[Congressional Record Volume 141, Number 169 (Monday, October 30, 1995)]
[Senate]
[Pages S16159-S16344]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


[[Page S 16159]]

  Following is the text of H.R. 2491, as passed on October 28, 1995:

       Resolved, That the bill from the House of Representatives 
     (H.R. 2491) entitled ``An Act to provide for reconciliation 
     pursuant to section 105 of the concurrent resolution on the 
     budget for fiscal year 1996'', do pass with the following 
     amendment:
       Strike out all after the enacting clause and insert:

     SECTION 1. SHORT TITLE.

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

     SEC. 2. TABLE OF TITLES.

       The table of titles for this Act is as follows:

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

     SEC. 1001. SHORT TITLE; TABLE OF CONTENTS.

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

Sec. 1001. Short title; table of contents.

                     Subtitle A--Commodity Programs

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

                        Subtitle B--Conservation

Sec. 1201. Conservation.

         Subtitle C--Agricultural Promotion and Export Programs

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

                    Subtitle D--Nutrition Assistance

                     Chapter 1--Food Stamp Program

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

                  Chapter 2--Child Nutrition Programs

                      Part I--Reimbursement Rates

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

                        Part II--Grant Programs

Sec. 1451. School breakfast startup grants.

                       Part III--Other Amendments

Sec. 1461. Child and adult care food program.

                     Chapter 3--Additional Savings

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

                       Chapter 4--Effective Date

Sec. 1491. Effective date.
                     Subtitle A--Commodity Programs

     SEC. 1101. ELIGIBILITY FOR ENROLLMENT IN ANNUAL PROGRAMS.

       (a) In General.--Title III of the Agricultural Act of 1949 
     (7 U.S.C. 1447 et seq.) is amended to read as follows:
        ``TITLE III--ANNUAL PROGRAMS FOR 1996 THROUGH 2002 CROPS

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

       ``(a) In General.--To be eligible for enrollment in 1 or 
     more of the annual programs established under this title, the 
     land on a farm must 

[[Page S 16160]]
     have been enrolled in 1 or more of the annual programs established 
     under this Act for rice, upland cotton, feed grains, or wheat 
     for a total of at least 3 of the 1991 through 1995 crop 
     years, as determined by the Secretary.
       ``(b) Additional Criteria.--In addition to the requirements 
     of subsection (a), for the purpose of determining the 
     eligibility of land for enrollment in 1 or more of the annual 
     programs established under this title, the Secretary shall 
     include acreage on the farm considered planted under section 
     503(c), including a certification of crop acreage base filed 
     with the Secretary in order to preserve base history, for any 
     of the 1991 through 1995 crops.
       ``(c) Eligibility to Receive Payments and Loans.--
     Enrollment in the annual program for a program crop shall be 
     required as a condition of the receipt of any payment or loan 
     under this title for the program crop.''.
       (b) Conforming Amendments.--The Agricultural Act of 1949 is 
     amended--
       (1) in title I (7 U.S.C. 1441 et seq.)--
       (A) by striking all sections other than sections 101B, 
     103B, 104(d), 105B, 106, 106A, 106B, 107B, 108B, 111, 114, 
     and 115; and
       (B) by moving sections 101B, 103B, 105B, and 107B to the 
     end of title III (as amended by subsection (a)) and 
     redesignating the sections as sections 302, 303, 304, and 
     305, respectively;
       (2) in title II (7 U.S.C. 1446 et seq.), by striking all 
     sections other than sections 202, 204, 205, and 206; and
       (3) by striking title VI (7 U.S.C. 1471 et seq.).

     SEC. 1102. RICE PROGRAM.

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

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

       (2) in subsection (a)--
       (A) in paragraph (1), by striking ``1995'' and inserting 
     ``2002'';
       (B) in paragraph (3), by striking ``1995'' and inserting 
     ``2002''; and
       (C) in paragraph (5)(D)(i), by striking ``August 1, 1991, 
     and ending July 31, 1996'' and inserting ``August 1, 1996, 
     and ending July 31, 2003'';
       (3) in subsection (b)(1), by striking ``1995'' and 
     inserting ``2002'';
       (4) in subsection (c)(1)--
       (A) in subparagraph (A), by striking ``1995'' and inserting 
     ``2002'';
       (B) in subparagraph (B)--
       (i) in clause (ii)--

       (I) in the clause heading, by striking ``and 1995'' and 
     inserting ``through 2002''; and
       (II) by striking ``and 1995'' and inserting ``through 
     2002'';

       (ii) by redesignating clause (iii) as clause (iv);
       (iii) by inserting after clause (ii) the following:
       ``(iii) Maximum payment rate.--The payment rate for rice 
     under this subsection shall not exceed (per hundredweight) 
     $4.21 for the 1996 crop, $4.19 for the 1997 crop, $3.86 for 
     the 1998 crop, $3.48 for the 1999 crop, $3.23 for the 2000 
     crop, $2.89 for the 2001 crop, and $2.66 for the 2002 
     crop.''; and
       (iv) in clause (iv) (as so redesignated), by striking 
     ``1995'' and inserting ``2002'';
       (C) in subparagraph (C)--
       (i) in clause (i), by striking ``within the permitted 
     acreage''; and
       (ii) in clause (ii)--

       (I) by striking ``85 percent'' and inserting ``70 
     percent''; and
       (II) by striking ``less the quantity'' and all that follows 
     through ``(e)(2)(D))'';

       (D) in subparagraph (D)--
       (i) in the subparagraph heading, by striking ``50/85'' and 
     inserting ``25/75'';
       (ii) in clause (i)--

       (I) by striking ``an acreage'' and all that follows through 
     ``rice and'';
       (II) by striking ``15 percent'' each place it appears and 
     inserting ``25 percent'';
       (III) by striking ``1997 crops (except as provided in 
     clause (v)(II))'' each place it appears and inserting ``2002 
     crops'';
       (IV) by striking ``(except as provided in subparagraph 
     (E))'' each place it appears and inserting ``or alternative 
     crops described in subparagraph (E)''; and
       (V) in subclause (I), by striking ``for the purpose'' and 
     all that follows through ``(e)(2)(D)'';

