 
                receiving AFDC benefits--
                            ``(I) was 3,300,000 in 1965;
                            ``(II) was 6,200,000 in 1970;
                            ``(III) was 7,400,000 in 1980; and
                            ``(IV) was 9,300,000 in 1992.
                    ``(ii) While the number of children receiving AFDC 
                benefits increased nearly threefold between 1965 and 
                1992, the total number of children in the United States 
                aged 0 to 18 has declined by 5.5 percent.
                    ``(B) The Department of Health and Human Services 
                has estimated that 12,000,000 children will receive 
                AFDC benefits within 10 years.
                    ``(C) The increase in the number of children 
                receiving public assistance is closely related to the 
                increase in births to unmarried women. Between 1970 and 
                1991, the percentage of live births to unmarried women 
                increased nearly threefold, from 10.7 percent to 29.5 
                percent.
            ``(6) The increase of out-of-wedlock pregnancies and births 
        is well documented as follows:
                    ``(A) It is estimated that the rate of nonmarital 
                teen pregnancy rose 23 percent from 54 pregnancies per 
                1,000 unmarried teenagers in 1976 to 66.7 pregnancies 
                in 1991. The overall rate of nonmarital pregnancy rose 
                14 percent from 90.8 pregnancies per 1,000 unmarried 
                women in 1980 to 103 in both 1991 and 1992. In 
                contrast, the overall pregnancy rate for married 
                couples decreased 7.3 percent between 1980 and 1991, 
                from 126.9 pregnancies per 1,000 married women in 1980 
                to 117.6 pregnancies in 1991.
                    ``(B) The total of all out-of-wedlock births 
                between 1970 and 1991 has risen from 10.7 percent to 
                29.5 percent and if the current trend continues, 50 
                percent of all births by the year 2015 will be out-of-
                wedlock.
            ``(7) The negative consequences of an out-of-wedlock birth 
        on the mother, the child, the family, and society are well 
        documented as follows:
                    ``(A) Young women 17 and under who give birth 
                outside of marriage are more likely to go on public 
                assistance and to spend more years on welfare once 
                enrolled. These combined effects of `younger and 
                longer' increase total AFDC costs per household by 25 
                percent to 30 percent for 17-year olds.
                    ``(B) Children born out-of-wedlock have a 
                substantially higher risk of being born at a very low 
                or moderately low birth weight.
                    ``(C) Children born out-of-wedlock are more likely 
                to experience low verbal cognitive attainment, as well 
                as more child abuse, and neglect.
                    ``(D) Children born out-of-wedlock were more likely 
                to have lower cognitive scores, lower educational 
                aspirations, and a greater likelihood of becoming 
                teenage parents themselves.
                    ``(E) Being born out-of-wedlock significantly 
                reduces the chances of the child growing up to have an 
                intact marriage.
                    ``(F) Children born out-of-wedlock are 3 more times 
                likely to be on welfare when they grow up.
            ``(8) Currently 35 percent of children in single-parent 
        homes were born out-of-wedlock, nearly the same percentage as 
        that of children in single-parent homes whose parents are 
        divorced (37 percent). While many parents find themselves, 
        through divorce or tragic circumstances beyond their control, 
        facing the difficult task of raising children alone, 
        nevertheless, the negative consequences of raising children in 
        single-parent homes are well documented as follows:
                    ``(A) Only 9 percent of married-couple families 
                with children under 18 years of age have income below 
                the national poverty level. In contrast, 46 percent of 
                female-headed households with children under 18 years 
                of age are below the national poverty level.
                    ``(B) Among single-parent families, nearly \1/2\ of 
                the mothers who never married received AFDC while only 
                \1/5\ of divorced mothers received AFDC.
                    ``(C) Children born into families receiving welfare 
                assistance are 3 times more likely to be on welfare 
                when they reach adulthood than children not born into 
                families receiving welfare.
                    ``(D) Mothers under 20 years of age are at the 
                greatest risk of bearing low birth-weight babies.
                    ``(E) The younger the single parent mother, the 
                less likely she is to finish high school.
                    ``(F) Young women who have children before 
                finishing high school are more likely to receive 
                welfare assistance for a longer period of time.
                    ``(G) Between 1985 and 1990, the public cost of 
                births to teenage mothers under the aid to families 
                with dependent children program, the food stamp 
                program, and the medicaid program has been estimated at 
                $120,000,000,000.
                    ``(H) The absence of a father in the life of a 
                child has a negative effect on school performance and 
                peer adjustment.
                    ``(I) Children of teenage single parents have lower 
                cognitive scores, lower educational aspirations, and a 
                greater likelihood of becoming teenage parents 
                themselves.
                    ``(J) Children of single-parent homes are 3 times 
                more likely to fail and repeat a year in grade school 
                than are children from intact two-parent families.
                    ``(K) Children from single-parent homes are almost 
                4 times more likely to be expelled or suspended from 
                school.
                    ``(L) Neighborhoods with larger percentages of 
                youth aged 12 through 20 and areas with higher 
                percentages of single-parent households have higher 
                rates of violent crime.
                    ``(M) Of those youth held for criminal offenses 
                within the State juvenile justice system, only 29.8 
                percent lived primarily in a home with both parents. In 
                contrast to these incarcerated youth, 73.9 percent of 
                the 62,800,000 children in the Nation's resident 
                population were living with both parents.
            ``(9) Therefore, in light of this demonstration of the 
        crisis in our Nation, it is the sense of the Congress that 
        prevention of out-of-wedlock pregnancy and reduction in out-of-
        wedlock birth are very important Government interests and the 
        policy contained in provisions of this title is intended to 
        address the crisis.
    ``(b) Requirement That Teenage Parents Live in Adult-supervised 
Settings.--
            ``(1) In general.--
                    ``(A) Requirement.--Except as provided in paragraph 
                (2), if a State provides assistance under the State 
                program funded under this part to an individual 
                described in subparagraph (B), such individual may only 
                receive assistance under the program if such individual 
                and the child of the individual reside in a place of 
                residence maintained by a parent, legal guardian, or 
                other adult relative of such individual as such 
                parent's, guardian's, or adult relative's own home.
                    ``(B) Individual described.-- For purposes of 
                subparagraph (A), an individual described in this 
                subparagraph is an individual who is--
                            ``(i) under the age of 18; and
                            ``(ii) not married and has a minor child in 
                        his or her care.
            ``(2) Exception.--
                    ``(A) Provision of, or assistance in locating, 
                adult-supervised living arrangement.--In the case of an 
                individual who is described in subparagraph (B), the 
                State agency shall provide, or assist such individual 
                in locating, a second chance home, maternity home, or 
                other appropriate adult-supervised supportive living 
                arrangement, taking into consideration the needs and 
                concerns of such individual, unless the State agency 
                determines that the individual's current living 
                arrangement is appropriate, and thereafter shall 
                require that such parent and the child of such parent 
                reside in such living arrangement as a condition of the 
                continued receipt of assistance under the plan (or in 
                an alternative appropriate arrangement, should 
                circumstances change and the current arrangement cease 
                to be appropriate).
                    ``(B) Individual described.--For purposes of 
                subparagraph (A), an individual is described in this 
                subparagraph if the individual is described in 
                paragraph (1)(B) and--
                            ``(i) such individual has no parent, legal 
                        guardian or other appropriate adult relative as 
                        described in (ii) of his or her own who is 
                        living or whose whereabouts are known;
                            ``(ii) no living parent, legal guardian, or 
                        other appropriate adult relative who would 
                        otherwise meet applicable State criteria to act 
                        as such individual's legal guardian, of such 
                        individual allows the individual to live in the 
                        home of such parent, guardian, or relative;
                            ``(iii) the State agency determines that--
                                    ``(I) the individual or the 
                                individual's custodial minor child is 
                                being or has been subjected to serious 
                                physical or emotional harm, sexual 
                                abuse, or exploitation in the residence 
                                of such individual's own parent or 
                                legal guardian; or
                                    ``(II) substantial evidence exists 
                                of an act or failure to act that 
                                presents an imminent or serious harm if 
                                such individual and such individual's 
                                minor child lived in the same residence 
                                with such individual's own parent or 
                                legal guardian; or
                            ``(iv) the State agency otherwise 
                        determines that it is in the best interest of 
                        the minor child to waive the requirement of 
                        paragraph (1) with respect to such individual 
                        or minor child.
                    ``(C) Second-chance home.--For purposes of this 
                paragraph, the term `second-chance home' means an 
                entity that provides individuals described in 
                subparagraph (B) with a supportive and supervised 
                living arrangement in which such individuals are 
                required to learn parenting skills, including child 
                development, family budgeting, health and nutrition, 
                and other skills to promote their long-term economic 
                independence and the well-being of their children.
            ``(3) Assistance to states in providing or locating adult-
        supervised supportive living arrangements for unmarried teenage 
        parents.--
                    ``(A) In general.--For each of fiscal years 1996 
                through 2002, each State that provides assistance under 
                the State program to individuals described in paragraph 
                (1)(B) shall be entitled to receive a grant in an 
                amount determined under subparagraph (B) for the 
                purpose of providing or locating adult-supervised 
                supportive living arrangements for individuals 
                described in paragraph (1)(B) in accordance with this 
                subsection.
                    ``(B) Amount determined.--
                            ``(i) In general.--The amount determined 
                        under this subparagraph is an amount that bears 
                        the same ratio to the amount specified under 
                        clause (ii) as the amount of the State family 
                        assistance grant for the State for such fiscal 
                        year (described in section 403(a)(2)) bears to 
                        the amount appropriated for such fiscal year in 
                        accordance with section 403(a)(4)(A).
                            ``(ii) Amount specified.--The amount 
                        specified in this subparagraph is--
                                    ``(I) for fiscal year 1996, 
                                $25,000,000;
                                    ``(II) for fiscal year 1997, 
                                $25,000,000; and
                                    ``(III) for each of fiscal years 
                                1998, 1999, 2000, 2001, and 2002, 
                                $20,000,000.
                    ``(C) Assistance to states in providing or locating 
                adult-supervised supportive living arrangements for 
                unmarried teenage parents.--There are authorized to be 
                appropriated and there are appropriated for fiscal 
                years 1996, 1997, 1998, 1999, 2000, 2001, and 2002 such 
                sums specified in subparagraph (B)(ii) for the purpose 
                of paying grants to States in accordance with the 
                provisions of this paragraph.
    ``(c) Requirement That Teenage Parents Attend High School or Other 
Equivalent Training Program.--If a State provides assistance under the 
State program funded under this part to an individual described in 
subsection (b)(1)(B) who has not successfully completed a high-school 
education (or its equivalent) and whose minor child is at least 12 
weeks of age, the State shall not provide such individual with 
assistance under the program (or, at the option of the State, shall 
provide a reduced level of such assistance) if the individual does not 
participate in--
            ``(1) educational activities directed toward the attainment 
        of a high school diploma or its equivalent; or
            ``(2) an alternative educational or training program that 
        has been approved by the State.
    ``(d) State Option To Deny Assistance in Certain Situations.--
Nothing in this subsection shall be construed to restrict the authority 
of a State to exercise its option to limit assistance under this part 
to individuals if such limitation is not inconsistent with the 
provisions of this part.

``SEC. 407. STATE PENALTIES.

    ``(a) In General.--Subject to the provisions of subsection (b), the 
Secretary shall deduct from the grant otherwise payable under section 
403 the following penalties:
            ``(1) For use of grant in violation of this part.--If an 
        audit conducted under section 408 finds that an amount paid to 
        a State under section 403 for a fiscal year has been used in 
        violation of this part, then the Secretary shall reduce the 
        amount of the grant otherwise payable to the State under such 
        section for the immediately succeeding fiscal year quarter by 
        the amount so used. If the State does not prove to the 
        satisfaction of the Secretary that such unlawful expenditure 
        was not made by the State in intentional violation of the 
        requirements of this part, then the Secretary shall impose an 
        additional penalty of 5 percent of such grant (determined 
        without regard to this section).
            ``(2) For failure to submit required report.--
                    ``(A) In general.--If the Secretary determines that 
                a State has not, within 6 months after the end of a 
                fiscal year, submitted the report required by section 
                409 for the fiscal year, the Secretary shall reduce by 
                5 percent the amount of the grant that would (in the 
                absence of this section) be payable to the State under 
                section 403 for the immediately succeeding fiscal year.
                    ``(B) Rescission of penalty.--The Secretary shall 
                rescind a penalty imposed on a State under subparagraph 
                (A) with respect to a report for a fiscal year if the 
                State submits the report before the end of the 
                immediately succeeding fiscal year.
            ``(3) For failure to satisfy minimum participation rates.--
                    ``(A) In general.--If the Secretary determines that 
                a State has failed to satisfy the minimum participation 
                rates specified in section 404(a) for a fiscal year, 
                the Secretary shall reduce the amount of the grant that 
                would (in the absence of this section) be payable to 
                the State under section 403 for the immediately 
                succeeding fiscal year by--
                            ``(i) in the first year in which the State 
                        fails to satisfy such rates, 5 percent; and
                            ``(ii) in subsequent years in which the 
                        State fails to satisfy such rates, the percent 
                        reduction determined under this subparagraph 
                        (if any) in the preceding year, increased by 5 
                        percent.
                    ``(B) Penalty based on severity of failure.--The 
                Secretary shall impose reductions under subparagraph 
                (A) on the basis of the degree of noncompliance.
            ``(4) For failure to participate in the income and 
        eligibility verification system.--If the Secretary determines 
        that a State program funded under this part is not 
        participating during a fiscal year in the income and 
        eligibility verification system required by section 1137, the 
        Secretary shall reduce by not more than 5 percent the amount of 
        the grant that would (in the absence of this section) be 
        payable to the State under section 403 for the immediately 
        succeeding fiscal year.
            ``(5) For failure to comply with paternity establishment 
        and child support enforcement requirements under part d.--
        Notwithstanding any other provision of this Act, if the 
        Secretary determines that the State agency that administers a 
        program funded under this part does not enforce the penalties 
        requested by the agency administering part D against recipients 
        of assistance under the State program who fail to cooperate in 
        establishing paternity in accordance with such part, the 
        Secretary shall reduce by not more than 5 percent the amount of 
        the grant that would (in the absence of this section) be 
        payable to the State under section 403 for the immediately 
        succeeding fiscal year.
            ``(6) For failure to timely repay a federal loan fund for 
        state welfare programs.--If the Secretary determines that a 
        State has failed to repay any amount borrowed from the Federal 
        Loan Fund for State Welfare Programs established under section 
        403(d) within the period of maturity applicable to such loan, 
        plus any interest owed on such loan, then the Secretary shall 
        reduce the amount of the grant otherwise payable to the State 
        under section 403 for the immediately succeeding fiscal year 
        quarter by the outstanding loan amount, plus the interest owed 
        on such outstanding amount. The Secretary may not forgive any 
        outstanding loan amount nor interest owed thereon.
    ``(b) Requirements.--
            ``(1) Limitation on amount of penalty.--
                    ``(A) In general.--In imposing the penalties 
                described in subsection (a), the Secretary shall not 
                reduce any quarterly payment to a State by more than 25 
                percent.
                    ``(B) Carryforward of unrecovered penalties.--To 
                the extent that subparagraph (A) prevents the Secretary 
                from recovering during a fiscal year the full amount of 
                all penalties imposed on a State under subsection (a) 
                for a prior fiscal year, the Secretary shall apply any 
                remaining amount of such penalties to the grant 
                otherwise payable to the State under section 403 for 
                the immediately succeeding fiscal year.
            ``(2) State funds to replace reductions in grant.--A State 
        which has a penalty imposed against it under subsection (a) 
        shall expend additional State funds in an amount equal to the 
        amount of the penalty for the purpose of providing assistance 
        under the State program under this part.
            ``(3) Reasonable cause for noncompliance.--The Secretary 
        may not impose a penalty on a State under subsection (a) if the 
        Secretary determines that the State has reasonable cause for 
        failing to comply with a requirement for which a penalty is 
        imposed under such subsection.
    ``(c) Certification of Amount of Penalties.--If the Secretary is 
required to reduce the amount of any grant under this section, the 
Secretary shall certify the amount of such reduction to the Secretary 
of the Treasury and the Secretary of the Treasury shall reduce the 
amount paid to the State under section 403 by such amount.
    ``(d) Effective Dates.--
            ``(1) In general.--The penalties described in paragraphs 
        (2) through (6) of subsection (a) shall apply--
                    ``(A) with respect to periods beginning 6 months 
                after the Secretary issues final rules with respect to 
                such penalties; or
                    ``(B) with respect to fiscal years beginning on or 
                after October 1, 1996;
        whichever is later.
            ``(2) Misuse of funds.--The penalties described in 
        subsection (a)(1) shall apply with respect to fiscal years 
        beginning on or after October 1, 1995.

``SEC. 408. AUDITS.

    ``(a) In General.--Each State shall, not less than annually, audit 
the State expenditures from amounts received under this part. Such 
audit shall--
            ``(1) determine the extent to which such expenditures were 
        or were not expended in accordance with this part; and
            ``(2) be conducted by an approved entity (as defined in 
        subsection (b)) in accordance with generally accepted auditing 
        principles.
    ``(b) Approved Entity.--For purposes of subsection (a), the term 
`approved entity' means an entity that--
            ``(1) is approved by the Secretary of the Treasury;
            ``(2) is approved by the chief executive officer of the 
        State; and
            ``(3) is independent of any agency administering activities 
        funded under this part.
    ``(c) Audit Report.--Not later than 30 days following the 
completion of an audit under this subsection, a State shall submit a 
copy of the audit to the State legislature, the Secretary of the 
Treasury, and the Secretary of Health and Human Services.
    ``(d) Additional Accounting Requirements.--The provisions of 
chapter 75 of title 31, United States Code, shall apply to the audit 
requirements of this section.

``SEC. 409. DATA COLLECTION AND REPORTING.

    ``(a) In general.--The Secretary, in consultation with State and 
local government officials and other interested persons, shall develop 
a quality assurance system of data collection and reporting that 
promotes accountability and ensures the improvement and integrity of 
programs funded under this part.
    ``(b) State Submissions.--
            ``(1) In general.--Not later than the 15th day of the first 
        month of each calendar quarter, each State to which a grant is 
        made under section 410(h) shall submit to the Secretary the 
        data described in paragraphs (2) and (3) with respect to 
        families described in paragraph (4).
            ``(2) Disaggregated data described.--The data described in 
        this paragraph with respect to families described in paragraph 
        (4) is a sample of monthly disaggregated case record data 
        containing the following:
                    ``(A) The age of the adults and children (including 
                pregnant women) in each family.
                    ``(B) The marital and familial status of each 
                member of the family (including whether the family is a 
                2-parent family and whether a child is living with an 
                adult relative other than a parent).
                    ``(C) The gender, educational level, work 
                experience, and race of the head of each family.
                    ``(D) The health status of each member of the 
                family (including whether any member of the family is 
                seriously ill, disabled, or incapacitated and is being 
                cared for by another member of the family).
                    ``(E) The type and amount of any benefit or 
                assistance received by the family, including--
                            ``(i) the amount of and reason for any 
                        reduction in assistance, and
                            ``(ii) if assistance is terminated, whether 
                        termination is due to employment, sanction, or 
                        time limit.
                    ``(F) Any benefit or assistance received by a 
                member of the family with respect to housing, food 
                stamps, job training, or the Head Start program.
                    ``(G) The number of months since the family filed 
                the most recent application for assistance under the 
                program and if assistance was denied, the reason for 
                the denial.
                    ``(H) The number of times a family has applied for 
                and received assistance under the State program and the 
                number of months assistance has been received each time 
                assistance has been provided to the family.
                    ``(I) The employment status of the adults in the 
                family (including the number of hours worked and the 
                amount earned).
                    ``(J) The date on which an adult in the family 
                began to engage in work, the number of hours the adult 
                engaged in work, the work activity in which the adult 
                participated, and the amount of child care assistance 
                provided to the adult (if any).
                    ``(K) The number of individuals in each family 
                receiving assistance and the number of individuals in 
                each family not receiving assistance, and the 
                relationship of each individual to the youngest child 
                in the family.
                    ``(L) The citizenship status of each member of the 
                family.
                    ``(M) The housing arrangement of each member of the 
                family.
                    ``(N) The amount of unearned income, child support, 
                assets, and other financial factors considered in 
                determining eligibility for assistance under the State 
                program.
                    ``(O) The location in the State of each family 
                receiving assistance.
                    ``(P) Any other data that the Secretary determines 
                is necessary to ensure efficient and effective program 
                administration.
            ``(3) Aggregated monthly data.--The data described in this 
        paragraph is the following aggregated monthly data with respect 
        to the families described in paragraph (4):
                    ``(A) The number of families.
                    ``(B) The number of adults in each family.
                    ``(C) The number of children in each family.
                    ``(D) The number of families for which assistance 
                has been terminated because of employment, sanctions, 
                or time limits.
            ``(4) Families described.--The families described in this 
        paragraph are--
                    ``(A) families receiving assistance under a State 
                program funded under this part for each month in the 
                calendar quarter preceding the calendar quarter in 
                which the data is submitted;
                    ``(B) families applying for such assistance during 
                such preceding calendar quarter; and
                    ``(C) families that became ineligible to receive 
                such assistance during such preceding calendar quarter.
            ``(5) Appropriate subsets of data collected.--The Secretary 
        shall determine appropriate subsets of the data described in 
        paragraphs (2) and (3) that a State is required to submit under 
        paragraph (1) with respect to families described in 
        subparagraphs (B) and (C) of paragraph (4).
            ``(6) Sampling and other methods.--The Secretary shall 
        provide the States with such case sampling plans and data 
        collection procedures as the Secretary deems necessary to 
        produce statistically valid estimates of each State's program 
        performance. The Secretary is authorized to develop and 
        implement procedures for verifying the quality of data 
        submitted by the States.
    ``(c) Report on Use of Federal Funds To Cover Administrative Costs 
and Overhead.--The report required by subsection (a) for a fiscal year 
shall include a statement of--
            ``(1) the total amount and percentage of the Federal funds 
        paid to the State under this part for the fiscal year that are 
        used to cover administrative costs or overhead; and
            ``(2) the total amount of State funds that are used to 
        cover such costs or overhead.
    ``(d) Report on State Expenditures on Programs for Needy 
Families.--The report required by subsection (a) for a fiscal year 
shall include a statement of the total amount expended by the State 
during the fiscal year on the program under this part and the purposes 
for which such amount was spent.
    ``(e) Report on Noncustodial Parents Participating in Work 
Activities.--The report required by subsection (a) for a fiscal year 
shall include the number of noncustodial parents in the State who 
participated in work activities during the fiscal year.
    ``(f) Report on Child Support Collected.--The report required by 
subsection (a) for a fiscal year shall include the total amount of 
child support collected by the State agency administering the State 
program under part D on behalf of a family receiving assistance under 
this part.
    ``(g) Report on Child Care.--The report required by subsection (a) 
for a fiscal year shall include the total amount expended by the State 
for child care under the program under this part, along with a 
description of the types of child care provided, including child care 
provided in the case of a family that--
            ``(1) has ceased to receive assistance under this part 
        because of employment; or
            ``(2) is not receiving assistance under this part but would 
        be at risk of becoming eligible for such assistance if child 
        care was not provided.
    ``(h) Report on Transitional Services.--The report required by 
subsection (a) for a fiscal year shall include the total amount 
expended by the State for providing transitional services to a family 
that has ceased to receive assistance under this part because of 
employment, along with a description of such services.
    ``(i) Secretary's Report on Data Processing.--
            ``(1) In general.--Not later than 6 months after the date 
        of the enactment of the Work Opportunity Act of 1995, the 
        Secretary shall prepare and submit to the Congress a report 
        on--
                    ``(A) the status of the automated data processing 
                systems operated by the States to assist management in 
                the administration of State programs under this part 
                (whether in effect before or after October 1, 1995); 
                and
                    ``(B) what would be required to establish a system 
                capable of--
                            ``(i) tracking participants in public 
                        programs over time; and
                            ``(ii) checking case records of the States 
                        to determine whether individuals are 
                        participating in public programs in 2 or more 
                        States.
            ``(2) Preferred contents.--The report required by paragraph 
        (1) should include--
                    ``(A) a plan for building on the automated data 
                processing systems of the States to establish a system 
                with the capabilities described in paragraph (1)(B); 
                and
                    ``(B) an estimate of the amount of time required to 
                establish such a system and of the cost of establishing 
                such a system.
    ``(j) Report to Congress.--Not later than 6 months after the end of 
fiscal year 1997, and each fiscal year thereafter, the Secretary shall 
transmit to the Congress a report describing--
            ``(1) whether the States are meeting--
                    ``(A) the participation rates described in section 
                404(a); and
                    ``(B) the objectives of--
                            ``(i) increasing employment and earnings of 
                        needy families, and child support collections; 
                        and
                            ``(ii) decreasing out-of-wedlock 
                        pregnancies and child poverty;
            ``(3) the demographic and financial characteristics of 
        families applying for assistance, families receiving 
        assistance, and families that become ineligible to receive 
        assistance;
            ``(4) the characteristics of each State program funded 
        under this part; and
            ``(5) the trends in employment and earnings of needy 
        families with minor children.

``SEC. 410. RESEARCH, EVALUATIONS, AND NATIONAL STUDIES.

    ``(a) Research.--The Secretary shall conduct research on the 
benefits, effects, and costs of operating different State programs 
funded under this part, including time limits relating to eligibility 
for assistance. The research shall include studies on the effects of 
different programs and the operation of such programs on welfare 
dependency, illegitimacy, teen pregnancy, employment rates, child well-
being, and any other area the Secretary deems appropriate.
    ``(b) Development and Evaluation of Innovative Approaches To 
Reducing Welfare Dependency and Increasing Child Well-Being.--
            ``(1) In general.--The Secretary may assist States in 
        developing, and shall evaluate, innovative approaches for 
        reducing welfare dependency and increasing the well-being of 
        minor children with respect to recipients of assistance under 
        programs funded under this part. The Secretary may provide 
        funds for training and technical assistance to carry out the 
        approaches developed pursuant to this paragraph.
            ``(2) Evaluations.--In performing the evaluations under 
        paragraph (1), the Secretary shall, to the maximum extent 
        feasible, use random assignment as an evaluation methodology.
    ``(c) Dissemination of Information.--The Secretary shall develop 
innovative methods of disseminating information on any research, 
evaluations, and studies conducted under this section, including the 
facilitation of the sharing of information and best practices among 
States and localities through the use of computers and other 
technologies.
    ``(d) Annual Ranking of States and Review of Most and Least 
Successful Work Programs.--
            ``(1) Annual ranking of states.--The Secretary shall rank 
        annually the States to which grants are paid under section 403 
        in the order of their success in placing recipients of 
        assistance under the State program funded under this part into 
        long-term private sector jobs, reducing the overall welfare 
        caseload, and, when a practicable method for calculating this 
        information becomes available, diverting individuals from 
        formally applying to the State program and receiving 
        assistance. In ranking States under this subsection, the 
        Secretary shall take into account the average number of minor 
        children in families in the State that have incomes below the 
        poverty line and the amount of funding provided each State for 
        such families.
            ``(2) Annual review of most and least successful work 
        programs.--The Secretary shall review the programs of the 3 
        States most recently ranked highest under paragraph (1) and the 
        3 States most recently ranked lowest under paragraph (1) that 
        provide parents with work experience, assistance in finding 
        employment, and other work preparation activities and support 
        services to enable the families of such parents to leave the 
        program and become self-sufficient.
    ``(e) Annual ranking of States and Review of Issues Relating to 
Out-of-Wedlock Births.--
            ``(1) Annual ranking of states.--
                    ``(A) In general.--The Secretary shall annually 
                rank States to which grants are paid under section 403 
                based on the following ranking factors (developed with 
                information reported by the State under section 
                406(f)):
                            ``(i) Absolute out-of-wedlock ratios.--The 
                        ratio represented by--
                                    ``(I) the total number of out-of-
                                wedlock births in families receiving 
                                assistance under the State program 
                                under this part in the State for the 
                                most recent fiscal year for which 
                                information is available; over
                                    ``(II) the total number of births 
                                in families receiving assistance under 
                                the State program under this part in 
                                the State for such year.
                            ``(ii) Net changes in the out-of-wedlock 
                        ratio.--The difference between the ratio 
                        described in subparagraph (A)(i) for the most 
                        recent fiscal year for which information is 
                        available and such State's ratio determined for 
                        the preceding year.
            ``(2) Annual review.--The Secretary shall review the 
        programs of the 5 States most recently ranked highest under 
        paragraph (1) and the 5 States most recently ranked the lowest 
        under paragraph (1).
    ``(f) Study on Alternative Outcomes Measures.--
            ``(1) Study.--The Secretary shall, in cooperation with the 
        States, study and analyze outcomes measures for evaluating the 
        success of a State in moving individuals out of the welfare 
        system through employment as an alternative to the minimum 
        participation rates described in section 404. The study shall 
        include a determination as to whether such alternative outcomes 
        measures should be applied on a national or a State-by-State 
        basis and a preliminary assessment of the job placement 
        performance bonus established under section 403(f).
            ``(2) Report.--Not later than September 30, 1998, the 
        Secretary shall submit to the Committee on Finance of the 
        Senate and the Committee on Ways and Means of the House of 
        Representatives a report containing the findings of the study 
        described in paragraph (1).
    ``(g) State-Initiated Studies.--A State shall be eligible to 
receive funding to evaluate the State's family assistance program 
funded under this part if--
            ``(1) the State submits a proposal to the Secretary for 
        such evaluation,
            ``(2) the Secretary determines that the design and approach 
        of the evaluation is rigorous and is likely to yield 
        information that is credible and will be useful to other 
        States, and
            ``(3) unless otherwise waived by the Secretary, the State 
        provides a non-Federal share of at least 10 percent of the cost 
        of such study.
    ``(h) Additional Amount for Studies and Demonstrations.--
            ``(1) In general.--There are authorized to be appropriated 
        and there are appropriated for each fiscal year described in 
        section 403(a)(1) an additional $20,000,000 for the purpose of 
        paying--
                    ``(A) the Federal share of any State-initiated 
                study approved under subsection (g);
                    ``(B) an amount determined by the Secretary to be 
                necessary to operate and evaluate demonstration 
                projects, relating to part A of title IV of this Act, 
                that are in effect or approved under section 1115 as of 
                October 1, 1995, and are continued after such date;
                    ``(C) the cost of conducting the research described 
                in subsection (a); and
                    ``(D) the cost of developing and evaluating 
                innovative approaches for reducing welfare dependency 
                and increasing the well-being of minor children under 
                subsection (b).
            ``(2) Allocation.--Of the amount appropriated under 
        paragraph (1) for a fiscal year--
                    ``(A) 50 percent shall be allocated for the 
                purposes described in subparagraphs (A) and (B) of 
                paragraph (1), and
                    ``(B) 50 percent shall be allocated for the 
                purposes described in subparagraphs (C) and (D) of 
                paragraph (1).

``SEC. 411. STUDY BY THE CENSUS BUREAU.

    ``(a) In General.--The Bureau of the Census shall expand the Survey 
of Income and Program Participation as necessary to obtain such 
information as will enable interested persons to evaluate the impact of 
the amendments made by the Work Opportunity Act of 1995 on a random 
national sample of recipients of assistance under State programs funded 
under this part and (as appropriate) other low-income families, and in 
doing so, shall pay particular attention to the issues of out-of-
wedlock births, welfare dependency, the beginning and end of welfare 
spells, and the causes of repeat welfare spells.
    ``(b) Appropriation.--Out of any money in the Treasury of the 
United States not otherwise appropriated, the Secretary of the Treasury 
shall pay to the Bureau of the Census $10,000,000 for each of fiscal 
years 1996, 1997, 1998, 1999, and 2000 to carry out subsection (a).

``SEC. 412. WAIVERS.

    ``(a) Continuation of Waivers.--
            ``(1) In general.--Except as provided in paragraph (2), if 
        any waiver granted to a State under section 1115 or otherwise 
        which relates to the provision of assistance under a State plan 
        under this part is in effect or approved by the Secretary as of 
        October 1, 1995, the amendments made by subtitle D of title I 
        and subtitles C, D, E, F, and G of title VII of the Balanced 
        Budget Reconciliation Act of 1995 shall not apply with respect 
        to the State before the expiration (determined without regard 
        to any extensions) of the waiver to the extent such amendments 
        are inconsistent with the terms of the waiver.
            ``(2) Financing limitation.--Notwithstanding any other 
        provision of law, beginning with fiscal year 1996, a State 
        operating under a waiver described in paragraph (1) shall 
        receive the payment described for such State for such fiscal 
        year under section 403, in lieu of any other payment provided 
        for in the waiver.
    ``(b) State Option To Terminate Waiver.--
            ``(1) In general.--A State may terminate a waiver described 
        in subsection (a) before the expiration of the waiver.
            ``(2) Report.--A State which terminates a waiver under 
        paragraph (1) shall submit a report to the Secretary 
        summarizing the waiver and any available information concerning 
        the result or effect of such waiver.
            ``(3) Hold harmless provision.--
                    ``(A) In general.--Notwithstanding any other 
                provision of law, a State that, not later than the date 
                described in subparagraph (B), submits a written 
                request to terminate a waiver described in subsection 
                (a) shall be held harmless for accrued cost neutrality 
                liabilities incurred under the terms and conditions of 
                such waiver.
                    ``(B) Date described.--The date described in this 
                subparagraph is the later of--
                            ``(i) January 1, 1996; or
                            ``(ii) 90 days following the adjournment of 
                        the first regular session of the State 
                        legislature that begins after the date of the 
                        enactment of the Work Opportunity Act of 1995.
    ``(c) Secretarial Encouragement of Current Waivers.--The Secretary 
shall encourage any State operating a waiver described in subsection 
(a) to continue such waiver and to evaluate, using random sampling and 
other characteristics of accepted scientific evaluations, the result or 
effect of such waiver.
    ``(d) Continuation of Individual Waivers.--A State may elect to 
continue one or more individual waivers described in subsection (a)(1).

``SEC. 413. STATE AND COUNTY DEMONSTRATION PROGRAMS.

    ``(a) No Limitation of State Demonstration Projects.--Nothing in 
this part shall be construed as limiting a State's ability to conduct 
demonstration projects for the purpose of identifying innovative or 
effective program designs in 1 or more political subdivisions of the 
State: Provided, That such State contains more than one county with a 
population of greater than 500,000.
    ``(b) County Welfare Demonstration Project.--
            ``(1) In general.--The Secretary of Health and Human 
        Services and the Secretary of Agriculture shall jointly enter 
        into negotiations with all counties having a population greater 
        than 500,000 desiring to conduct a demonstration project 
        described in paragraph (2) for the purpose of establishing 
        appropriate rules to govern the establishment and operation of 
        such project.
            ``(2) Demonstration project described.--The demonstration 
        project described in this paragraph shall provide that--
                    ``(A) a county participating in the demonstration 
                project shall have the authority and duty to administer 
                the operation of the program described under this part 
                as if the county were considered a State for the 
                purpose of this part;
                    ``(B) the State in which the county participating 
                in the demonstration project is located shall pass 
                through directly to the county the portion of the grant 
                received by the State under section 403 which the State 
                determines is attributable to the residents of such 
                county; and
                    ``(C) the duration of the project shall be for 5 
                years.
            ``(3) Commencement of project.--After the conclusion of the 
        negotiations described in paragraph (2), the Secretary of 
        Health and Human Services and the Secretary of Agriculture may 
        authorize a county to conduct the demonstration project 
        described in paragraph (2) in accordance with the rules 
        established during the negotiations.
            ``(4) Report.--Not later then 6 months after the 
        termination of a demonstration project operated under this 
        subsection, the Secretary of Health and Human Services and the 
        Secretary of Agriculture shall submit to the Congress a report 
        that includes--
                    ``(A) a description of the demonstration project;
                    ``(B) the rules negotiated with respect to the 
                project; and
                    ``(C) the innovations (if any) that the county was 
                able to initiate under the project.
            ``(5) Eligible county.--A county may participate in a 
        demonstration project under this subsection if the county is--
                    ``(A) a county that is already administering the 
                welfare program under this part;
                    ``(B) represents less than 25 percent of the 
                State's total welfare caseload.

``SEC. 414. DIRECT FUNDING AND ADMINISTRATION BY INDIAN TRIBES.

    ``(a) Purpose.--The purpose of this section is--
            ``(1) to strengthen and enhance the control and flexibility 
        of local governments over local programs; and
            ``(2) in recognition of the principles contained in the 
        Indian Self-Determination and Education Assistance Act (25 
        U.S.C. 450 et seq.)--
                    ``(A) to provide direct Federal funding to Indian 
                tribes for the tribal administration of the program 
                funded under this part; or
                    ``(B) to enable Indian tribes to enter into 
                agreements, contracts, or compacts with intertribal 
                consortia, States, or other entities for the 
                administration of such program on behalf of the Indian 
                tribe.
    ``(b) Grant Amounts for Indian Tribes.--
            ``(1) In general.--For each of fiscal years 1996, 1997, 
        1998, 1999, and 2000, the Secretary shall pay to each Indian 
        tribe that has an approved tribal family assistance plan a 
        tribal family assistance grant for the fiscal year in an amount 
        equal to the amount determined under paragraph (2).
            ``(2) Amount determined.--
                    ``(A) In general.--The amount determined under this 
                paragraph is an amount equal to the total amount of the 
                Federal payments to a State or States under section 403 
                for fiscal year 1994 (as in effect during such fiscal 
                year) attributable to expenditures by the State or 
                States under part A and part F of this title (as so in 
                effect) in such year for Indian families residing in 
                the service area or areas identified by the Indian 
                tribe in subsection (c)(1)(C).
                    ``(B) Use of State submitted data.--
                            ``(i) In general.--The Secretary shall use 
                        State submitted data to make each determination 
                        under subparagraph (A).
                            ``(ii) Disagreement with determination.--If 
                        an Indian tribe or tribal organization 
                        disagrees with State submitted data described 
                        under clause (i), the Indian tribe or tribal 
                        organization may submit to the Secretary such 
                        additional information as may be relevant to 
                        making the determination under subparagraph (A) 
                        and the Secretary may consider such information 
                        before making such determination.
    ``(c) 3-Year Tribal Family Assistance Plan.--
            ``(1) In general.--Any Indian tribe that desires to receive 
        a tribal family assistance grant shall submit to the Secretary 
        a 3-year tribal family assistance plan that--
                    ``(A) outlines the Indian tribe's approach to 
                providing welfare-related services for the 3-year 
                period, consistent with the purposes of this section;
                    ``(B) specifies whether the welfare-related 
                services provided under the plan will be provided by 
                the Indian tribe or through agreements, contracts, or 
                compacts with intertribal consortia, States, or other 
                entities;
                    ``(C) identifies the population and service area or 
                areas to be served by such plan;
                    ``(D) provides that a family receiving assistance 
                under the plan may not receive duplicative assistance 
                from other State or tribal programs funded under this 
                part;
                    ``(E) identifies the employment opportunities in or 
                near the service area or areas of the Indian tribe and 
                the manner in which the Indian tribe will cooperate and 
                participate in enhancing such opportunities for 
                recipients of assistance under the plan consistent with 
                any applicable State standards; and
                    ``(F) applies the fiscal accountability provisions 
                of section 5(f)(1) of the Indian Self-Determination and 
                Education Assistance Act (25 U.S.C. 450c(f)(1)), 
                relating to the submission of a single-agency audit 
                report required by chapter 75 of title 31, United 
                States Code.
            ``(2) Approval.--The Secretary shall approve each tribal 
        family assistance plan submitted in accordance with paragraph 
        (1).
            ``(3) Consortium of tribes.--Nothing in this section shall 
        preclude the development and submission of a single plan by the 
        participating Indian tribes of an intertribal consortium.
    ``(d) Minimum Work Participation Requirements and Time Limits.--The 
Secretary, with the participation of Indian tribes, shall establish for 
each Indian tribe receiving a grant under this section minimum work 
participation requirements, appropriate time limits for receipt of 
welfare-related services under such grant, and penalties against 
individuals--
            ``(1) consistent with the purposes of this section;
            ``(2) consistent with the economic conditions and resources 
        available to each tribe; and
            ``(3) similar to comparable provisions in section 404(d).
    ``(e) Emergency Assistance.--Nothing in this section shall preclude 
an Indian tribe from seeking emergency assistance from any Federal loan 
program or emergency fund.
    ``(f) Accountability.--Nothing in this section shall be construed 
to limit the ability of the Secretary to maintain program funding 
accountability consistent with--
            ``(1) generally accepted accounting principles; and
            ``(2) the requirements of the Indian Self-Determination and 
        Education Assistance Act (25 U.S.C. 450 et seq.).
    ``(g) Tribal Penalties.--For the purpose of ensuring the proper use 
of tribal family assistance grants, the following provisions shall 
apply to an Indian tribe with an approved tribal assistance plan:
            ``(1) The provisions of subsections (a)(1), (a)(6), and (b) 
        of section 407, in the same manner as such subsections apply to 
        a State.
            ``(2) The provisions of section 407(a)(3), except that such 
        subsection shall be applied by substituting `the minimum 
        requirements established under subsection (d) of section 414' 
        for `the minimum participation rates specified in section 404'.
    ``(h) Data Collection and Reporting.--For the purpose of ensuring 
uniformity in data collection, section 409 shall apply to an Indian 
tribe with an approved tribal family assistance plan.
    ``(i) Special Rule for Indian Tribes in Alaska.--
            ``(1) In general.--Notwithstanding any other provision of 
        this section, and except as provided in paragraph (2), an 
        Indian tribe in the State of Alaska that receives a tribal 
        family assistance grant under this section shall use such grant 
        to operate a program in accordance with the requirements 
        applicable to the program of the State of Alaska funded under 
        this part.
            ``(2) Waiver.--An Indian tribe described in paragraph (1) 
        may apply to the appropriate State authority to receive a 
        waiver of the requirement of paragraph (1).

``SEC. 415. ASSISTANT SECRETARY FOR FAMILY SUPPORT.

    ``The programs under this part and part D of this title shall be 
administered by an Assistant Secretary for Family Support within the 
Department of Health and Human Services, who shall be appointed by the 
President, by and with the advice and consent of the Senate, and who 
shall be in addition to any other Assistant Secretary of Health and 
Human Services provided for by law.

``SEC. 416. LIMITATION ON FEDERAL AUTHORITY.

    ``The Secretary of Health and Human Services and the Secretary of 
the Treasury may not regulate the conduct of States under this part or 
enforce any provision of this part, except to the extent expressly 
provided in this part.

``SEC. 417. APPEAL OF ADVERSE DECISION.

    ``(a) In General.--The Secretary shall notify the chief executive 
officer of a State of any adverse decision or action under this part, 
including any decision with respect to the State's plan or the 
imposition of a penalty under section 407.
    ``(b) Administrative Review of Adverse Decision.--
            ``(1) In general.--Within 60 days after the date a State 
        receives notice of an adverse decision under this section, the 
        State may appeal the decision, in whole or in part, to the 
        Departmental Appeals Board established in the Department of 
        Health and Human Services (hereafter referred to in this 
        section as the `Board') by filing an appeal with the Board.
            ``(2) Procedural rules.--The Board shall consider a State's 
        appeal on the basis of such documentation as the State may 
        submit and as the Board may require to support the final 
        decision of the Board. In deciding whether to uphold an adverse 
        decision or any portion thereof, the Board shall conduct a 
        thorough review of the issues and take into account all 
        relevant evidence. The Board shall make a final determination 
        with respect to an appeal filed under this paragraph not less 
        than 60 days after the date the appeal is filed.
    ``(c) Judicial Review of Adverse Decision.--
            ``(1) In general.--Within 90 days after the date of a final 
        decision by the Board with respect to an adverse decision 
        regarding a State under this section, the State may obtain 
        judicial review of the final decision (and the findings 
        incorporated into the final decision) by filing an action in--
                    ``(A) the district court of the United States for 
                the judicial district in which the principal or 
                headquarters office of the State agency is located; or
                    ``(B) the United States District Court for the 
                District of Columbia.
            ``(2) Procedural rules.--The district court in which an 
        action is filed shall review the final decision of the Board on 
        the record established in the administrative proceeding, in 
        accordance with the standards of review prescribed by 
        subparagraphs (A) through (E) of section 706(2) of title 5, 
        United States Code. The review shall be on the basis of the 
        documents and supporting data submitted to the Board.

``SEC. 418. AMOUNTS FOR CHILD CARE.

    ``(a) Child Care Allocation.--
            ``(1) In general.--From the amount appropriated under 
        section 403(a)(4)(A) for a fiscal year, the Secretary shall set 
        aside an amount equal to the total amount of the Federal 
        payments for fiscal year 1994 to States under section--
                    ``(A) 402(g)(3)(A) of this Act (as such section was 
                in effect before October 1, 1995) for amounts expended 
                for child care pursuant to paragraph (1) of such 
                section;
                    ``(B) 403(l)(1)(A) of this Act (as so in effect) 
                for amounts expended for child care pursuant to section 
                402(g)(1)(A) of this Act (as so in effect), in the case 
                of a State with respect to which section 1108 of this 
                Act applies; and
                    ``(C) 403(n) of this Act (as so in effect) for 
                child care services pursuant to section 402(i) of this 
                Act (as so in effect).
            ``(2) Distribution.--From amounts set aside for a fiscal 
        year under paragraph (1), the Secretary shall pay to a State an 
        amount equal to the total amounts of Federal payments for 
        fiscal year 1994 to the State under section--
                    ``(A) 402(g)(3)(A) of this Act (as such section was 
                in effect before October 1, 1995) for amounts expended 
                for child care pursuant to paragraph (1) of such 
                section;
                    ``(B) 403(l)(1)(A) of this Act (as so in effect) 
                for amounts expended for child care pursuant to section 
                402(g)(1)(A) of this Act (as so in effect), in the case 
                of a State with respect to which section 1108 of this 
                Act applies; and
                    ``(C) 403(n) of this Act (as so in effect) for 
                child care services pursuant to section 402(i) of this 
                Act (as so in effect).
            ``(3) Use of funds.--Amounts received by a State under 
        paragraph (2) shall only be used to provide child care 
        assistance under this part.
            ``(4) Federal payments.--For purposes of paragraphs (1) and 
        (2), Federal payments for fiscal year 1994 means such payments 
        as reported by the State on February 14, 1995.
    ``(b) Additional Appropriation.--
            ``(1) In general.--There are authorized to be appropriated 
        and there are appropriated, $3,000,000,000 to be distributed to 
        the States during the 5-fiscal year period beginning in fiscal 
        year 1996 for the provision of child care assistance.
            ``(2) Distribution.--
                    ``(A) In general.--The Secretary shall use amounts 
                made available under paragraph (1) to make grants to 
                States. The total amount of grants awarded to a State 
                under this paragraph shall be based on the formula used 
                for determining the amount of Federal payments to the 
                State for fiscal year 1994 under section 403(n) (as 
                such section was in effect before October 1, 1995) for 
                child care services pursuant to section 402(i) (as so 
                in effect) as such amount relates to the total amount 
                of such Federal payments to all States for such fiscal 
                year.
                    ``(B) Fiscal year 2000.--With respect to the last 
                quarter of fiscal year 2000, if the Secretary 
                determines that any allotment to a State under this 
                subsection will not be used by such State for carrying 
                out the purpose for which the allotment is available, 
                the Secretary shall make such allotment available for 
                carrying out such purpose to 1 or more other States 
                which apply for such funds to the extent the Secretary 
                determines that such other States will be able to use 
                such additional allotments for carrying out such 
                purpose. Such available allotments shall be reallocated 
                to a State pursuant to section 402(i) (as such section 
                was in effect before October 1, 1995) by substituting 
                `the number of children residing in all States applying 
                for such funds' for `the number of children residing in 
                the United States in the second preceding fiscal year'. 
                Any amount made available to a State from an 
                appropriation for a fiscal year in accordance with the 
                preceding sentence shall, for purposes of this part, be 
                regarded as part of such State's payment (as determined 
                under this subsection) for such year.
            ``(3) Amount of funds.--The Secretary shall pay to each 
        eligible State in a fiscal year an amount equal to the Federal 
        medical assistance percentage for such State for such fiscal 
        year (as defined in section 2122(c)) of so much of the 
        expenditures by the State for child care in such year as exceed 
        the State set-aside for such State under subsection (a) for 
        such year and the amount of State expenditures in fiscal year 
        1994 that equal the non-Federal share for the programs 
        described in subparagraphs (A), (B) and (C) of subsection 
        (a)(1).
            ``(4) Budget scoring.--Notwithstanding section 257(b)(2) of 
        the Balanced Budget and Emergency Deficit Control Act of 1985, 
        the baseline shall assume that no grant shall be made under 
        this subsection after fiscal year 2000.
    ``(c) Administrative Provisions.--
            ``(1) State option.--For purposes of section 402(a)(1)(B), 
        a State may, at its option, not require a single parent with a 
        child under the age of 6 to participate in work for more than 
        an average of 20 hours per week during a month and may count 
        such parent as being engaged in work for a month for purposes 
        of section 404(c)(1) if such parent participates in work for an 
        average of 20 hours per week during such month.
            ``(2) Rule of construction.--Nothing in this section shall 
        be construed to provide an entitlement to child care services 
        to any child.

``SEC. 419. ELIGIBILITY FOR CHILD CARE ASSISTANCE.

    Notwithstanding section 658T of the Child Care and Development 
Block Grant Act of 1990, the State agency specified in section 
402(a)(7) shall determine eligibility for child care assistance 
provided under this part in accordance with criteria determined by the 
State.

``SEC. 420. COLLECTION OF OVERPAYMENTS FROM FEDERAL TAX REFUNDS.

    ``(a) In General.--Upon receiving notice from the Secretary of 
Health and Human Services that a State agency administering a plan 
approved under this part has notified the Secretary that a named 
individual has been overpaid under the State plan approved under this 
part, the Secretary of the Treasury shall determine whether any amounts 
as refunds of Federal taxes paid are payable to such individual, 
regardless of whether such individual filed a tax return as a married 
or unmarried individual. If the Secretary of the Treasury finds that 
any such amount is payable, the Secretary shall withhold from such 
refunds an amount equal to the overpayment sought to be collected by 
the State and pay such amount to the State agency.
    ``(b) Regulations.--The Secretary of the Treasury shall issue 
regulations, after review by the Secretary of Health and Human 
Services, that provide--
            ``(1) that a State may only submit under subsection (a) 
        requests for collection of overpayments with respect to 
        individuals--
                    ``(A) who are no longer receiving assistance under 
                the State plan approved under this part,
                    ``(B) with respect to whom the State has already 
                taken appropriate action under State law against the 
                income or resources of the individuals or families 
                involved to collect the past-due legally enforceable 
                debt; and
                    ``(C) to whom the State agency has given notice of 
                its intent to request withholding by the Secretary of 
                the Treasury from the income tax refunds of such 
                individuals;
            ``(2) that the Secretary of the Treasury will give a timely 
        and appropriate notice to any other person filing a joint 
        return with the individual whose refund is subject to 
        withholding under subsection (a); and
            ``(3) the procedures that the State and the Secretary of 
        the Treasury will follow in carrying out this section which, to 
        the maximum extent feasible and consistent with the specific 
        provisions of this section, will be the same as those issued 
        pursuant to section 464(b) applicable to collection of past-due 
        child support.''.
    (c) Conforming Amendments Relating To Collection of Overpayments.--
            (1) Section 6402 of the Internal Revenue Code of 1986 
        (relating to authority to make credits or refunds) is amended--
                    (A) in subsection (a), by striking ``(c) and (d)'' 
                and inserting ``(c), (d), and (e)'';
                    (B) by redesignating subsections (e) through (i) as 
                subsections (f) through (j), respectively; and
                    (C) by inserting after subsection (d) the 
                following:
    ``(e) Collection of Overpayments Under Title IV-A of the Social 
Security Act.--The amount of any overpayment to be refunded to the 
person making the overpayment shall be reduced (after reductions 
pursuant to subsections (c) and (d), but before a credit against future 
liability for an internal revenue tax) in accordance with section 421 
of the Social Security Act (concerning recovery of overpayments to 
individuals under State plans approved under part A of title IV of such 
Act).''.
            (2) Paragraph (10) of section 6103(l) of such Code is 
        amended--
                    (A) by striking ``(c) or (d)'' each place it 
                appears and inserting ``(c), (d), or (e)''; and
                    (B) by adding at the end of subparagraph (B) the 
                following new sentence: ``Any return information 
                disclosed with respect to section 6402(e) shall only be 
                disclosed to officers and employees of the State agency 
                requesting such information.''.
            (3) The matter preceding subparagraph (A) of section 
        6103(p)(4) of such Code is amended--
                    (A) by striking ``(5), (10)'' and inserting 
                ``(5)''; and
                    (B) by striking ``(9), or (12)'' and inserting 
                ``(9), (10), or (12)''.
            (4) Section 552a(a)(8)(B)(iv)(III) of title 5, United 
        States Code, is amended by striking ``section 464 or 1137 of 
        the Social Security Act'' and inserting ``section 421, 464, or 
        1137 of the Social Security Act.''.

SEC. 7202. LIMITATIONS ON USE OF FUNDS FOR CERTAIN PURPOSES.

    No funds provided directly to institutions or organizations to 
provide services and administer programs described in section 
7202(a)(2) and programs established or modified under subtitle D of 
title I of this Act, this subtitle, or subtitle D, E, F, or G of this 
title shall be expended for sectarian worship or instruction. This 
section shall not apply to financial assistance provided to or on 
behalf of beneficiaries of assistance in the form of certificates, 
vouchers, or other forms of disbursement, if such beneficiary may 
choose where such assistance shall be redeemed.

SEC. 7203. CENSUS DATA ON GRANDPARENTS AS PRIMARY CAREGIVERS FOR THEIR 
              GRANDCHILDREN.

    (a) In General.--Not later than 90 days after the date of the 
enactment of this Act, the Secretary of Commerce (hereafter in this 
section referred to as the ``Secretary''), in carrying out the 
provisions of section 141 of title 13, United States Code, shall expand 
the data collection efforts of the Bureau of the Census (hereafter in 
this section referred to as the ``Bureau'') to enable the Bureau to 
collect statistically significant data, in connection with its 
decennial census and its mid-decade census, concerning the growing 
trend of grandparents who are the primary caregivers for their 
grandchildren.
    (b) Expanded Census Question.--In carrying out the provisions of 
subsection (a), the Secretary shall expand the Bureau's census question 
that details households which include both grandparents and their 
grandchildren. The expanded question shall be formulated to distinguish 
between the following households:
            (1) A household in which a grandparent temporarily provides 
        a home for a grandchild for a period of weeks or months during 
        periods of parental distress.
            (2) A household in which a grandparent provides a home for 
        a grandchild and serves as the primary caregiver for the 
        grandchild.

SEC. 7204. STUDY OF EFFECT OF WELFARE REFORM ON GRANDPARENTS AS PRIMARY 
              CAREGIVERS.

    (a) In General.--The Secretary of Health and Human Services 
(hereafter in this section referred to as the ``Secretary'') shall 
conduct a study evaluating the impact of amendments made by subtitle D 
of title I of this Act, this subtitle, and subtitles D, E, F, and G of 
this title on grandparents who have assumed the responsibility of 
providing care to their grandchildren. In such study, the Secretary 
shall identify barriers to participation in public programs including 
inconsistent policies, standards, and definitions used by programs and 
agencies in the administration of medicaid, assistance under a State 
program funded under part A of title IV of the Social Security Act, 
child support enforcement, and foster care programs on grandparents who 
have assumed the care-giving role for children whose natural parents 
are unable to provide care.
    (b) Report.--Not later than December 31, 1997, the Secretary shall 
submit a report setting forth the findings of the study described in 
subsection (a) to the Committee on Ways and Means and the Committee on 
Economic and Educational Opportunities of the House of Representatives 
and the Committee on Finance, the Committee on Labor and Human 
Resources, and the Special Committee on Aging of the Senate. The report 
shall include such recommendations for administrative or legislative 
changes as the Secretary considers appropriate.

SEC. 7205. DEVELOPMENT OF PROTOTYPE OF COUNTERFEIT-RESISTANT SOCIAL 
              SECURITY CARD REQUIRED.

    (a) Development.--
            (1) In general.--The Commissioner of Social Security 
        (hereafter in this section referred to as the ``Commissioner'') 
        shall in accordance with the provisions of this section develop 
        a prototype of a counterfeit-resistant social security card. 
        Such prototype card shall--
                    (A) be made of a durable, tamper-resistant material 
                such as plastic or polyester,
                    (B) employ technologies that provide security 
                features, such as magnetic stripes, holograms, and 
                integrated circuits, and
                    (C) be developed so as to provide individuals with 
                reliable proof of citizenship or legal resident alien 
                status.
            (2) Assistance by attorney general.--The Attorney General 
        of the United States shall provide such information and 
        assistance as the Commissioner deems necessary to achieve the 
        purposes of this section.
    (b) Study and Report.--
            (1) In general.--The Commissioner shall conduct a study and 
        issue a report to Congress which examines different methods of 
        improving the social security card application process.
            (2) Elements of study.--The study shall include an 
        evaluation of the cost and work load implications of issuing a 
        counterfeit-resistant social security card for all individuals 
        over a 3, 5, and 10 year period. The study shall also evaluate 
        the feasibility and cost implications of imposing a user fee 
        for replacement cards and cards issued to individuals who apply 
        for such a card prior to the scheduled 3, 5, and 10 year phase-
        in options.
            (3) Distribution of report.--Copies of the report described 
        in this subsection along with a facsimile of the prototype card 
        as described in subsection (a) shall be submitted to the 
        Committees on Ways and Means and Judiciary of the House of 
        Representatives and the Committees on Finance and Judiciary of 
        the Senate within l year of the date of the enactment of this 
        Act.

SEC. 7206. MODIFICATIONS TO THE JOB OPPORTUNITIES FOR CERTAIN LOW-
              INCOME INDIVIDUALS PROGRAM.

    Section 505 of the Family Support Act of 1988 (42 U.S.C. 1315 note) 
is amended--
            (1) in the heading, by striking ``demonstration'';
            (2) by striking ``demonstration'' each place it appears;
            (3) in subsection (a), by striking ``in each of fiscal 
        years'' and all that follows through ``10'' and inserting 
        ``shall enter into agreements with'';
            (4) in subsection (b)(3), by striking ``aid to families 
        with dependent children under part A of title IV of the Social 
        Security Act'' and inserting ``assistance under the State 
        program funded under part A of title IV of the Social Security 
        Act in the State in which the individual resides'';
            (5) in subsection (c)--
                    (A) in paragraph (1)(C), by striking ``aid to 
                families with dependent children under part A of title 
                IV of the Social Security Act'' and inserting 
                ``assistance under the State program funded under part 
                A of title IV of the Social Security Act'';
                    (B) in paragraph (2), by striking ``aid to families 
                with dependent children under title IV of such Act'' 
                and inserting ``assistance under the State program 
                funded under part A of title IV of the Social Security 
                Act'';
            (6) in subsection (d), by striking ``job opportunities and 
        basic skills training program (as provided for under title IV 
        of the Social Security Act'' and inserting ``the State program 
        funded under part A of title IV of the Social Security Act''; 
        and
            (7) by striking subsections (e) through (g) and inserting 
        the following:
    ``(e) Authorization of Appropriations.--For the purpose of 
conducting projects under this section, there is authorized to be 
appropriated an amount not to exceed $25,000,000 for any fiscal 
year.''.

SEC. 7207. DEMONSTRATION PROJECTS FOR SCHOOL UTILIZATION.

    (a) Findings.--It is the goal of the United States that children 
grow to be self-sufficient citizens, that parents equip themselves to 
provide the best parental care and guidance to their children, and that 
welfare dependency, crime, and the deterioration of neighborhoods be 
eliminated. It will contribute to these goals to increase the level of 
parents' involvement in their children's school and other activities, 
to increase the amount of time parents spend with or in close proximity 
to their children, to increase the portion of the day and night when 
children are in a safe and healthy environment and not exposed to 
unfavorable influences, to increase the opportunities for children to 
participate in safe, healthy, and enjoyable extra-curricular and 
organized developmental and recreational activities, and to make more 
accessible the opportunities for parents, especially those dependent on 
public assistance, to increase and enhance their parenting and living 
skills. All of these contributions can be facilitated by establishing 
the neighborhood public school as a focal point for such activities and 
by extending the hours of the day in which its facilities are available 
for such activities.
    (b) Grants.--The Secretary of Education (hereafter in this section 
referred to as the ``Secretary'') shall make demonstration grants as 
provided in subsection (c) to States to enable them to increase the 
number of hours during each day when existing public school facilities 
are available for use for the purposes set forth in subsection (d).
    (c) Selection of States.--The Secretary shall make grants to not 
more than 5 States for demonstration projects in accordance with this 
section. Each State shall select the number and location of schools 
based on the amount of funds it deems necessary for a school properly 
to achieve the goals of this program. The schools selected must have a 
significant percentage of students receiving benefits under part A of 
title IV of the Social Security Act. No more than 2 percent of the 
grant to any State shall be used for administrative expenses of any 
kind by any entity (except that none of the activities set forth in 
paragraphs (1) and (2) of subsection (d) shall be considered an 
administrative activity the expenses for which are limited by this 
subsection).
    (d) Use of Funds.--The grants made under subsection (b), in order 
that school facilities can be more fully utilized, shall be used to 
provide funding for, among other things--
            (1) extending the length of the school day, expanding the 
        scope of student programs offered before and after pre-existing 
        school hours, enabling volunteers and parents or professionals 
        paid from other sources to teach, tutor, coach, organize, 
        advise, or monitor students before and after pre-existing 
        school hours, and providing security, supplies, utilities, and 
        janitorial services before and after pre-existing school hours 
        for these programs,
            (2) making the school facilities available for community 
        and neighborhood clubs, civic associations and organizations, 
        Boy and Girl Scouts and similar organizations, adult education 
        classes, organized sports, parental education classes, and 
        other educational, recreational, and social activities.
None of the funds provided under this section can be used to supplant 
funds already provided to a school facility for services, equipment, 
personnel, or utilities nor can funds be used to pay costs associated 
with operating school facilities during hours those facilities are 
already available for student or community use.
    (e) Applications.--
            (1) In general.--The Governor of each State desiring to 
        conduct a demonstration project under this section shall 
        prepare and submit to the Secretary an application in such 
        manner and containing such information as the Secretary may 
        require. The Secretary shall actively encourage States to 
        submit such applications.
            (2) Approval.--The Secretary shall consider all 
        applications received from States desiring to conduct 
        demonstration projects under this section and shall approve 
        such applications in a number of States to be determined by the 
        Secretary (not to exceed 5), taking into account the overall 
        funding levels available under this section.
    (f) Duration.--A demonstration project under this section shall be 
conducted for not more than 4 years plus an additional time period of 
up to 12 months for final evaluation and reporting. The Secretary may 
terminate a project if the Secretary determines that the State 
conducting the project is not in substantial compliance with the terms 
of the application approved by the Secretary under this section.
    (g) Evaluation Plan.--
            (1) Standards.--Not later than 3 months after the date of 
        the enactment of this section, the Secretary shall develop 
        standards for evaluating the effectiveness of each 
        demonstration project in contributing toward meeting the 
        objectives set forth in subsection (a), which shall include the 
        requirement that an independent expert entity selected by the 
        Secretary provide an evaluation of all demonstration projects, 
        which evaluations shall be included in the appropriate State's 
        annual and final reports to the Secretary under subsection 
        (h)(1).
            (2) Submission of plan.--Each State conducting a 
        demonstration project under this section shall submit an 
        evaluation plan (meeting the standards developed by the 
        Secretary under paragraph (1)) to the Secretary not later than 
        90 days after the State is notified of the Secretary's approval 
        for such project. A State shall not receive any Federal funds 
        for the operation of the demonstration project until the 
        Secretary approves such evaluation plan.
    (h) Reports.--
            (1) State.--A State that conducts a demonstration project 
        under this section shall prepare and submit to the Secretary 
        annual and final reports in accordance with the State's 
        evaluation plan under subsection (g)(2) for such demonstration 
        project.
            (2) Secretary.--The Secretary shall prepare and submit to 
        the Congress annual reports concerning each demonstration 
        project under this section.
    (i) Authorizations.--
            (1) Grants.--There are authorized to be appropriated for 
        grants under subsection (b) for each of fiscal years 1996, 
        1997, 1998, 1999, and 2000, $10,000,000.
            (2) Administration.--There are authorized to be 
        appropriated $1,000,000 for each of fiscal years 1996, 1997, 
        1998, 1999, and 2000 for the administration of this section by 
        the Secretary, including development of standards and 
        evaluation of all demonstration projects by an independent 
        expert entity under subsection (g)(1).

SEC. 7208. CORRECTIVE COMPLIANCE PLAN.

    (a) In General.--
            (1) Notification of violation.--Notwithstanding any other 
        provision of law, the Federal Government shall, prior to 
        assessing a penalty against a State under any program 
        established or modified under subtitle D of title I of this 
        Act, this subtitle, or subtitle D, E, F, or G of this title, 
        notify the State of the violation of law for which such penalty 
        would be assessed and allow the State the opportunity to enter 
        into a corrective compliance plan in accordance with this 
        section which outlines how the State will correct any 
        violations for which such penalty would be assessed and how the 
        State will insure continuing compliance with the requirements 
        of such program.
            (2) 60-day period to propose a corrective compliance 
        plan.--Any State notified under paragraph (1) shall have 60 
        days in which to submit to the Federal Government a corrective 
        compliance plan to correct any violations described in such 
        paragraph.
            (3) Acceptance of plan.--The Federal Government shall have 
        60 days to accept or reject the State's corrective compliance 
        plan and may consult with the State during this period to 
        modify the plan. If the Federal Government does not accept or 
        reject the corrective compliance plan during the period, the 
        corrective compliance plan shall be deemed to be accepted.
    (b) Failure To Correct.--If a corrective compliance plan is 
accepted by the Federal Government, no penalty shall be imposed with 
respect to a violation described in subsection (a) if the State 
corrects the violation pursuant to the plan. If a State has not 
corrected the violation in a timely manner under the plan, some or all 
of the penalty shall be assessed.

SEC. 7209. PARENTAL RESPONSIBILITY CONTRACTS.

  (a) Assessment.--Notwithstanding any other provision of, or amendment 
made by, this subtitle, each State to which a grant is made under 
section 403 of the Social Security Act shall provide that the State 
agency, through a case manager, shall make an initial assessment of the 
education level, parenting skills, and history of parenting activities 
and involvement of each parent who is applying for financial assistance 
under the State plan funded under part A of title IV of the Social 
Security Act.
  (b) Parental Responsibility Contracts.--On the basis of the 
assessment made under subsection (a) with respect to each parent 
applicant, the case manager, in consultation with the parent applicant 
(hereafter in this subsection referred to as the ``client'') and, if 
possible, the client's spouse if one is present, shall develop a 
parental responsibility contract for the client, which meets the 
following requirements:
          (1) Sets forth the obligations of the client, including all 
        of the following the case manager believes are within the 
        ability and capacity of the client, are not incompatible with 
        the employment or school activities of the client, and are not 
        inconsistent with each other in the client's case or with the 
        well being of the client's children:
                  (A) Attend school, if necessary, and maintain certain 
                grades and attendance.
                  (B) Keep school-age children of the client in school.
                  (C) Immunize children of the client.
                  (D) Attend parenting and money management classes.
                  (E) Participate in parent and teacher associations 
                and other activities intended to involve parents in 
                their children's school activities and in the affairs 
                of their children's school.
                  (F) Attend school activities with their children 
                where attendance or participation by both children and 
                parents is appropriate.
                  (G) Undergo appropriate substance abuse treatment 
                counseling.
                  (H) Any other appropriate activity, at the option of 
                the State.
          (2) Provides that the client shall accept any bona fide offer 
        of unsubsidized full-time employment, unless the client has 
        good cause for not doing so.
  (c) Penalties for Noncompliance With Parental Responsibility 
Contract.--
          (1) In general.--Except as provided in paragraph (2), the 
        following penalties shall apply:
                  (A) Progressive reductions in assistance for 1st and 
                2nd acts of non-compliance.--The State plan described 
                in section 402 of the Social Security Act shall provide 
                that the amount of assistance otherwise payable under 
                part A of title IV of such Act to a family that 
                includes a client who, with respect to a parental 
                responsibility contract signed by the client, commits 
                an act of noncompliance without good cause, shall be 
                reduced by--
                          (i) 33 percent for the 1st such act of 
                        noncompliance; or
                          (ii) 66 percent for the 2nd such act of 
                        noncompliance.
                  (B) Denial of assistance for 3rd and subsequent acts 
                of noncompliance.--The State shall provide that in the 
                case of the 3rd or subsequent such act of 
                noncompliance, the family of which the client is a 
                member shall not thereafter be eligible for assistance 
                under this part.
                  (C) Length of penalties.--The penalty for an act of 
                noncompliance shall not exceed the greater of--
                          (i) in the case of--
                                  (I) the 1st act of noncompliance, 1 
                                month,
                                  (II) the 2nd act of noncompliance, 3 
                                months, or
                                  (III) the 3rd or subsequent act of 
                                noncompliance, 6 months; or
                          (ii) the period ending with the cessation of 
                        such act of noncompliance.
                  (D) Denial of assistance to adults refusing to accept 
                a bona fide offer of employment.--The State plan shall 
                provide that if an unemployed individual who has 
                attained 18 years of age refuses to accept a bona fide 
                offer of employment without good cause, such act of 
                noncompliance shall be considered a 3rd or subsequent 
                act of noncompliance.
          (2) State flexibility.--The State plan may provide for 
        different penalties than those specified in paragraph (1).

SEC. 7210. EXPENDITURE OF FEDERAL FUNDS IN ACCORDANCE WITH LAWS AND 
              PROCEDURES APPLICABLE TO EXPENDITURE OF STATE FUNDS.

    (a) In General.--Notwithstanding any other provision of law, any 
funds received by a State under the provisions of law specified in 
subsection (b) shall be expended only in accordance with the laws and 
procedures applicable to expenditures of the State's own revenues, 
including appropriation by the State legislature, consistent with the 
terms and conditions required under such provisions of law.
    (b) Provisions of Law.--The provisions of law specified in this 
subsection are the following:
            (1) Part A of title IV of the Social Security Act (relating 
        to block grants for temporary assistance to needy families).
            (2) The section of the Food Stamp Act of 1977 relating to 
        the optional State food assistance block grants.
            (3) The Child Care and Development Block Grant Act of 1990 
        (relating to block grants for child care).

SEC. 7211. CONFORMING AMENDMENTS TO THE SOCIAL SECURITY ACT.

    (a) Amendments to Title II.--
            (1) Section 205(c)(2)(C)(vi) (42 U.S.C. 405(c)(2)(C)(vi)), 
        as so redesignated by section 321(a)(9)(B) of the Social 
        Security Independence and Program Improvements Act of 1994, is 
        amended--
                    (A) by inserting ``an agency administering a 
                program funded under part A of title IV or'' before 
                ``an agency operating''; and
                    (B) by striking ``A or D of title IV of this Act'' 
                and inserting ``D of such title''.
            (2) Section 228(d)(1) (42 U.S.C. 428(d)(1)) is amended by 
        inserting ``under a State program funded under'' before ``part 
        A of title IV''.
    (b) Amendment to Part B of Title IV.--Section 422(b)(2) (42 U.S.C. 
622(b)(2)) is amended by striking ``under the State plan approved'' and 
inserting ``under the State program funded.''.
    (c) Amendments to Part D of Title IV.--
            (1) Section 451 (42 U.S.C. 651) is amended by striking 
        ``aid'' and inserting ``assistance under a State program 
        funded''.
            (2) Section 452(a)(10)(C) (42 U.S.C. 652(a)(10)(C)) is 
        amended--
                    (A) by striking ``aid to families with dependent 
                children'' and inserting ``assistance under a State 
                program funded under part A'';
                    (B) by striking ``such aid'' and inserting ``such 
                assistance''; and
                    (C) by striking ``402(a)(26) or''.
            (3) Section 452(a)(10)(F) (42 U.S.C. 652(a)(10)(F)) is 
        amended--
                    (A) by striking ``aid under a State plan approved'' 
                and inserting ``assistance under a State program 
                funded''; and
                    (B) by striking ``in accordance with the standards 
                referred to in section 402(a)(26)(B)(ii)'' and 
                inserting ``by the State''.
            (4) Section 452(b) (42 U.S.C. 652(b)) is amended in the 
        first sentence by striking ``aid under the State plan approved 
        under part A'' and inserting ``assistance under a State program 
        funded under part A''.
            (5) Section 452(d)(3)(B)(i) (42 U.S.C. 652(d)(3)(B)(i)) is 
        amended by striking ``1115(c)'' and inserting ``1115(b)''.
            (6) Section 452(g)(2)(A)(ii)(I) (42 U.S.C. 
        652(g)(2)(A)(ii)(I)) is amended by striking ``aid is being paid 
        under the State's plan approved under part A or E'' and 
        inserting ``assistance is being provided under the State 
        program funded under part A or aid is being paid under the 
        State's plan approved under part E''.
            (7) Section 452(g)(2)(A) (42 U.S.C. 652(g)(2)(A)) is 
        amended in the matter following clause (iii) by striking ``aid 
        was being paid under the State's plan approved under part A or 
        E'' and inserting ``assistance was being provided under the 
        State program funded under part A or aid was being paid under 
        the State's plan approved under part E''.
            (8) Section 452(g)(2) (42 U.S.C. 652(g)(2)) is amended in 
        the matter following subparagraph (B)--
                    (A) by striking ``who is a dependent child'' and 
                inserting ``with respect to whom assistance is being 
                provided under the State program funded under part A'';
                    (B) by inserting ``by the State agency 
                administering the State plan approved under this part'' 
                after ``found''; and
                    (C) by striking ``under section 402(a)(26)'' and 
                inserting ``with the State in establishing paternity''.
            (9) Section 452(h) (42 U.S.C. 652(h)) is amended by 
        striking ``under section 402(a)(26)''.
            (10) Section 453(c)(3) (42 U.S.C. 653(c)(3)) is amended by 
        striking ``aid'' and inserting ``assistance under a State 
        program funded''.
            (11) Section 454 (42 U.S.C. 654)) is amended--
                    (A) in paragraph (5)(A)--
                            (i) by striking ``under section 
                        402(a)(26)''; and
                            (ii) by striking ``except that this 
                        paragraph shall not apply to such payments for 
                        any month following the first month in which 
                        the amount collected is sufficient to make such 
                        family ineligible for assistance under the 
                        State plan approved under part A;''; and
                    (B) in paragraph (6)(D), by striking ``aid under a 
                State plan approved'' and inserting ``assistance under 
                a State program funded''.
            (12) Section 456 (42 U.S.C. 656) is amended--
                    (A) in subsection (a)(1), by striking ``under 
                section 402(a)(26)''; and
                    (B) by striking subsection (b) and inserting the 
                following:
    ``(b) A debt which is a support obligation enforceable under this 
title is not released by a discharge in bankruptcy under title 11, 
United States Code.''.
            (13) Section 466(a)(3)(B) (42 U.S.C. 666(a)(3)(B)) is 
        amended by striking ``402(a)(26) or''.
            (14) Section 466(b)(2) (42 U.S.C. 666(b)(2)) is amended by 
        striking ``aid'' and inserting ``assistance under a State 
        program funded''.
            (15) Section 469(a) (42 U.S.C. 669(a)) is amended--
                    (A) by striking ``aid under plans approved'' and 
                inserting ``assistance under State programs funded''; 
                and
                    (B) by striking ``such aid'' and inserting ``such 
                assistance''.
    (d) Amendments to Part E of Title IV.--
            (1) Section 470 (42 U.S.C. 670) is amended--
                    (A) by striking ``would be'' and inserting ``would 
                have been''; and
                    (B) by inserting ``(as such plan was in effect on 
                June 1, 1995)'' after ``part A''.
            (2) Section 471(17) (42 U.S.C. 671(17)) is amended by 
        striking ``plans approved under parts A and D'' and inserting 
        ``program funded under part A and plan approved under part D''.
            (3) Section 472(a) (42 U.S.C. 672(a)) is amended--
                    (A) in the matter preceding paragraph (1)--
                            (i) by striking ``would meet'' and 
                        inserting ``would have met'';
                            (ii) by inserting ``(as such sections were 
                        in effect on June 1, 1995)'' after ``407''; and
                            (iii) by inserting ``(as so in effect)'' 
                        after ``406(a)''; and
                    (B) in paragraph (4)--
                            (i) in subparagraph (A)--
                                    (I) by inserting ``would have'' 
                                after ``(A)''; and
                                    (II) by inserting ``(as in effect 
                                on June 1, 1995)'' after ``section 
                                402''; and
                            (ii) in subparagraph (B)(ii), by inserting 
                        ``(as in effect on June 1, 1995)'' after 
                        ``406(a)''.
            (4) Section 472(h) (42 U.S.C. 672(h)) is amended to read as 
        follows:
    ``(h)(1) For purposes of the medicaid program under title XIX of 
this Act or any successor to such program, any child with respect to 
whom foster care maintenance payments are made under this section shall 
be deemed to be a dependent child as defined in section 406 (as in 
effect as of June 1, 1995) and shall be deemed to be a recipient of aid 
to families with dependent children under part A of this title (as so 
in effect). For purposes of title XX, any child with respect to whom 
foster care maintenance payments are made under this section shall be 
deemed to be a minor child in a needy family under a State program 
funded under part A and shall be deemed to be a recipient of assistance 
under such part.
    ``(2) For purposes of paragraph (1), a child whose costs in a 
foster family home or child care institution are covered by the foster 
care maintenance payments being made with respect to the child's minor 
parent, as provided in section 475(4)(B), shall be considered a child 
with respect to whom foster care maintenance payments are made under 
this section.''.
            (5) Section 473(a)(2) (42 U.S.C. 673(a)(2)) is amended--
                    (A) in subparagraph (A)(i)--
                            (i) by inserting ``(as such sections were 
                        in effect on June 1, 1995)'' after ``407'';
                            (ii) by inserting ``(as so in effect)'' 
                        after ``specified in section 406(a)''; and
                            (iii) by inserting ``(as such section was 
                        in effect on June 1, 1995)'' after ``403'';
                    (B) in subparagraph (B)(i)--
                            (i) by inserting ``would have'' after 
                        ``(B)(i)''; and
                            (ii) by inserting ``(as in effect on June 
                        1, 1995)'' after ``section 402''; and
                    (C) in subparagraph (B)(ii)(II), by inserting ``(as 
                in effect on June 1, 1995)'' after ``406(a)''.
            (6) Section 473(b) (42 U.S.C. 673(b)) is amended to read as 
        follows:
    ``(b)(1) For purposes of the medicaid program under title XIX of 
this Act or any successor to such program, any child who is described 
in paragraph (3) shall be deemed to be a dependent child as defined in 
section 406 (as in effect as of June 1, 1995) and shall be deemed to be 
a recipient of aid to families with dependent children under part A of 
this title (as so in effect) in the State where such child resides.
    ``(2) For purposes of title XX, any child who is described in 
paragraph (3) shall be deemed to be a minor child in a needy family 
under a State program funded under part A and shall be deemed to be a 
recipient of assistance under such part.
    ``(3) A child described in this paragraph is any child--
            ``(A)(i) who is a child described in subsection (a)(2), and
            ``(ii) with respect to whom an adoption assistance 
        agreement is in effect under this section (whether or nor 
        adoption assistance payments are provided under the agreement 
        or are being made under this section), including any such child 
        who has been placed for adoption in accordance with applicable 
        State and local law (whether or not an interlocutory or other 
        judicial decree of adoption has been issued), or
            ``(B) with respect to whom foster care maintenance payments 
        are being made under section 472.
    ``(4) For purposes of paragraphs (1) and (2), a child whose costs 
in a foster family home or child-care institution are covered by the 
foster care maintenance payments being made with respect to the child's 
minor parent, as provided in section 475(4)(B), shall be considered a 
child with respect to whom foster care maintenance payments are being 
made under section 472.''.
    (e) Amendment to Title X.--Section 1002(a)(7) (42 U.S.C. 
1202(a)(7)) is amended by striking ``aid to families with dependent 
children under the State plan approved under section 402 of this Act'' 
and inserting ``assistance under a State program funded under part A of 
title IV''.
    (f) Amendments to Title XI.--
            (1) Section 1109 (42 U.S.C. 1309) is amended by striking 
        ``or part A of title IV,''.
            (2) Section 1115 (42 U.S.C. 1315) is amended--
                    (A) in subsection (a)(2)--
                            (i) by inserting ``(A)'' after ``(2)'';
                            (ii) by striking ``403,'';
                            (iii) by striking the period at the end and 
                        inserting ``, and''; and
                            (iv) by adding at the end the following new 
                        subparagraph:
            ``(B) costs of such project which would not otherwise be a 
        permissible use of funds under part A of title IV and which are 
        not included as part of the costs of projects under section 
        1110, shall to the extent and for the period prescribed by the 
        Secretary, be regarded as a permissible use of funds under such 
        part.''; and
                    (B) in subsection (c)(3), by striking ``under the 
                program of aid to families with dependent children'' 
                and inserting ``part A of such title''.
            (3) Section 1116 (42 U.S.C. 1316) is amended--
                    (A) in each of subsections (a)(1), (b), and (d), by 
                striking ``or part A of title IV,''; and
                    (B) in subsection (a)(3), by striking ``404,''.
            (4) Section 1118 (42 U.S.C. 1318) is amended--
                    (A) by striking ``403(a),'';
                    (B) by striking ``and part A of title IV,''; and
                    (C) by striking ``, and shall, in the case of 
                American Samoa, mean 75 per centum with respect to part 
                A of title IV''.
            (5) Section 1119 (42 U.S.C. 1319) is amended--
                    (A) by striking ``or part A of title IV''; and
                    (B) by striking ``403(a),''.
            (6) Section 1133(a) (42 U.S.C. 1320b-3(a)) is amended by 
        striking ``or part A of title IV,''.
            (7) Section 1136 (42 U.S.C. 1320b-6) is repealed.
            (8) Section 1137 (42 U.S.C. 1320b-7) is amended--
                    (A) in subsection (b), by striking paragraph (1) 
                and inserting the following:
            ``(1) any State program funded under part A of title IV of 
        this Act;''; and
                    (B) in subsection (d)(1)(B)--
                            (i) by striking ``In this subsection--'' 
                        and all that follows through ``(ii) in'' and 
                        inserting ``In this subsection, in'';
                            (ii) by redesignating subclauses (I), (II), 
                        and (III) as clauses (i), (ii), and (iii); and
                            (iii) by moving such redesignated material 
                        2 ems to the left.
            (9) Section 1108 (42 U.S.C. 1308) is amended--
                    (A) in subsection (a)--
                            (i) in the matter preceding paragraph (1)--
                                    (I) by inserting ``(or paid, in the 
                                case of part A of title IV)'' after 
                                ``certified''; and
                                    (II) by striking ``or, in the case 
                                of'' and all that follows through 
                                ``section 403(k)'';
                            (ii) in paragraph (1)--
                                    (I) in subparagraph (F), by 
                                striking ``or'';
                                    (II) in subparagraph (G), by 
                                striking ``the fiscal year 1989 and 
                                each fiscal year thereafter;'' and 
                                inserting ``each of the fiscal years 
                                1989 through 1995, or''; and
                                    (III) by inserting after 
                                subparagraph (G), the following new 
                                subparagraph:
                    ``(H) $100,039,000 with respect to fiscal year 1996 
                and each fiscal year thereafter;'';
                            (iii) in paragraph (2)--
                                    (I) in subparagraph (F), by 
                                striking ``or'';
                                    (II) in subparagraph (G), by 
                                striking ``the fiscal year 1989 and 
                                each fiscal year thereafter;'' and 
                                inserting ``each of the fiscal years 
                                1989 through 1995, or''; and
                                    (III) by inserting after 
                                subparagraph (G), the following new 
                                subparagraph:
                    ``(H) $3,489,000 with respect to fiscal year 1996 
                and each fiscal year thereafter;''; and
                            (iv) in paragraph (3)--
                                    (I) in subparagraph (F), by 
                                striking ``or'';
                                    (II) in subparagraph (G), by 
                                striking ``the fiscal year 1989 and 
                                each fiscal year thereafter.'' and 
                                inserting ``each of the fiscal years 
                                1989 through 1995, or''; and
                                    (III) by inserting after 
                                subparagraph (G), the following new 
                                subparagraph:
                    ``(H) $4,593,000 with respect to fiscal year 1996 
                and each fiscal year thereafter.''; and
                    (B) in subsection (d), by striking ``(exclusive of 
                any amounts'' and all that follows through ``section 
                403(k) applies)''.
    (g) Amendment to Title XIV.--Section 1402(a)(7) (42 U.S.C. 
1352(a)(7)) is amended by striking ``aid to families with dependent 
children under the State plan approved under section 402 of this Act'' 
and inserting ``assistance under a State program funded under part A of 
title IV''.
    (h) Amendment to Title XVI as in Effect With Respect to the 
Territories.--Section 1602(a)(11), as in effect without regard to the 
amendment made by section 301 of the Social Security Amendments of 1972 
(42 U.S.C. 1382 note), is amended by striking ``aid under the State 
plan approved'' and inserting ``assistance under a State program 
funded''.
    (i) Amendment to Title XVI as in Effect With Respect to the 
States.--Section 1611(c)(5)(A) (42 U.S.C. 1382(c)(5)(A)) is amended to 
read as follows: ``(A) a State program funded under part A of title 
IV,''.

SEC. 7212. CONFORMING AMENDMENTS TO THE FOOD STAMP ACT OF 1977 AND 
              RELATED PROVISIONS.

    (a) Section 5 of the Food Stamp Act of 1977 (7 U.S.C. 2014) is 
amended--
            (1) in the second sentence of subsection (a), by striking 
        ``plan approved'' and all that follows through ``title IV of 
        the Social Security Act'' and inserting ``program funded under 
        part A of title IV of the Social Security Act (42 U.S.C. 601 et 
        seq.) that the Secretary determines complies with standards 
        established by the Secretary that ensure that the standards 
        under the State program are comparable to or more restrictive 
        than those in effect on June 1, 1995'';
            (2) in subsection (d)(5)--
                    (A) by striking ``assistance to families with 
                dependent children'' and inserting ``assistance under a 
                State program funded''; and
                    (B) by striking paragraph (13) and redesignating 
                paragraphs (14), (15), and (16) as paragraphs (13), 
                (14), and (15), respectively;
            (3) in subsection (j), by striking ``plan approved under 
        part A of title IV of such Act (42 U.S.C. 601 et seq.)'' and 
        inserting ``program funded under part A of title IV of the Act 
        (42 U.S.C. 601 et seq.) that the Secretary determines complies 
        with standards established by the Secretary that ensure that 
        the standards under the State program are comparable to or more 
        restrictive than those in effect on June 1, 1995''.
    (b) Section 6 of such Act (7 U.S.C. 2015) is amended--
            (1) in subsection (c)(5), by striking ``the State plan 
        approved'' and inserting ``the State program funded'';
            (2) in subsection (e)--
                    (A) by striking ``aid to families with dependent 
                children'' and inserting ``benefits under a State 
                program funded''; and
                    (B) by inserting before the semicolon the 
                following: ``that the Secretary determines complies 
                with standards established by the Secretary that ensure 
                that the standards under the State program are 
                comparable to or more restrictive than those in effect 
                on June 1, 1995''; and
            (3) by adding at the end the following new subsection:
    ``(i) Notwithstanding any other provision of this Act, a household 
may not receive benefits under this Act as a result of the household's 
eligibility under a State program funded under part A of title IV of 
the Social Security Act (42 U.S.C. 601 et seq.), unless the Secretary 
determines that any household with income above 130 percent of the 
poverty guidelines is not eligible for the program.''.
    (c) Section 16(g)(4) of such Act (7 U.S.C. 2025(g)(4)) is amended 
by striking ``State plans under the Aid to Families with Dependent 
Children Program under'' and inserting ``State programs funded under 
part A of''.
    (d) Section 17 of such Act (7 U.S.C. 2026) is amended--
            (1) in the first sentence of subsection (b)(1)(A), by 
        striking ``to aid to families with dependent children under 
        part A of title IV of the Social Security Act'' and inserting 
        ``or are receiving assistance under a State program funded 
        under part A of title IV of the Social Security Act (42 U.S.C. 
        601 et seq.)''; and
            (2) in subsection (b)(3), by adding at the end the 
        following new subparagraph:
             ``(I) The Secretary may not grant a waiver under this 
        paragraph on or after October 1, 1995. Any reference in this 
        paragraph to a provision of title IV of the Social Security Act 
        shall be deemed to be a reference to such provision as in 
        effect on September 30, 1995.'';
    (e) Section 20 of such Act (7 U.S.C. 2029) is amended--
            (1) in subsection (a)(2)(B) by striking ``operating--'' and 
        all that follows through ``(ii) any other'' and inserting 
        ``operating any''; and
            (2) in subsection (b)--
                    (A) in paragraph (1)--
                            (i) by striking ``(b)(1) A household'' and 
                        inserting ``(b) A household''; and
                            (ii) in subparagraph (B), by striking 
                        ``training program'' and inserting 
                        ``activity'';
                    (B) by striking paragraph (2); and
                    (C) by redesignating subparagraphs (A) through (F) 
                as paragraphs (1) through (6), respectively.
    (f) Section 5(h)(1) of the Agriculture and Consumer Protection Act 
of 1973 (Public Law 93-186; 7 U.S.C. 612c note) is amended by striking 
``the program for aid to families with dependent children'' and 
inserting ``the State program funded''.
    (g) Section 9 of the National School Lunch Act (42 U.S.C. 1758) is 
amended--
            (1) in subsection (b)--
                    (A) in paragraph (2)(C)(ii)(II)--
                            (i) by striking ``program for aid to 
                        families with dependent children'' and 
                        inserting ``State program funded''; and
                            (ii) by inserting before the period at the 
                        end the following: ``that the Secretary 
                        determines complies with standards established 
                        by the Secretary that ensure that the standards 
                        under the State program are comparable to or 
                        more restrictive than those in effect on June 
                        1, 1995''; and
                    (B) in paragraph (6)--
                            (i) in subparagraph (A)(ii)--
                                    (I) by striking ``an AFDC 
                                assistance unit (under the aid to 
                                families with dependent children 
                                program authorized'' and inserting ``a 
                                family (under the State program 
                                funded''; and
                                    (II) by striking ``, in a State'' 
                                and all that follows through 
                                ``9902(2)))'' and inserting ``that the 
                                Secretary determines complies with 
                                standards established by the Secretary 
                                that ensure that the standards under 
                                the State program are comparable to or 
                                more restrictive than those in effect 
                                on June 1, 1995''; and
                            (ii) in subparagraph (B), by striking ``aid 
                        to families with dependent children'' and 
                        inserting ``assistance under the State program 
                        funded under part A of title IV of the Social 
                        Security Act (42 U.S.C. 601 et seq.) that the 
                        Secretary determines complies with standards 
                        established by the Secretary that ensure that 
                        the standards under the State program are 
                        comparable to or more restrictive than those in 
                        effect on June 1, 1995''; and
            (2) in subsection (d)(2)(C)--
                    (A) by striking ``program for aid to families with 
                dependent children'' and inserting ``State program 
                funded''; and
                    (B) by inserting before the period at the end the 
                following: ``that the Secretary determines complies 
                with standards established by the Secretary that ensure 
                that the standards under the State program are 
                comparable to or more restrictive than those in effect 
                on June 1, 1995''.
    (h) Section 17 of the Child Nutrition Act of 1966 (42 U.S.C. 1786) 
is amended--
            (1) in subsection (d)(2)(A)(ii)(II)--
                    (A) by striking ``program for aid to families with 
                dependent children established'' and inserting ``State 
                program funded''; and
                    (B) by inserting before the semicolon the 
                following: ``that the Secretary determines complies 
                with standards established by the Secretary that ensure 
                that the standards under the State program are 
                comparable to or more restrictive than those in effect 
                on June 1, 1995'';
            (2) in subsection (e)(4)(A), by striking ``program for aid 
        to families with dependent children'' and inserting ``State 
        program funded''; and
            (3) in subsection (f)(1)(C)(iii), by striking ``aid to 
        families with dependent children,'' and inserting ``State 
        program funded under part A of title IV of the Social Security 
        Act (42 U.S.C. 601 et seq.) and with the''.

SEC. 7213. CONFORMING AMENDMENTS TO OTHER LAWS.

    (a) Subsection (b) of section 508 of the Unemployment Compensation 
Amendments of 1976 (Public Law 94-566; 90 Stat. 2689) is amended to 
read as follows:
    ``(b) Provision for Reimbursement of Expenses.--For purposes of 
section 455 of the Social Security Act, expenses incurred to reimburse 
State employment offices for furnishing information requested of such 
offices--
            ``(1) pursuant to the third sentence of section 3(a) of the 
        Act entitled `An Act to provide for the establishment of a 
        national employment system and for cooperation with the States 
        in the promotion of such system, and for other purposes', 
        approved June 6, 1933 (29 U.S.C. 49b(a)), or
            ``(2) by a State or local agency charged with the duty of 
        carrying a State plan for child support approved under part D 
        of title IV of the Social Security Act,
shall be considered to constitute expenses incurred in the 
administration of such State plan.''.
    (b) Section 9121 of the Omnibus Budget Reconciliation Act of 1987 
(42 U.S.C. 602 note) is repealed.
    (c) Section 9122 of the Omnibus Budget Reconciliation Act of 1987 
(42 U.S.C. 602 note) is repealed.
    (d) Section 221 of the Housing and Urban-Rural Recovery Act of 1983 
(42 U.S.C. 602 note), relating to treatment under AFDC of certain 
rental payments for federally assisted housing, is repealed.
    (e) Section 159 of the Tax Equity and Fiscal Responsibility Act of 
1982 (42 U.S.C. 602 note) is repealed.
    (f) Section 202(d) of the Social Security Amendments of 1967 (81 
Stat. 882; 42 U.S.C. 602 note) is repealed.
    (g) Section 903 of the Stewart B. McKinney Homeless Assistance 
Amendments Act of 1988 (42 U.S.C. 11381 note), relating to 
demonstration projects to reduce number of AFDC families in welfare 
hotels, is amended--
            (1) in subsection (a), by striking ``aid to families with 
        dependent children under a State plan approved'' and inserting 
        ``assistance under a State program funded''; and
            (2) in subsection (c), by striking ``aid to families with 
        dependent children in the State under a State plan approved'' 
        and inserting ``assistance in the State under a State program 
        funded''.
    (h) The Higher Education Act of 1965 (20 U.S.C. 1001 et seq.) is 
amended--
            (1) in section 404C(c)(3) (20 U.S.C. 1070a-23(c)(3)), by 
        striking ``(Aid to Families with Dependent Children)''; and
            (2) in section 480(b)(2) (20 U.S.C. 1087vv(b)(2)), by 
        striking ``aid to families with dependent children under a 
        State plan approved'' and inserting ``assistance under a State 
        program funded''.
    (i) The Carl D. Perkins Vocational and Applied Technology Education 
Act (20 U.S.C. 2301 et seq.) is amended--
            (1) in section 231(d)(3)(A)(ii) (20 U.S.C. 
        2341(d)(3)(A)(ii)), by striking ``the program for aid to 
        dependent children'' and inserting ``the State program 
        funded'';
            (2) in section 232(b)(2)(B) (20 U.S.C. 2341a(b)(2)(B)), by 
        striking ``the program for aid to families with dependent 
        children'' and inserting ``the State program funded''; and
            (3) in section 521(14)(B)(iii) (20 U.S.C. 
        2471(14)(B)(iii)), by striking ``the program for aid to 
        families with dependent children'' and inserting ``the State 
        program funded''.
    (j) The Elementary and Secondary Education Act of 1965 (20 U.S.C. 
2701 et seq.) is amended--
            (1) in section 1113(a)(5) (20 U.S.C. 6313(a)(5)), by 
        striking ``Aid to Families with Dependent Children Program'' 
        and inserting ``State program funded under part A of title IV 
        of the Social Security Act'';
            (2) in section 1124(c)(5) (20 U.S.C. 6333(c)(5)), by 
        striking ``the program of aid to families with dependent 
        children under a State plan approved under'' and inserting ``a 
        State program funded under part A of''; and
            (3) in section 5203(b)(2) (20 U.S.C. 7233(b)(2))--
                    (A) in subparagraph (A)(xi), by striking ``Aid to 
                Families with Dependent Children benefits'' and 
                inserting ``assistance under a State program funded 
                under part A of title IV of the Social Security Act''; 
                and
                    (B) in subparagraph (B)(viii), by striking ``Aid to 
                Families with Dependent Children'' and inserting 
                ``assistance under the State program funded under part 
                A of title IV of the Social Security Act''.
    (k) Chapter VII of title I of Public Law 99-88 (25 U.S.C. 13d-1) is 
amended to read as follows: ``Provided further, That general assistance 
payments made by the Bureau of Indian Affairs shall be made--
            ``(1) after April 29, 1985, and before October 1, 1995, on 
        the basis of Aid to Families with Dependent Children (AFDC) 
        standards of need; and
            ``(2) on and after October 1, 1995, on the basis of 
        standards of need established under the State program funded 
        under part A of title IV of the Social Security Act,
except that where a State ratably reduces its AFDC or State program 
payments, the Bureau shall reduce general assistance payments in such 
State by the same percentage as the State has reduced the AFDC or State 
program payment.''.
    (l) The Internal Revenue Code of 1986 is amended--
            (1) in section 51(d)(9), by striking all that follows 
        ``agency as'' and inserting ``being eligible for financial 
        assistance under part A of title IV of the Social Security Act 
        and as having continually received such financial assistance 
        during the 90-day period which immediately precedes the date on 
        which such individual is hired by the employer.'';
            (2) in section 3304(a)(16), by striking ``eligibility for 
        aid or services,'' and all that follows through ``children 
        approved'' and inserting ``eligibility for assistance, or the 
        amount of such assistance, under a State program funded'';
            (3) in section 6103(l)(7)(D)(i), by striking ``aid to 
        families with dependent children provided under a State plan 
        approved'' and inserting ``a State program funded'';
            (4) in section 6334(a)(11)(A), by striking ``(relating to 
        aid to families with dependent children)''; and
            (5) in section 7523(b)(3)(C), by striking ``aid to families 
        with dependent children'' and inserting ``assistance under a 
        State program funded under part A of title IV of the Social 
        Security Act''.
    (m) Section 3(b) of the Wagner-Peyser Act (29 U.S.C. 49b(b)) is 
amended by striking ``State plan approved under part A of title IV'' 
and inserting ``State program funded under part A of title IV''.
    (n) The Job Training Partnership Act (29 U.S.C. 1501 et seq.) is 
amended--
            (1) in section 4(29)(A)(i) (29 U.S.C. 1503(29)(A)(i)), by 
        striking ``(42 U.S.C. 601 et seq.)'';
            (2) in section 106(b)(6)(C) (29 U.S.C. 1516(b)(6)(C)), by 
        striking ``State aid to families with dependent children 
        records,'' and inserting ``records collected under the State 
        program funded under part A of title IV of the Social Security 
        Act,'';
            (3) in section 121(b)(2) (29 U.S.C. 1531(b)(2))--
                    (A) by striking ``the JOBS program'' and inserting 
                ``the work activities required under title IV of the 
                Social Security Act''; and
                    (B) by striking the second sentence;
            (4) in section 123(c) (29 U.S.C. 1533(c))--
                    (A) in paragraph (1)(E), by repealing clause (vi); 
                and
                    (B) in paragraph (2)(D), by repealing clause (v);
            (5) in section 203(b)(3) (29 U.S.C. 1603(b)(3)), by 
        striking ``, including recipients under the JOBS program'';
            (6) in subparagraphs (A) and (B) of section 204(a)(1) (29 
        U.S.C. 1604(a)(1) (A) and (B)), by striking ``(such as the JOBS 
        program)'' each place it appears;
            (7) in section 205(a) (29 U.S.C. 1605(a)), by striking 
        paragraph (4) and inserting the following:
            ``(4) the portions of title IV of the Social Security Act 
        relating to work activities;'';
            (8) in section 253 (29 U.S.C. 1632)--
                    (A) in subsection (b)(2), by repealing subparagraph 
                (C); and
                    (B) in paragraphs (1)(B) and (2)(B) of subsection 
                (c), by striking ``the JOBS program or'' each place it 
                appears;
            (9) in section 264 (29 U.S.C. 1644)--
                    (A) in subparagraphs (A) and (B) of subsection 
                (b)(1), by striking ``(such as the JOBS program)'' each 
                place it appears; and
                    (B) in subparagraphs (A) and (B) of subsection 
                (d)(3), by striking ``and the JOBS program'' each place 
                it appears;
            (10) in section 265(b) (29 U.S.C. 1645(b)), by striking 
        paragraph (6) and inserting the following:
            ``(6) the portion of title IV of the Social Security Act 
        relating to work activities;'';
            (11) in the second sentence of section 429(e) (29 U.S.C. 
        1699(e)), by striking ``and shall be in an amount that does not 
        exceed the maximum amount that may be provided by the State 
        pursuant to section 402(g)(1)(C) of the Social Security Act (42 
        U.S.C. 602(g)(1)(C))'';
            (12) in section 454(c) (29 U.S.C. 1734(c)), by striking 
        ``JOBS and'';
            (13) in section 455(b) (29 U.S.C. 1735(b)), by striking 
        ``the JOBS program,'';
            (14) in section 501(1) (29 U.S.C. 1791(1)), by striking 
        ``aid to families with dependent children under part A of title 
        IV of the Social Security Act (42 U.S.C. 601 et seq.)'' and 
        inserting ``assistance under the State program funded under 
        part A of title IV of the Social Security Act'';
            (15) in section 506(1)(A) (29 U.S.C. 1791e(1)(A)), by 
        striking ``aid to families with dependent children'' and 
        inserting ``assistance under the State program funded'';
            (16) in section 508(a)(2)(A) (29 U.S.C. 1791g(a)(2)(A)), by 
        striking ``aid to families with dependent children'' and 
        inserting ``assistance under the State program funded''; and
            (17) in section 701(b)(2)(A) (29 U.S.C. 1792(b)(2)(A))--
                    (A) in clause (v), by striking the semicolon and 
                inserting ``; and''; and
                    (B) by striking clause (vi).
    (o) Section 3803(c)(2)(C)(iv) of title 31, United States Code, is 
amended to read as follows:
                            ``(iv) assistance under a State program 
                        funded under part A of title IV of the Social 
                        Security Act''.
    (p) Section 2605(b)(2)(A)(i) of the Low-Income Home Energy 
Assistance Act of 1981 (42 U.S.C. 8624(b)(2)(A)(i)) is amended to read 
as follows:
                            ``(i) assistance under the State program 
                        funded under part A of title IV of the Social 
                        Security Act;''.
    (q) Section 303(f)(2) of the Family Support Act of 1988 (42 U.S.C. 
602 note) is amended--
            (1) by striking ``(A)''; and
            (2) by striking subparagraphs (B) and (C).
    (r) The Balanced Budget and Emergency Deficit Control Act of 1985 
(2 U.S.C. 900 et seq.)) is amended--
            (1) in section 255(h) (2 U.S.C. 905(h), by striking ``Aid 
        to families with dependent children (75-0412-0-1-609);'' and 
        inserting ``Block grants to States for temporary assistance for 
        needy families;''; and
            (2) in section 256 (2 U.S.C. 906)--
                    (A) by striking subsection (k); and
                    (B) by redesignating subsection (l) as subsection 
                (k).
    (s) The Immigration and Nationality Act (8 U.S.C. 1101 et seq.) is 
amended--
            (1) in section 210(f) (8 U.S.C. 1160(f)), by striking ``aid 
        under a State plan approved under'' each place it appears and 
        inserting ``assistance under a State program funded under'';
            (2) in section 245A(h) (8 U.S.C. 1255a(h))--
                    (A) in paragraph (1)(A)(i), by striking ``program 
                of aid to families with dependent children'' and 
                inserting ``State program of assistance''; and
                    (B) in paragraph (2)(B), by striking ``aid to 
                families with dependent children'' and inserting 
                ``assistance under a State program funded under part A 
                of title IV of the Social Security Act''; and
            (3) in section 412(e)(4) (8 U.S.C. 1522(e)(4)), by striking 
        ``State plan approved'' and inserting ``State program funded''.
    (t) Section 640(a)(4)(B)(i) of the Head Start Act (42 U.S.C. 
9835(a)(4)(B)(i)) is amended by striking ``program of aid to families 
with dependent children under a State plan approved'' and inserting 
``State program of assistance funded''.
    (u) Section 9 of the Act of April 19, 1950 (64 Stat. 47, chapter 
92; 25 U.S.C. 639) is repealed.
    (v) Subparagraph (E) of section 213(d)(6) of the School-To-Work 
Opportunities Act of 1994 (20 U.S.C. 6143(d)(6)) is amended to read as 
follows:
                    ``(E) part A of title IV of the Social Security Act 
                (42 U.S.C. 601 et seq.) relating to work activities;''.

SEC. 7214. SECRETARIAL SUBMISSION OF LEGISLATIVE PROPOSAL FOR TECHNICAL 
              AND CONFORMING AMENDMENTS.

    Not later than 90 days after the date of the enactment of this Act, 
the Secretary of Health and Human Services, in consultation, as 
appropriate, with the heads of other Federal agencies, shall submit to 
the appropriate committees of Congress a legislative proposal providing 
for such technical and conforming amendments in the law as are required 
by the provisions of subtitle D of title I of this Act, this subtitle, 
and subtitles D, E, F, and G of this title.

SEC. 7215. EFFECTIVE DATE; TRANSITION RULE.

    (a) In General.--Except as otherwise provided in this subtitle, 
this subtitle and the amendments made by this subtitle shall take 
effect on October 1, 1995.
    (b) Transition Rule.--
            (1) State option to continue afdc program.--
                    (A) 9-month extension.--A State may continue a 
                State program under parts A and F of title IV of the 
                Social Security Act, as in effect on September 30, 1995 
                (for purposes of this paragraph, the ``State AFDC 
                program'') until June 30, 1996.
                    (B) Reduction of fiscal year 1996 grant.--In the 
                case of any State opting to continue the State AFDC 
                program pursuant to subparagraph (A), the State family 
                assistance grant paid to such State under section 
                403(a) of the Social Security Act (as added by section 
                7201 and as in effect on and after October 1, 1995) for 
                fiscal year 1996 (after the termination of the State 
                AFDC program) shall be reduced by an amount equal to 
                the total Federal payment to such State under section 
                403 of the Social Security Act (as in effect on 
                September 30, 1995) for such fiscal year.
            (2) Claims, actions, and proceedings.--The amendments made 
        by this subtitle shall not apply with respect to--
                    (A) powers, duties, functions, rights, claims, 
                penalties, or obligations applicable to aid, 
                assistance, or services provided before the effective 
                date of this subtitle under the provisions amended; and
                    (B) administrative actions and proceedings 
                commenced before such date, or authorized before such 
                date to be commenced, under such provisions.
            (3) Closing out account for those programs terminated or 
        substantially modified by this subtitle.--In closing out 
        accounts, Federal and State officials may use scientifically 
        acceptable statistical sampling techniques. Claims made under 
        programs which are repealed or substantially amended in this 
        subtitle and which involve State expenditures in cases where 
        assistance or services were provided during a prior fiscal 
        year, shall be treated as expenditures during fiscal year 1995 
        for purposes of reimbursement even if payment was made by a 
        State on or after October 1, 1995. States shall complete the 
        filing of all claims no later than September 30, 1997. Federal 
        department heads shall--
                    (A) use the single audit procedure to review and 
                resolve any claims in connection with the close out of 
                programs, and
                    (B) reimburse States for any payments made for 
                assistance or services provided during a prior fiscal 
                year from funds for fiscal year 1995, rather than the 
                funds authorized by this subtitle.
    (c) Sunset.--The amendment made by section 7201(b) shall be 
effective only during the 5-year period beginning on October 1, 1995.

