[House Document 104-160]
[From the U.S. Government Publishing Office]



                                     

        104th Congress, 2d Session - - - - - - - - House Document 104-
160, Pt. 2

 
          DEFICIT REDUCTION AND BALANCED BUDGET BY FISCAL YEAR 2002

                               ----------                              

                                MESSAGE

                                  from

                   THE PRESIDENT OF THE UNITED STATES

                              transmitting

 PROPOSED LEGISLATION FOR DEFICIT REDUCTION AND TO ACHIEVE A BALANCED 
                       BUDGET BY FISCAL YEAR 2002




January 9 (legislative day, January 5), 1996.--Message and accompanying 
    papers referred to the Union Calendar and ordered to be printed


        104th Congress, 2d Session - - - - - - - - House Document 104-
160, Pt. 2


                         DEFICIT REDUCTION AND

                  BALANCED BUDGET BY FISCAL YEAR 2002

                               __________

                                MESSAGE

                                  from

                   THE PRESIDENT OF THE UNITED STATES

                              transmitting

 PROPOSED LEGISLATION FOR DEFICIT REDUCTION AND TO ACHIEVE A BALANCED 
                       BUDGET BY FISCAL YEAR 2002




January 9 (legislative day, January 5), 1996.--Message and accompanying 
    papers referred to the Union Calendar and ordered to be printed
                  DEFICIT REDUCTION AND BALANCED BUDGET
To the Congress of the United States:
    I hereby submit to the Congress a plan to achieve a 
balanced budget not later than the fiscal year 2002 as 
certified by the Congressional Budget Office on January 6, 
1996. This plan has been prepared by Senator Daschle and if 
passed in its current form by the Congress, I would sign it 
into law.

                                                William J. Clinton.
    The White House, January 6, 1996.
 A BILL To provide for deficit reduction and achieve a balanced budget 
                          by fiscal year 2002

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Balanced Budget Act of 1995 
for Economic Growth and Fairness''.

SEC. 2. TABLE OF CONTENTS.

    This Act is organized into titles as follows:

Title I--Banking, Housing, and Related Provisions
Title II--Spectrum Allocation Provisions
Title III--Medicaid
Title IV--Medicare
Title V--Welfare Reform
Title VI--Federal Retirement Provisions
Title VII--Veterans Provisions
Title VIII--Asset Sales, User Fees, and other Mandatory Provisions
Title IX--Revenues
Title X--Budget Enforcement

           TITLE I--BANKING, HOUSING, AND RELATED PROVISIONS

                   Subtitle A--Financial Institutions

SEC. 2011. SPECIAL ASSESSMENT TO CAPITALIZE SAIF.

    (a) In General.--Except as provided in subsection (f), the 
Board of Directors shall impose a special assessment on the 
SAIF-assessable deposits of each insured depository at a rate 
applicable to all such institutions that the Board of 
Directors, in its `sole discretion, determines (after taking 
into account the adjustments described in subsections (g) 
through (j)) will cause the Savings Association Insurance Fund 
to achieve the designated reserve ratio on the first business 
day of January 1996.
    (b) Factors To Be Considered.--In carrying out subsection 
(a), the Board of Directors shall base its determination on--
          (1) the monthly Savings Association Insurance Fund 
        balance most recently calculated;
          (2) data on insured deposits reported in the most 
        recent reports of condition filed not later than 70 
        days before the date of enactment of this Act by 
        insured depository institutions; and
          (3) any other factors that the Board of Directors 
        deems appropriate.
    (c) Date of Determination.--For purposes of subsection (a), 
the amount of the SAIF-assessable deposits of an insured 
depository institution shall be determined as of March 31, 
1995.
    (d) Date Payment Due.--The special assessment imposed under 
this section shall be--
          (1) due on the first business day of January 1996; 
        and
          (2) paid to the Corporation on the later of--
                  (A) the first business day of January 1996; 
                or
                  (B) such other date as the Corporation shall 
                prescribe, but not later than 60 days after the 
                date of enactment of this Act.
    (e) Assessment Deposited in SAIF.--Notwithstanding any 
other provisions of law, the proceeds of the special assessment 
imposed under this section shall be deposited in the Savings 
Association Insurance Fund.
    (f) Exemptions for Certain Institutions.--
          (1) Exemption for weak institutions.--The Board of 
        Directors may, by order, in its sole discretion, exempt 
        any insured depository institution that the Board of 
        Directors determines to be weak, from paying the 
        special assessment imposed under this section if the 
        Board of Directors determines that the exemption would 
        reduce risk to the Savings Association Insurance Fund.
          (2) Guidelines required.--Not later than 30 days 
        after the date of enactment of this Act, the Board of 
        Directors shall prescribe guidelines setting forth the 
        criteria that the Board of Directors will use in 
        exempting institutions under paragraph (1). Such 
        guidelines shall be published in the Federal Register.
          (3) Exemption for certain newly chartered and other 
        defined institutions.--
                  (A) In general.--In addition to the 
                institutions exempted from paying the special 
                assessment under paragraph (1), the Board of 
                Directors shall exempt any insured depository 
                institution from payment of the special 
                assessment if the institution--
                          (i) was in existence on October 1, 
                        1995, and held no SAIF-assessable 
                        deposits prior to January 1, 1993;
                          (ii) is a Federal savings bank 
                        which--
                                  (I) was established de novo 
                                in April 1994 in order to 
                                acquire the deposits of a 
                                savings association which was 
                                in default or in danger of 
                                default; and
                                  (II) received minority 
                                interim capital assistance from 
                                the Resolution Trust 
                                Corporation under section 
                                21A(w) of the Federal Home Loan 
                                Bank Act in connection with the 
                                acquisition of any such savings 
                                association; or
                          (iii) is a savings association, the 
                        deposits of which are insured by the 
                        Savings Association Insurance Fund, 
                        which--
                                  (I) prior to January 1, 1987, 
                                was chartered as a Federal 
                                savings bank insured by the 
                                Federal Savings and Loan 
                                Insurance Corporation for the 
                                purpose of acquiring all or 
                                substantially all of the assets 
                                and assuming all or 
                                substantially all of the 
                                deposit liabilities of a 
                                national bank in a transaction 
                                consummated after July 1, 1986; 
                                and
                                  (II) as of the date of that 
                                transaction, had assets of less 
                                than $150,000,000.
                  (B) Definition.--For purposes of this 
                paragraph, an institution shall be deemed to 
                have held SAIF-assessable deposits prior to 
                January 1, 1993, if--
                          (i) it directly held SAIF-assessable 
                        insured deposits prior to that date; or
                          (ii) it succeeded to, acquired, 
                        purchased, or otherwise holds any SAIF-
                        assessable deposits as of the date of 
                        enactment of this Act that were SAIF-
                        assessable deposits prior to January 1, 
                        1993.
          (4) Exempt institutions required to pay assessments 
        at former rates.--
                  (A) Payments to saif and dif.--Any insured 
                depository institution that the Board of 
                Directors exempts under this subsection from 
                paying the special assessment imposed under 
                this section shall pay semiannual assessments--
                          (i) during calendar years 1996 and 
                        1997, into the Savings Association 
                        Insurance Fund, based on SAIF-
                        assessable deposits of that 
                        institution, at assessment rates 
                        calculated under the schedule in effect 
                        for Savings Association Insurance Fund 
                        members on June 30, 1995; and
                          (ii) during calendar years 1998 and 
                        1999--
                                  (I) into the Deposit 
                                Insurance Fund, based on SAIF-
                                assessable deposits of that 
                                institution as of December 31, 
                                1997, at assessment rates 
                                calculated under the schedule 
                                in effect for Savings 
                                Association Insurance Fund 
                                members on June 30, 1995; or
                                  (II) in accordance with 
                                clause (i), if the Bank 
                                Insurance Fund and the Savings 
                                Association Insurance Fund are 
                                not merged into the Deposit 
                                Insurance Fund.
                  (B) Optional pro rata payment of special 
                assessment.--This paragraph shall not apply 
                with respect to any insured depository 
                institution (or successor insured depository 
                institution) that has paid, during any calendar 
                year from 1997 through 1999, upon such terms as 
                the Corporation may announce, an amount equal 
                to the product of--
                          (i) 12.5 percent of the special 
                        assessment that the institution would 
                        have been required to pay under 
                        subsection (a), if the Board of 
                        Directors had not exempted the 
                        institution; and
                          (ii) the number of full semiannual 
                        periods remaining between the date of 
                        the payment and December 31, 1999.
    (g) Special Election for Certain Institutions Facing 
Hardship as a Result of the Special Assessment.--
          (1) Election authorized.--If--
                  (A) an insured depository institution, or any 
                depository institution holding company which, 
                directly or indirectly, controls such 
                institution, is subject to terms or covenants 
                in any debt obligation or preferred stock 
                outstanding on September 13, 1995; and
                  (B) the payment of the special assessment 
                under subsection (a) would pose a significant 
                risk of causing such depository institution or 
                holding company to default or violate any such 
                term or covenant,
        the depository institution may elect, with the approval 
        of the Corporation, to pay such special assessment in 
        accordance with paragraphs (2) and (3) in lieu of 
        paying such assessment in the manner required under 
        subsection (a).
          (2) 1st assessment.--An insured depository 
        institution which makes an election under paragraph (1) 
        shall pay an assessment of 50 percent of the amount of 
        the special assessment that would otherwise apply under 
        subsection (a), by the date on which such special 
        assessment is otherwise due under subsection (d).
          (3) 2d assessment.--An insured depository institution 
        which makes an election under paragraph (1) shall pay a 
        2d assessment, by the date established by the Board of 
        Directors in accordance with paragraph (4), in an 
        amount equal to the product of 51 percent of the rate 
        determined by the Board of Directors under subsection 
        (a) for determining the amount of the special 
        assessment and the SAIF-assessable deposits of the 
        institution on March 31, 1996, or such other date in 
        calendar year 1996 as the Board of Directors determines 
        to be appropriate.
          (4) Due date of 2d assessment.--The date established 
        by the Board of Directors for the payment of the 
        assessment under paragraph (3) by a depository 
        institution shall be the earliest practicable date 
        which the Board of Directors determines to be 
        appropriate, which is at least 15 days after the date 
        used by the Board of Directors under paragraph (3).
          (5) Supplemental special assessment.--An insured 
        depository institution which makes an election under 
        paragraph (1) shall pay a supplemental special 
        assessment, at the same time the payment under 
        paragraph (3) is made, in an amount equal to the 
        product of--
                  (A) 50 percent of the rate determined by the 
                Board of Directors under subsection (a) for 
                determining the amount of the special 
                assessment; and
                  (B) 95 percent of the amount by which the 
                SAIF-assessable deposits used by the Board of 
                Directors for determining the amount of the 1st 
                assessment under paragraph (2) exceeds, if any, 
                the SAIF-assessable deposits used by the Board 
                for determining the amount of the 2d assessment 
                under paragraph (3).
    (h) Adjustment of Special Assessment for Certain Bank 
Insurance Fund Member Banks.--
          (1) In general.--For purposes of computing the 
        special assessment imposed under this section with 
        respect to a Bank Insurance Fund member bank, the 
        amount of any deposits of any insured depository 
        institution which section 5(d)(3) of the Federal 
        Deposit Insurance Act treats as insured by the Savings 
        Association Insurance Fund shall be reduced by 20 
        percent--
                  (A) if the adjusted attributable deposit 
                amount of the Bank Insurance Fund member bank 
                is less than 50 percent of the total domestic 
                deposits of that member bank as of June 30, 
                1995; or
                  (B) if, as of June 30, 1995, the Bank 
                Insurance Fund member--
                          (i) had an adjusted attributable 
                        deposit amount equal to less than 75 
                        percent of the total assessable 
                        deposits of that member bank;
                          (ii) had total assessable deposits 
                        greater than $5,000,000,000; and
                          (iii) was owned or controlled by a 
                        bank holding company that owned or 
                        controlled insured depository 
                        institutions having an aggregate amount 
                        of deposits insured or treated as 
                        insured by the Bank Insurance Fund 
                        greater than the aggregate amount of 
                        deposits insured or treated as insured 
                        by the Savings Association Insurance 
                        Fund.
          (2) Adjusted attributable deposit amount.--For 
        purposes of this subsection, the ``adjusted 
        attributable deposit amount; shall be determined in 
        accordance with section 5(d)(3)(C) of the Federal 
        Deposit Insurance Act.
    (i) Adjustment to the Adjusted Attributable Deposit Amount 
for Certain Bank Insurance Fund Member Banks.--Section 5(d)(3) 
of the Federal Deposit Insurance Act (12 U.S.C. 1815(d)(3)) is 
amended--
          (1) in subparagraph (C), by striking ``The adjusted 
        attributable deposit amount'' and inserting ``Except as 
        provided in subparagraph (K), the adjusted attributable 
        deposit amount''; and
          (2) by adding at the end the following new 
        subparagraph:
                  ``(K) Adjustment of adjusted attributable 
                deposit amount.--The amount determined under 
                subparagraph (C)(i) for deposits acquired by 
                March 31, 1995, shall be reduced by 20 percent 
                for purposes of computing the adjusted 
                attributable deposit amount for the payment of 
                any assessment for any semiannual period after 
                December 31, 1995 (other than the special 
                assessment imposed under section 2011(a) of the 
                Balanced Budget Act of 1995), for a Bank 
                Insurance Fund member bank that, as of June 30, 
                1995--
                          ``(i) had an adjusted attributable 
                        deposit amount that was less than 50 
                        percent of the total deposits of that 
                        member bank; or
                          ``(ii)(I) had an adjusted 
                        attributable deposit amount equal to 
                        less than 75 percent of the total 
                        assessable deposits of that member 
                        bank;
                          ``(II) had total assessable deposits 
                        greater than $5,000,000,000; and
                          ``(III) was owned or controlled by a 
                        bank holding company that owned or 
                        controlled insured depository 
                        institutions having an aggregate amount 
                        of deposits insured or treated as 
                        insured by the Bank Insurance Fund 
                        greater than the aggregate amount of 
                        deposits insured or treated as insured 
                        by the Savings Association Insurance 
                        Fund.''.
    (j) Adjustment of Special Assessment for Certain Savings 
Associations.--
          (1) Special assessment reduction.--For purposes of 
        computing the special assessment imposed under this 
        section, in the case of any converted association, the 
        amount of any deposits of such association which were 
        insured by the Savings Association Insurance Fund as of 
        March 31, 1995, shall be reduced by 20 percent.
          (2) Converted association.--For purposes of this 
        subsection, the term ``converted association'' means--
                  (A) any Federal savings association--
                          (i) that is a member of the Savings 
                        Association Insurance Fund and that has 
                        deposits subject to assessment by that 
                        fund which did not exceed 
                        $4,000,000,000, as of March 31, 1995; 
                        and
                          (ii) that had been, or is a successor 
                        by merger, acquisition, or otherwise to 
                        an institution that had been, a State 
                        savings bank, the deposits of which 
                        were insured by the Federal Deposit 
                        Insurance Corporation prior to August 
                        9, 1989, that converted to a Federal 
                        savings association pursuant to section 
                        5(i) of the Home Owners Loan Act prior 
                        to January 1, 1985;
                  (B) a State depository institution that is a 
                member of the Savings Association Insurance 
                Fund that had been a State savings bank prior 
                to October 15, 1982, and was a Federal savings 
                association on August 9, 1989;
                  (C) an insured bank that--
                          (i) was established de novo in order 
                        to acquire the deposits of a savings 
                        association in default or in danger of 
                        default;
                          (ii) did not open for business before 
                        acquiring the deposits of such savings 
                        association; and
                          (iii) was a Savings Association 
                        Insurance Fund member as of the date of 
                        enactment of this Act; and
                  (D) an insured bank that--
                          (i) resulted from a savings 
                        association before December 19, 1991, 
                        in accordance with section 5(d)(2)(G) 
                        of the Federal Deposit Insurance Act; 
                        and
                          (ii) had an increase in its capital 
                        in conjunction with the conversion in 
                        an amount equal to more than 75 percent 
                        of the capital of the institution on 
                        the day before the date of the 
                        conversion.

SEC. 2012. FINANCING CORPORATION ASSESSMENTS SHARED PROPORTIONALLY BY 
                    ALL INSURED DEPOSITORY INSTITUTIONS.

    (a) In General.--Section 21 of the Federal Home Loan Bank 
Act (12 U.S.C. 1441) is amended--
          (1) in subsection (f)(2)--
                  (A) in the matter immediately preceding 
                subparagraph (A)--
                          (i) by striking ``Savings Association 
                        Insurance Fund member'' and inserting 
                        ``insured depository institution''; and
                          (ii) by striking ``members'' and 
                        inserting ``institutions''; and
                  (B) by striking ``, except that--'' and all 
                that follows through the end of the paragraph 
                and inserting ``, except that--
                  ``(A) the Financing Corporation shall have 
                first priority to make the assessment; and
                  ``(B) no limitation under clause (i) or (iii) 
                of section 7(b)(2)(A) of the Federal Deposit 
                Insurance Act shall apply for purposes of this 
                paragraph.''; and
          (2) in subsection (k)--
                  (A) by striking ``section--'' and inserting 
                ``section, the following definitions shall 
                apply:'';
                  (B) by striking paragraph (1);
                  (C) by redesignating paragraphs (2) and (3) 
                as paragraphs (1) and (2), respectively; and
                  (D) by adding at the end the following new 
                paragraph:
          ``(3) Insured depository institution.--The term 
        `insured depository institution' has the same meaning 
        as in section 3 of the Federal Deposit Insurance 
        Act.''.
    (b) Conforming Amendment.--Section 7(b)(2) of the Federal 
Deposit Insurance Act (12 U.S.C. 1817(b)(2)) is amended by 
striking subparagraph (D).
    (c) Effective Date.--This section and the amendments made 
by this section shall become effective on January 1, 1996.

SEC. 2013. MERGER OF BIF AND SAIF.

    (a) In General.--
          (1) Merger.--The Bank Insurance Fund and the Savings 
        Association Insurance Fund shall be merged into the 
        Deposit Insurance Fund established by section 11(a)(4) 
        of the Federal Deposit Insurance Act, as amended by 
        this section.
          (2) Disposition of assets and liabilities.--All 
        assets and liabilities of the Bank Insurance Fund and 
        the Savings Association Insurance Fund shall be 
        transferred to the Deposit Insurance Fund.
          (3) No separate existence.--The separate existence of 
        the Bank Insurance Fund and the Savings Association 
        Insurance Fund shall cease.
    (b) Special Reserve of the Deposit Insurance Fund.--
          (1) In general.--Immediately before the merger of the 
        Bank Insurance Fund and the Savings Association 
        Insurance Fund, if the reserve ratio of the Savings 
        Association Insurance Fund exceeds the designated 
        reserve ratio, the amount by which that reserve ratio 
        exceeds the designated reserve ratio shall be placed in 
        the Special Reserve of the Deposit Insurance Fund, 
        established under section 11(a)(5) of the Federal 
        Deposit Insurance Act, as amended by this section.
          (2) Definition.--For purposes of this subsection, the 
        term ``reserve ratio'' means the ratio of the net worth 
        of the Savings Association Insurance Fund to aggregate 
        estimated insured deposits held in all Savings 
        Association Insurance Fund members.
    (c) Effective Date.--This section and the amendments made 
by this section shall become effective on January 1, 1998, if 
no insured depository institution is a savings association on 
that date.
    (d) Technical and Conforming Amendments.--
          (1) Deposit insurance fund.--Section 11(a)(4) of the 
        Federal Deposit Insurance Act (12 U.S.C. 1821(a)(4)) is 
        amended--
                  (A) by redesignating subparagraph (B) as 
                subparagraph (C);
                  (B) by striking subparagraph (A) and 
                inserting the following:
                  ``(A) Establishment.--There is established 
                the Deposit Insurance Fund, which the 
                Corporation shall--
                          ``(i) maintain and administer;
                          ``(ii) use to carry out its insurance 
                        purposes in the manner provided by this 
                        subsection; and
                          ``(iii) invest in accordance with 
                        section 13(a).
                  ``(B) Uses.--The Deposit Insurance Fund shall 
                be available to the Corporation for use with 
                respect to Deposit Insurance Fund members.''; 
                and
                  (C) by striking ``(4) General provisions 
                relating to funds.--'' and inserting the 
                following:
          ``(4) Establishment of the deposit insurance fund.--
        ''.
          (2) Other references.--Section 11(a)(4)(C) of the 
        Federal Deposit Insurance Act (12 U.S.C. 1821(a)(4)(C), 
        as redesignated by paragraph (1) of this subsection) is 
        amended by striking ``Bank Insurance Fund and the 
        Savings Association Insurance Fund'' and inserting 
        ``Deposit Insurance Fund''.
          (3) Deposits into fund.--Section 11(a)(4) of the 
        Federal Deposit Insurance Act (12 U.S.C. 1821(a)(4)) is 
        amended by adding at the end the following new 
        subparagraph:
                  ``(D) Deposits.--All amounts assessed against 
                insured depository institutions by the 
                Corporation shall be deposited in the Deposit 
                Insurance Fund.''
          (4) Special reserve of deposits.--Section 11(a)(5) of 
        the Federal Deposit Insurance Act (12 U.S.C. 
        1821(a)(5)) is amended to read as follows:
          ``(5) Special reserve of deposit insurance fund.--
                  ``(A) Establishment.--
                          ``(i) In general.--There is 
                        established a Special Reserve of the 
                        Deposit Insurance Fund, which shall be 
                        administered by the Corporation and 
                        shall be invested in accordance with 
                        section 13(a).
                          ``(ii) Limitation.--The Corporation 
                        shall not provide any assessment 
                        credit, refund, or other payment from 
                        any amount in the Special Reserve.
                  ``(B) Emergency use of special reserve.--
                Notwithstanding subparagraph (A)(ii), the 
                Corporation may, in its sole discretion, 
                transfer amounts from the Special Reserve to 
                the Deposit Insurance Fund, for the purposes 
                set forth in paragraph (4), only if--
                          ``(i) the reserve ratio of the 
                        Deposit Insurance Fund is less than 50 
                        percent of the designated reserve 
                        ratio; and
                          ``(ii) the Corporation expects the 
                        reserve ratio of the Deposit Insurance 
                        Fund to remain at less than 50 percent 
                        of the designated reserve ratio for 
                        each of the next 4 calendar quarters.
                  ``(C) Exclusion of special reserve in 
                calculating reserve ratio.--Notwithstanding any 
                other provision of law, any amounts in the 
                Special Reserve shall be excluded in 
                calculating the reserve ratio of the Deposit 
                Insurance Fund under section 7.''.
          (5) Federal home loan bank act.--Section 
        21B(f)(2)(C)(ii) of the Federal Home Loan Bank Act (12 
        U.S.C. 1441b(f)(2)(C)(ii)) is amended--
                  (A) in subclause (I), by striking ``to 
                Savings Associations Insurance Fund members'' 
                and inserting ``to insured depository 
                institutions, and their successors, which were 
                Savings Association Insurance Fund members on 
                September 1, 1995''; and
                  (B) in subclause (II), by striking ``to 
                Savings Associations Insurance Fund members'' 
                and inserting ``to insured depository 
                institutions, and their successors, which were 
                Savings Association Insurance Fund members on 
                September 1, 1995''.
          (6) Repeals.--
                  (A) Section 3.--Section 3(y) of the Federal 
                Deposit Insurance Act (12 U.S.C. 1813(y)) is 
                amended to read as follows:
    ``(y) Definitions Relating to the Deposit Insurance Fund.--
The term--
          ``(1) Deposit insurance fund.--The term `Deposit 
        Insurance Fund' means the fund established under 
        section 11(a)(4).
          ``(2) Reserve ratio.--The term `reserve ratio' means 
        the ratio of the net worth of the Deposit Insurance 
        Fund to aggregate estimated insured deposits held in 
        all insured depository institutions.
          ``(3) Designated reserve ratio.--The designated 
        reserve ratio of the Deposit Insurance Fund for each 
        year shall be--
                  ``(A) 1.25 percent of estimated insured 
                deposits; or
                  ``(B) a higher percentage of estimated 
                insured deposits that the Board of Directors 
                determines to be justified for that year by 
                circumstances raising a significant risk of 
                substantial future losses to the fund.''.
                  (B) Section 7.--Section 7 of the Federal 
                Deposit Insurance Act (12 U.S.C. 1817) is 
                amended--
                          (i) by striking subsection (l);
                          (ii) by redesignating subsections (m) 
                        and (n) as subsections (l) and (m), 
                        respectively; and
                          (iii) in subsection (b)(2), by 
                        striking subparagraphs (B) and (F), and 
                        by redesignating subparagraphs (C), 
                        (E), (G), and (H) as subparagraphs (B) 
                        through (E), respectively.
                  (C) Section 11.--Section 11(a) of the Federal 
                Deposit Insurance Act (12 U.S.C. 1821(a)) is 
                amended--
                          (i) by striking paragraphs (6) and 
                        (7); and
                          (ii) by redesignating paragraph (8) 
                        as paragraph (6).
          (7) Section 5136 of the revised statutes.--Paragraph 
        Eleventh of section 5136 of the Revised Statutes (12 
        U.S.C. 24) is amended in the fifth sentence, by 
        striking ``affected deposit insurance fund'' and 
        inserting ``Deposit Insurance Fund''.
          (8) Investments promoting public welfare; limitations 
        on aggregate investments.--The 23d undesignated 
        paragraph of section 9 of the Federal Reserve Act (12 
        U.S.C. 338a) is amended in the fourth sentence, by 
        striking ``affected deposit insurance fund'' and 
        inserting ``Deposit Insurance Fund''.
          (9) Advances to critically undercapitalized 
        depository institutions.--Section 10B(b)(3)(A)(ii) of 
        the Federal Reserve Act (12 U.S.C. 347b(b)(3)(A)(ii)) 
        is amended by striking ``any deposit insurance fund 
        in'' and inserting ``the Deposit Insurance Fund of''.
          (10) Amendments to the balanced budget and emergency 
        deficit control act of 1985.--Section 255(g)(1)(A) of 
        the Balanced Budget and Emergency Deficit Control Act 
        of 1985 (2 U.S.C. 905(g)(1)(A)) is amended--
                  (A) by striking ``Bank Insurance Fund'' and 
                inserting ``Deposit Insurance Fund''; and
                  (B) by striking ``Federal Deposit Insurance 
                Corporation, Savings Association Insurance 
                Fund;''.
          (11) Further amendments to the federal home loan bank 
        act.--The Federal Home Loan Bank Act (12 U.S.C. 1421 et 
        seq.) is amended--
                  (A) in section 11(k) (12 U.S.C. 1431(k))--
                          (i) in the subsection heading, by 
                        striking, ``SAIF'' and inserting ``the 
                        Deposit Insurance Fund''; and
                          (ii) by striking ``Savings 
                        Association Insurance Fund'' each place 
                        such term appears and inserting 
                        ``Deposit Insurance Fund'';
                  (B) in section 21A(b)(4)(B) (12 U.S.C. 
                1441a(b)(4)(B)), by striking ``affected deposit 
                insurance fund'' and inserting ``Deposit 
                Insurance Fund'';
                  (C) in section 21A(b)(6)(B) (12 U.S.C. 
                1441a(b)(6)(B))--
                          (i) in the subparagraph heading, by 
                        striking ``SAIF-insured banks'' and 
                        inserting ``Charter conversions''; and
                          (ii) by striking ``Savings 
                        Association Insurance Fund member'' and 
                        inserting ``savings association'';
                  (D) in section 21A(b)(10)(A)(iv)(II) (12 
                U.S.C. 1441a(b)(10)(A)(iv)(II)), by striking 
                ``Savings Association Insurance Fund'' and 
                inserting ``Deposit Insurance Fund'';
                  (E) in section 21B(e) (12 U.S.C. 1441b(e))--
                          (i) in paragraph (5), by inserting 
                        ``as of the date of funding'' after 
                        ``Savings Association Insurance Fund 
                        members'' each place such term appears;
                          (ii) by striking paragraph (7); and
                          (iii) by redesignating paragraph (8) 
                        as paragraph (7); and
                  (F) in section 21B(k) (12 U.S.C. 1441b(k))--
                          (i) by striking paragraph (8); and
                          (ii) by redesignating paragraphs (9) 
                        and (10) as paragraphs (8) and (9), 
                        respectively.
          (12) Amendments to the home owners' loan act.--The 
        Home Owners' Loan Act (12 U.S.C. 1461 et seq.) is 
        amended--
                  (A) in section 5 (12 U.S.C. 1464)--
                          (i) in subsection (c)(5)(A), by 
                        striking ``that is a member of the Bank 
                        Insurance Fund'';
                          (ii) in subsection (c)(6), by 
                        striking ``As used in this subsection--
                        '' and inserting ``For purposes of this 
                        subsection, the following definitions 
                        shall apply:'';
                          (iii) in subsection (o)(1), by 
                        striking ``that is a Bank Insurance 
                        Fund member'';
                          (iv) in subsection (o)(2)(A), by 
                        striking ``a Bank Insurance Fund member 
                        until such time as it changes its 
                        status to a Savings Association 
                        Insurance Fund member'' and inserting 
                        ``insured by the Deposit Insurance 
                        Fund'';
                          (v) in subsection (t)(5)(D)(iii)(II), 
                        by striking ``affected deposit 
                        insurance fund'' and inserting 
                        ``Deposit Insurance Fund'';
                          (vi) in subsection (t)(7)(C)(i)(I), 
                        by striking ``affected deposit 
                        insurance fund'' and inserting 
                        ``Deposit Insurance Fund''; and
                          (vii) in subsection (v)(2)(A)(i), by 
                        striking ``, the Savings Association 
                        Insurance Fund'' and inserting ``or the 
                        Deposit Insurance Fund''; and
                  (B) in section 10 (12 U.S.C. 1467a)--
                          (i) in subsection 
                        (e)(1)(A)(iii)(VII), by adding ``or'' 
                        at the end;
                          (ii) in subsection (e)(1)(A)(iv), by 
                        adding ``and'' at the end;
                          (iii) in subsection (e)(1)(B), by 
                        striking ``Savings Association 
                        Insurance Fund or Bank Insurance Fund'' 
                        and inserting ``Deposit Insurance 
                        Fund'';
                          (iv) in subsection (e)(2), by 
                        striking ``Savings Association 
                        Insurance Fund or the Bank Insurance 
                        Fund'' and inserting ``Deposit 
                        Insurance Fund''; and
                          (v) in subsection (m)(3), by striking 
                        subparagraph (E), and by redesignating 
                        subparagraphs (F), (G), and (H) as 
                        subparagraphs (E), (F), and (G), 
                        respectively.
          (13) Amendments to the national housing act.--The 
        National Housing Act (12 U.S.C. 1701 et seq.) is 
        amended--
                  (A) in section 317(b)(1)(B) (12 U.S.C. 
                1723i(b)(1)(B)), by striking ``Bank Insurance 
                Fund for banks or through the Savings 
                Association Insurance Fund for savings 
                associations'' and inserting ``Deposit 
                Insurance Fund''; and
                  (B) in section 526(b)(1)(B)(ii) (12 U.S.C. 
                1735f-14(b)(1)(B)(ii)), by striking ``Bank 
                Insurance Fund for banks and through the 
                Savings Association Insurance Fund for savings 
                associations'' and inserting ``Deposit 
                Insurance Fund''.
          (14) Further amendments to the federal deposit 
        insurance act.--The Federal Deposit Insurance Act (12 
        U.S.C. 1811 et seq.) is amended--
                  (A) in section 3(a)(1) (12 U.S.C. 
                1813(a)(1)), by striking subparagraph (B) and 
                inserting the following:
                  ``(B) includes any former savings 
                association.'';
                  (B) in section 5(b)(5) (12 U.S.C. 
                1815(b)(5)), by striking ``the Bank Insurance 
                Fund or the Savings Association Insurance 
                Fund;'' and inserting ``Deposit Insurance 
                Fund,'';
                  (C) in section 5(d) (12 U.S.C. 1815(d)), by 
                striking paragraphs (2) and (3);
                  (D) in section 5(d)(1) (12 U.S.C. 
                1815(d)(1))--
                          (i) in subparagraph (A), by striking 
                        ``reserve ratios in the Bank Insurance 
                        Fund and the Savings Association 
                        Insurance Fund'' and inserting ``the 
                        reserve ratio of the Deposit Insurance 
                        Fund'';
                          (ii) by striking subparagraph (B) and 
                        inserting the following:
          ``(2) Fee credited to the deposit insurance fund.--
        The fee paid by the depository institution under 
        paragraph (1) shall be credited to the Deposit 
        Insurance Fund.'';
                          (iii) by striking ``(1) Uninsured 
                        institutions.--''; and
                          (iv) by redesignating subparagraphs 
                        (A) and (C) as paragraphs (1) and (3), 
                        respectively, and moving the margins 2 
                        ems to the left;
                  (E) in section 5(e) (12 U.S.C. 1815(e))--
                          (i) in paragraph (5)(A), by striking 
                        ``Bank Insurance Fund or the Savings 
                        Association Insurance Fund'' and 
                        inserting ``Deposit Insurance Fund'';
                          (ii) by striking paragraph (6); and
                          (iii) by redesignating paragraphs 
                        (7), (8), and (9) as paragraphs (6), 
                        (7), and (8), respectively;
                  (F) in section 6(5) (12 U.S.C. 1816(5)), by 
                striking ``Bank Insurance Fund or the Savings 
                Association Insurance Fund'' and inserting 
                ``Deposit Insurance Fund'';
                  (G) in section 7(b) (12 U.S.C. 1817(b))--
                          (i) in paragraph (1)(D), by striking 
                        ``each deposit insurance fund'' and 
                        inserting ``the Deposit Insurance 
                        Fund'';
                          (ii) in clauses (i)(I) and (iv) of 
                        paragraph (2)(A), by striking ``each 
                        deposit insurance fund'' each place 
                        such term appears and inserting ``the 
                        Deposit Insurance Fund'';
                          (iii) in paragraph (2)(A)(iii), by 
                        striking ``a deposit insurance fund'' 
                        and inserting ``the Deposit Insurance 
                        Fund'';
                          (iv) by striking clause (iv) of 
                        paragraph (2)(A);
                          (v) in paragraph (2)(C) (as 
                        redesignated by paragraph (6)(B) of 
                        this subsection)--
                                  (I) by striking ``any deposit 
                                insurance fund'' and inserting 
                                ``the Deposit Insurance Fund''; 
                                and
                                  (II) by striking ``that 
                                fund'' each place such term 
                                appears and inserting ``the 
                                Deposit Insurance Fund'';
                          (vi) in paragraph (2)(D) (as 
                        redesignated by paragraph (6)(B) of 
                        this subsection)--
                                  (I) in the subparagraph 
                                heading, by striking ``funds 
                                achieve'' and inserting ``fund 
                                achieves''; and
                                  (II) by striking ``a deposit 
                                insurance fund'' and inserting 
                                ``the Deposit Insurance Fund'';
                          (vii) in paragraph (3)--
                                  (I) in the paragraph heading, 
                                by striking ``funds'' and 
                                inserting ``fund'';
                                  (II) by striking ``that 
                                fund'' each place such term 
                                appears and inserting the ``the 
                                Deposit Insurance Fund'';
                                  (III) in subparagraph (A), by 
                                striking ``Except as provided 
                                in paragraph (2)(F), if'' and 
                                inserting ``If'';
                                  (IV) in subparagraph (A) by 
                                striking ``any deposit 
                                insurance fund'' and inserting 
                                ``the Deposit Insurance Fund''; 
                                and
                                  (V) by striking subparagraphs 
                                (C) and (D) and inserting the 
                                following:
                  ``(C) Amending schedule.--The Corporation 
                may, by regulation, amend a schedule 
                promulgated under subparagraph (B).''; and
                          (viii) in paragraph (6)--
                                  (I) by striking ``any such 
                                assessment'' and inserting 
                                ``any such assessment is 
                                necessary'';
                                  (II) by striking ``(A) is 
                                necessary--'';
                                  (III) by striking 
                                subparagraph (B);
                                  (IV) by redesignating clauses 
                                (i), (ii), and (iii) as 
                                subparagraphs (A), (B), and 
                                (C), respectively, and moving 
                                the margin 2 ems to the left; 
                                and
                                  (V) in subparagraph (C) (as 
                                redesignated), by striking ``; 
                                and'' and inserting a period;
                  (H) in section 11(f)(1) (12 U.S.C. 
                1821(f)(1)), by striking ``, except that--'' 
                and all that follows through the end of the 
                paragraph and inserting a period;
                  (I) in section 11(i)(3) (12 U.S.C. 
                1821(i)(3))--
                          (i) by striking subparagraph (B);
                          (ii) by redesignating subparagraph 
                        (C) as subparagraph (B); and
                          (iii) in subparagraph (B) (as 
                        redesignated), by striking 
                        ``subparagraphs (A) and (B)'' and 
                        inserting ``subparagraph (A)'';
                  (J) in section 11A(a) (12 U.S.C. 1821a(a))--
                          (i) in paragraph (2), by striking 
                        ``liabilities.--'' and all that follows 
                        through ``Except'' and inserting 
                        ``liabilities.--Except'';
                          (ii) by striking paragraph (2)(B); 
                        and
                          (iii) in paragraph (3), by striking 
                        ``the Bank Insurance Fund, the Savings 
                        Association Insurance Fund,'' and 
                        inserting ``the Deposit Insurance 
                        Fund,'';
                  (K) in section 11A(b) (12 U.S.C. 1821a(b)), 
                by striking paragraph (4);
                  (L) in section 11a(f) (12 U.S.C. 1821a(f)), 
                by striking ``Savings Association Insurance 
                Fund'' and inserting ``Deposit Insurance 
                Fund'';
                  (M) in section 13 (12 U.S.C. 1823)--
                          (i) in subsection (a)(1), by striking 
                        ``Bank Insurance Fund, the Savings 
                        Association Insurance Fund,'' and 
                        inserting ``Deposit Insurance Fund, the 
                        Special Reserve of the Deposit 
                        Insurance Fund,'';
                          (ii) in subsection (c)(4)(E)--
                                  (I) in the subparagraph 
                                heading, by striking ``funds'' 
                                and inserting ``fund''; and
                                  (II) in clause (i), by 
                                striking ``any insurance fund'' 
                                and inserting ``the Deposit 
                                Insurance Fund'';
                          (iii) in subsection (c)(4)(G)(ii)--
                                  (I) by striking ``appropriate 
                                insurance fund'' and inserting 
                                ``Deposit Insurance Fund'';
                                  (II) by striking ``the 
                                members of the insurance fund 
                                (of which such institution is a 
                                member)'' and inserting 
                                ``insured depository 
                                institutions'';
                                  (III) by striking ``each 
                                member's'' and inserting ``each 
                                insured depository 
                                institution's''; and
                                  (IV) by striking ``the 
                                member's'' each place such term 
                                appears and inserting ``the 
                                institution's'';
                          (iv) in subsection (c), by striking 
                        paragraph (11);
                          (v) in subsection (h), by striking 
                        ``Bank Insurance Fund'' and inserting 
                        ``Deposit Insurance Fund'';
                          (vi) in subsection (K)(4)(B)(i), by 
                        striking ``Savings Association 
                        Insurance Fund'' and inserting 
                        ``Deposit Insurance Fund''; and
                          (vii) in subsection (k)(5)(A), by 
                        striking ``Savings Association 
                        Insurance Fund'' and inserting 
                        ``Deposit Insurance Fund'';
                  (N) in section 14(a) (12 U.S.C. 1824(a)) in 
                the fifth sentence--
                          (i) by striking ``Bank Insurance Fund 
                        or the Savings Association Insurance 
                        Fund'' and inserting ``Deposit 
                        Insurance Fund''; and
                          (ii) by striking ``each such fund'' 
                        and inserting ``the Deposit Insurance 
                        Fund'';
                  (O) in section 14(b) (12 U.S.C. 1824(b)), by 
                striking ``Bank Insurance Fund or Savings 
                Association Insurance Fund'' and inserting 
                ``Deposit Insurance Fund'';
                  (P) in section 14(c) (12 U.S.C. 1824(c)), by 
                striking paragraph (3);
                  (Q) in section 14(d) (12 U.S.C. 1824(d))--
                          (i) by striking ``BIF'' each place 
                        such term appears and inserting 
                        ``DIF''; and
                          (ii) by striking ``Bank Insurance 
                        Fund'' each place such term appears and 
                        inserting ``Deposit Insurance Fund'';
                  (R) in section 15(c)(5) (12 U.S.C. 
                1825(c)(5))--
                          (i) by striking ``the Bank Insurance 
                        Fund or Savings Association Insurance 
                        Fund, respectively'' each place such 
                        term appears and inserting ``the 
                        Deposit Insurance Fund''; and
                          (ii) in subparagraph (B), by striking 
                        ``the Bank Insurance Fund or the 
                        Savings Association Insurance Fund, 
                        respectively'' and inserting ``the 
                        Deposit Insurance Fund'';
                  (S) in section 17(a) (12 U.S.C. 1827(a))--
                          (i) in the subsection heading, by 
                        striking ``BIF, SAIF,'' and inserting 
                        ``the Deposit Insurance Fund''; and
                          (ii) in paragraph (1), by striking 
                        ``the Bank Insurance Fund, the Savings 
                        Association Insurance Fund'' each place 
                        such term appears and inserting ``the 
                        Deposit Insurance Fund'';
                  (T) in section 17(d) (12 U.S.C. 1827(d)), by 
                striking ``the Bank Insurance Fund, the Savings 
                Association Insurance Fund,'' each place such 
                term appears and inserting ``the Deposit 
                Insurance Fund'';
                  (U) in section 18(m)(3) (12 U.S.C. 
                1828(m)(3))--
                          (i) by striking ``Savings Association 
                        Insurance Fund'' each place such term 
                        appears and inserting ``Deposit 
                        Insurance Fund''; and
                          (ii) in subparagraph (C), by striking 
                        ``or the Bank Insurance Fund'';
                  (V) in section 18(p) (12 U.S.C. 1828(p)), by 
                striking ``deposit insurance funds'' and 
                inserting ``Deposit Insurance Fund'';
                  (W) in section 24 (12 U.S.C. 1831a) in 
                subsections (a)(1) and (d)(1)(A), by striking 
                ``appropriate deposit insurance fund'' each 
                place such term appears and inserting ``Deposit 
                Insurance Fund'';
                  (X) in section 28 (12 U.S.C. 1831e), by 
                striking ``affected deposit insurance fund'' 
                each place such term appears and inserting 
                ``Deposit Insurance Fund'';
                  (Y) by striking section 31 (12 U.S.C. 1831h);
                  (Z) in section 36(i)(3) (12 U.S.C. 
                1831m(i)(3)) by striking ``affected deposit 
                insurance fund'' and inserting ``Deposit 
                Insurance Fund'';
                  (AA) in section 38(a) (12 U.S.C. 1831o(a)) in 
                the subsection heading, by striking ``Funds'' 
                and inserting ``Fund'';
                  (BB) in section 38(k) (12 U.S.C. 1831o(k))--
                          (i) in paragraph (1), by striking ``a 
                        deposit insurance fund'' and inserting 
                        ``the Deposit Insurance Fund''; and
                          (ii) in paragraph (2)(A)--
                                  (I) by striking ``A deposit 
                                insurance fund'' and inserting 
                                ``The Deposit Insurance Fund''; 
                                and
                                  (II) by striking ``the 
                                deposit insurance fund's 
                                outlays'' and inserting ``the 
                                outlays of the Deposit 
                                Insurance Fund''; and
                  (CC) in section 38(o) (12 U.S.C. 1831o(o))--
                          (i) by striking ``Associations.--'' 
                        and all that follows through 
                        ``Subsections (e)(2)'' and inserting 
                        ``Associations.--Subsections (e)(2)'';
                          (ii) by redesignating subparagraphs 
                        (A), (B), and (C) as paragraphs (1), 
                        (2), and (3), respectively, and moving 
                        the margins 2 ems to the left; and
                          (iii) in paragraph (1) (as 
                        redesignated), by redesignating clauses 
                        (i) and (ii) as subparagraphs (A) and 
                        (B), respectively, and moving the 
                        margins 2 ems to the left.
          (15) Amendments to the financial institutions reform, 
        recovery, and enforcement act of 1989.--The Financial 
        Institutions Reform, Recovery, and Enforcement Act 
        (Public Law 101-73; 103 Stat. 183) is amended--
                  (A) in section 951(b)(3)(B) (12 U.S.C. 
                1833a(b)(3)(B)), by striking ``Bank Insurance 
                Fund, the Savings Association Insurance Fund,'' 
                and inserting ``Deposit Insurance Fund''; and
                  (B) in section 1112(c)(1)(B) (12 U.S.C. 
                3341(c)(1)(B)), by striking ``Bank Insurance 
                Fund, the Savings Association Insurance Fund,'' 
                and inserting ``Deposit Insurance Fund''.
          (16) Amendment to the bank enterprise act of 1991.--
        Section 232(a)(1) of the Bank Enterprise Act of 1991 
        (12 U.S.C. 1834(a)(1)) is amended by striking ``section 
        7(b)(2)(H)'' and inserting ``section 7(b)(2)(G)''.
          (17) Amendment to the bank holding company act.--
        Section 2(j)(2) of the Bank Holding Company Act of 1956 
        (12 U.S.C. 1841(j)(2)) is amended by striking ``Savings 
        Association Insurance Fund'' and inserting ``Deposit 
        Insurance Fund''.

SEC. 2014. CREATION OF SAIF SPECIAL RESERVE.

    Section 11(a)(6) of the Federal Deposit Insurance Act (12 
U.S.C. 1821(a)(6)) is amended by adding at the end the 
following new subparagraph:
                  ``(L) Establishment of saif special 
                reserve.--
                          ``(i) Establishment.--If, on January 
                        1, 1998, the reserve ratio of the 
                        Savings Association Insurance Fund 
                        exceeds the designated reserve ratio, 
                        there is established a Special Reserve 
                        of the Savings Association Insurance 
                        Fund, which shall be administered by 
                        the Corporation and shall be invested 
                        in accordance with section 13(a).
                          ``(ii) Amounts in special reserve.--
                        If, on January 1, 1998, the reserve 
                        ratio of the Savings Association 
                        Insurance Fund exceeds the designated 
                        reserve ratio, the amount by which the 
                        reserve ratio exceeds the designated 
                        reserve ratio shall be placed in the 
                        Special Reserve of the Savings 
                        Association Insurance Fund established 
                        by clause (i).
                          ``(iii) Limitation.--The Corporation 
                        shall not provide any assessment 
                        credit, refund, or other payment from 
                        any amount in the Special Reserve of 
                        the Savings Association Insurance Fund.
                          ``(iv) Emergency use of special 
                        reserve.--Notwithstanding clause (iii), 
                        the Corporation may, in its sole 
                        discretion, transfer amounts from the 
                        Special Reserve of the Savings 
                        Association Insurance Fund to the 
                        Savings Association Insurance Fund for 
                        the purposes set forth in paragraph 
                        (4), only if--
                                  ``(I) the reserve ratio of 
                                the Savings Association 
                                Insurance Fund is less than 50 
                                percent of the designated 
                                reserve ratio; and
                                  ``(II) the Corporation 
                                expects the reserve ratio of 
                                the Savings Association 
                                Insurance Fund to remain at 
                                less than 50 percent of the 
                                designated reserve ratio for 
                                each of the next 4 calendar 
                                quarters.
                          ``(v) Exclusion of special reserve in 
                        calculating reserve ratio.--
                        Notwithstanding any other provision of 
                        law, any amounts in the Special Reserve 
                        of the Savings Association Insurance 
                        Fund shall be excluded in calculating 
                        the reserve ratio of the Savings 
                        Association Insurance Fund.''.

SEC. 2015. REFUND OF AMOUNTS IN DEPOSIT INSURANCE FUND IN EXCESS OF 
                    DESIGNATED RESERVE AMOUNT.

    Subsection (e) of section 7 of the Federal Deposit 
Insurance Act (12 U.S.C. 1817(e)) is amended to read as 
follows:
      ``(e) Refunds.--
          ``(1) Overpayments.--In the case of any payment of an 
        assessment by an insured depository institution in 
        excess of the amount due to the Corporation, the 
        Corporation may--
                  ``(A) refund the amount of the excess payment 
                to the insured depository institution; or
                  ``(B) credit such excess amount toward the 
                payment of subsequent semiannual assessments 
                until such credit is exhausted.
          ``(2) Balance in insurance fund in excess of 
        designated reserve.--
                  ``(A) In general.--Subject to subparagraphs 
                (B) and (C), if, as of the end of any 
                semiannual assessment period, the amount of the 
                actual reserves in--
                          ``(i) the Bank Insurance Fund (until 
                        the merger of such fund into the 
                        Deposit Insurance Fund pursuant to 
                        section 2013 of the Balanced Budget Act 
                        of 1995); or
                          ``(ii) the Deposit Insurance Fund 
                        (after the establishment of such fund),
                exceeds the balance required to meet the 
                designated reserve ratio applicable with 
                respect to such fund, such excess amount shall 
                be refunded to insured depository institutions 
                by the Corporation on such basis as the Board 
                of Directors determines to be appropriate, 
                taking into account the factors considered 
                under the risk-based assessment system.
                  ``(B) Refund not to exceed previous 
                semiannual assessment.--The amount of any 
                refund under this paragraph to any member of a 
                deposit insurance fund for any semiannual 
                assessment period may not exceed the total 
                amount of assessments paid by such member to 
                the insurance fund with respect to such period.
                  ``(C) Refund limitation for certain 
                institutions.--No refund may be made under this 
                paragraph with respect to the amount of any 
                assessment paid for any semiannual assessment 
                period by any insured depository institutions 
                described in clause (v) of subsection 
                (b)(2)(A).''.

SEC. 2016. ASSESSMENT RATES FOR SAIF MEMBERS MAY NOT BE LESS THAN 
                    ASSESSMENT RATES FOR BIF MEMBERS.

    Section 7(b)(2)(C) of the Federal Deposit Insurance Act (12 
U.S.C. 1817)(2)(E), as redesignated by section 2013(d)(6) of 
this Act) is amended--
          (1) by striking ``and'' at the end of clause (i);
          (2) by striking the period at the end of clause (ii) 
        and inserting ``; and''; and
          (3) by adding at the end of the following new clause:
                          ``(iii) notwithstanding any other 
                        provision of this subsection, during 
                        the period beginning on the date of 
                        enactment of the Balanced Budget Act of 
                        1995, and ending on January 1, 1998, 
                        the assessment rate for a Savings 
                        Association Insurance Fund member may 
                        not be less than the assessment rate 
                        for a Bank Insurance Fund member that 
                        poses a comparable risk to the deposit 
                        insurance fund.''.

SEC. 2017. ASSESSMENTS AUTHORIZED ONLY IF NEEDED TO MAINTAIN THE 
                    RESERVE RATIO OF A DEPOSIT INSURANCE FUND.

    (a) In General.--Section 7(b)(2)(A)(i) of the Federal 
Deposit Insurance Act (12 U.S.C. 1817(b)(2)(A)(i)) is amended 
in the matter preceding subclause (I) by inserting ``when 
necessary, and only to the extent necessary'' after ``insured 
depository institutions''.
    (b) Limitation on Assessment.--Section 7(b)(2)(A)(iii) of 
the Federal Deposit Insurance Act (12 U.S.C. 
1817(b)(2)(A)(iii)) is amended to read as follows:
                          ``(iii) Limitation on assessment.--
                        Except as provided in clause (v), the 
                        Board of Directors shall not set 
                        semiannual assessments with respect to 
                        a deposit insurance fund in excess of 
                        the amount needed--
                                  ``(I) to maintain the reserve 
                                ratio of the fund at the 
                                designated reserve ratio; or
                                  ``(II) if the reserve ratio 
                                is less than the designated 
                                reserve ratio, to increase the 
                                reserve ratio to the designated 
                                reserve ratio.''.
    (c) Exception to Limitation on Assessments.--Section 
7(b)(2)(A) of the Federal Deposit Insurance Act (12 U.S.C. 
1817(b)(2)(A)) is amended by adding at the end of the following 
new clause:
                          ``(v) Exception to limitation on 
                        assessments.--The Board of Directors 
                        may set semiannual assessments in 
                        excess of the amount permitted under 
                        clauses (i) and (iii) with respect to 
                        insured depository institutions that 
                        exhibit financial, operational, or 
                        compliance weaknesses ranging from 
                        moderately severe to unsatisfactory, or 
                        are not well capitalized, as that term 
                        is defined in section 38.''.

SEC. 2018. LIMITATION ON AUTHORITY OF OVERSIGHT BOARD TO CONTINUE TO 
                    EMPLOY MORE THAN 18 OFFICERS AND EMPLOYEES.

    (a) In General.--Section 21A(a) of the Federal Home Loan 
Bank Act (12 U.S.C. 1441a(a)) is amended by adding at the end 
the following new paragraph:
          ``(17) Phased-down operation of oversight board 
        following termination of corporation.--
                  ``(A) Termination of authority to employ 
                staff.--Except as provided in subparagraph (B), 
                the authority of the Thrift Depositor 
                Protection Oversight Board under paragraph (5) 
                to establish officer and employee positions, to 
                compensate officers and employees of the Board, 
                and to provide other benefits for officers and 
                employees of the Board shall terminate as of 
                December 31, 1995.
                  ``(B) Limited authority for employing 
                staff.--The Thrift Depositor Protection 
                Oversight Board may employ not more than 18 
                individuals, excluding any employee of any 
                other department or agency utilized by the 
                Board, to carry out the functions of the Board 
                during the period beginning on January 1, 1996 
                and ending on May 1, 1996, other than employees 
                whose employment is in the process of being 
                terminated in accordance with subparagraph (C).
                  ``(C) Termination of employment of additional 
                employees required to be commenced.--The Thrift 
                Depositor Protection Oversight Board shall 
                commence terminating, not later than December 
                31, 1995, and in accordance with title 5, 
                United States Code, and applicable regulations 
                of the Office of Personnel Management, the 
                employment of any employee of the Board whose 
                continued employment by the Board after such 
                date is inconsistent with the requirement of 
                subparagraph (B).''.
    (b) Technical and Conforming Amendments.--Section 21A(a)(5) 
of the Federal Home Loan Bank Act (12 U.S.C. 1441a(a)(5)) is 
amended in subparagraphs (B), (C), (D), and (E), by inserting 
``subject to paragraph (17)'', after the closing parenthesis of 
the subparagraph designation in each such subparagraph.

SEC. 2019. DEFINITIONS.

    For purposes of this subtitle--
          (1) the term ``Bank Insurance Fund'' means the fund 
        established pursuant to section (11)(a)(5)(A) of the 
        Federal Deposit Insurance Act, as that section existed 
        on the day before the date of enactment of this Act;
          (2) the terms ``Bank Insurance Fund member'' and 
        ``Savings Association Insurance Fund member'' have the 
        same meanings as in section 7(l) of the Federal Deposit 
        Insurance Act;
          (3) the terms ``bank'', ``Board of Directors'', 
        ``Corporation'', ``insured depository institution'', 
        ``Federal savings association'', ``savings 
        association'', ``State savings bank'', and ``State 
        depository institution'' have the same meanings as in 
        section 3 of the Federal Deposit Insurance Act;
          (4) the term ``Deposit Insurance Fund'' means the 
        fund established under section 11(a)(4) of the Federal 
        Deposit Insurance Act, as amended by section 2013(d) of 
        this Act;
          (5) the term ``depository institution holding 
        company'' has the same meaning as in section 3 of the 
        Federal Deposit Insurance Act;
          (6) the term ``designated reserve ratio'' has the 
        same meaning as in section 7(b)(2)(A)(iv) of the 
        Federal Deposit Insurance Act;
          (7) the term ``Savings Association Insurance Fund'' 
        means the fund established pursuant to section 
        11(a)(6)(A) of the Federal Deposit Insurance Act, as 
        that section existed on the day before the date of 
        enactment of this Act; and
          (8) the term ``SAIF-assessable deposit'' means--
                  (A) a deposit that is subject to assessment 
                for purposes of the Savings Association 
                Insurance Fund under the Federal Deposit 
                Insurance Act; and
                  (B) a deposit that section 5(d)(3) of the 
                Federal Deposit Insurance Act treats as insured 
                by the Savings Association Insurance Fund.

                          Subtitle B--Housing

SEC. 2051. ANNUAL ADJUSTMENT FACTORS FOR OPERATING COSTS ONLY; 
                    RESTRAINT ON RENT INCREASES.

    (a) Annual Adjustment Factors for Operating Costs Only.--
Section 8(c)(2)(A) of the United States Housing Act of 1937 (42 
U.S.C. 1437f(c)(2)(A)) is amended--
          (1) by striking ``(2)(A)'' and inserting 
        ``(2)(A)(i)'';
          (2) by striking the second sentence and all that 
        follows through the end of the subparagraph; and
          (3) by adding at the end of the following new clause:
    ``(ii) Each assistance contract under this section shall 
provide that--
          ``(I) if the maximum monthly rent for a unit in a new 
        construction or substantial rehabilitation project to 
        be adjusted using an annual adjustment factor exceeds 
        100 percent of the fair market rent for an existing 
        dwelling unit in the market area, the Secretary shall 
        adjust the rent using an operating costs factor that 
        increases the rent to reflect increases in operating 
        costs in the market area; and
          ``(II) if the owner of a unit in a project described 
        in subclause (I) demonstrates that the adjusted rent 
        determined under subclause (I) would not exceed the 
        rent for an unassisted unit of similar quality, type, 
        and age in the same market area, as determined by the 
        Secretary, the Secretary shall use the otherwise 
        applicable annual adjustment factor.''.
    (b) Restraint on Section 8 Rent Increases.--Section 
8(c)(2)(A) of the United States Housing Act of 1937 (42 U.S.C. 
1437f(c)(2)(A)), as amended by subsection (a), is amended by 
adding at the end the following new clause:
    ``(iii)(I) Subject to subclause (II), with respect to any 
unit assisted under this section that it occupied by the same 
family at the time of the most recent annual rental adjustment, 
if the assistance contract provides for the adjustment of the 
maximum monthly rent by applying an annual adjustment factor, 
and if the rent for the unit is otherwise eligible for an 
adjustment based on the full amount of the annual adjustment 
factor, 0.01 shall be subtracted from the amount of the annual 
adjustment factor, except that the annual adjustment factor 
shall not be reduced to less than 1.0.
    ``(II) With respect to any unit described in subclause (I) 
that is assisted under the certificate program, the adjusted 
rent shall not exceed the rent for a comparable unassisted unit 
of similar quality, type, and age in the market area in which 
the unit is located.''.
    (c) Effective Date.--The amendments made by this section 
shall become effective on October 1, 1995.

SEC. 2052. FORECLOSURE AVOIDANCE AND BORROWER ASSISTANCE.

    (a) Foreclosure Avoidance.--Except as provided in 
subsection (e), the last sentence of section 204(a) of the 
National Housing Act (12 U.S.C. 1710(a)) is amended by 
inserting before the period the following: ``: And provided 
further, That the Secretary may pay insurance benefits to the 
mortgagee to recompense the mortgagee for its actions to 
provide an alternative to foreclosure of a mortgage that is in 
default, which actions may include such actions as special 
forbearance, loan modification, and deeds in lieu of 
foreclosure, all upon such terms and conditions as the 
mortgagee shall determine in the mortgagee's sole discretion 
within guidelines provided by the Secretary, but which may not 
include assignment of a mortgage to the Secretary: And provided 
further, That for purposes of the preceding proviso, no action 
authorized by the Secretary and no action taken, nor any 
failure to act, by the Secretary or the mortgagee shall be 
subject to judicial review''.
    (b) Authority To Assist Mortgagors in Default.--Except as 
provided in subsection (e), section 230 of the National Housing 
Act (12 U.S.C. 1715u) is amended to read as follows:

              ``authority to assist mortgagors in default

    ``Sec. 230. (a) Payment of Partial Claim.--The Secretary 
may establish a program for payment of a partial insurance 
claim to a mortgagee that agrees to apply the claim amount to 
payment of a mortgage on a 1- to 4-family residence that is in 
default. Any such payment under such program to the mortgagee 
shall be made in the Secretary's sole discretion and on terms 
and conditions acceptable to the Secretary, except that--
          ``(1) the amount of the payment shall be in an amount 
        determined by the Secretary, which shall not exceed an 
        amount equivalent to 12 monthly mortgage payments and 
        any costs related to the default that are approved by 
        the Secretary; and
          ``(2) the mortgagor shall agree to repay the amount 
        of the insurance claim to the Secretary upon terms and 
        conditions acceptable to the Secretary.
The Secretary may pay the mortgagee, from the appropriate 
insurance fund, in connection with any activities that the 
mortgagee is required to undertake concerning repayment by the 
mortgagor of the amount owed to the Secretary.
    ``(b) Assignment.--
          ``(1) Program authority.--The Secretary may establish 
        a program for assignment to the Secretary, upon request 
        of the mortgagee, of a mortgage on a 1- to 4-family 
        residence insured under this Act.
          ``(2) Program requirements.--The Secretary may accept 
        assignment of a mortgage under a program under this 
        subsection only if--
                  ``(A) the mortgage was in default;
                  ``(B) the mortgagee has modified the mortgage 
                to cure the default and provide for mortgage 
                payments within the reasonable ability of the 
                mortgagor to pay at interest rates not 
                exceeding current market interest rates; and
                  ``(C) the Secretary arranges for servicing of 
                the assigned mortgage by a mortgagee (which may 
                include the assigning mortgagee) through 
                procedures that the Secretary has determined to 
                be in the best interests of the appropriate 
                insurance fund.
          ``(3) Payment of insurance benefits.--Upon accepting 
        assignment of a mortgage under the program under this 
        subsection, the Secretary may pay insurance benefits to 
        the mortgagee from the appropriate insurance fund in an 
        amount that the Secretary determines to be appropriate, 
        but which may not exceed the amount necessary to 
        compensate the mortgagee for the assignment and any 
        losses and expenses resulting from the mortgage 
        modification.
    ``(c) Prohibition of Judicial Review.--No decision by the 
Secretary to exercise or forego exercising any authority under 
this section shall be subject to judicial review.
    ``(d) Savings Provision.--Any mortgage for which the 
mortgagor has applied to the Secretary, before the date of the 
enactment of the Balanced Budget Act of 1995, for assignment 
pursuant to subsection (c) of this section as in effect before 
such date of enactment shall continue to be governed by the 
provisions of this section in effect immediately before such 
date of enactment.
    ``(e) Applicability of Other Laws.--No provision of this 
Act or any other law shall be construed to require the 
Secretary to provide an alternative to foreclosure for 
mortgagees with mortgages on 1- to 4-family residences insured 
by the Secretary under this Act, or to accept assignments of 
such mortgages.''.
    (c) Applicability of Amendments.--Except as provided in 
subsection (e), the amendments made by subsections (a) and (b) 
shall apply only with respect to mortgages insured under the 
National Housing Act that are originated on or after October 1, 
1995.
    (d) Regulations.--Not later than the expiration of the 60-
day period beginning on the date of the enactment of this Act, 
the Secretary of Housing and Urban Development shall issue 
interim regulations to implement this section and the 
amendments made by this section.
    (e) Effectiveness and Applicability.--If this Act is 
enacted after the date of the enactment of the Departments of 
Veterans Affairs and Housing and Urban Development, and 
Independent Agencies Appropriations Act, 1996--
          (1) subsections (a), (b), (c), and (d) of this 
        section shall not take effect; and
          (2) subsection (c) of the section relating to 
        foreclosure avoidance and borrower assistance in title 
        II of the Departments of Veterans Affairs and Housing 
        and Urban Development, and Independent Agencies 
        Appropriations Act, 1996, is amended by striking ``only 
        with respect to mortgages insured under the National 
        Housing Act that are originated before October 1, 
        1995'' and inserting ``to mortgages originated before, 
        on, and after October 1, 1995''.

      TITLE II--COMMUNICATIONS AND SPECTRUM ALLOCATION PROVISIONS

SEC. 3001. SPECTRUM AUCTIONS.

    (a) Extension and Expansion of Auction Authority.--
          (1) Amendments.--Section 309(j) of the Communications 
        Act of 1934 (47 U.S.C. 309(j)) is amended--
                  (A) by striking paragraphs (1) and (2) and 
                inserting the following:
          ``(1) General authority.--If, consistent with the 
        obligations described in paragraph (6)(E), mutually 
        exclusive applications are accepted for any initial 
        license or construction permit, then the Commission 
        shall grant such license or permit to a qualified 
        applicant through a system of competitive bidding that 
        meets the requirements of this subsection.
          ``(2) Exemptions.--The competitive bidding authority 
        granted by this subsection shall not apply to licenses 
        or construction permits issued by the Commission--
                  ``(A) that, as the result of the Commission 
                carrying out the obligations described in 
                paragraph (6)(E), are not mutually exclusive;
                  ``(B) for public safety radio services, 
                including non-Government uses the sole or 
                principal purpose of which is to protect the 
                safety of life, health, and property and which 
                are not made commercially available to the 
                public; or
                  ``(C) for initial licenses or construction 
                permits for new terrestrial digital television 
                services assigned by the Commission to existing 
                terrestrial broadcast licensees to replace 
                their current television licenses, unless--
                          ``(i) the Commission, not later than 
                        180 days after the date of enactment of 
                        the Balanced Budget Act of 1995, after 
                        notice and public comment, submits to 
                        Congress a report on the use of the 
                        authority provided in this subsection 
                        for the assignment of initial licenses 
                        or construction permits for use of the 
                        electromagnetic spectrum allocated but 
                        not assigned as of the date of 
                        enactment of that Act for television 
                        broadcast services; and
                          ``(ii) the Congress amends this 
                        subsection to authorize the use of the 
                        authority provided by this subsection 
                        for such licenses or permits.
                Except as provided in this subparagraph, the 
                Commission may not assign initial licenses or 
                construction permits under this title to 
                terrestrial commercial television broadcast 
                licensees to replace their existing broadcast 
                licenses before November 15, 1996.''; and
                  (B) by striking ``1998'' in paragraph (11) 
                and inserting ``2002''.
          (2) Conforming amendment.--Subsection (i) of section 
        309 of such Act is repealed.
          (3) Effective date.--The amendment made by paragraph 
        (1)(A) shall not apply with respect to any license or 
        permit for a terrestrial radio or television broadcast 
        station for which the Federal Communications Commission 
        has accepted mutually exclusive applications on or 
        before the date of enactment of this Act.
    (b) Commission Obligation To Make Additional Spectrum 
Available by Auction.--
          (1) In general.--The Federal Communications 
        Commission shall complete all actions necessary to 
        permit the assignment by September 30, 2002, by 
        competitive bidding pursuant to service 309(i) of the 
        Communications Act of 1934 (47 U.S.C. 309(j) of 
        licenses for the use of bands of frequencies that--
                  (A) individually span not less than 25 
                megahertz, unless a combination of smaller 
                bands can, notwithstanding the provisions of 
                paragraph (7) of such section, reasonably be 
                expected to produce greater receipts;
                  (B) in the aggregate span not less than 100 
                megahertz;
                  (C) are located below 3 gigahertz; and
                  (D) have not, as of the date of enactment of 
                this Act--
                          (i) been designated by Commission 
                        regulation for assignment pursuant to 
                        such section;
                          (ii) been identified by the Secretary 
                        of Commerce pursuant to section 113 of 
                        the National Telecommunications and 
                        Information Administration Organization 
                        Act; or
                          (iii) been reserved for Federal 
                        Government use pursuant to section 305 
                        of the Communications Act of 1934 (47 
                        U.S.C. 305).
                The Commission shall conduct the competitive 
                bidding for not less than one-half of such 
                aggregate spectrum by September 30, 2000.
          (2) Criteria for reassignment.--In making available 
        bands of frequencies for competitive bidding pursuant 
        to paragraph (1), the Commission shall--
                  (A) seek to promote the most efficient use of 
                the spectrum;
                  (B) take into account the cost to incumbent 
                licensees of relocating existing uses to other 
                bands of frequencies or other means of 
                communication;
                  (C) take into account the needs of public 
                safety radio services;
                  (D) comply with the requirements of 
                international agreements concerning spectrum 
                allocations; and
                  (E) take into account the costs to satellite 
                service providers that could result from 
                multiple auctions of like spectrum 
                internationally for global satellite systems.
          (3) Notification to ntia.--The Commission shall 
        notify the Secretary of Commerce if--
                  (A) the Commission is not able to provide for 
                the effective relocation of incumbent licensees 
                to bands of frequencies that are available to 
                the Commission for assignment; and
                  (B) the Commission has identified bands of 
                frequencies that are--
                          (i) suitable for the relocation of 
                        such licensees; and
                          (ii) allocated for Federal Government 
                        use, but that could be reallocated 
                        pursuant to part B of the National 
                        Telecommunications and Information 
                        Administration Organization Act (as 
                        amended by this section).
    (c) Identification and Reallocation of Frequencies.--The 
National Telecommunications and Information Administration 
Organization Act (47 U.S.C. 901 et seq.) is amended--
          (1) in section 113, by adding at the end the 
        following new subsections:
    ``(f) Additional Reallocation Report.--If the Secretary 
receives a notice from the Commission pursuant to section 
3001(b)(3) of the Balanced Budget Act of 1995, the Secretary 
shall prepare and submit to the President and the Congress a 
report recommending for reallocation for use other than by 
Federal Government stations under section 305 of the 1934 Act 
(47 U.S.C. 305), bands of frequencies that are suitable for the 
uses identified in the Commission's notice.
    ``(g) Relocation of Federal Government Stations.--
          ``(1) In general.--In order to expedite the efficient 
        use of the electromagnetic spectrum and notwithstanding 
        section 3302(b) of title 31, United States Code, any 
        Federal entity which operates a Federal Government 
        station may accept payment in advance or in-kind 
        reimbursement of costs, or a combination of payment in 
        advance and in-kind reimbursement, from any person to 
        defray entirely the expenses of relocating the Federal 
        entity's operations from one or more radio spectrum 
        frequencies to another frequency or frequencies, 
        including, without limitation, the costs of any 
        modification, replacement, ore reissuance of equipment, 
        facilities, operating manuals, regulations, or other 
        expenses incurred by that entity. Any such payment 
        shall be deposited in the account of such Federal 
        entity in the Treasury of the United States. Funds 
        deposited according to this paragraph shall be 
        available, without appropriation or fiscal year 
        limitation, only for the operations of the Federal 
        entity for which such funds were deposited under this 
        paragraph.
          ``(2) Process for relocation.--Any person seeking to 
        relocate a Federal Government station that has been 
        assigned a frequency within a band allocated for mixed 
        Federal and non-Federal use may submit a petition for 
        such relocation to NTIA. The NTIA shall limit or 
        terminate the Federal Government station's operating 
        license when the following requirements are met:
                  ``(A) the person seeking relocation of the 
                Federal Government station has guaranteed to 
                defray entirely, through payment in advance, 
                in-kind reimbursement of costs, or a 
                combination thereof, all relocation costs 
                incurred by the Federal entity, including all 
                engineering, equipment, site acquisition and 
                construction, and regulatory fee costs;
                  ``(B) the person seeking relocation completes 
                all activities necessary for implementing the 
                relocation, including construction of 
                replacement facilities (if necessary and 
                appropriate) and identifying and obtaining on 
                the Federal entity's behalf new frequencies for 
                use by the relocated Federal Government station 
                (where such station is not relocating to 
                spectrum reserved exclusively for Federal use);
                  ``(C) any necessary replacement facilities, 
                equipment modifications, or other changes have 
                been implemented and tested to ensure that the 
                Federal Government station is able to 
                successfully accomplish its purposes; and
                  ``(D) NTIA has determined that the proposed 
                use of the spectrum frequency band to which the 
                Federal entity will relocate its operations 
                is--
                          ``(i) consistent with obligations 
                        undertaken by the United States in 
                        international agreements and with 
                        United States national security and 
                        public safety interests; and
                          ``(ii) suitable for the technical 
                        characteristics of the band and 
                        consistent with other uses of the band.
                In exercising its authority under subparagraph 
                (d)(i), NTIA shall consult with the Secretary 
                of Defense, the Secretary of State, or other 
                appropriate officers of the Federal Government.
          ``(3) Right to reclaim.--If within one year after the 
        relocation the Federal Government station demonstrates 
        to the Commission that the new facilities or spectrum 
        are not comparable to the facilities or spectrum from 
        which the Federal Government station was relocated, the 
        person seeking such relocation must take reasonable 
        steps to remedy any defects or pay the Federal entity 
        for the costs of returning the Federal Government 
        station to the spectrum from which such station was 
        relocated.
    ``(h) Federal Action To Expedite Spectrum Transfer.--Any 
Federal Government station which operates on electromagnetic 
spectrum that has been identified for reallocation for mixed 
Federal and non-Federal use in any reallocation report under 
subsection (a) shall, to the maximum extent practicable through 
the use of the authority granted under subsection (g) and any 
other applicable provision of law, take action to relocate its 
spectrum use to other frequencies that are reserved for Federal 
use or to consolidate its spectrum use with other Federal 
Government stations in a manner that maximizes the spectrum 
available for non-Federal use. Subsection (c)(4) of this 
section shall not apply to the extent that a non-Federal user 
seeks to relocate or relocates a Federal power agency under 
subsection (g).
    ``(i) Definition.--For purposes of this section, the term 
`Federal entity' means any department, agency, or other 
instrumentality of the Federal Government that utilizes a 
Government station license obtained under section 305 of the 
1934 Act (47 U.S.C. 305).''; and
          (2) in section 114(a)(1), by striking ``(a) or 
        (d)(1)'' and inserting ``(a), (d)(1), or (f)''.
    (d) Identification and Reallocation of Auctionable 
Frequencies.--The National Telecommunications and Information 
Administration Organization Act (47 U.S.C. 901 et seq.) is 
amended--
          (1) in section 113(b)--
                  (A) by striking the heading of paragraph (1) 
                and inserting ``Initial reallocation report.--
                '';
                  (B) by inserting ``in the first report 
                required by subsection (a)'' after ``recommend 
                for reallocation'' in paragraph (1);
                  (C) by inserting ``or (3)'' after ``paragraph 
                (1)'' each place it appears in paragraph (2); 
                and
                  (D) by inserting after paragraph (2) the 
                following new paragraph:
          ``(3) Second reallocation report.--In accordance with 
        the provisions of this section, the Secretary shall 
        recommend for reallocation in the second report 
        required by subsection (a), for use other than by 
        Federal Government stations under section 305 of the 
        1934 Act (47 U.S.C. 305), a single frequency band that 
        spans not less than an additional 20 megahertz, that is 
        located below 3 gigahertz, and that meets the criteria 
        specified in paragraphs (1) through (5) of subsection 
        (a).''; and
          (2) in section 115--
                  (A) in subsection (b), by striking ``the 
                report required by section 113(a)'' and 
                inserting ``the initial reallocation report 
                required by section 113(a)''; and
                  (B) by adding at the end the following new 
                subsection:
    ``(c) Allocation and Assignment of Frequencies Identified 
in the Second Reallocation Report.--With respect to the 
frequencies made available for reallocation pursuant to section 
113(b)(3), the Commission shall, not later than 1 year after 
receipt of the second reallocation report required by such 
section, prepare, submit to the President and the Congress, and 
implement, a plan for the allocation and assignment under the 
1934 Act of such frequencies. Such plan shall propose the 
immediate allocation and assignment of all such frequencies in 
accordance with section 309(j) of the 1934 Act (47 U.S.C. 
309(j).''.

SEC. 3002. AUCTION OF RECAPTURED ANALOG LICENSES.

    (a) Analog Spectrum Reversion.--
          (1) Limitations on terms of analog television 
        licenses (``reversion date'').--No analog television 
        license may be renewed for a period that extends beyond 
        the earlier of December 31, 2005 or one year after the 
        date the Commission finds, based on annual surveys 
        conducted pursuant to paragraph (2), that at least 95% 
        of households in the United States have the capability 
        to receive and display television signals, other than 
        television signals transmitted pursuant to an analog 
        television license. Following such date, only advanced 
        television licenses shall be issued.
          (2) Annual survey.--The Department of Commerce shall, 
        each calendar year from 1998 to 2005, conduct a survey 
        to estimate the percentage of households in the United 
        States that have the capability to receive and display 
        television signals other than signals transmitted 
        pursuant to an analog television license.
          (3) Spectrum reversion.--(A) The Commission shall 
        ensure that, as analog television licenses expire 
        pursuant to paragraph (a)(1), spectrum previously used 
        for the broadcast of analog television is reclaimed and 
        organized in such manner as to maximize the deployment 
        of new and existing services.
          (B) Licensees for new services shall be selected by 
        competitive bidding. The FCC shall complete the 
        competitive bidding procedure by March 1, 2002.
          (4) Minimum service obligation.--(A) The Commission, 
        by regulation, shall establish procedures to ensure 
        that, within the year prior to the reversion date 
        defined in paragraph (1), the advanced television 
        licensees shall provide each household without the 
        capability to receive and display television signals 
        other than television signals transmitted pursuant to 
        an analog television license, if such household 
        requests, with the capability to receive and display 
        advanced television service.
          (B) Each advanced television service licensee shall 
        provide, each day for the duration of its license, at 
        least one non-subscription television service that 
        meets or exceeds minimum technical and other standards 
        established by the Commission as well as any other 
        regulations pursuant to the Communications Act of 1934, 
        as amended, and the Children's Television Act of 1990. 
        In setting these minimum technical standards, the 
        Commission shall, to the extent technically feasible, 
        ensure that picture and audio quality are at least as 
        good as provided to recipients under current Commission 
        rules for National Television Systems Committee (NTSC) 
        signals and shall adopt such technical and other 
        requirements as may be necessary or appropriate to 
        assure the quality of the signal used to provide 
        advanced television services, including regulations 
        that set the minimum number of hours per day that such 
        signal must be transmitted. The Commission shall revoke 
        the license of any advanced television licensee who 
        fails to meet this condition of the license. The 
        Commission shall promulgate regulations to assure the 
        dissemination of converter boxes or devices necessary 
        to ensure access to digital TV to all households that 
        desire this access at a reasonable cost. The Commission 
        in these regulations shall--
                  (A) ensure that consumers receive only one 
                such rebate per household; and
                  (B) implement a mechanism by which 
                responsibility for cost sharing can be 
                equitably allocated. To the extent possible, 
                the digital converter boxes distributed in 
                accordance with this section shall utilize an 
                affordable technology to process digital 
                signals for reception on analog television 
                sets.
          (5) Public interest obligation.--Nothing in this 
        section shall be construed as relieving an advanced 
        television licensee from its obligation to serve the 
        public interest, convenience, and necessity.
    (b) Definitions.--As used in this section--
          (1) the term ``advanced television services'' means 
        television services provided using digital or other 
        advanced technology to enhance audio quality and video 
        resolution, as further defined in the Opinion, Report, 
        and Order of the Commission entitled ``Advanced 
        Television Systems and Their Impact Upon the Existing 
        Television Service,'' MM Docket No. 87-268; and
          (2) the term ``analog television licenses'' means 
        licenses issued pursuant to CFR 73.682 et seq. and in 
        effect November 13, 1995.

                          TITLE III--MEDICAID

SEC. 11300. TABLE OF CONTENTS OF SUBTITLE.

    The table of contents of this subtitle is as follows:

                           TITLE III--MEDICAID

Sec. 11300. Table of contents of subtitle.

                        Part 1--Federal Payments

Sec. 11301. Limitations on per beneficiary rate of growth in Federal 
          financial participation.
Sec. 11302. Reduction of disproportionate share payments.
Sec. 11303. Medicaid eligibility quality control (MEQC) requirements.

                           Part 2--Eligibility

Sec. 11311. Extension of coverage to additional individuals, subject to 
          poverty-related or caseload limits.
Sec. 11312. Elimination of authority for new eligibility expansion 
          demonstrations.
Sec. 11313. Upper income limit on ``less restrictive'' eligibility 
          methodologies.

                          Part 3--Managed Care

Sec. 11321. Primary care case management services as State option 
          without need for wavier.
Sec. 11322. State options to restrict choice of providers.
Sec. 11323. Elimination of restrictions on risk contracts.
Sec. 11324. 6-month guaranteed eligibility for all individuals enrolled 
          in managed care.
Sec. 11325. Requirements to ensure quality of and access to care under 
          managed care plans.

                            Part 4--Benefits

Sec. 11331. Home- and community-based services as State option without 
          need for waiver.
Sec. 11332. Elimination of requirement to pay for private insurance.
Sec. 11333. Benefits for individuals covered during transition to work.

            Part 5--Provider Participation and Payment Rates

Sec. 11341. Methods for establishing provider payment rates.
Sec. 11343. Elimination of obstetrical and pediatric payment rate 
          requirements.

                    Part 6--State Plan Administration

Sec. 11351. MMIS requirements.
Sec. 11352. Elimination of personnel requirements.
Sec. 11353. Elimination of requirements for cooperative agreements with 
          health agencies.
Sec. 11355. State review of mentally ill or retarded nursing facility 
          residents upon change in physical or mental condition.
Sec. 11356. Nurse aide training in Medicare and Medicaid nursing 
          facilities subject to extended survey and under certain other 
          conditions.
Sec. 11357. Combined State plan submission.
Sec. 11358. Public Process for developing State plan amendments.

                         Part 7--Effective Date

Sec. 11361. Effective date.

                        PART 1--FEDERAL PAYMENTS

SEC. 201. LIMITATION ON AVERAGE PER BENEFICIARY RATE OF GROWTH IN 
                    FEDERAL FINANCIAL PARTICIPATION.

    (a) In General.--Title XIX of the Social Security Act is 
amended--
          (1) by redesignating section 1931 as section 1932, 
        and
          (2) by inserting after section 1930 the following new 
        section:

 ``LIMITATION ON FEDERAL FINANCIAL PARTICIPATION BASED ON AVERAGE PER 
                        BENEFICIARY EXPENDITURES

    ``Sec. 1931. (a) Aggregate Limit.--
          ``(1) In general.--Subject to the succeeding 
        provisions of this section, the total amount of 
        payments in grant awards to a State under section 
        1903(a) for the 4 quarters in each of fiscal years 1997 
        through 2002 shall not exceed the sum of the limits, 
        specified under paragraph (2), for each group of 
        medicaid enrollees (as defined in subsection (b)(1)) 
        for the State for the fiscal year. Such payment limit 
        shall be based on the total net matchable medicaid 
        expenditures for the State for the fiscal year as 
        defined and specified under subsection (c)(4).
          ``(2) Group limits.--The limit under this paragraph 
        for a group of medicaid enrollees for a State for a 
        fiscal year is the product of the following factors:
                  ``(A) The average per enrollee matchable 
                expenditure limit for the group for the State 
                for the fiscal year (determined under 
                subsection (c)(1)).
                  ``(B) The number of full-time equivalent 
                individuals in the group in the State in the 
                fiscal year (determined under subsection (d)).
                  ``(C) The Federal medical assistance 
                percentage for the State for the fiscal year 
                (as defined in section 1905(b)).
          ``(3) Exception for portion of medical assistance 
        provided under approved waivers.--
                  ``(A) In general.--In the case of a State 
                which provides medical assistance under its 
                State plan under this title pursuant to a 
                waiver granted under section 1115 (as of [date 
                of introduction of proposal]) on a Statewide 
                basis (or under such a waiver that covers a 
                substate area with a population of at least 9 
                million), the Secretary shall provide for an 
                adjustment in the application of this section 
                so that--
                          ``(i) the limitation on total 
                        payments under paragraph (1) does not 
                        apply to Federal financial 
                        participation attributable to the 
                        medical assistance (and related 
                        administrative expenditures) provided 
                        under such a waiver; and
                          ``(ii) the average per enrollee 
                        matchable expenditure limit established 
                        under subsection (c) and applicable to 
                        a group of medicaid enrollees is equal 
                        to such limit multiplied by the 
                        nonwaiver proportion (as defined in 
                        subparagraph (B)) for that group.
                  ``(B) Nonwaiver proportion.--In subparagraph 
                (A)(ii), the `nonwaiver proportion' for a group 
                of medicaid enrollees for a State for a fiscal 
                year is the ratio of--
                          ``(i) the amount of the Federal 
                        financial participation that the 
                        Secretary estimates would have been 
                        expended (in the absence of this 
                        section) for medical assistance (and 
                        related administrative expenditures) 
                        for the group for the State for the 
                        fiscal year for items and services not 
                        covered under the waiver, to
                          ``(ii) the total amount of the 
                        Federal financial participation that 
                        the Secretary estimates would have been 
                        expended (in the absence of this 
                        section) for medical assistance (and 
                        related administrative expenditures) 
                        for the group for the State for the 
                        fiscal year (whether or not covered 
                        under the waiver).
          ``(4) No application to vaccine program.--Nothing in 
        this section shall be construed as applying any 
        limitation to payments for the purchase and delivery of 
        qualified pediatric vaccines under section 1928.
    ``(b) Definitions Relating to Groups of Medicaid 
Enrollees.--In this section:
          ``(1) In general.--Each of the following shall be 
        considered a separate `group of medicaid enrollees':
                  ``(A) Nondisabled medicaid children.
                  ``(B) Nondisabled medicaid adults.
                  ``(C) Elderly medicaid beneficiaries.
                  ``(D) Disabled medicaid beneficiaries.
          ``(2) Nondisabled medicaid children.--The term 
        `nondisabled medicaid child' means a medicaid enrollee 
        who--
                  ``(A) is under 21 years of age,
                  ``(B) is not the custodial parent of a child, 
                and
                  ``(C) is not a disabled medicaid beneficiary.
          ``(3) Nondisabled medicaid adults.--The term 
        `nondisabled medicaid adult' means a medicaid enrollee 
        who--
                  ``(A) is under 65 years of age,
                  ``(B) is not a disabled medicaid beneficiary, 
                and
                  ``(C)(i) is at least 21 years of age or (ii) 
                is the custodial parent of a child.
          ``(4) Elderly medicaid beneficiary.--The term 
        `elderly medicaid beneficiary' means a medicaid 
        enrollee who is at least 65 years of age.
          ``(5) Disabled medicaid beneficiaries.--The term 
        `disabled medicaid beneficiary' means a medicaid 
        enrollee who--
                  ``(A) is under 65 years of age, and
                  ``(B) has been determined to meet the 
                standards for being blind or disabled under the 
                supplemental income security program under 
                title XVI.
          ``(6) Medicaid enrollee.--The term `medicaid 
        enrollee' means, with respect to a State medical 
        assistance program under this title, an individual who 
        is enrolled with such program, but does not include an 
        individual who is eligible only for medicare cost-
        sharing benefits under the program as--
                  ``(A) a qualified medicare beneficiary (as 
                defined in section 1905(p)(1)),
                  ``(B) a qualified disabled and working 
                individual (as defined in section 1905(s)), or
                  ``(C) an individual described in section 
                1902(a)(10)(E)(iii).
    ``(c) Average Per Enrollee Matchable Expenditure Limit; 
Total Net Matchable Medicaid Expenditures Defined.--
          ``(1) In general.--For purposes of this section, the 
        average `per enrollee matchable expenditure limit', for 
        a group of medicaid enrollees for a State--
                  ``(A) for fiscal year 1997 is equal to the 
                average base per enrollee amount (as defined 
                under paragraph (2)(A)) for the group for the 
                State multiplied by the allowable growth 
                multiplier (under paragraph (3)) for each of 
                fiscal years 1996 and 1997; and
                  ``(B) for a succeeding fiscal year is equal 
                to the per enrollee matchable expenditure limit 
                under this paragraph for the preceding fiscal 
                year multiplied by the allowable growth 
                multiplier for that succeeding fiscal year.
        Before the beginning of each of fiscal years 1997 
        through 2002, the Secretary shall determine and publish 
        each State's average per enrollee matchable expenditure 
        limit under this paragraph for each group of medicaid 
        enrollees.
          ``(2) Base per enrollee amount.--
                  ``(A) In general.--In this section, the `base 
                average per enrollee amount', for a group of 
                medicaid enrollees for a State, is equal to--
                          ``(i) the sum of (i) the base medical 
                        assistance amount (determined under 
                        subparagraph (C)) for the group and 
                        State, and (ii) the base administrative 
                        cost amount (determined under 
                        subparagraph (D)) for group and the 
                        State; divided by
                          ``(ii) the number of full-year 
                        equivalent medicaid enrollees in the 
                        group in the State in fiscal year 1995 
                        (as determined pursuant to subsection 
                        (d)).
                  ``(B) Determination of net matchable medicaid 
                expenditures for fiscal year 1995.--In order to 
                determine base average per enrollee amounts for 
                a State, the Secretary shall--
                          ``(i) determine the amount of the 
                        total net matchable medicaid 
                        expenditures (as defined in paragraph 
                        (4)) for the State for fiscal year 
                        1995, and
                          ``(ii) separately identify--
                                  ``(I) the portion of such 
                                amount attributable to medical 
                                assistance, and
                                  ``(II) the portion of such 
                                amount attributable to 
                                administrative costs.
                The Secretary shall base the determination 
                under clause (i) on the expenditures reported 
                by the State on line 11 of HCFA Form 64 for the 
                4 quarters of fiscal year 1995, subject to the 
                adjustments described in paragraph (4)(B)).
                  ``(C) Base medical assistance amount for each 
                group.--For each State for each group of 
                medicaid enrollees, the Secretary shall 
                determine a `base medical assistance amount' 
                equal to the amount, of the portion of the 
                total net matchable medicaid expenditures for 
                fiscal year 1995 for the State attributed to 
                medical assistance under subparagraph 
                (B)(ii)(I), that the Secretary finds is 
                attributable to items and services furnished to 
                individuals in such group for the State .
                  ``(D) Base administrative cost amount for 
                each group.--For each State for each group of 
                medicaid enrollees, the Secretary shall 
                determine a `base administrative cost amount' 
                equal to the amount that bears the same ratio 
                to the portion of the total net matchable 
                medicaid expenditures for fiscal year 1995 for 
                the State attributed to administrative costs 
                under subparagraph (B)(ii)(II) as the base 
                medical assistance amount for the group (as 
                determined under subparagraph (C) for the 
                State) bears to the sum of the base medical 
                assistance amounts for all the groups for the 
                State.
          ``(3) Allowable growth multiplier.--In this 
        subsection, the `allowable growth multiplier' for--
                  ``(A) fiscal year 1996 is 6.5 percent.
                  ``(B) fiscal year 1997 is 6.5 percent.
                  ``(C) fiscal year 1998 is 6.5 percent.
                  ``(D) fiscal year 1999 is 6.0 percent.
                  ``(E) fiscal year 2000 is 5.5 percent.
                  ``(F) fiscal year 2001 is 5.0 percent.
                  ``(G) fiscal year 2002 is 4.5 percent.
          ``(4) Equity adjustor in allowable growth multiplier 
        for states with low per capita expenditures.--
                  ``(A) Fiscal year 1997.--If the [per 
                beneficiary base amount described in paragraph 
                (  ) for the base fiscal year] for a State for 
                a [group of medicare enrollees]--
                          ``(i) does not exceed 80 percent of 
                        the national, weighted average of such 
                        [per beneficiary base amounts] for such 
                        group for all States for the year, 
                        then, the determining the per 
                        beneficiary limit for such State and 
                        group for fiscal year 1997, the 
                        allowable growth multiplier for each of 
                        fiscal years 1996 and 1997 shall be 
                        increased by 2.0 percentage points;
                          ``(ii) exceeds 80 percent, but does 
                        not exceed 90 percent, of such 
                        national, weighted average, then, in 
                        determining the per beneficiary limit 
                        for such State and group for fiscal 
                        year 1997, the allowable growth 
                        multiplier for each of fiscal years
          * * * * * * *
          ``(4) Total net matchable medicaid expenditures.--
                  ``(A) In general.--In this section, the term 
                `total net matchable medicaid expenditures' 
                means, for a State for a fiscal year, the total 
                net expenditures for the State under this title 
                for the 4 quarters of the fiscal year for which 
                payments may be made under section 1903, 
                reduced by the amount of such expenditures that 
                the Secretary determines is attributable to 
                expenditures described in subsection (e).
                  ``(B) Use of forms and adjustment.--The total 
                net matchable medicaid expenditures for a State 
                for a fiscal year shall be determined by the 
                Secretary based on reports submitted by the 
                State under section 1903 for quarters in the 
                fiscal year and as adjusted by the Secretary by 
                January 31 of the succeeding fiscal year to 
                take into account disallowances and similar 
                adjustments for expenditures not described in 
                subsection (e).
    ``(d) Determination of Number of Full-Year Equivalent 
Individuals.--
          ``(1) In general.--For purposes of this section, the 
        number of full-year equivalent individuals in each 
        group of medicaid enrollees for a State for a fiscal 
        year shall be determined, subject to paragraphs (2) and 
        (3), based on reports submitted by the State of the 
        Secretary.
          ``(2) Part-year enrollees.--In the case of 
        individuals who were not a medicaid enrollee for the 
        entire fiscal year (or are within a group of medicaid 
        enrollees for only part of a fiscal year), the number 
        shall take into account only the portion of the year in 
        which they were such enrollees or within such group.
          ``(3) Secretarial oversight.--In order to ensure the 
        accuracy of the numbers reported by States under this 
        subsection, the Secretary is authorized--
                  ``(A) to require documentation, whether on a 
                sample or other basis,
                  ``(B) to audit such reports (or to require 
                the performance of independent audits), and
                  ``(C) to revise the numbers so reported.
    ``(e) Expenditures Not Subject to (or Counted in) 
Limitation.--For purposes of this section, the following 
expenditures (for which payments may be made to a State under 
section 1903(a)) shall not be counted in computing base medical 
assistance amounts or base administrative cost amounts under 
subsection (c)(2) and Federal financial participation with 
respect to such expenditures shall not be subject to the limit 
established under subsection (a)(1):
          ``(1) Disproportionate share payment adjustments.--
        Expenditures attributable to payment adjustments made 
        under section 1923.
          ``(2) Medicare cost-sharing.--Expenditures for 
        medical assistance for medicare cost-sharing, as 
        defined in section 1905(p)(3).
          ``(3) Indian health programs.--Expenditures for 
        medical assistance for services provided by--
                  ``(A) the Indian Health Service,
                  ``(B) an Indian health program operated by an 
                Indian tribe or tribal organization pursuant to 
                a contract, grant, cooperative agreement, or 
                compact with the Indian Health Service pursuant 
                to the Indian Self-Determination Act (25 U.S.C. 
                450 et seq.), and
                  ``(C) an urban Indian health program operated 
                by an urban Indian organization pursuant to a 
                grant or contract with the Indian Health 
                Service pursuant to title V of the Indian 
                Health Care Improvement Act (25 U.S.C. 1601 et 
                seq.).
          ``(4) Information systems.--Expenditures described in 
        subparagraph (A)(i) and (B) of section 1903(a)(2).
          ``(5) Nursing facility preadmission screening, 
        resident review, and survey and certification 
        activities.--Expenditures described in subparagraphs 
        (C) and (D) of section 1903(a)(2).
          ``(6) SAVE.--Expenditures attributable to 
        implementation of the immigration status verification 
        system (described in section 1137(d)) pursuant to 
        section 1903(a)(4).
          ``(7) Fraud and abuse activities.--Expenditures for 
        activities of State medicaid fraud control units 
        pursuant to section 1903(a)(6).''.
    (b) Enforcement-Related Provisions.--
          (1) Assuring actual payments to states consistent 
        with limitation.--Section 1903(d) of such Act (42 
        U.S.C. 1396(d)) is amended--
                  (A) in paragraph (2)(A), by striking ``The 
                Secretary'' and inserting ``Subject to 
                paragraph (7), the Secretary'', and
                  (B) by adding at the end the following new 
                paragraph:
    ``(7)(A) The Secretary shall take such steps as are 
necessary to assure that payments under this subsection for 
quarters in a fiscal year (and for the entire fiscal year) are 
consistent with the limitation established under section 1931 
for the fiscal year. Such steps may include limiting such 
payments for one or more quarters in a fiscal year based on--
          ``(i) an appropriate proportion of the limitation 
        under section 1931(a) for the fiscal year involved, and
          ``(ii) numbers of individuals within each group of 
        medicaid enrollees, as reported under subparagraph (B) 
        for a recent previous quarter.
    ``(B) Each State shall include, in its report filed under 
paragraph (1)(A) for a calendar quarter--
          ``(i) the actual number of individuals within each 
        group of medicaid enrollees described in section 
        1931(b)(1) for the second previous calendar quarter and 
        (based on the data available) for the previous calendar 
        quarter, and
          ``(ii) an estimate of such numbers for the calendar 
        quarter involved.
as well as expenditures (other than expenditures described in 
section 1931(e)) attributable to each such group for such 
periods.
    ``(C) In order to implement section 1931 and this 
subsection, the Secretary shall--
          ``(i) change HCFA Form 37 to require States to 
        separate out spending projections by groups of medicaid 
        enrollees, and
          ``(ii) change HCFA Form 64 to include enrollment data 
        and to permit the attribution of expenditures to such 
        groups.
The Secretary shall provide for the auditing of information 
reported under clause (ii).
    ``(D) The Secretary shall take such actions as may be 
necessary to assure the accuracy of the base per enrollee 
amounts determined under section 1931(c)(2).''.
          (2) Upper income limit on ``less restrictive'' 
        eligibility methodologies.--Section 1902(r)(2) of such 
        Act (42 U.S.C. 1396a(r)(2)) is amended--
                  (A) in subparagraph (A), by inserting 
                ``(except as provided in subparagraph (C))'' 
                after ``no more restrictive'', and
                  (B) by adding at the end the following new 
                subparagraph:
    ``(C) The methodology described in subparagraph (A) shall 
not result in an income eligibility limit (based on gross 
income) that is greater than the greater of--
          ``(i) 150 percent of the poverty line (as defined in 
        section 673(2) of the Community Services Block Grant 
        Act (42 U.S.C. 9902(2)), including any revision 
        required by such section), or
          ``(ii) the income eligibility limit applicable under 
        the State plan in effect in fiscal year 1995 (taking 
        into account any such limit applicable under a waiver 
        under section 1115).''.
    (c) Application of Enhanced Matching Rate for Development 
of Information Systems.--Section 1903(a)(3)(A)(i) of such Act 
(42 U.S.C. 1396b(a)(3)(A)(i)) is amended by inserting before 
the comma at the end the following: ``and including information 
systems necessary to assure compliance with reporting 
requirements identified as necessary to carry out section 
______ of the [Omnibus Budget Reconciliation Act of 1995]''.
    (d) Conforming Amendment.--Section 1903(a) of such Act (42 
U.S.C. 1396b(a)), in the matter preceding paragraph (1), is 
amended by inserting ``or section 1931'' after ``except as 
otherwise provided in this section''.
    (e) Conforming Amendments.--
          (1) Section 1903(a) is amended in the matter 
        preceding paragraph (1) by inserting ``or section 
        1931'' after ``except as otherwise provided in the 
        section''.
          (2) Section 1903 is amended by adding after 
        subsection (w) the following new subsections:
    ``(x) Notwithstanding any other provision of this Act, no 
State shall be entitled to payment under this title--
          ``(1) with respect to expenditures after September 
        30, 1996, that exceed the limitation on Federal 
        financial participation specified in section 1931; or
          ``(2) with respect to an expenditure made or other 
        obligation incurred by a State before October 1, 1996, 
        unless the State has submitted to the Secretary, not 
        later than June 30, 1997, a claim for Federal financial 
        participation in such expenditure or obligation.''.

                       TITLE IV--MEDICARE SAVINGS

    (b) Amendments to Social Security Act.--Except as otherwise 
specifically provided, whenever in this title an amendment is 
expressed in terms of an amendment to or repeal of a section or 
other provision, the reference is considered to be made to that 
section or other provision of the Social Security Act.

                 PART 1--PROVISIONS RELATING TO PART A

SEC. 11101. UPDATES FOR PPS HOSPITALS.

    (a) Update Factors.--Section 1886(b)(3)(B)(i) (42 U.S.C. 
1395ww(b)(3)(B)(i)) is amended by striking subclauses (XII) and 
(XIII) and inserting the following:
          ``(XII) for each of the fiscal years 1997 through 
        2000, the market basket percentage increase minus 1.0 
        percentage points for hospitals in all areas,
          ``(XIII) for fiscal years 2001 and 2002, the market 
        basket percentage increase minus 1.5 percentage points 
        for hospitals in all areas, and
          ``(XIV) for fiscal year 2003 and each subsequent 
        fiscal year, the market basket percentage increase for 
        hospitals in all areas.''.
    (b) Adjustments for Case Mix When Recalibrating DRGS.--
          (1) In general.--Section 1886(d)(3) (42 U.S.C. 
        1395ww(d)(3)) is amended by adding at the end the 
        following:
          ``(F) Adjusting for estimated change in case mix.--
                  ``(i) In general.--Effective for discharges 
                occurring in a fiscal year in which the 
                Secretary implements significant changes (as 
                defined by the Secretary) in the diagnosis-
                related group classification system and 
                thereafter, the Secretary may (subject to 
                clause (ii)) adjust the standardized amounts to 
                take into account estimated case mix increase 
                not attributable to real case mix increase 
                anticipated to occur during the fiscal year to 
                which the standardized amounts apply.
                  ``(ii) Refinement.--With regard to the 
                adjustment described in clause (i), if the 
                Secretary determines, based on data taken from 
                the fiscal year to which the adjustment 
                applied, that the amount of the adjustment 
                varied from the actual amount of case mix 
                increase not attributable to real case mix 
                increase by more than 0.25 percentage points, 
                the Secretary shall make a prospective 
                adjustment to the standardized amounts to 
                correct for the variance.''.
          (2) PROPAC recommendations.--Section 1886(e)(2)(A) 
        (42 U.S.C. 1395ww(e)(2)(A)) is amended by adding at the 
        end the following: ``With respect to subsection (d) 
        hospitals, the Commission's recommendation regarding 
        the appropriate percentage change shall take into 
        account the anticipated difference during the fiscal 
        year between the change in the average weighting factor 
        and the change in real case mix.''.

SEC. 11102. MAINTAINING SAVINGS FROM TEMPORARY REDUCTION IN PPS CAPITAL 
                    RATES.

    Section 1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A)) is 
amended by adding at the end the following: ``In addition to 
the reduction described in the preceding sentence, for 
discharges occurring after September 30, 1995, the Secretary 
shall reduce by 15.7 percent the unadjusted standard Federal 
capital payment rate (as described in section 412.308(c) of 
volume 42 of the Code of Federal Regulations), as in effect on 
September 30, 1995) and shall reduce by 15.7 percent the 
unadjusted hospital-specific rate (as described in section 
412.328(e)(1) of volume 42 of the Code of Federal Regulations), 
as in effect on September 30, 1995).''.

SEC. 11103. REDUCTIONS IN DISPROPORTIONATE SHARE PAYMENT ADJUSTMENTS.

    (a) In General.--Section 1886(d)(5)(F) (42 U.S.C. 
1395ww(d)(5)(F)) is amended--
          (1) in clause (ii), by striking ``The amount'' and 
        inserting ``Subject to clause (ix), the amount'', and
          (2) by adding at the end the following:
                  ``(ix) Fiscal year 1999 and later.--For 
                discharges occurring on or after October 1, 
                1998, the payment amount otherwise determined 
                under clause (ii) shall be reduced by 10 
                percent.''.
    (b) Conforming Amendment Relating to Determination of 
Standardized Amounts.--Section 1886(d)(2)(C)(iv) (42 U.S.C. 
1395ww(d)(2)(C)(iv)) is amended inserting the following before 
the period: ``, and the Secretary shall not take into account 
any reductions in the amount of such additional payments 
resulting from the amendments made by section 11103(a) of the 
Balanced Budget Act of 1995 for Economic Growth and Fairness''.

SEC. 11104. REDUCTION IN ADJUSTMENT FOR INDIRECT MEDICAL EDUCATION.

    (a) In General.--Section 1886(d)(5)(B)(ii) (42 U.S.C. 
1395ww(d)(5)(B)(ii)) is amended by striking all after 
``occurring'' and inserting the following: ``the indirect 
teaching adjustment factor for discharges occurring--
                  ``(I) on or after January 1, 1996, and before 
                October 1, 1996, is equal to 1.77  x  (((1+r) 
                to the nth power) - 1),
                  ``(II) during fiscal years 1997 through 1999, 
                is equal to 1.67  x  (((1+r) to the nth power) 
                - 1),
                  ``(III) during the fiscal year 2000, is equal 
                to 1.55  x  (((1+r) to nth power) - 1), and
                  ``(IV) during the fiscal years beginning with 
                2001, is equal to 1.47  x  (((1+r) to the nth 
                power) - 1),
        where `r' is the ratio of the hospital's full-time 
        equivalent interns and residents to beds in `n' equals 
        .405.''.
    (b) Conforming Amendment Relating to Determination of 
Standardized Amounts.--Section 1886(d)(2)(C)(i) (42 U.S.C. 
1395ww(d)(2)(C)(i)) is amended by adding at the end the 
following: ``, except that the Secretary shall not take into 
account any reductions in the amount of additional payments 
under subsection (d)(5)(B)(ii) resulting from the amendments 
made by section 11104(a) of the Balanced Budget Act of 1995 for 
Economic Growth and Fairness,''.
    (c) Alternative to Restandardization of Costs.--Section 
1886(d)(3)(A) (42 U.S.C. 1395ww(d)(3)(A)) is amended by adding 
at the end the following:
                          ``(vi) Alternative to 
                        restandardization of costs.--
                        Notwithstanding clauses (i) through 
                        (v), if changes in the amount of 
                        payment under subsections (d)(3)(E), 
                        (d)(5)(B), or (d)(5)(F) would otherwise 
                        require the Secretary top restandardize 
                        hospital costs under subsection 
                        (d)(2)(C), the Secretary may compute 
                        payments amounts under the subparagraph 
                        in a manner that assures the aggregate 
                        payments under this subsection in a 
                        fiscal year not greater or less than 
                        those that would have been made in the 
                        year if the Secretary had 
                        restandardized hospital costs under 
                        subsection (d)(2)(C).''.
    (d) Effective Date.--The amendments made by the previous 
subsections apply to discharges occurring after 1995.

SEC. 11105. REVISIONS IN DETERMINATION OF AMOUNT OF PAYMENT FOR MEDICAL 
                    EDUCATION.

    (a) Indirect Medical Education.--
          (1) In general.--Section 1886(d)(5)(B) (42 U.S.C. 
        1395ww(d)(5)(B)) is amended--
                  (A) in clause (ii) (as amended by section 
                111104(a) of the Act), by inserting before the 
                period '', subject to clause (vii)'', and
                  (B) by adding at the end the following:
          ``(v) Limitations on numbers of interns and 
        residents.--In determining such adjustment with respect 
        to a hospital for discharges occurring on or after 
        October 1, 1995--
                  ``(I) except as provided in clause (vi), the 
                total number of interns and residents may not 
                exceed the number of interns and residents with 
                respect to the hospital's cost reporting period 
                ending on or before December 31, 1995, and
                  ``(II) except as provided in subclause (vi), 
                the number of interns and residents who are not 
                who are not primary care residents as defined 
                in section 1886 (h)(5)(H) or residents in 
                obstetrics and gynecology, may not exceed the 
                number of such residents as of such cost 
                reporting period.
          ``(vi) Adjustments to limits.--The Secretary shall 
        adjust the number of interns and residents in clause 
        (v)--
                  ``(I) by applying a weighting factor of 0.50 
                with respect to each intern or resident who was 
                not in an initial residency period as defined 
                in Section 1886(h)(5)(F),
                  ``(II) by including any interns and residents 
                that qualify under clause (iv), and
                  ``(III) as appropriate, where a hospital has 
                a significant increase in the number of primary 
                care or obstetrics and gynecology interns and 
                residents after June 30, 1995.
          ``(vii) Limitation on resident-to-bed ratio.--For 
        purposes of clause (ii), `r' may not exceed the ratio 
        of the number of interns and residents as determined 
        under clause (v) with respect to the hospital for its 
        most recent cost reporting period ending on or before 
        December 31, 1995, to the hospital's available beds (as 
        defined by the Secretary) during such cost reporting 
        period.''.
          (2) Payment for interns and residents providing off-
        site services.--Section 1886(d)(5)(B)(iv) (U.S.C. 42 
        1395ww(d)(5)(B)(iv) is amended to read as follows:
                          ``(iv) Off-site services.--All the 
                        time spent by an intern or resident in 
                        patient care activities under an 
                        approved medical residency training 
                        program shall be counted towards the 
                        determination of full-time equivalency 
                        at an entity in a non-hospital setting, 
                        if the hospital incurs all, or 
                        substantially all, of the costs for the 
                        training program in that setting.''.
    (b) Direct Medical Education.--
          (1) Limitation of number of residents.--Section 
        1886(h)(4) (42 U.S.C. 1395ww(h)(4)) is amended by 
        adding at the end the following:
                  ``(F) Limitation of number of residents for 
                certain fiscal years.--Such rules shall provide 
                that for purposes of a cost reporting period 
                beginning on or after October 1, 1995--
                          ``(i) the total number of full-time 
                        equivalent residents (as determined 
                        under this paragraph) with respect to 
                        an approved medical residency training 
                        program may not exceed the number of 
                        full-time equivalent residents with 
                        respect to the ending on or before 
                        December 31, 1995, and
                          ``(ii) the number of a hospital's 
                        full-time-equivalent residents as 
                        determined under this paragraph who are 
                        not primary care residents (as defined 
                        in paragraph (5)(H)) or residents in 
                        obstetrics and gynecology may not 
                        exceed the number of such residents as 
                        of such cost reporting period.
                  ``(G) Adjustments to limitations.--The 
                Secretary may adjust the limitations specified 
                in subparagraph (F) if a hospital has a 
                significant increase in the number of primary 
                care or obstetrics and gynecology interns or 
                residents after June 30, 1995.''.
          (2) Continuation of freeze on updates to fte resident 
        amounts.--Section 1886(h)(2)(D)(ii) (42 U.S.C. 
        1395ww(h)(2)(D)(ii)) is amended by striking ``fiscal 
        year 1994 or fiscal year 1995'' and inserting ``fiscal 
        years 1994 through 2000''.
          (3) Permitting payment to non-hospital providers.--
        Section 1886 (42 U.S.C. 1395ww)) is amended by adding 
        at the end the following:
    ``(j) Payment to Non-Hospital Providers.--Beginning with 
cost reporting periods beginning on or after July 1, 1996, the 
Secretary may make payments (in such amounts and in such form, 
and from each of the trust funds under this title, as the 
Secretary considers appropriate) to Federally Qualified Health 
Centers (as defined in section 1861(aa)(4)) and Rural Health 
Clinics (as defined in section 1861(aa)(2)) and eligible 
organizations with contracts under part C for the direct costs 
of medical education, if such costs are incurred in the 
operation of an approved medical residence training program 
described in subsection (h). The Secretary may designate 
additional entities as eligible organizations for such payments 
as the Secretary determines to be appropriate.''.
    (c) Application to Cost Contracts.--Section 1886(j) of the 
Social Security Act (42 U.S.C. 1395ww(j)) (as added by 
subsection (b)(3) of this section) applies to contracts under 
section 1876(h) of that Act (42 U.S.C. 1395mm).
    (d) Effective Date.--The amendments made by the previous 
subsections apply to hospital cost reporting periods beginning 
on or after October 1, 1995.
    (e) Commission on Medical Education and Workforce 
Priorities.--
          (1) In general.--There is established within the 
        Department of Health and Human Services a Commission to 
        be known as the National Commission on Medical 
        Education and Workforce Priorities (hereafter in this 
        subsection referred to as the ``Commission'').
          (2) Duties.--The Commission shall have the following 
        responsibilities:
                  (A) To develop and recommend to the Secretary 
                specific policies to address the preservation 
                of the research and educational capacity of the 
                Nation's academic health centers and the 
                supply, composition, and support of the future 
                health care workforce. The Commission shall 
                examine--
                          (i) the financing of graduate medical 
                        education,
                          (ii) issues relating to children's 
                        and specialty hospitals,
                          (iii) policies regarding 
                        international medical school graduates, 
                        and
                          (iv) the relationship of graduate 
                        medical education funding and service-
                        generated income.
                  (B) To make recommendations concerning the 
                most effective allocation of training resources 
                to ensure that the numbers and competencies of 
                health care professionals are responsive to the 
                Nation's needs.
          (3) Composition.--
                  (A) Qualifications.--The Commission shall 
                consist of 15 members appointed by the 
                Secretary, and shall to the extent feasible 
                include--
                          (i) individuals nationally recognized 
                        for expertise in health economics, 
                        medical education financing, medical 
                        practice, issues relating to the 
                        composition of the health care 
                        workforce, research on and development 
                        of technological and scientific 
                        advances in health care, and other 
                        related fields; and
                          (ii) health care professionals 
                        including physicians (both faculty and 
                        non-faculty), consumers, a dean and a 
                        chief executive officer or an academic 
                        health center or a teaching hospital, 
                        and representatives from health 
                        insurance organizations, managed care 
                        organizations, and medical workforce 
                        accrediting organizations.
                  (B) National representation.--To the extent 
                feasible, the membership of the Commission--
                          (i) shall represent the various 
                        geographic regions of the United 
                        States,
                          (ii) shall reflect the racial, 
                        ethnic, and gender composition of the 
                        United States; and
                          (iii) shall be broadly representative 
                        of medical schools, academic health 
                        centers, teaching hospitals, and 
                        schools involved in the training of 
                        non-physician providers of health 
                        services.
          (4) Terms of office.--Members of the Commission shall 
        first be appointed no later than July 1, 1996, for a 
        term of two and one half years.
          (5) Ex officio members.--In addition to the members 
        appointed pursuant to paragraph (3), the Commission 
        shall include--
                  (A) the Secretary of Health and Human 
                Services, the Secretary of Veterans Affairs, 
                and the Secretary of Defense (or a designee of 
                each such official); and
                  (B) such additional individuals as may be 
                designated by the Secretary from among Federal 
                officers or employees.
          (6) Chair.--The Secretary shall designate an 
        individual from among the members appointed pursuant to 
        paragraph (3)(A) to serve as the chair of the 
        Commission.
          (7) Quorum.--Nine members of the Commission shall 
        constitute a quorum, but a lesser number may hold 
        hearings.
          (8) Vacancies.--Any vacancy in the Commission shall 
        not affect its power to function.
          (9) Compensation.--Each member of the Commission who 
        is not otherwise employed by the United States 
        Government shall receive compensation at a rate equal 
        to the daily rate prescribed for GS-18 under the 
        General Schedule under section 5332 of title 5, United 
        States Code, for each day, including travel time, such 
        member is engaged in the actual performance of duties 
        as a member of the Commission. A member of the 
        Commission who is an officer or employee of the United 
        States Government shall serve without additional 
        compensation. All members of the Commission shall be 
        reimbursed for travel, subsistence, and other necessary 
        expenses incurred by them in the performance of their 
        duties.
          (10) Certain authorities and duties.--In order to 
        carry out the provisions of this subsection, the 
        Commission is authorized to--
                  (A) collect such information, hold such 
                hearings, and sit and act at such times and 
                places, either as a whole or by subcommittee, 
                and request the attendance and testimony of 
                such witnesses and the production of such 
                documents as the Commission may consider 
                advisable; and
                  (B) request the cooperation and assistance of 
                Federal departments, agencies, and 
                instrumentalities, and such departments, 
                agencies, and instrumentalities are authorized 
                to provide such cooperation and assistance.
          (11) Reports.--The Commission shall submit to the 
        Secretary a preliminary report not later than July 1, 
        1997, and a final report not later than July 1, 1998, 
        making recommendations on the matters specified in 
        paragraph (2).
          (12) Termination.--The Commission shall terminate as 
        of December 31, 1998.
          (13) Authorization of appropriations.--There is 
        authorized to be appropriated to the Secretary of 
        Health and Human Services for use in carrying out this 
        subsection not more than $250,000 for each of fiscal 
        years 1996, 1997, 1998. Funds appropriated for fiscal 
        year 1998 shall remain available until expended.

SEC. 11106. ELIMINATION OF IME AND DSH PAYMENTS ATTRIBUTABLE TO OUTLIER 
                    PAYMENTS.

    (a) Indirect Medical Education.--Section 
1886(d)(5)(B)(i)(I) (42 U.S.C. 1395ww(d)(5)(B)(i)(I)) is 
amended by inserting ``, for cases qualifying for additional 
payment under subparagraph (A)(i),'' before ``the amount paid 
to the hospital under subparagraph (A)''.
    (b) Disproportionate Share Adjustments.--Section 
1886(d)(5)(F)(ii)(I) (42 U.S.C. 1395ww(d)(5)(F)(ii)(I)) is 
amended by inserting ``, for cases qualifying for additional 
payment under subparagraph (A)(i),'' before ``the amount paid 
to the hospital under subparagraph (A)''.
    (c) Cost Outlier Payments.--Section 1886(d)(5)(A)(ii) (42 
U.S.C. 1395ww(d)(5)(A)(ii)) is amended by striking ``exceed the 
applicable DRG prospective payment rate'' and inserting 
``exceed the sum of the applicable DRG prospective payment rate 
plus any amounts payable under paragraphs (d)(5)(B) and 
(d)(5)(F)''.
    (d) Effective Date.--The amendments made by the previous 
subsections apply to discharges occurring on or after October 
1, 1995.

SEC. 11107. TREATMENT OF TRANSFER CASES.

    Section 1886(d)(5)(I) (42 U.S.C. 1395ww(d)(5)(I)) of the 
Act is amended by adding at the end the following:
    ``(iii) Certain transfers.--Effective for discharges 
occurring on or after October 1, 1995, transfer cases (as 
otherwise defined by the Secretary) shall also include cases in 
which a patient is transferred from a subsection (d) hospital 
to a hospital or hospital unit that is not a subsection (d) 
hospital (under section 1886(d)(1)(B) and implementing 
regulations) or to a skilled nursing facility for the purpose 
of receiving extended care services.''.

SEC. 11108. MORATORIUM ON NEW LONG TERM CARE HOSPITAL EXCLUSIONS.

    Section 1886(d)(1)(B)(iv) (42 U.S.C. 1395ww(d)(1)(B)(iv)) 
is amended by inserting ``(and had such an average on the date 
of enactment of the Balanced Budget Act of 1995 for Economic 
Growth and Fairness)'' before the comma.

SEC. 11109. PAYMENTS TO HOSPITALS EXCLUDED FROM PPS.

    (a) Reductions in Updates.--Section 1886(b)(3)(B)(ii) (42 
U.S.C. 1395ww(b)(4)(B)(ii)) is amended--
          (1) in subclause (V)
                  (A) by striking ``through 1997'' and 
                inserting ``through 1995'', and
                  (B) by striking ``and'',
          (2) by renumbering subclause (VI) as (VIII), and
          (3) by inserting after subclause (V) the following:
          ``(VI) fiscal years 1996 through 2000, the market 
        basket percentage increase minus 1.0 percentage point,
          ``(VII) fiscal years 2001 and 2002, the market basket 
        percentage increase minus 1.5 percentage points, and''.
    (b) Rebasing for PPS-Exempt Hospitals.--Section 
1886(b)(3)(A) (42 U.S.C. 1395ww(b)(3)(A)) is amended to read as 
follows:
    ``(3)(A) Target Amount.--
          ``(i) Calculation of target amount.--Subject to 
        clauses (ii) and (iii), and except as provided in 
        subparagraphs (C), (D), and (E), for purposes of this 
        subsection, the term `target amount' means--
                  ``(I) with respect to the first 12-month cost 
                reporting period in which this subparagraph is 
                applied to the hospital, the average allowable 
                operating costs of inpatient hospital services 
                (as defined in subsection (a)(4)) recognized 
                under this title for such hospital for the 
                hospital's two most recent 12-month cost 
                reporting periods beginning on or after October 
                1, 1990, subject to the floor and ceiling for 
                target amounts as specified in clause (ii), and 
                increased by the applicable percentage 
                increases under subparagraph (B)(ii) for the 
                hospital's succeeding cost reporting periods 
                beginning before fiscal year 1996, or
                  ``(II) with respect to a later cost reporting 
                period, the target amount for the preceding 
                cost reporting period, increased by the 
                applicable percentage increase under 
                subparagraph (B)(ii).
          ``(ii) Floor and ceiling.--Subject to clause (iii), 
        the target amount determined under this subparagraph 
        for a hospital or unit shall not be less than 70 
        percent nor more than 150 percent of the national mean 
        (adjusted by an appropriate wage index) of the 
        operating costs of inpatient hospital services 
        determined under this paragraph for hospitals (and 
        units thereof as applicable) of each type of hospital 
        described in subsection (d)(1)(B) for the cost 
        reporting periods noted in clause (i)(I) and updated by 
        the applicable percentage increase under subparagraph 
        (B)(ii).
          ``(iii) New hospitals.--In the case of a hospital 
        that does not have a cost reporting period beginning 
        before October 1, 1990--
                  ``(I) with respect to cost reporting periods 
                beginning during the hospital's first two 
                fiscal years of operation, the amount of 
                payment made under this title with respect to 
                operating costs of inpatient hospital services 
                (as defined in subsection (a)(4)) shall be the 
                reasonable costs for providing such services, 
                except that such amount may not exceed 150 
                percent of the national mean as determined and 
                updated in clause (ii),
                  ``(II) with respect to a later cost reporting 
                period, clauses (i) and (ii) shall apply to 
                such hospital except that the target amount for 
                the hospital shall be the average allowable 
                operating costs of inpatient hospital services 
                (as defined in subsection (a)(4)) recognized 
                under this title for the hospital's first two 
                12-month cost reporting periods beginning at 
                least one year after the hospital accepts its 
                first patient.''.
    (c) Exceptions and Adjustments.--Section 1886(b)((4)(A)(i) 
(42 U.S.C. 1395ww(b)(4)(A)(i)) is amended by inserting the 
following after the first sentence: * * *
          * * * * * * *

SEC. 11110. REDUCTIONS TO CAPITAL PAYMENTS FOR PPS-EXEMPT HOSPITALS.

    Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)) is amended by 
adding at the end the following new subparagraph:
          ``(T) Reductions for pps-exempt hospitals.--Such 
        regulations shall provide that, in determining the 
        amount of the payments that may be made under this 
        title with respect to the capital-related costs of 
        inpatient hospital services furnished by a hospital 
        that is not a subsection (d) hospital (as defined in 
        section 1886(d)(1)(B)) or a subsection (d) Puerto Rico 
        hospital (as defined in section 1886(d)(9)(A)), the 
        Secretary shall reduce the amounts of such payments 
        otherwise established under this title by 15 percent 
        for payment attributable to portions of cost reporting 
        periods occurring during each of the fiscal years 1996 
        through 2005.''.

SEC. 11111. MAINTAINING SAVINGS RESULTING FROM TEMPORARY FREEZE ON 
                    PAYMENT INCREASES FOR SKILLED NURSING FACILITIES.

    (a) Basing Updates to Per Diem Cost Limits Effective for 
Fiscal Year 1996 on Limits for Fiscal Year 1993.--
          (1) In general.--The last sentence of section 1888(a) 
        (42 U.S.C. 1395yy(a)) is amended by adding at the end 
        the following: ``, except that the limits effective 
        October 1, 1995 shall be based on the limits effective 
        on October 1, 1992 and shall not take into account any 
        changes in the routine service costs of skilled nursing 
        facilities occurring during cost reporting periods 
        which began during fiscal year 1994 or fiscal year 
        1995.''.
          (2) No exceptions permitted based on amendment.--The 
        Secretary of Health and Human Services shall not 
        consider the amendment made by paragraph (1) in making 
        any adjustments pursuant to section 1888(c) of the 
        Social Security Act.
    (b) Payments Determined on Prospective Basis.--Prospective 
payments made to skilled nursing facilities under section 
1888(d) of the Social Security Act for cost reporting periods 
beginning on or after October 1, 1995, shall be based on the 
rates effective for cost reporting periods beginning October 1, 
1992, and before October 1, 1993, and shall not take into 
account any changes in the costs of services occurring during 
cost reporting periods which began during fiscal year 1994 or 
fiscal year 1995.

SEC. 11112. INTERIM PROSPECTIVE PAYMENT FOR SKILLED NURSING FACILITIES.

    (a) In general.--Section 1888 (42 U.S.C. 1395yy) is amended 
by adding at the end the following:
    ``(e) Payment on an Interim Prospective Basis.--The 
Secretary shall, for cost reporting periods beginning on or 
after October 1, 1996, provide for payment for routine service 
costs (excluding capital-related costs) of extended care 
services in accordance with a prospective payment system 
established by the Secretary in the amounts provided in 
subsection (f), subject to the exceptions and limitations in 
subsections (g) and (h).
    ``(f) Determination of Payment Amounts.--
          ``(1) Per diem basis.--The amount of payment under 
        subsection (e) shall be determined on a per diem basis.
          ``(2) Use of base year costs updated by market 
        basket.--The Secretary shall compute the routine 
        service costs per diem in a base year (determined by 
        the Secretary) for each skilled nursing facility, and 
        shall update the per diem rate on the basis of a market 
        basket, excluding increases in routine service costs 
        associated with fiscal year 1994 and fiscal year 1995, 
        and other factors as the Secretary determines 
        appropriate.
          ``(3) Limitation on base year costs.--The base year 
        routine service costs used to determine the per diem 
        rate applicable to a skilled nursing facility may not 
        exceed the following limits:
                  ``(A) Rural areas.--With respect to skilled 
                nursing facilities located in rural areas, the 
                limit shall be equal to 112 percent of the mean 
                per diem routine service costs in a base year 
                (determined by the Secretary) for freestanding 
                skilled nursing facilities located in rural 
                areas within the same region.
                  ``(B) Urban areas.--With respect to skilled 
                nursing facilities located in urban areas, the 
                limit shall be equal to 112 percent of the mean 
                per diem routine service costs in a base year 
                (determined by the Secretary) for freestanding 
                skilled nursing facilities located in urban 
                areas within the same region.
                  ``(C) Definitions.--For purposes of this 
                subsection, urban and rural areas shall be 
                determined in the same manner as for purposes 
                of subsection (a), and the term ``region'' 
                shall have the same meaning as under section 
                1886(d)(2)(D).
                  ``(D) Wage adjustments.--In establishing 
                limits under this subsection, the Secretary may 
                make appropriate adjustments to the labor-
                related portion of the costs based upon on a 
                wage index and other factors as the Secretary 
                determines appropriate.
          ``(4) New skilled nursing facilities.--Skilled 
        nursing facilities entering the Medicare program 
        subsequent to the base period, determined in subsection 
        (f)(1), shall receive a routine payment rate equal to 
        the mean per diem routine costs of skilled nursing 
        facilities in the urban or rural area in which they are 
        located by region. The Secretary shall compute these 
        payment rates using per diem costs in a base year 
        (determined by the Secretary) and shall update the 
        rates on the basis of a market basket and other factors 
        as the Secretary determines appropriate.
          ``(5) Low medicare volume facilities.--Effective for 
        cost reporting periods beginning on or after October 1, 
        1996, low Medicare volume skilled nursing facilities, 
        as described in subsection (d), shall receive payment 
        for routine service costs as otherwise set forth in 
        subsections (e) through (j), except that they may elect 
        to receive payment on the basis of the rates described 
        in subsection (f)(4).
          ``(6) Case mix adjustments.--The Secretary may make 
        prospective adjustments to the routine payment rates to 
        account for changes in facility patient mix (case mix) 
        as the Secretary determines appropriate. Such 
        adjustments shall be made in a manner which does not 
        increase expenditures for the routine costs of skilled 
        nursing facility services beyond what would otherwise 
        occur.
    ``(g) Hold Harmless Payments.--
          ``(1) In general.--Subject to paragraphs (2) and (3), 
        a facility's per diem payment rate based on the 
        application of subsections (e) and (f) is the greater 
        of--
                  ``(A) its per diem payment amount in the base 
                year, and
                  ``(B) its base year cost per diem up to the 
                regional limit plus any exception amounts that 
                may have been granted in the base year 
                (adjusted by the market basket).
          ``(2) Limit.--The payment rate determined under 
        paragraph (1) shall not exceed the facility's cost per 
        diem incurred in the base year adjusted by the market 
        basket.
          ``(3) New entity exception.--Subparagraph (1)(A) does 
        not apply if the per diem payment amount in the base 
        year was determined on the basis of an exemption under 
        subsection (f)(4).
    ``(h) Upper Limits on Reasonable Costs.--The Secretary, in 
making determinations on the reasonable costs (both capital and 
operating) of ancillary services provided by skilled nursing 
facilities under part A, shall utilize as an upper limit, the 
carrier fee schedules applicable to such services as specified 
in sections 1834 and 1848. This subsection shall not have the 
effect of mitigating other limits on the reasonable costs of 
ancillary services currently in effect under Part A such as 
those specified in section 1861(v)(5)(A).
    ``(i) Elimination of Exceptions and Exemptions.--
Exceptions, as described in subsection (c), and exemptions, as 
described in the applicable regulations, are eliminated for 
cost reporting periods beginning on or after October 1, 
1996.''.
    (b) Consolidated Billing and Uniform Coding.--
          (1) In general.--Section 1862(a) (42 U.S.C. 1395y(a)) 
        is amended--
                  (A) by striking ``or'' at the end of 
                paragraph (14),
                  (B) by striking the period at the end of 
                paragraph (15) and adding a semicolon, and
                  (C) by inserting after paragraph (15) the 
                following:
          ``(16) which are other than physicians' services, 
        services described by sections 1861(s)(2)(K)(i) through 
        (iii), certified nurse-midwife services, qualified 
        psychologist services, and services of a certified 
        registered nurse anesthetist, and which are furnished 
        to an individual who is a resident of a skilled nursing 
        facility by an entity other than the skilled nursing 
        facility, unless the services are furnished under 
        arrangements (as defined in section 1861(w)(1)) with 
        the entity made by the skilled nursing facility; or
          ``(17) which are on a claim submitted by a skilled 
        nursing facility under this title, unless the claim 
        uses the HCFA common procedure coding system.''.
          (2) Conforming amendment.--Section 1866(a)(1)(H) (42 
        U.S.C. 1395cc(a)(1)(H)) is amended--
                  (A) by striking ``(i)'' and inserting ``(I)'' 
                and striking ``(ii)'' and inserting ``(II)'',
                  (B) by striking ``(H)'' and inserting 
                ``(H)(i)'', and
                  (C) by adding at the end the following:
    ``(ii) in the case of skilled nursing facilities which 
provide services for which payment may be made under this 
title, to have all items and services (other than physicians' 
services, and other than services described by section 
1861(s)(2)(K)(i) through (iii), certified nurse-midwife 
services, qualified psychologist services, and services of a 
certified registered nurse anesthetist)--
          ``(I) that are furnished to an individual who is a 
        resident of the skilled nursing facility, and
          ``(II) for which the individual is entitled to have 
        payment made under this title, furnished by the skilled 
        nursing facility or otherwise under arrangements (as 
        defined in section 1861(w)(1)) made by the skilled 
        nursing facility,''.
          (3) Effective date.--the amendments made by the 
        preceding paragraphs are effective for services 
        furnished on or after October 1, 1996.

SEC. 11113. FULL PROSPECTIVE PAYMENT SYSTEM FOR SKILLED NURSING 
                    FACILITIES.

    (a) In General.--Section 1888 (42 U.S.C. 1395yy) is amended 
by striking subsections (e) through (i) (as added by section 
11112(a) of this Act) and adding the following:
    ``(e) Full Prospective Payment System.--
          ``(1) In general.--The Secretary shall provide for 
        payment for all costs of extended care services 
        (including routine service costs, ancillary costs, and 
        capital related costs) in accordance with a prospective 
        payment system established by the Secretary.
          ``(2) Budget savings.--Prior to implementing the 
        prospective payment system described in paragraph (1) 
        in a budget neutral fashion, the Secretary shall 
        reduce, by 7 percent, the per diem rates for routine 
        costs, and the reasonable costs for ancillary services 
        and capital for skilled nursing facilities as such 
        rates and costs are in effect on September 30, 1998.''.
    (b) Effective Date.--The amendments made by the preceding 
subsection apply to cost reporting periods beginning on or 
after October 1, 1998.

SEC. 11114. SALARY EQUIVALENCY GUIDELINES FOR THERAPY SERVICES.

    Section 1861(v)(5) (42 U.S.C. 1395x(v)(5)) is amended--
          (1) by redesignating subparagraph (B) as subparagraph 
        (D),
          (2) in subparagraph (D), as redesignated, by adding 
        ``(B), or (C),'' after ``subparagraph (A),'',
          (3) by inserting the following after subparagraph 
        (A):
    ``(B) Salary Equivalency Guidelines for Therapy Services.--
          ``(i) In general.--Effective for services furnished 
        on or after January 1, 1996, the Secretary shall 
        establish guidelines relating to occupational therapy 
        services and speech-language pathology services, and 
        revise guidelines established under the subparagraph 
        (A) relating to respiratory therapy services and 
        physical therapy services using the methodology 
        described in clause (ii).
          ``(ii) Calculation of amounts.--The guidelines for 
        each therapy shall be equal to the sum of:
                  ``(I) the sum of an hourly salary rate, plus 
                fringe benefits, plus a rental expense factor 
                (in the same base year), and
                  ``(II) an overhead factor (excluding rental 
                expenses) equal to 28 percent of the amount 
                determined in subclause (I),
        adjusted by geographical area using the methodology 
        contained in the final regulation of the Secretary of 
        Health and Human Services published on page 44928 of 
        volume 48 of the Federal Register on September 30, 
        1983, updated annually from the base year to the 
        current year by an inflation factor.
          ``(iii) Data.--The data used in establishing the 
        guidelines under clause (ii) shall be:
                  ``(I) in the case of hourly salary rates, for 
                each therapy, the 75th percentile of salaries 
                paid to therapists working full-time in an 
                employment relationship in the area, from the 
                most recent available Bureau of Labor 
                Statistics (BLS) hospital salary data for each, 
                increased by 10 percent,
                  ``(II) in the case of fringe benefits, for 
                each therapy, an aggregate factor derived from 
                hospital cost reports ending in fiscal year 
                1991 for BLS survey areas used in subclause 
                (I),
                  ``(III) in the case of the rental expense 
                factor, for each therapy, an amount derived 
                from local area rental income data compiled by 
                the Building Owners and Managers Association 
                International for 1991, for BLS survey areas 
                used in subclause (I),
                  ``(IV) in the case of the inflation factor, 
                for each therapy, an amount equal to the 
                average of Employment Cost Indices for wages 
                and benefits of Civilian Hospital, Professional 
                Technical and Clerical Workers, and Private 
                Executives, Administrators and Managers, and 
                the Consumer Price Indices-Urban for Housing 
                and all items less food and energy, weighted by 
                the relative proportion that each component 
                represents of the guidelines amounts.
    ``(C) Use of Additional Data.--Nothing in subparagraph (B) 
shall preclude the Secretary from updating the guidelines using 
such data sources and methodology as the Secretary determine to 
be appropriate, except that any changes to the data sources 
will be made through rulemaking in a manner that does not 
increase aggregate spending for such services beyond what would 
otherwise occur.'', and
          (4) by adding at the end the following:
    ``(E) No Exception for Previous Contracts.--In applying 
limitations under section 1861(v)(5), the Secretary shall not 
recognize an exception for a provider that entered into a 
written binding contract or contingency contract with a 
therapist, provider or other organization prior to the date the 
initial guidelines are published.''.

SEC. 11115. REMOVAL OF GRADUATE MEDICAL EDUCATION, INDIRECT MEDICAL 
                    EDUCATION, AND DISPROPORTIONATE SHARE HOSPITAL 
                    PAYMENTS FROM THE CALCULATION OF THE ADJUSTED 
                    AVERAGE PER CAPITA COST.