       (iii) in clause (ii), by striking ``50 percent'' and 
     inserting ``25 percent'';
       (iv) in clause (iii), by striking ``(or other uses as 
     provided in subparagraph (E))'' and inserting ``or 
     alternative crops described in subparagraph (E)'';
       (v) in clause (v)--

       (I) in the clause heading, by striking ``Prevented planting 
     and reduced'' and inserting ``Reduced'';
       (II) in the first sentence of subclause (I), by striking 
     ``under subsection (e)''; and
       (III) in subclause (II)--

       (aa) in the subclause heading, by striking ``1997'' and 
     inserting ``2002'';
       (bb) by striking ``1997'' and inserting ``2002'';
       (cc) by striking ``if an acreage limitation'' and all that 
     follows through ``(aa) the'' and inserting ``if the'';
       (dd) by striking ``be prevented from planting the crop 
     or'';
       (ee) by striking ``8 percent'' the first place it appears 
     and inserting ``25 percent''; and
       (ff) by striking ``uses; or'' and all that follows through 
     the period at the end of the subclause and inserting 
     ``uses.'';
       (vi) in clause (vi), by striking ``permitted rice'' and all 
     that follows through ``this subparagraph'' and inserting 
     ``rice payment acres of the farm was devoted to conserving 
     uses or alternative crops described in subparagraph (E)''; 
     and
       (vii) by striking clause (viii); and
       (E) in the first sentence of subparagraph (E)(ii), by 
     inserting before the period at the end the following: ``or 
     other oilseeds as determined by the Secretary'';
       (5) by striking subsection (e) and inserting the following:
       ``(e) Haying and Grazing.--
       ``(1) In general.--Except as provided in paragraph (2), 
     haying and grazing of acreage under subsection (c)(1)(C) 
     shall be permitted, except during any consecutive 5-month 
     period that is established by the State committee established 
     under section 8(b) of the Soil Conservation and Domestic 
     Allotment Act (16 U.S.C. 590h(b)) for a State. The 5-month 
     period shall be established during the period beginning April 
     1, and ending October 31, of a year.
       ``(2) Natural disasters.--In the case of a natural 
     disaster, the Secretary may permit unlimited haying and 
     grazing on the acreage. The Secretary may not exclude 
     irrigated or irrigable acreage not planted to alfalfa when 
     exercising the authority under this paragraph.'';
       (6) in subsection (f)--
       (A) in paragraph (1), by striking ``1995'' and inserting 
     ``2002''; and
       (B) in paragraph (4)(C), by striking ``reduced by'' and all 
     that follows through ``subsection (e)''; and
       (7) in subsection (n), by striking ``1995'' and inserting 
     ``2002''.

     SEC. 1103. COTTON PROGRAM.

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

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

       (2) in subsection (a)--
       (A) in paragraph (1), by striking ``1997'' and inserting 
     ``2002'';
       (B) by striking paragraph (4) and inserting the following:
       ``(4) Storage payments.--The producer shall pay the cost of 
     all storage payments incurred for a 10-month nonrecourse 
     loan.''; and
       (C) in paragraph (5)--
       (i) by striking ``August 1, 1991, and ending July 31, 
     1998'' each place it appears and inserting ``August 1, 1996, 
     and ending July 31, 2003'';
       (ii) in subparagraph (E), by striking ``1.25 cents'' each 
     place it appears and inserting ``2.50 cents''; and
       (iii) in subparagraph (F)(i), by striking ``August 1991 and 
     ending July 31, 1998'' and inserting ``August 1, 1996, and 
     ending July 31, 2003'';
       (3) in subsection (b)(1), by striking ``1997'' and 
     inserting ``2002'';
       (4) in subsection (c)(1)--
       (A) in subparagraph (A), by striking ``1997'' and inserting 
     ``2002'';
       (B) in subparagraph (B)--
       (i) by redesignating clause (ii) as clause (iii);
       (ii) by inserting after clause (i) the following:
       ``(ii) Maximum payment rate.--The payment rate for upland 
     cotton under this subsection shall not exceed (per pound) 8.6 
     cents for the 1996 crop, 12.1 cents for the 1997 crop, 13.1 
     cents for the 1998 crop, 13.6 cents for the 1999 crop, 13.0 
     cents for the 2000 crop, 12.0 cents for the 2001 crop, and 
     11.5 cents for the 2002 crop.''; and
       (iii) in clause (iii) (as so redesignated), by striking 
     ``1997'' and inserting ``2002'';
       (C) in subparagraph (C)--
       (i) in clause (i), by striking ``within the permitted 
     acreage''; and
       (ii) in clause (ii)--

       (I) by striking ``85 percent'' and inserting ``70 
     percent''; and
       (II) by striking ``less the quantity'' and all that follows 
     through ``(e)(2)(D))'';

       (D) in subparagraph (D)--
       (i) in the subparagraph heading, by striking ``50/85'' and 
     inserting ``0/85'';
       (ii) in clause (i)--

       (I) by striking ``an acreage'' and all that follows through 
     ``cotton and'';
       (II) by striking ``1997 crops (except as provided in clause 
     (v)(II))'' each place it appears and inserting ``2002 
     crops'';
       (III) by striking ``(except as provided in subparagraph 
     (E))'' each place it appears and inserting ``or alternative 
     crops described in subparagraph (E)'';
       (IV) in subclause (I), by striking ``for the purpose'' and 
     all that follows through ``(e)(2)(D)''; and
       (V) in subclause (II), by striking ``, subject to the 
     compliance of the producers with clause (ii)'';