                Subtitle D--Supplemental Security Income

                  CHAPTER 1--ELIGIBILITY RESTRICTIONS

SEC. 7251. DENIAL OF SUPPLEMENTAL SECURITY INCOME BENEFITS BY REASON OF 
              DISABILITY TO DRUG ADDICTS AND ALCOHOLICS.

    (a) In General.--Section 1614(a)(3) (42 U.S.C. 1382c(a)(3)) is 
amended by adding at the end the following:
    ``(I) Notwithstanding subparagraph (A), an individual shall not be 
considered to be disabled for purposes of this title if alcoholism or 
drug addiction would (but for this subparagraph) be a contributing 
factor material to the Commissioner's determination that the individual 
is disabled.''.
    (b) Representative Payee Requirements.--
            (1) Section 1631(a)(2)(A)(ii)(II) (42 U.S.C. 
        1383(a)(2)(A)(ii)(II)) is amended to read as follows:
    ``(II) In the case of an individual eligible for benefits under 
this title by reason of disability, if such individual also has an 
alcoholism or drug addiction condition (as determined by the 
Commissioner of Social Security), the payment of such benefits to a 
representative payee shall be deemed to serve the interest of the 
individual. In any case in which such payment is so deemed under this 
subclause to serve the interest of an individual, the Commissioner 
shall include, in the individual's notification of such eligibility, a 
notice that such alcoholism or drug addiction condition accompanies the 
disability upon which such eligibility is based and that the 
Commissioner is therefore required to pay the individual's benefits to 
a representative payee.''.
            (2) Section 1631(a)(2)(B)(vii) (42 U.S.C. 
        1383(a)(2)(B)(vii)) is amended by striking ``eligible for 
        benefits'' and all that follows through ``is disabled'' and 
        inserting ``described in subparagraph (A)(ii)(II)''.
            (3) Section 1631(a)(2)(B)(ix)(II) (42 U.S.C. 
        1383(a)(2)(B)(ix)(II)) is amended by striking all that follows 
        ``15 years, or'' and inserting ``described in subparagraph 
        (A)(ii)(II)''.
            (4) Section 1631(a)(2)(D)(i)(II) (42 U.S.C. 
        1383(a)(2)(D)(i)(II)) is amended by striking ``eligible for 
        benefits'' and all that follows through ``is disabled'' and 
        inserting ``described in subparagraph (A)(ii)(II)''.
    (c) Treatment Services for Individuals with a Substance Abuse 
Condition.--
            (1) In general.--Title XVI (42 U.S.C. 1381 et seq.) is 
        amended by adding at the end the following new section:

 ``treatment services for individuals with a substance abuse condition

    ``Sec. 1636. (a) In the case of any individual eligible for 
benefits under this title by reason of disability who is identified as 
having a substance abuse condition, the Commissioner of Social Security 
shall make provision for referral of such individual to the appropriate 
State agency administering the State plan for substance abuse treatment 
services approved under subpart II of part B of title XIX of the Public 
Health Service Act (42 U.S.C. 300x-21 et seq.).
    ``(b) No individual described in subsection (a) shall be an 
eligible individual or eligible spouse for purposes of this title if 
such individual refuses without good cause to accept the referred 
services described under subsection (a).
            (2) Conforming amendment.--Section 1614(a)(4) (42 U.S.C. 
        1382c(a)(4)) is amended by inserting after the second sentence 
        the following new sentence: ``For purposes of the preceding 
        sentence, any individual identified by the Commissioner as 
        having a substance abuse condition shall seek and complete 
        appropriate treatment as needed.''.
    (d) Conforming Amendments.--
            (1) Section 1611(e) (42 U.S.C. 1382(e)) is amended by 
        striking paragraph (3).
            (2) Section 1634 (42 U.S.C. 1383c) is amended by striking 
        subsection (e).
            (3) Section 201(c)(1) of the Social Security Independence 
        and Program Improvements Act of 1994 (42 U.S.C. 425 note) is 
        amended--
                    (A) by striking ``--'' and all that follows through 
                ``(A)'' the 1st place it appears;
                    (B) by striking ``and'' the 3rd place it appears;
                    (C) by striking subparagraph (B);
                    (D) by striking ``either subparagraph (A) or 
                subparagraph (B)'' and inserting ``the preceding 
                sentence''; and
                    (E) by striking ``subparagraph (A) or (B)'' and 
                inserting ``the preceding sentence''.
    (e) Supplemental Funding for Alcohol and Substance Abuse Treatment 
Programs.--
            (1) In general.--Out of any money in the Treasury not 
        otherwise appropriated, there are hereby appropriated to 
        supplement State and Tribal programs funded under section 1933 
        of the Public Health Service Act (42 U.S.C. 300x-33), 
        $50,000,000 for each of the fiscal years 1997 and 1998.
            (2) Additional funds.--Amounts appropriated under paragraph 
        (1) shall be in addition to any funds otherwise appropriated 
        for allotments under section 1933 of the Public Health Service 
        Act (42 U.S.C. 300x-33) and shall be allocated pursuant to such 
        section 1933.
            (3) Use of Funds.--A State or Tribal government receiving 
        an allotment under this subsection shall consider as 
        priorities, for purposes of expending funds allotted under this 
        subsection, activities relating to the treatment of the abuse 
        of alcohol and other drugs.

SEC. 7252. DENIAL OF SSI BENEFITS FOR 10 YEARS TO INDIVIDUALS FOUND TO 
              HAVE FRAUDULENTLY MISREPRESENTED RESIDENCE IN ORDER TO 
              OBTAIN BENEFITS SIMULTANEOUSLY IN 2 OR MORE STATES.

    Section 1614(a) (42 U.S.C. 1382c(a)) is amended by adding at the 
end the following new paragraph:
    ``(5) An individual shall not be considered an eligible individual 
for purposes of this title during the 10-year period beginning on the 
date the individual is convicted in Federal or State court of having 
made a fraudulent statement or representation with respect to the place 
of residence of the individual in order to receive assistance 
simultaneously from 2 or more States under programs that are funded 
under part A of title IV, title XXI, or the Food Stamp Act of 1977, or 
benefits in 2 or more States under the supplemental security income 
program under title XVI.''.

SEC. 7253. DENIAL OF SSI BENEFITS FOR FUGITIVE FELONS AND PROBATION AND 
              PAROLE VIOLATORS.

    (a) In General.--Section 1611(e) (42 U.S.C. 1382(e)), as amended by 
section 7251(c)(1), is amended by inserting after paragraph (2) the 
following new paragraph:
    ``(3) A person shall not be an eligible individual or eligible 
spouse for purposes of this title with respect to any month if during 
such month the person is--
            ``(A) fleeing to avoid prosecution, or custody or 
        confinement after conviction, under the laws of the place from 
        which the person flees, for a crime, or an attempt to commit a 
        crime, which is a felony under the laws of the place from which 
        the person flees, or which, in the case of the State of New 
        Jersey, is a high misdemeanor under the laws of such State; or
            ``(B) violating a condition of probation or parole imposed 
        under Federal or State law.''.
    (b) Exchange of Information With Law Enforcement Agencies.--Section 
1631(e) (42 U.S.C. 1383(e)) is amended by inserting after paragraph (3) 
the following new paragraph:
    ``(4) Notwithstanding any other provision of law, the Commissioner 
shall furnish any Federal, State, or local law enforcement officer, 
upon the request of the officer, with the current address, Social 
Security number, and photograph (if applicable) of any recipient of 
benefits under this title, if the officer furnishes the agency with the 
name of the recipient and notifies the agency that--
            ``(A) the recipient--
                    ``(i) is fleeing to avoid prosecution, or custody 
                or confinement after conviction, under the laws of the 
                place from which the person flees, for a crime, or an 
                attempt to commit a crime, which is a felony under the 
                laws of the place from which the person flees, or 
                which, in the case of the State of New Jersey, is a 
                high misdemeanor under the laws of such State;
                    ``(ii) is violating a condition of probation or 
                parole imposed under Federal or State law; or
                    ``(iii) has information that is necessary for the 
                officer to conduct the officer's official duties; and
            ``(B) the location or apprehension of the recipient is 
        within the officer's official duties.''.

SEC. 7254. EFFECTIVE DATES; APPLICATION TO CURRENT RECIPIENTS.

    (a) Section 7251.--
            (1) In general.--Except as provided in paragraphs (2) and 
        (3), the amendments made by section 7251 shall apply to 
        applicants for benefits for months beginning on or after the 
        date of the enactment of this Act, without regard to whether 
        regulations have been issued to implement such amendments.
            (2) Application to current recipients.--
                    (A) Application and notice.--Notwithstanding any 
                other provision of law, in the case of an individual 
                who is receiving supplemental security income benefits 
                under title XVI of the Social Security Act as of the 
                date of the enactment of this Act and whose eligibility 
                for such benefits would terminate by reason of the 
                amendments made by section 7251, such amendments shall 
                apply with respect to the benefits of such individual, 
                including such individual's treatment (if any) provided 
                pursuant to such title as in effect on the day before 
                the date of such enactment, for months beginning on or 
                after January 1, 1997, and the Commissioner of Social 
                Security shall so notify the individual not later than 
                90 days after the date of the enactment of this Act.
                    (B) Reapplication.--
                            (i) In general.--Not later than 120 days 
                        after the date of the enactment of this Act, 
                        each individual notified pursuant to 
                        subparagraph (A) who desires to reapply for 
                        benefits under title XVI of the Social Security 
                        Act, as amended by this title, shall reapply to 
                        the Commissioner of Social Security.
                            (ii) Determination of eligibility.--Not 
                        later than 1 year after the date of the 
                        enactment of this Act, the Commissioner of 
                        Social Security shall determine the eligibility 
                        of each individual who reapplies for benefits 
                        under clause (i) pursuant to the procedures of 
                        such title.
            (3) Additional application of payee representative 
        requirements.--The amendments made by section 7251(b) shall 
        also apply--
                    (A) in the case of any individual who is receiving 
                supplemental security income benefits under title XVI 
                of the Social Security Act as of the date of the 
                enactment of this Act, on and after the date of such 
                individual's first continuing disability review 
                occurring after such date of enactment, and
                    (B) in the case of any individual who receives 
                supplemental security income benefits under title XVI 
                of the Social Security Act and has attained age 65, in 
                such manner as determined appropriate by the 
                Commissioner of Social Security.
    (b) Other Amendments.--The amendments made by sections 7252 and 
7253 shall take effect on the date of the enactment of this Act.

               CHAPTER 2--BENEFITS FOR DISABLED CHILDREN

SEC. 7261. DEFINITION AND ELIGIBILITY RULES.

    (a) Definition of Childhood Disability.--Section 1614(a)(3) (42 
U.S.C. 1382c(a)(3)), as amended by section 7251(a), is amended--
            (1) in subparagraph (A), by striking ``An individual'' and 
        inserting ``Except as provided in subparagraph (C), an 
        individual'';
            (2) in subparagraph (A), by striking ``(or, in the case of 
        an individual under the age of 18, if he suffers from any 
        medically determinable physical or mental impairment of 
        comparable severity)'';
            (3) by redesignating subparagraphs (C) through (I) as 
        subparagraphs (D) through (J), respectively;
            (4) by inserting after subparagraph (B) the following new 
        subparagraph:
    ``(C) An individual under the age of 18 shall be considered 
disabled for the purposes of this title if that individual has a 
medically determinable physical or mental impairment, which results in 
marked and severe functional limitations, and which can be expected to 
result in death or which has lasted or can be expected to last for a 
continuous period of not less than 12 months.''; and
            (5) in subparagraph (F), as redesignated by paragraph (3), 
        by striking ``(D)'' and inserting ``(E)''.
    (b) Changes to Childhood SSI Regulations.--
            (1) Modification to medical criteria for evaluation of 
        mental and emotional disorders.--The Commissioner of Social 
        Security shall modify sections 112.00C.2. and 112.02B.2.c.(2) 
        of appendix 1 to subpart P of part 404 of title 20, Code of 
        Federal Regulations, to eliminate references to maladaptive 
        behavior in the domain of personal/behavorial function.
            (2) Discontinuance of individualized functional 
        assessment.--The Commissioner of Social Security shall 
        discontinue the individualized functional assessment for 
        children set forth in sections 416.924d and 416.924e of title 
        20, Code of Federal Regulations.
    (c) Effective Date; Regulations; Application to Current 
Recipients.--
            (1) In general.--The amendments made by subsections (a) and 
        (b) shall apply to applicants for benefits for months beginning 
        on or after the date of the enactment of this Act, without 
        regard to whether regulations have been issued to implement 
        such amendments.
            (2) Regulations.--The Commissioner of Social Security shall 
        issue such regulations as the Commissioner determines to be 
        necessary to implement the amendments made by subsections (a) 
        and (b) not later than 60 days after the date of the enactment 
        of this Act.
            (3) Application to current recipients.--
                    (A) Eligibility determinations.--Not later than 1 
                year after the date of the enactment of this Act, the 
                Commissioner of Social Security shall redetermine the 
                eligibility of any individual under age 18 who is 
                receiving supplemental security income benefits based 
                on a disability under title XVI of the Social Security 
                Act as of the date of the enactment of this Act and 
                whose eligibility for such benefits may terminate by 
                reason of the amendments made by subsection (a) or (b). 
                With respect to any redetermination under this 
                subparagraph--
                            (i) section 1614(a)(4) of the Social 
                        Security Act (42 U.S.C. 1382c(a)(4)) shall not 
                        apply;
                            (ii) the Commissioner of Social Security 
                        shall apply the eligibility criteria for new 
                        applicants for benefits under title XVI of such 
                        Act;
                            (iii) the Commissioner shall give such 
                        redetermination priority over all continuing 
                        eligibility reviews and other reviews under 
                        such title; and
                            (iv) such redetermination shall be counted 
                        as a review or redetermination otherwise 
                        required to be made under section 208 of the 
                        Social Security Independence and Program 
                        Improvements Act of 1994 or any other provision 
                        of title XVI of the Social Security Act.
                    (B) Grandfather provision.--The amendments made by 
                subsections (a) and (b), and the redetermination under 
                subparagraph (A), shall only apply with respect to the 
                benefits of an individual described in subparagraph (A) 
                for months beginning on or after January 1, 1997.
                    (C) Notice.--Not later than 90 days after the date 
                of the enactment of this Act, the Commissioner of 
                Social Security shall notify an individual described in 
                subparagraph (A) of the provisions of this paragraph.

SEC. 7262. ELIGIBILITY REDETERMINATIONS AND CONTINUING DISABILITY 
              REVIEWS.

    (a) Continuing Disability Reviews Relating to Certain Children.--
Section 1614(a)(3)(H) (42 U.S.C. 1382c(a)(3)(H)), as redesignated by 
section 7261(a)(3), is amended--
            (1) by inserting ``(i)'' after ``(H)''; and
            (2) by adding at the end the following new clause:
    ``(ii)(I) Not less frequently than once every 3 years, the 
Commissioner shall review in accordance with paragraph (4) the 
continued eligibility for benefits under this title of each individual 
who has not attained 18 years of age and is eligible for such benefits 
by reason of an impairment (or combination of impairments) which may 
improve (or, which is unlikely to improve, at the option of the 
Commissioner).
    ``(II) A parent or guardian of a recipient whose case is reviewed 
under this clause shall present, at the time of review, evidence 
demonstrating that the recipient is, and has been, receiving treatment, 
to the extent considered medically necessary and available, of the 
condition which was the basis for providing benefits under this 
title.''.
    (b) Disability Eligibility Redeterminations Required for SSI 
Recipients Who Attain 18 Years of Age.--
            (1) In general.--Section 1614(a)(3)(H) (42 U.S.C. 
        1382c(a)(3)(H)), as amended by subsection (a), is amended by 
        adding at the end the following new clause:
    ``(iii) If an individual is eligible for benefits under this title 
by reason of disability for the month preceding the month in which the 
individual attains the age of 18 years, the Commissioner shall 
redetermine such eligibility--
            ``(I) during the 1-year period beginning on the 
        individual's 18th birthday; and
            ``(II) by applying the criteria used in determining the 
        initial eligibility for applicants who have attained the age of 
        18 years.
With respect to a redetermination under this clause, paragraph (4) 
shall not apply and such redetermination shall be considered a 
substitute for a review or redetermination otherwise required under any 
other provision of this subparagraph during that 1-year period.''.
            (2) Conforming repeal.--Section 207 of the Social Security 
        Independence and Program Improvements Act of 1994 (42 U.S.C. 
        1382 note; 108 Stat. 1516) is hereby repealed.
    (c) Continuing Disability Review Required for Low Birth Weight 
Babies.--Section 1614(a)(3)(H) (42 U.S.C. 1382c(a)(3)(H)), as amended 
by subsections (a) and (b), is amended by adding at the end the 
following new clause:
    ``(iv)(I) Not later than 12 months after the birth of an 
individual, the Commissioner shall review in accordance with paragraph 
(4) the continuing eligibility for benefits under this title by reason 
of disability of such individual whose low birth weight is a 
contributing factor material to the Commissioner's determination that 
the individual is disabled.
    ``(II) A review under subclause (I) shall be considered a 
substitute for a review otherwise required under any other provision of 
this subparagraph during that 12-month period.
    ``(III) A parent or guardian of a recipient whose case is reviewed 
under this clause shall present, at the time of review, evidence 
demonstrating that the recipient is, and has been, receiving treatment, 
to the extent considered medically necessary and available, of the 
condition which was the basis for providing benefits under this 
title.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to benefits for months beginning on or after the date of the 
enactment of this Act, without regard to whether regulations have been 
issued to implement such amendments.

SEC. 7263. ADDITIONAL ACCOUNTABILITY REQUIREMENTS.

    (a) Tightening of Representative Payee Requirements.--
            (1) Clarification of role.--Section 1631(a)(2)(B)(ii) (42 
        U.S.C. 1383(a)(2)(B)(ii)) is amended by striking ``and'' at the 
        end of subclause (II), by striking the period at the end of 
        subclause (IV) and inserting ``; and'', and by adding after 
        subclause (IV) the following new subclause:
            ``(V) advise such person through the notice of award of 
        benefits, and at such other times as the Commissioner of Social 
        Security deems appropriate, of specific examples of appropriate 
        expenditures of benefits under this title and the proper role 
        of a representative payee.''.
            (2) Documentation of expenditures required.--
                    (A) In general.--Subparagraph (C)(i) of section 
                1631(a)(2) (42 U.S.C. 1383(a)(2)) is amended to read as 
                follows:
    ``(C)(i) In any case where payment is made to a representative 
payee of an individual or spouse, the Commissioner of Social Security 
shall--
            ``(I) require such representative payee to document 
        expenditures and keep contemporaneous records of transactions 
        made using such payment; and
            ``(II) implement statistically valid procedures for 
        reviewing a sample of such contemporaneous records in order to 
        identify instances in which such representative payee is not 
        properly using such payment.''.
                    (B) Conforming amendment with respect to parent 
                payees.--Clause (ii) of section 1631(a)(2)(C) (42 
                U.S.C. 1383(a)(2)(C)) is amended by striking ``Clause 
                (i)'' and inserting ``Subclauses (II) and (III) of 
                clause (i)''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to benefits paid after the date of the enactment of 
        this Act.
    (b) Dedicated Savings Accounts.--
            (1) In general.--Section 1631(a)(2)(B) (42 U.S.C. 
        1383(a)(2)(B)) is amended by adding at the end the following 
        new clause:
    ``(xiv) Notwithstanding clause (x), the Commissioner of Social 
Security may, at the request of the representative payee, pay any lump 
sum payment for the benefit of a child into a dedicated savings account 
that could only be used to purchase for such child--
            ``(I) education and job skills training;
            ``(II) special equipment or housing modifications or both 
        specifically related to, and required by the nature of, the 
        child's disability; and
            ``(III) appropriate therapy and rehabilitation.''.
            (2) Disregard of trust funds.--Section 1613(a) (42 U.S.C. 
        1382b) is amended--
                    (A) by striking ``and'' at the end of paragraph 
                (9),
                    (B) by striking the period at the end of paragraph 
                (10) the first place it appears and inserting a 
                semicolon,
                    (C) by redesignating paragraph (10) the second 
                place it appears as paragraph (11) and striking the 
                period at the end of such paragraph and inserting ``; 
                and'', and
                    (D) by inserting after paragraph (11), as so 
                redesignated, the following new paragraph:
            ``(12) all amounts deposited in, or interest credited to, a 
        dedicated savings account described in section 
        1631(a)(2)(B)(xiv).''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to payments made after the date of the enactment of 
        this Act.

   CHAPTER 3--STUDIES REGARDING SUPPLEMENTAL SECURITY INCOME PROGRAM

SEC. 7271. ANNUAL REPORT ON THE SUPPLEMENTAL SECURITY INCOME PROGRAM.

    Title XVI is amended by adding at the end the following new 
section:

``SEC. 1636. ANNUAL REPORT ON PROGRAM.

    ``(a) Description of Report.--Not later than May 30 of each year, 
the Commissioner of Social Security shall prepare and deliver a report 
annually to the President and the Congress regarding the program under 
this title, including--
            ``(1) a comprehensive description of the program;
            ``(2) historical and current data on allowances and 
        denials, including number of applications and allowance rates 
        at initial determinations, reconsiderations, administrative law 
        judge hearings, council of appeals hearings, and Federal court 
        appeal hearings;
            ``(3) historical and current data on characteristics of 
        recipients and program costs, by recipient group (aged, blind, 
        work disabled adults, and children);
            ``(4) projections of future number of recipients and 
        program costs, through at least 25 years;
            ``(5) number of redeterminations and continuing disability 
        reviews, and the outcomes of such redeterminations and reviews;
            ``(6) data on the utilization of work incentives;
            ``(7) detailed information on administrative and other 
        program operation costs;
            ``(8) summaries of relevant research undertaken by the 
        Social Security Administration, or by other researchers;
            ``(9) State supplementation program operations;
            ``(10) a historical summary of statutory changes to this 
        title; and
            ``(11) such other information as the Commissioner deems 
        useful.
    ``(b) Views of Members of the Social Security Advisory Council.--
Each member of the Social Security Advisory Council shall be permitted 
to provide an individual report, or a joint report if agreed, of views 
of the program under this title, to be included in the annual report 
under this section.''.

SEC. 7272. IMPROVEMENTS TO DISABILITY EVALUATION.

    (a) Request for Comments.--
            (1) In general.--Not later than 60 days after the date of 
        the enactment of this Act, the Commissioner of Social Security 
        shall issue a request for comments in the Federal Register 
        regarding improvements to the disability evaluation and 
        determination procedures for individuals under age 18 to ensure 
        the comprehensive assessment of such individuals, including--
                    (A) additions to conditions which should be 
                presumptively disabling at birth or ages 0 through 3 
                years;
                    (B) specific changes in individual listings in the 
                Listing of Impairments set forth in appendix 1 of 
                subpart P of part 404 of title 20, Code of Federal 
                Regulations;
                    (C) improvements in regulations regarding 
                determinations based on regulations providing for 
                medical and functional equivalence to such Listing of 
                Impairments, and consideration of multiple impairments; 
                and
                    (D) any other changes to the disability 
                determination procedures.
            (2) Review and regulatory action.--The Commissioner of 
        Social Security shall promptly review such comments and issue 
        any regulations implementing any necessary changes not later 
        than 18 months after the date of the enactment of this Act.

SEC. 7273. STUDY OF DISABILITY DETERMINATION PROCESS.

    (a) In General.--Not later than 90 days after the date of the 
enactment of this Act, and from funds otherwise appropriated, the 
Commissioner of Social Security shall make arrangements with the 
National Academy of Sciences, or other independent entity, to conduct a 
study of the disability determination process under titles II and XVI 
of the Social Security Act. This study shall be undertaken in 
consultation with professionals representing appropriate disciplines.
    (b) Study Components.--The study described in subsection (a) shall 
include--
            (1) an initial phase examining the appropriateness of, and 
        making recommendations regarding--
                    (A) the definitions of disability in effect on the 
                date of the enactment of this Act and the advantages 
                and disadvantages of alternative definitions; and
                    (B) the operation of the disability determination 
                process, including the appropriate method of performing 
                comprehensive assessments of individuals under age 18 
                with physical and mental impairments;
            (2) a second phase, which may be concurrent with the 
        initial phase, examining the validity, reliability, and 
        consistency with current scientific knowledge of the standards 
        and individual listings in the Listing of Impairments set forth 
        in appendix 1 of subpart P of part 404 of title 20, Code of 
        Federal Regulations, and of related evaluation procedures as 
        promulgated by the Commissioner of Social Security; and
            (3) such other issues as the applicable entity considers 
        appropriate.
    (c) Reports and Regulations.--
            (1) Reports.--The Commissioner of Social Security shall 
        request the applicable entity, to submit an interim report and 
        a final report of the findings and recommendations resulting 
        from the study described in this section to the President and 
        the Congress not later than 18 months and 24 months, 
        respectively, from the date of the contract for such study, and 
        such additional reports as the Commissioner deems appropriate 
        after consultation with the applicable entity.
            (2) Regulations.--The Commissioner of Social Security shall 
        review both the interim and final reports, and shall issue 
        regulations implementing any necessary changes following each 
        report.

SEC. 7274. STUDY BY GENERAL ACCOUNTING OFFICE.

    Not later than January 1, 1998, the Comptroller General of the 
United States shall study and report on the impact of the amendments 
made by, and the provisions of, this title on the supplemental security 
income program under title XVI of the Social Security Act.

       CHAPTER 4--NATIONAL COMMISSION ON THE FUTURE OF DISABILITY

SEC. 7281. ESTABLISHMENT.

    There is established a commission to be known as the National 
Commission on the Future of Disability (referred to in this subtitle as 
the ``Commission''), the expenses of which shall be paid from funds 
otherwise appropriated for the Social Security Administration.

SEC. 7282. DUTIES OF THE COMMISSION.

    (a) In General.--The Commission shall develop and carry out a 
comprehensive study of all matters related to the nature, purpose, and 
adequacy of all Federal programs serving individuals with disabilities. 
In particular, the Commission shall study the disability insurance 
program under title II of the Social Security Act and the supplemental 
security income program under title XVI of such Act.
    (b) Matters Studied.--The Commission shall prepare an inventory of 
Federal programs serving individuals with disabilities, and shall 
examine--
            (1) trends and projections regarding the size and 
        characteristics of the population of individuals with 
        disabilities, and the implications of such analyses for program 
        planning;
            (2) the feasibility and design of performance standards for 
        the Nation's disability programs;
            (3) the adequacy of Federal efforts in rehabilitation 
        research and training, and opportunities to improve the lives 
        of individuals with disabilities through all manners of 
        scientific and engineering research; and
            (4) the adequacy of policy research available to the 
        Federal Government, and what actions might be undertaken to 
        improve the quality and scope of such research.
    (c) Recommendations.--The Commission shall submit to the 
appropriate committees of the Congress and to the President 
recommendations and, as appropriate, proposals for legislation, 
regarding--
            (1) which (if any) Federal disability programs should be 
        eliminated or augmented;
            (2) what new Federal disability programs (if any) should be 
        established;
            (3) the suitability of the organization and location of 
        disability programs within the Federal Government;
            (4) other actions the Federal Government should take to 
        prevent disabilities and disadvantages associated with 
        disabilities; and
            (5) such other matters as the Commission considers 
        appropriate.

SEC. 7283. MEMBERSHIP.

    (a) Number and Appointment.--
            (1) In general.--The Commission shall be composed of 15 
        members, of whom--
                    (A) five shall be appointed by the President, of 
                whom not more than 3 shall be of the same major 
                political party;
                    (B) three shall be appointed by the Majority Leader 
                of the Senate;
                    (C) two shall be appointed by the Minority Leader 
                of the Senate;
                    (D) three shall be appointed by the Speaker of the 
                House of Representatives; and
                    (E) two shall be appointed by the Minority Leader 
                of the House of Representatives.
            (2) Representation.--The Commission members shall be chosen 
        based on their education, training, or experience. In 
        appointing individuals as members of the Commission, the 
        President and the Majority and Minority Leaders of the Senate 
        and the Speaker and Minority Leader of the House of 
        Representatives shall seek to ensure that the membership of the 
        Commission reflects the diversity of individuals with 
        disabilities in the United States.
    (b) Comptroller General.--The Comptroller General shall serve on 
the Commission as an ex officio member of the Commission to advise and 
oversee the methodology and approach of the study of the Commission.
    (c) Prohibition Against Officer or Employee.--No officer or 
employee of any government shall be appointed under subsection (a).
    (d) Deadline for Appointment; Term of Appointment.--Members of the 
Commission shall be appointed not later than 60 days after the date of 
the enactment of this Act. The members shall serve on the Commission 
for the life of the Commission.
    (e) Meetings.--The Commission shall locate its headquarters in the 
District of Columbia, and shall meet at the call of the Chairperson, 
but not less than 4 times each year during the life of the Commission.
    (f) Quorum.--Ten members of the Commission shall constitute a 
quorum, but a lesser number may hold hearings.
    (g) Chairperson and Vice Chairperson.--Not later than 15 days after 
the members of the Commission are appointed, such members shall 
designate a Chairperson and Vice Chairperson from among the members of 
the Commission.
    (h) Continuation of Membership.--If a member of the Commission 
becomes an officer or employee of any government after appointment to 
the Commission, the individual may continue as a member until a 
successor member is appointed.
    (i) Vacancies.--A vacancy on the Commission shall be filled in the 
manner in which the original appointment was made not later than 30 
days after the Commission is given notice of the vacancy.
    (j) Compensation.--Members of the Commission shall receive no 
additional pay, allowances, or benefits by reason of their service on 
the Commission.
    (k) Travel Expenses.--Each member of the Commission shall receive 
travel expenses, including per diem in lieu of subsistence, in 
accordance with sections 5702 and 5703 of title 5, United States Code.

SEC. 7284. STAFF AND SUPPORT SERVICES.

    (a) Director.--
            (1) Appointment.--Upon consultation with the members of the 
        Commission, the Chairperson shall appoint a Director of the 
        Commission.
            (2) Compensation.--The Director shall be paid the rate of 
        basic pay for level V of the Executive Schedule.
    (b) Staff.--With the approval of the Commission, the Director may 
appoint such personnel as the Director considers appropriate.
    (c) Applicability of Civil Service Laws.--The staff of the 
Commission shall be appointed without regard to the provisions of title 
5, United States Code, governing appointments in the competitive 
service, and shall be paid without regard to the provisions of chapter 
51 and subchapter III of chapter 53 of such title relating to 
classification and General Schedule pay rates.
    (d) Experts and Consultants.--With the approval of the Commission, 
the Director may procure temporary and intermittent services under 
section 3109(b) of title 5, United States Code.
    (e) Staff of Federal Agencies.--Upon the request of the Commission, 
the head of any Federal agency may detail, on a reimbursable basis, any 
of the personnel of such agency to the Commission to assist in carrying 
out the duties of the Commission under this subtitle.
    (f) Other Resources.--The Commission shall have reasonable access 
to materials, resources, statistical data, and other information from 
the Library of Congress and agencies and elected representatives of the 
executive and legislative branches of the Federal Government. The 
Chairperson of the Commission shall make requests for such access in 
writing when necessary.
    (g) Physical Facilities.--The Administrator of the General Services 
Administration shall locate suitable office space for the operation of 
the Commission. The facilities shall serve as the headquarters of the 
Commission and shall include all necessary equipment and incidentals 
required for proper functioning of the Commission.

SEC. 7285. POWERS OF COMMISSION.

    (a) Hearings.--The Commission may conduct public hearings or forums 
at the discretion of the Commission, at any time and place the 
Commission is able to secure facilities and witnesses, for the purpose 
of carrying out the duties of the Commission under this subtitle.
    (b) Delegation of Authority.--Any member or agent of the Commission 
may, if authorized by the Commission, take any action the Commission is 
authorized to take by this section.
    (c) Information.--The Commission may secure directly from any 
Federal agency information necessary to enable the Commission to carry 
out its duties under this subtitle. Upon request of the Chairperson or 
Vice Chairperson of the Commission, the head of a Federal agency shall 
furnish the information to the Commission to the extent permitted by 
law.
    (d) Gifts, Bequests, and Devises.--The Commission may accept, use, 
and dispose of gifts, bequests, or devises of services or property, 
both real and personal, for the purpose of aiding or facilitating the 
work of the Commission. Gifts, bequests, or devises of money and 
proceeds from sales of other property received as gifts, bequests, or 
devises shall be deposited in the Treasury and shall be available for 
disbursement upon order of the Commission.
    (e) Mails.--The Commission may use the United States mails in the 
same manner and under the same conditions as other Federal agencies.

SEC. 7286. REPORTS.

    (a) Interim Report.--Not later than 1 year prior to the date on 
which the Commission terminates pursuant to section 7287, the 
Commission shall submit an interim report to the President and to the 
Congress. The interim report shall contain a detailed statement of the 
findings and conclusions of the Commission, together with the 
Commission's recommendations for legislative and administrative action, 
based on the activities of the Commission.
    (b) Final Report.--Not later than the date on which the Commission 
terminates, the Commission shall submit to the Congress and to the 
President a final report containing--
            (1) a detailed statement of final findings, conclusions, 
        and recommendations; and
            (2) an assessment of the extent to which recommendations of 
        the Commission included in the interim report under subsection 
        (a) have been implemented.
    (c) Printing and Public Distribution.--Upon receipt of each report 
of the Commission under this section, the President shall--
            (1) order the report to be printed; and
            (2) make the report available to the public upon request.

SEC. 7287. TERMINATION.

    The Commission shall terminate on the date that is 2 years after 
the date on which the members of the Commission have met and designated 
a Chairperson and Vice Chairperson.

                       Subtitle E--Child Support

     CHAPTER 1--ELIGIBILITY FOR SERVICES; DISTRIBUTION OF PAYMENTS

SEC. 7301. STATE OBLIGATION TO PROVIDE CHILD SUPPORT ENFORCEMENT 
              SERVICES.

    (a) State Plan Requirements.--Section 454 (42 U.S.C. 654) is 
amended--
            (1) by striking paragraph (4) and inserting the following 
        new paragraph:
            ``(4) provide that the State will--
                    ``(A) provide services relating to the 
                establishment of paternity or the establishment, 
                modification, or enforcement of child support 
                obligations, as appropriate, under the plan with 
                respect to--
                            ``(i) each child for whom (I) assistance is 
                        provided under the State program funded under 
                        part A of this title, (II) benefits or services 
                        are provided under the State program funded 
                        under part E of this title, or (III) medical 
                        assistance is provided under the State plan 
                        approved under title XXI, unless the State 
                        agency administering the plan determines (in 
                        accordance with paragraph (29)) that it is 
                        against the best interests of the child to do 
                        so; and
                            ``(ii) any other child, if an individual 
                        applies for such services with respect to the 
                        child; and
                    ``(B) enforce any support obligation established 
                with respect to--
                            ``(i) a child with respect to whom the 
                        State provides services under the plan; or
                            ``(ii) the custodial parent of such a 
                        child.''; and
            (2) by striking paragraph (6) and inserting the following 
        new subparagraph:
            ``(6) provide that--
                    ``(A) services under the plan shall be made 
                available to nonresidents on the same terms as to 
                residents; and
                    ``(B) application and collection fees are imposed 
                and collected and costs in excess of such fees are 
                collected in accordance with section 454C with respect 
                to services under the plan for--
                            ``(i) any individual not receiving 
                        assistance under any State program funded under 
                        part A; or
                            ``(ii) any individual receiving such 
                        assistance but solely through a program funded 
                        under section 418);''.
    (b) Continuation of Services for Families Ceasing To Receive 
Assistance Under the State Program Funded Under Part A.--Section 454 
(42 U.S.C. 654) is amended--
            (1) by striking ``and'' at the end of paragraph (23);
            (2) by striking the period at the end of paragraph (24) and 
        inserting ``; and''; and
            (3) by adding after paragraph (24) the following new 
        paragraph:
            ``(25) provide that when a family with respect to which 
        services are provided under the plan ceases to receive 
        assistance under the State program funded under part A, the 
        State shall provide appropriate notice to the family and 
        continue to provide such services, subject to the same 
        conditions and on the same basis as in the case of individuals 
        to whom services are furnished under this section, except that 
        an application or other request to continue services shall not 
        be required of such a family and certain fees shall be imposed 
        with respect to such family under section 454C(a)(1).''.
    (c) Conforming Amendments.--
            (1) Section 452(b) (42 U.S.C. 652(b)) is amended by 
        striking ``454(6)'' and inserting ``454(4)''.
            (2) Section 452(g)(2)(A) (42 U.S.C. 652(g)(2)(A)) is 
        amended by striking ``454(6)'' each place it appears and 
        inserting ``454(4)(A)(ii)''.
            (3) Section 466(a)(3)(B) (42 U.S.C. 666(a)(3)(B)) is 
        amended by striking ``in the case of overdue support which a 
        State has agreed to collect under section 454(6)'' and 
        inserting ``in any other case''.
            (4) Section 466(e) (42 U.S.C. 666(e)) is amended by 
        striking ``paragraph (4) or (6) of section 454'' and inserting 
        ``section 454(4)''.

SEC. 7302. DISTRIBUTION OF CHILD SUPPORT COLLECTIONS.

    (a) In General.--Section 457 (42 U.S.C. 657) is amended to read as 
follows:

``SEC. 457. DISTRIBUTION OF COLLECTED SUPPORT.

    ``(a) In General.--An amount collected on behalf of a family as 
support by a State pursuant to a plan approved under this part shall be 
distributed as follows:
            ``(1) Families receiving assistance.--In the case of a 
        family receiving assistance from the State, the State shall--
                    ``(A) retain, or distribute to the family, the 
                State share of the amount so collected; and
                    ``(B) pay to the Federal Government the Federal 
                share of the amount so collected.
            ``(2) Families that formerly received assistance.--In the 
        case of a family that formerly received assistance from the 
        State:
                    ``(A) Current support payments.--The State shall, 
                with regard to amounts collected which represent 
                amounts owed for the current month, distribute the 
                amounts so collected to the family.
                    ``(B) Payment of arrearages.--The State shall, with 
                regard to amounts collected which exceed amounts owed 
                for the current month, distribute the amounts so 
                collected as follows:
                            ``(i) Distribution to the family to satisfy 
                        arrearages that accrued after the family 
                        received assistance.--The State shall 
                        distribute the amount so collected to the 
                        family to the extent necessary to satisfy any 
                        support arrearages with respect to the family 
                        that accrued after the family stopped receiving 
                        assistance from the State.
                            ``(ii) Distribution to the family to 
                        satisfy arrearages that accrued before or while 
                        the family received assistance to the extent 
                        payments exceed assistance received.--In the 
                        case of arrearages of support obligations with 
                        respect to the family that were assigned to the 
                        State making or receiving the collection, as a 
                        condition of receiving assistance from the 
                        State, and which accrued before or while the 
                        family received such assistance, the State may 
                        retain all or a part of the State share and if 
                        the State does so retain, shall retain and pay 
                        to the Federal Government the Federal share of 
                        amounts so collected, to the extent the amount 
                        so retained does not exceed the amount of 
                        assistance provided to the family by the State.
                            ``(iii) Distribution of the remainder to 
                        the family.--To the extent that neither clause 
                        (i) nor clause (ii) applies to the amount so 
                        collected, the State shall distribute the 
                        amount to the family.
            ``(3) Families that never received assistance.--In the case 
        of any other family, the State shall distribute the amount so 
        collected to the family.
            ``(4) Families under certain agreements.--In the case of a 
        family receiving assistance from an Indian tribe, distribute 
        the amount so collected pursuant to an agreement entered into 
        pursuant to a State plan under section 454(32).
    ``(b) Transition Rule.--Any rights to support obligations which 
were assigned to a State as a condition of receiving assistance from 
the State under part A before the effective date of the Balanced Budget 
Reconciliation Act of 1995 shall remain assigned after such date.
    ``(c) Definitions.--As used in subsection (a):
            ``(1) Assistance.--The term `assistance from the State' 
        means--
                    ``(A) assistance under the State program funded 
                under part A or under the State plan approved under 
                part A of this title (as in effect before October 1, 
                1995); or
                    ``(B) benefits under the State plan approved under 
                part E of this title.
            ``(2) Federal share.--The term `Federal share' means, with 
        respect to an amount collected by the State to satisfy a 
        support obligation owed to a family for a time period--
                    ``(A) the greatest Federal medical assistance 
                percentage in effect for the State for fiscal year 1995 
                or any succeeding fiscal year; or
                    ``(B) if support is not owed to the family for any 
                month for which the family received aid to families 
                with dependent children under the State plan approved 
                under part A of this title (as in effect before October 
                1, 1995), the Federal reimbursement percentage for the 
                fiscal year in which the time period occurs.
            ``(3) Federal medical assistance percentage.--The term 
        `Federal medical assistance percentage' means--
                    ``(A) the Federal medical assistance percentage (as 
                defined in section 2122(c)) in the case of any State 
                for which subparagraph (B) does not apply; or
                    ``(B) the Federal medical assistance percentage (as 
                defined in section 1118), in the case of Puerto Rico, 
                the Virgin Islands, Guam, and American Samoa.
            ``(4) Federal reimbursement percentage.--The term `Federal 
        reimbursement percentage' means, with respect to a fiscal 
        year--
                    ``(A) the total amount paid to the State under 
                section 403 for the fiscal year; divided by
                    ``(B) the total amount expended by the State to 
                carry out the State program under part A during the 
                fiscal year.
            ``(5) State share.--The term `State share' means 100 
        percent minus the Federal share.''.
    (b) Conforming Amendment.--Section 464(a)(1) (42 U.S.C. 664(a)(1)) 
is amended by striking ``section 457(b)(4) or (d)(3)'' and inserting 
``section 457''.
    (c) Clerical Amendments.--Section 454 (42 U.S.C. 654) is amended--
            (1) in paragraph (11)--
                    (A) by striking ``(11)'' and inserting ``(11)(A)''; 
                and
                    (B) by inserting after the semicolon ``and''; and
            (2) by redesignating paragraph (12) as subparagraph (B) of 
        paragraph (11).
    (d) Effective Date.--
            (1) General rule.--Except as provided in paragraphs (2) and 
        (3), the amendment made by subsection (a) shall become 
        effective on October 1, 1999.
            (2) Earlier effective date for rules relating to 
        distribution of support collected for families receiving 
        assistance.--Section 457(a)(1) of the Social Security Act, as 
        added by the amendment made by subsection (a), shall become 
        effective on October 1, 1995.
            (3) Special rule.--A State may elect to have the amendment 
        made by subsection (a) become effective on a date earlier than 
        October 1, 1999, which date shall coincide with the operation 
        of the single statewide automated data processing and 
        information retrieval system required by section 454A of the 
        Social Security Act (as added by section 7344(a)(2)) and the 
        State disbursement unit required by section 454B of the Social 
        Security Act (as added by section 7312(b)), and the existence 
        of State requirements for assignment of support as a condition 
        of eligibility for assistance under part A of the Social 
        Security Act (as added by subtitle C).
            (4) Clerical amendments.--The amendments made by subsection 
        (b) shall become effective on October 1, 1995.

SEC. 7303. RIGHTS TO NOTIFICATION AND HEARINGS.

    (a) In General.--Section 454 (42 U.S.C. 654), as amended by section 
7302(b), is amended by inserting after paragraph (11) the following new 
paragraph:
            ``(12) establish procedures to provide that--
                    ``(A) individuals who are applying for or receiving 
                services under this part, or are parties to cases in 
                which services are being provided under this part--
                            ``(i) receive notice of all proceedings in 
                        which support obligations might be established 
                        or modified; and
                            ``(ii) receive a copy of any order 
                        establishing or modifying a child support 
                        obligation, or (in the case of a petition for 
                        modification) a notice of determination that 
                        there should be no change in the amount of the 
                        child support award, within 14 days after 
                        issuance of such order or determination; and
                    ``(B) individuals applying for or receiving 
                services under this part have access to a fair hearing 
                or other formal complaint procedure that meets 
                standards established by the Secretary and ensures 
                prompt consideration and resolution of complaints (but 
                the resort to such procedure shall not stay the 
                enforcement of any support order);''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
become effective on October 1, 1997.

SEC. 7304. PRIVACY SAFEGUARDS.

    (a) State Plan Requirement.--Section 454 (42 U.S.C. 654), as 
amended by section 7301(b), is amended--
            (1) by striking ``and'' at the end of paragraph (24);
            (2) by striking the period at the end of paragraph (25) and 
        inserting ``; and''; and
            (3) by adding after paragraph (25) the following new 
        paragraph:
            ``(26) will have in effect safeguards, applicable to all 
        confidential information handled by the State agency, that are 
        designed to protect the privacy rights of the parties, 
        including--
                    ``(A) safeguards against unauthorized use or 
                disclosure of information relating to proceedings or 
                actions to establish paternity, or to establish or 
                enforce support;
                    ``(B) prohibitions against the release of 
                information on the whereabouts of 1 party to another 
                party against whom a protective order with respect to 
                the former party has been entered; and
                    ``(C) prohibitions against the release of 
                information on the whereabouts of 1 party to another 
                party if the State has reason to believe that the 
                release of the information may result in physical or 
                emotional harm to the former party.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
become effective on October 1, 1997.

                  CHAPTER 2--LOCATE AND CASE TRACKING

SEC. 7311. STATE CASE REGISTRY.

    Section 454A, as added by section 7344(a)(2), is amended by adding 
at the end the following new subsections:
    ``(e) State Case Registry.--
            ``(1) Contents.--The automated system required by this 
        section shall include a registry (which shall be known as the 
        `State case registry') that contains records with respect to--
                    ``(A) each case in which services are being 
                provided by the State agency under the State plan 
                approved under this part; and
                    ``(B) each support order established or modified in 
                the State on or after October 1, 1998.
            ``(2) Linking of local registries.--The State case registry 
        may be established by linking local case registries of support 
        orders through an automated information network, subject to 
        this section.
            ``(3) Use of standardized data elements.--Such records 
        shall use standardized data elements for both parents (such as 
        names, social security numbers and other uniform identification 
        numbers, dates of birth, and case identification numbers), and 
        contain such other information (such as on-case status) as the 
        Secretary may require.
            ``(4) Payment records.--Each case record in the State case 
        registry with respect to which services are being provided 
        under the State plan approved under this part and with respect 
        to which a support order has been established shall include a 
        record of--
                    ``(A) the amount of monthly (or other periodic) 
                support owed under the order, and other amounts 
                (including arrearages, interest or late payment 
                penalties, and fees) due or overdue under the order;
                    ``(B) any amount described in subparagraph (A) that 
                has been collected;
                    ``(C) the distribution of such collected amounts;
                    ``(D) the birth date of any child for whom the 
                order requires the provision of support; and
                    ``(E) the amount of any lien imposed with respect 
                to the order pursuant to section 466(a)(4).
            ``(5) Updating and monitoring.--The State agency operating 
        the automated system required by this section shall promptly 
        establish and maintain, and regularly monitor, case records in 
        the State case registry with respect to which services are 
        being provided under the State plan approved under this part, 
        on the basis of--
                    ``(A) information on administrative actions and 
                administrative and judicial proceedings and orders 
                relating to paternity and support;
                    ``(B) information obtained from comparison with 
                Federal, State, or local sources of information;
                    ``(C) information on support collections and 
                distributions; and
                    ``(D) any other relevant information.
    ``(f) Information Comparisons and Other Disclosures of 
Information.--The State shall use the automated system required by this 
section to extract information from (at such times, and in such 
standardized format or formats, as may be required by the Secretary), 
to share and compare information with, and to receive information from, 
other data bases and information comparison services, in order to 
obtain (or provide) information necessary to enable the State agency 
(or the Secretary or other State or Federal agencies) to carry out this 
part, subject to section 6103 of the Internal Revenue Code of 1986. 
Such information comparison activities shall include the following:
            ``(1) Federal case registry of child support orders.--
        Furnishing to the Federal Case Registry of Child Support Orders 
        established under section 453(h) (and update as necessary, with 
        information including notice of expiration of orders) the 
        minimum amount of information on child support cases recorded 
        in the State case registry that is necessary to operate the 
        registry (as specified by the Secretary in regulations).
            ``(2) Federal parent locator service.--Exchanging 
        information with the Federal Parent Locator Service for the 
        purposes specified in section 453.
            ``(3) Temporary family assistance and medicaid agencies.--
        Exchanging information with State agencies (of the State and of 
        other States) administering programs funded under part A, 
        programs operated under State plans under title XXI, and other 
        programs designated by the Secretary, as necessary to perform 
        State agency responsibilities under this part and under such 
        programs.
            ``(4) Intrastate and interstate information comparisons.--
        Exchanging information with other agencies of the State, 
        agencies of other States, and interstate information networks, 
        as necessary and appropriate to carry out (or assist other 
        States to carry out) the purposes of this part.''.

SEC. 7312. COLLECTION AND DISBURSEMENT OF SUPPORT PAYMENTS.

    (a) State Plan Requirement.--Section 454 (42 U.S.C. 654), as 
amended by sections 7301(b) and 7304(a), is amended--
            (1) by striking ``and'' at the end of paragraph (25);
            (2) by striking the period at the end of paragraph (26) and 
        inserting ``; and''; and
            (3) by adding after paragraph (26) the following new 
        paragraph:
            ``(27) provide that, on and after October 1, 1998, the 
        State agency will--
                    ``(A) operate a State disbursement unit in 
                accordance with section 454B; and
                    ``(B) have sufficient State staff (consisting of 
                State employees), and (at State option) private or 
                governmental contractors reporting directly to the 
                State agency, to--
                            ``(i) provide automated monitoring and 
                        enforcement of support collections through the 
                        unit (including carrying out the automated data 
                        processing responsibilities described in 
                        section 454A(g)); and
                            ``(ii) take the actions described in 
                        section 466(c)(1) in appropriate cases.''.
    (b) Establishment of State Disbursement Unit.--Part D of title IV 
(42 U.S.C. 651-669), as amended by section 7344(a)(2), is amended by 
inserting after section 454A the following new section:

``SEC. 454B. COLLECTION AND DISBURSEMENT OF SUPPORT PAYMENTS.

    ``(a) State Disbursement Unit.--
            ``(1) In general.--In order for a State to meet the 
        requirements of this section, the State agency must establish 
        and operate a unit (which shall be known as the `State 
        disbursement unit') for the collection and disbursement of 
        payments under support orders in all cases being enforced by 
        the State pursuant to section 454(4).
            ``(2) Operation.--The State disbursement unit shall be 
        operated--
                    ``(A) directly by the State agency (or 2 or more 
                State agencies under a regional cooperative agreement), 
                or (to the extent appropriate) by a contractor 
                responsible directly to the State agency; and
                    ``(B) in coordination with the automated system 
                established by the State pursuant to section 454A.
            ``(3) Linking of local disbursement units.--The State 
        disbursement unit may be established by linking local 
        disbursement units through an automated information network, 
        subject to this section. The Secretary must agree that the 
        system will not cost more nor take more time to establish or 
        operate than a centralized system. In addition, employers shall 
        be given 1 location to which income withholding is sent.
    ``(b) Required Procedures.--The State disbursement unit shall use 
automated procedures, electronic processes, and computer-driven 
technology to the maximum extent feasible, efficient, and economical, 
for the collection and disbursement of support payments, including 
procedures--
            ``(1) for receipt of payments from parents, employers, and 
        other States, and for disbursements to custodial parents and 
        other obligees, the State agency, and the agencies of other 
        States;
            ``(2) for accurate identification of payments;
            ``(3) to ensure prompt disbursement of the custodial 
        parent's share of any payment; and
            ``(4) to furnish to any parent, upon request, timely 
        information on the current status of support payments under an 
        order requiring payments to be made by or to the parent.
    ``(c) Timing of Disbursements.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        State disbursement unit shall distribute all amounts payable 
        under section 457(a) within 2 business days after receipt from 
        the employer or other source of periodic income, if sufficient 
        information identifying the payee is provided.
            ``(2) Permissive retention of arrearages.--The State 
        disbursement unit may delay the distribution of collections 
        toward arrearages until the resolution of any timely appeal 
        with respect to such arrearages.
    ``(d) Business Day Defined.--As used in this section, the term 
`business day' means a day on which State offices are open for regular 
business.''.
    (c) Use of Automated System.--Section 454A, as added by section 
7344(a)(2) and as amended by section 7311, is amended by adding at the 
end the following new subsection:
    ``(g) Collection and Distribution of Support Payments.--
            ``(1) In general.--The State shall use the automated system 
        required by this section, to the maximum extent feasible, to 
        assist and facilitate the collection and disbursement of 
        support payments through the State disbursement unit operated 
        under section 454B, through the performance of functions, 
        including, at a minimum--
                    ``(A) transmission of orders and notices to 
                employers (and other debtors) for the withholding of 
                wages and other income--
                            ``(i) within 2 business days after receipt 
                        from a court, another State, an employer, the 
                        Federal Parent Locator Service, or another 
                        source recognized by the State of notice of, 
                        and the income source subject to, such 
                        withholding; and
                            ``(ii) using uniform formats prescribed by 
                        the Secretary;
                    ``(B) ongoing monitoring to promptly identify 
                failures to make timely payment of support; and
                    ``(C) automatic use of enforcement procedures 
                (including procedures authorized pursuant to section 
                466(c)) where payments are not timely made.
            ``(2) Business day defined.--As used in paragraph (1), the 
        term `business day' means a day on which State offices are open 
        for regular business.''.
    (d) Effective Date.--The amendments made by this section shall 
become effective on October 1, 1998.

SEC. 7313. STATE DIRECTORY OF NEW HIRES.

    (a) State Plan Requirement.--Section 454 (42 U.S.C. 654), as 
amended by sections 7301(b), 7304(a) and 7312(a), is amended--
            (1) by striking ``and'' at the end of paragraph (26);
            (2) by striking the period at the end of paragraph (27) and 
        inserting ``; and''; and
            (3) by adding after paragraph (27) the following new 
        paragraph:
            ``(28) provide that, on and after October 1, 1997, the 
        State will operate a State Directory of New Hires in accordance 
        with section 453A.''.
    (b) State Directory of New Hires.--Part D of title IV (42 U.S.C. 
651-669) is amended by inserting after section 453 the following new 
section:

``SEC. 453A. STATE DIRECTORY OF NEW HIRES.

    ``(a) Establishment.--
            ``(1) In general.--Not later than October 1, 1997, each 
        State shall establish an automated directory (to be known as 
        the `State Directory of New Hires') which shall contain 
        information supplied in accordance with subsection (b) by 
        employers on each newly hired employee.
            ``(2) Definitions.--As used in this section:
                    ``(A) Employee.--The term `employee'--
                            ``(i) means an individual who is an 
                        employee within the meaning of chapter 24 of 
                        the Internal Revenue Code of 1986; and
                            ``(ii) does not include an employee of a 
                        Federal or State agency performing intelligence 
                        or counterintelligence functions, if the head 
                        of such agency has determined that reporting 
                        pursuant to paragraph (1) with respect to the 
                        employee could endanger the safety of the 
                        employee or compromise an ongoing investigation 
                        or intelligence mission.
                    ``(B) Employer.--The term `employer' includes--
                            ``(i) any governmental entity, and
                            ``(ii) any labor organization.
                    ``(C) Labor organization.--The term `labor 
                organization' shall have the meaning given such term in 
                section 2(5) of the National Labor Relations Act, and 
                includes any entity (also known as a `hiring hall') 
                which is used by the organization and an employer to 
                carry out requirements described in section 8(f)(3) of 
                such Act of an agreement between the organization and 
                the employer.
    ``(b) Employer Information.--
            ``(1) Reporting requirement.--
                    ``(A) In general.--Except as provided in 
                subparagraphs (B) and (C), each employer shall furnish 
                to the Directory of New Hires of the State in which a 
                newly hired employee works, a report that contains the 
                name, address, and social security number of the 
                employee, and the name of, and identifying number 
                assigned under section 6109 of the Internal Revenue 
                Code of 1986 to, the employer.
                    ``(B) Multistate employers.--An employer that has 
                employees who are employed in 2 or more States and that 
                transmits reports magnetically or electronically may 
                comply with subparagraph (A) by designating 1 State in 
                which such employer has employees to which it will 
                transmit the report described in subparagraph (A), and 
                transmitting such report to such State. Any employer 
                that transmits reports pursuant to this subparagraph 
                shall notify the Secretary in writing as to which State 
                such employer designates for the purpose of sending 
                reports.
                    ``(C) Federal government employers.--Any 
                department, agency, or instrumentality of the United 
                States shall comply with subparagraph (A) by 
                transmitting the report described in subparagraph (A) 
                to the National Directory of New Hires established 
                pursuant to section 453.
            ``(2) Timing of report.--The report required by paragraph 
        (1) with respect to an employee shall be made not later than 
        the later of--
                    ``(A) 30 days after the date the employer hires the 
                employee; or
                    ``(B) in the case of an employer that reports by 
                magnetic or electronic means, the 1st business day of 
                the week following the date on which the employee 1st 
                receives wages or other compensation from the employer.
    ``(c) Reporting Format and Method.--Each report required by 
subsection (b) shall be made on a W-4 form and may be transmitted by 
1st class mail, magnetically, or electronically.
    ``(d) Civil Money Penalties on Noncomplying Employers.--The State 
shall have the option to set a State civil money penalty which shall be 
less than--
            ``(1) $25; or
            ``(2) $500 if, under State law, the failure is the result 
        of a conspiracy between the employer and the employee to not 
        supply the required report or to supply a false or incomplete 
        report.
    ``(e) Entry of Employer Information.--Information shall be entered 
into the data base maintained by the State Directory of New Hires 
within 5 business days of receipt from an employer pursuant to 
subsection (b).
    ``(f) Information Comparisons.--
            ``(1) In general.--Not later than October 1, 1998, an 
        agency designated by the State shall, directly or by contract, 
        conduct automated comparisons of the social security numbers 
        reported by employers pursuant to subsection (b) and the social 
        security numbers appearing in the records of the State case 
        registry for cases being enforced under the State plan.
            ``(2) Notice of match.--When an information comparison 
        conducted under paragraph (1) reveals a match with respect to 
        the social security number of an individual required to provide 
        support under a support order, the State Directory of New Hires 
        shall provide the agency administering the State plan approved 
        under this part of the appropriate State with the name, 
        address, and social security number of the employee to whom the 
        social security number is assigned, and the name of, and 
        identifying number assigned under section 6109 of the Internal 
        Revenue Code of 1986 to, the employer.
    ``(g) Transmission of Information.--
            ``(1) Transmission of wage withholding notices to 
        employers.--Within 2 business days after the date information 
        regarding a newly hired employee is entered into the State 
        Directory of New Hires, the State agency enforcing the 
        employee's child support obligation shall transmit a notice to 
        the employer of the employee directing the employer to withhold 
        from the wages of the employee an amount equal to the monthly 
        (or other periodic) child support obligation of the employee, 
        unless the employee's wages are not subject to withholding 
        pursuant to section 466(b)(3).
            ``(2) Transmissions to the national directory of new 
        hires.--
                    ``(A) New hire information.--Within 2 business days 
                after the date information regarding a newly hired 
                employee is entered into the State Directory of New 
                Hires, the State Directory of New Hires shall furnish 
                the information to the National Directory of New Hires.
                    ``(B) Wage and unemployment compensation 
                information.--The State Directory of New Hires shall, 
                on a quarterly basis, furnish to the National Directory 
                of New Hires extracts of the reports required under 
                section 303(a)(6) to be made to the Secretary of Labor 
                concerning the wages and unemployment compensation paid 
                to individuals, by such dates, in such format, and 
                containing such information as the Secretary of Health 
                and Human Services shall specify in regulations.
            ``(3) Business day defined.--As used in this subsection, 
        the term `business day' means a day on which State offices are 
        open for regular business.
    ``(h) Other Uses of New Hire Information.--
            ``(1) Location of child support obligors.--The agency 
        administering the State plan approved under this part shall use 
        information received pursuant to subsection (f)(2) to locate 
        individuals for purposes of establishing paternity and 
        establishing, modifying, and enforcing child support 
        obligations.
            ``(2) Verification of eligibility for certain programs.--A 
        State agency responsible for administering a program specified 
        in section 1137(b) shall have access to information reported by 
        employers pursuant to subsection (b) of this section for 
        purposes of verifying eligibility for the program.
            ``(3) Administration of employment security and workers' 
        compensation.--State agencies operating employment security and 
        workers' compensation programs shall have access to information 
        reported by employers pursuant to subsection (b) for the 
        purposes of administering such programs.''.
    (c) Quarterly Wage Reporting.--Section 1137(a)(3) (42 U.S.C. 1320b-
7(a)(3)) is amended--
            (1) by inserting ``(including State and local governmental 
        entities)'' after ``employers''; and
            (2) by inserting ``, and except that no report shall be 
        filed with respect to an employee of a State agency performing 
        intelligence or counterintelligence functions, if the head of 
        such agency has determined that filing such a report could 
        endanger the safety of the employee or compromise an ongoing 
        investigation or intelligence mission'' after ``paragraph 
        (2)''.

SEC. 7314. AMENDMENTS CONCERNING INCOME WITHHOLDING.

    (a) Mandatory Income Withholding.--
            (1) In general.--Section 466(a)(1) (42 U.S.C. 666(a)(1)) is 
        amended to read as follows:
            ``(1)(A) Procedures described in subsection (b) for the 
        withholding from income of amounts payable as support in cases 
        subject to enforcement under the State plan.
            ``(B) Procedures under which the wages of a person with a 
        support obligation imposed by a support order issued (or 
        modified) in the State before October 1, 1996, if not otherwise 
        subject to withholding under subsection (b), shall become 
        subject to withholding as provided in subsection (b) if 
        arrearages occur, without the need for a judicial or 
        administrative hearing.''.
            (2) Conforming amendments.--
                    (A) Section 466(b) (42 U.S.C. 666(b)) is amended in 
                the matter preceding paragraph (1), by striking 
                ``subsection (a)(1)'' and inserting ``subsection 
                (a)(1)(A)''.
                    (B) Section 466(b)(4) (42 U.S.C. 666(b)(4)) is 
                amended to read as follows:
            ``(4)(A) Such withholding must be carried out in full 
        compliance with all procedural due process requirements of the 
        State, and the State must send notice to each absent parent to 
        whom paragraph (1) applies--
                    ``(i) that the withholding has commenced; and
                    ``(ii) of the procedures to follow if the absent 
                parent desires to contest such withholding on the 
                grounds that the withholding or the amount withheld is 
                improper due to a mistake of fact.
            ``(B) The notice under subparagraph (A) shall include the 
        information provided to the employer under paragraph (6)(A).''.
                    (C) Section 466(b)(5) (42 U.S.C. 666(b)(5)) is 
                amended by striking all that follows ``administered 
                by'' and inserting ``the State through the State 
                disbursement unit established pursuant to section 454B, 
                in accordance with the requirements of section 454B.''.
                    (D) Section 466(b)(6)(A) (42 U.S.C. 666(b)(6)(A)) 
                is amended--
                            (i) in clause (i), by striking ``to the 
                        appropriate agency'' and all that follows and 
                        inserting ``to the State disbursement unit 
                        within 2 business days after the date the 
                        amount would (but for this subsection) have 
                        been paid or credited to the employee, for 
                        distribution in accordance with this part.'';
                            (ii) in clause (ii), by inserting ``be in a 
                        standard format prescribed by the Secretary, 
                        and'' after ``shall''; and
                            (iii) by adding at the end the following 
                        new clause:
            ``(iii) As used in this subparagraph, the term `business 
        day' means a day on which State offices are open for regular 
        business.''.
                    (E) Section 466(b)(6)(D) (42 U.S.C. 666(b)(6)(D)) 
                is amended by striking ``any employer'' and all that 
                follows and inserting ``any employer who--
                    ``(i) discharges from employment, refuses to 
                employ, or takes disciplinary action against any absent 
                parent subject to wage withholding required by this 
                subsection because of the existence of such withholding 
                and the obligations or additional obligations which it 
                imposes upon the employer; or
                    ``(ii) fails to withhold support from wages, or to 
                pay such amounts to the State disbursement unit in 
                accordance with this subsection.''.
                    (F) Section 466(b) (42 U.S.C. 666(b)) is amended by 
                adding at the end the following new paragraph:
            ``(11) Procedures under which the agency administering the 
        State plan approved under this part may execute a withholding 
        order through electronic means and without advance notice to 
        the obligor.''.
    (b) Conforming Amendment.--Section 466(c) (42 U.S.C. 666(c)) is 
repealed.

SEC. 7315. LOCATOR INFORMATION FROM INTERSTATE NETWORKS.

    Section 466(a) (42 U.S.C. 666(a)) is amended by adding at the end 
the following new paragraph:
            ``(12) Procedures to ensure that all Federal and State 
        agencies conducting activities under this part have access to 
        any system used by the State to locate an individual for 
        purposes relating to motor vehicles or law enforcement.''.

SEC. 7316. EXPANSION OF THE FEDERAL PARENT LOCATOR SERVICE.

    (a) Expanded Authority To Locate Individuals and Assets.--Section 
453 (42 U.S.C. 653) is amended--
            (1) in subsection (a), by striking all that follows 
        ``subsection (c))'' and inserting ``, for the purpose of 
        establishing parentage, establishing, setting the amount of, 
        modifying, or enforcing child support obligations, or enforcing 
        child visitation orders--
            ``(1) information on, or facilitating the discovery of, the 
        location of any individual--
                    ``(A) who is under an obligation to pay child 
                support or provide child visitation rights;
                    ``(B) against whom such an obligation is sought;
                    ``(C) to whom such an obligation is owed,
        including the individual's social security number (or numbers), 
        most recent address, and the name, address, and employer 
        identification number of the individual's employer;
            ``(2) information on the individual's wages (or other 
        income) from, and benefits of, employment (including rights to 
        or enrollment in group health care coverage); and
            ``(3) information on the type, status, location, and amount 
        of any assets of, or debts owed by or to, any such 
        individual.''; and
            (2) in subsection (b), in the matter preceding paragraph 
        (1), by striking ``social security'' and all that follows 
        through ``absent parent'' and inserting ``information described 
        in subsection (a)''.
    (b) Authorized Person for Information Regarding Visitation 
Rights.--Section 453(c) (42 U.S.C. 653(c)) is amended--
            (1) in paragraph (1), by striking ``support'' and inserting 
        ``support or to seek to enforce orders providing child 
        visitation rights'';
            (2) in paragraph (2), by striking ``, or any agent of such 
        court; and'' and inserting ``or to issue an order against a 
        resident parent for visitation rights, or any agent of such 
        court;'';
            (3) by striking the period at the end of paragraph (3) and 
        inserting ``; and''; and
            (4) by adding at the end the following new paragraph:
            ``(4) the absent parent, only with regard to a court order 
        against a resident parent for child visitation rights.''.
    (c) Reimbursement for Information From Federal Agencies.--Section 
453(e)(2) (42 U.S.C. 653(e)(2)) is amended in the 4th sentence by 
inserting ``in an amount which the Secretary determines to be 
reasonable payment for the information exchange (which amount shall not 
include payment for the costs of obtaining, compiling, or maintaining 
the information)'' before the period.
    (d) Reimbursement for Reports by State Agencies.--Section 453 (42 
U.S.C. 653) is amended by adding at the end the following new 
subsection:
    ``(g) The Secretary may reimburse Federal and State agencies for 
the costs incurred by such entities in furnishing information requested 
by the Secretary under this section in an amount which the Secretary 
determines to be reasonable payment for the information exchange (which 
amount shall not include payment for the costs of obtaining, compiling, 
or maintaining the information).''.
    (e) Technical Amendments.--
            (1) Sections 452(a)(9), 453(a), 453(b), 463(a), 463(e), and 
        463(f) (42 U.S.C. 652(a)(9), 653(a), 653(b), 663(a), 663(e), 
        and 663(f)) are each amended by inserting ``Federal'' before 
        ``Parent'' each place such term appears.
            (2) Section 453 (42 U.S.C. 653) is amended in the heading 
        by adding ``federal'' before ``parent''.
    (f) New Components.--Section 453 (42 U.S.C. 653), as amended by 
subsection (d) of this section, is amended by adding at the end the 
following new subsection:
    ``(h)(1) Not later than October 1, 1998, in order to assist States 
in administering programs under State plans approved under this part 
and programs funded under part A, and for the other purposes specified 
in this section, the Secretary shall establish and maintain in the 
Federal Parent Locator Service an automated registry (which shall be 
known as the `Federal Case Registry of Child Support Orders'), which 
shall contain abstracts of support orders and other information 
described in paragraph (2) with respect to each case in each State case 
registry maintained pursuant to section 454A(e), as furnished (and 
regularly updated), pursuant to section 454A(f), by State agencies 
administering programs under this part.
    ``(2) The information referred to in paragraph (1) with respect to 
a case shall be such information as the Secretary may specify in 
regulations (including the names, social security numbers or other 
uniform identification numbers, and State case identification numbers) 
to identify the individuals who owe or are owed support (or with 
respect to or on behalf of whom support obligations are sought to be 
established), and the State or States which have the case.
    ``(i)(1) In order to assist States in administering programs under 
State plans approved under this part and programs funded under part A, 
and for the other purposes specified in this section, the Secretary 
shall, not later than October 1, 1996, establish and maintain in the 
Federal Parent Locator Service an automated directory to be known as 
the National Directory of New Hires, which shall contain the 
information supplied pursuant to section 453A(g)(2).
    ``(2) Information shall be entered into the data base maintained by 
the National Directory of New Hires within 2 business days of receipt 
pursuant to section 453A(g)(2).
    ``(3) The Secretary of the Treasury shall have access to the 
information in the National Directory of New Hires for purposes of 
administering section 32 of the Internal Revenue Code of 1986, or the 
advance payment of the earned income tax credit under section 3507 of 
such Code, and verifying a claim with respect to employment in a tax 
return.
    ``(4) The Secretary shall maintain within the National Directory of 
New Hires a list of multistate employers that report information 
regarding newly hired employees pursuant to section 453A(b)(1)(B), and 
the State which each such employer has designated to receive such 
information.
    ``(j)(1)(A) The Secretary shall transmit information on individuals 
and employers maintained under this section to the Social Security 
Administration to the extent necessary for verification in accordance 
with subparagraph (B).
    ``(B) The Social Security Administration shall verify the accuracy 
of, correct, or supply to the extent possible, and report to the 
Secretary, the following information supplied by the Secretary pursuant 
to subparagraph (A):
            ``(i) The name, social security number, and birth date of 
        each such individual.
            ``(ii) The employer identification number of each such 
        employer.
    ``(2) For the purpose of locating individuals in a paternity 
establishment case or a case involving the establishment, modification, 
or enforcement of a support order, the Secretary shall--
            ``(A) compare information in the National Directory of New 
        Hires against information in the support case abstracts in the 
        Federal Case Registry of Child Support Orders not less often 
        than every 2 business days; and
            ``(B) within 2 such days after such a comparison reveals a 
        match with respect to an individual, report the information to 
        the State agency responsible for the case.
    ``(3) To the extent and with the frequency that the Secretary 
determines to be effective in assisting States to carry out their 
responsibilities under programs operated under this part and programs 
funded under part A, the Secretary shall--
            ``(A) compare the information in each component of the 
        Federal Parent Locator Service maintained under this section 
        against the information in each other such component (other 
        than the comparison required by paragraph (2)), and report 
        instances in which such a comparison reveals a match with 
        respect to an individual to State agencies operating such 
        programs; and
            ``(B) disclose information in such registries to such State 
        agencies.
    ``(4) The National Directory of New Hires shall provide the 
Commissioner of Social Security with all information in the National 
Directory, which shall be used to determine the accuracy of payments 
under the supplemental security income program under title XVI and in 
connection with benefits under title II.
    ``(5) The Secretary may provide access to information reported by 
employers pursuant to section 453A(b) for research purposes found by 
the Secretary to be likely to contribute to achieving the purposes of 
part A or this part, but without personal identifiers.
    ``(k)(1) The Secretary shall reimburse the Commissioner of Social 
Security, at a rate negotiated between the Secretary and the 
Commissioner, for the costs incurred by the Commissioner in performing 
the verification services described in subsection (j).
    ``(2) The Secretary shall reimburse costs incurred by State 
directories of new hires in furnishing information as required by 
subsection (j)(3), at rates which the Secretary determines to be 
reasonable (which rates shall not include payment for the costs of 
obtaining, compiling, or maintaining such information).
    ``(3) A State or Federal agency that receives information from the 
Secretary pursuant to this section shall reimburse the Secretary for 
costs incurred by the Secretary in furnishing the information, at rates 
which the Secretary determines to be reasonable (which rates shall 
include payment for the costs of obtaining, verifying, maintaining, and 
comparing the information).
    ``(l) Information in the Federal Parent Locator Service, and 
information resulting from comparisons using such information, shall 
not be used or disclosed except as expressly provided in this section, 
subject to section 6103 of the Internal Revenue Code of 1986.
    ``(m) The Secretary shall establish and implement safeguards with 
respect to the entities established under this section designed to--
            ``(1) ensure the accuracy and completeness of information 
        in the Federal Parent Locator Service; and
            ``(2) restrict access to confidential information in the 
        Federal Parent Locator Service to authorized persons, and 
        restrict use of such information to authorized purposes.
    ``(n) Each department, agency, and instrumentality of the United 
States shall on a quarterly basis report to the Federal Parent Locator 
Service the name and social security number of each employee and the 
wages paid to the employee during the previous quarter, except that no 
report shall be filed with respect to an employee of a department, 
agency, or instrumentality performing intelligence or 
counterintelligence functions, if the head of such department, agency, 
or instrumentality has determined that filing such a report could 
endanger the safety of the employee or compromise an ongoing 
investigation or intelligence mission.''.
    (f) Conforming Amendments.--
            (1) To part d of title iv of the social security act.--
        Section 454(8)(B) (42 U.S.C. 654(8)(B)) is amended to read as 
        follows:
                    ``(B) the Federal Parent Locator Service 
                established under section 453;''.
            (2) To federal unemployment tax act.--Section 3304(a)(16) 
        of the Internal Revenue Code of 1986 is amended--
                    (A) by striking ``Secretary of Health, Education, 
                and Welfare'' each place such term appears and 
                inserting ``Secretary of Health and Human Services'';
                    (B) in subparagraph (B), by striking ``such 
                information'' and all that follows and inserting 
                ``information furnished under subparagraph (A) or (B) 
                is used only for the purposes authorized under such 
                subparagraph;'';
                    (C) by striking ``and'' at the end of subparagraph 
                (A);
                    (D) by redesignating subparagraph (B) as 
                subparagraph (C); and
                    (E) by inserting after subparagraph (A) the 
                following new subparagraph:
                    ``(B) wage and unemployment compensation 
                information contained in the records of such agency 
                shall be furnished to the Secretary of Health and Human 
                Services (in accordance with regulations promulgated by 
                such Secretary) as necessary for the purposes of the 
                National Directory of New Hires established under 
                section 453(i) of the Social Security Act, and''.
            (3) To state grant program under title iii of the social 
        security act.--Subsection (h) of section 303 (42 U.S.C. 503) is 
        amended to read as follows:
    ``(h)(1) The State agency charged with the administration of the 
State law shall, on a reimbursable basis--
            ``(A) disclose quarterly, to the Secretary of Health and 
        Human Services wage and claim information, as required pursuant 
        to section 453(i)(1), contained in the records of such agency;
            ``(B) ensure that information provided pursuant to 
        subparagraph (A) meets such standards relating to correctness 
        and verification as the Secretary of Health and Human Services, 
        with the concurrence of the Secretary of Labor, may find 
        necessary; and
            ``(C) establish such safeguards as the Secretary of Labor 
        determines are necessary to insure that information disclosed 
        under subparagraph (A) is used only for purposes of section 
        453(i)(1) in carrying out the child support enforcement program 
        under title IV.
    ``(2) Whenever the Secretary of Labor, after reasonable notice and 
opportunity for hearing to the State agency charged with the 
administration of the State law, finds that there is a failure to 
comply substantially with the requirements of paragraph (1), the 
Secretary of Labor shall notify such State agency that further payments 
will not be made to the State until the Secretary of Labor is satisfied 
that there is no longer any such failure. Until the Secretary of Labor 
is so satisfied, the Secretary shall make no future certification to 
the Secretary of the Treasury with respect to the State.
    ``(3) For purposes of this subsection--
            ``(A) the term `wage information' means information 
        regarding wages paid to an individual, the social security 
        account number of such individual, and the name, address, 
        State, and the Federal employer identification number of the 
        employer paying such wages to such individual; and
            ``(B) the term `claim information' means information 
        regarding whether an individual is receiving, has received, or 
        has made application for, unemployment compensation, the amount 
        of any such compensation being received (or to be received by 
        such individual), and the individual's current (or most recent) 
        home address.''.

SEC. 7317. COLLECTION AND USE OF SOCIAL SECURITY NUMBERS FOR USE IN 
              CHILD SUPPORT ENFORCEMENT.

    (a) State Law Requirement.--Section 466(a) (42 U.S.C. 666(a)), as 
amended by section 7315, is amended by adding at the end the following 
new paragraph:
            ``(13) Procedures requiring that the social security number 
        of--
                    ``(A) any applicant for a professional license, 
                commercial driver's license, occupational license, or 
                marriage license be recorded on the application;
                    ``(B) any individual who is subject to a divorce 
                decree, support order, or paternity determination or 
                acknowledgment be placed in the records relating to the 
                matter; and
                    ``(C) any individual who has died be placed in the 
                records relating to the death and be recorded on the 
                death certificate.
        For purposes of subparagraph (A), if a State allows the use of 
        a number other than the social security number, the State shall 
        so advise any applicants.''.
    (b) Conforming Amendments.--Section 205(c)(2)(C) (42 U.S.C. 
405(c)(2)(C)), as amended by section 321(a)(9) of the Social Security 
Independence and Program Improvements Act of 1994, is amended--
            (1) in clause (i), by striking ``may require'' and 
        inserting ``shall require'';
            (2) in clause (ii), by inserting after the 1st sentence the 
        following: ``In the administration of any law involving the 
        issuance of a marriage certificate or license, each State shall 
        require each party named in the certificate or license to 
        furnish to the State (or political subdivision thereof), or any 
        State agency having administrative responsibility for the law 
        involved, the social security number of the party.'';
            (3) in clause (ii), by inserting ``or marriage 
        certificate'' after ``Such numbers shall not be recorded on the 
        birth certificate'';
            (4) in clause (vi), by striking ``may'' and inserting 
        ``shall''; and
            (5) by adding at the end the following new clauses:
                            ``(x) An agency of a State (or a political 
                        subdivision thereof) charged with the 
                        administration of any law concerning the 
                        issuance or renewal of a license, certificate, 
                        permit, or other authorization to engage in a 
                        profession, an occupation, or a commercial 
                        activity shall require all applicants for 
                        issuance or renewal of the license, 
                        certificate, permit, or other authorization to 
                        provide the applicant's social security number 
                        to the agency for the purpose of administering 
                        such laws, and for the purpose of responding to 
                        requests for information from an agency 
                        operating pursuant to part D of title IV.
                            ``(xi) All divorce decrees, support orders, 
                        and paternity determinations issued, and all 
                        paternity acknowledgments made, in each State 
                        shall include the social security number of 
                        each party to the decree, order, determination, 
                        or acknowledgement in the records relating to 
                        the matter, for the purpose of responding to 
                        requests for information from an agency 
                        operating pursuant to part D of title IV.''.

          CHAPTER 3--STREAMLINING AND UNIFORMITY OF PROCEDURES

SEC. 7321. ADOPTION OF UNIFORM STATE LAWS.

    Section 466 (42 U.S.C. 666) is amended by adding at the end the 
following new subsection:
    ``(f)(1) In order to satisfy section 454(20)(A) on or after January 
1, 1997, each State must have in effect the Uniform Interstate Family 
Support Act, as approved by the National Conference of Commissioners on 
Uniform State Laws in August 1992 (with the modifications and additions 
specified in this subsection), and the procedures required to implement 
such Act.
    ``(2) The State law enacted pursuant to paragraph (1) may be 
applied to any case involving an order which is established or modified 
in a State and which is sought to be modified or enforced in another 
State.
    ``(3) The State law enacted pursuant to paragraph (1) of this 
subsection shall contain the following provision in lieu of section 
611(a)(1) of the Uniform Interstate Family Support Act:
            ```(1) the following requirements are met:
                    ```(i) the child, the individual obligee, and the 
                obligor--
                            ```(I) do not reside in the issuing State; 
                        and
                            ```(II) either reside in this State or are 
                        subject to the jurisdiction of this State 
                        pursuant to section 201; and
                    ```(ii) in any case where another State is 
                exercising or seeks to exercise jurisdiction to modify 
                the order, the conditions of section 204 are met to the 
                same extent as required for proceedings to establish 
                orders; or'.
    ``(4) The State law enacted pursuant to paragraph (1) shall provide 
that, in any proceeding subject to the law, process may be served (and 
proved) upon persons in the State by any means acceptable in any State 
which is the initiating or responding State in the proceeding.''.

SEC. 7322. IMPROVEMENTS TO FULL FAITH AND CREDIT FOR CHILD SUPPORT 
              ORDERS.

    Section 1738B of title 28, United States Code, is amended--
            (1) in subsection (a)(2), by striking ``subsection (e)'' 
        and inserting ``subsections (e), (f), and (i)'';
            (2) in subsection (b), by inserting after the 2nd 
        undesignated paragraph the following:
            ```child's home State' means the State in which a child 
        lived with a parent or a person acting as parent for at least 6 
        consecutive months immediately preceding the time of filing of 
        a petition or comparable pleading for support and, if a child 
        is less than 6 months old, the State in which the child lived 
        from birth with any of them. A period of temporary absence of 
        any of them is counted as part of the 6-month period.'';
            (3) in subsection (c), by inserting ``by a court of a 
        State'' before ``is made'';
            (4) in subsection (c)(1), by inserting ``and subsections 
        (e), (f), and (g)'' after ``located'';
            (5) in subsection (d)--
                    (A) by inserting ``individual'' before 
                ``contestant''; and
                    (B) by striking ``subsection (e)'' and inserting 
                ``subsections (e) and (f)'';
            (6) in subsection (e), by striking ``make a modification of 
        a child support order with respect to a child that is made'' 
        and inserting ``modify a child support order issued'';
            (7) in subsection (e)(1), by inserting ``pursuant to 
        subsection (i)'' before the semicolon;
            (8) in subsection (e)(2)--
                    (A) by inserting ``individual'' before 
                ``contestant'' each place such term appears; and
                    (B) by striking ``to that court's making the 
                modification and assuming'' and inserting ``with the 
                State of continuing, exclusive jurisdiction for a court 
                of another State to modify the order and assume'';
            (9) by redesignating subsections (f) and (g) as subsections 
        (g) and (h), respectively;
            (10) by inserting after subsection (e) the following new 
        subsection:
    ``(f) Recognition of Child Support Orders.--If 1 or more child 
support orders have been issued in this or another State with regard to 
an obligor and a child, a court shall apply the following rules in 
determining which order to recognize for purposes of continuing, 
exclusive jurisdiction and enforcement:
            ``(1) If only 1 court has issued a child support order, the 
        order of that court must be recognized.
            ``(2) If 2 or more courts have issued child support orders 
        for the same obligor and child, and only 1 of the courts would 
        have continuing, exclusive jurisdiction under this section, the 
        order of that court must be recognized.
            ``(3) If 2 or more courts have issued child support orders 
        for the same obligor and child, and more than 1 of the courts 
        would have continuing, exclusive jurisdiction under this 
        section, an order issued by a court in the current home State 
        of the child must be recognized, but if an order has not been 
        issued in the current home State of the child, the order most 
        recently issued must be recognized.
            ``(4) If 2 or more courts have issued child support orders 
        for the same obligor and child, and none of the courts would 
        have continuing, exclusive jurisdiction under this section, a 
        court may issue a child support order, which must be 
        recognized.
            ``(5) The court that has issued an order recognized under 
        this subsection is the court having continuing, exclusive 
        jurisdiction.'';
            (11) in subsection (g) (as so redesignated)--
                    (A) by striking ``Prior'' and inserting 
                ``Modified''; and
                    (B) by striking ``subsection (e)'' and inserting 
                ``subsections (e) and (f)'';
            (12) in subsection (h) (as so redesignated)--
                    (A) in paragraph (2), by inserting ``including the 
                duration of current payments and other obligations of 
                support'' before the comma; and
                    (B) in paragraph (3), by inserting ``arrears 
                under'' after ``enforce''; and
            (13) by adding at the end the following new subsection:
    ``(i) Registration for Modification.--If there is no individual 
contestant or child residing in the issuing State, the party or support 
enforcement agency seeking to modify, or to modify and enforce, a child 
support order issued in another State shall register that order in a 
State with jurisdiction over the nonmovant for the purpose of 
modification.''.

SEC. 7323. ADMINISTRATIVE ENFORCEMENT IN INTERSTATE CASES.

    Section 466(a) (42 U.S.C. 666(a)), as amended by sections 7315 and 
7317(a), is amended by adding at the end the following new paragraph:
            ``(14) Procedures under which--
                    ``(A)(i) the State shall respond within 5 business 
                days to a request made by another State to enforce a 
                support order; and
                    ``(ii) the term `business day' means a day on which 
                State offices are open for regular business;
                    ``(B) the State may, by electronic or other means, 
                transmit to another State a request for assistance in a 
                case involving the enforcement of a support order, 
                which request--
                            ``(i) shall include such information as 
                        will enable the State to which the request is 
                        transmitted to compare the information about 
                        the case to the information in the data bases 
                        of the State; and
                            ``(ii) shall constitute a certification by 
                        the requesting State--
                                    ``(I) of the amount of support 
                                under the order the payment of which is 
                                in arrears; and
                                    ``(II) that the requesting State 
                                has complied with all procedural due 
                                process requirements applicable to the 
                                case;
                    ``(C) if the State provides assistance to another 
                State pursuant to this paragraph with respect to a 
                case, neither State shall consider the case to be 
                transferred to the caseload of such other State; and
                    ``(D) the State shall maintain records of--
                            ``(i) the number of such requests for 
                        assistance received by the State;
                            ``(ii) the number of cases for which the 
                        State collected support in response to such a 
                        request; and
                            ``(iii) the amount of such collected 
                        support.''.

SEC. 7324. USE OF FORMS IN INTERSTATE ENFORCEMENT.

    (a) Promulgation.--Section 452(a) (42 U.S.C. 652(a)) is amended--
            (1) by striking ``and'' at the end of paragraph (9);
            (2) by striking the period at the end of paragraph (10) and 
        inserting ``; and''; and
            (3) by adding at the end the following new paragraph:
            ``(11) not later than 60 days after the date of the 
        enactment of the Balance Budget Reconciliation Act of 1995, 
        establish an advisory committee, which shall include State 
        directors of programs under this part, and not later than June 
        30, 1996, after consultation with the advisory committee, 
        promulgate forms to be used by States in interstate cases for--
                    ``(A) collection of child support through income 
                withholding;
                    ``(B) imposition of liens; and
                    ``(C) administrative subpoenas.''.
    (b) Use by States.--Section 454(9) (42 U.S.C. 654(9)) is amended--
            (1) by striking ``and'' at the end of subparagraph (C);
            (2) by inserting ``and'' at the end of subparagraph (D); 
        and
            (3) by adding at the end the following new subparagraph:
                    ``(E) no later than October 1, 1996, in using the 
                forms promulgated pursuant to section 452(a)(11) for 
                income withholding, imposition of liens, and issuance 
                of administrative subpoenas in interstate child support 
                cases;''.

SEC. 7325. STATE LAWS PROVIDING EXPEDITED PROCEDURES.

    (a) State Law Requirements.--Section 466 (42 U.S.C. 666), as 
amended by section 7314, is amended--
            (1) in subsection (a)(2), by striking the 1st sentence and 
        inserting the following: ``Expedited administrative and 
        judicial procedures (including the procedures specified in 
        subsection (c)) for establishing paternity and for 
        establishing, modifying, and enforcing support obligations.''; 
        and
            (2) by inserting after subsection (b) the following new 
        subsection:
    ``(c) The procedures specified in this subsection are the 
following:
            ``(1) Procedures which give the State agency the authority 
        to take the following actions relating to establishment or 
        enforcement of support orders, without the necessity of 
        obtaining an order from any other judicial or administrative 
        tribunal, and to recognize and enforce the authority of State 
        agencies of other States) to take the following actions:
                    ``(A) To order genetic testing for the purpose of 
                paternity establishment as provided in section 
                466(a)(5).
                    ``(B) To subpoena any financial or other 
                information needed to establish, modify, or enforce a 
                support order, and to impose penalties for failure to 
                respond to such a subpoena.
                    ``(C) To require all entities in the State 
                (including for-profit, nonprofit, and governmental 
                employers) to provide promptly, in response to a 
                request by the State agency of that or any other State 
                administering a program under this part, information on 
                the employment, compensation, and benefits of any 
                individual employed by such entity as an employee or 
                contractor, and to sanction failure to respond to any 
                such request.
                    ``(D) To obtain access, subject to safeguards on 
                privacy and information security, to the following 
                records (including automated access, in the case of 
                records maintained in automated data bases):
                            ``(i) Records of other State and local 
                        government agencies, including--
                                    ``(I) vital statistics (including 
                                records of marriage, birth, and 
                                divorce);
                                    ``(II) State and local tax and 
                                revenue records (including information 
                                on residence address, employer, income 
                                and assets);
                                    ``(III) records concerning real and 
                                titled personal property;
                                    ``(IV) records of occupational and 
                                professional licenses, and records 
                                concerning the ownership and control of 
                                corporations, partnerships, and other 
                                business entities;
                                    ``(V) employment security records;
                                    ``(VI) records of agencies 
                                administering public assistance 
                                programs;
                                    ``(VII) records of the motor 
                                vehicle department; and
                                    ``(VIII) corrections records.
                            ``(ii) Certain records held by private 
                        entities, including--
                                    ``(I) customer records of public 
                                utilities and cable television 
                                companies; and
                                    ``(II) information (including 
                                information on assets and liabilities) 
                                on individuals who owe or are owed 
                                support (or against or with respect to 
                                whom a support obligation is sought) 
                                held by financial institutions (subject 
                                to limitations on liability of such 
                                entities arising from affording such 
                                access), as provided pursuant to 
                                agreements described in subsection 
                                (a)(18).
                    ``(E) In cases where support is subject to an 
                assignment in order to comply with a requirement 
                imposed pursuant to part A or section 2136, or to a 
                requirement to pay through the State disbursement unit 
                established pursuant to section 454B, upon providing 
                notice to obligor and obligee, to direct the obligor or 
                other payor to change the payee to the appropriate 
                government entity.
                    ``(F) To order income withholding in accordance 
                with subsections (a)(1) and (b) of section 466.
                    ``(G) In cases in which there is a support 
                arrearage, to secure assets to satisfy the arrearage 
                by--
                            ``(i) intercepting or seizing periodic or 
                        lump-sum payments from--
                                    ``(I) a State or local agency, 
                                including unemployment compensation, 
                                workers' compensation, and other 
                                benefits; and
                                    ``(II) judgments, settlements, and 
                                lotteries;
                            ``(ii) attaching and seizing assets of the 
                        obligor held in financial institutions;
                            ``(iii) attaching public and private 
                        retirement funds; and
                            ``(iv) imposing liens in accordance with 
                        subsection (a)(4) and, in appropriate cases, to 
                        force sale of property and distribution of 
                        proceeds.
                    ``(H) For the purpose of securing overdue support, 
                to increase the amount of monthly support payments to 
                include amounts for arrearages, subject to such 
                conditions or limitations as the State may provide.
        Such procedures shall be subject to due process safeguards, 
        including (as appropriate) requirements for notice, opportunity 
        to contest the action, and opportunity for an appeal on the 
        record to an independent administrative or judicial tribunal.
            ``(2) The expedited procedures required under subsection 
        (a)(2) shall include the following rules and authority, 
        applicable with respect to all proceedings to establish 
        paternity or to establish, modify, or enforce support orders:
                    ``(A) Procedures under which--
                            ``(i) each party to any paternity or child 
                        support proceeding is required (subject to 
                        privacy safeguards) to file with the tribunal 
                        and the State case registry upon entry of an 
                        order, and to update as appropriate, 
                        information on location and identity of the 
                        party, including social security number, 
                        residential and mailing addresses, telephone 
                        number, driver's license number, and name, 
                        address, and name and telephone number of 
                        employer; and
                            ``(ii) in any subsequent child support 
                        enforcement action between the parties, upon 
                        sufficient showing that diligent effort has 
                        been made to ascertain the location of such a 
                        party, the tribunal may deem State due process 
                        requirements for notice and service of process 
                        to be met with respect to the party, upon 
                        delivery of written notice to the most recent 
                        residential or employer address filed with the 
                        tribunal pursuant to clause (i).
                    ``(B) Procedures under which--
                            ``(i) the State agency and any 
                        administrative or judicial tribunal with 
                        authority to hear child support and paternity 
                        cases exerts statewide jurisdiction over the 
                        parties; and
                            ``(ii) in a State in which orders are 
                        issued by courts or administrative tribunals, a 
                        case may be transferred between local 
                        jurisdictions in the State without need for any 
                        additional filing by the petitioner, or service 
                        of process upon the respondent, to retain 
                        jurisdiction over the parties.''.
    (b) Automation of State Agency Functions.--Section 454A, as added 
by section 7344(a)(2) and as amended by sections 7311 and 7312(c), is 
amended by adding at the end the following new subsection:
    ``(h) Expedited Administrative Procedures.--The automated system 
required by this section shall be used, to the maximum extent feasible, 
to implement the expedited administrative procedures required by 
section 466(c).''.

                   CHAPTER 4--PATERNITY ESTABLISHMENT

SEC. 7331. STATE LAWS CONCERNING PATERNITY ESTABLISHMENT.

    (a) State Laws Required.--Section 466(a)(5) (42 U.S.C. 666(a)(5)) 
is amended to read as follows:
            ``(5)(A)(i) Procedures which permit the establishment of 
        the paternity of a child at any time before the child attains 
        21 years of age.
            ``(ii) As of August 16, 1984, clause (i) shall also apply 
        to a child for whom paternity has not been established or for 
        whom a paternity action was brought but dismissed because a 
        statute of limitations of less than 21 years was then in effect 
        in the State.
            ``(B)(i) Procedures under which the State is required, in a 
        contested paternity case, unless otherwise barred by State law, 
        to require the child and all other parties (other than 
        individuals found under section 454(29) to have good cause for 
        refusing to cooperate) to submit to genetic tests upon the 
        request of any such party if the request is supported by a 
        sworn statement by the party--
                    ``(I) alleging paternity, and setting forth facts 
                establishing a reasonable possibility of the requisite 
                sexual contact between the parties; or
                    ``(II) denying paternity, and setting forth facts 
                establishing a reasonable possibility of the 
                nonexistence of sexual contact between the parties.
            ``(ii) Procedures which require the State agency in any 
        case in which the agency orders genetic testing--
                    ``(I) to pay costs of such tests, subject to 
                recoupment (where the State so elects) from the alleged 
                father if paternity is established; and
                    ``(II) to obtain additional testing in any case 
                where an original test result is contested, upon 
                request and advance payment by the contestant.
            ``(C)(i) Procedures for a simple civil process for 
        voluntarily acknowledging paternity under which the State must 
        provide that, before a mother and a putative father can sign an 
        acknowledgment of paternity, the mother and the putative father 
        must be given notice, orally and in writing, of the 
        alternatives to, the legal consequences of, and the rights 
        (including, if 1 parent is a minor, any rights afforded due to 
        minority status) and responsibilities that arise from, signing 
        the acknowledgment.
            ``(ii) Such procedures must include a hospital-based 
        program for the voluntary acknowledgment of paternity focusing 
        on the period immediately before or after the birth of a child, 
        subject to such good cause and other exceptions as the State 
        shall establish and taking into account the best interests of 
        the child.
            ``(iii)(I) Such procedures must require the State agency 
        responsible for maintaining birth records to offer voluntary 
        paternity establishment services.
            ``(II)(aa) The Secretary shall prescribe regulations 
        governing voluntary paternity establishment services offered by 
        hospitals and birth record agencies.
            ``(bb) The Secretary shall prescribe regulations specifying 
        the types of other entities that may offer voluntary paternity 
        establishment services, and governing the provision of such 
        services, which shall include a requirement that such an entity 
        must use the same notice provisions used by, use the same 
        materials used by, provide the personnel providing such 
        services with the same training provided by, and evaluate the 
        provision of such services in the same manner as the provision 
        of such services is evaluated by, voluntary paternity 
        establishment programs of hospitals and birth record agencies.
            ``(iv) Such procedures must require the State to develop 
        and use an affidavit for the voluntary acknowledgment of 
        paternity which includes the minimum requirements of the 
        affidavit developed by the Secretary under section 452(a)(7) 
        for the voluntary acknowledgment of paternity, and to give full 
        faith and credit to such an affidavit signed in any other State 
        according to its procedures.
            ``(D)(i) Procedures under which the name of the father 
        shall be included on the record of birth of the child only--
                    ``(I) if the father and mother have signed a 
                voluntary acknowledgment of paternity; or
                    ``(II) pursuant to an order issued in a judicial or 
                administrative proceeding.
        Nothing in this clause shall preclude a State agency from 
        obtaining an admission of paternity from the father for 
        submission in a judicial or administrative proceeding, or 
        prohibit an order issued in a judicial or administrative 
        proceeding which bases a legal finding of paternity on an 
        admission of paternity by the father and any other additional 
        showing required by State law.
            ``(ii) Procedures under which--
                    ``(I) a voluntary acknowledgment of paternity is 
                considered a legal finding of paternity, subject to the 
                right of any signatory to rescind the acknowledgment 
                within 60 days;
                    ``(II) after the 60-day period referred to in 
                subclause (I), a signed voluntary acknowledgment of 
                paternity may be challenged in court only on the basis 
                of fraud, duress, or material mistake of fact, with the 
                burden of proof upon the challenger, and under which 
                the legal responsibilities (including child support 
                obligations) of any signatory arising from the 
                acknowledgment may not be suspended during the 
                challenge, except for good cause shown; and
                    ``(III) judicial or administrative proceedings are 
                not required or permitted to ratify an unchallenged 
                acknowledgment of paternity.
            ``(E) Procedures under which judicial or administrative 
        proceedings are not required or permitted to ratify an 
        unchallenged acknowledgment of paternity.
            ``(F) Procedures--
                    ``(i) requiring the admission into evidence, for 
                purposes of establishing paternity, of the results of 
                any genetic test that is--
                            ``(I) of a type generally acknowledged as 
                        reliable by accreditation bodies designated by 
                        the Secretary; and
                            ``(II) performed by a laboratory approved 
                        by such an accreditation body;
                    ``(ii) requiring an objection to genetic testing 
                results to be made in writing not later than a 
                specified number of days before any hearing at which 
                the results may be introduced into evidence (or, at 
                State option, not later than a specified number of days 
                after receipt of the results); and
                    ``(iii) making the test results admissible as 
                evidence of paternity without the need for foundation 
                testimony or other proof of authenticity or accuracy, 
                unless objection is made.
            ``(G) Procedures which create a rebuttable or, at the 
        option of the State, conclusive presumption of paternity upon 
        genetic testing results indicating a threshold probability that 
        the alleged father is the father of the child.
            ``(H) Procedures requiring a default order to be entered in 
        a paternity case upon a showing of service of process on the 
        defendant and any additional showing required by State law.
            ``(I) Procedures providing that the parties to an action to 
        establish paternity are not entitled to a trial by jury.
            ``(J) Procedures which require that a temporary order be 
        issued, upon motion by a party, requiring the provision of 
        child support pending an administrative or judicial 
        determination of parentage, where there is clear and convincing 
        evidence of paternity (on the basis of genetic tests or other 
        evidence).
            ``(K) Procedures under which bills for pregnancy, 
        childbirth, and genetic testing are admissible as evidence 
        without requiring third-party foundation testimony, and shall 
        constitute prima facie evidence of amounts incurred for such 
        services or for testing on behalf of the child.
            ``(L) Procedures ensuring that the putative father has a 
        reasonable opportunity to initiate a paternity action.
            ``(M) Procedures under which voluntary acknowledgments and 
        adjudications of paternity by judicial or administrative 
        processes are filed with the State registry of birth records 
        for comparison with information in the State case registry.''.
    (b) National Paternity Acknowledgment Affidavit.--Section 452(a)(7) 
(42 U.S.C. 652(a)(7)) is amended by inserting ``, and develop an 
affidavit to be used for the voluntary acknowledgment of paternity 
which shall include the social security number of each parent'' before 
the semicolon.
    (c) Technical Amendment.--Section 468 (42 U.S.C. 668) is amended by 
striking ``a simple civil process for voluntarily acknowledging 
paternity and''.

SEC. 7332. OUTREACH FOR VOLUNTARY PATERNITY ESTABLISHMENT.

    Section 454(23) (42 U.S.C. 654(23)) is amended by inserting ``and 
will publicize the availability and encourage the use of procedures for 
voluntary establishment of paternity and child support by means the 
State deems appropriate'' before the semicolon.

SEC. 7333. COOPERATION BY APPLICANTS FOR AND RECIPIENTS OF TEMPORARY 
              FAMILY ASSISTANCE.

    Section 454 (42 U.S.C. 654), as amended by sections 7301(b), 
7304(a), 7312(a), and 7313(a), is amended--
            (1) by striking ``and'' at the end of paragraph (27);
            (2) by striking the period at the end of paragraph (28) and 
        inserting ``; and''; and
            (3) by inserting after paragraph (28) the following new 
        paragraph:
            ``(29) provide that the State agency responsible for 
        administering the State plan--
                    ``(A) shall make the determination (and 
                redetermination at appropriate intervals) as to whether 
                an individual who has applied for or is receiving 
                assistance under the State program funded under part A 
                or the State program under title XXI is cooperating in 
                good faith with the State in establishing the paternity 
                of, or in establishing, modifying, or enforcing a 
                support order for, any child of the individual by 
                providing the State agency with the name of, and such 
                other information as the State agency may require with 
                respect to, the noncustodial parent of the child, 
                subject to such good cause and other exceptions as the 
                State shall establish and taking into account the best 
                interests of the child;
                    ``(B) shall require the individual to supply 
                additional necessary information and appear at 
                interviews, hearings, and legal proceedings;
                    ``(C) shall require the individual and the child to 
                submit to genetic tests pursuant to judicial or 
                administrative order; and
                    ``(D) shall promptly notify the individual and the 
                State agency administering the State program funded 
                under part A and the State agency administering the 
                State program under title XXI of each such 
                determination, and if noncooperation is determined, the 
                basis therefore.''.

             CHAPTER 5--PROGRAM ADMINISTRATION AND FUNDING

SEC. 7341. PERFORMANCE-BASED INCENTIVES AND PENALTIES.

    (a) Incentive Payments.--
            (1) In general.--Section 458 (42 U.S.C. 658) is amended--
                    (A) in subsection (a), by striking ``aid to 
                families'' and all through the end period, and 
                inserting ``assistance under a program funded under 
                part A, and regardless of the economic circumstances of 
                their parents, the Secretary shall, from the support 
                collected which would otherwise represent the 
                reimbursement to the Federal government under section 
                457, pay to each State for each fiscal year, on a 
                quarterly basis (as described in subsection (e)) 
                beginning with the quarter commencing October 1, 1999, 
                an incentive payment in an amount determined under 
                subsections (b) and (c).'';
                    (B) by striking subsections (b) and (c) and 
                inserting the following:
    ``(b)(1) Not later than 60 days after the date of the enactment of 
the Balanced Budget Reconciliation Act of 1995, the Secretary shall 
establish a committee which shall include State directors of programs 
under this part and which shall develop for the Secretary's approval a 
formula for the distribution of incentive payments to the States.
    ``(2) The formula developed and approved under paragraph (1)--
            ``(A) shall result in a percentage of the collections 
        described in subsection (a) being distributed to each State 
        based on the State's comparative performance in the following 
        areas and any other areas approved by the Secretary under this 
        subsection:
                    ``(i) The IV-D paternity establishment percentage, 
                as defined in section 452(g)(2).
                    ``(ii) The percentage of cases with a support order 
                with respect to which services are being provided under 
                the State plan approved under this part.
                    ``(iii) The percentage of cases with a support 
                order in which child support is paid with respect to 
                which services are being so provided.
                    ``(iv) In cases receiving services under the State 
                plan approved under this part, the amount of child 
                support collected compared to the amount of outstanding 
                child support owed.
                    ``(v) The cost-effectiveness of the State program;
            ``(B) shall take into consideration--
                    ``(i) the impact that incentives can have on 
                reducing the need to provide public assistance and on 
                permanently removing families from public assistance;
                    ``(ii) the need to balance accuracy and fairness 
                with simplicity of understanding and data gathering;
                    ``(iii) the need to reward performance which 
                improves short- and long-term program outcomes, 
                especially establishing paternity and support orders 
                and encouraging the timely payment of support;
                    ``(iv) the Statewide paternity establishment 
                percentage;
                    ``(v) baseline data on current performance and 
                projected costs of performance increases to assure that 
                top performing States can actually achieve the top 
                incentive levels with a reasonable resource investment;
                    ``(vi) performance outcomes which would warrant an 
                increase in the total incentive payments made to the 
                States; and
                    ``(vii) the use or distribution of any portion of 
                the total incentive payments in excess of the total of 
                the payments which may be distributed under subsection 
                (c);
            ``(C) shall be determined so as to distribute to the States 
        total incentive payments equal to the total incentive payments 
        for all States in fiscal year 1994, plus a portion of any 
        increase in the reimbursement to the Federal Government under 
        section 457 from fiscal year 1999 or any other increase based 
        on other performance outcomes approved by the Secretary under 
        this subsection;
            ``(D) shall use a definition of the term `State' which does 
        not include any area within the jurisdiction of an Indian 
        tribal government; and
            ``(E) shall use a definition of the term `Statewide 
        paternity establishment percentage' to mean with respect to a 
        State and a fiscal year--
                    ``(i) the total number of children in the State who 
                were born out of wedlock, who have not attained 1 year 
                of age and for whom paternity is established or 
                acknowledged during the fiscal year; divided by
                    ``(ii) the total number of children born out of 
                wedlock in the State during the fiscal year.
    ``(c) The total amount of the incentives payment made by the 
Secretary to a State in a fiscal year shall not exceed 90 percent of 
the total amounts expended by such State during such year for the 
operation of the plan approved under section 454, less payments to the 
State pursuant to section 455 for such year.'';
            (2) in subsection (d), by striking ``, and any amounts'' 
        through ``shall be excluded''.
    (b) Payments to Political Subdivisions.--Section 454(22) (42 U.S.C. 
654(22)) is amended by inserting before the semicolon the following: 
``, but a political subdivision shall not be entitled to receive, and 
the State may retain, any amount in excess of the amount the political 
subdivision expends on the State program under this part, less the 
amount equal to the percentage of that expenditure paid by the 
Secretary under section 455''.
    (c) Calculation of IV-D Paternity Establishment Percentage.--
            (1) Section 452(g)(1) (42 U.S.C. 652(g)(1)) is amended--
                    (A) in the matter preceding subparagraph (A) by 
                inserting ``its overall performance in child support 
                enforcement is satisfactory (as defined in section 
                458(b) and regulations of the Secretary), and'' after 
                ``1994,''; and
                    (B) in each of subparagraphs (A) and (B), by 
                striking ``75'' and inserting ``90''.
            (2) Section 452(g)(2)(A) (42 U.S.C. 652(g)(2)(A)) is 
        amended in the matter preceding clause (i)--
                    (A) by striking ``paternity establishment 
                percentage'' and inserting ``IV-D paternity 
                establishment percentage''; and
                    (B) by striking ``(or all States, as the case may 
                be)''.
            (3) Section 452(g)(3) (42 U.S.C. 652(g)(3)) is amended--
                    (A) by striking subparagraph (A) and redesignating 
                subparagraphs (B) and (C) as subparagraphs (A) and (B), 
                respectively;
                    (B) in subparagraph (A) (as so redesignated), by 
                striking ``the percentage of children born out-of-
                wedlock in a State'' and inserting ``the percentage of 
                children in a State who are born out of wedlock or for 
                whom support has not been established''; and
                    (C) in subparagraph (B) (as so redesignated)--
                            (i) by inserting ``and overall performance 
                        in child support enforcement'' after 
                        ``paternity establishment percentages''; and
                            (ii) by inserting ``and securing support'' 
                        before the period.
    (d) Effective Dates.--
            (1) Incentive adjustments.--
                    (A) In general.--The amendments made by subsections 
                (a) and (b) shall become effective on the date of the 
                enactment of this Act, except to the extent provided in 
                subparagraph (B).
                    (B) Exception.--Section 458 of the Social Security 
                Act, as in effect before the date of the enactment of 
                this section, shall be effective for purposes of 
                incentive payments to States for fiscal years before 
                fiscal year 2000.
            (2) Penalty reductions.--The amendments made by subsection 
        (c) shall become effective with respect to calendar quarters 
        beginning on and after the date of the enactment of this Act.

