[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 3607 Introduced in Senate (IS)]








109th CONGRESS
  2d Session
                                S. 3607

  To amend title IV of the Social Security Act to ensure funding for 
  grants to promote responsible fatherhood and strengthen low-income 
                   families, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 29, 2006

  Mr. Bayh (for himself and Mr. Obama) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
  To amend title IV of the Social Security Act to ensure funding for 
  grants to promote responsible fatherhood and strengthen low-income 
                   families, 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; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Responsible 
Fatherhood and Healthy Families Act of 2006''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.
TITLE I--PROMOTING RESPONSIBLE FATHERHOOD AND STRENGTHENING LOW-INCOME 
                                FAMILIES

Sec. 101. Healthy marriage promotion and responsible fatherhood 
                            programs.
Sec. 102. Grants to healthy family partnerships for domestic violence 
                            prevention, for services for families and 
                            individuals affected by domestic violence, 
                            and for developing and implementing best 
                            practices.
Sec. 103. Elimination of separate TANF work participation rate for 2-
                            PARENT families.
Sec. 104. Ban on Recovery of Medicaid Costs for Births.
Sec. 105. Improved collection and distribution of child support.
Sec. 106. Grants to States to conduct demonstration projects to promote 
                            economic opportunity for low-income 
                            parents.
Sec. 107. State assessments of barriers to employment and financial 
                            support of children.
Sec. 108. Collection of child support under the food stamp program.
                      TITLE II--REVENUE PROVISIONS

Sec. 201. Modifications to the earned income tax credit.
Sec. 202. Tax treatment of inverted entities.
Sec. 203. Tax treatment of controlled foreign corporations established 
                            in tax havens.
Sec. 204. Taxation of income of controlled foreign corporations 
                            attributable to imported property.

SEC. 2. FINDINGS.

    Congress makes the following findings:
            (1) The most important factor in a child's upbringing is 
        whether the child is brought up in a loving, healthy, 
        supportive environment.
            (2) Children who grow up with both parents are more likely 
        to finish high school, be economically self-sufficient, and to 
        have a healthier lifestyle than their peers who grow up in 
        single-parent homes.
            (3) Father-child interaction has been shown to promote the 
        positive physical, social, emotional, and mental development of 
        children.
            (4) Children typically live without both parents when their 
        parents are divorced or did not marry. More than \1/3\ of all 
        first marriages end in divorce, and 60 percent of divorcing 
        couples have children. More than \1/3\ of all births are to 
        unmarried women.
            (5) More than 1 in 4 families with children have only 1 
        parent present, and more than 1 in 3 children live absent their 
        biological father.
            (6) Recent studies demonstrate that most unwed fathers in 
        urban areas are highly involved with the mother of their child 
        before and after the child's birth, with 80 percent involved 
        during the mother's pregnancy, and 50 percent living with the 
        child's mother at the time of the child's birth. However, the 
        relationship between the parents often does not last, and 
        fathers do not maintain contact with their children as the 
        children grow up.
            (7) An estimated 40 percent of the children who live in 
        households without their father have not seen their fathers in 
        at least 1 year.
            (8) The inability of parents to sustain a healthy 
        relationship with their child's other parent and remain 
        involved in their child's life can have severe negative 
        consequences for the parents, the child, their community, and 
        taxpayers.
            (9) Single-parent families are 5 times as likely to be poor 
        as married-couple families.
            (10) Children raised in single-parent families are more 
        likely than children raised in 2-parent families to do poorly 
        in school, have emotional and behavioral problems, become 
        teenage parents, commit crimes, smoke cigarettes, abuse drugs 
        and alcohol, and have poverty-level incomes as adults.
            (11) Male unemployment and low wages are primary reasons 
        why parents do not marry, why 2-parent families break up, and 
        why fathers fail to remain involved with their children. In 
        2004, half of African-American young men lacked jobs.
            (12) Domestic violence is also a significant problem 
        leading to the non-formation or break-up of 2-parent families.
            (13) A history of incarceration is a major barrier to 
        employment. 60 percent of African-American men who dropped out 
        of high school have served time. When these men leave prison, 
        they often have difficulty finding a job and supporting their 
        children.
            (14) Over \1/2\ of State prison inmates are parents. When 
        parents go to prison, their child support obligations continue, 
        even though they have little ability to pay the support. When 
        these parents leave prison, they typically owe more than 
        $20,000 in child support debt. Parents leaving prison often re-
        enter the underground economy because of financial pressures or 
        to avoid the child support system, making it less likely that 
        they will successfully rejoin society and reunite with their 
        families.
            (15) Children should receive the child support paid by 
        their parents, and the government should not keep the money to 
        recover welfare costs. Regular child support income appears to 
        have a greater positive impact on children dollar for dollar 
        than other types of income. Researchers in Wisconsin found that 
        when monthly child support was passed through to families 
        receiving assistance under the Temporary Assistance for Needy 
        Families program established under part A of title IV of the 
        Social Security Act (TANF) and disregarded 100 percent in 
        determining assistance for the families, fathers paid more 
        child support, established their legal relationship with their 
        children more quickly, and worked less in the underground 
        economy. Moreover, the State costs of a full pass-through and 
        disregard of child support were fully offset by increased 
        payments by fathers and decreased public assistance use by 
        families.
            (16) Current law permits States to apply the cost of 
        passing through child support to families receiving assistance 
        under the TANF program toward their maintenance of effort (MOE) 
        requirements, but only to the extent that the State disregards 
        the child support payments in determining the amount and type 
        of TANF assistance.
            (17) Programs that increase employment opportunity and 
        reduce barriers by increasing employment opportunity and 
        reducing recidivism will benefit children and families.
            (18) Transitional jobs programs have shown promise in 
        reducing unemployment among chronically unemployed or 
        underemployed population groups, including formerly 
        incarcerated individuals, the homeless, and young African-
        American men.
            (19) To strengthen families it is important to improve the 
        upward economic mobility of the custodial and noncustodial 
        parent wage-earners, as well as youth at risk of early 
        fatherhood or incarceration, by providing the skills and 
        experience necessary to access jobs with family-sustaining 
        wages and benefits. In families in which all the members do not 
        live together, this is important to enable the prompt and 
        consistent payment of adequate child support.
            (20) It is important and useful to foster local and 
        regional economic development and job advancement for workers, 
        especially young custodial and noncustodial parents, by funding 
        local collaborations among business, education, and the 
        community in the development of pathways for preparing 
        disadvantaged citizens to meet the workforce needs of the local 
        and regional economy.
            (21) Employers benefit from working with and being 
        supported by the local education, post-secondary and workforce 
        systems in identifying the academic and occupational skill sets 
        needed to fill the skilled jobs in the changing economy. Local 
        economic and community development is enhanced when residents 
        have access to higher wage employment, thus increasing the tax 
        base, fueling the economy, and contributing to greater family 
        economic security.
            (22) Public-private career pathways partnerships are an 
        important tool for linking employers and workers with the 
        workforce education services they need and for integrating 
        community economic development and workforce education 
        services. Transitional jobs programs can serve as the first 
        step in a career pathway by giving unemployed individuals with 
        multiple barriers to employment, valuable work experience and 
        related services.
            (23) The purpose of child support is to provide necessary 
        income support for and increase the well-being of children 
        living apart from a parent. To improve the ability of low-
        income fathers to provide long-term support and care for their 
        children throughout their entire childhood, it is important 
        that child support polices support parental efforts to pursue 
        education and employment and to stay involved with their 
        children
            (24) Responsible fatherhood includes active participation 
        in financial support and child-rearing, as well as the 
        formation and maintenance of a positive, healthy, and 
        nonviolent relationship between father and child and a 
        cooperative, healthy, and nonviolent relationship between 
        parents.
            (25) States should be encouraged to implement voluntary 
        programs that provide support for responsible parenting, 
        including by increasing the employment, financial security, and 
        parental involvement of noncustodial parents.
            (26) Promoting responsible fatherhood saves the government 
        money by reducing the need for public assistance, increasing 
        the educational attainment of children, juvenile delinquency 
        and crime, reducing substance abuse, and lowering rates of 
        unemployment.
            (27) Responsible fatherhood programs should promote and 
        provide support services for--
                    (A) fostering loving and healthy relationships 
                between parents and children;
                    (B) increasing responsibility of noncustodial 
                parents for the long-term care and financial well-being 
                of their children;
                    (C) increasing employment of low-income, 
                noncustodial parents and improving compliance with 
                child support obligations; and
                    (D) reducing barriers to active 2-parent 
                involvement and cooperative parenting.
            (28) The promotion of responsible fatherhood should not 
        denigrate the standing or parenting efforts of single mothers 
        or other caregivers, lessen the protection of children from 
        abusive parents, or compromise the safety or health of the 
        custodial or noncustodial parent, but should increase the 
        chance that children will have 2 caring parents to help them 
        grow up healthy and secure.

TITLE I--PROMOTING RESPONSIBLE FATHERHOOD AND STRENGTHENING LOW-INCOME 
                                FAMILIES

SEC. 101. HEALTHY MARRIAGE PROMOTION AND RESPONSIBLE FATHERHOOD 
              PROGRAMS.

