1.Short
title; table of contents
(a)This Act may be cited
as the Roadmap for America’s Future
Act of 2009
.
(b)The table
of contents of this Act is as follows:
Sec. 1. Short title; table of
contents.
Sec. 2. Findings and purpose.
TITLE I—Health care reform
Subtitle A—Tax changes
Sec. 101. Refundable credit for health insurance
coverage.
Sec. 102. Changes to existing tax preferences for medical
coverage, etc., for individuals eligible for qualified health insurance
credit.
Subtitle B—Health Plan Choice; Small Business Health
Fairness
Sec. 111. Cooperative governing of individual health insurance
coverage.
Sec. 112. Small business health fairness.
Subtitle C—Health Care Services Commission
Part 1—Establishment and General Duties
Sec. 121. Establishment.
Sec. 122. General authorities and duties.
Sec. 123. Dissemination.
Part 2—Forum for Quality and Effectiveness in Health
Care
Sec. 131. Establishment of office.
Sec. 132. Membership.
Sec. 133. Duties.
Sec. 134. Adoption and enforcement of guidelines and
standards.
Sec. 135. Additional requirements.
Part 3—General Provisions
Sec. 141. Certain administrative authorities.
Sec. 142. Funding.
Sec. 143. Definitions.
Part 4—Terminations and transition
Sec. 151. Termination of Agency for Healthcare Research and
Quality.
Sec. 152. Transition.
Part 5—Independent Health Record Trust
Sec. 161. Short title of Part.
Sec. 162. Purpose.
Sec. 163. Definitions.
Sec. 164. Establishment, certification, and membership of
independent health record trusts.
Sec. 165. Duties of IHRT to IHRT participants.
Sec. 166. Availability and use of information from records in
IHRT consistent with privacy protections and agreements.
Sec. 167. Voluntary nature of trust participation and
information sharing.
Sec. 168. Financing of activities.
Sec. 169. Regulatory oversight.
TITLE II—Medicaid and SCHIP Reform
Sec. 201. Medicaid reform.
Sec. 202. SCHIP Reform.
TITLE III—Medicare Reform
Subtitle A—New Medicare Program
Sec. 301. Benefit changes.
Sec. 302. Unified Medicare Trust Fund.
Subtitle B—Changes in Current Medicare Program
Sec. 311. Income-related reduction in Part D premium
subsidy.
Sec. 312. Reduction in hospital market basket
increases.
Sec. 313. Elimination of indexing of income thresholds for Part
B income-related premiums.
TITLE IV—Social Security reform
Sec. 401. Short title and table of contents of
title.
Sec. 402. Establishment of Personal Social Security Savings
Program.
Sec. 403. Monthly insurance benefits for participating
individuals.
Sec. 404. Tax treatment of accounts.
Sec. 405. Self-Liquidating Social Security Transition
Fund.
Sec. 406. Budgetary treatment of Social Security.
Sec. 407. Accounting for the Old-Age, Survivors, and Disability
Insurance Program and the Personal Social Security Savings Program.
Sec. 408. Progressive indexing of benefits for old-age, wife’s,
and husband’s insurance benefits.
Sec. 409. Enhancements to Part A benefits.
TITLE V—Simplified Income Tax
Sec. 501. Short title.
Sec. 502. Repeal of alternative minimum tax for noncorporate
taxpayers.
Sec. 503. Simplified income tax system.
Sec. 504. Exclusion for capital gains, dividends, and
interest.
Sec. 505. Repeal of estate and gift taxes.
TITLE VI—Business Consumption Tax
Sec. 601. Short title.
Sec. 602. Repeal of corporate income tax; new tax paid by
corporations and other businesses.
Sec. 603. Repeal of Chapter
6.
Sec. 604. Revisions to the Code.
Sec. 605. Application of Subtitle
F.
Sec. 606. Effective dates.
TITLE VII—Budget Enforcement
Sec. 701. Short title; table of contents;
definitions.
Sec. 702. Long-term projections.
Sec. 703. Preview spending reduction order.
Sec. 704. Final spending reduction order.
Sec. 705. Eliminating excess spending amounts.
Sec. 706. Special procedures.
Sec. 707. Suspension in the event of war or low
growth.
Sec. 708. Alternate spending reduction legislation in the House
of Representatives.
Sec. 709. Alternate spending reduction legislation in the
Senate.
Sec. 710. General provisions.
Sec. 711. Effective date.
2.
(a)The
Congress finds as follows:
(1)The social
insurance strategies of the past century, which sprang from the New Deal,
expanded in the Great Society, and continue to dominate the terms of public
debate, are headed toward collapse.
(2)Although Americans
remain committed to the missions of these initiatives, the goals can no longer
be met on models created nearly 80 years ago—with large, centralized
institutions, especially government, serving as sole providers for an
increasingly dependent population.
(3)The failure of
this approach will not occur immediately, it will unfold over the next several
decades, becoming more intractable with each succeeding year; but it is
inevitable, and policies in place right now, today, are leading inexorably
toward it.
(4)Among the
inescapable signs are the following: an unsustainable path of Government
spending; levels of projected debt that threaten to bankrupt the country;
trillions of dollars of unfunded liabilities in the Government’s major benefit
programs; and the erosion of Americans’ security and confidence in health care
and retirement.
(5)These conditions
pose significant potential burdens not only for the Government, but for the
United States economy as well, threatening its ability to continue raising
standards of living, and its leadership in an increasingly international
marketplace.
(6)A
comprehensive plan is needed, and this legislation aims to energize the
productive capacities of Americans to generate sustained economic
growth.
(b)The
purpose of this Act is as follows:
(1)To provide access to health care coverage to 47 million
uninsured Americans by establishing a new tax credit; to reform health
insurance markets, high-risk pools, and electronic health records; and to
create a new agency to promote the dissemination of industry-defined health
care price and quality data.
(2)Medicaid and
schip reformTo improve health care coverage for those who need
it most by establishing a new option for States’ Medicaid and SCHIP
programs.
(3)To ensure the Medicare benefit continues to provide health
care coverage for seniors by establishing a new methodology to make the program
solvent and fiscally sustainable.
(4)To reform Social Security to ensure retirement security
for future generations and to make it solvent for the foreseeable future; to
address inequities in the system and provide millions of Americans with the
opportunity to build a retirement nest egg that they can pass on to their
heirs.
(5)Individual
income tax reformTo offer taxpayers a choice in paying their
Federal income taxes; to allow individuals to choose between the current tax
code or a highly simplified tax system with virtually no deductions or credits
(apart from an individual health care credit), two low tax rates and a generous
standard deduction and personal exemption; to fully repeal the alternative
minimum tax (AMT), eliminate the tax on interest, capital gains and dividends
in order to promote saving; and to repeal the estate tax.
(6)To eliminate the United States corporate income tax and
establishes a border-adjustable business consumption tax in its place; to
provide a new method of business taxation that will level the playing field for
United States businesses to compete with foreign businesses and will promote
sustained economic growth, investment and job creation in America.
(7)To keep total spending of the Government under control, a
limit on total outlays as a percentage of the gross domestic produce is
established; and enforced by automatic spending controls if it is
exceeded.
<enum>I</enum><header>Health care
reform</header>
<subtitle id="id29DF1C2A041E405EA6A14AC589AB0C4D"><enum>A</enum><header>Tax
changes</header>
<section display-inline="no-display-inline" id="H956D7BC9E9404B008E523D1DAE634440" section-type="subsequent-section"><enum>101.</enum><header>Refundable credit
for health insurance coverage</header>
<subsection id="H93A3A7D713CB46EB928E40E88EF45C7E"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Subpart C of part IV
of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to
refundable credits) is amended by inserting after section 36A the following new
section:</text>
<quoted-block id="H0802A99B153942EC8DBE9B05BAE1CA02">
<section id="H1C542985226C499AB6CE469FB200A0B2"><enum>36B.</enum><header>Qualified
health insurance credit</header>
<subsection id="HFB3DB147AE2441208C7B854C4FEC0066"><enum>(a)</enum><header>Allowance of
credit</header><text>In the case of an individual, there shall be allowed as a
credit against the tax imposed by this chapter for the taxable year the sum of
the monthly limitations determined under subsection (b) for the taxpayer and
the taxpayer’s spouse and dependents.</text>
</subsection><subsection display-inline="no-display-inline" id="HABC046941DEF46DA919E41D8A0CA9E89"><enum>(b)</enum><header>Monthly
limitation</header>
<paragraph id="HECF46846E6C64024B8ED578B3425105B"><enum>(1)</enum><header>In
general</header><text>The monthly limitation for each month during the taxable
year for an eligible individual is <fraction>1/12</fraction>th of—</text>
<subparagraph id="HE8ED8007D2E14030AEACA812C71376E0"><enum>(A)</enum><text>the applicable
adult amount, in the case that the eligible individual is the taxpayer or the
taxpayer’s spouse,</text>
</subparagraph><subparagraph id="H9772CA7AE0A549148C8CD91C1779545D"><enum>(B)</enum><text>the applicable
adult amount, in the case that the eligible individual is an adult dependent,
and</text>
</subparagraph><subparagraph id="H32C1AED0F0194872A58503110028EF5B"><enum>(C)</enum><text>the applicable
child amount, in the case that the eligible individual is a child
dependent.</text>
</subparagraph></paragraph><paragraph id="H9F351E1485674AEFA39E8C8658495C39"><enum>(2)</enum><header>Limitation on
aggregate amount</header><text>Notwithstanding paragraph (1), the aggregate
monthly limitations for the taxpayer and the taxpayer’s spouse and dependents
for any month shall not exceed <fraction>1/12</fraction>th of the applicable
aggregate amount.</text>
</paragraph><paragraph id="H96B32ECEEC9840DAAA31C9DA158D83AD"><enum>(3)</enum><header>No credit for
ineligible months</header><text>With respect to any individual, the monthly
limitation shall be zero for any month for which such individual is not an
eligible individual.</text>
</paragraph></subsection><subsection commented="no" id="HE7D5C819C2C94393B2E697005197E9C1"><enum>(c)</enum><header>Applicable
amounts</header><text>For purposes of this section—</text>
<paragraph id="H3184331BA7DF48BEB84480BDB96C7E85"><enum>(1)</enum><header>Applicable adult
amount</header><text>The term <term>applicable adult amount</term> means
$2,500.</text>
</paragraph><paragraph id="H21EAC425747848F9B67F5C9900182E69"><enum>(2)</enum><header>Applicable child
amount</header><text>The term <term>applicable child amount</term> means
$1,000.</text>
</paragraph><paragraph id="H7A7C716C2B4D4556B6B5FF27F8D5884B"><enum>(3)</enum><header>Applicable
aggregate amount</header><text>The term <term>applicable aggregate
amount</term> means $5,000.</text>
</paragraph></subsection><subsection id="HAE40A83D34424B7D8B55989DCA3088B6"><enum>(d)</enum><header>Eligible
individual</header><text>For purposes of this section—</text>
<paragraph id="HA66FCBBE5434442CA2D5E1744099F969"><enum>(1)</enum><header>In
general</header><text>The term <term>eligible individual</term> means, with
respect to any month, an individual who—</text>
<subparagraph id="HF73E619BA44C4400B1CF7C141821E973"><enum>(A)</enum><text display-inline="yes-display-inline">is the taxpayer, the taxpayer’s spouse, or
the taxpayer’s dependent, and</text>
</subparagraph><subparagraph id="HE1BAD31B123A45FDBDB6C3F22B60F300"><enum>(B)</enum><text>is covered under
qualified health insurance as of the 1st day of such month.</text>
</subparagraph></paragraph><paragraph id="H4C7C8024FD484510B8DA9CB86FF3F9FD"><enum>(2)</enum><header>Coverage under
Medicare, Medicaid, SCHIP, military coverage</header><text display-inline="yes-display-inline">The term <term>eligible individual</term>
shall not include any individual for a month if, as of the first day of such
month, such individual is—</text>
<subparagraph id="H1D32AE5A14694100896DC900DA05E72F"><enum>(A)</enum><text display-inline="yes-display-inline">entitled to benefits under part A of title
XVIII of the Social Security Act or enrolled under part B of such title, and
the individual is not a participant or beneficiary in a group health plan or
large group health plan that is a primary plan (as defined in section
1862(b)(2)(A) of such Act),</text>
</subparagraph><subparagraph id="HE3706F277D354AFBAFB37390001D31D5"><enum>(B)</enum><text>in the case of a
State that has not made the election described in section 1939(a)(1)(B) of the
Social Security Act, enrolled in the program under title XIX of such Act (other
than under section 1928 of such Act), or</text>
</subparagraph><subparagraph id="H17907DC0745A48CEACB322F0F2439100"><enum>(C)</enum><text>entitled to
benefits under chapter 55 of title 10, United States Code.</text>
</subparagraph></paragraph><paragraph display-inline="no-display-inline" id="H742DA7F4E9004AE5A6605EA4E0913CC2"><enum>(3)</enum><header>Identification
requirements</header><text display-inline="yes-display-inline">The term
<term>eligible individual</term> shall not include any individual for any month
unless the policy number associated with the qualified refund eligible health
insurance and the TIN of each eligible individual covered under such health
insurance for such month are included on the return of tax for the taxable year
in which such month occurs.</text>
</paragraph><paragraph id="H84EFD04C69534DC7856D662B1FEB4213"><enum>(4)</enum><header>Prisoners</header><text display-inline="yes-display-inline">The term <term>eligible individual</term>
shall not include any individual for a month if, as of the first day of such
month, such individual is imprisoned under Federal, State, or local
authority.</text>
</paragraph><paragraph id="H431651994A7C459AB0B3D229FB398305"><enum>(5)</enum><header>Aliens</header><text display-inline="yes-display-inline">The term <term>eligible individual</term>
shall not include any alien individual for a month if, as of the first day of
such month, such individual is not a lawful permanent resident of the United
States.</text>
</paragraph></subsection><subsection id="HEB6CF88F26234DD8B299A077919537A"><enum>(e)</enum><header>Qualified health
insurance</header><text>For purposes of this section, the term <term>qualified
health insurance</term> means any insurance constituting medical care which (as
determined under regulations prescribed by the Secretary) provides coverage for
inpatient and outpatient care, emergency benefits, and physician care. Such
term does not include any insurance substantially all of the coverage of which
is coverage described in section 223(c)(1)(B).</text>
</subsection><subsection id="HFF0D88F186334976004B901FD1C803B9"><enum>(f)</enum><header>Other
definitions</header><text>For purposes of this section—</text>
<paragraph commented="no" id="H9DD8E17FD443460E896607AA817790AF"><enum>(1)</enum><header>Dependent</header><text display-inline="yes-display-inline">The term <term>dependent</term> has the
meaning given such term by section 152 (determined without regard to
subsections (b)(1), (b)(2), and (d)(1)(B) thereof). An individual who is a
child to whom section 152(e) applies shall be treated as a dependent of the
custodial parent for a coverage month unless the custodial and noncustodial
parent agree otherwise.</text>
</paragraph><paragraph display-inline="no-display-inline" id="H787CB8CEA1EC49908949150034E75988"><enum>(2)</enum><header>Adult</header><text display-inline="yes-display-inline">The term <term>adult</term> means an
individual who is not a child.</text>
</paragraph><paragraph id="H567B2E27E33A4160B7BDB1D081CA57"><enum>(3)</enum><header>Child</header><text display-inline="yes-display-inline">The term <term>child</term> means a
qualifying child (as defined in section 152(c)).</text>
</paragraph></subsection><subsection id="H68667668A9C64562AB7C6C04D1D14CE8"><enum>(g)</enum><header>Special
rules</header>
<paragraph id="H088D76CAC54F4DB18FD42FC6CEDC6B01"><enum>(1)</enum><header>Coordination
with medical deduction, etc</header><text>Any amount paid by a taxpayer for
insurance to which subsection (a) applies shall not be taken into account in
computing the amount allowable to the taxpayer as a credit under section 35 or
as a deduction under section 213(a).</text>
</paragraph><paragraph id="H6201204104BB44F9BE9C56D6EC007D4C"><enum>(2)</enum><header>Medical and
health savings accounts</header><text display-inline="yes-display-inline">The
credit allowed under subsection (a) for any taxable year shall be reduced by
the aggregate amount distributed from Archer MSAs (as defined in section
220(d)) and health savings accounts (as defined in section 223(d)) which are
excludable from gross income for such taxable years by reason of being used to
pay premiums for coverage of an eligible individual (as defined in section
25E(e)) under qualified health insurance (as defined in section 25E(f)) for any
month.</text>
</paragraph><paragraph id="H04EBE1256B9E437FAE4677BA5C987700"><enum>(3)</enum><header>Denial of credit
to dependents</header><text>No credit shall be allowed under this section to
any individual with respect to whom a deduction under section 151 is allowable
to another taxpayer for a taxable year beginning in the calendar year in which
such individual’s taxable year begins.</text>
</paragraph><paragraph id="H0B836F25C60E43A0BEE11223BC90B9ED"><enum>(4)</enum><header>Married couples
must file joint return</header>
<subparagraph id="H0A3ED0C419C44F73B43D78EB2F19C8E"><enum>(A)</enum><header>In
general</header><text>If the taxpayer is married at the close of the taxable
year, the credit shall be allowed under subsection (a) only if the taxpayer and
his spouse file a joint return for the taxable year.</text>
</subparagraph><subparagraph id="H6328B2F276754F45A5D646FDEBBA93DE"><enum>(B)</enum><header>Marital status;
certain married individuals living apart</header><text>Rules similar to the
rules of paragraphs (3) and (4) of section 21(e) shall apply for purposes of
this paragraph.</text>
</subparagraph></paragraph><paragraph id="H839BDE1611E54B989235189FAFFE4E2E"><enum>(5)</enum><header>Verification of
coverage, etc</header><text>No credit shall be allowed under this section with
respect to any individual unless such individual’s coverage (and such related
information as the Secretary may require) is verified in such manner as the
Secretary may prescribe.</text>
</paragraph><paragraph id="H91A5E727F1304D938EF6BBF67BCFAE08"><enum>(6)</enum><header>Insurance which
covers other individuals; treatment of payments</header><text>Rules similar to
the rules of paragraphs (7) and (8) of section 35(g) shall apply for purposes
of this section.</text>
</paragraph></subsection><subsection id="HEBECC6138915440C8D9345F1B29DE596"><enum>(h)</enum><header>Coordination
with advance payments</header>
<paragraph id="H931A66FDE63645D69159D00325CBB855"><enum>(1)</enum><header>Reduction in
credit for advance payments</header><text>With respect to any taxable year, the
amount which would (but for this subsection) be allowed as a credit to the
taxpayer under subsection (a) shall be reduced (but not below zero) by the
aggregate amount paid on behalf of such taxpayer under section 7527A for months
beginning in such taxable year.</text>
</paragraph><paragraph id="H7FF8B0DB3F4F497EAD9B5B98A2640000"><enum>(2)</enum><header>Recapture of
excess advance payments</header><text display-inline="yes-display-inline">If
the aggregate amount paid on behalf of the taxpayer under section 7527A for
months beginning in the taxable year exceeds the sum of the monthly limitations
determined under subsection (b) for the taxpayer and the taxpayer’s spouse and
dependents for such months, then the tax imposed by this chapter for such
taxable year shall be increased by the sum of—</text>
<subparagraph id="HFA44606486224A26A410B107C1006217"><enum>(A)</enum><text>such excess,
plus</text>
</subparagraph><subparagraph id="H3B47C346BB704D81BCCBBBAA004749C7"><enum>(B)</enum><text>interest on such
excess determined at the underpayment rate established under section 6621 for
the period from the date of the payment under section 7527A to the date such
excess is paid.</text>
</subparagraph><continuation-text continuation-text-level="paragraph">For
purposes of subparagraph (B), an equal part of the aggregate amount of the
excess shall be deemed to be attributable to payments made under section 7527A
on the first day of each month beginning in such taxable year, unless the
taxpayer establishes the date on which each such payment giving rise to such
excess occurred, in which case subparagraph (B) shall be applied with respect
to each date so established.</continuation-text></paragraph></subsection><subsection id="H110BCA02B0AB4FCCA9F248D5CA598D17"><enum>(i)</enum><header>Annual inflation
adjustment</header><text display-inline="yes-display-inline">In the case of any
taxable year beginning in a calendar year after 2010 each of the dollar amounts
contained in subsection (c) shall be annually increased by the annual inflation
adjustment determined under subparagraph (B) section 1809(c)(2) of the Social
Security Act for such calendar year. Any adjustment under the preceding
sentence shall be rounded in the manner described in subparagraph (A) of such
section.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HA3E789D3522D4D998F95D1ACB3990595"><enum>(b)</enum><header>Advance payment
of credit</header><text>Chapter 77 (relating to miscellaneous provisions) of
such Code is amended by inserting after section 7527 the following new
section:</text>
<quoted-block id="HEB1FFE0EF00E4FB79460C22E78006C31">
<section id="HE99D6D4261004EFB983C91636CF30073"><enum>7527A.</enum><header>Advance
payment of qualified health insurance credit</header>
<subsection id="H9086B149AEF94204967D5228F2E5AC39"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">The Secretary shall
establish a program for making payments on behalf of individuals to providers
of qualified health insurance (as defined in section 36(f)) for such
individuals.</text>
</subsection><subsection id="H8D5B4F6FFAE3403EAECD66A020F86CE0"><enum>(b)</enum><header>Limitation</header><text>The
Secretary may make payments under subsection (a) only to the extent that the
Secretary determines that the amount of such payments made on behalf of any
taxpayer for any month does not exceed the sum of the monthly limitations
determined under section 36 for the taxpayer and taxpayer’s spouse and
dependents for such
month.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection display-inline="no-display-inline" id="H2CC084D2669C45C785B66506162CD9BA"><enum>(c)</enum><header>Information
reporting</header>
<paragraph id="HF363CD5FD9BD4F0BB21F652C7E2B9CF"><enum>(1)</enum><header>In
general</header><text>Subpart B of part III of subchapter A of chapter 61 of
such Code (relating to information concerning transactions with other persons)
is amended by inserting after section 6050V the following new section:</text>
<quoted-block display-inline="no-display-inline" id="HDFBBA6740CD74BB88FA97758669E91F8" style="OLC">
<section id="HE532EEAD4C034C2C00328D75DA137453"><enum>6050W.</enum><header>Returns
relating to qualified health insurance credit</header>
<subsection id="H7F9FB350D67B4EC7B136E0137EA580B2"><enum>(a)</enum><header>Requirement of
reporting</header><text display-inline="yes-display-inline">Every person who is
entitled to receive payments for any month of any calendar year under section
7527A (relating to advance payment of qualified health insurance credit) with
respect to any individual shall, at such time as the Secretary may prescribe,
make the return described in subsection (b) with respect to each such
individual.</text>
</subsection><subsection id="H9884F668DED24F91A7022F5660141B65"><enum>(b)</enum><header>Form and manner
of returns</header><text>A return is described in this subsection if such
return—</text>
<paragraph id="H8F4DFF4D1DD24B7483831CFCD800CD"><enum>(1)</enum><text>is in such form as
the Secretary may prescribe, and</text>
</paragraph><paragraph id="HECB87C4384E1417DA5AF396278EEC318"><enum>(2)</enum><text>contains, with
respect to each individual referred to in subsection (a)—</text>
<subparagraph id="H5699EB5AA9014AD68E67863846F1502"><enum>(A)</enum><text>the name, address,
and TIN of each such individual,</text>
</subparagraph><subparagraph id="H3751985BC8554336BC168CD0000A4E7"><enum>(B)</enum><text display-inline="yes-display-inline">the months for which amounts payments under
section 7527A were received,</text>
</subparagraph><subparagraph id="HF1046C2D96B64FE39D6D53AAC5189700"><enum>(C)</enum><text>the amount of each
such payment,</text>
</subparagraph><subparagraph id="HB7A51B30765A488099CA1851B4AF69C1"><enum>(D)</enum><text>the type of
insurance coverage provide by such person with respect to such individual and
the policy number associated with such coverage,</text>
</subparagraph><subparagraph id="H6C81011FB23747FD8E74BBA48EFBCC"><enum>(E)</enum><text>the name, address,
and TIN of the spouse and each dependent covered under such coverage,
and</text>
</subparagraph><subparagraph id="H54189421CE50431497D7D4916091785"><enum>(F)</enum><text>such other
information as the Secretary may prescribe.</text>
</subparagraph></paragraph></subsection><subsection id="H49A5942F947D47B3AFE0673709A91BB"><enum>(c)</enum><header>Statements To be
furnished to individuals with respect to whom information is
required</header><text>Every person required to make a return under subsection
(a) shall furnish to each individual whose name is required to be set forth in
such return a written statement showing—</text>
<paragraph id="H9A587C9483304F9DB300A74CB88DB28E"><enum>(1)</enum><text>the name and
address of the person required to make such return and the phone number of the
information contact for such person, and</text>
</paragraph><paragraph id="HCEE79A72100E4A729FB852F2F22F5CAE"><enum>(2)</enum><text>the information
required to be shown on the return with respect to such individual.</text>
</paragraph><continuation-text continuation-text-level="subsection">The
written statement required under the preceding sentence shall be furnished on
or before January 31 of the year following the calendar year for which the
return under subsection (a) is required to be made.</continuation-text></subsection><subsection id="HBE49AEACE3C24E0F919916D33E081E44"><enum>(d)</enum><header>Returns which
would be required To be made by 2 or more persons</header><text>Except to the
extent provided in regulations prescribed by the Secretary, in the case of any
amount received by any person on behalf of another person, only the person
first receiving such amount shall be required to make the return under
subsection
(a).</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H1129CBC7875E4A5B8C85FECC81000038"><enum>(2)</enum><header>Assessable
penalties</header>
<subparagraph id="H07725FAFB67D4CFD8E84F2032131C98"><enum>(A)</enum><text>Subparagraph (B) of
section 6724(d)(1) (relating to definitions) of such Code is amended by
redesignating clauses (xv) through (xxi) as clauses (xvi) through (xxii),
respectively, and by inserting after clause (xiv) the following new
clause:</text>
<quoted-block display-inline="no-display-inline" id="H3F614DCF80714615B3BCAE04C5BCD530" style="OLC">
<clause id="H7D8AD845DC67424600DEF208F2E5A4F0"><enum>(xv)</enum><text display-inline="yes-display-inline">section 6050W (relating to returns relating
to qualified health insurance
credit),</text>
</clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H7DFDFAB4C55A4683A80059E726F89700"><enum>(B)</enum><text>Paragraph (2) of
section 6724(d) of such Code is amended by striking the period at the end of
subparagraph (CC) and inserting <quote>, or</quote> and by inserting after
subparagraph (CC) the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H22053349F832407BBF3B6529747078E2" style="OLC">
<subparagraph id="H4B5A817B76C34721B71330CDE1239E"><enum>(DD)</enum><text display-inline="yes-display-inline">section 6050W (relating to returns relating
to qualified health insurance
credit).</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph></subsection><subsection id="H08D2FE90556C4CEF93126346B746A086"><enum>(d)</enum><header>Conforming
amendments</header>
<paragraph id="H3FD93D6AAF9B45DE98ACF4B9AAA27666"><enum>(1)</enum><text>Paragraph (2) of
section 1324(b) of title 31, United States Code, is amended by inserting
<quote>36B,</quote> after <quote>36A,</quote>.</text>
</paragraph><paragraph id="H6A456C8BB1A94607BD4FBB26F705F83"><enum>(2)</enum><text display-inline="yes-display-inline">The table of sections for subpart C of part
IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended
by inserting after the item relating to section 36A the following new
item:</text>
<quoted-block id="H518F7C0EA3074A4A8DF1AA963D85BC91" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 36B. Qualified health insurance
credit.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H681A8C6DC20F4E168BD0EAC58C282BE7"><enum>(3)</enum><text>The table of
sections for chapter 77 of such Code is amended by inserting after the item
relating to section 7527 the following new item:</text>
<quoted-block display-inline="no-display-inline" id="HBCCBCC83E5774944AA7FC276E4032798" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 7527A. Advance payment of qualified
health insurance
credit.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H36894B2F173440D3B923F109F31E6C41"><enum>(4)</enum><text>The table of
sections for subpart B of part III of subchapter A of chapter 61 of such Code
is amended by adding at the end the following new item:</text>
<quoted-block display-inline="no-display-inline" id="H975735CCFE2D4338BFE6406243FCDC44" style="OLC">
<toc container-level="quoted-block-container" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry level="section">Sec. 6050W. Returns relating to qualified
health insurance
credit.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H0F042D17E0524A519BDA187E2CE634D"><enum>(e)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2009.</text>
</subsection></section><section display-inline="no-display-inline" id="H665D8FB3926142FC9BEBE28F91E0B666" section-type="subsequent-section"><enum>102.</enum><header>Changes to existing
tax preferences for medical coverage, etc., for individuals eligible for
qualified health insurance credit</header>
<subsection id="HE47F889747AE427B9BB1E600736F4C6F"><enum>(a)</enum><header>Exclusion for
contributions by employer to accident and health plans</header>
<paragraph id="H5411ABE8B8BF45A40012CD52074D8721"><enum>(1)</enum><header>In
general</header><text>Section 106 of the Internal Revenue Code of 1986
(relating to contributions by employer to accident and health plans) is amended
by adding at the end the following new subsection:</text>
<quoted-block id="HD4895FAB20DC4BB1AA3D48D3101C1FAC">
<subsection id="H1F4EF5744D2B4209BBDCF9FBA061E2A1"><enum>(f)</enum><header>No exclusion for
individuals eligible for qualified health insurance
credit</header><text>Subsection (a) shall not apply with respect to any
employer-provided coverage under an accident or health plan for any individual
for any month unless such individual is described in paragraph (2) or (5) of
section 36(e) for such month. The amount includible in gross income by reason
of this subsection shall be determined under rules similar to the rules of
section
4980B(f)(4).</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HB49FB67EB1DF4C798DC5739D9BE2A7B4"><enum>(2)</enum><header>Conforming
amendments</header>
<subparagraph id="H2638B88BF488457E84275D22D79BF692"><enum>(A)</enum><text display-inline="yes-display-inline">Section 106(b)(1) of such Code is
amended—</text>
<clause id="H720A0B6CEE954F1B8D3B67FB8C1649FC"><enum>(i)</enum><text>by
inserting <quote>gross income does not include</quote> before <quote>amounts
contributed</quote>, and</text>
</clause><clause id="H9B8E2A1B6CF84558B3CC19F624979FEC"><enum>(ii)</enum><text display-inline="yes-display-inline">by striking <quote>shall be treated as
employer-provided coverage for medical expenses under an accident or health
plan</quote>.</text>
</clause></subparagraph><subparagraph id="HE8AEC7778F86435C95B8E11F001CA918"><enum>(B)</enum><text display-inline="yes-display-inline">Section 106(d)(1) of such Code is
amended—</text>
<clause id="H6A19F0E976E94C2A95BD2058AB882EB9"><enum>(i)</enum><text>by
inserting <quote>gross income does not include</quote> before <quote>amounts
contributed</quote>, and</text>
</clause><clause id="H39928281FC0A49F0AC29D356AAEDECA"><enum>(ii)</enum><text>by
striking <quote>shall be treated as employer-provided coverage for medical
expenses under an accident or health plan</quote>.</text>
</clause></subparagraph></paragraph></subsection><subsection id="H86810AFBFE4F479596E73236597075A3"><enum>(b)</enum><header>Amounts received
under accident and health plans</header>
<paragraph id="H51C2BBDC42BC4D44AC7719D28BDE7E3E"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">Section 105 of such
Code (relating to amounts received under accident and health plans) is amended
by adding at the end the following new subsection:</text>
<quoted-block id="H3032D121CD354DF09D01B10580E858BD">
<subsection id="HA30969F7E89645BC85FD0063682513D5"><enum>(k)</enum><header>No exclusion for
individuals eligible for qualified health insurance credit</header><text display-inline="yes-display-inline">Subsection (b) shall not apply with respect
to any employer-provided coverage under an accident or health plan for any
individual for any month unless such individual is described in paragraph (2)
or (5) of section 36(e) for such
month.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H09C3E796D96C47D7AB1DD6901BC01EFC"><enum>(c)</enum><header>Special rules
for health insurance costs of self-employed individuals</header><text display-inline="yes-display-inline">Subsection (l) of section 162 of such Code
(relating to special rules for health insurance costs of self-employed
individuals) is amended by adding at the end the following new
paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H610C8E1C56EF41C99C582236FB3E5259" style="OLC">
<paragraph id="H2A800CBE97784C9FB8EF414100C37CC"><enum>(6)</enum><header>No deduction to
individuals eligible for qualified health insurance</header><text display-inline="yes-display-inline">Paragraph (1) shall not apply for any
individual for any month unless such individual is described in paragraph (2)
or (5) of section 36(e) for such
month.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HA57796C3F1864228807651AF58626000"><enum>(d)</enum><header>Earned income
credit unaffected by repealed exclusions</header><text display-inline="yes-display-inline">Subparagraph (B) of section 32(c)(2) of
such Code is amended by redesignating clauses (v) and (vi) as clauses (vi) and
(vii), respectively, and by inserting after clause (iv) the following new
clause:</text>
<quoted-block display-inline="no-display-inline" id="HB292F8E588234DA6AC32AA5C269843B3" style="OLC">
<clause id="HBD72779CBE0D455DB000708423BF6072"><enum>(v)</enum><text>the earned income
of an individual shall be computed without regard to sections 105(k) and
106(f),</text>
</clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H4C786A0B83A646BE96F54C5CB41B801C"><enum>(e)</enum><header>Modification of
deduction for medical expenses</header><text display-inline="yes-display-inline">Subsection (d) of section 213 of such Code
is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HBFAAAE8A0F994341A6711D9E5844C5A" style="OLC">
<paragraph id="H3CB55C679B8D40B0B8C7551154F56401"><enum>(12)</enum><header>Premiums for
qualified health insurance</header><text>The term <term>medical care</term>
does not include any amount paid as a premium for coverage of an eligible
individual (as defined in section 36(e)) under qualified health insurance (as
defined in section 36(f)) for any
month.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HAA8E6B2DD972495E9283631C0000A0B2"><enum>(f)</enum><header>Reporting
requirement</header><text display-inline="yes-display-inline">Subsection (a) of
section 6051 of such Code is amended by striking <quote>and</quote> at the end
of paragraph (12), by striking the period at the end of paragraph (13) and
inserting <quote>and</quote>, and by inserting after paragraph (13) the
following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H7158D26ACFC74EC39E61C2F43682FB89" style="OLC">
<paragraph id="H9277B649946C43EC9DD9553683CDA68"><enum>(14)</enum><text display-inline="yes-display-inline">the total amount of employer-provided
coverage under an accident or health plan which is includible in gross income
by reason of sections 105(k) and
106(f).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="H8F17A8D7A30743BE9C0035E8319EA9B0"><enum>(g)</enum><header>Retired public
safety officers</header><text display-inline="yes-display-inline">Section
402(l)(4)(D) of such Code is amended by adding at the end the following:
<quote>Such term shall not include any premium for coverage by an accident or
health insurance plan for any month unless such individual is described in
paragraph (2) or (5) of section 36(e) for such month.</quote>.</text>
</subsection><subsection id="H82FB2D7DBF6D4F20818994CE66C984AB"><enum>(h)</enum><header>Employer
deduction as trade or business expense unaffected</header><text>For the
allowance of a deduction for amounts paid or incurred by an employer for
employee health benefits, see section 162 of the Internal Revenue Code of 1986
(relating to trade or business expenses).</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="HF515F5575AAF4594815B36D0B1CF9F33"><enum>(i)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to taxable years beginning after December 31,
2009.</text>
</subsection></section></subtitle><subtitle id="H6F0F908A38DA4535A50086D3B3A389FB"><enum>B</enum><header>Health Plan
Choice; Small Business Health Fairness</header>
<section id="H4E97F7D2AE2845AFADC522BF8BDE18B1"><enum>111.</enum><header>Cooperative
governing of individual health insurance coverage</header>
<subsection id="H290955AF963F473099BBB4151E933F07"><enum>(a)</enum><header>In
General</header><text>Title XXVII of the <act-name parsable-cite="PHSA">Public
Health Service Act</act-name> (42 U.S.C. 300gg et seq.) is amended by adding at
the end the following new part:</text>
<quoted-block act-name="Public" id="H87B814F6DFD440430028AC7E00923396" style="OLC">
<part id="H528FD07E9B8F41E799735E892904DB69"><enum>D</enum><header>Cooperative
Governing of Individual Health Insurance Coverage</header>
<section id="H87B66EBAF3BA4200B8A6F1EA00E8B931"><enum>2795.</enum><header>Definitions</header><text display-inline="no-display-inline">In this part:</text>
<paragraph id="H36750AB9F5514D6DA4A2C1C4FD04DCDE"><enum>(1)</enum><header>Primary
state</header><text>The term <term>primary State</term> means, with respect to
individual health insurance coverage offered by a health insurance issuer, the
State designated by the issuer as the State whose covered laws shall govern the
health insurance issuer in the sale of such coverage under this part. An
issuer, with respect to a particular policy, may only designate one such State
as its primary State with respect to all such coverage it offers. Such an
issuer may not change the designated primary State with respect to individual
health insurance coverage once the policy is issued, except that such a change
may be made upon renewal of the policy. With respect to such designated State,
the issuer is deemed to be doing business in that State.</text>
</paragraph><paragraph id="HFF9F8547724F43F7B355BCB4435541DA"><enum>(2)</enum><header>Secondary
state</header><text>The term <term>secondary State</term> means, with respect
to individual health insurance coverage offered by a health insurance issuer,
any State that is not the primary State. In the case of a health insurance
issuer that is selling a policy in, or to a resident of, a secondary State, the
issuer is deemed to be doing business in that secondary State.</text>
</paragraph><paragraph id="H2C9CC1ED3DF5435EA8D0976F28938F44"><enum>(3)</enum><header>Health insurance
issuer</header><text>The term <term>health insurance issuer</term> has the
meaning given such term in section 2791(b)(2), except that such an issuer must
be licensed in the primary State and be qualified to sell individual health
insurance coverage in that State.</text>
</paragraph><paragraph id="H00E31BC4750C45D89F6F306FB4B1C701"><enum>(4)</enum><header>Individual
health insurance coverage</header><text>The term <term>individual health
insurance coverage</term> means health insurance coverage offered in the
individual market, as defined in section 2791(e)(1).</text>
</paragraph><paragraph id="HCAAC7366B4C74227B66E308D1CB22790"><enum>(5)</enum><header>Applicable state
authority</header><text>The term <term>applicable State authority</term> means,
with respect to a health insurance issuer in a State, the State insurance
commissioner or official or officials designated by the State to enforce the
requirements of this title for the State with respect to the issuer.</text>
</paragraph><paragraph id="H54ADBB2775E04774A9104DDBB9D5DB86"><enum>(6)</enum><header>Hazardous
financial condition</header><text>The term <term>hazardous financial
condition</term> means that, based on its present or reasonably anticipated
financial condition, a health insurance issuer is unlikely to be able—</text>
<subparagraph id="H94524403CBE94CD190FCC48722CC7328"><enum>(A)</enum><text>to meet
obligations to policyholders with respect to known claims and reasonably
anticipated claims; or</text>
</subparagraph><subparagraph id="H6493AE8E101443648016788BEE6B487D"><enum>(B)</enum><text>to pay other
obligations in the normal course of business.</text>
</subparagraph></paragraph><paragraph id="H55D5F2A37C914EA80021AC035836A326"><enum>(7)</enum><header>Covered
laws</header>
<subparagraph id="HE37D4B9374664034B02993E0F6E07367"><enum>(A)</enum><header>In
general</header><text>The term <term>covered laws</term> means the laws, rules,
regulations, agreements, and orders governing the insurance business pertaining
to—</text>
<clause id="H9A4B3DF5C7084191AA668B00F3774B7E"><enum>(i)</enum><text>individual health
insurance coverage issued by a health insurance issuer;</text>
</clause><clause id="H49906DB3E8704A42813D10884B07ED00"><enum>(ii)</enum><text>the offer, sale,
rating (including medical underwriting), renewal, and issuance of individual
health insurance coverage to an individual;</text>
</clause><clause id="HBC0C532824B540AA8F30B8E730026A3"><enum>(iii)</enum><text>the provision to
an individual in relation to individual health insurance coverage of health
care and insurance related services;</text>
</clause><clause id="H6E8621D9A4AB45B7007D73B6D8A312BD"><enum>(iv)</enum><text>the provision to
an individual in relation to individual health insurance coverage of
management, operations, and investment activities of a health insurance issuer;
and</text>
</clause><clause id="H5061C37D32804778AAD92636FF19AA40"><enum>(v)</enum><text>the provision to
an individual in relation to individual health insurance coverage of loss
control and claims administration for a health insurance issuer with respect to
liability for which the issuer provides insurance.</text>
</clause></subparagraph><subparagraph id="H9FD81A6A58A24ADC94F31D5860496EFD"><enum>(B)</enum><header>Exception</header><text>Such
term does not include any law, rule, regulation, agreement, or order governing
the use of care or cost management techniques, including any requirement
related to provider contracting, network access or adequacy, health care data
collection, or quality assurance.</text>
</subparagraph></paragraph><paragraph id="H96D05167168349C7AF0197C2019758C9"><enum>(8)</enum><header>State</header><text>The
term <term>State</term> means the 50 States and includes the District of
Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the
Northern Mariana Islands.</text>
</paragraph><paragraph id="H315A070D38004D92BA64C4F16D2FD570"><enum>(9)</enum><header>Unfair claims
settlement practices</header><text>The term <term>unfair claims settlement
practices</term> means only the following practices:</text>
<subparagraph id="HE69DF5B3C2394A0085FD980063E9FE4"><enum>(A)</enum><text>Knowingly
misrepresenting to claimants and insured individuals relevant facts or policy
provisions relating to coverage at issue.</text>
</subparagraph><subparagraph id="H76B47DD8495F4E1B94A400019BBA2E7"><enum>(B)</enum><text>Failing to
acknowledge with reasonable promptness pertinent communications with respect to
claims arising under policies.</text>
</subparagraph><subparagraph id="H8CB13A43DB4F48B1BFC88FA88BC7919E"><enum>(C)</enum><text>Failing to adopt
and implement reasonable standards for the prompt investigation and settlement
of claims arising under policies.</text>
</subparagraph><subparagraph id="H61ABB72A9F31438B819B2C97CADACD35"><enum>(D)</enum><text>Failing to
effectuate prompt, fair, and equitable settlement of claims submitted in which
liability has become reasonably clear.</text>
</subparagraph><subparagraph id="H178167C0F7F545729BF4BBE500AB4368"><enum>(E)</enum><text>Refusing to pay
claims without conducting a reasonable investigation.</text>
</subparagraph><subparagraph id="HACA7BB6F42C446FCBA9C7D639E3C2642"><enum>(F)</enum><text>Failing to affirm
or deny coverage of claims within a reasonable period of time after having
completed an investigation related to those claims.</text>
</subparagraph><subparagraph id="H61351D020D1743AAA2A5C30062237330"><enum>(G)</enum><text>A pattern or
practice of compelling insured individuals or their beneficiaries to institute
suits to recover amounts due under its policies by offering substantially less
than the amounts ultimately recovered in suits brought by them.</text>
</subparagraph><subparagraph id="HAAF2B031396C463FBCB0416E0092551E"><enum>(H)</enum><text>A pattern or
practice of attempting to settle or settling claims for less than the amount
that a reasonable person would believe the insured individual or his or her
beneficiary was entitled by reference to written or printed advertising
material accompanying or made part of an application.</text>
</subparagraph><subparagraph id="H6D0608D2E0D74B37A28637E500886FF5"><enum>(I)</enum><text>Attempting to
settle or settling claims on the basis of an application that was materially
altered without notice to, or knowledge or consent of, the insured.</text>
</subparagraph><subparagraph id="H8FABD7FB5C8D4D018E71BE56D4C8D501"><enum>(J)</enum><text>Failing to provide
forms necessary to present claims within 15 calendar days of a requests with
reasonable explanations regarding their use.</text>
</subparagraph><subparagraph id="HA0EF82A898A249F6A9465BE61B9C2DD6"><enum>(K)</enum><text>Attempting to
cancel a policy in less time than that prescribed in the policy or by the law
of the primary State.</text>
</subparagraph></paragraph><paragraph id="H24CDA6F036E1491BAA00BDE2FD001D"><enum>(10)</enum><header>Fraud and
abuse</header><text>The term <term>fraud and abuse</term> means an act or
omission committed by a person who, knowingly and with intent to defraud,
commits, or conceals any material information concerning, one or more of the
following:</text>
<subparagraph id="HC11A2AB08D3B4DFBAA716691CB7402C6"><enum>(A)</enum><text>Presenting,
causing to be presented or preparing with knowledge or belief that it will be
presented to or by an insurer, a reinsurer, broker or its agent, false
information as part of, in support of or concerning a fact material to one or
more of the following:</text>
<clause id="H82046718DEEB40C500549F7257410828"><enum>(i)</enum><text>An
application for the issuance or renewal of an insurance policy or reinsurance
contract.</text>
</clause><clause id="H8616D5ACF1E8469DB6600609D1423BFC"><enum>(ii)</enum><text>The rating of an
insurance policy or reinsurance contract.</text>
</clause><clause id="H4187F564D2DC4979902506C55DBEC3E8"><enum>(iii)</enum><text>A claim for
payment or benefit pursuant to an insurance policy or reinsurance
contract.</text>
</clause><clause id="H5E8C349BDFFA4BFFBBF0EC1FC8043327"><enum>(iv)</enum><text>Premiums paid on
an insurance policy or reinsurance contract.</text>
</clause><clause id="H8787B01E54004F4300493156FFD4168D"><enum>(v)</enum><text>Payments made in
accordance with the terms of an insurance policy or reinsurance
contract.</text>
</clause><clause id="H1609BDEC6E6A4B9D84DC6735689EA741"><enum>(vi)</enum><text>A
document filed with the commissioner or the chief insurance regulatory official
of another jurisdiction.</text>
</clause><clause id="H9B0927FA1EAA4AD3A0DBFEA588F62B1"><enum>(vii)</enum><text>The financial
condition of an insurer or reinsurer.</text>
</clause><clause id="HAD138B64353F43749271E69B24F48E98"><enum>(viii)</enum><text>The formation,
acquisition, merger, reconsolidation, dissolution or withdrawal from one or
more lines of insurance or reinsurance in all or part of a State by an insurer
or reinsurer.</text>
</clause><clause id="HFE849DB8F4BD4B0683688B472FFA9DE8"><enum>(ix)</enum><text>The issuance of
written evidence of insurance.</text>
</clause><clause id="HFF6A5766FA2E4EAA878D6C002F03F508"><enum>(x)</enum><text>The reinstatement
of an insurance policy.</text>
</clause></subparagraph><subparagraph id="HD30C8C00AC344B67AF0268D5A3B0B5D6"><enum>(B)</enum><text>Solicitation or
acceptance of new or renewal insurance risks on behalf of an insurer reinsurer
or other person engaged in the business of insurance by a person who knows or
should know that the insurer or other person responsible for the risk is
insolvent at the time of the transaction.</text>
</subparagraph><subparagraph id="HFEAE18CAC350466100BAB39E3F9EABB9"><enum>(C)</enum><text>Transaction of the
business of insurance in violation of laws requiring a license, certificate of
authority or other legal authority for the transaction of the business of
insurance.</text>
</subparagraph><subparagraph id="HE432D23A65D94C2C83B97E18DC83F00"><enum>(D)</enum><text>Attempt to commit,
aiding or abetting in the commission of, or conspiracy to commit the acts or
omissions specified in this paragraph.</text>
</subparagraph></paragraph></section><section id="H0DA1AA5C3C61445A00AEB3339DE0FEE"><enum>2796.</enum><header>Application of
law</header>
<subsection id="HC68CA0B9D9CA47F89CFE5B6C066E13A8"><enum>(a)</enum><header>In
General</header><text>The covered laws of the primary State shall apply to
individual health insurance coverage offered by a health insurance issuer in
the primary State and in any secondary State, but only if the coverage and
issuer comply with the conditions of this section with respect to the offering
of coverage in any secondary State.</text>
</subsection><subsection id="H9614C808842C4795A353F4D07BA51DDF"><enum>(b)</enum><header>Exemptions From
Covered Laws in a Secondary State</header><text>Except as provided in this
section, a health insurance issuer with respect to its offer, sale, rating
(including medical underwriting), renewal, and issuance of individual health
insurance coverage in any secondary State is exempt from any covered laws of
the secondary State (and any rules, regulations, agreements, or orders sought
or issued by such State under or related to such covered laws) to the extent
that such laws would—</text>
<paragraph id="HE40D1D3DEC2A43B080511EF456167CE9"><enum>(1)</enum><text>make unlawful, or
regulate, directly or indirectly, the operation of the health insurance issuer
operating in the secondary State, except that any secondary State may require
such an issuer—</text>
<subparagraph id="HF1CAD77AB90E4951BA09609E68F3587E"><enum>(A)</enum><text>to pay, on a
nondiscriminatory basis, applicable premium and other taxes (including high
risk pool assessments) which are levied on insurers and surplus lines insurers,
brokers, or policyholders under the laws of the State;</text>
</subparagraph><subparagraph id="H126CE8ECBA62473BB8B227A5936C72CA"><enum>(B)</enum><text>to register with
and designate the State insurance commissioner as its agent solely for the
purpose of receiving service of legal documents or process;</text>
</subparagraph><subparagraph id="H117385BC4C394BD6BF41FB0970048EE"><enum>(C)</enum><text>to submit to an
examination of its financial condition by the State insurance commissioner in
any State in which the issuer is doing business to determine the issuer’s
financial condition, if—</text>
<clause id="H5913C7F8DDFA42DCB62148D56470CFD4"><enum>(i)</enum><text>the State
insurance commissioner of the primary State has not done an examination within
the period recommended by the National Association of Insurance Commissioners;
and</text>
</clause><clause id="HEB1CBE39936C47FD8619A9EC3C7188A5"><enum>(ii)</enum><text>any such
examination is conducted in accordance with the examiners’ handbook of the
National Association of Insurance Commissioners and is coordinated to avoid
unjustified duplication and unjustified repetition;</text>
</clause></subparagraph><subparagraph id="H4B379EC3285B48A7AE001EAE226481EE"><enum>(D)</enum><text>to comply with a
lawful order issued—</text>
<clause id="H308A2D4C412B401CB7D7134589A245BA"><enum>(i)</enum><text>in
a delinquency proceeding commenced by the State insurance commissioner if there
has been a finding of financial impairment under subparagraph (C); or</text>
</clause><clause id="H651C239B85154580AAFD3629DDB0FAF"><enum>(ii)</enum><text>in
a voluntary dissolution proceeding;</text>
</clause></subparagraph><subparagraph id="H2560B70A0052417D8D09B3F42C6CDA00"><enum>(E)</enum><text>to comply with an
injunction issued by a court of competent jurisdiction, upon a petition by the
State insurance commissioner alleging that the issuer is in hazardous financial
condition;</text>
</subparagraph><subparagraph id="HCE5CF5E49AF04B7FA1CB62F9E524B8BA"><enum>(F)</enum><text>to participate, on
a nondiscriminatory basis, in any insurance insolvency guaranty association or
similar association to which a health insurance issuer in the State is required
to belong;</text>
</subparagraph><subparagraph id="H0E48EFE2C1CB4DB4A7ECEDD000C9FF7"><enum>(G)</enum><text>to comply with any
State law regarding fraud and abuse (as defined in section 2795(10)), except
that if the State seeks an injunction regarding the conduct described in this
subparagraph, such injunction must be obtained from a court of competent
jurisdiction;</text>
</subparagraph><subparagraph id="H078502ED88F04C1AACC93D4747EE617D"><enum>(H)</enum><text>to comply with any
State law regarding unfair claims settlement practices (as defined in section
2795(9)); or</text>
</subparagraph><subparagraph id="HDF6F76B071404A389243D026F3F5F64E"><enum>(I)</enum><text>to comply with the
applicable requirements for independent review under section 2798 with respect
to coverage offered in the State;</text>
</subparagraph></paragraph><paragraph id="H955C95EE9BA4443D89363DC1E46E81D7"><enum>(2)</enum><text>require any
individual health insurance coverage issued by the issuer to be countersigned
by an insurance agent or broker residing in that Secondary State; or</text>
</paragraph><paragraph id="H88940617DA064FA88FABF29E4981F6DE"><enum>(3)</enum><text>otherwise
discriminate against the issuer issuing insurance in both the primary State and
in any secondary State.</text>
</paragraph></subsection><subsection id="HAA2BC64DEABA4BE89CCFB0A807AEE4A1"><enum>(c)</enum><header>Clear and
Conspicuous Disclosure</header><text>A health insurance issuer shall provide
the following notice, in 12-point bold type, in any insurance coverage offered
in a secondary State under this part by such a health insurance issuer and at
renewal of the policy, with the 5 blank spaces therein being appropriately
filled with the name of the health insurance issuer, the name of primary State,
the name of the secondary State, the name of the secondary State, and the name
of the secondary State, respectively, for the coverage concerned:</text>
<quoted-block display-inline="no-display-inline" id="H36D5B59755234154ABB8F9939E9C9F49" style="OLC"><list level="subsection" list-type="none">
<list-item><header-in-text level="section" style="USC">Notice</header-in-text></list-item>
<list-item><header-in-text level="section" style="USC">This
policy is issued by _____ and is governed by the laws and regulations of the
State of _____, and it has met all the laws of that State as determined by that
State’s Department of Insurance. This policy may be less expensive than others
because it is not subject to all of the insurance laws and regulations of the
State of _____, including coverage of some services or benefits mandated by the
law of the State of _____. Additionally, this policy is not subject to all of
the consumer protection laws or restrictions on rate changes of the State of
_____. As with all insurance products, before purchasing this policy, you
should carefully review the policy and determine what health care services the
policy covers and what benefits it provides, including any exclusions,
limitations, or conditions for such services or
benefits.</header-in-text></list-item></list>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H637C3CD7529C4B739CFE9041E208423"><enum>(d)</enum><header>Prohibition on
Certain Reclassifications and Premium Increases</header>
<paragraph id="H3D396D64B6984C588337DAA7D4EAA5C"><enum>(1)</enum><header>In
general</header><text>For purposes of this section, a health insurance issuer
that provides individual health insurance coverage to an individual under this
part in a primary or secondary State may not upon renewal—</text>
<subparagraph id="H7ED3715C7B8C403DBA9176B33737C0C1"><enum>(A)</enum><text>move or reclassify
the individual insured under the health insurance coverage from the class such
individual is in at the time of issue of the contract based on the
health-status related factors of the individual; or</text>
</subparagraph><subparagraph id="H3C10CB460CA3429B8C3EB5AE463DA38E"><enum>(B)</enum><text>increase the
premiums assessed the individual for such coverage based on a health
status-related factor or change of a health status-related factor or the past
or prospective claim experience of the insured individual.</text>
</subparagraph></paragraph><paragraph id="HD147819BE4F546E59D9D938C55216F5D"><enum>(2)</enum><header>Construction</header><text>Nothing
in paragraph (1) shall be construed to prohibit a health insurance
issuer—</text>
<subparagraph id="H51F31C0276D54B519F118696D6AE0287"><enum>(A)</enum><text>from terminating
or discontinuing coverage or a class of coverage in accordance with subsections
(b) and (c) of section 2742;</text>
</subparagraph><subparagraph id="HFD8C9A4FA2914F14B78E81B16E7DD0B6"><enum>(B)</enum><text>from raising
premium rates for all policy holders within a class based on claims
experience;</text>
</subparagraph><subparagraph id="HD1259FA3DD974D079E57A236E9B5B3FB"><enum>(C)</enum><text>from changing
premiums or offering discounted premiums to individuals who engage in wellness
activities at intervals prescribed by the issuer, if such premium changes or
incentives—</text>
<clause id="H8C8B19D2F0354552AF4E4C71A478ED00"><enum>(i)</enum><text>are disclosed to
the consumer in the insurance contract;</text>
</clause><clause id="H0317B23FAC6042A895EACB7D6E17876B"><enum>(ii)</enum><text>are based on
specific wellness activities that are not applicable to all individuals;
and</text>
</clause><clause id="HE460A4AE8D294C1F813D5B5EA0841B75"><enum>(iii)</enum><text>are not
obtainable by all individuals to whom coverage is offered;</text>
</clause></subparagraph><subparagraph id="H84D4788D53D244FDA4D18FA83C8DA389"><enum>(D)</enum><text>from reinstating
lapsed coverage; or</text>
</subparagraph><subparagraph id="H7DCD2B4B2F42404A8362F4D748191C76"><enum>(E)</enum><text>from retroactively
adjusting the rates charged an insured individual if the initial rates were set
based on material misrepresentation by the individual at the time of
issue.</text>
</subparagraph></paragraph></subsection><subsection id="HDEE6EAFA337D488982C9B6841E81F46"><enum>(e)</enum><header>Prior Offering of
Policy in Primary State</header><text>A health insurance issuer may not offer
for sale individual health insurance coverage in a secondary State unless that
coverage is currently offered for sale in the primary State.</text>
</subsection><subsection id="HF5BF7CB3C0934A32A35F8E87745DF1FA"><enum>(f)</enum><header>Licensing of
Agents or Brokers for Health Insurance Issuers</header><text>Any State may
require that a person acting, or offering to act, as an agent or broker for a
health insurance issuer with respect to the offering of individual health
insurance coverage obtain a license from that State, with commissions or other
compensation subject to the provisions of the laws of that State, except that a
State may not impose any qualification or requirement which discriminates
against a nonresident agent or broker.</text>
</subsection><subsection id="H13AC4F2422924706B809A46905B551EE"><enum>(g)</enum><header>Documents for
Submission to State Insurance Commissioner</header><text>Each health insurance
issuer issuing individual health insurance coverage in both primary and
secondary States shall submit—</text>
<paragraph id="H9C2BAD6B45B648559B30B4230321DBB0"><enum>(1)</enum><text>to the insurance
commissioner of each State in which it intends to offer such coverage, before
it may offer individual health insurance coverage in such State—</text>
<subparagraph id="HCC887A26CF2E46059B2C301271AB03A4"><enum>(A)</enum><text>a copy of the plan
of operation or feasibility study or any similar statement of the policy being
offered and its coverage (which shall include the name of its primary State and
its principal place of business);</text>
</subparagraph><subparagraph id="HC03542215B154F759D6535F36F90282C"><enum>(B)</enum><text>written notice of
any change in its designation of its primary State; and</text>
</subparagraph><subparagraph id="H214B9C2F2A13474D8FA190059847BA24"><enum>(C)</enum><text>written notice
from the issuer of the issuer’s compliance with all the laws of the primary
State; and</text>
</subparagraph></paragraph><paragraph id="H2F506C7538BE436A0060E738C0888E17"><enum>(2)</enum><text>to the insurance
commissioner of each secondary State in which it offers individual health
insurance coverage, a copy of the issuer’s quarterly financial statement
submitted to the primary State, which statement shall be certified by an
independent public accountant and contain a statement of opinion on loss and
loss adjustment expense reserves made by—</text>
<subparagraph id="H3843F1A540EE494D00EEC878EFF8794"><enum>(A)</enum><text>a member of the
American Academy of Actuaries; or</text>
</subparagraph><subparagraph id="HACF43DCFD6B04F9C8B89181EAADFFDC1"><enum>(B)</enum><text>a qualified loss
reserve specialist.</text>
</subparagraph></paragraph></subsection><subsection id="HA4D451B6B3A543ECBA70B7EBFD9E82F8"><enum>(h)</enum><header>Power of Courts
To Enjoin Conduct</header><text>Nothing in this section shall be construed to
affect the authority of any Federal or State court to enjoin—</text>
<paragraph id="H1928F27982CA40800021D00043D4A3BE"><enum>(1)</enum><text>the solicitation
or sale of individual health insurance coverage by a health insurance issuer to
any person or group who is not eligible for such insurance; or</text>
</paragraph><paragraph id="H03437EC3B9BC438D8573DF10E9DD9A6"><enum>(2)</enum><text>the solicitation or
sale of individual health insurance coverage that violates the requirements of
the law of a secondary State which are described in subparagraphs (A) through
(H) of section 2796(b)(1).</text>
</paragraph></subsection><subsection id="H23F0EE883D4B4FD188A6AF4D568C28FC"><enum>(i)</enum><header>Power of
Secondary States To Take Administrative Action</header><text>Nothing in this
section shall be construed to affect the authority of any State to enjoin
conduct in violation of that State’s laws described in section
2796(b)(1).</text>
</subsection><subsection id="H555C3D6D6CD448E582DAAC0013608DC2"><enum>(j)</enum><header>State Powers To
Enforce State Laws</header>
<paragraph id="HF2CCE35A68474306A8446C005F2E94CB"><enum>(1)</enum><header>In
general</header><text>Subject to the provisions of subsection (b)(1)(G)
(relating to injunctions) and paragraph (2), nothing in this section shall be
construed to affect the authority of any State to make use of any of its powers
to enforce the laws of such State with respect to which a health insurance
issuer is not exempt under subsection (b).</text>
</paragraph><paragraph id="H18520A5C4FD545D2A096F308B802AE00"><enum>(2)</enum><header>Courts of
competent jurisdiction</header><text>If a State seeks an injunction regarding
the conduct described in paragraphs (1) and (2) of subsection (h), such
injunction must be obtained from a Federal or State court of competent
jurisdiction.</text>
</paragraph></subsection><subsection id="H23BE5501C4E6462DB8E9175785D5E583"><enum>(k)</enum><header>States’
Authority To Sue</header><text>Nothing in this section shall affect the
authority of any State to bring action in any Federal or State court.</text>
</subsection><subsection id="H3C11A1F232584BEF925D00004BD01B75"><enum>(l)</enum><header>Generally
Applicable Laws</header><text>Nothing in this section shall be construed to
affect the applicability of State laws generally applicable to persons or
corporations.</text>
</subsection><subsection id="HD28CE81A2E664305B440E9A2D4728825"><enum>(m)</enum><header>Guaranteed
Availability of Coverage to HIPAA Eligible Individuals</header><text>To the
extent that a health insurance issuer is offering coverage in a primary State
that does not accommodate residents of secondary States or does not provide a
working mechanism for residents of a secondary State, and the issuer is
offering coverage under this part in such secondary State which has not adopted
a qualified high risk pool as its acceptable alternative mechanism (as defined
in section 2744(c)(2)), the issuer shall, with respect to any individual health
insurance coverage offered in a secondary State under this part, comply with
the guaranteed availability requirements for eligible individuals in section
2741.</text>
</subsection></section><section id="H98EE1190AA9B4FBEB100FA0019157600"><enum>2797.</enum><header>Primary State
must meet Federal floor before issuer may sell into secondary
States</header><text display-inline="no-display-inline">A health insurance
issuer may not offer, sell, or issue individual health insurance coverage in a
secondary State if the State insurance commissioner does not use a risk-based
capital formula for the determination of capital and surplus requirements for
all health insurance issuers.</text>
</section><section id="H88295B7340D049CD8B33EF6B91E42FCA"><enum>2798.</enum><header>Independent
external appeals procedures</header>
<subsection id="H774A67F43B0F40F399D5344143B4EB2"><enum>(a)</enum><header>Right to External
Appeal</header><text>A health insurance issuer may not offer, sell, or issue
individual health insurance coverage in a secondary State under the provisions
of this title unless—</text>
<paragraph id="HE5A46925A4C444ACB64C7200CF3EF158"><enum>(1)</enum><text>both the secondary
State and the primary State have legislation or regulations in place
establishing an independent review process for individuals who are covered by
individual health insurance coverage, or</text>
</paragraph><paragraph id="H4D98052A68434B1EAFAF289317B2FECE"><enum>(2)</enum><text>in any case in
which the requirements of subparagraph (A) are not met with respect to the
either of such States, the issuer provides an independent review mechanism
substantially identical (as determined by the applicable State authority of
such State) to that prescribed in the <quote>Health Carrier External Review
Model Act</quote> of the National Association of Insurance Commissioners for
all individuals who purchase insurance coverage under the terms of this part,
except that, under such mechanism, the review is conducted by an independent
medical reviewer, or a panel of such reviewers, with respect to whom the
requirements of subsection (b) are met.</text>
</paragraph></subsection><subsection id="H8E93A63C14094D7C984567E0D0932E2F"><enum>(b)</enum><header>Qualifications
of Independent Medical Reviewers</header><text>In the case of any independent
review mechanism referred to in subsection (a)(2)—</text>
<paragraph id="H389F4673CE324ABE943CF14253D9F656"><enum>(1)</enum><header>In
general</header><text>In referring a denial of a claim to an independent
medical reviewer, or to any panel of such reviewers, to conduct independent
medical review, the issuer shall ensure that—</text>
<subparagraph id="H869AD7FDE5214C14ABF475D9002C6554"><enum>(A)</enum><text>each independent
medical reviewer meets the qualifications described in paragraphs (2) and
(3);</text>
</subparagraph><subparagraph id="H6B1762D255AE4C64AC375509C6368854"><enum>(B)</enum><text>with respect to
each review, each reviewer meets the requirements of paragraph (4) and the
reviewer, or at least 1 reviewer on the panel, meets the requirements described
in paragraph (5); and</text>
</subparagraph><subparagraph id="H65950274999F4952816FD853DED3EF47"><enum>(C)</enum><text>compensation
provided by the issuer to each reviewer is consistent with paragraph
(6).</text>
</subparagraph></paragraph><paragraph id="HB5DDD41344F3449AAC681D65A5D31452"><enum>(2)</enum><header>Licensure and
expertise</header><text>Each independent medical reviewer shall be a physician
(allopathic or osteopathic) or health care professional who—</text>
<subparagraph id="H6292BAB722204C92AF46F5F7DBF0F753"><enum>(A)</enum><text>is appropriately
credentialed or licensed in 1 or more States to deliver health care services;
and</text>
</subparagraph><subparagraph id="H5A6B42E10FF54EBDB37863061D00A22B"><enum>(B)</enum><text>typically treats
the condition, makes the diagnosis, or provides the type of treatment under
review.</text>
</subparagraph></paragraph><paragraph id="H56E11965DEF94F46B73CEFB9F0F79EB"><enum>(3)</enum><header>Independence</header>
<subparagraph id="H89D6772A0C9E4D34800051EE54EACC05"><enum>(A)</enum><header>In
general</header><text>Subject to subparagraph (B), each independent medical
reviewer in a case shall—</text>
<clause id="H881AA9B350524176A81F98DFACF8E134"><enum>(i)</enum><text>not be a related
party (as defined in paragraph (7));</text>
</clause><clause id="HF7EAF29BB2A64D598D00C2E0C2A18F68"><enum>(ii)</enum><text>not have a
material familial, financial, or professional relationship with such a party;
and</text>
</clause><clause id="H2B23948D9AE1458CB5AC79F49EE8D963"><enum>(iii)</enum><text>not otherwise
have a conflict of interest with such a party (as determined under
regulations).</text>
</clause></subparagraph><subparagraph id="H883E1DEB4DAE4EDA88E87DEEE7BACBD1"><enum>(B)</enum><header>Exception</header><text>Nothing
in subparagraph (A) shall be construed to—</text>
<clause id="H3E228F0E2CBF4F28B3650599B277D3A6"><enum>(i)</enum><text>prohibit an
individual, solely on the basis of affiliation with the issuer, from serving as
an independent medical reviewer if—</text>
<subclause id="HA7CFB1B2895D4CF9AD7F943902ED6FEE"><enum>(I)</enum><text>a non-affiliated
individual is not reasonably available;</text>
</subclause><subclause id="H18B963D241F546419DA6883FFD386E4C"><enum>(II)</enum><text>the affiliated
individual is not involved in the provision of items or services in the case
under review;</text>
</subclause><subclause id="HFCE0DC9173484CBE95CAA4E3BB8DED68"><enum>(III)</enum><text>the fact of such
an affiliation is disclosed to the issuer and the enrollee (or authorized
representative) and neither party objects; and</text>
</subclause><subclause id="H95C9F5C6BEF846718B2E6F7035555CE9"><enum>(IV)</enum><text>the affiliated
individual is not an employee of the issuer and does not provide services
exclusively or primarily to or on behalf of the issuer;</text>
</subclause></clause><clause id="HAEC8B20594C2413AAE0576328EA22994"><enum>(ii)</enum><text>prohibit an
individual who has staff privileges at the institution where the treatment
involved takes place from serving as an independent medical reviewer merely on
the basis of such affiliation if the affiliation is disclosed to the issuer and
the enrollee (or authorized representative), and neither party objects;
or</text>
</clause><clause id="H73243A9F1C314F0B82EE15D0DCBA6413"><enum>(iii)</enum><text>prohibit receipt
of compensation by an independent medical reviewer from an entity if the
compensation is provided consistent with paragraph (6).</text>
</clause></subparagraph></paragraph><paragraph id="H2E54378DC71A430FAE44EC9B9F53DAEA"><enum>(4)</enum><header>Practicing
health care professional in same field</header>
<subparagraph id="HC81B4DE7EDFF4002A6F5F4785E91548"><enum>(A)</enum><header>In
general</header><text>In a case involving treatment, or the provision of items
or services—</text>
<clause id="H22BD3F63B1CB4E30B6390027439E614E"><enum>(i)</enum><text>by
a physician, a reviewer shall be a practicing physician (allopathic or
osteopathic) of the same or similar specialty, as a physician who, acting
within the appropriate scope of practice within the State in which the service
is provided or rendered, typically treats the condition, makes the diagnosis,
or provides the type of treatment under review; or</text>
</clause><clause id="H5D2CBD80579F464A9358F5890095749D"><enum>(ii)</enum><text>by a
non-physician health care professional, the reviewer, or at least 1 member of
the review panel, shall be a practicing non-physician health care professional
of the same or similar specialty as the non-physician health care professional
who, acting within the appropriate scope of practice within the State in which
the service is provided or rendered, typically treats the condition, makes the
diagnosis, or provides the type of treatment under review.</text>
</clause></subparagraph><subparagraph id="H2187E0D24EB844EF9BA52B9B887061F5"><enum>(B)</enum><header>Practicing
defined</header><text>For purposes of this paragraph, the term
<term>practicing</term> means, with respect to an individual who is a physician
or other health care professional, that the individual provides health care
services to individual patients on average at least 2 days per week.</text>
</subparagraph></paragraph><paragraph id="HEA6296EBEF1A49C78EF6162680BFA6B2"><enum>(5)</enum><header>Pediatric
expertise</header><text>In the case of an external review relating to a child,
a reviewer shall have expertise under paragraph (2) in pediatrics.</text>
</paragraph><paragraph id="H20547492DB994099A2F3535700070088"><enum>(6)</enum><header>Limitations on
reviewer compensation</header><text>Compensation provided by the issuer to an
independent medical reviewer in connection with a review under this section
shall—</text>
<subparagraph id="H32D2E173C2BD4F389909B0FC5EE06CB"><enum>(A)</enum><text>not exceed a
reasonable level; and</text>
</subparagraph><subparagraph id="H245F41E51D834B1AA2529B16345FC337"><enum>(B)</enum><text>not be contingent
on the decision rendered by the reviewer.</text>
</subparagraph></paragraph><paragraph id="HA89FE61DFEFD4F01A632FB1864128916"><enum>(7)</enum><header>Related party
defined</header><text>For purposes of this section, the term <term>related
party</term> means, with respect to a denial of a claim under a coverage
relating to an enrollee, any of the following:</text>
<subparagraph id="H2E1BCD661F824C7AB97DFE43EC2FB893"><enum>(A)</enum><text>The issuer
involved, or any fiduciary, officer, director, or employee of the
issuer.</text>
</subparagraph><subparagraph id="H963DDBEB08414B989663DD2C7B874C45"><enum>(B)</enum><text>The enrollee (or
authorized representative).</text>
</subparagraph><subparagraph id="H52FB7E356BF44635A8E5C23C85A0F087"><enum>(C)</enum><text>The health care
professional that provides the items or services involved in the denial.</text>
</subparagraph><subparagraph id="HE94B26865A8C45DFB1FFD8EC9239E28"><enum>(D)</enum><text>The institution at
which the items or services (or treatment) involved in the denial are
provided.</text>
</subparagraph><subparagraph id="H7CAA39E9063B4274B023D0498761D7A1"><enum>(E)</enum><text>The manufacturer
of any drug or other item that is included in the items or services involved in
the denial.</text>
</subparagraph><subparagraph id="HBB33FBDD77FD49398B3061DEB65CE791"><enum>(F)</enum><text>Any other party
determined under any regulations to have a substantial interest in the denial
involved.</text>
</subparagraph></paragraph><paragraph id="H88C7194AA7E2434F98A2E31F565EBB8D"><enum>(8)</enum><header>Definitions</header><text>For
purposes of this subsection:</text>
<subparagraph id="HB587685EE05E4B5F86236F29D8BEB800"><enum>(A)</enum><header>Enrollee</header><text>The
term <term>enrollee</term> means, with respect to health insurance coverage
offered by a health insurance issuer, an individual enrolled with the issuer to
receive such coverage.</text>
</subparagraph><subparagraph id="H9456A46300564B7EB4E57FA3A417C0EC"><enum>(B)</enum><header>Health care
professional</header><text>The term <term>health care professional</term> means
an individual who is licensed, accredited, or certified under State law to
provide specified health care services and who is operating within the scope of
such licensure, accreditation, or certification.</text>
</subparagraph></paragraph></subsection></section><section id="HA39D54127C254FAEBCBD137089816474"><enum>2799.</enum><header>Enforcement</header>
<subsection id="H9BCED3C55FE94C45889D5000E1DECE24"><enum>(a)</enum><header>In
General</header><text>Subject to subsection (b), with respect to specific
individual health insurance coverage the primary State for such coverage has
sole jurisdiction to enforce the primary State’s covered laws in the primary
State and any secondary State.</text>
</subsection><subsection id="H07F2133E4F5C420EB01B877FC3D26BC1"><enum>(b)</enum><header>Secondary
State’s Authority</header><text>Nothing in subsection (a) shall be construed to
affect the authority of a secondary State to enforce its laws as set forth in
the exception specified in section 2796(b)(1).</text>
</subsection><subsection id="H5CC5FED9740F447AB4D0882C5D30E3D2"><enum>(c)</enum><header>Court
Interpretation</header><text>In reviewing action initiated by the applicable
secondary State authority, the court of competent jurisdiction shall apply the
covered laws of the primary State.</text>
</subsection><subsection id="HBC034E94FB9F4107ACF567C30027DD00"><enum>(d)</enum><header>Notice of
Compliance Failure</header><text>In the case of individual health insurance
coverage offered in a secondary State that fails to comply with the covered
laws of the primary State, the applicable State authority of the secondary
State may notify the applicable State authority of the primary
State.</text>
</subsection></section></part><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HC41D9A0FB49F4B72AE5EE091F263C814"><enum>(b)</enum><header>Effective
Date</header><text>The amendment made by subsection (a) shall apply to
individual health insurance coverage offered, issued, or sold after the date
that is one year after the date of the enactment of this Act.</text>
</subsection><subsection id="H4DD0ED72E83349B4AB8DD7520C14808"><enum>(c)</enum><header>GAO Ongoing Study
and Reports</header>
<paragraph id="H6C7A7CC722E542F184D945849CB9D15"><enum>(1)</enum><header>Study</header><text>The
Comptroller General of the United States shall conduct an ongoing study
concerning the effect of the amendment made by subsection (a) on—</text>
<subparagraph id="HD93FCE28026C482EAD5366594E1F07A1"><enum>(A)</enum><text>the number of
uninsured and under-insured;</text>
</subparagraph><subparagraph id="HED73F83A409B42EDA5EE7C194725E209"><enum>(B)</enum><text>the availability
and cost of health insurance policies for individuals with pre-existing medical
conditions;</text>
</subparagraph><subparagraph id="H154C9DF98E304C728B632C4EC88B632B"><enum>(C)</enum><text>the availability
and cost of health insurance policies generally;</text>
</subparagraph><subparagraph id="H8AED88F62F7A41898EF9003B00B4DEB8"><enum>(D)</enum><text>the elimination or
reduction of different types of benefits under health insurance policies
offered in different States; and</text>
</subparagraph><subparagraph id="H801EE2FD71F14C67BD93B4520F67697"><enum>(E)</enum><text>cases of fraud or
abuse relating to health insurance coverage offered under such amendment and
the resolution of such cases.</text>
</subparagraph></paragraph><paragraph id="HFF3F581776864BC7B3714C2C3B283B3E"><enum>(2)</enum><header>Annual
reports</header><text>The Comptroller General shall submit to Congress an
annual report, after the end of each of the 5 years following the effective
date of the amendment made by subsection (a), on the ongoing study conducted
under paragraph (1).</text>
</paragraph></subsection><subsection id="HB5DAD823D61942DA9113E572B83B63CE"><enum>(d)</enum><header>Severability</header><text>If
any provision of this title or the application of such provision to any person
or circumstance is held to be unconstitutional, the remainder of this title and
the application of the provisions of such to any other person or circumstance
shall not be affected.</text>
</subsection></section><section id="H14B3D04C8413447786DE78594F135E26" section-type="subsequent-section"><enum>112.</enum><header>Small business
health fairness</header>
<subsection id="HBAD1E29486964FE5008379764B06FA45"><enum>(a)</enum><header>Rules governing
association health plans</header>
<paragraph id="H71B77F74645D4199A8202628FB2517FA"><enum>(1)</enum><header>In
General</header><text display-inline="yes-display-inline">Subtitle B of title I
of the <act-name parsable-cite="ERISA">Employee Retirement Income Security Act
of 1974</act-name> is amended by adding after part 7 the following new
part:</text>
<quoted-block act-name="Employee Retirement Income Security Act of 1974" id="H5ED6503EF08E4D16A6DCAE6998CFD5EA" style="OLC">
<part id="HE6BF680E57E74906B16174D9338FE200"><enum>8</enum><header>RULES GOVERNING
ASSOCIATION HEALTH PLANS</header>
<section id="H739C1F7D8BE74D3594D897C2555BE741"><enum>801.</enum><header>Association
health plans</header>
<subsection id="HD42A9CD6E85940D9A6A9F40607CE7BB"><enum>(a)</enum><header>In
General</header><text>For purposes of this part, the term <term>association
health plan</term> means a group health plan whose sponsor is (or is deemed
under this part to be) described in subsection (b).</text>
</subsection><subsection id="H4E09427EE63044BEBC3BCC1D29FD2DAF"><enum>(b)</enum><header>Sponsorship</header><text>The
sponsor of a group health plan is described in this subsection if such
sponsor—</text>
<paragraph id="HA78A6B84899245C0BB3B779BFA502044"><enum>(1)</enum><text>is organized and
maintained in good faith, with a constitution and bylaws specifically stating
its purpose and providing for periodic meetings on at least an annual basis, as
a bona fide trade association, a bona fide industry association (including a
rural electric cooperative association or a rural telephone cooperative
association), a bona fide professional association, or a bona fide chamber of
commerce (or similar bona fide business association, including a corporation or
similar organization that operates on a cooperative basis (within the meaning
of section 1381 of the Internal Revenue Code of 1986)), for substantial
purposes other than that of obtaining or providing medical care;</text>
</paragraph><paragraph id="HF0EF472654DB4DF3B137464FDE8E00C2"><enum>(2)</enum><text>is established as
a permanent entity which receives the active support of its members and
requires for membership payment on a periodic basis of dues or payments
necessary to maintain eligibility for membership in the sponsor; and</text>
</paragraph><paragraph id="H5D95A16F9F3C43A6ABF629D40161B99"><enum>(3)</enum><text>does not condition
membership, such dues or payments, or coverage under the plan on the basis of
health status-related factors with respect to the employees of its members (or
affiliated members), or the dependents of such employees, and does not
condition such dues or payments on the basis of group health plan
participation.</text>
</paragraph><continuation-text continuation-text-level="subsection">Any
sponsor consisting of an association of entities which meet the requirements of
paragraphs (1), (2), and (3) shall be deemed to be a sponsor described in this
subsection.</continuation-text></subsection></section><section id="H56C40CB834F848B0A84E02E7AE27F567"><enum>802.</enum><header>Certification
of association health plans</header>
<subsection id="H39FE2B00D17949C2B53805BEB000BE35"><enum>(a)</enum><header>In
General</header><text>The applicable authority shall prescribe by regulation a
procedure under which, subject to subsection (b), the applicable authority
shall certify association health plans which apply for certification as meeting
the requirements of this part.</text>
</subsection><subsection id="H0D9362A40BCC4B39948811D5053B9477"><enum>(b)</enum><header>Standards</header><text>Under
the procedure prescribed pursuant to subsection (a), in the case of an
association health plan that provides at least one benefit option which does
not consist of health insurance coverage, the applicable authority shall
certify such plan as meeting the requirements of this part only if the
applicable authority is satisfied that the applicable requirements of this part
are met (or, upon the date on which the plan is to commence operations, will be
met) with respect to the plan.</text>
</subsection><subsection id="H32F849DF3CBE4DD5A73825009E746994"><enum>(c)</enum><header>Requirements
Applicable to Certified Plans</header><text>An association health plan with
respect to which certification under this part is in effect shall meet the
applicable requirements of this part, effective on the date of certification
(or, if later, on the date on which the plan is to commence operations).</text>
</subsection><subsection id="H2FE38296610A424A85006732FF40372"><enum>(d)</enum><header>Requirements for
Continued Certification</header><text>The applicable authority may provide by
regulation for continued certification of association health plans under this
part.</text>
</subsection><subsection id="H9C9EF774C9FB4CDB88F9DBA985B13AB"><enum>(e)</enum><header>Class
Certification for Fully Insured Plans</header><text>The applicable authority
shall establish a class certification procedure for association health plans
under which all benefits consist of health insurance coverage. Under such
procedure, the applicable authority shall provide for the granting of
certification under this part to the plans in each class of such association
health plans upon appropriate filing under such procedure in connection with
plans in such class and payment of the prescribed fee under section
807(a).</text>
</subsection><subsection id="H08A4CDCEDA3247F699F2A3ABC26F04EE"><enum>(f)</enum><header>Certification of
Self-Insured Association Health Plans</header><text>An association health plan
which offers one or more benefit options which do not consist of health
insurance coverage may be certified under this part only if such plan consists
of any of the following:</text>
<paragraph id="HF669333053A24033B7FAD1D19DD4EE8"><enum>(1)</enum><text>a plan which
offered such coverage on the date of the enactment of this part,</text>
</paragraph><paragraph id="H6A61C90418004320BE682DEFBEB4821C"><enum>(2)</enum><text>a plan under which
the sponsor does not restrict membership to one or more trades and businesses
or industries and whose eligible participating employers represent a broad
cross-section of trades and businesses or industries, or</text>
</paragraph><paragraph id="HC82FD18C8F214373AD24F611A15F813"><enum>(3)</enum><text>a plan whose
eligible participating employers represent one or more trades or businesses, or
one or more industries, consisting of any of the following: agriculture;
equipment and automobile dealerships; barbering and cosmetology; certified
public accounting practices; child care; construction; dance, theatrical and
orchestra productions; disinfecting and pest control; financial services;
fishing; food service establishments; hospitals; labor organizations; logging;
manufacturing (metals); mining; medical and dental practices; medical
laboratories; professional consulting services; sanitary services;
transportation (local and freight); warehousing; wholesaling/distributing; or
any other trade or business or industry which has been indicated as having
average or above-average risk or health claims experience by reason of State
rate filings, denials of coverage, proposed premium rate levels, or other means
demonstrated by such plan in accordance with regulations.</text>
</paragraph></subsection></section><section id="H1FB67F8B717B45E39705B53BA323A4ED"><enum>803.</enum><header>Requirements
relating to sponsors and boards of trustees</header>
<subsection id="HBD520B7506B94F7896EA40E260F615C"><enum>(a)</enum><header>Sponsor</header><text>The
requirements of this subsection are met with respect to an association health
plan if the sponsor has met (or is deemed under this part to have met) the
requirements of section 801(b) for a continuous period of not less than 3 years
ending with the date of the application for certification under this
part.</text>
</subsection><subsection id="H7567A11B7FAF440200B6B8D827B796CD"><enum>(b)</enum><header>Board of
Trustees</header><text>The requirements of this subsection are met with respect
to an association health plan if the following requirements are met:</text>
<paragraph id="HA7176101AB854788881BDCC200EF7E17"><enum>(1)</enum><header>Fiscal
control</header><text>The plan is operated, pursuant to a trust agreement, by a
board of trustees which has complete fiscal control over the plan and which is
responsible for all operations of the plan.</text>
</paragraph><paragraph id="H826BA90096A94BA893FCEF525C77EB8C"><enum>(2)</enum><header>Rules of
operation and financial controls</header><text>The board of trustees has in
effect rules of operation and financial controls, based on a 3-year plan of
operation, adequate to carry out the terms of the plan and to meet all
requirements of this title applicable to the plan.</text>
</paragraph><paragraph id="HDAE2F46900324DC391744BD7700008BA"><enum>(3)</enum><header>Rules governing
relationship to participating employers and to contractors</header>
<subparagraph id="HB13B0EDAEE33421B8726D3FA58B8E5C5"><enum>(A)</enum><header>Board
membership</header>
<clause id="HFF6D8AF4763D448D00A39DFE23D86914"><enum>(i)</enum><header>In
general</header><text>Except as provided in clauses (ii) and (iii), the members
of the board of trustees are individuals selected from individuals who are the
owners, officers, directors, or employees of the participating employers or who
are partners in the participating employers and actively participate in the
business.</text>
</clause><clause id="H464CDCC8E4884A57ADCFEF3E4655CD2"><enum>(ii)</enum><header>Limitation</header>
<subclause id="H22AC401232DE4254979B84EA7381479D"><enum>(I)</enum><header>General
rule</header><text>Except as provided in subclauses (II) and (III), no such
member is an owner, officer, director, or employee of, or partner in, a
contract administrator or other service provider to the plan.</text>
</subclause><subclause id="H760D04838A2340E2A8EA6866A82BA6DB"><enum>(II)</enum><header>Limited
exception for providers of services solely on behalf of the
sponsor</header><text>Officers or employees of a sponsor which is a service
provider (other than a contract administrator) to the plan may be members of
the board if they constitute not more than 25 percent of the membership of the
board and they do not provide services to the plan other than on behalf of the
sponsor.</text>
</subclause><subclause id="HDD2F678AB8974A16B08DCDDA3BD122D2"><enum>(III)</enum><header>Treatment of
providers of medical care</header><text>In the case of a sponsor which is an
association whose membership consists primarily of providers of medical care,
subclause (I) shall not apply in the case of any service provider described in
subclause (I) who is a provider of medical care under the plan.</text>
</subclause></clause><clause id="H665D63D4BC464F02AE65B97CA619198F"><enum>(iii)</enum><header>Certain plans
excluded</header><text>Clause (i) shall not apply to an association health plan
which is in existence on the date of the enactment of this part.</text>
</clause></subparagraph><subparagraph id="H2599CE52A2E64FB20028148033E46834"><enum>(B)</enum><header>Sole
authority</header><text>The board has sole authority under the plan to approve
applications for participation in the plan and to contract with a service
provider to administer the day-to-day affairs of the plan.</text>
</subparagraph></paragraph></subsection><subsection id="H4A9D6DBA87804101A894F0FFD304E422"><enum>(c)</enum><header>Treatment of
Franchise Networks</header><text>In the case of a group health plan which is
established and maintained by a franchiser for a franchise network consisting
of its franchisees—</text>
<paragraph id="H597E60B410154AD181D9DD1F685B427"><enum>(1)</enum><text>the requirements of
subsection (a) and section 801(a) shall be deemed met if such requirements
would otherwise be met if the franchiser were deemed to be the sponsor referred
to in section 801(b), such network were deemed to be an association described
in section 801(b), and each franchisee were deemed to be a member (of the
association and the sponsor) referred to in section 801(b); and</text>
</paragraph><paragraph id="HE061414A3B6F4387AFF6B88F0200517B"><enum>(2)</enum><text>the requirements
of section 804(a)(1) shall be deemed met.</text>
</paragraph><continuation-text continuation-text-level="subsection">The
Secretary may by regulation define for purposes of this subsection the terms
<term>franchiser</term>, <term>franchise network</term>, and
<term>franchisee</term>.</continuation-text></subsection></section><section id="H94CA54ECF9BD4F9C834D7E24007B4489"><enum>804.</enum><header>Participation
and coverage requirements</header>
<subsection id="H63F2EF7533D64413AD3ED471E275CFC"><enum>(a)</enum><header>Covered Employers
and Individuals</header><text>The requirements of this subsection are met with
respect to an association health plan if, under the terms of the plan—</text>
<paragraph id="HCE98E163D9D34916AE3BA20CF3CDB19"><enum>(1)</enum><text>each participating
employer must be—</text>
<subparagraph id="HDE75B33B315A428DA35E45E02889D998"><enum>(A)</enum><text>a member of the
sponsor,</text>
</subparagraph><subparagraph id="HA32F5EE52ABD45B8AF12F05EC0693688"><enum>(B)</enum><text>the sponsor,
or</text>
</subparagraph><subparagraph id="H71654101621845F38229C440A3D0E7D8"><enum>(C)</enum><text>an affiliated
member of the sponsor with respect to which the requirements of subsection (b)
are met,</text>
</subparagraph><continuation-text continuation-text-level="paragraph">except
that, in the case of a sponsor which is a professional association or other
individual-based association, if at least one of the officers, directors, or
employees of an employer, or at least one of the individuals who are partners
in an employer and who actively participates in the business, is a member or
such an affiliated member of the sponsor, participating employers may also
include such employer; and</continuation-text></paragraph><paragraph id="HD2957EC7D17742D5B2C6D13FE27FF33D"><enum>(2)</enum><text>all individuals
commencing coverage under the plan after certification under this part must
be—</text>
<subparagraph id="HC14B4CAC16204CE6A93015E5AAA49A5"><enum>(A)</enum><text>active or retired
owners (including self-employed individuals), officers, directors, or employees
of, or partners in, participating employers; or</text>
</subparagraph><subparagraph id="H6A2D0DBAC3F34E778D9B469FCB9BB480"><enum>(B)</enum><text>the beneficiaries
of individuals described in subparagraph (A).</text>
</subparagraph></paragraph></subsection><subsection id="HFA58C386F8314993B19B003F69CC8D71"><enum>(b)</enum><header>Coverage of
Previously Uninsured Employees</header><text>In the case of an association
health plan in existence on the date of the enactment of this part, an
affiliated member of the sponsor of the plan may be offered coverage under the
plan as a participating employer only if—</text>
<paragraph id="HCEEDEA756B324DC1A938CFADD86BDE12"><enum>(1)</enum><text>the affiliated
member was an affiliated member on the date of certification under this part;
or</text>
</paragraph><paragraph id="H859AD9FFE08C4A81B5FB940000D08884"><enum>(2)</enum><text>during the
12-month period preceding the date of the offering of such coverage, the
affiliated member has not maintained or contributed to a group health plan with
respect to any of its employees who would otherwise be eligible to participate
in such association health plan.</text>
</paragraph></subsection><subsection id="H6D600ECDA2DE4E679B08C5B21080AD00"><enum>(c)</enum><header>Individual
Market Unaffected</header><text>The requirements of this subsection are met
with respect to an association health plan if, under the terms of the plan, no
participating employer may provide health insurance coverage in the individual
market for any employee not covered under the plan which is similar to the
coverage contemporaneously provided to employees of the employer under the
plan, if such exclusion of the employee from coverage under the plan is based
on a health status-related factor with respect to the employee and such
employee would, but for such exclusion on such basis, be eligible for coverage
under the plan.</text>
</subsection><subsection id="H16AD658FE4A1479B845291077E7DC022"><enum>(d)</enum><header>Prohibition of
Discrimination Against Employers and Employees Eligible To
Participate</header><text>The requirements of this subsection are met with
respect to an association health plan if—</text>
<paragraph id="H61C5484FBF424DE69640B772E907424E"><enum>(1)</enum><text>under the terms of
the plan, all employers meeting the preceding requirements of this section are
eligible to qualify as participating employers for all geographically available
coverage options, unless, in the case of any such employer, participation or
contribution requirements of the type referred to in section 2711 of the
<act-name parsable-cite="PHSA">Public Health Service Act</act-name> are not
met;</text>
</paragraph><paragraph id="H0ABC47725DE242EBB8DC71ED5E0903C"><enum>(2)</enum><text>upon request, any
employer eligible to participate is furnished information regarding all
coverage options available under the plan; and</text>
</paragraph><paragraph id="H362A4DE56B304F75B7F4F0A2653EE9EE"><enum>(3)</enum><text>the applicable
requirements of sections 701, 702, and 703 are met with respect to the
plan.</text>
</paragraph></subsection></section><section id="H1E8F10304EBE42C6BAFC38F1B4633F7F"><enum>805.</enum><header>Other
requirements relating to plan documents, contribution rates, and benefit
options</header>
<subsection id="HAADE10FF24C94D0A9DF0BBC7BF1C14C"><enum>(a)</enum><header>In
General</header><text>The requirements of this section are met with respect to
an association health plan if the following requirements are met:</text>
<paragraph id="H4C3C8935315041E000B1ED5600B1E020"><enum>(1)</enum><header>Contents of
governing instruments</header><text>The instruments governing the plan include
a written instrument, meeting the requirements of an instrument required under
section 402(a)(1), which—</text>
<subparagraph id="H8FA45512F60A45068CE5C6B0CF06308D"><enum>(A)</enum><text>provides that the
board of trustees serves as the named fiduciary required for plans under
section 402(a)(1) and serves in the capacity of a plan administrator (referred
to in section 3(16)(A));</text>
</subparagraph><subparagraph id="H60EEF4EDD37942CFBD779F68854BF307"><enum>(B)</enum><text>provides that the
sponsor of the plan is to serve as plan sponsor (referred to in section
3(16)(B)); and</text>
</subparagraph><subparagraph id="H47D66DE2B2D14118AEC1781614022FD"><enum>(C)</enum><text>incorporates the
requirements of section 806.</text>
</subparagraph></paragraph><paragraph id="H5DC7E49E85734EFC8D115404C26FF859"><enum>(2)</enum><header>Contribution
rates must be nondiscriminatory</header>
<subparagraph id="H80DE658A22864BF28659D62874AD5E14"><enum>(A)</enum><text>The contribution
rates for any participating small employer do not vary on the basis of any
health status-related factor in relation to employees of such employer or their
beneficiaries and do not vary on the basis of the type of business or industry
in which such employer is engaged.</text>
</subparagraph><subparagraph id="H67E4C26F027E4D8AB386E5D608327ED"><enum>(B)</enum><text>Nothing in this
title or any other provision of law shall be construed to preclude an
association health plan, or a health insurance issuer offering health insurance
coverage in connection with an association health plan, from—</text>
<clause id="H3BA6BFB6B9AD459D8429D486593E2560"><enum>(i)</enum><text>setting
contribution rates based on the claims experience of the plan; or</text>
</clause><clause id="H2C46586ED54540B7984B3EDE1386139"><enum>(ii)</enum><text>varying
contribution rates for small employers in a State to the extent that such rates
could vary using the same methodology employed in such State for regulating
premium rates in the small group market with respect to health insurance
coverage offered in connection with bona fide associations (within the meaning
of section 2791(d)(3) of the <act-name parsable-cite="PHSA">Public Health
Service Act</act-name>),</text>
</clause><continuation-text continuation-text-level="subparagraph">subject
to the requirements of section 702(b) relating to contribution rates.</continuation-text></subparagraph></paragraph><paragraph id="HE2D319E393B647D5AFE3E8DC63BE6464"><enum>(3)</enum><header>Floor for number
of covered individuals with respect to certain plans</header><text>If any
benefit option under the plan does not consist of health insurance coverage,
the plan has as of the beginning of the plan year not fewer than 1,000
participants and beneficiaries.</text>
</paragraph><paragraph id="H574F1AFB6B9E45BB9B902871FF1E3B77"><enum>(4)</enum><header>Marketing
requirements</header>
<subparagraph id="H5F753A0A55A54669B7246D84C33F1D81"><enum>(A)</enum><header>In
general</header><text>If a benefit option which consists of health insurance
coverage is offered under the plan, State-licensed insurance agents shall be
used to distribute to small employers coverage which does not consist of health
insurance coverage in a manner comparable to the manner in which such agents
are used to distribute health insurance coverage.</text>
</subparagraph><subparagraph id="HFBE0124C01B34844906F72D43BDC70DC"><enum>(B)</enum><header>State-licensed
insurance agents</header><text>For purposes of subparagraph (A), the term
<term>State-licensed insurance agents</term> means one or more agents who are
licensed in a State and are subject to the laws of such State relating to
licensure, qualification, testing, examination, and continuing education of
persons authorized to offer, sell, or solicit health insurance coverage in such
State.</text>
</subparagraph></paragraph><paragraph id="H718260A5042B4A6FBDAB0C8E1C704FC"><enum>(5)</enum><header>Regulatory
requirements</header><text>Such other requirements as the applicable authority
determines are necessary to carry out the purposes of this part, which shall be
prescribed by the applicable authority by regulation.</text>
</paragraph></subsection><subsection id="HF1AFD55BC9344E41BDFED72BA8AB1864"><enum>(b)</enum><header>Ability of
Association Health Plans To Design Benefit Options</header><text>Subject to
section 514(d), nothing in this part or any provision of State law (as defined
in section 514(c)(1)) shall be construed to preclude an association health
plan, or a health insurance issuer offering health insurance coverage in
connection with an association health plan, from exercising its sole discretion
in selecting the specific items and services consisting of medical care to be
included as benefits under such plan or coverage, except (subject to section
514) in the case of (1) any law to the extent that it is not preempted under
section 731(a)(1) with respect to matters governed by section 711, 712, or 713,
or (2) any law of the State with which filing and approval of a policy type
offered by the plan was initially obtained to the extent that such law
prohibits an exclusion of a specific disease from such coverage.</text>
</subsection></section><section id="H6D53C36638284E849C16F838AFFE6122"><enum>806.</enum><header>Maintenance of
reserves and provisions for solvency for plans providing health benefits in
addition to health insurance coverage</header>
<subsection id="HA435494284EA472EB23FF5CD83EB8F5B"><enum>(a)</enum><header>In
General</header><text>The requirements of this section are met with respect to
an association health plan if—</text>
<paragraph id="H5EF5731E61E6466F95AEE1002FE1ECB"><enum>(1)</enum><text>the benefits under
the plan consist solely of health insurance coverage; or</text>
</paragraph><paragraph id="HA18BE3E28F8744C29F00AFA346AF93C"><enum>(2)</enum><text>if the plan
provides any additional benefit options which do not consist of health
insurance coverage, the plan—</text>
<subparagraph id="H8489D869BD2845CFBD09628D5D28D7D8"><enum>(A)</enum><text>establishes and
maintains reserves with respect to such additional benefit options, in amounts
recommended by the qualified actuary, consisting of—</text>
<clause id="HC12E86D484D64C96AA00B6078CF48C49"><enum>(i)</enum><text>a
reserve sufficient for unearned contributions;</text>
</clause><clause id="H38D25B583A10445EB53081E43BD1F44C"><enum>(ii)</enum><text>a
reserve sufficient for benefit liabilities which have been incurred, which have
not been satisfied, and for which risk of loss has not yet been transferred,
and for expected administrative costs with respect to such benefit
liabilities;</text>
</clause><clause id="H8C2A60B1AC8843BDA97BA849AFB548B7"><enum>(iii)</enum><text>a reserve
sufficient for any other obligations of the plan; and</text>
</clause><clause id="HD4F5B9A4DA2948C8BE3D60E896D4A9E9"><enum>(iv)</enum><text>a
reserve sufficient for a margin of error and other fluctuations, taking into
account the specific circumstances of the plan; and</text>
</clause></subparagraph><subparagraph id="H37EC0EFE59464FC79F8FFA00B299C3F5"><enum>(B)</enum><text>establishes and
maintains aggregate and specific excess/stop loss insurance and solvency
indemnification, with respect to such additional benefit options for which risk
of loss has not yet been transferred, as follows:</text>
<clause id="H9815ED3326AE48CC8EFD519C1E788BBF"><enum>(i)</enum><text>The plan shall
secure aggregate excess/stop loss insurance for the plan with an attachment
point which is not greater than 125 percent of expected gross annual claims.
