[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2762 Introduced in House (IH)]







107th CONGRESS
  1st Session
                                H. R. 2762

  To provide incentives to encourage private sector efforts to reduce 
earthquake losses, to establish a national disaster mitigation program, 
                        and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             August 2, 2001

Ms. Hooley of Oregon introduced the following bill; which was referred 
 to the Committee on Ways and Means, and in addition to the Committees 
  of Financial Services, and Science, for a period to be subsequently 
   determined by the Speaker, in each case for consideration of such 
 provisions as fall within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
  To provide incentives to encourage private sector efforts to reduce 
earthquake losses, to establish a national disaster mitigation program, 
                        and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Earthquake Loss Reduction Act of 
2001''.

SEC. 2. FINDINGS AND PURPOSE.

    (a) Findings.--Congress finds the following:
            (1) After 23 years of research funded by the National 
        Earthquake Hazards Reduction Program, a substantial body of 
        knowledge exists about earth sciences, geotechnical, and 
        structural engineering and human behavior relating earthquakes.
            (2) The foremost challenge as we enter the 21st century is 
        putting this knowledge to work by reducing future losses to 
        improve the safety of Americans and the performance of State 
        and local government facilities and private buildings and 
        facilities.
            (3) Earthquakes and tsunamis cause great danger to human 
        life and property throughout the United States and continue to 
        threaten Americans significantly in over 40 States and 
        territories.
            (4) Too few States and local communities have sufficiently 
        identified and assessed their risk and implemented adequate 
        measures to reduce losses from such disasters and to ensure 
        that their critical public infrastructure and facilities will 
        continue to function after the disaster.
            (5) Too much of the Nation's stocks of housing and 
        commercial buildings remain inherently vulnerable to earthquake 
        shaking. Future losses in these facilities can be lessened 
        using currently feasible technology.
            (6) Too much of local government infrastructure remain at 
        risk and are likely to be non-functional in the aftermath of 
        foreseeable earthquake events at the time when the services 
        they provide are critically necessary.
            (7) Federal, State and local government expenditures for 
        disaster assistance and recovery have increased without 
        commensurate reduction in the likelihood of future losses from 
        such earthquakes.
            (8) Feasible techniques for reducing future earthquake 
        losses are readily available.
            (9) Without economic incentives, it is unlikely that States 
        and local communities and the public will be able to implement 
        available measures to reduce losses and ensure continued 
        functionality of their infrastructure.
            (10) With moderate to strong seismic activity many historic 
        buildings would sustain extensive damage and the cost to repair 
        these structures will be prohibitive. Private insurance 
        companies are becoming increasingly reluctant to issue seismic 
        coverage. Without assistance, these historic, national 
        treasures will be lost forever.
    (b) Purpose.--It is the purpose of this Act to establish a national 
disaster mitigation program that--
            (1) reduces the loss of life and property, human suffering, 
        economic disruption, and disaster assistance costs resulting 
        from earthquakes;
            (2) offers financial incentives to encourage private sector 
        efforts to reduce earthquake losses;
            (3) provides matching funds to encourage and assist States 
        and local governments and the private sector in their efforts 
        to implement measures designed to ensure the continued 
        functionality of public infrastructure, historic buildings, 
        commerce, and habitation after earthquakes;
            (4) creates Federal, State and local government 
        partnerships to reduce the vulnerability of public 
        infrastructure, commercial enterprises, historic buildings, and 
        residential buildings to earthquakes;
            (5) creates a national seismic insurance pool to protect 
        national historic buildings;
            (6) reduces risk of public and private investment in 
        historic buildings; and
            (7) increases protection of our national historic legacy.

SEC. 3. NONREFUNDABLE CREDIT FOR EXPENSES RELATED TO SEISMIC RETROFIT 
              OF PRINCIPAL RESIDENCE.

    (a) General Rule.--Subpart A of part IV of subchapter A of chapter 
1 of the Internal Revenue Code of 1986 (relating to nonrefundable 
personal credits) is amended by inserting after section 25A the 
following:

``SEC. 25B. EXPENSES RELATED TO SEISMIC RETROFIT OF PRINCIPAL 
              RESIDENCE.