    (a) Ensuring Funding for Responsible Fatherhood Programs.--Section 
403(a)(2)(C) of the Social Security Act (42 U.S.C. 603(a)(2)(C)) is 
amended--
            (1) in the subparagraph heading, by striking ``Limitation 
        on use of'' and inserting ``Requirement to use certain''; and
            (2) in clause (i), by striking ``may not award more than 
        $50,000,000'' and inserting ``shall award at least 
        $100,000,000''.
    (b) Requirements To Ensure Procedures To Address Domestic Violence 
Prevention.--
            (1) In general.--Section 403(a)(2) of the Social Security 
        Act (42 U.S.C. 603(a)(2)) is amended--
                    (A) by redesignating subparagraph (D) as 
                subparagraph (G); and
                    (B) by inserting after subparagraph (C) the 
                following new subparagraphs:
                    ``(D) Requirements for receipt of funds.--An entity 
                may not be awarded a grant under this paragraph unless 
                the entity, as a condition of receiving funds under 
                such a grant--
                            ``(i) consults with domestic violence 
                        organizations that have demonstrated expertise 
                        working with survivors of domestic violence in 
                        developing policies, procedures, programs and 
                        training necessary to appropriately address 
                        domestic violence in families served by 
                        programs and activities funded under such 
                        grant;
                            ``(ii) describes in the application for a 
                        grant under this paragraph--
                                    ``(I) how the programs or 
                                activities proposed to be conducted 
                                will appropriately address issues of 
                                domestic violence; and
                                    ``(II) what the entity will do, to 
                                the extent relevant, to ensure that 
                                participation in such programs or 
                                activities is voluntary, and to inform 
                                potential participants that their 
                                involvement is voluntary;
                            ``(iii) establishes a written protocol for 
                        providers and administrators of programs and 
                        activities relevant to the grant that--
                                    ``(I) provides for helping identify 
                                instances or risks of domestic 
                                violence; and
                                    ``(II) specifies the procedures for 
                                making service referrals and providing 
                                protections and appropriate assistance 
                                for identified individuals and 
                                families; and
                            ``(iv) submits the annual reports required 
                        under subparagraph (E).
                    ``(E) Annual reports to the secretary.--Each entity 
                awarded a grant under this paragraph shall submit to 
                the Secretary an annual report on the programs and 
                activities funded under the grant that includes the 
                following:
                            ``(i) A description of the written 
                        protocols developed in accordance with the 
                        requirements of subparagraph (D)(iii) for each 
                        program or activity funded under the grant and 
                        how such protocols are used, including specific 
                        policies and procedures for addressing domestic 
                        violence issues within each program or activity 
                        funded under the grant and how confidentiality 
                        issues are addressed.
                            ``(ii) The name of each individual, 
                        organization, or entity that was consulted in 
                        the development of such protocols.
                            ``(iii) A description of each individual, 
                        organization, or entity (if any) that provided 
                        training on domestic violence for the entity or 
                        for any subgrantees.
                            ``(iv) A description of any implementation 
                        issues identified with respect to domestic 
                        violence and how such issues were addressed.
                    ``(F) Domestic violence defined.--In this 
                paragraph, the term `domestic violence' has the meaning 
                given that term in section 402(a)(7)(B).''.
            (2) Conforming amendments.--Section 403(a)(2) of such Act 
        (42 U.S.C. 603(a)(2)) is amended--
                    (A) in subparagraph (A)(i)--
                            (i) by striking ``(B) and (C)'' and 
                        inserting ``(B), (C), (D), and (E)''; and
                            (ii) by striking ``subparagraph (D)'' and 
                        inserting ``subparagraph (G)'';
                    (B) in subparagraphs (B)(i) and (C)(i), by striking 
                ``(D)'' each place it appears and inserting ``(G)''; 
                and
                    (C) in subparagraph (G) (as redesignated by 
                paragraph (1)(A)), by striking ``$150,000,000 for each 
                of fiscal years 2006 through 2010'' and inserting 
                ``$150,000,000 for fiscal year 2006 and $200,000,000 
                for each of fiscal years 2007 through 2010''.
    (c) Assurance of Voluntary Participation.--Section 
403(a)(2)(A)(ii)(II) of the Social Security Act (42 U.S.C. 
603(a)(2)(A)(ii)(II)) is amended--
            (1) in item (aa), by striking ``and'' at the end;
            (2) in item (bb), by striking the period at the end and 
        inserting a semicolon; and
            (3) by adding at the end the following new items:
                                            ``(cc) to not condition the 
                                        receipt of assistance under the 
                                        program funded under this part, 
                                        under a program funded with 
                                        qualified State expenditures 
                                        (as defined in section 
                                        409(a)(7)(B)(i)), or under any 
                                        other program funded under this 
                                        title on enrollment in any such 
                                        programs or activities; and
                                            ``(dd) to permit any 
                                        individual who has begun to 
                                        participate in a particular 
                                        program or activity funded 
                                        under this paragraph, including 
                                        an individual whose 
                                        participation is specified in 
                                        the individual responsibility 
                                        plan developed for the 
                                        individual in accordance with 
                                        section 408(b), to transfer to 
                                        another such program or 
                                        activity funded under this 
                                        paragraph upon notification to 
                                        the entity and the State agency 
                                        responsible for administering 
                                        the State program funded under 
                                        this part.''.
    (d) Activities Promoting Responsible Fatherhood.--Section 
403(a)(2)(C)(ii) of the Social Security Act (42 U.S.C. 
603(a)(2)(C)(ii)) is amended--
            (1) in subclause (I), by striking ``marriage or sustain 
        marriage'' and insert ``healthy relationships and marriages or 
        to sustain healthy relationships or marriages'';
            (2) in subclause (II), by inserting ``educating youth who 
        are not yet parents about the economic, social, and family 
        consequences of early parenting, helping participants in 
        fatherhood programs work with their own children to break the 
        cycle of early parenthood,'' after ``child support payments,''; 
        and
            (3) in subclause (III), by striking ``fathers'' and 
        inserting ``low-income fathers and other low-income 
        noncustodial parents whom are not eligible for assistance under 
        the State program funded under this part''.
    (e) Effective Date.--The amendments made by this section shall take 
effect on October 1, 2006.

SEC. 102. GRANTS TO HEALTHY FAMILY PARTNERSHIPS FOR DOMESTIC VIOLENCE 
              PREVENTION, FOR SERVICES FOR FAMILIES AND INDIVIDUALS 
              AFFECTED BY DOMESTIC VIOLENCE, AND FOR DEVELOPING AND 
              IMPLEMENTING BEST PRACTICES.

    Section 403(a) of the Social Security Act (42 U.S.C. 603(a)) is 
amended by adding at the end the following new paragraph:
            ``(6) Grants to healthy family partnerships for domestic 
        violence prevention, for services for families and individuals 
        affected by domestic violence, and for developing and 
        implementing best practices.--
                    ``(A) In general.--The Secretary shall award grants 
                on a competitive basis to healthy family partnerships 
                to--
                            ``(i) conduct programs and activities that 
                        are designed to prevent domestic violence;
                            ``(ii) provide services for victims of 
                        domestic violence; and
                            ``(iii) develop and implement best 
                        practices for preventing domestic violence, 
                        particularly as a barrier to economic security, 
                        and for providing services to families and 
                        individuals affected by such violence including 
                        through caseworker training and the provision 
                        of technical assistance.
                    ``(B) Education services.--In awarding grants under 
                subparagraph (A), the Secretary shall ensure that 10 
                percent of the funds made available under such grants 
                are used for high schools and other secondary 
                educational institutions and institutions of higher 
                education to provide education services on the value of 
                healthy relationships, responsible parenting, and 
                healthy marriages characterized by mutual respect and 
                non-violence, and the importance of building 
                relationships skills such as communication, conflict 
                resolution, and budgeting.
                    ``(C) Application.--The respective entity and 
                organization of a healthy family partnership entered 
                into for purposes of receiving a grant under this 
                paragraph shall submit a joint application to the 
                Secretary, at such time and in such manner as the 
                Secretary shall specify, containing--
                            ``(i) a description of how the partnership 
                        intends to carry out the activities described 
                        in subparagraph (A);
                            ``(ii) an assurance that funds made 
                        available under the grant shall be used to 
                        supplement, and not supplant, other funds used 
                        by the entity or organization to carry out 
                        programs, activities, or services described in 
                        subparagraph (A) or (B); and
                            ``(iii) such other information as the 
                        Secretary may require.
                    ``(D) General rules governing use of funds.--The 
                rules of section 404, other than subsection (b) of that 
                section, shall not apply to a grant made under this 
                paragraph.
                    ``(E) Definitions.--In this paragraph:
                            ``(i) Domestic violence.--The term 
                        `domestic violence' has the meaning given that 
                        term in section 402(a)(7)(B).
                            ``(ii) Healthy family partnership.--The 
                        term `healthy family partnership' means a 
                        partnership between--
                                    ``(I) an entity receiving funds 
                                under a grant made under paragraph (2) 
                                to promote healthy marriage or 
                                responsible fatherhood; and
                                    ``(II) an organization described in 
                                paragraph (2)(D)(i).
                    ``(F) Appropriation.--Out of any money in the 
                Treasury of the United States not otherwise 
                appropriated, there are appropriated for each of fiscal 
                years 2007 through 2010, $25,000,000 for purposes of 
                awarding grants to healthy family partnerships under 
                this paragraph.''.

SEC. 103. ELIMINATION OF SEPARATE TANF WORK PARTICIPATION RATE FOR 2-
              PARENT FAMILIES.

    (a) In General.--Section 407 of the Social Security Act (42 U.S.C. 
607) is amended--
            (1) in subsection (a)--
                    (A) beginning in the heading, by striking 
                ``Participation Rate Requirements'' and all that 
                follows through ``A State'' in paragraph (1) and 
                inserting ``Participation Rate Requirements.--A 
                State''; and
                    (B) by striking paragraph (2);
            (2) in subsection (b)--
                    (A) in paragraph (1)(A), by striking ``subsection 
                (a)(1)'' and inserting ``subsection (a)'';
                    (B) in paragraph (2), by striking the paragraph 
                heading and all that follows through ``A family'' and 
                inserting ``Special rule.--A family'';
                    (C) in paragraph (4), by striking ``paragraphs 
                (1)(B) and (2)(B)'' and inserting ``determining monthly 
                participation rates under paragraph (1)(B)''; and
                    (D) in paragraph (5), by striking ``rates'' and 
                inserting ``rate''; and
            (3) in subsection (c)--
                    (A) in paragraph (1)(B), in the matter preceding 
                clause (i), by striking ``subsection (b)(2)(B)'' and 
                inserting ``subsection (b)(1)(B)(i)''; and
                    (B) in paragraph (2)(D)--
                            (i) by striking ``paragraphs (1)(B)(i) and 
                        (2)(B) of subsection (b)'' and inserting 
                        ``subsection (b)(1)(B)(i)''; and
                            (ii) by striking ``and in 2-parent 
                        families, respectively,''.
    (b) Effective Date.--
            (1) In general.--The amendments made by subsection (a) 
        shall take effect on the date of enactment of this Act and 
        shall apply to the determination of minimum participation rates 
        for months beginning on or after that date.
            (2) Limitation on penalty imposition.--Notwithstanding 
        section 409(a)(3) of the Social Security Act, the Secretary of 
        Health and Human Services shall not impose a penalty against a 
        State under that section on the basis of the State's failure to 
        satisfy the participation rate required for fiscal year 2006 if 
        the State demonstrates that the State would have met such 
        requirement if, with respect to those months of fiscal year 
        2006 that began prior to or on the date of enactment of this 
        Act, the State were permitted to count 2-parent families that 
        met the requirements of section 407(c)(1)(A) of the Social 
        Security Act (42 U.S.C. 607(c)(1)(A)) in the determination of 
        monthly participation rates under section 407(b)(1)(B)(i) of 
        such Act (42 U.S.C. 607(b)(1)(B)(i)).

SEC. 104. BAN ON RECOVERY OF MEDICAID COSTS FOR BIRTHS.