SEC. 7342. FEDERAL AND STATE REVIEWS AND AUDITS.

    (a) State Agency Activities.--Section 454 (42 U.S.C. 654) is 
amended--
            (1) in paragraph (14), by striking ``(14)'' and inserting 
        ``(14)(A)'';
            (2) by redesignating paragraph (15) as subparagraph (B) of 
        paragraph (14); and
            (3) by inserting after paragraph (14) the following new 
        paragraph:
            ``(15) provide for--
                    ``(A) a process for annual reviews of and reports 
                to the Secretary on the State program operated under 
                the State plan approved under this part, including such 
                information as may be necessary to measure State 
                compliance with Federal requirements for expedited 
                procedures, using such standards and procedures as are 
                required by the Secretary, under which the State agency 
                will determine the extent to which the program is 
                operated in compliance with this part; and
                    ``(B) a process of extracting from the automated 
                data processing system required by paragraph (16) and 
                transmitting to the Secretary data and calculations 
                concerning the levels of accomplishment (and rates of 
                improvement) with respect to applicable performance 
                indicators (including IV-D paternity establishment 
                percentages and overall performance in child support 
                enforcement) to the extent necessary for purposes of 
                sections 452(g) and 458.''.
    (b) Federal Activities.--Section 452(a)(4) (42 U.S.C. 652(a)(4)) is 
amended to read as follows:
            ``(4)(A) review data and calculations transmitted by State 
        agencies pursuant to section 454(15)(B) on State program 
        accomplishments with respect to performance indicators for 
        purposes of subsection (g) of this section and section 458;
            ``(B) review annual reports submitted pursuant to section 
        454(15)(A) and, as appropriate, provide to the State comments, 
        recommendations for additional or alternative corrective 
        actions, and technical assistance; and
            ``(C) conduct audits, in accordance with the Government 
        auditing standards of the Comptroller General of the United 
        States--
                    ``(i) at least once every 3 years (or more 
                frequently, in the case of a State which fails to meet 
                the requirements of this part concerning performance 
                standards and reliability of program data) to assess 
                the completeness, reliability, and security of the 
                data, and the accuracy of the reporting systems, used 
                in calculating performance indicators under subsection 
                (g) of this section and section 458;
                    ``(ii) of the adequacy of financial management of 
                the State program operated under the State plan 
                approved under this part, including assessments of--
                            ``(I) whether Federal and other funds made 
                        available to carry out the State program are 
                        being appropriately expended, and are properly 
                        and fully accounted for; and
                            ``(II) whether collections and 
                        disbursements of support payments are carried 
                        out correctly and are fully accounted for; and
                    ``(iii) for such other purposes as the Secretary 
                may find necessary;''.
    (c) Effective Date.--The amendments made by this section shall be 
effective with respect to calendar quarters beginning 12 months or more 
after the date of the enactment of this Act.

SEC. 7343. REQUIRED REPORTING PROCEDURES.

    (a) Establishment.--Section 452(a)(5) (42 U.S.C. 652(a)(5)) is 
amended by inserting ``, and establish procedures to be followed by 
States for collecting and reporting information required to be provided 
under this part, and establish uniform definitions (including those 
necessary to enable the measurement of State compliance with the 
requirements of this part relating to expedited processes) to be 
applied in following such procedures'' before the semicolon.
    (b) State Plan Requirement.--Section 454 (42 U.S.C. 654), as 
amended by sections 7301(b), 7304(a), 7312(a), 7313(a), and 7333, is 
amended--
            (1) by striking ``and'' at the end of paragraph (28);
            (2) by striking the period at the end of paragraph (29) and 
        inserting ``; and''; and
            (3) by adding after paragraph (29) the following new 
        paragraph:
            ``(30) provide that the State shall use the definitions 
        established under section 452(a)(5) in collecting and reporting 
        information as required under this part.''.

SEC. 7344. AUTOMATED DATA PROCESSING REQUIREMENTS.

    (a) Revised Requirements.--
            (1) In general.--Section 454(16) (42 U.S.C. 654(16)) is 
        amended--
                    (A) by striking ``, at the option of the State,'';
                    (B) by inserting ``and operation by the State 
                agency'' after ``for the establishment'';
                    (C) by inserting ``meeting the requirements of 
                section 454A'' after ``information retrieval system'';
                    (D) by striking ``in the State and localities 
                thereof, so as (A)'' and inserting ``so as'';
                    (E) by striking ``(i)''; and
                    (F) by striking ``(including'' and all that follows 
                and inserting a semicolon.
            (2) Automated data processing.--Part D of title IV (42 
        U.S.C. 651-669) is amended by inserting after section 454 the 
        following new section:

``SEC. 454A. AUTOMATED DATA PROCESSING.

    ``(a) In General.--In order for a State to meet the requirements of 
this section, the State agency administering the State program under 
this part shall have in operation a single statewide automated data 
processing and information retrieval system which has the capability to 
perform the tasks specified in this section with the frequency and in 
the manner required by or under this part.
    ``(b) Program Management.--The automated system required by this 
section shall perform such functions as the Secretary may specify 
relating to management of the State program under this part, 
including--
            ``(1) controlling and accounting for use of Federal, State, 
        and local funds in carrying out the program; and
            ``(2) maintaining the data necessary to meet Federal 
        reporting requirements under this part on a timely basis.
    ``(c) Calculation of Performance Indicators.--In order to enable 
the Secretary to determine the incentive and penalty adjustments 
required by sections 452(g) and 458, the State agency shall--
            ``(1) use the automated system--
                    ``(A) to maintain the requisite data on State 
                performance with respect to paternity establishment and 
                child support enforcement in the State; and
                    ``(B) to calculate the IV-D paternity establishment 
                percentage and overall performance in child support 
                enforcement for the State for each fiscal year; and
            ``(2) have in place systems controls to ensure the 
        completeness and reliability of, and ready access to, the data 
        described in paragraph (1)(A), and the accuracy of the 
        calculations described in paragraph (1)(B).
    ``(d) Information Integrity and Security.--The State agency shall 
have in effect safeguards on the integrity, accuracy, and completeness 
of, access to, and use of data in the automated system required by this 
section, which shall include the following (in addition to such other 
safeguards as the Secretary may specify in regulations):
            ``(1) Policies restricting access.--Written policies 
        concerning access to data by State agency personnel, and 
        sharing of data with other persons, which--
                    ``(A) permit access to and use of data only to the 
                extent necessary to carry out the State program under 
                this part; and
                    ``(B) specify the data which may be used for 
                particular program purposes, and the personnel 
                permitted access to such data.
            ``(2) Systems controls.--Systems controls (such as 
        passwords or blocking of fields) to ensure strict adherence to 
        the policies described in paragraph (1).
            ``(3) Monitoring of access.--Routine monitoring of access 
        to and use of the automated system, through methods such as 
        audit trails and feedback mechanisms, to guard against and 
        promptly identify unauthorized access or use.
            ``(4) Training and information.--Procedures to ensure that 
        all personnel (including State and local agency staff and 
        contractors) who may have access to or be required to use 
        confidential program data are informed of applicable 
        requirements and penalties (including those in section 6103 of 
        the Internal Revenue Code of 1986), and are adequately trained 
        in security procedures.
            ``(5) Penalties.--Administrative penalties (up to and 
        including dismissal from employment) for unauthorized access 
        to, or disclosure or use of, confidential data.''.
            (3) Regulations.--The Secretary of Health and Human 
        Services shall prescribe final regulations for implementation 
        of section 454A of the Social Security Act not later than 2 
        years after the date of the enactment of this Act.
            (4) Implementation timetable.--Section 454(24) (42 U.S.C. 
        654(24)), as amended by sections 7304(a)(2) and 7312(a)(1), is 
        amended to read as follows:
            ``(24) provide that the State will have in effect an 
        automated data processing and information retrieval system--
                    ``(A) by October 1, 1997, which meets all 
                requirements of this part which were enacted on or 
                before the date of enactment of the Family Support Act 
                of 1988; and
                    ``(B) by October 1, 1999, which meets all 
                requirements of this part enacted on or before the date 
                of the enactment of the Balanced Budget Reconciliation 
                Act of 1995, except that such deadline shall be 
                extended by 1 day for each day (if any) by which the 
                Secretary fails to meet the deadline imposed by section 
                7344(a)(3) of the Balanced Budget Reconciliation Act of 
                1995.''.
    (b) Special Federal Matching Rate for Development Costs of 
Automated Systems.--
            (1) In general.--Section 455(a) (42 U.S.C. 655(a)) is 
        amended--
                    (A) in paragraph (1)(B)--
                            (i) by striking ``90 percent'' and 
                        inserting ``the percent specified in paragraph 
                        (3)'';
                            (ii) by striking ``so much of''; and
                            (iii) by striking ``which the Secretary'' 
                        and all that follows and inserting ``, and''; 
                        and
                    (B) by adding at the end the following new 
                paragraph:
    ``(3)(A) The Secretary shall pay to each State, for each quarter in 
fiscal years 1996 and 1997, 90 percent of so much of the State 
expenditures described in paragraph (1)(B) as the Secretary finds are 
for a system meeting the requirements specified in section 454(16) (as 
in effect on the day before the date of the enactment of the Balanced 
Budget Reconciliation Act of 1995), but limited to the amount approved 
for States in the advance planning documents of such States submitted 
on or before May 1, 1995.
    ``(B)(i) The Secretary shall pay to each State, for each quarter in 
fiscal years 1997 through 2001, the percentage specified in clause (ii) 
of so much of the State expenditures described in paragraph (1)(B) as 
the Secretary finds are for a system meeting the requirements of 
sections 454(16) and 454A.
    ``(ii) The percentage specified in this clause is the greater of--
            ``(I) 80 percent; or
            ``(II) the percentage otherwise applicable to Federal 
        payments to the State under subparagraph (A) (as adjusted 
        pursuant to section 458).''.
            (2) Temporary limitation on payments under special federal 
        matching rate.--
                    (A) In general.--The Secretary of Health and Human 
                Services may not pay more than $260,000,000 in the 
                aggregate under section 455(a)(3) of the Social 
                Security Act for fiscal years 1996, 1997, 1998, 1999, 
                and 2000.
                    (B) Allocation of limitation among states.--The 
                total amount payable to a State under section 455(a)(3) 
                of such Act for fiscal years 1996, 1997, 1998, 1999, 
                and 2000 shall not exceed the limitation determined for 
                the State by the Secretary of Health and Human Services 
                in regulations.
                    (C) Allocation formula.--The regulations referred 
                to in subparagraph (B) shall prescribe a formula for 
                allocating the amount specified in subparagraph (A) 
                among States with plans approved under part D of title 
                IV of the Social Security Act, which shall take into 
                account--
                            (i) the relative size of State caseloads 
                        under such part; and
                            (ii) the level of automation needed to meet 
                        the automated data processing requirements of 
                        such part.
    (c) Conforming Amendment.--Section 123(c) of the Family Support Act 
of 1988 (102 Stat. 2352; Public Law 100-485) is repealed.

SEC. 7345. TECHNICAL ASSISTANCE.

    (a) For Training of Federal and State Staff, Research and 
Demonstration Programs, and Special Projects of Regional or National 
Significance.--Section 452 (42 U.S.C. 652) is amended by adding at the 
end the following new subsection:
    ``(j) Out of any money in the Treasury of the United States not 
otherwise appropriated, there is hereby appropriated to the Secretary 
for each fiscal year an amount equal to 1 percent of the total amount 
paid to the Federal Government pursuant to section 457(a) during the 
immediately preceding fiscal year (as determined on the basis of the 
most recent reliable data available to the Secretary as of the end of 
the 3rd calendar quarter following the end of such preceding fiscal 
year), to cover costs incurred by the Secretary for--
            ``(1) information dissemination and technical assistance to 
        States, training of State and Federal staff, staffing studies, 
        and related activities needed to improve programs under this 
        part (including technical assistance concerning State automated 
        systems required by this part); and
            ``(2) research, demonstration, and special projects of 
        regional or national significance relating to the operation of 
        State programs under this part.''.
    (b) Operation of Federal Parent Locator Service.--Section 453 (42 
U.S.C. 653), as amended by section 7316(f), is amended by adding at the 
end the following new subsection:
    ``(n) Out of any money in the Treasury of the United States not 
otherwise appropriated, there is hereby appropriated to the Secretary 
for each fiscal year an amount equal to 2 percent of the total amount 
paid to the Federal Government pursuant to section 457(a) during the 
immediately preceding fiscal year (as determined on the basis of the 
most recent reliable data available to the Secretary as of the end of 
the 3rd calendar quarter following the end of such preceding fiscal 
year), to cover costs incurred by the Secretary for operation of the 
Federal Parent Locator Service under this section, to the extent such 
costs are not recovered through user fees.''.

SEC. 7346. REPORTS AND DATA COLLECTION BY THE SECRETARY.

    (a) Annual Report to Congress.--
            (1) Section 452(a)(10)(A) (42 U.S.C. 652(a)(10)(A)) is 
        amended--
                    (A) by striking ``this part;'' and inserting ``this 
                part, including--''; and
                    (B) by adding at the end the following new clauses:
                            ``(i) the total amount of child support 
                        payments collected as a result of services 
                        furnished during the fiscal year to individuals 
                        receiving services under this part;
                            ``(ii) the cost to the States and to the 
                        Federal Government of so furnishing the 
                        services; and
                            ``(iii) the number of cases involving 
                        families--
                                    ``(I) who became ineligible for 
                                assistance under State programs funded 
                                under part A during a month in the 
                                fiscal year; and
                                    ``(II) with respect to whom a child 
                                support payment was received in the 
                                month;''.
            (2) Section 452(a)(10)(C) (42 U.S.C. 652(a)(10)(C)) is 
        amended--
                    (A) in the matter preceding clause (i)--
                            (i) by striking ``with the data required 
                        under each clause being separately stated for 
                        cases'' and inserting ``separately stated for 
                        (1) cases'';
                            (ii) by striking ``cases where the child 
                        was formerly receiving'' and inserting ``or 
                        formerly received'';
                            (iii) by inserting ``or 2136'' after 
                        ``471(a)(17)''; and
                            (iv) by inserting ``(2)'' before ``all 
                        other'';
                    (B) in each of clauses (i) and (ii), by striking 
                ``, and the total amount of such obligations'';
                    (C) in clause (iii), by striking ``described in'' 
                and all that follows and inserting ``in which support 
                was collected during the fiscal year;'';
                    (D) by striking clause (iv); and
                    (E) by redesignating clause (v) as clause (vii), 
                and inserting after clause (iii) the following new 
                clauses:
                            ``(iv) the total amount of support 
                        collected during such fiscal year and 
                        distributed as current support;
                            ``(v) the total amount of support collected 
                        during such fiscal year and distributed as 
                        arrearages;
                            ``(vi) the total amount of support due and 
                        unpaid for all fiscal years; and''.
            (3) Section 452(a)(10)(G) (42 U.S.C. 652(a)(10)(G)) is 
        amended by striking ``on the use of Federal courts and''.
            (4) Section 452(a)(10) (42 U.S.C. 652(a)(10)) is amended--
                    (A) in subparagraph (H), by striking ``and'';
                    (B) in subparagraph (I), by striking the period and 
                inserting ``; and''; and
                    (C) by inserting after subparagraph (I) the 
                following new subparagraph:
                    ``(J) compliance, by State, with the standards 
                established pursuant to subsections (h) and (i).''.
            (5) Section 452(a)(10) (42 U.S.C. 652(a)(10)) is amended by 
        striking all that follows subparagraph (J), as added by 
        paragraph (4).
    (b) Effective Date.--The amendments made by subsection (a) shall be 
effective with respect to fiscal year 1996 and succeeding fiscal years.

      CHAPTER 6--ESTABLISHMENT AND MODIFICATION OF SUPPORT ORDERS

SEC. 7351. NATIONAL CHILD SUPPORT GUIDELINES COMMISSION.

    (a) Establishment.--There is hereby established a commission to be 
known as the National Child Support Guidelines Commission (in this 
section referred to as the ``Commission'').
    (b) General Duties.--
            (1) In general.--The Commission shall determine--
                    (A) whether it is appropriate to develop a national 
                child support guideline for consideration by the 
                Congress or for adoption by individual States; or
                    (B) based on a study of various guideline models, 
                the benefits and deficiencies of such models, and any 
                needed improvements.
            (2) Development of models.--If the Commission determines 
        under paragraph (1)(A) that a national child support guideline 
        is needed or under paragraph (1)(B) that improvements to 
        guideline models are needed, the Commission shall develop such 
        national guideline or improvements.
    (c) Matters for Consideration by the Commission.--In making the 
recommendations concerning guidelines required under subsection (b), 
the Commission shall consider--
            (1) the adequacy of State child support guidelines 
        established pursuant to section 467;
            (2) matters generally applicable to all support orders, 
        including--
                    (A) the feasibility of adopting uniform terms in 
                all child support orders;
                    (B) how to define income and under what 
                circumstances income should be imputed; and
                    (C) tax treatment of child support payments;
            (3) the appropriate treatment of cases in which either or 
        both parents have financial obligations to more than 1 family, 
        including the effect (if any) to be given to--
                    (A) the income of either parent's spouse; and
                    (B) the financial responsibilities of either parent 
                for other children or stepchildren;
            (4) the appropriate treatment of expenses for child care 
        (including care of the children of either parent, and work-
        related or job-training-related child care);
            (5) the appropriate treatment of expenses for health care 
        (including uninsured health care) and other extraordinary 
        expenses for children with special needs;
            (6) the appropriate duration of support by 1 or both 
        parents, including--
                    (A) support (including shared support) for 
                postsecondary or vocational education; and
                    (B) support for disabled adult children;
            (7) procedures to automatically adjust child support orders 
        periodically to address changed economic circumstances, 
        including changes in the Consumer Price Index or either 
        parent's income and expenses in particular cases;
            (8) procedures to help noncustodial parents address 
        grievances regarding visitation and custody orders to prevent 
        such parents from withholding child support payments until such 
        grievances are resolved; and
            (9) whether, or to what extent, support levels should be 
        adjusted in cases in which custody is shared or in which the 
        noncustodial parent has extended visitation rights.
    (d) Membership.--
            (1) Number; appointment.--
                    (A) In general.--The Commission shall be composed 
                of 12 individuals appointed not later than January 15, 
                1997, of which--
                            (i) 2 shall be appointed by the Chairman of 
                        the Committee on Finance of the Senate, and 1 
                        shall be appointed by the ranking minority 
                        member of the Committee;
                            (ii) 2 shall be appointed by the Chairman 
                        of the Committee on Ways and Means of the House 
                        of Representatives, and 1 shall be appointed by 
                        the ranking minority member of the Committee; 
                        and
                            (iii) 6 shall be appointed by the Secretary 
                        of Health and Human Services.
                    (B) Qualifications of members.--Members of the 
                Commission shall have expertise and experience in the 
                evaluation and development of child support guidelines. 
                At least 1 member shall represent advocacy groups for 
                custodial parents, at least 1 member shall represent 
                advocacy groups for noncustodial parents, and at least 
                1 member shall be the director of a State program under 
                part D of title IV of the Social Security Act.
            (2) Terms of office.--Each member shall be appointed for a 
        term of 2 years. A vacancy in the Commission shall be filled in 
        the manner in which the original appointment was made.
    (e) Commission Powers, Compensation, Access to Information, and 
Supervision.--The 1st sentence of subparagraph (C), the 1st and 3rd 
sentences of subparagraph (D), subparagraph (F) (except with respect to 
the conduct of medical studies), clauses (ii) and (iii) of subparagraph 
(G), and subparagraph (H) of section 1886(e)(6) of the Social Security 
Act shall apply to the Commission in the same manner in which such 
provisions apply to the Prospective Payment Assessment Commission.
    (f) Report.--Not later than 2 years after the appointment of 
members, the Commission shall submit to the President, the Committee on 
Ways and Means of the House of Representatives, and the Committee on 
Finance of the Senate, a recommended national child support guideline 
and a final assessment of issues relating to such a proposed national 
child support guideline.
    (g) Termination.--The Commission shall terminate 6 months after the 
submission of the report described in subsection (e).

SEC. 7352. SIMPLIFIED PROCESS FOR REVIEW AND ADJUSTMENT OF CHILD 
              SUPPORT ORDERS.

    Section 466(a)(10) (42 U.S.C. 666(a)(10)) is amended to read as 
follows:
            ``(10) Procedures under which the State shall review and 
        adjust each support order being enforced under this part upon 
        the request of either parent or the State if there is an 
        assignment. Such procedures shall provide the following:
                    ``(A) The State shall review and, as appropriate, 
                adjust the support order every 3 years, taking into 
                account the best interests of the child involved.
                    ``(B)(i) The State may elect to review and, if 
                appropriate, adjust an order pursuant to subparagraph 
                (A) by--
                            ``(I) reviewing and, if appropriate, 
                        adjusting the order in accordance with the 
                        guidelines established pursuant to section 
                        467(a) if the amount of the child support award 
                        under the order differs from the amount that 
                        would be awarded in accordance with the 
                        guidelines; or
                            ``(II) applying a cost-of-living adjustment 
                        to the order in accordance with a formula 
                        developed by the State and permit either party 
                        to contest the adjustment, within 30 days after 
                        the date of the notice of the adjustment, by 
                        making a request for review and, if 
                        appropriate, adjustment of the order in 
                        accordance with the child support guidelines 
                        established pursuant to section 467(a).
                    ``(ii) Any adjustment under clause (i) shall be 
                made without a requirement for proof or showing of a 
                change in circumstances.
                    ``(C) The State may use automated methods 
                (including automated comparisons with wage or State 
                income tax data) to identify orders eligible for 
                review, conduct the review, identify orders eligible 
                for adjustment, and apply the appropriate adjustment to 
                the orders eligible for adjustment under the threshold 
                established by the State.
                    ``(D)(i) The State shall, at the request of either 
                parent subject to such an order or of any State child 
                support enforcement agency, review and, if appropriate, 
                adjust the order in accordance with the guidelines 
                established pursuant to section 467(a) based upon a 
                substantial change in the circumstances of either 
                parent.
                    ``(ii) The State shall provide notice to the 
                parents subject to such an order informing them of 
                their right to request the State to review and, if 
                appropriate, adjust the order pursuant to clause (i). 
                The notice may be included in the order.''.

SEC. 7353. FURNISHING CONSUMER REPORTS FOR CERTAIN PURPOSES RELATING TO 
              CHILD SUPPORT.

    Section 604 of the Fair Credit Reporting Act (15 U.S.C. 1681b) is 
amended by adding at the end the following new paragraphs:
            ``(4) In response to a request by the head of a State or 
        local child support enforcement agency (or a State or local 
        government official authorized by the head of such an agency), 
        if the person making the request certifies to the consumer 
        reporting agency that--
                    ``(A) the consumer report is needed for the purpose 
                of establishing an individual's capacity to make child 
                support payments or determining the appropriate level 
                of such payments;
                    ``(B) the paternity of the consumer for the child 
                to which the obligation relates has been established or 
                acknowledged by the consumer in accordance with State 
                laws under which the obligation arises (if required by 
                those laws);
                    ``(C) the person has provided at least 10 days' 
                prior notice to the consumer whose report is requested, 
                by certified or registered mail to the last known 
                address of the consumer, that the report will be 
                requested; and
                    ``(D) the consumer report will be kept 
                confidential, will be used solely for a purpose 
                described in subparagraph (A), and will not be used in 
                connection with any other civil, administrative, or 
                criminal proceeding, or for any other purpose.
            ``(5) To an agency administering a State plan under section 
        454 of the Social Security Act (42 U.S.C. 654) for use to set 
        an initial or modified child support award.''.

SEC. 7354. NONLIABILITY FOR DEPOSITORY INSTITUTIONS PROVIDING FINANCIAL 
              RECORDS TO STATE CHILD SUPPORT ENFORCEMENT AGENCIES IN 
              CHILD SUPPORT CASES.

    (a) In General.--Notwithstanding any other provision of Federal or 
State law, a depository institution shall not be liable under any 
Federal or State law to any person for disclosing any financial record 
of an individual to a State child support enforcement agency attempting 
to establish, modify, or enforce a child support obligation of such 
individual.
    (b) Prohibition of Disclosure of Financial Record Obtained by State 
Child Support Enforcement Agency.--A State child support enforcement 
agency which obtains a financial record of an individual from a 
financial institution pursuant to subsection (a) may disclose such 
financial record only for the purpose of, and to the extent necessary 
in, establishing, modifying, or enforcing a child support obligation of 
such individual.
    (c) Civil Damages for Unauthorized Disclosure.--
            (1) Disclosure by state officer or employee.--If any person 
        knowingly, or by reason of negligence, discloses a financial 
        record of an individual in violation of subsection (b), such 
        individual may bring a civil action for damages against such 
        person in a district court of the United States.
            (2) No liability for good faith but erroneous 
        interpretation.--No liability shall arise under this subsection 
        with respect to any disclosure which results from a good faith, 
        but erroneous, interpretation of subsection (b).
            (3) Damages.--In any action brought under paragraph (1), 
        upon a finding of liability on the part of the defendant, the 
        defendant shall be liable to the plaintiff in an amount equal 
        to the sum of--
                    (A) the greater of--
                            (i) $1,000 for each act of unauthorized 
                        disclosure of a financial record with respect 
                        to which such defendant is found liable; or
                            (ii) the sum of--
                                    (I) the actual damages sustained by 
                                the plaintiff as a result of such 
                                unauthorized disclosure; plus
                                    (II) in the case of a willful 
                                disclosure or a disclosure which is the 
                                result of gross negligence, punitive 
                                damages; plus
                    (B) the costs (including attorney's fees) of the 
                action.
    (d) Definitions.--For purposes of this section:
            (1) The term ``depository institution'' means--
                    (A) a depository institution, as defined in section 
                3(c) of the Federal Deposit Insurance Act (12 U.S.C. 
                1813(c));
                    (B) an institution-affiliated party, as defined in 
                section 3(u) of such Act (12 U.S.C. 1813(v)); and
                    (C) any Federal credit union or State credit union, 
                as defined in section 101 of the Federal Credit Union 
                Act (12 U.S.C. 1752), including an institution-
                affiliated party of such a credit union, as defined in 
                section 206(r) of such Act (12 U.S.C. 1786(r)).
            (2) The term ``financial record'' has the meaning given 
        such term in section 1101 of the Right to Financial Privacy Act 
        of 1978 (12 U.S.C. 3401).
            (3) The term ``State child support enforcement agency'' 
        means a State agency which administers a State program for 
        establishing and enforcing child support obligations.

                CHAPTER 7--ENFORCEMENT OF SUPPORT ORDERS

SEC. 7361. INTERNAL REVENUE SERVICE COLLECTION OF ARREARAGES.

    (a) Amendment to Internal Revenue Code.--Section 6305(a) of the 
Internal Revenue Code of 1986 (relating to collection of certain 
liability) is amended--
            (1) by striking ``and'' at the end of paragraph (3);
            (2) by striking the period at the end of paragraph (4) and 
        inserting ``, and'';
            (3) by adding at the end the following new paragraph:
            ``(5) no additional fee may be assessed for adjustments to 
        an amount previously certified pursuant to such section 452(b) 
        with respect to the same obligor.''; and
            (4) by striking ``Secretary of Health, Education, and 
        Welfare'' each place it appears and inserting ``Secretary of 
        Health and Human Services''.
    (b) Effective Date.--The amendments made by this section shall 
become effective October 1, 1997.

SEC. 7362. AUTHORITY TO COLLECT SUPPORT FROM FEDERAL EMPLOYEES.

    (a) Consolidation and Streamlining of Authorities.--Section 459 (42 
U.S.C. 659) is amended to read as follows:

``SEC. 459. CONSENT BY THE UNITED STATES TO INCOME WITHHOLDING, 
              GARNISHMENT, AND SIMILAR PROCEEDINGS FOR ENFORCEMENT OF 
              CHILD SUPPORT AND ALIMONY OBLIGATIONS.

    ``(a) Consent To Support Enforcement.--Notwithstanding any other 
provision of law (including section 207 of this Act and section 5301 of 
title 38, United States Code), effective January 1, 1975, moneys (the 
entitlement to which is based upon remuneration for employment) due 
from, or payable by, the United States or the District of Columbia 
(including any agency, subdivision, or instrumentality thereof) to any 
individual, including members of the Armed Forces of the United States, 
shall be subject, in like manner and to the same extent as if the 
United States or the District of Columbia were a private person, to 
withholding in accordance with State law enacted pursuant to 
subsections (a)(1) and (b) of section 466 and regulations of the 
Secretary under such subsections, and to any other legal process 
brought, by a State agency administering a program under a State plan 
approved under this part or by an individual obligee, to enforce the 
legal obligation of the individual to provide child support or alimony.
    ``(b) Consent to Requirements Applicable to Private Person.--With 
respect to notice to withhold income pursuant to subsection (a)(1) or 
(b) of section 466, or any other order or process to enforce support 
obligations against an individual (if the order or process contains or 
is accompanied by sufficient data to permit prompt identification of 
the individual and the moneys involved), each governmental entity 
specified in subsection (a) shall be subject to the same requirements 
as would apply if the entity were a private person, except as otherwise 
provided in this section.
    ``(c) Designation of Agent; Response to Notice or Process--
            ``(1) Designation of agent.--The head of each agency 
        subject to this section shall--
                    ``(A) designate an agent or agents to receive 
                orders and accept service of process in matters 
                relating to child support or alimony; and
                    ``(B) annually publish in the Federal Register the 
                designation of the agent or agents, identified by title 
                or position, mailing address, and telephone number.
            ``(2) Response to notice or process.--If an agent 
        designated pursuant to paragraph (1) of this subsection 
        receives notice pursuant to State procedures in effect pursuant 
        to subsection (a)(1) or (b) of section 466, or is effectively 
        served with any order, process, or interrogatory, with respect 
        to an individual's child support or alimony payment 
        obligations, the agent shall--
                    ``(A) as soon as possible (but not later than 15 
                days) thereafter, send written notice of the notice or 
                service (together with a copy of the notice or service) 
                to the individual at the duty station or last-known 
                home address of the individual;
                    ``(B) within 30 days (or such longer period as may 
                be prescribed by applicable State law) after receipt of 
                a notice pursuant to such State procedures, comply with 
                all applicable provisions of section 466; and
                    ``(C) within 30 days (or such longer period as may 
                be prescribed by applicable State law) after effective 
                service of any other such order, process, or 
                interrogatory, respond to the order, process, or 
                interrogatory.
    ``(d) Priority of Claims.--If a governmental entity specified in 
subsection (a) receives notice or is served with process, as provided 
in this section, concerning amounts owed by an individual to more than 
1 person--
            ``(1) support collection under section 466(b) must be given 
        priority over any other process, as provided in section 
        466(b)(7);
            ``(2) allocation of moneys due or payable to an individual 
        among claimants under section 466(b) shall be governed by 
        section 466(b) and the regulations prescribed under such 
        section; and
            ``(3) such moneys as remain after compliance with 
        paragraphs (1) and (2) shall be available to satisfy any other 
        such processes on a 1st-come, 1st-served basis, with any such 
        process being satisfied out of such moneys as remain after the 
        satisfaction of all such processes which have been previously 
        served.
    ``(e) No Requirement To Vary Pay Cycles.--A governmental entity 
that is affected by legal process served for the enforcement of an 
individual's child support or alimony payment obligations shall not be 
required to vary its normal pay and disbursement cycle in order to 
comply with the legal process.
    ``(f) Relief From Liability.--
            ``(1) Neither the United States, nor the government of the 
        District of Columbia, nor any disbursing officer shall be 
        liable with respect to any payment made from moneys due or 
        payable from the United States to any individual pursuant to 
        legal process regular on its face, if the payment is made in 
        accordance with this section and the regulations issued to 
        carry out this section.
            ``(2) No Federal employee whose duties include taking 
        actions necessary to comply with the requirements of subsection 
        (a) with regard to any individual shall be subject under any 
        law to any disciplinary action or civil or criminal liability 
        or penalty for, or on account of, any disclosure of information 
        made by the employee in connection with the carrying out of 
        such actions.
    ``(g) Regulations.--Authority to promulgate regulations for the 
implementation of this section shall, insofar as this section applies 
to moneys due from (or payable by)--
            ``(1) the United States (other than the legislative or 
        judicial branches of the Federal Government) or the government 
        of the District of Columbia, be vested in the President (or the 
        designee of the President);
            ``(2) the legislative branch of the Federal Government, be 
        vested jointly in the President pro tempore of the Senate and 
        the Speaker of the House of Representatives (or their 
        designees), and
            ``(3) the judicial branch of the Federal Government, be 
        vested in the Chief Justice of the United States (or the 
        designee of the Chief Justice).
    ``(h) Moneys Subject To Process.--
            ``(1) In general.--Subject to paragraph (2), moneys paid or 
        payable to an individual which are considered to be based upon 
        remuneration for employment, for purposes of this section--
                    ``(A) consist of--
                            ``(i) compensation paid or payable for 
                        personal services of the individual, whether 
                        the compensation is denominated as wages, 
                        salary, commission, bonus, pay, allowances, or 
                        otherwise (including severance pay, sick pay, 
                        and incentive pay);
                            ``(ii) periodic benefits (including a 
                        periodic benefit as defined in section 
                        228(h)(3)) or other payments--
                                    ``(I) under the insurance system 
                                established by title II;
                                    ``(II) under any other system or 
                                fund established by the United States 
                                which provides for the payment of 
                                pensions, retirement or retired pay, 
                                annuities, dependents' or survivors' 
                                benefits, or similar amounts payable on 
                                account of personal services performed 
                                by the individual or any other 
                                individual;
                                    ``(III) as compensation for death 
                                under any Federal program;
                                    ``(IV) under any Federal program 
                                established to provide `black lung' 
                                benefits; or
                                    ``(V) by the Secretary of Veterans 
                                Affairs as pension, or as compensation 
                                for a service-connected disability or 
                                death (except any compensation paid by 
                                the Secretary to a member of the Armed 
                                Forces who is in receipt of retired or 
                                retainer pay if the member has waived a 
                                portion of the retired pay of the 
                                member in order to receive the 
                                compensation); and
                            ``(iii) workers' compensation benefits paid 
                        under Federal or State law; but
                    ``(B) do not include any payment--
                            ``(i) by way of reimbursement or otherwise, 
                        to defray expenses incurred by the individual 
                        in carrying out duties associated with the 
                        employment of the individual; or
                            ``(ii) as allowances for members of the 
                        uniformed services payable pursuant to chapter 
                        7 of title 37, United States Code, as 
                        prescribed by the Secretaries concerned 
                        (defined by section 101(5) of such title) as 
                        necessary for the efficient performance of 
                        duty.
            ``(2) Certain amounts excluded.--In determining the amount 
        of any moneys due from, or payable by, the United States to any 
        individual, there shall be excluded amounts which--
                    ``(A) are owed by the individual to the United 
                States;
                    ``(B) are required by law to be, and are, deducted 
                from the remuneration or other payment involved, 
                including Federal employment taxes, and fines and 
                forfeitures ordered by court-martial;
                    ``(C) are properly withheld for Federal, State, or 
                local income tax purposes, if the withholding of the 
                amounts is authorized or required by law and if amounts 
                withheld are not greater than would be the case if the 
                individual claimed all dependents to which he was 
                entitled (the withholding of additional amounts 
                pursuant to section 3402(i) of the Internal Revenue 
                Code of 1986 may be permitted only when the individual 
                presents evidence of a tax obligation which supports 
                the additional withholding);
                    ``(D) are deducted as health insurance premiums;
                    ``(E) are deducted as normal retirement 
                contributions (not including amounts deducted for 
                supplementary coverage); or
                    ``(F) are deducted as normal life insurance 
                premiums from salary or other remuneration for 
                employment (not including amounts deducted for 
                supplementary coverage).
    ``(i) Definitions.--As used in this section:
            ``(1) United states.--The term `United States' includes any 
        department, agency, or instrumentality of the legislative, 
        judicial, or executive branch of the Federal Government, the 
        United States Postal Service, the Postal Rate Commission, any 
        Federal corporation created by an Act of Congress that is 
        wholly owned by the Federal Government, and the governments of 
        the territories and possessions of the United States.
            ``(2) Child support.--The term `child support', when used 
        in reference to the legal obligations of an individual to 
        provide such support, means periodic payments of funds for the 
        support and maintenance of a child or children with respect to 
        which the individual has such an obligation, and (subject to 
        and in accordance with State law) includes payments to provide 
        for health care, education, recreation, clothing, or to meet 
        other specific needs of such a child or children, and includes 
        attorney's fees, interest, and court costs, when and to the 
        extent that the same are expressly made recoverable as such 
        pursuant to a decree, order, or judgment issued in accordance 
        with applicable State law by a court of competent jurisdiction.
            ``(3) Alimony.--The term `alimony', when used in reference 
        to the legal obligations of an individual to provide the same, 
        means periodic payments of funds for the support and 
        maintenance of the spouse (or former spouse) of the individual, 
        and (subject to and in accordance with State law) includes 
        separate maintenance, alimony pendente lite, maintenance, and 
        spousal support, and includes attorney's fees, interest, and 
        court costs when and to the extent that the same are expressly 
        made recoverable as such pursuant to a decree, order, or 
        judgment issued in accordance with applicable State law by a 
        court of competent jurisdiction. Such term does not include any 
        payment or transfer of property or its value by an individual 
        to the spouse or a former spouse of the individual in 
        compliance with any community property settlement, equitable 
        distribution of property, or other division of property between 
        spouses or former spouses.
            ``(4) Private person.--The term `private person' means a 
        person who does not have sovereign or other special immunity or 
        privilege which causes the person not to be subject to legal 
        process.
            ``(5) Legal process.--The term `legal process' means any 
        writ, order, summons, or other similar process in the nature of 
        garnishment--
                    ``(A) which is issued by--
                            ``(i) a court of competent jurisdiction in 
                        any State, territory, or possession of the 
                        United States;
                            ``(ii) a court of competent jurisdiction in 
                        any foreign country with which the United 
                        States has entered into an agreement which 
                        requires the United States to honor the 
                        process; or
                            ``(iii) an authorized official pursuant to 
                        an order of such a court of competent 
                        jurisdiction or pursuant to State or local law; 
                        and
                    ``(B) which is directed to, and the purpose of 
                which is to compel, a governmental entity which holds 
                moneys which are otherwise payable to an individual to 
                make a payment from the moneys to another party in 
                order to satisfy a legal obligation of the individual 
                to provide child support or make alimony payments.''.
    (b) Conforming Amendments.--
            (1) To part d of title iv.--Sections 461 and 462 (42 U.S.C. 
        661 and 662) are repealed.
            (2) To title 5, united states code.--Section 5520a of title 
        5, United States Code, is amended, in subsections (h)(2) and 
        (i), by striking ``sections 459, 461, and 462 of the Social 
        Security Act (42 U.S.C. 659, 661, and 662)'' and inserting 
        ``section 459 of the Social Security Act (42 U.S.C. 659)''.
    (c) Military Retired and Retainer Pay.--
            (1) Definition of court.--Section 1408(a)(1) of title 10, 
        United States Code, is amended--
                    (A) by striking ``and'' at the end of subparagraph 
                (B);
                    (B) by striking the period at the end of 
                subparagraph (C) and inserting ``; and''; and
                    (C) by adding after subparagraph (C) the following 
                new subparagraph:
                    ``(D) any administrative or judicial tribunal of a 
                State competent to enter orders for support or 
                maintenance (including a State agency administering a 
                program under a State plan approved under part D of 
                title IV of the Social Security Act), and, for purposes 
                of this subparagraph, the term `State' includes the 
                District of Columbia, the Commonwealth of Puerto Rico, 
                the Virgin Islands, Guam, and American Samoa.''.
            (2) Definition of court order.--Section 1408(a)(2) of such 
        title is amended by inserting ``or a court order for the 
        payment of child support not included in or accompanied by such 
        a decree or settlement,'' before ``which--''.
            (3) Public payee.--Section 1408(d) of such title is 
        amended--
                    (A) in the heading, by inserting ``(or for Benefit 
                of)'' before ``Spouse or''; and
                    (B) in paragraph (1), in the 1st sentence, by 
                inserting ``(or for the benefit of such spouse or 
                former spouse to a State disbursement unit established 
                pursuant to section 454B of the Social Security Act or 
                other public payee designated by a State, in accordance 
                with part D of title IV of the Social Security Act, as 
                directed by court order, or as otherwise directed in 
                accordance with such part D)'' before ``in an amount 
                sufficient''.
            (4) Relationship to part d of title iv.--Section 1408 of 
        such title is amended by adding at the end the following new 
        subsection:
    ``(j) Relationship to Other Laws.--In any case involving an order 
providing for payment of child support (as defined in section 459(i)(2) 
of the Social Security Act) by a member who has never been married to 
the other parent of the child, the provisions of this section shall not 
apply, and the case shall be subject to the provisions of section 459 
of such Act.''.
    (d) Effective Date.--The amendments made by this section shall 
become effective 6 months after the date of the enactment of this Act.

SEC. 7363. ENFORCEMENT OF CHILD SUPPORT OBLIGATIONS OF MEMBERS OF THE 
              ARMED FORCES.

    (a) Availability of Locator Information.--
            (1) Maintenance of address information.--The Secretary of 
        Defense shall establish a centralized personnel locator service 
        that includes the address of each member of the Armed Forces 
        under the jurisdiction of the Secretary. Upon request of the 
        Secretary of Transportation, addresses for members of the Coast 
        Guard shall be included in the centralized personnel locator 
        service.
            (2) Type of address.--
                    (A) Residential address.--Except as provided in 
                subparagraph (B), the address for a member of the Armed 
                Forces shown in the locator service shall be the 
                residential address of that member.
                    (B) Duty address.--The address for a member of the 
                Armed Forces shown in the locator service shall be the 
                duty address of that member in the case of a member--
                            (i) who is permanently assigned overseas, 
                        to a vessel, or to a routinely deployable unit; 
                        or
                            (ii) with respect to whom the Secretary 
                        concerned makes a determination that the 
                        member's residential address should not be 
                        disclosed due to national security or safety 
                        concerns.
            (3) Updating of locator information.--Within 30 days after 
        a member listed in the locator service establishes a new 
        residential address (or a new duty address, in the case of a 
        member covered by paragraph (2)(B)), the Secretary concerned 
        shall update the locator service to indicate the new address of 
        the member.
            (4) Availability of information.--The Secretary of Defense 
        shall make information regarding the address of a member of the 
        Armed Forces listed in the locator service available, on 
        request, to the Federal Parent Locator Service established 
        under section 453 of the Social Security Act.
    (b) Facilitating Granting of Leave for Attendance at Hearings.--
            (1) Regulations.--The Secretary of each military 
        department, and the Secretary of Transportation with respect to 
        the Coast Guard when it is not operating as a service in the 
        Navy, shall prescribe regulations to facilitate the granting of 
        leave to a member of the Armed Forces under the jurisdiction of 
        that Secretary in a case in which--
                    (A) the leave is needed for the member to attend a 
                hearing described in paragraph (2);
                    (B) the member is not serving in or with a unit 
                deployed in a contingency operation (as defined in 
                section 101 of title 10, United States Code); and
                    (C) the exigencies of military service (as 
                determined by the Secretary concerned) do not otherwise 
                require that such leave not be granted.
            (2) Covered hearings.--Paragraph (1) applies to a hearing 
        that is conducted by a court or pursuant to an administrative 
        process established under State law, in connection with a civil 
        action--
                    (A) to determine whether a member of the Armed 
                Forces is a natural parent of a child; or
                    (B) to determine an obligation of a member of the 
                Armed Forces to provide child support.
            (3) Definitions.--For purposes of this subsection:
                    (A) The term ``court'' has the meaning given that 
                term in section 1408(a) of title 10, United States 
                Code.
                    (B) The term ``child support'' has the meaning 
                given such term in section 459(i) of the Social 
                Security Act (42 U.S.C. 659(i)).
    (c) Payment of Military Retired Pay in Compliance With Child 
Support Orders.--
            (1) Date of certification of court order.--Section 1408 of 
        title 10, United States Code, as amended by section 7362(c)(4), 
        is amended--
                    (A) by redesignating subsections (i) and (j) as 
                subsections (j) and (k), respectively; and
                    (B) by inserting after subsection (h) the following 
                new subsection:
    ``(i) Certification Date.--It is not necessary that the date of a 
certification of the authenticity or completeness of a copy of a court 
order for child support received by the Secretary concerned for the 
purposes of this section be recent in relation to the date of receipt 
by the Secretary.''.
            (2) Payments consistent with assignments of rights to 
        states.--Section 1408(d)(1) of such title is amended by 
        inserting after the 1st sentence the following: ``In the case 
        of a spouse or former spouse who assigns to a State the rights 
        of the spouse or former spouse to receive support, the 
        Secretary concerned may make the child support payments 
        referred to in the preceding sentence to that State in amounts 
        consistent with that assignment of rights.''.
            (3) Arrearages owed by members of the uniformed services.--
        Section 1408(d) of such title is amended by adding at the end 
        the following new paragraph:
    ``(6) In the case of a court order for which effective service is 
made on the Secretary concerned on or after the date of the enactment 
of this paragraph and which provides for payments from the disposable 
retired pay of a member to satisfy the amount of child support set 
forth in the order, the authority provided in paragraph (1) to make 
payments from the disposable retired pay of a member to satisfy the 
amount of child support set forth in a court order shall apply to 
payment of any amount of child support arrearages set forth in that 
order as well as to amounts of child support that currently become 
due.''.
            (4) Payroll deductions.--The Secretary of Defense shall 
        begin payroll deductions within 30 days after receiving notice 
        of withholding, or for the 1st pay period that begins after 
        such 30-day period.

SEC. 7364. VOIDING OF FRAUDULENT TRANSFERS.

    Section 466 (42 U.S.C. 666), as amended by section 7321, is amended 
by adding at the end the following new subsection:
    ``(g) In order to satisfy section 454(20)(A), each State must have 
in effect--
            ``(1)(A) the Uniform Fraudulent Conveyance Act of 1981;
            ``(B) the Uniform Fraudulent Transfer Act of 1984; or
            ``(C) another law, specifying indicia of fraud which create 
        a prima facie case that a debtor transferred income or property 
        to avoid payment to a child support creditor, which the 
        Secretary finds affords comparable rights to child support 
        creditors; and
            ``(2) procedures under which, in any case in which the 
        State knows of a transfer by a child support debtor with 
        respect to which such a prima facie case is established, the 
        State must--
                    ``(A) seek to void such transfer; or
                    ``(B) obtain a settlement in the best interests of 
                the child support creditor.''.

SEC. 7365. WORK REQUIREMENT FOR PERSONS OWING CHILD SUPPORT.

    Section 466(a) (42 U.S.C. 666(a)), as amended by sections 7301(a), 
7315, 7317(a), and 7323, is amended by adding at the end the following 
new paragraph:
            ``(15) Procedures requiring the State, in any case in which 
        an individual owes support with respect to a child receiving 
        services under this part, to seek a court order or 
        administrative order that requires the individual to--
                    ``(A) pay such support in accordance with a plan 
                approved by the court; or
                    ``(B) if the individual is not working and is not 
                incapacitated, participate in work activities 
                (including, at State option, work activities as defined 
                in section 482) as the court deems appropriate.''.

SEC. 7366. DEFINITION OF SUPPORT ORDER.

    Section 453 (42 U.S.C. 653) as amended by sections 7316 and 
7345(b), is amended by adding at the end the following new subsection:
    ``(o) As used in this part, the term `support order' means a 
judgment, decree, or order, whether temporary, final, or subject to 
modification, issued by a court or an administrative agency of 
competent jurisdiction, for the support and maintenance of a child, 
including a child who has attained the age of majority under the law of 
the issuing State, or a child and the parent with whom the child is 
living, which provides for monetary support, health care, arrearages, 
or reimbursement, and which may include related costs and fees, 
interest and penalties, income withholding, attorneys' fees, and other 
relief.''.

SEC. 7367. REPORTING ARREARAGES TO CREDIT BUREAUS.

    Section 466(a)(7) (42 U.S.C. 666(a)(7)) is amended to read as 
follows:
            ``(7)(A) Procedures (subject to safeguards pursuant to 
        subparagraph (B)) requiring the State to report periodically to 
        consumer reporting agencies (as defined in section 603(f) of 
        the Fair Credit Reporting Act (15 U.S.C. 1681a(f)) the name of 
        any absent parent who is delinquent in the payment of support, 
        and the amount of overdue support owed by such parent.
            ``(B) Procedures ensuring that, in carrying out 
        subparagraph (A), information with respect to an absent parent 
        is reported--
                    ``(i) only after such parent has been afforded all 
                due process required under State law, including notice 
                and a reasonable opportunity to contest the accuracy of 
                such information; and
                    ``(ii) only to an entity that has furnished 
                evidence satisfactory to the State that the entity is a 
                consumer reporting agency.''.

SEC. 7368. LIENS.

    Section 466(a)(4) (42 U.S.C. 666(a)(4)) is amended to read as 
follows:
            ``(4) Procedures under which--
                    ``(A) liens arise by operation of law against real 
                and personal property for amounts of overdue support 
                owed by an absent parent who resides or owns property 
                in the State; and
                    ``(B) the State accords full faith and credit to 
                liens described in subparagraph (A) arising in another 
                State, without registration of the underlying order.''.

SEC. 7369. STATE LAW AUTHORIZING SUSPENSION OF LICENSES.

    Section 466(a) (42 U.S.C. 666(a)), as amended by sections 7315, 
7317(a), 7323, and 7365, is amended by adding at the end the following 
new paragraph:
            ``(16) Procedures under which the State has (and uses in 
        appropriate cases) authority to withhold or suspend, or to 
        restrict the use of, driver's licenses, professional and 
        occupational licenses, and recreational licenses of individuals 
        owing overdue support or failing, after receiving appropriate 
        notice, to comply with subpoenas or warrants relating to 
        paternity or child support proceedings.''.

SEC. 7370. DENIAL OF PASSPORTS FOR NONPAYMENT OF CHILD SUPPORT.

    (a) HHS Certification Procedure.--
            (1) Secretarial responsibility.--Section 452 (42 U.S.C. 
        652), as amended by section 7345, is amended by adding at the 
        end the following new subsection:
    ``(k)(1) If the Secretary receives a certification by a State 
agency in accordance with the requirements of section 454(31) that an 
individual owes arrearages of child support in an amount exceeding 
$5,000, the Secretary shall transmit such certification to the 
Secretary of State for action (with respect to denial, revocation, or 
limitation of passports) pursuant to section 7370(b) of the Balanced 
Budget Reconciliation Act of 1995.
    ``(2) The Secretary shall not be liable to an individual for any 
action with respect to a certification by a State agency under this 
section.''.
            (2) State cse agency responsibility.--Section 454 (42 
        U.S.C. 654), as amended by sections 7301(b), 7304(a), 7312(b), 
        7313(a), 7333, and 7343(a), is amended--
                    (A) by striking ``and'' at the end of paragraph 
                (29);
                    (B) by striking the period at the end of paragraph 
                (30) and inserting ``; and''; and
                    (C) by adding after paragraph (30) the following 
                new paragraph:
            ``(31) provide that the State agency will have in effect a 
        procedure (which may be combined with the procedure for tax 
        refund offset under section 464) for certifying to the 
        Secretary, for purposes of the procedure under section 452(k) 
        (concerning denial of passports), determinations that 
        individuals owe arrearages of child support in an amount 
        exceeding $5,000, under which procedure--
                    ``(A) each individual concerned is afforded notice 
                of such determination and the consequences thereof, and 
                an opportunity to contest the determination; and
                    ``(B) the certification by the State agency is 
                furnished to the Secretary in such format, and 
                accompanied by such supporting documentation, as the 
                Secretary may require.''.
    (b) State Department Procedure for Denial of Passports.--
            (1) In general.--The Secretary of State shall, upon 
        certification by the Secretary of Health and Human Services 
        transmitted under section 452(k) of the Social Security Act, 
        refuse to issue a passport to such individual, and may revoke, 
        restrict, or limit a passport issued previously to such 
        individual.
            (2) Limit on liability.--The Secretary of State shall not 
        be liable to an individual for any action with respect to a 
        certification by a State agency under this section.
    (c) Effective Date.--This section and the amendments made by this 
section shall become effective October 1, 1996.

SEC. 7371. INTERNATIONAL CHILD SUPPORT ENFORCEMENT.

    The Secretary of State is authorized to negotiate reciprocal 
agreements with foreign nations on behalf of the States, territories, 
and possessions of the United States regarding the international 
enforcement of child support obligations and designating the Department 
of Health and Human Services as the central authority for such 
enforcement.

SEC. 7372. DENIAL OF MEANS-TESTED FEDERAL BENEFITS TO NONCUSTODIAL 
              PARENTS WHO ARE DELINQUENT IN PAYING CHILD SUPPORT.

    (a) In General.--Notwithstanding any other provision of law, a non-
custodial parent who is more then 2 months delinquent in paying child 
support shall not be eligible to receive any means-tested Federal 
benefits.
    (b) Exception.--
            (1) In general.--Subsection (a) shall not apply to an 
        unemployed non-custodial parent who is more then 2 months 
        delinquent in paying child support if such parent--
                    (A) enters into a schedule of repayment for past 
                due child support with the entity that issued the 
                underlying child support order; and
                    (B) meets all of the terms of repayment specified 
                in the schedule of repayment as enforced by the 
                appropriate disbursing entity.
            (2) 2-year exclusion.--(A) A non-custodial parent who 
        becomes delinquent in child support a second time or any 
        subsequent time shall not be eligible to receive any means-
        tested Federal benefits for a 2-year period beginning on the 
        date that such parent failed to meet such terms.
            (B) At the end of that two-year period, paragraph (A) shall 
        once again apply to that individual.
    (c) Means-tested Federal Benefits.-- For purposes of this section, 
the term ``means-tested Federal benefits'' means benefits under any 
program of assistance, funded in whole or in part, by the Federal 
Government, for which eligibility for benefits is based on need.

SEC. 7373. CHILD SUPPORT ENFORCEMENT FOR INDIAN TRIBES.

    (a) Child Support Enforcement Agreements.--Section 454 (42 U.S.C. 
654), as amended by sections 7301(b), 7304(a), 7312(b), 9313(a), 7333, 
7343(a), and 7370(a)(2) is amended--
            (1) by striking ``and'' at the end of paragraph (30);
            (2) by striking the period at the end of paragraph (31) and 
        inserting ``; and''; and
            (3) by adding after paragraph (31) the following new 
        paragraph:
            ``(32) provide that a State that receives funding pursuant 
        to section 429 and that has within its borders Indian country 
        (as defined in section 1151 of title 18, United States Code) 
        shall, through the State administering agency, make reasonable 
        efforts to enter into cooperative agreements with an Indian 
        tribe or tribal organization (as defined in paragraphs (1) and 
        (2) of section 428(c)), if the Indian tribe or tribal 
        organization demonstrates that such tribe or organization has 
        an established tribal court system or a Court of Indian 
        Offenses with the authority to establish paternity, establish 
        and enforce support orders, and to enter support orders in 
        accordance with child support guidelines established by such 
        tribe or organization, under which the State and tribe or 
        organization shall provide for the cooperative delivery of 
        child support enforcement services in Indian country and for 
        the forwarding of all funding collected pursuant to the 
        functions performed by the tribe or organization to the State 
        agency, or conversely, by the State agency to the tribe or 
        organization, which shall distribute such funding in accordance 
        with such agreement.''.
    (b) Direct Federal Funding to Indian Tribes and Tribal 
Organizations.--Section 455 (42 U.S.C. 655) is amended by adding at the 
end the following new subsection:
    ``(b) The Secretary may, in appropriate cases, make direct payments 
under this part to an Indian tribe or tribal organization which has an 
approved child support enforcement plan under this title. In 
determining whether such payments are appropriate, the Secretary shall, 
at a minimum, consider whether services are being provided to eligible 
Indian recipients by the State agency through an agreement entered into 
pursuant to section 454(32). The Secretary shall provide for an 
appropriate adjustment to the State allotment under this section to 
take into account any payments made under this subsection to Indian 
tribes or tribal organizations located within such State.''.
    (c) Cooperative Enforcement Agreements.--Paragraph (7) of section 
454 (42 U.S.C. 654) is amended by inserting ``and Indian tribes or 
tribal organizations (as defined in section 450(b) of title 25, United 
States Code)'' after ``law enforcement officials''.

SEC. 7374. FINANCIAL INSTITUTION DATA MATCHES.

    Section 466(a) (42 U.S.C. 666(a)), as amended by sections 7315, 
7317(a), 7323, 7365, and 7369, is amended by adding at the end the 
following new paragraph:
            ``(17) Procedures under which the State agency shall enter 
        into agreements with financial institutions doing business 
        within the State to develop and operate a data match system, 
        using automated data exchanges to the maximum extent feasible, 
        in which such financial institutions are required to provide 
        for each calendar quarter the name, record address, social 
        security number, and other identifying information for each 
        absent parent identified by the State who maintains an account 
        at such institution and, in response to a notice of lien or 
        levy, to encumber or surrender, as the case may be, assets held 
        by such institution on behalf of any absent parent who is 
        subject to a child support lien pursuant to paragraph (4). For 
        purposes of this paragraph, the term `financial institution' 
        means Federal and State commercial savings banks, including 
        savings and loan associations and cooperative banks, Federal 
        and State chartered credit unions, benefit associations, 
        insurance companies, safe deposit companies, money-market 
        mutual funds, and any similar entity authorized to do business 
        in the State, and the term `account' means a demand deposit 
        account, checking or negotiable withdrawal order account, 
        savings account, time deposit account, or money-market mutual 
        fund account.''.

SEC. 7375. ENFORCEMENT OF ORDERS AGAINST PATERNAL GRANDPARENTS IN CASES 
              OF MINOR PARENTS.

    Section 466(a) (42 U.S.C. 666(a)), as amended by sections 7315, 
7317(a), 7323, 7365, 7369, and 7374, is amended by adding at the end 
the following new paragraph:
            ``(18) Procedures under which any child support order 
        enforced under this part with respect to a child of minor 
        parents, if the mother of such child is receiving assistance 
        under the State grant under part A, shall be enforceable, 
        jointly and severally, against the paternal grandparents of 
        such child.''.

SEC. 7376. SENSE OF THE SENATE REGARDING THE INABILITY OF THE NON-
              CUSTODIAL PARENT TO PAY CHILD SUPPORT.

    It is the sense of the Senate that--
            (a) States should diligently continue their efforts to 
        enforce child support payments by the non-custodial parent to 
        the custodial parent, regardless of the employment status or 
        location of the non-custodial parent; and
            (b) States are encouraged to pursue pilot programs in which 
        the parents of a non-adult, non-custodial parent who refuses to 
        or is unable to pay child support must--
                    (1) pay or contribute to the child support owed by 
                the non-custodial parent; or
                    (2) otherwise fulfill all financial obligations and 
                meet all conditions imposed on the non-custodial 
                parent, such as participation in a work program or 
                other related activity.

                       CHAPTER 8--MEDICAL SUPPORT

SEC. 7378. TECHNICAL CORRECTION TO ERISA DEFINITION OF MEDICAL CHILD 
              SUPPORT ORDER.

    (a) In General.--Section 609(a)(2)(B) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1169(a)(2)(B)) is amended--
            (1) by striking ``issued by a court of competent 
        jurisdiction'';
            (2) by striking the period at the end of clause (ii) and 
        inserting a comma; and
            (3) by adding, after and below clause (ii), the following:
                ``if such judgment, decree, or order (I) is issued by a 
                court of competent jurisdiction or (II) is issued 
                through an administrative process established under 
                State law and has the force and effect of law under 
                applicable State law.''.
    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        take effect on the date of the enactment of this Act.
            (2) Plan amendments not required until january 1, 1996.--
        Any amendment to a plan required to be made by an amendment 
        made by this section shall not be required to be made before 
        the 1st plan year beginning on or after January 1, 1996, if--
                    (A) during the period after the date before the 
                date of the enactment of this Act and before such 1st 
                plan year, the plan is operated in accordance with the 
                requirements of the amendments made by this section; 
                and
                    (B) such plan amendment applies retroactively to 
                the period after the date before the date of the 
                enactment of this Act and before such 1st plan year.
        A plan shall not be treated as failing to be operated in 
        accordance with the provisions of the plan merely because it 
        operates in accordance with this paragraph.

SEC. 7379. ENFORCEMENT OF ORDERS FOR HEALTH CARE COVERAGE.

    Section 466(a) (42 U.S.C. 666(a)), as amended by sections 7315, 
7317(a), 7323, 7365, 7369, 7374, and 7376, is amended by adding at the 
end the following new paragraph:
            ``(19) Procedures under which all child support orders 
        enforced under this part shall include a provision for the 
        health care coverage of the child, and in the case in which an 
        absent parent provides such coverage and changes employment, 
        and the new employer provides health care coverage, the State 
        agency shall transfer notice of the provision to the employer, 
        which notice shall operate to enroll the child in the absent 
        parent's health plan, unless the absent parent contests the 
        notice.''.

CHAPTER 9--ENHANCING RESPONSIBILITY AND OPPORTUNITY FOR NONRESIDENTIAL 
                                PARENTS

SEC. 7381. GRANTS TO STATES FOR ACCESS AND VISITATION PROGRAMS.

    Part D of title IV (42 U.S.C. 651-669) is amended by adding at the 
end the following new section:

``SEC. 469A. GRANTS TO STATES FOR ACCESS AND VISITATION PROGRAMS.

    ``(a) In General.--The Administration for Children and Families 
shall make grants under this section to enable States to establish and 
administer programs to support and facilitate absent parents' access to 
and visitation of their children, by means of activities including 
mediation (both voluntary and mandatory), counseling, education, 
development of parenting plans, visitation enforcement (including 
monitoring, supervision and neutral drop-off and pickup), and 
development of guidelines for visitation and alternative custody 
arrangements.
    ``(b) Amount of Grant.--The amount of the grant to be made to a 
State under this section for a fiscal year shall be an amount equal to 
the lesser of--
            ``(1) 90 percent of State expenditures during the fiscal 
        year for activities described in subsection (a); or
            ``(2) the allotment of the State under subsection (c) for 
        the fiscal year.
    ``(c) Allotments to States.--
            ``(1) In general.--The allotment of a State for a fiscal 
        year is the amount that bears the same ratio to the amount 
        appropriated for grants under this section for the fiscal year 
        as the number of children in the State living with only 1 
        biological parent bears to the total number of such children in 
        all States.
            ``(2) Minimum allotment.--The Administration for Children 
        and Families shall adjust allotments to States under paragraph 
        (1) as necessary to ensure that no State is allotted less 
        than--
                    ``(A) $50,000 for fiscal year 1996 or 1997; or
                    ``(B) $100,000 for any succeeding fiscal year.
    ``(d) No Supplantation of State Expenditures for Similar 
Activities.--A State to which a grant is made under this section may 
not use the grant to supplant expenditures by the State for activities 
specified in subsection (a), but shall use the grant to supplement such 
expenditures at a level at least equal to the level of such 
expenditures for fiscal year 1995.
    ``(e) State Administration.--Each State to which a grant is made 
under this section--
            ``(1) may administer State programs funded with the grant, 
        directly or through grants to or contracts with courts, local 
        public agencies, or nonprofit private entities;
            ``(2) shall not be required to operate such programs on a 
        statewide basis; and
            ``(3) shall monitor, evaluate, and report on such programs 
        in accordance with regulations prescribed by the Secretary.''.

                    CHAPTER 10--EFFECT OF ENACTMENT

SEC. 7391. EFFECTIVE DATES.

    (a) In General.--Except as otherwise specifically provided (but 
subject to subsections (b) and (c))--
            (1) the provisions of this subtitle requiring the enactment 
        or amendment of State laws under section 466 of the Social 
        Security Act, or revision of State plans under section 454 of 
        such Act, shall be effective with respect to periods beginning 
        on and after October 1, 1996; and
            (2) all other provisions of this subtitle shall become 
        effective upon the date of the enactment of this Act.
    (b) Grace Period for State Law Changes.--The provisions of this 
subtitle shall become effective with respect to a State on the later 
of--
            (1) the date specified in this subtitle, or
            (2) the effective date of laws enacted by the legislature 
        of such State implementing such provisions,
but in no event later than the 1st day of the 1st calendar quarter 
beginning after the close of the 1st regular session of the State 
legislature that begins after the date of the enactment of this Act. 
For purposes of the previous sentence, in the case of a State that has 
a 2-year legislative session, each year of such session shall be deemed 
to be a separate regular session of the State legislature.
    (c) Grace Period for State Constitutional Amendment.--A State shall 
not be found out of compliance with any requirement enacted by this 
subtitle if the State is unable to so comply without amending the State 
constitution until the earlier of--
            (1) 1 year after the effective date of the necessary State 
        constitutional amendment; or
            (2) 5 years after the date of the enactment of this 
        subtitle.

                        Subtitle F--Noncitizens

SEC. 7401. STATE OPTION TO PROHIBIT ASSISTANCE FOR CERTAIN ALIENS.

    (a) In General.--A State may, at its option, prohibit the use of 
any Federal funds received for the provision of assistance under any 
means-tested public assistance program for any individual who is a 
noncitizen of the United States.
    (b) Exceptions.--Subsection (a) shall not apply to--
            (1) any individual who is described in subclause (II), 
        (III), or (IV) of section 1614(a)(1)(B)(i) of the Social 
        Security Act (42 U.S.C. 1382c(a)(1)(B)(i)); and
            (2) any program described in section 7402(f)(2).

SEC. 7402. DEEMED INCOME REQUIREMENT FOR FEDERAL AND FEDERALLY FUNDED 
              PROGRAMS.

    (a) Deeming Requirement for Federal and Federally Funded 
Programs.--Subject to subsection (d), for purposes of determining the 
eligibility of an individual (whether a citizen or national of the 
United States or an alien) for assistance and the amount of assistance, 
under any Federal program of assistance provided or funded, in whole or 
in part, by the Federal Government for which eligibility is based on 
need, the income and resources described in subsection (b) shall, 
notwithstanding any other provision of law, be deemed to be the income 
and resources of such individual.
    (b) Deemed Income and Resources.--The income and resources 
described in this subsection include the following:
            (1) The income and resources of any person who, as a 
        sponsor of such individual's entry into the United States, or 
        in order to enable such individual lawfully to remain in the 
        United States, executed an affidavit of support or similar 
        agreement with respect to such individual.
            (2) The income and resources of the sponsor's spouse.
    (c) Length of Deeming Period.--The requirement of subsection (a) 
shall apply for the period for which the sponsor has agreed, in such 
affidavit or agreement, to provide support for such individual, or for 
a period of 5 years beginning on the date such individual was first 
lawfully in the United States after the execution of such affidavit or 
agreement, whichever period is longer.
    (d) Limitation on Measurement of Deemed Income and Resources.--
            (1) In general.--If a determination described in paragraph 
        (2) is made, the amount of income and resources of the sponsor 
        or the sponsor's spouse which shall be attributed to the 
        sponsored individual shall not exceed the amount actually 
        provided, for a period beginning on the date of such 
        determination and lasting 12 months or, if the address of the 
        sponsor is unknown to the sponsored individual on the date of 
        such determination, for 12 months after the address becomes 
        known to the sponsored individual or to the agency (which shall 
        inform such individual within 7 days).
            (2) Determination.--The determination described in this 
        paragraph is a determination by an agency that a sponsored 
        individual would, in the absence of the assistance provided by 
        the agency, be unable to obtain food and shelter, taking into 
        account the individual's own income, plus any cash, food, 
        housing, or other assistance provided by other individuals, 
        including the sponsor.
    (e) Deeming Authority to State and Local Agencies.--
            (1) In general.--Notwithstanding any other provision of 
        law, but subject to an exception equivalent to that in 
        subsection (d), the State or local government may, for purposes 
        of determining the eligibility of an individual (whether a 
        citizen or national of the United States or an alien) for 
        assistance, and the amount of assistance, under any State or 
        local program of assistance for which eligibility is based on 
        need, or any need-based program of assistance administered by a 
        State or local government other than a program described in 
        subsection (a), require that the income and resources described 
        in paragraph (2) be deemed to be the income and resources of 
        such individual.
            (2) Deemed income and resources.--The income and resources 
        described in this paragraph include the following:
                    (A) The income and resources of any person who, as 
                a sponsor of such individual's entry into the United 
                States, or in order to enable such individual lawfully 
                to remain in the United States, executed an affidavit 
                of support or similar agreement with respect to such 
                individual.
                    (B) The income and resources of the sponsor's 
                spouse.
            (3) Length of deemed income period.--Subject to an 
        exception equivalent to subsection (d), a State or local 
        government may impose a requirement described in paragraph (1) 
        for the period for which the sponsor has agreed, in such 
        affidavit or agreement, to provide support for such individual, 
        or for a period of 5 years beginning on the date such 
        individual was first lawfully in the United States after the 
        execution of such affidavit or agreement, whichever period is 
        longer.
    (f) Applicability of Section.--
            (1) Individuals.--The provisions of this section shall not 
        apply to the eligibility of any individual who is described in 
        subclause (II), (III), or (IV) of section 1614(a)(1)(B)(i) of 
        the Social Security Act (42 U.S.C. 1382c(a)(1)(B)(i)).
            (2) Programs.--The provisions of this section shall not 
        apply to eligibility for--
                    (A) emergency medical services under title XXI of 
                the Social Security Act;
                    (B) short-term emergency disaster relief;
                    (C) assistance or benefits under the National 
                School Lunch Act;
                    (D) assistance or benefits under the Child 
                Nutrition Act of 1966;
                    (E) public health assistance for immunizations with 
                respect to immunizable diseases and for testing and 
                treatment for communicable diseases if the Secretary of 
                Health and Human Services determines that such testing 
                and treatment is necessary;
                    (F) the Head Start program (42 U.S.C. 9801); and
                    (G) programs specified by the Attorney General, in 
                the Attorney General's sole and unreviewable discretion 
                after consultation with appropriate Federal agencies 
                and departments, which (i) deliver services at the 
                community level, including through public or private 
                nonprofit agencies; (ii) do not condition the provision 
                of assistance, the amount of assistance provided, or 
                the cost of assistance provided on the individual 
                recipient's income or resources; and (iii) are 
                necessary for the protection of life, safety, or public 
                health.
    (g) Conforming Amendments.--
            (1) Section 1621 (42 U.S.C. 1382j) is repealed.
            (2) Section 1614(f)(3) (42 U.S.C. 1382c(f)(3)) is amended 
        by striking ``section 1621'' and inserting ``section 7402 of 
        the Balanced Budget Reconciliation Act of 1995''.

SEC. 7403. REQUIREMENTS FOR SPONSOR'S AFFIDAVIT OF SUPPORT.

    (a) Enforceability.--No affidavit of support may be relied upon by 
the Attorney General or by any consular officer to establish that an 
alien is not excludable as a public charge under section 212(a)(4) of 
the Immigration and Nationality Act unless such affidavit is executed 
as a contract--
            (1) which is legally enforceable against the sponsor by the 
        sponsored individual, by the Federal Government, and by any 
        State, district, territory, or possession of the United States 
        (or any subdivision of such State, district, territory, or 
        possession of the United States) which provides any benefit 
        under a program described in subsection (d)(2), but not later 
        than 10 years after the sponsored individual last receives any 
        such benefit;
            (2) in which the sponsor agrees to financially support the 
        sponsored individual, so that he or she will not become a 
        public charge, until the sponsored individual has worked in the 
        United States for 40 qualifying quarters; and
            (3) in which the sponsor agrees to submit to the 
        jurisdiction of any Federal or State court for the purpose of 
        actions brought under subsection (d)(4).
    (b) Forms.--Not later than 90 days after the date of the enactment 
of this Act, the Secretary of State, the Attorney General, and the 
Secretary of Health and Human Services shall jointly formulate the 
affidavit of support described in this section.
    (c) Notification of Change of Address.--
            (1) In general.--The sponsor shall notify the Attorney 
        General and the State, district, territory, or possession in 
        which the sponsored individual is currently resident within 30 
        days of any change of address of the sponsor during the period 
        specified in subsection (a)(1).
            (2) Penalty.--Any person subject to the requirement of 
        paragraph (1) who fails to satisfy such requirement shall be 
        subject to a civil penalty of--
                    (A) not less than $250 or more than $2,000, or
                    (B) if such failure occurs with knowledge that the 
                sponsored individual has received any benefit described 
                in section 241(a)(5)(C) of the Immigration and 
                Nationality Act, not less than $2,000 or more than 
                $5,000.
    (d) Reimbursement of Government Expenses.--
            (1) In general.--Upon notification that a sponsored 
        individual has received any benefit under a program described 
        in paragraph (2), the appropriate Federal, State, or local 
        official shall request reimbursement by the sponsor in the 
        amount of such assistance.
            (2) Programs described.--The programs described in this 
        paragraph include the following:
                    (A) Assistance under a State program funded under 
                part A of title IV of the Social Security Act.
                    (B) The medicaid program under title XXI of the 
                Social Security Act.
                    (C) The food stamp program under the Food Stamp Act 
                of 1977.
                    (D) The supplemental security income program under 
                title XVI of the Social Security Act.
                    (E) Any State general assistance program.
                    (F) Any other program of assistance funded, in 
                whole or in part, by the Federal Government or any 
                State or local government entity, for which eligibility 
                for benefits is based on need, except the programs 
                specified in section 7402(f)(2).
            (3) Regulations.--The Commissioner of Social Security shall 
        prescribe such regulations as may be necessary to carry out 
        paragraph (1). Such regulations shall provide for notification 
        to the sponsor by certified mail to the sponsor's last known 
        address.
            (4) Reimbursement.--If within 45 days after requesting 
        reimbursement, the appropriate Federal, State, or local agency 
        has not received a response from the sponsor indicating a 
        willingness to commence payments, an action may be brought 
        against the sponsor pursuant to the affidavit of support.
            (5) Action in case of failure.--If the sponsor fails to 
        abide by the repayment terms established by such agency, the 
        agency may, within 60 days of such failure, bring an action 
        against the sponsor pursuant to the affidavit of support.
            (6) Statute of limitations.--No cause of action may be 
        brought under this subsection later than 10 years after the 
        sponsored individual last received any benefit under a program 
        described in paragraph (2).
    (e) Jurisdiction.--For purposes of this section, no State court 
shall decline for lack of jurisdiction to hear any action brought 
against a sponsor for reimbursement of the cost of any benefit under a 
program described in subsection (d)(2) if the sponsored individual 
received public assistance while residing in the State.
    (f) Definitions.--For the purposes of this section--
            (1) the term ``sponsor'' means an individual who--
                    (A) is a United States citizen or national or an 
                alien who is lawfully admitted to the United States for 
                permanent residence;
                    (B) is 18 years of age or over;
                    (C) is domiciled in any of the several States of 
                the United States, the District of Columbia, or any 
                territory or possession of the United States; and
                    (D) demonstrates the means to maintain an annual 
                income equal to at least 200 percent of the poverty 
                line for the individual and the individual's family 
                (including the sponsored individual), through evidence 
                that shall include a copy of the individual's Federal 
                income tax returns for his or her most recent two 
                taxable years and a written statement, executed under 
                oath or as permitted under penalty of perjury under 
                section 1746 of title 28, United States Code, that the 
                copies are true copies of such returns;
            (2) the term ``poverty line'' has the same meaning given 
        such term in section 673(2) of the Community Services Block 
        Grant Act (42 U.S.C. 9902(2)); and
            (3) the term ``qualifying quarter'' means a three-month 
        period in which the sponsored individual has--
                    (A) earned at least the minimum necessary for the 
                period to count as one of the 40 calendar quarters 
                required to qualify for social security retirement 
                benefits;
                    (B) not received need-based public assistance; and
                    (C) had income tax liability for the tax year of 
                which the period was part.

SEC. 7404. LIMITED ELIGIBILITY OF NONCITIZENS FOR SSI BENEFITS.

    (a) In General.--Paragraph (1) of section 1614(a) (42 U.S.C. 
1382c(a)) is amended--
            (1) in subparagraph (B)(i), by striking ``either'' and all 
        that follows through ``, or'' and inserting ``(I) a citizen; 
        (II) a noncitizen who is granted asylum under section 208 of 
        the Immigration and Nationality Act or whose deportation has 
        been withheld under section 243(h) of such Act for a period of 
        not more than 5 years after the date of arrival into the United 
        States; (III) a noncitizen who is admitted to the United States 
        as a refugee under section 207 of such Act for not more than 
        such 5-year period; (IV) a noncitizen, lawfully present in any 
        State (or any territory or possession of the United States), 
        who is a veteran (as defined in section 101 of title 38, United 
        States Code) with a discharge characterized as an honorable 
        discharge and not on account of alienage or who is the spouse 
        or unmarried dependent child of such veteran; or (V) a 
        noncitizen who has worked sufficient calendar quarters of 
        coverage to be a fully insured individual for benefits under 
        title II, or''; and
            (2) by adding at the end the following new flush sentence:
``For purposes of subparagraph (B)(i)(IV), the determination of whether 
a noncitizen is lawfully present in the United States shall be made in 
accordance with regulations of the Attorney General. A noncitizen shall 
not be considered to be lawfully present in the United States for 
purposes of this title merely because the noncitizen may be considered 
to be permanently residing in the United States under color of law for 
purposes of any particular program.''.
    (b) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by subsection (a) shall apply to applicants for 
        benefits for months beginning on or after the date of the 
        enactment of this Act, without regard to whether regulations 
        have been issued to implement such amendments.
            (2) Application to current recipients.--
                    (A) Application and notice.--Notwithstanding any 
                other provision of law, in the case of an individual 
                who is receiving supplemental security income benefits 
                under title XVI of the Social Security Act as of the 
                date of the enactment of this Act and whose eligibility 
                for such benefits would terminate by reason of the 
                amendments made by subsection (a), such amendments 
                shall apply with respect to the benefits of such 
                individual for months beginning on or after January 1, 
                1997, and the Commissioner of Social Security shall so 
                notify the individual not later than 90 days after the 
                date of the enactment of this Act.
                    (B) Reapplication.--
                            (i) In general.--Not later than 120 days 
                        after the date of the enactment of this Act, 
                        each individual notified pursuant to 
                        subparagraph (A) who desires to reapply for 
                        benefits under title XVI of the Social Security 
                        Act shall reapply to the Commissioner of Social 
                        Security.
                            (ii) Determination of eligibility.--Not 
                        later than 1 year after the date of the 
                        enactment of this Act, the Commissioner of 
                        Social Security shall determine the eligibility 
                        of each individual who reapplies for benefits 
                        under clause (i) pursuant to the procedures of 
                        such title XVI.

SEC. 7405. TREATMENT OF NONCITIZENS.

    (a) In General.--Notwithstanding any other provision of law, a 
noncitizen who has entered into the United States on or after the date 
of the enactment of this Act shall not, during the 5-year period 
beginning on the date of such noncitizen's entry into the United 
States, be eligible to receive any benefits under any program of 
assistance provided, or funded, in whole or in part, by the Federal 
Government, for which eligibility for benefits is based on need.
    (b) Exceptions.--Subsection (a) shall not apply to--
            (1) any individual who is described in subclause (II), 
        (III), (IV), or (V) of section 1614(a)(1)(B)(i) of the Social 
        Security Act (42 U.S.C. 1382c(a)(1)(B)(i));
            (2) any program described in section 7402(f)(2); and
            (3) payments for foster care and adoption assistance under 
        part E of title IV of the Social Security Act for a child who 
        would, in the absence of this section, be eligible to have such 
        payments made on the child's behalf under such part, but only 
        if the foster or adoptive parent or parents of such child are 
        not noncitizens described in subsection (a).

SEC. 7406. INFORMATION REPORTING.

    (a) Title IV of the Social Security Act.--Section 405 of the Social 
Security Act, as added by section 7201(b), is amended by adding at the 
end the following new subsection:
    ``(g) State Required To Provide Certain Information.--Each State to 
which a grant is made under section 403 shall, at least 4 times 
annually and upon request of the Immigration and Naturalization 
Service, furnish the Immigration and Naturalization Service with the 
name and address of, and other identifying information on, any 
individual who the State knows is unlawfully in the United States.''.
    (b) SSI.--Section 1631(e) (42 U.S.C. 1383(e)) is amended--
            (1) by redesignating the paragraphs (6) and (7) inserted by 
        sections 206(d)(2) and 206(f)(1) of the Social Security 
        Independence and Programs Improvement Act of 1994 (Public Law 
        103-296; 108 Stat. 1514, 1515) as paragraphs (7) and (8), 
        respectively; and
            (2) by adding at the end the following new paragraph:
            ``(9) Notwithstanding any other provision of law, the 
        Commissioner shall, at least 4 times annually and upon request 
        of the Immigration and Naturalization Service (hereafter in 
        this paragraph referred to as the `Service'), furnish the 
        Service with the name and address of, and other identifying 
        information on, any individual who the Commissioner knows is 
        unlawfully in the United States, and shall ensure that each 
        agreement entered into under section 1616(a) with a State 
        provides that the State shall furnish such information at such 
        times with respect to any individual who the State knows is 
        unlawfully in the United States.''.
    (c) Housing Programs.--Title I of the United States Housing Act of 
1937 (42 U.S.C. 1437 et seq.) is amended by adding at the end the 
following new section:

``SEC. 27. PROVISION OF INFORMATION TO LAW ENFORCEMENT AND OTHER 
              AGENCIES.

    ``(a) Notice to Immigration and Naturalization Service of Illegal 
Aliens.--Notwithstanding any other provision of law, the Secretary 
shall, at least 4 times annually and upon request of the Immigration 
and Naturalization Service (hereafter in this subsection referred to as 
the `Service'), furnish the Service with the name and address of, and 
other identifying information on, any individual who the Secretary 
knows is unlawfully in the United States, and shall ensure that each 
contract for assistance entered into under section 6 or 8 of this Act 
with a public housing agency provides that the public housing agency 
shall furnish such information at such times with respect to any 
individual who the public housing agency knows is unlawfully in the 
United States.''.

SEC. 7407. PROHIBITION ON PAYMENT OF FEDERAL BENEFITS TO CERTAIN 
              PERSONS.

    (a) In General.--Notwithstanding any other provision of law and 
except as provided in subsection (b), Federal benefits shall not be 
paid or provided to any person who is not a person lawfully present 
within the United States.
    (b) Exceptions.--Subsection (a) shall not apply with respect to the 
following benefits:
            (1) Emergency medical services under title XXI of the 
        Social Security Act.
            (2) Short-term emergency disaster relief.
            (3) Assistance or benefits under the National School Lunch 
        Act.
            (4) Assistance or benefits under the Child Nutrition Act of 
        1966.
            (5) Public health assistance for immunizations and, if the 
        Secretary of Health and Human Services determines that it is 
        necessary to prevent the spread of a serious communicable 
        disease, for testing and treatment of such disease.
    (c) Definitions.--For purposes of this section:
            (1) Federal benefit.--The term ``Federal benefit'' means--
                    (A) the issuance of any grant, contract, loan, 
                professional license, or commercial license provided by 
                an agency of the United States or by appropriated funds 
                of the United States; and
                    (B) any retirement, welfare, Social Security, 
                health, disability, public housing, post-secondary 
                education, food stamps, unemployment benefit, or any 
                other similar benefit for which payments or assistance 
                are provided by an agency of the United States or by 
                appropriated funds of the United States.
            (2) Person lawfully present within the united states.--The 
        term ``person lawfully present within the United States'' means 
        a person who, at the time the person applies for, receives, or 
        attempts to receive a Federal benefit, is a United States 
        citizen, a permanent resident alien, an alien whose deportation 
        has been withheld under section 243(h) of the Immigration and 
        Nationality Act (8 U.S.C. 1253(h)), an asylee, a refugee, a 
        parolee who has been paroled for a period of at least 1 year, a 
        national, or a national of the United States for purposes of 
        the immigration laws of the United States (as defined in 
        section 101(a)(17) of the Immigration and Nationality Act (8 
        U.S.C. 1101(a)(17)).
    (d) State Obligation.--Notwithstanding any other provision of law, 
a State that administers a program that provides a Federal benefit 
(described in subsection (c)(1)) or provides State benefits pursuant to 
such a program shall not be required to provide such benefit to a 
person who is not a person lawfully present within the United States 
(as defined in subsection (c)(2)) through a State agency or with 
appropriated funds of such State.
    (e) Verification of Eligibility.--
            (1) In general.--Not later than 18 months after the date of 
        the enactment of this Act, the Attorney General of the United 
        States, after consultation with the Secretary of Health and 
        Human Services, shall promulgate regulations requiring 
        verification that a person applying for a Federal benefit, 
        including a benefit described in subsection (b), is a person 
        lawfully present within the United States and is eligible to 
        receive such benefit. Such regulations shall, to the extent 
        feasible, require that information requested and exchanged be 
        similar in form and manner to information requested and 
        exchanged under section 1137 of the Social Security Act.
            (2) State compliance.--Not later than 24 months after the 
        date the regulations described in paragraph (1) are adopted, a 
        State that administers a program that provides a Federal 
        benefit described in such paragraph shall have in effect a 
        verification system that complies with the regulations.
            (3) Authorization of appropriations.--There are authorized 
        to be appropriated such sums as may be necessary to carry out 
        the purpose of this section.
    (f) Severability.--If any provision of this section or the 
application of such provision to any person or circumstance is held to 
be unconstitutional, the remainder of this section and the application 
of the provisions of such to any person or circumstance shall not be 
affected thereby.

      Subtitle G--Additional Provisions Relating to Welfare Reform

         CHAPTER 1--REDUCTIONS IN FEDERAL GOVERNMENT POSITIONS

SEC. 7411. REDUCTIONS.

    (a) Definitions.--As used in this section:
            (1) Appropriate effective date.--The term ``appropriate 
        effective date'', used with respect to a Department referred to 
        in this section, means the date on which all provisions of 
        subtitle D of title I, this subtitle, or subtitles C, D, E, and 
        F of this title that the Department is required to carry out, 
        and amendments and repeals made by such titles and subtitles to 
        provisions of Federal law that the Department is required to 
        carry out, are effective.
            (2) Covered activity.--The term ``covered activity'', used 
        with respect to a Department referred to in this section, means 
        an activity that the Department is required to carry out 
        under--
                    (A) a provision of subtitle D of title I, this 
                subtitle, or subtitle C, D, E, or F of this title; or
                    (B) a provision of Federal law that is amended or 
                repealed by any such title or subtitles.
    (b) Reports.--
            (1) Contents.--Not later than December 31, 1995, each 
        Secretary referred to in paragraph (2) shall prepare and submit 
        to the relevant committees described in paragraph (3) a report 
        containing--
                    (A) the determinations described in subsection (c);
                    (B) appropriate documentation in support of such 
                determinations; and
                    (C) a description of the methodology used in making 
                such determinations.
            (2) Secretary.--The Secretaries referred to in this 
        paragraph are--
                    (A) the Secretary of Agriculture;
                    (B) the Secretary of Education;
                    (C) the Secretary of Labor;
                    (D) the Secretary of Housing and Urban Development; 
                and
                    (E) the Secretary of Health and Human Services.
            (3) Relevant committees.--The relevant Committees described 
        in this paragraph are the following:
                    (A) With respect to each Secretary described in 
                paragraph (2), the Committee on Government Reform and 
                Oversight of the House of Representatives and the 
                Committee on Governmental Affairs of the Senate.
                    (B) With respect to the Secretary of Agriculture, 
                the Committee on Agriculture and the Committee on 
                Economic and Educational Opportunities of the House of 
                Representatives and the Committee on Agriculture, 
                Nutrition, and Forestry of the Senate.
                    (C) With respect to the Secretary of Education, the 
                Committee on Economic and Educational Opportunities of 
                the House of Representatives and the Committee on Labor 
                and Human Resources of the Senate.
                    (D) With respect to the Secretary of Labor, the 
                Committee on Economic and Educational Opportunities of 
                the House of Representatives and the Committee on Labor 
                and Human Resources of the Senate.
                    (E) With respect to the Secretary of Housing and 
                Urban Development, the Committee on Banking and 
                Financial Services of the House of Representatives and 
                the Committee on Banking, Housing, and Urban Affairs of 
                the Senate.
                    (F) With respect to the Secretary of Health and 
                Human Services, the Committee on Economic and 
                Educational Opportunities of the House of 
                Representatives, the Committee on Labor and Human 
                Resources of the Senate, the Committee on Ways and 
                Means of the House of Representatives, and the 
                Committee on Finance of the Senate.
            (4) Report on changes.--Not later than December 31, 1996, 
        and each December 31 thereafter, each Secretary referred to in 
        paragraph (2) shall prepare and submit to the relevant 
        Committees described in paragraph (3), a report concerning any 
        changes with respect to the determinations made under 
        subsection (c) for the year in which the report is being 
        submitted.
    (c) Determinations.--Not later than December 31, 1995, each 
Secretary referred to in subsection (b)(2) shall determine--
            (1) the number of full-time equivalent positions required 
        by the Department headed by such Secretary to carry out the 
        covered activities of the Department, as of the day before the 
        date of enactment of this Act;
            (2) the number of such positions required by the Department 
        to carry out the activities, as of the appropriate effective 
        date for the Department; and
            (3) the difference obtained by subtracting the number 
        referred to in paragraph (2) from the number referred to in 
        paragraph (1).
    (d) Actions.--Not later than 30 days after the appropriate 
effective date for the Department involved, each Secretary referred to 
in subsection (b)(2) shall take such actions as may be necessary, 
including reduction in force actions, consistent with sections 3502 and 
3595 of title 5, United States Code, to reduce the number of positions 
of personnel of the Department by at least the difference referred to 
in subsection (c)(3).
    (e) Consistency.--
            (1) Education.--The Secretary of Education shall carry out 
        this section in a manner that enables the Secretary to meet the 
        requirements of this section.
            (2) Labor.--The Secretary of Labor shall carry out this 
        section in a manner that enables the Secretary to meet the 
        requirements of this section.
            (3) Health and human services.--The Secretary of Health and 
        Human Services shall carry out this section in a manner that 
        enables the Secretary to meet the requirements of this section 
        and section 7412.
    (f) Calculation.--In determining, under subsection (c), the number 
of full-time equivalent positions required by a Department to carry out 
a covered activity, a Secretary referred to in subsection (b)(2), shall 
include the number of such positions occupied by personnel carrying out 
program functions or other functions (including budgetary, legislative, 
administrative, planning, evaluation, and legal functions) related to 
the activity.
    (g) General Accounting Office Report.--Not later than July 1, 1996, 
the Comptroller General of the United States shall prepare and submit 
to the committees described in subsection (b)(3), a report concerning 
the determinations made by each Secretary under subsection (c). Such 
report shall contain an analysis of the determinations made by each 
Secretary under subsection (c) and a determination as to whether 
further reductions in full-time equivalent positions are appropriate.

SEC. 7412. REDUCING PERSONNEL IN WASHINGTON, D.C. AREA.

    In making reductions in full-time equivalent positions, the 
Secretary of Health and Human Services is encouraged to reduce 
personnel in the Washington, DC, area office (agency headquarters) 
before reducing field personnel.

              CHAPTER 2--BLOCK GRANTS FOR SOCIAL SERVICES

SEC. 7421. REDUCTION IN BLOCK GRANTS FOR SOCIAL SERVICES.

    Section 2003(c) (42 U.S.C. 1397b) is amended--
            (1) by striking ``and'' at the end of paragraph (4); and
            (2) by striking paragraph (5) and inserting the following:
            ``(5) $2,800,000,000 for each of the fiscal years 1990 
        through 1996; and
            ``(6) $2,240,000,000 for each fiscal year after fiscal year 
        1996.''.

SEC. 7422. ESTABLISHING NATIONAL GOALS TO PREVENT TEENAGE PREGNANCIES.

    (a) In General.--Not later than January 1, 1997, the Secretary of 
Health and Human Services shall establish and implement a strategy 
for--
            (1) preventing an additional 2 percent of out-of-wedlock 
        teenage pregnancies a year, and
            (2) assuring that at least 25 percent of the communities in 
        the United States have teenage pregnancy prevention programs in 
        place.
    (b) Report.--Not later than June 30, 1998, and annually thereafter, 
the Secretary shall report to the Congress with respect to the progress 
that has been made in meeting the goals described in paragraphs (1) and 
(2) of subsection (a).
    (c) Out-of-Wedlock and Teenage Pregnancy Prevention Programs.--
Section 2002 (42 U.S.C. 1397a) is amended by adding at the end the 
following new subsection:
    ``(f)(1) The Secretary shall conduct a study with respect to State 
programs that have been implemented to determine the relative 
effectiveness of the different approaches for reducing out-of-wedlock 
pregnancies and preventing teenage pregnancy and the approaches that 
can be best replicated by other States.
    ``(2) Each State shall provide to the Secretary, in such form and 
with such frequency as the Secretary requires, data from the programs 
the State has implemented. The Secretary shall report to the Congress 
annually on the progress of the programs and shall, not later than June 
30, 1998, submit to the Congress a report on the study required under 
paragraph (1).''.

          CHAPTER 3--FOSTER CARE MAINTENANCE PAYMENTS PROGRAM

SEC. 7431. LIMITATION ON GROWTH OF ADMINISTRATIVE EXPENSES FOR FOSTER 
              CARE MAINTENANCE PAYMENTS PROGRAM.

    Section 474(b) (42 U.S.C. 674) is amended by adding at the end the 
following new paragraph:
    ``(5) Notwithstanding the provisions of subparagraphs (D) and (E) 
of subsection (a)(3), the total amount of the payment under such 
subparagraphs with respect to the foster care maintenance payments 
program for any fiscal year beginning with fiscal year 1996 shall not 
exceed 110 percent of the total amount of such payment for the 
preceding fiscal year.''.

                  CHAPTER 4--MISCELLANEOUS PROVISIONS

SEC. 7441. EXEMPTION OF BATTERED INDIVIDUALS FROM CERTAIN REQUIREMENTS.

    (a) In General.--Notwithstanding any other provision of, or 
amendment made by, subtitle D of title I of this Act, this subtitle, or 
subtitle C, D, E, or F of this title, the applicable administering 
authority of any specified provision may exempt from (or modify) the 
application of such provision to any individual who was battered or 
subjected to extreme cruelty if the physical, mental, or emotional 
well-being of the individual would be endangered by the application of 
such provision to such individual. The applicable administering 
authority may take into consideration the family circumstances and the 
counseling and other supportive service needs of the individual.
    (b) Specified Provisions.--For purposes of this section, the term 
``specified provision'' means any requirement, limitation, or penalty 
under any of the following:
            (1) Sections 404, 405 (a) and (b), 406 (b), (c), and (d), 
        414(d), 453(c), 469A, and 1614(a)(1) of the Social Security 
        Act.
            (2) Sections 5(i) (other than paragraph (3) thereof) and 6 
        (d) and (j), and the provision relating to work requirements in 
        section 6 of the Food Stamp Act of 1977.
            (3) Sections 7401(a) and 7402 of this Act.
    (c) Definitions and Special Rules.--For purposes of this section--
            (1) Battered or subjected to extreme cruelty.--The term 
        ``battered or subjected to extreme cruelty'' includes, but is 
        not limited to--
                    (A) physical acts resulting in, or threatening to 
                result in, physical injury;
                    (B) sexual abuse, sexual activity involving a 
                dependent child, forcing the caretaker relative of a 
                dependent child to engage in nonconsensual sexual acts 
                or activities, or threats of or attempts at physical or 
                sexual abuse;
                    (C) mental abuse; and
                    (D) neglect or deprivation of medical care.
            (2) Calculation of participation rates.--An individual 
        exempted from the work requirements under section 404 of the 
        Social Security Act by reason of subsection (a) shall not be 
        included for purposes of calculating the State's participation 
        rate under such section.

SEC. 7442. SENSE OF THE SENATE ON LEGISLATIVE ACCOUNTABILITY FOR 
              UNFUNDED MANDATES IN WELFARE REFORM LEGISLATION.

    (a) Findings.--The Senate finds that the purposes of the Unfunded 
Mandates Reform Act of 1995 are--
            (1) to strengthen the partnership between the Federal 
        Government and State, local and tribal governments;
            (2) to end the imposition, in the absence of full 
        consideration by Congress, of Federal mandates on State, local 
        and tribal governments without adequate Federal funding, in a 
        manner that may displace other essential State, local and 
        tribal governmental priorities;
            (3) to assist Congress in its consideration of proposed 
        legislation establishing or revising Federal programs 
        containing Federal mandates affecting State, local and tribal 
        governments, and the private sector by--
                    (A) providing for the development of information 
                about the nature and size of mandates in proposed 
                legislation; and
                    (B) establishing a mechanism to bring such 
                information to the attention of the Senate and the 
                House of Representatives before the Senate and the 
                House of Representatives vote on proposed legislation;
            (4) to promote informed and deliberate decisions by 
        Congress on the appropriateness of Federal mandates in any 
        particular instance; and
            (5) to require that Congress consider whether to provide 
        funding to assist State, local and tribal governments in 
        complying with Federal mandates.
    (b) Sense of the Senate.--It is the sense of the Senate that prior 
to the Senate acting on the conference report on either H.R. 4 or any 
other legislation including welfare reform provisions, the 
Congressional Budget Office shall prepare an analysis of the conference 
report to include--
            (1) estimates, over each of the next 7 fiscal years, by 
        State and in total, of--
                    (A) the costs to States of meeting all work 
                requirements in the conference report, including those 
                for single-parent families, two-parent families, and 
                those who have received cash assistance for 2 years;
                    (B) the resources available to the States to meet 
                these work requirements, defined as Federal 
                appropriations authorized in the conference report for 
                this purpose in addition to what States are projected 
                to spend under current welfare law; and
                    (C) the amount of any additional revenue needed by 
                the States to meet the work requirements in the 
                conference report, beyond resources available as 
                defined under subparagraph (B);
            (2) an estimate, based on the analysis in paragraph (1), of 
        how many States would opt to pay any penalty provided for by 
        the conference report rather than raise the additional revenue 
        needed to meet the work requirements in the conference report; 
        and
            (3) estimates, over each of the next 7 fiscal years, of the 
        costs to States of any other requirements imposed on them by 
        such legislation.

SEC. 7443. SENSE OF THE SENATE REGARDING ENFORCEMENT OF STATUTORY RAPE 
              LAWS.

    It is the sense of the Senate that States and local jurisdictions 
should aggressively enforce statutory rape laws.

SEC. 7444. SANCTIONING FOR TESTING POSITIVE FOR CONTROLLED SUBSTANCES.

    Notwithstanding any other provision of law, States shall not be 
prohibited by the Federal Government from sanctioning welfare 
recipients who test positive for use of controlled substances.

SEC. 7445. FRAUD UNDER MEANS-TESTED WELFARE AND PUBLIC ASSISTANCE 
              PROGRAMS.

    (a) In General.--If an individual's benefits under a Federal, 
State, or local law relating to a means-tested welfare or a public 
assistance program are reduced because of an act of fraud by the 
individual under the law or program, the individual may not, for the 
duration of the reduction, receive an increased benefit under any other 
means-tested welfare or public assistance program for which Federal 
funds are appropriated as a result of a decrease in the income of the 
individual (determined under the applicable program) attributable to 
such reduction.
    (b) Welfare or Public Assistance Programs for Which Federal Funds 
Are Appropriated.--For purposes of subsection (a), the term ``means-
tested welfare or public assistance program for which Federal funds are 
appropriated'' shall include the food stamp program under the Food 
Stamp Act of 1977 (7 U.S.C. 2011 et seq.), any program of public or 
assisted housing under title I of the United States Housing Act of 1937 
(42 U.S.C. 1437 et seq.), and State programs funded under part A of 
title IV of the Social Security Act (42 U.S.C. 601 et seq.).

           Subtitle H--Reform of the Earned Income Tax Credit

SEC. 7460. AMENDMENT OF 1986 CODE.

    Except as otherwise expressly provided, whenever in this subtitle 
an amendment or repeal is expressed in terms of an amendment to, or 
repeal of, a section or other provision, the reference shall be 
considered to be made to a section or other provision of the Internal 
Revenue Code of 1986.

SEC. 7461. EARNED INCOME CREDIT DENIED TO INDIVIDUALS NOT AUTHORIZED TO 
              BE EMPLOYED IN THE UNITED STATES.

    (a) In General.--Section 32(c)(1) (relating to individuals eligible 
to claim the earned income tax credit) is amended by adding at the end 
the following new subparagraph:
                    ``(F) Identification number requirement.--The term 
                `eligible individual' does not include any individual 
                who does not include on the return of tax for the 
                taxable year--
                            ``(i) such individual's taxpayer 
                        identification number, and
                            ``(ii) if the individual is married (within 
                        the meaning of section 7703), the taxpayer 
                        identification number of such individual's 
                        spouse.''.
    (b) Special Identification Number.--Section 32 is amended by adding 
at the end the following new subsection:
    ``(l) Identification Numbers.--Solely for purposes of subsections 
(c)(1)(F) and (c)(3)(D), a taxpayer identification number means a 
social security number issued to an individual by the Social Security 
Administration (other than a social security number issued pursuant to 
clause (II) (or that portion of clause (III) that relates to clause 
(II)) of section 205(c)(2)(B)(i) of the Social Security Act).''.
    (c) Extension of Procedures Applicable to Mathematical or Clerical 
Errors.--Section 6213(g)(2) (relating to the definition of mathematical 
or clerical errors) is amended by striking ``and'' at the end of 
subparagraph (D), by striking the period at the end of subparagraph (E) 
and inserting a comma, and by inserting after subparagraph (E) the 
following new subparagraphs:
                    ``(F) an omission of a correct taxpayer 
                identification number required under section 32 
                (relating to the earned income tax credit) to be 
                included on a return, and
                    ``(G) an entry on a return claiming the credit 
                under section 32 with respect to net earnings from 
                self-employment described in section 32(c)(2)(A) to the 
                extent the tax imposed by section 1401 (relating to 
                self-employment tax) on such net earnings has not been 
                paid.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 7462. REPEAL OF EARNED INCOME CREDIT FOR INDIVIDUALS WITHOUT 
              CHILDREN.

    (a) In General.--Subparagraph (A) of section 32(c)(1) (defining 
eligible individual) is amended to read as follows:
                    ``(A) In general.--The term `eligible individual' 
                means any individual who has a qualifying child for the 
                taxable year.''.
    (b) Conforming Amendments.--Each of the tables contained in 
paragraphs (1) and (2) of section 32(b) are amended by striking the 
items relating to no qualifying children.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 7463. MODIFICATION OF EARNED INCOME CREDIT AMOUNT AND PHASEOUT.

    (a) Decrease in Credit Rate.--
            (1) In general.--Subsection (b) of section 32, as amended 
        by section 7462(b), is amended to read as follows:
    ``(b) Percentages and Amounts.--
            ``(1) In general.--The credit percentage shall be 
        determined as follows:

``In the case of an eligible                            The credit per-
individual with:                                            centage is:

    1 qualifying child............................                  34 
    2 or more qualifying children.................                  36 
            ``(2) Amounts.--The earned income amount and the phaseout 
        amount shall be determined as follows:


                                                                                                                
    ``In the case of an eligible                                                                                
          individual with:               The earned income amount is:             The phaseout amount is:       
                                                                                                                
1 qualifying child.................  $6,000..............................                 $11,000               
2 or more qualifying children......  $8,425..............................                $11,000.''             
                                                                                                                

      
            (2) Conforming amendment.--Paragraph (1) of section 32(j) 
        is amended by striking ``subsection (b)(2)(A)'' and inserting 
        ``subsection (b)(2)''.
    (b) Phaseout.--Paragraph (2) of section 32(a) (relating to 
limitation) is amended to read as follows:
            ``(2) Limitation.--The amount of the credit allowable to a 
        taxpayer under paragraph (1) for any taxable year shall be 
        reduced by 0.66 percent (0.86 percent if only 1 qualifying 
        child) for each $100 or fraction thereof by which the 
        taxpayer's adjusted gross income (or, if greater, earned 
        income) for the taxable year exceeds the phaseout amount.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 7464. RULES RELATING TO DENIAL OF EARNED INCOME CREDIT ON BASIS OF 
              DISQUALIFIED INCOME.

    (a) Definition of Disqualified Income.--Paragraph (2) of section 
32(i) (defining disqualified income) is amended by striking ``and'' at 
the end of subparagraph (B), by striking the period at the end of 
subparagraph (C) and inserting ``, and'', and by adding at the end the 
following new subparagraphs:
                    ``(D) capital gain net income, and
                    ``(E) the excess (if any) of--
                            ``(i) the aggregate income from all passive 
                        activities for the taxable year (determined 
                        without regard to any amount described in a 
                        preceding subparagraph), over
                            ``(ii) the aggregate losses from all 
                        passive activities for the taxable year (as so 
                        determined).
        For purposes of subparagraph (E), the term `passive activity' 
        has the meaning given such term by section 469.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 7465. MODIFICATION OF ADJUSTED GROSS INCOME DEFINITION FOR EARNED 
              INCOME CREDIT.