    (a) Exclusion of Graduate Medical Education, Indirect 
Medical Education, and Disproportionate Share Hospital Payments 
From the Calculation of the Adjusted Average Per Capita Cost.--
Section 1851H(2) (as added by subtitle B of this title) is 
amended by adding at the end the following: ``Starting in 
calendar year 1998, the AAPCC shall not include estimated 
amounts that would have been paid for indirect medical 
education costs under section 1886(d)(5)(B), disproportionate 
share payment adjustments under section 1886(d)(5)(F), and 
direct graduate medical education costs under section 
1886(h).''.
    (b) Payments for Graduate Education Programs.--Section 
1851F (as added by subtitle B of this title) is amended by 
adding at the end the following:
    ``(k) Payments for Graduate Medical Education Programs.--
          ``(1) Additional payments.--
                  ``(A) Additional payment to be made.--
                Starting in calendar year 1998, each contract 
                with an eligible organization under this 
                section shall provide for an additional payment 
                for Medicare's share of allowable direct 
                graduate medical education costs incurred by 
                such organization for an approved medical 
                residency program.
                  ``(B) Limitation for risk contracts.--The sum 
                of such payments to all eligible organizations 
                having a risk contract under this section shall 
                not exceed 75 percent of the amount that would 
                otherwise have been payable to the organization 
                if the estimated amounts for direct graduate 
                medical education costs under section 1886(h) 
                had been included in the AAPCC.
          ``(2) Allowable costs.--If the eligible organization 
        has an approved program, the Secretary shall determine 
        the allowable costs as follows:
                  ``(A) Risk contracts.--In the case of an 
                eligible organization having a risk contract 
                under this section, and that incurs all or 
                substantially all of the costs of the approved 
                medical residency program, the allowable costs 
                for such program shall equal the national 
                average per resident amount times the number of 
                full-time-equivalent residents in the program.
                  ``(B) Other contracts.--In the case of other 
                eligible organizations, the allowable costs 
                shall equal the lesser of--
                          ``(i) the direct graduate medical 
                        education costs incurred by the 
                        organization, and
                          ``(ii) the national average per 
                        resident amount times the number of 
                        full-time-equivalent residents in the 
                        program.
          ``(3) Costs under contracts with hospitals.--If the 
        eligible organization has a written agreement with a 
        hospital or other entity that has an approved medical 
        residency program, the allowable costs shall include 
        such payments specified in the agreement for direct 
        graduate medical education costs incurred for resident 
        time spent in patient care related activities. 
        Allowable costs under this paragraph shall not exceed 
        75 percent of the amount that would have been included 
        in the AAPCC to account direct graduate medical 
        education costs (if such costs had not been removed by 
        the last sentence of section 1851H(2).
          ``(4) Definitions.--As used in this subsection--
                  ``(A) the terms `approved medical residency 
                program', `direct graduate medical education 
                costs', and `full-time-equivalent residents' 
                have the same meanings as under section 
                1886(h),
                  ``(B) the term `Medicare's share' means the 
                amount determined by multiplying the eligible 
                organization's allowable costs for an approved 
                medical residency program by the ratio of the 
                number of individuals enrolled with the 
                organization under this section to the total 
                number of individuals enrolled with the 
                organization,
                  ``(C) the term `national average per resident 
                amount' means an amount estimated by the 
                Secretary to equal the weighted average amount 
                that would be paid per full-time-equivalent 
                resident under section 1886(h) for the calendar 
                year (determined separately for primary care 
                residency programs (including obstetrics and 
                gynecology residency programs) and for other 
                residency programs).''.
    (c) Additional Payments to Hospitals for Managed Care 
Enrollees.--Section 1886(d) (42 U.S.C. 1395ww(d)) is amended by 
adding at the end the following:
    ``(11) Additional Payments to Hospitals for Managed Care 
Enrollees.--
          ``(A) In general.--For portions of cost reporting 
        periods occurring on or after January 1, 1998, the 
        Secretary shall provide for an additional payment 
        amount for subsection (d) hospitals for services 
        furnished to individuals who are enrolled in an 
        organization having a contract with an eligible 
        organization under part C and who are entitled to part 
        A.
          ``(B) Amount of payment.--Subject to subparagraph 
        (F), the amount of such payment shall be determined by 
        multiplying (i) the sum of the amounts determined under 
        subparagraphs (C) and (D), by (ii) the product of the 
        number of discharges determined under subparagraph (E) 
        and the estimated average per discharge amount that 
        would otherwise have been paid under section 
        1886(d)(1)(A) if the individuals had not been enrolled 
        in an organization having a contract with an eligible 
        organization under part C.
          ``(C) Indirect teaching adjustment factor.--The 
        Secretary shall determine an indirect teaching 
        adjustment factor equal to 1.11(((1+r) to the 
        nth power)-1), where `r' and `n' have the same meaning 
        as in section 1886(d)(5)(B).
          ``(D) Disproportionate share adjustment.--The 
        Secretary shall determine a disproportionate share 
        adjustment factor equal to the disproportionate share 
        adjustment percentage applicable to the hospital under 
        section 1886(d)(5)(F).
          ``(E) Determination of number of discharges.--The 
        Secretary shall determine the number of discharges as 
        equal to the lesser of--
                  ``(i) the number of discharges during the 
                current cost reporting period attributable to 
                individuals who are enrolled in an organization 
                having a risk contract and who are entitled to 
                part A of this title, and
                  ``(ii) the number of discharges paid under 
                section 1886(d) during the hospital's cost 
                reporting period beginning in fiscal year 1992 
                minus the number of discharges paid under 
                section 1886(d) during the hospital's current 
                cost reporting period.
          ``(F) Adjustment for savings.--At the beginning of 
        each calendar year, the Secretary shall make an 
        adjustment in the amounts otherwise payable under this 
        paragraph so that the estimated payments under this 
        paragraph for the discharges occurring in that calendar 
        year, together with the estimated amounts payable under 
        section 1851F for that calendar year, equal 75 percent 
        of the amounts the Secretary estimates would otherwise 
        have been payable under section 1851F during that 
        calendar year if the adjusted average per capita cost 
        determined under section 1851F included estimated 
        amounts for indirect medical education costs, 
        disproportionate share payment adjustments, and direct 
        graduate medical education costs.''.
    (d) Use of Interim Final Regulations.--The Secretary of 
Health and Human Services may issue regulations on an interim 
final basis to implement this title and the amendments made by 
this title.

SEC. 11116. SOLE COMMUNITY HOSPITALS.

    (a) Rebasing the Target Amount.--Section 1886(b)(3)(C) (42 
U.S.C. 13955ww (b)(3)(C)) is amended--
          (1) by striking ``or'' at the end of clause (iii),
          (2) in clause (iv)--
                  (A) by striking ``and each subsequent fiscal 
                year'', and
                  (B) by striking the period at the end and 
                adding a comma,
          (3) by inserting after clause (iv) the following:
          ``(v) with respect to discharges occurring in fiscal 
        year 1996, the average of--
                  ``(I) the allowable operating costs of 
                inpatient hospital services (as defined in 
                subsection (a)(4)) recognized under this title 
                for the hospital's cost reporting period (if 
                any) beginning during fiscal year 1992 
                increased (in a compounded manner) by the 
                applicable percentage increases applied to such 
                hospital under this paragraph for cost 
                reporting periods beginning in fiscal year 1993 
                and for discharges occurring in fiscal years 
                1994, 1995, and 1996, and
                  ``(II) the allowable operating costs of 
                inpatient hospital services (as defined in 
                subsection (a)(4)) recognized under this title 
                for the hospital's cost reporting period (if 
                any) beginning during fiscal year 1993 
                increased (in a compounded manner) by the 
                applicable percentage increase applied to such 
                hospital under this paragraph for discharges 
                occurring in fiscal years 1994, 1995, and 1996, 
                or
          ``(vi) With respect to discharges occurring in fiscal 
        year 1997 and each subsequent fiscal year, the target 
        amount for the preceding year (determined without 
        application of clause (viii)) increased by the 
        applicable percentage increase under subparagraph 
        (B)(iv).'', and
          (4) by adding at the end the following:
``Notwithstanding clauses (v) and (vi), the target amount with 
respect to discharges occurring in fiscal year 1996 and each 
subsequent fiscal year shall be the higher of the amount 
determined under clause (v) or (vi) (as applicable) and the 
target amount with respect to discharges occurring in fiscal 
year 1995 (as determined under clause (iv)) increased by the 
applicable percentage increase under subparagraph (B)(iv) for 
discharges occurring in fiscal year 1996. The Secretary may 
substitute more recent cost reporting periods for those 
specified in subclause (v) but no more often than every four 
fiscal years.''.
    (b) Eliminating the Volume Adjustment.--Section 
1886(d)(5)(D)(ii) (42 U.S.C. 1395ww(d)(5)(D)(ii)) is amended by 
striking ``In'' and inserting ``For cost reporting periods 
beginning before October 1, 1995, in''.

SEC. 11117. RURAL PRIMARY CARE HOSPITAL PROGRAM.

    (a) In General.--The heading to section 1820 (42 U.S.C. 
1395i-4)) is amended to read ``rural primary care hospital 
program''.
    (b) Expansion of Program to All States.--Section 1820(a)(1) 
(42 U.S.C. 1395i-4(a)(1)) is amended by striking ``not more 
than 7'' after ``shall make grants to''.
    (c) Moratorium on New Essential Access Community Hospital 
Designations.--Section 1820 (42 U.S.C. 1395i-4)) is amended--
          (1) in subsections (a)(3) and (b)(1)(C), by striking 
        ``essential access community hospitals or'' after 
        ``as'',
          (2) in subsection (c)(1)(B), by striking ``an 
        essential access community hospital'' after ``is 
        designated as'',
          (3) in subsection (d)(1), by striking ``essential 
        access community hospitals or'' after ``facilities in 
        the State as'',
          (4) in subsection (d)(2), by striking ``or an 
        essential access community hospital'' after ``rural 
        primary care hospital'',
          (5) by striking subsection (e),
          (6) in subsection (g)(1), by amending subparagraph 
        (A) to read as follows:
                  ``(A) at least one hospital that is not a 
                rural primary care hospital. and'',
          (7) in subsection (i)--
                  (A) in the heading, by striking ``Hospitals 
                or'' and ``by Secretary'',
                  (B) by striking paragraphs (1) and (2)(C),
                  (C) in paragraph (2)(A)(ii), by striking 
                ``subparagraph (B)'' and inserting ``paragraph 
                (2)'',
                  (D) by redesignating paragraph (2) as (1),
                  (E) by striking the subparagraph designation 
                ``(B)'' and inserting  ``(2)  Facilities  
                designated  by  the  Sec- retary.--'',
                  (F) by striking the heading to paragraph (1) 
                (as redesignated by subparagraph (D) of this 
                paragraph) and the subparagraph designation 
                ``(A)'' and inserting ``Facilities designated 
                by the state.--'', and
                  (G) by redesignating clauses (i) through 
                (iii) of paragraph (1) (as redesignated by 
                subparagraph (D) of this paragraph) as 
                subparagraphs (A) through (C), and
          (8) in paragraphs (1) and (2) of subsection (j), by 
        striking ``an essential access community hospital or'' 
        each time it appears.
    (d) Continuing Participation of Rural Primary Care 
Hospitals.--Section 1820(h)(1)(A) (42 U.S.C. 1395i-4(h)(1)(A)) 
(as redesignated by subsection (c)(7) of this section) is 
amended by inserting before the semicolon the following: ``(or 
in a State which the Secretary finds would receive a grant 
under such subsection during a fiscal year if funds were 
appropriated for grants under such subsection for the fiscal 
year)''.
    (e) Designation of Nonprofit or Public Hospitals.--Section 
1820(f)(1)(A) (42 U.S.C. 1395i-4(f)(1)(A)) is amended by 
inserting ``is a nonprofit or public hospital, and is'' after 
``(A)''.
    (f) Establishing a Minimum Separation Distance Between 
Facilities.--Section 1820(f)(1) (42 U.S.C. 1395i-4(f)(1)) is 
amended--
          (1) by striking ``and'' at the end of subparagraph 
        (G),
          (2) by striking the period at the end of subparagraph 
        (H) and adding a semicolon, and
          (3) by adding at the end the following:
                  ``(I) is located at least a 35-mile drive 
                from any rural primary care hospital or 
                hospital, or is certified by the State as being 
                a necessary provider of health care services to 
                residents in the area, because of local 
                geography or service patterns.''.
    (g) Removal of Requirement for Prior Compliance With 
Hospital Standards.--Section 1820(f)(1)(B) (42 U.S.C. 1395i-
4(f)(1)(B)) is amended by striking ``and had not been found, on 
the basis of a survey under section 1864, to be in violation of 
any requirement to participate as a hospital under this 
title''.
    (h) Limitation on Number of Inpatient Beds.--The matter in 
section 1820(f)(1)(F) (42 U.S.C. 1395i-4(f)(1)(F)) preceding 
clause (i) is amended by striking ``6'' and inserting ``15''.
    (i) Limitation on Length of Inpatient Stays.--Section 
1820(f) (42 U.S.C. 1395i-4(f)) is amended--
          (1) in the matter in paragraph (1)(F) preceding 
        clause (i), by striking ``subject to paragraph (4),'',
          (2) in paragraph (1)(F)(i), by striking ``72 hours'' 
        and inserting ``96 hours'', and
          (3) by striking paragraph (4).
    (j) Conforming Change.--Section 1814(a)(8) (42 U.S.C. 
1395f(a)(8)) is amended by striking ``within 72 hours'' and 
inserting ``within 96 hours''.
    (k) Permitting Rural Primary Care Hospitals To Maintain 
Swing Beds.--Section 1820(f)(3) (42 U.S.C. 1395i-4(f)(3)) is 
amended--
          (1) in the first sentence, by striking everything 
        after ``are used for the furnishing of extended care 
        services'' up to the period, and
          (2) by amending the second sentence to read as 
        follows: ``Nothing in this subsection shall be 
        construed to prohibit a rural primary care hospital 
        from entering into an agreement under section 1883 
        under which its facilities are used for the furnishing 
        of extended care services.''.
    (l) Conforming Change.--Section 1883 (42 U.S.C. 1395tt) is 
amended by striking ``hospital'' each place it appears and 
inserting ``hospital or rural primary care hospital''.
    (m) Change in Payment Methodology.--Section 1814(l)(1) (42 
U.S.C. 1395f(l)(1)) is amended by striking ``services--'' and 
all that follows and inserting ``services is the reasonable 
cost of the rural primary care hospital in providing such 
services, as determined under section 1861(v).''.
    (n) Elimination of Deadline for Development of Prospective 
Payment System.--Section 1814(l) (42 U.S.C. 1395f(l)(1)) is 
amended--
          (1) by striking paragraph (2), and
          (2) by striking ``(l)(1)'' and inserting ``(l)''.
    (o) No Change in Payment to Existing Essential Access 
Community Hospitals.--Clauses (iii)(III) and (v) of Section 
1886(d)(5)(D) (42 U.S.C. 1395ww(d)(5)(D)) are each amended by--
          (1) inserting ``was'' after ``is located in a rural 
        area and'', and
          (2) inserting ``as in effect on the day before 
        effective date of the Balanced Budget Act of 1995 for 
        Economic Growth and Fairness'' after ``section 
        1820(I)(1)''.
    (p) Conforming Amendment.--Section 1820(c)(3) (42 U.S.C. 
1395i-4(c)(3)) is amended by striking ``(i)(2)(C)'' and 
inserting ``(i)(2)'';
    (q) Technical Amendment.--Section 1820(f)(1)(A) (42 U.S.C. 
1395i-4(f)(1)(A)) is amended by striking ``section 
1866(d)(2)(D)'' and inserting ``section 1886(d)(2)(D)''.

SEC. 11118. RESPITE BENEFIT.

    (a) Entitlement.--Section 1832(a)(2) (42 U.S.C. 
1395k(a)(2)) is amended by--
          (1) striking ``and'' at the end of subparagraph (I),
          (2) striking the period at the end of subparagraph 
        (J) and inserting ``; and'', and
          (3) inserting at the end the following new 
        subparagraph:
                  ``(K) respite services for no more than 32 
                hours each year''.
    (b) Conditions and Limitations on Payment.--
          (1) Payment rate.--Section 1833(a)(2) (42 U.S.C. 
        13951(a)(2)) is amended by--
                  (A) adding a new subparagraph (G) to read as 
                follows:
                  ``(G)(i) with respect to respite services, 
                payment shall be made at a rate equal to $7.50 
                per hour for 1996 and at a rate to be 
                determined by the Secretary in subsequent 
                years; and
                  ``(ii) notwithstanding any provisions of 
                section 1861(v), in the case of respite 
                services furnished by a home health agency (or 
                other organization designated by the Secretary 
                pursuant to regulations), payment to the agency 
                or other organization for respite services may 
                not exceed 110 percent of the hourly respite 
                allowance times the number of hours of respite 
                for which the agency authorizes payment.''
          (2) Conditions of payment.--Section 1835(a)(2) (42 
        U.S.C. 1395n-(a)(2)) is amended by--
                  (A) striking ``and'' at the end of 
                subparagraph (E),
                  (B) striking the period at the end of 
                subparagraph (F) and inserting ``; and'', and
                  (C) inserting at the end the following new 
                subparagraph:
                  ``(G) In the case of respite services, that 
                the individual for whom payment is claimed is 
                severely impaired due to irreversible dementia 
                (the individual has scored three or more errors 
                on the Short Portable Mental Status 
                Questionnaire) and either needs assistance in 
                at least one out of five activities of daily 
                living (bathing, dressing, transferring, 
                toileting, and eating) or in at least one out 
                of four instrumental activities of daily living 
                (meal preparation, medication management, money 
                management, and telephoning), or needs constant 
                supervision because of one or more behavioral 
                problems.''
          (3) Family designation of respite services provider 
        and care giver.--Section 1835(a)(2) (42 U.S.C. 
        1295n(a)(2)) is amended by--
                  (A) by adding at the end the following new 
                sentences: ``In the case of respite services 
                which are the subject of the certification 
                described in subparagraph (G), the entity or 
                individual providing the care for which respite 
                is sought shall designate a respite services 
                caregiver either through a home health agency 
                or (if the Secretary designates other 
                organizations to provide or arrange for such 
                services) other organization. The agency or 
                organization shall determine the amount of 
                respite entitlement remaining in the calendar 
                year and inform the entity or individual of the 
                extent to which respite services may be 
                authorized. When services have been provided, 
                the entity or individual shall inform the 
                agency or organization, which shall then make 
                payment to the caregiver. Where additional 
                payment is made on behalf of the beneficiary, 
                the agency or organization shall assure the 
                entity or individual is informed of the limits 
                applicable to such amount. No payment may be 
                made under this title for respite services if 
                the charge to the patient per hour for care by 
                respite aides exceeds by more than two dollars 
                the hourly rates established under this 
                title.''
    (c) Definitions.--Section 1861 (42 U.S.C. 1395x) is 
amended--
          (1) in subsection (m)--
                  (A) by striking ``and'' at the end of 
                paragraph (6);
                  (B) by adding ``and'' at the end of paragraph 
                (7); and
                  (C) by inserting after paragraph (7) the 
                following:
          ``(8) respite services as described in subsection 
        (oo);'',
          (2) in subsection (o)--
                  (A) by striking ``and'' at the end of 
                paragraph (6);
                  (B) by adding ``and'' at the end of paragraph 
                (7); and
                  (C) by inserting after paragraph (7) the 
                following:
          ``(8) agrees to provide or arrange for respite 
        services as described in subsection (oo);'', and
          (3) by adding at the end the following:
    ``(oo) Respite Services; Respite Aides; Respite 
Providers.--
          ``(1) Respite services.--The term `respite services' 
        means temporary care provided to individuals who meet 
        the requirements of section 1835(a)(2) for the purposes 
        of ensuring periodic time-off for co-resident primary 
        informal caregivers. Although respite providers may 
        provide assistance with personal care and/or household 
        maintenance activities, their primary function is to 
        provide protective supervision for persons with 
        Alzheimer's and related dementias whose memory, 
        orientation, judgment, and reasoning abilities have 
        become so impaired that, for safety's sake , they 
        require the constant attention or close physical 
        proximity of another person at all or almost all hours 
        of the day or night.
          ``(2) Respite aides.--The term `respite aides' means 
        individuals who have been designated by the Secretary 
        as qualified to act as caregivers for purposes of 
        providing the services described in paragraph (1). 
        Respite aides may be nurse aides as identified in 
        section 1819, home health aides as identified in 
        section 1891, or other individuals licensed by the 
        State or recognized by the Secretary as having the 
        skills necessary to provide such services.
          ``(3) Respite providers.--The term `respite 
        providers' means organizations identified by the 
        Secretary in regulations as qualified to provide or 
        arrange for respite services under this title. The 
        Secretary may establish by regulation any requirements 
        for respite providers as the Secretary determines 
        appropriate.''.
    (d) Payment From Supplementary Medical Insurance Trust Fund 
for Respite Services Furnished to Individuals With Only 
Hospital Insurance Coverage.--(Section 1812(a) (42 U.S.C. 
1395(a)) is amended by--
          (1) striking ``and'' and the end of paragraph (3),
          (2) striking the period at the end of paragraph (4), 
        and inserting ''; and'', and
          (3) inserting at the end the following new paragraph:
          ``(5) respite services, described in section 
        1832(a)(2)(K), except that such services shall be 
        furnished under the Supplementary Medical Insurance 
        Program.''
    (e) Exclusion of Additional Part B Costs From Determination 
of Part B Monthly Premium.--Section 1839(a)(5) (42 U.S.C. 
1395r(a)), as added by section 11147(f) of this Act, is further 
amended by--
          (1) inserting ``and Respite Benefit'' after ``Home 
        Health'', and
          (2) inserting before the period the following:
        ``and for respite services as described in section 
        1832(a)(2)(K).''
    (f) Sunset.--The amendments made by this shall be effective 
for services furnished through fiscal year 2005.

                 PART 2--PROVISIONS RELATING TO PART B

SEC. 11121. PAYMENTS FOR PHYSICIANS' SERVICES.

    (a) Establishing Update to Conversion Factor To Match 
Spending Under Sustainable Growth Rate.--
          (1) Update.--
                  (A) In general.--Section 1848(d)(3) (42 
                U.S.C. 1395w-4(d)(3)) is amended to read as 
                follows:
          ``(3) Update.--
                  ``(A) In general.--Unless Congress otherwise 
                provides, subject to subparagraph (E), for 
                purposes of this section the update for a year 
                (beginning with 1997) is equal to the product 
                of--
                          ``(i) 1 plus the Secretary's estimate 
                        of the percentage increase in the MEI 
                        (described in section 1842(i)(3)) for 
                        the year (divided by 100), and
                          ``(ii) 1 plus the Secretary's 
                        estimate of the update adjustment 
                        factor for the year (divided by 100),
                minus 2 and multiplied by 100.
                  ``(B) Update adjustment factor.--The `update 
                adjustment factor' for a year is equal to the 
                quotient of--
                          ``(i) the difference between (I) the 
                        sum of the allowed expenditures for 
                        physicians' services furnished during 
                        each of the years 1995 through the year 
                        involved and (II) the sum of the amount 
                        of actual expenditures for physicians' 
                        services furnished during each of the 
                        years 1995 through the previous year, 
                        divided by
                          ``(ii) the Secretary's estimate of 
                        allowed expenditures for physicians' 
                        services furnished during the year.
                  ``(C) Determination of allowed 
                expenditures.--For purposes of subparagraph 
                (B), allowed expenditures for physicians' 
                services shall be determined as follows (as 
                estimated by the Secretary):
                          ``(i) 1995.--In the case of allowed 
                        expenditures for 1995, such 
                        expenditures shall be equal to actual 
                        expenditures for services furnished 
                        during the 12-month period ending with 
                        June 30, 1995.
                          ``(ii) 1996 and later years.--In the 
                        case of allowed expenditures for 1996 
                        and each subsequent year, such 
                        expenditures shall be equal to allowed 
                        expenditures for the previous year, 
                        increased by the sustainable growth 
                        rate under subsection (f) for the 
                        fiscal year which begins during the 
                        year.
                  ``(D) Determination of actual expenditures.--
                For purposes of subparagraph (B), the amount of 
                actual expenditures for physicians' services 
                furnished during a year shall be equal to the 
                amount of expenditures for such services during 
                the 12-month period ending with June of the 
                previous year.
                  ``(E) Restriction on variation from medicare 
                economic index.--Notwithstanding the amount of 
                the update adjustment factor determined under 
                subparagraph (B), the update in the conversion 
                factor under this paragraph for a year may not 
                be--
                          ``(i) greater than 103 percent of 1 
                        plus the Secretary's estimate of the 
                        percentage increase in the MEI 
                        (described in section 1842(i)(3)) for 
                        the year (divided by 100), minus 1 and 
                        multiplied by 100, or
                          ``(ii) less than 93 percent of 1 plus 
                        the Secretary's estimate of the 
                        percentage increase in the MEI 
                        (described in section 1842(i)(3)) for 
                        the year (divided by 100), minus 1 and 
                        multiplied by 100.''.
                  (B) Effective date.--The amendments made by 
                subparagraph (A) apply to physicians' services 
                furnished on or after January 1, 1997.
          (2) Conforming amendments.--
                  (A) Section 1848(d)(2).--Section 
                1848(d)(2)(A) (42 U.S.C. 1395w-4(d)(2)(A)) is 
                amended--
                          (i) in the matter preceding clause 
                        (i)--
                                  (I) by striking ``(or 
                                updates) in the conversion 
                                factor (or factors)'' and 
                                inserting ``in the conversion 
                                factor'',
                                  (II) by striking ``(beginning 
                                with 1991)'' and inserting 
                                ``(beginning with 1996)'', and
                                  (III) by striking the second 
                                sentence,
                          (ii) by amending clause (ii) to read 
                        as follows:
                          ``(ii) such factors as enter into the 
                        calculation of the update adjustment 
                        factor as described in paragraph 
                        (3)(B); and '',
                          (iii) by amending clause (iii) to 
                        read as follows:
                          ``(iii) access to services.'',
                          (iv) by striking clauses (iv), (v), 
                        and (vi), and
                          (v) by striking the last sentence.
                  (B) Section 1848(d)(2)(b).--Section 
                1848(d)(2)(B) (42 U.S.C. 1395w-4(d)(2)(B)) is 
                amended--
                          (i) by striking ``and'' at the end of 
                        clause (iii),
                          (ii) by striking the period at the 
                        end of clause (iv) and adding ``; 
                        and'', and
                          (iii) by adding at the end the 
                        following new clause:
                          ``(v) changes in volume or intensity 
                        of services.''.
                  (C) Redesignation of subparagraph.--Section 
                1848(d)(2) (42 U.S.C. 1395w-4(d)(2)) is further 
                amended--
                          (i) by striking subparagraphs (C), 
                        (D), and (E),
                          (ii) by redesignating striking 
                        subparagraph (F) as subparagraph (C), 
                        and
                          (iii) in subparagraph (C), as 
                        redesignated, by striking ``(or 
                        updates) in the conversion factor (or 
                        factors)'' and inserting ``in the 
                        conversion factor''.
    (b) Replacement of Volume Performance Standard With 
Sustainable Growth Rate.--
          (1) In general.--Section 1848(f) (42 U.S.C. 1395w-
        4(f)) is amended by striking paragraphs (2) through (5) 
        and inserting the following:
          ``(2) Specification of growth rate.--
                  ``(A) Fiscal year 1996.--The sustainable 
                growth rate for all physicians' services for 
                fiscal year 1996 shall be equal to the product 
                of--
                          ``(i) 1 plus the Secretary's estimate 
                        of the percentage increase in the MEI 
                        (described in section 1842(i)(3)) for 
                        1996 (divided by 100),
                          ``(ii) 1 plus the Secretary's 
                        estimate of the percentage change 
                        (divided by 100) in the average number 
                        of individuals enrolled under this part 
                        (other than private plan enrollees) 
                        from fiscal year 1995 to fiscal year 
                        1996,
                          ``(iii) 1 plus the Secretary's 
                        estimate of the projected percentage 
                        growth in real gross domestic product 
                        per capita (divided by 100) from fiscal 
                        year 1995 to fiscal year 1996, plus 1 
                        percentage point, and
                          ``(iv) 1 plus the Secretary's 
                        estimate of the percentage change 
                        (divided by 100) in expenditures for 
                        all physicians' services in fiscal year 
                        1996 (compared with fiscal year 1995) 
                        which will result from changes in law 
                        (including the Balanced Budget Act of 
                        1995 for Economic Growth and Fairness), 
                        determined without taking into account 
                        estimated changes in expenditures due 
                        to changes in the volume and intensity 
                        of physicians' services or change in 
                        expenditures resulting from changes in 
                        the update to the conversion factor 
                        under subsection (d),
                minus 1 and multiplied by 100.
                  ``(B) Subsequent years.--The sustainable 
                growth rate for all physicians' services for 
                fiscal year 1997 and each subsequent year shall 
                be equal to the product of--
                          ``(i) 1 plus the Secretary's estimate 
                        of the percentage increase in the MEI 
                        for the fiscal year involved (described 
                        in section 1842(i)(3)) (divided by 
                        100),
                          ``(ii) 1 plus the Secretary's 
                        estimate of the percentage change 
                        (divided by 100) in the average number 
                        of individuals enrolled under this part 
                        (other than private plan enrollees) 
                        from the previous fiscal year to the 
                        fiscal year involved,
                          ``(iii) 1 plus the Secretary's 
                        estimate of the projected percentage 
                        growth in real gross domestic product 
                        per capita (divided by 100) from the 
                        previous fiscal year to the fiscal year 
                        involved, plus 1 percentage point, and
                          ``(iv) 1 plus the Secretary's 
                        estimate of the percentage change 
                        (divided by 100) in expenditures for 
                        all physicians' services in the fiscal 
                        year (compared with the previous fiscal 
                        year) which will result from changes in 
                        law, determined without taking into 
                        account estimated changes in 
                        expenditures due to changes in the 
                        volume and intensity of physicians' 
                        services or change in expenditures 
                        resulting from changes in the update to 
                        the conversion factor under subsection 
                        (d), minus 1 and multiplied by 100.
          ``(3) Definitions.--In this subsection:
                  ``(A) Services included in physicians' 
                services.--The term `physicians' services' 
                includes other items and services (such as 
                clinical diagnostic laboratory test and 
                radiology services), specified by the 
                Secretary, that are commonly performed or 
                furnished by a physician or in a physician's 
                office, but does not include services furnished 
                to an eligible organization enrollee.
                  ``(B) Eligible organization enrollee.--The 
                term `eligible organization enrollee' means, 
                with respect to a fiscal year, an individual 
                enrolled under this part who has elected to 
                receive benefits under this title through an 
                eligible organization with a contract under 
                part C (and, through 2000, enrollment with an 
                organization with a contract under section 
                1876(h).''.
          (2) Conforming amendments.--Section 1848(f) (42 
        U.S.C. 1395w-4(f)) is amended--
                  (A) in the heading, by striking ``volume 
                performance standard rates of increase'' and 
                inserting ``sustainable growth rate'',
                  (B) in paragraph (1)--
                          (i) in the heading, by striking 
                        ``volume performance standard rates of 
                        increase'' and inserting ``sustainable 
                        growth rate'',
                          (ii) in subparagraph (A), in the 
                        matter preceding clause (i), by 
                        striking ``performance standard rates 
                        of increase'' and inserting 
                        ``sustainable growth rate'', and
                          (iii) in subparagraph (A), by 
                        striking ``HMO enrollees'' each place 
                        it appears and inserting ``eligible 
                        organization enrollees'',
                  (C) in subparagraph (B), by striking 
                ``performance standard rates of increase'' and 
                inserting ``sustainable growth rate'', and
                  (D) in subparagraph (C)--
                          (i) in the heading, by striking 
                        ``performance standard rates of 
                        increase'' and inserting ``sustainable 
                        growth rate'',
                          (ii) in the first sentence, by 
                        striking ``with 1991), the performance 
                        standard rates of increase'' and all 
                        that follows through the first period 
                        and inserting ``with 1997), the 
                        sustainable growth rate for the fiscal 
                        year beginning in that year.'', and
                          (iii) in the second sentence, by 
                        striking ``January 1, 1990, the 
                        performance standard rate of increase 
                        under subparagraph (D) for fiscal year 
                        1990'' and inserting ``January 1, 1997, 
                        the sustainable growth rate for fiscal 
                        year 1997''.
    (c) Establishment of Single Conversion Factor for 1996.--
          (1) In general.--Section 1848(d)(1) (42 U.S.C. 1395w-
        4(d)(1)) is amended--
                  (A) by redesignating subparagraph (C) as 
                subparagraph (D), and
                  (B) by inserting after subparagraph (B) the 
                following:
                          ``(C) Special rule for 1996.--For 
                        1996, the conversion factor under this 
                        subsection shall be $35.42 for all 
                        physicians' services, except that, for 
                        surgical services (as defined in 
                        subsection (j)(i), the conversion 
                        factor for 1996 shall be $38.10.''.
          (2) Conforming amendments.--Section 1848 (42 U.S.C. 
        1395w-4) is amended--
                  (A) by striking ``(or factors)'' each place 
                it appears in subsection (d)(1)(A) and 
                (d)(1)(D)(ii) (as redesignated by paragraph 
                (1)(a),
                  (B) in subsection (d)(1)(A), by striking ``or 
                updates'',
                  (C) in subsection (d)(1)(D)(ii) (as 
                redesignated by paragraph (1)(A)), by striking 
                ``(or updates)'', and
                  (D) in subsection (i)(1)(C), by striking 
                ``conversion factors'' and inserting ``the 
                conversion factor''.

SEC. 11122. PRACTICE EXPENSE RELATIVE VALUE UNITS.

    (a) Extension to 1997.--Section 1848(c)(2)(E)(i) (42 U.S.C. 
1395w-4(c)(2)(E)(i)) is amended--
          (1) by striking ``and'' at the end of subclause (II),
          (2) by striking the period at the end of subclause 
        (III) and inserting ``, and'', and
          (3) by inserting at the end the following:
                  ``(IV) 1997, by an additional 25 percent of 
                such excess.''
    (b) Change in Floor on Reductions and Services Covered.--
Clauses (ii) and (iii)(II) of Section 1848(c)(2)(E) (42 U.S.C. 
1395w-4(c)(2)(E)) are each amended by inserting ``(or 115 
percent in the case of 1997)'' after ``128 percent''.

SEC. 11123. SINGLE FEE FOR SURGERY.

    (a) In General.--Section 1848(a) (42 U.S.C. 1395w-4(a)) is 
amended by adding at the end the following:
          ``(5) Single fee for surgery.--
                  ``(A) General rule.--Payment under this part 
                for surgical services (as defined by the 
                Secretary under subsection (j)(1)), when a 
                separate payment is also made for the services 
                of a physician or physician assistant acting as 
                an assistant at surgery, may not (except as 
                provided in subparagraph (B)), when added to 
                the separate payment made for the services of 
                that other practitioner, exceed the amount that 
                would be paid for the surgical services if a 
                separate payment were not made for the services 
                of that practitioner.
                  ``(B) Exceptions.--The Secretary may specify 
                surgery procedures or situations to which 
                subparagraph (A) shall not apply.''
    (b) Conforming Amendment.--Section 1848(g)(2)(D) (42 U.S.C. 
1395w-4(g)(2)(D)) is amended by inserting ``(or the lower 
amount under subsection (a)(5))'' after ``subsection (a)''.
    (c) Effective Date.--The amendments made by the preceding 
subsections apply to services furnished on or after January 1, 
1996.

SEC. 11124. INCENTIVES TO CONTROL HIGH VOLUME FOR IN-HOSPITAL 
                    PHYSICIANS' SERVICES.

    (a) In General.--
          (1) Limitations described.--Part B of title XVIII is 
        amended by adding at the end the following:

``SEC. 1849. INCENTIVES TO CONTROL HIGH VOLUME FOR IN-HOSPITAL 
                    PHYSICIANS' SERVICES.

    ``(a) Services Subject to Reduction.--
          ``(1) Determination of hospital-specific per 
        admission relative value.--Not later than October 1 of 
        each year (beginning with 1998), the Secretary shall 
        determine for each hospital--
                  ``(A) the hospital-specific per admission 
                relative value under subsection (b)(2) for the 
                following year, and
                  ``(B) whether such hospital-specific relative 
                value is projected to exceed the allowable 
                average per admission relative value applicable 
                to the hospital for the following year under 
                subsection (b)(1).
          ``(2) Reduction for services at hospitals exceeding 
        allowable average per admission relative value.--If the 
        Secretary determines (under paragraph (1)) that a 
        medical staff's hospital-specific per admission 
        relative value for a year (beginning with 1999) is 
        projected to exceed the allowable average per admission 
        relative value applicable to the medical staff for the 
        year, the Secretary shall reduce (in accordance with 
        subsection (c)) the amount of payment otherwise 
        determined under this part for each physician's service 
        furnished during the year to an inpatient of the 
        hospital by an individual who is a member of the 
        hospital's medical staff.
          ``(3) Timing of determination; notice to medical 
        staffs and carriers.--Not later than October 1 of each 
        year (beginning with 1998), the Secretary shall notify 
        the medical executive committee of each hospital (as 
        set forth in the Standards of the Joint Commission on 
        the Accreditation of Health Organizations) of the 
        determinations made with respect to the medical staff 
        under paragraph (1).
    ``(b) Determination of Allowable Average per Admission 
Relative Value and Hospital--Specific per Admission Relative 
Values.--
          ``(1) Allowable average per admission relative 
        value.--
                  ``(A) Urban hospitals.--In the case of a 
                hospital located in an urban area, the 
                allowable average per admission relative value 
                established under this subsection for 1999 and 
                2000 is equal to 125 percent and for years 
                after 2000 is 120 percent of the median of 1997 
                hospital-specific per admission relative values 
                determined under paragraph (2) for all hospital 
                medical staffs.
                  ``(B) Rural hospitals.--In the case of a 
                hospital located in a rural area, the allowable 
                average per admission relative value 
                established under this subsection for 1999 and 
                each succeeding year, is equal to 140 percent 
                of the median of the 1997 hospital-specific per 
                admission relative values determined under 
                paragraph (2) for all hospital medical staffs.
          ``(2) Hospital-specific per admission relative 
        value.--
                  ``(A) In general.--The hospital-specific per 
                admission relative value projected for a 
                hospital (other than a teaching hospital) for a 
                calendar year, shall be equal to the average 
                per admission relative value (as determined 
                under section 1848(c)(2)) for physicians' 
                services furnished to inpatients of the 
                hospital by the hospital's medical staff 
                (excluding interns and residents) during the 
                second year preceding such calendar year, 
                adjusted for variations in case-mix and 
                disproportionate share status among hospitals 
                (as determined by the Secretary under 
                subparagraph (C)).
                  ``(B) Special rule for teaching hospitals.--
                The hospital-specific relative value projected 
                for a teaching hospital in a calendar year 
                shall be equal to the sum of--
                          ``(i) the average per admission 
                        relative value (as determined under 
                        section 1848(c)(2)) for physicians' 
                        services furnished to inpatients of the 
                        hospital by the hospital's medical 
                        staff (excluding interns and residents) 
                        during the second year preceding such 
                        calendar year, and
                          ``(ii) the equivalent per admission 
                        relative value (as determined under 
                        section 1848(c)(2)) for physicians' 
                        services furnished to inpatients of the 
                        hospital by interns and residents of 
                        the hospital during the second year 
                        preceding such calendar year, adjusted 
                        for variations in case-mix, 
                        disproportionate share status, and 
                        teaching status among hospitals (as 
                        determined by the Secretary under 
                        subparagraph (C)). The Secretary shall 
                        determine such equivalent relative 
                        value unit per admission for interns 
                        and residents based on the best 
                        available data and may make such 
                        adjustment in the aggregate.
                  ``(C) Adjustment for teaching and 
                disproportionate share hospitals.--The 
                Secretary shall adjust the allowable per 
                admission relative values otherwise determined 
                under this paragraph to take into account the 
                needs of teaching hospitals and hospitals 
                receiving additional payments under 
                subparagraphs (F) and (G) of section 
                1886(d)(5). The adjustment for teaching status 
                or disproportionate share shall not be less 
                than zero.
    ``(c) Amount of Reduction.--The amount of payment otherwise 
made under this part for a physician's service that is subject 
to a reduction under subsection (a) during a year shall be 
reduced 15 percent, in the case of a service furnished by a 
member of the medical staff of the hospital for which the 
Secretary determines under subsection (a)(1) that the hospital 
medical staff's projected relative value per admission exceeds 
the allowable average per admission relative value.
    ``(d) Reconciliation of Reductions Based on Hospital-
Specific Relative Value per Admission With Actual Relative 
Values.--
          ``(1) Determination of actual average per admission 
        relative value.--Not later than October 1 of each year 
        (beginning with 2000), the Secretary shall determine 
        the actual average per admission relative value (as 
        determined pursuant to section 1848(c)(2)) for the 
        physicians' services furnished by members of a 
        hospitals medical staff to inpatients of the hospital 
        during the previous year, on the basis of claims for 
        payment for such services that are submitted to the 
        Secretary not later than 90 days after the last day of 
        such previous year. The actual average per admission 
        relative value shall be adjusted by the appropriate 
        case-mix, disproportionate share factor, and teaching 
        factor for the hospital medical staff (as determined by 
        the Secretary under subsection (b)(2)(C)). 
        Notwithstanding any other provision of this title, no 
        payment may be made under this part for any physician's 
        service furnished by a member of a hospital's medical 
        staff to an inpatient of the hospital during a year 
        unless such claim is submitted to the Secretary for 
        payment for such service not later than 90 days after 
        the last day of the year.
          ``(2) Reconciliation with reductions taken.--In the 
        case of a hospital for which the payment amounts for 
        physicians' services furnished by members of the 
        hospital's medical staff to inpatients of the hospital 
        were reduced under this section for a year--
                  ``(A) if the actual average per admission 
                relative value for such hospital's medical 
                staff during the year (as determined by the 
                Secretary under paragraph (1)) did not exceed 
                the allowable average per admission relative 
                value applicable to the hospital's medical 
                staff under subsection (b)(1) for the year, the 
                Secretary shall reimburse the fiduciary agent 
                for the medical staff by the amount by which 
                payments for such services were reduced for the 
                year under subsection (c), including interest 
                at an appropriate rate determined by the 
                Secretary;
                  ``(B) if the actual average per admission 
                relative value for such hospital's medical 
                staff during the year exceeded the allowable 
                average per admission relative value applicable 
                to the hospital's medical staff under 
                subsection (a)(1) for the year, the Secretary 
                shall reimburse the fiduciary agent for the 
                medical staff the amount withheld under 
                subsection (c) multiplied by the `final ratio', 
                including interest at an appropriate rate 
                determined by the Secretary. The final ratio 
                described in the previous sentence shall be 
                determined by dividing the difference between 
                the initial ratio and 0.85, by 0.15, where the 
                initial ratio is determined by dividing the 
                medical staff's allowable average per admission 
                relative value for a year (as determined under 
                subsection (a)(1)) by the medical staff's 
                actual hospital-specific per admission relative 
                value for such year, but in no case shall the 
                initial ratio be less than 0.85.
          ``(3) Medical executive committee of a hospital.--
        Each medical executive committee of a hospital whose 
        medical staff is projected to exceed the allowable 
        relative value per admission for a year, shall have one 
        year from the date of notification that such medical 
        staff is projected to exceed the allowable relative 
        value per admission to designate a fiduciary agent for 
        the medical staff to receive and disburse any 
        appropriate withhold amount made by the carrier.
          ``(4) Alternative reimbursement to members of 
        staff.--At the request of a fiduciary agent for the 
        medical staff, if the fiduciary agent for the medical 
        staff is owed the reimbursement described in paragraph 
        (2)(B) for excess reductions in payments during a year, 
        the Secretary shall make such reimbursement to the 
        members of the hospital's medical staff, on a pro-rata 
        basis according to the proportion of expenditures for 
        physicians' services furnished to inpatients of the 
        hospital during the year that were furnished by each 
        member of the medical staff.
      ``(e) Definitions.--In this section, the following 
definitions apply:
          ``(1) Medical staff.--An individual furnishing a 
        physician's service is considered to be on the medical 
        staff of a hospital--
                  ``(A) if (in accordance with requirements for 
                hospitals established by the Joint Commission 
                on Accreditation of Health Organizations)--
                          ``(i) the individual is subject to 
                        bylaws, rules, and regulations 
                        established by the hospital to provide 
                        a framework for the self-governance of 
                        medical staff activities,
                          ``(ii) subject to such bylaws, rules, 
                        and regulations, the individual has 
                        clinical privileges granted by the 
                        hospital's governing body, and
                          ``(iii) under such clinical 
                        privileges, the individual may provide 
                        physicians' services independently 
                        within the scope of the individual's 
                        clinical privileges, or
                  ``(B) if such physician provides at least one 
                service to a medicare beneficiary in such 
                hospital.
          ``(2) Rural area; urban area.--The terms `rural area' 
        and `urban area' have the meaning given such terms 
        under section 1886(d)(2)(D).
          ``(3) Teaching hospital.--The term `hospital' means a 
        hospital which has a teaching program approved as 
        specified in section 1861(b)(6).
          ``(4) Hospital.--The term `hospital' means a 
        subsection (d) hospital as defined in section 1886(d).
          ``(5) Physicians' services.--The term `physicians' 
        services' means those services described in section 
        1848(j)(3).
          (2) Conforming amendments.--
                  (A) Section 1833 (a).--Section 1833(a)(1)(N) 
                (42 U.S.C. 13951(a)(1)(N)) is amended by 
                inserting ``(subject to reduction under section 
                1849)'' after ``1848(a)(1)''.
                  (B) Section 1848 (a).--Section 1848(a)(1)(B) 
                (42 U.S.C. 1395w-4(a)(1)(B)) is amended by 
                striking ``this subsection,'' and inserting 
                ``this subsection and section 1849,''.
    (b) Requiring Physicians To Identify Hospital at Which 
Service Furnished.--Section 1848(g)(4)(A)(i) (42 U.S.C. 1395w-
4(g)(4)(A)(i)) is amended by striking ``beneficiary,'' and 
inserting ``beneficiary (and, in the case of a service 
furnished to an inpatient of a hospital, report the hospital 
identification number on such claim form),''.
    (c) Effective Dates.--
          (1) Subsection (a).--The amendments made by 
        subsection (a) apply to services furnished on or after 
        January 1, 1999.
          (2) Subsection (b).--The amendments made by 
        subsection (b) apply to services furnished on or after 
        January 1, 1998.

SEC. 11125. AMBULATORY SURGICAL CENTER SERVICE UPDATES.

    Section 1833(i)(2)(C) (42 U.S.C. 13951(i)(2)(C)) is 
amended--
          (1) by striking ``1996'' and inserting ``2003'', and
          (2) by inserting after the subparagraph designation 
        ``(C)'' the following: ``Notwithstanding the second 
        sentence of subparagraph (A) or the second sentence of 
        subparagraph (B), with respect to fiscal years 1996 
        through 2002, the Secretary shall increase amounts for 
        facility services by the percentage increase in the 
        consumer price index for all urban consumers (U.S. city 
        average) as estimated by the Secretary for the 12-month 
        period ending with the midpoint of the year involved, 
        reduced by two percentage points.''

SEC. 11126. OXYGEN AND OXYGEN EQUIPMENT.

    (a) In General.--Section 1834(a)(9)(C) (42 U.S.C. 
1395m(a)(9)(C)) is amended--
          (1) by striking ``and'' at the end of clause (iii),
          (2) in clause (iv)--
                  (A) by striking ``a subsequent year'' and 
                inserting ``1993, 1994, and 1995'', and
                  (B) by striking the period at the end and 
                adding ``; and'', and
          (3) by adding at the end the following:
                          ``(v) in each of year beginning with 
                        1996 is the national limited monthly 
                        payment rate computed under 
                        subparagraph (B) for the item for the 
                        year reduced by the applicable 
                        percentage described in subparagraph 
                        (D) (but in no case may the amount 
                        determined under this clause be less 
                        than 70 percent of such national 
                        limited payment rate).''.
    (b) Applicable Percentage Described.--Section 1834(a)(9) 
(42 U.S.C. 1395m(a)(9)) is amended by adding at the end the 
following:
                  ``(D) Applicable percentage described.--In 
                clause (v) of subparagraph (C), the `applicable 
                percentage' with respect to a year described in 
                that clause is--
                          ``(i) for 1996, 20 percent,
                          ``(ii) for 1997, 21\2/3\ percent,
                          ``(iii) for 1998, 23\1/3\ percent,
                          ``(iv) for 1999, 25 percent,
                          ``(v) for 2000, 26\2/3\ percent,
                          ``(vi) for 2001, 28\1/3\ percent, and
                          ``(vii) for 2002 and thereafter, 30 
                        percent.''.

SEC. 11127. PAYMENT LIMITS FOR HMOS AND CMPS WITH RISK CONTRACTS.

    (a) In General.--Section 1851F(e)(2)(C) (as added by 
subtitle B of this title) is amended--
          (1) by inserting ``, subject to adjustment to take 
        into account the provisions of the succeeding clauses'' 
        before the period,
          (2) by striking ``The annual'' and inserting ``(i) In 
        general.--The annual'', and
          (3) by adding at the end the following new clauses:
          ``(ii) Ceiling.--The portion of the annual per capita 
        rate of payment for each such class attributable to 
        payments made from the Federal Supplementary Medical 
        Insurance Trust Fund may not exceed 95 percent of the 
        following amount (unless the portion of the annual per 
        capita rate of payment for each such class attributable 
        to payments made from the Federal Hospital Insurance 
        Trust Fund is less than 95 percent of the weighted 
        national average of all adjusted average per capita 
        costs determined under paragraph (4) for that class 
        that are attributable to payments made from the Federal 
        Hospital Insurance Trust Fund):
                  ``(I) 1996.--For 1996, 150 percent of the 
                weighted national average of all adjusted 
                average per capita costs determined under 
                paragraph (4) for that class that are 
                attributable to payments made from such Trust 
                Fund, plus 80 percent of the amount by which 
                (if any) the adjusted average per capita cost 
                for that class exceeds 150 percent of that 
                weighted national average.
                  ``(II) 1997.--For 1997, 150 percent of the 
                weighted national average of all adjusted 
                average per capita costs determined under 
                paragraph (4) for that class that are 
                attributable to payments made from such Trust 
                Fund, plus 60 percent of the amount by which 
                (if any) the adjusted average per capita cost 
                for that class exceeds 150 percent of that 
                weighted national average.
                  ``(III) 1998.--For 1998, 150 percent of the 
                weighted national average of all adjusted 
                average per capta costs determined under 
                paragraph (4) for that class that are 
                attributable to payments made from such Trust 
                Fund, plus 40 percent of the amount by which 
                (if any) the adjusted average per capita cost 
                for that class exceeds 150 percent of that 
                weighted national average.
                  ``(IV) 1999.--For 1999, 150 percent of the 
                weighted national average of all adjusted 
                average per capita costs determined under 
                paragraph (4) for that class that are 
                attributable to payments made from such Trust 
                Fund, plus 20 percent of the amount by which 
                (if any) the adjusted average per capita cost 
                for that class exceeds 150 percent of that 
                weighted national average.
                  ``(V) 2000 and later years.--For 2000 and 
                each succeeding year (subject to the 
                establishment by the Secretary of alternative 
                limits under clause (vi)), 150 percent of the 
                weighted national average of all adjusted 
                average per capita costs determined under 
                paragraph (4) for that class that are 
                attributable to payments made from such Trust 
                Fund.
          ``(iii) Floor.--For 1996 and succeeding years, the 
        portion of the annual per capita rate of payment for 
        each such class attributable to payments made from the 
        Federal Supplementary Medical Insurance Trust Fund may 
        not be less than 80 percent of 95 percent of the 
        weighted national average of all adjusted average per 
        capita costs determined under paragraph (4) for that 
        class that are attributable to payments made from such 
        Trust Fund, unless the portion of the annual per capita 
        rate of payment for each such class attributable to 
        payments made from the Federal Hospital Insurance Trust 
        Fund is greater than 95 percent of the weighted 
        national average of all adjusted average per capita 
        costs determined under paragraph (4) for that class 
        that are attributable to payments made from the Federal 
        Hospital Insurance Trust Fund.
          ``(iv) Future revisions.--For 2001 and succeeding 
        years, the Secretary may revise any of the percentages 
        otherwise applicable during a year under the preceding 
        clauses (other than clause (i)), but only if the 
        aggregate payments made under this title to eligible 
        organizations under risk-sharing contracts during the 
        year is not greater than the aggregate payments that 
        would have been made under this title to such 
        organizations during the year if the Secretary had not 
        revised the percentages.
          ``(v) Disregard of esrd costs.--For purposes of 
        clauses (ii) and (iii), in determining the weighted 
        average of all adjusted average per capita costs 
        determined under paragraph (4) for a class, the 
        Secretary shall not take into account any costs 
        associated with individuals entitled to benefits under 
        this title under section 226A.''.
    (b) Conforming Amendment.--Section 1851F(e) (as added by 
subtitle B of this title)) is amended by inserting ``, adjusted 
to take into account the limitations imposed by clauses (ii) 
through (iv) of paragraph (2)(C)'' before the period.

SEC. 11128. WAIVE COST-SHARING FOR MAMMOGRAPHY.--

    (a) Diagnostic Mammography.--Section 1861(s) (42 U.S.C. 
1395x(s)) is amended--
          (1) in paragraph (3), by striking ``including 
        diagnostic mammography if conducted by a facility that 
        has a certificate (or provisional certificate) issued 
        under section 354 of the Public Health Service Act'',
          (2) by striking ``and'' at the end of paragraph (15),
          (3) by striking the period at the end of paragraph 
        (16) and inserting ``; and'', and
          (4) by adding at the end the following:
          ``(17) diagnostic mammography, if conducted by a 
        facility that has a certificate (or provisional 
        certificate) issued under section 354 of the Public 
        Health Service Act.''.
    (b) Payment for Screening Mammography.--Section 
1834(c)(1)(C) (42 U.S.C. 1395m(c)(1)(C)) is amended by striking 
``, subject to the deductible established under section 
1833(b),'' and ``80 percent of''.
    (c) Waiver of Deductible.--The first sentence of section 
1833(b) (42 U.S.C. 1395l(b)) is amended by--
          (1) striking ``and'' before ``(4)'', and
          (2) inserting the following before the period: ``, 
        and (5) such deductible shall not apply with respect to 
        screening and diagnostic mammography described in 
        section 1861(s)(13) and section 1861(s)(17).''
    (d) Waiver of Coinsurance.--Section 1833(a)(1) (42 U.S.C. 
1395l(a)(1)) is amended by--
          (1) striking ``and'' at the end of clause (O),
          (2) inserting after clause (P) the following: ``, and
          ``(Q) with respect to diagnostic mammography 
        described in section 1861(s)(17), the amount paid shall 
        be 100 percent of the fee schedule amount provided 
        under section 1848.''.
    (e) Waiver of Coinsurance in Hospital Outpatient 
Departments.--The third sentence of section 1866(a)(2)(A) (42 
U.S.C. 1395cc(a)(2)(A)) is amended by inserting after 
``1861(s)(10)(A)'' the following: ``, with respect to items and 
services described in section 1861(s)(13), with respect to 
items and services described in section 1861(s)(17),''.
    (f) Effective Date.--The amendments made by the preceding 
subsections apply to services furnished on or after January 1, 
1997.

SEC. 11129. ANNUAL MAMMOGRAMS.

    (a) Providing Annual Screening Mammography for Women Over 
Age 49.--Section 1834(c)(2)(A) (42 U.S.C. 1395m) (c)(2)(A)) is 
amended--
          (1) in clause (iv), by striking ``but under 63 years 
        of age,'' and
          (2) by striking clause (v).
    (b) Effective Date.--The amendment made by subsection (a) 
applies to services furnished on or after January 1, 1997.

SEC. 11130. COVERAGE OF COLORECTAL SCREENING.

    (a) In General.--Section 1834 (42 U.S.C. 1395m) is amended 
by inserting after subsection (c) the following:
    ``(d) Frequency and Payment Limits for Screening Fecal-
Occult Blood Tests, Screening Flexible Sigmoidoscopies and 
Screening Colonoscopy.--
          ``(1) Frequency limits for screening fecal-occult 
        blood tests.--Subject to revision by the Secretary 
        under paragraph (4), no payment may be made under this 
        part for a screening fecal-occult blood test provided 
        in an individual for the purpose of early detection of 
        colon cancer if the test is performed--
                  ``(A) in the case of an individual under 65 
                years of age, more frequently than is provided 
                in a periodicity schedule established by the 
                Secretary for purposes of this subparagraph, or
                  ``(B) in the case of any other individual, 
                within the 11 months following the month in 
                which a previous screening fecal-occult blood 
                test was performed.
          ``(2) Screening flexible sigmoidoscopies.--
                  ``(A) Payment amount.--The Secretary shall 
                establish a payment amount under section 1848 
                with respect to screening flexible 
                sigmoidoscopies provided for the purpose of 
                early detection of colon cancer that is 
                consistent with payment amounts under such 
                section for similar or related services, except 
                that such payment amount shall be established 
                without regard to subsection (a)(2)(A) of such 
                section.
                  ``(B) Frequency limits.--Subject to revision 
                by the Secretary under paragraph (4), no 
                payment may be made under this part for a 
                screening flexible sigmoidoscopy provided to an 
                individual for the purpose of early detection 
                of colon cancer if the procedure is performed--
                          ``(i) in the case of an individual 
                        under 65 years of age, more frequently 
                        than is provided in a periodicity 
                        schedule established by the Secretary 
                        for purposes of this subparagraph, or
                          ``(ii) in the case of any other 
                        individual, within the 59 months 
                        following the month in which a previous 
                        screening flexible sigmoidoscopy was 
                        performed.
          ``(3) Screening colonoscopy for individuals at high 
        risk for colorectal cancer.--
                  ``(A) Payment amount.--The Secretary shall 
                establish a payment amount under section 1848 
                with respect to screening colonoscopy for 
                individuals at high risk for colorectal cancer 
                (as determined in accordance with criteria 
                established by the Secretary) provided for the 
                purpose of early detection of colon cancer that 
                is consistent with payment amounts under such 
                section for similar or related services, except 
                that such payment amount shall be established 
                without regard to subsection (a)(2)(A) of such 
                section.
                  ``(B) Frequency limit.--Subject to revision 
                by the Secretary under paragraph (4), no 
                payment may be made under this part for a 
                screening colonoscopy for individuals at high 
                risk for colorectal cancer provided to an 
                individual for the purpose of early detection 
                of colon cancer if the procedure is performed 
                within the 47 months following the month in 
                which a previous screening colonoscopy was 
                performed.
                  ``(C) Factors considered in establishing 
                criteria for determining individuals at high 
                risk.--In establishing criteria for determining 
                whether an individual is at high risk for 
                colorectal cancer for purposes of this 
                paragraph, the Secretary shall take into 
                consideration family history, prior experience 
                of cancer, a history of chronic digestive 
                disease condition, and the presence of any 
                appropriate recognized gene markers for 
                colorectal cancer.
          ``(4) Revision of frequency.--
                  ``(A) Review.--The Secretary shall review 
                periodically the appropriate frequency for 
                performing screening fecal-occult blood tests, 
                screening flexible sigmoidoscopies, and 
                screening colonoscopy based on age and such 
                other factors and the Secretary believes to be 
                pertinent.
                  ``(B) Revision of frequency.--The Secretary, 
                taking into consideration the review made under 
                clause (i), may revise from time to time the 
                frequency with which such tests and procedures 
                may be paid for under this subsection.''.
    (b) Conforming Amendments.--
          (1) Section 1833(a).--Paragraphs (1)(D) and (2)(D) of 
        section 1833(a) (42 U.S.C. 13951(a)) are each amended 
        by striking ``subsection (h)(1),'' and inserting 
        ``subsection (h)(1) or section 1834(d)(1),''.
          (2) Section 1848(a)(2)(A).--Clauses (i) and (ii) of 
        section 1848(a)(2)(A) (42 U.S.C. 13951(a)(2)(A)) are 
        each amended by striking ``a service'' and inserting 
        ``a service (other than a screening flexible 
        sigmoidoscopy provided to an individual for the purpose 
        of early detection of colon cancer or a screening 
        colonoscopy provided to an individual at high risk for 
        colorectal cancer for the purpose of early detection of 
        colon cancer)''.
          (3) Section 1862(a).--Section 1862(a) (42 U.S.C. 
        1395y(a)) is amended--
                  (A) in paragraph (1)--
                          (i) by striking ``and'' at the end of 
                        subparagraph (E),
                          (ii) by striking the semicolon at the 
                        end of subparagraph (F) and inserting 
                        ``and'', and
                          (iii) by adding at the end the 
                        following:
                  ``(G) in the case of screening fecal-occult 
                blood tests, screening flexible 
                sigmoidoscopies, and screening colonoscopy 
                provided for the purpose of early detection of 
                colon cancer, which are performed more 
                frequently than is covered under section 
                1834(d);'', and
                  (B) in paragraph (7), by striking ``paragraph 
                (1)(B) or under paragraph (1)(F)'' and 
                inserting ``subparagraphs (B), (F), or (G) of 
                paragraph (1)''.
    (c) Effective Date.--The amendments made by the preceding 
subsections apply to services furnished on or after January 1, 
1996.

SEC. 11131. PAYMENTS FOR VACCINES AND VACCINE ADMINISTRATION.

    (a) Payment Amounts for the Administration of Certain 
Vaccines.--
          (1) In general.--Section 1833(k) (42 U.S.C. 13951(k)) 
        is amended to read as follows:
    ``(k) Payment Amount for Certain Vaccines.--
          ``(1) In general.--The payment amount under this part 
        for the administration of a vaccine described in 
        section 1861(s)(10) shall be equal to--
                  ``(A)(i) for a vaccine administered in 1996 
                not in connection with the furnishing of 
                another service, $9.00, and
                  ``(ii) for a vaccine administered in 1996 in 
                connection with the furnishing of another 
                service, $4.00, and
                  ``(B) for a vaccine administered in any 
                subsequent year, the amount determined under 
                subparagraph (A), or under this subparagraph, 
                for the previous year, increased by the update 
                under section 1848(d)(3) for that subsequent 
                year for physicians' services (described in 
                section 1848(d)(3)(A)(ii)(I)).
          ``(2) Cross reference.--For a limitation on actual 
        charges for items and services described in section 
        1861(s)(10), see paragraphs (1) and (2) of section 
        1848(g).''.
          (2) Conforming amendment to section 1832(a)(1).--
        Section 1832(a)(1) (42 U.S.C. 1395k(a)(1)) is amended 
        by striking ``and (D)'' and inserting ``, (D), and 
        (K)''.
          (3) Conforming amendments to section 1832(a)(2).--
        Section 1832(a)(2) (42 U.S.C. 1395k(a)(2)) is amended--
                  (A) in subparagraph (B), by striking 
                ``described in subparagraph (G) or subparagraph 
                (I)'' and inserting ``or services described in 
                subparagraph (G), (I), or (K)'',
                  (B) in subparagraph (D), by inserting before 
                the semicolon the following: ``, other than, in 
                either case, services described in subparagraph 
                (K)'',
                  (C) in subparagraph (H), by inserting before 
                the semicolon the following: ``, other than 
                services described in subparagraph (K)'',
                  (D) in subparagraph (I), by striking the 
                final ``and'',
                  (E) in subparagraph (J), by striking the 
                period and adding ``; and'', and
                  (F) by adding at the end the following:
                  ``(K) administration of vaccines by providers 
                of services, or as rural health clinic or 
                Federally qualified health center services.''.
          (4) Conforming amendments to section 1833(a)(1).--
        Section 1833(a)(1)(B) (42 U.S.C. 13951(a)(1)(B)) is 
        amended--
                  (A) by striking ``items and services 
                described'' and inserting ``vaccines listed'', 
                and
                  (B) by inserting at the end the following: 
                ``and, with respect to the administration of 
                those vaccines, the amounts described in 
                subsection (k)(1),''
          (5) Conforming amendments to section 1833(a)(2).--
        Section 1833(a)(2) (42 U.S.C. 13951(a)(2)) is amended--
                  (A) in the matter preceding subparagraph (A), 
                by striking ``and (I)'' and inserting ``, (I), 
                and (K)'', and
                  (B) in the matter in subparagraph (A) 
                preceding clause (i), by striking ``items and 
                services described'' and inserting ``vaccines 
                listed''.
          (6) Conforming amendment to section 1833(a)(3).--
        Section 1833(a)(3) (42 U.S.C. 13951(a)(3)) is amended 
        by striking ``items and services described'' and 
        inserting ``vaccines listed''.
          (7) Conforming amendments to section 1833(a)(6).--
        Section 1833(a)(6) (42 U.S.C. 13951(a)(6)) is amended--
                  (A) by inserting ``other than services 
                described in section 1832(a)(2)(K)'' after 
                ``services'', and
                  (B) by striking ``and''.
          (8) Conforming amendment to section 1833(a)(7).--
        Section 1833(a)(7) (42 U.S.C. 13951(a)(7)) is amended 
        by striking the period and adding at the end ``; and''.
          (9) Cross reference.--Section 1833(a) (42 U.S.C. 
        13951(a)) is amended by adding at the end the 
        following:
          ``(8) in the case of services described in section 
        1832(a)(2)(k), the amount described in subsection 
        (k)(1).''.
          (10) Conforming amendment to section 1834(g).--
        Section 1834(g)(2) (42 U.S.C. 1395m(g)(2)) is amended 
        by inserting ``(other than services described in 
        section 1832(a)(2)(K))'' after ``hospital services''.
          (11) Conforming amendments to section 1842(b).--
                  (A) Initial matter in paragraph (3)(b).--The 
                matter in section 1842(b)(3)(B) (42 U.S.C. 
                1395u(b)(3)(B)) preceding clause (i) is amended 
                by inserting ``, where payment under this part 
                for a service is on a basis other than a cost 
                basis,'' after ``carrier, and''.
                  (B) Paragraph (3)(b)(ii).--Section 
                1842(b)(3)(B)(ii)(I) (42 U.S.C. 
                1395u(b)(3)(B)(ii)(I)) is amended by inserting 
                ``(or other payment basis)'' after ``reasonable 
                charge''.
          (12) Conforming amendments to section 1848(g).--
                  (A) Paragraph (1).--The first sentence of 
                section 1848(g)(1) (42 U.S.C. 1395w-4(g)(1)) is 
                amended by inserting ``or items and services 
                described in section 1861(s)(10)'' after 
                ``January 1, 1991)''.
                  (B) Paragraph (2).--Section 1848(g)(2)(C) (42 
                U.S.C. 1395w-4(g)(2)(C)) is amended by adding 
                at the end the following: ``For items and 
                services described in section 1861(s)(10) 
                furnished in a year after 1994, the `limiting 
                charge' shall be 115 percent of the applicable 
                amount described in section 1833(k)(1).''.
    (b) Elimination of Coinsurance and Deductible for Hepatitis 
B Vaccine.--Section 1833(a)(1)(B) (42 U.S.C. 13951(a)(1)(B)), 
the matter in subparagraph (A) of section 1833(a)(2) (42 U.S.C. 
13951(a)(2)) preceding clause (i), section 1833(a)(3) (42 
U.S.C. 13951(a)(3)), paragraph (1) of the first sentence of 
section 1833(b) (42 U.S.C. 13951(b)), and the third sentence of 
section 1866(a)(2)(A) (42 U.S.C. 1395cc(a)(2)(A)) are each 
amended by striking ``1861(s)(10)(A)'' and inserting 
``1861(s)(10)''.
    (c) Repeal of Obsolete Provisions.--
          (1) Social security act.--Section 1861(s)(10)(A) (42 
        U.S.C. 1395x(s)(10)(A)) is amended by striking ``, 
        subject to section 4071(b) of the Omnibus 
        Reconciliation Act of 1987,''.
          (2) OBRA-1987.--Section 4071(b) of the Omnibus Budget 
        Reconciliation Act of 1987 is repealed.

              PART 3--PROVISIONS RELATING TO PARTS A AND B

SEC. 11141. CENTERS OF EXCELLENCE.

    (a) In General.--Title XVIII is amended by inserting after 
section 1888 the following:

``SEC. 1889. CENTERS OF EXCELLENCE.

    ``(a) In General.--The Secretary shall use a competitive 
process to contract with centers of excellence for cataract 
surgery, coronary artery by-pass surgery, and such other 
services as the Secretary determines to be appropriate. Payment 
under this title shall be made for services subject to such 
contracts on the basis of negotiated or all-inclusive rates as 
follows:
          ``(1) Coverage of urban area.--The center shall cover 
        services provided in an urban area (as defined in 
        section 1886(d)(2)(D)) for years beginning with fiscal 
        year 1996.
          ``(2) Savings required.--The amount of payment made 
        by the Secretary to the center under this title for 
        services covered under the project shall be less than 
        the aggregate amount of the payments that the Secretary 
        would have made to the center for such services had the 
        project not been in effect.
          ``(3) Types of services.--The Secretary shall make 
        payments to the center on such a basis for the 
        following services furnished to individuals entitled to 
        benefits under this title:
                  ``(A) Facility, professional, and related 
                services relating to cataract surgery.
                  ``(B) Coronary artery bypass surgery and 
                related services.
                  ``(C) Such other services as the Secretary 
                and the center may agree to cover under the 
                agreement.
    ``(b) Rebate of Portion of Savings.--In the case of any 
services furnished by a center under subsection (a), the 
Secretary shall make a payment to each individual to whom such 
services are furnished at such time and in such manner as the 
Secretary may provide, in an amount equal to 10 percent of the 
amount by which--
          ``(1) the amount of payment that would have been made 
        by the Secretary under this title to the center for 
        such services if the services had not been provided at 
        the center, exceeds
          ``(2) the amount of payment made by the Secretary 
        under this title to the center for such services.''.
    (b) Effective Date.--The amendments made by subsection (a) 
apply to services furnished on or after October 1, 1996.

SEC. 11142. MAINTAINING SAVINGS RESULTING FROM TEMPORARY FREEZE ON 
                    PAYMENT INCREASES FOR HOME HEALTH SERVICES.

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

SEC. 11143. INTERIM PAYMENTS FOR HOME HEALTH SERVICES.

    (a) Reductions in Cost Limits.--Section 1861(v)(1)(L)(i) 
(42 U.S.C. 1395x(v)(1)(L)(i)) is amended--
          (1) by inserting ``and before October 1, 1996,'' 
        after ``July 1, 1987'' in subclause (III),
          (2) by striking the period at the end of the matter 
        following subclause (III), and inserting ``, and'', and
          (3) by adding at the end the following new subclause:
          ``(IV) October 1, 1996, 105 percent of the median of 
        the labor-related and nonlabor per visit costs for 
        freestanding home health agencies.''.
    (b) Delay in Updates.--Section 1861(v)(1)(L)(iii) (42 
U.S.C. 1395x(v)(1)(L)(iii)) is amended by striking ``July 1, 
1996'' and inserting ``October 1, 1996''.
    (c) Additions to Cost Limits.--Section 1861(v)(1)(L) (42 
U.S.C. 1395x(v)(1)(L)) is amended by adding at the end the 
following:
                          ``(iv) Limits for fiscal years 1997 
                        through 1999.--For services furnished 
                        by home health agencies for cost 
                        reporting periods beginning on or after 
                        October 1, 1996, but before October 1, 
                        1999, the Secretary shall provide for 
                        an interim system of limits. Payment 
                        shall be the lower of--
                                  ``(I) costs determined under 
                                the preceding provisions of 
                                this subparagraph, or
                                  ``(II) an agency-specific per 
                                beneficiary annual limitation 
                                calculated from the agency's 
                                12-month cost reporting period 
                                ending on or after January 1, 
                                1994, and on or before December 
                                31, 1994, based on reasonable 
                                costs (including nonroutine 
                                medical supplies), updated by 
                                the home health market basket 
                                index. The per beneficiary 
                                limitation shall be multiplied 
                                by the agency's unduplicated 
                                census count of patients 
                                (entitled to benefits under 
                                this title) for the year 
                                subject to the limitation to 
                                determine the aggregate agency 
                                specific per beneficiary 
                                limitation.
                          ``(v) Special rules.--For services 
                        furnished by home health agencies for 
                        cost reporting periods beginning on or 
                        after October 1, 1996, the following 
                        rules shall apply:
                                  ``(I) For new providers and 
                                those providers without a 12-
                                month cost reporting period 
                                ending in calendar year 1994, 
                                the per beneficiary limitation 
                                shall be equal to the mean of 
                                these limits (or the 
                                Secretary's best estimates 
                                thereof) applied to home health 
                                agencies as determined by the 
                                Secretary. Home health agencies 
                                that have altered their 
                                corporate structure or name 
                                shall not be considered new 
                                provides for payment purposes.
                                  ``(II) For beneficiaries who 
                                use services furnished by more 
                                than one home health agency, 
                                the per beneficiary limitations 
                                shall be prorated among 
                                agencies.
                          ``(vi) Bonus payments.--Home health 
                        agencies whose cost or utilization 
                        experience is below 125 percent of the 
                        mean national or census region 
                        aggregate per beneficiary cost or 
                        utilization experience for 1994, or 
                        best estimates thereof, and whose year-
                        end reasonable costs are below the 
                        agency-specific per beneficiary 
                        limitation, shall receive payments 
                        equal to 50 percent of the difference 
                        between the agency's reasonable costs 
                        and its limit for fiscal years 1997, 
                        1998, and 1999. Such payments may not 
                        exceed 5 percent of such agency's 
                        aggregate Medicare reasonable cost in a 
                        year.
                          ``(vii) Modifications for regional or 
                        national variations in utilization.--
                        Effective January 1, 1997, or as soon 
                        as feasible, the Secretary shall modify 
                        the agency-specific per beneficiary 
                        annual limitation described in clause 
                        (iv) to provide for regional or 
                        national variations in utilization. For 
                        purposes of determining payment under 
                        clause (iv), the limit shall be 
                        calculated through a blend of 75 
                        percent of the agency-specific cost or 
                        utilization experience in 1994 with 25 
                        percent of the national or census 
                        region cost or utilization experience 
                        in 1994, or the Secretary's best 
                        estimates thereof.''.
    (d) Use of Interim Final Regulations.--The Secretary shall 
implement the payment limits described in section 
1861(v)(1)(L)(iv) of the Social Security Act by publishing in 
the Federal Register a notice of interim final payment limits 
by August 1, 1996, and allowing for a period of public comment 
thereon. Payments subject to these limits will be effective for 
cost reporting periods beginning on or after October 1, 1996, 
without the necessity for consideration of comments received, 
but the Secretary shall, by Federal Register notice, affirm or 
modify the limits after considering those comments.
    (e) Development of Case Mix System.--The Secretary shall 
expand research on a prospective payment system for home health 
agencies that shall tie prospective payments to an episode of 
care, including an intensive effort to develop a reliable case 
mix adjuster that explains a significant amount of the 
variances in costs.
    (f) Submission of Data for Case Mix System.--Effective for 
cost reporting periods beginning on or after October 1, 1998, 
the Secretary may require all home health agencies to submit 
such additional information as the Secretary deems necessary 
for the development of a reliable case mix system.

SEC. 11144. PROSPECTIVE PAYMENT FOR HOME HEALTH SERVICES.

    Title XVIII is amended by adding at the end the following:

``SEC. 1893. PROSPECTIVE PAYMENT FOR HOME HEALTH SERVICES.

    ``(a) In General.--Notwithstanding section 1861(v), the 
Secretary shall, for cost reporting periods beginning on or 
after October 1, 1999, provide for payments for home health 
services in accordance with a prospective payment system, which 
pays home health agencies on a per episode basis, established 
by the Secretary.
    ``(b) Elements of System.--Such a system shall include the 
following:
          ``(1) Based on a per episode amount.--All services 
        covered and paid on a reasonable cost basis under the 
        medicare home health benefit as of the date of the 
        enactment of the Balanced Budget Act of 1995 for 
        Economic Growth and Fairness, including medical 
        supplies, shall be subject to the per episode amount. 
        In defining an episode of care, the Secretary shall 
        consider an appropriate length of time for an episode, 
        the use of services, and the number of visits provided 
        within an episode, potential changes in the mix of 
        services provided within an episode and their cost, and 
        a general system design that will provide for continued 
        access to quality services. The per episode amount 
        shall be based on the most current audited cost report 
        data available to the Secretary
          ``(2) Use of case mix.--The Secretary shall employ an 
        appropriate case mix adjustment that explains a 
        significant amount of the variation in cost.
          ``(3) Annual adjustments.--The episode payment amount 
        shall be adjusted annually by the home health market 
        basket index. The labor portion of the episode amount 
        shall be adjusted for geographic differences in labor-
        related costs based on the most current hospital wage 
        index.
          ``(4) Outliers.--The Secretary may designate a 
        payment provision for outliers, recognizing the need to 
        adjust payments due to unusual variations in the type 
        or amount of medically necessary care.
          ``(5) Coordination by home health agency.--A home 
        health agency shall be responsible for coordinating all 
        care for a beneficiary. If a beneficiary elects to 
        transfer to, or receive services from, another home 
        health agency within an episode period, the episode 
        payment shall be prorated between home health agencies.
    ``(c) Savings.--Prior to implementing the prospective 
system described in subsections (a) and (b) in a budget neutral 
fashion, the Secretary shall first reduce, by 15 percent, the 
cost limits, per beneficiary limits, and actual costs, 
described in section 1861(v)(1)(L)(iv), as such limits are in 
effect on September 30, 1999.''.

SEC. 11145. PAYMENT BASED ON LOCATION WHERE HOME HEALTH SERVICE IS 
                    FURNISHED.

    (a) Conditions of Participation.--Section 1891 (42 U.S.C. 
1395bbb) is amended by adding at the end the following:
    ``(g) Payment on Basis of Location of Service.--A home 
health agency shall submit claims for payment of home health 
services under this title only on the basis of the geographic 
location at which the service is furnished, as determined by 
the Secretary.''.
    (b) Wage Adjustment.--Section 1861(v)(1)(L)(iii) (42 U.S.C. 
1395x(v)(1)(L)(iii)) is amended by striking ``agency is 
located'' and inserting ``service is furnished''.
    (c) Effective Date.--The amendments made by previous 
subsections apply to services furnished on or after October 1, 
1996.

SEC. 11146. ELIMINATION OF PERIODIC INTERIM PAYMENTS FOR HOME HEALTH 
                    AGENCIES.

    (a) In General.--Section 1815(e)(2) (42 U.S.C. 1395g(e)(2)) 
is amended--
          (1) by inserting ``and'' at the end of subparagraph 
        (C),
          (2) by striking subparagraph (D), and
          (3) by redesignating subparagraph (E) as (D).
    (b) Effective Date.--The amendments made by subsection (a) 
apply to payments made on or after October 1, 1999.

SEC. 11147. ESTABLISHMENT OF POST-HOSPITAL HOME HEALTH BENEFIT UNDER 
                    PART A AND TRANSFER OF OTHER HOME HEALTH SERVICES 
                    TO PART B.

    (a) In General.--Section 1812(a)(3) (42 U.S.C. 1395d(a)(3)) 
is amended--
          (1) by inserting ``post-hospital'' before ``home 
        health services'', and
          (2) by inserting ``for up to 100 visits during any 
        spell of illness (or, in the case of an individual who 
        is not enrolled in the insurance program established by 
        part B, home health services)'' before the semicolon.
    (b) Post-Hospital Home Health Services.--Section 1861 (42 
U.S.C. 1395x), as amended by section 11118, is further amended 
by adding at the end the following:
    ``(pp) Post-Hospital Home Health Services.--The term `post-
hospital home health services' means home health services 
furnished to an individual under a plan of treatment 
established when the individual was an inpatient of a hospital 
or rural primary care hospital for not less than 3 consecutive 
days before discharge, if home health services are initiated 
for such individual within 30 days after discharge from the 
hospital or rural primary care hospital.''.
    (c) Conforming Amendments.--Section 1812(b) (42 U.S.C. 
1395d(b)) is amended--
          (1) by striking ``or'' at the end of paragraph (2);
          (2) by striking the period at the end of paragraph 
        (3) and inserting ``; or'', and
          (3) by adding at the end the following:
          ``(4) post-hospital home health services furnished to 
        the individual during such spell of illness after such 
        services had been furnished to the individual for 100 
        visits during such spell.''.
    (d) Clarification of Part-Time or Intermittent Nursing 
Care.--Section 1861(m) (42 U.S.C. 1395x(m)) is amended by 
adding at the end the following: ``For purposes of paragraphs 
(1) and (4), the term `part-time or intermittent services' 
means skilled nursing and home health aide services furnished 
any number of days per week as long as they are furnished 
(combined) less than 8 hours each day and 28 or less hours each 
week (or, subject to review on a case-by-case basis as to the 
need for care, less than 8 hours each day and 35 or less hours 
per week). For purposes of sections 1814(a)(2)(C) and 
1835(a)(2)(A), `intermittent' means skilled nursing care that 
is either provided or needed on fewer than 7 days each week, or 
less than 8 hours or each day of skilled nursing and home 
health services combined for periods of 21 days or less (with 
extensions in exceptional circumstances when the need for 
additional care is finite and predictable).''.
    (e) Payments Under Part B.--Subparagraph (A) of section 
1833(a)(2) (42 U.S.C. 13951(a)(2)) is amended to read as 
follows:
                  ``(A) with respect to home health services 
                (other than a covered osteoporosis drug (as 
                defined in section 1861(kk)), and to items and 
                services described in section 1861(s)(10)(A), 
                the amounts determined under section 
                1861(v)(1)(L) or section 1893, or, if such 
                services are furnished by a public provider of 
                services, or by another provider which 
                demonstrates to the satisfaction of the 
                Secretary that a significant portion of its 
                patients are low-income (and requests that 
                payment be made under this provision), free of 
                charge or at nominal charges to the public, the 
                amount determined in accordance with section 
                1814(b)(2);''.
    (f) Exclusion of Additional Part B Costs From Determination 
of Part B Monthly Premium.--Section 1839(a) (42 U.S.C. 
1395r(a)) is amended--
          (A) in the second sentence of paragraph (1), by 
        inserting ``(except as provided in paragraph (5))'' 
        before the period, and
          (B) by adding at the end the following:
    ``(5) Exclusion of Home Health Costs.--In estimating the 
benefits and administrative costs which will be payable from 
the Federal Supplementary Medical Insurance Trust Fund for a 
year (beginning with 1997), the Secretary shall exclude an 
estimate of any benefits and administrative costs attributable 
to home health services for which payment would have been made 
under part A during the year but for paragraph (4) of section 
1812(b), or home health services furnished under part A that 
are not post-hospital home health services.''
    (g) Payments From Supplementary Medical Insurance Trust 
Fund for Certain Home Health Services Furnished Under Part A.--
Section 1815(a) (42 U.S.C. 1395g(a)) is amended by inserting 
after ``Trust Fund'' the following: ``or in the case of home 
health services that are not post-hospital home health 
services, from the Federal Supplementary Medical Insurance 
Trust Fund)''.
    (h) Effective Date.--The amendments made by the preceding 
subsections apply to spells of illness beginning on or after 
October 1, 1996.

SEC. 11148. PERMANENT EXTENSION OF CERTAIN SECONDARY PAYER PROVISIONS.

    (a) Working Disabled.--Section 1862(b)(1)(B) is amended by 
striking clause (iii).
    (b) Individual With End Stage Renal Disease.--Section 
1862(b)(1)(C) is amended--
          (1) in the first sentence, by striking ``12-month'' 
        each place it occurs and inserting ``18-month'', and
          (2) by striking the second sentence.
    (c) IRS-SSA-HCFA Data Match.--
          (1) Social security act.--Section 1862(b)(5)(C) is 
        amended by striking clause (iii).
          (2) Internal revenue code.--Section 6103(l)(12) of 
        the Internal Revenue Code of 1986 is amended by 
        striking subparagraph (F).

                    PART 4--MEDICARE PART B PREMIUM

SEC. 11161. PART B PREMIUM.

    (a) In General.--The first and second sentences of section 
1839(a)(3) (42 U.S.C. 1395r(a)(3)) are amended to read as 
follows: ``The Secretary shall, during September of each year, 
determine and promulgate a monthly premium rate for the 
succeeding calendar year. That monthly premium rate shall be 
equal to 50 percent of the monthly actuarial rate for enrollees 
age 65 and over, determined according to paragraph (1), for 
that succeeding calendar year.''.
    (b) Conforming and Technical Amendments.--Section 1839 (42 
U.S.C. 1395r) is amended--
          (1) in subsection (a)(2), by striking ``(b) and (e)'' 
        and inserting ``(b), (c), and (f)'',
          (2) in the third sentence of subsection (a)(3)--
                  (A) by inserting ``rate'' after ``premium'', 
                and
                  (B) by striking ``and the derivation of the 
                dollar amounts specified in this paragraph'',
          (3) by striking subsection (e), and
          (4) by redesignating subsection (g) and (e) and 
        inserting that subsection after subsection (d).
    (c) Effective Date.--The amendments made by the preceding 
subsections apply to premiums for months after December 1995.

                  Subtitle B--Expanded Medicare Choice

SEC. 11201. EXPANDED CHOICE UNDER MEDICARE.

    (a) In General.--Title XVIII (42 U.S.C. 1395 et seq.) is 
amended by inserting after section 1804 the following:

                ``option to enroll in managed care plans

    ``Sec. 1805. Every individual entitled to benefits under 
part A and enrolled under part B or enrolled under part B only 
shall be eligible to enroll under part C with any eligible 
organization with which the Secretary has entered into a 
contract under part C and which serves the geographic area in 
which the individual resides.''.
    (b) Effective Date.--The amendment made by subsection (a) 
applies to enrollments whose periods begin after 1996.

SEC. 11202. BROADER CHOICE AMONG MANAGED CARE ORGANIZATIONS.

    (a) In General.--Title XVIII (42 U.S.C. 1395 et seq.) is 
amended--
          (1) by redesignating part C (42 U.S.C. 1395x et seq.) 
        as part D, and
          (2) by inserting after part B (42 U.S.C. 1395j et 
        seq.) the following:

                  ``PART C--MANAGED CARE ORGANIZATIONS

``SEC. 1851A. TYPES OF MANAGED CARE ORGANIZATIONS.

    ``(a) Eligible Organizations.--For purposes of this part, 
the term `eligible organization' means a public or private 
entity, organized under the laws of any State, that is--
          ``(1) a qualified health maintenance organization 
        (QHMO),
          ``(2) a competitive medical plan (CMP),
          ``(3) a preferred provider organization (PPO), or
          ``(4) a provider sponsored organization (PSO).
    ``(b) Qualified Health Maintenance Organization (QHMO).--
For purposes of this part, the term `qualified health 
maintenance organization' means such as organization (as 
defined in section 1310(d) of the Public Health Service Act) 
that meets the requirements of subparagraphs (B) and (E) of 
subsection (c)(1).
    ``(c) Competitive Medical Plan (CMP).--
          ``(1) In general.--For purposes of this part, the 
        term `competitive medical plan' means an entity that 
        meets the following requirements:
                  ``(A) Minimum services to all members.--The 
                entity provides to enrolled members at least 
                the following health care services:
                          ``(i) Physicians' services performed 
                        by physicians (as defined in section 
                        1861(r)(1)).
                          ``(ii) Inpatient hospital services.
                          ``(iii) Laboratory, X-ray, emergency, 
                        and preventive services.
                          ``(iv) Out-of-area coverage.
                  ``(B) Provision of physicians' services.--The 
                entity provides physicians' services primarily 
                (i) directly through physicians who are either 
                employees or partners of such organization, or 
                (ii) through contracts with individual 
                physicians or one or more groups of physicians 
                (organized on a group practice or individual 
                practice basis).
                  ``(C) Compensation on prepaid risk basis.--
                The entity is compensated (except for 
                deductibles, coinsurance, and copayments) for 
                the provision of health care services to 
                enrolled members by a payment which is paid on 
                a periodic basis without regard to the date the 
                health care services are provided and which is 
                fixed without regard to the frequency, extent, 
                or kind of health care service actually 
                provided to a member.
                  ``(D) Assumption of risk.--The entity assumes 
                full financial risk on a prospective basis for 
                the provision of the health care services 
                listed in subparagraph (A), except that such 
                entity may--
                          ``(i) obtain insurance or make other 
                        arrangements for the cost of providing 
                        to any enrolled member health care 
                        services listed in subparagraph (A) the 
                        aggregate value of which exceeds $5,000 
                        in any year,
                          ``(ii) obtain insurance or make other 
                        arrangements for the cost of health 
                        care services listed in subparagraph 
                        (A) provided to its enrolled members 
                        other than through the entity because 
                        medical necessity required their 
                        provision before they could be secured 
                        through the entity,
                          ``(iii) obtain insurance or make 
                        other arrangements for not more than 90 
                        percent of the amount by which its 
                        costs for any of its fiscal years 
                        exceed 115 percent of its income for 
                        such fiscal year, and
                          ``(iv) make arrangements with 
                        physicians or other health 
                        professionals, health care 
                        institutions, or any combination of 
                        such individuals or institutions to 
                        assume all or part of the financial 
                        risk on a prospective basis for the 
                        provision of basic health services by 
                        the physicians or other health 
                        professionals or through the 
                        institutions.
                  ``(E) Fiscal soundness; provision against 
                insolvency.--The entity meets standards for 
                fiscal soundness (including standards for 
                provision against the risk of insolvency) 
                applicable to Federally qualified health 
                maintenance organizations under title XIII of 
                the Public Health Service Act.
          ``(2) Exception for certain grandfathered 
        contracts.--Paragraph (1)(A)(ii) shall not apply to an 
        entity which had contracted with a single State agency 
        administering a State plan approved under title XIX for 
        the provision of services (other than inpatient 
        hospital services) to individuals eligible for such 
        services under such State plan on a prepaid risk basis 
        prior to 1970.
    ``(d) Preferred Provider Organization (PPO).--
          ``(1) In general.--For purposes of this part, the 
        term `preferred provider organization' means an entity 
        that meets the following requirements:
                  ``(A) Minimum services to all members.--The 
                entity provides at least physicians' services 
                performed by physicians (as defined in section 
                1861(r)(1)).
                  ``(B) Provision of physician services; fiscal 
                soundness.--The entity meets the requirements 
                of subparagraphs (B) and (E) of subsection 
                (c)(1).
                  ``(C) Assumption of risk.--The entity meets 
                the requirements of subsection (c)(1)(D) with 
                respect to members enrolled with the 
                organization under this part.
          ``(2) Determination of private membership.--In 
        applying the provisions of sections 1851E(g) and 
        1851F(e)(1)(B)(i) and (f)(1)(B)(i) (concerning minimum 
        private enrollment) to an organization that meets the 
        requirements of paragraph (1), individuals for whom the 
        organization has assumed substantial financial risk 
        shall be considered to be members of the organization.
    ``(e) Provider Sponsored Organization (PSO).--
          ``(1) In general.--For purposes of this part, the 
        term `provider sponsored organization' means an entity 
        that meets the following requirements:
                  ``(A) Type of entity.--The entity is a 
                hospital, a group of affiliated hospitals, or 
                an affiliated group consisting of a hospital or 
                hospitals and physicians (as defined in section 
                1861(r)(1)).
                  ``(B) Minimum Services to all members.--The 
                entity provides at least physicians' services 
                performed by physicians (as defined in section 
                1861(r)(1)) and inpatient hospital services.
                  ``(C) Direct provision of services.--The 
                entity provides directly a substantial portion 
                of the services covered under this title (as 
                determined by the Secretary, which may vary for 
                rural or under served areas).
                  ``(D) Assumption of risk.--The entity meets 
                the requirements of subsection (c)(1)(D) with 
                respect to members enrolled with the 
                organization under this part.
                  ``(E) Fiscal soundness; provision against 
                insolvency.--The entity meets requirements for 
                fiscal soundness and provision against 
                insolvency developed by the Secretary.
          ``(2) Determination of private membership.--In 
        applying the provisions of sections 1851E(g) and 
        1851F(e)(1)(B)(i) and (f)(1)(B)(i) (concerning minimum 
        private enrollment) to an organization that meets the 
        requirements of paragraph (1), individuals for whom the 
        organization has assumed substantial financial risk 
        shall be considered to be members of the organization.
          ``(3) Limited preemption of state law.--Except as 
        otherwise provided in the next sentence, an 
        organization that meets the requirements of paragraph 
        (1) may provide health benefits to individuals enrolled 
        with the organization under this part without regard to 
        any State law that imposes requirements different from 
        those under paragraph (1)(E)) (concerning fiscal 
        soundness and provision against insolvency), or that 
        imposes requirements (in other respects) that differ 
        from those imposed on other organizations which provide 
        health care benefits only through (or preferentially 
        through) certain entities. If the Secretary determines 
        that a State has licensing standards which are 
        substantially equivalent to the requirements of such 
        paragraph (1)(E), that the State has a process for 
        issuing licenses on a timely basis, and that the State 
        does not impose requirements (in other respects) that 
        differ from those imposed on other organizations which 
        provide health care benefits only through (or 
        preferentially through) certain entities, the Secretary 
        shall require the organization to obtain a license from 
        the State.

``SEC. 1851B. ENROLLMENT AND DISENROLLMENT.

    ``(a) In General.--
          ``(1) Secretary's responsibility.--The Secretary 
        shall carry out enrollment and termination of 
        enrollment of individuals with eligible organizations.
          ``(2) Individual options.--An individual may, as 
        prescribed by regulations--
                  ``(A) enroll under this part with an eligible 
                organization; and
                  ``(B) terminate enrollment with such 
                organization--
                          ``(i) as of the beginning of the 
                        first calendar month following the date 
                        on which the request is made for such 
                        termination;
                          ``(ii) as of the date determined in 
                        accordance with regulations, in the 
                        case of financial insolvency of the 
                        organization; and
                          ``(iii) retroactively to the date of 
                        enrollment, in such special 
                        circumstances as the Secretary may 
                        designate.
    ``(b) Information Concerning Enrollment.--
          ``(1) Standardized comparative materials.--The 
        Secretary shall develop and distribute standardized 
        comparative materials about eligible organizations and 
        medicare supplemental policies (as defined in section 
        1882(g)(1)) to enable individuals to compare benefits, 
        costs, and quality indicators.
          ``(2) Cost-sharing by participating organizations.--
        Each eligible organization with a contract under this 
        part shall pay the Secretary for its pro rata share (as 
        determined by the Secretary) of the estimated costs to 
        be incurred by the Secretary in carrying out the 
        requirements of the preceding sentence, the first 
        sentence of subsection (a)(1), and section 4360 of the 
        Omnibus Reconciliation Act of 1990. Those payments are 
        appropriated to defray the costs described in the 
        preceding sentence, to remain available until expended.
          ``(2) Review of marketing materials.--The Secretary 
        may prescribe the procedures and conditions under which 
        an eligible organization that has entered into a 
        contract with the Secretary under this subsection may 
        furnish information about the organization to enrollees 
        and individuals eligible to enroll under this part. No 
        brochures, application forms, or other promotional or 
        informational material may be distributed by an 
        organization to (or for the use of) such individuals 
        unless at least 45 days before its distribution, the 
        organization has submitted the material to the 
        Secretary for review, and the Secretary has not 
        disapproved the distribution of the material. The 
        Secretary shall review all such material submitted and 
        shall disapprove such material if the Secretary 
        determines, in the Secretary's discretion, that the 
        material is materially inaccurate or misleading or 
        otherwise makes a material misrepresentation.
    ``(c) Periods of Enrollment.--
          ``(1) Standard enrollment opportunities.--Subject to 
        the provisions of this section, an organization with a 
        contract under this part shall permit enrollment under 
        this part by any individual--
                  ``(A) during the month of each year specified 
                by the Secretary for all eligible 
                organizations;
                  ``(B) during the individual's initial 
                enrollment period in the program under part B 
                (as described in section 1837(d));
                  ``(C) during a special enrollment period in 
                the program under part B (for individuals 
                formerly electing employment-based coverage) 
                described in section 1837(i)(3); and
                  ``(D) during the 90-day period beginning 30 
                days before the date the individual takes up 
                residence in the service area of the 
                organization.
          ``(2) Special enrollment period for individuals 
        losing coverage by another organization.--
                  ``(A) In general.--Subject to other 
                provisions of this section, if a contract with 
                an organization under this part is not renewed 
                or otherwise terminated, or is renewed in a 
                manner that discontinues coverage for 
                individuals residing in part of the service 
                area, each other organization with a contract 
                under this part shall permit enrollment under 
                this part by affected individuals enrolled with 
                such other organization on the effective date 
                of such termination or discontinuation of 
                coverage.
                  ``(B) Enrollment period.--The enrollment 
                period required by subparagraph (A) shall be 
                for 30 days and shall begin 30 days after the 
                date that the Secretary provides notice of such 
                requirement.
          ``(2) Acceptance or denial of application.--An 
        eligible organization shall enroll individuals under 
        this part in the order of application, and may deny 
        enrollment of such an individual only if the 
        enrollment--
                  ``(A) would exceed the limits of the 
                organization's capacity (as determined by the 
                Secretary);
                  ``(B) would result in an enrolled population 
                substantially nonrepresentative, as determined 
                in accordance with regulations of the 
                Secretary, of the population in the geographic 
                area served by the organization; or
                  ``(C) would result in the organization's 
                failing to meet the requirements of sections 
                1851E(g) and 1851F(e)(1)(B)(i) and (f)(1)(B)(i) 
                (concerning minimum private enrollment).
          ``(3) Effective date of enrollment.--An individual's 
        enrollment with an eligible organization under this 
        part shall be effective--
                  ``(A) in the case of an enrollment under 
                paragraph (1)(A), on the first day of the third 
                month beginning after the end of the enrollment 
                period;
                  ``(B) in the case of an enrollment under 
                paragraph (1)(B), as specified by section 
                1838(a);
                  ``(C) in the case of an enrollment under 
                paragraph (1)(C), as specified by section 
                1838(e);
                  ``(D) in the case of an enrollment under 
                paragraph (1)(D), on the first day of the first 
                month following the month in which the 
                individual enrolled; and
                  ``(E) in the case of an enrollment under 
                paragraph (2), 30 days after the end of the 
                open enrollment period, or, if the Secretary 
                determines that such date is not feasible, such 
                other date as the Secretary specifies.
    ``(d) Enrollment or termination for health reasons 
prohibited.--An eligible organization--
          ``(1) shall not refuse to enroll, and shall not expel 
        or refuse to re-enroll, any individual eligible to 
        enroll or enrolled with the organization under this 
        part because of the individual's health status or 
        requirements for health care services;
          ``(2) shall include in any marketing materials a 
        statement of the requirements of paragraph (1); and
          ``(3) shall notify each such individual of the 
        requirements of paragraph (1) at the time of the 
        individual's enrollment.

``SEC. 1851C. BENEFITS.

    ``(a) Basic Benefits.--
          ``(1) In general.--An eligible organization must 
        provide to members enrolled under this part, either 
        directly or through providers and other persons that 
        meet the applicable requirements of this title and part 
        A of title XI--
                  ``(A) services covered under parts A and B of 
                this title, for those members entitled to 
                benefits under part A and enrolled under part 
                B, or
                  ``(B) services covered under part B, for 
                those members enrolled only under such part,
        which are available to individuals residing in the 
        geographic area served by the organization.
          ``(2) PPO required to afford `point of service' 
        option.--An eligible organization that contracts as a 
        preferred provider organization under this part, in 
        addition to providing services in accordance with 
        paragraph (1), shall also pay for any service furnished 
        to a member enrolled under this part (in the amounts, 
        if any, that otherwise would be paid under this title) 
        by any entity that may furnish that service under this 
        title (other than an entity through which the 
        organization provides services, or other than a service 
        with respect to which the organization is required to 
        provide for reimbursement under subsection (h)(2) 
        (concerning urgently needed services provided outside 
        the organization).
          ``(3) PSO prohibited from affording `point of 
        service' option.--An eligible organization that 
        contracts as a provider sponsored organization under 
        this part may not pay for any service described in 
        subsection (d) that is furnished to a number enrolled 
        under this part.
    ``(b) Additional Benefits or Other Adjustment Under Risk 
Plans.--
          ``(1) Requirement where adjusted community rates 
        below payment rates.--Each contract under section 
        1851F(e) shall provide for adjustment in accordance 
        with this subsection, if--
                  ``(A) the adjusted community rate for 
                services under parts A and B (as reduced for 
                the actual value of the coinsurance and 
                deductibles under those parts) for members 
                enrolled under this part with the organization 
                and entitled to benefits under part A and 
                enrolled in part B, or
                  ``(B) the adjusted community rate for 
                services under part B (as reduced for the 
                actuarial value of the coinsurance and 
                deductibles under that part) for members 
                enrolled under this part B only is less than 
                the average of the per capita rates of payment 
                to be made under section 1851F(e)(2) at the 
                beginning of an annual contract period for 
                members enrolled under this part with the 
                organization and entitled to benefits under 
                part A and enrolled in part B, or enrolled in 
                part B only, respectively.
          ``(2) Selection by organization of additional 
        benefits.--An eligible organization to which paragraph 
        (1) applies shall either--
                  ``(A) provide to members described in 
                paragraph (1)(A) or (1)(B), as applicable, the 
                additional benefits described in paragraph (3) 
                which are selected by the eligible organization 
                and which the Secretary finds are at least 
                equal in value to the difference between the 
                average per capita payment and the adjusted 
                community rate (as so reduced); or
                  ``(B) elect an alternative, in accordance 
                with paragraph (4).
          ``(3) Additional benefits.--The additional benefits 
        referred to in paragraph (2) are--
                  ``(A) the reduction of the premium rate or 
                other charges made with respect to services 
                furnished by the organization to members 
                enrolled under this part; or
                  ``(B) the provision of additional health 
                benefits; or both.
          ``(4) Alternatives to additional benefits.--An 
        eligible organization to which paragraph (1) applies--
                  ``(A) may elect to receive a lesser payment 
                such that there is no longer a difference 
                between the AAPCC and adjusted community rate 
                (as so reduced); and
                  ``(B) may (with the approval of the 
                Secretary) provide that a part of the value of 
                such additional benefits be withheld and 
                reserved by the Secretary as provided in 
                paragraph (5).
          ``(5) Benefit stabilization fund.--An organization 
        having a contract under section 1851F(e) may (with the 
        approval of the Secretary) provide that a part of the 
        value of additional benefits otherwise required to be 
        provided by reason of paragraph (1) be withheld and 
        reserved in the Federal Hospital Insurance Trust Fund 
        and in the Federal Supplementary Medical Insurance 
        Trust Fund (in such proportions as the Secretary 
        determines to be appropriate) by the Secretary for 
        subsequent annual contract periods, to the extent 
        required to stabilize and prevent undue fluctuations in 
        the additional benefits offered in those subsequent 
        periods by the organization in accordance with 
        paragraph (3). Any of such value of additional benefits 
        which is not provided to members of the organization in 
        accordance with paragraph (3) prior to the end of such 
        period, shall revert for the use of such trust funds.
          ``(6) Determination of per capita rates.--If the 
        Secretary finds that there is insufficient enrollment 
        experience to determine an average of the per capita 
        rates of payment to be made under section 1851F(e)(2) 
        at the beginning of a contract period, the Secretary 
        may determine such an average based on the enrollment 
        experience of other contracts entered into under this 
        part.
    ``(c) Supplemental Benefits.--
          ``(1) Subject to secretary's approval.--An eligible 
        organization may provide to individuals enrolled under 
        this part (without affording such individuals an option 
        to decline such coverage), such additional health care 
        services as the Secretary may approve. The Secretary 
        shall approve any such additional services unless the 
        Secretary determines that including such additional 
        services will substantially discourage enrollment by 
        covered individuals with the organization.
          ``(2) At enrollees' option.--Such an organization may 
        provide to such individuals such additional health care 
        services as such individuals may elect, at their 
        option, to have covered.
          ``(3) Disclosure of premium.--Such an organization 
        shall furnish to such individuals information on the 
        portion of its premium rate or other charges applicable 
        to such additional services.
    ``(d) Standarized Packages of Additional Benefits.--Any 
health care service described in subsection (b) or (c) that is 
included in a standardized package of benefits specified by the 
Secretary may be offered only as part of that standardized 
package.
    ``(e) Availability and Accessibility of Services.--
          ``(1) Services provided through the organization.--An 
        eligible organization with a contract under this part 
        must make the services it has contracted to provide to 
        individuals enrolled with the organization under this 
        part--
                  ``(A) available and accessible to each such 
                individual, within the area served by the 
                organization, with reasonable promptness and in 
                a manner with assures continuity, and
                  ``(B) when medically necessary, available and 
                accessible twenty-four hours a day and seven 
                days a week.
          ``(2) Services provided outside the organization.--An 
        eligible organization with a contract under this part 
        must provide for reimbursement with respect to services 
        described in paragraph (1) provided to such an 
        individual other than through the organization, if--
                  ``(A) the services were medically necessary 
                and immediately required because of an 
                unforeseen illness, injury, or condition; and
                  ``(B) it was not reasonable given the 
                circumstances to obtain the services through 
                the organization.

``SEC. 1851D. LIABILITY OF BENEFICIARY AND THIRD PARTIES.

    ``(a) Limits on Liability for Required Benefits.--
          ``(1) Limitation to actuarial value of fee-for-
        service coverage.--Total charges by an eligible 
        organization to individuals enrolled with the 
        organization under this part, with respect to services 
        described in section 1851C(a)--
                  ``(A) shall include no amounts other than the 
                individual's share of premiums, deductibles, 
                coinsurance, and copayments; and
                  ``(B) shall not exceed the actuarial value of 
                the deductibles and coinsurance that would be 
                applicable under this title on the average to 
                such individuals if they were not members of an 
                eligible organization.
          ``(2) Alternative data.--If the Secretary finds that 
        adequate data are not available for the determination 
        required under paragraph (1) with respect to an 
        eligible organization, the Secretary may substitute the 
        actuarial value of the deductibles and coinsurance 
        applicable on the average to individuals in the area, 
        in the State, or in the United States, eligible to 
        enroll under this part with the organization, or other 
        appropriate data.
    ``(b) Limits on Premium for Supplemental Benefits.--If an 
eligible organization provides to its members enrolled under 
this part supplemental benefits in accordance with section 
1851C, the sum of--
          ``(1) the portion of such organization's premium rate 
        charged, with respect to such supplemental benefits, to 
        members enrolled under this part, and
          ``(2) the deductibles, coinsurance, and copayments 
        charged, with respect to such services to such members 
        shall not exceed the adjusted community rate for such 
        services.
    ``(c) Limitation on Amounts an Out-of-Plan Physician or 
Other Entity May Collect.--
          ``(1) A physician or other entity (other than a 
        provider of services) that does not have a contract 
        establishing payment amounts for services furnished to 
        an individual enrolled under this part with an eligible 
        organization shall accept as payment in full for 
        services that are furnished to such an individual the 
        amounts that the physician or other entity could 
        collect if the indvidiual were not so enrolled. Any 
        penalty or other provision of law that applies to such 
        payments with respect to an individual entitled to 
        benefits under this title (but not enrolled with an 
        eligible organization under this part) shall also apply 
        with respect to an individual so enrolled.
          ``(2) For similar requirements applicable to 
        providers of services, see section 1866(a)(1)(O).
    ``(d) Plan as a Secondary Payer.--Notwithstanding any other 
provision of law, an eligible organization may (in the case of 
the provision of services for which the Medicare program is a 
secondary payer under section 1862(b)(2)) charge or authorize 
the provider of such services to charge, in accordance with the 
charges allowed under such law or policy--
          ``(1) the insurance carrier, employer, or other 
        entity which under such law, plan, or policy is to pay 
        for the provision of such services, or
          ``(2) such member to the extent that the member has 
        been paid under such law, plan, or policy for such 
        services.

``SEC. 1851E. BENEFICIARY PROTECTIONS.

    ``(a) Explanation of Rights and Restrictions.--Each 
eligible organization shall provide each enrollee, at the time 
of enrollment and not less frequently than annually thereafter, 
an explanation of the enrollee's rights under this part and 
other important information, including the following:
          ``(1) Coverage.--The enrollee's rights to benefits 
        from the organization, and benefit limitations, 
        including--
                  ``(A) out-of-area coverage provided by the 
                organization,
                  ``(B) the organization's coverage of 
                emergency services and urgently needed care, 
                and
                  ``(C) the restrictions on payments under this 
                title for services furnished other than by or 
                through the organization.
          ``(2) Termination of coverage.--An explanation that--
                  ``(A) the organization may terminate or 
                refuse to renew the contract under this part; 
                and
                  ``(B) termination of such contract could 
                result in termination of enrollment of 
                individuals with the organization.
          ``(3) Patient rights.--Safeguards on enrollees' 
        rights, including--
                  ``(A) appeal rights of enrollees,
                  ``(B) the right to be informed about various 
                treatment options, and
                  ``(C) the right to decline treatment.
          ``(4) Emergencies.--The appropriate use of the 911 
        emergency telephone system in the case of medical 
        emergencies.
          ``(5) Fraud and abuse reporting.--The processes for 
        reporting potential fraud or abuse.
    ``(b) Notification of Termination Option in Marketing 
Materials.--Each eligible organization with a contract under 
this part shall include the information required by subsection 
(a)(2) in any marketing materials described in section 
1851B(b)(3) that are distributed by an eligible organization to 
individuals eligible to enroll under this part with the 
organization.
    ``(c) Grievance Mechanism.--An eligible organization with a 
contract under this part must provide meaningful procedures for 
hearing and resolving grievances between the organization 
(including any entity or individual through which the 
organization provides health care services) and members 
enrolled with the organization under this part.
    ``(d) Coverage Determinations and Appeals.--
          ``(1) Determination by organization.--An eligible 
        organization with a contract under this part shall have 
        a procedure for determining whether an individual 
        enrolled with the organization under this part is 
        entitled to receive a health service described in 
        section 1851C(a) and the amount (if any) that the 
        individual is required to pay for that service, which 
        includes the following elements:
                  ``(A) Timely review.--The organization shall 
                provide for review of a coverage issue within 
                30 days of a request by such individual, and 
                for reconsideration, where requested, within 60 
                days after the initial review.
                  ``(B) Expedited review in urgent cases.--The 
                organization shall have an expedited process 
                for review and reconsideration of a coverage 
                issue in cases in which delayed treatment may 
                place the health of such individual in 
                jeopardy, risk serious impairment of bodily 
                functions, or limit medically appropriate 
                treatment options.
          ``(2) Review by external contractor.--An individual 
        dissatisfied with a determination under paragraph (1) 
        concerning such individual's coverage under a contract 
        under this part is entitled to a hearing before an 
        independent reviewer designated by the Secretary.
          ``(3) Appeal to secretary.--An individual 
        dissatisfied with a determination under paragraph (2) 
        concerning such individual's coverage under a contract 
        under this part is entitled, if the amount in 
        controversy is $100 or more, to a hearing before the 
        Secretary to the same extent as is provided in section 
        205(b), and in any such hearing the Secretary shall 
        make the eligible organization a party. If the amount 
        in controversy is $1,000 or more, the individual or 
        eligible organization shall, upon notifying the other 
        party, be entitled to judicial review of the 
        Secretary's final decision as provided in section 
        205(g), and both the individual and the eligible 
        organization shall be entitled to be parties to that 
        judicial review. In applying sections 205(b) and 205(g) 
        as provided in this subparagraph, and in applying 
        section 205(l) thereto, any reference therein to the 
        Commissioner of Social Security or the Social Security 
        Administration shall be considered a reference to the 
        Secretary or the Department of Health and Human 
        Services, respectively.
    ``(e) Quality Assurance.--
          ``(1) Internal quality assurance (iqa) program.--
                  ``(A) In general.--Subject to subparagraph 
                (B), an eligible organization must have 
                arrangements, established in accordance with 
                regulations of the Secretary, for an ongoing 
                quality assurance program for health care 
                services provided to individuals enrolled with 
                the organization under this part that--
                          ``(i) focuses on health outcomes; and
                          ``(ii) provides for review by 
                        physicians and other health care 
                        professionals of the process followed 
                        in the provision of such health care 
                        services.
                  ``(B) Acceptance of accreditation in 
                satisfaction of iqa standards.--If (or to the 
                extent that) an eligible organization has been 
                accredited by an accrediting body whose 
                standards with respect to one or more of the 
                elements of an internal quality assurance 
                program are at least as stringent as such 
                standards pursuant to subparagraph (A), the 
                organization shall be deemed to meet the 
                requirements of such subparagraph (A) with 
                respect to such program elements.
          ``(2) External quality review.--
                  ``(A) Requirements.--Each contract with an 
                eligible organization under this part shall 
                provide that the organization will maintain an 
                agreement with--
                          ``(i) a utilization and quality 
                        control peer review organization (which 
                        has a contract with the Secretary under 
                        part B of title XI for the area in 
                        which the eligible organization is 
                        located);
                          ``(ii) an entity selected by the 
                        Secretary under section 1154(a)(4)(C); 
                        or
                          ``(iii) an independent quality review 
                        and improvement organization selected 
                        by the organization and approved by the 
                        Secretary,
                under which the review organization will 
                perform functions under section 1154(a)(4)(B) 
                and section 1154(a)(14) (other than those 
                performed under contracts described in section 
                1866(a)(1)(F)) with respect to services, 
                furnished by the eligible organization, for 
                which payment may be made under this title.
                  ``(B) Quality review as covered service.--For 
                purposes of payment under this title, the cost 
                of such agreement to the eligible organization 
                shall be considered a cost incurred by a 
                provider of services in providing covered 
                services under this title and shall be paid 
                directly by the Secretary to the review 
                organization on behalf of such eligible 
                organization in accordance with a schedule 
                established by the Secretary.
                  ``(C) Payment from trust funds.--Such 
                payments--
                          ``(i) shall be transferred in 
                        appropriate proportions from the 
                        Federal Hospital Insurance Trust Fund 
                        and from the Supplemental Medical 
                        Insurance Trust Fund, without regard to 
                        amounts appropriated in advance in 
                        appropriation Acts, in the same manner 
                        as transfers are made for payment for 
                        services provided directly to 
                        beneficiaries, and
                          ``(ii) shall not be less in the 
                        aggregate for such organizations for a 
                        fiscal year that the amounts the 
                        Secretary determines to be sufficient 
                        to cover the costs of such 
                        organizations' conducting activities 
                        described in subparagraph (A) with 
                        respect to such eligible organizations 
                        under part B of title XI.
    ``(f) Beneficiary Advance Directives Concerning Medical 
Treatment.--A contract under this part shall provide that an 
eligible organization shall meet the requirements of section 
1866(f) (relating to maintaining written policies and 
procedures respecting advance directives).
    ``(g) Private Enrollment Requirements.--
          ``(1) 50 percent requirement.--Subject to section 
        11205 of the Balanced Budget Act of 1995 for Economic 
        Growth and Fairness, each eligible organization with 
        which the Secretary enters into a contract under this 
        part shall have, for the duration of such contract, an 
        enrolled membership (without consideration of members 
        enrolled in the program under title XIX) at least one-
        half of which consists of individuals who are not 
        entitled to benefits under this title.
          ``(2) Exceptions.--The Secretary may modify or waive 
        the requirement imposed by paragraph (1) only in the 
        following circumstances:
                  ``(A) Area with large medicare population.--
                If more than 50 percent of the population of 
                the area served by the organization consists of 
                individuals who are entitled to benefits under 
                this title.
                  ``(B) Initial period for governmental 
                contractor.--In the case of an eligible 
                organization that is owned and operated by a 
                governmental entity, only with respect to a 
                period of three years beginning on the date the 
                organization first enters into a contract under 
                this part, and only if the organization has 
                taken and is making reasonable efforts to 
                enroll individuals who are not entitled to 
                benefits under this title,
                  ``(C) Underserved rural area.--If the 
                organization serves an underserved rural area.
                  ``(D) Contractor with good past record.--If 
                the organization has had contracts under this 
                part for a total of at least three years, has 
                complied with all applicable requirements 
                during that period, maintains a level of 
                enrollment of individuals not entitled to 
                benefits under this title determined by the 
                Secretary, and complies with any additional 
                monitoring requirements established by the 
                Secretary.
                  ``(E) Contractor with good record in another 
                geographic area.--If--
                          ``(i) the Secretary has not 
                        previously entered into a contract with 
                        the organization under this part in the 
                        same geographic area (or has entered 
                        into contracts for a total of three 
                        years or less),
                          ``(ii) the organization (or a parent 
                        company that controls the organization) 
                        has entered into (or subsidiaries of 
                        the organization or parent company have 
                        entered into) contracts under this part 
                        for at least three different geographic 
                        areas--
                                  ``(I) for which no waiver has 
                                been granted under this 
                                paragraph and during the course 
                                of which there has been 
                                compliance with all applicable 
                                requirements; or
                                  ``(II) for which a waiver has 
                                been granted under subparagraph 
                                (D);
                          ``(iii) the organization (or parent 
                        company) demonstrates to the Secretary 
                        a long-term business and financial 
                        commitment to the geographic area 
                        served by the organization, and the 
                        Secretary determines that a waiver is 
                        necessary to promote competition in 
                        that area; and
                          ``(iv) the organization complies with 
                        all applicable requirements and any 
                        additional monitoring requirements 
                        established by the Secretary.
          ``(3) Substitution of quality measurement system.--
        For conditions under which the requirements of this 
        subsection will be replaced by requirements of a 
        quality measurement system, see section 11205 of the 
        Balanced Budget Act of 1995 for Economic Growth and 
        Fairness.
    ``(h) Access to Specialty Care and Case Management.--Each 
eligible organization shall ensure that enrollees with chronic 
illnesses or disabilities, and other enrollees as appropriate, 
shall have access to medically appropriate specialty care and 
medically appropriate case management.
    ``(i) Restrictions on Physician Incentive Plans.--
          ``(1) Criteria.--Each contract with an eligible 
        organization under this part shall provide that the 
        organization may not operate any physician incentive 
        plan (as defined in paragraph (2)) unless the following 
        requirements are met:
                  ``(A) No inducement to limit care.--No 
                specific payment is made directly or indirectly 
                under the plan to a physician or physician 
                group as an inducement to reduce or limit 
                medically necessary services provided with 
                respect to a specific individual enrolled with 
                the organization.
                  ``(B) Requirements where physician at 
                financial risk.--If the plan places a physician 
                or physician group at substantial financial 
                risk (as determined by the Secretary) for 
                services not provided by the physician or 
                physician group, the organization--
                          ``(i) provides stop-loss protection 
                        for the physician or group that is 
                        adequate and appropriate, based on 
                        standards developed by the Secretary 
                        that take into account the number of 
                        physicians placed at such substantial 
                        financial risk in the group or under 
                        the plan and the number of individuals 
                        enrolled with the organization who 
                        receive services from the physician or 
                        the physician group, and
                          ``(ii) conducts periodic surveys of 
                        both individuals enrolled and 
                        individuals previously enrolled with 
                        the organization to determine the 
                        degree of access of such individuals to 
                        services provided by the organization 
                        and satisfaction with the quality of 
                        such services.
                  ``(C) Disclosure to secretary.--The 
                organization provides the Secretary with 
                descriptive information regarding the plan, 
                sufficient to permit the Secretary to determine 
                whether the plan is in compliance with the 
                requirements of this paragraph.
          ``(2) Definition of `physician incentive plan'.--In 
        this subsection, the term `physician incentive plan' 
        means any compensation arrangement between an eligible 
        organization and a physician or physician group that 
        may directly or indirectly have the effect of reducing 
        or limiting services provided with respect to 
        individuals enrolled with the organization.''.

                Medicare's Capitation Payment Provisions

    These provisions would replace ``Section 1851F'' (e)(2) of 
the Administration's bill.
    In general, the Medicare capitation rate would be the 
greater of--
          (1) a blended rate of the area-specific rate and a 
        national, input-price adjusted rate, further adjusted 
        by a budget neutrality adjustment; or
          (2) a minimum payment amount; or
          (3) the previous year's rate increased by 2 percent.
    The payment area is the county.
    The blended rate in 1996 and 1997 would be 90 percent area 
specific rate and 10 percent the input price adjusted national 
rate; in 1998, it would be 85 percent area specific and 15 
percent national; in 1999, it would be 80 percent area specific 
and 20 percent national; in 2000, it would be 75 percent area 
specific and 25 percent national; and in 2001 and subsequent 
years, it would be 70 percent area specific and 30 percent 
national.
    The area-specific rate would be the area specific rate for 
the previous year indexed by the national average per capita 
growth rate. However, IME, GME and DSH would be removed from 
the area-specific rate in 1997.
    National average per capita growth rates would be the 
Secretary's estimate (determined annually) of the projected per 
capita rate of growth in private health insurance expenditures 
adjusted to reflect differences between the average benefit 
package under private insurance and the Medicare benefit 
package and differences in utilization and intensity of 
services between the general insured population and Medicare 
beneficiaries. Unless the Secretary determines otherwise, the 
national average per capita growth percentage would be 7 
percent.
    The input-price-adjusted annual national capitation rate 
for a payment area for a particular year would equal the sum, 
for all types of Medicare services, of the product of (1) the 
national standardized annual capitation rate for that year, (2) 
the proportion of the national standardized annual capitation 
rate for that year which is attributable to the type of 
service, (3) an input price index that reflects for that year 
and the service the relative input price of the service 
compared to the national average input price of the service.
    The national standardized annual capitation rate for a 
particular year would equal the sum (for all payment areas) of 
the product of the (1) annual area specific capitation rate for 
that year and (2) the average number of beneficiaries residing 
in the payment area in that year divided by the total average 
number of beneficiaries residing in all payment areas for that 
year.
    To determine the input price index for 1996, Medicare 
services would be divided into 2 types of services--Part A and 
Part B. The proportion of the rate attributable to Part A 
services would equal the 1995 AAPCC for Part A divided by the 
1995 AAPCC for Part A and Part B. The proportion of the rate 
attributable to Part B services would be 100 percent minus the 
proportion of the rate attributable to Part A services.
    In 1996 only, for Part A services, 70 percent of the 
payments would be adjusted by the hospital wage index. For Part 
B services, 66 percent of the payments would be adjusted by the 
GPCI. Of the remaining 34 percent of Part B services, 70 
percent would be adjusted by the hospital wage index.
    The input price index values would be computed based on the 
beneficiary population who are 65 years of age or older who are 
not determined to have ESRD.
    In 1997, the Secretary could continue to apply the same or 
similar methodology.
    The minimum payment amount would equal $310 in 1996 and 
$325 in 1997. In subsequent years, the minimum amount would be 
indexed by the national average per capita growth rate listed 
above.
    To ensure budget neutrality, each year blended area-
specific capitation payments would be adjusted so that the 
total payments would not exceed what total payments would have 
been if all payments were based on 100 percent area specific 
capitation rate.

``SEC. 1851F. PAYMENTS TO MEDICAREPLUS ORGANIZATIONS.

     (a) Payments to Organizations.--
          ``(1) Monthly payment.--
                  ``(A) In general.--Under a contract under 
                paragraph (1) the Secretary shall make monthly 
                payments under this section in advance to each 
                eligible organization, with respect to coverage 
                of an individual under this part in a payment 
                area for a month, in an amount equal to \1/12\ 
                of the annual capitation rate (as calculated 
                under subsection (c)) with respect to that 
                individual for that area, adjusted for such 
                risk factors as age, disability status, gender, 
                institutional status, and such other factors as 
                the Secretary determines to be appropriate, so 
                as to ensure actuarial equivalence. The 
                Secretary may add to, modify, or substitute for 
                such factors, if such changes will improve the 
                determination of actuarial equivalence.
                  ``(B) Special rule for end-stage renal 
                disease.--The Secretary shall establish a 
                separate rate of payment to an eligible 
                organization with respect to any individual 
                determined to have end-stage renal disease and 
                enrolled in a plan of the organization. Such 
                rate of payment shall be actuarially equivalent 
                to rates paid to other enrollees in the payment 
                area (or such other area as specified by the 
                Secretary).
          ``(2) Adjustment to reflect number of enrollees.--
                  ``(A) In general.--The amount of payment 
                under this subsection may be retroactively 
                adjusted to take into account any differences 
                between the actual number of individuals 
                enrolled with an organization under this part 
                and the number of such individuals estimated to 
                be so enrolled in determining the amount of the 
                advance payment.
                  ``(B) Special rule for certain enrollees.--
                          ``(i) In general.--Subject to clause 
                        (ii), the Secretary may make 
                        retroactive adjustments under 
                        subparagraph (A) to take into account 
                        individuals enrolled during the period 
                        beginning on the date on which the 
                        individual enrolls with an eligible 
                        organization under a plan operated, 
                        sponsored, or contributed to by the 
                        individual's employer or former 
                        employer (or the employer or former 
                        employer of the individual's spouse) 
                        and ending on the date on which the 
                        individual is enrolled in the 
                        organization under this part, except 
                        that for purposes of making such 
                        retroactive adjustments under this 
                        subparagraph, such period may not 
                        exceed 90 days.
                          ``(ii) Exception.--No adjustment may 
                        be made under clause (i) with respect 
                        to any individual who does not certify 
                        that the organization provided the 
                        individual with the disclosure 
                        statement described in section 
                        1851(E)(a) at the time the individual 
                        enrolled with the organization.
    ``(b) Annual Announcement of Payment Rates.--
          ``(1) Annual announcement.--The Secretary shall 
        annually determine, and shall announce (in a manner 
        intended to provide notice to interested parties) not 
        later than August 1 before the calendar year 
        concerned--
                  ``(A) the annual capitation rate for each 
                payment area for the year, and
                  ``(B) the risk and other factors to be used 
                in adjusting such rates under subsection 
                (a)(1)(A) for payments for months in that year.
          ``(2) Advance notice of methodological changes.--At 
        least 45 days before making the announcement under 
        paragraph (2) for a year, the Secretary shall provide 
        for notice to eligible organizations of proposed 
        changes to be made in the methodology from the 
        methodology and assumptions used in the previous 
        announcement and shall provide such organizations an 
        opportunity to comment on such proposed changes.
          ``(3) Explanation of assumptions.--In each 
        announcement made under paragraph (1) for a year, the 
        Secretary shall include an explanation of the 
        assumptions and changes in methodology used in the 
        announcement in sufficient detail so that eligible 
        organizations can compute monthly adjusted capitation 
        rates for individuals in each payment area which is in 
        whole or in part within the service area of such an 
        organization.
    ``(c) Calculation of Annual Capitation Rates.--
          ``(1) In general.--For purposes of this part, the 
        annual capitation rate for a payment area for a 
        contract year consisting of a calendar year, is equal 
        to the greatest of the following:
                  ``(A) Blended capitation rate.--The sum of--
                          ``(i) area-specific percentage for 
                        the year (as specified under paragraph 
                        (2) for the year) of the annual area-
                        specific MedicarePlus capitation rate 
                        for the year for the MedicarePlus 
                        payment area, as determined under 
                        paragraph (3), and
                          ``(ii) national percentage (as 
                        specified under paragraph (2) for the 
                        year) of the input-price-adjusted 
                        annual national MedicarePlus 
                        capitation, rate for the year, as 
                        determined under paragraph (4),
                multiplied by a budget neutrality adjustment 
                factor determined under paragraph (5).
                  ``(B) Minimum amount.--
                          ``(i) For 1996, $310.
                          ``(ii) For 1997, $325.
                          ``(iii) For a succeeding year, is the 
                        minimum amount specified in this 
                        subparagraph for the preceding year 
                        increased by national per capita growth 
                        percentage, specified under paragraph 
                        (6) for that succeeding year.
                  ``(C) Minimum increase of 3 percent over 
                previous year's rate.--
                          ``(i) For 1996, 102 percent of the 
                        annual per capita rate of payment for 
                        1995 determined under section 
                        1876(a)(1)(C) for the payment area.
                          ``(ii) For a subsequent year, 102 
                        percent of the annual capitation rate 
                        under this subsection for the area for 
                        the previous year.
          ``(2) Area-specific and national percentages.--For 
        purposes of paragraph (1)(A)--
                  ``(A) for 1996 and 1997, the `area-specific 
                percentage' is 90 percent and the `national 
                percentage' is 10 percent,
                  ``(B) for 1998, the `area-specific 
                percentage' is 85 percent and the `national 
                percentage' is 15 percent,
                  ``(C) for 1999, the `area-specific 
                percentage' is 80 percent and the `national 
                percentage' is 20 percent,
                  ``(D) for 2000, the `area-specific 
                percentage' is 75 percent and the `national 
                percentage' is 25 percent, and
                  ``(E) for a year after 2000, the `area-
                specific percentage' is 70 percent and the 
                `national percentage' is 30 percent.
          ``(3) Annual area-specific medicare choice capitation 
        rate.--
                  ``(A) In general.--For purposes of paragraph 
                (1)(A), subject to subparagraph (B), the annual 
                area-specific Medicare Choice capitation rate 
                for a Medicare Choice payment area--
                          ``(i) for 1996 is the annual per 
                        capita rate of payment for 1995 
                        determined under section 1876(a)(1)(C) 
                        for the payment area, increased by the 
                        national average per capita growth 
                        percentage for 1996 (as defined in 
                        paragraph (6)); or
                          ``(ii) for a subsequent year is the 
                        annual area-specific capitation rate 
                        for the previous year determined under 
                        this paragraph for the payment area, 
                        increased by the national average per 
                        capita growth percentage for such 
                        subsequent year.
                  ``(B) Removal of medical education and 
                disproportionate share hospital payments from 
                calculation of adjusted average per capita 
                cost.--In determining the annual area-specific 
                Medicare Choice capitation rate for 1997 under 
                subparagraph (A)(i), the average annual per 
                capita rate of payment for 1996 determined 
                under (A)(i) shall be determined as though the 
                Secretary had excluded from such rate any 
                amounts which the Secretary estimated would 
                have been payable under this title during the 
                year for--
                          ``(i) payment adjustments under 
                        section 1886(d)(5)(F) for hospitals 
                        serving a disproportionate share of 
                        low-income patients; and
                          ``(ii) the indirect costs of medical 
                        education under section 1886(d)(5)(B) 
                        or for direct graduate medical 
                        education costs under section 1886(h).
          ``(4) Input-price-adjusted annual national capitation 
        rate.--
                  ``(A) In general.--For purposes of paragraph 
                (1)(A), the input-price-adjusted annual 
                national capitation rate for a payment area for 
                a year is equal to the sum, for all the types 
                of medicare services (as classified by the 
                Secretary), of the plan (for each such type) 
                of--
                          ``(i) the national standardized 
                        annual capitation rate (determined 
                        under subparagraph (B)) for the year,
                          ``(ii) the proportion of such rate 
                        for the year which is attributable to 
                        such type of services, and
                          ``(iii) an index that reflects (for 
                        that year and that type of services) 
                        the relative input price of such 
                        services in the area compared to the 
                        national average input price of such 
                        services.
                In applying clause (iii), the Secretary shall, 
                subject to subparagraph (C), apply those 
                indices under this title that are used in 
                applying (or updating) national payment rates 
                for specific areas and localities.
                  ``(B) National standardized annual capitation 
                rate.--In subparagraph (A)(i), the `national 
                standardized annual capitation rate' for a year 
                is equal to--
                          ``(i) the sum (for all payment areas) 
                        of the product of (I) the annual area-
                        specific capitation rate for that year 
                        for the area under paragraph (3), and 
                        (II) the average number of medicare 
                        beneficiaries residing in that area in 
                        the year; divided by
                          ``(ii) the total average number of 
                        medicare beneficiaries residing in all 
                        the payment areas for that year.
                  ``(C) Special rules for 1996.--In applying 
                this paragraph for 1996--
                          ``(i) medicare services shall be 
                        divided into 2 types of services: part 
                        A services and part B services;
                          ``(ii) the proportions described in 
                        subparagraph (A)(ii) for such types of 
                        services shall be--
                                  ``(I) for part A services, 
                                the ratio (expressed as a 
                                percentage) of the average 
                                annual per capita rate of 
                                payment for the area for part A 
                                for 1995 to the total average 
                                annual per capita rate of 
                                payment for the area for parts 
                                A and B for 1995, and
                                  ``(II) for part B services, 
                                100 percent minus the ratio 
                                described in subclause (I);
                          ``(iii) for the part A services, 70 
                        percent of payments attributable to 
                        such services shall be adjusted by the 
                        index used under section 1886(d)(3)(E) 
                        to adjust payment rates for relative 
                        hospital wage levels for hospitals 
                        located in the payment area involved;
                          ``(iv) for part B services--
                                  ``(I) 66 percent of payments 
                                attributable to such services 
                                shall be adjusted by the index 
                                of the geographic area factors 
                                under section 1848(e) used to 
                                adjust payment rates for 
                                physicians' services furnished 
                                in the payment area, and
                                  ``(II) of the remaining 34 
                                percent of the amount of such 
                                payments, 70 percent shall be 
                                adjusted by the index described 
                                in clause (iii);
                          ``(v) the index values shall be 
                        computed based only on the beneficiary 
                        population who are 65 years of age or 
                        older who are not determined to have 
                        end stage renal disease.
                The Secretary may continue to apply the rules 
                described in this subparagraph (or similar 
                rules) for 1997.
          ``(5) Budget neutrality adjustment factor.--For each 
        year, the Secretary shall compute a budget neutrality 
        adjustment factor so that the aggregate of the payments 
        under this part shall not exceed the aggregate payments 
        that would have been made under this part if the area-
        specific percentage for the year had been 100 percent 
        and the national percentage had been 0 percent.
          ``(6) National average per capita growth percentage 
        defined.--In this part, the ``national average per 
        capita growth percentage shall be the percentage 
        determined by the Secretary on an annual basis (not 
        later than August 1st before the calendar year 
        concerned) to reflect the Secretary's estimate of the 
        projected per capita rate of growth in private health 
        insurance expenditures adjusted to reflect differences 
        between the average benefit package under private 
        insurance and the Medicare benefit package and 
        differences in utilization and intensity of services 
        between the general insured population and Medicare 
        beneficiaries. In determining this percentage, the 
        Secretary shall consider the traditional fee-for-
        service growth rates to ensure there is not a wide 
        disparity between fee for service growth rates and the 
        national average per capita growth rate. Unless the 
        Secretary otherwise determines, the national average 
        per capita growth percentage shall be 7 percent.
    ``(d) Payment Area Defined.--
          ``(1) In general.--In this part, except as provided 
        in paragraph (3), the term `payment area' means a 
        county, or equivalent area specified by the Secretary.
          ``(2) Rule for esrd beneficiaries.--In the case of 
        individuals who are determined to have end stage renal 
        disease, the payment area shall be each State.

``SEC. 1851G. SANCTIONS.

    ``(a) Violations Subject to Civil Money Penalties.--In 
addition to any other remedies authorized by law, the Secretary 
may impose a civil money penalty in accordance with subsection 
(c) on an eligible organization with a contract under this part 
that has committed any of the following violations:
          ``(1) Failure to provide medically necessary care.--
        The organization has failed substantially to provide 
        medically necessary items and services that are 
        required (under law or under the contract) to be 
        provided to an individual covered under the contract, 
        if the failure has adversely affected (or has 
        substantial likelihood of adversely affecting) the 
        individual.
          ``(2) Excessive premiums.--The organization has 
        imposed premiums on individuals enrolled under this 
        part in excess of the premiums permitted.
          ``(3) Discontinuation of coverage.--The organization 
        has expelled or refused to re-enroll an individual in 
        violation of the provisions of this part.
          ``(4) Discouraging enrollment.--The organization has 
        engaged in any practice that would reasonably be 
        expected to have the effect of denying or discouraging 
        enrollment (except as permitted by this part) by 
        eligible individuals with the organization whose 
        medical condition or history indicates a need for 
        substantial future medical services.
          ``(5) False information.--The organization has 
        misrepresented or falsified information furnished--
                  ``(A) to the Secretary under this part, or
                  ``(B) to an individual or to any other entity 
                under this part.
          ``(6) Failure to cooperate with external quality 
        review.--The organization fails to cooperate in the 
        performance of the review required under section 
        1851E(e)(2).
          ``(7) Physician incentive plan violations.--The 
        organization fails to comply with the requirements of 
        section 1851E(i).
          ``(8) Relationship with excluded individual or 
        entity.--The organization.--
                  ``(A) employs or contracts with any 
                individual or entity that is excluded from 
                participation under this title under section 
                1128 or 1128A for the provision of health care, 
                utilization review, medical social work, or 
                administrative services; or
                  ``(B) employs or contracts with any entity 
                for the provision (directly or indirectly) 
                through such an excluded individual or entity 
                of such services.
    ``(b) Violations Subject to Intermediate Sanctions.--In 
addition to any other remedies authorized by law, the Secretary 
may impose an intermediate sanction in accordance with 
subsection (d) on an eligible organization with a contract 
under this part that has committed any of the following 
violations:
          ``(1) Violation subject to civil money penalty.--Any 
        violation specified in subsection (a).
          ``(2) Grounds for termination of contract.--Any 
        violation that would be grounds for termination of the 
        contract with the organization pursuant to section 
        1851F(b)(2).
          ``(3) Failure to make prompt payment.--Failure to 
        make prompt payment as required by section 1851F(d).
          ``(4) Delayed coverage determinations.--Failure to 
        meet timeliness standards for coverage determinations 
        under section 1851E(d)(1).
          ``(5) Insufficient private enrollment.--Failure to 
        meet the minimum requirements of section 1851E(g).
    ``(c) Civil Money Penalties.--
          ``(1) Amount of penalty.--The Secretary may impose, 
        on an eligible organization determined to have 
        committed a violation specified in subsection (a), 
        civil money penalties not to exceed the sum of the 
        following amounts, as applicable:
                  ``(A) for each such determination, not more 
                than--
                          ``(i) $100,000 in the case of a 
                        determination under subsection (a)(4) 
                        or (a)(5)(i); or
                          ``(ii) $25,000, in the case of any 
                        other such determination;
                  ``(B) with respect to a determination under 
                subsection (a)(2), double the excess amount 
                charged (and the excess amount charged shall be 
                deducted from the penalty and returned to the 
                individual concerned); and
                  ``(C) with respect to a determination under 
                subsection (a)(4), $15,000 for each individual 
                not enrolled as a result of the practice 
                involved.
          ``(2) Administrative procedure.--The provisions of 
        section 1128A (other than subsections (a) and (b) shall 
        apply to a civil money penalty under this section in 
        the same manner as they apply to a civil money penalty 
        or proceeding under section 1128A(a).
    ``(d) Intermediate Sanctions.--The Secretary may impose, on 
an eligible organization determined to have committed a 
violation specified in subsection (a) or (b), either or both of 
the following sanctions.
          ``(1) Suspension of enrollment.--Suspension of 
        enrollment of individuals with the organization under 
        this part after the date the Secretary notifies the 
        organization of a determination under subsection (a) or 
        (b) and until the Secretary is satisfied that the basis 
        for such determination has been corrected and is not 
        likely to recur.
          ``(2) Suspension of payment.--Suspension of payment 
        to the organization under this part for individuals 
        enrolled after the date the Secretary notifies the 
        organization of a determination under subsection (a) or 
        (b) and until the Secretary is satisfied that the basis 
        for such determination has been corrected and is not 
        likely to recur.