    (a) Ban on Recovery.--
            (1) In general.--Section 454 of the Social Security Act (42 
        U.S.C. 654), as amended by section 7301(B)(1)(C) of the Deficit 
        Reduction Act of 2005 (Public Law 109-171), is amended--
                    (A) by striking ``and'' at the end of paragraph 
                (33);
                    (B) by striking the period at the end of paragraph 
                (34) and inserting ``; and''; and
                    (C) by inserting after paragraph (34) the 
                following:
            ``(35) provide that, except as provided in section 
        1902(a)(25)(F)(ii), the State shall not use the State program 
        operated under this part to collect any amount owed to the 
        State by reason of costs incurred under the State plan approved 
        under title XIX for the birth of a child for whom support 
        rights have been assigned pursuant to section 471(a)(17) or 
        1912.''.
            (2) Rule of construction.--Nothing in section 454(35) of 
        the Social Security Act (42 U.S.C. 654(35)), as added by 
        paragraph (1), shall be construed as affecting the application 
        of section 1902(a)(25) of such Act (42 U.S.C. 1396a(a)(25)) 
        with respect to a State (relating to the State Medicaid plan 
        requirement for the State to take all reasonable measures to 
        ascertain the legal liability of third parties to pay for care 
        and services available under the plan).
    (b) Clarification That Ban on Recovery Does Not Apply With Respect 
to Insurance of a Parent With an Obligation To Pay Child Support.--
Section 1902(a)(25)(F) of the Social Security Act (42 U.S.C. 
1396a(a)(25)(F)) is amended--
            (1) in clause (i), by adding ``add'' after the semicolon; 
        and
            (2) in clause (ii), by inserting ``only if such third-party 
        liability is derived through insurance,'' before ``seek''.
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section take effect on October 1, 2006.
            (2) Extension of effective date for state law amendment.--
        In the case of a State plan under title XIX of the Social 
        Security Act (42 U.S.C. 1396 et seq.) which the Secretary of 
        Health and Human Services determines requires State legislation 
        in order for the plan to meet the additional requirements 
        imposed by the amendments made by this section, the State plan 
        shall not be regarded as failing to comply with the 
        requirements of such title solely on the basis of its failure 
        to meet these additional requirements before the first day of 
        the first calendar quarter beginning after the close of the 
        first regular session of the State legislature that begins 
        after the date of 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 the session is considered to 
        be a separate regular session of the State legislature.

SEC. 105. IMPROVED COLLECTION AND DISTRIBUTION OF CHILD SUPPORT.

    (a) Distribution of Child Support.--
            (1) Full distribution of child support collected; reform of 
        rules for distribution of child support collected on behalf of 
        children in foster care.--
                    (A) In general.--Section 457 of the Social Security 
                Act (42 U.S.C. 657) is amended--
                            (i) by striking subsection (a) and 
                        inserting the following:
    ``(a) Full Distribution of Amounts Collected on Behalf of Any 
Family.--Subject to subsection (c), the entire amount collected on 
behalf of any family as support by a State pursuant to a plan approved 
under this part shall be paid by the State to the family.''; and
                            (ii) by striking subsections (c) through 
                        (e) and inserting the following:
    ``(c) Amounts Collected for Child for Whom Foster Care Maintenance 
Payments Are Made.--Notwithstanding the preceding provisions of this 
section, amounts collected by a State as child support for months in 
any period on behalf of a child for whom a public agency is making 
foster care maintenance payments under part E shall be paid to the 
public agency responsible for supervising the placement of the child, 
which may use the payments in the manner it determines will serve the 
best interests of the child, including setting such payments aside for 
the child's future needs, depositing the funds in a child asset 
account, or making all or a part thereof available to the person 
responsible for meeting the child's day-to-day needs.''.
                    (B) Foster care state plan amendment.--Section 
                471(a)(17) of the Social Security Act (42 U.S.C. 
                671(a)(17)) is amended--
                            (i) by inserting ``and consistent with the 
                        child's case plan'' after ``where 
                        appropriate''; and
                            (ii) by striking ``secure an assignment to 
                        the State of any rights to support'' and 
                        inserting ``establish and enforce child support 
                        obligations''.
            (2) Conforming amendments.--
                    (A) Section 409(a)(7)(B)(i)(I)(aa) of such Act (42 
                U.S.C. 609(a)(7)(B)(i)(I)(aa)) is amended by striking 
                ``457(a)(1)(B)'' and inserting ``457(a)''.
                    (B) Section 454(5) of such Act (42 U.S.C. 654(5)) 
                is amended by striking ``(A) in any case'' and all that 
                follows through ``(B)''.
                    (C) Paragraphs (1)(B) and (2)(B) of section 457(b) 
                of such Act (42 U.S.C. 657(b)), as amended by section 
                7301(c) of the Deficit Reduction Act of 2005 (Public 
                Law 109-171; 120 Stat. 141), is amended by striking 
                ``in accordance with subsection (a)(4)'' each place it 
                appears.
                    (D) Section 466(a)(3)(B) of such Act (42 U.S.C. 
                666(a)(3)(B)) is amended by striking ``408(a)(3) or''.
            (3) Repeal of certain dra amendments.--Effective on the 
        date of enactment of this Act, subsections (a) and (b) of 
        section 7301 of the Deficit Reduction Act of 2005 (Public Law 
        109-171; 120 Stat. 141) are repealed and parts A and D of title 
        IV of the Social Security Act shall be applied as if the 
        amendments made by such subsections had not been enacted.
    (b) Prohibition on Conditioning Receipt of TANF on Assignment of 
Support.--Section 408(a)(3) of the Social Security Act (42 U.S.C. 
608(a)(3)) is amended--
            (1) in the paragraph heading, by striking ``No assistance 
        for families not'' and inserting ``Prohibition on conditioning 
        assistance for families on'';
            (2) by inserting ``not'' after ``shall'';
            (3) by inserting ``or under a program funded with qualified 
        State expenditures (as defined in section 409(a)(7)(B)(i))'' 
        after ``this part''; and
            (4) by striking ``, not exceeding the total amount of 
        assistance so paid to the family,''.
    (c) Requirement To Disregard Percentage of Child Support Collected 
in Determining Amount and Type of TANF Assistance.--Section 408(a) of 
the Social Security Act (42 U.S.C. 608(a)) is amended by adding at the 
end the following new paragraph:
            ``(12) Requirement to disregard percentage of child support 
        collected in determining amount and type of tanf assistance.--A 
        State to which a grant is made under section 403 shall 
        disregard at least the same percentage of amounts collected as 
        support on behalf of a family as the percentage of earned 
        income that the State disregards in determining the amount or 
        type of assistance provided to the family under the State 
        program funded under this part or under a program funded with 
        qualified State expenditures (as defined in section 
        409(a)(7)(B)(i)).''.
    (d) Restoration of Federal Funding.--Effective on the date of 
enactment of this Act, section 7309 of the Deficit Reduction Act of 
2005 (Public Law 109-171; 120 Stat. 147) is repealed and part D of 
title IV of the Social Security Act shall be applied as if the 
amendment made by subsection (a) of that section had not been enacted.
    (e) Repeal of Mandatory Fee for Child Support Collection.--
Effective on the date of enactment of this Act, section 7310 of the 
Deficit Reduction Act of 2005 (Public Law 109-171; 120 Stat. 147) is 
repealed and part D of title IV of the Social Security Act shall be 
applied as if the amendments made by that section had not been enacted.
    (f) Prohibition on Considering a Period of Incarceration Voluntary 
Unemployment.--Section 466(a) of the Social Security Act (42 U.S.C. 
666(a)) is amended by inserting after paragraph (19) the following new 
paragraph:
            ``(20) Procedures relating to periods of incarceration of 
        noncustodial parents.--
                    ``(A) In general.--Procedures which require that, 
                in determining or modifying the amount of, or terms and 
                conditions of, any support obligation of a noncustodial 
                parent, the State--
                            ``(i) shall not consider any period of 
                        incarceration of such parent as a period of 
                        voluntary employment that disqualifies the 
                        parent from obtaining a review and adjustment, 
                        if appropriate, of the support obligation; and
                            ``(ii) subject to subparagraph (B) in the 
                        case of an incarcerated parent, shall--
                                    ``(I) temporarily suspend any 
                                support obligation on the parent and 
                                the enforcement of any support 
                                obligation of the parent existing prior 
                                to the period of incarceration; and
                                    ``(II) temporarily prohibit the 
                                accrual of any interest on any support 
                                obligation of the parent existing prior 
                                to the period of incarceration during 
                                any such period.
                    ``(B) Notice and opportunity to challenge 
                suspension.--Such procedures shall require the State to 
                provide a custodial parent with--
                            ``(i) notice of any suspension of review, 
                        adjustment, or enforcement of a support 
                        obligation and of any prohibition on interest 
                        accrual on such obligation that is imposed in 
                        accordance with subparagraph (A)(ii); and
                            ``(ii) an opportunity to request that the 
                        suspension or prohibition be terminated or 
                        modified on the basis that the noncustodial 
                        parent has sufficient income or resources to 
                        continue payment of the support obligation 
                        during the noncustodial parent's period of 
                        incarceration.''.
    (g) Forgiving or Other Modification of Child Support Arrearages 
Assigned to the State.--Section 466(a)(9) of the Social Security Act 
(42 U.S.C. 666(a)(9)) is amended in the flush matter following 
subparagraph (C), by inserting the following new sentence at the end: 
``Nothing in this paragraph shall be construed as prohibiting a State 
from forgiving, compromising, reducing or waiving arrearages 
permanently assigned to the State under part A or E of this title or 
under title XIX.''.
    (h) Review and Adjustment of Child Support Arrearages Upon 
Request.--Section 466(a)(10) of the Social Security Act (42 U.S.C. 
666(a)(10)) is amended by adding at the end the following new 
subparagraph:
                    ``(D) Review and adjustment of arrearages.--
                Procedures which require the State to review, and if 
                appropriate, reduce the balance of arrearages 
                permanently assigned to the State under part A or E of 
                this title, or under title XIX , pursuant to standards 
                and procedures established by the State, in cases where 
                the obligor lacks sufficient ability to pay the 
                arrears, adjustment will promote timely payment of 
                current support, or barriers, such as incarceration, 
                may have limited the ability of the obligor to timely 
                seek a modification of the order, and it is in the best 
                interests of the child to make such reduction. Nothing 
                in the preceding sentence shall be construed as 
                affecting arrearages that have not been permanently 
                assigned to the State under such part or title.''.
    (i) Study and Report.--Not later than October 1, 2007, the 
Secretary of Health and Human Services shall study and submit a report 
to Congress regarding the following:
            (1) The effect of age eligibility restrictions for the 
        earned income tax credit established under section 32 of the 
        Internal Revenue Code of 1986 for individuals without 
        qualifying children on--
                    (A) the ability of young parents to pay child 
                support;
                    (B) compliance with child support orders; and
                    (C) the relationship between young noncustodial 
                parents and their children.
            (2) The impact of State earned income tax credit programs, 
        especially such programs with targeted benefits for 
        noncustodial parents, on--
                    (A) the ability of noncustodial parents to pay 
                child support;
                    (B) compliance with child support orders; and
                    (C) the relationship between noncustodial parents 
                and their children.
            (3) The challenges faced by legal immigrants and 
        individuals for whom English is not their primary language in 
        fulfilling child support and other noncustodial parenting 
        obligations.
    (j) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        section, the amendments made by this section shall take effect 
        on October 1, 2009, and shall apply to payments under parts A 
        and D of title IV of the Social Security Act for calendar 
        quarters beginning on or after that date, and without regard to 
        whether regulations to implement the amendments are promulgated 
        by such date.
            (2) State option to accelerate effective date.--
        Notwithstanding paragraph (1), a State may elect to have the 
        amendments made by the preceding provisions of this section 
        apply to the State and to amounts collected by the State (and 
        to payments under parts A and D of title IV of such Act), on 
        and after such date as the State may select that is not earlier 
        than October 1, 2006, and not later than September 30, 2009.