    (a) In General.--Subsections (a)(2), (c)(1)(C), and (f)(2)(B) of 
section 32 are each amended by striking ``adjusted gross income'' and 
inserting ``modified adjusted gross income''.
    (b) Modified Adjusted Gross Income Defined.--Section 32(c) 
(relating to definitions and special rules) is amended by adding at the 
end the following new paragraph:
            ``(5) Modified adjusted gross income.--
                    ``(A) In general.--The term `modified adjusted 
                gross income' means adjusted gross income--
                            ``(i) increased by the sum of the amounts 
                        described in subparagraph (B), and
                            ``(ii) determined without regard to--
                                    ``(I) the amounts described in 
                                subparagraph (C), or
                                    ``(II) the deduction allowed under 
                                section 172.
                    ``(B) Nontaxable income taken into account.--
                Amounts described in this subparagraph are--
                            ``(i) social security benefits (as defined 
                        in section 86(d)) received by the taxpayer 
                        during the taxable year to the extent not 
                        included in gross income,
                            ``(ii) amounts which--
                                    ``(I) are received during the 
                                taxable year by (or on behalf of) a 
                                spouse pursuant to a divorce or 
                                separation instrument (as defined in 
                                section 71(b)(2)), and
                                    ``(II) under the terms of the 
                                instrument are fixed as payable for the 
                                support of the children of the payor 
                                spouse (as determined under section 
                                71(c)),
                        but only to the extent such amounts exceed 
                        $6,000,
                            ``(iii) interest received or accrued during 
                        the taxable year which is exempt from tax 
                        imposed by this chapter, and
                            ``(iv) amounts received as a pension or 
                        annuity, and any distributions or payments 
                        received from an individual retirement plan, by 
                        the taxpayer during the taxable year to the 
                        extent not included in gross income.
                Clause (iv) shall not include any amount which is not 
                includible in gross income by reason of section 402(c), 
                403(a)(4), 403(b)(8), 408(d) (3), (4), or (5), or 
                457(e)(10).
                    ``(C) Certain amounts disregarded.--An amount is 
                described in this subparagraph if it is--
                            ``(i) the amount of losses from sales or 
                        exchanges of capital assets in excess of gains 
                        from such sales or exchanges to the extent such 
                        amount does not exceed the amount under section 
                        1211(b)(1),
                            ``(ii) the net loss from the carrying on of 
                        trades or businesses, computed separately with 
                        respect to--
                                    ``(I) trades or businesses (other 
                                than farming) conducted as sole 
                                proprietorships,
                                    ``(II) trades or businesses of 
                                farming conducted as sole 
                                proprietorships, and
                                    ``(III) other trades or business,
                            ``(iii) the net loss from estates and 
                        trusts, and
                            ``(iv) the excess (if any) of amounts 
                        described in subsection (i)(2)(C)(ii) over the 
                        amounts described in subsection (i)(2)(C)(i) 
                        (relating to nonbusiness rents and royalties).
                For purposes of clause (ii), there shall not be taken 
                into account items which are attributable to a trade or 
                business which consists of the performance of services 
                by the taxpayer as an employee.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 7466. PROVISIONS TO IMPROVE TAX COMPLIANCE.

    (a) Increase in Penalties for Return Preparers.--
            (1) Understatement penalty.--Section 6694 (relating to 
        understatement of income tax liability by income tax return 
        preparer) is amended--
                    (A) by striking ``$250'' in subsection (a) and 
                inserting ``$500'', and
                    (B) by striking ``$1,000'' in subsection (b) and 
                inserting ``$2,000''.
            (2) Other assessable penalties.--Section 6695 (relating to 
        other assessable penalties) is amended--
                    (A) by striking ``$50'' and ``$25,000'' in 
                subsections (a), (b), (c), (d), and (e) and inserting 
                ``$100'' and ``$50,000'', respectively, and
                    (B) by striking ``$500'' in subsection (f) and 
                inserting ``$1,000''.
    (b) Aiding and Abetting Penalty.--Section 6701(b) (relating to 
amount of penalty) is amended--
            (1) by striking ``$1,000'' in paragraph (1) and inserting 
        ``2,000'', and
            (2) by striking ``10,000'' in paragraph (2) and inserting 
        ``20,000''.
    (c) Review of Electronic Filing of Earned Income Credit Claims.--
The Secretary of the Treasury shall use the maximum review process that 
is administratively feasible to ensure that originators of electronic 
returns involving the earned income credit under section 32 of the 
Internal Revenue Code of 1986 comply with the law.
    (d) Effective Date.--The amendments made by this section shall 
apply to penalties with respect to taxable years beginning after 
December 31, 1995.

                  Subtitle I--Increase in Public Debt

SEC. 7471. INCREASE IN PUBLIC DEBT.

    Subsection (b) of section 3101 of title 31, United States Code, is 
amended by striking the dollar amount contained therein and inserting 
``$5,500,000,000,000''.

             TITLE VIII--COMMITTEE ON GOVERNMENTAL AFFAIRS

SEC. 8001. EXTENSION OF DELAY IN COST-OF-LIVING ADJUSTMENTS IN FEDERAL 
              EMPLOYEE RETIREMENT BENEFITS THROUGH FISCAL YEAR 2002.

    Section 11001(a) of the Omnibus Budget Reconciliation Act of 1993 
(Public Law 103-66; 107 Stat. 408) is amended in the matter preceding 
paragraph (1) by striking out ``or 1996,'' and inserting in lieu 
thereof ``1996, 1997, 1998, 1999, 2000, 2001, or 2002,''.

SEC. 8002. INCREASED CONTRIBUTIONS TO FEDERAL CIVILIAN RETIREMENT 
              SYSTEMS.

    (a) Civil Service Retirement System.--
            (1) Deductions.--The first sentence of section 8334(a)(1) 
        of title 5, United States Code, is amended to read as follows: 
        ``The employing agency shall deduct and withhold from the basic 
        pay of an employee, Member, Congressional employee, law 
        enforcement officer, firefighter, bankruptcy judge, judge of 
        the United States Court of Appeals for the Armed Forces, United 
        States magistrate, or Claims Court judge, as the case may be, 
        the percentage of basic pay applicable under subsection (c).''.
            (2) Agency contributions.--
                    (A) Increase in agency contributions during 
                calendar years 1996 through 2002.--Section 8334(a)(1) 
                of title 5, United States Code (as amended by this 
                section) is further amended--
                            (i) by inserting ``(A)'' after ``(1)''; and
                            (ii) by adding at the end thereof the 
                        following new subparagraph:
                    ``(B)(i) Notwithstanding subparagraph (A), the 
                agency contribution under the second sentence of such 
                subparagraph, during the period beginning on January 1, 
                1996, through December 31, 2002--
                            ``(I) for each employing agency (other than 
                        the United States Postal Service) shall be 8.5 
                        percent of the basic pay of an employee, 
                        Congressional employee, and a Member of 
                        Congress, 9 percent of the basic pay of a law 
                        enforcement officer and a firefighter, and 9.5 
                        percent of the basic pay of a Claims Court 
                        judge, a United States magistrate, a judge of 
                        the United States Court of Appeals for the 
                        Armed Services, and a bankruptcy judge, as the 
                        case may be; and
                            ``(II) for the United States Postal Service 
                        shall be 7 percent of the basic pay of an 
                        employee and 9 percent of the basic pay of a 
                        law enforcement officer.''.
                    (B) No reduction in agency contributions by the 
                postal service.--Agency contributions by the United 
                States Postal Service under section 8348(h) of title 5, 
                United States Code--
                            (i) shall not be reduced as a result of the 
                        amendments made under paragraph (3) of this 
                        subsection; and
                            (ii) shall be computed as though such 
                        amendments had not been enacted.
            (3) Individual deductions, withholdings, and deposits.--The 
        table under section 8334(c) of title 5, United States Code, is 
        amended--
                    (A) in the matter relating to an employee by 
                striking out


                                          ``7....................  After December 31, 1969.''                   
                                                                                                                

                and inserting in lieu thereof the following:


                                          ``7....................  January 1, 1970, to December 31, 1995.       
                                           7.25..................  January 1, 1996, to December 31, 1996.       
                                           7.4...................  January 1, 1997, to December 31, 1997.       
                                           7.5...................  January 1, 1998, to December 31, 2002.       
                                           7.....................  After December 31, 2002.'';                  
                                                                                                                

                    (B) in the matter relating to a Member or employee 
                for Congressional employee service by striking out


                                          ``7\1/2\...............  After December 31, 1969.''                   
                                                                                                                

                and inserting in lieu thereof the following:


                                          ``7.5..................  January 1, 1970, to December 31, 1995.       
                                           7.25..................  January 1, 1996, to December 31, 1996.       
                                           7.4...................  January 1, 1997, to December 31, 1997.       
                                           7.5...................  January 1, 1998, to December 31, 2002.       
                                           7.....................  After December 31, 2002.'';                  
                                                                                                                

                    (C) in the matter relating to a Member for Member 
                service by striking out


                                          ``8....................  After December 31, 1969.''                   
                                                                                                                

                and inserting in lieu thereof the following:


                                          ``8....................  January 1, 1970, to December 31, 1995.       
                                           7.25..................   January 1, 1996, to December 31, 1996.      
                                           7.4...................  January 1, 1997, to December 31, 1997.       
                                           7.5...................  January 1, 1998, to December 31, 2002.       
                                           7.....................  After December 31, 2002.'';                  
                                                                                                                

                    (D) in the matter relating to a law enforcement 
                officer for law enforcement service and firefighter for 
                firefighter service by striking out


                                          ``7\1/2\...............  After December 31, 1974.''                   
                                                                                                                

                and inserting in lieu thereof the following:


                                          ``7.5..................  January 1, 1975, to December 31, 1995.       
                                           7.75..................  January 1, 1996, to December 31, 1996.       
                                           7.9...................  January 1, 1997, to December 31, 1997.       
                                           8.....................  January 1, 1998, to December 31, 2002.       
                                           7.5...................  After December 31, 2002.'';                  
                                                                                                                

                    (E) in the matter relating to a bankruptcy judge by 
                striking out


                                          ``8....................  After December 31, 1983.''                   
                                                                                                                

                and inserting in lieu thereof the following:


                                          ``8....................  January 1, 1984, to December 31, 1995.       
                                           8.25..................  January 1, 1996, to December 31, 1996.       
                                           8.4...................  January 1, 1997, to December 31, 1997.       
                                           8.5...................  January 1, 1998, to December 31, 2002.       
                                           8.....................  After December 31, 2002.'';                  
                                                                                                                

                    (F) in the matter relating to a judge of the United 
                States Court of Appeals for the Armed Forces for 
                service as a judge of that court by striking out


                                          ``8....................  On and after the date of the enactment of the
                                                                    Department of Defense Authorization Act,    
                                                                    1984.''                                     
                                                                                                                

                and inserting in lieu thereof the following:


                                          ``8....................  The date of the enactment of the Department  
                                                                    of Defense Authorization Act, 1984, to      
                                                                    December 31, 1995.                          
                                           8.25..................  January 1, 1996, to December 31, 1996.       
                                           8.4...................  January 1, 1997, to December 31, 1997.       
                                           8.5...................  January 1, 1998, to December 31, 2002.       
                                           8.....................  After December 31, 2002.'';                  
                                                                                                                

                    (G) in the matter relating to a United States 
                magistrate by striking out


                                          ``8....................  After September 30, 1987.''                  
                                                                                                                

                and inserting in lieu thereof the following:


                                          ``8....................  October 1, 1987, to December 31, 1995.       
                                           8.25..................  January 1, 1996, to December 31, 1996.       
                                           8.4...................  January 1, 1997, to December 31, 1997.       
                                           8.5...................  January 1, 1998, to December 31, 2002.       
                                           8.....................  After December 31, 2002.'';                  
                                                                                                                

                and
                    (H) in the matter relating to a Claims Court judge 
                by striking out


                                          ``8....................  After September 30, 1988.''                  
                                                                                                                

                and inserting in lieu thereof the following:


                                          ``8....................  October 1, 1988, to December 31, 1995.       
                                           8.25..................  January 1, 1996, to December 31, 1996.       
                                           8.4...................  January 1, 1997, to December 31, 1997.       
                                           8.5...................  January 1, 1998, to December 31, 2002.       
                                           8.....................  After December 31, 2002.''.                  
                                                                                                                

            (4) Other service.--
                    (A) Military service.--Section 8334(j) of title 5, 
                United States Code, is amended--
                            (i) in paragraph (1)(A) by inserting ``and 
                        subject to paragraph (5),'' after ``Except as 
                        provided in subparagraph (B),''; and
                            (ii) by adding at the end thereof the 
                        following new paragraph:
    ``(5) Effective with respect to any period of military service 
after December 31, 1995, the percentage of basic pay under section 204 
of title 37 payable under paragraph (1) shall be equal to the same 
percentage as would be applicable under section 8334(c) for that same 
period for service as an employee, subject to paragraph (1)(B).''.
                    (B) Volunteer service.--Section 8334(l) of title 5, 
                United States Code, is amended--
                            (i) in paragraph (1) by adding at the end 
                        thereof the following: ``This paragraph shall 
                        be subject to paragraph (4).''; and
                            (ii) by adding at the end thereof the 
                        following new paragraph:
    ``(4) Effective with respect to any period of service after 
December 31, 1995, the percentage of the readjustment allowance or 
stipend (as the case may be) payable under paragraph (1) shall be equal 
to the same percentage as would be applicable under section 8334(c) for 
that same period for service as an employee.''.
    (b) Federal Employees Retirement System.--
            (1) Individual deductions and withholdings.--
                    (A) In general.--Section 8422(a) of title 5, United 
                States Code, is amended by striking out paragraph (2) 
                and inserting in lieu thereof the following:
    ``(2) The percentage to be deducted and withheld from basic pay for 
any pay period shall be equal to--
            ``(A) the applicable percentage under paragraph (3), minus
            ``(B) the percentage then in effect under section 3101(a) 
        of the Internal Revenue Code of 1986 (relating to rate of tax 
        for old-age, survivors, and disability insurance).
    ``(3) The applicable percentage under this paragraph, for civilian 
service shall be as follows:

                                                                                                                
                                           ``Percentage of basic                                                
                                                   pay                             Service period               
                                                                                                                
Employee................................  7......................  Before January 1, 1996.                      
                                          7.25...................  January 1, 1996, to December 31, 1996.       
                                          7.4....................  January 1, 1997, to December 31, 1997.       
                                          7.5....................  January 1, 1998, to December 31, 2002.       
                                          7......................  After December 31, 2002.                     
 Congressional employee.................  7.5....................  Before January 1, 1996.                      
                                          7.25...................  January 1, 1996, to December 31, 1996.       
                                          7.4....................  January 1, 1997, to December 31, 1997.       
                                          7.5....................  January 1, 1998, to December 31, 2002.       
                                          7......................  After December 31, 2002.                     
 Member.................................  7.5....................  Before January 1, 1996.                      
                                          7.25...................  January 1, 1996, to December 31, 1996.       
                                          7.4....................  January 1, 1997, to December 31, 1997.       
                                          7.5....................  January 1, 1998, to December 31, 2002.       
                                          7......................  After December 31, 2002.                     
 Law enforcement officer, firefighter,    7.5....................  Before January 1, 1996.                      
 or air traffic controller.                                                                                     
                                          7.75...................  January 1, 1996, to December 31, 1996.       
                                          7.9....................  January 1, 1997, to December 31, 1997.       
                                          8......................  January 1, 1998, to December 31, 2002.       
                                          7.5....................  After December 31, 2002.                     
                                                                                                                

                    (B) Military service.--Section 8422(e) of title 5, 
                United States Code, is amended--
                            (i) in paragraph (1)(A) by inserting ``and 
                        subject to paragraph (6),'' after ``Except as 
                        provided in subparagraph (B),''; and
                            (ii) by adding at the end thereof the 
                        following:
            ``(6) The percentage of basic pay under section 204 of 
        title 37 payable under paragraph (1), with respect to any 
        period of military service performed during--
                    ``(A) January 1, 1996, through December 31, 1996, 
                shall be 3.25 percent;
                    ``(B) January 1, 1997, through December 31, 1997, 
                shall be 3.4 percent; and
                    ``(C) January 1, 1998, through December 31, 2002, 
                shall be 3.5 percent.''.
                    (C) Volunteer service.--Section 8422(f) of title 5, 
                United States Code, is amended--
                            (i) in paragraph (1) by adding at the end 
                        thereof the following: ``This paragraph shall 
                        be subject to paragraph (4).''; and
                            (ii) by adding at the end the following:
            ``(4) The percentage of the readjustment allowance or 
        stipend (as the case may be) payable under paragraph (1), with 
        respect to any period of volunteer service performed during--
                    ``(A) January 1, 1996, through December 31, 1996, 
                shall be 3.25 percent;
                    ``(B) January 1, 1997, through December 31, 1997, 
                shall be 3.4 percent; and
                    ``(C) January 1, 1998, through December 31, 2002, 
                shall be 3.5 percent.''.
            (2) No reduction in agency contributions.--Agency 
        contributions under section 8423 (a) and (b) of title 5, United 
        States Code , shall not be reduced as a result of the 
        amendments made under paragraph (1) of this subsection.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the first day of the first applicable pay period beginning on 
or after January 1, 1996.

SEC. 8003. FEDERAL RETIREMENT PROVISIONS RELATING TO MEMBERS OF 
              CONGRESS AND CONGRESSIONAL EMPLOYEES.

    (a) Relating to the Years of Service as a Member of Congress and 
Congressional Employees for Purposes of Computing an Annuity.--
            (1) CSRS.--Section 8339 of title 5, United States Code, is 
        amended--
                    (A) in subsection (a) by inserting ``or Member'' 
                after ``employee''; and
                    (B) by striking out subsections (b) and (c).
            (2) FERS.--Section 8415 of title 5, United States Code, is 
        amended--
                    (A) by striking out subsections (b) and (c);
                    (B) in subsections (a) and (g) by inserting ``or 
                Member'' after ``employee'' each place it appears; and
                    (C) in subsection (g)(2) by striking out 
                ``Congressional employee''.
    (b) Administrative Regulations.--The Secretary of the Senate and 
the Clerk of the House of Representatives, in consultation with the 
Office of Personnel Management, may prescribe regulations to carry out 
the provisions of this section and the amendments made by this section 
for applicable employees and Members of Congress.
    (c) Effective Dates.--
            (1) Years of service; annuity computation.--(A) The 
        amendments made by subsection (a) shall take effect on the date 
        of the enactment of this Act and shall apply only with respect 
        to the computation of an annuity relating to--
                    (i) the service of a Member of Congress as a Member 
                or as a Congressional employee performed on or after 
                January 1, 1996; and
                    (ii) the service of a Congressional employee as a 
                Congressional employee performed on or after January 1, 
                1996.
            (B) An annuity shall be computed as though the amendments 
        made under subsection (a) had not been enacted with respect 
        to--
                    (i) the service of a Member of Congress as a Member 
                or a Congressional employee or military service 
                performed before January 1, 1996; and
                    (ii) the service of a Congressional employee as a 
                Congressional employee or military service performed 
                before January 1, 1996.
            (2) Regulations.--The provisions of subsection (b) shall 
        take effect on the date of the enactment of this Act.

                  TITLE IX--COMMITTEE ON THE JUDICIARY

SEC. 9001. PATENT AND TRADEMARK FEES.

    Section 10101 of the Omnibus Budget Reconciliation Act of 1990 (35 
U.S.C. 41 note) is amended--
            (1) in subsection (a) by striking ``1998'' and inserting 
        ``2002'';
            (2) in subsection (b)(2) by striking ``1998'' and inserting 
        ``2002''; and
            (3) in subsection (c)--
                    (A) by striking ``through 1998'' and inserting 
                ``through 2002''; and
                    (B) by adding at the end the following:
            ``(9) $119,000,000 in fiscal year 1999.
            ``(10) $119,000,000 in fiscal year 2000.
            ``(11) $119,000,000 in fiscal year 2001.
            ``(12) $119,000,000 in fiscal year 2002.''.

            TITLE X--COMMITTEE ON LABOR AND HUMAN RESOURCES

SECTION 10001. REFERENCES; GENERAL EFFECTIVE DATE.

    (a) References.--Except as otherwise expressly provided, whenever 
in this title an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, 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 (20 U.S.C. 1001 et seq.).
    (b) General Effective Date.--Unless otherwise specified in this 
title, the amendments made by this title shall take effect on January 
1, 1996.

SEC. 10002. PARTICIPATION OF INSTITUTIONS AND ADMINISTRATION OF LOAN 
              PROGRAMS.

    (a) Limitation on Proportion of Loans Made Under the Direct Loan 
Program.--Section 453(a) (20 U.S.C. 1087c(a)) is amended--
            (1) by amending paragraph (2) to read as follows:
            ``(2) Determination of number of agreements.--The Secretary 
        may enter into agreements under subsections (a) and (b) of 
        section 454 with institutions for participation in the direct 
        loan program under this part, subject to the following:
                    ``(A) For academic year 1994-1995, loans made under 
                this part shall represent not more than 5 percent of 
                new student loan volume for such year.
                    ``(B) For academic year 1995-1996, loans made under 
                this part, including Federal Direct Consolidation 
                Loans, shall represent not more than 30 percent of the 
                new student loan volume for such year, except that the 
                Secretary shall not enter into such an agreement with 
                an eligible institution that has not applied and been 
                accepted for participation in the direct loan program 
                under this part on or before September 30, 1995.
                    ``(C) For academic year 1996-1997 and for each 
                succeeding academic year, loans made under this part, 
                including Federal Direct Consolidation Loans, shall 
                represent not more than 20 percent of the new student 
                loan volume for such year, except that the Secretary 
                shall not enter into such an agreement with an eligible 
                institution that has not applied and been accepted for 
                participation in the direct loan program under this 
                part on or before September 30, 1995.'';
            (2) by striking paragraph (3);
            (3) by redesignating paragraph (4) as paragraph (3); and
            (4) in the second sentence of paragraph (3) (as 
        redesignated by paragraph (3)), by striking ``on the most 
        recent program data available'' and inserting ``on data from 
        the academic year preceding the academic year for which the 
        estimate is made''.
    (b) Elimination of Conscription.--Section 453(b)(2) (20 U.S.C. 
1087c(b)(2)) is amended--
            (1) by striking subparagraph (B); and
            (2) in subparagraph (A)--
                    (A) by striking ``(i) categorizing'' and inserting 
                ``categorizing'';
                    (B) in clause (ii)--
                            (i) by striking ``beginning''; and
                            (ii) by striking ``; and'' and inserting a 
                        period; and
                    (C) by redesignating clause (ii) (as amended by 
                subparagraph (B)) as subparagraph (B).
    (c) Control of Administrative Expenses.--Section 458 (10 U.S.C. 
1087h) is amended--
            (1) by amending subsection (a) to read as follows:
    ``(a) Expenses.--
            ``(1) In general.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), each fiscal year there shall be 
                available to the Secretary from funds not otherwise 
                appropriated, funds to be obligated for subsidy costs 
                under this part. There shall also be available from 
                funds not otherwise appropriated, funds to be obligated 
                for indirect administrative expenses under this part 
                and part B, not to exceed (from such funds not 
                otherwise appropriated) $260,000,000 for fiscal year 
                1994, $345,000,000 for fiscal year 1995, $85,000,000 
                (and such sums as may be necessary for administrative 
                cost allowances for guaranty agencies for costs accrued 
                prior to January 1, 1996) for fiscal year 1996, and 
                $85,000,000 for each of the fiscal years 1997 through 
                2002.
                    ``(B) Reduction.--The amount authorized to be made 
                available for fiscal year 1997 under subparagraph (A) 
                shall be reduced by the amount of any unobligated 
                unexpended funds available to carry out this subsection 
                for any fiscal year prior to fiscal year 1996.
                    ``(C) Prohibition.--Notwithstanding any other 
                provision of this subsection, funds made available 
                under this subsection shall not be available for 
                subsidy costs or direct administrative expenses under 
                part B.
            ``(2) Direct and indirect administrative expenses.--
                    ``(A) Direct administrative expenses.--For purposes 
                of this subsection the term `direct administrative 
                expenses' means the cost of--
                            ``(i) activities related to credit 
                        extension, loan origination, loan servicing, 
                        management of contractors, and payments to 
                        contractors, other government entities, and 
                        program participants;
                            ``(ii) collection of delinquent loans; and
                            ``(iii) write-off and closeout of loans.
                    ``(B) Indirect administrative expenses.--For 
                purposes of this subsection the term `indirect 
                administrative expenses' means the cost of--
                            ``(i) personnel engaged in developing 
                        program regulations, policy and administrative 
                        guidance;
                            ``(ii) audits of institutions and 
                        contractors;
                            ``(iii) program reviews; and
                            ``(iv) other oversight of the program under 
                        this part or under part B.''; and
            (2) by striking subsection (d).
    (d) Default Rate Limitations on Direct Lending.--
            (1) Institutional eligibility based on default rates.--The 
        first sentence of section 435(a)(2)(A) (20 U.S.C. 
        1085(a)(2)(A)) is amended by inserting ``or part D'' after 
        ``under this part''.
            (2) Cohort default rate.--Section 435(m)(1) (20 U.S.C. 
        1085(m)(1)) is amended--
                    (A) in subparagraph (A)--
                            (i) by striking ``428, 428A, or 428H'' and 
                        inserting ``428, 428A, 428H, or part D (other 
                        than Federal Direct PLUS Loans)''; and
                            (ii) by striking ``428C'' and inserting 
                        ``428C or 455(g)'';
                    (B) in subparagraph (B)--
                            (i) by striking ``only''; and
                            (ii) by inserting ``and loans made under 
                        part D determined by the Secretary to be in 
                        default,'' after ``for insurance,'' and
                    (C) in subparagraph (C), by striking ``428C'' and 
                inserting ``428C or 455(g)''.
            (3) Termination of institutional participation.--Section 
        455 (20 U.S.C. 1087e) is amended by adding at the end the 
        following new subsection:
    ``(l) Termination of Institutions for High Default Rates.--
            ``(1) Methodology and criteria.--After consultation with 
        institutions of higher education and other members of the 
        higher education community, the Secretary shall develop--
                    ``(A) a methodology for the calculation of 
                institutional default rates under the loan programs 
                operated pursuant to this part;
                    ``(B) criteria for the initiation of termination 
                proceedings on the basis of such default rates; and
                    ``(C) procedures for the conduct of such 
                termination proceedings.
            ``(2) Data collection.--
                    ``(A) In general.--The Secretary shall compile data 
                on loans subject to repayment schedules under sections 
                428(b)(1)(E)(i), 428C(c)(2)(A), and 455(e)(4) at the 
                end of each fiscal year setting forth for such year by 
                institution, and by programs under parts B and D 
                individually and combined--
                            ``(i) the number and amount of loans 
                        scheduled for payments that did not equal the 
                        interest accruing on the loans;
                            ``(ii) the number and amount of loans where 
                        no payment was scheduled to be received from 
                        the borrower due to their low-income status;
                            ``(iii) the number and amount of loans 
                        where a scheduled payment was more than 90 days 
                        delinquent; and
                            ``(iv) the projected amount of interest and 
                        principal to be forgiven at the end of the 25 
                        year repayment period, based on the projected 
                        payment schedule for the borrower over that 
                        period.
                    ``(B) Annual collection and use.--Such data shall 
                be compiled annually and used in developing the 
                methodology, criteria and procedures required by 
                paragraph (1). Such data shall be available for review 
                by institutions of higher education, members of the 
                higher education community, and the Advisory Committee 
                on Student Financial Assistance established under 
                section 491.
            ``(3) Comparability to part b.--In developing the 
        methodology, criteria, and procedures required by paragraph 
        (1), the Secretary, to the maximum extent possible, shall 
        establish standards for the termination of institutions from 
        participation in loan programs under this part that are 
        comparable to the standards established for the termination of 
        institutions from participation in the loan programs under part 
        B. Such procedures shall include provisions for the appeal of 
        default rate calculations based on deficiencies in the 
        servicing of loans under this part that are comparable to the 
        provisions for such appeals based on deficiencies in the 
        servicing of loans under part B.
            ``(4) Limitations on authorization to issue new loans under 
        this part.--The methodology, criteria, procedures and standards 
        required by paragraphs (1) and (3) shall be promulgated in 
        final form not later than 120 days after the date of enactment 
        of this paragraph. Notwithstanding any other provision of this 
        part, if such methodology, criteria, procedures and standards 
        have not been promulgated in final form within 120 days after 
        the date of enactment of this paragraph, then no loans under 
        this part shall be made until the Secretary promulgates such 
        methodology, criteria, procedures and standards.''.
    (e) Elimination of Transition to Direct Loans.--The Act (20 U.S.C. 
1001 et seq.) is further amended--
            (1) in section 422(c)(7) (20 U.S.C. 1072(c)(7)--
                    (A) in subparagraph (A), by striking ``during the 
                transition'' and all that follows through ``part D of 
                this title''; and
                    (B) in subparagraph (B), by striking ``section 
                428(c)(10)(F)(v)'' and inserting ``section 
                428(c)(9)(F)(v)'';
            (2) in section 428(c)(8) (20 U.S.C. 1078(c)(8))--
                    (A) by striking subparagraph (B); and
                    (B) by striking ``(A) If'' and inserting ``If'';
            (3) in clause (vii) of section 428(c)(9)(F) (20 U.S.C. 
        1078(c)(9)(F))--
                    (A) by inserting ``and'' before ``to avoid 
                disruption''; and
                    (B) by striking ``, and to ensure an orderly 
                transition'' and all that follows through the end of 
                such clause and inserting a period;
            (4) in section 428(c)(9)(K) (20 U.S.C. 1078(c)(9)(K)), by 
        striking ``the progress of the transition from the loan 
        programs under this part to'' and inserting ``the integrity and 
        administration of'';
            (5) in section 428(e)(1)(B)(ii) (20 U.S.C. 
        1078(e)(1)(B)(ii)), by striking ``during the transition'' and 
        all that follows through ``under part D of this title'';
            (6) in section 428(e)(3) (20 U.S.C. 1078(e)(3)), by 
        striking ``of transition'';
            (7) in section 428(j)(3) (20 U.S.C. 1078(j)(3))--
                    (A) in the heading for paragraph (3), by striking 
                ``during transition to direct lending''; and
                    (B) in subparagraph (A), by striking ``during the 
                transition'' and all that follows through ``part D of 
                this title'';
            (8) in the heading for paragraph (2) of section 453(c) (20 
        U.S.C. 1078c(c)), by striking ``Transition'' and inserting 
        ``Institutional'';
            (9) in the heading for paragraph (3) of section 453(c) (20 
        U.S.C. 1078c(c)), by striking ``after transition'';
            (10) in section 456(b) (20 U.S.C. 1087f(b))--
                    (A) in paragraph (3), by inserting ``and'' after 
                the semicolon;
                    (B) by striking paragraph (4);
                    (C) by redesignating paragraph (5) as paragraph 
                (4);
                    (D) in paragraph (4) (as redesignated by 
                subparagraph (C)), by striking ``successful operation'' 
                and inserting ``integrity and efficiency''; and
            (11) in paragraph (1) of section 422(g)--
                    (A) in the first sentence, by striking ``or the 
                program authorized by part D of this title''; and
                    (B) in the second sentence, by striking ``or the 
                program authorized by part D of this title''.
    (f) Fees for Origination Services.--Subsection (b) of section 452 
(20 U.S.C. 1087b) is repealed.
    (g) Risk Sharing.--Section 428(n) (20 U.S.C. 1078(n)) is amended by 
adding at the end the following new paragraph:
            ``(5) Applicability to part d loans.--The provisions of 
        this subsection shall apply to institutions of higher education 
        participating in direct lending under part D with respect to 
        loans made under such part, and for the purposes of this 
        paragraph, paragraph (4) shall be applied by inserting `or part 
        D' after `this part'.''.

SEC. 10003. LOAN TERMS AND CONDITIONS.

    (a) Comparability Provisions.--Paragraph (1) of section 455(a) (20 
U.S.C. 1087e(a)) is amended to read as follows:
            ``(1) Parallel terms, conditions, eligibility requirements, 
        benefits and amounts.--Unless otherwise specified in this part, 
        loans made to borrowers under this part shall have the same 
        terms, conditions, eligibility requirements and benefits, be 
        subject to the same administrative requirements for 
        origination, payment and processing of applications, deferments 
        and forbearances, be available in the same amounts, and be 
        subject to the same interest rates and same amount of fees, as 
        the corresponding types of loans made to borrowers under 
        sections 428, 428B, and 428H. The Secretary shall promulgate 
        regulations implementing this paragraph not later than 120 days 
        after the date of enactment of the Balanced Budget 
        Reconciliation Act of 1995.''.
    (b) Ability of Part D Borrowers To Obtain Federal Stafford 
Consolidation Loans.--Section 428C(a)(4) (20 U.S.C. 1078-3(a)(4)) is 
amended--
            (1) by redesignating subparagraphs (B), (C) and (D) as 
        subparagraphs (C), (D) and (E), respectively; and
            (2) by inserting after subparagraph (A) the following new 
        subparagraph:
                    ``(B) made under part D of this title;''.
    (c) Ability of Part B Borrowers To Obtain Federal Direct 
Consolidation Loans.--Paragraph (5) of section 428C(b) (20 U.S.C. 1078-
3(b)) is amended to read as follows:
            ``(5) Direct consolidation loans for borrowers in specified 
        circumstances.--
                    ``(A) Subject to section 453(a)(2)(B), the 
                Secretary may offer a borrower a Federal Direct 
                Consolidation loan if a borrower otherwise eligible for 
                a consolidation loan pursuant to this section is--
                            ``(i) unable to obtain a consolidation loan 
                        from a lender with an agreement under 
                        subsection (a)(1); or
                            ``(ii) unable to obtain a consolidation 
                        loan with income contingent repayment terms 
                        from a lender with an agreement under 
                        subsection (a)(1).
                    ``(B) The Secretary shall establish appropriate 
                certification procedures to verify the eligibility of 
                borrowers for consolidation loans under this paragraph.
                    ``(C) The Secretary shall not offer consolidation 
                loans under this paragraph if, in the Secretary's 
                judgment, the Department does not have the necessary 
                origination and servicing arrangements in place for 
                such loans, or the projected volume in such loans will 
                be destabilizing to the availability of loans otherwise 
                available under this part.''.
    (d) Income Contingent Repayment in the Federal Family Education 
Loan Program.--
            (1) Insurance program agreements.--Section 428(b)(1)(E)(i) 
        (20 U.S.C. 1078(b)(1)(E)(i)) is amended by striking ``or income 
        sensitive-repayment schedule'' and inserting ``repayment 
        schedule, an income-sensitive repayment schedule, or an income 
        contingent repayment schedule,''.
            (2) Repayment schedules.--The matter preceding clause (i) 
        of section 428C(c)(2)(A) (20 U.S.C. 1078-3(c)(2)(A)) is 
        amended--
                    (A) in the first sentence, by striking ``or income-
                sensitive repayment schedules'' and inserting 
                ``repayment schedules, income-sensitive repayment 
                schedules, or income contingent repayment schedules''; 
                and
                    (B) in the second sentence, by striking ``income-
                sensitive'' and inserting ``graduated, income-
                sensitive, or income contingent''.
            (3) Comparable terms and conditions.--Section 428(m) (20 
        U.S.C. 1078(m)) is amended by adding at the end the following 
        new paragraph:
            ``(3) Income contingent repayment schedules.--For the 
        purpose of this part, income contingent repayment schedules 
        established pursuant to subsections (b)(1)(E)(i) and (c)(2)(A) 
        may have terms and conditions comparable to the terms and 
        conditions established by the Secretary pursuant to section 
        455(e)(4).''.

SEC. 10004. AMENDMENTS AFFECTING FFELP LENDERS AND LOAN HOLDERS.

    (a) Risk Sharing by the Loan Holders.--
            (1) Amendment.--Section 428(b)(1)(G) (20 U.S.C. 
        1078(b)(1)(G)) is amended by striking ``98 percent'' and 
        inserting ``95 percent''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply with respect to loans for which the first 
        disbursement is made on or after January 1, 1996.
    (b) Exceptional Performance Insurance Reduction.--Section 
428I(b)(1) (20 U.S.C. 1078-9(b)(1)) is amended--
            (1) in the paragraph heading, by striking ``100 percent''; 
        and
            (2) by striking ``100 percent of'' and inserting ``95 
        percent of''.
    (c) Loan Fees From Lenders.--
            (1) Amendment.--Section 438(d)(2) (20 U.S.C. 1087-1(d)(2)) 
        is amended by striking ``0.50 percent'' and inserting ``1.0 
        percent''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply with respect to loans for which the first 
        disbursement is made on or after January 1, 1996.
    (d) Lender and Holder Rebate.--
            (1) Amendment.--Section 438 (20 U.S.C. 1078) is amended by 
        adding at the end the following new subsection:
    ``(g) Subsidy Rebate on Stafford Loans.--
            ``(1) Rebate.--Each holder of a subsidized or unsubsidized 
        Federal Stafford loan under this part shall pay to the 
        Secretary, on a biannual basis, a subsidy rebate in an amount 
        equal to .025 percent of the unpaid principal amount of each 
        such loan in repayment that such holder holds.
            ``(2) Deposit.--The Secretary shall deposit all subsidy 
        rebates collected under paragraph (1) into the insurance fund 
        established in section 431.''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply with respect to loans for which the first 
        disbursement is made on or after January 1, 1996.
    (e) Small Lender Audit Exemption.--Section 428(b)(1)(U)(iii) (20 
U.S.C. 1078(b)(1)(U)(iii)) is amended--
            (1) by inserting ``in the case of any lender that 
        originates or holds more than $5,000,000 in principal on loans 
        made under this title in any fiscal year,'' before ``for (I)'';
            (2) by inserting ``such'' before ``lender at least once'';
            (3) by inserting ``such'' before ``a lender that is 
        audited''; and
            (4) by striking ``if the lender'' and inserting ``if such 
        lender''.

SEC. 10005. AMENDMENTS AFFECTING GUARANTY AGENCIES.

    (a) Use of Reserve Funds to Purchase Defaulted Loans.--Section 422 
(20 U.S.C. 1072) is amended by adding at the end the following new 
subsection:
    ``(h) Use of Reserve Funds to Purchase Defaulted Loans.--
            ``(1) In general.--Except as provided in paragraph (2), a 
        guaranty agency shall use not less than 50 percent of such 
        agency's reserve funds to purchase and hold defaulted loans 
        that are guaranteed by such agency and for which a claim for 
        insurance is filed with such agency by an eligible lender. The 
        amount of such purchases shall be considered as reserve funds 
        under this section and used in the calculation of the minimum 
        reserve level under section 428(c)(9).
            ``(2) Special rule.--A guaranty agency shall not be 
        required to use its reserve funds to purchase and hold 
        defaulted loans in accordance with paragraph (1) to the extent 
        that--
                    ``(A) the dollar volume of insurance claims filed 
                with such agency does not amount to 50 percent of such 
                agency's available reserve funds;
                    ``(B) such use is prohibited by State law; or
                    ``(C) such use will compromise the ability of the 
                guaranty agency to pay program expenses.''.
    (b) Extension of Period a Guaranty Agency Must Hold a Defaulted 
Loan.--
            (1) Exemption for extended holding period.--The last 
        sentence of section 428(c)(1)(A) (20 U.S.C. 1078(c)(1)(A)) is 
        amended by striking ``A guaranty agency'' and inserting 
        ``Except as provided in section 428K, a guaranty agency''.
            (2) New extended holding period program.--
                    (A) Amendment.--Part B of title IV (20 U.S.C. 1071 
                et seq.) is amended by inserting after section 428J the 
                following new section:

``SEC. 428K. GUARANTOR PURCHASE OF CLAIMS WITH RESERVE FUNDS.

    ``(a) Loans Subject to Extended Holding Period.--Except as provided 
in subsection (b), a guaranty agency shall file a claim for 
reimbursement with respect to losses (resulting from the default of a 
borrower) subject to reimbursement by the Secretary pursuant to section 
428(c)(1) not less than 180 days nor more than 225 days after the 
guaranty agency discharges such agency's insurance obligation on a loan 
insured under this part. Such claim shall include losses on the unpaid 
principal and accrued interest of any such loan, including interest 
accrued from the date of such discharge to the date such agency files 
the claim for reimbursement from the Secretary.
    ``(b) Loans Excluded From Extended Holding.--A guaranty agency may 
file a claim with respect to losses subject to reimbursement by the 
Secretary pursuant to section 428(c)(1) prior to 180 days after the 
date the guaranty agency discharges such agency's insurance obligation 
on a loan insured under this part, if--
            ``(1) such agency used 50 percent or more of such agency's 
        reserve funds to purchase or hold loans in accordance with 
        section 422(h);
            ``(2) such claim is based on an inability to locate the 
        borrower and the guaranty agency certifies to the Secretary 
        that--
                    ``(A) diligent attempts were made to locate the 
                borrower through the use of reasonable skip-tracing 
                techniques in accordance with section 428(c)(2)(G); and
                    ``(B) such skip-tracing attempts to locate the 
                borrower were unsuccessful; or
            ``(3) the guaranty agency determines that the borrower is 
        unlikely to possess the financial resources to begin repaying 
        the loan prior to 180 days after default by the borrower.
    ``(c) Guaranty Agency Efforts During Extended Holding Period.--A 
guaranty agency shall attempt to bring a loan described in subsection 
(a) into repayment status during the period prior to 180 days after the 
date the guaranty agency discharges its insurance obligation on such 
loan, so that no claim for reimbursement by the Secretary is necessary. 
Upon securing payments satisfactory to the guaranty agency during such 
period, such agency shall, if practicable, sell such loan to an 
eligible lender. Such loan shall not be sold to an eligible lender that 
the guaranty agency determines has substantially failed to exercise the 
due diligence required of lenders under this part.
    ``(d) Regulation Prohibited.--The Secretary shall not promulgate 
regulations regarding the collection activity of a guaranty agency with 
respect to a loan described in subsection (a) for which reinsurance has 
not been paid under section 428(c)(1).''.
                    (B) Effective date.--The amendment made by this 
                paragraph shall apply with respect to loans for which 
                claims for insurance are filed by eligible lenders on 
                or after January 1, 1996.
    (c) Administrative Cost Allowance.--Section 428(f)(1) (20 U.S.C. 
1078(f)(1)) is amended--
            (1) in the matter preceding clause (i) of subparagraph (A), 
        by striking ``For a fiscal year prior to fiscal year 1994, 
        the'' and inserting ``The''; and
            (2) by amending subparagraph (B) to read as follows:
                    ``(B)(i) The total amount of payments for any 
                fiscal year prior to fiscal year 1994 made under this 
                paragraph shall be equal to 1 percent of the total 
                principal amount of the loans upon which insurance was 
                issued under this part during such fiscal year by such 
                guaranty agency.
                    ``(ii) For fiscal year 1996 and each succeeding 
                fiscal year, each guaranty agency shall elect to 
                receive an administrative cost allowance, payable 
                quarterly, for such fiscal year calculated on the basis 
                of either of the following:
                            ``(I) 0.85 percent of the total principal 
                        amount of the loans upon which insurance was 
                        issued under this part during such fiscal year 
                        by such guaranty agency; or
                            ``(II) 0.08 percent of the original 
                        principal amount of loans under this part 
                        guaranteed by the guaranty agency that was 
                        outstanding at the end of the previous fiscal 
                        year.
                    ``(iii) The guaranty agency shall be deemed to have 
                a contractual right against the United States to 
                receive payments according to the provisions of this 
                subparagraph. Payments shall be made promptly and 
                without administrative delay to any guaranty agency 
                submitting an accurate and complete application 
                therefor under this subparagraph.
                    ``(iv) Notwithstanding clauses (ii) and (iii), for 
                each of the fiscal years 1996 through 2002, the 
                Secretary shall pay an aggregate amount for such year 
                of not more than $180,000,000 to all guaranty agencies 
                receiving administrative cost allowances under this 
                subparagraph.
    (d) Secretary's Equitable Share of Collections on Consolidated 
Defaulted Loans.--Section 428(c)(6)(A) (20 U.S.C. 1078(C)(6)(A) is 
amended--
            (1) in the matter preceding clause (i)--
                    (A) by inserting ``or on behalf of'' after ``made 
                by''; and
                    (B) by inserting ``, including payments made to 
                discharge loans made under this title to obtain a 
                consolidation loan pursuant to this part or part D,'' 
                after ``borrower''; and
            (2) in clause (ii), by inserting after ``an amount equal 
        to'' the following: ``--
                                    ``(I) for defaulted loans 
                                consolidated pursuant to this part or 
                                part D on or after January 1, 1996, 25 
                                percent of the amount of the balance of 
                                the principal and accrued interest 
                                outstanding at the time of such 
                                consolidation; or
                                    ``(II) for all other loans,''.
    (e) Reserve Fund Reforms.--
            (1) Strengthening and stabilizing guaranty agencies.--
        Section 428(c) (20 U.S.C. 1078(c)) is amended--
                    (A) in paragraph (8) (as amended by section 
                10002(e)(2)), by adding at the end the following new 
                sentences: ``Prior to making such determination for 
                guaranty agencies, the Secretary shall, in consultation 
                with guaranty agencies, develop criteria to determine 
                whether such agencies have made adequate collection 
                efforts. Such criteria shall be prescribed by 
                regulations that are developed through negotiated 
                rulemaking and that include procedures for 
                administrative due process. In determining whether a 
                guaranty agency's collection efforts have met such 
                criteria, the Secretary shall consider such agency's 
                record of success in collecting on defaulted loans, the 
                age of the loans, and the amount of recent payments 
                received on the loans.'';
                    (B) in subparagraph (9)(C), by striking ``80 
                percent'' and inserting ``78 percent'';
                    (C) by amending subparagraph (9)(E) to read as 
                follows:
                    ``(E) After providing a guaranty agency notice and 
                opportunity for a hearing on the record, the Secretary 
                may terminate a guaranty agency's agreement in 
                accordance with subparagraph (F) if--
                            ``(i) such guaranty agency is required to 
                        submit a management plan under this paragraph 
                        and fails to submit a plan that is acceptable 
                        to the Secretary;
                            ``(ii) the Secretary determines that such 
                        guaranty agency has failed to improve 
                        substantially its administrative and financial 
                        condition and that such guaranty agency is in 
                        danger of financial collapse; or
                            ``(iii) the Secretary determines that such 
                        action is necessary to ensure the continued 
                        availability of loans to student or parent 
                        borrowers.''; and
                    (D) in paragraph (9)(F)--
                            (i) in clause (i), by inserting ``in 
                        accordance with any recommendation, submitted 
                        by a State, for a successor agency if such 
                        successor agency is not subject to an 
                        outstanding limitation, suspension, or 
                        termination action'' before the semicolon;
                            (ii) in clause (ii), by inserting ``in 
                        accordance with any recommendation, submitted 
                        by a State, for a successor agency if such 
                        successor agency is not subject to an 
                        outstanding limitation, suspension, or 
                        termination action'' before the semicolon;
                            (iii) in clause (iii), by inserting ``and 
                        if no guaranty agency is willing to act as a 
                        successor guaranty agency under clause (i) or 
                        (ii)'' before the semicolon; and
                            (iv) in clause (vi), by inserting 
                        ``dedicated to the functions of the guaranty 
                        agency under the loan insurance program under 
                        this part'' after ``assets of the guaranty 
                        agency''.
            (2) Strengthening guaranty agency reserves.--Section 422(g) 
        (20 U.S.C. 1072(g)) is amended--
                    (A) in paragraph (1)--
                            (i) in the sentence preceding subparagraph 
                        (A), by inserting ``current and future'' before 
                        ``program expenses''; and
                            (ii) in subparagraph (D)--
                                    (I) by striking ``(A) or'' and 
                                inserting ``(A),''; and
                                    (II) by inserting ``or (C)'' before 
                                ``shall be based''; and
                    (B) in paragraph (2)--
                            (i) in subparagraph (A), by inserting ``, 
                        after notice and an opportunity for a 
                        hearing,'' after ``Secretary determines''; and
                            (ii) in subparagraph (B), by inserting ``, 
                        after notice and an opportunity for a 
                        hearing,'' after ``direct a guaranty agency''.
            (3) Additional amendments.--Section 422 (20 U.S.C. 1072) is 
        further amended--
                    (A) in the last sentence of subsection (a)(2), by 
                striking ``Except as provided in section 428(c)(10) (E) 
                or (F), such'' and inserting ``Except as provided in 
                subparagraph (E) or (F) of section 428(c)(9), such''; 
                and
                    (B) in subsection (g), by amending paragraph (4) to 
                read as follows:
            ``(4) Disposition of funds returned to or recovered by the 
        secretary.--Any funds that are returned to or otherwise 
        recovered by the Secretary pursuant to this subsection shall be 
        returned to the Treasury of the United States for purposes of 
        reducing the Federal debt and shall be deposited into the 
        special account under section 3113(d) of title 31, United 
        States Code.''.
    (f) Elimination of Supplemental Preclaims Assistance.--
            (1) Amendment.--Section 428(l) (20 U.S.C. 1078(l)) is 
        amended--
                    (A) by striking paragraph (2); and
                    (B) by striking ``(l) Preclaims'' and all that 
                follows through ``Upon receipt'' and inserting ``(l) 
                Preclaims Assistance and Supplemental Preclaims 
                Assistance.--Upon receipt''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to loans for which the first delinquency occurs on 
        or after January 1, 1996.

SEC. 10006. REAUTHORIZATION.

    Notwithstanding any other provision of law, the authorization of 
appropriations for each program under part B of title IV (20 U.S.C. 
1071 et seq.) and the duration of such program, is extended through 
fiscal year 2002.

SEC. 10007. CONNIE LEE PRIVATIZATION.

    (a) Status of the Corporation and Corporate Powers; Obligations Not 
Federally Guaranteed.--
            (1) Status of the corporation.--The College Construction 
        Loan Insurance Association (hereafter in this section referred 
        to as the ``Corporation'') shall not be an agency, 
        instrumentality, or establishment of the United States 
        Government, nor a Government corporation nor a Government 
        controlled corporation as such terms are defined in section 103 
        of title 5, United States Code. No action under section 1491 of 
        title 28, United States Code (commonly known as the Tucker Act) 
        shall be allowable against the United States based on the 
        actions of the Corporation.
            (2) Corporate powers.--The Corporation shall be subject to 
        the provisions of this section, and, to the extent not 
        inconsistent with this section, to the District of Columbia 
        Business Corporation Act (or the comparable law of another 
        State, if applicable). The Corporation shall have the powers 
        conferred upon a corporation by the District of Columbia 
        Business Corporation Act (or such other applicable State law) 
        as from time to time in effect in order to conduct its affairs 
        as a private, for-profit corporation and to carry out its 
        purposes and activities incidental thereto. The Corporation 
        shall have the power to enter into contracts, to execute 
        instruments, to incur liabilities, to provide products and 
        services, and to do all things as are necessary or incidental 
        to the proper management of its affairs and the efficient 
        operation of a private, for-profit business.
            (3) Limitation on ownership of stock.--
                    (A) Secretary of the treasury.--The Secretary of 
                the Treasury, in completing the sale of stock pursuant 
                to subsection (c), may not sell or issue the stock held 
                by the Secretary of Education to an agency, 
                instrumentality, or establishment of the United States 
                Government, or to a Government corporation or a 
                Government controlled corporation as such terms are 
                defined in section 103 of title 5, United States Code, 
                or to a government-sponsored enterprise as such term is 
                defined in section 622 of title 2, United States Code.
                    (B) Student loan marketing association.--The 
                Student Loan Marketing Association shall not increase 
                its share of the ownership of the Corporation in excess 
                of 42 percent of the shares of stock of the Corporation 
                outstanding on the date of enactment of this Act. The 
                Student Loan Marketing Association shall not control 
                the operation of the Corporation, except that the 
                Student Loan Marketing Association may participate in 
                the election of directors as a shareholder, and may 
                continue to exercise its right to appoint directors 
                under section 754 of the Higher Education Act of 1965 
                (20 U.S.C. 1132f-3) as long as that section is in 
                effect.
            (4) No federal guarantee.--
                    (A) Obligations insured by the corporation.--
                            (i) Full faith and credit of the united 
                        states.--No obligation that is insured, 
                        guaranteed, or otherwise backed by the 
                        Corporation shall be deemed to be an obligation 
                        that is guaranteed by the full faith and credit 
                        of the United States.
                            (ii) Student loan marketing association.--
                        No obligation that is insured, guaranteed, or 
                        otherwise backed by the Corporation shall be 
                        deemed to be an obligation that is guaranteed 
                        by the Student Loan Marketing Association.
                            (iii) Special rule.--This paragraph shall 
                        not affect the determination of whether such 
                        obligation is guaranteed for purposes of 
                        Federal income taxes.
                    (B) Securities offered by the corporation.--No debt 
                or equity securities of the Corporation shall be deemed 
                to be guaranteed by the full faith and credit of the 
                United States.
            (5) Definition.--The term ``Corporation'' as used in this 
        section shall refer to the College Construction Loan Insurance 
        Association as in existence as of the day before the date of 
        enactment of this Act, and to any successor corporation.
    (b) Related Privatization Requirements.--
            (1) Notice requirements.--
                    (A) In general.--During the six-year period 
                following the date of enactment of this Act, the 
                Corporation shall include, in each of the Corporation's 
                contracts for the insurance, guarantee, or reinsurance 
                of obligations, and in each document offering debt or 
                equity securities of the Corporation a prominent 
                statement providing notice that--
                            (i) such obligations or such securities, as 
                        the case may be, are not obligations of the 
                        United States, nor are such obligations 
                        guaranteed in any way by the full faith and 
                        credit of the United States; and
                            (ii) the Corporation is not an 
                        instrumentality of the United States.
                    (B) Additional notice.--During the five-year period 
                following the sale of stock pursuant to subsection 
                (c)(1), in addition to the notice requirements in 
                subparagraph (A), the Corporation shall include, in 
                each of the contracts and documents referred to in such 
                subparagraph, a prominent statement providing notice 
                that the United States is not an investor in the 
                Corporation.
            (2) Corporate charter.--The Corporation's charter shall be 
        amended as necessary and without delay to conform to the 
        requirements of this section.
            (3) Corporate name.--The name of the Corporation, or of any 
        direct or indirect subsidiary thereof, may not contain the term 
        ``College Construction Loan Insurance Association'', or any 
        substantially similar variation thereof.
            (4) Transitional requirements.--
                    (A) Requirements until stock sale.--Notwithstanding 
                subsection (d), the requirements of sections 754 and 
                760 of the Higher Education Act of 1965 (20 U.S.C. 1001 
                et seq.), as such Act was in existence on the day 
                before the date of enactment of this Act, shall 
                continue to be effective until the day immediately 
                following the date of closing of the purchase of the 
                Secretary of Education's stock (or the date of closing 
                of the final purchase, in the case of multiple 
                transactions) pursuant to subsection (c)(1) of this 
                Act.
                    (B) Reports after stock sale.--The Corporation 
                shall, not later than March 30 of the first full 
                calendar year immediately following the sale pursuant 
                to subsection (c)(1), and each of the two succeeding 
                years, submit to the Secretary of Education a report 
                describing the Corporation's efforts to assist in the 
                financing of education facilities projects, including 
                projects for elementary, secondary, and postsecondary 
                educational institution infrastructure, and detailing, 
                on a project-by-project basis, the Corporation's 
                business dealings with educational institutions that 
                are rated by a nationally recognized statistical rating 
                organization at or below the organization's third 
                highest rating.
    (c) Sale of Federally Owned Stock.--
            (1) Sale of stock required.--The Secretary of the Treasury 
        shall sell, pursuant to section 324 of title 31, United States 
        Code, the stock of the Corporation owned by the Secretary of 
        Education as soon as possible after the date of enactment of 
        this Act, but not later than six months after such date.
            (2) Purchase by the corporation.--In the event that the 
        Secretary of the Treasury is unable to sell the stock, or any 
        portion thereof, at a price acceptable to the Secretary of 
        Education and the Secretary of the Treasury, the Corporation 
        shall purchase, within 9 months after the date of enactment of 
        this Act, such stock at a price determined by the Secretary of 
        the Treasury and acceptable to the Corporation based on the 
        independent appraisal of one or more nationally recognized 
        financial firms, except that such price shall not exceed the 
        value of the Secretary of Education's stock as determined by 
        the Congressional Budget Office in House Report 104-153, dated 
        June 22, 1995.
            (3) Reimbursement of costs of sale.--The Secretary of the 
        Treasury shall be reimbursed from the proceeds of the sale of 
        the stock under this subsection for all reasonable costs 
        related to such sale, including all reasonable expenses 
        relating to one or more independent appraisals under this 
        subsection.
            (4) Assistance by the corporation.--The Corporation shall 
        provide such assistance as the Secretary of the Treasury and 
        the Secretary of Education may require to facilitate the sale 
        of the stock under this subsection.
    (e) Repeal of Statutory Restrictions and Related Provisions.--Part 
D of title VII of the Higher Education Act of 1965 (20 U.S.C. 1001 et 
seq.) is repealed.

                TITLE XI--COMMITTEE ON VETERANS' AFFAIRS

SEC. 11001. SHORT TITLE.

    This title may be cited as the ``Veterans Reconciliation Act of 
1995''.

              Subtitle A--Extension of Certain Authorities

SEC. 11011. EXTENSION OF AUTHORITY TO REQUIRE THAT CERTAIN VETERANS 
              MAKE COPAYMENTS IN EXCHANGE FOR RECEIVING OUTPATIENT 
              MEDICATIONS.

    Section 1722A(c) of title 38, United States Code, is amended by 
striking out ``September 30, 1998'' and inserting in lieu thereof 
``September 30, 2002''.

SEC. 11012. EXTENSION OF AUTHORITY FOR MEDICAL CARE COST RECOVERY.

    Section 1729(a)(2)(E) of title 38, United States Code, is amended 
by striking out ``before October 1, 1998,'' and inserting in lieu 
thereof ``before October 1, 2002,''.

SEC. 11013. LOAN FEES.

    (a) Increase in Home Loan Fees.--Paragraph (4) of section 3729(a) 
of title 38, United States Code, is amended by striking out ``before 
October 1, 1998,'' and inserting in lieu thereof ``before October 1, 
2002,''
    (b) Fee for Multiple Use of Housing Assistance.--Paragraph (5)(C) 
of such section is amended by striking out ``before October 1, 1998'' 
and inserting in lieu thereof ``before October 1, 2002''.

SEC. 11014. EXTENSION OF CERTAIN INCOME VERIFICATION AUTHORITY.

    (a) Extension.--Section 5317(g) of title 38, United States Code, is 
amended by striking out ``September 30, 1998'' and inserting in lieu 
thereof ``September 30, 2002''.
    (b) Conforming Amendment.--Section 6103(l)(7)(D) of the Internal 
Revenue Code of 1986 (26 U.S.C. 6103(l)(7)(D)) is amended in the second 
sentence of the flush matter after clause (ix) by striking out 
``September 30, 1998'' and inserting in lieu thereof ``September 30, 
2002''.

SEC. 11015. EXTENSION OF LIMITATION ON PENSION FOR CERTAIN RECIPIENTS 
              OF MEDICAID-COVERED NURSING HOME CARE.

    Section 5503(f)(7) of title 38, United States Code, is amended by 
striking out ``September 30, 1998'' and inserting in lieu thereof 
``September 30, 2002''.

      Subtitle B--Cost-of-Living Adjustments in Compensation Rates

SEC. 11021. POLICY REGARDING COST-OF-LIVING ADJUSTMENT IN COMPENSATION 
              RATES.

    In each of fiscal years 1996 through 2002, the cost-of-living 
adjustments in the rates and limitations for compensation payable under 
chapter 11 of title 38, United States Code, and of dependency and 
indemnity compensation payable under chapter 13 of such title will be 
no more than a percentage equal to the percentage by which benefit 
amounts payable under title II of the Social Security Act (42 U.S.C. 
401 et seq.) are increased as of December 1 of the fiscal year 
concerned as a result of a determination under section 215(i) of such 
Act (42 U.S.C. 415(i)), with all increased monthly rates and 
limitations (other than increased rates or limitations equal to a whole 
dollar amount) rounded down to the next lower dollar.

                    Subtitle C--Educational Benefits

SEC. 11031. LIMITATION REGARDING COST-OF-LIVING ADJUSTMENTS FOR 
              MONTGOMERY GI BILL BENEFITS.

    With respect to each of fiscal years 1996 through 2002, the cost-
of-living adjustments in the rates of educational assistance payable 
under chapter 30 of title 38, United States Code, shall be the 
percentage equal to 50 percent of the percentage by which such 
assistance would be increased under section 3015(g) of such title with 
respect to such fiscal year but for this section.

SEC. 11032. INCREASE IN AMOUNT OF CONTRIBUTION FOR PARTICIPATION IN 
              MONTGOMERY GI BILL PROGRAM.

    (a) Active Duty Service.--Section 3011(b) of title 38, United 
States Code, is amended to read as follows:
    ``(b)(1) The basic pay of any individual described in subsection 
(a)(1)(A) of this section who first becomes a member of the Armed 
Forces or enters on active duty during the period beginning on October 
1, 1995, and ending on September 30, 1996, and who does not make an 
election under subsection (c)(1) of this section shall be reduced by 
$134.96 for each of the first 12 months that such individual is 
entitled to such pay.
    ``(2) The basic pay of any individual described in subsection 
(a)(1)(A) of this section who first becomes a member of the Armed 
Forces or enters on active duty during any fiscal year beginning on or 
after October 1, 1996, and before September 30, 2002, and who does not 
make an election under subsection (c)(1) of this section, shall be 
reduced, for each of the first 12 months that such individual is 
entitled to such pay, by an amount equal to the amount of the reduction 
required under this subsection during the preceding fiscal year 
increased by the percentage, if any, by which rates payable for 
educational assistance are increased under section 3015(g) of this 
title with respect to the fiscal year during which the individual first 
becomes a member of the Armed Forces or enters on active duty.
    ``(3) Any amount by which the basic pay of an individual is reduced 
under this chapter shall revert to the Treasury and shall not, for 
purposes of any Federal law, be considered to have been received by or 
to be within the control of such individual.''.
    (b) Service in the Selected Reserve.--Section 3012(c) of such title 
is amended to read as follows:
    ``(c)(1) The basic pay of any individual described in subsection 
(a)(1)(A) of this section who first becomes a member of the Armed 
Forces or enters on active duty during the period beginning on October 
1, 1995, and ending on September 30, 1996, and who does not make an 
election under subsection (d)(1) of this section shall be reduced by 
$134.96 for each of the first 12 months that such individual is 
entitled to such pay.
    ``(2) The basic pay of any individual described in subsection 
(a)(1)(A) of this section who first becomes a member of the Armed 
Forces or enters on active duty during any fiscal year beginning on or 
after October 1, 1996, and before September 30, 2002, and who does not 
make an election under subsection (d)(1) of this section, shall be 
reduced, for each of the first 12 months that such individual is 
entitled to such pay, by an amount equal to the amount of the reduction 
required under this subsection during the preceding fiscal year 
increased by the percentage, if any, by which rates payable for 
educational assistance are increased under section 3015(g) of this 
title with respect to the fiscal year during which the individual first 
becomes a member of the Armed Forces or enters on active duty.
    ``(3) Any amount by which the basic pay of an individual is reduced 
under this chapter shall revert to the Treasury and shall not, for 
purposes of any Federal law, be considered to have been received by or 
to be within the control of such individual.''.

                       Subtitle D--Miscellaneous

SEC. 11041. CLARIFICATION OF ENTITLEMENT FOR BENEFITS FOR DISABILITY 
              RESULTING FROM TREATMENT OR VOCATIONAL SERVICES PROVIDED 
              BY DEPARTMENT OF VETERANS AFFAIRS.

    (a) Clarification.--The text of section 1151 of title 38, United 
States Code, is amended to read as follows:
    ``(a)(1) Disability or death compensation shall be awarded under 
this chapter, and dependency and indemnity compensation shall be 
awarded under chapter 13 of this title, for additional disability or 
death of a veteran in the same manner as if such additional disability 
or death, as the case may be, were service-connected if such additional 
disability or death--
            ``(A) is not the result of the veteran's willful 
        misconduct; and
            ``(B) results from--
                    ``(i) carelessness, negligence, lack of proper 
                skill, error in judgment, or similar instance of fault 
                in any hospital care, medical or surgical treatment, or 
                examination furnished either by a Department employee 
                or in a Department facility under any of the laws 
                administered by the Secretary;
                    ``(ii) an event in such hospital care, medical or 
                surgical treatment, or examination that is not 
                reasonably foreseeable; or
                    ``(iii) the provision of training and 
                rehabilitative services by the Secretary (or by a 
                service-provider used by the Secretary for such 
                provision under section 3115 of this title) as part of 
                an approved rehabilitation program under chapter 31 of 
                this title.
    ``(2) For purposes of paragraph (1), the term `Department facility' 
means a facility over which the Secretary has direct jurisdiction.
    ``(b) Where an individual is, on or after December 1, 1962, awarded 
a judgment against the United States in a civil action brought pursuant 
to section 1346(b) of title 28 or, on or after December 1, 1962, enters 
into a settlement or compromise under section 2672 or 2677 of title 28 
by reason of a disability or death treated pursuant to this section as 
if it were service-connected, then no benefits shall be paid to such 
individual for any month beginning after the date such judgment, 
settlement, or compromise on account of such disability or death 
becomes final until the aggregate amount of benefits which would be 
paid but for this subsection equals the total amount included in such 
judgment, settlement, or compromise.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on the date of the enactment of this Act and apply to 
claims filed (including original claims and applications to reopen, 
revise, reconsider, or otherwise readjudicate claims previously filed) 
for disability or death compensation, or dependency and indemnity 
compensation, on or after that date, regardless of the date of the 
occurrence of the additional disability or death upon which the claims 
are based.

SEC. 11042. AUTHORITY TO PAY PLOT OR INTERMENT ALLOWANCE FOR VETERANS 
              BURIED IN STATE CEMETERIES.

    Section 2303 of title 38, United States Code, is amended by adding 
at the end the following:
    ``(c) Subject to the availability of funds appropriated, in 
addition to the benefits provided for under section 2302 of this title, 
section 2307 of this title, and subsection (a) of this section, in the 
case of a veteran who--
            ``(1) is eligible for burial in a national cemetery under 
        section 2402 of this title, and
            ``(2) is buried (without charge for the cost of a plot or 
        interment) in a cemetery, or a section of a cemetery, that (A) 
        is used solely for the interment of persons eligible for burial 
        in a national cemetery, and (B) is owned by a State or by an 
        agency or political subdivision of a State,
the Secretary may pay to such State, agency, or political subdivision 
the sum of $150 as a plot or interment allowance for such veteran, 
provided that payment was not made under clause (1) of subsection (b) 
of this section.''.

          TITLE XII--COMMITTEE ON FINANCE--REVENUE PROVISIONS

SEC. 12000. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.

    (a) Short Title.--This title may be cited as the ``Revenue 
Reconciliation Act of 1995''.
    (b) Amendments to Internal Revenue Code of 1986.--Except as 
otherwise specifically provided, wherever in this title an amendment is 
expressed in terms of an amendment to or repeal of a section or other 
provision, the reference shall be considered to be made to that section 
or other provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents of this title is as 
follows:

          TITLE XII--COMMITTEE ON FINANCE--REVENUE PROVISIONS

Sec. 12000. Short title; references; table of contents.

                     Subtitle A--Family Tax Relief

Sec. 12001. Child tax credit.
Sec. 12002. Reduction in marriage penalty.
Sec. 12003. Credit for adoption expenses.
Sec. 12004. Credit for interest on education loans.

             Subtitle B--Savings And Investment Incentives

                Chapter 1--Retirement Savings Incentives

               subchapter a--individual retirement plans

                  Part I--Restoration of IRA Deduction

Sec. 12101. Restoration of IRA deduction.
Sec. 12102. Inflation adjustment for deductible amount.
Sec. 12103. Homemakers eligible for full IRA deduction.

                  Part II--Nondeductible Tax-Free IRAs

Sec. 12111. Establishment of nondeductible tax-free individual 
                subchapter b--penalty-free distributions
Sec. 12121. Distributions from certain plans may be used without 
                            penalty to purchase first homes or to pay 
                            higher education or financially devastating 
                   subchapter c--simple savings plans
Sec. 12131. Establishment of savings incentive match plans for 
                            employees of small employers.
Sec. 12132. Extension of simple plan to 401(k) arrangements.

                    Chapter 2--Capital Gains Reform

            subchapter a--taxpayers other than corporations
Sec. 12141. Capital gains deduction.
Sec. 12142. Modifications to exclusion of gain on certain small 
                            business stock.
Sec. 12143. Rollosubchapter b--corporate capital gainsock.
Sec. 12151. Reduction of alternative capital gain tax for corporations.

          Chapter 3--Corporate Alternative Minimum Tax Reform

Sec. 12161. Modification of depreciation rules under minimum tax.
Sec. 12162. Long-term unused credits allowed against minimum tax.

                 Subtitle C-- Health Related Provisions

                  Chapter 1--Long-Term Care Provisions

          subchapter a--long-term care services and contracts

                       Part I--General Provisions

Sec. 12201. Qualified long-term care services treated as medical care.
Sec. 12202. Treatment of long-term care insurance or plans.
Sec. 12203. Reporting requirements.
Sec. 12204. Effective dates.

                Part II--Consumer Protection Provisions

Sec. 12211. Policy requirements.
Sec. 12212. Requirements for issuers of long-term care insurance 
                            policies.
Sec. 12213. Coordination with State requirements.
Sec. 1221subchapter b--treatment of accelerated death benefits
Sec. 12221. Treatment of accelerated death benefits under life 
                            insurance contracts.
Sec. 12222. Treatment of companies issuing qualified accelerated death 
                 subchapter c--medical savings accounts
Sec. 12231. Deduction for contributions to medical savings accounts.
Sec. 12232. Exclusion from income of employer contributions to medical 
                            savings accounts.
Sec. 12233. Medical ssubchapter d--other provisions
Sec. 12241. Increase in deduction for health insurance costs of self-
                            employed individuals.
Sec. 12242. Adjustment of death benefit limits for certain policies.
Sec. 12243. Organizations subject to section 833.

                     Subtitle D--Estate Tax Reform

Sec. 12301. Family-owned business exclusion.
Sec. 12302. Increase in unified estate and gift tax credit.
Sec. 12303. Treatment of land subject to a qualified conservation 
                            easement.
Sec. 12304. Expansion of exception from generation-skipping transfer 
                            tax for transfers to individuals with 
                            deceased parents.
Sec. 12305. Extension of treatment of certain rents under section 2032A 
                            to lineal descendants.

              Subtitle E--Extension Of Expiring Provisions

            Chapter 1--Extensions Through February 28, 1997

Sec. 12401. Employer-provided educational assistance programs.
Sec. 12402. Research credit.
Sec. 12403. Employer-provided group legal services.
Sec. 12404. Orphan drug tax credit.
Sec. 12405. Contributions of stock to private foundations.
Sec. 12406. Delay of scheduled increase in tax on fuel used in 
                            commercial aviation.

    Chapter 2--Extensions of Superfund and Oil Spill Liability Taxes

Sec. 12411. Extension of hazardous substance superfund.
Sec. 12412. Extension of oil spill liability tax.

              Chapter 3--Extensions Relating to Fuel Taxes

Sec. 12421. Ethanol blender refunds.
Sec. 12422. Extension of binding contract date for biomass and coal 
                            facilities.

                  Chapter 4--Diesel Dyeing Provisions

Sec. 12431. Moratorium for excise tax on diesel fuel sold for use or 
                            used in diesel-powered motorboats.

           Chapter 5--Treatment of Individuals Who Expatriate

Sec. 12441. Revision of tax rules on expatriation.
Sec. 12442. Information on individuals expatriating.

            Subtitle F--Taxpayer Bill of Rights 2 Provisions

Sec. 12501. Expansion of authority to abate interest.
Sec. 12502. Review of IRS failure to abate interest.
Sec. 12503. Joint return may be made after separate returns without 
                            full payment of tax.
Sec. 12504. Modifications to certain levy exemption amounts.
Sec. 12505. Offers-in-compromise.
Sec. 12506. Award of litigation costs permitted in declaratory judgment 
                            proceedings.
Sec. 12507. Court discretion to reduce award for litigation costs for 
                            failure to exhaust administrative remedies.
Sec. 12508. Enrolled agents included as third-party recordkeepers.
Sec. 12509. Safeguards relating to designated summonses.
Sec. 12510. Annual reminders to taxpayers with outstanding delinquent 
                            accounts.

       Subtitle G--Casualty And Involuntary Conversion Provisions

Sec. 12601. Basis adjustment to property held by corporation where 
                            stock in corporation is replacement 
                            property under involuntary conversion 
                            rules.
Sec. 12602. Expansion of requirement that involuntarily converted 
                            property be replaced with property acquired 
                            from an unrelated person.
Sec. 12603. Special rule for crop insurance proceeds and disaster 
                            payments.
Sec. 12604. Application of involuntary exclusion rules to 
                            presidentially declared disasters.

        Subtitle H--Exempt Organizations and Charitable Reforms

Sec. 12701. Cooperative service organizations for certain foundations.
Sec. 12702. Exclusion from unrelated business taxable income for 
                            certain sponsorship payments.
Sec. 12703. Treatment of dues paid to agricultural or horticultural 
                            organizations.
Sec. 12704. Repeal of credit for contributions to community development 
                            corporations.
Sec. 12705. Clarification of treatment of qualified football coaches 
                            plans.

              Subtitle I--Tax Reform and Other Provisions

              Chapter 1--Provisions Relating to Businesses

Sec. 12801. Tax treatment of certain extraordinary dividends.
Sec. 12802. Registration of confidential corporate tax shelters.
Sec. 12803. Denial of deduction for interest on loans with respect to 
                            company-owned insurance.
Sec. 12804. Termination of suspense accounts for family corporations 
                            required to use accrual method of 
                            accounting.
Sec. 12805. Termination of Puerto Rico and possession tax credit.
Sec. 12806. Depreciation under income forecast method.
Sec. 12807. Repeal of exclusion for interest on loans used to acquire 
                            employer securities.

                        Chapter 2--Legal Reforms

Sec. 12811. Repeal of exclusion for punitive damages and for damages 
                            not attributable to physical injuries or 
                            sickness.
Sec. 12812. Reporting of certain payments made to attorneys.

        Chapter 3--Reforms Relating to Nonrecognition Provisions

Sec. 12821. No rollover or exclusion of gain on sale of principal 
                            residence which is attributable to 
                            depreciation deductions.
Sec. 12822. Nonrecognition of gain on sale of principal residence by 
                            noncitizens limited to new residences 
                            located in the United States.

          Chapter 4--Excise Tax and Tax-Exempt Bond Provisions

Sec. 12831. Repeal of diesel fuel tax rebate to purchasers of diesel-
                            powered automobiles and light trucks.
Sec. 12832. Repeal of wine and flavors content credit.
Sec. 12833. Modifications to excise tax on ozone-depleting chemicals.
Sec. 12834. Election to avoid tax-exempt bond penalties for local 
                            furnishers of electricity and gas.
Sec. 12835. Tax-exempt bonds for sale of Alaska Power Administration 
                            facility.

                Chapter 5--Foreign Trust Tax Compliance

Sec. 12841. Improved information reporting on foreign trusts.
Sec. 12842. Modifications of rules relating to foreign trusts having 
                            one or more United States beneficiaries.
Sec. 12843. Foreign persons not to be treated as owners under grantor 
                            trust rules.
Sec. 12844. Information reporting regarding foreign gifts.
Sec. 12845. Modification of rules relating to foreign trusts which are 
                            not grantor trusts.
Sec. 12846. Residence of estates and trusts, etc.

         Chapter 6--Financial Asset Securitization Investments

Sec. 12851. Financial asset securitization investment trusts.

                   Chapter 7--Depreciation Provisions

Sec. 12861. Treatment of contributions in aid of construction.
Sec. 12862. Deduction for certain operating authority.
Sec. 12863. Class life for gas station convenience stores and similar 
                            structures.

                      Chapter 8--Other Provisions

Sec. 12871. Application of failure-to-pay penalty to substitute 
                            returns.
Sec. 12872. Extension of withholding to certain gambling winnings.
Sec. 12873. Losses from foreclosure property.
Sec. 12874. Newspaper distributors treated as direct sellers.
Sec. 12875. Nonrecognition treatment for certain transfers by common 
                            trust funds to regulated investment 
                            companies.
Sec. 12876. Treatment of certain insurance contracts on retired lives.
Sec. 12877. Treatment of modified guaranteed contracts.
Sec. 12878. $1,000,000 compensation deduction limit extended to all 
                            employees of all corporations.
Sec. 12879. Sense of the Senate.
Sec. 12880. Increased deductibility of business meal expenses for 
                            individuals subject to Federal limitations 
                            on hours of service.
Sec. 12881. Rollover of gain from sale of farm assets to individual 
                            retirement plans.
Sec. 12882. Disposition of stock in domestic corporations by 10-percent 
                            foreign shareholders.
Sec. 12883. Limitation on treaty benefits.
Sec. 12884. Sense of the Senate regarding tax treatment of conversions 
                            of thrift charters to bank charters.

                   Subtitle J--Pension Simplification

                     Chapter 1--General Provisions

      subchapter a--simplification of nondiscrimination provisions
Sec. 12901. Definition of highly compensated employees; repeal of 
                            family aggregation.
Sec. 12902. Definition of compensation for section 415 purposes.
Sec. 12903. Modification of additional participation requirements.
Sec. 12904. Nondiscrimination rules for qualified cash or deferred 
              subchapter b--simplified distribution rulestributions.
Sec. 12911. Repeal of 5-year income averaging for lump-sum 
                            distributions.
Sec. 12912. Repeal of $5,000 exclusion of employees' death benefits.
Sec. 12913. Simplified method for taxing annuity distributions under 
                            certain employer plans.
Secsubchapter c--targeted access to pension plans for small employers
Sec. 12916. Credit for pension plan start-up costs of small employers.
Sec. 12917. Tax-exesubchapter d--paperwork reductionsection 401(k).
Sec. 12921. Limsubchapter e--miscellaneous simplification
Sec. 12931. Treatment of leased employees.
Sec. 12932. Plans covering self-employed individuals.
Sec. 12933. Elimination of special vesting rule for multiemployer 
                            plans.
Sec. 12934. Full-funding limitation of multiemployer plans.
Sec. 12935. Treatment of governmental and multiemployer plans under 
                            section 415.
Sec. 12936. Treatment of deferred compensation plans of State and local 
                            governments and tax-exempt organizations.
Sec. 12937. Contributions on behalf of disabled employees.
Sec. 12938. Distributions under rural cooperative plans.
Sec. 12939. Tenured faculty.
Sec. 12940. Uniform retirement age.
Sec. 12941. Modifications of section 403(b).
Sec. 12942. Tax on prohibited transactions.
Sec. 12943. Extension of Internal Revenue Service user fees.
Sec. 12944. Limitation on State income taxation of certain pension 
                            income.

                        Chapter 2--Church Plans

Sec. 12951. New qualification provision for church plans.
Sec. 12952. Retirement income accounts of churches.
Sec. 12953. Contracts purchased by a church.
Sec. 12954. Change in distribution requirement for retirement income 
                            accounts.
Sec. 12955. Required beginning date for distributions under church 
                            plans.
Sec. 12956. Participation of ministers in church plans.
Sec. 12957. Certain rules aggregating employees not to apply to 
                            churches, etc.
Sec. 12958. Self-employed ministers treated as employees for purposes 
                            of certain welfare benefit plans and 
                            retirement income accounts.
Sec. 12959. Deductions for contributions by certain ministers to 
                            retirement income accounts.
Sec. 12960. Modification for church plans of rules for plans maintained 
                            by more than one employer.
Sec. 12961. Section 457 not to apply to deferred compensation of a 
                            church.
Sec. 12962. Church plan modification to separate account requirement of 
                            section 401(h).
Sec. 12963. Rule relating to investment in contract not to apply to 
                            foreign missionaries.
Sec. 12964. Repeal of elective deferral catch-up limitation for 
                            retirement income accounts.
Sec. 12965. Church plans may annuitize benefits.
Sec. 12966. Church plans may increase benefit payments.
Sec. 12967. Rules applicable to self-insured medical reimbursement 
                            plans not to apply to plans of churches.
Sec. 12968. Retirement benefits of ministers not subject to tax on net 
                            earnings from self-employment.

                     Subtitle A--Family Tax Relief

SEC. 12001. CHILD TAX CREDIT.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
(relating to nonrefundable personal credits) is amended by inserting 
after section 22 the following new section:

``SEC. 23. CHILD TAX CREDIT.

    ``(a) Allowance of Credit.--There shall be allowed as a credit 
against the tax imposed by this chapter for the taxable year an amount 
equal to $500 multiplied by the number of qualifying children of the 
taxpayer.
    ``(b) Limitation.--
            ``(1) In general.--The amount of the credit which would 
        (but for this subsection) be allowed by subsection (a) shall be 
        reduced (but not below zero) by $25 for each $1,000 (or 
        fraction thereof) by which the taxpayer's adjusted gross income 
        exceeds the threshold amount.
            ``(2) Threshold amount.--For purposes of paragraph (1), the 
        term `threshold amount' means--
                    ``(A) $110,000 in the case of a joint return,
                    ``(B) $75,000 in the case of an individual who is 
                not married, and
                    ``(C) $55,000 in the case of a married individual 
                filing a separate return.
        For purposes of this paragraph, marital status shall be 
        determined under section 7703.
    ``(c) Qualifying Child.--For purposes of this section--
            ``(1) In general.--The term `qualifying child' means any 
        individual if--
                    ``(A) the taxpayer is allowed a deduction under 
                section 151 with respect to such individual for such 
                taxable year,
                    ``(B) such individual has not attained the age of 
                18 as of the close of the calendar year in which the 
                taxable year of the taxpayer begins, and
                    ``(C) such individual bears a relationship to the 
                taxpayer described in section 32(c)(3)(B) (determined 
                without regard to clause (ii) thereof).
            ``(2) Exception for certain noncitizens.--The term 
        `qualifying child' shall not include any individual who would 
        not be a dependent if the first sentence of section 152(b)(3) 
        were applied without regard to all that follows `resident of 
        the United States'.
    ``(d) Certain Other Rules Apply.--Rules similar to the rules of 
subsections (d) and (e) of section 32 shall apply for purposes of this 
section.''.
    (b) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 is amended by inserting after the 
item relating to section 22 the following new item:

``Sec. 23. Child tax credit.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 12002. REDUCTION IN MARRIAGE PENALTY.

    (a) Increase in Basic Standard Deduction for Married Individuals.--
Section 63(c) (relating to standard deduction) is amended--
            (1) by striking ``$5,000'' in paragraph (2)(A) and 
        inserting ``the applicable dollar amount'',
            (2) by striking ``$2,500'' in paragraph (2)(D) and 
        inserting ``\1/2\ of the applicable dollar amount'', and
            (3) by inserting after paragraph (6) the following new 
        paragraph:
            ``(7) Applicable dollar amount.--For purposes of paragraph 
        (2), the applicable dollar amount shall be determined under the 
        following table:

                                                         The applicable
``For taxable years beginning in                     dollar amount is--
        calendar year--
    1996..........................................              $6,800 
    1997..........................................               7,150 
    1998..........................................               7,500 
    1999..........................................               7,950 
    2000..........................................               8,200 
    2001..........................................               8,600 
    2002..........................................               9,100 
    2003..........................................               9,500 
    2004..........................................               9,950 
    2005 and thereafter...........................           10,800.''.
    (b) Cost-of-Living Adjustments.--Section 63(c)(4) (relating to 
adjustments for inflation) is amended by adding at the end the 
following new flush sentence:
        ``This paragraph shall also apply to the $10,800 amount in 
        paragraph (7) for taxable years beginning after 2005, except 
        that subparagraph (B) shall be applied by substituting `2004' 
        for `1987'.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 12003. CREDIT FOR ADOPTION EXPENSES.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
(relating to nonrefundable personal credits), as amended by section 
12001, is amended by inserting after section 23 the following new 
section:

``SEC. 24. ADOPTION EXPENSES.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this subtitle 
for the taxable year the amount of the qualified adoption expenses paid 
or incurred by the taxpayer during such taxable year.
    ``(b) Limitations.--
            ``(1) Dollar limitation.--The aggregate amount of qualified 
        adoption expenses which may be taken into account under 
        subsection (a) with respect to the adoption of a child shall 
        not exceed $5,000.
            ``(2) Income limitation.--The amount allowable as a credit 
        under subsection (a) for any taxable year shall be reduced (but 
        not below zero) by an amount which bears the same ratio to the 
        amount so allowable (determined without regard to this 
        paragraph but with regard to paragraph (1)) as--
                    ``(A) the amount (if any) by which the taxpayer's 
                taxable income exceeds $60,000, bears to
                    ``(B) $40,000.
            ``(3) Denial of double benefit.--
                    ``(A) In general.--No credit shall be allowed under 
                subsection (a) for any expense for which a deduction or 
                credit is allowable under any other provision of this 
                chapter.
                    ``(B) Grants.--No credit shall be allowed under 
                subsection (a) for any expense to the extent that funds 
                for such expense are received under any Federal, State, 
                or local program.
                    ``(C) Reimbursement.--No credit shall be allowed 
                under subsection (a) for any expense to the extent that 
                such expense is reimbursed and the reimbursement is 
                excluded from gross income under section 137.
    ``(c) Carryforwards of Unused Credit.--If the credit allowable 
under subsection (a) for any taxable year exceeds the limitation 
imposed by section 26(a) for such taxable year reduced by the sum of 
the credits allowable under this subpart (other than this section), 
such excess shall be carried to the succeeding taxable year and added 
to the credit allowable under subsection (a) for such taxable year. No 
credit may be carried forward under this subsection to any taxable year 
following the fifth taxable year after the taxable year in which the 
credit arose.
    ``(d) Qualified Adoption Expenses.--
            ``(1) In general.--The term `qualified adoption expenses' 
        means reasonable and necessary adoption fees, court costs, 
        attorney fees, and other expenses--
                    ``(A) which are directly related to, and the 
                principal purpose of which is for, the legal and final 
                adoption of an eligible child by the taxpayer, and
                    ``(B) which are not incurred in violation of State 
                or Federal law or in carrying out any surrogate 
                parenting arrangement.
            ``(2) Expenses for adoption of spouse's child not 
        eligible.--The term `qualified adoption expenses' shall not 
        include any expenses in connection with the adoption by an 
        individual of a child who is the child of such individual's 
        spouse.
            ``(3) Eligible child.--The term `eligible child' means any 
        individual--
                    ``(A) who has not attained age 18 as of the time of 
                the adoption, or
                    ``(B) who is physically or mentally incapable of 
                caring for himself.
    ``(e) Married Couples Must File Joint Returns.--Rules similar to 
the rules of paragraphs (2), (3), and (4) of section 21(e) shall apply 
for purposes of this section.''.
    (b) Exclusion of Amounts Received Under Employer's Adoption 
Assistance Programs.--Part III of subchapter B of chapter 1 (relating 
to items specifically excluded from gross income) is amended by 
redesignating section 137 as section 138 and by inserting after section 
136 the following new section:

``SEC. 137. ADOPTION ASSISTANCE PROGRAMS.

    ``(a) In General.--Gross income of an employee does not include 
amounts paid or expenses incurred by the employer for qualified 
adoption expenses in connection with the adoption of a child by an 
employee if such amounts are furnished pursuant to an adoption 
assistance program.
    ``(b) Limitations.--
            ``(1) Dollar limitation.--The aggregate amount excludable 
        from gross income under subsection (a) for all taxable years 
        with respect to the adoption of any single child by the 
        taxpayer shall not exceed $5,000.
            ``(2) Income limitation.--The amount excludable from gross 
        income under subsection (a) for any taxable year shall be 
        reduced (but not below zero) by an amount which bears the same 
        ratio to the amount so excludable (determined without regard to 
        this paragraph but with regard to paragraph (1)) as--
                    ``(A) the amount (if any) by which the taxpayer's 
                taxable income (determined without regard to this 
                section) exceeds $60,000, bears to
                    ``(B) $40,000.
    ``(c) Adoption Assistance Program.--For purposes of this section, 
an adoption assistance program is a plan of an employer--
            ``(1) under which the employer provides employees with 
        adoption assistance, and
            ``(2) which meets requirements similar to the requirements 
        of paragraphs (2), (3), and (5) of section 127(b).
An adoption reimbursement program operated under section 1052 of title 
10, United States Code (relating to armed forces) or section 514 of 
title 14, United States Code (relating to members of the Coast Guard) 
shall be treated as an adoption assistance program for purposes of this 
section.
    ``(d) Qualified Adoption Expenses.--For purposes of this section, 
the term `qualified adoption expenses' has the meaning given such term 
by section 24(d).''.
    (c) Conforming Amendments.--
            (1) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1, as amended by section 12001, is 
        amended by inserting after the item relating to section 23 the 
        following new item:

``Sec. 24. Adoption expenses.''.
            (2) The table of sections for part III of subchapter B of 
        chapter 1 is amended by striking the item relating to section 
        137 and inserting the following:

``Sec. 137. Adoption assistance programs.
``Sec. 138. Cross reference to other Acts.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 12004. CREDIT FOR INTEREST ON EDUCATION LOANS.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
(relating to nonrefundable personal credits), as amended by sections 
12001 and 12003, is amended by inserting after section 24 the following 
new section:

``SEC. 24A. INTEREST ON EDUCATION LOANS.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to 20 percent of the interest paid 
by the taxpayer during the taxable year on any qualified education 
loan.
    ``(b) Maximum Credit.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        credit allowed by subsection (a) for the taxable year shall not 
        exceed $500 ($1,000 if the taxpayer has 1 or more qualified 
        education loans covering the qualified higher education 
        expenses of more than 1 individual).
            ``(2) Limitation based on modified adjusted gross income.--
                    ``(A) In general.--If the modified adjusted gross 
                income of the taxpayer for the taxable year exceeds 
                $40,000 ($60,000 in the case of a joint return), the 
                amount which would (but for this paragraph) be 
                allowable as a credit under this section shall be 
                reduced (but not below zero) by the amount which bears 
                the same ratio to the amount which would be so 
                allowable as such excess bears to $15,000.
                    ``(B) Modified adjusted gross income.--The term 
                `modified adjusted gross income' means adjusted gross 
                income determined--
                            ``(i) without regard to sections 135, 911, 
                        931, and 933, and
                            ``(ii) after application of sections 86, 
                        219, and 469.
                    ``(C) Inflation adjustment.--In the case of any 
                taxable year beginning after 1996, the $40,000 and 
                $60,000 amounts referred to 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, 
                        by substituting `1995' for `1992'.
                    ``(D) Rounding.--If any amount as adjusted under 
                subparagraph (C) is not a multiple of $50, such amount 
                shall be rounded to the nearest multiple of $50.
    ``(c) Limitation on Taxpayers Eligible for Credit.--No credit shall 
be allowed by this section to an individual for the taxable year if a 
deduction under section 151 with respect to such individual is allowed 
to another taxpayer for the taxable year beginning in the calendar year 
in which such individual's taxable year begins.
    ``(d) Limit on Period Credit Allowed.--
            ``(1) In general.--Except as provided in paragraph (2), a 
        credit shall be allowed under this section only with respect to 
        interest paid on any qualified education loan during the first 
        60 months (whether or not consecutive) in which interest 
        payments are required. For purposes of this paragraph, any loan 
        and all refinancings of such loan shall be treated as 1 loan.
            ``(2) Dependent.--If the qualified education loan was used 
        to pay qualified higher education expenses of an individual 
        other than the taxpayer or the taxpayer's spouse, a credit 
        shall be allowed under this section for any taxable year with 
        respect to such loan only if--
                    ``(A) a deduction under section 151 with respect to 
                such individual is allowed to the taxpayer for such 
                taxable year, and
                    ``(B) such individual is at least a half-time 
                student with respect to such taxable year.
    ``(e) Definitions.--For purposes of this section--
            ``(1) Qualified education loan.--The term `qualified 
        education loan' means any indebtedness incurred to pay 
        qualified higher education expenses--
                    ``(A) which are incurred on behalf of the taxpayer, 
                the taxpayer's spouse, or a dependent of the taxpayer,
                    ``(B) which are paid or incurred within a 
                reasonable period of time before or after the 
                indebtedness is incurred, and
                    ``(C) which are attributable to education furnished 
                during a period during which the recipient was at least 
                a half-time student.
        Such term includes indebtedness used to refinance indebtedness 
        which qualifies as a qualified education loan. The term 
        `qualified education loan' shall not include any indebtedness 
        owed to a person who is related (within the meaning of section 
        267(b) or 707(b)(1)) to the taxpayer.
            ``(2) Qualified higher education expenses.--The term 
        `qualified higher education expenses' means the cost of 
        attendance (as defined in section 472 of the Higher Education 
        Act of 1965, 20 U.S.C. 1087ll, as in effect on the day before 
        the date of the enactment of this Act) of the taxpayer, the 
        taxpayer's spouse, or a dependent of the taxpayer at an 
        eligible educational institution, reduced by the sum of--
                    ``(A) the amount excluded from gross income under 
                section 135 by reason of such expenses, and
                    ``(B) the amount of the reduction described in 
                section 135(d)(1).
        For purposes of the preceding sentence, the term `eligible 
        educational institution' has the same meaning given such term 
        by section 135(c)(3), except that such term shall also include 
        an institution conducting an internship or residency program 
        leading to a degree or certificate awarded by an institution of 
        higher education, a hospital, or a health care facility which 
        offers postgraduate training.
            ``(3) Half-time student.--The term `half-time student' 
        means any individual who would be a student as defined in 
        section 151(c)(4) if `half-time' were substituted for `full-
        time' each place it appears in such section.
            ``(4) Dependent.--The term `dependent' has the meaning 
        given such term by section 152.
    ``(f) Special Rules.--
            ``(1) Denial of double benefit.--No credit shall be allowed 
        under this section for any amount for which a deduction is 
        allowable under any other provision of this chapter.
            ``(2) Married couples must file joint return.--If the 
        taxpayer is married at the close of the taxable year, the 
        credit shall be allowed under subsection (a) only if the 
        taxpayer and the taxpayer's spouse file a joint return for the 
        taxable year.
            ``(3) Marital status.--Marital status shall be determined 
        in accordance with section 7703.''.
    (b) Reporting Requirement.--
            (1) In general.--Subpart B of part III of subchapter A of 
        chapter 61 (relating to information concerning transactions 
        with other persons) is amended by inserting after section 6050P 
        the following new section:

``SEC. 6050Q. RETURNS RELATING TO EDUCATION LOAN INTEREST RECEIVED IN 
              TRADE OR BUSINESS FROM INDIVIDUALS.

    ``(a) Education Loan Interest of $600 or More.--Any person--
            ``(1) who is engaged in a trade or business, and
            ``(2) who, in the course of such trade or business, 
        receives from any individual interest aggregating $600 or more 
        for any calendar year on 1 or more qualified education loans,
shall make the return described in subsection (b) with respect to each 
individual from whom such interest was received at such time as the 
Secretary may by regulations prescribe.
    ``(b) Form and Manner of Returns.--A return is described in this 
subsection if such return--
            ``(1) is in such form as the Secretary may prescribe,
            ``(2) contains--
                    ``(A) the name, address, and TIN of the individual 
                from whom the interest described in subsection (a)(2) 
                was received,
                    ``(B) the amount of such interest received for the 
                calendar year, and
                    ``(C) such other information as the Secretary may 
                prescribe.
    ``(c) Application to Governmental Units.--For purposes of 
subsection (a)--
            ``(1) Treated as persons.--The term `person' includes any 
        governmental unit (and any agency or instrumentality thereof).
            ``(2) Special rules.--In the case of a governmental unit or 
        any agency or instrumentality thereof--
                    ``(A) subsection (a) shall be applied without 
                regard to the trade or business requirement contained 
                therein, and
                    ``(B) any return required under subsection (a) 
                shall be made by the officer or employee appropriately 
                designated for the purpose of making such return.
    ``(d) Statements To Be Furnished to Individuals With Respect to 
Whom Information Is Required.--Every person required to make a return 
under subsection (a) shall furnish to each individual whose name is 
required to be set forth in such return a written statement showing--
            ``(1) the name and address of the person required to make 
        such return, and
            ``(2) the aggregate amount of interest described in 
        subsection (a)(2) received by the person required to make such 
        return from the individual to whom the statement is required to 
        be furnished.
The written statement required under the preceding sentence shall be 
furnished on or before January 31 of the year following the calendar 
year for which the return under subsection (a) was required to be made.
    ``(e) Qualified Education Loan Defined.--For purposes of this 
section, except as provided in regulations prescribed by the Secretary, 
the term `qualified education loan' has the meaning given such term by 
section 24A(e)(1).
    ``(f) Returns Which Would Be Required To Be Made by 2 or More 
Persons.--Except to the extent provided in regulations prescribed by 
the Secretary, in the case of interest received by any person on behalf 
of another person, only the person first receiving such interest shall 
be required to make the return under subsection (a).''.
            (2) Assessable penalties.--Section 6724(d) (relating to 
        definitions) is amended--
                    (A) by redesignating clauses (ix) through (xiv) as 
                clauses (x) through (xv), respectively, in paragraph 
                (1)(B) and by inserting after clause (viii) of such 
                paragraph the following new clause:
                            ``(ix) section 6050Q (relating to returns 
                        relating to education loan interest received in 
                        trade or business from individuals),'', and
                    (B) by redesignating subparagraphs (Q) through (T) 
                as subparagraphs (R) through (U), respectively, in 
                paragraph (2) and by inserting after subparagraph (P) 
                of such paragraph the following new subparagraph:
                    ``(Q) section 6050Q (relating to returns relating 
                to education loan interest received in trade or 
                business from individuals),''.
    (c) Clerical Amendments.--
            (1) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1, as amended by sections 12001 and 
        12003, is amended by inserting after the item relating to 
        section 24 the following new item:

``Sec. 24A. Interest on education loans.''.
            (2) The table of sections for subpart B of part III of 
        subchapter A of chapter 61 is amended by inserting after the 
        item relating to section 6050P the following new item:

``Sec. 6050Q. Returns relating to education loan interest received in 
                            trade or business from individuals.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to any qualified education loan (as defined in section 24A(e)(1) 
of the Internal Revenue Code of 1986, as added by this section) 
incurred on, before, or after the date of the enactment of this Act, 
but only with respect to any loan interest payment due after December 
31, 1995.

             Subtitle B--Savings and Investment Incentives

                CHAPTER 1--RETIREMENT SAVINGS INCENTIVES

               Subchapter A--Individual Retirement Plans

                  PART I--RESTORATION OF IRA DEDUCTION

SEC. 12101. RESTORATION OF IRA DEDUCTION.

    (a) Increase in Income Limits for Active Participants.--
            (1) In general.--Subparagraph (B) of section 219(g)(3) 
        (relating to applicable dollar amount) is amended to read as 
        follows:
                    ``(B) Applicable dollar amount.--The term 
                `applicable dollar amount' means the following:
                            ``(i) In the case of a taxpayer filing a 
                        joint return:

                                                         The applicable
``For taxable years beginning in:                     dollar amount is:
    1996..........................................             $45,000 
    1997..........................................             $50,000 
    1998..........................................             $55,000 
    1999..........................................             $60,000 
    2000..........................................             $65,000 
    2001..........................................             $70,000 
    2002..........................................             $75,000 
    2003..........................................             $80,000 
    2004..........................................             $85,000 
    2005..........................................             $90,000 
    2006..........................................             $95,000 
    2007 and thereafter...........................            $100,000.
                            ``(ii) In the case of any other taxpayer 
                        (other than a married individual filing a 
                        separate return):

                                                         The applicable
``For taxable years beginning in:                     dollar amount is:
    1996..........................................             $30,000 
    1997..........................................             $35,000 
    1998..........................................             $40,000 
    1999..........................................             $45,000 
    2000..........................................             $50,000 
    2001..........................................             $55,000 
    2002..........................................             $60,000 
    2003..........................................             $65,000 
    2004..........................................             $70,000 
    2005..........................................             $75,000 
    2006..........................................             $80,000 
    2007 and thereafter...........................             $85,000.
                            ``(iii) In the case of a married individual 
                        filing a separate return, zero.''.
            (2) Increase in phase-out range for joint returns.--Clause 
        (ii) of section 219(g)(2)(A) is amended by inserting ``($20,000 
        in the case of a joint return)'' after ``$10,000''.
            (3) Cost-of-living adjustments.--Section 219(g)(3) is 
        amended by adding at the end the following new subparagraph:
                    ``(C) Cost-of-living adjustments.--In the case of 
                any taxable year beginning in a calendar year after 
                2007, the $100,000 and $85,000 amounts in clauses (i) 
                and (ii) of subparagraph (B) shall each be increased by 
                an amount equal to the product of such dollar amount 
                and the cost-of-living adjustment for the calendar year 
                determined under subsection (h)(3), except that 
                subsection (h)(3)(A)(ii) shall be applied by 
                substituting `2006' for `1994'. If any amount to which 
                either such amount is increased is not a multiple of 
                $5,000, such amount shall be rounded to the next lower 
                multiple of $5,000.''.
    (b) Individual Not Disqualified by Spouse's Participation.--
Paragraph (1) of section 219(g) (relating to limitation on deduction 
for active participants in certain pension plans) is amended by 
striking ``or the individual's spouse''.
    (c) Repeal of Nondeductible Contributions.--
            (1) Subsection (f) of section 219 is amended by striking 
        paragraph (7).
            (2) Paragraph (5) of section 408(d) is amended by striking 
        the last sentence.
            (3) Section 408(o) is amended by adding at the end the 
        following new paragraph.
            ``(5) Termination.--This subsection shall not apply to any 
        designated nondeductible contribution for any taxable year 
        beginning after December 31, 1995.''.
            (4) Subsection (b) of section 4973 is amended by striking 
        the last sentence.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 12102. INFLATION ADJUSTMENT FOR DEDUCTIBLE AMOUNT.

    (a) In General.--Section 219 is amended by redesignating subsection 
(h) as subsection (i) and by inserting after subsection (g) the 
following new subsection:
    ``(h) Cost-of-Living Adjustments.--
            ``(1) Deduction amount.--
                    ``(A) In general.--In the case of any taxable year 
                beginning in a calendar year after 1996, the $2,000 
                amount under subsection (b)(1)(A) shall be increased by 
                an amount equal to the product of $2,000 and the cost-
                of-living adjustment for the calendar year.
                    ``(B) Rounding to next lower $500.--If the amount 
                to which $2,000 would be increased under subparagraph 
                (A) is not a multiple of $500, such amount shall be 
                rounded to the next lower multiple of $500.
            ``(2) Cost-of-living adjustment.--For purposes of this 
        subsection--
                    ``(A) In general.--The cost-of-living adjustment 
                for any calendar year is the percentage (if any) by 
                which--
                            ``(i) the CPI for such calendar year, 
                        exceeds
                            ``(ii) the CPI for 1995.
                    ``(B) CPI for any calendar year.--The CPI for any 
                calendar year shall be determined in the same manner as 
                under section 1(f)(4).''.
    (b) Conforming Amendments.--
            (1) Section 408(a)(1) is amended by striking ``in excess of 
        $2,000 on behalf of any individual'' and inserting ``on behalf 
        of any individual in excess of the amount in effect for such 
        taxable year under section 219(b)(1)(A)''.
            (2) Section 408(b)(2)(B) is amended by striking ``$2,000'' 
        and inserting ``the dollar amount in effect under section 
        219(b)(1)(A)''.
            (3) Section 408(j) is amended by striking ``$2,000''.

SEC. 12103. HOMEMAKERS ELIGIBLE FOR FULL IRA DEDUCTION.

    (a) Spousal IRA Computed on Basis of Compensation of Both 
Spouses.--Subsection (c) of section 219 (relating to special rules for 
certain married individuals) is amended to read as follows:
    ``(c) Special Rules for Certain Married Individuals.--
            ``(1) In general.--In the case of an individual to whom 
        this paragraph applies for the taxable year, the limitation of 
        paragraph (1) of subsection (b) shall be equal to the lesser 
        of--
                    ``(A) the dollar amount in effect under subsection 
                (b)(1)(A) for the taxable year, or
                    ``(B) the sum of--
                            ``(i) the compensation includible in such 
                        individual's gross income for the taxable year, 
                        plus
                            ``(ii) the compensation includible in the 
                        gross income of such individual's spouse for 
                        the taxable year reduced by--
                                    ``(I) the amount allowable as a 
                                deduction under subsection (a) to such 
                                spouse for such taxable year, and
                                    ``(II) the amount of any 
                                contribution on behalf of such spouse 
                                to an IRA Plus account under section 
                                408A for such taxable year.
            ``(2) Individuals to whom paragraph (1) applies.--Paragraph 
        (1) shall apply to any individual if--
                    ``(A) such individual files a joint return for the 
                taxable year, and
                    ``(B) the amount of compensation (if any) 
                includible in such individual's gross income for the 
                taxable year is less than the compensation includible 
                in the gross income of such individual's spouse for the 
                taxable year.''.
    (b) Conforming Amendments.--
            (1) Paragraph (2) of section 219(f) (relating to other 
        definitions and special rules) is amended by striking 
        ``subsections (b) and (c)'' and inserting ``subsection (b)''.
            (2) Section 408(d)(5) is amended by striking ``$2,250'' and 
        inserting ``the dollar amount in effect under section 
        219(b)(1)(A)''.
            (3) Section 219(g)(1) is amended by striking ``(c)(2)'' and 
        inserting ``(c)(1)(A)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

                  PART II--NONDEDUCTIBLE TAX-FREE IRAS

SEC. 12111. ESTABLISHMENT OF NONDEDUCTIBLE TAX-FREE INDIVIDUAL 
              RETIREMENT ACCOUNTS.

    (a) In General.--Subpart A of part I of subchapter D of chapter 1 
(relating to pension, profit-sharing, stock bonus plans, etc.) is 
amended by inserting after section 408 the following new section:

``SEC. 408A. IRA PLUS ACCOUNTS.