``SEC. 1851H. DEFINITIONS.

    ``(a) Adjusted Community Rate.--
          ``(1) In general.--For purposes of this part, the 
        term `adjusted community rate' for a service or 
        services means, at the election of an eligible 
        organization, either--
                  ``(A) the rate of payment for that service or 
                services which the Secretary annually 
                determines would apply to a member enrolled 
                under this part with an eligible organization 
                if the rate of payment were determined under a 
                community rating system' (as defined in section 
                1302(8) of the Public Health Service Act, other 
                than subparagraph (C)), or
                  ``(B) such portion of the weighted aggregate 
                premium, which the Secretary annually estimates 
                would apply to a member enrolled under this 
                part with the eligible organization, as the 
                Secretary annually estimates is attributable to 
                that service or services, adjusted in 
                accordance with paragraph (2).
          ``(2) Adjustment of differences in utilization.--The 
        rate determined in accordance with subparagraphs (A) 
        and (B) of paragraph (1) shall be adjusted for--
                  ``(A) the differences between the utilization 
                characteristics of the members enrolled with 
                the eligible organization under this part and 
                utilization characteristics of the other 
                members of the organization; or
                  ``(B) (if the Secretary finds that adequate 
                data are not available to calculate the 
                adjustment pursuant to subparagraph (A)) the 
                differences between--
                          ``(i) the utilization characteristics 
                        of members in other eligible 
                        organizations, or individuals in the 
                        area, in the State, or in the United 
                        States, eligible to enroll under this 
                        part with an eligible organization, and
                          ``(ii) the utilization 
                        characteristics of the rest of the 
                        population in the area, in the State, 
                        or in the United States, respectively.
    ``(b) Adjusted Average Per Capita Cost (AAPCC).--For 
purposes of this part, the term `AAPCC' (adjusted average per 
capita cost) means the average per capita amount that the 
Secretary estimates in advance (on the basis of actual 
experience, or retrospective actuarial equivalent based upon an 
adequate sample and other information and data, in a geographic 
area served by an eligible organization or in a similar area, 
with appropriate adjustments to assure actuarial equivalence) 
would be payable in any contract year for services covered 
under parts A and B, or part B only, and types of expenses 
otherwise reimbursable under parts A and B, or part B only 
(including administrative costs incurred by organizations 
described in sections 1816 and 1842), if the services were to 
be furnished by other than an eligible organization or, in the 
case of services covered only under section 1861(s)(2)(H), if 
the services were to be furnished by a physician or as an 
incident to a physician's service.''.
    (b) Repeal of Superseded Provision.--Section 1876 (42 
U.S.C. 1395mm) is repealed, except to the extent provided in 
subsection (e).
    (c) Conforming Amendments.--
          (1) Section 1154(a)(4)(B) (42 U.S.C. 1320c-
        3(a)(4)(B)) is amended--
                  (A) in the first sentence, by striking 
                ``risk-sharing contract under section 1876'' 
                and inserting ``contract under part C of title 
                XVIII'', and
                  (B) in the second sentence, by striking ``a 
                health maintenance organization or competitive 
                medical plan under section 1876'' and inserting 
                ``an eligible organization under part C of 
                title XVIII''.
          (2) The second sentence of section 1154(a)(4)(C) (42 
        U.S.C. 1320c-3(A)(4)(C)) is amended by striking 
        ``section 1876'' and inserting ``part C of title 
        XVIII''.
          (3) Section 1866(a)(1)(O) (42 U.S.C. 1395cc(a)(1)(O)) 
        is amended by striking ``risk-sharing contract under 
        section 1876'' and inserting ``contract under part C''.
          (4) The matter in the first sentence of section 
        1866(f)(1) (42 U.S.C. 1395cc(f)(1)) preceding 
        subparagraph (A) is amended by striking ``1876(c)(8)'' 
        and inserting ``1851E(f)''.
          (5) Section 1866(f)(2)(E) (42 U.S.C. 1395cc(f)(2)(E)) 
        is amended by striking ``1876(b)'' and inserting 
        ``1851A(a)''.
          (6) Section 1882(f)(1) is amended--
                  (A) by striking ``1876(b) and inserting 
                ``1851A''; and
                  (B) by striking ``section 1876'' and 
                inserting ``part C''.
    (d) Effective Date.--Except to the extent otherwise 
provided, the amendments made by the preceding subsections 
apply to items and services furnished after 1996.
    (e) Transition Provisions for Cost Contracts.--
          (1) Repeal of authority for cost contracts delayed to 
        2001.--The amendments made by the preceding subsections 
        (other than the amendments specified in paragraph (2)) 
        do not apply to items and services furnished before 
        2001 under a contract under section 1876(h) of the 
        Social Security Act (42 U.S.C. 1395mm(h)).
          (2) Provisions whose effect is not delayed.--The 
        effective dates of the following provisions of part C 
        of the Social Security Act (as enacted by subsection 
        (a)(2) of this section) shall not be delayed by reason 
        of paragraph (1):
                  (A) Definition of qualified hmo.--Section 
                1851A(b).
                  (B) Enrollment and disenrollment.--Section 
                1851B.
                  (C) Beneficiary protections.--Subsections (a) 
                (explanation of patients' rights and 
                restrictions), (c) (grievance mechanism), (d) 
                (coverage determinations and appeals), and (g) 
                (private enrollment requirements) of section 
                1851E.
          (3) Option restricted to grandfathered 
        organizations.--With respect to services provided after 
        1995 but before 2001, the Secretary may enter into 
        contracts under subsection (h) of section 1876 of the 
        Social Security Act (42 U.S.C. 1395mm) only with 
        entities with which the Secretary has entered into 
        contracts under that subsection for all or part of 
        1995, or to which payments have been made during 1995 
        under section 1833(a)(1)(A) of that Act (42 U.S.C. 
        13951(a)(1)(A)).
    (f) Regulations.--
          (1) Continuity of current regulations.--Regulations 
        in effect (or available in proposed form) on December 
        31, 1996, that apply to section 1876 of the Social 
        Security Act (42 U.S.C. 1395mm) shall apply to part C 
        of title XVIII of that Act (as enacted by subsection 
        (a)(2) of this section), except to the extent that the 
        regulations are inconsistent with the provisions of 
        that part.
          (2) Interim final regulations.--The Secretary may 
        issue regulations before 1998 for part C of title XVIII 
        of the Social Security Act (as enacted by subsection 
        (a)(2) of this section) on an interim final basis.
    (g) Consideration of Experience Under Section 1876 in 
Satisfaction of Requirements of Part C.--Any requirement in 
part C of title XVIII of the Social Security Act (as enacted by 
subsection (a)(2) of this section) that (in a particular 
context) relates to matters that occurred before 1997 shall be 
satisfied if the corresponding requirement was satisfied under 
section 1876 (42 U.S.C. 1395mm) of that Act.
    (h) Enrollment Transition Rule.--An individual who is 
enrolled on December 31, 1996, with an eligible organization 
under section 1876 of the Social Security Act (42 U.S.C. 
1395mm) shall be considered to be enrolled with that 
organization on January 1, 1997, under part C of title XVIII of 
that Act (as added by subsection (a)(2) of this section) if 
that organization has a contract under that part for providing 
services on January 1, 1997 (unless the individual has 
disenrolled effective on that date).
    (i) Immediate Effective Date for Certain Requirements for 
Demonstrations.--Section 1851B(b)(2) of the Social Security Act 
(as enacted by subsection (a)(2) of this section) (requiring 
contribution to certain costs related to the enrollment process 
comparative materials) applies to demonstrations occurring 
after the date of enactment of this Act.

SEC. 11203. DEVELOPMENT OF STANDARDS FOR FISCAL SOUNDNESS AND 
                    REQUIREMENTS AGAINST RISK OF INSOLVENCY.

    The Secretary of Health and Human Services, in consultation 
with the National Association of Insurance Commissioners, 
organizations that provide or pay for health care services, and 
consumer organizations, shall develop (and publish as an 
interim final rule by July 1, 1996) standards for fiscal 
soundness and requirements concerning adequate provision 
against the risk of insolvency for provider sponsored 
organizations that have entered into contracts under part C of 
title XVIII of the Social Security Act (as enacted by section 
11202(a)(2) of this Act). The Secretary may also publish, as an 
interim final rule by that date, any additional requirements 
related to such organizations.

SEC. 11204. APPLICABILITY OF MEDICARE RATES TO ENROLLEES WHO USE AN 
                    OUT-OF-PLAN PROVIDER OF SERVICES.

    (a) Section 1866(a)(1)(O) (42 U.S.C. 1395cc(a)(1)(O)) is 
amended--
          (1) by striking ``in the case of hospitals and 
        skilled nursing facilities,'';
          (2) by striking ``inpatient hospital and extended 
        care services that are covered under this title and'' 
        and inserting ``services that''; and
          (3) by striking ``(in the case of hospitals) or 
        limits (in the case of skilled nursing facilities)''.
    (b) The amendment made by subsection (a) applies to 
services furnished after 1996.

SEC. 11205. SUBSTITUTION OF QUALITY MEASUREMENT SYSTEM FOR PRIVATE 
                    ENROLLMENT REQUIREMENT.

    (a) Promulgation of Regulations.--The Secretary of Health 
and Human Services, after consulting with representatives from 
managed health care plans (including representatives of 
provider service organizations), consumer organizations, and 
other major purchasers of managed care services--
          (1) shall publish proposed regulations by July 1, 
        1997, requiring the collection, analysis, and reporting 
        of data that will permit measurement of outcomes and 
        other indices of the quality of managed care plans;
          (2) shall publish final regulations after completing 
        review of comments on the proposed regulations 
        published pursuant to paragraph (1).
    (b) Revision of Beneficiary Protection Requirement.--As of 
the effective date of final regulations published pursuant to 
subsection (a), section 1851E(g) (as enacted by section 
11202(a)(2) of this Act) is amended to read as follows:
    ``(g) Quality Measurement System.--Each eligible 
organization with which the Secretary enters into a contract 
under this part shall meet the requirements of the quality 
measurement system established by the Secretary in 
regulations.''.

SEC. 11206. HMO COMPETITIVE PRICING AND RELATED DEMONSTRATIONS.

    (a) Amendment Effective on Date of Enactment.--Section 
402(b) of the Social Security Amendments of 1967 (42 U.S.C. 
1395b-1(b)) is amended by inserting after the first sentence 
the following: ``The Secretary may also waive, in the case of 
such an experiment or demonstration project, compliance with 
the requirements of sections 1876 and 1882 of that Act.
          ``(2) Report to congress on competitive pricing 
        demonstration.--Not later then January 1, 2002, the 
        Secretary shall report to Congress on specific 
        recommendations for a new payment methodology for 
        eligible organizations with contracts under Part C to 
        be based on the results of the competitive pricing 
        demonstrations.''.
    (b) Amendment Effective for 1997-2000.--
          (1) The second sentence of section (402)(b) of the 
        Social Security Amendments of 1967 (42 U.S.C. 1395B-
        1(b)) (as added by subsection (a) of this section) is 
        amended by inserting ``and part C of title XVIII'' 
        after ``1882''.
          (2) The amendment made by paragraph (1) applies to 
        activities occurring after 1996.
    (c) Amendment Effective After 2000.--
          (1) The second sentence of section 402(b) of the 
        Social Security Amendments of 1967 (42 U.S.C. 1395b-
        1(b)) (as added by subsection (a) and amended by 
        subsection (b) of this section) is further amended by 
        striking ``sections 1876 and 1882'' and inserting 
        ``section 1882''.
          (2) The amendment made by paragraph (1) applies to 
        activities occurring after 2000.

SEC. 11207. ELIMINATION OF HEALTH CARE PREPAYMENT PLAN OPTION FOR 
                    ENTITIES ELIGIBLE TO PARTICIPATE UNDER PART C.

    (a) Elimination of Option.--
          (1) In general.--Section 1833(a)(1)(A) (42 U.S.C. 
        13951(a)(1)(A)) is amended by inserting after 
        ``prepayment basis'' the following: ``(and either is 
        sponsored by a union or employer, or does not provide, 
        or provide benefits for, any inpatient hospital 
        services)''.
          (2) Effective date.--The amendment made by 
        subparagraph (A) applies to services furnished after 
        1996.
    (b) Medigap Amendment.--Section 1882(g) (42 U.S.C. 
1395ss(g)) is amended by striking ``, during the period 
beginning on the date specified in subsection (p)(1)(C) and 
ending on December 31, 1995,''.

SEC. 11208. MEDIGAP REFORMS.

    (a) Uniform Enrollment Periods.--
          (1) In general.--Section 1882(s)(2)(A) (42 U.S.C. 
        1395ss(s)(2)(A)) is amended by striking ``an 
        application is submitted'' and all that follows and 
        inserting the following:
``an application is submitted--
          ``(i) prior to or during the 6-month period beginning 
        with the first month as of the first day on which the 
        individual is 65 years of age or older and is enrolled 
        for benefits under part B;
          ``(ii) during an annual 30-day period specified by 
        the Secretary; or
          ``(iii) during a period specified by the Secretary in 
        the circumstances described in section 1851B(c)(2) 
        (with respect to an individual losing coverage through 
        an organization's termination of contract or 
        discontinuation of coverage).''.
          (2) Effective date.--The amendment made by the 
        paragraph (1) is effective after 1996.
    (b) Standardized Information.--
          (1) In general.--
                  (A)(i) Section 1882 (42 U.S.C. 1395ss) is 
                amended by adding at the end the following:
    ``(u) Each entity that offers a medicare supplemental 
policy shall pay the Secretary for its pro rata share (a 
determined by the Secretary) of the estimated costs to be 
incurred by the Secretary in carrying out the requirements of 
the first sentence of section 1851B(b)(1) and section 4360 of 
the Omnibus Reconciliation Act of 1990. Those payments are 
appropriated to defray the costs described in the preceding 
sentence, to remain available until expended.''.
                  (ii) Section 1882(c)(5) (42 U.S.C. 
                1395ss(c)(5)) is amended by striking ``(t)'' 
                and inserting ``(u)''.
                  (B) Section 4360(g) of the Omnibus 
                Reconciliation Act of 1990 (42 U.S.C. 1395b-
                4(g)) is amended to read as follows:
    ``(g) Funding.--For funding provisions, see section 
1851B(b)(2), and section 1882(u), of the Social Security 
Act.''.
          (2) Effective date.--The amendments made by the 
        preceding paragraphs apply to demonstrations occurring 
        after the date of enactment of this Act, and to other 
        activities occurring after 1996.
    (c) Community Rating.--
          (1) In general.--Section 1882(c) (42 U.S.C. 
        1395ss(c)) is amended--
                  (A) by striking ``and'' at the end of 
                paragraph (4),
                  (B) by striking the period at the end of 
                paragraph (5) and adding ``; and'', and
                  (C) by adding after paragraph (5) the 
                following: ``(6) provides for the same premium 
                for each enrollee.''.
          (2) Conforming amendment.--Section 1882(b)(1)(B) (42 
        U.S.C. 1395ss(b)(1)(B)) is amended by striking ``(5)'' 
        and inserting ``(6)''.
          (3) Effective date and transitional provisions.--The 
        amendments made by the preceding paragraphs apply to 
        policies and plans as of the beginning of 1997 (whether 
        issued before or after that time), subject to such 
        transitional rules as the Secretary may develop after 
        consulting with the National Association of Insurance 
        Commissioners.
    (d) Long-Term Care Insurance Safe Harbor.--
          (1) In general.--Section 1882(d)(3)(C) is amended--
                  (A) by striking ``or (iii)'' and inserting 
                ``(iii)''; and
                  (B) by inserting before the period the 
                following: ``, or (iv) the sale or issuance of 
                a health insurance policy (or rider to an 
                insurance contract which is not a health 
                insurance policy) providing benefits only for 
                long-term care, nursing home care, home health 
                care, or community-based care, or any 
                combination thereof, that coordinates against 
                or excludes items and services available under 
                this title, if such coordination or exclusion 
                is disclosed in the policy's outline of 
                coverage.''.
          (2) Effective date and other rules.--
                  (A) The amendments made by this section shall 
                take effect as if included in the enactment of 
                section 4354 of the Omnibus Budget 
                Reconciliation Act of 1990 (hereafter referred 
                to as ``OBRA-1990'').
                  (B) No penalty shall be imposed under section 
                1882(d)(3)(A)(i) of the Social Security Act for 
                any set or omission occurring after the 
                effective date of the amendments made by 
                section 4354 of OBRA-90 and before the date of 
                the enactment of this Act relating to the sale 
                of a health insurance policy described in 
                section 1882(d)(3)(C)(iv) of the Social 
                Security Act.

SEC. 11209. STANDARDIZED BENEFITS PACKAGES.

    (a) Managed Care.--The Secretary, no later than July 1, 
1996, after consulting with the National Association of 
Insurance Commissioners, consumer groups, managed care plans, 
providers of health care, and insurers, shall develop standard 
packages of benefits (in addition to the benefits covered under 
title XVIII of the Social Security Act (42 U.S.C. 1395 et 
seq.)) that may be offered by eligible organizations under part 
C of that title (as added by section 11202(a)(2) of this Act).
    (b) Medigap.--
          (1)(A) The Secretary shall request the National 
        Association of Insurance Commissioners, in consultation 
        with consumer groups, managed care plans, providers of 
        health care, and insurers, to examine (and recommend by 
        March 1, 1997, any restructuring needed for) the 
        standard benefit packages developed under section 
        1882(p)(2) of the Social Security Act (42 U.S.C. 
        1395ss(p)(2)) in order to facilitate to the maximum 
        extent feasible comparison across medicare supplemental 
        policies and benefits offered by eligible organizations 
        under section 1876.
          (B) The Secretary, no later than May 1, 1997, after 
        taking into account any recommendations made under 
        subparagraph (A) by the National Association of 
        Insurance Commissioners, shall restructure, as needed, 
        those standard benefit packages.
          (2)(A) Section 1882(p) (42 U.S.C. 1395ss(p)) is 
        amended by adding at the end the following:
          ``(11) The groups or packages of benefits (including 
        the core group of basic benefits) under paragraph (2) 
        shall be modified by any changes made by the Secretary 
        under section 11209(b)(1)(B) of the Balanced Budget Act 
        of 1995 for Economic Growth and Fairness.''.
          (B) The amendment made by subparagraph (A) applies to 
        services provided after 1997.

                     MEDICAID LANGUAGE EXPLANATION

    The proposal would include language with establishing a per 
capita cap on the average per beneficiary rate of growth in the 
Medicaid program.
    There would be an ``equity adjustor'' to states with low 
per capita expenditures (i.e., their growth rates would be 
higher than other states). The national average growth rate, 
however, would be tagged to grow by a national index 
(compensating for the ``equity adjustor'').
    With respect to savings in the disproportionate share 
hospital program, we would phase out the current 
disproportionate share program and phase in a retargeted 
disproportionate share program identical to the Coalition's 
bill.
    Funding levels would be as follows:

----------------------------------------------------------------------------------------------------------------
                                                     1996     1997     1998     1999     2000     2001     2002 
----------------------------------------------------------------------------------------------------------------
Phase-out........................................     10.7      8.0      5.3      2.6      0.0      0.0      0.0
Phase-in.........................................      0.0      1.3      2.7      4.0      5.0      5.0      5.0
                                                  --------------------------------------------------------------
  Total..........................................     10.7      9.3      8.0      6.6      5.0      5.0      5.0
----------------------------------------------------------------------------------------------------------------

    The program would also include a mandatory set-aside of 
payments of $290 million for federally qualified health centers 
and $125 million for rural health centers in FY 1997 to be 
increased annually by the overall rate of Medicaid growth in 
the previous year. We estimate this would cost approximately $3 
billion over the six year period.
    In addition, we would include language from the conference 
report for the $3.5 billion for payments to states for costs 
incurred for the provision of care to undocumented aliens.
    ``(b) For Undocumented Immigrants.--
          ``(1) In general.--Each of the 15 States with the 
        largest number of illegal immigrants (as estimated by 
        the Statistics Division of the Immigration and 
        Naturalization Service as of October, 1992) shall be 
        entitled, for each of fiscal years 1996 through 2000, 
        to an amount bearing the same ratio to the amount 
        specified in paragraph (2) as the illegal immigrant 
        population in all 15 such States.
          ``(2) Amounts authorized.--For purposes of paragraph 
        (1) amounts authorized to be appropriated are:
                  ``(A) $631,000,000 for fiscal year 1996;
                  ``(B) $664,000,000 for fiscal year 1997;
                  ``(C) $699,000,000 for fiscal year 1998;
                  ``(D) $735,000,000 for fiscal year 1999; and
                  ``(E) $771,000,000 for fiscal year 2000.
          ``(3) Annual report.--Not later than 90 days after 
        the end of each fiscal year in which a State receives 
        or uses amounts pursuant to this subsection, the State 
        shall submit to the Secretary, and make available to 
        the public, a report on its use of such amounts in such 
        fiscal year which includes:
                  ``(A) a listing of each of the providers 
                receiving payment from such amounts and the 
                amount of such payments; and
                  ``(B) such information as the Secretary may 
                require to provide an assurance that services 
                provided with such payments were consistent 
                with the limitations under section 1903(v).
    ``(c) Extended Availability of Funds.--Amounts appropriated 
pursuant to this section and not required by a State for the 
purposes of this section in a fiscal year may be used by the 
State for such purposes in any subsequent fiscal year, and 
shall remain available until expended.
    ``(d) State Assurances.--Each State receiving transitional 
assistance payments under this section shall provide assurances 
satisfactory to the Secretary--
          ``(1) in the case of payments under subsection (a), 
        that such payments will be used by the State to make 
        payments to health care providers for services which 
        would otherwise be uncompensated; and
          ``(2) in the case of payments under subsection (b), 
        that such payments will be used by the State to make 
        payments for emergency health care services for illegal 
        immigrants in accordance with section 1903(v).''.
          (2) Payments to states.--Section 1903(a) is amended--
                  (A) by striking the period at the end of 
                paragraph (7) and inserting ``; plus''; and
                  (B) by adding after paragraph (7) the 
                following new paragraph;
                          ``(8) an amount equal to 100 percent 
                        of payments authorized pursuant to 
                        section 1923A''.
          (3) Sunset.--Effective October 1, 2000, the 
        amendments made by this subsection are repealed.

SEC. 11303. MEDICAID ELIGIBILITY QUALITY CONTROL (MEQC) REQUIREMENTS.

    Section 1903(u) is amended--
          (1) in paragraph (1)(A), to read as follows:
                  ``(A) Notwithstanding subsection (a), the 
                Secretary shall reduce the aggregate Federal 
                payment limit applicable to a State for fiscal 
                year 1997 or any succeeding fiscal year by the 
                amount, if any, equal to the sum of the 
                products, for each group defined in section 
                1931(b), of--
                          ``(i) the number of excess erroneous 
                        enrollments of individuals in each such 
                        group; and
                          ``(ii) the per beneficiary rate 
                        applicable to such group for such 
                        fiscal year pursuant to section 
                        1931(c).'';
          (2) in paragraph (1)(C), by striking ``erroneous 
        excess payments for medical assistance'' and inserting 
        ``excess erroneous enrollments'';
          (3) by striking subparagraphs (D) and (E) of 
        paragraph (1) and inserting the following:
                  ``(D) Calculation factors.--For purposes of 
                this subsection--
                          ``(i) Erroneous enrollments.--The 
                        term `erroneous enrollments' means, 
                        with respect to a group defined in 
                        section 1931(b), the number of 
                        individuals that a State reports, 
                        pursuant to section 1931(c)(4), as 
                        enrolled in such group who either (I) 
                        should have been so reported as 
                        enrolled in another such group which 
                        has a lower per beneficiary base rate, 
                        or (II) were ineligible for medical 
                        assistance under the State plan.
                          ``(ii) Exclusion from erroneous 
                        enrollments.--The term `erroneous 
                        enrollments' does not include any 
                        enrollment--
                                  ``(I) of individuals whose 
                                eligibility was determined 
                                exclusively by the Commissioner 
                                of Social Security under an 
                                agreement pursuant to section 
                                1634, and such other classes of 
                                individuals as the Secretary 
                                may by regulation prescribe 
                                whose eligibility was 
                                determined in part under such 
                                an agreement;
                                  ``(II) resulting from the 
                                failure of an individual to 
                                cooperate or give correct 
                                information with respect to 
                                third-party liability as 
                                required under section 
                                1912(a)(1)(C) or 402(a)(26)(C); 
                                or
                                  ``(III) during a presumptive 
                                eligibility period (as defined 
                                in section 1920(b)(1)).
                          ``(iii) Excess erroneous 
                        enrollments.--The term `excess 
                        erroneous enrollments' means, with 
                        respect to a group of individuals 
                        defined in section 1931(b), erroneous 
                        enrollments in excess of 3 percent of 
                        total enrollments of individuals in 
                        such group.''; and
          (4) in paragraph (2), by striking ``erroneous excess 
        payments'' and inserting ``excess erroneous 
        enrollments''.

                          PART 2--ELIGIBILITY

SEC. 11311. EXTENSION OF COVERAGE TO ADDITIONAL INDIVIDUALS, SUBJECT TO 
                    POVERTY-RELATED OR CASELOAD LIMITS.

    (a) Expanded Eligibility.--Section 1902(a)(10) is amended 
by adding after subparagraph (F) the following new paragraph:
                  ``(G) at the option of a State, for making 
                medical assistance available to one of the 
                following groups of individuals who would 
                otherwise be ineligible for such assistance:
                          ``(i) individuals whose income does 
                        not exceed a limit established by the 
                        State, not greater than 150 percent of 
                        the Federal poverty line; or * * *
    (b) Disregard of Additional Enrollees in Calculation of 
Federal Payment Limit.--Section 1931(c)(4)(A), as added by 
section 11301 of this Act, is amended by adding at the end the 
following new clause:
                          ``(iii) Expanded eligibility 
                        disregard.--The numbers reported by the 
                        State shall not include any individuals 
                        enrolled in the State program under 
                        this title pursuant to section 
                        1902(a)(10)(G).''.

SEC. 11312. ELIMINATION OF AUTHORITY FOR NEW ELIGIBILITY EXPANSION 
                    DEMONSTRATIONS.

    Section 1115(a)(1) is amended by inserting ``(except that 
waivers of requirements of section 1902 with respect to 
eligibility of individuals for medical assistance shall not be 
granted (but may be extended or modified) on or after October 
1, 1996)'' after ``project''.

SEC. 11313. UPPER INCOME LIMIT ON ``LESS RESTRICTIVE'' ELIGIBILITY 
                    METHODOLOGIES.

    Section 1902(r)(2) is amended--
          (1) in paragraph (A), by inserting ``(except as 
        provided in subparagraph (C))'' after ``no more 
        restrictive''; and
          (2) by adding at the end the following new 
        subparagraph:
    ``(C) The methodology described in subparagraph (A) shall 
not result in an income eligibility limit (based on gross 
income) higher than the higher of--
          ``(i) 150 percent of the Federal poverty line; or
          ``(ii) the income eligibility limit applicable under 
        the State plan in effect in fiscal year 1995 (taking 
        into account any such limit applicable under a waiver 
        under section 1115).''.

                          PART 3--MANAGED CARE

SEC. 11321. PRIMARY CARE CASE MANAGEMENT SERVICES AS STATE OPTION 
                    WITHOUT NEED FOR WAIVER.

    (a) Primary Care Case Management Services Defined.--Section 
1905 is amended by adding at the end of the following new 
subsection:
    ``(t)(1) The term `primary care case management system' 
means a State program under which individuals eligible for 
medical assistance under the State plan under this title are 
enrolled with primary care case managers and are entitled to 
receive health care items and services covered under the State 
plan and specified in such program only as approved (and 
arranged or provided) by such managers.
    ``(2) The term `primary care case manager' means a provider 
that has entered into a primary care case management contract 
with the State agency and that is--
          ``(A) a physician, a physician group practice, or an 
        entity employing or having other arrangements with 
        physicians who provide case management services; or
          ``(B) at State option--
                  ``(i) a nurse practitioner (as described in 
                section 1905(a)(21);
                  ``(ii) a certified nurse-midwife (as defined 
                in section 1861(gg)); or
                  ``(iii) a physician assistant (as defined in 
                section 1861(aa)(5).
    ``(3) The term `primary care case management contract' 
means a contract with a State agency under which a primary care 
case manager undertakes to locate, coordinate and monitor 
covered primary care, covered primary care and other services, 
or covered services specified by the State, to all individuals 
enrolled with the primary care case manager, and which provides 
for--
          ``(A) reasonable and adequate hours of operation, 
        including 24-hour availability of information, 
        referral, and treatment with respect to medical 
        emergencies;
          ``(B) restriction of enrollment to individuals 
        residing sufficiently near a service delivery site of 
        the entity to be able to reach such site within a 
        reasonable time using available and affordable modes of 
        transportation;
          ``(C) employment of, or contracts or other 
        arrangements with, sufficient numbers of physicians and 
        other appropriate health car professionals to ensure 
        that services under the contract can be furnished to 
        enrollees promptly and without compromise to quality of 
        care;
          ``(D) a prohibition on discrimination on the basis of 
        health status or requirements for health services in 
        enrollment, disenrollment, reenrollment, or 
        disenrollment of individuals eligible for medical 
        assistance under this title; and
          ``(E) a right for enrollees to terminate such 
        enrollment without cause during the first month of each 
        enrollment period, each such enrollment period not to 
        exceed six months in duration, and to terminate their 
        enrollment at any time for cause.
    ``(4) The term `primary care' includes all health care 
services customarily provided by or under the supervision of, 
and all laboratory services customarily provided by or through, 
a general practitioner, family medicine physician, internal 
medicine physician, obstetrician/gynecologist, or 
pediatrician.''.
    (b) Inclusion in Definition of Medical Assistance.--Section 
1905(a) is amended--
          (1) by striking ``and'' at the end of paragraph (24);
          (2) by redesignating paragraph (25) as paragraph 
        (26); and
          (3) by inserting after paragraph (24) the following 
        new paragraph:
          ``(25) primary care case management services (as 
        defined in subsection (t)); and''.
    (c) State Plan Requirement.--Section 1902(a) is amended--
          (1) by striking ``and'' at the end of paragraph (61);
          (2) by striking the period at the end of paragraph 
        (62) and inserting ``; and''; and
          (3) by adding after paragraph (62) the following new 
        paragraph:
          ``(63) provide that any primary care case management 
        services furnished under the plan will be furnished in 
        accordance with the provisions of section 1905(t).''.
    (d) Repeal of Waiver Authority.--Section 1915(b) is amended 
by striking paragraph (1) and redesignating paragraphs (2), 
(3), and (4) as paragraphs (1), (2), and (3), respectively.
    (e) Exception to Freedom of Choice.--For State option to 
mandate enrollment in primary care case management programs, 
see section 11322.

SEC. 11322. STATE OPTIONS TO RESTRICT CHOICE OF PROVIDERS.

    (a) Mandatory Enrollment in Managed Care.--Section 1915(a) 
is amended by inserting at the end the following new paragraph:
          ``(3) requires individuals eligible for medical 
        assistance for items or services under the State plan 
        to enroll with an entity that provides or arranges for 
        services for enrollees under a contract pursuant to 
        section 1903(m), or with a primary care case manager 
        (as defined in section 1905(t)) (and/or restricts the 
        number of provider agreements with such entities under 
        the State plan, consistent with quality of care), if--
                  ``(A)(i) individuals are permitted to choose 
                between at least 2 such entities, or 2 such 
                managers, or an entity and a manager, each of 
                which has sufficient capacity to provide 
                services to enrollees; or
                  ``(ii) with respect to a rural area--
                          ``(I) individuals who are required to 
                        enroll with a single entity are 
                        afforded the option in appropriate 
                        circumstances to obtain covered 
                        services by an alternative provider; 
                        and
                          ``(II) an individual who is offered 
                        no alternative to a single entity or 
                        manager is given a choice between at 
                        least two providers within such entity 
                        or through such manager;
                  ``(iii)(I) the State does not restrict the 
                participation of any Indian health program 
                specified in section 1931(d)(1)(C); and
                  ``(II) in any case in which the State directs 
                the enrollment of an individual who is an 
                Indian (as defined in section 4 of the Indian 
                Health Care Improvement Act of 1976) in 
                accordance with this subsection, such 
                individual is enrolled with a participating 
                entity specified in subclause (I), if any;
                  ``(B) the State restricts such individuals 
                from changing their enrollment without cause 
                for periods no longer than six months (and 
                permits enrollees to change enrollment for 
                cause at any time); and
                  ``(C) such restrictions do not apply to 
                providers of family planning services (as 
                defined in section 1905(a)(4)(C)) and are not 
                conditions for payment of medicare cost sharing 
                pursuant to section 1905(p)(3).''.
    (b) State Option for Six-Month Lock-In in Risk-Based 
Arrangements.--Section 1903(m)(2) is amended--
          (1) in paragraph (A)(vi)--
                  (A) by striking ``(I) as provided under 
                subparagraph (F),''; and
                  (B) by striking all that follows ``to 
                terminate such enrollment'' and inserting ``in 
                accordance with the provisions of subparagraph 
                (F);''; and
          (2) in subparagraph (F), by striking ``In the case 
        of--'' and all that follows through ``a State plan'' 
        and inserting ``A State plan''.

SEC. 11323. ELIMINATION OF RESTRICTIONS ON RISK CONTRACTS.

    (a) 75 Percent Limit on Medicare and Medicaid Enrollment.--
          (1) In general.--Section 1903(m)(2)(A) is amended by 
        striking clause (ii).
          (2) Conforming amendments.--Section 1903(m)(2) is 
        amended--
                  (A) by striking subparagraphs (C), (D), and 
                (E); and
                  (B) in subparagraph (G), by striking 
                ``clauses (i) and (ii)'' and inserting ``clause 
                (i)''.
    (b) Secretarial Approval of Contracts Over $100,000.--
Section 1903(m)(2)(A) is amended in clause (iii) by striking 
all that follow ``actuarially sound basis'' and inserting a 
semicolon.
    (c) Additional Amendments.--For additional amendments to 
section 1903(m)(2)(A), see section 11341(b).

SEC. 11324. 6-MONTH GUARANTEED ELIGIBILITY FOR ALL INDIVIDUALS ENROLLED 
                    IN MANAGED CARE.

    Section 1902(e)(2) is amended--
          (1) by striking ``who is enrolled'' and all that 
        follows through ``section 1903(m)(2)(A)'' and inserting 
        ``who is enrolled with a health maintenance 
        organization (as defined in section 1903(m)), with a 
        primary care case manager (as defined in section 
        1905(t),''; and
          (2) by inserting before the period ``or by or through 
        such case manager''.

SEC. 11325. REQUIREMENTS TO ENSURE QUALITY OF AND ACCESS TO CARE UNDER 
                    MANAGED CARE PLANS.

    Section 1902(a), as amended by section 11321(c), is 
amended--
          (1) in paragraph (62), by striking ``; and'' at the 
        end and inserting a semicolon;
          (2) by striking the period at the end of paragraph 
        (63) and inserting ``; and''; and
          (3) by adding after paragraph (63) the following new 
        paragraph:
          ``(64) provide, with respect to all agreements 
        between the State agency and entities described in 
        section 1903(m), section 1905(t), and other providers 
        of managed care services--
                  ``(A) that the State agency will develop and 
                implement a quality improvement strategy, 
                consistent with standards established by the 
                Secretary, which includes--
                          ``(i) standards for the provision of 
                        services under such agreements designed 
                        to ensure reasonable access of enrolled 
                        individuals to covered services meeting 
                        applicable standards for quality and 
                        safety;
                          ``(ii) procedures for monitoring 
                        performance of entities under such 
                        agreements, including--
                                  ``(I) procedures for 
                                collection from (or reporting 
                                by) providers of patient data; 
                                and
                                  ``(II) procedures for 
                                analysis of such data;
                  ``(B) that providers entering into such 
                agreements under which payment is made on a 
                prepaid capitated or other risk basis shall be 
                required--
                          ``(i) to demonstrate a capacity to 
                        deliver covered services to all 
                        enrolled individuals; and
                          ``(ii) to maintain an internal 
                        quality assurance program, meeting such 
                        standards as the Secretary may 
                        establish in regulations, which 
                        includes a grievance process.''.

                            PART 4--BENEFITS

SEC. 11331. HOME- AND COMMUNITY-BASED SERVICES AS STATE OPTION WITHOUT 
                    NEED FOR WAIVER.

    (a) Elimination of Waiver Restriction.--Section 1915(c) is 
relocated and redesignated as subsection (u) of section 1905, 
and is amended--
          (1) in paragraph (1), by striking everything through 
        ``pursuant to a written plan'' and inserting ``The term 
        `home- and community-based services' means items and 
        services (other than room and board) which are provided 
        in accordance with the provisions of this subsection, 
        and pursuant to a written plan'';
          (2) in paragraph (2)--
                  (A) by striking the matter that precedes 
                subparagraph (A) and inserting ``A State agency 
                that elects to provide home- and community-
                based services as defined in this subsection 
                shall ensure that--'';
                  (B) by adding ``and'' at the end of 
                subparagraph (B);
                  (C) by striking the semicolon at the end of 
                subparagraph (C) and inserting a period; and
                  (D) by striking subparagraphs (D) and (E);
          (3) in paragraph (3), to read as follows:
          ``(3) A State plan may provide--
                  ``(i) that home- and community-based services 
                furnished under the plan shall not be subject 
                to the provisions of section 1902(a)(1) 
                (relating to statewideness), section 
                1902(a)(10)(B) (relating to comparability), or 
                section 1902(a)(10)(C)(i)(III) (relating to 
                income and resource rules applicable in the 
                community), and
                  ``(ii) for purposes of post-eligibility 
                treatment of income, for disregard of a greater 
                amount for the maintenance needs of the 
                individual than amounts specified in 
                regulations with respect to a similarly 
                situated institutionalized individual.'';
          (4) in paragraph (4)--
                  (A) by striking the matter preceding 
                subparagraph (A) and inserting ``A State plan 
                providing for home- and community-based 
                services may--'';
                  (B) in subparagraph (A)--
                          (i) by striking ``benefits under such 
                        waiver'' and inserting ``such 
                        benefits'';
                          (ii) by striking ``under such 
                        waiver'' and inserting ``for such 
                        benefits''; and
                          (iii) by striking ``if the waiver did 
                        not apply'' and inserting ``if 
                        institutionalized''; and
                  (C) by striking the final sentence; and
          (5) by striking paragraphs (6) through (10).
    (b) Inclusion in Definition of ``Medical Assistance''.--
Section 1905(a)(22) is amended to read ``home- and community-
based services (as defined in subsection (u));''.
    (c) State Plan Requirement.--Section 1902(a), as amended by 
sections 11321(c) and 11325, is amended--
          (1) by striking ``and'' at the end of paragraph (63);
          (2) by striking the period at the end of paragraph 
        (64) and inserting ``; and''; and
          (3) by adding after paragraph (64) the following new 
        paragraph:
          ``(65) provide that any home- and community-based 
        services furnished under the plan will be furnished in 
        accordance with the provisions of section 1905(u).''.
    (d) Repeal of Superseded Provisions.--
          (1) Sections 1929 and 1930 are repealed.
          (2) Section 1905(a) is amended by striking paragraph 
        (23).

SEC. 11332. ELIMINATION OF REQUIREMENTS TO PAY FOR PRIVATE INSURANCE.

    (a) Repeal of State Plan Provision.--
          (1) Section 1902(a)(25) is amended--
                  (A) by striking subparagraph (G); and
                  (B) by redesignating subparagraphs (H) and 
                (I) as subparagraphs (G) and (H), respectively.
    (b) Repeal of Enrollment Requirements.--Section 1906 is 
repealed.
    (c) Reinstatement of State Option.--Section 1905(a) is 
amended, in the matter preceding clause (i), by inserting 
``(including, at State option, through purchase or payment of 
enrollee costs of health insurance)'' after ``The term `medical 
assistance' means payment''.

SEC. 11333. BENEFITS FOR INDIVIDUALS COVERED DURING TRANSITION TO WORK.

    (a) Payment of Group Health Coinsurance at Medicaid 
Rates.--
          (1) Section 1925(a)(4)(B) is amended--
                  (A) by striking ``and'' at the end of clause 
                (i)(II);
                  (B) by striking the period at the end of 
                clause (ii); and
                  (C) by adding after clause (ii) the following 
                new clause:
                          ``(iii) the State may limit the 
                        amount of any deductible or copayment 
                        for any health care item or service to 
                        the applicable portion of the amount 
                        the State would pay if such item or 
                        service had been furnished by a 
                        provider participating in the program 
                        under the State plan.''.
          (2) Section 1925(b)(4)(D) is amended by adding at the 
        end the following new sentence: ``If the State elects 
        to pay such deductibles and coinsurance, the State may 
        limit the amount of such payments as provided in 
        subsection (a)(4)(C)(iii).''.
    (b) Elimination of Premium Limit.--Section 1925 (b)(5)(C) 
is repealed.
    (c) Provision Concerning Reporting Requirements made 
Optional.--
          (1) Reporting requirement.--Section 1925(b)(2)(B) is 
        amended to read as follows:
                  ``(B) Reporting requirements.--Each State may 
                require, as a condition for additional extended 
                assistance under this subsection, reports by 
                the family at such times and containing such 
                information as the State may specify concerning 
                gross monthly earnings and costs for child 
                care.''.
          (2) State option to terminate benefits for failure to 
        report.--Section 1925(b)(3)(A) is amended (a) in clause 
        (iii), by striking ``(2)(B)(ii)'' each place it appears 
        and inserting ``(2)(B)''.

            PART 5--PROVIDER PARTICIPATION AND PAYMENT RATES

SEC. 11341. METHODS FOR ESTABLISHING PROVIDER PAYMENT RATES.

    (a) Plan Amendments.--Section 1902(a)(13) is amended--
          (1) by striking all that precedes subparagraph (D) 
        and inserting the following:
    ``(13) provide--
          ``(A) for a public process for determination of rates 
        of payment under the plan (including any payment 
        adjustments under section 1923) for nursing facility 
        services and services of intermediate care facilities 
        for the mentally retarded under which--
                  ``(i) proposed rates are published, and 
                providers, beneficiaries and their 
                representatives, and other concerned State 
                residents are given a reasonable opportunity 
                for review and comment thereon; and
                  ``(ii) final rates are published, together 
                with justifications based on the administrative 
                record; and'';
          (2) by redesignating subsections (D) and (E) as 
        subsections (B) and (C), respectively;
          (3) in subparagraph (B), as redesignated, by striking 
        everything through ``of 100 percent of costs'' and 
        inserting the following:
          ``(B) for payment under the plan--
                  ``(i) for all services described in clause 
                (B) or (C) of section 1905(a)(2) furnished on 
                or before September 30, 1998; and
                  ``(ii) for services described in clause (i) 
                furnished on or after October 1, 1998, by an 
                entity described in section 1931(d)(1)(C) of 
                100 percent of costs''; and
          (4) by striking subsection (F).
    (b) Study and Report to Congress.--The Secretary shall 
conduct a study of the effect on access to services, and 
quality and safety of services, of the rate-setting methods 
used by States pursuant to section 1902(a)(13) of the Social 
Security Act, as amended by subsection (a), and shall submit a 
report to the Congress on the conclusions from such study, 
together with any legislative recommendations, not later than 
the date four years after enactment of this Act.

SEC. 11343. ELIMINATION OF OBSTETRICAL AND PEDIATRIC PAYMENT RATE 
                    REQUIREMENTS.

    Section 1926 is repealed.

                   PART 6--STATE PLAN ADMINISTRATION

SEC. 11351. MMIS REQUIREMENTS.

    (a) In General.--Section 1903(r) is amended--
          (1) by striking all that precedes paragraph (5) and 
        inserting the following:
    ``(r) Medicaid Management Information Systems (MMIS).--(1) 
In General.--In order to receive payments under subsection (a) 
for use of automated data systems in administration of the 
State plan under this title, a State must have in operation 
mechanized claims processing and information retrieval systems 
that meet the requirements of this subsection and that the 
Secretary has found to be--
          ``(A) adequate to provide efficient, economical, and 
        effective administration of such State plan;
          ``(B) compatible with the claims processing and 
        information retrieval systems used in the 
        administration of title XVIII, and for this purpose--
                  ``(i) having a uniform identification coding 
                system for providers, other payees, and 
                beneficiaries under this title or title XVIII;
                  ``(ii) providing liaison between States and 
                carriers and intermediaries with agreements 
                under title XVIII to facilitate timely exchange 
                of appropriate data; and
                  ``(iii) providing for exchange of data 
                between the States and the Secretary with 
                respect to persons sanctioned under this title 
                or title XVIII;
          ``(C) capable of providing accurate and timely data;
          ``(D) able to accommodate receipt of provider claims 
        in standard formats to the extent specified by the 
        Secretary; and
          ``(E) able to transmit electronically such data as is 
        specified by the Secretary.''.
          (2) in paragraph (5)--
                  (A) by striking all that precedes clause (i) 
                and inserting the following:
    ``(2) In order to meet the requirements of this paragraph, 
mechanized claims processing and information retrieval systems 
must meet the following requirements:'';
                  (B) in clause (iii), by striking ``under 
                paragraph (6)''; and
                  (C) by redesignating clauses (i) through 
                (iii) as paragraphs (A) through (C); and
          (3) by striking paragraphs (6), (7), and (8).
    (b) Conforming Amendments.--Section 1902(a)(25)(A)(ii) is 
amended--
          ((1) by striking ``, and'' at the end of subclause 
        (I) and inserting a semicolon;
          (2) by relocating the matter in subclause (I) 
        immediately after ``which plan shall'', after striking 
        the intervening hyphen and the subclause designation; 
        and
          (3) by striking subclause (II).

SEC. 11352. ELIMINATION OF PERSONNEL REQUIREMENTS.

    Section 1902(a)(4) is amended--
          (1) in subparagraph (A), to read as follows:
          ``(A) provide such methods of administration as found 
        by the Secretary to be necessary for the proper and 
        efficient operation of the plan;'';
          (2) by striking subparagraph (B); and
          (3) by redesignating subparagraph (C) as subparagraph 
        (B).

SEC. 11353. ELIMINATION OF REQUIREMENTS FOR COOPERATIVE AGREEMENTS WITH 
                    HEALTH AGENCIES.

    Section 1902(a)(11) is repealed.

SEC. 11355. STATE REVIEW OF MENTALLY ILL OR RETARDED NURSING FACILITY 
                    RESIDENTS UPON CHANGE IN PHYSICAL OR MENTAL 
                    CONDITION.

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

SEC. 11356. NURSE AID TRAINING IN MEDICARE AND MEDICAID NURSING 
                    FACILITIES SUBJECT TO EXTENDED SURVEY AND UNDER 
                    CERTAIN OTHER CONDITIONS.

    (a) Medicare.--Section 1819(f)(2)(B)(iii)(I) is amended, in 
the matter preceding sub-subclause (a), by striking ``by or in 
a skilled nursing facility'' and inserting ``by a skilled 
nursing facility (or in such a facility, unless the State 
determines that there is no other such program offered within a 
reasonable distance, provides notice of the approval to the 
State long-term care ombudsman, and assures, through an 
oversight effort, that an adequate environment exists for such 
a program)''.
    (b) Medicaid.--Section 1919(f)(2)(B)(iii)(I) is amended, in 
the matter preceding sub-subclause (a), by striking ``by or in 
a nursing facility'' and inserting ``by a nursing facility (or 
in such a facility, unless the State determines that there is 
no other such program offered within a reasonable distance, 
provides notice of the approval to the State long-term care 
ombudsman, and assures, through an oversight effort, that an 
adequate environment exists for such a program)''.

SEC. 11357. COMBINED STATE PLAN SUBMISSION.

    (a) In General.--A State may submit to the Secretary of 
Health and Human Services a single State plan (with any 
amendments) to carry out--
          (1) the long-term care grant program established by 
        subtitle E;
          (2) the program of health insurance for the 
        temporarily unemployed established by subtitle G; and
          (3) the medical assistance program under title XIX of 
        the Social Security Act.
    (b) Effect of Combined Submission.--A State plan submitted 
pursuant to subsection (a) must meet all requirements of each 
of the programs specified in such subsection.
    (c) Timetable For Approval.--The Secretary shall, within 90 
days after receipt of a State plan submitted pursuant to 
subsection (a), either approve or disapprove the plan, or 
inform the State that specified additional information is 
needed to permit review of the plan.

SEC. 11358. PUBLIC PROCESS FOR DEVELOPING STATE PLAN AMENDMENTS.

    Section 1902(a), as amended by sections 11321(c), 11325, 
and 11331(c), is amended--
          (1) by striking ``and'' at the end of paragraph (64);
          (2) by striking the period at the end of paragraph 
        (65) and inserting ``; and''; and
          (3) by adding after paragraph (65) the following new 
        paragraph:
          ``(66) a process for development of amendments to the 
        State plan that affords an opportunity for review and 
        comment to interested persons and groups, including 
        beneficiaries, providers, Indian tribes, tribal 
        organizations, Indian Health Service facilities, and 
        urban Indian health organizations.''.

                         PART 7--EFFECTIVE DATE

SEC. 11361. EFFECTIVE DATE.

    (a) In General.--Except where otherwise specifically 
provided, the provisions of and amendments made by this 
subtitle shall be effective with respect to State programs 
under title XIX of the Social Security Act on and after October 
1, 1996.
    (b) Extension For State Law Amendment.--In the case of a 
State plan under title XIX of the Social Security Act which the 
Secretary of Health and Human Services determines requires 
State legislation in order for the plan to meet the additional 
requirements imposed by the amendments made by subsection (a), 
the State plan shall not be regarded as failing to comply with 
the requirements of such title solely on the basis of its 
failure to meet these additional requirements before the first 
day of the first calendar quarter beginning after the close of 
the first regular session of the State legislature that begins 
after the date of enactment of this Act. For purposes of the 
previous sentence, in the case of a State that has a 2-year 
legislative session, each year of such session shall be deemed 
to be a separate regular session of the State legislature.

                      Subtitle D--Fraud and Abuse

SEC. 11401. SHORT TITLE; TABLE OF CONTENTS OF SUBTITLE.

    (a) Short Title.--This subtitle may be cited as the 
``Federal Health Care Payment Integrity Act of 1995''.
    (b) Table of Contents of Subtitle.--The table of contents 
of this subtitle is as follows:

                            TABLE OF CONTENTS

Sec. 11401. Short title; references in subtitle.

        Part 1--Amendments to Current Law Enforcement Authorities

Sec. 11402. Extension of current civil money penalties.
Sec. 11403. Exclusion of persons who defraud Medicare.
Sec. 11404. Illegal remuneration with respect to health care benefit 
          programs
Sec. 11405. Amendments to PRO (quality of care) sanctions provisions.
Sec. 11406. Final adverse action data base.
Sec. 11407. Expansion of authority of medicaid fraud control units.
Sec. 11408. Recovery of overpayments from bankrupt providers.
Sec. 11409. Grants to States to revoke licenses of unqualified 
          providers.
Sec. 11410. Authorization for interception of wire, oral or electronic 
          communications.

               Part 2--Resources for Anti-Fraud Activities

Sec. 11421. Medicare anti-fraud and abuse program.
Sec. 11422. Medicare beneficiary integrity system.
Sec. 11423. Government-side anti-fraud reinvestment fund.

                   Part 3--Amendments to Criminal Law

Sec. 11431. Health care fraud.
Sec. 11432. Forfeitures for federal health care offenses.
Sec. 11433. Injunctive relief relating to federal health care offenses.
Sec. 11434. Grand jury disclosure.
Sec. 11435. False statements.
Sec. 11436. Obstruction of criminal investigations, audits or 
          inspections of federal health care offenses.
Sec. 11437. Theft or embezzlement.
Sec. 11438. Laundering of monetary instruments.
Sec. 11439. Authorized investigative demand procedures.

                      Part 4--Medicare Improvements

                   Subpart A--Coordination of Benefits

Sec. 11441. Clarification of time and filing limitations.
Sec. 11442. Clarification of liability of third party administrators.
Sec. 11443. Clarification of payment amounts to Medicare.
Sec. 11444. Conditions for double damages.
Sec. 11445. Repeal of excise tax.
Sec. 11446. Information requirements.
Sec. 11447. Technical changes concerning minimum sizes of group health 
          plans.

                      Subpart B--Contractor Reform

Sec. 11451. Increased flexibility in contracting for medicare claims 
          processing.

          Subpart C--Provisions Relating to Part B of Medicare

Sec. 11461. Replacement of reasonable charge methodology by fee 
          schedules.
Sec. 11462. Application of inherent reasonableness to surgical 
          dressings.
Sec. 11463. Application of competitive acquisition process to certain 
          part B items and services.
Sec. 11464. Application of competitive acquisition process to laboratory 
          services.
Sec. 11465. Changes in payments for clinical laboratory tests.

       Subaprt D--Provisions Relating to Parts A and B of Medicare

Sec. 11471. Disclosure of taxpayer identifying numbers and other 
          information.
Sec. 11472. Use of wage index for area in which home health services are 
          furnished.

       PART 1--AMENDMENTS TO CURRENT LAW ENFORCEMENT AUTHORITIES

SEC. 11402. EXTENSION OF CURRENT CIVIL MONEY PENALTIES.

    (a) General Civil Money Penalties.--Section 1128A (42 
U.S.C. 1320a-7a) is amended--
          (1) in the third sentence of subsection (a), by 
        striking ``programs under title XVIII'' and inserting 
        ``Federal health care program (as defined in subsection 
        (m))'';
          (2) in subsection (f)--
                  (A) by redesignating paragraph (3) as 
                paragraph (4); and
                  (B) by inserting after paragraph (2) the 
                following new paragraph:
          ``(3) With respect to amounts recovered arising out 
        of a claim under a Federal health care program (as 
        defined in subsection (m)), the portion of such amounts 
        as is determined to have been paid by the program shall 
        be repaid to the program, and the portion of such 
        amount attributable to the amounts recovered under this 
        section by reason of the amendments made by the Federal 
        Health Care Payment Integrity Act of 1995 (as estimated 
        by the Secretary) shall be deposited into the Health 
        Care Fraud and Abuse Control Account established under 
        section 11423 of such Act.'';
          (3) in subsection (i)--
                  (A) in paragraph (2), by striking ``title V, 
                XVIII, XIX, or XX of this Act'' and inserting 
                ``a Federal health care program (as defined in 
                subsection (m))'';
                  (B) in paragraph (4), by striking ``a health 
                insurance or medical services program under 
                title XVIII or XIX of this Act'' and inserting 
                ``a Federal health care program (as so 
                defined)''; and
                  (C) in paragraph (5), by striking ``title V, 
                XVIII, XIX, or XX'' and inserting ``a Federal 
                health care program (as so defined)''; and
          (4) by adding at the end the following new 
        subsection:
    ``(m)(1) For purposes of this section, with respect to a 
Federal health care program not contained in this Act, 
references to the Secretary in this section shall be deemed to 
be references to the Secretary of Administrator of the 
department or agency with jurisdiction over such program and 
references to the Inspector General of the Department of Health 
and Human Services in this section shall be deemed to be 
references to the Inspector General and any other office with 
primary enforcement authority of the applicable department or 
agency. With respect to investigations of an employee welfare 
benefit plan as defined in section 3 of the Employee Retirement 
Income Security Act, the agency or department shall be deemed 
to be the Department of Labor.
    ``(2)(A) The Secretary and Administrator of the departments 
and agencies referred to in paragraph (1) may include, in any 
action pursuant to this section, claims within the Jurisdiction 
of other Federal departments or agencies as long as the 
following conditions are satisfied:
          ``(i) The case involves primarily claims submitted to 
        the Federal health care programs of the department or 
        agency initiating the action.
          ``(ii) The Secretary of Administrator and the 
        Inspector General of the department or agency 
        initiating the action gives notice and an opportunity 
        to participate in the investigation to the Secretary or 
        Administrator and the Inspector General of the 
        department or agency with primary jurisdiction over the 
        Federal health care programs to which the claims were 
        submitted. With respect to actions involving an 
        employee welfare benefit plan as defined in section 3 
        of the Employee Retirement Income Security Act, the 
        department with primary jurisdiction shall be deemed to 
        be the Department of Labor for purposes of this notice.
    ``(B) If the conditions specified in subparagraph (A) are 
fulfilled, the Inspector General of the department or agency 
initiating the action is authorized to exercise all powers 
granted under the Inspector General Act of 1978 with respect to 
the claims submitted to the other departments or agencies to 
the same manner and extent as provided in that Act with respect 
to claims submitted to such departments or agencies.''.
    (b) Excluded Individual Retaining Ownership or Control 
Interest in Participating Entity.--Section 1128A(a) (42 U.S.C. 
1320a-7a(a)) is amended--
          (1) by striking ``or'' at the end of paragraph 
        (a)(D);
          (2) by striking ``, or'' at the end of paragraph (2) 
        and inserting a semicolon;
          (3) by striking the semicolon at the end of paragraph 
        (3) and inserting ``; or''; and
          (4) by inserting after paragraph (3) the following 
        new paragraph:
          ``(4) in the case of a person who is not an 
        organization, agency, or other entity, is excluded from 
        participating in a program under title XVIII or a State 
        health care program in accordance with this subsection 
        or under section 1128 and who, at the time of a 
        violation of this subsection, retains a direct or 
        indirect ownership or control interest of 5 percent or 
        more, or an ownership or control interest (as defined 
        in section 1124(a)(3)) in, or who is an officer or 
        managing employee (as defined in section 1126(b)) of, 
        an entity that is participating in a program under 
        title XVIII or a State health care program;''.
    (c) Employer Billing for Services Furnished, Directed, or 
Prescribed by an Excluded Employee.--Section 1128A(a)(1) (42 
U.S.C. 1320a-7a(a)(1)) is amended--
          (1) by striking ``or'' at the end of subparagraph 
        (C);
          (2) by striking ``; or'' at the end of subparagraph 
        (D) and inserting ``, or''; and
          (3) by adding at the end the following new 
        subparagraph:
                  ``(E) is for a medical or other item or 
                service furnished, directed, or prescribed by 
                an individual who is an employee or agent of 
                the person during a period in which such 
                employee or agent was excluded from the program 
                under which the claim was made on any of the 
                grounds for exclusion described in subparagraph 
                (D);''.
    (d) Modifications of Amounts of Penalties and 
Assessments.--Section 1128A(a) (42 U.S.C. 1320a-7a(a)), as 
amended by subsection (b), is amended in the matter following 
paragraph (4)--
          (1) by striking ``$2,000'' and inserting $10,000'';
          (2) by inserting ``; in cases under paragraph (4), 
        $10,000 for each day the prohibited relationship 
        occurs'' after ``false or misleading information was 
        given''; and
          (3) by striking ``twice the amount'' and inserting 
        ``3 times the amount''.
    (e) Claims for Item or Service Based on Incorrect Coding.--
Section 1128A(a)(1)(A) (42 U.S.C. 1320a-7a(a)(1)(A)) is amended 
by striking ``claimed,'' and inserting ``claimed, including any 
person who engages in a pattern or practice of presenting or 
causing to be presented a claim for an item or service that is 
based on a code that the person knows or should know will 
result in a greater payment to the person that the code the 
person knows or should know is applicable to the item or 
service actually provided''.
    (f) Permitting Secretary to Impose Civil Money Penalty.--
Section 1128A(b) (42 U.S.C. 1320a-7a(b)) is amended by adding 
the following new subparagraph:
          ``(3) Any person (including any organization, agency, 
        or other entity, but excluding a beneficiary as defined 
        in subsection (i)(5)) who the Secretary determines has 
        violated section 1128B(b) of this title shall be 
        subject to a civil monetary penalty of not more that 
        $10,000 for each such violation. In addition, such 
        person shall be subject to an assessment of not more 
        than twice the total amount of the remuneration 
        offered, paid, solicited, or received in violation of 
        section 1128B(b). The total amount of remuneration 
        subject to all assessments shall be calculated without 
        regard to whether some portion thereof also may have 
        been intended to serve a purpose other than one 
        proscribed by section 1128B(b).''.
    (g) Prohibition Against Offering Inducements to Individuals 
Enrolled Under Programs.--
          (1) Offer of remuneration.--Section 1128A(a) (42 
        U.S.C. 1320a-7a(a)) as amended by subsection (b) of 
        this section, is amended--
                  (A) by striking ``or'' at the end of 
                paragraph (3) and inserting a semicolon;
                  (B) by inserting ``or'' after the semicolon 
                at the end of paragraph (4); and
                  (C) by inserting after paragraph (4) the 
                following new paragraph:
                  ``(5) offers to or transfers remuneration to 
                any individual eligible for benefits under a 
                Federal health program that such person knows 
                or should know is likely to influence such 
                individual to order or receive from a 
                particular provider, practitioner, or supplier 
                any item or service for which payment may be 
                made, in whole or in part, under such 
                program;''.
          (2) Remuneration defined.--Section 2238A(i) (42 
        U.S.C. 1320a-7a(i)) is amended by adding the following 
        new paragraph:
          ``(6) The term `remuneration' includes the waiver of 
        coinsurance and deductible amounts (or any part 
        thereof), and transfers of items or services for free 
        or for other than fair market value. The term 
        `remuneration' does not include--
                  ``(A) the waiver of coinsurance and 
                deductible amounts by a person, if--
                          ``(i) the waiver is not offered as 
                        part of any advertisement or 
                        solicitation;
                          ``(ii) the person does not routinely 
                        waive coinsurance or deductible 
                        amounts; and
                          ``(iii) the person--
                                  ``(I) waives the coinsurance 
                                and deductible amount after 
                                determining in good faith that 
                                the individual is in financial 
                                need;
                                  ``(II) fails to collect 
                                coinsurance or deductible 
                                amounts after making reasonable 
                                collection efforts; or
                                  (III) provides for any 
                                permissible waiver as specified 
                                in section 1128B(b)(3) or in 
                                regulations issued by the 
                                Secretary;
                  ``(B) differentials in coinsurance and 
                deductible amounts as part of a benefit plan 
                design as long as the differentials have been 
                disclosed in writing to all beneficiaries, 
                third party payors, and providers, to whom 
                claims are presented and as long as the 
                differentials meet the standards as defined in 
                regulations promulgated by the Secretary not 
                later than 180 days after the date of the 
                enactment of this Act; or
                  ``(C) incentives given to individuals to 
                promote the delivery of preventive care as 
                determined by the Secretary in regulations as 
                promulgated.''.
    (h) Definition of Federal Health Care Program.--Section 
1128A (42 U.S.C. 1320a-7b) is amended by adding at the end the 
following new subsection:
    ``(m) Federal Health Care Program.--For purposes of this 
section, the term `Federal health care program' means--
          ``(1) any plan or program (except a plan described in 
        section 3(1) of the Employee Retirement Income Security 
        Act) that provides health benefits, whether directly, 
        through insurance, or otherwise, which is funded, in 
        whole or in part, by the United States Government; or
          ``(2) any State health care program, as defined in 
        section 1128(h).''.

SEC. 11403. EXCLUSION OF PERSONS WHO DEFRAUD MEDICARE.

    (a) Minimum Period of Exclusion for Certain Individuals and 
Entities Subject to Permissive Exclusion From Medicare and 
State Health Care Programs.--Section 1128(c)(3) (42 U.S.C. 
1320a-7(c)(3)) is amended by adding at the end the following 
new subparagraphs:
          ``(D) In the case of an exclusion of an individual or 
        entity under paragraph (1), (2), or (3) of subsection 
        (b), the period of the exclusion shall be 3 years, 
        unless the Secretary determines in accordance with 
        published regulations that a longer period is 
        appropriate because of aggravating circumstances.
          ``(E) In the case of an exclusion of an individual or 
        entity under subsection (b)(4) or (b)(5), the period of 
        the exclusion shall not be less than the period during 
        which the individual or entity's license to provide 
        health care is revoked, suspended, or surrendered, or 
        the individual or the entity is excluded or suspended 
        from a Federal or State health care program.
          ``(F) In the case of an exclusion of an individual or 
        entity under subsection (b)(6)(B), the period of the 
        exclusion shall be not less than 1 year.''.
    (b) Permissive Exclusion of Individuals With Ownership or 
Control Interest in Sanctioned Entities.--Section 1128(b) (42 
U.S.C. 1320a-7(b)) is amended by adding at the end the 
following new paragraph:
          ``(15) Individuals controlling a sanctioned entity.--
        Any individual who has a direct or indirect ownership 
        or control interest of 5 percent or more, or an 
        ownership or control interest (as defined in section 
        1124(a)(3)) in, or who is an officer or managing 
        employee (as defined in section 1126(b)) of, an 
        entity--
                  ``(A) that has been convicted of any offense 
                described in subsection (a) or in paragraph 
                (1), (2), or (3) of this subsection; or
                  ``(B) that has been excluded from 
                participation under a program title XVIII or 
                under a State health care program.''.
    (c) Sanctions Against Providers for Excessive Fees or 
Prices.--Section 1128(b)(6)(A) (42 U.S.C. 1320a-7(b)(6)(A)) is 
amended--
          (1) by inserting after ``substantially in excess of 
        such individual's or entity's usual charges'' the 
        following: ``(as specified by the Secretary in 
        regulations)''; and
          (2) by striking ``(or in applicable cases, 
        substantially in excess of such individuals or 
        entities' costs)'' and inserting ``, costs or fees'' 
        before ``for such items or services.''.
    (d) Applicability of the Bankruptcy Code To Program 
Sanctions.--
          (1) Section 1128 (42 U.S.C. 1320a-7) is amended by 
        adding at the end the following new subsection:
                  ``(j) An exclusion imposed under this section 
                is not subject to the automatic stay imposed 
                under the Bankruptcy Code, 11 U.S.C. 
                Sec. 362.''.
          (2) Section 1128A(a) (42 U.S.C. 1320a-7a) is amended 
        by adding at the end the following sentence: ``An 
        exclusion imposed under this section is not subject to 
        the automatic stay which is imposed under 11 U.S.C. 
        Sec. 362, and any penalties and assessments imposed 
        under this section shall be nondischargeable under the 
        Bankruptcy Code (11 U.S.C. Sec. 101 et seq.).''.
          (3) Section 1892(a)(4) (42 U.S.C. 1395ccc(a)(4)) is 
        amended by adding at the end the following sentence: 
        ``An exclusion imposed under paragraph (2)(C)(ii) or 
        paragraph (3)(B) is not subject to the automatic stay 
        which is imposed under the Bankruptcy Code (11 U.S.C. 
        Sec. 362).''.

SEC. 11404. ILLEGAL REMUNERATION WITH RESPECT TO HEALTH CARE BENEFIT 
                    PROGRAMS.

    (a) In General.--Chapter 11 of title 18, United States 
Code, is amended by adding at the end the following:

``Sec. 227. Illegal remuneration with respect to health care benefit 
                    programs

    ``(a) Whoever knowingly and willfully solicits or receives 
any remuneration (including any kickback, bribe, or rebate) 
directly or indirectly, overtly or covertly, in cash or in 
kind--
          ``(1) in return for referring any individual to a 
        person for the furnishing or arranging for the 
        furnishing of any item or service for which payment may 
        be made in whole or in part by any health care benefit 
        program; or
          ``(2) in return for purchasing, leasing, ordering, or 
        arranging for or recommending purchasing, leasing or 
        ordering any good, facility, service, or item for which 
        payment may be made in whole or in part by any health 
        care benefit program, or attempting to do so,
shall be fined under this title or imprisoned for not more than 
5 years, or both.
    ``(b) Whoever knowingly and willfully offers or pays any 
remuneration (including any kickback, bribe, or rebate) 
directly or indirectly, overtly, or covertly, in cash or in 
kind to any person to induce such person--
          ``(1) to refer an individual to a person for the 
        furnishing or arranging for the furnishing of any item 
        or service for which payment may be made in whole or in 
        part by any health benefit program; or
          ``(2) to purchase, lease, order, or arrange for or 
        recommend purchasing, leasing, or ordering any good, 
        facility, service, or item for which payment may be 
        made in whole or in part by any health benefit program 
        or attempts to do so,
shall be fined under this title or imprisoned for not more than 
5 years, or both.
    ``(c) Subsections (a) and (b) shall not apply to--
          ``(1) a discount or other reduction in price obtained 
        by a provider of services or other entity under a 
        health care benefit program if the reduction in price 
        is properly disclosed and appropriately reflected in 
        the costs claimed or charges made by the provider or 
        entity under a health care benefit program;
          ``(2) any amount paid by an employer to an employee 
        (who has a bona fide employment relationship with such 
        employer) for employment in the provision of covered 
        items or services if the amount of the remuneration 
        under the arrangement is consistent with the fair 
        market value of the services and is not determined in a 
        manner that takes into account (directly or indirectly) 
        the volume or value of any referrals;
          ``(3) any amount paid by a vendor of goods or 
        services to a person authorized to act as a purchasing 
        agent for a group of individuals or entities who are 
        furnishing services reimbursed under a health care 
        benefit program if--
                  ``(A) the person has a written contract, with 
                each such individual or entity, which specifies 
                the amount to be paid the person, which amount 
                may be a fixed amount or a percentage of the 
                value of the purchases made by each such 
                individual or entity under the contract, and
                  ``(B) in the case of an entity that is a 
                provider of services (as defined in section 
                1861(u) of the Social Security Act, the person 
                discloses (in such form and manner as the 
                Secretary of Health and Human Services 
                requires) to the entity and, upon request, to 
                the Secretary the amount received from each 
                such vendor with respect to purchases made by 
                or on behalf of the entity;
          ``(4) a waiver of any coinsurance under part B of 
        title XVIII of the Social Security Act by a federally 
        qualified health care center with respect to an 
        individual who qualifies for subsidized services under 
        a provision of the Public Health Service Act; and
          ``(5) any payment practice specified by the Secretary 
        of Health and Human Services in regulations promulgated 
        pursuant to section 14(a) of the Medicare and Medicaid 
        Patient and Program Protection act of 1987.
    ``(d) Any person injured in his business or property by 
reason of a violation of this section or section 226 of this 
title may sue therefor in any appropriate United States 
district court and shall recover threefold the damages such 
person sustains and the cost of the suit, including a 
reasonable attorney's fee.
    ``(e) As used in this section, `health care benefit 
program' has the meaning given such term in section 1347(b) of 
this title.''.
    (b) Clerical Amendment.--The table of sections at the 
beginning of chapter 11 of title 18, United States Code, is 
amended by adding at the end the following:

``227. Illegal remuneration with respect to health care benefit 
          programs.''.

    (c) Conforming Amendment.--Section 1128B of the Social 
Security Act (42 U.S.C. 1320a-7b) is amended by striking 
subsection (b).

SEC. 11405. AMENDMENTS TO PRO (QUALITY OF CARE) SANCTIONS PROVISIONS.

    (a) Minumum Period of Exclusion for Practitioners and 
Persons Failing To Meet Statutory Obligations.--
          (1) In general.--Section 1156(b)(1) (42 U.S.C. 1320c-
        5(b)(1)) is amended in the second sentence by striking 
        ``may prescribe)'' and inserting ``may prescribe, 
        except that such period may not be less than 1 
        year).''.
          (2) Conforming amendment.--Section 1156(b)(2) (42 
        U.S.C. 1320c-5(b)(2)) is amended by striking ``shall 
        remain'' and inserting ``shall (subject to the minimum 
        period specified in the second sentence of paragraph 
        (1)) remain''.
    (b) Repeal of ``Unwilling or Unable'' Condition for 
Imposition of Sanction.--Section 1156(b)(1) (42 U.S.C. 1320c-
5(b)(1) is amended--
          (1) in the second sentence, by striking ``and 
        determines'' and all that follows through ``such 
        obligations,''; and
          (2) by striking the third sentence.
    (c) Sanctions Against Practitioners and Persons for Failure 
To Comply With Statutory Obligations.--Section 1156(b)(3) (42 
U.S.C. 1320c-5(b)(3)) is amended by striking ``the actual or 
estimated cost'' and inserting ``up to $10,000 for each 
instance.''

SEC. 11406. FINAL ADVERSE ACTION DATA BASE.

      (a) General Purpose.--Not later than January 1, 1997, the 
Secretary of Health and Human Services (in this section 
referred to as the ``Secretary'') shall establish a national 
health care fraud and abuse data collection program or the 
reporting of final adverse actions against health care 
providers, suppliers, or practitioners as required by 
subsection (b), with access as set forth in subsection (c).
    (b) Reporting of Information.--
          (1) In general.--Each government agency and Federal 
        health care program shall (and each other health plan 
        may) report to the Secretary any final adverse action 
        taken against a health care provider, supplier, or 
        practitioner.
          (2) Information to be reported.--The information to 
        be reported under paragraph (1) includes:
                  (A) The name and TIN (as defined in section 
                7701(a)(41) of the Internal Revenue Code of 
                1986) of--
                          (i) any health care provider, 
                        supplier, or practitioner that is the 
                        subject of a final adverse action, and
                          (ii) any individual with a 
                        relationship specified in section 
                        1128(b)(8)(A) to an entity described in 
                        clause (i).
                  (B) The name (if know) of any health care 
                entity with which a health care provider, 
                supplier, or practitioner is affiliated or 
                associated.
                  (C) The nature of the final adverse action 
                and whether such action is on appeal.
                  (D) A description of the acts of omissions 
                and injuries upon which the final adverse 
                action was based, and such other information as 
                the Secretary determines by regulation is 
                required for appropriate interpretation of 
                information reported under this section.
          (3) Confidentiality.--In determining what information 
        is required, the Secretary shall include procedures to 
        ensure that the privacy of individuals receiving health 
        care services is appropriately protected.
          (4) Timing and form of reporting.--The information 
        required to be reported under this subsection shall be 
        reported regularly (but less often than monthly) and in 
        such form and manner as the Secretary prescribes. Such 
        information shall first be required to be reported on a 
        date specified by the Secretary.
    (c) Disclosure and Correction of Information.--
          (1) Disclosure.--With respect to the information 
        about final adverse actions reported to the Secretary 
        under this section respecting a health care provider, 
        supplier, or practitioner, the Secretary shall, by 
        regulation, provide for--
                  (A) disclosure of the information, upon 
                request, to the health care provider, supplier, 
                or licensed practitioner, and
                  (B) procedures in the case of disputed 
                accuracy of the information.
          (2) Corrections.--Each Government agency and health 
        plan shall report corrections of information already 
        reported about any final adverse action taken against a 
        health care provider, supplier, or practitioner, in 
        such form and manner that the Secretary prescribes by 
        regulation.
    (d) Access to Reported Information.--
          (1) Availability.--The information in this database 
        shall be available to Federal and State government 
        agencies, health plans, and the public pursuant to 
        procedures that the Secretary shall provide by 
        regulation.
          (2) Fees for disclosure.--The Secretary may establish 
        or approve reasonable fees for the disclosure of 
        information in this database (other than with respect 
        to requests by Federal agencies). The amount of such a 
        fee may be sufficient to recover the full costs of 
        carrying out the provisions of this section, including 
        reporting, disclosure and administration. Such fees 
        shall be available to the Secretary or, in the 
        Secretary's discretion to the agency designated under 
        this section to cover such costs.
    (e) Protection From Liability for Reporting.--No person or 
entity, including the agency designated by the Secretary in 
subsection (b)(5) shall be held liable in any civil action with 
respect to any report made as required by this section, without 
knowledge of the falsity of the information contained in the 
report.
    (f) Definitions and Special Rules.--For purposes of this 
section:
          (1)(A) The term ``final adverse action'' includes:
                  (i) Civil judgments against a health care 
                provider or practitioner in Federal or State 
                court related to the delivery of a health care 
                item or service.
                  (ii) Federal or State criminal convictions 
                related to the delivery of a health care item 
                or service.
                  (iii) Actions by Federal or State agencies 
                responsible for the licensing and 
                certifications of health care providers, 
                suppliers, and licensed health care 
                practitioners, including--
                          (I) formal or official actions, such 
                        as revocation or suspension of a 
                        license (and the length of any such 
                        suspension), reprimand, censure or 
                        probation,
                          (II) any other loss of license, or 
                        the right to apply for or renew a 
                        license of the provider, supplier, or 
                        practitioner, whether by operation of 
                        law, voluntary surrender, non-renewable 
                        or otherwise, or
                          (III) any other negative action or 
                        finding by such Federal or State agency 
                        that, is publicly available 
                        information.
                  (iv) Exclusion from participation in Federal 
                or State health care programs.
                  (v) Any other adjudicated actions or 
                decisions that the Secretary shall establish by 
                regulation.
          (B) The term does not include any action with respect 
        to a malpractice claim.
          (2) The terms ``licensed health care practitioner'', 
        ``licensed practitioner'', and ``practitioner'' mean, 
        with respect to a State, an individual who is licensed 
        or otherwise authorized by the State to provide health 
        care services (or any individual who, without authority 
        holds himself or herself out to be so licensed or 
        authorized).
          (3) The term ``health care provider'' means a 
        provider of services as defined in section 1861(u) of 
        the Social Security Act, and any person or entity, 
        including a health maintenance organization, group 
        medical practice, or any other entity listed by the 
        Secretary in regulation, that provides health care 
        services.
          (4) The term ``supplier'' means a supplier of health 
        care items and services described in section 1819(a) 
        and (b), and section 1861 of the Social Security Act.
          (5) The term ``Government agency'' shall include:
                  (A) The Department of Justice.
                  (B) The Department of Health and Human 
                Services.
                  (C) Any other Federal agency that either 
                administers or provides payment for the 
                delivery of health care services, including, 
                but not limited to the Department of Defense 
                and the Veterans' Administration.
                  (D) State law enforcement agencies.
                  (E) State medicaid fraud and abuse units.
                  (F) Federal or State agencies responsible for 
                the licensing and certification of health care 
                providers and licensed health care 
                practitioners.
          (6) the term ``Federal health care program'' has the 
        meaning given such term in section 1128B(b) of the 
        Social Security Act.
          (7) The term ``health plan'' has the meaning given 
        such term in section 1347 of title 18 of the United 
        States Code.
          (8) For purposes of paragraph (1), the existence of a 
        conviction shall be determined under section 1128 of 
        the Social Security Act.
    (g) Conforming Amendment.--Section 1921(d) (42 U.S.C. 
1396r-2(d)) is amended by inserting ``and section 105 of the 
Federal Health Care Payment Integrity Act of 1995 after 
``section 422 of the Health Care Quality Improvement Act of 
1986''.

SEC. 11407. EXPANSION OF AUTHORITY OF MEDICAID FRAUD CONTROL UNITS.

    (a) Extension of Concurrent Authority To Investigate and 
Prosecute Fraud in Other Federal Programs.--Section 1903(q)(3) 
(42 U.S.C. 1396b(q)(3)) is amended by striking ``in connection 
with'' and all that follows and inserting the following:
          ``in connection with--
                  ``(A) any aspect of the provision of medical 
                assistance and the activities of providers of 
                such assistance under the State plan under this 
                title; and
                  ``(B) (in cases where the entity's function 
                is also described by subparagraph (A), and upon 
                the approval of the relevant Federal agency) 
                any aspect of the provision of health care 
                services and activities of providers of such 
                services under any Federal health care program 
                (as defined in section 1128B(b)(1)).''.
    (b) Extension of Authority To Investigate and Prosecute 
Patient Abuse in Non-Medicaid Board and Care Facilities.--
Section 1903(q)(4) (42 U.S.C. 1396(b)(q)(4)) is amended to read 
as follows:
          ``(4)(A) The entity has--
                  ``(i) procedures for reviewing complaints of 
                abuse or neglect of patients in health care 
                facilities which receive payments under the 
                State plan under this title;
                  ``(ii) at the option of the entity, 
                procedures for reviewing complaints of abuse or 
                neglect of patients residing in board and care 
                facilities; and
                  ``(iii) procedures for acting upon such 
                complaints under the criminal laws of the State 
                or for referring such complaints to other State 
                agencies for action.
          ``(B) For purposes of this paragraph, the term `board 
        and care facility' means a residential setting which 
        receives payment from or on behalf of two or more 
        unrelated adults who reside in such facility, and for 
        whom one or both of the following is provided:
                  ``(i) Nursing care services provided by, or 
                under the supervision of, a registered nurse, 
                licensed practical nurse, or licensed nursing 
                assistant.
                  ``(ii) Personal care services that assist 
                residents with the activities of daily living, 
                including personal hygiene, dressing, bathing, 
                eating, toileting, ambulation, transfer, 
                positioning, self-medication, body care, travel 
                to medical services, essential shopping, meal 
                preparation, laundry, and housework.''.
    (c) Authority of Inspectors General.--Nothing in this Act 
affects the authority of the Inspectors General of the 
Department of Veterans Affairs, the Department of Defense, and 
other health care agencies under the Inspector General Act of 
1978 to conduct investigations, audits, inspections, and 
evaluations of programs and operations of their respective 
agencies, including health care programs and operations.

SEC. 11408. RECOVERY OF MEDICARE OVERPAYMENTS FROM BANKRUPT PROVIDERS.

    (a) Medicare Part A.--Section 1815(d) (42 U.S.C. 1395g(d)) 
is amended by adding at the end the following sentence: 
``Amounts due to the program under this part are not 
dischargeable under any title of the Bankruptcy Code (11 U.S.C. 
101 et seq.).''.
    (b) Medicare Part B.--Section 1833(j) (42 U.S.C. 13951(j)) 
is amended by adding at the end the following sentence: 
``Amounts due to the program under this part are not 
dischargeable under any title of the Bankruptcy Code (11 U.S.C. 
101 et seq.).''.

SEC. 11409. GRANTS TO STATES TO REVOKE LICENSES OF UNQUALIFIED 
                    PROVIDERS.

    The Secretary of Health and Human Services is authorized to 
make grants to States for activities necessary to revoke the 
licenses, certification, or other State authorization of health 
care professionals and entities determined to be unqualified 
for such authorization on the basis of exclusion from Federal 
health care programs under section 1128 or 1128A or for any 
other reason.

SEC. 11410. AUTHORIZATION FOR INTERCEPTION OF WIRE, ORAL OR ELECTRONIC 
                    COMMUNICATIONS.

    (a) Section 2516(1)(c) of title 18, United States Code, is 
amended--
          (1) by inserting ``section 226 (bribery and graft in 
        connection with health care), section 227 (illegal 
        remunerations,'' after ``section 224 (bribery in 
        sporting contests),''; and
          (2) by inserting ``section 1347 (health care 
        fraud),'' after ``section 1344 (relating to bank 
        fraud),''.
    (b) Definitions.--Section 1961(1) of title 18, United 
States Code, is amended--
          (1) by inserting ``sections 226 and 227 (relating to 
        bribery and graft, and illegal remuneration in 
        connection with health care),'' after ``section 224 
        (relating to sports bribery),'';
          (2) by inserting ``section 669 (relating to theft or 
        embezzlement in connection with health care),'' after 
        ``section 664 (relating to embezzlement from pension 
        and welfare funds),''; and
          (3) by inserting ``section 1347 (relating to health 
        care fraud),'' after ``section 1344 (relating to 
        financial institution fraud),''.

              PART 2--RESOURCES FOR ANTI-FRAUD ACTIVITIES

SEC. 11421. HEALTH CARE FINANCING ADMINISTRATION AND HHS INSPECTOR 
                    GENERAL FUNDING.

    (a) Findings and Statement of Purpose.--
          (1) Findings.--The Congress finds that--
                  (A) a significant amount of funds expended on 
                the Medicare program are lost to fraud, 
                medically unnecessary services and other abuse; 
                and
                  (B) The Department of Health and Human 
                Services through activities of the Office of 
                Inspector General and Health Care Financing 
                Administration is effective in combating 
                Medicare fraud and abuse and returning misspent 
                funds to the Federal Treasury.
          (2) Purpose.--It is the purpose of this Act to--
                  (A) protect, to the maximum extent 
                practicable, the Medicare and Medicaid programs 
                from further losses due to fraud and abuse;
                  (B) test methods by which the savings that 
                these activities generate can be properly 
                accounted for when determining funding levels; 
                and
                  (C) ensure an adequate source of five-year 
                funding for HHS Medicare anti-fraud and abuse 
                activities.
    (b) Establishment of Medicare Anti-Fraud and Abuse 
Program.--Title XI (42 U.S.C. 1301 et seq.) is amended by 
adding at the end thereof the following new part:

            ``Part C--Medicare Anti-Fraud and Abuse Program

                               ``purpose

    ``Sec. 1171. The purpose of this part is to provide funding 
for activities of the Office of Inspector General related to 
preventing and detecting fraud and abuse in the programs under 
title XVIII and determining the accuracy and appropriateness of 
expenditures under such programs.

                          ``funding available

    ``Sec. 1172. (a) Covered Anti-Fraud and Abuse Activities.--
Funding from the trust funds established under title XVIII 
shall be available, in accordance with subsection (b), for 
activities conducted by the Inspector General, either directly 
or by contract, pursuant to this Act or the Inspector General 
Act of 1978, for the purposes of--
          ``(1) Prosecuting matters related to the programs 
        under title XVIII through criminal, civil, and 
        administrative proceedings.
          ``(2) Conducting investigations relating to such 
        programs.
          ``(3) Performing financial and performance audits of 
        programs and operations relating to the such programs.
          ``(4) Performing inspections and other evaluations 
        relating to such programs.
          ``(5) Conducting provider and consumer education 
        activities regarding the requirements of this title and 
        title XVIII.
    ``(b) Payments From Trust Funds.--Obligations incurred by 
the Inspector General in carrying out the activities designated 
in subsection (a) shall be paid from--
          ``(1) funds in the Federal Hospital Insurance Trust 
        Fund; and
          ``(2) funds in the Federal Supplementary Medical 
        Insurance Trust Fund, in the amounts set forth in 
        subsection (c), allocated between those funds as the 
        Secretary shall deem fair and equitable after taking 
        into consideration the expenses attributable to each of 
        the programs under title XVIII. The Secretary shall 
        make such transfers of moneys between those funds as 
        may be appropriate to settle accounts between them in 
        cases where expenses properly payable from one fund 
        have been paid from the other fund.
    ``(c) Payment Amounts.--Total amounts paid from the Trust 
Funds in accordance with subsection (b) shall equal--
          ``(1) $130 million for fiscal year 1996;
          ``(2) $181 million for fiscal year 1997;
          ``(3) $204 million for fiscal year 1998;
          ``(4) $223 million for fiscal year 1999; and
          ``(5) $244 million for fiscal year 2000.''.

SEC. 11422. ESTABLISHMENT OF THE MEDICARE BENEFICIARY INTEGRITY SYSTEM.

    (a) In General.--Part C of title XVIII (42 U.S.C. 1395x et 
seq.) is amended by inserting after section 1889 the following:

                     ``beneficiary integrity system

    ``Sec. 1890. (a) Obligations incurred for beneficiary 
integrity system activities for each of fiscal years 1996 
through 2000 shall be paid from funds in the Federal Hospital 
Insurance Trust Fund and the Federal Supplementary Medical 
Insurance Trust Fund, in the amounts set forth in subsection 
(b), allocated between those funds as the Secretary shall deem 
fair and equitable after taking into consideration the expenses 
attributable to each of the programs under this title. The 
Secretary shall make such transfers or moneys between those 
funds as may be appropriate to settle accounts between them in 
cases where expenses properly payable from one fund have been 
paid from the other fund.
    ``(b) Total amounts paid from the Trust Funds in accordance 
with subsection (a) shall equal--
          ``(1) $430,000,000 for fiscal year 1996,
          ``(2) $490,000,000 for fiscal year 1997,
          ``(3) $550,000,000 for fiscal year 1998,
          ``(4) $620,000,000 for fiscal year 1999, and
          ``(5) $670,000,000 for fiscal year 2000.
    ``(c) For purposes of this section, beneficiary integrity 
system activities consist of the following:
          ``(1) Review of activities of providers of services 
        or other persons in connection with this title, 
        including medical and utilization review and fraud 
        review.
          ``(2) Audit of cost reports.
          ``(3) Determination as to whether payment should not 
        be, or should not have been, made under this title by 
        reason of section 1862(b), and recovery of payments 
        that should not have been made.
          ``(4) Education of providers of services, 
        beneficiaries, and other persons with respect to 
        payment integrity and beneficiary integrity system 
        issues.''.
    (b) Effective Date.--The amendment made by subsection (a) 
applies to obligations incurred after fiscal year 1995.

SEC. 11423. GOVERNMENT-WIDE ANTI-FRAUD REINVESTMENT FUND.

    (a) Establishment.--
          (1) In general.--There is hereby established the 
        Health Care Fraud and Abuse Control Account. The Health 
        Care Fraud and Abuse Control Account shall consist of--
                  (A) such gifts and bequests as may be made as 
                provided in subparagraph (B);
                  (B) such amounts as may be deposited in the 
                Health Care Fraud and Abuse Control Account as 
                provided in title XI of the Social Security 
                Act; and
                  (C) such amounts as are transferred to the 
                Health Care Fraud and Abuse Control Account 
                under paragraph (3), but in no year shall more 
                than $10 million be transferred or otherwise 
                deposited to the Health Care Fraud and Abuse 
                Control Account.
          (2) Authorization to accept gifts.--The Health Care 
        Fraud and Abuse Control Account is authorized to accept 
        on behalf of the United States money gifts and bequests 
        made unconditionally to the Health Care Fraud and Abuse 
        Control Account for the benefit of the Health Care 
        Fraud and Abuse Control Program or any activity 
        financed through the Health Care Fraud and Abuse 
        Control Account, but not to exceed $10 million.
          (3) Transfer of amounts.--The Secretary of the 
        Treasury shall transfer to the Health Care Fraud and 
        Abuse Control Account, under rules similar to the rules 
        in section 9601 of the Internal Revenue Code of 1986, 
        an amount equal to the sum of the following:
                  (A) Civil monetary penalties and assessments 
                recovered (including voluntary settlement 
                agreements) under titles XI, XVIII, and XIX of 
                the Social Security Act (except as otherwise 
                provided by law); the Program Fraud Civil 
                Remedies Act (31 U.S.C. 3801 et seq.) and other 
                civil monetary penalties and assessments 
                imposed in health care cases.
                  (B) Penalties and damages otherwise 
                creditable to Miscellaneous Receipts, Treasury, 
                obtained (including voluntary settlement 
                agreements) under the False Claims Act (31 
                U.S.C. 3729 et seq.), in cases involving claims 
                related to the provision of health care items 
                and services (other than funds awarded to a 
                relator or for the damages sustained by the 
                health plan because of the acts governed by 
                section 3729).
    (b) General Use of Funds.--
          (1) In general.--Amounts in the Health Care Fraud and 
        Abuse Control Account shall be paid, at the discretion 
        jointly of the Attorney General and the Secretary of 
        Health and Human Services (acting through the Inspector 
        General of the Department of Health and Human Services) 
        to cover the costs (including equipment, salaries and 
        benefits, and travel and training) of activities 
        designed to prevent and detect health care fraud and 
        abuse, and to promote economy and efficiency in Federal 
        health care programs, such as health care fraud 
        investigations, audits, and inspections, including the 
        costs of--
                  (A) prosecuting health care matters (through 
                criminal, civil, and administrative 
                proceedings);
                  (B) investigations;
                  (C) financial and performance audits of 
                health care programs and operations;
                  (D) inspections and other evaluations; and
                  (E) provider and consumer education regarding 
                compliance with the provisions of this title.
          (2) ERISA plans.--Any recoveries in connection with 
        an employee welfare benefit plan as defined in section 
        3 of the Employee Retirement Income Security Act of 
        1974 (18 U.S.C. 1002) shall first be used to make whole 
        participants and beneficiaries of the employee welfare 
        benefit plan.
          (3) Funds used to supplement agency appropriations.--
        It is intended that disbursements made from the Health 
        Care Fraud and Abuse control Account be fairly 
        apportioned among all Federal health care agencies and 
        be used to increase and not supplant the recipient 
        agency's appropriated operating budget.
          (4) Annual report.--The Secretary and the Attorney 
        General shall submit jointly an annual report to 
        Congress on the amount of revenue which is generated 
        and disbursed by the Health Care Fraud and Abuse 
        Control Account in each fiscal year.

                   PART 3--AMENDMENTS TO CRIMINAL LAW

SEC. 11431. HEALTH CARE FRAUD.

    In General.--
          (1) Fines and imprisonment for health care fraud 
        violations.--Chapter 63 of title 18, United States 
        Code, is amended by adding at the end the following new 
        section:

``Sec. 1347. Health care fraud.

    ``(a) Whoever knowingly and willfully executes, or attempts 
to execute, a scheme or artifice--
          ``(1) to defraud any health plan or other person, in 
        connection with the delivery of or payment for health 
        care benefits, items, or services; or
          ``(2) to obtain, by means of false or fraudulent 
        pretenses, representations, or promises, any of the 
        money or property owned by, or under the custody or 
        control of, any health plan, or person in connection 
        with the delivery of or payment for health care 
        benefits, items, and services;
shall be fined under this title or imprisoned not more than 10 
years, or both. If the violation results in serious bodily 
injury (as defined in section 1365(g)(3) of this title), such 
person may be imprisoned for any term of years.
    ``(b) For purposes of this section, the term ` health plan 
means a plan or program that provides health benefits, whether 
directly, through insurance, or otherwise, and includes--
          ``(1) a policy of health insurance;
          ``(2) a contract of a service benefit organization;
          ``(3) a membership agreement with a health 
        maintenance organization or other prepaid health plan; 
        and
          ``(4) an employee welfare benefit plan or a multiple 
        employer welfare arrangement (as those terms are 
        defined in section 3 of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1002).''.
          (2) Clerical Amendment.--The table of sections at the 
        beginning of chapter 63 of title 18, United States 
        Code, is amended by adding at the end the following:

``1347. Health care fraud.''.

SEC. 11432. FORFEITURES FOR FEDERAL HEALTH CARE OFFENSES.

    In General.--Section 982(a) of title 18, United States 
Code, is amended by adding after paragraph (5) the following 
new paragraph:
          ``(6)(A) the court, in imposing sentence on a person 
        convicted of a Federal health care offense, shall order 
        the person to forfeit property, real or personal, that 
        constitutes or is derived, directly or indirectly, from 
        proceeds traceable to the commission of the offense.
          ``(B) For purposes of this paragraph, the term 
        `Federal health care offense' means a violation of, or 
        a criminal conspiracy to violate--
                  ``(i) section 1347 of this title;
                  ``(ii) section 1128B of the Social Security 
                Act;
                  ``(iii) sections 287, 371, 664, 666, 1001, 
                1027, 1341, 1343, 1920, of 1954 of this title 
                if the violation or conspiracy relates to 
                health care fraud; or
                  ``(iv) section 501 or 511 of the Employee 
                Retirement Income Security Act of 1974, if the 
                violation or conspiracy relates to health care 
                fraud.''.

SEC. 11433. INJUNCTIVE RELIEF RELATING TO FEDERAL HEALTH CARE OFFENSES.

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

SEC. 11434. GRAND JURY DISCLOSURE.

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

SEC. 11435. FALSE STATEMENTS.

    (a) In General.--Chapter 47 of title 18, United States 
Code, is amended by adding at the end the following new 
section:

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

    ``(a) Whoever, in any matter involving a health plan, 
knowingly and willfully falsifies, conceals, or covers up by 
any trick, scheme, or device a material fact, or makes any 
false, fictitious, or fraudulent statements or representations, 
or makes or uses any false writing or document knowing the same 
to contain any false, fictitious, or fraudulent statement or 
entry, shall be fined under this title or imprisoned not more 
than 5 years, or both.
    ``(b) For purposes of this section, the term `health plan' 
has the meaning given such term in section 1347(b).''.
    (b) Clerical Amendment.--The table of sections at the 
beginning of chapter 47 of title 18, United States Code, is 
amended by adding at the end the following:

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

SEC. 11436. OBSTRUCTION OF CRIMINAL INVESTIGATIONS, AUDITS OR 
                    INSPECTIONS OF FEDERAL HEALTH CARE OFFENSES.

    (a) In General.--Chapter 73 of title 18, United States 
Code, is amended by adding at the end the following new 
section:

``Sec. 1518. Obstruction of criminal investigations, audits or 
                    inspections of Federal health care offenses.

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

``1518. Obstruction of Criminal Investigations, Audits, or Inspections 
          of Federal Health Care Offenses.''.

SEC. 11437. THEFT OR EMBEZZLEMENT.

    (a) In General.--Chapter 31 of title 18, United States 
Code, is amended by adding at the end the following new 
section: ``Sec. 669. Theft or embezzlement in connection with 
health care.
    ``(a) In General.--Whoever willfully embezzles, steals, or 
otherwise without authority willfully and unlawfully converts 
to the use of any person other than the rightful owner, or 
intentionally misapplies any of the moneys, funds, securities, 
premiums, credits, property, or other assets of a health plan, 
shall be fined under this title or imprisoned not more than 10 
years, or both.
    ``(b) Health Plan.--As, used in this section the term 
`health plan' has the meaning given such term in section 
1347(b).''.
    (b) Clerical Amendment.--The table of sections at the 
beginning of chapter 31 of title 18, United States Code, is 
amended by adding at the end the following:

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

SEC. 11438. LAUNDERING OF MONETARY INSTRUMENTS.

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

SEC. 11439. AUTHORIZED INVESTIGATIVE DEMAND PROCEDURES.

    (a) In General.--Chapter 233 of title 18, United States 
Code, is amended by adding after section 3485 the following new 
section:

``Sec. 3486. Authorized investigative demand procedures.

    ``(a) Authorization.--
          ``(1) In any investigation relating to functions set 
        forth in paragraph (2), the Attorney General or 
        designee may issue in writing and cause to be served a 
        subpoena compelling production of any records 
        (including any books, papers, documents, electronic 
        media, or other objects or tangible things), which may 
        be relevant to an authorized law enforcement inquiry, 
        that a person or legal entity may possess or have care, 
        custody, or control. A custodian of records may be 
        required to give testimony concerning the production 
        and authentication of such records. The production of 
        records may be required from any place in any State or 
        in any territory, or other place subject to the 
        jurisdiction of the United States at any designated 
        place; except that such production shall not be 
        required more than 500 miles distant from the place 
        where the subpoena is served. Witnesses summoned under 
        this section shall be paid the same fees and mileage 
        that are paid witnesses in the courts of the United 
        States. A subpoena requiring the production of records 
        shall describe the objects required to be produced and 
        prescribe a return date within a reasonable period of 
        time within which the objects can be assembled and made 
        available.
          ``(2) Investigative demands utilizing an 
        administrative subpoena are authorized for any 
        investigation with respect to any act or activity 
        constituting or involving health car fraud, including a 
        scheme or artifice--
                  ``(A) to defraud any health plan or other 
                person, in connection with the delivery of or 
                payment for health care benefits, items, or 
                services; or
                  ``(B) to obtain, by means of false or 
                fraudulent pretenses, representations, or 
                promises, any of the money or property owned 
                by, or under the custody or control or, any 
                health plan, or person in connection with the 
                delivery of or payment for health care 
                benefits, items, or services.
    ``(b) Service.--A subpoena issued under this section may be 
served by any person designated in the subpoena to serve it. 
Service upon a natural person may be made by personal delivery 
of the subpoena to such person. Service may be made upon a 
domestic or foreign association which is subject to suit under 
a common name, by delivering the subpoena to an officer, to a 
managing or general agent, or to any other agency authorized by 
appointment or by law to receive service of process. The 
affidavit of the person serving the subpoena entered on a true 
copy thereof by the person serving it shall be proof of 
service.
    ``(c) Enforcement.--In the case of contumacy by or refusal 
to obey a subpoena issued to any person, the Attorney General 
may invoke the aid of any court of the United States within the 
Jurisdiction of which the investigation is carried on or of 
which the subpoenaed person is an inhabitant, or in which such 
person carries on business or may be found, to compel 
compliance with the subpoena. The court may issue an order 
requiring the subpoenaed person to appear before the Attorney 
General to produce records, if so ordered, or to give testimony 
touching the matter under investigation. Any failure to obey 
the order of the court may be punished by the court as a 
contempt thereof. All process in any such case may be served in 
any Judicial district in which such person may be found.
    ``(d) Immunity From Civil Liability.--Notwithstanding any 
Federal, State, or local law, any person, including officers, 
agents, and employees receiving a subpoena under this section, 
who complies in good faith with the subpoena and thus produces 
the materials sought, shall not be liable in any court of any 
State or the United States to any customer or other persons for 
such production or for nondisclosure of that production to the 
customer.
    ``(e) Use in Action Against Individuals.--
          ``(1) Health information about an individual that is 
        disclosed under this section may not be used in, or 
        disclosed to any person for use in, any administrative, 
        civil, or criminal action or investigation directed 
        against the individual who is the subject of the 
        information unless the action or investigation arises 
        out of and is directly related to receipt of health 
        care or payment for health care or action involving a 
        fraudulent claim related to health; or if authorized by 
        an appropriate order of a court of competent 
        jurisdiction, granted after application showing good 
        cause therefore.
          ``(2) In assessing good cause, the court shall weigh 
        the public interest and the need for disclosure against 
        the injury to the patient, to the physician-patient 
        relationship, and to the treatment services.
          ``(3) Upon the granting of such order, the court, in 
        determining the extent to which any disclosure of all 
        or any part of any record is necessary, shall impose 
        appropriate safeguards against unauthorized disclosure.
    ``(f) Health Plan.--As used in this section the term 
`health plan' has the meaning given such term in section 
1347(b).''.
    (b) Clerical Amendment.--The table of sections for chapter 
223 of title 18, United States Code, is amended by inserting 
after the item relating to section 3405 the following new item: 
Sec. 3486. Authorized investigative demand procedures''.
    (c) Conforming Amendment.--Section 1510(b)(3)(B) of title 
18, United States Code, is amended by inserting ``or a 
Department of Justice subpoena (issued under section 3486),'' 
after ``subpoena''.

                     PART 4--MEDICARE IMPROVEMENTS

                  Subpart A--Coordination of Benefits

SEC. 11441. CLARIFICATION OF TIME AND FILING LIMITATIONS.

    (a) In General.--Section 1862(b)(2)(B) (42 U.S.C. 
1395y(b)(2)(B)) is amended by adding at the end of the 
following:
                  ``(v) Time, filing, and related provisions 
                under primary plan.--Requirements under a 
                primary plan as to the filing of a claim, time 
                limitations for the filing of a claim, 
                information not maintained by the Secretary, or 
                notification or pre-admission review, shall not 
                apply to a claim by the United States under 
                clause (ii) or (iii).''.
    (b) Effective Date.--The amendment made by subsection (a) 
applies to items and services furnished after 1990.

SEC. 11442. CLARIFICATION OF LIABILITY OF THIRD PARTY ADMINISTRATORS.

    (a) In General.--Section 1862(b)(2)(B)(ii) (42 U.S.C. 
1395(b)(2)(B)(ii)) is amended by inserting ``, or which 
determines claims under the primary plan'' after ``primary 
plan''.
    (b) Claims Between Parties Other Than the United States.--
Section 1862(b)(2)(B) (42 U.S.C. 1395y(b)(2)(B)) (as amended by 
section 11441(a) of this Act) is further amended by adding at 
the end the following:
          ``(vi) Claims between parties other than the united 
        states.--A claim by the United States under clause (ii) 
        or (iii) shall not preclude claims between other 
        parties.''.
    (c) Effective Date.--The amendments made by the previous 
subsections apply to items and services furnished after 1990.

SEC. 11443. CLARIFICATION OF PAYMENT AMOUNTS TO MEDICARE.

    (a) In General.--Section 1862(b)(2)(B)(i) (42 U.S.C. 
1395y(b)(2)(B)(i)) is amended to read as follows:
          ``(i) Repayment required.--
                  ``(I) Any payment under this title, with 
                respect to any item or service for which 
                payment by a primary plan is required under the 
                preceding provisions of this subsection, shall 
                be conditioned on reimbursement to the 
                appropriate Trust Fund established by this 
                title when notice or other information is 
                received that payment for that item or service 
                has been or should have been made under those 
                provisions. If reimbursement is not made to the 
                appropriate Trust Fund before the expiration of 
                the 60-day period that begins on the date such 
                notice or other information is received, the 
                Secretary may charge interest (beginning with 
                the date on which the notice or other 
                information is received) on the amount of the 
                reimbursement until reimbursement is made (at a 
                rate determined by the Secretary in accordance 
                with regulations of the Secretary of the 
                Treasury applicable to charges for late 
                payments).
                  ``(II) The amount owned by a primary plan 
                under the first sentence of subclause (I) is 
                the lesser of the full primary payment required 
                (if that amount is readily determinable) and 
                the amount paid under this title for that item 
                or service.''.
    (b) Conforming and Technical Amendments.--
          (1) Subparagraphs (A)(i)(I) and (B)(i) of section 
        1862(b)(1) (42 U.S.C. 1395y(b)(1)) are each amended by 
        inserting ``(or eligible to be covered)'' after 
        ``covered''.
          (2) Section 1862(b)(1)(C)(ii) (42 U.S.C. 
        1395y(b)(1)(C)(ii)) is amended by striking ``covered by 
        such plan''.
          (3) The matter in section 1862(b)(2)(A) (42 U.S.C. 
        1395y(b)(2)(A)) preceding clause (i) is amended by 
        striking ``, except as provided in subparagraph (B),''.
    (c) Effective Date.--The amendments made by the previous 
subsections apply to items and services furnished after 1990.

SEC. 11444. CONDITIONS FOR DOUBLE DAMAGES.

    (a) In General.--Section 1862(b)(2)(B)(ii) (42 U.S.C. 
1395y(b)(2)(B)(ii)) is amended--
          (1) by striking ``, in accordance with paragraph 
        (3)(A)'', and
          (2) by inserting ``, unless the entity demonstrates 
        that it did not know, and could not have known, of its 
        obligation to pay'' after ``against that entity.''
    (b) Conforming Amendment.--Section 1862(b)(3)(A) is amended 
by striking ``(or appropriate reimbursement)''.

SEC. 11445. REPEAL OF EXCISE TAX.

    (a) In General.--Chapter 47 of the Internal Revenue Code of 
1986 (26 U.S.C. 5000) is repealed.
    (b) Conforming Amendment to the Internal Revenue Code of 
1986.--The table of chapters of subtitle D of the Internal 
Revenue Code of 1986 (26 U.S.C. 4001 et seq.) is amended by 
striking the listing for chapter 47.
    (c) Conforming Amendments to the Social Security Act.--
          (1) Section 1862(b)(1)(A) (42 U.S.C. 1395y(b)(1)(A)) 
        is amended by striking clause (v).
          (2) The matter in section 1862(b)(1)(C) (42 U.S.C. 
        1395y(b)(1)(C)) preceding clause (i) is amended by 
        striking ``plan (as defined in subparagraph (A)(v))--'' 
        and inserting ``plan--''.
          (3) Section 1862(b)(1)(E) (42 U.S.C. 1395y(b)(1)(E)) 
        is amended by adding at the end the following:
                  ``(iv) Group health plan defined.--The term 
                `group health plan' means a plan (including a 
                self-insured plan) of, or contributed to by, an 
                employer or employee organization to provide 
                health care (directly or otherwise) to the 
                employees, former employees, the employer, 
                others associated or formerly associated with 
                the employer in a business relationship, or 
                their families.''.
          (4) Section 1862(b)(3) (42 U.S.C. 1395y(b)(3)) is 
        amended--
                  (A) by striking subparagraph (B), and
                  (B) by redesignating subparagraph (C) as (B).
          (5) Subparagraph (A) of the first sentence of section 
        1837(i)(1) (42 U.S.C. 1395p(i)(1)), subparagraph (B) of 
        the first sentence of section 1837(i)(2) (42 U.S.C. 
        1395p(i)(2)), section 1837(i)(3)(A) (42 U.S.C. 
        1395p(i)(3)(A)), and clause (2) of the second sentence 
        of section 1839(b) (42 U.S.C. 1395r(b)), are each 
        amended by striking ``1862(b)(1)(A)(v)'' and inserting 
        ``1862(b)(1)(E)(iv)''.
    (d) Effective Date.--The amendment made by subsection (a) 
applies, with respect to the Internal Revenue Code of 1986, to 
expenses incurred after 1994.

SEC. 11446. INFORMATION REQUIREMENTS.

    (a) Information From Group Health Plans.--Section 1862(b) 
(42 U.S.C. 1395y(b)) is amended by adding at the end the 
following:
          ``(7) Information from group health plans.--
                  ``(A) Provision of information by group 
                health plans.--The administrator of a group 
                health plan (other than a plan exempt, under 
                paragraph (1)(E)(v), from the requirements of 
                paragraph (1)) shall provide to the Secretary 
                any or all of the information elements listed 
                in subparagraph (C), and in such manner and at 
                such times (but not more frequently than four 
                times per year), as the Secretary may specify, 
                with respect to each individual covered under 
                the plan and entitled to benefits under this 
                title.
                  ``(B) Provision of information by employers 
                and employee organizations.--An employer (or 
                employee organization) that maintains or 
                participates in a group health plan (other than 
                a plan exempt, under paragraph (1)(E)(v), from 
                the requirements of paragraph (1)) shall 
                provide to the administrator of the plan any or 
                all of the information elements listed in 
                subparagraph (C), and in such manner and at 
                such times (but not more frequently than four 
                times per year), as the Secretary may specify, 
                with respect to each individual covered under 
                the plan and entitled to benefits under this 
                title.
                  ``(C) Information elements to be provided.--
                The information elements to be provided under 
                subparagraph (A) or (B) are:
                          ``(i) Elements concerning the 
                        individual.--
                                  ``(I) The individual's name.
                                  ``(II) The individual's date 
                                of birth.
                                  ``(II) The individual's sex.
                                  ``(IV) The individual's 
                                social security insurance 
                                number.
                                  ``(V) The number assigned by 
                                the Secretary to the individual 
                                for claims under this title.
                                  ``(VI) The family 
                                relationship of the individual 
                                to the person who has current 
                                or former employment status 
                                with the employer.
                          ``(ii) Elements concerning the family 
                        member with current or former 
                        employment status.--
                                  ``(I) The name of the person 
                                in the individual's family who 
                                has current or former 
                                employment status with the 
                                employer.
                                  ``(II) That person's social 
                                security insurance number.
                                  ``(III) The number or other 
                                identifier assigned by the plan 
                                to that person.
                                  ``(IV) The periods of 
                                coverage for that person under 
                                the plan.
                                  ``(V) The employment status 
                                of that person (current or 
                                former) during those periods of 
                                coverage.
                                  ``(VI) The classes (of that 
                                person's family members) 
                                covered under the plan.
                          ``(iii) Plan elements.--
                                  ``(I) The nature of the items 
                                and services covered under the 
                                plan.
                                  ``(II) The name and address 
                                to which claims under the plan 
                                are to be sent.
                          ``(iv) Elements concerning the 
                        employer.--
                                  (I) The employer's name.
                                  ``(II) The employer's 
                                address.
                                  ``(III) The employer 
                                identification number of the 
                                employer.
                  ``(D) Use of identifiers.--The administrator 
                of a group health plan shall utilize an 
                identifier for the plan (that the Secretary may 
                furnish) in providing information under 
                subparagraph (A) and in other transactions, as 
                may be specified by the Secretary, related to 
                the provisions of this subsection.
                  ``(E) Penalty for noncompliance.--Any entity 
                that knowingly and willfully fails to comply 
                with a requirement imposed by the previous 
                subparagraphs shall be subject to a civil money 
                penalty not to exceed $1000 for each incident 
                of such failure. The provisions of section 
                1128A (other than subsections (a) and (b)) 
                shall apply to a civil money penalty under the 
                previous sentence in the same manner as those 
                provisions apply to a penalty or proceeding 
                under section 1128A(a).''.
    (b) Effective Date.--The amendment made by subsection (a) 
is effective 180 days after the date of enactment of this Act.

SEC. 11447. TECHNICAL CHANGES CONCERNING MINIMUM SIZES OF GROUP HEALTH 
                    PLANS.

    (a) Consolidation of Requirements.--
          (1) Section 1862(b)(1)(A) (42 U.S.C. 1395y(b)(1)(A)) 
        (as amended by section 11443 of this Act) is further 
        amended--
                  (A) by striking clauses (ii) and (iii), and
                  (B) by renumbering clause (iv) as (ii).
          (2) Section 1862(b)(1)(B) (42 U.S.C. 1395y(b)(1)(B)) 
        is amended--
                  (A) in clause (i), by striking ``large group 
                health plan (as defined in clause (iv))'' and 
                inserting ``group health plan'', and
                  (B) by striking clause (iv).
          (3) Section 1862(b)(1)(E) (42 U.S.C. 1395y(b)(1)(E)) 
        (as amended by section 405(c)(3) of this Act) is 
        further amended by adding at the end the following:
                  ``(v) Exclusion of group health plans of 
                small and medium employers.--
                          ``(I) Subparagraph (A) shall not 
                        apply to a group health plan unless the 
                        plan covers employees of at least one 
                        employer that has 20 or more employees 
                        on at least 50 percent of its business 
                        days in each of 20 or more calendar 
                        weeks in the current or preceding 
                        calendar year.
                          ``(II) Subparagraph (B) shall not 
                        apply to a group health plan unless the 
                        plan covers employees of at least one 
                        employer that has 100 or more employees 
                        on at least 50 percent of its business 
                        days in each of 20 or more calendar 
                        weeks in the current or preceding 
                        calendar year.''.
    (b) Conforming Amendments.--
          (1) The second sentence of section 1862(b)(2)(A) (42 
        U.S.C. 1395y(b)(2)(A)) is amended by striking ``or 
        large group health plan''.
          (2) Section 1862 (b)(3)(C) (42 U.S.C. 1395y(b)(3)(C)) 
        is amended--
                  (A) in the heading, by striking ``or a large 
                group health plan'', and
                  (B) in the first sentence, by striking ``or a 
                large group health plan''.
          (3)(A) Subparagraph (A) of the first sentence of 
        section 1837(i)(1) (42 U.S.C. 1395p(i)(1)) is amended 
        by striking ``(or the individual's spouse's) current 
        employment status'' and inserting ``current employment 
        status (or the current employment status of a family 
        member of the individual).''.
          (B) Section 1837(i)(1) (42 U.S.C. 1395p(i)(1)) is 
        amended by striking the second sentence.
          (4)(A) Subparagraph (b) of the first sentence of 
        section 1837(i)(2) (42 U.S.C. 1395p(i)(2)) is amended 
        by striking ``(or the individual's spouse's) current 
        employment status'' and inserting ``current employment 
        status (or the current employment status of a family 
        member of the individual).''.
          (B) Section 1837(i)(2) (42 U.S.C. 1395p(i)(2)) is 
        amended by striking the second sentence.
          (5) Section 1837(i)(3) (42 U.S.C. 1395p(i)(3)) is 
        amended--
                  (A) by striking subparagraph (b), and
                  (B) by striking ``(3)(A)'' and inserting 
                ``(3)''.
          (6) Clause (2) of the second sentence of section 
        1839(b) (42 U.S.C. 1395r(b)) is amended by striking 
        ``by reason of the individual's (or the individual's 
        spouse's) current employment status or months during 
        which the individual has not attained the age of 65 and 
        for which the individual can demonstrate that the 
        individual was enrolled in a large group health plan''.

                      Subpart B--Contractor Reform

SEC. 11451. INCREASED FLEXIBILITY IN CONTRACTING FOR MEDICARE CLAIMS 
                    PROCESSING.

    (a) Carriers to Include Entities That are Not Insurance 
Companies.--
          (1) The matter in section 1842(a) (42 U.S.C. 
        1395u(a)) preceding paragraph (1) is amended by 
        striking ``with carriers'' and inserting ``with 
        agencies and organizations (referred to as carriers)''.
          (2) Section 1842(f) (42 U.S.C. 1394u(f)) is repealed.
    (b) Choice of Fiscal Intermediaries by Providers of 
Services; Secretarial Flexibility in Assigning Functions to 
Intermediaries and Carriers.--
          (1) Section 1816 (42 U.S.C. 1395h) is amended by 
        striking everything after the heading but before 
        subsection (b) and inserting the following:
    ``Sec. 1816. (a)(1) The Secretary may enter into contracts 
with agencies or organizations to reform any or all of the 
following functions, or parts of those functions (or, to the 
extent provided in a contract, to secure performance thereof by 
other organizations):
          ``(A) determine (subject to the provisions of section 
        1878 and to such review by the Secretary as may be 
        provided for the contracts) the amount of the payments 
        required pursuant to this part to be made to providers 
        of services,
          ``(B) make payments described in subparagraph (A),
          ``(C) provide consultative services to institutions 
        or agencies to enable them to establish and maintain 
        fiscal records necessary for purposes of this part and 
        otherwise to qualify as providers of services,
          ``(D) serve as a center for, and communicate to 
        individuals entitles to benefits under this part and to 
        providers of services, any information or instructions 
        furnished to the agency or organization by the 
        Secretary, and serve as a channel of communication from 
        individuals entitled to benefits under this part and 
        from providers of services to the Secretary,
          ``(E) make such audits of the records of providers of 
        services as may be necessary to insure that proper 
        payments are made under this part,
          ``(F) perform the functions described by subsection 
        (d), and
          ``(G) perform such other functions as are necessary 
        to carry out the purposes of this part.
    ``(2) As used in this title and title XI, the term `fiscal 
intermediary' means an agency or organization with a contract 
under this section.''.
          (2) Subsections (d) and (e) of section 1816 (42 
        U.S.C. 1395h) are amended to read as follows:
    ``(d) Each provider of services shall have a fiscal 
intermediary that--
          ``(1) acts as a single point of contact for the 
        provider of services under this part,
          ``(2) makes its services sufficiently available to 
        meet the needs of the provider of services, and
          ``(3) is responsible and accountable for arranging 
        the resolution of issues raised under this part by the 
        provider of services.
    ``(e)(1)(A) The Secretary shall, at least every five years, 
permit each provider of services (other than a home health 
agency or a hospice program) to choose an agency or 
organization (from at least three proposed by the Secretary, of 
which at least one shall have an office in the geographic area 
of the provider of services, except as provided by subparagraph 
(B)(ii)(II)) as the fiscal intermediary under subsection (d) 
for the provider of services. If a contract with that fiscal 
intermediary is discontinued, the Secretary shall permit the 
provider of services to choose under the same conditions from 
three other agencies or organizations
    ``(B)(i) The Secretary, in carrying out subparagraph (A), 
shall permit a group of hospitals (or a group of another class 
of providers other than home health agencies or hospice 
programs) under common ownership by, or control of, a 
particular entity to choose one agency or organization (from at 
least three proposed by the Secretary) as the fiscal 
intermediary under subsection (d) for all the providers in that 
group if the conditions specified in clause (ii) are met
    ``(ii) the conditions for clause (i) to apply are that--
          ``(I) the group includes all the providers or 
        services of that class that are under common ownership 
        by, or control of, that particular entity, and
          ``(II) all the providers of services in that group 
        agree that none of the agencies or organizations 
        proposed by the Secretary is required to have an office 
        in any particular geographic area.
    ``(2) The Secretary, in evaluating the performance of a 
fiscal intermediary, shall solicit comments from providers of 
services.''.
          (3)(A) Section 1816(b)(1)(A) (42 U.S.C. 
        1395h(b)(1)(A)) is amended by striking ``after applying 
        the standards, criteria, and procedures'' and inserting 
        ``after evaluating the ability of the agency or 
        organization to fulfill the contract performance 
        requirements''.
          (B) The first sentence of section 1816(f)(1) (42 
        U.S.C. 1395h(f)(1)) is amended--
                  (i) by striking ``develop standards, 
                criteria, and procedures'' and inserting ``, 
                after public notice and opportunity for 
                comment, develop contract performance 
                requirements'', and
                  (ii) by striking ``, and the Secretary shall 
                establish standards and criteria with respect 
                to the efficient and effective administration 
                of this part''.
          (C) The second sentence of section 1842(b)(2)(A) (42 
        U.S.C. 1395u(b)(2)(A)) is amended to read as follows: 
        ``The Secretary shall, after public notice and 
        opportunity for comment, develop contract performance 
        requirements for the efficient and effective 
        performance of contract obligations under this 
        section.''.
          (D) Section 1842(b)(2)(A) (42 U.S.C. 1395u(b)(2)(A)) 
        is amended by striking the third sentence.
          (E) The matter in section 1842(b)(2)(B) (42 U.S.C. 
        1395u(b)(2)(B)) preceding clause (i) is amended by 
        striking ``establish standards'' and inserting 
        ``develop contract performance requirements''.
          (F) Section 1842(b)(2)(D) (42 U.S.C. 1395u(b)(2)(D)) 
        is amended by striking ``standards and criteria'' each 
        place it occurs and inserting ``contract performance 
        requirements''.
          (4)(A) The matter in section 1816(b) (42 U.S.C. 
        1395h(b)) preceding paragraph (1) is amended by 
        striking ``an agreement'' and inserting ``a contract''.
          (B) Paragraphs (1)(B) and (2)(A) of section 1816(b) 
        (42 U.S.C. 1395h(b)) are each amended by striking 
        ``agreement'' and inserting ``contract''.
          (C) The first sentence of section 1816(c)(1) (42 
        U.S.C. 1395h(c)(1)) is amended by striking ``An 
        agreement'' and inserting ``A contract''.
          (D) The last sentence of section 1816(c)(1) (42 
        U.S.C. 1395h(c)(1)) is amended by striking ``an 
        agreement'' and inserting ``a contract''.
          (E) The matter in section 1816(c)(2)(A) (42 U.S.C. 
        1395h(c)(2)(A)) preceding clause (i) is amended by 
        striking ``agreement'' and inserting ``contract''.
          (F) Section 1816(c)(3)(A) (42 U.S.C. 1395h(c)(3)(A)) 
        is amended by striking ``agreement'' and inserting 
        ``contract''.
          (G) The first sentence of section 1816(f)(1) (42 
        U.S.C. 1395h(f)(1)) is amended by striking ``an 
        agreement'' and inserting ``a contract''.
          (H) Section 1816(h) (42 U.S.C. 1395h(h)) is amended--
                  (i) by striking ``An agreement'' and 
                inserting ``A contract'', and
                  (ii) by striking ``the agreement'' each place 
                it occurs and inserting ``the contract''.
          (I) Section 1816(i)(1) (42 U.S.C. 1395h(i)(1)) is 
        amended by striking ``an agreement'' and inserting ``a 
        contract''.
          (J) Section 1816(j) (42 U.S.C. 1395(j)) is amended by 
        striking ``An agreement'' and inserting ``A contract''.
          (K) Section 1816(k) (42 U.S.C. 1395h(k)) is amended 
        by striking ``An agreement'' and inserting ``A 
        contract''.
          (L) The matter in section 1842(a) (42 U.S.C. 
        1395u(a)) preceding paragraph (1) is amended by 
        striking ``agreements'' and inserting ``contracts''.
          (M) Section 1842(h)(3)(A) (42 U.S.C. 1395u(h)(3)(A)) 
        is amended by striking ``an agreement'' and inserting 
        ``a contract''.
          (5) Section 1816(f)(1) (42 U.S.C. 1395h(f)(1)) is 
        amended by striking the second sentence.
          (6)(A) The matter in section 1816(c)(2)(A) (42 U.S.C. 
        1395h(c)(2)(A)) preceding clause (i) is amended by 
        inserting ``that provides for making payments under 
        this part'' after ``this section''.
          (B) Section 1816(c)(3)(A) (42 U.S.C. 1395h(c)(3)(A)) 
        is amended by inserting ``that provides for making 
        payments under this part'' after ``this section''.
          (C) Section 1816(k) (42 U.S.C. 1395h(k)) is amended 
        by inserting ``(as appropriate)'' after ``submit''.
          (D) The matter in section 1842(a) (42 U.S.C. 
        1395u(a)) preceding paragraph (1) is amended by 
        striking ``some or all of the following functions'' and 
        inserting ``any or all of the following functions, or 
        parts of those functions''.
          (E) The first sentence of section 1842(b)(2)(C) (42 
        U.S.C. 1395u(b)(2)(C)) is amended by inserting ``(as 
        appropriate)'' after ``carriers''.
          (F) The matter preceding subparagraph (A) in the 
        first sentence of section 1842(b)(3) (42 U.S.C. 
        1395u(b)(3)) is amended by inserting ``(as 
        appropriate)'' after ``contract''.
          (G) The matter in section 1842(b)(7)(A) (42 U.S.C. 
        1395u(b)(7)(A)) preceding clause (i) is amended by 
        striking ``the carrier'' and inserting ``a carrier''.
          (H) The matter in section 1842(b)(11)(A) (42 U.S.C. 
        1395u(b)(11)(A)) preceding clause (i) is amended by 
        inserting ``(as appropriate)'' after ``each carrier''.
          (I) The first sentence of section 1842(h)(2) (42 
        U.S.C. 1395u(b)(2)) is amended by inserting ``(as 
        appropriate)'' after ``shall''.
          (J) Section 1842(h)(5)(A) (42 U.S.C. 1395u(h)(5)(A) 
        is amended by inserting ``(as appropriate)'' after 
        ``carrier''.
          (7)(A) Section 1816(c)(2)(C) (42 U.S.C. 
        1395h(c)(2)(C) is amended by striking ``hospital, rural 
        primary care hospital, skilled nursing facility, home 
        health agency hospice program, comprehensive outpatient 
        rehabilitation facility, or rehabilitation agency'' and 
        inserting ``* * * of services''.
          (B) The matter in section 1816(j) (42 U.S.C. 1395(j)) 
        preceding paragraph (1) is amended by striking ``for 
        home health services, extended care services, or post-
        hospital extended care services''.
          (8) Section 1842(a)(3) (42 U.S.C. 1395u(a)(3)) is 
        amended by inserting ``(to and from individuals enroll 
        under this part and to and from physicians and other 
        entities that furnish items and services)'' after 
        ``communication''.
    (c) Elimination of Special Provisions for Terminations of 
Contracts.--
          (1) The matter in section 1816(b) (42 U.S.C. 
        1395h(b)) preceding paragraph (1) is amended by 
        striking ``or renew''.
          (2) The last sentence of section 1816(c)(1) (42 
        U.S.C. 1395h(c)(1)) is amended by striking ``or 
        renewing''.
          (3) Section 1816(f)(1) (42 U.S.C. 1395h(f)(1)) is 
        amended by striking ``, renew, or terminate'' and ``, 
        whether the Secretary should assign or reassign a 
        provider of services to an agency or organization,''.
          (4) Section 1816(g) (42 U.S.C. 1395h(g)) is repealed.
          (5) The last sentence of section 1842(b)(2)(A) (42 
        U.S.C. 1395u(b)(2)(A)) is amended by striking ``or 
        renewing''.
          (6) Section 1842(b) (42 U.S.C. 1395u(b)) is amended 
        by striking paragraph (5).
    (d) Repeal of Fiscal Intermediary Requirements That Are Not 
Cost-Effective.--Section 1816(f)(2) (42 U.S.C. 1395h(f)(2)) is 
amended to read as follows:
    ``(2) The contract performance requirements developed under 
paragraph (1) shall include, with respect to claims for 
services furnished under this part by any provider of services 
other than a hospital, whether such agency or organization is 
able to process 75 percent of reconsiderations within 60 days 
and 90 percent of reconsiderations within 90 days.''.
    (e) Repeal of Cost Reimbursement Requirements.--
          (1) The first sentence of section 1816(c)(1) (42 
        U.S.C. 1395h(c)(1)) is amended--
                  (A) by striking the comma after 
                ``appropriate'' and inserting ``and'', and
                  (B) by striking everything after ``subsection 
                (a)'' up to the period.
          (2) Section 1816(c)(1) (42 U.S.C. 1395h(c)(1)) is 
        further amended by striking the second and third 
        sentences.
          (3) The first sentence of section 1842(c)(1)(A) (42 
        U.S.C. 1395u(c)(1)(A)) is amended--
                  (A) by striking ``shall provide'' the first 
                place it occurs and inserting ``may provide'', 
                and
                  (B) by striking everything after ``this 
                part'' up to the period.
          (4) Section 1842(c)(1) (42 U.S.C. 1395u(c)(1)) is 
        further amended by striking the remaining sentences.
          (5) Section 2326(a) of the Deficit Reduction Act of 
        1984 (42 U.S.C. 1395h nt) is repealed.
    (f) Competition Required for New Contracts and In Cases of 
Poor Performance.--
          (1) Section 1816(c) (42 U.S.C. 1395h(c)) is amended 
        by adding at the end the following:
    ``(4)(A) A contract with a fiscal intermediary under this 
section may be renewed from term to term without regard to any 
provision of law requiring competition if the fiscal 
intermediary has met or exceeded the performance requirements 
established in the current contract.
    ``(B) Functions may be transferred among fiscal 
intermediaries without regard to any provision of law requiring 
competition.''.
          (2) Section 1842(b) (42 U.S.C. 1395u(b)) is amended 
        by striking everything before paragraph (2) and 
        inserting the following:
    ``(b)(1)(A) A contract with a carrier under subsection (a) 
may be renewed from term to term without regard to any 
provision of law requiring competition if the carrier has met 
or exceeded the performance requirements established in the 
current contract.
    ``(B) Functions may be transferred among carriers without 
regard to any provision of law requiring competition.''.
    (g) Waiver of Competitive Requirements for Initial 
Contracts.--
          (1) Contracts whose periods begin during the one year 
        period that begins on the first day of the fourth 
        calendar month that begins after the date of enactment 
        of this Act may be entered into under section 1816(a) 
        of the Social Security Act (42 U.S.C. 1395h(a)) without 
        regard to any provision of law requiring competition.
          (2) The amendments made by subsection (f) apply to 
        contracts whose periods begin after the end of the one 
        year period specified in paragraph (1) of this 
        subsection.
    (h) Effective Dates.--
          (1) The amendments made by subsection (c) apply to 
        contracts whose periods end at, or after, the end of 
        the third calendar month that begins after the date of 
        enactment of this Act.
          (2) The amendments made by subsections (a), (b), (d), 
        and (e) apply to contracts whose periods begin after 
        the third calendar month that begins after the date of 
        enactment of this Act.

          Subpart C--Provisions Relating to Part B of Medicare

SEC. 11461. REPLACEMENT OF REASONABLE CHARGE METHODOLOGY BY FEE 
                    SCHEDULES.

    (a) In General.--The matter in section 1833(a)(1) (42 
U.S.C. 13951(a)(1)) preceding clause (A) is amended by striking 
``the reasonable charges for the services'' and inserting ``the 
lesser of the actual charges for the services and the amounts 
determined by the applicable fee schedules developed by the 
Secretary for the particular services''.
    (b) Conforming Amendments.--
          (1) Section 1833(a)(1) (42 U.S.C. 1395l(a)(1)) is 
        amended--
                  (A) in clause (A), by striking ``reasonable 
                charges for'' and inserting ``payment bases 
                otherwise applicable to'',
                  (B) in clause (B), by striking ``reasonable 
                charges'' and inserting ``fee schedule 
                amounts'', and
                  (C) by inserting after clause (F) the 
                following: ``(G) with respect to services 
                described in clause (i), (ii), or (iv) of 
                section 1861(s)(2)(K) (relating to physician 
                assistants and nurse practitioners), the 
                amounts paid shall be 80 percent of the lesser 
                of the actual charge for the services and the 
                applicable amount determined under subclause 
                (I) of (II) of section 1842(b)(12)(A)(ii),''.
          (2) Section 1833(a)(2) (42 U.S.C. 1395l(a)(2)) is 
        amended--
                  (A) in the matter in subparagraph (B) 
                preceding clause (i), by striking ``(C), (D),'' 
                and inserting ``(D),'' and
                  (B) by striking subparagraph (C).
          (3) Section 1833(l) (42 U.S.C. 1395l(l)) is amended--
                  (A) in paragraph (3)--
                          (i) by striking subparagraph (B), and
                          (ii) by striking ``(3)(A)'' and 
                        inserting ``(3)'', and
                  (B) by striking paragraph (6).
          (4) The heading to section 1834(g)(1)(A)(ii) (42 
        U.S.C. 1395m(g)(1)(A)(ii)) is amended by striking 
        ``Reasonable charges for professional'' and inserting 
        ``Professional''.
          (5) Section 1842(a) (42 U.S.C. 1395u(a)) is amended--
                  (A) in the matter preceding paragraph (1), by 
                striking ``reasonable charge'' and inserting 
                ``fee schedule'', and
                  (B) in paragraph (1)(A), by striking 
                ``reasonable charge'' and inserting ``other''.
          (6)(A) The matter preceding clause (i) in 
        subparagraph (B) of the first sentence of section 
        1842(b)(3) (42 U.S.C. 1395u(b)(3)) is amended by 
        striking everything after ``assure that,'' and 
        inserting the following: ``where payment under this 
        part for a service is on a basis other than a cost 
        basis, such payment will (except as otherwise provided 
        in section 1870(f)) be made--''.
          (B) Subparagraph (B)(ii)(I) of the first sentence of 
        section 1842(b)(3) (42 U.S.C. 1395u(b)(3)) is amended 
        to read as follows: ``(I) the amount determined by the 
        applicable payment basis under this part is the full 
        charge for the service,''.
          (C) Section 1842(b)(3) (42 U.S.C. 1395u(b)(3)) is 
        amended by striking the second, third, fourth, fifth, 
        sixth, eight, and ninth sentences.
          (7)(A) Section 1842(b)(4) (42 U.S.C. 1395u(b)(4)) is 
        amended to read as follows:
          ``(4) In the case of an enteral or parenteral pump 
        that is furnished on a rental basis during a period of 
        medical need--
                  ``(A) monthly rental payments shall not be 
                made under this part for more than 15 months 
                during that period, and
                  ``(B) after monthly rental payments have been 
                made for 15 months during that period, payment 
                under this part shall be made for maintenance 
                and servicing of the pump is such amounts as 
                the Secretary determines to be reasonable and 
                necessary to ensure the proper operation of the 
                pump.''.
          (B) Section 6112(b) (42 U.S.C. 1395m nt) of the 
        Omnibus Reconciliation Act of 1989 is repealed.
          (8) Section 1842(b)(7) (42 U.S.C. 1395u(b)(7)) is 
        amended--
                  (A) in the matter in subparagraph (D)(i) 
                preceding subclause (I), by striking ``, to the 
                extent that such payment is otherwise allowed 
                under this paragraph,'',
                  (B) in subparagraph (D)(ii), by striking 
                ``subparagraph'' and inserting ``paragraph'',
                  (C) by striking ``(7)(A) In the case of'' 
                through the end of subparagraph (C).
                  (D) by striking ``(D)(i)'' and inserting 
                ``(7)(A)'',
                  (E) by redesignating clauses (ii) and (iii) 
                as subparagraphs (B) and (C), respectively, and
                  (F) by redesignating subclauses (I), (II), 
                and (III), of subparagraph (A) (as redesignated 
                by subparagraph (D) of this paragraph) as 
                clauses (i), (ii), and (iii), respectively.
          (9)(A) Section 1842(b) (42 U.S.C. 1395u(b)) is 
        amended by striking paragraphs (8) and (9).
          (B) The first sentence of section 1834(a)(10)(B) (42 
        U.S.C. 1395m(a)(10(B)) is amended by striking 
        everything after ``is authorized to'' up to the period 
        and inserting the following: ``describe by regulation 
        the factors to be used in determining the cases (of 
        particular items) in which the application of this 
        subsection results in the determination of an amount 
        that, by reason of its being grossly excessive or 
        grossly deficient, is not inherently reasonable, and to 
        provide in those cases for the factors that will be 
        considered in establishing an amount that is realistic 
        and equitable''.
          (10) Section 1842(b)(10) (42 U.S.C. 1395u(b)(10)) is 
        repealed.
          (11) Section 1842(b)(11) (42 U.S.C. 1395u(b)(11)) is 
        amended--
                  (A) by striking subparagraphs (B) through 
                (D),
                   (B) by striking ``(11)(A)'' and inserting 
                ``(11)'', and
                  (C) by redesignating clauses (i) and (ii) as 
                subparagraphs (A) and (B), respectively.
          (12) Section 1842(b)(12)(A)(ii) (42 U.S.C. 
        1395u(b)(12)(A)(ii) is amended--
                  (A) in the matter preceding subclause (I), by 
                striking ``prevailing charges determined under 
                paragraph (3)'' and inserting ``the amounts 
                determined under section 1833(a)(1)(G)'', and
                  (B) in subclause (II), by striking 
                ``prevailing charge rate'' and all that follows 
                up to the period and inserting ``fee schedule 
                amount specified in section 1848 for such 
                services performed by physicians''.
          (13) Paragraphs (14) through (17) of section 1842(b) 
        (42 U.S.C. 1395u(b)) are repealed.
          (14)(A) Section 1842(b)(18)(A) (42 U.S.C. 
        1395u(b)(18)(A)) is amended by striking ``reasonable 
        charge or''.
          (B) Paragraph (18) of section 1842(b) (42 U.S.C. 
        1395u(b)) is renumbered as paragraph (14).
          (15)(A) The matter in section 1842(j) (42 U.S.C. 
        1395u(j)) preceding paragraph (2) is amended to read as 
        follows:
    ``(j)(1) See subsections (k), (l), (m), (n), and (p) as to 
the cases in which sanctions may be applied under paragraph 
(2).''.
          (B) Section 1842(j)(4) (42 U.S.C. 1395u(j)(4)) is 
        amended by striking ``under paragraph (1)''.
          (16) Section 1842(n)(1)(A) (42 U.S.C. 1395u(n)(1)(A)) 
        is amended by striking ``reasonable charge (or other 
        applicable limit)'' and inserting ``other applicable 
        limit''.
          (17) Section 1842(q) 42 U.S.C. 1395u(q) is amended--
                  (A) by striking paragraph (1)(B), and
                  (B) by striking ``(q)(1)(A)'' and inserting 
                ``(q)(1)''.
          (18) Section 1845(b)(1) (42 U.S.C. 1395w-1(b)(1) is 
        amended by striking ``adjustments to the reasonable 
        charge levels for physicians' services recognized under 
        section 1842(b) and''.
          (19) Section 1848(i)(3) (42 U.S.C. 1395w-4(i)(3)) is 
        repealed.
          (20) Clause (ii) of the first sentence of section 
        1866(a)2)(A) (42 U.S.C. 1395cc(a)(2)(A) is amended by 
        striking ``reasonable charges'' through ``provider)'' 
        and inserting ``amount customarily charged for such 
        items and services by such provider''.
          (21) Section 1881(b)(3)(A) (42 U.S.C. 
        1395rr(b)(3)(A)) is amended by striking ``a reasonable 
        charge'' through ``section 1848)'' and inserting ``the 
        basis described in section 1848''.
          (22) Section 9340 of the Omnibus Budget 
        Reconciliation Act of 1986 (42 U.S.C. 1395u nt) is 
        repealed.
    (c) Effective Dates.--The amendments made by the preceding 
subsections, to the extent they substitute fee schedules for 
reasonable charges, apply to particular services as of the date 
specified by the Secretary of Health and Human Services.
    (d) Initial Budget Neutrality.--The Secretary, in 
developing a fee schedule for particular services (under the 
amendments made by subsections (a) and (b)), shall set amounts 
for the first year period to which the fee schedule applies at 
a level such that the total payments under title XVIII of the 
Social Security Act (42 U.S.C. 1395 et seq.) for those services 
for that year period shall be approximately equal to the 
estimated total payments if those amendments had not been made.