SEC. 106. GRANTS TO STATES TO CONDUCT DEMONSTRATION PROJECTS TO PROMOTE 
              ECONOMIC OPPORTUNITY FOR LOW-INCOME PARENTS.

    (a) Authority To Award Grants.--The Secretary of Health and Human 
Services, in consultation with the Secretary of Labor, shall award 
grants to States to conduct demonstration projects to carry out one or 
more of the purposes described in subsection (b).
    (b) Purposes Described.--For purposes of subsection (a), the 
purposes described in this subsection are the following:
            (1) Court-supervised or iv-d agency-supervised employment 
        programs for noncustodial parents.--
                    (A) In general.--To establish, in coordination with 
                counties and other local or tribal governments, court-
                supervised or IV-D agency supervised-employment 
                programs for noncustodial parents who have barriers to 
                employment and a history of nonpayment of child support 
                obligations, as determined by a court or the IV-D 
                agency, and who are determined by the court or agency 
                to be in need of employment services or placement in 
                order to pay such child support obligations. A 
                noncustodial parent described in the preceding sentence 
                who is an ex-offender shall be eligible to participate 
                in a program established to carry out this purpose.
                    (B) Requirements.--
                            (i) Option to participate prior to contempt 
                        finding.--A State shall not be eligible to 
                        receive a grant under this section to carry out 
                        this purpose unless any program established 
                        with funds made available under the grant 
                        provides noncustodial parents described in 
                        subparagraph (A) with an option to participate 
                        in the program prior to the court or agency 
                        entering a finding that the noncustodial parent 
                        is in contempt for failure to pay a child 
                        support obligation and, potentially subject to 
                        criminal penalties.
                            (ii) Program goals.--An employment program 
                        established with funds made available under a 
                        grant awarded under this section to carry out 
                        this purpose shall be designed to do the 
                        following:
                                    (I) To assist noncustodial parents 
                                described in subparagraph (A) obtain 
                                and maintain unsubsidized employment.
                                    (II) To increase the amount of 
                                financial support received by children.
                                    (III) To help noncustodial parents 
                                described in subparagraph (A) improve 
                                relationships with their children and 
                                their children's custodial parent.
                            (iii) 6 months of continuous, timely 
                        payments.--An employment program established 
                        with funds made available under this section to 
                        carry out this purpose shall not permit a 
                        noncustodial parent placed in the program to 
                        graduate from the program and avoid penalties 
                        for failure to pay a child support obligation 
                        until the noncustodial parent completes at 
                        least 6 months of continuous, timely payment of 
                        the parent's child support obligations.
                            (iv) Use of funds.--Services provided under 
                        an employment program established with funds 
                        made available under a grant made to carry out 
                        this purpose may include one or more of the 
                        following:
                                    (I) Job development.
                                    (II) Supervised job search.
                                    (III) Job placement.
                                    (IV) Case management.
                                    (V) Court liaison services.
                                    (VI) Educational assessment.
                                    (VII) Remedial education services 
                                or educational referral.
                                    (VIII) Vocational assessment or 
                                services.
                                    (IX) Counseling on responsible 
                                fatherhood.
                                    (X) Support funds for services such 
                                as transportation or short-term 
                                training.
                                    (XI) Referral for support services.
                                    (XII) Employment retention 
                                services.
                                    (XIII) Transitional jobs programs.
                                    (XIV) Public-private career pathway 
                                partnerships established in accordance 
                                with paragraph (3).
                            (v) Administration.--A State that receives 
                        a grant under this section to carry out this 
                        purpose may contract with a public or private 
                        nonprofit organization, including a faith-based 
                        or community-based organization, to administer 
                        (in conjunction with the court of jurisdiction 
                        or the IV-D agency) the court-supervised or IV-
                        D agency-supervised employment program.
            (2) Transitional jobs grants.--
                    (A) In general.--To establish and expand 
                transitional jobs programs for eligible individuals, 
                including such programs conducted by local governments, 
                State employment agencies, nonprofit organizations, and 
                faith-based or community-based organizations or 
                intermediaries, that--
                            (i) combine time-limited employment in 
                        transitional jobs that may be subsidized with 
                        public funds, with activities that promote 
                        skill development and remove barriers to 
                        employment, such as case management services 
                        and education, training, child support-related 
                        services, and other activities, pursuant to 
                        individual plans; and
                            (ii) provide such individuals with--
                                    (I) transitional jobs placements 
                                and job placement assistance, to help 
                                the individuals make the transition 
                                from subsidized employment in 
                                transitional jobs to stable 
                                unsubsidized employment; and
                                    (II) retention services after the 
                                transition to unsubsidized employment.
                    (B) Eligible individuals.--For purposes of this 
                paragraph, the term ``eligible individuals'' means 
                individuals within any of the following categories of 
                disproportionately chronically unemployed individuals:
                            (i) Individuals who have attained age 16, 
                        but not attained age 36, and who have 
                        documented barriers to employment, particularly 
                        such individuals who are parents or expectant 
                        parents.
                            (ii) Formerly incarcerated individuals.
                            (iii) Homeless or formerly homeless 
                        individuals.
                            (iv) Individuals with disabilities.
                            (v) Individuals designated by a court or 
                        the IV-D agency to participate in transitional 
                        jobs programs.
                    (C) Limitations on use of funds.--
                            (i) Allowable activities.--A State that 
                        receives a grant to carry out this purpose (or 
                        a subgrantee of such State) (referred to in 
                        this paragraph as the ``program operator'') 
                        shall use the funds made available under the 
                        grant to operate a transitional jobs program 
                        for eligible individuals consistent with the 
                        following requirements:
                                    (I) Jobs.--The program operator 
                                shall place eligible individuals in 
                                temporary jobs, the incomes from which 
                                may be subsidized in whole or in part 
                                with public funds. An eligible 
                                individual placed in such a job 
                                (referred to in this paragraph as ``a 
                                participant'') shall perform work 
                                directly for the program operator or 
                                another public, nonprofit, or private 
                                sector organization (which operator or 
                                organization may be referred to in this 
                                paragraph as a ``worksite employer'') 
                                within the community involved.
                                    (II) Hours.--
                                            (aa) In general.--Subject 
                                        to item (bb), the transitional 
                                        jobs program shall provide a 
                                        participant with not less than 
                                        30, and not more than 40, hours 
                                        per week of a combination of 
                                        paid employment and the 
                                        services described in 
                                        subclauses (III), (IV), and 
                                        (V).
                                            (bb) Accommodation of 
                                        special circumstances.--The 
                                        number of hours per week 
                                        required under item (aa) may be 
                                        adjusted in the case of a 
                                        participant who requires a 
                                        modified work week to 
                                        accommodate special 
                                        circumstances.
                                    (III) Job preparation and 
                                services.--The program operator shall--
                                            (aa) develop an individual 
                                        plan for each participant, 
                                        which shall contain a goal that 
                                        focuses on preparation of the 
                                        participant for unsubsidized 
                                        jobs in demand in the local 
                                        economy that offer the 
                                        potential for advancement and 
                                        growth (including increases in 
                                        wages and benefits);
                                            (bb) develop transitional 
                                        jobs placements for 
                                        participants that will best 
                                        prepare them for jobs described 
                                        in item (aa) or participation 
                                        in the public-private career 
                                        pathway partnerships 
                                        established in accordance with 
                                        paragraph (3); and
                                            (cc) provide case 
                                        management services and ensure 
                                        that appropriate education, 
                                        training, and other activities 
                                        are available to participants, 
                                        consistent with each 
                                        participant's individual plan.
                                    (IV) Job placement assistance and 
                                retention services.--The program 
                                operator shall provide job placement 
                                assistance to help participants obtain 
                                unsubsidized employment and shall 
                                provide retention services to the 
                                participants for a minimum of 6 months 
                                after entry into the unsubsidized 
                                employment.
                                    (V) Education or training.--In any 
                                workweek in which a participant is 
                                scheduled to work at least 30 hours in 
                                the program, not less than 20 percent 
                                of the scheduled hours and not more 
                                than 50 percent of the scheduled hours 
                                shall involve participation in--
                                            (aa) education or training 
                                        activities designed to improve 
                                        the participant's employability 
                                        and potential earnings;
                                            (bb) other activities 
                                        designed to reduce or eliminate 
                                        any barriers that may impede 
                                        the participant's ability to 
                                        secure and advance in 
                                        unsubsidized employment; or
                                            (cc) activities designed to 
                                        promote financial literacy and 
                                        the use of products and 
                                        services that increase personal 
                                        savings and build financial 
                                        assets for family support, 
                                        education, homeownership, and 
                                        retirement.
                                    (VI) Duration.--
                                            (aa) In general.--Subject 
                                        to item (bb), the duration of 
                                        any placement in the program 
                                        shall be for a period of 6 
                                        consecutive months.
                                            (bb) 3 month extension.--A 
                                        program placement may be 
                                        extended on a one-time basis 
                                        for an additional period of 3 
                                        consecutive months upon the 
                                        conclusion of the original 6-
                                        month placement period if such 
                                        extension would be consistent 
                                        with the individual's plan for 
                                        transition to unsubsidized 
                                        employment.
                                    (VII) Supervision.--The worksite 
                                employer or program operator shall 
                                supervise program participants, 
                                consistent with the goal of addressing 
                                the limited work experience and skills 
                                of the participants.
                    (D) Reports.--Not later than 120 days after the end 
                of the grant period, the program operator shall submit 
                a report to the Secretary of Health and Human Services 
                and the Secretary of Labor that contains information on 
                the number of participants in the program who have 
                entered unsubsidized employment, rates of retention in 
                such employment for those participants, demographic 
                information regarding the participants, and information 
                regarding the wages and benefits received by the 
                participants.
                    (E) Technical assistance.--The Secretary of Health 
                and Human Services, in consultation with the Secretary 
                of Labor, shall enter into contracts with entities with 
                demonstrated experience in the provision of 
                transitional jobs to provide technical assistance to 
                the program operators and worksite employers for the 
                programs assisted under this paragraph.