    ``(a) General Rule.--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 50 percent of so much of the qualified 
seismic retrofit expenses of the taxpayer for the taxable year as do 
not exceed $6,000.
    ``(b) Qualified Seismic Retrofit Expenses.--For purposes of this 
section--
            ``(1) In general.--The term `qualified seismic retrofit 
        expenses' means amounts paid or incurred by the taxpayer during 
        the taxable year in relation to any seismic retrofit 
        construction of the principal residence of the taxpayer.
            ``(2) Seismic retrofit construction.--The term `seismic 
        retrofit construction' means any addition or improvement--
                    ``(A) which is certified by the State disaster 
                agency or other applicable agency--
                            ``(i) as resulting in the mitigation of the 
                        risk of damage to existing property from an 
                        earthquake, and
                            ``(ii) as being in addition to any addition 
                        or improvement required by any State or local 
                        law with respect to such property, and
                    ``(B) which is placed in service at least 5 years 
                after the date the building is first placed in service.
        Such term does not include the cost of acquiring such property 
        (or any interest therein).
            ``(3) Principal residence.--The term `principal residence' 
        has the same meaning as when used in section 121.
    ``(c) Denial of Double Benefit.--No deduction shall be allowed 
under any other provision of this chapter with respect to any amount of 
qualified seismic retrofit expenses taken into account under subsection 
(a).
    ``(d) Basis Adjustment.--For purposes of this subtitle, if a credit 
is allowed under this section with respect to any residence, the basis 
of such residence shall be reduced by the amount of the credit so 
allowed.''.
    (b) Conforming Amendments.--
            (1) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1 of the Internal Revenue Code of 1986 
        is amended by inserting after the item relating to section 25A 
        the following new item:

                              ``Sec. 25B. Expenses related to seismic 
                                        retrofit of principal 
                                        residence.''.
            (2) Subsection (a) of section 1016 of such Code is amended 
        by striking ``and'' at the end of paragraph (26), by striking 
        the period at the end of paragraph (27) and inserting ``, 
        and'', and by adding at the end the following new paragraph:
            ``(28) in the case of a residence with respect to which a 
        credit was allowed under section 25B, to the extent provided in 
        section 25B(d).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to expenses paid or incurred in taxable years beginning after 
December 31, 2000.

SEC. 4. RECOVERY PERIOD FOR DEPRECIATION OF CERTAIN SEISMIC RETROFIT 
              EXPENSES.

    (a) Treatment as 5-Year Property.--Section 168(e)(3)(B) of the 
Internal Revenue Code of 1986 (relating to 5-year property) is amended 
by striking ``and'' at the end of clause (v), by striking the period 
and inserting ``, and'' at the end of clause (vi), and by inserting 
after clause (vi) the following new clause:
                            ``(vii) any qualified seismic retrofit 
                        property.''.
    (b) Definition of Qualified Seismic Retrofit Property.--Section 
168(i) of the Internal Revenue Code of 1986 (relating to definitions 
and special rules) is amended by adding at the end the following new 
paragraph:
            ``(15) Qualified seismic retrofit property.--
                    ``(A) In general.--The term `qualified seismic 
                retrofit property' means any addition or improvement to 
                real property for which depreciation is allowable under 
                this section--
                            ``(i) for which the expenditure is properly 
                        chargeable to the capital account, and
                            ``(ii) which is a seismic retrofit.
                    ``(B) Seismic retrofit.--For purposes of 
                subparagraph (A)(i), the term `seismic retrofit' means 
                any addition or improvement--
                            ``(i) which is certified by the State 
                        disaster agency or other applicable agency--
                                    ``(I) as resulting in the 
                                mitigation of the risk of damage to 
                                existing property from an earthquake, 
                                and
                                    ``(II) as being in addition to any 
                                addition or improvement required by any 
                                State or local law with respect to such 
                                property, and
                            ``(ii) which is placed in service at least 
                        5 years after the date the building is first 
                        placed in service.
                Such term does not include the cost of acquiring such 
                property (or any interest therein).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to qualified seismic retrofit property placed in service after 
December 31, 2000.

SEC. 5. QUALIFIED SEISMIC RETROFITTING BONDS.