       (iii) by striking clauses (ii) and (viii);
       (iv) by redesignating clauses (iii) through (vii) and 
     clause (ix) as clauses (ii) through (vi) and clause (vii), 
     respectively;
       (v) in clause (ii) (as so redesignated), by striking ``(or 
     other uses as provided in subparagraph (E))'' and inserting 
     ``or alternative crops described in subparagraph (E)'';
       (vi) in clause (iii) (as so redesignated), by striking ``, 
     without regard to the requirement imposed under clause 
     (ii),'';
       (vii) in clause (iv) (as so redesignated)--

       (I) in the clause heading, by striking ``Prevented planting 
     and reduced'' and inserting ``Reduced'';
       (II) in the first sentence of subclause (I)--

       (aa) by striking ``under subsection (e)''; and
       (bb) by striking ``without regard to the requirement 
     imposed under clause (ii)''; and

       (III) in subclause (II)--

       (aa) in the subclause heading, by striking ``1997'' and 
     inserting ``2002'';
       (bb) by striking ``1997'' and inserting ``2002'';
       (cc) by striking ``clause (iii) without regard'' and all 
     that follows through ``(aa) the'' and inserting ``clause (ii) 
     if the'';
       (dd) by striking ``be prevented from planting the crop 
     or'';
       (ee) by striking ``8 percent'' the first place it appears 
     and inserting ``15 percent''; and

[[Page S 16161]]

       (ff) by striking ``uses; or'' and all that follows through 
     the period at the end of the subclause and inserting 
     ``uses.'';
       (viii) in clause (v) (as so redesignated), by striking 
     ``permitted cotton'' and all that follows through ``this 
     subparagraph'' and inserting ``cotton payment acres of the 
     farm was devoted to conserving uses or alternative crops 
     described in subparagraph (E)''; and
       (ix) in clause (vi) (as so redesignated), by striking 
     ``(vi)'' and inserting ``(v)''; and
       (E) in the first sentence of subparagraph (E)(ii), by 
     inserting before the period at the end the following: ``or 
     other oilseeds as determined by the Secretary'';
       (5) by striking subsection (e) and inserting the following:
       ``(e) Haying and Grazing.--
       ``(1) In general.--Except as provided in paragraph (2), 
     haying and grazing of acreage under subsection (c)(1)(C) 
     shall be permitted, except during any consecutive 5-month 
     period that is established by the State committee established 
     under section 8(b) of the Soil Conservation and Domestic 
     Allotment Act (16 U.S.C. 590h(b)) for a State. The 5-month 
     period shall be established during the period beginning April 
     1, and ending October 31, of a year.
       ``(2) Natural disasters.--In the case of a natural 
     disaster, the Secretary may permit unlimited haying and 
     grazing on the acreage. The Secretary may not exclude 
     irrigated or irrigable acreage not planted to alfalfa when 
     exercising the authority under this paragraph.'';
       (6) in subsection (f)--
       (A) in paragraph (1), by striking ``1995'' and inserting 
     ``2002''; and
       (B) in paragraph (4)(C), by striking ``reduced by'' and all 
     that follows through ``subsection (e)''; and
       (7) in subsection (o), by striking ``1997'' and inserting 
     ``2002''.

     SEC. 1104. FEED GRAIN PROGRAM.

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

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

       (2) in subsection (a)--
       (A) in paragraph (1), by striking ``1995'' and inserting 
     ``2002'';
       (B) in paragraph (4)--
       (i) in subparagraph (A)--

       (I) by striking ``may'' and inserting ``shall'';
       (II) in clause (i), by inserting ``or'' after the 
     semicolon; and
       (III) in clause (iii), by striking ``(iii) the'' and 
     inserting the following:
       ``(III) the''; and

       (ii) in subparagraph (C), by striking ``1995'' and 
     inserting ``2002''; and
       (C) in paragraph (6), by striking ``1995'' and inserting 
     ``2002'';
       (3) in subsection (b)(1), by striking ``1995'' and 
     inserting ``2002'';
       (4) in subsection (c)(1)--
       (A) in subparagraph (A), by striking ``1995'' and inserting 
     ``2002'';
       (B) in subparagraph (B)--
       (i) in clause (ii)--

       (I) in the clause heading, by striking ``and 1995'' and 
     inserting ``through 2002''; and
       (II) by striking ``and 1995'' and inserting ``through 
     2002'';

       (ii) by redesignating clause (iii) as clause (iv);
       (iii) by inserting after clause (ii) the following:
       ``(iii) Maximum payment rate.--The payment rates under this 
     subsection shall not exceed (per bushel)--

       ``(I) in the case of corn, $.53 for the 1996 crop, $.53 for 
     the 1997 crop, $.57 for the 1998 crop, $.56 for the 1999 
     crop, $.53 for the 2000 crop, $.54 for the 2001 crop, and 
     $.55 for the 2002 crop;
       ``(II) in the case of grain sorghums, $.59 for the 1996 
     crop, $.59 for the 1997 crop, $.63 for the 1998 crop, $.61 
     for the 1999 crop, $.59 for the 2000 crop, $.60 for the 2001 
     crop, and $.61 for the 2002 crop;
       ``(III) in the case of oats, $.12 for the 1996 crop, $.11 
     for the 1997 crop, $.12 for the 1998 crop, $.11 for the 1999 
     crop, $.09 for the 2000 crop, $.09 for the 2001 crop, and 
     $.10 for the 2002 crop; and
       ``(IV) in the case of barley, $.45 for the 1996 crop, $.43 
     for the 1997 crop, $.44 for the 1998 crop, $.42 for the 1999 
     crop, $.39 for the 2000 crop, $.39 for the 2001 crop, and 
     $.40 for the 2002 crop.''; and

       (iv) in clause (iv) (as so redesignated), by striking 
     ``1995'' each place it appears and inserting ``2002'';
       (C) in subparagraph (C)--
       (i) in clause (i)--

       (I) by inserting after ``crop'' the following: ``or to a 
     commodity permitted under section 504(b)''; and
       (II) by striking ``within the permitted acreage''; and