            (3) Public-private career pathways partnerships.--
                    (A) In general.--To allow workforce education 
                providers representing career pathway partnerships--
                            (i) to create or expand career pathways 
                        with specific employers for disadvantaged 
                        workers, which may include any mix of such 
                        employers' existing lower wage employees, new 
                        hires or potential hires; or
                            (ii) to fill in gaps in career pathways in 
                        particular localities or regions as needed to 
                        ensure that career pathways are accessible to 
                        unemployed disadvantaged workers and at risk 
                        youth who have lower skills or limited English 
                        proficiency, including through the creation of 
                        workforce education services, such as 
                        ``bridge'' programs that contextualize basic 
                        skills, English language, or college remedial 
                        education services to specific career pathways, 
                        and efforts to create opportunities for gaining 
                        work experience in a career pathway.
                    (B) Use of funds.--Funds made available under a 
                grant under this section to carry out this purpose may 
                be used by career pathways partnerships for any expense 
                reasonably related to the accomplishment of the 
                specific objectives of the partnership and the purpose 
                described in this paragraph, including any of the 
                activities described in paragraph (1)(B)(iv).
                    (C) Limitations.--
                            (i) In general.--Of the funds made 
                        available to a career pathway partnership to 
                        carry out the purpose described in this 
                        paragraph--
                                    (I) not more than 30 percent of 
                                such funds may be used to pay or 
                                subsidize wages during a period of work 
                                experience or internship, not to exceed 
                                90 days; and
                                    (II) not more than 10 percent of 
                                such funds may be used for 
                                administrative purposes.
                            (ii) Prohibition on subsidizing wages of 
                        current employees.--No funds made available to 
                        carry out this paragraph shall be used to 
                        subsidize the wages of any individual who, as 
                        of the date of the establishment of the career 
                        pathway partnership, is an employee of any 
                        employer participating in the partnership.
                    (D) Requirements for awarding of subgrants.--
                            (i) In general.--Funds shall be made 
                        available to career pathway partnerships to 
                        carry out the purpose described in this 
                        paragraph based on a performance-based 
                        accountability system that includes the 
                        following measures of performance:
                                    (I) The number of individuals to be 
                                trained.
                                    (II) The percentage of such 
                                individuals who complete the program.
                                    (III) The percentage of such 
                                individuals who enter or advance in 
                                employment.
                                    (IV) The wage and benefit gains of 
                                individuals who complete the program 
                                before and within 6 months after their 
                                program completion, including the 
                                extent to which the individuals 
                                achieved economic self-sufficiency.
                                    (V) The percentage of individuals 
                                who complete the program and are placed 
                                in jobs who retain employment for at 
                                least 6 months.
                                    (VI) The percentage of individuals 
                                who owe child support and complete the 
                                program who improve in their payment of 
                                child support within 6 months after 
                                their program completion.
                        In establishing goals for such measures, due 
                        consideration shall be given to the education, 
                        work experience, and job readiness of the 
                        individuals expected to participate in the 
                        program; the barriers of such individuals to 
                        employment, and the local job market.
                            (ii) Considerations for funding renewals.--
                        A subgrantee's level of success in achieving 
                        employment, advancement, wage, and employment 
                        retention goals shall be a primary 
                        consideration for determining whether to renew 
                        a grant made to such entity and the funding 
                        level for such grant.
                            (iii) Priorities for awards of subgrants.--
                        In awarding subgrants to carry out this 
                        purpose, a State shall give priority to 
                        applications that--
                                    (I) propose to serve areas of high 
                                poverty, high youth unemployment, high 
                                drop out rates, or high rates of low-
                                income single-parent families;
                                    (II) include a substantial cash or 
                                in-kind match by all employers, 
                                including joint labor-management 
                                programs where applicable, in the 
                                partnerships, such as paid release time 
                                for employed workforce education 
                                participants;
                                    (III) use instructional materials 
                                and instructors directly used in the 
                                specific business or industry sectors 
                                of the partnership employers;
                                    (IV) link successful completion of 
                                workforce education services to wage 
                                increases, promotions or job hires;
                                    (V) will result in attainment of 
                                employer-recognized occupational and 
                                educational credentials;
                                    (VI) address career guidance and 
                                adult basic education and English 
                                language needs as well as job-specific 
                                skills;
                                    (VII) demonstrate a blending of 
                                resources from partner agencies in the 
                                workforce system and other sectors and 
                                Federal programs, including superior 
                                procedures for coordinating responsible 
                                fatherhood promotion activities, where 
                                appropriate, to support the development 
                                of high quality pathways;
                                    (VIII) identify how the subgrantee 
                                will maximize services to unemployed 
                                disadvantaged workers who also face 
                                other barriers in the labor market, 
                                such as high school dropout, offender 
                                status, aging out of foster care, low 
                                basic skill level, including limited 
                                English proficiency, learning 
                                disabilities, physical, emotional or 
                                behavior disabilities, or substance 
                                abuse recovery, which may be through 
                                direct relationships with local 
                                providers of transitional jobs programs 
                                under which in appropriate 
                                circumstances transitional jobs 
                                participants may access career pathways 
                                programs upon completion of the 
                                transitional jobs program; and
                                    (IX) support collaboration, as 
                                appropriate, between employers and 
                                labor organizations and other workforce 
                                development professionals, including 
                                joint labor management training and 
                                education programs where appropriate.
                    (E) Definitions.--In this paragraph:
                            (i) Adult education.--The term ``adult 
                        education'' has the meaning given that term in 
                        section 203 of the Workforce Investment Act of 
                        1998 (20 U.S.C. 9202).
                            (ii) Career pathway.--The term ``career 
                        pathway'' means a linked set of workforce 
                        education and job opportunities within a 
                        specific business or industry sector, or for an 
                        occupational sector that cuts across multiple 
                        business and industry sectors, which begins at 
                        the lowest skill and English language levels, 
                        and extends through for-credit college 
                        opportunities such as earning relevant 
                        associate or bachelor's degrees, and prepares 
                        individuals for advancement in jobs in demand 
                        in the local or regional labor market.
                            (iii) Community-based provider.--The term 
                        ``community-based provider'' means a not-for-
                        profit organization, with local boards of 
                        directors, that directly provides workforce 
                        education services.
                            (iv) Institution of higher education.--The 
                        term ``institution of higher education'' has 
                        the meaning given that term in section 101 of 
                        the Higher Education Act of 1965 (20 U.S.C. 
                        1001).
                            (v) Charter school.--The term ``charter 
                        school'' has the meaning given that term in 
                        section 5210 of the Elementary and Secondary 
                        Education Act of 1965 (20 U.S.C. 7221i).
                            (vi) Area vocational education school.--The 
                        term ``area vocational and technical education 
                        school'' has the meaning given that term in 
                        section 3 of the Carl D. Perkins Vocational and 
                        Technical Education Act of 1998 (20 U.S.C. 
                        2302).
                            (vii) Disadvantaged workers.--The term 
                        ``disadvantaged workers'' means unemployed 
                        individuals in households whose income is at or 
                        below the lower living standard or employed 
                        individuals with wages at or below \2/3\ of the 
                        median wage for the State or region applying 
                        for the grant or the partnership applying for a 
                        subgrant.
                            (viii) Career pathway partnership.--The 
                        term ``career pathway partnership'' means 
                        collaborations of 1 or more workforce education 
                        providers, 1 or more employers, 1 or more labor 
                        organizations, where applicable, as a result of 
                        such organization's representation of employees 
                        at the worksite who have skills in which the 
                        training or employment programs are proposed, 
                        and may include optional additional entities as 
                        needed to provide a comprehensive range of 
                        workforce education and ancillary support 
                        services.
                            (ix) Workforce education.--The term 
                        ``workforce education'' means a set of career 
                        guidance and exploration, adult education, job 
                        training, registered apprenticeship programs, 
                        and for-credit postsecondary education services 
                        aimed at preparing individuals to enter and 
                        sustain employment in specific occupations and 
                        to have the sufficient skills to respond to 
                        shifting employment opportunities.
                            (x) Workforce education provider.--The term 
                        ``workforce education provider'' means 
                        community-based providers, institutions of 
                        higher education, area vocational and technical 
                        education schools, charter schools, and other 
                        public nonprofit entities that provide 
                        workforce education.
    (c) Matching Requirement.--
            (1) In general.--The Secretary of Health and Human Services 
        may not award a grant to a State under this section unless the 
        State agrees that, with respect to the costs to be incurred by 
        the State in conducting a demonstration project with funds 
        provided under the grant, the State will make available non-
        Federal contributions in an amount equal to 10 percent of the 
        amount of Federal funds paid to the State under such grant.
            (2) Non-federal contributions.--In this subsection, the 
        term ``non-Federal contributions'' includes contributions by 
        the State and by public and private entities that may be in 
        cash or in kind, but does not include any amounts provided by 
        the Federal Government, or services assisted or subsidized to 
        any significant extent by the Federal Government, or any amount 
        expended by a State before October 1, 2006.
    (d) Worker Protections and Labor Standards.--
            (1) Rate of pay; benefits and working conditions.--
                    (A) In general.--A worksite employer of a 
                participant in a program or activity funded under this 
                section shall pay the participant at the rate paid to 
                employees of the worksite employer who are not 
                participants in such program or activity and who 
                perform comparable work at the worksite, including 
                periodic increases where appropriate. If no other 
                employees of the worksite employer perform comparable 
                work at the worksite, the worksite employer shall pay 
                the participant not less than the applicable Federal or 
                State minium wage, whichever is higher.
                    (B) Benefits and conditions.--An individual 
                employed through participation in a program or activity 
                funded under this section shall be provided with 
                benefits and working conditions at the same level and 
                to the same extent as such benefits and conditions are 
                provided to other employees of the employer of the 
                individual who have worked a similar length of time and 
                perform the same work
            (2) Nonduplication.--
                    (A) In general.--Funds provided through a grant 
                made under this paragraph shall be used only for a 
                program or activity that does not duplicate, and is in 
                addition to, a program or activity otherwise available 
                in the locality of the program or activity funded under 
                this section.
                    (B) Private, nonprofit entity.--Funds provided 
                through a grant made under this section shall not be 
                provided to a private nonprofit entity to conduct 
                programs or activities that are the same as or 
                substantially equivalent to activities provided by a 
                State or local government agency in the area in which 
                such entity is located, unless the requirements of 
                paragraph (3) are met.
            (3) Nondisplacement.--
                    (A) In general.--A worksite employer shall not 
                displace an employee or position (including partial 
                displacement such as reduction in hours, wages, or 
                employment benefits) or impair contracts for services 
                or collective bargaining agreements, as a result of the 