    (a) In General.-- Section 144 of the Internal Revenue Code of 1986 
(relating to qualified small issue bond; qualified student loan bond; 
qualified redevelopment bond) is amended by adding at the end the 
following new subsection:
    ``(d) Qualified Seismic Retrofitting Bond.--For purposes of this 
part--
            ``(1) In general.--The term `qualified seismic retrofitting 
        bond' means any bond issued as part of an issue 95 percent or 
        more of the net proceeds of which are to be used--
                    ``(A) for seismic retrofitting expenditures, and
                    ``(B) in a manner which meets the requirements of 
                paragraph (3).
            ``(2) Seismic retrofitting expenditure.--For purposes of 
        paragraph (1), the term `seismic retrofitting expenditure' 
        means any amount properly chargeable to capital account--
                    ``(A) which is certified by the State disaster 
                agency or other applicable agency--
                            ``(i) as resulting in the mitigation of the 
                        risk of damage to existing property from an 
                        earthquake, and
                            ``(ii) as being in addition to any addition 
                        or improvement required by any State or local 
                        law with respect to such property, and
                    ``(B) which is placed in service at least 5 years 
                after the date the building is first placed in service.
        Such term does not include the cost of acquiring such property 
        (or any interest therein).
            ``(3) Use of proceeds requirements.--The use of the 
        proceeds of an issue meets the requirements of this paragraph 
        if within the 26-month period beginning with the date of 
        issue--
                    ``(A) at least 95 percent of the net proceeds of 
                such issue are used for seismic retrofitting 
                expenditures or are used to finance 1 or more loans to 
                ultimate borrowers for such expenditures, or
                    ``(B) to the extent not so used under subparagraph 
                (A), such proceeds in excess of $10,000 are used to 
                redeem bonds which are part of such issue.''.
    (b) Bonds Treated as Qualified Bonds.--Paragraph (1) of section 
141(e) of the Internal Revenue Code of 1986 (defining qualified bond) 
is amended by striking ``or'' at the end of subparagraph (F), by 
redesignating subparagraph (G) as subparagraph (H), and by inserting 
after subparagraph (F) the following new subparagraph:
                    ``(G) a qualified seismic retrofitting bond, or''.
    (c) Bonds Included for Purposes of Small Issuer Exemption Status.--
Subclause (I) of section 265(b)(3)(C)(ii) of the Internal Revenue Code 
of 1986 (relating to obligations not taken into account in determining 
status as qualified small issuer) is amended by inserting ``, or a 
qualified seismic retrofitting bond, as defined in section 144(d)(1)'' 
after ``section 145''.
    (d) Exception From Volume Cap.--Section 146(g) of the Internal 
Revenue Code of 1986 (relating to exception for certain bonds) is 
amended by striking ``and'' at the end of paragraph (3), by striking 
the period at the end of paragraph (4) and inserting a comma, and by 
adding after paragraph (4) the following new paragraphs:
            ``(5) any qualified mortgage bond if 95 percent or more of 
        the net proceeds of the bond are to be used to provide home 
        improvement loans in connection with seismic retrofitting 
        expenditures (as defined in section 144(d)(2) without regard to 
        the capital account requirement), and
            ``(6) any qualified seismic retrofitting bond.''.
    (e) Proceeds of Mortgage Revenue Bonds Used in Connection With 
Seismic Retrofitting.--
            (1) In general.--Paragraph (4) of section 143(k) of the 
        Internal Revenue Code of 1986 (relating to other definitions 
        and special rules for qualified mortgage bonds) is amended to 
        read as follows:
            ``(4) Qualified home improvement loan.--The term `qualified 
        home improvement loan' means--
                    ``(A) the financing (in an amount which does not 
                exceed $15,000)--
                            ``(i) of alterations, repairs, and 
                        improvements on or in connection with an 
                        existing residence by the owner thereof, but
                            ``(ii) only for such items as substantially 
                        protect or improve the basic livability or 
                        energy efficiency of the property, and
                    ``(B) the financing (in an amount which does not 
                exceed $20,000) of seismic retrofitting expenditures 
                (as defined in section 144(d)(2) without regard to the 
                capital account requirement) in connection with an 
                existing residence by the owner thereof.''.
            (2) Exception from income requirements.--Section 143(f) of 
        such Code (relating to income requirements) is amended by 
        adding at the end the following new paragraph:
            ``(7) Exception for certain qualified home improvement 
        loans.--Paragraph (1) shall not apply with respect to any 
        qualified home improvement loan (as defined in subsection 
        (k)(4)(B).''.
    (f) Clerical Amendments.--
            (1) The heading of section 144 of the Internal Revenue Code 
        of 1986 is amended by striking ``bond.'' and inserting ``bond; 
        qualified seismic retrofitting bond.''.
            (2) The item relating to section 144 in the table of 
        sections for subpart A of part IV of subchapter B of chapter 1 
        of such Code is amended by striking ``bond.'' and inserting 
        ``bond; qualified seismic retrofitting bond.''
    (g) Effective Date.--The amendments made by this section shall 
apply to bonds issued after the date of the enactment of this Act.