    ``(a) General Rule.--Except as provided in this section, an IRA 
Plus account shall be treated for purposes of this title in the same 
manner as an individual retirement plan.
    ``(b) IRA Plus Account.--For purposes of this title, the term `IRA 
Plus account' means an individual retirement plan which is designated 
at the time of establishment of the plan as an IRA Plus account.
    ``(c) Treatment of Contributions.--
            ``(1) No deduction allowed.--No deduction shall be allowed 
        under section 219 for a contribution to an IRA Plus account.
            ``(2) Contribution limit.--The aggregate amount of 
        contributions for any taxable year to all IRA Plus accounts 
        maintained for the benefit of an individual shall not exceed 
        the excess (if any) of--
                    ``(A) the maximum amount allowable as a deduction 
                under section 219 with respect to such individual for 
                such taxable year (computed without regard to 
                subsection (g) of such section), over
                    ``(B) the amount so allowed.
            ``(3) Rollover contributions.--
                    ``(A) In general.--No rollover contribution may be 
                made to an IRA Plus account unless it is a qualified 
                rollover contribution.
                    ``(B) Coordination with limit.--A qualified 
                rollover contribution shall not be taken into account 
                for purposes of paragraph (2).
    ``(d) Tax Treatment of Distributions.--
            ``(1) In general.--Except as provided in this subsection, 
        any amount paid or distributed out of an IRA Plus account shall 
        not be included in the gross income of the distributee.
            ``(2) Exception for earnings on contributions.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), any amount distributed out of an IRA 
                Plus account which consists of earnings shall be 
                included in the gross income of the distributee for the 
                taxable year in which the distribution occurs.
                    ``(B) Exceptions for earnings on contributions held 
                at least 5 years.--Subparagraph (A) shall not apply to 
                earnings allocable to contributions held in an IRA Plus 
                account for at least 5 years as of the date of the 
                distribution but only if--
                            ``(i) such distribution occurs on or after 
                        the date on which the individual for whom the 
                        account was established attains age 59\1/2\, or
                            ``(ii) in any case where such distribution 
                        occurs before such date, the distribution is 
                        described in any subparagraph of section 
                        72(t)(2) (other than subparagraph (A)(i) 
                        thereof).
                    ``(C) Ordering rule.--
                            ``(i) First-in, first-out rule.--
                        Distributions from an IRA Plus account shall be 
                        treated as having been made--
                                    ``(I) first from the earliest 
                                contribution (and earnings allocable 
                                thereto) remaining in the account at 
                                the time of the distribution, and
                                    ``(II) then from other 
                                contributions (and earnings allocable 
                                thereto) in the order in which made.
                            ``(ii) Allocations between contributions 
                        and earnings.--Any portion of a distribution 
                        allocated to a contribution (and earnings 
                        allocable thereto) shall be treated as 
                        allocated first to the earnings and then to the 
                        contribution.
                            ``(iii) Allocation of earnings.--Earnings 
                        shall be allocated to a contribution in such 
                        manner as the Secretary may by regulations 
                        prescribe.
                            ``(iv) Contributions in same year.--For 
                        purposes of this subparagraph and section 
                        72(t)(8), all contributions made for the same 
                        taxable year shall be treated as 1 contribution 
                        made on the first day of the taxable year.
                    ``(D) Cross reference.--

                                ``For additional tax for early 
withdrawal, see section 72(t).
            ``(3) Rollovers.--
                    ``(A) In general.--Paragraph (2) shall not apply to 
                any distribution which is transferred in a qualified 
                rollover contribution to another IRA Plus account.
                    ``(B) Contribution period.--For purposes of 
                paragraph (2), the IRA Plus account to which any 
                contributions are transferred from another IRA Plus 
                account shall be treated as having held such 
                contributions during any period such contributions were 
                held (or are treated as held under this subparagraph) 
                by the account from which transferred.
            ``(4) Special rules relating to qualified rollovers.--
                    ``(A) In general.--Notwithstanding any other 
                provision of law, in the case of a qualified rollover 
                contribution to an IRA Plus account from an individual 
                retirement plan which is not an IRA Plus account--
                            ``(i) there shall be included in gross 
                        income any amount which, but for the qualified 
                        rollover contribution, would be includible in 
                        gross income, but
                            ``(ii) section 72(t) shall not apply to 
                        such amount.
                    ``(B) Time for inclusion.--In the case of any 
                qualified rollover contribution which occurs before 
                January 1, 1998, any amount includible in gross income 
                under subparagraph (A) with respect to such 
                contribution shall be includible ratably over the 4-
                taxable year period beginning in the taxable year in 
                which the amount was paid or distributed out of the 
                individual retirement plan.
    ``(e) Qualified Rollover Contribution.--For purposes of this 
section, the term `qualified rollover contribution' means a rollover 
contribution to an IRA Plus account from another such account, or from 
an individual retirement plan but only if such rollover contribution 
meets the requirements of section 408(d)(3). For purposes of section 
408(d)(3)(B), there shall be disregarded any qualified rollover 
contribution from an individual retirement plan to an IRA plus 
account.''.
    (b) Early Withdrawal Penalty.--Section 72(t), as amended by section 
12121(c), is amended by adding at the end the following new paragraph:
            ``(8) Special rules for distributions from ira plus 
        accounts.--Notwithstanding any other provision of this 
        subsection, paragraph (1) shall apply to any amount received 
        from an IRA Plus account to the extent such amount is required 
        to be included in gross income under section 408A(d)(2) unless 
        such amount is part of a distribution required under section 
        401(a)(9).''.
    (c) Excess Contributions.--Section 4973(b) is amended by adding at 
the end the following new sentence: ``For purposes of paragraphs (1)(B) 
and (2)(C), the amount allowable as a deduction under section 219 shall 
be computed without regard to section 408A.''.
    (d) Conforming Amendment.--The table of sections for subpart A of 
part I of subchapter D of chapter 1 is amended by inserting after the 
item relating to section 408 the following new item:

``Sec. 408A. IRA Plus accounts.''.
    (e) Effective Dates.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

                Subchapter B--Penalty-Free Distributions

SEC. 12121. DISTRIBUTIONS FROM CERTAIN PLANS MAY BE USED WITHOUT 
              PENALTY TO PURCHASE FIRST HOMES OR TO PAY HIGHER 
              EDUCATION OR FINANCIALLY DEVASTATING MEDICAL EXPENSES.

    (a) In General.--Paragraph (2) of section 72(t) (relating to 
exceptions to 10-percent additional tax on early distributions from 
qualified retirement plans) is amended by adding at the end the 
following new subparagraph:
            ``(D) Distributions from individual retirement plans for 
        first home purchases or educational expenses.--Distributions to 
        an individual from an individual retirement plan--
                    ``(i) which are qualified first-time homebuyer 
                distributions (as defined in paragraph (6)), or
                    ``(ii) to the extent such distributions do not 
                exceed the qualified higher education expenses (as 
                defined in paragraph (7)) of the taxpayer for the 
                taxable year.''.
    (b) Financially Devastating Medical Expenses.--
            (1) In general.--Section 72(t)(3)(A) is amended by striking 
        ``(B),''.
            (2) Certain lineal descendants and ancestors treated as 
        dependents.--Subparagraph (B) of section 72(t)(2) is amended by 
        striking ``medical care'' and all that follows and inserting 
        ``medical care determined--
                            ``(i) without regard to whether the 
                        employee itemizes deductions for such taxable 
                        year, and
                            ``(ii) in the case of an individual 
                        retirement plan, by treating such employee's 
                        dependents as including--
                                    ``(I) all children and 
                                grandchildren of the employee or such 
                                employee's spouse, and
                                    ``(II) all ancestors of the 
                                employee or such employee's spouse.''.
            (3) Conforming amendment.--Subparagraph (B) of section 
        72(t)(2) is amended by striking ``or (C)'' and inserting ``, 
        (C), (D), or (E)''.
    (c) Definitions.--Section 72(t) is amended by adding at the end the 
following new paragraphs:
            ``(6) Qualified first-time homebuyer distributions.--For 
        purposes of paragraph (2)(D)(i)--
                    ``(A) In general.--The term `qualified first-time 
                homebuyer distribution' means any payment or 
                distribution received by an individual to the extent 
                such payment or distribution is used by the individual 
                before the close of the 60th day after the day on which 
                such payment or distribution is received to pay 
                qualified acquisition costs with respect to a principal 
                residence of a first-time homebuyer who is such 
                individual, the spouse of such individual, or any 
                child, grandchild, or ancestor of such individual or 
                the individual's spouse.
                    ``(B) Lifetime dollar limitation.--The aggregate 
                amount of payments or distributions received by an 
                individual which may be treated as qualified first-time 
                homebuyer distributions for any taxable year shall not 
                exceed the excess (if any) of--
                            ``(i) $10,000, over
                            ``(ii) the aggregate amounts treated as 
                        qualified first-time homebuyer distributions 
                        with respect to such individual for all prior 
                        taxable years.
                    ``(C) Qualified acquisition costs.--For purposes of 
                this paragraph, the term `qualified acquisition costs' 
                means the costs of acquiring, constructing, or 
                reconstructing a residence. Such term includes any 
                usual or reasonable settlement, financing, or other 
                closing costs.
                    ``(D) First-time homebuyer; other definitions.--For 
                purposes of this paragraph--
                            ``(i) First-time homebuyer.--The term 
                        `first-time homebuyer' means any individual 
                        if--
                                    ``(I) such individual (and if 
                                married, such individual's spouse) had 
                                no present ownership interest in a 
                                principal residence during the 2-year 
                                period ending on the date of 
                                acquisition of the principal residence 
                                to which this paragraph applies, and
                                    ``(II) subsection (h) or (k) of 
                                section 1034 did not suspend the 
                                running of any period of time specified 
                                in section 1034 with respect to such 
                                individual on the day before the date 
                                the distribution is applied pursuant to 
                                subparagraph (A)(ii).
                            ``(ii) Principal residence.--The term 
                        `principal residence' has the same meaning as 
                        when used in section 1034.
                            ``(iii) Date of acquisition.--The term 
                        `date of acquisition' means the date--
                                    ``(I) on which a binding contract 
                                to acquire the principal residence to 
                                which subparagraph (A) applies is 
                                entered into, or
                                    ``(II) on which construction or 
                                reconstruction of such a principal 
                                residence is commenced.
                    ``(E) Special rule where delay in acquisition.--If 
                any distribution from any individual retirement plan 
                fails to meet the requirements of subparagraph (A) 
                solely by reason of a delay or cancellation of the 
                purchase or construction of the residence, the amount 
                of the distribution may be contributed to an individual 
                retirement plan as provided in section 408(d)(3)(A)(i) 
                (determined by substituting `120 days' for `60 days' in 
                such section), except that--
                            ``(i) section 408(d)(3)(B) shall not be 
                        applied to such contribution, and
                            ``(ii) such amount shall not be taken into 
                        account in determining whether section 
                        408(d)(3)(A)(i) applies to any other amount.
            ``(7) Qualified higher education expenses.--For purposes of 
        paragraph (2)(D)(ii)--
                    ``(A) In general.--The term `qualified higher 
                education expenses' means tuition, fees, books, 
                supplies, and equipment required for the enrollment or 
                attendance of--
                            ``(i) the taxpayer,
                            ``(ii) the taxpayer's spouse, or
                            ``(iii) any child (as defined in section 
                        151(c)(3)), grandchild, or ancestor of the 
                        taxpayer or the taxpayer's spouse,
                at an eligible educational institution (as defined in 
                section 135(c)(3)).
                    ``(B) Coordination with savings bond provisions.--
                The amount of qualified higher education expenses for 
                any taxable year shall be reduced by any amount 
                excludable from gross income under section 135.''.
    (d) Penalty-Free Distributions for Certain Unemployed 
Individuals.--Paragraph (2) of section 72(t) is amended by adding at 
the end the following new subparagraph:
                    ``(E) Distributions to unemployed individuals.--A 
                distribution from an individual retirement plan to an 
                individual after separation from employment, if--
                            ``(i) such individual has received 
                        unemployment compensation for 12 consecutive 
                        weeks under any Federal or State unemployment 
                        compensation law by reason of such separation, 
                        and
                            ``(ii) such distributions are made during 
                        any taxable year during which such unemployment 
                        compensation is paid or the succeeding taxable 
                        year.
                To the extent provided in regulations, a self-employed 
                individual shall be treated as meeting the requirements 
                of clause (i) if, under Federal or State law, the 
                individual would have received unemployment 
                compensation but for the fact the individual was self-
                employed.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

                   Subchapter C--Simple Savings Plans

SEC. 12131. ESTABLISHMENT OF SAVINGS INCENTIVE MATCH PLANS FOR 
              EMPLOYEES OF SMALL EMPLOYERS.

    (a) In General.--Section 408 (relating to individual retirement 
accounts) is amended by redesignating subsection (p) as subsection (q) 
and by inserting after subsection (o) the following new subsection:
    ``(p) Simple Retirement Accounts.--
            ``(1) In general.--For purposes of this title, the term 
        `simple retirement account' means an individual retirement 
        plan--
                    ``(A) with respect to which the requirements of 
                paragraphs (3), (4), and (5) are met; and
                    ``(B) with respect to which the only contributions 
                allowed are contributions under a qualified salary 
                reduction arrangement.
            ``(2) Qualified salary reduction arrangement.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `qualified salary reduction arrangement' means 
                a written arrangement of an eligible employer under 
                which--
                            ``(i) an employee eligible to participate 
                        in the arrangement may elect to have the 
                        employer make payments--
                                    ``(I) as elective employer 
                                contributions to a simple retirement 
                                account on behalf of the employee, or
                                    ``(II) to the employee directly in 
                                cash,
                            ``(ii) the amount which an employee may 
                        elect under clause (i) for any year is required 
                        to be expressed as a percentage of compensation 
                        and may not exceed a total of $6,000 for any 
                        year,
                            ``(iii) the employer is required to make a 
                        matching contribution to the simple retirement 
                        account for any year in an amount equal to so 
                        much of the amount the employee elects under 
                        clause (i)(I) as does not exceed the applicable 
                        percentage of compensation for the year, and
                            ``(iv) no contributions may be made other 
                        than contributions described in clause (i) or 
                        (iii).
                    ``(B) Definitions.--For purposes of this 
                subsection--
                            ``(i) Eligible employer.--The term 
                        `eligible employer' means an employer who 
                        normally employs 100 or fewer employees on any 
                        day during the year.
                            ``(ii) Applicable percentage.--
                                    ``(I) In general.--The term 
                                `applicable percentage' means 3 
                                percent.
                                    ``(II) Election of lower 
                                percentage.--An employer may elect to 
                                apply a lower percentage (not less than 
                                1 percent) for any year for all 
                                employees eligible to participate in 
                                the plan for such year if the employer 
                                notifies the employees of such lower 
                                percentage within a reasonable period 
                                of time before the 60-day election 
                                period for such year under paragraph 
                                (5)(C). An employer may not elect a 
                                lower percentage under this subclause 
                                for any year if that election would 
                                result in the applicable percentage 
                                being lower than 3 percent in more than 
                                2 of the years in the 5-year period 
                                ending with such year.
                                    ``(III) Special rule for years 
                                arrangement not in effect.--If any year 
                                in the 5-year period described in 
                                subclause (II) is a year prior to the 
                                first year for which any qualified 
                                salary reduction arrangement is in 
                                effect with respect to the employer (or 
                                any predecessor), the employer shall be 
                                treated as if the level of the employer 
                                matching contribution was at 3 percent 
                                of compensation for such year.
                    ``(C) Arrangement may be only plan of employer.--
                            ``(i) In general.--An arrangement shall not 
                        be treated as a qualified salary reduction 
                        arrangement for any year if the employer (or 
                        any predecessor employer) maintained a 
                        qualified plan with respect to which 
                        contributions were made, or benefits were 
                        accrued, for service in any year in the period 
                        beginning with the year such arrangement became 
                        effective and ending with the year for which 
                        the determination is being made.
                            ``(ii) Qualified plan.--For purposes of 
                        this subparagraph, the term `qualified plan' 
                        means a plan, contract, pension, or trust 
                        described in subparagraph (A) or (B) of section 
                        219(g)(5).
                    ``(D) No fee or penalty on employee's initial 
                investment determination.--An arrangement shall not be 
                treated as a qualified salary reduction arrangement 
                unless it provides that no fee or penalty will be 
                imposed on an employee's initial determination with 
                respect to the investment of any contribution.
                    ``(E) Cost-of-living adjustment.--The Secretary 
                shall adjust the $6,000 amount under subparagraph 
                (A)(ii) at the same time and in the same manner as 
                under section 415(d), except that the base period taken 
                into account shall be the calendar quarter ending 
                September 30, 1995, and any increase under this 
                subparagraph which is not a multiple of $500 shall be 
                rounded to the next lower multiple of $500.
            ``(3) Vesting requirements.--The requirements of this 
        paragraph are met with respect to a simple retirement account 
        if the employee's rights to any contribution to the simple 
        retirement account are nonforfeitable. For purposes of this 
        paragraph, the rules similar to the rules of subsection (k)(4) 
        shall apply.
            ``(4) Participation requirements.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to any simple retirement 
                account for a year only if, under the qualified salary 
                reduction arrangement, all employees of the employer 
                who--
                            ``(i) received at least $5,000 in 
                        compensation from the employer during each of 
                        the 2 preceding years, and
                            ``(ii) who are reasonably expected to 
                        receive at least $5,000 in compensation during 
                        the year,
                are eligible to make the election under paragraph 
                (2)(A)(i).
                    ``(B) Excludable employees.--An employer may elect 
                to exclude from the requirement under subparagraph (A) 
                employees described in section 410(b)(3).
            ``(5) Administrative requirements.--The requirements of 
        this paragraph are met with respect to any simplified 
        retirement account if, under the qualified salary reduction 
        arrangement--
                    ``(A) an employer must--
                            ``(i) make the elective employer 
                        contributions under paragraph (2)(A)(i) not 
                        later than the close of the 30-day period 
                        following the last day of the month with 
                        respect to which the contributions are to be 
                        made, and
                            ``(ii) make the matching contributions 
                        under paragraph (2)(A)(iii) not later than the 
                        date described in section 404(m)(2)(B),
                    ``(B) an employee may elect to terminate 
                participation in such arrangement at any time during 
                the year, except that if an employee so terminates, the 
                arrangement may provide that the employee may not elect 
                to resume participation until the beginning of the next 
                year, and
                    ``(C) each employee eligible to participate may 
                elect, during the 60-day period before the beginning of 
                any year, to participate in the arrangement, or to 
                modify the amounts subject to such arrangement, for 
                such year.
            ``(6) Definitions.--For purposes of this subsection--
                    ``(A) Compensation.--
                            ``(i) In general.--The term `compensation' 
                        means amounts described in paragraphs (3) and 
                        (8) of section 6051(a).
                            ``(ii) Self-employed.--In the case of an 
                        employee described in subparagraph (B), 
                        compensation means net earnings from self-
                        employment determined under section 1402(a) 
                        without regard to any contribution under this 
                        subsection.
                    ``(B) Employee.--The term `employee' includes an 
                employee as defined in section 401(c)(1).
                    ``(C) Year.--The term `year' means the calendar 
                year.''.
    (b) Tax Treatment of Simple Retirement Accounts.--
            (1) Deductibility of contributions by employees.--
                    (A) Section 219(b) (relating to maximum amount of 
                deduction) is amended by adding at the end the 
                following new paragraph:
            ``(4) Special rule for simple retirement accounts.--This 
        section shall not apply with respect to any amount contributed 
        to a simple retirement account established under section 
        408(p).''.
                    (B) Section 219(g)(5)(A) (defining active 
                participant) is amended by striking ``or'' at the end 
                of clause (iv) and by adding at the end the following 
                new clause:
                            ``(vi) any simple retirement account 
                        (within the meaning of section 408(p)), or''.
            (2) Deductibility of employer contributions.--Section 404 
        (relating to deductions for contributions of an employer to 
        pension, etc. plans) is amended by adding at the end the 
        following new subsection:
    ``(m) Special Rules for Simple Retirement Accounts.--
            ``(1) In general.--Employer contributions to a simple 
        retirement account shall be treated as if they are made to a 
        plan subject to the requirements of this section.
            ``(2) Timing.--
                    ``(A) Deduction.--Contributions described in 
                paragraph (1) shall be deductible in the taxable year 
                of the employer with or within which the calendar year 
                for which the contributions were made ends.
                    ``(B) Contributions after end of year.--For 
                purposes of this subsection, contributions shall be 
                treated as made for a taxable year if they are made on 
                account of the taxable year and are made not later than 
                the time prescribed by law for filing the return for 
                the taxable year (including extensions thereof).''.
            (3) Contributions and distributions.--
                    (A) Section 402 (relating to taxability of 
                beneficiary of employees' trust) is amended by adding 
                at the end the following new subsection:
    ``(k) Treatment of Simple Retirement Accounts.--Rules similar to 
the rules of paragraphs (1) and (3) of subsection (h) shall apply to 
contributions and distributions with respect to a simple retirement 
account under section 408(p).''.
                    (B) Section 408(d)(3) is amended by adding at the 
                end the following new subparagraph:
                    ``(G) Simple retirement accounts.--This paragraph 
                shall not apply to any amount paid or distributed out 
                of a simple retirement account (as defined in section 
                408(p)) unless it is paid into another simple 
                retirement account.''.
                    (C) Clause (i) of section 457(c)(2)(B) is amended 
                by striking ``section 402(h)(1)(B)'' and inserting 
                ``section 402(h)(1)(B) or (k)''.
            (4) Penalties.--
                    (A) Early withdrawals.--Section 72(t) (relating to 
                additional tax in early distributions), as amended by 
                sections 12111(b) and 12121(c), is amended by adding at 
                the end the following new paragraph:
            ``(9) Special rules for simple retirement accounts.--In the 
        case of any amount received from a simple retirement account 
        (within the meaning of section 408(p)) during the 2-year period 
        beginning on the date such individual first participated in any 
        qualified salary reduction arrangement maintained by the 
        individual's employer under section 408(p)(2), paragraph (1) 
        shall be applied by substituting `25 percent' for `10 
        percent'.''.
                    (B) Failure to report.--Section 6693 is amended by 
                redesignating subsection (c) as subsection (d) and by 
                inserting after subsection (b) the following new 
                subsection:
    ``(c) Penalties Relating to Simple Retirement Accounts.--
            ``(1) Employer penalties.--An employer who fails to provide 
        1 or more notices required by section 408(l)(2)(C) shall pay a 
        penalty of $50 for each day on which such failures continue.
            ``(2) Trustee penalties.--A trustee who fails--
                    ``(A) to provide 1 or more statements required by 
                the last sentence of section 408(i) shall pay a penalty 
                of $50 for each day on which such failures continue, or
                    ``(B) to provide 1 or more summary descriptions 
                required by section 408(l)(2)(B) shall pay a penalty of 
                $50 for each day on which such failures continue.
            ``(3) Reasonable cause exception.--No penalty shall be 
        imposed under this subsection with respect to any failure which 
        the taxpayer shows was due to reasonable cause.''.
            (5) Reporting requirements.--
                    (A)(i) Section 408(l) is amended by adding at the 
                end the following new paragraph:
            ``(2) Simple retirement accounts.--
                    ``(A) No employer reports.--Except as provided in 
                this paragraph, no report shall be required under this 
                section by an employer maintaining a qualified salary 
                reduction arrangement under subsection (p).
                    ``(B) Summary description.--The trustee of any 
                simple retirement account established pursuant to a 
                qualified salary reduction arrangement under subsection 
                (p) shall provide to the employer maintaining the 
                arrangement, each year a description containing the 
                following information:
                            ``(i) The name and address of the employer 
                        and the trustee.
                            ``(ii) The requirements for eligibility for 
                        participation.
                            ``(iii) The benefits provided with respect 
                        to the arrangement.
                            ``(iv) The time and method of making 
                        elections with respect to the arrangement.
                            ``(v) The procedures for, and effects of, 
                        withdrawals from the arrangement.
                    ``(C) Employee notification.--The employer shall 
                notify each employee immediately before the period for 
                which an election described in subsection (p)(5)(C) may 
                be made of the employee's opportunity to make such 
                election. Such notice shall include a copy of the 
                description described in subparagraph (B).''.
                    (ii) Section 408(l) is amended by striking ``An 
                employer'' and inserting--
            ``(1) In general.--An employer''.
                    (B) Section 408(i) is amended by adding at the end 
                the following new flush sentence:
``In the case of a simple retirement account under subsection (p), only 
one report under this subsection shall be required to be submitted each 
calendar year to the Secretary (at the time provided under paragraph 
(2)) but, in addition to the report under this subsection, there shall 
be furnished, within 30 days after each calendar year, to the 
individual on whose behalf the account is maintained a statement with 
respect to the account balance as of the close of, and the account 
activity during, such calendar year.''.
            (6) Exemption from top-heavy plan rules.--Section 416(g)(4) 
        (relating to special rules for top-heavy plans) is amended by 
        adding at the end the following new subparagraph:
                    ``(G) Simple retirement accounts.--The term `top-
                heavy plan' shall not include a simple retirement 
                account under section 408(p).''.
            (7) Conforming amendments.--
                    (A) Section 280G(b)(6) is amended by striking 
                ``or'' at the end of subparagraph (B), by striking the 
                period at the end of subparagraph (C) and inserting ``, 
                or'' and by adding after subparagraph (C) the following 
                new subparagraph:
                    ``(D) a simple retirement account described in 
                section 408(p).''.
                    (B) Section 402(g)(3) is amended by striking 
                ``and'' at the end of subparagraph (B), by striking the 
                period at the end of subparagraph (C) and inserting ``, 
                and'', and by adding after subparagraph (C) the 
                following new subparagraph:
                    ``(D) any elective employer contribution under 
                section 408(p)(2)(A)(i).''.
                    (C) Subsections (b), (c), (m)(4)(B), and (n)(3)(B) 
                of section 414 are each amended by inserting 
                ``408(p),'' after ``408(k),''.
                    (D) Section 4972(d)(1)(A) is amended by striking 
                ``and'' at the end of clause (ii), by striking the 
                period at the end of clause (iii) and inserting ``, 
                and'', and by adding after clause (iii) the following 
                new clause:
                            ``(iv) any simple retirement account 
                        (within the meaning of section 408(p)).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 12132. EXTENSION OF SIMPLE PLAN TO 401(k) ARRANGEMENTS.

    (a) Alternative Method of Satisfying Section 401(k) 
Nondiscrimination Tests.--Section 401(k) (relating to cash or deferred 
arrangements) is amended by adding at the end the following new 
paragraph:
            ``(11) Adoption of simple plan to meet nondiscrimination 
        tests.--
                    ``(A) In general.--A cash or deferred arrangement 
                maintained by an eligible employer shall be treated as 
                meeting the requirements of paragraph (3)(A)(ii) if 
                such arrangement meets--
                            ``(i) the contribution requirements of 
                        subparagraph (B),
                            ``(ii) the exclusive benefit requirements 
                        of subparagraph (C), and
                            ``(iii) the vesting requirements of section 
                        408(p)(3).
                    ``(B) Contribution requirements.--The requirements 
                of this subparagraph are met if, under the 
                arrangement--
                            ``(i) an employee may elect to have the 
                        employer make elective contributions for the 
                        year on behalf of the employee to a trust under 
                        the plan in an amount which is expressed as a 
                        percentage of compensation of the employee but 
                        which in no event exceeds $6,000,
                            ``(ii) the employer is required to make a 
                        matching contribution to the trust for the year 
                        in an amount equal to so much of the amount the 
                        employee elects under clause (i) as does not 
                        exceed 3 percent of compensation for the year, 
                        and
                            ``(iii) no other contributions may be made 
                        other than contributions described in clause 
                        (i) or (ii).
                    ``(C) Exclusive benefit.--The requirements of this 
                subparagraph are met for any year to which this 
                paragraph applies if no contributions were made, or 
                benefits were accrued, for services during such year 
                under any qualified plan of the employer on behalf of 
                any employee eligible to participate in the cash or 
                deferred arrangement, other than contributions 
                described in subparagraph (B).
                    ``(D) Definitions and special rule.--
                            ``(i) Definitions.--For purposes of this 
                        paragraph, any term used in this paragraph 
                        which is also used in section 408(p) shall have 
                        the meaning given such term by such section.
                            ``(ii) Coordination with top-heavy rules.--
                        A plan meeting the requirements of this 
                        paragraph for any year shall not be treated as 
                        a top-heavy plan under section 416 for such 
                        year.''.
    (b) Alternative Methods of Satisfying Section 401(m) 
Nondiscrimination Tests.--Section 401(m) (relating to nondiscrimination 
test for matching contributions and employee contributions) is amended 
by redesignating paragraph (10) as paragraph (11) and by adding after 
paragraph (9) the following new paragraph:
            ``(10) Alternative method of satisfying tests.--A defined 
        contribution plan shall be treated as meeting the requirements 
        of paragraph (2) with respect to matching contributions if the 
        plan--
                    ``(A) meets the contribution requirements of 
                subparagraph (B) of subsection (k)(11),
                    ``(B) meets the exclusive benefit requirements of 
                subsection (k)(11)(C), and
                    ``(C) meets the vesting requirements of section 
                408(p)(3).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 1995.

                    CHAPTER 2--CAPITAL GAINS REFORM

            Subchapter A--Taxpayers Other Than Corporations

SEC. 12141. CAPITAL GAINS DEDUCTION.

    (a) In General.--Part I of subchapter P of chapter 1 (relating to 
treatment of capital gains) is amended by redesignating section 1202 as 
section 1203 and by inserting after section 1201 the following new 
section:

``SEC. 1202. CAPITAL GAINS DEDUCTION.

    ``(a) General Rule.--If for any taxable year a taxpayer other than 
a corporation has a net capital gain, 50 percent of such gain shall be 
a deduction from gross income.
    ``(b) Estates and Trusts.--In the case of an estate or trust, the 
deduction shall be computed by excluding the portion (if any) of the 
gains for the taxable year from sales or exchanges of capital assets 
which, under sections 652 and 662 (relating to inclusions of amounts in 
gross income of beneficiaries of trusts), is includible by the income 
beneficiaries as gain derived from the sale or exchange of capital 
assets.
    ``(c) Coordination With Treatment of Capital Gain Under Limitation 
on Investment Interest.--For purposes of this section, the net capital 
gain for any taxable year shall be reduced (but not below zero) by the 
amount which the taxpayer takes into account as investment income under 
section 163(d)(4)(B)(iii).
    ``(d) Special Rule for Collectibles.--The rate of tax imposed by 
section 1 on the excess of--
            ``(1) the net capital gain for the taxable year determined 
        as if section 1222(12) had not applied to any collectible sold 
        or exchanged during the taxable year, over
            ``(2) the net capital gain for the taxable year,
shall not exceed 28 percent.
    ``(e) Transitional Rule.--
            ``(1) In general.--In the case of a taxable year which 
        includes October 14, 1995--
                    ``(A) the amount taken into account as the net 
                capital gain under subsection (a) shall not exceed the 
                net capital gain determined by only taking into account 
                gains and losses properly taken into account for the 
                portion of the taxable year on or after October 14, 
                1995, and
                    ``(B) the amount of the net capital gain taken into 
                account in applying section 1(h) for such year shall be 
                reduced by the amount taken into account under 
                subsection (a) for such year.
            ``(2) Special rules for pass-thru entities.--
                    ``(A) In general.--In applying paragraph (1) with 
                respect to any pass-thru entity, the determination of 
                when gains and losses are properly taken into account 
                shall be made at the entity level.
                    ``(B) Pass-thru entity defined.--For purposes of 
                subparagraph (A), the term `pass-thru entity' means--
                            ``(i) a regulated investment company,
                            ``(ii) a real estate investment trust,
                            ``(iii) an S corporation,
                            ``(iv) a partnership,
                            ``(v) an estate or trust, and
                            ``(vi) a common trust fund.''.
    (b) Deduction Allowable in Computing Adjusted Gross Income.--
Subsection (a) of section 62 is amended by inserting after paragraph 
(15) the following new paragraph:
            ``(16) Long-term capital gains.--The deduction allowed by 
        section 1202.''.
    (c) Alternative Minimum Tax.--
            (1) Half of deduction disallowed.--Section 56(b)(1) 
        (relating to limitations on deductions of individuals) is 
        amended by adding at the end the following new subparagraph:
                    ``(G) Capital gains deduction reduced.--In 
                determining the deduction allowable under section 1202, 
                section 1202(a) shall be applied by substituting `25 
                percent' for `50 percent'''.
            (2) Conforming amendment.--Section 57(a)(7) is amended by 
        striking ``1202'' and inserting ``1203''.
    (d) Treatment of Collectibles.--
            (1) In general.--Section 1222 is amended by inserting after 
        paragraph (11) the following new paragraph:
            ``(12) Special rule for collectibles.--
                    ``(A) In general.--Any gain or loss from the sale 
                or exchange of a collectible shall be treated as a 
                short-term capital gain or loss (as the case may be), 
                without regard to the period such asset was held. The 
                preceding sentence shall apply only to the extent the 
                gain or loss is taken into account in computing taxable 
                income.
                    ``(B) Treatment of certain sales of interest in 
                partnership, etc.--For purposes of subparagraph (A), 
                any gain from the sale or exchange of an interest in a 
                partnership, S corporation, or trust which is 
                attributable to unrealized appreciation in the value of 
                collectibles held by such entity shall be treated as 
                gain from the sale or exchange of a collectible. Rules 
                similar to the rules of section 751(f) shall apply for 
                purposes of the preceding sentence.
                    ``(C) Collectible.--For purposes of this paragraph, 
                the term `collectible' means any capital asset which is 
                a collectible (as defined in section 408(m) without 
                regard to paragraph (3) thereof).''.
            (2) Charitable deduction not affected.--
                    (A) Paragraph (1) of section 170(e) is amended by 
                adding at the end the following new sentence: ``For 
                purposes of this paragraph, section 1222 shall be 
                applied without regard to paragraph (12) thereof 
                (relating to special rule for collectibles).''.
                    (B) Clause (iv) of section 170(b)(1)(C) is amended 
                by inserting before the period at the end the 
                following: ``and section 1222 shall be applied without 
                regard to paragraph (12) thereof (relating to special 
                rule for collectibles)''.
    (e) Technical and Conforming Changes.--
            (1) Section 1 is amended by striking subsection (h).
            (2) Paragraph (1) of section 170(e) is amended by striking 
        ``the amount of gain'' in the material following subparagraph 
        (B)(ii) and inserting ``50 percent (\28/35\ in the case of a 
        corporation) of the amount of gain''.
            (3) Subparagraph (B) of section 172(d)(2) is amended to 
        read as follows:
                    ``(B) the deduction under section 1202 and the 
                exclusion under section 1203 shall not be allowed.''.
            (4) The last sentence of section 453A(c)(3) is amended by 
        striking all that follows ``long-term capital gain,'' and 
        inserting ``the maximum rate on net capital gain under section 
        1201 or the deduction under section 1202 and the exclusion 
        under section 1203 (whichever is appropriate) shall be taken 
        into account.''.
            (5) Paragraph (4) of section 642(c) is amended to read as 
        follows:
            ``(4) Adjustments.--To the extent that the amount otherwise 
        allowable as a deduction under this subsection consists of gain 
        from the sale or exchange of capital assets held for more than 
        1 year or gain described in section 1203(a), proper adjustment 
        shall be made for any deduction allowable to the estate or 
        trust under section 1202 (relating to deduction for excess of 
        capital gains over capital losses) or for the exclusion 
        allowable to the estate or trust under section 1203 (relating 
        to exclusion for gain from certain small business stock). In 
        the case of a trust, the deduction allowed by this subsection 
        shall be subject to section 681 (relating to unrelated business 
        income).''.
            (6) The last sentence of section 643(a)(3) is amended to 
        read as follows: ``The deduction under section 1202 (relating 
        to deduction of excess of capital gains over capital losses) 
        and the exclusion under section 1203 (relating to exclusion for 
        gain from certain small business stock) shall not be taken into 
        account.''.
            (7) Subparagraph (C) of section 643(a)(6) is amended by 
        inserting ``(i)'' before ``there shall'' and by inserting 
        before the period ``, and (ii) the deduction under section 1202 
        (relating to capital gains deduction) and the exclusion under 
        section 1203 (relating to exclusion for gain from certain small 
        business stock) shall not be taken into account''.
            (8) Paragraph (4) of section 691(c) is amended by striking 
        ``sections 1(h), 1201, 1202, and 1211'' and inserting 
        ``sections 1201, 1202, 1203, and 1211''.
            (9) The second sentence of section 871(a)(2) is amended by 
        inserting ``or 1203'' after ``section 1202''.
            (10)(A) Paragraph (2) of section 904(b) is amended by 
        striking subparagraph (A), by redesignating subparagraph (B) as 
        subparagraph (A), and by inserting after subparagraph (A) (as 
        so redesignated) the following new subparagraph:
                    ``(B) Other taxpayers.--In the case of a taxpayer 
                other than a corporation, taxable income from sources 
                outside the United States shall include gain from the 
                sale or exchange of capital assets only to the extent 
                of foreign source capital gain net income.''.
            (B) Subparagraph (A) of section 904(b)(2), as so 
        redesignated, is amended--
                    (i) by striking all that precedes clause (i) and 
                inserting the following:
                    ``(A) Corporations.--In the case of a corporation--
                '', and
                    (ii) by striking in clause (i) ``in lieu of 
                applying subparagraph (A),''.
            (C) Paragraph (3) of section 904(b) is amended by striking 
        subparagraphs (D) and (E) and inserting the following new 
        subparagraph:
                    ``(D) Rate differential portion.--The rate 
                differential portion of foreign source net capital 
                gain, net capital gain, or the excess of net capital 
                gain from sources within the United States over net 
                capital gain, as the case may be, is the same 
                proportion of such amount as the excess of the highest 
                rate of tax specified in section 11(b) over the 
                alternative rate of tax under section 1201(a) bears to 
                the highest rate of tax specified in section 11(b).''.
            (D) Clause (v) of section 593(b)(2)(D) is amended--
                    (i) by striking ``if there is a capital gain rate 
                differential (as defined in section 904(b)(3)(D)) for 
                the taxable year,'', and
                    (ii) by striking ``section 904(b)(3)(E)'' and 
                inserting ``section 904(b)(3)(D)''.
            (11) The last sentence of section 1044(d) is amended by 
        striking ``1202'' and inserting ``1203''.
            (12)(A) Paragraph (2) of section 1211(b) is amended to read 
        as follows:
            ``(2) the sum of--
                    ``(A) the excess of the net short-term capital loss 
                over the net long-term capital gain, and
                    ``(B) one-half of the excess of the net long-term 
                capital loss over the net short-term capital gain.''.
            (B) So much of paragraph (2) of section 1212(b) as precedes 
        subparagraph (B) thereof is amended to read as follows:
            ``(2) Special rules.--
                    ``(A) Adjustments.--
                            ``(i) For purposes of determining the 
                        excess referred to in paragraph (1)(A), there 
                        shall be treated as short-term capital gain in 
                        the taxable year an amount equal to the lesser 
                        of--
                                    ``(I) the amount allowed for the 
                                taxable year under paragraph (1) or (2) 
                                of section 1211(b), or
                                    ``(II) the adjusted taxable income 
                                for such taxable year.
                            ``(ii) For purposes of determining the 
                        excess referred to in paragraph (1)(B), there 
                        shall be treated as short-term capital gain in 
                        the taxable year an amount equal to the sum 
                        of--
                                    ``(I) the amount allowed for the 
                                taxable year under paragraph (1) or (2) 
                                of section 1211(b) or the adjusted 
                                taxable income for such taxable year, 
                                whichever is the least, plus
                                    ``(II) the excess of the amount 
                                described in subclause (I) over the net 
                                short-term capital loss (determined 
                                without regard to this subsection) for 
                                such year.''.
            (C) Subsection (b) of section 1212 is amended by adding at 
        the end the following new paragraph:
            ``(3) Transitional rule.--In the case of any amount which, 
        under this subsection and section 1211(b) (as in effect for 
        taxable years beginning before January 1, 1996), is treated as 
        a capital loss in the first taxable year beginning after 
        December 31, 1995, paragraph (2) and section 1211(b) (as so in 
        effect) shall apply (and paragraph (2) and section 1211(b) as 
        in effect for taxable years beginning after December 31, 1995, 
        shall not apply) to the extent such amount exceeds the total of 
        any capital gain net income (determined without regard to this 
        subsection) for taxable years beginning after December 31, 
        1995.''.
            (13) Paragraph (1) of section 1402(i) is amended by 
        inserting ``, and the deduction provided by section 1202 and 
        the exclusion provided by section 1203 shall not apply'' before 
        the period at the end thereof.
            (14) Subsection (e) of section 1445 is amended--
                    (A) in paragraph (1) by striking ``35 percent (or, 
                to the extent provided in regulations, 28 percent)'' 
                and inserting ``28 percent (or, to the extent provided 
                in regulations, 19.8 percent)'', and
                    (B) in paragraph (2) by striking ``35 percent'' and 
                inserting ``28 percent''.
            (15)(A) The second sentence of section 7518(g)(6)(A) is 
        amended--
                    (i) by striking ``during a taxable year to which 
                section 1(h) or 1201(a) applies'', and
                    (ii) by striking ``28 percent (34 percent'' and 
                inserting ``19.8 percent (28 percent''.
            (B) The second sentence of section 607(h)(6)(A) of the 
        Merchant Marine Act, 1936 is amended--
                    (i) by striking ``during a taxable year to which 
                section 1(h) or 1201(a) of such Code applies'', and
                    (ii) by striking ``28 percent (34 percent'' and 
                inserting ``19.8 percent (28 percent''.
            (16) Section 1203, as redesignated by subsection (a), is 
        amended by adding at the end the following new subsection:
    ``(l) Cross Reference.--

                                ``For treatment of eligible gain not 
excluded under subsection (a), see section 1202.''.
    (f) Clerical Amendment.--The table of sections for part I of 
subchapter P of chapter 1 is amended by striking the item relating to 
section 1202 and by inserting after the item relating to section 1201 
the following new items:

``Sec. 1202. Capital gains deduction.
``Sec. 1203. 50-percent exclusion for gain from certain small business 
                            stock.''.
    (g) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxable years ending after October 13, 1995.
            (2) Collectibles.--The amendments made by subsection (d) 
        shall apply to sales and exchanges after October 13, 1995.
            (3) Repeal of section 1(h).--The amendment made by 
        subsection (e)(1) shall apply to taxable years beginning after 
        October 13, 1995.
            (4) Contributions.--The amendment made by subsection (e)(2) 
        shall apply to contributions after October 13, 1995.
            (5) Use of long-term losses.--The amendments made by 
        subsection (e)(12) shall apply to taxable years beginning after 
        December 31, 1995.
            (6) Withholding.--The amendment made by subsection (e)(14) 
        shall apply only to amounts paid after the date of the 
        enactment of this Act.

SEC. 12142. MODIFICATIONS TO EXCLUSION OF GAIN ON CERTAIN SMALL 
              BUSINESS STOCK.

    (a) Stock of Larger Businesses Eligible for Exclusion.--Paragraph 
(1) of section 1203(d), as redesignated by section 12141, is amended by 
striking ``$50,000,000'' each place it appears and inserting 
``$100,000,000''.
    (b) Repeal of Per-Issuer Limitation.--Section 1203, as so 
redesignated, is amended by striking subsection (b).
    (c) Other Modifications.--
            (1) Repeal of working capital limitation.--Paragraph (6) of 
        section 1203(e), as so redesignated, is amended--
                    (A) by striking ``2 years'' in subparagraph (B) and 
                inserting ``5 years'', and
                    (B) by striking the last sentence.
            (2) Exception from redemption rules where business 
        purpose.--Paragraph (3) of section 1203(c), as so redesignated, 
        is amended by adding at the end the following new subparagraph:
                    ``(D) Waiver where business purpose.--A purchase of 
                stock by the issuing corporation shall be disregarded 
                for purposes of subparagraph (B) if the issuing 
                corporation establishes that there was a business 
                purpose for such purchase and one of the principal 
                purposes of the purchase was not to avoid the 
                limitations of this section.''.
    (d) Effective Dates.--
            (1) Increase in size.--The amendment made by subsection (a) 
        shall apply to stock issued after the date of the enactment of 
        this Act.
            (2) Other rules.--The amendments made by subsections (b) 
        and (c) shall apply to stock issued after August 10, 1993.

SEC. 12143. ROLLOVER OF GAIN FROM SALE OF QUALIFIED STOCK.

    (a) In General.--Part III of subchapter O of chapter 1 is amended 
by adding at the end the following new section:

``SEC. 1045. ROLLOVER OF GAIN FROM QUALIFIED SMALL BUSINESS STOCK TO 
              ANOTHER QUALIFIED SMALL BUSINESS STOCK.

    ``(a) Nonrecognition of Gain.--If a taxpayer other than a 
corporation elects the application of this section to any sale of 
qualified small business stock, eligible gain from such sale shall be 
recognized only to the extent that the amount realized on such sale 
exceeds--
            ``(1) the cost of any qualified small business stock 
        purchased by the taxpayer during the 60-day period beginning on 
        the date of such sale, reduced by
            ``(2) any portion of such cost previously taken into 
        account under this section.
This section shall not apply to any gain which is treated as ordinary 
income for purposes of this title.
    ``(b) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Qualified small business stock.--The term `qualified 
        small business stock' has the meaning given such term by 
        section 1203(c).
            ``(2) Eligible gain.--The term `eligible gain' means any 
        gain from the sale or exchange of qualified small business 
        stock held for more than 5 years.
            ``(3) Purchase.--A taxpayer shall be treated as having 
        purchased any property if, but for paragraph (4), the 
        unadjusted basis of such property in the hands of the taxpayer 
        would be its cost (within the meaning of section 1012).
            ``(4) Basis adjustments.--If gain from any sale is not 
        recognized by reason of subsection (a), such gain shall be 
        applied to reduce (in the order acquired) the basis for 
        determining gain or loss of any qualified small business stock 
        which is purchased by the taxpayer during the 60-day period 
        described in subsection (a).
    ``(c) Special Rules for Treatment of Replacement Stock.--
            ``(1) Holding period for accrued gain.--For purposes of 
        this chapter, gain from the disposition of any replacement 
        qualified small business stock shall be treated as eligible 
        gain to the extent that the amount of such gain does not exceed 
        the amount of the reduction in the basis of such stock by 
        reason of subsection (b)(4).
            ``(2) Tacking of holding period for purposes of deferral.--
        Solely for purposes of applying this section, if any 
        replacement qualified small business stock is disposed of 
        before the taxpayer has held such stock for more than 5 years, 
        gain from such stock shall be treated as eligible gain for 
        purposes of subsection (a).
            ``(3) Replacement qualified small business stock.--For 
        purposes of this subsection, the term `replacement qualified 
        small business stock' means any qualified small business stock 
        the basis of which was reduced under subsection (b)(4).''.
    (b) Conforming Amendments.--
            (1) Section 1016(a)(23) is amended--
                    (A) by striking ``or 1044'' and inserting ``, 1044, 
                or 1045'', and
                    (B) by striking ``or 1044(d)'' and inserting ``, 
                1044(d), or 1045(b)(4)''.
            (2) The table of sections for part III of subchapter O of 
        chapter 1 is amended by adding at the end the following new 
        item:

``Sec. 1045. Rollover of gain from qualified small business stock to 
                            another qualified small business stock.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to stock sold or exchanged after the date of the enactment of 
this Act.

                 Subchapter B--Corporate Capital Gains

SEC. 12151. REDUCTION OF ALTERNATIVE CAPITAL GAIN TAX FOR CORPORATIONS.

    (a) In General.--Section 1201 is amended to read as follows:

``SEC. 1201. ALTERNATIVE TAX FOR CORPORATIONS.

    ``(a) General Rule.--If for any taxable year a corporation has a 
net capital gain, then, in lieu of the tax imposed by sections 11, 511, 
and 831 (a) and (b) (whichever is applicable), there is hereby imposed 
a tax (if such tax is less than the tax imposed by such sections) which 
shall consist of the sum of--
            ``(1) a tax computed on the taxable income reduced by the 
        amount of the net capital gain, at the rates and in the manner 
        as if this subsection had not been enacted, plus
            ``(2) a tax of 28 percent of the net capital gain.
    ``(b) Special Rules for Qualified Small Business Gain.--
            ``(1) In general.--If for any taxable year a corporation 
        has gain from the sale or exchange of any qualified small 
        business stock held for more than 5 years, the amount 
        determined under subsection (a)(2) for such taxable year shall 
        be equal to the sum of--
                    ``(A) 21 percent of the lesser of such gain or the 
                corporation's net capital gain, plus
                    ``(B) 28 percent of the net capital gain reduced by 
                the gain taken into account under subparagraph (A).
            ``(2) Qualified small business stock.--For purposes of 
        paragraph (1), the term `qualified small business stock' has 
        the meaning given such term by section 1203(c), except that 
        stock shall not be treated as qualified small business stock if 
        such stock was at any time held by a member of a parent-
        subsidiary controlled group (as defined in section 1203(d)(3)).
    ``(c) Transitional Rule.--
            ``(1) In general.--In applying this section, net capital 
        gain for any taxable year shall not exceed such net capital 
        gain determined by taking into account only gain or loss 
        properly taken into account for the portion of the taxable year 
        after October 13, 1995.
            ``(2) Special rule for pass-thru entities.--Section 
        1202(e)(2) shall apply for purposes of paragraph (1).
    ``(d) Cross References.--

                                ``For computation of the alternative 
tax--
                                  ``(1) in the case of life insurance 
companies, see section 801(a)(2),
                                  ``(2) in the case of regulated 
investment companies and their shareholders, see section 852(b)(3)(A) 
and (D), and
                                  ``(3) in the case of real estate 
investment trusts, see section 857(b)(3)(A).''.
    (b) Technical Amendment.--Clause (iii) of section 852(b)(3)(D) is 
amended by striking ``65 percent'' and inserting ``72 percent''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years ending after October 13, 1995.
            (2) Qualified small business stock.--Section 1201(b) of the 
        Internal Revenue Code of 1986 (as added by subsection (a)) 
        shall apply to gain from qualified small business stock 
        acquired on or after the date of the enactment of this Act.

          CHAPTER 3--CORPORATE ALTERNATIVE MINIMUM TAX REFORM

SEC. 12161. MODIFICATION OF DEPRECIATION RULES UNDER MINIMUM TAX.

    (a) In General.--Clause (i) of section 56(a)(1)(A) is amended by 
striking ``under the alternative system of section 168(g)'' and 
inserting ``under section 168 except that the recovery period used 
shall be the period determined under section 168(g)''.
    (b) Conforming Amendment.--Clause (ii) of section 56(a)(1)(A) is 
amended by striking ``The method'' and inserting ``In the case of 
property placed in service before January 1, 1996, the method''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 1995.

SEC. 12162. LONG-TERM UNUSED CREDITS ALLOWED AGAINST MINIMUM TAX.

    (a) In General.--Section 53(c) (relating to limitation) is amended 
by adding at the end the following new paragraph:
            ``(2) Special rule for taxpayers with long-term unused 
        credits.--
                    ``(A) In general.--If--
                            ``(i) a corporation to which section 56(g) 
                        applies has a long-term unused minimum tax 
                        credit for a taxable year, and
                            ``(ii) no credit would be allowable under 
                        this section for the taxable year by reason of 
                        paragraph (1),
                then there shall be allowed a credit under subsection 
                (a) for the taxable year in the amount determined under 
                subparagraph (B).
                    ``(B) Amount of credit.--For purposes of 
                subparagraph (A), the amount of the credit shall be 
                equal to the least of the following for the taxable 
                year:
                            ``(i) The long-term unused minimum tax 
                        credit.
                            ``(ii) 50 percent of the taxpayer's 
                        tentative minimum tax.
                            ``(iii) The excess (if any) of the amount 
                        under paragraph (1)(B) over the amount under 
                        paragraph (1)(A).
                    ``(C) Long-term unused minimum tax credit.--For 
                purposes of this paragraph--
                            ``(i) In general.--The long-term unused 
                        minimum tax credit for any taxable year is the 
                        portion of the minimum tax credit determined 
                        under subsection (b) attributable to the 
                        adjusted net minimum tax for taxable years 
                        beginning after 1986 and ending before the 5th 
                        taxable year immediately preceding the taxable 
                        year for which the determination is being made.
                            ``(ii) First-in, first-out ordering rule.--
                        For purposes of clause (i), credits shall be 
                        treated as allowed under subsection (a) on a 
                        first-in, first-out basis.''.
    (b) Conforming Amendments.--(1) Section 53(c) (as in effect before 
the amendment made by subsection (a)) is amended--
            (A) by striking ``The'' and inserting:
            ``(1) In general.--The'', and
            (B) by redesignating paragraphs (1) and (2) as 
        subparagraphs (A) and (B), respectively.
    (2) Subparagraph (C) of section 108(b)(4) is amended by striking 
``and (G)'' in the text and heading thereof and inserting ``, (C), and 
(G)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

                 Subtitle C--Health Related Provisions

                  CHAPTER 1--LONG-TERM CARE PROVISIONS

          Subchapter A--Long-Term Care Services and Contracts

                       PART I--GENERAL PROVISIONS

SEC. 12201. QUALIFIED LONG-TERM CARE SERVICES TREATED AS MEDICAL CARE.

    (a) General Rule.--Paragraph (1) of section 213(d) (defining 
medical care) is amended by striking ``or'' at the end of subparagraph 
(B), by redesignating subparagraph (C) as subparagraph (D), and by 
inserting after subparagraph (B) the following new subparagraph:
                    ``(C) for qualified long-term care services (as 
                defined in section 7702B(e)), or''.
    (b) Technical Amendments.--
            (1) Subparagraph (D) of section 213(d)(1) (as redesignated 
        by subsection (a)) is amended to read as follows:
                    ``(D) for insurance (including amounts paid as 
                premiums under part B of title XVIII of the Social 
                Security Act, relating to supplementary medical 
                insurance for the aged)--
                            ``(i) covering medical care referred to in 
                        subparagraphs (A) and (B), or
                            ``(ii) covering medical care referred to in 
                        subparagraph (C), but only if such coverage is 
                        provided under a qualified long-term care 
                        insurance contract (as defined in section 
                        7702B(b)).''.
            (2) Paragraph (6) of section 213(d) is amended--
                    (A) by striking ``subparagraphs (A) and (B)'' in 
                the matter preceding subparagraph (A) and inserting 
                ``subparagraphs (A), (B), and (C)'', and
                    (B) by striking ``paragraph (1)(C)'' in 
                subparagraph (A) and inserting ``paragraph (1)(D)''.
            (3) Paragraph (7) of section 213(d) is amended by striking 
        ``subparagraphs (A) and (B)'' and inserting ``subparagraphs 
        (A), (B), and (C)''.

SEC. 12202. TREATMENT OF LONG-TERM CARE INSURANCE OR PLANS.

    (a) General Rule.--Chapter 79 (relating to definitions) is amended 
by inserting after section 7702A the following new section:

``SEC. 7702B. TREATMENT OF LONG-TERM CARE INSURANCE OR PLANS.

    ``(a) General Rule.--For purposes of this title--
            ``(1) a qualified long-term care insurance contract shall 
        be treated as an accident or health insurance contract,
            ``(2) any plan of an employer providing coverage of 
        qualified long-term care services shall be treated as an 
        accident or health plan with respect to such services,
            ``(3) amounts (other than policyholder dividends, as 
        defined in section 808, or premium refunds) received under such 
        a contract or plan shall be treated as amounts received for 
        personal injuries or sickness and shall be treated as 
        reimbursement for expenses actually incurred for medical care 
        (as defined in section 213(d)),
            ``(4) payments described in subsection (b)(5) shall be 
        treated as payments made with respect to qualified long-term 
        care services, and
            ``(5) a qualified long-term care insurance contract shall 
        be treated as a guaranteed renewable contract subject to the 
        rules of section 816(e).
    ``(b) Qualified Long-Term Care Insurance Contract.--
            ``(1) In general.--For purposes of this title, the term 
        `qualified long-term care insurance contract' means any 
        insurance contract if--
                    ``(A) the only insurance protection provided under 
                such contract is coverage of qualified long-term care 
                services, and
                    ``(B) such contract meets the requirements of 
                paragraphs (2), (3), and (4).
            ``(2) Premium requirements.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to a contract if such 
                contract provides that--
                            ``(i) premium payments may not be made 
                        earlier than the date such payments would have 
                        been made if the contract provided for level 
                        annual payments over the life of the contract 
                        (or, if shorter, 20 years), and
                            ``(ii) all refunds of premiums, and all 
                        policyholder dividends or similar amounts, 
                        under such contract are to be applied as a 
                        reduction in future premiums or to increase 
                        future benefits.
                A contract shall not be treated as failing to meet the 
                requirements of clause (i) solely by reason of a 
                provision providing for a waiver of premiums if the 
                insured becomes a functionally impaired individual.
                    ``(B) Refunds upon death or complete surrender or 
                cancellation.--Subparagraph (A)(ii) shall not apply to 
                any refund on the death of the insured, or on any 
                complete surrender or cancellation of the contract, if, 
                under the contract, the amount refunded may not exceed 
                the amount of the premiums paid under the contract. For 
                purposes of this title, any refund described in the 
                preceding sentence shall be includible in gross income 
                to the extent that any deduction or exclusion was 
                allowed with respect to the refund.
            ``(3) Borrowing, pledging, or assigning prohibited.--The 
        requirements of this paragraph are met with respect to a 
        contract if such contract provides that no money may be 
        borrowed under such contract and that such contract (or any 
        portion thereof) may not be assigned or pledged as collateral 
        for a loan.
            ``(4) Prohibition of duplicate payment.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to a contract if such 
                contract does not pay or reimburse expenses incurred to 
                the extent that such expenses are reimbursable under 
                title XVIII of the Social Security Act, or would be so 
                reimbursable but for the application of a deductible or 
                coinsurance amount.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to expenses which are reimbursable under title XVIII of 
                the Social Security Act only as a secondary payor.
                    ``(C) Coordination with other laws.--No provision 
                of law shall be construed or applied so as to prohibit 
                the offering of a qualified long-term care insurance 
                contract on the basis that it coordinates its benefits 
                with those provided under title XVIII of the Social 
                Security Act.
            ``(5) Per diem and other periodic payments permitted.--For 
        purposes of subsection (a)(4), payments are described in this 
        paragraph for any calendar year if, under the contract, such 
        payments are made to (or on behalf of) a functionally impaired 
        individual on a per diem or other periodic basis without regard 
        to the expenses incurred or services rendered during the period 
        to which the payments relate.
    ``(c) Special Rules for Treatment of Insureds.--For purposes of 
this title, solely with respect to the insured under any qualified 
long-term care insurance contract--
            ``(1) Aggregate payments in excess of limits.--
                    ``(A) In general.--If the aggregate payments under 
                all qualified long-term care insurance contracts with 
                respect to an insured for any period (whether on a 
                periodic basis or otherwise) exceed the dollar amount 
                in effect for such period under subparagraph (B), such 
                excess payments shall be treated as made for qualified 
                long-term care services only if made with respect to 
                such services provided during such period.
                    ``(B) Dollar amount.--The dollar amount in effect 
                under this paragraph shall be $150 per day (or the 
                equivalent amount in the case of payments on another 
                periodic basis).
                    ``(C) Adjustments for increased costs.--
                            ``(i) In general.--In the case of any 
                        calendar year after 1997, the dollar amount in 
                        effect under subparagraph (B) for any period 
                        occurring during such calendar year shall be 
                        equal to the sum of--
                                    ``(I) the amount in effect under 
                                subparagraph (B) for the preceding 
                                calendar year (after application of 
                                this subparagraph), plus
                                    ``(II) the applicable percentage of 
                                the amount under subclause (I).
                            ``(ii) Applicable percentage.--For purposes 
                        of clause (i), the term `applicable percentage' 
                        means, with respect to any calendar year, the 
                        lesser of--
                                    ``(I) 5 percent, or
                                    ``(II) the cost-of-living 
                                adjustment for such calendar year.
                            ``(iii) Cost-of-living adjustment.--For 
                        purposes of clause (ii), the cost-of-living 
                        adjustment for any calendar year is the 
                        percentage (if any) by which the cost index 
                        under clause (iv) for the preceding calendar 
                        year exceeds such index for the second 
                        preceding calendar year. In the case of any 
                        calendar year beginning before 1999, this 
                        clause shall be applied by substituting the 
                        Consumer Price Index (as defined in section 
                        1(f)(5)) for the cost index under clause (iv).
                            ``(iv) Cost index.--The Secretary, in 
                        consultation with the Secretary of Health and 
                        Human Services, shall before January 1, 1999, 
                        establish a cost index to measure increases in 
                        costs of nursing home and similar facilities. 
                        The Secretary may from time to time revise such 
                        index to the extent necessary to accurately 
                        measure increases or decreases in such costs.
            ``(2) Assignment or pledge.--Such contract shall not be 
        treated as a qualified long-term care insurance contract during 
        any period on or after the date on which the contract (or any 
        portion thereof) is assigned or pledged as collateral for a 
        loan.
    ``(d) Treatment of Coverage Provided as Part of a Life Insurance 
Contract.--Except as otherwise provided in regulations prescribed by 
the Secretary, in the case of any long-term care insurance coverage 
provided under a life insurance contract--
            ``(1) In general.--This section shall apply as if the 
        portion of the contract providing such coverage is a separate 
        contract.
            ``(2) Application of section 7702.--Section 7702(c)(2) 
        (relating to the guideline premium limitation) shall be applied 
        by increasing the guideline premium limitation with respect to 
        a life insurance contract, as of any date--
                    ``(A) by the sum of the charges against the 
                contract's cash surrender value (within the meaning of 
                section 7702(f)(2)(A)) for such coverage made to that 
                date under the contract, less
                    ``(B) any such charges the imposition of which 
                reduces the premiums paid for the contract (within the 
                meaning of section 7702(f)(1)).
            ``(3) Application of section 213.--No deduction shall be 
        allowed under section 213(a) for charges against the life 
        insurance contract's cash surrender value described in 
        paragraph (2), unless such charges are includible in income as 
        a result of the application of section 72(e)(10) and the rider 
        is a qualified long-term care insurance contract under 
        subsection (b).
            ``(4) Portion.--For purposes of this subsection, the term 
        `portion' means only the terms and benefits under a life 
        insurance contract that are in addition to the terms and 
        benefits under the contract without regard to the coverage of 
        qualified long-term care services, except that the payment of 
        benefits shall not result in the benefits failing to be treated 
        as long-term care insurance by reason of a reduction in the 
        contract's death benefit or cash surrender value resulting from 
        any such payment.
    ``(e) Qualified Long-Term Care Services.--For purposes of this 
section--
            ``(1) In general.--The term `qualified long-term care 
        services' means necessary diagnostic, preventive, therapeutic, 
        curing, treating, mitigating, or rehabilitative services, and 
        maintenance or personal care services, which--
                    ``(A) are required by an individual during any 
                period during which such individual is a functionally 
                impaired individual,
                    ``(B) have as their primary purpose the provision 
                of--
                            ``(i) needed assistance with 1 or more 
                        activities of daily living which a functionally 
                        impaired individual is certified as being 
                        unable to perform under paragraph (2), or
                            ``(ii) substantial supervision which the 
                        individual is certified under paragraph (2) as 
                        needing to protect the individual from threats 
                        to health and safety due to substantial 
                        cognitive impairment, and
                    ``(C) are provided pursuant to a continuing plan of 
                care prescribed by a licensed health care practitioner.
            ``(2) Functionally impaired individual.--The term 
        `functionally impaired individual' means any individual who is 
        certified by a licensed health care practitioner as--
                    ``(A) being unable to perform, without substantial 
                assistance from another individual (including 
                assistance involving verbal reminding or physical 
                cuing), at least 2 activities of daily living described 
                in paragraph (3), or
                    ``(B) requiring substantial supervision to protect 
                such individual from threats to health and safety due 
                to substantial cognitive impairment.
        Such term shall not include any individual otherwise meeting 
        the requirements of the preceding sentence unless, within the 
        preceding 12-month period, a licensed health care practitioner 
        has certified that such individual meets such requirements.
            ``(3) Activities of daily living.--Each of the following is 
        an activity of daily living:
                    ``(A) Eating.
                    ``(B) Transferring.
                    ``(C) Toileting.
                    ``(D) Dressing.
                    ``(E) Bathing.
                    ``(F) Continence.
            ``(4) Licensed health care practitioner.--
                    ``(A) In general.--The term `licensed health care 
                practitioner' means any individual--
                            ``(i) who is--
                                    ``(I) a physician (as defined in 
                                section 1861(r)(1) of the Social 
                                Security Act) or registered 
                                professional nurse,
                                    ``(II) a qualified community care 
                                case manager (as defined in 
                                subparagraph (B)), or
                                    ``(III) any other individual who 
                                meets such requirements as may be 
                                prescribed by the Secretary after 
                                consultation with the Secretary of 
                                Health and Human Services, and
                            ``(ii) who is not a relative of the 
                        individual receiving care.
                    ``(B) Qualified community care case manager.--The 
                term `qualified community care case manager' means an 
                individual or entity which--
                            ``(i) has experience or has been trained in 
                        providing case management services and in 
                        preparing individual care plans;
                            ``(ii) has experience in assessing 
                        individuals to determine their functional and 
                        cognitive impairment; and
                            ``(iii) meets such requirements as may be 
                        prescribed by the Secretary after consultation 
                        with the Secretary of Health and Human 
                        Services.
            ``(5) Relative.--The term `relative' means an individual 
        bearing a relationship to another individual which is described 
        in paragraphs (1) through (8) of section 152(a).
    ``(f) Continuation Coverage Treatment Not To Apply.--Section 4980B 
shall not apply to--
            ``(1) qualified long-term care insurance contracts, or
            ``(2) plans described in subsection (a)(2).
    ``(g) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the requirements of this section, 
including regulations to prevent the avoidance of this section by 
providing qualified long-term care services under a life insurance 
contract.''.
    (b) Long-Term Care Insurance Not Permitted Under Cafeteria Plans or 
Flexible Spending Arrangements.--
            (1) Cafeteria plans.--Section 125(f) is amended by adding 
        at the end the following new sentence: ``Such term shall not 
        include any qualified long-term care insurance contract (as 
        defined in section 7702B(b)).''.
            (2) Flexible spending arrangements.--The text of section 
        106 (relating to contributions by employer to accident and 
        health plans) is amended to read as follows:
    ``(a) General Rule.--Except as provided in subsection (b), gross 
income of an employee does not include employer-provided coverage under 
an accident or health plan.
    ``(b) Inclusion of Long-Term Care Benefits Provided Through 
Flexible Spending Arrangements.--
            ``(1) In general.--Effective on and after January 1, 1996, 
        gross income of an employee shall include employer-provided 
        coverage for qualified long-term care services (as defined in 
        section 7702B(e)) to the extent that such coverage is provided 
        through a flexible spending or similar arrangement.
            ``(2) Flexible spending arrangement.--For purposes of this 
        subsection, a flexible spending arrangement is a benefit 
        program which provides employees with coverage under which--
                    ``(A) specified incurred expenses may be reimbursed 
                (subject to reimbursement maximums and other reasonable 
                conditions), and
                    ``(B) the maximum amount of reimbursement which is 
                reasonably available to a participant for such coverage 
                is less than 500 percent of the value of such coverage.
        In the case of an insured plan, the maximum amount reasonably 
        available shall be determined on the basis of the underlying 
        coverage.''.
    (c) Reserves.--Clause (iii) of section 807(d)(3)(A) is amended by 
inserting ``(other than a qualified long-term care insurance contract 
within the meaning of section 7702B)'' after ``contract''.
    (d) Clerical Amendment.--The table of sections for chapter 79 is 
amended by inserting after the item relating to section 7702A the 
following new item:

``Sec. 7702B. Treatment of long-term care insurance or plans.''.

SEC. 12203. REPORTING REQUIREMENTS.

    (a) In General.--Subpart B of part III of subchapter A of chapter 
61, as amended by section 12004(b), is amended by adding at the end the 
following new section:

``SEC. 6050R. CERTAIN LONG-TERM CARE BENEFITS.

    ``(a) Requirement of Reporting.--Any person who pays long-term care 
benefits shall make a return, according to the forms or regulations 
prescribed by the Secretary, setting forth--
            ``(1) the aggregate amount of such benefits paid by such 
        person to any individual during any calendar year, and
            ``(2) the name, address, and TIN of such individual.
    ``(b) Statements To Be Furnished to Persons With Respect to Whom 
Information Is Required.--Every person required to make a return under 
subsection (a) shall furnish to each individual whose name is required 
to be set forth in such return a written statement showing--
            ``(1) the name of the person making the payments, and
            ``(2) the aggregate amount of long-term care benefits paid 
        to the individual which are required to be shown on such 
        return.
The written statement required under the preceding sentence shall be 
furnished to the individual on or before January 31 of the year 
following the calendar year for which the return under subsection (a) 
was required to be made.
    ``(c) Long-Term Care Benefits.--For purposes of this section, the 
term `long-term care benefit' means any amount paid under a long-term 
care insurance policy (within the meaning of section 4980C(e)).''.
    (b) Penalties.--
            (1) Subparagraph (B) of section 6724(d)(1), as amended by 
        section 12004, is amended by redesignating clauses (x) through 
        (xv) as clauses (xi) through (xvi), respectively, and by 
        inserting after clause (ix) the following new clause:
                            ``(x) section 6050R (relating to certain 
                        long-term care benefits),''.
            (2) Paragraph (2) of section 6724(d), as so amended, is 
        amended by redesignating subparagraphs (R) through (U) as 
        subparagraphs (S) through (V), respectively, and by inserting 
        after subparagraph (Q) the following new subparagraph:
                    ``(R) section 6050R(b) (relating to certain long-
                term care benefits),''.
    (c) Clerical Amendment.--The table of sections for subpart B of 
part III of subchapter A of chapter 61 is amended by adding at the end 
the following new item:

``Sec. 6050R. Certain long-term care benefits.''.

SEC. 12204. EFFECTIVE DATES.

    (a) Section 12201.--The amendments made by section 12201 shall 
apply to taxable years beginning after December 31, 1995.
    (b) Section 12202.--The amendments made by section 12202 shall 
apply to contracts issued after December 31, 1995.
    (c) Section 12203.--The amendments made by section 12203 shall 
apply to benefits paid after December 31, 1995.
    (d) Transition Rule.--If, after the date of the enactment of this 
Act and before January 1, 1997, a contract providing coverage for 
services which are similar to qualified long-term care services (as 
defined in section 7702B(e) of the Internal Revenue Code of 1986) and 
issued on or before such date of enactment, is exchanged for a 
qualified long-term care insurance contract (as defined in section 
7702B(b) of such Code), such exchange shall be treated as an exchange 
to which section 1035 of such Code applies.
    (e) Issuance of Certain Riders Permitted.--For purposes of section 
101(f), 7702, or 7702A of the Internal Revenue Code of 1986, the 
issuance of a rider on a life insurance contract providing coverage of 
qualified long-term care services, or the conformance of such a rider 
to the requirements of this Act, shall not be treated as a modification 
or material change of such contract.
    (f) No Inference.--No inference shall be drawn from the amendments 
made by this subpart as to how the Internal Revenue Code of 1986 is to 
be applied before the effective date of such amendments to qualified 
long-term care services or contracts.

                PART II--CONSUMER PROTECTION PROVISIONS

SEC. 12211. POLICY REQUIREMENTS.

    (a) In General.--Section 7702B (as added by section 12202) is 
amended by redesignating subsection (g) as subsection (h) and by 
inserting after subsection (f) the following new subsection:
    ``(g) Consumer Protection Provisions.--
            ``(1) In general.--The requirements of this subsection are 
        met with respect to any contract if any long-term care 
        insurance policy issued under the contract meets--
                    ``(A) the requirements of the model regulation and 
                model Act described in paragraph (2),
                    ``(B) the disclosure requirement of paragraph (3), 
                and
                    ``(C) the requirements relating to 
                nonforfeitability under paragraph (4).
            ``(2) Requirements of model regulation and act.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to any policy if such 
                policy meets--
                            ``(i) Model regulation.--The following 
                        requirements of the model regulation:
                                    ``(I) Section 7A (relating to 
                                guaranteed renewal or 
                                noncancellability), and the 
                                requirements of section 6B of the model 
                                Act relating to such section 7A.
                                    ``(II) Section 7B (relating to 
                                prohibitions on limitations and 
                                exclusions).
                                    ``(III) Section 7C (relating to 
                                extension of benefits).
                                    ``(IV) Section 7D (relating to 
                                continuation or conversion of 
                                coverage).
                                    ``(V) Section 7E (relating to 
                                discontinuance and replacement of 
                                policies).
                                    ``(VI) Section 8 (relating to 
                                unintentional lapse).
                                    ``(VII) Section 9 (relating to 
                                disclosure), other than section 9F 
                                thereof.
                                    ``(VIII) Section 10 (relating to 
                                prohibitions against post-claims 
                                underwriting).
                                    ``(IX) Section 11 (relating to 
                                minimum standards).
                                    ``(X) Section 12 (relating to 
                                requirement to offer inflation 
                                protection), except that any 
                                requirement for a signature on a 
                                rejection of inflation protection shall 
                                permit the signature to be on an 
                                application or on a separate form.
                                    ``(XI) Section 23 (relating to 
                                prohibition against preexisting 
                                conditions and probationary periods in 
                                replacement policies or certificates).
                            ``(ii) Model act.--The following 
                        requirements of the model Act:
                                    ``(I) Section 6C (relating to 
                                preexisting conditions).
                                    ``(II) Section 6D (relating to 
                                prior hospitalization).
                    ``(B) Definitions.--For purposes of this 
                paragraph--
                            ``(i) Model provisions.--The terms `model 
                        regulation' and `model Act' mean the long-term 
                        care insurance model regulation, and the long-
                        term care insurance model Act, respectively, 
                        promulgated by the National Association of 
                        Insurance Commissioners (as adopted as of 
                        January 1993).
                            ``(ii) Coordination.--Any provision of the 
                        model regulation or model Act listed under 
                        clause (i) or (ii) of subparagraph (A) shall be 
                        treated as including any other provision of 
                        such regulation or Act necessary to implement 
                        the provision.
            ``(3) Disclosure requirement.--The requirement of this 
        paragraph is met with respect to any policy if such policy 
        meets the requirements of section 4980C(d)(1).
            ``(4) Nonforfeiture requirements.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to any level premium 
                long-term care insurance policy, if the issuer of such 
                policy offers to the policyholder, including any group 
                policyholder, a nonforfeiture provision meeting the 
                requirements of subparagraph (B).
                    ``(B) Requirements of provision.--The nonforfeiture 
                provision required under subparagraph (A) shall meet 
                the following requirements:
                            ``(i) The nonforfeiture provision shall be 
                        appropriately captioned.
                            ``(ii) The nonforfeiture provision shall 
                        provide for a benefit available in the event of 
                        a default in the payment of any premiums and 
                        the amount of the benefit may be adjusted 
                        subsequent to being initially granted only as 
                        necessary to reflect changes in claims, 
                        persistency, and interest as reflected in 
                        changes in rates for premium paying policies 
                        approved by the Secretary for the same policy 
                        form.
                            ``(iii) The nonforfeiture provision shall 
                        provide at least one of the following:
                                    ``(I) Reduced paid-up insurance.
                                    ``(II) Extended term insurance.
                                    ``(III) Shortened benefit period.
                                    ``(IV) Other similar offerings 
                                approved by the Secretary.
            ``(5) Long-term care insurance policy defined.--For 
        purposes of this subsection, the term `long-term care insurance 
        policy' has the meaning given such term by section 4980C(e).''.
    (b) Conforming Amendment.--Section 7702B(b)(1)(B) (as added by 
section 12202) is amended by inserting ``and of subsection (g)'' after 
``and (4)''.

SEC. 12212. REQUIREMENTS FOR ISSUERS OF LONG-TERM CARE INSURANCE 
              POLICIES.

    (a) In General.--Chapter 43 is amended by adding at the end the 
following new section:

``SEC. 4980C. REQUIREMENTS FOR ISSUERS OF LONG-TERM CARE INSURANCE 
              POLICIES.

    ``(a) General Rule.--There is hereby imposed on any person failing 
to meet the requirements of subsection (c) or (d) a tax in the amount 
determined under subsection (b).
    ``(b) Amount.--
            ``(1) In general.--The amount of the tax imposed by 
        subsection (a) shall be $100 per policy for each day any 
        requirements of subsection (c) or (d) are not met with respect 
        to each long-term care insurance policy.
            ``(2) Waiver.--In the case of a failure which is due to 
        reasonable cause and not to willful neglect, the Secretary may 
        waive part or all of the tax imposed by subsection (a) to the 
        extent that payment of the tax would be excessive relative to 
        the failure involved.
    ``(c) Responsibilities.--The requirements of this subsection are as 
follows:
            ``(1) Requirements of model provisions.--
                    ``(A) Model regulation.--The following requirements 
                of the model regulation must be met:
                            ``(i) Section 13 (relating to application 
                        forms and replacement coverage).
                            ``(ii) Section 14 (relating to reporting 
                        requirements), except that the issuer shall 
                        also report at least annually the number of 
                        claims denied during the reporting period for 
                        each class of business (expressed as a 
                        percentage of claims denied), other than claims 
                        denied for failure to meet the waiting period 
                        or because of any applicable preexisting 
                        condition.
                            ``(iii) Section 20 (relating to filing 
                        requirements for marketing).
                            ``(iv) Section 21 (relating to standards 
                        for marketing), including inaccurate completion 
                        of medical histories, other than sections 
                        21C(1) and 21C(6) thereof, except that--
                                    ``(I) in addition to such 
                                requirements, no person shall, in 
                                selling or offering to sell a long-term 
                                care insurance policy, misrepresent a 
                                material fact; and
                                    ``(II) no such requirements shall 
                                include a requirement to inquire or 
                                identify whether a prospective 
                                applicant or enrollee for long-term 
                                care insurance has accident and 
                                sickness insurance.
                            ``(v) Section 22 (relating to 
                        appropriateness of recommended purchase).
                            ``(vi) Section 24 (relating to standard 
                        format outline of coverage).
                            ``(vii) Section 25 (relating to requirement 
                        to deliver shopper's guide).
                    ``(B) Model act.--The following requirements of the 
                model Act must be met:
                            ``(i) Section 6F (relating to right to 
                        return), except that such section shall also 
                        apply to denials of applications and any refund 
                        shall be made within 30 days of the return or 
                        denial.
                            ``(ii) Section 6G (relating to outline of 
                        coverage).
                            ``(iii) Section 6H (relating to 
                        requirements for certificates under group 
                        plans).
                            ``(iv) Section 6I (relating to policy 
                        summary).
                            ``(v) Section 6J (relating to monthly 
                        reports on accelerated death benefits).
                            ``(vi) Section 7 (relating to 
                        incontestability period).
                    ``(C) Definitions.--For purposes of this paragraph, 
                the terms `model regulation' and `model Act' have the 
                meanings given such terms by section 7702B(g)(2)(B).
            ``(2) Delivery of policy.--If an application for a long-
        term care insurance policy (or for a certificate under a group 
        long-term care insurance policy) is approved, the issuer shall 
        deliver to the applicant (or policyholder or certificateholder) 
        the policy (or certificate) of insurance not later than 30 days 
        after the date of the approval.
            ``(3) Information on denials of claims.--If a claim under a 
        long-term care insurance policy is denied, the issuer shall, 
        within 60 days of the date of a written request by the 
        policyholder or certificateholder (or representative)--
                    ``(A) provide a written explanation of the reasons 
                for the denial, and
                    ``(B) make available all information directly 
                relating to such denial.
    ``(d) Disclosure.--The requirements of this subsection are met if 
the issuer of a long-term care insurance policy discloses in such 
policy and in the outline of coverage required under subsection 
(c)(1)(B)(ii) that the policy is intended to be a qualified long-term 
care insurance contract under section 7702B(b) of the Internal Revenue 
Code of 1986.
    ``(e) Long-Term Care Insurance Policy Defined.--For purposes of 
this section, the term `long-term care insurance policy' means any 
product which is advertised, marketed, or offered as long-term care 
insurance.''.
    (b) Conforming Amendment.--The table of sections for chapter 43 is 
amended by adding at the end the following new item:

``Sec. 4980C. Requirements for issuers of long-term care insurance 
                            policies.''.

SEC. 12213. COORDINATION WITH STATE REQUIREMENTS.

    Nothing in this part shall prevent a State from establishing, 
implementing, or continuing in effect standards related to the 
protection of policyholders of long-term care insurance policies (as 
defined in section 4980C(e) of the Internal Revenue Code of 1986), if 
such standards are not in conflict with or inconsistent with the 
standards established under such Code.

SEC. 12214. EFFECTIVE DATES.

    (a) In General.--The provisions of, and amendments made by, this 
part shall apply to contracts issued after December 31, 1995. The 
provisions of section 12204(d) of this Act (relating to transition 
rule) shall apply to such contracts.
    (b) Issuers.--The amendments made by section 12212 shall apply to 
actions taken after December 31, 1995.

         Subchapter B--Treatment of Accelerated Death Benefits

SEC. 12221. TREATMENT OF ACCELERATED DEATH BENEFITS UNDER LIFE 
              INSURANCE CONTRACTS.

    (a) General Rule.--Section 101 (relating to certain death benefits) 
is amended by adding at the end the following new subsection:
    ``(g) Treatment of Certain Accelerated Death Benefits.--
            ``(1) In general.--For purposes of this section, any amount 
        received under a life insurance contract on the life of an 
        insured who is a terminally ill individual shall be treated as 
        an amount paid by reason of the death of such insured.
            ``(2) Necessary conditions.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                any amount received unless--
                            ``(i) the total amount received is not less 
                        than the present value (determined under 
                        subparagraph (B)) of the reduction in the death 
                        benefit otherwise payable in the event of the 
                        death of the insured, and
                            ``(ii) the percentage reduction in the cash 
                        surrender value of the contract by reason of 
                        the distribution does not exceed the percentage 
                        reduction in the death benefit payable under 
                        the contract by reason of such distribution.
                    ``(B) Present value.--The present value of the 
                reduction in the death benefit shall be determined by--
                            ``(i) using a discount rate which is based 
                        on an interest rate which does not exceed the 
                        highest interest rate set forth in subparagraph 
                        (C), and
                            ``(ii) assuming that the death benefit (or 
                        the portion thereof) would have been paid on 
                        the date which is 12 months after the date of 
                        the certification referred to in paragraph (3).
                    ``(C) Rates.--The interest rates set forth in this 
                subparagraph are the following:
                            ``(i) The 90-day Treasury bill yield.
                            ``(ii) The rate described as Moody's 
                        Corporate Bond Yield Average-Monthly Average 
                        Corporates as published by Moody's Investors 
                        Service, Inc., or any successor thereto, for 
                        the calendar month ending 2 months before the 
                        date on which the rate is determined.
                            ``(iii) The rate used to compute the cash 
                        surrender values under the contract during the 
                        applicable period plus 1 percent per annum.
                    ``(D) Special rules relating to liens.--If a lien 
                is imposed against a life insurance contract with 
                respect to any amount referred to in paragraph (1)--
                            ``(i) for purposes of subparagraph (A), the 
                        amount of such lien shall be treated as a 
                        reduction (at the time of receipt) in the death 
                        benefit or cash surrender value to the extent 
                        that such benefit or value, as the case may be, 
                        is (or may become) subject to the lien, and
                            ``(ii) paragraph (1) shall not apply to the 
                        amount received unless any rate of interest 
                        with respect to any amount in connection with 
                        which such lien is imposed does not exceed the 
                        highest rate set forth in subparagraph (C).
            ``(3) Treatment of viatical settlements.--
                    ``(A) In general.--In the case of a life insurance 
                contract on the life of an insured described in 
                paragraph (1), if--
                            ``(i) any portion of such contract is sold 
                        to any viatical settlement provider, or
                            ``(ii) any portion of the death benefit is 
                        assigned to such a provider,
                the amount paid for such sale or assignment shall be 
                treated as an amount paid under the life insurance 
                contract by reason of the death of such insured.
                    ``(B) Viatical settlement provider.--The term 
                `viatical settlement provider' means any person 
                regularly engaged in the trade or business of 
                purchasing, or taking assignments of, life insurance 
                contracts on the lives of insureds described in 
                paragraph (1) if--
                            ``(i) such person is licensed for such 
                        purposes in the State in which the insured 
                        resides, or
                            ``(ii) in the case of an insured who 
                        resides in a State not requiring the licensing 
                        of such persons for such purposes, such 
                        person--
                                    ``(I) meets the requirements of 
                                sections 8 and 9 of the Viatical 
                                Settlements Model Act of the National 
                                Association of Insurance Commissioners, 
                                and
                                    ``(II) meets the requirements of 
                                the Model Regulations of the National 
                                Association of Insurance Commissioners 
                                (relating to standards for evaluation 
                                of reasonable payments) in determining 
                                amounts paid by such person in 
                                connection with such purchases or 
                                assignments.
            ``(4) Terminally ill individual.--For purposes of this 
        subsection, the term `terminally ill individual' means an 
        individual who the insurer has determined, after receipt of an 
        acceptable certification by a licensed physician (as defined in 
        section 1861(r)(1) of the Social Security Act), has an illness 
        or physical condition which is reasonably expected to result in 
        death within 12 months after the date of certification.
            ``(5) Exception for business-related policies.--This 
        subsection shall not apply in the case of any amount paid to 
        any taxpayer other than the insured if such taxpayer has an 
        insurable interest with respect to the life of the insured by 
        reason of the insured being a director, officer, or employee of 
        the taxpayer or by reason of the insured having a financial 
        interest in any trade or business carried on by the 
        taxpayer.''.
    (b) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendment made by this section shall apply to amounts received 
        after December 31, 1995.
            (2) Delay in application of discount rules.--Clause (i) of 
        section 101(g)(2)(A) of the Internal Revenue Code of 1986 shall 
        not apply to any amount received before July 1, 1996.
            (3) Issuance of rider not treated as material change.--For 
        purposes of applying section 101(f), 7702, or 7702A of the 
        Internal Revenue Code of 1986 to any contract, the issuance of 
        a qualified accelerated death benefit rider (as defined in 
        section 818(g) of such Code (as added by this Act)), or the 
        conformance of such a rider to the requirements of such 
        section, shall not be treated as a modification or material 
        change of such contract.

SEC. 12222. TREATMENT OF COMPANIES ISSUING QUALIFIED ACCELERATED DEATH 
              BENEFIT RIDERS.

    (a) Qualified Accelerated Death Benefit Riders Treated as Life 
Insurance.--Section 818 (relating to other definitions and special 
rules) is amended by adding at the end the following new subsection:
    ``(g) Qualified Accelerated Death Benefit Riders Treated as Life 
Insurance.--For purposes of this part--
            ``(1) In general.--Any reference to a life insurance 
        contract shall be treated as including a reference to a 
        qualified accelerated death benefit rider on such contract.
            ``(2) Qualified accelerated death benefit riders.--For 
        purposes of this subsection, the term `qualified accelerated 
        death benefit rider' means any rider on a life insurance 
        contract which provides for a distribution to an individual 
        upon the insured becoming a terminally ill individual (as 
        defined in section 101(g)(3)).''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1996.

                 Subchapter C--Medical Savings Accounts

SEC. 12231. DEDUCTION FOR CONTRIBUTIONS TO MEDICAL SAVINGS ACCOUNTS.

    (a) In General.--Part VII of subchapter B of chapter 1 (relating to 
additional itemized deductions for individuals) is amended by 
redesignating section 220 as section 221 and by inserting after section 
219 the following new section:

``SEC. 220. CONTRIBUTIONS TO MEDICAL SAVINGS ACCOUNTS.

    ``(a) Deduction Allowed.--In the case of an eligible individual, 
the amounts paid in cash during the taxable year by such individual to 
a medical savings account for the benefit of such individual or for the 
benefit of such individual and any spouse or dependent of such 
individual who is an eligible individual shall be treated for purposes 
of sections 162(l) and 213 as amounts paid for insurance which 
constitutes medical care.
    ``(b) Limitations.--
            ``(1) Only 1 account per family.--Except as provided in 
        regulations prescribed by the Secretary, no amount shall be 
        treated as paid for insurance by reason of subsection (a) for 
        amounts paid to any medical savings account if the account 
        beneficiary, or such beneficiary's spouse or dependent, is a 
        beneficiary of any other medical savings account.
            ``(2) Dollar limitation.--
                    ``(A) In general.--Except as otherwise provided in 
                this subsection, the aggregate amount which may be 
                treated as paid for insurance under subsection (a) with 
                respect to any account beneficiary shall not exceed the 
                lesser of--
                            ``(i) $2,000, or
                            ``(ii) the deductible under the high 
                        deductible health plan covering such 
                        individual.
                    ``(B) Family account.--If the high deductible 
                health plan covering an eligible individual provides 
                coverage for any other eligible individual who is the 
                spouse or any dependent (as defined in section 152) of 
                the taxpayer, the limitation under subparagraph (A) 
                shall be equal to the lesser of--
                            ``(i) $4,000, or
                            ``(ii) the annual limit under the high 
                        deductible health plan on the aggregate amount 
                        of deductibles required to be paid by all 
                        individuals.
            ``(3) Proration of limitation.--
                    ``(A) In general.--The limitation under paragraph 
                (2) shall be the sum of the monthly limitations for 
                months during the taxable year that the individual is 
                an eligible individual if--
                            ``(i) such individual is not an eligible 
                        individual for all months of the taxable year,
                            ``(ii) the deductible under the high 
                        deductible health plan covering such individual 
                        is not the same throughout such taxable year, 
                        or
                            ``(iii) such limitation is determined under 
                        paragraph (2)(B) for some but not all months 
                        during such taxable year.
                    ``(B) Monthly limitation.--The monthly limitation 
                for any month shall be an amount equal to \1/12\ of the 
                limitation which would (but for this paragraph) be 
                determined under paragraph (2) if the facts and 
                circumstances as of the first day of such month that 
                such individual is covered under a high deductible 
                health plan were true for the entire taxable year.
    ``(c) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Eligible individual.--The term `eligible individual' 
        means, with respect to any month, any individual--
                    ``(A) who is covered under a high deductible health 
                plan during such month, and
                    ``(B) who is not eligible during such month--
                            ``(i) to participate in an employer-
                        subsidized health plan maintained by an 
                        employer of the individual, the individual's 
                        spouse, or any dependent of either, or
                            ``(ii) to receive any employer contribution 
                        to a medical savings account.
        For purposes of subparagraph (B), a self-employed individual 
        (within the meaning of section 401(c)) shall not be treated as 
        his own employer.
            ``(2) High deductible health plan.--The term `high 
        deductible health plan' means a health plan which--
                    ``(A) has an annual deductible limit for each 
                individual covered by the plan which is not less than 
                $1,500, and
                    ``(B) has an annual limit on the aggregate amount 
                of deductibles required to be paid with respect to all 
                individuals covered by the plan which is not less than 
                $3,000.
            ``(3) Cost-of-living adjustments.--In the case of taxable 
        years beginning after December 31, 1996, each dollar amount 
        contained in paragraph (2) and subsection (b)(2) shall be 
        increased by an amount equal to the product of--
                    ``(A) such dollar amount, and
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, except that such section shall 
                be applied by substituting `the medical component of 
                the CPI' for `the CPI' each place it appears and by 
                substituting `1995' for `1992' in subparagraph (B).
        If any amount under this paragraph is not a multiple of $50, 
        such amount shall be rounded to the next lower multiple of $50.
            ``(4) Medical savings account.--The term `medical savings 
        account' has the meaning given such term by section 7705.
            ``(5) Time when contributions deemed made.--A contribution 
        shall be deemed to be made on the last day of the preceding 
        taxable year if the contribution is made on account of such 
        taxable year and is made not later than the time prescribed by 
        law for filing the return for such taxable year (not including 
        extensions thereof).''.
    (b) Clerical Amendment.--The table of sections for part VII of 
subchapter B of chapter 1 is amended by striking the last item and 
inserting the following new item:

``Sec. 220. Contributions to medical savings accounts.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 12232. EXCLUSION FROM INCOME OF EMPLOYER CONTRIBUTIONS TO MEDICAL 
              SAVINGS ACCOUNTS.

    (a) In General.--Section 106 (relating to contributions by 
employers to accident and health plans), as amended by section 
12202(b), is amended by adding at the end the following new subsection:
    ``(c) Contributions to Medical Savings Accounts.--
            ``(1) Treatment of contributions.--
                    ``(A) In general.--Gross income of an employee who 
                is covered by a high deductible health plan of an 
                employer shall not include any employer contribution to 
                a medical savings account on behalf of the employee or 
                the employee's spouse or dependents.
                    ``(B) No constructive receipt.--No amount shall be 
                included in the gross income of any employee solely 
                because the employee may choose between the 
                contributions described in subparagraph (A) and 
                employer contributions to a health plan of the 
                employer.
            ``(2) Limitations.--
                    ``(A) Only 1 account per family.--Except as 
                provided in regulations, no amount may be excluded 
                under subsection (a) for contributions to a medical 
                savings account if the employee, or such employee's 
                spouse or dependent, is a beneficiary of any other 
                medical savings account.
                    ``(B) Dollar limitation.--The amount which may be 
                excluded under paragraph (1) for any taxable year shall 
                not exceed the limitation under section 220(b)(2) 
                (without regard to this subsection) which is applicable 
                to such employee for such taxable year.
            ``(3) Special rule for deduction of employer 
        contributions.--Any employer contribution to a medical savings 
        account, if otherwise allowable as a deduction under this 
        chapter, shall be allowed only for the taxable year in which 
        paid.
            ``(4) Definitions.--For purposes of this subsection--
                    ``(A) High deductible health plan.--The term `high 
                deductible health plan' has the meaning given such term 
                by section 220(c)(2).
                    ``(B) Medical savings account.--The term `medical 
                savings account' has the meaning given such term by 
                section 7705.''.
    (b) Exclusion of Employer Payments.--
            (1) In general.--Notwithstanding any other provision of 
        law, any payment made to or for the benefit of an employee with 
        respect to which, at the time of the payment, it is reasonable 
        to believe that the employee will be able to exclude such 
        payment from income under section 106(c) shall be treated in 
        the same manner as payments to or for the benefit of an 
        employee on account of sickness or accident.
            (2) Railroad retirement tax.--Subsection (e) of section 
        3231 is amended by adding at the end the following new 
        paragraph:
            ``(10) Medical savings account contributions.--The term 
        `compensation' shall not include any payment made to or for the 
        benefit of an employee if at the time of such payment it is 
        reasonable to believe that the employee will be able to exclude 
        such payment from income under section 106(c).''.
            (3) Unemployment tax.--Subsection (b) of section 3306 is 
        amended by striking ``or'' at the end of paragraph (15), by 
        striking the period at the end of paragraph (16) and inserting 
        ``; or'', and by inserting after paragraph (16) the following 
        new paragraph:
            ``(17) any payment made to or for the benefit of an 
        employee if at the time of such payment it is reasonable to 
        believe that the employee will be able to exclude such payment 
        from income under section 106(c).''.
            (4) Withholding tax.--Subsection (a) of section 3401 is 
        amended by striking ``or'' at the end of paragraph (19), by 
        striking the period at the end of paragraph (20) and inserting 
        ``; or'', and by inserting after paragraph (20) the following 
        new paragraph:
            ``(21) any payment made to or for the benefit of an 
        employee if at the time of such payment it is reasonable to 
        believe that the employee will be able to exclude such payment 
        from income under section 106(c).''.
    (c) Medical Savings Accounts Not Permitted Under Cafeteria Plans.--
Section 125(f) is amended by adding at the end the following new 
sentence: ``Such term shall not include any contribution to a medical 
savings account under section 7705.''.
    (d) Conforming Amendment.--Section 106(a), as designated by section 
12202(b), is amended by striking ``subsection (b)'' and inserting 
``subsection (b) or (c)''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 12233. MEDICAL SAVINGS ACCOUNTS.

    (a) In General.--Chapter 79 is amended by adding at the end the 
following new section:

``SEC. 7705. MEDICAL SAVINGS ACCOUNTS.

    ``(a) General Rule.--The term `medical savings account' means a 
trust created or organized in the United States for the exclusive 
benefit of the beneficiaries of the trust, but only if the written 
governing instrument creating the trust meets the following 
requirements:
            ``(1) Except in the case of a rollover contribution 
        described in subsection (c)(5)--
                    ``(A) no contribution will be accepted unless--
                            ``(i) it is in cash, and
                            ``(ii) it is made for a period during which 
                        the individual on whose behalf it is made is 
                        covered under a high deductible health plan, 
                        and
                    ``(B) contributions will not be accepted for any 
                taxable year in excess of the amount determined under 
                section 220(b)(2) for such taxable year.
            ``(2) The trustee is a bank (as defined in section 408(n)), 
        insurance company (as defined in section 816), or another 
        person who demonstrates to the satisfaction of the Secretary 
        that the manner in which such person will administer the trust 
        will be consistent with the requirements of this section.
            ``(3) The assets of the trust will not be commingled with 
        other property except in a common trust fund or common 
        investment fund.
            ``(4) No part of the trust assets will be invested in life 
        insurance contracts.
            ``(5) The interest of an individual in the balance in the 
        individual's account is nonforfeitable.
    ``(b) Tax Treatment of Accounts.--
            ``(1) In general.--A medical savings account is exempt from 
        taxation under this subtitle unless such account has ceased to 
        be a medical savings account by reason of paragraph (2) or (3). 
        Notwithstanding the preceding sentence, any such account is 
        subject to the taxes imposed by section 511 (relating to 
        imposition of tax on unrelated business income of charitable, 
        etc. organizations).
            ``(2) Account terminations.--Rules similar to the rules of 
        paragraphs (2) and (4) of section 408(e) shall apply to medical 
        savings accounts, and any amount treated as distributed under 
        such rules shall be treated as not used to pay qualified 
        medical expenses.
            ``(3) Failure to remain in health plan.--
                    ``(A) In general.--If, at any time during the 2-
                taxable year period beginning with the first taxable 
                year in which an individual was an account beneficiary 
                in a medical savings account, the account beneficiary 
                becomes a participant in a health plan which has a 
                lower individual (or aggregate) deductible limit than 
                the lowest individual (or aggregate) limit permitted 
                under a high deductible health plan, the account shall 
                cease to be a medical savings account as of the first 
                day of the taxable year in which the individual ceases 
                to be so covered.
                    ``(B) Exception.--This paragraph shall not apply to 
                any account beneficiary who becomes a participant in a 
                plan described in subparagraph (A) by reason of 
                separation from employment.
                    ``(C) Account treated as distributing all its 
                assets.--In any case in which any account ceases to be 
                a medical savings account by reason of subparagraph (A) 
                on the first day of any taxable year, subsection (c) 
                shall be applied as if--
                            ``(i) there were a distribution on such 
                        first day in an amount equal to the fair market 
                        value (on such first day) of all assets in the 
                        account (on such first day), and
                            ``(ii) no portion of such distribution were 
                        used to pay qualified medical expenses.
    ``(c) Tax Treatment of Distributions.--
            ``(1) Amounts used for qualified medical expenses.--
                    ``(A) In general.--Any amount paid or distributed 
                out of a medical savings account which is used 
                exclusively to pay qualified medical expenses of any 
                account beneficiary (or any spouse or dependent of the 
                beneficiary) shall not be includible in gross income.
                    ``(B) Treatment after death of account 
                beneficiary.--
                            ``(i) Treatment if beneficiary is spouse.--
                        If, after the death of the account beneficiary, 
                        the account beneficiary's interest is payable 
                        to (or for the benefit of) the beneficiary's 
                        spouse, the medical savings account shall be 
                        treated as if the spouse were the account 
                        beneficiary.
                            ``(ii) Treatment if designated beneficiary 
                        is not spouse.--In the case of an account 
                        beneficiary's interest in a medical savings 
                        account which is payable to (or for the benefit 
                        of) any person other than such beneficiary's 
                        spouse upon the death of such beneficiary--
                                    ``(I) such account shall cease to 
                                be a medical savings account as of the 
                                date of death, and
                                    ``(II) an amount equal to the fair 
                                market value of the assets in such 
                                account on such date shall be 
                                includible if such person is not the 
                                estate of such beneficiary, in such 
                                person's gross income for the taxable 
                                year which includes such date, or if 
                                such person is the estate of such 
                                beneficiary, in such beneficiary's 
                                gross income for last taxable year of 
                                such beneficiary.
            ``(2) Inclusion of amounts not used for qualified medical 
        expenses.--
                    ``(A) In general.--Any amount paid or distributed 
                out of a medical savings account which is not used 
                exclusively to pay the qualified medical expenses of 
                the account beneficiary or of the spouse or dependents 
                of such beneficiary shall be included in the gross 
                income of such beneficiary to the extent such amount 
                does not exceed the excess of--
                            ``(i) the aggregate contributions to such 
                        account which were allowed as a deduction under 
                        section 162(l) or 213 or which were excluded 
                        under section 106(c), over
                            ``(ii) the aggregate prior payments or 
                        distributions from such account which were 
                        includible in gross income under this 
                        paragraph.
                    ``(B) Special rules.--For purposes of subparagraph 
                (A)--
                            ``(i) all medical savings accounts of the 
                        account beneficiary shall be treated as 1 
                        account,
                            ``(ii) all payments and distributions 
                        during any taxable year shall be treated as 1 
                        distribution, and
                            ``(iii) any distribution of property shall 
                        be taken into account at its fair market value 
                        on the date of the distribution.
            ``(3) Excess contributions returned before due date of 
        return.--Paragraph (2) shall not apply to the distribution of 
        any contribution paid during a taxable year to a medical 
        savings account to the extent that such contribution exceeds 
        the amount under subsection (a)(1)(B) if--
                    ``(A) such distribution is received by the 
                individual on or before the last day prescribed by law 
                (including extensions of time) for filing such 
                individual's return for such taxable year, and
                    ``(B) such distribution is accompanied by the 
                amount of net income attributable to such excess 
                contribution.
        Any net income described in subparagraph (B) shall be included 
        in the gross income of the individual for the taxable year in 
        which it is received.
            ``(4) Penalty for distributions not used for qualified 
        medical expenses.--
                    ``(A) In general.--The tax imposed by chapter 1 on 
                the account beneficiary for any taxable year in which 
                there is a payment or distribution from a medical 
                savings account of such beneficiary which is includible 
                in gross income under paragraph (2) shall be increased 
                by 10 percent of the amount which is so includible.
                    ``(B) Exception for disability or death.--
                Subparagraph (A) shall not apply if the payment or 
                distribution is made after the account beneficiary 
                becomes disabled within the meaning of section 72(m)(7) 
                or dies.
                    ``(C) Exception for distributions after age 59\1/
                2\.--Subparagraph (A) shall not apply to any payment or 
                distribution after the date on which the account 
                beneficiary attains age 59\1/2\.
            ``(5) Rollover contribution.--An amount is described in 
        this paragraph as a rollover contribution if it meets the 
        requirements of subparagraphs (A) and (B).
                    ``(A) In general.--Paragraph (2) shall not apply to 
                any amount paid or distributed from a medical savings 
                account to the account beneficiary to the extent the 
                amount received is paid into a medical savings account 
                for the benefit of such beneficiary not later than the 
                60th day after the day on which the beneficiary 
                receives the payment or distribution.
                    ``(B) Limitation.--This paragraph shall not apply 
                to any amount described in subparagraph (A) received by 
                an individual from a medical savings account if, at any 
                time during the 1-year period ending on the day of such 
                receipt, such individual received any other amount 
                described in subparagraph (A) from a medical savings 
                account which was not includible in the individual's 
                gross income because of the application of this 
                paragraph.
            ``(6) Coordination with medical expense deduction.--For 
        purposes of determining the amount of the deduction under 
        section 213, any payment or distribution out of a medical 
        savings account for qualified medical expenses shall not be 
        treated as an expense paid for medical care.
            ``(7)  Transfer of account incident to divorce.--The 
        transfer of an individual's interest in a medical savings 
        account to an individual's spouse or former spouse under a 
        divorce or separation instrument described in subparagraph (A) 
        of section 71(b)(2) shall not be considered a taxable transfer 
        made by such individual notwithstanding any other provision of 
        this subtitle, and such interest shall, after such transfer, be 
        treated as a medical savings account with respect to which the 
        spouse is the account beneficiary.
    ``(d) Definitions.--For purposes of this section--
            ``(1) Qualified medical expenses.--
                    ``(A) In general.--The term `qualified medical 
                expenses' means any expense for medical care (as 
                defined in section 213(d)).
                    ``(B) Exception for insurance.--
                            ``(i) In general.--Such term shall not 
                        include any expense for insurance.
                            ``(ii) Exceptions.--Clause (i) shall not 
                        apply to any expense for--
                                    ``(I) coverage under a health plan 
                                during a period of continuation 
                                coverage described in section 
                                4980B(f)(2)(B),
                                    ``(II) coverage under a qualified 
                                long-term care contract (as defined in 
                                section 7702B(b)), or
                                    ``(III) coverage under a health 
                                plan during a period in which the 
                                individual is receiving unemployment 
                                compensation under any Federal or State 
                                law.
            ``(2) Account beneficiary.--The term `account beneficiary' 
        means the individual for whose benefit the medical savings 
        account is maintained.
    ``(e) Custodial Accounts.--For purposes of this section, a 
custodial account shall be treated as a trust if--
            ``(1) the assets of such account are held by a bank (as 
        defined in section 408(n)), insurance company (as defined in 
        section 816), or another person who demonstrates to the 
        satisfaction of the Secretary that the manner in which such 
        person will administer the account will be consistent with the 
        requirements of this section, and
            ``(2) the custodial account would, except for the fact that 
        it is not a trust, constitute a medical savings account 
        described in subsection (a).
For purposes of this title, in the case of a custodial account treated 
as a trust by reason of the preceding sentence, the custodian of such 
account shall be treated as the trustee thereof.
    ``(f) Reports.--The trustee of a medical savings account shall make 
such reports regarding such account to the Secretary and to the 
individual for whose benefit the account is maintained with respect to 
contributions, distributions, and such other matters as the Secretary 
may require under regulations. The reports required by this subsection 
shall be filed at such time and in such manner and furnished to such 
individuals at such time and in such manner as may be required by those 
regulations.''.
    (b) Exclusion of Accounts From Estate Tax.--
            (1) In general.--Section 2057, as added by section 7006, is 
        amended--
                    (A) by inserting ``or medical savings account (as 
                defined in section 7705)'' before ``included'', and
                    (B) by inserting ``or medical savings'' after 
                ``choice'' in the heading.
            (2) Conforming amendment.--The table of sections for part 
        IV of subchapter A of chapter 11 is amended by inserting ``or 
        medical savings'' after ``choice''.
    (c) Tax on Excess Contributions.--Section 4973 (relating to tax on 
excess contributions to individual retirement accounts, certain section 
403(b) contracts, and certain individual retirement annuities) is 
amended--
            (1) by inserting ``medical savings accounts,'' after 
        ``accounts,'' in the heading of such section,
            (2) by striking ``or'' at the end of paragraph (1) of 
        subsection (a),
            (3) by redesignating paragraph (2) of subsection (a) as 
        paragraph (3) and by inserting after paragraph (1) the 
        following:
            ``(2) a medical savings account (within the meaning of 
        section 7705(a)), or'', and
            (4) by adding at the end the following new subsection:
    ``(d) Excess Contributions to Medical Savings Accounts.--For 
purposes of this section, in the case of a medical savings account 
(within the meaning of section 7705(a)), the term `excess 
contributions' means the amount by which the amount contributed for the 
taxable year to the account exceeds the amount which may be contributed 
to the account under section 7705(a)(1)(B) for such taxable year. For 
purposes of this subsection, any contribution which is distributed out 
of the medical savings account in a distribution to which section 
7705(c)(3) applies shall be treated as an amount not contributed.''.
    (d) Tax on Prohibited Transactions.--Section 4975 (relating to 
prohibited transactions), as amended by section 7006(c), is amended--
            (1) by adding at the end of subsection (c) the following 
        new paragraph:
            ``(5) Special rule for medical savings accounts.--An 
        individual for whose benefit a medical savings account (within 
        the meaning of section 7705(a)) is established shall be exempt 
        from the tax imposed by this section with respect to any 
        transaction concerning such account (which would otherwise be 
        taxable under this section) if, with respect to such 
        transaction, the account ceases to be a medical savings account 
        by reason of the application of section 7705(b)(2)(A)(i) to 
        such account.'', and
            (2) by striking ``or'' at the end of subparagraph (D), by 
        redesignating subparagraph (E) as subparagraph (F), and by 
        inserting after subparagraph (D) the following new 
        subparagraph:
                    ``(E) a medical savings account described in 
                section 7705(a), or''.
    (e) Failure To Provide Reports on Medical Savings Accounts.--
Section 6693(a)(2) (relating to failure to provide reports on 
individual retirement accounts or annuities), as amended by section 
7006, is amended by striking ``and'' at the end of subparagraph (A), by 
striking the period at the end of subparagraph (B) and inserting ``, 
and'', and by adding at the end the following subparagraph:
                    ``(C) section 7705(f) (relating to medical savings 
                accounts).''.
    (f) Exception From Capitalization of Policy Acquisition Expenses.--
Subparagraph (B) of section 848(e)(1) (defining specified insurance 
contract), as amended by 7006, is amended by striking ``and'' at the 
end of clause (iii), by striking the period at the end of clause (iv) 
and inserting ``, and'', and by adding at the end the following new 
clause:
                            ``(v) any contract which is a medical 
                        savings account (as defined in section 
                        7705).''.
    (g) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1996.

                     Subchapter D--Other Provisions

SEC. 12241. INCREASE IN DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-
              EMPLOYED INDIVIDUALS.

    (a) Increase in Deduction.--Section 162(l) is amended by striking 
``30 percent'' in paragraph (1) and inserting ``55 percent''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1995.

SEC. 12242. ADJUSTMENT OF DEATH BENEFIT LIMITS FOR CERTAIN POLICIES.

    (a) In General.--Subparagraph (C)(i) of section 7702(e)(2) 
(relating to limited increases in death benefit permitted) is amended 
by striking ``$5,000'' and inserting ``$7,000'' and by striking 
``$25,000'' and inserting ``$30,000''.
    (b) Inflation Adjustments.--Section 7702(e) (relating to 
computational rules) is amended by adding at the end the following new 
paragraph:
            ``(3) Inflation adjustment to death benefit limits for 
        years after 1996.--In the case of any taxable year beginning in 
        a calendar year after 1996, each dollar amount contained in 
        paragraph (2)(C)(i) shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3), for the calendar year in which 
                the taxable year begins, by substituting `calendar year 
                1995' for `calendar year 1992' in subparagraph (B) 
                thereof.''.
    (c) Conforming Amendment.--Section 72(e)(10)(B) is amended by 
striking ``$25,000'' and inserting ``$30,000 (adjusted at the same time 
and in the same manner as under section 7702(e)(3))''.
    (d) Effective Date.--The amendments made by this section shall 
apply to contracts entered into after December 31, 1995.