                use by such employer of a participant in a program or 
                activity funded under this section, and no participant 
                in the program or activity shall be assigned to fill 
                any established unfilled position vacancy.
                    (B) Job opportunities.--A job opportunity shall not 
                be created under this paragraph that will infringe in 
                any manner on the promotional opportunity of an 
                employed individual.
                    (C) Limitation on services.--
                            (i) Supplantation of hiring.--A participant 
                        in any program or activity funded under this 
                        section shall not perform any services or 
                        duties, or engage in activities, that will 
                        supplant the hiring of employees that are not 
                        participants in the program or activity.
                            (ii) Duties formerly performed by another 
                        employee.--A participant in any program or 
                        activity funded under this section shall not 
                        perform services or duties, or engage in 
                        activities, that are services, duties, or 
                        activities that had been performed by or were 
                        assigned to any employee who recently resigned 
                        or was discharged, who is subject to a 
                        reduction in force, who has recall rights 
                        pursuant to a collective bargaining agreement 
                        or applicable personnel procedures, who is on 
                        leave (such as terminal, temporary, vacation, 
                        emergency, or sick leave), who is on strike, or 
                        who is being locked out.
                    (D) Concurrence of local labor organization.--No 
                placement shall be made under a program or activity 
                funded under this section until the entity conducting 
                the program or activity has obtained the written 
                concurrence of any local labor organization 
                representing employees who are engaged in the same or 
                substantially similar work as that proposed to be 
                carried out for the worksite employer with whom a 
                participant is to be placed under the program or 
                activity.
            (4) No impact on union organizing.--A State conducting a 
        demonstration project funded under this section and any entity 
        conducting a program or activity funded under this section 
        shall provide the Secretary with a certified assurance that 
        none of such funds shall be used to assist or deter union 
        organizing.
            (5) Accountability.--
                    (A) In general.--Funds provided under this section 
                shall not be used to subsidize training or employment 
                with an employer that has a demonstrable record of 
                noncompliance with Federal labor, civil rights, 
                workplace safety, or related laws.
                    (B) Certified satisfactory record.--Employers who 
                receive training or wage subsidies under programs or 
                activities funded under this section shall have a 
                satisfactory record in labor relations and employment 
                practices, as certified by the Secretary of Labor.
                    (C) Application of worker protection laws.--A 
                participant in a program or activity funded under this 
                section shall be considered to be an employee of any 
                employer that the participant is placed with for all 
                purposes under Federal and State law, including laws 
                relating to health and safety, civil rights, and 
                worker's compensation.
            (6) Grievance procedure.--An entity conducting a program or 
        activity funded under this section shall establish and maintain 
        a procedure for the filing and adjudication of grievances by 
        employees of worksite employers who are not participants in the 
        program, or such employees' representatives, or by participants 
        in such a program or activity alleging a violation of a 
        provision of this subsection that is similar to the grievance 
        procedure established by a State for purposes of section 
        407(f)(3) of the Social Security Act (42 U.S.C. 607(f)(3)).
            (7) Nonpreemption of state law.--The provisions of this 
        subsection shall not be construed to preempt any provision of 
        State law that affords greater protections to employees or 
        participants than are afforded by this subsection.
            (8) Treatment of amounts paid to participants.--Amounts 
        paid to a participant in a program or activity funded under 
        this section shall be--
                    (A) considered earned income for purpose of 
                determining the participant's eligibility for the child 
                tax credit established under section 24 of the Internal 
                Revenue Code of 1986, the earned income tax credit 
                established under section 32 of such Code, and any 
                other tax benefit established under such Code the 
                eligibility for which is based on earned income; and
                    (B) disregarded for purposes of determining the 
                participant's, the participant's family's, or the 
                participant's household's eligibility for, or amount 
                of, assistance or benefits provided under any means-
                tested program funded in whole or in part with Federal 
                funds.
    (e) Application.--
            (1) Requirements for all applications.--
                    (A) In general.--A State desiring to receive a 
                grant to conduct a demonstration project under this 
                section to carry out one or more of the purposes 
                described in subsection (b) shall submit an application 
                to the Secretary of Health and Human Services at such 
                time, in such manner, and containing such information 
                or assurances as the Secretary may require.
                    (B) Compliance with worker protections and labor 
                standards.--The application shall include an assurance 
                that the State and any entity conducting a program or 
                activity under the project shall comply with the worker 
                protections and labor standards established in 
                accordance with such protections under subsection (d),
                    (C) Nondiscrimination.--The application shall 
                include an assurance that the State and any entity 
                conducting a program or activity under the 
                demonstration project shall comply with section 
                188(a)(2) of the Workforce Investment Act of 1998 (29 
                U.S.C. 2938(a)(2)) to the same extent that such section 
                would apply to the entity if the program or activity 
                conducted under the demonstration project was 
                considered to be funded or otherwise financially 
                assisted under that Act.
                    (D) Assurance grant will supplement, not supplant, 
                other state funding.--The application shall include an 
                assurance from the chief executive officer of the State 
                that funds made available under the grant will 
                supplement, and not supplant, other funds used by the 
                State to establish or support employment placements for 
                low-income parents.
            (2) Specific demonstration project requirements.--
                    (A) Court-supervised or iv-d agency-supervised 
                employment programs for noncustodial parents.--In order 
                to conduct a demonstration project described in 
                paragraph (1) of subsection (b), a State shall include 
                in the application submitted to the Secretary of Health 
                and Human Services, the following:
                            (i) Evidence of an agreement between the 
                        State and 1 or more counties to establish an 
                        employment program that meets the requirements 
                        of subsection (b)(2).
                            (ii) The number of potential noncustodial 
                        parents to be served by the program.
                            (iii) The purposes specific to that State's 
                        program.
                            (iv) The median income of the target 
                        population.
                    (B) Public-private career pathways partnerships.--
                In order to conduct a demonstration project described 
                in paragraph (3) of subsection (b), a State shall 
                include in the application submitted to the Secretary 
                of Health and Human Services a description of--
                            (i) the number, characteristics, and 
                        employment and earnings status of disadvantaged 
                        individuals in the State or applicable region 
                        where the program is to be conducted;
                            (ii) which business and industry sectors, 
                        or occupational clusters that cut across 
                        sectors, will be targeted by the career 
                        pathways partnership, based on overall economic 
                        benefit to the community, the current and 
                        future demand for workers, the advancement 
                        opportunities for workers, the wages at each 
                        step of the career pathway, and availability of 
                        worker benefits;
                            (iii) the interventions that will be put in 
                        place to address any educational deficits or 
                        learning disabilities of individuals who 
                        participate in the program and to ensure that 
                        such individuals have the academic, technical, 
                        communications, and other job skills to 
                        function in the jobs targeted by the 
                        partnership;
                            (iv) how the members of the partnership 
                        will collaborate on the development of 
                        curriculum and delivery of training that will 
                        provide the necessary occupational, academic 
                        and other work-related skills and credentialing 
                        needed for the specific labor market areas;
                            (v) the supports that will be used to 
                        provide counseling, mentoring or other support 
                        to individuals while in training or to assist 
                        them in navigating in complicated work 
                        environments;
                            (vi) the set of career exposure activities 
                        that will be put in place to provide hands-on 
                        experience such as work experience, on the job 
                        training, internships, or work-study;
                            (vii) the agreements that are in place with 
                        employers, industry groups, and labor 
                        organizations, where applicable, to ensure 
                        access to jobs and advancement opportunities in 
                        the targeted businesses, industry or 
                        occupations;
                            (viii) how the workforce education 
                        providers in the partnership will assess the 
                        employment barriers and needs of local 
                        disadvantaged individuals who participate in 
                        the program and will identify resources for 
                        meeting those needs;
                            (ix) how the workforce education providers 
                        will work with partnership employers, business 
                        and industry groups, labor organizations, where 
                        applicable, and local economic development 
                        organizations to identify the priority 
                        workforce needs of the local industry;
                            (x) how the partnerships will ensure that 
                        the appropriate program delivery models and 
                        formal agreements are in place to ensure 
                        maximum benefits to the individuals receiving 
                        career pathway partnership services and to the 
                        employers and labor organizations, where 
                        applicable, in the partnership and the 
                        industries or businesses they represent; and
                            (xi) how partnership employers and labor 
                        organizations, where applicable, will be 
                        actively involved in identifying specific 
                        workforce education needs, planning the 
                        curriculum, assisting in training activities, 
                        providing job opportunities, and coordinating 
                        job retention for individuals hired after 
                        training through the program and follow-up 
                        support.
            (3) Applications by indian tribes or tribal 
        organizations.--The Secretary of Health and Human Services may 
        exempt an Indian tribe or tribal organization from any 
        requirement of this section that the Secretary determines would 
        be inappropriate to apply to the Indian tribe or tribal 
        organization, taking into account the resources, needs, and 
        other circumstances of the Indian tribe or tribal organization.
    (f) Priorities and Requirements for Awarding Grants.--
            (1) In general.--Subject to paragraphs (2) and (3), the 
        Secretary of Health and Human Services, in consultation with 
        the Secretary of Labor, shall give priority to making grants to 
        carry out the purposes described in subsection (b) to entities 
        that--
                    (A) demonstrate a plan for implementing measures to 
                track their performance with respect to meeting the 
                goals of quality job placement, long-term unsubsidized 
                job retention, increasing child support payments, 
                decreasing unpaid child support arrearages, and 
                increasing the involvement of low-income noncustodial 
                parents with their children; and
                    (B) coordinate with, and link individuals to, other 
                public and private benefits and employment services for 
                low-income, noncustodial parents among the different 
                systems or programs in which such parents are involved, 
                including the criminal justice system, the State 
                programs funded under each part of title IV of the 
                Social Security Act (42 U.S.C. 601 et seq.) (including 
                programs and activities funded under section 403(a)(2) 
                of the Social Security Act (42 U.S.C. 603(a)(2)), 
                educational assistance programs, and job training or 
                employment programs, including State employment 
                agencies.
            (2) Reflective of target populations.--In making grants to 
        carry out these purposes, the Secretary of Health and Human 
        Services, in consultation with the Secretary of Labor, shall 
        give priority to States with proposed demonstration projects 
        that are designed to target low-income parents, including 
        custodial and noncustodial parents, and low-income married 
        couples.
            (3) Substantial funding for each of the purposes.--In 
        making grants under this section, the Secretary of Health and 
        Human Services, in consultation with the Secretary of Labor, 
        shall ensure that a substantial share of the amount 
        appropriated under subsection (i) for a fiscal year is used for 
        carrying out each of the purposes described in subsection (b).
    (g) Evaluation.--The Secretary of Health and Human Services, in 
consultation with the Secretary of Labor, shall provide for an 
independent and rigorous evaluation of the demonstration projects 
conducted under this section that includes, to the maximum extent 
feasible, random assignment or other appropriate statistical 
techniques, in order to assess the effectiveness of the projects.
    (h) General Definitions.--In this section:
            (1) State.--The term ``State'' means each of the 50 States, 
        the District of Columbia, the Commonwealth of Puerto Rico, the 
        United States Virgin Islands, Guam, American Samoa, and 
        includes an Indian tribe or tribal organization.
            (2) IV-D agency.--The term ``IV-D agency'' means the State 
        or local agency responsible for administering the State program 
        established under part D of title IV of the Social Security Act 
        (42 U.S.C. 651 et seq.).
            (3) Indian tribe; tribal organization.--The terms ``Indian 
        tribe'' and ``tribal organization'' have the meaning given such 
        terms in section 4 of the Indian Self-Determination and 
        Education Assistance Act (25 U.S.C. 450b).
    (i) Appropriation.--Out of any money in the Treasury of the United 
States not otherwise appropriated, there are appropriated to carry out 
this section, $50,000,000 for each of fiscal years 2007 through 2009.