The applicable authority may by regulation provide for upward adjustments in
the amount of such percentage in specified circumstances in which the plan
specifically provides for and maintains reserves in excess of the amounts
required under subparagraph (A).</text>
</clause><clause id="HE7B11A95131F4154A771F8D127E32002"><enum>(ii)</enum><text>The plan shall
secure specific excess/stop loss insurance for the plan with an attachment
point which is at least equal to an amount recommended by the plan’s qualified
actuary. The applicable authority may by regulation provide for adjustments in
the amount of such insurance in specified circumstances in which the plan
specifically provides for and maintains reserves in excess of the amounts
required under subparagraph (A).</text>
</clause><clause id="HD7B71538B69340EB801814410370B28F"><enum>(iii)</enum><text>The plan shall
secure indemnification insurance for any claims which the plan is unable to
satisfy by reason of a plan termination.</text>
</clause></subparagraph></paragraph><continuation-text continuation-text-level="subsection">Any
person issuing to a plan insurance described in clause (i), (ii), or (iii) of
subparagraph (B) shall notify the Secretary of any failure of premium payment
meriting cancellation of the policy prior to undertaking such a cancellation.
Any regulations prescribed by the applicable authority pursuant to clause (i)
or (ii) of subparagraph (B) may allow for such adjustments in the required
levels of excess/stop loss insurance as the qualified actuary may recommend,
taking into account the specific circumstances of the plan.</continuation-text></subsection><subsection id="H2310E275BF62478EA063CE2F00AECFF5"><enum>(b)</enum><header>Minimum Surplus
in Addition to Claims Reserves</header><text>In the case of any association
health plan described in subsection (a)(2), the requirements of this subsection
are met if the plan establishes and maintains surplus in an amount at least
equal to—</text>
<paragraph id="HCC2A730BD6B04486BCB8695C4039B07"><enum>(1)</enum><text>$500,000, or</text>
</paragraph><paragraph id="H99F9C1F81E094FF682906B6FA51BFDC"><enum>(2)</enum><text>such greater amount
(but not greater than $2,000,000) as may be set forth in regulations prescribed
by the applicable authority, considering the level of aggregate and specific
excess/stop loss insurance provided with respect to such plan and other factors
related to solvency risk, such as the plan’s projected levels of participation
or claims, the nature of the plan’s liabilities, and the types of assets
available to assure that such liabilities are met.</text>
</paragraph></subsection><subsection id="H0BF9B930631D4572AF00092F19BAA3A6"><enum>(c)</enum><header>Additional
Requirements</header><text>In the case of any association health plan described
in subsection (a)(2), the applicable authority may provide such additional
requirements relating to reserves, excess/stop loss insurance, and
indemnification insurance as the applicable authority considers appropriate.
Such requirements may be provided by regulation with respect to any such plan
or any class of such plans.</text>
</subsection><subsection id="HDF564846676F4458B9DCB6ADD5AC8317"><enum>(d)</enum><header>Adjustments for
Excess/Stop Loss Insurance</header><text>The applicable authority may provide
for adjustments to the levels of reserves otherwise required under subsections
(a) and (b) with respect to any plan or class of plans to take into account
excess/stop loss insurance provided with respect to such plan or plans.</text>
</subsection><subsection id="HDF9F169194BC4170BAB6DBCDFA99E59F"><enum>(e)</enum><header>Alternative
Means of Compliance</header><text>The applicable authority may permit an
association health plan described in subsection (a)(2) to substitute, for all
or part of the requirements of this section (except subsection (a)(2)(B)(iii)),
such security, guarantee, hold-harmless arrangement, or other financial
arrangement as the applicable authority determines to be adequate to enable the
plan to fully meet all its financial obligations on a timely basis and is
otherwise no less protective of the interests of participants and beneficiaries
than the requirements for which it is substituted. The applicable authority may
take into account, for purposes of this subsection, evidence provided by the
plan or sponsor which demonstrates an assumption of liability with respect to
the plan. Such evidence may be in the form of a contract of indemnification,
lien, bonding, insurance, letter of credit, recourse under applicable terms of
the plan in the form of assessments of participating employers, security, or
other financial arrangement.</text>
</subsection><subsection id="H0634606E5BE840D589CFADB4940F344"><enum>(f)</enum><header>Measures To
Ensure Continued Payment of Benefits by Certain Plans in Distress</header>
<paragraph id="HB4C6473E4F9F462184AD6424CA320669"><enum>(1)</enum><header>Payments by
certain plans to association health plan fund</header>
<subparagraph id="H3324EFFDB1364DD8A687FEF5D8190087"><enum>(A)</enum><header>In
general</header><text>In the case of an association health plan described in
subsection (a)(2), the requirements of this subsection are met if the plan
makes payments into the Association Health Plan Fund under this subparagraph
when they are due. Such payments shall consist of annual payments in the amount
of $5,000, and, in addition to such annual payments, such supplemental payments
as the Secretary may determine to be necessary under paragraph (2). Payments
under this paragraph are payable to the Fund at the time determined by the
Secretary. Initial payments are due in advance of certification under this
part. Payments shall continue to accrue until a plan’s assets are distributed
pursuant to a termination procedure.</text>
</subparagraph><subparagraph id="H8F64F8576ADD4B48AF3700DF65AD9400"><enum>(B)</enum><header>Penalties for
failure to make payments</header><text>If any payment is not made by a plan
when it is due, a late payment charge of not more than 100 percent of the
payment which was not timely paid shall be payable by the plan to the
Fund.</text>
</subparagraph><subparagraph id="HFBAF27599A6A4F7C9594A7C69F857281"><enum>(C)</enum><header>Continued duty
of the secretary</header><text>The Secretary shall not cease to carry out the
provisions of paragraph (2) on account of the failure of a plan to pay any
payment when due.</text>
</subparagraph></paragraph><paragraph id="H374C24AD6DBA421F8E181C27D136FB3C"><enum>(2)</enum><header>Payments by
secretary to continue excess/stop loss insurance coverage and indemnification
insurance coverage for certain plans</header><text>In any case in which the
applicable authority determines that there is, or that there is reason to
believe that there will be: (A) a failure to take necessary corrective actions
under section 809(a) with respect to an association health plan described in
subsection (a)(2); or (B) a termination of such a plan under section 809(b) or
810(b)(8) (and, if the applicable authority is not the Secretary, certifies
such determination to the Secretary), the Secretary shall determine the amounts
necessary to make payments to an insurer (designated by the Secretary) to
maintain in force excess/stop loss insurance coverage or indemnification
insurance coverage for such plan, if the Secretary determines that there is a
reasonable expectation that, without such payments, claims would not be
satisfied by reason of termination of such coverage. The Secretary shall, to
the extent provided in advance in appropriation Acts, pay such amounts so
determined to the insurer designated by the Secretary.</text>
</paragraph><paragraph id="H1820DFBA35CF465800244B8FF100CB6F"><enum>(3)</enum><header>Association
health plan fund</header>
<subparagraph id="HF2E3B4818DFE4C1B80F3273CAA32497F"><enum>(A)</enum><header>In
general</header><text>There is established on the books of the Treasury a fund
to be known as the <quote>Association Health Plan Fund</quote>. The Fund shall
be available for making payments pursuant to paragraph (2). The Fund shall be
credited with payments received pursuant to paragraph (1)(A), penalties
received pursuant to paragraph (1)(B); and earnings on investments of amounts
of the Fund under subparagraph (B).</text>
</subparagraph><subparagraph id="H305B9ECAFB8A4A99AD2D126DDB9B2E00"><enum>(B)</enum><header>Investment</header><text>Whenever
the Secretary determines that the moneys of the fund are in excess of current
needs, the Secretary may request the investment of such amounts as the
Secretary determines advisable by the Secretary of the Treasury in obligations
issued or guaranteed by the United States.</text>
</subparagraph></paragraph></subsection><subsection id="HD3993EDA6C134978902F129502D779C"><enum>(g)</enum><header>Excess/Stop Loss
Insurance</header><text>For purposes of this section—</text>
<paragraph id="HF2135976DED44F599B38F22700A3FC1C"><enum>(1)</enum><header>Aggregate
excess/stop loss insurance</header><text>The term <term>aggregate excess/stop
loss insurance</term> means, in connection with an association health plan, a
contract—</text>
<subparagraph id="HBA7B0AB100AF4CFAA8FEF3F49963EF19"><enum>(A)</enum><text>under which an
insurer (meeting such minimum standards as the applicable authority may
prescribe by regulation) provides for payment to the plan with respect to
aggregate claims under the plan in excess of an amount or amounts specified in
such contract;</text>
</subparagraph><subparagraph id="HAC22F414D8CE4BC789B7B5299326526B"><enum>(B)</enum><text>which is
guaranteed renewable; and</text>
</subparagraph><subparagraph id="H6C7CA2C736074AC68409BCEA4F6BBB00"><enum>(C)</enum><text>which allows for
payment of premiums by any third party on behalf of the insured plan.</text>
</subparagraph></paragraph><paragraph id="H6528D797122345DDA85F3C8300CCD29C"><enum>(2)</enum><header>Specific
excess/stop loss insurance</header><text>The term <term>specific excess/stop
loss insurance</term> means, in connection with an association health plan, a
contract—</text>
<subparagraph id="H35C7CE45918943E5BE9BA56C865F16BF"><enum>(A)</enum><text>under which an
insurer (meeting such minimum standards as the applicable authority may
prescribe by regulation) provides for payment to the plan with respect to
claims under the plan in connection with a covered individual in excess of an
amount or amounts specified in such contract in connection with such covered
individual;</text>
</subparagraph><subparagraph id="H323EC6758CD24AD6B0E3827377FAF44B"><enum>(B)</enum><text>which is
guaranteed renewable; and</text>
</subparagraph><subparagraph id="H63BA308F0CA349E49D3972EEE0CF5CE2"><enum>(C)</enum><text>which allows for
payment of premiums by any third party on behalf of the insured plan.</text>
</subparagraph></paragraph></subsection><subsection id="HFF90104EA7CC427EA98BC2AC2F32F249"><enum>(h)</enum><header>Indemnification
Insurance</header><text>For purposes of this section, the term
<term>indemnification insurance</term> means, in connection with an association
health plan, a contract—</text>
<paragraph id="H110AF9ABC0CE4A3394B0F0E771EB239D"><enum>(1)</enum><text>under which an
insurer (meeting such minimum standards as the applicable authority may
prescribe by regulation) provides for payment to the plan with respect to
claims under the plan which the plan is unable to satisfy by reason of a
termination pursuant to section 809(b) (relating to mandatory
termination);</text>
</paragraph><paragraph id="H56DC528F4C3346F6ABF5BD10D05BEBE"><enum>(2)</enum><text>which is guaranteed
renewable and noncancellable for any reason (except as the applicable authority
may prescribe by regulation); and</text>
</paragraph><paragraph id="HB0A5A0009BAF490E91A03990C6653BC3"><enum>(3)</enum><text>which allows for
payment of premiums by any third party on behalf of the insured plan.</text>
</paragraph></subsection><subsection id="H0BA7F58EAC3E4797927122070015A1E"><enum>(i)</enum><header>Reserves</header><text>For
purposes of this section, the term <term>reserves</term> means, in connection
with an association health plan, plan assets which meet the fiduciary standards
under part 4 and such additional requirements regarding liquidity as the
applicable authority may prescribe by regulation.</text>
</subsection><subsection id="H2CC370D6550A40FBB18D3D68BE5B5B22"><enum>(j)</enum><header>Solvency
Standards Working Group</header>
<paragraph id="H2F873CE0CBF8449D8E94135D214FCAE2"><enum>(1)</enum><header>In
general</header><text>Within 90 days after the date of the enactment of this
part, the applicable authority shall establish a Solvency Standards Working
Group. In prescribing the initial regulations under this section, the
applicable authority shall take into account the recommendations of such
Working Group.</text>
</paragraph><paragraph id="H7B6CF287ED7041D0A476D6B7899EF53"><enum>(2)</enum><header>Membership</header><text>The
Working Group shall consist of not more than 15 members appointed by the
applicable authority. The applicable authority shall include among persons
invited to membership on the Working Group at least one of each of the
following:</text>
<subparagraph id="HC2D2F0DDCC964F059BFD338816F4400"><enum>(A)</enum><text>a representative of
the National Association of Insurance Commissioners;</text>
</subparagraph><subparagraph id="H98A216A0586E432D8150185CD0C82509"><enum>(B)</enum><text>a representative
of the American Academy of Actuaries;</text>
</subparagraph><subparagraph id="H6BACE3DB0192479AB77208CC59CE0E1"><enum>(C)</enum><text>a representative of
the State governments, or their interests;</text>
</subparagraph><subparagraph id="H7866216647314B0396B9E7076E1E4FDE"><enum>(D)</enum><text>a representative
of existing self-insured arrangements, or their interests;</text>
</subparagraph><subparagraph id="H26EC4FA0416B4DD28513A6ADAC8B39C"><enum>(E)</enum><text>a representative of
associations of the type referred to in section 801(b)(1), or their interests;
and</text>
</subparagraph><subparagraph id="H11DBC48628984E1BA0C767CB1E53F1A4"><enum>(F)</enum><text>a representative
of multiemployer plans that are group health plans, or their interests.</text>
</subparagraph></paragraph></subsection></section><section id="H4C6767D7DD2D4DD6A1001692786BB7CD"><enum>807.</enum><header>Requirements
for application and related requirements</header>
<subsection id="H2EA1E52D3B964F968F6E1D38F7C79820"><enum>(a)</enum><header>Filing
Fee</header><text>Under the procedure prescribed pursuant to section 802(a), an
association health plan shall pay to the applicable authority at the time of
filing an application for certification under this part a filing fee in the
amount of $5,000, which shall be available in the case of the Secretary, to the
extent provided in appropriation Acts, for the sole purpose of administering
the certification procedures applicable with respect to association health
plans.</text>
</subsection><subsection id="H4DE6454BEDF84602BC12A7942E500808"><enum>(b)</enum><header>Information To
Be Included in Application for Certification</header><text>An application for
certification under this part meets the requirements of this section only if it
includes, in a manner and form which shall be prescribed by the applicable
authority by regulation, at least the following information:</text>
<paragraph id="H28DAC305F8394C4C831FAE562443F9F"><enum>(1)</enum><header>Identifying
information</header><text>The names and addresses of—</text>
<subparagraph id="H2ADE5718C9D44784A82F70F59CAAF668"><enum>(A)</enum><text>the sponsor;
and</text>
</subparagraph><subparagraph id="HB8ADC4AE0B174E7BAC4887212DDA4D82"><enum>(B)</enum><text>the members of the
board of trustees of the plan.</text>
</subparagraph></paragraph><paragraph id="HA1D4575F1A3843FAA84BDA057C8B824C"><enum>(2)</enum><header>States in which
plan intends to do business</header><text>The States in which participants and
beneficiaries under the plan are to be located and the number of them expected
to be located in each such State.</text>
</paragraph><paragraph id="H364954E6BF8E4658B103BBB31200302C"><enum>(3)</enum><header>Bonding
requirements</header><text>Evidence provided by the board of trustees that the
bonding requirements of section 412 will be met as of the date of the
application or (if later) commencement of operations.</text>
</paragraph><paragraph id="H26C28D1826824FDE8E03787F784633F6"><enum>(4)</enum><header>Plan
documents</header><text>A copy of the documents governing the plan (including
any bylaws and trust agreements), the summary plan description, and other
material describing the benefits that will be provided to participants and
beneficiaries under the plan.</text>
</paragraph><paragraph id="H6800EE527431443CBD6F7EAFD5223630"><enum>(5)</enum><header>Agreements with
service providers</header><text>A copy of any agreements between the plan and
contract administrators and other service providers.</text>
</paragraph><paragraph id="H773B9311F71B4075B84E51C4EBB1E3C2"><enum>(6)</enum><header>Funding
report</header><text>In the case of association health plans providing benefits
options in addition to health insurance coverage, a report setting forth
information with respect to such additional benefit options determined as of a
date within the 120-day period ending with the date of the application,
including the following:</text>
<subparagraph id="H3EAF653ACB2E4C5A995465CE6F75B595"><enum>(A)</enum><header>Reserves</header><text>A
statement, certified by the board of trustees of the plan, and a statement of
actuarial opinion, signed by a qualified actuary, that all applicable
requirements of section 806 are or will be met in accordance with regulations
which the applicable authority shall prescribe.</text>
</subparagraph><subparagraph id="H5A4E419478664DF4B9F5DFF1A24873A"><enum>(B)</enum><header>Adequacy of
contribution rates</header><text>A statement of actuarial opinion, signed by a
qualified actuary, which sets forth a description of the extent to which
contribution rates are adequate to provide for the payment of all obligations
and the maintenance of required reserves under the plan for the 12-month period
beginning with such date within such 120-day period, taking into account the
expected coverage and experience of the plan. If the contribution rates are not
fully adequate, the statement of actuarial opinion shall indicate the extent to
which the rates are inadequate and the changes needed to ensure
adequacy.</text>
</subparagraph><subparagraph id="HB1CA02F376A7458191F1B0697245CC00"><enum>(C)</enum><header>Current and
projected value of assets and liabilities</header><text>A statement of
actuarial opinion signed by a qualified actuary, which sets forth the current
value of the assets and liabilities accumulated under the plan and a projection
of the assets, liabilities, income, and expenses of the plan for the 12-month
period referred to in subparagraph (B). The income statement shall identify
separately the plan’s administrative expenses and claims.</text>
</subparagraph><subparagraph id="H77A136DA7ADB437293AC196CF2D2B1AC"><enum>(D)</enum><header>Costs of
coverage to be charged and other expenses</header><text>A statement of the
costs of coverage to be charged, including an itemization of amounts for
administration, reserves, and other expenses associated with the operation of
the plan.</text>
</subparagraph><subparagraph id="H154D31FB009C4B55A4EF9600A905205F"><enum>(E)</enum><header>Other
information</header><text>Any other information as may be determined by the
applicable authority, by regulation, as necessary to carry out the purposes of
this part.</text>
</subparagraph></paragraph></subsection><subsection id="HAAFB33B1DF534309006CCAB076236082"><enum>(c)</enum><header>Filing Notice of
Certification With States</header><text>A certification granted under this part
to an association health plan shall not be effective unless written notice of
such certification is filed with the applicable State authority of each State
in which at least 25 percent of the participants and beneficiaries under the
plan are located. For purposes of this subsection, an individual shall be
considered to be located in the State in which a known address of such
individual is located or in which such individual is employed.</text>
</subsection><subsection id="HF332605852D74381A0E68FB53FB35CC7"><enum>(d)</enum><header>Notice of
Material Changes</header><text>In the case of any association health plan
certified under this part, descriptions of material changes in any information
which was required to be submitted with the application for the certification
under this part shall be filed in such form and manner as shall be prescribed
by the applicable authority by regulation. The applicable authority may require
by regulation prior notice of material changes with respect to specified
matters which might serve as the basis for suspension or revocation of the
certification.</text>
</subsection><subsection id="H55414C118A5E4D09A83D61C1B4EC0055"><enum>(e)</enum><header>Reporting
Requirements for Certain Association Health Plans</header><text>An association
health plan certified under this part which provides benefit options in
addition to health insurance coverage for such plan year shall meet the
requirements of section 103 by filing an annual report under such section which
shall include information described in subsection (b)(6) with respect to the
plan year and, notwithstanding section 104(a)(1)(A), shall be filed with the
applicable authority not later than 90 days after the close of the plan year
(or on such later date as may be prescribed by the applicable authority). The
applicable authority may require by regulation such interim reports as it
considers appropriate.</text>
</subsection><subsection id="H28A9CEFFD4C4406099D0D593AA2608F2"><enum>(f)</enum><header>Engagement of
Qualified Actuary</header><text>The board of trustees of each association
health plan which provides benefits options in addition to health insurance
coverage and which is applying for certification under this part or is
certified under this part shall engage, on behalf of all participants and
beneficiaries, a qualified actuary who shall be responsible for the preparation
of the materials comprising information necessary to be submitted by a
qualified actuary under this part. The qualified actuary shall utilize such
assumptions and techniques as are necessary to enable such actuary to form an
opinion as to whether the contents of the matters reported under this
part—</text>
<paragraph id="H8D9FEA38B85A4448A7E6570011A97393"><enum>(1)</enum><text>are in the
aggregate reasonably related to the experience of the plan and to reasonable
expectations; and</text>
</paragraph><paragraph id="HF4D5F8877374498586C3756749AD8474"><enum>(2)</enum><text>represent such
actuary’s best estimate of anticipated experience under the plan.</text>
</paragraph><continuation-text continuation-text-level="subsection">The
opinion by the qualified actuary shall be made with respect to, and shall be
made a part of, the annual report.</continuation-text></subsection></section><section id="H705E64484A17485F00B8D34346715BE2"><enum>808.</enum><header>Notice
requirements for voluntary termination</header><text display-inline="no-display-inline">Except as provided in section 809(b), an
association health plan which is or has been certified under this part may
terminate (upon or at any time after cessation of accruals in benefit
liabilities) only if the board of trustees, not less than 60 days before the
proposed termination date—</text>
<paragraph id="H5216423464E34055B238E2BE903BA998"><enum>(1)</enum><text>provides to the
participants and beneficiaries a written notice of intent to terminate stating
that such termination is intended and the proposed termination date;</text>
</paragraph><paragraph id="HD06D8D85106E4196BCFA1D03A250B447"><enum>(2)</enum><text>develops a plan
for winding up the affairs of the plan in connection with such termination in a
manner which will result in timely payment of all benefits for which the plan
is obligated; and</text>
</paragraph><paragraph id="H580F82D343A94603B33BAC695C287869"><enum>(3)</enum><text>submits such plan
in writing to the applicable authority.</text>
</paragraph><continuation-text continuation-text-level="section">Actions
required under this section shall be taken in such form and manner as may be
prescribed by the applicable authority by regulation.</continuation-text></section><section id="H485BC91194514B4E9CDECD61E0A6221"><enum>809.</enum><header>Corrective
actions and mandatory termination</header>
<subsection id="H8559BD456DC84FCEB4E400F647DD8124"><enum>(a)</enum><header>Actions To Avoid
Depletion of Reserves</header><text>An association health plan which is
certified under this part and which provides benefits other than health
insurance coverage shall continue to meet the requirements of section 806,
irrespective of whether such certification continues in effect. The board of
trustees of such plan shall determine quarterly whether the requirements of
section 806 are met. In any case in which the board determines that there is
reason to believe that there is or will be a failure to meet such requirements,
or the applicable authority makes such a determination and so notifies the
board, the board shall immediately notify the qualified actuary engaged by the
plan, and such actuary shall, not later than the end of the next following
month, make such recommendations to the board for corrective action as the
actuary determines necessary to ensure compliance with section 806. Not later
than 30 days after receiving from the actuary recommendations for corrective
actions, the board shall notify the applicable authority (in such form and
manner as the applicable authority may prescribe by regulation) of such
recommendations of the actuary for corrective action, together with a
description of the actions (if any) that the board has taken or plans to take
in response to such recommendations. The board shall thereafter report to the
applicable authority, in such form and frequency as the applicable authority
may specify to the board, regarding corrective action taken by the board until
the requirements of section 806 are met.</text>
</subsection><subsection id="HCEA7F2FACD834378AF81929BE051B853"><enum>(b)</enum><header>Mandatory
Termination</header><text>In any case in which—</text>
<paragraph id="H436D7D79A7284BC185A60097AF9EB754"><enum>(1)</enum><text>the applicable
authority has been notified under subsection (a) (or by an issuer of
excess/stop loss insurance or indemnity insurance pursuant to section 806(a))
of a failure of an association health plan which is or has been certified under
this part and is described in section 806(a)(2) to meet the requirements of
section 806 and has not been notified by the board of trustees of the plan that
corrective action has restored compliance with such requirements; and</text>
</paragraph><paragraph id="H224E9FBF37C949F692A077D52FC26C87"><enum>(2)</enum><text>the applicable
authority determines that there is a reasonable expectation that the plan will
continue to fail to meet the requirements of section 806,</text>
</paragraph><continuation-text continuation-text-level="subsection">the board
of trustees of the plan shall, at the direction of the applicable authority,
terminate the plan and, in the course of the termination, take such actions as
the applicable authority may require, including satisfying any claims referred
to in section 806(a)(2)(B)(iii) and recovering for the plan any liability under
subsection (a)(2)(B)(iii) or (e) of section 806, as necessary to ensure that
the affairs of the plan will be, to the maximum extent possible, wound up in a
manner which will result in timely provision of all benefits for which the plan
is obligated.</continuation-text></subsection></section><section id="H5082E8B416C045A1987083B2007D7600"><enum>810.</enum><header>Trusteeship by
the Secretary of insolvent association health plans providing health benefits
in addition to health insurance coverage</header>
<subsection id="HEDC88650C0F74A3084E8226B58EA637"><enum>(a)</enum><header>Appointment of
Secretary as Trustee for Insolvent Plans</header><text>Whenever the Secretary
determines that an association health plan which is or has been certified under
this part and which is described in section 806(a)(2) will be unable to provide
benefits when due or is otherwise in a financially hazardous condition, as
shall be defined by the Secretary by regulation, the Secretary shall, upon
notice to the plan, apply to the appropriate United States district court for
appointment of the Secretary as trustee to administer the plan for the duration
of the insolvency. The plan may appear as a party and other interested persons
may intervene in the proceedings at the discretion of the court. The court
shall appoint such Secretary trustee if the court determines that the
trusteeship is necessary to protect the interests of the participants and
beneficiaries or providers of medical care or to avoid any unreasonable
deterioration of the financial condition of the plan. The trusteeship of such
Secretary shall continue until the conditions described in the first sentence
of this subsection are remedied or the plan is terminated.</text>
</subsection><subsection id="H899327736A3D4DC2849C1DED008B69F7"><enum>(b)</enum><header>Powers as
Trustee</header><text>The Secretary, upon appointment as trustee under
subsection (a), shall have the power—</text>
<paragraph id="H0A480145567446D400C4CD959D00CDED"><enum>(1)</enum><text>to do any act
authorized by the plan, this title, or other applicable provisions of law to be
done by the plan administrator or any trustee of the plan;</text>
</paragraph><paragraph id="H40896B3F4C1F437289AED7A136B191F"><enum>(2)</enum><text>to require the
transfer of all (or any part) of the assets and records of the plan to the
Secretary as trustee;</text>
</paragraph><paragraph id="H8B565FFCD0704524A3BA19EB0033007D"><enum>(3)</enum><text>to invest any
assets of the plan which the Secretary holds in accordance with the provisions
of the plan, regulations prescribed by the Secretary, and applicable provisions
of law;</text>
</paragraph><paragraph id="H0CD5068DD2894D0BAF009400758B43E2"><enum>(4)</enum><text>to require the
sponsor, the plan administrator, any participating employer, and any employee
organization representing plan participants to furnish any information with
respect to the plan which the Secretary as trustee may reasonably need in order
to administer the plan;</text>
</paragraph><paragraph id="H2866400C7255434489F55D1CDB3E5F31"><enum>(5)</enum><text>to collect for the
plan any amounts due the plan and to recover reasonable expenses of the
trusteeship;</text>
</paragraph><paragraph id="H8247F3091A8D4827BC0033C3B88555F5"><enum>(6)</enum><text>to commence,
prosecute, or defend on behalf of the plan any suit or proceeding involving the
plan;</text>
</paragraph><paragraph id="H145148E054194774A77D83A994ACF0CB"><enum>(7)</enum><text>to issue, publish,
or file such notices, statements, and reports as may be required by the
Secretary by regulation or required by any order of the court;</text>
</paragraph><paragraph id="H20AA7B1C3AE64FFB9F00378B20E181D3"><enum>(8)</enum><text>to terminate the
plan (or provide for its termination in accordance with section 809(b)) and
liquidate the plan assets, to restore the plan to the responsibility of the
sponsor, or to continue the trusteeship;</text>
</paragraph><paragraph id="H8E34D950050F43F48F3340674B293E00"><enum>(9)</enum><text>to provide for the
enrollment of plan participants and beneficiaries under appropriate coverage
options; and</text>
</paragraph><paragraph id="HC5E9F84E7085429C935B62C606858C39"><enum>(10)</enum><text>to do such other
acts as may be necessary to comply with this title or any order of the court
and to protect the interests of plan participants and beneficiaries and
providers of medical care.</text>
</paragraph></subsection><subsection id="H578987EDB4254C678B894FFD1863DF7B"><enum>(c)</enum><header>Notice of
Appointment</header><text>As soon as practicable after the Secretary’s
appointment as trustee, the Secretary shall give notice of such appointment
to—</text>
<paragraph id="H475113E47AE74EB586C77600A3303201"><enum>(1)</enum><text>the sponsor and
plan administrator;</text>
</paragraph><paragraph id="H93D5B5628E324A90A46C83B002B469C"><enum>(2)</enum><text>each
participant;</text>
</paragraph><paragraph id="HAE887EACF07741FB8207E9A3F62956F7"><enum>(3)</enum><text>each participating
employer; and</text>
</paragraph><paragraph id="HE9D3EB90D8164FE2BF79465913D4A91F"><enum>(4)</enum><text>if applicable,
each employee organization which, for purposes of collective bargaining,
represents plan participants.</text>
</paragraph></subsection><subsection id="HD85B8FCA9FCC4DEEA600ABCA8F00AC47"><enum>(d)</enum><header>Additional
Duties</header><text>Except to the extent inconsistent with the provisions of
this title, or as may be otherwise ordered by the court, the Secretary, upon
appointment as trustee under this section, shall be subject to the same duties
as those of a trustee under section 704 of title 11, United States Code, and
shall have the duties of a fiduciary for purposes of this title.</text>
</subsection><subsection id="H648608C557324A5BBC7CF9FEE61B13B"><enum>(e)</enum><header>Other
Proceedings</header><text>An application by the Secretary under this subsection
may be filed notwithstanding the pendency in the same or any other court of any
bankruptcy, mortgage foreclosure, or equity receivership proceeding, or any
proceeding to reorganize, conserve, or liquidate such plan or its property, or
any proceeding to enforce a lien against property of the plan.</text>
</subsection><subsection id="HDECAF508B12F45C982B356EF1747DE39"><enum>(f)</enum><header>Jurisdiction of
Court</header>
<paragraph id="H42295BA458524546A9C61D7BF0D2BEB2"><enum>(1)</enum><header>In
general</header><text>Upon the filing of an application for the appointment as
trustee or the issuance of a decree under this section, the court to which the
application is made shall have exclusive jurisdiction of the plan involved and
its property wherever located with the powers, to the extent consistent with
the purposes of this section, of a court of the United States having
jurisdiction over cases under chapter 11 of title 11, United States Code.
Pending an adjudication under this section such court shall stay, and upon
appointment by it of the Secretary as trustee, such court shall continue the
stay of, any pending mortgage foreclosure, equity receivership, or other
proceeding to reorganize, conserve, or liquidate the plan, the sponsor, or
property of such plan or sponsor, and any other suit against any receiver,
conservator, or trustee of the plan, the sponsor, or property of the plan or
sponsor. Pending such adjudication and upon the appointment by it of the
Secretary as trustee, the court may stay any proceeding to enforce a lien
against property of the plan or the sponsor or any other suit against the plan
or the sponsor.</text>
</paragraph><paragraph id="H7C4B3FC482F64F458229AA70CCCB183"><enum>(2)</enum><header>Venue</header><text>An
action under this section may be brought in the judicial district where the
sponsor or the plan administrator resides or does business or where any asset
of the plan is situated. A district court in which such action is brought may
issue process with respect to such action in any other judicial
district.</text>
</paragraph></subsection><subsection id="H353489031310471EBE0306097C1791DA"><enum>(g)</enum><header>Personnel</header><text>In
accordance with regulations which shall be prescribed by the Secretary, the
Secretary shall appoint, retain, and compensate accountants, actuaries, and
other professional service personnel as may be necessary in connection with the
Secretary’s service as trustee under this section.</text>
</subsection></section><section id="H68B900CE8F9140D6BACDD18F069498BF"><enum>811.</enum><header>State
assessment authority</header>
<subsection id="H84CECC9166AF41168869A83B2093E299"><enum>(a)</enum><header>In
General</header><text>Notwithstanding section 514, a State may impose by law a
contribution tax on an association health plan described in section 806(a)(2),
if the plan commenced operations in such State after the date of the enactment
of this part.</text>
</subsection><subsection id="H7C2386404BC1455D002EDB7DC0B33D80"><enum>(b)</enum><header>Contribution
Tax</header><text>For purposes of this section, the term <term>contribution
tax</term> imposed by a State on an association health plan means any tax
imposed by such State if—</text>
<paragraph id="H8045FA0C42F24E39B7EAD9D4CC8BEF3"><enum>(1)</enum><text>such tax is
computed by applying a rate to the amount of premiums or contributions, with
respect to individuals covered under the plan who are residents of such State,
which are received by the plan from participating employers located in such
State or from such individuals;</text>
</paragraph><paragraph id="H347F30723B65422F8F8BD71B832EBD7"><enum>(2)</enum><text>the rate of such
tax does not exceed the rate of any tax imposed by such State on premiums or
contributions received by insurers or health maintenance organizations for
health insurance coverage offered in such State in connection with a group
health plan;</text>
</paragraph><paragraph id="H7A83502BA9BE48F281BBE8BDE1B3F5DE"><enum>(3)</enum><text>such tax is
otherwise nondiscriminatory; and</text>
</paragraph><paragraph id="HCB65212B3A24401EA1071D9FFCC24369"><enum>(4)</enum><text>the amount of any
such tax assessed on the plan is reduced by the amount of any tax or assessment
otherwise imposed by the State on premiums, contributions, or both received by
insurers or health maintenance organizations for health insurance coverage,
aggregate excess/stop loss insurance (as defined in section 806(g)(1)),
specific excess/stop loss insurance (as defined in section 806(g)(2)), other
insurance related to the provision of medical care under the plan, or any
combination thereof provided by such insurers or health maintenance
organizations in such State in connection with such plan.</text>
</paragraph></subsection></section><section id="HE84D561612644CAC903D91D8CE50525D"><enum>812.</enum><header>Definitions and
rules of construction</header>
<subsection id="H7D9EA274B9EB4360992140C882C1724"><enum>(a)</enum><header>Definitions</header><text>For
purposes of this part—</text>
<paragraph id="H08C101EA97D449EBA2A252C0224F64"><enum>(1)</enum><header>Group health
plan</header><text>The term <term>group health plan</term> has the meaning
provided in section 733(a)(1) (after applying subsection (b) of this
section).</text>
</paragraph><paragraph id="H11C882C272DF4F5088FE612376C6DFA0"><enum>(2)</enum><header>Medical
care</header><text>The term <term>medical care</term> has the meaning provided
in section 733(a)(2).</text>
</paragraph><paragraph id="HED1FAFF12292448F81CF8EBBC6BD3076"><enum>(3)</enum><header>Health insurance
coverage</header><text>The term <term>health insurance coverage</term> has the
meaning provided in section 733(b)(1).</text>
</paragraph><paragraph id="H6E4C0B6C240442BEBE2F878656BAD935"><enum>(4)</enum><header>Health insurance
issuer</header><text>The term <term>health insurance issuer</term> has the
meaning provided in section 733(b)(2).</text>
</paragraph><paragraph id="H09649294AFF94D15906FB132F5D7032D"><enum>(5)</enum><header>Applicable
authority</header><text>The term <term>applicable authority</term> means the
Secretary, except that, in connection with any exercise of the Secretary’s
authority regarding which the Secretary is required under section 506(d) to
consult with a State, such term means the Secretary, in consultation with such
State.</text>
</paragraph><paragraph id="HCDC71E01CD5641F88BF88CFB71B0084"><enum>(6)</enum><header>Health
status-related factor</header><text>The term <term>health status-related
factor</term> has the meaning provided in section 733(d)(2).</text>
</paragraph><paragraph id="H6411133D44A14668BCE618D4D3C37734"><enum>(7)</enum><header>Individual
market</header>
<subparagraph id="H29884D2456C44995A9718C2F9B63A959"><enum>(A)</enum><header>In
general</header><text>The term <term>individual market</term> means the market
for health insurance coverage offered to individuals other than in connection
with a group health plan.</text>
</subparagraph><subparagraph id="H46264A77FDC541FC99563866FDD37E79"><enum>(B)</enum><header>Treatment of
very small groups</header>
<clause id="HF106AD8018484A4391448FFAC516C4C"><enum>(i)</enum><header>In
general</header><text>Subject to clause (ii), such term includes coverage
offered in connection with a group health plan that has fewer than 2
participants as current employees or participants described in section
732(d)(3) on the first day of the plan year.</text>
</clause><clause id="HEE144B3CDB594FFA9E25B22C12BB059B"><enum>(ii)</enum><header>State
exception</header><text>Clause (i) shall not apply in the case of health
insurance coverage offered in a State if such State regulates the coverage
described in such clause in the same manner and to the same extent as coverage
in the small group market (as defined in section 2791(e)(5) of the
<act-name parsable-cite="PHSA">Public Health Service Act</act-name>) is
regulated by such State.</text>
</clause></subparagraph></paragraph><paragraph id="H53CD057D3B284834B9F39DCEB44B2988"><enum>(8)</enum><header>Participating
employer</header><text>The term <term>participating employer</term> means, in
connection with an association health plan, any employer, if any individual who
is an employee of such employer, a partner in such employer, or a self-employed
individual who is such employer (or any dependent, as defined under the terms
of the plan, of such individual) is or was covered under such plan in
connection with the status of such individual as such an employee, partner, or
self-employed individual in relation to the plan.</text>
</paragraph><paragraph id="H92C661F7208146ABAD1D611957475B77"><enum>(9)</enum><header>Applicable state
authority</header><text>The term <term>applicable State authority</term> means,
with respect to a health insurance issuer in a State, the State insurance
commissioner or official or officials designated by the State to enforce the
requirements of title XXVII of the <act-name parsable-cite="PHSA">Public Health
Service Act</act-name> for the State involved with respect to such
issuer.</text>
</paragraph><paragraph id="H1AFE752D8D1A402BB5116256C6001D14"><enum>(10)</enum><header>Qualified
actuary</header><text>The term <term>qualified actuary</term> means an
individual who is a member of the American Academy of Actuaries.</text>
</paragraph><paragraph id="HD0C15F4EA87E4066ACC967F745DA0057"><enum>(11)</enum><header>Affiliated
member</header><text>The term <term>affiliated member</term> means, in
connection with a sponsor—</text>
<subparagraph id="HA21FDC4B11CA4B01989730A66961796B"><enum>(A)</enum><text>a person who is
otherwise eligible to be a member of the sponsor but who elects an affiliated
status with the sponsor,</text>
</subparagraph><subparagraph id="H195F498D19A541909B32A290483D24D3"><enum>(B)</enum><text>in the case of a
sponsor with members which consist of associations, a person who is a member of
any such association and elects an affiliated status with the sponsor,
or</text>
</subparagraph><subparagraph id="H6A25D92F2F644EE5972120006B009188"><enum>(C)</enum><text>in the case of an
association health plan in existence on the date of the enactment of this part,
a person eligible to be a member of the sponsor or one of its member
associations.</text>
</subparagraph></paragraph><paragraph id="H4CAA5116D310411F87A05E4CD6554AC"><enum>(12)</enum><header>Large
employer</header><text>The term <term>large employer</term> means, in
connection with a group health plan with respect to a plan year, an employer
who employed an average of at least 51 employees on business days during the
preceding calendar year and who employs at least 2 employees on the first day
of the plan year.</text>
</paragraph><paragraph id="H3A5567FF31E8453B85DD8F006405D21B"><enum>(13)</enum><header>Small
employer</header><text>The term <term>small employer</term> means, in
connection with a group health plan with respect to a plan year, an employer
who is not a large employer.</text>
</paragraph></subsection><subsection id="H287AC22BEEE648F2B831A008067FDCC3"><enum>(b)</enum><header>Rules of
Construction</header>
<paragraph id="HD6F8035504E44DB18080191C4E43E0EC"><enum>(1)</enum><header>Employers and
employees</header><text>For purposes of determining whether a plan, fund, or
program is an employee welfare benefit plan which is an association health
plan, and for purposes of applying this title in connection with such plan,
fund, or program so determined to be such an employee welfare benefit
plan—</text>
<subparagraph id="H041D4BE0363F4ED4BC668E4F6DDF8743"><enum>(A)</enum><text>in the case of a
partnership, the term <term>employer</term> (as defined in section 3(5))
includes the partnership in relation to the partners, and the term
<term>employee</term> (as defined in section 3(6)) includes any partner in
relation to the partnership; and</text>
</subparagraph><subparagraph id="HCD6F3ECD0CFF406DAA5B535E20E098DE"><enum>(B)</enum><text>in the case of a
self-employed individual, the term <term>employer</term> (as defined in section
3(5)) and the term <term>employee</term> (as defined in section 3(6)) shall
include such individual.</text>
</subparagraph></paragraph><paragraph id="H3951876C3A2D403E8B9D64ABBEB0CA"><enum>(2)</enum><header>Plans, funds, and
programs treated as employee welfare benefit plans</header><text>In the case of
any plan, fund, or program which was established or is maintained for the
purpose of providing medical care (through the purchase of insurance or
otherwise) for employees (or their dependents) covered thereunder and which
demonstrates to the Secretary that all requirements for certification under
this part would be met with respect to such plan, fund, or program if such
plan, fund, or program were a group health plan, such plan, fund, or program
shall be treated for purposes of this title as an employee welfare benefit plan
on and after the date of such
demonstration.</text>
</paragraph></subsection></section></part><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H3D1DB8DA1B0E4E2900C8AA3768454228"><enum>(2)</enum><header>Conforming
Amendments to Preemption Rules</header>
<subparagraph id="H753D4C4E403845A081EF9674E5CA9D6"><enum>(A)</enum><text>Section 514(b)(6)
of such Act (29 U.S.C. 1144(b)(6)) is amended by adding at the end the
following new subparagraph:</text>
<quoted-block id="H3D1570ED62F94A64B200FD87C000AB29" style="OLC">
<subparagraph id="H0BB5E2B41179435CB000AACF9DC13213" indent="up2"><enum>(E)</enum><text>The preceding subparagraphs of this
paragraph do not apply with respect to any State law in the case of an
association health plan which is certified under part
8.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H75572F56D9B34E9A8F6CEEAF82398B88"><enum>(B)</enum><text>Section 514 of
such Act (29 U.S.C. 1144) is amended—</text>
<clause id="HC020E752490E4947AAAEE27E9009C6C"><enum>(i)</enum><text>in
subsection (b)(4), by striking <quote>Subsection (a)</quote> and inserting
<quote>Subsections (a) and (d)</quote>;</text>
</clause><clause id="HE548BA45DB8D4457866700AD2DD19BA"><enum>(ii)</enum><text>in
subsection (b)(5), by striking <quote>subsection (a)</quote> in subparagraph
(A) and inserting <quote>subsection (a) of this section and subsections
(a)(2)(B) and (b) of section 805</quote>, and by striking <quote>subsection
(a)</quote> in subparagraph (B) and inserting <quote>subsection (a) of this
section or subsection (a)(2)(B) or (b) of section 805</quote>;</text>
</clause><clause id="H0341A24AEBC2427E83DF7578374CFF4E"><enum>(iii)</enum><text>by
redesignating subsection (d) as subsection (e); and</text>
</clause><clause id="H62D93B81C56A41E884D4B37774B6A4ED"><enum>(iv)</enum><text>by
inserting after subsection (c) the following new subsection:</text>
<quoted-block id="H315B61007B3F48BF8EBC3BC3E46E5459" style="OLC">
<subsection id="HD0FC685B51774C2E9C4279260457A7D"><enum>(d)</enum><paragraph commented="no" display-inline="yes-display-inline" id="HA42A3F7D70454CC598C160BC7F8171B"><enum>(1)</enum><text>Except as provided in
subsection (b)(4), the provisions of this title shall supersede any and all
State laws insofar as they may now or hereafter preclude, or have the effect of
precluding, a health insurance issuer from offering health insurance coverage
in connection with an association health plan which is certified under part
8.</text>
</paragraph><paragraph id="H5E52B20FC4AB47C18F46EA004CA896B6" indent="up1"><enum>(2)</enum><text>Except as provided in paragraphs (4)
and (5) of subsection (b) of this section—</text>
<subparagraph id="HDE45AF5BCE9D41C7A5B3E92B56B1DAE4"><enum>(A)</enum><text>In any case in which health insurance
coverage of any policy type is offered under an association health plan
certified under part 8 to a participating employer operating in such State, the
provisions of this title shall supersede any and all laws of such State insofar
as they may preclude a health insurance issuer from offering health insurance
coverage of the same policy type to other employers operating in the State
which are eligible for coverage under such association health plan, whether or
not such other employers are participating employers in such plan.</text>
</subparagraph><subparagraph id="H7F00F247A48F4CEAAE798C9676EE4D00"><enum>(B)</enum><text>In any case in which health insurance
coverage of any policy type is offered in a State under an association health
plan certified under part 8 and the filing, with the applicable State authority
(as defined in section 812(a)(9)), of the policy form in connection with such
policy type is approved by such State authority, the provisions of this title
shall supersede any and all laws of any other State in which health insurance
coverage of such type is offered, insofar as they may preclude, upon the filing
in the same form and manner of such policy form with the applicable State
authority in such other State, the approval of the filing in such other
State.</text>
</subparagraph></paragraph><paragraph id="H23E1F746FA2E43728D7F21955647F0A6" indent="up1"><enum>(3)</enum><text>Nothing in subsection (b)(6)(E) or
the preceding provisions of this subsection shall be construed, with respect to
health insurance issuers or health insurance coverage, to supersede or impair
the law of any State—</text>
<subparagraph id="H5F9D92E7AE8B46ED9058471779116E10"><enum>(A)</enum><text>providing solvency standards or
similar standards regarding the adequacy of insurer capital, surplus, reserves,
or contributions, or</text>
</subparagraph><subparagraph id="HE40D869F47A3419DAC6FD623B584D5B7"><enum>(B)</enum><text>relating to prompt payment of
claims.</text>
</subparagraph></paragraph><paragraph id="H8884493956F54ABA940095D1071F053D" indent="up1"><enum>(4)</enum><text>For additional provisions relating to
association health plans, see subsections (a)(2)(B) and (b) of section
805.</text>
</paragraph><paragraph id="HDED6232AC8BE435F8CEAC7B8FF99E0F7" indent="up1"><enum>(5)</enum><text>For purposes of this subsection, the
term <term>association health plan</term> has the meaning provided in section
801(a), and the terms <term>health insurance coverage</term>,
<term>participating employer</term>, and <term>health insurance issuer</term>
have the meanings provided such terms in section 812,
respectively.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</clause></subparagraph><subparagraph id="H350A75E3D96C443FA35BC164363BBEA"><enum>(C)</enum><text>Section
514(b)(6)(A) of such Act (29 U.S.C. 1144(b)(6)(A)) is amended—</text>
<clause id="HA7C9C7489AFC4C249E9B69A65B74844F"><enum>(i)</enum><text>in
clause (i)(II), by striking <quote>and</quote> at the end;</text>
</clause><clause id="HCD04F9D22F484BDE88D50599DA909E18"><enum>(ii)</enum><text>in
clause (ii), by inserting <quote>and which does not provide medical care
(within the meaning of section 733(a)(2)),</quote> after
<quote>arrangement,</quote>, and by striking <quote>title.</quote> and
inserting <quote>title, and</quote>; and</text>
</clause><clause id="HDF1E087B5BBD4C20851182905F30B71B"><enum>(iii)</enum><text>by
adding at the end the following new clause:</text>
<quoted-block id="HF5EA1D51F7794963ABD66FE9F14EF067" style="OLC">
<clause id="H0CF44D375C504CF6ABC24F8FE236EF10" indent="up2"><enum>(iii)</enum><text>subject to subparagraph (E), in the
case of any other employee welfare benefit plan which is a multiple employer
welfare arrangement and which provides medical care (within the meaning of
section 733(a)(2)), any law of any State which regulates insurance may
apply.</text>
</clause><after-quoted-block>.</after-quoted-block></quoted-block>
</clause></subparagraph><subparagraph id="HC6DA61A7F38D4D358134345E421179B5"><enum>(D)</enum><text>Section 514(e) of
such Act (as redesignated by subparagraph (B)(iii)) is amended—</text>
<clause id="H17CAF605BCE34FEF882F66A4B987CDC2"><enum>(i)</enum><text>by
striking <quote>Nothing</quote> and inserting <quote>(1) Except as provided in
paragraph (2), nothing</quote>; and</text>
</clause><clause id="H76C0AD474D1B4B89AE33A733E2B1D1FD"><enum>(ii)</enum><text>by
adding at the end the following new paragraph:</text>
<quoted-block id="H5123E3139DD244FA8FA6FCD6F1D743B4" style="OLC">
<paragraph id="H3744DA3A85BE47DFA733172F87167E3B" indent="up1"><enum>(2)</enum><text>Nothing in any other provision of law
enacted on or after the date of the enactment of part 8 shall be construed to
alter, amend, modify, invalidate, impair, or supersede any provision of this
title, except by specific cross-reference to the affected
section.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</clause></subparagraph></paragraph><paragraph id="H13380062AE2848D882D80000F9B3AAB4"><enum>(3)</enum><header>Plan
Sponsor</header><text>Section 3(16)(B) of such Act (29 U.S.C. 102(16)(B)) is
amended by adding at the end the following new sentence: <quote>Such term also
includes a person serving as the sponsor of an association health plan under
part 8.</quote>.</text>
</paragraph><paragraph id="H84C58E0E91EB4AFAA41B18A78318C839"><enum>(4)</enum><header>Disclosure of
Solvency Protections Related to Self-Insured and Fully Insured Options Under
Association Health Plans</header><text>Section 102(b) of such Act (29 U.S.C.
102(b)) is amended by adding at the end the following: <quote>An association
health plan shall include in its summary plan description, in connection with
each benefit option, a description of the form of solvency or guarantee fund
protection secured pursuant to this Act or applicable State law, if
any.</quote>.</text>
</paragraph><paragraph id="HA5F3BA538AE04C7EAFB131601FACCF6"><enum>(5)</enum><header>Savings
Clause</header><text>Section 731(c) of such Act is amended by inserting
<quote>or part 8</quote> after <quote>this part</quote>.</text>
</paragraph><paragraph id="HC4506595A11147BA82622B89C7D39B2D"><enum>(6)</enum><header>Report to the
Congress Regarding Certification of Self-Insured Association Health
Plans</header><text>Not later than January 1, 2013, the Secretary of Labor
shall report to the Committee on Education and the Workforce of the House of
Representatives and the Committee on Health, Education, Labor, and Pensions of
the Senate the effect association health plans have had, if any, on reducing
the number of uninsured individuals.</text>
</paragraph><paragraph id="HB8A5DA3372F148F5AF97C3ECFF79136B"><enum>(7)</enum><header>Clerical
Amendment</header><text>The table of contents in section 1 of the
<act-name parsable-cite="ERISA">Employee Retirement Income Security Act of
1974</act-name> is amended by inserting after the item relating to section 734
the following new items:</text>
<quoted-block act-name="Employee Retirement Income Security Act of 1974" id="HA9A10D45981D4FC38560B2819EA9F583" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="part">Part 8—Rules Governing Association Health
Plans</toc-entry>
<toc-entry level="section">801. Association health plans.</toc-entry>
<toc-entry level="section">802. Certification of association health
plans.</toc-entry>
<toc-entry level="section">803. Requirements relating to sponsors and
boards of trustees.</toc-entry>
<toc-entry level="section">804. Participation and coverage
requirements.</toc-entry>
<toc-entry level="section">805. Other requirements relating to plan
documents, contribution rates, and benefit options.</toc-entry>
<toc-entry level="section">806. Maintenance of reserves and
provisions for solvency for plans providing health benefits in addition to
health insurance coverage.</toc-entry>
<toc-entry level="section">807. Requirements for application and
related requirements.</toc-entry>
<toc-entry level="section">808. Notice requirements for voluntary
termination.</toc-entry>
<toc-entry level="section">809. Corrective actions and mandatory
termination.</toc-entry>
<toc-entry level="section">810. Trusteeship by the Secretary of
insolvent association health plans providing health benefits in addition to
health insurance coverage.</toc-entry>
<toc-entry level="section">811. State assessment
authority.</toc-entry>
<toc-entry level="section">812. Definitions and rules of
construction.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="HC88CED3AF7854640928DE430DC430025"><enum>(b)</enum><header>Clarification of
treatment of single employer arrangements</header><text>Section 3(40)(B) of the
<act-name parsable-cite="ERISA">Employee Retirement Income Security Act of
1974</act-name> (29 U.S.C. 1002(40)(B)) is amended—</text>
<paragraph id="H55115EB309E1434FAC70C7AF3699FDAF"><enum>(1)</enum><text>in clause (i), by
inserting after <quote>control group,</quote> the following: <quote>except
that, in any case in which the benefit referred to in subparagraph (A) consists
of medical care (as defined in section 812(a)(2)), two or more trades or
businesses, whether or not incorporated, shall be deemed a single employer for
any plan year of such plan, or any fiscal year of such other arrangement, if
such trades or businesses are within the same control group during such year or
at any time during the preceding 1-year period,</quote>;</text>
</paragraph><paragraph id="HB69237CD9EDD4C789971F8885666DEA5"><enum>(2)</enum><text>in clause (iii),
by striking <quote>(iii) the determination</quote> and inserting the
following:</text>
<quoted-block id="H85E4013490244B05A8EF435918A21175" style="OLC">
<clause id="H8412F9BCB6334027BDA7C4E4D909833C" indent="up2"><enum>(iii)</enum><subclause commented="no" display-inline="yes-display-inline" id="H6667A02BA1C54183001049B0715E4FCD"><enum>(I)</enum><text>in any case in which the
benefit referred to in subparagraph (A) consists of medical care (as defined in
section 812(a)(2)), the determination of whether a trade or business is under
<quote>common control</quote> with another trade or business shall be
determined under regulations of the Secretary applying principles consistent
and coextensive with the principles applied in determining whether employees of
two or more trades or businesses are treated as employed by a single employer
under section 4001(b), except that, for purposes of this paragraph, an interest
of greater than 25 percent may not be required as the minimum interest
necessary for common control, or</text>
</subclause><subclause id="H9D95173EAD3848DA92E063DA19D53385" indent="up1"><enum>(II)</enum><text>in any other case, the
determination</text>
</subclause></clause><after-quoted-block>;</after-quoted-block></quoted-block>
</paragraph><paragraph id="H7E16A88E93BB4EA2BDF841EA4ED51DB6"><enum>(3)</enum><text>by redesignating
clauses (iv) and (v) as clauses (v) and (vi), respectively; and</text>
</paragraph><paragraph id="H56A049F813A34F0997A9C2AFB21255EC"><enum>(4)</enum><text>by inserting after
clause (iii) the following new clause:</text>
<quoted-block id="H1CABC22DFCDF4B6FBBF6A5CFCF9EC7A9" style="OLC">
<clause id="H16173438B3E0428A8203BC6341E2CBE" indent="up2"><enum>(iv)</enum><text>in any case in which the benefit
referred to in subparagraph (A) consists of medical care (as defined in section
812(a)(2)), in determining, after the application of clause (i), whether
benefits are provided to employees of two or more employers, the arrangement
shall be treated as having only one participating employer if, after the
application of clause (i), the number of individuals who are employees and
former employees of any one participating employer and who are covered under
the arrangement is greater than 75 percent of the aggregate number of all
individuals who are employees or former employees of participating employers
and who are covered under the
arrangement,</text>
</clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H639EC5804AFC41438B9E00BC6BE18C7"><enum>(c)</enum><header>Enforcement
provisions relating to association health plans</header>
<paragraph id="HAE63629503E14837A5C009CCF9C2635"><enum>(1)</enum><header>Criminal
Penalties for Certain Willful Misrepresentations</header><text>Section 501 of
the <act-name parsable-cite="ERISA">Employee Retirement Income Security Act of
1974</act-name> (29 U.S.C. 1131) is amended—</text>
<subparagraph id="H788F4B3293844AC88200806D2541543D"><enum>(A)</enum><text>by inserting
<quote>(a)</quote> after <quote>Sec. 501.</quote>; and</text>
</subparagraph><subparagraph id="HFC6169440A6E4FA9AD2879148CA00061"><enum>(B)</enum><text>by adding at the
end the following new subsection:</text>
<quoted-block id="H8D543AE56A2E4800BC260056A500B491" style="OLC">
<subsection id="H3F2F1130A6994922A764D4021055AD33"><enum>(b)</enum><text>Any person who
willfully falsely represents, to any employee, any employee’s beneficiary, any
employer, the Secretary, or any State, a plan or other arrangement established
or maintained for the purpose of offering or providing any benefit described in
section 3(1) to employees or their beneficiaries as—</text>
<paragraph id="H3F469FED3197453E86925F73AD295D50"><enum>(1)</enum><text>being an
association health plan which has been certified under part 8;</text>
</paragraph><paragraph id="H5972ADA81691463BA8F24B78BB6235F"><enum>(2)</enum><text>having been
established or maintained under or pursuant to one or more collective
bargaining agreements which are reached pursuant to collective bargaining
described in section 8(d) of the National Labor Relations Act (29 U.S.C.
158(d)) or paragraph Fourth of section 2 of the Railway Labor Act (45 U.S.C.