SEC. 12243. ORGANIZATIONS SUBJECT TO SECTION 833.

    (a) In General.--Section 833(c) (relating to organization to which 
section applies) is amended by adding at the end the following new 
paragraph:
            ``(4) Treatment as existing blue cross or blue shield 
        organization.--
                    ``(A) In general.--Paragraph (2) shall be applied 
                to an organization described in subparagraph (B) as if 
                it were a Blue Cross or Blue Shield organization.
                    ``(B) Applicable organization.--An organization is 
                described in this subparagraph if it--
                            ``(i) is organized under, and governed by, 
                        State laws which are specifically and 
                        exclusively applicable to not-for-profit health 
                        insurance or health service type organizations, 
                        and
                            ``(ii) is not a Blue Cross or Blue Shield 
                        organization or health maintenance 
                        organization.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years ending after October 13, 1995.

                     Subtitle D--Estate Tax Reform

SEC. 12301. FAMILY-OWNED BUSINESS EXCLUSION.

    (a) In General.--Part III of subchapter A of chapter 11 (relating 
to gross estate) is amended by inserting after section 2033 the 
following new section:

``SEC. 2033A. FAMILY-OWNED BUSINESS EXCLUSION.

    ``(a) In General.--In the case of an estate of a decedent to which 
this section applies, the value of the gross estate shall not include 
the lesser of--
            ``(1) the adjusted value of the qualified family-owned 
        business interests of the decedent otherwise includible in the 
        estate, or
            ``(2) the sum of--
                    ``(A) $1,500,000, plus
                    ``(B) 50 percent of the excess (if any) of the 
                adjusted value of such interests over $1,500,000, but 
                not over $5,000,000.
    ``(b) Estates to Which Section Applies.--
            ``(1) In general.--This section shall apply to an estate 
        if--
                    ``(A) the decedent was (at the date of the 
                decedent's death) a citizen or resident of the United 
                States,
                    ``(B) the sum of--
                            ``(i) the adjusted value of the qualified 
                        family-owned business interests described in 
                        paragraph (2), plus
                            ``(ii) the amount of the gifts of such 
                        interests determined under paragraph (3),
                exceeds 50 percent of the adjusted gross estate, and
                    ``(C) during the 8-year period ending on the date 
                of the decedent's death there have been periods 
                aggregating 5 years or more during which--
                            ``(i) such interests were owned by the 
                        decedent or a member of the decedent's family, 
                        and
                            ``(ii) there was material participation 
                        (within the meaning of section 2032A(e)(6)) by 
                        the decedent or a member of the decedent's 
                        family in the operation of the business to 
                        which such interests relate.
            ``(2) Includible qualified family-owned business 
        interests.--The qualified family-owned business interests 
        described in this paragraph are the interests which--
                    ``(A) are included in determining the value of the 
                gross estate (without regard to this section), and
                    ``(B) are acquired by any qualified heir from, or 
                passed to any qualified heir from, the decedent (within 
                the meaning of section 2032A(e)(9)).
            ``(3) Includible gifts of interests.--The amount of the 
        gifts of qualified family-owned business interests determined 
        under this paragraph is the excess of--
                    ``(A) the sum of--
                            ``(i) the amount of such gifts from the 
                        decedent to members of the decedent's family 
                        taken into account under subsection 
                        2001(b)(1)(B), plus
                            ``(ii) the amount of such gifts otherwise 
                        excluded under section 2503(b),
                to the extent such interests are continuously held by 
                members of such family (other than the decedent's 
                spouse) between the date of the gift and the date of 
                the decedent's death, over
                    ``(B) the amount of gifts from the decedent to 
                members of the decedent's family otherwise included in 
                the gross estate.
    ``(c) Adjusted Gross Estate.--For purposes of this section, the 
term `adjusted gross estate' means the value of the gross estate 
(determined without regard to this section)--
            ``(1) reduced by any amount deductible under paragraph (3) 
        or (4) of section 2053(a), and
            ``(2) increased by the excess of--
                    ``(A) the sum of--
                            ``(i) the amount of gifts determined under 
                        subsection (b)(3), plus
                            ``(ii) the amount of other transfers from 
                        the decedent to the decedent's spouse (at the 
                        time of the transfer) within 10 years of the 
                        date of the decedent's death, plus
                            ``(iii) the amount of other gifts (not 
                        included under clause (i) or (ii)) from the 
                        decedent within 3 years of such date, other 
                        than gifts to members of the decedent's family 
                        otherwise excluded under section 2503(b), over
                    ``(B) the sum of the amounts described in clauses 
                (i), (ii), and (iii) of subparagraph (A) which are 
                otherwise includible in the gross estate.
For purposes of the preceding sentence, the Secretary may provide that 
de minimis gifts to persons other than members of the decedent's family 
shall not be taken into account.
    ``(d) Adjusted value of the qualified family-owned business 
interests.--For purposes of this section, the adjusted value of any 
qualified family-owned business interest is the value of such interest 
for purposes of this chapter (determined without regard to this 
section), reduced by the excess of--
            ``(1) any amount deductible under paragraph (3) or (4) of 
        section 2053(a), over
            ``(2) the sum of--
                    ``(A) any indebtedness on any qualified residence 
                of the decedent the interest on which is deductible 
                under section 163(h)(3), plus
                    ``(B) any indebtedness to the extent the taxpayer 
                establishes that the proceeds of such indebtedness were 
                used for the payment of educational and medical 
                expenses of the decedent, the decedent's spouse, or the 
                decedent's dependents (within the meaning of section 
                152), plus
                    ``(C) any indebtedness not described in clause (i) 
                or (ii), to the extent such indebtedness does not 
                exceed $10,000.
    ``(e) Qualified Family-Owned Business Interest.--
            ``(1) In general.--For purposes of this section, the term 
        `qualified family-owned business interest' means--
                    ``(A) an interest as a proprietor in a trade or 
                business carried on as a proprietorship, or
                    ``(B) an interest in an entity carrying on a trade 
                or business, if--
                            ``(i) at least--
                                    ``(I) 50 percent of such entity is 
                                owned (directly or indirectly) by the 
                                decedent and members of the decedent's 
                                family,
                                    ``(II) 70 percent of such entity is 
                                so owned by members of 2 families, or
                                    ``(III) 90 percent of such entity 
                                is so owned by members of 3 families, 
                                and
                            ``(ii) for purposes of subclause (II) or 
                        (III) of clause (i), at least 30 percent of 
                        such entity is so owned by the decedent and 
                        members of the decedent's family.
            ``(2) Limitation.--Such term shall not include--
                    ``(A) any interest in a trade or business the 
                principal place of business of which is not located in 
                the United States,
                    ``(B) any interest in an entity, if the stock or 
                debt of such entity or a controlled group (as defined 
                in section 267(f)(1)) of which such entity was a member 
                was readily tradable on an established securities 
                market or secondary market (as defined by the 
                Secretary) at any time within 3 years of the date of 
                the decedent's death,
                    ``(C) any interest in a trade or business not 
                described in section 542(c)(2), if more than 35 percent 
                of the adjusted ordinary gross income of such trade or 
                business for the taxable year which includes the date 
                of the decedent's death would qualify as personal 
                holding company income (as defined in section 543(a)),
                    ``(D) that portion of an interest in a trade or 
                business that is attributable to--
                            ``(i) cash or marketable securities, or 
                        both, in excess of the reasonably expected day-
                        to-day working capital needs of such trade or 
                        business, and
                            ``(ii) any other assets of the trade or 
                        business (other than assets used in the active 
                        conduct of a trade or business described in 
                        section 542(c)(2)), the income of which is 
                        described in section 543(a) or in subparagraph 
                        (B), (C), (D), or (E) of section 954(c)(1) 
                        (determined by substituting `trade or business' 
                        for `controlled foreign corporation)'.
            ``(3) Rules regarding ownership.--
                    ``(A) Ownership of entities.--For purposes of 
                paragraph (1)(B)--
                            ``(i) Corporations.--Ownership of a 
                        corporation shall be determined by the holding 
                        of stock possessing the appropriate percentage 
                        of the total combined voting power of all 
                        classes of stock entitled to vote and the 
                        appropriate percentage of the total value of 
                        shares of all classes of stock.
                            ``(ii) Partnerships.--Ownership of a 
                        partnership shall be determined by the owning 
                        of the appropriate percentage of the capital 
                        interest or the profits interest in such 
                        partnership.
                    ``(B) Ownership of tiered entities.--For purposes 
                of this section, if by reason of holding an interest in 
                a trade or business, a decedent or any member of the 
                decedent's family is treated as holding an interest in 
                any other trade or business--
                            ``(i) such ownership interest in the other 
                        trade or business shall be disregarded in 
                        determining if the ownership interest in the 
                        first trade or business is a qualified family-
                        owned business interest, and
                            ``(ii) this section shall be applied 
                        separately in determining if such interest in 
                        any other trade or business is a qualified 
                        family-owned business interest.
                    ``(C) Individual ownership rules.--For purposes of 
                this section, an interest owned, directly or 
                indirectly, by or for an entity described in paragraph 
                (1)(B) shall be considered as being owned 
                proportionately by or for the entity's shareholders, 
                partners, or beneficiaries. A person shall be treated 
                as a beneficiary of any trust only if such person has a 
                present interest in such trust.
    ``(f) Tax Treatment of Failure To Materially Participate in 
Business or Dispositions of Interests.--
            ``(1) In general.--There is imposed an additional estate 
        tax if, within 10 years after the date of the decedent's death 
        and before the date of the qualified heir's death--
                    ``(A) the material participation requirements 
                described in section 2032A(c)(6)(B) are not met with 
                respect to the qualified family-owned business interest 
                which was acquired (or passed) from the decedent,
                    ``(B) the qualified heir disposes of any portion of 
                a qualified family-owned business interest (other than 
                by a disposition to a member of the qualified heir's 
                family or through a qualified conservation contribution 
                under section 170(h)),
                    ``(C) the qualified heir loses United States 
                citizenship (within the meaning of section 877A) or 
                with respect to whom an event described in subparagraph 
                (A) or (B) of section 877A(e)(1) occurs, and such heir 
                does not comply with the requirements of subsection 
                (g), or
                    ``(D) the principal place of business of a trade or 
                business of the qualified family-owned business 
                interest ceases to be located in the United States.
            ``(2) Additional estate tax.--
                    ``(A) In general.--The amount of the additional 
                estate tax imposed by paragraph (1) shall be equal to--
                            ``(i) the applicable percentage of the 
                        adjusted tax difference attributable to the 
                        qualified family-owned business interest (as 
                        determined under rules similar to the rules of 
                        section 2032A(c)(2)(B)), plus
                            ``(ii) interest on the amount determined 
                        under clause (i) at the underpayment rate 
                        established under section 6621 for the period 
                        beginning on the date the estate tax liability 
                        was due under this chapter and ending on the 
                        date such additional estate tax is due.
                    ``(B) Applicable percentage.--For purposes of this 
                paragraph, the applicable percentage shall be 
                determined under the following table:
                                                         The applicable
``If the event described in                              percentage is:
        paragraph (1) occurs in the 
        following year of material 
        participation:
    1 through 6...................................                 100 
    7.............................................                  80 
    8.............................................                  60 
    9.............................................                  40 
    10............................................                  20.
    ``(g) Security Requirements for Noncitizen Qualified Heirs.--
            ``(1) In general.--Except upon the application of 
        subparagraph (F) or (M) of subsection (h)(3), if a qualified 
        heir is not a citizen of the United States, any interest under 
        this section passing to or acquired by such heir (including any 
        interest held by such heir at a time described in subsection 
        (f)(1)(C)) shall be treated as a qualified family-owned 
        business interest only if the interest passes or is acquired 
        (or is held) in a qualified trust.
            ``(2) Qualified trust.--The term `qualified trust' means a 
        trust--
                    ``(A) which is organized under, and governed by, 
                the laws of the United States or a State, and
                    ``(B) with respect to which the trust instrument 
                requires that at least 1 trustee of the trust be an 
                individual citizen of the United States or a domestic 
                corporation.
    ``(h) Other Definitions and Applicable Rules.--For purposes of this 
section--
            ``(1) Qualified heir.--The term `qualified heir'--
                    ``(A) has the meaning given to such term by section 
                2032A(e)(1), and
                    ``(B) includes any active employee of the trade or 
                business to which the qualified family-owned business 
                interest relates if such employee has been employed by 
                such trade or business for a period of at least 10 
                years before the date of the decedent's death.
            ``(2) Member of the family.--The term `member of the 
        family' has the meaning given to such term by section 
        2032A(e)(2).
            ``(3) Applicable rules.--Rules similar to the following 
        rules shall apply:
                    ``(A) Section 2032A(b)(4) (relating to decedents 
                who are retired or disabled).
                    ``(B) Section 2032A(b)(5) (relating to special 
                rules for surviving spouses).
                    ``(C) Section 2032A(c)(2)(D) (relating to partial 
                dispositions).
                    ``(D) Section 2032A(c)(3) (relating to only 1 
                additional tax imposed with respect to any 1 portion).
                    ``(E) Section 2032A(c)(4) (relating to due date).
                    ``(F) Section 2032A(c)(5) (relating to liability 
                for tax; furnishing of bond).
                    ``(G) Section 2032A(c)(7) (relating to no tax if 
                use begins within 2 years; active management by 
                eligible qualified heir treated as material 
                participation).
                    ``(H) Section 2032A(e)(10) (relating to community 
                property).
                    ``(I) Section 2032A(e)(14) (relating to treatment 
                of replacement property acquired in section 1031 or 
                1033 transactions).
                    ``(J) Section 2032A(f) (relating to statute of 
                limitations).
                    ``(K) Section 6166(b)(3) (relating to farmhouses 
                and certain other structures taken into account).
                    ``(L) Subparagraphs (B), (C), and (D) of section 
                6166(g)(1) (relating to acceleration of payment).
                    ``(M) Section 6324B (relating to special lien for 
                additional estate tax).''.
    (b) Clerical Amendment.--The table of sections for part III of 
subchapter A of chapter 11 is amended by inserting after the item 
relating to section 2033 the following new item:

``Sec. 2033A. Family-owned business exclusion.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying after December 31, 1995.

SEC. 12302. INCREASE IN UNIFIED ESTATE AND GIFT TAX CREDIT.

    (a) Estate Tax Credit.--
            (1) In general.--Section 2010 (relating to unified credit 
        against estate tax) is amended--
                    (A) by striking ``$192,800'' in subsection (a) and 
                inserting ``$248,300'', and
                    (B) by redesignating subsection (b) as subsection 
                (c) and by inserting after subsection (a) the following 
                new subsection:
    ``(b) Phase-in of Credit.--

``In the case of decedents dying    Subsection (a) shall be applied by 
        in:                                 substituting for `$248,300' 
                                            the following amount:
    1996..........................................            $202,050 
    1997..........................................             211,300 
    1998..........................................             220,550 
    1999..........................................             229,800 
    2000..........................................          239,050.''.
            (2) Conforming amendments.--
                    (A) Subsection (a) of section 6018 is amended--
                            (i) by striking ``$600,000'' in paragraph 
                        (1) and inserting ``$750,000'', and
                            (ii) by adding at the end the following new 
                        paragraph:
            ``(5) Phase-in of filing requirement amount.--

``In the case of decedents dying    Paragraph (1) shall be applied by 
        in:                                 substituting for `$750,000' 
                                            the following amount:
    1996..........................................            $625,000 
    1997..........................................             650,000 
    1998..........................................             675,000 
    1999..........................................             700,000 
    2000..........................................          725,000.''.
                    (B) Section 2001(c)(2) is amended to read as 
                follows:
            ``(2) Phaseout of graduated rates and unified credit.--
                    ``(A) In general.--The tentative tax determined 
                under paragraph (1) shall be increased by an amount 
                equal to 5 percent of so much of the amount (with 
                respect to which the tentative is to be computed) as 
                exceeds $10,000,000 but does not exceed $22,150,000.
                    ``(B) Phase-in of end point of phaseout range.--

``In the case of decedents dying    Subparagraph (A) shall be applied 
        in:                                 by substituting for 
                                            `$22,150,000' the following 
                                            amount:
    1996..........................................         $21,225,000 
    1997..........................................          21,410,000 
    1998..........................................          21,595,000 
    1999..........................................          21,780,000 
    2000..........................................       21,965,000.''.
                    (C) Paragraph (3) of section 2102(c) is amended--
                            (i) by striking ``$192,800'' in 
                        subparagraph (A) and inserting ``$248,300'', 
                        and
                            (ii) by adding at the end the following new 
                        subparagraph:
                    ``(C) Phase-in of credit.--

``In the case of decedents dying    Subparagraph (A) shall be applied 
        in:                                 by substituting for 
                                            `$248,300' the following 
                                            amount:
    1996..........................................            $202,050 
    1997..........................................             211,300 
    1998..........................................             220,550 
    1999..........................................             229,800 
    2000..........................................          239,050.''.
    (b) Unified Gift Tax Credit.--Section 2505 (relating to unified 
credit against gift tax) is amended--
            (1) by striking ``$192,800'' in subsection (a)(1) and 
        inserting ``$248,300'', and
            (2) by redesignating subsection (b) as subsection (c) and 
        by inserting after subsection (a) the following new subsection:
    ``(b) Phase-in of Credit.--

``In the case of gifts made in:     Subsection (a)(1) shall be applied 
                                            by substituting for 
                                            `$248,300' the following 
                                            amount:
    1996..........................................            $202,050 
    1997..........................................             211,300 
    1998..........................................             220,550 
    1999..........................................             229,800 
    2000..........................................          239,050.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to the estates of decedents dying, and gifts made, after December 
31, 1995.

SEC. 12303. TREATMENT OF LAND SUBJECT TO A QUALIFIED CONSERVATION 
              EASEMENT.

    (a) Estate Tax With Respect to Land Subject to a Qualified 
Conservation Easement.--Section 2031 (relating to the definition of 
gross estate) is amended by redesignating subsection (c) as subsection 
(d) and by inserting after subsection (b) the following new subsection:
    ``(c) Estate Tax With Respect to Land Subject to a Qualified 
Conservation Easement.--
            ``(1) In general.--If the executor makes the election 
        described in paragraph (5), then, except as otherwise provided 
        in this subsection, there shall be excluded from the gross 
        estate the applicable percentage of the lesser of--
                    ``(A) the value of land subject to a qualified 
                conservation easement, reduced by the amount of any 
                deduction under section 2055(f) with respect to such 
                land, or
                    ``(B) the excess (if any) of--
                            ``(i) $5,000,000, over
                            ``(ii) the adjusted value of the qualified 
                        family-owned business interests of the decedent 
                        determined under section 2033A.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the term `applicable percentage' means 50 percent reduced 
        (but not below zero) by 2 percentage points for each percentage 
        point (or fraction thereof) by which the value of the qualified 
        conservation easement is less than 30 percent of the value of 
        the land (determined without regard to the value of such 
        easement and reduced by the value of any retained development 
        right (as defined in paragraph (4)).
            ``(3) Treatment of certain indebtedness.--
                    ``(A) In general.--The exclusion provided in 
                paragraph (1) shall not apply to the extent that the 
                land is debt-financed property.
                    ``(B) Definitions.--For purposes of this 
                paragraph--
                            ``(i) Debt-financed property.--The term 
                        `debt-financed property' means any property 
                        with respect to which there is an acquisition 
                        indebtedness (as defined in clause (ii)) on the 
                        date of the decedent's death.
                            ``(ii) Acquisition indebtedness.--The term 
                        `acquisition indebtedness' means, with respect 
                        to debt-financed property, the unpaid amount 
                        of--
                                    ``(I) the indebtedness incurred by 
                                the donor in acquiring such property,
                                    ``(II) the indebtedness incurred 
                                before the acquisition of such property 
                                if such indebtedness would not have 
                                been incurred but for such acquisition,
                                    ``(III) the indebtedness incurred 
                                after the acquisition of such property 
                                if such indebtedness would not have 
                                been incurred but for such acquisition 
                                and the incurrence of such indebtedness 
                                was reasonably foreseeable at the time 
                                of such acquisition, and
                                    ``(IV) the extension, renewal, or 
                                refinancing of an acquisition 
                                indebtedness.
            ``(4) Treatment of retained development right.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                the value of any development right retained by the 
                donor in the conveyance of a qualified conservation 
                easement.
                    ``(B) Termination of retained development right.--
                If every person in being who has an interest (whether 
                or not in possession) in the land executes an agreement 
                to extinguish permanently some or all of any 
                development rights (as defined in subparagraph (D)) 
                retained by the donor on or before the date for filing 
                the return of the tax imposed by section 2001, then any 
                tax imposed by section 2001 shall be reduced 
                accordingly. Such agreement shall be filed with the 
                return of the tax imposed by section 2001. The 
                agreement shall be in such form as the Secretary shall 
                prescribe.
                    ``(C) Additional tax.--Any failure to implement the 
                agreement described in subparagraph (B) not later than 
                the earlier of--
                            ``(i) the date which is 2 years after the 
                        date of the decedent's death, or
                            ``(ii) the date of the sale of such land 
                        subject to the qualified conservation 
                        easement),
                shall result in the imposition of an additional tax in 
                the amount of the tax which would have been due on the 
                retained development rights subject to such agreement. 
                Such additional tax shall be due and payable on the 
                last day of the 6th month following such date.
                    ``(D) Development right defined.--For purposes of 
                this paragraph, the term `development right' means any 
                right to use the land subject to the qualified 
                conservation easement in which such right is retained 
                for any commercial purpose which is not subordinate to 
                and directly supportive of the use of such land as a 
                farm for farming purposes (within the meaning of 
                section 6420(c).
            ``(5) Election.--The election under this subsection shall 
        be made on the return of the tax imposed by section 2001. Such 
        an election, once made, shall be irrevocable.
            ``(6) Calculation of estate tax due.--An executor making 
        the election described in paragraph (5) shall, for purposes of 
        calculating the amount of tax imposed by section 2001, include 
        the value of any development right (as defined in paragraph 
        (4)) retained by the donor in the conveyance of such qualified 
        conservation easement. The computation of tax on any retained 
        development right prescribed in this paragraph shall be done in 
        such manner and on such forms as the Secretary shall prescribe.
            ``(7) Definitions.--For purposes of this subsection--
                    ``(A) Land subject to a qualified conservation 
                easement.--The term `land subject to a qualified 
                conservation easement' means land--
                            ``(i) which is located in or within 25 
                        miles of an area which, on the date of the 
                        decedent's death, is--
                                    ``(I) a metropolitan area (as 
                                defined by the Office of Management and 
                                Budget), or
                                    ``(II) a national park or 
                                wilderness area designated as part of 
                                the National Wilderness Preservation 
                                System (unless it is determined by the 
                                Secretary that land in or within 25 
                                miles of such a park or wilderness area 
                                is not under significant development 
                                pressure),
                            ``(ii) which was owned by the decedent or a 
                        member of the decedent's family at all times 
                        during the 3-year period ending on the date of 
                        the decedent's death, and
                            ``(iii) with respect to which a qualified 
                        conservation easement is or has been made by 
                        the decedent or a member of the decedent's 
                        family.
                    ``(B) Qualified conservation easement.--The term 
                `qualified conservation easement' means a qualified 
                conservation contribution (as defined in section 
                170(h)(1)) of a qualified real property interest (as 
                defined in section 170(h)(2)(C)), except that clause 
                (iv) of section 170(h)(4)(A) shall not apply, and the 
                restriction on the use of such interest described in 
                section 170(h)(2)(C) shall include a prohibition on 
                commercial recreational activity.
                    ``(C) Member of family.--The term `member of the 
                decedent's family' means any member of the family (as 
                defined in section 2032A(e)(2)) of the decedent.
            ``(8) Application of this section to interests in 
        partnerships, corporations, and trusts.--This section shall 
        apply to an interest in a partnership, corporation, or trust if 
        at least 30 percent of the entity is owned (directly or 
        indirectly) by the decedent, as determined under the rules 
        described in section 2033A(e)(3).''.
    (b) Carryover Basis.--Section 1014(a) (relating to basis of 
property acquired from a decedent) is amended by striking the period at 
the end of paragraph (3) and inserting ``, or'' and by adding after 
paragraph (3) the following new paragraph:
            ``(4) to the extent of the applicability of the exclusion 
        described in section 2031(c), the basis in the hands of the 
        decedent.''.
    (c) Qualified Conservation Contribution Is Not a Disposition.--
Subsection (c) of section 2032A (relating to alternative valuation 
method) is amended by adding at the end the following new paragraph:
            ``(8) Qualified conservation contribution is not a 
        disposition.--A qualified conservation contribution (as defined 
        in section 170(h)) by gift or otherwise shall not be deemed a 
        disposition under subsection (c)(1)(A).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying after December 31, 1995.

SEC. 12304. EXPANSION OF EXCEPTION FROM GENERATION-SKIPPING TRANSFER 
              TAX FOR TRANSFERS TO INDIVIDUALS WITH DECEASED PARENTS.

    (a) In General.--Section 2651 (relating to generation assignment) 
is amended by redesignating subsection (e) as subsection (f), and by 
inserting after subsection (d) the following new subsection:
    ``(e) Special Rule for Persons With a Deceased Parent.--
            ``(1) In general.--For purposes of determining whether any 
        transfer is a generation-skipping transfer, if--
                    ``(A) an individual is a descendant of a parent of 
                the transferor (or the transferor's spouse or former 
                spouse), and
                    ``(B) such individual's parent who is a lineal 
                descendant of the parent of the transferor (or the 
                transferor's spouse or former spouse) is dead at the 
                time the transfer from which such interest is 
                established or derived is subject to a tax imposed by 
                chapter 11 or 12 upon the transferor (and if there 
                shall be more than 1 such time, then at the earliest 
                such time),
        such individual shall be treated as if such individual were a 
        member of the generation which is 1 generation below the lower 
        of the transferor's generation or the generation assignment of 
        the youngest living ancestor of such individual who is also a 
        descendant of the parent of the transferor (or the transferor's 
        spouse or former spouse), and the generation assignment of any 
        descendant of such individual shall be adjusted accordingly.
            ``(2) Limited application of subsection to collateral 
        heirs.--This subsection shall not apply with respect to a 
        transfer to any individual who is not a lineal descendant of 
        the transferor (or the transferor's spouse or former spouse) 
        if, at the time of the transfer, such transferor has any living 
        lineal descendant.''.
    (b) Conforming Amendments.--
            (1) Section 2612(c) (defining direct skip) is amended by 
        striking paragraph (2) and by redesignating paragraph (3) as 
        paragraph (2).
            (2) Section 2612(c)(2) (as so redesignated) is amended by 
        striking ``section 2651(e)(2)'' and inserting ``section 
        2651(f)(2)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to terminations, distributions, and transfers occurring after 
December 31, 1994.

SEC. 12305. EXTENSION OF TREATMENT OF CERTAIN RENTS UNDER SECTION 2032A 
              TO LINEAL DESCENDANTS.

    (a) General Rule.--Paragraph (7) of section 2032A(c) (relating to 
special rules for tax treatment of dispositions and failures to use for 
qualified use) is amended by adding at the end the following new 
subparagraph:
                    ``(E) Certain rents treated as qualified use.--For 
                purposes of this subsection, a surviving spouse or 
                lineal descendant of the decedent shall not be treated 
                as failing to use qualified real property in a 
                qualified use solely because such spouse or descendant 
                rents such property to a member of the family of such 
                spouse or descendant on a net cash basis. For purposes 
                of the preceding sentence, a legally adopted child of 
                an individual shall be treated as the child of such 
                individual by blood.''.
    (b) Conforming Amendment.--Section 2032A(b)(5)(A) is amended by 
striking out the last sentence.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to leases entered into after December 31, 1995.

              Subtitle E--Extension of Expiring Provisions

            CHAPTER 1--EXTENSIONS THROUGH FEBRUARY 28, 1997

SEC. 12401. EMPLOYER-PROVIDED EDUCATIONAL ASSISTANCE PROGRAMS.

    (a) Extension.--Subsection (d) of section 127 (relating to 
educational assistance programs) is amended by striking ``December 31, 
1994'' and inserting ``February 28, 1997''.
    (b) Conforming Amendments.--Paragraph (2) of section 127(a) is 
amended--
            (1) by inserting ``($875 in calendar year 1997)'' after 
        ``$5,250'' the second and third place it appears, and
            (2) by striking ``$5,250'' in the heading.
    (c) Special Rule.--In the case of any taxable year beginning in 
1997, only amounts paid before March 1, 1997, by the employer for 
educational assistance for the employee shall be taken into account in 
determining the amount excluded under section 127 of the Internal 
Revenue Code of 1986 with respect to such employee for such taxable 
year.
    (d) Effective Date.--The amendments made by subsections (a) and (b) 
shall apply to taxable years beginning after December 31, 1994.

SEC. 12402. RESEARCH CREDIT.

    (a) In General.--Subsection (h) of section 41 (relating to credit 
for research activities) is amended--
            (1) by striking ``June 30, 1995'' each place it appears and 
        inserting ``February 28, 1997'', and
            (2) by striking ``July 1, 1995'' each place it appears and 
        inserting ``March 1, 1997''.
    (b) Base Amount for Start-up Companies.--Clause (i) of section 
41(c)(3)(B) (relating to start-up companies) is amended to read as 
follows:
                            ``(i)  Taxpayers to which subparagraph 
                        applies.--The fixed-base percentage shall be 
                        determined under this subparagraph if--
                                    ``(I) the first taxable year in 
                                which a taxpayer had both gross 
                                receipts and qualified research 
                                expenses begins after December 31, 
                                1983, or
                                    ``(II) there are fewer than 3 
                                taxable years beginning after December 
                                31, 1983, and before January 1, 1989, 
                                in which the taxpayer had both gross 
                                receipts and qualified research 
                                expenses.''.
    (c)  Conforming amendment.--Subparagraph (D) of section 28(b)(1) is 
amended by striking ``June 30, 1995'' and inserting ``February 28, 
1997''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after June 30, 1995.

SEC. 12403. EMPLOYER-PROVIDED GROUP LEGAL SERVICES.

    (a) In General.--Subsection (e) of section 120 (relating to amounts 
received under qualified group legal services plans) is amended to read 
as follows:
    ``(e) Application of Sections.--This section and section 501(c)(20) 
shall not apply to any taxable year beginning before January 1, 1996, 
or after February 28, 1997.''
    (b) Conforming Amendments.--Subsection (a) of section 120 is 
amended by inserting ``($12 in taxable years beginning in 1997)'' after 
``$70''.
    (c) Special Rule.--In the case of any taxable year beginning in 
1997, only amounts paid before March 1, 1997, by the employer for 
coverage for the employee, the employee's spouse, or the employee's 
dependents, under a qualified group legal services plan for periods 
before March 1, 1997, shall be taken into account in determining the 
amount excluded under section 120 of the Internal Revenue Code of 1986 
with respect to such employee for such taxable year.
    (d) Effective Date.--The amendments made by subsections (a) and (b) 
shall apply to taxable years beginning after December 31, 1995.

SEC. 12404. ORPHAN DRUG TAX CREDIT.

    (a) Recategorized as a Business Credit.--
            (1) In general.--Section 28 (relating to clinical testing 
        expenses for certain drugs for rare diseases or conditions) is 
        transferred to subpart D of part IV of subchapter A of chapter 
        1, inserted after section 45B, and redesignated as section 45C.
            (2) Conforming amendment.--Subsection (b) of section 38 
        (relating to general business credit) is amended by striking 
        ``plus'' at the end of paragraph (10), by striking the period 
        at the end of paragraph (11) and inserting ``, plus'', and by 
        adding at the end the following new paragraph:
            ``(12) the orphan drug credit determined under section 
        45C(a).''.
            (3) Clerical amendments.--
                    (A) The table of sections for subpart B of such 
                part IV is amended by striking the item relating to 
                section 28.
                    (B) The table of sections for subpart D of such 
                part IV is amended by adding at the end the following 
                new item:

        ``Sec. 45C. Clinical testing expenses for certain drugs for 
                            rare diseases or conditions.''.
    (b) Credit Termination.--Subsection (e) of section 45C, as 
redesignated by subsection (a)(1), is amended by striking ``December 
31, 1994'' and inserting ``February 28, 1997''.
    (c) No Pre-1995 Carrybacks.--Subsection (d) of section 39 (relating 
to carryback and carryforward of unused credits) is amended by adding 
at the end the following new paragraph:
            ``(7) No carryback of section 45C credit before 1995.--No 
        portion of the unused business credit for any taxable year 
        which is attributable to the orphan drug credit determined 
        under section 45C may be carried back to a taxable year 
        beginning before January 1, 1995.''.
    (d) Additional Conforming Amendments.--
            (1) Section 45C(a), as redesignated by subsection (a)(1), 
        is amended by striking ``There shall be allowed as a credit 
        against the tax imposed by this chapter for the taxable year'' 
        and inserting ``For purposes of section 38, the credit 
        determined under this section for the taxable year is''.
            (2) Section 45C(d), as so redesignated, is amended by 
        striking paragraph (2) and by redesignating paragraphs (3), 
        (4), and (5) as paragraphs (2), (3), and (4).
            (3) Section 29(b)(6)(A) is amended by striking ``sections 
        27 and 28'' and inserting ``section 27''.
            (4) Section 30(b)(3)(A) is amended by striking ``sections 
        27, 28, and 29'' and inserting ``sections 27 and 29''.
            (5) Section 53(d)(1)(B) is amended--
                    (A) by striking ``or not allowed under section 28 
                solely by reason of the application of section 
                28(d)(2)(B),'' in clause (iii), and
                    (B) by striking ``or not allowed under section 28 
                solely by reason of the application of section 
                28(d)(2)(B)'' in clause (iv)(II).
            (6) Section 55(c)(2) is amended by striking ``28(d)(2),''.
            (7) Section 280C(b) is amended--
                    (A) by striking ``section 28(b)'' in paragraph (1) 
                and inserting ``section 45C(b)'',
                    (B) by striking ``section 28'' in paragraphs (1) 
                and (2)(A) and inserting ``section 45C(b)'', and
                    (C) by striking ``subsection (d)(2) thereof'' in 
                paragraphs (1) and (2)(A) and inserting ``section 
                38(c)''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 1994.

SEC. 12405. CONTRIBUTIONS OF STOCK TO PRIVATE FOUNDATIONS.

    (a) In General.--Subparagraph (D) of section 170(e)(5) (relating to 
special rule for contributions of stock for which market quotations are 
readily available) is amended by striking ``December 31, 1994'' and 
inserting ``February 28, 1997''.
    (b) Effective Date.--The amendment made by this section shall apply 
to contributions made after December 31, 1994.

SEC. 12406. DELAY OF SCHEDULED INCREASE IN TAX ON FUEL USED IN 
              COMMERCIAL AVIATION.

    (a) In General.--Sections 4092(b)(2), 6421(f)(2)(B), and 
6427(l)(4)(B) are each amended by striking ``September 30, 1995'' and 
inserting ``February 28, 1997''.
    (b) Conforming Amendment.--Section 13245 of the Omnibus Budget 
Reconciliation Act of 1993 is hereby repealed.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        take effect after September 30, 1995.
            (2) Cross reference.--

                                For refund of tax paid on commercial 
aviation fuel before the date of the enactment of this Act, see section 
6427(l) of the Internal Revenue Code of 1986.
    (d) Floor Stocks Tax.--
            (1) Imposition of tax.--In the case of commercial aviation 
        fuel which is held by any person on March 1, 1997, there is 
        hereby imposed a floor stocks tax equal to 4.3 cents per 
        gallon.
            (2) Liability for tax and method of payment.--
                    (A) Liability for tax.--A person holding aviation 
                fuel on March 1, 1997, to which the tax imposed by 
                paragraph (1) applies shall be liable for such tax.
                    (B) Method of payment.--The tax imposed by 
                paragraph (1) shall be paid in such manner as the 
                Secretary shall prescribe.
                    (C) Time for payment.--The tax imposed by paragraph 
                (1) shall be paid on or before September 30, 1997.
            (3) Definitions.--For purposes of this subsection--
                    (A) Held by a person.--Aviation fuel shall be 
                considered as ``held by a person'' if title thereto has 
                passed to such person (whether or not delivery to the 
                person has been made).
                    (B) Commercial aviation fuel.--The term 
                ``commercial aviation fuel'' means aviation fuel (as 
                defined in section 4093 of such Code) which is held on 
                March 1, 1997, for sale or use in commercial aviation 
                (as defined in section 4092(b) of such Code).
                    (C) Secretary.--The term ``Secretary'' means the 
                Secretary of the Treasury or the Secretary's delegate.
            (4) Exception for exempt uses.--The tax imposed by 
        paragraph (1) shall not apply to aviation fuel held by any 
        person exclusively for any use for which a credit or refund of 
        the entire tax imposed by section 4091 of such Code (other than 
        the rate imposed by section 4091(b)(2) of such Code) is 
        allowable for aviation fuel so used.
            (5) Exception for certain amounts of fuel.--
                    (A) In general.--No tax shall be imposed by 
                paragraph (1) on aviation fuel held on March 1, 1997, 
                by any person if the aggregate amount of commercial 
                aviation fuel held by such person on such date does not 
                exceed 2,000 gallons. The preceding sentence shall 
                apply only if such person submits to the Secretary (at 
                the time and in the manner required by the Secretary) 
                such information as the Secretary shall require for 
                purposes of this paragraph.
                    (B) Exempt fuel.--For purposes of subparagraph (A), 
                there shall not be taken into account fuel held by any 
                person which is exempt from the tax imposed by 
                paragraph (1) by reason of paragraph (4).
                    (C) Controlled groups.--For purposes of this 
                paragraph--
                            (i) Corporations.--
                                    (I) In general.--All persons 
                                treated as a controlled group shall be 
                                treated as 1 person.
                                    (II) Controlled group.--The term 
                                ``controlled group'' has the meaning 
                                given to such term by subsection (a) of 
                                section 1563 of such Code; except that 
                                for such purposes the phrase ``more 
                                than 50 percent'' shall be substituted 
                                for the phrase ``at least 80 percent'' 
                                each place it appears in such 
                                subsection.
                            (ii) Nonincorporated persons under common 
                        control.--Under regulations prescribed by the 
                        Secretary, principles similar to the principles 
                        of clause (i) shall apply to a group of persons 
                        under common control where 1 or more of such 
                        persons is not a corporation.
            (6) Other laws applicable.--All provisions of law, 
        including penalties, applicable with respect to the taxes 
        imposed by section 4091 of such Code shall, insofar as 
        applicable and not inconsistent with the provisions of this 
        subsection, apply with respect to the floor stock taxes imposed 
        by paragraph (1) to the same extent as if such taxes were 
        imposed by such section 4091.

    CHAPTER 2--EXTENSIONS OF SUPERFUND AND OIL SPILL LIABILITY TAXES

SEC. 12411. EXTENSION OF HAZARDOUS SUBSTANCE SUPERFUND.

    (a) Extension of Taxes.--
            (1) Environmental tax.--Section 59A(e) is amended to read 
        as follows:
    ``(e) Application of Tax.--The tax imposed by this section shall 
apply to taxable years beginning after December 31, 1986, and before 
January 1, 1998.''.
            (2) Excise taxes.--Section 4611(e) is amended to read as 
        follows:
    ``(e) Application of Hazardous Substance Superfund Financing 
Rate.--The Hazardous Substance Superfund financing rate under this 
section shall apply after December 31, 1986, and before October 1, 
2002.''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 12412. EXTENSION OF OIL SPILL LIABILITY TAX.

    (a) In General.--Section 4611(f)(1) (relating to application of oil 
spill liability trust fund financing rate) is amended by striking 
``after December 31, 1989, and before January 1, 1995'' and inserting 
``after December 31, 1995, and before October 1, 2002''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on January 1, 1996.

              CHAPTER 3--EXTENSIONS RELATING TO FUEL TAXES

SEC. 12421. ETHANOL BLENDER REFUNDS.

    (a) In General.--Paragraph (4) of section 6427(f) (relating to 
gasoline, diesel fuel, and aviation fuel used to produce certain 
alcohol fuels) is amended by striking ``1995'' and inserting ``1999''.
    (b) Special Rule.--With respect to refund claims which could have 
been filed under section 6427(f) of the Internal Revenue Code of 1986 
during the period beginning on October 8, 1995, and ending on the date 
of the enactment of this Act, but for the expiration of such section 
after September 30, 1995, interest shall accrue on such claims from the 
date which is the later of--
            (1) November 1, 1995, or
            (2) 20 days after the claim could have been filed under 
        such section as in effect on September 30, 1995.
    (c) Effective Date.--The amendment made by subsection (a) shall 
take effect on the date of the enactment of this Act.

SEC. 12422. EXTENSION OF BINDING CONTRACT DATE FOR BIOMASS AND COAL 
              FACILITIES.

    (a) In General.--Subparagraph (A) of section 29(g)(1) (relating to 
extension of certain facilities) is amended by striking ``January 1, 
1997'' and inserting ``January 1, 1998'' and by striking ``January 1, 
1996'' and inserting ``January 1, 1997''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

                  CHAPTER 4--DIESEL DYEING PROVISIONS

SEC. 12431. MORATORIUM FOR EXCISE TAX ON DIESEL FUEL SOLD FOR USE OR 
              USED IN DIESEL-POWERED MOTORBOATS.

    (a) In General.--Subparagraph (D) of section 4041(a)(1) (relating 
to the imposition of tax on diesel fuel and special motor fuels) is 
amended to read as follows:
                    ``(D) Diesel fuel used in motorboats.--
                            ``(i) Moratorium.--No tax shall be imposed 
                        by subsection (a) or (d)(1) on diesel fuel sold 
                        for use or used in a diesel-powered motorboat 
                        during the period after December 31, 1995, and 
                        before March 1, 1997.
                            ``(ii) Special termination date.--In the 
                        case of any sale for use, or use, of fuel in a 
                        diesel-powered motorboat--
                                    ``(I) effective during the period 
                                after September 30, 1999, and before 
                                January 1, 2000, the rate of tax 
                                imposed by this paragraph is 24.3 cents 
                                per gallon, and
                                    ``(II) the termination of the tax 
                                under subsection (d) shall not occur 
                                before January 1, 2000.''.
    (b) Effective Date.--The amendments made by this section shall take 
effect after December 31, 1995.

           CHAPTER 5--Treatment of Individuals Who Expatriate

SEC. 12441. REVISION OF TAX RULES ON EXPATRIATION.

    (a) In General.--Subpart A of part II of subchapter N of chapter 1 
is amended by inserting after section 877 the following new section:

``SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION.

    ``(a) General Rules.--For purposes of this subtitle--
            ``(1) Mark to market.--Except as provided in subsection 
        (f), all property of a covered expatriate to which this section 
        applies shall be treated as sold on the expatriation date for 
        its fair market value.
            ``(2) Recognition of gain or loss.--In the case of any sale 
        under paragraph (1)--
                    ``(A) notwithstanding any other provision of this 
                title, any gain arising from such sale shall be taken 
                into account for the taxable year of the sale unless 
                such gain is excluded from gross income under part III 
                of subchapter B, and
                    ``(B) any loss arising from such sale shall be 
                taken into account for the taxable year of the sale to 
                the extent otherwise provided by this title, except 
                that section 1091 shall not apply (and section 1092 
                shall apply) to any such loss.
            ``(3) Exclusion for certain gain.--The amount which would 
        (but for this paragraph) be includible in the gross income of 
        any individual by reason of this section shall be reduced (but 
        not below zero) by $600,000. For purposes of this paragraph, 
        allocable expatriation gain taken into account under subsection 
        (f)(2) shall be treated in the same manner as an amount 
        required to be includible in gross income.
            ``(4) Election to continue to be taxed as united states 
        citizen.--
                    ``(A) In general.--If an expatriate elects the 
                application of this paragraph--
                            ``(i) this section (other than this 
                        paragraph) shall not apply to the expatriate, 
                        but
                            ``(ii) the expatriate shall be subject to 
                        tax under this title, with respect to property 
                        to which this section would apply but for such 
                        election, in the same manner as if the 
                        individual were a United States citizen.
                    ``(B) Limitation on amount of estate, gift, and 
                generation-skipping transfer taxes.--The aggregate 
                amount of taxes imposed under subtitle B with respect 
                to any transfer of property by reason of an election 
                under subparagraph (A) shall not exceed the amount of 
                income tax which would be due if the property were sold 
                for its fair market value immediately before the time 
                of the transfer or death (taking into account the rules 
                of paragraph (2)).
                    ``(C) Requirements.--Subparagraph (A) shall not 
                apply to an individual unless the individual--
                            ``(i) provides security for payment of tax 
                        in such form and manner, and in such amount, as 
                        the Secretary may require,
                            ``(ii) consents to the waiver of any right 
                        of the individual under any treaty of the 
                        United States which would preclude assessment 
                        or collection of any tax which may be imposed 
                        by reason of this paragraph, and
                            ``(iii) complies with such other 
                        requirements as the Secretary may prescribe.
                    ``(D) Election.--An election under subparagraph (A) 
                shall apply to all property to which this section would 
                apply but for the election and, once made, shall be 
                irrevocable. Such election shall also apply to property 
                the basis of which is determined in whole or in part by 
                reference to the property with respect to which the 
                election was made.
    ``(b) Election To Defer Tax.--
            ``(1) In general.--If the taxpayer elects the application 
        of this subsection with respect to any property--
                    ``(A) no amount shall be required to be included in 
                gross income under subsection (a)(1) with respect to 
                the gain from such property for the taxable year of the 
                sale, but
                    ``(B) the taxpayer's tax for the taxable year in 
                which such property is disposed of shall be increased 
                by the deferred tax amount with respect to the 
                property.
        Except to the extent provided in regulations, subparagraph (B) 
        shall apply to a disposition whether or not gain or loss is 
        recognized in whole or in part on the disposition.
            ``(2) Deferred tax amount.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the term `deferred tax amount' means, with respect to 
                any property, an amount equal to the sum of--
                            ``(i) the difference between the amount of 
                        tax paid for the taxable year described in 
                        paragraph (1)(A) and the amount which would 
                        have been paid for such taxable year if the 
                        election under paragraph (1) had not applied to 
                        such property, plus
                            ``(ii) an amount of interest on the amount 
                        described in clause (i) determined for the 
                        period--
                                    ``(I) beginning on the 91st day 
                                after the expatriation date, and
                                    ``(II) ending on the due date for 
                                the taxable year described in paragraph 
                                (1)(B),
                        by using the rates and method applicable under 
                        section 6621 for underpayments of tax for such 
                        period.
                For purposes of clause (ii), the due date is the date 
                prescribed by law (determined without regard to 
                extension) for filing the return of the tax imposed by 
                this chapter for the taxable year.
                    ``(B) Allocation of losses.--For purposes of 
                subparagraph (A), any losses described in subsection 
                (a)(2)(B) shall be allocated ratably among the gains 
                described in subsection (a)(2)(A).
            ``(3) Security.--
                    ``(A) In general.--No election may be made under 
                paragraph (1) with respect to any property unless 
                adequate security is provided with respect to such 
                property.
                    ``(B) Adequate security.--For purposes of 
                subparagraph (A), security with respect to any property 
                shall be treated as adequate security if--
                            ``(i) it is a bond in an amount equal to 
                        the deferred tax amount under paragraph (2)(A) 
                        for the property, or
                            ``(ii) the taxpayer otherwise establishes 
                        to the satisfaction of the Secretary that the 
                        security is adequate.
            ``(4) Waiver of certain rights.--No election may be made 
        under paragraph (1) unless the taxpayer consents to the waiver 
        of any right under any treaty of the United States which would 
        preclude assessment or collection of any tax imposed by reason 
        of this section.
            ``(5) Dispositions.--For purposes of this subsection, a 
        taxpayer making an election under this subsection with respect 
        to any property shall be treated as having disposed of such 
        property--
                    ``(A) immediately before death if such property is 
                held at such time, and
                    ``(B) at any time the security provided with 
                respect to the property fails to meet the requirements 
                of paragraph (3) and the taxpayer does not correct such 
                failure within the time specified by the Secretary.
            ``(6) Elections.--An election under paragraph (1) shall 
        only apply to property described in the election and, once 
        made, is irrevocable. An election may be under paragraph (1) 
        with respect to an interest in a trust with respect to which 
        gain is required to be recognized under subsection (f)(1).
    ``(c) Covered Expatriate.--For purposes of this section--
            ``(1) In general.--The term `covered expatriate' means an 
        expatriate--
                    ``(A) whose average annual net income tax (as 
                defined in section 38(c)(1)) for the period of 5 
                taxable years ending before the expatriation date is 
                greater than $100,000, or
                    ``(B) whose net worth as of such date is $500,000 
                or more.
        If the expatriation date is after 1996, such $100,000 and 
        $500,000 amounts shall be increased by an amount equal to such 
        dollar amount multiplied by the cost-of-living adjustment 
        determined under section 1(f)(3) for such calendar year by 
        substituting `1995' for `1992' in subparagraph (B) thereof. Any 
        increase under the preceding sentence shall be rounded to the 
        nearest multiple of $1,000.
            ``(2) Exceptions.--An individual shall not be treated as a 
        covered expatriate if--
                    ``(A) the individual--
                            ``(i) became at birth a citizen of the 
                        United States and a citizen of another country 
                        and, as of the expatriation date, continues to 
                        be a citizen of, and is taxed as a resident of, 
                        such other country, and
                            ``(ii) has been a resident of the United 
                        States (as defined in section 
                        7701(b)(1)(A)(ii)) for not more than 8 taxable 
                        years during the 15-taxable year period ending 
                        with the taxable year during which the 
                        expatriation date occurs, or
                    ``(B)(i) the individual's relinquishment of United 
                States citizenship occurs before such individual 
                attains age 18\1/2\, and
                    ``(ii) the individual has been a resident of the 
                United States (as so defined) for not more than 5 
                taxable years before the date of relinquishment.
    ``(d) Property to Which Section Applies.--For purposes of this 
section--
            ``(1) In general.--Except as otherwise provided by the 
        Secretary, this section shall apply to--
                    ``(A) any interest in property held by a covered 
                expatriate on the expatriation date the gain from which 
                would be includible in the gross income of the 
                expatriate if such interest had been sold for its fair 
                market value on such date in a transaction in which 
                gain is recognized in whole or in part, and
                    ``(B) any other interest in a trust to which 
                subsection (f) applies.
            ``(2) Exceptions.--This section shall not apply to the 
        following property:
                    ``(A) United states real property interests.--Any 
                United States real property interest (as defined in 
                section 897(c)(1)), other than stock of a United States 
                real property holding corporation which does not, on 
                the expatriation date, meet the requirements of section 
                897(c)(2).
                    ``(B) Interest in certain retirement plans.--
                            ``(i) In general.--Any interest in a 
                        qualified retirement plan (as defined in 
                        section 4974(c)), other than any interest 
                        attributable to contributions which are in 
                        excess of any limitation or which violate any 
                        condition for tax-favored treatment.
                            ``(ii) Foreign pension plans.--
                                    ``(I) In general.--Under 
                                regulations prescribed by the 
                                Secretary, interests in foreign pension 
                                plans or similar retirement 
                                arrangements or programs.
                                    ``(II) Limitation.--The value of 
                                property which is treated as not sold 
                                by reason of this subparagraph shall 
                                not exceed $500,000.
    ``(e) Definitions.--For purposes of this section--
            ``(1) Expatriate.--The term `expatriate' means--
                    ``(A) any United States citizen who relinquishes 
                his citizenship, or
                    ``(B) any long-term resident of the United States 
                who--
                            ``(i) ceases to be a lawful permanent 
                        resident of the United States (within the 
                        meaning of section 7701(b)(6)), or
                            ``(ii) commences to be treated as a 
                        resident of a foreign country under the 
                        provisions of a tax treaty between the United 
                        States and the foreign country and who does not 
                        waive the benefits of such treaty applicable to 
                        residents of the foreign country.
            ``(2) Expatriation date.--The term `expatriation date' 
        means--
                    ``(A) the date an individual relinquishes United 
                States citizenship, or
                    ``(B) in the case of a long-term resident of the 
                United States, the date of the event described in 
                clause (i) or (ii) of paragraph (1)(B).
            ``(3) Relinquishment of citizenship.--A citizen shall be 
        treated as relinquishing his United States citizenship on the 
        earliest of--
                    ``(A) the date the individual renounces his United 
                States nationality before a diplomatic or consular 
                officer of the United States pursuant to paragraph (5) 
                of section 349(a) of the Immigration and Nationality 
                Act (8 U.S.C. 1481(a)(5)),
                    ``(B) the date the individual furnishes to the 
                United States Department of State a signed statement of 
                voluntary relinquishment of United States nationality 
                confirming the performance of an act of expatriation 
                specified in paragraph (1), (2), (3), or (4) of section 
                349(a) of the Immigration and Nationality Act (8 U.S.C. 
                1481(a)(1)-(4)),
                    ``(C) the date the United States Department of 
                State issues to the individual a certificate of loss of 
                nationality, or
                    ``(D) the date a court of the United States cancels 
                a naturalized citizen's certificate of naturalization.
        Subparagraph (A) or (B) shall not apply to any individual 
        unless the renunciation or voluntary relinquishment is 
        subsequently approved by the issuance to the individual of a 
        certificate of loss of nationality by the United States 
        Department of State.
            ``(4) Long-term resident.--
                    ``(A) In general.--The term `long-term resident' 
                means any individual (other than a citizen of the 
                United States) who is a lawful permanent resident of 
                the United States in at least 8 taxable years during 
                the period of 15 taxable years ending with the taxable 
                year during which the expatriation date occurs. For 
                purposes of the preceding sentence, an individual shall 
                not be treated as a lawful permanent resident for any 
                taxable year if such individual is treated as a 
                resident of a foreign country for the taxable year 
                under the provisions of a tax treaty between the United 
                States and the foreign country and does not waive the 
                benefits of such treaty applicable to residents of the 
                foreign country.
                    ``(B) Special rule.--For purposes of subparagraph 
                (A), there shall not be taken into account--
                            ``(i) any taxable year during which any 
                        prior sale is treated under subsection (a)(1) 
                        as occurring, or
                            ``(ii) any taxable year prior to the 
                        taxable year referred to in clause (i).
    ``(f) Special Rules Applicable to Beneficiaries' Interests in 
Trust.--
            ``(1) In general.--Except as provided in paragraph (2), if 
        an individual is determined under paragraph (3) to hold an 
        interest in a trust--
                    ``(A) the individual shall not be treated as having 
                sold such interest,
                    ``(B) such interest shall be treated as a separate 
                share in the trust, and
                    ``(C)(i) such separate share shall be treated as a 
                separate trust consisting of the assets allocable to 
                such share,
                    ``(ii) the separate trust shall be treated as 
                having sold its assets immediately before the 
                expatriation date for their fair market value and as 
                having distributed all of its assets to the individual 
                as of such time, and
                    ``(iii) the individual shall be treated as having 
                recontributed the assets to the separate trust.
        Subsection (a)(2) shall apply to any income, gain, or loss of 
        the individual arising from a distribution described in 
        subparagraph (C)(ii).
            ``(2) Special rules for interests in qualified trusts.--
                    ``(A) In general.--If the trust interest described 
                in paragraph (1) is an interest in a qualified trust--
                            ``(i) paragraph (1) and subsection (a) 
                        shall not apply, and
                            ``(ii) in addition to any other tax imposed 
                        by this title, there is hereby imposed on each 
                        distribution with respect to such interest a 
                        tax in the amount determined under subparagraph 
                        (B).
                    ``(B) Amount of tax.--The amount of tax under 
                subparagraph (A)(ii) shall be equal to the lesser of--
                            ``(i) the highest rate of tax imposed by 
                        section 1(e) for the taxable year in which the 
                        expatriation date occurs, multiplied by the 
                        amount of the distribution, or
                            ``(ii) the balance in the deferred tax 
                        account immediately before the distribution 
                        determined without regard to any increases 
                        under subparagraph (C)(ii) after the 30th day 
                        preceding the distribution.
                    ``(C) Deferred tax account.--For purposes of 
                subparagraph (B)(ii)--
                            ``(i) Opening balance.--The opening balance 
                        in a deferred tax account with respect to any 
                        trust interest is an amount equal to the tax 
                        which would have been imposed on the allocable 
                        expatriation gain with respect to the trust 
                        interest if such gain had been included in 
                        gross income under subsection (a).
                            ``(ii) Increase for interest.--The balance 
                        in the deferred tax account shall be increased 
                        by the amount of interest determined (on the 
                        balance in the account at the time the interest 
                        accrues), for periods after the 90th day after 
                        the expatriation date, by using the rates and 
                        method applicable under section 6621 for 
                        underpayments of tax for such periods.
                            ``(iii) Decrease for taxes previously 
                        paid.--The balance in the tax deferred account 
                        shall be reduced--
                                    ``(I) by the amount of taxes 
                                imposed by subparagraph (A) on any 
                                distribution to the person holding the 
                                trust interest, and
                                    ``(II) in the case of a person 
                                holding a nonvested interest, to the 
                                extent provided in regulations, by the 
                                amount of taxes imposed by subparagraph 
                                (A) on distributions from the trust 
                                with respect to nonvested interests not 
                                held by such person.
                    ``(D) Allocable expatriation gain.--For purposes of 
                this paragraph, the allocable expatriation gain with 
                respect to any beneficiary's interest in a trust is the 
                amount of gain which would be allocable to such 
                beneficiary's vested and nonvested interests in the 
                trust if the beneficiary held directly all assets 
                allocable to such interests.
                    ``(E) Tax deducted and withheld.--
                            ``(i) In general.--The tax imposed by 
                        subparagraph (A)(ii) shall be deducted and 
                        withheld by the trustees from the distribution 
                        to which it relates.
                            ``(ii) Exception where failure to waive 
                        treaty rights.--If an amount may not be 
                        deducted and withheld under clause (i) by 
                        reason of the distributee failing to waive any 
                        treaty right with respect to such 
                        distribution--
                                    ``(I) the tax imposed by 
                                subparagraph (A)(ii) shall be imposed 
                                on the trust and each trustee shall be 
                                personally liable for the amount of 
                                such tax, and
                                    ``(II) any other beneficiary of the 
                                trust shall be entitled to recover from 
                                the distributee the amount of such tax 
                                imposed on the other beneficiary.
                    ``(F) Disposition.--If a trust ceases to be a 
                qualified trust at any time, a covered expatriate 
                disposes of an interest in a qualified trust, or a 
                covered expatriate holding an interest in a qualified 
                trust dies, then, in lieu of the tax imposed by 
                subparagraph (A)(ii), there is hereby imposed a tax 
                equal to the lesser of--
                            ``(i) the tax determined under paragraph 
                        (1) as if the expatriation date were the date 
                        of such cessation, disposition, or death, 
                        whichever is applicable, or
                            ``(ii) the balance in the tax deferred 
                        account immediately before such date.
                Such tax shall be imposed on the trust and each trustee 
                shall be personally liable for the amount of such tax 
                and any other beneficiary of the trust shall be 
                entitled to recover from the covered expatriate or the 
                estate the amount of such tax imposed on the other 
                beneficiary.
                    ``(G) Definitions and special rule.--For purposes 
                of this paragraph--
                            ``(i) Qualified trust.--The term `qualified 
                        trust' means a trust--
                                    ``(I) which is organized under, and 
                                governed by, the laws of the United 
                                States or a State, and
                                    ``(II) with respect to which the 
                                trust instrument requires that at least 
                                1 trustee of the trust be an individual 
                                citizen of the United States or a 
                                domestic corporation.
                            ``(ii) Vested interest.--The term `vested 
                        interest' means any interest which, as of the 
                        expatriation date, is vested in the 
                        beneficiary.
                            ``(iii) Nonvested interest.--The term 
                        `nonvested interest' means, with respect to any 
                        beneficiary, any interest in a trust which is 
                        not a vested interest. Such interest shall be 
                        determined by assuming the maximum exercise of 
                        discretion in favor of the beneficiary and the 
                        occurrence of all contingencies in favor of the 
                        beneficiary.
                            ``(iv) Adjustments.--The Secretary may 
                        provide for such adjustments to the bases of 
                        assets in a trust or a deferred tax account, 
                        and the timing of such adjustments, in order to 
                        ensure that gain is taxed only once.
            ``(3) Determination of beneficiaries' interest in trust.--
                    ``(A) Determinations under paragraph (1).--For 
                purposes of paragraph (1), a beneficiary's interest in 
                a trust shall be based upon all relevant facts and 
                circumstances, including the terms of the trust 
                instrument and any letter of wishes or similar 
                document, historical patterns of trust distributions, 
                and the existence of and functions performed by a trust 
                protector or any similar advisor.
                    ``(B) Other determinations.--For purposes of this 
                section--
                            ``(i) Constructive ownership.--If a 
                        beneficiary of a trust is a corporation, 
                        partnership, trust, or estate, the 
                        shareholders, partners, or beneficiaries shall 
                        be deemed to be the trust beneficiaries for 
                        purposes of this section.
                            ``(ii) Taxpayer return position.--A 
                        taxpayer shall clearly indicate on its income 
                        tax return--
                                    ``(I) the methodology used to 
                                determine that taxpayer's trust 
                                interest under this section, and
                                    ``(II) if the taxpayer knows (or 
                                has reason to know) that any other 
                                beneficiary of such trust is using a 
                                different methodology to determine such 
                                beneficiary's trust interest under this 
                                section.
    ``(g) Termination of Deferrals, Etc.--On the date any property held 
by an individual is treated as sold under subsection (a), 
notwithstanding any other provision of this title--
            ``(1) any period during which recognition of income or gain 
        is deferred shall terminate, and
            ``(2) any extension of time for payment of tax shall cease 
        to apply and the unpaid portion of such tax shall be due and 
        payable at the time and in the manner prescribed by the 
        Secretary.
    ``(h) Imposition of Tentative Tax.--
            ``(1) In general.--If an individual is required to include 
        any amount in gross income under subsection (a) for any taxable 
        year, there is hereby imposed, immediately before the 
        expatriation date, a tax in an amount equal to the amount of 
        tax which would be imposed if the taxable year were a short 
        taxable year ending on the expatriation date.
            ``(2) Due date.--The due date for any tax imposed by 
        paragraph (1) shall be the 90th day after the expatriation 
        date.
            ``(3) Treatment of tax.--Any tax paid under paragraph (1) 
        shall be treated as a payment of the tax imposed by this 
        chapter for the taxable year to which subsection (a) applies.
            ``(4) Deferral of tax.--The provisions of subsection (b) 
        shall apply to the tax imposed by this subsection to the extent 
        attributable to gain includible in gross income by reason of 
        this section.
    ``(i) Coordination With Estate and Gift Taxes.--If subsection (a) 
applies to property held by an individual for any taxable year and--
            ``(1) such property is includible in the gross estate of 
        such individual solely by reason of section 2107, or
            ``(2) section 2501 applies to a transfer of such property 
        by such individual solely by reason of section 2501(a)(3),
then there shall be allowed as a credit against the additional tax 
imposed by section 2101 or 2501, whichever is applicable, solely by 
reason of section 2107 or 2501(a)(3) an amount equal to the increase in 
the tax imposed by this chapter for such taxable year by reason of this 
section.
    ``(j) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section, including regulations--
            ``(1) to prevent double taxation by ensuring that--
                    ``(A) appropriate adjustments are made to basis to 
                reflect gain recognized by reason of subsection (a) and 
                the exclusion provided by subsection (a)(3), and
                    ``(B) any gain by reason of a deemed sale under 
                subsection (a) of an interest in a corporation, 
                partnership, trust, or estate is reduced to reflect 
                that portion of such gain which is attributable to an 
                interest in a trust which a shareholder, partner, or 
                beneficiary is treated as holding directly under 
                subsection (f)(3)(B)(i), and
            ``(2) which provide for the proper allocation of the 
        exclusion under subsection (a)(3) to property to which this 
        section applies.
    ``(k) Cross Reference.--

                                ``For income tax treatment of 
individuals who terminate United States citizenship, see section 
7701(a)(47).''.
    (b) Inclusion in Income of Gifts and Inheritances From Covered 
Expatriates.--Section 102 (relating to gifts, etc. not included in 
gross income) is amended by adding at the end the following new 
subsection:
    ``(d) Gifts and Inheritances From Covered Expatriates.--Subsection 
(a) shall not exclude from gross income the value of any property 
acquired by gift, bequest, devise, or inheritance from a covered 
expatriate after the expatriation date. For purposes of this 
subsection, any term used in this subsection which is also used in 
section 877A shall have the same meaning as when used in section 
877A.''.
    (c) Definition of Termination of United States Citizenship.--
Section 7701(a) is amended by adding at the end the following new 
paragraph:
            ``(47) Termination of united states citizenship.--An 
        individual shall not cease to be treated as a United States 
        citizen before the date on which the individual's citizenship 
        is treated as relinquished under section 877A(e)(3).''.
    (d) Conforming Amendments.--
            (1) Section 877 is amended by adding at the end the 
        following new subsection:
    ``(f) Application.--This section shall not apply to any individual 
who relinquishes (within the meaning of section 877A(e)(3)) United 
States citizenship on or after February 6, 1995.''.
            (2) Section 2107(c) is amended by adding at the end the 
        following new paragraph:
            ``(3) Cross reference.--For credit against the tax imposed 
        by subsection (a) for expatriation tax, see section 877A(i).''.
            (3) Section 2501(a)(3) is amended by adding at the end the 
        following new flush sentence:
        ``For credit against the tax imposed under this section by 
        reason of this paragraph, see section 877A(i).''.
            (4) Paragraph (10) of section 7701(b) is amended by adding 
        at the end the following new sentence: ``This paragraph shall 
        not apply to any long-term resident of the United States who is 
        an expatriate (as defined in section 877A(e)(1)).''.
    (e) Clerical Amendment.--The table of sections for subpart A of 
part II of subchapter N of chapter 1 is amended by inserting after the 
item relating to section 877 the following new item:

``Sec. 877A. Tax responsibilities of expatriation.''.
    (f) Effective Date.--
            (1) In general.--Except as provided in this subsection, the 
        amendments made by this section shall apply to expatriates 
        (within the meaning of section 877A(e) of the Internal Revenue 
        Code of 1986, as added by this section) whose expatriation date 
        (as so defined) occurs on or after February 6, 1995.
            (2) Gifts and bequests.--Section 102(d) of the Internal 
        Revenue Code of 1986 (as added by subsection (b)) shall apply 
        to amounts received from expatriates (as so defined) whose 
        expatriation date (as so defined) occurs on and after February 
        6, 1995.
            (3) Special rules relating to certain acts occurring before 
        february 6, 1995.--In the case of an individual who took an act 
        of expatriation specified in paragraph (1), (2), (3), or (4) of 
        section 349(a) of the Immigration and Nationality Act (8 U.S.C. 
        1481(a) (1)-(4)) before February 6, 1995, but whose 
        expatriation date (as so defined) occurs after February 6, 
        1995--
                    (A) the amendment made by subsection (c) shall not 
                apply,
                    (B) the amendment made by subsection (d)(1) shall 
                not apply for any period prior to the expatriation 
                date, and
                    (C) the other amendments made by this section shall 
                apply as of the expatriation date.
            (4) Due date for tentative tax.--The due date under section 
        877A(h)(2) of such Code shall in no event occur before the 90th 
        day after the date of the enactment of this Act.

SEC. 12442. INFORMATION ON INDIVIDUALS EXPATRIATING.

    (a) In General.--Subpart A of part III of subchapter A of chapter 
61 is amended by inserting after section 6039E the following new 
section:

``SEC. 6039F. INFORMATION ON INDIVIDUALS EXPATRIATING.

    ``(a) Requirement.--
            ``(1) In general.--Notwithstanding any other provision of 
        law, any expatriate (within the meaning of section 877A(e)(1)) 
        shall provide a statement which includes the information 
        described in subsection (b).
            ``(2) Timing.--
                    ``(A) Citizens.--In the case of an expatriate 
                described in section 877(e)(1)(A), such statement shall 
                be--
                            ``(i) provided not later than the 
                        expatriation date (within the meaning of 
                        section 877A(e)(2)), and
                            ``(ii) provided to the person or court 
                        referred to in section 877A(e)(3).
                    ``(B) Noncitizens.--In the case of an expatriate 
                described in section 877A(e)(1)(B), such statement 
                shall be provided to the Secretary with the return of 
                tax imposed by chapter 1 for the taxable year during 
                which the event described in such section occurs.
    ``(b) Information To Be Provided.--Information required under 
subsection (a) shall include--
            ``(1) the taxpayer's TIN,
            ``(2) the mailing address of such individual's principal 
        foreign residence,
            ``(3) the foreign country in which such individual is 
        residing,
            ``(4) the foreign country of which such individual is a 
        citizen,
            ``(5) in the case of an individual having a net worth of at 
        least the dollar amount applicable under section 877A(c)(1)(B), 
        information detailing the assets and liabilities of such 
        individual, and
            ``(6) such other information as the Secretary may 
        prescribe.
    ``(c) Penalty.--Any individual failing to provide a statement 
required under subsection (a) shall be subject to a penalty for each 
year during any portion of which such failure continues in an amount 
equal to the greater of--
            ``(1) 5 percent of the additional tax required to be paid 
        under section 877A for such year, or
            ``(2) $1,000,
unless it is shown that such failure is due to reasonable cause and not 
to willful neglect.
    ``(d) Information To Be Provided to Secretary.--Notwithstanding any 
other provision of law--
            ``(1) any Federal agency or court which collects (or is 
        required to collect) the statement under subsection (a) shall 
        provide to the Secretary--
                    ``(A) a copy of any such statement, and
                    ``(B) the name (and any other identifying 
                information) of any individual refusing to comply with 
                the provisions of subsection (a),
            ``(2) the Secretary of State shall provide to the Secretary 
        a copy of each certificate as to the loss of American 
        nationality under section 358 of the Immigration and 
        Nationality Act which is approved by the Secretary of State, 
        and
            ``(3) the Federal agency primarily responsible for 
        administering the immigration laws shall provide to the 
        Secretary the name of each lawful permanent resident of the 
        United States (within the meaning of section 7701(b)(6)) whose 
        status as such has been revoked or has been administratively or 
        judicially determined to have been abandoned.
Notwithstanding any other provision of law, not later than 30 days 
after the close of each calendar quarter, the Secretary shall publish 
in the Federal Register the name of each individual relinquishing 
United States citizenship (within the meaning of section 877A(e)(3)) 
with respect to whom the Secretary receives information under the 
preceding sentence during such quarter.
    ``(e) Exemption.--The Secretary may by regulations exempt any class 
of individuals from the requirements of this section if the Secretary 
determines that applying this section to such individuals is not 
necessary to carry out the purposes of this section.''.
    (b) Clerical Amendment.--The table of sections for such subpart A 
is amended by inserting after the item relating to section 6039E the 
following new item:

``Sec. 6039F. Information on individuals expatriating.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to individuals to whom section 877A of the Internal Revenue Code 
of 1986 applies and whose expatriation date (as defined in section 
877A(e)(2)) occurs on or after February 6, 1995, except that no 
statement shall be required by such amendments before the 90th day 
after the date of the enactment of this Act.

            Subtitle F--Taxpayer Bill of Rights 2 Provisions

SEC. 12501. EXPANSION OF AUTHORITY TO ABATE INTEREST.

    (a) General Rule.--Paragraph (1) of section 6404(e) (relating to 
abatement of interest in certain cases) is amended--
            (1) by inserting ``unreasonable'' before ``error'' each 
        place it appears in subparagraphs (A) and (B), and
            (2) by striking ``in performing a ministerial act'' each 
        place it appears and inserting ``in performing a ministerial or 
        managerial act''.
    (b) Clerical Amendment.--The subsection heading for subsection (e) 
of section 6404 is amended--
            (1) by striking ``Assessments'' and inserting 
        ``Abatement'', and
            (2) by inserting ``Unreasonable'' before ``Errors''.
    (c) Effective Date.--The amendments made by this section shall 
apply to interest accruing with respect to deficiencies or payments for 
taxable years beginning after the date of the enactment of this Act.

SEC. 12502. REVIEW OF IRS FAILURE TO ABATE INTEREST.

    (a) In General.--Section 6404 is amended by adding at the end the 
following new subsection:
    ``(g) Review of Denial of Request for Abatement of Interest.--The 
Tax Court shall have jurisdiction over any action brought by a taxpayer 
who meets the requirements referred to in section 7430(c)(4)(A)(iii) to 
determine whether the Secretary's failure to abate interest under this 
section was an abuse of discretion if such action is brought within 6 
months after the date of the Secretary's final determination not to 
abate such interest.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to requests for abatement after the date of the enactment of this Act.

SEC. 12503. JOINT RETURN MAY BE MADE AFTER SEPARATE RETURNS WITHOUT 
              FULL PAYMENT OF TAX.

    (a) General Rule.--Paragraph (2) of section 6013(b) (relating to 
limitations on filing of joint return after filing separate returns) is 
amended by striking subparagraph (A) and by redesignating subparagraphs 
(B) through (E) as subparagraphs (A) through (D), respectively.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 12504. MODIFICATIONS TO CERTAIN LEVY EXEMPTION AMOUNTS.

    (a) Fuel, Etc.--Paragraph (2) of section 6334(a) (relating to fuel, 
provisions, furniture, and personal effects exempt from levy) is 
amended--
            (1) by striking ``If the taxpayer is the head of a family, 
        so'' and inserting ``So'',
            (2) by striking ``his household'' and inserting ``the 
        taxpayer's household'', and
            (3) by striking ``$1,650 ($1,550 in the case of levies 
        issued during 1989)'' and inserting ``$2,500''.
    (b) Books, Etc.--Paragraph (3) of section 6334(a) (relating to 
books and tools of a trade, business, or profession) is amended by 
striking ``$1,100 ($1,050 in the case of levies issued during 1989)'' 
and inserting ``$1,250''.
    (c) Inflation Adjustment.--Section 6334 (relating to property 
exempt from levy) is amended by adding at the end the following new 
subsection:
    ``(f) Inflation Adjustment.--
            ``(1) In general.--In the case of any calendar year 
        beginning after 1996, each dollar amount referred to in 
        paragraphs (2) and (3) of subsection (a) shall be increased by 
        an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for such calendar year, by 
                substituting `calendar year 1995' for `calendar year 
                1992' in subparagraph (B) thereof.
            ``(2) Rounding.--If any dollar amount after being increased 
        under paragraph (1) is not a multiple of $10, such dollar 
        amount shall be rounded to the nearest multiple of $10.''.
    (d) Effective Date.--The amendments made by this section shall take 
effect with respect to levies issued after December 31, 1995.

SEC. 12505. OFFERS-IN-COMPROMISE.

    (a) Review Requirements.--Subsection (b) of section 7122 (relating 
to records) is amended by striking ``$500.'' and inserting ``$50,000. 
However, such compromise shall be subject to continuing quality review 
by the Secretary.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 12506. AWARD OF LITIGATION COSTS PERMITTED IN DECLARATORY JUDGMENT 
              PROCEEDINGS.

    (a) In General.--Subsection (b) of section 7430 is amended by 
striking paragraph (3) and by redesignating paragraph (4) as paragraph 
(3).
    (b) Effective Date.--The amendments made by this section shall 
apply with respect to proceedings commenced after the date of the 
enactment of this Act.

SEC. 12507. COURT DISCRETION TO REDUCE AWARD FOR LITIGATION COSTS FOR 
              FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES.

    (a) General Rule.--Paragraph (1) of section 7433(d) (relating to 
civil damages for certain unauthorized collection actions) is amended 
to read as follows:
            ``(1) Award for damages may be reduced if administrative 
        remedies not exhausted.--The amount of damages awarded under 
        subsection (b) may be reduced if the court determines that the 
        plaintiff has not exhausted the administrative remedies 
        available to such plaintiff within the Internal Revenue 
        Service.''.
    (b) Effective Date.--The amendment made by this section shall apply 
with respect to proceedings commenced after the date of the enactment 
of this Act.

SEC. 12508. ENROLLED AGENTS INCLUDED AS THIRD-PARTY RECORDKEEPERS.

    (a) In General.--Paragraph (3) of section 7609(a) (relating to 
third-party recordkeeper defined) is amended by striking ``and'' at the 
end of subparagraph (G), by striking the period at the end of 
subparagraph (H) and inserting ``; and'', and by adding at the end the 
following new subparagraph:
                    ``(I) any enrolled agent.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to summonses issued after the date of the enactment of this Act.

SEC. 12509. SAFEGUARDS RELATING TO DESIGNATED SUMMONSES.

    (a) Limitation on Persons to Whom Designated Summons May Be 
Issued.--Paragraph (1) of section 6503(k), as added by section 11311(a) 
of the Omnibus Budget Reconciliation Act of 1990, is amended by 
striking ``with respect to any return of tax by a corporation'' and 
inserting ``to a corporation (or to any other person to whom the 
corporation has transferred records) with respect to any return of tax 
by such corporation for a taxable year (or other period) for which such 
corporation is being examined under the coordinated examination program 
(or any successor program) of the Internal Revenue Service''.
    (b) Effective Date.--The amendment made by this section shall apply 
to summonses issued after the date of the enactment of this Act.

SEC. 12510. ANNUAL REMINDERS TO TAXPAYERS WITH OUTSTANDING DELINQUENT 
              ACCOUNTS.

    (a) In General.--Chapter 77 (relating to miscellaneous provisions) 
is amended by adding at the end the following new section:

``SEC. 7524. ANNUAL NOTICE OF TAX DELINQUENCY.

    ``Not less often than annually, the Secretary shall send a written 
notice to each taxpayer who has a tax delinquent account of the amount 
of the tax delinquency as of the date of the notice.''.
    (b) Clerical Amendment.--The table of sections for chapter 77 is 
amended by adding at the end the following new item:

``Sec. 7524. Annual notice of tax delinquency.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to calendar years after 1995.

       Subtitle G--Casualty and Involuntary Conversion Provisions

SEC. 12601. BASIS ADJUSTMENT TO PROPERTY HELD BY CORPORATION WHERE 
              STOCK IN CORPORATION IS REPLACEMENT PROPERTY UNDER 
              INVOLUNTARY CONVERSION RULES.

    (a) In General.--Subsection (b) of section 1033 is amended to read 
as follows:
    ``(b) Basis of Property Acquired Through Involuntary Conversion.--
            ``(1) Conversions described in subsection (a)(1).--If the 
        property was acquired as the result of a compulsory or 
        involuntary conversion described in subsection (a)(1), the 
        basis shall be the same as in the case of the property so 
        converted--
                    ``(A) decreased in the amount of any money received 
                by the taxpayer which was not expended in accordance 
                with the provisions of law (applicable to the year in 
                which such conversion was made) determining the taxable 
                status of the gain or loss upon such conversion, and
                    ``(B) increased in the amount of gain or decreased 
                in the amount of loss to the taxpayer recognized upon 
                such conversion under the law applicable to the year in 
                which such conversion was made.
            ``(2) Conversions described in subsection (a)(2).--In the 
        case of property purchased by the taxpayer in a transaction 
        described in subsection (a)(2) which resulted in the 
        nonrecognition of any part of the gain realized as the result 
        of a compulsory or involuntary conversion, the basis shall be 
        the cost of such property decreased in the amount of the gain 
        not so recognized; and if the property purchased consists of 
        more than 1 piece of property, the basis determined under this 
        sentence shall be allocated to the purchased properties in 
        proportion to their respective costs.
            ``(3) Property held by corporation the stock of which is 
        replacement property.--
                    ``(A) In general.--If the basis of stock in a 
                corporation is decreased under paragraph (2), an amount 
                equal to such decrease shall also be applied to reduce 
                the basis of property held by the corporation at the 
                time the taxpayer acquired control (as defined in 
                subsection (a)(2)(E)) of such corporation.
                    ``(B) Limitation.--Subparagraph (A) shall not apply 
                to the extent that it would (but for this subparagraph) 
                require a reduction in the aggregate adjusted bases of 
                the property of the corporation below the taxpayer's 
                adjusted basis of the stock in the corporation 
                (determined immediately after such basis is decreased 
                under paragraph (2)).
                    ``(C) Allocation of basis reduction.--The decrease 
                required under subparagraph (A) shall be allocated--
                            ``(i) first to property which is similar or 
                        related in service or use to the converted 
                        property,
                            ``(ii) second to depreciable property (as 
                        defined in section 1017(b)(3)(B)) not described 
                        in clause (i), and
                            ``(iii) then to other property.
                    ``(D) Special rules.--
                            ``(i) Reduction not to exceed adjusted 
                        basis of property.--No reduction in the basis 
                        of any property under this paragraph shall 
                        exceed the adjusted basis of such property 
                        (determined without regard to such reduction).
                            ``(ii) Allocation of reduction among 
                        properties.--If more than 1 property is 
                        described in a clause of subparagraph (C), the 
                        reduction under this paragraph shall be 
                        allocated among such property in proportion to 
                        the adjusted bases of such property (as so 
                        determined).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to involuntary conversions occurring after September 13, 1995.

SEC. 12602. EXPANSION OF REQUIREMENT THAT INVOLUNTARILY CONVERTED 
              PROPERTY BE REPLACED WITH PROPERTY ACQUIRED FROM AN 
              UNRELATED PERSON.

    (a) In General.--Subsection (i) of section 1033 is amended to read 
as follows:
    ``(i) Replacement Property Must Be Acquired From Unrelated Person 
in Certain Cases.--
            ``(1) In general.--If the property which is involuntarily 
        converted is held by a taxpayer to which this subsection 
        applies, subsection (a) shall not apply if the replacement 
        property or stock is acquired from a related person. The 
        preceding sentence shall not apply to the extent that the 
        related person acquired the replacement property or stock from 
        an unrelated person during the period applicable under 
        subsection (a)(2)(B).
            ``(2) Taxpayers to which subsection applies.--This 
        subsection shall apply to--
                    ``(A) a C corporation,
                    ``(B) a partnership in which 1 or more C 
                corporations own, directly or indirectly (determined in 
                accordance with section 707(b)(3)), more than 50 
                percent of the capital interest, or profits interest, 
                in such partnership at the time of the involuntary 
                conversion, and
                    ``(C) any other taxpayer if, with respect to 
                property which is involuntarily converted during the 
                taxable year, the aggregate of the amount of realized 
                gain on such property on which there is realized gain 
                exceeds $100,000.
        In the case of a partnership, subparagraph (C) shall apply with 
        respect to the partnership and with respect to each partner. A 
        similar rule shall apply in the case of an S corporation and 
        its shareholders.
            ``(3) Related person.--For purposes of this subsection, a 
        person is related to another person if the person bears a 
        relationship to the other person described in section 267(b) or 
        707(b)(1).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to involuntary conversions occurring after September 13, 1995.

SEC. 12603. SPECIAL RULE FOR CROP INSURANCE PROCEEDS AND DISASTER 
              PAYMENTS.

    (a) In General.--Section 451(d) (relating to special rule for crop 
insurance proceeds and disaster payments) is amended to read as 
follows:
    ``(d) Special Rule for Crop Insurance Proceeds and Disaster 
Payments.--
            ``(1) General rule.--In the case of any payment described 
        in paragraph (2), a taxpayer reporting on the cash receipts and 
        disbursements method of accounting--
                    ``(A) may elect to treat any such payment received 
                in the taxable year of destruction or damage of crops 
                as having been received in the following taxable year 
                if the taxpayer establishes that, under the taxpayer's 
                practice, income from such crops involved would have 
                been reported in a following taxable year, or
                    ``(B) may elect to treat any such payment received 
                in a taxable year following the taxable year of the 
                destruction or damage of crops as having been received 
                in the taxable year of destruction or damage, if the 
                taxpayer establishes that, under the taxpayer's 
                practice, income from such crops involved would have 
                been reported in the taxable year of destruction or 
                damage.
            ``(2) Payments described.--For purposes of this subsection, 
        a payment is described in this paragraph if such payment--
                    ``(A) is insurance proceeds received on account of 
                destruction or damage to crops, or
                    ``(B) is disaster assistance received under any 
                Federal law as a result of--
                            ``(i) destruction or damage to crops caused 
                        by drought, flood, or other natural disaster, 
                        or
                            ``(ii) inability to plant crops because of 
                        such a disaster.''.
    (b) Effective Date.--The amendment made by subsection (a) applies 
to payments received after December 31, 1992, as a result of 
destruction or damage occurring after such date.

SEC. 12604. APPLICATION OF INVOLUNTARY EXCLUSION RULES TO 
              PRESIDENTIALLY DECLARED DISASTERS.

    (a) In General.--Section 1033(h) is amended by redesignating 
paragraphs (2) and (3) as paragraphs (3) and (4) and by inserting after 
paragraph (1) the following new paragraph:
            ``(2) Trade or business and investment property.--If a 
        taxpayer's property held for productive use in a trade or 
        business or for investment is compulsorily or involuntarily 
        converted as a result of a Presidentially declared disaster, 
        tangible property of a type held for productive use in a trade 
        or business shall be treated for purposes of subsection (a) as 
        property similar or related in use to the property so 
        converted.''.
    (b) Conforming Amendments.--Section 1033(h) is amended--
            (1) by striking ``residence'' in paragraph (3) (as 
        redesignated by subsection (a)) and inserting ``property'',
            (2) by striking ``Principal Residences'' in the heading and 
        inserting ``Property'', and
            (3) by striking ``(1) In general.--'' and inserting ``(1) 
        Principal residences.--''.
    (c) Effective Date.--The amendments made by this section shall 
apply to disasters declared after December 31, 1994, in taxable years 
ending after such date.

        Subtitle H--Exempt Organizations and Charitable Reforms

SEC. 12701. COOPERATIVE SERVICE ORGANIZATIONS FOR CERTAIN FOUNDATIONS.

    (a) In General.--Section 501 (relating to exemption from tax on 
corporations, certain trusts, etc.) is amended by redesignating 
subsection (n) as subsection (o) and by inserting after subsection (m) 
the following new subsection:
    ``(n) Cooperative Service Organizations for Certain Foundations.--
            ``(1) In general.--For purposes of this title, if an 
        organization--
                    ``(A) is organized and operated solely for purposes 
                referred to in subsection (f)(1),
                    ``(B) is composed solely of members which are 
                exempt from taxation under subsection (a) and are--
                            ``(i) private foundations, or
                            ``(ii) community foundations as to which 
                        section 170(b)(1)(A)(vi) applies,
                    ``(C) has at least 20 members,
                    ``(D) does not at any time after the second taxable 
                year beginning after the date of its organization or, 
                if later, beginning after the date of the enactment of 
                this subsection, have a member which holds more than 10 
                percent (by value) of the interests in the 
                organization,
                    ``(E) is organized and controlled by its members 
                but is not controlled by any one member and does not 
                have a member which controls another member of the 
                organization, and
                    ``(F) permits members of the organization to 
                require the dismissal of any of the organization's 
                investment advisers, following reasonable notice, if 
                members holding a majority of interest in the account 
                managed by such adviser vote to remove such adviser,
        then such organization shall be treated as an organization 
        organized and operated exclusively for charitable purposes.
            ``(2) Treatment of income of members.--If any member of an 
        organization described in paragraph (1) is a private foundation 
        (other than an exempt operating foundation, as defined in 
        section 4940(d)), such private foundation's allocable share of 
        the capital gain net income and gross investment income of the 
        organization for any taxable year of the organization shall be 
        treated, for purposes of section 4940, as capital gain net 
        income and gross investment income of such private foundation 
        (whether or not distributed to such foundation) for the taxable 
        year of such private foundation with or within which the 
        taxable year of the organization described in paragraph (1) 
        ends (and such private foundation shall take into account its 
        allocable share of the deductions referred to in section 
        4940(c)(3) of the organization).
            ``(3) Applicable excise taxes.--Subchapter A of chapter 42 
        (other than sections 4940 and 4942) shall apply to any 
        organization described in paragraph (1).''.
    (b) Conforming Amendments.--
            (1) Section 4945(d) is amended by adding at the end the 
        following new flush sentence:
``Paragraph (4)(B) shall not apply to a grant to an organization 
described in section 501(n).''
            (2) Section 4942(g)(1)(A) is amended by inserting ``or an 
        organization described in section 501(n)'' after ``subsection 
        (j)(3))''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 1995.

SEC. 12702. EXCLUSION FROM UNRELATED BUSINESS TAXABLE INCOME FOR 
              CERTAIN SPONSORSHIP PAYMENTS.

    (a) In General.--Section 513 (relating to unrelated trade or 
business income) is amended by adding at the end the following new 
subsection:
    ``(i) Treatment of Certain Sponsorship Payments.--
            ``(1) In general.--The term `unrelated trade or business' 
        does not include the activity of soliciting and receiving 
        qualified sponsorship payments.
            ``(2) Qualified sponsorship payments.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `qualified sponsorship 
                payment' means any payment made by any person engaged 
                in a trade or business with respect to which there is 
                no arrangement or expectation that such person will 
                receive any substantial return benefit other than the 
                use or acknowledgement of the name or logo (or product 
                lines) of such person's trade or business in connection 
                with the activities of the organization that receives 
                such payment. Such a use or acknowledgement does not 
                include advertising such person's products or services 
                (including messages containing qualitative or 
                comparative language, price information or other 
                indications of savings or value, an endorsement, or an 
                inducement to purchase, sell, or use such products or 
                services).
                    ``(B) Limitations.--
                            ``(i) Contingent payments.--The term 
                        `qualified sponsorship payment' does not 
                        include any payment if the amount of such 
                        payment is contingent upon the level of 
                        attendance at one or more events, broadcast 
                        ratings, or other factors indicating the degree 
                        of public exposure to one or more events.
                            ``(ii) Acknowledgements or advertising in 
                        periodicals.--The term `qualified sponsorship 
                        payment' does not include any payment which 
                        entitles the payor to an acknowledgement or 
                        advertising in regularly scheduled and printed 
                        material that is not related to and primarily 
                        distributed in connection with a specific event 
                        conducted by the payee organization.
            ``(3) Allocation of portions of single payment.--For 
        purposes of this subsection, to the extent that a portion of a 
        payment would (if made as a separate payment) be a qualified 
        sponsorship payment, such portion of such payment and the other 
        portion of such payment shall be treated as separate 
        payments.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to payments solicited or received after December 31, 1995.

SEC. 12703. TREATMENT OF DUES PAID TO AGRICULTURAL OR HORTICULTURAL 
              ORGANIZATIONS.

    (a) General Rule.--Section 512 (defining unrelated business taxable 
income) is amended by adding at the end the following new subsection:
    ``(d) Treatment of Dues of Agricultural or Horticultural 
Organizations.--
            ``(1) In general.--If--
                    ``(A) an agricultural or horticultural organization 
                described in section 501(c)(5) requires annual dues to 
                be paid in order to be a member of such organization, 
                and
                    ``(B) the amount of such required annual dues does 
                not exceed $100,
        in no event shall any portion of such dues be treated as 
        derived by such organization from an unrelated trade or 
        business by reason of any benefits or privileges to which 
        members of such organization are entitled.
            ``(2) Indexation of $100 amount.--In the case of any 
        taxable year beginning in a calendar year after 1995, the $100 
        amount in paragraph (1) shall be increased by an amount equal 
        to--
                    ``(A) $100, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, by substituting `calendar year 
                1994' for `calendar year 1992' in subparagraph (B) 
                thereof.
            ``(3) Dues.--For purposes of this subsection, the term 
        `dues' means any payment required to be made in order to be 
        recognized by the organization as a member of the 
        organization.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1994.

SEC. 12704. REPEAL OF CREDIT FOR CONTRIBUTIONS TO COMMUNITY DEVELOPMENT 
              CORPORATIONS.

    (a) In General.--Section 13311 of the Revenue Reconciliation Act of 
1993 (relating to credit for contributions to certain community 
development corporations) is hereby repealed.
    (b) Effective Date.--The amendment made by this section shall apply 
to contributions made after the date of the enactment of this Act 
(other than contributions made pursuant to a legally enforceable 
agreement which is effect on the date of the enactment of this Act).

SEC. 12705. CLARIFICATION OF TREATMENT OF QUALIFIED FOOTBALL COACHES 
              PLANS.

    (a) In General.--Subparagraph (F) of section 3(37) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1002(37)(F)) is 
amended by redesignating clause (ii) as clause (iii) and by inserting 
after clause (i) the following new clause:
                    ``(ii) For purposes of the Internal Revenue Code of 
                1986--
                            ``(I) clause (i) shall apply, and
                            ``(II) a qualified football coaches plan 
                        shall be treated as a multiemployer 
                        collectively bargained plan.''.
    (b) Imposition of Excise Tax.--
            (1) In general.--For purposes of reinstatement as a 
        qualified football coaches plan under the Internal Revenue Code 
        of 1986, there is hereby imposed on the cash or deferred 
        arrangement maintained by an organization described in section 
        501(c)(6) of such Code, an excise tax equal to $25,000, to be 
        paid in the first plan year of the arrangement beginning after 
        the date of the enactment of this Act.
            (2) Application of certain rules.--For purposes of the 
        Internal Revenue Code of 1986, the tax imposed under paragraph 
        (1) shall be treated as a tax imposed under subtitle D of such 
        Code.
    (c) Effective Date.--The amendments made by subsection (a) shall 
apply to years beginning after December 22, 1987.

              Subtitle I--Tax Reform and Other Provisions

              CHAPTER 1--PROVISIONS RELATING TO BUSINESSES

SEC. 12801. TAX TREATMENT OF CERTAIN EXTRAORDINARY DIVIDENDS.

    (a) Treatment of Extraordinary Dividends in Excess of Basis.--
Paragraph (2) of section 1059(a) (relating to corporate shareholder's 
basis in stock reduced by nontaxed portion of extraordinary dividends) 
is amended to read as follows:
            ``(2) Amounts in excess of basis.--If the nontaxed portion 
        of such dividends exceeds such basis, such excess shall be 
        treated as gain from the sale or exchange of such stock for the 
        taxable year in which the extraordinary dividend is 
        received.''.
    (b) Treatment of Redemptions Where Options Involved.--Paragraph (1) 
of section 1059(e) (relating to treatment of partial liquidations and 
non-pro rata redemptions) is amended to read as follows:
            ``(1) Treatment of partial liquidations and certain 
        redemptions.--Except as otherwise provided in regulations--
                    ``(A) Redemptions.--In the case of any redemption 
                of stock--
                            ``(i) which is part of a partial 
                        liquidation (within the meaning of section 
                        302(e)) of the redeeming corporation,
                            ``(ii) which is not pro rata as to all 
                        shareholders, or
                            ``(iii) which would not have been treated 
                        (in whole or in part) as a dividend if any 
                        options had not been taken into account under 
                        section 318(a)(4),
                any amount treated as a dividend with respect to such 
                redemption shall be treated as an extraordinary 
                dividend to which paragraphs (1) and (2) of subsection 
                (a) apply without regard to the period the taxpayer 
                held such stock. In the case of a redemption described 
                in clause (iii), only the basis in the stock redeemed 
                shall be taken into account under subsection (a).
                    ``(B) Reorganizations, etc.--An exchange described 
                in section 356(a)(1) which is treated as a dividend 
                under section 356(a)(2) shall be treated as a 
                redemption of stock for purposes of applying 
                subparagraph (A).''.
    (c) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to distributions after May 3, 1995.
            (2) Transition rule.--The amendments made by this section 
        shall not apply to any distribution made pursuant to the terms 
        of a written binding contract in effect on May 3, 1995, and at 
        all times thereafter before such distribution.
            (3) Certain dividends not pursuant to certain 
        redemptions.--In determining whether the amendment made by 
        subsection (a) applies to any extraordinary dividend other than 
        a dividend treated as an extraordinary dividend under section 
        1059(e)(1) of the Internal Revenue Code of 1986 (as amended by 
        this Act), paragraphs (1) and (2) shall be applied by 
        substituting ``September 13, 1995'' for ``May 3, 1995''.

SEC. 12802. REGISTRATION OF CONFIDENTIAL CORPORATE TAX SHELTERS.

    (a) In General.--Section 6111 (relating to registration of tax 
shelters) is amended by redesignating subsections (d) and (e) as 
subsections (e) and (f), respectively, and by inserting after 
subsection (c) the following new subsection:
    ``(d) Certain Confidential Arrangements Treated as Tax Shelters.--
            ``(1) In general.--For purposes of this section, the term 
        `tax shelter' includes any entity, plan, arrangement, or 
        transaction--
                    ``(A) a significant purpose of the structure of 
                which is the avoidance or evasion of Federal income tax 
                for a participant which is a corporation,
                    ``(B) which is offered to any potential participant 
                under conditions of confidentiality, and
                    ``(C) for which the tax shelter promoters may 
                receive fees in excess of $100,000 in the aggregate.
            ``(2) Conditions of confidentiality.--For purposes of 
        paragraph (1)(B), an offer is under conditions of 
        confidentiality if--
                    ``(A) the potential participant to whom the offer 
                is made (or any other person acting on behalf of such 
                participant) has an understanding or agreement with or 
                for the benefit of any promoter of the tax shelter that 
                such participant (or other person) will limit 
                disclosure of the tax shelter or any significant tax 
                features of the tax shelter, or
                    ``(B) any promoter of the tax shelter--
                            ``(i) claims, knows, or has reason to know,
                            ``(ii) knows or has reason to know that any 
                        other person (other than the potential 
                        participant) claims, or
                            ``(iii) causes another person to claim,
                that the tax shelter (or any aspect thereof) is 
                proprietary to any person other than the potential 
                participant or is otherwise protected from disclosure 
                to or use by others.
        For purposes of this subsection, the term `promoter' means any 
        person or any related person (within the meaning of section 267 
        or 707) who participates in the organization, management, or 
        sale of the tax shelter.
            ``(3) Persons other than promoter required to register in 
        certain cases.--
                    ``(A) In general.--If--
                            ``(i) the requirements of subsection (a) 
                        are not met with respect to any tax shelter (as 
                        defined in paragraph (1)) by any tax shelter 
                        promoter, and
                            ``(ii) no tax shelter promoter is a United 
                        States person,
                then each United States person who discussed 
                participation in such shelter shall register such 
                shelter under subsection (a).
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to a United States person who discussed participation 
                in a tax shelter if--
                            ``(i) such person notified the promoter in 
                        writing (not later than the close of the 
                        seventh day after the day on which such 
                        discussions began) that such person would not 
                        participate in such shelter, and
                            ``(ii) such person does not participate in 
                        such shelter.
            ``(4) Offer to participate treated as offer for sale.--For 
        purposes of subsections (a) and (b), an offer to participate in 
        a tax shelter (as defined in paragraph (1)) shall be treated as 
        an offer for sale.''.
    (b) Penalty.--Subsection (a) of section 6707 (relating to failure 
to furnish information regarding tax shelters) is amended by adding at 
the end the following new paragraph:
            ``(3) Confidential arrangements.--
                    ``(A) In general.--In the case of a tax shelter (as 
                defined in section 6111(d)), the penalty imposed under 
                paragraph (1) shall be an amount equal to the greater 
                of--
                            ``(i) 50 percent of the fees paid to any 
                        promoter of the tax shelter with respect to 
                        offerings made before the date such shelter is 
                        registered under section 6111, or
                            ``(ii) $10,000.
                Clause (i) shall be applied by substituting `75 
                percent' for `50 percent' in the case of an intentional 
                failure or act described in paragraph (1).
                    ``(B) Special rule for participants required to 
                register shelter.--In the case of a person required to 
                register such a tax shelter by reason of section 
                6111(d)(3)--
                            ``(i) such person shall be required to pay 
                        the penalty under paragraph (1) only if such 
                        person actually participated in such shelter,
                            ``(ii) the amount of such penalty shall be 
                        determined by taking into account under 
                        subparagraph (A)(i) only the fees paid by such 
                        person, and
                            ``(iii) such penalty shall be in addition 
                        to the penalty imposed on any other person for 
                        failing to register such shelter.''.
    (c) Conforming Amendments.--
            (1) Paragraph (2) of section 6707(a) is amended by striking 
        ``The penalty'' and inserting ``Except as provided in paragraph 
        (3), the penalty''.
            (2) Subparagraph (A) of section 6707(a)(1) is amended by 
        striking ``paragraph (2)'' and inserting ``paragraph (2) or 
        (3), as the case may be''.
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to any tax shelter (as defined in section 6111(d) of the 
        Internal Revenue Code of 1986, as amended by this section) 
        interests in which are offered to potential participants after 
        the date of the enactment of this Act.
            (2) Due date for registration.--The due date for 
        registering any tax shelter required to be registered by reason 
        of the amendments made by this section shall be not earlier 
        than the close of a reasonable period after the Secretary of 
        the Treasury prescribes guidance with respect to meeting such 
        requirements.

SEC. 12803. DENIAL OF DEDUCTION FOR INTEREST ON LOANS WITH RESPECT TO 
              COMPANY-OWNED INSURANCE.

    (a) In General.--Paragraph (4) of section 264(a) is amended--
            (1) by inserting ``, or any endowment or annuity contracts 
        owned by the taxpayer covering any individual,'' after ``the 
        life of any individual'', and
            (2) by striking all that follows ``carried on by the 
        taxpayer'' and inserting a period.
    (b) Exception for Contracts Relating to Key Persons; Permissible 
Interest Rates.--Section 264 is amended--
            (1) by striking ``Any'' in subsection (a)(4) and inserting 
        ``Except as provided in subsection (d), any'', and
            (2) by adding at the end the following new subsection:
    ``(d) Special Rules For Application of Subsection (a)(4).--
            ``(1) Exception for key persons.--Subsection (a)(4) shall 
        not apply to any interest paid or accrued on any indebtedness 
        with respect to policies or contracts covering an individual 
        who is a key person to the extent that the aggregate amount of 
        such indebtedness with respect to policies and contracts 
        covering such individual does not exceed $50,000.
            ``(2) Interest rate cap on key persons and pre-1986 
        contracts.--No deduction shall be allowed by reason of 
        paragraph (1) or the last sentence of subsection (a) with 
        respect to interest paid or accrued for any month to the extent 
        the amount of such interest exceeds the amount which would have 
        been determined if the rate of interest for such month were the 
        rate of interest described as Moody's Corporate Bond Yield 
        Average-Monthly Average Corporates as published by Moody's 
        Investors Service, Inc., or any successor thereto, for such 
        month.
            ``(3) Key person.--For purposes of paragraph (1), the term 
        `key person' means an officer or 20-percent owner, except that 
        the number of individuals who may be treated as key persons 
        with respect to any taxpayer shall not exceed the greater of--
                    ``(A) 5 individuals, or
                    ``(B) the lesser of 5 percent of the total officers 
                and employees of the taxpayer or 25 individuals.
            ``(4) 20-percent owner.--For purposes of this subsection, 
        the term `20-percent owner' means--
                    ``(A) if the taxpayer is a corporation, any person 
                who owns directly 20 percent or more of the outstanding 
                stock of the corporation or stock possessing 20 percent 
                or more of the total combined voting power of all stock 
                of the corporation, or
                    ``(B) if the taxpayer is not a corporation, any 
                person who owns 20 percent or more of the capital or 
                profits interest in the employer.
            ``(5) Aggregation rules.--
                    ``(A) In general.--For purposes of paragraph (4)(A) 
                and applying the $50,000 limitation in paragraph (1)--
                            ``(i) all members of a controlled group 
                        shall be treated as 1 taxpayer, and
                            ``(ii) such limitation shall be allocated 
                        among the members of such group in such manner 
                        as the Secretary may prescribe.
                    ``(B) Controlled group.--For purposes of this 
                paragraph, all persons treated as a single employer 
                under subsection (a) or (b) of section 52 or subsection 
                (m) or (o) of section 414 shall be treated as members 
                of a controlled group.''.
    (c) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to interest paid or accrued after December 31, 1995.
            (2) Transition rule for existing indebtedness.--
                    (A) In general.--In the case of indebtedness 
                incurred before January 1, 1996, the amendments made by 
                this section shall not apply to qualified interest paid 
                or accrued on such indebtedness after October 13, 1995, 
                and before January 1, 2001.
                    (B) Qualified interest.--For purposes of 
                subparagraph (A), the qualified interest with respect 
                to any indebtedness for any month is the amount of 
                interest which would be paid or accrued for such month 
                on such indebtedness if the lesser of the following 
                rates of interest were used for such month:
                            (i) The rate of interest specified under 
                        the terms of the indebtedness as in effect on 
                        October 13, 1995 (and without regard to 
                        modification of such terms after such date).
                            (ii) The applicable percentage rate of 
                        interest described as Moody's Corporate Bond 
                        Yield Average-Monthly Average Corporates as 
                        published by Moody's Investors Service, Inc., 
                        or any successor thereto, for such month.
                    (C) Applicable percentage.--For purposes of 
                subparagraph (B), the applicable percentage is as 
                follows:

        ``For calendar year:
                                                     The percentage is:
                1995 or 1996.........................  100 percent     
                1997.................................   95 percent     
                1998.................................   90 percent     
                1999.................................   85 percent     
                2000................................. 80 percent.''    
            (3) Special rule for grandfathered contracts.--This section 
        shall not apply to any contract purchased on or before June 20, 
        1986, except that--
                    (A) paragraph (2) shall apply to interest on 
                indebtedness incurred in connection with such contract 
                which is paid or accrued after October 13, 1995, and 
                before January 1, 1996, and
                    (B) section 264(d)(2) of the Internal Revenue Code 
                of 1986 (as added by subsection (b)) shall apply to 
                such interest paid or accrued after December 31, 1995.
    (d) Spread of Income Inclusion on Surrender, Etc. of Contracts.--
            (1) In general.--If any amount is received under any life 
        insurance policy or endowment or annuity contract described in 
        paragraph (4) of section 264(a) of the Internal Revenue Code of 
        1986--
                    (A) on the complete surrender, redemption, or 
                maturity of such policy or contract during calendar 
                year 1996, 1997, 1998, 1999, 2000, or 2001, or
                    (B) in full discharge during any such calendar year 
                of the obligation under the policy or contract which is 
                in the nature of a refund of the consideration paid for 
                the policy or contract,
        then (in lieu of any other inclusion in gross income) such 
        amount shall be includible in gross income ratably over the 4-
        taxable year period beginning with the taxable year such amount 
        would (but for this paragraph) be includible. The preceding 
        sentence shall only apply to the extent the amount is 
        includible in gross income for the taxable year in which the 
        event described in subparagraph (A) or (B) occurs.
            (2) Special rules for applying section 264.--A contract 
        shall not be treated as failing--
                    (A) to meet the requirement of section 264(c)(1) of 
                the Internal Revenue Code of 1986, or
                    (B) to be treated as a single premium contract 
                under section 264(b)(1) of such Code,
        solely by reason of an occurrence described in subparagraph (A) 
        or (B) of paragraph (1) of this subsection or solely by reason 
        of no additional premiums being received under the contract by 
        reason of a lapse occurring after October 13, 1995.
            (3) Special rule for deferred acquisition costs.--In the 
        case of the occurrence of any event described in subparagraph 
        (A) or (B) of paragraph (1) of this subsection with respect to 
        any policy or contract--
                    (A) section 848 of the Internal Revenue Code of 
                1986 shall not apply to the unamortized balance (if 
                any) of the specified policy acquisition expenses 
                attributable to such policy or contract immediately 
                before the insurance company's taxable year in which 
                such event occurs, and
                    (B) there shall be allowed as a deduction to such 
                company for such taxable year under chapter 1 of such 
                Code an amount equal to such unamortized balance.