       (ii) in clause (ii)--

       (I) by striking ``85 percent'' and inserting ``70 
     percent''; and
       (II) by striking ``less the quantity'' and all that follows 
     through ``(e)(2)(D))'';

       (D) in subparagraph (D)(i), by striking ``Notwithstanding 
     the foregoing provisions of this section, if'' and inserting 
     ``If''; and
       (E) in subparagraph (E)--
       (i) in clause (i)--

       (I) by striking ``an acreage'' and all that follows through 
     ``grains and'';
       (II) by striking ``1997 crops (except as provided in clause 
     (vii))'' each place it appears and inserting ``2002 crops'';
       (III) by striking ``(except as provided in subparagraph 
     (F))'' each place it appears and inserting ``or alternative 
     crops described in subparagraph (F)''; and
       (IV) in subclause (I), by striking ``for the purpose'' and 
     all that follows through ``(e)(2)(D)'';

       (ii) in clause (ii), by striking ``(or other uses as 
     provided in subparagraph (F))'' and inserting ``or 
     alternative crops described in subparagraph (F)'';
       (iii) in clause (iv), by striking ``permitted feed grain'' 
     and all that follows through ``this subparagraph'' and 
     inserting ``feed grain payment acres of the farm was devoted 
     to conserving uses or alternative crops described in 
     subparagraph (F)'';
       (iv) by striking clause (vi);
       (v) by redesignating clause (vii) as clause (vi); and
       (vi) in clause (vi) (as so redesignated)--

       (I) in the clause heading, by striking ``Exceptions to 0/
     85'' and inserting ``Reduced yields'';
       (II) by striking ``an acreage'' and all that follows 
     through ``crop and'';
       (III) by striking subclause (II);
       (IV) in subclause (I)(aa)--

       (aa) by striking ``(aa)''; and
       (bb) by striking ``be prevented from planting the crop 
     or''; and

       (V) in subclause (I)(bb)--

       (aa) by striking ``(bb)'' and inserting ``(II)'';
       (bb) by striking ``8 percent'' and inserting ``15 
     percent''; and
       (cc) by striking ``; or'' and inserting a period;
       (5) by striking subsection (e) and inserting the following:
       ``(e) Haying and Grazing.--
       ``(1) In general.--Except as provided in paragraph (2), 
     haying and grazing of acreage under subsection (c)(1)(C) 
     shall be permitted, except during any consecutive 5-month 
     period that is established by the State committee established 
     under section 8(b) of the Soil Conservation and Domestic 
     Allotment Act (16 U.S.C. 590h(b)) for a State. The 5-month 
     period shall be established during the period beginning April 
     1, and ending October 31, of a year.
       ``(2) Natural disasters.--In the case of a natural 
     disaster, the Secretary may permit unlimited haying and 
     grazing on the acreage. The Secretary may not exclude 
     irrigated or irrigable acreage not planted to alfalfa when 
     exercising the authority under this paragraph.'';
       (6) in subsection (f)--
       (A) in paragraph (1), by striking ``1995'' and inserting 
     ``2002''; and
       (B) in paragraph (4)(C), by striking ``reduced by'' and all 
     that follows through ``subsection (e)'';
       (7) in subsection (g)(1), by striking ``under subsection 
     (e)'';
       (8) in subsection (o)(1), by striking ``and acreage 
     reduction'';
       (9) in subsection (p)(1), by striking ``1995'' and 
     inserting ``2002'';
       (10) in subsection (q)(1)--
       (A) by striking ``1995'' and inserting ``2002'';
       (B) in subparagraph (C), by inserting ``and'' after the 
     semicolon at the end;
       (C) in subparagraph (D), by striking ``; and'' and 
     inserting a period; and
       (D) by striking subparagraph (E); and
       (11) in subsection (r), by striking ``1995'' and inserting 
     ``2002''.

     SEC. 1105. WHEAT PROGRAM.

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

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

       (2) in subsection (a)--
       (A) in paragraph (1), by striking ``1995'' and inserting 
     ``2002''; and
       (B) in paragraph (4)--
       (i) in subparagraph (A)--

       (I) by striking ``may'' and inserting ``shall'';
       (II) in clause (i), by inserting ``or'' after the 
     semicolon; and
       (III) in clause (iii), by striking ``(iii) the'' and 
     inserting the following:
       ``(III) the''; and

       (ii) in subparagraph (C), by striking ``1995'' and 
     inserting ``2002'';
       (3) in subsection (b)(1), by striking ``1995'' and 
     inserting ``2002'';
       (4) in subsection (c)(1)--
       (A) in subparagraph (A), by striking ``1995'' and inserting 
     ``2002'';
       (B) in subparagraph (B)--
       (i) in clause (ii)--

       (I) in the clause heading, by striking ``and 1995'' and 
     inserting ``through 2002''; and
       (II) by striking ``and 1995'' and inserting ``through 
     2002'';

       (ii) by redesignating clause (iii) as clause (iv);
       (iii) by inserting after clause (ii) the following:
       ``(iii) Maximum payment rate.--The payment rate for wheat 
     under this subsection shall not exceed (per bushel) $.89 for 
     the 1996 crop, $.94 for the 1997 crop, $.95 for the 1998 
     crop, $.89 for the 1999 crop, $.79 for the 2000 crop, $.78 
     for the 2001 crop, and $.71 for the 2002 crop.''; and
       (iv) in clause (iv) (as so redesignated), by striking 
     ``1995'' and inserting ``2002'';
       (C) in subparagraph (C)--
       (i) in clause (i)--

       (I) by inserting after ``crop'' the following: ``or to a 
     commodity permitted under section 504(b)''; and
       (II) by striking ``within the permitted acreage''; and

       (ii) in clause (ii)--

       (I) by striking ``85 percent'' and inserting ``70 
     percent''; and
       (II) by striking ``less the quantity'' and all that follows 
     through ``(e)(2)(D))'';