152, paragraph Fourth) or which are reached pursuant to labor-management
negotiations under similar provisions of State public employee relations laws;
or</text>
</paragraph><paragraph id="HD1282A304E3A4B96801F6700EA477513"><enum>(3)</enum><text>being a plan or
arrangement described in section 3(40)(A)(i),</text>
</paragraph><continuation-text continuation-text-level="subsection">shall,
upon conviction, be imprisoned not more than 5 years, be fined under title 18,
United States Code, or
both.</continuation-text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="HD597C6E7E49A4119B2ADD7AE5BF184DE"><enum>(2)</enum><header>Cease Activities
Orders</header><text>Section 502 of such Act (29 U.S.C. 1132) is amended by
adding at the end the following new subsection:</text>
<quoted-block id="H63F67282656C4103B9D40322D900F8E" style="OLC">
<subsection id="HEACA338E739247A4AD4EA7DB2F439CB0"><enum>(n)</enum><header>Association
Health Plan Cease and Desist Orders</header>
<paragraph id="H6695218544494D628145001D04D5DC38"><enum>(1)</enum><header>In
general</header><text>Subject to paragraph (2), upon application by the
Secretary showing the operation, promotion, or marketing of an association
health plan (or similar arrangement providing benefits consisting of medical
care (as defined in section 733(a)(2))) that—</text>
<subparagraph id="H43ECC40F4AC943B90057679CECE57FF9"><enum>(A)</enum><text>is not certified
under part 8, is subject under section 514(b)(6) to the insurance laws of any
State in which the plan or arrangement offers or provides benefits, and is not
licensed, registered, or otherwise approved under the insurance laws of such
State; or</text>
</subparagraph><subparagraph id="H48DE19AE628942669D30AA5B610069FC"><enum>(B)</enum><text>is an association
health plan certified under part 8 and is not operating in accordance with the
requirements under part 8 for such certification,</text>
</subparagraph><continuation-text continuation-text-level="paragraph">a district
court of the United States shall enter an order requiring that the plan or
arrangement cease activities.</continuation-text></paragraph><paragraph id="HB7E301E728C3479189C5A2AAB9317393"><enum>(2)</enum><header>Exception</header><text>Paragraph
(1) shall not apply in the case of an association health plan or other
arrangement if the plan or arrangement shows that—</text>
<subparagraph id="H03DC74D89A7545F7A9168E298797407E"><enum>(A)</enum><text>all benefits under
it referred to in paragraph (1) consist of health insurance coverage;
and</text>
</subparagraph><subparagraph id="H3E082C90C933452695946CB1C43433B7"><enum>(B)</enum><text>with respect to
each State in which the plan or arrangement offers or provides benefits, the
plan or arrangement is operating in accordance with applicable State laws that
are not superseded under section 514.</text>
</subparagraph></paragraph><paragraph id="HF85495E6266E43EF8EC0003EB6C33D05"><enum>(3)</enum><header>Additional
equitable relief</header><text>The court may grant such additional equitable
relief, including any relief available under this title, as it deems necessary
to protect the interests of the public and of persons having claims for
benefits against the
plan.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HA1CDE3C1A4F34C4EB887F0224D17872C"><enum>(3)</enum><header>Responsibility
for Claims Procedure</header><text>Section 503 of such Act (29 U.S.C. 1133) is
amended by inserting <quote>(a) <header-in-text level="subsection" style="OLC">In general</header-in-text>.—</quote> before <quote>In
accordance</quote>, and by adding at the end the following new
subsection:</text>
<quoted-block id="HB05BE03B7D9046D5A4B064D500A52F70" style="OLC">
<subsection id="HE7B16E2A7C5D4D58A4FC7901ADAAEA4"><enum>(b)</enum><header>Association
Health Plans</header><text>The terms of each association health plan which is
or has been certified under part 8 shall require the board of trustees or the
named fiduciary (as applicable) to ensure that the requirements of this section
are met in connection with claims filed under the
plan.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H7DB1F42087F2493C83B50090F0B718CD"><enum>(d)</enum><header>Cooperation
between Federal and State authorities</header><text>Section 506 of the
<act-name parsable-cite="ERISA">Employee Retirement Income Security Act of
1974</act-name> (29 U.S.C. 1136) is amended by adding at the end the following
new subsection:</text>
<quoted-block act-name="Employee Retirement Income Security Act of 1974" id="H0C1CE161678E47659C0984C4FE1EB18" style="OLC">
<subsection id="HF582427501AA49D89FEEB3396E817E79"><enum>(d)</enum><header>Consultation
With States With Respect to Association Health Plans</header>
<paragraph id="H583175C4063846BD956DBE8589D40133"><enum>(1)</enum><header>Agreements with
states</header><text>The Secretary shall consult with the State recognized
under paragraph (2) with respect to an association health plan regarding the
exercise of—</text>
<subparagraph id="H8F7076A5D77E4DD2A0C13DF0204FC126"><enum>(A)</enum><text>the Secretary’s
authority under sections 502 and 504 to enforce the requirements for
certification under part 8; and</text>
</subparagraph><subparagraph id="H134A7180EFB44C8BA8BE00F81103AB81"><enum>(B)</enum><text>the Secretary’s
authority to certify association health plans under part 8 in accordance with
regulations of the Secretary applicable to certification under part 8.</text>
</subparagraph></paragraph><paragraph id="H256BF6EDDC20429BB0674FD62910045"><enum>(2)</enum><header>Recognition of
primary domicile state</header><text>In carrying out paragraph (1), the
Secretary shall ensure that only one State will be recognized, with respect to
any particular association health plan, as the State with which consultation is
required. In carrying out this paragraph—</text>
<subparagraph id="H18ABAFF152554417A685A6EA0016E23E"><enum>(A)</enum><text>in the case of a
plan which provides health insurance coverage (as defined in section
812(a)(3)), such State shall be the State with which filing and approval of a
policy type offered by the plan was initially obtained, and</text>
</subparagraph><subparagraph id="H4EB90431DEEF4F168F03D0DF00CAF3D3"><enum>(B)</enum><text>in any other case,
the Secretary shall take into account the places of residence of the
participants and beneficiaries under the plan and the State in which the trust
is
maintained.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H92DF899C3A31480FBBD31153900434A"><enum>(e)</enum><header>Effective date
and transitional and other rules</header>
<paragraph id="H5C070E642F9A4FBABA4559D99CC5C202"><enum>(1)</enum><header>Effective
Date</header><text>The amendments made by this section shall take effect 1 year
after the date of the enactment of this Act. The Secretary of Labor shall first
issue all regulations necessary to carry out such amendments within 1 year
after the date of the enactment of this Act.</text>
</paragraph><paragraph id="H9B98AE86A05646DE822CC9D56F5871AF"><enum>(2)</enum><header>Treatment of
Certain Existing Health Benefits Programs</header>
<subparagraph id="HED8C04DCAE124C6486B68FBEA40CBDD"><enum>(A)</enum><header>In
general</header><text>In any case in which, as of the date of the enactment of
this Act, an arrangement is maintained in a State for the purpose of providing
benefits consisting of medical care for the employees and beneficiaries of its
participating employers, at least 200 participating employers make
contributions to such arrangement, such arrangement has been in existence for
at least 10 years, and such arrangement is licensed under the laws of one or
more States to provide such benefits to its participating employers, upon the
filing with the applicable authority (as defined in section 812(a)(5) of the
<act-name parsable-cite="ERISA">Employee Retirement Income Security Act of
1974</act-name> (as amended by this subtitle)) by the arrangement of an
application for certification of the arrangement under part 8 of subtitle B of
title I of such Act—</text>
<clause id="HF48B4A5516D84570AF36576F005E541B"><enum>(i)</enum><text>such
arrangement shall be deemed to be a group health plan for purposes of title I
of such Act;</text>
</clause><clause id="HE6C36D2E68F74CADB6208EC662FF089D"><enum>(ii)</enum><text>the
requirements of sections 801(a) and 803(a) of the
<act-name parsable-cite="ERISA">Employee Retirement Income Security Act of
1974</act-name> shall be deemed met with respect to such arrangement;</text>
</clause><clause id="H415E9BEAABB14E07BA537FDE05E48206"><enum>(iii)</enum><text>the requirements
of section 803(b) of such Act shall be deemed met, if the arrangement is
operated by a board of directors which—</text>
<subclause id="H28D5C769CA774292B3E017DA5348FB41"><enum>(I)</enum><text>is elected by the
participating employers, with each employer having one vote; and</text>
</subclause><subclause id="H937166276D3146089CBEC5F105C1C3B0"><enum>(II)</enum><text>has complete
fiscal control over the arrangement and which is responsible for all operations
of the arrangement;</text>
</subclause></clause><clause id="HB55393509A3A4F7C8D5F61C43374F62B"><enum>(iv)</enum><text>the
requirements of section 804(a) of such Act shall be deemed met with respect to
such arrangement; and</text>
</clause><clause id="H7237BAE53BC242D992AFB26D00A9CFE9"><enum>(v)</enum><text>the
arrangement may be certified by any applicable authority with respect to its
operations in any State only if it operates in such State on the date of
certification.</text>
</clause><continuation-text continuation-text-level="subparagraph">The
provisions of this subparagraph shall cease to apply with respect to any such
arrangement at such time after the date of the enactment of this Act as the
applicable requirements of this subparagraph are not met with respect to such
arrangement.</continuation-text></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H43234F99A21246C5A711E2CBEEE2D78B"><enum>(B)</enum><header>Definitions</header><text>For
purposes of this paragraph, the terms <term>group health plan</term>,
<term>medical care</term>, and <term>participating employer</term> shall have
the meanings provided in section 812 of the <act-name parsable-cite="ERISA">Employee Retirement Income Security Act of
1974</act-name>, except that the reference in paragraph (7) of such section to
an <term>association health plan</term> shall be deemed a reference to an
arrangement referred to in this paragraph.</text>
</subparagraph></paragraph></subsection></section></subtitle><subtitle id="H12C6897E95F04484B2775E91769F67CF"><enum>C</enum><header>Health Care
Services Commission</header>
<part id="H3DB10930B56A4366BDBFB2372791B000"><enum>1</enum><header>Establishment and
General Duties</header>
<section id="H2FCC4BF127BE4D32AD2B82002F157E7E"><enum>121.</enum><header>Establishment</header>
<subsection id="H502E6482EC10489DAC5444DBD9B9377D"><enum>(a)</enum><header>In
general</header><text>There is hereby established a Health Care Services
Commission (in this subtitle referred to as the <quote>Commission</quote>) to
be composed of five commissioners (in this subtitle referred to as the
<quote>Commissioners</quote>) to be appointed by the President by and with the
advice and consent of the Senate. Not more than three of such commissioners
shall be members of the same political party, and in making appointments
members of different political parties shall be appointed alternately as nearly
as may be practicable. No commissioner shall engage in any other business,
vocation, or employment than that of serving as commissioner. Each commissioner
shall hold office for a term of five years and until his successor is appointed
and has qualified, except that he shall not so continue to serve beyond the
expiration of the next session of Congress subsequent to the expiration of said
fixed term of office, and except (1) any commissioner appointed to fill a
vacancy occurring prior to the expiration of the term for which his predecessor
was appointed shall be appointed for the remainder of such term, and (2) the
terms of office of the commissioners first taking office after the enactment of
this subtitle shall expire as designated by the President at the time of
nomination, one at the end of one year, one at the end of two years, one at the
end of three years, one at the end of four years, and one at the end of five
years, after the date of the enactment of this Act.</text>
</subsection><subsection id="HE3973028781F4C8395E11B40853D9EF8"><enum>(b)</enum><header>Purpose</header><text>The
purpose of the Commission is to enhance the quality, appropriateness, and
effectiveness of health care services, and access to such services, through the
establishment of a broad base of scientific research and through the promotion
of improvements in clinical practice and in the organization, financing, and
delivery of health care services.</text>
</subsection><subsection id="HC53994150B214F7FA8D7CB53E06E2B57"><enum>(c)</enum><header>Appointment of
chairman</header><text display-inline="yes-display-inline">The President shall,
from among the Commissioners appointed under subsection (a), designate an
individual to serve as the Chairman of the Commission.</text>
</subsection></section><section id="H0AA8534512B94168A200E222564003F6"><enum>122.</enum><header>General
authorities and duties</header>
<subsection id="H0C2E47AFE8A74E5AB0BA1EE56D90BE00"><enum>(a)</enum><header>In
general</header><text>In carrying out section 121(b), the Commissioners shall
conduct and support research, demonstration projects, evaluations, training,
guideline development, and the dissemination of information, on health care
services and on systems for the delivery of such services, including activities
with respect to—</text>
<paragraph id="HCFFAC9C8CB2E4C059954A34B66F0C3E2"><enum>(1)</enum><text>the effectiveness,
efficiency, and quality of health care services;</text>
</paragraph><paragraph id="HAE03250ED3CB4330BAD1BB451EEBA71F"><enum>(2)</enum><text>subject to
subsection (d), the outcomes of health care services and procedures;</text>
</paragraph><paragraph id="H6013A4B8C937403700908BAFF5C0B700"><enum>(3)</enum><text>clinical practice,
including primary care and practice-oriented research;</text>
</paragraph><paragraph id="H96A59B45C721413E8F17F9C9D183713D"><enum>(4)</enum><text>health care
technologies, facilities, and equipment;</text>
</paragraph><paragraph id="HB5A3AE6E4AF44D22BFA4565664C0007"><enum>(5)</enum><text>health care costs,
productivity, and market forces;</text>
</paragraph><paragraph id="H80246AF9C2B342AA8C56249E9144A124"><enum>(6)</enum><text>health promotion
and disease prevention;</text>
</paragraph><paragraph id="H9C99712CB02940E3B8A965346C880506"><enum>(7)</enum><text>health statistics
and epidemiology; and</text>
</paragraph><paragraph id="H1F3389EABF154981ACCEF800094E4700"><enum>(8)</enum><text>medical
liability.</text>
</paragraph></subsection><subsection id="H0066433603EE412B8C01E2E1EF8E684"><enum>(b)</enum><header>Requirements with
respect to rural areas and underserved populations</header><text>In carrying
out subsection (a), the Commissioners shall undertake and support research,
demonstration projects, and evaluations with respect to—</text>
<paragraph id="HC40075C9696D4A17006E2E1BBA1950D3"><enum>(1)</enum><text>the delivery of
health care services in rural areas (including frontier areas); and</text>
</paragraph><paragraph id="H5A5F6ED80B534C81BBF3C6D168005119"><enum>(2)</enum><text>the health of
low-income groups, minority groups, and the elderly.</text>
</paragraph></subsection></section><section id="H95B66FFFA2B942A39C01F8F6548B9EF1"><enum>123.</enum><header>Dissemination</header>
<subsection id="H929525D180D646D6AB5251EA27822300"><enum>(a)</enum><header>In
general</header><text>The Commissioners shall—</text>
<paragraph id="HDD47313AE3C0420199B6FEEADB2E2483"><enum>(1)</enum><text>promptly publish,
make available, and otherwise disseminate, in a form understandable and on as
broad a basis as practicable so as to maximize its use, the results of
research, demonstration projects, and evaluations conducted or supported under
this subtitle and the guidelines, standards, and review criteria developed
under this subtitle;</text>
</paragraph><paragraph id="H1970559DAA254418A83551687B61F9F8"><enum>(2)</enum><text>promptly make
available to the public data developed in such research, demonstration
projects, and evaluations; and</text>
</paragraph><paragraph id="HDB993E362DA34021A014EB2799DC31AD"><enum>(3)</enum><text>as appropriate,
provide technical assistance to State and local government and health agencies
and conduct liaison activities to such agencies to foster dissemination.</text>
</paragraph></subsection><subsection id="HE748509B311146F18D974DD5955FDCC0"><enum>(b)</enum><header>Prohibition
against restrictions</header><text>Except as provided in subsection (c), the
Commissioners may not restrict the publication or dissemination of data from,
or the results of, projects conducted or supported under this subtitle.</text>
</subsection><subsection id="H9C066553534C4AD2A88B005150EAA69D"><enum>(c)</enum><header>Limitation on
use of certain information</header><text>No information, if an establishment or
person supplying the information or described in it is identifiable, obtained
in the course of activities undertaken or supported under this subtitle may be
used for any purpose other than the purpose for which it was supplied unless
such establishment or person has consented (as determined under regulations of
the Secretary) to its use for such other purpose. Such information may not be
published or released in other form if the person who supplied the information
or who is described in it is identifiable unless such person has consented (as
determined under regulations of the Secretary) to its publication or release in
other form.</text>
</subsection><subsection id="H5DD2B00D87CA41B693D989A9B1D608CC"><enum>(d)</enum><header>Certain
interagency agreement</header><text>The Commissioners and the Director of the
National Library of Medicine shall enter into an agreement providing for the
implementation of subsection (a)(1).</text>
</subsection></section></part><part id="H09FF4802EC944201BFDF48C17328A2E6"><enum>2</enum><header>Forum
for Quality and Effectiveness in Health Care</header>
<section id="H957CC21BBBA845D7A295BC00FA6DD96D"><enum>131.</enum><header>Establishment
of office</header><text display-inline="no-display-inline">There is established
within the Commission an office to be known as the Office of the Forum for
Quality and Effectiveness in Health Care. The office shall be headed by a
director (referred to in this subtitle as the <quote>Director</quote>), who
shall be appointed by the Commissioners.</text>
</section><section commented="no" id="HE156BCA560D648E5B7F3A4574F6EE2E6"><enum>132.</enum><header>Membership</header>
<subsection commented="no" id="H97DA68D8B25B49AA8BC04F91A98E0001"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">The Office of the
Forum for Quality and Effectiveness in Health Care shall be composed of 15
individuals nominated by private sector health care organizations and appointed
by the Commission and shall include representation from at least the
following:</text>
<paragraph commented="no" id="H5F807EB730394281A0CB563C2D3110AE"><enum>(1)</enum><text>Health insurance
industry.</text>
</paragraph><paragraph commented="no" id="HB41F68E7F5F4429DB3FDF9683C03579"><enum>(2)</enum><text>Health care
provider groups.</text>
</paragraph><paragraph commented="no" id="HA419E9D9AB1741389DF5FBDD1DF130D8"><enum>(3)</enum><text>Non-profit
organizations.</text>
</paragraph><paragraph commented="no" id="HB51092E2EEB147BAA4C0835EA385B2D1"><enum>(4)</enum><text>Rural health
organizations.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="HF9EFDDD4C091400B97BBD1E570137238"><enum>(b)</enum><header>Terms</header>
<paragraph commented="no" id="H36F0FF58F0C745C6B03C6B3FC2622218"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">Except as provided in
subparagraph (B), members of the Office of the Forum for Quality and
Effectiveness in Health Care shall serve for a term of 5 years.</text>
</paragraph><paragraph commented="no" id="H60C05548EDE54F7F96A4920236C8B6C3"><enum>(2)</enum><header>Staggered
rotation</header><text display-inline="yes-display-inline">Of the members first
appointed to the Office of the Forum for Quality and Effectiveness in Health
Care, the Commission shall appoint 5 members to serve for a term of 2 years, 5
members to serve for a term of 3 years, and 5 members to serve for a term of 4
years.</text>
</paragraph></subsection><subsection commented="no" id="HC5EF22E414B944D8979426B643F63CF4"><enum>(c)</enum><header>Treatment of
other employment</header><text display-inline="yes-display-inline">Each member
of the Office of the Forum for Quality and Effectiveness in Health Care shall
serve the Office independently from any other position of employment.</text>
</subsection></section><section commented="no" id="H00DA62012404488C8E6D25A8AE822C01"><enum>133.</enum><header>Duties</header>
<subsection commented="no" id="H8087E0D0C55E46E3BBCED990BBD77E11"><enum>(a)</enum><header>Establishment of
forum program</header><text>The Commissioners, acting through the Director,
shall establish a program to be known as the Forum for Quality and
Effectiveness in Health Care. For the purpose of promoting transparency in
price, quality, appropriateness, and effectiveness of health care, the
Director, using the process set forth in section 134, shall arrange for the
development and periodic review and updating of standards of quality,
performance measures, and medical review criteria through which health care
providers and other appropriate entities may assess or review the provision of
health care and assure the quality of such care.</text>
</subsection><subsection commented="no" id="HCAB3A0CD399D439897F88D38A68B4958"><enum>(b)</enum><header>Certain
requirements</header><text>Guidelines, standards, performance measures, and
review criteria under subsection (a) shall—</text>
<paragraph commented="no" id="H059CC45F720D47F7AB00312F3739AF20"><enum>(1)</enum><text>be based on the
best available research and professional judgment regarding the effectiveness
and appropriateness of health care services and procedures; and</text>
</paragraph><paragraph commented="no" id="HFD716DB43AB54CB78E6956DD50595BB6"><enum>(2)</enum><text>be presented in
formats appropriate for use by physicians, health care practitioners,
providers, medical educators, and medical review organizations and in formats
appropriate for use by consumers of health care.</text>
</paragraph></subsection><subsection commented="no" id="HD9DD648DBDCC45DD80D5854379754553"><enum>(c)</enum><header>Authority for
contracts</header><text>In carrying out this part, the Director may enter into
contracts with public or nonprofit private entities.</text>
</subsection><subsection id="H0E8519B069724635B8D2C545F06F95DF"><enum>(d)</enum><header>Public
disclosure of recommendations</header><text display-inline="yes-display-inline">For each fiscal year beginning with 2011,
the Director shall make publicly available the following:</text>
<paragraph id="HFC84A6AF7527462288F359735FB758C7"><enum>(1)</enum><text>quarterly reports
for public comment that include proposed recommendations for guidelines,
standards, performance measures, and review criteria under subsection (a) and
any updates to such guidelines, standards, performance measures, and review
criteria; and</text>
</paragraph><paragraph id="H1816ED3AE0DA4A2FBD68D05935742993"><enum>(2)</enum><text>after
consideration of such comments, a final report that contains final
recommendations for such guidelines, standards, performance measures, review
criteria, and updates.</text>
</paragraph></subsection><subsection commented="no" id="H3D8E5BFBF2C54FD68701C5D39180F466"><enum>(e)</enum><header>Date certain for
initial guidelines and standards</header><text>The Commissioners, by not later
than January 1, 2013, shall assure the development of an initial set of
guidelines, standards, performance measures, and review criteria under
subsection (a).</text>
</subsection></section><section commented="no" id="HEA2EE1BACAD9447A99F98C4CFECF4BB"><enum>134.</enum><header>Adoption and
enforcement of guidelines and standards</header>
<subsection commented="no" id="H4B1C6822F9044A89AE86B822C8A031E4"><enum>(a)</enum><header>Adoption of
recommendations of Forum for Quality and Effectiveness in Health
Care</header><text display-inline="yes-display-inline">For each fiscal year,
the Commissioners shall adopt the recommendations made for such year in the
final report under subsection (d)(2) of section 133 for guidelines, standards,
performance measures, and review criteria described in subsection (a) of such
section.</text>
</subsection><subsection commented="no" id="H3E4AAF0D90FD4D5790F55096285CA3D4"><enum>(b)</enum><header>Enforcement
authority</header><text>The Commissioners, in consultation with the Secretary
of Health and Human Services, have the authority to make recommendations to the
Secretary to enforce compliance of health care providers with the guidelines,
standards, performance measures, and review criteria adopted under subsection
(a). Such recommendations may include the following, with respect to a health
care provider who is not in compliance with such guidelines, standards,
measures, and criteria:</text>
<paragraph commented="no" id="H504CE8537D624E9E847E739F904DC0F9"><enum>(1)</enum><text display-inline="yes-display-inline">Exclusion from participation in Federal
health care programs (as defined in section 1128B(f) of the Social Security
Act).</text>
</paragraph><paragraph commented="no" id="H6AAA8E3C0B5F4F1C9BA6807EA8C25D79"><enum>(2)</enum><text>Imposition of a
civil money penalty on such provider.</text>
</paragraph></subsection></section><section id="HEAC82D2C57FD4357BB07B69BBE593E96"><enum>135.</enum><header>Additional
requirements</header>
<subsection id="H04630A0520FE4B82802D453EADAA039C"><enum>(a)</enum><header>Program
agenda</header><text display-inline="yes-display-inline">The Commissioners
shall provide for an agenda for the development of the guidelines, standards,
performance measures, and review criteria described in section 133(a),
including with respect to the standards, performance measures, and review
criteria, identifying specific aspects of health care for which the standards,
performance measures, and review criteria are to be developed and those that
are to be given priority in the development of the standards, performance
measures, and review criteria.</text>
</subsection></section></part><part id="HD6DB99D9A4CF49BFBF971D9CE1D85992"><enum>3</enum><header>General
Provisions</header>
<section id="H414428E6565F42ADB348BE24A84197B6"><enum>141.</enum><header>Certain
administrative authorities</header><text display-inline="no-display-inline">The
Commissioners, in carrying out this subtitle, may accept voluntary and
uncompensated services.</text>
</section><section id="H2923B46CF7AB4BECBE97DF767BAF30A9"><enum>142.</enum><header>Funding</header><text display-inline="no-display-inline">For the purpose of carrying out this
subtitle, there are authorized to be appropriated such sums as may be necessary
for fiscal years 2011 through 2015.</text>
</section><section id="H8FE28390B0CA4BA3A091C21B2807CDD1"><enum>143.</enum><header>Definitions</header><text display-inline="no-display-inline">For purposes of this subtitle:</text>
<paragraph id="H4B951075906047518C9F278C75E849C4"><enum>(1)</enum><text>The term
<term>Commissioners</term> means the Commissioners of the Health Care Services
Commission.</text>
</paragraph><paragraph id="H767706DA60684A7200A6688BEC71F380"><enum>(2)</enum><text>The term
<term>Commission</term> means the Health Care Services Commission.</text>
</paragraph><paragraph id="H9C35F1A5A97D4A67B4B860E9C7A5E89"><enum>(3)</enum><text>The term
<term>Director</term> means the Director of the Office of the Forum for Quality
and Effectiveness in Health Care.</text>
</paragraph><paragraph id="H4D5128AE762348CA82F623008D863B71"><enum>(4)</enum><text>The term
<term>Secretary</term> means the Secretary of Health and Human Services.</text>
</paragraph></section></part><part id="H0862DF996D3242679B5162459140A339"><enum>4</enum><header>Terminations and
transition</header>
<section id="H0989EF6111204D2BB89C3048786DCADA"><enum>151.</enum><header>Termination of
Agency for Healthcare Research and Quality</header><text display-inline="no-display-inline">As of the date of the enactment of this Act,
the Agency for Healthcare Research and Quality is terminated, and title IX of
the Public Health Service Act is repealed.</text>
</section><section id="H507241B50F464A7E9C971F003C83D97B"><enum>152.</enum><header>Transition</header><text display-inline="no-display-inline">All orders, grants, contracts, privileges,
and other determinations or actions of the Agency for Healthcare Research and
Quality that are effective as of the date before the date of the enactment of
this Act, shall be transferred to the Secretary and shall continue in effect
according to their terms unless changed pursuant to law.</text>
</section></part><part id="HF45F6D4AE93040498E54D9CDC88167A0"><enum>5</enum><header>Independent Health
Record Trust</header>
<section display-inline="no-display-inline" id="HEB707E66D2944253AE5BFB0028F300A3" section-type="subsequent-section"><enum>161.</enum><header>Short title of
Part</header><text display-inline="no-display-inline">This part may be cited as
the <quote><short-title>Independent Health Record Trust
Act of 2009</short-title></quote>.</text>
</section><section id="HD479C842017349A2BFAE2C2011C69193" section-type="subsequent-section"><enum>162.</enum><header>Purpose</header><text display-inline="no-display-inline">It is the purpose of this part to provide
for the establishment of a nationwide health information technology network
that—</text>
<paragraph id="HF70E1FE19FB64EF482C08D648B6BB99"><enum>(1)</enum><text>improves health
care quality, reduces medical errors, increases the efficiency of care, and
advances the delivery of appropriate, evidence-based health care
services;</text>
</paragraph><paragraph id="HDECEFFC04FBF4885BE00C610625C02F4"><enum>(2)</enum><text>promotes wellness,
disease prevention, and the management of chronic illnesses by increasing the
availability and transparency of information related to the health care needs
of an individual;</text>
</paragraph><paragraph id="H3B7EBDE3D4244193BEF581E34280EB68"><enum>(3)</enum><text>ensures that
appropriate information necessary to make medical decisions is available in a
usable form at the time and in the location that the medical service involved
is provided;</text>
</paragraph><paragraph id="H5D4AF1A213864684A00048D6A0D900E0"><enum>(4)</enum><text>produces greater
value for health care expenditures by reducing health care costs that result
from inefficiency, medical errors, inappropriate care, and incomplete
information;</text>
</paragraph><paragraph id="H349F680ABAE8473584FF8F9F5BB500C0"><enum>(5)</enum><text>promotes a more
effective marketplace, greater competition, greater systems analysis, increased
choice, enhanced quality, and improved outcomes in health care services;</text>
</paragraph><paragraph id="HAB3C596A63AA4BF987C5D5E900330015"><enum>(6)</enum><text>improves the
coordination of information and the provision of such services through an
effective infrastructure for the secure and authorized exchange and use of
health information; and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="HE054059F636D468E94F7A6B30084A20"><enum>(7)</enum><text display-inline="yes-display-inline">ensures that the health information
privacy, security, and confidentiality of individually identifiable health
information is protected.</text>
</paragraph></section><section id="HF9540C02BB1F4BE9B09B915BFDB842E2" section-type="subsequent-section"><enum>163.</enum><header>Definitions</header><text display-inline="no-display-inline">In this part:</text>
<paragraph commented="no" display-inline="no-display-inline" id="HAD9238625E614A78B2002299C00059AC"><enum>(1)</enum><header>Access</header><text>The
term <term>access</term> means, with respect to an electronic health record,
entering information into such account as well as retrieving information from
such account.</text>
</paragraph><paragraph id="H5C38C7D72280406E83B65B50C617A0C5"><enum>(2)</enum><header>Account</header><text>The
term <term>account</term> means an electronic health record of an individual
contained in an independent health record trust.</text>
</paragraph><paragraph id="H85ADBC7B087545E0BF6642D400008F5F"><enum>(3)</enum><header>Affirmative
consent</header><text>The term <term>affirmative consent</term> means, with
respect to an electronic health record of an individual contained in an IHRT,
express consent given by the individual for the use of such record in response
to a clear and conspicuous request for such consent or at the individual’s own
initiative.</text>
</paragraph><paragraph id="H2657188F67154497AF005D367F69CB07"><enum>(4)</enum><header>Authorized EHR
data user</header><text display-inline="yes-display-inline">The term
<term>authorized EHR data user</term> means, with respect to an electronic
health record of an IHRT participant contained as part of an IHRT, any entity
(other than the participant) authorized (in the form of affirmative consent) by
the participant to access the electronic health record.</text>
</paragraph><paragraph id="HBC7A103E38C04D538B15E690DB009FA8"><enum>(5)</enum><header>Confidentiality</header><text display-inline="yes-display-inline">The term <term>confidentiality</term>
means, with respect to individually identifiable health information of an
individual, the obligation of those who receive such information to respect the
health information privacy of the individual.</text>
</paragraph><paragraph id="H08A69175632342FEA3C3EA37CCFB6350"><enum>(6)</enum><header>Electronic
health record</header><text>The term <term>electronic health record</term>
means a longitudinal collection of information concerning a single individual,
including medical records and personal health information, that is stored
electronically.</text>
</paragraph><paragraph id="HC3F77505847F41D9B250DE1CF0FCE066"><enum>(7)</enum><header>Health
information privacy</header><text display-inline="yes-display-inline">The term
<term>health information privacy</term> means, with respect to individually
identifiable health information of an individual, the right of such individual
to control the acquisition, uses, or disclosures of such information.</text>
</paragraph><paragraph commented="no" id="H86FD498421364795A2E114008919E445"><enum>(8)</enum><header>Health
plan</header><text display-inline="yes-display-inline">The term <term>health
plan</term> means a group health plan (as defined in section 2208(1) of the
Public Health Service Act (42 U.S.C. 300bb–8(1))) as well as a plan that offers
health insurance coverage in the individual market.</text>
</paragraph><paragraph id="H0827EC2AFA48492780CAFF56F98E9B63"><enum>(9)</enum><header>HIPAA privacy
regulations</header><text>The term <term>HIPAA privacy regulations</term> means
the regulations promulgated under section 264(c) of the Health Insurance
Portability and Accountability Act of 1996 (42 U.S.C. 1320d–2 note).</text>
</paragraph><paragraph id="HC66094CE4ED447A69B57C2E84373AB35"><enum>(10)</enum><header>Independent
health record trust; IHRT</header><text>The terms <term>independent health
record trust</term> and <term>IHRT</term> mean a legal arrangement under the
administration of an IHRT operator that meets the requirements of this part
with respect to electronic health records of individuals participating in the
trust or IHRT.</text>
</paragraph><paragraph id="H4A1BF94CBB904FE296B42FF3A5FB0206"><enum>(11)</enum><header>IHRT
operator</header><text>The term <term>IHRT operator</term> means, with respect
to an IHRT, the organization that is responsible for the administration and
operation of the IHRT in accordance with this part.</text>
</paragraph><paragraph id="HE03306501D564676AF237B06BF076E27"><enum>(12)</enum><header>IHRT
participant</header><text>The term <term>IHRT participant</term> means, with
respect to an IHRT, an individual who has a participation agreement in effect
with respect to the maintenance of the individual’s electronic health record by
the IHRT.</text>
</paragraph><paragraph id="HEEB31AEE2939421D878392B8DA77176F"><enum>(13)</enum><header>Individually
identifiable health information</header><text>The term <term>individually
identifiable health information</term> has the meaning given such term in
section 1171(6) of the Social Security Act (42 U.S.C. 1320d(6)).</text>
</paragraph><paragraph id="H9A9C9BB7D43744A597C5CA0097084BF7"><enum>(14)</enum><header>Security</header><text>The
term <term>security</term> means, with respect to individually identifiable
health information of an individual, the physical, technological, or
administrative safeguards or tools used to protect such information from
unwarranted access or disclosure.</text>
</paragraph></section><section commented="no" display-inline="no-display-inline" id="H032127BE46464457B7E505FD325DB530"><enum>164.</enum><header>Establishment,
certification, and membership of independent health record trusts</header>
<subsection id="H076C86EFC8694F68837015FCFB7300C4"><enum>(a)</enum><header>Establishment</header><text>Not
later than one year after the date of the enactment of this Act, the Federal
Trade Commission, in consultation with the National Committee on Vital and
Health Statistics, shall prescribe standards for the establishment,
certification, operation, and interoperability of IHRTs to carry out the
purposes described in section 162 in accordance with the provisions of this
part.</text>
</subsection><subsection id="H0E94BE580290440393B56DFA73B500C2"><enum>(b)</enum><header>Certification</header>
<paragraph id="H51DE90179EBE423F8E7D723E57001818"><enum>(1)</enum><header>Certification by
FTC</header><text display-inline="yes-display-inline">The Federal Trade
Commission shall provide for the certification of IHRTs. No IHRT may be
certified unless the IHRT is determined to meet the standards for certification
established under subsection (a).</text>
</paragraph><paragraph id="HDF494FE1980A417C8C84D8919EE60019"><enum>(2)</enum><header>Decertification</header><text>The
Federal Trade Commission shall establish a process for the revocation of
certification of an IHRT under this section in the case that the IHRT violates
the standards established under subsection (a).</text>
</paragraph></subsection><subsection display-inline="no-display-inline" id="H430E35F18BCB42929D6343F8AA815BE4"><enum>(c)</enum><header>Membership</header>
<paragraph id="H8BF0E406501646CD80236C869CA68EBD"><enum>(1)</enum><header>In
general</header><text>To be eligible to be a participant in an IHRT, an
individual shall—</text>
<subparagraph id="H0A5981066B1045848477F6BFBB6C2AC"><enum>(A)</enum><text>submit to the IHRT
information as required by the IHRT to establish an electronic health record
with the IHRT; and</text>
</subparagraph><subparagraph id="H7EEFE0FD2D004274A014DEB3800C457"><enum>(B)</enum><text>enter into a
privacy protection agreement described in section 166(b)(1) with the
IHRT.</text>
</subparagraph><continuation-text continuation-text-level="paragraph">The process
to determine eligibility of an individual under this subsection shall allow for
the establishment by such individual of an electronic health record as
expeditiously as possible if such individual is determined so eligible.</continuation-text></paragraph><paragraph id="H69A7F07DCEB644EEA8FBF5C42CBE8633"><enum>(2)</enum><header>No limitation on
membership</header><text>Nothing in this subsection shall be construed to
permit an IHRT to restrict membership, including on the basis of health
condition.</text>
</paragraph></subsection></section><section id="H3D1A148894294609BD37E640F27453FC"><enum>165.</enum><header>Duties of IHRT
to IHRT participants</header>
<subsection display-inline="no-display-inline" id="H25D8700A9D36406980F6626F3DE92D9"><enum>(a)</enum><header>Fiduciary duty of
IHRT; penalties for violations of fiduciary duty</header>
<paragraph id="H39F99E7CF09D463C99513719E66FA906"><enum>(1)</enum><header>Fiduciary
duty</header><text display-inline="yes-display-inline">With respect to the
electronic health record of an IHRT participant maintained by an IHRT, the IHRT
shall have a fiduciary duty to act for the benefit and in the interests of such
participant and of the IHRT as a whole. Such duty shall include obtaining the
affirmative consent of such participant prior to the release of information in
such participant’s electronic health record in accordance with the requirements
of this part.</text>
</paragraph><paragraph id="H72FC1C74BE424F1F9E8F9245196F85EE"><enum>(2)</enum><header>Penalties</header><text display-inline="yes-display-inline">If the IHRT knowingly or recklessly
breaches the fiduciary duty described in paragraph (1), the IHRT shall be
subject to the following penalties:</text>
<subparagraph id="HE6E9B63D0A99430F9CE91AEDDA9E6A1"><enum>(A)</enum><text>Loss of
certification of the IHRT.</text>
</subparagraph><subparagraph id="H8B1CF3342C6F45E0A43E2D60E2105F5B"><enum>(B)</enum><text>A fine that is not
in excess of $50,000.</text>
</subparagraph><subparagraph id="H86E5A5F1E04A4DF5B44359F323F72FDF"><enum>(C)</enum><text>A term of
imprisonment for the individuals involved of not more than 5 years.</text>
</subparagraph></paragraph></subsection><subsection id="H51A28FA861D34E8D81F42400FB7E0139"><enum>(b)</enum><header>Electronic
health record deemed To be held in trust by IHRT</header><text>With respect to
an individual, an electronic health record maintained by an IHRT shall be
deemed to be held in trust by the IHRT for the benefit of the individual and
the IHRT shall have no legal or equitable interest in such electronic health
record.</text>
</subsection></section><section id="H67D976F620584FF18FBEC75FF4589094"><enum>166.</enum><header>Availability
and use of information from records in IHRT consistent with privacy protections
and agreements</header>
<subsection commented="no" display-inline="no-display-inline" id="HE4543948029D48799D009B71DC2B0056"><enum>(a)</enum><header>Protected
electronic health records use and access</header>
<paragraph id="H49723FC6F24E48249C84A7A714161BF"><enum>(1)</enum><header>General rights
regarding uses of information</header>
<subparagraph id="HF849C00C28BA4FE2A0A801272D542763"><enum>(A)</enum><header>In
general</header><text>With respect to the electronic health record of an IHRT
participant maintained by an IHRT, subject to paragraph (2)(C), primary uses
and secondary uses (described in subparagraphs (B) and (C), respectively) of
information within such record (other than by such participant) shall be
permitted only upon the authorization of such use, prior to such use, by such
participant.</text>
</subparagraph><subparagraph id="HD7D51A05BECE493380C3FD0080EDCA5E"><enum>(B)</enum><header>Primary
uses</header><text>For purposes of subparagraph (A) and with respect to an
electronic health record of an individual, a primary use is a use for purposes
of the individual’s self-care or care by health care professionals.</text>
</subparagraph><subparagraph id="H394C83F172C94A3088CC389697ED57DA"><enum>(C)</enum><header>Secondary
uses</header><text display-inline="yes-display-inline">For purposes of
subparagraph (B) and with respect to an electronic health record of an
individual, a secondary use is any use not described in subparagraph (B) and
includes a use for purposes of public health research or other related
activities. Additional authorization is required for a secondary use extending
beyond the original purpose of the secondary use authorized by the IHRT
participant involved. Nothing in this paragraph shall be construed as requiring
authorization for every secondary use that is within the authorized original
purpose.</text>
</subparagraph></paragraph><paragraph id="HA593354858684CD195A9B7C7A802EC8C"><enum>(2)</enum><header>Rules for
primary use of records for health care purposes</header><text>With respect to
the electronic health record of an IHRT participant (or specified parts of such
electronic health record) maintained by an IHRT standards for access to such
record shall provide for the following:</text>
<subparagraph id="HD950B0618A5C440AA9617C4BA49CD018"><enum>(A)</enum><header>Access by IHRT
participants to their electronic health records</header>
<clause id="H40041115EDBF44A5AB18E6C1BB1D27AC"><enum>(i)</enum><header>Ownership</header><text>The
participant maintains ownership over the entire electronic health record (and
all portions of such record) and shall have the right to electronically access
and review the contents of the entire record (and any portion of such record)
at any time, in accordance with this subparagraph.</text>
</clause><clause id="HF445A893FBDA400A9BC6018BF9B9C9D"><enum>(ii)</enum><header>Addition of
personal information</header><text display-inline="yes-display-inline">The
participant may add personal health information to the health record of that
participant, except that such participant shall not alter information that is
entered into the electronic health record by any authorized EHR data user. Such
participant shall have the right to propose an amendment to information that is
entered by an authorized EHR data user pursuant to standards prescribed by the
Federal Trade Commission for purposes of amending such information.</text>
</clause><clause id="HAD22807E783840ADABF0E061B3C3B02D"><enum>(iii)</enum><header>Identification
of information entered by participant</header><text display-inline="yes-display-inline">Any additions or amendments made by the
participant to the health record shall be identified and disclosed within such
record as being made by such participant.</text>
</clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H10D3BE2D750D43E6AF5538C9803208EA"><enum>(B)</enum><header>Access by
entities other than IHRT participant</header>
<clause id="HFC5E19244D36426F859CA4A93A115D9"><enum>(i)</enum><header>Authorized access
only</header><text>Except as provided under subparagraph (C) and paragraph (4),
access to the electronic health record (or any portion of the record)—</text>
<subclause id="H44AE0D85B62A42AE9F95F6EF04B599D"><enum>(I)</enum><text>may be made only by
authorized EHR data users and only to such portions of the record as specified
by the participant; and</text>
</subclause><subclause id="H989C1DBC16CE4CC19824EC5EB29FB039"><enum>(II)</enum><text>may be limited by
the participant for purposes of entering information into such record,
retrieving information from such record, or both.</text>
</subclause></clause><clause id="H0D4551E55A2846A1B64D8C16ABA814A0"><enum>(ii)</enum><header>Identification
of entity that enters information</header><text>Any information that is added
by an authorized EHR data user to the health record shall be identified and
disclosed within such record as being made by such user.</text>
</clause><clause commented="no" id="HF7830CFBFA964A23BDA787C5EF977200"><enum>(iii)</enum><header>Satisfaction
of HIPAA privacy regulations</header><text display-inline="yes-display-inline">In the case of a record of a covered entity
(as defined for purposes of HIPAA privacy regulations), with respect to an
individual, if such individual is an IHRT participant with an independent
health record trust and such covered entity is an authorized EHR data user, the
requirement under the HIPAA privacy regulations for such entity to provide the
record to the participant shall be deemed met if such entity, without charge to
the IHRT or the participant—</text>
<subclause commented="no" id="H0A277D3993B14998B25D92AA240442A9"><enum>(I)</enum><text>forwards to the
trust an appropriately formatted electronic copy of the record (and updates to
such records) for inclusion in the electronic health record of the participant
maintained by the trust;</text>
</subclause><subclause commented="no" id="HC9FE40D38516419FBB7BB6705CD08146"><enum>(II)</enum><text>enters such
record into the electronic health record of the participant so maintained;
or</text>
</subclause><subclause id="HE05C959F0F404F43BE71F0D2B21B8D06"><enum>(III)</enum><text>otherwise makes
such record available for electronic access by the IHRT or the individual in a
manner that permits such record to be included in the account of the individual
contained in the IHRT.</text>
</subclause></clause><clause id="HAA0DC6AAAC944049B2C076B45003D95"><enum>(iv)</enum><header>Notification of
sensitive information</header><text>Any information, with respect to the
participant, that is sensitive information, as specified by the Federal Trade
Commission, shall not be forwarded or entered by an authorized EHR data user
into the electronic health record of the participant maintained by the trust
unless the user certifies that the participant has been notified of such
information.</text>
</clause></subparagraph><subparagraph id="H551D129CBDB64E1692612C7D872B0600"><enum>(C)</enum><header>Deemed
authorization for access for emergency health care</header>
<clause id="H45E6C42BB8064F00A6CDC7E4997B9912"><enum>(i)</enum><header>Findings</header><text>Congress
finds that—</text>
<subclause id="HC050EBAD73074EF995E6395B9004E88C"><enum>(I)</enum><text>given the size and
nature of visits to emergency departments in the United States, readily
available health information could make the difference between life and death;
and</text>
</subclause><subclause id="HBF70D3549608485A00D12C5021802E5F"><enum>(II)</enum><text>because of the
case mix and volume of patients treated, emergency departments are well
positioned to provide information for public health surveillance, community
risk assessment, research, education, training, quality improvement, and other
uses.</text>
</subclause></clause><clause id="HF94CEAC624DF4F32BA7FDC9159721B65"><enum>(ii)</enum><header>Use of
information</header><text>With respect to the electronic health record of an
IHRT participant (or specified parts of such electronic health record)
maintained by an IHRT, the participant shall be deemed as providing
authorization (in the form of affirmative consent) for health care providers to
access, in connection with providing emergency care services to the
participant, a limited, authenticated information set concerning the
participant for emergency response purposes, unless the participant specifies
that such information set (or any portion of such information set) may not be
so accessed. Such limited information set may include information—</text>
<subclause id="H7FB7006D340744D4BFC9CF57FE1EA269"><enum>(I)</enum><text>patient
identification data, as determined appropriate by the participant;</text>
</subclause><subclause id="H054920C62DC24B4094285F53CC96CD68"><enum>(II)</enum><text>provider
identification that includes the use of unique provider identifiers;</text>
</subclause><subclause id="HFA27B4D9EE63431EB7B9102089214FF4"><enum>(III)</enum><text>payment
information;</text>
</subclause><subclause id="H5D8D99D83F154F78B45D5300C360BCAD"><enum>(IV)</enum><text>information
related to the individual’s vitals, allergies, and medication history;</text>
</subclause><subclause id="H54F59FFBB76A4D13AB70D88D25C39E12"><enum>(V)</enum><text>information
related to existing chronic problems and active clinical conditions of the
participant; and</text>
</subclause><subclause id="H0215D37174F747DD8F462DAC12B03FAD"><enum>(VI)</enum><text>information
concerning physical examinations, procedures, results, and diagnosis
data.</text>
</subclause></clause></subparagraph></paragraph><paragraph commented="no" id="H30A96D4D726F4E569890C414692DD795"><enum>(3)</enum><header>Rules for
secondary uses of records for research and other purposes</header>
<subparagraph id="HE41A427534144A8CA5D29160CECC9217"><enum>(A)</enum><header>In
general</header><text>With respect to the electronic health record of an IHRT
participant (or specified parts of such electronic health record) maintained by
an IHRT, the IHRT may sell such record (or specified parts of such record) only
if—</text>
<clause commented="no" id="HA1D76927CFDB4D11B2262759C392E405"><enum>(i)</enum><text>the transfer is
authorized by the participant pursuant to an agreement between the participant
and the IHRT and is in accordance with the privacy protection agreement
described in subsection (b)(1) entered into between such participant and such
IHRT;</text>
</clause><clause commented="no" id="H3A7D36BA860D4E1B824F0029E0F0096"><enum>(ii)</enum><text>such agreement
includes parameters with respect to the disclosure of information involved and
a process for the authorization of the further disclosure of information in
such record;</text>
</clause><clause id="H90672A7C087D4E37A86C470076ADFCBC"><enum>(iii)</enum><text>the information
involved is to be used for research or other activities only as provided for in
the agreement;</text>
</clause><clause id="H97369BE2D9434A558500AA5698A55826"><enum>(iv)</enum><text>the
recipient of the information provides assurances that the information will not
be further transferred or reused in violation of such agreement; and</text>
</clause><clause commented="no" id="H5F9F8E489CF140DCBFB38FF5FACC61CC"><enum>(v)</enum><text>the transfer
otherwise meets the requirements and standards prescribed by the Federal Trade
Commission.</text>
</clause></subparagraph><subparagraph id="H068AED3CF3434F559DEF79B0492EEF03"><enum>(B)</enum><header>Treatment of
public health reporting</header><text>Nothing in this paragraph shall be
construed as prohibiting or limiting the use of health care information of an
individual, including an individual who is an IHRT participant, for public
health reporting (or other research) purposes prior to the inclusion of such
information in an electronic health record maintained by an IHRT.</text>
</subparagraph></paragraph><paragraph id="H57B0C114BA3043769093CFA11B0368D5"><enum>(4)</enum><header>Law enforcement
clarification</header><text display-inline="yes-display-inline">Nothing in this
part shall prevent an IHRT from disclosing information contained in an
electronic health record maintained by the IHRT when required for purposes of a
lawful investigation or official proceeding inquiring into a violation of, or
failure to comply with, any criminal or civil statute or any regulation, rule,
or order issued pursuant to such a statute.</text>
</paragraph><paragraph id="H1A06D9D918814C558648458CEB07162E"><enum>(5)</enum><header>Rule of
construction</header><text>Nothing in this section shall be construed to
require a health care provider that does not utilize electronic methods or
appropriate levels of health information technology on the date of the
enactment of this Act to adopt such electronic methods or technology as a
requirement for participation or compliance under this part.</text>
</paragraph></subsection><subsection id="H9FBCF034D56B43109E52CF189100D572"><enum>(b)</enum><header>Privacy
protection agreement; treatment of State privacy and security laws</header>
<paragraph id="H25255010035244A9A19CAC9C8667B3D"><enum>(1)</enum><header>Privacy
protection agreement</header><text>A privacy protection agreement described in
this subsection is an agreement, with respect to an electronic health record of
an IHRT participant to be maintained by an independent health record trust,
between the participant and the trust—</text>
<subparagraph id="HA8A65C72614B4D05B452E4E0FE802F00"><enum>(A)</enum><text>that is consistent
with the standards described in subsection (a)(2);</text>
</subparagraph><subparagraph id="HAAABD3EC8C6D481DBDBF7C9F4ADA5DA"><enum>(B)</enum><text display-inline="yes-display-inline">under which the participant specifies the
portions of the record that may be accessed, under what circumstances such
portions may be accessed, any authorizations for indicated authorized EHR data
users to access information contained in the record, and the purposes for which
the information (or portions of the information) in the record may be
used;</text>
</subparagraph><subparagraph id="H499E0FB13FC44074BEE471125FF3F600"><enum>(C)</enum><text display-inline="yes-display-inline">which provides a process for the
authorization of the transfer of information contained in the record to a third
party, including for the sale of such information for purposes of research, by
an authorized EHR data user and reuse of such information by such third party,
including a provision requiring that such transfer and reuse is not in
violation of any privacy or transfer restrictions placed by the participant on
the independent health record of such participant; and</text>
</subparagraph><subparagraph id="H770C7A825E1F43729200DEB000B2E511"><enum>(D)</enum><text>under which the
trust provides assurances that the trust will not transfer, disclose, or
provide access to the record (or any portion of the record) in violation of the
parameters established in the agreement or to any person or entity who has not
agreed to use and transfer such record (or portion of such record) in
accordance with such agreement.</text>
</subparagraph></paragraph><paragraph id="H10846002CDD041DE82E0EE96A41ECE5C"><enum>(2)</enum><header>Treatment of
State laws</header>
<subparagraph id="H6AB3C06123C0411AAA684C00E79E70"><enum>(A)</enum><header>In
general</header><text>Except as provided under subparagraph (B), the provisions
of a privacy protection agreement entered into between an IHRT and an IHRT
participant shall preempt any provision of State law (or any State regulation)
relating to the privacy and confidentiality of individually identifiable health
information or to the security of such health information.</text>
</subparagraph><subparagraph id="HCC9AE49128BC42E600F001D18857EDC"><enum>(B)</enum><header>Exception for
privileged information</header><text>The provisions of a privacy protection
agreement shall not preempt any provision of State law (or any State
regulation) that recognizes privileged communications between physicians,
health care practitioners, and patients of such physicians or health care
practitioners, respectively.</text>
</subparagraph><subparagraph id="HD85717A09743475C812E6DB7AEFA4700"><enum>(C)</enum><header>State
defined</header><text>For purposes of this section, the term <term>State</term>
has the meaning given such term when used in title XI of the Social Security
Act, as provided under section 1101(a) of such Act (42 U.S.C. 1301(a)).</text>
</subparagraph></paragraph></subsection></section><section id="H8CEB46C0367446C89DF71D2E61C3DB0"><enum>167.</enum><header>Voluntary nature
of trust participation and information sharing</header>
<subsection id="H916534DCF77C4F159FDCCEC9DE504F0"><enum>(a)</enum><header>In
general</header><text>Participation in an independent health record trust, or
authorizing access to information from such a trust, is voluntary. No employer,
health insurance issuer, group health plan, health care provider, or other
person may require, as a condition of employment, issuance of a health
insurance policy, coverage under a group health plan, the provision of health
care services, payment for such services, or otherwise, that an individual
participate in, or authorize access to information from, an independent health
record trust.</text>
</subsection><subsection id="H380CCA17364E4C01995617CF09889D11"><enum>(b)</enum><header>Enforcement</header><text>The
penalties provided for in subsection (a) of section 1177 of the Social Security
Act (42 U.S.C. 1320d–6) shall apply to a violation of subsection (a) in the
same manner as such penalties apply to a person in violation of subsection (a)
of such section.</text>
</subsection></section><section id="HF0AA493C20A94DDFBED47B27A0622D43"><enum>168.</enum><header>Financing of
activities</header>
<subsection id="H29CD82F2EC394EE28EAC37B786F8AC5"><enum>(a)</enum><header>In
general</header><text>Except as provided in subsection (b), an IHRT may
generate revenue to pay for the operations of the IHRT through—</text>
<paragraph id="H926A5ABF437345B8A5D3C600C7EF9CCC"><enum>(1)</enum><text>charging IHRT
participants account fees for use of the trust;</text>
</paragraph><paragraph id="H4C88FC8A5C9940378B6FF600F163E482"><enum>(2)</enum><text>charging
authorized EHR data users for accessing electronic health records maintained in
the trust;</text>
</paragraph><paragraph id="H8D587F929E064499917681D3DAF253"><enum>(3)</enum><text>the
sale of information contained in the trust (as provided for in section
166(a)(3)(A)); and</text>
</paragraph><paragraph id="HACA1BC8D4EEA401C852829AFA32B9997"><enum>(4)</enum><text>any other activity
determined appropriate by the Federal Trade Commission.</text>
</paragraph></subsection><subsection id="H54EAFDD81A284B44ABF7F7601D4FC8CA"><enum>(b)</enum><header>Prohibition
against access fees for health care providers</header><text display-inline="yes-display-inline">For purposes of providing incentives to
health care providers to access information maintained in an IHRT, as
authorized by the IHRT participants involved, the IHRT may not charge a fee for
services specified by the IHRT. Such services shall include the transmittal of
information from a health care provider to be included in an independent
electronic health record maintained by the IHRT (or permitting such provider to
input such information into the record), including the transmission of or
access to information described in section 166(a)(2)(C)(ii) by appropriate
emergency responders.</text>
</subsection><subsection id="H2156767F496A40EFB860B727BE20D1FD"><enum>(c)</enum><header>Required
disclosures</header><text>The sources and amounts of revenue derived under
subsection (a) for the operations of an IHRT shall be fully disclosed to each
IHRT participant of such IHRT and to the public.</text>
</subsection><subsection commented="no" id="H20324D88F05B44EAB819F0053AB07B1"><enum>(d)</enum><header>Treatment of
income</header><text>For purposes of the Internal Revenue Code of 1986, any
revenue described in subsection (a) shall not be included in gross income of
any IHRT, IHRT participant, or authorized EHR data user.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="H0818703222794A918DC6DDFBEB7F7157" section-type="subsequent-section"><enum>169.</enum><header>Regulatory
oversight</header>
<subsection id="HAB9B3C0FA2C7478B9FE1D8A9A51B44AA"><enum>(a)</enum><header>In
general</header><text>In carrying out this part, the Federal Trade Commission
shall promulgate regulations for independent health record trusts.</text>
</subsection><subsection id="H1B331C11366A45A700583FF2CB8E800"><enum>(b)</enum><header>Establishment of
Interagency Steering Committee</header>
<paragraph id="H4513BD9C4EC64F3287BA9F59FB85BF59"><enum>(1)</enum><header>In
general</header><text>The Secretary of Health and Human Services shall
establish an Interagency Steering Committee in accordance with this
subsection.</text>
</paragraph><paragraph id="H852150945B074271B0EFA501A5C6BF7"><enum>(2)</enum><header>Chairperson</header><text>The
Secretary of Health and Human Services shall serve as the chairperson of the
Interagency Steering Committee.</text>
</paragraph><paragraph id="H70B21483FE9542CA921700156D19B538"><enum>(3)</enum><header>Membership</header><text>The
members of the Interagency Steering Committee shall consist of the Attorney
General, the Chairperson of the Federal Trade Commission, the Chairperson for
the National Committee for Vital and Health Statistics, a representative of the
Federal Reserve, and other Federal officials determined appropriate by the
Secretary of Health and Human Services.</text>
</paragraph><paragraph id="HB6EC3C1C91AF4D1185F86711A3662EB2"><enum>(4)</enum><header>Duties</header><text>The
Interagency Steering Committee shall coordinate the implementation of this
part, including the implementation of policies described in subsection (d)
based upon the recommendations provided under such subsection, and regulations
promulgated under this part.</text>
</paragraph></subsection><subsection id="H0646C4D8C6384920B8567D19EFA3006"><enum>(c)</enum><header>Federal advisory
committee</header>
<paragraph id="H0B8A59EC0BB44CE283BD78DDFBBD9B"><enum>(1)</enum><header>In
general</header><text>The National Committee for Vital and Health Statistics
shall serve as an advisory committee for the IHRTs. The membership of such
advisory committee shall include a representative from the Federal Trade
Commission and the chairperson of the Interagency Steering Committee. Not less
than 60 percent of such membership shall consist of representatives of
nongovernment entities, at least one of whom shall be a representative from an
organization representing health care consumers.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="HA6588303306D45C6A01E7897F784A243"><enum>(2)</enum><header>Duties</header><text>The
National Committee for Vital and Health Statistics shall issue periodic reports
and review policies concerning IHRTs based on each of the following
factors:</text>
<subparagraph id="HAF94111D03B542540002A503F1BFC966"><enum>(A)</enum><text>Privacy and
security policies.</text>
</subparagraph><subparagraph id="HF12B1C91225A45599410C68BE5BBB1CD"><enum>(B)</enum><text>Economic
progress.</text>
</subparagraph><subparagraph id="HB4BAF73A376947D59096732F326DE42F"><enum>(C)</enum><text>Interoperability
standards.</text>
</subparagraph></paragraph></subsection><subsection id="H5CA13864BA1E4F53008135738B00992D"><enum>(d)</enum><header>Policies
recommended by Federal Trade Commission</header><text>The Federal Trade
Commission, in consultation with the National Committee for Vital and Health
Statistics, shall recommend policies to—</text>
<paragraph id="HDABF62DEFA3D4E6F906F9DDE00493700"><enum>(1)</enum><text>provide assistance
to encourage the growth of independent health record trusts;</text>
</paragraph><paragraph id="HCA9A8CD86F8145368138780066AE86B9"><enum>(2)</enum><text>track economic
progress as it pertains to operators of independent health records trusts and
individuals receiving nontaxable income with respect to accounts;</text>
</paragraph><paragraph id="H7B8B08BDD98544B19476C2C5A09EC3F4"><enum>(3)</enum><text>conduct public
education activities regarding the creation and usage of the independent health
records trusts;</text>
</paragraph><paragraph id="H400BCC0277844B1FA5A89D691B31F27B"><enum>(4)</enum><text display-inline="yes-display-inline">establish standards for the
interoperability of health information technology to ensure that information
contained in such record may be shared between the trust involved, the
participant, and authorized EHR data users, including for the standardized
collection and transmission of individual health records (or portions of such
records) to authorized EHR data users through a common interface and for the
portability of such records among independent health record trusts; and</text>
</paragraph><paragraph id="H9E222A04A54B45D7975379FA54CF258"><enum>(5)</enum><text>carry out any other
activities determined appropriate by the Federal Trade Commission.</text>
</paragraph></subsection><subsection id="HCA645055CA004FE592834703F2009FB2"><enum>(e)</enum><header>Regulations
promulgated by Federal Trade Commission</header><text>The Federal Trade
Commission shall promulgate regulations based on, at a minimum, the following
factors:</text>
<paragraph id="HDF6F18C83D4644A89DA09B7FC15C7445"><enum>(1)</enum><text>Requiring that an
IHRT participant, who has an electronic health record that is maintained by an
IHRT, be notified of a security breech with respect to such record, and any
corrective action taken on behalf of the participant.</text>
</paragraph><paragraph id="HEC94A59155BF4A9781BE5B303004061D"><enum>(2)</enum><text>Requiring that
information sent to, or received from, an IHRT that has been designated as
high-risk should be authenticated through the use of methods such as the
periodic changing of passwords, the use of biometrics, the use of tokens or
other technology as determined appropriate by the council.</text>
</paragraph><paragraph id="H582E10C4525D4AD8B9DE189C95C83130"><enum>(3)</enum><text>Requiring a delay
in releasing sensitive health care test results and other similar information
to patients directly in order to give physicians time to contact the
patient.</text>
</paragraph><paragraph id="H41C0A27681F141C3804D5D44F915C0C1"><enum>(4)</enum><text>Recommendations
for entities operating IHRTs, including requiring analysis of the potential
risk of health transaction security breeches based on set criteria.</text>
</paragraph><paragraph id="H7C1605A22977415F90003FA19E4834EA"><enum>(5)</enum><text>The conduct of
audits of IHRTs to ensure that they are in compliance with the requirements and
standards established under this part.</text>
</paragraph><paragraph id="H5F0EAA2F6AC44C0A8F00E44449A152EB"><enum>(6)</enum><text>Disclosure to IHRT
participants of the means by which such trusts are financed, including revenue
from the sale of patient data.</text>
</paragraph><paragraph id="H78DB186D34DF442500D8DD2F74A0C1C8"><enum>(7)</enum><text>Prevention of
certification of an entity seeking independent heath record trust certification
based on—</text>
<subparagraph id="HEC44E9CD04254EF3B2CA200DEC41D2"><enum>(A)</enum><text>the potential for
conflicts between the interests of such entity and the security of the health
information involved; and</text>
</subparagraph><subparagraph id="H9A3032F29A1244879C2C08D4B8628F6C"><enum>(B)</enum><text>the involvement of
the entity in any activity that is contrary to the best interests of a
patient.</text>
</subparagraph></paragraph><paragraph id="HCD729908891C4194B43BDE729E010061"><enum>(8)</enum><text>Prevention of the
use of revenue sources that are contrary to a patient’s interests.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="HC5DAEF53943F48A8B8028257EC704B03"><enum>(9)</enum><text>Public disclosure
of audits in a manner similar to financial audits required for publicly traded
stock companies.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="HA918FD928DBF458DAB39EA44EA70763E"><enum>(10)</enum><text>Requiring
notification to a participating entity that the information contained in such
record may not be representative of the complete or accurate electronic health
record of such account holder.</text>
</paragraph></subsection><subsection id="HF6F092378FCF42C8A9DE4E283DB1CB2"><enum>(f)</enum><header>Compliance
report</header><text>Not later than 1 year after the date of the enactment of
this Act, and annually thereafter, the Commission shall submit to the Committee
on Health, Education, Labor, and Pensions and the Committee on Finance of the
Senate and the Committee on Energy and Commerce and the Committee on Ways and
Means of the House of Representatives, a report on compliance by and progress
of independent health record trusts with this part. Such report shall describe
the following:</text>
<paragraph id="H9AE52F5E69BD43D5AFA05E1249909373"><enum>(1)</enum><text>The number of
complaints submitted about independent health record trusts, which shall be
divided by complaints related to security breaches, and complaints not related
to security breaches, and may include other categories as the Interagency
Steering Committee established under subsection (b) determines
appropriate.</text>
</paragraph><paragraph id="HBE30A00FAC32492AB5FA9056847FDD95"><enum>(2)</enum><text>The number of
enforcement actions undertaken by the Commission against independent health
record trusts in response to complaints under paragraph (1), which shall be
divided by enforcement actions related to security breaches and enforcement
actions not related to security breaches and may include other categories as
the Interagency Steering Committee established under subsection (b) determines
appropriate.</text>
</paragraph><paragraph id="H1F4B58DCF46A4BAD941B37F4A6E57391"><enum>(3)</enum><text>The economic
progress of the individual owner or institution operator as achieved through
independent health record trust usage and existing barriers to such
usage.</text>
</paragraph><paragraph id="HE691CBE6170F482283E5EF8E0100DB6B"><enum>(4)</enum><text>The progress in
security auditing as provided for by the Interagency Steering Committee council
under subsection (b).</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="HECF9F4DE9CF0427B822188A3F11D9E1C"><enum>(5)</enum><text>The other core
responsibilities of the Commission as described in subsection (a).</text>
</paragraph></subsection><subsection id="HB157E6FBAC9A44548715BDD61C44FE1"><enum>(g)</enum><header>Interagency
memorandum of understanding</header><text>The Interagency Steering Committee
shall ensure, through the execution of an interagency memorandum of
understanding, that—</text>
<paragraph id="H84658346948D4C5087B0C52200DF1725"><enum>(1)</enum><text>regulations,
rulings, and interpretations issued by Federal officials relating to the same
matter over which 2 or more such officials have responsibility under this part
are administered so as to have the same effect at all times; and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H4FFD86AB35DD4194BA3FD7CA625D971"><enum>(2)</enum><text>the memorandum
provides for the coordination of policies related to enforcing the same
requirements through such officials in order to have coordinated enforcement
strategy that avoids duplication of enforcement efforts and assigns priorities
in enforcement.</text>
</paragraph></subsection></section></part></subtitle><enum>II</enum><header>Medicaid and
SCHIP Reform</header>
<section id="HD4647D50ECE74BDA86D9E5E4821C75E" section-type="subsequent-section"><enum>201.</enum><header>Medicaid
reform</header>
<subsection id="H1CC610E3224D496B94468FA604752083"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Title XIX of the
Social Security Act is amended by adding at the end the following new
section:</text>
<quoted-block display-inline="no-display-inline" id="HA2B55C9B8B9B4AAF9B5DA500D64D7EC8" style="traditional">
<section id="HBE7BEDF7E63049C3BC6D30A279C2C053"><enum>1943.</enum><header>Revision of Medicaid program</header><subsection commented="no" display-inline="yes-display-inline" id="H1729AA9E0E8F4533830865EEFABC527B"><enum>(a)</enum><header>Election of block
grant or implementation of refundable tax credit for Medicaid population for
acute care services and maintenance of effort spending</header>
<paragraph id="HF21726B9EEEA475787BFE299362518C"><enum>(1)</enum><header>In
general</header><text>Each State shall elect—</text>
<subparagraph id="HC6D4826CD944448A9C13C4E0060C5A9"><enum>(A)</enum><text display-inline="yes-display-inline">to receive block grant funding under
subsection (b); or</text>
</subparagraph><subparagraph id="H64D35B9A058A4633A4A260323C31A457"><enum>(B)</enum><text>to have
Medicaid-eligible individuals eligible to receive refundable tax credits under
section 36B of the Internal Revenue Code of 1986 and to provide for maintenance
of effort described in subsection (c).</text>
</subparagraph><continuation-text continuation-text-level="paragraph">If a State
fails to make such an election, the State shall be treated as making the
election described in subparagraph (A).</continuation-text></paragraph><paragraph id="HE9D32232F3A64598BE49A166C079226E"><enum>(2)</enum><header>Limitations on
election</header><text>If a State makes the election described in paragraph
(1)(B), the State may not change such election. A State that makes the election
described in paragraph (1)(A) may change such election with notice to the
Secretary.</text>
</paragraph><paragraph id="HE7F12992795B48969EAD6F11E68EF2B"><enum>(3)</enum><header>Effective date;
implementation</header><text>This subsection shall first take effect as of
January 1, 2011. For items and services furnished on or after such date, no
payment shall be made under section 1903 to any State.</text>
</paragraph></subsection><subsection id="H7EB2BF6447D448009FB317DE4382CE79"><enum>(b)</enum><header>Block grant
payment for acute care services</header>
<paragraph id="HE1BA073107DA41A790BC51AFB7E12B00"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">The block grant
payment amount under this subsection for a State—</text>
<subparagraph id="HE78078FC19214E16938DB3DEEB32B3C7"><enum>(A)</enum><text>for 2011 is equal
to the total Federal payments under this title and title XXI to the State for
calendar quarters in 2010 (other than payments for medical assistance for
long-term care services, as defined for purposes of subsection (e)), increased
by the inflation adjustment factor for the year (described in paragraph (2));
or</text>
</subparagraph><subparagraph id="H5F19D620983D4429B7FCF13D80F7A97D"><enum>(B)</enum><text display-inline="yes-display-inline">for a subsequent year is, subject to
subsection (d), equal to the block grant payment amount under this subsection
for the State for the previous year increased by the inflation adjustment
factor for the year (described in paragraph (2)) and a population growth factor
(described in paragraph (3)).</text>
</subparagraph></paragraph><paragraph id="HE1435CC048884CA29C32775904D1C920"><enum>(2)</enum><header>Inflation
adjustment factor</header><text display-inline="yes-display-inline">The
inflation adjustment factor in this paragraph for a year is equal to the
average of the projected annual rate of increase in the consumer price index
for urban consumers (all items; U.S. city average) and the percentage increase
in the MEI (as defined in section 1842(i)(3)) for the year.</text>
</paragraph><paragraph id="HCD80FDE9BB854A8C9DAE833011A8CA4F"><enum>(3)</enum><header>Population
growth factor</header><text display-inline="yes-display-inline">The Secretary
shall determine and apply a population growth factor based on the percentage
increase in the population included in the computation of National Health
Expenditures from the calendar year in which the previous fiscal year ends to
the calendar year in which the fiscal year involved ends, as most recently
published by the Secretary, but adjusted among the States so as to reflect
differences in relative population growth rates among such States.</text>
</paragraph><paragraph id="HE3D7DB17C7C7455EB74E21923032335F"><enum>(4)</enum><header>Limitation</header><text display-inline="yes-display-inline">Payment under this subsection shall only be
available to States for costs of health care and related administrative
costs.</text>
</paragraph><paragraph id="HFCECE7A02E02425692124776B9FAEF"><enum>(5)</enum><header>No requirement for
State matching payment</header><text>Nothing in this subsection shall be
construed as requiring a State to make any matching payments as a condition of
receiving payment under this subsection.</text>
</paragraph><paragraph id="HBCFAFA99F1EB499FA40002263925221E"><enum>(6)</enum><header>Periodicity of
payments</header><text>The Secretary shall provide for making payments under
this subsection on a quarterly or other appropriate basis.</text>
</paragraph></subsection><subsection id="HD27920B9D16D4D65AADEFEFC71F1AB55"><enum>(c)</enum><header>Maintenance of
effort (MOE) requirement</header>
<paragraph id="HB88992300C014A18A7BD347FC7EC0084"><enum>(1)</enum><header>In
general</header><text>The maintenance of effort requirement under this
subsection for a State for a year is to provide for payment in the MOE amount
specified in paragraph (2) for the year for purposes described in, and in
accordance with, paragraph (3).</text>
</paragraph><paragraph id="H322CDEABDF30451B91E5A4ACB774D28B"><enum>(2)</enum><header>MOE
amount</header><text>The MOE amount specified in this paragraph for a
State—</text>
<subparagraph id="H8BC1596B26DF4C43815BE6755E347FEC"><enum>(A)</enum><text>for 2011 is equal
to the amount of expenditures of the State under this title and title XXI for
calendar quarters in 2009, not taking into account Federal payments made to the
State under the respective title and not taking into account such payments that
are attributable to medical assistance for long-term care services (as defined
for purposes of subsection (e)), increased by the inflation adjustment factor
described in subsection (b)(2) for 2010 and further increased by such factor
for 2011; or</text>
</subparagraph><subparagraph id="HA74FEBF37B4049189E94DBB7D8F01DEA"><enum>(B)</enum><text display-inline="yes-display-inline">for a subsequent year is equal to the MOE
amount specified in this paragraph for the State for the previous year
increased by the inflation adjustment factor described in subsection (b)(2) for
such subsequent year.</text>
</subparagraph></paragraph><paragraph id="HE2515AE01CB347678DC1D3455F815700"><enum>(3)</enum><header>Application
toward spending</header><text>Payments by a State shall be used for the
following purposes, with priority given to such purposes in the following
order:</text>
<subparagraph id="H1617B51B832E4EF4B495E68C3D49674D"><enum>(A)</enum><text>To develop an
auto-enrollment program for previously eligible Medicaid recipients.</text>
</subparagraph><subparagraph id="HD91677014A264E38A7E9367263758C1F"><enum>(B)</enum><text>To assist
individuals in low-income families (as defined by the State) and high-cost
individuals and families (for those for whom insurance is unavailable or very
expensive because of their health status) to purchase qualifying health
insurance. Eligible expenses shall include direct assistance with premiums and
cost-sharing.</text>
</subparagraph><subparagraph id="H87666106E1444AF4ADC2B1DB5D6B541"><enum>(C)</enum><text>For purposes of
funding qualified high risk pools (as defined in section 2744(c)(2) of the
Public Health Service Act).</text>
</subparagraph><subparagraph id="HE0FA837D74E2419DBE8E8CE6A8F2B655"><enum>(D)</enum><text>For establishment
and funding of reinsurance mechanisms.</text>
</subparagraph><subparagraph id="H3FEA680C61D64E2FB8F2D1BF6023346"><enum>(E)</enum><text>For establishment
and maintenance of networks designed to improve consumer information,
transparency in price and quality data, and reduction in transaction costs
associated with enrolling individuals in health insurance coverage.</text>
</subparagraph></paragraph></subsection><subsection id="HC67282BA3B834B7F981D1F5C27976802"><enum>(d)</enum><header>Phase-out of DSH
payments</header>
<paragraph id="H919BA118AE5B4E9C822F261EFF3CB200"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">Notwithstanding any
other provision of law, the amount of DSH allotment otherwise provided under
section 1923(f) for each State for a fiscal year shall be reduced—</text>
<subparagraph id="HBBEAF5F0E2B34653AAE22F19142BCA7E"><enum>(A)</enum><text>by 25 percent for
fiscal year 2011;</text>
</subparagraph><subparagraph id="HE14A2155C2A04EE2A59909EBA85F356F"><enum>(B)</enum><text>by 50 percent for
fiscal year 2012;</text>
</subparagraph><subparagraph id="H2A86C1D8647249C38EDD7737573C3FC6"><enum>(C)</enum><text>by 75 percent for
fiscal year 2013; and</text>
</subparagraph><subparagraph id="H1F6840D377BE4DF1898FBFD7FF0774A5"><enum>(D)</enum><text>entirely for
fiscal year 2014 and each succeeding fiscal year.</text>
</subparagraph></paragraph><paragraph id="H02E4FF8558A949DBA14202BA96D5368"><enum>(2)</enum><header>Adjustment in
block grant</header><text>The amount of any block grant for a State under
subsection (b) for a fiscal year shall be adjusted to reflect the amount of
reductions in DSH allotment under paragraph (1) for the State and the fiscal
year.</text>
</paragraph></subsection><subsection id="HFA18A8E5C8CC4406BADE042D42B69F6E"><enum>(e)</enum><header>Block grant for
long-term care services</header>
<paragraph id="H65B9D9A7AA9C4E2C9DB31586FFAE50FF"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">Notwithstanding any
other provision of this title, instead of any payment under this title to a
State for long-term care services (as defined by the Secretary), the Secretary
shall pay to a State the long-term care block grant amount specified in
paragraph (2).</text>
</paragraph><paragraph id="H751AF8C516AD4BD985BAB66437EEC484"><enum>(2)</enum><header>Long-term care
block grant amount</header><text>The long-term block grant payment amount under
this paragraph for a State—</text>
<subparagraph id="HEE541E7C134E474ABCBEE6A1A93FE9C8"><enum>(A)</enum><text>for 2011 is equal
to the total Federal payments under this title to the State for calendar
quarters in 2010 for long-term care services, as defined for purposes of
paragraph (1), increased by the inflation adjustment factor for the year
(described in subsection (b)(2)); or</text>
</subparagraph><subparagraph id="HE9C7D6480AFC49B8A9EC00DE315D6568"><enum>(B)</enum><text display-inline="yes-display-inline">for a subsequent year is equal to the
long-term care block grant payment amount under this paragraph for the State
for the previous year increased by such inflation adjustment factor for the
year.</text>
</subparagraph></paragraph><paragraph id="HA05CB1E6B8B04CF18156ADDE65BC0003"><enum>(3)</enum><header>Application of
provisions</header><text>The provisions of paragraphs (3), (4), and (5) of
subsection (b) shall apply to payments under this subsection.</text>
</paragraph><paragraph id="H6B6473D07A184706982C9E90F4D787D4"><enum>(4)</enum><header>Effective date;
implementation</header><text>This subsection shall first take effect as of
January 1, 2011. For long-term care items and services furnished on or after
such date, no payment shall be made under section 1903 to any
State.</text>
</paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection></section><section id="HA576B3DA5D4F4884A2275D595834DC00"><enum>202.</enum><header>SCHIP
Reform</header>
<subsection id="H5ADB86F7B9834262A5ECE5767D76E966"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Effective for items
and services furnished on or after January 1, 2011, title XXI of the Social
Security Act is repealed.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="HE80D36414ED249DDBEA372FAEC87DAAE"><enum>(b)</enum><header>Construction</header><text>Subsection
(a) shall not affect payment for items and services furnished before such
date.</text>
</subsection></section><enum>III</enum><header>Medicare
Reform</header>
<subtitle id="HCD49B8CA2B664920AB4D07E3FDB0FCFD"><enum>A</enum><header>New Medicare
Program</header>
<section id="H3912E6D9B17C4D298F65CEE136566DA6"><enum>301.</enum><header>Benefit
changes</header><text display-inline="no-display-inline">Title XVIII of the
Social Security Act is amended by inserting after section 1809 the following
new section:</text>
<quoted-block display-inline="no-display-inline" id="H6D1B3AE254BF4C5A87FEFF2FBACFD00" style="traditional">
<section id="H2CE944B0A9EC44EAAD611423A322102B"><enum>1809A.</enum><header>Program for new Medicare beneficiaries beginning in
2019</header><subsection commented="no" display-inline="yes-display-inline" id="HC8921E7ACD59442A8CA74F2FAADE506B"><enum>(a)</enum><header>Application</header>
<paragraph id="HE4F1A033A9234136A0FF83FA1022EAB4"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">Notwithstanding any
other provision of law (including sections 226 and 226A), the provisions of
this section shall apply to individuals (other than individuals entitled to
benefits only because of the application of section 1881(d)) who first become
entitled to benefits under part A, or whose coverage period under part B
begins, on or after January 1, 2019.</text>
</paragraph><paragraph id="H22B57F98657A400BB02B855984FC91FC"><enum>(2)</enum><header>No impact on
FICA/SECA tax revenues</header><text>Nothing in this section shall be construed
as affecting revenues through the payment of hospital insurance taxes under
sections 1401(b), 3101(b), and 3111(b) of the Internal Revenue Code of
1986.</text>
</paragraph><paragraph id="HD3B4760B4F724A0FA2AF2009F0B02DA9"><enum>(3)</enum><header>No impact on
other beneficiaries</header>
<subparagraph id="HC5CB63F16B9246EBAA09A32062CD5787"><enum>(A)</enum><header>In
general</header><text>This section shall not apply to individuals not described
in paragraph (1).</text>
</subparagraph><subparagraph id="H55FFBFEF733D42F3B6422CCFE9808BFE"><enum>(B)</enum><header>No impact on
computation of medicare premiums for older Medicare
beneficiaries</header><text>Premiums under parts A, B, and D shall be computed
for individuals not described in paragraph (1) based on the average costs that
the Secretary estimates would have been applicable if this section did not
apply.</text>
</subparagraph></paragraph></subsection><subsection id="HC10CDACAA71E4022A6FEE7BC65B3118D"><enum>(b)</enum><header>Alternative
benefits</header>
<paragraph id="H29B64708DA6349589DD17F5EB01BD552"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">An individual
described in subsection (a)(1) is only entitled to benefits under this title in
accordance with this section. In the case of such an individual who has
qualified health insurance coverage, the individual is entitled under this
section—</text>
<subparagraph id="H85DA083070FD4AEE83994596F6CAFCBB"><enum>(A)</enum><text>to an
income-related payment under subsection (c); and</text>
</subparagraph><subparagraph id="HAE8247F6797041D18627A84825FCC28"><enum>(B)</enum><text>in the case of a
low-income individual (as defined in paragraph (3) of subsection (d)), to a
contribution to a medical savings account of the individual in the amount
specified in such subsection.</text>
</subparagraph></paragraph><paragraph id="HD87AD2FB46C84FE69F4278997DE56828"><enum>(2)</enum><header>Alternative
premium obligations</header><text display-inline="yes-display-inline">An
individual described in subsection (a)(1)—</text>
<subparagraph id="H42FA6850F7DC49DE95FB147CFE13C8BD"><enum>(A)</enum><text>is not responsible
for payment of any premium otherwise applicable under part B or D; but</text>
</subparagraph><subparagraph id="H574C30FF1708466388D642E8C5BEDD7"><enum>(B)</enum><text>is responsible for
payment of the premium for qualified health insurance coverage referred to in
paragraph (1) and may apply the income-related payment under subsection (c)
toward such premium.</text>
</subparagraph></paragraph><paragraph id="HC5C96366F37E42A1A806316CA2E0038"><enum>(3)</enum><header>Qualified health
insurance coverage defined</header><text display-inline="yes-display-inline">In
this subsection, the term <term>qualified health insurance coverage</term>
means health benefits coverage, whether under a group health plan, health
insurance coverage or otherwise, but does not include coverage under a health
plan if substantially all of its coverage is coverage described in section
223(c)(1)(B) of the Internal Revenue Code of 1986.</text>
</paragraph></subsection><subsection id="H39AA2675F7C746E08C5DA6801BEF0300"><enum>(c)</enum><header>Income-related
payment</header>
<paragraph id="H290AFE009E66472B88F96D62B6755700"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">The amount of the
income-related payment under this subsection for an individual for a year is
equal to—</text>
<subparagraph id="H05F60F5FCBF04EBF9F80336E001640BD"><enum>(A)</enum><text>the annual amount
specified for the year in paragraph (2);</text>
</subparagraph><subparagraph id="H7A2499A6E0D643218BF603F59B47B54F"><enum>(B)</enum><text>subject to
reduction under paragraph (3) (relating to higher income individuals);</text>
</subparagraph><subparagraph id="HF91B42E96A5F4298A2F6E637B676C903"><enum>(C)</enum><text>further subject to
adjustment under paragraph (4); and</text>
</subparagraph><subparagraph id="HD31066B9B81946809843F900FF9626A1"><enum>(D)</enum><text>subject to
pro-ration under paragraph (5).</text>
</subparagraph></paragraph><paragraph id="HAB9AC6938C744CE7AAE86F372CFF7766"><enum>(2)</enum><header>Annual
amount</header>
<subparagraph id="H188C0D1D63CC447DAE40D305BC2FFCA8"><enum>(A)</enum><header>In
general</header><text>The annual amount specified in this paragraph—</text>
<clause id="H3205C7FDD03042FFBF8DC7F8832274BC"><enum>(i)</enum><text>for 2019 is
$9,500; and</text>
</clause><clause id="HB1C576F905A24857933688F2FAB514AF"><enum>(ii)</enum><text>for any
subsequent year is the annual amount specified in this paragraph for the
preceding year increased by the annual inflation adjustment described in
subparagraph (B) for such subsequent year.</text>
</clause><continuation-text continuation-text-level="subparagraph">Any
amount computed under clause (ii) that is not a multiple of $12 shall be
rounded to the nearest multiple of $12.</continuation-text></subparagraph><subparagraph id="H65296E0228A94BA499A000B567C505D0"><enum>(B)</enum><header>Annual inflation
adjustment</header><text>The annual inflation adjustment under this
subparagraph for a year is equal to the average of—</text>
<clause id="HF38A05354A414B4FAB1906945EE245F3"><enum>(i)</enum><text>the annual rate of
increase in the consumer price index for urban consumers (all items; U.S. city
average) for the year, as projected by the Secretary in consultation with the
Bureau of Labor Statistics before the beginning of the year; and</text>
</clause><clause id="H66219223FE144B62AC5E88412F17B017"><enum>(ii)</enum><text display-inline="yes-display-inline">the annual rate of increase in the medical
care component of the consumer price index for all urban consumers (U.S. city
average) for the year, as projected by the Secretary in consultation with the
Bureau of Labor Statistics before the beginning of the year.</text>
</clause></subparagraph></paragraph><paragraph id="H85E406DA9F3D4ECABE84EFCA8CE6F17"><enum>(3)</enum><header>Reduction for
higher-income individuals</header>
<subparagraph id="H66B27E62BF5041E2A4D7989DB3E9C78C"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">In the case of an
individual whose modified adjusted gross income exceeds the threshold amount
specified in paragraph (2) of section 1839(i), as adjusted under paragraph (5)
of such section, the annual amount under paragraph (2) shall be reduced by the
adjustment percentage specified in subparagraph (B).</text>
</subparagraph><subparagraph id="HAA3FB12C11EF440BA2AF71C4334E5D59"><enum>(B)</enum><header>Adjustment
percentage</header><text>In the case of an individual for whom the applicable
percentage specified in section 1839(i)(3)(C)—</text>
<clause id="HEE76DF4659F440258679A1390028BF4D"><enum>(i)</enum><text>is
less than 80 percent, the adjustment percentage under this subparagraph shall
be 50 percent; or</text>
</clause><clause id="H75B83A95E3BC41788E07555CB9E8A65C"><enum>(ii)</enum><text>is equal to 80
percent, the adjustment percentage under this subparagraph shall be 70
percent.</text>
</clause></subparagraph><subparagraph id="HC7E79EF8CE4E4F6190F1726CAD6F2035"><enum>(C)</enum><header>Application of
certain provisions</header><text>The provisions of paragraphs (4) through (6)
of section 1839(i) shall apply under this paragraph in the same manner as they
apply for purposes of such section.</text>
</subparagraph></paragraph><paragraph id="H1ACDF9FC6CE940660012DCF090EE400"><enum>(4)</enum><header>Risk, geographic
area, and other adjustments</header>
<subparagraph id="H14020DC81E7C4497A3C5E45173C7467"><enum>(A)</enum><header>Risk
adjustment</header><text display-inline="yes-display-inline">The payment amount
under this subsection for an individual shall be adjusted, using a methodology
specified by the Secretary, in a manner that takes into account the relative
risk factors (such as those described in section 1853(a)(1)(C)(i)) associated
with such individual. Such adjustment shall be made in such a manner as not to
change the total amount of payments made under this subsection as a result of
such adjustment.</text>
</subparagraph><subparagraph id="H2E9594C13646452EB19C7E8348F5162B"><enum>(B)</enum><header>Partial
geographic area adjustment</header><text>Such payment amount for an individual
also shall be adjusted, using a methodology specified by the Secretary, in a
manner that takes into account the relative differences in area health care
costs for the area in which the individual resides compared to other areas.