SEC. 107. STATE ASSESSMENTS OF BARRIERS TO EMPLOYMENT AND FINANCIAL 
              SUPPORT OF CHILDREN.

    (a) State Assessments and Reports.--As a condition of the continued 
approval of a State plan under part D of title IV of the Social 
Security Act (42 U.S.C. 651 et. seq.), each State with an approved such 
plan, acting through the appropriate State agencies, shall assess the 
State policies with respect to the issues described in subsection (b) 
and submit a report to the Secretary of Health and Human Services on 
the results of such assessment not later than March 15, 2008.
    (b) Issues Described.--For purposes of subsection (a), the issues 
described in this subsection are the following:
            (1) The process of setting and modifying child support 
        obligations, particularly with respect to low-income parents, 
        including--
                    (A) the role and criteria for using imputed income 
                in determining child support obligations;
                    (B) the process of modifying obligations;
                    (C) the consideration of income and employment 
                status, including efforts to identify unreported 
                income;
                    (D) the consideration of incarceration;
                    (E) the consideration of disability;
                    (F) the treatment of arrearages, including interest 
                charged, and laws or procedures that interfere with 
                forgiveness, adjustment, waiver, or compromise of 
                arrears owed to the State by low-income noncustodial 
                parents who lack sufficient ability to pay such 
                arrearages;
                    (G) the procedures related to retroactive support; 
                and
                    (H) State pass-through and disregard policies for 
                recipients of means tested public benefits.
            (2) The impact of state criminal laws and law enforcement 
        practices on the employment acquisition, retention, and 
        advancement prospects of individuals following arrest, 
        conviction, or incarceration, including--
                    (A) any efforts, including counseling or employment 
                support, to assist ex-prisoners with reentry to a 
                community and successful reunification with their 
                families; and
                    (B) an assessment of any efforts to seal or expunge 
                arrest and conviction records and any efforts to grant 
                certificates or other acknowledgments of rehabilitation 
                to ex-prisoners, and to examine State occupational 
                licensing and certification procedures.
            (3) Identification of any other barriers to healthy family 
        formation or sustainable economic opportunity for custodial and 
        noncustodial parents that are created or exacerbated by Federal 
        or State laws, policies, or procedures, including an 
        examination of the rules of Federal and State means-tested 
        programs, the operation of the State workforce system, the 
        availability of financial education services, and the 
        availability of domestic violence services and child support 
        procedures to help victims of domestic violence stay safe and 
        obtain the child support they are owed.
    (c) Grants to States for Commissions on State Law Improvements in 
the Best Interest of Children and Families.--The Secretary of Health 
and Human Services shall award grants to States to establish or support 
commissions to review the State assessment conducted in accordance with 
subsection (a) and to make recommendations on ways to improve State law 
in the best interest of children and families.
    (d) Appropriations.--Out of any money in the Treasury of the United 
States not otherwise appropriated, there are appropriated to the 
Secretary of Health and Human Services for the period of fiscal years 
2007 through 2008, $3,000,000, to remain available until expended, for 
the purpose of making--
            (1) payments to States to offset all or a portion of the 
        costs of conducting the State assessments and reports required 
        under subsection (a); and
            (2) grants to States under subsection (c).

SEC. 108. COLLECTION OF CHILD SUPPORT UNDER THE FOOD STAMP PROGRAM.

    (a) Encouragement of Collection of Child Support.--Section 5 of the 
Food Stamp Act of 1977 (7 U.S.C. 2014) is amended--
            (1) in subsection (e)--
                    (A) by redesignating paragraphs (5) and (6) as 
                paragraphs (6) and (7), respectively;
                    (B) in paragraph (4)(B), by striking ``paragraph 
                (6)'' and inserting ``paragraph (7)''; and
                    (C) by inserting after paragraph (4) the following:
            ``(5) Deduction for child support received.--
                    ``(A) In general.--A household shall be allowed a 
                deduction of 20 percent of all legally obligated child 
                support payments received from an identified or 
                putative parent of a child in the household if that 
                parent is not a household member.
                    ``(B) Order of determining deductions.--A deduction 
                under this paragraph shall be determined before the 
                computation of the excess shelter deduction under 
                paragraph (7).''; and
            (2) in subsection (k)(4)(B), by striking ``subsection 
        (e)(6)'' and inserting ``subsection (e)(7)'';
    (b) Simplified Verification of Child Support Payments.--Section 
5(n) of the Food Stamp Act of 1977 (7 U.S.C. 2014(n)) is amended--
            (1) in the subsection heading, by striking ``State Options 
        to Simplify'', and inserting ``Simplified''; and
            (2) by striking ``Regardless of whether'' and inserting the 
        following:
            ``(1) In general.--A household that is paying legally 
        obligated child support through the program under part D of 
        title IV of the Social Security Act (42 U.S.C. 651 et seq.) 
        shall receive--
                    ``(A) a deduction under subsection (e)(4); or
                    ``(B) an exclusion for paid child support under 
                subsection (d)(3).
            ``(2) State options.--Regardless of whether''.
    (c) Inclusion of Economic Opportunities Programs in Definition of 
Work Program.--Section 6(o)(2) of the Food Stamp Act of 1977 (7 U.S.C. 
2015(o)(2)) is amended--
            (1) in subparagraph (C), by striking ``or'' at the end;
            (2) in subparagraph (D), by striking the period at the end 
        and inserting ``; or''; and
            (3) by adding at the end the following:
                    ``(E) participate in and comply with the 
                requirements of a demonstration project under section 
                106 of the Responsible Fatherhood and Healthy Families 
                Act of 2006;''.
    (d) Effective Date.--
            (1) In general.--This section and the amendments made by 
        this section take effect on October 1, 2007.
            (2) State option.--A State may implement the amendments 
        made by subsections (a) and (b) for participating households at 
        the first recertification of the households that occurs on or 
        after October 1, 2007.

                      TITLE II--REVENUE PROVISIONS

SEC. 201. MODIFICATIONS TO THE EARNED INCOME TAX CREDIT.

    (a) Increase in Phaseout Amount for Workers With No Qualifying 
Children.--
            (1) In general.--The table under section 32(b)(2)(A) of the 
        Internal Revenue Code of 1986 is amended by striking ``$5,280'' 
        and inserting ``$10,712''.
            (2) Inflation adjustment.--
                    (A) In general.--Subsection (j) of section 32 of 
                such Code is amended by redesignating paragraph (2) as 
                paragraph (3) and by inserting after paragraph (1) the 
                following new paragraph:
            ``(2) Phaseout amount for individuals with no qualifying 
        children.--In the case of any taxable year beginning after 
        calendar year 2007, the `$10,712' dollar amount in section 
        (b)(2)(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 the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 2006' for `calendar year 1992' in 
                subparagraph (B) thereof.''.
                    (B) Conforming amendment.--Clause (i) of section 
                32(j)(1)(B) of such Code is amended by inserting 
                ``(other than the amount described in paragraph (2))'' 
                after ``subsections (b)(2)(A)''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years ending after December 31, 2005.
    (b) Enhanced Credit for Certain Workers With No Qualifying 
Children.--
            (1) In general.--Section 32 of the Internal Revenue Code of 
        1986 is amended by adding at the end the following new 
        subsection:
    ``(n) Additional Credit for Certain Workers.--
            ``(1)  In general.--In the case of a qualified individual, 
        the credit allowed under subsection (a) shall be increased by 
        an amount equal to 100 percent of the amount of the credit 
        allowed under this section (without regard to this subsection).
            ``(2) Qualified individual.--For purposes of this 
        subsection, the term `qualified individual' means an eligible 
        individual who--
                    ``(A) is described in clause (ii) of subsection 
                (c)(1)(A),
                    ``(B) is the parent of a child who meets the age 
                requirements of section 152(c)(3) before the end of the 
                taxable year of the eligible individual,
                    ``(C) is required to make child support payments 
                with respect to such child--
                            ``(i) pursuant to an order which is in 
                        effect for not less than one-half of the 
                        taxable year of such individual, and
                            ``(ii) through a State agency responsible 
                        for administering the State plan under part D 
                        of title IV of the Social Security Act, and
                    ``(D) has paid child support during the taxable 
                year in an amount not less than the amount of child 
                support due during the taxable year for every order 
                requiring the individual to make child support 
                payments.
            ``(3) Regulations.--The Secretary shall establish 
        regulations to carry out the purposes of this subsection, 
        including regulations which provide for the verification of the 
        payment of child support in accordance with paragraph 
        (2)(D).''.
            (2) Verification of payment.--
                    (A) In general.--The Secretary of Health and Human 
                Services, in consultation with the Secretary of the 
                Treasury, shall include in the Federal Case Registry of 
                Child Support Orders established under section 453(h) 
                of the Social Security Act (42 U.S.C. 653(h)) such 
                information as the Secretary of the Treasury determines 
                necessary to allow for verification of the status of 
                individuals as qualified individuals (as defined under 
                section 32(n) of the Internal Revenue Code of 1986, as 
                added by paragraph (1)).
                    (B) Additional federal procedures.--In addition to 
                the authority provided under subparagraph (A), the 
                Secretary of Health and Human Services and the 
                Secretary of the Treasury may establish such additional 
                procedures as are appropriate to ensure that the 
                Secretary of the Treasury has the information that the 
                Secretary of the Treasury needs to verify payment of 
                child support obligations in a timely fashion.
                    (C) State procedures.--The Secretary of Health and 
                Human States, in consultation with the States, shall 
                establish procedures for informing a noncustodial 
                parent in a timely fashion when the parent has paid the 
                amount of child support owed by the parent for a 
                taxable year so that the parent may determine the 
                extent to which the parent is a qualified individual 
                for purposes of qualifying for the additional credit 
                established under section 32(n) of the Internal Revenue 
                Code of 1986, as added by paragraph (1).
            (3) Effective date.--The amendment made by paragraph (1) 
        shall apply to taxable years beginning after December 31, 2007.
    (c) Marriage Penalty Relief.--
            (1) In general.--Subparagraph (B) of section 32(b)(2) of 
        the Internal Revenue Code of 1986 is amended--
                    (A) in clause (ii), by striking ``, 2006, and 2007, 
                and'' and inserting ``and 2006'',
                    (B) in clause (iii) by striking ``after 2007.'' and 
                inserting ``in 2007, and'', and
                    (C) by adding at the end the following new clause:
                            ``(iv) $4,000 in the case of taxable years 
                        beginning after 2007.''.
            (2) Inflation adjustment.--Clause (ii) of section 
        32(j)(1)(B) of such Code is amended--
                    (A) by striking ``$3,000'' and inserting 
                ``$4,000'', and
                    (B) by striking ``subsection (b)(2)(B)(iii)'' and 
                inserting ``subsection (b)(2)(B)(iv)''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 2005.

SEC. 202. TAX TREATMENT OF INVERTED ENTITIES.