       (D) in subparagraph (D)(i), by striking ``Notwithstanding 
     the foregoing provisions of this section, if'' and inserting 
     ``If''; and
       (E) in subparagraph (E)--
       (i) in clause (i)--

       (I) by striking ``an acreage'' and all that follows through 
     ``wheat and'';
       (II) by striking ``1997 crops (except as provided in clause 
     (vii))'' each place it appears and inserting ``2002 crops'';

[[Page S 16162]]

       (III) by striking ``(except as provided in subparagraph 
     (F))'' each place it appears and inserting ``or alternative 
     crops described in subparagraph (F)''; and
       (IV) in subclause (I), by striking ``for the purpose'' and 
     all that follows through ``(e)(2)(D)'';

       (ii) in clause (ii), by striking ``(or other uses as 
     provided in subparagraph (F))'' and inserting ``or 
     alternative crops described in subparagraph (F)'';
       (iii) in clause (iv), by striking ``permitted wheat'' and 
     all that follows through ``this subparagraph'' and inserting 
     ``wheat grain payment acres of the farm was devoted to 
     conserving uses or alternative crops described in 
     subparagraph (F)'';
       (iv) by striking clause (vi);
       (v) by redesignating clause (vii) as clause (vi); and
       (vi) in clause (vi) (as so redesignated)--

       (I) in the clause heading, by striking ``Exceptions to 0/
     85'' and inserting ``Reduced yields'';
       (II) by striking ``an acreage'' and all that follows 
     through ``crop and'';
       (III) by striking subclause (II);
       (IV) in subclause (I)(aa)--

       (aa) by striking ``(aa)''; and
       (bb) by striking ``be prevented from planting the crop 
     or''; and

       (V) in subclause (I)(bb)--

       (aa) by striking ``(bb)'' and inserting ``(II)'';
       (bb) by striking ``8 percent'' and inserting ``15 
     percent''; and
       (cc) by striking ``; or'' and inserting a period;
       (5) by striking subsection (e) and inserting the following:
       ``(e) Haying and Grazing.--
       ``(1) In general.--Except as provided in paragraph (2), 
     haying and grazing of acreage under subsection (c)(1)(C) 
     shall be permitted, except during any consecutive 5-month 
     period that is established by the State committee established 
     under section 8(b) of the Soil Conservation and Domestic 
     Allotment Act (16 U.S.C. 590h(b)) for a State. The 5-month 
     period shall be established during the period beginning April 
     1, and ending October 31, of a year.
       ``(2) Natural disasters.--In the case of a natural 
     disaster, the Secretary may permit unlimited haying and 
     grazing on the acreage. The Secretary may not exclude 
     irrigated or irrigable acreage not planted to alfalfa when 
     exercising the authority under this paragraph.'';
       (6) in subsection (f)--
       (A) in paragraph (1), by striking ``1995'' and inserting 
     ``2002''; and
       (B) in paragraph (4)(C), by striking ``reduced by'' and all 
     that follows through ``subsection (e)'';
       (7) in subsection (g)(1), by striking ``under subsection 
     (e)'';
       (8) in subsection (o)(1), by striking ``and acreage 
     reduction'';
       (9) in subsection (p)(2)(B), by striking ``less the 
     quantity'' and all that follows through ``(e)(2)(D))''; and
       (10) in subsection (q), by striking ``1995'' and inserting 
     ``2002''.

     SEC. 1106. MILK PROGRAM.

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

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

       ``(a) In General.--During the period beginning January 1, 
     1996, and ending December 31, 2002, the price of milk 
     produced in the 48 contiguous States shall be supported as 
     provided in this section.
       ``(b) Support Price.--
       ``(1) In general.--During the period referred to in 
     subsection (a), the price of milk used for cheese shall be 
     supported at a rate equal to $10.00 per hundredweight for 
     calendar year 1996, subject to subsection (d). Milk used for 
     nonfat dry milk or butter shall not be supported under this 
     section.
       ``(2) Annual reduction.--For each of calendar years 1997 
     through 2002, the Secretary shall reduce the rate of price 
     support for milk used for cheese by 10 cents per 
     hundredweight.
       ``(c) Purchases.--
       ``(1) In general.--The price of milk used for cheese shall 
     be supported through the purchase of cheese and based on the 
     support price in effect during the applicable calendar year.
       ``(2) Sales through deip.--All sales for export under the 
     dairy export incentive program established under section 153 
     of the Food Security Act of 1985 (15 U.S.C. 713a-14) shall be 
     considered as total purchases under subsection (d).
       ``(d) Support Rate Adjustments.--Effective January 1 of 
     each of the calendar years 1996 through 2002, if the level of 
     purchases of milk and the products of milk by the Commodity 
     Credit Corporation under this section (less sales under 
     section 407 for unrestricted use), through direct purchases 
     or through sales under the dairy export incentive program 
     established under section 153 of the Food Security Act of 
     1985 (15 U.S.C. 713a-14), as estimated by the Secretary by 
     November 20 of the preceding calendar year, will exceed 
     1,500,000,000 pounds (milk equivalent, total milk solids 
     basis), the Secretary shall decrease by 25 cents per 
     hundredweight, in addition to the annual reduction under 
     subsection (b)(2), the rate of price support for milk used 
     for cheese in effect for the calendar year. The support rate 
     adjustment provided under this subsection shall be effective 
     only for the calendar year applicable to the estimate of the 
     Secretary. After the support rate adjustment terminates, the 
     support price shall be the level provided under subsection 
     (b)(2).
       ``(e) Commodity Credit Corporation.--The Secretary shall 
     carry out the program authorized by this section through the 
     Commodity Credit Corporation.
       ``(f) Period.--This section shall be effective only during 
     the period beginning January 1, 1996, and ending December 31, 
     2002.''.
       (b) Milk Manufacturing Marketing Adjustment.--Section 102 
     of the Food, Agriculture, Conservation, and Trade Act of 1990 
     (7 U.S.C. 1446e-1) is repealed.
       (c) Class IV Account.--Effective January 1, 1996, section 
     8c(5) of the Agricultural Adjustment Act (7 U.S.C. 608c(5)), 
     reenacted with amendments by the Agricultural Marketing 
     Agreement Act of 1937, is amended--
       (1) in paragraph (A), by adding at the end the following: 
     ``Each marketing order issued pursuant to this section for 
     milk and milk products shall include all skim milk and 
     butterfat used to produce butter, nonfat dry milk, and dry 
     whole milk as part of a Class IV classification.''; and
       (2) by adding at the end the following:
       ``(M) Class iv account.--
       ``(i) Definitions.--In this paragraph:

       ``(I) Account.--The term `Account' means the Account for 
     Class IV final products established under clause (ii).
       ``(II) Administrator.--The term `Administrator' means the 
     Administrator of the Account appointed under clause (vii).
       ``(III) Class iv final product.--The term `Class IV final 
     product' means butter, nonfat dry milk, and dry whole milk.
       ``(IV) Milk marketing order.--The term `milk marketing 
     order' means a milk marketing order issued pursuant to this 
     section and any comparable State milk marketing order or 
     system.

       ``(ii) Establishment of account.--Notwithstanding any other 
     provision of law, the Secretary shall establish an Account 
     for Class IV final products to equalize returns from all milk 
     used in the 48 contiguous States to produce Class IV final 
     products among all milk marketed by producers for commercial 
     use.
       ``(iii) Class iv price and differential; proration.--

       ``(I) Price.--The Secretary shall determine a milk 
     equivalent value per hundredweight for Class IV final 
     products each month based on the average wholesale market 
     prices during the month for Class IV final products. The milk 
     equivalent value at 3.67 percent milkfat shall be the per 
     hundredweight Class IV price under the Account.
       ``(II) Differential.--The Administrator of the Account 
     shall announce, on the first business day of each month, the 
     per hundredweight Class IV differential applicable to the 
     preceding month. The monthly Class IV differential shall be 
     the amount, if any, by which the support rate for milk in 
     effect under section 204 of the Agricultural Act of 1949 (7 
     U.S.C. 1446e) exceeds the Class IV price established pursuant 
     to subclause (I).
       ``(III) Proration.--On or before the twentieth day after 
     the end of each month, the Administrator of the Account 
     shall--

       ``(aa) determine the quantity of milk produced in the 48 
     contiguous States of the United States and marketed for 
     commercial use in producing Class IV final products during 
     the preceding month;
       ``(bb) calculate the quantity equal to the number of 
     hundredweights of milk used for Class IV final products 
     during the preceding month (as determined under item (aa)) 
     multiplied by the Class IV differential for the month 
     established under subclause (II), and add to that amount the 
     cost of administering the Account during the current month; 
     and
       ``(cc) prorate the amount established under item (bb) among 
     the total amount, in hundredweights, of milk produced in the 
     48 contiguous States and marketed for commercial use during 
     the preceding month.
       ``(iv) Account obligations.--On or before the twenty-fifth 
     day after the end of each month:

       ``(I) Each person making payment to a producer for milk 
     produced in any of the 48 contiguous States of the United 
     States and marketed for commercial use shall collect from 
     each producer the amount determined by multiplying the 
     quantity of milk handled for the account of the producer 
     during the preceding month by the Class IV differential 
     proration established pursuant to clause (iii)(III)(ccc). The 
     amount shall be remitted to the Administrator of the Account.
       ``(II) Any producer marketing milk of the producer's own 
     production in the form of milk or dairy products to 
     consumers, either directly or through retail or wholesale 
     outlets, shall remit to the Administrator of the Account the 
     amount determined by multiplying the quantity of the milk 
     marketed by the producer by the Class IV differential 
     proration established under clause (iii)(III)(ccc).

       ``(v) Distribution of account proceeds.--On or before the 
     thirtieth day after the end of each month, the Administrator 
     of the Account shall pay to each person that used skim milk 
     and butterfat to produce Class IV final products during the 
     preceding month a proportionate share of the total Account 
     proceeds for the month. The proportion of the total proceeds 
     payable to each person shall be the same proportion that the 
     skim milk and butterfat used by the person to produce Class 
     IV final products during the preceding month is of the total 
     skim milk and butterfat used by all persons during the 
     preceding month to produce Class IV final products.
       ``(vi) Effect on blend prices.--Producer blend prices under 
     a milk marketing order shall be adjusted to account for 
     revenue distributions required under clauses (iv) and (v).
       ``(vii) Administration of class iv account.--The Secretary 
     shall appoint a person to serve as the Administrator of the 
     Account and shall delegate to the Administrator such powers 
     as are needed to carry out the duties of Administrator.
       ``(viii) Enforcement.--

       ``(I) Collection.--The amounts specified in clause (iv) 
     shall be collected and remitted to the Administrator in the 
     manner prescribed by the Secretary.

[[Page S 16163]]

       ``(II) Penalties.--If any person fails to remit the amounts 
     required under clause (iv) or fails to comply with such 
     requirements for recordkeeping or otherwise as are required 
     by the Secretary to carry out this subparagraph, the person 
     shall be liable to the Secretary for a civil penalty up to, 
     as determined by the Secretary, an amount determined by 
     multiplying--

       ``(i) the quantity of milk involved in the violation; by
       ``(ii) the support rate for milk in effect under section 
     204 of the Agricultural Act of 1949 (7 U.S.C. 1446e) for the 
     applicable calendar year.

       ``(III) Enforcement.--The Secretary may enforce this clause 
     in the courts of the United States.