Such adjustment shall be made in such a manner as not to change the total
amount of payments made under this subsection as a result of such adjustment.
The Secretary shall provide for a decrease over time in the adjustment made
under this subparagraph.</text>
</subparagraph><subparagraph id="H8CFACC6CCFFB445F98CC2F5D84418E1"><enum>(C)</enum><header>Certain part A
buy-in individuals</header><text>Such payment amount for an individual who is
not eligible for benefits under part A pursuant to section 226 or 226A shall be
adjusted by such proportion or amount as the Secretary determines appropriate
to take into account premiums that would otherwise be payable under section
1818 or 1818A for benefits under part A.</text>
</subparagraph></paragraph><paragraph id="H2EC268B90BBD4B44AD2D3FA724AFA452"><enum>(5)</enum><header>Pro-ratio for
partial year of eligibility</header><text display-inline="yes-display-inline">In the case of an individual whose
entitlement under this section is for less than an entire year, the payment
amount under this subsection shall be pro-rated to reflect the portion of the
year included in such entitlement.</text>
</paragraph><paragraph id="HCC0464FAE19B45E6BE7B44AEDBC4B80"><enum>(6)</enum><header>Payment on
periodic basis</header><text>The Secretary shall provide for the payment under
this subsection on an appropriate monthly or other periodic basis.</text>
</paragraph></subsection><subsection id="H7090A4BBE81F4A229FE41D57BC9D518"><enum>(d)</enum><header>Contribution to a
medical savings account (MSA) for low-income individuals</header>
<paragraph id="HB29FD191BA8846CFB82B4673E87BB382"><enum>(1)</enum><header>In
general</header><text>The amount of the contribution under subsection (b)(1)(B)
to a medical savings account of a low-income individual is equal—</text>
<subparagraph id="H58ED0E6FB43D4B858D9F1E6428006CFB"><enum>(A)</enum><text>in the case of an
individual described in clause (i) or (ii) of paragraph (4)(A), to the full MSA
contribution amount (as defined in paragraph (2)); or</text>
</subparagraph><subparagraph id="H08F832CCED7C4B88AEB3393B7F6EE207"><enum>(B)</enum><text>in the case of any
other individual, to 75 percent of the full MSA contribution amount.</text>
</subparagraph></paragraph><paragraph id="H0CAA12789A0A4111A1C7FC3DB7EEF5"><enum>(2)</enum><header>Full MSA
contribution amount</header><text display-inline="yes-display-inline">For
purposes of this subsection, the term <term>full MSA contribution amount</term>
means, for a year for an individual, an amount to be equivalent to the full
amount of the average deductible of a high-deductible health plan (as defined
in section 223(c)(2) of the Internal Revenue Code of 1986) as determined by the
Secretary.</text>
</paragraph><paragraph id="H301F562314F243AFB4F6529CEDD6113F"><enum>(3)</enum><header>No Medicaid
coverage for Medicare-covered services</header>
<subparagraph id="HA334CE16BC734D5C89D021BD2FF77202"><enum>(A)</enum><header>In
general</header><text>In the case of an individual who is eligible to be
provided a contribution to a medical savings account under this subsection, the
individual is not entitled to any payment under a State plan under title XIX
with respect to any benefits relating to items and services for which coverage
is provided under this title.</text>
</subparagraph><subparagraph id="H440EF0278EF34870AB1D00BAABCAB719"><enum>(B)</enum><header>Construction</header><text>Subparagraph
(A) shall not affect the continued provision of medical assistance under title
XIX for items and services, such as dental, vision, or long-term care facility
services, for which benefits are not provided under this title regardless of
medical necessity.</text>
</subparagraph></paragraph><paragraph id="H103164E4CDBA421EA520BF0899EC308E"><enum>(4)</enum><header>Periodic
payment</header><text display-inline="yes-display-inline">The Secretary shall
provide for the contribution into medical savings accounts of amounts under
this subsection on an appropriate monthly or other periodic basis.</text>
</paragraph><paragraph id="HDFA8D43766EA40959BB3FFA0C59E7770"><enum>(5)</enum><header>Low-income
individual defined</header>
<subparagraph id="HAA3FA16A311342B380DAE0220109D59B"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">For purposes of this
section, the term <term>low-income individual</term> means an individual
described in subsection (a)(1)—</text>
<clause id="H98A32A03C49A4448A2B19FFF592C69D"><enum>(i)</enum><text>who
meets the requirement of section 1936(c)(6)(A)(ii) (relating to a full-benefit
dual eligible individual);</text>
</clause><clause id="H629A2B9C2C9D420B84897F50C08EF89"><enum>(ii)</enum><text>whose income (as
determined under section 1612 for purposes of the supplemental security income
program, except as provided in subparagraph (B)) does not exceed 100 percent of
the official income poverty line (referred to in section 1905(p)(1)) applicable
to a family of the size involved; or</text>
</clause><clause id="HE5BEEFE7BBB34EDC941322C4BB8FE7D"><enum>(iii)</enum><text>whose income (as
so determined) exceeds 100 percent, but does not exceed 150 percent, of such
official income poverty line applicable to a family of the size
involved.</text>
</clause></subparagraph><subparagraph id="HF6EE977C36934B09B6A32FA42802A4A5"><enum>(B)</enum><header>Application of
special rule regarding application of Social Security
increases</header><text>The provisions of subparagraph (D) of section
1905(p)(2) shall apply to determinations of income under subparagraph (A) in
the same manner they apply under such section.</text>
</subparagraph><subparagraph id="HC432B3AC6444451EAE2B008000453F22"><enum>(C)</enum><header>Determination
process</header><text>The Secretary shall specify a process for the
determination of whether individuals are low-income
individuals.</text>
</subparagraph></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</section><section id="HC2993E18B2754690BB4FD2B84086F6D4"><enum>302.</enum><header>Unified
Medicare Trust Fund</header>
<subsection id="H83CA7F5201294951838673009F8C43C4"><enum>(a)</enum><header>In
general</header><text>The Federal Hospital Insurance Trust Fund (established
under section 1817 of the Social Security Act) and the Federal Supplementary
Medical Insurance Trust Fund (established under section 1841 of such Act) are
hereby consolidated into a unified Medicare trust fund. Such trust fund shall
have separate accounts for parts A, B, and D of such title and shall be
administered by the same board of trustees that administers the current Trust
Funds.</text>
</subsection><subsection id="H7EA479DD43B14301BAFF670986D4441"><enum>(b)</enum><header>Construction</header><text>Nothing
in this section shall be construed as affecting the actual transfer of funds or
computations of amounts of premiums under any part of the Medicare
program.</text>
</subsection><subsection id="H834EEDEE08B04B63001095FAF6F89AB"><enum>(c)</enum><header>Solvency</header><text>The
Medicare trustee shall establish a measure of program solvency for the Medicare
program of total outlays as a measure of gross domestic product.</text>
</subsection></section></subtitle><subtitle id="H415CF7528B3E43958C877792B37DC482"><enum>B</enum><header>Changes in Current
Medicare Program</header>
<section id="H0A3AA1909C6D41DFA4D4D0EF7BC83DD"><enum>311.</enum><header>Income-related
reduction in Part D premium subsidy</header>
<subsection id="HC1363E8049C944AF91F267A700F9DB4E"><enum>(a)</enum><header>Income-related
reduction in Part D premium subsidy</header>
<paragraph id="H2DD70C7159384F0397682561BDF08B61"><enum>(1)</enum><header>In
general</header><text>Section 1860D–13(a) of the Social Security Act (42 U.S.C.
1395w–113(a)) is amended by adding at the end the following new
paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H49FEA70CF2034AD9A478F0F48DCAB492" style="OLC">
<paragraph id="H9D29C049D02642C8B308589D8C4331BC"><enum>(7)</enum><header>Reduction in
premium subsidy based on income</header>
<subparagraph id="HD85B9B75ECAD48978B00A4F12DABD68F"><enum>(A)</enum><header>In
general</header><text>In the case of an individual whose modified adjusted
gross income exceeds the threshold amount applicable under paragraph (2) of
section 1839(i) (including application of paragraph (5) of such section) for
the calendar year, the monthly amount of the premium subsidy applicable to the
premium under this section for a month after December 2009 shall be reduced
(and the monthly beneficiary premium shall be increased) by the monthly
adjustment amount specified in subparagraph (B).</text>
</subparagraph><subparagraph id="HC4359BF29B7B42328136A00DBEE73BD"><enum>(B)</enum><header>Monthly
adjustment amount</header><text>The monthly adjustment amount specified in this
subparagraph for an individual for a month in a year is equal to the product
of—</text>
<clause id="HB81B347190B84BD48BFA00976BC87444"><enum>(i)</enum><text>the quotient
obtained by dividing—</text>
<subclause id="H3918C9A352AC4644908B88464600D69F"><enum>(I)</enum><text>the applicable
percentage determined under paragraph (3)(C) of section 1839(i) (including
application of paragraph (5) of such section) for the individual for the
calendar year reduced by 25.5 percent; by</text>
</subclause><subclause id="H1D90CF6312C24AEE001DCA9D00ADFA78"><enum>(II)</enum><text>25.5 percent;
and</text>
</subclause></clause><clause id="HDBEDDEEE8E5C43BA9F1E59C1A503EB70"><enum>(ii)</enum><text>the base
beneficiary premium (as computed under paragraph (2)).</text>
</clause></subparagraph><subparagraph id="H1C9C9D1D6BCC4C3C914E06C81035D07F"><enum>(C)</enum><header>Modified
adjusted gross income</header><text>For purposes of this paragraph, the term
<term>modified adjusted gross income</term> has the meaning given such term in
subparagraph (A) of section 1839(i)(4), determined for the taxable year
applicable under subparagraphs (B) and (C) of such section.</text>
</subparagraph><subparagraph commented="no" id="H3BFF4375C8F74D25BA1FC7B40095B4BF"><enum>(D)</enum><header>Determination by
commissioner of Social Security</header><text>The Commissioner of Social
Security shall make any determination necessary to carry out the income-related
reduction in premium subsidy under this paragraph.</text>
</subparagraph><subparagraph commented="no" id="H35F41C216AE1406F8CAB7C2726C9C700"><enum>(E)</enum><header>Procedures to
assure correct income-related reduction in premium subsidy</header>
<clause id="H5E4B12DF419642A3A2284452BCCE1BB5"><enum>(i)</enum><header>Disclosure of
base beneficiary premium</header><text>Not later than September 15 of each year
beginning with 2009, the Secretary shall disclose to the Commissioner of Social
Security the amount of the base beneficiary premium (as computed under
paragraph (2)) for the purpose of carrying out the income-related reduction in
premium subsidy under this paragraph with respect to the following year.</text>
</clause><clause id="H7138A3067770498393B3E75BBA92A77E"><enum>(ii)</enum><header>Additional
disclosure</header><text>Not later than October 15 of each year beginning with
2009, the Secretary shall disclose to the Commissioner of Social Security the
following information for the purpose of carrying out the income-related
reduction in premium subsidy under this paragraph with respect to the following
year:</text>
<subclause id="H9830BAC5F1D74BACA658AC5068ABAC9D"><enum>(I)</enum><text>The modified
adjusted gross income threshold applicable under paragraph (2) of section
1839(i) (including application of paragraph (5) of such section).</text>
</subclause><subclause id="HE41A34901784460394A2DF3CCBF464DA"><enum>(II)</enum><text>The applicable
percentage determined under paragraph (3)(C) of section 1839(i) (including
application of paragraph (5) of such section).</text>
</subclause><subclause id="H4E9A535EE2D6469989725156759DFD74"><enum>(III)</enum><text>The monthly
adjustment amount specified in subparagraph (B).</text>
</subclause><subclause id="H7D469A88626A45908751F0BE00950778"><enum>(IV)</enum><text>Any other
information the Commissioner of Social Security determines necessary to carry
out the income-related reduction in premium subsidy under this
paragraph.</text>
</subclause></clause></subparagraph><subparagraph commented="no" id="HDACF3008102041E8BE67558E97078203"><enum>(F)</enum><header>Rule of
construction</header><text>The formula used to determine the monthly adjustment
amount specified under subparagraph (B) shall only be used for the purpose of
determining such monthly adjustment amount under such
subparagraph.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H7AF9E0D577364ED70079C811922315B"><enum>(2)</enum><header>Collection of
monthly adjustment amount</header><text>Section 1860D–13(c) of the Social
Security Act (42 U.S.C. 1395w–113(c)) is amended—</text>
<subparagraph id="HAB94F2F5575C430085E1D96EA046F374"><enum>(A)</enum><text>in paragraph (1),
by striking <quote>(2) and (3)</quote> and inserting <quote>(2), (3), and
(4)</quote>; and</text>
</subparagraph><subparagraph id="HC86B7944D2E34550B3D6DAC84B41A700"><enum>(B)</enum><text>by adding at the
end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H27B1210E609B406BA90672B49783C9C7" style="OLC">
<paragraph id="HC5A1E2130CBC4450A149392175D0FBAB"><enum>(4)</enum><header>Collection of
monthly adjustment amount</header>
<subparagraph id="H1E4D5329BAF242E8857C4B8CD9F633E1"><enum>(A)</enum><header>In
general</header><text>Notwithstanding any other provision of this subsection or
section 1854(d)(2), subject to subparagraph (B), the amount of the
income-related reduction in premium subsidy for an individual for a month (as
determined under subsection (a)(7)) shall be paid through withholding from
benefit payments in the manner provided under section 1840.</text>
</subparagraph><subparagraph id="HBD19EAEBE2764A61BADAAA565500D926"><enum>(B)</enum><header>Agreements</header><text>In
the case where the monthly benefit payments of an individual that are withheld
under subparagraph (A) are insufficient to pay the amount described in such
subparagraph, the Commissioner of Social Security shall enter into agreements
with the Secretary, the Director of the Office of Personnel Management, and the
Railroad Retirement Board as necessary in order to allow other agencies to
collect the amount described in subparagraph (A) that was not withheld under
such
subparagraph.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph></subsection><subsection id="H9ED024A0E3B245F29D5EDCA53FD0BB03"><enum>(b)</enum><header>Conforming
amendments</header>
<paragraph id="HE6D6EFB5F0A04BF88FAA126EEDE57C3D"><enum>(1)</enum><header>Medicare</header><text>Part
D of title XVIII of the Social Security Act (42 U.S.C. 1395w–101 et seq.) is
amended—</text>
<subparagraph id="H4448429E41CE46BF86FC9FAFC781D170"><enum>(A)</enum><text>in section
1860D–13(a)(1)—</text>
<clause id="H152963936CB040DC95C914D03738CBEE"><enum>(i)</enum><text>by
redesignating subparagraph (F) as subparagraph (G);</text>
</clause><clause id="HC67282709F7D44BCAC00913C80B0BBDB"><enum>(ii)</enum><text>in
subparagraph (G), as redesignated by clause (i), by striking <quote>(D) and
(E)</quote> and inserting <quote>(D), (E), and (F)</quote>; and</text>
</clause><clause id="H390592B37CA84F46A3886213CACBE47"><enum>(iii)</enum><text>by
inserting after subparagraph (E) the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="HDD5982A46B064D34B9D5FE6387CBB0C1" style="OLC">
<subparagraph id="HA7B101963FB44B4B9BC256C0EEB61EC7"><enum>(F)</enum><header>Increase based
on income</header><text>The monthly beneficiary premium shall be increased
pursuant to paragraph (7).</text>
</subparagraph><after-quoted-block>;
and</after-quoted-block></quoted-block>
</clause></subparagraph><subparagraph id="HB77A7BBBF28D41579C10DAF77F48E726"><enum>(B)</enum><text>in section
1860D–15(a)(1)(B), by striking <quote>paragraph (1)(B)</quote> and inserting
<quote>paragraphs (1)(B) and (1)(F)</quote>.</text>
</subparagraph></paragraph><paragraph id="HDFC63A6C7D97435BB351289F301D15D5"><enum>(2)</enum><header>Internal Revenue
Code</header><text>Section 6103(l)(20) of the Internal Revenue Code of 1986
(relating to disclosure of return information to carry out Medicare part B
premium subsidy adjustment) is amended—</text>
<subparagraph id="HCC354EE8C4294007BE26931453BFF54F"><enum>(A)</enum><text>in the heading, by
striking <quote><header-in-text level="paragraph" style="OLC">part B premium
subsidy adjustment</header-in-text></quote> and inserting
<quote><header-in-text level="paragraph" style="OLC">parts B and D premium
subsidy adjustments</header-in-text></quote>;</text>
</subparagraph><subparagraph id="HA8FC56BD4C8146B3B9A2275F21EDB5C9"><enum>(B)</enum><text>in subparagraph
(A)—</text>
<clause id="HE6F5393D24AD4045A87FF64C7B33257"><enum>(i)</enum><text>in
the matter preceding clause (i), by inserting <quote>or 1860D–13(a)(7)</quote>
after <quote>1839(i)</quote>; and</text>
</clause><clause id="HE85F81DCC61A4B4890029682C56494A1"><enum>(ii)</enum><text>in
clause (vii), by inserting after <quote>subsection (i) of such section</quote>
the following: <quote>or under section 1860D–13(a)(7) of such Act</quote>;
and</text>
</clause></subparagraph><subparagraph id="HDAA1B7CFB49D43DF00869E8DD4CC01FC"><enum>(C)</enum><text>in subparagraph
(B)—</text>
<clause id="H96C5F8C3A7664925B786C4798E6500DB"><enum>(i)</enum><text>by
inserting <quote>or such section 1860D–13(a)(7)</quote> before the period at
the end;</text>
</clause><clause id="H152544C50F0A42B7BDC4B8D21000CE04"><enum>(ii)</enum><text>as
amended by clause (i), by inserting <quote>or for the purpose of resolving tax
payer appeals with respect to any such premium adjustment</quote> before the
period at the end; and</text>
</clause><clause id="HA69FF8B585264072BDD0DC9219C17800"><enum>(iii)</enum><text>by
adding at the end the following new sentence: <quote>Officers, employees, and
contractors of the Social Security Administration may disclose such return
information to officers, employees, and contractors of the Department of Health
and Human Services, the Office of Personnel Management, the Railroad Retirement
Board, the Department of Justice, and the courts of the United States to the
extent necessary to carry out the purposes described in the preceding
sentence.</quote>; and</text>
</clause></subparagraph><subparagraph id="HE3C86CA4345D49868E7531592FC6BB8E"><enum>(D)</enum><text>by adding at the
end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H4A02FA6DB509499C00231059B3BAD39B" style="OLC">
<subparagraph id="H70135E6463DD4494AE550400B61DD3E"><enum>(C)</enum><header>Timing of
disclosure</header><text>Return information shall be disclosed to officers,
employees, and contractors of the Social Security Administration under
subparagraph (A) not later than the date that is 90 days prior to the date on
which the taxpayer first becomes entitled to benefits under part A of title
XVIII of the Social Security Act or eligible to enroll for benefits under part
B of such
title.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph></subsection></section><section id="HCA12BD6C7CE1476785E125D5D79BD761"><enum>312.</enum><header>Reduction in
hospital market basket increases</header><text display-inline="no-display-inline">Notwithstanding any other provision of
law:</text>
<paragraph id="H5A2B98E0C6014365B9DF7858D3481589"><enum>(1)</enum><header>Outpatient
hospital services</header><text>For 2010 and each succeeding year, the OPD fee
schedule increase factor otherwise computed under section 1833(t)(3)(C)(iv) of
the Social Security Act (42 U.S.C. 1395l(t)(3)(C)(iv)) shall be reduced by .4
percentage points.</text>
</paragraph><paragraph id="HE8B9D694CF5444FAA8D1A267031DA283"><enum>(2)</enum><header>Inpatient
hospital services</header><text>For fiscal year 2010 and each succeeding fiscal
year, the applicable percentage increase otherwise computed under clauses (i)
and (ii) of section 1886(b)(3)(B) of such Act (42 U.S.C. 1395ww(b)(3)(B)) shall
be reduced by .4 percentage points.</text>
</paragraph></section><section id="H903B6E0C3A8D48C59296B84A60E13F"><enum>313.</enum><header>Elimination of
indexing of income thresholds for Part B income-related premiums</header>
<subsection id="H5BFF64085ED1445A8D34F529B305B37B"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Section 1839(i) of
the Social Security Act (42 U.S.C. 1395r(i)) is amended by striking paragraph
(5).</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="H0B18CB6D2F1E454A83C5E3E9259D9CBC"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by subsection (a) shall apply to premiums
for years beginning with 2010.</text>
</subsection></section></subtitle><enum>IV</enum><header>Social Security
reform</header>
<section display-inline="no-display-inline" id="HF70FD63E8A7F4459AB1EA882833374CD" section-type="subsequent-section"><enum>401.</enum><header>Short title and
table of contents of title</header>
<subsection id="HE684A3E1A9A145289BDA6001E7FA398"><enum>(a)</enum><header>Short title of
title</header><text>This title may be cited as the <quote><short-title>Social Security Personal Savings Guarantee and Prosperity
Act of 2009</short-title></quote>.</text>
</subsection><subsection id="HEC207DFE184E4DB5B9242F4DAD72A650"><enum>(b)</enum><header>Table of
contents of title</header><text>The table of contents for this title is as
follows:</text>
<toc container-level="legis-body-container" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="yes-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="HC84D4095D33044559B98005FA112E319" level="title">Title IV—Social Security reform</toc-entry>
<toc-entry idref="HF70FD63E8A7F4459AB1EA882833374CD" level="section">Sec. 401. Short title and table of contents of
title.</toc-entry>
<toc-entry idref="H04628E7B67BD4B03BB32B7142CE70A0" level="section">Sec. 402. Establishment of Personal Social Security Savings
Program.</toc-entry><toc-quoted-entry style="OLC">
<toc-entry idref="H1C150333241E4054A11DF1FE69002D08" level="part">Part B—Personal Social Security Savings Program</toc-entry>
<toc-entry idref="H9B8F6BA94C64484FBDA6C858C5535400" level="section">Sec. 251. Definitions.</toc-entry>
<toc-entry idref="H813B60EDAF7A4BCEAC9C64F534915CDC" level="section">Sec. 252. Social Security Personal Savings Fund.</toc-entry>
<toc-entry idref="H9F535C741323493C9B3C97A147FDCD0" level="section">Sec. 253. Participation in Program.</toc-entry>
<toc-entry idref="HF908DB26F437495194273F44229F672E" level="section">Sec. 254. Personal Social Security savings
accounts.</toc-entry>
<toc-entry idref="H88275C57EADD4D15A5CC6EC560139BC3" level="section">Sec. 255. Tier I Investment Fund.</toc-entry>
<toc-entry idref="H27B09F0FBF534617B99FC19E13E52D3" level="section">Sec. 256. Tier II Investment Fund.</toc-entry>
<toc-entry idref="HF2EF333093D645F18CC8D26F5CC6CCB9" level="section">Sec. 257. Tier III Investment Options.</toc-entry>
<toc-entry idref="H7DCC998CD91A4BA1A7BC343E2336E1CA" level="section">Sec. 258. Personal Social Security savings annuity and other
distributions.</toc-entry>
<toc-entry idref="HB84B624BF91049C4AEFEED6D126E41A3" level="section">Sec. 259. Guarantee of promised benefits.</toc-entry>
<toc-entry idref="H1899404C84884F78003BD79EC35270DB" level="section">Sec. 260. Personal Social Security Savings Board.</toc-entry>
<toc-entry idref="HECCCC085EA4143B7BD83004DC574AC47" level="section">Sec. 261. Executive Director.</toc-entry></toc-quoted-entry>
<toc-entry idref="H8E07E39875314238807E26F621A408C3" level="section">Sec. 403. Monthly insurance benefits for participating
individuals.</toc-entry>
<toc-entry idref="H77612E0786BA43A0B3764EEE07FF8B72" level="section">Sec. 404. Tax treatment of accounts.</toc-entry>
<toc-entry idref="H1AE364899A51467000CA351FD7A16E75" level="section">Sec. 405. Self-Liquidating Social Security Transition
Fund.</toc-entry>
<toc-entry idref="HC27181CB5F8A4827BA4F5934A9B3CE27" level="section">Sec. 406. Budgetary treatment of Social Security.</toc-entry>
<toc-entry idref="H9E3A939BED284A1E8469EDDEDE00B18B" level="section">Sec. 407. Accounting for the Old-Age, Survivors, and Disability
Insurance Program and the Personal Social Security Savings Program.</toc-entry>
<toc-entry idref="H4201C116B33F4BC3B65D63E7BA29214D" level="section">Sec. 408. Progressive indexing of benefits for old-age, wife’s,
and husband’s insurance benefits.</toc-entry>
<toc-entry idref="H2ED55F47A49F4781B7243BDF3CABBC88" level="section">Sec. 409. Enhancements to Part A benefits.</toc-entry>
</toc>
</subsection></section><section id="H04628E7B67BD4B03BB32B7142CE70A0"><enum>402.</enum><header>Establishment of
Personal Social Security Savings Program</header>
<subsection id="HFC51AB6A783A40C4A9BF949775D701D"><enum>(a)</enum><header>In
general</header><text>Title II of the Social Security Act is amended—</text>
<paragraph id="H0751F577FA264B89918825AD9EE6B119"><enum>(1)</enum><text>by inserting
before section 201 the following:</text>
<quoted-block display-inline="no-display-inline" id="H2C262F1A2BF24922847E0391988623D1" style="OLC">
<part id="H88AF675B3432494FB1B6A4389725BC7"><enum>A</enum><header>Insurance
benefits</header>
</part><after-quoted-block>;</after-quoted-block></quoted-block>
<continuation-text continuation-text-level="paragraph">and</continuation-text></paragraph><paragraph id="H46C6FAA58982456A92F050C96E3C0036"><enum>(2)</enum><text>by adding at the
end the following new part:</text>
<quoted-block display-inline="no-display-inline" id="HD3A992B3DA7542B6AC969415823231B0" style="OLC">
<part id="H1C150333241E4054A11DF1FE69002D08"><enum>B</enum><header>Personal Social
Security Savings Program</header>
<section id="H9B8F6BA94C64484FBDA6C858C5535400"><enum>251.</enum><header>Definitions</header><text display-inline="no-display-inline">For purposes of this part—</text>
<paragraph id="H798691DCC7D343D3B7A5F95706A61DD7"><enum>(1)</enum><header>Participating
individual</header><text>The term <term>participating individual</term> has the
meaning provided in section 253(a).</text>
</paragraph><paragraph id="H43798E9C485147AF984F4DE212506106"><enum>(2)</enum><header>Board</header><text>The
term <term>Board</term> means the Personal Social Security Savings Board
established under section 260.</text>
</paragraph><paragraph id="H188C3B882CC844A184859EEC1CCC2B7"><enum>(3)</enum><header>Executive
Director</header><text>The term <term>Executive Director</term> means the
Executive Director appointed under section 261.</text>
</paragraph><paragraph id="H6D099CF3E90C43BDBAD12B9CD78C5D85"><enum>(4)</enum><header>Personal Social
Security savings account</header><text>The term <term>personal social security
savings account</term> means an account established under section
254(a).</text>
</paragraph><paragraph id="H2DF71239709E48709CCD5CDCD2CCE5B"><enum>(5)</enum><header>Personal social
security savings annuity</header><text>The term <term>personal social security
savings annuity</term> means an annuity approved by the Board under section
258(b)(3).</text>
</paragraph><paragraph id="H41C5615B3A694547B06EE29031BFEAD8"><enum>(6)</enum><header>Savings
Fund</header><text>The term <term>Savings Fund</term> means the Social Security
Personal Savings Fund established under section 252.</text>
</paragraph><paragraph id="HCCC8CABF826E4F869F7D14A26DF87D00"><enum>(7)</enum><header>Tier I
Investment Fund</header><text>The term <term>Tier I Investment Fund</term>
means the trust fund created under section 255.</text>
</paragraph><paragraph id="HCD46F4CA3A72479693A1C63407BACF55"><enum>(8)</enum><header>Tier II
Investment Fund</header><text>The term <term>Tier II Investment Fund</term>
means the trust fund created under section 256.</text>
</paragraph><paragraph id="H6DE2FF25E5424A92BDACCA03A157211D"><enum>(9)</enum><header>Tier III
Investment Option</header><text>The term <term>Tier III Investment
Option</term> means an investment option which is—</text>
<subparagraph id="H40F0A64CBFCB4D5CA100A58C747E69CF"><enum>(A)</enum><text>offered by an
eligible entity certified by the Board under section 257(b); and</text>
</subparagraph><subparagraph id="H7C8A4E3E48BC44D5BA6FE1AC2800F35C"><enum>(B)</enum><text>approved by the
Board under section 257(c).</text>
</subparagraph></paragraph></section><section id="H813B60EDAF7A4BCEAC9C64F534915CDC"><enum>252.</enum><header>Social Security
Personal Savings Fund</header>
<subsection id="H4D10C87E7D7A4DCCA9F392CD561FBF9"><enum>(a)</enum><header>Establishment of
Savings Fund</header>
<paragraph id="H6AAA68D87CCD495186C61F9CC9DF48D6"><enum>(1)</enum><header>Establishment</header><text display-inline="yes-display-inline">There is established in the Treasury of the
United States a trust fund to be known as the <term>Social Security Personal
Savings Fund</term>.</text>
</paragraph><paragraph id="H23334B930C6F4EC2A4F41FB1E9D0E164"><enum>(2)</enum><header>Amounts in
Fund</header><text display-inline="yes-display-inline">The Savings Fund shall
consist of—</text>
<subparagraph id="H67260291203244679688781247B63FC9"><enum>(A)</enum><text>all amounts
transferred to or deposited into the Savings Fund under subsection (b),
increased by the total net earnings from investments of sums in the Savings
Fund attributable to such transferred or deposited amounts, and reduced by the
total net losses from investments of such sums, and</text>
</subparagraph><subparagraph id="HA7AE356F86AA4582B8981D79045C2004"><enum>(B)</enum><text>the reserves held
in the Annuity Reserves Account established under section 258(b)(3), increased
by the total net earnings from investments of such reserves, and reduced by the
total net losses from investments of such reserves.</text>
</subparagraph></paragraph><paragraph id="HF6B0A459916640C0880000DB241BCDC9"><enum>(3)</enum><header>Trustees</header><text>The
Board shall serve as trustees of the Savings Fund.</text>
</paragraph><paragraph id="H7F25DB32BCAC47DC00343D49AD23395E"><enum>(4)</enum><header>Budget
authority; appropriation</header><text display-inline="yes-display-inline">This
part constitutes budget authority in advance of appropriations Acts and
represents the obligation of the Board to provide for the payment of amounts
provided under this part. The amounts held in the Savings Fund are appropriated
and shall remain available without fiscal year limitation.</text>
</paragraph></subsection><subsection id="H2D8F476D6408408399FF809FDF4E36A5"><enum>(b)</enum><header>Deposits into
Fund</header>
<paragraph id="H4DED2FD912004F0AB367C2B5CC4050A8"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">During each calendar
year, the Secretary of the Treasury shall deposit into the Savings Fund, from
amounts held in the Federal Old-Age and Survivors Insurance Trust Fund, a total
amount equal, in the aggregate, to 100 percent of the redirected social
security contribution for such calendar year of each individual who is a
participating individual for such calendar year.</text>
</paragraph><paragraph id="H6A4AB7247C254C4200859F978D3573C9"><enum>(2)</enum><header>Transfers based
on estimates</header>
<subparagraph id="H80F47CAFF691477A96B7AA71CAF8962E"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">The amounts deposited
pursuant to paragraph (1) shall be transferred in at least weekly payments from
the Federal Old-Age and Survivors Insurance Trust Fund to the Savings
Fund.</text>
</subparagraph><subparagraph id="H7882630F2EE44EA1AD361477DFE22F08"><enum>(B)</enum><header>Determination of
amounts</header><text display-inline="yes-display-inline">The amounts
transferred under subparagraph (A) shall be determined on the basis of
estimates, made by the Commissioner of Social Security and certified to the
Secretary of the Treasury, of the wages paid to, and self-employment income
derived by, participating individuals. Proper adjustments shall be made in
amounts subsequently transferred to the extent prior estimates were in excess
of or were less than actual amounts transferred.</text>
</subparagraph></paragraph><paragraph id="HC064A6FEB137414D855DADB1A5079982"><enum>(3)</enum><header>Redirected
Social Security contributions</header><text>For purposes of paragraph
(1)—</text>
<subparagraph id="HD5985EC791CF4EB6963B01DFDAB68895"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">The term
<term>redirected social security contributions</term> means, with respect to an
individual for a calendar year, the sum of—</text>
<clause id="H99E8D33EAD6F450CB6458C213CB8F1F3"><enum>(i)</enum><text>the product
derived by multiplying—</text>
<subclause id="HCC7D316E339946DF83189EA13C3DB445"><enum>(I)</enum><text display-inline="yes-display-inline">the sum of the total wages paid to, and
self-employment income derived by, such individual during such calendar year,
to the extent such total wages and self-employment income do not exceed the
base amount for such calendar year; by</text>
</subclause><subclause id="H3AB4B1B489264BD8BC393E24E300EE5"><enum>(II)</enum><text>the applicable
base percentage for the calendar year; and</text>
</subclause></clause><clause id="H52FBDE51C88B4AE5BA63A7A2A3ADDCF2"><enum>(ii)</enum><text>the product
derived by multiplying—</text>
<subclause id="H983E340C21A04320B370D1E398F069F"><enum>(I)</enum><text display-inline="yes-display-inline">the sum of the total wages paid to, and
self-employment income derived by, such individual during such calendar year,
to the extent such total wages and self-employment income exceed the base
amount (taking into account the limits imposed by the contribution and benefit
base under section 230); by</text>
</subclause><subclause id="H91860BADF0F84226BD303D0276D4DD59"><enum>(II)</enum><text>the applicable
supplemental percentage for the calendar year.</text>
</subclause></clause></subparagraph><subparagraph id="H2C684DE1428242B29C69C41E68A5068B"><enum>(B)</enum><header>Base
amount</header><text>For purposes of subparagraph (A)—</text>
<clause id="HCCA33646A01A4D56AF9C8DB209898606"><enum>(i)</enum><header>Initial base
amount</header><text>The base amount for calendar year 2012 is $10,000.</text>
</clause><clause id="HFAFF46F46CFB446292DFAEE71EC779C3"><enum>(ii)</enum><header>Adjustments to
base amount</header><text display-inline="yes-display-inline">The base amount
for any calendar year after 2012 is the product derived by multiplying $10,000
by a fraction—</text>
<subclause id="H8DFB54F25FA64E229953D831B00B225"><enum>(I)</enum><text display-inline="yes-display-inline">the numerator of which is the national
average wage index (as defined in section 209(k)) for the first of the 2
preceding calendar years; and</text>
</subclause><subclause id="H5F2BEDCB535A4B3DB47DAE05008359C1"><enum>(II)</enum><text display-inline="yes-display-inline">the denominator of which is the national
average wage index (as so defined) for 2010.</text>
</subclause></clause></subparagraph><subparagraph commented="no" id="H93C0154DFFF447018D56AE2D0082D7D8"><enum>(C)</enum><header>Applicable base
percentage</header><text>For purposes of subparagraph (A), the applicable base
percentage for a calendar year is—</text>
<clause id="H6F897765F33746B9838253A4C4BD801C"><enum>(i)</enum><text>for calendar years
after 2011 and before 2022, 2 percent;</text>
</clause><clause id="H8D660DA600D54102B5958E84B375AF69"><enum>(ii)</enum><text>for calendar
years after 2021 and before 2032, 4 percent;</text>
</clause><clause id="HEA0DC018EBA348BC9066C39D4E3024E6"><enum>(iii)</enum><text>for calendar
years after 2031 and before 2042, 6 percent; and</text>
</clause><clause id="H206BE4753CA04903B0429BF216191987"><enum>(iv)</enum><text>for calendar
years after 2041, 8 percent.</text>
</clause></subparagraph><subparagraph commented="no" id="HB0E0BE2831824FCE9F36A7616FC35CD9"><enum>(D)</enum><header>Applicable
supplemental percentage</header><text>For purposes of subparagraph (A), the
applicable supplemental percentage for a calendar year is—</text>
<clause id="H4339175B63204BEA8DCBE9FA902E34BA"><enum>(i)</enum><text>for calendar years
after 2011 and before 2022, 1 percent;</text>
</clause><clause id="HEC95C365623A4BF897BF07777443E65B"><enum>(ii)</enum><text>for calendar
years after 2021 and before 2032, 2 percent;</text>
</clause><clause id="H0A226018B0F9444C8116F1DCE8F3CF19"><enum>(iii)</enum><text>for calendar
years after 2031 and before 2042, 3 percent; and</text>
</clause><clause id="H43695164965F413684FA2F5E4B86DF9D"><enum>(iv)</enum><text>for calendar
years after 2041, 4 percent.</text>
</clause></subparagraph></paragraph></subsection><subsection id="H703F85052B184B0CB6669756C7E57775"><enum>(c)</enum><header>Availability</header><text display-inline="yes-display-inline">The sums in the Savings Fund are
appropriated and shall remain available without fiscal year limitation—</text>
<paragraph id="H3D8EE0EDDB2C425F8C88EE506396B909"><enum>(1)</enum><text display-inline="yes-display-inline">to invest funds in the Tier I Investment
Fund of the Savings Fund and the Tier II Investment Fund of the Savings Fund
under sections 255 and 256, respectively;</text>
</paragraph><paragraph id="H85AB6B2777594C44BEDDE4EB855FAFBC"><enum>(2)</enum><text display-inline="yes-display-inline">to transfer into Tier III Investment
Options under section 257;</text>
</paragraph><paragraph id="H08151BE2FAF64780A575A56600957CF"><enum>(3)</enum><text display-inline="yes-display-inline">to make distributions in accordance with
section 258; and</text>
</paragraph><paragraph id="HF1615F397DB0483D90E65E1FE8E6CACF"><enum>(4)</enum><text display-inline="yes-display-inline">to pay the administrative expenses of the
Board in accordance with subsection (e).</text>
</paragraph></subsection><subsection id="H677304D4F4B7435680429B85A96E94F6"><enum>(d)</enum><header>Limitations on
use of funds</header>
<paragraph id="H9EB2A5034D0F423598DC71679B310006"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">Sums in the Savings
Fund credited to a participating individual’s personal social security savings
account may not be used for, or diverted to, purposes other than for the
exclusive benefit of the participating individual or the participating
individual’s beneficiaries under this part.</text>
</paragraph><paragraph id="H4247C6EA42E2408BB1DC3E7228AC40D1"><enum>(2)</enum><header>Assignments</header><text display-inline="yes-display-inline">Sums in the Savings Fund may not be
assigned or alienated and are not subject to execution, levy, attachment,
garnishment, or other legal process.</text>
</paragraph></subsection><subsection id="H43EE059600F84CB386B5854979DB19A2"><enum>(e)</enum><header>Payment of
administrative expenses</header><text display-inline="yes-display-inline">Administrative expenses incurred to carry
out this part shall be paid out of net earnings in the Savings Fund in
conjunction with the allocation of investment earnings and losses under section
254(c).</text>
</subsection><subsection id="H64540AE3FEDE4C34ACBC72843F834BB8"><enum>(f)</enum><header>Limitation</header><text display-inline="yes-display-inline">The sums in the Savings Fund shall not be
appropriated for any purpose other than the purposes specified in this part and
may not be used for any other purpose.</text>
</subsection></section><section display-inline="no-display-inline" id="H9F535C741323493C9B3C97A147FDCD0" section-type="subsequent-section"><enum>253.</enum><header>Participation in
Program</header>
<subsection id="H0D5ABE0805B84C43A9143FCF1F60357F"><enum>(a)</enum><header>Participating
individual</header><text>For purposes of this part, the term
<term>participating individual</term> means any individual—</text>
<paragraph id="H0A6C33E79A23450EB0D778055CC865C7"><enum>(1)</enum><subparagraph commented="no" display-inline="yes-display-inline" id="HAA96C585D3FE4072AF578092052C28E4"><enum>(A)</enum><text>who receives wages in
any calendar year after December 31, 2011, on which there is imposed a tax
under section 3101(a) of the Internal Revenue Code of 1986, or</text>
</subparagraph><subparagraph id="H5899BDC1006743C19D817E230078BFE1" indent="up1"><enum>(B)</enum><text>who derives self-employment income for
a taxable year beginning after December 31, 2011, on which there is imposed a
tax under section 1401(a) of the Internal Revenue Code of 1986,</text>
</subparagraph></paragraph><paragraph id="HEA3BBAC454254281AE77B86C58B369A8"><enum>(2)</enum><text>who is born on or
after January 1, 1955, and</text>
</paragraph><paragraph id="H952CE79552D140EEA2E4F1E9331C256B"><enum>(3)</enum><text>who has not filed
an election to renounce such individual’s status as a participating individual
under subsection (b) or has filed such an election and has subsequently filed
an election to reinstate such individual’s status as a participating individual
under subsection (c).</text>
</paragraph></subsection><subsection id="HB7CBE5A46DBE4E51A1A7ADFF41629503"><enum>(b)</enum><header>Renunciation of
participation</header>
<paragraph id="H2F978BF2535846EE92A6429E15DA3E43"><enum>(1)</enum><header>In
general</header><text>An individual—</text>
<subparagraph id="HD34F09CF3D0E4605BCA66BC4D9E29ED8"><enum>(A)</enum><text>who has not
attained retirement age (as defined in section 216(l)(1)), and</text>
</subparagraph><subparagraph id="H37D91AD8C76948B599FC22A6FCFFD57"><enum>(B)</enum><text>with respect to
whom no distribution has been made from amounts credited to the individual’s
personal social security savings account for the purchase of a personal social
security savings annuity,</text>
</subparagraph><continuation-text continuation-text-level="paragraph">may elect,
in such form and manner as shall be prescribed in regulations of the Board, to
renounce such individual’s status as a <term>participating individual</term>
for purposes of this part. Upon completion of the procedures provided for under
paragraph (2), any such individual who has made such an election shall not be
treated as a participating individual under this part, effective as if such
individual had never been a participating individual. The Board shall provide
for immediate notification of such election to the Commissioner of Social
Security, the Secretary of the Treasury, and the Executive Director.</continuation-text></paragraph><paragraph id="H19F7DA0C05DB4D10BF88A25307B24DAB"><enum>(2)</enum><header>Procedure</header><text>The
Board shall prescribe by regulation procedures governing the termination of an
individual's status as <term>participating individual</term> pursuant to an
election under this subsection. Such procedures shall include—</text>
<subparagraph id="HABC64127C05E4F3FB5408546CDE33A2"><enum>(A)</enum><text>prompt closing of
the individual’s personal social security savings account established under
section 254,</text>
</subparagraph><subparagraph id="HCD05D7EAADF2413D9994A2065B998CB1"><enum>(B)</enum><text>revocation of any
benefit credit certificate assigned to the individual’s personal social
security savings account under section 255, and</text>
</subparagraph><subparagraph id="H4813167EA5C64474AC005374F0114F1F"><enum>(C)</enum><text>prompt transfer to
the Federal Old-Age and Survivors Insurance Trust Fund as general receipts of
any amount held in the Tier II Investment Fund of the Savings Fund or under a
Tier III Investment Option pursuant to section 256 or 257 and credited to such
individual’s personal social security savings account.</text>
</subparagraph></paragraph></subsection><subsection id="HA6736210971A4ECF98B3364C07D5B09"><enum>(c)</enum><header>Reinstatement of
participation</header>
<paragraph id="H6EB02D8061914A0100A9A3D991BCFB99"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">Any individual who
has filed an election under subsection (b) to renounce such individual's status
as a <term>participating individual</term> under this part may elect, in such
form and manner as shall be prescribed in regulations of the Board, to
reinstate such status. Such regulations shall provide for regular, periodic
opportunities for the filing of such an election. The Board shall provide for
immediate notification to the Commissioner of Social Security, the Secretary of
the Treasury, and the Executive Director of such election.</text>
</paragraph><paragraph id="HC29FCE6368EA49C0998F5219CDFEAFD6"><enum>(2)</enum><header>Effectiveness of
reinstatement</header><text display-inline="yes-display-inline">An election
under this subsection shall be effective with respect to wages earned, and
self-employment income derived, on the earliest date on which the Board
determines is practicable to make such election effective following the date of
the filing of the election. The individual filing the election shall be treated
as becoming a participating individual under this part on the effective date of
the election as if such individual first met the requirements of subsection (a)
on such date.</text>
</paragraph><paragraph id="H052F45DE3DAE4B028F458C25FBA9984D"><enum>(3)</enum><header>Irrevocability</header><text>An
election under this subsection shall be irrevocable.</text>
</paragraph></subsection></section><section id="HF908DB26F437495194273F44229F672E"><enum>254.</enum><header>Personal Social
Security savings accounts</header>
<subsection id="H616C360111CA4DED9696FE2119528111"><enum>(a)</enum><header>Establishment of
publicly administered system of personal security savings
accounts</header><text display-inline="yes-display-inline">As soon as
practicable after the later of January 1, 2012, or the date on which an
individual becomes a participating individual under this part, the Executive
Director shall establish a personal social security savings account for such
individual. Such account shall be the means by which amounts held in the Tier I
Investment Fund and the Tier II Investment Fund of the Savings Fund under
sections 255 and 256 and amounts held under Tier III Investment Options under
section 257 are credited to such individual, under procedures which shall be
established by the Board by regulation. Each account of a participating
individual shall be identified to such participating individual by means of the
participating individual’s social security account number.</text>
</subsection><subsection id="H3C5C38222C6F425C8BA4F4C66F305700"><enum>(b)</enum><header>Account
balance</header><text display-inline="yes-display-inline">The balance in a
participating individual’s account at any time is the sum of—</text>
<paragraph id="HC1007AC07BBE4A58B9ABA7FCD6D1067E"><enum>(1)</enum><text>the balance in the
Tier I Investment Fund of the Savings Fund credited to such participating
individual prior to transfer of the credited amount to the Tier II Investment
Fund of the Savings Fund; plus</text>
</paragraph><paragraph id="H2537249524A94EA994D3002698C9A7B4"><enum>(2)</enum><text>the excess
of—</text>
<subparagraph id="HA7D937A3BC1D4E8DB941E46D64A409A5"><enum>(A)</enum><text display-inline="yes-display-inline">all deposits in the Tier II Investment Fund
of the Savings Fund credited to such participating individual’s personal social
security savings account, subject to such increases and reductions as may
result from allocations made to and reductions made in the account pursuant to
subsection (c)(1); over</text>
</subparagraph><subparagraph id="H1C255315A466495FB02F509C409F1B7F"><enum>(B)</enum><text display-inline="yes-display-inline">amounts paid out of the Tier II Investment
Fund in connection with amounts credited to such participating individual’s
personal social security savings account; plus</text>
</subparagraph></paragraph><paragraph id="H732B1579BFF343A0B703C605A83685F6"><enum>(3)</enum><text>the excess
of—</text>
<subparagraph id="H2F61CDCDEFB847E6BDFBD77E4C4B385B"><enum>(A)</enum><text display-inline="yes-display-inline">the deposits in the Tier III Investment
Options credited to such participating individual’s personal social security
savings account, subject to such increases and reductions as may result from
amounts credited to, and reductions made in, the account pursuant to subsection
(c)(2); over</text>
</subparagraph><subparagraph id="H8F38A70D145A49FC9FF3E2EDFE5C7FC"><enum>(B)</enum><text display-inline="yes-display-inline">amounts paid out of the Tier III Investment
Options of such participating individual.</text>
</subparagraph></paragraph><continuation-text continuation-text-level="subsection">The
calculation made under paragraph (3) shall be made separately for each Tier III
Investment Option of the participating individual. The Board shall also hold
for the participating individual any benefit credit certificate assigned to the
participating individual’s personal social security savings account under
section 255.</continuation-text></subsection><subsection id="HDC50F983F5DB4F529CC371F397DD9DA"><enum>(c)</enum><header>Allocation of
earnings and losses</header><text display-inline="yes-display-inline">Pursuant
to regulations which shall be prescribed by the Board, the Executive Director
shall allocate to each personal social security savings account an amount equal
to the net earnings and net losses from each investment of sums—</text>
<paragraph id="H97F58D3974E947FCA1FD63B13D76A836"><enum>(1)</enum><text display-inline="yes-display-inline">in the Tier I Investment Fund and the Tier
II Investment Fund which are attributable to sums credited to such account
reduced by an appropriate share of the administrative expenses paid out of the
net earnings, as determined by the Executive Director; and</text>
</paragraph><paragraph id="H55AB939DC7844C84844C25ED7C857529"><enum>(2)</enum><text display-inline="yes-display-inline">in the Tier III Investment Options which
are attributable to sums credited to such account reduced by the administrative
expenses paid out of the net earnings.</text>
</paragraph></subsection></section><section id="H88275C57EADD4D15A5CC6EC560139BC3"><enum>255.</enum><header>Tier I
Investment Fund</header>
<subsection id="HF46ECD384337400F940493D42BEA23ED"><enum>(a)</enum><header>Establishment of
Tier I Investment Fund</header>
<paragraph id="H712F1CBFF0184C0E9F6962FF5533A1A8"><enum>(1)</enum><header>In
general</header><text>The Savings Fund shall include a separate fund to be
known as the <quote>Tier I Investment Fund</quote>.</text>
</paragraph><paragraph id="H7AC66F49D4F44599B25405A52F8B72C4"><enum>(2)</enum><header>Amounts in
fund</header><text>The Tier I Investment Fund consists of all amounts derived
from payments into the Fund under section 252(b) and remaining after investment
of such amounts under subsection (b), including additional amounts derived as
income from such investments.</text>
</paragraph><paragraph id="HD9E422EA044846149C4CB4C8BE94FA65"><enum>(3)</enum><header>Use of
funds</header><text>The amounts held in the Fund are appropriated and shall
remain available without fiscal year limitation—</text>
<subparagraph id="H1F35D8A0075D48D493A96D3969864DB3"><enum>(A)</enum><text>to be held for
investment on behalf of participating individuals under subsection (b),</text>
</subparagraph><subparagraph id="H68C0C95642074FFE823600638E925D03"><enum>(B)</enum><text>to pay the
administrative expenses related to the Fund, and</text>
</subparagraph><subparagraph id="HD9BFFD9ABB8848D2904C48AD73A22FBD"><enum>(C)</enum><text>to make transfers
from the Fund under subsection (c)(2).</text>
</subparagraph></paragraph></subsection><subsection display-inline="no-display-inline" id="H81B29A98ECC2499592C7961CC7EE385B"><enum>(b)</enum><header>Investment of
Fund balance</header><text>For purposes of investment of the Tier I Investment
Fund, the Board shall contract with appropriate professional asset managers,
recordkeepers, and custodians selected for investment of amounts held in the
Fund, so as to provide for investment of the balance of the Fund, in a manner
providing broad diversification in accordance with regulations of the Board,
in—</text>
<paragraph id="HF8CB2C74B0FA4214BF669DFD13626B1"><enum>(1)</enum><text>insurance
contracts,</text>
</paragraph><paragraph id="HAC0AB30C4F044C0BAE3D95D68BB5E851"><enum>(2)</enum><text>certificates of
deposit, or</text>
</paragraph><paragraph id="HF6902E5B95C54776957E43317BBF7664"><enum>(3)</enum><text>other instruments
or obligations selected by such asset managers,</text>
</paragraph><continuation-text continuation-text-level="subsection">which
return the amount invested and pay interest, at a specified rate or rates, on
that amount during a specified period of time.</continuation-text></subsection><subsection id="HF784B4E5882044F89F92ECC77A9DE24"><enum>(c)</enum><header>Separate
crediting to personal Social Security savings accounts and transfers to the
Tier II Investment Fund or to Tier III Investment Options</header>
<paragraph id="H98A8E271DBD74D7D941B13E2C8BB8300"><enum>(1)</enum><header>Crediting to
accounts</header>
<subparagraph id="H004AE52D1806408B95EB47A2002CEA04"><enum>(A)</enum><header>In
general</header><text>Subject to this paragraph, the Board shall provide for
prompt, separate crediting, as soon as practicable, of the amounts deposited in
the Tier I Investment Fund to the personal social security savings account of
each participating individual with respect to the redirected social security
contributions (as defined in section 252(b)(3)) of such participating
individual. The Board shall include in such crediting, with respect to each
such individual, any increases or decreases in such amounts so as to reflect
the net returns and losses from investment of the balance of the Fund prior to
such crediting. For purposes of determining such increases and decreases for
each calendar year, the amounts deposited into the Fund in connection with such
individual during such calendar year shall be deemed to have been deposited on
June 30 of such year.</text>
</subparagraph><subparagraph id="H31C7C9012FBF4C439CE3E050EE76B543"><enum>(B)</enum><header>Treatment of
married participating individuals</header><text>If the participating individual
is married as of the end of the calendar year in which the amounts to be
credited were deposited in the Tier I Investment Fund and the spouse is also a
participating individual, the personal social security savings account of the
participating individual and the personal social security savings account of
his or her spouse shall each be credited with 50 percent of such
amounts.</text>
</subparagraph></paragraph><paragraph id="HDF7C437EC3854D389971F922DA51BAF7"><enum>(2)</enum><header>Transfers from
the Tier I Investment Fund</header><text display-inline="yes-display-inline">In
accordance with elections filed with the Board by a participating individual,
any amount credited to the personal social security savings account of such
participating individual under paragraph (1) shall be promptly transferred to
the Tier II Investment Fund of the Savings Fund for investment in accordance
with section 256 and, to the extent available under section 257, to Tier III
Investment Options in accordance with section 257.</text>
</paragraph></subsection><subsection id="H156CF8CADCC44D8DA579AD6BEAD069A6"><enum>(d)</enum><header>Treatment of
amounts held in Tier I Investment Fund</header><text>Subject to this
part—</text>
<paragraph id="HFFC833F37A7B4E76BCF3A939A6229566"><enum>(1)</enum><text>until amounts
deposited into the Tier I Investment Fund during any calendar year are credited
to personal social security savings accounts, such amounts shall be treated as
the unallocated property of all participating individuals with respect to whom
amounts were deposited in the Fund during such year, jointly held in trust for
such participating individuals in the Savings Fund, and</text>
</paragraph><paragraph id="H29C57F09354E46F9A800EA859CDDF048"><enum>(2)</enum><text>amounts deposited
into the Fund which are credited to the personal social security savings
account of a participating individual shall be treated as property of the
participating individual, held in trust for such participating individual in
the Savings Fund.</text>
</paragraph></subsection></section><section id="H27B09F0FBF534617B99FC19E13E52D3"><enum>256.</enum><header>Tier II
Investment Fund</header>
<subsection id="H65F72BFEAE2040F4AEDEE37443D8E5AE"><enum>(a)</enum><header>Establishment of
Tier II Investment Fund</header>
<paragraph id="HF330D84E8B124FF58BFC2ED4B48F7CB"><enum>(1)</enum><header>In
general</header><text>The Savings Fund shall include a separate fund to be
known as the <quote>Tier II Investment Fund</quote>.</text>
</paragraph><paragraph id="HEAC74F89B81C473EAC10254676C5C043"><enum>(2)</enum><header>Amounts in
Fund</header><text>The Tier II Investment Fund consists of all amounts derived
from payments into the Fund under section 255(c)(2) and remaining after
investment of such amounts under subsection (b), including additional amounts
derived as income from such investments.</text>
</paragraph><paragraph id="H8DF3421BA1BB487AA9B79EFBE7EB2771"><enum>(3)</enum><header>Use of
funds</header><text>The amounts held in the Fund are appropriated and shall
remain available without fiscal year limitation—</text>
<subparagraph id="H760CED43E21D461C9C1919347CC79676"><enum>(A)</enum><text>to be held for
investment under subsection (b),</text>
</subparagraph><subparagraph id="HBEF5724101AC4DD7AABDDB1D00740089"><enum>(B)</enum><text>to pay the
administrative expenses related to the Fund, and</text>
</subparagraph><subparagraph id="H9E7D7C3E2CF44677A5929F9D1DAFA8EA"><enum>(C)</enum><text>to make transfers
to Tier III Investment Options under section 257 or to make payments under
section 258.</text>
</subparagraph></paragraph></subsection><subsection id="H3CE38C844924467F00F1E72522F1BB8"><enum>(b)</enum><header>Payments into
Tier II Investment Fund</header>
<paragraph id="H2B3F7EA637244EB491864507B7559445"><enum>(1)</enum><header>In
general</header><text>Upon the crediting under section 252 to the personal
social security savings account of a participating individual of any amount
held in the Tier I Investment Fund for any calendar year, the Board shall
transfer from the Tier I Investment Fund into the Tier II Investment Fund any
amount so credited to such participating individual’s account which is not
transferred to a Tier III Investment Option pursuant to an election under
section 257(a).</text>
</paragraph><paragraph id="H45263BF59C1D4A2DACE65900ACB5A861"><enum>(2)</enum><header>Ongoing separate
crediting</header><text>Subject to this paragraph, the Board shall provide for
ongoing separate crediting to each participating individual’s personal social
security savings account of the amounts deposited in the Tier II Investment
Fund with respect to such participating individual, together with any increases
or decreases therein so as to reflect the net returns and losses from
investment thereof while held in the Fund.</text>
</paragraph></subsection><subsection id="HBADF23A6044E4AD08C5133CA54D5D6AA"><enum>(c)</enum><header>Investment
accounts</header>
<paragraph id="H5E0AAD572EFE479CB37597E5EAAF7FDC"><enum>(1)</enum><header>In
general</header><text>For purposes of investment of the Tier II Investment
Fund, the Board shall divide the Fund into 6 investment accounts. The Board
shall contract with appropriate investment managers, recordkeepers, and
custodians selected for investment of amounts held in each investment account.
Such accounts shall consist of—</text>
<subparagraph id="H4A6C49BA11E34EDDB1C43C76B7D300DA"><enum>(A)</enum><text>a Lifecycle
Investment Account,</text>
</subparagraph><subparagraph id="HA397130AE7894096BF007CA78DF69395"><enum>(B)</enum><text>a Government
Securities Investment Account,</text>
</subparagraph><subparagraph id="H388D10966EFA4FBABB3B675BFC0009CB"><enum>(C)</enum><text>a Fixed Income
Investment Account,</text>
</subparagraph><subparagraph id="HD8B432E9A77E468C007BABF906FC2291"><enum>(D)</enum><text>a Common Stock
Index Investment Account,</text>
</subparagraph><subparagraph id="HD92BB058DC2F4A7900A8D1F8769B4333"><enum>(E)</enum><text>a Small
Capitalization Stock Index Investment Account, and</text>
</subparagraph><subparagraph id="HEFEB0A73E91843F3AAD5813296D17E75"><enum>(F)</enum><text>an International
Stock Index Investment Account.</text>
</subparagraph></paragraph><paragraph id="H1BCF095165834EE282E32AB6D5479F8"><enum>(2)</enum><header>Election of
investment options</header>
<subparagraph id="H65081E9B541A4F8CA500E4BB055CF7"><enum>(A)</enum><header>Default investment
account</header><text>Except as provided in an election in effect under
subparagraph (B), amounts held in the Tier II Investment Fund shall be credited
to the Lifecycle Investment Account.</text>
</subparagraph><subparagraph id="H325EB69EF7F8465B9400C73D7B58F4B7"><enum>(B)</enum><header>Election of
transfers between investment accounts</header><text>In any case in which a
participating individual who has an amount in such individual’s personal social
security savings account credited to any of the investment accounts in the Tier
II Investment Fund files with the Secretary of the Treasury a written election
under this subparagraph, not more frequently than annually and in accordance
with regulations of the Board, the Secretary of the Treasury shall transfer the
full amount so credited in such investment account from such investment account
to any one of the other investment accounts in the Tier II Investment Fund
(whichever is designated in such election).</text>
</subparagraph></paragraph></subsection><subsection id="H4B4F876C49574AA7A7005F275E0544C3"><enum>(d)</enum><header>Lifecyle
Investment Account</header>
<paragraph id="HB688883E5BBB4A54B2BA859D02007F2E"><enum>(1)</enum><header>In
general</header><text>The investment manager, recordkeeper, and custodian
selected for investment of amounts held in the Lifecyle Investment Account
shall invest such amounts under regulations which shall be prescribed by the
Board in a mix of equities and fixed income instruments so as to ensure, to the
maximum extent practicable, that, of the total balance in the Fund credited to
such account and available for investment (after allowing for administrative
expenses), the percentage invested in fixed income instruments by individuals
in designated cohorts, ranging in age up to those of at least retirement age,
will increase in a linear progression from 0 percent to 100 percent as the
cohort approaches retirement age.</text>
</paragraph><paragraph id="H049FA4D316E84ACCB5A68FB5D41DE5D"><enum>(2)</enum><header>Investment in
equities</header><text>In accordance with regulations which shall be prescribed
by the Board, the Board shall establish standards which must be met by equities
selected for investment in the Lifecycle Investment Account. In conformity with
such standards, the Board shall select, for purposes of such investment,
indices which are comprised of equities the aggregate market value of which is,
in each case, a reasonably broad representation of companies whose shares are
traded on the equity markets. Amounts invested in equities under an investment
option shall be held in a portfolio designed to replicate the performance of
one or more of such indices.</text>
</paragraph><paragraph id="HCBF2F0432B624B2BBC29FF65FF886194"><enum>(3)</enum><header>Investment in
fixed income instruments</header><text>In accordance with regulations which
shall be prescribed by the Board, the Board shall establish standards which
must be met by fixed income instruments selected for investment in the
Lifecycle Investment Account. Such standards shall take into account the
competing considerations of risk and return. Amounts invested in fixed income
instruments in an investment option shall be held in a portfolio which shall
consist of a diverse range of fixed income instruments, taking into full
account the opposing considerations of risk and maximization of return.</text>
</paragraph></subsection><subsection id="HD649704ED1A543B8921C612B112DB75"><enum>(e)</enum><header>Government
Securities Investment Account</header>
<paragraph id="H456A46DFF567437ABDFDE79C9349CC44"><enum>(1)</enum><header>In
general</header><text>Amounts in the Government Securities Investment Account
shall be invested in securities of the United States Government as provided in
this subsection.</text>
</paragraph><paragraph id="HB6CFF414AC764F7E8BF984F75589AF82"><enum>(2)</enum><header>Issuance of
special obligations</header><text>The Secretary of the Treasury is authorized
to issue special interest-bearing obligations of the United States for purchase
by the Tier II Investment Fund for purposes of investment of amounts in the
Government Securities Investment Account. Such obligations shall have
maturities fixed with due regard to the needs of the Fund as determined by the
Board, and shall bear interest at a rate equal to the average market yield
(computed by the Secretary of the treasury on the basis of market quotations as
of the end of the calendar month next preceding the date of issue of such
obligations) on all marketable interest-bearing obligations of the United
States then forming a part of the public debt which are not due or callable
earlier than 4 years after the end of such calendar month. Any average market
yield computed under this paragraph which is not a multiple of one-eighth of 1
percent shall be rounded to the nearest multiple of one-eighth of 1
percent.</text>
</paragraph></subsection><subsection id="H0DDA483CC908427AAB582C270020927D"><enum>(f)</enum><header>Fixed Income
Investment Account</header><text>Amounts in the Fixed Income Investment Account
shall be invested in instruments or obligations which return the amount
invested and pay interest, at a specified rate or rates, on that amount during
a specified period of time, consisting of instruments or obligations in one or
more of the following categories:</text>
<paragraph id="HB188C9792A304E29BFBFB9009B940064"><enum>(1)</enum><text>insurance
contracts;</text>
</paragraph><paragraph id="H141A2B6E9D0F42E2A1004E1F00A7831F"><enum>(2)</enum><text>certificates of
deposit; or</text>
</paragraph><paragraph id="H2E78DD4204BA486094E300E594EFB963"><enum>(3)</enum><text>other instruments
or obligations selected by qualified professional asset managers.</text>
</paragraph></subsection><subsection display-inline="no-display-inline" id="H3DE4E8BACA70424EA6A712099CA9F75C"><enum>(g)</enum><header>Common Stock
Index Investment Account</header>
<paragraph id="H377BB81C4F91465600034193BE0007AD"><enum>(1)</enum><header>Portfolio
design</header><text>Amounts held in the Common Stock Investment Account shall
be invested in a portfolio of common stock designed to replicate the
performance of the index selected under paragraph (2). The portfolio shall be
designed such that, to the extent practicable, the percentage of the balance in
the Common Stock Index Investment Account that is invested in each stock is the
same as the percentage determined by dividing the aggregate market value of all
shares of that stock by the aggregate market value of all shares of all stocks
included in such index.</text>
</paragraph><paragraph id="H6953FF617F22472D89DE6E9B7C9F3511"><enum>(2)</enum><header>Selection of
index</header><text>The Board shall select, for purposes of investment of
amounts held in the Common Stock Investment Account, an index which is a
commonly recognized index comprised of common stock the aggregate market value
of which is a reasonably complete representation of the United States equity
markets.</text>
</paragraph></subsection><subsection id="H81A443C6E0E94BFF9238B4A28418527B"><enum>(h)</enum><header>Small
Capitalization Stock Index Investment Account</header>
<paragraph id="HE5F2C1D9F47D4A5CA6CC68C84DB8A426"><enum>(1)</enum><header>Portfolio
design</header><text>Amounts held in the Small Capitalization Stock Index
Investment Account shall be invested in a portfolio of common stock designed to
replicate the performance of the index selected under paragraph (2). The
portfolio shall be designed such that, to the extent practicable, the
percentage of the balance in the Small Capitalization Stock Index Investment
Account that is invested in each stock is the same as the percentage determined
by dividing the aggregate market value of all shares of that stock by the
aggregate market value of all shares of all stocks included in such
index.</text>
</paragraph><paragraph id="HFCFA0B21A2B9465AB06681B4311B415D"><enum>(2)</enum><header>Selection of
index</header><text>The Board shall select, for purposes of investment of
amounts held in the Small Capitalization Stock Index Investment Account, an
index which is a commonly recognized index comprised of common stock the
aggregate market value of which represents the United States equity markets
excluding the common stocks included in the Common Stock Index Investment
Account.</text>
</paragraph></subsection><subsection display-inline="no-display-inline" id="H0670B601AB9547790074DBDE42236419"><enum>(i)</enum><header>International
Stock Index Investment Account</header>
<paragraph id="H7D7FB83C5A67446290816614DB9C3D88"><enum>(1)</enum><header>Portfolio
design</header><text>Amounts held in the International Stock Index Investment
Account shall be invested in a portfolio of stock designed to replicate the
performance of the index selected under paragraph (2). The portfolio shall be
designed such that, to the extent practicable, the percentage of the balance in
the International Stock Index Investment Account that is invested in each stock
is the same as the percentage determined by dividing the aggregate market value
of all shares of that stock by the aggregate market value of all shares of all
stocks included in such index.</text>
</paragraph><paragraph id="H6B1AFC69B4414B518EC7237679AF307B"><enum>(2)</enum><header>Selection of
index</header><text>The Board shall select, for purposes of investment of
amounts held in the International Stock Index Investment Account, an index
which is a commonly recognized index comprised of common stock the aggregate
market value of which is a reasonably complete representation of the
international equity markets excluding the United States equity markets.</text>
</paragraph></subsection><subsection commented="no" id="HF697EEC1C968412F85FB232703E534B4"><enum>(j)</enum><header>Additional
investment options</header><text>The Board may from time to time, as determined
by regulation as appropriate to further the purposes of this section,
shall—</text>
<paragraph commented="no" id="H98EC5332E26F4B01A027DBCBC30017CF"><enum>(1)</enum><text>establish
investment accounts in the Tier II Investment Fund meeting the requirements of
this section in addition to those established by this section, and</text>
</paragraph><paragraph commented="no" id="H9E0ADFE1F225439CA14802B68C2AC09"><enum>(2)</enum><text>terminate
investment accounts in the Tier II Investment Fund established pursuant to
paragraph (1).</text>
</paragraph></subsection><subsection id="H949379E22FB941CB881BD7D548AF602F"><enum>(k)</enum><header>Disclosure of
administrative costs</header><text>The Board shall provide to each
participating individual an annual disclosure of the rate of administrative
costs chargeable with respect to investment in each investment account in the
Tier II Investment Fund. Such disclosure shall be written in a manner
calculated to be understood by the average participating individual.</text>
</subsection><subsection id="H4A60FD16FAFE4078AB66F55D9EC408B3"><enum>(l)</enum><header>Treatment of
amounts held in Tier II Investment Fund</header><text>Subject to this part,
amounts deposited into, and held and accounted for in, the Tier II Investment
Fund with respect to any participating individual shall continue to be treated
as property of such participating individual, held in trust for such
participating individual in the Fund.</text>
</subsection></section><section id="HF2EF333093D645F18CC8D26F5CC6CCB9"><enum>257.</enum><header>Tier III
Investment Options</header>
<subsection id="H2EFD2E43181E4B1F8C68ED80F9F0E109"><enum>(a)</enum><header>Election of Tier
III Investment Options</header>
<paragraph id="H8C5272BEEDFE403BA337FB54D0EE7328"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">A participating
individual may elect to direct transfers from amounts in the Savings Fund
credited to the personal social security savings account of such individual
into 1 or more Tier III Investment Options in accordance with paragraph
(2).</text>
</paragraph><paragraph id="H76ECA37E79064B75984ED627A500CB3F"><enum>(2)</enum><header>Commencement of
Tier III investment options upon attainment of election threshold</header><text display-inline="yes-display-inline">In any case in which, as of the end of any
calendar year, the total balance in the Savings Fund credited to a
participating individual’s personal social security savings account exceeds for
the first time the election threshold, the Board shall, by regulation, provide
for an opportunity for such participating individual to make, at any time
thereafter, such individual’s first election of one or more of the Tier III
Investment Options for investment of an amount in the Savings Fund credited to
such account. Such election may be in lieu of or in addition to investment in
the options available with respect to the Tier II Investment Fund of the
Savings Fund.</text>
</paragraph><paragraph id="HBCA8BAAFC832430E81F03B967917CA2"><enum>(3)</enum><header>Allocation of
funds</header><text display-inline="yes-display-inline">In the case of an
election under paragraph (1), funds credited to the personal social security
savings account of the participating individual and elected for transfer to one
or more Tier III Investment Options shall be transferred to the Tier III
Investment Options so elected for such calendar year, in percentages specified
in the election by the participating individual for each applicable
portfolio.</text>
</paragraph><paragraph id="HCF62E6CBF5A54740A1F93FAD9E986555"><enum>(4)</enum><header>Election
threshold</header>
<subparagraph id="HC76FB3496423429AACDC86DB741239D1"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">Subject to
subparagraph (B), for purposes of this subsection the term <term>election
threshold</term> means an amount equal to $25,000.</text>
</subparagraph><subparagraph id="H9B1CC0C79B0E46C2953613E2DE8CD280"><enum>(B)</enum><header>Adjustments</header><text display-inline="yes-display-inline">The Board shall adjust annually (effective
for annual reporting months occurring after December 2012) the dollar amount
set forth in subparagraph (A) under procedures providing for adjustments in the
same manner and to the same extent as adjustments are provided for under the
procedures used to adjust benefit amounts under section 215(i)(2)(A), except
that any amount so adjusted that is not a multiple of $1.00 shall be rounded to
the nearest multiple of $1.00.</text>
</subparagraph></paragraph><paragraph id="HDAA71942AC934FBB890300BF13A12597"><enum>(5)</enum><header>Subsequent
investment of amounts held in Tier III Investment Options</header><text>Any
amounts held in one or more Tier III Investment Options may be—</text>
<subparagraph id="H0B7E6E6C6DD1490083DAB57193CD0009"><enum>(A)</enum><text>transferred at any
time to one or more other Tier III Investment Options, subject to applicable
regulations of the Board and the terms governing the affected Tier III
Investment Options, and</text>
</subparagraph><subparagraph id="HD3CA7A7649D04373A3DE05B654291270"><enum>(B)</enum><text>transferred, not
more frequently than annually, to the Tier II Investment Fund, for deposit in
the applicable investment account then selected by the participating individual
under section 256.</text>
</subparagraph></paragraph></subsection><subsection id="HEB17C2126AEF4710ADB3EF1F00E268C7"><enum>(b)</enum><header>Certification of
eligible entities</header>
<paragraph id="HC46BEA820D474E5AA417E32044EDED60"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">The Board shall
certify eligible entities to offer Tier III Investment Options under this
part.</text>
</paragraph><paragraph id="H3FF8312BCE1E4DAE981759344F83F2C1"><enum>(2)</enum><header>Application</header><text display-inline="yes-display-inline">Any eligible entity that desires to be
certified by the Board to offer a Tier III Investment Option shall submit an
application to the Board at such time, in such manner, and containing such
information as the Board may require.</text>
</paragraph><paragraph id="HCBD5D218C4FD46A8BD536B00856C0065"><enum>(3)</enum><header>Requirements for
approval</header><text display-inline="yes-display-inline">The Board shall not
certify an eligible entity unless such eligible entity agrees to the following
requirements:</text>
<subparagraph id="H128824B8BC534A7FAC5F7D8304DA59C"><enum>(A)</enum><header>Separate
accounting</header><text display-inline="yes-display-inline">Each eligible
entity shall, with respect to each Tier III Investment Option offered by such
eligible entity to participating individuals—</text>
<clause id="HB72FFF36AFCD452FB74F491F31346400"><enum>(i)</enum><text>establish separate
accounts for the contributions of each participating individual, and any
earnings properly allocable to the contributions, and</text>
</clause><clause id="HE656093A402A4029AAEFABCA0200C27D"><enum>(ii)</enum><text>maintain separate
recordkeeping with respect to each account.</text>
</clause></subparagraph><subparagraph id="H474C7CDC6738415000002D00FF14B28"><enum>(B)</enum><header>Treatment of
amounts held in Fund</header><text display-inline="yes-display-inline">Amounts
deposited into, and held and accounted for in, a Tier III Investment Option
with respect to any participating individual shall be treated as property of
such participating individual, held in trust for such participating
individual.</text>
</subparagraph><subparagraph display-inline="no-display-inline" id="H2FA30FFB90A94B0A80F6F8E5A231BEA1"><enum>(C)</enum><header>Trust
requirements</header><text display-inline="yes-display-inline">Amounts held and
accounted for with respect to a participating individual shall be held in a
trust created or organized in the United States for the exclusive benefit of
such individual or his beneficiaries.</text>
</subparagraph><subparagraph id="HB8D765BCBAA248CA8C007FB6FA1C2267"><enum>(D)</enum><header>Exemption from
third party claims</header><text display-inline="yes-display-inline">Each Tier
III Investment Option shall be exempt from any and all third party claims
against the eligible entity.</text>
</subparagraph><subparagraph display-inline="no-display-inline" id="HA3B004BD3F8B4BDFA1D0DFC51FCFF138"><enum>(E)</enum><header>Disclosure of
administrative costs</header><text>Each eligible entity offering a Tier III
Investment Option under this section shall provide to each participating
individual an annual disclosure of the rate of administrative costs chargeable
with respect to investment in such Option. Such disclosure shall be written in
a manner calculated to be understood by the average participating individual.