SEC. 11462. APPLICATION OF INHERENT REASONABLENESS TO SURGICAL 
                    DRESSINGS.

    Section 1834(i) (42 U.S.C. 1395m(i)) is amended by adding 
at the end the following:
          ``(3) Adjustment for inherent reasonableness.--The 
        provisions of subsection (a)(10)(B) shall also apply to 
        surgical dressings.''.

SEC. 11463. APPLICATION OF COMPETITIVE ACQUISITION PROCESS TO CERTAIN 
                    PART B ITEMS AND SERVICES.

    (a) General Rule.--Part B of title XVIII (42 U.S.C. 1395j 
et seq.) is amended by inserting after section 1846 the 
following:

            ``COMPETITIVE ACQUISITION OF ITEMS AND SERVICES

    ``Sec. 1847. (a) Establishment of Bidding Areas.--
          ``(1) In general.--The Secretary shall establish 
        competitive acquisition areas for the purposes of 
        awarding contracts for the furnishing under this part 
        of the items and services described in subsection (c) 
        after 1995. The Secretary may establish different 
        competitive acquisition areas under this subsection for 
        different classes of items and services under this 
        part.
          ``(2) Criteria for establishment.--The competitive 
        acquisition areas established under paragraph (1) 
        shall--
                  ``(A) initially be, or be within, 
                metropolitan statistical areas, and
                  ``(B) be chosen based on the availability and 
                accessibility of entities able to furnish items 
                and services, and the probable savings to be 
                realized by the use of competitive bidding in 
                the furnishing of items and services in the 
                area.
    ``(b) Awarding of Contracts in Areas.--
          ``(1) In general.--The Secretary shall conduct a 
        competition among individuals and entities supplying 
        items and services under this part for each competitive 
        acquisition area established under subsection (a) for 
        each class of items and services.
          ``(2) Conditions for awarding contract.--The 
        Secretary may not award a contract to any entity under 
        the competition conducted pursuant to paragraph (1) to 
        furnish an item or service under this part unless the 
        Secretary finds that the entity meets quality standards 
        specified by the Secretary for the furnishing of the 
        item or service.
          ``(3) Contents of contract.--A contract entered into 
        with an entity under the competition conducted pursuant 
        to paragraph (1) shall specify (for all of the items 
        and services within a class)--
                  ``(A) the quantity of items and services the 
                entity shall provide; and
                  ``(B) such other terms and conditions as the 
                Secretary may require.
    ``(c) Services Described.--The items and services to which 
the provisions of this section shall apply are as follows:
          ``(1) Magnetic resonance imaging tests and 
        computerized axial tomography scans, including 
        physician's interpretation of the results of such tests 
        and scans.
          ``(2) Enteral and parenteral nutrients, supplies, and 
        equipment.
          ``(3) Such other items as the Secretary may 
        specify.''.
    (b) Items and Services To Be Furnished Only Through 
Competitive Acquisition.--Section 1862(a) (42 U.S.C. 1395y(a)) 
is amended--
          (1) by striking ``or'' at the end of paragraph (14),
          (2) by striking the period at the end of paragraph 
        (15) and inserting ``; or'', and
          (3) by inserting after paragraph (15) the following:
          ``(16) where such expenses are for an item or service 
        furnished in a competitive acquisition area (as 
        established by the Secretary under section 1847(a)) by 
        an entity other than an entity with which the Secretary 
        has entered into a contract under section 1847(b) for 
        the furnishing of such an item or service in that area, 
        unless the Secretary finds that such expenses were 
        incurred in a case of urgent need.''.
    (c) Reduction in Payment Amounts if Competitive Acquisition 
Fails To Achieve Minimum Reduction in Payments.--
Notwithstanding any provision of title XVIII of the Social 
Security Act (42 U.S.C. 1395 et seq.), if the establishment of 
competitive acquisition areas under section 1847 of that Act 
(as added by this part) and the furnishing of items and 
services under that section during 1997 does not result in a 
reduction of at least 15 percent in the projected payment 
amounts that would apply to a class of items or services under 
part B of that title (42 U.S.C. 1395j et seq.) if that class of 
items or services were not to be furnished under that section 
1997, the Secretary shall reduce for that year the payment 
amounts for that class of items and services by the percentage 
the Secretary determines necessary to result in that reduction 
for that year (and those reduced amounts shall be considered 
the full payment amounts for that year in calculating payment 
amounts for future years).
    (d) Effective Date.--The amendments made by subsections (a) 
and (b) apply to items and services furnished under part B of 
title XVIII of the Social Security Act (42 U.S.C. 1395j et 
seq.) after 1995.

SEC. 11464. APPLICATION OF COMPETITIVE ACQUISITION PROCESS TO 
                    LABORATORY SERVICES.

    (a) In General.--Section 1847(c), as added by section 
11463(a) of this Act, is amended by renumbering paragraph (4) 
as (5) and inserting after paragraph (3) the following:
          ``(4) Clinical diagnostic laboratory tests.''.
    (b) Reduction in Payment Amounts if Competitive Acquisition 
Fails To Achieve Minimum Reduction in Payments.--See section 
11463(c) for provisions that address reductions in payment 
amounts.
    (c) Effective Date.--The amendment made by subsection (a) 
applies to tests furnished under part B of title XVIII of the 
Social Security Act (42 U.S.C. 1395j et seq.) after 1995.

SEC. 11465. CHANGES IN PAYMENTS FOR CLINICAL LABORATORY TESTS.

    (a) In General.--Section 1833(h)(2)(A)(iii) (42 U.S.C. 
1395l(h)(2)(A)(iii)) is amended--
          (1) by striking the clause designation ``(iii)'' and 
        inserting ``(iii)(I)'', and
          (2) by adding at the end the following:
    ``(II) In lieu of the fees established under subclause I, 
the Secretary may pay for tests classified as automated tests 
on the basis of a nationally uniform fee for a group of tests 
(of whatever number) performed together.
    ``(III) The Secretary shall pay for tests for amylase, 
apolipoprotein A, apolipoprotein B, creatine kinase, gamma 
glutamyl transferase, iron, lipase, magnesium, thyroxine, 
triglyceride, or triiodothyronine uptake on the same basis as 
the Secretary pays for other tests classified as automated 
tests.
    ``(IV) The Secretary may, from time to time, reclassify 
specific tests as automated or not automated, based on the 
volume of a test and the relative frequency by which the test 
is performed on automated equipment.''.
    (b) Effective Date and Initial Payment Levels.--
          (1) The amendments made by subsection (a) apply to 
        tests performed after 1995.
          (2) If the Secretary sets a nationally uniform fee 
        under subclause (II) of section 1833(h)(2)(A)(iii) of 
        the Social Security Act (42 U.S.C. 1395(h)(2)(A)(iii)), 
        such a fee shall be initially established so that 
        estimated aggregate payments under such fee shall equal 
        the estimated aggregate amounts that would otherwise 
        have been payable for the tests under subclause (I).

      Subpart D--Provisions Relating to Parts A and B of Medicare

SEC. 11471. DISCLOSURE OF TAXPAYER IDENTIFYING NUMBERS AND OTHER 
                    INFORMATION.

    (a) Providers of Services and Certain Other Entities.--
Section 1124 (42 U.S.C. 1320a-3) is amended by adding at the 
end of the following:
    ``(c) The Secretary may also require a disclosing entity to 
supply the Secretary with the taxpayer identifying number (TIN) 
of the disclosing entity, of any person concerning whom 
information is to be supplied under subsection (a), or of any 
other disclosing entity listed under subsection (b).''.
    (b) Entities That Furnish Items and Services Under Part 
B.--
          (1) Section 1124A(c)(1) (42 U.S.C. 1320a-3a(c)(1)) is 
        amended by striking ``on an assignment-related basis''.
          (2) Section 1124A(a) (42 U.S.C. 1320a-3a(a)) is 
        amended--
                  (A) by striking ``and'' at the end of 
                paragraph (1),
                  (B) by striking the period at the end of 
                paragraph (2) and adding ''; and'', and
                  (C) by adding at the end the following:
          ``(3) on the identity of each individual described in 
        section 1866(a)(1)(D).''.
          (3) Section 1124A (42 U.S.C. 1320a-3a) is amended--
                  (A) by redesignating subsection (c) as (d), 
                and
                  (B) by inserting after subsection (b) the 
                following:
    ``(d) The Secretary may also require a disclosing part B 
provider to provide the Secretary with the taxpayer identifying 
number (TIN) of the disclosing part B provider, of any person 
concerning whom information is to be supplied under subsection 
(a)(1), and of any managing employee or entity listed under 
subsection (a)(2).''.
    (c) Verification of TINs With the Secretary of the 
Treasury.--Section 6103(m) of the Internal Revenue Code of 1986 
(26 U.S.C. 6103(m)) is amended by adding at the end the 
following:
          ``(8) Individuals and other entities involved in 
        furnishing health care items and services under Federal 
        (or federally supported) programs.--Upon written 
        request by the Secretary of Health and Human Services, 
        the Secretary shall disclose to the Secretary of Health 
        and Human Services the name of each person or entity 
        whose TIN has been obtained under section 1124(c) or 
        1124A(d) of the Social Security Act.''.

SEC. 11472. USE OF WAGE INDEX FOR AREA IN WHICH HOME HEALTH SERVICES 
                    ARE FURNISHED.

    (a) In General.--Section 1861(v)(1)(L)(iii) (42 U.S.C. 
1395x(v)(1)(L)(iii)) is amended by striking ``the home health 
agency is located'' and inserting ``services are furnished''.
    (b) Effective Date.--The amendment made by subsection (a) 
applies to services furnished after 1996.

                     Changes to Administration Bill

    (1) SNF PPS (Section 11113): Advance effective date by one 
year to October 1, 1997. Interim PPS contained in Section 11112 
would apply between October 1, 1996 and September 30, 1997.
    (2) Medical Education (Section 11105): Delete all but 
subsections (a)(1) and (b)(1). The only thing that remains is 
the freeze on interns and residents at the hospital-specific 
level in the aggregate and for non-primary care slots, for both 
Medicare IME and GME payments. Plus the 2 proposals on the 
attached sheet.
    (3) AAPCC Add-Ons (Section 11115): Change subsection (c) 
(new section 1886(d)(11)(F)) to payback of 100 percent of IME, 
GME and DSH (rather than 75 percent), effective 1/1/98. See 
change in removal of add-ons in managed care section.
    (4) Oxygen (Section 11126): Delete Section 11126 from 
Administration bill. Substitute Section 8233 from H.R. 2530 
(the Coalition bill).
    (5) Rural Provisions: Keep Section 11116 (Sole Community 
Hospitals) and Section 11117 (Rural Primary Care Hospital 
Program). Add Section 7021 (Rural Referral Center), Section 
7024 (PA/NP), Section 7025 (Telemedicine). Section 7026 (Rural 
Health Outreach Grants), Section 7028 (DSH threshold) from the 
Senate Democratic Plan (printed in the Congressional Record on 
Nov. 1).
    (6) Managed Care: See attachment.
    (7) Preventive benefits demonstration program sunsets in 
2001 unless the Secretary determines these benefits are cost-
effective.

                        Additional GMF proposals

    Medical Education: Add provision from Administration 
package to allow hospitals to count residents in non-hospital 
settings for purposes of their IME adjustment as long as their 
resident-to-bed ratio does not increase, effective 7/1/96.
    Medical Education: Add provision from Administration 
package to allow DGME payments to be made to certain non-
hospital settings when the non-hospital is paying for the 
resident's salary in that setting, effective 7/1/96.
    (c) Upgraded Durable Medical Equipment.--Section 1834(a) 
(42 U.S.C. 1395m(a)) is amended by inserting after paragraph 
(15) the following new paragraph:
          ``(16) Certain upgraded items.--
                  ``(A) Individual's right to choose upgraded 
                item.--Notwithstanding any other provision of 
                law, effective on the date on which the 
                Secretary issues regulations under subparagraph 
                (C), an individual may purchase or rent from a 
                supplier an item of upgraded durable medical 
                equipment for which payment would be made under 
                this subsection if the item were a standard 
                item.
                  ``(B) Payments to supplier.--In the case of 
                the purchase or rental of an upgraded item 
                under subparagraph (A)--
                          ``(i) the supplier shall receive 
                        payment under this subsection with 
                        respect to such item as if such item 
                        were a standard item; and
                          ``(ii) the individual purchasing or 
                        renting the item shall pay the supplier 
                        an amount equal to the difference 
                        between the supplier's charge and the 
                        amount under clause (i).
                In no event may the supplier's charge for an 
                upgraded item exceed the applicable fee 
                schedule amount (if any) for such item.
                  ``(C) Consumer protection safeguards.--The 
                Secretary shall issue regulations providing for 
                consumer protection standards with respect to 
                the furnishing of upgraded equipment under 
                subparagraph (A). Such regulations shall 
                provide for--
                          ``(i) determination of fair market 
                        prices with respect to an upgraded 
                        item;
                          ``(ii) full disclosure of the 
                        availability and price of standard 
                        items and proof of receipt of such 
                        disclosure information by the 
                        beneficiary before the furnishing of 
                        the upgraded item;
                          ``(iii) conditions of participation 
                        for suppliers in the simplified billing 
                        arrangement;
                          ``(iv) sanctions of suppliers who are 
                        determined to engage in coercive or 
                        abusive practices, including exclusion; 
                        and
                          ``(v) such other safeguards as the 
                        Secretary determines are necessary.''.

    OTHER MEDICARE CHANGES TO ADMINISTRATION'S ORIGINAL PLAN CHOICES

    Expanded Secretarial discretion over 50/50 and minimum 
enrollment: The Administration bill would establish minimum 
enrollment requirements of 5,000 members in urban areas and 
1,500 members in rural areas, and maintain the 50/50 enrollment 
composition requirement in urban and rural areas, counting 
members for whom the entity is ``substantially at risk''. The 
50/50 requirement could be waived in certain situations.
    This change would give the Secretary authority to contract 
with organizations not meeting either the initial enrollment or 
the 50/50 requirements, subject to: (1) an evaluation that the 
entity has as the ability to manage risk; (2) capacity limits 
imposed by the Secretary; (3) meeting appropriate financial 
solvency requirements; and (4) a higher level of monitoring.
    Secretarial authority to contract out with entities: 
Eligible health plans would include those specified in the 
Administration bill, with the addition of an ``other'' category 
for new types of plans that meet specified standards. The 
Secretary would retain discretion as to which plans could 
contract with Medicare.
    Nurses and PSO issue: The Administration bill limits who 
can establish PSOs to various mixtures of physicians and/or 
hospitals. This change would treat nurse practioners on a par 
with physicians for purposes of creating PSOs.

                                BENEFITS

    Barium enemas with sigmoidoscopy for high risk 
beneficiaries: The Administration bill would cover colonoscopy 
for beneficiaries at high risk of colon cancer. Under this 
change, Medicare would cover either (1) a colonoscopy or (2) a 
combination of a flexible sigmoidoscopy and an air contrast 
barium enema. The original estimate for the complete colon 
screening benefit was $1.1 billion; the original proposal was 
repriced, based on new information, at $1.365 billion. The 
total cost estimate, including this change, is $1.355 billion, 
or estimated lower costs of $10 million over 7 years. (The 
combination of sigmoidoscopy and air contrast barium enema cost 
slightly less than colonoscopy.) Because HCFA expects a small 
net savings, we do not anticipate this change would affect 
CBO's estimate.

                           REGULATORY REFORM

    CLIA compromise: The ``Blue Dog'' proposal would exempt all 
physician office laboratories (POLs) from CLIA requirements, 
except when they perform Pap smear tests. An identical 
provision was deleted under the Byrd rule from the 
Reconciliation Bill. This provision would leave a majority of 
the nation's labs with no quality oversight at all. Various 
compromise proposals for reducing CLIA burdens on POLs have 
been discussed on Capitol Hill. One such compromise, drafted by 
Democrats on the House Commerce Committee, would (1) remove the 
requirement of biennial laboratory inspections, allowing as-
needed inspections based on criteria set by the Secretary; (2) 
mandate that all routine inspections be announced; and (3) 
reduce application requirements for CLIA certificates and 
remove biennial re-application requirements. This change would 
reduce burdens related to inspections and paperwork without 
compromising the quality of laboratory testing.
    Self-referral compensation exception: The Administration 
bill includes no provision in this area; the Reconciliation 
Bill would substantially weaken current protections.
    This change, modeled after Mr. Stark's bill, would:
    1. Add exceptions for shared facility services and for 
capitated payments (if designated health services are 
included).
    2. Entirely exclude intraocular lens, eyeglasses, and 
contact lenses from designated health services subject to 
prohibitions.
    3. Include DME and parenteral and enteral nutrients, 
equipment and supplies in the exception for in-office ancillary 
services.
    4. Delineate the requirements for permissible compensation 
arrangements, thus making the requirements uniform for all 
arrangements.
    5. Repeal the exception for physicians' services.
    The ``General Exceptions to both Ownership and Compensation 
Arrangement Prohibitions'' would then be: (1) shared facility 
services (new); (2) in-office ancillary services (including 
DME, parenteral and enteral nutrients, equipment, and supplies) 
(altered); (3) pre-paid plans (unchanged); (4) capitated 
payments (new); and (5) other permissible exceptions 
(unchanged).

                                 Other

    OPD/PPS: Add a PPS for OPDs. In particular, in FY 2002, 
establish a PPS that would be budget neutral relative to what 
Medicare payments would have been in 2002 and also budget 
neutral relative to what total beneficiary coinsurance would 
have been in 2002.
    Hospice: Under current law, hospice care is excepted from 
the package of services provided by risk plans. If 
beneficiaries elect hospice care, Medicare makes payments 
directly to the hospice, and the HMOs and CMPs receive the full 
monthly capitation amount (less an amount paid to the hospice 
for attending physician services). Thus, hospices are not 
required to contract directly with HMOs and CMPs. This 
technical change would retain the current provision under the 
new authority for Medicare managed care contracting.
    SNF minimum data set: This change would require the 
continuation of standardized resident assessments contained in 
the minimum data set (MDS). The MDS data is necessary for 
developing a case-mix adjustor for a SNF PPS, proposed 
elsewhere in the bills. Current Congressional proposals 
eliminate the requirement that this data be collected by 
eliminating certain nursing home quality standards.
    Home health agency data for case mix system: This change 
would allow the Secretary to mandate the collection of data 
that may be necessary to develop a case mix adjustor for HH 
PPS. There is currently no requirement that such data be 
collected.
    Rural Primary Care Hospital Program (Sec. 11117 in 
President's bill)
    (1) Sen. Baucus is seeking an extension of the MAF 
demonstration project until 2002, such as the one that was 
included in the Conference Agreement. Since our Rural Primary 
Care Hospital (RPCH) expansion proposal makes RPCHs much more 
similar to MAFs in all key aspects, we suggest grandfathering 
all MAFs as RPCHs as of the date of implementation of the 
national program. This would effectively make all MAFs 
permanent, so that extensions of the MAF demonstration would no 
longer be necessary.
    Centers of excellence: This change would replace the term 
``rebates'' with ``beneficiary incentives.''

                        TITLE V--WELFARE REFORM

SEC. 9000. AMENDMENT OF THE SOCIAL SECURITY ACT.

  Except as otherwise expressly provided, wherever in this 
title an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the 
reference shall be considered to be made to a section or other 
provision of the Social Security Act.

              Subtitle A--Temporary Employment Assistance

SEC. 9101. STATE PLAN.

  (a) In General.--Title IV (42 U.S.C. 601 et seq.) is amended 
by striking part A and inserting the following:

               ``Part A--Temporary Employment Assistance

``SEC. 400. APPROPRIATION.

  ``For the purpose of providing assistance to families with 
needy children and assisting parents of children in such 
families to obtain and retain private sector work to the extent 
possible, and public sector or volunteer work if necessary, 
through the Work First Employment Block Grant program 
(hereafter in this title referred to as the `Work First 
program'), there is hereby authorized to be appropriated, and 
is hereby appropriated, for each fiscal year a sum sufficient 
to carry out the purposes of this part. The sums made available 
under this section shall be used for making payments to States 
which have approved State plans for temporary employment 
assistance.

      ``Subpart 1--State Plans for Temporary Employment Assistance

``SEC. 401. ELEMENTS OF STATE PLANS.

  ``A State plan for temporary employment assistance shall 
provide a description of the State program which carries out 
the purpose described in section 400 and shall meet the 
requirements of the following sections of this subpart.

``SEC. 402. FAMILY ELIGIBILITY FOR TEMPORARY EMPLOYMENT ASSISTANCE.

  ``(a) In General.--The State plan shall provide that any 
family--
          ``(1) with 1 or more children (or any expectant 
        family, at the option of the State), defined as needy 
        by the State; and
          ``(2) which fulfills the conditions set forth in 
        subsection (b),
shall be eligible for cash assistance under the plan, except as 
otherwise provided under this part.
  ``(b) Individual Responsibility Plan.--The State plan shall 
provide that not later than 30 days after the approval of the 
application for temporary employment assistance, a parent 
qualifying for assistance shall execute an individual 
responsibility plan as described in section 403. If a child 
otherwise eligible for assistance under this part is residing 
with a relative other than a parent, the State plan may require 
the relative to execute such a plan as a condition of the 
family receiving such assistance.
  ``(c) Limitations on Eligibility.--
          ``(1) Length of time.--
                  ``(A) In general.--Except as provided in 
                subparagraphs (B), (C), (D), and (E), the State 
                plan shall provide that the family of an 
                individual who, after attaining age 18 years 
                (or age 19 years, at the option of the State), 
                has received assistance under the plan for 60 
                months, shall no longer be eligible for cash 
                assistance under the plan.
                  ``(B) Hardship exception.--With respect to 
                any family, the State plan shall not include in 
                the determination of the 60-month period under 
                subparagraph (A) any month in which--
                          ``(i) at the option of the State, the 
                        family includes an individual working 
                        20 hours per week (or more, at the 
                        option of the State);
                          ``(ii) the family resides in an area 
                        with an unemployment rate exceeding 8 
                        percent; or
                          ``(iii) the family is experiencing 
                        other special hardship circumstances 
                        which make it appropriate for the State 
                        to provide an exemption for such month, 
                        except that the total number of 
                        exemptions under this clause for any 
                        month shall not exceed 15 percent of 
                        the number of families to which the 
                        State is providing assistance under the 
                        plan.
                  ``(C) Exception for teen parents.--With 
                respect to any family, the State plan shall not 
                include in the determination of the 60-month 
                period under subparagraph (A) any month in 
                which the parent--
                          ``(i) is under age 18 (or age 19, at 
                        the option of the State); and
                          ``(ii) is making satisfactory 
                        progress while attending high school or 
                        an alternative technical preparation 
                        school.
                  ``(D) Exception for individuals exempt from 
                work requirements.--With respect to any family, 
                the State plan shall not include in the 
                determination of the 60-month period under 
                subparagraph (A) any month in which 1 or each 
                of the parents--
                          ``(i) is seriously ill, 
                        incapacitated, or of advanced age;
                          ``(ii)(I) except for a child 
                        described in subclause (II), is 
                        responsible for a child under age 1 
                        year (or age 6 months, at the option of 
                        the State), or
                          ``(II) in the case of a second or 
                        subsequent child born during such 
                        period, is responsible for a child 
                        under age 3 months;
                          ``(iii) is pregnant in the third 
                        trimester; or
                          ``(iv) is caring for a family member 
                        who is ill or incapacitated.
                  ``(E) Exception for child-only cases.--With 
                respect to any child who has not attained age 
                18 (or age 19, at the option of the State) and 
                who is eligible for assistance under this part, 
                but not as a member of a family otherwise 
                eligible for assistance under this part 
                (determined without regard to this paragraph), 
                the State plan shall not include in the 
                determination of the 60-month period under 
                subparagraph (A) any month in which such child 
                has not attained such age.
                  ``(F) Other program eligibility.--The State 
                plan shall provide that if a family is no 
                longer eligible for cash assistance under the 
                plan due to the imposition of the 60-month 
                period under subparagraph (A) or due to the 
                imposition of a penalty under subparagraph 
                (A)(ii) or (B)(ii) of section 403(e)(1)--
                          ``(i) for purposes of determining 
                        eligibility for any other Federal or 
                        federally assisted program based on 
                        need, such family shall continue to be 
                        considered eligible for such cash 
                        assistance;
                          ``(ii) for purposes of determining 
                        the amount of assistance under any 
                        other Federal or federally assisted 
                        program based on need, such family 
                        shall continue to be considered 
                        receiving such cash assistance; and
                          ``(iii) the State may, at the option 
                        of the State, after having assessed the 
                        needs of the child or children of the 
                        family, provide for such needs with a 
                        voucher for such family--
                                  ``(I) determined on the same 
                                basis as the State would 
                                provide assistance under the 
                                State plan to such a family 
                                with 1 less individual,
                                  ``(II) designed appropriately 
                                to pay third parties for 
                                shelter, goods, and services 
                                received by the child or 
                                children, and
                                  ``(III) payable directly to 
                                such third parties.
          ``(2) Treatment of interstate migrants.--The State 
        plan may apply to a category of families the rules for 
        such category under a plan of another State approved 
        under this part, if a family in such category has moved 
        to the State from the other State and has resided in 
        the State for less than 12 months.
          ``(3) Individuals on old-age assistance or ssi 
        ineligible for temporary employment assistance.--The 
        State plan shall provide that no assistance shall be 
        furnished any individual under the plan with respect to 
        any period with respect to which such individual is 
        receiving old-age assistance under the State plan 
        approved under section 102 of title I or supplemental 
        security income under title XVI.
          ``(4) Children for whom federal, state, or local 
        foster care maintenance or adoption assistance payments 
        are made.--A child with respect to whom foster care 
        maintenance payments or adoption assistance payments 
        are made under part E or under State or local law shall 
        not, for the period for which such payments are made, 
        be regarded as a needy child under this part, and such 
        child's income and resources shall be disregarded in 
        determining the eligibility of the family of such child 
        for temporary employment assistance.
          ``(5) Denial of assistance for 10 years to a person 
        found to have fraudulently misrepresented residence in 
        order to obtain assistance in 2 or more states.--The 
        State plan shall provide that no assistance will be 
        furnished any individual under the plan during the 10-
        year period that begins on the date the individual is 
        convicted in Federal or State court of having made, a 
        fraudulent statement or representation with respect to 
        the place of residence of the individual in order to 
        receive benefits or services simultaneously from 2 or 
        more States under programs that are funded under this 
        part, title XIX, or the Food Stamp Act of 1977, or 
        benefits in 2 or more States under the supplemental 
        security income program under title XVI.
          ``(6) Denial of assistance for fugitive felons and 
        probation and parole violators.--
                  ``(A) In general.--The State plan shall 
                provide that no assistance will be furnished 
                any individual under the plan for any period if 
                during such period the State agency has 
                knowledge that such individual is--
                          ``(i) fleeing to avoid prosecution, 
                        or custody or confinement after 
                        conviction, under the laws of the place 
                        from which the individual flees, for a 
                        crime, or an attempt to commit a crime, 
                        which is a felony under the laws of the 
                        place from which the individual flees, 
                        or which, in the case of the State of 
                        New Jersey, is a high misdemeanor under 
                        the laws of such State; or
                          ``(ii) violating a condition of 
                        probation or parole imposed under 
                        Federal or State law.
                  ``(B) Exchange of information with law 
                enforcement agencies.--Notwithstanding any 
                other provision of law, the State plan shall 
                provide that the State shall furnish any 
                Federal, State, or local law enforcement 
                officer, upon the request of the officer, with 
                the current address of any recipient of 
                assistance under the plan, if the officer 
                furnishes the agency with the name of the 
                recipient and notifies the agency that--
                          ``(i) such recipient--
                                  ``(I) is described in clause 
                                (i) or (ii) of subparagraph 
                                (A); or
                                  ``(II) has information that 
                                is necessary for the officer to 
                                conduct the officer's official 
                                duties; and
                          ``(ii) the location or apprehension 
                        of the recipient is within such 
                        officer's official duties.
  ``(d) Determination of Eligibility.--
          ``(1) Determination of need.--The State plan shall 
        provide that the State agency take into consideration 
        any income and resources of any individual the State 
        determines should be considered in determining the need 
        of the child or relative claiming temporary employment 
        assistance, subject to section 407.
          ``(2) Resource and income determination.--In 
        determining the total resources and income of the 
        family of any needy child, the State plan shall provide 
        the following:
                  ``(A) Resources.--The State's resource limit, 
                including a description of the policy 
                determined by the State regarding any exclusion 
                allowed for vehicles owned by family members, 
                resources set aside for future needs of a 
                child, individual development accounts, or 
                other policies established by the State to 
                encourage savings.
                  ``(B) Family income.--The extent to which 
                earned or unearned income is disregarded in 
                determining eligibility for, and amount of, 
                assistance.
                  ``(C) Child support.--The State's policy, if 
                any, for determining the extent to which child 
                support received in excess of $50 per month on 
                behalf of a member of the family is disregarded 
                in determining eligibility for, and the amount 
                of, assistance.
                  ``(D) Child's earnings.--The treatment of 
                earnings of a child living in the home.
                  ``(E) Earned income tax credit.--The State 
                agency shall disregard any refund of Federal 
                income taxes made to a family receiving 
                temporary employment assistance by reason of 
                section 32 of the Internal Revenue Code of 1986 
                (relating to earned income tax credit) and any 
                payment made to such a family by an employer 
                under section 3507 of such Code (relating to 
                advance payment of earned income credit).
          ``(3) Verification system.--The State plan shall 
        provide that information is requested and exchanged for 
        purposes of income and eligibility verification in 
        accordance with a State system which meets the 
        requirements of section 1137.

``SEC. 403. INDIVIDUAL RESPONSIBILITY PLAN.

  ``(a) Assessment.--The State agency responsible for 
administering the State plan shall make an initial assessment 
of the skills, prior work experience, and employability of each 
applicant for, or recipient of, assistance under the State plan 
who--
          ``(1) has attained 18 years of age; or
          ``(2) has not completed high school or obtained a 
        certificate of high school equivalency, and is not 
        attending secondary school.
  ``(b) Individual Responsibility Plans.--
          ``(1) In general.--On the basis of the assessment 
        made under subsection (a) with respect to an 
        individual, the State agency, in consultation with the 
        individual, shall develop an individual responsibility 
        plan for the individual, which--
                  ``(A) shall provide that participation by the 
                individual in job search activities shall be a 
                condition of eligibility for assistance under 
                the State plan approved under part A, except 
                during any period for which the individual is 
                employed full-time in an unsubsidized job in 
                the private sector;
                  ``(B) sets forth an employment goal for the 
                individual and a plan for moving the individual 
                immediately into private sector employment;
                  ``(C) sets forth the obligations of the 
                individual, which may include a requirement 
                that the individual attend school, maintain 
                certain grades and attendance, keep school age 
                children of the individual in school, immunize 
                children, attend parenting and money management 
                classes, or do other things that will help the 
                individual become and remain employed in the 
                private sector;
                  ``(D) may require that the individual enter 
                the State program established under part F, if 
                the caseworker determines that the individual 
                will need education, training, job placement 
                assistance, wage enhancement, or other services 
                to become employed in the private sector;
                  ``(E) shall provide that the individual 
                must--
                          ``(i) assign to the State any rights 
                        to support from any other person the 
                        individual may have in such 
                        individual's own behalf or in behalf of 
                        any other family member for whom the 
                        individual is applying for or receiving 
                        assistance; and
                          ``(ii) cooperate with the State--
                                  ``(I) in establishing the 
                                paternity of a child born out 
                                of wedlock with respect to whom 
                                assistance is claimed, and
                                  ``(II) in obtaining support 
                                payments for the individual and 
                                for a child with respect to 
                                whom such assistance is 
                                claimed, or in obtaining any 
                                other payments or property due 
                                the individual or the child,
                unless (in either case) the individual is found 
                to have good cause for refusing to cooperate as 
                determined by the State agency in accordance 
                with standards prescribed by the Secretary, 
                which standards shall take into consideration 
                the best interests of the child on whose behalf 
                assistance is claimed.
                  ``(F) to the greatest extent possible shall 
                be designed to move the individual into 
                whatever private sector employment the 
                individual is capable of handling as quickly as 
                possible, and to increase the responsibility 
                and amount of work the individual is to handle 
                over time;
                  ``(G) shall describe what services the State 
                will provide the individual so that the 
                individual will be able to obtain and keep 
                employment in the private sector, and describe 
                the job counseling and other services that will 
                be provided by the State; and
                  ``(H) at the option of the State, may require 
                the individual to undergo appropriate substance 
                abuse treatment.
          ``(2) Timing.--The State agency shall comply with 
        paragraph (1) with respect to an individual--
                  ``(A) within 90 days (or, at the option of 
                the State, 180 days) after the effective date 
                of this part, in the case of an individual who, 
                as of such effective date, is a recipient of 
                assistance under the State plan approved under 
                this part; or
                  ``(B) within 30 days (or, at the option of 
                the State, 90 days) after the individual is 
                determined to be eligible for such assistance, 
                in the case of any other individual.
  ``(c) Provision of Program and Employment Information.--The 
State shall inform all applicants for and recipients of 
assistance under the State plan approved under this part of all 
available services under the State plan for which they are 
eligible.
  ``(d) Requirement That Recipients Enter the Work First 
Program.--
          ``(1) In general.--Beginning with fiscal year 2004, 
        the State shall place recipients of assistance under 
        the State plan approved under this part, who have not 
        become employed in the private sector within 1 year 
        after signing an individual responsibility plan, in the 
        first available slot in the State program established 
        under part F, except as provided in paragraph (2).
          ``(2) Exceptions.--A state may not be required to 
        place a recipient of such assistance in the State 
        program established under part F if the recipient--
                  ``(A) is ill, incapacitated, or of advanced 
                age;
                  ``(B) has not attained 18 years of age;
                  ``(C) is caring for a child or parent who is 
                ill or incapacitated; or
                  ``(D) is enrolled in school or in educational 
                or training programs that will lead to private 
                sector employment.
  ``(e) Penalties.--
          ``(1) State not operating a work first or workfare 
        program.--In the case of a State that is not operating 
        a program under part F or G:
                  ``(A) Failure to comply with individual 
                responsibility plan or agreement of mutual 
                responsibility.--
                          ``(i) Progressive reductions in 
                        assistance for 1st and 2nd failures.--
                        The amount of assistance otherwise to 
                        be provided under the State plan 
                        approved under this part to a family 
                        that includes an individual who fails 
                        without good cause to comply with an 
                        individual responsibility plan (or, if 
                        the State has established a program 
                        under subpart 1 of part F and the 
                        individual is required to participate 
                        in the program, an agreement of mutual 
                        responsibility) signed by the 
                        individual (other than by reason of 
                        conduct described in paragraph (2)) 
                        shall be reduced by--
                                  ``(I) 33 percent for the 1st 
                                such act of noncompliance; or
                                  ``(II) 66 percent for the 2nd 
                                such act of noncompliance.
                          ``(ii) Denial of assistance for 3rd 
                        failure.--In the case of the 3rd such 
                        act of noncompliance, the family of 
                        which the individual is a member shall 
                        not thereafter be eligible for 
                        assistance under the State plan 
                        approved under this part.
                          ``(iii) Acts of noncompliance.--For 
                        purposes of this paragraph, a 1st act 
                        of noncompliance by an individual that 
                        continues for more than 1 calendar 
                        month shall be considered a 2nd act of 
                        noncompliance, and a 2nd act of 
                        noncompliance that continues for more 
                        than 3 calendar months shall be 
                        considered a 3rd act of noncompliance.
                  ``(B) Denial of assistance to adults refusing 
                to work, look for work, or accept a bona fide 
                offer of employment.--
                          ``(i) Refusal to work or look for 
                        work.--If an unemployed individual who 
                        has attained 18 years of age refuses to 
                        work or look for work--
                                  ``(I) in the case of the 1st 
                                such refusal, assistance under 
                                the State plan approved under 
                                this part shall not be payable 
                                with respect to the individual 
                                until the later of--
                                          ``(aa) a period of 
                                        not less than 6 months 
                                        after the date of the 
                                        first such refusal; or
                                          ``(bb) the first date 
                                        the individual agrees 
                                        to work or look for 
                                        work; or
                                  ``(II) in the case of the 2nd 
                                such refusal, the family of 
                                which the individual is a 
                                member shall not thereafter be 
                                eligible for assistance under 
                                the State plan approved under 
                                this part.
                          ``(ii) Refusal to accept a bona fide 
                        offer of employment.--If an unemployed 
                        individual who has attained 18 years of 
                        age refuses to accept a bona fide offer 
                        of employment, the family of which the 
                        individual is a member shall not 
                        thereafter be eligible for assistance 
                        under the State plan approved under 
                        this part.
          ``(2) Other states.--In the case of any other State, 
        the State shall reduce, by such amount as the State 
        considers appropriate, the amount of assistance 
        otherwise payable under the State plan approved under 
        this part to a family that includes an individual who 
        fails without good cause to comply with an individual 
        responsibility plan signed by the individual.

``SEC. 404. PAYMENT OF ASSISTANCE.

  ``(a) Standards of Assistance.--The State plan shall specify 
standards of assistance, including--
          ``(1) the composition of the unit for which 
        assistance will be provided;
          ``(2) a standard, expressed in money amounts, to be 
        used in determining the need of applicants and 
        recipients;
          ``(3) a standard, expressed in money amounts, to be 
        used in determining the amount of the assistance 
        payment; and
          ``(4) the methodology to be used in determining the 
        payment amount received by assistance units.
  ``(b) Level of Assistance.--Except as otherwise provided in 
this title, the State plan shall provide that--
          ``(1) the determination of need and the amount of 
        assistance for all applicants and recipients shall be 
        made on an objective and equitable basis; and
          ``(2) families of similar composition with similar 
        needs and circumstances shall be treated similarly.
  ``(c) Correction of Payments.--The State plan shall provide 
that the State agency will promptly take all necessary steps to 
correct any overpayment or underpayment of assistance under 
such plan, including the request for Federal tax refund 
intercepts as provided under section 416.
  ``(d) Optional Voluntary Diversion Program.--The State plan 
shall, at the option of the State, and in such part or parts of 
the State as the State may select, provide that--
          ``(1) upon the recommendation of the caseworker who 
        is handling the case of a family eligible for 
        assistance under the State plan, the State shall, in 
        lieu of any other assistance under the State plan to 
        the family during a time period of not more than 3 
        months, make a lump-sum payment to the family for the 
        time period in an amount not to exceed--
                  ``(A) the value of the monthly benefits that 
                would otherwise be provided to the family under 
                the State plan; multiplied by
                  ``(B) the number of months in the time 
                period;
          ``(2) a lump-sum payment pursuant to subparagraph (A) 
        shall not be made more than once to any family; and
          ``(3) if, during a time period for which the State 
        has made a lump-sum payment to a family pursuant to 
        subparagraph (A), the family applies for and (but for 
        the lump-sum payment) would be eligible under the State 
        plan for a monthly benefit that is greater than the 
        value of the monthly benefit which would have been 
        provided to the family under the State plan at the time 
        of the calculation of the lump sum payment, then, 
        notwithstanding subparagraph (A), the State shall, for 
        that part of the time period that remains after the 
        family becomes eligible for the greater monthly 
        benefit, provide monthly benefits to the family in an 
        amount not to exceed--
                  ``(A) the amount by which the value of the 
                greater monthly benefit exceeds the value of 
                the former monthly benefit, multiplied by the 
                number of months in the time period; divided by
                  ``(B) the whole number of months remaining in 
                the time period.

``SEC. 405. OTHER PROGRAMS.

  ``(a) Work First Program; Workfare or Job Placement Voucher 
Program.--The State plan shall provide that the State has in 
effect and operation--
          ``(1) a work first program that meets the 
        requirements of part F; and
          ``(2) a workfare program that meets the requirements 
        of part G, or a job placement voucher program that 
        meets the requirements of part H, but not both.
  ``(b) Provision of Positions and Vouchers.--The State plan 
shall provide that the State shall provide a position in the 
workfare program established by the State under part G, or a 
job placement voucher under the job placement voucher program 
established by the State under part H to any individual who, by 
reason of section 487(b), is prohibited from participating in 
the work first program operated by the State, and shall not 
provide such a position or such a voucher to any other 
individual.
  ``(c) Provision of Case Management Services.--The State plan 
shall provide that the State shall provide to participants in 
such programs such case management services as are necessary to 
ensure the integrated provision of benefits and services under 
such programs.
  ``(d) State Child Support Agency.--The State plan shall--
          ``(1) provide that the State has in effect a plan 
        approved under part D and operates a child support 
        program in substantial compliance with such plan;
          ``(2) provide that the State agency administering the 
        plan approved under this part shall be responsible for 
        assuring that--
                  ``(A) the benefits and services provided 
                under plans approved under this part and part D 
                are furnished in an integrated manner, 
                including coordination of intake procedures 
                with the agency administering the plan approved 
                under part D;
                  ``(B) all applicants for, and recipients of, 
                temporary employment assistance are encouraged, 
                assisted, and required (as provided under 
                section 403(b)(1)(E)(ii)) to cooperate in the 
                establishment and enforcement of paternity and 
                child support obligations and are notified 
                about the services available under the State 
                plan approved under part D; and
                  ``(C) procedures require referral of 
                paternity and child support enforcement cases 
                to the agency administering the plan approved 
                under part D not later than 10 days after the 
                application for temporary employment 
                assistance; and
          ``(3) provide for prompt notice (including the 
        transmittal of all relevant information) to the State 
        child support collection agency established pursuant to 
        part D of the furnishing of temporary employment 
        assistance with respect to a child who has been 
        deserted or abandoned by a parent (including a child 
        born out-of-wedlock without regard to whether the 
        paternity of such child has been established).
  ``(e) Child Welfare Services and Foster Care and Adoption 
Assistance.--The State plan shall provide that the State has in 
effect--
          ``(1) a State plan for child welfare services 
        approved under part B; and
          ``(2) a State plan for foster care and adoption 
        assistance approved under part E,
and operates such plans in substantial compliance with the 
requirements of such parts.
  ``(f) Report of Child Abuse, etc.--The State plan shall 
provide that the State agency will--
          ``(1) report to an appropriate agency or official, 
        known or suspected instances of physical or mental 
        injury, sexual abuse or exploitation, or negligent 
        treatment or maltreatment of a child receiving 
        assistance under the State plan under circumstances 
        which indicate that the child's health or welfare is 
        threatened thereby; and
          ``(2) provide such information with respect to a 
        situation described in paragraph (1) as the State 
        agency may have.
  ``(g) Availability of Assistance in Rural Areas of State.--
The State plan shall consider and address the needs of rural 
areas in the State to ensure that families in such areas 
receive assistance to become self-sufficient.
  ``(h) Family Preservation.--
          ``(1) In general.--The State plan shall describe the 
        efforts by the State to promote family preservation and 
        stability, including efforts--
                  ``(A) to encourage fathers to stay home and 
                be a part of the family;
                  ``(B) to keep families together to the extent 
                possible; and
                  ``(C) except to the extent provided in 
                paragraph (2), to treat 2-parent families and 
                1-parent families equally with respect to 
                eligibility for assistance.
          ``(2) Maintenance of treatment.--The State may impose 
        eligibility limitations relating specifically to 2-
        parent families to the extent such limitations are no 
        more restrictive than such limitations in effect in the 
        State plan in fiscal year 1995.

``SEC. 406. ADMINISTRATIVE REQUIREMENTS FOR STATE PLAN.

  ``(a) Statewide Plan.--The State plan shall be in effect in 
all political subdivisions of the State, and, if administered 
by the subdivisions, be mandatory upon such subdivisions. If 
such plan is not administered uniformly throughout the State, 
the plan shall describe the administrative variations.
  ``(b) Single Administrating Agency.--The State plan shall 
provide for the establishment or designation of a single State 
agency to administer the plan or supervise the administration 
of the plan.
  ``(c) Financial Participation.--The State plan shall provide 
for financial participation by the State in the same manner and 
amount as such State participates under title XIX, except that 
with respect to the sums expended for the administration of the 
State plan, the percentage shall be 50 percent.
  ``(d) Reasonable Promptness.--The State plan shall provide 
that all individuals wishing to make application for temporary 
employment assistance shall have opportunity to do so, and that 
such assistance be furnished with reasonable promptness to all 
eligible individuals.
  ``(e) Automated Data Processing System.--The State plan 
shall, at the option of the State, provide for the 
establishment and operation of an automated statewide 
management information system designed effectively and 
efficiently, to assist management in the administration of the 
State plan approved under this part, so as--
          ``(1) to control and account for--
                  ``(A) all the factors in the total 
                eligibility determination process under such 
                plan for assistance, and
                  ``(B) the costs, quality, and delivery of 
                payments and services furnished to applicants 
                for and recipients of assistance; and
          ``(2) to notify the appropriate officials for child 
        support, food stamp, and social service programs, and 
        the medical assistance program approved under title 
        XIX, whenever a recipient becomes ineligible for such 
        assistance or the amount of assistance provided to a 
        recipient under the State plan is changed.
  ``(f) Disclosure of Information.--The State plan shall 
provide for safeguards which restrict the use or disclosure of 
information concerning applicants or recipients.
  ``(g) Detection of Fraud.--The State plan shall provide, in 
accordance with regulations issued by the Secretary, for 
appropriate measures to detect fraudulent applications for 
temporary employment assistance before the establishment of 
eligibility for such assistance.

                 ``Subpart 2--Administrative Provisions

``SEC. 411. APPROVAL OF PLAN.

  ``(a) In General.--The Secretary shall approve a State plan 
which fulfills the requirements under subpart 1 within 120 days 
of the submission of the plan by the State to the Secretary.
  ``(b) Deemed Approval.--If a State plan has not been rejected 
by the Secretary during the period specified in subsection (a), 
the plan shall be deemed to have been approved.

``SEC. 412. COMPLIANCE.

  In the case of any State plan for temporary employment 
assistance which has been approved under section 411, if the 
Secretary, after reasonable notice and opportunity for hearing 
to the State agency administering or supervising the 
administration of such plan, finds that in the administration 
of the plan there is a failure to comply substantially with any 
provision required by subpart 1 to be included in the plan, the 
Secretary shall notify such State agency that further payments 
will not be made to the State (or in the Secretary's 
discretion, that payments will be limited to categories under 
or parts of the State plan not affected by such failure) until 
the Secretary is satisfied that such prohibited requirement is 
no longer so imposed, and that there is no longer any such 
failure to comply. Until the Secretary is so satisfied the 
Secretary shall make no further payments to such State (or 
shall limit payments to categories under or parts of the State 
plan not affected by such failure).

``SEC. 413. PAYMENTS TO STATES.

  ``(a) Computation of Amount.--Subject to section 412, from 
the sums appropriated therefor, the Secretary of the Treasury 
shall pay to each State which has an approved plan for 
temporary employment assistance, for each quarter, beginning 
with the quarter commencing October 1, 1996, an amount equal to 
the Federal medical assistance percentage (as defined in 
section 1905(b)) of the expenditures by the State under such 
plan.
  ``(b) Method of Computation and Payment.--The method of 
computing and paying such amounts shall be as follows:
          ``(1) The Secretary shall, prior to the beginning of 
        each quarter, estimate the amount to be paid to the 
        State for such quarter under the provisions of 
        subsection (a), such estimate to be based on--
                  ``(A) a report filed by the State containing 
                its estimate of the total sum to be expended in 
                such quarter in accordance with the provisions 
                of such subsection and stating the amount 
                appropriated or made available by the State and 
                its political subdivisions for such 
                expenditures in such quarter, and if such 
                amount is less than the State's proportionate 
                share of the total sum of such estimated 
                expenditures, the source or sources from which 
                the difference is expected to be derived;
                  ``(B) records showing the number of needy 
                children in the State; and
                  ``(C) such other information as the Secretary 
                may find necessary.
          ``(2) The Secretary of Health and Human Services 
        shall then certify to the Secretary of the Treasury the 
        amount so estimated by the Secretary of Health and 
        Human Services--
                  ``(A) reduced or increased, as the case may 
                be, by any sum by which the Secretary of Health 
                and Human Services finds that the estimate for 
                any prior quarter was greater or less than the 
                amount which should have been paid to the State 
                for such quarter;
                  ``(B) reduced by a sum equivalent to the pro 
                rata share to which the Federal Government is 
                equitably entitled, as determined by the 
                Secretary of Health and Human Services, of the 
                net amount recovered during any prior quarter 
                by the State or any political subdivision 
                thereof with respect to temporary employment 
                assistance furnished under the State plan; and
                  ``(C) reduced by such amount as is necessary 
                to provide the appropriate reimbursement to the 
                Federal Government that the State is required 
                to make under section 457 out of that portion 
                of child support collections retained by the 
                State pursuant to such section,
        except that such increases or reductions shall not be 
        made to the extent that such sums have been applied to 
        make the amount certified for any prior quarter greater 
        or less than the amount estimated by the Secretary of 
        Health and Human Services for such prior quarter.
  ``(c) Method of Payment.--The Secretary of the Treasury shall 
thereupon, through the Fiscal Service of the Department of the 
Treasury and prior to audit or settlement by the General 
Accounting Office, pay to the State, at the time or times fixed 
by the Secretary of Health and Human Services, the amount so 
certified.

``SEC. 414. QUALITY ASSURANCE, DATA COLLECTION, AND REPORTING SYSTEM.

  ``(a) Quality Assurance.--
          ``(1) In general.--Under the State plan, a quality 
        assurance system shall be developed based upon a 
        collaborative effort involving the Secretary, the 
        State, the political subdivisions of the State, and 
        assistance recipients, and shall include quantifiable 
        program outcomes related to self sufficiency in the 
        categories of welfare-to-work, payment accuracy, and 
        child support.
          ``(2) Modifications to system.--As deemed necessary, 
        but not more often than every 2 years, the Secretary, 
        in consultation with the State, the political 
        subdivisions of the State, and assistance recipients, 
        shall make appropriate changes in the design and 
        administration of the quality assurance system, 
        including changes in benchmarks, measures, and data 
        collection or sampling procedures.
  ``(b) Data Collection and Reporting.--
          ``(1) In general.--The State plan shall provide for a 
        quarterly report to the Secretary regarding the data 
        described in paragraphs (2) and (3) and such additional 
        data needed for the quality assurance system. The data 
        collection and reporting system under this subsection 
        shall promote accountability, continuous improvement, 
        and integrity in the State plans for temporary 
        employment assistance and Work First.
          ``(2) Disaggregated data.--The State shall collect 
        the following data items on a monthly basis from 
        disaggregated case records of applicants for and 
        recipients of temporary employment assistance from the 
        previous month:
                  ``(A) The age of adults and children 
                (including pregnant women).
                  ``(B) Marital or familial status of cases: 
                married (2-parent family), widowed, divorced, 
                separated, or never married; or child living 
                with other adult relative.
                  ``(C) The gender, race, educational 
                attainment, work experience, disability status 
                (whether the individual is seriously ill, 
                incapacitated, or caring for a disabled or 
                incapacitated child) of adults.
                  ``(D) The amount of cash assistance and the 
                amount and reason for any reduction in such 
                assistance. Any other data necessary to 
                determine the timeliness and accuracy of 
                benefits and welfare diversions.
                  ``(E) Whether any member of the family 
                receives benefits under any of the following:
                          ``(i) Any housing program.
                          ``(ii) The food stamp program under 
                        the Food Stamp Act of 1977.
                          ``(iii) The Head Start programs 
                        carried out under the Head Start Act.
                          ``(iv) Any job training program.
                  ``(F) The number of months since the most 
                recent application for assistance under the 
                plan.
                  ``(G) The total number of months for which 
                assistance has been provided to the families 
                under the plan.
                  ``(H) The employment status, hours worked, 
                and earnings of individuals while receiving 
                assistance, whether the case was closed due to 
                employment, and other data needed to meet the 
                work performance rate.
                  ``(I) Status in Work First and workfare, 
                including the number of hours an individual 
                participated and the component in which the 
                individual participated.
                  ``(J) The number of persons in the assistance 
                unit and their relationship to the youngest 
                child. Nonrecipients in the household and their 
                relationship to the youngest child.
                  ``(K) Citizenship status.
                  ``(L) Shelter arrangement.
                  ``(M) Unearned income (not including 
                temporary employment assistance), such as child 
                support, and assets.
                  ``(N) The number of children who have a 
                parent who is deceased, incapacitated, or 
                unemployed.
                  ``(O) Geographic location.
          ``(3) Aggregated data.--The State shall collect the 
        following data items on a monthly basis from aggregated 
        case records of applicants for and recipients of 
        temporary employment assistance from the previous 
        month:
                  ``(A) The number of adults receiving 
                assistance.
                  ``(B) The number of children receiving 
                assistance.
                  ``(C) The number of families receiving 
                assistance.
                  ``(D) The number of assistance units who had 
                their grants reduced or terminated and the 
                reason for the reduction or termination, 
                including sanction, employment, and meeting the 
                time limit for assistance).
                  ``(E) The number of applications for 
                assistance; the number approved and the number 
                denied and the reason for denial.
          ``(4) Longitudinal studies.--The State shall submit 
        selected data items for a cohort of individuals who are 
        tracked over time. This longitudinal sample shall be 
        used for selected data items described in paragraphs 
        (2) and (3), as determined appropriate by the 
        Secretary.
  ``(c) Additional Data.--The report required by subsection (b) 
for a fiscal year quarter shall also include the following:
          ``(1) Report on use of federal funds to cover 
        administrative costs and overhead.--A statement of--
                  ``(A) the percentage of the Federal funds 
                paid to the State under this part for the 
                fiscal year quarter that are used to cover 
                administrative costs or overhead; and
                  ``(B) the total amount of State funds that 
                are used to cover such costs or overhead.
          ``(2) Report on state expenditures on programs for 
        needy families.--A statement of the total amount 
        expended by the State during the fiscal year quarter on 
        programs for needy families, with the amount spent on 
        the program under this part, and the purposes for which 
        such amount was spent, separately stated.
          ``(3) Report on noncustodial parents participating in 
        work activities.--The number of noncustodial parents in 
        the State who participated in work activities during 
        the fiscal year quarter.
          ``(4) Report on child support collected.--The total 
        amount of child support collected by the State agency 
        administering the State plan under part D on behalf of 
        a family receiving assistance under this part.
          ``(5) Report on child care.--The total amount 
        expended by the State for child care under this part, 
        along with a description of the types of child care 
        provided, such as child care provided in the case of a 
        family that has ceased to receive assistance under this 
        part because of increased hours of, or increased income 
        from, employment, or in the case of a family that is 
        not receiving assistance under this part but would be 
        at risk of becoming eligible for such assistance if 
        child care was not provided.
          ``(6) Report on transitional services.--The total 
        amount expended by the State for providing transitional 
        services to a family that has ceased to receive 
        assistance under this part because of increased hours 
        of, or increased income from, employment, along with a 
        description of such services.
  ``(d) Collection Procedures.--The Secretary shall provide 
case sampling plans and data collection procedures as deemed 
necessary to make statistically valid estimates of plan 
performance.
  ``(e) Verification.--The Secretary shall develop and 
implement procedures for verifying the quality of the data 
submitted by the State, and shall provide technical assistance, 
funded by the compliance penalties imposed * * *
          * * * * * * *

SEC. 9201. EXTENSION OF PROVISION PROVIDING ADDITIONAL ELIGIBILITY FOR 
                    MEDICAID.

    Subsection (f) of section 1925 of the Social Security Act 
(42 U.S.C. 1396r-6(f)) is amended by striking ``1998'' and 
inserting ``2002''.

SEC. 9202. NOTICE OF AVAILABILITY REQUIRED TO BE PROVIDED TO APPLICANTS 
                    AND FORMER RECIPIENTS OF TEMPORARY FAMILY 
                    ASSISTANCE, FOOD STAMPS, AND MEDICAID.

    (a) Temporary Family Assistance.--Section 406, as added by 
the amendment made by section 9101(a) of this Act, is amended 
by adding at the end the following:
    ``(h) Notice of Availability of EITC.--The State plan shall 
provide that the State agency referred to in subsection (b) 
must provide written notice of the existence and availability 
of the earned income credit under section 32 of the Internal 
Revenue Code of 1986 to--
          ``(1) any individual who applies for assistance under 
        the State plan, upon receipt of the application; and
          ``(2) any individual whose assistance under the State 
        plan (or under the State plan approved under part A of 
        this title (as in effect before the effective date of 
        title IX of the Omnibus Budget Reconciliation Act of 
        1995) is terminated, in the notice of termination of 
        benefits.''.
    (b) Food Stamps.--Section 11(e) of the Food Stamp Act of 
1977 (7 U.S.C. 2020(e)) is amended--
          (1) in paragraph (24) by striking ``and'' at the end;
          (2) in paragraph (25) by striking the period at the 
        end and inserting ``; and''; and
          (3) by inserting after paragraph (25) the following:
          ``(26) that whenever a household applies for food 
        stamp benefits, and whenever such benefits are 
        terminated with respect to a household, the State 
        agency shall provide to each member of such household 
        notice of--
                  ``(A) the existence of the earned income tax 
                credit under section 32 of the Internal Revenue 
                Code of 1986; and
                  ``(B) the fact that such credit may be 
                applicable to such member.''.
    (c) Medicaid.--Section 1902(a) (42 U.S.C. 1396a(a)) is 
amended--
          (1) by striking ``and'' at the end of paragraph (61);
          (2) by striking the period at the end of paragraph 
        (62) and inserting ``; and''; and
          (3) by inserting after paragraph (62) the following 
        new paragraph:
          ``(63) provide that the State shall provide notice of 
        the existence and availability of the earned income tax 
        credit under section 32 of the Internal Revenue Code of 
        1986 to each individual applying for medical assistance 
        under the State plan and to each individual whose 
        eligibility for medical assistance under the State plan 
        is terminated.''.

SEC. 9203. NOTICE OF AVAILABILITY OF EARNED INCOME TAX CREDIT AND 
                    DEPENDENT CARE TAX CREDIT TO BE INCLUDED ON W-4 
                    FORM.

    (a) In General.--Section 11114 of the Omnibus Budget 
Reconciliation Act of 1990 (26 U.S.C. 21 note), relating to 
program to increase public awareness, is amended by adding at 
the end the following new sentence: ``Such means shall include 
printing a notice of the availability of such credits on the 
forms used by employees to determine the proper number of 
withholding exemptions under chapter 24 of such Code.''

SEC. 9204. ADVANCE PAYMENT OF EARNED INCOME TAX CREDIT THROUGH STATE 
                    DEMONSTRATION PROGRAMS.

    (a) In General.--Section 3507 of the Internal Revenue Code 
of 1986 (relating to the advance payment of the earned income 
tax credit) is amended by adding at the end the following:
    ``(g) State Demonstrations.--
          ``(1) In general.--In lieu of receiving earned income 
        advance amounts from an employer under subsection (a), 
        a participating resident shall receive advance earned 
        income payments from a responsible State agency 
        pursuant to a State Advance Payment Program that is 
        designated pursuant to paragraph (2).
          ``(2) Designations.--
                  ``(A) In general.--From among the States 
                submitting proposals satisfying the 
                requirements of paragraph (3), the Secretary 
                (in consultation with the Secretary of Health 
                and Human Services) may designate not more than 
                4 State Advance Payment Demonstrations. States 
                selected for the demonstrations may have, in 
                the aggregate, no more than 5 percent of the 
                total number of households participating in the 
                program under the Food Stamp program in the 
                immediately preceding fiscal year. 
                Administrative costs of a State in conducting a 
                demonstration under this section may be 
                included for matching under section 413(a) of 
                the Social Security Act and section 16(a) of 
                the Food Stamp Act of 1977.
                  ``(B) When designation may be made.--Any 
                designation under this paragraph shall be made 
                no later than December 31, 1996.
                  ``(C) Period for which designation is in 
                effect.--
                          ``(i) In general.--Designations made 
                        under this paragraph shall be effective 
                        for advance earned income payments made 
                        after December 31, 1996, and before 
                        January 1, 2000.
                          ``(ii) Special rules.--
                                  ``(I) Revocation of 
                                designations.--The Secretary 
                                may revoke any designation made 
                                under this paragraph if the 
                                Secretary determines that the 
                                State is not complying 
                                substantially with the proposal 
                                described in paragraph (3) 
                                submitted by the State.
                                  ``(II) Automatic termination 
                                of designations.--Any failure 
                                by a State to comply with the 
                                reporting requirements 
                                described in paragraphs (3)(F) 
                                and (3)(G) shall have the 
                                effect of immediately 
                                terminating the designation 
                                under this paragraph and 
                                rendering paragraph (5)(A)(ii) 
                                inapplicable to subsequent 
                                payments.
          ``(3) Proposals.--No State may be designated under 
        paragraph (2) unless the State's proposal for such 
        designation--
                  ``(A) identifies the responsible State 
                agency,
                  ``(B) describes how and when the advance 
                earned income payments will be made by that 
                agency, including a description of any other 
                State or Federal benefits with which such 
                payments will be coordinated,
                  ``(C) describes how the State will obtain the 
                information on which the amount of advance 
                earned income payments made to each 
                participating resident will be determined in 
                accordance with paragraph (4),
                  ``(D) describes how State residents who will 
                be eligible to receive advance earned income 
                payments will be selected, notified of the 
                opportunity to receive advance earned income 
                payments from the responsible State agency, and 
                given the opportunity to elect to participate 
                in the program,
                  ``(E) describes how the State will verify, in 
                addition to receiving the certifications and 
                statement described in paragraph (7)(D)(iv), 
                the eligibility of participating residents for 
                the earned income tax credit,
                  ``(F) commits the State to furnishing to each 
                participating resident by January 31 of each 
                year a written statement showing--
                          ``(i) the name and taxpayer 
                        identification number of the 
                        participating resident, and
                          ``(ii) the total amount of advance 
                        earned income payments made to the 
                        participating resident during the prior 
                        calendar year,
                  ``(G) commits the State to furnishing to the 
                Secretary by December 1 of each year a written 
                statement showing the name and taxpayer 
                identification number of each participating 
                resident,
                  ``(H) commits the State to treat any advance 
                earned income payments as described in 
                paragraph (5) and any repayments of excessive 
                advance earned income payments as described in 
                paragraph (6),
                  ``(I) commits the State to assess the 
                development and implementation of its State 
                Advance Payment Program, including an agreement 
                to share its findings and lessons with other 
                interested States in a manner to be described 
                by the Secretary, and
                  ``(J) is submitted to the Secretary on or 
                before June 30, 1996.
          ``(4) Amount and timing of advance earned income 
        payments.--
                  ``(A) Amount.--
                          ``(i) In general.--The method for 
                        determining the amount of advance 
                        earned income payments made to each 
                        participating resident shall conform to 
                        the fullest extent possible with the 
                        provisions of subsection (c).
                          ``(ii) Special rule.--A State may, at 
                        its election, apply the rules of 
                        subsection (c)(2)(B) by substituting 
                        `between 60 percent and 75 percent of 
                        the credit percentage in effect under 
                        section 32(b)(1) for an individual with 
                        the corresponding number of qualifying 
                        children' for `60 percent of the credit 
                        percentage in effect under section 
                        32(b)(1) for such an eligible 
                        individual with 1 qualifying child' in 
                        clause (i) and `the same percentage (as 
                        applied in clause (i))' for `60 
                        percent' in clause (ii).
                  ``(B) Timing.--The frequency of advance 
                earned income payments may be determined on the 
                basis of the payroll periods of participating 
                residents, on a single statewide schedule, or 
                on any other reasonable basis prescribed by the 
                State in its proposal; however, in no event may 
                advance earned income payments be made to any 
                participating resident less frequently than on 
                a calendar-quarter basis.
          ``(5) Payments to be treated as payments of 
        withholding and fica taxes.--
                  ``(A) In general.--For purposes of this 
                title, advance earned income payments during 
                any calendar quarter--
                          ``(i) shall neither be treated as a 
                        payment of compensation nor be included 
                        in gross income, and
                          ``(ii) shall be treated as made out 
                        of--
                                  ``(I) amounts required to be 
                                deducted by the State and 
                                withheld for the calendar 
                                quarter by the State under 
                                section 3401 (relating to wage 
                                withholding),
                                  ``(II) amounts required to be 
                                deducted for the calendar 
                                quarter under section 3102 
                                (relating to FICA employee 
                                taxes), and
                                  ``(III) amounts of the taxes 
                                imposed on the State for the 
                                calendar quarter under section 
                                3111 (relating to FICA employer 
                                taxes),
                        as if the State had paid to the 
                        Secretary, on the day on which payments 
                        are made to participating residents, an 
                        amount equal to such payments.
                  ``(B) If advance payments exceed taxes due.--
                If for any calendar quarter the aggregate 
                amount of advance earned income payments made 
                by the responsible State agency under a State 
                Advance Payment Program exceeds the sum of the 
                amounts referred to in subparagraph (A)(ii) 
                (without regard to paragraph (6)(A)), each such 
                advance earned income payment shall be reduced 
                by an amount which bears the same ratio to such 
                excess as such advance earned income payment 
                bears to the aggregate amount of all such 
                advance earned income payments.
          ``(6) State repayment of excessive advance earned 
        income payments.--
                  ``(A) In general.--Notwithstanding any other 
                provision of law, in the case of an excessive 
                advance earned income payment a State shall be 
                treated as having deducted and withheld under 
                section 3401 (relating to wage withholding), 
                and as being required to pay to the United 
                States, the repayment amount during the 
                repayment calendar quarter.
                  ``(B) Excessive advance earned income 
                payment.--For purposes of this section, the 
                term `excessive advance income payment' means 
                that portion of any advance earned income 
                payment that, when combined with other advance 
                earned income payments previously made to the 
                same participating resident during the same 
                calendar year, exceeds the amount of earned 
                income tax credit to which that participating 
                resident is entitled under section 32 for that 
                year.
                  ``(C) Repayment amount.--For purposes of this 
                subsection, the term `repayment amount' means 
                an amount equal to 50 percent of the excess 
                of--
                          ``(i) excessive advance earned income 
                        payments made by a State during a 
                        particular calendar year, over
                          ``(ii) the sum of--
                                  ``(I) 4 percent of all 
                                advance earned income payments 
                                made by the State during that 
                                calendar year, and
                                  ``(II) the excessive advance 
                                earned income payments made by 
                                the State during that calendar 
                                year that have been collected 
                                from participating residents by 
                                the Secretary.
                  ``(D) Repayment calendar quarter.--For 
                purposes of this subsection, the term 
                `repayment calendar quarter' means the second 
                calendar quarter of the third calendar year 
                beginning after the calendar year in which an 
                excessive earned income payment is made.
          ``(7) Definitions.--For purposes of this subsection--
                  ``(A) State advance payment program.--The 
                term `State Advance Payment Program' means the 
                program described in a proposal submitted for 
                designation under paragraph (1) and designated 
                by the Secretary under paragraph (2).
                  ``(B) Responsible state agency.--The term 
                `responsible State agency' means the single 
                State agency that will be making the advance 
                earned income payments to residents of the 
                State who elect to participate in a State 
                Advance Payment Program.
                  ``(C) Advance earned income payments.--The 
                term `advance earned income payments' means an 
                amount paid by a responsible State agency to 
                residents of the State pursuant to a State 
                Advance Payment Program.
                  ``(D) Participating resident.--The term 
                `participating resident' means an individual 
                who--
                          ``(i) is a resident of a State that 
                        has in effect a designated State 
                        Advance Payment Program,
                          ``(ii) makes the election described 
                        in paragraph (3)(D) pursuant to 
                        guidelines prescribed by the State,
                          ``(iii) certifies to the State the 
                        number of qualifying children the 
                        individual has, and
                          ``(iv) provides to the State the 
                        certifications and statement described 
                        in subsections (b)(1), (b)(2), (b)(3), 
                        and (b)(4) (except that for purposes of 
                        this clause, the term `any employer' 
                        shall be substituted for `another 
                        employer' in subsection (b)(3)), along 
                        with any other information required by 
                        the State.''.
    (b) Technical Assistance.--The Secretaries of the Treasury 
and Health and Human Services shall jointly ensure that 
technical assistance is provided to State Advance Payment 
Programs and that these programs are rigorously evaluated.
    (c) Annual Reports.--The Secretary shall issue annual 
reports detailing the extent to which--
          (1) residents participate in the State Advance 
        Payment Programs,
          (2) participating residents file Federal and State 
        tax returns,
          (3) participating residents report accurately the 
        amount of the advance earned income payments made to 
        them by the responsible State agency during the year, 
        and
          (4) recipients of excessive advance earned income 
        payments repay those amounts.
The report shall also contain an estimate of the amount of 
advance earned income payments made by each responsible State 
agency but not reported on the tax returns of a participating 
resident and the amount of excessive advance earned income 
payments.
    (d) Authorization of Appropriations.--For purposes of 
providing technical assistance described in subsection (b), 
preparing the reports described in subsection (c), and 
providing grants to States in support of designated State 
Advance Payment Programs, there are authorized to be 
appropriated in advance to the Secretary of the Treasury and 
the Secretary of Health and Human Services a total of 
$1,400,000 for fiscal years 1997 through 2000.

SEC. 9205. CONSOLIDATED CHILD CARE DEVELOPMENT BLOCK GRANT.

    (a) Purpose.--It is the purpose of this section to--
          (1) eliminate program fragmentation and create a 
        seamless system of high quality child care that allows 
        for continuity of care for children as parents move 
        from welfare to work;
          (2) provide for parental choice among high quality 
        child care programs; and
          (3) increase the availability of high quality 
        affordable child care in order to promote self 
        sufficiency and support working families.
    (b) Amendments to Child Care and Development Block Grant 
Act of 1990.--
          (1) Appropriations.--Section 658B of the Child Care 
        and Development Block Grant Act of 1990 (42 U.S.C. 
        9858) is amended to read as follows:

``SEC. 658B. APPROPRIATION.

    ``(a) Authorization of Appropriations of Block Grant 
Funds.--For the purpose of providing child care services for 
eligible children through the awarding of grants to States 
under this subchapter (other than the grants awarded under 
subsection (b)) by the Secretary, there are authorized to be 
appropriated, $1,000,000,000 for fiscal year 1996 and such sums 
as may be necessary for fiscal years 1997 through 2002.
    ``(b) Appropriations of Federal Matching Funds.--For the 
purpose of providing child care services for eligible children 
through the awarding of matching grants to States under section 
658J(d) by the Secretary, there are authorized to be 
appropriated and are hereby appropriated, baseline plus 
$500,000,000 for fiscal year 1996, baseline plus $500,000,000 
for fiscal year 1997, baseline plus $500,000,000 for fiscal 
year 1998, baseline plus $500,000,000 for fiscal year 1999, 
baseline plus $500,000,000 for fiscal year 2000, baseline plus 
$500,000,000 for fiscal year 2001, and baseline plus 
$500,000,000 for fiscal year 2002.''.
          (2) Use of funds.--Section 658E(c)(3)(B) of the Child 
        Care and Development Block Grant Act of 1990 (42 U.S.C. 
        9858c(c)(3)(B)) is amended--
                  (A) in clause (i), by striking ``with very 
                low family incomes (taking into consideration 
                family size)'' and inserting ``described in 
                clause (ii) (in the order so described)'';
                  (B) by redesignating clauses (i) and (ii) as 
                subclauses (I) and (II), respectively, and 
                realigning the margins accordingly;
                  (C) by striking ``Subject'' and inserting the 
                following:
                          ``(i) In general.--Subject''; and
                  (D) by adding at the end the following new 
                clause:
                          ``(ii) Families described.--The 
                        families described in this clause are 
                        the following:
                                  ``(I) Families containing an 
                                individual receiving assistance 
                                under a State plan approved 
                                under part A of title IV of the 
                                Social Security Act and 
                                participating in education, job 
                                search, job training, work, or 
                                workfare programs.
                                  ``(II) Families containing an 
                                individual who--
                                          ``(aa) no longer 
                                        qualifies for child 
                                        care assistance under 
                                        section 405(b) of the 
                                        Social Security Act 
                                        because such individual 
                                        has ceased to receive 
                                        assistance under the 
                                        temporary employment 
                                        assistance program 
                                        under part A of title 
                                        IV of the Social 
                                        Security Act as a 
                                        result of increased 
                                        hours of, or increased 
                                        income from, 
                                        employment; and
                                          ``(bb) the State 
                                        determines requires 
                                        such child care 
                                        assistance in order to 
                                        continue such 
                                        employment (but only 
                                        for the 1-year period 
                                        beginning on the date 
                                        that the individual no 
                                        longer qualifies for 
                                        child care assistance 
                                        under section 405(b) of 
                                        such Act, and, at the 
                                        option of the State, 
                                        for the additional 1-
                                        year period beginning 
                                        after the conclusion of 
                                        the first 1-year 
                                        period).
                                  ``(III) Families containing 
                                an individual who--
                                          ``(aa) is not 
                                        described in subclause 
                                        (I) or (II); and
                                          ``(bb) has an annual 
                                        income for a fiscal 
                                        year below 75 percent 
                                        of the State median 
                                        income.''.
          (3) Set-asides for quality and expansion.--Section 
        658E(c)(3) of the Child Care and Development Block 
        Grant Act of 1990 (42 U.S.C. 9858c(c)(3))--
                  (A) in subparagraph (C), by striking ``25 
                percent'' and inserting ``10 percent''.
          (4) Sliding fee scale.--Section 658E(c)(5) of the 
        Child Care and Development Block Grant Act of 1990 (42 
        U.S.C. 9858c(c)(5)) is amended by inserting ``described 
        in subclauses (II) and (III) of paragraph (3)(B)(ii)'' 
        after ``families''.
          (5) Matching requirement for new funds.--

``SEC. 418. FUNDING FOR CHILD CARE.

    ``(a) General Child Care Entitlement.--
          ``(1) General entitlement.--Subject to the amount 
        appropriated under 658(B)(b), each State shall, for the 
        purpose of providing child care assistance, be entitled 
        to payments under a grant under this subsection for a 
        fiscal year in an amount equal to--
                  ``(A) the sum of the total amount required to 
                be paid to the State under former section 403 
                for fiscal year 1994 with respect to amounts 
                expended for child care under section--
                          ``(i) 402(g) of this Act (as such 
                        section was in effect before October 1, 
                        1995); and
                          ``(ii) 403(i) of this Act (as so in 
                        effect); or
                  ``(B) the average of the total amounts 
                required to be paid to the State for fiscal 
                years 1992 through 1994 under the sections 
                referred to in subparagraph (A);
          whichever is greater.
          ``(2) Remainder.--
                  ``(A) Grants.--The Secretary shall use any 
                amounts appropriated for a fiscal year under 
                658(B)(b)(3), and remaining after the 
                reservation described in paragraph (3) and 
                after grants are awarded under paragraph (1), 
                to make grants to States under this paragraph.
                  ``(B) Amount.--Subject to subparagraph (C), 
                the amount of a grant awarded to a State for a 
                fiscal year under this paragraph shall be based 
                on the formula used for determining the amount 
                of Federal payments to the State under section 
                658(o).
                  ``(C) Matching requirement.--The Secretary 
                shall pay to each eligible State in a fiscal 
                year an amount, under a grant under 
                subparagraph (A), equal to the Federal medical 
                assistance percentage for such State for fiscal 
                year 1994 (as defined in section 1905(b)) of so 
                much of the expenditures by the State for child 
                care in such year as exceed the State set-aside 
                for such State under subparagraph (A) for such 
                year and the amount of State expenditures in 
                fiscal year 1994 that equal the non-Federal 
                share for the programs described in 
                subparagraphs (A), (B) and (C) of paragraph 
                (1).
          ``(3) Redistribution.--With respect to any fiscal 
        year, if the Secretary determines that amounts under 
        any grant awarded to a State under this subsection for 
        such fiscal year will not be used by such State for 
        carrying out the purpose for which the grant is made, 
        the Secretary shall make such amounts available for 
        carrying out such purpose to 1 or more other States 
        which apply for such funds to the extent the Secretary 
        determines that such other States will be able to use 
        such additional amounts for carrying out such purpose. 
        Such available amounts shall be redistributed to a 
        State pursuant to section 402(i) (as such section was 
        in effect before October 1, 1995) by substituting `the 
        number of children residing in all States applying for 
        such funds' for `the number of children residing in the 
        United States in the second preceding fiscal year'. Any 
        amount made available to a State from an appropriation 
        for a fiscal year in accordance with the preceding 
        sentence shall, for purposes of this part, be regarded 
        as part of such State's payment (as determined under 
        this subsection) for such year.
    ``(e) Amounts Reserved for Indian Tribes.--The Secretary 
shall reserve not more than 3 percent of the amount 
appropriated under section 658B in each fiscal year for 
payments to Indian tribes and tribal organizations with 
applications approved under section 6580(c). The amounts 
reserved under the prior sentence shall be available to make 
grants to or enter into contracts with Indian tribes or tribal 
organizations consistent with section 6580(c) without a 
requirement of matching funds by the Indian tribes or tribal 
organizations.
    ``(f) Same Treatment as Allotments.--Amounts paid to a 
State or Indian tribe under subsections (d) and (e) shall be 
subject to the same requirements under this subchapter as 
amounts paid from the allotment under section 658O.''.
                  (B) Conforming amendments.--Section 658O of 
                the Child Care and Development Block Grant Act 
                of 1990 (42 U.S.C. 9858m) is amended--
                          (i) in subsection (a)--
                                  (I) in paragraph (1), by 
                                striking ``this subchapter'' 
                                and inserting section 658B(a); 
                                and
                                  (II) in paragraph (2), by 
                                striking ``section 658B'' and 
                                inserting ``section 658B(a); 
                                and
                          (ii) in subsection (b)(1), by 
                        striking ``section 658B'' and inserting 
                        ``section 658B(a)''.
          (6) Improving quality.--
                  (A) Increase in required funding.--Section 
                658G of the Child Care and Development Block 
                Grant Act of 1990 (42 U.S.C. 9858e) is amended 
                by striking ``not less than 20 percent''.
                  (B) Quality improvement incentive 
                initiative.--Section 658G of the Child Care and 
                Development Block Grant Act of 1990 (42 U.S.C. 
                9858e) is amended--
                          (i) by striking ``A State'' and 
                        inserting ``(a) In General.--A State'';
                          (ii) by adding at the end the 
                        following new subparagraphs:
          ``(6) Before and after-school activities.--Increasing 
        the availability of before and after-school care.
          ``(7) Infant care.--Increasing the availability of 
        child care for infants under the age of 18 months.
          ``(8) Nontraditional work hours.--Increasing the 
        availability of child care between the hours of 5:00 
        p.m. and 8:00 a.m.''
                          (iii) by adding at the end the 
                        following new subsection:
  ``(b) Quality Improvement Incentive Initiative.--
          ``(1) In general.--The Secretary shall establish a 
        child care quality improvement incentive initiative to 
        make funds available to States that demonstrate 
        progress in the implementation of--
                  ``(A) innovative teacher training programs 
                such as the Department of Defense staff 
                development and compensation program for child 
                care personnel; or
                  ``(B) enhanced child care quality standards 
                and licensing and monitoring procedures.
          ``(2) Funding.--From the amounts made available for 
        each fiscal year under subsection (a), the Secretary 
        shall reserve not to exceed $250,000,000 in each such 
        fiscal year to carry out this subsection.''.
          (7) Repeal--Section 658H of the Child Care and 
        Development Block Grant Act of 1990 (42 U.S.C. 9858f) 
        is repealed.
          (8) Payments.--Section 658J(a) of the Child Care and 
        Development Block Grant Act of 1990 (42 U.S.C. 9858h) 
        is amended by striking ``Subject to the availability of 
        appropriation, a'' and inserting ``A''.
          (9) Definition of poverty line.--Section 658P of the 
        Child Care and Development Block Grant Act of 1990 (42 
        U.S.C. 9858n) is amended--
                  (A) by redesignating paragraphs (10) through 
                (14) as paragraphs (11) through (15), 
                respectively; and
                  (B) by inserting after paragraph (9), the 
                following new paragraph:
          ``(10) Poverty line.--The term `poverty line' means 
        the poverty line (as such term is defined in section 
        673(2) of the Community Services Block Grant Act (42 
        U.S.C. 9902(2)), including any revision required by 
        such section) that--
                  ``(A) in the case of a family of less than 4 
                individuals, is applicable to a family of the 
                size involved; and
                  ``(B) in the case of a family of 4 or more 
                individuals, is applicable to a family of 4 
                individuals.''.
  (c) Program Repeals.--
          (1) State dependent care grants.--Subchapter E of 
        chapter 8 of subtitle A of title VI of the Omnibus 
        Budget Reconciliation Act of 1981 (42 U.S.C. 9871 et 
        seq.) is repealed.
          (2) Child development associate scholarship 
        assistance act.--The Child Development Associate 
        Scholarship Assistance Act of 1985 (42 U.S.C. 10901 et 
        seq.) is repealed.

SEC. 9206. CERTAIN FEDERAL ASSISTANCE INCLUDIBLE IN GROSS INCOME.

  (a) In General.--Part II of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to items specifically 
included in gross income) is amended by adding at the end the 
following new section:

``SEC. 91. CERTAIN FEDERAL ASSISTANCE.

  ``(a) In General.--Gross income shall include an amount equal 
to the specified Federal assistance received by the taxpayer 
during the taxable year.
  ``(b) Specified Federal Assistance.--For purposes of this 
section--
          ``(1) In general.--The term `specified Federal 
        assistance' means--
                  ``(A) supplemental security income benefits 
                under title XVI of the Social Security Act 
                (including supplemental security income 
                benefits of the type described in section 1616 
                of such Act or section 212 of Public Law 93-
                66).''.
  (b) Reporting.--
          (1) In general.--Subpart B of part III of subchapter 
        A of chapter 61 of such Code is amended by adding at 
        the end the following new section:

``SEC. 6050Q. PAYMENTS OF CERTAIN FEDERAL ASSISTANCE.

  ``(a) Requirement of Reporting.--The appropriate official 
shall make a return, according to the forms and regulations 
prescribed by the Secretary, setting forth--
          ``(1) the aggregate amount of specified Federal 
        assistance paid to any individual during any calendar 
        year, and
          ``(2) the name, address, and TIN of such individual.
  ``(b) Statements To Be Furnished to Persons With Respect to 
Whom Information Is Required.--Every person required to make a 
return under subsection (a) shall furnish to each individual 
whose name is required to be set forth in such return a written 
statement showing--
          ``(1) the aggregate amount of payments made to the 
        individual which are required to be shown on such 
        return, and
          ``(2) the name of the agency making the payments.
The written statement required under the preceding sentence 
shall be furnished to the individual on or before January 31 of 
the year following the calendar year for which the return under 
subsection (a) was required to be made.
  ``(c) Definitions and Special Rule.--For purposes of this 
section--
          ``(1) Appropriate official.--The term `appropriate 
        official' means--
                  ``(A) in the case of specified Federal 
                assistance described in section 91(b)(1)(A), 
                the head of the State agency administering the 
                plan under which such assistance is provided,
                  ``(B) in the case of specified Federal 
                assistance described in section 91(b)(1)(B), 
                the head of the State agency administering the 
                program under which such assistance is 
                provided, and
                  ``(C) in the case of specified Federal 
                assistance described in section 91(b)(1)(C), 
                the Secretary of Health and Human Services.
          ``(2) Specified federal assistance.--The term 
        `specified Federal assistance' has the meaning given 
        such term by section 91(b).
          ``(3) Amounts treated as paid.--The rules of section 
        91(c) shall apply for purposes of determining to whom 
        specified Federal assistance is paid.''
          (2) Penalties.--
                  (A) Subparagraph (B) of section 6724(d)(1) of 
                such Code is amended by redesignating clauses 
                (ix) through (xiv) as clauses (x) through (xv), 
                respectively, and by inserting after clause 
                (viii) the following new clause:
                          ``(ix) section 6050Q (relating to 
                        payments of certain Federal 
                        assistance),''.
                  (B) Paragraph (2) of section 6724(d) of such 
                Code is amended by redesignating subparagraphs 
                (Q) through (T) as subparagraphs (R) through 
                (U), respectively, and by inserting after 
                subparagraph (P) the following new 
                subparagraph:
                  ``(Q) section 6050Q(b) (relating to payments 
                of certain Federal assistance),''.
  (c) Supplemental Security Income Benefits Not Taken into 
Account for Purposes of the Earned Income Tax Credit.--Section 
32 of the Internal Revenue Code of 1986 (relating to the earned 
income tax credit), is amended by adding at the end the 
following new subsection:
  ``(k) Adjusted Gross Income Determined Without Regard to 
Certain Federal Assistance.--For purposes of this section, 
adjusted gross income shall be determined without regard to any 
amount which is includible in gross income solely by reason of 
section 91.''
  (d) Clerical Amendments.--
          (1) The table of sections for part II of subchapter B 
        of chapter 1 of such Code is amended by adding at the 
        end the following new item:

        ``Sec. 91. Certain Federal assistance.''.

          (2) 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:


        ``Sec. 6050Q. Payments of certain Federal assistance.''.

  (e) Effective Date.--The amendments made by this section 
shall apply to benefits received after December 31, 1995, 
except that the amendment made by subsection (c) shall apply to 
taxable years beginning after such date.

SEC. 9207. DEPENDENT CARE CREDIT TO BE REFUNDABLE; HIGH-INCOME 
                    TAXPAYERS INELIGIBLE FOR CREDIT.

  (a) Credit To Be Refundable.--
          (1) In general.--Section 21 of the Internal Revenue 
        Code of 1986 (relating to expenses for household and 
        dependent care services necessary for gainful 
        employment) is hereby moved to subpart C of part IV of 
        subchapter A of chapter 1 of such Code (relating to 
        refundable credits) and inserted after section 34.
          (2) Technical amendments.--
                  (A) Section 35 of such Code is redesignated 
                as section 36.
                  (B) Section 21 of such Code is redesignated 
                as section 35.
                  (C) Paragraph (1) of section 35(a) of such 
                Code (as redesignated by subparagraph (B)) is 
                amended by striking ``this chapter'' and 
                inserting ``this subtitle''.
                  (D) Subparagraph (C) of section 129(a)(2) of 
                such Code is amended by striking ``section 
                21(e)'' and inserting ``section 35(e)''.
                  (E) Paragraph (2) of section 129(b) of such 
                Code is amended by striking ``section 
                21(d)(2)'' and inserting ``section 35(d)(2)''.
                  (F) Paragraph (1) of section 129(e) of such 
                Code is amended by striking ``section 
                21(b)(2)'' and inserting ``section 35(b)(2)''.
                  (G) Subsection (e) of section 213 of such 
                Code is amended by striking ``section 21'' and 
                inserting ``section 35''.
                  (H) Paragraph (2) of section 1324(b) of title 
                31, United States Code, is amended by inserting 
                before the period ``, or from section 35 of 
                such Code''.
                  (I) The table of sections for subpart C of 
                part IV of subchapter A of chapter 1 of such 
                Code is amended by striking the item relating 
                to section 35 and inserting the following:

        ``Sec. 35. Expenses for household and dependent care services 
                  necessary for gainful employment.
        ``Sec. 36. Overpayments of tax.''.

                  (J) The table of sections for subpart A of 
                such part IV is amended by striking the item 
                relating to section 21.
  (b) Higher-Income Taxpayers Ineligible for Credit.--
Subsection (a) of section 35 of such Code, as redesignated by 
subsection (a), is amended by adding at the end the following 
new paragraph:
          ``(3) Phaseout of credit for higher-income 
        taxpayers.--The amount of the credit which would (but 
        for this paragraph) be allowed by this section shall be 
        reduced (but not below zero) by an amount which bears 
        the same ratio to such amount of credit as the excess 
        of the taxpayer's adjusted gross income for the taxable 
        year over $60,000 bears to $20,000. Any reduction 
        determined under the preceding sentence which is not a 
        multiple of $10 shall be rounded to the nearest 
        multiple of $10.''.
  (c) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 1996.

                         Subtitle C--Work First

SEC. 9301. WORK FIRST PROGRAM.

  (a) Establishment and Operation of Program.--Title IV (42 
U.S.C. 601 et seq.) is amended by striking part F and inserting 
the following:

                      ``Part F--Work First Program

``SEC. 481. STATE ROLE.

  ``(a) Program Requirements.--Any State may establish and 
operate a work first program that meets the following 
requirements:
          ``(1) Objective.--The objective of the program is for 
        each program participant to find and hold a full-time 
        unsubsidized paid job, and for this goal to be achieved 
        in a cost-effective fashion.
          ``(2) Method.--The method of the program is to 
        connect recipients of assistance under the State plan 
        approved under part A with the private sector labor 
        market as soon as possible and offer them the support 
        and skills necessary to remain in the labor market. 
        Each component of the program should be permeated with 
        an emphasis on employment and with an understanding 
        that minimum wage jobs are a stepping stone to more 
        highly paid employment. The program shall provide 
        recipients with education, training, job search and 
        placement, wage supplementation, temporary subsidized 
        jobs, or such other services that the State deems 
        necessary to help a recipient obtain private sector 
        employment.
          ``(3) Job creation.--The creation of jobs, with an 
        emphasis on private sector jobs, shall be a component 
        of the program and shall be a priority for each State 
        office with responsibilities under the program.
          ``(4) Forms of assistance.--The State shall provide 
        assistance to participants in the program in the form 
        of education, training, job placement services 
        (including vouchers for job placement services), work 
        supplementation programs, temporary subsidized job 
        creation, job counseling, assistance in establishing 
        microenterprises, or other services to provide 
        individuals with the support and skills necessary to 
        obtain and keep employment in the private sector.
          ``(5) 2-year limitation on participation.--The 
        program shall comply with section 487(b).
          ``(6) Agreements of mutual responsibility.--
                  ``(A) In general.--The State agency shall 
                develop an agreement of mutual responsibility 
                for each program participant, which will be an 
                individualized comprehensive plan, developed by 
                the team and the participant, to move the 
                participant into a full-time unsubsidized job. 
                The agreement should detail the education, 
                training, or skills that the individual will be 
                receiving to obtain a full-time unsubsidized 
                job, and the obligations of the individual.
                  ``(B) Hours of participation requirement.--
                The agreement shall provide that the individual 
                shall participate in activities in accordance 
                with the agreement for--
                          ``(i) not fewer than 20 hours per 
                        week during fiscal years 1997 and 1998;
                          ``(ii) not fewer than 25 hours per 
                        week during fiscal year 1999; and
                          ``(iii) not fewer than 30 hours per 
                        week thereafter.
          ``(7) Caseload participation rates.--The program 
        shall comply with section 488.
          ``(8) Nondisplacement.--The program may not be 
        operated in a manner that results in--
                  ``(A) the displacement of a currently 
                employed worker or position by a program 
                participant;
                  ``(B) the replacement of an employee who has 
                been terminated with a program participant; or
                  ``(C) the replacement of an individual who is 
                on layoff from the same position given to a 
                program participant or any equivalent position.
  ``(b) Annual Reports.--
          ``(1) Compliance with performance measures.--Each 
        State that operates a program under this part shall 
        submit to the Secretary annual reports that compare the 
        achievements of the program with the performance-based 
        measures established under section 488(c).
          ``(2) Compliance with participation rates.--Each 
        State that operates a program under this part for a 
        fiscal year shall submit to the Secretary a report on 
        the participation rate of the State for the fiscal 
        year.

``SEC. 482. REVAMPED JOBS PROGRAM.

  ``A State that establishes a program under this part may 
operate a program similar to the program known as the `GAIN 
Program' that has been operated by Riverside County, 
California, under Federal law in effect immediately before the 
date this part first applies to the State of California.

``SEC. 483. USE OF PLACEMENT COMPANIES.

  ``(a) In General.--A State that establishes a program under 
this part may enter into contracts with private companies 
(whether operated for profit or not for profit) for the 
placement of participants in the program in positions of full-
time employment, preferably in the private sector, for wages 
sufficient to eliminate the need of such participants for cash 
assistance.
  ``(b) Required Contract Terms.--Each contract entered into 
under this section with a company shall meet the following 
requirements:
          ``(1) Provision of job readiness and support 
        services.--The contract shall require the company to 
        provide, to any program participant who presents to the 
        company a voucher issued under subsection (d) intensive 
        personalized support and job readiness services 
        designed to prepare the individual for employment and 
        ensure the continued success of the individual in 
        employment.
          ``(2) Payments.--
                  ``(A) In general.--The contract shall provide 
                for payments to be made to the company with 
                respect to each program participant who 
                presents to the company a voucher issued under 
                subsection (d).
                  ``(B) Structure.--The contract shall provide 
                for the majority of the amounts to be paid 
                under the contract with respect to a program 
                participant, to be paid after the company has 
                placed the participant in a position of full-
                time employment and the participant has been 
                employed in the position for such period of not 
                less than 5 months as the State deems 
                appropriate.
  ``(c) Competitive Bidding Required.--Contracts under this 
section shall be awarded only after competitive bidding.
  ``(d) Vouchers.--The State shall issue a voucher to each 
program participant whose agreement of mutual responsibility 
provides for the use of placement companies under this section, 
indicating that the participant is eligible for the services of 
such a company.

``SEC. 484. TEMPORARY SUBSIDIZED JOB CREATION.

  ``A State that establishes a program under this part may 
establish a program similar to the program known as `JOBS Plus' 
that has been operated by the State of Oregon under Federal law 
in effect immediately before the date this part first applies 
to the State of Oregon.

``SEC. 485. MICROENTERPRISE.

  ``(a) Grants and Loans to Nonprofit Organizations for the 
Provision of Technical Assistance, Training, and Credit to Low 
Income Entrepreneurs.--A State that establishes a program under 
this part may make grants and loans to nonprofit organizations 
to provide technical assistance, training, and credit to low 
income entrepreneurs for the purpose of establishing 
microenterprises.
  ``(b) Microenterprise Defined.--For purposes of this 
subsection, the term `microenterprise' means a commercial 
enterprise which has 5 or fewer employees, 1 or more of whom 
owns the enterprise.

``SEC. 486. WORK SUPPLEMENTATION PROGRAM.

  ``(a) In General.--A State that establishes a program under 
this part may institute a work supplementation program under 
which the State, to the extent it considers appropriate, may 
reserve the sums that would otherwise be payable under the 
State plan approved under part A to participants in the program 
and use the sums instead for the purpose of providing and 
subsidizing jobs for the participants (as described in 
subsection (c)(3) (A) and (B)), as an alternative to providing 
such assistance to the participants.
  ``(b) State Flexibility.--
          ``(1) Nothing in this part, or in any State plan 
        approved under part A, shall be construed to prevent a 
        State from operating (on such terms and conditions and 
        in such cases as the State may find to be necessary or 
        appropriate) a work supplementation program in 
        accordance with this section and section 484 (as in 
        effect immediately before the date this part first 
        applies to the State).
          ``(2) Notwithstanding any other provision of law, a 
        State may adjust the levels of the standards of need 
        under the State plan as the State determines to be 
        necessary and appropriate for carrying out a work 
        supplementation program under this section.
          ``(3) Notwithstanding any other provision of law, a 
        State operating a work supplementation program under 
        this section may provide that the need standards in 
        effect in those areas of the State in which the program 
        is in operation may be different from the need 
        standards in effect in the areas in which the program 
        is not in operation, and the State may provide that the 
        need standards for categories of recipients may vary 
        among such categories to the extent the State 
        determines to be appropriate on the basis of ability to 
        participate in the work supplementation program.
          ``(4) Notwithstanding any other provision of law, a 
        State may make such further adjustments in the amounts 
        of assistance provided under the plan to different 
        categories of recipients (as determined under paragraph 
        (3)) in order to offset increases in benefits from 
        needs-related programs (other than the State plan 
        approved under part A) as the State determines to be 
        necessary and appropriate to further the purposes of 
        the work supplementation program.
          ``(5) In determining the amounts to be reserved and 
        used for providing and subsidizing jobs under this 
        section as described in subsection (a), the State may 
        use a sampling methodology.
          ``(6) Notwithstanding any other provision of law, a 
        State operating a work supplementation program under 
        this section, may reduce or eliminate the amount of 
        earned income to be disregarded under the State plan as 
        the State determines to be necessary and appropriate to 
        further the purposes of the work supplementation 
        program.
  ``(c) Rules Relating to Supplemented Jobs.--
          ``(1) A work supplementation program operated by a 
        State under this section may provide that any 
        individual who is an eligible individual (as determined 
        under paragraph (2)) shall take a supplemented job (as 
        defined in paragraph (3)) to the extent that 
        supplemented jobs are available under the program. 
        Payments by the State to individuals or to employers 
        under the work supplementation program shall be treated 
        as expenditures incurred by the State for temporary 
        employment assistance under part A except as limited by 
        subsection (d).
          ``(2) For purposes of this section, an eligible 
        individual is an individual who is in a category which 
        the State determines should be eligible to participate 
        in the work supplementation program, and who would, at 
        the time of placement in the job involved, be eligible 
        for assistance under an approved State plan if the 
        State did not have a work supplementation program in 
        effect.
          ``(3) For purposes of this subsection, a supplemented 
        job is--
                  ``(A) a job provided to an eligible 
                individual by the State or local agency 
                administering the State plan under part A; or
                  ``(B) a job provided to an eligible 
                individual by any other employer for which all 
                or part of the wages are paid by the State or 
                local agency.
        A State may provide or subsidize under the program any 
        job which the State determines to be appropriate.
  ``(d) Cost Limitation.--The amount of the Federal payment to 
a State under section 413 for expenditures incurred in making 
payments to individuals and employers under a work 
supplementation program under this subsection shall not exceed 
an amount equal to the amount which would otherwise be payable 
under such section if the family of each individual employed in 
the program established in the State under this section had 
received the maximum amount of assistance providable under the 
State plan to such a family with no income (without regard to 
adjustments under subsection (b) of this section) for the 
lesser of--
          ``(1) 9 months; or
          ``(2) the number of months in which the individual 
        was employed in the program.
  ``(e) Rules of Interpretation.--
          ``(1) This section shall not be construed as 
        requiring the State or local agency administering the 
        State plan to provide employee status to an eligible 
        individual to whom the State or local agency provides a 
        job under the work supplementation program (or with 
        respect to whom the State or local agency provides all 
        or part of the wages paid to the individual by another 
        entity under the program), or as requiring any State or 
        local agency to provide that an eligible individual 
        filling a job position provided by another entity under 
        the program be provided employee status by the entity 
        during the first 13 weeks the individual fills the 
        position.
          ``(2) Wages paid under a work supplementation program 
        shall be considered to be earned income for purposes of 
        any provision of law.
  ``(f) Preservation of Medicaid Eligibility.--Any State that 
chooses to operate a work supplementation program under this 
section shall provide that any individual who participates in 
the program, and any child or relative of the individual (or 
other individual living in the same household as the 
individual) who would be eligible for assistance under the 
State plan approved under part A if the State did not have a 
work supplementation program, shall be considered individuals 
receiving assistance under the State plan approved under part A 
for purposes of eligibility for medical assistance under the 
State plan approved under title XIX.

``SEC. 487. PARTICIPATION RULES.

  ``(a) In General.--Except as provided in subsection (b), a 
State that establishes a program under this part may require 
any individual receiving assistance under the State plan 
approved under part A to participate in the program.
  ``(b) 2-Year Limitation on Participation.--
          ``(1) In general.--Except as provided in paragraph 
        (2), an individual may not participate in a State 
        program established under this part if the individual 
        has participated in the State program established under 
        this part for 24 months after the date the individual 
        first signed an agreement of mutual responsibility 
        under this part, excluding any month during which the 
        individual worked for an average of at least 25 hours 
        per week in a private sector job.
          ``(2) Authority to allow repeat participation.--
                  ``(A) In general.--Subject to subparagraph 
                (B) of this paragraph, a State may allow an 
                individual who, by reason of paragraph (1), 
                would be prohibited from participating in the 
                State program established under this part to 
                participate in the program for such additional 
                period or periods as the State determines 
                appropriate.
                  ``(B) Limitation on percentage of repeat 
                participants.--
                          ``(i) In general.--Except as provided 
                        in clause (ii) of this subparagraph, 
                        the number of individuals allowed under 
                        subparagraph (A) to participate during 
                        a program year in a State program 
                        established under this part shall not 
                        exceed--
                                  ``(I) 10 percent of the total 
                                number of individuals who 
                                participated in the State 
                                program established under this 
                                part or the State program 
                                established under part H during 
                                the immediately preceding 
                                program year; or
                                  ``(II) in the case of fiscal 
                                year 2004 or any succeeding 
                                fiscal year, 15 percent of such 
                                total number of individuals.
                          ``(ii) Authority to increase 
                        limitation.--
                                  ``(I) Petition.--A State may 
                                request the Secretary to 
                                increase to not more than 15 
                                percent the percentage 
                                limitation imposed by clause 
                                (i)(I) for a fiscal year before 
                                fiscal year 2004.
                                  ``(II) Authority to grant 
                                request.--The Secretary may 
                                approve a request made pursuant 
                                to subclause (I) if the 
                                Secretary deems it appropriate. 
                                The Secretary shall develop 
                                recommendations on the criteria 
                                that should be applied in 
                                evaluating requests under 
                                subclause (I).

``SEC. 488. CASELOAD PARTICIPATION RATES; PERFORMANCE MEASURES.

  ``(a) Participation Rates.--
          ``(1) Requirement.--A State that operates a program 
        under this part shall achieve a participation rate for 
        the following fiscal years of not less than the 
        following percentage:

``Fiscal year:                                               Percentage:
    1997......................................................       20 
    1998......................................................       24 
    1999......................................................       28 
    2000......................................................       32 
    2001......................................................       36 
    2002......................................................       40 
    2003 or later.............................................       52.

          ``(2) Participation rate defined.--
                  ``(A) In general.--As used in this 
                subsection, the term `participation rate' 
                means, with respect to a State and a fiscal 
                year, an amount equal to--
                          ``(i) the average monthly number of 
                        individuals who, during the fiscal 
                        year, participate in the State program 
                        established under this part or (if 
                        applicable) part G or H; divided by
                          ``(ii) the average monthly number of 
                        individuals who are not described in 
                        section 402(c)(1)(D) and for whom an 
                        individual responsibility plan is in 
                        effect under section 403 during the 
                        fiscal year.
                  ``(B) Special rule.--For each of the 1st 12 
                months after an individual ceases to receive 
                assistance under a State plan approved under 
                part A by reason of having become employed for 
                more than 25 hours per week in an unsubsidized 
                job in the private sector, the individual shall 
                be considered to be participating in the State 
                program established under this part, and to be 
                an adult recipient of such assistance, for 
                purposes of subparagraph (A).
          ``(3) State compliance reports.--Each State that 
        operates a program under this part for a fiscal year 
        shall submit to the Secretary a report on the 
        participation rate of the State for the fiscal year.
          ``(4) Effect of failure to meet participation 
        rates.--
                  ``(A) In general.--If a State reports that 
                the State has failed to achieve the 
                participation rate required by paragraph (1) 
                for the fiscal year, the Secretary may make 
                recommendations for changes in the State 
                program established under this part and (if the 
                State has established a program under part G) 
                the State program established under part G. The 
                State may elect to follow such recommendations, 
                and shall demonstrate to the Secretary how the 
                State will achieve the required participation 
                rates.
                  ``(B) Second consecutive failure.--
                Notwithstanding subparagraph (A), if a State 
                fails to achieve the participation rate 
                required by paragraph (1) for 2 consecutive 
                fiscal years, the Secretary may--
                          ``(i) require the State to make 
                        changes in the State program 
                        established under this part and (if the 
                        State has established a program under 
                        part G) the State program established 
                        under part G; and
                          ``(ii) reduce by 5 percent the amount 
                        otherwise payable to the State under 
                        section 413.
  ``(b) Performance Standards.--The Secretary shall develop 
standards to be used to measure the effectiveness of the 
programs established under this part and part G in moving 
recipients of assistance under the State plan approved under 
part A into full-time unsubsidized employment.
  ``(c) Performance-Based Measures.--
          ``(1) Establishment.--The Secretary shall, by 
        regulation, establish measures of the effectiveness of 
        the State programs established under this part and 
        under part G in moving recipients of assistance under 
        the State plan approved under part A into full-time 
        unsubsidized employment, based on the performance of 
        such programs.
          ``(2) Annual compliance reports.--Each State that 
        operates a program under this part shall submit to the 
        Secretary annual reports that compare the achievements 
        of the program with the performance-based measures 
        established under paragraph (1).

``SEC. 489. FEDERAL ROLE.

  ``(a) Approval of State Plans.--
          ``(1) In general.--Within 60 days after the date a 
        State submits to the Secretary a plan that provides for 
        the establishment and operation of a work first program 
        that meets the requirements of section 481, the 
        Secretary shall approve the plan.
          ``(2) Authority to extend approval deadline.--The 60-
        day deadline established in paragraph (1) with respect 
        to a State may be extended in accordance with an 
        agreement between the Secretary and the State.
  ``(b) Performance-Based Measures.--The Secretary shall, by 
regulation, establish measures of the effectiveness of the 
State program established under this part and (if the State has 
established a program under part G) the State program 
established under part G in moving recipients of assistance 
under the State plan approved under part A into full-time 
unsubsidized employment, based on the performance of such 
programs.
  ``(c) Effect of Failure To Meet Participation Rates.--
          ``(1) In general.--If a State reports that the State 
        has failed to achieve the participation rate required 
        by section 488 for the fiscal year, the Secretary may 
        make recommendations for changes in the State program 
        established under this part and (if the State has 
        established a program under part G) the State program 
        established under part G. The State may elect to follow 
        such recommendations, and shall demonstrate to the 
        Secretary how the State will achieve the required 
        participation rates.
          ``(2) Second consecutive failure.--Notwithstanding 
        paragraph (1), if the State has failed to achieve the 
        participation rates required by section 488 for 2 
        consecutive fiscal years, the Secretary may require the 
        State to make changes in the State program established 
        under this part and (if the State has established a 
        program under part G) the State program established 
        under part G.

                       ``Part G--Workfare Program

``SEC. 490. ESTABLISHMENT AND OPERATION OF PROGRAM.

  ``(a) In General.--A State that establishes a work first 
program under part F may establish and carry out a workfare 
program that meets the requirements of this part, unless the 
State has established a job placement voucher program under 
part H.
  ``(b) Objective.--The objective of the workfare program is 
for each program participant to find and hold a full-time 
unsubsidized paid job, and for this goal to be achieved in a 
cost-effective fashion.
  ``(c) Case Management Teams.--The State shall assign to each 
program participant a case management team that shall meet with 
the participant and assist the participant to choose the most 
suitable workfare job under subsection (e), (f), or (g) and to 
eventually obtain a full-time unsubsidized paid job.
  ``(d) Provision of Jobs.--The State shall provide each 
participant in the program with a community service job that 
meets the requirements of subsection (e) or a subsidized job 
that meets the requirements of subsection (f) or (g).
  ``(e) Community Service Jobs.--
          ``(1) In general.--Except as provided in paragraphs 
        (2) and (3), each participant shall work for not fewer 
        than 30 hours per week (or, at the option of the State, 
        20 hours per week during fiscal years 1997 and 1998, 
        not fewer than 25 hours per week during fiscal year 
        1999, not fewer than 30 hours per week during fiscal 
        years 2000 and 2001, and not fewer than 35 hours per 
        week thereafter) in a community service job, and be 
        paid at a rate which is not greater than 75 percent 
        (or, at the option of the State, 100 percent) of the 
        maximum amount of assistance that may be provided under 
        the State plan approved under part A to a family of the 
        same size and composition with no income.
          ``(2) Exception.--(A) If the participant has obtained 
        unsubsidized part-time employment in the private 
        sector, the State shall provide the participant with a 
        part-time community service job.
          ``(B) If the State provides a participant a part-time 
        community service job under subparagraph (A), the State 
        shall ensure that the participant works for not fewer 
        than 30 hours per week.
          ``(3) Wages not considered earned income.--Wages paid 
        under a workfare program shall not be considered to be 
        earned income for purposes of any provision of law.
          ``(4) Community service job defined.--For purposes of 
        this section, the term `community service job' means--
                  ``(A) a job provided to a participant by the 
                State administering the State plan under part 
                A; or
                  ``(B) a job provided to a participant by any 
                other employer for which all or part of the 
                wages are paid by the State.
        A State may provide or subsidize under the program any 
        job which the State determines to be appropriate.
  ``(f) Temporary Subsidized Job Creation.--A State that 
establishes a workfare program under this part may establish a 
program similar to the program operated by the State of Oregon, 
which is known as `JOBS Plus'.
  ``(g) Work Supplementation Program.--
          ``(1) In general.--A State that establishes a 
        workfare program under this part may institute a work 
        supplementation program under which the State, to the 
        extent it considers appropriate, may reserve the sums 
        that would otherwise be payable to participants in the 
        program as a community service minimum wage and use the 
        sums instead for the purpose of providing and 
        subsidizing private sector jobs for the participants.
          ``(2) Employer agreement.--An employer who provides a 
        private sector job to a participant under paragraph (1) 
        shall agree to provide to the participant an amount in 
        wages equal to the poverty threshold for a family of 
        three.
  ``(h) Job Search Requirement.--The State shall require each 
participant to spend a minimum of 5 hours per week on 
activities related to securing unsubsidized full-time 
employment in the private sector.
  ``(i) Duration of Participation.--
          ``(1) In general.--Except as provided in paragraph 
        (2), an individual may not participate for more than 2 
        years in a workfare program under this part.
          ``(2) Authority to allow repeated participation.--
                  ``(A) In general.--Subject to subparagraph 
                (B), a State may allow an individual who, by 
                reason of paragraph (1), would be prohibited 
                from participating in the State program 
                established under this part to participate in 
                the program for such additional period or 
                periods as the State determines appropriate.
                  ``(B) Limitation on percentage of repeat 
                participants.--
                          ``(i) In general.--Except as provided 
                        in clause (ii), the number of 
                        individuals allowed under subparagraph 
                        (A) to participate during a program 
                        year in a State program established 
                        under this part shall not exceed 10 
                        percent of the total number of 
                        individuals who participated in the 
                        program during the immediately 
                        preceding program year.
                          ``(ii) Authority to increase 
                        limitation.--
                                  ``(I) Petition.--A State may 
                                request the Secretary to 
                                increase the percentage 
                                limitation imposed by clause 
                                (i) to not more than 15 
                                percent.
                                  ``(II) Authority to grant 
                                request.--The Secretary may 
                                approve a request made pursuant 
                                to subclause (I) if the 
                                Secretary deems it appropriate. 
                                The Secretary shall develop 
                                recommendations on the criteria 
                                that should be applied in 
                                evaluating requests under 
                                subclause (I).
  ``(j) Use of Placement Companies.--A State that establishes a 
workfare program under this part may enter into contracts with 
private companies (whether operated for profit or not for 
profit) for the placement of participants in the program in 
positions of full-time employment, preferably in the private 
sector, for wages sufficient to eliminate the need of such 
participants for cash assistance in accordance with section 
483.
  ``(k) Maximum of 3 Community Service Jobs.--A program 
participant may not receive more than 3 community service jobs 
under the program.

                ``Part H--Job Placement Voucher Program

``SEC. 490A. JOB PLACEMENT VOUCHER PROGRAM.

  ``A State that is not operating a workfare program under part 
G may establish a job placement voucher program that meets the 
following requirements:
          ``(1) The program shall offer each program 
        participant a voucher which the participant may use to 
        obtain employment in the private sector.
          ``(2) An employer who receives a voucher issued under 
        the program from an individual may redeem the voucher 
        at any time after the individual has been employed by 
        the employer for 6 months, unless another employee of 
        the employer was displaced by the employment of the 
        individual.
          ``(3) Upon presentation of a voucher by an employer 
        to the State agency responsible for the administration 
        of the program, the State agency shall pay to the 
        employer an amount equal to 50 percent of the total 
        amount of assistance provided under the State plan 
        approved under part A to the family of which the 
        individual is a member for the most recent 12 months 
        for which the family was eligible for such 
        assistance.''.
  (c) Funding.--Section 413(a), as added by section 9101(a) of 
this Act, is amended--
          (1) by striking ``Subject to'' and inserting the 
        following:
          ``(1) In general.--Subject to''; and
          (2) by inserting after and below the end the 
        following:
          ``(2) Work first and other programs.--(A) Each State 
        that is operating a program in accordance with a plan 
        approved under part F and a program in accordance with 
        part G or H shall be entitled to payments under 
        paragraph (3) for any fiscal year in an amount equal to 
        the sum of the applicable percentages (specified in 
        such paragraph) of its expenditures to carry out such 
        programs (subject to limitations prescribed by or 
        pursuant to such parts or this part on expenditures 
        that may be included for purposes of determining 
        payment under paragraph (3)), but such payments for any 
        fiscal year in the case of any State may not exceed the 
        limitation determined under subparagraph (B) with 
        respect to the State.
          ``(B) The limitation determined under this 
        subparagraph with respect to a State for any fiscal 
        year is the amount that bears the same ratio to the 
        amount specified in subparagraph (C) for such fiscal 
        year as the average monthly number of adult recipients 
        (as defined in subparagraph (D)) in the State in the 
        preceding fiscal year bears to the average monthly 
        number of such recipients in all the States for such 
        preceding year.
          ``(C)(i) The amount specified in this subparagraph 
        is--
                  ``(I) $1,600,000,000 for fiscal year 1997;
                  ``(II) $1,600,000,000 for fiscal year 1998;
                  ``(III) $1,900,000,000 for fiscal year 1999;
                  ``(IV) $2,500,000,000 for fiscal year 2000; 
                and
                  ``(V) $3,200,000,000 for fiscal year 2001; 
                and
                  ``(VI) $4,700,000,000 for fiscal year 2002; 
                and
                  ``(VII) the amount determined under clause 
                (ii) for fiscal year 2003 and each succeeding 
                fiscal year.
          ``(ii) The amount determined under this clause for a 
        fiscal year is the product of the following:
                  ``(I) The amount specified in this 
                subparagraph for the immediately preceding 
                fiscal year.
                  ``(II) 1.00 plus the percentage (if any) by 
                which--
                          ``(aa) the average of the Consumer 
                        Price Index (as defined in section 
                        1(f)(5) of the Internal Revenue Code of 
                        1986) for the most recent 12-month 
                        period for which such information is 
                        available; exceeds
                          ``(bb) the average of the Consumer 
                        Price Index (as so defined) for the 12-
                        month period ending on June 30 of the 
                        2nd preceding fiscal year.
                  ``(III) The amount that bears the same ratio 
                to the amount specified in this subparagraph 
                for the immediately preceding fiscal year as 
                the number of individuals whom the Secretary 
                estimates will participate in programs operated 
                under part F, G, or H during the fiscal year 
                bears to the total number of individuals who 
                participated in such programs during such 
                preceding fiscal year.
          ``(D) For purposes of this paragraph, the term `adult 
        recipient' in the case of any State means an individual 
        other than a dependent child (unless such child is the 
        custodial parent of another dependent child) whose 
        needs are met (in whole or in part) with assistance 
        provided under the State plan approved under this part.
          ``(E) For purposes of subparagraph (D), the term 
        `dependent child' means a needy child (i) who has been 
        deprived of parental support or care by reason of the 
        death, continued absence from the home (other than 
        absence occasioned solely by reason of the performance 
        of active duty in the uniformed services of the United 
        States), or physical or mental incapacity of a parent, 
        and who is living with his father, mother, grandfather, 
        grandmother, brother, sister, stepfather, stepmother, 
        stepbrother, stepsister, uncle, aunt, first cousin, 
        nephew, or niece, in a place of residence maintained by 
        one or more of such relatives as his or their own home, 
        and (ii) who is (I) under the age of eighteen, or (II) 
        at the option of the State, under the age of nineteen 
        and a full-time student in a secondary school (or in 
        the equivalent level of vocational or technical 
        training), if, before he attains age nineteen, he may 
        reasonably be expected to complete the program of such 
        secondary school (or such training).
          ``(F) For purposes of subparagraph (E), the term 
        `relative with whom any dependent child is living' 
        means the individual who is one of the relatives 
        specified in subparagraph (E) and with whom such child 
        is living (within the meaning of such subsection) in a 
        place of residence maintained by such individual 
        (himself or together with any one or more of the other 
        relatives so specified) as his (or their) own home.
          ``(3)(A) In lieu of any payment under paragraph (1) 
        therefor, the Secretary shall pay to each State that is 
        operating a program in accordance with a plan approved 
        under part F and a program in accordance with part G or 
        H, with respect to expenditures by the State to carry 
        out such programs, an amount equal to--
                  ``(i) with respect to so much of such 
                expenditures in a fiscal year as do not exceed 
                the State's expenditures in the fiscal year 
                1987 with respect to which payments were made 
                to such State from its allotment for such 
                fiscal year pursuant to part C of this title as 
                then in effect, 90 percent; and
                  ``(ii) with respect to so much of such 
                expenditures in a fiscal year as exceed the 
                amount described in clause (i)--
                          ``(I) 50 percent, in the case of 
                        expenditures for administrative costs 
                        made by a State in operating such 
                        programs for such fiscal year (other 
                        than the personnel costs for staff 
                        employed full-time in the operation of 
                        such program) and the costs of 
                        transportation and other work-related 
                        supportive services; and
                          ``(II) 60 percent or the Federal 
                        medical assistance percentage (as 
                        defined in the last sentence of section 
                        1118), whichever is the greater, in the 
                        case of expenditures made by a State in 
                        operating such programs for such fiscal 
                        year (other than for costs described in 
                        subclause (I)).
          ``(B) With respect to the amount for which payment is 
        made to a State under subparagraph (A)(i), the State's 
        expenditures for the costs of operating such programs 
        may be in cash or in kind, fairly evaluated.
          ``(C) Not more than 10 percent of the amount payable 
        to a State under this paragraph for a quarter may be 
        for expenditures made during the quarter with respect 
        to program participants who are not eligible for 
        assistance under the State plan approved under this 
        part.''.
  (d) Secretary's Special Adjustment Fund.--Section 413(a), as 
added by section 9101(a) of this Act, is amended by adding at 
the end the following:
          ``(4) Secretary's special adjustment fund.--(A) There 
        shall be available to the Secretary from the amount 
        appropriated for payments under paragraph (2) for 
        States' programs under parts F and G for fiscal year 
        1996, $300,000,000 for special adjustments to States' 
        limitations on Federal payments for such programs.
          ``(B) A State may, not later than March 1 and 
        September 1 of each fiscal year, submit to the 
        Secretary a request to adjust the limitation on 
        payments under this section with respect to its program 
        under part F (and, in fiscal years after 1997) its 
        program under part G for the following fiscal year. The 
        Secretary shall only consider such a request from a 
        State which has, or which demonstrates convincingly on 
        the basis of estimates that it will, submit allowable 
        claims for Federal payment in the full amount available 
        to it under paragraph (2) in the current fiscal year 
        and obligated 95 percent of its full amount in the 
        prior fiscal year. The Secretary shall by regulation 
        prescribe criteria for the equitable allocation among 
        the States of Federal payments pursuant to adjustments 
        of the limitations referred to in the preceding 
        sentence in the case where the requests of all States 
        that the Secretary finds reasonable exceed the amount 
        available, and, within 30 days following the dates 
        specified in this paragraph, will notify each State 
        whether one or more of its limitations will be adjusted 
        in accordance with the State's request and the amount 
        of the adjustment (which may be some or all of the 
        amount requested).
          ``(C) The Secretary may adjust the limitation on 
        Federal payments to a State for a fiscal year under 
        paragraph (2), and upon a determination by the 
        Secretary that (and the amount by which) a State's 
        limitation should be raised, the amount specified in 
        such paragraph shall be considered to be so increased 
        for the following fiscal year.
          ``(D) The amount made available under subparagraph 
        (A) for special adjustments shall remain available to 
        the Secretary until expended. That amount shall be 
        reduced by the sum of the adjustments approved by the 
        Secretary in any fiscal year, and the amount shall be 
        increased in a fiscal year by the amount by which all 
        States' limitations under paragraph (2) of this 
        subsection and section 2008 for a fiscal year exceeded 
        the sum of the Federal payments under such provisons of 
        law for such fiscal year, but for fiscal years after 
        1997, such amount at the end of such fiscal year shall 
        not exceed $400,000,000.''.
  (e) Conforming Amendments.--
          (1) Section 1115(b)(2)(A) (42 U.S.C. 1315(b)(2)(A)) 
        is amended by striking ``, and 402(a)(19) (relating to 
        the work incentive program)''.
          (2) Section 1108 (42 U.S.C. 1308) is amended--
                  (A) in subsection (a), by striking ``or, in 
                the case of part A of title IV, section 
                403(k)''; and
                  (B) in subsection (d), by striking 
                ``(exclusive of any amounts on account of 
                services and items to which, in the case of 
                part A of such title, section 403(k) 
                applies)''.
          (3) Section 1902(a)(10)(A)(i)(I) (42 U.S.C. 
        1396a(a)(19)(A)(i)(I)) is amended--
                  (A) by striking ``402(a)(37), 406(h), or''; 
                and
                  (B) by striking ``482(e)(6)'' and inserting 
                ``486(f)''.
          (4) Section 1928(a)(1) (42 U.S.C. 1396s(a)(1)) is 
        amended by striking ``482(e)(6)'' and inserting 
        ``486(f)''.
  (f) Intent of the Congress.--The Congress intends for State 
activities under section 484 of the Social Security Act (as 
added by the amendment made by section 9301(a) of this Act) to 
emphasize the use of the funds that would otherwise be used to 
provide individuals with assistance under part A of title IV of 
the Social Security Act and with food stamp benefits under the 
Food Stamp Act of 1977, to subsidize the wages of such 
individuals in temporary jobs.
  (g) Sense of the Congress.--It is the sense of the Congress 
that States should target individuals who have not attained 25 
years of age for participation in the program established by 
the State under part F of title IV of the Social Security Act 
(as added by the amendment made by section 9301(a) of this 
section) in order to break the cycle of welfare dependency.

SEC. 9302. REGULATIONS.

  The Secretary of Health and Human Services shall prescribe 
such regulations as may be necessary to implement the 
amendments made by this subtitle.

SEC. 9303. APPLICABILITY TO STATES.

  (a) State Option to Accelerate Applicability.--If a State 
formally notifies the Secretary of Health and Human Services 
that the State desires to accelerate the applicability to the 
State of the amendments made by this subtitle, the amendments 
shall apply to the State on and after such earlier date as the 
State may select.
  (b) State Option to Delay Applicability Until Waivers 
Expire.--The amendments made by this subtitle shall not apply 
to a State with respect to which there is in effect a waiver 
issued under section 1115 of the Social Security Act for the 
State program established under part F of title IV of such Act, 
until the waiver expires, if the State formally notifies the 
Secretary of Health and Human Services that the State desires 
to so delay such effective date.
  (c) Authority of the Secretary of Health and Human Services 
to Delay Applicability to a State.--If a State formally 
notifies the Secretary of Health and Human Services that the 
State desires to delay the applicability to the State of the 
amendments made by this title, the amendments shall apply to 
the State on and after any later date agreed upon by the 
Secretary and the State.

     Subtitle D--Family Responsibility And Improved Child Support 
                              Enforcement

CHAPTER 1--ELIGIBILITY AND OTHER MATTERS CONCERNING TITLE IV-D PROGRAM 
                                CLIENTS

SEC. 9401. STATE OBLIGATION TO PROVIDE PATERNITY ESTABLISHMENT AND 
                    CHILD SUPPORT ENFORCEMENT SERVICES.

  (a) State Law Requirements.--Section 466(a) (42 U.S.C. 
666(a)) is amended by inserting after paragraph (11) the 
following:
          ``(12) Use of central case registry and centralized 
        collections unit.--Procedures under which--
                  ``(A) every child support order established 
                or modified in the State on or after October 1, 
                1998, is recorded in the central case registry 
                established in accordance with section 454A(e); 
                and
                  ``(B) child support payments are collected 
                through the centralized collections unit 
                established in accordance with section 454B--
                          ``(i) on and after October 1, 1998, 
                        under each order subject to wage 
                        withholding under section 466(b); and
                          ``(ii) on and after October 1, 1999, 
                        under each other order required to be 
                        recorded in such central case registry 
                        under this paragraph or section 
                        454A(e), except as provided in 
                        subparagraph (C); and
                  ``(C)(i) parties subject to a child support 
                order described in subparagraph (B)(ii) may opt 
                out of the procedure for payment of support 
                through the centralized collections unit (but 
                not the procedure for inclusion in the central 
                case registry) by filing with the State agency 
                a written agreement, signed by both parties, to 
                an alternative payment procedure; and
                  ``(ii) an agreement described in clause (i) 
                becomes void whenever either party advises the 
                State agency of an intent to vacate the 
                agreement.''.
  (b) State Plan Requirements.--Section 454 (42 U.S.C. 654) is 
amended--
          (1) by striking paragraph (4) and inserting the 
        following:
          ``(4) provide that such State will undertake--
                  ``(A) to provide appropriate services under 
                this part to--
                          ``(i) each child with respect to whom 
                        an assignment is effective under 
                        section 403(b)(1)(E)(i), 471(a)(17), or 
                        1912 (except in cases where the State 
                        agency determines, in accordance with 
                        paragraph (25), that it is against the 
                        best interests of the child to do so); 
                        and
                          ``(ii) each child not described in 
                        clause (i)--
                                  ``(I) with respect to whom an 
                                individual applies for such 
                                services; and
                                  ``(II) (on and after October 
                                1, 1998) each child with 
                                respect to whom a support order 
                                is recorded in the central 
                                State case registry established 
                                under section 454A, regardless 
                                of whether application is made 
                                for services under this part; 
                                and
                  ``(B) to enforce the support obligation 
                established with respect to the custodial 
                parent of a child described in subparagraph (A) 
                unless the parties to the order which 
                establishes the support obligation have opted, 
                in accordance with section 466(a)(12)(C), for 
                an alternative payment procedure.''; and
          (2) in paragraph (6)--
                  (A) by striking subparagraph (A) and 
                inserting the following:
                  ``(A) services under the State plan shall be 
                made available to nonresidents on the same 
                terms as to residents;'';
                  (B) in subparagraph (B)--
                          (i) by inserting ``on individuals not 
                        receiving assistance under part A'' 
                        after ``such services shall be 
                        imposed''; and
                          (ii) by inserting ``but no fees or 
                        costs shall be imposed on any absent or 
                        custodial parent or other individual 
                        for inclusion in the central State 
                        registry maintained pursuant to section 
                        454A(e)''; and
                  (C) in each of subparagraphs (B), (C), and 
                (D)--
                          (i) by indenting such subparagraph 
                        and aligning its left margin with the 
                        left margin of subparagraph (A); and
                          (ii) by striking the final comma and 
                        inserting a semicolon.
  (c) Conforming Amendments.--
          (1) Section 452(g)(2)(A) (42 U.S.C. 652(g)(2)(A)) is 
        amended by striking ``454(6)'' each place it appears 
        and inserting ``454(4)(A)(ii)''.
          (2) Section 454(23) (42 U.S.C. 654(23)) is amended, 
        effective October 1, 1998, by striking ``information as 
        to any application fees for such services and''.
          (3) Section 466(a)(3)(B) (42 U.S.C. 666(a)(3)(B)) is 
        amended by striking ``in the case of overdue support 
        which a State has agreed to collect under section 
        454(6)'' and inserting ``in any other case''.
          (4) Section 466(e) (42 U.S.C. 666(e)) is amended by 
        striking ``or (6)''.

SEC. 9402. DISTRIBUTION OF PAYMENTS.

  (a) Distributions Through State Child Support Enforcement 
Agency to Former Assistance Recipients.--Section 454(5) (42 
U.S.C. 654(5)) is amended--
          (1) in subparagraph (A)--
                  (A) by striking ``section 402(a)(26) is 
                effective,'' and inserting ``section 
                403(b)(1)(E)(i) is effective, except as 
                otherwise specifically provided in section 464 
                or 466(a)(3),''; and
                  (B) by striking ``except that'' and all that 
                follows through the semicolon; and
          (2) in subparagraph (B), by striking ``, except'' and 
        all that follows through ``medical assistance''.
  (b) Distribution to a Family Currently Receiving Temporary 
Employment Assistance.--Section 457 (42 U.S.C. 657) is 
amended--
          (1) by striking subsection (a) and redesignating 
        subsection (b) as subsection (a);
          (2) in subsection (a) (as so redesignated)--
                  (A) in the matter preceding paragraph (2), to 
                read as follows:
  ``(a) In the Case of a Family Receiving TEA.--Amounts 
collected under this part during any month as support of a 
child who is receiving assistance under part A (or a parent or 
caretaker relative of such a child) shall (except in the case 
of a State exercising the option under subsection (b)) be 
distributed as follows:
          ``(1) an amount equal to the amount that will be 
        disregarded pursuant to section 402(d)(2)(C) shall be 
        taken from each of--
                  ``(A) the amounts received in a month which 
                represent payments for that month; and
                  ``(B) the amounts received in a month which 
                represent payments for a prior month which were 
                made by the absent parent in that prior month;
        and shall be paid to the family without affecting its 
        eligibility for assistance or decreasing any amount 
        otherwise payable as assistance to such family during 
        such month;'';
                  (B) in paragraph (4), by striking ``or (B)'' 
                and all that follows through the period and 
                inserting ``; then (B) from any remainder, 
                amounts equal to arrearages of such support 
                obligations assigned, pursuant to part A, to 
                any other State or States shall be paid to such 
                other State or States and used to pay any such 
                arrearages (with appropriate reimbursement of 
                the Federal Government to the extent of its 
                participation in the financing); and then (C) 
                any remainder shall be paid to the family.''; 
                and
          (3) by inserting after subsection (a) (as so 
        redesignated) the following new subsection:
  ``(b) Alternative Distribution in Case of Family Receiving 
TEA.--In the case of a State electing the option under this 
subsection, amounts collected as described in subsection (a) 
shall be distributed as follows:
          ``(1) an amount equal to the amount that will be 
        disregarded pursuant to section 402(d)(2)(C) shall be 
        taken from each of--
                  ``(A) the amounts received in a month which 
                represent payments for that month; and
                  ``(B) the amounts received in a month which 
                represent payments for a prior month which were 
                made by the absent parent in that prior month;
        and shall be paid to the family without affecting its 
        eligibility for assistance or decreasing any amount 
        otherwise payable as assistance to such family during 
        such month;
          ``(2) second, from any remainder, amounts equal to 
        the balance of support owed for the current month shall 
        be paid to the family;
          ``(3) third, from any remainder, amounts equal to 
        arrearages of such support obligations assigned, 
        pursuant to part A, to the State making the collection 
        shall be retained and used by such State to pay any 
        such arrearages (with appropriate reimbursement of the 
        Federal Government to the extent of its participation 
        in the financing);
          ``(4) fourth, from any remainder, amounts equal to 
        arrearages of such support obligations assigned, 
        pursuant to part A, to any other State or States shall 
        be paid to such other State or States and used to pay 
        any such arrearages (with appropriate reimbursement of 
        the Federal Government to the extent of its 
        participation in the financing); and
          ``(5) fifth, any remainder shall be paid to the 
        family.''.
  (c) Distribution to a Family Not Receiving TEA.--Section 
457(c) (42 U.S.C. 657(c)) is amended to read as follows:
  ``(c) Distributions in Case of Family Not Receiving TEA.--
Amounts collected by a State agency under this part during any 
month as support of a child who is not receiving assistance 
under part A (or of a parent or caretaker relative of such a 
child) shall (subject to the remaining provisions of this 
section) be distributed as follows:
          ``(1) first, amounts equal to the total of such 
        support owed for such month shall be paid to the 
        family;
          ``(2) second, from any remainder, amounts equal to 
        arrearages of such support obligations for months 
        during which such child did not receive assistance 
        under part A shall be paid to the family;
          ``(3) third, from any remainder, amounts equal to 
        arrearages of such support obligations assigned to the 
        State making the collection pursuant to part A shall be 
        retained and used by such State to pay any such 
        arrearages (with appropriate reimbursement of the 
        Federal Government to the extent of its participation 
        in the financing); and
          ``(4) fourth, from any remainder, amounts equal to 
        arrearages of such support obligations assigned to any 
        other State pursuant to part A shall be paid to such 
        other State or States, and used to pay such arrearages, 
        in the order in which such arrearages accrued (with 
        appropriate reimbursement of the Federal Government to 
        the extent of its participation in the financing).''.
  (d) Distribution to a Child Receiving Assistance Under Title 
IV-E.--Section 457(d) (42 U.S.C. 657(d)) is amended, in the 
matter preceding paragraph (1), by striking ``Notwithstanding 
the preceding provisions of this section, amounts'' and 
inserting the following:
  ``(d) Distributions in Case of a Child Receiving Assistance 
Under Title IV-E.--Amounts''.
  (e) Regulations.--The Secretary of Health and Human Services 
shall promulgate regulations under part A of title IV of the 
Social Security Act, establishing standards applicable to 
States electing the alternative formula under section 457(b) of 
such Act for distribution of collections on behalf of families 
receiving temporary employment assistance, designed to minimize 
irregular monthly payments to such families.
  (f) Clerical Amendments.--Section 454 (42 U.S.C. 654) is 
amended--
          (1) in paragraph (11)--
                  (A) by striking ``(11)'' and inserting 
                ``(11)(A)''; and
                  (B) by inserting after the semicolon ``and''; 
                and
          (2) by redesignating paragraph (12) as subparagraph 
        (B) of paragraph (11).
  (g) Effective Dates.--
          (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall 
        become effective on October 1, 1996.
          (2) Family not receiving tea.--The amendment made by 
        subsection (c) shall become effective on October 1, 
        1999.
          (3) Special rules.--
                  (A) Applicability.--A State may elect to have 
                the amendments made by any subsection of this 
                section become effective only with respect to 
                child support cases beginning on or after the 
                effective date of such subsection.
                  (B) Delayed implementation.--A State may 
                elect to have the amendments made by this 
                section (other than subsection (c)) become 
                effective on a date later than October 1, 1996, 
                which date shall coincide with the operation of 
                the single statewide automated data processing 
                and information retrieval system required by 
                section 454A of the Social Security Act (as 
                added by section 9415(a)(2) of this Act) and 
                the State centralized collection unit required 
                by section 454B of the Social Security Act (as 
                added by section 9422(b) of this Act).

SEC. 9403. DUE PROCESS RIGHTS.