SEC. 12804. TERMINATION OF SUSPENSE ACCOUNTS FOR FAMILY CORPORATIONS 
              REQUIRED TO USE ACCRUAL METHOD OF ACCOUNTING.

    (a) In General.--Subsection (i) of section 447 (relating to method 
of accounting for corporations engaged in farming) is amended by adding 
at the end the following new paragraph:
            ``(7) Termination.--
                    ``(A) In general.--No suspense account may be 
                established under this subsection by any corporation 
                required by this section to change its method of 
                accounting for any taxable year ending after September 
                13, 1995.
                    ``(B) 20-year phaseout of existing suspense 
                accounts.--Each suspense account under this subsection 
                shall be reduced (but not below zero) for each of the 
                first 20 taxable years beginning after September 13, 
                1995, by an amount equal to the applicable portion of 
                such account. Any reduction in a suspense account under 
                this paragraph shall be included in gross income for 
                the taxable year of the reduction. The amount of the 
                reduction required under this paragraph for any taxable 
                year shall be reduced (but not below zero) by the 
                amount of any reduction required for such taxable year 
                under any other provision of this subsection.
                    ``(C) Applicable portion.--For purposes of 
                subparagraph (B), the term `applicable portion' means, 
                for any taxable year, the amount which would ratably 
                reduce the amount in the account (after taking into 
                account prior reductions) to zero over the period 
                consisting of such taxable year and the remaining 
                taxable years in such first 20 taxable years.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years ending after September 13, 1995.

SEC. 12805. TERMINATION OF PUERTO RICO AND POSSESSION TAX CREDIT.

    (a) In General.--Section 936 is amended by adding at the end the 
following new subsection:
    ``(j) Termination.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, this section shall not apply to any taxable year 
        beginning after December 31, 1995.
            ``(2) Transition rules for active business income credit.--
                    ``(A) In general.--In the case of an existing 
                credit claimant with respect to a possession, the 
                credit determined under subsection (a)(1)(A) for that 
                possession shall be allowed for taxable years beginning 
                after December 31, 1995, and before January 1, 2002.
                    ``(B) Phasedown of reduced credit.--
                            ``(i) In general.--In the case of an 
                        existing credit claimant to which subsection 
                        (a)(4)(B) applies, the applicable percentage 
                        under clause (ii) thereof shall be reduced by--
                                    ``(I) 10 percentage points for 
                                taxable years beginning in 1999,
                                    ``(II) 20 percentage points for 
                                taxable years beginning in 2000, and
                                    ``(III) 30 percentage points for 
                                taxable years beginning in 2001.
                            ``(ii) Reduction not taken into account for 
                        local tax deduction.--The reduction under 
                        clause (i) shall not be taken into account for 
                        purposes of the last sentence of subsection 
                        (a)(4)(B)(i).
                            ``(iii) Election irrevocable after 1997.--
                        An election under subsection (a)(4)(B)(iii) 
                        which is in effect for the taxpayer's last 
                        taxable year beginning before 1997 may not be 
                        revoked unless it is revoked for the taxpayer's 
                        first taxable year beginning in 1997 and all 
                        subsequent taxable years.
            ``(3) Restrictions on qualified possession source 
        investment income.--
                    ``(A) In general.--In the case of an existing 
                credit claimant with respect to a possession, the 
                credit determined under subsection (a)(1)(B) for that 
                possession shall be allowed for taxable years beginning 
                after December 31, 1995, and before January 1, 2001, 
                except that only qualified possession source investment 
                income derived from a qualifying asset may be taken 
                into account in computing the amount of such credit.
                    ``(B) Qualifying asset.--For purposes of 
                subparagraph (A)--
                            ``(i) In general.--The term `qualifying 
                        asset' means--
                                    ``(I) an asset held by the 
                                possession corporation on October 13, 
                                1995, or
                                    ``(II) an asset which was purchased 
                                from the proceeds of an asset described 
                                in subclause (I) or this subclause.
                            ``(ii) Restriction on reinvestment.--An 
                        asset shall not be treated as a qualifying 
                        asset under clause (i) with respect to income 
                        derived from such asset for periods after the 
                        date on which the existing credit claimant has 
                        held such asset (and all prior assets the 
                        proceeds of which have been rolled into such 
                        asset) for the shortest period which results in 
                        the maximum reduction of possession taxes under 
                        the laws of the possession in effect on October 
                        13, 1995.
            ``(4) Special rules for certain possessions.--
                    ``(A) In general.--In the case of an existing 
                credit claimant with respect to an applicable 
                possession, this section (other than the preceding 
                paragraphs of this subsection) shall apply to taxable 
                years beginning after December 31, 1995, and before 
                January 1, 2006.
                    ``(B) Applicable possession.--For purposes of this 
                paragraph, the term `applicable possession' means Guam, 
                American Samoa, and the Commonwealth of the Northern 
                Mariana Islands.
            ``(5) Existing credit claimant.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `existing credit 
                claimant' means, with respect to any possession, a 
                corporation--
                            ``(i) which was actively conducting a trade 
                        or business in that possession on October 13, 
                        1995, and
                            ``(ii) with respect to which an election 
                        under this section was in effect for the 
                        corporation's taxable year which includes 
                        October 13, 1995.
                    ``(B) New lines of business prohibited.--If, after 
                October 13, 1995, a corporation which would (but for 
                this subparagraph) be an existing credit claimant with 
                respect to a possession adds a substantial new line of 
                business with respect to a trade or business conducted 
                in that possession, such corporation shall cease to be 
                treated as an existing credit claimant with respect to 
                that possession as of the close of the taxable year 
                ending before the date of such addition.
                    ``(C) Binding contract exception.--If, on October 
                13, 1995, and at all times thereafter, there is in 
                effect with respect to a corporation a binding contract 
                for the acquisition of assets to be used in, or for the 
                sale of assets to be produced from, a trade or business 
                within a possession, the corporation shall be treated 
                for purposes of this paragraph as actively conducting 
                such trade or business on October 13, 1995. The 
                preceding sentence shall not apply if such trade or 
                business is not actively conducted before January 1, 
                1996.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1995.

SEC. 12806. DEPRECIATION UNDER INCOME FORECAST METHOD.

    (a) General Rule.--Section 167 (relating to depreciation) is 
amended by redesignating subsection (g) as subsection (h) and by 
inserting after subsection (f) the following new subsection:
    ``(g) Depreciation Under Income Forecast Method.--
            ``(1) In general.--If the depreciation deduction allowable 
        under this section to any taxpayer with respect to any property 
        is determined under the income forecast method or any similar 
        method--
                    ``(A) in determining the amount of the depreciation 
                deduction under such method, the estimated income from 
                the property shall include all income earned in 
                connection with the property before the close of the 
                10th taxable year following the taxable year in which 
                the property was placed in service,
                    ``(B) the adjusted basis of the property shall only 
                include amounts with respect to which the requirements 
                of section 461(h) are satisfied,
                    ``(C) the depreciation deduction under such method 
                for the 10th taxable year beginning after the taxable 
                year in which the property was placed in service shall 
                be equal to the adjusted basis of such property as of 
                the beginning of such 10th taxable year, and
                    ``(D) such taxpayer shall pay (or be entitled to 
                receive) interest computed under the look-back method 
                of paragraph (2) for any recomputation year.
            ``(2) Look-back method.--The interest computed under the 
        look-back method of this paragraph for any recomputation year 
        shall be determined by--
                    ``(A) first determining the depreciation deductions 
                under this section with respect to such property which 
                would have been allowable for prior taxable years if 
                the determination of the amounts so allowable had been 
                made on the basis of the sum of the following (instead 
                of the estimated income with respect to such 
                property)--
                            ``(i) the actual income from such property 
                        for periods before the close of the 
                        recomputation year, and
                            ``(ii) an estimate of the future income 
                        with respect to such property for periods after 
                        the recomputation year,
                    ``(B) second, determining (solely for purposes of 
                computing such interest) the overpayment or 
                underpayment of tax for each such prior taxable year 
                which would result solely from the application of 
                subparagraph (A), and
                    ``(C) then using the adjusted overpayment rate (as 
                defined in section 460(b)(7)), compounded daily, on the 
                overpayment or underpayment determined under 
                subparagraph (B).
        For purposes of the preceding sentence, any cost incurred after 
        the property is placed in service (which is not treated as a 
        separate property under paragraph (5)) shall be taken into 
        account by discounting (using the Federal mid-term rate 
        determined under section 1274(d) as of the time such cost is 
        incurred) such cost to its value as of the date the property is 
        placed in service. The taxpayer may elect with respect to any 
        property to have the preceding sentence not apply to such 
        property.
            ``(3) Exception from look-back method.--Paragraph (1)(D) 
        shall not apply with respect to any property which, when placed 
        in service by the taxpayer, had a basis of $100,000 or less.
            ``(4) Recomputation year.--For purposes of this subsection, 
        except as provided in regulations, the term `recomputation 
        year' means, with respect to any property, the third and the 
        10th taxable years beginning after the taxable year in which 
        the property was placed in service, unless the actual income 
        from the property for the period before the close of such third 
        or 10th taxable year is within 10 percent of the estimated 
        income from the property for such period which was taken into 
        account under paragraph (1)(A).
            ``(5) Special rules.--
                    ``(A) Certain costs treated as separate property.--
                For purposes of this subsection, the following costs 
                shall be treated as separate properties:
                            ``(i) Any costs incurred with respect to 
                        any property after the 10th taxable year 
                        beginning after the taxable year in which the 
                        property was placed in service.
                            ``(ii) Any costs incurred after the 
                        property is placed in service and before the 
                        close of such 10th taxable year if such costs 
                        are significant and give rise to a significant 
                        increase in the income from the property which 
                        was not included in the estimated income from 
                        the property.
                    ``(B) Syndication income from television series.--
                In the case of property which is an episode in a 
                television series, income from syndicating such series 
                shall not be required to be taken into account under 
                this subsection before the earlier of--
                            ``(i) the 4th taxable year beginning after 
                        the date the first episode in such series is 
                        placed in service, or
                            ``(ii) the earliest taxable year in which 
                        the taxpayer has an arrangement relating to the 
                        future syndication of such series.
                    ``(C) Collection of interest.--For purposes of 
                subtitle F (other than sections 6654 and 6655), any 
                interest required to be paid by the taxpayer under 
                paragraph (1) for any recomputation year shall be 
                treated as an increase in the tax imposed by this 
                chapter for such year.
                    ``(D) Determinations.--For purposes of this 
                subsection, determinations of the amount of income from 
                any property shall be determined in the same manner as 
                for purposes of applying the income forecast method; 
                except that any income from the disposition of such 
                property shall be taken into account.
                    ``(E) Treatment of pass-thru entities.--Rules 
                similar to the rules of section 460(b)(4) shall apply 
                for purposes of this subsection.''.
    (b) Effective Date.--
            (1) In general.--The amendment made by subsection (a) shall 
        apply to property placed in service after September 13, 1995.
            (2) Binding contracts.--The amendment made by subsection 
        (a) shall not apply to any property produced or acquired by the 
        taxpayer pursuant to a written contract which was binding on 
        September 13, 1995, and at all times thereafter before such 
        production or acquisition.

SEC. 12807. REPEAL OF EXCLUSION FOR INTEREST ON LOANS USED TO ACQUIRE 
              EMPLOYER SECURITIES.

    (a) In General.--Section 133 (relating to interest on certain loans 
used to acquire employer securities) is hereby repealed.
    (b) Conforming Amendments.--
            (1) Subparagraph (B) of section 291(e)(1) is amended by 
        striking clause (iv) and by redesignating clause (v) as clause 
        (iv).
            (2) Section 812 is amended by striking subsection (g).
            (3) Paragraph (5) of section 852(b) is amended by striking 
        subparagraph (C).
            (4) Paragraph (2) of section 4978(b) is amended by striking 
        subparagraph (A) and all that follows and inserting the 
        following:
                    ``(A) first from qualified securities to which 
                section 1042 applied acquired during the 3-year period 
                ending on the date of the disposition, beginning with 
                the securities first so acquired, and
                    ``(B) then from any other employer securities.
        If subsection (d) applies to a disposition, the disposition 
        shall be treated as made from employer securities in the 
        opposite order of the preceding sentence.''.
            (5)(A) Section 4978B (relating to tax on disposition of 
        employer securities to which section 133 applied) is hereby 
        repealed.
            (B) The table of sections for chapter 43 is amended by 
        striking the item relating to section 4978B.
            (6) Subsection (e) of section 6047 is amended by striking 
        paragraphs (1), (2), and (3) and inserting the following new 
        paragraphs:
            ``(1) any employer maintaining, or the plan administrator 
        (within the meaning of section 414(g)) of, an employee stock 
        ownership plan which holds stock with respect to which section 
        404(k) applies to dividends paid on such stock, or
            ``(2) both such employer or plan administrator,''.
            (7) Subsection (f) of section 7872 is amended by striking 
        paragraph (12).
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to loans made after October 13, 1995.
            (2) Refinancings.--The amendments made by this section 
        shall not apply to loans made after October 13, 1995, to 
        refinance securities acquisition loans (determined without 
        regard to section 133(b)(1)(B) of the Internal Revenue Code of 
        1986, as in effect on the day before the date of the enactment 
        of this Act) made on or before such date or to refinance loans 
        described in this paragraph if--
                    (A) the refinancing loans meet the requirements of 
                section 133 of such Code (as so in effect),
                    (B) immediately after the refinancing the principal 
                amount of the loan resulting from the refinancing does 
                not exceed the principal amount of the refinanced loan 
                (immediately before the refinancing), and
                    (C) the term of such refinancing loan does not 
                extend beyond the last day of the term of the original 
                securities acquisition loan.
        For purposes of this paragraph, the term ``securities 
        acquisition loan'' includes a loan from a corporation to an 
        employee stock ownership plan described in section 133(b)(3) of 
        such Code (as so in effect).

                        CHAPTER 2--LEGAL REFORMS

SEC. 12811. REPEAL OF EXCLUSION FOR PUNITIVE DAMAGES AND FOR DAMAGES 
              NOT ATTRIBUTABLE TO PHYSICAL INJURIES OR SICKNESS.

    (a) In General.--Paragraph (2) of section 104(a) (relating to 
compensation for injuries or sickness) is amended to read as follows:
            ``(2) the amount of any damages (other than punitive 
        damages) received (whether by suit or agreement and whether as 
        lump sums or as periodic payments) on account of personal 
        physical injuries or physical sickness;''.
    (b) Emotional Distress as Such Treated as Not Physical Injury or 
Physical Sickness.--Section 104(a) is amended by striking the last 
sentence and inserting the following new sentence: ``For purposes of 
paragraph (2), emotional distress shall not be treated as a physical 
injury or physical sickness. The preceding sentence shall not apply to 
an amount of damages not in excess of the amount paid for medical care 
(described in subparagraph (A) or (B) of section 213(d)(1)) 
attributable to emotional distress.''.
    (c) Special Rule for States in Which Only Punitive Damages May Be 
Awarded in Wrongful Death Actions.--Section 104 is amended by 
redesignating subsection (c) as subsection (d) and by inserting after 
the subsection (b) the following new subsection:
    ``(c) Restriction on Punitive Damages Not to Apply in Certain 
Cases.--The restriction on the application of subsection (a)(2) to 
punitive damages shall not apply to punitive damages awarded in a civil 
action--
            ``(1) which is a wrongful death action, and
            ``(2) with respect to which applicable State law (as in 
        effect on September 13, 1995 and without regard to any 
        modification after such date) provides, or has been construed 
        to provide by a court of competent jurisdiction pursuant to a 
        decision issued on or before September 13, 1995, that only 
        punitive damages may be awarded in such an action.
This subsection shall cease to apply to any civil action filed on or 
after the first date on which the applicable State law ceases to 
provide (or is no longer construed to provide) the treatment described 
in paragraph (2).''
    (d) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to amounts received 
        after December 31, 1995, in taxable years ending after such 
        date.
            (2) Exception.--The amendments made by this section shall 
        not apply to any amount received under a written binding 
        agreement, court decree, or mediation award in effect on (or 
        issued on or before) September 13, 1995.

SEC. 12812. REPORTING OF CERTAIN PAYMENTS MADE TO ATTORNEYS.

    (a) In General.--Section 6045 (relating to returns of brokers) is 
amended by adding at the end the following new subsection:
    ``(f) Return Required in the Case of Payments to Attorneys.--
            ``(1) In general.--Any person engaged in a trade or 
        business and making a payment (in the course of such trade or 
        business) to which this subsection applies shall file a return 
        under subsection (a) and a statement under subsection (b) with 
        respect to such payment.
            ``(2) Application of subsection.--
                    ``(A) In general.--This subsection shall apply to 
                any payment to an attorney in connection with legal 
                services (whether or not such services are performed 
                for the payor).
                    ``(B) Exception.--This subsection shall not apply 
                to the portion of any payment which is required to be 
                reported under section 6041(a) (or would be so required 
                but for the dollar limitation contained therein) or 
                section 6051.''.
    (b) Reporting of Attorneys' Fees Payable to Corporations.--The 
regulations providing an exception under section 6041 of the Internal 
Revenue Code of 1986 for payments made to corporations shall not apply 
to payments of attorneys' fees.
    (c) Effective Date.--The amendment made by this section shall apply 
to payments made after December 31, 1995.

        CHAPTER 3--REFORMS RELATING TO NONRECOGNITION PROVISIONS

SEC. 12821. NO ROLLOVER OR EXCLUSION OF GAIN ON SALE OF PRINCIPAL 
              RESIDENCE WHICH IS ATTRIBUTABLE TO DEPRECIATION 
              DEDUCTIONS.

    (a) In General.--Subsection (d) of section 1034 (relating to 
limitations) is amended by adding at the end the following new 
paragraph:
            ``(3) Recognition of gain attributable to depreciation.--
        Subsection (a) shall not apply to so much of the gain from the 
        sale of any residence as does not exceed the portion of the 
        depreciation adjustments (as defined in section 1250(b)(3)) 
        attributable to periods after December 31, 1995, in respect of 
        such residence.''.
    (b) Comparable Treatment Under 1-Time Exclusion of Gain on Sale of 
Principal Residence.--Subsection (d) of section 121 is amended by 
adding at the end the following new paragraph:
            ``(10) Recognition of gain attributable to depreciation.--
                    ``(A) In general.--Subsection (a) shall not apply 
                to so much of the gain from the sale of any property as 
                does not exceed the portion of the depreciation 
                adjustments (as defined in section 1250(b)(3)) 
                attributable to periods after December 31, 1995, in 
                respect of such property.
                    ``(B) Coordination with paragraph (5).--If this 
                section does not apply to gain attributable to a 
                portion of a residence by reason of paragraph (5), 
                subparagraph (A) shall not apply to depreciation 
                adjustments attributable to such portion.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 1995.

SEC. 12822. NONRECOGNITION OF GAIN ON SALE OF PRINCIPAL RESIDENCE BY 
              NONCITIZENS LIMITED TO NEW RESIDENCES LOCATED IN THE 
              UNITED STATES.

    (a) In General.--Subsection (d) of section 1034 (relating to 
limitations) (as amended by section 12821) is amended by adding at the 
end the following new paragraph:
            ``(4) New residence must be located in united states in 
        certain cases.--
                    ``(A) In general.--In the case of a sale of an old 
                residence by a taxpayer--
                            ``(i) who is not a citizen of the United 
                        States at the time of sale, and
                            ``(ii) who is not a citizen or resident of 
                        the United States on the date which is 2 years 
                        after the date of the sale of such old 
                        residence,
                subsection (a) shall apply only if the new residence is 
                located in the United States or a possession of the 
                United States.
                    ``(B) Property held jointly by husband and wife.--
                Subparagraph (A) shall not apply if--
                            ``(i) the old residence is held by a 
                        husband and wife as joint tenants, tenants by 
                        the entirety, or community property,
                            ``(ii) such husband and wife make a joint 
                        return for the taxable year of the sale or 
                        exchange, and
                            ``(iii) one spouse is a citizen of the 
                        United States at the time of sale.''.
    (b) Effective Date.--
            (1) In general.--The amendment made by this section shall 
        apply to sales of old residences after December 31, 1995.
            (2) Treatment of purchases of new residences.--The 
        amendment made by this section shall not apply to new 
        residences--
                    (A) purchased before September 13, 1995, or
                    (B) purchased on or after such date pursuant to a 
                binding contract in effect on such date and at all 
                times thereafter before such purchase.
            (3) Certain rules to apply.--For purposes of this 
        subsection, the rules of paragraphs (1), (2), and (3) of 
        section 1034(c) of the Internal Revenue Code of 1986 shall 
        apply.

          CHAPTER 4--EXCISE TAX AND TAX-EXEMPT BOND PROVISIONS

SEC. 12831. REPEAL OF DIESEL FUEL TAX REBATE TO PURCHASERS OF DIESEL-
              POWERED AUTOMOBILES AND LIGHT TRUCKS.

    (a) In General.--Section 6427 (relating to fuels not used for 
taxable purposes) is amended by striking subsection (g).
    (b) Conforming Amendments.--
            (1) Paragraph (3) of section 34(a) is amended to read as 
        follows:
            ``(3) under section 6427 with respect to fuels used for 
        nontaxable purposes or resold during the taxable year 
        (determined without regard to section 6427(k)).''.
            (2) Paragraphs (1) and (2)(A) of section 6427(i) are each 
        amended--
                    (A) by striking ``(g),'', and
                    (B) by striking ``(or a qualified diesel powered 
                highway vehicle purchased)'' each place it appears.
    (c) Effective Date.--The amendments made by this section shall 
apply to vehicles purchased after December 31, 1995.

SEC. 12832. REPEAL OF WINE AND FLAVORS CONTENT CREDIT.

    (a) In General.--Section 5010 (relating to credit for wine content 
and for flavors content) is repealed.
    (b) Effective Date.--The repeal made by this section shall take 
effect with respect to distilled spirits (as defined in section 
5002(a)(8) of the Internal Revenue Code of 1986) removed from bonded 
premises (as defined in section 5002(a)(3) of such Code) after December 
31, 1995.

SEC. 12833. MODIFICATIONS TO EXCISE TAX ON OZONE-DEPLETING CHEMICALS.

    (a) In General.--Section 4682(d)(1) (relating to recycling) is 
amended by inserting ``(including any halon imported from any country 
which is a signatory to the Montreal Protocol on Substances that 
Deplete the Ozone Layer)'' after ``ozone-depleting chemical''.
    (b) Certification System.--The Secretary of the Treasury, after 
consultation with the Administrator of the Environmental Protection 
Agency, shall develop a certification system to ensure compliance with 
the recycling requirement for imported halon under section 4682(d)(1) 
of the Internal Revenue Code of 1986, as amended by subsection (a).
    (c) Effective Date.--The amendment made by subsection (a) shall 
take effect on the date of the enactment of this Act.

SEC. 12834. ELECTION TO AVOID TAX-EXEMPT BOND PENALTIES FOR LOCAL 
              FURNISHERS OF ELECTRICITY AND GAS.

    Section 142(f) (relating to local furnishing of electric energy or 
gas) is amended by adding at the end the following new paragraphs:
            ``(3) Election to avoid penalties for certain furnishers.--
                    ``(A) In general.--If--
                            ``(i) the principal user of facilities for 
                        the local furnishing of electric energy or gas 
                        financed such facilities in whole or in part 
                        with exempt facility bonds described in 
                        subsection (a)(8) issued before the date of the 
                        enactment of this paragraph,
                            ``(ii) such bonds would (but for this 
                        paragraph) cease to be tax-exempt by reason of 
                        such user failing to meet the local furnishing 
                        requirement of such section as a result of a 
                        service area expansion by such user, and
                            ``(iii) an election described in 
                        subparagraph (B) is made by such user with 
                        respect to all such facilities of the user,
                then such bonds shall not cease to be tax-exempt by 
                reason of such expansion (and section 150(b)(4) shall 
                not apply to interest on such bonds).
                    ``(B) Election.--An election is described in this 
                subparagraph if it is an election made in such manner 
                as the Secretary prescribes, and such user agrees 
                that--
                            ``(i) no bonds exempt from tax under 
                        section 103 may be issued on or after the date 
                        of the enactment of this paragraph with respect 
                        to the facilities or any other facilities with 
                        respect to which such user is a principal user,
                            ``(ii) the expansion of the service area--
                                    ``(I) is not financed with the 
                                proceeds of any exempt facility bond 
                                described in subsection (a)(8), and
                                    ``(II) is not treated as a 
                                nonqualifying use under the rules of 
                                paragraph (2), and
                            ``(iii) all outstanding bonds used to 
                        finance the facilities are redeemed not later 
                        than 6 months after the later of--
                                    ``(I) the earliest date on which 
                                such bonds may be redeemed, or
                                    ``(II) the date of the agreement.
                    ``(C) Principal user.--For purposes of this 
                paragraph, the term `principal user' means any person 
                or a group of related persons (within the meaning of 
                section 144(a)(3)) which includes such person.
            ``(4) Application of section.--For purposes of this 
        section, no person may qualify as a local furnisher of electric 
        energy or gas unless such person is such a local furnisher on 
        the date of the enactment of this paragraph.''.

SEC. 12835. TAX-EXEMPT BONDS FOR SALE OF ALASKA POWER ADMINISTRATION 
              FACILITY.

    Sections 142(f)(4) (as added by section 12834(a)) and 147(d) of the 
Internal Revenue Code of 1986 shall not apply with respect to any 
private activity bond issued after the date of the enactment of this 
Act and used to finance the acquisition of the Snettisham hydroelectric 
project from the Alaska Power Administration in determining if such 
bond is a qualified bond for purposes of such Code.

                CHAPTER 5--FOREIGN TRUST TAX COMPLIANCE

SEC. 12841. IMPROVED INFORMATION REPORTING ON FOREIGN TRUSTS.

    (a) In General.--Section 6048 (relating to returns as to certain 
foreign trusts) is amended to read as follows:

``SEC. 6048. INFORMATION WITH RESPECT TO CERTAIN FOREIGN TRUSTS.

    ``(a) Notice of Certain Events.--
            ``(1) General rule.--On or before the 90th day (or such 
        later day as the Secretary may prescribe) after any reportable 
        event, the responsible party shall provide written notice of 
        such event to the Secretary in accordance with paragraph (2).
            ``(2) Contents of notice.--The notice required by paragraph 
        (1) shall contain such information as the Secretary may 
        prescribe, including--
                    ``(A) the amount of money or other property (if 
                any) transferred to the trust in connection with the 
                reportable event, and
                    ``(B) the identity of the trust and of each trustee 
                and beneficiary (or class of beneficiaries) of the 
                trust.
            ``(3) Reportable event.--For purposes of this subsection--
                    ``(A) In general.--The term `reportable event' 
                means--
                            ``(i) the creation of any foreign trust by 
                        a United States person,
                            ``(ii) the transfer of any money or 
                        property (directly or indirectly) to a foreign 
                        trust by a United States person, including a 
                        transfer by reason of death, and
                            ``(iii) the death of a citizen or resident 
                        of the United States if--
                                    ``(I) the decedent was treated as 
                                the owner of any portion of a foreign 
                                trust under the rules of subpart E of 
                                part I of subchapter J of chapter 1, or
                                    ``(II) any portion of a foreign 
                                trust was included in the gross estate 
                                of the decedent.
                    ``(B) Exceptions.--
                            ``(i) Fair market value sales.--
                        Subparagraph (A)(ii) shall not apply to any 
                        transfer of property to a trust in exchange for 
                        consideration of at least the fair market value 
                        of the transferred property. For purposes of 
                        the preceding sentence, consideration other 
                        than cash shall be taken into account at its 
                        fair market value and the rules of section 
                        679(a)(3) shall apply.
                            ``(ii) Pension and charitable trusts.--
                        Subparagraph (A) shall not apply with respect 
                        to a trust which is--
                                    ``(I) described in section 
                                404(a)(4) or 404A, or
                                    ``(II) determined by the Secretary 
                                to be described in section 501(c)(3).
            ``(4) Responsible party.--For purposes of this subsection, 
        the term `responsible party' means--
                    ``(A) the grantor in the case of the creation of an 
                inter vivos trust,
                    ``(B) the transferor in the case of a reportable 
                event described in paragraph (3)(A)(ii) other than a 
                transfer by reason of death, and
                    ``(C) the executor of the decedent's estate in any 
                other case.
    ``(b) United States Grantor of Foreign Trust.--
            ``(1) In general.--If, at any time during any taxable year 
        of a United States person, such person is treated as the owner 
        of any portion of a foreign trust under the rules of subpart E 
        of part I of subchapter J of chapter 1, such person shall be 
        responsible to ensure that--
                    ``(A) such trust makes a return for such year which 
                sets forth a full and complete accounting of all trust 
                activities and operations for the year, the name of the 
                United States agent for such trust, and such other 
                information as the Secretary may prescribe, and
                    ``(B) such trust furnishes such information as the 
                Secretary may prescribe to each United States person 
                (i) who is treated as the owner of any portion of such 
                trust or (ii) who receives (directly or indirectly) any 
                distribution from the trust.
            ``(2) Trusts not having united states agent.--
                    ``(A) In general.--If the rules of this paragraph 
                apply to any foreign trust, the determination of 
                amounts required to be taken into account with respect 
                to such trust by a United States person under the rules 
                of subpart E of part I of subchapter J of chapter 1 
                shall be determined by the Secretary in the Secretary's 
                sole discretion from the Secretary's own knowledge or 
                from such information as the Secretary may obtain 
                through testimony or otherwise.
                    ``(B) United states agent required.--The rules of 
                this paragraph shall apply to any foreign trust to 
                which paragraph (1) applies unless such trust agrees 
                (in such manner, subject to such conditions, and at 
                such time as the Secretary shall prescribe) to 
                authorize a United States person to act as such trust's 
                limited agent solely for purposes of applying sections 
                7602, 7603, and 7604 with respect to--
                            ``(i) any request by the Secretary to 
                        examine records or produce testimony related to 
                        the proper treatment of amounts required to be 
                        taken into account under the rules referred to 
                        in subparagraph (A), or
                            ``(ii) any summons by the Secretary for 
                        such records or testimony.
                The appearance of persons or production of records by 
                reason of a United States person being such an agent 
                shall not subject such persons or records to legal 
                process for any purpose other than determining the 
                correct treatment under this title of the amounts 
                required to be taken into account under the rules 
                referred to in subparagraph (A). A foreign trust which 
                appoints an agent described in this subparagraph shall 
                not be considered to have an office or a permanent 
                establishment in the United States, or to be engaged in 
                a trade or business in the United States, solely 
                because of the activities of such agent pursuant to 
                this subsection.
                    ``(C) Other rules to apply.--Rules similar to the 
                rules of paragraphs (2) and (4) of section 6038A(e) 
                shall apply for purposes of this paragraph.
    ``(c) Reporting by United States Beneficiaries of Foreign Trusts.--
            ``(1) In general.--If any United States person receives 
        (directly or indirectly) during any taxable year of such person 
        any distribution from a foreign trust, such person shall make a 
        return with respect to such trust for such year which 
        includes--
                    ``(A) the name of such trust,
                    ``(B) the aggregate amount of the distributions so 
                received from such trust during such taxable year, and
                    ``(C) such other information as the Secretary may 
                prescribe.
            ``(2) Inclusion in income if records not provided.--If 
        adequate records are not provided to the Secretary to determine 
        the proper treatment of any distribution from a foreign trust, 
        such distribution shall be treated as an accumulation 
        distribution includible in the gross income of the distributee 
        under chapter 1. To the extent provided in regulations, the 
        preceding sentence shall not apply if the foreign trust elects 
        to be subject to rules similar to the rules of subsection 
        (b)(2)(B).
    ``(d) Special Rules.--
            ``(1) Determination of whether united states person 
        receives distribution.--For purposes of this section, in 
        determining whether a United States person receives a 
        distribution from a foreign trust, the fact that a portion of 
        such trust is treated as owned by another person under the 
        rules of subpart E of part I of subchapter J of chapter 1 shall 
        be disregarded.
            ``(2) Domestic trusts with foreign activities.--To the 
        extent provided in regulations, a trust which is a United 
        States person shall be treated as a foreign trust for purposes 
        of this section and section 6677 if such trust has substantial 
        activities, or holds substantial property, outside the United 
        States.
            ``(3) Time and manner of filing information.--Any notice or 
        return required under this section shall be made at such time 
        and in such manner as the Secretary shall prescribe.
            ``(4) Modification of return requirements.--The Secretary 
        is authorized to suspend or modify any requirement of this 
        section if the Secretary determines that the United States has 
        no significant tax interest in obtaining the required 
        information.''.
    (b) Increased Penalties.--Section 6677 (relating to failure to file 
information returns with respect to certain foreign trusts) is amended 
to read as follows:

``SEC. 6677. FAILURE TO FILE INFORMATION WITH RESPECT TO CERTAIN 
              FOREIGN TRUSTS.

    ``(a) Civil Penalty.--In addition to any criminal penalty provided 
by law, if any notice or return required to be filed by section 6048--
            ``(1) is not filed on or before the time provided in such 
        section, or
            ``(2) does not include all the information required 
        pursuant to such section or includes incorrect information,
the person required to file such notice or return shall pay a penalty 
equal to 35 percent of the gross reportable amount. If any failure 
described in the preceding sentence continues for more than 90 days 
after the day on which the Secretary mails notice of such failure to 
the person required to pay such penalty, such person shall pay a 
penalty (in addition to the amount determined under the preceding 
sentence) of $10,000 for each 30-day period (or fraction thereof) 
during which such failure continues after the expiration of such 90-day 
period. In no event shall the penalty under this subsection with 
respect to any failure exceed the gross reportable amount.
    ``(b) Special Rules for Returns Under Section 6048(b).--In the case 
of a return required under section 6048(b)--
            ``(1) the United States person referred to in such section 
        shall be liable for the penalty imposed by subsection (a), and
            ``(2) subsection (a) shall be applied by substituting `5 
        percent' for `35 percent'.
    ``(c) Gross Reportable Amount.--For purposes of subsection (a), the 
term `gross reportable amount' means--
            ``(1) the gross value of the property involved in the event 
        (determined as of the date of the event) in the case of a 
        failure relating to section 6048(a),
            ``(2) the gross value of the portion of the trust's assets 
        at the close of the year treated as owned by the United States 
        person in the case of a failure relating to section 6048(b)(1), 
        and
            ``(3) the gross amount of the distributions in the case of 
        a failure relating to section 6048(c).
    ``(d) Reasonable Cause Exception.--No penalty shall be imposed by 
this section on any failure which is shown to be due to reasonable 
cause and not due to willful neglect. The fact that a foreign 
jurisdiction would impose a civil or criminal penalty on the taxpayer 
(or any other person) for disclosing the required information is not 
reasonable cause.
    ``(e) Deficiency Procedures Not To Apply.--Subchapter B of chapter 
63 (relating to deficiency procedures for income, estate, gift, and 
certain excise taxes) shall not apply in respect of the assessment or 
collection of any penalty imposed by subsection (a).''.
    (c) Conforming Amendments.--
            (1) Paragraph (2) of section 6724(d), as amended by section 
        12203, is amended by striking ``or'' at the end of subparagraph 
        (U), by striking the period at the end of subparagraph (V) and 
        inserting ``, or'', and by inserting after subparagraph (V) the 
        following new subparagraph:
                    ``(W) section 6048(b)(1)(B) (relating to foreign 
                trust reporting requirements).''.
            (2) The table of sections for subpart B of part III of 
        subchapter A of chapter 61 is amended by striking the item 
        relating to section 6048 and inserting the following new item:

``Sec. 6048. Information with respect to certain foreign trusts.''.
            (3) The table of sections for part I of subchapter B of 
        chapter 68 is amended by striking the item relating to section 
        6677 and inserting the following new item:

``Sec. 6677. Failure to file information with respect to certain 
                            foreign trusts.''.
    (d) Effective Dates.--
            (1) Reportable events.--To the extent related to subsection 
        (a) of section 6048 of the Internal Revenue Code of 1986, as 
        amended by this section, the amendments made by this section 
        shall apply to reportable events (as defined in such section 
        6048) occurring after the date of the enactment of this Act.
            (2) Grantor trust reporting.--To the extent related to 
        subsection (b) of such section 6048, the amendments made by 
        this section shall apply to taxable years of United States 
        persons beginning after the date of the enactment of this Act.
            (3) Reporting by united states beneficiaries.--To the 
        extent related to subsection (c) of such section 6048, the 
        amendments made by this section shall apply to distributions 
        received after the date of the enactment of this Act.

SEC. 12842. MODIFICATIONS OF RULES RELATING TO FOREIGN TRUSTS HAVING 
              ONE OR MORE UNITED STATES BENEFICIARIES.

    (a) Treatment of Trust Obligations, Etc.--
            (1) Paragraph (2) of section 679(a) is amended by striking 
        subparagraph (B) and inserting the following:
                    ``(B) Transfers at fair market value.--To any 
                transfer of property to a trust in exchange for 
                consideration of at least the fair market value of the 
                transferred property. For purposes of the preceding 
                sentence, consideration other than cash shall be taken 
                into account at its fair market value.''.
            (2) Subsection (a) of section 679 (relating to foreign 
        trusts having one or more United States beneficiaries) is 
        amended by adding at the end the following new paragraph:
            ``(3) Certain obligations not taken into account under fair 
        market value exception.--
                    ``(A) In general.--In determining whether paragraph 
                (2)(B) applies to any transfer by a person described in 
                clause (ii) or (iii) of subparagraph (C), there shall 
                not be taken into account--
                            ``(i) except as provided in regulations, 
                        any obligation of a person described in 
                        subparagraph (C), and
                            ``(ii) to the extent provided in 
                        regulations, any obligation which is guaranteed 
                        by a person described in subparagraph (C).
                    ``(B) Treatment of principal payments on 
                obligation.--Principal payments by the trust on any 
                obligation referred to in subparagraph (A) shall be 
                taken into account on and after the date of the payment 
                in determining the portion of the trust attributable to 
                the property transferred.
                    ``(C) Persons described.--The persons described in 
                this subparagraph are--
                            ``(i) the trust,
                            ``(ii) any grantor or beneficiary of the 
                        trust, and
                            ``(iii) any person who is related (within 
                        the meaning of section 643(i)(2)(B)) to any 
                        grantor or beneficiary of the trust.''.
    (b) Exemption of Transfers to Charitable Trusts.--Subsection (a) of 
section 679 is amended by striking ``section 404(a)(4) or 404A'' and 
inserting ``section 6048(a)(3)(B)(ii)''.
    (c) Other Modifications.--Subsection (a) of section 679 is amended 
by adding at the end the following new paragraphs:
            ``(4) Special rules applicable to foreign grantor who later 
        becomes a united states person.--
                    ``(A) In general.--If a nonresident alien 
                individual has a residency starting date within 5 years 
                after directly or indirectly transferring property to a 
                foreign trust, this section and section 6048 shall be 
                applied as if such individual transferred to such trust 
                on the residency starting date an amount equal to the 
                portion of such trust attributable to the property 
                transferred by such individual to such trust in such 
                transfer.
                    ``(B) Treatment of undistributed income.--For 
                purposes of this section, undistributed net income for 
                periods before such individual's residency starting 
                date shall be taken into account in determining the 
                portion of the trust which is attributable to property 
                transferred by such individual to such trust but shall 
                not otherwise be taken into account.
                    ``(C) Residency starting date.--For purposes of 
                this paragraph, an individual's residency starting date 
                is the residency starting date determined under section 
                7701(b)(2)(A).
            ``(5) Outbound trust migrations.--If--
                    ``(A) an individual who is a citizen or resident of 
                the United States transferred property to a trust which 
                was not a foreign trust, and
                    ``(B) such trust becomes a foreign trust while such 
                individual is alive,
        then this section and section 6048 shall be applied as if such 
        individual transferred to such trust on the date such trust 
        becomes a foreign trust an amount equal to the portion of such 
        trust attributable to the property previously transferred by 
        such individual to such trust. A rule similar to the rule of 
        paragraph (4)(B) shall apply for purposes of this paragraph.''.
    (d) Modifications Relating to Whether Trust Has United States 
Beneficiaries.--Subsection (c) of section 679 is amended by adding at 
the end the following new paragraphs:
            ``(3) Certain united states beneficiaries disregarded.--A 
        beneficiary shall not be treated as a United States person in 
        applying this section with respect to any transfer of property 
        to foreign trust if such beneficiary first became a United 
        States person more than 5 years after the date of such 
        transfer.
            ``(4) Treatment of former united states persons.--To the 
        extent provided by the Secretary, for purposes of this 
        subsection, the term `United States person' includes any person 
        who was a United States person at any time during the existence 
        of the trust.''.
    (e) Technical Amendment.--Subparagraph (A) of section 679(c)(2) is 
amended to read as follows:
                    ``(A) in the case of a foreign corporation, such 
                corporation is a controlled foreign corporation (as 
                defined in section 957(a)),''.
    (f) Regulations.--Section 679 is amended by adding at the end the 
following new subsection:
    ``(d) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section.''.
    (g) Effective Date.--The amendments made by this section shall 
apply to transfers of property after February 6, 1995.

SEC. 12843. FOREIGN PERSONS NOT TO BE TREATED AS OWNERS UNDER GRANTOR 
              TRUST RULES.

    (a) General Rule.--
            (1) Subsection (f) of section 672 (relating to special rule 
        where grantor is foreign person) is amended to read as follows:
    ``(f) Subpart Not To Result in Foreign Ownership.--
            ``(1) In general.--Notwithstanding any other provision of 
        this subpart, this subpart shall apply only to the extent such 
        application results in an amount being currently taken into 
        account (directly or through 1 or more entities) under this 
        chapter in computing the income of a citizen or resident of the 
        United States or a domestic corporation.
            ``(2) Exceptions.--
                    ``(A) Certain revocable and irrevocable trusts.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), paragraph (1) shall not apply to 
                        any trust if--
                                    ``(I) the power to revest 
                                absolutely in the grantor title to the 
                                trust property is exercisable solely by 
                                the grantor without the approval or 
                                consent of any other person or with the 
                                consent of a related or subordinate 
                                party who is subservient to the 
                                grantor, or
                                    ``(II) the only amounts 
                                distributable from such trust (whether 
                                income or corpus) during the lifetime 
                                of the grantor are amounts 
                                distributable to the grantor or the 
                                spouse of the grantor.
                            ``(ii) Exception.--Clause (i) shall not 
                        apply to any trust which has a beneficiary who 
                        is a United States person to the extent such 
                        beneficiary has made transfers of property by 
                        gift (directly or indirectly) to a foreign 
                        person who is the grantor of such trust. For 
                        purposes of the preceding sentence, any gift 
                        shall not be taken into account to the extent 
                        such gift is excluded from taxable gifts under 
                        section 2503(b).
                    ``(B) Compensatory trusts.--Except as provided in 
                regulations, paragraph (1) shall not apply to any 
                portion of a trust distributions from which are taxable 
                as compensation for services rendered.
            ``(3) Special rules.--Except as otherwise provided in 
        regulations prescribed by the Secretary--
                    ``(A) a controlled foreign corporation (as defined 
                in section 957) shall be treated as a domestic 
                corporation for purposes of paragraph (1), and
                    ``(B) paragraph (1) shall not apply for purposes of 
                applying part III of subchapter G (relating to foreign 
                personal holding companies) and part VI of subchapter P 
                (relating to treatment of certain passive foreign 
                investment companies).
            ``(4) Recharacterization of purported gifts.--In the case 
        of any transfer directly or indirectly from a partnership or 
        foreign corporation which the transferee treats as a gift or 
        bequest, the Secretary may recharacterize such transfer in such 
        circumstances as the Secretary determines to be appropriate to 
        prevent the avoidance of the purposes of this subsection.
            ``(5) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary or appropriate to carry out the 
        purposes of this subsection, including regulations providing 
        that paragraph (1) shall not apply in appropriate cases.''.
            (2) The last sentence of subsection (c) of section 672 of 
        such Code is amended by inserting ``subsection (f) and'' before 
        ``sections 674''.
    (b) Credit for Certain Taxes.--Paragraph (2) of section 665(d) is 
amended by adding at the end the following new sentence: ``Under rules 
or regulations prescribed by the Secretary, in the case of any foreign 
trust of which the settlor or another person would be treated as owner 
of any portion of the trust under subpart E but for section 672(f), the 
term `taxes imposed on the trust' includes the allocable amount of any 
income, war profits, and excess profits taxes imposed by any foreign 
country or possession of the United States on the settlor or such other 
person in respect of trust gross income.''.
    (c) Distributions by Certain Foreign Trusts Through Nominees.--
            (1) Section 643 is amended by adding at the end the 
        following new subsection:
    ``(h) Distributions by Certain Foreign Trusts Through Nominees.--
For purposes of this part, any amount paid to a United States person 
which is derived directly or indirectly from a foreign trust of which 
the payor is not the grantor shall be deemed in the year of payment to 
have been directly paid by the foreign trust to such United States 
person.''.
            (2) Section 665 is amended by striking subsection (c).
    (d) Effective Date.--
            (1) In general.--Except as provided by paragraph (2), the 
        amendments made by this section shall take effect on the date 
        of the enactment of this Act.
            (2) Exception for certain trusts.--The amendments made by 
        this section shall not apply to any trust--
                    (A) which is treated as owned by the grantor or 
                another person under section 676 or 677 (other than 
                subsection (a)(3) thereof) of the Internal Revenue Code 
                of 1986, and
                    (B) which is in existence on September 19, 1995.
        The preceding sentence shall not apply to the portion of any 
        such trust attributable to any transfer to such trust after 
        September 19, 1995.
    (e) Transitional Rule.--If--
            (1) by reason of the amendments made by this section, any 
        person other than a United States person ceases to be treated 
        as the owner of a portion of a domestic trust, and
            (2) before January 1, 1997, such trust becomes a foreign 
        trust, or the assets of such trust are transferred to a foreign 
        trust,
no tax shall be imposed by section 1491 of the Internal Revenue Code of 
1986 by reason of such trust becoming a foreign trust or the assets of 
such trust being transferred to a foreign trust.

SEC. 12844. INFORMATION REPORTING REGARDING FOREIGN GIFTS.

    (a) In General.--Subpart A of part III of subchapter A of chapter 
61, as amended by section 12442, is amended by inserting after section 
6039F the following new section:

``SEC. 6039G. NOTICE OF GIFTS RECEIVED FROM FOREIGN PERSONS.

    ``(a) In General.--If the value of the aggregate foreign gifts 
received by a United States person (other than an organization 
described in section 501(c) and exempt from tax under section 501(a)) 
during any taxable year exceeds $10,000, such United States person 
shall furnish (at such time and in such manner as the Secretary shall 
prescribe) such information as the Secretary may prescribe regarding 
each foreign gift received during such year.
    ``(b) Foreign Gift.--For purposes of this section, the term 
`foreign gift' means any amount received from a person other than a 
United States person which the recipient treats as a gift or bequest. 
Such term shall not include any qualified transfer (within the meaning 
of section 2503(e)(2)).
    ``(c) Penalty for Failure To File Information.--
            ``(1) In general.--If a United States person fails to 
        furnish the information required by subsection (a) with respect 
        to any foreign gift within the time prescribed therefor 
        (including extensions)--
                    ``(A) the tax consequences of the receipt of such 
                gift shall be determined by the Secretary in the 
                Secretary's sole discretion from the Secretary's own 
                knowledge or from such information as the Secretary may 
                obtain through testimony or otherwise, and
                    ``(B) such United States person shall pay (upon 
                notice and demand by the Secretary and in the same 
                manner as tax) an amount equal to 5 percent of the 
                amount of such foreign gift for each month for which 
                the failure continues (not to exceed 25 percent of such 
                amount in the aggregate).
            ``(2) Reasonable cause exception.--Paragraph (1) shall not 
        apply to any failure to report a foreign gift if the United 
        States person shows that the failure is due to reasonable cause 
        and not due to willful neglect.
    ``(d) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section.''.
    (b) Clerical Amendment.--The table of sections for such subpart is 
amended by inserting after the item relating to section 6039F the 
following new item:

``Sec. 6039G. Notice of large gifts received from foreign persons.''.
    (c) Effective Date.--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.

SEC. 12845. MODIFICATION OF RULES RELATING TO FOREIGN TRUSTS WHICH ARE 
              NOT GRANTOR TRUSTS.

    (a) Modification of Interest Charge on Accumulation 
Distributions.--Subsection (a) of section 668 (relating to interest 
charge on accumulation distributions from foreign trusts) is amended to 
read as follows:
    ``(a) General Rule.--For purposes of the tax determined under 
section 667(a)--
            ``(1) Interest determined using underpayment rates.--The 
        interest charge determined under this section with respect to 
        any distribution is the amount of interest which would be 
        determined on the partial tax computed under section 667(b) for 
        the period described in paragraph (2) using the rates and the 
        method under section 6621 applicable to underpayments of tax.
            ``(2) Period.--For purposes of paragraph (1), the period 
        described in this paragraph is the period which begins on the 
        date which is the applicable number of years before the date of 
        the distribution and which ends on the date of the 
        distribution.
            ``(3) Applicable number of years.--For purposes of 
        paragraph (2)--
                    ``(A) In general.--The applicable number of years 
                with respect to a distribution is the number determined 
                by dividing--
                            ``(i) the sum of the products described in 
                        subparagraph (B) with respect to each 
                        undistributed income year, by
                            ``(ii) the aggregate undistributed net 
                        income.
                The quotient determined under the preceding sentence 
                shall be rounded under procedures prescribed by the 
                Secretary.
                    ``(B) Product described.--For purposes of 
                subparagraph (A), the product described in this 
                subparagraph with respect to any undistributed income 
                year is the product of--
                            ``(i) the undistributed net income for such 
                        year, and
                            ``(ii) the sum of the number of taxable 
                        years between such year and the taxable year of 
                        the distribution (counting in each case the 
                        undistributed income year but not counting the 
                        taxable year of the distribution).
            ``(4) Undistributed income year.--For purposes of this 
        subsection, the term `undistributed income year' means any 
        prior taxable year of the trust for which there is 
        undistributed net income, other than a taxable year during all 
        of which the beneficiary receiving the distribution was not a 
        citizen or resident of the United States.
            ``(5) Determination of undistributed net income.--
        Notwithstanding section 666, for purposes of this subsection, 
        an accumulation distribution from the trust shall be treated as 
        reducing proportionately the undistributed net income for 
        undistributed income years.
            ``(6) Periods before 1996.--Interest for the portion of the 
        period described in paragraph (2) which occurs before January 
        1, 1996, shall be determined--
                    ``(A) by using an interest rate of 6 percent, and
                    ``(B) without compounding until January 1, 1996.''.
    (b) Abusive Transactions.--Section 643(a) is amended by inserting 
after paragraph (6) the following new paragraph:
            ``(7) Abusive transactions.--The Secretary shall prescribe 
        such regulations as may be necessary or appropriate to carry 
        out the purposes of this part, including regulations to prevent 
        avoidance of such purposes.''.
    (c) Treatment of Loans From Trust Property.--
            (1) In general.--Section 643 (relating to definitions 
        applicable to subparts A, B, C, and D) is amended by adding at 
        the end the following new subsection:
    ``(i) Loans From Foreign Trusts.--For purposes of subparts B, C, 
and D--
            ``(1) General rule.--If a foreign trust makes a loan of 
        cash or marketable securities directly or indirectly to--
                    ``(A) any grantor or beneficiary of such trust who 
                is a United States person, or
                    ``(B) any United States person not described in 
                subparagraph (A) who is related to such grantor or 
                beneficiary,
        the amount of such loan shall be treated as a distribution by 
        such trust to such grantor or beneficiary (as the case may be).
            ``(2) Definitions and special rules.--For purposes of this 
        subsection--
                    ``(A) Cash.--The term `cash' includes foreign 
                currencies and cash equivalents.
                    ``(B) Related person.--
                            ``(i) In general.--A person is related to 
                        another person if the relationship between such 
                        persons would result in a disallowance of 
                        losses under section 267 or 707(b). In applying 
                        section 267 for purposes of the preceding 
                        sentence, section 267(c)(4) shall be applied as 
                        if the family of an individual includes the 
                        spouses of the members of the family.
                            ``(ii) Allocation of use.--If any person 
                        described in paragraph (1)(B) is related to 
                        more than one person, the grantor or 
                        beneficiary to whom the treatment under this 
                        subsection applies shall be determined under 
                        regulations prescribed by the Secretary.
                    ``(C) Exclusion of tax-exempts.--The term `United 
                States person' does not include any entity exempt from 
                tax under this chapter.
                    ``(D) Trust not treated as simple trust.--Any trust 
                which is treated under this subsection as making a 
                distribution shall be treated as not described in 
                section 651.
            ``(3) Subsequent transactions regarding loan principal.--If 
        any loan is taken into account under paragraph (1), any 
        subsequent transaction between the trust and the original 
        borrower regarding the principal of the loan (by way of 
        complete or partial repayment, satisfaction, cancellation, 
        discharge, or otherwise) shall be disregarded for purposes of 
        this title.''.
            (2) Technical amendment.--Paragraph (8) of section 7872(f) 
        is amended by inserting ``, 643(i),'' before ``or 1274'' each 
        place it appears.
    (d) Effective Dates.--
            (1) Interest charge.--The amendment made by subsection (a) 
        shall apply to distributions after the date of the enactment of 
        this Act.
            (2) Abusive transactions.--The amendment made by subsection 
        (b) shall take effect on the date of the enactment of this Act.
            (3) Use of trust property.--The amendment made by 
        subsection (c) shall apply to loans of cash or marketable 
        securities after September 19, 1995.

SEC. 12846. RESIDENCE OF ESTATES AND TRUSTS, ETC.

    (a) Treatment as United States Person.--
            (1) In general.--Paragraph (30) of section 7701(a) is 
        amended by striking subparagraph (D) and by inserting after 
        subparagraph (C) the following:
                    ``(D) any estate or trust if--
                            ``(i) a court within the United States is 
                        able to exercise primary supervision over the 
                        administration of the estate or trust, and
                            ``(ii) in the case of a trust, one or more 
                        United States fiduciaries have the authority to 
                        control all substantial decisions of the 
                        trust.''.
            (2) Conforming amendment.--Paragraph (31) of section 
        7701(a) is amended to read as follows:
            ``(31) Foreign estate or trust.--The term `foreign estate' 
        or `foreign trust' means any estate or trust other than an 
        estate or trust described in section 7701(a)(30)(D).''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply--
                    (A) to taxable years beginning after December 31, 
                1996, or
                    (B) at the election of the trustee of a trust, to 
                taxable years ending after the date of the enactment of 
                this Act.
        Such an election, once made, shall be irrevocable.
    (b) Domestic Trusts Which Become Foreign Trusts.--
            (1) In general.--Section 1491 (relating to imposition of 
        tax on transfers to avoid income tax) is amended by adding at 
        the end the following new flush sentence:
``If a trust which is not a foreign trust becomes a foreign trust, such 
trust shall be treated for purposes of this section as having 
transferred, immediately before becoming a foreign trust, all of its 
assets to a foreign trust.''.
            (2) Penalty.--Section 1494 is amended by adding at the end 
        the following new subsection:
    ``(c) Penalty.--In the case of any failure to file a return 
required by the Secretary with respect to any transfer described in 
section 1491 with respect to a trust, the person required to file such 
return shall be liable for the penalties provided in section 6677 in 
the same manner as if such failure were a failure to file a return 
under section 6048(a).''.
            (3) Effective date.--The amendments made by this subsection 
        shall take effect on the date of the enactment of this Act.

         CHAPTER 6--FINANCIAL ASSET SECURITIZATION INVESTMENTS

SEC. 12851. FINANCIAL ASSET SECURITIZATION INVESTMENT TRUSTS.

    (a) In General.--Subchapter M of chapter 1 is amended by adding at 
the end the following new part:

       ``PART V--FINANCIAL ASSET SECURITIZATION INVESTMENT TRUSTS

``Sec. 860H. Taxation of FASIT's.
``Sec. 860I. Taxation of holders of regular interests.
``Sec. 860J. Taxation of holder of ownership interest.
``Sec. 860K. Non-FASIT losses not to offset certain FASIT inclusions.
``Sec. 860L. Treatment of transfers of high-yield interests to 
                            disqualified holders.
``Sec. 860M. Definitions and other rules.

``SEC. 860H. TAXATION OF FASIT'S.

    ``(a) General Rule.--Except as otherwise provided in this part, 
solely for purposes of this title, a FASIT shall be treated as a 
partnership and shall not be treated as a taxable mortgage pool.
    ``(b) Income Taxable to Holders.--The income of any FASIT shall be 
taxable to the holder of the ownership interest in such FASIT as 
provided in this part.

``SEC. 860I. TAXATION OF HOLDERS OF REGULAR INTERESTS.

    ``(a) General Rule.--In determining the tax under this chapter of 
any holder of a regular interest in a FASIT, such interest shall be 
treated--
            ``(1) if not otherwise a debt instrument, as a debt 
        instrument, and
            ``(2) for purposes of section 165(g), as issued by a 
        corporation.
    ``(b) Holders Must Use Accrual Method.--The amounts includible in 
gross income with respect to any regular interest in a FASIT shall be 
determined under the accrual method of accounting.

``SEC. 860J. TAXATION OF HOLDER OF OWNERSHIP INTEREST.

    ``(a) General Rule.--Except as otherwise provided in this subtitle, 
the tax under this chapter of the holder of the ownership interest in a 
FASIT shall be determined as if--
            ``(1) such holder were a partner in such FASIT, and
            ``(2) such FASIT had filed an election under section 754.
    ``(b) Certain Provisions of Subchapter K Not To Apply.--The 
following provisions shall not apply under subsection (a): Section 704 
(other than subsection (d)) and sections 708, 721, 724, 735, 737, and 
751.
    ``(c) Other Rules For Determining Taxable Income of FASIT.--For 
purposes of this subtitle, the taxable income of a FASIT shall be 
determined under an accrual method of accounting, and in determining 
such taxable income--
            ``(1) regular interests in such FASIT (if not otherwise 
        debt instruments) shall be treated as indebtedness of such 
        FASIT,
            ``(2) the constant yield method (including the rules of 
        section 1272(a)(6)) shall be applied in determining all 
        interest, acquisition discount, original issue discount, and 
        market discount and all premium deductions or adjustments with 
        respect to all debt instruments held by the FASIT,
            ``(3) the amount of the tax imposed by section 860M(e) 
        (relating to tax on income from foreclosure property) shall be 
        allowed as a deduction, and
            ``(4) there shall not be taken into account any item of 
        income, gain, loss, or deduction allocable to prohibited 
        income.
    ``(d) Recognition of Gain on Contributions to FASIT.--
            ``(1) In general.--If property is contributed to a FASIT by 
        the holder of the ownership interest in such FASIT--
                    ``(A) notwithstanding any other provision of this 
                subtitle, gain shall be recognized to the holder of 
                such interest in the same manner as if such holder had 
                sold such property to the FASIT at its fair market 
                value on the date of such contribution, and
                    ``(B) the basis of the FASIT in such property shall 
                be such fair market value.
        To the extent provided in regulations, gain recognized under 
        the preceding sentence shall not be includible in gross income 
        before the earliest date on which such property supports any 
        regular interest in such FASIT or any indebtedness of the 
        holder of the ownership interest (or by any person related to 
        such holder).
            ``(2) Gain recognition on property supporting regular 
        interests.--Solely for purposes of determining gain, property 
        held by the holder of the ownership interest in a FASIT (or by 
        any person related to such holder) which supports any regular 
        interest in such FASIT shall be treated as sold on the earliest 
        date such property supports such an interest at its fair market 
        value on such date and as reacquired by such holder (or person) 
        immediately thereafter.
            ``(3) Valuation of property.--For purposes of this 
        subsection and subsection (e)--
                    ``(A) In general.--In the case of any property 
                contributed to a FASIT (other than cash equivalents), 
                the fair market value of such property shall be equal 
                to the sum of the present values of the reasonably 
                expected payments under such property determined in the 
                manner provided by regulations prescribed by the 
                Secretary--
                            ``(i) as of the date of the contribution or 
                        the earliest date of such support (as the case 
                        may be), and
                            ``(ii) by using a discount rate equal to 
                        130 percent of the applicable Federal rate (as 
                        defined in section 1274(d)), or such other 
                        discount rate specified in such regulations, 
                        compounded semiannually.
                    ``(B) Special rule for revolving loan accounts.--
                For purposes of subparagraph (A), in the case of 
                extensions of credit on revolving loan accounts having 
                substantially the same terms--
                            ``(i) each extension of credit shall be 
                        treated as a separate debt instrument, and
                            ``(ii) the reasonably expected payments 
                        under such an instrument shall be determined 
                        using a periodic principal payment rate equal 
                        to the reasonably anticipated periodic rate at 
                        which principal payments on the accounts will 
                        be made, as a proportion of their aggregate 
                        outstanding principal balances.
    ``(e) Gain Recognition on Certain Distributions.--If a FASIT makes 
a distribution of property with respect to any regular or ownership 
interest--
            ``(1) notwithstanding any other provision of this subtitle, 
        gain shall be recognized to such FASIT on the distribution in 
        the same manner as if the FASIT had sold such property to the 
        distributee at its fair market value on the date of such 
        distribution, and
            ``(2) the basis of the distributee in such property shall 
        be such fair market value.
    ``(f) Tax-exempt Interest Loses Character.--Interest accrued by the 
FASIT which is exempt from tax imposed by this subtitle shall, when 
taken into account by the holder of the ownership interest in the 
FASIT, be treated as ordinary income.

``SEC. 860K. NON-FASIT LOSSES NOT TO OFFSET CERTAIN FASIT INCLUSIONS.

    ``(a) In General.--The taxable income of the holder of the 
ownership interest or high-yield interest in a FASIT for any taxable 
year shall in no event be less than such holder's taxable income 
determined solely with respect to such interests.
    ``(b) Coordination With Section 172.--Any increase in the taxable 
income of any holder of an ownership interest or high-yield interest in 
a FASIT for any taxable year by reason of subsection (a) shall be 
disregarded--
            ``(1) in determining under section 172 the amount of any 
        net operating loss for such taxable year, and
            ``(2) in determining taxable income for such taxable year 
        for purposes of the 2nd sentence of section 172(b)(2).
    ``(c) Coordination With Minimum Tax.--For purposes of part VI of 
subchapter A of this chapter--
            ``(1) the reference in section 55(b)(2) to taxable income 
        shall be treated as a reference to taxable income determined 
        without regard to this section,
            ``(2) the alternative minimum taxable income of any holder 
        of the ownership interest or high-yield interest in a FASIT for 
        any taxable year shall in no event be less than such holder's 
        taxable income determined solely with respect to such 
        interests, and
            ``(3) any increase in taxable income under this section 
        shall be disregarded for purposes of computing the alternative 
        tax net operating loss deduction.

``SEC. 860L. TREATMENT OF TRANSFERS OF HIGH-YIELD INTERESTS TO 
              DISQUALIFIED HOLDERS.

    ``(a) General Rule.--If any high-yield interest is held by a 
disqualified holder, this chapter shall be applied as if the transferor 
of such interest to such holder had not transferred such interest.
    ``(b) Exceptions.--Rules similar to the rules of paragraphs (4) and 
(7) of section 860E(e) shall apply to the tax imposed by reason of 
subsection (a).
    ``(c) Disqualified Holder.--For purposes of this section, the term 
`disqualified holder' means any holder other than an eligible 
corporation (as defined in section 860M(a)(2)).
    ``(d) Treatment of Interests Held By Certain Dealers.--
            ``(1) In general.--Subsection (a) shall not apply to any 
        high-yield interest held by a disqualified holder if--
                    ``(A) such holder is a dealer in goods or services 
                and such interest exclusively represents an interest 
                supported by--
                            ``(i) loans made by the dealer to finance a 
                        customer's acquisition of goods or services 
                        from such dealer in the ordinary course of 
                        business, and
                            ``(ii) assets described in section 
                        860M(c)(1)(D) that are incidental to the 
                        securitization of such loans, or
                    ``(B) such holder is a dealer in securities who 
                acquired such interest exclusively for sale to 
                customers in the ordinary course of business (and not 
                for investment).
            ``(2) Change in dealer status.--
                    ``(A) In general.--In the case of a dealer 
                described in paragraph (1)(B) which is not an eligible 
                corporation (as defined in section 860M(a)(2)), if--
                            ``(i) such dealer ceases to be a dealer in 
                        securities, or
                            ``(ii) such dealer commences holding the 
                        high-yield interest for investment,
                there is hereby imposed (in addition to other taxes) an 
                excise tax equal to the product of the highest rate of 
                tax specified in section 11(b)(1) and the income of 
                such dealer attributable to such interest for periods 
                after the date of such cessation or commencement.
                    ``(B) Holding for 31 days or less.--For purposes of 
                subparagraph (A)(ii), a dealer shall not be treated as 
                holding an interest for investment before the 32d day 
                after the date such dealer acquired such interest 
                unless such interest is so held as part of a plan to 
                avoid the purposes of this paragraph.
                    ``(C) Administrative provisions.--The deficiency 
                procedures of subtitle F shall apply to the tax imposed 
                by this paragraph.

``SEC. 860M. DEFINITIONS AND OTHER RULES.

    ``(a) FASIT.--
            ``(1) In general.--For purposes of this title, the terms 
        `financial asset securitization investment trust' and `FASIT' 
        mean any entity--
                    ``(A) for which an election to be treated as a 
                FASIT applies for the taxable year and all prior 
                taxable years,
                    ``(B) all of the interests in which are regular 
                interests or the ownership interest,
                    ``(C) which has 1 (and only 1) ownership interest 
                and such ownership interest is held directly by an 
                eligible corporation,
                    ``(D) as of the close of the 3rd month beginning 
                after the day of its formation and at all times 
                thereafter, substantially all of the assets of which 
                consist of permitted assets,
                    ``(E) which has a taxable year which is the taxable 
                year of the holder of the ownership interest in the 
                FASIT, and
                    ``(F) which is not described in section 851(a).
        A rule similar to the rule of the last sentence of section 
        860D(a) shall apply for purposes of this paragraph.
            ``(2) Eligible corporation.--For purposes of paragraph 
        (1)(C), the term `eligible corporation' means any domestic C 
        corporation other than--
                    ``(A) a corporation which is exempt from tax under 
                this chapter, and
                    ``(B) an entity described in section 851(a) or 
                856(a).
            ``(3) Failure to qualify as fasit if rights to excessive 
        servicing fees held by others.--For purposes of this subtitle, 
        an entity shall not be treated as a FASIT if any person (other 
        than such entity) retains a stripped interest or has a right to 
        receive excessive servicing fees with respect to any debt 
        instrument held by such entity. A right is described in the 
        preceding sentence only if such right was created at the time 
        such instrument was contributed to such entity (or in 
        anticipation of such right being contributed) or is held by the 
        contributor of such instrument or by any person who is related 
        to such contributor.
            ``(4) Election.--An entity (otherwise meeting the 
        requirements of paragraph (1)) may elect to be treated as a 
        FASIT for its 1st taxable year. Such an election shall be made 
        on its return for such 1st taxable year. Except as provided in 
        paragraph (5), such an election shall apply to the taxable year 
        for which made and all subsequent taxable years.
            ``(5) Termination.--If any entity ceases to be a FASIT at 
        any time during the taxable year, such entity shall not be 
        treated as a FASIT for such taxable year or any succeeding 
        taxable year.
            ``(6) Inadvertent terminations, etc.--Rules similar to the 
        rules of section 860D(b)(2)(B) shall apply to inadvertent 
        failures to qualify or remain qualified as a FASIT.
    ``(b) Interests in FASIT.--For purposes of this subpart--
            ``(1) Regular interest.--
                    ``(A) In general.--The term `regular interest' 
                means any interest which is issued by a FASIT with 
                fixed terms and which is designated as a regular 
                interest if--
                            ``(i) such interest unconditionally 
                        entitles the holder to receive a specified 
                        principal amount (or other similar amount),
                            ``(ii) except as otherwise provided by the 
                        Secretary--
                                    ``(I) in the case of a FASIT which 
                                would be treated as a REMIC if an 
                                election under section 860D(b) had been 
                                made, interest payments (or other 
                                similar amounts), if any, with respect 
                                to such interest at or before maturity 
                                meet the requirements applicable under 
                                clause (i) or (ii) of section 
                                860G(a)(1)(B), or
                                    ``(II) in the case of any other 
                                FASIT, interest payments (or other 
                                similar amounts), if any, with respect 
                                to such interest would not be treated 
                                as contingent payments (as defined in 
                                regulations prescribed by the Secretary 
                                under section 1275,
                            ``(iii) such interest does not have a 
                        stated maturity (including options to renew) 
                        greater than 30 years (or such longer period as 
                        may be permitted by regulations),
                            ``(iv) the issue price of such interest 
                        does not exceed 125 percent of its stated 
                        principal amount, and
                            ``(v) the yield to maturity on such 
                        interest is less than the sum determined under 
                        section 163(i)(1)(B) with respect to such 
                        interest.
                Interest shall not fail to meet the requirements of 
                clause (i) merely because the timing (but not the 
                amount) of the principal payments (or other similar 
                amounts) may be contingent on the extent that payments 
                on debt instruments held by the FASIT are made in 
                advance of anticipated payments and on the amount of 
                income from permitted assets.
                    ``(B) High-yield interests.--
                            ``(i) In general.--The term `regular 
                        interest' includes any high-yield interest.
                            ``(ii) High-yield interest.--The term 
                        `high-yield interest' means any interest which 
                        would be described in subparagraph (A) but for 
                        failing to meet the requirements of one or more 
                        of clauses (i), (iv), or (v) thereof.
            ``(2) Ownership interest.--The term `ownership interest' 
        means the interest issued by a FASIT which is designated as an 
        ownership interest and which is not a regular interest.
    ``(c) Permitted Assets.--For purposes of this part--
            ``(1) In general.--The term `permitted asset' means--
                    ``(A) any investment of amounts received under debt 
                instruments described in subparagraph (B) for a 
                temporary period before distribution to holders of 
                interests in the FASIT,
                    ``(B) debt instruments (as defined in section 
                1275(a)(1)) under which interest, if any, is payable--
                            ``(i) at a fixed rate,
                            ``(ii) at a qualified variable rate (as 
                        defined in regulations prescribed by the 
                        Secretary under section 860G(a)(1)(B)(i), or
                            ``(iii) at any other varying rate permitted 
                        under regulations prescribed by the Secretary,
                    ``(C) foreclosure property,
                    ``(D) any asset--
                            ``(i) which is an interest rate or foreign 
                        currency notional principal contract, letter of 
                        credit, insurance, guarantee against payment 
                        defaults, or other similar instrument, 
                        permitted by the Secretary, and
                            ``(ii) which is a reasonably required to 
                        guarantee or hedge against the FASIT's risks 
                        associated with being the obligor on interests 
                        issued by the FASIT,
                    ``(E) any interest in a partnership if--
                            ``(i) all of the assets of the partnership 
                        are debt instruments described in subparagraph 
                        (B), and
                            ``(ii) such interest is an undivided pro 
                        rata interest in such assets, and
                    ``(F) contract rights to acquire debt instruments 
                described in subparagraph (B) or assets described in 
                subparagraph (D).
            ``(2) Debt issued by holder of ownership interest not 
        permitted asset.--The term `permitted asset' shall not include 
        any debt instrument issued by the holder of the ownership 
        interest in the FASIT or by any person related to such holder 
        or any direct or indirect interest in such a debt instrument.
            ``(3) Foreclosure property.--The term `foreclosure 
        property' means property--
                    ``(A) which would be foreclosure property under 
                section 856(e) (determined without regard to paragraph 
                (5) thereof) if acquired by a real estate investment 
                trust, and
                    ``(B) which is acquired in connection with the 
                default or imminent default of a debt instrument held 
                by the FASIT unless the security interest in such 
                property was created for the principal purpose of 
                permitting the FASIT to invest in such property.
        Solely for purposes of subsection (a)(1), the determination of 
        whether any property is foreclosure property shall be made 
        without regard to section 856(e)(4).
    ``(d) Tax on Prohibited Transactions.--
            ``(1) In general.--There is hereby imposed for each taxable 
        year of a FASIT a tax equal to 100 percent of the net income 
        derived from prohibited transactions.
            ``(2) Prohibited transactions.--For purposes of this part, 
        the term `prohibited transaction' means--
                    ``(A) the receipt of any income derived from any 
                asset that is not a permitted asset,
                    ``(B) except as provided in paragraph (3), the 
                disposition of any permitted asset,
                    ``(C) the receipt of any income derived from any 
                activity other than--
                            ``(i) the acquisition of existing debt 
                        instruments,
                            ``(ii) the holding of existing debt 
                        instruments, and
                            ``(iii) the processing of payments received 
                        on debt instruments held by the FASIT and the 
                        distribution of amounts to holders of interests 
                        in the FASIT, and
                    ``(D) the receipt of any income representing a fee 
                or other compensation for services (other than any fee 
                received as compensation for a waiver, amendment, or 
                consent under permitted assets (other than foreclosure 
                property) held by the FASIT).
            ``(3) Exception for income from certain dispositions.--
                    ``(A) In general.--Paragraph (2)(B) shall not apply 
                to a disposition which would not be a prohibited 
                transaction (as defined in section 860F(a)(2)) by 
                reason of--
                            ``(i) clause (ii), (iii), or (iv) of 
                        section 860F(a)(2)(A), or
                            ``(ii) section 860F(a)(5),
                if the FASIT were treated as a REMIC and debt 
                instruments described in subsection (c)(1)(B) were 
                treated as qualified mortgages.
                    ``(B) Substitution of debt instruments; reduction 
                of over-collateralization.--Paragraph (2)(B) shall not 
                apply to--
                            ``(i) the substitution of a debt instrument 
                        described in subsection (c)(1)(B) for another 
                        debt instrument which is a permitted asset, or
                            ``(ii) the distribution of a debt 
                        instrument contributed by the holder of the 
                        ownership interest to such holder in order to 
                        reduce over-collateralization of the FASIT,
                but only if a principal purpose of acquiring the debt 
                instrument which is disposed of was not the recognition 
                of gain (or the reduction of an loss) as a result of an 
                increase in the market value of the debt instrument 
                after its acquisition by the FASIT.
                    ``(C) Liquidation of class of regular interests.--
                Paragraph (2)(B) shall not apply to the complete 
                liquidation of any class of regular interests.
            ``(4) Net income.--For purposes of this subsection, net 
        income shall be determined in accordance with section 
        860F(a)(3).
    ``(e) Tax on Income From Foreclosure Property.--
            ``(1) In general.--A tax is hereby imposed for each taxable 
        year on the net income from foreclosure property of each FASIT. 
        Such tax shall be computed by multiplying the net income from 
        foreclosure property by the highest rate of tax specified in 
        section 11(b).
            ``(2) Net income from foreclosure property.--For purposes 
        of this part, the term `net income from foreclosure property' 
        means the amount which would be the FASIT's net income from 
        foreclosure property under section 857(b)(4)(B) if the FASIT 
        were a real estate investment trust.
    ``(f) Coordination With Wash Sales Rules.--Rules similar to the 
rules of section 860F(d) shall apply to the ownership interest in a 
FASIT.
    ``(g) Related Person.--For purposes of this part, a person 
(hereinafter in this subsection referred to as the `related person') is 
related to any person if--
            ``(1) the related person bears a relationship to such 
        person specified in section 267(b) or section 707(b)(1), or
            ``(2) the related person and such person are engaged in 
        trades or businesses under common control (within the meaning 
        of subsections (a) and (b) of section 52).
For purposes of paragraph (1), in applying section 267(b) or 707(b)(1), 
`20 percent' shall be substituted for `50 percent'.
    ``(h) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
part, including regulations to prevent the abuse of the purposes of 
this part through transactions which are not primarily related to 
securitization of debt instruments by a FASIT.''.
    (b) Technical Amendments.--
            (1) Paragraph (2) of section 26(b) is amended by striking 
        ``and'' at the end of subparagraph (M), by striking the period 
        at the end of subparagraph (N) and inserting ``, and'', and by 
        adding at the end the following new subparagraph:
                    ``(O) section 860L (relating to treatment of 
                transfers of high-yield interests to disqualified 
                holders).''.
            (2) Paragraph (6) of section 56(g) is amended by striking 
        ``or REMIC'' and inserting ``REMIC, or FASIT''.
            (3) Clause (ii) of section 382(l)(4)(B) is amended by 
        striking ``or a REMIC to which part IV of subchapter M 
        applies'' and inserting ``a REMIC to which part IV of 
        subchapter M applies, or a FASIT to which part V of subchapter 
        M applies''.
            (4) Paragraph (1) of section 582(c) is amended by inserting 
        ``, and any regular or ownership interest in a FASIT,'' after 
        ``REMIC''.
            (5) Paragraph (4) of section 593(d) is amended--
                    (A) by adding at the end the following new 
                sentence: ``References in the preceding provisions of 
                this paragraph to a REMIC shall be treated as including 
                a reference to a FASIT.'', and
                    (B) by inserting ``or fasit's'' after ``remic's'' 
                in the heading.
            (6) Subparagraph (E) of section 856(c)(6) is amended by 
        adding at the end the following new sentence: ``References in 
        the preceding provisions of this subparagraph to a REMIC shall 
        be treated as including a reference to a FASIT.''.
            (7) Subparagraph (C) of section 1202(e)(4) is amended by 
        striking ``or REMIC'' and inserting ``REMIC, or FASIT''.
            (8) Clause (xi) of section 7701(a)(19)(C) is amended to 
        read as follows:
                            ``(xi) any regular or residual interest in 
                        a REMIC, and any regular or ownership interest 
                        in a FASIT, but only in the proportion which 
                        the assets of such REMIC or FASIT consist of 
                        property described in any of the preceding 
                        clauses of this subparagraph; except that if 95 
                        percent or more of the assets of such REMIC or 
                        FASIT are assets described in clauses (i) 
                        through (x), the entire interest in the REMIC 
                        or FASIT shall qualify.''.
            (9) Subparagraph (A) of section 7701(i)(2) is amended by 
        inserting ``or a FASIT'' after ``a REMIC''.
    (c) Clerical Amendment.--The table of parts for subchapter M of 
chapter 1 is amended by adding at the end the following new item:

``Part V. Financial asset securitization investment trusts.''.
    (d) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

                   CHAPTER 7--DEPRECIATION PROVISIONS

SEC. 12861. TREATMENT OF CONTRIBUTIONS IN AID OF CONSTRUCTION.

    (a) Treatment of Contributions in Aid of Construction.--
            (1) In general.--Section 118 (relating to contributions to 
        the capital of a corporation) is amended--
                    (A) by redesignating subsection (c) as subsection 
                (e), and
                    (B) by inserting after subsection (b) the following 
                new subsections:
    ``(c) Special Rules for Water and Sewage Disposal Utilities.--
            ``(1) General rule.--For purposes of this section, the term 
        `contribution to the capital of the taxpayer' includes any 
        amount of money or other property received from any person 
        (whether or not a shareholder) by a regulated public utility 
        which provides water or sewerage disposal services if--
                    ``(A) such amount is a contribution in aid of 
                construction,
                    ``(B) in the case of contribution of property other 
                than water or sewerage disposal facilities, such amount 
                meets the requirements of the expenditure rule of 
                paragraph (2), and
                    ``(C) such amount (or any property acquired or 
                constructed with such amount) is not included in the 
                taxpayer's rate base for ratemaking purposes.
            ``(2) Expenditure rule.--An amount meets the requirements 
        of this paragraph if--
                    ``(A) an amount equal to such amount is expended 
                for the acquisition or construction of tangible 
                property described in section 1231(b)--
                            ``(i) which is the property for which the 
                        contribution was made or is of the same type as 
                        such property, and
                            ``(ii) which is used predominantly in the 
                        trade or business of furnishing water or 
                        sewerage disposal services,
                    ``(B) the expenditure referred to in subparagraph 
                (A) occurs before the end of the second taxable year 
                after the year in which such amount was received, and
                    ``(C) accurate records are kept of the amounts 
                contributed and expenditures made, the expenditures to 
                which contributions are allocated, and the year in 
                which the contributions and expenditures are received 
                and made.
            ``(3) Definitions.--For purposes of this subsection--
                    ``(A) Contribution in aid of construction.--The 
                term `contribution in aid of construction' shall be 
                defined by regulations prescribed by the Secretary, 
                except that such term shall not include amounts paid as 
                service charges for starting or stopping services.
                    ``(B) Predominantly.--The term `predominantly' 
                means 80 percent or more.
                    ``(C) Regulated public utility.--The term 
                `regulated public utility' has the meaning given such 
                term by section 7701(a)(33), except that such term 
                shall not include any utility which is not required to 
                provide water or sewerage disposal services to members 
                of the general public in its service area.
            ``(4) Disallowance of deductions and credit; adjusted 
        basis.--Notwithstanding any other provision of this subtitle, 
        no deduction or credit shall be allowed for, or by reason of, 
        any expenditure which constitutes a contribution in aid of 
        construction to which this subsection applies. The adjusted 
        basis of any property acquired with contributions in aid of 
        construction to which this subsection applies shall be zero.
    ``(d) Statute of Limitations.--If the taxpayer for any taxable year 
treats an amount as a contribution to the capital of the taxpayer 
described in subsection (c), then--
            ``(1) the statutory period for the assessment of any 
        deficiency attributable to any part of such amount shall not 
        expire before the expiration of 3 years from the date the 
        Secretary is notified by the taxpayer (in such manner as the 
        Secretary may prescribe) of--
                    ``(A) the amount of the expenditure referred to in 
                subparagraph (A) of subsection (c)(2),
                    ``(B) the taxpayer's intention not to make the 
                expenditures referred to in such subparagraph, or
                    ``(C) a failure to make such expenditure within the 
                period described in subparagraph (B) of subsection 
                (c)(2); and
            ``(2) such deficiency may be assessed before the expiration 
        of such 3-year period notwithstanding the provisions of any 
        other law or rule of law which would otherwise prevent such 
        assessment.''.
            (2) Conforming amendment.--Section 118(b) is amended by 
        inserting ``except as provided in subsection (c),'' before 
        ``the term''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to amounts received after the date of the enactment 
        of this Act.
    (b) Recovery Method and Period for Water Utility Property.--
            (1) Requirement to use straight line method.--Section 
        168(b)(3) is amended by adding at the end the following new 
        subparagraph:
                    ``(F) Water utility property described in 
                subsection (e)(5).''.
            (2) 25-year recovery period.--The table contained in 
        section 168(c)(1) is amended by inserting the following item 
        after the item relating to 20-year property:

    ``Water utility property......................          25 years''.
            (3) Water utility property.--
                    (A) In general.--Section 168(e) is amended by 
                adding at the end the following new paragraph:
            ``(5) Water utility property.--The term `water utility 
        property' means property--
                    ``(A) which is an integral part of the gathering, 
                treatment, or commercial distribution of water, and 
                which, without regard to this paragraph, would be 20-
                year property, and
                    ``(B) any municipal sewer.''.
                    (B) Conforming amendments.--Section 168 is 
                amended--
                            (i) by striking subparagraph (F) of 
                        subsection (e)(3), and
                            (ii) by striking the item relating to 
                        subparagraph (F) in the table in subsection 
                        (g)(3).
            (4) Alternative system.--Clause (iv) of section 
        168(g)(2)(C) is amended by inserting ``or water utility 
        property'' after ``tunnel bore''.
            (5) Effective date.--The amendments made by this subsection 
        shall apply to property placed in service after the date of the 
        enactment of this Act, other than property placed in service 
        pursuant to a binding contract in effect on such date and at 
        all times thereafter before the property is placed in service.

SEC. 12862. DEDUCTION FOR CERTAIN OPERATING AUTHORITY.

    (a) General Rule.--For purpose of chapter 1 of the Internal Revenue 
Code of 1986, in computing the taxable income of a taxpayer who, on 
January 1, 1995, held one or more operating authorities preempted by 
section 601 of the Federal Aviation Administration Authorization Act of 
1994, the taxpayer shall be entitled to deduct ratably over the 36-
month period beginning with January 1995 an amount equal to the 
aggregate adjusted bases of such operating authorities held by the 
taxpayer on January 1, 1995.
    (b) Treatment As Depreciation.--Any deduction under subsection (a) 
shall be treated as a deduction for depreciation for purposes of the 
Internal Revenue Code of 1986.
    (c) Effective Date.--The provisions of this section shall apply to 
taxable years ending after December 31, 1994.

SEC. 12863. CLASS LIFE FOR GAS STATION CONVENIENCE STORES AND SIMILAR 
              STRUCTURES.

    (a) In General.--Section 168(e)(3)(E) (classifying certain property 
as 15-year property) is amended by striking ``and'' at the end of 
clause (i), by striking the period at the end of clause (ii) and 
inserting ``, and'', and by adding at the end the following new clause:
                            ``(iii) any section 1250 property which is 
                        a retail motor fuels outlet (whether or not 
                        food or other convenience items are sold at the 
                        outlet).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to property which is placed in service on or after the date of 
the enactment of this Act and to which section 168 of the Internal 
Revenue Code of 1986 applies after the amendment made by section 201 of 
the Tax Reform Act of 1986. A taxpayer may elect to have such 
amendments apply with respect to any property placed in service before 
such date and to which such section so applies.

                      CHAPTER 8--OTHER PROVISIONS

SEC. 12871. APPLICATION OF FAILURE-TO-PAY PENALTY TO SUBSTITUTE 
              RETURNS.

    (a) General Rule.--Section 6651 (relating to failure to file tax 
return or to pay tax) is amended by adding at the end the following new 
subsection:
    ``(g) Treatment of Returns Prepared by Secretary Under Section 
6020(b).--In the case of any return made by the Secretary under section 
6020(b)--
            ``(1) such return shall be disregarded for purposes of 
        determining the amount of the addition under paragraph (1) of 
        subsection (a), but
            ``(2) such return shall be treated as the return filed by 
        the taxpayer for purposes of determining the amount of the 
        addition under paragraphs (2) and (3) of subsection (a).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply in the case of any return the due date for which (determined 
without regard to extensions) is after the date of the enactment of 
this Act.

SEC. 12872. EXTENSION OF WITHHOLDING TO CERTAIN GAMBLING WINNINGS.

    (a) Repeal of Exemption for Bingo and Keno.--Paragraph (5) of 
section 3402(q) is amended to read as follows:
            ``(5) Exemption for slot machines.--The tax imposed under 
        paragraph (1) shall not apply to winnings from a slot 
        machine.''.
    (b) Threshold Amount.--Paragraph (3) of section 3402(q) is 
amended--
            (1) by striking ``(B) and (C)'' in subparagraph (A) and 
        inserting ``(B), (C), and (D)'', and
            (2) by adding at the end the following new subparagraph:
                    ``(D) Bingo and keno.--Proceeds of more than $5,000 
                from a wager placed in a bingo or keno game.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1996.

SEC. 12873. LOSSES FROM FORECLOSURE PROPERTY.

    (a) In General.--Section 818(b) is amended by adding at the end the 
following new paragraph:
            ``(2) Losses from foreclosure property.--
                    ``(A) In general.--In the case of any loss arising 
                from the sale or exchange of foreclosure property which 
                (without regard to this paragraph) is treated as a 
                capital loss--
                            ``(i) only 15 percent of the amount of such 
                        loss shall be treated as a capital loss, and
                            ``(ii) the remainder shall be treated as a 
                        loss from the sale or exchange of real property 
                        used in carrying on an insurance business which 
                        is recognized ratably over the 10-taxable year 
                        period beginning with the taxable year 
                        following the taxable year in which the sale or 
                        exchange of the foreclosure property occurred.
                    ``(B) Foreclosure property.--For purposes of this 
                paragraph, the term ``foreclosure property'' means any 
                real property used in a trade or businesses (as defined 
                in section 1231(b) without regard to this subsection) 
                which is acquired by a life insurance company as the 
                result of--
                            ``(i) such company having bid on such 
                        property at foreclosure, or
                            ``(ii) such company having otherwise 
                        reduced such property to ownership or 
                        possession by agreement or process of law, 
                        after there was a default (or default was 
                        imminent) on indebtedness which such property 
                        secured.''.
    (b) Conforming Amendments.--Section 818(b) is amended--
            (1) by striking ``In the'' and inserting:
            ``(1) In general.--In the '', and
            (2) by redesignating paragraphs (1) and (2) and 
        subparagraphs (A) and (B) of paragraph (1) as subparagraphs (A) 
        and (B) and clauses (i) and (ii) of subparagraph (A), 
        respectively.
    (c) Effective Date.--The amendments made by subsection (a) shall 
apply to taxable years beginning after December 31, 1994.

SEC. 12874. NEWSPAPER DISTRIBUTORS TREATED AS DIRECT SELLERS.

    (a) In General.--Section 3508(b)(2)(A) in amended by striking 
``or'' at the end of clause (i), by inserting ``or'' at the end of 
clause (ii), and by inserting after clause (ii) the following new 
clause:
                            ``(iii) is engaged in the trade or business 
                        of the delivering or distribution of newspapers 
                        or shopping news (including any services 
                        directly related to such trade or business),''.
    (b) Effective Date.--The amendments made by this section shall 
apply to services performed after December 31, 1995.

SEC. 12875. NONRECOGNITION TREATMENT FOR CERTAIN TRANSFERS BY COMMON 
              TRUST FUNDS TO REGULATED INVESTMENT COMPANIES.

    (a) General Rule.--Section 584 (relating to common trust funds) is 
amended by redesignating subsection (h) as subsection (i) and by 
inserting after subsection (g) the following new subsection:
    ``(h) Nonrecognition Treatment for Certain Transfers to Regulated 
Investment Companies.--
            ``(1) In general.--If--
                    ``(A) pursuant to a single plan, a common trust 
                fund transfers substantially all of its assets to one 
                or more regulated investment companies in exchange 
                solely for stock in the company or companies to which 
                such assets are so transferred, and
                    ``(B) such stock is distributed by such common 
                trust fund to participants in such common trust fund in 
                exchange solely for their interests in such common 
                trust fund,
        no gain or loss shall be recognized by such common trust fund 
        by reason of such transfer or distribution, and no gain or loss 
        shall be recognized by any participant in such common trust 
        fund by reason of such exchange.
            ``(2) Basis rules.--
                    ``(A) Regulated investment company.--The basis of 
                any asset received by a regulated investment company in 
                a transfer referred to in paragraph (1)(A) shall be the 
                same as it would be in the hands of the common trust 
                fund.
                    ``(B) Participants.--The basis of the stock which 
                is received in an exchange referred to in paragraph 
                (1)(B) shall be the same as that of the property 
                exchanged. If stock in more than one regulated 
                investment company is received in such exchange, the 
                basis determined under the preceding sentence shall be 
                allocated among the stock in each such company on the 
                basis of respective fair market values.
            ``(3) Treatment of assumptions of liability.--
                    ``(A) In general.--In determining whether the 
                transfer referred to in paragraph (1)(A) is in exchange 
                solely for stock in one or more regulated investment 
                companies, the assumption by any such company of a 
                liability of the common trust fund, and the fact that 
                any property transferred by the common trust fund is 
                subject to a liability, shall be disregarded.
                    ``(B) Special rule where assumed liabilities exceed 
                basis.--
                            ``(i) In general.--If, in any transfer 
                        referred to in paragraph (1)(A), the assumed 
                        liabilities exceed the aggregate adjusted bases 
                        (in the hands of the common trust fund) of the 
                        assets transferred to the regulated investment 
                        company or companies--
                                    ``(I) notwithstanding paragraph 
                                (1), gain shall be recognized to the 
                                common trust fund on such transfer in 
                                an amount equal to such excess,
                                    ``(II) the basis of the assets 
                                received by the regulated investment 
                                company or companies in such transfer 
                                shall be increased by the amount so 
                                recognized, and
                                    ``(III) any adjustment to the basis 
                                of a participant's interest in the 
                                common trust fund as a result of the 
                                gain so recognized shall be treated as 
                                occurring immediately before the 
                                exchange referred to in paragraph 
                                (1)(B).
                        If the transfer referred to in paragraph (1)(A) 
                        is to two or more regulated investment 
                        companies, the basis increase under subclause 
                        (II) shall be allocated among such companies on 
                        the basis of the respective fair market values 
                        of the assets received by each of such 
                        companies.
                            ``(ii) Assumed liabilities.--For purposes 
                        of clause (i), the term `assumed liabilities' 
                        means the aggregate of--
                                    ``(I) any liability of the common 
                                trust fund assumed by any regulated 
                                investment company in connection with 
                                the transfer referred to in paragraph 
                                (1)(A), and
                                    ``(II) any liability to which 
                                property so transferred is subject.
            ``(4) Common trust fund must meet diversification rules.--
        This subsection shall not apply to any common trust fund which 
        would not meet the requirements of section 368(a)(2)(F)(ii) if 
        it were a corporation. For purposes of the preceding sentence, 
        Government securities shall not be treated as securities of an 
        issuer in applying the 25-percent and 50-percent test and such 
        securities shall not be excluded for purposes of determining 
        total assets under clause (iv) of section 368(a)(2)(F).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to transfers after December 31, 1995.

SEC. 12876. TREATMENT OF CERTAIN INSURANCE CONTRACTS ON RETIRED LIVES.

    (a) General Rule.--
            (1) Paragraph (2) of section 817(d) (defining variable 
        contract) is amended by striking ``or'' at the end of 
        subparagraph (A), by striking ``and'' at the end of 
        subparagraph (B) and inserting ``or'', and by inserting after 
        subparagraph (B) the following new subparagraph:
                    ``(C) provides for funding of insurance on retired 
                lives as described in section 807(c)(6), and''.
            (2) Paragraph (3) of section 817(d) is amended by striking 
        ``or'' at the end of subparagraph (A), by striking the period 
        at the end of subparagraph (B) and inserting ``, or'', and by 
        inserting after subparagraph (B) the following new 
        subparagraph:
                    ``(C) in the case of funds held under a contract 
                described in paragraph (2)(C), the amounts paid in, or 
                the amounts paid out, reflect the investment return and 
                the market value of the segregated asset account.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 12877. TREATMENT OF MODIFIED GUARANTEED CONTRACTS.

    (a) General Rule.--Subpart E of part I of subchapter L of chapter 1 
(relating to definitions and special rules) is amended by inserting 
after section 817 the following new section:

``SEC. 817A. SPECIAL RULES FOR MODIFIED GUARANTEED CONTRACTS.

    ``(a) Computation of Reserves.--In the case of a modified 
guaranteed contract, clause (ii) of section 807(e)(1)(A) shall not 
apply.
    ``(b) Segregated Assets Under Modified Guaranteed Contracts Marked 
to Market.--
            ``(1) In general.--In the case of any life insurance 
        company, for purposes of this subtitle--
                    ``(A) Any gain or loss with respect to a segregated 
                asset shall be treated as ordinary income or loss, as 
                the case may be.
                    ``(B) If any segregated asset is held by such 
                company as of the close of any taxable year--
                            ``(i) such company shall recognize gain or 
                        loss as if such asset were sold for its fair 
                        market value on the last business day of such 
                        taxable year, and
                            ``(ii) any such gain or loss shall be taken 
                        into account for such taxable year.
                Proper adjustment shall be made in the amount of any 
                gain or loss subsequently realized for gain or loss 
                taken into account under the preceding sentence. The 
                Secretary may provide by regulations for the 
                application of this subparagraph at times other than 
                the times provided in this subparagraph.
            ``(2) Segregated asset.--For purposes of paragraph (1), the 
        term `segregated asset' means any asset held as part of a 
        segregated account referred to in subsection (d)(1) under a 
        modified guaranteed contract.
    ``(c) Special Rule in Computing Life Insurance Reserves.--For 
purposes of applying section 816(b)(1)(A) to any modified guaranteed 
contract, an assumed rate of interest shall include a rate of interest 
determined, from time to time, with reference to a market rate of 
interest.
    ``(d) Modified Guaranteed Contract Defined.--For purposes of this 
section, the term `modified guaranteed contract' means a contract not 
described in section 817--
            ``(1) all or part of the amounts received under which are 
        allocated to an account which, pursuant to State law or 
        regulation, is segregated from the general asset accounts of 
        the company and is valued from time to time with reference to 
        market values,
            ``(2) which--
                    ``(A) provides for the payment of annuities,
                    ``(B) is a life insurance contract, or
                    ``(C) is a pension plan contract which is not a 
                life, accident, or health, property, casualty, or 
                liability contract,
            ``(3) for which reserves are valued at market for annual 
        statement purposes, and
            ``(4) which provides for a net surrender value or a 
        policyholder's fund (as defined in section 807(e)(1)).
If only a portion of a contract is not described in section 817, such 
portion shall be treated for purposes of this section as a separate 
contract.
    ``(e) Regulations.--The Secretary may prescribe regulations--
            ``(1) to provide for the treatment of market value 
        adjustments under sections 72, 7702, 7702A, and 807(e)(1)(B),
            ``(2) to determine the interest rates applicable under 
        sections 807(c)(3), 807(d)(2)(B), and 812 with respect to a 
        modified guaranteed contract annually, in a manner appropriate 
        for modified guaranteed contracts and, to the extent 
        appropriate for such a contract, to modify or waive the 
        applicability of section 811(d),
            ``(3) to provide rules to limit ordinary gain or loss 
        treatment to assets constituting reserves for modified 
        guaranteed contracts (and not other assets) of the company,
            ``(4) to provide appropriate treatment of transfers of 
        assets to and from the segregated account, and
            ``(5) as may be necessary or appropriate to carry out the 
        purposes of this section.''.
    (b) Clerical Amendment.--The table of sections for subpart E of 
part I of subchapter L of chapter 1 is amended by inserting after the 
item relating to section 817 the following new item:

``Sec. 817A. Special rules for modified guaranteed contracts.''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 1995.
            (2) Treatment of net adjustments.--In the case of any 
        taxpayer required by the amendments made by this section to 
        change its calculation of reserves to take into account market 
        value adjustments and to mark segregated assets to market for 
        any taxable year--
                    (A) such changes shall be treated as a change in 
                method of accounting initiated by the taxpayer,
                    (B) such changes shall be treated as made with the 
                consent of the Secretary, and
                    (C) the adjustments required by reason of section 
                481 of the Internal Revenue Code of 1986 shall be taken 
                into account as ordinary income or loss by the taxpayer 
                for the taxpayer's first taxable year beginning after 
                December 31, 1995.

SEC. 12878. $1,000,000 COMPENSATION DEDUCTION LIMIT EXTENDED TO ALL 
              EMPLOYEES OF ALL CORPORATIONS.

    (a) In General.--Section 162(m) is amended--
            (1) by striking ``publicly held corporation'' in paragraph 
        (1) and inserting ``taxpayer (other than personal service 
        corporations)'',
            (2) by striking ``covered employee'' each place it appears 
        in paragraphs (1) and (4) and inserting ``employee'', and
            (3) by striking paragraphs (2) and (3) and redesignating 
        paragraph (4) as paragraph (3).
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995, except that 
there shall not be taken into account with respect to any employee to 
whom section 162(m) of the Internal Revenue Code of 1986 applies solely 
by reason of such amendments remuneration payable under a written 
binding contract which was in effect on October 25, 1995, and which was 
not modified thereafter in any material respect before such 
remuneration is paid.
    (c) Use of Revenues.--Notwithstanding any other provision of law, 
the Commissioner of Social Security shall increase the earnings limit 
otherwise determined for each year under section 203 of the Social 
Security Act (42 U.S.C. 403) by an amount which takes into account the 
increase in revenues for such year as estimated by the Secretary of the 
Treasury resulting from the amendment to section 162(m)(3) of the 
Internal Revenue Code of 1986 made by the Balanced Budget 
Reconciliation Act of 1995.

SEC. 12879. SENSE OF THE SENATE.

    The Senate finds that:
            (1) The Senate has held hearings on the social security 
        earnings limit in 1994 and 1995 and the House has held two 
        hearings on the social security earnings limit in 1995;
            (2) The Senate has overwhelmingly passed sense of the 
        Senate language calling for substantial reform of the social 
        security earnings limit;
            (3) The House of Representatives has overwhelmingly passed 
        legislation to raise the exempt amount under the social 
        security earnings limit three times, in 1989, 1992, and 1995;
            (4) Such legislation is a key provision of the Contract 
        with America;
            (5) The President in his 1992 campaign document ``Putting 
        People First'' pledged to lift the social security earnings 
        limit;
            (6) The social security earnings limit is a depression-era 
        relic that unfairly punishes working seniors; therefore,
            (7) It is the intent of the Congress that legislation will 
        be passed before the end of 1995 to raise the social security 
        earnings limit for working seniors aged 65 through 69 in a 
        manner which will ensure the financial integrity of the social 
        security trust funds and will be consistent with the goal of 
        achieving a balanced budget in 7 years.

SEC. 12880. INCREASED DEDUCTIBILITY OF BUSINESS MEAL EXPENSES FOR 
              INDIVIDUALS SUBJECT TO FEDERAL LIMITATIONS ON HOURS OF 
              SERVICE.

    (a) In General.--Section 274(n) (relating to only 50 percent of 
meal and entertainment expenses allowed as deduction) is amended by 
adding at the end the following new paragraph:
            ``(3) Special rule for individuals subject to federal 
        limitations on hours of service.--In the case of any expenses 
        for food or beverages consumed by an individual during, or 
        incident to, any period of duty which is subject to the hours 
        of service limitations of the Department of Transportation, 
        paragraph (1) shall be applied by substituting `80 percent' for 
        `50 percent''.''
    (b) Repeal of Special Transition Rule to Financial Institution 
Exception to Interest Allocation Rules.--Paragraph (5) of section 
1215(c) of the Tax Reform Act of 1986 (Public Law 99-514, 100 Stat. 
2548) is hereby repealed.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 12881. ROLLOVER OF GAIN FROM SALE OF FARM ASSETS TO INDIVIDUAL 
              RETIREMENT PLANS.

    (a) In General.--Part III of subchapter O of chapter 1 (relating to 
common nontaxable exchanges) is amended by inserting after section 1034 
the following new section:

``SEC. 1034A. ROLLOVER OF GAIN ON SALE OF FARM ASSETS INTO ASSET 
              ROLLOVER ACCOUNT.

    ``(a) Nonrecognition of Gain.--Subject to the limits of subsection 
(c), if a taxpayer has a qualified net farm gain from the sale of a 
qualified farm asset, then, at the election of the taxpayer, gain (if 
any) from such sale shall be recognized only to the extent such gain 
exceeds the contributions to 1 or more asset rollover accounts of the 
taxpayer for the taxable year in which such sale occurs.
    ``(b) Asset Rollover Account.--
            ``(1) General rule.--Except as provided in this section, an 
        asset rollover account shall be treated for purposes of this 
        title in the same manner as an individual retirement plan.
            ``(2) Asset rollover account.--For purposes of this title, 
        the term `asset rollover account' means an individual 
        retirement plan which is designated at the time of the 
        establishment of the plan as an asset rollover account. Such 
        designation shall be made in such manner as the Secretary may 
        prescribe.
    ``(c) Contribution Rules.--
            ``(1) No deduction allowed.--No deduction shall be allowed 
        under section 219 for a contribution to an asset rollover 
        account.
            ``(2) Aggregate contribution limitation.--Except in the 
        case of rollover contributions, the aggregate amount for all 
        taxable years which may be contributed to all asset rollover 
        accounts established on behalf of an individual shall not 
        exceed--
                    ``(A) $500,000 ($250,000 in the case of a separate 
                return by a married individual), reduced by
                    ``(B) the amount by which the aggregate value of 
                the assets held by the individual (and spouse) in 
                individual retirement plans (other than asset rollover 
                accounts) exceeds $100,000.
        The determination under subparagraph (B) shall be made as of 
        the close of the taxable year for which the determination is 
        being made.
            ``(3) Annual contribution limitations.--
                    ``(A) General rule.--The aggregate contribution 
                which may be made in any taxable year to all asset 
                rollover accounts shall not exceed 100 percent of the 
                lesser of--
                            ``(i) the qualified net farm gain for the 
                        taxable year, or
                            ``(ii) an amount determined by multiplying 
                        the number of years the taxpayer is a qualified 
                        farmer by $10,000.
                    ``(B) Spouse.--In the case of a married couple 
                filing a joint return under section 6013 for the 
                taxable year, subparagraph (A) shall be applied by 
                substituting `$20,000' for `$10,000' for each year the 
                taxpayer's spouse is a qualified farmer.
            ``(4) Adjustment to annual contribution limitation.--The 
        Secretary may reduce the percentage limitation in paragraph 
        (3)(A) to such lower percentage as the Secretary determines 
        necessary to assure that the aggregate amount of deductions for 
        all individuals for a taxable year does not exceed the 
        aggregate amount of the increases in receipts for the taxable 
        year by reason of the amendments made by sections 12883 and 
        12884 of the Balanced Budget Reconciliation Act of 1995.
            ``(5) Time when contribution deemed made.--For purposes of 
        this section, a taxpayer shall be deemed to have made a 
        contribution to an asset rollover account on the last day of 
        the preceding taxable year if the contribution is made on 
        account of such taxable year and is made not later than the 
        time prescribed by law for filing the return for such taxable 
        year (not including extensions thereof).
    ``(d) Qualified Net Farm Gain; Etc.--For purposes of this section--
            ``(1) Qualified net farm gain.--The term `qualified net 
        farm gain' means the lesser of--
                    ``(A) the net capital gain of the taxpayer for the 
                taxable year, or
                    ``(B) the net capital gain for the taxable year 
                determined by only taking into account gain (or loss) 
                in connection with a disposition of a qualified farm 
                asset.
            ``(2) Qualified farm asset.--The term `qualified farm 
        asset' means an asset used by a qualified farmer in the active 
        conduct of the trade or business of farming (as defined in 
        section 2032A(e)).
            ``(3) Qualified farmer.--
                    ``(A) In general.--The term `qualified farmer' 
                means a taxpayer who--
                            ``(i) during the 5-year period ending on 
                        the date of the disposition of a qualified farm 
                        asset materially participated in the trade or 
                        business of farming, and
                            ``(ii) owned (or who with the taxpayer's 
                        spouse owned) 50 percent or more of such trade 
                        or business during such 5-year period.
                    ``(B) Material participation.--For purposes of this 
                paragraph, a taxpayer shall be treated as materially 
                participating in a trade or business if the taxpayer 
                meets the requirements of section 2032A(e)(6).
            ``(4) Rollover contributions.--Rollover contributions to an 
        asset rollover account may be made only from other asset 
        rollover accounts.
    ``(e) Distribution Rules.--For purposes of this title, the rules of 
paragraphs (1) and (2) of section 408(d) shall apply to any 
distribution from an asset rollover account.
    ``(f) Individual Required To Report Qualified Contributions.--
            ``(1) In general.--Any individual who--
                    ``(A) makes a contribution to any asset rollover 
                account for any taxable year, or
                    ``(B) receives any amount from any asset rollover 
                account for any taxable year,
        shall include on the return of tax imposed by chapter 1 for 
        such taxable year and any succeeding taxable year (or on such 
        other form as the Secretary may prescribe) information 
        described in paragraph (2).
            ``(2) Information required to be supplied.--The information 
        described in this paragraph is information required by the 
        Secretary which is similar to the information described in 
        section 408(o)(4)(B).
            ``(3) Penalties.--For penalties relating to reports under 
        this paragraph, see section 6693(b).''.
    (b) Contributions Not Deductible.--Section 219(d) (relating to 
other limitations and restrictions) is amended by adding at the end the 
following new paragraph:
            ``(5) Contributions to asset rollover accounts.--No 
        deduction shall be allowed under this section with respect to a 
        contribution under section 1034A.''.
    (c) Excess Contributions.--
            (1) In general.--Section 4973 (relating to tax on excess 
        contributions to individual retirement accounts, certain 
        section 403(b) contracts, and certain individual retirement 
        annuities) is amended by adding at the end the following new 
        subsection:
    ``(d) Asset Rollover Accounts.--For purposes of this section, in 
the case of an asset rollover account referred to in subsection (a)(1), 
the term `excess contribution' means the excess (if any) of the amount 
contributed for the taxable year to such account over the amount which 
may be contributed under section 1034A.''.
            (2) Conforming amendments.--
                    (A) Section 4973(a)(1) is amended by striking 
                ``or'' and inserting ``an asset rollover account 
                (within the meaning of section 1034A), or''.
                    (B) The heading for section 4973 is amended by 
                inserting ``asset rollover accounts,'' after 
                ``contracts''.
                    (C) The table of sections for chapter 43 is amended 
                by inserting ``asset rollover accounts,'' after 
                ``contracts'' in the item relating to section 4973.
    (d) Technical Amendments.--
            (1) Paragraph (1) of section 408(a) (defining individual 
        retirement account) is amended by inserting ``or a qualified 
        contribution under section 1034A,'' before ``no contribution''.
            (2) Subparagraph (A) of section 408(d)(5) is amended by 
        inserting ``or qualified contributions under section 1034A'' 
        after ``rollover contributions''.
            (3)(A) Subparagraph (A) of section 6693(b)(1) is amended by 
        inserting ``or 1034A(f)(1)'' after ``408(o)(4)''.
            (B) Section 6693(b)(2) is amended by inserting ``or 
        1034A(f)(1)'' after ``408(o)(4)''.
            (4) The table of sections for part III of subchapter O of 
        chapter 1 is amended by inserting after the item relating to 
        section 1034 the following new item:

``Sec. 1034A. Rollover of gain on sale of farm assets into asset 
                            rollover account.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to sales and exchanges after the date of the enactment of this 
Act.