The Board shall provide for coordination of disclosures with respect to Tier
III Investment Options under this subparagraph so as to assist participating
individuals in comparing alternative Options based on administrative
costs.</text>
</subparagraph><subparagraph id="H00DD26CFD2AA4CCCBE318DD890DEA9A2"><enum>(F)</enum><header>Reporting to the
Executive Director and the Board</header><text display-inline="yes-display-inline">Each eligible entity shall provide reports
to the Executive Director and the Board at such time, in such manner, and
containing such information as the Board may require.</text>
</subparagraph></paragraph><paragraph id="HE040B1E4E12F43F7AF0023BD64CF8D5"><enum>(4)</enum><header>Eligible entity
defined</header><text display-inline="yes-display-inline">For purposes of this
section, the term <term>eligible entity</term> means any investment company (as
defined in section 3 of the Investment Company Act of 1940) or other person
that the Board determines appropriate to offer Tier III Investment Options
under this part.</text>
</paragraph></subsection><subsection id="HFCB407A0D81543EAACFC48B9BC168024"><enum>(c)</enum><header>Approval of Tier
III Investment Options</header>
<paragraph id="H4D46B81A58414983A2AE6EB157005F3B"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">No funds may be
transferred into a Tier III Investment Option unless the Board has approved an
application submitted under paragraph (2) with respect to the option.</text>
</paragraph><paragraph id="H38F87BA63C9F403DBB9308BF56ACCB13"><enum>(2)</enum><header>Application</header><text display-inline="yes-display-inline">With respect to each Tier III Investment
Option that an eligible entity certified under subsection (b)(1) seeks to
offer, such entity shall submit an application to the Board at such time, in
such manner, and containing such information as the Board may require.</text>
</paragraph><paragraph id="H6BC1B5C6A62E405BBBA9DBFC14382921"><enum>(3)</enum><header>Qualifications
for approval</header><text>The Board may not approve an application submitted
under paragraph (2) in connection with a Tier III Investment Option unless the
following requirements are met:</text>
<subparagraph id="HDB9CBEC6D42B4A81A96E85140579C4B5"><enum>(A)</enum><header>Option must be
offered by certified eligible entity</header><text display-inline="yes-display-inline">The Tier III Investment Option is offered
by an eligible entity certified under subsection (b).</text>
</subparagraph><subparagraph id="H30B95EEA350D48F694EECEB45F9312D6"><enum>(B)</enum><header>Option must meet
quality factors</header>
<clause id="HA1C29970EF4841FBB5719002B3F31998"><enum>(i)</enum><header>In
general</header><text>The Tier III Investment Option meets qualifications which
shall be prescribed by the Board relating to the quality factors described in
clause (ii).</text>
</clause><clause id="H1A260D2B18F745D99E2BBA3211E64DFF"><enum>(ii)</enum><header>Quality
factors</header><text display-inline="yes-display-inline">The quality factors
described in this clause are—</text>
<subclause id="H13B8A2AF97E64613B87700BF9BA37199"><enum>(I)</enum><text display-inline="yes-display-inline">the safety and soundness of the Tier III
Investment Option's proposed investment policy;</text>
</subclause><subclause id="H2FC090051F07457AA0115DCD5E9775B2"><enum>(II)</enum><text display-inline="yes-display-inline">the experience and record of performance of
the proposed investment option, if any;</text>
</subclause><subclause id="H8D70BF4C73A5428C9E22DA2B1492B16C"><enum>(III)</enum><text display-inline="yes-display-inline">the experience and record of performance of
the entity issuing or offering such option; and</text>
</subclause><subclause id="H59CCD7BBABA54B93A48545EFDDA1B3B"><enum>(IV)</enum><text display-inline="yes-display-inline">such other factors as the Board may
determine appropriate.</text>
</subclause></clause></subparagraph></paragraph></subsection><subsection id="H8F613A5D457B4C2186A8404C27C0D2AA"><enum>(d)</enum><header>Considerations
for certification and approval</header><text display-inline="yes-display-inline">In determining whether to certify an
eligible entity under subsection (b) or to approve a Tier III Investment Option
under subsection (c), the Board shall—</text>
<paragraph id="H664788FF754D4465A5A945D222D9AF1C"><enum>(1)</enum><text display-inline="yes-display-inline">act in the best interests of the
participating individuals;</text>
</paragraph><paragraph id="H27604B1571034E5A9BD902B7317041E"><enum>(2)</enum><text display-inline="yes-display-inline">base its determination solely on
considerations of balancing safety and soundness of the Tier III Investment
Option with the maximization of returns of such option; and</text>
</paragraph><paragraph id="H9396BDAD386D4A8BA769ABDD6CF8C326"><enum>(3)</enum><text display-inline="yes-display-inline">not base any determination related to the
entity or option on political or other extraneous considerations.</text>
</paragraph></subsection><subsection id="H722FEDBAD6724501A8E21000E6E382B0"><enum>(e)</enum><header>Sponsorship of
Tier III Investment Options by Membership and Labor Organizations</header>
<paragraph id="H25B97C265CC648ACB1C5D91989E1B563"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">A membership or labor
organization (as defined by the Board) may sponsor Tier III Investment Options
under contracts with eligible entities certified under subsection (b) who shall
administer the investment option if such investment option is approved by the
Board under subsection (c).</text>
</paragraph><paragraph id="H4883FB5592E14B3D937153A61EC87D30"><enum>(2)</enum><header>Limitation to
membership</header><text display-inline="yes-display-inline">A membership or
labor organization (as so defined) may limit to the members of such
organization participation in a Tier III Investment Option sponsored by such
organization.</text>
</paragraph></subsection><subsection id="H9B0A48CCD7124D2AABE5A62486BB3D1C"><enum>(f)</enum><header>Distributions in
case of death</header><text>Upon the death of a participating individual, the
amount of any assets held under a Tier III Investment Option credited to the
personal social security savings account of such individual shall be
distributed in accordance with section 258(e).</text>
</subsection></section><section id="H7DCC998CD91A4BA1A7BC343E2336E1CA"><enum>258.</enum><header>Personal Social
Security savings annuity and other distributions</header>
<subsection id="H5020CE65706D4149869C9590765DAA5F"><enum>(a)</enum><header>Date of initial
distribution</header><text display-inline="yes-display-inline">Except as
provided in subsection (e), distributions may be made to a participating
individual from amounts credited to the personal social security savings
account of such individual only on or after the earliest of—</text>
<paragraph id="HAF14439BDE374555854F49FD76A1B9DF"><enum>(1)</enum><text display-inline="yes-display-inline">the date the participating individual
attains retirement age (as defined in section 216(l)(1)) or, if elected by the
individual, early retirement age (as defined in section 216(l)(2)); or</text>
</paragraph><paragraph id="HDAA112A80400418BA96BBD22D3FF9B1B"><enum>(2)</enum><text display-inline="yes-display-inline">the date on which the amount credited to
the participating individual's personal social security savings account is
sufficient to purchase a personal social security savings annuity with a
monthly benefit that is at least equal to the minimum annuity payment amount
(as defined in subsection (b)(4)(C)(iii)).</text>
</paragraph></subsection><subsection id="H6363EBC21E9440129718B87834883383"><enum>(b)</enum><header>Personal social
security savings annuities</header>
<paragraph id="HE415FFB305624C79878C572364616E4E"><enum>(1)</enum><header>Notice of
available annuities</header><text display-inline="yes-display-inline">Not later
than the date determined under subsection (a), the Board shall notify each
participating individual of—</text>
<subparagraph id="H411C5CDA263040E793D93E648600AB00"><enum>(A)</enum><text display-inline="yes-display-inline">the most recent listing of personal social
security savings annuities offered by the Annuity Issuance Authority under
paragraph (2); and</text>
</subparagraph><subparagraph id="H110CB78E83824F84B6D5007C7DBECE5E"><enum>(B)</enum><text display-inline="yes-display-inline">the entitlement of the participating
individual to purchase such an annuity.</text>
</subparagraph></paragraph><paragraph display-inline="no-display-inline" id="HC4E5172A358D43F6958F7D4D8310C542"><enum>(2)</enum><header>Annuity Issuance
Authority</header><text>There is established in the office of the Board an
agency which shall be known as the <quote>Annuity Issuance Authority</quote>.
The Authority shall provide, in accordance with regulations of the Board, for
the issuance of personal social security savings annuities for purchase from
the Authority under this section and to otherwise administer the issuance of
such annuities in accordance with such regulations.</text>
</paragraph><paragraph display-inline="no-display-inline" id="H377FE92FFE7B4452908319C9AC985D38"><enum>(3)</enum><header>Annuity Reserves
Account</header><text>There is established in the Savings Fund an Annuity
Reserves Account. The Account shall consist of all amounts received by the
Authority from the purchase of personal social security savings annuities under
this section (plus such amounts as may be transferred to the Account under
paragraph (5)(B)), increased by the total net earnings from investments of such
reserves under subparagraph (A) of paragraph (5) and reduced by the total net
losses from investments of such reserves under such subparagraph.</text>
</paragraph><paragraph id="HA2488052C41B437CA3CAB00005322C8"><enum>(4)</enum><header>Purchase of
annuities</header>
<subparagraph id="H48A43D6BF8F24857AEFA002E98EBCF43"><enum>(A)</enum><header>Selection of
annuity</header><text display-inline="yes-display-inline">On a date elected by
the participating individual, but no earlier than the date determined under
subsection (a), a participating individual may purchase a personal social
security savings annuity selected from among the annuities offered by the
Authority under paragraph (2).</text>
</subparagraph><subparagraph id="H4CF274BC5E9A4A47B4EFBC6478BB3913"><enum>(B)</enum><header>Transfer of
assets</header><text display-inline="yes-display-inline">Upon the selection of
an annuity by a participating individual under subparagraph (A), the Board
shall provide for the transfer of assets, credited to the personal social
security savings account of the participating individual and held in the Tier
II Investment Fund or under 1 or more Tier III Investment Options (or any
combination thereof), in a total amount sufficient to purchase the annuity
selected by the participating individual from annuities offered by the
Authority.</text>
</subparagraph><subparagraph id="H90A3470372B547B7A2F55D53B2D4E3BC"><enum>(C)</enum><header>Minimum annuity
payment amount</header>
<clause id="HDE3F3298D9E5460D874C07EC712590D9"><enum>(i)</enum><header>In
general</header><text display-inline="yes-display-inline">Subject to
subparagraph (D), if, at the time a personal social security savings annuity is
purchased under subparagraph (A), the assets credited to the personal social
security savings account of the participating individual are sufficient to
purchase a personal social security savings annuity offered by the Authority
under paragraph (2) with a monthly annuity payment that is at least equal to
the minimum annuity payment amount, the amount of the monthly annuity payment
provided by such annuity may not be less then the minimum annuity payment
amount.</text>
</clause><clause id="H78772F6B8F6142DA979FC1B55867394"><enum>(ii)</enum><header>Construction</header><text display-inline="yes-display-inline">Nothing in this subparagraph shall be
construed to prohibit a participating individual from using personal social
security savings account assets to purchase a personal social security savings
annuity offered by the Authority under paragraph (2) which provides for a
monthly payment in excess of the minimum amount required under clause
(i).</text>
</clause><clause id="HDB9B5C3210584AC99BF6098842F7E32"><enum>(iii)</enum><header>Minimum annuity
payment amount defined</header><text display-inline="yes-display-inline">For
purposes of this part, the term <term>minimum annuity payment amount</term>
means, as of any date, an amount equal to the monthly equivalent of 150 percent
of the poverty line for an individual (as in effect on such date), determined
under the poverty guidelines of the Department of Health and Human Services
issued under sections 652 and 673(2) of the Omnibus Budget Reconciliation Act
of 1981.</text>
</clause></subparagraph><subparagraph id="H4DE651478FF141B7B16B5CA5B1EF85C8"><enum>(D)</enum><header>Purchase of
annuities in the event of insufficient assets</header><text display-inline="yes-display-inline">If a participating individual desires, or
is required under subsection (f), to purchase a personal social security
savings annuity under subsection (b) on or after the date determined under
subsection (a)(1) and the assets of the personal social security savings
account of such individual are insufficient to purchase a personal social
security savings annuity that provides for a monthly payment that is at least
equal to the minimum annuity payment amount (as defined in paragraph
(4)(C)(iii)), the participating individual shall purchase a personal social
security savings annuity with a monthly payment equal to the maximum amount
that the participating individual's personal social security savings account
can fund, as determined in accordance with regulations which shall be
prescribed by the Authority, and that otherwise meets the requirements of this
subsection (including the cost-of-living protection requirement of subsection
(c)(1)(C)), and the Authority shall provide for appropriate certification to
the Secretary of the Treasury with respect to the participating individual’s
eligibility for guarantee payments under section 259.</text>
</subparagraph></paragraph><paragraph id="H4B5F2353213B43F69C3455E5C4A6E364"><enum>(5)</enum><header>Maintenance of
reserves for payment of annuities</header>
<subparagraph id="H55E368C33D6D411EAB3E12E795AAEAE"><enum>(A)</enum><header>Investment of
reserves</header><text>For purposes of investment of reserves held in the
Annuity Reserves Account, the Authority shall contract with appropriate
investment managers, recordkeepers, and custodians selected by the Authority
for investment of such reserves. Such reserves shall be invested under
regulations which shall be prescribed by the Authority so as to ensure, to the
maximum extent practicable, that, of the total balance of the reserves (after
payment of administrative expenses to such managers, recordkeepers, and
custodians)—</text>
<clause id="H341BE4CFAD8A454EB435E9DC288DC8F2"><enum>(i)</enum><text>65
percent is invested in equities in the same manner and under the same standards
as are provided in section 256(c)(4), and</text>
</clause><clause id="HC21965DC7291488093D4D00B2422E00"><enum>(ii)</enum><text>35
percent is invested in fixed income instruments in the same manner and under
the same standards as are provided in section 256(c)(5).</text>
</clause></subparagraph><subparagraph id="H1508162B95A34205B3F596002352E963"><enum>(B)</enum><header>Provision for
full payment of annuities</header><text>Payment of personal social security
savings annuities in accordance with the terms of such annuities shall be made,
irrespective of the sufficiency of reserves in the Annuity Reserves Fund
attributable to funds obtained from the purchase of such annuities. In the
event of any impending insufficiency in the Annuity Reserves Account for the
next fiscal year, the Authority shall certify to the Secretary of the Treasury
the amount of such insufficiency, and the Secretary of the Treasury shall
transfer from the Federal Old-Age and Survivors Insurance Trust Fund to the
Annuity Reserves Account the amount of the insufficiency, as so certified, in
such installments, made prior to or during such fiscal year, as are necessary
to eliminate in advance such insufficiency.</text>
</subparagraph></paragraph></subsection><subsection id="H35C55007A67944CF85AEC26CC128FCAB"><enum>(c)</enum><header>Personal social
security savings annuity</header>
<paragraph id="H74AEFB6CB03B4019A235D4EE45336B38"><enum>(1)</enum><header>In
general</header><text>For purposes of this part, the term <term>personal social
security savings annuity</term> means an annuity that meets the following
requirements:</text>
<subparagraph id="H378573A467E945C7898E000775B4D8B"><enum>(A)</enum><text display-inline="yes-display-inline">The annuity starting date (as defined in
section 72(c)(4) of the Internal Revenue Code of 1986) commences on the first
day of the month beginning after the date of the purchase of the
annuity.</text>
</subparagraph><subparagraph id="HEE537935AC8C4ACF0076ADCE8EF4CA9D"><enum>(B)</enum><text display-inline="yes-display-inline">The terms of the annuity provide—</text>
<clause id="H84EE5CAD52774C0DA61EB31EEA00CF8F"><enum>(i)</enum><text>for a monthly
payment to the participating individual during the life of the participating
individual equal to at least the minimum annuity payment amount (as defined in
subsection (b)(4)(C)(iii)), or</text>
</clause><clause id="H7C97097498574D85A8EA9D3797B41839"><enum>(ii)</enum><text>in the case of an
annuity purchased under subparagraph (D) of subsection (b)(4), the maximum
monthly payment determined under regulations prescribed under such
subparagraph.</text>
</clause></subparagraph><subparagraph display-inline="no-display-inline" id="H526DE9FD4D2247A6A61D3C2041D70406"><enum>(C)</enum><text display-inline="yes-display-inline">The terms of the annuity include procedures
providing for adjustments in the amount of the monthly payments in the same
manner and to the same extent as adjustments are provided for under the
procedures used to adjust benefit amounts under section 215(i)(2)(A). Nothing
in this subparagraph shall be construed to preclude the terms governing such an
annuity from providing for adjustments in the amount of monthly payments
resulting in a payment for any month greater than the payment for that month
that would result from adjustments required under the preceding sentence
(b)(4)(D).</text>
</subparagraph><subparagraph id="H2DF19CCEB7264A27BFE0D015E1B09FBB"><enum>(D)</enum><text display-inline="yes-display-inline">The terms of the annuity include such other
terms and conditions as the Board requires for the protection of the
annuitant.</text>
</subparagraph></paragraph><paragraph id="HC2233D50866744EBAB0093DCAAA4F7B7"><enum>(2)</enum><header>Exemption from
third party claims</header><text display-inline="yes-display-inline">Each
personal social security savings annuity shall be exempt from any and all third
party claims against the issuer.</text>
</paragraph></subsection><subsection id="H257D32502A6A40948E392EDCA0E77C58"><enum>(d)</enum><header>Right To use
excess personal Social Security savings account assets</header><text display-inline="yes-display-inline">To the extent assets credited to a
participating individual's personal social security savings account remain
after the purchase of an annuity under subsection (b), the remaining assets
shall be payable to the participating individual at such time, in such manner,
and in such amounts as the participating individual may specify, subject to
subsection (f).</text>
</subsection><subsection display-inline="no-display-inline" id="H1B9501C321B3477FB238121557BCBE60"><enum>(e)</enum><header>Distributions in
case of death</header><text display-inline="yes-display-inline">If the
participating individual dies before all amounts which are held in the Tier I
Investment Fund or the Tier II Investment Fund of the Savings Fund or held
under a Tier III Investment Option and which are credited to the personal
social security savings account of the individual are otherwise distributed in
accordance with this section, such amounts shall be distributed, under
regulations which shall be prescribed by the Board—</text>
<paragraph id="H0BFE886AB75347F08BE60055DB23CBEC"><enum>(1)</enum><text display-inline="yes-display-inline">in any case in which one or more
beneficiaries have been designated in advance, to such beneficiaries in
accordance with such designation as provided in such regulations, and</text>
</paragraph><paragraph id="H3DD90213A09D41D8A570B310CCB44100"><enum>(2)</enum><text>in the case of any
amount not distributed as described in paragraph (1), to such individual's
estate.</text>
</paragraph></subsection><subsection commented="no" id="HA43E822CD8AA417AB305A52753DE0413"><enum>(f)</enum><header>Date of final
distribution</header><text>All amounts credited to the personal social security
savings account of an individual shall be distributed, by means of the purchase
of annuities or otherwise in a manner consistent with the requirements of this
section, not later than 5 years after the date the individual attains
retirement age (as defined in section 216(l)). The Board shall provide by
regulation for means of distribution necessary to ensure compliance with the
requirements of this subsection.</text>
</subsection></section><section id="HB84B624BF91049C4AEFEED6D126E41A3"><enum>259.</enum><header>Guarantee of
promised benefits</header>
<subsection id="HBD8C01859BC34128BEC414B25BBD59B1"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">If, for any month
ending after the date on which a participating individual attains retirement
age (as defined in section 216(l)(1)), the monthly payment under a
participating individual's personal social security savings annuity is less
than the minimum annuity payment amount (as defined in section
258(b)(4)(C)(iii)), adjusted as provided in section 258(c)(1)(C), the Annuity
Issuance Authority shall so certify to the Secretary of the Treasury and, upon
receipt of such certification, such Secretary shall provide to the
participating individual, from amounts in the Federal Old-Age and Survivors
Insurance Trust Fund, a guaranty payment for such month to supplement the
personal social security savings annuity and to guarantee full payment of such
individual's monthly promised benefits.</text>
</subsection><subsection id="H73DD56E4E2F14E37B4A8D100E1F80E9"><enum>(b)</enum><header>Guaranty
payment</header><text display-inline="yes-display-inline">For purposes of
subsection (a), a participating individual's guaranty payment for any month is
equal to the excess of—</text>
<paragraph id="HBE973D18747B424184948FEB52637CAD"><enum>(1)</enum><text display-inline="yes-display-inline">the minimum annuity payment amount (as
defined in section 258(b)(4)(C)(iii)), adjusted as provided in section
258(c)(1)(C); over</text>
</paragraph><paragraph id="HC329C8970A6143E4B419004992842DBF"><enum>(2)</enum><text display-inline="yes-display-inline">the payment for such month of the personal
social security savings annuity purchased by the participating
individual.</text>
</paragraph></subsection><subsection id="HB2959A4AF5E34F928C2F4897855000B4"><enum>(c)</enum><header>Protection of
part <enum-in-header>A</enum-in-header> normal retirement benefit
levels</header>
<paragraph id="H509350FA79CF4AE8B1E659151639A768"><enum>(1)</enum><header>In
general</header><text>In any case in which, for any month ending after the date
on which a participating individual attains retirement age (as defined in
section 216(l)(1))—</text>
<subparagraph id="HEF844CC91D574F51939DF54B84FCFA8E"><enum>(A)</enum><text>such individual’s
assumed total normal retirement part A benefit for such month, exceeds</text>
</subparagraph><subparagraph id="H6B5171FC91C54A37AF59FE1D800F39E"><enum>(B)</enum><text>the monthly payment
payable for such month under such individual’s personal social security savings
annuity,</text>
</subparagraph><continuation-text continuation-text-level="paragraph">the
Secretary of the Treasury shall pay to such individual for such month, from
amounts in the Federal Old-Age and Survivors Insurance Trust Fund, an
additional amount (if any) equal to the excess of the amount described in
subparagraph (A) over the amount described in subparagraph (B).</continuation-text></paragraph><paragraph id="HA95BAA3D287A4D1FA012EE1B83D4D39"><enum>(2)</enum><header>Definition</header><text>For
purposes of this subsection, the term <term>assumed total normal retirement
part A benefit</term> means, in connection with a participating individual, the
total amount of monthly insurance benefits under section 202 based on such
individual’s wages and self-employment income (adjusted by taking into account
adjustments under section 215(i)) that would have been payable if—</text>
<subparagraph id="HB9C48200E7B34BC9AE552E20FE4004A7"><enum>(A)</enum><text>section 202(z) did
not apply, and</text>
</subparagraph><subparagraph id="H6F9E7F0081274CD98521B2BB026100DE"><enum>(B)</enum><text>such individual
applied for old-age insurance benefits under section 202(a) during the month in
which such individual attains retirement age (as defined in section
216(l)(1)).</text>
</subparagraph></paragraph></subsection></section><section id="H1899404C84884F78003BD79EC35270DB"><enum>260.</enum><header>Personal Social
Security Savings Board</header>
<subsection id="HE0E281A05B6D427BBA3CFFBB2CC9582E"><enum>(a)</enum><header>Establishment</header><text>There
is established in the executive branch of the Government a Personal Social
Security Savings Board.</text>
</subsection><subsection id="HA8DF4B454E0A4FDDAEE79EF900AFA391"><enum>(b)</enum><header>Composition</header><text>The
Board shall be composed of—</text>
<paragraph id="HB42B21D196B84A828BC49AFF27E6002"><enum>(1)</enum><text>3 members appointed
by the President, of whom 1 shall be designated by the President as Chairman;
and</text>
</paragraph><paragraph id="H8C33D78806524DAD9BCE4E62AE1F2E53"><enum>(2)</enum><text>2 members
appointed by the President, of whom—</text>
<subparagraph id="HE3F9A89B68124AB4BB2DFDE58D81BF79"><enum>(A)</enum><text>1 shall be
appointed by the President after taking into consideration the recommendation
made by the Speaker of the House of Representatives in consultation with the
minority leader of the House of Representatives; and</text>
</subparagraph><subparagraph id="HA1AD96BC283C490BA8424B9E95C4900"><enum>(B)</enum><text>1 shall be
appointed by the President after taking into consideration the recommendation
made by the majority leader of the Senate in consultation with the minority
leader of the Senate.</text>
</subparagraph></paragraph></subsection><subsection id="HA0BBD01AFABF4D89B94848FC26385EF6"><enum>(c)</enum><header>Advice and
consent</header><text>Appointments under subsection (b) shall be made by and
with the advice and consent of the Senate.</text>
</subsection><subsection id="H430CA12CEB564335962E91B00F47654"><enum>(d)</enum><header>Membership
requirements</header><text>Members of the Board shall have substantial
experience, training, and expertise in the management of financial investments
and pension benefit plans.</text>
</subsection><subsection id="H8C0482507BB34672B5CA6C01B1F85E00"><enum>(e)</enum><header>Length of
appointments</header>
<paragraph id="H26BACBDA47EA4140881E64CF6EBA54BC"><enum>(1)</enum><header>Terms</header><text>A
member of the Board shall be appointed for a term of 4 years, except that of
the members first appointed under subsection (b)—</text>
<subparagraph id="HEBFAE32D386E4EBC8898904F0089CAFC"><enum>(A)</enum><text>the Chairman shall
be appointed for a term of 4 years;</text>
</subparagraph><subparagraph id="HFFDC3931036F4DECBA7E317CDAF3AA00"><enum>(B)</enum><text>the members
appointed under subsection (b)(2) shall be appointed for terms of 3 years;
and</text>
</subparagraph><subparagraph id="H862EAC1FFBBB4D6C81F1AC13046EF833"><enum>(C)</enum><text>the remaining
members shall be appointed for terms of 2 years.</text>
</subparagraph></paragraph><paragraph id="H1CBF698C7072430188A1F8239FD4A2E9"><enum>(2)</enum><header>Vacancies</header>
<subparagraph id="H46266253A4834F83BC8176EB9600D083"><enum>(A)</enum><header>In
general</header><text>A vacancy on the Board shall be filled in the manner in
which the original appointment was made and shall be subject to any conditions
that applied with respect to the original appointment.</text>
</subparagraph><subparagraph id="H80F09554FDE547D7B9797D7E126982F1"><enum>(B)</enum><header>Completion of
term</header><text>An individual chosen to fill a vacancy shall be appointed
for the unexpired term of the member replaced.</text>
</subparagraph></paragraph><paragraph id="HE31386651F8F471EBC735F0081542581"><enum>(3)</enum><header>Expiration</header><text>The
term of any member shall not expire before the date on which the member's
successor takes office.</text>
</paragraph></subsection><subsection id="H089AD6715F1A4577AB4366564167A453"><enum>(f)</enum><header>Duties</header><text>The
Board shall—</text>
<paragraph id="H0130820F02574A3691941147C8393427"><enum>(1)</enum><text>administer the
program established under this part;</text>
</paragraph><paragraph id="HDB7BAC11441D415887527D00CDB44A1"><enum>(2)</enum><text>establish policies
for the investment and management of the Savings Fund, including the Tier I
Investment Fund and the Tier II Investment Fund, and amounts held under Tier
III Investment Options, including policies applicable to the asset managers,
recordkeepers, and custodians with responsibility for managing the investment
of amounts credited to personal social security investment accounts, and for
the management and operation of personal social security savings annuities,
which shall provide for—</text>
<subparagraph id="H7A6E46F14B4B47299309CDA03C96C39"><enum>(A)</enum><text>prudent investments
suitable for accumulating funds for payment of retirement income;</text>
</subparagraph><subparagraph id="H8668528A02DA407FB0C3C968EBC22141"><enum>(B)</enum><text>sound management
practices; and</text>
</subparagraph><subparagraph id="HA6CFB0C1D1D24F99917B695026041E4D"><enum>(C)</enum><text>low administrative
costs;</text>
</subparagraph></paragraph><paragraph id="H8DE5A617D453420CB7FE8521D7A39016"><enum>(3)</enum><text>review the
performance of investments made for the Tier I Investment Fund and the Tier II
Investment Fund;</text>
</paragraph><paragraph id="HD2F8127D410A4409BAC94FB3F8182F05"><enum>(4)</enum><text>review the
performance of investments made under Tier III Investment Options;</text>
</paragraph><paragraph id="HF0F151D5E18547118F515269FA5581C6"><enum>(5)</enum><text>review the
management and operation of personal social security savings annuities;</text>
</paragraph><paragraph id="HABAE5C9AE18E46C9AA99D2B52BA7211"><enum>(6)</enum><text>review and approve
the budget of the Board; and</text>
</paragraph><paragraph id="HDEF9D03C3AC94A32A23BC77068DFBFF3"><enum>(7)</enum><text>comply with the
fiduciary requirements of part 4 of subtitle B of title I of the Employee
Retirement Income Security Act of 1974 (relating to fiduciary responsibility)
in connection with any exercise of discretion in connection with the assets of
the Savings Fund.</text>
</paragraph></subsection><subsection id="HDE0FE71113864FE5936352C3344969A3"><enum>(g)</enum><header>Administrative
provisions</header>
<paragraph id="H86AAE0DDAA4D413F88E3A311D5F5E97C"><enum>(1)</enum><header>In
general</header><text>The Board may—</text>
<subparagraph id="H8F11DF798DF14477B2E281E26A6EC71"><enum>(A)</enum><text>adopt, alter, and
use a seal;</text>
</subparagraph><subparagraph id="HFD4FDCBE726D48AB89DB45EBBA4E48AA"><enum>(B)</enum><text>except as provided
in paragraph (4), direct the Executive Director to take such action as the
Board considers appropriate to carry out the provisions of this part and the
policies of the Board in accordance with delegations under this part;</text>
</subparagraph><subparagraph id="H0F220E5991AE478EBFE908F207D0F31C"><enum>(C)</enum><text>upon the
concurring votes of 4 members, remove the Executive Director from office for
good cause shown;</text>
</subparagraph><subparagraph id="HA06AE0B76C814C828537BA894F659887"><enum>(D)</enum><text>provide to the
Executive Director such resources as are necessary to carry out the duties of
the Executive Director; and</text>
</subparagraph><subparagraph id="H4E774630A60E4CF1A1525BBBEECB49F"><enum>(E)</enum><text>take such other
actions as may be necessary to carry out the functions of the Board.</text>
</subparagraph></paragraph><paragraph id="H1696037814884895856928EE44B60007"><enum>(2)</enum><header>Meetings</header><text>The
Board shall meet—</text>
<subparagraph id="H63DC72A12941430CA6001ED3465C03E"><enum>(A)</enum><text>not less than once
during each month; and</text>
</subparagraph><subparagraph id="HA656385A97DE41A5AD7B60ADF7E66FA2"><enum>(B)</enum><text>at additional
times at the call of the Chairman.</text>
</subparagraph></paragraph><paragraph id="H15D5D9BB7C03484FA22BA498A139494D"><enum>(3)</enum><header>Exercise of
powers</header>
<subparagraph id="H071933EEEA254EADAEF4ECD702BFA369"><enum>(A)</enum><header>In
general</header><text>Except as provided in paragraph (1)(C), the Board shall
perform the functions and exercise the powers of the Board on a majority vote
of a quorum of the Board. Three members of the Board shall constitute a quorum
for the transaction of business.</text>
</subparagraph><subparagraph id="H640788079C434AA58DAAB6C5CA3E0CB"><enum>(B)</enum><header>Vacancies</header><text>A
vacancy on the Board shall not impair the authority of a quorum of the Board to
perform the functions and exercise the powers of the Board.</text>
</subparagraph></paragraph><paragraph id="H6333975DF4A446629DE589DB97E16CE8"><enum>(4)</enum><header>Limitations on
investments</header><text>The Board may not direct any person to invest or to
cause to be invested any sums in the Tier II Investment Fund or any personal
social security investment account in a specific asset or to dispose of or
cause to be disposed of any specific asset of such Fund or any such
account.</text>
</paragraph></subsection><subsection id="HC5E013E6A6854696A528CDA781F7305"><enum>(h)</enum><header>Compensation</header>
<paragraph id="HD349628D979A4A279C9CFA7EB2F39D9D"><enum>(1)</enum><header>In
general</header><text>Each member of the Board who is not an officer or
employee of the Federal Government shall be compensated at the daily rate of
basic pay for level IV of the Executive Schedule for each day during which such
member is engaged in performing a function of the Board.</text>
</paragraph><paragraph id="H8F8C8FDA1FA64F60A7E99FB56CF713F"><enum>(2)</enum><header>Expenses</header><text>A
member of the Board shall be paid travel, per diem, and other necessary
expenses under subchapter I of chapter 57 of title 5, United States Code, while
traveling away from such member's home or regular place of business in the
performance of the duties of the Board.</text>
</paragraph><paragraph id="H80B7A89DFE154E399329E9FBF4D3CFD0"><enum>(3)</enum><header>Source of
funds</header><text>Payments authorized under this subsection shall be paid
from the Tier I Investment Fund or the Tier II Investment Fund, as determined
appropriate by the Board.</text>
</paragraph></subsection><subsection id="HDC613744424E497C84F8919607E73B39"><enum>(i)</enum><header>Discharge of
responsibilities</header><text>The members of the Board shall discharge their
responsibilities solely in the interest of the participating individuals and
their beneficiaries under this part.</text>
</subsection><subsection id="HC2E920C8587345EF004D3CB7234E4EDB"><enum>(j)</enum><header>Annual
independent audit</header><text>The Board shall annually engage an independent
qualified public accountant to audit the activities of the Board.</text>
</subsection><subsection id="H12EA7B7428DA4946B46F4BF886DF45A6"><enum>(k)</enum><header>Submission of
budget to Congress</header><text>The Board shall prepare and submit to the
President, and, at the same time, to the appropriate committees of Congress, an
annual budget of the expenses and other items relating to the Board which shall
be included as a separate item in the budget required to be transmitted to
Congress under section 1105 of title 31, United States Code.</text>
</subsection><subsection id="H4742468AE3EA474B813DB9247FFE343F"><enum>(l)</enum><header>Submission of
legislative recommendations</header><text>The Board may submit to the
President, and, at the same time, shall submit to each House of Congress, any
legislative recommendations of the Board relating to any of its functions under
this part or any other provision of law.</text>
</subsection></section><section id="HECCCC085EA4143B7BD83004DC574AC47"><enum>261.</enum><header>Executive
Director</header>
<subsection id="H73431F70485247579E07A77ECE623181"><enum>(a)</enum><header>Appointment of
Executive Director</header><text>The Board shall appoint, without regard to the
provisions of law governing appointments in the competitive service, an
Executive Director by action agreed to by a majority of the members of the
Board.</text>
</subsection><subsection id="H2916821753424BB4B3BEA255B923A933"><enum>(b)</enum><header>Duties</header><text>The
Executive Director shall, as determined appropriate by the Board—</text>
<paragraph id="H6822FB705487480CB5714C77BB73F754"><enum>(1)</enum><text>carry out the
policies established by the Board;</text>
</paragraph><paragraph id="H2C332B00796A494C9FDBD11D65BD2ED7"><enum>(2)</enum><text>invest and manage
the Tier I Investment Fund and the Tier II Investment Fund in accordance with
the investment policies and other policies established by the Board;</text>
</paragraph><paragraph id="H658692951D2E4502977D4011D4F2ED7D"><enum>(3)</enum><text>administer the
provisions of this part relating to the Tier I Investment Fund and the Tier II
Investment Fund; and</text>
</paragraph><paragraph id="H7752102E79C44D08816443E4F9900C3"><enum>(4)</enum><text>prescribe such
regulations (other than regulations relating to fiduciary responsibilities) as
may be necessary for the administration of this part relating to the Tier I
Investment Fund and the Tier II Investment Fund.</text>
</paragraph></subsection><subsection id="H6BAB9276E0BE44FD83B41E449E6D68D3"><enum>(c)</enum><header>Administrative
authority</header><text>The Executive Director may, within the scope of the
duties of the Executive Director as determined by the Board—</text>
<paragraph id="HD5EDB9D2B378407FAD856488C2DD896C"><enum>(1)</enum><text>appoint such
personnel as may be necessary to carry out the provisions of this part relating
to the Tier I Investment Fund and the Tier II Investment Fund;</text>
</paragraph><paragraph id="H6959DF54F50442A7B598D44C1C4B18E4"><enum>(2)</enum><text>subject to
approval by the Board, procure the services of experts and consultants under
section 3109 of title 5, United States Code;</text>
</paragraph><paragraph id="H76195AA2972A4BC99E17DB9E3360B9E0"><enum>(3)</enum><text>secure directly
from an Executive agency, the United States Postal Service, or the Postal Rate
Commission any information necessary to carry out the provisions of this part
and the policies of the Board relating to the Tier I Investment Fund and the
Tier II Investment Fund;</text>
</paragraph><paragraph id="HAC95A5FC4AC94C8E923C363600C033AB"><enum>(4)</enum><text>make such payments
out of sums in the Tier I Investment Fund and the Tier II Investment Fund as
the Executive Director determines, in accordance with regulations of the Board,
are necessary to carry out the provisions of this part and the policies of the
Board;</text>
</paragraph><paragraph id="HAC11ABA9310B4EE39691FBECC2120130"><enum>(5)</enum><text>pay the
compensation, per diem, and travel expenses of individuals appointed under
paragraphs (1), (2), and (6) from the Tier I Investment Fund or the Tier II
Investment Fund, in accordance with regulations of the Board;</text>
</paragraph><paragraph id="HE115E1EFCCD948B3B63DFB96ADF8161E"><enum>(6)</enum><text>accept and use the
services of individuals employed intermittently in the Government service and
reimburse such individuals for travel expenses, authorized by section 5703 of
title 5, United States Code, including per diem as authorized by section 5702
of such title;</text>
</paragraph><paragraph id="HC653855ADE984A92A022B694AF7CAFFF"><enum>(7)</enum><text>except as
otherwise expressly prohibited by law or the policies of the Board, delegate
any of the Executive Director's functions to such employees under the Board as
the Executive Director may designate and authorize such successive
redelegations of such functions to such employees under the Board as the
Executive Director may consider to be necessary or appropriate; and</text>
</paragraph><paragraph id="H8017478AD12E453F0000B5F16EA86700"><enum>(8)</enum><text>take such other
actions as are appropriate to carry out the functions of the Executive
Director.</text>
</paragraph></subsection></section></part><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H85DBC8ABDCD84080844C6B3E3CCBCFB1"><enum>(b)</enum><header>Effective
date</header><text>The amendments made by this section shall apply with respect
to wages paid after December 31, 2011, for pay periods ending after such date
and self-employment income for taxable years beginning after such date.</text>
</subsection></section><section id="H8E07E39875314238807E26F621A408C3"><enum>403.</enum><header>Monthly
insurance benefits for participating individuals</header><text display-inline="no-display-inline">Section 202 of the Social Security Act (42
U.S.C. 402) is amended by adding at the end the following new
subsection:</text>
<quoted-block display-inline="no-display-inline" id="HC37BD57E620447A3919F65E9BDE6159" other-style="archaic" style="other">
<subsection id="HF8497C874B0D471B8679FCF1075CAC5D"><enum>(z)</enum><header>Benefits for participants under part B</header><paragraph commented="no" display-inline="yes-display-inline" id="HF520E02CBFDE458882B83C00CF16AE60"><enum>(1)</enum><text>Notwithstanding the
preceding provisions of this section—</text>
<subparagraph id="H6FAC27589AD647FD9FCC5EF0CE42D27F" indent="up1"><enum>(A)</enum><text>a participating individual under the
Personal Social Security Savings Program under part B shall not be entitled to
old-age insurance benefits under subsection (a); and</text>
</subparagraph><subparagraph id="HAB82F02313E44B07B1C7001FA3ABB2A1" indent="up1"><enum>(B)</enum><text>except as provided in paragraph (2),
no individual shall be entitled to benefits under this section on the basis of
the wages and self-employment income of such a participating individual.</text>
</subparagraph></paragraph><paragraph id="HE776139F91DE4544A764282986AF5025" indent="up1"><enum>(2)</enum><text>In the case of any such participating
individual who dies before such individual purchases a personal social security
savings annuity under section 258, paragraph (1)(B) shall not apply with
respect to child’s insurance benefits under subsection (d), widow’s insurance
benefits under subsection (e), widower’s insurance benefits under subsection
(f), mother’s and father’s insurance benefits under subsection (g), and
parent’s insurance benefits under subsection
(h).</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</section><section display-inline="no-display-inline" id="H77612E0786BA43A0B3764EEE07FF8B72"><enum>404.</enum><header>Tax treatment
of accounts</header>
<subsection id="HD57FBF89282E4775B3685265A72F6614"><enum>(a)</enum><header>In
general</header>
<paragraph id="HDD00E97948714208A9D3EB7101AD5484"><enum>(1)</enum><header>In
general</header><text>Subchapter F of chapter 1 of the Internal Revenue Code of
1986 (relating to exempt organizations) is amended by adding at the end the
following new part:</text>
<quoted-block id="H060E4E01A6FC463C8242192077B067CC">
<part id="HA3EA997376F8455BB7D2FE7FD240AE74"><enum>IX</enum><header>Personal Social
Security Savings Program</header>
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 530A. Personal social security
savings program.</toc-entry>
</toc>
<section id="H9C0E68B257364FB4B5CD591535C44BAC"><enum>530A.</enum><header>Personal
social security savings program</header>
<subsection id="HB400F563696148439E90C6657367DCA1"><enum>(a)</enum><header>General
Rule</header><text display-inline="yes-display-inline">The Social Security
Personal Savings Fund and each Tier III Investment Option are exempt from
taxation under this subtitle. Notwithstanding the preceding sentence, sums in a
personal social security savings account which are attributable to a Tier III
Option shall be subject to the taxes imposed by section 511 (relating to
imposition of tax on unrelated business income of charitable, etc.
organizations).</text>
</subsection><subsection display-inline="no-display-inline" id="H08D5AA08DB554D84B132C84E5C34EE8E"><enum>(b)</enum><header>Distributions</header>
<paragraph id="HA0A4664271064F3394507371E3BFEFA7"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">Any qualified
distribution from—</text>
<subparagraph id="HF1143740AC8F43079D36D465CA9142C4"><enum>(A)</enum><text>amounts credited
to a personal social security savings account from the Social Security Personal
Savings Fund or attributable to a Tier III Investment Option, or</text>
</subparagraph><subparagraph id="H69D4BF6F900F4293BFFE29F491854D72"><enum>(B)</enum><text>a personal social
security savings annuity,</text>
</subparagraph><continuation-text continuation-text-level="paragraph">shall not
be included in the gross income of the distributee.</continuation-text></paragraph><paragraph id="H8E01F60D873E4454A4AE4D8EB09BF500"><enum>(2)</enum><header>Qualified
distribution</header><text display-inline="yes-display-inline">For purposes of
paragraph (1), the term <term>qualified distribution</term> means a
distribution which meets the requirements of section 258 of the Social Security
Act and which is not a guaranty payment (as defined by section 259 of such
Act).</text>
</paragraph></subsection><subsection id="HCD74DAD68092457190ADFCCEE0AEBBF5"><enum>(c)</enum><header>Definitions</header><text>For
purposes of this section—</text>
<paragraph display-inline="no-display-inline" id="HECDE48AFF92948978448F255BDE0011"><enum>(1)</enum><header>Personal social
security savings account</header><text>The term <term>personal social security
savings account</term> means an account established under section 254(a) of the
Social Security Act.</text>
</paragraph><paragraph id="H5926ADED3B9B46D580FB69A721ED974D"><enum>(2)</enum><header>Personal social
security savings annuity</header><text>The term <term>personal social security
savings annuity</term> means an annuity approved by the Personal Social
Security Savings Board under section 258(b)(3) of the Social Security
Act.</text>
</paragraph><paragraph id="H3533C8BAA13D4E488B948B5BD2E3E958"><enum>(3)</enum><header>Social Security
Personal Savings Fund</header><text display-inline="yes-display-inline">The
term <term>Social Security Personal Savings Fund</term> means the Savings Fund
established under section 252 of the Social Security Act.</text>
</paragraph><paragraph id="HC54568BC0EF043168B22EC5C6DBA2C7E"><enum>(4)</enum><header>Tier III
Investment Option</header><text display-inline="yes-display-inline">The term
<term>Tier III Investment Option</term> has the meaning given such term by
section 251(9) of the Social Security Act.</text>
</paragraph></subsection><subsection id="H405397F79F474451B3FBCC512CA4DA3"><enum>(d)</enum><header>Estate tax
treatment</header><text display-inline="yes-display-inline">No amount shall be
includible in the gross estate of any individual for purposes of chapter 11 by
reason of an interest in the Tier I Investment Fund or the Tier II Investment
Fund of the Savings Fund or held under a Tier III Investment Option and which
is credited to the personal social security savings account of the
individual.</text>
</subsection></section></part><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HA78AC591FDA0469A813C882228420029"><enum>(2)</enum><header>Conforming
amendment</header><text>Section 86(d)(1)(A) of such Code is amended by
inserting <quote>part A of</quote> after <quote>under</quote>.</text>
</paragraph><paragraph id="H275A07A7A8714F46AD7F4B36E69886C5"><enum>(3)</enum><header>Clerical
amendment</header><text>The table of parts for subchapter F of chapter 1 of
such Code is amended by adding after the item relating to part VIII the
following new item:</text>
<quoted-block id="H425069244EF24473958025B26F4D757C" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="part">Part IX. Personal Social Security Savings
Program.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="HBCC561199D92492FAC3CD5466C053881"><enum>(b)</enum><header>Guaranty
payments</header><text display-inline="yes-display-inline">Paragraph (1) of
section 86(d) of the Internal Revenue Act of 1986, as amended by subsection
(a)(2), is amended by striking <quote>or</quote> at the end of subparagraph
(A), by striking the period and inserting <quote>, or</quote> at the end of
subparagraph (B), and by adding at the end the following new
subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H6843FB56308449B2A9E4459F60E969C3" style="OLC">
<subparagraph id="H937A2A38FBD8448BB806FB5DDB794600"><enum>(C)</enum><text display-inline="yes-display-inline">a guaranty payment under section 259(a),
and a payment of an additional amount under section 259(c), of the Social
Security
Act.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H43944CF4218D427389FDFB7150DC6ECA"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2010.</text>
</subsection></section><section display-inline="no-display-inline" id="H1AE364899A51467000CA351FD7A16E75" section-type="subsequent-section"><enum>405.</enum><header>Self-Liquidating
Social Security Transition Fund</header><text display-inline="no-display-inline">Part B of title II of the Social Security
Act (as added by section 101 of this Act) is amended by adding at the end the
following new section:</text>
<quoted-block display-inline="no-display-inline" id="H20E2318BEC8F4E9B8CCE73006B130095" style="OLC">
<section id="H68A696D47C8A4BED83F19FA6ED73D1BA"><enum>262.</enum><header>Self-Liquidating
Social Security Transition Fund</header>
<subsection id="H6210DCD32195494EB6E964BF00A598C7"><enum>(a)</enum><header>Establishment</header><text display-inline="yes-display-inline">There is hereby created on the books of the
Treasury of the United States a trust fund to be known as the Self-Liquidating
Social Security Transition Fund (in this section referred to as the
<quote>Transition Fund</quote>).</text>
</subsection><subsection id="HC40E4022349B4D089FC13B5B8E897259"><enum>(b)</enum><header>Board of
Trustees</header>
<paragraph id="H6B69F55FFE634BAC9CBE360056588481"><enum>(1)</enum><header>Establishment</header><text display-inline="yes-display-inline">With respect to the Transition Fund, there
is hereby created a body to be known as the Board of Trustees of the Transition
Fund (in this section referred to as the <quote>Board of Trustees</quote>)
composed of the Commissioner of Social Security, the Secretary of the Treasury,
and the members of the Personal Social Security Savings Board.</text>
</paragraph><paragraph id="HF728434C153A4DA19F3285206F43CBEE"><enum>(2)</enum><header>Duties</header><text>The
Board of Trustees shall—</text>
<subparagraph id="HFD27CD757F104468888E393053A136C"><enum>(A)</enum><text>provide for the
issuance of obligations by the Transition Fund pursuant to subsection
(c),</text>
</subparagraph><subparagraph id="H45A07D32DA674D2EAE8ECB3FDE89372F"><enum>(B)</enum><text>provide for the
receipt and management of amounts paid into the Transition Fund pursuant to
subsection (d),</text>
</subparagraph><subparagraph id="HF225BFE5977E4502A15D65B883DEB74E"><enum>(C)</enum><text display-inline="yes-display-inline">use all funds paid into the Transition Fund
to redeem obligations issued under subsection (c) as soon as
practicable,</text>
</subparagraph><subparagraph id="HCE5476D1D59E4503ACEF5163140622F"><enum>(D)</enum><text display-inline="yes-display-inline">report to Congress not later than the first
day of April of each year on the operation and status of the Transition Fund
during the preceding fiscal year and on its expected operation and status
during the current fiscal year and the next 2 fiscal years, and</text>
</subparagraph><subparagraph id="H155B48B3F4914CEB8BC723CD000700A6"><enum>(E)</enum><text display-inline="yes-display-inline">review the general policies followed in
managing the Transition Fund, and recommend changes in such policies, including
necessary changes in the provisions of law which govern the way in which the
Transition Fund is to be managed.</text>
</subparagraph></paragraph><paragraph id="H56365987F5604FB0A4E01FFFDF18CA22"><enum>(3)</enum><header>Meetings</header><text display-inline="yes-display-inline">The Board of Trustees shall meet not less
frequently than once each calendar year.</text>
</paragraph></subsection><subsection display-inline="no-display-inline" id="HE1A822F223F24079AFD7F4F5AF79F300"><enum>(c)</enum><header>Issuance of
Transition Fund bonds</header>
<paragraph id="HC4090D19556D4CBF98B1B7943070FE79"><enum>(1)</enum><header>Issuance</header>
<subparagraph id="H36B3B9A5412A4235B6C1C6B2147E58F2"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">The purposes for
which obligations of the United States may be issued under chapter 31 of title
31, United States Code, are hereby extended to authorize the issuance at par of
public-debt obligations by the Transition Fund.</text>
</subparagraph><subparagraph id="H232B9A7F80DF45A3BAE650820C600A1"><enum>(B)</enum><header>Required
issuance</header><text display-inline="yes-display-inline">Beginning on January
1, 2012, whenever any obligation held in the Federal Old-Age and Survivors
Insurance Trust Fund or the Federal Disability Insurance Trust Fund is repaid
from the general fund of the Treasury to either of such Trust Funds, the
Transition Fund shall issue an obligation under this subsection in an amount
equal to the amount of interest and principal so repaid.</text>
</subparagraph><subparagraph id="HDFA2CDA5E94B45E7AD1138B444FBE543"><enum>(C)</enum><header>Transfer of
proceeds to general fund of the Treasury</header><text display-inline="yes-display-inline">Proceeds from the issuance of any
obligation issued under this section shall be transferred to the general fund
of the Treasury.</text>
</subparagraph><subparagraph id="H2D86599A33D9459AA77D6EFD0425BC"><enum>(D)</enum><header>Accounting</header><text display-inline="yes-display-inline">The debt owed on any obligation issued
under this section shall be considered to be debt of the Transition Fund and
shall be accounted for in such manner.</text>
</subparagraph></paragraph><paragraph id="H8E941C75C0BE4779A46C6147F6429510"><enum>(2)</enum><header>Maturities and
interest rate</header><text display-inline="yes-display-inline">Such
obligations issued by the Transition Fund for purchase by the public shall have
maturities fixed with due regard for the needs of the Transition Fund and shall
bear interest at a rate equal to the average market yield (computed by the
Secretary of the Treasury on the basis of market quotations as of the end of
the calendar month next preceding the date of such issue) on all marketable
interest-bearing obligations of the United States then forming a part of the
public debt which are not due or callable until after the expiration of 4 years
from the end of such calendar month, except that where such average market
yield is not a multiple of one-eighth of 1 per centum, the rate of interest on
such obligations shall be the multiple of one-eighth of 1 per centum nearest
such market yield.</text>
</paragraph><paragraph id="HA5BE507EB5CE44F1BC51214925196E7B"><enum>(3)</enum><header>Repayment of
obligations</header><text display-inline="yes-display-inline">Obligations
issued under this subsection may be redeemed only by funds in the Transition
Fund.</text>
</paragraph></subsection><subsection id="H4FBB7B1BE7A3429D872700A8A8E39F61"><enum>(d)</enum><header>Deposit of OASDI
Trust Fund surplus</header>
<paragraph id="HA0A33AE988A945E000CC93E900249BCC"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">There are
appropriated to the Transition Fund for the fiscal year beginning in 2033, and
for each fiscal year thereafter, out of any moneys in the Federal Old-Age and
Survivors Insurance Trust Fund, amounts equivalent to the OASDI trust fund
surplus (as defined in paragraph (2)) for the preceding fiscal year.</text>
</paragraph><paragraph id="H6DBC9C1766EC48D1A3DCA87B00B2534C"><enum>(2)</enum><header>Transfers based
on estimates</header><text display-inline="yes-display-inline">The amounts
appropriated by paragraph (1) shall be transferred from time to time from the
Federal Old-Age and Survivors Insurance Trust Fund to the Transition Fund, such
amounts to be determined on the basis of estimates by the Commissioner of
Social Security. Proper adjustments shall be made in amounts subsequently
transferred to the extent prior estimates were in excess of or were less than
such surplus.</text>
</paragraph><paragraph id="H0A611903F1D34EFD90008F1581E70D4"><enum>(3)</enum><header>OASDI Trust Fund
surplus defined</header><text display-inline="yes-display-inline">In this
section, the term <term>OASDI trust fund surplus</term> for a fiscal year means
the dollar amount by which the Federal Old-Age and Survivors Insurance Trust
Fund could be reduced as of the end of such fiscal year so as to result in an
OASDI trust fund ratio (as defined in section 201(p)(4)) for such fiscal year
equal to 125 percent.</text>
</paragraph><paragraph id="H44447D585D1D4883BA74F5C1158E7350"><enum>(4)</enum><header>Rule of
construction</header><text>This section shall not be construed to require
redemption of obligations of the Trust Fund for the purpose of making transfers
to the Transition Fund under this section or for any other purpose other than
to provide for payment of benefits under part A of title II of the Social
Security Act.</text>
</paragraph></subsection><subsection id="H25788217B5D44331933762AFC1871954"><enum>(e)</enum><header>Redemption of
obligations upon deposit of funds</header><text display-inline="yes-display-inline">Obligations issued under subsection (c) may
be redeemed only by funds in the Transition Fund. The Board of Trustees shall
provide for the redemption of such obligations as soon as possible with funds
deposited into the Transition Fund pursuant to subsection (d).</text>
</subsection><subsection id="H16584DEA7F994743AEDA83E465A2547E"><enum>(f)</enum><header>Sunset</header><text display-inline="yes-display-inline">On the first date as of which all of the
obligations issued under subsection (c) have been redeemed, any balance
remaining in the Transition Fund as of such date shall be deposited in the
Federal Old-Age and Survivors Insurance Trust Fund, the terms of the Board of
Trustees shall end, the Transition Fund shall cease to exist, and this section
shall be
repealed.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</section><section id="HC27181CB5F8A4827BA4F5934A9B3CE27"><enum>406.</enum><header>Budgetary
treatment of social security</header>
<subsection id="HD32141FFF7BF4D4893A15D7665BEEAA0"><enum>(a)</enum><header>In
general</header><text>Section 710 of the Social Security Act (42 U.S.C. 911) is
amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H0F03648C797C4969BFB108395B960000" style="traditional">
<section display-inline="no-display-inline" id="H6857CA29ACD047F0B333BD81820935BB" section-type="subsequent-section"><enum>710.</enum><header>Budgetary treatment of social security</header><text display-inline="no-display-inline">Notwithstanding any other provision of law
and except as provided in subsection (b), the receipts and disbursements shall
be treated in the same manner as section 13301 of the Budget Enforcement Act of
1990.</text>
</section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H27C001CB2C58420E9849C6468E935CB7"><enum>(b)</enum><header>Effective
date</header><text>The amendments made by this section shall apply with respect
to fiscal years beginning on or after October 1, 2011.</text>
</subsection></section><section display-inline="no-display-inline" id="H9E3A939BED284A1E8469EDDEDE00B18B" section-type="subsequent-section"><enum>407.</enum><header>Accounting for the
Old-Age, Survivors, and Disability Insurance Program and the Personal Social
Security Savings Program</header><text display-inline="no-display-inline">Title
VII of the Social Security Act is amended by inserting after section 705 (42
U.S.C. 906) the following new section:</text>
<quoted-block display-inline="no-display-inline" id="H903E735A6E02489F906D04B2878CFD9D" other-style="archaic" style="other">
<section display-inline="no-display-inline" id="HD7F129F56ED14E4BA0748E8975A94DE" section-type="subsequent-section"><enum>706.</enum><header>Accounting for the Old-Age, Survivors, and Disability
Insurance Program and the Personal Social Security Savings
Program</header><subsection commented="no" display-inline="yes-display-inline" id="HE7A4C7254DE44C489E1E3D9D37934439"><enum>(a)</enum><header>Social Security Lockbox
Budget</header><text display-inline="yes-display-inline">At the time of the transmittal to the
Congress by the President of the budget of the United States Government, the
President shall transmit to each House of the Congress a separate report (to be
known as the <quote>Social Security Lockbox Budget</quote>) detailing the
performance during the preceding fiscal year of each of the accounts
established under subsection (b). Such report shall set forth, as determined as
of the end of the year—</text>
<paragraph id="HE9DF41CE9EBE4272BE8DF14B522E3DB2"><enum>(1)</enum><text>the amount of the
balance of each account,</text>
</paragraph><paragraph id="HE3D354314EF44E859CB25BE23146C8D"><enum>(2)</enum><text>the amount of the
total charges and the amount of the total credits to each account for the year,
and</text>
</paragraph><paragraph id="HD03F2BFD16FD4E01A8E4502DA100CC1D"><enum>(3)</enum><text>the amount of the
total for the year of each category of charges and credits itemized in
subsection (b).</text>
</paragraph></subsection><subsection display-inline="no-display-inline" id="HE492218D59C24A38BEEA8BDD5C137284"><enum>(b)</enum><header>Establishment of
accounts</header><text>For purposes of
accounting for certain receipts and disbursement of the Treasury of the United
States in connection with the Old-Age, Survivors, and Disability Insurance
Program under part A of title II of the Social Security Act and the Personal
Security Savings Program under part B of such title, the Secretary of the
Treasury shall establish and maintain a Social Security Part A Account, a
Social Security Part B Account, and a Self-Liquidating Social Security
Transition Fund Account.</text>
</subsection><subsection id="H3A015E409E134A109E52DFC09DCA7E"><enum>(c)</enum><header>Credits and charges to the Social
Security Part A Account</header><paragraph commented="no" display-inline="yes-display-inline" id="H388FBFF7A6474FB1AFD4AE9963A5918"><enum>(1)</enum><text>For each fiscal year, the
Social Security Part A Account shall be credited with the sum of—</text>
<subparagraph id="H6E099214AD4B4C7B94B41EA3BC550074" indent="up1"><enum>(A)</enum><text>all receipts during the year by the
Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability
Insurance Trust Fund under section 201 (including amounts received as interest
on notes and obligations purchased by the Trust Funds under section 201(d) of
such Act, and excluding amounts received in redemption of such notes and
obligations and amounts received by either such Trust Fund as transfers from
the other such Trust Fund), and</text>
</subparagraph><subparagraph id="HA956D55EA40349C9BA44F8C2D064C47E" indent="up1"><enum>(B)</enum><text display-inline="yes-display-inline">all receipts during the year by the Federal
Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance
Trust Fund under section 121(e) of the Social Security Amendments of 1983
(relating to appropriation of amounts equivalent to taxes on social security
benefits) (42 U.S.C. 401 note).</text>
</subparagraph></paragraph><paragraph id="H63FA4FCD2AB943C7A645A92FC434DE22" indent="up1"><enum>(2)</enum><text>For each fiscal year, the Social
Security Part A Account shall be charged with the sum of—</text>
<subparagraph id="H40B77061DC08499FB6CD19D24CE42143"><enum>(A)</enum><text>all benefits paid during the year from
the Federal Old-Age and Survivors Insurance Trust Fund and the Federal
Disability Insurance Trust Fund under part A of title II of the Social Security
Act,</text>
</subparagraph><subparagraph id="HE07F0BBB420B4CD4A4E9ABB4D7CD79A2"><enum>(B)</enum><text>all redirected social security
contributions transferred during the year to the Social Security Personal
Savings Fund under section 252(b),</text>
</subparagraph><subparagraph id="H7716830EDC12426499074C8D5DBCB8BD"><enum>(C)</enum><text>all other expenditures during the year
from the Trust Funds under part A of title II (excluding amounts expended as
transfers by either such Trust Fund to the other such Trust Fund and amounts
paid for the purchase of notes and obligations under section 201(d)),
and</text>
</subparagraph><subparagraph id="HED042D0EE1024B67824B847439A1AAEF"><enum>(D)</enum><text>all transfers from the Federal Old-Age
and Survivors Insurance Trust Fund to the Self-Liquidating Social Security
Transition Fund under section 262(d).</text>
</subparagraph></paragraph></subsection><subsection id="HDC56CAD6A2404B8A8BE784AAB5EA7419"><enum>(d)</enum><header>Charges and credits to the Social
Security Part B Account</header><paragraph commented="no" display-inline="yes-display-inline" id="H6B27197E1F804D5493B2F47855568E63"><enum>(1)</enum><text>For each fiscal year,
the Social Security Part B Account shall be credited with—</text>
<subparagraph id="H5120E565549B4B01A993C5DA7B296FE" indent="up1"><enum>(A)</enum><text>all redirected social security
contributions transferred during the year to the Personal Social Security
Savings Fund under section 252(b) of the Social Security Act, and</text>
</subparagraph><subparagraph id="H38776EBADE1A40898833B27B6519006F" indent="up1"><enum>(B)</enum><text>any net increase in the Tier I
Investment Fund attributable to investment for the fiscal year, any net
increase in the Tier II Investment Fund attributable to investment for the
fiscal year, and the total amount of any net increases in Tier III Investment
Options attributable to investment for the fiscal year.</text>
</subparagraph></paragraph><paragraph id="H6DD555E92003475B8E6BE9B4AC7D00C4" indent="up1"><enum>(2)</enum><text>For each fiscal year, the Social
Security Part B Account shall be charged with—</text>
<subparagraph id="H8AB0D35C037441019F7329004B73396D"><enum>(A)</enum><text>all administrative costs incurred for
the fiscal year with respect to the Tier I Investment Fund, the Tier II
Investment Fund, and the Tier III Investment Options,</text>
</subparagraph><subparagraph display-inline="no-display-inline" id="HAD90B4BC59834850BF957920023FF2FF"><enum>(B)</enum><text>any net decrease in the Tier I
Investment Fund attributable to investment for the fiscal year, any net
decrease in the Tier II Investment Fund attributable to investment for the
fiscal year, and the total amount of any net decreases in Tier III Investment
Options attributable to investment for the fiscal year, and</text>
</subparagraph><subparagraph id="H1F13A860C59B467AA99945CD61D88B40"><enum>(C)</enum><text>annuity payments made during the year
under section 258 from the Annuity Reserve Account in the Savings Fund.</text>
</subparagraph></paragraph></subsection><subsection id="H853B25ACA0884C3CBEB39880A89DCEC4"><enum>(e)</enum><header>Charges and credits to the
Self-Liquidating Social Security Transition Fund Account</header><paragraph commented="no" display-inline="yes-display-inline" id="H06D0C261CE5D4D0CA04E9D6949F32727"><enum>(1)</enum><text display-inline="yes-display-inline">For each fiscal year, the Self-Liquidating
Social Security Transition Account shall be credited with—</text>
<subparagraph id="H70D20FABD4F5494FB5EF0379248D9EA6" indent="up1"><enum>(A)</enum><text display-inline="yes-display-inline">all transfers to the Transition Fund from
the Federal Old-Age and Survivors Insurance Trust Fund under section 262(b),
and</text>
</subparagraph><subparagraph id="H68BA1112EBC74526A2307FA9122CADF4" indent="up1"><enum>(B)</enum><text>all amounts expended during the fiscal
year from the Trust Funds in the redemption under section 262(e) of obligations
issued by the Transition fund under section 262(c).</text>
</subparagraph></paragraph><paragraph display-inline="no-display-inline" id="HE8417ACADA8F45E1885E40F876D0C98D" indent="up1"><enum>(2)</enum><text>For each fiscal year, the
Self-Liquidating Social Security Transition Fund Account shall be charged with
the total amount of obligations issued during the fiscal year by the Transition
Fund under section
262(c)</text>
</paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</section><section id="H4201C116B33F4BC3B65D63E7BA29214D"><enum>408.</enum><header>Progressive
indexing of benefits for old-age, wife’s, and husband’s insurance
benefits</header>
<subsection id="HA4B7907C196D4194924ED089CB714F0"><enum>(a)</enum><header>In
general</header><text>Section 215(a) of the Social Security Act (42 U.S.C.