  (a) In General.--Section 454 (42 U.S.C. 654), as amended by 
section 9402(f) of this Act, is amended by inserting after 
paragraph (11) the following new paragraph:
          ``(12) provide for procedures to ensure that--
                  ``(A) individuals who are applying for or 
                receiving services under this part, or are 
                parties to cases in which services are being 
                provided under this part--
                          ``(i) receive notice of all 
                        proceedings in which support 
                        obligations might be established or 
                        modified; and
                          ``(ii) receive a copy of any order 
                        establishing or modifying a child 
                        support obligation, or (in the case of 
                        a petition for modification) a notice 
                        of determination that there should be 
                        no change in the amount of the child 
                        support award, within 14 days after 
                        issuance of such order or 
                        determination;
                  ``(B) individuals applying for or receiving 
                services under this part have access to a fair 
                hearing that meets standards established by the 
                Secretary and ensures prompt consideration and 
                resolution of complaints (but the resort to 
                such procedure shall not stay the enforcement 
                of any support order); and
                  ``(C) individuals adversely affected by the 
                establishment or modification of (or, in the 
                case of a petition for modification, the 
                determination that there should be no change 
                in) a child support order shall be afforded not 
                less than 30 days after the receipt of the 
                order or determination to initiate proceedings 
                to challenge such order or determination;''.
  (b) Effective Date.--The amendment made by subsection (a) 
shall become effective on October 1, 1997.

SEC. 9404. PRIVACY SAFEGUARDS.

  (a) State Plan Requirement.--Section 454 (42 U.S.C. 454) is 
amended--
          (1) by striking ``and'' at the end of paragraph (23);
          (2) by striking the period at the end of paragraph 
        (24) and inserting ``; and''; and
          (3) by adding after paragraph (24) the following:
          ``(25) will have in effect safeguards applicable to 
        all sensitive and confidential information handled by 
        the State agency designed to protect the privacy rights 
        of the parties, including--
                  ``(A) safeguards against unauthorized use or 
                disclosure of information relating to 
                proceedings or actions to establish paternity, 
                or to establish or enforce support;
                  ``(B) prohibitions on the release of 
                information on the whereabouts of one party to 
                another party against whom a protective order 
                with respect to the former party has been 
                entered; and
                  ``(C) prohibitions on the release of 
                information on the whereabouts of one party to 
                another party if the State has reason to 
                believe that the release of the information may 
                result in physical or emotional harm to the 
                former party.''.
  (b) Effective Date.--The amendment made by subsection (a) 
shall become effective on October 1, 1997.

             CHAPTER 2--PROGRAM ADMINISTRATION AND FUNDING

SEC. 9411. FEDERAL MATCHING PAYMENTS.

  (a) Increased Base Matching Rate.--Section 455(a)(2) (42 
U.S.C. 655(a)(2)) is amended to read as follows:
          ``(2) The applicable percent for a quarter for 
        purposes of paragraph (1)(A) is--
                  ``(A) for fiscal year 1997, 69 percent,
                  ``(B) for fiscal year 1998, 72 percent, and
                  ``(C) for fiscal year 1999 and succeeding 
                fiscal years, 75 percent.''.
  (b) Maintenance of Effort.--Section 455 (42 U.S.C. 655) is 
amended--
          (1) in subsection (a)(1), in the matter preceding 
        subparagraph (A), by striking ``From'' and inserting 
        ``Subject to subsection (c), from''; and
          (2) by inserting after subsection (b) the following 
        new subsection:
  ``(c) Maintenance of Effort.--Notwithstanding the provisions 
of subsection (a), total expenditures for the State program 
under this part for fiscal year 1997 and each succeeding fiscal 
year, reduced by the percentage specified for such fiscal year 
under subsection (a)(2)(A), (B), or (C)(i), shall not be less 
than such total expenditures for fiscal year 1996, reduced by 
66 percent.''.

SEC. 9412. PERFORMANCE-BASED INCENTIVES AND PENALTIES.

  (a) Incentive Adjustments to Federal Matching Rate.--Section 
458 (42 U.S.C. 658) is amended to read as follows:

                ``incentive adjustments to matching rate

  ``Sec. 458. (a) Incentive Adjustment.--(1) In General.--In 
order to encourage and reward State child support enforcement 
programs which perform in an effective manner, the Federal 
matching rate for payments to a State under section 
455(a)(1)(A), for each fiscal year beginning on or after 
October 1, 1998, shall be increased by a factor reflecting the 
sum of the applicable incentive adjustments (if any) determined 
in accordance with regulations under this section with respect 
to Statewide paternity establishment and to overall performance 
in child support enforcement.
  ``(2) Standards.--(A) In General.--The Secretary shall 
specify in regulations--
          ``(i) the levels of accomplishment, and rates of 
        improvement as alternatives to such levels, which 
        States must attain to qualify for incentive adjustments 
        under this section; and
          ``(ii) the amounts of incentive adjustment that shall 
        be awarded to States achieving specified accomplishment 
        or improvement levels, which amounts shall be 
        graduated, ranging up to--
                  ``(I) 5 percentage points, in connection with 
                Statewide paternity establishment; and
                  ``(II) 10 percentage points, in connection 
                with overall performance in child support 
                enforcement.
  ``(B) Limitation.--In setting performance standards pursuant 
to subparagraph (A)(i) and adjustment amounts pursuant to 
subparagraph (A)(ii), the Secretary shall ensure that the 
aggregate number of percentage point increases as incentive 
adjustments to all States do not exceed such aggregate 
increases as assumed by the Secretary in estimates of the cost 
of this section as of June 1995, unless the aggregate 
performance of all States exceeds the projected aggregate 
performance of all States in such cost estimates.
  ``(3) Determination of Incentive Adjustment.--The Secretary 
shall determine the amount (if any) of incentive adjustment due 
each State on the basis of the data submitted by the State 
pursuant to section 454(15)(B) concerning the levels of 
accomplishment (and rates of improvement) with respect to 
performance indicators specified by the Secretary pursuant to 
this section.
  ``(4) Fiscal Year Subject to Incentive Adjustment.--The total 
percentage point increase determined pursuant to this section 
with respect to a State program in a fiscal year shall apply as 
an adjustment to the applicable percent under section 455(a)(2) 
for payments to such State for the succeeding fiscal year.
  ``(5) Recycling of Incentive Adjustment.--A State shall 
expend in the State program under this part all funds paid to 
the State by the Federal Government as a result of an incentive 
adjustment under this section.
  ``(b) Meaning of Terms.--For purposes of this section--
          ``(1) the term `Statewide paternity establishment 
        percentage' means, with respect to a fiscal year, the 
        ratio (expressed as a percentage) of--
                  ``(A) the total number of out-of-wedlock 
                children in the State under one year of age for 
                whom paternity is established or acknowledged 
                during the fiscal year, to
                  ``(B) the total number of children born out 
                of wedlock in the State during such fiscal 
                year; and
          ``(2) the term `overall performance in child support 
        enforcement' means a measure or measures of the 
        effectiveness of the State agency in a fiscal year 
        which takes into account factors including--
                  ``(A) the percentage of cases requiring a 
                child support order in which such an order was 
                established;
                  ``(B) the percentage of cases in which child 
                support is being paid;
                  ``(C) the ratio of child support collected to 
                child support due; and
                  ``(D) the cost-effectiveness of the State 
                program, as determined in accordance with 
                standards established by the Secretary in 
                regulations.''.
  (b) Adjustment of Payments Under Part D of Title IV.--Section 
455(a)(2) (42 U.S.C. 655(a)(2)), as amended by section 9411(a) 
of this Act, is amended--
          (1) by striking the period at the end of subparagraph 
        (C)(ii) and inserting a comma; and
          (2) by adding after and below subparagraph (C), flush 
        with the left margin of the subsection, the following:
``increased by the incentive adjustment factor (if any) 
determined by the Secretary pursuant to section 458.''.
  (c) Conforming Amendments.--Section 454(22) (42 U.S.C. 
654(22)) is amended--
          (1) by striking ``incentive payments'' the first 
        place it appears and inserting ``incentive 
        adjustments''; and
          (2) by striking ``any such incentive payments made to 
        the State for such period'' and inserting ``any 
        increases in Federal payments to the State resulting 
        from such incentive adjustments''.
  (d) Calculation of IV-D Paternity Establishment Percentage.--
(1) Section 452(g)(1) (42 U.S.C. 652(g)(1)) is amended in the 
matter preceding subparagraph (A) by inserting ``its overall 
performance in child support enforcement is satisfactory (as 
defined in section 458(b) and regulations of the Secretary), 
and'' after ``1994,''.
  (2) Section 452(g)(2) (42 U.S.C. 652(g)(2)) is amended--
          (A) in subparagraph (A), in the matter preceding 
        clause (i)--
                  (i) by striking ``paternity establishment 
                percentage'' and inserting ``IV-D paternity 
                establishment percentage''; and
                  (ii) by striking ``(or all States, as the 
                case may be)'';
          (B) in subparagraph (A)(i), by striking ``during the 
        fiscal year'';
          (C) in subparagraph (A)(ii)(I), by striking ``as of 
        the end of the fiscal year'' and inserting ``in the 
        fiscal year or, at the option of the State, as of the 
        end of such year'';
          (D) in subparagraph (A)(ii)(II), by striking ``or (E) 
        as of the end of the fiscal year'' and inserting ``in 
        the fiscal year or, at the option of the State, as of 
        the end of such year'';
          (E) in subparagraph (A)(iii)--
                  (i) by striking ``during the fiscal year''; 
                and
                  (ii) by striking ``and'' at the end; and
          (F) in the matter following subparagraph (A)--
                  (i) by striking ``who were born out of 
                wedlock during the immediately preceding fiscal 
                year'' and inserting ``born out of wedlock'';
                  (ii) by striking ``such preceding fiscal 
                year'' both places it appears and inserting 
                ``the preceding fiscal year''; and
                  (iii) by striking ``or (E)'' the second place 
                it appears.
  (3) Section 452(g)(3) (42 U.S.C. 652(g)(3)) is amended--
          (A) by striking subparagraph (A) and redesignating 
        subparagraphs (B) and (C) as subparagraphs (A) and (B), 
        respectively;
          (B) in subparagraph (A), as redesignated, by striking 
        ``the percentage of children born out-of-wedlock in the 
        State'' and inserting ``the percentage of children in 
        the State who are born out of wedlock or for whom 
        support has not been established''; and
          (C) in subparagraph (B), as redesignated--
                  (i) by inserting ``and overall performance in 
                child support enforcement'' after ``paternity 
                establishment percentages''; and
                  (ii) by inserting ``and securing support'' 
                before the period.
  (e) Reduction of Payments Under Part D of Title IV.--
          (1) New requirements.--Section 455 (42 U.S.C. 655) is 
        amended by inserting after subsection (b) the 
        following:
  ``(c)(1) If the Secretary finds, with respect to a State 
program under this part in a fiscal year beginning on or after 
October 1, 1997--
          ``(A)(i) on the basis of data submitted by a State 
        pursuant to section 454(15)(B), that the State program 
        in such fiscal year failed to achieve the IV-D 
        paternity establishment percentage (as defined in 
        section 452(g)(2)(A)) or the appropriate level of 
        overall performance in child support enforcement (as 
        defined in section 458(b)(2)), or to meet other 
        performance measures that may be established by the 
        Secretary, or
          ``(ii) on the basis of an audit or audits of such 
        State data conducted pursuant to section 452(a)(4)(C), 
        that the State data submitted pursuant to section 
        454(15)(B) is incomplete or unreliable; and
          ``(B) that, with respect to the succeeding fiscal 
        year--
                  ``(i) the State failed to take sufficient 
                corrective action to achieve the appropriate 
                performance levels as described in subparagraph 
                (A)(i) of this paragraph, or
                  ``(ii) the data submitted by the State 
                pursuant to section 454(15)(B) is incomplete or 
                unreliable,
the amounts otherwise payable to the State under this part for 
quarters following the end of such succeeding fiscal year, 
prior to quarters following the end of the first quarter 
throughout which the State program is in compliance with such 
performance requirement, shall be reduced by the percentage 
specified in paragraph (2).
  ``(2) The reductions required under paragraph (1) shall be--
          ``(A) not less than 6 nor more than 8 percent, or
          ``(B) not less than 8 nor more than 12 percent, if 
        the finding is the second consecutive finding made 
        pursuant to paragraph (1), or
          ``(C) not less than 12 nor more than 15 percent, if 
        the finding is the third or a subsequent consecutive 
        such finding.
  ``(3) For purposes of this subsection, section 405(d), and 
section 452(a)(4), a State which is determined as a result of 
an audit to have submitted incomplete or unreliable data 
pursuant to section 454(15)(B), shall be determined to have 
submitted adequate data if the Secretary determines that the 
extent of the incompleteness or unreliability of the data is of 
a technical nature which does not adversely affect the 
determination of the level of the State's performance.''.
          (2) Conforming amendments.--
                  (A) Section 452(a)(4) (42 U.S.C. 652(a)(4)) 
                is amended by striking ``403(h)'' each place 
                such term appears and inserting ``455(c)''.
                  (B) Subsections (d)(3)(A), (g)(1), and 
                (g)(3)(A) of section 452 (42 U.S.C. 652) are 
                each amended by striking ``403(h)'' and 
                inserting ``455(c)''.
  (f) Effective Dates.--
          (1) Incentive adjustments.--(A) The amendments made 
        by subsections (a), (b), and (c) shall become effective 
        October 1, 1997, except to the extent provided in 
        subparagraph (B).
          (B) Section 458 of the Social Security Act, as in 
        effect prior to the enactment of this section, shall be 
        effective for purposes of incentive payments to States 
        for fiscal years prior to fiscal year 1999.
          (2) Penalty reductions.--(A) The amendments made by 
        subsection (d) shall become effective with respect to 
        calendar quarters beginning on and after the date of 
        enactment of this Act.
          (B) The amendments made by subsection (e) shall 
        become effective with respect to calendar quarters 
        beginning on and after the date one year after the date 
        of enactment of this Act.

SEC. 9413. FEDERAL AND STATE REVIEWS AND AUDITS.

  (a) State Agency Activities.--Section 454 (42 U.S.C. 654) is 
amended--
          (1) in paragraph (14), by striking ``(14)'' and 
        inserting ``(14)(A)'';
          (2) by redesignating paragraph (15) as subparagraph 
        (B) of paragraph (14); and
          (3) by inserting after paragraph (14) the following 
        new paragraph:
          ``(15) provide for--
                  ``(A) a process for annual reviews of and 
                reports to the Secretary on the State program 
                under this part, which shall include such 
                information as may be necessary to measure 
                State compliance with Federal requirements for 
                expedited procedures and timely case 
                processing, using such standards and procedures 
                as are required by the Secretary, under which 
                the State agency will determine the extent to 
                which such program is in conformity with 
                applicable requirements with respect to the 
                operation of State programs under this part 
                (including the status of complaints filed under 
                the procedure required under paragraph 
                (12)(B)); and
                  ``(B) a process of extracting from the State 
                automated data processing system and 
                transmitting to the Secretary data and 
                calculations concerning the levels of 
                accomplishment (and rates of improvement) with 
                respect to applicable performance indicators 
                (including IV-D paternity establishment 
                percentages and overall performance in child 
                support enforcement) to the extent necessary 
                for purposes of sections 452(g) and 458.''.
  (b) Federal Activities.--Section 452(a)(4) (42 U.S.C. 
652(a)(4)) is amended to read as follows:
          ``(4)(A) review data and calculations transmitted by 
        State agencies pursuant to section 454(15)(B) on State 
        program accomplishments with respect to performance 
        indicators for purposes of section 452(g) and 458, and 
        determine the amount (if any) of penalty reductions 
        pursuant to section 455(c) to be applied to the State;
          ``(B) review annual reports by State agencies 
        pursuant to section 454(15)(A) on State program 
        conformity with Federal requirements; evaluate any 
        elements of a State program in which significant 
        deficiencies are indicated by such report on the status 
        of complaints under the State procedure under section 
        454(12)(B); and, as appropriate, provide to the State 
        agency comments, recommendations for additional or 
        alternative corrective actions, and technical 
        assistance; and
          ``(C) conduct audits, in accordance with the 
        government auditing standards of the United States 
        Comptroller General--
                  ``(i) at least once every 3 years (or more 
                frequently, in the case of a State which fails 
                to meet requirements of this part, or of 
                regulations implementing such requirements, 
                concerning performance standards and 
                reliability of program data) to assess the 
                completeness, reliability, and security of the 
                data, and the accuracy of the reporting 
                systems, used for the calculations of 
                performance indicators specified in subsection 
                (g) and section 458;
                  ``(ii) of the adequacy of financial 
                management of the State program, including 
                assessments of--
                          ``(I) whether Federal and other funds 
                        made available to carry out the State 
                        program under this part are being 
                        appropriately expended, and are 
                        properly and fully accounted for; and
                          ``(II) whether collections and 
                        disbursements of support payments and 
                        program income are carried out 
                        correctly and are properly and fully 
                        accounted for; and
                  ``(iii) for such other purposes as the 
                Secretary may find necessary;''.
  (c) Effective Date.--The amendments made by this section 
shall be effective with respect to calendar quarters beginning 
on or after the date one year after enactment of this section.

SEC. 9414. REQUIRED REPORTING PROCEDURES.

  (a) Establishment.--Section 452(a)(5) (42 U.S.C. 652(a)(5)) 
is amended by inserting ``, and establish procedures to be 
followed by States for collecting and reporting information 
required to be provided under this part, and establish uniform 
definitions (including those necessary to enable the 
measurement of State compliance with the requirements of this 
part relating to expedited processes and timely case 
processing) to be applied in following such procedures'' before 
the semicolon.
  (b) State Plan Requirement.--Section 454 (42 U.S.C. 654), as 
amended by section 9404(a) of this Act, is amended--
          (1) by striking ``and'' at the end of paragraph (24);
          (2) by striking the period at the end of paragraph 
        (25) and inserting ``; and''; and
          (3) by adding after paragraph (25) the following:
          ``(26) provide that the State shall use the 
        definitions established under section 452(a)(5) in 
        collecting and reporting information as required under 
        this part.''.

SEC. 9415. AUTOMATED DATA PROCESSING REQUIREMENTS.

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

                      ``automated data processing

  ``Sec. 454A. (a) In General.--In order to meet the 
requirements of this section, for purposes of the requirement 
of section 454(16), a State agency shall have in operation a 
single statewide automated data processing and information 
retrieval system which has the capability to perform the tasks 
specified in this section, and performs such tasks with the 
frequency and in the manner specified in this part or in 
regulations or guidelines of the Secretary.
  ``(b) Program Management.--The automated system required 
under this section shall perform such functions as the 
Secretary may specify relating to management of the program 
under this part, including--
          ``(1) controlling and accounting for use of Federal, 
        State, and local funds to carry out such program; and
          ``(2) maintaining the data necessary to meet Federal 
        reporting requirements on a timely basis.
  ``(c) Calculation of Performance Indicators.--In order to 
enable the Secretary to determine the incentive and penalty 
adjustments required by sections 452(g) and 458, the State 
agency shall--
          ``(1) use the automated system--
                  ``(A) to maintain the requisite data on State 
                performance with respect to paternity 
                establishment and child support enforcement in 
                the State; and
                  ``(B) to calculate the IV-D paternity 
                establishment percentage and overall 
                performance in child support enforcement for 
                the State for each fiscal year; and
          ``(2) have in place systems controls to ensure the 
        completeness, and reliability of, and ready access to, 
        the data described in paragraph (1)(A), and the 
        accuracy of the calculations described in paragraph 
        (1)(B).
  ``(d) Information Integrity and Security.--The State agency 
shall have in effect safeguards on the integrity, accuracy, and 
completeness of, access to, and use of data in the automated 
system required under this section, which shall include the 
following (in addition to such other safeguards as the 
Secretary specifies in regulations):
          ``(1) Policies restricting access.--Written policies 
        concerning access to data by State agency personnel, 
        and sharing of data with other persons, which--
                  ``(A) permit access to and use of data only 
                to the extent necessary to carry out program 
                responsibilities;
                  ``(B) specify the data which may be used for 
                particular program purposes, and the personnel 
                permitted access to such data; and
                  ``(C) ensure that data obtained or disclosed 
                for a limited program purpose is not used or 
                redisclosed for another, impermissible purpose.
          ``(2) Systems controls.--Systems controls (such as 
        passwords or blocking of fields) to ensure strict 
        adherence to the policies specified under paragraph 
        (1).
          ``(3) Monitoring of access.--Routine monitoring of 
        access to and use of the automated system, through 
        methods such as audit trails and feedback mechanisms, 
        to guard against and promptly identify unauthorized 
        access or use.
          ``(4) Training and information.--The State agency 
        shall have in effect procedures to ensure that all 
        personnel (including State and local agency staff and 
        contractors) who may have access to or be required to 
        use sensitive or confidential program data are fully 
        informed of applicable requirements and penalties, and 
        are adequately trained in security procedures.
          ``(5) Penalties.--The State agency shall have in 
        effect administrative penalties (up to and including 
        dismissal from employment) for unauthorized access to, 
        or disclosure or use of, confidential data.''.
  (3) Regulations.--Section 452 (42 U.S.C. 652) is amended by 
adding at the end the following:
  ``(j) The Secretary shall prescribe final regulations for 
implementation of the requirements of section 454A not later 
than 2 years after the date of the enactment of this 
subsection.''.
  (4) Implementation Timetable.--Section 454(24) (42 U.S.C. 
654(24)), as amended by sections 9404(a)(2) and 9414(b)(1) of 
this Act, is amended to read as follows:
          ``(24) provide that the State will have in effect an 
        automated data processing and information retrieval 
        system--
                  ``(A) by October 1, 1995, meeting all 
                requirements of this part which were enacted on 
                or before the date of enactment of the Family 
                Support Act of 1988; and
                  ``(B) by October 1, 1999, meeting all 
                requirements of this part enacted on or before 
                the date of enactment of the Omnibus Budget 
                Reconciliation Act of 1995 (but this provision 
                shall not be construed to alter earlier 
                deadlines specified for elements of such 
                system), except that such deadline shall be 
                extended by 1 day for each day (if any) by 
                which the Secretary fails to meet the deadline 
                imposed by section 452(j) of this Act;''.
  (b) Special Federal Matching Rate for Development Costs of 
Automated Systems.--Section 455(a) (42 U.S.C. 655(a)) is 
amended--
          (1) in paragraph (1)(B)--
                  (A) by striking ``90 percent'' and inserting 
                ``the percent specified in paragraph (3)'';
                  (B) by striking ``so much of''; and
                  (C) by striking ``which the Secretary'' and 
                all that follows and inserting ``, and''; and
          (2) by adding at the end the following new paragraph:
  ``(3)(A) The Secretary shall pay to each State, for each 
quarter in fiscal year 1996, 90 percent of so much of State 
expenditures described in subparagraph (1)(B) as the Secretary 
finds are for a system meeting the requirements specified in 
section 454(16), or meeting such requirements without regard to 
clause (D) thereof.
  ``(B)(i) The Secretary shall pay to each State, for each 
quarter in fiscal years 1997 through 2001, the percentage 
specified in clause (ii) of so much of State expenditures 
described in subparagraph (1)(B) as the Secretary finds are for 
a system meeting the requirements specified in sections 454(16) 
and 454A, subject to clause (iii).
  ``(ii) The percentage specified in this clause, for purposes 
of clause (i), is the higher of--
          ``(I) 80 percent, or
          ``(II) the percentage otherwise applicable to Federal 
        payments to the State under subparagraph (A) (as 
        adjusted pursuant to section 458).''.
  (c) Conforming Amendment.--Section 123(c) of the Family 
Support Act of 1988 (102 Stat. 2352; Public Law 100-485) is 
repealed.
  (d) Additional Provisions.--For additional provisions of 
section 454A, as added by subsection (a) of this section, see 
the amendments made by sections 9421, 9422(c), and 9433(d) of 
this Act.

SEC. 9416. DIRECTOR OF CSE PROGRAM; STAFFING STUDY.

  (a) Reporting to Secretary.--Section 452(a) (42 U.S.C. 
652(a)) is amended in the matter preceding paragraph (1) by 
striking ``directly''.
  (b) Staffing Studies.--
          (1) Scope.--The Secretary of Health and Human 
        Services shall, directly or by contract, conduct 
        studies of the staffing of each State child support 
        enforcement program under part D of title IV of the 
        Social Security Act. Such studies shall include a 
        review of the staffing needs created by requirements 
        for automated data processing, maintenance of a central 
        case registry and centralized collections of child 
        support, and of changes in these needs resulting from 
        changes in such requirements. Such studies shall 
        examine and report on effective staffing practices used 
        by the States and on recommended staffing procedures.
          (2) Frequency of studies.--The Secretary shall 
        complete the first staffing study required under 
        paragraph (1) by October 1, 1997, and may conduct 
        additional studies subsequently at appropriate 
        intervals.
          (3) Report to the congress.--The Secretary shall 
        submit a report to the Congress stating the findings 
        and conclusions of each study conducted under this 
        subsection.

SEC. 9417. FUNDING FOR SECRETARIAL ASSISTANCE TO STATE PROGRAMS.

  Section 452 (42 U.S.C. 652), as amended by section 9415(a)(3) 
of this Act, is amended by adding at the end the following new 
subsection:
  ``(k) Funding for Federal Activities Assisting State 
Programs.--(1) There shall be available to the Secretary, from 
amounts appropriated for fiscal year 1996 and each succeeding 
fiscal year for payments to States under this part, the amount 
specified in paragraph (2) for the costs to the Secretary for--
          ``(A) information dissemination and technical 
        assistance to States, training of State and Federal 
        staff, staffing studies, and related activities needed 
        to improve programs (including technical assistance 
        concerning State automated systems);
          ``(B) research, demonstration, and special projects 
        of regional or national significance relating to the 
        operation of State programs under this part; and
          ``(C) operation of the Federal Parent Locator Service 
        under section 453, to the extent such costs are not 
        recovered through user fees.
  ``(2) The amount specified in this paragraph for a fiscal 
year is the amount equal to a percentage of the reduction in 
Federal payments to States under part A on account of child 
support (including arrearages) collected in the preceding 
fiscal year on behalf of children receiving assistance under 
State plans approved under part A in such preceding fiscal year 
(as determined on the basis of the most recent reliable data 
available to the Secretary as of the end of the third calendar 
quarter following the end of such preceding fiscal year), equal 
to--
          ``(A) 1 percent, for the activities specified in 
        subparagraphs (A) and (B) of paragraph (1); and
          ``(B) 2 percent, for the activities specified in 
        subparagraph (C) of paragraph (1).''.

SEC. 9418. REPORTS AND DATA COLLECTION BY THE SECRETARY.

  (a) Annual Report to Congress.--(1) Section 452(a)(10)(A) (42 
U.S.C. 652(a)(10)(A)) is amended--
          (A) by striking ``this part;'' and inserting ``this 
        part, including--''; and
          (B) by adding at the end the following indented 
        clauses:
                          ``(i) the total amount of child 
                        support payments collected as a result 
                        of services furnished during such 
                        fiscal year to individuals receiving 
                        services under this part;
                          ``(ii) the cost to the States and to 
                        the Federal Government of furnishing 
                        such services to those individuals; and
                          ``(iii) the number of cases involving 
                        families--
                                  ``(I) who became ineligible 
                                for assistance under a State 
                                plan approved under part A 
                                during a month in such fiscal 
                                year; and
                                  ``(II) with respect to whom a 
                                child support payment was 
                                received in the same month;''.
  (2) Section 452(a)(10)(C) (42 U.S.C. 652(a)(10)(C)) is 
amended--
          (A) in the matter preceding clause (i)--
                  (i) by striking ``with the data required 
                under each clause being separately stated for 
                cases'' and inserting ``separately stated for 
                (1) cases'';
                  (ii) by striking ``cases where the child was 
                formerly receiving'' and inserting ``or 
                formerly received'';
                  (iii) by inserting ``or 1912'' after 
                ``471(a)(17)''; and
                  (iv) by inserting ``(2)'' before ``all 
                other'';
          (B) in each of clauses (i) and (ii), by striking ``, 
        and the total amount of such obligations'';
          (C) in clause (iii), by striking ``described in'' and 
        all that follows and inserting ``in which support was 
        collected during the fiscal year;'';
          (D) by striking clause (iv); and
          (E) by redesignating clause (v) as clause (vii), and 
        inserting after clause (iii) the following new clauses:
                          ``(iv) the total amount of support 
                        collected during such fiscal year and 
                        distributed as current support;
                          ``(v) the total amount of support 
                        collected during such fiscal year and 
                        distributed as arrearages;
                          ``(vi) the total amount of support 
                        due and unpaid for all fiscal years; 
                        and''.
  (3) Section 452(a)(10)(G) (42 U.S.C. 652(a)(10)(G)) is 
amended by striking ``on the use of Federal courts and''.
  (4) Section 452(a)(10) (42 U.S.C. 652(a)(10)) is amended by 
striking all that follows subparagraph (I).
  (b) Data Collection and Reporting.--Section 469 (42 U.S.C. 
669) is amended--
          (1) by striking subsections (a) and (b) and inserting 
        the following:
  ``(a) The Secretary shall collect and maintain, on a fiscal 
year basis, up-to-date statistics, by State, with respect to 
services to establish paternity and services to establish child 
support obligations, the data specified in subsection (b), 
separately stated, in the case of each such service, with 
respect to--
          ``(1) families (or dependent children) receiving 
        assistance under State plans approved under part A (or 
        E); and
          ``(2) families not receiving such assistance.
  ``(b) The data referred to in subsection (a) are--
          ``(1) the number of cases in the caseload of the 
        State agency administering the plan under this part in 
        which such service is needed; and
          ``(2) the number of such cases in which the service 
        has been provided.''; and
          (2) in subsection (c), by striking ``(a)(2)'' and 
        inserting ``(b)(2)''.
  (c) Effective Date.--The amendments made by this section 
shall be effective with respect to fiscal year 1996 and 
succeeding fiscal years.

                  CHAPTER 3--LOCATE AND CASE TRACKING

SEC. 9421. CENTRAL STATE AND CASE REGISTRY.

  Section 454A, as added by section 9415(a)(2) of this Act, is 
amended by adding at the end the following:
  ``(e) Central Case Registry.--(1) In General.--The automated 
system required under this section shall perform the functions, 
in accordance with the provisions of this subsection, of a 
single central registry containing records with respect to each 
case in which services are being provided by the State agency 
(including, on and after October 1, 1998, each order specified 
in section 466(a)(12)), using such standardized data elements 
(such as names, social security numbers or other uniform 
identification numbers, dates of birth, and case identification 
numbers), and containing such other information (such as 
information on case status) as the Secretary may require.
  ``(2) Payment Records.--Each case record in the central 
registry shall include a record of--
          ``(A) the amount of monthly (or other periodic) 
        support owed under the support order, and other amounts 
        due or overdue (including arrears, interest or late 
        payment penalties, and fees);
          ``(B) the date on which or circumstances under which 
        the support obligation will terminate under such order;
          ``(C) all child support and related amounts collected 
        (including such amounts as fees, late payment 
        penalties, and interest on arrearages);
          ``(D) the distribution of such amounts collected; and
          ``(E) the birth date of the child for whom the child 
        support order is entered.
  ``(3) Updating and Monitoring.--The State agency shall 
promptly establish and maintain, and regularly monitor, case 
records in the registry required by this subsection, on the 
basis of--
          ``(A) information on administrative actions and 
        administrative and judicial proceedings and orders 
        relating to paternity and support;
          ``(B) information obtained from matches with Federal, 
        State, or local data sources;
          ``(C) information on support collections and 
        distributions; and
          ``(D) any other relevant information.
  ``(f) Data Matches and Other Disclosures of Information.--The 
automated system required under this section shall have the 
capacity, and be used by the State agency, to extract data at 
such times, and in such standardized format or formats, as may 
be required by the Secretary, and to share and match data with, 
and receive data from, other data bases and data matching 
services, in order to obtain (or provide) information necessary 
to enable the State agency (or Secretary or other State or 
Federal agencies) to carry out responsibilities under this 
part. Data matching activities of the State agency shall 
include at least the following:
          ``(1) Data bank of child support orders.--Furnish to 
        the Data Bank of Child Support Orders established under 
        section 453(h) (and update as necessary, with 
        information including notice of expiration of orders) 
        minimal information (to be specified by the Secretary) 
        on each child support case in the central case 
        registry.
          ``(2) Federal parent locator service.--Exchange data 
        with the Federal Parent Locator Service for the 
        purposes specified in section 453.
          ``(3) Temporary employment assistance program and 
        medicaid agencies.--Exchange data with State agencies 
        (of the State and of other States) administering the 
        programs under part A and title XIX, as necessary for 
        the performance of State agency responsibilities under 
        this part and under such programs.
          ``(4) Intra- and interstate data matches.--Exchange 
        data with other agencies of the State, agencies of 
        other States, and interstate information networks, as 
        necessary and appropriate to carry out (or assist other 
        States to carry out) the purposes of this part.''.

SEC. 9422. CENTRALIZED COLLECTION AND DISBURSEMENT OF SUPPORT PAYMENTS.

  (a) State Plan Requirement.--Section 454 (42 U.S.C. 654), as 
amended by sections 9404(a) and 9414(b) of this Act, is 
amended--
          (1) by striking ``and'' at the end of paragraph (25);
          (2) by striking the period at the end of paragraph 
        (26) and inserting ``; and''; and
          (3) by adding after paragraph (26) the following new 
        paragraph:
          ``(27) provide that the State agency, on and after 
        October 1, 1998--
          ``(A) will operate a centralized, automated unit for 
        the collection and disbursement of child support under 
        orders being enforced under this part, in accordance 
        with section 454B; and
          ``(B) will have sufficient State staff (consisting of 
        State employees), and (at State option) contractors 
        reporting directly to the State agency to monitor and 
        enforce support collections through such centralized 
        unit, including carrying out the automated data 
        processing responsibilities specified in section 
        454A(g) and to impose, as appropriatein particular 
cases, the administrative enforcement remedies specified in section 
466(c)(1).''.
  (b) Establishment of Centralized Collection Unit.--Part D of 
title IV (42 U.S.C. 651-669) is amended by adding after section 
454A the following new section:

     ``centralized collection and disbursement of support payments

  ``Sec. 454B. (a) In General.--In order to meet the 
requirement of section 454(27), the State agency must operate a 
single centralized, automated unit for the collection and 
disbursement of support payments, coordinated with the 
automated data system required under section 454A, in 
accordance with the provisions of this section, which shall 
be--
          ``(1) operated directly by the State agency (or by 
        two or more State agencies under a regional cooperative 
        agreement), or by a single contractor responsible 
        directly to the State agency; and
          ``(2) used for the collection and disbursement 
        (including interstate collection and disbursement) of 
        payments under support orders in all cases being 
        enforced by the State pursuant to section 454(4).
  ``(b) Required Procedures.--The centralized collections unit 
shall use automated procedures, electronic processes, and 
computer-driven technology to the maximum extent feasible, 
efficient, and economical, for the collection and disbursement 
of support payments, including procedures--
          ``(1) for receipt of payments from parents, 
        employers, and other States, and for disbursements to 
        custodial parents and other obligees, the State agency, 
        and the State agencies of other States;
          ``(2) for accurate identification of payments;
          ``(3) to ensure prompt disbursement of the custodial 
        parent's share of any payment; and
          ``(4) to furnish to either parent, upon request, 
        timely information on the current status of support 
        payments.''.
  (c) Use of Automated System.--Section 454A, as added by 
section 9415(a)(2) of this Act and as amended by section 9421 
of this Act, is amended by adding at the end the following new 
subsection:
  ``(g) Centralized Collection and Distribution of Support 
Payments.--The automated system required under this section 
shall be used, to the maximum extent feasible, to assist and 
facilitate collections and disbursement of support payments 
through the centralized collections unit operated pursuant to 
section 454B, through the performance of functions including at 
a minimum--
          ``(1) generation of orders and notices to employers 
        (and other debtors) for the withholding of wages (and 
        other income)--
                  ``(A) within two working days after receipt 
                (from the directory of New Hires established 
                under section 453(i) or any other source) of 
                notice of and the income source subject to such 
                withholding; and
                  ``(B) using uniform formats directed by the 
                Secretary;
          ``(2) ongoing monitoring to promptly identify 
        failures to make timely payment; and
          ``(3) automatic use of enforcement mechanisms 
        (including mechanisms authorized pursuant to section 
        466(c)) where payments are not timely made.''.
  (d) Effective Date.--The amendments made by this section 
shall become effective on October 1, 1998.

SEC. 9423. AMENDMENTS CONCERNING INCOME WITHHOLDING.

  (a) Mandatory Income Withholding.--(1) Section 466(a)(1) (42 
U.S.C. 666(a)(1)) is amended to read as follows:
          ``(1) Income withholding.--(A) Under orders enforced 
        under the state plan.--Procedures described in 
        subsection (b) for the withholding from income of 
        amounts payable as support in cases subject to 
        enforcement under the State plan.
          ``(B) Under certain orders predating change in 
        requirement.--Procedures under which all child support 
        orders issued (or modified) before October 1, 1996, and 
        which are not otherwise subject to withholding under 
        subsection (b), shall become subject to withholding 
        from wages as provided in subsection (b) if arrearages 
        occur, without the need for a judicial or 
        administrative hearing.''.
  (2) Section 466(a)(8) (42 U.S.C. 666(a)(8)) is repealed.
  (3) Section 466(b) (42 U.S.C. 666(b)) is amended--
          (A) in the matter preceding paragraph (1), by 
        striking ``subsection (a)(1)'' and inserting 
        ``subsection (a)(1)(A)'';
          (B) in paragraph (5), by striking all that follows 
        ``administered by'' and inserting ``the State through 
        the centralized collections unit established pursuant 
        to section 454B, in accordance with the requirements of 
        such section 454B.'';
          (C) in paragraph (6)(A)(i)--
                  (i) by inserting ``, in accordance with 
                timetables established by the Secretary,'' 
                after ``must be required''; and
                  (ii) by striking ``to the appropriate 
                agency'' and all that follows and inserting 
                ``to the State centralized collections unit 
                within 5 working days after the date such 
                amount would (but for this subsection) have 
                been paid or credited to the employee, for 
                distribution in accordance with this part.'';
          (D) in paragraph (6)(A)(ii), by inserting ``be in a 
        standard format prescribed by the Secretary, and'' 
        after ``shall''; and
          (E) in paragraph (6)(D)--
                  (i) by striking ``employer who discharges'' 
                and inserting ``employer who--(A) discharges'';
                  (ii) by relocating subparagraph (A), as 
                designated, as an indented subparagraph after 
                and below the introductory matter;
                  (iii) by striking the period at the end; and
                  (iv) by adding after and below subparagraph 
                (A) the following new subparagraph:
                  ``(B) fails to withhold support from wages, 
                or to pay such amounts to the State centralized 
                collections unit in accordance with this 
                subsection.''.
  (b) Conforming Amendment.--Section 466(c) (42 U.S.C. 666(c)) 
is repealed.
  (c) Definition of Terms.--The Secretary shall promulgate 
regulations providing definitions, for purposes of part D of 
title IV of the Social Security Act, for the term ``income'' 
and for such other terms relating to income withholding under 
section 466(b) of such Act as the Secretary may find it 
necessary or advisable to define.

SEC. 9424. LOCATOR INFORMATION FROM INTERSTATE NETWORKS.

  Section 466(a) (42 U.S.C. 666(a)), as amended by section 
9423(a)(2) of this Act, is amended by inserting after paragraph 
(7) the following:
          ``(8) Locator information from interstate networks.--
        Procedures ensuring that the State will neither provide 
        funding for, nor use for any purpose (including any 
        purpose unrelated to the purposes of this part), any 
        automated interstate network or system used to locate 
        individuals--
                  ``(A) for purposes relating to the use of 
                motor vehicles; or
                  ``(B) providing information for law 
                enforcement purposes (where child support 
                enforcement agencies are otherwise allowed 
                access by State and Federal law),
        unless all Federal and State agencies administering 
        programs under this part (including the entities 
        established under section 453) have access to 
        information in such system or network to the same 
        extent as any other user of such system or network.''.

SEC. 9425. EXPANDED FEDERAL PARENT LOCATOR SERVICE.

  (a) Expanded Authority to Locate Individuals and Assets.--
Section 453 (42 U.S.C. 653) is amended--
          (1) in subsection (a), by striking all that follows 
        ``subsection (c))'' and inserting the following:
``, for the purpose of establishing parentage, establishing, 
setting the amount of, modifying, or enforcing child support 
obligations--
          ``(1) information on, or facilitating the discovery 
        of, the location of any individual--
                  ``(A) who is under an obligation to pay child 
                support;
                  ``(B) against whom such an obligation is 
                sought; or
                  ``(C) to whom such an obligation is owed, 
                including such individual's social security 
                number (or numbers), most recent residential 
                address, and the name, address, and employer 
                identification number of such individual's 
                employer; and
          ``(2) information on the individual's wages (or other 
        income) from, and benefits of, employment (including 
        rights to or enrollment in group health care coverage); 
        and
          ``(3) information on the type, status, location, and 
        amount of any assets of, or debts owed by or to, any 
        such individual.''; and
          (2) in subsection (b)--
                  (A) in the matter preceding paragraph (1), by 
                striking ``social security'' and all that 
                follows through ``absent parent'' and inserting 
                ``information specified in subsection (a)''; 
                and
                  (B) in paragraph (2), by inserting before the 
                period ``, or from any consumer reporting 
                agency (as defined in section 603(f) of the 
                Fair Credit Reporting Act (15 U.S.C. 
                1681a(f))'';
          (3) in subsection (e)(1), by inserting before the 
        period ``, or by consumer reporting agencies''.
  (b) Reimbursement for Data From Federal Agencies.--Section 
453(e)(2) (42 U.S.C. 653(e)(2)) is amended in the fourth 
sentence by inserting before the period ``in an amount which 
the Secretary determines to be reasonable payment for the data 
exchange (which amount shall not include payment for the costs 
of obtaining, compiling, or maintaining the data)''.
  (c) Access to Consumer Reports Under Fair Credit Reporting 
Act.--(1) Section 608 of the Fair Credit Reporting Act (15 
U.S.C. 1681f) is amended--
          (A) by striking ``, limited to'' and inserting ``to a 
        governmental agency (including the entire consumer 
        report, in the case of a Federal, State, or local 
        agency administering a program under part D of title IV 
        of the Social Security Act, and limited to''; and
          (B) by striking ``employment, to a governmental 
        agency'' and inserting ``employment, in the case of any 
        other governmental agency)''.
  (2) Reimbursement for Reports by State Agencies and Credit 
Bureaus.--Section 453 (42 U.S.C. 653) is amended by adding at 
the end the following new subsection:
  ``(g) The Secretary is authorized to reimburse costs to State 
agencies and consumer credit reporting agencies the costs 
incurred by such entities in furnishing information requested 
by the Secretary pursuant to this section in an amount which 
the Secretary determines to be reasonable payment for the data 
exchange (which amount shall not include payment for the costs 
of obtaining, compiling, or maintaining the data).''.
  (d) Disclosure of Tax Return Information.--(1) Section 
6103(1)(6)(A)(ii) of the Internal Revenue Code of 1986 is 
amended by striking ``, but only if'' and all that follows and 
inserting a period.
  (2) Section 6103(1)(8)(A) of the Internal Revenue Code of 
1986 is amended by inserting ``Federal,'' before ``State or 
local''.
  (e) Technical Amendments.--
          (1) Sections 452(a)(9), 453(a), 453(b), 463(a), and 
        463(e) (42 U.S.C. 652(a)(9), 653(a), 653(b), 663(a), 
        and 663(e)) are each amended by inserting ``Federal'' 
        before ``Parent'' each place it appears.
          (2) Section 453 (42 U.S.C. 653) is amended in the 
        heading by adding ``federal'' before ``parent''.
  (f) New Components.--Section 453 (42 U.S.C. 653), as amended 
by subsection (c)(2) of this section, is amended by adding at 
the end the following:
  ``(h) Data Bank of Child Support Orders.--
          ``(1) In general.--Not later than October 1, 1998, In 
        order to assist States in administering their State 
        plans under this part and parts A, F, and G, and for 
        the other purposes specified in this section, the 
        Secretary shall establish and maintain in the Federal 
        Parent Locator Service an automated registry to be 
        known as the Data Bank of Child Support Orders, which 
        shall contain abstracts of child support orders and 
        other information described in paragraph (2) on each 
        case in each State central case registry maintained 
        pursuant to section 454A(e), as furnished (and 
        regularly updated), pursuant to section 454A(f), by 
        State agencies administering programs under this part.
          ``(2) Case information.--The information referred to 
        in paragraph (1), as specified by the Secretary, shall 
        include sufficient information (including names, social 
        security numbers or other uniform identification 
        numbers, and State case identification numbers) to 
        identify the individuals who owe or are owed support 
        (or with respect to or on behalf of whom support 
        obligations are sought to be established), and the 
        State or States which have established or modified, or 
        are enforcing or seeking to establish, such an order.
  ``(i) Directory of New Hires.--
          ``(1) In general.--Not later than October 1, 1998, In 
        order to assist States in administering their State 
        plans under this part and parts A, F, and G, and for 
        the other purposes specified in this section, the 
        Secretary shall establish and maintain in the Federal 
        Parent Locator Service an automated directory to be 
        known as the directory of New Hires, containing--
                  ``(A) information supplied by employers on 
                each newly hired individual, in accordance with 
                paragraph (2); and
                  ``(B) information supplied by State agencies 
                administering State unemployment compensation 
                laws, in accordance with paragraph (3).
          ``(2) Employer information.--
                  ``(A) Information required.--Subject to 
                subparagraph (D), each employer shall furnish 
                to the Secretary, for inclusion in the 
                directory established under this subsection, 
                not later than 10 days after the date (on or 
                after October 1, 1998) on which the employer 
                hires a new employee (as defined in 
                subparagraph (C)), a report containing the 
                name, date of birth, and social security number 
                of such employee, and the employer 
                identification number of the employer.
                  ``(B) Reporting method and format.--The 
                Secretary shall provide for transmission of the 
                reports required under subparagraph (A) using 
                formats and methods which minimize the burden 
                on employers, which shall include--
                          ``(i) automated or electronic 
                        transmission of such reports;
                          ``(ii) transmission by regular mail; 
                        and
                          ``(iii) transmission of a copy of the 
                        form required for purposes of 
                        compliance with section 3402 of the 
                        Internal Revenue Code of 1986.
                  ``(C) Employee defined.--For purposes of this 
                paragraph, the term `employee' means any 
                individual subject to the requirement of 
                section 3402(f)(2) of the Internal Revenue Code 
                of 1986.
                  ``(D) Paperwork reduction requirement.--As 
                required by the information resources 
                management policies published by the Director 
                of the Office of Management and Budget pursuant 
                to section 3504(b)(1) of title 44, United 
                States Code, the Secretary, in order to 
                minimize the cost and reporting burden on 
                employers, shall not require reporting pursuant 
                to this paragraph if an alternative reporting 
                mechanism can be developed that either relies 
                on existing Federal or State reporting or 
                enables the Secretary to collect the needed 
                information in a more cost-effective and 
                equally expeditious manner, taking into account 
                the reporting costs on employers.
                  ``(E) Civil money penalty on noncomplying 
                employers.--(i) Any employer that fails to make 
                a timely report in accordance with this 
                paragraph with respect to an individual shall 
                be subject to a civil money penalty, for each 
                calendar year in which the failure occurs, of 
                the lesser of $500 or 1 percent of the wages or 
                other compensation paid by such employer to 
                such individual during such calendar year.
                  ``(ii) Subject to clause (iii), the 
                provisions of section 1128A (other than 
                subsections (a) and (b) thereof) shall apply to 
                a civil money penalty under clause (i) in the 
                same manner as they apply to a civil money 
                penalty or proceeding under section 1128A(a).
                  ``(iii) Any employer with respect to whom a 
                penalty under this subparagraph is upheld after 
                an administrative hearing shall be liable to 
                pay all costs of the Secretary with respect to 
                such hearing.
          ``(3) Employment security information.--
                  ``(A) Reporting requirement.--Each State 
                agency administering a State unemployment 
                compensation law approved by the Secretary of 
                Labor under the Federal Unemployment Tax Act 
                shall furnish to the Secretary of Health and 
                Human Services extracts of the reports to the 
                Secretary of Labor concerning the wages and 
                unemployment compensation paid to individuals 
                required under section 303(a)(6), in accordance 
                with subparagraph (B).
                  ``(B) Manner of compliance.--The extracts 
                required under subparagraph (A) shall be 
                furnished to the Secretary of Health and Human 
                Services on a quarterly basis, with respect to 
                calendar quarters beginning on and after 
                October 1, 1996, by such dates, in such format, 
                and containing such information as required by 
                that Secretary in regulations.
  ``(j) Data Matches and Other Disclosures.--
          ``(1) Verification by social security 
        administration.--(A) The Secretary shall transmit data 
        on individuals and employers maintained under this 
        section to the Social Security Administration to the 
        extent necessary for verification in accordance with 
        subparagraph (B).
          ``(B) The Social Security Administration shall verify 
        the accuracy of, correct or supply to the extent 
        necessary and feasible, and report to the Secretary, 
        the following information in data supplied by the 
        Secretary pursuant to subparagraph (A):
                  ``(i) the name, social security number, and 
                birth date of each individual; and
                  ``(ii) the employer identification number of 
                each employer.
          ``(2) Child support locator matches.--For the purpose 
        of locating individuals for purposes of paternity 
        establishment and establishment and enforcement of 
        child support, the Secretary shall--
                  ``(A) match data in the directory of New 
                Hires against the child support order abstracts 
                in the Data Bank of Child Support Orders not 
                less often than every 2 working days; and
                  ``(B) report information obtained from such a 
                match to concerned State agencies operating 
                programs under this part not later than 2 
                working days after such match.
          ``(3) Data matches and disclosures of data in all 
        registries for title iv program purposes.--The 
        Secretary shall--
                  ``(A) perform matches of data in each 
                component of the Federal Parent Locator Service 
                maintained under this section against data in 
                each other such component (other than the 
                matches required pursuant to paragraph (1)), 
                and report information resulting from such 
                matches to State agencies operating programs 
                under this part and parts A, F, and G; and
                  ``(B) disclose data in such registries to 
                such State agencies,
        to the extent, and with the frequency, that the 
        Secretary determines to be effective in assisting such 
        States to carry out their responsibilities under such 
        programs.
  ``(k) Fees.--
          ``(1) For ssa verification.--The Secretary shall 
        reimburse the Commissioner of Social Security, at a 
        rate negotiated between the Secretary and the 
        Commissioner, the costs incurred by the Commissioner in 
        performing the verification services specified in 
        subsection (j).
          ``(2) For information from sesas.--The Secretary 
        shall reimburse costs incurred by State employment 
        security agencies in furnishing data as required by 
        subsection (j)(3), at rates which the Secretary 
        determines to be reasonable (which rates shall not 
        include payment for the costs of obtaining, compiling, 
        or maintaining such data).
          ``(3) For information furnished to state and federal 
        agencies.--State and Federal agencies receiving data or 
        information from the Secretary pursuant to this section 
        shall reimburse the costs incurred by the Secretary in 
        furnishing such data or information, at rates which the 
        Secretary determines to be reasonable (which rates 
        shall include payment for the costs of obtaining, 
        verifying, maintaining, and matching such data or 
        information).
  ``(l) Restriction on Disclosure and Use.--Data in the Federal 
Parent Locator Service, and information resulting from matches 
using such data, shall not be used or disclosed except as 
specifically provided in this section.
  ``(m) Retention of Data.--Data in the Federal Parent Locator 
Service, and data resulting from matches performed pursuant to 
this section, shall be retained for such period (determined by 
the Secretary) as appropriate for the data uses specified in 
this section.
  ``(n) Information Integrity and Security.--The Secretary 
shall establish and implement safeguards with respect to the 
entities established under this section designed to--
          ``(1) ensure the accuracy and completeness of 
        information in the Federal Parent Locator Service; and
          ``(2) restrict access to confidential information in 
        the Federal Parent Locator Service to authorized 
        persons, and restrict use of such information to 
        authorized purposes.
  ``(o) Limit on Liability.--The Secretary shall not be liable 
to either a State or an individual for inaccurate information 
provided to a component of the Federal Parent Locator Service 
section and disclosed by the Secretary in accordance with this 
section.''.
  (g) Conforming Amendments.--
          (1) To part d of title iv of the social security 
        act.--Section 454(8)(B) (42 U.S.C. 654(8)(B)) is 
        amended to read as follows:
                  ``(B) the Federal Parent Locator Service 
                established under section 453;''.
          (2) To federal unemployment tax act.--Section 
        3304(16) of the Internal Revenue Code of 1986 is 
        amended--
                  (A) by striking ``Secretary of Health, 
                Education, and Welfare'' each place such term 
                appears and inserting ``Secretary of Health and 
                Human Services'';
                  (B) in subparagraph (B), by striking ``such 
                information'' and all that follows and 
                inserting ``information furnished under 
                subparagraph (A) or (B) is used only for the 
                purposes authorized under such subparagraph;'';
                  (C) by striking ``and'' at the end of 
                subparagraph (A);
                  (D) by redesignating subparagraph (B) as 
                subparagraph (C); and
                  (E) by inserting after subparagraph (A) the 
                following new subparagraph:
                  ``(B) wage and unemployment compensation 
                information contained in the records of such 
                agency shall be furnished to the Secretary of 
                Health and Human Services (in accordance with 
                regulations promulgated by such Secretary) as 
                necessary for the purposes of the directory of 
                New Hires established under section 453(i) of 
                the Social Security Act, and''.
          (3) To state grant program under title iii of the 
        social security act.--Section 303(a) (42 U.S.C. 503(a)) 
        is amended--
                  (A) by striking ``and'' at the end of 
                paragraph (8);
                  (B) by striking the period at the end of 
                paragraph (9) and inserting ``; and''; and
                  (C) by adding after paragraph (9) the 
                following new paragraph:
          ``(10) The making of quarterly electronic reports, at 
        such dates, in such format, and containing such 
        information, as required by the Secretary of Health and 
        Human Services under section 453(i)(3), and compliance 
        with such provisions as such Secretary may find 
        necessary to ensure the correctness and verification of 
        such reports.''.

SEC. 9426. USE OF SOCIAL SECURITY NUMBERS.

  (a) State Law Requirement.--Section 466(a) (42 U.S.C. 
666(a)), as amended by section 9401(a) of this Act, is amended 
by inserting after paragraph (12) the following:
          ``(13) Social security numbers required.--Procedures 
        requiring the recording of social security numbers--
                  ``(A) of both parties on marriage licenses 
                and divorce decrees; and
                  ``(B) of both parents, on birth records and 
                child support and paternity orders.''.
  (b) Clarification of Federal Policy.--Section 
205(c)(2)(C)(ii) (42 U.S.C. 405(c)(2)(C)(ii)) is amended by 
striking the third sentence and inserting ``This clause shall 
not be considered to authorize disclosure of such numbers 
except as provided in the preceding sentence.''.

          CHAPTER 4--STREAMLINING AND UNIFORMITY OF PROCEDURES

SEC. 9431. ADOPTION OF UNIFORM STATE LAWS.

  Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
9401(a) and 9426(a) of this Act, is amended inserting after 
paragraph (13) the following:
          ``(14) Interstate enforcement.--(A) Adoption of 
        uifsa.--Procedures under which the State adopts in its 
        entirety (with the modifications and additions 
        specified in this paragraph) not later than January 1, 
        1997, and uses on and after such date, the Uniform 
        Interstate Family Support Act, as approved by the 
        National Conference of Commissioners on Uniform State 
        Laws in August, 1992.
          ``(B) Expanded application of uifsa.--The State law 
        adopted pursuant to subparagraph (A) shall be applied 
        to any case--
                  ``(i) involving an order established or 
                modified in one State and for which a 
                subsequent modification is sought in another 
                State; or
                  ``(ii) in which interstate activity is 
                required to enforce an order.
          ``(C) Jurisdiction to modify orders.--The State law 
        adopted pursuant to subparagraph (A) of this paragraph 
        shall contain the following provision in lieu of 
        section 611(a)(1) of the Uniform Interstate Family 
        Support Act described in such subparagraph (A):
          `` `(1) the following requirements are met:
                  `` `(i) the child, the individual obligee, 
                and the obligor--
                          `` `(I) do not reside in the issuing 
                        State; and
                          `` `(II) either reside in this State 
                        or are subject to the jurisdiction of 
                        this State pursuant to section 201; and
                  `` `(ii) (in any case where another State is 
                exercising or seeks to exercise jurisdiction to 
                modify the order) the conditions of section 204 
                are met to the same extent as required for 
                proceedings to establish orders; or'.
          ``(D) Service of process.--The State law adopted 
        pursuant to subparagraph (A) shall recognize as valid, 
        for purposes of any proceeding subject to such State 
        law, service of process upon persons in the State (and 
        proof of such service) by any means acceptable in 
        another State which is the initiating or responding 
        State in such proceeding.
          ``(E) Cooperation by employers.--The State law 
        adopted pursuant to subparagraph (A) shall provide for 
        the use of procedures (including sanctions for 
        noncompliance) under which all entities in the State 
        (including for-profit, nonprofit, and governmental 
        employers) are required to provide promptly, in 
        response to a request by the State agency of that or 
        any other State administering a program under this 
        part, information on the employment, compensation, and 
        benefits of any individual employed by such entity as 
        an employee or contractor.''.

SEC. 9432. IMPROVEMENTS TO FULL FAITH AND CREDIT FOR CHILD SUPPORT 
                    ORDERS.

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

SEC. 9433. STATE LAWS PROVIDING EXPEDITED PROCEDURES.

  (a) State Law Requirements.--Section 466 (42 U.S.C. 666) is 
amended--
          (1) in subsection (a)(2), in the first sentence, to 
        read as follows: ``Expedited administrative and 
        judicial procedures (including the procedures specified 
        in subsection (c)) for establishing paternity and for 
        establishing, modifying, and enforcing support 
        obligations.''; and
          (2) by adding after subsection (b) the following new 
        subsection:
  ``(c) Expedited Procedures.--The procedures specified in this 
subsection are the following:
          ``(1) Administrative action by state agency.--
        Procedures which give the State agency the authority 
        (and recognize and enforce the authority of State 
        agencies of other States), without the necessity of 
        obtaining an order from any other judicial or 
        administrative tribunal (but subject to due process 
        safeguards, including (as appropriate) requirements for 
        notice, opportunity to contest the action, and 
        opportunity for an appeal on the record to an 
        independent administrative or judicial tribunal), to 
        take the following actions relating to establishment or 
        enforcement of orders:
                  ``(A) Genetic testing.--To order genetic 
                testing for the purpose of paternity 
                establishment as provided in section 466(a)(5).
                  ``(B) Default orders.--To enter a default 
                order, upon a showing of service of process and 
                any additional showing required by State law--
                          ``(i) establishing paternity, in the 
                        case of any putative father who refuses 
                        to submit to genetic testing; and
                          ``(ii) establishing or modifying a 
                        support obligation, in the case of a 
                        parent (or other obligor or obligee) 
                        who fails to respond to notice to 
                        appear at a proceeding for such 
                        purpose.
                  ``(C) Subpoenas.--To subpoena any financial 
                or other information needed to establish, 
                modify, or enforce an order, and to sanction 
                failure to respond to any such subpoena.
                  ``(D) Access to personal and financial 
                information.--To obtain access, subject to 
                safeguards on privacy and information security, 
                to the following records (including automated 
                access, in the case of records maintained in 
                automated data bases):
                          ``(i) records of other State and 
                        local government agencies, including--
                                  ``(I) vital statistics 
                                (including records of marriage, 
                                birth, and divorce);
                                  ``(II) State and local tax 
                                and revenue records (including 
                                information on residence 
                                address, employer, income and 
                                assets);
                                  ``(III) records concerning 
                                real and titled personal 
                                property;
                                  ``(IV) records of 
                                occupational and professional 
                                licenses, and records 
                                concerning the ownership and 
                                control of corporations, 
                                partnerships, and other 
                                business entities;
                                  ``(V) employment security 
                                records;
                                  ``(VI) records of agencies 
                                administering public assistance 
                                programs;
                                  ``(VII) records of the motor 
                                vehicle department; and
                                  ``(VIII) corrections records; 
                                and
                          ``(ii) certain records held by 
                        private entities, including--
                                  ``(I) customer records of 
                                public utilities and cable 
                                television companies; and
                                  ``(II) information (including 
                                information on assets and 
                                liabilities) on individuals who 
                                owe or are owed support (or 
                                against or with respect to whom 
                                a support obligation is sought) 
                                held by financial institutions 
                                (subject to limitations on 
                                liability of such entities 
                                arising from affording such 
                                access).
                  ``(E) Income withholding.--To order income 
                withholding in accordance with subsection 
                (a)(1) and (b) of section 466.
                  ``(F) Change in payee.--(In cases where 
                support is subject to an assignment under 
                section 403(b)(1)(E)(i), 471(a)(17), or 1912, 
                or to a requirement to pay through the 
                centralized collections unit under section 
                454B) upon providing notice to obligor and 
                obligee, to direct the obligor or other payor 
                to change the payee to the appropriate 
                government entity.
                  ``(G) Secure assets to satisfy arrearages.--
                For the purpose of securing overdue support--
                          ``(i) to intercept and seize any 
                        periodic or lump-sum payment to the 
                        obligor by or through a State or local 
                        government agency, including--
                                  ``(I) unemployment 
                                compensation, workers' 
                                compensation, and other 
                                benefits;
                                  ``(II) judgments and 
                                settlements in cases under the 
                                jurisdiction of the State or 
                                local government; and
                                  ``(III) lottery winnings;
                          ``(ii) to attach and seize assets of 
                        the obligor held by financial 
                        institutions;
                          ``(iii) to attach public and private 
                        retirement funds in appropriate cases, 
                        as determined by the Secretary; and
                          ``(iv) to impose liens in accordance 
                        with paragraph (a)(4) and, in 
                        appropriate cases, to force sale of 
                        property and distribution of proceeds.
                  ``(H) Increase monthly payments.--For the 
                purpose of securing overdue support, to 
                increase the amount of monthly support payments 
                to include amounts for arrearages (subject to 
                such conditions or restrictions as the State 
                may provide).
                  ``(I) Suspension of drivers' licenses.--To 
                suspend drivers' licenses of individuals owing 
                past-due support, in accordance with subsection 
                (a)(16).
          ``(2) Substantive and procedural rules.--The 
        expedited procedures required under subsection (a)(2) 
        shall include the following rules and authority, 
        applicable with respect to all proceedings to establish 
        paternity or to establish, modify, or enforce support 
        orders:
                  ``(A) Locator information; presumptions 
                concerning notice.--Procedures under which--
                          ``(i) the parties to any paternity or 
                        child support proceedings are required 
                        (subject to privacy safeguards) to file 
                        with the tribunal before entry of an 
                        order, and to update as appropriate, 
                        information on location and identity 
                        (including Social Security number, 
                        residential and mailing addresses, 
                        telephone number, driver's license 
                        number, and name, address, and 
                        telephone number of employer); and
                          ``(ii) in any subsequent child 
                        support enforcement action between the 
                        same parties, the tribunal shall be 
                        authorized, upon sufficient showing 
                        that diligent effort has been made to 
                        ascertain such party's current 
                        location, to deem due process 
                        requirements for notice and service of 
                        process to be met, with respect to such 
                        party, by delivery to the most recent 
                        residential or employer address so 
                        filed pursuant to clause (i).
                  ``(B) Statewide jurisdiction.--Procedures 
                under which--
                          ``(i) the State agency and any 
                        administrative or judicial tribunal 
                        with authority to hear child support 
                        and paternity cases exerts statewide 
                        jurisdiction over the parties, and 
                        orders issued in such cases have 
                        statewide effect; and
                          ``(ii) (in the case of a State in 
                        which orders in such cases are issued 
                        by local jurisdictions) a case may be 
                        transferred between jurisdictions in 
                        the State without need for any 
                        additional filing by the petitioner, or 
                        service of process upon the respondent, 
                        to retain jurisdiction over the 
                        parties.''.
  (c) Exceptions From State Law Requirements.--Section 466(d) 
(42 U.S.C. 666(d)) is amended--
          (1) by striking ``(d) If'' and inserting the 
        following:
  ``(d) Exemptions From Requirements.--
          ``(1) In general.--Subject to paragraph (2), if''; 
        and
          (2) by adding at the end the following new paragraph:
          ``(2) Nonexempt requirements.--The Secretary shall 
        not grant an exemption from the requirements of--
                  ``(A) subsection (a)(5) (concerning 
                procedures for paternity establishment);
                  ``(B) subsection (a)(10) (concerning 
                modification of orders);
                  ``(C) subsection (a)(12) (concerning 
                recording of orders in the central State case 
                registry);
                  ``(D) subsection (a)(13) (concerning 
                recording of Social Security numbers);
                  ``(E) subsection (a)(14) (concerning 
                interstate enforcement); or
                  ``(F) subsection (c) (concerning expedited 
                procedures), other than paragraph (1)(A) 
                thereof (concerning establishment or 
                modification of support amount).''.
  (d) Automation of State Agency Functions.--Section 454A, as 
added by section 9415(a)(2) of this Act and as amended by 
sections 9421 and 9422(c) of this Act, is amended by adding at 
the end the following new subsection:
  ``(h) Expedited Administrative Procedures.--The automated 
system required under this section shall be used, to the 
maximum extent feasible, to implement any expedited 
administrative procedures required under section 466(c).''.

                   CHAPTER 5--PATERNITY ESTABLISHMENT

SEC. 9441. SENSE OF THE CONGRESS.

  It is the sense of the Congress that social services should 
be provided in hospitals to women who have become pregnant as a 
result of rape or incest.

SEC. 9442. AVAILABILITY OF PARENTING SOCIAL SERVICES FOR NEW FATHERS.

  Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
9401(a), 9426(a), and 9431 of this Act, is amended by inserting 
after paragraph (14) the following:
          ``(15) Procedures for providing new fathers with 
        positive parenting counseling that stresses the 
        importance of paying child support in a timely manner, 
        in accordance with regulations prescribed by the 
        Secretary.''.

SEC. 9443. COOPERATION REQUIREMENT AND GOOD CAUSE EXCEPTION.

  (a) In General.--Section 454 (42 U.S.C. 654) is amended--
          (1) by striking ``and'' at the end of paragraph (23);
          (2) by striking the period at the end of paragraph 
        (24) and inserting ``; and''; and
          (3) by inserting after paragraph (24) the following:
          ``(25) provide that the State agency administering 
        the plan under this part--
                  ``(A) will make the determination specified 
                under paragraph (4), as to whether an 
                individual is cooperating with efforts to 
                establish paternity and secure support (or has 
                good cause not to cooperate with such efforts) 
                for purposes of the requirements of sections 
                403(b)(1)(E)(i) and 1912;
                  ``(B) will advise individuals, both orally 
                and in writing, of the grounds for good cause 
                exceptions to the requirement to cooperate with 
                such efforts;
                  ``(C) will take the best interests of the 
                child into consideration in making the 
                determination whether such individual has good 
                cause not to cooperate with such efforts;
                  ``(D)(i) will make the initial determination 
                as to whether an individual is cooperating (or 
                has good cause not to cooperate) with efforts 
                to establish paternity within 10 days after 
                such individual is referred to such State 
                agency by the State agency administering the 
                program under part A of title XIX;
                  ``(ii) will make redeterminations as to 
                cooperation or good cause at appropriate 
                intervals; and
                  ``(iii) will promptly notify the individual, 
                and the State agencies administering such 
                programs, of each such determination and 
                redetermination;
                  ``(E) with respect to any child born on or 
                after the date 10 months after enactment of 
                this provision, will not determine (or 
                redetermine) the mother (or other custodial 
                relative) of such child to be cooperating with 
                efforts to establish paternity unless such 
                individual furnishes--
                          ``(i) the name of the putative father 
                        (or fathers); and
                          ``(ii) sufficient additional 
                        information to enable the State agency, 
                        if reasonable efforts were made, to 
                        verify the identity of the person named 
                        as the putative father (including such 
                        information as the putative father's 
                        present address, telephone number, date 
                        of birth, past or present place of 
                        employment, school previously or 
                        currently attended, and names and 
                        addresses of parents, friends, or 
                        relatives able to provide location 
                        information, or other information that 
                        could enable service of process on such 
                        person), and
                  ``(F)(i) (where a custodial parent who was 
                initially determined not to be cooperating (or 
                to have good cause not to cooperate) is later 
                determined to be cooperating or to have good 
                cause not to cooperate) will immediately notify 
                the State agencies administering the programs 
                under part A of title XIX that this eligibility 
                condition has been met; and
                  ``(ii) (where a custodial parent was 
                initially determined to be cooperating (or to 
                have good cause not to cooperate)) will not 
                later determine such individual not to be 
                cooperating (or not to have good cause not to 
                cooperate) until such individual has been 
                afforded an opportunity for a hearing.''.
  (b) Medicaid Amendments.--Section 1912(a) (42 U.S.C. 
1396k(a)) is amended--
          (1) in paragraph (1)(B), by inserting ``(except as 
        provided in paragraph (2))'' after ``to cooperate with 
        the State'';
          (2) in subparagraphs (B) and (C) of paragraph (1) by 
        striking ``, unless'' and all that follows and 
        inserting a semicolon; and
          (3) by redesignating paragraph (2) as paragraph (5), 
        and inserting after paragraph (1) the following new 
        paragraphs:
          ``(2) provide that the State agency will immediately 
        refer each applicant or recipient requiring paternity 
        establishment services to the State agency 
        administering the program under part D of title IV;
          ``(3) provide that an individual will not be required 
        to cooperate with the State, as provided under 
        paragraph (1), if the individual is found to have good 
        cause for refusing to cooperate, as determined in 
        accordance with standards prescribed by the Secretary, 
        which standards shall take into consideration the best 
        interests of the individuals involved--
                  ``(A) to the satisfaction of the State agency 
                administering the program under part D, as 
                determined in accordance with section 454(25), 
                with respect to the requirements to cooperate 
                with efforts to establish paternity and to 
                obtain support (including medical support) from 
                a parent; and
                  ``(B) to the satisfaction of the State agency 
                administering the program under this title, 
                with respect to other requirements to cooperate 
                under paragraph (1);
          ``(4) provide that (except as provided in paragraph 
        (5)) an applicant requiring paternity establishment 
        services (other than an individual presumptively 
        eligible pursuant to section 1920) shall not be 
        eligible for medical assistance under this title until 
        such applicant--
                  ``(i) has furnished to the agency 
                administering the State plan under part D of 
                title IV the information specified in section 
                454(25)(E); or
                  ``(ii) has been determined by such agency to 
                have good cause not to cooperate; and
          ``(5) provide that the provisions of paragraph (4) 
        shall not apply with respect to an applicant--
                  ``(i) if such agency has not, within 10 days 
                after such individual was referred to such 
                agency, provided the notification required by 
                section 454(25)(D)(iii), until such 
                notification is received; and
                  ``(ii) if such individual appeals a 
                determination that the individual lacks good 
                cause for noncooperation, until after such 
                determination is affirmed after notice and 
                opportunity for a hearing.''.
  (c) Effective Date.--The amendments made by this section 
shall be effective with respect to applications filed in or 
after the first calendar quarter beginning 10 months or more 
after the date of the enactment of this Act (or such earlier 
quarter as the State may select) for assistance under a State 
plan approved under part A of title IV of the Social Security 
Act or for medical assistance under a State plan approved under 
title XIX of such Act.

SEC. 9444. FEDERAL MATCHING PAYMENTS.

  (a) Increased Base Matching Rate.--Section 455(a)(2) (42 
U.S.C. 655(a)(2)) is amended to read as follows:
          ``(2) The applicable percent for a quarter for 
        purposes of paragraph (1)(A) is--
                  ``(A) for fiscal year 1996, 69 percent;
                  ``(B) for fiscal year 1997, 72 percent; and
                  ``(C) for fiscal year 1998 and succeeding 
                fiscal years, 75 percent.''.
  (b) Maintenance of Effort.--Section 455 (42 U.S.C. 655) is 
amended--
          (1) in subsection (a)(1), in the matter preceding 
        subparagraph (A), by striking ``From'' and inserting 
        ``Subject to subsection (c), from''; and
          (2) by inserting after subsection (b) the following:
  ``(c) Maintenance of Effort.--Notwithstanding subsection (a), 
total expenditures for the State program under this part for 
fiscal year 1996 and each succeeding fiscal year, reduced by 
the percentage specified for such fiscal year under 
subparagraph (A), (B), or (C)(i) of paragraph (2), shall not be 
less than such total expenditures for fiscal year 1995, reduced 
by 66 percent.''.

SEC. 9445. STATE LAWS CONCERNING PATERNITY ESTABLISHMENT.

  (a) State Laws Required.--Section 466(a)(5) (42 U.S.C. 
666(a)(5)) is amended--
          (1) by striking ``(5)'' and inserting the following:
          ``(5) Procedures concerning paternity establish- 
         ment.--'';
          (2) in subparagraph (A)--
                  (A) by striking ``(A)(i)'' and inserting the 
                following:
                  ``(A) Establishment process available from 
                birth until age eighteen.--(i)''; and
                  (B) by indenting clauses (i) and (ii) so that 
                the left margin of such clauses is 2 ems to the 
                right of the left margin of paragraph (4);
          (3) in subparagraph (B)--
                  (A) by striking ``(B)'' and inserting the 
                following:
                  ``(B) Procedures concerning genetic 
                testing.--(i)'';
                  (B) in clause (i), as redesignated, by 
                inserting before the period ``, where such 
                request is supported by a sworn statement (I) 
                by such party alleging paternity setting forth 
                facts establishing a reasonable possibility of 
                the requisite sexual contact of the parties, or 
                (II) by such party denying paternity setting 
                forth facts establishing a reasonable 
                possibility of the nonexistence of sexual 
                contact of the parties;'';
                  (C) by inserting after and below clause (i) 
                (as redesignated) the following new clause:
                  ``(ii) Procedures which require the State 
                agency, in any case in which such agency orders 
                genetic testing--
                          ``(I) to pay costs of such tests, 
                        subject to recoupment (where the State 
                        so elects) from the putative father if 
                        paternity is established; and
                          ``(II) to obtain additional testing 
                        in any case where an original test 
                        result is disputed, upon request and 
                        advance payment by the disputing 
                        party.'';
          (4) by striking subparagraphs (C) and (D) and 
        inserting the following:
                  ``(C) Paternity acknowledgment.--(i) 
                Procedures for a simple civil process for 
                voluntarily acknowledging paternity under which 
                the State must provide that, before a mother 
                and a putative father can sign an 
                acknowledgment of paternity, the putative 
                father and the mother must be given notice, 
                orally, in writing, and in a language that each 
                can understand, of the alternatives to, the 
                legal consequences of, and the rights 
                (including, if 1 parent is a minor, any rights 
                afforded due to minority status) and 
                responsibilities that arise from, signing the 
                acknowledgment.
                  ``(ii) Such procedures must include a 
                hospital-based program for the voluntary 
                acknowledgment of paternity focusing on the 
                period immediately before or after the birth of 
                a child.
                  ``(iii) Such procedures must require the 
                State agency responsible for maintaining birth 
                records to offer voluntary paternity 
                establishment services.
                  ``(iv) The Secretary shall prescribe 
                regulations governing voluntary paternity 
                establishment services offered by hospitals and 
                birth record agencies. The Secretary shall 
                prescribe regulations specifying the types of 
                other entities that may offer voluntary 
                paternity establishment services, and governing 
                the provision of such services, which shall 
                include a requirement that such an entity must 
                use the same notice provisions used by, the 
                same materials used by, provide the personnel 
                providing such services with the same training 
                provided by, and evaluate the provision of such 
                services in the same manner as, voluntary 
                paternity establishment programs of hospitals 
                and birth record agencies.
                  ``(v) Such procedures must require the State 
                and those required to establish paternity to 
                use only the affidavit developed under section 
                452(a)(7) for the voluntary acknowledgment of 
                paternity, and to give full faith and credit to 
                such an affidavit signed in any other State.
                  ``(D) Status of signed paternity 
                acknowledgment.--(i) Procedures under which a 
                signed acknowledgment of paternity is 
                considered a legal finding of paternity, 
                subject to the right of any signatory to 
                rescind the acknowledgment within 60 days.
                  ``(ii)(I) Procedures under which, after the 
                60-day period referred to in clause (i), a 
                signed acknowledgment of paternity may be 
                challenged in court only on the basis of fraud, 
                duress, or material mistake of fact, with the 
                burden of proof upon the challenger, and under 
                which the legal responsibilities (including 
                child support obligations) of any signatory 
                arising from the acknowledgment may not be 
                suspended during the challenge, except for good 
                cause shown.
                  ``(II) Procedures under which, after the 60-
                day period referred to in clause (i), a minor 
                who signs an acknowledgment of paternity other 
                than in the presence of a parent or court-
                appointed guardian ad litem may rescind the 
                acknowledgment in a judicial or administrative 
                proceeding, until the earlier of--
                          ``(aa) attaining the age of majority; 
                        or
                          ``(bb) the date of the first judicial 
                        or administrative proceeding brought 
                        (after the signing) to establish a 
                        child support obligation, visitation 
                        rights, or custody rights with respect 
                        to the child whose paternity is the 
                        subject of the acknowledgment, and at 
                        which the minor is represented by a 
                        parent, guardian ad litem, or 
                        attorney.'';
          (5) by striking subparagraph (E) and inserting the 
        following:
                  ``(E) Bar on acknowledgment ratification 
                proceedings.--Procedures under which no 
                judicial or administrative proceedings are 
                required or permitted to ratify an unchallenged 
                acknowledgment of paternity.'';
          (6) by striking subparagraph (F) and inserting the 
        following:
                  ``(F) Admissibility of genetic testing 
                results.--Procedures--
                          ``(i) requiring that the State admit 
                        into evidence, for purposes of 
                        establishing paternity, results of any 
                        genetic test that is--
                                  ``(I) of a type generally 
                                acknowledged, by accreditation 
                                bodies designated by the 
                                Secretary, as reliable evidence 
                                of paternity; and
                                  ``(II) performed by a 
                                laboratory approved by such an 
                                accreditation body;
                          ``(ii) that any objection to genetic 
                        testing results must be made in writing 
                        not later than a specified number of 
                        days before any hearing at which such 
                        results may be introduced into evidence 
                        (or, at State option, not later than a 
                        specified number of days after receipt 
                        of such results); and
                          ``(iii) that, if no objection is 
                        made, the test results are admissible 
                        as evidence of paternity without the 
                        need for foundation testimony or other 
                        proof of authenticity or accuracy.''; 
                        and
          (7) by adding after subparagraph (H) the following 
        new subparagraphs:
                  ``(I) No right to jury trial.--Procedures 
                providing that the parties to an action to 
                establish paternity are not entitled to jury 
                trial.
                  ``(J) Temporary support order based on 
                probable paternity in contested cases.--
                Procedures which require that a temporary order 
                be issued, upon motion by a party, requiring 
                the provision of child support pending an 
                administrative or judicial determination of 
                parentage, where there is clear and convincing 
                evidence of paternity (on the basis of genetic 
                tests or other evidence).
                  ``(K) Proof of certain support and paternity 
                establishment costs.--Procedures under which 
                bills for pregnancy, childbirth, and genetic 
                testing are admissible as evidence without 
                requiring third-party foundation testimony, and 
                shall constitute prima facie evidence of 
                amounts incurred for such services and testing 
                on behalf of the child.
                  ``(L) Waiver of state debts for 
                cooperation.--At the option of the State, 
                procedures under which the tribunal 
                establishing paternity and support has 
                discretion to waive rights to all or part of 
                amounts owed to the State (but not to the 
                mother) for costs related to pregnancy, 
                childbirth, and genetic testing and for public 
                assistance paid to the family where the father 
                cooperates or acknowledges paternity before or 
                after genetic testing.
                  ``(M) Standing of putative fathers.--
                Procedures ensuring that the putative father 
                has a reasonable opportunity to initiate a 
                paternity action.''.
  (b) National Paternity Acknowledgment Affidavit.--Section 
452(a)(7) (42 U.S.C. 652(a)(7)) is amended by inserting ``, and 
develop an affidavit to be used for the voluntary 
acknowledgment of paternity which shall include the social 
security account number of each parent'' before the semicolon.
  (c) Technical Amendment.--Section 468 (42 U.S.C. 668) is 
amended by striking ``a simple civil process for voluntarily 
acknowledging paternity and''.

SEC. 9446. OUTREACH FOR VOLUNTARY PATERNITY ESTABLISHMENT.

  (a) State Plan Requirement.--Section 454(23) (42 U.S.C. 
654(23)) is amended by adding at the end the following new 
subparagraph:
                  ``(C) publicize the availability and 
                encourage the use of procedures for voluntary 
                establishment of paternity and child support 
                through a variety of means, which--
                          ``(i) include distribution of written 
                        materials at health care facilities 
                        (including hospitals and clinics), and 
                        other locations such as schools;
                          ``(ii) may include pre-natal programs 
                        to educate expectant couples on 
                        individual and joint rights and 
                        responsibilities with respect to 
                        paternity (and may require all 
                        expectant recipients of assistance 
                        under part A to participate in such 
                        pre-natal programs, as an element of 
                        cooperation with efforts to establish 
                        paternity and child support);
                          ``(iii) include, with respect to each 
                        child discharged from a hospital after 
                        birth for whom paternity or child 
                        support has not been established, 
                        reasonable follow-up efforts (including 
                        at least one contact of each parent 
                        whose whereabouts are known, except 
                        where there is reason to believe such 
                        follow-up efforts would put mother or 
                        child at risk), providing--
                                  ``(I) in the case of a child 
                                for whom paternity has not been 
                                established, information on the 
                                benefits of and procedures for 
                                establishing paternity; and
                                  ``(II) in the case of a child 
                                for whom paternity has been 
                                established but child support 
                                has not been established, 
                                information on the benefits of 
                                and procedures for establishing 
                                a child support order, and an 
                                application for child support 
                                services;''.
  (b) Enhanced Federal Matching.--Section 455(a)(1)(C) (42 
U.S.C. 655(a)(1)(C)) is amended--
          (1) by inserting ``(i)'' before ``laboratory costs'', 
        and
          (2) by inserting before the semicolon ``, and (ii) 
        costs of outreach programs designed to encourage 
        voluntary acknowledgment of paternity''.
  (c) Effective Dates.--(1) The amendments made by subsection 
(a) shall become effective October 1, 1997.
  (2) The amendments made by subsection (b) shall be effective 
with respect to calendar quarters beginning on and after 
October 1, 1996.

      CHAPTER 6--ESTABLISHMENT AND MODIFICATION OF SUPPORT ORDERS

SEC. 9451. NATIONAL CHILD SUPPORT GUIDELINES COMMISSION.

  (a) Establishment.--There is hereby established a commission 
to be known as the ``National Child Support Guidelines 
Commission'' (in this section referred to as the 
``Commission'').
  (b) General Duties.--The Commission shall develop a national 
child support guideline for consideration by the Congress that 
is based on a study of various guideline models, the benefits 
and deficiencies of such models, and any needed improvements.
  (c) Membership.--
          (1) Number; appointment.--
                  (A) In general.--The Commission shall be 
                composed of 12 individuals appointed jointly by 
                the Secretary of Health and Human Services and 
                the Congress, not later than January 15, 1997, 
                of which--
                          (i) 2 shall be appointed by the 
                        Chairman of the Committee on Finance of 
                        the Senate, and 1 shall be appointed by 
                        the ranking minority member of the 
                        Committee;
                          (ii) 2 shall be appointed by the 
                        Chairman of the Committee on Ways and 
                        Means of the House of Representatives, 
                        and 1 shall be appointed by the ranking 
                        minority member of the Committee; and
                          (iii) 6 shall be appointed by the 
                        Secretary of Health and Human Services.
                  (B) Qualifications of members.--Members of 
                the Commission shall have expertise and 
                experience in the evaluation and development of 
                child support guidelines. At least 1 member 
                shall represent advocacy groups for custodial 
                parents, at least 1 member shall represent 
                advocacy groups for noncustodial parents, and 
                at least 1 member shall be the director of a 
                State program under part D of title IV of the 
                Social Security Act.
          (2) Terms of office.--Each member shall be appointed 
        for a term of 2 years. A vacancy in the Commission 
        shall be filled in the manner in which the original 
        appointment was made.
  (d) Commission Powers, Compensation, Access to Information, 
and Supervision.--The first sentence of subparagraph (C), the 
first and third sentences of subparagraph (D), subparagraph (F) 
(except with respect to the conduct of medical studies), 
clauses (ii) and (iii) of subparagraph (G), and subparagraph 
(H) of section 1886(e)(6) of the Social Security Act shall 
apply to the Commission in the same manner in which such 
provisions apply to the Prospective Payment Assessment 
Commission.
  (e) Report.--Not later than 2 years after the appointment of 
members, the Commission shall submit to the President, the 
Committee on Ways and Means of the House of Representatives, 
and the Committee on Finance of the Senate, a recommended 
national child support guideline and a final assessment of 
issues relating to such a proposed national child support 
guideline.
  (f) Termination.--The Commission shall terminate 6 months 
after the submission of the report described in subsection (e).

SEC. 9452. SIMPLIFIED PROCESS FOR REVIEW AND ADJUSTMENT OF CHILD 
                    SUPPORT ORDERS.

  (a) In General.--Section 466(a)(10) (42 U.S.C. 666(a)(10)) is 
amended to read as follows:
          ``(10) Procedures for modification of support 
        orders.--
                  ``(A)(i) Procedures under which--
                          ``(I) every 3 years, at the request 
                        of either parent subject to a child 
                        support order, the State shall review 
                        and, as appropriate, adjust the order 
                        in accordance with the guidelines 
                        established under section 467(a) if the 
                        amount of the child support award under 
                        the order differs from the amount that 
                        would be awarded in accordance with 
                        such guidelines, without a requirement 
                        for any other change in circumstances; 
                        and
                          ``(II) upon request at any time of 
                        either parent subject to a child 
                        support order, the State shall review 
                        and, as appropriate, adjust the order 
                        in accordance with the guidelines 
                        established under section 467(a) based 
                        on a substantial change in the 
                        circumstances of either such parent.
                  ``(ii) Such procedures shall require both 
                parents subject to a child support order to be 
                notified of their rights and responsibilities 
                provided for under clause (i) at the time the 
                order is issued and in the annual information 
                exchange form provided under subparagraph (B).
                  ``(B) Procedures under which each child 
                support order issued or modified in the State 
                after the effective date of this subparagraph 
                shall require the parents subject to the order 
                to provide each other with a complete statement 
                of their respective financial condition 
                annually on a form which shall be established 
                by the Secretary and provided by the State. The 
                Secretary shall establish regulations for the 
                enforcement of such exchange of information.''.

                CHAPTER 7--ENFORCEMENT OF SUPPORT ORDERS

SEC. 9461. FEDERAL INCOME TAX REFUND OFFSET.

  (a) Changed Order of Refund Distribution Under Internal 
Revenue Code.--Section 6402(c) of the Internal Revenue Code of 
1986 is amended by striking the 3rd sentence.
  (b) Elimination of Disparities in Treatment of Assigned and 
Non-Assigned Arrearages.--(1) Section 464(a) (42 U.S.C. 664(a)) 
is amended--
          (A) by striking ``(a)'' and inserting ``(a) Offset 
        Authorized.--'';
          (B) in paragraph (1)--
                  (i) in the first sentence, by striking 
                ``which has been assigned to such State 
                pursuant to section 402(a)(26) or section 
                471(a)(17)''; and
                  (ii) in the second sentence, by striking ``in 
                accordance with section 457 (b)(4) or (d)(3)'' 
                and inserting ``as provided in paragraph (2)'';
          (C) in paragraph (2), to read as follows:
          ``(2) The State agency shall distribute amounts paid 
        by the Secretary of the Treasury pursuant to paragraph 
        (1)--
                  ``(A) in accordance with section 457(a)(4) or 
                (d)(3), in the case of past-due support 
                assigned to a State pursuant to section 
                403(b)(1)(E)(i) or 471(a)(17); and
                  ``(B) to or on behalf of the child to whom 
                the support was owed, in the case of past-due 
                support not so assigned.'';
          (D) in paragraph (3)--
                  (i) by striking ``or (2)'' each place it 
                appears; and
                  (ii) in subparagraph (B), by striking ``under 
                paragraph (2)'' and inserting ``on account of 
                past-due support described in paragraph 
                (2)(B)''.
          (2) Section 464(b) (42 U.S.C. 664(b)) is amended--
                  (A) by striking ``(b)(1)'' and inserting 
                ``(b) Regulations.--''; and
                  (B) by striking paragraph (2).
          (3) Section 464(c) (42 U.S.C. 664(c)) is amended--
                  (A) by striking ``(c)(1) Except as provided 
                in paragraph (2), as'' and inserting ``(c) 
                Definition.--As''; and
                  (B) by striking paragraphs (2) and (3).
  (c) Effective Date.--The amendments made by this section 
shall become effective October 1, 1999.

SEC. 9462. INTERNAL REVENUE SERVICE COLLECTION OF ARREARS.

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

SEC. 9463. AUTHORITY TO COLLECT SUPPORT FROM FEDERAL EMPLOYEES.

  (a) Consolidation and Streamlining of Authorities.--
          (1) Section 459 (42 U.S.C. 659) is amended in the 
        caption by inserting ``income withholding,'' before 
        ``garnishment''.
          (2) Section 459(a) (42 U.S.C. 659(a)) is amended--
                  (A) by striking ``(a)'' and inserting ``(a) 
                Consent To Support Enforcement.--
                  (B) by striking ``section 207'' and inserting 
                ``section 207 of this Act and 38 U.S.C. 5301''; 
                and
                  (C) by striking all that follows ``a private 
                person,'' and inserting ``to withholding in 
                accordance with State law pursuant to 
                subsections (a)(1) and (b) of section 466 and 
                regulations of the Secretary thereunder, and to 
                any other legal process brought, by a State 
                agency administering a program under this part 
                or by an individual obligee, to enforce the 
                legal obligation of such individual to provide 
                child support or alimony.''.
          (3) Section 459(b) (42 U.S.C. 659(b)) is amended to 
        read as follows:
  ``(b) Consent to Requirements Applicable to Private Person.-- 
Except as otherwise provided herein, each entity specified in 
subsection (a) shall be subject, with respect to notice to 
withhold income pursuant to subsection (a)(1) or (b) of section 
466, or to any other order or process to enforce support 
obligations against an individual (if such order or process 
contains or is accompanied by sufficient data to permit prompt 
identification of the individual and the moneys involved), to 
the same requirements as would apply if such entity were a 
private person.''.
          (4) Section 459(c) (42 U.S.C. 659(c)) is redesignated 
        and relocated as paragraph (2) of subsection (f), and 
        is amended--
                  (A) by striking ``responding to 
                interrogatories pursuant to requirements 
                imposed by section 461(b)(3)'' and inserting 
                ``taking actions necessary to comply with the 
                requirements of subsection (A) with regard to 
                any individual''; and
                  (B) by striking ``any of his duties'' and all 
                that follows and inserting ``such duties.''.
          (5) Section 461 (42 U.S.C. 661) is amended by 
        striking subsection (b), and section 459 (42 U.S.C. 
        659) is amended by inserting after subsection (b) (as 
        added by paragraph (3) of this subsection) the 
        following:
  ``(c) Designation of Agent; Response to Notice or Process.--
(1) The head of each agency subject to the requirements of this 
section shall--
          ``(A) designate an agent or agents to receive orders 
        and accept service of process; and
          ``(B) publish (i) in the appendix of such 
        regulations, (ii) in each subsequent republication of 
        such regulations, and (iii) annually in the Federal 
        Register, the designation of such agent or agents, 
        identified by title of position, mailing address, and 
        telephone number.''.
          (6) Section 459 (42 U.S.C. 659) is amended by 
        striking subsection (d) and by inserting after 
        subsection (c)(1) (as added by paragraph (5) of this 
        subsection) the following:
  ``(2) Whenever an agent designated pursuant to paragraph (1) 
receives notice pursuant to subsection (a)(1) or (b) of section 
466, or is effectively served with any order, process, or 
interrogatories, with respect to an individual's child support 
or alimony payment obligations, such agent shall--
          ``(A) as soon as possible (but not later than fifteen 
        days) thereafter, send written notice of such notice or 
        service (together with a copy thereof) to such 
        individual at his duty station or last-known home 
        address;
          ``(B) within 30 days (or such longer period as may be 
        prescribed by applicable State law) after receipt of a 
        notice pursuant to subsection (a)(1) or (b) of section 
        466, comply with all applicable provisions of such 
        section 466; and
          ``(C) within 30 days (or such longer period as may be 
        prescribed by applicable State law) after effective 
        service of any other such order, process, or 
        interrogatories, respond thereto.''.
          (7) Section 461 (42 U.S.C. 661) is amended by 
        striking subsection (c), and section 459 (42 U.S.C. 
        659) is amended by inserting after subsection (c) (as 
        added by paragraph (5) and amended by paragraph (6) of 
        this subsection) the following:
  ``(d) Priority of Claims.--In the event that a governmental 
entity receives notice or is served with process, as provided 
in this section, concerning amounts owed by an individual to 
more than one person--
          ``(1) support collection under section 466(b) must be 
        given priority over any other process, as provided in 
        section 466(b)(7);
          ``(2) allocation of moneys due or payable to an 
        individual among claimants under section 466(b) shall 
        be governed by the provisions of such section 466(b) 
        and regulations thereunder; and
          ``(3) such moneys as remain after compliance with 
        subparagraphs (A) and (B) shall be available to satisfy 
        any other such processes on a first-come, first-served 
        basis, with any such process being satisfied out of 
        such moneys as remain after the satisfaction of all 
        such processes which have been previously served.''.
          (8) Section 459(e) (42 U.S.C. 659(e)) is amended by 
        striking ``(e)'' and inserting the following:
  ``(e) No Requirement To Vary Pay Cycles.--''.
          (9) Section 459(f) (42 U.S.C. 659(f)) is amended by 
        striking ``(f)'' and inserting the following:
  ``(f) Relief From Liability.--(1)''.
          (10) Section 461(a) (42 U.S.C. 661(a)) is 
        redesignated and relocated as section 459(g), and is 
        amended--
                  (A) by striking ``(g)'' and inserting the 
                following:
  ``(g) Regulations.--''; and
                  (B) by striking ``section 459'' and inserting 
                ``this section''.
          (11) Section 462 (42 U.S.C. 662) is amended by 
        striking subsection (f), and section 459 (42 U.S.C. 
        659) is amended by inserting the following after 
        subsection (g) (as added by paragraph (10) of this 
        subsection):
  ``(h) Moneys Subject to Process.--(1) Subject to subsection 
(i), moneys paid or payable to an individual which are 
considered to be based upon remuneration for employment, for 
purposes of this section--
          ``(A) consist of--
                  ``(i) compensation paid or payable for 
                personal services of such individual, whether 
                such compensation is denominated as wages, 
                salary, commission, bonus, pay, allowances, or 
                otherwise (including severance pay, sick pay, 
                and incentive pay);
                  ``(ii) periodic benefits (including a 
                periodic benefit as defined in section 
                228(h)(3)) or other payments--
                          ``(I) under the insurance system 
                        established by title II;
                          ``(II) under any other system or fund 
                        established by the United States which 
                        provides for the payment of pensions, 
                        retirement or retired pay, annuities, 
                        dependents' or survivors' benefits, or 
                        similar amounts payable on account of 
                        personal services performed by the 
                        individual or any other individual;
                          ``(III) as compensation for death 
                        under any Federal program;
                          ``(IV) under any Federal program 
                        established to provide `black lung' 
                        benefits; or
                          ``(V) by the Secretary of Veterans 
                        Affairs as pension, or as compensation 
                        for a service-connected disability or 
                        death (except any compensation paid by 
                        such Secretary to a former member of 
                        the Armed Forces who is in receipt of 
                        retired or retainer pay if such former 
                        member has waived a portion of his 
                        retired pay in order to receive such 
                        compensation); and
                  ``(iii) worker's compensation benefits paid 
                under Federal or State law; but
          ``(B) do not include any payment--
                  ``(i) by way of reimbursement or otherwise, 
                to defray expenses incurred by such individual 
                in carrying out duties associated with his 
                employment; or
                  ``(ii) as allowances for members of the 
                uniformed services payable pursuant to chapter 
                7 of title 37, United States Code, as 
                prescribed by the Secretaries concerned 
                (defined by section 101(5) of such title) as 
                necessary for the efficient performance of 
                duty.''.
          (12) Section 462(g) (42 U.S.C. 662(g)) is 
        redesignated and relocated as section 459(i) (42 U.S.C. 
        659(i)).
          (13)(A) Section 462 (42 U.S.C. 662) is amended--
                  (i) in subsection (e)(1), by redesignating 
                subparagraphs (A), (B), and (C) as clauses (i), 
                (ii), and (iii); and
                  (ii) in subsection (e), by redesignating 
                paragraphs (1) and (2) as subparagraphs (A) and 
                (B).
          (B) Section 459 (42 U.S.C. 659) is amended by adding 
        at the end the following:
  ``(j) Definitions.--For purposes of this section--''.
          (C) Subsections (a) through (e) of section 462 (42 
        U.S.C. 662), as amended by subparagraph (A) of this 
        paragraph, are relocated and redesignated as paragraphs 
        (1) through (4), respectively of section 459(j) (as 
        added by subparagraph (B) of this paragraph, (42 U.S.C. 
        659(j)), and the left margin of each of such paragraphs 
        (1) through (4) is indented 2 ems to the right of the 
        left margin of subsection (i) (as added by paragraph 
        (12) of this subsection).
  (b) Conforming Amendments.--
          (1) To part d of title iv.--Sections 461 and 462 (42 
        U.S.C. 661), as amended by subsection (a) of this 
        section, are repealed.
          (2) To title 5, united states code.--Section 5520a of 
        title 5, United States Code, is amended, in subsections 
        (h)(2) and (i), by striking ``sections 459, 461, and 
        462 of the Social Security Act (42 U.S.C. 659, 661, and 
        662)'' and inserting ``section 459 of the Social 
        Security Act (42 U.S.C. 659)''.
  (c) Military Retired and Retainer Pay.--(1) Definition of 
Court.--Section 1408(a)(1) of title 10, United States Code, is 
amended--
          (A) by striking ``and'' at the end of subparagraph 
        (B);
          (B) by striking the period at the end of subparagraph 
        (C) and inserting ``; and''; and
          (C) by adding after subparagraph (C) the following 
        new paragraph:
                  ``(D) any administrative or judicial tribunal 
                of a State competent to enter orders for 
                support or maintenance (including a State 
                agency administering a State program under part 
                D of title IV of the Social Security Act).'';
  (2) Definition of Court Order.--Section 1408(a)(2) of such 
title is amended by inserting ``or a court order for the 
payment of child support not included in or accompanied by such 
a decree or settlement,'' before ``which--''.
  (3) Public Payee.--Section 1408(d) of such title is amended--
          (A) in the heading, by striking ``to spouse'' and 
        inserting ``to (or for benefit of)''; and
          (B) in paragraph (1), in the first sentence, by 
        inserting ``(or for the benefit of such spouse or 
        former spouse to a State central collections unit or 
        other public payee designated by a State, in accordance 
        with part D of title IV of the Social Security Act, as 
        directed by court order, or as otherwise directed in 
        accordance with such part D)'' before ``in an amount 
        sufficient''.
  (4) Relationship to Part D of Title IV.--Section 1408 of such 
title is amended by adding at the end the following new 
subsection:
  ``(j) Relationship to Other Laws.--In any case involving a 
child support order against a member who has never been married 
to the other parent of the child, the provisions of this 
section shall not apply, and the case shall be subject to the 
provisions of section 459 of the Social Security Act.''.
  (d) Effective Date.--The amendments made by this section 
shall become effective 6 months after the date of the enactment 
of this Act.

SEC. 9464. ENFORCEMENT OF CHILD SUPPORT OBLIGATIONS OF MEMBERS OF THE 
                    ARMED FORCES.

  (a) Availability of Locator Information.--
          (1) Maintenance of address information.--The 
        Secretary of Defense shall establish a centralized 
        personnel locator service that includes the address of 
        each member of the Armed Forces under the jurisdiction 
        of the Secretary. Upon request of the Secretary of 
        Transportation, addresses for members of the Coast 
        Guard shall be included in the centralized personnel 
        locator service.
          (2) Type of address.--
                  (A) Residential address.--Except as provided 
                in subparagraph (B), the address for a member 
                of the Armed Forces shown in the locator 
                service shall be the residential address of 
                that member.
                  (B) Duty address.--The address for a member 
                of the Armed Forces shown in the locator 
                service shall be the duty address of that 
                member in the case of a member--
                          (i) who is permanently assigned 
                        overseas, to a vessel, or to a 
                        routinely deployable unit; or
                          (ii) with respect to whom the 
                        Secretary concerned makes a 
                        determination that the member's 
                        residential address should not be 
                        disclosed due to national security or 
                        safety concerns.
          (3) Updating of locator information.--Within 30 days 
        after a member listed in the locator service 
        establishes a new residential address (or a new duty 
        address, in the case of a member covered by paragraph 
        (2)(B)), the Secretary concerned shall update the 
        locator service to indicate the new address of the 
        member.
          (4) Availability of information.--The Secretary of 
        Defense shall make information regarding the address of 
        a member of the Armed Forces listed in the locator 
        service available, on request, to the Federal Parent 
        Locator Service.
  (b) Facilitating Granting of Leave for Attendance at 
Hearings.--
          (1) Regulations.--The Secretary of each military 
        department, and the Secretary of Transportation with 
        respect to the Coast Guard when it is not operating as 
        a service in the Navy, shall prescribe regulations to 
        facilitate the granting of leave to a member of the 
        Armed Forces under the jurisdiction of that Secretary 
        in a case in which--
                  (A) the leave is needed for the member to 
                attend a hearing described in paragraph (2);
                  (B) the member is not serving in or with a 
                unit deployed in a contingency operation (as 
                defined in section 101 of title 10, United 
                States Code); and
                  (C) the exigencies of military service (as 
                determined by the Secretary concerned) do not 
                otherwise require that such leave not be 
                granted.
          (2) Covered hearings.--Paragraph (1) applies to a 
        hearing that is conducted by a court or pursuant to an 
        administrative process established under State law, in 
        connection with a civil action--
                  (A) to determine whether a member of the 
                Armed Forces is a natural parent of a child; or
                  (B) to determine an obligation of a member of 
                the Armed Forces to provide child support.
          (3) Definitions.--For purposes of this subsection:
                  (A) The term ``court'' has the meaning given 
                that term in section 1408(a) of title 10, 
                United States Code.
                  (B) The term ``child support'' has the 
                meaning given such term in section 462 of the 
                Social Security Act (42 U.S.C. 662).
  (c) Payment of Military Retired Pay in Compliance With Child 
Support Orders.--
          (1) Date of certification of court order.--Section 
        1408 of title 10, United States Code, is amended--
                  (A) by redesignating subsection (i) as 
                subsection (j); and
                  (B) by inserting after subsection (h) the 
                following new subsection (i):
  ``(i) Certification Date.--It is not necessary that the date 
of a certification of the authenticity or completeness of a 
copy of a court order or an order of an administrative process 
established under State law for child support received by the 
Secretary concerned for the purposes of this section be recent 
in relation to the date of receipt by the Secretary.''.
          (2) Payments consistent with assignments of rights to 
        states.--Section 1408(d)(1) of such title is amended by 
        inserting after the first sentence the following: ``In 
        the case of a spouse or former spouse who, pursuant to 
        section 403(b)(1)(E)(i) of the Social Security Act, 
        assigns to a State the rights of the spouse or former 
        spouse to receive support, the Secretary concerned may 
        make the child support payments referred to in the 
        preceding sentence to that State in amounts consistent 
        with that assignment of rights.''.
          (3) Arrearages owed by members of the uniformed 
        services.--Section 1408(d) of such title is amended by 
        adding at the end the following new paragraph:
  ``(6) In the case of a court order or an order of an 
administrative process established under State law for which 
effective service is made on the Secretary concerned on or 
after the date of the enactment of this paragraph and which 
provides for payments from the disposable retired pay of a 
member to satisfy the amount of child support set forth in the 
order, the authority provided in paragraph (1) to make payments 
from the disposable retired pay of a member to satisfy the 
amount of child support set forth in a court order or an order 
of an administrative process established under State law shall 
apply to payment of any amount of child support arrearages set 
forth in that order as well as to amounts of child support that 
currently become due.''.

SEC. 9465. MOTOR VEHICLE LIENS.

  Section 466(a)(4) (42 U.S.C. 666(a)(4)) is amended--
          (1) by striking ``(4) Procedures'' and inserting the 
        following:
          ``(4) Liens.--
                  ``(A) In general.--Procedures''; and
          (2) by adding at the end the following new 
        subparagraph:
                  ``(B) Motor vehicle liens.--Procedures for 
                placing liens for arrears of child support on 
                motor vehicle titles of individuals owing such 
                arrears equal to or exceeding two months of 
                support, under which--
                          ``(i) any person owed such arrears 
                        may place such a lien;
                          ``(ii) the State agency administering 
                        the program under this part shall 
                        systematically place such liens;
                          ``(iii) expedited methods are 
                        provided for--
                                  ``(I) ascertaining the amount 
                                of arrears;
                                  ``(II) affording the person 
                                owing the arrears or other 
                                titleholder to contest the 
                                amount of arrears or to obtain 
                                a release upon fulfilling the 
                                support obligation;
                          ``(iv) such a lien has precedence 
                        over all other encumbrances on a 
                        vehicle title other than a purchase 
                        money security interest; and
                          ``(v) the individual or State agency 
                        owed the arrears may execute on, seize, 
                        and sell the property in accordance 
                        with State law.''.

SEC. 9466. VOIDING OF FRAUDULENT TRANSFERS.

  Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
9401(a), 9426(a), 9431, and 9442 of this Act, is amended by 
inserting after paragraph (15) the following:
          ``(16) Fraudulent transfers.--Procedures under 
        which--
                  ``(A) the State has in effect--
                          ``(i) the Uniform Fraudulent 
                        Conveyance Act of 1981,
                          ``(ii) the Uniform Fraudulent 
                        Transfer Act of 1984, or
                          ``(iii) another law, specifying 
                        indicia of fraud which create a prima 
                        facie case that a debtor transferred 
                        income or property to avoid payment to 
                        a child support creditor, which the 
                        Secretary finds affords comparable 
                        rights to child support creditors; and
                  ``(B) in any case in which the State knows of 
                a transfer by a child support debtor with 
                respect to which such a prima facie case is 
                established, the State must--
                          ``(i) seek to void such transfer; or
                          ``(ii) obtain a settlement in the 
                        best interests of the child support 
                        creditor.''.

SEC. 9467. STATE LAW AUTHORIZING SUSPENSION OF LICENSES.

  Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
9401(a), 9426(a), 9431, 9442, and 9466 of this Act, is amended 
by inserting after paragraph (16) the following:
          ``(17) Authority to withhold or suspend licenses.--
        Procedures under which the State has (and uses in 
        appropriate cases) authority (subject to appropriate 
        due process safeguards) to withhold or suspend, or to 
        restrict the use of driver's licenses, and professional 
        and occupational licenses of individuals owing overdue 
        child support or failing, after receiving appropriate 
        notice, to comply with subpoenas or warrants relating 
        to paternity or child support proceedings.''.

SEC. 9468. REPORTING ARREARAGES TO CREDIT BUREAUS.

  Section 466(a)(7) (42 U.S.C. 666(a)(7)) is amended to read as 
follows:
          ``(7) Reporting arrearages to credit bureaus.--(A) 
        Procedures (subject to safeguards pursuant to 
        subparagraph (B)) requiring the State to report 
        periodically to consumer reporting agencies (as defined 
        in section 603(f) of the Fair Credit Reporting Act (15 
        U.S.C. 1681a(f)) the name of any absent parent who is 
        delinquent by 90 days or more in the payment of 
        support, and the amount of overdue support owed by such 
        parent.
          ``(B) Procedures ensuring that, in carrying out 
        subparagraph (A), information with respect to an absent 
        parent is reported--
                  ``(i) only after such parent has been 
                afforded all due process required under State 
                law, including notice and a reasonable 
                opportunity to contest the accuracy of such 
                information; and
                  ``(ii) only to an entity that has furnished 
                evidence satisfactory to the State that the 
                entity is a consumer reporting agency.''.

SEC. 9469. EXTENDED STATUTE OF LIMITATION FOR COLLECTION OF ARREARAGES.

  (a) Amendments.--Section 466(a)(9) (42 U.S.C. 666(a)(9)) is 
amended--
          (1) by striking ``(9) Procedures'' and inserting the 
        following:
          ``(9) Legal treatment of arrears.--
                  ``(A) Finality.--Procedures'';
          (2) by redesignating subparagraphs (A), (B), and (C) 
        as clauses (i), (ii), and (iii), respectively, and by 
        indenting each of such clauses 2 additional ems to the 
        right; and
          (3) by adding after and below subparagraph (A), as 
        redesignated, the following new subparagraph:
                  ``(B) Statute of limitations.--Procedures 
                under which the statute of limitations on any 
                arrearages of child support extends at least 
                until the child owed such support is 30 years 
                of age.''.
  (b) Application of Requirement.--The amendment made by this 
section shall not be read to require any State law to revive 
any payment obligation which had lapsed prior to the effective 
date of such State law.

SEC. 9470. CHARGES FOR ARREARAGES.

  (a) State Law Requirement.--Section 466(a) (42 U.S.C. 
666(a)), as amended by sections 9401(a), 9426(a), 9431, 9442, 
9466, and 9467 of this Act, is amended by inserting after 
paragraph (17) the following:
          ``(18) Charges for arrearages.--Procedures providing 
        for the calculation and collection of interest or 
        penalties for arrearages of child support, and for 
        distribution of such interest or penalties collected 
        for the benefit of the child (except where the right to 
        support has been assigned to the State).''.
  (b) Regulations.--The Secretary of Health and Human Services 
shall establish by regulation a rule to resolve choice of law 
conflicts arising in the implementation of the amendment made 
by subsection (a).
  (c) Conforming Amendment.--Section 454(21) (42 U.S.C. 
654(21)) is repealed.
  (d) Effective Date.--The amendments made by this section 
shall be effective with respect to arrearages accruing on or 
after October 1, 1998.

SEC. 9471. DENIAL OF PASSPORTS FOR NONPAYMENT OF CHILD SUPPORT.

  (a) HHS Certification Procedure.--
          (1) Secretarial responsibility.--Section 452 (42 
        U.S.C. 652), as amended by sections 9415(a)(3) and 9417 
        of this Act, is amended by adding at the end the 
        following new subsection:
  ``(l) Certifications for Purposes of Passport Restrictions.--
          ``(1) In general.--Where the Secretary receives a 
        certification by a State agency in accordance with the 
        requirements of section 454(28) that an individual owes 
        arrearages of child support in an amount exceeding 
        $5,000 or in an amount exceeding 24 months' worth of 
        child support, the Secretary shall transmit such 
        certification to the Secretary of State for action 
        (with respect to denial, revocation, or limitation of 
        passports) pursuant to section 9471(b) of the Omnibus 
        Budget Reconciliation Act of 1995.
          ``(2) Limit on liability.--The Secretary shall not be 
        liable to an individual for any action with respect to 
        a certification by a State agency under this 
        section.''.
          (2) State cse agency responsibility.--Section 454 (42 
        U.S.C. 654), as amended by sections 9404(a), 9414(b), 
        and 9422(a) of this Act, is amended--
                  (A) by striking ``and'' at the end of 
                paragraph (26);
                  (B) by striking the period at the end of 
                paragraph (27) and inserting ``; and''; and
                  (C) by adding after paragraph (27) the 
                following new paragraph:
          ``(28) provide that the State agency will have in 
        effect a procedure (which may be combined with the 
        procedure for tax refund offset under section 464) for 
        certifying to the Secretary, for purposes of the 
        procedure under section 452(l) (concerning denial of 
        passports) determinations that individuals owe 
        arrearages of child support in an amount exceeding 
        $5,000 or in an amount exceeding 24 months' worth of 
        child support, under which procedure--
                  ``(A) each individual concerned is afforded 
                notice of such determination and the 
                consequences thereof, and an opportunity to 
                contest the determination; and
                  ``(B) the certification by the State agency 
                is furnished to the Secretary in such format, 
                and accompanied by such supporting 
                documentation, as the Secretary may require.''.
  (b) State Department Procedure for Denial of Passports.--
          (1) In general.--The Secretary of State, upon 
        certification by the Secretary of Health and Human 
        Services, in accordance with section 452(l) of the 
        Social Security Act, that an individual owes arrearages 
        of child support in excess of $5,000, shall refuse to 
        issue a passport to such individual, and may revoke, 
        restrict, or limit a passport issued previously to such 
        individual.
          (2) Limit on liability.--The Secretary of State shall 
        not be liable to an individual for any action with 
        respect to a certification by a State agency under this 
        section.
  (c) Effective Date.--This section and the amendments made by 
this section shall become effective October 1, 1996.

SEC. 9472. INTERNATIONAL CHILD SUPPORT ENFORCEMENT.

  (a) Sense of the Congress That the United States Should 
Ratify the United Nations Convention of 1956.--It is the sense 
of the Congress that the United States should ratify the United 
Nations Convention of 1956.
  (b) Treatment of International Child Support Cases as 
Interstate Cases.--Section 454 (42 U.S.C. 654), as amended by 
sections 9404(a), 9414(b), 9422(a), and 9471(a)(2) of this Act, 
is amended--
          (1) by striking ``and'' at the end of paragraph (27);
          (2) by striking the period at the end of paragraph 
        (28) and inserting ``; and''; and
          (3) by inserting after paragraph (28) the following:
          ``(29) provide that the State must treat 
        international child support cases in the same manner as 
        the State treats interstate child support cases.''.

SEC. 9473. SEIZURE OF LOTTERY WINNINGS, SETTLEMENTS, PAYOUTS, AWARDS, 
                    AND BEQUESTS, AND SALE OF FORFEITED PROPERTY, TO 
                    PAY CHILD SUPPORT ARREARAGES.

  Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
9401(a), 9426(a), 9431, 9442, 9466, 9467, and 9470(a) of this 
Act, is amended by inserting after paragraph (18) the 
following:
          ``(19) Procedures, in addition to other income 
        withholding procedures, under which a lien is imposed 
        against property with the following effect:
                  ``(A) The person required to make a payment 
                under a policy of insurance or a settlement of 
                a claim made with respect to the policy shall--
                          ``(i) suspend the payment until an 
                        inquiry is made to and a response 
                        received from the agency as to whether 
                        the person otherwise entitled to the 
                        payment owes a child support arrearage; 
                        and
                          ``(ii) if there is such an arrearage, 
                        withhold from the payment the lesser of 
                        the amount of the payment or the amount 
                        of the arrearage, and pay the amount 
                        withheld to the agency for 
                        distribution.
                  ``(B) The payor of any amount pursuant to an 
                award, judgment, or settlement in any action 
                brought in Federal or State court shall--
                          ``(i) suspend the payment of the 
                        amount until an inquiry is made to and 
                        a response is received from the agency 
                        as to whether the person otherwise 
                        entitled to the payment owes a child 
                        support arrearage; and
                          ``(ii) if there is such an arrearage, 
                        withhold from the payment the lesser of 
                        the amount of the payment or the amount 
                        of the arrearage, and pay the amount 
                        withheld to the agency for 
                        distribution.
                  ``(C) If the State seizes property forfeited 
                to the State by an individual by reason of a 
                criminal conviction, the State shall--
                          ``(i) hold the property until an 
                        inquiry is made to and a response is 
                        received from the agency as to whether 
                        the individual owes a child support 
                        arrearage; and
                          ``(ii) if there is such an arrearage, 
                        sell the property and, after satisfying 
                        the claims of all other private or 
                        public claimants to the property and 
                        deducting from the proceeds of the sale 
                        the attendant costs (such as for 
                        towing, storage, and the sale), pay the 
                        lesser of the remaining proceeds or the 
                        amount of the arrearage directly to the 
                        agency for distribution.
                  ``(D) Any person required to make a payment 
                in respect of a decedent shall--
                          ``(i) suspend the payment until an 
                        inquiry is made to and a response 
                        received from the agency as to whether 
                        the person otherwise entitled to the 
                        payment owes a child support arrearage; 
                        and
                          ``(ii) if there is such an arrearage, 
                        withhold from the payment the lesser of 
                        the amount of the payment or the amount 
                        of the arrearage, and pay the amount 
                        withheld to the agency for 
                        distribution.''.

SEC. 9474. LIABILITY OF GRANDPARENTS FOR FINANCIAL SUPPORT OF CHILDREN 
                    OF THEIR MINOR CHILDREN.

  Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
9401(a), 9426(a), 9431, 9442, 9466, 9467, 9470(a), and 9473 of 
this Act, is amended by inserting after paragraph (19) the 
following:
          ``(20) Procedures under which each parent of an 
        individual who has not attained 18 years of age is 
        liable for the financial support of any child of the 
        individual to the extent that the individual is unable 
        to provide such support. The preceding sentence shall 
        not apply to the State if the State plan explicitly 
        provides for such inapplicability.''.

SEC. 9475. SENSE OF THE CONGRESS REGARDING PROGRAMS FOR NONCUSTODIAL 
                    PARENTS UNABLE TO MEET CHILD SUPPORT OBLIGATIONS.

  It is the sense of the Congress that the States should 
develop programs, such as the program of the State of Wisconsin 
known as the ``Children's First Program'', that are designed to 
work with noncustodial parents who are unable to meet their 
child support obligations.

                       CHAPTER 8--MEDICAL SUPPORT

SEC. 9481. TECHNICAL CORRECTION TO ERISA DEFINITION OF MEDICAL CHILD 
                    SUPPORT ORDER.

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

               CHAPTER 9--FOOD STAMP PROGRAM REQUIREMENTS

SEC. 9491. COOPERATION WITH CHILD SUPPORT AGENCIES.

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

SEC. 9492. DISQUALIFICATION FOR CHILD SUPPORT ARREARS.

  Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015), as 
amended by section 9491 of this Act, is amended by adding at 
the end the following:
  ``(k) Disqualification for Child Support Arrears.--
          ``(1) In general.--At the option of a State agency, 
        except as provided in paragraph (2), no individual 
        shall be eligible to participate in the food stamp 
        program as a member of any household during any month 
        that the individual is delinquent in any payment due 
        under a court order for the support of a child of the 
        individual.
          ``(2) Exceptions.--Paragraph (1) shall not apply if--
                  ``(A) a court is allowing the individual to 
                delay payment; or
                  ``(B) the individual is complying with a 
                payment plan approved by a court or the State 
                agency designated under part D of title IV of 
                the Social Security Act (42 U.S.C. 651 et seq.) 
                to provide support for the child of the 
                individual.''.

                    CHAPTER 10--EFFECT OF ENACTMENT

SEC. 9498. EFFECTIVE DATES.

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

SEC. 9499. SEVERABILITY.

  If any provision of this title or the application thereof to 
any person or circumstance is held invalid, the invalidity 
shall not affect other provisions or applications of this title 
which can be given effect without regard to the invalid 
provision or application, and to this end the provisions of 
this title shall be severable.

            Subtitle E--Teen Pregnancy and Family Stability

SEC. 9501. STATE OPTION TO DENY TEMPORARY EMPLOYMENT ASSISTANCE FOR 
                    ADDITIONAL CHILDREN.

  (a) In General.--Section 402(d)(1), as added by section 
9101(a) of this Act, is amended--
          (1) by striking ``(1) Determination of need.--'' and 
        inserting the following:
          ``(1) Determination of need.--
                  ``(A) In general.--''; and
          (2) by adding at the end the following:
                  ``(B) Optional denial of assistance to 
                families having additional children while 
                receiving assistance.--At the option of the 
                State, the State plan may provide that--
                          ``(i)(I) a child shall not be 
                        considered a needy child if the child 
                        is born (other than as a result of rape 
                        or incest) to a member of a family--
                                  ``(aa) while the family was a 
                                recipient of assistance under 
                                the State plan; or
                                  ``(bb) during the 6-month 
                                period ending with the date the 
                                family applied for such 
                                assistance; and
                          ``(II) if the value of assistance to 
                        a family under the State plan approved 
                        under this part is reduced by reason of 
                        subclause (I), each member of the 
                        family shall be considered to be 
                        receiving such assistance for purposes 
                        of eligibility for medical assistance 
                        under the State plan approved under 
                        title XIX for so long as assistance to 
                        the family under the State plan 
                        approved under this part would 
                        otherwise not be so reduced; and
                          ``(ii) if the State exercises the 
                        option, the State may provide the 
                        family with vouchers, in amounts not 
                        exceeding the amount of any such 
                        reduction in assistance, that may be 
                        used only to pay for particular goods 
                        and services specified by the State as 
                        suitable for the care of the child of 
                        the parent (such as diapers, clothing, 
                        or school supplies).''.
  (b) Effective Date.--The amendment made by subsection (a) of 
this section shall take effect in the same manner as the 
amendment made by section 9101(a) takes effect.

SEC. 9502. SUPERVISED LIVING ARRANGEMENTS FOR MINORS.

  (a) In General.--Section 402(c), as added by section 9101(a) 
of this Act, is amended by adding at the end the following:
          ``(8) Supervised living arrangements for minors.--The 
        State plan shall provide that--
                  ``(A) except as provided in subparagraph (B), 
                in the case of any individual who is under age 
                18 and has never married, and who has a needy 
                child in his or her care (or is pregnant and is 
                eligible for temporary employment assistance 
                under the State plan)--
                          ``(i) such individual may receive 
                        such assistance for the individual and 
                        such child (or for herself in the case 
                        of a pregnant woman) only if such 
                        individual and child (or such pregnant 
                        woman) reside in a place of residence 
                        maintained by a parent, legal guardian, 
                        or other adult relative of such 
                        individual as such parent's, 
                        guardian's, or adult relative's own 
                        home; and
                          ``(ii) such assistance (where 
                        possible) shall be provided to the 
                        parent, legal guardian, or other adult 
                        relative on behalf of such individual 
                        and child; and
                  ``(B)(i) in the case of an individual 
                described in clause (ii)--
                          ``(I) the State agency shall assist 
                        such individual in locating an 
                        appropriate adult-supervised supportive 
                        living arrangement taking into 
                        consideration the needs and concerns of 
                        the individual, unless the State agency 
                        determines that the individual's 
                        current living arrangement is 
                        appropriate, and thereafter shall 
                        require that the individual (and child, 
                        if any) reside in such living 
                        arrangement as a condition of the 
                        continued receipt of assistance under 
                        the plan (or in an alternative 
                        appropriate arrangement, should 
                        circumstances change and the current 
                        arrangement cease to be appropriate), 
                        or
                          ``(II) if the State agency is unable, 
                        after making diligent efforts, to 
                        locate any such appropriate living 
                        arrangement, the State agency shall 
                        provide for comprehensive case 
                        management, monitoring, and other 
                        social services consistent with the 
                        best interests of the individual (and 
                        child) while living independently (as 
                        determined by the State agency); and
                  ``(ii) for purposes of clause (i), an 
                individual is described in this clause if--
                          ``(I) such individual has no parent 
                        or legal guardian of his or her own who 
                        is living and whose whereabouts are 
                        known;
                          ``(II) no living parent or legal 
                        guardian of such individual allows the 
                        individual to live in the home of such 
                        parent or guardian;
                          ``(III) the State agency determines 
                        that the physical or emotional health 
                        of such individual or any needy child 
                        of the individual would be jeopardized 
                        if such individual and such needy child 
                        lived in the same residence with such 
                        individual's own parent or legal 
                        guardian; or
                          ``(IV) the State agency otherwise 
                        determines (in accordance with 
                        regulations issued by the Secretary) 
                        that it is in the best interest of the 
                        needy child to waive the requirement of 
                        subparagraph (A) with respect to such 
                        individual.''.
  (b) Effective Date.--The amendment made by subsection (a) of 
this section shall take effect in the same manner as the 
amendment made by section 9101(a) takes effect.

SEC. 9503. NATIONAL CLEARINGHOUSE ON ADOLESCENT PREGNANCY.

  (a) In General.--Title XX (42 U.S.C. 1397-1397f), as amended 
by section 9205(b) of this Act, is amended by adding at the end 
the following:

``SEC. 2010. NATIONAL CLEARINGHOUSE ON ADOLESCENT PREGNANCY.

  ``(a) National Clearinghouse on Adolescent Pregnancy.--
          ``(1) Establishment.--The responsible Federal 
        officials shall establish, through grant or contract, a 
        national center for the collection and provision of 
        programmatic information and technical assistance that 
        relates to adolescent pregnancy prevention programs, to 
        be known as the `National Clearinghouse on Adolescent 
        Pregnancy Prevention Programs'.
          ``(2) Functions.--The national center established 
        under paragraph (1) shall serve as a national 
        information and data clearinghouse, and as a training, 
        technical assistance, and material development source 
        for adolescent pregnancy prevention programs. Such 
        center shall--
                  ``(A) develop and maintain a system for 
                disseminating information on all types of 
                adolescent pregnancy prevention programs and on 
                the state of adolescent pregnancy prevention 
                program development, including information 
                concerning the most effective model programs;
                  ``(B) develop and sponsor a variety of 
                training institutes and curricula for 
                adolescent pregnancy prevention program staff;
                  ``(C) identify model programs representing 
                the various types of adolescent pregnancy 
                prevention programs;
                  ``(D) develop technical assistance materials 
                and activities to assist other entities in 
                establishing and improving adolescent pregnancy 
                prevention programs;
                  ``(E) develop networks of adolescent 
                pregnancy prevention programs for the purpose 
                of sharing and disseminating information; and
                  ``(F) conduct such other activities as the 
                responsible Federal officials find will assist 
                in developing and carrying out programs or 
                activities to reduce adolescent pregnancy.
  ``(b) Funding.--The responsible Federal officials shall make 
grants to eligible entities for the establishment and operation 
of a National Clearinghouse on Adolescent Pregnancy Prevention 
Programs under subsection (a) so that in the aggregate the 
expenditures for such grants do not exceed $2,000,000 for 
fiscal year 1996, $4,000,000 for fiscal year 1997, $8,000,000 
for fiscal year 1998, and $10,000,000 for fiscal year 1999 and 
each subsequent fiscal year.
  ``(c) Definitions.--As used in this section:
          ``(1) Adolescents.--The term `adolescents' means 
        youth who are ages 10 through 19.
          ``(2) Eligible entity.--The term `eligible entity' 
        means a partnership that includes--
                  ``(A) a local education agency, acting on 
                behalf of one or more schools, together with
                  ``(B) one or more community-based 
                organizations, institutions of higher 
                education, or public or private agencies or 
                organizations.
          ``(3) Eligible area.--The term `eligible area' means 
        a school attendance area in which--
                  ``(A) at least 75 percent of the children are 
                from low-income families as that term is used 
                in part A of title I of the Elementary and 
                Secondary Education Act of 1965; or
                  ``(B) the number of children receiving 
                assistance under a State plan approved under 
                part A of title IV of this Act is substantial 
                as determined by the responsible Federal 
                officials; or
                  ``(C) the unmarried adolescent birth rate is 
                high, as determined by the responsible Federal 
                officials.
          ``(4) School.--The term `school' means a public 
        elementary, middle, or secondary school.
          ``(5) Responsible federal officials.--The term 
        `responsible Federal officials' means the Secretary of 
        Education, the Secretary of Health and Human Services, 
        and the Chief Executive Officer of the Corporation for 
        National and Community Service.''.
  (b) Effective Date.--The amendment made by this section shall 
become effective January 1, 1996.

SEC. 9504. REQUIRED COMPLETION OF HIGH SCHOOL OR OTHER TRAINING FOR 
                    TEENAGE PARENTS.

  (a) In General.--Section 403(b)(1)(D), as added by section 
9101(a) of this Act, is amended--
          (1) by inserting ``(i)'' after ``(D)''; and
          (2) by adding at the end the following:
                  ``(ii) in the case of a client who is a 
                custodial parent who is under age 18 (or age 
                19, at the option of the State), has not 
                successfully completed a high-school education 
                (or its equivalent), and is required to 
                participate in the Work First program 
                (including an individual who would otherwise be 
                exempt from participation in the program), 
                shall provide that--
                          ``(I) such parent participate in--
                                  ``(aa) educational activities 
                                directed toward the attainment 
                                of a high school diploma or its 
                                equivalent on a full-time (as 
                                defined by the educational 
                                provider) basis; or
                                  ``(bb) an alternative 
                                educational or training program 
                                on a full-time (as defined by 
                                the provider) basis; and
                          ``(II) child care be provided in 
                        accordance with section 2009 with 
                        respect to the family.''.
  (b) State Option To Provide Additional Incentives and 
Penalties to Encourage Teen Parents to Complete High School and 
Participate in Parenting Activities.--
          (1) State plan.--Section 403(b)(1)(D), as amended by 
        subsection (a) of this section, is amended by adding at 
        the end the following:
                  ``(iii) at the option of the State, may 
                provide that the client who is a custodial 
                parent or pregnant woman who is under age 19 
                (or age 21, at the option of the State) 
                participate in a program of monetary incentives 
                and penalties which--
                          ``(I) may, at the option of the 
                        State, require full-time participation 
                        by such custodial parent or pregnant 
                        woman in secondary school or equivalent 
                        educational activities, or 
                        participation in a course or program 
                        leading to a skills certificate found 
                        appropriate by the State agency or 
                        parenting education activities (or any 
                        combination of such activities and 
                        secondary education);
                          ``(II) shall require that the needs 
                        of such custodial parent or pregnant 
                        woman be reviewed and the program 
                        assure that, either in the initial 
                        development or revision of such 
                        individual's individual responsibility 
                        plan, there will be included a 
                        description of the services that will 
                        be provided to the client and the way 
                        in which the program and service 
                        providers will coordinate with the 
                        educational or skills training 
                        activities in which the client is 
                        participating;
                          ``(III) shall provide monetary 
                        incentives (to be treated as assistance 
                        under the State plan) for more than 
                        minimally acceptable performance of 
                        required educational activities;
                          ``(IV) shall provide penalties (which 
                        may be those required by subsection (e) 
                        or, with the approval of the Secretary, 
                        other monetary penalties that the State 
                        finds will better achieve the 
                        objectives of the program) for less 
                        than minimally acceptable performance 
                        of required activities;
                          ``(V) shall provide that when a 
                        monetary incentive is payable because 
                        of the more than minimally acceptable 
                        performance of required educational 
                        activities by a custodial parent, the 
                        incentive be paid directly to such 
                        parent, regardless of whether the State 
                        agency makes payment of assistance 
                        under the State plan directly to such 
                        parent; and
                          ``(VI) for purposes of any other 
                        Federal or federally-assisted program 
                        based on need, shall not consider any 
                        monetary incentive paid under the State 
                        plan as income in determining a 
                        family's eligibility for or amount of 
                        benefits under such program, and if 
                        assistance is reduced by reason of a 
                        penalty under this clause, such other 
                        program shall treat the family involved 
                        as if no such penalty has been 
                        applied.''.
  (c) Effective Date.--The amendments made by this section 
shall take effect in the same manner as the amendment made by 
section 9101(a) takes effect.

SEC. 9505. DENIAL OF FEDERAL HOUSING BENEFITS TO MINORS WHO BEAR 
                    CHILDREN OUT-OF-WEDLOCK.

  (a) Prohibition of Assistance.--Notwithstanding any other 
provision of law, a household whose head of household is an 
individual who has borne a child out-of-wedlock before 
attaining 18 years of age may not be provided Federal housing 
assistance for a dwelling unit until attaining such age, 
unless--
          (1) after the birth of the child--
                  (A) the individual marries an individual who 
                has been determined by the relevant State to be 
                the biological father of the child; or
                  (B) the biological parent of the child has 
                legal custody of the child and marries an 
                individual who legally adopts the child;
          (2) the individual is a biological and custodial 
        parent of another child who was not born out-of-
        wedlock; or
          (3) eligibility for such Federal housing assistance 
        is based in whole or in part on any disability or 
        handicap of a member of the household.
          (4) the state deems it necessary.
  (b) Definitions.--For purposes of this section, the following 
definitions shall apply:
          (1) Covered program.--The term ``covered program'' 
        means--
                  (A) the program of rental assistance on 
                behalf of low-income families provided under 
                section 8 of the United States Housing Act of 
                1937 (42 U.S.C. 1437f);
                  (B) the public housing program under title I 
                of the United States Housing Act of 1937 (42 
                U.S.C. 1437 et seq.);
                  (C) the program of rent supplement payments 
                on behalf of qualified tenants pursuant to 
                contracts entered into under section 101 of the 
                Housing and Urban Development Act of 1965 (12 
                U.S.C. 1701s);
                  (D) the program of interest reduction 
                payments pursuant to contracts entered into by 
                the Secretary of Housing and Urban Development 
                under section 236 of the National Housing Act 
                (12 U.S.C. 1715z-1);
                  (E) the program for mortgage insurance 
                provided pursuant to sections 221(d) (3) or (4) 
                of the National Housing Act (12 U.S.C. 
                1715l(d)) for multifamily housing for low- and 
                moderate-income families;
                  (F) the rural housing loan program under 
                section 502 of the Housing Act of 1949 (42 
                U.S.C. 1472);
                  (G) the rural housing loan guarantee program 
                under section 502(h) of the Housing Act of 1949 
                (42 U.S.C. 1472(h));
                  (H) the loan and grant programs under section 
                504 of the Housing Act of 1949 (42 U.S.C. 1474) 
                for repairs and improvements to rural 
                dwellings;
                  (I) the program of loans for rental and 
                cooperative rural housing under section 515 of 
                the Housing Act of 1949 (42 U.S.C. 1485);
                  (J) the program of rental assistance payments 
                pursuant to contracts entered into under 
                section 521(a)(2)(A) of the Housing Act of 1949 
                (42 U.S.C. 1490a(a)(2)(A));
                  (K) the loan and assistance programs under 
                sections 514 and 516 of the Housing Act of 1949 
                (42 U.S.C. 1484, 1486) for housing for farm 
                labor;
                  (L) the program of grants and loans for 
                mutual and self-help housing and technical 
                assistance under section 523 of the Housing Act 
                of 1949 (42 U.S.C. 1490c);
                  (M) the program of grants for preservation 
                and rehabilitation of housing under section 533 
                of the Housing Act of 1949 (42 U.S.C. 1490m); 
                and
                  (N) the program of site loans under section 
                524 of the Housing Act of 1949 (42 U.S.C. 
                1490d).
          (2) Covered project.--The term ``covered project'' 
        means any housing for which Federal housing assistance 
        is provided that is attached to the project or specific 
        dwelling units in the project.
          (3) Federal housing assistance.--The term ``Federal 
        housing assistance'' means--
                  (A) assistance provided under a covered 
                program in the form of any contract, grant, 
                loan, subsidy, cooperative agreement, loan or 
                mortgage guarantee or insurance, or other 
                financial assistance; or
                  (B) occupancy in a dwelling unit that is--
                          (i) provided assistance under a 
                        covered program; or
                          (ii) located in a covered project and 
                        subject to occupancy limitations under 
                        a covered program that are based on 
                        income.
          (4) State.--The term ``State'' means the States of 
        the United States, the District of Columbia, the 
        Commonwealth of Puerto Rico, the Commonwealth of the 
        Northern Mariana Islands, Guam, the Virgin Islands, 
        American Samoa, and any other territory or possession 
        of the United States.
  (c) Limitations on Applicability.--Subsection (a) shall not 
apply to Federal housing assistance provided for a household 
pursuant to an application or request for such assistance made 
by such household before the effective date of this Act if the 
household was receiving such assistance on the effective date 
of this Act.

SEC. 9506. STATE OPTION TO DENY TEMPORARY EMPLOYMENT ASSISTANCE TO 
                    MINOR PARENTS.

  (a) In General.--Section 402(d)(1), as added by section 
9101(a) of this Act and as amended by section 9501(a) of this 
Act, is amended by adding at the end the following:
                  ``(C) Optional denial of assistance to minor 
                parents.--At the option of the State, the State 
                plan may provide that--
                          ``(i)(I) in determining the need of a 
                        family, the State may disregard the 
                        needs of any family member who is a 
                        parent and has not attained 18 years of 
                        age or such lesser age as the State may 
                        prescribe; and
                          ``(II) if the value of the assistance 
                        provided to a family under the State 
                        plan approved under this part is 
                        reduced by reason of subclause (I), 
                        each member of the family shall be 
                        considered to be receiving such 
                        assistance for purposes of eligibility 
                        for medical assistance under the State 
                        plan approved under title XIX for so 
                        long as such assistance under the State 
                        plan approved under this part would 
                        otherwise not be so reduced; and
                  ``(ii) if the State exercises the option, the 
                State may provide the family with vouchers, in 
                amounts not exceeding the value of any such 
                reduction in assistance, that may be used only 
                to pay for--
                          ``(I) particular goods and services 
                        specified by the State as suitable for 
                        the care of the child of the parent 
                        (such as diapers, clothing, or cribs); 
                        and
                          ``(II) the costs associated with a 
                        maternity home, foster home, or other 
                        adult-supervised supportive living 
                        arrangement in which the parent and the 
                        child live.''.
  (b) Effective Date.--The amendment made by subsection (a) 
shall take effect in the same manner in which the amendment 
made by section 9101(a) takes effect.

                         Subtitle F--SSI Reform

SEC. 9601. DEFINITION AND ELIGIBILITY RULES.