SEC. 6. TREATMENT OF PASSIVE LOSSES OF CERTAIN PARTNERSHIPS ENGAGED IN 
              SEISMIC RETROFITTING.

    (a) In General.--Section 469 of the Internal Revenue Code of 1986 
(relating to passive activity losses and credits limited) is amended by 
adding at the end the following new subsection:
    ``(n) Exemption for Seismic Retrofitting Trade or Business.--
            ``(1) In general.--In the case of any natural person, 
        subsection (a) shall not apply to that portion of the passive 
activity loss or the deduction equivalent (within the meaning of 
subsection (j)(5)) of the passive activity credit for any taxable year 
which is attributable to any seismic retrofitting activity which such 
person engages in during the taxable year, whether or not the taxpayer 
materially participates in such activity.
            ``(2) Seismic retrofitting activity.--For purposes of this 
        subsection, the term `seismic retrofitting activity' means any 
        activity which involves the trade or business of seismic 
        retrofit construction (as defined in section 25B(b)(2)) for 
        residential property.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 2000.

SEC. 7. MORTGAGE INSURANCE INCENTIVE.

    Section 203(b)(2) of the National Housing Act (12 U.S.C. 
1709(b)(2)), is amended, in the second undesignated paragraph, by 
inserting ``or due to seismic retrofitting of the residence (within the 
meaning of the term `seismic retrofit construction' under section 
25B(b)(2) of the Internal Revenue Code of 1986)'' after ``Act) 
therein''.

SEC. 8. EARTHQUAKE DISASTER MITIGATION AND RECOVERY PLANNING GRANT 
              PROGRAM.

    (a) Definitions.--
            (1) In general.--Section 4 of the Earthquake Hazards 
        Reduction Act of 1977 (42 U.S.C. 7703) is amended by adding at 
        the end the following:
            ``(8) Agency.--The term `Agency' means the Federal 
        Emergency Management Agency.
            ``(9) Critical facility.--The term `critical facility' 
        means--
                    ``(A) a public structure (including a police 
                station, fire station, city or town hall, school, or 
                other public building) or a public or nonprofit private 
                hospital that is--
                            ``(i) owned by an entity; and
                            ``(ii) critical to the continuity of the 
                        entity or to the conduct of the disaster 
                        response activities of the entity; or
                    ``(B) a facility that--
                            ``(i) provides medical services to a 
                        specific occupational or industry segment of 
                        the general public; and
                            ``(ii) is operated by an organization 
                        described in subsection (c) or (d) of section 
                        501 of the Internal Revenue Code of 1986 and 
                        exempt from taxation under subsection (a) of 
                        such section.
            ``(10) Critical public infrastructure.--The term `critical 
        public infrastructure' means a utility or transportation system 
        (including a bridge, energy system, water or sewer system, or 
        communication system) that is--
                    ``(A) owned by an entity; and
                    ``(B) critical to the conduct of the disaster 
                response activities of the entity.
            ``(11) Earthquake disaster.--
                    ``(A) In general.--The term `earthquake disaster' 
                means a disaster that results from a movement of the 
                earth.
                    ``(B) Inclusions.--The term `earthquake disaster' 
                includes a disaster that results from a tsunami or an 
                earthquake-caused landslide or liquefaction (as 
                determined by the Director of the Agency).
            ``(12) Grant program.--The term `grant program' means the 
        earthquake disaster mitigation and recovery planning grant 
        program established under section 6.
            ``(13) Indian tribe.--The term `Indian tribe' has the 
        meaning given the term in section 4 of the Indian Self-
        Determination and Education Assistance Act (25 U.S.C. 450b).
            ``(14) Institution of higher education.--The term 
        `institution of higher education' has the meaning given the 
        term in section 101 of the Higher Education Act of 1965 (20 
        U.S.C. 1001).
            ``(15) Local government.--The term `local government' 
        means--
                    ``(A) a city, town, township, county, parish, 
                village, or other general-purpose political subdivision 
                of a State;
                    ``(B) an Indian tribe; and
                    ``(C) a geologic hazard abatement or similar 
                special purpose district formed to carry out or fund 
                projects to reduce the vulnerability of infrastructure 
                and buildings to earthquake disasters.
            ``(16) Loss reduction trust fund.--The term `Loss Reduction 
        Trust Fund' means the Loss Reduction Trust Fund established by 
        section 7.''.
            (2) Conforming amendment.--Section 5(b)(1) of the 
        Earthquake Hazards Reduction Act of 1977 (42 U.S.C. 7704(b)(1)) 
        is amended by striking ``(hereafter in this Act referred to as 
        the `Agency')''.
    (b) Grant Program.--The Earthquake Hazards Reduction Act of 1977 is 
amended by inserting after section 5 (42 U.S.C. 7704) the following:

``SEC. 6. EARTHQUAKE DISASTER MITIGATION AND RECOVERY PLANNING GRANT 
              PROGRAM.

    ``(a) Establishment.--The Director of the Agency may establish a 
grant program to provide financial assistance to eligible recipients 
described in subsection (b) to pay the Federal share of the cost of 
carrying out earthquake disaster mitigation and recovery planning 
measures with respect to the critical facilities and critical public 
infrastructure under the jurisdiction of the recipients.
    ``(b) Eligible Recipients.--
            ``(1) In general.--To be eligible for a grant under the 
        grant program, an entity shall be a local government, public or 
        nonprofit private hospital, or public institution of higher 
        education that--
                    ``(A) has jurisdiction over, or is located in, an 
                area that is subject to earthquake disasters;
                    ``(B) submits to the Director of the Agency for 
                approval an application for the grant in such form as 
                the Director shall require;
                    ``(C) has completed an earthquake disaster risk 
                analysis;
                    ``(D) has adopted a long-term strategic earthquake 
                disaster loss reduction plan that identifies high 
                priority earthquake disaster loss reduction projects; 
                and
                    ``(E) meets criteria established by the Director 
                under paragraph (2).
            ``(2) Criteria.--
                    ``(A) Establishment.--The Director of the Agency 
                shall establish, by regulation, criteria that local 
                governments, public and nonprofit private hospitals, 
                and public institutions of higher education shall meet 
                to qualify for grants under the grant program.
                    ``(B) Requirement applicable to local 
                governments.--The criteria under subparagraph (A) 
                applicable to local governments shall include the 
                requirement that a local government adopt and enforce 
                comprehensive ordinances, building codes, land use 
                measures, and other measures for earthquake disaster 
                loss reduction that--
                            ``(i) take into consideration the 
                        identified earthquake hazards applicable to the 
                        area over which the local government has 
                        jurisdiction; and
                            ``(ii) reflect current, cost-effective 
                        techniques designed to reduce losses from 
                        earthquake disasters and ensure the continued 
                        functionality of critical facilities and 
                        critical public infrastructure.
                    ``(C) Consultation.--The criteria under 
                subparagraph (A) shall be adopted after consultation 
                with--
                            ``(i) Federal, State, and local government 
                        officials and agencies; and
                            ``(ii) other persons knowledgeable in the 
                        fields of natural disasters and hazard 
                        mitigation.
    ``(c) Cost Sharing.--
            ``(1) Federal share.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                Federal share of the cost of measures carried out using 
a grant under the grant program shall be 75 percent.
                    ``(B) Insufficiency of federal funds.--In paying 
                the Federal share under subparagraph (A) in a case in 
                which there are insufficient funds in the Loss 
                Reduction Trust Fund to fund all applications that are 
                eligible for approval, the Director of the Agency may 
                consider--
                            ``(i) the desirability of geographical 
                        dispersal of available funds;
                            ``(ii) the extent to which any applicant 
                        faces a greater risk of earthquake disasters, 
                        in number or severity, than other applicants;
                            ``(iii) the extent to which each applicant 
                        is expending resources on addressing urgent 
                        problems concerning critical facilities or 
                        critical public infrastructure; and
                            ``(iv) the extent to which the measures 
                        proposed to be funded using the grant are 
                        expected to result in cost savings to the 
                        Federal Government under the Robert T. Stafford 
                        Disaster Relief and Emergency Assistance Act 
                        (42 U.S.C. 5121 et seq.).
            ``(2) Non-federal share.--
                    ``(A) Grants to local governments (other than 
                indian tribes).--In the case of a grant to a local 
                government (other than an Indian tribe) under the grant 
                program, the non-Federal share of the cost of measures 
                carried out using the grant shall be provided as 
                follows:
                            ``(i) \1/2\ by the State.
                            ``(ii) \1/2\ by the local government.
                    ``(B) Grants to indian tribes.--In the case of a 