SEC. 12882. DISPOSITION OF STOCK IN DOMESTIC CORPORATIONS BY 10-PERCENT 
              FOREIGN SHAREHOLDERS.

    (a) General Rule.--Subpart D of part II of subchapter N of chapter 
1 (relating to miscellaneous provisions) is amended by adding at the 
end the following new section:

``SEC. 899. DISPOSITION OF STOCK IN DOMESTIC CORPORATIONS BY 10-PERCENT 
              FOREIGN SHAREHOLDERS.

    ``(a) General Rule.--
            ``(1) Treatment as effectively connected with united states 
        trade or business.--For purposes of this title, if any 
        nonresident alien individual or foreign corporation is a 10-
        percent shareholder in any domestic corporation, any gain or 
        loss of such individual or foreign corporation from the 
        disposition of any stock in such domestic corporation shall be 
        taken into account--
                    ``(A) in the case of a nonresident alien 
                individual, under section 871(b)(1), or
                    ``(B) in the case of a foreign corporation, under 
                section 882(a)(1),
        as if the taxpayer were engaged during the taxable year in a 
        trade or business within the United States through a permanent 
        establishment in the United States and as if such gain or loss 
        were effectively connected with such trade or business and 
        attributable to such permanent establishment. Notwithstanding 
        section 865, any such gain or loss shall be treated as from 
        sources in the United States.
            ``(2) 24-percent minimum tax on nonresident alien 
        individuals.--
                    ``(A) In general.--In the case of any nonresident 
                alien individual, the amount determined under section 
                55(b)(1)(A) shall not be less than 24 percent of the 
                lesser of--
                            ``(i) the individual's alternative minimum 
                        taxable income (as defined in section 55(b)(2)) 
                        for the taxable year, or
                            ``(ii) the individual's net taxable stock 
                        gain for the taxable year.
                    ``(B) Net taxable stock gain.--For purposes of 
                subparagraph (A), the term `net taxable stock gain' 
                means the excess of--
                            ``(i) the aggregate gains for the taxable 
                        year from dispositions of stock in domestic 
                        corporations with respect to which such 
                        individual is a 10-percent shareholder, over
                            ``(ii) the aggregate of the losses for the 
                        taxable year from dispositions of such stock.
                    ``(C) Coordination with section 897(a)(2).--Section 
                897(a)(2)(A) shall not apply to any nonresident alien 
                individual for any taxable year for which such 
                individual has a net taxable stock gain, but the amount 
                of such net taxable stock gain shall be increased by 
                the amount of such individual's net United States real 
                property gain (as defined in section 897(a)(2)(B)) for 
                such taxable year.
    ``(b) 10-Percent Shareholder.--
            ``(1) In general.--For purposes of this section, the term 
        `10-percent shareholder' means any person who at any time 
        during the shorter of--
                    ``(A) the period beginning on January 1, 1996, and 
                ending on the date of the disposition, or
                    ``(B) the 5-year period ending on the date of the 
                disposition,
        owned 10 percent or more (by vote or value) of the stock in the 
        domestic corporation.
            ``(2) Constructive ownership.--
                    ``(A) In general.--Section 318(a) (relating to 
                constructive ownership of stock) shall apply for 
                purposes of paragraph (1).
                    ``(B) Modifications.--For purposes of subparagraph 
                (A)--
                            ``(i) paragraph (2)(C) of section 318(a) 
                        shall be applied by substituting `10 percent' 
                        for `50 percent', and
                            ``(ii) paragraph (3)(C) of section 318(a) 
                        shall be applied--
                                    ``(I) by substituting `10 percent' 
                                for `50 percent', and
                                    ``(II) in any case where such 
                                paragraph would not apply but for 
                                subclause (I), by considering a 
                                corporation as owning the stock (other 
                                than stock in such corporation) owned 
                                by or for any shareholder of such 
                                corporation in that proportion which 
                                the value of the stock which such 
                                shareholder owns in such corporation 
                                bears to the value of all stock in such 
                                corporation.
            ``(3) Treatment of stock held by certain partnerships.--
                    ``(A) In general.--For purposes of this section, 
                if--
                            ``(i) a partnership is a 10-percent 
                        shareholder in any domestic corporation, and
                            ``(ii) 10 percent or more of the capital or 
                        profits interests in such partnership is held 
                        (directly or indirectly) by nonresident alien 
                        individuals or foreign corporations,
                each partner in such partnership who is not otherwise a 
                10-percent shareholder in such corporation shall, with 
                respect to the stock in such corporation held by the 
                partnership, be treated as a 10-percent shareholder in 
                such corporation.
                    ``(B) Exception.--
                            ``(i) In general.--Subparagraph (A) shall 
                        not apply with respect to stock in a domestic 
                        corporation held by any partnership if, at all 
                        times during the 5-year period ending on the 
                        date of the disposition involved--
                                    ``(I) the aggregate bases of the 
                                stock and securities in such domestic 
                                corporation held by such partnership 
                                was less than 25 percent of the 
                                partnership's net adjusted asset cost, 
                                and
                                    ``(II) the partnership did not own 
                                50 percent or more (by vote or value) 
                                of the stock in such domestic 
                                corporation.
                        The Secretary may by regulations disregard any 
                        failure to meet the requirements of subclause 
                        (I) where the partnership normally met such 
                        requirements during such 5-year period.
                            ``(ii) Net adjusted asset cost.--For 
                        purposes of clause (i), the term `net adjusted 
                        asset cost' means--
                                    ``(I) the aggregate bases of all of 
                                the assets of the partnership other 
                                than cash and cash items, reduced by
                                    ``(II) the portion of the 
                                liabilities of the partnership not 
                                allocable (on a proportionate basis) to 
                                assets excluded under subclause (I).
                    ``(C) Exception not to apply to 50-percent 
                partners.--Subparagraph (B) shall not apply in the case 
                of any partner owning (directly or indirectly) more 
                than 50 percent of the capital or profits interests in 
                the partnership at any time during the 5-year period 
                ending on the date of the disposition.
                    ``(D) Special rules.--For purposes of subparagraph 
                (B) and (C)--
                            ``(i) Treatment of predecessors.--Any 
                        reference to a partnership or corporation shall 
                        be treated as including a reference to any 
                        predecessor thereof.
                            ``(ii) Partnership not in existence.--If 
                        any partnership was not in existence throughout 
                        the entire 5-year period ending on the date of 
                        the disposition, only the portion of such 
                        period during which the partnership (or any 
                        predecessor) was in existence shall be taken 
                        into account.
                    ``(E) Other pass-thru entities; tiered entities.--
                Rules similar to the rules of the preceding provisions 
                of this paragraph shall also apply in the case of any 
                pass-thru entity other than a partnership and in the 
                case of tiered partnerships and other entities.
    ``(c) Coordination With Nonrecognition Provisions; Etc.--
            ``(1) Coordination with nonrecognition provisions.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), any nonrecognition provision shall 
                apply for purposes of this section to a transaction 
                only in the case of--
                            ``(i) an exchange of stock in a domestic 
                        corporation for other property the sale of 
                        which would be subject to taxation under this 
                        chapter, or
                            ``(ii) a distribution with respect to which 
                        gain or loss would not be recognized under 
                        section 336 if the sale of the distributed 
                        property by the distributee would be subject to 
                        tax under this chapter.
                    ``(B) Regulations.--The Secretary shall prescribe 
                regulations (which are necessary or appropriate to 
                prevent the avoidance of Federal income taxes) 
                providing--
                            ``(i) the extent to which nonrecognition 
                        provisions shall, and shall not, apply for 
                        purposes of this section, and
                            ``(ii) the extent to which--
                                    ``(I) transfers of property in a 
                                reorganization, and
                                    ``(II) changes in interests in, or 
                                distributions from, a partnership, 
                                trust, or estate,
                        shall be treated as sales of property at fair 
                        market value.
                    ``(C) Nonrecognition provision.--For purposes of 
                this paragraph, the term `nonrecognition provision' 
                means any provision of this title for not recognizing 
                gain or loss.
            ``(2) Certain other rules made applicable.--For purposes of 
        this section, rules similar to the rules of subsections (g) and 
        (j) of section 897 shall apply.
    ``(d) Certain Interest Treated as Stock.--For purposes of this 
section--
            ``(1) any option or other right to acquire stock in a 
        domestic corporation,
            ``(2) the conversion feature of any debt instrument issued 
        by a domestic corporation, and
            ``(3) to the extent provided in regulations, any other 
        interest in a domestic corporation other than an interest 
        solely as creditor,
shall be treated as stock in such corporation.
    ``(e) Treatment of Certain Gain as a Dividend.--In the case of any 
gain which would be subject to tax by reason of this section but for a 
treaty and which results from any distribution in liquidation or 
redemption, for purposes of this subtitle, such gain shall be treated 
as a dividend to the extent of the earnings and profits of the domestic 
corporation attributable to the stock. Rules similar to the rules of 
section 1248(c) (determined without regard to paragraph (2)(D) thereof) 
shall apply for purposes of the preceding sentence.
    ``(f) Regulations.--The Secretary shall prescribe such regulations 
as may be appropriate to carry out the purposes of this section, 
including--
            ``(1) regulations coordinating the provisions of this 
        section with the provisions of section 897, and
            ``(2) regulations aggregating stock held by a group of 
        persons acting together.''
    (b) Withholding of Tax.--Subchapter A of chapter 3 is amended by 
adding at the end the following new section:

``SEC. 1447. WITHHOLDING OF TAX ON CERTAIN STOCK DISPOSITIONS.

    ``(a) General Rule.--Except as otherwise provided in this section, 
in the case of any disposition of stock in a domestic corporation by a 
foreign person who is a 10-percent shareholder in such corporation, the 
withholding agent shall deduct and withhold a tax equal to 10 percent 
of the amount realized on the disposition.
    ``(b) Exceptions.--
            ``(1) Stock which is not regularly traded.--In the case of 
        a disposition of stock which is not regularly traded, a 
        withholding agent shall not be required to deduct and withhold 
        any amount under subsection (a) if--
                    ``(A) the transferor furnishes to such withholding 
                agent an affidavit by such transferor stating, under 
                penalty of perjury, that section 899 does not apply to 
                such disposition because--
                            ``(i) the transferor is not a foreign 
                        person, or
                            ``(ii) the transferor is not a 10-percent 
                        shareholder, and
                    ``(B) such withholding agent does not know (or have 
                reason to know) that such affidavit is not correct.
            ``(2) Stock which is regularly traded.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), a withholding agent shall not be 
                required to deduct and withhold any amount under 
                subsection (a) with respect to any disposition of 
                regularly traded stock if such withholding agent does 
                not know (or have reason to know) that section 899 
                applies to such disposition.
                    ``(B) Special rule where substantial disposition.--
                If--
                            ``(i) there is a disposition of regularly 
                        traded stock in a corporation, and
                            ``(ii) the amount of stock involved in such 
                        disposition constitutes 1 percent or more (by 
                        vote or value) of the stock in such 
                        corporation,
                subparagraph (A) shall not apply but paragraph (1) 
                shall apply as if the disposition involved stock which 
                was not regularly traded.
                    ``(C) Notification by foreign person.--If section 
                899 applies to any disposition by a foreign person of 
                regularly traded stock, such foreign person shall 
                notify the withholding agent that section 899 applies 
                to such disposition.
            ``(3) Nonrecognition transactions.--A withholding agent 
        shall not be required to deduct and withhold any amount under 
        subsection (a) in any case where gain or loss is not recognized 
        by reason of section 899(c) (or the regulations prescribed 
        under such section).
    ``(c) Special Rule Where No Withholding.--If
            ``(1) there is no amount deducted and withheld under this 
        section with respect to any disposition to which section 899 
        applies, and
            ``(2) the foreign person does not pay the tax imposed by 
        this subtitle to the extent attributable to such disposition on 
        the date prescribed therefor,
for purposes of determining the amount of such tax, the foreign 
person's basis in the stock disposed of shall be treated as zero or 
such other amount as the Secretary may determine (and, for purposes of 
section 6501, the underpayment of such tax shall be treated as due to a 
willful attempt to evade such tax).
    ``(d) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Withholding agent.--The term `withholding agent' 
        means--
                    ``(A) the last United States person to have the 
                control, receipt, custody, disposal, or payment of the 
                amount realized on the disposition, or
                    ``(B) if there is no such United States person, the 
                person prescribed in regulations.
            ``(2) Foreign person.--The term `foreign person' means any 
        person other than a United States person.
            ``(3) Regularly traded stock.--The term `regularly traded 
        stock' means any stock of a class which is regularly traded on 
        an established securities market.
            ``(4) Authority to prescribe reduced amount.--At the 
        request of the person making the disposition or the withholding 
        agent, the Secretary may prescribe a reduced amount to be 
        withheld under this section if the Secretary determines that to 
        substitute such reduced amount will not jeopardize the 
        collection of the tax imposed by section 871(b)(1) or 
        882(a)(1).
            ``(5) Other terms.--Except as provided in this section, 
        terms used in this section shall have the same respective 
        meanings as when used in section 899.
            ``(6) Certain rules made applicable.--Rules similar to the 
        rules of section 1445(e) shall apply for purposes of this 
        section.
    ``(e) Regulations.--The Secretary shall prescribe such regulations 
as may be appropriate to carry out the purposes of this section, 
including regulations coordinating the provisions of this section with 
the provisions of sections 1445 and 1446.''
    (c) Exception From Branch Profits Tax.--Subparagraph (C) of section 
884(d)(2) is amended to read as follows:
                    ``(C) gain treated as effectively connected with 
                the conduct of a trade or business within the United 
                States under--
                            ``(i) section 897 in the case of the 
                        disposition of a United States real property 
                        interest described in section 897(c)(1)(A)(ii), 
                        or
                            ``(ii) section 899,''.
    (d) Reports With Respect to Certain Distributions.--Paragraph (2) 
of section 6038B(a) (relating to notice of certain transfers to foreign 
person) is amended by striking ``section 336'' and inserting ``section 
302, 331, or 336''.
    (e) Clerical Amendments.--
            (1) The table of sections for subpart D of part II of 
        subchapter N of chapter 1 is amended by adding at the end the 
        following new item:

``Sec. 899. Dispositions of stock in domestic corporations by 10-
                            percent foreign shareholders.''
            (2) The table of sections for subchapter A of chapter 3 is 
        amended by adding at the end the following new item:

``Sec. 1447. Withholding of tax on certain stock dispositions.''
    (f) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        dispositions after December 31, 1995, except that section 1447 
        of the Internal Revenue Code of 1986 (as added by this section) 
        shall not apply to any disposition before the date that is 6 
        months after the date of the enactment of this Act.
            (2) Coordination with treaties.--Sections 899 (other than 
        subsection (e) thereof) and 1447 of the Internal Revenue Code 
        of 1986 (as added by this section) shall not apply to any 
        disposition by any person if the application of such sections 
        to such disposition would be contrary to any treaty between the 
        United States and a foreign country which was in effect on the 
        date of the enactment of this Act, and at the time of such 
        disposition and if the person making such disposition is 
        entitled to the benefits of such treaty determined after the 
        application of section 894(c) of the Internal Revenue Code of 
        1986 (as added by section 12883).

SEC. 12883. LIMITATION ON TREATY BENEFITS.

    (a) General Rule.--Section 894 (relating to income affected by 
treaty) is amended by adding at the end the following new subsection:
    ``(c) Limitation on Treaty Benefits.--
            ``(1) Treaty shopping.--No foreign entity shall be entitled 
        to any benefits granted by the United States under any treaty 
        between the United States and a foreign country unless such 
        entity is a qualified resident of such foreign country.
            ``(2) Tax favored income.--No person shall be entitled to 
        any benefits granted by the United States under any treaty 
        between the United States and a foreign country with respect to 
        any income of such person if such income bears a significantly 
        lower tax under the laws of such foreign country than similar 
        income arising from sources within such foreign country derived 
        by residents of such foreign country.
            ``(3) Qualified resident.--For purposes of this 
        subsection--
                    ``(A) In general.--Except as otherwise provided in 
                this paragraph, the term `qualified resident' means, 
                with respect to any foreign country, any foreign entity 
                which is a resident of such foreign country unless--
                            ``(i) 50 percent or more (by value) of the 
                        stock or beneficial interests in such entity 
                        are owned (directly or indirectly) by 
                        individuals who are not residents of such 
                        foreign country and who are not United States 
                        citizens or resident aliens, or
                            ``(ii) 50 percent or more of its income is 
                        used (directly or indirectly) to meet 
                        liabilities to persons who are not residents of 
                        such foreign country or citizens or residents 
                        of the United States.
                    ``(B) Special rule for publicly traded entities.--A 
                foreign entity which is a resident of a foreign country 
                shall be treated as a qualified resident of such 
                foreign country if--
                            ``(i) interests in such entity are 
                        primarily and regularly traded on an 
                        established securities market in such country, 
                        or
                            ``(ii) such entity is not described in 
                        subparagraph (A)(ii) and such entity is wholly 
                        owned by another foreign entity which is 
                        organized in such foreign country and the 
                        interests in which are so traded.
                    ``(C) Entities owned by publicly traded domestic 
                corporations.--A foreign entity which is a resident of 
                a foreign country shall be treated as a qualified 
                resident of such foreign country if--
                            ``(i) such entity is not described in 
                        subparagraph (A)(ii) and such entity is wholly 
                        owned (directly or indirectly) by a domestic 
                        corporation, and
                            ``(ii) stock of such domestic corporation 
                        is primarily and regularly traded on an 
                        established securities market in the United 
                        States.
                    ``(D) Secretarial authority.--The Secretary may, in 
                his sole discretion, treat a foreign entity as being a 
                qualified resident of a foreign country if such entity 
                establishes to the satisfaction of the Secretary that 
                such entity meets such requirements as the Secretary 
                may establish to ensure that individuals who are not 
                residents of such foreign country do not use the treaty 
                between such foreign country and the United States in a 
                manner consistent with the purposes of this subsection.
            ``(4) Foreign entity.--For purposes of this subsection, the 
        term `foreign entity' means any corporation, partnership, 
        trust, estate, or other entity which is not a United States 
        person.''.
    (b) Conforming Amendment.--Paragraph (4) of section 884(e) is 
amended to read as follows:
            ``(4) Qualified resident.--For purposes of this subsection, 
        the term `qualified resident' has the meaning given to such 
        term by section 894(c)(3).''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1996, and shall apply to any treaty whether 
entered into before, on, or after such date.

SEC. 12884. SENSE OF THE SENATE REGARDING TAX TREATMENT OF CONVERSIONS 
              OF THRIFT CHARTERS TO BANK CHARTERS.

    In order to facilitate sound national banking policy and assist in 
the conversion of thrift charters to bank charters, it is the sense of 
the Senate that section 593 of the Internal Revenue Code of 1986 
(relating to reserves for losses on loans) should be repealed and 
appropriate relief should be granted for the pre-1988 portion of any 
bad debt reserves of a thrift charter.

                   Subtitle J--Pension Simplification

                     CHAPTER 1--GENERAL PROVISIONS

      Subchapter A--Simplification of Nondiscrimination Provisions

SEC. 12901. DEFINITION OF HIGHLY COMPENSATED EMPLOYEES; REPEAL OF 
              FAMILY AGGREGATION.

    (a) In General.--Paragraph (1) of section 414(q) (defining highly 
compensated employee) is amended to read as follows:
            ``(1) In general.--The term `highly compensated employee' 
        means any employee who--
                    ``(A) was a 5-percent owner at any time during the 
                year or the preceding year,
                    ``(B) had compensation for the preceding year from 
                the employer in excess of $80,000, or
                    ``(C) was the most highly compensated officer of 
                the employer for the preceding year.
        The Secretary shall adjust the $80,000 amount under 
        subparagraph (B) at the same time and in the same manner as 
        under section 415(d), except that the base period shall be the 
        calendar quarter ending September 30, 1996.''.
    (b) Special Rule For Tax Exempt and Governmental Plans.--Paragraph 
(2) of section 414(q) is amended to read as follows:
            ``(2) Special rule for tax exempt and governmental plans.--
        Solely for purposes of applying subsections (k) and (m) of 
        section 401, paragraph (1)(C) shall not apply to a plan 
        maintained by--
                    ``(A) a State or local government or political 
                subdivision thereof, or any agency or instrumentality 
                thereof, or
                    ``(B) any organization exempt from tax under this 
                subtitle.''.
    (c) Repeal of Family Aggregation Rules.--
            (1) In general.--Paragraph (6) of section 414(q) is hereby 
        repealed.
            (2) Compensation limit.--Paragraph (17)(A) of section 
        401(a) is amended by striking the last sentence.
            (3) Deduction.--Subsection (l) of section 404 is amended by 
        striking the last sentence.
    (d) Conforming Amendments.--
            (1) Paragraphs (4), (5), (8), and (12) of section 414(q) 
        are hereby repealed.
            (2)(A) Section 414(r) is amended by adding at the end the 
        following new paragraph:
            ``(9) Excluded employees.--For purposes of this subsection, 
        the following employees shall be excluded:
                    ``(A) Employees who have not completed 6 months of 
                service.
                    ``(B) Employees who normally work less than 17\1/2\ 
                hours per week.
                    ``(C) Employees who normally work not more than 6 
                months during any year.
                    ``(D) Employees who have not attained the age of 
                21.
                    ``(E) Except to the extent provided in regulations, 
                employees who are included in a unit of employees 
                covered by an agreement which the Secretary of Labor 
                finds to be a collective bargaining agreement between 
                employee representatives and the employer.
        Except as provided by the Secretary, the employer may elect to 
        apply subparagraph (A), (B), (C), or (D) by substituting a 
        shorter period of service, smaller number of hours or months, 
        or lower age for the period of service, number of hours or 
        months, or age (as the case may be) specified in such 
        subparagraph.''.
            (B) Subparagraph (A) of section 414(r)(2) is amended by 
        striking ``subsection (q)(8)'' and inserting ``paragraph (9)''.
            (3) Section 1114(c)(4) of the Tax Reform Act of 1986 is 
        amended by adding at the end the following new sentence: ``Any 
        reference in this paragraph to section 414(q) shall be treated 
        as a reference to such section as in effect before the Revenue 
        Reconciliation Act of 1995.''.
    (e) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to years beginning after December 31, 1996, except that 
        in determining whether an employee is a highly compensated 
        employee for years beginning in 1997, such amendments shall be 
        treated as having been in effect for years beginning in 1996.
            (2) Family aggregation.--The amendments made by subsection 
        (c) shall apply to years beginning after December 31, 1995.

SEC. 12902. DEFINITION OF COMPENSATION FOR SECTION 415 PURPOSES.

    (a) General Rule.--Section 415(c)(3) (defining participant's 
compensation) is amended by adding at the end the following new 
subparagraph:
                    ``(D) Certain deferrals included.--The term 
                `participant's compensation' shall include--
                            ``(i) any elective deferral (as defined in 
                        section 402(g)(3)), and
                            ``(ii) any amount which is contributed by 
                        the employer of the election of the employee 
                        and which is not includible in the gross income 
                        of the employee under section 125 or 457.''.
    (b) Conforming Amendments.--
            (1) Section 414(q)(7) is amended to read as follows:
            ``(7) Compensation.--For purposes of this subsection, the 
        term `compensation' has the meaning given such term by section 
        415(c)(3).''.
            (2) Section 414(s)(2) is amended by inserting ``not'' after 
        ``elect'' in the text and heading thereof.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1997.

SEC. 12903. MODIFICATION OF ADDITIONAL PARTICIPATION REQUIREMENTS.

    (a) General Rule.--Section 401(a)(26)(A) (relating to additional 
participation requirements) is amended to read as follows:
            ``(A) In general.--In the case of a trust which is a part 
        of a defined benefit plan, such trust shall not constitute a 
        qualified trust under this subsection unless on each day of the 
        plan year such trust benefits at least the lesser of--
                    ``(i) 50 employees of the employer, or
                    ``(ii) the greater of--
                            ``(I) 40 percent of all employees of the 
                        employer, or
                            ``(II) 2 employees (or if there is only 1 
                        employee, such employee).''.
    (b) Separate Line of Business Test.--Section 401(a)(26)(G) 
(relating to separate line of business) is amended by striking 
``paragraph (7)'' and inserting ``paragraph (2)(A) or (7)''.
    (c) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 1995.

SEC. 12904. NONDISCRIMINATION RULES FOR QUALIFIED CASH OR DEFERRED 
              ARRANGEMENTS AND MATCHING CONTRIBUTIONS.

    (a) Alternative Methods of Satisfying Section 401(k) 
Nondiscrimination Tests.--Section 401(k) (relating to cash or deferred 
arrangements), as amended by this Act, is amended by adding at the end 
the following new paragraph:
            ``(12) Alternative methods of meeting nondiscrimination 
        requirements.--
                    ``(A) In general.--A cash or deferred arrangement 
                shall be treated as meeting the requirements of 
                paragraph (3)(A)(ii) if such arrangement--
                            ``(i) meets the contribution requirements 
                        of subparagraph (B) or (C), and
                            ``(ii) meets the notice requirements of 
                        subparagraph (D).
                    ``(B) Matching contributions.--
                            ``(i) In general.--The requirements of this 
                        subparagraph are met if, under the arrangement, 
                        the employer makes matching contributions on 
                        behalf of each employee who is not a highly 
                        compensated employee in an amount equal to--
                                    ``(I) 100 percent of the elective 
                                contributions of the employee to the 
                                extent such elective contributions do 
                                not exceed 3 percent of the employee's 
                                compensation, and
                                    ``(II) 50 percent of the elective 
                                contributions of the employee to the 
                                extent that such elective contributions 
                                exceed 3 percent but do not exceed 5 
                                percent of the employee's compensation.
                            ``(ii) Rate for highly compensated 
                        employees.--The requirements of this 
                        subparagraph are not met if, under the 
                        arrangement, the matching contribution with 
                        respect to any elective contribution of a 
                        highly compensated employee at any level of 
                        compensation is greater than that with respect 
                        to an employee who is not a highly compensated 
                        employee.
                            ``(iii) Alternative plan designs.--If the 
                        matching contribution with respect to any 
                        elective contribution at any specific level of 
                        compensation is not equal to the percentage 
                        required under clause (i), an arrangement shall 
                        not be treated as failing to meet the 
                        requirements of clause (i) if--
                                    ``(I) the level of an employer's 
                                matching contribution does not increase 
                                as an employee's elective contributions 
                                increase, and
                                    ``(II) the aggregate amount of 
                                matching contributions with respect to 
                                elective contributions not in excess of 
                                such level of compensation is at least 
                                equal to the amount of matching 
                                contributions which would be made if 
                                matching contributions were made on the 
                                basis of the percentages described in 
                                clause (i).
                    ``(C) Nonelective contributions.--The requirements 
                of this subparagraph are met if, under the arrangement, 
                the employer is required, without regard to whether the 
                employee makes an elective contribution or employee 
                contribution, to make a contribution to a defined 
                contribution plan on behalf of each employee who is not 
                a highly compensated employee and who is eligible to 
                participate in the arrangement in an amount equal to at 
                least 3 percent of the employee's compensation.
                    ``(D) Notice requirement.--An arrangement meets the 
                requirements of this paragraph if, under the 
                arrangement, each employee eligible to participate is, 
                within a reasonable period before any year, given 
                written notice of the employee's rights and obligations 
                under the arrangement which--
                            ``(i) is sufficiently accurate and 
                        comprehensive to appraise the employee of such 
                        rights and obligations, and
                            ``(ii) is written in a manner calculated to 
                        be understood by the average employee eligible 
                        to participate.
                    ``(E) Other requirements.--
                            ``(i) Withdrawal and vesting 
                        restrictions.--An arrangement shall not be 
                        treated as meeting the requirements of 
                        subparagraph (B) or (C) unless the requirements 
                        of subparagraphs (B) and (C) of paragraph (2) 
                        are met with respect to all employer 
                        contributions (including matching 
                        contributions).
                            ``(ii) Social security and similar 
                        contributions not taken into account.--An 
                        arrangement shall not be treated as meeting the 
                        requirements of subparagraph (B) or (C) unless 
                        such requirements are met without regard to 
                        subsection (l), and, for purposes of subsection 
                        (l), employer contributions under subparagraph 
                        (B) or (C) shall not be taken into account.
                    ``(F) Other plans.--An arrangement shall be treated 
                as meeting the requirements under subparagraph (A)(i) 
                if any other plan maintained by the employer meets such 
                requirements with respect to employees eligible under 
                the arrangement.''.
    (b) Alternative Methods of Satisfying Section 401(m) 
Nondiscrimination Tests.--Section 401(m) (relating to nondiscrimination 
test for matching contributions and employee contributions), as amended 
by this Act, is amended by redesignating paragraph (10) as paragraph 
(11) and by adding after paragraph (9) the following new paragraph:
            ``(11) Alternative method of satisfying tests.--
                    ``(A) In general.--A defined contribution plan 
                shall be treated as meeting the requirements of 
                paragraph (2) with respect to matching contributions if 
                the plan--
                            ``(i) meets the contribution requirements 
                        of subparagraph (B) or (C) of subsection 
                        (k)(12),
                            ``(ii) meets the notice requirements of 
                        subsection (k)(12)(D), and
                            ``(iii) meets the requirements of 
                        subparagraph (B).
                    ``(B) Limitation on matching contributions.--The 
                requirements of this subparagraph are met if--
                            ``(i) matching contributions on behalf of 
                        any employee may not be made with respect to an 
                        employee's contributions or elective deferrals 
                        in excess of 6 percent of the employee's 
                        compensation,
                            ``(ii) the level of an employer's matching 
                        contribution does not increase as an employee's 
                        contributions or elective deferrals increase, 
                        and
                            ``(iii) the matching contribution with 
                        respect to any highly compensated employee at a 
                        specific level of compensation is not greater 
                        than that with respect to an employee who is 
                        not a highly compensated employee.''.
    (c) Year for Computing Nonhighly Compensated Employee Percentage.--
            (1) Cash or deferred arrangements.--Clause (ii) of section 
        401(k)(3)(A) is amended--
                    (A) by striking ``such year'' and inserting ``the 
                plan year'',
                    (B) by striking ``for such plan year'' and 
                inserting ``the preceding plan year'', and
                    (C) by adding at the end the following new 
                sentence: ``An arrangement may apply this clause by 
                using the plan year rather than the preceding plan year 
                if the employer so elects, except that if such an 
                election is made, it may not be changed except as 
                provided by the Secretary.''.
            (2) Matching and employee contributions.--Section 
        401(m)(2)(A) is amended--
                    (A) by inserting ``for such plan year'' after 
                ``highly compensated employee'',
                    (B) by inserting ``for the preceding plan year'' 
                after ``eligible employees'' each place it appears in 
                clause (i) and clause (ii), and
                    (C) by adding at the end the following flush 
                sentence: ``This subparagraph may be applied by using 
                the plan year rather than the preceding plan year if 
                the employer so elects, except that if such an election 
                is made, it may not be changed except as provided the 
                Secretary.''.
    (d) Special Rule for Determining Average Deferral Percentage for 
First Plan Year, Etc.--
            (1) Paragraph (3) of section 401(k) is amended by adding at 
        the end the following new subparagraph:
                    ``(E) For purposes of this paragraph, in the case 
                of the first plan year of any plan, the amount taken 
                into account as the actual deferral percentage of 
                nonhighly compensated employees for the preceding plan 
                year shall be--
                            ``(i) 3 percent, or
                            ``(ii) if the employer makes an election 
                        under this subclause, the actual deferral 
                        percentage of nonhighly compensated employees 
                        determined for such first plan year.''.
            (2) Paragraph (3) of section 401(m) is amended by adding at 
        the end thereof the following: ``Rules similar to the rules of 
        subsection (k)(3)(E) shall apply for purposes of this 
        subsection.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1998.

              Subchapter B--Simplified Distribution Rules

SEC. 12911. REPEAL OF 5-YEAR INCOME AVERAGING FOR LUMP-SUM 
              DISTRIBUTIONS.

    (a) In General.--Subsection (d) of section 402 (relating to 
taxability of beneficiary of employees' trust) is amended to read as 
follows:
    ``(d) Taxability of Beneficiary of Certain Foreign Situs Trusts.--
For purposes of subsections (a), (b), and (c), a stock bonus, pension, 
or profit-sharing trust which would qualify for exemption from tax 
under section 501(a) except for the fact that it is a trust created or 
organized outside the United States shall be treated as if it were a 
trust exempt from tax under section 501(a).''.
    (b) Conforming Amendments.--
            (1) Subparagraph (D) of section 402(e)(4) (relating to 
        other rules applicable to exempt trusts) is amended to read as 
        follows:
                    ``(D) Lump-sum distribution.--For purposes of this 
                paragraph--
                            ``(i) In general.--The term `lump sum 
                        distribution' means the distribution or payment 
                        within one taxable year of the recipient of the 
                        balance to the credit of an employee which 
                        becomes payable to the recipient--
                                    ``(I) on account of the employee's 
                                death,
                                    ``(II) after the employee attains 
                                age 59\1/2\,
                                    ``(III) on account of the 
                                employee's separation from service, or
                                    ``(IV) after the employee has 
                                become disabled (within the meaning of 
                                section 72(m)(7)),
                        from a trust which forms a part of a plan 
                        described in section 401(a) and which is exempt 
                        from tax under section 501 or from a plan 
                        described in section 403(a). Subclause (III) of 
                        this clause shall be applied only with respect 
                        to an individual who is an employee without 
                        regard to section 401(c)(1), and subclause (IV) 
                        shall be applied only with respect to an 
                        employee within the meaning of section 
                        401(c)(1). For purposes of this clause, a 
                        distribution to two or more trusts shall be 
                        treated as a distribution to one recipient. For 
                        purposes of this paragraph, the balance to the 
                        credit of the employee does not include the 
                        accumulated deductible employee contributions 
                        under the plan (within the meaning of section 
                        72(o)(5)).
                            ``(ii) Aggregation of certain trusts and 
                        plans.--For purposes of determining the balance 
                        to the credit of an employee under clause (i)--
                                    ``(I) all trusts which are part of 
                                a plan shall be treated as a single 
                                trust, all pension plans maintained by 
                                the employer shall be treated as a 
                                single plan, all profit-sharing plans 
                                maintained by the employer shall be 
                                treated as a single plan, and all stock 
                                bonus plans maintained by the employer 
                                shall be treated as a single plan, and
                                    ``(II) trusts which are not 
                                qualified trusts under section 401(a) 
                                and annuity contracts which do not 
                                satisfy the requirements of section 
                                404(a)(2) shall not be taken into 
                                account.
                            ``(iii) Community property laws.--The 
                        provisions of this paragraph shall be applied 
                        without regard to community property laws.
                            ``(iv) Amounts subject to penalty.--This 
                        paragraph shall not apply to amounts described 
                        in subparagraph (A) of section 72(m)(5) to the 
                        extent that section 72(m)(5) applies to such 
                        amounts.
                            ``(v) Balance to credit of employee not to 
                        include amounts payable under qualified 
                        domestic relations order.--For purposes of this 
                        paragraph, the balance to the credit of an 
                        employee shall not include any amount payable 
                        to an alternate payee under a qualified 
                        domestic relations order (within the meaning of 
                        section 414(p)).
                            ``(vi) Transfers to cost-of-living 
                        arrangement not treated as distribution.--For 
                        purposes of this paragraph, the balance to the 
                        credit of an employee under a defined 
                        contribution plan shall not include any amount 
                        transferred from such defined contribution plan 
                        to a qualified cost-of-living arrangement 
                        (within the meaning of section 415(k)(2)) under 
                        a defined benefit plan.
                            ``(vii) Lump-sum distributions of alternate 
                        payees.--If any distribution or payment of the 
                        balance to the credit of an employee would be 
                        treated as a lump-sum distribution, then, for 
                        purposes of this paragraph, the payment under a 
                        qualified domestic relations order (within the 
                        meaning of section 414(p)) of the balance to 
                        the credit of an alternate payee who is the 
                        spouse or former spouse of the employee shall 
                        be treated as a lump-sum distribution. For 
                        purposes of this clause, the balance to the 
                        credit of the alternate payee shall not include 
                        any amount payable to the employee.''.
            (2) Section 402(c) (relating to rules applicable to 
        rollovers from exempt trusts) is amended by striking paragraph 
        (10).
            (3) Paragraph (1) of section 55(c) (defining regular tax) 
        is amended by striking ``shall not include any tax imposed by 
        section 402(d) and''.
            (4) Paragraph (8) of section 62(a) (relating to certain 
        portion of lump-sum distributions from pension plans taxed 
        under section 402(d)) is hereby repealed.
            (5) Section 401(a)(28)(B) (relating to coordination with 
        distribution rules) is amended by striking clause (v).
            (6) Subparagraph (B)(ii) of section 401(k)(10) (relating to 
        distributions that must be lump-sum distributions) is amended 
        to read as follows:
                    ``(ii) Lump-sum distribution.--For purposes of this 
                subparagraph, the term `lump-sum distribution' means 
                any distribution of the balance to the credit of an 
                employee immediately before the distribution.''.
            (7) Section 406(c) (relating to termination of status as 
        deemed employee not to be treated as separation from service 
        for purposes of limitation of tax) is hereby repealed.
            (8) Section 407(c) (relating to termination of status as 
        deemed employee not to be treated as separation from service 
        for purposes of limitation of tax) is hereby repealed.
            (9) Section 691(c) (relating to deduction for estate tax) 
        is amended by striking paragraph (5).
            (10) Paragraph (1) of section 871(b) (relating to 
        imposition of tax) is amended by striking ``section 1, 55, or 
        402(d)(1)'' and inserting ``section 1 or 55''.
            (11) Subsection (b) of section 877 (relating to alternative 
        tax) is amended by striking ``section 1, 55, or 402(d)(1)'' and 
        inserting ``section 1 or 55''.
            (12) Section 4980A(c)(4) is amended--
                    (A) by striking ``to which an election under 
                section 402(d)(4)(B) applies'' and inserting ``(as 
                defined in section 402(e)(4)(D)) with respect to which 
                the individual elects to have this paragraph apply'',
                    (B) by adding at the end the following new flush 
                sentence:
        ``An individual may elect to have this paragraph apply to only 
        one lump-sum distribution.'', and
                    (C) by striking the heading and inserting:
            ``(4) Special one-time election.--''.
            (13) Section 402(e) is amended by striking paragraph (5).
    (c) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 1998.
            (2) Retention of certain transition rules.--Notwithstanding 
        any other provision of this section, the amendments made by 
        this section shall not apply to any distribution for which the 
        taxpayer elects the benefits of section 1122 (h)(3) or (h)(5) 
        of the Tax Reform Act of 1986. For purposes of the preceding 
        sentence, the rules of sections 402(c)(10) and 402(d) of the 
        Internal Revenue Code of 1986 (as in effect before the 
        amendments made by this Act) shall apply.

SEC. 12912. REPEAL OF $5,000 EXCLUSION OF EMPLOYEES' DEATH BENEFITS.

    (a) In General.--Subsection (b) of section 101 is hereby repealed.
    (b) Conforming Amendment.--Subsection (c) of section 101 is amended 
by striking ``subsection (a) or (b)'' and inserting ``subsection (a)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 12913. SIMPLIFIED METHOD FOR TAXING ANNUITY DISTRIBUTIONS UNDER 
              CERTAIN EMPLOYER PLANS.

    (a) General Rule.--Subsection (d) of section 72 (relating to 
annuities; certain proceeds of endowment and life insurance contracts) 
is amended to read as follows:
    ``(d) Special Rules for Qualified Employer Retirement Plans.--
            ``(1) Simplified method of taxing annuity payments.--
                    ``(A) In general.--In the case of any amount 
                received as an annuity under a qualified employer 
                retirement plan--
                            ``(i) subsection (b) shall not apply, and
                            ``(ii) the investment in the contract shall 
                        be recovered as provided in this paragraph.
                    ``(B) Method of recovering investment in 
                contract.--
                            ``(i) In general.--Gross income shall not 
                        include so much of any monthly annuity payment 
                        under a qualified employer retirement plan as 
                        does not exceed the amount obtained by 
                        dividing--
                                    ``(I) the investment in the 
                                contract (as of the annuity starting 
                                date), by
                                    ``(II) the number of anticipated 
                                payments determined under the table 
                                contained in clause (iii) (or, in the 
                                case of a contract to which subsection 
                                (c)(3)(B) applies, the number of 
                                monthly annuity payments under such 
                                contract).
                            ``(ii) Certain rules made applicable.--
                        Rules similar to the rules of paragraphs (2) 
                        and (3) of subsection (b) shall apply for 
                        purposes of this paragraph.
                            ``(iii) Number of anticipated payments.--

                         ``If the age of the
                                                                       
                           primary annuitant on
                                                             The number
                           the annuity starting
                                                         of anticipated
                           date is:
                                                           payments is:
                               Not more than 55......           360    
                               More than 55 but not             310    
                            more than 60.
                               More than 60 but not             260    
                            more than 65.
                               More than 65 but not             210    
                            more than 70.
                               More than 70..........           160    
                    ``(C) Adjustment for refund feature not 
                applicable.--For purposes of this paragraph, investment 
                in the contract shall be determined under subsection 
                (c)(1) without regard to subsection (c)(2).
                    ``(D) Special rule where lump sum paid in 
                connection with commencement of annuity payments.--If, 
                in connection with the commencement of annuity payments 
                under any qualified employer retirement plan, the 
                taxpayer receives a lump sum payment--
                            ``(i) such payment shall be taxable under 
                        subsection (e) as if received before the 
                        annuity starting date, and
                            ``(ii) the investment in the contract for 
                        purposes of this paragraph shall be determined 
                        as if such payment had been so received.
                    ``(E) Exception.--This paragraph shall not apply in 
                any case where the primary annuitant has attained age 
                75 on the annuity starting date unless there are fewer 
                than 5 years of guaranteed payments under the annuity.
                    ``(F) Adjustment where annuity payments not on 
                monthly basis.--In any case where the annuity payments 
                are not made on a monthly basis, appropriate 
                adjustments in the application of this paragraph shall 
                be made to take into account the period on the basis of 
                which such payments are made.
                    ``(G) Qualified employer retirement plan.--For 
                purposes of this paragraph, the term `qualified 
                employer retirement plan' means any plan or contract 
                described in paragraph (1), (2), or (3) of section 
                4974(c).
            ``(2) Treatment of employee contributions under defined 
        contribution plans.--For purposes of this section, employee 
        contributions (and any income allocable thereto) under a 
        defined contribution plan may be treated as a separate 
        contract.''.
    (b) Effective Date.--The amendment made by this section shall apply 
in cases where the annuity starting date is after December 31, 1995.

SEC. 12914. REQUIRED DISTRIBUTIONS.

    (a) In General.--Section 401(a)(9)(C) (defining required beginning 
date) is amended to read as follows:
                    ``(C) Required beginning date.--For purposes of 
                this paragraph--
                            ``(i) In general.--The term `required 
                        beginning date' means April 1 of the calendar 
                        year following the later of--
                                    ``(I) the calendar year in which 
                                the employee attains age 70\1/2\, or
                                    ``(II) the calendar year in which 
                                the employee retires.
                            ``(ii) Exception.--Subclause (II) of clause 
                        (i) shall not apply--
                                    ``(I) except as provided in section 
                                409(d), in the case of an employee who 
                                is a 5-percent owner (as defined in 
                                section 416) with respect to the plan 
                                year ending in the calendar year in 
                                which the employee attains age 70\1/2\, 
                                or
                                    ``(II) for purposes of section 408 
                                (a)(6) or (b)(3).
                            ``(iii) Actuarial adjustment.--In the case 
                        of an employee to whom clause (i)(II) applies 
                        who retires in a calendar year after the 
                        calendar year in which the employee attains age 
                        70\1/2\, the employee's accrued benefit shall 
                        be actuarially increased to take into account 
                        the period after age 70\1/2\ in which the 
                        employee was not receiving any benefits under 
                        the plan.
                            ``(iv) Exception for governmental and 
                        church plans.--Clauses (ii) and (iii) shall not 
                        apply in the case of a governmental plan or 
                        church plan. For purposes of this clause, the 
                        term `church plan' means a plan maintained by a 
                        church for church employees, and the term 
                        `church' means any church (as defined in 
                        section 3121(w)(3)(A)) or qualified church-
                        controlled organization (as defined in section 
                        3121(w)(3)(B)).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to years beginning after December 31, 1995.
    (c) Date for Adoption of Plan Amendments.--If any amendment made by 
this section or any other provision of this subtitle requires an 
amendment to any plan, such plan amendment shall not be required to be 
made before the first day of the first plan year beginning on or after 
January 1, 1997, if--
            (1) during the period after such amendment takes effect and 
        before such first plan year, the plan is operated in accordance 
        with the requirements of such amendment, and
            (2) such plan amendment applies retroactively to such 
        period.
In the case of a governmental plan (as defined in section 414(d) of the 
Internal Revenue Code of 1986), this subsection shall be applied by 
substituting ``1999'' for ``1997''.

   Subchapter C--Targeted Access to Pension Plans For Small Employers

SEC. 12916. CREDIT FOR PENSION PLAN START-UP COSTS OF SMALL EMPLOYERS.

    (a) Allowance of Credit.--Section 38(b) (defining current year 
business credit), as amended by this Act, is amended by striking 
``plus'' at the end of paragraph (11), by striking the period at the 
end of paragraph (12), and inserting ``, plus'', and by adding at the 
end the following new paragraph:
            ``(13) the small employer pension plan start-up cost 
        credit.''.
    (b) Small Employer Pension Plan Start-Up Cost Credit.--Subpart D of 
part IV of subchapter A of chapter 1 (relating to business related 
credits), as amended by this Act, is amended by adding at the end the 
following new section:

``SEC. 45D. SMALL EMPLOYER PENSION PLAN START-UP COST CREDIT.

    ``(a) Amount of Credit.--For purposes of section 38--
            ``(1) In general.--The small employer pension plan start-up 
        cost credit for any taxable year is an amount equal to 50 
        percent of the qualified start-up costs of an eligible employer 
        in establishing a qualified pension plan.
            ``(2) Aggregate limitation.--The amount of the credit under 
        paragraph (1) for any taxable year shall not exceed $500, 
        reduced by the aggregate amount determined under this section 
        for all preceding taxable years of the taxpayer.
    ``(b) Qualified Start-Up Costs; Qualified Pension Plan.--For 
purposes of this section--
            ``(1) Qualified start-up costs.--The term `qualified start-
        up costs' means any ordinary and necessary expenses of an 
        eligible employer which--
                    ``(A) are paid or incurred in connection with the 
                establishment of a qualified pension plan, and
                    ``(B) are of a nonrecurring nature.
            ``(2) Qualified pension plan.--The term `qualified pension 
        plan' means--
                    ``(A) a qualified salary reduction arrangement 
                described in section 408(p) (relating to simple 
                retirement accounts), or
                    ``(B) an arrangement described in section 
                401(k)(11).
    ``(c) Eligible Employer.--For purposes of this section--
            ``(1) In general.--The term `eligible employer' means an 
        employer which did not make any contributions on behalf of any 
        employee to--
                    ``(A) a qualified pension plan,
                    ``(B) a plan described in section 401(a) which 
                includes a trust exempt from tax under section 501(a), 
                or
                    ``(C) a simplified employee pension (as defined in 
                section 408(k)),
        during the 2 taxable years immediately preceding the taxable 
        year.
            ``(2) Professional service employers excluded.--Such term 
        shall not include an employer substantially all of the 
        activities of which involve the performance of services in the 
        fields of health, law, engineering, architecture, accounting, 
        actuarial science, performing arts, financial services, or 
        consulting.
    ``(d) Special Rules.--For purposes of this section--
            ``(1) Aggregation rules.--All persons treated as a single 
        employer under subsection (a) or (b) of section 52 or 
        subsection (n) or (o) of section 414 shall be treated as one 
        person.
            ``(2) Disallowance of deduction.--No deduction shall be 
        allowable under this chapter for any qualified start-up costs 
        for which a credit is allowable under subsection (a).''.
    (c) Conforming Amendments.--
            (1) Section 39(d) is amended by adding at the end the 
        following new paragraph:
            ``(8) No carryback of pension credit.--No portion of the 
        unused business credit for any taxable year which is 
        attributable to the small employer pension plan start-up cost 
        credit determined under section 45D may be carried back to a 
        taxable year ending before the date of the enactment of section 
        45D.''.
            (2) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 is amended by adding at the end the 
        following new item:

``Sec. 45D. Small employer pension plan start-up cost credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to costs incurred after the date of the enactment of this Act in 
taxable years ending after such date.

SEC. 12917. TAX-EXEMPT ORGANIZATIONS ELIGIBLE UNDER SECTION 401(k).

    (a) General Rule.--Clause (ii) of section 401(k)(4)(B) is amended 
to read as follows:
                            ``(ii) any organization described in 
                        section 501(c)(3) which is exempt from tax 
                        under section 501(a).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to plan years beginning after December 31, 1997, but shall not apply to 
any cash or deferred arrangement to which clause (i) of section 
1116(f)(2)(B) of the Tax Reform Act of 1986 applies.

                   Subchapter D--Paperwork Reduction

SEC. 12921. LIMITATION ON COMBINED SECTION 415 LIMIT.

    (a) In General.--Section 415(e) (relating to limitation in case of 
defined benefit plan and defined contribution plan for same employee) 
is amended by adding at the end the following new paragraph:
            ``(7) Limitation on application of subsection.--In the case 
        of years beginning after December 31, 1998, this subsection 
        shall only apply to plans maintained by an employer described 
        in section 45D(c)(2).''.
    (b) Excess Distributions.--Section 4980A is amended by adding at 
the end the following new subsection:
    ``(g) Limitation on Application.--This section shall not apply to 
distributions during years beginning after December 31, 1995, and 
before January 1, 1999, and such distributions shall be treated as made 
first from amounts not described in subsection (f).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1995.

               Subchapter E--Miscellaneous Simplification

SEC. 12931. TREATMENT OF LEASED EMPLOYEES.

    (a) General Rule.--Subparagraph (C) of section 414(n)(2) (defining 
leased employee) is amended to read as follows:
                    ``(C) such services are performed under primary 
                direction or control by the recipient.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to years beginning after December 31, 1995, but shall not apply 
to any relationship determined under an Internal Revenue Service ruling 
issued before the date of the enactment of this Act pursuant to section 
414(n)(2)(C) of the Internal Revenue Code of 1986 (as in effect on the 
day before such date) not to involve a leased employee.

SEC. 12932. PLANS COVERING SELF-EMPLOYED INDIVIDUALS.

    (a) Aggregation Rules.--Section 401(d) (relating to additional 
requirements for qualification of trusts and plans benefiting owner-
employees) is amended to read as follows:
    ``(d) Contribution Limit on Owner-Employees.--A trust forming part 
of a pension or profit-sharing plan which provides contributions or 
benefits for employees some or all of whom are owner-employees shall 
constitute a qualified trust under this section only if, in addition to 
meeting the requirements of subsection (a), the plan provides that 
contributions on behalf of any owner-employee may be made only with 
respect to the earned income of such owner-employee which is derived 
from the trade or business with respect to which such plan is 
established.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1995.

SEC. 12933. ELIMINATION OF SPECIAL VESTING RULE FOR MULTIEMPLOYER 
              PLANS.

    (a) In General.--Paragraph (2) of section 411(a) (relating to 
minimum vesting standards) is amended--
            (1) by striking ``subparagraph (A), (B), or (C)'' and 
        inserting ``subparagraph (A) or (B)''; and
            (2) by striking subparagraph (C).
    (b) Effective Date.--The amendments made by this section shall 
apply to plan years beginning on or after the earlier of--
            (1) the later of--
                    (A) January 1, 1996, or
                    (B) the date on which the last of the collective 
                bargaining agreements pursuant to which the plan is 
                maintained terminates (determined without regard to any 
                extension thereof after the date of the enactment of 
                this Act), or
            (2) January 1, 1998.
Such amendments shall not apply to any individual who does not have 
more than 1 hour of service under the plan on or after the 1st day of 
the 1st plan year to which such amendments apply.

SEC. 12934. FULL-FUNDING LIMITATION OF MULTIEMPLOYER PLANS.

    (a) Full-Funding Limitation.--Section 412(c)(7)(C) (relating to 
full-funding limitation) is amended--
            (1) by inserting ``or in the case of a multiemployer 
        plan,'' after ``paragraph (6)(B),'', and
            (2) by inserting ``and multiemployer plans'' after 
        ``paragraph (6)(b)'' in the heading thereof.
    (b) Valuation.--Section 412(c)(9) is amended--
            (1) by inserting ``(3 years in the case of a multiemployer 
        plan)'' after ``year'', and
            (2) by striking ``Annual valuation'' in the heading and 
        inserting ``Valuation''.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1997.

SEC. 12935. TREATMENT OF GOVERNMENTAL AND MULTIEMPLOYER PLANS UNDER 
              SECTION 415.

    (a) Compensation Limit.--Subsection (b) of section 415 is amended 
by adding immediately after paragraph (10) the following new paragraph:
            ``(11) Special limitation rule for governmental and 
        multiemployer plans.--In the case of a governmental plan (as 
        defined in section 414(d)) or a multiemployer plan, 
        subparagraph (B) of paragraph (1) shall not apply. This 
        paragraph shall not apply to any benefit provided under the 
        plan to a State or local legislator.''.
    (b) Treatment of Certain Excess Benefit Plans.--
            (1) In general.--Section 415 is amended by adding at the 
        end the following new subsection:
    ``(m) Treatment of Qualified Governmental Excess Benefit 
Arrangements.--
            ``(1) Governmental plan not affected.--In determining 
        whether a governmental plan (as defined in section 414(d)) 
        meets the requirements of this section, benefits provided under 
        a qualified governmental excess benefit arrangement shall not 
        be taken into account. Income accruing to a governmental plan 
        (or to a trust that is maintained solely for the purpose of 
        providing benefits under a qualified governmental excess 
        benefit arrangement) in respect of a qualified governmental 
        excess benefit arrangement shall constitute income derived from 
        the exercise of an essential governmental function upon which 
        such governmental plan (or trust) shall be exempt from tax 
        under section 115.
            ``(2) Taxation of participant.--For purposes of this 
        chapter--
                    ``(A) the taxable year or years for which amounts 
                in respect of a qualified governmental excess benefit 
                arrangement are includible in gross income by a 
                participant, and
                    ``(B) the treatment of such amounts when so 
                includible by the participant,
        shall be determined as if such qualified governmental excess 
        benefit arrangement were treated as a plan for the deferral of 
        compensation which is maintained by a corporation not exempt 
        from tax under this chapter and which does not meet the 
        requirements for qualification under section 401.
            ``(3) Qualified governmental excess benefit arrangement.--
        For purposes of this subsection, the term `qualified 
        governmental excess benefit arrangement' means a portion of a 
        governmental plan if--
                    ``(A) such portion is maintained solely for the 
                purpose of providing to participants in the plan that 
                part of the participant's annual benefit otherwise 
                payable under the terms of the plan that exceeds the 
                limitations on benefits imposed by this section,
                    ``(B) under such portion no election is provided at 
                any time to the participant (directly or indirectly) to 
                defer compensation, and
                    ``(C) benefits described in subparagraph (A) are 
                not paid from a trust forming a part of such 
                governmental plan unless such trust is maintained 
                solely for the purpose of providing such benefits.''.
            (2) Coordination with section 457.--Subsection (e) of 
        section 457 is amended by adding at the end the following new 
        paragraph:
            ``(14) Treatment of qualified governmental excess benefit 
        arrangements.--Subsections (b)(2) and (c)(1) shall not apply to 
        any qualified governmental excess benefit arrangement (as 
        defined in section 415(m)(3)), and benefits provided under such 
        an arrangement shall not be taken into account in determining 
        whether any other plan is an eligible deferred compensation 
        plan.''.
            (3) Conforming amendment.--Paragraph (2) of section 457(f) 
        is amended by striking the word ``and'' at the end of 
        subparagraph (C), by striking the period after subparagraph (D) 
        and inserting ``, and'', and by adding at the end the following 
        new subparagraph:
                    ``(E) a qualified governmental excess benefit 
                arrangement described in section 415(m).''.
    (c) Exemption for Survivor and Disability Benefits.--Paragraph (2) 
of section 415(b) is amended by adding at the end the following new 
subparagraph:
                    ``(I) Exemption for survivor and disability 
                benefits provided under governmental and environmental 
                plans.--Subparagraph (B) of paragraph (1), subparagraph 
                (C) of this paragraph, and paragraph (5) shall not 
                apply to--
                            ``(i) income received from a governmental 
                        plan (as defined in section 414(d)) or a 
                        multiemployer plan as a pension, annuity, or 
                        similar allowance as the result of the 
                        recipient becoming disabled by reason of 
                        personal injuries or sickness, or
                            ``(ii) amounts received from either such 
                        plan by the beneficiaries, survivors, or the 
                        estate of an employee as the result of the 
                        death of the employee.''
    (d) Revocation of Grandfather Election.--
            (1) In general.--Subparagraph (C) of section 415(b)(10) is 
        amended by adding at the end the following new clause:
                            ``(ii) Revocation of election.--An election 
                        under clause (i) may be revoked not later than 
                        the last day of the third plan year beginning 
                        after the date of the enactment of this clause. 
                        The revocation shall apply to all plan years to 
                        which the election applied and to all 
                        subsequent plan years. Any amount paid by a 
                        plan in a taxable year ending after the 
                        revocation shall be includible in income in 
                        such taxable year under the rules of this 
                        chapter in effect for such taxable year, except 
                        that, for purposes of applying the limitations 
                        imposed by this section, any portion of such 
                        amount which is attributable to any taxable 
                        year during which the election was in effect 
                        shall be treated as received in such taxable 
                        year.''.
            (2) Conforming amendment.--Subparagraph (C) of section 
        415(b)(10) is amended by striking ``This'' and inserting:
                            ``(i) In general.--This''.
    (e) Effective Date.--
            (1) In general.--The amendments made by subsections (a), 
        (b), and (c) shall apply to years beginning after December 31, 
        1995. The amendments made by subsection (d) shall apply with 
        respect to revocations adopted after the date of the enactment 
        of this Act.
            (2) Treatment for years beginning before date of 
        enactment.--Nothing in the amendments made by this section 
        shall be construed to infer that a governmental plan (as 
        defined in section 414(d) of the Internal Revenue Code of 1986) 
        fails to satisfy the requirements of section 415 of such Code 
        for any taxable year beginning before the date of the enactment 
        of this Act.
            (3) Multiemployer plans.--In the case of a multiemployer 
        plan, the amendments made by subsections (a) and (c) shall 
        apply to years beginning after December 31, 1995.

SEC. 12936. TREATMENT OF DEFERRED COMPENSATION PLANS OF STATE AND LOCAL 
              GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS.

    (a) Special Rules for Plan Distributions.--Paragraph (9) of section 
457(e) (relating to other definitions and special rules) is amended to 
read as follows:
            ``(9) Benefits not treated as made available by reason of 
        certain elections, etc.--
                    ``(A) Total amount payable is $3,500 or less.--The 
                total amount payable to a participant under the plan 
                shall not be treated as made available merely because 
                the participant may elect to receive such amount (or 
                the plan may distribute such amount without the 
                participant's consent) if--
                            ``(i) such amount does not exceed $3,500, 
                        and
                            ``(ii) such amount may be distributed only 
                        if--
                                    ``(I) no amount has been deferred 
                                under the plan with respect to such 
                                participant during the 2-year period 
                                ending on the date of the distribution, 
                                and
                                    ``(II) there has been no prior 
                                distribution under the plan to such 
                                participant to which this subparagraph 
                                applied.
                A plan shall not be treated as failing to meet the 
                distribution requirements of subsection (d) by reason 
                of a distribution to which this subparagraph applies.
                    ``(B) Election to defer commencement of 
                distributions.--The total amount payable to a 
                participant under the plan shall not be treated as made 
                available merely because the participant may elect to 
                defer commencement of distributions under the plan if--
                            ``(i) such election is made after amounts 
                        may be available under the plan in accordance 
                        with subsection (d)(1)(A) and before 
                        commencement of such distributions, and
                            ``(ii) the participant may make only 1 such 
                        election.''.
    (b) Cost-of-Living Adjustment of Maximum Deferral Amount.--
Subsection (e) of section 457, as amended by section 12935(b)(2), is 
amended by adding at the end the following new paragraph:
            ``(15) Cost-of-living adjustment of maximum deferral 
        amount.--The Secretary shall adjust the $7,500 amount specified 
        in subsections (b)(2) and (c)(1) at the same time and in the 
        same manner as under section 415(d), except that the base 
        period shall be the calendar quarter ending September 30, 
        1994.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 12937. CONTRIBUTIONS ON BEHALF OF DISABLED EMPLOYEES.

    (a) All Disabled Participants Receiving Contributions.--Section 
415(c)(3)(C) is amended by adding at the end the following: ``If a 
defined contribution plan provides for the continuation of 
contributions on behalf of all participants described in clause (i) for 
a fixed or determinable period, this subparagraph shall be applied 
without regard to clauses (ii) and (iii).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1995.

SEC. 12938. DISTRIBUTIONS UNDER RURAL COOPERATIVE PLANS.

    (a) Distributions for Hardship or After a Certain Age.--Section 
401(k)(7) is amended by adding at the end the following new 
subparagraph:
                    ``(C) Special rule for certain distributions.--A 
                rural cooperative plan which includes a qualified cash 
                or deferred arrangement shall not be treated as 
                violating the requirements of section 401(a) or of 
                paragraph (2) merely by reason of a hardship 
                distribution or a distribution to a participant after 
                attainment of age 59\1/2\. For purposes of this 
                section, the term `hardship distribution' means a 
                distribution described in paragraph (2)(B)(i)(IV) 
                (without regard to the limit of its application to 
                profit-sharing or stock bonus plans).''.
    (b) Definition of Rural Cooperative Plans.--
            (1) Public utility districts.--Clause (i) of section 
        401(k)(7)(B) (defining rural cooperative) is amended to read as 
        follows:
                            ``(i) any organization which--
                                    ``(I) is engaged primarily in 
                                providing electric service on a mutual 
                                or cooperative basis, or
                                    ``(II) is engaged primarily in 
                                providing electric service to the 
                                public in its area of service and which 
                                is exempt from tax under this subtitle 
                                or which is a State or local government 
                                (or an agency or instrumentality 
                                thereof), other than a municipality (or 
                                an agency or instrumentality 
                                thereof).''
            (2) Related organizations.--Subparagraph (B) of section 
        401(k)(7), as amended by paragraph (1), is amended by striking 
        clause (iv) and inserting the following new clauses:
                            ``(iv) an organization which is a national 
                        association of organizations described in any 
                        other clause of this subparagraph, or
                            ``(v) any other organization which provides 
                        services which are related to the activities of 
                        an organization described in clause (i), (ii), 
                        (iii), or (iv), but only in the case of a plan 
                        with respect to which substantially all of the 
                        organizations maintaining it are described in 
                        clause (i), (ii), (iii), or (iv).''.
    (c) Effective Dates.--
            (1) Distributions.--The amendments made by subsection (a) 
        shall apply to distributions after the date of the enactment of 
        this Act.
            (2) Rural cooperative.--The amendments made by subsection 
        (b) shall apply to plan years beginning after December 31, 
        1994.

SEC. 12939. TENURED FACULTY.

    (a) In General.--Section 457(e)(11) is amended by inserting 
``eligible faculty voluntary retirement incentive pay,'' after 
``disability pay,''.
    (b) Definition.--Section 457(e), as amended by sections 12935(b)(2) 
and 12936(b), is amended by adding at the end the following new 
paragraph:
            ``(16) Definition of eligible faculty voluntary retirement 
        incentive pay.--For purposes of this section, the term 
        `eligible faculty voluntary retirement incentive pay' means 
        payments under a plan established for employees serving under 
        contracts of unlimited tenure (or similar arrangements 
        providing for unlimited tenure) at an institution of higher 
        education (as defined in section 1201(a) of the Higher 
        Education Act of 1965 (20 U.S.C. 1141(a))) which--
                    ``(A) provides--
                            ``(i) payment to employees electing to 
                        retire during a specified period of time of 
                        limited duration, or
                            ``(ii) payment to employees who elect to 
                        retire prior to normal retirement age,
                    ``(B) provides that the total amount of payments to 
                an employee does not exceed the equivalent of twice the 
                employee's annual compensation (within the meaning of 
                section 415(c)(3)) during the year immediately 
                preceding the employee's termination of service, and
                    ``(C) provides that all payments to an employee 
                must be completed within 5 years after the employee's 
                termination of service.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1995.

SEC. 12940. UNIFORM RETIREMENT AGE.

    (a) Discrimination Testing.--Paragraph (5) of section 401(a) 
(relating to special rules relating to nondiscrimination requirements) 
is amended by adding at the end the following new subparagraph:
                    ``(F) Social security retirement age.--For purposes 
                of testing for discrimination under paragraph (4)--
                            ``(i) the social security retirement age 
                        (as defined in section 415(b)(8)) shall be 
                        treated as a uniform retirement age, and
                            ``(ii) subsidized early retirement benefits 
                        and joint and survivor annuities shall not be 
                        treated as being unavailable to employees on 
                        the same terms merely because such benefits or 
                        annuities are based in whole or in part on an 
                        employee's social security retirement age (as 
                        so defined).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1995.

SEC. 12941. MODIFICATIONS OF SECTION 403(b).

    (a) Multiple Salary Reduction Agreements Permitted.--
            (1) General rule.--For purposes of section 403(b) of the 
        Internal Revenue Code of 1986, the frequency that an employee 
        is permitted to enter into a salary reduction agreement, the 
        salary to which such an agreement may apply, and the ability to 
        revoke such an agreement shall be determined under the rules 
        applicable to cash or deferred elections under section 401(k) 
        of such Code.
            (2) Effective date.--This subsection shall apply to taxable 
        years beginning after December 31, 1995.
    (b) Treatment of Indian Tribal Governments.--In the case of any 
contract purchased in a plan year beginning before January 1, 1995, 
section 403(b) of the Internal Revenue Code of 1986 shall be applied as 
if any reference to an employer described in section 501(c)(3) of the 
Internal Revenue Code of 1986 which is exempt from tax under section 
501 of such Code included a reference to an employer which is an Indian 
tribal government (as defined by section 7701(a)(40) of such Code), a 
subdivision of an Indian tribal government (determined in accordance 
with section 7871(d) of such Code), an agency or instrumentality of an 
Indian tribal government or subdivision thereof, or a corporation 
chartered under Federal, State, or tribal law which is owned in whole 
or in part by any of the foregoing.
    (c) Elective Deferrals.--
            (1) In general.--Section 403(b)(1) is amended by inserting 
        ``and'' at the end of subparagraph (C), by striking ``and'' at 
        the end of subparagraph (D), and by striking subparagraph (E).
            (2) Effective date.--The amendment made by this subsection 
        shall apply to years beginning after December 31, 1995.

SEC. 12942. TAX ON PROHIBITED TRANSACTIONS.

    (a) In General.--Section 4975(a) is amended by striking ``5 
percent'' and inserting ``10 percent''.
    (b) Effective Date.--The amendment made by this section shall apply 
to prohibited transactions occurring after December 31, 1995.

SEC. 12943. EXTENSION OF INTERNAL REVENUE SERVICE USER FEES.

    Subsection (c) of section 10511 of the Revenue Act of 1987 is 
amended by striking ``October 1, 2000'' and by inserting ``October 1, 
2002''.

SEC. 12944. LIMITATION ON STATE INCOME TAXATION OF CERTAIN PENSION 
              INCOME.

    (a) In General.--Chapter 4 of title 4, United States Code, is 
amended by adding at the end the following:
``Sec. 114. Limitation on State income taxation of certain pension 
              income
    ``(a) No State may impose an income tax on any retirement income of 
an individual who is not a resident or domiciliary of such State (as 
determined under the laws of such State).
    ``(b) For purposes of this section--
            ``(1) The term `retirement income' means any income from--
                    ``(A) a qualified trust under section 401(a) of the 
                Internal Revenue Code of 1986 that is exempt under 
                section 501(a) from taxation;
                    ``(B) a simplified employee pension as defined in 
                section 408(k) of such Code;
                    ``(C) an annuity plan described in section 403(a) 
                of such Code;
                    ``(D) an annuity contract described in section 
                403(b) of such Code;
                    ``(E) an individual retirement plan described in 
                section 7701(a)(37) of such Code;
                    ``(F) an eligible deferred compensation plan (as 
                defined in section 457 of such Code);
                    ``(G) a governmental plan (as defined in section 
                414(d) of such Code);
                    ``(H) a trust described in section 501(c)(18) of 
                such Code; or
                    ``(I) any plan, program, or arrangement described 
                in section 3121(v)(2)(C) of such Code, if such income 
                is part of a series of substantially equal periodic 
                payments (not less frequently than annually) made for--
                            ``(i) the life or life expectancy of the 
                        recipient (or the joint lives or joint life 
                        expectancies of the recipient and the 
                        designated beneficiary of the recipient), or
                            ``(ii) a period of not less than 10 years.
        Such term includes any retired or retainer pay of a member or 
        former member of a uniform service computed under chapter 71 of 
        title 10, United States Code.
            ``(2) The term `income tax' has the meaning given such term 
        by section 110(c).
            ``(3) The term `State' includes any political subdivision 
        of a State, the District of Columbia, and the possessions of 
        the United States.
    ``(c) Nothing in this section shall be construed as having any 
effect on the application of section 514 of the Employee Retirement 
Income Security Act of 1974.''.
    (b) Conforming Amendment.--The table of sections for chapter 4 of 
title 4, United States Code, is amended by adding at the end the 
following:

``114. Limitation on State income taxation of certain pension income''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts received after December 31, 1994.

                        CHAPTER 2--CHURCH PLANS

SEC. 12951. NEW QUALIFICATION PROVISION FOR CHURCH PLANS.

    (a) In General.--Subpart A of part I of subchapter D of chapter 1 
(relating to pension, profit-sharing, stock bonus plans, etc.) is 
amended by adding after section 401 the following new section:

``SEC. 401A. QUALIFIED CHURCH PLAN.

    ``(a) General Rule.--For purposes of all Federal laws, including 
this title, a qualified church plan shall be treated as satisfying the 
requirements of section 401(a), and all references in (or pertaining 
to) this title and such laws to a plan described in section 401(a) 
shall include a qualified church plan. Except as otherwise provided in 
this section, no paragraph of section 401(a) shall apply to a qualified 
church plan.
    ``(b) Definition of Qualified Church Plan.--A plan is a qualified 
church plan if such plan meets the following requirements:
            ``(1) Church plan requirement.--The plan is a church plan 
        (within the meaning of section 414(e)), and the election 
        provided by section 410(d) has not been made with respect to 
        such plan.
            ``(2) Employee contributions are nonforfeitable.--An 
        employee's rights in the employee's accrued benefit derived 
        from the employee's own contributions are nonforfeitable.
            ``(3) Vesting requirements.--The plan satisfies the 
        requirements of subparagraph (A) or (B).
                    ``(A) 10-year vesting.--A plan satisfies the 
                requirements of this paragraph if an employee who has 
                at least 10 years of service has a nonforfeitable right 
                to 100 percent of the employee's accrued benefit 
                derived from employer contributions.
                    ``(B) 5- to 15-year vesting.--A plan satisfies the 
                requirements of this paragraph if an employee who has 
                completed at least 5 years of service has a 
                nonforfeitable right to a percentage of the employee's 
                accrued benefit derived from employer contributions 
                which is not less than the percentage determined under 
                the following table:
                  
                                                         Nonforfeitable
                    ``Years of service
                                                             percentage
                            5........................           25     
                            6........................           30     
                            7........................           35     
                            8........................           40     
                            9........................           45     
                            10.......................           50     
                            11.......................           60     
                            12.......................           70     
                            13.......................           80     
                            14.......................           90     
                            15 or more...............          100.    
                    ``(C) Years of service.--For purposes of this 
                paragraph, an employee's years of service shall be 
                determined in accordance with any reasonable method 
                selected by the plan administrator.
            ``(4) Funding requirements.--The plan meets the funding 
        requirements of section 401(a)(7) as in effect on September 1, 
        1974.
            ``(5) Additional requirements.--
                    ``(A) The plan meets the requirements of paragraphs 
                (1), (2), (8), (9), (16), (17), (25), (27), and (30) of 
                section 401(a).
                    ``(B) If the plan includes employees of an 
                organization which is not a church, the plan meets the 
                requirements of sections 401(a)(3) and 401(a)(6) (as in 
                effect on September 1, 1974) and sections 401(a)(4), 
                401(a)(5), and 401(m).
        For purposes of subparagraph (B), the plan administrator may 
        elect to treat the portion of the plan maintained by any 
        organization (or organizations) described in subparagraph (B) 
        as a separate plan (or plans).
    ``(c) Definitions and Special Rules.--
            ``(1) Church.--For purposes of this section, the term 
        `church' means a church or a convention or association of 
        churches, including an organization described in section 
        414(e)(3)(A) and an organization described in section 
        414(e)(3)(B)(ii), other than--
                    ``(A) an organization described in section 
                170(b)(1)(A)(ii) above the secondary school level 
                (other than a school for religious training), or
                    ``(B) an organization described in section 
                170(b)(1)(A)(iii)--
                            ``(i) which provides community service for 
                        inpatient medical care of the sick or injured 
                        (including obstetrical care); and
                            ``(ii) not more than 50 percent of the 
                        total patient days of which during any year are 
                        customarily assignable to the categories of 
                        chronic convalescent and rest, drug and 
                        alcoholic, epileptic, mentally deficient, 
                        mental, nervous and mental, and tuberculosis, 
                        and care for the aged.
            ``(2) Satisfaction of trust provision.--A plan shall not 
        fail to be described in this section merely because such plan 
        is funded through an organization described in section 
        414(e)(3)(A) if--
                    ``(A) such organization is subject to fiduciary 
                requirements under applicable State law;
                    ``(B) such organization is separately incorporated 
                from the church or convention or association of 
                churches which controls it or with which it is 
                associated;
                    ``(C) the assets which equitably belong to the plan 
                are separately accounted for; and
                    ``(D) under the plan, at any time prior to the 
                satisfaction of all liabilities with respect to 
                participants and their beneficiaries, such assets 
                cannot be used for, or diverted to, purposes other than 
                for the exclusive benefit of participants and their 
                beneficiaries (except that this paragraph shall not be 
                construed to preclude the use of plan assets to defray 
                the reasonable costs associated with administering the 
                plan and informing employees and employers of the 
                availability of the plan).
            ``(3) Certain sections apply.--Section 401 (b), (c), and 
        (h) shall apply to a qualified church plan.
            ``(4) Failure of one organization maintaining plan not to 
        disqualify plan.--If one or more organizations maintaining a 
        church plan fail to satisfy the requirements of subsection (b), 
        such plan shall not be treated as failing to satisfy the 
        requirements of this section with respect to other 
        organizations maintaining such plan.
            ``(5) Certain employees not considered highly compensated 
        and excluded employees.--For purposes of this section, no 
        employee shall be considered an officer, person whose principal 
        duties consist in supervising the work of other employees, or 
        highly compensated employee if such employee during the year or 
        the preceding year received compensation from the employer of 
        less than $50,000. For purposes of this section, there shall be 
        excluded from consideration employees described in section 
        410(b)(3)(A). The Secretary shall adjust the $50,000 amount 
        under this paragraph at the same time and in the same manner as 
        under section 415(d).
            ``(6) Time for determination of applicable law.--Except 
        where otherwise specified, the determination of whether a plan 
        meets the requirements of subsection (b) shall be made in 
        accordance with the provisions of this title as in effect 
        immediately following enactment of the Revenue Reconciliation 
        Act of 1995.''.
    (b) Effect on Existing Plans.--A church plan (within the meaning of 
section 414(e) of the Internal Revenue Code of 1986) which is otherwise 
subject to the applicable requirements of section 401(a) of such Code 
and which has not made the election provided by section 410(d) of such 
Code shall not be subject to section 401A of such Code, and shall 
remain subject to the applicable requirements of section 401(a) of such 
Code, unless the board of directors or trustees of an organization 
described in section 414(e)(3)(A) of such Code, or other appropriate 
governing body responsible for maintaining the plan, adopts a 
resolution under which the church plan is made subject to section 401A 
of such Code.
    (c) Effective Dates.--
            (1) In general.--The amendment made by this section shall 
        be effective for years beginning after December 31, 1994, 
        except that the provisions of section 401A(b)(3) of the 
        Internal Revenue Code of 1986 shall be effective for years 
        beginning after December 31, 1996. No regulation or ruling 
        under section 401(a) of such Code issued after December 31, 
        1994, shall apply to a qualified church plan described in 
        section 401A of such Code unless such regulation or ruling is 
        specifically made applicable by its terms to qualified church 
        plans.
            (2) Prior years.--Nothing in the amendment made by this 
        section shall be construed to infer that a church plan (within 
        the meaning of section 414(e) of such Code) fails to satisfy 
        the applicable requirements of section 401(a) of such Code for 
        any year beginning prior to January 1, 1995.

SEC. 12952. RETIREMENT INCOME ACCOUNTS OF CHURCHES.

    (a) In General.--Section 403(b)(9) is amended to read as follows:
            ``(9) Retirement income accounts provided by churches, 
        etc.--
                    ``(A) Amounts paid treated as contributions.--For 
                purposes of this title--
                            ``(i) a retirement income account shall be 
                        treated as an annuity contract described in 
                        this subsection, and
                            ``(ii) amounts paid by an employer 
                        described in paragraph (1)(A) or by a church or 
                        a convention or association of churches, 
                        including an organization described in section 
                        414(e)(3)(A) or 414(e)(3)(B)(ii), to a 
                        retirement income account shall be treated as 
                        amounts contributed by the employer for an 
                        annuity contract for the employee on whose 
                        behalf such account is maintained.
                    ``(B) Retirement income account.--For purposes of 
                this paragraph, the term `retirement income account' 
                means a program established or maintained by a church, 
                a convention or association of churches, including an 
                organization described in section 414(e)(3)(A), to 
                provide benefits under this subsection for an employee 
                described in paragraph (1) or an individual described 
                in paragraph (13)(F), or their beneficiaries.''.
    (b) Effective Dates.--
            (1) In general.--The amendment made by this section shall 
        be effective for years beginning after December 31, 1994.
            (2) Prior years.--Nothing in the amendment made by this 
        section shall be construed to infer that a church plan (within 
        the meaning of section 414(e)) fails to satisfy the applicable 
        requirements of section 403(b) for any year beginning prior to 
        January 1, 1995.

SEC. 12953. CONTRACTS PURCHASED BY A CHURCH.

    (a) Clarification of Applicable Nondiscrimination Requirements.--
Subparagraph (D) of section 403(b)(1) is amended to read as follows:
                    ``(D) except in the case of a contract purchased by 
                a church, such contract is purchased under a plan which 
                meets the nondiscrimination requirements of paragraph 
                (12)(A), and''.
    (b) Certain Coverage Rules Apply.--Subparagraph (B) of section 
403(b)(12) is amended to read as follows:
                    ``(B) Certain requirements.--If a contract 
                purchased by a church is purchased under a church plan 
                (within the meaning of section 414(e)) by--
                            ``(i) an organization described in section 
                        170(b)(1)(A)(ii) above the secondary school 
                        level (other than a school for religious 
                        training), or
                            ``(ii) an organization described in section 
                        170(b)(1)(A)(iii)--
                                    ``(I) which provides community 
                                service for inpatient medical care of 
                                the sick or injured (including 
                                obstetrical care), and
                                    ``(II) no more than 50 percent of 
                                the total patient days of which during 
                                any year are customarily assignable to 
                                the categories of chronic convalescent 
                                and rest, drug and alcoholic, 
                                epileptic, mentally deficient, mental, 
                                nervous and mental, and tuberculosis, 
                                and care for the aged,
                        the plan meets the requirements of sections 
                        401(a)(3) and 401(a)(6), as in effect on 
                        September 1, 1974, and sections 401(a)(4), 
                        401(a)(5), 401(a)(17), and 401(m).
                For purposes of this subparagraph, the plan 
                administrator may elect to treat the portion of the 
                plan maintained by any organization (or organizations) 
                described in this subparagraph as a separate plan (or 
                plans).''.
    (c) Special Rules for Churches.--Section 403(b) is amended by 
adding at the end the following new paragraph:
            ``(13) Definitions and special rules.--
                    ``(A) Contract purchased by a church.--For purposes 
                of this subsection, the term `contract purchased by a 
                church' includes an annuity described in section 
                403(b)(1), a custodial account described in section 
                403(b)(7), and a retirement income account described in 
                section 403(b)(9).
                    ``(B) Church.--For purposes of this subsection, the 
                term `church' means a church or a convention or 
                association of churches, including an organization 
                described in section 414(e)(3)(A) or section 
                414(e)(3)(B)(ii).
                    ``(C) Vesting.--In the case of a contract purchased 
                by a church under a church plan (within the meaning of 
                section 414(e))--
                            ``(i) sections 403(b)(1)(C) and 403(b)(6) 
                        shall not apply;
                            ``(ii) such contract is not described in 
                        this subsection unless an employee's rights in 
                        the employee's accrued benefit under such 
                        contract which is attributable to contributions 
                        made pursuant to a salary reduction agreement 
                        are nonforfeitable; and
                            ``(iii) such contract is not described in 
                        this subsection unless the plan satisfies the 
                        requirements of either of the following:
                                    ``(I) The plan provides that an 
                                employee who has at least 10 years of 
                                service has a nonforfeitable right to 
                                100 percent of the employee's accrued 
                                benefit derived from employer 
                                contributions.
                                    ``(II) The plan provides that an 
                                employee who has completed at least 5 
                                years of service has a nonforfeitable 
                                right to a percentage of the employee's 
                                accrued benefit derived from employer 
                                contributions which percentage is not 
                                less than the percentage determined 
                                under the following table:

                               
                                                         Nonforfeitable
                               ``Years of service
                                                             percentage
                                     5...............           25     
                                     6...............           30     
                                     7...............           35     
                                     8...............           40     
                                     9...............           45     
                                     10..............           50     
                                     11..............           60     
                                     12..............           70     
                                     13..............           80     
                                     14..............           90     
                                     15 or more......          100.    
                For purposes of clause (iii), an employee's years of 
                service shall be determined in accordance with any 
                reasonable method selected by the plan administrator.
                    ``(D) Failure of one organization maintaining plan 
                not to disqualify plan.--In the case of a contract 
                purchased by a church under a church plan (within the 
                meaning of section 414(e)), if one or more 
                organizations maintaining the church plan fails to 
                satisfy the requirements of this section, such plan 
                shall not be treated as failing to satisfy the 
                requirements of this section with respect to other 
                organizations maintaining such plan.
                    ``(E) Certain employees not considered highly 
                compensated and excluded employees.--For purposes of 
                this subsection, no employee for whom a contract is 
                purchased by a church shall be considered an officer, 
                person whose principal duties consist in supervising 
                the work of other employees, or highly compensated 
                employee if such employee during the year or the 
                preceding year received compensation from the employer 
                of less than $50,000. For purposes of this subsection, 
                there shall be excluded employees described in section 
                410(b)(3)(A). The Secretary shall adjust the $50,000 
                amount under this subparagraph at the same time and in 
                the same manner as under section 415(d).
                    ``(F) Certain ministers may participate.--For 
                purposes of this subsection--
                            ``(i) In general.--The term `employee' 
                        shall include a duly ordained, commissioned, or 
                        licensed minister of a church in the exercise 
                        of his or her ministry who is a self-employed 
                        individual (within the meaning of section 
                        401(c)(1)(B)) or any duly ordained, 
                        commissioned, or licensed minister of a church 
                        in the exercise of his or her ministry who is 
                        employed by an organization other than an 
                        organization described in section 501(c)(3).
                            ``(ii) Treatment as employer and 
                        employee.--A self-employed minister described 
                        in clause (i) shall be treated as his or her 
                        own employer which is an organization described 
                        in section 501(c)(3) and which is exempt from 
                        tax under section 501(a). Such an employee who 
                        is employed by an organization other than an 
                        organization described in section 501(c)(3) 
                        shall be treated as employed by an organization 
                        described in section 501(c)(3) and which is 
                        exempt from tax under section 501(a).
                            ``(iii) Compensation.--In determining the 
                        compensation of a self-employed minister 
                        described in clause (i), the earned income 
                        (within the meaning of section 401(c)(2)) of 
                        such minister shall be substituted for `the 
                        amount of compensation which is received from 
                        the employer' under paragraph (3).
                In determining the years of service of a self-employed 
                minister described in clause (i), the years (and 
                portions of years) in which such minister was a self-
                employed individual (within the meaning of section 
                401(c)(1)(B)) shall be included for purposes of 
                paragraph (4).
                    ``(G) Time for determination of applicable law.--
                Except where otherwise specified, the determination of 
                whether a contract purchased by a church meets the 
                requirements of this subsection shall be made in 
                accordance with the provisions of this title as in 
                effect immediately following enactment of the Revenue 
                Reconciliation Act of 1993.''.
    (d) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        be effective for years beginning after December 31, 1994, 
        except that the provisions of section 403(b)(13)(C)(iii) of the 
        Internal Revenue Code of 1986 shall be effective for years 
        beginning after December 31, 1996. No regulation or ruling 
        issued under section 401(a) or 403(b) of such Code after 
        December 31, 1994, shall apply to a contract purchased by a 
        church unless such regulation or ruling is specifically made 
        applicable by its terms to such contracts. For purposes of 
        applying the exclusion allowance of section 403(b)(2) of such 
        Code and the limitations of section 415 of such Code, any 
        contribution made after December 31, 1996, which is forfeitable 
        pursuant to section 403(b)(13)(C) of such Code shall be treated 
        as an amount contributed to the contract in the year for which 
        such contribution is made and not in the year the contribution 
        becomes nonforfeitable.
            (2) Prior years.--Nothing in the amendments made by this 
        section shall be construed to infer that a church plan (within 
        the meaning of section 414(e) of such Code) fails to satisfy 
        the applicable requirements of section 403(b) of such Code for 
        any year beginning prior to January 1, 1995.

SEC. 12954. CHANGE IN DISTRIBUTION REQUIREMENT FOR RETIREMENT INCOME 
              ACCOUNTS.

    (a) In General.--Subparagraph (A) of section 403(b)(11) is amended 
by inserting ``or, in the case of a retirement income account described 
in paragraph (9), within the meaning of section 401(k)(2)'' after 
``section 72(m)(7)''.
    (b) Effective Date.--The amendment made by this section shall be 
effective for years beginning after December 31, 1994.

SEC. 12955. REQUIRED BEGINNING DATE FOR DISTRIBUTIONS UNDER CHURCH 
              PLANS.

    (a) In General.--Subparagraph (C) of section 401(a)(9) is amended 
by striking the last sentence and inserting the following new sentence: 
``For purposes of this subparagraph, the term `church plan' has the 
meaning given such term by section 414(e).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to years after December 31, 1994.

SEC. 12956. PARTICIPATION OF MINISTERS IN CHURCH PLANS.

    (a) In General.--Section 414 is amended by adding the following new 
subsection:
    ``(u) Special Rules for Ministers.--Notwithstanding any other 
provision of this title, if a duly ordained, commissioned, or licensed 
minister of a church in the exercise of his or her ministry 
participates in a church plan (within the meaning of section 414(e)), 
then--
            ``(1) such minister shall be excluded from consideration 
        for purposes of applying sections 401(a)(3), 401(a)(4), and 
        401(a)(5), as in effect on September 1, 1974, and sections 
        401(a)(4), 401(a)(5), 401(a)(26), 401(k)(3), 401(m), 
        403(b)(1)(D) (including section 403(b)(12)), and 410 to any 
        stock bonus, pension, profit-sharing, or annuity plan 
        (including an annuity described in section 403(b) or a 
        retirement income account described in section 403(b)(9)) 
        described in this part. For purposes of this part, the church 
        plan in which such minister participates shall be treated as a 
        plan or contract meeting the requirements of section 401(a), 
        401A, or 403(b) (including section 403(b)(9)) with respect to 
        such minister's participation; and
            ``(2) such minister shall be excluded from consideration 
        for purposes of applying an applicable section to any plan 
        providing benefits described in an applicable section.
For purposes of paragraph (2), the term `applicable section' means 
section 79(d), section 105(h), paragraphs (1), (2), and (3) of section 
120(c), section 125(b), section 127(b)(2), and paragraphs (2), (3), and 
(8) of section 129(d).''.
    (b) Effective Date.--The amendment made by this section shall be 
effective for years beginning after December 31, 1995.

SEC. 12957. CERTAIN RULES AGGREGATING EMPLOYEES NOT TO APPLY TO 
              CHURCHES, ETC.

    (a) In General.--Section 414 is amended by adding at the end the 
following new subsection:
    ``(v) Certain Rules Aggregating Employees Not To Apply to Churches, 
Etc.--
            ``(1) In general.--If the election provided by paragraph 
        (3) is made, for purposes of sections 401(a)(3), 401(a)(4), and 
        401(a)(5), as in effect on September 1, 1974, and sections 
        401(a)(4), 401(a)(5), 401(a)(17), 401(a)(26), 401(h), 401(m), 
        410(b), 411(d)(1), and 416, subsections (b), (c), (m), (o), and 
        (t) of this section shall not apply to treat the employees of 
        church-related organizations as employed by a single employer, 
        except in the case of employees of church-related organizations 
        which are not exempt from tax under section 501(a) and which 
        have a common, immediate parent.
            ``(2) Definition of church-related organization.--For 
        purposes of this subsection, the term `church-related 
        organization' means a church or a convention or association of 
        churches, an organization described in section 414(e)(3)(A), an 
        organization described in section 414(e)(3)(B)(ii), or an 
        organization the employees of which would be aggregated with 
        the employees of such organizations but for the election 
        provided by paragraph (3).
            ``(3) Election to disaggregate.--The provisions of this 
        subsection shall apply if a church-related organization makes 
        an election for itself and other church-related organizations 
        (in such form and manner as the Secretary may by regulations 
        prescribe) on or before the last day of the first plan year 
        beginning on or after January 1, 1998.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 1994.

SEC. 12958. SELF-EMPLOYED MINISTERS TREATED AS EMPLOYEES FOR PURPOSES 
              OF CERTAIN WELFARE BENEFIT PLANS AND RETIREMENT INCOME 
              ACCOUNTS.

    (a) In General.--Section 7701(a)(20) is amended to read as follows:
            ``(20) Employee.--For the purpose of applying the 
        provisions of section 79 with respect to group-term life 
        insurance purchased for employees, for the purpose of applying 
        the provisions of sections 104, 105, and 106 with respect to 
        accident or health insurance or accident or health plans, for 
        the purpose of applying the provisions of section 101(b) with 
        respect to employees' death benefits, for the purpose of 
        applying the provisions of subtitle A with respect to 
        contributions to or under a stock bonus, pension, profit-
        sharing, or annuity plan, and with respect to distributions 
        under such a plan, or by a trust forming part of such a plan, 
        and for purposes of applying section 125 with respect to 
        cafeteria plans, the term `employee' shall include a duly 
        ordained, commissioned, or licensed minister of a church in the 
        exercise of his or her ministry who is a self-employed 
        individual (within the meaning of section 401(c)(1)(B)) or a 
        full-time life insurance salesman who is considered an employee 
        for the purpose of chapter 21, or in the case of services 
        performed before January 1, 1951, who would be considered an 
        employee if his services were performed during 1951.''.
    (b) Effective Date.--The amendment made by this section shall be 
effective for years beginning after December 31, 1994.

SEC. 12959. DEDUCTIONS FOR CONTRIBUTIONS BY CERTAIN MINISTERS TO 
              RETIREMENT INCOME ACCOUNTS.

    (a) In General.--Section 404(a) is amended by adding the following 
new paragraph:
            ``(10) Contributions by certain ministers to retirement 
        income accounts.--If contributions are made by a minister 
        described in section 403(b)(13)(F) to a retirement income 
        account described in section 403(b)(9) and not by a person 
        other than such minister, such contributions shall be treated 
        as made to a trust which is exempt from tax under section 
        501(a) which is part of a plan which is described in section 
        401(a) and shall be deductible under this subsection to the 
        extent such contributions do not exceed the exclusion allowance 
        of such minister, determined under section 403(b)(2).''.
    (b) Effective Date.--The amendment made by this section shall be 
effective for years beginning after December 31, 1994.

SEC. 12960. MODIFICATION FOR CHURCH PLANS OF RULES FOR PLANS MAINTAINED 
              BY MORE THAN ONE EMPLOYER.

    (a) In General.--Section 413(c) is amended by adding at the end the 
following new paragraph:
            ``(8) Church plans maintained by more than one employer.--A 
        church plan (within the meaning of section 414(e)) maintained 
        by more than one employer, and with respect to which the 
        election provided by section 410(d) has not been made, which 
        commingles assets solely for purposes of investment and pooling 
        for mortality experience to provide to participants annuities 
        computed with reference to the balance in the participants' 
        accounts when such accounts become payable shall not be treated 
        as a single plan maintained by more than one employer under 
        this subsection. The rules provided by this paragraph shall 
        apply for purposes of applying section 403(b)(12) to such 
        church plan.''.
    (b) Effective Date.--The amendment made by this section shall be 
effective for years beginning after December 31, 1994.

SEC. 12961. SECTION 457 NOT TO APPLY TO DEFERRED COMPENSATION OF A 
              CHURCH.

    (a) In General.--Paragraph (13) of section 457(e) is amended to 
read as follows:
            ``(13) Special rule for churches.--The term `eligible 
        employer' shall not include a church (within the meaning of 
        section 401A(c)(1)).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1994.

SEC. 12962. CHURCH PLAN MODIFICATION TO SEPARATE ACCOUNT REQUIREMENT OF 
              SECTION 401(h).

    (a) Exception to Separate Account Requirement.--Section 401(h) is 
amended by adding at the end the following new sentence: 
``Notwithstanding the preceding sentence, in the case of a pension or 
annuity plan that is a church plan (within the meaning of section 
414(e)) which is maintained by more than one employer, paragraph (6) 
shall not apply to an employee who is a key employee for purposes of 
section 416 solely because such employee is described in section 
416(i)(1)(A)(i) (relating to officers having an annual compensation 
greater than 150 percent of the amount in effect under section 
415(c)(1)(A)).''.
    (b) Application of Section 415(l).--Section 415(l)(1) is amended to 
read as follows:
            ``(1) In general.--For purposes of this section, the 
        following shall be treated as an annual addition to a defined 
        contribution plan for purposes of subsection (c):
                    ``(A) Contributions allocated to any individual 
                medical account which is part of a pension or annuity 
                plan.
                    ``(B) The actuarially determined amount of 
                prefunding for the insurance value of benefits which 
                are--
                            ``(i) described in section 401(h);
                            ``(ii) paid under a pension or annuity plan 
                        that is a church plan (within the meaning of 
                        section 414(e));
                            ``(iii) paid under a plan maintained by 
                        more than one employer; and
                            ``(iv) payable solely to an employee who is 
                        a key employee for purposes of section 415 
                        solely because such employee is described in 
                        section 416(i)(1)(A)(i) (relating to officers 
                        having an annual compensation greater than 150 
                        percent of the amount in effect under section 
                        415(c)(1)(A)), his spouse, or his dependents.
                Subparagraph (B) of section (c)(1) shall not apply to 
                any amount treated as an annual addition under the 
                preceding sentence.''.
    (c) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 1994.

SEC. 12963. RULE RELATING TO INVESTMENT IN CONTRACT NOT TO APPLY TO 
              FOREIGN MISSIONARIES.

    (a) In General.--The last sentence of section 72(f) is amended to 
read as follows: ``The preceding sentence shall not apply to amounts 
which were contributed by the employer, as determined under regulations 
prescribed by the Secretary, to provide pension or annuity credits, to 
the extent such credits are attributable to services performed before 
January 1, 1963, and are provided pursuant to pension or annuity plan 
provisions in existence on March 12, 1962, and on that date applicable 
to such services, or to provide pension or annuity credits for foreign 
missionaries (within the meaning of section 403(b)(2)(D)(iii)).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1994.

SEC. 12964. REPEAL OF ELECTIVE DEFERRAL CATCH-UP LIMITATION FOR 
              RETIREMENT INCOME ACCOUNTS.

    (a) In General.--Clause (iii) of section 402(g)(8)(A) is amended to 
read as follows:
                            ``(iii) except in the case of elective 
                        deferrals under a retirement income account 
                        described in section 403(b)(9), the excess of 
                        $5,000 multiplied by the number of years of 
                        service of the employee with the qualified 
                        organization over the employer contributions 
                        described in paragraph (3) made by the 
                        organization on behalf of such employee for 
                        prior taxable years (determined in the manner 
                        prescribed by the Secretary).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 1994.

SEC. 12965. CHURCH PLANS MAY ANNUITIZE BENEFITS.

    (a) In General.--A retirement income account described in section 
403(b)(9) of the Internal Revenue Code of 1986, a church plan (within 
the meaning of section 414(e) of such Code) that is a plan described in 
section 401(a) or 401A of such Code, or an account which consists of 
qualified voluntary employee contributions described in section 
219(e)(2) of such Code (as in effect before the date of the enactment 
of the Tax Reform Act of 1986) and earnings thereon, shall not fail to 
be described in such sections merely because it pays benefits to 
participants (and their beneficiaries) from a pool of assets 
administered or funded by an organization described in section 
414(e)(3)(A) of such Code, rather than through the purchase of 
annuities from an insurance company.
    (b) Effective Date.--This provision shall be effective for years 
beginning after December 31, 1994.

SEC. 12966. CHURCH PLANS MAY INCREASE BENEFIT PAYMENTS.

    (a) In General.--A retirement income account described in section 
403(b)(9) of the Internal Revenue Code of 1986, a church plan (within 
the meaning of section 414(e) of such Code) that is a plan described in 
section 401(a) or 401A of such Code, or an account which consists of 
qualified voluntary employee contributions described in section 
219(e)(2) of such Code (as in effect before the date of the enactment 
of the Tax Reform Act of 1986) and earnings thereon, shall not fail to 
be described in such sections merely because it provides benefit 
payments to participants (and their beneficiaries)--
            (1) to take into account the investment performance of the 
        underlying assets or favorable interest or mortality 
        experience, or
            (2) that increase in an amount not in excess of 5 percent 
        per year.
    (b) Effective Date.--This provision shall be effective for years 
beginning after December 31, 1994.

SEC. 12967. RULES APPLICABLE TO SELF-INSURED MEDICAL REIMBURSEMENT 
              PLANS NOT TO APPLY TO PLANS OF CHURCHES.

    (a) In General.--Section 105(h) is amended by adding at the end the 
following new paragraph:
            ``(11) Plans of churches.--This subsection shall not apply 
        to a plan maintained by a church (within the meaning of section 
        401A(c)(1)).''.
    (b) Effective Date.--The amendment made by this section shall be 
effective for years beginning after December 31, 1994.

SEC. 12968. RETIREMENT BENEFITS OF MINISTERS NOT SUBJECT TO TAX ON NET 
              EARNINGS FROM SELF-EMPLOYMENT.

    (a) In General.--Section 1402(a)(8) (defining net earning from 
self-employment) is amended by inserting ``, but shall not include in 
such net earning from self-employment any retirement benefit received 
by such individual from a church plan (as defined in section 414(e))'' 
before the semicolon at the end.
    (b) Effective Date.--The amendments made by this section shall 
apply to years beginning before, on, or after December 31, 1994.

                  TITLE XIII--MISCELLANEOUS PROVISIONS

SEC. 13001. GENERATIONAL ACCOUNTING IN PRESIDENT'S BUDGET.

    Section 1105(a) of title 31, United States Code, is amended by 
adding at the end thereof the following:
            ``(32) an analysis of the generational accounting 
        consequences of the budget including the projected Federal 
        deficit, at current spending levels, in the fiscal year that is 
        20 years after the fiscal year for which the budget is 
        submitted and the revenue levels (including the increase 
        required in current levels) required to eliminate the projected 
        Federal deficit.''.

SEC. 13002. LEASE-PURCHASE OF OVERSEAS PROPERTY.

    (a) Authority for Lease-Purchase.--Subject to subsections (b) and 
(c), the Secretary is authorized to acquire by lease-purchase such 
properties as are described in subsection (b), if--
            (1) the Secretary of State, and
            (2) the Director of the Office of Management and Budget,
certify and notify the appropriate committees of Congress that the 
lease-purchase arrangement will result in a net cost savings to the 
Federal government when compared to a lease, a direct purchase, or 
direct construction of comparable property.
    (b) Locations and Limitations.--The authority granted in subsection 
(a) may be exercised only--
            (1) to acquire appropriate housing for Department of State 
        personnel stationed abroad and for the acquisition of other 
        facilities, in locations in which the United States has a 
        diplomatic mission; and
            (2) during fiscal years 1996 through 1999.
    (c) Authorization of Funding.--Funds for lease-purchase 
arrangements made pursuant to subsection (a) shall be available from 
amounts appropriated under the authority of section 111(a)(3) (relating 
to the Acquisition and Maintenance of Buildings Abroad'' account).

SEC. 13003. PAY OF MEMBERS OF CONGRESS AND THE PRESIDENT DURING 
              GOVERNMENT SHUTDOWNS.

    (a) In General.--Members of Congress and the President shall not 
receive basic pay for any period in which--
            (1) there is more than a 24-hour lapse in appropriations 
        for any Federal agency or department as a result of a failure 
        to enact a regular appropriations bill or continuing 
        resolution; or
            (2) the Federal Government is unable to make payments or 
        meet obligations because the public debt limit under section 
        3101 of title 31, United States Code has been reached.
    (b) Retroactive Pay Prohibited.--No pay forfeited in accordance 
with subsection (a) may be paid retroactively.

SEC. 13004. SENSE OF THE SENATE ON CONTINUED HUMAN RIGHTS VIOLATIONS IN 
              THE FORMER YUGOSLAVIA.

    (a) Findings.--The Senate makes the following findings:
            (1) Human rights violations and atrocities continue 
        unabated in the former Yugoslavia.
            (2) The Assistant Secretary of State for Human Rights 
        recently reported that starting in mid-September and 
        intensifying between October 6 and October 12, 1995 many 
        thousands of Bosnian Muslims and Croats in Northwest Bosnia 
        were systematically forced from their homes by paramilitary 
        units, local police and in some instances, Bosnian Serb Army 
        officials and soldiers.
            (3) Despite the October 12, 1995 cease-fire which went into 
        effect by agreement of the warring parties in the former 
        Yugoslavia, Bosnian Serbs continue to conduct a brutal campaign 
        to expel non-Serb civilians who remain in Northwest Bosnia, and 
        are subjecting non-Serbs to untold horror--murder, rape, 
        robbery and other violence.
            (4) Horrible examples of ``ethnic cleansing'' persist in 
        Northwest Bosnia. Some 6,000 refugees recently reached Zenica 
        and reported that nearly 2,000 family members from this group 
        are still unaccounted for.
            (5) The United Nations spokesman in Zagreb reported that 
        many refugees have been given only a few minutes to leave their 
        homes and that ``girls as young as 17 are reported to have been 
        taken into wooded areas and raped''. Elderly, sick and very 
        young refugees have been driven to remote areas and forced to 
        walk long distances on unsafe roads and cross rivers without 
        bridges.
            (6) The War Crimes Tribunal for the former Yugoslavia has 
        collected volumes of evidence of atrocities, including the 
        establishment of death camps, mass executions and systematic 
        campaigns of rape and terror. This War Crimes Tribunal has 
        already issued 43 indictments on the basis of this evidence.
            (7) The Assistant Secretary of State for Human Rights has 
        described the eyewitness accounts as ``prima facia evidence of 
        war crimes which, if confirmed, could very well lead to further 
        indictments by the War Crimes Tribunal''.
            (8) The United Nations High Commissioner for Refugees 
        estimates that more than 22,000 Muslims and Croats have been 
        forced from their homes since mid-September in Bosnian Serb 
        controlled areas.
            (9) In opening the Dodd Center Symposium on the topic of 
        ``50 Years After Nuremburg'' on October 16, 1995, President 
        Clinton cited the ``excellent progress'' of the War Crimes 
        Tribunal for the former Yugoslavia and said, ``Those accused of 
        war crimes, crimes against humanity and genocide must be 
        brought to justice. They must be tried and, if found guilty, 
        they must be held accountable.''.
            (10) President Clinton also observed on October 16, 1995, 
        ``some people are concerned that pursuing peace in Bosnia and 
        prosecuting war criminals are incompatible goals. But I believe 
        they are wrong. There must be peace for justice to prevail, but 
        there must be justice when peace prevails''.
    (b) Sense of the Senate.--It is the sense of the Senate that--
            (1) the Senate condemns the systematic human rights abuses 
        against the people of Bosnia and Herzegovena.
            (2) with peace talks scheduled to begin in the United 
        States on October 31, 1995, these new reports of Serbian 
        atrocities are of grave concern to all Americans.
            (3) the Bosnian Serb leadership should immediately halt 
        these atrocities, fully account for the missing, and allow 
        those who have been separated to return to their families.
            (4) the International Red Cross, United Nations agencies 
        and human rights organizations should be granted full and 
        complete access to all locations throughout Bosnia and 
        Herzegovena.
            (5) the Bosnian Serb leadership should fully cooperate to 
        facilitate the complete investigation of the above allegations 
        so that those responsible may be held accountable under 
        international treaties, conventions, obligations and law.
            (6) the United States should continue to support the work 
        of the War Crimes Tribunal for the former Yugoslavia.
            (7) ``ethnic cleansing'' by any faction, group, leader, or 
        government is unjustified, immoral and illegal and all 
        perpetrators of war crimes, crimes against humanity, genocide 
        and other human rights violations in the former Yugoslavia must 
        be held accountable.

            Passed the House of Representatives October 26, 1995.

            Attest:

                                                ROBIN H. CARLE,

                                                                 Clerk.

            Passed the Senate October 28 (legislative day, October 26), 
      1995.

            Attest:

                                             KELLY D. JOHNSTON,

                                                             Secretary.
104th CONGRESS

  1st Session 

                               H. R. 2491

_______________________________________________________________________

                               AMENDMENT

_______________________________________________________________________

             October 28 (legislative day, October 26), 1995

                    Ordered to be printed as passed

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