  (a) Definition of Childhood Disability.--Section 1614(a)(3) 
(42 U.S.C. 1382c(a)(3)) is amended--
          (1) in subparagraph (A), by striking ``An 
        individual'' and inserting ``Except as provided in 
        subparagraph (C), an individual'';
          (2) in subparagraph (A), by striking ``(or, in the 
        case of an individual under the age of 18, if he 
        suffers from any medically determinable physical or 
        mental impairment of comparable severity)'';
          (3) by redesignating subparagraphs (C) through (H) as 
        subparagraphs (D) through (I), respectively;
          (4) by inserting after subparagraph (B) the following 
        new subparagraph:
  ``(C) An individual under the age of 18 shall be considered 
disabled for the purposes of this title if that individual has 
a medically determinable physical or mental impairment, which 
results in marked and severe functional limitations, and which 
can be expected to result in death or which has lasted or can 
be expected to last for a continuous period of not less than 12 
months.''; and
          (5) in subparagraph (F), as so redesignated by 
        paragraph (3) of this subsection, by striking ``(D)'' 
        and inserting ``(E)''.
  (b) Changes to Childhood SSI Regulations.--
          (1) Modification to medical criteria for evaluation 
        of mental and emotional disorders.--The Commissioner of 
        Social Security shall modify sections 112.00C.2. and 
        112.02B.2.c.(2) of appendix 1 to subpart P of part 404 
        of title 20, Code of Federal Regulations, to eliminate 
        references to maladaptive behavior in the domain of 
        personal/behavorial function.
          (2) Discontinuance of individualized functional 
        assessment.--The Commissioner of Social Security shall 
        discontinue the individualized functional assessment 
        for children set forth in sections 416.924d and 
        416.924e of title 20, Code of Federal Regulations.
  (c) Effective Date; Regulations; Application to Current 
Recipients.--
          (1) In general.--The amendments made by subsections 
        (a) and (b) shall apply to applicants for benefits for 
        months beginning on or after January 1, 1997.
          (2) Regulations.--The Commissioner of Social Security 
        shall issue such regulations as the Commissioner 
        determines to be necessary to implement the amendments 
        made by subsections (a) and (b), not later than January 
        1, 1997.
          (3) Application to current recipients.--
                  (A) Eligibility determinations.--Beginning on 
                January 1, 1997, and ending not later than 
                January 1, 1998, the Commissioner of Social 
                Security shall redetermine the eligibility of 
                any individual under age 18 who is receiving 
                supplemental security income benefits based on 
                a disability under title XVI of the Social 
                Security Act as of the date of the enactment of 
                this Act and whose eligibility for such 
                benefits may terminate by reason of the 
                amendments made by subsection (a) or (b). With 
                respect to any redetermination under this 
                subparagraph--
                          (i) section 1614(a)(4) of the Social 
                        Security Act (42 U.S.C. 1382c(a)(4)) 
                        shall not apply;
                          (ii) the Commissioner of Social 
                        Security shall apply the eligibility 
                        criteria for new applicants for 
                        benefits under title XVI of such Act;
                          (iii) the Commissioner shall give 
                        such redetermination priority over all 
                        continuing eligibility reviews and 
                        other reviews under such title; and
                          (iv) such redetermination shall be 
                        counted as a review or redetermination 
                        otherwise required to be made under 
                        section 208 of the Social Security 
                        Independence and Program Improvements 
                        Act of 1994 or any other provision of 
                        title XVI of the Social Security Act.
                  (B) Notice.--Not later than 90 days after the 
                date of the enactment of this Act, the 
                Commissioner of Social Security shall notify an 
                individual described in subparagraph (A) of the 
                provisions of this paragraph.

SEC. 9602. ELIGIBILITY REDETERMINATIONS AND CONTINUING DISABILITY 
                    REVIEWS.

  (a) Continuing Disability Reviews Relating to Certain 
Children.--Section 1614(a)(3)(H) (42 U.S.C. 1382c(a)(3)(H)), as 
so redesignated by section 9601(a)(3) of this Act, is amended--
          (1) by inserting ``(i)'' after ``(H)''; and
          (2) by adding at the end the following new clause:
  ``(ii)(I) Not less frequently than once every 3 years, the 
Commissioner shall review in accordance with paragraph (4) the 
continued eligibility for benefits under this title of each 
individual who has not attained 18 years of age and is eligible 
for such benefits by reason of an impairment (or combination of 
impairments) which may improve (or, which is unlikely to 
improve, at the option of the Commissioner).
  ``(II) A parent or guardian of a recipient whose case is 
reviewed under this clause shall present, at the time of 
review, evidence demonstrating that the recipient is, and has 
been, receiving treatment, to the extent considered medically 
necessary and available, of the condition which was the basis 
for providing benefits under this title.''.
  (b) Disability Eligibility Redeterminations Required for SSI 
Recipients Who Attain 18 Years of Age.--
          (1) In general.--Section 1614(a)(3)(H) (42 U.S.C. 
        1382c(a)(3)(H)), as so redesignated by section 
        9601(a)(3) of this Act and as amended by subsection (a) 
        of this section, is amended by adding at the end the 
        following new clause:
  ``(iii) If an individual is eligible for benefits under this 
title by reason of disability for the month preceding the month 
in which the individual attains the age of 18 years, the 
Commissioner shall redetermine such eligibility--
          ``(I) during the 1-year period beginning on the 
        individual's 18th birthday; and
          ``(II) by applying the criteria used in determining 
        the initial eligibility for applicants who have 
        attained the age of 18 years.
With respect to a redetermination under this clause, paragraph 
(4) shall not apply and such redetermination shall be 
considered a substitute for a review or redetermination 
otherwise required under any other provision of this 
subparagraph during that 1-year period.''.
          (2) Conforming repeal.--Section 207 of the Social 
        Security Independence and Program Improvements Act of 
        1994 (42 U.S.C. 1382 note; 108 Stat. 1516) is hereby 
        repealed.
  (c) Continuing Disability Review Required for Low Birth 
Weight Babies.--Section 1614(a)(3)(H) (42 U.S.C. 
1382c(a)(3)(H)), as so redesignated by section 9601(a)(3) of 
this Act and as amended by subsections (a) and (b) of this 
section, is amended by adding at the end the following new 
clause:
  ``(iv)(I) Not later than 12 months after the birth of an 
individual, the Commissioner shall review in accordance with 
paragraph (4) the continuing eligibility for benefits under 
this title by reason of disability of such individual whose low 
birth weight is a contributing factor material to the 
Commissioner's determination that the individual is disabled.
  ``(II) A review under subclause (I) shall be considered a 
substitute for a review otherwise required under any other 
provision of this subparagraph during that 12-month period.
  ``(III) A parent or guardian of a recipient whose case is 
reviewed under this clause shall present, at the time of 
review, evidence demonstrating that the recipient is, and has 
been, receiving treatment, to the extent considered medically 
necessary and available, of the condition which was the basis 
for providing benefits under this title.''.
  (d) Effective Date.--The amendments made by this section 
shall apply to benefits for months beginning on or after the 
date of the enactment of this Act, without regard to whether 
regulations have been issued to implement such amendments.

SEC. 9603. ADDITIONAL ACCOUNTABILITY REQUIREMENTS.

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

SEC. 9604. DENIAL OF SSI BENEFITS BY REASON OF DISABILITY TO DRUG 
                    ADDICTS AND ALCOHOLICS.

  (a) In General.--Section 1614(a)(3) (42 U.S.C. 1382c(a)(3)), 
as amended by section 9601(a)(3) of this Act, is amended by 
adding at the end the following:
  ``(J) Notwithstanding subparagraph (A), an individual shall 
not be considered to be disabled for purposes of this title if 
alcoholism or drug addiction would (but for this subparagraph) 
be a contributing factor material to the Commissioner's 
determination that the individual is disabled.''.
  (b) Conforming Amendments.--
          (1) Section 1611(e) (42 U.S.C. 1382(e)) is amended by 
        striking paragraph (3).
          (2) Section 1613(a)(12) (42 U.S.C. 1382b(a)(12)) is 
        amended by striking ``1631(a)(2)(B)(xiv)'' and 
        inserting ``1631(a)(2)(B)(xiii)''.
          (3) Section 1631(a)(2)(A)(ii) (42 U.S.C. 
        1383(a)(2)(A)(ii)) is amended--
                  (A) by striking ``(I)''; and
                  (B) by striking subclause (II).
          (4) Section 1631(a)(2)(B) (42 U.S.C. 1383(a)(2)(B)) 
        is amended--
                  (A) by striking clause (vii);
                  (B) in clause (viii), by striking ``(ix)'' 
                and inserting ``(viii)'';
                  (C) in clause (ix)--
                          (i) by striking ``(viii)'' and 
                        inserting ``(vii)''; and
                          (ii) in subclause (II), by striking 
                        all that follows ``15 years'' and 
                        inserting a period;
                  (D) in clause (xiii)--
                          (i) by striking ``(xii)'' and 
                        inserting ``(xi)''; and
                          (ii) by striking ``(xi)'' and 
                        inserting ``(x)'';
                  (E) in clause (xiv) (as added by section 
                9603(b)(1) of this Act), by striking ``(x)'' 
                and inserting ``(ix)''; and
                  (F) by redesignating clauses (viii) through 
                (xiv) as clauses (vii) through (xiii), 
                respectively.
          (5) Section 1631(a)(2)(D)(i)(II) (42 U.S.C. 
        1383(a)(2)(D)(i)(II)) is amended by striking all that 
        follows ``$25.00 per month'' and inserting a period.
          (6) Section 1634 (42 U.S.C. 1383c) is amended by 
        striking subsection (e).
          (7) Section 201(c)(1) of the Social Security 
        Independence and Program Improvements Act of 1994 (42 
        U.S.C. 425 note) is amended--
                  (A) by striking ``--'' and all that follows 
                through ``(A)'' the 1st place such term 
                appears;
                  (B) by striking ``and'' the 3rd place such 
                term appears;
                  (C) by striking subparagraph (B);
                  (D) by striking ``either subparagraph (A) or 
                subparagraph (B)'' and inserting ``the 
                preceding sentence''; and
                  (E) by striking ``subparagraph (A) or (B)'' 
                and inserting ``the preceding sentence''.
  (c) Effective Date.--The amendments made by this section 
shall take effect on October 1, 1995, and shall apply with 
respect to months beginning on or after such date.
  (d) Funding of Certain Programs for Drug Addicts and 
Alcoholics.--Out of any money in the Treasury of the United 
States not otherwise appropriated, the Secretary of the 
Treasury shall pay to the Director of the National Institute on 
Drug Abuse--
          (1) $95,000,000, for each of fiscal years 1997, 1998, 
        1999, and 2000, for expenditure through the Federal 
        Capacity Expansion Program to expand the availability 
        of drug treatment; and
          (2) $5,000,000 for each of fiscal years 1997, 1998, 
        1999, and 2000 to be expended solely on the medication 
        development project to improve drug abuse and drug 
        treatment research.

SEC. 9605. DENIAL OF SSI BENEFITS FOR 10 YEARS TO INDIVIDUALS FOUND TO 
                    HAVE FRAUDULENTLY MISREPRESENTED RESIDENCE IN ORDER 
                    TO OBTAIN BENEFITS SIMULTANEOUSLY IN 2 OR MORE 
                    STATES.

  Section 1614(a) (42 U.S.C. 1382c(a)) is amended by adding at 
the end the following:
  ``(5) An individual shall not be considered an eligible 
individual for purposes of this title during the 10-year period 
beginning on the date the individual is found by a State to 
have made, or is convicted in Federal or State court of having 
made, a fraudulent statement or representation with respect to 
the place of residence of the individual in order to receive 
benefits simultaneously from 2 or more States under programs 
that are funded under part A of title IV, or title XIX of this 
Act, the consolidated program of food assistance under chapter 
2 of subtitle E of title XIV of the Omnibus Budget 
Reconciliation Act of 1995, or the Food Stamp Act of 1977 (as 
in effect before the effective date of such chapter), or 
benefits in 2 or more States under the supplemental security 
income program under title XVI of this Act.''.

SEC. 9606. DENIAL OF SSI BENEFITS FOR FUGITIVE FELONS AND PROBATION AND 
                    PAROLE VIOLATORS.

  (a) In General.--Section 1611(e) (42 U.S.C. 1382(e)), as 
amended by section 9604(b)(1) of this Act, is amended by 
inserting after paragraph (2) the following:
          ``(3) A person shall not be an eligible individual or 
        eligible spouse for purposes of this title with respect 
        to any month if, throughout the month, the person is--
                  ``(A) fleeing to avoid prosecution, or 
                custody or confinement after conviction, under 
                the laws of the place from which the person 
                flees, for a crime, or an attempt to commit a 
                crime, which is a felony under the laws of the 
                place from which the person flees, or which, in 
                the case of the State of New Jersey, is a high 
                misdemeanor under the laws of such State; or
                  ``(B) violating a condition of probation or 
                parole imposed under Federal or State law.''.
  (b) Exchange of Information With Law Enforcement Agencies.--
Section 1631(e) of such Act (42 U.S.C. 1383(e)) is amended by 
inserting after paragraph (3) the following:
  ``(4) Notwithstanding any other provision of law, the 
Commissioner shall furnish any Federal, State, or local law 
enforcement officer, upon the request of the officer, with the 
current address of any recipient of benefits under this title, 
if the officer furnishes the agency with the name of the 
recipient and notifies the agency that--
          ``(A) the recipient--
                  ``(i) is fleeing to avoid prosecution, or 
                custody or confinement after conviction, under 
                the laws of the place from which the person 
                flees, for a crime, or an attempt to commit a 
                crime, which is a felony under the laws of the 
                place from which the person flees, or which, in 
                the case of the State of New Jersey, is a high 
                misdemeanor under the laws of such State;
                  ``(ii) is violating a condition of probation 
                or parole imposed under Federal or State law; 
                or
                  ``(iii) has information that is necessary for 
                the officer to conduct the officer's official 
                duties;
          ``(B) the location or apprehension of the recipient 
        is within the official duties of the officer; and
          ``(C) the request is made in the proper exercise of 
        such duties.''.

                Subtitle D--Supplemental Security Income

SEC. 9607 VERIFICATION OF ELIGIBILITY FOR CERTAIN SSI DISABILITY 
                    BENEFITS.

    Section 1631 (42 U.S.C. 1383) is amended by adding at the 
end the following new subsection:
    ``(o)(1) Notwithstanding any other provision of law, if the 
Commissioner of Social Security determines that an individual, 
who is 18 years of age or older, is eligible to receive 
benefits pursuant to section 1614(a)(3), the Commissioner 
shall, at the time of the determination, either exempt the 
individual from an eligibility review or establish a schedule 
for reviewing the individual's continuing eligibility in 
accordance with paragraph (2).
    ``(2)(A) The Commissioner shall establish a periodic review 
with respect to the continuing eligibility of an individual to 
receive benefits, unless the individual is exempt from review 
under subparagraph (C) or is subject to a scheduled review 
under subparagraph (B). A periodic review under this 
subparagraph shall be initiated by the Commissioner not later 
than 30 months after the date a determination is made that the 
individual is eligible for benefits and every 30 months 
thereafter, unless a waiver is granted under section 221(i)(2). 
However, the Commissioner shall not postpone the initiation of 
a periodic review for more than 12 months in any case in which 
such waiver has been granted unless exigent circumstances 
require such postponement.
    ``(B)(i) In the case of an individual, other than an 
individual who is exempt from review under subparagraph (C) or 
with respect to whom subparagraph (A) applies, the Commissioner 
shall schedule a review regarding the individual's continuing 
eligibility to receive benefits at any time the Commissioner 
determines, based on the evidence available, that there is a 
significant possibility that the individual may cease to be 
entitled to such benefits.
    ``(ii) The Commissioner may establish classifications of 
individuals for whom a review of continuing eligibility is 
scheduled based on the impairments that are the basis for such 
individuals' eligibility for benefits. A review of an 
individual covered by a classification shall be scheduled in 
accordance with the applicable classification, unless the 
Commissioner determines that applying such schedule is 
inconsistent with the purpose of this Act or the integrity of 
the supplemental security income program.
    ``(C)(i) The Commissioner may exempt an individual from 
review under this subsection, if the individual's eligibility 
for benefits is based on a condition that, as a practical 
matter, has no substantial likelihood of improving to a point 
where the individual will be able to perform substantial 
gainful activity.
    ``(ii) The Commissioner may establish classifications of 
individuals who are exempt from review under this subsection 
based on the impairments that are the basis for such 
individuals' eligibility for benefits. Notwithstanding any such 
classification, the Commissioner may, at the time of 
determining an individual's eligibility, schedule a review of 
such individual's continuing eligibility if the Commissioner 
determines that a review is necessary to preserve the integrity 
of the supplemental security income program.
    ``(3) The Commissioner may revise a determination made 
under paragraph (1) and schedule a review under paragraph 
(2)(B), if the Commissioner obtains credible evidence that an 
individual may no longer be eligible for benefits or the 
Commissioner determines that a review is necessary to maintain 
the integrity of the supplemental security income program. 
Information obtained under section 1137 may be used as the 
basis to schedule a review.
    ``(4)(i) The requirements of sections 1614(a)(4) and 1633 
shall apply to reviews conducted under this subsection.
    ``(ii) Such reviews may be conducted by the applicable 
State agency or the Commissioner, whichever is appropriate.''.

    modification to accelerate implementation of conrad continuing 
                      disability review provision

    At the end of section 841 of S. 840, insert after ``is 
appropriate.'' the following:
          ``(5) Transition rule.--Not later than three months 
        after the date of enactment of this subsection, the 
        Commissioner shall establish a schedule for reviewing 
        the continuing eligibility of each individual receiving 
        benefits pursuant to section 1614(a)(3) on the date of 
        enactment and who is 18 years of age or older unless 
        such individual is exempt under subparagraph (2)(C). 
        Such reviews shall be scheduled under the procedures 
        set out in paragraph (2), except that the reviews shall 
        be scheduled so that the eligibility of one-third of 
        all such non-exempt individuals is reviewed within one 
        year after the date of enactment, the eligibility of 
        two-thirds of such non-exempt individuals is reviewed 
        within two years of the date of enactment, and all 
        remaining non-exempt individuals receiving benefits on 
        the date of enactment of this subsection who continue 
        receiving benefits shall have their eligibility 
        reviewed within three years of the date of enactment. 
        Each individual determined eligible to continue 
        receiving benefits in a review scheduled under this 
        paragraph shall, at the time of such determination, be 
        subject to paragraph (1).''.

                    Subtitle H--Treatment of Aliens

SEC. 9801. EXTENSION OF DEEMING OF INCOME AND RESOURCES UNDER TEA, SSI, 
                    AND FOOD STAMP PROGRAMS.

  (a) In General.--Except as provided in subsections (b) and 
(c), in applying sections 407 and 1621 of the Social Security 
Act and section 5(i) of the Food Stamp Act of 1977, the period 
in which each respective section otherwise applies with respect 
to an alien shall be extended through the date (if any) on 
which the alien becomes a citizen of the United States (under 
chapter 2 of title III of the Immigration and Nationality Act).
  (b) Exception.--Subsection (a) shall not apply to an alien 
if--
          (1) the alien has been lawfully admitted to the 
        United States for permanent residence, has attained 75 
        years of age, and has resided in the United States for 
        at least 5 years;
          (2) the alien--
                  (A) is a veteran (as defined in section 101 
                of title 38, United States Code) with a 
                discharge characterized as an honorable 
                discharge,
                  (B) is on active duty (other than active duty 
                for training) in the Armed Forces of the United 
                States, or
                  (C) is the spouse or unmarried dependent 
                child of an individual described in 
                subparagraph (A) or (B);
          (3) the alien is the subject of domestic violence by 
        the alien's spouse and a divorce between the alien and 
        the alien's spouse has been initiated through the 
        filing of an appropriate action in an appropriate 
        court; or
          (4) there has been paid with respect to the self-
        employment income or employment of the alien, or of a 
        parent or spouse of the alien, taxes under chapter 2 or 
        chapter 21 of the Internal Revenue Code of 1986 in each 
        of 20 different calendar quarters.
  (c) Hold Harmless for Medicaid Eligibility.--Subsection (a) 
shall not apply with respect to determinations of eligibility 
for benefits under a State plan approved under part A of title 
IV of the Social Security Act or under the supplemental income 
security program under title XVI of such Act but only insofar 
as such determinations provide for eligibility for medical 
assistance under title XIX of such Act.
    (d) Execption for Aliens Receiving Benefit.--Subsection (a) 
shall not apply with respect to determinations of eligibility 
for a benefit for an alien receiving such a benefit on the date 
of the enactment of the Common Sense Budget Act of 1996 who 
otherwise continues to be eligible for and continues to receive 
such benefit after such date.
  (e) Rules Regarding Income and Resource Deeming Under TEA 
Program.--Subpart 1 of part A of title IV of the Social 
Security Act, as added by section 9101(a) of this Act, is 
amended by adding at the end the following:

``SEC. 407. ATTRIBUTION OF SPONSOR'S INCOME AND RESOURCES TO ALIEN.

  ``(a) For purposes of determining eligibility for and the 
amount of assistance under a State plan approved under this 
part for an individual who is an alien lawfully admitted for 
permanent residence or otherwise permanently residing in the 
United States under color of law (including any alien who is 
lawfully present in the United States as a result of the 
application of the provisions of section 207(c) of the 
Immigration and Nationality Act (or of section 203(a)(7) of 
such Act prior to April 1, 1980), or as a result of the 
application of the provisions of section 208 or 212(d)(5) of 
such Act), the income and resources of any person who (as a 
sponsor of such individual's entry into the United States) 
executed an affidavit of support or similar agreement with 
respect to such individual, and the income and resources of the 
sponsor's spouse, shall be deemed to be the unearned income and 
resources of such individual (in accordance with subsections 
(b) and (c)) for a period of three years after the individual's 
entry into the United States, except that this section is not 
applicable if such individual is a dependent child and such 
sponsor (or such sponsor's spouse) is the parent of such child.
  ``(b)(1) The amount of income of a sponsor (and his spouse) 
which shall be deemed to be the unearned income of an alien for 
any month shall be determined as follows:
          ``(A) the total amount of earned and unearned income 
        of such sponsor and such sponsor's spouse (if such 
        spouse is living with the sponsor) shall be determined 
        for such month;
          ``(B) the amount determined under subparagraph (A) 
        shall be reduced by an amount equal to the sum of--
                  ``(i) the lesser of (I) 20 percent of the 
                total of any amounts received by the sponsor 
                and his spouse in such month as wages or salary 
                or as net earnings from self-employment, plus 
                the full amount of any costs incurred by them 
                in producing self-employment income in such 
                month, or (II) $175;
                  ``(ii) the cash needs standard established by 
                the State under its plan for a family of the 
                same size and composition as the sponsor and 
                those other individuals living in the same 
                household as the sponsor who are claimed by him 
                as dependents for purposes of determining his 
                Federal personal income tax liability but whose 
                needs are not taken into account in making a 
                determination under section 402(d);
                  ``(iii) any amounts paid by the sponsor (or 
                his spouse) to individuals not living in such 
                household who are claimed by him as dependents 
                for purposes of determining his Federal 
                personal income tax liability; and
                  ``(iv) any payments of alimony or child 
                support with respect to individuals not living 
                in such household.
  ``(2) The amount of resources of a sponsor (and his spouse) 
which shall be deemed to be the resources of an alien for any 
month shall be determined as follows:
          ``(A) the total amount of the resources (determined 
        as if the sponsor were applying for assistance under 
        the State plan approved under this part) of such 
        sponsor and such sponsor's spouse (if such spouse is 
        living with the sponsor) shall be determined; and
          ``(B) the amount determined under subparagraph (A) 
        shall be reduced by $1,500.
  ``(c)(1) Any individual who is an alien and whose sponsor was 
a public or private agency shall be ineligible for assistance 
under a State plan approved under this part during the period 
of three years after his or her entry into the United States, 
unless the State agency administering such plan determines that 
such sponsor either no longer exists or has become unable to 
meet such individual's needs; and such determination shall be 
made by the State agency based upon such criteria as it may 
specify in the State plan, and upon such documentary evidence 
as it may therein require. Any such individual, and any other 
individual who is an alien (as a condition of his or her 
eligibility for assistance under a State plan approved under 
this part during the period of three years after his or her 
entry into the United States), shall be required to provide to 
the State agency administering such plan such information and 
documentation with respect to his sponsor as may be necessary 
in order for the State agency to make any determination 
required under this section, and to obtain any cooperation from 
such sponsor necessary for any such determination. Such alien 
shall also be required to provide to the State agency such 
information and documentation as it may request and which such 
alien or his sponsor provided in support of such alien's 
immigration application.
  ``(2) The Secretary shall enter into agreements with the 
Secretary of State and the Attorney General whereby any 
information available to them and required in order to make any 
determination under this section will be provided by them to 
the Secretary (who may, in turn, make such information 
available, upon request, to a concerned State agency), and 
whereby the Secretary of State and Attorney General will inform 
any sponsor of an alien, at the time such sponsor executes an 
affidavit of support or similar agreement, of the requirements 
imposed by this section.
  ``(d) Any sponsor of an alien, and such alien, shall be 
jointly and severally liable for an amount equal to any 
overpayment of assistance under the State plan made to such 
alien during the period of three years after such alien's entry 
into the United States, on account of such sponsor's failure to 
provide correct information under the provisions of this 
section, except where such sponsor was without fault, or where 
good cause of such failure existed. Any such overpayment which 
is not repaid to the State or recovered in accordance with the 
procedures generally applicable under the State plan to the 
recoupment of overpayments shall be withheld from any 
subsequent payment to which such alien or such sponsor is 
entitled under any provision of this Act.
  ``(e)(1) In any case where a person is the sponsor of two or 
more alien individuals who are living in the same home, the 
income and resources of such sponsor (and his spouse), to the 
extent they would be deemed the income and resources of any one 
of such individuals under the preceding provisions of this 
section, shall be divided into two or more equal shares (the 
number of shares being the same as the number of such alien 
individuals) and the income and resources of each such 
individual shall be deemed to include one such share.
  ``(2) Income and resources of a sponsor (and his spouse) 
which are deemed under this section to be the income and 
resources of any alien individual in a family shall not be 
considered in determining the need of other family members 
except to the extent such income or resources are actually 
available to such other members.
  ``(f) The provisions of this section shall not apply with 
respect to any alien who is--
          ``(1) admitted to the United States as a result of 
        the application, prior to April 1, 1980, of the 
        provisions of section 203(a)(7) of the Immigration and 
        Nationality Act;
          ``(2) admitted to the United States as a result of 
        the application, after March 31, 1980, of the 
        provisions of section 207(c) of such Act;
          ``(3) paroled into the United States as a refugee 
        under section 212(d)(5) of such Act;
          ``(4) granted political asylum by the Attorney 
        General under section 208 of such Act; or
          ``(5) a Cuban and Haitian entrant, as defined in 
        section 501(e) of the Refugee Education Assistance Act 
        of 1980 (Public Law 96-422).'.

SEC. 9802. REQUIREMENTS FOR SPONSOR'S AFFIDAVITS OF SUPPORT.

  (a) In General.--Title II of the Immigration and Nationality 
Act is amended by inserting after section 213 the following new 
section:

           ``requirements for sponsor's affidavit of support

  ``Sec. 213A. (a) Enforceability.--
          ``(1) In general.--No affidavit of support may be 
        accepted by the Attorney General or by any consular 
        officer to establish that an alien is not excludable 
        under section 212(a)(4) unless such affidavit is 
        executed as a contract--
                  ``(A) which is legally enforceable against 
                the sponsor by the Federal Government, by a 
                State, or by any political subdivision of a 
                State, providing cash benefits under a public 
                cash assistance program (as defined in 
                subsection (f)(2)), but not later than 5 years 
                after the date the alien last receives any such 
                cash benefit; and
                  ``(B) in which the sponsor agrees to submit 
                to the jurisdiction of any Federal or State 
                court for the purpose of actions brought under 
                subsection (e)(2).
          ``(2) Expiration of liability.--Such contract shall 
        only apply with respect to cash benefits described in 
        paragraph (1)(A) provided to an alien before the 
        earliest of the following:
                  ``(A) Citizenship.--The date the alien 
                becomes a citizen of the United States under 
                chapter 2 of title III.
                  ``(B) Veteran.--The first date the alien is 
                described in section 9801(b)(2)(A) of the 
                Omnibus Budget Reconciliation Act of 1995.
                  ``(C) Payment of social security taxes.--The 
                first date as of which the condition described 
                in section 9801(b)(4) of the Omnibus Budget 
                Reconciliation Act of 1995 is met with respect 
                to the alien.
          ``(3) Nonapplication during certain periods.--Such 
        contract also shall not apply with respect to cash 
        benefits described in paragraph (1)(A) provided during 
        any period in which the alien is described in section 
        9801(b)(2)(B) or 9801(b)(2)(C) of the Omnibus Budget 
        Reconciliation Act of 1995.
  ``(b) Forms.--Not later than 90 days after the date of 
enactment of this section, the Attorney General, in 
consultation with the Secretary of State and the Secretary of 
Health and Human Services, shall formulate an affidavit of 
support consistent with the provisions of this section.
  ``(c) Notification of Change of Address.--
          ``(1) Requirement.--The sponsor shall notify the 
        Federal Government and the State in which the sponsored 
        alien is currently resident within 30 days of any 
        change of address of the sponsor during the period 
        specified in subsection (a)(1)(A).
          ``(2) Enforcement.--Any person subject to the 
        requirement of paragraph (1) who fails to satisfy such 
        requirement shall be subject to a civil penalty of--
                  ``(A) not less than $250 or more than $2,000, 
                or
                  ``(B) if such failure occurs with knowledge 
                that the sponsored alien has received any 
                benefit under any means-tested public benefits 
                program, not less than $2,000 or more than 
                $5,000.
  ``(d) Reimbursement of Government Expenses.--
          ``(1) Request for reimbursement.--
                  ``(A) In general.--Upon notification that a 
                sponsored alien has received any cash benefits 
                described in subsection (a)(1)(A), the 
                appropriate Federal, State, or local official 
                shall request reimbursement by the sponsor in 
                the amount of such cash benefits.
                  ``(B) Regulations.--The Attorney General, in 
                consultation with the Secretary of Health and 
                Human Services, shall prescribe such 
                regulations as may be necessary to carry out 
                subparagraph (A).
          ``(2) Initiation of action.--If within 45 days after 
        requesting reimbursement, the appropriate Federal, 
        State, or local agency has not received a response from 
        the sponsor indicating a willingness to commence 
        payments, an action may be brought against the sponsor 
        pursuant to the affidavit of support.
          ``(3) Failure to abide by repayment terms.--If the 
        sponsor fails to abide by the repayment terms 
        established by such agency, the agency may, within 60 
        days of such failure, bring an action against the 
        sponsor pursuant to the affidavit of support.
          ``(4) Limitation on actions.--No cause of action may 
        be brought under this subsection later than 5 years 
        after the date the alien last received any cash benefit 
        described in subsection (a)(1)(A).
  ``(f) Definitions.--For the purposes of this section:
          ``(1) Sponsor.--The term `sponsor' means an 
        individual who--
                  ``(A) is a citizen or national of the United 
                States or an alien who is lawfully admitted to 
                the United States for permanent residence;
                  ``(B) is 18 years of age or over; and
                  ``(C) is domiciled in any State.
          ``(2) Public cash assistance program.--The term 
        `public cash assistance program' means a program of the 
        Federal Government or of a State or political 
        subdivision of a State that provides direct cash 
        assistance for the purpose of income maintenance and in 
        which the eligibility of an individual, household, or 
        family eligibility unit for cash benefits under the 
        program, or the amount of such cash benefits, or both 
        are determined on the basis of income, resources, or 
        financial need of the individual, household, or unit. 
        Such term does not include any program insofar as it 
        provides medical, housing, education, job training, 
        food, or in-kind assistance or social services.''.
  (b) Clerical Amendment.--The table of contents of such Act is 
amended by inserting after the item relating to section 213 the 
following:

``Sec. 213A. Requirements for sponsor's affidavit of support.''.

  (c) Effective Date.--Subsection (a) of section 213A of the 
Immigration and Nationality Act, as inserted by subsection (a) 
of this section, shall apply to affidavits of support executed 
on or after a date specified by the Attorney General, which 
date shall be not earlier than 60 days (and not later than 90 
days) after the date the Attorney General formulates the form 
for such affidavits under subsection (b) of such section 213A.

SEC. 9803. EXTENDING REQUIREMENT FOR AFFIDAVITS OF SUPPORT TO FAMILY-
                    RELATED AND DIVERSITY IMMIGRANTS.

  (a) In General.--Section 212(a)(4) of the Immigration and 
Nationality Act (8 U.S.C. 1182(a)(4)) is amended to read as 
follows:
          ``(4) Public charge and affidavits of support.--
                  ``(A) Public charge.--Any alien who, in the 
                opinion of the consular officer at the time of 
                application for a visa, or in the opinion of 
                the Attorney General at the time of application 
                for admission or adjustment of status, is 
                likely at any time to become a public charge is 
                excludable.
                  ``(B) Affidavits of support.--Any immigrant 
                who seeks admission or adjustment of status as 
                any of the following is excludable unless there 
                has been executed with respect to the immigrant 
                an affidavit of support pursuant to section 
                213A:
                          ``(i) As an immediate relative (under 
                        section 201(b)(2)).
                          ``(ii) As a family-sponsored 
                        immigrant under section 203(a) (or as 
                        the spouse or child under section 
                        203(d) of such an immigrant).
                          ``(iii) As the spouse or child (under 
                        section 203(d)) of an employment-based 
                        immigrant under section 203(b).
                          ``(iv) As a diversity immigrant under 
                        section 203(c) (or as the spouse or 
                        child under section 203(d) of such an 
                        immigrant).''.
  (b) Effective Date.--The amendment made by subsection (a) 
shall apply to aliens with respect to whom an immigrant visa is 
issued (or adjustment of status is granted) after the date 
specified by the Attorney General under section 9802(c)

SEC. 6102. REDUCTION IN TITLE XX BLOCK GRANTS TO STATES FOR SOCIAL 
                    SERVICES.

    Section 2003(c) of the Social Security Act (42 U.S.C. 
1397b(c)) is amended--
          (1) by striking ``and'' at the end of paragraph (4);
          (2) in paragraph (5), by striking ``fiscal year after 
        fiscal year 1989.'' and inserting ``of fiscal years 
        1990 through 1995; and''; and
          (3) by adding at the end the following:
          ``(6) $2,520,000,000 for fiscal year 1996 and each 
        succeeding fiscal year.''.

                          PART 1--FOOD STAMPS

                              Short Title

    Sec. 12001. This part may be cited as ``The Food Stamp Act 
Amendments of 1995''.

 include minor children under 18 years old in their parents' households

    Sec. 12011. Section 3(i) of the Food Stamp Act of 1997 (7 
U.S.C. 2012(i)) is amended by striking the first parenthetical 
phrase in the second sentence and inserting in lieu thereof--
``(except children who have reached the age of 18 and are 
themselves parents living with their children or married and 
living with their spouses)''.

    use the cost of the thrifty food plan for allotment adjustments

    Sec. 12012. Section 3(o) of the Food Stamp Act of 1977 (7 
U.S.C. 2012(o)) is amended by--
          (1) inserting in paragraph (11) of the second 
        sentence immediately following ``and each October 1 
        thereafter,'' the words ``through the last day of the 
        first month after the month of enactment of the 
        Balanced Budget Act of 1995 for Economic Growth and 
        Fairness''; and
          (2) inserting a new third sentence as follows--
                  ``On the first day of the second month after 
                the month of enactment of the Balanced Budget 
                Act of 1995 for Economic Growth and Fairness 
                and each October 1 thereafter, adjust the cost 
                of the diet to reflect the cost of the diet, in 
                the preceding June, and round the result to the 
                nearest lower dollar increment for each 
                household size, except that on the first day of 
                the second month after the month of enactment 
                of the Balanced Budget Act of 1995 for Economic 
                Growth and Fairness, the Secretary may not 
                reduce the cost of the diet in effect on 
                September 30, 1995.''.

               lower age for excluding students' earnings

    Sec. 12013. Section 5(d)(7) of the Food Stamp Act of 1977 
(7 U.S.C. 2014(d)(7)) is amended by striking ``is 21 years of 
age or younger'' and inserting ``has not reached the age of 
18''.

             count governmental energy assistance as income

    Sec. 12014. (a) Section 5(d) of the Food Stamp Act of 1977 
(7 U.S.C. 2014(d)) is amended by striking paragraph (11) and 
renumbering paragraphs (12) through (16) as paragraphs (11) 
through (15), respectively.
    (b) Section 5(e) of the Food Stamp Act of 1977 (7 U.S.C. 
2014(e)) is amended by striking ``If a State agency elects'' 
and all that follows through ``season for which it was 
provided.''.
    (c) Section 5(k) of the Food Stamp Act of 1977 (7 U.S.C. 
2014(k)) is amended--
          (1) in paragraph (1)(B), by striking ``, not 
        including energy or utility-cost assistance,'';
          (2) in paragraph (2), by striking subparagraph (C); 
        and
          (3) by adding at the end the following--
                  ``(4)(A) For purposes of subsection (d)(1), a 
                payment made under a Federal or State law to 
                provide energy assistance to a household shall 
                be considered money payable directly to the 
                household.
                  ``(B) For purposes of subsection (e), an 
                expense paid on behalf of a household under a 
                Federal or State law to provide energy 
                assistance shall be considered an out-of-pocket 
                expense incurred and paid by the household.''.
    (d) Section 2605(f) of the Low-Income Home Energy 
Assistance Act of 1981 (42 U.S.C. 8624(f)) is amended--
          (1) by striking ``(1) Notwithstanding any other 
        provision of law unless'' and inserting 
        ``Notwithstanding any other provision of law except the 
        Food Stamp Act of 1977 (7 U.S.C. 2011 et seq.), and 
        any'';
          (2) in paragraph (1), by striking ``food stamps,''; 
        and (3) by striking paragraph (2).

                     reduce the standard deduction

    Sec. 12015. Section 5(e) of the Food Stamp Act of 1977 (7 
U.S.C. 2014(e)) is amended by striking the first two sentences 
and inserting in lieu thereof the following--``The Secretary 
shall allow a standard deduction for each household in the 48 
contiguous States and the District of Columbia, Alaska, Hawaii, 
Guam, and the Virgin Islands of the United States of--
          ``for fiscal year 1995, $134, $   , $   , $   , and $  
         , respectively;
          ``(i) for fiscal year 1996, $130, $   , $   , $   , 
        and $   , respectively;
          ``(ii) for fiscal year 1997, $115, $   , $   , $   , 
        and $   , respectively; and
          ``(iii) on October 1, 1997, and each October 1 
        thereafter, the Secretary shall adjust the standard 
        deduction to the nearest lower dollar increment to 
        reflect changes in the Consumer Price Index for all 
        urban consumers published by the Bureau of Labor 
        Statistics, for items other than food, for the 12-month 
        period ending the preceding June 30.''.

    make mandatory use of standard utility allowances a state option

    Sec. 12016. Section 5(e) of the Food Stamp Act of 1977 (7 
U.S.C. 2014(e)) is amended by inserting immediately before ``No 
such allowance may be used'' the following new sentence--``A 
State agency may make the use of a standard utility allowance 
mandatory for all households with qualifying utility costs if 
(1) the State agency has developed one or more standards that 
include the cost of heating and cooling and one or more 
standards that do not include the cost of heating and cooling; 
and (2) the Secretary finds that the standards will not result 
in increased program costs.''.

               freeze amount of vehicle asset limitation

    Sec. 12017. The first sentence of section 5(g)(2) of the 
Food Stamp Act of 1977 (7 U.S.C. 2014(g)(2)) is amended by 
striking ``through September 30, 1995'' and all that follows 
through ``such date and on'' and inserting ``and shall be 
adjusted on October 1, 1996, and''.

 require cooperation with child support enforcement agencies at state 
                                 option

    Sec. 12018. (a) Section 6 of the Food Stamp Act of 1977 (7 
U.S.C. 2015) is amended by adding new subsections (i) and (j) 
at the end thereof as follows--``(i) At the option of the 
State, no natural or adoptive parent or other individual who is 
living with and exercising parental control over a child under 
the age of eighteen who has an absent parent shall be eligible 
to participate in the food stamp program unless such parent or 
individual cooperates with the State agency administering the 
program under part D of title IV of the Social Security Act (or 
is determined by such State agency to have good cause not to 
cooperate) in (1) establishing the paternity of such child (if 
born out of wedlock), and (2) obtaining support for such child 
or for herself/himself and for such child. Notwithstanding any 
provision of part D of title IV of the Social Security Act, no 
person required under this subsection to cooperate with the 
State agency administering the program under part D of title IV 
of the Social Security Act may be required to pay a fee or 
other costs for services provided under such program.''.
    ``(j) At the option of the State agency, no person who 
fails to make legally obligated child support payments shall be 
eligible to participate in the food stamp program unless such 
person is unemployed or establishes that the child support 
award is inconsistent with applicable guidelines.''.

  facilitate implementation of a national electronic benefit transfer 
                            delivery system

    Sec. 12019. Section 7 of the Food Stamp Act of 1977 (7 
U.S.C. 2016) is amended by--
          (1) striking in subsection (g) ``(1)'';
          (2) striking paragraph (g)(2); and
          (3) striking in subsection (g) ``(A)'' and ``(B)'' 
        and inserting in lieu thereof ``(1)'' and ``(2)'', 
        respectively.

                   repeal minimum benefit adjustments

    Sec. 12020. Section 8(a) of the Food Stamp Act of 1977 (7 
U.S.C. 2017(a)) is amended by striking in the proviso ``, and 
shall be adjusted'' and all that follows through ``$5''.

                  prorate benefits on recertification

    Sec. 12021. Section 8(c)(2)(B) of the Food Stamp Act of 
1977 (7 U.S.C. 2017(c)(2)(B)) is amended by striking ``of more 
than one month''.

  prohibit allotment increases for penalties under other welfare and 
                       public assistance programs

    Sec. 12022. Section 8 of the Food Stamp Act of 1977 (7 
U.S.C. 2017) is amended by striking subsection (d) and 
inserting in lieu thereof the following--``(d) If the benefits 
of a household are reduced under a Federal, State, or local law 
relating to a welfare or public assistance program because of a 
penalty or for the failure to perform an action required under 
the law or program, for the duration of the reduction the 
household may not receive an increased allotment as the result 
of a decrease in the income of the household to the extent that 
the decrease is the result of the reduction.''.

     permit states to determine most useful and reliable means of 
                              verification

    Sec. 12023. Section 11 of the Food Stamp Act of 1977 (7 
U.S.C. 2020) is amended by--
          (1) striking in subsection (e)(3) all that follows 
        ``, and that the State agency shall'' through ``(E)'';
          (2) inserting after the paragraph designation (19) of 
        subsection (e) ``at the option of the State agency,''; 
        and
          (3) by adding at the end thereof the following new 
        subsection--
                  ``(p) Notwithstanding any other provision of 
                law, State agencies (described in section 
                3(n)(1) of this Act) shall not be required to 
                use an income and eligibility verification 
                system established under section 1137 of the 
                Social Security Act (42 U.S.C. 1320b-7) or the 
                immigration status verification system 
                established under section 1137(d) of the Social 
                Security Act (42 U.S.C. 1320b-71d)).''.

                    expand claims collection methods

    Sec. 12024. (a) Section 11(e)(8) of the Food Stamp Act of 
1977 (7 U.S.C. 2020(e)(8)) is amended by inserting before the 
semicolon at the end thereof the following--``or refunds of 
Federal taxes as authorized pursuant to 31 U.S.C. 3720A''.
    (b) Section 13 of the Food Stamp Act of 1977 (7 U.S.C. 
2022) is amended by--
          (1) striking paragraph (1) of subsection (b);
          (2) redesignating subparagraph (A) of paragraph 
        (b)(2) as paragraph (b)(1);
          (3) striking in paragraph (b)(1), as redesignated by 
        this subsection, ``, other than claims the collection 
        of which is provided for in paragraph (1) of this 
        subsection and claims arising from an error of the 
        State agency,'';
          (4) inserting at the end of paragraph (b)(1), as 
        redesignated by this subsection, the following new 
        sentence--``A State agency may waive the use of 
        allotment reduction as a means of collecting a claim 
        arising from an error of the State agency if su8ch 
        collection would cause a hardship (as defined by the 
        State agency) on the household but shall continue to 
        pursue all other lawful methods of collection of such 
        claims as prescribed in subsection (b)(2).'';
          (5) striking in paragraph (b)(1), as redesignated by 
        this subsection, ``, except that the household shall'' 
        and inserting in lieu thereof ``. At the option of the 
        State, the household may'';
          (6) redesignating subparagraph (b)(2)(B) as paragraph 
        (b)(2);
          (7) striking in paragraph (b)(2), as redesignated by 
        this subsection, ``or subparagraph (A)'';
          (8) striking in subsection (d) ``and except for 
        claims arising from an error of the State agency,'';
          (9) striking in subsection (d) ``may'' and inserting 
        in lieu thereof ``shall''; and
          (10) inserting before the period at the end of 
        subsection (d) the following--``or refunds of Federal 
        taxes as authorized pursuant to 31 U.S.C. 3720A''.
    (c) Section 16(a) of the Food Stamp Act of 1977 (7 U.S.C. 
2025(a)) is amended by striking ``25 percent during the period 
beginning October 1, 1990'' and all that follows through 
``error of a State agency.'' and inserting in lieu thereof the 
following--``25 percent of overissuances, except those arising 
from an error of the State agency, which are recovered or 
collected pursuant to subsections (b), (c), and (d) of section 
13.''.
    (d) Section 6402(d) of the Internal Revenue Code (26 U.S.C. 
6402(d)) is amended by--
          (1) inserting in paragraph (1) immediately following 
        ``any Federal agency'' the following--
                  ``(or any State agency that has the 
                responsibility for the administration of the 
                food stamp program operated pursuant to the 
                Food Stamp Act of 1977)''; and
          (inserting in the second sentence of paragraph (2) 
        immediately following ``a Federal agency'' the 
        following--
                  ``(or a State agency that has the 
                responsibility for the administration of the 
                food stamp program operated pursuant to the 
                Food Stamp Act of 1977)''.

                            EFFECTIVE DATES

    Sec. 12025. Except as otherwise provided in this part, the 
provisions of this part shall become effective the first day of 
the second month after the month of enactment.

                        PART 2--CHILD NUTRITION

           IMPROVED TARGETING OF DAY CARE HOME REIMBURSEMENTS

    Sec. 12031. (a) Restructured Day Care Home 
Reimbursements.--Section 17(f)(3) of the National School Lunch 
Act (42 U.S.C. 1766(f)(3)) is amended by striking ``(3)(A) 
Institutions'' and all that follows through the end of 
subparagraph (A) and inserting the following--
          ``(3) Reimbursement of family or group day care home 
        sponsoring organizations.--
                  ``(A) Reimbursement factor.--
                          ``(i) In general.--An institution 
                        that participates in the program under 
                        this section as a family or group day 
                        care home sponsoring organization shall 
                        be provided, for payment to a home 
                        sponsored by the organization, 
                        reimbursement factors in accordance 
                        with this subparagraph for the cost of 
                        obtaining and preparing food and 
                        prescribed labor costs involved in 
                        providing meals under this section.
                          ``(ii) Tier i family or group day 
                        care homes.--
                                  ``(I) Definition.--In this 
                                paragraph, the term `tier I 
                                family or group day care home' 
                                means--
                                          ``(aa) a family or 
                                        group day care home 
                                        that is located in a 
                                        geographic area, as 
                                        defined by the 
                                        Secretary based on 
                                        census data, in which 
                                        at least 50 percent of 
                                        the children residing 
                                        in the area are members 
                                        of households whose 
                                        incomes meet the income 
                                        eligibility guidelines 
                                        for free or reduced 
                                        price meals under 
                                        section 9;
                                          ``(bb) a family or 
                                        group day care home 
                                        that is located in an 
                                        area served by a school 
                                        enrolling elementary 
                                        students in which at 
                                        least 50 percent of the 
                                        total number of 
                                        children enrolled are 
                                        certified eligible to 
                                        receive free or reduced 
                                        price school meals 
                                        under this Act or the 
                                        Child Nutrition Act of 
                                        1966 (42 U.S.C. 1771 et 
                                        seq.); or
                                          ``(cc) a family or 
                                        group day care home 
                                        that is operated by a 
                                        provider whose 
                                        household meets the 
                                        eligibility 
                                        requirements for free 
                                        or reduced price meals 
                                        under section 9 and 
                                        whose eligibility is 
                                        verified by the 
                                        sponsoring organization 
                                        of the home under 
                                        regulations established 
                                        by the Secretary.
                                  ``(II) Reimbursement.--Except 
                                as provided in subclause (III), 
                                a tier I family or group day 
                                care home shall be provided 
                                reimbursement factors under 
                                this clause without a 
                                requirement for documentation 
                                of the costs described in 
                                clause (i), except that 
                                reimbursement shall not be 
                                provided under this subclause 
                                for meals or supplements served 
                                to the children of a person 
                                acting as a family or group day 
                                care home provider unless the 
                                children meet the eligibility 
                                requirements for free or 
                                reduced price meals under 
                                section 9.
                                  ``(III) Factors.--Except as 
                                provided in subclause (IV), the 
                                reimbursement factors applied 
                                to a home referred to in 
                                subclause (II) shall be the 
                                factors in effect on the date 
                                of enactment of this subclause.
                                  ``(IV) Adjustments.--The 
                                reimbursement factors under 
                                this subparagraph shall be 
                                adjusted on October 1, 1996, 
                                July 1, 1997, and each July 1 
                                thereafter, to reflect changes 
                                in the Consumer Price Index for 
                                food at home for the most 
                                recent 12-month period for 
                                which the data are available. 
                                The reimbursement factors under 
                                this subparagraph shall be 
                                rounded to the nearest lower 
                                cent increment and based on the 
                                unrounded adjustment in effect 
                                on June 30 of the preceding 
                                school year.
                          ``(iii) Tier ii family or group day 
                        care homes.--
                                  ``(I) In general.--
                                          ``(aa) Factors.--
                                        Except as provided in 
                                        subclause (II), with 
                                        respect to meals or 
                                        supplements served 
                                        under this clause by a 
                                        family or group day 
                                        care home that does not 
                                        meet the criteria set 
                                        forth in clause 
                                        (ii)(I), the 
                                        reimbursement factors 
                                        shall be $1 for lunches 
                                        and suppers, 30 cents 
                                        for breakfasts, and 15 
                                        cents for supplements.
                                          ``(bb) Adjustments.--
                                        The factors shall be 
                                        adjusted on July 1, 
                                        1997, and each July 1 
                                        thereafter, to reflect 
                                        changes in the Consumer 
                                        Price Index for food at 
                                        home for the most 
                                        recent 12-month period 
                                        for which the data are 
                                        available. The 
                                        reimbursement factors 
                                        under this item shall 
                                        be rounded down to the 
                                        nearest lower cent 
                                        increment and based on 
                                        the unrounded 
                                        adjustment for the 
                                        preceding 12-month 
                                        period.
                                          ``(cc) 
                                        Reimbursement.--A 
                                        family or group day 
                                        care home shall be 
                                        provided reimbursement 
                                        factors under this 
                                        subclause without a 
                                        requirement for 
                                        documentation of the 
                                        costs described in 
                                        clause (i), except that 
                                        reimbursement shall not 
                                        be provided under this 
                                        subclause for meals or 
                                        supplements served to 
                                        the children of a 
                                        person acting as a 
                                        family or group day 
                                        care home provider 
                                        unless the children 
                                        meet the eligibility 
                                        requirements for free 
                                        or reduced price meals 
                                        under section 9.
                                  ``(II) Other factors.--A 
                                family or group day care home 
                                that does not meet the criteria 
                                set forth in clause (ii)(I) may 
                                elect to be provided 
                                reimbursement factors 
                                determined in accordance with 
                                the following requirements:
                                          ``(aa) Children 
                                        eligible for free or 
                                        reduced price meals.--
                                        In the case of meals or 
                                        supplements served 
                                        under this subsection 
                                        to children who meet 
                                        the eligibility 
                                        requirements for free 
                                        or reduced price meals 
                                        under section 9, the 
                                        family or group day 
                                        care home shall be 
                                        provided reimbursement 
                                        factors set by the 
                                        Secretary in accordance 
                                        with clause (ii)(III).
                                          ``(bb) Ineligible 
                                        children.--In the case 
                                        of meals or supplements 
                                        served under this 
                                        subsection to children 
                                        who do not meet the 
                                        eligibility 
                                        requirements for free 
                                        or reduced priced meals 
                                        under section 9, the 
                                        family or group day 
                                        care home shall be 
                                        provided reimbursement 
                                        factors in accordance 
                                        with subclause (I).
                                  ``(III) Information and 
                                determinations.--
                                          ``(aa) In general.--
                                        If a family or group 
                                        day care home elects to 
                                        claim the factors 
                                        described in subclause 
                                        (II), the family or 
                                        group day care home 
                                        sponsoring organization 
                                        serving the home shall 
                                        collect the necessary 
                                        eligibility 
                                        information, as 
                                        determined by the 
                                        Secretary, from any 
                                        parent or other 
                                        caretaker to make the 
                                        determinations 
                                        specified in subclause 
                                        (II) and shall make the 
                                        determinations in 
                                        accordance with rules 
                                        prescribed by the 
                                        Secretary.
                                          ``(bb) Categorical 
                                        Eligibility--In making 
                                        a determination under 
                                        item (aa), a family or 
                                        group day care home 
                                        sponsoring organization 
                                        may consider a child 
                                        participating in or 
                                        subsidized under, or a 
                                        child with a parent 
                                        participating in or 
                                        subsidized under, a 
                                        federally or State 
                                        supported child care or 
                                        other benefit program 
                                        with an income 
                                        eligibility limit that 
                                        does not exceed the 
                                        income eligibility 
                                        guidelines for free or 
                                        reduced price meals 
                                        under section 9 to be a 
                                        child who is eligible 
                                        for free or reduced 
                                        price meals under 
                                        section 9.
                                          ``(cc) Factors for 
                                        children only.--A 
                                        family or group day 
                                        care home may elect to 
                                        receive the 
                                        reimbursement factors 
                                        prescribed under clause 
                                        (ii) (III) solely for 
                                        the children 
                                        participating in a 
                                        program referred to in 
                                        item (bb) if the home 
                                        elects not to have 
                                        eligibility information 
                                        collected from parents 
                                        or other caretakers.''.
    (b) Grants to States To Provide Assistance to Family or 
Group Day Care Homes.--Section 17(f)(3) of the National School 
Lunch Act (42 U.S.C. 1766(f)(3)) is amended by adding at the 
end the following--
                                          ``(D) Grants to 
                                        states to provide 
                                        assistance to family or 
                                        group day care homes.--
                  ``(i) In general.--
                          ``(I) Reservation.--The Secretary 
                        shall reserve $5,000,000 of the amount 
                        made available to carry out this 
                        section for fiscal year 1996.
                          ``(II) Purpose.--The Secretary shall 
                        use the funds made available under 
                        subclause (I) to provide grants to 
                        States for the purpose of providing--
                                  ``(aa) assistance, including 
                                grants, to family or group day 
                                care home sponsoring 
                                organizations and other 
                                appropriate organization, in 
                                securing and providing 
                                training, materials, automated 
                                data processing assistance, and 
                                other assistance for the staff 
                                of the sponsoring 
                                organizations; and
                                  ``(bb) training and other 
                                assistance to family or group 
                                day care homes in the 
                                implementation of the 
                                amendments to subparagraph (A) 
                                made by section 12031(a) of the 
                                Balanced Budget Act of 1995 for 
                                Economic Growth and Fairness.
                  ``(ii) Allocation.--The Secretary shall 
                allocate from the funds reserved under clause 
                (i)(I)--
                          ``(I) $30,000 in base funding to each 
                        State; and
                          ``(II) any remaining amount among the 
                        States, based on the number of family 
                        or group day case homes participating 
                        in the program in a State during fiscal 
                        year 1994 as a percentage of the number 
                        of all family or group day care homes 
                        participating in the program during 
                        fiscal year 1994.
                  ``(iii) Retention of funds.--of the amount of 
                funds made available to a State for fiscal year 
                1996 under clause (i), the State may retain not 
                to exceed 30 percent of the amount to carry out 
                this subparagraph.
                  ``(iv) Additional payments.--Any payments 
                received under this subparagraph shall be in 
                addition to payments that a State receives 
                under subparagraph (A) (as amended by section 
                12031(a) of the Balanced Budget Act of 1995 for 
                Economic Growth and Fairness).''.
    (c) Provision of Data.--Section 17(f)(3) of the National 
School Lunch Act (42 U.S.C. 1766(f)(3)), as amended by 
subsection (b), is further amended by adding at the end the 
following--
          ``(E) Provision of data to family or group day care 
        home sponsoring organizations.--
                  ``(i) Census data.--The Secretary shall 
                provide to each State agency administering a 
                child and adult care food program under this 
                section data from the most recent decennial 
                census survey or other appropriate census 
                survey for which the data are available showing 
                which areas in the State meet the requirements 
                of subparagraph (A)(ii)(I)(aa). The State 
                agency shall provide the data to family or 
                group day care home sponsoring organizations 
                located in the State.
                  ``(ii) School data.--
                          ``(I) In general.--A State agency 
                        administering the school lunch program 
                        under this Act or the school breakfast 
                        program under the Child Nutrition Act 
                        of 1966 (42 U.S.C. 1771 et seq.) shall 
                        provide data for each elementary school 
                        in the State, or shall direct each 
                        school within the State to provide data 
                        for the school, to approved family or 
                        group day care home sponsoring 
                        organizations that request the data, on 
                        the percentage of enrolled children who 
                        are certified eligible for free or 
                        reduced price meals.
                          ``(II) Use of data from preceding 
                        school year.--In determining for a 
                        fiscal year or other annual period 
                        whether a home qualifies as a tier I 
                        family or group day care home under 
                        subparagraph (A)(ii)(I), the State 
                        agency administering the program under 
                        this section, and a family or group day 
                        care home sponsoring organization, 
                        shall use the most current available 
                        data at the time of the determination.
                  ``(iii) Duration of determination.--For 
                purposes of this section, a determination that 
                a family or group day care home is located in 
                an area that qualifies the home as a tier I 
                family or group day care home (as the term is 
                defined in subparagraph (A)(ii)(I)), shall be 
                in effect for 3 years (unless the determination 
                is made on the basis of census data, in which 
                case the determination shall remain in effect 
                until more recent census data are available) 
                unless the State agency determines that the 
                area in which the home is located no longer 
                qualifies the home as a tier I family or group 
                day care home.''.
    (d) Conforming Amendments.--Section 17(c) of the National 
School Lunch Act (42 U.S.C. 1766(c)) is amended by inserting 
``except as provided in subsection (f)(3),'' after ``For 
purposes of this section,'' each place it appears in paragraphs 
(1), (2), and (3).
    (e) Effective Date.--
          (1) In general.--Except as provided in paragraph (2), 
        the amendments made by this section shall become 
        effective on the date of enactment of this part.
          (2) Improved targeting of day care home 
        reimbursements.--The amendments made by subsections 
        (a), (c), and (d) shall become effective on October 7, 
        1996.

SEC.  . REIMBURSEMENT RATE ADJUSTMENTS.

    (a) In general.--
          (1) Commodity rate.--Section 6(a)(1)(B) of the 
        National School Lunch Act (42 U.S.C. 1755(g)(1)(M) is 
        amended by striking ``\1/4\ cent'' and inserting 
        ``lower cent increment''.
          (2) Lunch, breakfast and supplement rates.--Section 
        11(a)(3)(b) of the National School Lunch Act (42 U.S.C. 
        1759a(a)(3)(B)) is amended by striking ``one fourth 
        cent'' and inserting ``lower cent increment''.
          (3) Summer program rates.--Section 13(b)(1) of the 
        National School Lunch Act (42 U.S.C. 1761(b)(1)) is 
        amended by striking ``one-fourth cent'' and inserting 
        ``lower cent increment''.
          (4) Family day care rates.--Section 17(f)(3(A) of the 
        National School Lunch Act (42 U.S.C. 1766(f)(3)(A)) is 
        amended in the last sentence by striking ``one-fourth 
        cent'' and inserting ``lower cent increment''.
          (5) Special milk program rates.--Section 3(a)(8) of 
        the Child Nutrition Act (42 U.S.C. 1772(a)(8)) is 
        amended by striking ``one-fourth cent'' and inserting 
        ``lower cent increment''.
          (6) Severe need rates.--Section 4(b)(2)(B)(ii) of the 
        Child Nutrition Act (42 U.S.C. 1773(b)(B)(ii)) is 
        amended by striking ``one-fourth cent'' and inserting 
        ``lower cent increment''.
    (b) Effective dates.--The amendments made by subsection (a) 
shall become effective on July 1, 1996.

SEC.   . ELIMINATION OF START-UP AND EXPANSION GRANTS.

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

SEC.  . AUTHORIZATION OF APPROPRIATIONS.

    Section 19(i) of the Child Nutrition Act (42 U.S.C. 
1788(i)) is amended--
          (a) in the first sentence of paragraph (2)(A), by 
        striking ``and each succeeding fiscal year'';
          (b) by redesignating paragraphs (3) and (4) as 
        paragraphs (4) and (5), respectively; and
          (c) by inserting after paragraph (2) the following: 
        ``(3) fiscal years 1997 through 2002--
                  ``(A) In general.--There are authorized to be 
                appropriated to carry out this section 
                $10,000,00 for each of the fiscal years 1997 
                through 2002.
                  ``(B) Grants.--
                          ``(i)'' In general.--Grants to each 
                        State from the amounts made available 
                        under subparagraph (A) shall be based 
                        on a rate of 50 cents for each child 
                        enrolled in schools or institutions 
                        within the State, except that no State 
                        shall * * * an amount less than $75,000 
                        per fiscal year.
                          ``(ii) Insufficient funds.--If an 
                        amount made available for any fiscal 
                        year is insufficient to pay the amount 
                        to which each State is entitled under 
                        clause (i), the amount of each grant 
                        shall be ratably reduced.''

SEC. 12035. DIRECT FEDERAL EXPENDITURES.

    (a) Commodity Assistance.--
          (1) Section 6(g) of the National School Lunch Act (42 
        U.S.C. 1755(g)) is amended by striking ``12 percent'' 
        and inserting ``8 percent''.

            Title X--Food Stamps and Commodity Distribution

SEC. 1001. SHORT TITLE.

    This title may be cited as the ``Food Stamp Reform and 
Commodity Distribution Act of 1995''.

                     Subtitle A--Food Stamp Program

SEC. 1011. DEFINITION OF CERTIFICATION PERIOD.

    Section 3(c) of the Food Stamp Act of 1977 (7 U.S.C. 
2012(c)) is amended by striking ``Except as provided'' and all 
that follows and inserting the following: ``The certification 
period shall not exceed 12 months, except that the 
certification period may be up to 24 months if all adult 
household members are elderly or disabled. A State agency shall 
have at least 1 contact with each certified household every 12 
months''.

SEC. 1012. DEFINITION OF COUPON.

    Section 3(d) of the Food Stamp Act of 1977 (7 U.S.C. 
2012(d)) is amended by striking ``or type of certificate'' and 
inserting ``type of certificate, authorization card, cash or 
check issued in lieu of a coupon, or an access device, 
including an electronic benefit transfer card or personal 
identification number,''.

SEC. 1016. DEFINITION OF HOMELESS INDIVIDUAL.

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

SEC. 1017. STATE OPTION FOR ELIGIBILITY STANDARDS.

    Section 5(b) of the Food Stamp Act of 1977 (7 U.S.C. 
2014(d)) is amended by striking ``(b) The Secretary'' and 
inserting the following:
    ``(b) Eligibility Standards.--Except as otherwise provided 
in this Act, the Secretary''.

SEC. 1023. DOUBLE PENALTIES FOR VIOLATING FOOD STAMP PROGRAM 
                    REQUIREMENTS.

    Section 6(b)(1) of the Food Stamp Act of 1977 (7 U.S.C. 
2015(b)(1)) is amended--
          (1) in clause (i), by striking ``six months'' and 
        inserting ``1 year''; and
          (2) in clause (ii), by striking ``1 year'' and 
        inserting ``2 years''.

SEC. 1024. DISQUALIFICATION OF CONVICTED INDIVIDUALS.

    Section 6(b)(1)(iii) of the Food Stamp Act of 1977 (7 
U.S.C. 2015(b)(1)(iii) is amended--
          (1) in subclause (II), by striking ``or'' at the end;
          (2) in subclause (III), by striking the period at the 
        end and inserting ``; or''; and
          (3) by inserting after subclause (III) the following:
                  ``(IV) a conviction of an offense under 
                subsection (b) or (c) of section 15 involving 
                an item covered by subsection (b) or (c) of 
                section 15 having a value of $500 or more.''.

SEC. 1027. EMPLOYMENT AND TRAINING.

    (a) In General.--Section 6(d)(4) of the Food Stamp Act of 
1977 (7 U.S.C. 2015(d)(4)) is amended--
          (1) in subparagraph (A)--
                  (A) by striking ``Not later than April 1, 
                1987, each'' and inserting ``Each'';
                  (B) by inserting ``work,'' after ``skills, 
                training,''; and
                  (C) by adding at the end the following: 
                ``Each component of an employment and training 
                program carried out under this paragraph shall 
                be delivered through a statewide workforce 
                development system, unless the component is not 
                available locally through the statewide 
                workforce development system.'';
          (2) in subparagraph (B)--
                  (A) in the matter preceding clause (i), by 
                striking the colon at the end and inserting the 
                following: ``, except that the State agency 
                shall retain the option to apply employment 
                requirements prescribed under this subparagraph 
                to a program applicant at the time of 
                application:'';
                  (B) in clause (i), by striking ``with terms 
                and conditions'' and all that follows through 
                ``time of application''; and
                  (C) in clause (iv)--
                          (i) by striking subclauses (I) and 
                        (II); and
                          (ii) by redesignating subclauses 
                        (III) and (IV) as subclauses (I) and 
                        (II), respectively;
          (3) in subparagraph (D)--
                  (A) in clause (i), by striking ``to which the 
                application'' and all that follows through ``30 
                days or less'';
                  (B) in clause (ii), by striking ``but with 
                respect'' and all that follows through ``child 
                care''; and
                  (C) in clause (iii), by striking ``, on the 
                basis of'' and all that follows through 
                ``clause (ii)'' and inserting ``the exemption 
                continues to be valid'';
          (4) in subparagraph (E), by striking the third 
        sentence;
          (5) in subparagraph (G)--
                  (A) by striking ``(G)(i) The State'' and 
                inserting ``(G) The State''; and
                  (B) by striking clause (ii);
          (6) in subparagraph (H), by striking ``(H)(i) The 
        Secretary'' and all that follows through ``(ii) Federal 
        funds'' and inserting ``(H) Federal funds'';
          (7) in subparagraph (I)(i)(II), by striking ``, or 
        was in operation,'' and all that follows through 
        ``Social Security Act'' and inserting the following: 
        ``), except that no such payment or reimbursement shall 
        exceed the applicable local market rate'';
          (8)(A) by striking subparagraphs (K) and (L) and 
        inserting the following:
                  ``(K) Limitation on funding.--Notwithstanding 
                any other provision of this paragraph, the 
                amount of funds a State agency uses to carry 
                out this paragraph (including under 
                subparagraph (I)) for participants who are 
                receiving benefits under a State program funded 
                under part A of title IV of the Social Security 
                Act (42 U.S.C. 601 et seq.) shall not exceed 
                the amount of funds the State agency used in 
                fiscal year 1995 to carry out this paragraph 
                for participants who were receiving benefits in 
                fiscal year 1995 under a State program funded 
                under part A of title IV of the Act (42 U.S.C. 
                601 et seq.).''; and
                  (B) by redesignating subparagraphs (M) and 
                (N) as subparagraphs (L) and (M), respectively; 
                and
          (9) in subparagraph (L), as redesignated by paragraph 
        (8)(B)--
                  (A) by striking ``(L)(i) The Secretary'' and 
                inserting ``(L) The Secretary''; and
                  (B) by striking clause (ii).
    (b) Funding.--Section 16(h) of the Act (7 U.S.C. 2025(h)) 
is amended by striking ``(h)(1)(A) The Secretary'' and all that 
follows through the end of paragraph (1) and inserting the 
following:
    ``(h) Funding of Employment and Training Programs.--
          ``(1) In general.--
                  ``(A) Amounts.--To carry out employment and 
                training programs, the Secretary shall reserve 
                for allocation to State agencies from funds 
                made available for each fiscal year under 
                section 18(a)(1) the amount of--
                          ``(i) for fiscal year 1996, 
                        $77,000,000;
                          ``(ii) for fiscal year 1997, 
                        $79,000,000;
                          ``(iii) for fiscal year 1998, 
                        $81,000,000;
                          ``(iv) for fiscal year 1999, 
                        $84,000,000;
                          ``(v) for fiscal year 2000, 
                        $86,000,000;
                          ``(vi) for fiscal year 2001, 
                        $88,000,000; and
                          ``(vii) for fiscal year 2002, 
                        $90,000,000.
                  ``(B) Allocation.--The Secretary shall 
                allocate the amounts reserved under 
                subparagraph (A) among the State agencies using 
                a reasonable formula (as determined by the 
                Secretary) that gives consideration to the 
                population in each State affected by section 
                6(o).
                  ``(C) Reallocation.--
                          ``(i) Notification.--A State agency 
                        shall promptly notify the Secretary if 
                        the State agency determines that the 
                        State agency will not expend all of the 
                        funds allocated to the State agency 
                        under subparagraph (B).
                          ``(ii) Reallocation.--On notification 
                        under clause (i), the Secretary shall 
                        reallocate the funds that the State 
                        agency will not expend as the Secretary 
                        considers appropriate and equitable.
                  ``(D) Minimum allocation.--Notwithstanding 
                subparagraphs (A) through (C), the Secretary 
                shall ensure that each State agency operating 
                an employment and training program shall 
                receive not less than $50,000 in each fiscal 
                year.''.
    (c) Additional Matching Funds.--Section 16(h)(2) of the Act 
(7 U.S.C. 2025(h)(2)) is amended by inserting before the period 
at the end the following: ``, including the costs for case 
management and casework to facilitate the transition from 
economic dependency to self-sufficiency through work''.
    (d) Reports.--Section 16(h) of the Act (7 U.S.C. 2025(h)) 
is amended--
          (1) in paragraph (5)--
                  (A) by striking ``(5)(A) The Secretary'' and 
                inserting ``(5) The Secretary''; and
                  (B) by striking subparagraph (B); and
          (2) by striking paragraph (6).

SEC. 1030. DISQUALIFICATION OF FLEEING FELONS.

    Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015), as 
amended by section 1029, is further amended by inserting after 
subsection (j) the following:
    ``(k) Disqualification of Fleeing Felons.--No member of a 
household who is otherwise eligible to participate in the food 
stamp program shall be eligible to participate in the program 
as a member of that or any other household during any period 
during which the individual is--
          (1) fleeing to avoid prosecution, or custody or 
        confinement after conviction, under the law of the 
        place from which the individual is fleeing, for a 
        crime, or attempt to commit a crime, that is a felony 
        under the law of the place from which the individual is 
        fleeing or that, in the case of New Jersey, is a high 
        misdemeanor under the law of New Jersey; or
          ``(2) violating a condition of probation or parole 
        imposed under a Federal or State law.''.

SEC. 1034. ENCOURAGE ELECTRONIC BENEFIT TRANSFER SYSTEMS.

    (a) In General.--Section 7(i) of the Food Stamp Act of 1977 
(7 U.S.C. 2016(i)) is amended--
          (1) by striking paragraph (1) and inserting the 
        following:
          ``(1) Electronic benefit transfers.--
                  ``(A) Implementation.--Each State agency 
                shall implement an electronic benefit transfer 
                system in which household benefits determined 
                under section 8(a) or 24 are issued from and 
                stored in a central databank before October 1, 
                2002, unless the Secretary provides a waiver 
                for a State agency that faces unusual barriers 
                to implementing an electronic benefit transfer 
                system.
                  ``(C) State flexibility.--Subject to 
                paragraph (2), a State agency may procure and 
                implement an electronic benefit transfer system 
                under the terms, conditions, and design that 
                the State agency considers appropriate.
                  ``(D) Operation.--An electronic benefit 
                transfer system should take into account 
                generally accepted standard operating rules 
                based on--
                          ``(i) commercial electronic funds 
                        transfer technology;
                          ``(ii) the need to permit interstate 
                        operation and law enforcement 
                        monitoring; and
                          ``(iii) the need to permit monitoring 
                        and investigations by authorized law 
                        enforcement agencies.'';
          ``(8) Replacement card fee.--A State agency may 
        collect a charge for replacement of an electronic 
        benefit transfer card by reducing the monthly allotment 
        of the household receiving the replacement card.
          ``(9) Optional photographic identification.--
                  ``(A) In general.--A State agency may require 
                that an electronic benefit card contain a 
                photograph of 1 or more members of a household.
                  ``(B) Other authorized users.--If a State 
                agency requires a photograph on an electronic 
                benefit card under subparagraph (A), the State 
                agency shall establish procedures to ensure 
                that any other appropriate member of the 
                household or any authorized representative of 
                the household may utilize the card.''.

SEC. 1035. VALUE OF MINIMUM ALLOTMENT.

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

SEC. 1036. BENEFITS ON RECERTIFICATION.

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

SEC. 1037. OPTIONAL COMBINED ALLOTMENT AND EXPEDITED HOUSEHOLDS.

    Section 8(c) of the Food Stamp Act of 1977 (7 U.S.C. 
2017(c)) is amended by striking paragraph (3) and inserting the 
following:
          ``(3) Optional combined allotment for expedited 
        households.--A State agency may provide to an eligible 
        household applying after the 15th day of a month, in 
        lieu of the initial allotment of the household and the 
        regular allotment of the household for the following 
        month, an allotment that is equal to the total amount 
        of the initial allotment and the first regular 
        allotment. The allotment shall be provided in 
        accordance with section 11(e)(3) in the case of a 
        household that is not entitled to expedited service and 
        in accordance with paragraphs (3) and (9) of section 
        11(e) in the case of a household that is entitled to 
        expedited service.''.

SEC. 1038. FAILURE TO COMPLY WITH OTHER MEANS-TESTED PUBLIC ASSISTANCE 
                    PROGRAMS.

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

SEC. 1037. OPTIONAL COMBINED ALLOTMENT FOR EXPEDITED HOUSEHOLDS.

    Section 8(c) of the Food Stamp Act of 1977 (7 U.S.C. 
2017(c)) is amended by striking paragraph (3) and inserting the 
following:
          ``(3) Optional combined allotment for expedited 
        households.--A State agency may provide to an eligible 
        household applying after the 15th day of a month, in 
        lieu of the initial allotment of the household and the 
        regular allotment of the household for the following 
        month, an allotment that is equal to the total amount 
        of the initial allotment and the first regular 
        allotment. The allotment shall be provided in 
        accordance with section 11(e)(3) in the case of a 
        household that is not entitled to expedited service and 
        in accordance with paragraphs (3) and (9) of section 
        11(e) in the case of a household that is entitled to 
        expedited service.''.

SEC. 1039. ALLOTMENTS FOR HOUSEHOLDS RESIDING IN CENTERS.

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

SEC. 1046. EXCHANGE OF LAW ENFORCEMENT INFORMATION.

    Section 11(e)(8) of the Food Stamp Act of 1977 (7 U.S.C. 
2020(e)(8)) is amended--
          (1) by striking ``that (A) such'' and inserting the 
        following: ``that--
                  ``(A) the'';
          (2) by striking ``law, (B) notwithstanding'' and 
        inserting the following: ``law;
                  ``(B) notwithstanding'';
          (3) by striking ``Act, and (C) such'' and inserting 
        the following: ``Act;
                  ``(C) the''; and
          (4) by adding at the end the following:
                  ``(D) notwithstanding any other provision of 
                law, the address, social security number, and, 
                if available, photograph of any member of a 
                household shall be made available, on request, 
                to any Federal, State, or local law enforcement 
                officer if the officer furnishes the State 
                agency with the name of the member and notifies 
                the agency that--
                          ``(i) the member--
                                  ``(I) is fleeing to avoid 
                                prosecution, or custody or 
                                confinement after conviction, 
                                for a crime (or attempt to 
                                commit a crime) that, under the 
                                law of the place the member is 
                                fleeing, is a felony (or, in 
                                the case of New Jersey, a high 
                                misdemeanor), or is violating a 
                                condition of probation or 
                                parole imposed under Federal or 
                                State law; or
                                  ``(II) has information that 
                                is necessary for the officer to 
                                conduct an official duty 
                                related to subclause (I);
                          ``(ii) locating or apprehending the 
                        member is an official duty; and
                          ``(iii) the request is being made in 
                        the proper exercise of an official 
                        duty; and
                  ``(E) the safeguards shall not prevent 
                compliance with paragraph (16);''.

SEC. 1047. EXPEDITED COUPON SERVICE.

    Section 11(e)(9) of the Food Stamp Act of 1977 (7 U.S.C. 
2020(e)(9)) is amended--
          (1) in subparagraph (A)--
                  (A) by striking ``five days'' and inserting 
                ``7 days''; and
                  (B) by inserting ``and'' at the end;
          (2) by striking subparagraphs (B) and (C);
          (3) by redesignating subparagraph (D) as subparagraph 
        (B); and
          (4) in subparagraph (B), as redesignated by paragraph 
        (3), by striking ``, (B), or (C)''.

SEC. 1048. WITHDRAWING FAIR HEARING REQUESTS.

    Section 11(e)(10) of the Food Stamp Act of 1977 (7 U.S.C. 
2020(e)(10)) is amended by inserting before the semicolon at 
the end a period and the following: ``At the option of a State, 
at any time prior to a fair hearing determination under this 
paragraph, a household may withdraw, orally or in writing, a 
request by the household for the fair hearing. If the 
withdrawal request is an oral request, the State agency shall 
provide a written notice to the household confirming the 
withdrawal request and providing the household with an 
opportunity to request a hearing''.

SEC. 1049. INCOME, ELIGIBILITY, AND IMMIGRATION STATUS VERIFICATION 
                    SYSTEMS.

    Section 11 of the Food Stamp Act of 1977 (7 U.S.C. 2020) is 
amended--
          (1) in subsection (e)(18), as redesignated by section 
        1044(1)(D)--
                  (A) by striking ``that information is'' and 
                inserting ``at the option of the State agency, 
                that information may be''; and
                  (B) by striking ``shall be requested'' and 
                inserting ``may be requested''; and
          (2) by adding at the end the following:
    ``(p) State Verification Option--Notwithstanding any other 
provision of law, in carrying out the food stamp program, a 
State agency shall not be required to use an income and 
eligibility or an immigration status verification system 
established under section 1137 of the Social Security Act (42 
U.S.C. 1320b-7).''.

SEC. 1059. AUTHORIZATION OF PILOT PROJECTS.

    Section 17(b)(1)(B) of the Food Stamp Act of 1977 (7 U.S.C. 
2026(b)(1)(B)), as amended by section 1058, is further 
amended--
          (1) in clause (iv), by striking ``coupons. Any 
        pilot'' and inserting the following: ``coupons.
                          ``(v) Cash payment pilot projects.--
                        Any pilot''; and
          (2) in clause (v), as so amended, by striking 
        ``1995'' and inserting ``2002''.

SEC. 1060. RESPONSE TO WAIVERS.

    Section 17(b)(1) of the Food Stamp Act of 1977 (7 U.S.C. 
2026(b)(1)), as amended by section 1058, is further amended by 
adding at the end the following:
                  ``(D) Response to waivers.--
                          ``(i) Response.--Not later than 60 
                        days after the date of receiving a 
                        request for a waiver under subparagraph 
                        (A), the Secretary shall provide a 
                        response that--
                                  ``(I) approves the waiver 
                                request;
                                  ``(II) denies the waiver 
                                request and explains any 
                                modification needed for 
                                approval of the waiver request;
                                  ``(III) denies the waiver 
                                request and explains the 
                                grounds for the denial; or
                                  ``(IV) requests clarification 
                                of the waiver request.
                          ``(ii) Failure to respond.--If the 
                        Secretary does not provide a response 
                        in accordance with clause (i), the 
                        waiver shall be considered approved, 
                        unless the approval is specifically 
                        prohibited by this Act.
                          ``(iii) Notice of denial.--On denial 
                        of a waiver request under clause 
                        (i)(III), the Secretary shall provide a 
                        copy of the waiver request and a 
                        description of the reasons for the 
                        denial to the Committee on Agriculture 
                        of the House of Representatives and the 
                        Committee on Agriculture, Nutrition, 
                        and Forestry of the Senate.''.

              Subtitle B--Commodity Distribution Programs

SEC. 1071. COMMODITY DISTRIBUTION PROGRAM; COMMODITY SUPPLEMENTAL FOOD 
                    PROGRAM.

    (a) Reauthorization.--The first sentence of section 4(a) of 
the Agriculture and Consumer Protection Act of 1973 (Public Law 
93-86; 7 U.S.C. 612c note) is amended by striking ``1995'' and 
inserting ``2002''.
    (b) Funding.--Section 5 of the Act (Public Law 93-86; 7 
U.S.C. 612c note) is amended--
          (1) in subsection (a)(2), by striking ``1995'' and 
        inserting ``2002''; and
          (2) in subsection (d)(2), by striking ``1995'' and 
        inserting ``2002''.

SEC. 1073. FOOD BANK DEMONSTRATION PROJECT.

    Section 3 of the Charitable Assistance and Food Bank Act of 
1987 (Public Law 100-232; 7 U.S.C. 612c note) is repealed.

SEC. 1074. HUNGER PREVENTION PROGRAMS.

    The Hunger Prevention Act of 1988 (Public Law 100-435; 7 
U.S.C 612c note) is amended--
          (1) by striking section 110;
          (2) by striking subtitle C of title II; and
          (3) by striking section 502.

SEC. 1075. REPORT ON ENTITLEMENT COMMODITY PROCESSING.

    Section 1773 of the Food, Agriculture, Conservation, and 
Trade Act of 1990 (Public Law 101-624; 7 U.S.C. 612c note) is 
amended by striking subsection (f).

                        TITLE XI--MISCELLANEOUS

SEC. 1101. EXPENDITURE OF FEDERAL FUNDS IN ACCORDANCE WITH LAWS AND 
                    PROCEDURES APPLICABLE TO EXPENDITURE OF STATE 
                    FUNDS.

    (a) In General.--Notwithstanding any other provision of 
law, any funds received by a State under the provisions of law 
specified in subsection (b) shall be expended only in 
accordance with the laws and procedures applicable to 
expenditures of the State's own revenues, including 
appropriation by the State legislature, consistent with the 
terms and conditions required under such provisions of law.

          TITLE VI--FEDERAL RETIREMENT AND RELATED PROVISIONS

        Subtitle A--Civil Service and Postal Service Provisions

SEC. 6001. EXTENSION OF DELAY IN COST-OF-LIVING ADJUSTMENTS IN FEDERAL 
                    EMPLOYEE RETIREMENT BENEFITS THROUGH FISCAL YEAR 
                    2002.

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

SEC. 6002. INCREASED CONTRIBUTIONS TO FEDERAL CIVILIAN RETIREMENT 
                    SYSTEMS.

    (a) Civil Service Retirement System.--
          (1) Deductions.--The first sentence of section 
        8334(a)(1) of title 5, United States Code, is amended 
        to read as follows: ``The employing agency shall deduct 
        and withhold from the basic pay of an employee, Member, 
        Congressional employee, law enforcement officer, 
        firefighter, bankruptcy judge, judge of the United 
        States Court of Appeals for the Armed Forces, United 
        States magistrate, or Claims Court judge, as the case 
        may be, the percentage of basic pay applicable under 
        subsection (c).''.
          (2) Agency contributions.--
                  (A) Increase in agency contribution during 
                calendar years 1996 through 2002.--Section 
                8334(a)(1) of title 5, United States Code (as 
                amended by this section) is further amended--
                          (i) by inserting ``(A)'' after 
                        ``(1)''; and
                          (ii) by adding at the end thereof the 
                        following new subparagraph;
                  ``(B)(i) Notwithstanding subparagraph (A), 
                the agency contribution under the second 
                sentence of such subparagraph, during the 
                period beginning on January 1, 1996, through 
                December 31, 2002--
                          ``(I) for each employing agency 
                        (other than the United States Postal 
                        Service or the Washington Metropolitan 
                        Airport Authority) shall be 8.51 
                        percent of the basic pay of an 
                        employee, Congressional employee, and a 
                        Member of Congress, 9.01 percent of the 
                        basic pay of a law enforcement officer, 
                        a member of the Capitol Police, and a 
                        firefighter, and 8.51 percent of the 
                        basic pay of a Claims Court judge, a 
                        United States magistrate, a judge of 
                        the United States Court of Appeals for 
                        the Armed Services, and a bankruptcy 
                        judge, as the case may be; and
                          ``(II) for the United States Postal 
                        Service and the Washington Metropolitan 
                        Airport Authority shall be 7 percent of 
                        the basic pay of an employee and 7.5 
                        percent of the basic pay of a law 
                        enforcement officer or firefighter.''.
                  (B) No reduction in agency contributions by 
                the postal service.--Agency contributions by 
                the United States Postal Service under section 
                8348(h) of title 5, United States Code--
                          (i) shall not be reduced as a result 
                        of the amendments made under paragraph 
                        (3) of this subsection; and
                          (ii) shall be computed as through 
                        such amendments had not been enacted.
          (3) Individual deductions, withholdings, and 
        deposits.--The table under section 8334(c) of title 5, 
        United States Code, is amended--
                  (A) in the matter relating to an employee by 
                striking out

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


                and inserting in lieu thereof the following:


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


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

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


                and inserting in lieu thereof the following:


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


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


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


                and inserting in lieu thereof the following:


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


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


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


                and inserting in lieu thereof the following:


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


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


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


                and inserting in lieu thereof the following:


                                   ``8.............  January 1, 1984, to
                                                      December 31, 1995.
                                   7.5.............  January 1, 1996, to
                                                      December 31, 1996.
                                   7.4.............  January 1, 1997, to
                                                      December 31, 1997.
                                   7.5.............  January 1, 1998, to
                                                      December 31, 2002.
                                   7...............  After December 31, 
                                                      2002.'';          
                                                                        


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


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


                and inserting in lieu thereof the following:


                                   ``8.............  The date of the    
                                                      enactment of the  
                                                      Department of     
                                                      Defense           
                                                      Authorization Act,
                                                      1984, to December 
                                                      31, 1995.         
                                   7.25............  January 1, 1996, to
                                                      December 31, 1996.
                                   7.4.............  January 1, 1997, to
                                                      December 31, 1997.
                                   7.5.............  January 1, 1998, to
                                                      December 31, 2002.
                                   7...............  After December 31, 
                                                      2002.'';          
                                                                        


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


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


                and inserting in lieu thereof the following:


                                   ``8.............  October 1, 1987, to
                                                      December 31, 1995.
                                   7.25............  January 1, 1996, to
                                                      December 31, 1996.
                                   7.4.............  January 1, 1997, to
                                                      December 31, 1997.
                                   7.5.............  January 1, 1998, to
                                                      December 31, 2002.
                                   7...............  After December 31, 
                                                      2002.'';          
                                                                        


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


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


                and inserting in lieu thereof the following:


                                   ``8.............  October 1, 1988, to
                                                      December 31, 1995.
                                   7.25............  January 1, 1996, to
                                                      December 31, 1996.
                                   7.4.............  January 1, 1997, to
                                                      December 31, 1997.
                                   7.5.............  January 1, 1998, to
                                                      December 31, 2002.
                                   7...............  After December 31, 
                                                      2002.'';          
                                                                        


                and
                  (I) by inserting after the matter relating to 
                a Claims Court judge the following:


``Member of the Capitol Police...  2.5.............  August 1, 1920, to 
                                                      June 30, 1926.    
                                   3.5.............  July 1, 1926, to   
                                                      June 30, 1942.    
                                   5...............  July 1, 1942, to   
                                                      June 30, 1948.    
                                   6...............  July 1, 1948, to   
                                                      October 31, 1956. 
                                   6.5.............  November 1, 1956,  
                                                      to December 31,   
                                                      1969.             
                                   7.5.............  January 1, 1970, to
                                                      December 31, 1995.
                                   7.75............  January 1, 1996, to
                                                      December 31, 1996.
                                   7.9.............  January 1, 1997, to
                                                      December 31, 1997.
                                   8...............  January 1, 1998, to
                                                      December 31, 2002.
                                   7.5.............  After December 31, 
                                                      2002.''.          
                                                                        


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


Employee.........................  7...............  Before January 1,  
                                                      1996.             
                                   7.25............  January 1, 1996, to
                                                      December 31, 1996.
                                   7.4.............  January 1, 1997, to
                                                      December 31, 1997.
                                   7.5.............  January 1, 1998, to
                                                      December 31, 2002.
                                   7...............  After December 31, 
                                                      2002.             
Congressional employee...........  7.5.............  Before January 1,  
                                                      1996.             
                                   7.25............  January 1, 1996, to
                                                      December 31, 1996.
                                   7.4.............  January 1, 1997, to
                                                      December 31, 1997.
                                   7.5.............  January 1, 1998, to
                                                      December 31, 2002.
                                   7...............  After December 31, 
                                                      2002.             
Member...........................  7.5.............  Before January 1,  
                                                      1996.             
                                   7.25............  January 1, 1996, to
                                                      December 31, 1996.
                                   7.4.............  January 1, 1997, to
                                                      December 31, 1997.
                                   7.5.............  January 1, 1998, to
                                                      December 31, 2002.
                                   7...............  After December 31, 
                                                      2002.             
Law enforcement officer,           7.5.............  Before January 1,  
 firefighter, member of the                           1996.             
 Capitol Police, or air traffic                                         
 controller.                                                            
                                   7.75............  January 1, 1996, to
                                                      December 31, 1996.
                                   7.9.............  January 1, 1997, to
                                                      December 31, 1997.
                                   8...............  January 1, 1998, to
                                                      December 31, 2002.
                                   7.5.............  After December 31, 
                                                      2002.             
                                                                        


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

SEC. 6003. FEDERAL RETIREMENT PROVISIONS RELATING TO MEMBERS OF 
                    CONGRESS AND CONGRESSIONAL EMPLOYEES.

    (a) Relating to the Years of Service as a Member of 
Congress and Congressional Employees for Purposes of Computing 
an Annuity.--
          (1) CSRS.--Section 8339 of title 5, United States 
        Code, is amended--
                  (A) in subsection (a) inserting ``or Member'' 
                after ``employee''; and
                  (B) by striking out subsections (b) and (c).
          (2) FERS.--Section 8415 of title 5, United States 
        Code, is amended--
                  (A) by striking out subsections (b) and (c);
                  (B) in subsections (a) and (g) by inserting 
                ``or Member'' after ``employee'' each place it 
                appears; and
                  (C) in subsection (g)(2) by striking out 
                ``Congressional employee''.
    (b) Accrual Rate for Member and Congressional Employee 
Service Performed but Not Vested Before Effective Date.--
          (1) Application.--This subsection shall apply to an 
        individual who--
                  (A) is a Member of Congress or Congressional 
                employee on December 31, 1995;
                  (B) has performed less than 5 years of 
                service as a Member of Congress or 
                Congressional employee on December 31, 1995; 
                and
                  (C) after December 31, 1995, completes 5 
                years of service as a Member of Congress or 
                Congressional employee, that includes a period 
                of service performed as a Member of Congress or 
                Congressional employee before January 1, 1996.
          (2) Computation of annuity.--In computing the annuity 
        of an individual described under paragraph (1)--
                  (A) any period of service as a Member of 
                Congress or Congressional employee performed 
                before January 1, 1996, shall be computed under 
                section 8339 or 8415 of title 5, United States 
                Code (as though the amendments under subsection 
                (a) of this section were not enacted); and
                  (B) the 5 year service requirement under 
                subsections (b) and (c) of section 8339 or 8415 
                of such title (as in effect before the date of 
                enactment of this Act) shall be deemed 
                fulfilled.
    (c) Capitol Police.--Section 8339(q) of title 5, United 
States Code, is amended by striking out ``with subsection (b), 
except that, in the case of a member who retires under section 
8335(d) or 8336(m), and who meets the requirements of 
subsection (b)(2),'' and inserting in lieu thereof ``with 
subsection (a), except that in the case of a member who retires 
under section 8335(d) or 8336(m), and who has deductions 
withheld from his pay or has made deposit covering his last 5 
years of civilian service,''.
    (d) Administrative Regulations.--The Office of Personnel 
Management, in consultation with the Secretary of the Senate 
and the Clerk of the House of Representatives, may prescribe 
regulations to carry out the provisions of this section and the 
amendments made by this section for applicable employees and 
Members of Congress.
    (e) Effective Dates.--
          (1) Years of service; annuity computation.--
                  (A) Service after effective date.--The 
                amendments made by subsection (a) shall take 
                effect on January 1, 1996, and shall apply only 
                with respect to the computation of an annuity 
                relating to--
                          (i) the service of a Member of 
                        Congress as a Member or as a 
                        Congressional employee performed on or 
                        after January 1, 1996; and
                          (ii) the service of a Congressional 
                        employee as a Congressional employee 
                        performed on or after January 1, 1996.
                  (B) Service before effective date.--An 
                annuity shall be computed as though the 
                amendments made under subsection (a) had not 
                been enacted with respect to--
                          (i) the service of a Member of 
                        Congress as a Member or a Congressional 
                        employee or military service performed 
                        before January 1, 1996; and
                          (ii) the service of a Congressional 
                        employee as a Congressional employee or 
                        military service performed before 
                        January 1, 1996.
                  (C) Alternative effective date relating to 
                members of congress.--If a court of competent 
                jurisdiction makes a final determination that a 
                provision of this paragraph violates the 27th 
                amendment of the United States Constitution, 
                the effective date and application dates 
                relating to Members of Congress shall be 
                January 1, 1997.
          (2) Administrative provisions.--The provisions of 
        subsections (b), (c), and (d) shall take effect on the 
        date of the enactment of this Act.

SEC. 6004. ACCRUAL RATES RELATING TO CERTAIN JUDGES WITH SIMILAR 
                    TREATMENT AS CONGRESSIONAL SERVICE.

    (a) Judge of the United States Court of Military Appeals.--
Section 8339(d)(7) of title 5, United States Code, is amended 
by striking out ``service.'' and inserting in lieu thereof 
``service performed before January 1, 1996.''
    (b) Claims Court Judge, Bankruptcy Judge, United States 
Magistrate.--Section 8339(n) of title 5, United States Code, is 
amended by striking out ``service.'' and inserting in lieu 
thereof ``service performed before January 1, 1996. The annuity 
of any such employee is, and with respect to any service 
referred to in the preceding sentence that is performed on or 
after January 1, 1996, computed under subsection (a).''.

SEC. 6005. REPEAL OF AUTHORIZATION OF TRANSITIONAL APPROPRIATIONS FOR 
                    THE UNITED STATES POSTAL SERVICE.

    (a) Repeal.--
          (1) In general.--Section 2004 of title 39, United 
        States Code, is repealed.
          (2) Technical and conforming amendment.--
                  (A) The table of sections for chapter 20 of 
                such title is amended by repealing the item 
                relating to section 2004.
                  (B) Section 2003(e)(2) of such title is 
                amended by striking ``sections 2401 and 2004'' 
                each place it appears and inserting ``section 
                2401''.
    (b) Clarification That Liabilities Formerly Paid Pursuant 
to Section 2004 Remain Liabilities Payable by the Postal 
Service.--Section 2003 of title 39, United States Code, is 
amended by adding at the end the following:
    ``(h) Liabilities of the former Post Office Department to 
the Employees' Compensation Fund (appropriations for which were 
authorized by former section 2004, as in effect before the 
effective date of this subsection) shall be liabilities of the 
Postal Service payable out of the Fund.''.
    (c) Effective Date.--
          (1) In general.--This section and the amendments made 
        by this section shall be effective as of October 1, 
        1995.
          (2) Provisions relating to payments for fiscal year 
        1996.--
                  (A) Amounts not yet paid.--No payment may be 
                made to the Postal Service Fund, on or after 
                the date of the enactment of this Act, pursuant 
                to any appropriation for fiscal year 1996 
                authorized by section 2004 of title 39, United 
                States Code (as in effect before the effective 
                date of this section).
                  (B) Amounts paid.--If any payment to the 
                Postal Service Fund is or has been made 
                pursuant to an appropriation for fiscal year 
                1996 authorized by such section 2004, then an 
                amount equal to the amount of such payment 
                shall be paid from such Fund into the Treasury 
                as miscellaneous receipts.

SEC. 13103. REQUIREMENT THAT CERTAIN AGENCIES PREFUND GOVERNMENT HEALTH 
                    BENEFITS CONTRIBUTIONS FOR THEIR ANNUITANTS.

    (a) Definitions.--For the purpose of this section--
          (1) the term ``agency'' means any agency or other 
        instrumentality within the executive branch of the 
        Government, the receipts and disbursements of which are 
        not generally included in the totals of the budget of 
        the United States Government submitted by the 
        President;
          (2) the term ``health benefits plan'' means, with 
        respect to an agency, a health benefits plan, 
        established by or under Federal law, in which employees 
        or annuitants of such agency may participate;
          (3) the term ``health-benefits coverage'' means 
        coverage under a health benefits plan;
          (4) an individual shall be considered to be an 
        ``annuitant of an agency'' if such individual is 
        entitled to an annuity, under a retirement system 
        established by or under Federal law, by virtue of--
                  (A) such individual's service with, and 
                separation from, such agency; or
                  (B) being the survivor of an annuitant under 
                subparagraph (A) or of an individual who died 
                while employed by such agency; and
          (5) the term ``Office'' means the Office of Personnel 
        Management.
    (b) Prefunding Requirement.--
          (1) In general.--Effective as of October 1, 1996, 
        each agency shall be required to prepay the Government 
        contributions which are or will be required in 
        connection with providing health-benefits coverage for 
        annuitants of such agency.
          (2) Regulations.--The Office shall prescribe such 
        regulations as may be necessary to carry out this 
        section. The regulations shall be designed to ensure at 
        least the following:
                  (A) Amounts paid by each agency shall be 
                sufficient to cover the amounts which would 
                otherwise be payable by such agency (on a 
                ``pay-as-you-go'' basis), on or after the 
                applicable effective date under paragraph (1), 
                on behalf of--
                          (i) individuals who are annuitants of 
                        the agency as of such effective date; 
                        and
                          (ii) individuals who are employed by 
                        the agency as of such effective date, 
                        or who become employed by the agency 
                        after such effective date, after such 
                        individuals have become annuitants of 
                        the agency (including their survivors).
                  (B)(i) For purposes of determining any 
                amounts payable by an agency--
                          (I) this section shall be treated as 
                        if it had taken effect at the beginning 
                        of the 20-year period which ends on the 
                        effective date applicable under 
                        paragraph (1) with respect to such 
                        agency; and
                          (II) in addition to any amounts 
                        payable under subparagraph (A), each 
                        agency shall also be responsible for 
                        paying any amounts for which it would 
                        have been responsible, with respect to 
                        the 20-year period described in 
                        subclause (I), in connection with any 
                        individuals who are annuitants or 
                        employees of the agency as of the 
                        applicable effective date under 
                        paragraph (1).
                  (ii) Any amounts payable under this 
                subparagraph for periods preceding the 
                applicable effective date under paragraph (1) 
                shall be payable in equal installments over the 
                20-year period beginning on such effective 
                date.
    (c) FASB Standards.--Regulations under subsection (b) shall 
be in conformance with the provisions of standard 106 of the 
Financial Accounting Standards Board, issued in December 1990.
    (d) Clarification.--Nothing in this section shall be 
considered to permit or require duplicative payments on behalf 
of any individuals.
    (e) Draft Legislation.--The Office shall prepare and submit 
to Congress any draft legislation which may be necessary in 
order to carry out this section.

               TITLE VII--VETERANS AND RELATED PROVISIONS

SEC. 10001. SHORT TITLE; TABLE OF CONTENTS.

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

Sec. 10001. Short title; table of contents.

             Subtitle A--Extension of Temporary Authorities

Sec. 10011. Authority to require that certain veterans make copayments 
          in exchange for receiving health-care benefits.
Sec. 10012. Medical care cost recovery authority.
Sec. 10013. Income verification authority.
Sec. 10014. Limitation on pension for certain recipients of medicaid-
          covered nursing home care.
Sec. 10015. Home loan fees.
Sec. 10016. Procedures applicable to liquidation sales on defaulted home 
          loans guaranteed by the Department of Veterans Affairs.
Sec. 10017. Enhanced loan asset sale authority.

                        Subtitle B--Other Matters

Sec. 10021. Revision to prescription drug copayment.
Sec. 10022. Rounding down of cost-of-living adjustments in compensation 
          and DIC rates.
Sec. 10023. Revised standard for liability for injuries resulting from 
          Department of Veterans Affairs treatment.
Sec. 10024. Withholding of payments and benefits.

             Subtitle A--Extension of Temporary Authorities

SEC. 10011. AUTHORITY TO REQUIRE THAT CERTAIN VETERANS MAKE COPAYMENTS 
                    IN EXCHANGE FOR RECEIVING HEALTH-CARE BENEFITS.

    (a) Hospital and Medical Care.--Section 8013(e) of the 
Omnibus Budget Reconciliation Act of 1990 (38 U.S.C. 1710 note) 
is amended by striking out ``September 30, 1998'' and inserting 
in lieu thereof ``September 30, 2002''.
    (b) Outpatient Medications.--Section 1722A(c) of title 38, 
United States Code, is amended by striking out ``September 30, 
1998'' and inserting in lieu thereof ``September 30, 2002''.

SEC. 10012. MEDICAL CARE COST RECOVERY AUTHORITY.

    Section 1729(a)(2)(E) of title 38, United States Code, is 
amended by striking out ``before October 1, 1998,'' and 
inserting ``before October 1, 2002,''.

SEC. 10013. INCOME VERIFICATION AUTHORITY.

    Section 5317(g) of title 38, United States Code, is amended 
by striking out ``September 30, 1998'' and inserting in lieu 
thereof ``September 30, 2002''.

SEC. 10014. LIMITATION ON PENSION FOR CERTAIN RECIPIENTS OF MEDICAID-
                    COVERED NURSING HOME CARE.

    Section 5503(f)(7) of title 38, United States Code, is 
amended by striking out ``September 30, 1998'' and inserting in 
lieu thereof ``September 30, 2002''.

SEC. 10015. HOME LOAN FEES.

    Section 3729(a) of title 38, United States Code, is 
amended--
          (1) in paragraph (4), by striking out ``October 1, 
        1998'' and inserting in lieu thereof ``October 1, 
        2002''; and
          (2) in paragraph (5)(C), by striking out ``October 1, 
        1998'' and inserting in lieu thereof ``October 1, 
        2002''.

SEC. 10016. PROCEDURES APPLICABLE TO LIQUIDATION SALES ON DEFAULTED 
                    HOME LOANS GUARANTEED BY THE DEPARTMENT OF VETERANS 
                    AFFAIRS.

    Section 3732(c)(11) of title 38, United States Code, is 
amended by striking out ``October 1, 1998'' and inserting 
``October 1, 2002''.

SEC. 10017. ENHANCED LOAN ASSET SALE AUTHORITY.

    Section 3720(h)(2) of title 38, United States Code, is 
amended by striking out ``December 31, 1995'' and inserting in 
lieu thereof ``September 30, 2002''.

                       Subtitle B--Other Matters

SEC. 1002.  ROUNDING DOWN OF COST-OF-LIVING ADJUSTMENTS IN COMPENSATION 
                    AND DIC RATES.

    (a) Fiscal Year 1996 COLA.--Effective as of December 1, 
1995, the Secretary of Veterans Affairs shall recompute any 
increase in an adjustment that is otherwise provided by law to 
be effective during fiscal year 1996 in the rates of disability 
compensation and dependency and indemnity compensation paid by 
the Secretary as such rates were in effect on November 30, 
1995. The recomputation shall provide for the same percentage 
increase as provided under such law, but with amounts so 
recomputed (if not a whole dollar amount).

``Sec. 1103. Cost-of-living adjustments

    ``(a) In the computation of cost-of-living adjustments for 
fiscal years 1997 through 2002 in the rates of, and dollar 
limitations applicable to, compensation payable under this 
chapter, such adjustments shall be made by a uniform percentage 
that is no more than the percentage equal to the social 
security increase for that fiscal year, with all increased 
monthly rates and limitations (other than increased rates or 
limitations equal to a whole dollar amount) rounded down to the 
next lower whole dollar amount.
    ``(b) For purposes of this section, the term `social 
security increase' means the percentage by which benefit 
amounts payable under title II of the Social Security Act (42 
U.S.C. 401 et seq.) are increased for any fiscal year as a 
result of a determination under section 215(i) of such Act (42 
U.S.C. 415(i)).''.
    (b) The table of sections at the beginning of such chapter 
is amended by inserting after the item relating to section 1102 
the following new item:

``1103. Cost-of-living adjustments.''.

    (c) Out-Year DIC COLAs.--(1) Chapter 13 of title 38, United 
States Code, is amended by inserting after section 1302 the 
following new section:

``Sec. 1303. Cost-of-living adjustments

    ``(a) In the computation of cost-of-living adjustments for 
fiscal years 1997 through 2002 in the rates of dependency and 
indemnity compensation payable under this chapter, such 
adjustments shall be made by a uniform percentage that is no 
more than the percentage equal to the social security increase 
for that fiscal year, with all increased monthly rates (other 
than increased rates equal to a whole dollar amount) rounded 
down to the next lower whole dollar amount.
    ``(b) For purposes of this section, the term `social 
security increase' means the percentage by which benefit 
amounts payable under title II of the Social Security Act (42 
U.S.C. 401 et seq.) are increased for any fiscal year as a 
result of a determination under section 215(i) of such Act (42 
U.S.C. 415(i)).''.
    (2) The table of sections at the beginning of such chapter 
is amended by inserting after the item relating to section 1302 
the following new item:

``1303. Cost-of-living adjustments.''.

SEC. 10023.  REVISED STANDARD FOR LIABILITY FOR INJURIES RESULTING FROM 
                    DEPARTMENT OF VETERANS AFFAIRS TREATMENT.

    (a) Revised Standard.--Section 1151 of title 38, United 
States Code, is amended--
          (1) by designating the second sentence as subsection 
        (c);
          (2) by striking out the first sentence and inserting 
        in lieu thereof the following:
    ``(a) Compensation under this chapter and dependency and 
indemnity compensation under chapter 13 of this title shall be 
awarded for a qualifying additional disability of a veteran or 
the qualifying death of a veteran in the same manner as if such 
disability or death were service-connected.
    ``(b)(1) For purposes of this section, a disability or 
death is a qualifying additional disability or a qualifying 
death only if the disability or death--
          ``(A) was caused by Department health care and was a 
        proximate result of--
                  ``(i) negligence on the part of the 
                Department in furnishing the Department health 
                care; or
                  ``(ii) an event not reasonably foreseeable; 
                or
          ``(B) was incurred as a proximate result of the 
        provision of training and rehabilitation services by 
        the Secretary (including by a service-provider used by 
        the Secretary for such purpose under section 3115 of 
        this title) as part of an approved rehabilitation 
        program under chapter 31 of this title.
    ``(2) For purposes of this section, the term `Department 
health care' means hospital care, medical or surgical 
treatment, or an examination that is furnished under any law 
administered by the Secretary to a veteran by a Department 
employee or in a facility over which the Secretary has direct 
jurisdiction.
    ``(3) A disability or death of a veteran which is the 
result of the veteran's willful misconduct is not a qualifying 
disability or death for purposes of this section.''; and
          (3) by adding at the end the following:
    ``(d) Effective with respect to injuries, aggravations of 
injuries, and deaths occurring after September 30, 2002, a 
disability or death is a qualifying additional disability or a 
qualifying death for purposes of this section (notwithstanding 
the provisions of subsection (b)(1)) if the disability or 
death--
          ``(1) was the result of Department health care; or
          ``(2) was the result of the pursuit of a course of 
        vocational rehabilitation under chapter 31 of this 
        title.''.
    (b) Conforming Amendments.--Subsection (c) of such section, 
as designated by subsection (a)(1), is amended--
          (1) by striking out ``, aggravation,'' both places it 
        appears; and
          (2) by striking out ``sentence'' and inserting in 
        lieu thereof ``subsection''.
    (c) Effective Date.--The amendments made by this section 
shall apply to any administrative or judicial determination of 
eligibility for benefits under section 1151 of title 38, United 
States Code, based on a claim that is received by the Secretary 
on or after October 1, 1995, including any such determination 
based on an original application or an application seeking to 
reopen, revise, reconsider, or otherwise readjudicate any claim 
for benefits under section 1151 of that title or any 
predecessor provision of law.

SEC. 10024.  WITHHOLDING OF PAYMENTS AND BENEFITS.

    (a) Notice Required in Lieu of Consent or Court Order.--
Section 3726 of title 38, United States Code, is amended by 
striking out ``unless'' and all that follows and inserting in 
lieu thereof the following: ``unless the Secretary provides 
such veteran or surviving spouse with notice by certified mail 
with return receipt requested of the authority of the Secretary 
to waive the payment of indebtedness under section 5302(b) of 
this title. If the Secretary does not waive the entire amount 
of the liability, the Secretary shall then determine whether 
the veteran or surviving spouse should be released from 
liability under section 3713(b) of this title. If the Secretary 
determines that the veteran or surviving spouse should not be 
released from liability, the Secretary shall notify the veteran 
or surviving spouse of that determination and provide a notice 
of the procedure for appealing that determination, unless the 
Secretary has previously made such determination and notified 
the veteran or surviving spouse of the procedure for appealing 
the determination.``.
    (b) Conforming Amendment.--Section 5302(b) of such title is 
amended by inserting ``with return receipt requested'' after 
``certified mail''.
    (c) Effective Date.--The amendments made by this section 
shall apply with respect to any indebtedness to the United 
States arising pursuant to chapter 37 of title 38, United 
States Code, before, on, or after the date of the enactment of 
this Act.

                    Subtitle C--Educational Benefits

SEC. 11031. LIMITATION REGARDING COST-OF-LIVING ADJUSTMENTS FOR 
                    MONTGOMERY GI BILL BENEFITS.

    With respect to each of fiscal years 1966 through 2002, the 
cost-of-living adjustments in the rates of educational 
assistance payable under chapter 30 of title 38, United States 
Code, shall be the percentage equal to 50 percent of the 
percentage by which such assistance would be increased under 
section 3015(g) of such title with respect to such fiscal year 
but for this section.

    TITLE VIII--ASSET SALES; USER FEES AND OTHER MANDATORY PROGRAMS

            Subtitle A--United States Enrichment Corporation

SEC. 3001. SHORT TITLE.

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

SEC. 3002. PURPOSE.

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

SEC. 3003. DEFINITIONS.

    For purposes of this subtitle:
          (1) The term ``AVLIS'' means atomic vapor laser 
        isotope separation technology.
          (2) The term ``Corporation'' means the United States 
        Enrichment Corporation and, unless the context 
        otherwise requires, includes the private corporation 
        and any successor thereto following privatization.
          (3) The term ``gaseous diffusion plants'' means the 
        Paducah Gaseous Diffusion Plant at Paducah, Kentucky 
        and the Portsmouth Gaseous Diffusion Plant at Piketon, 
        Ohio.
          (4) The term ``highly enriched uranium'' means 
        uranium enriched to 20 percent or more of the uranium-
        235 isotope.
          (5) The term ``low-enriched uranium'' means uranium 
        enriched to less than 20 percent of the uranium-235 
        isotope, including that which is derived from highly 
        enriched uranium.
          (6) The term ``low-level radioactive waste'' has the 
        meaning given such term in section 2(9) of the Low-
        Level Radioactive Waste Policy Act (42 U.S.C. 
        2021b(9)).
          (7) The term ``private corporation'' means the 
        corporation established under section 3005.
          (8) The term ``privatization'' means the transfer of 
        ownership of the Corporation to private investors.
          (9) The term ``privatization date'' means the date on 
        which 100 percent of the ownership of the Corporation 
        has been transferred to private investors.
          (10) The term ``public offering'' means an 
        underwritten offering to the public of the common stock 
        of the private corporation pursuant to section 3004.
          (11) The ``Russian HEU Agreement'' means the 
        Agreement Between the Government of the United States 
        of America and the Government of the Russian Federation 
        Concerning the Disposition of Highly Enriched Uranium 
        Extracted from Nuclear Weapons, dated February 18, 
        1993.
          (12) The term ``Secretary'' means the Secretary of 
        Energy.
          (13) The ``Suspension Agreement'' means the Agreement 
        to Suspend the Antidumping Investigation on Uranium 
        from the Russian Federation, as amended.
          (14) The term ``uranium enrichment'' means the 
        separation of uranium of a given isotopic content into 
        2 components, 1 having a higher percentage of a fissile 
        isotope and 1 having a lower percentage.

SEC. 3004. SALE OF THE CORPORATION.

    (a) Authorization.--The Board of Directors of the 
Corporation, with the approval of the Secretary of the 
Treasury, shall transfer ownership of the assets and 
obligations of the Corporation to the private corporation 
established under section 3005 (which may be consummated 
through a merger or consolidation effected in accordance with, 
and having the effects provided under, the laws of the State of 
incorporation of the private corporation, as if the Corporation 
were incorporated thereunder.).
    (b) Board Determination.--The Board, with the approval of 
the Secretary of the Treasury, shall select the method of 
transfer and establish terms and conditions for the transfer to 
provide the maximum proceeds to the Treasury of the United 
States and to provide for the long-term viability of the 
private corporation, the continued operation of the gaseous 
diffusion plants, and the public interest in maintaining 
reliable and economical domestic uranium mining and enrichment 
industries.
    (c) Application of Securities Laws.--Any offering or sale 
of securities by the private corporation shall be subject to 
the Securities Act of 1993 (15 U.S.C. 77a et seq.), the 
Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), and 
the provisions of the Constitution and laws of any State, 
territory, or possession of the United States relating to 
transactions in securities.
    (d) Proceeds.--Proceeds from the sale of the United States' 
interest in the Corporation shall be--
          (1) deposited in the general fund of the Treasury;
          (2) included in the budget baseline required by the 
        Balanced Budget and Emergency Deficit Control Act of 
        1985; and
          (3) counted as an offset to direct spending for 
        purposes of section 252 of such Act, notwithstanding 
        section 257(e) of such Act.
    (e) Expenses.--Expenses of privatization shall be paid from 
Corporation revenue accounts in the United States Treasury.

SEC. 3005 ESTABLISHMENT OF PRIVATE CORPORATION.

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

SEC. 3006. TRANSFERS TO THE PRIVATE CORPORATION.

    Concurrent with privatization, the Corporation shall 
transfer to the private corporation--
          (1) the lease of the gaseous diffusion plants in 
        accordance with section 3007,
          (2) all personal property and inventories of the 
        Corporation,
          (3) all contracts, agreements, and leases under 
        section 3108(a),
          (4) the Corporation's right to purchase power from 
        the Secretary under section 3008(b),
          (5) such funds in accounts of the Corporation held by 
        the Treasury or on deposit with any bank or other 
        financial institution as approved by the Secretary of 
        the Treasury, and
          (6) all of the Corporation's records, including all 
        of the papers and other documentary materials, 
        regardless of physical form or characteristics, made or 
        received by the Corporation.

SEC. 3007. LEASING OF GASEOUS DIFFUSION FACILITIES.

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

SEC. 3008. TRANSFER OF CONTRACTS.

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

SEC. 3009. LIABILITIES.

    (a) Liability of the United States.--(1) Except as 
otherwise provided in this subtitle, all liabilities arising 
out of the operation of the uranium enrichment enterprise 
before July 1, 1993, shall remain the direct liabilities of the 
Secretary.
    (2) Except as provided in subsection (a)(3) or otherwise 
provided in a memorandum of agreement entered into by the 
Corporation and the Office of Management and Budget prior to 
the privatization date, all liabilities arising out of the 
operation of the Corporation between July 1, 1993, and the 
privatization date shall remain the direct liabilities of the 
United States.
    (3) All liabilities arising out of the disposal of depleted 
uranium generated by the Corporation between July 1, 1993 and 
privatization date shall become the direct liabilities of the 
Secretary.
    (4) Any stated or implied consent for the United States, or 
any agent or officer of the United States, to be sued by any 
person for any legal, equitable, or other relief with respect 
to any claim arising out of, or resulting from, the 
privatization of the Corporation is hereby withdrawn.
    (5) To the extent that any claim against the United States 
under this section is of the type otherwise required by Federal 
statute or regulation to be presented to a Federal agency or 
official for adjudication or review, such claim shall be 
presented to the Department of Energy in accordance with the 
procedures to be established by the Secretary. Nothing in this 
paragraph shall be construed to impose on the Department of 
Energy liability to pay any claim presented pursuant to this 
paragraph.
    (6) The Attorney General shall represent the United States 
in any action seeking to impose liability under this 
subsection.
    (b) Liability of the Corporation.--Notwithstanding any 
provision of any agreement to which the Corporation is a party, 
the Corporation shall not be considered in breach, default, or 
violation of any agreement because of the transfer of such 
agreement to the private corporation under section 3008 or any 
other action the Corporation is required to take under this 
subtitle.
    (c) Liability of the Private Corporation.--Except as 
provided in this subtitle, the private corporation shall be 
liable for any liabilities arising out of its operations after 
the privatization date.
    (d) Liability of Officers and Directors.--(1) No officer, 
director, employee, or agent of the Corporation shall be liable 
in any civil proceeding to any party in connection with any 
action taken in connection with the privatization if, with 
respect to the subject matter of the action, suit, or 
proceeding, such person was acting within the scope of his 
employment.
    (2) This subsection shall not apply to claims arising under 
the Securities Exchange Act of 1933 (15 U.S.C. 77a et seq.), 
the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), or 
under the Constitution or laws of any State, territory, or 
possession of the United States relating to transactions in 
securities.

SEC. 3010. EMPLOYEE PROTECTIONS.

    (a) Contractor Employees.--(1) Privatization shall not 
diminish the accrued, vested pension benefits of employees of 
the Corporation's operating contractor at the two gaseous 
diffusion plants.
    (2) In the event that the private corporation terminates or 
changes the contractor at either or both of the gaseous 
diffusion plants, the plan sponsor or other appropriate 
fiduciary of the pension plan covering employees of the prior 
operating contractor shall arrange for the transfer of all plan 
assets and liabilities relating to accrued pension benefits of 
such plan's participants and beneficiaries from such plant to a 
pension plan sponsored by the new contractor or the private 
corporation or a joint labor-management plan, as the case may 
be.
    (3) In addition to any obligations arising under the 
National Labor Relations Act, any employer (including the 
private corporation if it operates a gaseous diffusion plant 
without a contractor or any contractor of the private 
corporation) at a gaseous diffusion plant shall--
          (A) abide by the terms of any unexpired collective 
        bargaining agreement covering employees in bargaining 
        units at the plant and in effect on the privatization 
        date until the stated expiration or termination date of 
        the agreement; or
          (B) in the event a collective bargaining agreement is 
        not in effect upon the privatization date, have the 
        same bargaining obligations under section 8(d) of the 
        National Labor Relations Act (29 U.S.C. 158(d)) as it 
        had immediately before the privatization date.
    (4) If the private corporation replaces its operating 
contractor at a gaseous diffusion plant, the new employer 
(including the new contractor or the private corporation if it 
operates a gaseous diffusion plant without a contractor) 
shall--
          (A) offer employment to non-management employees of 
        the predecessor contractor to the extent that their 
        jobs still exist or they are qualified for new jobs, 
        and
          (B) abide by the terms of the predecessor 
        contractor's collective bargaining agreement until the 
        agreement expires or a new agreement is signed.
    The provisions of subparagraphs (A) and (B) apply only to 
replacements of operating contractors at the gaseous diffusion 
plants during the first two years following the privatization 
date (if any) and to the first bona fide replacement of an 
operating contractor at a gaseous diffusion plant following the 
expiration of that two year period. For purposes of this 
paragraph, a replacement of an operating contractor is 
considered to be ``bona fide'' unless it is made solely to 
evade or avoid the provisions of subparagraphs (A) and (B).
    (5) In the event of a plant closing or mass layoff (as such 
terms are defined in section 2(a) (2) and (3) of the Worker 
Adjustment and Retraining Notification Act (29 U.S.C. 
2102(2)(2) and (3))) at either of the gaseous diffusion plants, 
the Secretary of Energy shall treat any adversely affected 
employee of an operating contractor at either plant who was an 
employee at such plant on July 1, 1993, as a Department of 
Energy employee for purposes of sections 3161 and 3162 of the 
National Defense Authorization Act for Fiscal Year 1993 (42 
U.S.C. 7274h-7274i).
    (6)(A) The Secretary and the private corporation shall 
cause the post-retirement health benefits plan provider (or its 
successor) to continue to provide benefits for persons employed 
by an operating contractor at either of the gaseous diffusion 
plants in an economically efficient manner and at substantially 
the same level of coverage as eligible retirees are entitled to 
receive on the privatization date.
    (B) Persons eligible for coverage under subparagraph (A) 
shall be limited to:
          (i) Persons who retired from active employment at one 
        of the gaseous diffusion plants on or before the 
        privatization date as vested participants in a pension 
        plan maintained either by the Corporation's operating 
        contractor or by a contractor employed prior to July 1, 
        1993, by the Department of Energy to operate a gaseous 
        diffusion plant.
          (ii) Persons who are employed by the Corporation's 
        operating contractor on or before the privatization 
        date and are vested participants in a pension plan 
        maintained either by the Corporation's operating 
        contractor or by a contractor employed prior to July 1, 
        1993, by the Department of Energy to operate a gaseous 
        diffusion plant.
    (C) The Secretary shall fund the entire cost of post-
retirement health benefits for persons who retired from 
employment with an operating contractor prior to July 1, 1993.
    (D) The Secretary and the Corporation shall fund the cost 
of post-retirement health benefits for persons who retire from 
employment with an operating contractor after July 1, 1993 in 
proportion to the retired person's years and months of service 
at a gaseous diffusion plant under their respective management.
    (7)(A) Any suit under this subsection alleging a violation 
of an agreement between an employer and a labor organization 
shall be brought in accordance with section 301 of the Labor 
Management Relations Act (29 U.S.C. 185).
                  (B) Any charge under this subsection alleging 
                an unfair labor practice violation of section 8 
                of the National Labor Relations Act (29 U.S.C. 
                158) shall be pursued in accordance with 
                section 10 of the National Labor Relations Act 
                (29 U.S.C. 160).
                  (C) Any suit alleging a violation of any 
                provision of this subsection, to the extent it 
                does not allege a violation of the National 
                Labor Relations Act, may be brought in any 
                district court of the United States having 
                jurisdiction of the parties, without regard to 
                the amount in controversy or the citizenships 
                of the parties.
    (b) Former Federal Employees.--(1)(A) Employees of the 
Corporation who were subject to either the Civil Service 
Retirement System (CSRS) or the Federal Employees' Retirement 
System (FERS) on the day immediately preceding the 
privatization date shall elect--
          (i) to retain their coverage under either CSRS or 
        FERS, as applicable, in lieu of coverage by the 
        Corporation's retirement system, or
          (ii) to receive a deferred annuity or lump sum 
        benefit payable to a terminated employee under CSRS or 
        FERS, as applicable.
    (B) Those employees electing subparagraph (A)(ii) shall 
have the option to transfer the balance in their Thrift Savings 
Plan account to a defined contribution plan under the 
Corporation's retirement system, consistent with applicable law 
and the terms of the Corporation's defined contribution plan.
    (2) The Corporation shall pay to the Civil Service 
Retirement and Disability Fund--
          (A) such employee deductions and agency contributions 
        as are required by sections 8334, 8422, and 8423 of 
        title 5, United States Code, for those employees who 
        elect to retain their coverage under either CSRS or 
        FERS pursuant to paragraph (1);
          (B) such additional agency contributions as are 
        determined necessary by the Office of Personnel 
        Management to pay, in combination with the sums under 
        subparagraph (A), the ``normal cost'' (determined using 
        dynamic assumptions) of retirement benefits for those 
        employees who elect to retain their coverage under CSRS 
        pursuant to paragraph (1), with the concept of ``normal 
        cost'' being used consistent with generally accepted 
        actuarial standards and principles; and
          (C) such additional amounts, not to exceed two 
        percent of the amounts under subparagraphs (A) and (B), 
        as are determined necessary by the Office of Personnel 
        Management to pay the cost of administering retirement 
        benefits for employees who retire from the Corporation 
        after the privatization date under either CSRS or FERS, 
        for their survivors, and for survivors of employees of 
        the Corporation who die after the privatization date 
        (which amounts shall be available to the Office of 
        Personnel Management as provided in section 
        8348(a)(1)(B) of title 5, United States Code).
    (3) The Corporation shall pay to the Thrift Savings Fund 
such employee and agency contributions as are required by 
section 8432 of title 5, United States Code, for those 
employees who elect to retain their coverage under FERS 
pursuant to paragraph (1).
    (4) Any employee of the Corporation who was subject to the 
Federal Employee Health Benefits Program (FEHBP) on the day 
immediately preceding the privatization date and who elects to 
retain coverage under either CSRS or FERS pursuant to paragraph 
(1) shall have the option to receive health benefits from a 
health benefit plan established by the Corporation or to 
continue without interruption coverage under the FEHBP, in lieu 
of coverage by the Corporation's health benefit system.
    (5) The Corporation shall pay to the Employees Health 
Benefits Fund--
          (A) such employee deductions and agency contributions 
        as are required by section 8906 (a)-(f) of title 5, 
        United States Code, for those employees who elect to 
        retain their coverage under FEHBP pursuant to paragraph 
        (4); and
          (B) such amounts as are determined necessary by the 
        Office of Personnel Management under paragraph (6) to 
        reimburse the Office of Personnel Management for 
        contributions under section 8906(g)(1) of title 5, 
        United States Code, for those employees who elect to 
        retain their coverage under FEHBP pursuant to paragraph 
        (4).
    (6) The amounts required under paragraph (5)(B) shall pay 
the Government contributions for retired employees who retire 
from the Corporation after the privatization date under either 
CSRS or FERS, for survivors of such retired employees, and for 
survivors of employees of the Corporation who die after the 
privatization date, with said amounts prorated to reflect only 
that portion of the total service of such employees and retired 
persons that was performed for the Corporation after the 
privatization date.

SEC. 3011. OWNERSHIP LIMITATIONS.

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

SEC. 3012. URANIUM TRANSFERS AND SALES.

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

                 Annual Maximum Deliveries to End Users

Year:                          (millions lbs. U3O8 equivalent)
1998..............................................................     3
1999..............................................................     5
2000..............................................................     7
2001..............................................................     9
2002..............................................................    11
2003..............................................................    13
2004..............................................................    15
2005..............................................................    16
2006..............................................................    17
2007..............................................................    18
2008..............................................................    19
2009 and each succeeding year.....................................    20

          (6) Uranium hexafluoride delivered to the Russian 
        Executive Agent under paragraph (3) or auctioned 
        pursuant to paragraph (4) may be sold at any time as 
        Russian-origin natural uranium in a matched sale 
        pursuant to the Suspension Agreement, and in such case 
        shall not be counted against the annual maximum 
        deliveries set forth in paragraph (5).
          (7) Uranium hexafluoride delivered to the Russian 
        Executive Agent under paragraph (3) or auctioned 
        pursuant to paragraph (4) may be sold at any time for 
        use in the United States for the purpose of overfeeding 
        in the operations of enrichment facilities.
          (8) Nothing in this subsection (b) shall restrict the 
        sale of the conversion component of such uranium 
        hexafluoride.
          (9) The Secretary of Commerce shall have 
        responsibility for the administration and enforcement 
        of the limitations set forth in this subsection. The 
        Secretary of Commerce may require any person to provide 
        any certifications, information, or take any action 
        that may be necessary to enforce these limitations. The 
        U.S. Customs Service shall maintain and provide any 
        information required by the Secretary of Commerce and 
        shall take any action requested by the Secretary of 
        Commerce which is necessary for the administration and 
        enforcement of the uranium delivery limitations set 
        forth in this section.
          (10) The President shall monitor the actions of the 
        United States Executive Agent under the Russian HEU 
        Agreement and shall report to the Congress not later 
        than December 31 of each year on the effect the low-
        enriched uranium delivered under the Russian HEU 
        Agreement is having on the domestic uranium mining, 
        conversion, and enrichment industries, and the 
        operation of the gaseous diffusion plants. Such report 
        shall include a description of actions taken or 
        proposed to be taken by the President to prevent or 
        mitigate any material adverse impact on such industries 
        or any loss of employment at the gaseous diffusion 
        plants as a result of the Russian HEU Agreement.
          (11)(A) In the event that the President makes a 
        determination that a waiver under this subsection with 
        respect to the importation of highly enriched uranium 
        or low-enriched uranium derived from highly enriched 
        uranium extracted from nuclear weapons dismantled in 
        the Russian Federation and purchased from the Russian 
        Federation under a government-to-government agreement 
        is in the national security interest of the United 
        States, then such highly enriched uranium and low-
        enriched uranium derived from highly enriched uranium, 
        including, within the limits established by this 
        section, the natural uranium component thereof and any 
        uranium products delivered pursuant to enrichment 
        contracts affected by such imports, shall not be 
        subject to title VII of the Tariff Act of 1930, to such 
        extent, for such period, and under such terms and 
        conditions as may be provided in the order making such 
        determination.
          (B) No person shall have any cause of action or 
        defense based on this section, and no court shall have 
        jurisdiction to entertain challenges based on any 
        action taken by the President or the Secretary of 
        Commerce pursuant to this section or on an alleged 
        failure to take any such action.
    (c) Transfers to the Corporation.--
          (1) The Secretary shall transfer to the Corporation 
        without charge up to 50 metric tons of enriched uranium 
        and up to 7,000 metric tons of natural uranium from the 
        Department of Energy's stockpile, subject to the 
        restrictions in subsection (c)(2).
          (2) The Corporation shall not deliver for commercial 
        end use in the United States--
                  (A) any of the uranium transferred under this 
                subsection before January 1, 1998;
                  (B) more than 10 percent of the uranium (by 
                uranium hexafluoride equivalent content) 
                transferred under this subsection or more than 
                4 million pounds, whichever is less, in any 
                calendar year after 1997; or
                  (C) more than 800,000 separative work units 
                contained in low-enriched uranium transferred 
                under this subsection in any calendar year.
    (d) Inventory Sales.--(1) In addition to the transfers 
authorized under subsections (c) and (e), the Secretary may, 
from time to time, sell natural and low-enriched uranium 
(including low-enriched uranium derived from highly enriched 
uranium) from the Department of Energy's stockpile.
    (2) Except as provided in subsections (b), (c), and (e), no 
sale or transfer of natural or low-enriched uranium shall be 
made unless--
          (A) the President determines that the material is not 
        necessary to national security needs,
          (B) the Secretary determines that the sale of the 
        material will not have an adverse material impact on 
        the domestic uranium mining, conversion, or enrichment 
        industry, taking into account the sales of uranium 
        under the Russian HEU Agreement and the Suspension 
        Agreement, and
          (C) the price paid to the Secretary will not be less 
        than the fair market value of the material.
    (e) Government Transfers.--Nothwithstanding subsection 
(d)(2), the Secretary may transfer or sell enriched uranium--
          (1) to a Federal agency if the material is 
        transferred for the use of the receiving agency without 
        any resale or transfer to another entity and the 
        material does not meet commercial specifications;
          (2) to any person for national security purposes, as 
        determined by the Secretary; or
          (3) to any State or local agency or nonprofit, 
        charitable, or educational institution for use other 
        than the generation of electricity for commercial use.
    (f) Savings Provision.--Nothing in this subtitle shall be 
read to modify the terms of the Russian HEU Agreement.

SEC. 3013. LOW-LEVEL WASTE.

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

SEC. 3014. AVLIS.

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

SEC. 3015. APPLICATION OF CERTAIN LAWS.

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

SEC. 3016. AMENDMENTS OF THE ATOMIC ENERGY ACT.

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

SEC. 3017. AMENDMENTS TO OTHER LAWS.

    (a) Definition of Government Corporation.--As of the 
privatization date, section 9101(3) of title 31, United States 
Code, is amended by striking subparagraph (N).
    (b) Definition of the Corporation.--Section 1018(1) of the 
Energy Policy Act of 1992 (42 U.S.C. 2296b-7(1)) is amended by 
adding immediately before the period ``, or its successor''.
    (b) Repeal of Prior Conditional Enactment.--Section 
8114A(b) of Public Law 103-335 (108 Stat. 2648) is repealed.

           Subtitle B--Naval Petroleum Reserves Privatization

SEC. 4101. SHORT TITLE.

    This subtitle may be cited as the ``Naval Petroleum 
Reserves Privatization Act''.

              PART I--DEFINITIONS, APPLICABILITY OF TITLES

SEC. 4111. DEFINITIONS.

    For the purposes of this subtitle:
          (a) ``Department'' means the United States Department 
        of Energy.
          (b) ``Naval petroleum reserves'' (referred to in this 
        subtitle as ``the Reserves'') means Naval Petroleum 
        Reserve Numbered 1 (Elk Hills), located in Kern County, 
        California, established by Executive order of the 
        President, dated September 2, 1912; Naval Petroleum 
        Reserve Numbered 2 (Buena Vista), located in Kern 
        County, California, established by Executive order of 
        the President, dated December 13, 1912; Navel Petroleum 
        Reserve Numbered 3 (Teapot Dome), located in Wyoming, 
        established by Executive order of the President, dated 
        April 30, 1915; Oil Shale Reserve Numbered 1, located 
        in Colorado, established by Executive order of the 
        President, dated December 6, 1916, as amended by 
        Executive order dated June 12, 1919; and Oil Shale 
        Reserve Numbered 3, located in Colorado, established by 
        Executive order of the President, dated September 27, 
        1924.
          (c) ``Petroleum'' includes crude oil, gases 
        (including natural gas), natural gasoline, and other 
        related hydrocarbons, oil shale, and the products of 
        any of such resources.
          (d) ``Secretary'' means the Secretary of Energy.
          (e) ``Unit Plan Contract'' means the agreement of 
        June 19, 1944 between the Department and Chevron 
        U.S.A., Inc.

SEC. 4112. APPLICABILITY OF TITLES.

    (a) Parts 1, 2, and 4, of this subtitle take effect upon 
enactment of this subtitle.

                         PART II--PRIVATIZATION

SEC. 4121. PRIVATIZATION PLAN AND IMPLEMENTATION.