                grant to an Indian tribe under the grant program, the 
                non-Federal share of the cost of measures carried out 
                using the grant shall be provided as follows:
                            ``(i) \1/2\ by the Bureau of Indian 
                        Affairs.
                            ``(ii) \1/2\ by the Indian tribe.
                    ``(C) Grants to public hospitals.--In the case of a 
                grant to a public hospital under the grant program, the 
                non-Federal share of the cost of measures carried out 
                using the grant shall be provided as follows:
                            ``(i) \1/2\ by the State, from funds other 
                        than general State appropriations to the 
                        hospital.
                            ``(ii) \1/2\ by the public hospital, from 
                        general State appropriations to the hospital or 
                        from funds donated to the hospital.
                    ``(D) Grants to nonprofit private hospitals.--In 
                the case of a grant to a nonprofit private hospital 
                under the grant program, the non-Federal share of the 
                cost of measures carried out using the grant shall be 
                provided by the nonprofit private hospital.
                    ``(E) Grants to public institutions of higher 
                education.--In the case of a grant to a public 
                institution of higher education under the grant 
                program, the non-Federal share of the cost of measures 
                carried out using the grant shall be provided as 
                follows:
                            ``(i) \1/2\ by the State, from funds other 
                        than general State appropriations to the 
                        institution of higher education.
                            ``(ii) \1/2\ by the public institution of 
                        higher education, from general State 
                        appropriations to the institution of higher 
                        education or from funds donated to the 
                        institution of higher education.
    ``(d) Use of Grant Funds.--
            ``(1) In general.--A grant under the grant program may be 
        used--
                    ``(A) to retrofit critical facilities and critical 
                public infrastructure in accordance with paragraph (2);
                    ``(B) to implement earthquake disaster mitigation 
                measures in accordance with paragraph (3); or
                    ``(C) to develop earthquake disaster recovery plans 
                in accordance with paragraph (4).
            ``(2) Retrofit of critical facilities and critical public 
        infrastructure.--
                    ``(A) In general.--A grant under the grant program 
                may be used to retrofit a critical facility or critical 
                public infrastructure with parts or equipment that 
                meets current standards for withstanding earthquake 
                disasters (as determined by the Director of the 
                Agency).
                    ``(B) Selection of critical facilities and critical 
                public infrastructure.--A critical facility or critical 
                public infrastructure shall be selected for a grant 
                under subparagraph (A) if the critical facility or 
                critical public infrastructure is identified in a long-
                term strategic earthquake disaster loss reduction plan 
                adopted under subsection (b)(1)(D) as having high 
                priority for retrofit because of the effect that damage 
                to the critical facility or critical public 
                infrastructure from an earthquake disaster would have 
                on the quality of human life in the region and on 
                recovery from the earthquake disaster.
            ``(3) Implementation of earthquake disaster mitigation 
        measures.--A grant under the grant program may be used to 
        implement an earthquake disaster mitigation measure designed to 
        ensure the continued functionality of a critical facility or 
        critical public infrastructure.
            ``(4) Development of earthquake disaster recovery plans.--
                    ``(A) In general.--A grant under the grant program 
                may be used to develop an earthquake disaster recovery 
                plan that includes--
                            ``(i) a plan for reestablishing government 
                        operations and community services after an 
                        earthquake disaster; and
                            ``(ii) a plan for long-term recovery after 
                        an earthquake disaster.
                    ``(B) Schedule for payment of grant funds.--Of a 
                grant for measures described in subparagraph (A)--
                            ``(i) 50 percent shall be paid upon 
                        approval by the Director of the Agency of the 
                        application for the grant; and
                            ``(ii) 50 percent shall be paid upon 
                        adoption of the earthquake disaster recovery 
                        plan by the local government, public hospital, 
                        or public institution of higher education.