415(a)) is amended—</text>
<paragraph id="HDD88AD0D1B8B4AB7A7DCA59B50AE014"><enum>(1)</enum><text>by
striking <quote>The</quote> in paragraph (1)(A) and inserting <quote>In the
case of any benefit other than an applicable benefit to which paragraph (2)
applies, the</quote>, and</text>
</paragraph><paragraph id="H1CED08B48913446498DA018C58A67300"><enum>(2)</enum><text>by redesignating
paragraphs (2) through (7) as paragraphs (3) through (8), respectively, and by
inserting after paragraph (1) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HB26A02DAB7E74E03A7DA7BFFF334436E" style="OLC">
<paragraph id="H6FE82997BCF849E1A962D60020FA0897" indent="up1"><enum>(2)</enum><subparagraph commented="no" display-inline="yes-display-inline" id="H292AAA4E50B14A2BA79E35471841E143"><enum>(A)</enum><text>In the case of an
applicable benefit with respect to any individual who initially becomes
eligible for old-age insurance benefits or who dies (before becoming eligible
for such benefits) in calendar year 2017 or later, the primary insurance amount
of the individual shall be equal to the sum of—</text>
<clause id="H10725EB9D1364362A002D283B3549C35" indent="up1"><enum>(i)</enum><text>90 percent of the individual's average
indexed monthly earning (determined under subsection (b)) to the extent that
such earnings do not exceed the amount established for purposes of paragraph
(1)(A)(i) by paragraph (1)(B);</text>
</clause><clause id="H63188FD2C5AA4E5889E47258D905ACE9" indent="up1"><enum>(ii)</enum><text>32 percent of the individual's
average indexed monthly earnings to the extent that such earnings exceed the
amount established for purposes of paragraph (1)(A)(i) by paragraph (1)(B) but
do not exceed the amount established for purposes of this clause by
subparagraph (B);</text>
</clause><clause id="HA0C0B4A9730D4F1D8E2C13EE7FA20060" indent="up1"><enum>(iii)</enum><text>32 percent (reduced as provided in
subparagraph (C)) of the individual's average indexed monthly earnings to the
extent that such earnings exceed the amount established for purposes of clause
(ii) but do not exceed the amount established for purposes of paragraph
(1)(A)(ii) by paragraph (1)(B); and</text>
</clause><clause id="H21883B0B3421441200B0E7CBE1FD8D57" indent="up1"><enum>(iv)</enum><text>15 percent (reduced as provided in
subparagraph (C)) of the individual's average indexed monthly earnings to the
extent that such earnings exceed the amount established for purposes of
paragraph (1)(A)(ii) by paragraph (1)(B).</text>
</clause></subparagraph><subparagraph id="HB4725E759A3146DB87A4718CB4608894" indent="up1"><enum>(B)</enum><clause commented="no" display-inline="yes-display-inline" id="HA78D060DF69943E8B11400D951007C1D"><enum>(i)</enum><text>For purposes of
subparagraph (A)(ii), the amount established under this subparagraph for
calendar year 2017 shall be the level of average indexed monthly earnings
determined by the Chief Actuary of the Social Security Administration under
clause (ii) as being at the 30th percentile for the period of calendar years
2006 through 2008.</text>
</clause><clause id="H4A91EC706611446D83F6F6886266002F" indent="up1"><enum>(ii)</enum><text>For purposes of clause (i), the
average indexed monthly earnings for the period of calendar years 2006 through
2008 shall be determined by—</text>
<subclause id="H58485DE38A814550BAC5067C03EEDFEE"><enum>(I)</enum><text>determining the average indexed
monthly earnings for each individual who initially became eligible for old-age
insurance benefits or who died (before becoming eligible for such benefits)
during such period, except that in determining such average indexed monthly
earnings under subsection (b), subsection (b)(3)(A)(ii)(I) shall be applied by
substituting calendar year 2002 for the second calendar year described in such
subsection; and</text>
</subclause><subclause id="H22497FF36D6E4203AE5C148B081DAED"><enum>(II)</enum><text>multiplying the amount determined for
each individual under subclause (I) by the quotient obtained by dividing the
national average wage index (as defined in section 209(k)(1)) for the calendar
year 2015 by such index for the calendar year 2003.</text>
</subclause></clause><clause id="H3AAC073A11DE42BB93581F4CCDAB6DA2" indent="up1"><enum>(iii)</enum><text>For purposes of subparagraph
(A)(ii), the amount established under this subparagraph for any calendar year
after 2017 shall be equal to the product of the amount in effect under clause
(i) with respect to calendar year 2017 and the quotient obtained by
dividing—</text>
<subclause id="HE0BF217C860245029EED86C38D46E153"><enum>(I)</enum><text>the national average wage index (as
defined in section 209(k)(1)) for the second calendar year preceding the
calendar year for which the determination is being made, by</text>
</subclause><subclause id="HD4F9891B07F74266A268E3AE00504563"><enum>(II)</enum><text>the national average wage index (as
so defined) for 2015.</text>
</subclause></clause><clause id="H46AF8F7E6EBA4F9900E3311D65BD3BAF" indent="up1"><enum>(iv)</enum><text>The amount established under this
subparagraph for any calendar year shall be rounded to the nearest $1, except
that any amount so established which is a multiple of $0.50 but not of $1 shall
be rounded to the next higher $1.</text>
</clause></subparagraph><subparagraph id="HA16092A76B0F45819838BAAC434357C7" indent="up1"><enum>(C)</enum><clause commented="no" display-inline="yes-display-inline" id="H1EF0E27CCC904521B6C959D00D2AA1"><enum>(i)</enum><text>Except as provided in
clause (ii), in the case of any calendar year after 2016, each of the
percentages to which this subparagraph applies by reason of clauses (iii) or
(iv) of subparagraph (A) shall be a percentage equal to such percentage
multiplied by the quotient obtained by dividing—</text>
<subclause id="H433A2AE9CF8341789E6470399362ABE" indent="up1"><enum>(I)</enum><text>the difference of the maximum
CPI-indexed benefit amount for such year over the amount determined under this
paragraph for an individual whose average indexed monthly earnings are equal to
the amount established for purposes of subparagraph (A)(ii) for such year,
by</text>
</subclause><subclause id="H81339A93CFB3477CB85F31B43763E8D" indent="up1"><enum>(II)</enum><text>the difference of the maximum
wage-indexed benefit amount for such year over the amount determined under this
paragraph for an individual whose average indexed monthly earnings are equal to
the amount established for purposes of subparagraph (A)(ii) for such
year.</text>
</subclause></clause><clause id="H26DD554ED93B458783F7D2107477D88C" indent="up1"><enum>(ii)</enum><subclause commented="no" display-inline="yes-display-inline" id="H7FD5A78C6EB74A3B9FE674E234049F1C"><enum>(I)</enum><text>In the case of any
calendar year which is a positive balance year, clause (i) shall not apply and
each of the percentages to which this subparagraph applies by reason of clause
(iii) or (iv) of subparagraph (B) shall be a percentage equal to the percentage
determined under this subparagraph for the preceding year (determined after the
application of this subparagraph).</text>
</subclause><subclause id="HE4A4A12494704A2FAFA2CB4EA138374B" indent="up1"><enum>(II)</enum><text>In the case of any calendar year
after a positive balance year which is not a positive balance year, this
subparagraph shall be applied by substituting <quote>the second calendar year
preceding the most recent positive balance year</quote> for <quote>2014</quote>
each place it appears in clause (iv).</text>
</subclause></clause><clause id="H5D7D6709722C43F0B3C6EFD1FC4DA231" indent="up1"><enum>(iii)</enum><text>For purposes of clause (i), the
maximum wage-indexed benefit amount for any calendar year shall be equal to the
amount determined under this paragraph (determined without regard to any
reduction under this subparagraph) for an individual with wages paid in and
self-employment income credited to each computation base year in an amount
equal to the contribution and benefit base for each calendar year.</text>
</clause><clause id="H78DE7F2BC1394F238F5E1BA06F2C8866" indent="up1"><enum>(iv)</enum><text>For purposes of clause (i), the
maximum CPI-indexed benefit amount for any calendar year shall be an amount
equal to the amount determined under clause (iii) for such year multiplied by a
fraction—</text>
<subclause id="H643308E1E0A9439183421300E6171F4E"><enum>(I)</enum><text>the numerator of which is the ratio
(rounded to the nearest one-thousandth of 1 percent) of the Consumer Price
Index for the second preceding year to such index for 2014; and</text>
</subclause><subclause id="H5C217381D4C747FF8719B5C6011DDFC6"><enum>(II)</enum><text>the denominator of which is the ratio
(rounded to the nearest one-thousandth of 1 percent) of the national wage index
(as defined in section 209(k)(1)) for the second year preceding such year to
such index for 2014.</text>
</subclause></clause><clause commented="no" display-inline="no-display-inline" id="HEB88A08995DD4030B2393C6500FB61A4" indent="up1"><enum>(v)</enum><subclause commented="no" display-inline="yes-display-inline" id="H2F0F35AA5ABE4C208507000100864DE0"><enum>(I)</enum><text display-inline="yes-display-inline">For purposes of this subparagraph, a
positive balance year is a calendar year following any calendar year after 2081
for which the Chief Actuary of the Social Security Administration certifies to
the Secretary of the Treasury and the Congress that the combined balance ratio
of the Federal Old-Age and Survivors Trust Fund and the Federal Disability
Insurance Trust Fund is not less than 100 percent for such year.</text>
</subclause><subclause commented="no" display-inline="no-display-inline" id="H975C7C37411446A4BA2EBDE15D5C51BD" indent="up1"><enum>(II)</enum><text display-inline="yes-display-inline">For purposes of subclause (I), the combined
balance ratio of the Federal Old-Age and Survivors Trust Fund and the Federal
Disability Insurance Trust Fund for any calendar year is the ratio of the
combined balance of such Trust Funds as of the last day of such calendar year
(reduced by any transfer made pursuant to section 201(o) in such calendar year)
to the amount estimated by the Commissioner of Social Security under section
201(l)(3)(B)(iii)(II) to be paid from such Trust Funds during the calendar year
following such calendar year for all purposes authorized by section 201
(determined as if such following calendar year were a positive balance
year).</text>
</subclause></clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H558B2B9672A4425C9CBAF0A270C9B42" indent="up1"><enum>(D)</enum><text>For purposes of this paragraph, rules
similar to the rules of subparagraphs (C) and (D) of paragraph (1) shall
apply.</text>
</subparagraph><subparagraph id="H5B869481BA4C417791864739229C742C" indent="up1"><enum>(E)</enum><text>For purposes of this paragraph, the
term <term>applicable benefit</term> means any benefit under section 202 other
than—</text>
<clause id="HB7047E2058F84A350000067C38531F00"><enum>(i)</enum><text>a child's insurance benefit under
section 202(d) with respect to a child of an individual who has died;</text>
</clause><clause id="H520D432B83324AC9960003D3AE0B874"><enum>(ii)</enum><text>a widow's insurance benefit under
section 202(e) with respect to a widow who has not attained age 60 and is under
a disability (as defined in section 223(d)) which began before the end of the
period specified in section 202(e)(4);</text>
</clause><clause id="H55791A4D7C494DFC87DE225800C39D85"><enum>(iii)</enum><text>a widower's insurance benefit under
section 202(f) with respect to a widower who has not attained age 60 and is
under a disability (as defined in section 223(d)) which began before the end of
the period specified in section 202(f)(4); and</text>
</clause><clause id="HB951661BC15348B2B5654CCA5DD2E522"><enum>(iv)</enum><text>a mother's and father's insurance
benefit under section
202(g).</text>
</clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="HFF3F4C687271470D89C691315600EC55"><enum>(b)</enum><header>Treatment of
disabled beneficiaries</header><text>Section 215(a) of such Act (as amended by
subsection (a)) is amended further by adding at the end the following new
paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H69D3DA41BFDE4CE38E434025B7362C64" style="traditional">
<paragraph id="H5A34C63BC48E4DE0B8DED1E590074D0" indent="up1"><enum>(9)</enum><subparagraph commented="no" display-inline="yes-display-inline" id="HCC7925528B5A41E5AAF2873E1D943FC0"><enum>(A)</enum><text>Notwithstanding the
preceding provisions of this subsection, in the case of an individual who has
or has had a period of disability and who initially becomes eligible for
old-age insurance benefits or who dies (before becoming eligible for such
benefits) in any calendar year in or after 2017, the primary insurance amount
of such individual shall be the sum of—</text>
<clause id="H1F1369E5CFE348C8BF4ED414AAFB005B" indent="up1"><enum>(i)</enum><text>the amount determined under
subparagraph (B); and</text>
</clause><clause id="H90EE6B3A67B54056A5AC9415A2F6A941" indent="up1"><enum>(ii)</enum><text>the product derived by
multiplying—</text>
<subclause id="HCA5DE36CC05F4BB8B0BB75131C931100"><enum>(I)</enum><text>the excess of the amount determined
under subparagraph (C) over the amount determined under subparagraph (B),
by</text>
</subclause><subclause id="H3C5C00EC582445ECB23D78CF78D4F7E"><enum>(II)</enum><text>the adjustment factor for such
individual determined under subparagraph (D).</text>
</subclause></clause></subparagraph><subparagraph id="H439FD592FD54400E89031EBABDC82DAA" indent="up1"><enum>(B)</enum><text display-inline="yes-display-inline">The amount determined under this
subparagraph is the amount of such individual's primary insurance amount as
determined under this section without regard to this paragraph.</text>
</subparagraph><subparagraph id="H02FBFA8CD88F43B2ACAEFFABD522692" indent="up1"><enum>(C)</enum><text>The amount determined under this
subparagraph is the amount of such individual's primary insurance amount as
determined under this section as in effect with respect to individuals becoming
eligible for old-age or disability insurance benefits under section 202(a) on
the date of the enactment of the <short-title>Social
Security Personal Savings Guarantee and Prosperity Act of
2009</short-title>.</text>
</subparagraph><subparagraph id="HD76345EBE5664E4D9E04DABA007CCBCE" indent="up1"><enum>(D)</enum><text>The adjustment factor determined
under this subparagraph for any individual is the ratio (not greater than 1)
of—</text>
<clause id="H9773B6522A224302B730976C503E2900"><enum>(i)</enum><text>the total number of months during
which such individual is under a disability (as defined in section 223(d))
during the period beginning on the date the individual attains age 22 and
ending on the first day of such individual's first month of eligibility for
old-age insurance benefits under section 202(a) (or, if earlier, the month of
such individual's death), to</text>
</clause><clause id="HDB6C2E583D1149E486D374D3ACC92146"><enum>(ii)</enum><text>the number of months during the
period beginning on the date the individual attains age 22 and ending on the
first day of such individual's first month of eligibility for old-age insurance
benefits under section 202(a) (or, if earlier, the month of such individual's
death).</text>
</clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H5A159E3459CA41C5B1534D298E249E06"><enum>(c)</enum><header>Conforming
amendments</header>
<paragraph id="H4D2B78B265E0492985D808B0077BD700"><enum>(1)</enum><text>Subsections
(e)(2)(B)(i)(I) and (f)(2)(B)(i)(I) of section 202 of the Social Security Act
are each amended by inserting <quote>or section 215(a)(2)(B)(iii)</quote> after
<quote>section 215(a)(1)(B)(i) and (ii)</quote>.</text>
</paragraph><paragraph id="H9EDBBC066BE44C53B9825458E36DDDA7"><enum>(2)</enum><text>Section 203(a)(10)
of such Act is amended—</text>
<subparagraph id="H28E4BBAB1D514FF3A3AE17A42F907D00"><enum>(A)</enum><text>in subparagraph
(A)(i), by striking <quote>215(a)(2)(B)(i)</quote> and inserting
<quote>215(a)(3)(B)(i)</quote>;</text>
</subparagraph><subparagraph id="H2EA1E6D2C4F94654A462F88205027D00"><enum>(B)</enum><text>in subparagraph
(A)(ii), by striking <quote>215(a)(2)(C)</quote> and inserting
<quote>215(a)(3)(C)</quote>; and</text>
</subparagraph><subparagraph id="H4DA8AF0BC9BE4E2B8327D9B6F6B1F3C"><enum>(C)</enum><text>in subparagraph
(B)(ii), by striking <quote>215(a)(2)</quote> and inserting
<quote>215(a)(3)</quote>.</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="H4ECBEE4C280B42BBB24E32C45C673852"><enum>(3)</enum><text display-inline="yes-display-inline">Section 209(k)(1) of such Act is amended by
inserting <quote>215(a)(2)(B), 215(a)(2)(C),</quote> after
<quote>215(a)(1)(D),</quote>.</text>
</paragraph><paragraph id="HEDE4A3ADD6B24165B3D4D9869BB16EE9"><enum>(4)</enum><text>Section 215(a) of
such Act is amended—</text>
<subparagraph id="HDC1826BB32E04AC1813BB175A3A6F046"><enum>(A)</enum><text>in paragraph
(4)(A), as redesignated by paragraph (2), by striking <quote>paragraph
(4)</quote> and inserting <quote>paragraph (5)</quote>;</text>
</subparagraph><subparagraph id="H1130964AF8BA49D0BB4E385507EDE83F"><enum>(B)</enum><text>in paragraph
(4)(B), as redesignated by paragraph (2), by striking <quote>paragraph
(2)(A)</quote> and inserting <quote>paragraph (3)(A)</quote>;</text>
</subparagraph><subparagraph id="HCCBC86124BA741948233E995F9C8CC3"><enum>(C)</enum><text>in paragraph (5),
as redesignated by paragraph (2), by striking <quote>paragraph (3)(A)</quote>
and inserting <quote>paragraph (4)(A)</quote>;</text>
</subparagraph><subparagraph id="HA7CCC370F20F4F9B9DE6C98C261FA9D9"><enum>(D)</enum><text>in paragraph
(6)(A), as redesignated by paragraph (2), by striking <quote>paragraph
(4)(B)</quote> and inserting <quote>paragraph (5)(B)</quote>; and</text>
</subparagraph><subparagraph id="H9E4DC49A643E4BF08722D3B8D0003B0"><enum>(E)</enum><text>in paragraph
(8)(B)(ii)(I), as redesignated by paragraph (2), by striking <quote>paragraph
(3)(B)</quote> and inserting <quote>paragraph (4)(B)</quote>.</text>
</subparagraph></paragraph><paragraph id="H9622B07FD8B443568BB956EAD09CFE96"><enum>(5)</enum><text>Section 215(d)(3)
of such Act is amended—</text>
<subparagraph id="H46AED089B5C84EF1AB0848FC6FB59632"><enum>(A)</enum><text>by striking
<quote>paragraph (4)(B)(ii)</quote> and inserting <quote>paragraph
(5)(B)(ii)</quote>; and</text>
</subparagraph><subparagraph id="H2EAA502C56D24E93BB8738C37F652530"><enum>(B)</enum><text>by striking
<quote>subsection (a)(7)(C)</quote> and inserting <quote>subsection
(a)(8)(C)</quote>.</text>
</subparagraph></paragraph><paragraph id="HD7F92E74BCEF49E9BC379D15D8BAB6C"><enum>(6)</enum><text>Subsection 215(f)
of such Act is amended—</text>
<subparagraph id="H3328F2CD256F45B48010EA287782004C"><enum>(A)</enum><text>in paragraph
(2)(B), by striking <quote>subsection (a)(4)(B)</quote> and inserting
<quote>subsection (a)(5)(B)</quote>;</text>
</subparagraph><subparagraph id="H3143EDEEAEB344329EF18B1545164169"><enum>(B)</enum><text>in paragraph (7),
by striking <quote>subsection (a)(4)(B)</quote> and inserting <quote>subsection
(a)(5)(B)</quote>, and by striking <quote>subsection (a)(6)</quote> and
inserting <quote>subsection (a)(7)</quote>;</text>
</subparagraph><subparagraph id="H8713C0A325B14B3E936071D9B9C2987E"><enum>(C)</enum><text>in paragraph
(9)(A)—</text>
<clause id="H245ED5EDDC5A4C74B371CA653C50F1E1"><enum>(i)</enum><text>by
striking <quote>subsection (a)(7)(A)</quote> and inserting <quote>subsection
(a)(8)(A)</quote>; and</text>
</clause><clause id="H1643D7171EC44A2D9E0066438CF76037"><enum>(ii)</enum><text>by
striking <quote>subsection (a)(7)(C)</quote> and inserting <quote>subsection
(a)(8)(C)</quote>; and</text>
</clause></subparagraph><subparagraph id="HA261EF462F4F4219A80000B8BFEFC002"><enum>(D)</enum><text>in paragraph
(9)(B), by striking <quote>subsection (a)(7)</quote> each place it appears and
inserting <quote>subsection (a)(8)</quote>.</text>
</subparagraph></paragraph></subsection></section><section id="H2ED55F47A49F4781B7243BDF3CABBC88"><enum>409.</enum><header>Enhancements to
Part A benefits</header>
<subsection id="H17872EF7606C4235977EA778704B5007"><enum>(a)</enum><header>CPI indexing in
Part A benefit formula</header><text>Section 215(a)(1)(B) of the Social
Security Act (42 U.S.C. 415(a)(1)(B)) is amended—</text>
<paragraph id="HAE38C9E0DE4A454BB85010BAD324CB2F"><enum>(1)</enum><text>by redesignating
clause (iii) as clause (iv);</text>
</paragraph><paragraph id="H7A9676F26F0543EF9FCC4B1743D50931"><enum>(2)</enum><text>in clause (ii), by
inserting <quote>and before 2017</quote> after <quote>1979</quote>;</text>
</paragraph><paragraph id="H03E9FEEDB78D46B1B2BDAB30D4B18DAA"><enum>(3)</enum><text>in clause (iv) (as
so redesignated), by inserting <quote>or (iii)</quote> after <quote>clause
(ii)</quote>; and</text>
</paragraph><paragraph id="H4E0A9AD929E84B3F949F3E6292102136"><enum>(4)</enum><text>by inserting after
clause (ii) the following new clause:</text>
<quoted-block display-inline="no-display-inline" id="HC2C5F091C5C14710B8B2C2626E944BBC" style="traditional">
<clause id="H0FE581D565534C589CBDB7A2F9709BDB" indent="up3"><enum>(iii)</enum><text>For individuals who initially
become eligible for old-age or disability insurance benefits, or who die
(before becoming eligible for such benefits), in any calendar year after 2016,
each of the amounts so established shall be equal to the product of the
corresponding amount established with respect to the calendar year 2016 under
clause (ii) of this subparagraph and the quotient obtained by dividing—</text>
<subclause id="HDC09F9CCEF494D4FA7AC7176FCE13858"><enum>(I)</enum><text>the Consumer Price Index for the
second calendar year preceding the calendar year for which the determination is
made, by</text>
</subclause><subclause id="HB441D6A4CFA14820BD982D4E25F4E249"><enum>(II)</enum><text>the Consumer Price Index for
2014.</text>
</subclause><continuation-text continuation-text-level="clause">For purposes
of this clause, the term <term>Consumer Price Index</term> for a calendar year
means the arithmetical mean of the Consumer Price Index (within the meaning of
such term as used in subsection (i)) for the 12 months in such calendar
year.</continuation-text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="HBDF61AD945634E82AD7FF6663815BF47"><enum>(b)</enum><header>Enhanced part A
benefit levels for low earners</header><text>Section 215(a) of such Act (as
amended by section 408) is amended by adding at the end the following new
paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HDD20313321474A659169D33EFE894FA2" style="traditional">
<paragraph id="H634C440B3F304E1CBD5D57BE93C7773B" indent="up1"><enum>(10)</enum><subparagraph commented="no" display-inline="yes-display-inline" id="H0249AF68AB634196A33233AD2100355B"><enum>(A)</enum><text display-inline="yes-display-inline">In the case of any individual who initially
becomes eligible for old-age or disability insurance benefits, or who dies
(before becoming eligible for such benefits), in any calendar year after 2016
and whose average indexed monthly earnings is less than twice the 35-year low
earner AIME for such calendar year, each primary insurance amount otherwise
determined under paragraph (1) or (2) shall be the product of—</text>
<clause id="H6CD1D0C0A2AB41599FE710C3EF8C2962" indent="up1"><enum>(i)</enum><text>such primary insurance amount as so
determined, and</text>
</clause><clause id="H7971946E362F46B9B1FE4FD700CAA13D" indent="up1"><enum>(ii)</enum><text>the applicable adjustment factor for
such individual.</text>
</clause></subparagraph><subparagraph id="H5EEF303521C942EBABBA029FDFFFF378" indent="up1"><enum>(B)</enum><text>For purposes of this paragraph, the
applicable adjustment factor for an individual is 100 percent plus the product
of—</text>
<clause id="H9D0C8735428F44B6B341B13C88022062"><enum>(i)</enum><text>the applicable percentage for the
calendar year,</text>
</clause><clause id="H0EE5143489E04E57BAF202B72765FAA9"><enum>(ii)</enum><text>the applicable AIME factor,
and</text>
</clause><clause id="H5B00B14DDDFC46758D0595BD00C8BE8C"><enum>(iii)</enum><text>the applicable coverage
factor.</text>
</clause></subparagraph><subparagraph id="H66F39641CD6043B398A9C50DA744490" indent="up1"><enum>(C)</enum><text>For purposes of subparagraph (B)(i),
the applicable percentage for a calendar year is the percentage set forth in
connection with such calendar year in the following table:</text>
<table align-to-level="section" blank-lines-before="1" colsep="0" frame="none" line-rules="no-gen" rowsep="0" rule-weights="0.0.0.0.0.0" table-template-name="Flush/hang, 1 text, 1 num, bold hds" table-type="Leaderwork">
<tgroup cols="2" rowsep="0"><colspec coldef="txt" colname="column1" colwidth="208.50pt" min-data-value="55"></colspec><colspec coldef="fig" colname="column2" colwidth="188.25pt" min-data-value="7"></colspec>
<thead>
<row><entry align="left" colname="column1" morerows="0" namest="column1" rowsep="0"><bold>If the calendar year is:</bold></entry><entry align="right" colname="column2" morerows="0" namest="column2" rowsep="0"><bold>The percentage is:</bold></entry>
</row>
</thead>
<tbody>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2017</entry><entry align="right" colname="column2" leader-modify="clr-ldr" rowsep="0">4.04</entry>
</row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2018</entry><entry align="right" colname="column2" leader-modify="clr-ldr" rowsep="0">8.08</entry>
</row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2019</entry><entry align="right" colname="column2" leader-modify="clr-ldr" rowsep="0">12.12</entry>
</row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2020</entry><entry align="right" colname="column2" leader-modify="clr-ldr" rowsep="0">16.16</entry>
</row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2021</entry><entry align="right" colname="column2" leader-modify="clr-ldr" rowsep="0">20.20</entry>
</row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2022</entry><entry align="right" colname="column2" leader-modify="clr-ldr" rowsep="0">24.24</entry>
</row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2023</entry><entry align="right" colname="column2" leader-modify="clr-ldr" rowsep="0">28.28</entry>
</row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2024</entry><entry align="right" colname="column2" leader-modify="clr-ldr" rowsep="0">32.32</entry>
</row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2025</entry><entry align="right" colname="column2" leader-modify="clr-ldr" rowsep="0">36.36</entry>
</row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2026 or thereafter</entry><entry align="right" colname="column2" leader-modify="clr-ldr" rowsep="0">40.40.</entry>
</row>
</tbody>
</tgroup>
</table>
</subparagraph><subparagraph id="H6E18108730BA45538D26782F2544FA00" indent="up1"><enum>(D)</enum><text>For purposes of subparagraph
(B)(ii)—</text>
<clause id="H008D7C2FCBBD496E81D62022C399D808"><enum>(i)</enum><text display-inline="yes-display-inline">in
any case in which an individual’s average indexed monthly earnings is less than
or equal to the 30-year low earner AIME for the calendar year referred to in
subparagraph (A), the applicable AIME factor in connection with the individual
for the calendar year is 1,</text>
</clause><clause id="H0D082D94162C4E57BDF6F3A84734F261"><enum>(ii)</enum><text display-inline="yes-display-inline">in any case in which an individual’s AIME
is greater than the 30-year low earner AIME for the calendar year referred to
in subparagraph (A) and less than twice the 35-year low earner AIME for the
calendar year, the applicable AIME factor in connection with the individual for
the calendar year is the quotient derived by dividing—</text>
<subclause id="H60618DE40A794FE39CD4EC404D2736FD"><enum>(I)</enum><text>the excess of twice the 35-year low
earner AIME for the calendar year over the individual’s average indexed monthly
earnings, by</text>
</subclause><subclause id="H0CF39B99F03A44ACA525D3F6FC7BCB71"><enum>(II)</enum><text>the excess of twice the 35-year
low earner AIME for the calendar year over the 30-year low earner AIME for the
calendar year, and</text>
</subclause></clause><clause id="H642BEC156ADC44958FC2C7CB3384011E"><enum>(iii)</enum><text display-inline="yes-display-inline">in any case in which an individual’s
average indexed monthly earnings is greater than or equal to twice the 35-year
low earner AIME for the calendar year referred to in subparagraph (A), the
applicable AIME factor in connection with an individual for the calendar year
is 0.</text>
</clause></subparagraph><subparagraph id="H21212E815CCC4E8A0085CE3FDDAD8810" indent="up1"><enum>(E)</enum><text>For purposes of subparagraph
(B)(iii)—</text>
<clause id="H37768425716E49A18F54C0CAA8A36F56"><enum>(i)</enum><text display-inline="yes-display-inline">in
any case in which the number of an individual’s quarters of coverage earned
prior to the date on which the individual became eligible or died as described
in subparagraph (A) is less than or equal to twice the number of elapsed years
with respect to the individual, the applicable coverage factor in connection
with the individual is 0,</text>
</clause><clause id="H890E2A8693DE4A44A239403325798554"><enum>(ii)</enum><text display-inline="yes-display-inline">in any case in which the number of an
individual’s quarters of coverage earned prior to the date on which the
individual became eligible or died as described in subparagraph (A) is greater
than twice the number of elapsed years with respect to the individual and less
than three times the number of elapsed years with respect to the individual,
the applicable coverage factor in connection with the individual is 1 plus the
quotient derived by dividing—</text>
<subclause id="HDDDEC120124B4ABA96A34C74577BE0E"><enum>(I)</enum><text>the excess of the number of the
individual’s quarters of coverage over 3 times the number of elapsed years with
respect to the individual, by</text>
</subclause><subclause id="H6264127B925941688383DBBE84011954"><enum>(II)</enum><text>the number of elapsed years with
respect to the individual, and</text>
</subclause></clause><clause id="H4B9405329A5F47DAA5714D9383C135C9"><enum>(iii)</enum><text display-inline="yes-display-inline">in any case in which the number of an
individual’s quarters of coverage earned prior to the date on which the
individual became eligible or died as described in subparagraph (A) is greater
than or equal to 3 times the number of elapsed years with respect to the
individual, the applicable coverage factor in connection with the individual is
1.</text>
</clause></subparagraph><subparagraph id="HFEEEE9BB4F8B4F9FAA19825B2DF039EE" indent="up1"><enum>(F)</enum><text>For purposes of this
paragraph—</text>
<clause id="H8382589FEAC84D2E90FCA076BFA77236"><enum>(i)</enum><text>The term <term>30-year low earner
AIME</term> for a calendar year means the amount which would be the average
indexed monthly earnings of an individual—</text>
<subclause id="H2B9F1BF6CE9040FC93081B01C32322B1"><enum>(I)</enum><text>whose benefit computation years are
the preceding 30 calendar years, and</text>
</subclause><subclause id="H3358498736BB43ECB15D9D3300734FAA"><enum>(II)</enum><text>whose primary insurance amount is
based solely on wages earned during such calendar years for 40 hours per week
at an hourly rate equivalent to the minimum wage required under section 6 of
the Fair Labor Standards Act of 1938 (29 U.S.C. 206) at the time such wages
were earned.</text>
</subclause></clause><clause display-inline="no-display-inline" id="H0E79548B7AD84C22B8F9D32500E7E520"><enum>(ii)</enum><text>The term <term>35-year low earner
AIME</term> for a calendar year means the amount which would be the average
indexed monthly earnings of an individual—</text>
<subclause id="H18BD1EB5AC0C4428BA8B889C2E7320A2"><enum>(I)</enum><text>whose benefit computation years are
the preceding 35 calendar years, and</text>
</subclause><subclause id="H8DB57148025E43E69BEC21E7309970E"><enum>(II)</enum><text>whose primary insurance amount is
based solely on wages earned during such calendar years for 40 hours per week
at an hourly rate equivalent to the minimum wage required under section 6 of
the Fair Labor Standards Act of 1938 (29 U.S.C. 206) at the time such wages
were earned.</text>
</subclause></clause><clause id="HC2D62FAD8F804755A456D37366B86504"><enum>(iii)</enum><text>The term <term>number of elapsed
years</term> has the meaning provided in subsection
(b)(2)(B)(iii).</text>
</clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection></section><enum>V</enum><header>Simplified Income
Tax</header>
<section id="H3692781668B541D397C2F31BDA008E48"><enum>501.</enum><header>Short
title</header><text display-inline="no-display-inline">This title may be cited
as the <quote><short-title>Taxpayer Choice Act of
2009</short-title></quote>.</text>
</section><section id="H187F8967F18440FBA1A4772918E44C2"><enum>502.</enum><header>Repeal of
alternative minimum tax for noncorporate taxpayers</header>
<subsection id="H545F174BA72249C3941256AFA33BA003"><enum>(a)</enum><header>In
general</header><text>Section 55(a) of the Internal Revenue Code of 1986
(relating to alternative minimum tax imposed) is amended by adding at the end
the following new flush sentence:</text>
<quoted-block display-inline="no-display-inline" id="H857CD00AB3084A9C8999F800B7924FC2" style="OLC">
<quoted-block-continuation-text quoted-block-continuation-text-level="subsection">In the
case of a taxpayer other than a corporation, no tax shall be imposed by this
section for any taxable year beginning after December 31, 2009, and the
tentative minimum tax of any taxpayer other than a corporation for any such
taxable year shall be zero for purposes of this
title.</quoted-block-continuation-text><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H56521193DF744D8995546F17A300F1DB"><enum>(b)</enum><header>Conforming
amendments</header>
<paragraph id="H4C31610D10794DF8BEF0E45E9E552D4D"><enum>(1)</enum><text>Section 26(c) of
such Code is amended by striking <quote>the term <term>tentative minimum
tax</term> means the amount determined under section 55(b)(1)</quote> and
inserting <quote>the tentative minimum tax is zero.</quote>.</text>
</paragraph><paragraph id="H3AE148651223440FAAF597F229CD619F"><enum>(2)</enum><text>Section 911(f)(2)
of such Code is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H9A4B824BAD6C4590825DE1313E59F72B" style="OLC">
<paragraph id="H0D474FA853524CB5883F2084AF75F99C"><enum>(2)</enum><text>the tentative
minimum tax under section 55 for the taxable year shall be
zero.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H1AA21D614BD8417BBF13063E60C3125D"><enum>(c)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to taxable years beginning after December 31,
2009.</text>
</subsection></section><section display-inline="no-display-inline" id="H54FA32A8EDBC4327A9B771B43CFB1B1D" section-type="subsequent-section"><enum>503.</enum><header>Simplified income
tax system</header>
<subsection id="H5ABB4D5D6C524FB68578C59CB332E737"><enum>(a)</enum><header>In
general</header><text>Part I of subchapter A of chapter 1 of the Internal
Revenue Code of 1986 (relating to tax on individuals) is amended by
redesignating section 5 as section 6 and by inserting after section 4 the
following new section:</text>
<quoted-block id="H04254F0F4FA042AAA70851445FF071C9" style="OLC">
<section id="H419D658843014CEC9BA5C62D063CBD65"><enum>5.</enum><header>Simplified income
tax system</header>
<subsection id="HA923A4C06C614D79BF82D979062BCE7C"><enum>(a)</enum><header>Election</header>
<paragraph id="H0E37AA19EC614C8099C5FA21032028C8"><enum>(1)</enum><header>In
general</header><text>A taxpayer other than a corporation may elect in
accordance with this subsection to be subject to the tax imposed by this
section in lieu of the tax imposed by section 1 for a taxable year and all
subsequent taxable years.</text>
</paragraph><paragraph id="HA667F3A06DFD4FC58F9777B8003F5DF5"><enum>(2)</enum><header>Effect of
election</header><text>For purposes of this title, if an election is in effect
under paragraph (1) for any taxable year, the tax imposed by this section shall
be treated as the tax imposed by section 1 for the taxable year and, except as
provided by sections 31 and 36, no amount shall be allowed as a credit against
such tax for the taxable year.</text>
</paragraph><paragraph id="HE50BF159CF7E4B8A9B223500FC062D94"><enum>(3)</enum><header>Election</header>
<subparagraph id="H2E930AC4644B475595D1FFA2817E30FE"><enum>(A)</enum><header>In
general</header>
<clause id="HC9923A4B1D9C486F8E002387EEEA7592"><enum>(i)</enum><header>In
general</header><text>Except as provided in clause (ii) of this subparagraph
and clauses (ii) and (iii) of subparagraph (B), the election under paragraph
(1) may only be made with respect to any taxable year beginning before January
1, 2019, on a timely filed return for the first taxable year for which the
election applies.</text>
</clause><clause id="H9A3170C6651E4E3BBA4BCFAA3FADFB69"><enum>(ii)</enum><header>New
taxpayers</header><text display-inline="yes-display-inline">In the case of an
individual with no tax liability under this title before January 1, 2019, the
election under paragraph (1) may only be made for the first taxable year
beginning after December 31, 2018, for which such individual has tax liability
under this title.</text>
</clause></subparagraph><subparagraph id="H7DF6C0E1EFC349CC8CC60997A61C6996"><enum>(B)</enum><header>Effect of
election</header>
<clause id="H46FEC6ED457B4C0281F899BCE234B52"><enum>(i)</enum><header>In
general</header><text>Except as provided in clauses (ii) and (iii), the
election under paragraph (1), once made, shall be irrevocable.</text>
</clause><clause id="H62750D33B2DD4112A010E02C2FCB3240"><enum>(ii)</enum><header>One-time
revocation of election</header><text display-inline="yes-display-inline">A
taxpayer may revoke an election under paragraph (1) for a taxable year and all
subsequent taxable years. The preceding sentence shall not apply if the
taxpayer has made a revocation under such sentence for any prior taxable
year.</text>
</clause><clause id="H4CFBF49BF935447FBB78001E2136F66"><enum>(iii)</enum><header>Filing status
changes due to major life events</header><text>In the case of any major life
event described in clause (iv), a taxpayer may make an election under paragraph
(1) or revoke such an election under clause (ii). Any such election or
revocation shall apply for the taxable year for which made and all subsequent
taxable years until the taxpayer makes an election under the preceding sentence
for any subsequent (and all succeeding) taxable year.</text>
</clause><clause id="H92C03747B53248DCB52B685D39E64E8D"><enum>(iv)</enum><header>Major life
event</header><text>For purposes of clause (iii), a major life event described
in this clause is marriage, divorce, and death.</text>
</clause></subparagraph></paragraph></subsection><subsection id="H8D230693711C47F0A0BE9BD5125B57CF"><enum>(b)</enum><header>Tax
imposed</header>
<paragraph id="H2791F26D99054BF8B22200C9C737C81F"><enum>(1)</enum><header>Married
individuals and surviving spouses</header><text display-inline="yes-display-inline">In the case of a taxpayer for whom an
election under subsection (a) is in effect and who is a married individual (as
defined in section 7703) who makes a single return jointly with his spouse
under section 6013 or a surviving spouse (as defined in section 2(a)), there is
hereby imposed on the alternative taxable income of such individual a tax
determined in accordance with the following table:</text>
<table align-to-level="section" blank-lines-before="1" frame="none" line-rules="no-gen" rule-weights="0.0.0.4.0.0" table-type="subformat-2-Tax-Rate">
<tgroup cols="2"><colspec coldef="txt" colname="col1" colsep="0" colwidth="140" min-data-value="0"></colspec><colspec coldef="txt" colname="col2" colsep="0" colwidth="200" min-data-value="0"></colspec>
<thead>
<row><entry align="left" colname="I45" rowsep="0">If taxable
income is:</entry><entry align="left" colname="I46" rowsep="0">The tax
is:</entry>
</row>
</thead>
<tbody>
<row><entry colname="I47" rowsep="0">Not over
$100,000</entry><entry colname="I48" rowsep="0">10% of alternative taxable
income.</entry>
</row>
<row><entry colname="I47" rowsep="0">Over $100,000</entry><entry colname="I48" rowsep="0">$10,000, plus 25% of the excess over $100,000.</entry>
</row>
</tbody>
</tgroup>
</table>
</paragraph><paragraph id="HB078F23E90C74E2995FF5F3B2DF77B27"><enum>(2)</enum><header>Unmarried
individuals (other than surviving spouses)</header><text display-inline="yes-display-inline">In the case of a taxpayer for whom an
election under subsection (a) is in effect and who is not described in
paragraph (1), there is hereby imposed on the alternative taxable income of
such individual a tax determined in accordance with the following table:</text>
<table align-to-level="section" blank-lines-before="1" frame="none" line-rules="no-gen" rule-weights="0.0.0.4.0.0" table-type="subformat-2-Tax-Rate">
<tgroup cols="2"><colspec coldef="txt" colname="col1" colsep="0" colwidth="140" min-data-value="0"></colspec><colspec coldef="txt" colname="col2" colsep="0" colwidth="200" min-data-value="0"></colspec>
<thead>
<row><entry align="left" colname="I45" rowsep="0">If taxable
income is:</entry><entry align="left" colname="I46" rowsep="0">The tax
is:</entry>
</row>
</thead>
<tbody>
<row><entry colname="I47" rowsep="0">Not over
$50,000</entry><entry colname="I48" rowsep="0">10% of alternative taxable
income.</entry>
</row>
<row><entry colname="I47" rowsep="0">Over $50,000</entry><entry colname="I48" rowsep="0">$5,000, plus 25% of the excess over $50,000.</entry>
</row>
</tbody>
</tgroup>
</table>
</paragraph></subsection><subsection id="H0C1F84174F0D4DF7A5DBEEF591A42443"><enum>(c)</enum><header>Alternative
taxable income</header><text>For purposes of this section—</text>
<paragraph id="H994809F86B1B4B6E006600FB8A8CCD2"><enum>(1)</enum><header>In
general</header><text>The term <term>alternative taxable income</term>
means—</text>
<subparagraph id="H69F52AFBE35A4C8381072006EF9029C0"><enum>(A)</enum><text>gross
income,</text>
</subparagraph><subparagraph id="H086E4E9941DA4553BDB55395EC38005D"><enum>(B)</enum><text>the amount
excluded from income under section 139C for capital gains, dividends, and
interest, minus</text>
</subparagraph><subparagraph id="HC71ECEB9167A46DB826E81C46E941B8D"><enum>(C)</enum><text>the sum of—</text>
<clause display-inline="no-display-inline" id="HEF23D5B148B74C9998E500D1DE34D68E"><enum>(i)</enum><text>the personal
exemption,</text>
</clause><clause id="HBCF1D36E69834715AF6EED97C1C84FA6"><enum>(ii)</enum><text display-inline="yes-display-inline">the dependent allowance, plus</text>
</clause><clause id="H8FD52417B56B4FC4B7985208692E378C"><enum>(iii)</enum><text>the alternative
standard deduction.</text>
</clause></subparagraph></paragraph><paragraph id="HDC8C91A3AA124176B2509CC5F0B1E397"><enum>(2)</enum><header>Personal
exemption</header><text display-inline="yes-display-inline">The personal
exemption is—</text>
<subparagraph id="HC0EFFD1BA96F4327A6B2E332D9C550F4"><enum>(A)</enum><text>200 percent of the
dollar amount in effect under subparagraph (B) in the case of—</text>
<clause id="HD78C30A4DE124020963E735718A94420"><enum>(i)</enum><text>a
joint return, or</text>
</clause><clause id="H5810B6D7E863477FA985F268952B346B"><enum>(ii)</enum><text>a
surviving spouse (as defined in section 2(a)), and</text>
</clause></subparagraph><subparagraph id="H039E4FA3D74C4DFDB6993C2B92A2C06B"><enum>(B)</enum><text>$3,500 in the case
of an individual—</text>
<clause id="H6EA15CA4071A4882B7D342D04DFCA7E7"><enum>(i)</enum><text>who is not married
and is not a surviving spouse, or</text>
</clause><clause id="HF26859E8EC304B3FA3A2770924126900"><enum>(ii)</enum><text>who is a married
individual filing a separate return.</text>
</clause></subparagraph></paragraph><paragraph id="H8C13DE1CE38746A5B407186F51991111"><enum>(3)</enum><header>Dependent
allowance</header><text display-inline="yes-display-inline">The dependent
allowance is $3,500 for each dependent (as defined in section 152).</text>
</paragraph><paragraph id="HD569B8D92294474C90E49041AAA9D3CB"><enum>(4)</enum><header>Alternative
standard deduction</header><text>The alternative standard deduction
means—</text>
<subparagraph id="HB2F0140FF2EC4E9DB40003FD47005131"><enum>(A)</enum><text>$25,000 in the
case of—</text>
<clause id="H0EA367FEB03744E2A3D01D96FB135108"><enum>(i)</enum><text>a
joint return, or</text>
</clause><clause id="HB97BD711E28B4F8500AFC8DCAE8507A"><enum>(ii)</enum><text>a
surviving spouse (as defined in section 2(a)), and</text>
</clause></subparagraph><subparagraph id="H70F771C2B78245F89D45B4C78F00356D"><enum>(B)</enum><text>$12,500 in the
case of an individual—</text>
<clause id="H5A84BBB41A6A4E8697148620F641D66"><enum>(i)</enum><text>who
is not married and is not a surviving spouse, or</text>
</clause><clause id="H9336FC60B68B46F78668575E9C263297"><enum>(ii)</enum><text>who is a married
individual filing a separate return.</text>
</clause></subparagraph></paragraph></subsection><subsection display-inline="no-display-inline" id="H27AD98B584BC4DB18913AB0151D572E5"><enum>(d)</enum><header>Inflation
adjustments</header>
<paragraph id="HCC9BE5F58A8C43AE84744F00F0E234D9"><enum>(1)</enum><header>In
general</header><text>In the case of any taxable year beginning in a calendar
year after 2009, each of the dollar amounts for the rate brackets in subsection
(b) and each of the dollar amounts in subsection (d)(2)(B), (d)(3), and (d)(4)
shall be increased by an amount equal to—</text>
<subparagraph id="H6A7661B05EBD42CCA5E467C3F3793513"><enum>(A)</enum><text>such dollar
amount, multiplied by</text>
</subparagraph><subparagraph id="HEDD940230317453991E774F999C67751"><enum>(B)</enum><text>the cost-of-living
adjustment determined under section 1(f)(3) for the calendar year in which the
taxable year begins, by substituting <quote>calendar year 2008</quote> for
<quote>calendar year 1992</quote> in subparagraph (B) thereof.</text>
</subparagraph></paragraph><paragraph id="H357CEC39D613460299703D10BABBA84"><enum>(2)</enum><header>Rounding</header><text>If
any amount as adjusted under clause (i) is not a multiple of $100, such amount
shall be rounded to the nearest multiple of
$100.</text>
</paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H2E44249A1795435CBB19D511CD23538"><enum>(b)</enum><header>Conforming
amendment</header><text>The table of sections for part I of subchapter A of
chapter 1 of such Code is amended by striking the item relating to section 5
and inserting after the item relating to section 4 the following:</text>
<quoted-block id="H7F842E63673A4213AA35A41DC1E7604B" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 5. Simplified income tax
System.</toc-entry>
<toc-entry level="section">Sec. 6. Cross references relating to tax
on
individuals.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H6A6EC4DA7EC7435D82D03F00FA404230"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2009.</text>
</subsection></section><section display-inline="no-display-inline" id="HFFC07EFBBDDF4D2592E9EDF24BEE00ED" section-type="subsequent-section"><enum>504.</enum><header>Exclusion for
capital gains, dividends, and interest</header>
<subsection id="H74C60369D0BA431C88CFE0D06CA04900"><enum>(a)</enum><header>In
general</header><text>Part III of subchapter B of chapter 1 of the Internal
Revenue Code of 1986 (relating to items specifically excluded from gross
income) is amended by inserting after section 139C the following new
section:</text>
<quoted-block display-inline="no-display-inline" id="H8DFACF73D68844E685ECDF00BD0021AA" style="OLC">
<section id="HC936A2CB58954DF293732E2D1411D174"><enum>139D.</enum><header>Capital gains,
dividends, and interest</header>
<subsection id="HE802073F2EAE48F7B9632590E1F8A6EA"><enum>(a)</enum><header>Exclusion</header><text display-inline="yes-display-inline">Gross income does not include amounts
received by an individual as net capital gains, qualified dividends, and
interest.</text>
</subsection><subsection id="H011F8979078045D6A9B71DCA92C38105"><enum>(b)</enum><header>Qualified
dividends</header><text display-inline="yes-display-inline">For purposes of
this section—</text>
<paragraph id="H695196BDC11A41C7946B089F4756D1AF"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">The term
<term>qualified dividends</term> means dividends received during the taxable
year from—</text>
<subparagraph id="H53F1ED747EA04779B866CCAADDD365AC"><enum>(A)</enum><text>domestic
corporations, and</text>
</subparagraph><subparagraph id="HAE2EBC8AD53B47EDA7C1A5F169724D12"><enum>(B)</enum><text>qualified foreign
corporations.</text>
</subparagraph></paragraph><paragraph id="HAB13B855D4E446BAB83363064FA3C911"><enum>(2)</enum><header>Qualified
foreign corporations</header>
<subparagraph id="H8E53A4CAE7644244BDF6B5169C005648"><enum>(A)</enum><header>In
general</header><text>Except as otherwise provided in this paragraph, the term
<term>qualified foreign corporation</term> means any foreign corporation
if—</text>
<clause id="HB788FEDB48E2405791B5B1FA3B80DCB2"><enum>(i)</enum><text>such corporation
is incorporated in a possession of the United States, or</text>
</clause><clause id="HB36787CA63404FC1863D13CB632CAC8F"><enum>(ii)</enum><text>such corporation
is eligible for benefits of a comprehensive income tax treaty with the United
States which the Secretary determines is satisfactory for purposes of this
paragraph and which includes an exchange of information program.</text>
</clause></subparagraph><subparagraph id="H8C5528309799486EB8D795FFFD52B4B"><enum>(B)</enum><header>Dividends on
stock readily tradable on United States securities market</header><text>A
foreign corporation not otherwise treated as a qualified foreign corporation
under subparagraph (A) shall be so treated with respect to any dividend paid by
such corporation if the stock with respect to which such dividend is paid is
readily tradable on an established securities market in the United
States.</text>
</subparagraph><subparagraph id="H16799DF574634E8AB8B2E5852786C08B"><enum>(C)</enum><header>Exclusion of
dividends of certain foreign corporations</header><text>Such term shall not
include any foreign corporation which for the taxable year of the corporation
in which the dividend was paid, or the preceding taxable year, is a passive
foreign investment company (as defined in section 1297).</text>
</subparagraph></paragraph><paragraph id="HB356065B7E46446EA52BBF73855679A1"><enum>(3)</enum><header>Special
rule</header><text display-inline="yes-display-inline">If a taxpayer to whom
this section applies receives, with respect to any share of stock, qualified
dividend income from 1 or more dividends which are extraordinary dividends
(within the meaning of section 1059(c)), any loss on the sale or exchange of
such share shall, to the extent of such dividends, be treated as long-term
capital loss.</text>
</paragraph></subsection><subsection id="HDED6382AD5CE4BAA99892E13B64E4029"><enum>(c)</enum><header>Interest</header><text>For
purposes of this section, the term <term>interest</term> means—</text>
<paragraph id="HE3F45DC0A3514958A246E154CC216201"><enum>(1)</enum><text>interest on
deposits with a bank (as defined in section 581),</text>
</paragraph><paragraph id="HAC1442EA1312437B00B7CC6708DB37B"><enum>(2)</enum><text>amounts (whether or
not designated as interest) paid, in respect to deposits, investment
certificates, or withdrawable or repurchasable shares, by—</text>
<subparagraph id="H650559D32B0D4F10AC3072A0E291EE6"><enum>(A)</enum><text>a mutual savings
bank, cooperative bank, domestic building and loan association, industrial loan
association or bank, or credit union, or</text>
</subparagraph><subparagraph id="HF3F061E991614121B5AC42BEF619A43C"><enum>(B)</enum><text>any other savings
or thrift institution, which is chartered and supervised under Federal or State
law,</text>
</subparagraph><continuation-text continuation-text-level="paragraph">the
deposits or accounts in which are insured under Federal or State law or which
are protected and guaranteed under State law,</continuation-text></paragraph><paragraph id="H443818008C2741D8BEE8F95C6F716B5B"><enum>(3)</enum><text>interest
on—</text>
<subparagraph id="H01CD7BEBDE3C42F2A44B72F3DC85D357"><enum>(A)</enum><text>evidences of
indebtedness (including bonds, debentures, notes, and certificates) issued by a
domestic corporation in registered form, and</text>
</subparagraph><subparagraph id="H960D793AAB5B4C7080371E21FED8E168"><enum>(B)</enum><text>to the extent
provided in regulations prescribed by the Secretary, other evidences of
indebtedness issued by a domestic corporation of a type offered by corporations
to the public,</text>
</subparagraph></paragraph><paragraph id="H0978EF1B06514D01B9450086733ED258"><enum>(4)</enum><text>interest on
obligations of the United States, a State, or a political subdivision of a
State (not excluded from gross income of the taxpayer under any other provision
of law), and</text>
</paragraph><paragraph id="H70B4FF57DD584165893CBFC6C30922B"><enum>(5)</enum><text>interest
attributable to participation shares in a trust established and maintained by a
corporation established pursuant to Federal law.</text>
</paragraph></subsection><subsection id="HFA49A96584A04F3ABDB485DD1EC76267"><enum>(d)</enum><header>Certain
nonresident aliens ineligible for exclusion</header><text>In the case of a
nonresident alien individual, subsection (a) shall apply only—</text>
<paragraph id="HE3CD34E2ED48490586EB252625E9B0D2"><enum>(1)</enum><text>in determining the
tax imposed for the taxable year pursuant to section 871(b)(1) and only in
respect to dividends and interest which are effectively connected with the
conduct of a trade or business within the United States, or</text>
</paragraph><paragraph id="H32F42220A96A4D388D81695D99A3E4D1"><enum>(2)</enum><text>in determining the
tax imposed for the taxable year pursuant to section
877(b).</text>
</paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HD0CA6C65A6214734B6F4ED348BCEB7C5"><enum>(b)</enum><header>Conforming
amendment</header><text>Section 1 of such Code is amended by striking
subsection (h).</text>
</subsection><subsection id="H365DFD4BE41D456397A6510077649643"><enum>(c)</enum><header>Clerical
amendment</header><text>The table of sections for such part III is amended by
inserting after the item relating to section 139C the following new
item:</text>
<quoted-block display-inline="no-display-inline" id="H249E75F16DDE4BE49EB667E13B51ACAC" style="OLC">
<toc container-level="quoted-block-container" idref="H8DFACF73D68844E685ECDF00BD0021AA" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="HC936A2CB58954DF293732E2D1411D174" level="section">Sec. 13DC. Capital gains, dividends, and
interest.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection display-inline="no-display-inline" id="H9B66082548ED44919DF3866D6CFEDE8"><enum>(d)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2009.</text>
</subsection></section><section display-inline="no-display-inline" id="HCF6AE24AB61C4449B3C563C30C7F2AB" section-type="subsequent-section"><enum>505.</enum><header>Repeal of estate and
gift taxes</header>
<subsection id="HDB261C3028524ADCB1008398A5F5EB4"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Subtitle B of the
Internal Revenue Code of 1986 is hereby repealed.</text>
</subsection><subsection id="H61F38441F6CD4256B4A400D9669C034D"><enum>(b)</enum><header>Effective
date</header><text>The repeal made by subsection (a) shall apply to the estates
of decedents dying, and gifts made, and generation-skipping transfers after
December 31, 2009.</text>
</subsection></section><enum>VI</enum><header>Business
Consumption Tax</header>
<section id="H4620BC1FF02842C1BE9051625316E37"><enum>601.</enum><header>Short
title</header><text display-inline="no-display-inline">This title may be cited
as the <quote><short-title>Competitive American Business
Tax</short-title></quote>.</text>
</section><section id="H9C83A53AD6944DA3BE7BB77F35F95496"><enum>602.</enum><header>Repeal of
corporate income tax; new tax paid by corporations and other
businesses</header>
<subsection id="HBC60BC8E51F04D35A8BCEBEBEB17C3D2"><enum>(a)</enum><header>In
general</header><text>Subtitle A of the Internal Revenue Code of 1986 is
amended by inserting after chapter 6 the following new chapter:</text>
<quoted-block id="H766535549A6F470D97D049FB39160860">
<chapter id="HA05386D49DDE4149BB60FC82C565F3F"><enum>7</enum><header>Business
Consumption Tax</header>
<toc container-level="chapter-container" idref="HA05386D49DDE4149BB60FC82C565F3F" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H3915D9A3326640EABF4F8E002B7F51FA" level="subchapter">Subchapter A. Imposition of tax.</toc-entry>
<toc-entry idref="H180D28534D844EE38D97E47D661543C6" level="subchapter">Subchapter B. Basic rules for business consumption
tax.</toc-entry>
<toc-entry idref="H5C8371FC87B34538A34E6749C414256F" level="subchapter">Subchapter C. Capital contributions, mergers, acquisitions,
and distributions.</toc-entry>
<toc-entry idref="HA4E0458F182D48E6AA9CBF38418F667F" level="subchapter">Subchapter D. Accounting method rules.</toc-entry>
<toc-entry idref="HB051EFA58E864C14A300A6C74008017C" level="subchapter">Subchapter E. Land and rental property.</toc-entry>
<toc-entry idref="H1DB4436E45A64FBA96FF9100C97EF5CC" level="subchapter">Subchapter F. Insurance and financial products.</toc-entry>
<toc-entry idref="H5542BF91DF1645369B6F6B75BAB547E9" level="subchapter">Subchapter G. Financial intermediation and financial
institutions.</toc-entry>
<toc-entry idref="HDAB66A3DB40A4872817910994E3E507B" level="subchapter">Subchapter H. Tax-exempt organizations.</toc-entry>
<toc-entry idref="H900F91CB92F7480C91A99E3FDE13659D" level="subchapter">Subchapter I. Cooperatives.</toc-entry>
<toc-entry idref="H053E8AC701F84CFE89A06E0BD7C86F7" level="subchapter">Subchapter J. Sourcing rules.</toc-entry>
<toc-entry idref="HDB4B0CFA9AD149C4B77776C7895F57D2" level="subchapter">Subchapter K. Import tax.</toc-entry>
<toc-entry idref="HFBD87C0B02134FF99EAF8D63B67766D2" level="subchapter">Subchapter L. Transition rules.</toc-entry>
<toc-entry idref="H4BE637E055604D3C93C51C2E00E568AE" level="subchapter">Subchapter M. Rules for administration, consolidated
returns.</toc-entry>
<toc-entry idref="HED3C4D41289E44F68EC0703E8F994745" level="subchapter">Subchapter N. Definitions and rules of
application.</toc-entry>
</toc>
<subchapter id="H3915D9A3326640EABF4F8E002B7F51FA"><enum>A</enum><header>Imposition of
tax</header>
<toc regeneration="yes-regeneration">
<toc-entry idref="HB85F2C52FD944F02B300CA87A96B24B8" level="section">Sec. 1601. Imposition of tax.</toc-entry>
<toc-entry idref="H80B54F1561404983BD00CB56FDCE352F" level="section">Sec. 1602. Taxable amount.</toc-entry>
<toc-entry idref="HC26066BD73AC410C9C914C14549E2C20" level="section">Sec. 1603. Zero rating for exports and interest.</toc-entry>
<toc-entry idref="H011219D7BF07459895262011B8847735" level="section">Sec. 1604. Governmental entities.</toc-entry>
<toc-entry idref="H1C6AC61DA2834209AF815BB532006B55" level="section">Sec. 1605. Exempt organizations.</toc-entry>
<toc-entry idref="HF0442C6ECA4B492283ADE132CFE22922" level="section">Sec. 1606. Credit against tax.</toc-entry>
</toc>
<section display-inline="no-display-inline" id="HB85F2C52FD944F02B300CA87A96B24B8" section-type="subsequent-section"><enum>1601.</enum><header>Imposition of
tax</header>
<subsection id="H2DD6B19CB7C54F2FBB4C6F34F3B95363"><enum>(a)</enum><header>General
rule</header><text>A tax is hereby imposed on each taxable transaction.</text>
</subsection><subsection id="HFDBF0E48D6BD4645970473FAE48699D5"><enum>(b)</enum><header>Amount of
tax</header><text>Except as otherwise provided in this chapter, the amount of
the tax shall be 8.5 percent of the taxable amount.</text>
</subsection><subsection id="H8DD219C34D6B447B8C426006D872C6CF"><enum>(c)</enum><header>Taxable
transaction</header><text>For purposes of this chapter, the term <term>taxable
transaction</term> means—</text>
<paragraph id="HA6D04F61F052487D8190A5C57981CE6"><enum>(1)</enum><text>the sale of
property in the United States,</text>
</paragraph><paragraph id="H296A739DA80A4A269B00E0BD672FD975"><enum>(2)</enum><text>the performance of
services in the United States, and</text>
</paragraph><paragraph id="H8F4F0FAF83124531A5ECE1DAB2DB6"><enum>(3)</enum><text>the importing of
property into the United States,</text>
</paragraph><continuation-text continuation-text-level="subsection">by a
taxable person in a business transaction.</continuation-text></subsection><subsection id="HC668CD7E6B55433CAB78063D55A5238D"><enum>(d)</enum><header>Business
transaction</header>
<paragraph id="H1348BFE5B1D2405CA8BCCC0099EA4BC6"><enum>(1)</enum><header>General
Rule</header><text>For purposes of this chapter, the term <term>business
transaction</term> means a transaction engaged in by—</text>
<subparagraph id="H78A7BEB4926743079DD8A25B9DE6D7D0"><enum>(A)</enum><text>a corporation,
or</text>
</subparagraph><subparagraph id="HF0D0A34FE7234B6C837DA9D24F1DBA9"><enum>(B)</enum><text>any person (other
than a corporation) in connection with a business.</text>
</subparagraph></paragraph><paragraph id="H37EE9501D05844849825402C4CB33FFA"><enum>(2)</enum><header>Sales and Leases
of Real Property; Imports</header><text>For purposes of this chapter—</text>
<subparagraph id="H5186F1D6FF6648C494E9B392C535E6B5"><enum>(A)</enum><header>In
general</header><text>The term <term>business transaction</term>
includes—</text>
<clause id="HBA2D7DBAD9B842FEB900DDEF2A97900"><enum>(i)</enum><text>any
sale or leasing of real property, and</text>
</clause><clause id="HB674988AC4434F6BB8A7EE331B556014"><enum>(ii)</enum><text>any importing of
property,</text>
</clause><continuation-text continuation-text-level="subparagraph">whether
or not such transaction is described in paragraph (1).</continuation-text></subparagraph><subparagraph id="HA411CC5314D8461AAC3BA0D24F501F43"><enum>(B)</enum><header>Certain imported
articles</header><text>Notwithstanding subparagraph (A)(ii), the importing of
an article which is free of duty under part 2 of schedule 8 of the Tariff
Schedules of the United States shall not be treated as a business transaction
unless such transaction is described in paragraph (1).</text>
</subparagraph></paragraph></subsection><subsection display-inline="no-display-inline" id="H78F6F4DEF53B4FD48834332D1F98D9E7"><enum>(e)</enum><header>Taxable
person</header>
<paragraph id="H85BD7EDA17FA4A629D02F905661882EF"><enum>(1)</enum><header>General
Rule</header><text>Except as otherwise provided in this chapter, for purposes
of this chapter, the term <term>taxable person</term> means a person who
engages in a business or in a business transaction.</text>
</paragraph><paragraph id="HB64ECC929B7E40C7B27FCC76B2CEBED"><enum>(2)</enum><header>Treatment of
Employees, etc</header><text>For purposes of this chapter, an employee shall
not be treated as a taxable person with respect to activities engaged in as an
employee.</text>
</paragraph></subsection><subsection display-inline="no-display-inline" id="HADAA205F4E2947448456AC587F9DA2DD"><enum>(f)</enum><header>Transactions in
the United States</header>
<paragraph display-inline="no-display-inline" id="H76AF34FB37AC419EB3D0577379956E4E"><enum>(1)</enum><header>Sales of
Property</header><text>For purposes of this chapter—</text>
<subparagraph id="H74434CB9859642A900B09DD1FFD31EEF"><enum>(A)</enum><header>In
general</header><text>Except as provided in subparagraph (B), the sale of
property shall be treated as occurring where delivery takes place.</text>
</subparagraph><subparagraph id="HC971D3D8E3CE4BB89C6100FEBA542EE6"><enum>(B)</enum><header>Real
property</header><text>The sale of real property shall be treated as occurring
where the real property is located.</text>
</subparagraph></paragraph><paragraph display-inline="no-display-inline" id="H314C72AE10274A4495DCF95763F6792"><enum>(2)</enum><header>Performance of
Service</header><text>For purposes of this chapter—</text>
<subparagraph id="H5C832315114440C6B203F8D4F56036E1"><enum>(A)</enum><header>In
general</header><text>Except as otherwise provided in this paragraph, a service
shall be treated as occurring where it is performed.</text>
</subparagraph><subparagraph id="HAD586C7F387B4C90AADD60C422CF5C63"><enum>(B)</enum><header>Services
performed inside and outside the United States</header><text>If a service is
performed both inside and outside the United States, such service shall be
treated as performed—</text>
<clause id="H342D03E8369F48609C0000CFFCA2459"><enum>(i)</enum><text>inside the United
States, if 50 percent or more of such service is performed inside the United
States, and</text>
</clause><clause id="HD80BD94597364147A50327D9DC163109"><enum>(ii)</enum><text>outside the
United States, if less than 50 percent of such service is performed inside the
United States.</text>
</clause></subparagraph></paragraph></subsection><subsection display-inline="no-display-inline" id="H47362E516738450CAC8E35503332B156"><enum>(g)</enum><header>Rules relating
to other terms used in subsection <enum-in-header>(c)</enum-in-header></header>
<paragraph id="HD96C9437AE904BADA4F9DBB6645DCED7"><enum>(1)</enum><header>Exchanges
Treated as Sales</header><text>For purposes of this chapter—</text>
<subparagraph id="H32EFAD40D9CF45248B2C7CAE7B307B17"><enum>(A)</enum><text>an exchange of
property for property or services shall be treated as a sale of property,
and</text>
</subparagraph><subparagraph id="H9463C60CD7F84E1A00A2EABAB9B9F0D4"><enum>(B)</enum><text>an exchange of
services for property or services shall be treated as the performance of
services.</text>
</subparagraph></paragraph><paragraph id="H99FB9550EC0C400796AB0062E13218EB"><enum>(2)</enum><header>Certain
Transfers to Employees Treated as Sales</header><text>For purposes of this
chapter, the transfer of property to an employee as compensation (other than a
transfer of a type for which no amount is includible in the gross income of
employees for purposes of chapter 1) shall be treated as the sale of
property.</text>
</paragraph><paragraph id="HE72B7EC784E74850813ED2F8E4DE4480"><enum>(3)</enum><header>Performance of
Services</header><text>For purposes of this chapter—</text>
<subparagraph id="HF09A47E0886542C697786F0021AA81AD"><enum>(A)</enum><header>Certain
activities treated as performance of services</header><text>Activities treated
as included in the performance of services shall include (but shall not be
limited to)—</text>
<clause id="H29353D1DB4FF435EAC00CD033D33EDC"><enum>(i)</enum><text>permitting the use
of property,</text>
</clause><clause id="H3F9951D9D52E45EABE85FAE85550DE26"><enum>(ii)</enum><text>the granting of a
right to the performance of services or to reimbursement (including the
granting of warranties, insurance, and similar items), and</text>
</clause><clause id="H1EDD850CD4CB4C4CBDC93F08E5DDACDF"><enum>(iii)</enum><text>the making of a
covenant not to compete (or similar agreement to refrain from doing
something).</text>
</clause></subparagraph><subparagraph id="HFF115C5177564D4E8578462644DFFA1D"><enum>(B)</enum><header>Employers and
employees</header>
<clause id="H8B215982688A4E1696A1F574EC64B772"><enum>(i)</enum><header>Services for
employer</header><text>An employee’s services for the employee’s employer shall
not be treated as the performance of services.</text>
</clause><clause id="H762193D8641F4F7A98642C82D277CBC"><enum>(ii)</enum><header>Services for
employee</header><text>An employer’s services for the employer’s employee shall
not be treated as the performance of services unless such services are of a
type which constitute gross income to the employee for purposes of chapter
1.</text>
</clause></subparagraph><subparagraph id="H2A45F083D2D94B73ACDFC87157E56EEB"><enum>(C)</enum><header>Performance of
services treated as sale of services</header><text>The performance of services
shall be treated as the sale of services.</text>
</subparagraph></paragraph></subsection></section><section display-inline="no-display-inline" id="H80B54F1561404983BD00CB56FDCE352F" section-type="subsequent-section"><enum>1602.</enum><header>Taxable
amount</header>
<subsection id="HDD48ECD036CE41FEADDD6DD8472405D5"><enum>(a)</enum><header>Amount Charged
Customer</header><text>For purposes of this chapter, the taxable amount for any
transaction for which money is the only consideration shall be the price
charged the purchaser of the property or services by the seller thereof—</text>
<paragraph id="HDE6D3662309B4BC8ABCC68DAFE600053"><enum>(1)</enum><text>including all
invoiced charges for transportation, and other items payable to the seller with
respect to this transaction, but</text>
</paragraph><paragraph id="H601801CA82FF4702A5D02E2EA4793FFB"><enum>(2)</enum><text>excluding the tax
imposed by section 1601 with respect to this transaction and excluding any
State and local sales and use taxes with respect to this transaction.</text>
</paragraph></subsection><subsection id="HEEF88D3B8F6C457C00F668EEA3C9409B"><enum>(b)</enum><header>Exchanges</header><text>For
purposes of this chapter, the taxable amount in any exchange of property or
services shall be the fair market value of the property or services transferred
by the person liable for the tax (determined as if such person had sold the
property or services to the other party to the exchange).</text>
</subsection><subsection id="H4A346E97BF424120877449EBB50030B5"><enum>(c)</enum><header>Imports</header><text>For
purposes of this chapter, the taxable amount in the case of any import shall
be—</text>
<paragraph id="H2E71B20993E64235AA3F1B4DB4757395"><enum>(1)</enum><text>the customs value
plus customs duties and any other duties which may be imposed, or</text>
</paragraph><paragraph id="H1B4998327C4F4A538F0394EAA2AA9016"><enum>(2)</enum><text>if there is no
such customs value, the fair market value (determined as if the importer had
sold the property).</text>
</paragraph></subsection></section><section id="HC26066BD73AC410C9C914C14549E2C20"><enum>1603.</enum><header>Zero rating
for exports and interest</header><text display-inline="no-display-inline">The
rate of the tax imposed by section 1601 shall be zero with respect to the
following:</text>
<paragraph id="H9077DB5EFA3141B0BB4651004CD762AA"><enum>(1)</enum><header>Exports</header><text>Exports
of property.</text>
</paragraph><paragraph id="H1ED9D50452E1466598FC9D226000912D"><enum>(2)</enum><header>Interest</header><text>Interest.</text>
</paragraph></section><section display-inline="no-display-inline" id="H011219D7BF07459895262011B8847735" section-type="subsequent-section"><enum>1604.</enum><header>Governmental
entities</header>
<subsection id="HD62651FBD7A94052B0C407EA1D0068E"><enum>(a)</enum><header>Zero Rating for
Sales to Governmental Entities and Educational Activities of Governmental
Entities</header><text>The rate of the tax imposed by section 1601 shall be
zero with respect to the following:</text>
<paragraph id="H00AE6FF157BD44A99E3DF0BB7EB5A8C6"><enum>(1)</enum><header>Sales to
governmental entities</header><text>Any sale of property or services to a
governmental entity.</text>
</paragraph><paragraph id="HE4873D51E0B74D17802FE889005582BE"><enum>(2)</enum><header>Educational
activities</header><text>The providing by a governmental entity of property and
services in connection with the education of students.</text>
</paragraph></subsection><subsection id="H2B3BA76A7A1F47239546B2A67709E100"><enum>(b)</enum><header>Sales, etc., by
Governmental Entities Taxable Only Where Separate Charge Is
Made</header><text>For purposes of this chapter, the sale of property and the
performance of services by a governmental entity shall be a taxable transaction
if (and only if) a separate charge of fee is made therefor.</text>
</subsection><subsection id="H675076E9CF4A427DB6C7B66CDEC74E89"><enum>(c)</enum><header>Governmental
Entity Defined</header><text>For purposes of this chapter, the term
<term>governmental entity</term> means the United States, any State or
political subdivision thereof, the District of Columbia, a Commonwealth or
possession of the United States, or any agency or instrumentality of any of the
foregoing.</text>
</subsection></section><section display-inline="no-display-inline" id="H1C6AC61DA2834209AF815BB532006B55" section-type="subsequent-section"><enum>1605.</enum><header>Exempt
organizations</header>
<subsection id="HACA262768E594F969300FAE56BAFC1D8"><enum>(a)</enum><header>Zero Rating for
Section <enum-in-header>501(c)(3)</enum-in-header> Organizations; Credit
Allowed for All Purchases</header>
<paragraph id="HD239AFFB157F4E86B8007FE7A57814F"><enum>(1)</enum><header>Zero
rating</header><text>The rate of the tax imposed by section 1601 shall be zero
with respect to any taxable transaction engaged in by a section 501(c)(3)
organization other than as part of an unrelated business.</text>
</paragraph><paragraph id="H1A6EEE5D85AB4E51949C7B2750584D4E"><enum>(2)</enum><header>Credit allowed
for all purchases</header><text>For purposes of this chapter, a section
501(c)(3) organization shall be treated as engaged in a business with respect
to all of its activities.</text>
</paragraph></subsection><subsection id="H148D515BA38E471D923861668456931F"><enum>(b)</enum><header>Taxable
Transactions in Case of Other Exempt Organizations</header><text>For purposes
of this chapter, the sale of property and the performance of services by any
exempt organization other than a section 501(c)(3) organization shall be a
taxable transaction if (and only if) a charge or fee is made for such
services.</text>
</subsection><subsection id="H9F5EE863248545F0B1C17F76A18B9F15"><enum>(c)</enum><header>Definitions</header><text>For
purposes of this chapter—</text>
<paragraph id="H3902E534D1304902BDF5761899792933"><enum>(1)</enum><header>Section
<enum-in-header>501(c)(3)</enum-in-header> organizations</header><text>The term
<term>section 501(c)(3) organization</term> means an organization described in
section 501(c)(3) which is exempt from tax under section 501(a).</text>
</paragraph><paragraph id="HBB53D119943C464BB05E156580B2BD7F"><enum>(2)</enum><header>Other exempt
organization</header><text>The term <term>other exempt organization</term>
means any organization (other than a section 501(c)(3) organization) which is
exempt from tax under chapter 1.</text>
</paragraph></subsection></section><section display-inline="no-display-inline" id="HF0442C6ECA4B492283ADE132CFE22922" section-type="subsequent-section"><enum>1606.</enum><header>Credit against
tax</header>
<subsection id="H62402046C6BA414487C6DF0073E81254"><enum>(a)</enum><header>General
Rule</header><text>There shall be allowed as a credit against the tax imposed
by section 1601 the aggregate amount of tax imposed by section 1601 which has
been paid by sellers to the taxpayer of property and services which the
taxpayer uses in the business to which the transaction relates.</text>
</subsection><subsection id="H9ED5E40AA16F4254AA3DC7B4A100FC36"><enum>(b)</enum><header>Exempt
Transactions, etc</header><text>If—</text>
<paragraph id="H718C603EF821449D9968AF6C3013C486"><enum>(1)</enum><text>property or
services are used partly in the business and partly for other purposes,
or</text>
</paragraph><paragraph id="HD087C974445340B792CD991D862E0910"><enum>(2)</enum><text>property or
services are used partly for taxable transactions and partly for other
transactions,</text>
</paragraph><continuation-text continuation-text-level="subsection">the
credit shall be allowable only with respect to the property and services used
for taxable transactions in the business. No credit shall be allowable for any
transaction occurring when the taxpayer was a nontaxable person.</continuation-text></subsection><subsection id="H81C6BAD79F7A424D97594FF9AE6840D2"><enum>(c)</enum><header>Excess Credit
Treated as Overpayment</header>
<paragraph id="H1B4869F62D5F47B800A0B80032847F50"><enum>(1)</enum><header>In
general</header><text>If for any taxable period the aggregate amount of the
credits allowable by subsection (a) exceeds the aggregate amount of the tax
imposed by section 1601 for such period, such excess shall be treated as an
overpayment of the tax imposed by section 1601.</text>
</paragraph><paragraph id="HECF4253812E443BFA0B342282CF2034F"><enum>(2)</enum><header>Time when
overpayment arises</header><text>Any overpayment under paragraph (1) for any
taxable period shall be treated as arising on the later of—</text>
<subparagraph id="HB5A158B7855A4CA4BA08AC966E18F61F"><enum>(A)</enum><text>the due date for
the return for such period, or</text>
</subparagraph><subparagraph id="H342AA2ED35174E0CA200E131DE2B497D"><enum>(B)</enum><text>the date on which
the return is filed.</text>
</subparagraph></paragraph></subsection></section></subchapter><subchapter id="H180D28534D844EE38D97E47D661543C6"><enum>B</enum><header>Basic rules for
business consumption tax</header>
<toc container-level="chapter-container" idref="HA05386D49DDE4149BB60FC82C565F3F" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H3DDE1AC500B04EC99C84DA48FFF4BAA4" level="section">Sec. 1611. Gross profits.</toc-entry>
<toc-entry idref="H09893A4234584101BD8985EB954A4B1" level="section">Sec. 1612. Taxable receipts.</toc-entry>
<toc-entry idref="HFF8E6D8E6E2A480CA8A34EEA12012255" level="section">Sec. 1613. Deductible amounts.</toc-entry>
<toc-entry idref="H7C6286E260B14B3B83FA00A9C142CD42" level="section">Sec. 1614. Cost of business purchases.</toc-entry>
<toc-entry idref="H607049CC2AF14BCBBEA25817A709F880" level="section">Sec. 1615. Business entity and business activity.</toc-entry>
<toc-entry idref="H23DF5CD053D9416DA8189D8666E0E2F1" level="section">Sec. 1616. Loss carryover deduction.</toc-entry>
</toc>
<section id="H3DDE1AC500B04EC99C84DA48FFF4BAA4"><enum>1611.</enum><header>Gross
profits</header><text display-inline="no-display-inline"><quote>Gross
profits</quote> means for a taxable transaction of a business entity the amount
by which—</text>
<paragraph id="H85302F7446FD455E8CB800FDC0C4FF"><enum>(1)</enum><text>the taxable receipts
of the business entity with respect to the taxable transaction, exceed</text>
</paragraph><paragraph id="HC5364B26D3C14294A19C00E9E1B2441D"><enum>(2)</enum><text>the deductible
amounts for the business entity with respect to the taxable
transactions.</text>
</paragraph></section><section id="H09893A4234584101BD8985EB954A4B1"><enum>1612.</enum><header>Taxable
receipts</header>
<subsection id="HBC6CA2737B534808A2F6E40114CB2D3"><enum>(a)</enum><header>In
general</header><text><quote>Taxable receipts</quote> means all receipts from
the sale of property, use of property, and performance of services in the
United States.</text>
</subsection><subsection commented="no" id="H1D11E3FEBCF9442F8DFEFDFD41C9BF3D"><enum>(b)</enum><header>Games of
chance</header><text>Amounts received for playing games of chance by business
entities engaging in the activity of providing such games shall be treated as
receipts from the sale of property or services.</text>
</subsection><subsection id="H030558D1B3E448C28B93DC9D940041DA"><enum>(c)</enum><header>In-Kind
receipts</header><text>The taxable receipts attributable to the receipt of
property, use of property or services in whole or partial exchange for
property, use of property or services equal the fair market value of the
services or property received.</text>
</subsection><subsection id="HC7B2D7B0DA3040D199CA355BECE55670"><enum>(d)</enum><header>Taxes</header><text>Taxable
receipts do not include any excise tax, sales tax, custom duty, or other
separately stated levy imposed by a Federal, State, or local government
received by a business entity in connection with the sale of property or
services or the use of property.</text>
</subsection><subsection commented="no" id="HB3FDD9CEAEFB49CCB41C22C646AABCE1"><enum>(e)</enum><header>Financial
receipts</header><text display-inline="yes-display-inline">Except as provided
in subchapter G (relating to financial intermediation and financial
institutions), taxable receipts do not include financial receipts (as defined
by regulations by the Secretary).</text>
</subsection></section><section id="HFF8E6D8E6E2A480CA8A34EEA12012255"><enum>1613.</enum><header>Deductible
amounts</header><text display-inline="no-display-inline"><quote>Deductible
amounts</quote> for a business entity in a taxable transaction include—</text>
<paragraph id="H80F1AAC34AE24873A7EA81E568944EE6"><enum>(1)</enum><text>the cost of
business purchases with respect to the taxable transaction (as determined under
section 1614),</text>
</paragraph><paragraph commented="no" id="H4ED55776C8F34DE8A063B9C50023C478"><enum>(2)</enum><text>such entity’s loss
carryover deduction (as determined under section 1616), and</text>
</paragraph><paragraph id="H4F4AAE921B134E0FA6CD167545000988"><enum>(3)</enum><text>the transition
basis deduction (as determined under section 1711).</text>
</paragraph></section><section id="H7C6286E260B14B3B83FA00A9C142CD42"><enum>1614.</enum><header>Cost of
business purchases</header>
<subsection id="H586AB67CB0614313A44B2875001DA7AC"><enum>(a)</enum><header>Business
purchases</header>
<paragraph id="H43F3FE8087E043688C884D40091DC541"><enum>(1)</enum><header>In
general</header><text><quote>Business purchases</quote> means the acquisition
of—</text>
<subparagraph id="HF09EF2A89A424FA2A6AF131BB7761EB8"><enum>(A)</enum><text>property,</text>
</subparagraph><subparagraph id="H2C67192F622642A0B11409B6E4444891"><enum>(B)</enum><text>the use of
property, or</text>
</subparagraph><subparagraph id="H49638C00D55E44F288FDE53875D6544E"><enum>(C)</enum><text>services,</text>
</subparagraph><continuation-text continuation-text-level="paragraph">in the
United States for use in a business activity.</continuation-text></paragraph><paragraph id="H150FED8D2C5B4270B53BD1431448AA8"><enum>(2)</enum><header>Examples</header><text>Business
purchases include (without limitation) the—</text>
<subparagraph id="H04DE4D5351C243BB8746B754D7DF0028"><enum>(A)</enum><text>purchase or rental
of real property,</text>
</subparagraph><subparagraph id="HCDFB91E03A004149AC102D2DCE9B8B71"><enum>(B)</enum><text>purchase or rental
of capital equipment,</text>
</subparagraph><subparagraph id="H94268CDAACAB4B8C80B1A51338F3663D"><enum>(C)</enum><text>purchase of
supplies and inventory,</text>
</subparagraph><subparagraph id="H04F98FB647CD46A4B7A934735046479B"><enum>(D)</enum><text>purchase of
services from independent contractors,</text>
</subparagraph><subparagraph id="H94611B7935944964BD960068E2156540"><enum>(E)</enum><text>purchase of
financial intermediation services (as determined in accordance with section
1661),</text>
</subparagraph><subparagraph id="H778D4E3093634C21B89051325C60322C"><enum>(F)</enum><text>imports for use in
a business activity, and</text>
</subparagraph><subparagraph id="H76C94BD63FD248AFA22C26F5040037A4"><enum>(G)</enum><text display-inline="yes-display-inline">premiums for the cost of health insurance
policies for which the service provider, members of his family, or persons
designated by him or members of his family are the beneficiaries.</text>
</subparagraph></paragraph><paragraph commented="no" id="HBA6B4FEF09EA4DFF9395EBE524EC442"><enum>(3)</enum><header>Exclusions</header><text>Business
purchases do not include—</text>
<subparagraph commented="no" id="HF35FA648649045B897E12100BE00ECD5"><enum>(A)</enum><text>payments for use
of money or capital, such as interest or dividends (except to the extent that a
portion so paid is a fee for financial intermediation services),</text>
</subparagraph><subparagraph commented="no" id="H159577BCFAD14002A3DCF67C00E3EB9C"><enum>(B)</enum><text>premiums for life
insurance,</text>
</subparagraph><subparagraph commented="no" id="H0075C00097614EE7BCE83E72B5F7F6C0"><enum>(C)</enum><text>the acquisition of
savings assets or other financial instruments.</text>
</subparagraph><subparagraph commented="no" id="HE6B9212E0D0649B19BA58E26DEF3DF8B"><enum>(D)</enum><text>property acquired
outside the United States (but such property shall be taken into account as an
import if imported),</text>
</subparagraph><subparagraph commented="no" id="HE0EFBD5A263C4A18B5A9193E902CB343"><enum>(E)</enum><text>services performed
outside the United States (unless treated as imported into the United
States),</text>
</subparagraph><subparagraph commented="no" id="H4193FC3EEC1F46A580A3622E12D179FF"><enum>(F)</enum><text>compensation
expenses for an individual (other than amounts paid to an individual in his
capacity as a business entity), or</text>
</subparagraph><subparagraph commented="no" id="HA0B1AAA04B484F49ACD735601E79C2"><enum>(G)</enum><text>taxes (except as
provided in subsection (b)(2) relating to product taxes).</text>
</subparagraph></paragraph><paragraph commented="no" id="HD207F42DDB074B7E9E2135A4C30D41E"><enum>(4)</enum><header>Compensation
expenses</header><text><quote>Compensation expenses</quote> means—</text>
<subparagraph commented="no" id="H3B0C0F561B424791BF2F5F521FDD1C22"><enum>(A)</enum><text>wages, salaries or
other cash payable for services,</text>
</subparagraph><subparagraph commented="no" id="H155385DC1F6849A48479E100B88822B3"><enum>(B)</enum><text>any taxes imposed
on the recipient that are withheld by the business entity,</text>
</subparagraph><subparagraph commented="no" id="H2DE9D36497B34FDDA2A11186669107E"><enum>(C)</enum><text>the cost of
property purchased to provide employees with compensation (other than property
incidental to the provision of fringe benefits that are excluded from income
under the individual tax), and</text>
</subparagraph><subparagraph commented="no" id="H5EFD5C1AC00F4394BAD91DE36B361B4C"><enum>(D)</enum><text>the cost of fringe
benefits which are includible in an employee’s, partner’s, or proprietor’s
income under section 5 (or are excluded solely because they constitute employee
savings), including (without limitation)—</text>
<clause commented="no" id="H7D88CF3C3BE3456C94CA6848C5F174F2"><enum>(i)</enum><text>contributions to
retirement and severance benefit plans,</text>
</clause><clause commented="no" id="HD837033E9DC5460883278C2BC9261BA6"><enum>(ii)</enum><text>premiums for the
cost of life, accident, disability and other insurance policies for which the
service provider, members of his family, or persons designated by him or
members of his family are the beneficiaries,</text>
</clause><clause commented="no" id="H9972DB45A44043CA9652009062B4BA3"><enum>(iii)</enum><text>rental of parking
spaces or parking fees (unless the parking space is used for a vehicle that is
regularly used in a business activity);</text>
</clause><clause commented="no" id="H315E41BB89B0404D907CAFFA614592BB"><enum>(iv)</enum><text>employer paid
educational benefits;</text>
</clause><clause commented="no" id="HF75C328411984C1985AB9CF9F7A1D919"><enum>(v)</enum><text>employer paid
housing (other than housing provided for the convenience of the employer);
and</text>
</clause><clause commented="no" id="HC6C268F3232F4524B0C988BEBCE07240"><enum>(vi)</enum><text>employer paid
meals (other than meals provided for the convenience of the employer).</text>
</clause></subparagraph></paragraph></subsection><subsection id="H242F7CFF5ACB480FA47C4139D90700B"><enum>(b)</enum><header>Cost of business
purchases</header>
<paragraph id="H1E21CCE3B0374D52A957B8F77E8097E8"><enum>(1)</enum><header>In
general</header><text>The <quote>cost of a business purchase</quote> is the
amount paid or to be paid for the business purchase.</text>
</paragraph><paragraph id="HC8EF846D2EC44BA3A72488E68ED29EC3"><enum>(2)</enum><header>Taxes</header>
<subparagraph id="H079595DFDEFD451DB4AABF77ACEE688C"><enum>(A)</enum><header>In
general</header><text>The <quote>cost of business purchases</quote> includes
any product taxes paid with respect to the property or services
purchased.</text>
</subparagraph><subparagraph id="H1BDDA08AC264467EA721361BE076A2B"><enum>(B)</enum><header>Product
tax</header><text><quote>Product tax</quote> means any excise tax, sales or use
tax, custom duty, or other separately stated levy imposed by a Federal, State,
or local government on the production, severance or consumption of property or
on the provision of services, whether or not separately stated, and including
any such taxes that are technically imposed on the seller of property or
services.</text>
</subparagraph><subparagraph id="H8AEDB31390274D7681413DA27CEFD58B"><enum>(C)</enum><header>Taxes not
product taxes</header><text>Product taxes do not include—</text>
<clause id="HC3B3E9D61C85459600BD2D11D4BE2022"><enum>(i)</enum><text>the import
tax,</text>
</clause><clause id="H27E8E07FD2D34D7989DDECBFFBDD6E4"><enum>(ii)</enum><text>state and local
property taxes,</text>
</clause><clause id="H22AB65D0552943EAB03D006F96BB543C"><enum>(iii)</enum><text>franchise or
income taxes,</text>
</clause><clause id="HAC9B5CCDC8ED473E9CB21274E010047"><enum>(iv)</enum><text>payroll taxes and
self-employment taxes, or</text>
</clause><clause id="H64EDF6DF97104AF6A040BEFC9527F82"><enum>(v)</enum><text>the
business tax.</text>
</clause></subparagraph></paragraph><paragraph id="HC5C24A8D74E0454AB6909314B8C553C5"><enum>(3)</enum><header>Imports</header><text>In
the case of an import by a business entity, the cost of the import is the
import price for purposes of the import tax. The import tax is not part of the
cost of the import.</text>
</paragraph></subsection><subsection id="H8A970617C26F4F53AC99EF51007DDB08"><enum>(c)</enum><header>Property and
services acquired for property</header><text>If a business entity receives
property or services from a business entity in whole or partial exchange for
property or services, the property or services acquired shall be treated as if
they were purchased for an amount equal to the fair market value of the
services or property received. For purposes of this section, property includes
stock and other equity interests in business other than stock or an equity
interest in the business entity acquiring the property or services.</text>
</subsection><subsection id="H7C92CA704F974376B490D9F0A61BE267"><enum>(d)</enum><header>Gambling
payments</header><text>In the case of a business involving gambling, lotteries,
or other games of chance, business purchases include amounts paid to
winners.</text>
</subsection><subsection id="H38FFA417634045C7ABD7F623CE5E650"><enum>(e)</enum><header>Savings
assets</header><text><quote>Savings assets</quote> means stocks, bonds,
securities, certificates of deposits, investments in partnerships and limited
liability companies, shares of mutual funds, life insurance policies,
annuities, and other similar savings or investment assets.</text>
</subsection></section><section id="H607049CC2AF14BCBBEA25817A709F880"><enum>1615.</enum><header>Business
entity and business activity</header>
<subsection id="H74672C374C2A4B3A807B9E4E4F58B870"><enum>(a)</enum><header>Business
entity</header><text>For purposes of the business tax, <quote>business
entity</quote> means any corporation, unincorporated association, partnership,
limited liability company, proprietorship, independent contractor, individual,
or any other person engaging in business activity in the United States. An
individual shall be considered a business entity only with respect to the
individual’s business activities.</text>
</subsection><subsection id="HD16E928C996F413DBCACD6B7A4CB82BB"><enum>(b)</enum><header>Business
activity</header><text><quote>Business activity</quote> means the sale of
property or services, the leasing of property, the development of property or
services for subsequent sale or use in producing property or services for
subsequent sale. <quote>Business activity</quote> does not include casual or
occasional sales of property used by an individual (other than in a business
activity), such as the sale by an individual of a vehicle used by the
individual.</text>
</subsection><subsection id="HD5DEAF0239CE4E47AB7740D5ADC0420"><enum>(c)</enum><header>Exception for
certain employees</header>
<paragraph id="H6B5DAA8FF9AC4D2B80D1046111DD0034"><enum>(1)</enum><header>In
general</header><text><quote>Business activity</quote> does not include—</text>
<subparagraph id="H1CD81529118546528FF30154CEC38F96"><enum>(A)</enum><text>the performance of
services by an employee for an employer that is a business entity with respect
to the activity in which the employee is engaged, or</text>
</subparagraph><subparagraph id="H43A0D05AC0A940CBB4DEC97C6E1CF2C6"><enum>(B)</enum><text>the performance of
regular domestic household services (including babysitting, housecleaning, and
lawn cutting) by an employee of an employer that is an individual or
family.</text>
</subparagraph></paragraph><paragraph id="H35B06821419B46A9B435C13E99DE485C"><enum>(2)</enum><header>Employee
defined</header><text>For purposes of this subsection, <quote>employee</quote>
includes an individual partner who provides services to a partnership or an
individual member who provides services to a limited liability company, or a
proprietor with respect to compensation for services from his
proprietorship.</text>
</paragraph></subsection></section><section commented="no" id="H23DF5CD053D9416DA8189D8666E0E2F1"><enum>1616.</enum><header>Loss carryover
deduction</header>
<subsection commented="no" id="H1335D4B9A357422296B7AE9FC7C9DED"><enum>(a)</enum><header>Deduction</header><text>The
<quote>loss carryover deduction</quote> for a taxable period is the lesser
of—</text>
<paragraph commented="no" id="H384751663106412F8600377CF5009577"><enum>(1)</enum><text>the business
entity’s gross profits for the taxable period (determined without the loss
carryover deduction), or</text>
</paragraph><paragraph commented="no" id="H5FB359AB5AD64703B8644253BEA43199"><enum>(2)</enum><text>the amount of the
loss carryover to the taxable period.</text>
</paragraph></subsection><subsection commented="no" id="HACB730567EC24BD5A6BFE5695FDCB9A9"><enum>(b)</enum><header>Loss
carryover</header>
<paragraph commented="no" id="H0BFB5F1FF621466F8CF102A016EB795F"><enum>(1)</enum><header>General
rule</header><text>A loss for any taxable period shall be a loss carryover to
the succeeding taxable period.</text>
</paragraph><paragraph commented="no" id="HA069E07648FC475EA82C6B64C35FFE31"><enum>(2)</enum><header>Loss carryovers
to a taxable period</header><text>The loss carryover to a taxable period is the
sum of the loss carryovers from all prior taxable periods beginning on or after
January 1 of the year following the year in which this chapter is
enacted.</text>
</paragraph><paragraph commented="no" id="H36370B2F3B7D44EA812D3EAF9F4ED95"><enum>(3)</enum><header>Reduction of loss
carryovers as a result of the deduction</header><text>A business entity’s loss
carryovers shall be reduced each year by the amount of the loss carryover
deduction for the year. Loss carryovers shall be reduced in the order that they
arose.</text>
</paragraph></subsection><subsection commented="no" id="HAE8544A41A61461B941948C9846DD370"><enum>(c)</enum><header>Loss for taxable
period</header><text>A business entity’s loss (if any) for the taxable period
equals the excess (if any) of—</text>
<paragraph commented="no" id="H5F05C9FD307A4B0B99166FA23DD95103"><enum>(1)</enum><text>the sum of—</text>
<subparagraph commented="no" id="H1E092E1FB34441F680A3BE2CE4EF5A8"><enum>(A)</enum><text>the cost of
business purchases for the taxable period, and</text>
</subparagraph><subparagraph commented="no" id="HCD3A750901474EF088A9EEDDDD69F7"><enum>(B)</enum><text>the transition basis
adjustment for the taxable period, over</text>
</subparagraph></paragraph><paragraph commented="no" id="H4F8852C8AF9C48CB93E6C1EFC78D4FE"><enum>(2)</enum><text>taxable receipts
for the taxable period.</text>
</paragraph></subsection><subsection commented="no" id="HDC6C09AF8F544CD88B1CCA74BC82EAE"><enum>(d)</enum><header>Special
rules</header>
<paragraph commented="no" id="H3E406246EFBF428B88275BA8473E9629"><enum>(1)</enum><header>Consolidated
returns</header><text>In the case of a consolidated return, the loss for a
taxable period shall be determined on a consolidated group basis. In the case
of a deconsolidation, the loss carryovers from the consolidated group shall be
allocated in accordance with rules to be prescribed by the Secretary.</text>
</paragraph><paragraph commented="no" id="HF3AD932A7C6E41719EB21816847E008D"><enum>(2)</enum><header>Loss carryovers
of acquired business entity</header><text display-inline="yes-display-inline">Any loss arising in the case of the
acquisition of a business entity shall be allowed as prescribed by the
Secretary.</text>
</paragraph></subsection><subsection id="H0836D3F8EF354E4190830023475DB048"><enum>(e)</enum><header>Interest</header><text display-inline="yes-display-inline">Interest shall be allowed on each loss
carried forward under this section at a rate determined by the Secretary of the
Treasury.</text>
</subsection></section></subchapter><subchapter id="H5C8371FC87B34538A34E6749C414256F"><enum>C</enum><header>Capital
contributions, mergers, acquisitions, and distributions</header>
<toc regeneration="no-regeneration">
<toc-entry idref="H0D196D0F55D6453F9DFBA2B93EBA9C9" level="section">Sec. 1621. Contributions to a business entity.</toc-entry>
<toc-entry idref="HB190D1045E014E60B0E96DF0DE5CE991" level="section">Sec. 1622. Distributions of property.</toc-entry>
<toc-entry idref="HE21A13247C404B4DA2CD39434FFA85EA" level="section">Sec. 1623. Asset acquisitions.</toc-entry>
<toc-entry idref="HF28A3964130F4F9EAA7CDF9DD387E812" level="section">Sec. 1624. Mergers and stock acquisitions.</toc-entry>
<toc-entry idref="H8507DC9E583645268142DACDD468214" level="section">Sec. 1625. Spin-offs, split-offs, etc.</toc-entry>
<toc-entry idref="HB8B8F8CBBAD24954AD7082DD2FEE946E" level="section">Sec. 1626. Allocation of certain tax attributes.</toc-entry>
</toc>
<section id="H0D196D0F55D6453F9DFBA2B93EBA9C9"><enum>1621.</enum><header>Contributions
to a business entity</header>
<subsection id="HF05CF20C8F8E4945993CAD903FDE13E"><enum>(a)</enum><header>By business
entity</header>
<paragraph id="H7E664342F3B6464C98E3C7F9EEF3C1A0"><enum>(1)</enum><header>Cash</header><text>If
a business entity contributes cash to a business entity of which it is or
becomes a partial or full owner, the amount contributed is not a deductible
amount to the contributor or a taxable receipt to the recipient.</text>
</paragraph><paragraph id="H5DBB86A94D5443A989ABF1EA9EC838AB"><enum>(2)</enum><header>Property or
services</header><text>If a business entity contributes property or services to
a business entity of which it is or becomes a partial or full owner, the
transaction will not result in taxable receipts to the contributor or a
deduction for a business purchase for the recipient and will not constitute a
sale resulting in taxable receipts to the contributor.</text>
</paragraph></subsection><subsection id="H062590146BC44D4F98BDF5EC3CFA53E7"><enum>(b)</enum><header>By
individual</header>
<paragraph id="H9AEF6E25343D48D193B6257F88293E8B"><enum>(1)</enum><header>Cash</header><text>If
an individual contributes cash to a business entity, the cash received is not a
taxable receipt.</text>
</paragraph><paragraph id="H2179DC3132DE46B8B98BC63ECB3834C2"><enum>(2)</enum><header>New
property</header><text>If an individual contributes to a business entity
property that the individual purchased for the business entity but which was
not used by any person after its purchase, the property shall be considered
purchased by such business entity from the person from which the individual
purchased the property.</text>
</paragraph><paragraph id="HF204BC9E27BF4FE4B145BD23B9BC9975"><enum>(3)</enum><header>Personal use
property</header>
<subparagraph id="H19B68CECFA584C738DCCD8AA03012149"><enum>(A)</enum><header>In
general</header><text>If an individual contributes personal use property to a
business entity in which the individual has an ownership interest or for which
the individual receives an ownership interest, the business entity shall not be
permitted to deduct the value of the property received as a business expense.