       ``(ix) Regulations.--The Secretary shall issue regulations 
     to establish the Account without regard to the notice and 
     comment requirements of section 553 of title 5, United States 
     Code.''.
       (d) Northeast Interstate Dairy Compact.--Congress consents 
     to the Northeast Interstate Dairy Compact entered into among 
     the States of Vermont, New Hampshire, Maine, Connecticut, 
     Rhode Island, and Massachusetts, subject to the following 
     conditions:
       (1) Compensation of ccc.--Before the end of each fiscal 
     year that a Compact price regulation is in effect, the 
     Compact Commission shall compensate the Commodity Credit 
     Corporation for the cost of any purchases of milk and milk 
     products by the Corporation that result from projected fluid 
     milk production for the fiscal year within the Compact region 
     in excess of the national average rate of purchases of milk 
     and milk products by the Corporation.
       (2) Milk market order administrator.--By agreement among 
     the States and the Secretary of Agriculture, the 
     Administrator shall provide technical assistance to the 
     compact Commission, and be reimbursed for the assistance, 
     with respect to the applicable milk marketing order issued 
     under section 8c(5) of the Agricultural Adjustment Act (7 
     U.S.C. 608c(5)), reenacted with amendments by the 
     Agricultural Marketing Agreement Act of 1937.
       (3) Termination and renewal.--The consent for the Compact 
     shall--
       (A) terminate on the date that is 7 years after the date of 
     enactment of this Act, subject to subparagraph (B); and
       (B) may be renewed by Congress, without prior ratification 
     by the States' legislatures.
       (e) Agricultural Competitiveness Grants.--The Secretary of 
     Agriculture (referred to in this subtitle as the 
     ``Secretary'') shall, in accordance with this subtitle, award 
     a grant to a grantee eligible under section 1502 to promote a 
     purpose of this subtitle.
       (f) Eligible Grantee.--The Secretary may make a grant under 
     section 1501 to--
       (1) a college or university;
       (2) a State agricultural experiment station;
       (3) a State Cooperative Extension Service;
       (4) a research institution or organization;
       (5) a private organization or person; or
       (6) a Federal agency.
       (g) Use of Grant.--A grant made under section 1501 may be 
     used by a grantee for 1 or more of the following uses:
       (1) Research, ranging from discovery to principles of 
     application.
       (2) Extension and related private-sector activities.
       (3) Education.
       (h) Priority.--In administering this subtitle, the 
     Secretary shall--
       (1) establish priorities for allocating grants, based on 
     needs and opportunities of the food and agriculture system in 
     the United States;
       (2) seek and accept proposals for grants;
       (3) determine the relevance and merit of proposals through 
     a system of peer review; and
       (4) award grants on the basis of merit and quality.
       (i) Administration.--
       (1) Competitive grant.--A grant under section 1501 shall be 
     awarded on a competitive basis.
       (2) Term.--A grant under section 1501 shall have a term 
     that does not exceed 5 years.
       (3) Matching funds.--As a condition of receipt of a grant 
     under section 1501, the Secretary shall require the funding 
     of the grant with equal matching funds from a non-Federal 
     source if the grant is--
       (A) for applied research that is commodity-specific; and
       (B) not of national scope.
       (4) Administrative costs.--The Secretary may use not more 
     than 4 percent of the funds made available under section 1506 
     for administrative costs incurred by the Secretary in 
     carrying out this subtitle.
       (5) Construction costs.--None of the funds made available 
     under section 1507 may be used for the construction of a new 
     building or the acquisition, expansion, remodeling, or 
     alteration of an existing building (including site grading 
     and improvement and architect fees).
       (j) Regulations.--The Secretary shall issue such 
     regulations as are necessary to carry out this subtitle.
       (k) Use of commodity credit corporation funds.--
       (1) In general.--Subject to subsection (b), the Secretary 
     shall use $30,000,000 of the funds of the Commodity Credit 
     Corporation for each of fiscal years 1996 through 2002 to 
     carry out this title.
       (2) Limitation.--The Secretary may use less than 
     $30,000,000 of the funds of the Commodity Credit Corporation 
     for any fiscal year if the Secretary determines that the full 
     funding level is not necessary to fund all qualifying 
     applications for agricultural competitiveness grants that 
     satisfy the priority criteria established under section 1504.
       (3) Powers of the Corporation.--Section 5 of the Commodity 
     Credit Corporation Charter Act (15 U.S.C. 714c) (as amended 
     by section 1201(c)(1)) is amended by inserting after 
     subsection (g) the following:
       ``(h) Carry out research, extension, and education related 
     to agriculture by using not more than $30,000,000 of the 
     funds of the Corporation in any fiscal year for any function 
     or activity relating to agricultural research, extension, or 
     education.''.
       (l) Effective date.--This subtitle and the amendment made 
     by this subtitle shall become effective upon enactment.

     SEC. 1107. OILSEEDS PROGRAM.

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

     SEC. 1108. SUGAR PROGRAM.