``SEC. 7. LOSS REDUCTION TRUST FUND.

    ``(a) Establishment.--There is established in the Treasury of the 
United States a fund to be known as the `Loss Reduction Trust Fund', 
consisting of--
            ``(1) such amounts as are appropriated to the Loss 
        Reduction Trust Fund under subsection (b);
            ``(2) such amounts as are appropriated to the Loss 
        Reduction Trust Fund under section 12(e); and
            ``(3) any interest earned on investment of amounts in the 
        Loss Reduction Trust Fund under subsection (d).
    ``(b) Transfers to Loss Reduction Trust Fund.--There are 
appropriated to the Loss Reduction Trust Fund amounts equivalent to--
            ``(1) such amounts as the Director of the Agency determines 
        are remaining after the close-out of any active disaster 
        declaration account under the Robert T. Stafford Disaster 
        Relief and Emergency Assistance Act (42 U.S.C. 5121 et seq.);
            ``(2) such amounts as--
                    ``(A) were allocated for hazard mitigation 
                assistance with respect to a major disaster under 
                section 404 of that Act (42 U.S.C. 5170c); and
                    ``(B) the Director of the Agency determines are 
                remaining after expiration of the time limits 
                established under subsection (c) of that section; and
            ``(3) amounts received as gifts under subsection (f).
    ``(c) Expenditures From Loss Reduction Trust Fund.--Upon request by 
the Director of the Agency, the Secretary of the Treasury shall 
transfer from the Loss Reduction Trust Fund to the Director of the 
Agency such amounts as the Director of the Agency determines are 
necessary to carry out section 6.
    ``(d) Investment of Amounts.--
            ``(1) In general.--The Secretary of the Treasury shall 
        invest such portion of the Loss Reduction Trust Fund as is not, 
        in the judgment of the Secretary of the Treasury, required to 
        meet current withdrawals. Investments may be made only in 
        interest-bearing obligations of the United States.
            ``(2) Acquisition of obligations.--For the purpose of 
        investments under paragraph (1), obligations may be acquired--
                    ``(A) on original issue at the issue price; or
                    ``(B) by purchase of outstanding obligations at the 
                market price.
            ``(3) Sale of obligations.--Any obligation acquired by the 
        Loss Reduction Trust Fund may be sold by the Secretary of the 
        Treasury at the market price.
            ``(4) Credits to fund.--The interest on, and the proceeds 
        from the sale or redemption of, any obligations held in the 
        Loss Reduction Trust Fund shall be credited to and form a part 
        of the Loss Reduction Trust Fund.
    ``(e) Transfers of Amounts.--
            ``(1) In general.--The amounts required to be transferred 
        to the Loss Reduction Trust Fund under this section shall be 
        transferred at least monthly from the general fund of the 
        Treasury to the Loss Reduction Trust Fund on the basis of 
        estimates made by the Secretary of the Treasury.
            ``(2) Adjustments.--Proper adjustment shall be made in 
        amounts subsequently transferred to the extent prior estimates 
        were in excess of or less than the amounts required to be 
        transferred.
    ``(f) Gifts.--The Secretary of the Treasury may accept gifts of 
cash for transfer to the Loss Reduction Trust Fund.''.
    (c) Authorization of Appropriations.--Section 12 of the Earthquake 
Hazards Reduction Act of 1977 (42 U.S.C. 7706) is amended by inserting 
after subsection (d) the following:
    ``(e) Loss Reduction Trust Fund.--There is authorized to be 
appropriated to the Loss Reduction Trust Fund $1,000,000,000.''.
                                 <all>