The business entity will have a tax basis in the contributed property equal to
the contributor’s basis.</text>
</subparagraph><subparagraph id="H0DB5EC8806E3484890FE4700E1E2B34"><enum>(B)</enum><header>Personal use
property</header><text><quote>Personal use property</quote> means any property
used by an individual at any time other than in a business activity.</text>
</subparagraph></paragraph><paragraph id="HCB97485668D24FB6A4966797005264B2"><enum>(4)</enum><header>Services</header><text>If
an individual contributes services to a business entity in which the individual
has an ownership interest or receives an ownership interest, the business
entity shall not be permitted to deduct the value of the services received (or
the value of the equity interest provided to the services provider).</text>
</paragraph></subsection></section><section id="HB190D1045E014E60B0E96DF0DE5CE991"><enum>1622.</enum><header>Distributions
of property</header>
<subsection id="H5C6FA6CCC5B14987A157194FE5B1F2A6"><enum>(a)</enum><header>Distributions
other than to controlling business</header><text>If a business entity
distributes all or a portion of its assets to its owners (other than a
controlling business entity), the business entity will be treated as if it sold
the assets to its owners at fair market value. The fair market value will be
determined by the distributing corporation and those determinations, unless
unreasonable, will be binding on the recipients.</text>
</subsection><subsection id="HC2A70DF4519340A3AAA6CDDB09BE800"><enum>(b)</enum><header>Distributions to
a controlling business</header><text>If a business entity distributes all or a
portion of its assets to a controlling business, the controlling business will
assume the distributing entity’s tax attributes with respect to the assets and
neither entity will have taxable receipts or a deduction as a result of the
transaction.</text>
</subsection><subsection id="H2C7CD8E261B04FB5BBC7D700B2B308F"><enum>(c)</enum><header>Distribution of
personal use property</header><text>If personal use property is distributed to
the individual who contributed the personal use property to a business entity,
the fair market value of the property for purposes of paragraph (a) shall equal
the basis of the property plus any enhancement in value of the property
attributable to business purchases with respect to the property.</text>
</subsection><subsection id="H9B05670627324E7E8C6D69DF00F8FAD8"><enum>(d)</enum><header>Controlling
business entity</header><text>A business entity is a <quote>controlling
business entity</quote> with respect to another business entity if it owns
directly or indirectly more than 50 percent of the profits or capital interest
in the other business entity.</text>
</subsection><subsection id="HFED4FC32D40F47DE8F086FA1017493C1"><enum>(e)</enum><header>Application of
this Section</header><text>This section applies to both liquidating and
nonliquidating distributions. Property shall be treated as distributed if the
property is used for a nonbusiness purpose for more than an insubstantial
period of time during a taxable period.</text>
</subsection></section><section id="HE21A13247C404B4DA2CD39434FFA85EA"><enum>1623.</enum><header>Asset
acquisitions</header>
<subsection id="H4F458D2F7E37497AA7DEF3ABCCED7FA0"><enum>(a)</enum><header>In
general</header><text>If a business entity transfers some or all of its assets,
the consideration received for such assets shall be allocated among the assets
transferred in the same manner as was required by section 1060. If the
transferee and transferor agree in writing on the allocation of any
consideration, or as to the fair market value of any of the assets, such
agreement shall be binding on both the transferor and transferee unless the
Secretary determines that such allocation (or fair market value) is not
appropriate.</text>
</subsection><subsection id="HC9ECCC82167E4FB5A909093BCFFE05EA"><enum>(b)</enum><header>Tax
consequences</header><text>The tax consequences of an asset acquisition shall
be determined in accordance with the rules of this chapter and shall be
dependent upon allocations made under subsection (a). In general, consideration
allocable to savings assets, such as stock in another business entity, would
not be included in taxable receipts of the transferor and would not be a
business purchase of the purchaser, but consideration allocable to the sale of
tangible property and intangible property (other than savings assets) will
constitute taxable receipts of the seller and a business purchase of the
purchaser.</text>
</subsection><subsection id="HAFF49875861F4DF591BBE3188849D731"><enum>(c)</enum><header>Election To
treat asset acquisition as a stock acquisition</header><text>In the case of the
sale of substantially all of the assets of a business entity or substantially
all of the assets of a line of business or a separately standing business of a
business entity, the transferee and transferor can jointly elect to treat the
acquisition as if it were an acquisition of the stock of a business entity
holding the assets so transferred. In such case, the rules of section 1624
shall apply.</text>
</subsection><subsection id="H79A6B403C04C4114A0C2582F30FF295F"><enum>(d)</enum><header>Authority To
require allocation agreement and notice to the Secretary</header><text>If the
Secretary determines that certain types of asset acquisitions have significant
possibilities of tax avoidance, the Secretary may require—</text>
<paragraph id="H77FC99BFC57F4F15B6B30000BFE051F5"><enum>(1)</enum><text>parties to such
types of acquisitions to enter into agreements allocating consideration,</text>
</paragraph><paragraph id="H23BDFD8B583D4685AD073DCD4C79002D"><enum>(2)</enum><text>parties to
acquisitions involving certain kinds of assets to enter into agreements
allocating part of the consideration to those assets, or</text>
</paragraph><paragraph id="H8D95C2D1A66547CD94448036A436F67"><enum>(3)</enum><text>parties to certain
acquisitions to report information to the Secretary.</text>
</paragraph></subsection><subsection id="H64FCA6C264BA48C9BE1DD0DB7BFF0002"><enum>(e)</enum><header>Asset
acquisition rules do not apply if consideration includes equity in
purchaser</header>
<paragraph id="H2024CEA1B2424AA7A29E332188590028"><enum>(1)</enum><header>In
general</header><text>If a business entity issues its own equity or equity in a
subsidiary or other controlled entity as part of the consideration for the
transfer of assets to it, the transaction shall not be treated as an asset
acquisition and the rules of section 1624 shall apply.</text>
</paragraph><paragraph id="H158738288D3C4BAB953489B3A59BE66C"><enum>(2)</enum><header>Equity</header><text>For
purposes of this subsection, equity means—</text>
<subparagraph id="HB12C2B23FD1B45999BAFFC6344151185"><enum>(A)</enum><text>stock, in the case
of a corporation,</text>
</subparagraph><subparagraph id="HD9844782EC724CBBBDFAEDAD8675DBB7"><enum>(B)</enum><text>partnership or
similar interest, in the case of a partnership or limited liability company,
and</text>
</subparagraph><subparagraph id="HD41E90DB187B4896ABF78E91DE628271"><enum>(C)</enum><text>an ownership
interest or interest in profits in the case of any other business
entity.</text>
</subparagraph></paragraph></subsection></section><section id="HF28A3964130F4F9EAA7CDF9DD387E812"><enum>1624.</enum><header>Mergers and
stock acquisitions</header>
<subsection id="H602ADAFE552C420CB23E03D07884C106"><enum>(a)</enum><header>Mergers</header><text>A
merger of one business entity into another or two businesses entities into a
third business entity or any other similar transaction shall have no direct
consequences under the business tax. The surviving entity shall assume the tax
attributes of the merged corporations, including any loss carryovers and credit
carryovers.</text>
</subsection><subsection id="H8E131EB2B6FE43FBA63EF6BF4E715D91"><enum>(b)</enum><header>Stock
acquisition</header><text>The acquisition of all or substantially all of the
ownership interest in one business entity either for cash or in exchange for
ownership in the acquiring entity or an entity controlled by the acquired
entity shall have no direct consequences under the business tax.</text>
</subsection></section><section id="H8507DC9E583645268142DACDD468214"><enum>1625.</enum><header>Spin-offs,
split-offs, etc</header><text display-inline="no-display-inline">A spin-off,
split-off or split-up of a business entity shall have no direct tax
consequences under the business tax.</text>
</section><section commented="no" id="HB8B8F8CBBAD24954AD7082DD2FEE946E"><enum>1626.</enum><header>Allocation of
certain tax attributes</header><text display-inline="no-display-inline">The
Secretary shall prescribe rules for allocation of loss carryovers in cases of
substantial shifts of assets from one business entity to another business
entity. Under such rules, a portion of a business entity’s carryovers may be
deemed transferred when assets are transferred.</text>
</section></subchapter><subchapter id="HA4E0458F182D48E6AA9CBF38418F667F"><enum>D</enum><header>Accounting method
rules</header>
<toc regeneration="no-regeneration">
<toc-entry idref="H6F4F3C285B4047668145F55F377602D1" level="section">Sec. 1631. General accounting rules.</toc-entry>
<toc-entry idref="H7C7CCA1D3C384F17BD6E610049FD00D4" level="section">Sec. 1632. Use of the cash method of accounting.</toc-entry>
<toc-entry idref="H79BF2591281740E99F7898996C3D87FE" level="section">Sec. 1633. Long-term contracts.</toc-entry>
<toc-entry idref="H4ED9602354B74908AB8D5EB5CC8C744E" level="section">Sec. 1634. Post-sale price adjustments and refunds.</toc-entry>
<toc-entry idref="H73EC2D91D90F4342A3CC2026BA6B73E1" level="section">Sec. 1635. Bad debts.</toc-entry>
<toc-entry idref="HF6A04D488C27455FA08400F088EEFE05" level="section">Sec. 1636. Transition rules.</toc-entry>
</toc>
<section id="H6F4F3C285B4047668145F55F377602D1"><enum>1631.</enum><header>General
accounting rules</header>
<subsection id="H2596970041394F51A8B6E6AAB1F55749"><enum>(a)</enum><header>In
general</header><text>Except as provided in section 1632, a business entity
shall use an accrual method of accounting for purposes of determining the
timing of recognition of taxable receipts and deduction of business purchases.
All business purchases shall be deducted when incurred (in the case of a
business entity using the accrual method of accounting) or when paid (in case
of a business entity using the cash method of accounting) without regard to
whether the business purchases are for or relate to—</text>
<paragraph id="HB652C4B4A0BE44C8006FEDE3DB2F4B42"><enum>(1)</enum><text>inventory,</text>
</paragraph><paragraph id="HAF57EF3D22B84A9FA6055427ED90CBAB"><enum>(2)</enum><text>assets with a
useful life of more than one year, or</text>
</paragraph><paragraph id="H25E6CF27FF9C4792A13367C7DC195047"><enum>(3)</enum><text>property that will
be used to produce other property.</text>
</paragraph></subsection><subsection id="HA9A90259179143AA807634FB99F47400"><enum>(b)</enum><header>Economic
performance</header><text>For purposes of determining whether an amount has
been incurred, the all events test shall not be treated as met any earlier than
when economic performance with respect to such item occurs.</text>
</subsection><subsection id="H3C0413C8083543AD898634A046FADED4"><enum>(c)</enum><header>Consistent
accounting methods</header><text>Except as otherwise expressly provided in this
chapter, a business entity shall secure the consent of the Secretary before
changing the method of accounting by which it determines gross profits. This
provision shall not apply to changes required by the adoption of the business
tax.</text>
</subsection></section><section id="H7C7CCA1D3C384F17BD6E610049FD00D4"><enum>1632.</enum><header>Use of the
cash method of accounting</header>
<subsection id="H4B9D70E3F530401BB7E609D6F2FE4D00"><enum>(a)</enum><header>In
general</header><text>A business entity that was permitted to use and used the
cash method of accounting under the Internal Revenue Code of 1986 shall be
permitted to continue to use the cash method of accounting.</text>
</subsection><subsection id="HC707385C3AAE480FBA94E5E980A9AD2D"><enum>(b)</enum><header>New business
entities</header><text>A new business entity shall be permitted to use the cash
method of accounting if permitted to under regulations prescribed by the
Secretary.</text>
</subsection><subsection id="H2FA73424C7914F03AFA218D992A6A7A5"><enum>(c)</enum><header>Change or
expansion of business</header><text>Subsection (a) shall cease to apply to a
business entity that changes or expands its business such that under
regulations prescribed by the Secretary it is no longer eligible to use the
cash method of accounting.</text>
</subsection><subsection id="HBF22B7406AA54DF2BB40826605D94B2"><enum>(d)</enum><header>Regulations</header>
<paragraph id="HCE8B7B9344FD43F9A52FD942A2FC8CC6"><enum>(1)</enum><header>Use of cash
method</header><text>The Secretary shall prescribe regulations defining which
business entities may use the cash method of accounting. In general, those
regulations shall be consistent with the rules under sections 447 and 448,
except that all corporations shall be treated as C corporations were treated
under those sections. The regulations shall not require a business entity
described in subsection (a) to convert to the accrual method prior to January
1, 2010.</text>
</paragraph><paragraph id="H8FCCBE76C51649F682FF5B6D9F9391E"><enum>(2)</enum><header>Change in
accounting method</header><text>The Secretary shall prescribe regulations to
prevent double counting of taxable receipts and deductible expenses in the case
of a change in accounting method.</text>
</paragraph></subsection></section><section id="H79BF2591281740E99F7898996C3D87FE"><enum>1633.</enum><header>Long-term
contracts</header>
<subsection id="HA0B91D0FFCE44F90936DC0DC4FD6F1F"><enum>(a)</enum><header>In
general</header><text>In the case of a long-term contract—</text>
<paragraph id="H843E3C300DA14F8BA4E92B987DB99169"><enum>(1)</enum><header>Contractor
expenses</header><text>The contractor shall be entitled to deduct its business
purchases when paid or incurred.</text>
</paragraph><paragraph id="HFE8D2B3FC8C94FBAAC2066D1598DA8E"><enum>(2)</enum><header>Contractor
receipts</header><text>The contractor shall recognize taxable receipts—</text>
<subparagraph id="HB53ED57F5830445CBAE1EAD1797C144F"><enum>(A)</enum><text>in the case of a
project in which the acquirer has no ownership interest in the project until
delivery—</text>
<clause id="HC5CCBFCC22144B3387A6401282337DCC"><enum>(i)</enum><text>upon delivery of
the project, in the case of an accrual basis contractor, or</text>
</clause><clause id="H3830B943E85446FB96F0CB76F7457B75"><enum>(ii)</enum><text>upon the later of
delivery of the project or the receipt of payment, in the case of cash-basis
contractor.</text>
</clause></subparagraph><subparagraph id="H47A46EA7B9114B8D943EB3D2C9654882"><enum>(B)</enum><text>in the case of a
project in which the acquirer obtains an ownership interest as the project is
constructed—</text>
<clause id="H79A6C52C82F4461296E85501E3884FE"><enum>(i)</enum><text>when the contractor
has the right to payments, in the case of an accrual basis contractor,
or</text>
</clause><clause id="HD498C32C2069409C9B3B7BF6A308CEA7"><enum>(ii)</enum><text>upon the later of
when the contractor receives the cash or has the right to payments, in the case
of a cash basis contractor.</text>
</clause></subparagraph></paragraph><paragraph id="H89AA02F557F147CB86B34C19DF159300"><enum>(3)</enum><header>Acquirer
expenses</header><text>The acquirer that is a business entity shall be entitled
to deduct its costs of the business purchase—</text>
<subparagraph id="H422A5DA3BBA74C1A0008C27E11DEB585"><enum>(A)</enum><text>in the case of a
cash-basis acquirer, at such time as a cash basis contractor would be required
to treat the amounts paid as taxable receipts, or</text>
</subparagraph><subparagraph id="HBCB31DA9CAF6491897AFB9701C2C51EC"><enum>(B)</enum><text>in the case of an
accrual-basis acquirer, at such time as an accrual basis contractor would be
required to treat the amounts paid or due as taxable receipts.</text>
</subparagraph></paragraph></subsection><subsection id="HB851C4D1F8864E60B1732C9DBFA5CAF9"><enum>(b)</enum><header>Right to
payments</header>
<paragraph id="H89E23A430ECD4CBB906E28FFA12EFC93"><enum>(1)</enum><header>In
general</header><text>A contractor shall be treated as having a right to
payments with respect to a project at any time to the extent that the
contractor would not be required to return payments received (or would be
entitled to collect payments not yet received) if the project were terminated
at such time by the contractor.</text>
</paragraph><paragraph id="H5A437F882D5D4A0D897E0063719D73F9"><enum>(2)</enum><header>Contractual
provisions</header><text>If a long-term contract includes a procedure for
paying the contractor as work is completed (for example, by reason of a draw
down from a trust account), the contractual provisions shall generally govern
when a contractor has a right to payment.</text>
</paragraph><paragraph id="H2AC1B10926014ACF8F058C4FA63D2750"><enum>(3)</enum><header>Percentage
completion method of accounting</header><text>If a long-term contract does not
include a mechanism for paying the contractor as work is completed, the
percentage-of-completion method of accounting shall be used to determine the
timing of taxable receipts of the contractor and business purchases of the
acquirer.</text>
</paragraph></subsection><subsection id="H9850355342E949C4ABA1F99CCFAF67D"><enum>(c)</enum><header>Long-Term
contract</header>
<paragraph id="HA4D9D314B5804CECA9004F4DFE6B6D75"><enum>(1)</enum><header>In
general</header><text><term>Long-term contract</term> means—</text>
<subparagraph id="H97DDC6DD055748EEB335989341728248"><enum>(A)</enum><text>any contract that
covers service or production through parts of two different calendar years if
the contract includes a formal deposit and draw-down mechanism, and</text>
</subparagraph><subparagraph id="H3849EF3C1B97499ABBF33B591C62EA9F"><enum>(B)</enum><text>any contract for
the manufacture, building, installation, or construction of property if such
contract is not completed within the taxable period of the contractor in which
such contract is entered into.</text>
</subparagraph></paragraph><paragraph id="HA0AC0E2396B547E392461693C5B0B960"><enum>(2)</enum><header>Exception</header><text>A
contract for the manufacture of property shall not be treated as a long-term
contract unless such contract involves the manufacture of—</text>
<subparagraph id="HC6A4DDA68DC7409F8D91C549A5173D5"><enum>(A)</enum><text>any unique item of
a type which is not normally included in the finished goods inventory of the
taxpayer, or</text>
</subparagraph><subparagraph id="H8421D3A7BD754B1D8BBDE952CE006996"><enum>(B)</enum><text>any item which
normally requires more than 12 calendar months to complete.</text>
</subparagraph></paragraph></subsection><subsection id="HD9E596B3D1ED4A6F89E9CECEB200772C"><enum>(d)</enum><header>Consistency</header><text>The
Secretary may require business entities to file statements containing such
information with respect to long-term contracts as the Secretary may prescribe
to ensure consistency in reporting.</text>
</subsection><subsection id="H32DAC9C83B214C3BB33451EBB900966D"><enum>(e)</enum><header>Foreign
contracts</header><text>This section shall not be construed to permit a
deduction for a business purchase for the cost of property produced outside the
United States pursuant to a long-term contract at any time prior to the import
of such property into the United States.</text>
</subsection></section><section commented="no" id="H4ED9602354B74908AB8D5EB5CC8C744E"><enum>1634.</enum><header>Post-sale
price adjustments and refunds</header>
<subsection commented="no" id="HBFC23F2F0C17458185F5003D39009148"><enum>(a)</enum><header>Receipt of price
adjustment</header><text>In the case of a post-sale price adjustment
attributable to a business purchase which was taken into account in computing
gross profits for a prior taxable transaction, the amount of such adjustment
shall be treated as a reduction or increase, as the case may be, in the cost of
business purchases for the taxable period in which the adjustment is made or
incurred.</text>
</subsection><subsection commented="no" id="H4CDE0D8CDDAD4DE8B743D27173787CC5"><enum>(b)</enum><header>Issuance of
price adjustment</header><text display-inline="yes-display-inline">In the case
of a post-sale price adjustment attributable to a sale the receipts from which
were taken into account in determining taxable receipts for a prior taxable
transaction, the amount of such adjustment shall be treated as a reduction or
increase, as the case may be, in taxable receipts for the taxable period in
which the adjustment is made or incurred.</text>
</subsection><subsection commented="no" id="H70C8943141ED45CD83D3FF40C960A245"><enum>(c)</enum><header>Post-Sale price
adjustment</header><text><quote>Post-sale price adjustment</quote> means a
refund, rebate, or other price allowance attributable to a sale of property or
services or an upward adjustment in price that was not previously taken into
account under the business entity’s method of accounting.</text>
</subsection></section><section commented="no" id="H73EC2D91D90F4342A3CC2026BA6B73E1"><enum>1635.</enum><header>Bad
debts</header>
<subsection commented="no" id="HC93ACCE8EEBD4D6E82AEFA557232319B"><enum>(a)</enum><header>Seller</header><text>If
an amount owed to an accrual basis business entity for property or services
sold—</text>
<paragraph commented="no" id="H01A323B232D240B7BCF47F3CFA26DE91"><enum>(1)</enum><text>was taken into
account as a taxable receipt in a prior taxable period, and</text>
</paragraph><paragraph commented="no" id="H5A456A83F5C94C75BA1EDAFC643572FB"><enum>(2)</enum><text>becomes wholly or
partially uncollectible during the taxable period, then the seller shall treat
the amount as a reduction in taxable receipts for the taxable period in which
it becomes wholly or partially uncollectible.</text>
</paragraph></subsection><subsection commented="no" id="H7057008C015B499200BE1890FE8BAEB7"><enum>(b)</enum><header>Notice
requirement</header><text>No reduction shall be allowed under subsection (a)
unless the seller notifies the purchaser of the amount which the seller has
treated as wholly or partially uncollectible.</text>
</subsection><subsection commented="no" id="H673E9545F74842F2A52D454E843578A"><enum>(c)</enum><header>Subsequent
collection</header><text>If an amount which was treated as uncollectible under
subsection (a) is subsequently collected, it shall be treated as a taxable
receipt when collected.</text>
</subsection><subsection commented="no" id="H62E2E7E9BD584DB59072FE31E33223A2"><enum>(d)</enum><header>Purchaser</header><text>If
a purchaser receives notice under subsection (b) from a seller and the
purchaser has treated the amount labeled uncollectible as a business purchase
in a prior taxable period, then the purchaser shall treat such amount as a
reduction in the cost of business purchases in the taxable period to which the
notice relates. If the purchaser subsequently repays such amount, the repayment
shall constitute the cost of a business purchase.</text>
</subsection></section><section commented="no" id="HF6A04D488C27455FA08400F088EEFE05"><enum>1636.</enum><header>Transition
rules</header>
<subsection commented="no" id="HD385138EBC2040AEB22DA6A34DBDCFAD"><enum>(a)</enum><header>No double
deductions</header><text>A business entity shall not be entitled to treat as a
<quote>cost of business purchase</quote> any amount that the business entity
deducted in computing taxable income under the income tax in effect prior the
effective date of the business tax.</text>
</subsection><subsection commented="no" id="H7BF26B31376541B4AF772C8CF53D7613"><enum>(b)</enum><header>No double
inclusion</header><text>A business entity shall not be required to include in
taxable receipts any receipt that the business entity took into account in
computing taxable income under the income tax in effect prior to the effect
date of the business tax.</text>
</subsection><subsection commented="no" id="H8346A309023E437693A53BC0AF209541"><enum>(c)</enum><header>No loss of
deduction</header><text>An expense which—</text>
<paragraph commented="no" id="H61A1423C555A465AA7CCB0517CA2EB13"><enum>(1)</enum><text>a business entity
would have been able to deduct as a cost of a business purchase in an
accounting period before the effective date of the business tax if the business
tax had been in effect in such period, and</text>
</paragraph><paragraph commented="no" id="H088345A3E993408CB335C6FF51ECDA82"><enum>(2)</enum><text>the business
entity would have been able to deduct as an expense in computing taxable income
in a period after the business tax is effective if the income tax had continued
in effect, shall be treated as a cost of a business purchase incurred or paid
at the time that it would have been paid or incurred under the income tax if
the income tax had continued in effect. This subsection shall not apply to any
amount which is to be taken into account under subchapter N (relating to
amortization of transition basis, inventory costs, and safe harbor leases), any
amounts which would have been deducted under the income tax through loss
carryover deductions, or any deductions deferred by the uniform capitalization
rules under section 263A.</text>
</paragraph></subsection><subsection commented="no" id="HA06EE16F1D794CCB9C4700B8FF9CD320"><enum>(d)</enum><header>All taxable
receipts taxed</header><text>A receipt which—</text>
<paragraph commented="no" id="HA0986FE5A15F4C4F99B750C646B07705"><enum>(1)</enum><text>a business entity
would have been required to treat as a taxable receipt in an accounting period
before the effective date of the business tax if the business tax had been in
effect in such period, and</text>
</paragraph><paragraph commented="no" id="HD7AD1C5632C34CB4A8A3F4C3843C11D9"><enum>(2)</enum><text>the business
entity would have been required to include in gross income in a period after
the business tax is effective if the income tax had continued in effect</text>
</paragraph><continuation-text commented="no" continuation-text-level="subsection">shall be treated as a taxable
receipt at the time that it would have been included in income if the income
tax had continued in effect.</continuation-text></subsection></section></subchapter><subchapter id="HB051EFA58E864C14A300A6C74008017C"><enum>E</enum><header>Land and rental
property</header>
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 1641. No deduction for land
purchased for nonbusiness use.</toc-entry>
<toc-entry level="section">Sec. 1642. Taxable receipts for land
held for nonbusiness use.</toc-entry>
<toc-entry level="section">Sec. 1643. Certain rental
property.</toc-entry>
</toc>
<section id="HDEF5AAFB7CB4431B8EA40037EF00CFCB"><enum>1641.</enum><header>No deduction
for land purchased for nonbusiness use</header>
<subsection id="H018353A0D94547FFA1FBD027D68B2F12"><enum>(a)</enum><header>In
general</header><text>The acquisition of unimproved land shall not constitute a
business purchase if the unimproved land is not acquired to be used in a
business activity or if the land is acquired for—</text>
<paragraph id="HF1DA0C9DC141446CA46CB197801D0078"><enum>(1)</enum><text>speculation,</text>
</paragraph><paragraph id="HEBE5784E8A4049739251E2FC00A0F8D6"><enum>(2)</enum><text>development
(including subdivision),</text>
</paragraph><paragraph id="H1CC3FFE333AF44729679478DB75FA6D2"><enum>(3)</enum><text>temporary leasing
or other use not commensurate with the value of the land,</text>
</paragraph><paragraph id="HEF5F01F84F5B4C3EA4A5AD7BEEEB2FF"><enum>(4)</enum><text>indefinite future
use in a business activity, or</text>
</paragraph><paragraph id="H306E3458D9E74F0E92A289803C7486BE"><enum>(5)</enum><text>use in
compensating employees.</text>
</paragraph></subsection><subsection id="H829BD800F351433CA530FF94D507ABD2"><enum>(b)</enum><header>Future use in
business activity</header><text>Unimproved land will not be considered held for
<quote>indefinite future use in a business activity</quote> if promptly upon
acquisition, the purchaser or the lessee begins construction of improvements on
the land (other than improvements, such as paving or sewage lines, intended for
indefinite future development) that will be used in a business activity. Such
improvement must be commensurate with the value of the land.</text>
</subsection><subsection id="H4F73E8454D8D433AA32FF92C68A823ED"><enum>(c)</enum><header>Unimproved
land</header><text><quote>Unimproved land</quote> means—</text>
<paragraph id="H42383330E8084C94901F78AF211BF49E"><enum>(1)</enum><text>land with no
buildings on it,</text>
</paragraph><paragraph id="H10B1EF05F3B24EB59494AAD860DDA1D4"><enum>(2)</enum><text>land with
improvements if the value of the improvements is relatively small in comparison
to the value of the land and it is anticipated that the improvements will be
demolished and not used, and</text>
</paragraph><paragraph id="HDB10A17F429C4F2AB36B9F39A0F2EF90"><enum>(3)</enum><text>land in excess of
the amount reasonably needed for the buildings located on it.</text>
</paragraph></subsection><subsection id="H11BD19CDDC40462A8B94EA92A859E705"><enum>(d)</enum><header>Conversion to
business use</header><text>If the acquisition of land is not treated as a
business purchase by reason of subsection (a) and the land is subsequently used
in a manner for which it could have been treated as a business purchase, the
cost of the land will be treated as a business purchase when the improvements
on the land are placed in service (or in the case of construction for sale,
substantially completed and advertised for sale).</text>
</subsection></section><section id="HD4B5524B7F644AEEAF40E495AFE51979"><enum>1642.</enum><header>Taxable
receipts from sale of land held for nonbusiness use</header>
<subsection id="HCC2BC6FA00744F8380B8DDF6B422805E"><enum>(a)</enum><header>Tax
basis</header><text>A business entity shall have a tax basis in land equal to
the cost of the land if such cost is not deductible by reason of section
1641(a) and the land has not been converted to business use for purposes of
section 1641(d).</text>
</subsection><subsection id="HE74B255160A44354B040D5153BDABEE1"><enum>(b)</enum><header>Taxable receipts
of a land sale</header><text>The taxable receipts from the sale of land (or
portion thereof) in which a business entity has a tax basis by reason of
subsection (a) shall be the amount by which the proceeds exceed the basis of
such land (or portion thereof).</text>
</subsection></section><section id="HD5B7526F9AEF467A97E201A3F9B9C10"><enum>1643.</enum><header>Certain rental
property</header>
<subsection id="HE3E57757235A4826B7B8003B8E99BB00"><enum>(a)</enum><header>In
general</header><text>Except as provided in subsection (b), the activity of
rental of real estate is a business activity to which the business tax
applies.</text>
</subsection><subsection id="H7C538C1A5F7A4D4181EAEC7654B290F5"><enum>(b)</enum><header>Rental property
becomes nonrental property</header><text>If property which is considered rental
property for purposes of subsection (a) in one taxable period ceases to be
rental property in the following taxable period, the property (and any
associated debt) shall be treated as distributed by the business entity to its
owners. Section 1622(a) shall apply to such distribution.</text>
</subsection></section></subchapter><subchapter commented="no" id="H1DB4436E45A64FBA96FF9100C97EF5CC"><enum>F</enum><header>Insurance and
financial products</header>
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 1651. General rules.</toc-entry>
<toc-entry level="section">Sec. 1652. Fees for financial
intermediation services.</toc-entry>
</toc>
<section commented="no" id="HFCD9FCC2C5034E7590CCC9AD0057A700"><enum>1651.</enum><header>General
rules</header>
<subsection commented="no" id="H7FB8A7E5693A4CA3B83BD2F5D214F8F2"><enum>(a)</enum><header>Taxable
receipts</header><text>Except in the case of a financial intermediation
business, taxable receipts do not include financial receipts (as defined in
section 1662).</text>
</subsection><subsection commented="no" id="H568BCDCA64AC4E53B1CDB7D84972882D"><enum>(b)</enum><header>Business
purchases</header><text>Except in the case of a financial intermediation
business, business purchases do not include the cost of financial instruments
or payments for use of money or capital, other than fees for financial
intermediation services.</text>
</subsection></section><section commented="no" id="H3A975F4670AB48F7A472DF1976F9456C"><enum>1652.</enum><header>Fees for
financial intermediation services</header>
<subsection commented="no" id="HEAB92D905728447AADFBA2C7003B3DE5"><enum>(a)</enum><header>Business
purchase</header><text>Business purchases include explicit fees and implicit
fees for financial intermediation services (except to the extent that such fees
are for services treated as performed outside the United States and not
imported into the United States or for services treated as exported.).</text>
</subsection><subsection commented="no" id="HA746947B81CE4131BCE72C1CD5A201CB"><enum>(b)</enum><header>Financial
intermediation services</header><text>Except as provided in subchapter G, the
term <term>financial intermediation service</term> shall be determined in
accordance with regulations promulgated by the Secretary.</text>
</subsection></section></subchapter><subchapter commented="no" id="H5542BF91DF1645369B6F6B75BAB547E9"><enum>G</enum><header>Financial
intermediation and financial institutions</header>
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 1661. Activities constituting a
financial intermediation business.</toc-entry>
<toc-entry level="section">Sec. 1662. General rule for
taxation.</toc-entry>
<toc-entry level="section">Sec. 1663. Special rule for
banks.</toc-entry>
<toc-entry level="section">Sec. 1664. Insurance
companies.</toc-entry>
<toc-entry level="section">Sec. 1665. Financial pass-through
entities.</toc-entry>
</toc>
<section commented="no" id="HC869E918BBDF4B96A8C6624FE4514EC"><enum>1661.</enum><header>Activities
constituting a financial intermediation business</header>
<subsection commented="no" id="HD809C66B041543C9B1121DD5813D6EA5"><enum>(a)</enum><header>Financial
intermediation business</header><text>The providing of financial intermediation
services shall be considered a business activity. The gross profit of a
business entity providing financial intermediation services shall be determined
by taking into account the rules of this subchapter.</text>
</subsection><subsection commented="no" id="H520AB9F78A40482D978881DCCB8EC5DF"><enum>(b)</enum><header>Separate
business activity</header><text>The provision of financial intermediation
services for unrelated persons shall be considered a separate business activity
and a business shall be considered a separate entity with respect to such
activity. An entity engaging in such business is referred to in this chapter as
a <term>financial intermediation business</term>.</text>
</subsection><subsection commented="no" id="H2D2A8771C3E8406283FA8F79DF7E624B"><enum>(c)</enum><header>Definitions</header>
<paragraph commented="no" id="H20439C5A1675477DAFC0D182704B7079"><enum>(1)</enum><header>Financial
intermediation services</header><text><term>Financial intermediation
services</term> include—</text>
<subparagraph commented="no" id="HBE48F65E0F574EFCB0865334A7CFB6DA"><enum>(A)</enum><text>lending
services,</text>
</subparagraph><subparagraph commented="no" id="HEFB8B6B08EA2476C88B44D59496778D7"><enum>(B)</enum><text>insurance
services,</text>
</subparagraph><subparagraph commented="no" id="HE6D5882EBD30444E941939187C6E6B84"><enum>(C)</enum><text>market-making and
dealer services, and</text>
</subparagraph><subparagraph commented="no" id="H1B2DA817DDBD42F7B4CFC518E74F7F7F"><enum>(D)</enum><text>any other service
provided as business activity in which a person acts as an intermediary
in—</text>
<clause commented="no" id="H9A69E05AFDBD45CD9CAC0861C8B816CB"><enum>(i)</enum><text>the transfer of
property, services, or financial assets, liabilities, risks or instruments (or
income or expense derived therefrom) between two or more persons, or</text>
</clause><clause commented="no" id="HCDE82F9796AC42458FD1AB55127285E"><enum>(ii)</enum><text>the pooling of
economic risk among other persons,</text>
</clause><continuation-text commented="no" continuation-text-level="subparagraph">and derives all or a portion of
such person’s gross receipts from streams of income or expense, discounts, or
other financial flows associated with the matter with respect to which such
person is acting as an intermediary.</continuation-text></subparagraph></paragraph><paragraph commented="no" id="H39CC7A72A6274BF8A5E9984D6E6C3D3E"><enum>(2)</enum><header>Lending
services</header><text><quote>Lending services</quote> means the regular making
of loans and providing credit to, or taking deposits from customers, but does
not include an installment or delayed payment arrangement provided by a seller
of property or services under which additional charges or fees are imposed by
the seller for the late payment.</text>
</paragraph><paragraph commented="no" id="HD20C61718868448D8C5C153ECF00B1C1"><enum>(3)</enum><header>Market-making or
dealer services</header><text><quote>Market-making or dealer services</quote>
means services provided by a person who—</text>
<subparagraph commented="no" id="H7315B2013013475F8DA05571CB50CF5E"><enum>(A)</enum><text>regularly
purchases financial instruments from or sells financial instruments to
customers in the ordinary course of a trade or business, and</text>
</subparagraph><subparagraph commented="no" id="H84CF5DE6CED44DDD980046EDD332B9D8"><enum>(B)</enum><text>regularly offers
to enter into, assume, offset, assign, or otherwise terminate positions in
financial instruments with customers in the ordinary course of a trade or
business.</text>
</subparagraph></paragraph></subsection></section><section commented="no" id="H90387B20D71F4535B400662FEE973658"><enum>1662.</enum><header>General rule
for taxation</header>
<subsection commented="no" id="HB8EDEB0BD81F4DF1B3CDEF348B8CF2D3"><enum>(a)</enum><header>In
general</header><text>In the case of a financial intermediation business, gross
profits shall be computed by—</text>
<paragraph commented="no" id="HA98B07B426AE4B63A3BDDB4F823B4273"><enum>(1)</enum><text>substituting
financial receipts for taxable receipts, and</text>
</paragraph><paragraph commented="no" id="H73FAD730CECB470FA6A3262144DBC2CC"><enum>(2)</enum><text>including
financial expenses as business purchases.</text>
</paragraph></subsection><subsection commented="no" id="HB2713E2992A945FE9834E6B7FE1EAE01"><enum>(b)</enum><header>Definitions</header>
<paragraph commented="no" id="H22FFF815680A4B8EA5FF055722AA3EBB"><enum>(1)</enum><header>Financial
receipts</header><text><term>Financial receipts</term> means all receipts other
than amounts received as contributions to capital.</text>
</paragraph><paragraph commented="no" id="H3FC4F87A06FA467E89D2D9EA594ED1E5"><enum>(2)</enum><header>Financial
expenses</header><text><term>Financial expenses</term> include—</text>
<subparagraph commented="no" id="HAF8B978B8CA94C2FAEAB2D97CD87074E"><enum>(A)</enum><text>payments for
principal and interest that is properly allocable to the provision of financial
intermediation services,</text>
</subparagraph><subparagraph commented="no" id="H606FE3BF10C54039A5000045DD7B14C"><enum>(B)</enum><text>the cost of and
payments under financial instruments (other than financial instruments in the
person subject to the tax imposed under this chapter and any person related to
such person),</text>
</subparagraph><subparagraph commented="no" id="H9CA37956926D4A66BFEB2600FA7EB4D"><enum>(C)</enum><text>claims and cash
surrender values paid in connection with insurance or reinsurance services,
and</text>
</subparagraph><subparagraph commented="no" id="H146AD00DF3F14FBE8B004D31499B2390"><enum>(D)</enum><text>amounts paid for
reinsurance.</text>
</subparagraph></paragraph><paragraph commented="no" id="H4B88FF35821743F9A400257FD1C6AAE3"><enum>(3)</enum><header>Financial
instrument</header><text><term>Financial instrument</term> means any—</text>
<subparagraph commented="no" id="H295EE3352A0A49BA82C418C889B8B49"><enum>(A)</enum><text>share of stock in a
corporation,</text>
</subparagraph><subparagraph commented="no" id="H56D74DA6EB5C4B3DAE0096AF07BEEAE6"><enum>(B)</enum><text>equity ownership
in any widely held or publicly traded partnership, trust, or other business
entity,</text>
</subparagraph><subparagraph commented="no" id="HA7904DE7F9924730A0A9B59BB7E5BBB"><enum>(C)</enum><text>note, bond,
debenture, or other evidence of indebtedness,</text>
</subparagraph><subparagraph commented="no" id="H1EF98A3BA53046EFAC3EBA5154F6E140"><enum>(D)</enum><text>interest rate,
currency, or equity notional principal contract,</text>
</subparagraph><subparagraph commented="no" id="HA60F05528CF144D59211F0BD3952DC7E"><enum>(E)</enum><text>evidence or
interest in, or a derivative financial instrument in, any financial instrument
described in subparagraph (A), (B), (C), or (D), or any currency, including any
option, forward contract, short position, and any similar financial instrument
in such a financial instrument or currency, and</text>
</subparagraph><subparagraph commented="no" id="HE9EBC0017F7B4DDF8EA3B34755110009"><enum>(F)</enum><text>a position
which—</text>
<clause commented="no" id="HDD5F73AF8F8D468B86938007130193A9"><enum>(i)</enum><text>is not a financial
instrument described in subparagraph (A), (B), (C), (D) or (E),</text>
</clause><clause commented="no" id="H5348B6EDCAED4587B8D424AA72CFA400"><enum>(ii)</enum><text>is a hedge with
respect to such a financial instrument, and</text>
</clause><clause commented="no" id="H041B508FF365436DB532C43647582300"><enum>(iii)</enum><text>is clearly
identified in the dealer’s records as being described in this subparagraph
before the close of the day on which it was acquired or entered into.</text>
</clause></subparagraph></paragraph></subsection><subsection commented="no" id="H62E3A709CE1E43AEA8586866D5C0F632"><enum>(c)</enum><header>International
matters</header><text>For purposes of this section in the case of a financial
intermediation business with activity in and outside the United States—</text>
<paragraph commented="no" id="H9F1D218663FE4C628B202444B0437FD2"><enum>(1)</enum><header>Inclusion
regardless of source</header>
<subparagraph commented="no" id="H7D59280E11E7483C0084CB60C080041"><enum>(A)</enum><text>Financial receipts
shall be determined without regard to whether they are received for property or
service provided in or outside the United States, except that financial
receipts do not include amounts that—</text>
<clause commented="no" id="H4B700DAFBDD34179B1005C02CAC7732D"><enum>(i)</enum><text>are not taxable
receipts (as determined without regard to this section), but</text>
</clause><clause commented="no" id="H2D1A486F58F0425B8C90DCBB008D451C"><enum>(ii)</enum><text>would have been
taxable receipts (as determined without regard to this section) if they had
been received for services or property in the United States.</text>
</clause></subparagraph><subparagraph commented="no" id="H9570DFE60D524617B2B10786AA4BA0AB"><enum>(B)</enum><text>Financial expenses
shall be determined without regard to whether they are received for property or
services acquired in or outside the United States.</text>
</subparagraph></paragraph><paragraph commented="no" id="H5744A84889A44D1C8B2BEA5BA321DAA0"><enum>(2)</enum><header>Allocation</header><text>Under
regulations prescribed by the Secretary, gross profits (as determined without
regard to this paragraph) shall be reduced by the amount of financial
intermediation gross profit attributable to financial intermediation activity
provided outside the United States.</text>
</paragraph><paragraph commented="no" id="HA4B4C71A39584449A300C717784F1F58"><enum>(3)</enum><header>Gross profit
attributable to financial intermediation activity</header><text><term>Gross
profits attributable to financial intermediation activity</term> means the
excess of—</text>
<subparagraph commented="no" id="H260E9A7070984A60A86BE1F99B4DC115"><enum>(A)</enum><text>gross profits as
determined under this section (but without regard to paragraph (2)),
over</text>
</subparagraph><subparagraph commented="no" id="H2A73F357336C436D9125268D3299A2C7"><enum>(B)</enum><text>gross profits as
determined without regard to this subchapter.</text>
</subparagraph></paragraph></subsection></section><section commented="no" id="H7DA805AB1E284FC1B35435DD939B308D"><enum>1663.</enum><header>Special rules
for banks</header>
<subsection commented="no" id="H856A2B6DA05D495690BD3B223E5E9808"><enum>(a)</enum><header>In
general</header><text>In the case of a bank, gross profits shall be determined
in accordance with section 1662, except that—</text>
<paragraph commented="no" id="HB6ADA5795A2F43FB94FB5E444DF05D4"><enum>(1)</enum><header>Financial
receipts</header><text>Financial receipts shall include only—</text>
<subparagraph commented="no" id="H3BC08244E8B64BEAB77333501DC9EA3"><enum>(A)</enum><text>taxable receipts
(as determined without regard to this subchapter),</text>
</subparagraph><subparagraph commented="no" id="HC3ACBD4852444842AD00E072293CCED9"><enum>(B)</enum><text>interest on loans
made or acquired by the bank,</text>
</subparagraph><subparagraph commented="no" id="H462117C7A4444474BF765000E3D16D00"><enum>(C)</enum><text>gain on the sale
of loans,</text>
</subparagraph><subparagraph commented="no" id="HC1AEA710F36648C4963859BAE3A72F2C"><enum>(D)</enum><text>discount points
received, and</text>
</subparagraph><subparagraph commented="no" id="H46E3E40B7632428F977374DAA8A578AF"><enum>(E)</enum><text>any explicit fees
for financial or fiduciary services not included in subparagraphs (A) through
(E).</text>
</subparagraph></paragraph><paragraph commented="no" id="HFD9D6508738C4A89A0CEA3A82CDED6EB"><enum>(2)</enum><header>Financial
expenses</header><text>Financial expenses shall include only—</text>
<subparagraph commented="no" id="HB0AE4FF429BF499CB03F48B91EB7AEF3"><enum>(A)</enum><text>interest paid to
depositors and on other funds borrowed by the bank, and</text>
</subparagraph><subparagraph commented="no" id="HF308012854F34B3FB95EFCBBF6AA916D"><enum>(B)</enum><text>reasonable
additions to reserves for bad debts.</text>
</subparagraph></paragraph><paragraph commented="no" id="H04E1FCFBF2B24DEEAEBFD2270087F500"><enum>(3)</enum><header>Foreclosure
property</header><text>Gross profits shall properly take into account proceeds
from the operation or sale of foreclosure property.</text>
</paragraph></subsection><subsection commented="no" id="HECA9A8BB24A642FEA5D717DD3160E5AE"><enum>(b)</enum><header>Bank</header>
<paragraph commented="no" id="HE67958091880471D821339101509D160"><enum>(1)</enum><header>In
general</header><text><term>Bank</term> means a bank or trust company
incorporated and doing business under the laws of the United States, the
District of Columbia, or any State, a substantial part of the business of which
consists of receiving deposits and making loans and discounts, or of exercising
fiduciary powers similar to those exercised by national banks under the
authority of the Comptroller of the Currency, and which is subject by law to
supervision and examination by State or Federal authority having supervision
over banking institutions or credit unions. Such term includes domestic
building and loan associations and credit unions.</text>
</paragraph><paragraph commented="no" id="HDCBB788E11044677BEBD9CE5B6BE4C28"><enum>(2)</enum><header>Other
activities</header><text>If a bank is engaged in significant amounts of
activities other than those described in paragraph (1), the bank shall be
considered as a separate business entity with respect to such other
activity.</text>
</paragraph></subsection></section><section commented="no" id="H7BB3306636894F85938E96AA44AA1BA3"><enum>1664.</enum><header>Insurance
companies</header>
<subsection commented="no" id="H1EECEABB104B41EB8057249E004885C4"><enum>(a)</enum><header>In
general</header><text>In the case of companies providing insurance services,
gross profits shall be determined in accordance with section 1662,
except—</text>
<paragraph commented="no" id="H3342FC7648314DC9B694271B1C2FE500"><enum>(1)</enum><text>subsection (c) of
section 1662 (relating to international operations) shall not apply, and</text>
</paragraph><paragraph commented="no" id="H557B670EE35A4C5696D962D5DF58716D"><enum>(2)</enum><text>the rules of
subchapter J (sourcing rules) shall apply to determine financial receipts and
financial expenses.</text>
</paragraph></subsection><subsection commented="no" id="H684BC1BD717540CC93546129A3CD215C"><enum>(b)</enum><header>Result
inconsistent with statutory intent</header><text>If an insurance company
determines that the application of subsection (a) produces results inconsistent
with the territorial approach of the business tax, it may apply to the
Secretary for permission to apply section 1662(c) in lieu of subsection
(a).</text>
</subsection></section><section commented="no" id="H36634EE1D77642028B91827D82A099BE"><enum>1665.</enum><header>Financial
pass-through entities</header>
<subsection commented="no" id="HDB9A821159A74040944938345DC9AAC0"><enum>(a)</enum><header>In
general</header><text>In the case of a financial pass-thru entity, gross
profits shall be determined in accordance with section 1662, except—</text>
<paragraph commented="no" id="H1A02D29E6B4E4F75A213FEB2D7F81D2C"><enum>(1)</enum><text>financial receipts
shall include contributions to capital, and</text>
</paragraph><paragraph commented="no" id="H7E48C77B390F4588BFB90935DD93394"><enum>(2)</enum><text>financial expenses
shall include—</text>
<subparagraph commented="no" id="H84C05592460D48F8A99F006971B15FC3"><enum>(A)</enum><text>distributions to
persons holding interests in the pass-thru entity, and</text>
</subparagraph><subparagraph commented="no" id="H5ACF3FEAC08B475EB6F5564C70E2D16C"><enum>(B)</enum><text>investments in
related entities (including wholly owned entities) engaging in real estate
investment.</text>
</subparagraph></paragraph></subsection><subsection commented="no" id="HC7C74082BB774B998114C6553CEE1B60"><enum>(b)</enum><header>Pass-Thru
entity</header><text display-inline="yes-display-inline"><term>Pass-thru
entity</term> means a business entity that is intended to serve as a conduit.