    (a) Preparation of Plan.--
          (1) The Secretary shall prepare not later than March 
        31, 1997, in consultation with the Secretary of the 
        Treasury, a plan for selling Naval Petroleum Reserve 
        Numbered 1 and for selling or leasing the remaining 
        Reserves out of Federal ownership, in fiscal year 2002.
          (2) The plan shall include consideration of 
        alternative means for selling Naval Petroleum Reserve 
        Numbered 1 and for selling or leasing the remaining 
        Reserves. The plan shall include the estimated return 
        on the Government's investment in the Reserves 
        achievable through each sale or lease alternative and 
        shall include the Secretary's recommendation on the 
        preferred means of selling or leasing the Reserves. The 
        plan shall specify a minimum acceptable price for the 
        Reserves, which is not less than the net present value 
        of the sum of the:
                  (A) anticipated revenue stream that the 
                Secretary, in consultation with the Secretary 
                of the Treasury, determines the Treasury would 
                receive from the Reserves if they were not sold 
                or leased, and
                  (B) the payments due under subsection (g). 
                The minimum acceptable price may be adjusted by 
                the Secretary for relevant economic factors 
                after consideration of the results of the 
                studies conducted under subsection (c) of this 
                section.
    (b) Presidential Approval.--The Secretary shall submit the 
plan to the President not later than March 31, 1997. The 
President may modify the minimum acceptable price in the plan, 
or otherwise modify the plan. The President shall approve the 
plan with or without modifications by June 30, 1997. When the 
plan is approved with or without modification by the President, 
the Secretary shall implement the plan. Not later than the end 
of fiscal year 2002 the Secretary of Energy shall enter into 
one or more contracts for the sale of all rights, title, and 
interest of the United States in and to all lands owned or 
controlled by the United States inside Naval Petroleum Reserve 
Numbered 1.
    (c) Acquisition of Service.--The Secretary may enter into 
contracts on a non-competitive basis for studies relating to 
the preparation or implementation of the plan.
    (d) Equity Shares in Naval Petroleum Reserve Numbered 1.--
          (1) Not later than five months after the effective 
        date, the Secretary shall finalize equity interests of 
        the known oil and gas zones in Naval Petroleum Reserve 
        Numbered 1 in the manner provided by this subsection.
          (2) The Secretary shall retain the services of an 
        independent petroleum engineer, mutually acceptable to 
        the equity owners, who shall prepare a recommendation 
        on final equity figures. The Secretary may accept the 
        recommendation of the independent petroleum engineer 
        for final equity in each known oil and gas zone and 
        establish final equity interest in Naval Petroleum 
        Reserve Numbered 1 in accordance with the 
        recommendation, or the Secretary may use such other 
        method to establish final equity interest in the 
        reserve as the Secretary considers appropriate.
          (3) If, on the effective date, there is an ongoing 
        equity redetermination dispute between the equity 
        owners under section 9(b) of the unit plan contract, 
        the dispute shall be resolved in the manner provided in 
        the unit plan contract within five months after the 
        effective date. The resolution shall be considered 
        final for all purposes under this section.
    (e) Future Liabilities.--To effectuate the sale of the 
interest of the United States in Naval Petroleum Reserve 
Numbered 1, the Secretary may extend such indemnities and 
warranties as the Secretary considers reasonable and necessary 
to protect the purchaser from claims arising from the ownership 
in the reserve by the United States.
    (f) Deposit of Proceeds.--Proceeds from the sale or lease 
of the Reserves under this subtitle shall be deposited into 
miscellaneous receipts in the Treasury.
    (g) Revenue Sharing With the State of California.--
Notwithstanding any other law, the Secretary of the Treasury 
shall pay to the State of California (to be credited by the 
State to the Supplemental Benefits Maintenance Account within 
the Teachers' Retirement Fund) seven percent of proceeds from 
the sale of Naval Petroleum Reserve Numbered 1. The State of 
California share (seven percent of proceeds) shall be paid in 
annual installments of 2.25 percent of the share in each fiscal 
year from the date of sale for 9 fiscal years, and 25.75 of the 
share in the tenth fiscal year. Payments under this subsection 
may begin upon a release of all claims against the United 
States by the State of California and the Teachers' Retirement 
Fund with respect to production and proceeds of sale from Naval 
Petroleum Reserve Numbered 1.
    (h) Expenditures for Sale or Lease.--(1) Section 501 of 
Public Law 101-45 is hereby repealed.
    (2) Unobligated balances in the Naval Petroleum and Oil 
Shale Reserves account shall be used for necessary expenses 
related to sale of lease of the reserves.
    (a) Effect on Existing Contracts.--(1) In the case of any 
contract, in effect on the effective date, for the purchase of 
production from any part of the United States' share of Naval 
Petroleum Reserve Numbered 1, the sale of the interest of the 
United States in the reserve shall be subject to the contract 
for a period of three months after the closing date of the sale 
or until termination of the contract, whichever occurs first. 
The term of any contract entered into after the effective date 
for the purchase of the production shall not exceed the 
anticipated closing date for the sale of the reserve.
    (2) The Secretary shall exercise the termination procedures 
provided in the contract between the United States and Bechtel 
Petroleum Operations, Inc., Contract Number DE-ACO1-85FE60520 
or in any subsequent management and operating contract so that 
the contract terminates not later than the date of closing of 
the sale of Naval Petroleum Reserve Numbered 1 under section 
3412.
    (3) The Secretary shall exercise the termination procedures 
provided in the unit plan contract so that the unit plan 
contract terminates not later than the date of closing of the 
sale reserve.
    (b) Effect on Antitrust Laws.--Nothing in this subtitle 
shall be construed to alter the application of the antitrust 
laws of the United States to the purchaser or purchasers (as 
the case may be) of Naval Petroleum Reserve Numbered 1 or to 
the lands in the reserve subject to sale or lease under Section 
4121 upon the completion of the sale or lease.
    (c) Preservation of Private Right, Title, and Interest.--
Nothing in this subtitle shall be construed to adversely affect 
the ownership interest of any other entity having any right, 
title, and interest in and to lands within the boundaries of 
Naval Petroleum Reserve Numbered 1 and which are subject to the 
unit plan contract.
    The Secretary may transfer to the purchaser or purchasers 
(as the case may be) of Naval Petroleum Reserve Numbered 1 the 
incidental take permit regarding the reserve issued to the 
Secretary by the United States Fish and Wildlife Serve and in 
effect on the effective date if the Secretary determines that 
transfer of the permit is necessary to expedite the sale of the 
reserve in a manner that maximized the value of the sale to the 
United States. The transferred permit shall cover the identical 
activities, and shall be subject to the same terms and 
conditions, as apply to the permit at the time of the transfer.

SEC. 4122. RELATIONSHIP TO BALANCED BUDGET AND EMERGENCY DEFICIT 
                    CONTROL ACT OF 1985.

    If the President so designates, the net proceeds from 
privatizing the Reserves under this subtitle shall be included 
in the budget baseline required by the Balanced Budget and 
Emergency Deficit Control Act of 1985 and shall be counted for 
the purposes of section 252 of that Act as an offset to direct 
spending notwithstanding section 257(a) of the Act.

SEC. 4123. DISCRETIONARY SPENDING LIMITS.

    (a) Upon sale of the NPR Numbered 1 the discretionary 
spending limits set forth in section 601(a)(2) of the 
Congressional Budget Act of 1974 (2 U.S.C. 665(a)(2)) (as 
adjusted in conformance with section 251 of the Balanced Budget 
and Emergency Deficit Control Act of 1985) for fiscal year 2003 
are reduced as follows:
        for fiscal year 2002 for the discretionary category: 
        $158 million in new budget authority and $166 million 
        in outlays.
    (b) For fiscal year 2004, the comparable amount for 
budgetary purposes is considered to be $158 million in new 
budget authority and $166 million in outlays. For fiscal year 
2005 the comparable amount for budgetary purposes is considered 
to be $158 million in new budget authority and $166 million in 
outlays.

                 PART III--OIL SHALE RESERVE NUMBERED 2

SEC. 4131.  TRANSFER.

    Subject to sections 4132 and 4133 of this subtitle, the 
functions vested in the Secretary with regard to Oil Shale 
Reserve Numbered 2 (located in Utah, established by Executive 
order of the President dated December 6, 1916) by chapter 641 
of title 10, United States Code, as amended by section 501 of 
this Act, are transferred to and vested in the Secretary of the 
Interior.

SEC. 4132.  GREEN RIVER AREA.

    (a) Report and Management of Area.--The Secretary of the 
Interior shall study and submit to the President a report on 
the appropriateness of including the Green River area within 
the national wild and scenic rivers system. During the study 
period, the Secretary of the Interior shall manage the Green 
River area in a manner consistent with the memorandum of 
understanding between the Department of Energy and the 
Department of the Interior under which the reserve is being 
currently managed.
    (b) For purposes of this section, ``Green River area'' 
means the following area within Oil Shale Reserve Numbered 2: 
The segments of the Green River that are within the boundaries 
of Oil Shale Reserve Numbered 2, which include the 
approximately 11.6 mile segment of the Green River extending 
from the northern boundary of Oil Shale Reserve Numbered 2 near 
Duchess Hole to the western boundary of Oil Shale Reserve 
Numbered 2 near Rock House Bottom and the approximately .6 mile 
segment of the Green River in Oil Shale Reserve Numbered 2 near 
the base of Peters Point, and the area extending one-half mile 
from the river on each side of these segments.

SEC. 4133.  UINTAH AND OURAY INDIAN RESERVATION.

    Nothing in this subtitle affects any interest in, or right 
or obligation respecting, the Uintah and Ouray Indian 
Reservation.

                         PART IV--MISCELLANEOUS

SEC. 4151.  AMENDMENTS TO CHAPTER 641 OF TITLE 10, UNITED STATES CODE.

    Chapter 641 of title 10, United States Code, is amended:
          (a) in the table of contents, by renaming section 
        7438 ``Mining and removal of oil shale.'';
          (b) in section 7420, by striking paragraph (6);
          (c) in section 7421(a), by striking ``for national 
        defense purposes, except as otherwise provided in this 
        chapter'';
          (d) by amending section 7422 to read as follows:
                  ``(a) Prior to privatization, the Secretary, 
                directly or by contract, lease, or otherwise, 
                shall explore, prospect, conserve, develop, 
                use, produce, and operate the naval petroleum 
                reserves to maximize the economic value of 
                these properties to the Nation, except that no 
                petroleum leases shall be granted at Naval 
                Petroleum Reserves Numbered 1 and 3.
                  ``(b) The Secretary shall dispose of the 
                United States' share of petroleum produced from 
                the naval petroleum reserves in accordance with 
                section 7430 of this chapter.
                  ``(c) The Secretary may construct, acquire, 
                or contract for the use of storage and shipping 
                facilities, and pipelines and associated 
                facilities, on and off the naval petroleum 
                reserves, for transporting petroleum to 
                locations where it will be refined or shipped.
                  ``(d) The Secretary may store petroleum owned 
                or managed by other Federal agencies and 
                instrumentalities, for appropriate 
                reimbursement reasonably reflecting fair market 
                value.
                  ``(e) The Secretary may acquire a pipeline in 
                the vicinity of a naval petroleum reserve not 
                otherwise operated as a common carrier, by 
                condemnation, if necessary, if the pipeline 
                owner refuses to accept, convey, and transport 
                petroleum produced at that reserve without 
                discrimination and at reasonable rates. The 
                Secretary may acquire rights-of-way for new 
                pipelines and associated facilities by eminent 
                domain under the Act of February 26, 1931 (40 
                U.S.C. 258a-258e), and the prospective holder 
                of the right-of-way is ``the authority 
                empowered by law to acquire the lands'' within 
                the meaning of that Act. New pipelines shall 
                accept, convey, and transport any petroleum 
                produced at the naval petroleum reserves at 
                reasonable rates as a common carrier,'';
          (e) in section 7423, by striking ``when that 
        production is authorized under section 7422 of this 
        title'';
          (f) in section 7425(a), by striking ``, with the 
        approval of the President,'';
          (g) in section 7426, as follows:
                  (1) by striking ``Subject to the provisions 
                of section 7422(c) of this title, the'' and 
                inserting ``The'' in subsection (a),
                  (2) by inserting ``as is fixed, or'' after 
                ``contract,'' in subsection (b), and
                  (3) by striking ``than having petroleum 
                produced for national defense'' and inserting 
                ``producing petroleum'' in subsection (c);
          (h) in section 7427, by striking ``, with the consent 
        of the President,'';
          (i) in section 7428, by striking ``approval by the 
        President and to'';
          (j) in section 7429, by striking ``If any such land 
        is to be re-leased, the'' and inserting ``The'';
          (k) in section 7430, as follows:
    (l) by amending subsection (b)(2) to read as follows:
          ``(2) The Secretary may not sell any part of the 
        United States share of petroleum produced from Naval 
        Petroleum Reserves Numbered 1, 2, and 3 for less than 
        the Secretary's estimate of the current sales price of 
        comparable petroleum in the same area.'',
                  (2) by striking ``Naval Petroleum Reserves 
                Numbered 1 or Numbered 3'' and inserting ``the 
                naval petroleum reserves'' in subsection (j),
                  (3)(A) by amending subsection (l)(1) to read 
                as follows: ``Notwithstanding any other 
                provision of this chapter (but subject to 
                paragraph (2)), the Secretary may provide any 
                portion of the United States share of petroleum 
                to any other Federal agency or instrumentality 
                for its use in order to meet petroleum product 
                requirements of the Federal Government.'';
                  (B) by striking ``the Department of Defense'' 
                and inserting ``any other Federal agency or 
                instrumentality'' and striking ``Secretary of 
                Defense'' and inserting ``other Federal 
                agencies and instrumentalities'' in subsection 
                (l)(2); and
                  (C) by striking ``exchange'' and inserting 
                ``transaction'' in subsection (l)(3), and
                  (4) by striking subsections (c), (d), (e), 
                (f), (g), (h), and (i);
          (l) in section 7431, as follows:
                  (1) by striking ``and approval'' in the catch 
                line,
                  (2) by striking ``and the President's 
                approval must be obtained'' in subsection (a),
                  (3) by striking 11 and Presidential approval 
                are'' and inserting ``is'' in subsection 
                (a)(2), and
                  (4) by striking subsections (a)(3), and (c);
    (m) by amending section 7432 to read as follows:

``Sec. 7432. Production Enhancement

    ``Not more than $60 million of the United States share of 
amounts collected in fiscal year 1996 under the Emergency 
Petroleum Allocation Act of 1973 (15 U.S.C. Sec. 751 et seq.) 
may be used to enhance production from the Reserves in that 
fiscal year, to the extent provided in an appropriations 
Act.'';
    (n) by amending section 7434 to read as follows: ``Prior to 
privatization, the Secretary shall submit a report to the 
Committee on Armed Services of the Senate and the Committee on 
National Security of the House of Representatives, within 270 
days of the end of each fiscal year, on production from the 
naval petroleum reserves for the preceding fiscal year and on 
other naval petroleum reserves matters the Secretary considers 
appropriate.''; and
    (o) by amending section 7438 to read as follows:

``Sec. 7438. Mining and removal of oil shale

    ``(a) Except as provided in title III of the Naval 
Petroleum Reserves Privatization Act, prior to privatization 
the Secretary may mine and remove, or authorize the mining and 
removal of, oil shale or oil shale products from Oil Shale 
Reserves Numbered 1, 2, and 3 needed for the national defense 
or for research, development, test, evaluation, and 
demonstration work, at prices and under other terms that the 
Secretary directs.
    ``(b) This section is not intended to authorize the 
commercial development and operation of the naval oil shale 
reserves by the Government in competition with private 
industry.''.

SEC. 4132. CONFORMING AMENDMENTS AND REPEALERS.

    (a) Section 2 of Pub. L. No. 96-137, 93 Stat. 1061 (1979) 
(42 U.S.C. 7156a) is repealed.
    (b) Section 501 of the Dire Emergency Supplemental 
Appropriations and Transfers, Urgent Supplementals, and 
correcting Enrollment Errors Act of 1989 (10 U.S.C. 7431 note) 
is repealed.
    (c) Chapter 641 of title 10 United States Code ceases to 
apply to any Reserve that is privatized.

                    CHAPTER 2--DEPARTMENT OF ENERGY

SEC. 5221. SALE OF DOE ASSETS.

  (a) Asset Management and Disposition Program.--
          (1) In general.--In order to maximize the use of 
        Department of Energy assets and to reduce overhead and 
        other costs related to asset management at the 
        Department's facilities and laboratories, the Secretary 
        of Energy shall conduct an asset management and 
        disposition program that will result in not less than 
        $225,000,000 in receipts and savings by October 1, 
        2000.
          (2) Items to be included.--The program shall include 
        an inventory of assets in the care of the Department 
        and its contractors; the recovery, reuse, and 
        stewardship of assets; and disposition of a minimum of 
        1,139,000,000 pounds of fuel, 136,000 tons of chemicals 
        and industrial gases, 557,000 tons of scrap metal, 
        14,000 radiation sources, 17,000 pieces of major 
        equipment, 11,000 pounds of precious metals, and 
        91,000,000 pounds of base metals.
  (b) Federal Property and Adminstrative Services Act.--The 
disposition of assets under this section is not subject to 
section 202 or 203 of the Federal Property and Administrative 
Services Act of 1949 (40 U.S.C. 483, 484) or section 13 of the 
Surplus Property Act of 1944 (50 U.S.C. App. 1622). In order to 
avoid market disruptions, the Secretary shall consult with 
appropriate executive agencies with respect to dispositions 
under this section.
  (c) Disposition of Proceeds.--After deduction of 
administrative costs of disposition under this section not to 
exceed $7,000,000 per year, the remainder of the proceeds from 
dispositions under this subpart shall be returned to the 
Treasury as miscellaneous receipts. There shall be established 
a new receipt account in the Treasury for proceeds of asset 
sales under this section.

SEC. 5222. SALE OF WEEKS ISLAND OIL.

  Notwithstanding section 161 of the Energy Policy and 
Conservation Act (42 U.S.C. 6241), the Secretary of Energy 
shall draw down and sell 32,000,000 barrels of oil contained in 
the Weeks Island Strategic Petroleum Reserve Facility. The 
Secretary shall, to the greatest extent practicable, sell oil 
from the reserve in a manner that minimizes the impact of such 
sale upon supply levels and market forces.

SEC. 5223. LEASE OF EXCESS STRATEGIC PETROLEUM RESERVE CAPACITY.

  (a) Amendment.--Part B of title I of the Energy Policy and 
Conservation Act (42 U.S.C. 6231 et seq.) is amended by adding 
at the end the following:

                   ``USE OF UNDERUTILIZED FACILITIES

  ``Sec. 168. (a) Authority.--Notwithstanding any other 
provision of this title, the Secretary, by lease or otherwise, 
for any term and under such other conditions as the Secretary 
considers necessary or appropriate, may store in underutilized 
Strategic Petroleum Reserve facilities petroleum product owned 
by a foreign government or its representative. Petroleum 
products stored under this section are not part of the 
Strategic Petroleum Reserve and may be exported without license 
from the United States.
  ``(b) Protection of Facilities.--All agreements entered into 
pursuant to subsection (a) shall contain provisions providing 
for fees to fully compensate the United States for all costs of 
storage and removals of petroleum products, including the cost 
of replacement facilities necessitated as a result of any 
withdrawals.
  ``(c) Access to Stored Oil.--The Secretary shall ensure that 
agreements to store petroleum products for foreign governments 
or their representatives do not affect the ability of the 
United States to withdraw, distribute, or sell petroleum from 
the Strategic Petroleum reserve in response to an energy 
emergency or to the obligations of the United States under the 
Agreement on an International Energy Program''.
  (b) Table of Contents Amendment.--The table of contents of 
part B of title I of the Energy Policy and Conservation Act is 
amended by adding at the end the following:

``Sec. 168. Use of underutilized facilities.''.

                     Subtitle C--Natural Resources

                     Subchapter B--Helium Reserves

SEC. 5311. SHORT TITLE.

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

SEC. 5312. AMENDMENT OF HELIUM ACT.

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

SEC. 5313. AUTHORITY OF SECRETARY.

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

``SEC. 3. AUTHORITY OF SECRETARY.

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

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

  ``(a) Storage, Transportation and Withdrawal.--The Secretary 
may store, transport and withdraw crude helium and maintain and 
operate crude helium storage facilities, in existence on the 
date of enactment of the Helium Act of 1995 at the Bureau of 
Mines Cliffside Field, and related helium transportation and 
withdrawal facilities.
  ``(b) Cessation of Production, Refining, and Marketing.--Not 
later than 18 months after the date of enactment of the Helium 
Act of 1995, the Secretary shall cease producing, refining, and 
marketing refined helium and shall cease carrying out all other 
activities relating to helium which the Secretary was 
authorized to carry out under this Act before the date of 
enactment of the Helium Act of 1995, except activities 
described in subsection (a).
  ``(c) Disposal of Facilities.--
          ``(1) In general.--Subject to paragraph (5), not 
        later than 24 months after the cessation of activities 
        referred to in section (b) of this section, the 
        Secretary shall designate as excess property and 
        dispose of all facilities, equipment, and other real 
        and personal property, and all interests therein, held 
        by the United States for the purpose of producing, 
        refining and marketing refined helium.
          ``(2) Applicable law.--The disposal of such property 
        shall be in accordance with the Federal Property and 
        Administrative Services Act of 1949.
          ``(3) Proceeds.--All proceeds accruing to the United 
        States by reason of the sale or other disposal of such 
        property shall be treated as moneys received under this 
        chapter for purposes of section 6(f).
          ``(4) Costs.--All costs associated with such sale and 
        disposal (including costs associated with termination 
        of personnel) and with the cessation of activities 
        under subsection (b) shall be paid from amounts 
        available in the helium production fund established 
        under section 6(f).
          ``(5) Exception.--Paragraph (1) shall not apply to 
        any facilities, equipment, or other real or personal 
        property, or any interest therein, necessary for the 
        storage, transportation and withdrawal of crude helium 
        or any equipment, facilities, or other real or personal 
        property, required to maintain the purity, quality 
        control, and quality assurance of crude helium in the 
        Bureau of Mines Cliffside Field.
  ``(d) Existing Contracts.--
          ``(1) In general.--All contracts that were entered 
        into by any person with the Secretary for the purchase 
        by the person from the Secretary of refined helium and 
        that are in effect on the date of the enactment of the 
        Helium Act of 1995 shall remain in force and effect 
        until the date on which the refining operations cease, 
        as described in subsection (b).
          ``(2) Costs.--Any costs associated with the 
        termination of contracts described in paragraph (1) 
        shall be paid from the helium production fund 
        established under section 6(f).

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

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

SEC. 5314. SALE OF CRUDE HELIUM.

    (a) Subsection 6(a) is amended by striking ``from the 
Secretary'' and inserting ``from persons who have entered into 
enforceable contracts to purchase an equivalent amount of crude 
helium from the Secretary''.
    (b) Subsection 6(b) is amended--
          (1) by inserting ``crude'' before ``helium''; and
          (2) by adding the following at the end: ``Except as 
        may be required by reason of subsection (a), sales of 
        crude helium under this section shall be in amounts as 
        the Secretary determines, in consultation with the 
        helium industry, necessary to carry out this subsection 
        with minimum market disruption.''.
    (c) Subsection 6(c) is amended--
          (1) by inserting ``crude'' after ``Sales of''; and
          (2) by striking ``together with interest as provided 
        in this subsection'' and all that follows through the 
        end of the subsection and inserting ``all funds 
        required to be repaid to the United States as of 
        October 1, 1995 under this section (referred to in this 
        subsection as `repayable amounts'). The price at which 
        crude helium is sold by the Secretary shall not be less 
        than the amount determined by the Secretary by--
          ``(1) dividing the outstanding amount of such 
        repayable amounts by the volume (in million cubic feet) 
        of crude helium owned by the United States and stored 
        in the Bureau of Mines Cliffside Field at the time of 
        the sale concerned, and
          ``(2) adjusting the amount determined under paragraph 
        (1) by the Consumer Price Index for years beginning 
        after December 31, 1995.''.
    (d) Subsection 6(d) is amended to read as follows:
  ``(d) Extraction of Helium From Deposits on Federal Lands.--
All moneys received by the Secretary from the sale or 
disposition of helium on Federal lands shall be paid to the 
Treasury and credited against the amounts required to be repaid 
to the Treasury under subsection (c).''.
    (e) Subsection 6(e) is repealed.
    (f) Subsection 6(f) is amended--
          (1) by striking ``(f)'' and inserting ``(e)(1)''; and
          (2) by adding the following at the end:
    ``(2)(A) Within 7 days after the commencement of each 
fiscal year after the disposal of the facilities referred to in 
section 4(c), all amounts in such fund in excess of $2,000,000 
(or such lesser sum as the Secretary deems necessary to carry 
out this Act during such fiscal year) shall be paid to the 
Treasury and credited as provided in paragraph (1).
    ``(B) On repayment of all amounts referred to in subsection 
(c), the fund established under this section shall be 
terminated and all moneys received under this Act shall be 
deposited in the general fund of the Treasury.''.

SEC. 5315. ELIMINATION OF STOCKPILE.

    Section 8 is amended to read as follows:

``SEC. 8. ELIMINATION OF STOCKPILE.

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

SEC. 5316. REPEAL OF AUTHORITY TO BORROW.

    Sections 12 and 15 are repealed.

SEC. 5317. LAND CONVEYANCE IN POTTER COUNTY, TEXAS.

    (a) In General.--The Secretary of the Interior shall 
transfer all right, title, and interest of the United States in 
and to the parcel of land described in subsection (b) to the 
Texas Plains Girl Scout Council for consideration of $1, 
reserving to the United States such easements as may be 
necessary for pipeline rights-of-way.
    (b) Land Description.--The parcel of land referred to in 
subsection (a) is all those certain lots, tracts or parcels of 
land lying and being situated in the County of Potter and State 
of Texas, and being the East Three Hundred Thirty-One (E331) 
acres out of Section Seventy-eight (78) in Block Nine (9), B.S. 
& F. Survey, (some times known as the G.D. Landis pasture) 
Potter County, Texas, located by certificate No. 1/39 and 
evidenced by letters patents Nos. 411 and 412 issued by the 
State of Texas under date of November 23, 1937, and of record 
in Vol. 66A of the Patent Records of the State of Texas. The 
metes and bounds description of such lands is as follows:
          (1) First tract.--One Hundred Seventy-one (171) acres 
        of land known as the North part of the East part of 
        said survey Seventy-eight (78) aforesaid, described by 
        metes and bounds as follows:
          Beginning at a stone 20 x 12 x 3 inches marked X, set 
        by W.D. Twichell in 1905, for the Northeast corner of 
        this survey and the Northwest corner of Section 59;
          Thence, South 0 degrees 12 minutes East with the West 
        line of said Section 59, 999.4 varas to the Northeast 
        corner of the South 160 acres of East half of Section 
        78;
          Thence, North 89 degrees 47 minutes West with the 
        North line of the South 150 acres of the East half, 
        956.8 varas to a point in the East line of the West 
        half Section 78;
          Thence, North 0 degrees 10 minutes West with the East 
        line of the West half 999.4 varas to a stone 18 x 14 x 
        3 inches in the middle of the South line of Section 79;
          Thence, South 89 degrees 47 minutes East 965 varas to 
        the place of beginning.
          (2) Second tract.--One Hundred Sixty (160) acres of 
        land known as the South part of the East part of said 
        survey No. Seventy-eight (78) described by metes and 
        bounds as follows:
          Beginning at the Southwest corner of Section 59, a 
        stone marked X and a pile of stones; Thence, North 89 
        degrees 47 minutes West with the North line of Section 
        77, 966.5 varas to the Southeast corner of the West 
        half of Section 78; Thence, North 0 degrees 10 minutes 
        West with the East line of the West half of Section 78;
          Thence, South 89 degrees 47 minutes East 965.8 varas 
        to a point in the East line of Section 78;
          Thence, South 0 degrees 12 minutes East 934.6 varas 
        to the place of beginning.
          Containing an area of 331 acres, more or less.

      CHAPTER 8--OUTER CONTINENTAL SHELF DEEP WATER ROYALTY RELIEF

SEC. 5421. SHORT TITLE.

    This chapter may be referred to as the ``Outer Continental 
Shelf Deep Water Royalty Relief Act''.

SEC. 5422. AMENDMENTS TO THE OUTER CONTINENTAL SHELF LANDS ACT.

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

SEC. 5423. NEW LEASES.

    Section 8(a)(1) of the Outer Continental Shelf Lands Act, 
as amended (43 U.S.C. 1337(a)(1)), is amended--
          (1) by redesignating subparagraph (H) as subparagraph 
        (I);
          (2) by striking ``or'' at the end of subparagraph 
        (G); and
          (3) by inserting after subparagraph (G) the following 
        new subparagraph:
                  ``(H) cash bonus bid with royalty at no less 
                than 12 and 1/2 per centum fixed by the 
                Secretary in amount or value of production 
                saved, removed, or sold, and with suspension of 
                royalties for a period, volume, or value of 
                production determined by the Secretary, which 
                suspensions may vary based on the price of 
                production from the lease; or''.

SEC. 5424. LEASE SALES.

    For all tracts located in water depths of 200 meters or 
greater in the Western and Central Planning Area of the Gulf of 
Mexico, including that portion of the Eastern Planning Area of 
the Gulf of Mexico encompassing whole lease blocks lying west 
of 87 degrees, 30 minutes West longitude, any lease sale within 
seven years of the date of enactment of this chapter, shall use 
the bidding system authorized in section 8(a)(1)(H) of the 
Outer Continental Shelf Lands Act, as amended by this chapter, 
except that the suspension of royalties shall be set at a 
volume of not less than the following:
          (1) 17.5 million barrels of oil equivalent for leases 
        in water depths of 200 to 400 meters;
          (2) 52.5 million barrels of oil equivalent for leases 
        in 400 to 800 meters of water; and
          (3) 87.5 million barrels of oil equivalent for leases 
        in water depths greater than 800 meters.

SEC. 5425. REGULATIONS.

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

SEC. 5426. SAVINGS CLAUSE.

    Nothing in this chapter shall be construed to affect any 
offshore pre-leasing, leasing, or development moratorium, 
including any moratorium applicable to the Eastern Planning 
Area of the Gulf of Mexico located off the Gulf Coast of 
Florida.

                     Subtitle C--GSA Property Sales

SEC. 6021. SALE OF GOVERNORS ISLAND, NEW YORK.

    (a) In General.--Notwithstanding any other provision of 
law, the Administrator of General Services shall dispose of by 
sale at fair market value all rights, title, and interests of 
the United States in and to the land of, and improvements to, 
Governors Island, New York.
    (b) Right of First Refusal.--Before a sale is made under 
subsection (a) to any other parties, the State of New York and 
the city of New York shall be given the right of first refusal 
to purchase all or part of Governors Island. Such right may be 
exercised by either the State of New York or the city of New 
York or by both parties acting jointly.
    (c) Proceeds.--Proceeds from the disposal of Governors 
Island under subsection (a) shall be deposited in the general 
fund of the Treasury and credited as miscellaneous receipts.

SEC. 6022. SALE OF AIR RIGHTS.

    (a) In General.--Notwithstanding any other provision of 
law, the Administrator of General Services shall sell, at fair 
market value and in a manner to be determined by the 
Administrator, the air rights adjacent to Washington Union 
Station described in subsection (b), including air rights 
conveyed to the Administrator under subsection (d). The 
Administrator shall complete the sale by such date as is 
necessary to ensure that the proceeds from the sale will be 
deposited in accordance with subsection (c).
    (b) Description.--The air rights referred to in subsection 
(a) total approximately 16.5 acres and are depicted on the plat 
map of the District of Columbia as follows:
          (1) Part of lot 172, square 720.
          (2) Part of lots 172 and 823, square 720.
          (3) Part of lot 811, square 717.
    (c) Proceeds.--Before September 30, 1996, proceeds from the 
sale of air rights under subsection (a) shall be deposited in 
the general fund of the Treasury and credited as miscellaneous 
receipts.
    (d) Conveyance of Amtrak Air Rights.--
          (1) General rule.--As a condition of future Federal 
        financial assistance, Amtrak shall convey to the 
        Administrator of General Services on or before December 
        31, 1995, at no charge, all of the air rights of Amtrak 
        described in subsection (b).
          (2) Failure to comply.--If Amtrak does not meet the 
        condition established by paragraph (1), Amtrak shall be 
        prohibited from obligating Federal funds after March 1, 
        1996.

            TITLE V--ENERGY AND NATURAL RESOURCES PROVISIONS

        Subtitle A--Nuclear Regulatory Commission Annual Charges

SEC. 5001. NUCLEAR REGULATORY COMMISSION ANNUAL CHARGES.

    Section 6101(a)(3) of the Omnibus Budget Reconciliation Act 
of 1990 (42 U.S.C. 2214(a)(3)) is amended by striking 
``September 30, 1998'' and inserting ``September 30, 2002''.

                Subtitle B--Department of Energy Assets

            CHAPTER 1--UNITED STATES ENRICHMENT CORPORATION

SEC. 5410. HETCH HETCHY DAM.

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

               CHAPTER 7--POWER MARKETING ADMINISTRATIONS

       Subchapter A--Bonneville Power Administration Refinancing

SEC. 5401. DEFINITIONS.

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

SEC. 5402. NEW PRINCIPAL AMOUNTS.

    (a) Principal Amount.--Effective October 1, 1995, an old 
capital investment has a new principal amount that is the sum 
of--
          (1) the present value of the old payment amounts for 
        the old capital investment, calculated using a discount 
        rate equal to the Treasury rate for the old capital 
        investment; and
          (2) an amount equal to $100,000,000 multiplied by a 
        fraction the numerator of which is the principal amount 
        of the old payment amounts for the old capital 
        investment and the denominator of which is the sum of 
        the principal amounts of the old payment amounts for 
        all old capital investments.
    (b) Determination.--With the approval of the Secretary of 
the Treasury, based solely on consistency with this subchapter, 
the Administrator shall determine the new principal amounts 
under this section and the assignment of interest rates to the 
new principal amounts under section 5403.
    (c) Old Payment Amount.--For the purposes of this section, 
``old payment amounts'' means, for an old capital investment, 
the annual interest and principal that the Administrator would 
have paid to the United States Treasury from October 1, 1995, 
if this subchapter had not been enacted, assuming that--
          (1) the principal were repaid--
                  (A) on the repayment date the Administrator 
                assigned before October 1, 1993, to the old 
                capital investment, or
                  (B) with respect to an old capital investment 
                for which the Administrator has not assigned a 
                repayment date before October 1, 1993, on a 
                repayment date the Administrator shall assign 
                to the old capital investment in accordance 
                with paragraph 10(d)(1) of the version of 
                Department of Energy Order RA 6120.2 in effect 
                on October 1, 1993; and
          (2) interest were paid--
                  (A) at the interest rate the Administrator 
                assigned before October 1, 1993, to the old 
                capital investment, or
                  (B) with respect to an old capital investment 
                for which the Administrator has not assigned an 
                interest rate before October 1, 1993, at a rate 
                determined by the Secretary of the Treasury, 
                taking into consideration prevailing market 
                yields, during the month preceding the 
                beginning of the fiscal year in which the 
                related project, facility, or separable unit or 
                feature is placed in service, on outstanding 
                interest-bearing obligations of the United 
                States with periods to maturity comparable to 
                the period between the beginning of the fiscal 
                year and the repayment date for the old capital 
                investment.

SEC. 5403. INTEREST RATE FOR NEW PRINCIPAL AMOUNTS.

    As of October 1, 1995, the unpaid balance on the new 
principal amount established for an old capital investment 
under section 5402 bears interest annually at the Treasury rate 
for the old capital investment until the earlier of the date 
that the new principal amount is repaid or the repayment date 
for the new principal amount.

SEC. 5404. REPAYMENT DATES.

    As of October 1, 1995, the repayment date for the new 
principal amount established for an old capital investment 
under section 5402 is no earlier than the repayment date for 
the old capital investment assumed in section 5402(c)(1).

SEC. 5405. PREPAYMENT LIMITATIONS.

    During the period October 1, 1995, through September 30, 
2000, the total new principal amounts of old capital 
investments, as established under section 5402, that the 
Administrator may pay before their respective repayment dates 
shall not exceed $100,000,000.

SEC. 5406. INTEREST RATES FOR NEW CAPITAL INVESTMENTS DURING 
                    CONSTRUCTION.

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

SEC. 5407. INTEREST RATES FOR NEW CAPITAL INVESTMENTS.

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

SEC. 5408. CREDITS TO ADMINISTRATOR'S PAYMENTS TO THE UNITED STATES 
                    TREASURY.

    The Confederated Tribe of the Colville Reservation Grand 
Coulee Dam Settlement Act (Public Law 103-436; 108 Stat. 4577) 
is amended by striking section 6 and inserting the following:

``SEC. 6. CREDITS TO ADMINISTRATOR'S PAYMENTS TO THE UNITED STATES 
                    TREASURY.

    ``So long as the Administrator makes annual payments to the 
tribes under the settlement agreement, the Administrator shall 
apply against amounts otherwise payable by the Administrator to 
the United States Treasury a credit that reduces the 
Administrator's payment in the amount and for each fiscal year 
as follows: $15,250,000 in fiscal year 1996; $15,860,000 in 
fiscal year 1997; $16,490,000 in fiscal year 1998; $17,150,000 
in fiscal year 1999; $17,840,000 in fiscal year 2000; and 
$4,100,000 in each succeeding fiscal year.''.

SEC. 5409. CONTRACT PROVISIONS.

    In each contract of the Administrator that provides for the 
Administrator to sell electric power, transmission, or related 
services, and that is in effect after September 30, 1995, the 
Administrator shall offer to include, or as the case may be, 
shall offer to amend to include, provisions specifying that 
after September 30, 1995--
          (1) the Administrator shall establish rates and 
        charges on the basis that--
                  (A) the principal amount of an old capital 
                investment shall be no greater than the new 
                principal amount established under section 
                5402;
                  (B) the interest rate applicable to the 
                unpaid balance of the new principal amount of 
                an old capital investment shall be no greater 
                than the interest rate established under 
                section 5403;
                  (C) any payment of principal of an old 
                capital investment shall reduce the outstanding 
                principal balance of the old capital investment 
                in the amount of the payment at the time the 
                payment is tendered; and
                  (D) any payment of interest on the unpaid 
                balance of the new principal amount of an old 
                capital investment shall be a credit against 
                the appropriate interest account in the amount 
                of the payment at the time the payment is 
                tendered;
          (2) apart from charges necessary to repay the new 
        principal amount of an old capital investment as 
        established under section 5402 and to pay the interest 
        on the principal amount under section 5403, no amount 
        may be charged for return to the United States Treasury 
        as repayment for or return on an old capital 
        investment, whether by way of rate, rent, lease 
        payment, assessment, user charge, or any other fee;
          (3) amounts provided under section 1304 of title 31, 
        United States Code, shall be available to pay, and 
        shall be the sole source for payment of, a judgment 
        against or settlement by the Administrator or the 
        United States on a claim for a breach of the contract 
        provisions required by this subchapter; and
          (4) the contract provisions specified in this 
        subchapter do not--
                  (A) preclude the Administrator from 
                recovering, through rates or other means, any 
                tax that is generally imposed on electric 
                utilities in the United States, or
                  (B) affect the Administrator's authority 
                under applicable law, including section 7(g) of 
                the Pacific Northwest Electric Power Planning 
                and Conservation Act (16 U.S.C. 839e(g)), to--
                          (i) allocate costs and benefits, 
                        including but not limited to fish and 
                        wildlife costs, to rates or resources, 
                        or
                          (ii) design rates.

SEC. 5410. SAVINGS PROVISIONS.

    (a) Repayment.--This subchapter does not affect the 
obligation of the Administrator to repay the principal 
associated with each capital investment, and to pay interest on 
the principal, only from the ``Administrator's net proceeds,'' 
as defined in section 13(b) of the Federal Columbia River 
Transmission System Act (16 U.S.C. 838k(b)).
    (b) Payment of Capital Investment.--Except as provided in 
section 5405, this subchapter does not affect the authority of 
the Administrator to pay all or a portion of the principal 
amount associated with a capital investment before the 
repayment date for the principal amount.

        Subchapter B--Alaska Power Marketing Administration Sale

SEC. 5411. SHORT TITLE.

    This subchapter may be cited as the ``Alaska Power 
Administration Asset Sale and Termination Act''.

SEC. 5412. DEFINITIONS.

    For purposes of this subchapter:
          (1) The term ``Eklutna'' means Eklutna Hydroelectric 
        Project and related assets as described in section 4 
        and Exhibit A of the Eklutna Purchase Agreement.
          (2) The term ``Eklutna Purchase Agreement'' means the 
        August 2, 1989, Eklutna Purchase Agreement between the 
        Alaska Power Administration of the Department of Energy 
        and the Eklutna Purchasers, together with any 
        amendments thereto adopted before the date of enactment 
        of this Act.
          (3) The term ``Eklutna Purchasers'' means the 
        Municipality of Anchorage doing business as Municipal 
        Light and Power, the Chugach Electric Association, Inc. 
        and the Matanuska Electric Association, Inc.
          (4) The term ``Snettisham'' means the Snettisham 
        Hydroelectric Project and related assets as described 
        in section 4 and Exhibit A of the Snettisham Purchase 
        Agreement.
          (5) The term ``Snettisham Purchase Agreement'' means 
        the February 10, 1989, Snettisham Purchase Agreement 
        between the Alaska Power Administration of the 
        Department of Energy and the Alaska Power Authority and 
        its successors in interest, together with any 
        amendments thereto adopted before the date of enactment 
        of this Act.
          (6) The term ``Snettisham Purchaser'' means the 
        Alaska Industrial Development and Export Authority or a 
        successor State agency or authority.

SEC. 5413. SALE OF EKLUTNA AND SNETTISHAM HYDROELECTRIC PROJECTS.

                     CHAPTER 11--PARK ENTRANCE FEES

SEC. 5451. FEES.

    (a) Admission Fees.--Section 4(a) of the Land and Water 
Conservation Fund Act of 1965 (16 U.S.C. 460l-6a(a)) is 
amended--
          (1) in the first sentence of the subsection by 
        striking ``no more than 21'';
          (2) in the first sentence of paragraph (1)(A)(i) by 
        striking ``$25'' and inserting ``$50'';
          (3) in the second sentence of paragraph (1)(B) by 
        striking ``$15'' and inserting ``$25'';
          (4) in paragraph (2) by striking the fourth, fifth, 
        and sixth sentences and inserting ``The fee for a 
        single-visit permit at any designated area shall be 
        collected on a per person basis, not to exceed $6 per 
        person, including for persons entering by private, 
        noncommercial vehicle.'';
          (5) in paragraph (3)--
                  (A) in the third sentence by inserting 
                ``Great'' before ``Smoky''; and
                  (B) by striking the last sentence;
          (6) in paragraph (4)--
                  (A) by striking the second sentence and 
                inserting ``Such permit shall be 
                nontransferable, shall be issued for a one-time 
                charge, which shall be set at the same rate as 
                the fee for a Golden Eagle Passport, and shall 
                entitle the permittee to free admission into 
                any area designated pursuant to this 
                subsection.''; and
                  (B) by striking the third sentence and 
                inserting ``No fees of any kind shall be 
                collected from any persons who have a right of 
                access for hunting or fishing privileges under 
                a specific provision of law or treaty or who 
                are engaged in the conduct of official Federal, 
                State, or local government business.'';
          (7) by striking paragraph (5) and inserting the 
        following:
          ``(5) The Secretary of the Interior and the Secretary 
        of Agriculture shall establish procedures providing for 
        the issuance of a lifetime admission permit to any 
        citizen of, or person legally domiciled in, the United 
        States, if such citizen or person applies for such 
        permit and is permanently disabled. Such procedures 
        shall ensure that a lifetime admission permit shall be 
        issued only to persons who have been medically 
        determined to be permanently disabled. A lifetime 
        admission permit shall be nontransferable, shall be 
        issued without charge, and shall entitle the permittee 
        and one accompanying individual to general admission 
        into any area designated pursuant to this subsection, 
        notwithstanding the method of travel.'';
          (8) by striking paragraph (9) and by redesignating 
        paragraph (10) as paragraph (9)'';
          (9) by striking all but the last sentence of 
        paragraph (11) and redesignating paragraph (11) as 
        paragraph (10); and
          (10) by redesignating paragraph (12) as paragraph 
        (11).
    (b) Recreation Fees.--Section 4 of the Land and Water 
Conservation Fund Act of 1965 (16 U.S.C. 460l-6a) is amended by 
striking subsection (b) and inserting the following:
    ``(b) Recreation Use Fees.--Each agency developing, 
administering, providing, or furnishing at Federal expense 
services for such activities as camping, including, but not 
limited to, back country camping under permit, guarded swimming 
sites, boat launch facilities, managed parking lots, motorized 
recreation use and other recreation uses, is authorized, in 
accordance with this section to provide for the collection of 
recreation use fees at the place of use or any reasonably 
convenient location. The administering Secretary may establish 
both daily and annual recreation use fees.''.
    (c) Criteria, Posting and Uniformity of Fees.--Section 4(d) 
of the Land and Water Conservation Fund Act of 1965 (16 U.S.C. 
460l-6a(d)) is amended in the first sentence by striking 
``recreation fees charged by non-Federal public agencies,'' and 
inserting ``fees charged by other public and private 
entities,''.
    (d) Penalty.--Section 4(e) of the Land and Water 
Conservation Fund Act of 1965 (16 U.S.C. 460l-6a(e)) is amended 
by striking ``of not more than $100.'' and inserting ``as 
provided by law.''.
    (e) Technical Amendments.--Section 4(h) of the Land and 
Water Conservation Fund Act of 1965 (16 U.S.C. 460l-6a(h)) is 
amended--
          (1) by striking ``Bureau of Outdoor Recreation'' and 
        inserting ``National Park Service'';
          (2) by striking ``Natural Resources'' and inserting 
        ``Resources''; and
          (3) by striking ``Bureau'' and inserting ``National 
        Park Service''.
    (f) Use of Fees.--Section 4(i) of the Land and Water 
Conservation Fund Act of 1965 (16 U.S.C. 460l-6a(i)) is 
amended--
          (1) in the first sentence of paragraph (1)(B) by 
        striking ``fee collection costs for that fiscal year'' 
        and inserting ``fee collection costs for the 
        immediately preceding fiscal year'' and by striking 
        ``section in that fiscal year'' and inserting ``section 
        in such immediately preceding fiscal year'';
          (2) in the second sentence of subparagraph (B) by 
        striking ``in that fiscal year''; and
          (3) by striking paragraph (4) and inserting the 
        following:
          ``(4) Amounts covered into the special account for 
        the National Park Service shall be allocated among park 
        system units in accordance with subsection (j) for 
        obligation or expenditure by the Director of the 
        National Park Service for park operations.''.
    (g) Time of Reimbursement.--Section 4(k) of the Land and 
Water Conservation Fund Act of 1965 (16 U.S.C. 460l-6a(k)) is 
amended by striking the last sentence.
    (h) Commercial Tour Use Fees.--Section 4(n) of the Land and 
Water Conservation Fund Act of 1965 (16 U.S.C. 460l-6a(n)) is 
amended--
          (1) by striking the first sentence of paragraph (1) 
        and inserting ``In the case of each unit of the 
        National Park System for which an admission fee is 
        charged under this section, the Secretary of the 
        Interior shall establish, by October 1, 1996, a 
        commercial tour use fee in lieu of a per person 
        admission fee to be imposed on each vehicle entering 
        the unit for the purpose of providing commercial tour 
        services within the unit.''; and
          (2) by striking the period at the end of paragraph 
        (3) and inserting ``, with written notification of such 
        adjustments provided to commercial tour operators 12 
        months in advance of implementation.''.
    (i) Conforming Amendments.--
          (1) Title I of the Department of the Interior and 
        Related Agencies Appropriations Act, 1994, is amended 
        by striking the second proviso under the heading 
        ``Administrative Provisions'' under the heading 
        ``National Park Service'' (related to recovery of costs 
        associated with special use permits).
          (2) Section 3 of the Act entitled ``An Act creating 
        the Mount Rushmore National Memorial Commission and 
        defining its purposes and powers'', approved February 
        25, 1929 (45 Stat. 1300, chapter 315), is amended by 
        striking the last sentence.
          (3) Section 5 of Public Law 87-657 (16 U.S.C. 459c-
        5), is amended by striking subsection (e).
          (4) Section 3 of Public Law 87-750 (16 U.S.C. 398e) 
        is amended by striking subsection (b).
          (5) Section 4(e) of Public Law 92-589 (16 U.S.C. 
        460bb-3) is amended by striking the first sentence.
          (6) Section 6 of Public Law 95-348 (16 U.S.C. 410dd) 
        is amended by striking subsection (j).
          (7) Section 207 of Public Law 96-199 (16 U.S.C. 
        410ff-6) is repealed.
          (8) Section 106 of Public Law 96-287 (16 U.S.C. 
        410gg-5) is amended by striking the last sentence.
          (9) Section 204 of Public Law 96-287 (94 Stat. 601) 
        is amended by striking the last sentence.
          (10) Section 5 of Public Law 96-428 (94 Stat. 1842; 
        16 U.S.C. 461 note) is repealed.
          (11) Public Law 100-55 (101 Stat. 371; U.S.C. 460l-6a 
        note) is repealed.

SEC. 5452. COVERING OF INCREASED FEE REVENUES INTO SPECIAL ACCOUNTS.

  Of the funds deposited in special accounts in the Treasury 
for the National Park Service, Bureau of Land Management, and 
Forest Service as set forth in section 4(i) of the Land and 
Water Conservation Fund Act of 1965 (16 U.S.C. 460l-6a(i)), 
beginning in fiscal year 1997, 80 percent of all receipts 
earned in the previous year in excess of the following amounts 
for each covered agency shall be made available to that agency 
without further appropriation:
          (1) National Park System:
                  (A) $82,000,000 for fiscal year 1997.
                  (B) $85,000,000 for fiscal year 1998.
                  (C) $88,000,000 for fiscal year 1999.
                  (D) $91,000,000 for fiscal year 2000.
                  (E) $94,000,000 for fiscal year 2001.
                  (F) $97,000,000 for fiscal year 2002.
                  (G) $100,000,000 for fiscal year 2003.
          (2) Bureau of Land Management:
                  (A) $4,500,000 for fiscal year 1997.
                  (B) $5,000,000 for fiscal year 1998.
                  (C) $5,000,000 for fiscal year 1999.
                  (D) $5,000,000 for fiscal year 2000.
                  (E) $5,000,000 for fiscal year 2001.
                  (F) $5,000,000 for fiscal year 2002.
                  (G) $5,000,000 for fiscal year 2003.
          (3) Forest Service:
                  (A) $20,000,000 for fiscal year 1997.
                  (B) $20,600,000 for fiscal year 1998.
                  (C) $21,200,000 for fiscal year 1999.
                  (D) $21,900,000 for fiscal year 2000.
                  (E) $22,500,000 for fiscal year 2001.
                  (F) $23,600,000 for fiscal year 2002.
                  (G) $24,300,000 for fiscal year 2003.

SEC. 5453. ALLOCATION AND USE OF FEES.

  (a) Allocation.--Beginning in fiscal year 1997, receipts 
above the amounts stated in section 5454 in each covered 
agency's special account from the previous fiscal year shall be 
allocated as follows:
          (1) Seventy-five percent shall be allocated among the 
        units or areas of each affected agency in the same 
        proportion as fees collected pursuant to section 4 of 
        the Land and Water Conservation Fund Act of 1965 (16 
        U.S.C. 460l-6a) from a specific unit or area bear to 
        the total amount of such fees collected from all units 
        or areas of the same covered agency for each fiscal 
        year.
          (2) Twenty-five percent shall be allocated among each 
        covered agency's units or areas on the basis of need, 
        as determined by the Secretary.
  (b) Use.--Expenditures from the special accounts shall be 
used solely for infrastructure related to visitor use and 
annual operating expenses related to visitor services at units 
or areas of the covered agencies.

                 Subtitle F--National Defense Stockpile

SEC. 12601. DISPOSAL OF CERTAIN MATERIALS IN NATIONAL DE-  FENSE 
                    STOCKPILE FOR DEFICIT REDUCTION.

    (a) Disposals Required.--(1) During fiscal year 1996, the 
President shall dispose of all cobalt contained in the National 
Defense Stockpile that, as of the date of the enactment of this 
Act, is authorized for disposal under any law (other than this 
Act).
    (2) In addition to the disposal of cobalt under paragraph 
(1), the President shall dispose of additional quantities of 
cobalt and quantities of other materials contained in the 
National Defense Stockpile and specified in the table in 
subsection (b) so as to result in receipts to the United States 
in amounts equal to--
          (A) $21,000,000 during the fiscal year ending 
        September 30, 1996;
          (B) $338,000,000 during the five-fiscal year period 
        ending on September 30, 2000; and
          (C) $649,000,000 during the seven-fiscal year period 
        ending on September 30, 2002.
    (b) Limitation on Disposal Quantity.--The total quantities 
of materials authorized for disposal by the President under 
subsection (a)(2) may not exceed the amounts set forth in the 
following table:

                     AUTHORIZED STOCKPILE DISPOSALS                     
------------------------------------------------------------------------
          Material for disposal                       Quantity          
------------------------------------------------------------------------
Aluminum.................................  62,881 short tons.           
Cobalt...................................  30,000,000 pounds contained. 
Columbium Ferro..........................  930,911 pounds contained.    
Germanium Metal..........................  40,000 kilograms.            
Indium...................................  35,000 troy ounces.          
Palladium................................  15,000 troy ounces.          
Platinum.................................  10,000 troy ounces.          
Rubber, Natural..........................  125,138 long tons.           
Tantalum, Carbide Powder.................  6,000 pounds contained.      
Tantalum, Minerals.......................  750,000 pounds contained.    
Tantalum, Oxide..........................  40,000 pounds contained.     
------------------------------------------------------------------------

    (c) Deposit of Receipts.--Notwithstanding section 9 of the 
Strategic and Critical Materials Stock Piling Act (50 U.S.C. 
98h), funds received as a result of the disposal of materials 
under subsection (a)(2) shall be deposited into the general 
fund of the Treasury for the purpose of deficit reduction.
    (d) Relationship to Other Disposal Authority.--The disposal 
authority provided in subsection (a)(2) is new disposal 
authority and is in addition to, and shall not affect, any 
other disposal authority provided by law regarding the 
materials specified in such subsection.
    (e) Termination of Disposal Authority.--The President may 
not use the disposal authority provided in subsection (a)(2) 
after the date on which the total amount of receipts specified 
in subparagraph (C) of such subsection is achieved.
    (f) Definition.--The term ``National Defense Stockpile'' 
means the National Defense Stockpile provided for in section 4 
of the Strategic and Critical Materials Stock Piling Act (50 
U.S.C. 98c).

SEC. 9002. EXTENSION OF HIGHER VESSEL TONNAGE DUTIES.

    (a) Extension of Duties.--Section 36 of the Act of August 
5, 1909 (36 Stat. 111; 46 U.S.C. App. 121), is amended by 
striking ``for fiscal years 1991, 1992, 1993, 1994, 1995, 1996, 
1997, 1998,'' each place it appears and inserting ``for fiscal 
years through fiscal year 2002,''.
    (b) Conforming Amendment.--The Act entitled ``An Act 
concerning tonnage duties on vessels entering otherwise than 
the sea'', approved March 8, 1910 (36 Stat. 234; 46 U.S.C. App. 
132), is amended by striking ``for fiscal years 1991, 1992, 
1993, 1994, 1995, 1996, 1997, and 1998,'' and inserting 
``fiscal years through fiscal year 2002,''.

SEC. 9003. FEMA RADIOLOGICAL EMERGENCY PREPAREDNESS FEES.

    (a) In General.--The Director of the Federal Emergency 
Management Agency may assess and collect fees applicable to 
persons subject to radiological emergency preparedness 
regulations issued by the Director.
    (b) Requirements.--The assessment and collection of fees by 
the Director under subsection (a) shall be fair and equitable 
and shall reflect the full amount of costs to the Agency of 
providing radiological emergency planning, preparedness, 
response, and associated services. Such fees shall be assessed 
by the Director in a manner that reflects the use of resources 
of the Agency for classes of regulated persons and the and the 
administrative costs of collecting such fees.
    (c) Amount of Fees.--The aggregate amount of fees assessed 
under subsection (a) in a fiscal year shall approximate but not 
be less than, 100 percent of the amounts anticipated by the 
Director to be obligated for the radiological emergency 
preparedness program of the Agency for such fiscal year.
    (d) Deposit of Fees in Treasury.--Fees received pursuant to 
subsection (a) shall be deposited in the general fund of the 
Treasury as offsetting receipts.
    (e) Expiration of Authority.--The authority of the Director 
to assess and collect fees under subsection (a) shall expire on 
September 30, 2002.

SEC. 6011. PATENT AND TRADEMARK FEES.

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

   CHAPTER 6--DISCLOSURE OF RETURN INFORMATION FOR ADMINISTRATION OF 
                       CERTAIN VETERANS PROGRAMS

SEC. 11161. DISCLOSURE OF RETURN INFORMATION FOR ADMINISTRATION OF 
                    CERTAIN VETERANS PROGRAMS.

    (a) General Rule.--Subparagraph (D) of section 6103(l)(7) 
(relating to disclosure of return information to Federal, 
State, and local agencies administering certain programs) is 
amended by striking ``Clause (viii) shall not apply after 
September 30, 1998.'' and inserting ``Clause (viii) shall not 
apply after September 30, 2002.''
    (b) Effective Date.--The amendment made by section (a) 
shall take effect on the date of the enactment of this Act.

            Subtitle F--Taxpayer Bill of Rights 2 Provisions

SEC. 11201. EXPANSION OF AUTHORITY TO ABATE INTEREST.

    (a) General Rule.--Paragraph (1) of section 6404(e) 
(relating to abatement of interest in certain cases) is 
amended--
          (1) by inserting ``unreasonable'' before ``error'' 
        each place it appears in subparagraphs (A) and (B), and
          (2) by striking ``in performing a ministerial act'' 
        each place it appears and inserting ``in performing a 
        ministerial or managerial act''.
    (b) Clerical Amendment.--The subsection heading for 
subsection (e) of section 6404 is amended--
          (1) by striking ``Assessment'' and inserting 
        ``Abatement'', and
          (2) by inserting ``Unreasonable'' before ``Errors''.
    (c) Effective Date.--The amendments made by this section 
shall apply to interest accruing with respect to deficiencies 
or payments for taxable years beginning after the date of the 
enactment of this Act.

SEC. 11202. EXTENSION OF INTEREST-FREE PERIOD FOR PAYMENT OF   TAX 
                    AFTER NOTICE AND DEMAND.

    (a) General Rule.--Paragraph (3) of section 6601(e) 
(relating to payments made within 10 days after notice and 
demand) is amended to read as follows:

SEC 6105. DENIAL OF UNEMPLOYMENT INSURANCE TO INDIVIDUALS WHO 
                    VOLUNTARILY LEAVE MILITARY SERVICE.

    (a) General Rule.--Paragraph (1) of section 8521(a) of 
title 5, United State Code, is amended to read as follows:
          ``(1) `Federal service' means active service (not 
        including active duty in a reserve status unless for a 
        continuous period of 45 days or more) in the armed 
        forces or the commissioned corps of the National 
        Oceanic and Atmospheric Administration if with respect 
        to that service the individual--
                  ``(A) was discharged or released under 
                honorable conditions,
                  ``(B) did not resign or voluntarily leave the 
                service, and
                  ``(C) was not discharged or released for 
                cause as defined by the Secretary of 
                Defense;''.
    (b) Effective Date.--The amendment made by subsection (a) 
shall apply in the case of a discharge or release after the 
date of the enactment of this Act.

TITLE IX--LIMITATIONS ON CORPORATE WELFARE AND OTHER REVENUE PROVISIONS

SEC. ____001. AMENDMENT OF 1986 CODE.

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

SEC. ____002. TABLE OF CONTENTS.

  The table of contents for this title is as follows:

     TITLE ____--LIMITATIONS ON CORPORATE WELFARE AND OTHER REVENUE 
                               PROVISIONS

Sec. ____001. Amendment of 1986 Code.
Sec. ____002. Table of contents.

                        Subtitle A--Expatriation

Sec. ____101. Revision of tax rules on expatriation.
Sec. ____102. Information on individuals expatriating.

                      Subtitle B--Corporate Reforms

Sec. ____201. Tax treatment of certain extraordinary dividends.
Sec. ____202. Registration of confidential corporate tax shelters.
Sec. ____203. Denial of deduction for interest on loans with respect to 
          company-owned insurance.
Sec. ____204. Termination of suspense accounts for family corporations 
          required to use accrual method of accounting.
Sec. ____205. Modifications of Puerto Rico and possessions tax credit.
Sec. ____206. Personal property used predominantly in the United States 
          treated as not property of a like kind with respect to 
          property used predominantly outside the United States.
Sec. ____207. Repeal of financial institution transition rule to 
          interest allocation rules.
Sec. ____208. Conversion of large corporations into S corporations 
          treated as complete liquidation.
Sec. ____209. Modification of taxable years to which net operating 
          losses may be carried.
Sec. ____210. Constructive sales treatment for appreciated financial 
          positions.
Sec. ____211. Modification of rules for allocating interest expense to 
          tax-exempt interest.
Sec. ____212. Reduction of 70 percent dividends received deduction to 50 
          percent.
Sec. ____213. Modification of holding period applicable to dividends 
          received deduction.
Sec. ____214. Certain preferred stock treated as boot.
Sec. ____215. Denial of interest deductions on certain debt instruments.
Sec. ____216. Deferral of deduction for interest on convertible debt 
          until payment.

                     Subtitle C--Foreign Provisions

                         Part I--Foreign Trusts

Sec. ____301. Improved information reporting on foreign trusts.
Sec. ____302. Modifications of rules relating to foreign trusts having 
          one or more United States beneficiaries.
Sec. ____303. Foreign persons not to be treated as owners under grantor 
          trust rules.
Sec. ____304. Information reporting regarding foreign gifts.
Sec. ____305. Modification of rules relating to foreign trusts which are 
          not grantor trusts.
Sec. ____306. Residence of estates and trusts, etc.

                    Part II--Other Foreign Provisions

Sec. ____311. Definition of foreign personal holding company income.
Sec. ____312. Treatment of foreign oil and gas extraction income.
Sec. ____313. Limitation on exclusion of earned income of citizens or 
          residents of the United States living abroad.

                    Subtitle D--Accounting Provisions

Sec. ____401. Repeal of bad debt reserve method for thrift savings 
          associations.
Sec. ____402. Depreciation under income forecast method.
Sec. ____403. Repeal of lower-of-cost-or-market method of accounting for 
          inventories.

                  Subtitle E--Administrative Provisions

Sec. ____501. Repeal of diesel fuel tax rebate to purchasers of diesel-
          powered automobiles and light trucks.
Sec. ____502. Increased information reporting penalties.

       Subtitle F--Casualty and Involuntary Conversion Provisions

Sec. ____601. Basis adjustment to property held by corporation where 
          stock in corporation is replacement property under involuntary 
          conversion rules.

      Subtitle G--Excise Tax on Amounts of Private Excess Benefits

Sec. ____701. Excise taxes for failure by certain charitable 
          organizations to meet certain qualification requirements.
Sec. ____702. Reporting of certain excise taxes and other information.
Sec. ____703. Increase in penalties on exempt organizations for failure 
          to file complete and timely annual returns.

                 Subtitle H--Extension of Certain Taxes

Sec. ____801. Extension of hazardous substance Superfund taxes.
Sec. ____802. Extension of oil spill liability tax.
Sec. ____803. Extension of Federal unemployment tax.

             Subtitle I--Provisions Relating To Individuals

Sec. ____851. No rollover or exclusion of gain on sale of principal 
          residence which is attributable to depreciation deductions.
Sec. ____852. Extension of withholding to certain gambling winnings.
Sec. ____853. Repeal of special rule for rental use of vacation homes, 
          etc., for less than 15 days.

               Subtitle J--Reform of Earned Income Credit

Sec. ____901. Earned income credit denied to individuals not authorized 
          to be employed in the United States.
Sec. ____902. Rules relating to denial of earned income credit on basis 
          of disqualified income.

                        Subtitle A--Expatriation

SEC. ____101. REVISION OF TAX RULES ON EXPATRIATION.

  (a) In General.--Subpart A of part II of subchapter N of 
chapter 1 is amended by inserting after section 877 the 
following new section:

``SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION.

  ``(a) General Rules.--For purposes of this subtitle--
          ``(1) Mark to market.--Except as provided in 
        subsection (f), all property of a covered expatriate to 
        which this section applies shall be treated as sold on 
        the expatriation date for its fair market value.
          ``(2) Recognition of gain or loss.--In the case of 
        any sale under paragraph (1)--
                  ``(A) notwithstanding any other provision of 
                this title, any gain arising from such sale 
                shall be taken into account for the taxable 
                year of the sale unless such gain is excluded 
                from gross income under part III of subchapter 
                B, and
                  ``(B) any loss arising from such sale shall 
                be taken into account for the taxable year of 
                the sale to the extent otherwise provided by 
                this title, except that section 1091 shall not 
                apply (and section 1092 shall apply) to any 
                such loss.
          ``(3) Exclusion for certain gain.--The amount which 
        would (but for this paragraph) be includible in the 
        gross income of any individual by reason of this 
        section shall be reduced (but not below zero) by 
        $600,000. For purposes of this paragraph, allocable 
        expatriation gain taken into account under subsection 
        (f)(2) shall be treated in the same manner as an amount 
        required to be includible in gross income.
          ``(4) Election to continue to be taxed as united 
        states citizen.--
                  ``(A) In general.--If an expatriate elects 
                the application of this paragraph--
                          ``(i) this section (other than this 
                        paragraph) shall not apply to the 
                        expatriate, but
                          ``(ii) the expatriate shall be 
                        subject to tax under this title, with 
                        respect to property to which this 
                        section would apply but for such 
                        election, in the same manner as if the 
                        individual were a United States 
                        citizen.
                  ``(B) Limitation on amount of estate, gift, 
                and generation-skipping transfer taxes.--The 
                aggregate amount of taxes imposed under 
                subtitle B with respect to any transfer of 
                property by reason of an election under 
                subparagraph (A) shall not exceed the amount of 
                income tax which would be due if the property 
                were sold for its fair market value immediately 
                before the time of the transfer or death 
                (taking into account the rules of paragraph 
                (2)).
                  ``(C) Requirements.--Subparagraph (A) shall 
                not apply to an individual unless the 
                individual--
                          ``(i) provides security for payment 
                        of tax in such form and manner, and in 
                        such amount, as the Secretary may 
                        require,
                          ``(ii) consents to the waiver of any 
                        right of the individual under any 
                        treaty of the United States which would 
                        preclude assessment or collection of 
                        any tax which may be imposed by reason 
                        of this paragraph, and
                          ``(iii) complies with such other 
                        requirements as the Secretary may 
                        prescribe.
                  ``(D) Election.--An election under 
                subparagraph (A) shall apply to all property to 
                which this section would apply but for the 
                election and, once made, shall be irrevocable. 
                Such election shall also apply to property the 
                basis of which is determined in whole or in 
                part by reference to the property with respect 
                to which the election was made.
  ``(b) Election To Defer Tax.--
          ``(1) In general.--If the taxpayer elects the 
        application of this subsection with respect to any 
        property--
                  ``(A) no amount shall be required to be 
                included in gross income under subsection 
                (a)(1) with respect to the gain from such 
                property for the taxable year of the sale, but
                  ``(B) the taxpayer's tax for the taxable year 
                in which such property is disposed of shall be 
                increased by the deferred tax amount with 
                respect to the property.
        Except to the extent provided in regulations, 
        subparagraph (B) shall apply to a disposition whether 
        or not gain or loss is recognized in whole or in part 
        on the disposition.
          ``(2) Deferred tax amount.--
                  ``(A) In general.--For purposes of paragraph 
                (1), the term `deferred tax amount' means, with 
                respect to any property, an amount equal to the 
                sum of--
                          ``(i) the difference between the 
                        amount of tax paid for the taxable year 
                        described in paragraph (1)(A) and the 
                        amount which would have been paid for 
                        such taxable year if the election under 
                        paragraph (1) had not applied to such 
                        property, plus
                          ``(ii) an amount of interest on the 
                        amount described in clause (i) 
                        determined for the period--
                                  ``(I) beginning on the 91st 
                                day after the expatriation 
                                date, and
                                  ``(II) ending on the due date 
                                for the taxable year described 
                                in paragraph (1)(B),
                        by using the rates and method 
                        applicable under section 6621 for 
                        underpayments of tax for such period.
                For purposes of clause (ii), the due date is 
                the date prescribed by law (determined without 
                regard to extension) for filing the return of 
                the tax imposed by this chapter for the taxable 
                year.
                  ``(B) Allocation of losses.--For purposes of 
                subparagraph (A), any losses described in 
                subsection (a)(2)(B) shall be allocated ratably 
                among the gains described in subsection 
                (a)(2)(A).
          ``(3) Security.--
                  ``(A) In general.--No election may be made 
                under paragraph (1) with respect to any 
                property unless adequate security is provided 
                with respect to such property.
                  ``(B) Adequate security.--For purposes of 
                subparagraph (A), security with respect to any 
                property shall be treated as adequate security 
                if--
                          ``(i) it is a bond in an amount equal 
                        to the deferred tax amount under 
                        paragraph (2)(A) for the property, or
                          ``(ii) the taxpayer otherwise 
                        establishes to the satisfaction of the 
                        Secretary that the security is 
                        adequate.
          ``(4) Waiver of certain rights.--No election may be 
        made under paragraph (1) unless the taxpayer consents 
        to the waiver of any right under any treaty of the 
        United States which would preclude assessment or 
        collection of any tax imposed by reason of this 
        section.
          ``(5) Dispositions.--For purposes of this subsection, 
        a taxpayer making an election under this subsection 
        with respect to any property shall be treated as having 
        disposed of such property--
                  ``(A) immediately before death if such 
                property is held at such time, and
                  ``(B) at any time the security provided with 
                respect to the property fails to meet the 
                requirements of paragraph (3) and the taxpayer 
                does not correct such failure within the time 
                specified by the Secretary.
          ``(6) Elections.--An election under paragraph (1) 
        shall only apply to property described in the election 
        and, once made, is irrevocable. An election may be 
        under paragraph (1) with respect to an interest in a 
        trust with respect to which gain is required to be 
        recognized under subsection (f)(1).
  ``(c) Covered Expatriate.--For purposes of this section--
          ``(1) In general.--The term `covered expatriate' 
        means an expatriate--
                  ``(A) whose average annual net income tax (as 
                defined in section 38(c)(1)) for the period of 
                5 taxable years ending before the expatriation 
                date is greater than $100,000, or
                  ``(B) whose net worth as of such date is 
                $500,000 or more.
        If the expatriation date is after 1996, such $100,000 
        and $500,000 amounts shall be increased by an amount 
        equal to such dollar amount multiplied by the cost-of-
        living adjustment determined under section 1(f)(3) for 
        such calendar year by substituting `1995' for `1992' in 
        subparagraph (B) thereof. Any increase under the 
        preceding sentence shall be rounded to the nearest 
        multiple of $1,000.
          ``(2) Exceptions.--An individual shall not be treated 
        as a covered expatriate if--
                  ``(A) the individual--
                          ``(i) became at birth a citizen of 
                        the United States and a citizen of 
                        another country and, as of the 
                        expatriation date, continues to be a 
                        citizen of, and is taxed as a resident 
                        of, such other country, and
                          ``(ii) has been a resident of the 
                        United States (as defined in section 
                        7701(b)(1)(A)(ii)) for not more than 8 
                        taxable years during the 15-taxable 
                        year period ending with the taxable 
                        year during which the expatriation date 
                        occurs, or
                  ``(B)(i) the individual's relinquishment of 
                United States citizenship occurs before such 
                individual attains age 18\1/2\, and
                  ``(ii) the individual has been a resident of 
                the United States (as so defined) for not more 
                than 5 taxable years before the date of 
                relinquishment.
  ``(d) Property to Which Section Applies.--For purposes of 
this section--
          ``(1) In general.--Except as otherwise provided by 
        the Secretary, this section shall apply to--
                  ``(A) any interest in property held by a 
                covered expatriate on the expatriation date the 
                gain from which would be includible in the 
                gross income of the expatriate if such interest 
                had been sold for its fair market value on such 
                date in a transaction in which gain is 
                recognized in whole or in part, and
                  ``(B) any other interest in a trust to which 
                subsection (f) applies.
          ``(2) Exceptions.--This section shall not apply to 
        the following property:
                  ``(A) United states real property 
                interests.--Any United States real property 
                interest (as defined in section 897(c)(1)), 
                other than stock of a United States real 
                property holding corporation which does not, on 
                the expatriation date, meet the requirements of 
                section 897(c)(2).
                  ``(B) Interest in certain retirement plans.--
                          ``(i) In general.--Any interest in a 
                        qualified retirement plan (as defined 
                        in section 4974(c)), other than any 
                        interest attributable to contributions 
                        which are in excess of any limitation 
                        or which violate any condition for tax-
                        favored treatment.
                          ``(ii) Foreign pension plans.--
                                  ``(I) In general.--Under 
                                regulations prescribed by the 
                                Secretary, interests in foreign 
                                pension plans or similar 
                                retirement arrangements or 
                                programs.
                                  ``(II) Limitation.--The value 
                                of property which is treated as 
                                not sold by reason of this 
                                subparagraph shall not exceed 
                                $500,000.
  ``(e) Definitions.--For purposes of this section--
          ``(1) Expatriate.--The term `expatriate' means--
                  ``(A) any United States citizen who 
                relinquishes his citizenship, or
                  ``(B) any long-term resident of the United 
                States who--
                          ``(i) ceases to be a lawful permanent 
                        resident of the United States (within 
                        the meaning of section 7701(b)(6)), or
                          ``(ii) commences to be treated as a 
                        resident of a foreign country under the 
                        provisions of a tax treaty between the 
                        United States and the foreign country 
                        and who does not waive the benefits of 
                        such treaty applicable to residents of 
                        the foreign country.
          ``(2) Expatriation date.--The term `expatriation 
        date' means--
                  ``(A) the date an individual relinquishes 
                United States citizenship, or
                  ``(B) in the case of a long-term resident of 
                the United States, the date of the event 
                described in clause (i) or (ii) of paragraph 
                (1)(B).
          ``(3) Relinquishment of citizenship.--A citizen shall 
        be treated as relinquishing his United States 
        citizenship on the earliest of--
                  ``(A) the date the individual renounces his 
                United States nationality before a diplomatic 
                or consular officer of the United States 
                pursuant to paragraph (5) of section 349(a) of 
                the Immigration and Nationality Act (8 U.S.C. 
                1481(a)(5)),
                  ``(B) the date the individual furnishes to 
                the United States Department of State a signed 
                statement of voluntary relinquishment of United 
                States nationality confirming the performance 
                of an act of expatriation specified in 
                paragraph (1), (2), (3), or (4) of section 
                349(a) of the Immigration and Nationality Act 
                (8 U.S.C. 1481(a)(1)-(4)),
                  ``(C) the date the United States Department 
                of State issues to the individual a certificate 
                of loss of nationality, or
                  ``(D) the date a court of the United States 
                cancels a naturalized citizen's certificate of 
                naturalization.
        Subparagraph (A) or (B) shall not apply to any 
        individual unless the renunciation or voluntary 
        relinquishment is subsequently approved by the issuance 
        to the individual of a certificate of loss of 
        nationality by the United States Department of State.
          ``(4) Long-term resident.--
                  ``(A) In general.--The term `long-term 
                resident' means any individual (other than a 
                citizen of the United States) who is a lawful 
                permanent resident of the United States in at 
                least 8 taxable years during the period of 15 
                taxable years ending with the taxable year 
                during which the expatriation date occurs. For 
                purposes of the preceding sentence, an 
                individual shall not be treated as a lawful 
                permanent resident for any taxable year if such 
                individual is treated as a resident of a 
                foreign country for the taxable year under the 
                provisions of a tax treaty between the United 
                States and the foreign country and does not 
                waive the benefits of such treaty applicable to 
                residents of the foreign country.
                  ``(B) Special rule.--For purposes of 
                subparagraph (A), there shall not be taken into 
                account--
                          ``(i) any taxable year during which 
                        any prior sale is treated under 
                        subsection (a)(1) as occurring, or
                          ``(ii) any taxable year prior to the 
                        taxable year referred to in clause (i).
  ``(f) Special Rules Applicable to Beneficiaries' Interests in 
Trust.--
          ``(1) In general.--Except as provided in paragraph 
        (2), if an individual is determined under paragraph (3) 
        to hold an interest in a trust--
                  ``(A) the individual shall not be treated as 
                having sold such interest,
                  ``(B) such interest shall be treated as a 
                separate share in the trust, and
                  ``(C)(i) such separate share shall be treated 
                as a separate trust consisting of the assets 
                allocable to such share,
                  ``(ii) the separate trust shall be treated as 
                having sold its assets immediately before the 
                expatriation date for their fair market value 
                and as having distributed all of its assets to 
                the individual as of such time, and
                  ``(iii) the individual shall be treated as 
                having recontributed the assets to the separate 
                trust.
        Subsection (a)(2) shall apply to any income, gain, or 
        loss of the individual arising from a distribution 
        described in subparagraph (C)(ii).
          ``(2) Special rules for interests in qualified 
        trusts.--
                  ``(A) In general.--If the trust interest 
                described in paragraph (1) is an interest in a 
                qualified trust--
                          ``(i) paragraph (1) and subsection 
                        (a) shall not apply, and
                          ``(ii) in addition to any other tax 
                        imposed by this title, there is hereby 
                        imposed on each distribution with 
                        respect to such interest a tax in the 
                        amount determined under subparagraph 
                        (B).
                  ``(B) Amount of tax.--The amount of tax under 
                subparagraph (A)(ii) shall be equal to the 
                lesser of--
                          ``(i) the highest rate of tax imposed 
                        by section 1(e) for the taxable year in 
                        which the expatriation date occurs, 
                        multiplied by the amount of the 
                        distribution, or
                          ``(ii) the balance in the deferred 
                        tax account immediately before the 
                        distribution determined without regard 
                        to any increases under subparagraph 
                        (C)(ii) after the 30th day preceding 
                        the distribution.
                  ``(C) Deferred tax account.--For purposes of 
                subparagraph (B)(ii)--
                          ``(i) Opening balance.--The opening 
                        balance in a deferred tax account with 
                        respect to any trust interest is an 
                        amount equal to the tax which would 
                        have been imposed on the allocable 
                        expatriation gain with respect to the 
                        trust interest if such gain had been 
                        included in gross income under 
                        subsection (a).
                          ``(ii) Increase for interest.--The 
                        balance in the deferred tax account 
                        shall be increased by the amount of 
                        interest determined (on the balance in 
                        the account at the time the interest 
                        accrues), for periods after the 90th 
                        day after the expatriation date, by 
                        using the rates and method applicable 
                        under section 6621 for underpayments of 
                        tax for such periods.
                          ``(iii) Decrease for taxes previously 
                        paid.--The balance in the tax deferred 
                        account shall be reduced--
                                  ``(I) by the amount of taxes 
                                imposed by subparagraph (A) on 
                                any distribution to the person 
                                holding the trust interest, and
                                  ``(II) in the case of a 
                                person holding a nonvested 
                                interest, to the extent 
                                provided in regulations, by the 
                                amount of taxes imposed by 
                                subparagraph (A) on 
                                distributions from the trust 
                                with respect to nonvested 
                                interests not held by such 
                                person.
                  ``(D) Allocable expatriation gain.--For 
                purposes of this paragraph, the allocable 
                expatriation gain with respect to any 
                beneficiary's interest in a trust is the amount 
                of gain which would be allocable to such 
                beneficiary's vested and nonvested interests in 
                the trust if the beneficiary held directly all 
                assets allocable to such interests.
                  ``(E) Tax deducted and withheld.--
                          ``(i) In general.--The tax imposed by 
                        subparagraph (A)(ii) shall be deducted 
                        and withheld by the trustees from the 
                        distribution to which it relates.
                          ``(ii) Exception where failure to 
                        waive treaty rights.--If an amount may 
                        not be deducted and withheld under 
                        clause (i) by reason of the distributee 
                        failing to waive any treaty right with 
                        respect to such distribution--
                                  ``(I) the tax imposed by 
                                subparagraph (A)(ii) shall be 
                                imposed on the trust and each 
                                trustee shall be personally 
                                liable for the amount of such 
                                tax, and
                                  ``(II) any other beneficiary 
                                of the trust shall be entitled 
                                to recover from the distributee 
                                the amount of such tax imposed 
                                on the other beneficiary.
                  ``(F) Disposition.--If a trust ceases to be a 
                qualified trust at any time, a covered 
                expatriate disposes of an interest in a 
                qualified trust, or a covered expatriate 
                holding an interest in a qualified trust dies, 
                then, in lieu of the tax imposed by 
                subparagraph (A)(ii), there is hereby imposed a 
                tax equal to the lesser of--
                          ``(i) the tax determined under 
                        paragraph (1) as if the expatriation 
                        date were the date of such cessation, 
                        disposition, or death, whichever is 
                        applicable, or
                          ``(ii) the balance in the tax 
                        deferred account immediately before 
                        such date.
                Such tax shall be imposed on the trust and each 
                trustee shall be personally liable for the 
                amount of such tax and any other beneficiary of 
                the trust shall be entitled to recover from the 
                covered expatriate or the estate the amount of 
                such tax imposed on the other beneficiary.
                  ``(G) Definitions and special rule.--For 
                purposes of this paragraph--
                          ``(i) Qualified trust.--The term 
                        `qualified trust' means a trust--
                                  ``(I) which is organized 
                                under, and governed by, the 
                                laws of the United States or a 
                                State, and
                                  ``(II) with respect to which 
                                the trust instrument requires 
                                that at least 1 trustee of the 
                                trust be an individual citizen 
                                of the United States or a 
                                domestic corporation.
                          ``(ii) Vested interest.--The term 
                        `vested interest' means any interest 
                        which, as of the expatriation date, is 
                        vested in the beneficiary.
                          ``(iii) Nonvested interest.--The term 
                        `nonvested interest' means, with 
                        respect to any beneficiary, any 
                        interest in a trust which is not a 
                        vested interest. Such interest shall be 
                        determined by assuming the maximum 
                        exercise of discretion in favor of the 
                        beneficiary and the occurrence of all 
                        contingencies in favor of the 
                        beneficiary.
                          ``(iv) Adjustments.--The Secretary 
                        may provide for such adjustments to the 
                        bases of assets in a trust or a 
                        deferred tax account, and the timing of 
                        such adjustments, in order to ensure 
                        that gain is taxed only once.
          ``(3) Determination of beneficiaries' interest in 
        trust.--
                  ``(A) Determinations under paragraph (1).--
                For purposes of paragraph (1), a beneficiary's 
                interest in a trust shall be based upon all 
                relevant facts and circumstances, including the 
                terms of the trust instrument and any letter of 
                wishes or similar document, historical patterns 
                of trust distributions, and the existence of 
                and functions performed by a trust protector or 
                any similar advisor.
                  ``(B) Other determinations.--For purposes of 
                this section--
                          ``(i) Constructive ownership.--If a 
                        beneficiary of a trust is a 
                        corporation, partnership, trust, or 
                        estate, the shareholders, partners, or 
                        beneficiaries shall be deemed to be the 
                        trust beneficiaries for purposes of 
                        this section.
                          ``(ii) Taxpayer return position.--A 
                        taxpayer shall clearly indicate on its 
                        income tax return--
                                  ``(I) the methodology used to 
                                determine that taxpayer's trust 
                                interest under this section, 
                                and
                                  ``(II) if the taxpayer knows 
                                (or has reason to know) that 
                                any other beneficiary of such 
                                trust is using a different 
                                methodology to determine such 
                                beneficiary's trust interest 
                                under this section.
  ``(g) Termination of Deferrals, Etc.--On the date any 
property held by an individual is treated as sold under 
subsection (a), notwithstanding any other provision of this 
title--
          ``(1) any period during which recognition of income 
        or gain is deferred shall terminate, and
          ``(2) any extension of time for payment of tax shall 
        cease to apply and the unpaid portion of such tax shall 
        be due and payable at the time and in the manner 
        prescribed by the Secretary.
  ``(h) Imposition of Tentative Tax.--
          ``(1) In general.--If an individual is required to 
        include any amount in gross income under subsection (a) 
        for any taxable year, there is hereby imposed, 
        immediately before the expatriation date, a tax in an 
        amount equal to the amount of tax which would be 
        imposed if the taxable year were a short taxable year 
        ending on the expatriation date.
          ``(2) Due date.--The due date for any tax imposed by 
        paragraph (1) shall be the 90th day after the 
        expatriation date.
          ``(3) Treatment of tax.--Any tax paid under paragraph 
        (1) shall be treated as a payment of the tax imposed by 
        this chapter for the taxable year to which subsection 
        (a) applies.
          ``(4) Deferral of tax.--The provisions of subsection 
        (b) shall apply to the tax imposed by this subsection 
        to the extent attributable to gain includible in gross 
        income by reason of this section.
  ``(i) Coordination With Estate and Gift Taxes.--If subsection 
(a) applies to property held by an individual for any taxable 
year and--
          ``(1) such property is includible in the gross estate 
        of such individual solely by reason of section 2107, or
          ``(2) section 2501 applies to a transfer of such 
        property by such individual solely by reason of section 
        2501(a)(3),
then there shall be allowed as a credit against the additional 
tax imposed by section 2101 or 2501, whichever is applicable, 
solely by reason of section 2107 or 2501(a)(3) an amount equal 
to the increase in the tax imposed by this chapter for such 
taxable year by reason of this section.
  ``(j) Regulations.--The Secretary shall prescribe such 
regulations as may be necessary or appropriate to carry out the 
purposes of this section, including regulations--
          ``(1) to prevent double taxation by ensuring that--
                  ``(A) appropriate adjustments are made to 
                basis to reflect gain recognized by reason of 
                subsection (a) and the exclusion provided by 
                subsection (a)(3), and
                  ``(B) any gain by reason of a deemed sale 
                under subsection (a) of an interest in a 
                corporation, partnership, trust, or estate is 
                reduced to reflect that portion of such gain 
                which is attributable to an interest in a trust 
                which a shareholder, partner, or beneficiary is 
                treated as holding directly under subsection 
                (f)(3)(B)(i), and
          ``(2) which provide for the proper allocation of the 
        exclusion under subsection (a)(3) to property to which 
        this section applies.
  ``(k) Cross Reference.--

          ``For income tax treatment of individuals who terminate United 
        States citizenship, see section 7701(a)(47).''.
  (b) Inclusion in Income of Gifts and Inheritances From 
Covered Expatriates.--Section 102 (relating to gifts, etc. not 
included in gross income) is amended by adding at the end the 
following new subsection:
  ``(d) Gifts and Inheritances From Covered Expatriates.--
Subsection (a) shall not exclude from gross income the value of 
any property acquired by gift, bequest, devise, or inheritance 
from a covered expatriate after the expatriation date. For 
purposes of this subsection, any term used in this subsection 
which is also used in section 877A shall have the same meaning 
as when used in section 877A.''.
  (c) Definition of Termination of United States Citizenship.--
Section 7701(a) is amended by adding at the end the following 
new paragraph:
          ``(47) Termination of united states citizenship.--An 
        individual shall not cease to be treated as a United 
        States citizen before the date on which the 
        individual's citizenship is treated as relinquished 
        under section 877A(e)(3).''.
  (d) Conforming Amendments.--
          (1) Section 877 is amended by adding at the end the 
        following new subsection:
  ``(f) Application.--This section shall not apply to any 
individual who relinquishes (within the meaning of section 
877A(e)(3)) United States citizenship on or after February 6, 
1995.''.
          (2) Section 2107(c) is amended by adding at the end 
        the following new paragraph:
          ``(3) Cross reference.--For credit against the tax 
        imposed by subsection (a) for expatriation tax, see 
        section 877A(i).''.
          (3) Section 2501(a)(3) is amended by adding at the 
        end the following new flush sentence:
        ``For credit against the tax imposed under this section 
        by reason of this paragraph, see section 877A(i).''.
          (4) Paragraph (10) of section 7701(b) is amended by 
        adding at the end the following new sentence: ``This 
        paragraph shall not apply to any long-term resident of 
        the United States who is an expatriate (as defined in 
        section 877A(e)(1)).''.
  (e) Clerical Amendment.--The table of sections for subpart A 
of part II of subchapter N of chapter 1 is amended by inserting 
after the item relating to section 877 the following new item:

``Sec. 877A. Tax responsibilities of expatriation.''.
  (f) Effective Date.--
          (1) In general.--Except as provided in this 
        subsection, the amendments made by this section shall 
        apply to expatriates (within the meaning of section 
        877A(e) of the Internal Revenue Code of 1986, as added 
        by this section) whose expatriation date (as so 
        defined) occurs on or after February 6, 1995.
          (2) Gifts and bequests.--Section 102(d) of the 
        Internal Revenue Code of 1986 (as added by subsection 
        (b)) shall apply to amounts received from expatriates 
        (as so defined) whose expatriation date (as so defined) 
        occurs on and after February 6, 1995.
          (3) Special rules relating to certain acts occurring 
        before february 6, 1995.--In the case of an individual 
        who took an act of expatriation specified in paragraph 
        (1), (2), (3), or (4) of section 349(a) of the 
        Immigration and Nationality Act (8 U.S.C. 1481(a) (1)-
        (4)) before February 6, 1995, but whose expatriation 
        date (as so defined) occurs after February 6, 1995--
                  (A) the amendment made by subsection (c) 
                shall not apply,
                  (B) the amendment made by subsection (d)(1) 
                shall not apply for any period prior to the 
                expatriation date, and
                  (C) the other amendments made by this section 
                shall apply as of the expatriation date.
          (4) Due date for tentative tax.--The due date under 
        section 877A(h)(2) of such Code shall in no event occur 
        before the 90th day after the date of the enactment of 
        this Act.

SEC. ____102. INFORMATION ON INDIVIDUALS EXPATRIATING.

  (a) In General.--Subpart A of part III of subchapter A of 
chapter 61 is amended by inserting after section 6039E the 
following new section:

``SEC. 6039F. INFORMATION ON INDIVIDUALS EXPATRIATING.

  ``(a) Requirement.--
          ``(1) In general.--Notwithstanding any other 
        provision of law, any expatriate (within the meaning of 
        section 877A(e)(1)) shall provide a statement which 
        includes the information described in subsection (b).
          ``(2) Timing.--
                  ``(A) Citizens.--In the case of an expatriate 
                described in section 877(e)(1)(A), such 
                statement shall be--
                          ``(i) provided not later than the 
                        expatriation date (within the meaning 
                        of section 877A(e)(2)), and
                          ``(ii) provided to the person or 
                        court referred to in section 
                        877A(e)(3).
                  ``(B) Noncitizens.--In the case of an 
                expatriate described in section 877A(e)(1)(B), 
                such statement shall be provided to the 
                Secretary with the return of tax imposed by 
                chapter 1 for the taxable year during which the 
                event described in such section occurs.
  ``(b) Information To Be Provided.--Information required under 
subsection (a) shall include--
          ``(1) the taxpayer's TIN,
          ``(2) the mailing address of such individual's 
        principal foreign residence,
          ``(3) the foreign country in which such individual is 
        residing,
          ``(4) the foreign country of which such individual is 
        a citizen,
          ``(5) in the case of an individual having a net worth 
        of at least the dollar amount applicable under section 
        877A(c)(1)(B), information detailing the assets and 
        liabilities of such individual, and
          ``(6) such other information as the Secretary may 
        prescribe.
  ``(c) Penalty.--Any individual failing to provide a statement 
required under subsection (a) shall be subject to a penalty for 
each year during any portion of which such failure continues in 
an amount equal to the greater of--
          ``(1) 5 percent of the additional tax required to be 
        paid under section 877A for such year, or
          ``(2) $1,000,
unless it is shown that such failure is due to reasonable cause 
and not to willful neglect.
  ``(d) Information To Be Provided to Secretary.--
Notwithstanding any other provision of law--
          ``(1) any Federal agency or court which collects (or 
        is required to collect) the statement under subsection 
        (a) shall provide to the Secretary--
                  ``(A) a copy of any such statement, and
                  ``(B) the name (and any other identifying 
                information) of any individual refusing to 
                comply with the provisions of subsection (a),
          ``(2) the Secretary of State shall provide to the 
        Secretary a copy of each certificate as to the loss of 
        American nationality under section 358 of the 
        Immigration and Nationality Act which is approved by 
        the Secretary of State, and
          ``(3) the Federal agency primarily responsible for 
        administering the immigration laws shall provide to the 
        Secretary the name of each lawful permanent resident of 
        the United States (within the meaning of section 
        7701(b)(6)) whose status as such has been revoked or 
        has been administratively or judicially determined to 
        have been abandoned.
Notwithstanding any other provision of law, not later than 30 
days after the close of each calendar quarter, the Secretary 
shall publish in the Federal Register the name of each 
individual relinquishing United States citizenship (within the 
meaning of section 877A(e)(3)) with respect to whom the 
Secretary receives information under the preceding sentence 
during such quarter.
  ``(e) Exemption.--The Secretary may by regulations exempt any 
class of individuals from the requirements of this section if 
the Secretary determines that applying this section to such 
individuals is not necessary to carry out the purposes of this 
section.''.
  (b) Clerical Amendment.--The table of sections for such 
subpart A is amended by inserting after the item relating to 
section 6039E the following new item:

``Sec. 6039F. Information on individuals expatriating.''.

  (c) Effective Date.--The amendments made by this section 
shall apply to individuals to whom section 877A of the Internal 
Revenue Code of 1986 applies and whose expatriation date (as 
defined in section 877A(e)(2)) occurs on or after February 6, 
1995, except that no statement shall be required by such 
amendments before the 90th day after the date of the enactment 
of this Act.

                     Subtitle B--Corporate Reforms

SEC. ____201. TAX TREATMENT OF CERTAIN EXTRAORDINARY DIVIDENDS.

  (a) Treatment of Extraordinary Dividends in Excess of 
Basis.--Paragraph (2) of section 1059(a) (relating to corporate 
shareholder's basis in stock reduced by nontaxed portion of 
extraordinary dividends) is amended to read as follows:
          ``(2) Amounts in excess of basis.--If the nontaxed 
        portion of such dividends exceeds such basis, such 
        excess shall be treated as gain from the sale or 
        exchange of such stock for the taxable year in which 
        the extraordinary dividend is received.''.
  (b) Treatment of Redemptions Where Options Involved.--
Paragraph (1) of section 1059(e) (relating to treatment of 
partial liquidations and non-pro rata redemptions) is amended 
to read as follows:
          ``(1) Treatment of partial liquidations and certain 
        redemptions.--Except as otherwise provided in 
        regulations--
                  ``(A) Redemptions.--In the case of any 
                redemption of stock--
                          ``(i) which is part of a partial 
                        liquidation (within the meaning of 
                        section 302(e)) of the redeeming 
                        corporation,
                          ``(ii) which is not pro rata as to 
                        all shareholders, or
                          ``(iii) which would not have been 
                        treated (in whole or in part) as a 
                        dividend if any options had not been 
                        taken into account under section 
                        318(a)(4),
                any amount treated as a dividend with respect 
                to such redemption shall be treated as an 
                extraordinary dividend to which paragraphs (1) 
                and (2) of subsection (a) apply without regard 
                to the period the taxpayer held such stock. In 
                the case of a redemption described in clause 
                (iii), only the basis in the stock redeemed 
                shall be taken into account under subsection 
                (a).
                  ``(B) Reorganizations, etc.--An exchange 
                described in section 356(a)(1) which is treated 
                as a dividend under section 356(a)(2) shall be 
                treated as a redemption of stock for purposes 
                of applying subparagraph (A).''.
  (c) Effective Dates.--
          (1) In general.--The amendments made by this section 
        shall apply to distributions after May 3, 1995.
          (2) Transition rule.--The amendments made by this 
        section shall not apply to any distribution made 
        pursuant to the terms of--
                  (A) a written binding contract in effect on 
                May 3, 1995, and at all times thereafter before 
                such distribution, or
                  (B) a tender offer outstanding on May 3, 
                1995.
          (3) Certain dividends not pursuant to certain 
        redemptions.--In determining whether the amendment made 
        by subsection (a) applies to any extraordinary dividend 
        other than a dividend treated as an extraordinary 
        dividend under section 1059(e)(1) of the Internal 
        Revenue Code of 1986 (as amended by this Act), 
        paragraphs (1) and (2) shall be applied by substituting 
        ``September 13, 1995'' for ``May 3, 1995''.

SEC. ____202. REGISTRATION OF CONFIDENTIAL CORPORATE TAX SHELTERS.

  (a) In General.--Section 6111 (relating to registration of 
tax shelters) is amended by redesignating subsections (d) and 
(e) as subsections (e) and (f), respectively, and by inserting 
after subsection (c) the following new subsection:
  ``(d) Certain Confidential Arrangements Treated as Tax 
Shelters.--
          ``(1) In general.--For purposes of this section, the 
        term `tax shelter' includes any entity, plan, 
        arrangement, or transaction--
                  ``(A) a significant purpose of the structure 
                of which is the avoidance or evasion of Federal 
                income tax for a direct or indirect participant 
                which is a corporation,
                  ``(B) which is offered to any potential 
                participant under conditions of 
                confidentiality, and
                  ``(C) for which the tax shelter promoters may 
                receive fees in excess of $100,000 in the 
                aggregate.
          ``(2) Conditions of confidentiality.--For purposes of 
        paragraph (1)(B), an offer is under conditions of 
        confidentiality if--
                  ``(A) the potential participant to whom the 
                offer is made (or any other person acting on 
                behalf of such participant) has an 
                understanding or agreement with or for the 
                benefit of any promoter of the tax shelter that 
                such participant (or such other person) will 
                limit disclosure of the tax shelter or any 
                significant tax features of the tax shelter, or
                  ``(B) any promoter of the tax shelter--
                          ``(i) claims, knows, or has reason to 
                        know,
                          ``(ii) knows or has reason to know 
                        that any other person (other than the 
                        potential participant) claims, or
                          ``(iii) causes another person to 
                        claim,
                that the tax shelter (or any aspect thereof) is 
                proprietary to any person other than the 
                potential participant or is otherwise protected 
                from disclosure to or use by others.
        For purposes of this subsection, the term `promoter' 
        means any person or any related person (within the 
        meaning of section 267 or 707) who participates in the 
        organization, management, or sale of the tax shelter.
          ``(3) Persons other than promoter required to 
        register in certain cases.--
                  ``(A) In general.--If--
                          ``(i) the requirements of subsection 
                        (a) are not met with respect to any tax 
                        shelter (as defined in paragraph (1)) 
                        by any tax shelter promoter, and
                          ``(ii) no tax shelter promoter is a 
                        United States person,
                then each United States person who discussed 
                participation in such shelter shall register 
                such shelter under subsection (a).
                  ``(B) Exception.--Subparagraph (A) shall not 
                apply to a United States person who discussed 
                participation in a tax shelter if--
                          ``(i) such person notified the 
                        promoter in writing (not later than the 
                        close of the 90th day after the day on 
                        which such discussions began) that such 
                        person would not participate in such 
                        shelter, and
                          ``(ii) such person does not 
                        participate in such shelter.
          ``(4) Offer to participate treated as offer for 
        sale.--For purposes of subsections (a) and (b), an 
        offer to participate in a tax shelter (as defined in 
        paragraph (1)) shall be treated as an offer for 
        sale.''.
  (b) Penalty.--Subsection (a) of section 6707 (relating to 
failure to furnish information regarding tax shelters) is 
amended by adding at the end the following new paragraph:
          ``(3) Confidential arrangements.--
                  ``(A) In general.--In the case of a tax 
                shelter (as defined in section 6111(d)), the 
                penalty imposed under paragraph (1) shall be an 
                amount equal to the greater of--
                          ``(i) 50 percent of the fees paid to 
                        any promoter of the tax shelter with 
                        respect to offerings made before the 
                        date such shelter is registered under 
                        section 6111, or
                          ``(ii) $10,000.
                Clause (i) shall be applied by substituting `75 
                percent' for `50 percent' in the case of an 
                intentional failure or act described in 
                paragraph (1).
                  ``(B) Special rule for participants required 
                to register shelter.--In the case of a person 
                required to register such a tax shelter by 
                reason of section 6111(d)(3)--
                          ``(i) such person shall be required 
                        to pay the penalty under paragraph (1) 
                        only if such person actually 
                        participated in such shelter,
                          ``(ii) the amount of such penalty 
                        shall be determined by taking into 
                        account under subparagraph (A)(i) only 
                        the fees paid by such person, and
                          ``(iii) such penalty shall be in 
                        addition to the penalty imposed on any 
                        other person for failing to register 
                        such shelter.''.
  (c) Conforming Amendments.--
          (1) Paragraph (2) of section 6707(a) is amended by 
        striking ``The penalty'' and inserting ``Except as 
        provided in paragraph (3), the penalty''.
          (2) Subparagraph (A) of section 6707(a)(1) is amended 
        by striking ``paragraph (2)'' and inserting ``paragraph 
        (2) or (3), as the case may be''.
  (d) Effective Date.--The amendments made by this section 
shall apply to any tax shelter (as defined in section 6111(d) 
of the Internal Revenue Code of 1986, as amended by this 
section) interests in which are offered to potential 
participants after the Secretary of the Treasury prescribes 
guidance with respect to meeting requirements added by such 
amendments.

SEC. ____203. DENIAL OF DEDUCTION FOR INTEREST ON LOANS WITH RESPECT TO 
                    COMPANY-OWNED INSURANCE.

  (a) In General.--Paragraph (4) of section 264(a) is amended--
          (1) by inserting ``, or any endowment or annuity 
        contracts owned by the taxpayer covering any 
        individual,'' after ``the life of any individual'', and
          (2) by striking all that follows ``carried on by the 
        taxpayer'' and inserting a period.
  (b) Exception for Contracts Relating to Key Persons; 
Permissible Interest Rates.--Section 264 is amended--
          (1) by striking ``Any'' in subsection (a)(4) and 
        inserting ``Except as provided in subsection (d), 
        any'', and
          (2) by adding at the end the following new 
        subsection:
  ``(d) Special Rules For Application of Subsection (a)(4).--
          ``(1) Exception for key persons.--Subsection (a)(4) 
        shall not apply to any interest paid or accrued on any 
        indebtedness with respect to policies or contracts 
        covering an individual who is a key person to the 
        extent that the aggregate amount of such indebtedness 
        with respect to policies and contracts covering such 
        individual does not exceed $50,000.
          ``(2) Interest rate cap on key persons and pre-1986 
        contracts.--
                  ``(A) In general.--No deduction shall be 
                allowed by reason of paragraph (1) or the last 
                sentence of subsection (a) with respect to 
                interest paid or accrued for any month to the 
                extent the amount of such interest exceeds the 
                amount which would have been determined if the 
                applicable rate of interest were used for such 
                month.
                  ``(B) Applicable rate of interest.--For 
                purposes of subparagraph (A)--
                          ``(i) In general.--The applicable 
                        rate of interest for any month is the 
                        rate of interest described as Moody's 
                        Corporate Bond Yield Average-Monthly 
                        Average Corporates as published by 
                        Moody's Investors Service, Inc., or any 
                        successor thereto, for such month.
                          ``(ii) Pre-1986 contract.--In the 
                        case of indebtedness on a contract to 
                        which the last sentence of subsection 
                        (a) applies--
                                  ``(I) which is a contract 
                                providing a fixed rate of 
                                interest, the applicable rate 
                                of interest for any month shall 
                                be the Moody's rate described 
                                in clause (i) for the month in 
                                which the contract was 
                                purchased, or
                                  ``(II) which is a contract 
                                providing a variable rate of 
                                interest, the applicable rate 
                                of interest for any month in an 
                                applicable period shall be such 
                                Moody's rate for the second 
                                month preceding the first month 
                                in such period.
                        For purposes of subclause (II), the 
                        taxpayer shall elect an applicable 
                        period for such contract on its return 
                        of tax imposed by this chapter for its 
                        first taxable year ending on or after 
                        October 13, 1995. Such applicable 
                        period shall be for any number of 
                        months (not greater than 12) specified 
                        in the election and may not be changed 
                        by the taxpayer without the consent of 
                        the Secretary.
          ``(3) Key person.--For purposes of paragraph (1), the 
        term `key person' means an officer or 20-percent owner, 
        except that the number of individuals who may be 
        treated as key persons with respect to any taxpayer 
        shall not exceed the greater of--
                  ``(A) 5 individuals, or
                  ``(B) the lesser of 5 percent of the total 
                officers and employees of the taxpayer or 10 
                individuals.
          ``(4) 20-percent owner.--For purposes of this 
        subsection, the term `20-percent owner' means--
                  ``(A) if the taxpayer is a corporation, any 
                person who owns directly 20 percent or more of 
                the outstanding stock of the corporation or 
                stock possessing 20 percent or more of the 
                total combined voting power of all stock of the 
                corporation, or
                  ``(B) if the taxpayer is not a corporation, 
                any person who owns 20 percent or more of the 
                capital or profits interest in the employer.
          ``(5) Aggregation rules.--
                  ``(A) In general.--For purposes of paragraph 
                (4)(A) and applying the $50,000 limitation in 
                paragraph (1)--
                          ``(i) all members of a controlled 
                        group shall be treated as 1 taxpayer, 
                        and
                          ``(ii) such limitation shall be 
                        allocated among the members of such 
                        group in such manner as the Secretary 
                        may prescribe.
                  ``(B) Controlled group.--For purposes of this 
                paragraph, all persons treated as a single 
                employer under subsection (a) or (b) of section 
                52 or subsection (m) or (o) of section 414 
                shall be treated as members of a controlled 
                group.''.
  (c) Effective Dates.--
          (1) In general.--The amendments made by this section 
        shall apply to interest paid or accrued after October 
        13, 1995.
          (2) Transition rule for existing indebtedness.--
                  (A) In general.--In the case of--
                          (i) indebtedness incurred before 
                        January 1, 1996, or
                          (ii) indebtedness incurred before 
                        January 1, 1997, with respect to any 
                        contract or policy entered into in 1994 
                        or 1995,
                the amendments made by this section shall not 
                apply to qualified interest paid or accrued on 
                such indebtedness after October 13, 1995, and 
                before January 1, 1999.
                  (B) Qualified interest.--For purposes of 
                subparagraph (A), the qualified interest with 
                respect to any indebtedness for any month is 
                the applicable percentage of the amount of 
                interest (otherwise deductible) which would be 
                paid or accrued for such month on such 
                indebtedness if--
                          (i) in the case of any interest paid 
                        or accrued after December 31, 1995, 
                        indebtedness with respect to no more 
                        than 20,000 insured individuals were 
                        taken into account, and
                          (ii) the lesser of the following 
                        rates of interest were used for such 
                        month:
                                  (I) The rate of interest 
                                specified under the terms of 
                                the indebtedness as in effect 
                                on October 13, 1995 (and 
                                without regard to modification 
                                of such terms after such date).
                                  (II) The rate of interest 
                                described as Moody's Corporate 
                                Bond Yield Average-Monthly 
                                Average Corporates as published 
                                by Moody's Investors Service, 
                                Inc., or any successor thereto, 
                                for such month.
                For purposes of clause (i), all persons treated 
                as a single employer under subsection (a) or 
                (b) of section 52 of the Internal Revenue Code 
                of 1986 or subsection (m) or (o) of section 414 
                of such Code shall be treated as one person.
                  (C) Applicable percentage.--For purposes of 
                subparagraph (B), the applicable percentage is 
                as follows:

    For calendar year:                                The percentage is:
        1995............................................    100 percent 
        1996............................................     90 percent 
        1997............................................     80 percent 
        1998............................................     70 percent.

          (3) Special rule for grandfathered contracts.--This 
        section shall not apply to any contract purchased on or 
        before June 20, 1986, except that section 264(d)(2) of 
        the Internal Revenue Code of 1986 shall apply to 
        interest paid or accrued after October 13, 1995.
  (d) Spread of Income Inclusion on Surrender, Etc. of 
Contracts.--
          (1) In general.--If any amount is received under any 
        life insurance policy or endowment or annuity contract 
        described in paragraph (4) of section 264(a) of the 
        Internal Revenue Code of 1986--
                  (A) on the complete surrender, redemption, or 
                maturity of such policy or contract during 
                calendar year 1996, 1997, or 1998, or
                  (B) in full discharge during any such 
                calendar year of the obligation under the 
                policy or contract which is in the nature of a 
                refund of the consideration paid for the policy 
                or contract,
        then (in lieu of any other inclusion in gross income) 
        such amount shall be includible in gross income ratably 
        over the 4-taxable year period beginning with the 
        taxable year such amount would (but for this paragraph) 
        be includible. The preceding sentence shall only apply 
        to the extent the amount is includible in gross income 
        for the taxable year in which the event described in 
        subparagraph (A) or (B) occurs.
          (2) Special rules for applying section 264.--A 
        contract shall not be treated as--
                  (A) failing to meet the requirement of 
                section 264(c)(1) of the Internal Revenue Code 
                of 1986, or
                  (B) a single premium contract under section 
                264(b)(1) of such Code,
        solely by reason of an occurrence described in 
        subparagraph (A) or (B) of paragraph (1) of this 
        subsection or solely by reason of no additional 
        premiums being received under the contract by reason of 
        a lapse occurring after October 13, 1995.
          (3) Special rule for deferred acquisition costs.--In 
        the case of the occurrence of any event described in 
        subparagraph (A) or (B) of paragraph (1) of this 
        subsection with respect to any policy or contract--
                  (A) section 848 of the Internal Revenue Code 
                of 1986 shall not apply to the unamortized 
                balance (if any) of the specified policy 
                acquisition expenses attributable to such 
                policy or contract immediately before the 
                insurance company's taxable year in which such 
                event occurs, and
                  (B) there shall be allowed as a deduction to 
                such company for such taxable year under 
                chapter 1 of such Code an amount equal to such 
                unamortized balance.

SEC. ____204. TERMINATION OF SUSPENSE ACCOUNTS FOR FAMILY CORPORATIONS 
                    REQUIRED TO USE ACCRUAL METHOD OF ACCOUNTING.

  (a) In General.--Subsection (i) of section 447 (relating to 
method of accounting for corporations engaged in farming) is 
amended by adding at the end the following new paragraph:
          ``(7) Termination.--
                  ``(A) In general.--No suspense account may be 
                established under this subsection by any 
                corporation required by this section to change 
                its method of accounting for any taxable year 
                ending after September 13, 1995.
                  ``(B) 20-year phaseout of existing suspense 
                accounts.--Each suspense account under this 
                subsection shall be reduced (but not below 
                zero) for each of the first 20 taxable years 
                beginning after September 13, 1995, by an 
                amount equal to the applicable portion of such 
                account. Any reduction in a suspense account 
                under this paragraph shall be included in gross 
                income for the taxable year of the reduction. 
                The amount of the reduction required under this 
                paragraph for any taxable year shall be reduced 
                (but not below zero) by the amount of any 
                reduction required for such taxable year under 
                any other provision of this subsection.
                  ``(C) Applicable portion.--For purposes of 
                subparagraph (B), the term `applicable portion' 
                means, for any taxable year, the amount which 
                would ratably reduce the amount in the account 
                (after taking into account prior reductions) to 
                zero over the period consisting of such taxable 
                year and the remaining taxable years in such 
                first 20 taxable years.''.
  (b) Effective Date.--The amendment made by this section shall 
apply to taxable years ending after September 13, 1995.

SEC. ____205. MODIFICATIONS OF PUERTO RICO AND POSSESSIONS TAX CREDIT.

  (a) Phaseout of Reduced Credit.--The table contained in 
clause (ii) of section 936(a)(4)(B) (relating to election to 
take reduced credit) is amended to read as follows:

``In the case of taxable years beginning in:            
                The percentage is:
    1996......................................................       50 
    1997......................................................       36 
    1998......................................................       24 
    1999......................................................       16 
    2000......................................................        8 
    2001 and thereafter.......................................      0.''

  (b) Carryover of Excess Economic Activity Credit.--
          (1) In general.--Section 936(a)(4) is amended by 
        redesignating subparagraph (C) as subparagraph (D) and 
        by inserting after subparagraph (B) the following new 
        subparagraph:
                  ``(C) Carryover of excess economic activity 
                credit.--
                          ``(i) In general.--If the amount 
                        determined under subparagraph (A) for 
                        any taxable year exceeds the amount of 
                        the credit determined under paragraph 
                        (1) for such taxable year with respect 
                        to income referred to in paragraph 
                        (1)(A), the amount determined under 
                        subparagraph (A) for the following 
                        taxable year shall be increased by the 
                        amount of such excess.
                          ``(ii) Limitation.--Any excess 
                        described in clause (i) may not be 
                        carried to any taxable year after the 
                        5th taxable year following the taxable 
                        year in which it arises.
                          ``(iii) Ordering rule.--For purposes 
                        of applying subparagraph (A), the 
                        limitation under subparagraph (A) shall 
                        be treated as used on a first-in, 
                        first-out basis.''
  (c) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 1995.

SEC. ____206. PERSONAL PROPERTY USED PREDOMINANTLY IN THE UNITED STATES 
                    TREATED AS NOT PROPERTY OF A LIKE KIND WITH RESPECT 
                    TO PROPERTY USED PREDOMINANTLY OUTSIDE THE UNITED 
                    STATES.

  (a) In General.--Subsection (h) of section 1031 (relating to 
exchange of property held for productive use or investment) is 
amended to read as follows:
  ``(h) Special Rules for Foreign Real and Personal Property.--
For purposes of this section--
          ``(1) Real property.--Real property located in the 
        United States and real property located outside the 
        United States are not property of a like kind.
          ``(2) Personal property.--
                  ``(A) In general.--Personal property used 
                predominantly within the United States and 
                personal property used predominantly outside 
                the United States are not property of a like 
                kind.
                  ``(B) Predominant use.--Except as provided in 
                subparagraph (C), the predominant use of any 
                property shall be determined based on--
                          ``(i) in the case of the property 
                        relinquished in the exchange, the 2-
                        year period ending on the date of such 
                        relinquishment, and
                          ``(ii) in the case of the property 
                        acquired in the exchange, the 2-year 
                        period beginning on the date of such 
                        acquisition.
                  ``(C) Special rule for certain property.--
                Property described in any subparagraph of 
                section 168(g)(4) shall be treated as used 
                predominantly in the United States.''
  (b) Effective Date.--
          (1) In general.--The amendment made by this section 
        shall apply to transfers after December 6, 1995, in 
        taxable years ending after such date.
          (2) Binding contracts.--The amendment made by this 
        section shall not apply to any transfer pursuant to a 
        written binding contract in effect on December 6, 1995, 
        and at all times thereafter before the disposition or 
        acquisition of property. A contract shall not fail to 
        meet the requirements of the preceding sentence solely 
        because--
                  (A) it provides for a sale in lieu of an 
                exchange, or
                  (B) the property to be disposed of as 
                relinquished property, or the property to be 
                acquired as replacement property, whichever is 
                applicable, was not identified under such 
                contract before December 7, 1995.

SEC. ____207. REPEAL OF FINANCIAL INSTITUTION TRANSITION RULE TO 
                    INTEREST ALLOCATION RULES.

  (a) In General.--Paragraph (5) of section 1215(c) of the Tax 
Reform Act of 1986 (Public Law 99-514, 100 Stat. 2548) is 
hereby repealed.
  (b) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 1995.

SEC. ____208. CONVERSION OF LARGE CORPORATIONS INTO S CORPORATIONS 
                    TREATED AS COMPLETE LIQUIDATION.

  (a) In General.--Section 1374 (relating to tax imposed on 
certain built-in gains) is amended by redesignating subsection 
(e) as subsection (f) and by inserting after subsection (d) the 
following new subsection:
  ``(e) Section Not To Apply to Conversions of Large C 
Corporations.--
          ``(1) In general.--If an S corporation was a large C 
        corporation for the last taxable year before the first 
        taxable year for which the election under section 
        1362(a) was effective--
                  ``(A) the preceding provisions of this 
                section shall not apply to the S corporation, 
                but
                  ``(B) for purposes of this title--
                          ``(i) the C corporation shall be 
                        treated as having distributed, as of 
                        the last day of such last taxable year, 
                        all its property to its shareholders in 
                        complete liquidation, and
                          ``(ii) the shareholders shall be 
                        treated as having immediately 
                        contributed such property to the S 
                        corporation in exchange for its stock.
          ``(2) Special rule for asset acquisitions.--Rules 
        similar to the rules of paragraph (1) shall apply to 
        any transaction described in subsection (d)(8) in which 
        an S corporation acquires assets from a large C 
        corporation.
          ``(3) Large c corporation.--For purposes of this 
        subsection, the term `large C corporation' means a C 
        corporation the fair market value of all of the stock 
        of which, as of the close of the last taxable year 
        described in paragraph (1), is greater than $5,000,000.
  (b) Regulatory Authority To Prevent Avoidance.--Section 
1374(f), as redesignated by subsection (a), is amended by 
inserting ``and regulations preventing avoidance of the 
application of subsection (e)'' before the period at the end.
  (c) Effective Dates.--
          (1) In general.--The amendments made by this section 
        shall apply to elections under section 1361(a) of the 
        Internal Revenue Code of 1986 which are made after 
        December 6, 1995.
          (2) Acquisitions.--The provisions of section 
        1374(e)(2) of such Code (as added by the amendments 
        made by this section) shall apply to acquisitions after 
        December 6, 1995, except that such provisions shall not 
        apply to any acquisition after such date pursuant to a 
        binding contract in effect on such date and at all 
        times thereafter before such acquisition.

SEC. ____209. MODIFICATION OF TAXABLE YEARS TO WHICH NET OPERATING 
                    LOSSES MAY BE CARRIED.

  (a) In General.--Subparagraph (A) of section 172(b)(1) 
(relating to years to which loss may be carried) is amended--
          (1) by striking ``3'' in clause (i) and inserting 
        ``1'', and
          (2) by striking ``15'' in clause (ii) and inserting 
        ``20''.
  (b) Effective Date.--The amendments made by this section 
shall apply to net operating losses for taxable years beginning 
after December 31, 1995.

SEC. ____210. CONSTRUCTIVE SALES TREATMENT FOR APPRECIATED FINANCIAL 
                    POSITIONS.

  (a) In General.--Part IV of subchapter P of chapter 1 is 
amended by adding at the end the following new section:

``SEC. 1259. CONSTRUCTIVE SALES TREATMENT FOR APPRECIATED FINANCIAL 
                    POSITIONS.

  ``(a) In General.--If there is a constructive sale of an 
appreciated financial position--
          ``(1) such position shall be treated as sold for its 
        fair market value on the date of such constructive sale 
        (and any gain shall be taken into account for the 
        taxable year which includes such date), and
          ``(2) for purposes of applying this title for periods 
        after the constructive sale--
                  ``(A) proper adjustment shall be made in the 
                amount of any gain or loss subsequently 
                realized with respect to such position for any 
                gain taken into account by reason of paragraph 
                (1), and
                  ``(B) the holding period of such position 
                shall be determined as if such position were 
                originally acquired on the date of such 
                constructive sale.
  ``(b) Appreciated Financial Position.--For purposes of this 
section--
          ``(1) In general.--The term `appreciated financial 
        position' means any position with respect to any stock, 
        debt instrument, or partnership interest if there would 
        be gain were such position sold.
          ``(2) Position.--The term `position' means an 
        interest, including a futures or forward contract, 
        short sale, or option.
  ``(c) Constructive Sale.--For purposes of this section--
          ``(1) In general.--A taxpayer shall be treated as 
        having made a constructive sale of an appreciated 
        financial position if the taxpayer or a related 
        person--
                  ``(A) enters into 1 or more positions with 
                respect to the same or substantially identical 
                property which, for some period, substantially 
                eliminate both risk of loss and opportunity for 
                gain on the appreciated financial position, or
                  ``(B) enters into any other transaction which 
                is marketed or sold as being economically 
                equivalent to any transaction described in 
                subparagraph (A).
        The transactions described in subparagraph (A) shall 
        include making a short sale with respect to 
        substantially identical property, and the granting of a 
        call option, or the acquisition of a put option, with 
        respect to the same or substantially identical property 
        but only if there is a substantial certainty that such 
        call or put option will be exercised.
          ``(2) Exception for transactions marked to market.--
        The term `constructive sale' shall not include any 
        transaction if the appreciated financial position which 
        is part of such transaction is marked to market under 
        section 475 or 1256.
          ``(3) Exception for sales of nonpublicly traded 
        property.--The term `constructive sale' shall not 
        include any contract for sale of any stock, debt 
        instrument, or partnership interest which is not a 
        marketable security (as defined in section 453(f)) if 
        the sale occurs within 1 year after the date such 
        contract is entered into.
          ``(4) Related person.--A person is related to another 
        person with respect to a transaction if--
                  ``(A) the relationship between such persons 
                would result in a disallowance of losses under 
                section 267 or 707(b), and
                  ``(B) such transaction is entered into with a 
                view toward avoiding the purposes of this 
                section.
  ``(d) Special Rules.--
          ``(1) Transactions covering less than all of 
        appreciated financial positions.--If there is a 
        constructive sale of less than all of the appreciated 
        financial positions held by the taxpayer, subsection 
        (a) shall apply to such positions in the order in which 
        acquired or entered into.
          ``(2) Treatment of subsequent sale of position which 
        was deemed sold.--If--
                  ``(A) there is a constructive sale of any 
                appreciated financial position,
                  ``(B) such position is subsequently sold or 
                otherwise disposed of, and
                  ``(C) at the time of such sale or 
                disposition, the transaction resulting in the 
                constructive sale of such position is open,
        solely for purposes of determining whether the taxpayer 
        has entered into a constructive sale of any other 
        appreciated financial position held by the taxpayer, 
        the taxpayer shall be treated as entering into such 
        transaction immediately after such sale or other 
        disposition.
          ``(3) Certain trust instruments treated as stock.--
        For purposes of this section, an interest in a trust 
        which is actively traded (within the meaning of section 
        1092(d)(1)) shall be treated as stock.
  ``(e) Regulations.--The Secretary shall prescribe such 
regulations as may be necessary or appropriate to carry out the 
purposes of this section.''
  (b) Clerical Amendment.--The table of sections for such part 
IV is amended by adding at the end the following new item:

``Sec. 1259. Constructive sales treatment for appreciated financial 
          positions.''

  (c) Effective Date.--
          (1) In general.--The amendments made by this section 
        shall apply to--
                  (A) constructive sales after the date of the 
                enactment of this Act, and
                  (B) constructive sales after January 4, 1996, 
                and before the date of the enactment of this 
                Act but only if the transaction is not closed 
                before the date which is 30 days after the date 
                of the enactment of this Act.
        In a case to which subparagraph (B) applies, section 
        1259 of the Internal Revenue Code of 1986 (as added by 
        this section) shall be applied as if the constructive 
        sale occurred on the date which is 30 days after the 
        date of the enactment of this Act.
          (2) Special rule.--In the case of a decedent dying 
        after the date of the enactment of this Act, if--
                  (A) there was a constructive sale on or 
                before such date of enactment of any 
                appreciated financial position, and
                  (B) on the day before the date of the 
                decedent's death, the transaction resulting in 
                the constructive sale of such position is open,
        for purposes of the Internal Revenue Code of 1986, such 
        position (and any property related thereto, as 
        determined under the principles of section 1259(d)(1) 
        of such Code (as so added)) shall be treated as 
        property constituting rights to receive an item of 
        income in respect of a decedent under section 691 of 
        such Code.

SEC. ____211. MODIFICATION OF RULES FOR ALLOCATING INTEREST EXPENSE TO 
                    TAX-EXEMPT INTEREST.

  (a) Pro Rata Allocation Rules Applicable to Corporations.--
          (1) In general.--Paragraph (1) of section 265(b) is 
        amended by striking ``In the case of a financial 
        institution'' and inserting ``In the case of a 
        corporation''.
          (2) Only obligations acquired after december 6, 1995 
        taken into account.--Subparagraph (A) of section 
        265(b)(2) is amended by striking ``August 7, 1986'' and 
        inserting ``December 6, 1995 (August 7, 1986, in the 
        case of a financial institution)''.
          (3) Small issuer exception not to apply.--
        Subparagraph (A) of section 265(b)(3) is amended by 
        striking ``Any qualified'' and inserting ``In the case 
        of a financial institution, any qualified''.
          (4) Exception for certain bonds acquired on sale of 
        goods or services.--Subparagraph (B) of section 
        265(b)(4) is amended by adding at the end the following 
        new sentence: ``In the case of a taxpayer other than a 
        financial institution, such term shall not include a 
        nonsaleable obligation acquired by such taxpayer in the 
        ordinary course of business as payment for goods or 
        services provided by such taxpayer to any State or 
        local government.''
          (5) Look-thru rules for partnerships.--Paragraph (6) 
        of section 265(b) is amended by adding at the end the 
        following new subparagraph:
                  ``(C) Look-thru rules for partnerships.--In 
                the case of a corporation which is a partner in 
                a partnership, such corporation shall be 
                treated for purposes of this subsection as 
                holding directly its allocable share of the 
                assets of the partnership.''
          (6) Application of pro rata disallowance on 
        affiliated group basis.--Subsection (b) of section 265 
        is amended by adding at the end the following new 
        paragraph:
          ``(7) Application of disallowance on affiliated group 
        basis.--
                  ``(A) In general.--For purposes of this 
                subsection, all members of an affiliated group 
                filing a consolidated return under section 1501 
                shall be treated as 1 taxpayer.
                  ``(B) Treatment of insurance companies.--This 
                subsection shall not apply to an insurance 
                company, and subparagraph (A) shall be applied 
                without regard to any member of an affiliated 
                group which is an insurance company.''
          (7) Clerical amendment.--The subsection heading for 
        section 265(b) is amended by striking ``Financial 
        Institutions'' and inserting ``Corporations''.
  (b) Application of Section 265(a)(2) With Respect to 
Controlled Groups.--Paragraph (2) of section 265(a) is amended 
after ``obligations'' by inserting ``held by the taxpayer (or 
any corporation which is a member of a controlled group (as 
defined in section 267(f)(1)) which includes the taxpayer)''.
  (c) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 1995.

SEC. ____212. REDUCTION OF 70 PERCENT DIVIDENDS RECEIVED DEDUCTION TO 
                    50 PERCENT.

  (a) In General.--Paragraph (1) of section 243(a) (relating to 
dividends received by corporations) is amended by striking ``70 
percent'' and inserting ``50 percent''.
  (b) Conforming Changes.--Each of the following provisions is 
amended by striking ``70 percent'' and inserting ``50 
percent'':
          (1) Section 243(c)(1).
          (2) Subsections (a)(3) and (b)(2) of section 244.
          (3) Section 245(c)(1)(B).
          (4) Section 246(b)(3)(B).
          (5) Section 246A(a)(1).
  (c) Effective Date.--The amendments made by this section 
shall apply to dividends received or accrued after January 31, 
1996.

SEC. ____213. MODIFICATION OF HOLDING PERIOD APPLICABLE TO DIVIDENDS 
                    RECEIVED DEDUCTION.

  (a) In General.--Subparagraph (A) of section 246(c)(1) is 
amended to read as follows:
                  ``(A) which is held by the taxpayer for 45 
                days or less during the 90-day period beginning 
                on the date which is 45 days before the date on 
                which such share becomes ex-dividend with 
                respect to such dividend, or''.
  (b) Conforming Amendments.--
          (1) Paragraph (2) of section 246(c) is amended to 
        read as follows:
          ``(2) 90-day rule in the case of certain preference 
        dividends.--In the case of stock having preference in 
        dividends, if the taxpayer receives dividends with 
        respect to such stock which are attributable to a 
        period or periods aggregating in excess of 366 days, 
        paragraph (1)(A) shall be applied--
                  ``(A) by substituting `90 days' for `45 days' 
                each place it appears, and
                  ``(B) by substituting `180-day period' for 
                `90-day period'.''
          (2) Paragraph (3) of section 246(c) is amended by 
        adding ``and'' at the end of subparagraph (A), by 
        striking subparagraph (B), and by redesignating 
        subparagraph (C) as subparagraph (B).
  (c) Effective Date.--The amendments made by this section 
shall apply to dividends received or accrued after January 31, 
1996.

SEC. ____214. CERTAIN PREFERRED STOCK TREATED AS BOOT.

  (a) Section 351.--Section 351 (relating to transfer to 
corporation controlled by transferor) is amended by 
redesignating subsection (g) as subsection (h) and by inserting 
after subsection (f) the following new subsection:
  ``(g) Nonqualified Preferred Stock Not Treated as Stock.--
          ``(1) In general.--For purposes of subsections (a) 
        and (b), the term `stock' shall not include 
        nonqualified preferred stock.
          ``(2) Nonqualified preferred stock.--For purposes of 
        paragraph (1), the term `nonqualified preferred stock' 
        means preferred stock if--
                  ``(A) the holder of such stock has the right 
                to require the issuer or a related person to 
                redeem or purchase the stock,
                  ``(B) the issuer or a related person is 
                required to redeem or purchase such stock,
                  ``(C) the issuer or a related person has the 
                right to redeem or purchase the stock and, as 
                of the issue date, it is more likely than not 
                that such right will be exercised, or
                  ``(D) the dividend rate on such stock varies 
                in whole or in part (directly or indirectly) 
                with reference to interest rates, commodity 
                prices, or other similar indices.
        Subparagraphs (A), (B), and (C) shall apply only if the 
        right or obligation referred to therein may be 
        exercised within the 20-year period beginning on the 
        issue date of such stock and if such right or 
        obligation is not pursuant to a contingency the 
        likelihood of which is remote.
          ``(3) Definitions.--For purposes of this subsection--
                  ``(A) Preferred stock.--The term `preferred 
                stock' means stock which is limited and 
                preferred as to dividends and does not 
                participate (including through a conversion 
                privilege) in corporate growth to any 
                significant extent.
                  ``(B) Related person.--A person shall be 
                treated as related to another person if they 
                bear a relationship to such other person 
                described in section 267(b) or 707(b).
          ``(4) Regulations.--The Secretary may prescribe such 
        regulations as may be necessary or appropriate to carry 
        out the purposes of this subsection and sections 
        354(a)(2)(C), 355(a)(3)(D), and 356(e). The Secretary 
        may also prescribe regulations, consistent with the 
        treatment under this subsection and such sections, for 
        the treatment of nonqualified preferred stock under 
        other provisions of this title.''
  (b) Section 354.--Paragraph (2) of section 354(a) (relating 
exchanges of stock and securities in certain reorganizations) 
is amended by adding at the end the following new subparagraph:
                  ``(C) Nonqualified preferred stock.--
                          ``(i) In general.--Nonqualified 
                        preferred stock (as defined in section 
                        351(g)(2)) received in exchange for 
                        stock other than nonqualified preferred 
                        stock (as so defined) shall not be 
                        treated as stock or securities.
                          ``(ii) Recapitalizations of family-
                        owned corporations.--
                                  ``(I) In general.--Clause (i) 
                                shall not apply in the case of 
                                a recapitalization under 
                                section 368(a)(1)(E) of a 
                                family-owned corporation.
                                  ``(II) Family-owned 
                                corporation.--For purposes of 
                                this clause, the term `family-
                                owned corporation' means any 
                                corporation which is described 
                                in clause (i) of section 
                                447(d)(2)(C) throughout the 8-
                                year period beginning on the 
                                date which is 5 years before 
                                the date of the 
                                recapitalization. For purposes 
                                of the preceding sentence, 
                                stock shall not be treated as 
                                owned by a family member during 
                                any period that such family 
                                member's holding period would 
                                be reduced under the rules of 
                                section 246(c)(4).
  (c) Section 355.--Paragraph (3) of section 355(a) is amended 
by adding at the end the following new subparagraph:
                  ``(D) Nonqualified preferred stock.--
                Nonqualified preferred stock (as defined in 
                section 351(g)(2)) received in a distribution 
                with respect to stock other than nonqualified 
                preferred stock (as so defined) shall not be 
                treated as stock or securities.''
  (d) Section 356.--Section 356 is amended by redesignating 
subsections (e) and (f) as subsections (f) and (g), 
respectively, and by inserting after subsection (d) the 
following new subsection:
  ``(e) Nonqualified Preferred Stock Treated as Other 
Property.--For purposes of this section--
          ``(1) In general.--Except as provided in paragraph 
        (2), the term `other property' includes nonqualified 
        preferred stock (as defined in section 351(g)(2)).
          ``(2) Exception.--The term `other property' does not 
        include nonqualified preferred stock (as so defined) to 
        the extent that, under section 354 or 355, such 
        preferred stock would be permitted to be received 
        without the recognition of gain.''
  (e) Conforming Amendments.--
          (1) Subparagraph (B) of section 354(a)(2) is amended 
        by inserting ``(including nonqualified preferred stock, 
        as defined in section 351(g)(2))'' after ``stock''.
          (2) Subparagraph (A) of section 354(a)(3) is amended 
        by inserting ``nonqualified preferred stock and'' after 
        ``including''.
          (3) Section 1036 is amended by redesignating 
        subsection (b) as subsection (c) and by inserting after 
        subsection (a) the following new subsection:
  ``(b) Nonqualified Preferred Stock Treated as Not Stock.--For 
purposes of this section, nonqualified preferred stock (as 
defined in section 351(g)(2)) shall be treated as not stock.''
  (f) Effective Date.--
          (1) In general.--The amendments made by this section 
        shall apply to transactions after December 7, 1995.
          (2) Transitional rule.--The amendments made by this 
        section shall not apply to--
                  (A) any stock issued pursuant to a written 
                agreement which was (subject to customary 
                conditions) binding on December 7, 1995, and at 
                all times thereafter before the stock was 
                issued,
                  (B) any stock issued pursuant to an exchange 
                offer which was outstanding on such date, and
                  (C) any stock which was priced for purposes 
                of issuance on or before such date.

SEC. ____215. DENIAL OF INTEREST DEDUCTIONS ON CERTAIN DEBT 
                    INSTRUMENTS.

  (a) In General.--Section 163 (relating to deduction for 
interest) is amended by redesignating subsection (k) as 
subsection (l) and by inserting after subsection (j) the 
following new subsection:
  ``(k) Disallowance of Deduction on Certain Debt Instruments 
of Corporations.--
          ``(1) In general.--No deduction shall be allowed 
        under this chapter for any interest paid or accrued on 
        a disqualified debt instrument.
          ``(2) Disqualified debt instrument.--For purposes of 
        this subsection--
                  ``(A) In general.--The term `disqualified 
                debt instrument' means any indebtedness of a 
                corporation--
                          ``(i) which has a weighted average 
                        maturity of more than 40 years, or
                          ``(ii) any principal or interest on 
                        which is payable in equity of the 
                        issuer or a related party.
                  ``(B) Exceptions.--Such term shall not 
                include--
                          ``(i) a demand loan,
                          ``(ii) indebtedness in connection 
                        with a lease described in section 
                        1055(c)(1) (relating to redeemable 
                        ground rents), or
                          ``(iii) any other indebtedness 
                        specified by the Secretary.
          ``(3) Weighted average maturity.--For purposes of 
        paragraph (2)(A)(i), the weighted average maturity of 
        any indebtedness shall be determined in the same manner 
        as under section 1273, and in making such 
        determination--
                  ``(A) any option or other right to extend, 
                renew, or relend the amount of any indebtedness 
                shall be treated as if exercised,
                  ``(B) the holding of a put, call, or other 
                right to accelerate payment shall be 
                disregarded, and
                  ``(C) 2 or more loans which are part of the 
                same transaction or series of transactions 
                shall be treated as 1 loan.
          ``(4) Special rules for amounts payable in equity.--
        For purposes of paragraph (2)(A)(ii), principal or 
        interest on indebtedness shall be treated as payable in 
        equity of the issuer or a related party only if--
                  ``(A) the principal or interest is required 
                to be paid or converted, or at the option of 
                the issuer or a related party is payable or 
                convertible, into such equity,
                  ``(B) the amount of principal or interest is 
                required to be determined, or at the option of 
                the issuer or a related party is determined, by 
                reference to the value of such equity at the 
                time of payment of such principal or interest, 
                or
                  ``(C) the indebtedness is part of an 
                arrangement which is reasonably expected to 
                result in a transaction described in 
                subparagraph (A) or (B).
        The requirements of the preceding sentence shall be 
        treated as met with respect to any principal or 
        interest on indebtedness only if such requirement is 
        met with respect to a substantial amount of such 
        principal or interest.
          ``(5) Related party.--For purposes of this 
        subsection, a person is a related party with respect to 
        another person if such person bears a relationship to 
        such other person described in section 267(b) or 
        707(b).
          ``(6) Regulations.--The Secretary shall prescribe 
        such regulations as may be necessary or appropriate to 
        carry out the purposes of this subsection, including 
        regulations preventing avoidance of this subsection 
        through the use of an issuer other than a 
        corporation.''
  (b) Classification of Certain Instruments as Debt or 
Equity.--Section 385(c) (relating to effect of classification 
by issuer) is amended by redesignating paragraph (3) as 
paragraph (4) and by inserting after paragraph (2) the 
following new paragraph:
          ``(3) Deemed classification of interest as stock.--
                  ``(A) In general.--Except as otherwise 
                provided in regulations, for purposes of this 
                subsection, an applicable corporation shall be 
                treated as having characterized an interest in 
                the corporation as stock if--
                          ``(i) it has a term of more than 20 
                        years (determined under the principles 
                        of subparagraphs (A), (B), and (C) of 
                        section 163(k)(3)), and
                          ``(ii) it is not shown as 
                        indebtedness on an applicable balance 
                        sheet of the issuer.
                This paragraph shall not apply to an interest 
                described in section 163(k)(2)(B).
                  ``(B) Effect of characterization.--Any 
                characterization of an interest as stock under 
                subparagraph (A)--
                          ``(i) may not be changed, and
                          ``(ii) except to the extent provided 
                        in regulations, shall be treated as 
                        having been made as of the time of 
                        issuance.
                  ``(C) Applicable corporation, etc.--For 
                purposes of this paragraph--
                          ``(i) Applicable corporation.--The 
                        term `applicable corporation' means, 
                        with respect to any interest, a 
                        corporation which, at any time during 
                        the 1-year period beginning on the date 
                        of issuance of the interest, is--
                                  ``(I) required to file annual 
                                financial statements with the 
                                Securities and Exchange 
                                Commission, or
                                  ``(II) required to be 
                                included in such financial 
                                statements.
                          ``(ii) Applicable balance sheet.--The 
                        term `applicable balance sheet' means 
                        any balance sheet which is required to 
                        be filed with the Securities and 
                        Exchange Commission by the issuer of an 
                        interest or which is required to 
                        include data with respect to such 
                        issuer.
                  ``(D) Interests issued to related parties.--
                For purposes of subparagraph (A)(ii), if--
                          ``(i) an interest in a corporation to 
                        which subparagraph (A) applies is 
                        issued to a person (other than a 
                        corporation) which is related to the 
                        issuer, and
                          ``(ii) such interest is not shown on 
                        an applicable balance sheet of the 
                        issuer solely because the related 
                        person is consolidated with such person 
                        on such balance sheet,
                such interest shall be treated as having been 
                characterized as stock if such related person 
                issues a related instrument not shown as 
                indebtedness on such balance sheet. For 
                purposes of the preceding sentence, a person is 
                a related person with respect to an issuer if 
                such person bears a relationship to the issuer 
                described in section 267(b) or 707(b).
                  ``(E) Exception for certain lease 
                receivables.--This subsection shall not apply 
                to a nonrecourse interest if the issuer's 
                investment in a related lease receivable as 
                shown on the applicable balance sheet is 
                reduced by the amount of such interest.''
  (c) Regulations.--Paragraph (4) of section 385(c), as 
redesignated by subsection (b), is amended to read as follows:
          ``(4) Regulations.--The Secretary shall prescribe 
        such regulations as may be necessary or appropriate to 
        carry out the purposes of this subsection, including 
        such requirements for the providing of information to 
        the Secretary or such other persons as the Secretary 
        determines appropriate.''
  (d) Effective Date.--
          (1) In general.--The amendments made by this section 
        shall apply to interests in a corporation issued on or 
        after December 7, 1995.
          (2) Transitional rule.--The amendments made by this 
        section shall not apply to--
                  (A) any interest issued pursuant to a 
                commitment which was binding on December 6, 
                1995, and at all times thereafter before the 
                interest was issued,
                  (B) any interest issued pursuant to an 
                exchange offer which was outstanding on such 
                date,
                  (C) any interest which was priced for 
                purposes of issuance on or before such date,
                  (D) interests issued pursuant to a 
                registration statement filed with the 
                Securities and Exchange Commission on or before 
                December 7, 1995 (other than a registration 
                statement which, under 17 CFR 230.415, 
                contemplated a delayed or continuous offering 
                of such interests), but only to the extent that 
                such interests are described in, and the amount 
                of such interests does not exceed in the 
                aggregate the amount stated in, such 
                registration statement as of such date,
                  (E) interests issued pursuant to a 
                registration statement which is filed with the 
                Securities and Exchange Commission on or before 
                December 7, 1995, and which, under 17 CFR 
                230.415, contemplated a delayed or continuous 
                offering of such interests if a prospectus 
                supplement (including a preliminary prospectus 
                supplement) to such registration statement was 
                filed under 17 CFR 230.424 on or before 
                December 7, 1995, but only to the extent that 
                such interests are described in, and the amount 
                of such interests does not exceed in the 
                aggregate the amount stated in, such prospectus 
                supplement as of such date (or, to the extent a 
                preliminary prospectus supplement as of such 
                date does not state a maximum amount to be 
                issued, the amount expected to be offered may 
                be established by other contemporaneous, 
                written evidence), and
                  (F) interests issued pursuant to a private 
                placement that contemplates resales of the 
                interests pursuant to 17 CFR 230.144A, but only 
                if, on or before December 7, 1995--
                          (i) the issuer had made a public 
                        announcement of its intention to issue 
                        the interests, and
                          (ii) an offering circular or 
                        memorandum (including a preliminary 
                        offering circular or memorandum) with 
                        respect to the interests had been 
                        distributed to prospective investors, 
                        but only to the extent that such 
                        interests are described in, and the 
                        amount of such interests does not 
                        exceed in the aggregate the amount 
                        stated in, such offering circular or 
                        memorandum as of such date.
        An interest shall be treated as meeting the 
        requirements of subparagraph (A) if such interest is 
        issued, before the 30th day after the date of the 
        enactment of this Act, as part of an issue 
        substantially identical (other than yield) to an issue 
        which was publicly announced as having been sold on 
        December 7, 1995, but which was terminated on such 
        date.