    (a) In General.--Section 7874 of the Internal Revenue Code of 1986 
is amended--
            (1) by striking ``March 4, 2003'' in subsection 
        (a)(2)(B)(i) and in the matter following subsection 
        (a)(2)(B)(iii) and inserting ``March 20, 2002'',
            (2) by striking ``at least 60 percent'' in subsection 
        (a)(2)(B)(ii) and inserting ``more than 50 percent'',
            (3) by striking ``80 percent'' in subsection (b) and 
        inserting ``at least 80 percent'',
            (4) by striking ``60 percent'' in subsection (b) and 
        inserting ``more than 50 percent'',
            (5) by adding at the end of subsection (a)(2) the following 
        new sentence: ``Except as provided in regulations, an 
        acquisition of properties of a domestic corporation shall not 
        be treated as described in subparagraph (B) if none of the 
        corporation's stock was readily tradeable on an established 
        securities market at any time during the 4-year period ending 
        on the date of the acquisition.'', and
            (6) by redesignating subsection (g) as subsection (h) and 
        by inserting after subsection (f) the following new subsection:
    ``(g) Special Rules Applicable to Expatriated Entities.--
            ``(1) Increases in accuracy-related penalties.--In the case 
        of any underpayment of tax of an expatriated entity--
                    ``(A) section 6662(a) shall be applied with respect 
                to such underpayment by substituting `30 percent' for 
                `20 percent', and
                    ``(B) if such underpayment is attributable to one 
                or more gross valuation understatements, the increase 
                in the rate of penalty under section 6662(h) shall be 
                to 50 percent rather than 40 percent.
            ``(2) Modifications of limitation on interest deduction.--
        In the case of an expatriated entity, section 163(j) shall be 
        applied--
                    ``(A) without regard to paragraph (2)(A)(ii) 
                thereof, and
                    ``(B) by substituting `25 percent' for `50 percent' 
                each place it appears in paragraph (2)(B) thereof.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after March 20, 2002.

SEC. 203. TAX TREATMENT OF CONTROLLED FOREIGN CORPORATIONS ESTABLISHED 
              IN TAX HAVENS.

    (a) In General.--Subchapter C of chapter 80 of the Internal Revenue 
Code of 1986 (relating to provisions affecting more than one subtitle) 
is amended by adding at the end the following new section:

``SEC. 7875. CONTROLLED FOREIGN CORPORATIONS IN TAX HAVENS TREATED AS 
              DOMESTIC CORPORATIONS.

    ``(a) General Rule.--If a controlled foreign corporation is a tax-
haven CFC, then, notwithstanding section 7701(a)(4), such corporation 
shall be treated for purposes of this title as a domestic corporation.
    ``(b) Tax-Haven CFC.--For purposes of this section--
            ``(1) In general.--The term `tax-haven CFC' means, with 
        respect to any taxable year, a foreign corporation which--
                    ``(A) was created or organized under the laws of a 
                tax-haven country, and
                    ``(B) is a controlled foreign corporation 
                (determined without regard to this section) for an 
                uninterrupted period of 30 days or more during the 
                taxable year.
            ``(2) Exception.--The term `tax-haven CFC' does not include 
        a foreign corporation for any taxable year if substantially all 
        of its income for the taxable year is derived from the active 
        conduct of trades or businesses within the country under the 
        laws of which the corporation was created or organized.
    ``(c) Tax-Haven Country.--For purposes of this section--
            ``(1) In general.--The term `tax-haven country' means any 
        of the following:


``Andorra                                Guernsey                                 Panama
Anguilla                                 Isle of Man                              Samoa
Antigua and Barbuda                      Jersey                                   San Marino
Aruba                                    Liberia                                  Federation of
Commonwealth of the                      Principality of                            Saint Christ-
   Bahamas                                 Liechtenstein                            opher
Bahrain                                  Republic of the                            and Nevis
Barbados                                   Maldives                               Saint Lucia
Belize                                   Malta                                    Saint Vincent
Bermuda                                  Republic of the                            and the
British Virgin Islands                     Marshall Islands                         Grenadines
Cayman Islands                           Mauritius                                Republic of the
Cook Islands                             Principality of Monaco                     Seychelles
Cyprus                                   Montserrat                               Tonga
Commonwealth of the                      Republic of Nauru                        Turks and Caicos
   Dominica                              Netherlands                              Republic of
Gibraltar                                Antilles                                   Vanuatu
Grenada                                  Niue                                     ..............................
 

            ``(2) Secretarial authority.--The Secretary may remove or 
        add a foreign jurisdiction from the list of tax-haven countries 
        under paragraph (1) if the Secretary determines such removal or 
        addition is consistent with the purposes of this section.''.
    (b) Conforming Amendment.--The table of sections for subchapter C 
of chapter 80 of such Code is amended by adding at the end the 
following new item:

``Sec. 7875. Controlled foreign corporations in tax havens treated as 
                            domestic corporations.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

SEC. 204. TAXATION OF INCOME OF CONTROLLED FOREIGN CORPORATIONS 
              ATTRIBUTABLE TO IMPORTED PROPERTY.

    (a) General Rule.--Subsection (a) of section 954 of the Internal 
Revenue Code of 1986 (defining foreign base company income) is amended 
by striking ``and'' at the end of paragraph (4), by striking the period 
at the end of paragraph (5) and inserting ``, and'', and by adding at 
the end the following new paragraph:
            ``(6) imported property income for the taxable year 
        (determined under subsection (j) and reduced as provided in 
        subsection (b)(5)).''.
    (b) Definition of Imported Property Income.--Section 954 of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new subsection:
    ``(j) Imported Property Income.--
            ``(1) In general.--For purposes of subsection (a)(6), the 
        term `imported property income' means income (whether in the 
        form of profits, commissions, fees, or otherwise) derived in 
        connection with--
                    ``(A) manufacturing, producing, growing, or 
                extracting imported property;
                    ``(B) the sale, exchange, or other disposition of 
                imported property; or
                    ``(C) the lease, rental, or licensing of imported 
                property.
        Such term shall not include any foreign oil and gas extraction 
        income (within the meaning of section 907(c)) or any foreign 
        oil related income (within the meaning of section 907(c)).
            ``(2) Imported property.--For purposes of this subsection--
                    ``(A) In general.--Except as otherwise provided in 
                this paragraph, the term `imported property' means 
                property which is imported into the United States by 
                the controlled foreign corporation or a related person.
                    ``(B) Imported property includes certain property 
                imported by unrelated persons.--The term `imported 
                property' includes any property imported into the 
                United States by an unrelated person if, when such 
                property was sold to the unrelated person by the 
                controlled foreign corporation (or a related person), 
                it was reasonable to expect that--
                            ``(i) such property would be imported into 
                        the United States; or
                            ``(ii) such property would be used as a 
                        component in other property which would be 
                        imported into the United States.
                    ``(C) Exception for property subsequently 
                exported.--The term `imported property' does not 
                include any property which is imported into the United 
                States and which--
                            ``(i) before substantial use in the United 
                        States, is sold, leased, or rented by the 
                        controlled foreign corporation or a related 
                        person for direct use, consumption, or 
                        disposition outside the United States; or
                            ``(ii) is used by the controlled foreign 
                        corporation or a related person as a component 
                        in other property which is so sold, leased, or 
                        rented.
            ``(3) Definitions and special rules.--
                    ``(A) Import.--For purposes of this subsection, the 
                term `import' means entering, or withdrawal from 
                warehouse, for consumption or use. Such term includes 
                any grant of the right to use intangible property (as 
                defined in section 936(h)(3)(B)) in the United States.
                    ``(B) United states.--For purposes of this 
                subsection, the term `United States' includes the 
                Commonwealth of Puerto Rico, the Virgin Islands of the 
                United States, Guam, American Samoa, and the 
                Commonwealth of the Northern Mariana Islands.
                    ``(C) Unrelated person.--For purposes of this 
                subsection, the term `unrelated person' means any 
                person who is not a related person with respect to the 
                controlled foreign corporation.
                    ``(D) Coordination with foreign base company sales 
                income.--For purposes of this section, the term 
                `foreign base company sales income' shall not include 
                any imported property income.''.
    (c) Separate Application of Limitations on Foreign Tax Credit for 
Imported Property Income.--
            (1) Before 2007.--
                    (A) In general.--Paragraph (1) of section 904(d) of 
                the Internal Revenue Code of 1986 (relating to separate 
                application of section with respect to certain 
                categories of income), as in effect for taxable years 
                beginning before January 1, 2007, is amended by 
                striking ``and'' at the end of subparagraph (H), by 
                redesignating subparagraph (I) as subparagraph (J), and 
                by inserting after subparagraph (H) the following new 
                subparagraph:
                    ``(I) imported property income, and''.
                    (B) Imported property income defined.--Paragraph 
                (2) of section 904(d) of such Code, as so in effect, is 
                amended by redesignating subparagraphs (H) and (I) as 
                subparagraphs (I) and (J), respectively, and by 
                inserting after subparagraph (G) the following new 
                subparagraph:
                    ``(H) Imported property income.--The term `imported 
                property income' means any income received or accrued 
                by any person which is of a kind which would be 
                imported property income (as defined in section 
                954(j)).''.
                    (C) Look-thru rules to apply.--Subparagraph (F) of 
                section 904(d)(3) of such Code, as so in effect, is 
                amended by striking ``or (D)'' and inserting ``(D), or 
                (I)''.
            (2) After 2006.--
                    (A) In general.--Paragraph (1) of section 904(d) of 
                the Internal Revenue Code of 1986 (relating to separate 
                application of section with respect to certain 
                categories of income), as in effect for taxable years 
                beginning after December 31, 2006, is amended by 
                striking ``and'' at the end of subparagraph (A), by 
                redesignating subparagraph (B) as subparagraph (C), and 
                by inserting after subparagraph (A) the following new 
                subparagraph:
                    ``(B) imported property income, and''.
                    (B) Imported property income defined.--Paragraph 
                (2) of section 904(d) of such Code, as so in effect, is 
                amended by redesignating subparagraphs (J) and (K) as 
                subparagraphs (K) and (L), respectively, and by 
                inserting after subparagraph (I) the following new 
                subparagraph:
                    ``(J) Imported property income.--The term `imported 
                property income' means any income received or accrued 
                by any person which is of a kind which would be 
                imported property income (as defined in section 
                954(j)).''.
                    (C) Conforming amendment.--Clause (ii) of section 
                904(d)(2)(A) of such Code, as so in effect, is amended 
                by inserting ``or imported property income'' after 
                ``passive category income''.
    (d) Technical Amendments.--
            (1) Clause (iii) of section 952(c)(1)(B) of such Code 
        (relating to certain prior year deficits may be taken into 
        account) is amended--
                    (A) by redesignating subclauses (II), (III), (IV), 
                and (V) as subclauses (III), (IV), (V), and (VI), and
                    (B) by inserting after subclause (I) the following 
                new subclause:
                                    ``(II) imported property income,''.
            (2) Paragraph (5) of section 954(b) of such Code (relating 
        to deductions to be taken into account) is amended by striking 
        ``and the foreign base company oil related income'' and 
        inserting ``the foreign base company oil related income, and 
        the imported property income''.
    (e) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years of 
        foreign corporations beginning after the date of the enactment 
        of this Act, and to taxable years of United States shareholders 
        within which or with which such taxable years of such foreign 
        corporations end.
            (2) Subsection (c).--The amendments made by subsection 
        (c)(1) shall apply to taxable years beginning after the date of 
        the enactment of this Act and before January 1, 2007, and the 
        amendments made by subsection (c)(2) shall apply to taxable 
        years beginning after December 31, 2006.
                                 <all>