The Secretary shall prescribe regulations defining pass-thru entity.</text>
</subsection></section></subchapter><subchapter commented="no" id="HDAB66A3DB40A4872817910994E3E507B"><enum>H</enum><header>Tax-exempt
organizations</header>
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 1671. Exemption for governmental
entities.</toc-entry>
<toc-entry level="section">Sec. 1672. Tax-exempt
organizations.</toc-entry>
<toc-entry level="section">Sec. 1673. Tax on unrelated business
activity.</toc-entry>
<toc-entry level="section">Sec. 1674. Unrelated business
activity.</toc-entry>
</toc>
<section commented="no" id="HF87C0249C00249FDA235DE4C90BD438F"><enum>1671.</enum><header>Exemption for
governmental entities</header>
<subsection commented="no" id="H20D377FFFBC54829AF792D2459E0D4D4"><enum>(a)</enum><header>States</header><text>Except
as provided in section 1672, a state, political subdivision thereof and the
District of Columbia shall be exempt from taxation under this chapter on any
gross profits derived from the exercise of any essential governmental
function.</text>
</subsection><subsection commented="no" id="HF936440C5AD744D7B41800EB20AC9FA2"><enum>(b)</enum><header>Possessions</header><text>The
government of any possession of the United States shall be exempt from taxation
under this chapter on any gross profits earned by the possession.</text>
</subsection></section><section commented="no" id="HDC6DDA211965450694EC65F89278405D"><enum>1672.</enum><header>Tax-exempt
organizations</header>
<subsection commented="no" id="HEB71C35A0CCE47D19F3E57004C514CDA"><enum>(a)</enum><header>Exemption from
taxation</header><text>An organization described in subsection (c) or (d) of
section 501 and exempt from tax under section 501(a) shall be exempt from
taxation under this chapter.</text>
</subsection><subsection commented="no" id="H231F4D16B50B413890DE9C8C945EE755"><enum>(b)</enum><header>Tax on unrelated
business activity</header><text>An organization exempt from taxation under
subsection (a) shall be subject to tax to the extent provided in sections 1675
and 1676, but shall be considered a tax-exempt organization for purposes of any
law that refers to tax-exempt organizations.</text>
</subsection></section><section commented="no" id="H2520C2C0B09B479383BCCA5566A7B9B0"><enum>1673.</enum><header>Tax on
unrelated business activity</header>
<subsection commented="no" id="H4E99E8746CA14E2B803F13578DA4DC28"><enum>(a)</enum><header>In
general</header><text>Each organization described in subsection (b) shall be
subject to the Business Consumption Tax under section 1601 on its gross profits
from its unrelated business activity.</text>
</subsection><subsection commented="no" id="HF85DC1576652468AB997B5632234435B"><enum>(b)</enum><header>Organizations
subject to tax</header><text>This section shall apply to—</text>
<paragraph commented="no" id="H8D4B9A1635A24099BC7085F2E77633B5"><enum>(1)</enum><text>organizations
exempt from the business tax under section 1672, other than instrumentalities
of the United States, and</text>
</paragraph><paragraph commented="no" id="H68B03ABACCAB460985319436BF69F66E"><enum>(2)</enum><text>colleges and
universities which are instrumentalities of any government and corporations
owned by one or more such colleges or universities.</text>
</paragraph></subsection></section><section commented="no" id="HF36234AB427A4421A5F7FABD883F0000"><enum>1674.</enum><header>Unrelated
business activity</header>
<subsection commented="no" id="H0FC3B4E4444B433C009B75245E63F100"><enum>(a)</enum><header>In
general</header><text><term>Unrelated business activity</term> means any trade
or business the conduct of which is not substantially related (aside from the
need of such organization for income or funds or the use it makes of the
profits derived) to the exercise or performance by such organization of its
charitable, educational, or other purpose or function constituting the basis
for its exemption under section 501, except that such term does not include any
trade or business—</text>
<paragraph commented="no" id="HF28BE1242CFD4CAD909E651EA32910F6"><enum>(1)</enum><text>in which
substantially all the work in carrying on such trade or business is performed
for the organization without compensation;</text>
</paragraph><paragraph commented="no" id="HBF9ADC262E6743578600CF995EB96F9D"><enum>(2)</enum><text>which is carried
on, in the case of an organization described in section 501(c)(3) or in the
case of a college or university described in section 1673(b), by the
organization primarily for the convenience of its members, students, patients,
officers, or employees, which is the selling by the organization of items of
work-related clothes and equipment and items normally sold through vending
machines, through food dispensing facilities, or by snack bars, for the
convenience of its members at their usual places of employment; or</text>
</paragraph><paragraph commented="no" id="HF2ED37868FF1451F94DF59BD07A84100"><enum>(3)</enum><text>which is the
selling of merchandise, substantially all of which has been received by the
organization as gifts or contributions.</text>
</paragraph></subsection><subsection commented="no" id="HFF3C6C3A61474E3F9FB44DFC289E6220"><enum>(b)</enum><header>Advertising,
etc., activities</header><text>For purposes of this section, <term>trade or
business</term> includes any activity which is carried on for the production of
income from the sale of goods or the performance of services. For purposes of
the preceding sentence, an activity does not lose identity as a trade or
business merely because it is carried on within a larger aggregate of similar
activities or within a larger complex of other endeavors which may, or may not,
be related to the exempt purposes of the organization. Where an activity
carried on for profit constitutes an unrelated trade or business, no part of
such trade or business shall be excluded from such classification merely
because it does not result in profit.</text>
</subsection><subsection commented="no" id="HECA4E33C0E164EC6A5955C7BBDED0066"><enum>(c)</enum><header>Trade or
business</header>
<paragraph commented="no" id="H05AC9025E895415386EC58399F68B2C6"><enum>(1)</enum><header>Certain business
activities</header><text>An activity shall not be considered a <term>trade or
business</term> solely because the activity is a business activity (such as
certain passive rental activity) that would be subject to the business tax if
conducted by a business entity other than a tax-exempt organization.</text>
</paragraph><paragraph commented="no" id="HDBF2999769044F3387C966374B6F2534"><enum>(2)</enum><header>Regulations</header><text>The
Secretary shall prescribe regulations defining a <term>trade or
business</term>. Such regulations shall be consistent with the provisions under
sections 511 through 513, except to the extent such provisions are inconsistent
with other principles of the business tax.</text>
</paragraph><paragraph commented="no" id="H83352D67646C4F32B49F00C400ED6D"><enum>(3)</enum><header>Trade
shows</header><text>The conduct of trade shows and conventions shall not be
excluded from the definition of trade or business.</text>
</paragraph></subsection></section></subchapter><subchapter id="H900F91CB92F7480C91A99E3FDE13659D"><enum>I</enum><header>Cooperatives</header>
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 1681. Patronage dividends of
cooperatives.</toc-entry>
</toc>
<section id="H3FFB8A6A96DB4A81A8003CDC4100D03"><enum>1681.</enum><header>Patronage
dividends of cooperatives</header>
<subsection id="HC80B3C1B214B48C394A736FDC15800B3"><enum>(a)</enum><header>Patronage
dividends paid by supply cooperatives</header><text>A qualified patronage
dividend paid by a supply cooperative to a patron shall be treated as if it is
a refund of a portion of the amounts paid by the patron for goods, services, or
use of capital.</text>
</subsection><subsection id="H9ED0B61BA7F84686B4D9C4831FDC76B5"><enum>(b)</enum><header>Patronage
dividends paid by marketing cooperatives</header><text>A qualified patronage
dividend paid to a patron by a marketing cooperative shall be treated as an
upward price adjustment in the amount received by the patron for its goods
marketed by the cooperative.</text>
</subsection><subsection id="HC0841DBD9EB64425A9F086C4817DDCD"><enum>(c)</enum><header>Dividend
treatment</header><text>Only the portion of a patronage dividend that is not a
qualified patronage dividend shall be treated as a dividend under this
chapter.</text>
</subsection><subsection id="HAFD53775BDB446E281CD59D8C49768B0"><enum>(d)</enum><header>Regulations</header><text>The
Secretary shall prescribe regulations for the application of this section. The
regulations shall generally be consistent with subchapter T of chapter 1 except
to the extent that such rules are inconsistent with provisions of this
chapter.</text>
</subsection></section></subchapter><subchapter id="H053E8AC701F84CFE89A06E0BD7C86F7"><enum>J</enum><header>Sourcing
rules</header>
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 1691. Exports of property or
services.</toc-entry>
<toc-entry level="section">Sec. 1692. Imports of property or
services.</toc-entry>
<toc-entry level="section">Sec. 1693. Import or export of
services.</toc-entry>
<toc-entry level="section">Sec. 1694. International transportation
services.</toc-entry>
<toc-entry level="section">Sec. 1695. International
communications.</toc-entry>
<toc-entry level="section">Sec. 1696. Insurance.</toc-entry>
<toc-entry level="section">Sec. 1697. Banking services.</toc-entry>
</toc>
<section id="H201D838107F04ED1B636CC5ED03BADA4"><enum>1691.</enum><header>Exports of
property or services</header>
<subsection id="HFACEB0F7E9E84E308E5458B08DAB659"><enum>(a)</enum><header>General
rule</header><text>Taxable receipts do not include amounts received by the
exporter thereof for property or services exported from the United States for
use or consumption outside the United States.</text>
</subsection><subsection id="H05C604F12D604C6D9CF1571F2892B7B3"><enum>(b)</enum><header>Export through
nonbusiness entity</header><text>For purposes of subsection (a), if property or
services are sold to a governmental entity or a tax-exempt organization for
export and are exported other than in an activity of such entity which is
subject to the business tax, then the seller of such property or services is
deemed to be the exporter thereof.</text>
</subsection></section><section id="HB1AB337C618444D383CF185D5C87967B"><enum>1692.</enum><header>Imports of
property or services</header>
<subsection id="H863A52F72AE84563BABE21F4D4AA007F"><enum>(a)</enum><header>In
general</header><text>The import of property or services for consumption in the
United States shall constitute a business purchase if such property or service
is to be used in a business activity in the United States. Property being held
for sale or retail by a business entity that is in the business of selling
goods shall be considered held for <quote>use in a business
activity</quote>.</text>
</subsection><subsection id="H216D61C8FA2848DF8E0484ABD0E1AD17"><enum>(b)</enum><header>Amount of
business purchase</header>
<paragraph id="H139835D6A0B0485A9F2B2E82DA24884C"><enum>(1)</enum><header>In
general</header><text>The cost of business purchases with respect to the import
of property or services for use or consumption in the United States is the
customs value, price or other amount used for purposes of determining the
import tax under section 1701 or section 1702.</text>
</paragraph><paragraph id="HB21B15DCAB974565B76410AAE7DBC494"><enum>(2)</enum><header>Import
tax</header><text>The cost of business purchases does not include any import
tax paid. No deduction shall be allowed with respect to property or service
imported by a business entity unless the import tax is paid with respect to
such import.</text>
</paragraph></subsection></section><section id="HB095A6B38F7E438183E2ECBE0074B603"><enum>1693.</enum><header>Import or
export of services</header>
<subsection id="HD9515161A5E04E7B9DB240ACFF6E63EB"><enum>(a)</enum><header>In
general</header><text>Except as otherwise provided in this subchapter or in
rules prescribed under subchapter G (relating to financial intermediation
business), services shall not be treated as imported or exported from the
location in which they are performed.</text>
</subsection><subsection id="HACF2F49C39C94B19ADD8E592F57C24EC"><enum>(b)</enum><header>Import of
services</header><text>A business entity shall be treated as importing a
service if—</text>
<paragraph id="H1CE70F829D4A4C3A9F83C72B45D58B5F"><enum>(1)</enum><text>the entire benefit
of the service will be realized in the United States, and</text>
</paragraph><paragraph id="H4549928B711E4B0DBE2CF4FEF553FC34"><enum>(2)</enum><text>the benefit will
be realized in connection with the United States business activities of the
business entity.</text>
</paragraph></subsection><subsection id="HA3EE9F95805D43438DEFEFA1D6674300"><enum>(c)</enum><header>Export of
services</header><text>A business will be treated as exporting a service
if—</text>
<paragraph id="HB3E2213A3D52457A9D2F006FD710689D"><enum>(1)</enum><text>the entire benefit
of the service will be realized outside of the United States, and</text>
</paragraph><paragraph id="H36AD92501769439DBB3E45B1CE319E80"><enum>(2)</enum><text>the benefit will
be realized solely in connection with the activities of the purchaser occurring
outside the United States.</text>
</paragraph></subsection><subsection id="H3C1746C3580B4FB9A6598F0846A8C6CB"><enum>(d)</enum><header>Services
acquired from service provider that provides services In and outside the United
States</header>
<paragraph id="H80F3C71119244E71849370C6F4C51746"><enum>(1)</enum><header>In
general</header><text>If a business entity acquires services from a service
provider that provides services both in and outside the United States and the
service provider shows on the invoice where the services are provided—</text>
<subparagraph id="HE2C8B07FA4EB49728107EC3DC808E9E4"><enum>(A)</enum><text>the business
entity shall treat the services as provided where stated on the invoice,
and</text>
</subparagraph><subparagraph id="H987B027705D743E1B61DD01BA79C767C"><enum>(B)</enum><text>the service
provider shall treat as taxable receipts any services listed as provided in the
United States.</text>
</subparagraph></paragraph><paragraph id="HF681BFDE748E480E94362D4C4362D9B9"><enum>(2)</enum><header>No
invoice</header><text>If a business entity acquires services from a service
provider that provides services both in and outside the United States and the
service provider does not show on an invoice where such services are
provided—</text>
<subparagraph id="H4B006376EA83415D82F634A7D36C4689"><enum>(A)</enum><text>the business
entity shall treat the services as if provided in the location to which payment
is sent, and</text>
</subparagraph><subparagraph id="HB45633101B19494BAAC6D5B559B45CEE"><enum>(B)</enum><text>the service
provider shall treat as taxable receipts any payments received in the United
States.</text>
</subparagraph></paragraph></subsection></section><section id="HD7E03EFF79B14E90971D8110E9EE88D"><enum>1694.</enum><header>International
transportation services</header>
<subsection id="H99AB6E59B8DF47989FF18BFA706DA88C"><enum>(a)</enum><header>Transportation
of property</header>
<paragraph id="H2F9F2D75B6AB48179F6637FEA213255B"><enum>(1)</enum><header>Taxable
receipts</header>
<subparagraph id="H1E04E59ED96649B8A5157ED1D8E95ED"><enum>(A)</enum><header>Exports</header><text>Taxable
receipts do not include receipts from the transportation of property exported
from the United States.</text>
</subparagraph><subparagraph id="HF7762CFCCD0C4A7B89A4FFB9007118C2"><enum>(B)</enum><header>Imports</header><text>Taxable
receipts include receipts from transportation of property imported into the
United States only if such costs are not taken into account in determining the
import tax.</text>
</subparagraph><subparagraph id="H0BEF7968DD734E72A8E596D3A73DDE81"><enum>(C)</enum><header>Presumptions</header><text>The
Secretary shall prescribe regulations describing situations in which a
transporter of property must presume that no import tax has been paid on the
cost of its services.</text>
</subparagraph></paragraph><paragraph id="H681DE660658C4057B7CB4BD6D70658B7"><enum>(2)</enum><header>Business
purchases</header>
<subparagraph id="H9E718C0BF1FA4587B309C5AE3C39FD7B"><enum>(A)</enum><header>Exports</header><text>Business
purchases do not include amounts paid or incurred for the cost of
transportation of property exported from the United States.</text>
</subparagraph><subparagraph id="H2873390FC1E948058B14D774B9E37963"><enum>(B)</enum><header>Imports</header><text>Amounts
paid or incurred for transportation of goods imported into the United States,
shall constitute a cost of business purchase only to the extent that they are
taken into account in determining the customs value for purposes of section
1701(a) (relating to the import tax).</text>
</subparagraph></paragraph></subsection><subsection id="H5EBE351BF7894025851EA129DBCEC3E4"><enum>(b)</enum><header>Transportation
of passengers</header>
<paragraph id="H521C1D990C6946A98439DB5EC2C300DE"><enum>(1)</enum><header>Taxable
receipts</header><text>Taxable receipts—</text>
<subparagraph id="H52A85FA298D641298F4464AF33C1DEF0"><enum>(A)</enum><text>include receipts
from the transportation of passengers from the United States to a destination
outside the United States, but</text>
</subparagraph><subparagraph id="HF8C6F586C4D4459FB54E45A524E500A3"><enum>(B)</enum><text>do not include
receipts from the transportation of passengers from outside the United States
to a destination in the United States.</text>
</subparagraph></paragraph><paragraph id="H74745CB6E7C74DB9BDDA8D362DC2F2CC"><enum>(2)</enum><header>Business
purchases</header><text>Business purchases—</text>
<subparagraph id="HDB017D6C14F24374B9EF43322E12D7BB"><enum>(A)</enum><text>include amounts
paid or incurred in a business activity for the transportation of passengers
from the United States to a destination outside the United States, but</text>
</subparagraph><subparagraph id="H6C1F1FBA8FF942AD861446D77EF6F98F"><enum>(B)</enum><text>do not include
amounts paid or incurred for transportation of passengers from outside the
United States to a destination in the United States.</text>
</subparagraph></paragraph><paragraph id="H1AB25C0BB21C4DDAB9AAD9B34C9E9024"><enum>(3)</enum><header>Simplifying
rules</header><text>The Secretary may provide rules that simplify this
subsection, including rules under which—</text>
<subparagraph id="H0117613B5C474AD8902E8C1741011F27"><enum>(A)</enum><text>half of receipts
attributable to transportation to or from the United States are treated as
taxable receipts,</text>
</subparagraph><subparagraph id="H5C8C896D077D4B3C80009C9DF7269800"><enum>(B)</enum><text>half of the cost
for business trips to and from the United States are treated as business
purchases, and</text>
</subparagraph><subparagraph id="H710BA78A95DA4E93A35F7713F2E28F08"><enum>(C)</enum><text>all transportation
expenses of a business entity that has no regular business outside the United
States are treated as business purchases.</text>
</subparagraph></paragraph></subsection></section><section id="HAE83C79C7BDF409B915278D74377B609"><enum>1695.</enum><header>International
communications</header>
<subsection id="H472F3041C70B4EAD9BF3BA119E70DFE5"><enum>(a)</enum><header>In
general</header><text>For purposes of section 1692, communications services
shall be treated as provided at the point of origin of the communications and
shall not be treated as imported or exported.</text>
</subsection><subsection id="HFB7659B6C4D44D40B50954F890568B27"><enum>(b)</enum><header>Communications
services</header><text>Communications services include—</text>
<paragraph id="H5D2B5CC5F11B444E9C931BA96F77259E"><enum>(1)</enum><text>telephone
communications services,</text>
</paragraph><paragraph id="HF336637CF2444688B927CCF143EBC1AA"><enum>(2)</enum><text>courier services
(except in the case of transportation of property that is imported or
exported),</text>
</paragraph><paragraph id="HD754C3A3CA884F8E9644D0B7005433D7"><enum>(3)</enum><text>satellite
transmission services,</text>
</paragraph><paragraph id="H113FF5A8B6C64005AE85731E47158934"><enum>(4)</enum><text>telegraph
services,</text>
</paragraph><paragraph id="HE3ACE1243EC648FFB95B0010636B4800"><enum>(5)</enum><text>facsimile
transmission services, and</text>
</paragraph><paragraph id="H5D460979E54C423F84F5505948FFA256"><enum>(6)</enum><text>other similar
services.</text>
</paragraph></subsection></section><section commented="no" id="H1A2A4DFCB8854E30B9506E4963146FC5"><enum>1696.</enum><header>Insurance</header>
<subsection commented="no" id="H44F924767E38475A81CAD7B09CDD4EB"><enum>(a)</enum><header>In
general</header><text>Insurance services will be treated as provided at the
location of the insurance company providing the services. Except as the
Secretary may prescribe by regulations, insurance companies will be treated as
providing services at the location to which insurance payments are made.</text>
</subsection><subsection commented="no" id="HC3B9117FC34E4162A530ACAC13C33DE9"><enum>(b)</enum><header>Insured risks in
the United States</header><text>If insurance services are provided outside the
United States and the insured risk is located in the United States—</text>
<paragraph commented="no" id="HFAAC711B81F845DFBB29941D7EBFFF99"><enum>(1)</enum><text>the insurance
service shall be treated as imported,</text>
</paragraph><paragraph commented="no" id="H08034A1A2979477FBA361B04C5BCFEAB"><enum>(2)</enum><text>the insurance
premiums shall be subject to the import tax, and</text>
</paragraph><paragraph commented="no" id="H75FD57F5CEA2482EA4002CF511AEEAD8"><enum>(3)</enum><text>payments of
insurance benefits shall not be treated as imported.</text>
</paragraph></subsection><subsection commented="no" id="H5B8ED4743F514711B1FC9153FB9141FD"><enum>(c)</enum><header>Insured risk
outside the United States</header><text>If insurance services are provided
inside the United States and the insured risk is located outside the United
States—</text>
<paragraph commented="no" id="HBC59FC5FDCB44925AEB4E952BD7EC41F"><enum>(1)</enum><text>insurance services
shall be treated as exported, and</text>
</paragraph><paragraph commented="no" id="H980CFB56F1564F189D5450217240FBDD"><enum>(2)</enum><text>payments of
insurance benefits shall be treated as payments for services outside the United
States, and shall not be deducted as business purchases.</text>
</paragraph></subsection><subsection commented="no" id="HEE6F76034B284545B1C26C0272A4AA03"><enum>(d)</enum><header>Insurance
services</header><text>Insurance services means the provision of insurance and
services related to insurance other than insurance that is treated as a savings
asset.</text>
</subsection></section><section commented="no" id="H0B11DB3B971140F6AF2D5F53FAD15663"><enum>1697.</enum><header>Banking
services</header><text display-inline="no-display-inline">The Secretary shall
prescribe regulations on the location of banking services and the extent to
which such services are to be treated as imported or exported.</text>
</section></subchapter><subchapter id="HDB4B0CFA9AD149C4B77776C7895F57D2"><enum>K</enum><header>Import
tax</header>
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 1701. Imposition of tax on
property.</toc-entry>
<toc-entry level="section">Sec. 1702. Imposition of tax on import
of services.</toc-entry>
<toc-entry level="section">Sec. 1703. General rules for the import
tax.</toc-entry>
</toc>
<section id="HAD96E828C37E42C6B71697275F8B9786"><enum>1701.</enum><header>Imposition of
tax on property</header>
<subsection id="H4D14BE32E6CC42D5A742EB0024195777"><enum>(a)</enum><header>General
rule</header><text>There is hereby imposed a tax equal to 8.5 percent of the
customs value of all property entered into the United States for consumption,
use or warehousing.</text>
</subsection><subsection id="HD6A38E4A8063489690214C0596A253C0"><enum>(b)</enum><header>Liability for
tax</header><text>The tax imposed on the import of property by subsection (a)
shall be paid by the person entering the property into the United States for
consumption, use or warehousing. Such tax shall be due and payable at the time
of import.</text>
</subsection><subsection id="H565A909B20E24347A02EF81B8047212B"><enum>(c)</enum><header>Imports of
previously exported property</header><text>In the case of any article that is
classified under a heading or subheading of subchapter I or II of chapter 98 of
the Tariff Schedules of the United States, the tax under this section shall be
imposed only on that portion of the customs value of such article that is
dutiable under such heading or subheading.</text>
</subsection><subsection id="H7C2FE7E3A68C42BAAB3981FCB0F004D"><enum>(d)</enum><header>Imports for
personal consumption</header><text>The import tax imposed by this section shall
not apply to any article entered into the United States duty free under
subchapters I through VII of chapter 98 of the Tariff Schedules of the United
States.</text>
</subsection></section><section id="HCC4572700B8A410398B3D150C0AC818B"><enum>1702.</enum><header>Imposition of
tax on import of services</header>
<subsection id="HFE10F9210B9D4D8700A12555F0B52F00"><enum>(a)</enum><header>General
rule</header><text display-inline="yes-display-inline">There is hereby imposed
a tax equal to 8.5 percent of the cost of all services treated as imported into
the United States during the taxable period of the service recipient.</text>
</subsection><subsection id="H18B65ED64BA34FE2B353309C0061FE4B"><enum>(b)</enum><header>Liability for
the tax</header><text>The tax on the import of services imposed by subsection
(a) shall be paid by the person who receives the imported services. The tax
shall be payable as if it were an addition to the business tax imposed by
section 1601.</text>
</subsection><subsection id="HF2F7D10F388D440A9B4CC9D1A1991E16"><enum>(c)</enum><header>Imported
services</header><text>For purposes of this section, services shall be treated
as imported if they are treated as imported under section 1693 (general rules
on import of services) or section 1696 (related to insurance).</text>
</subsection></section><section id="H9CBFCBFD3BBE4866009B7E9843FFD947"><enum>1703.</enum><header>General rules
for the import tax</header><text display-inline="no-display-inline"><quote>Import tax</quote> means the tax
imposed by section 1701 on the import of property and the tax imposed by
section 1702 on the import of services.</text>
</section></subchapter><subchapter commented="no" id="HFBD87C0B02134FF99EAF8D63B67766D2"><enum>L</enum><header>Transition
rules</header>
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 1711. Amortization of transition
basis.</toc-entry>
</toc>
<section commented="no" id="H00F83614CDDC41F09EA7A1E600EE30F6"><enum>1711.</enum><header>Amortization
of transition basis</header>
<subsection commented="no" id="HE6D77DAB7786468CA2F3F52970D5E900"><enum>(a)</enum><header>Transition basis
deduction</header><text>The <term>transition basis deduction</term> for a
taxable period is the sum of the amortization allowance determined under this
section for the taxable period.</text>
</subsection><subsection id="HE50FD7BFC15E4954AFA2FE97C15400F2"><enum>(b)</enum><header>Treatment of
interest flows</header><text>Interest flows between non-financial businesses
shall be treated as under current law, phased out over 5 years.</text>
</subsection><subsection id="H3481D145B41244F6872B31401EB5B9D2"><enum>(c)</enum><header>Amortization
rules</header><text>The amortization allowance to all property placed in
service before the effective date of this section shall be the lesser
of—</text>
<paragraph id="HA9D395853F8344A7B9FEA69ED4F55200"><enum>(1)</enum><text>the amortization
period under current law remaining on such date, or</text>
</paragraph><paragraph id="HD8561ADA96664A0C84DB38279915B6E9"><enum>(2)</enum><text>a 5-year ratable
period beginning on such date.</text>
</paragraph></subsection></section></subchapter><subchapter id="H4BE637E055604D3C93C51C2E00E568AE"><enum>M</enum><header>Rules for
administration, consolidated returns</header>
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 1721. Returns, due dates,
etc.</toc-entry>
<toc-entry level="section">Sec. 1722. Consolidated
returns.</toc-entry>
<toc-entry level="section">Sec. 1723. Seller liable for
tax.</toc-entry>
<toc-entry level="section">Sec. 1724. Tax invoices.</toc-entry>
<toc-entry level="section">Sec. 1725. Time for filing return and
claiming credit; deposits of tax.</toc-entry>
<toc-entry level="section">Sec. 1726. Secretary to be notified of
certain events.</toc-entry>
<toc-entry level="section">Sec. 1727. Regulations.</toc-entry>
</toc>
<section id="HAEBE90EBF9F743868C930704776289EB"><enum>1721.</enum><header>Returns, due
dates, etc</header>
<subsection id="HA2CB39E6A43940EF947FCC3C4904A89"><enum>(a)</enum><header>In
general</header><text>Until subtitle F is amended to reflect the adoption of
this chapter, the rules of subtitle F relating to C corporations shall apply to
business entities with respect to—</text>
<paragraph id="H9C9D60EB48914EDCA2CB933EB0502DD8"><enum>(1)</enum><text>returns and
records;</text>
</paragraph><paragraph id="H73CF4296ABBC4094A63360B32F886294"><enum>(2)</enum><text>time and place for
paying tax;</text>
</paragraph><paragraph id="H7701B5D2245744699778DDC268FF6DEC"><enum>(3)</enum><text>assessment of
taxes;</text>
</paragraph><paragraph id="H6A84000C45174AF8BC772111453C5CC3"><enum>(4)</enum><text>collections and
liens;</text>
</paragraph><paragraph id="H186E8E81FC184CF40000BF4B6542E7B"><enum>(5)</enum><text>abatements,
credits, and refunds;</text>
</paragraph><paragraph id="H1A72EDD6E1094F92AD98B87CE2FA42C6"><enum>(6)</enum><text>interest on
underpayments and overpayments;</text>
</paragraph><paragraph id="H9192BBFA454042089CCD2F8D50A3CFBB"><enum>(7)</enum><text>additions to tax
and penalties;</text>
</paragraph><paragraph id="H97F90724FA31464E94126208E6DA6CCA"><enum>(8)</enum><text>closing agreements
and compromises;</text>
</paragraph><paragraph id="HB83595C01E9743BFB8C8763CEF148783"><enum>(9)</enum><text>crimes;</text>
</paragraph><paragraph id="H2511317120B84DCE839348E46F5C8DF"><enum>(10)</enum><text>judicial
proceedings;</text>
</paragraph><paragraph id="H5A27339369A742F497DBCFEA7B73892"><enum>(11)</enum><text>discovery of
liability and enforcement; and</text>
</paragraph><paragraph id="H4947C0E91DAC4E488104C3CE091B4DF8"><enum>(12)</enum><text>estimated
taxes.</text>
</paragraph></subsection><subsection id="H554545DEC15C456EA3D06B32341F25C"><enum>(b)</enum><header>Individuals
engaging in business activities</header><text>Under rules prescribed by the
Secretary, individuals engaging in business activities on their own or with
their spouses shall be permitted to file their business tax returns with their
individual tax returns and shall be subject to estimated tax rules for
individual income tax returns.</text>
</subsection></section><section commented="no" id="H5CED642BBAD34188991C5B61F9FF7D00"><enum>1722.</enum><header>Consolidated
returns</header>
<subsection commented="no" id="H3D1FFDCF19C646BF85FD9169A981A6D4"><enum>(a)</enum><header>In
general</header><text>Business entities may file consolidated returns of
business tax if they would have been permitted to file consolidated returns
under section 1501 and such section were applied by treating each business
entity as a corporation and its owners or partners as shareholders.</text>
</subsection><subsection commented="no" id="H45EE02E7F64B43128CB561757FFEE5DD"><enum>(b)</enum><header>Financial
institutions</header><text>Financial intermediation businesses may be included
in consolidated returns, but each financial intermediation business must
compute its gross profits separately.</text>
</subsection><subsection commented="no" id="H21B251F52C0D4D528FFA5892FCC78D9B"><enum>(c)</enum><header>Intercompany
transactions</header><text>In computing the gross profits of a consolidated
group, intercompany transactions can be taken into account, or at the election
of the filer, be disregarded (except in the case of transactions with financial
intermediation businesses).</text>
</subsection></section><section id="H55A64C61CBC44EB497388FAEBAA82E09"><enum>1723.</enum><header>Seller liable
for tax</header><text display-inline="no-display-inline">The person selling the
property or services shall be liable for the tax imposed by section
1601.</text>
</section><section id="H87E7A440B34C422EB104B96294E87B4"><enum>1724.</enum><header>Tax
invoices</header>
<subsection id="H369D9EC51450483DBD06A55268DA45B1"><enum>(a)</enum><header>Seller Must Give
Purchaser Tax Invoice</header><text>Any taxable person engaging in a taxable
transaction shall give the purchaser a tax invoice with respect to such
transaction if the seller has reason to believe that the purchaser is a taxable
person.</text>
</subsection><subsection id="HAC286D354BD740A9A7B1671B1B0040B8"><enum>(b)</enum><header>Content of
Invoice</header><text>The tax invoice required by subsection (a) with respect
to any transaction shall set forth—</text>
<paragraph id="HF5A582D407734AA88D86FF111055C9BF"><enum>(1)</enum><text>the name and
identification number of the seller,</text>
</paragraph><paragraph id="HC9E3FD549C8F4742AC1498D083C1EC68"><enum>(2)</enum><text>the name of the
purchaser,</text>
</paragraph><paragraph id="HC12C4AF7916C40B40052D16EF1A851FF"><enum>(3)</enum><text>the amount of the
tax imposed by section 1601, and</text>
</paragraph><paragraph id="HF05CC9F19B6648AEBEA8A8A05C509453"><enum>(4)</enum><text>such other
information as may be prescribed by regulations.</text>
</paragraph></subsection><subsection id="H651A6AFE137C4EA1AA36E200A5AE6644"><enum>(c)</enum><header>No Credit
Without Invoice</header>
<paragraph id="H69E2799179D74BBF8695086063721C19"><enum>(1)</enum><header>In
general</header><text>Except as provided in paragraphs (2) and (3), a purchaser
may claim a credit with respect to a transaction only if the purchaser—</text>
<subparagraph id="H135CC4AE6EDC42A2A0DB07970DC3D00"><enum>(A)</enum><text>has received from
the seller and has in the purchaser’s possession a tax invoice which meets the
requirements of subsection (b), and</text>
</subparagraph><subparagraph id="HE7058C5D2E0749EF9B003BCA9BF0F342"><enum>(B)</enum><text>is named as the
purchaser in such invoice.</text>
</subparagraph></paragraph><paragraph id="HBC20C9F1425B4F1094DC5300DF4066A0"><enum>(2)</enum><header>Employees or
other agents named in invoices</header><text>To the extent provided in
regulations, the naming of an employee or other agent of the purchaser shall be
treated as the naming of the purchaser.</text>
</paragraph><paragraph id="H25175F88AA434CF0906C50AF92518CD5"><enum>(3)</enum><header>Waiver of
invoice requirement in certain cases</header><text>To the extent provided in
regulations, paragraph (1) shall not apply—</text>
<subparagraph id="H8F224287F6B144A5A14290F51FCE5396"><enum>(A)</enum><text>where the
purchaser without fault on the purchaser’s part fails to receive or fails to
have in the purchaser’s possession a tax invoice,</text>
</subparagraph><subparagraph id="H9E924A41DE434BA3809B52071C4991B5"><enum>(B)</enum><text>to a taxable
transaction (or category of transactions) where—</text>
<clause id="H367E92D8986242539B71B9577F647595"><enum>(i)</enum><text>the amount
involved is de minimis, or</text>
</clause><clause id="H29F46FC69FBB487FBB9B27DBE77E57D2"><enum>(ii)</enum><text>the information
required by subsection (b) can be reliably established by sampling or by
another method and can be adequately documented.</text>
</clause></subparagraph></paragraph></subsection><subsection id="H472DB50DF14D4D00BF52E539A1E9EB75"><enum>(d)</enum><header>Time for
Furnishing Invoice</header><text>Any invoice required to be furnished by
subsection (a) with respect to any transaction shall be furnished not later
than 15 business days after the tax point for such transaction.</text>
</subsection></section><section id="H256F12E5F2C4472EBAEE28304024B227"><enum>1725.</enum><header>Time for
filing return and claiming credit; deposits of tax</header>
<subsection id="H6506F6C19D064889A3FA42F183B750B4"><enum>(a)</enum><header>Filing
Return</header><text>Before the first day of the second calendar month
beginning after the close of each taxable period, each taxable person shall
file a return of the tax imposed by section 1601 on taxable transactions having
a tax point within such taxable period.</text>
</subsection><subsection id="H6A527E03B3634DD08800916B0080B17D"><enum>(b)</enum><header>Credit Allowed
for Taxable Period in Which Purchaser Receives Invoice</header>
<paragraph id="HBF0BAA97946344C984B93DCB9D706221"><enum>(1)</enum><header>In
general</header><text>Except as provided in paragraph (2), a credit allowable
by section 1606 with respect to a transaction may be allowed only for the first
taxable period by the close of which the taxpayer—</text>
<subparagraph id="H93C968F1E2DE4890BF295475F871EF46"><enum>(A)</enum><text>has paid or
accrued amounts properly allocable to the tax imposed by section 1601 with
respect to such transaction, and</text>
</subparagraph><subparagraph id="HC5CEC31A22A84DAA9BF70000BBC5AE15"><enum>(B)</enum><text>has a tax invoice
(or equivalent) with respect to such transaction.</text>
</subparagraph></paragraph><paragraph id="HE091C1237BA84A0BA4C888D55C9BC179"><enum>(2)</enum><header>Use for later
period</header><text>Under regulations, a credit allowable by section 1606 may
be allowed for a period after the period set forth in paragraph (1).</text>
</paragraph></subsection><subsection id="H043EEF5566EC4EA0007324D043FC2E5"><enum>(c)</enum><header>Taxable
Period</header><text>For purposes of this chapter—</text>
<paragraph id="H84279657241E41A29EE4884E15B9286"><enum>(1)</enum><header>In
general</header><text>The term <term>taxable period</term> means a calendar
quarter.</text>
</paragraph><paragraph id="H8885D3C019F64716ACB46CF18B685FCC"><enum>(2)</enum><header>Exception</header>
<subparagraph id="H1D82823F96794530B45B205688B010C1"><enum>(A)</enum><header>Election of
1-month period</header><text>If the taxpayer so elects, the term <term>taxable
period</term> means a calendar month.</text>
</subparagraph><subparagraph id="H7974936EBC5B4A6FBA2B925EE7A9CB71"><enum>(B)</enum><header>Other
periods</header><text>To the extent provided in regulations, the term
<term>taxable period</term> includes a period, other than a calendar quarter or
month, selected by the taxpayer.</text>
</subparagraph></paragraph></subsection><subsection id="H4293473279FC410F9B9E2875E945A5DD"><enum>(d)</enum><header>Tax
Point</header><text>For purposes of this chapter—</text>
<paragraph id="HC92EF312E7F14FBBBB2736A800DE42C9"><enum>(1)</enum><header>Chapter 1 rules
with respect to seller govern</header><text>Except as provided in paragraph
(2), the tax point for any sale of property or services is the earlier
of—</text>
<subparagraph id="HB1EB7C73860643D2B931FA2EED385F62"><enum>(A)</enum><text>the time (or
times) when any income from the sale should be treated by the seller as
received or accrued (or any loss should be taken into account by the seller)
for purposes of chapter 1, or</text>
</subparagraph><subparagraph id="HD68A03B72D9E4D5EB0B577FB5F6F04FE"><enum>(B)</enum><text>the time (or
times) when the seller receives payment for the sale.</text>
</subparagraph></paragraph><paragraph id="H629C22C4DF6A47BAA28E003B13B89D67"><enum>(2)</enum><header>Imports</header><text>In
the case of the importing of property, the tax point is when the property is
entered, or withdrawn from warehouse, for consumption in the United
States.</text>
</paragraph></subsection><subsection id="H5EEA7C3E09684CB700F41B3B15756B14"><enum>(e)</enum><header>Monthly Deposits
Required</header><text>To the extent provided in regulations, monthly deposits
may be required of the estimated liability for any taxable period for the tax
imposed by section 1601.</text>
</subsection></section><section id="H8833555FDA9E43758F744E47E4614891"><enum>1726.</enum><header>Secretary to
be notified of certain events</header><text display-inline="no-display-inline">To the extent provided in regulations, each
person engaged in a business shall notify the Secretary (at such time or times
as may be prescribed by such regulations) of any change in the form in which a
business is conducted or any other change which might affect the liability for
the tax imposed by section 1601 or the amount of such tax or any credit against
such tax, or otherwise affect the administration of such tax in the case of
such person.</text>
</section><section id="HE3BE481864E6444DBD2143FE564B6FCB"><enum>1727.</enum><header>Regulations</header><text display-inline="no-display-inline">The Secretary shall prescribe such
regulations as may be necessary to carry out the purposes of this
chapter.</text>
</section></subchapter><subchapter commented="no" id="HED3C4D41289E44F68EC0703E8F994745"><enum>N</enum><header>Definitions and
rules of application</header>
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 1731. Definitions.</toc-entry>
<toc-entry level="section">Sec. 1732. Rules of
application.</toc-entry>
</toc>
<section commented="no" id="H0D1794D129F84F6D831999990070013E"><enum>1731.</enum><header>Definitions</header><text display-inline="no-display-inline">If a term that is used but not defined in
this chapter or in section 7701 is defined in chapter 1, the definition in
chapter 1 shall apply except if manifestly incompatible with the intent of the
provision in which the term is used.</text>
</section><section commented="no" id="HE0C27CC55F9D43D89EB64BA635095D89"><enum>1732.</enum><header>Rules of
application</header>
<subsection commented="no" id="HF4D6F163FFCB4200A9535E44C0E99868"><enum>(a)</enum><header>Definitions</header><text>Any
definition included in this chapter shall apply for all purposes of this
chapter unless—</text>
<paragraph commented="no" id="H34FC08BB059C44A300247607153F8071"><enum>(1)</enum><text>such definition is
limited to the purposes of a particular chapter, section, or subsection,
or</text>
</paragraph><paragraph commented="no" id="H1C3F385430334BB99C5740BDB5C41080"><enum>(2)</enum><text>the definition
clearly would not be applicable in a particular context.</text>
</paragraph></subsection><subsection commented="no" id="H8AD317DA8FF14EC28777EA8FB2B7D00"><enum>(b)</enum><header>Interpretations
consistent with Internal Revenue Code of 1986</header><text>Terms not defined
in this chapter, chapter 1 or section 7701, but defined elsewhere in this
title, shall be interpreted in a manner consistent with this title, except to
the extent such interpretation would be inconsistent with the principles and
purposes of this
chapter.</text>
</subsection></section></subchapter></chapter><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="H4CC43D55021D4E62B99182D775F24C01"><enum>(b)</enum><text>The amendments
made by this section shall be effective on January 1, 2010, except to the
extent otherwise specifically provided in the text of such amendments.</text>
</subsection></section><section id="HEE925613D1874BE2B377E0BF84E55720"><enum>603.</enum><header>Repeal of
Chapter <enum-in-header>6</enum-in-header></header><text display-inline="no-display-inline">Chapter 6 of the Code (relating to
consolidated returns) is repealed as of January 1, 2010.</text>
</section><section id="H82A8DB81F636470E94DCB037CA0635E4"><enum>604.</enum><header>Revisions to
the Code</header><text display-inline="no-display-inline">Not later than
January 1, 2010, the Secretary shall submit to Congress proposed changes in the
Internal Revenue Code of 1986 that—</text>
<paragraph id="H14392CFC2D72406E949EEC769266B1B4"><enum>(1)</enum><text>revise subtitles C
through J of such Code to fully reflect the amendments to subtitle A of such
Code made by this title and the repeal of subtitle B of such Code,</text>
</paragraph><paragraph id="HE7AA14D791CC41C59EAD81F05EC9F6A2"><enum>(2)</enum><text>include statutory
definitions or rules in cases where the Secretary concludes that the
definitions or rules cannot or should not be addressed by regulation,</text>
</paragraph><paragraph id="HD53BFB4C7BF3430C94FA4F00D3BC7DD9"><enum>(3)</enum><text>revise chapter 2
of such Code (relating to the self-employment tax) to conform to changes made
by this title, and</text>
</paragraph><paragraph id="H1773AAF288B94A93ACF1ECFB7E2CC00"><enum>(4)</enum><text>revise chapter 3 of
such Code (relating to withholding on nonresident aliens and foreign
corporations) to reflect changes made by this title.</text>
</paragraph></section><section display-inline="no-display-inline" id="H8621714F8DF745E39B93C787BFCD00E9" section-type="subsequent-section"><enum>605.</enum><header>Application of
Subtitle <enum-in-header>F</enum-in-header></header><text display-inline="no-display-inline">Until such time as subtitle F of the
Internal Revenue Code of 1986 is amended to reflect the amendments made by this
title, the provisions of such subtitle F shall be treated as generally applying
to chapter 7 of subtitle A of such Code—</text>
<paragraph id="HD2EB031E40F3456C9B5F859E05DABFDE"><enum>(1)</enum><text>without regard to
specific cross references,</text>
</paragraph><paragraph id="HC8C08AF721B14EE499F1989C8DEBFC0"><enum>(2)</enum><text>without regard to
provisions relating to partnerships, and</text>
</paragraph><paragraph id="HCDCDFEC6552448D9BC0000C03BA48E44"><enum>(3)</enum><text>as if the business
tax under such chapter 7 were the corporate income tax and all business
entities were corporations (except for purposes of collection, in which case
the owners of noncorporate entities shall be obligated for taxes owned by the
entities to the same extent as they would if the entity owed the tax prior to
the amendment of the Code).</text>
</paragraph></section><section display-inline="no-display-inline" id="HED58BAAFC39545A8AEB8E59D79E69995" section-type="subsequent-section"><enum>606.</enum><header>Effective
dates</header>
<subsection id="H798322347D4A448EB3E29C8195A50071"><enum>(a)</enum><header>In
general</header><text>Except as otherwise provided in this title, the
amendments made by this title shall be effective on and after January 1, 2010,
with respect to tax years beginning on such date.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="HD2601559D9CB4439A0A5EF2CB3B6CDD6"><enum>(b)</enum><header>Special rules
for businesses with 52–53 week year</header><text>If a business uses a 52–53
week taxable period the amendments made by this title shall apply to the
business with respect to its tax year beginning in the last week in December
except with respect to any transactions occurring during 2009 that were
structured to take advantage of the application of this title to such business
at a time when this title did not apply to other businesses or to
individuals.</text>
</subsection></section><enum>VII</enum><header>Budget
Enforcement</header>
<section id="H7A90777EA94E48A991B6364B92B22C59"><enum>701.</enum><header>Short title;
table of contents; definitions</header>
<subsection id="HCE8FA154ABDE470D98E3B361BFA50C1"><enum>(a)</enum><header>Short
title</header><text>This title may be cited as the <quote>Budget Control Act of
2009</quote>.</text>
</subsection><subsection id="HE7A0CCB7FFC24E2B86FA82C13D8F65FE"><enum>(b)</enum><header>Table of
contents</header>
<toc>
<toc-entry idref="H3FBFDF39FC53462C8B17C4B903008700" level="title">TITLE VII—Budget Enforcement</toc-entry>
<toc-entry idref="H7A90777EA94E48A991B6364B92B22C59" level="section">Sec. 701. Short title; table of contents;
definitions.</toc-entry>
<toc-entry idref="H8C4AEEAB925947E9B212C95D5697F87F" level="section">Sec. 702. Long-term projections.</toc-entry>
<toc-entry idref="HD3447E0880734E459214FFC5ECE96589" level="section">Sec. 703. Preview spending reduction order.</toc-entry>
<toc-entry idref="H57C45662AC0843A1BDB58B4C4D121E14" level="section">Sec. 704. Final spending reduction order.</toc-entry>
<toc-entry idref="H6F11FDC753F74038B87F780240C48078" level="section">Sec. 705. Eliminating excess spending amounts.</toc-entry>
<toc-entry idref="H44807921088C4DCC89341C1BD31C8803" level="section">Sec. 706. Special procedures.</toc-entry>
<toc-entry idref="H8A1FF5B4382749BCB16CE699AB9C7F87" level="section">Sec. 707. Suspension in the event of war or low
growth.</toc-entry>
<toc-entry idref="H2B470CAFBEE2451F93A6D5A839B33DF3" level="section">Sec. 708. Alternate spending reduction legislation in the House
of Representatives.</toc-entry>
<toc-entry idref="HF026811204C14A6194982569DFC0624E" level="section">Sec. 709. Alternate spending reduction legislation in the
Senate.</toc-entry>
<toc-entry idref="H19CD085102CF405694F912EF00982100" level="section">Sec. 710. General provisions.</toc-entry>
<toc-entry idref="HD650FDE75E8443D3A27000AA13B562BA" level="section">Sec. 711. Effective date.</toc-entry>
</toc>
</subsection><subsection id="HF47E96D8D26B4EF08FAA4C7677D11792"><enum>(c)</enum><header>Definitions</header><text>As
used in this title:</text>
<paragraph id="HC1B8BBD5F1654030A44E7FD6A6C502EF"><enum>(1)</enum><text>The terms
<term>budget authority</term> and <term>outlays</term> have the meanings given
to such terms in section 3 of the Congressional Budget Act of 1974.</text>
</paragraph><paragraph id="H5DC60BE17D5D423CBFF7B3BE1FA6AAF"><enum>(2)</enum><text>The term
<term>budgetary resources</term> means new budget authority, budget authority,
unobligated balances, direct spending authority, and obligation
limitations.</text>
</paragraph><paragraph id="H585A03E9E3E542C09969762818670006"><enum>(3)</enum><text>The term
<term>spending reduction</term> refers to the cancellation of budgetary
resources provided by discretionary appropriations or direct spending.</text>
</paragraph><paragraph id="H8D8A6398555A4DCD998F53F9155DA53D"><enum>(4)</enum><text>The term
<term>discretionary appropriations</term> means budgetary resources provided in
appropriation Acts.</text>
</paragraph><paragraph id="H511342F8617743B49D83BFCA7FF15FAD"><enum>(5)</enum><text>The term
<term>direct spending</term> means budget resources provided in law other than
appropriation Acts.</text>
</paragraph><paragraph id="HBBCA19E47FDC4B7EA059CE2560087BD6"><enum>(6)</enum><text>The term
<term>gross domestic product</term>, with respect to any fiscal year, means the
gross national product during such fiscal year consistent with Department of
Commerce definitions.</text>
</paragraph><paragraph id="H1B2EE65C13DF4B76A7A6A212C536E0E"><enum>(7)</enum><text>The term
<term>account</term> means an item for which appropriations are made in any
appropriation Act and, for items not provided for in appropriation Acts, such
term means an item for which there is a designated budget account
identification code number in the President’s budget.</text>
</paragraph><paragraph id="HB644A3F6C96C483993C527B72DB9FC5"><enum>(8)</enum><text>The term
<term>budget year</term> means, with respect to a session of Congress, the
fiscal year of the Government that starts on October 1 of the calendar year in
which that session begins.</text>
</paragraph><paragraph id="HA8E5F2973F2F444E8EF9BA4C92A700D8"><enum>(9)</enum><text>The term
<term>current year</term> means, with respect to a budget year, the fiscal year
that immediately precedes that budget year.</text>
</paragraph><paragraph id="HCC05283021034E8CB61CFC4B2CE7B100"><enum>(10)</enum><text>The term
<term>OMB</term> means the Director of the Office of Management and
Budget.</text>
</paragraph><paragraph id="HAA1FA2FCB31840F0BDAA2B200E6FB88"><enum>(11)</enum><text>The term
<term>CBO</term> means the Director of the Congressional Budget Office.</text>
</paragraph><paragraph id="HD0E29FD73C9E432CA75EBBE0AC653F82"><enum>(12)</enum><text>The term
<term>baseline</term> means the baseline estimates OMB or CBO, as applicable,
annually submits to Congress consistent with section 257 of the Balanced Budget
and Emergency Deficit Control Act of 1985.</text>
</paragraph><paragraph id="H4F610B648242405E8CBBF909D3D8642B"><enum>(13)</enum><text>The term
<term>guideline period</term> means the period of fiscal years as set forth in
section 702(f).</text>
</paragraph><paragraph id="HEEB802F84EFF429D0029F5E935AD40B3"><enum>(14)</enum><text>The term
<term>excess spending amount</term> means the amount of outlays a projected
spending amount exceeds the guideline spending amount for a fiscal year within
the guideline period.</text>
</paragraph><paragraph id="HC293BE38D0BB4C830058F910DE681758"><enum>(15)</enum><text>The term
<term>projected spending amount</term> means the amount of total outlays of the
Federal Government for a fiscal year within the guideline period and as
calculated in section 702(c).</text>
</paragraph><paragraph id="H2BBA6ECCD4DA415C96DE2FD56855F817"><enum>(16)</enum><text>The term
<term>guideline spending amount</term> means the amount of total outlays of the
Federal Government for a fiscal year as a percentage of the gross domestic
product for such fiscal year within the guideline period.</text>
</paragraph><paragraph id="H0D067954520C4ACD84CBA9EF5F9CE5D9"><enum>(17)</enum><text>The term
<term>preview order</term> means a preview spending reduction order as defined
in section 703.</text>
</paragraph><paragraph id="HB95A7CC0F42C4E69A6D22215B5F5B7C1"><enum>(18)</enum><text>The term
<term>final order</term> means a final spending reduction order as defined in
section 704.</text>
</paragraph></subsection></section><section id="H8C4AEEAB925947E9B212C95D5697F87F"><enum>702.</enum><header>Long-term
projections</header>
<subsection id="H7016CBD251DA4E10A47C1B167F9622A4"><enum>(a)</enum><header>OMB long-term
economic growth and budget projections</header><text>For each fiscal year
within the guideline period, OMB shall prepare a report that sets forth the
amount of total spending of the Government in outlays, within the budget as
submitted by the President anually under section 1105(a) of title 31, United
States Code.</text>
</subsection><subsection id="HF2A8293B29FB4A1EBBF1DDD12F00F195"><enum>(b)</enum><header>CBO long-term
economic growth and budget projections</header><text>By February 1 of each
calendar year, for each fiscal year within the guideline period, CBO shall
prepare a report that sets forth the amount of total spending of the Government
in outlays, and the amount of spending of each program within the budget as CBO
prepares its annual baseline and its reestimate of the President’s
budget.</text>
</subsection><subsection id="H9895BDD15C44452F9B9FDC996EFD25E5"><enum>(c)</enum><header>Inclusion in the
final spending reduction</header><text>Each report prepared pursuant to
subsections (a) and (b) shall be included in the preview spending reduction and
final spending reduction, as applicable, set forth in sections 703 and
704.</text>
</subsection></section><section id="HD3447E0880734E459214FFC5ECE96589"><enum>703.</enum><header>Preview
spending reduction order</header>
<subsection id="H0B284928A98B469CBCC908BDAAC2DC00"><enum>(a)</enum><header>Issuance</header><text>Not
later than 15 calendar days after the date Congress adjourns to end a session
of Congress, every fiscal year other than which a final order is issued, OMB
shall issue a preview spending reduction order.</text>
</subsection><subsection id="H5624EC83DE50497EA63D2FB1EAE78095"><enum>(b)</enum><header>Contents</header><text>A
preview order shall be subject to the same requirements as that set forth for a
final spending reduction in section 704.</text>
</subsection><subsection id="HF5CABB7F4CC545C5B3476DB960089500"><enum>(c)</enum><header>Availability</header><text>A
preview order required to be issued by this section shall be submitted by OMB
to the House of Representatives and the Senate on the day it is issued.</text>
</subsection><subsection id="H0EB1AB9EE72E40EB86AEDE6999BC17CD"><enum>(d)</enum><header>Effect</header><text>A
preview order shall not cause a spending reduction.</text>
</subsection></section><section id="H57C45662AC0843A1BDB58B4C4D121E14"><enum>704.</enum><header>Final spending
reduction order</header>
<subsection id="H7F7627AB92D54CE48FC3F34F417EEDBF"><enum>(a)</enum><header>Issuance</header><text>Not
later than 15 calendar days after the date Congress adjourns to end a session
of Congress, every fifth fiscal year following the fiscal year in which this
Act is enacted, OMB shall issue a final spending reduction order to eliminate
an excess spending amount (if any) as calculated under subsection (b).</text>
</subsection><subsection id="HD04BB0C348E34620B84125B02D3E23BD"><enum>(b)</enum><header>Content of a
final spending control order</header><text>In addition to any other information
required under this title to be included in any final spending control order,
this order shall contain, for the budget year, for each account to be subject
to a spending reduction, estimates of the baseline level of budgetary resources
and resulting outlays and the amount of budgetary resources to be subject to a
spending reduction and resulting outlay reductions. The order shall also
contain estimates of the effects on outlays of the spending reduction in each
outyear for direct spending programs.</text>
</subsection><subsection id="H484AE67E44114873B05C7F3EA3A4AA66"><enum>(c)</enum><header>Availability</header><text>A
final order required to be issued by this section shall be submitted by OMB to
the House of Representatives, the Senate, and the President on the day it is
issued.</text>
</subsection><subsection id="HC3F52D59E533497191A19B198B3D4C"><enum>(d)</enum><header>Spending control
buffer</header><text>If there is an excess spending amount in only one fiscal
year or in one period of two successive fiscal years during the guideline
period, and such amount or amounts exceed the guideline spending amount by .1
percent of GDP or less, then the final spending reduction shall be issued, but
shall not take effect.</text>
</subsection><subsection id="H6247B1FE81EC4EA8BE60576867B2467"><enum>(e)</enum><header>Presidential
order</header><text>On the date specified in subsection (a), if in its final
spending reduction OMB calculates there exists an impermissible excess spending
amount, the President shall issue an order fully implementing without change
all spending reductions required by the OMB calculations set forth in that
report. This order shall be effective on the first day of the fiscal year
following the fiscal year in which the order is issued.</text>
</subsection></section><section id="H6F11FDC753F74038B87F780240C48078"><enum>705.</enum><header>Eliminating
excess spending amounts</header>
<subsection id="H4ED8072765A54FBF8008DA0020DF9599"><enum>(a)</enum><header>Enforcing a
spending reduction for discretionary spending</header>
<paragraph id="H12C3AC994C6747E08FADC552CE33499"><enum>(1)</enum><header>Eliminating a
discretionary spending excess</header><text>OMB shall include in its final
order a requirement that each discretionary account shall be reduced by an
amount of budget authority calculated by multiplying the baseline level of
budgetary resources in that account at that time by the uniform percentage
necessary to reduce outlays sufficient to eliminate an excess spending
amount.</text>
</paragraph><paragraph id="H51A2C610F9E1476EBAE340CA71DF4BFC"><enum>(2)</enum><header>Part-year
appropriations</header><text>If, on the date a final spending reduction is
issued, there is in effect an Act making or continuing appropriations for part
of a fiscal year for any budget account, then the dollar spending reduction
calculated for that account under paragraph (1) shall be subtracted
from—</text>
<subparagraph id="H70144E428DBC4ADB8E3E92CDAB002E4B"><enum>(A)</enum><text>the annualized
amount otherwise available by law in that account under that or a subsequent
part-year appropriation; and</text>
</subparagraph><subparagraph id="HD7D6F3E73C9D436681015DE812C5C0A7"><enum>(B)</enum><text>when a full-year
appropriation for that account is enacted, from the amount otherwise provided
by the full-year appropriation.</text>
</subparagraph></paragraph></subsection><subsection id="HAAD0B377685E41B7892950E4EACBE410"><enum>(b)</enum><header>Eliminating a
direct spending excess</header><text display-inline="yes-display-inline">OMB
shall include in its final order a requirement that each direct spending
account shall be reduced by an amount of budget authority calculated by
multiplying the baseline level of budgetary resources in that account at that
time by the uniform percentage necessary to reduce outlays sufficient to
eliminate an excess spending amount.</text>
</subsection><subsection id="HEE36970362764FEF8EAD147DBC101D0"><enum>(c)</enum><header>Uniform
percentage</header><text>The percentage required to produce a spending
reduction, as ordered by a final order, shall be calculated by OMB by adding
all budgetary resources of the Government, and reducing that amount by an
amount sufficient to reduce the total amount of outlays of the Government to
equal, or lower, a level of outlays than the amount set forth in the guideline
period.</text>
</subsection></section><section id="H44807921088C4DCC89341C1BD31C8803"><enum>706.</enum><header>Special
procedures</header>
<subsection id="HB69BE5D0B254444FB7B8E278D9F36909"><enum>(a)</enum><header>Social security
benefits</header><text>Benefits payable under the old-age, survivors, and
disability insurance program established under title II of the Social Security
Act, shall be exempt from a spending reduction required by a final order
if—</text>
<paragraph id="H87FB5C2697084C4C9718A4A05EE164BE"><enum>(1)</enum><text>the Social
Security Trustees issue, in the fiscal year such order is issued, a statement
that the old-age, survivors, and disability Trust Funds have achieved or will
achieve solvency under current law within the guideline period beginning in the
year following the year the final order is issued;</text>
</paragraph><paragraph id="H341F7D3A4C6242DFA4F7D890023E1F7B"><enum>(2)</enum><text>it would require
an amount that exceeds such amount as the Trustees determine are required to
achieve solvency in that period, as determined by the Social Security Trustees;
and</text>
</paragraph><paragraph id="HD6136070840E42D693B3A75B04AAE75"><enum>(3)</enum><text>it
would require a spending reduction of an amount greater than 1 percent of
budgetary resources in any fiscal year within the guideline period.</text>
</paragraph></subsection><subsection id="HEF9216948AA6498E9B14AF19A1243310"><enum>(b)</enum><header>Net
interest</header><text>A spending reduction shall not cause any effect on
payments for net interest (as set forth in function 900).</text>
</subsection><subsection id="H2A61D27407D043E1AA216F1E06C7004D"><enum>(c)</enum><header>Obligated
balances</header><text>Obligated balances of budget authority carried over from
prior fiscal years shall be exempt from a spending reduction under any order
issued under this title.</text>
</subsection><subsection id="HC2B9940E48C049BBB386E3E5AF2F863F"><enum>(d)</enum><header>Application to
fast growing programs</header><text>Any program whose growth in the budget year
is less than the rate of inflation as determined by OMB, shall be exempt from a
spending reduction issued under this title.</text>
</subsection><subsection id="HF7314260D59C441687BDED8EAD5F5135"><enum>(e)</enum><header>Limitation on
spending reductions</header><text>No program shall be subject to a spending
reduction of more than 1 percent of its budgetary resources.</text>
</subsection><subsection id="H7B9533EB08AB4DB4B400C64847AC4062"><enum>(f)</enum><header>Uniform
percentage rate of reduction and other limitations</header><text>All spending
reductions with respect to a fiscal year shall be made so as to ensure that
outlays for each program, project, activity, or account involved are reduced by
a percentage rate that is uniform for all such programs, projects, activities,
and accounts, and may not be made so as to achieve a percentage rate of
reduction in any such item exceeding the rate specified in the order.</text>
</subsection><subsection id="H0516F62771C5403D9B9E265CA7008653"><enum>(g)</enum><header>Effect of a
final order</header><text>Upon the issue of a final order, a spending reduction
shall be ordered for all nonexempt spending accounts. The spending reduction
shall be effective as follows:</text>
<paragraph id="HF5D1043C0BAA4F31B230AC3F5EF2927"><enum>(1)</enum><text>Budgetary resources
subject to a spending reduction to any discretionary account shall be
permanently cancelled.</text>
</paragraph><paragraph id="HCCF2736343DA45F78D6CA2C1554F2FE0"><enum>(2)</enum><text>The same
percentage spending reduction shall apply to all programs, projects, and
activities within a budget account (with programs, projects, and activities as
delineated in the appropriation Act or accompanying report for the relevant
fiscal year covering that account, or for accounts not included in
appropriation Acts, as delineated in the most recently submitted President’s
budget).</text>
</paragraph><paragraph id="H2BB7E2206218401996F900F2ED5B71E9"><enum>(3)</enum><text>Administrative
regulations implementing a spending reduction shall be made within 120 days of
the issue of a final order.</text>
</paragraph><paragraph id="H5DF620725E934D5BB0E19F69CEF9108D"><enum>(4)</enum><text>Budgetary
resources subject to a spending reduction in revolving, trust, and special fund
accounts and offsetting collections subject to a spending reduction in
appropriation accounts shall not be available for obligation during the fiscal
year in which the spending reduction is issued, and shall be available in
subsequent years only to the extent as provided by law.</text>
</paragraph></subsection></section><section id="H8A1FF5B4382749BCB16CE699AB9C7F87"><enum>707.</enum><header>Suspension in
the event of war or low growth</header>
<subsection id="H78ABF254A2B14FCC9E98BC02F51988C0"><enum>(a)</enum><header>Procedures in
the Event of a Low Growth Report</header>
<paragraph id="HC7699FAEF92743E3A2B7D7AB004384A5"><enum>(1)</enum><header>Low growth
report</header><text>Whenever OMB or CBO issues a low-growth report under
section 710(a), the majority leader of the House of Representatives and the
majority leader of the Senate shall introduce a joint resolution suspending the
relevant provisions of this title, titles III and IV of the Congressional
Budget Act of 1974, and section 1103 of title 31, United States Code.</text>
</paragraph><paragraph id="H4141B60E997E4F2E80D5AA96CCDA4B8F"><enum>(2)</enum><header>Form of joint
resolution</header>
<subparagraph id="H481437A7AA2641ACB78C58AD589439CB"><enum>(A)</enum><text>The matter after
the resolving clause in any joint resolution introduced pursuant to paragraph
(1) shall be as follows: <quote>That the Congress declares that the conditions
specified in section 711(a) of the Budget Control Act of 2008 are met, and the
implementation of the Congressional Budget and Impoundment Control Act of 1974,
chapter 11 of title 31, United States Code, and the Budget Control Act of 2008
is hereby suspended.</quote>.</text>
</subparagraph><subparagraph id="H7574A8D8FF3A4B45A7B6C8BED7AECDD4"><enum>(B)</enum><text>The title of the
joint resolution shall be <quote>A joint resolution suspending certain
provisions of law pursuant to section 711(a) of the Budget Control Act of
2008.</quote></text>
</subparagraph></paragraph><paragraph id="HA39951C2ACF245529465BC342DC84C2F"><enum>(3)</enum><header>Supermajority</header><text>A
joint resolution introduced pursuant to paragraph (1), an amendment thereto, or
a conference report thereon, shall only be passed if it receives not less than
three-fifths vote of approval of the total number of Members of the House of
Representatives and the Senate.</text>
</paragraph></subsection><subsection id="H083984DD34734187978116A48695CC70"><enum>(b)</enum><header>Suspension of
spending reduction procedures</header><text>Upon the enactment of a declaration
of war or a joint resolution described in subsection (a)—</text>
<paragraph id="H7CE11DA22D424AD18F87C1BB5D27781F"><enum>(1)</enum><text>the subsequent
issuance of any final spending reduction is precluded;</text>
</paragraph><paragraph id="H7A0A12350E8C47BAAE011246A36D0001"><enum>(2)</enum><text>titles III and IV
of the Congressional Budget Act of 1974 are suspended; and</text>
</paragraph><paragraph id="H0ADFD044BB104629831214F711158EA"><enum>(3)</enum><text>section 1103 of
title 31, United States Code, is suspended.</text>
</paragraph></subsection><subsection id="H9E1C9259BC1E428E93917580A68684E5"><enum>(c)</enum><header>Restoration of
spending control procedures</header>
<paragraph id="H2A07B3D92E0C48C48481CAE95224E3B2"><enum>(1)</enum><header>War</header><text>In
the event of a suspension of spending control procedures due to a declaration
of war, then, effective with the fifth fiscal year that begins in the session
after the state of war is concluded, the provisions of subsection (b) triggered
by that declaration of war are no longer effective.</text>
</paragraph><paragraph id="H14DBEE0BF54A4C1B8B7B7E5B9125DB"><enum>(2)</enum><header>Suspension</header><text>In
the event of a suspension of spending control procedures due to the enactment
of a joint resolution described in subsection (a), then, effective with regard
to the first fiscal year beginning at least 12 months after the enactment of
that resolution, the provisions of subsection (b) triggered by that resolution
are no longer effective.</text>
</paragraph></subsection></section><section id="H2B470CAFBEE2451F93A6D5A839B33DF3"><enum>708.</enum><header>Alternate
spending reduction legislation in the House of Representatives</header>
<subsection id="H5AD934838BCD40638735DA2E9039222F"><enum>(a)</enum><header>Introduction of
joint resolution</header><text>At any time after the Director of OMB issues a
final order for a fiscal year, but before the end of the session of Congress in
session on the date of the issuance of such order, the majority leader of the
House of Representatives may introduce a joint resolution which contains
provisions directing the President to modify the most recent final order issued
pursuant to this title, or provide an alternative to eliminate the spending
excess for such fiscal year or years. After the introduction of the first such
joint resolution in either House of Congress in any calendar year, then no
other joint resolution introduced pursuant to this section shall be subject to
the procedures set forth in this section.</text>
</subsection><subsection id="H736C053775E9447E93FF51D4576B11B3"><enum>(b)</enum><header>Procedures for
consideration of joint resolutions</header>
<paragraph id="H7292CEFB96BA438A9475D6CBC07FBD7"><enum>(1)</enum><text>Any committee of
the House of Representatives to which an alternative spending compliance
measure is referred shall report it to the House without amendment not later
than the seventh legislative day after the date of its introduction. If a
committee fails to report the bill within that period or the House has adopted
a concurrent resolution providing for adjournment sine die at the end of a
Congress, it shall be in order to move that the House discharge the committee
from further consideration of the bill. Such a motion shall be in order only at
a time designated by the Speaker in the legislative schedule within two
legislative days after the day on which the proponent announces his intention
to offer the motion. Such a motion shall not be in order after a committee has
reported a spending compliance measure with respect to that special message or
after the House has disposed of a motion to discharge with respect to that
special message. The previous question shall be considered as ordered on the
motion to its adoption without intervening motion except twenty minutes of
debate equally divided and controlled by the proponent and an opponent. If such
a motion is adopted, the House shall proceed immediately to consider the
spending compliance measure bill in accordance with paragraph (3). A motion to
reconsider the vote by which the motion is disposed of shall not be in
order.</text>
</paragraph><paragraph id="H7EE38B9D085D4D1A85964516693F6CA1"><enum>(2)</enum><text>After a spending
compliance measure is reported or a committee has been discharged from further
consideration, or the House has adopted a concurrent resolution providing for
adjournment sine die at the end of a Congress, it shall be in order to move to
proceed to consider the spending compliance measure in the House. Such a motion
shall be in order only at a time designated by the Speaker in the legislative
schedule within two legislative days after the day on which the proponent
announces his intention to offer the motion. Such a motion shall not be in
order after the House has disposed of a motion to proceed with respect to that
special message. The previous question shall be considered as ordered on the
motion to its adoption without intervening motion. A motion to reconsider the
vote by which the motion is disposed of shall not be in order.</text>
</paragraph><paragraph id="H3C0192960ED346E8A06D3F5480C2D1CC"><enum>(3)</enum><text>The spending
compliance measure shall be considered as read. All points of order against an
approval bill and against its consideration are waived. The previous question
shall be considered as ordered on an approval bill to its passage without
intervening motion except five hours of debate equally divided and controlled
by the proponent and an opponent and one motion to limit debate on the bill. A
motion to reconsider the vote on passage of the bill shall not be in
order.</text>
</paragraph><paragraph id="H6674CA7F7DCF4596B2FAF25B8019F41D"><enum>(4)</enum><text>A
spending compliance measure received from the Senate shall not be referred to
committee.</text>
</paragraph></subsection><subsection id="H0908F13E1AE747B383D099BFD02F0B9"><enum>(c)</enum><header>Voting</header><text>The
vote on final passage of a joint resolution or conference report thereon
referred to in paragraph (1) shall require approval of not less than
three-fifths of the Members of the House of Representatives.</text>
</subsection></section><section id="HF026811204C14A6194982569DFC0624E"><enum>709.</enum><header>Alternate
spending reduction legislation in the Senate</header>
<subsection id="H6997B2B028EF4E5285AE614BE93850E7"><enum>(a)</enum><header>Introduction of
joint resolution</header><text>At any time after OMB issues a final order for a
fiscal year, but before the end of the session of Congress in session on the
date of the issuance of such order, the majority leader of either House of
Congress may introduce a joint resolution which contains provisions directing
the President to modify the most recent final order provide an alternative to
eliminate the spending excess for such fiscal year or years. After the
introduction of the first such joint resolution in either House of Congress in
any calendar year, then no other joint resolution introduced in such House in
such calendar year shall be subject to the procedures set forth in this
section.</text>
</subsection><subsection id="H29E776DAEE964A269253ED5CFD2470CB"><enum>(b)</enum><header>Procedures for
consideration of joint resolutions</header>
<paragraph id="H22747132BDE34B1ABAF8D0C97DE92B19"><enum>(1)</enum><header>Referral to
committee</header><text>A joint resolution introduced in the Senate under
subsection (a) shall not be referred to a committee of the Senate and shall be
placed on the calendar pending disposition of such joint resolution in
accordance with this subsection.</text>
</paragraph><paragraph id="HDEBD73909FA845269BEF39FA310030A1"><enum>(2)</enum><header>Consideration in
the senate</header><text>On or after the third calendar day (excluding
Saturdays, Sundays, and legal holidays) beginning after a joint resolution is
introduced under subsection (a), notwithstanding any rule or precedent of the
Senate, including rule XXII of the Standing Rules of the Senate, it is in order
(even though a previous motion to the same effect has been disagreed to) for
any Member of the Senate to move to proceed to the consideration of the joint
resolution. The motion is not in order after the eighth calendar day (excluding
Saturdays, Sundays, and legal holidays) beginning after a joint resolution (to
which the motion applies) is introduced. The joint resolution is privileged in
the Senate. A motion to reconsider the vote by which the motion is agreed to or
disagreed to shall not be in order. If a motion to proceed to the consideration
of the joint resolution is agreed to, the Senate shall immediately proceed to
consideration of the joint resolution without intervening motion, order, or
other business, and the joint resolution shall remain the unfinished business
of the Senate until disposed of.</text>
</paragraph><paragraph id="H1A90494494C249EE876FC6BB5C937B80"><enum>(3)</enum><header>Debate in the
senate</header>
<subparagraph id="H03F97FCD86B34D36B9B7D093AD94F2DC"><enum>(A)</enum><text>In the Senate,
debate on a joint resolution introduced under subsection (a), amendments
thereto, and all debatable motions and appeals in connection therewith shall be
limited to not more than 10 hours, which shall be divided equally between the
majority leader and the minority leader (or their designees).</text>
</subparagraph><subparagraph id="H0E1317E9BE8847E580F238AE2B3C9528"><enum>(B)</enum><text>A motion to
postpone, or a motion to proceed to the consideration of other business is not
in order. A motion to reconsider the vote by which the joint resolution is
agreed to or disagreed to is not in order, and a motion to recommit the joint
resolution is not in order.</text>
</subparagraph><subparagraph id="HC366894E6D9940FC85E1BD50F524D4E2"><enum>(C)</enum><clause commented="no" display-inline="yes-display-inline" id="H20A7D319AD6C4721B124DE1EBE3DB648"><enum>(i)</enum><text>No amendment that is not
germane to the provisions of the joint resolution shall be in order in the
Senate. In the Senate, an amendment, any amendment to an amendment, or any
debatable motion or appeal is debatable for not to exceed 30 minutes to be
equally divided between, and controlled by, the mover and the majority leader
(or their designees), except that in the event that the majority leader favors
the amendment, motion, or appeal, the minority leader (or the minority leader’s
designee) shall control the time in opposition to the amendment, motion, or
appeal.</text>
</clause><clause id="H129A44AA5FD4492BA0C086765671BC16" indent="up1"><enum>(ii)</enum><text>In the Senate, an amendment that
is otherwise in order shall be in order notwithstanding the fact that it amends
the joint resolution in more than one place or amends language previously
amended. It shall not be in order in the Senate to vote on the question of
agreeing to such a joint resolution or any amendment thereto unless the figures
then contained in such joint resolution or amendment are mathematically
consistent.</text>
</clause></subparagraph></paragraph><paragraph id="H3D3B262BDAA14AA880A70629625F76E5"><enum>(4)</enum><header>Vote on final
passage</header><text>Immediately following the conclusion of the debate on a
joint resolution introduced under subsection (a), a single quorum call at the
conclusion of the debate if requested in accordance with the rules of the
Senate, and the disposition of any pending amendments under paragraph (3), the
vote on final passage of the joint resolution shall occur.</text>
</paragraph><paragraph id="H599843A38D2844E2ACD91D8CB58071FD"><enum>(5)</enum><header>Appeals</header><text>Appeals
from the decisions of the Chair shall be decided without debate.</text>
</paragraph><paragraph id="H7ADBA7C1C55E49D28EBF46546642F98B"><enum>(6)</enum><header>Conference
reports</header><text>In the Senate, points of order under titles III and IV of
the Congressional Budget Act of 1974 are applicable to a conference report on
the joint resolution or any amendments in disagreement thereto.</text>
</paragraph><paragraph id="H67F658430AC34B439CDC68F176D16BBF"><enum>(7)</enum><header>Resolution from
other house</header><text>If, before the passage by the Senate of a joint
resolution of the Senate introduced under subsection (a), the Senate receives
from the House of Representatives a joint resolution introduced under
subsection (a), then the following procedures shall apply:</text>
<subparagraph id="H25DFC53E2A6743D79FE40877D100F4DD"><enum>(A)</enum><text>The joint
resolution of the House of Representatives shall not be referred to a committee
and shall be placed on the calendar.</text>
</subparagraph><subparagraph id="HC4D4B84435CD4D8DB505FF51FC1CBB9F"><enum>(B)</enum><text>With respect to a
joint resolution introduced under subsection (a) in the Senate—</text>
<clause id="H0CB672AA29794AE49B09BEB89B85BB28"><enum>(i)</enum><text>the
procedure in the Senate shall be the same as if no joint resolution had been
received from the House; but</text>
</clause><clause id="HA112832087C14C34AEE3869DFEEF03E8"><enum>(ii)</enum><subclause commented="no" display-inline="yes-display-inline" id="H6CCE0EC0205543A39EB45BC75F6E5D96"><enum>(I)</enum><text>the vote on final
passage shall be on the joint resolution of the House if it is identical to the
joint resolution then pending for passage in the Senate; or</text>
</subclause><subclause id="HD07609662D73422BA63F78996F900040" indent="up1"><enum>(II)</enum><text>if the joint resolution from the House
is not identical to the joint resolution then pending for passage in the Senate
and the Senate then passes the Senate joint resolution, the Senate shall be
considered to have passed the House joint resolution as amended by the text of
the Senate joint resolution.</text>
</subclause></clause></subparagraph><subparagraph id="H0EDA099EF8ED478DB8D9BD8B71DF4E00"><enum>(C)</enum><text>Upon disposition
of the joint resolution received from the House, it shall no longer be in order
to consider the resolution originated in the Senate.</text>
</subparagraph></paragraph><paragraph id="H7B9631B7CF9041298B7CBCC5243DFD2B"><enum>(8)</enum><header>Senate action on
house resolution</header><text>If the Senate receives from the House of
Representatives a joint resolution introduced pursuant to this section after
the Senate has disposed of a Senate originated resolution which is identical to
the House passed joint resolution, the action of the Senate with regard to the
disposition of the Senate originated joint resolution shall be deemed to be the
action of the Senate with regard to the House originated joint resolution. If
it is not identical to the House passed joint resolution, then the Senate shall
be considered to have passed the joint resolution of the House as amended by
the text of the Senate joint resolution.</text>
</paragraph><paragraph id="H3F205FF59F914AF38C1510B6258509F4"><enum>(9)</enum><text>The vote on final
passage of a joint resolution or conference report thereon referred to in
paragraph (1) shall require approval of not less than three-fifths of the
Members of the Senate.</text>
</paragraph></subsection></section><section id="H19CD085102CF405694F912EF00982100"><enum>710.</enum><header>General
provisions</header>
<subsection id="HFA847EDB709843B390271FA88B881C3D"><enum>(a)</enum><header>Low growth
report</header><text>OMB and CBO shall notify the Congress if—</text>
<paragraph id="H6ECBBAFAE47A47489161DA00589DBA19"><enum>(1)</enum><text>during the period
consisting of the quarter during which such notification is given, the quarter
preceding such notification, and the 4 quarters following such notification,
OMB or CBO has determined that real economic growth is projected or estimated
to be less than zero with respect to each of any 2 consecutive quarters within
such period; or</text>
</paragraph><paragraph id="HAB275DD0419B433AB0B364E1D1FF004B"><enum>(2)</enum><text>the most recent of
the Department of Commerce’s advance preliminary or final reports of actual
real economic growth indicate that the rate of real economic growth for each of
the most recently reported quarter and the immediately preceding quarter is
less than one percent.</text>
</paragraph></subsection><subsection id="H5CA0F01A5BAD406989EBF97778DFDB1"><enum>(b)</enum><header>Economic and
technical assumptions</header><text>For all purposes of this title, OMB shall
use the same economic and technical assumptions as used in the most recent
budget submitted under section 1105(a) of title 31, United States Code.</text>
</subsection><subsection id="H83107AB593054D218D35A126FE491181"><enum>(c)</enum><header>Social security
trustee report</header><text>The Trustees of the Social Security Administration
shall annually issue a report consistent with section 708(c) and OMB shall
include such report in a final order and a preview order.</text>
</subsection><subsection id="HCEE92EFDC2AF4EFF9BB1D7C17FA89F8D"><enum>(d)</enum><header>Congressional
spending limit</header><paragraph commented="no" display-inline="yes-display-inline" id="H900B5C47418640729B33BB61B65070EB"><enum>(1)</enum><text display-inline="yes-display-inline">The Congressional Budget and Impoundment
Control Act of 1974 is amended by adding at the end of title III the following
new section:</text>
<quoted-block display-inline="no-display-inline" id="H942FE9941AD34300BBDDCFD1835D10E3" style="OLC">
<section id="H2527874512F44034B9B6926E7F5B1240"><enum>316</enum><header>Aggregate
spending limits</header><text display-inline="no-display-inline">It shall not
be in order in the House of Representatives or the Senate to consider any bill,
joint resolution, amendment, motion, or conference report that would cause an
excess spending amount, as defined in section 701(c)(16) of the Budget Control
Act of
2008.</text>
</section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H336F298DB354424A9DDB73B23C34EC64" indent="up1"><enum>(2)</enum><text display-inline="yes-display-inline">The table of contents set forth in section
1(b) of the Congressional Budget and Impoundment Control Act of 1974 is amended
by inserting after the item relating to section 315 the following new
item:</text>
<quoted-block display-inline="no-display-inline" id="H9BC70ABC69C44604AD284EC75FF533B2" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 316. Aggregate spending
limits.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H4D7E7D2FB51E4715BBC6D718214072EC"><enum>(e)</enum><header>Congressional
Revenue Limits</header><paragraph commented="no" display-inline="yes-display-inline" id="H1DE99A9FACA64649A676282F70F58E6C"><enum>(1)</enum><text>The Congressional Budget
Act of 1974 (as amended by subsection (d)) is further amended by adding at the
end of title III the following new section:</text>
<quoted-block display-inline="no-display-inline" id="HDC7E7742409F48F3884B84BEC5B4AEF" style="OLC">
<section id="HCB0A928360E942998300B14314142F5C"><enum>317.</enum><header>Tax Rate
Limits</header><text display-inline="no-display-inline">It shall not be in
order in the House of Representatives or the Senate to consider any bill, joint
resolution, amendment, motion, or conference report that would cause aggregate
Federal revenue levels, in any fiscal year, to exceed the percentage of revenue
relative to the Gross Domestic Product set forth in subsection (b) unless so
determined by a vote of not less than three-fifths of the Members voting, a
quorum being
present.</text>
</section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H748488EC39344FF48BEB32BB533275E9" indent="up1"><enum>(2)</enum><text display-inline="yes-display-inline">The table of contents set forth in section
1(b) of the Congressional Budget and Impoundment Control Act of 1974 is amended
by inserting after the item relating to section 316 the following new
item:</text>
<quoted-block display-inline="no-display-inline" id="HC23B127ACE7A4D34A9005CC60031FA68" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 317. Tax rate limits.
</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="HD5C994B02F18430B9CA6882E095DC390"><enum>(f)</enum><header>Fiscal years of
the guideline period</header><text display-inline="yes-display-inline">The
fiscal years within the 75-year period referred to as a guideline period in
this title shall be as follows:</text>
<paragraph id="H1EDABE6E09BD4D9F8F4B651FA5EC22C1"><enum>(1)</enum><text>Fiscal year 2010:
19.9 percent.</text>
</paragraph><paragraph id="H13C03A4C6B074C5EAE09B858EE85A06E"><enum>(2)</enum><text>Fiscal year 2011:
19.8 percent.</text>
</paragraph><paragraph id="HF239AEF8CABB4BAAB02208007F11D9CD"><enum>(3)</enum><text>Fiscal year 2012:
20.0 percent.</text>
</paragraph><paragraph id="H2D1F309948FF41998C0051F7B9CF96D3"><enum>(4)</enum><text>Fiscal year 2013:
20.1 percent.</text>
</paragraph><paragraph id="HBEA94BEFB5584CB2A10700F9CCE9FC08"><enum>(5)</enum><text>Fiscal year 2014:
20.2 percent.</text>
</paragraph><paragraph id="H13C48AF588D4472492294411F8D16425"><enum>(6)</enum><text>Fiscal year 2015:
20.1 percent.</text>
</paragraph><paragraph id="H9C9ED96229AC42498719ECCDD412003C"><enum>(7)</enum><text>Fiscal year 2016:
20.1 percent.</text>
</paragraph><paragraph id="H53ACEE9C1E6141B78CF74E6813FDE39D"><enum>(8)</enum><text>Fiscal year 2017:
20.2 percent.</text>
</paragraph><paragraph id="H57E86F85FC8540419458B915F42E082B"><enum>(9)</enum><text>Fiscal year 2018:
20.3 percent.</text>
</paragraph><paragraph id="HD54A03B64BDC4C88A2E48780005142F0"><enum>(10)</enum><text>Fiscal year 2019:
20.4 percent.</text>
</paragraph><paragraph id="HCD12FD34592247FA856B1FC5CFE17585"><enum>(11)</enum><text>Fiscal year 2020:
20.5 percent.</text>
</paragraph><paragraph id="H06342C6E39524E3A9CC9885BA03D51"><enum>(12)</enum><text>Fiscal year 2021:
20.7 percent.</text>
</paragraph><paragraph id="H11A1027CFABF4CCA8DAB3661554EF9E6"><enum>(13)</enum><text>Fiscal year 2022:
21.5 percent.</text>
</paragraph><paragraph id="H4354871F45A1469985B41C8B468CBFDD"><enum>(14)</enum><text>Fiscal year 2023:
21.7 percent.</text>
</paragraph><paragraph id="HFBDDBDAF3E2D40C8AE68256D6C5FC995"><enum>(15)</enum><text>Fiscal year 2024:
22.0 percent.</text>
</paragraph><paragraph id="HDCD1413825B842ABADD100A219E5BCED"><enum>(16)</enum><text>Fiscal year 2025:
22.3 percent.</text>
</paragraph><paragraph id="HA1767502FBED48CBB858C87C91D9DC50"><enum>(17)</enum><text>Fiscal year 2026:
22.5 percent.</text>
</paragraph><paragraph id="H049E92A6C76946B7A21CE98C6949B8FF"><enum>(18)</enum><text>Fiscal year 2027:
22.3 percent.</text>
</paragraph><paragraph id="H8AF2051DB2B8465A825EBE8C486DF81F"><enum>(19)</enum><text>Fiscal year 2028:
22.6 percent.</text>
</paragraph><paragraph id="HCBDFA27793044AF693B2D99F2F6F1176"><enum>(20)</enum><text>Fiscal year 2029:
22.9 percent.</text>
</paragraph><paragraph id="H8A9A70AC947D4F24A96805526FFEE2E3"><enum>(21)</enum><text>Fiscal year 2030:
23.1 percent.</text>
</paragraph><paragraph id="H1A0BB59533614F2D873903E9100918E6"><enum>(22)</enum><text>Fiscal year 2031:
23.2 percent.</text>
</paragraph><paragraph id="HCF277EA46DA544B89C61EEDEBA9C004C"><enum>(23)</enum><text>Fiscal year 2032:
23.9 percent.</text>
</paragraph><paragraph id="H02DD3337F7B64CD696C87252E1AFFD8C"><enum>(24)</enum><text>Fiscal year 2033:
23.9 percent.</text>
</paragraph><paragraph id="HAE1BA37298D045D68EAD3BDF9DE0DCCA"><enum>(25)</enum><text>Fiscal year 2034:
23.9 percent.</text>
</paragraph><paragraph id="H0C48117FBBA1481597C2F6B093824B01"><enum>(26)</enum><text>Fiscal year 2035:
23.9 percent.</text>
</paragraph><paragraph id="HBAAF52687EB849B49B19190000268F09"><enum>(27)</enum><text>Fiscal year 2036:
24.0 percent.</text>
</paragraph><paragraph id="H0EE3BC4EFA5044FBB2AB2D9C26B8F860"><enum>(28)</enum><text>Fiscal year 2037:
24.2 percent.</text>
</paragraph><paragraph id="HEA60FE27E6F1467192F49104938F0099"><enum>(29)</enum><text>Fiscal year 2038:
24.2 percent.</text>
</paragraph><paragraph id="HFC7064E5F95E491FBCC3CF2752C755D"><enum>(30)</enum><text>Fiscal year 2039:
24.3 percent.</text>
</paragraph><paragraph id="H19316DF75BF84BD3B4DFB3682303EC2F"><enum>(31)</enum><text>Fiscal year 2040:
24.1 percent.</text>
</paragraph><paragraph id="H8D0A4691957847E79F92369671354CEF"><enum>(32)</enum><text>Fiscal year 2041:
24.1 percent.</text>
</paragraph><paragraph id="H8E450871DAD94340831542EC088C1636"><enum>(33)</enum><text>Fiscal year 2042:
24.7 percent.</text>
</paragraph><paragraph id="H930193CD1F2941B387238845FB7E8B36"><enum>(34)</enum><text>Fiscal year 2043:
24.5 percent.</text>
</paragraph><paragraph id="H5302670486884270BEF14B769DF9E167"><enum>(35)</enum><text>Fiscal year 2044:
24.5 percent.</text>
</paragraph><paragraph id="HDCD0BFB7547B4E159E14EC49A02B328B"><enum>(36)</enum><text>Fiscal year 2045:
24.4 percent.</text>
</paragraph><paragraph id="HAE5B2367BF94418AA72800023D726BF7"><enum>(37)</enum><text>Fiscal year 2046:
24.3 percent.</text>
</paragraph><paragraph id="H2ED0713B492A49F29D34D2CBEB2B5442"><enum>(38)</enum><text>Fiscal year 2047:
24.2 percent.</text>
</paragraph><paragraph id="H80AEC7D279964DF0974FD3E004E4261"><enum>(39)</enum><text>Fiscal year 2048:
24.2 percent.</text>
</paragraph><paragraph id="H530E885F75A0420EAE2BDB9228AEAECE"><enum>(40)</enum><text>Fiscal year 2049:
24.0 percent.</text>
</paragraph><paragraph id="H1173ED5FF21C4624B8E0CA026450F471"><enum>(41)</enum><text>Fiscal year 2050:
24.0 percent.</text>
</paragraph><paragraph id="H6CC93ECCFFFB444DA48B9E6E00E8AAB"><enum>(42)</enum><text>Fiscal year 2051:
24.0 percent.</text>
</paragraph><paragraph id="H97C7167F71D34A00BECE8D22D076E493"><enum>(43)</enum><text>Fiscal year 2052:
23.8 percent.</text>
</paragraph><paragraph id="HE57B319ACD4343C8926145ED1F0408EB"><enum>(44)</enum><text>Fiscal year 2053:
23.6 percent.</text>
</paragraph><paragraph id="H8E04AEF6169547F2AEEB59B89123C0A7"><enum>(45)</enum><text>Fiscal year 2054:
23.4 percent.</text>
</paragraph><paragraph id="HBCA6D647C0FF495784A76848DE96612C"><enum>(46)</enum><text>Fiscal year 2055:
23.3 percent.</text>
</paragraph><paragraph id="H77C72C6C06AE42DAB889B1CA6E0284DF"><enum>(47)</enum><text>Fiscal year 2056:
23.2 percent.</text>
</paragraph><paragraph id="HF9E2B8AB37DB4E9198A66336373DD6D8"><enum>(48)</enum><text>Fiscal year 2057:
23.0 percent.</text>
</paragraph><paragraph id="HA408445E5FB34792AF792660DDE8AB31"><enum>(49)</enum><text>Fiscal year 2058:
22.9 percent.</text>
</paragraph><paragraph id="H56DAAD040EDD41DE9880EF59F932C910"><enum>(50)</enum><text>Fiscal year 2059:
22.7 percent.</text>
</paragraph><paragraph id="H0B860AC39B4E40D7964395787D27EBDF"><enum>(51)</enum><text>Fiscal year 2060:
22.7 percent.</text>
</paragraph><paragraph id="H9BA174D9002A4A0BBD615DE2D2196B10"><enum>(52)</enum><text>Fiscal year 2061:
22.4 percent.</text>
</paragraph><paragraph id="HC7F782A765094931B3404FD37F0440C8"><enum>(53)</enum><text>Fiscal year 2062:
22.2 percent.</text>
</paragraph><paragraph id="HB16D24D4B1074739A1B7637D7F7FF54"><enum>(54)</enum><text>Fiscal year 2063:
22.0 percent.</text>
</paragraph><paragraph id="HAA975304E596414AAF376DC084953B6"><enum>(55)</enum><text>Fiscal year 2064:
21.8 percent.</text>
</paragraph><paragraph id="H0F634DE42115407B9581C5EC925141E5"><enum>(56)</enum><text>Fiscal year 2065:
21.7 percent.</text>
</paragraph><paragraph id="H9E0196D373BC4102AAABC2AABB41614E"><enum>(57)</enum><text>Fiscal year 2066:
21.5 percent.</text>
</paragraph><paragraph id="H9CBEBA9FB76E4BD58D90527F3CED9835"><enum>(58)</enum><text>Fiscal year 2067:
21.2 percent.</text>
</paragraph><paragraph id="H2A06FC4DC0F2406F8323F900B4BF00BF"><enum>(59)</enum><text>Fiscal year 2068:
20.8 percent.</text>
</paragraph><paragraph id="H9311BE1981AD4145A13BCAEA56F47E54"><enum>(60)</enum><text>Fiscal year 2069:
20.5 percent.</text>
</paragraph><paragraph id="H81F71A0804B34BA18C4192023EE700C9"><enum>(61)</enum><text>Fiscal year 2070:
20.1 percent.</text>
</paragraph><paragraph id="H40344F1BD40F443DA420C7FBC984D1C"><enum>(62)</enum><text>Fiscal year 2071:
19.9 percent.</text>
</paragraph><paragraph id="H1A28C21AA03944E0B4FC006077956848"><enum>(63)</enum><text>Fiscal year 2072:
19.7 percent.</text>
</paragraph><paragraph id="H1878EE725E8043E3AE636ED6DB2C700"><enum>(64)</enum><text>Fiscal year 2073:
19.6 percent.</text>
</paragraph><paragraph id="HFF83CE8D36F34F3CA1D3E0B0B2CCB817"><enum>(65)</enum><text>Fiscal year 2074:
19.4 percent.</text>
</paragraph><paragraph id="HD3F1436E65FF486494340027C187DD4D"><enum>(66)</enum><text>Fiscal year 2075:
19.2 percent.</text>
</paragraph><paragraph id="H0D6AB528BB154A0B84C21529B1C04BDC"><enum>(67)</enum><text>Fiscal year 2076:
18.9 percent.</text>
</paragraph><paragraph id="H91025230E96E4753B943CC2681294D07"><enum>(68)</enum><text>Fiscal year 2077:
18.5 percent.</text>
</paragraph><paragraph id="HDCF556F6518E4E1E8D9D6EE684A8DDE4"><enum>(69)</enum><text>Fiscal year 2078:
18.0 percent.</text>
</paragraph><paragraph id="H05D2DD3E430E4098B06BC67525CD81AB"><enum>(70)</enum><text>Fiscal year 2079:
17.5 percent.</text>
</paragraph><paragraph id="H3D5F5FAA93FF477789CF3D9F2D1BA89C"><enum>(71)</enum><text>Fiscal year 2080:
17.3 percent.</text>
</paragraph><paragraph id="HA484FB45E08E40169F148D9C7F5534B6"><enum>(72)</enum><text>Fiscal year 2081:
16.9 percent.</text>
</paragraph><paragraph id="H565C73F8ADCE476984B8B728F1B800DD"><enum>(73)</enum><text>Fiscal year 2082:
16.5 percent.</text>
</paragraph><paragraph id="H26881B4121D04916A4AB0020011C1FE5"><enum>(74)</enum><text>Fiscal year 2083:
16.0 percent.</text>
</paragraph><paragraph id="H110C1E7B4A4A487789025600EA2D55BB"><enum>(75)</enum><text>Fiscal year 2084:
16.0 percent.</text>
</paragraph></subsection></section><section id="HD650FDE75E8443D3A27000AA13B562BA"><enum>711.</enum><header>Effective
date</header><text display-inline="no-display-inline">This title shall apply to
fiscal year 2010 and subsequent fiscal years.</text>
</section>