SEC. ____216. DEFERRAL OF DEDUCTION FOR INTEREST ON CONVERTIBLE DEBT 
                    UNTIL PAYMENT.

  (a) In General.--Section 163, as amended by section ____, is 
amended by redesignating subsection (l) as subsection (m) and 
by inserting after subsection (k) the following new subsection:
  ``(l) Deferral of Interest Deduction on Convertible 
Indebtedness.--
          ``(1) In general.--Interest on convertible 
        indebtedness of a corporation shall be deductible under 
        this chapter only in the taxable year in which paid. 
        For purposes of the preceding sentence, the principles 
        of section 163(i)(3)(B) shall apply.
          ``(2) Equity payments disregarded.--Except to the 
        extent provided in regulations, payments (including 
        through an arrangement described in paragraph (3)(C)) 
        shall be disregarded for purposes of paragraph (1) if 
        such payments are in the form of--
                  ``(A) equity of the issuer or a related 
                party, or
                  ``(B) cash or other property the amount of 
                which is determined by reference to the value 
                of such equity.
          ``(3) Convertible indebtedness.--For purposes of this 
        subsection--
                  ``(A) In general.--The term `convertible 
                indebtedness' means any indebtedness if--
                          ``(i) the indebtedness is convertible 
                        into equity of the issuer or a related 
                        party,
                          ``(ii) the amount principal or 
                        interest on such indebtedness is 
                        determined by reference to the value of 
                        such equity, or
                          ``(iii) the indebtedness is issued 
                        with warrants or similar instruments as 
                        part of an investment unit in which the 
                        indebtedness may be used to satisfy the 
                        exercise price of such warrants or 
                        similar instruments.
                  ``(B) Exceptions.--Such term shall not 
                include--
                          ``(i) any indebtedness which would 
                        (but for this subparagraph) be 
                        convertible indebtedness solely because 
                        a fixed payment of principal or 
                        interest is, at the election of the 
                        holder, payable in equity of the issuer 
                        or a related party having a value equal 
                        to the amount of such principal or 
                        interest, or
                          ``(ii) any other indebtedness 
                        specified by the Secretary.
          ``(4) Related party.--For purposes of this 
        subsection, persons are related if they bear a 
        relationship specified in section 267(b) or section 
        707(b).
          ``(5) Regulations.--The Secretary shall prescribe 
        such regulations as may be necessary or appropriate to 
        carry out the purposes of this subsection, including 
        regulations preventing avoidance of this subsection 
        through the use of an issuer other than a 
        corporation.''
  (b) Effective Dates.--
          (1) In general.--Except as provided in paragraph (2), 
        the amendments made by this section shall apply to 
        indebtedness issued on or after December 7, 1995.
          (2) Transitional rule.--The amendments made by this 
        section shall not apply to--
                  (A) any indebtedness issued pursuant to a 
                commitment which was binding on December 6, 
                1995, and at all times thereafter before the 
                indebtedness was issued,
                  (B) any indebtedness issued pursuant to an 
                exchange offer which was outstanding on such 
                date,
                  (C) any indebtedness which was priced for 
                purposes of issuance on or before such date,
                  (D) indebtedness issued pursuant to a 
                registration statement filed with the 
                Securities and Exchange Commission on or before 
                December 7, 1995 (other than a registration 
                statement which, under 17 CFR 230.415, 
                contemplated a delayed or continuous offering 
                of such indebtedness), but only to the extent 
                that such indebtedness is described in, and the 
                amount of such indebtedness does not exceed in 
                the aggregate the amount stated in, such 
                registration statement as of such date,
                  (E) indebtedness issued pursuant to a 
                registration statement which is filed with the 
                Securities and Exchange Commission on or before 
                December 7, 1995, and which, under 17 CFR 
                230.415, contemplated a delayed or continuous 
                offering of such indebtedness if a prospectus 
                supplement (including a preliminary prospectus 
                supplement) to such registration statement was 
                filed under 17 CFR 230.424 on or before 
                December 7, 1995, but only to the extent that 
                such indebtedness is described in, and the 
                amount of such indebtedness does not exceed in 
                the aggregate the amount stated in, such 
                prospectus supplement as of such date (or, to 
                the extent a preliminary prospectus supplement 
                as of such date does not state a maximum amount 
                to be issued, the amount expected to be offered 
                may be established by other contemporaneous, 
                written evidence), and
                  (F) indebtedness issued pursuant to a private 
                placement that contemplates resales of the 
                instruments pursuant to 17 CFR 230.144A, but 
                only if, on or before December 7, 1995--
                          (i) the issuer had made a public 
                        announcement of its intention to issue 
                        the indebtedness, and
                          (ii) an offering circular or 
                        memorandum (including a preliminary 
                        offering circular or memorandum) with 
                        respect to the indebtedness had been 
                        distributed to prospective investors, 
                        but only to the extent that such 
                        indebtedness is described in, and the 
                        amount of such indebtedness does not 
                        exceed in the aggregate the amount 
                        stated in, such offering circular or 
                        memorandum as of such date.
        Indebtedness shall be treated as meeting the 
        requirements of subparagraph (A) if such indebtedness 
        is issued, before the 30th day after the date of the 
        enactment of this Act, as part of an issue 
        substantially identical (other than yield) to an issue 
        which was publicly announced as having been sold on 
        December 7, 1995, but which was terminated on such 
        date.

                     Subtitle C--Foreign Provisions

                         PART I--FOREIGN TRUSTS

SEC. ____301. IMPROVED INFORMATION REPORTING ON FOREIGN TRUSTS.

  (a) In General.--Section 6048 of the Internal Revenue Code of 
1986 (relating to returns as to certain foreign trusts) is 
amended to read as follows:

``SEC. 6048. INFORMATION WITH RESPECT TO CERTAIN FOREIGN TRUSTS.

  ``(a) Notice of Certain Events.--
          ``(1) General rule.--On or before the 90th day (or 
        such later day as the Secretary may prescribe) after 
        any reportable event, the responsible party shall 
        provide written notice of such event to the Secretary 
        in accordance with paragraph (2).
          ``(2) Contents of notice.--The notice required by 
        paragraph (1) shall contain such information as the 
        Secretary may prescribe, including--
                  ``(A) the amount of money or other property 
                (if any) transferred to the trust in connection 
                with the reportable event, and
                  ``(B) the identity of the trust and of each 
                trustee and beneficiary (or class of 
                beneficiaries) of the trust.
          ``(3) Reportable event.--For purposes of this 
        subsection--
                  ``(A) In general.--The term `reportable 
                event' means--
                          ``(i) the creation of any foreign 
                        trust by a United States person,
                          ``(ii) the transfer of any money or 
                        property (directly or indirectly) to a 
                        foreign trust by a United States 
                        person, including a transfer by reason 
                        of death, and
                          ``(iii) the death of a citizen or 
                        resident of the United States if--
                                  ``(I) the decedent was 
                                treated as the owner of any 
                                portion of a foreign trust 
                                under the rules of subpart E of 
                                part I of subchapter J of 
                                chapter 1, or
                                  ``(II) any portion of a 
                                foreign trust was included in 
                                the gross estate of the 
                                decedent.
                  ``(B) Exceptions.--
                          ``(i) Fair market value sales.--
                        Subparagraph (A)(ii) shall not apply to 
                        any transfer of property to a trust in 
                        exchange for consideration of at least 
                        the fair market value of the 
                        transferred property. For purposes of 
                        the preceding sentence, consideration 
                        other than cash shall be taken into 
                        account at its fair market value and 
                        the rules of section 679(a)(3) shall 
                        apply.
                          ``(ii) Pension and charitable 
                        trusts.--Subparagraph (A) shall not 
                        apply with respect to a trust which 
                        is--
                                  ``(I) described in section 
                                404(a)(4) or 404A, or
                                  ``(II) determined by the 
                                Secretary to be described in 
                                section 501(c)(3).
          ``(4) Responsible party.--For purposes of this 
        subsection, the term `responsible party' means--
                  ``(A) the grantor in the case of the creation 
                of an inter vivos trust,
                  ``(B) the transferor in the case of a 
                reportable event described in paragraph 
                (3)(A)(ii) other than a transfer by reason of 
                death, and
                  ``(C) the executor of the decedent's estate 
                in any other case.
  ``(b) United States Grantor of Foreign Trust.--
          ``(1) In general.--If, at any time during any taxable 
        year of a United States person, such person is treated 
        as the owner of any portion of a foreign trust under 
        the rules of subpart E of part I of subchapter J of 
        chapter 1, such person shall be responsible to ensure 
        that--
                  ``(A) such trust makes a return for such year 
                which sets forth a full and complete accounting 
                of all trust activities and operations for the 
                year, the name of the United States agent for 
                such trust, and such other information as the 
                Secretary may prescribe, and
                  ``(B) such trust furnishes such information 
                as the Secretary may prescribe to each United 
                States person (i) who is treated as the owner 
                of any portion of such trust or (ii) who 
                receives (directly or indirectly) any 
                distribution from the trust.
          ``(2) Trusts not having united states agent.--
                  ``(A) In general.--If the rules of this 
                subsection apply to any foreign trust, the 
                determination of amounts required to be taken 
                into account with respect to such trust by a 
                United States person under the rules of subpart 
                E of part I of subchapter J of chapter 1 shall 
                be determined by the Secretary in the 
                Secretary's sole discretion from the 
                Secretary's own knowledge or from such 
                information as the Secretary may obtain through 
                testimony or otherwise.
                  ``(B) United states agent required.--The 
                rules of this subsection shall apply to any 
                foreign trust to which paragraph (1) applies 
                unless such trust agrees (in such manner, 
                subject to such conditions, and at such time as 
                the Secretary shall prescribe) to authorize a 
                United States person to act as such trust's 
                limited agent solely for purposes of applying 
                sections 7602, 7603, and 7604 with respect to--
                          ``(i) any request by the Secretary to 
                        examine records or produce testimony 
                        related to the proper treatment of 
                        amounts required to be taken into 
                        account under the rules referred to in 
                        subparagraph (A), or
                          ``(ii) any summons by the Secretary 
                        for such records or testimony.
                The appearance of persons or production of 
                records by reason of a United States person 
                being such an agent shall not subject such 
                persons or records to legal process for any 
                purpose other than determining the correct 
                treatment under this title of the amounts 
                required to be taken into account under the 
                rules referred to in subparagraph (A). A 
                foreign trust which appoints an agent described 
                in this subparagraph shall not be considered to 
                have an office or a permanent establishment in 
                the United States, or to be engaged in a trade 
                or business in the United States, solely 
                because of the activities of such agent 
                pursuant to this subsection.
                  ``(C) Other rules to apply.--Rules similar to 
                the rules of paragraphs (2) and (4) of section 
                6038A(e) shall apply for purposes of this 
                paragraph.
  ``(c) Reporting by United States Beneficiaries of Foreign 
Trusts.--
          ``(1) In general.--If any United States person 
        receives (directly or indirectly) during any taxable 
        year of such person any distribution from a foreign 
        trust, such person shall make a return with respect to 
        such trust for such year which includes--
                  ``(A) the name of such trust,
                  ``(B) the aggregate amount of the 
                distributions so received from such trust 
                during such taxable year, and
                  ``(C) such other information as the Secretary 
                may prescribe.
          ``(2) Inclusion in income if records not provided.--
        If adequate records are not provided to the Secretary 
        to determine the proper treatment of any distribution 
        from a foreign trust, such distribution shall be 
        treated as an accumulation distribution includible in 
        the gross income of the distributee under chapter 1. To 
        the extent provided in regulations, the preceding 
        sentence shall not apply if the foreign trust elects to 
        be subject to rules similar to the rules of subsection 
        (b)(2)(B).
  ``(d) Special Rules.--
          ``(1) Determination of whether united states person 
        receives distribution.--For purposes of this section, 
        in determining whether a United States person receives 
        a distribution from a foreign trust, the fact that a 
        portion of such trust is treated as owned by another 
        person under the rules of subpart E of part I of 
        subchapter J of chapter 1 shall be disregarded.
          ``(2) Domestic trusts with foreign activities.--To 
        the extent provided in regulations, a trust which is a 
        United States person shall be treated as a foreign 
        trust for purposes of this section and section 6677 if 
        such trust has substantial activities, or holds 
        substantial property, outside the United States.
          ``(3) Time and manner of filing information.--Any 
        notice or return required under this section shall be 
        made at such time and in such manner as the Secretary 
        shall prescribe.
          ``(4) Modification of return requirements.--The 
        Secretary is authorized to suspend or modify any 
        requirement of this section if the Secretary determines 
        that the United States has no significant tax interest 
        in obtaining the required information.''
  (b) Increased Penalties.--Section 6677 of such Code (relating 
to failure to file information returns with respect to certain 
foreign trusts) is amended to read as follows:

``SEC. 6677. FAILURE TO FILE INFORMATION WITH RESPECT TO CERTAIN 
                    FOREIGN TRUSTS.

  ``(a) Civil Penalty.--In addition to any criminal penalty 
provided by law, if any notice or return required to be filed 
by section 6048--
          ``(1) is not filed on or before the time provided in 
        such section, or
          ``(2) does not include all the information required 
        pursuant to such section or includes incorrect 
        information,
the person required to file such notice or return shall pay a 
penalty equal to 35 percent of the gross reportable amount. If 
any failure described in the preceding sentence continues for 
more than 90 days after the day on which the Secretary mails 
notice of such failure to the person required to pay such 
penalty, such person shall pay a penalty (in addition to the 
amount determined under the preceding sentence) of $10,000 for 
each 30-day period (or fraction thereof) during which such 
failure continues after the expiration of such 90-day period.
  ``(b) Special Rules for Returns Under Section 6048(b).--In 
the case of a return required under section 6048(b)--
          ``(1) the United States person referred to in such 
        section shall be liable for the penalty imposed by 
        subsection (a), and
          ``(2) subsection (a) shall be applied by substituting 
        `5 percent' for `35 percent'.
  ``(c) Gross Reportable Amount.--For purposes of subsection 
(a), the term `gross reportable amount' means--
          ``(1) the gross value of the property involved in the 
        event (determined as of the date of the event) in the 
        case of a failure relating to section 6048(a),
          ``(2) the gross value of the portion of the trust's 
        assets at the close of the year treated as owned by the 
        United States person in the case of a failure relating 
        to section 6048(b)(1), and
          ``(3) the gross amount of the distributions in the 
        case of a failure relating to section 6048(c).
  ``(d) Reasonable Cause Exception.--No penalty shall be 
imposed by this section on any failure which is shown to be due 
to reasonable cause and not due to willful neglect. The fact 
that a foreign jurisdiction would impose a civil or criminal 
penalty on the taxpayer (or any other person) for disclosing 
the required information is not reasonable cause.
  ``(e) Deficiency Procedures Not To Apply.--Subchapter B of 
chapter 63 (relating to deficiency procedures for income, 
estate, gift, and certain excise taxes) shall not apply in 
respect of the assessment or collection of any penalty imposed 
by subsection (a).''
  (c) Conforming Amendments.--
          (1) Paragraph (2) of section 6724(d) of such Code is 
        amended by striking ``or'' at the end of subparagraph 
        (S), by striking the period at the end of subparagraph 
        (T) and inserting ``, or'', and by inserting after 
        subparagraph (T) the following new subparagraph:
                  ``(U) section 6048(b)(1)(B) (relating to 
                foreign trust reporting requirements).''
          (2) The table of sections for subpart B of part III 
        of subchapter A of chapter 61 is of such Code amended 
        by striking the item relating to section 6048 and 
        inserting the following new item:

        ``Sec. 6048. Information with respect to certain foreign 
                  trusts.''

          (3) The table of sections for part I of subchapter B 
        of chapter 68 of such Code is amended by striking the 
        item relating to section 6677 and inserting the 
        following new item:

        ``Sec. 6677. Failure to file information with respect to certain 
                  foreign trusts.''

  (d) Effective Dates.--
          (1) Reportable events.--To the extent related to 
        subsection (a) of section 6048 of the Internal Revenue 
        Code of 1986, as amended by this section, the 
        amendments made by this section shall apply to 
        reportable events (as defined in such section 6048) 
        occurring after the date of the enactment of this Act.
          (2) Grantor trust reporting.--To the extent related 
        to subsection (b) of such section 6048, the amendments 
        made by this section shall apply to taxable years of 
        United States persons beginning after the date of the 
        enactment of this Act.
          (3) Reporting by united states beneficiaries.--To the 
        extent related to subsection (c) of such section 6048, 
        the amendments made by this section shall apply to 
        distributions received after the date of the enactment 
        of this Act.

SEC. ____302. MODIFICATIONS OF RULES RELATING TO FOREIGN TRUSTS HAVING 
                    ONE OR MORE UNITED STATES BENEFICIARIES.

  (a) Treatment of Trust Obligations, Etc.--
          (1) Paragraph (2) of section 679(a) of the Internal 
        Revenue Code of 1986 is amended by striking 
        subparagraph (B) and inserting the following:
                  ``(B) Transfers at fair market value.--To any 
                transfer of property to a trust in exchange for 
                consideration of at least the fair market value 
                of the transferred property. For purposes of 
                the preceding sentence, consideration other 
                than cash shall be taken into account at its 
                fair market value.''
          (2) Subsection (a) of section 679 of such Code 
        (relating to foreign trusts having one or more United 
        States beneficiaries) is amended by adding at the end 
        the following new paragraph:
          ``(3) Certain obligations not taken into account 
        under fair market value exception.--
                  ``(A) In general.--In determining whether 
                paragraph (2)(B) applies to any transfer by a 
                person described in clause (ii) or (iii) of 
                subparagraph (C), there shall not be taken into 
                account--
                          ``(i) any obligation of a person 
                        described in subparagraph (C), and
                          ``(ii) to the extent provided in 
                        regulations, any obligation which is 
                        guaranteed by a person described in 
                        subparagraph (C).
                  ``(B) Treatment of principal payments on 
                obligation.--Principal payments by the trust on 
                any obligation referred to in subparagraph (A) 
                shall be taken into account on and after the 
                date of the payment in determining the portion 
                of the trust attributable to the property 
                transferred.
                  ``(C) Persons described.--The persons 
                described in this subparagraph are--
                          ``(i) the trust,
                          ``(ii) any grantor or beneficiary of 
                        the trust, and
                          ``(iii) any person who is related 
                        (within the meaning of section 
                        643(i)(3)) to any grantor or 
                        beneficiary of the trust.''
  (b) Exemption of Transfers to Charitable Trusts.--Subsection 
(a) of section 679 of such Code is amended by striking 
``section 404(a)(4) or 404A'' and inserting ``section 
6048(a)(3)(B)(ii)''.
  (c) Other Modifications.--Subsection (a) of section 679 of 
such Code is amended by adding at the end the following new 
paragraphs:
          ``(4) Special rules applicable to foreign grantor who 
        later becomes a united states person.--
                  ``(A) In general.--If a nonresident alien 
                individual has a residency starting date within 
                5 years after directly or indirectly 
                transferring property to a foreign trust, this 
                section and section 6048 shall be applied as if 
                such individual transferred to such trust on 
                the residency starting date an amount equal to 
                the portion of such trust attributable to the 
                property transferred by such individual to such 
                trust in such transfer.
                  ``(B) Treatment of undistributed income.--For 
                purposes of this section, undistributed net 
                income for periods before such individual's 
                residency starting date shall be taken into 
                account in determining the portion of the trust 
                which is attributable to property transferred 
                by such individual to such trust but shall not 
                otherwise be taken into account.
                  ``(C) Residency starting date.--For purposes 
                of this paragraph, an individual's residency 
                starting date is the residency starting date 
                determined under section 7701(b)(2)(A).
          ``(5) Outbound trust migrations.--If--
                  ``(A) an individual who is a citizen or 
                resident of the United States transferred 
                property to a trust which was not a foreign 
                trust, and
                  ``(B) such trust becomes a foreign trust 
                while such individual is alive,
        then this section and section 6048 shall be applied as 
        if such individual transferred to such trust on the 
        date such trust becomes a foreign trust an amount equal 
        to the portion of such trust attributable to the 
        property previously transferred by such individual to 
        such trust. A rule similar to the rule of paragraph 
        (4)(B) shall apply for purposes of this paragraph.''
  (d) Modifications Relating to Whether Trust Has United States 
Beneficiaries.--Subsection (c) of section 679 of such Code is 
amended by adding at the end the following new paragraphs:
          ``(3) Certain united states beneficiaries 
        disregarded.--A beneficiary shall not be treated as a 
        United States person in applying this section with 
        respect to any transfer of property to foreign trust if 
        such beneficiary first became a United States person 
        more than 5 years after the date of such transfer.
          ``(4) Treatment of former united states persons.--To 
        the extent provided by the Secretary, for purposes of 
        this subsection, the term `United States person' 
        includes any person who was a United States person at 
        any time during the existence of the trust.''
  (e) Technical Amendment.--Subparagraph (A) of section 
679(c)(2) is amended to read as follows:
                  ``(A) in the case of a foreign corporation, 
                such corporation is a controlled foreign 
                corporation (as defined in section 957(a)),''.
  (f) Regulations.--Section 679 is amended by adding at the end 
the following new subsection:
  ``(d) Regulations.--The Secretary shall prescribe such 
regulations as may be necessary or appropriate to carry out the 
purposes of this section.''
  (g) Effective Date.--The amendments made by this section 
shall apply to transfers of property after February 6, 1995.

SEC. ____303. FOREIGN PERSONS NOT TO BE TREATED AS OWNERS UNDER GRANTOR 
                    TRUST RULES.

  (a) General Rule.--
          (1) Subsection (f) of section 672 of the Internal 
        Revenue Code of 1986 (relating to special rule where 
        grantor is foreign person) is amended to read as 
        follows:
  ``(f) Subpart Not To Result in Foreign Ownership.--
          ``(1) In general.--Notwithstanding any other 
        provision of this subpart, this subpart shall apply 
        only to the extent such application results in an 
        amount being currently taken into account (directly or 
        through 1 or more entities) under this chapter in 
        computing the income of a citizen or resident of the 
        United States or a domestic corporation.
          ``(2) Exceptions.--
                  ``(A) Certain revocable and ir-revocable 
                trusts.--
                          ``(i) In general.--Except as provided 
                        in clause (ii), paragraph (1) shall not 
                        apply to any trust if--
                                  ``(I) the power to revest 
                                absolutely in the grantor title 
                                to the trust property is 
                                exercisable solely by the 
                                grantor without the approval or 
                                consent of any other person or 
                                with the consent of a related 
                                or subordinate party who is 
                                subservient to the grantor, or
                                  ``(II) the only amounts 
                                distributable from such trust 
                                (whether income or corpus) 
                                during the lifetime of the 
                                grantor are amounts 
                                distributable to the grantor or 
                                the spouse of the grantor.
                          ``(ii) Exception.--Clause (i) shall 
                        not apply to any trust which has a 
                        beneficiary who is a United States 
                        person to the extent such beneficiary 
                        has made transfers of property by gift 
                        (directly or indirectly) to a foreign 
                        person who is the grantor of such 
                        trust. For purposes of the preceding 
                        sentence, any gift shall not be taken 
                        into account to the extent such gift is 
                        excluded from taxable gifts under 
                        section 2503(b).
                  ``(B) Compensatory trusts.--Except as 
                provided in regulations, paragraph (1) shall 
                not apply to any portion of a trust 
                distributions from which are taxable as 
                compensation for services rendered.
          ``(3) Special rules.--Except as otherwise provided in 
        regulations prescribed by the Secretary--
                  ``(A) a controlled foreign corporation (as 
                defined in section 957) shall be treated as a 
                domestic corporation for purposes of paragraph 
                (1), and
                  ``(B) paragraph (1) shall not apply for 
                purposes of applying part III of subchapter G 
                (relating to foreign personal holding 
                companies) and part VI of subchapter P 
                (relating to treatment of certain passive 
                foreign investment companies).
          ``(4) Recharacterization of purported gifts.--In the 
        case of any transfer directly or indirectly from a 
        partnership or foreign corporation which the transferee 
        treats as a gift or bequest, the Secretary may 
        recharacterize such transfer in such circumstances as 
        the Secretary determines to be appropriate to prevent 
        the avoidance of the purposes of this subsection.
          ``(5) Regulations.--The Secretary shall prescribe 
        such regulations as may be necessary or appropriate to 
        carry out the purposes of this subsection, including 
        regulations providing that paragraph (1) shall not 
        apply in appropriate cases.''
          (2) The last sentence of subsection (c) of section 
        672 of such Code is amended by inserting ``subsection 
        (f) and'' before ``sections 674''.
  (b) Credit for Certain Taxes.--Paragraph (2) of section 
665(d) of such Code is amended by adding at the end the 
following new sentence: ``Under rules or regulations prescribed 
by the Secretary, in the case of any foreign trust of which the 
settlor or another person would be treated as owner of any 
portion of the trust under subpart E but for section 672(f), 
the term `taxes imposed on the trust' includes the allocable 
amount of any income, war profits, and excess profits taxes 
imposed by any foreign country or possession of the United 
States on the settlor or such other person in respect of trust 
gross income.''
  (c) Distributions by Certain Foreign Trusts Through 
Nominees.--
          (1) Section 643 of such Code is amended by adding at 
        the end the following new subsection:
  ``(h) Distributions by Certain Foreign Trusts Through 
Nominees.--For purposes of this part, any amount paid to a 
United States person which is derived directly or indirectly 
from a foreign trust of which the payor is not the grantor 
shall be deemed in the year of payment to have been directly 
paid by the foreign trust to such United States person.''
          (2) Section 665 of such Code is amended by striking 
        subsection (c).
  (d) Effective Date.--
          (1) In general.--Except as provided by paragraph (2), 
        the amendments made by this section shall take effect 
        on the date of the enactment of this Act.
          (2) Exception for certain trusts.--The amendments 
        made by this section shall not apply to any trust--
                  (A) which is treated as owned by the grantor 
                or another person under section 676 or 677 
                (other than subsection (a)(3) thereof) of the 
                Internal Revenue Code of 1986, and
                  (B) which is in existence on September 19, 
                1995.
        The preceding sentence shall not apply to the portion 
        of any such trust attributable to any transfer to such 
        trust after September 19, 1995.
  (e) Transitional Rule.--If--
          (1) by reason of the amendments made by this section, 
        any person other than a United States person ceases to 
        be treated as the owner of a portion of a domestic 
        trust, and
          (2) before January 1, 1997, such trust becomes a 
        foreign trust, or the assets of such trust are 
        transferred to a foreign trust,
no tax shall be imposed by section 1491 of the Internal Revenue 
Code of 1986 by reason of such trust becoming a foreign trust 
or the assets of such trust being transferred to a foreign 
trust.

SEC. ____304. INFORMATION REPORTING REGARDING FOREIGN GIFTS.

  (a) In General.--Subpart A of part III of subchapter A of 
chapter 61 of the Internal Revenue Code of 1986 is amended by 
inserting after section 6039E the following new section:

``SEC. 6039F. NOTICE OF GIFTS RECEIVED FROM FOREIGN PERSONS.

  ``(a) In General.--If the value of the aggregate foreign 
gifts received by a United States person (other than an 
organization described in section 501(c) and exempt from tax 
under section 501(a)) during any taxable year exceeds $10,000, 
such United States person shall furnish (at such time and in 
such manner as the Secretary shall prescribe) such information 
as the Secretary may prescribe regarding each foreign gift 
received during such year.
  ``(b) Foreign Gift.--For purposes of this section, the term 
`foreign gift' means any amount received from a person other 
than a United States person which the recipient treats as a 
gift or bequest. Such term shall not include any qualified 
transfer (within the meaning of section 2503(e)(2)).
  ``(c) Penalty for Failure To File Information.--
          ``(1) In general.--If a United States person fails to 
        furnish the information required by subsection (a) with 
        respect to any foreign gift within the time prescribed 
        therefor (including extensions)--
                  ``(A) the tax consequences of the receipt of 
                such gift shall be determined by the Secretary 
                in the Secretary's sole discretion from the 
                Secretary's own knowledge or from such 
                information as the Secretary may obtain through 
                testimony or otherwise, and
                  ``(B) such United States person shall pay 
                (upon notice and demand by the Secretary and in 
                the same manner as tax) an amount equal to 5 
                percent of the amount of such foreign gift for 
                each month for which the failure continues (not 
                to exceed 25 percent of such amount in the 
                aggregate).
          ``(2) Reasonable cause exception.-- Paragraph (1) 
        shall not apply to any failure to report a foreign gift 
        if the United States person shows that the failure is 
        due to reasonable cause and not due to willful neglect.
  ``(d) Regulations.--The Secretary shall prescribe such 
regulations as may be necessary or appropriate to carry out the 
purposes of this section.''
  (b) Clerical Amendment.--The table of sections for such 
subpart is amended by inserting after the item relating to 
section 6039E the following new item:

        ``Sec. 6039F. Notice of large gifts received from foreign 
                  persons.''

  (c) Effective Date.--The amendments made by this section 
shall apply to amounts received after the date of the enactment 
of this Act in taxable years ending after such date.

SEC. ____305. MODIFICATION OF RULES RELATING TO FOREIGN TRUSTS WHICH 
                    ARE NOT GRANTOR TRUSTS.

  (a) Modification of Interest Charge on Accumulation 
Distributions.--Subsection (a) of section 668 of the Internal 
Revenue Code of 1986 (relating to interest charge on 
accumulation distributions from foreign trusts) is amended to 
read as follows:
  ``(a) General Rule.--For purposes of the tax determined under 
section 667(a)--
          ``(1) Interest determined using underpayment rates.--
        The interest charge determined under this section with 
        respect to any distribution is the amount of interest 
        which would be determined on the partial tax computed 
        under section 667(b) for the period described in 
        paragraph (2) using the rates and the method under 
        section 6621 applicable to underpayments of tax.
          ``(2) Period.--For purposes of paragraph (1), the 
        period described in this paragraph is the period which 
        begins on the date which is the applicable number of 
        years before the date of the distribution and which 
        ends on the date of the distribution.
          ``(3) Applicable number of years.--For purposes of 
        paragraph (2)--
                  ``(A) In general.--The applicable number of 
                years with respect to a distribution is the 
                number determined by dividing--
                          ``(i) the sum of the products 
                        described in subparagraph (B) with 
                        respect to each undistributed income 
                        year, by
                          ``(ii) the aggregate undistributed 
                        net income.
                The quotient determined under the preceding 
                sentence shall be rounded under procedures 
                prescribed by the Secretary.
                  ``(B) Product described.--For purposes of 
                subparagraph (A), the product described in this 
                subparagraph with respect to any undistributed 
                income year is the product of--
                          ``(i) the undistributed net income 
                        for such year, and
                          ``(ii) the sum of the number of 
                        taxable years between such year and the 
                        taxable year of the distribution 
                        (counting in each case the 
                        undistributed income year but not 
                        counting the taxable year of the 
                        distribution).
          ``(4) Undistributed income year.--For purposes of 
        this subsection, the term `undistributed income year' 
        means any prior taxable year of the trust for which 
        there is undistributed net income, other than a taxable 
        year during all of which the beneficiary receiving the 
        distribution was not a citizen or resident of the 
        United States.
          ``(5) Determination of undistributed net income.--
        Notwithstanding section 666, for purposes of this 
        subsection, an accumulation distribution from the trust 
        shall be treated as reducing proportionately the 
        undistributed net income for prior taxable years.
          ``(6) Periods before 1996.--Interest for the portion 
        of the period described in paragraph (2) which occurs 
        before January 1, 1996, shall be determined--
                  ``(A) by using an interest rate of 6 percent, 
                and
                  ``(B) without compounding until January 1, 
                1996.''
  (b) Abusive Transactions.--Section 643(a) of such Code is 
amended by inserting after paragraph (6) the following new 
paragraph:
          ``(7) Abusive transactions.--The Secretary shall 
        prescribe such regulations as may be necessary or 
        appropriate to carry out the purposes of this part, 
        including regulations to prevent avoidance of such 
        purposes.''
  (c) Treatment of Use of Trust Property.--
          (1) In general.--Section 643 of such Code (relating 
        to definitions applicable to subparts A, B, C, and D) 
        is amended by adding at the end the following new 
        subsection:
  ``(i) Use of Foreign Trust Property.--For purposes of 
subparts B, C, and D--
          ``(1) General rule.--If a foreign trust makes a loan 
        of cash or marketable securities directly or indirectly 
        to--
                  ``(A) any grantor or beneficiary of such 
                trust who is a United States person, or
                  ``(B) any United States person not described 
                in subparagraph (A) who is related to such 
                grantor or beneficiary,
        the amount of such loan shall be treated as a 
        distribution by such trust to such grantor or 
        beneficiary (as the case may be).
          ``(2) Use of other property.--Except as provided in 
        regulations prescribed by the Secretary, any direct or 
        indirect use of trust property (other than cash or 
        marketable securities) by a person referred to in 
        subparagraph (A) or (B) of paragraph (1) shall be 
        treated as a distribution to the grantor or beneficiary 
        (as the case may be) equal to the fair market value of 
        the use of such property. The Secretary may prescribe 
        regulations treating a loan guarantee by the trust as a 
        use of trust property equal to the value of the 
        guarantee.
          ``(3) Definitions and special rules.--For purposes of 
        this subsection--
                  ``(A) Cash.--The term `cash' includes foreign 
                currencies and cash equivalents.
                  ``(B) Related person.--
                          ``(i) In general.--A person is 
                        related to another person if the 
                        relationship between such persons would 
                        result in a disallowance of losses 
                        under section 267 or 707(b). In 
                        applying section 267 for purposes of 
                        the preceding sentence, section 
                        267(c)(4) shall be applied as if the 
                        family of an individual includes the 
                        spouses of the members of the family.
                          ``(ii) Allocation of use.--If any 
                        person described in paragraph (1)(B) is 
                        related to more than one person, the 
                        grantor or beneficiary to whom the 
                        treatment under this subsection applies 
                        shall be determined under regulations 
                        prescribed by the Secretary.
                  ``(C) Exclusion of tax-exempts.--The term 
                `United States person' does not include any 
                entity exempt from tax under this chapter.
                  ``(D) Trust not treated as simple trust.--Any 
                trust which is treated under this subsection as 
                making a distribution shall be treated as not 
                described in section 651.
          ``(4) Subsequent transactions regarding loan 
        principal.--If any loan is taken into account under 
        paragraph (1), any subsequent transaction between the 
        trust and the original borrower regarding the principal 
        of the loan (by way of complete or partial repayment, 
        satisfaction, cancellation, discharge, or otherwise) 
        shall be disregarded for purposes of this title.''
          (2) Technical amendment.--Paragraph (8) of section 
        7872(f) is amended by inserting ``, 643(i),'' before 
        ``or 1274'' each place it appears.
  (d) Effective Dates.--
          (1) Interest charge.--The amendment made by 
        subsection (a) shall apply to distributions after the 
        date of the enactment of this Act.
          (2) Abusive transactions.--The amendment made by 
        subsection (b) shall take effect on the date of the 
        enactment of this Act.
          (3) Use of trust property.--The amendment made by 
        subsection (c) shall apply to--
                  (A) loans of cash or marketable securities 
                after September 19, 1995, and
                  (B) uses of other trust property after 
                December 31, 1995.

SEC. ____306. RESIDENCE OF ESTATES AND TRUSTS, ETC.

  (a) Treatment as United States Person.--
          (1) In general.--Paragraph (30) of section 7701(a) of 
        the Internal Revenue Code of 1986 is amended by 
        striking subparagraph (D) and by inserting after 
        subparagraph (C) the following:
                  ``(D) any estate or trust if--
                          ``(i) a court within the United 
                        States is able to exercise primary 
                        supervision over the administration of 
                        the estate or trust, and
                          ``(ii) in the case of a trust, one or 
                        more United States fiduciaries have the 
                        authority to control all substantial 
                        decisions of the trust.''
          (2) Conforming amendment.--Paragraph (31) of section 
        7701(a) of such Code is amended to read as follows:
          ``(31) Foreign estate or trust.--The term `foreign 
        estate' or `foreign trust' means any estate or trust 
        other than an estate or trust described in section 
        7701(a)(30)(D).''
          (3) Effective date.--The amendments made by this 
        subsection shall apply--
                  (A) to taxable years beginning after December 
                31, 1996, or
                  (B) at the election of the trustee of a 
                trust, to taxable years ending after the date 
                of the enactment of this Act.
        Such an election, once made, shall be irrevocable.
  (b) Domestic Trusts Which Become Foreign Trusts.--
          (1) In general.--Section 1491 of such Code (relating 
        to imposition of tax on transfers to avoid income tax) 
        is amended by adding at the end the following new flush 
        sentence:
``If a trust which is not a foreign trust becomes a foreign 
trust, such trust shall be treated for purposes of this section 
as having transferred, immediately before becoming a foreign 
trust, all of its assets to a foreign trust.''
          (2) Penalty.--Section 1494 of the Internal Revenue 
        Code of 1986 is amended by adding at the end the 
        following new subsection:
  ``(c) Penalty.--In the case of any failure to file a return 
required by the Secretary with respect to any transfer 
described in section 1491, the person required to file such 
return shall be liable for the penalties provided in section 
6677 in the same manner as if such failure were a failure to 
file a return under section 6048(a).''
          (3) Effective date.--The amendments made by this 
        subsection shall take effect on the date of the 
        enactment of this Act.

                   PART II--OTHER FOREIGN PROVISIONS

SEC. ____311. DEFINITION OF FOREIGN PERSONAL HOLDING COMPANY INCOME.

  (a) Income From Notional Principal Contracts.--
          (1) In general.--Paragraph (1) of section 954(c) 
        (defining foreign personal holding company income) is 
        amended by adding at the end the following new 
        subparagraph:
                  ``(F) Income from notional principal 
                contracts.--Net income from notional principal 
                contracts. Any item of income, gain, deduction, 
                or loss from a notional principal contract 
                entered into for purposes of hedging any item 
                described in subparagraph (B), (C), (D), or (E) 
                shall not be taken into account for purposes of 
                this subparagraph but shall be taken into 
                account under such other subparagraph.''
          (2) Exception for dealers.--Paragraph (2) of section 
        954(c) is amended by adding at the end the following 
        new subparagraph:
                  ``(C) Exception for dealers.--Except as 
                provided by regulations, in the case of a 
                regular dealer in property, forward contracts, 
                option contracts, or similar financial 
                instruments (including notional principal 
                contracts), there shall not be taken into 
                account in computing foreign personal holding 
                income any item of income, gain, deduction, or 
                loss from any transaction (including hedging 
                transactions) entered into in the ordinary 
                course of such dealer's trade or business as 
                such a dealer.''
          (3) Conforming amendment.--Subparagraph (B) of 
        section 954(c)(1) is amended--
                  (A) by striking the second sentence, and
                  (B) by striking ``also'' in the last 
                sentence.
  (b) Payments in Lieu of Dividends.--Paragraph (1) of section 
954(c), as amended by subsection (a), is amended by adding at 
the end the following new subparagraph:
                  ``(G) Payments in lieu of dividends.--
                Payments in lieu of dividends which are made 
                pursuant to an agreement to which section 1058 
                applies.''
  (c) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 1995.

SEC. ____312. TREATMENT OF FOREIGN OIL AND GAS EXTRACTION INCOME.

  (a) Disallowance of Foreign Tax Credit.--Section 907(a) is 
amended to read as follows:
  ``(a) Denial of Foreign Tax Credit for Extraction Income.--
          ``(1) In general.--Notwithstanding any other 
        provision of this part--
                  ``(A) no credit shall be allowed under 
                section 901(a) for any income, war profits, or 
                excess profits taxes paid or accrued (or deemed 
                paid under section 902 or 960) to any country 
                which are attributable to foreign oil and gas 
                extraction income, and
                  ``(B) subsections (a), (b), and (c) of 
                section 904 and sections 902 and 960 shall be 
                applied separately with respect to foreign oil 
                and gas extraction income.
          ``(2) Taxes allowed as deduction, etc.--Sections 78 
        and 275 shall not apply to any tax which is not 
        allowable as a credit under section 901(a) by reason of 
        this subsection.''
  (b) Elimination of Deferral.--Section 954(g) is amended by 
adding at the end the following new paragraph:
          ``(3) No exceptions for extraction income.--
        Notwithstanding paragraphs (1) and (2), foreign base 
        company oil related income shall include all foreign 
        oil and gas extraction income (as defined in section 
        907(c)(1)) for the taxable year.''
  (c) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 1995. 
The amendments made by this section shall apply notwithstanding 
any treaty obligation of the United States.

SEC. ____313. LIMITATION ON EXCLUSION OF EARNED INCOME OF CITIZENS OR 
                    RESIDENTS OF THE UNITED STATES LIVING ABROAD.

  (a) In General.--Section 911 (relating to exclusion of earned 
income of citizens or residents of the United States living 
abroad) is amended by redesignating subsection (f) as 
subsection (g) and by inserting after subsection (e) the 
following new subsection:
  ``(f) Exclusion To Be Applied at Lowest Rates of Tax.--If 
this section applies to a taxpayer for any taxable year, the 
tax imposed this chapter for such taxable year shall be equal 
to the greater of--
          ``(1) such tax determined without regard to this 
        subsection, or
          ``(2) the excess of--
                  ``(A) such tax determined without regard to 
                this section, over
                  ``(B) a tax determined under section 1 on an 
                amount of taxable income equal to the amount of 
                the exclusion under subsection (a).''
  (b) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 1995.

                   Subtitle D--Accounting Provisions

SEC. ____401. REPEAL OF BAD DEBT RESERVE METHOD FOR THRIFT SAVINGS 
                    ASSOCIATIONS.

  (a) In General.--Section 593 (relating to reserves for losses 
on loans) is hereby repealed.
  (b) Conforming Amendments.--
          (1) Subsection (d) of section 50 is amended by adding 
        at the end the following new sentence:
``Paragraphs (1)(A), (2)(A), and (4) of section 46(e) referred 
to in paragraph (1) of this subsection shall not apply to any 
taxable year beginning after December 31, 1995.''
          (2) Subsection (e) of section 52 is amended by 
        striking paragraph (1) and by redesignating paragraphs 
        (2) and (3) as paragraphs (1) and (2), respectively.
          (3) Subsection (a) of section 57 is amended by 
        striking paragraph (4).
          (4) Section 246 is amended by striking subsection 
        (f).
          (5) Clause (i) of section 291(e)(1)(B) is amended by 
        striking ``or to which section 593 applies''.
          (6) Subparagraph (A) of section 585(a)(2) is amended 
        by striking ``other than an organization to which 
        section 593 applies''.
          (7) Sections 595 and 596 are hereby repealed.
          (8) Subsection (a) of section 860E is amended--
                  (A) by striking ``Except as provided in 
                paragraph (2), the'' in paragraph (1) and 
                inserting ``The'',
                  (B) by striking paragraphs (2) and (4) and 
                redesignating paragraphs (3) and (5) as 
                paragraphs (2) and (3), respectively, and
                  (C) by striking in paragraph (2) (as so 
                redesignated) all that follows ``subsection'' 
                and inserting a period.
          (9) Paragraph (3) of section 992(d) is amended by 
        striking ``or 593''.
          (10) Section 1038 is amended by striking subsection 
        (f).
          (11) Clause (ii) of section 1042(c)(4)(B) is amended 
        by striking ``or 593''.
          (12) Subsection (c) of section 1277 is amended by 
        striking ``or to which section 593 applies''.
          (13) Subparagraph (B) of section 1361(b)(2) is 
        amended by striking ``or to which section 593 
        applies''.
          (14) The table of sections for part II of subchapter 
        H of chapter 1 is amended by striking the items 
        relating to sections 593, 595, and 596.
  (c) Effective Date.--
          (1) In general.--Except as provided in paragraph (2), 
        the amendments made by this section shall apply to 
        taxable years beginning after December 31, 1995.
          (2) Repeal of section 595.--The repeal of section 595 
        under subsection (b)(7) shall apply to property 
        acquired in taxable years beginning after December 31, 
        1995.
  (d) 6-Year Spread of Adjustments.--
          (1) In general.--In the case of any taxpayer who is 
        required by reason of the amendments made by this 
        section to change its method of computing reserves for 
        bad debts--
                  (A) such change shall be treated as a change 
                in a method of accounting,
                  (B) such change shall be treated as initiated 
                by the taxpayer and as having been made with 
                the consent of the Secretary, and
                  (C) the net amount of the adjustments 
                required to be taken into account by the 
                taxpayer under section 481(a)--
                          (i) shall be determined by taking 
                        into account only applicable excess 
                        reserves, and
                          (ii) as so determined, shall be taken 
                        into account ratably over the 6-taxable 
                        year period beginning with the first 
                        taxable year beginning after December 
                        31, 1995.
          (2) Applicable excess reserves.--
                  (A) In general.--For purposes of paragraph 
                (1), the term `applicable excess reserves' 
                means the excess (if any) of--
                          (i) the balance of the reserves 
                        described in section 593(c)(1) of such 
                        Code (as in effect on the day before 
                        the date of the enactment of this Act) 
                        as of the close of the taxpayer's last 
                        taxable year beginning before January 
                        1, 1996, over
                          (ii) the lesser of--
                                  (I) the balance of such 
                                reserves as of the close of the 
                                taxpayer's last taxable year 
                                beginning before January 1, 
                                1988, or
                                  (II) the balance of the 
                                reserves described in subclause 
                                (I), reduce by an amount 
                                determined in the same manner 
                                as under section 
                                585(b)(2)(B)(ii) on the basis 
                                of the taxable years described 
                                in clause (i) and this clause.
                  (B) Special rule for thrifts which become 
                small banks.--In the case of a bank (as defined 
                in section 581 of such Code) which is not a 
                large bank (as defined in section 585(c)(2) of 
                such Code) for its first taxable year beginning 
                after December 31, 1995--
                          (i) the balance taken into account 
                        under subparagraph (A)(ii) shall not be 
                        less than the amount which would be the 
                        balance of such reserve as of the close 
                        of its last taxable year beginning 
                        before January 1, 1996, if the 
                        additions to such reserve for all 
                        taxable years had been determined under 
                        section 585(b)(2)(A), and
                          (ii) the opening balance of the 
                        reserve for bad debts as of the 
                        beginning of such first taxable year 
                        shall be the balance taken into account 
                        under subparagraph (A)(ii) (determined 
                        after the application of clause (i) of 
                        this subparagraph).
                The preceding sentence shall not apply for 
                purposes of paragraphs (5), (6), and (7).
          (3) Recapture of pre-1988 reserves where taxpayer 
        ceases to be bank.--If during any taxable year 
        beginning after December 31, 1995, a taxpayer to which 
        paragraph (1) applied is not a bank (as defined in 
        section 581), paragraph (1) shall apply to the reserves 
        described in subparagraph (A)(ii) except that such 
        reserves shall be taken into account ratably over the 
        6-taxable year period beginning with such taxable year.
          (4) Suspension of recapture if residential loan 
        requirement met.--
                  (A) In general.--In the case of a bank which 
                meets the residential loan requirement of 
                subparagraph (B) for a taxable year beginning 
                after December 31, 1995, and before January 1, 
                1998--
                          (i) no adjustment shall be taken into 
                        account under paragraph (1) for such 
                        taxable year, and
                          (ii) such taxable year shall be 
                        disregarded in determining--
                                  (I) whether any other taxable 
                                year is a taxable year for 
                                which an adjustment is required 
                                to be taken into account under 
                                paragraph (1), and
                                  (II) the amount of such 
                                adjustment.
                  (B) Residential loan requirement.--A taxpayer 
                meets the residential loan requirement of this 
                subparagraph for any taxable year if the 
                principal amount of the residential loans made 
                by the taxpayer during such year is not less 
                than the base amount for such year.
                  (C) Residential loan.--For purposes of this 
                paragraph, the term ``residential loan'' means 
                any loan described in clause (v) of section 
                7701(a)(19)(C) of such Code but only if such 
                loan is incurred in acquiring, constructing, or 
                improving the property described in such 
                clause.
                  (D) Base amount.--For purposes of 
                subparagraph (B), the base amount is the 
                average of the principal amounts of the 
                residential loans made by the taxpayer during 
                the 6 most recent taxable years beginning 
                before January 1, 1996. At the election of the 
                taxpayer who made such loans during each of 
                such 6 taxable years, the preceding sentence 
                shall be applied without regard to the taxable 
                year in which such principal amount was the 
                highest and the taxable year in such principal 
                amount was the lowest. Such an election may be 
                made only for the first taxable year beginning 
                after December 31, 1995, and, if made for such 
                taxable year, shall apply to the succeeding 
                taxable year unless revoked with the consent of 
                the Secretary of the Treasury or his delegate.
                  (E) Controlled groups.--In the case of a 
                taxpayer which is a member of any controlled 
                group of corporations described in section 
                1563(a)(1) of such Code, subparagraph (B) shall 
                be applied with respect to such group.
          (5) Continued application of fresh start under 
        section 585 transitional rules.--In the case of a 
        taxpayer to which paragraph (1) applied and which was 
        not a large bank (as defined in section 585(c)(2) of 
        such Code) for its first taxable year beginning after 
        December 31, 1995:
                  (A) In general.--For purposes of determining 
                the net amount of adjustments referred to in 
                section 585(c)(3)(A)(iii) of such Code, there 
                shall be taken into account only the excess of 
                the reserve for bad debts as of the close of 
                the last taxable year before the 
                disqualification year over the balance taken 
                into account by such taxpayer under paragraph 
                (2)(A)(ii) of this subsection.
                  (B) Treatment under elective cut-off 
                method.--For purposes of applying section 
                585(c)(4) of such Code--
                          (i) the balance of the reserve taken 
                        into account under subparagraph (B) 
                        thereof shall be reduced by the balance 
                        taken into account by such taxpayer 
                        under paragraph (2)(A)(ii) of this 
                        subsection, and
                          (ii) no amount shall be includible in 
                        gross income by reason of such 
                        reduction.
          (6) Continued application of section 593(e).--
        Notwithstanding the amendments made by this section, in 
        the case of a taxpayer to which paragraph (1) of this 
        subsection applies, section 593(e) of such Code (as in 
        effect on the day before the date of the enactment of 
        this Act) shall continue to apply to such taxpayer as 
        if such taxpayer were a domestic building and loan 
        association but the amount of the reserves taken into 
        account under subparagraphs (B) and (C) of section 
        593(e)(1) (as so in effect) shall be the balance taken 
        into account by such taxpayer under paragraph 
        (2)(A)(ii) of this subsection.
          (7) Certain items included as section 381(c) items.--
        The balance of the applicable excess reserves, and the 
        balance taken into account by a taxpayer under 
        paragraph (2)(A)(ii) of this subsection, shall be 
        treated as items described in section 381(c) of such 
        Code.
          (8) Conversions to credit unions.--In the case of a 
        taxpayer to which paragraph (1) applied which becomes a 
        credit union described in section 501(c)(14)(A)--
                  (A) any amount required to be included in the 
                gross income of the credit union by reason of 
                this subsection shall be treated as derived 
                from an unrelated trade or business (as defined 
                in section 513), and
                  (B) for purposes of paragraph (3), the credit 
                union shall not be treated as if it were a 
                bank.
          (9) Regulations.--The Secretary of the Treasury or 
        his delegate shall prescribe such regulations as may be 
        necessary to carry out this subsection, including 
        regulations providing for the application of paragraphs 
        (4) and (6) in the case of acquisitions, mergers, spin-
        offs, and other reorganizations.

SEC. ____402. DEPRECIATION UNDER INCOME FORECAST METHOD.

  (a) General Rule.--Section 167 (relating to depreciation) is 
amended by redesignating subsection (g) as subsection (h) and 
by inserting after subsection (f) the following new subsection:
  ``(g) Depreciation Under Income Forecast Method.--
          ``(1) In general.--If the depreciation deduction 
        allowable under this section to any taxpayer with 
        respect to any property is determined under the income 
        forecast method or any similar method--
                  ``(A) in applying such method, the income 
                from the property shall include all income 
                earned in connection with the property before 
                the close of the 10th taxable year following 
                the taxable year in which the property was 
                placed in service,
                  ``(B) the adjusted basis of the property 
                shall only include amounts with respect to 
                which the requirements of section 461(h) are 
                satisfied,
                  ``(C) the depreciation deduction under such 
                method for the 10th taxable year beginning 
                after the taxable year in which the property 
                was placed in service shall be equal to the 
                adjusted basis of such property as of the 
                beginning of such 10th taxable year, and
                  ``(D) such taxpayer shall pay (or be entitled 
                to receive) interest computed under the look-
                back method of paragraph (2) for any 
                recomputation year.
          ``(2) Look-back method.--The interest computed under 
        the look-back method of this paragraph for any 
        recomputation year shall be determined by--
                  ``(A) first determining the depreciation 
                deductions under this section with respect to 
                such property which would have been allowable 
                for prior taxable years if the determination of 
                the amounts so allowable had been made on the 
                basis of the sum of the following (instead of 
                the estimated income with respect to such 
                property)--
                          ``(i) the actual income earned in 
                        connection with such property for 
                        periods before the close of the 
                        recomputation year, and
                          ``(ii) an estimate of the future 
                        income to be earned in connection with 
                        such property for periods after the 
                        recomputation year,
                  ``(B) second, determining (solely for 
                purposes of computing such interest) the 
                overpayment or underpayment of tax for each 
                such prior taxable year which would result 
                solely from the application of subparagraph 
                (A), and
                  ``(C) then using the adjusted overpayment 
                rate (as defined in section 460(b)(7)), 
                compounded daily, on the overpayment or 
                underpayment determined under subparagraph (B).
        For purposes of the preceding sentence, any cost 
        incurred after the property is placed in service (which 
        is not treated as a separate property under paragraph 
        (5)) shall be taken into account by discounting (using 
        the Federal mid-term rate determined under section 
        1274(d) as of the time such cost is incurred) such cost 
        to its value as of the date the property is placed in 
        service. The taxpayer may elect with respect to any 
        property to have the preceding sentence not apply to 
        such property.
          ``(3) Exception from look-back method.--Paragraph 
        (1)(D) shall not apply with respect to any property 
        which, when placed in service by the taxpayer, had a 
        basis of $100,000 or less.
          ``(4) Recomputation year.--For purposes of this 
        subsection, except as provided in regulations, the term 
        `recomputation year' means, with respect to any 
        property, the 3d and the 10th taxable years beginning 
        after the taxable year in which the property was placed 
        in service, unless the actual income earned in 
        connection with the property for the period before the 
        close of such 3d or 10th taxable year is within 10 
        percent of the income earned in connection with the 
        property for such period which was taken into account 
        under paragraph (1)(A).
          ``(5) Special rules.--
                  ``(A) Certain costs treated as separate 
                property.--For purposes of this subsection, the 
                following costs shall be treated as separate 
                properties:
                          ``(i) Any costs incurred with respect 
                        to any property after the 10th taxable 
                        year beginning after the taxable year 
                        in which the property was placed in 
                        service.
                          ``(ii) Any costs incurred after the 
                        property is placed in service and 
                        before the close of such 10th taxable 
                        year if such costs are significant and 
                        give rise to a significant increase in 
                        the income from the property which was 
                        not included in the estimated income 
                        from the property.
                  ``(B) Syndication income from television 
                series.--In the case of property which is an 
                episode in a television series, income from 
                syndicating such series shall not be required 
                to be taken into account under this subsection 
                before the earlier of--
                          ``(i) the 4th taxable year beginning 
                        after the date the first episode in 
                        such series is placed in service, or
                          ``(ii) the earliest taxable year in 
                        which the taxpayer has an arrangement 
                        relating to the future syndication of 
                        such series.
                  ``(C) Special rules for financial 
                exploitation of characters, etc.--For purposes 
                of this subsection, in the case of television 
                and motion picture films, the income from the 
                property shall include income from the 
                exploitation of characters, designs, scripts, 
                scores, and other incidental income associated 
                with such films, but only to the extent that 
                such income is earned in connection with the 
                ultimate use of such items by, or the ultimate 
                sale of merchandise to, persons who are not 
                related persons (within the meaning of section 
                267(b)) to the taxpayer.
                  ``(D) Collection of interest.--For purposes 
                of subtitle F (other than sections 6654 and 
                6655), any interest required to be paid by the 
                taxpayer under paragraph (1) for any 
                recomputation year shall be treated as an 
                increase in the tax imposed by this chapter for 
                such year.
                  ``(E) Determinations.--For purposes of 
                paragraph (2), determinations of the amount of 
                income earned in connection with any property 
                shall be determined in the same manner as for 
                purposes of applying the income forecast 
                method; except that any income from the 
                disposition of such property shall be taken 
                into account.
                  ``(F) Treatment of pass-thru entities.--Rules 
                similar to the rules of section 460(b)(4) shall 
                apply for purposes of this subsection.''
  (b) Effective Date.--
          (1) In general.--The amendment made by subsection (a) 
        shall apply to property placed in service after 
        September 13, 1995.
          (2) Binding contracts.--The amendment made by 
        subsection (a) shall not apply to any property produced 
        or acquired by the taxpayer pursuant to a written 
        contract which was binding on September 13, 1995, and 
        at all times thereafter before such production or 
        acquisition.

SEC. ____403. REPEAL OF LOWER-OF-COST-OR-MARKET METHOD OF ACCOUNTING 
                    FOR INVENTORIES.

  (a) In General.--Section 471 (relating to general rule for 
inventories) is amended by redesignating subsection (b) as 
subsection (c) and by inserting after subsection (a) the 
following new subsection:
  ``(b) Certain Write-Downs Not Permitted; Use of Mark-Downs 
Required Under Retail Method.--
          ``(1) In general.--A taxpayer--
                  ``(A) may not use the lower-of-cost-or-market 
                method of accounting for inventories, and
                  ``(B) may not write-down items by reason of 
                being unsalable at normal prices or unusable in 
                the normal way because of damage, 
                imperfections, shop wear, changes of style, odd 
                or broken lots, or other similar causes.
        Subparagraph (B) shall not apply to a taxpayer using a 
        mark-to-market method of accounting for both gains and 
        losses in inventory values.
          ``(2) Mark-downs required to be taken into account 
        under retail method.--The retail method of accounting 
        for inventories shall be applied by taking into account 
        mark-downs in determining the approximate cost of the 
        inventories.
          ``(3) Exception for certain small businesses.--
        Paragraph (1) shall not apply to any taxpayer for the 
        taxable year if the average annual gross receipts of 
        the taxpayer for the 3 preceding taxable years do not 
        exceed $5,000,000. For purposes of the preceding 
        sentence, rules similar to the rules of paragraph (2) 
        and (3) of section 448(c) shall apply.
          ``(4) Regulations.--The Secretary shall prescribe 
        such regulations as may be appropriate to carry out the 
        purposes of this subsection, including regulations 
        relating to wash-sale-type transactions.''
  (b) Conforming Amendments.--
          (1) Clause (iii) of section 312(n)(4)(C) is amended 
        to read as follows:
                          ``(iii) Inventory amount.--The 
                        inventory amount of assets under the 
                        first-in, first-out method authorized 
                        by section 471 shall be determined 
                        using the method authorized to be used 
                        by the taxpayer under such section.''
          (2) Subparagraph (C) of section 1363(d)(4) is amended 
        to read as follows:
                          ``(iii) Inventory amount.--The 
                        inventory amount of assets under a 
                        method authorized by section 471 shall 
                        be determined using the method 
                        authorized to be used by the 
                        corporation under such section.''
  (c) Effective Date.--
          (1) In general.--The amendments made by this section 
        shall apply to taxable years beginning after December 
        31, 1995.
          (2) Change in method of accounting.--In the case of 
        any taxpayer required by this section to change its 
        method accounting for its first taxable year beginning 
        after December 31, 1995--
                  (A) such change shall be treated as initiated 
                by the taxpayer,
                  (B) such change shall be treated as made with 
                the consent of the Secretary of the Treasury, 
                and
                  (C) the net amount of the adjustments 
                required to be taken into account by the 
                taxpayer under section 481 of the Internal 
                Revenue Code of 1986 shall be taken into 
                account ratably over the 4-taxable year period 
                beginning with the first taxable year beginning 
                after December 31, 1995.

                 Subtitle E--Administrative Provisions

SEC. ____501. REPEAL OF DIESEL FUEL TAX REBATE TO PURCHASERS OF DIESEL-
                    POWERED AUTOMOBILES AND LIGHT TRUCKS.

  (a) In General.--Section 6427 (relating to fuels not used for 
taxable purposes) is amended by striking subsection (g).
  (b) Conforming Amendments.--
          (1) Paragraph (3) of section 34(a) is amended to read 
        as follows:
          ``(3) under section 6427 with respect to fuels used 
        for nontaxable purposes or resold during the taxable 
        year (determined without regard to section 6427(k)).''.
          (2) Paragraphs (1) and (2)(A) of section 6427(i) are 
        each amended--
                  (A) by striking ``(g),'', and
                  (B) by striking ``(or a qualified diesel 
                powered highway vehicle purchased)'' each place 
                it appears.
  (c) Effective Date.--The amendments made by this section 
shall apply to vehicles purchased after December 31, 1995.

SEC. ____502. INCREASED INFORMATION REPORTING PENALTIES.

  (a) In General.--Section 6721(a) (relating to imposition of 
penalty) is amended by adding at the end the following new 
paragraph:
          ``(3) Increased penalty if less than 97 percent of 
        aggregate amount of items reported correctly.--
                  ``(A) In general.--Subject to the overall 
                limitation of paragraph (1), the amount of the 
                penalty under paragraph (1) for any failure 
                with respect to any information return shall be 
                equal to the greater of $50 or 5 percent of the 
                amount required to be reported correctly but 
                not so reported.
                  ``(B) Exception where substantial 
                compliance.--Subparagraph (A) shall not apply 
                to failures with respect to information returns 
                required to be filed by a person during any 
                calendar year if the aggregate amount which is 
                timely and correctly reported on such returns 
                filed by the person for the calendar year is at 
                least 97 percent of the aggregate amount which 
                is required to be reported on such returns by 
                the person for the calendar year.''
  (b) Conforming Amendment.--Paragraph (1) of section 6721(a) 
is amended by striking ``In'' and inserting ``Except as 
provided in paragraph (3), in''.
  (c) Effective Date.--The amendments made by this section 
shall apply to returns the due date for which (without regard 
to extensions) is more than 90 days after the date of the 
enactment of this Act.

       Subtitle F--Casualty and Involuntary Conversion Provisions

SEC. ____601. BASIS ADJUSTMENT TO PROPERTY HELD BY CORPORATION WHERE 
                    STOCK IN CORPORATION IS REPLACEMENT PROPERTY UNDER 
                    INVOLUNTARY CONVERSION RULES.

  (a) In General.--Subsection (b) of section 1033 is amended to 
read as follows:
  ``(b) Basis of Property Acquired Through Involuntary 
Conversion.--
          ``(1) Conversions described in subsection (a)(1).--If 
        the property was acquired as the result of a compulsory 
        or involuntary conversion described in subsection 
        (a)(1), the basis shall be the same as in the case of 
        the property so converted--
                  ``(A) decreased in the amount of any money 
                received by the taxpayer which was not expended 
                in accordance with the provisions of law 
                (applicable to the year in which such 
                conversion was made) determining the taxable 
                status of the gain or loss upon such 
                conversion, and
                  ``(B) increased in the amount of gain or 
                decreased in the amount of loss to the taxpayer 
                recognized upon such conversion under the law 
                applicable to the year in which such conversion 
                was made.
          ``(2) Conversions described in subsection (a)(2).--In 
        the case of property purchased by the taxpayer in a 
        transaction described in subsection (a)(2) which 
        resulted in the nonrecognition of any part of the gain 
        realized as the result of a compulsory or involuntary 
        conversion, the basis shall be the cost of such 
        property decreased in the amount of the gain not so 
        recognized; and if the property purchased consists of 
        more than 1 piece of property, the basis determined 
        under this sentence shall be allocated to the purchased 
        properties in proportion to their respective costs.
          ``(3) Property held by corporation the stock of which 
        is replacement property.--
                  ``(A) In general.--If the basis of stock in a 
                corporation is decreased under paragraph (2), 
                an amount equal to such decrease shall also be 
                applied to reduce the basis of property held by 
                the corporation at the time the taxpayer 
                acquired control (as defined in subsection 
                (a)(2)(E)) of such corporation.
                  ``(B) Limitation.--Subparagraph (A) shall not 
                apply to the extent that it would (but for this 
                subparagraph) require a reduction in the 
                aggregate adjusted bases of the property of the 
                corporation below the taxpayer's adjusted basis 
                of the stock in the corporation (determined 
                immediately after such basis is decreased under 
                paragraph (2)).
                  ``(C) Allocation of basis reduction.--The 
                decrease required under subparagraph (A) shall 
                be allocated--
                          ``(i) first to property which is 
                        similar or related in service or use to 
                        the converted property,
                          ``(ii) second to depreciable property 
                        (as defined in section 1017(b)(3)(B)) 
                        not described in clause (i), and
                          ``(iii) then to other property.
                  ``(D) Special rules.--
                          ``(i) Reduction not to exceed 
                        adjusted basis of property.--No 
                        reduction in the basis of any property 
                        under this paragraph shall exceed the 
                        adjusted basis of such property 
                        (determined without regard to such 
                        reduction).
                          ``(ii) Allocation of reduction among 
                        properties.--If more than 1 property is 
                        described in a clause of subparagraph 
                        (C), the reduction under this paragraph 
                        shall be allocated among such property 
                        in proportion to the adjusted bases of 
                        such property (as so determined).''.
  (b) Effective Date.--The amendment made by this section shall 
apply to involuntary conversions occurring after September 13, 
1995.

      Subtitle G--Excise Tax on Amounts of Private Excess Benefits

SEC. ____701. EXCISE TAXES FOR FAILURE BY CERTAIN CHARITABLE 
                    ORGANIZATIONS TO MEET CERTAIN QUALIFICATION 
                    REQUIREMENTS.

  (a) In General.--Chapter 42 (relating to private foundations 
and certain other tax-exempt organizations) is amended by 
redesignating subchapter D as subchapter E and by inserting 
after subchapter C the following new subchapter:

  ``Subchapter D--Failure By Certain Charitable Organizations To Meet 
                   Certain Qualification Requirements

        ``Sec. 4958. Taxes on excess benefit transactions.

``SEC. 4958. TAXES ON EXCESS BENEFIT TRANSACTIONS.

  ``(a) Initial Taxes.--
          ``(1) On the disqualified person.--There is hereby 
        imposed on each excess benefit transaction a tax equal 
        to 25 percent of the excess benefit. The tax imposed by 
        this paragraph shall be paid by any disqualified person 
        referred to in subsection (f)(1) with respect to such 
        transaction.
          ``(2) On the management.--In any case in which a tax 
        is imposed by paragraph (1), there is hereby imposed on 
        the participation of any organization manager in the 
        excess benefit transaction, knowing that it is such a 
        transaction, a tax equal to 10 percent of the excess 
        benefit, unless such participation is not willful and 
        is due to reasonable cause. The tax imposed by this 
        paragraph shall be paid by any organization manager who 
        participated in the excess benefit transaction.
  ``(b) Additional Tax On the Disqualified Person.--In any case 
in which an initial tax is imposed by subsection (a)(1) on an 
excess benefit transaction and the excess benefit involved in 
such transaction is not corrected within the taxable period, 
there is hereby imposed a tax equal to 200 percent of the 
excess benefit involved. The tax imposed by this subsection 
shall be paid by any disqualified person referred to in 
subsection (f)(1) with respect to such transaction.
  ``(c) Excess Benefit Transaction; Excess Benefit.--For 
purposes of this section--
          ``(1) Excess benefit transaction.--
                  ``(A) In general.--The term `excess benefit 
                transaction' means any transaction in which an 
                economic benefit is provided by an applicable 
                tax-exempt organization directly or indirectly 
                to or for the use of any disqualified person if 
                the value of the economic benefit provided 
                exceeds the value of the consideration 
                (including the performance of services) 
                received for providing such benefit. For 
                purposes of the preceding sentence, an economic 
                benefit shall not be treated as consideration 
                for the performance of services unless such 
                organization clearly indicated its intent to so 
                treat such benefit.
                  ``(B) Excess benefit.--The term `excess 
                benefit' means the excess referred to in 
                subparagraph (A).
          ``(2) Authority to include certain other private 
        inurement.--To the extent provided in regulations 
        prescribed by the Secretary, the term `excess benefit 
        transaction' includes any transaction in which the 
        amount of any economic benefit provided to or for the 
        use of a disqualified person is determined in whole or 
        in part by the revenues of 1 or more activities of the 
        organization but only if such transaction results in 
        inurement not permitted under paragraph (3) or (4) of 
        section 501(c), as the case may be. In the case of any 
        such transaction, the excess benefit shall be the 
        amount of the inurement not so permitted.
  ``(d) Special Rules.--For purposes of this section--
          ``(1) Joint and several liability.--If more than 1 
        person is liable for any tax imposed by subsection (a) 
        or subsection (b), all such persons shall be jointly 
        and severally liable for such tax.
          ``(2) Limit for management.--With respect to any 1 
        excess benefit transaction, the maximum amount of the 
        tax imposed by subsection (a)(2) shall not exceed 
        $10,000.
  ``(e) Applicable Tax-Exempt Organization.--For purposes of 
this subchapter, the term `applicable tax-exempt organization' 
means--
          ``(1) any organization which (without regard to any 
        excess benefit) would be described in paragraph (3) or 
        (4) of section 501(c) and exempt from tax under section 
        501(a), and
          ``(2) any organization which was described in 
        paragraph (1) at any time during the 10-year period 
        ending on the date of the transaction.
Such term shall not include a private foundation (as defined in 
section 509(a)).
  ``(f) Other Definitions.--For purposes of this section--
          ``(1) Disqualified person.--The term `disqualified 
        person' means, with respect to any transaction--
                  ``(A) any person who was, at any time during 
                the 5-year period ending on the date of such 
                transaction, in a position to exercise 
                substantial influence over the affairs of the 
                organization,
                  ``(B) a member of the family of an individual 
                described in subparagraph (A), and
                  ``(C) a 35-percent controlled entity.
          ``(2) Organization manager.--The term `organization 
        manager' means, with respect to any applicable tax-
        exempt organization, any officer, director, or trustee 
        of such organization (or any individual having powers 
        or responsibilities similar to those of officers, 
        directors, or trustees of the organization).
          ``(3) 35-percent controlled entity.--
                  ``(A) In general.--The term `35-percent 
                controlled entity' means--
                          ``(i) a corporation in which persons 
                        described in subparagraph (A) or (B) of 
                        paragraph (1) own more than 35 percent 
                        of the total combined voting power,
                          ``(ii) a partnership in which such 
                        persons own more than 35 percent of the 
                        profits interest, and
                          ``(iii) a trust or estate in which 
                        such persons own more than 35 percent 
                        of the beneficial interest.
                  ``(B) Constructive ownership rules.--Rules 
                similar to the rules of paragraphs (3) and (4) 
                of section 4946(a) shall apply for purposes of 
                this paragraph.
          ``(4) Family members.--The members of an individual's 
        family shall be determined under section 4946(d); 
        except that such members also shall include the 
        brothers and sisters (whether by the whole or half 
        blood) of the individual and their spouses.
          ``(5) Taxable period.--The term `taxable period' 
        means, with respect to any excess benefit transaction, 
        the period beginning with the date on which the 
        transaction occurs and ending on the earliest of--
                  ``(A) the date of mailing a notice of 
                deficiency under section 6212 with respect to 
                the tax imposed by subsection (a)(1), or
                  ``(B) the date on which the tax imposed by 
                subsection (a)(1) is assessed.
          ``(6) Correction.--The terms `correction' and 
        `correct' mean, with respect to any excess benefit 
        transaction, undoing the excess benefit to the extent 
        possible, and where fully undoing the excess benefit is 
        not possible, such additional corrective action as is 
        prescribed by the Secretary by regulations.''
  (b) Application of Private Inurement Rule to Tax-Exempt 
Organizations Described in Section 501(c)(4).--
          (1) Paragraph (4) of section 501(c) is amended by 
        inserting ``(A)'' after ``(4)'' and by adding at the 
        end the following:
          ``(B) Subparagraph (A) shall not apply to an entity 
        unless no part of the net earnings of such entity 
        inures to the benefit of any private shareholder or 
        individual.''
          (2) In the case of an organization operating on a 
        cooperative basis which, before the date of the 
        enactment of this Act, was determined by the Secretary 
        of the Treasury or his delegate, to be described in 
        section 501(c)(4) of the Internal Revenue Code of 1986 
        and exempt from tax under section 501(a) of such Code, 
        the allocation or return of net margins or capital to 
        the members of such organization in accordance with its 
        incorporating statute and bylaws shall not be treated 
        for purposes of such Code as the inurement of the net 
        earnings of such organization to the benefit of any 
        private shareholder or individual. The preceding 
        sentence shall apply only if such statute and bylaws 
        are substantially as such statute and bylaws were in 
        existence on the date of the enactment of this Act.
  (c) Technical and Conforming Amendments.--
          (1) Subsection (e) of section 4955 is amended--
                  (A) by striking ``Section 4945'' in the 
                heading and inserting ``Sections 4945 and 
                4958'', and
                  (B) by inserting before the period ``or an 
                excess benefit for purposes of section 4958''.
          (2) Subsections (a), (b), and (c) of section 4963 are 
        each amended by inserting ``4958,'' after ``4955,''.
          (3) Subsection (e) of section 6213 is amended by 
        inserting ``4958 (relating to private excess 
        benefit),'' before ``4971''.
          (4) Paragraphs (2) and (3) of section 7422(g) are 
        each amended by inserting ``4958,'' after ``4955,''.
          (5) Subsection (b) of section 7454 is amended by 
        inserting ``or whether an organization manager (as 
        defined in section 4958(f)(2)) has `knowingly' 
        participated in an excess benefit transaction (as 
        defined in section 4958(c)),'' after ``section 
        4912(b),''.
          (6) The table of subchapters for chapter 42 is 
        amended by striking the last item and inserting the 
        following:

        ``Subchapter D. Failure by certain charitable organizations to 
                  meet certain qualification requirements.
        ``Subchapter E. Abatement of first and second tier taxes in 
                  certain cases.''

    (d) Effective Dates.--
          (1) In general.--The amendments made by this section 
        (other than subsection (b)) shall apply to excess 
        benefit transactions occurring on or after September 
        14, 1995.
          (2) Binding contracts.--The amendments referred to in 
        paragraph (1) shall not apply to any benefit arising 
        from a transaction pursuant to any written contract 
        which was binding on September 13, 1995, and at all 
        times thereafter before such transaction occurred.
          (3) Application of private inurement rule to tax-
        exempt organizations described in section 501(c)(4).--
                  (A) In general.--The amendment made by 
                subsection (b) shall apply to inurement 
                occurring on or after September 14, 1995.
                  (B) Binding contracts.--The amendment made by 
                subsection (b) shall not apply to any inurement 
                occurring before January 1, 1997, pursuant to a 
                written contract which was binding on September 
                13, 1995, and at all times thereafter before 
                such inurement occurred.

SEC. ____702. REPORTING OF CERTAIN EXCISE TAXES AND OTHER INFORMATION.

  (a) Reporting by Organizations Described in Section 
501(c)(3).--Subsection (b) of section 6033 (relating to certain 
organizations described in section 501(c)(3)) is amended by 
striking ``and'' at the end of paragraph (9), by redesignating 
paragraph (10) as paragraph (14), and by inserting after 
paragraph (9) the following new paragraphs:
          ``(10) the respective amounts (if any) of the taxes 
        paid by the organization during the taxable year under 
        the following provisions:
                  ``(A) section 4911 (relating to tax on excess 
                expenditures to influence legislation),
                  ``(B) section 4912 (relating to tax on 
                disqualifying lobbying expenditures of certain 
                organizations), and
                  ``(C) section 4955 (relating to taxes on 
                political expenditures of section 501(c)(3) 
                organizations),
          ``(11) the respective amounts (if any) of the taxes 
        paid by the organization, or any disqualified person 
        with respect to such organization, during the taxable 
        year under section 4958 (relating to taxes on private 
        excess benefit from certain charitable organizations),
          ``(12) such information as the Secretary may require 
        with respect to any excess benefit transaction (as 
        defined in section 4958),
          ``(13) the name of each disqualified person (as 
        defined in section 4958(f)(1)(A)) with respect to such 
        organization and such other information with respect to 
        such disqualified persons as the Secretary may 
        prescribe, and''.
  (b) Organizations Described in Section 501(c)(4).--Section 
6033 is amended by redesignating subsection (f) as subsection 
(g) and by inserting after subsection (e) the following new 
subsection:
  ``(f) Certain Organizations Described in Section 501(c)(4).--
Every organization described in section 501(c)(4) which is 
subject to the requirements of subsection (a) shall include on 
the return required under subsection (a) the information 
referred to in paragraphs (11), (12) and (13) of subsection (b) 
with respect to such organization.''
  (c) Effective Date.--The amendments made by this section 
shall apply to returns for taxable years beginning after the 
date of the enactment of this Act.

SEC. ____703. INCREASE IN PENALTIES ON EXEMPT ORGANIZATIONS FOR FAILURE 
                    TO FILE COMPLETE AND TIMELY ANNUAL RETURNS.

  (a) In General.--Subparagraph (A) of section 6652(c)(1) 
(relating to annual returns under section 6033) is amended by 
striking ``$10'' and inserting ``$20'' and by striking 
``$5,000'' and inserting ``$10,000''.
  (b) Larger Penalty on Organizations Having Gross Receipts in 
Excess of $1,000,000.--Subparagraph (A) of section 6652(c)(1) 
is amended by adding at the end the following new sentence: 
``In the case of an organization having gross receipts 
exceeding $1,000,000 for any year, with respect to the return 
required under section 6033 for such year, the first sentence 
of this subparagraph shall be applied by substituting `$100' 
for `$20' and, in lieu of applying the second sentence of this 
subparagraph, the maximum penalty under this subparagraph shall 
not exceed $50,000.''
  (c) Effective Date.--The amendments made by this section 
shall apply to returns for taxable years ending on or after 
December 31, 1995.

                 Subtitle H--Extension of Certain Taxes

SEC. ____801. EXTENSION OF HAZARDOUS SUBSTANCE SUPERFUND TAXES.

  (a) Extension of Taxes.--
          (1) Environmental tax.--Section 59A(e) is amended to 
        read as follows:
  ``(e) Application of Tax.--The tax imposed by this section 
shall apply to taxable years beginning after December 31, 1986, 
and before January 1, 1997.''.
          (2) Excise taxes.--Section 4611(e) is amended to read 
        as follows:
  ``(e) Application of Hazardous Substance Superfund Financing 
Rate.--The Hazardous Substance Superfund financing rate under 
this section shall apply after December 31, 1986, and before 
October 1, 1996.''.
  (b) Termination on Deposits of Taxes Into Hazardous Substance 
Superfund.--Paragraph (1) of section 9507(b) is amended by 
inserting ``before August 1, 1996'' after ``received''.
  (c) Effective Date.--The amendments made by this section 
shall take effect on the date of the enactment of this Act.

SEC. ____802. EXTENSION OF OIL SPILL LIABILITY TAX.

  (a) In General.--Section 4611(f)(1) (relating to application 
of oil spill liability trust fund financing rate) is amended by 
striking ``after December 31, 1989, and before January 1, 
1995'' and inserting ``after December 31, 1995, and before 
October 1, 2002''.
  (b) Effective Date.--The amendment made by this section shall 
take effect on January 1, 1996.

SEC. ____803. EXTENSION OF FEDERAL UNEMPLOYMENT TAX.

  Section 3301 (relating to rate of Federal unemployment tax) 
is amended--
          (1) by striking ``1998'' in paragraph (1) and 
        inserting ``2002'', and
          (2) by striking ``1999'' in paragraph (2) and 
        inserting ``2003''.

             Subtitle I--Provisions Relating To Individuals

SEC. ____851. NO ROLLOVER OR EXCLUSION OF GAIN ON SALE OF PRINCIPAL 
                    RESIDENCE WHICH IS ATTRIBUTABLE TO DEPRECIATION 
                    DEDUCTIONS.

  (a) In General.--Subsection (d) of section 1034 (relating to 
limitations) is amended by adding at the end the following new 
paragraph:
          ``(3) Recognition of gain attributable to 
        depreciation.--Subsection (a) shall not apply to so 
        much of the gain from the sale of any residence as does 
        not exceed the portion of the depreciation adjustments 
        (as defined in section 1250(b)(3)) attributable to 
        periods after December 31, 1995, in respect of such 
        residence.''.
  (b) Comparable Treatment Under 1-Time Exclusion of Gain on 
Sale of Principal Residence.--Subsection (d) of section 121 is 
amended by adding at the end the following new paragraph:
          ``(10) Recognition of gain attributable to 
        depreciation.--
                  ``(A) In general.--Subsection (a) shall not 
                apply to so much of the gain from the sale of 
                any property as does not exceed the portion of 
                the depreciation adjustments (as defined in 
                section 1250(b)(3)) attributable to periods 
                after December 31, 1995, in respect of such 
                property.
                  ``(B) Coordination with paragraph (5).--If 
                this section does not apply to gain 
                attributable to a portion of a residence by 
                reason of paragraph (5), subparagraph (A) shall 
                not apply to depreciation adjustments 
                attributable to such portion.''.
  (c) Effective Date.--The amendments made by this section 
shall apply to taxable years ending after December 31, 1995.

SEC. ____852. EXTENSION OF WITHHOLDING TO CERTAIN GAMBLING WINNINGS.

  (a) Repeal of Exemption for Bingo and Keno.--Paragraph (5) of 
section 3402(q) is amended to read as follows:
          ``(5) Exemption for slot machines.--The tax imposed 
        under paragraph (1) shall not apply to winnings from a 
        slot machine.''.
  (b) Threshold Amount.--Paragraph (3) of section 3402(q) is 
amended--
          (1) by striking ``(B) and (C)'' in subparagraph (A) 
        and inserting ``(B), (C), and (D)'', and
          (2) by adding at the end the following new 
        subparagraph:
                  ``(D) Bingo and keno.--Proceeds of more than 
                $5,000 from a wager placed in a bingo or keno 
                game.''.
  (c) Effective Date.--The amendments made by this section 
shall take effect on January 1, 1996.

SEC. ____853. REPEAL OF SPECIAL RULE FOR RENTAL USE OF VACATION HOMES, 
                    ETC., FOR LESS THAN 15 DAYS.

  (a) In General.--Section 280A (relating to disallowance of 
certain expenses in connection with business use of home, 
rental of vacation homes, etc.) is amended by striking 
subsection (g).
  (b) No Basis Reduction Unless Depreciation Claimed.--Section 
1016 is amended by redesignating subsection (e) as subsection 
(f) and by inserting after subsection (d) the following new 
subsection:
  ``(e) Special Rule Where Rental Use of Vacation Home, Etc., 
for Less Than 15 Days.--If a dwelling unit is used during the 
taxable year by the taxpayer as a residence and such dwelling 
unit is actually rented for less than 15 days during the 
taxable year, the reduction under subsection (a)(2) by reason 
of such rental use in any taxable year beginning after December 
31, 1995, shall not exceed the depreciation deduction allowed 
for such rental use.''
  (c) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 1995.

               Subtitle J--Reform of Earned Income Credit

SEC. ____901. EARNED INCOME CREDIT DENIED TO INDIVIDUALS NOT AUTHORIZED 
                    TO BE EMPLOYED IN THE UNITED STATES.

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

SEC. ____902. RULES RELATING TO DENIAL OF EARNED INCOME CREDIT ON BASIS 
                    OF DISQUALIFIED INCOME.

  (a) Definition of Disqualified Income.--Paragraph (2) of 
section 32(i) (defining disqualified income) is amended by 
striking ``and'' at the end of subparagraph (B), by striking 
the period at the end of subparagraph (C) and inserting ``, 
and'', and by adding at the end the following new subparagraph:
                  ``(D) the net capital gain (as defined in 
                section 1222) of the taxpayer for such taxable 
                year.''
  (b) Effective Date.--The amendment made by this section shall 
apply to taxable years beginning after December 31, 1995.

                  TITLE 9--MIDDLE CLASS BILL OF RIGHTS

SEC. ____00. SHORT TITLE; AMENDMENT OF 1986 CODE.

  (a) Short Title.--This Act may be cited as the ``Middle-Class 
Bill of Rights Tax Relief Act of 1996''.
  (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is 
expressed in terms of an amendment to, or repeal of, a section 
or other provision, the reference shall be considered to be 
made to a section or other provision of the Internal Revenue 
Code of 1986.
  (c) Table of Contents.--

                 TITLE ____--MIDDLE CLASS BILL OF RIGHTS

Sec. ____00. Short title; amendment of 1986 Code.

                   Subtitle A--Middle Class Tax Relief

Sec. ____01. Credit for families with young children.
Sec. ____02. Deduction for higher education expenses.

     Subtitle B--Provisions Relating To Individual Retirement Plans

                  Part I--Retirement Savings Incentives

                         SUBPART A--IRA DEDUCTION

Sec. ____11. Increase in income limitations.
Sec. ____12. Inflation adjustment for deductible amount and income 
          limitations.
Sec. ____13. Coordination of IRA deduction limit with elective deferral 
          limit.

                  SUBPART B--NONDEDUCTIBLE TAX-FREE IRA'S

Sec. ____21. Establishment of nondeductible tax-free individual 
          retirement accounts.

                   Part II--Penalty-Free Distributions

Sec. ____21. Distributions from certain plans may be used without 
          penalty to purchase first homes, to pay higher education or 
          financially devastating medical expenses, or by the 
          unemployed.
Sec. ____22. Contributions must be held at least 5 years in certain 
          cases.

Subtitle C--Increase in Deduction for Health Care Costs of Self-Employed 
                               Individuals

Sec. ____31. Increase in self-employed individuals' deduction for health 
          insurance costs.

                  Subtitle A--Middle Class Tax Relief

SEC. ____01. CREDIT FOR FAMILIES WITH YOUNG CHILDREN.

  (a) In General.--Subpart A of part IV of subchapter A of 
chapter 1 (relating to nonrefundable personal credits) is 
amended by inserting after section 22 the following new 
section:

``SEC. 23. FAMILIES WITH YOUNG CHILDREN.

  ``(a) Allowance of Credit.--
          ``(1) In general.--In the case of an individual, 
        there shall be allowed as a credit against the tax 
        imposed by this chapter for the taxable year an amount 
        equal to $300 multiplied by the number of eligible 
        children of the taxpayer for the taxable year.
          ``(2) Increase in credit.--In the case of taxable 
        years beginning after December 31, 1998, paragraph (1) 
        shall be applied by substituting `$500' for `$300'.
  ``(b) Limitations.--
          ``(1) Phase-out of credit.--
                  ``(A) In general.--The amount of the credit 
                allowed under subsection (a) shall be reduced 
                (but not below zero) by the amount determined 
                under subparagraph (B).
                  ``(B) Amount of reduction.--The amount 
                determined under this subparagraph equals the 
                amount which bears the same ratio to the credit 
                (determined without regard to this subsection) 
                as--
                          ``(i) the excess of--
                                  ``(I) the taxpayer's adjusted 
                                gross income for such taxable 
                                year, over
                                  ``(II) $60,000, bears to
                          ``(ii) $15,000.
                Any amount determined under this subparagraph 
                which is not a multiple of $10 shall be rounded 
                to the next lowest $10.
                  ``(C) Adjusted gross income.--For purposes of 
                this paragraph, adjusted gross income of any 
                taxpayer shall be increased by any amount 
                excluded from gross income under section 911, 
                931, or 933.
          ``(2) Limitation based on amount of tax.--The credit 
        allowed by subsection (a) for the taxable year (after 
        the application of paragraph (1)) shall not exceed the 
        excess (if any) of--
                  ``(A) the taxpayer's regular tax liability 
                for the taxable year reduced by the credits 
                allowable against such tax under this subpart 
                (other than this section) determined without 
                regard to section 26, over
                  ``(B) the sum of--
                          ``(i) the taxpayer's tentative 
                        minimum tax for such taxable year, plus
                          ``(ii) the credit allowed for the 
                        taxable year under section 32.
  ``(c) Eligible Child.--For purposes of this section, the term 
`eligible child' means any child (as defined in section 
151(c)(3)) of the taxpayer--
          ``(1) who has not attained age 13 as of the close of 
        the calendar year in which the taxable year of the 
        taxpayer begins,
          ``(2) who is a dependent of the taxpayer with respect 
        to whom the taxpayer is allowed a deduction under 
        section 151 for such taxable year, and
          ``(3) whose TIN is included on the taxpayer's return 
        for such taxable year.
  ``(d) Inflation Adjustments.--In the case of a taxable year 
beginning in a calendar year after 1999--
          ``(1) In general.--The $500 and $60,000 amounts 
        contained in subsections (a)(2) and (b)(2) shall each 
        be increased by an amount equal to--
                  ``(A) such dollar amount, multiplied by
                  ``(B) the cost-of-living adjustment 
                determined under section 1(f)(3) for the 
                calendar year in which the taxable year begins, 
                determined by substituting `calendar year 1998' 
                for `calendar year 1992' in subparagraph (B) 
                thereof.
          ``(2) Increase in phaseout range.--If the amount 
        applicable under subsection (a) for any taxable year 
        exceeds $500, subsection (b)(2)(B) shall be applied by 
        substituting an amount equal to 30 times such 
        applicable amount for `$15,000'.
          ``(3) Rounding.--If any amount as adjusted under 
        paragraph (1) is not a multiple of $100, such amount 
        shall be rounded to the next lowest multiple of $100.
  ``(e) Special Rules.--
          ``(1) Amount of credit may be determined under 
        tables.--The amount of the credit allowed by this 
        section may be determined under tables prescribed by 
        the Secretary.
          ``(2) Certain other rules apply.--Rules similar to 
        the rules of subsections (c)(1)(E) and (F), (d), and 
        (e) of section 32 shall apply for purposes of this 
        section.
  ``(f) Termination.--This section shall not apply to taxable 
years beginning after December 31, 2000.''
  (b) Clerical Amendment.--The table of sections for subpart A 
of part IV of subchapter A of chapter 1 is amended by inserting 
after the item relating to section 22 the following new item:

        ``Sec. 23. Families with young children.''

  (c) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 1995.

SEC. ____02. DEDUCTION FOR HIGHER EDUCATION EXPENSES.

  (a) Deduction Allowed.-- Part VII of subchapter B of chapter 
1 (relating to additional itemized deductions for individuals) 
is amended by redesignating section 220 as section 221 and by 
inserting after section 219 the following new section:

``SEC. 220. HIGHER EDUCATION TUITION AND FEES.

  ``(a) Allowance of Deduction.--In the case of an individual, 
there shall be allowed as a deduction the amount of qualified 
higher education expenses paid by the taxpayer during the 
taxable year.
  ``(b) Limitations.--
          ``(1) Dollar limitation.--
                  ``(A) In general.--The amount allowed as a 
                deduction under subparagraph (a) for any 
                taxable year shall not exceed $10,000.
                  ``(B) Phase-in.--In the case of taxable years 
                beginning in 1996, 1997, or 1998, `$5,000' 
                shall be substituted for `$10,000' in 
                subparagraph (A).
          ``(2) Limitation based on modified adjusted gross 
        income.--
                  ``(A) In general.--The amount which would 
                (but for this paragraph) be taken into account 
                under paragraph (1) shall be reduced (but not 
                below zero) by the amount determined under 
                subparagraph (B).
                  ``(B) Amount of reduction.--The amount 
                determined under this subparagraph equals the 
                amount which bears the same ratio to the amount 
                which would be so taken into account as--
                          ``(i) the excess of--
                                  ``(I) the taxpayer's modified 
                                adjusted gross income for such 
                                taxable year, over
                                  ``(II) $70,000 ($100,000 in 
                                the case of a joint return), 
                                bears to
                          ``(ii) $20,000.
                  ``(C) Modified adjusted gross income.--The 
                term `modified adjusted gross income' means the 
                adjusted gross income of the taxpayer for the 
                taxable year determined--
                          ``(i) without regard to this section 
                        and sections 911, 931, and 933, and
                          ``(ii) after the application of 
                        sections 86, 135, 219 and 469.
                For purposes of sections 86, 135, 219, and 469, 
                adjusted gross income shall be determined 
                without regard to the deduction allowed under 
                this section.
                  ``(D) Inflation adjustments.--
                          ``(i) In general.--In the case of a 
                        taxable year beginning after 1999, the 
                        $70,000 and $100,000 amounts described 
                        in subparagraph (B) shall each be 
                        increased by an amount equal to--
                                  ``(I) such dollar amounts, 
                                multiplied by
                                  ``(II) the cost-of-living 
                                adjustment determined under 
                                section 1(f)(3) for the 
                                calendar year in which the 
                                taxable year begins, determined 
                                by substituting `calendar year 
                                1998' for `calendar year 1992' 
                                in subparagraph (B) thereof.
                          ``(ii) Rounding.--If any amount as 
                        adjusted under clause (i) is not a 
                        multiple of $5,000, such amount shall 
                        be rounded to the next lowest multiple 
                        of $5,000.
  ``(c) Qualified Higher Education Expenses.--For purposes of 
this section--
          ``(1) Qualified higher education expenses.--
                  ``(A) In general.--The term `qualified higher 
                education expenses' means tuition and fees 
                charged by an educational institution and 
                required for the enrollment or attendance of--
                          ``(i) the taxpayer,
                          ``(ii) the taxpayer's spouse, or
                          ``(iii) any dependent of the taxpayer 
                        with respect to whom the taxpayer is 
                        allowed a deduction under section 151,
                as an eligible student at an institution of 
                higher education.
                  ``(B) Exception for education involving 
                sports, etc.--Such term does not include 
                expenses with respect to any course or other 
                education involving sports, games, or hobbies, 
                unless such expenses--
                          ``(i) are part of a degree program, 
                        or
                          ``(ii) are deductible under this 
                        chapter without regard to this section.
                  ``(C) Exception for nonacademic fees.--Such 
                term does not include any student activity 
                fees, athletic fees, insurance expenses, or 
                other expenses unrelated to a student's 
                academic course of instruction.
                  ``(D) Eligible student.--For purposes of 
                subparagraph (A), the term `eligible student' 
                means a student who--
                          ``(i) meets the requirements of 
                        section 484(a)(1) of the Higher 
                        Education Act of 1965 (20 U.S.C. 
                        1091(a)(1)), as in effect on the date 
                        of the enactment of this section, and
                          ``(ii)(I) is carrying at least one-
                        half the normal full-time work load for 
                        the course of study the student is 
                        pursuing, as determined by the 
                        institution of higher education, or
                          ``(II) is enrolled in a course which 
                        enables the student to improve the 
                        student's job skills or to acquire new 
                        job skills.
                  ``(E) Identification requirement.--No 
                deduction shall be allowed under subsection (a) 
                to a taxpayer with respect to an eligible 
                student unless the taxpayer includes the name, 
                age, and taxpayer identification number of such 
                eligible student on the return of tax for the 
                taxable year.
          ``(2) Institution of higher education.--The term 
        `institution of higher education' means an institution 
        which--
                  ``(A) is described in section 481 of the 
                Higher Education Act of 1965 (20 U.S.C. 1088), 
                as in effect on the date of the enactment of 
                this section, and
                  ``(B) is eligible to participate in programs 
                under title IV of such Act.
  ``(d) Special Rules.--
          ``(1) No double benefit.--
                  ``(A) In general.--No deduction shall be 
                allowed under subsection (a) for qualified 
                higher education expenses with respect to which 
                a deduction is allowable to the taxpayer under 
                any other provision of this chapter unless the 
                taxpayer irrevocably waives his right to the 
                deduction of such expenses under such other 
                provision.
                  ``(B) Dependents.--No deduction shall be 
                allowed under subsection (a) 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.
                  ``(C) Savings bond exclusion.--A deduction 
                shall be allowed under subsection (a) for 
                qualified higher education expenses only to the 
                extent the amount of such expenses exceeds the 
                amount excludable under section 135 for the 
                taxable year.
          ``(2) Limitation on taxable year of deduction.--
                  ``(A) In general.--A deduction shall be 
                allowed under subsection (a) for any taxable 
                year only to the extent the qualified higher 
                education expenses are in connection with 
                enrollment at an institution of higher 
                education during the taxable year.
                  ``(B) Certain prepayments allowed.--
                Subparagraph (A) shall not apply to qualified 
                higher education expenses paid during a taxable 
                year if such expenses are in connection with an 
                academic term beginning during such taxable 
                year or during the 1st 3 months of the next 
                taxable year.
          ``(3) Adjustment for certain scholarships and 
        veterans benefits.--The amount of qualified higher 
        education expenses otherwise taken into account under 
        subsection (a) with respect to the education of an 
        individual shall be reduced (before the application of 
        subsection (b)) by the sum of the amounts received with 
        respect to such individual for the taxable year as--
                  ``(A) a qualified scholarship which under 
                section 117 is not includable in gross income,
                  ``(B) an educational assistance allowance 
                under chapter 30, 31, 32, 34, or 35 of title 
                38, United States Code, or
                  ``(C) a payment (other than a gift, bequest, 
                devise, or inheritance within the meaning of 
                section 102(a)) for educational expenses, or 
                attributable to enrollment at an eligible 
                educational institution, which is exempt from 
                income taxation by any law of the United 
                States.
          ``(4) No deduction for married individuals filing 
        separate returns.--If the taxpayer is a married 
        individual (within the meaning of section 7703), this 
        section shall apply only if the taxpayer and the 
        taxpayer's spouse file a joint return for the taxable 
        year.
          ``(5) Nonresident aliens.--If the taxpayer is a 
        nonresident alien individual for any portion of the 
        taxable year, this section shall apply only if such 
        individual is treated as a resident alien of the United 
        States for purposes of this chapter by reason of an 
        election under subsection (g) or (h) of section 6013.
          ``(6) Regulations.--The Secretary may prescribe such 
        regulations as may be necessary or appropriate to carry 
        out this section, including regulations requiring 
        recordkeeping and information reporting.
  ``(e) Termination.--This section shall not apply to taxable 
years beginning after December 31, 2000.''
  (b) Deduction Allowed in Computing Adjusted Gross Income.--
Section 62(a) is amended by inserting after paragraph (15) the 
following new paragraph:
          ``(16) Higher education tuition and fees.--The 
        deduction allowed by section 220.''
  (c) Conforming Amendment.--The table of sections for part VII 
of subchapter B of chapter 1 is amended by striking the item 
relating to section 220 and inserting:

        ``Sec. 220. Higher education tuition and fees.
        ``Sec. 221. Cross reference.''

  (d) Effective Date.--The amendments made by this section 
shall apply to payments made after December 31, 1995.

     Subtitle B--Provisions Relating To Individual Retirement Plans

                 PART I--RETIREMENT SAVINGS INCENTIVES

                        Subpart A--IRA Deduction

SEC. ____11. INCREASE IN INCOME LIMITATIONS.

  (a) In General.--Subparagraph (B) of section 219(g)(3) is 
amended--
          (1) by striking ``$40,000'' in clause (i) and 
        inserting ``$80,000'', and
          (2) by striking ``$25,000'' in clause (ii) and 
        inserting ``$50,000''.
  (b) Phase-Out of Limitations.--Clause (ii) of section 
219(g)(2)(A) is amended by striking ``$10,000'' and inserting 
``an amount equal to 10 times the dollar amount applicable for 
the taxable year under subsection (b)(1)(A)''.
  (c) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 1995, 
and before January 1, 2001.

SEC. ____12. INFLATION ADJUSTMENT FOR DEDUCTIBLE AMOUNT AND INCOME 
                    LIMITATIONS.

  (a) In General.--Section 219 is amended by redesignating 
subsection (h) as subsection (i) and by inserting after 
subsection (g) the following new subsection:
  ``(h) Cost-of-Living Adjustments.--
          ``(1) In general.--In the case of any taxable year 
        beginning in a calendar year after 1996, each dollar 
        amount to which this subsection applies shall be 
        increased by an amount equal to--
                  ``(A) such dollar amount, multiplied by
                  ``(B) the cost-of-living adjustment 
                determined under section 1(f)(3) for the 
                calendar year in which the taxable year begins, 
                determined by substituting `calendar year 1995' 
                for `calendar year 1992' in subparagraph (B) 
                thereof.
          ``(2) Dollar amounts to which subsection applies.--
        This subsection shall apply to--
                  ``(A) the $2,000 amounts under subsection 
                (b)(1)(A) and (c), and
                  ``(B) the applicable dollar amounts under 
                subsection (g)(3)(B).
          ``(3) Rounding rules.--
                  ``(A) Deduction amounts.--If any amount 
                referred to in paragraph (2)(A) as adjusted 
                under paragraph (1) is not a multiple of $500, 
                such amount shall be rounded to the next lowest 
                multiple of $500.
                  ``(B) Applicable dollar amounts.--If any 
                amount referred to in paragraph (2)(B) as 
                adjusted under paragraph (1) is not a multiple 
                of $5,000, such amount shall be rounded to the 
                next lowest multiple of $5,000.''
  (b) Conforming Amendments.--
          (1) Clause (i) of section 219(c)(2)(A) is amended to 
        read as follows:
                          ``(i) the sum of $250 and the dollar 
                        amount in effect for the taxable year 
                        under subsection (b)(1)(A), or''.
          (2) Section 408(a)(1) is amended by striking ``in 
        excess of $2,000 on behalf of any individual'' and 
        inserting ``on behalf of any individual in excess of 
        the amount in effect for such taxable year under 
        section 219(b)(1)(A)''.
          (3) Section 408(b)(2)(B) is amended by striking 
        ``$2,000'' and inserting ``the dollar amount in effect 
        under section 219(b)(1)(A)''.
          (4) Subparagraph (A) of section 408(d)(5) is amended 
        by striking ``$2,250'' and inserting ``the dollar 
        amount in effect for the taxable year under section 
        219(c)(2)(A)(i)''.
          (5) Section 408(j) is amended by striking ``$2,000''.
  (c) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 1995, 
and before January 1, 2001.

SEC. ____13. COORDINATION OF IRA DEDUCTION LIMIT WITH ELECTIVE DEFERRAL 
                    LIMIT.

  (a) In General.--Section 219(b) (relating to maximum amount 
of deduction) is amended by adding at the end the following new 
paragraph:
          ``(4) Coordination with elective deferral limit.--The 
        amount determined under paragraph (1) or subsection 
        (c)(2) with respect to any individual for any taxable 
        year shall not exceed the excess (if any) of--
                  ``(A) the limitation applicable for the 
                taxable year under section 402(g)(1), over
                  ``(B) the elective deferrals (as defined in 
                section 402(g)(3)) of such individual for such 
                taxable year.''
  (b) Conforming Amendment.--Section 219(c) is amended by 
adding at the end the following new paragraph:
  ``(3) Cross Reference.--

          ``For reduction in paragraph (2) amount, see subsection 
        (b)(4).''

  (c) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 1995, 
and before January 1, 2001.

                Subpart B--Nondeductible Tax-Free IRA's

SEC. ____21. ESTABLISHMENT OF NONDEDUCTIBLE TAX-FREE INDIVIDUAL 
                    RETIREMENT ACCOUNTS.

  (a) In General.--Subpart A of part I of subchapter D of 
chapter 1 (relating to pension, profit-sharing, stock bonus 
plans, etc.) is amended by inserting after section 408 the 
following new section:

``SEC. 408A. SPECIAL INDIVIDUAL RETIREMENT ACCOUNTS.

  ``(a) General Rule.--Except as provided in this chapter, a 
special individual retirement account shall be treated for 
purposes of this title in the same manner as an individual 
retirement plan.
  ``(b) Special Individual Retirement Account.--For purposes of 
this title, the term `special individual retirement account' 
means an individual retirement plan which is designated at the 
time of establishment of the plan as a special individual 
retirement account.
  ``(c) Treatment of Contributions.--
          ``(1) No deduction allowed.--No deduction shall be 
        allowed under section 219 for a contribution to a 
        special individual retirement account.
          ``(2) Contribution limit.--The aggregate amount of 
        contributions for any taxable year to all special 
        individual retirement accounts maintained for the 
        benefit of an individual shall not exceed the excess 
        (if any) of--
                  ``(A) the maximum amount allowable as a 
                deduction under section 219 with respect to 
                such individual for such taxable year, over
                  ``(B) the amount so allowed.
          ``(3) Special rules for qualified transfers.--
                  ``(A) In general.--No rollover contribution 
                may be made to a special individual retirement 
                account unless it is a qualified transfer.
                  ``(B) Limit not to apply.--The limitation 
                under paragraph (2) shall not apply to a 
                qualified transfer to a special individual 
                retirement account.
  ``(d) Tax Treatment of Distributions.--
          ``(1) In general.--Except as provided in this 
        subsection, any amount paid or distributed out of a 
        special individual retirement account shall not be 
        included in the gross income of the distributee.
          ``(2) Exception for earnings on contributions held 
        less than 5 years.--
                  ``(A) In general.--Any amount distributed out 
                of a special individual retirement account 
                which consists of earnings allocable to 
                contributions made to the account during the 5-
                year period ending on the day before such 
                distribution shall be included in the gross 
                income of the distributee for the taxable year 
                in which the distribution occurs.
                  ``(B) Ordering rule.--
                          ``(i) First-in, first-out rule.--
                        Distributions from a special individual 
                        retirement account shall be treated as 
                        having been made--
                                  ``(I) first from the earliest 
                                contribution (and earnings 
                                allocable thereto) remaining in 
                                the account at the time of the 
                                distribution, and
                                  ``(II) then from other 
                                contributions (and earnings 
                                allocable thereto) in the order 
                                in which made.
                          ``(ii) Allocations between 
                        contributions and earnings.--Any 
                        portion of a distribution allocated to 
                        a contribution (and earnings allocable 
                        thereto) shall be treated as allocated 
                        first to the earnings and then to the 
                        contribution.
                          ``(iii) Allocation of earnings.--
                        Earnings shall be allocated to a 
                        contribution in such manner as the 
                        Secretary may by regulations prescribe.
                          ``(iv) Contributions in same year.--
                        Except as provided in regulations, all 
                        contributions made during the same 
                        taxable year may be treated as 1 
                        contribution for purposes of this 
                        subparagraph.
                  ``(C) Cross reference.--

          ``For additional tax for early withdrawal, see section 72(t).

          ``(3) Qualified transfer.--
                  ``(A) In general.--Paragraph (2) shall not 
                apply to any distribution which is transferred 
                in a qualified transfer to another special 
                individual retirement account.
                  ``(B) Contribution period.--For purposes of 
                paragraph (2), the special individual 
                retirement account to which any contributions 
                are transferred shall be treated as having held 
                such contributions during any period such 
                contributions were held (or are treated as held 
                under this subparagraph) by the special 
                individual retirement account from which 
                transferred.
          ``(4) Special rules relating to certain transfers.--
                  ``(A) In general.--Notwithstanding any other 
                provision of law, in the case of a qualified 
                transfer to a special individual retirement 
                account from an individual retirement plan 
                which is not a special individual retirement 
                account--
                          ``(i) there shall be included in 
                        gross income any amount which, but for 
                        the qualified transfer, would be 
                        includible in gross income, but
                          ``(ii) section 72(t) shall not apply 
                        to such amount.
                  ``(B) Time for inclusion.--In the case of any 
                qualified transfer which occurs before January 
                1, 1997, any amount includible in gross income 
                under subparagraph (A) with respect to such 
                contribution shall be includible ratably over 
                the 4-taxable year period beginning in the 
                taxable year in which the amount was paid or 
                distributed out of the individual retirement 
                plan.
  ``(e) Qualified Transfer.--For purposes of this section--
          ``(1) In general.--The term `qualified transfer' 
        means a transfer to a special individual retirement 
        account from another such account or from an individual 
        retirement plan but only if such transfer meets the 
        requirements of section 408(d)(3).
          ``(2) Limitation.--A transfer otherwise described in 
        paragraph (1) shall not be treated as a qualified 
        transfer if the taxpayer's adjusted gross income for 
        the taxable year of the transfer exceeds the sum of--
                  ``(A) the applicable dollar amount, plus
                  ``(B) the dollar amount applicable for the 
                taxable year under section 219(g)(2)(A)(ii).
        This paragraph shall not apply to a transfer from a 
        special individual retirement account to another 
        special individual retirement account.
          ``(3) Definitions.--For purposes of this subsection, 
        the terms `adjusted gross income' and `applicable 
        dollar amount' have the meanings given such terms by 
        section 219(g)(3), except subparagraph (A)(ii) thereof 
        shall be applied without regard to the phrase `or the 
        deduction allowable under this section'.''
  (b) Early Withdrawal Penalty.--Section 72(t) is amended by 
adding at the end the following new paragraph:
          ``(6) Rules relating to special individual retirement 
        accounts.--In the case of a special individual 
        retirement account under section 408A--
                  ``(A) this subsection shall only apply to 
                distributions out of such account which consist 
                of earnings allocable to contributions made to 
                the account during the 5-year period ending on 
                the day before such distribution, and
                  ``(B) paragraph (2)(A)(i) shall not apply to 
                any distribution described in subparagraph 
                (A).''
  (c) Excess Contributions.--Section 4973(b) is amended by 
adding at the end the following new sentence: ``For purposes of 
paragraphs (1)(B) and (2)(C), the amount allowable as a 
deduction under section 219 shall be computed without regard to 
section 408A.''
  (d) Conforming Amendment.--The table of sections for subpart 
A of part I of subchapter D of chapter 1 is amended by 
inserting after the item relating to section 408 the following 
new item:

        ``Sec. 408A. Special individual retirement accounts.''

  (e) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 1995, 
and before January 1, 2001.

                  PART II--PENALTY-FREE DISTRIBUTIONS

SEC. ____21. DISTRIBUTIONS FROM CERTAIN PLANS MAY BE USED WITHOUT 
                    PENALTY TO PURCHASE FIRST HOMES, TO PAY HIGHER 
                    EDUCATION OR FINANCIALLY DEVASTATING MEDICAL 
                    EXPENSES, OR BY THE UNEMPLOYED.

  (a) In General.--Paragraph (2) of section 72(t) (relating to 
exceptions to 10-percent additional tax on early distributions 
from qualified retirement plans) is amended by adding at the 
end the following new subparagraph:
                  ``(D) Distributions from certain plans for 
                first home purchases or educational expenses.--
                Distributions to an individual from an 
                individual retirement plan--
                          ``(i) which are qualified first-time 
                        homebuyer distributions (as defined in 
                        paragraph (7)); or
                          ``(ii) to the extent such 
                        distributions do not exceed the 
                        qualified higher education expenses (as 
                        defined in paragraph (8)) of the 
                        taxpayer for the taxable year.''
  (b) Financially Devastating Medical Expenses.--
          (1) In general.--Section 72(t)(3)(A) is amended by 
        striking ``(B),''.
          (2) Certain lineal descendants and ancestors treated 
        as dependents and long-term care services treated as 
        medical care.--Subparagraph (B) of section 72(t)(2) is 
        amended by striking ``medical care'' and all that 
        follows and inserting ``medical care determined--
                          ``(i) without regard to whether the 
                        employee itemizes deductions for such 
                        taxable year, and
                          ``(ii) in the case of an individual 
                        retirement plan--
                                  ``(I) by treating such 
                                employee's dependents as 
                                including all children, 
                                grandchildren and ancestors of 
                                the employee or such employee's 
                                spouse and
                                  ``(II) by treating qualified 
                                long-term care services (as 
                                defined in paragraph (9)) as 
                                medical care for purposes of 
                                this subparagraph (B).''
          (3) Conforming amendment.--Subparagraph (B) of 
        section 72(t)(2) is amended by striking ``or (C)'' and 
        inserting ``, (C) or (D)''.
  (c) Definitions.--Section 72(t), as amended by this Act, is 
amended by adding at the end the following new paragraphs:
          ``(7) Qualified first-time homebuyer distributions.--
        For purposes of paragraph (2)(D)(i)--
                  ``(A) In general.--The term `qualified first-
                time homebuyer distribution' means any payment 
                or distribution received by an individual to 
                the extent such payment or distribution is used 
                by the individual before the close of the 60th 
                day after the day on which such payment or 
                distribution is received to pay qualified 
                acquisition costs with respect to a principal 
                residence of a first-time homebuyer who is such 
                individual or the spouse, child (as defined in 
                section 151(c)(3)), or grandchild of such 
                individual.
                  ``(B) Qualified acquisition costs.--For 
                purposes of this paragraph, the term `qualified 
                acquisition costs' means the costs of 
                acquiring, constructing, or reconstructing a 
                residence. Such term includes any usual or 
                reasonable settlement, financing, or other 
                closing costs.
                  ``(C) First-time homebuyer; other 
                definitions.--For purposes of this paragraph--
                          ``(i) First-time homebuyer.--The term 
                        `first-time homebuyer' means any 
                        individual if--
                                  ``(I) such individual (and if 
                                married, such individual's 
                                spouse) had no present 
                                ownership interest in a 
                                principal residence during the 
                                3-year period ending on the 
                                date of acquisition of the 
                                principal residence to which 
                                this paragraph applies, and
                                  ``(II) subsection (h) or (k) 
                                of section 1034 did not suspend 
                                the running of any period of 
                                time specified in section 1034 
                                with respect to such individual 
                                on the day before the date the 
                                distribution is applied 
                                pursuant to subparagraph (A).
                        In the case of an individual described 
                        in section 143(i)(1)(C) for any year, 
                        an ownership interest shall not include 
                        any interest under a contract of deed 
                        described in such section. An 
                        individual who loses an ownership 
                        interest in a principal residence 
                        incident to a divorce or legal 
                        separation is deemed for purposes of 
                        this subparagraph to have had no 
                        ownership interest in such principal 
                        residence within the period referred to 
                        in subclause (II).
                          ``(ii) Principal residence.--The term 
                        `principal residence' has the same 
                        meaning as when used in section 1034.
                          ``(iii) Date of acquisition.--The 
                        term `date of acquisition' means the 
                        date--
                                  ``(I) on which a binding 
                                contract to acquire the 
                                principal residence to which 
                                subparagraph (A) applies is 
                                entered into, or
                                  ``(II) on which construction 
                                or reconstruction of such a 
                                principal residence is 
                                commenced.
                  ``(D) Special rule where delay in 
                acquisition.--If any distribution from any 
                individual retirement plan fails to meet the 
                requirements of subparagraph (A) solely by 
                reason of a delay or cancellation of the 
                purchase or construction of the residence, the 
                amount of the distribution may be contributed 
                to an individual retirement plan as provided in 
                section 408(d)(3)(A)(i) (determined by 
                substituting `120 days' for `60 days' in such 
                section), except that--
                          ``(i) section 408(d)(3)(B) shall not 
                        be applied to such contribution, and
                          ``(ii) such amount shall not be taken 
                        into account in determining whether 
                        section 408(d)(3)(A)(i) applies to any 
                        other amount.
          ``(8) Qualified higher education expenses.--For 
        purposes of paragraph (2)(D)(ii)--
                  ``(A) In general.--The term `qualified higher 
                education expenses' means tuition and fees 
                required for the enrollment or attendance of--
                          ``(i) the taxpayer,
                          ``(ii) the taxpayer's spouse,
                          ``(iii) a dependent of the taxpayer 
                        with respect to whom the taxpayer is 
                        allowed a deduction under section 151, 
                        or
                          ``(iv) the taxpayer's child (as 
                        defined in section 151(c)(3)) or 
                        grandchild,
                as an eligible student at an institution of 
                higher education (as defined in paragraphs 
                (1)(D) and (2) of section 220(c)).
                  ``(B) Exceptions.--The term `qualified higher 
                education expenses' does not include expenses 
                described in subparagraphs (B) and (C) of 
                section 220(c)(1).
                  ``(C) Coordination with savings bond 
                provisions.--The amount of qualified higher 
                education expenses for any taxable year shall 
                be reduced by any amount excludable from gross 
                income under section 135.
          ``(9) Qualified long-term care services.--For 
        purposes of paragraph (2)(B)--
                  ``(A) In general.--The term `qualified long-
                term care services' means necessary diagnostic, 
                curing, mitigating, treating, preventive, 
                therapeutic, and rehabilitative services, and 
                maintenance and personal care services (whether 
                performed in a residential or nonresidential 
                setting) which--
                          ``(i) are required by an individual 
                        during any period the individual is an 
                        incapacitated individual (as defined in 
                        subparagraph (B)),
                          ``(ii) have as their primary 
                        purpose--
                                  ``(I) the provision of needed 
                                assistance with 1 or more 
                                activities of daily living (as 
                                defined in subparagraph (C)), 
                                or
                                  ``(II) protection from 
                                threats to health and safety 
                                due to severe cognitive 
                                impairment, and
                          ``(iii) are provided pursuant to a 
                        continuing plan of care prescribed by a 
                        licensed professional (as defined in 
                        subparagraph (D)).
                  ``(B) Incapacitated individual.--The term 
                `incapacitated individual' means any individual 
                who--
                          ``(i) is unable to perform, without 
                        substantial assistance from another 
                        individual (including assistance 
                        involving cueing or substantial 
                        supervision), at least 2 activities of 
                        daily living as defined in subparagraph 
                        (C), or
                          ``(ii) has severe cognitive 
                        impairment as defined by the Secretary 
                        in consultation with the Secretary of 
                        Health and Human Services.
                Such term shall not include any individual 
                otherwise meeting the requirements of the 
                preceding sentence unless a licensed 
                professional within the preceding 12-month 
                period has certified that such individual meets 
                such requirements.
                  ``(C) Activities of daily living.--Each of 
                the following is an activity of daily living:
                          ``(i) Eating.
                          ``(ii) Toileting.
                          ``(iii) Transferring.
                          ``(iv) Bathing.
                          ``(v) Dressing.
                  ``(D) Licensed professional.--The term 
                `licensed professional' means--
                          ``(i) a physician or registered 
                        professional nurse, or
                          ``(ii) any other individual who meets 
                        such requirements as may be prescribed 
                        by the Secretary after consultation 
                        with the Secretary of Health and Human 
                        Services.
                  ``(E) Certain services not included.--The 
                term `qualified long-term care services' shall 
                not include any services provided to an 
                individual--
                          ``(i) by a relative (directly or 
                        through a partnership, corporation, or 
                        other entity) unless the relative is a 
                        licensed professional with respect to 
                        such services, or
                          ``(ii) by a corporation or 
                        partnership which is related (within 
                        the meaning of section 267(b) or 
                        707(b)) to the individual.
                For purposes of this subparagraph, the term 
                `relative' means an individual bearing a 
                relationship to the individual which is 
                described in paragraphs (1) through (8) of 
                section 152(a).''
  (d) Penalty-Free Distributions for Certain Unemployed 
Individuals.--Paragraph (2) of section 72(t) is amended by 
adding at the end the following new subparagraph:
                  ``(E) Distributions to unemployed 
                individuals.--A distribution from an individual 
                retirement plan to an individual after 
                separation from employment, if--
                          ``(i) such individual has received 
                        unemployment compensation for 12 
                        consecutive weeks under any Federal or 
                        State unemployment compensation law by 
                        reason of such separation, and
                          ``(ii) such distributions are made 
                        during any taxable year during which 
                        such unemployment compensation is paid 
                        or the succeeding taxable year.''
  (e) Effective Date.--The amendments made by this section 
shall apply to payments and distributions after December 31, 
1995, and before January 1, 2001.

SEC. ____22. CONTRIBUTIONS MUST BE HELD AT LEAST 5 YEARS IN CERTAIN 
                    CASES.

  (a) In General.--Section 72(t), as amended by this Act, is 
amended by adding at the end the following new paragraph:
          ``(10) Certain contributions must be held 5 years.--
                  ``(A) In general.--Paragraph (2)(A)(i) shall 
                not apply to any amount distributed out of an 
                individual retirement plan (other than a 
                special individual retirement account) which is 
                allocable to contributions made to the plan 
                during the 5-year period ending on the date of 
                such distribution (and earnings on such 
                contributions).
                  ``(B) Ordering rule.--For purposes of this 
                paragraph, distributions shall be treated as 
                having been made--
                          ``(i) first from the earliest 
                        contribution (and earnings allocable 
                        thereto) remaining in the account at 
                        the time of the distribution, and
                          ``(ii) then from other contributions 
                        (and earnings allocable thereto) in the 
                        order in which made.
                Earnings shall be allocated to contributions in 
                such manner as the Secretary may prescribe.
                  ``(C) Special rule for rollovers.--
                          ``(i) Pension plans.--Subparagraph 
                        (A) shall not apply to distributions 
                        out of an individual retirement plan 
                        which are allocable to rollover 
                        contributions to which section 402(c), 
                        403(a)(4), or 403(b)(8) applied.
                          ``(ii) Contribution period.--For 
                        purposes of subparagraph (A), amounts 
                        shall be treated as having been held by 
                        a plan during any period such 
                        contributions were held (or are treated 
                        as held under this clause) by any 
                        individual retirement plan from which 
                        transferred.
                  ``(D) Special accounts.--For rules applicable 
                to special individual retirement accounts under 
                section 408A, see paragraph (8).''
  (b) Effective Date.--The amendment made by this section shall 
apply to contributions (and earnings allocable thereto) which 
are made after December 31, 1995, and before January 1, 2001.

    Subtitle C--Increase in Deduction for Health Care Costs of Self-
                          Employed Individuals

SEC. ____31. INCREASE IN SELF-EMPLOYED INDIVIDUALS' DEDUCTION FOR 
                    HEALTH INSURANCE COSTS.

  (a) In General.--Section 162(l) (relating to special rules 
for health insurance costs of self-employed individuals) is 
amended--
          (1) by striking ``30 percent'' in paragraph (1) and 
        inserting ``the applicable percentage'', and
          (2) by adding at the end the following new paragraph:
          ``(6) Applicable percentage.--For purposes of this 
        subsection, the term `applicable percentage' means the 
        percentage determined in accordance with the following 
        table:

``In the case of taxable years                            The applicable
 beginning in:                                            percentage is:
    1996......................................................       35 
    1997......................................................       35 
    1998......................................................       40 
    1999......................................................       45 
    2000......................................................       50 
    2001 and thereafter.......................................     30.''

  (b) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 1995.

                      TITLE X--BUDGET ENFORCEMENT

SEC. 10001. PURPOSE.

    The Congress declares that it is essential to--
          (1) preserve the deficit reduction achieved by this 
        Act;
          (2) extend the system of discretionary spending 
        limits for the single discretionary category set forth 
        in section 601 of the Congressional Budget Act of 1974;
          (3) extend the pay-as-you-go enforcement system;
          (4) prohibit the consideration of direct spending or 
        receipts legislation that would decrease the pay-as-
        you-go surplus achieved by this Act and created under 
        section 252 of the Balanced Budget and Emergency 
        Deficit Contract of 1985; and
          (5) provide for additional deficit reduction, 
        investment, and tax relief in the event that actual 
        deficit reduction exceeds that currently projected by 
        the Congressional Budget Office to result from 
        enactment of this Act.

SEC. 10002. DISCRETIONARY SPENDING LIMITS.

    (a) Definition of ``Discretionary Spending Limit''.--
Section 601(a)(2) of the Congressional Budget Act of 1974 is 
amended--
          (1) in subparagraph (E) by striking the word ``and''; 
        and
          (2) by striking subparagraph (F) and inserting the 
        following:
          ``(F) with respect to fiscal year 1996, for the 
        discretionary category: $502,000,000,000 in new budget 
        authority and $539,535,000,000 in outlays;
          ``(G) with respect to fiscal year 1997, for the 
        discretionary category: $508,000,000,000 in new budget 
        authority and $546,851,000,000 in outlays;
          ``(H) with respect to fiscal year 1998, for the 
        discretionary category: $514,000,000,000 in new budget 
        authority and $540,041,000,000 in outlays;
          ``(I) with respect to fiscal year 1999, for the 
        discretionary category: $508,000,000,000 in new budget 
        authority and $542,166,000,000 in outlays;
          ``(J) with respect to fiscal year 2000, for the 
        discretionary category: $504,000,000,000 in new budget 
        authority and $541,759,000,000 in outlays;
          ``(K) with respect to fiscal year 2001, for the 
        discretionary category: $500,000,000,000 in new budget 
        authority and $530,833,000,000 in outlays; and
          ``(L) with respect to fiscal year 2002, for the 
        discretionary category: $482,000,000,000 in new budget 
        authority and $514,088,000,000 in outlays;''.
    (b) Point of Order in the Senate.--Section 601(b)(1) of the 
Congressional Budget Act of 1974 is amended to read as follows:
    ``(1) Except as otherwise provided in this Act, it shall 
not be in order in the Senate to consider any concurrent 
resolution on the budget for fiscal year 1996, 1997, 1998, 
1999, 2000, 2001, or 2002 (or amendment, motion, or conference 
report on such a resolution) that would exceed any of the 
deficit targets or discretionary spending limits in this 
title.''.
    (c) Conforming Amendments.--(1) Section 251 of the Balanced 
Budget and Emergency Deficit Control Act of 1985 is amended--
          (A) in subsection (a) by striking ``Fiscal Years 
        1991-1998 Enforcement.--'' and inserting ``Fiscal Years 
        1991-2002 Enforcement.--'';
          (B) in subsection (b)(1)--
                  (i) in the matter before subparagraph (A), 
                by--
                          (I) striking ``When the President 
                        submits the budget under section 
                        1105(a) of title 31, United States 
                        Code, for budget year 1992, 1993, 1994, 
                        1995, 1996, 1997, or 1998'' and 
                        inserting ``When the President submits 
                        the budget under section 1105(a) of 
                        title 31, United States Code, for 
                        budget year 1992, 1993, 1994, 1995, 
                        1996, 1997, 1998, 1999, 2000, 2001, or 
                        2002''; and
                          (II) striking ``the budget shall 
                        include, adjustments to discretionary 
                        spending limits (and those limits as 
                        cumulatively adjusted) for the budget 
                        year and each outyear through 1998'' 
                        and inserting ``the budget shall 
                        include, adjustments to discretionary 
                        spending limits (and those limits as 
                        cumulatively adjusted) for the budget 
                        year and each outyear through 2002'';
                  (ii) in paragraph (1)(B), by striking 
                ``budget year 1996, 1997, or 1998,'' and 
                inserting ``budget year 1996, 1997, 1998, 2000, 
                2001, or 2002,'';
                  (iii) in the matter before subparagraph (A) 
                in paragraph (2) by--
                          (I) striking ``When OMB submits a 
                        sequestration report under section 254 
                        (g) or (h) for fiscal year 1991, 1992, 
                        1993, 1994, 1995, 1996, 1997, or 
                        1998,'' and inserting ``When OMB 
                        submits a sequestration report under 
                        section 254(g) or (h) for fiscal year 
                        1991, 1992, 1993, 1994, 1995, 1996, 
                        1997, 1998, 1999, 2000, 2001, or 
                        2002,''; and
                          (II) striking ``for the fiscal year 
                        and each succeeding year through 
                        1998,'' and inserting ``for the fiscal 
                        year and each succeeding year through 
                        2002,'';
                  ``(iv) by amending paragraph (2)(A) to read 
                as follows:
                  ``(A) IRS funding.--(i) To the extent that 
                appropriations are enacted that provide 
                additional new budget authority or result in 
                additional outlays for the Internal Revenue 
                Service compliance initiative in any fiscal 
                year, the adjustments for that year shall be 
                those amounts of additional new budget 
                authority or additional outlays (as defined in 
                clause (ii)), but not to exceed in any fiscal 
                year $405,000,000 in new budget authority and 
                $405,000,000 in outlays.
                  ``(ii) Additional amounts.--As used in this 
                subparagraph, the terms `additional new budget 
                authority' or `additional outlays' shall mean, 
                for any fiscal year, budget authority or 
                outlays (as the case may be) in excess of the 
                amounts requested for that fiscal year for the 
                Internal Revenue Service in the President's 
                Budget for fiscal year 1996.'';
                  (v) in paragraph (2)(E)(iv), by striking 
                ``fiscal years 1994, 1995, 1996, 1997, and 
                1998,'' and inserting ``fiscal years 1994, 
                1995, 1996, 1997, 1998, 1999, 2000, 2001, and 
                2002''; and
                  (vi) in paragraph (2)(F), by striking 
                ``fiscal year 1996, 1997, or 1998'' and 
                inserting ``fiscal year 1996, 1997, 1998, 1999, 
                2000, 2001, or 2002''.
    (2) Reports.--Sections 254(d)(2) and 254(g)(2)(A) of the 
Balanced Budget and Emergency Deficit Control Act of 1985 are 
each amended by striking ``1998'' and inserting ``2002''.
    (3) Congressional enforcement.--
          (A) Title VI of the Congressional Budget Act of 1974 
        is amended--
                  (i) in section 602(c) and (d), by striking 
                ``1995'' each time it appears and inserting 
                ``2002'';
                  (ii) in section 606(a), by striking ``fiscal 
                year 1992, 1993, 1994, or 1995,'' and inserting 
                ``any fiscal year''; and
                  (iii) in section 606(d)(1), by striking 
                ``fiscal years 1992, 1993, 1994, and 1995,'' 
                and inserting any fiscal year''.
          (B) Section 210 of House Concurrent Resolution 67 
        (104th Congress) is repealed.
    (4) Expiration.--(A) Notwithstanding section 275(b) of the 
Balanced Budget and Emergency Deficit Control Act of 1985, 
sections 250, 251, 252, and 254 through 258C of that Act, the 
second sentence of section 904(c) of the Congressional Budget 
Act, and the second sentence of section 904(d) of the 
Congressional Budget Act shall expire on September 30, 2002.
    (B) Section 607 of the Congressional Budget Act of 1974 is 
amended by striking ``shall apply to fiscal years 1991 to 
1998'' and inserting ``shall apply to fiscal years 1991 to 
2002''

SEC. 10003. ENFORCING PAY-AS-YOU-GO.

    (a) Section 252 of the Balanced Budget and Emergency 
Deficit Control Act of 1985 is amended--
          (1) in subsection (a), by striking ``Fiscal Year 
        1992-1998 Enforcement.'' and inserting ``Fiscal Year 
        1992-2002 Enforcement.'';
          (2) in subsection (d), by striking ``estimate of the 
        amount of change in outlays or receipts, as the case 
        may be, in each fiscal year through fiscal year 1998'' 
        both places that it appears and inserting ``estimate of 
        the amount of change in outlays or receipts, as the 
        case may be, in each fiscal year through fiscal year 
        2002'' both places; and
          (3) in subsection (e), by striking ``for any fiscal 
        year from 1991 through 1998,'' and inserting ``for any 
        fiscal year from 1991 through 2002,''.
    (b) Section 254(g)(3) of the Balanced Budget and Emergency 
Deficit Control Act of 1985 is amended by striking ``1998'' and 
inserting ``2002''.
    (c) Upon enactment of this Act, the director of the Office 
of Management and Budget shall reduce the balances of direct 
spending and receipts legislation applicable to each fiscal 
year under section 252 of the Balanced Budget and Emergency 
Deficit Control Act of 1985 by an amount equal to the net 
deficit reduction achieved through the enactment in this Act of 
direct spending and receipts legislation for that year.

SEC. 10004. FISCAL DIVIDEND FOR DEFICIT REDUCTION, INVESTMENT, AND TAX 
                    REDUCTION.

    Title VI of the Congressional Budget Act is amended by 
inserting at the end thereof the following new section:

``SEC. 608. FISCAL DIVIDEND FOR DEFICIT REDUCTION, INVESTMENT, AND TAX 
                    REDUCTION.

    ``(a) Definitions.--
          ``(1) Deficit targets.--The term `deficit target' 
        means--
                  ``(A) with respect to fiscal year 1999, 
                $131,000,000,000;
                  ``(B) with respect to fiscal year 2000, 
                $114,000,000,000;
                  ``(C) with respect to fiscal year 2001, 
                $54,000,000,000; and
                  ``(D) with respect to fiscal year 2002, 
                $0.''.
          ``(2) Fiscal dividend.--The term `fiscal dividend' 
        means, for any fisal year, the amount by which the 
        deficit target exceeds the actual deficit.
    ``(b) Use of the Fiscal Dividend in the Congressional 
Budget Process--
          ``(1) Filings--As soon as practicable after the 
        actual deficit for th prior fiscal year is known, the 
        Chairs of the Committees on the Budget of the Senate 
        and House shall file with their respective Houses--
                  ``(A) revised allocations under sections 
                302(a) and 602(a) of the Congressional Budget 
                Act of 1974 to the Committees on Appropriations 
                for the current fiscal year and corresponding 
                aggregates, increased by one third of the 
                fiscal dividend for the prior fiscal year; and
                  ``(B) revised revenue aggregates for the 
                current fiscal year, decreased by one third of 
                the fiscal dividend for the prior fiscal year.
          ``(2) Effect of revised allocations and aggregates.--
        Revised allocations and aggregates submitted under this 
        subsection shall be considered for the purposes of the 
        Congressional Budget Act of 1974 as allocations and 
        aggregates contained in the most recently adopted 
        concurrent resolution on the budget.
                  ``(B) Use of the fiscal dividend in the 
                enforcement of discrettionary spending 
                limits.--As soon as practicable after the 
                actual deficit for the prior fiscal year is 
                known, the Director of the Office of Management 
                and Budget shall increase the discretionary 
                spending limits for the current fiscal year by 
                one third of the fiscal dividend for the prior 
                fiscal year.
                  ``(C) Use of the fiscal dividend in the 
                enforcement of pay-as-you-go.--As soon as 
                practicable after the actual deficit for the 
                prior fiscal year is known, the Director of the 
                Office of Management and Budget shall credit 
                the balances of direct spending and receipts 
                legislation applicable to the current fiscal 
                year under section 252 of the Balanced Budget 
                and Emergency Deficit Control Act of 1985 by 
                one third of the fiscal dividend for the prior 
                fiscal year.''

SEC. 10005. EXERCISE OF RULE-MAKING POWERS

    The Congress enacts the provisions of this part--
          (1) as an exercise of the rule-making power of the 
        Senate and the House of Representatives, respectively, 
        and as such these provisions shall be considered as 
        part of the rules of each House, respectively, or of 
        that House to which they specifically apply, and such 
        rules shall supersede other rules only to the extent 
        that they are inconsistent therewith; and
          (2) with full recognition of the constitutional right 
        of either House to change such rules (so far as 
        relating to such House) at any time, in the same 
        manner, and to the same extent as in the case of any 
        other rule of such House.
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