       (a) In General.--Section 206 of the Agricultural Act of 
     1949 (7 U.S.C. 1446g) is amended--
       (1) in the section heading, by striking ``1997'' and 
     inserting ``2002'';
       (2) in subsection (a), by striking ``1997'' and inserting 
     ``2002'';
       (3) in subsection (b), by striking ``nonrecourse'';
       (4) in subsection (c)--
       (A) by striking ``1997'' and inserting ``2002''; and
       (B) by striking ``nonrecourse'';
       (5) by redesignating subsections (d) through (j) as 
     subsections (f) through (l), respectively;
       (6) by inserting after subsection (c) the following:
       ``(d) Loans.--
       ``(1) In general.--Subject to paragraph (2), the Secretary 
     shall carry out this section through the use of recourse 
     loans.
       ``(2) Import trigger for nonrecourse loans.--If in any 
     fiscal year the tariff rate quota for imports of sugar into 
     the United States is established at a level equal to 
     1,340,000 or more short tons, raw value, the Secretary shall 
     for the duration of the fiscal year make available 
     nonrecourse loans under this section. A recourse loan made 
     during the fiscal year prior to the tariff rate quota being 
     established at 1,340,000 or more short tons, raw value, under 
     this section shall be modified by the Secretary into a 
     nonrecourse loan for the remainder of the term of the loan.
       ``(3) Processor assurances.--The Secretary shall obtain 
     from each processor that obtains either a recourse or 
     nonrecourse loan under this section such assurances as the 
     Secretary considers necessary to ensure that producers of 
     sugarcane and sugar beets will receive payments that are 
     proportional to the value of the loan received by the 
     processor, as determined by the Secretary.
       ``(e) Forfeitures.--A penalty shall be assessed on the 
     forfeiture of any sugar pledged as collateral for a 
     nonrecourse loan. The penalty for cane sugar shall be 
     equivalent to 1 cent per pound. The penalty for beet sugar 
     shall bear the same relation to the penalty for cane sugar as 
     the marketing assessment for sugar beets bears to the 
     marketing assessment for sugarcane.'';
       (7) in subsection (f)(1) (as so redesignated), by striking 
     ``1997'' and inserting ``2002'';
       (8) in subsection (h) (as so redesignated), by striking 
     ``subsection (g)'' and inserting ``subsection (i)'';
       (9) in subsection (i) (as so redesignated)--
       (A) in the subsection heading, by striking ``Nonrecourse''; 
     and
       (B) by striking ``price support'' each place it appears;
       (10) in subsection (k) (as so redesignated)--
       (A) in the subsection heading, by striking ``Marketing 
     Assessment'' and inserting ``Assessments on All Marketed 
     Sugar'';
       (B) in paragraph (1)--
       (i) by striking ``1996'' and inserting ``2002'';
       (ii) in subparagraph (A)--

       (I) by striking ``each of fiscal years 1992 through 1994, 
     1.0'' and inserting ``fiscal year 1996, 1.1''; and
       (II) by striking ``(but'' and all that follows through 
     ``sugar),''; and

       (iii) in subparagraph (B)--

       (I) by striking ``1995 through 1998, 1.1'' and inserting 
     ``1997 through 2003, 1.375''; and
       (II) by striking ``(but'' and all that follows through 
     ``sugar),''; and

       (C) in paragraph (2)--
       (i) by striking ``1996'' and inserting ``2002'';
       (ii) in subparagraph (A)--

       (I) by striking ``each of fiscal years 1992 through 1994, 
     1.0722'' and inserting ``fiscal year 1996, 1.1794''; and
       (II) by striking ``(but'' and all that follows through 
     ``sugar),''; and

       (iii) in subparagraph (B)--

       (I) by striking ``1995 through 1998, 1.1794'' and inserting 
     ``1997 through 2003, 1.47425''; and
       (II) by striking ``(but'' and all that follows through 
     ``sugar),''; and

       (D) by striking paragraph (6); and
       (11) in subsection (l) (as so redesignated), by striking 
     ``1997'' and inserting ``2002''.
       (b) Loan Provisions.--Section 401(e)(1) of the Agricultural 
     Act of 1949 (7 U.S.C. 1421(e)(1)) is amended by adding at the 
     end the following: ``In the case of price support for 
     sugarcane or sugar beets, the payment owed producers by a 
     processor shall be reduced in proportion to the loan 
     forfeiture penalty amounts incurred by the processor as 
     provided in section 206(e).''.
       (c) Marketing Allotments.--Part VII of subtitle B of title 
     III of the Agricultural Adjustment Act of 1938 (7 U.S.C. 
     1359aa et seq.) is repealed.

     SEC. 1109. ACREAGE BASE AND YIELD SYSTEM.

       Title V of the Agricultural Act of 1949 (7 U.S.C. 1461 et 
     seq.) is amended--
       (1) in section 503 (7 U.S.C. 1463)--

[[Page S 16164]]

       (A) in subsection (a)--
       (i) in paragraph (2), by adding ``and historical soybean 
     acreage'' after ``crop acreage bases''; and
       (ii) by adding at the end the following:
       ``(4) Historical soybean acreage.--
       ``(A) In general.--The Secretary shall provide for the 
     establishment and maintenance of an historical soybean 
     acreage for each farm.
       ``(B) Quantity.--
       ``(i) In general.--Except as provided in clause (ii), the 
     historical soybean acreage for a farm for a crop year shall 
     be equal to the average of the acreage planted to soybeans 
     for harvest on the farm in each of the previous 5 crop years.
       ``(ii) Exception.--In determining the historical soybean 
     acreage for a farm for a crop year, the Secretary shall 
     exclude from the acreage any soybean plantings that were 
     considered planted to a program crop or are planted for 
     harvest on a crop acreage base.'';
       (B) in subsection (b)--
       (i) by striking ``Calculation.--'' and all that follows 
     through ``paragraph (2), the'' in paragraph (1) and inserting 
     ``Calculation.--The''; and
       (ii) by striking paragraph (2);
       (C) in subsection (c)--
       (i) in paragraph (1), by inserting ``in the case of each of 
     the 1991 through 1995 crops,'' after ``(1)'';
       (ii) in paragraph (3), by striking ``1997'' and inserting 
     ``1995'';
       (iii) in paragraph (4)--

       (I) by inserting ``in the case of the 1991 through 1995 
     crops, and base acreage in the case of the 1996 through 2002 
     crops,'' after ``permitted acreage''; and
       (II) by inserting ``or conservation uses or related 
     commodity production permitted by the Secretary'' after 
     ``section 504''; and

       (iv) in paragraph (6), by inserting ``in the case of each 
     of the 1991 through 1995 crops,'' after ``(6)''; and
       (D) by striking subsection (h);
       (2) in section 504 (7 U.S.C. 1464)--
       (A) in subsection (b)--
       (i) in paragraph (1)--

       (I) in the paragraph heading, by striking ``Permitted 
     crops'' and inserting ``Payment acres'';
       (II) by striking ``for purposes of this section,'';
       (III) by striking ``a crop acreage base'' and inserting 
     ``the payment acres of a crop acreage base'';
       (IV) in subparagraph (D), by striking ``and'' at the end;
       (V) in subparagraph (E), by striking the period at the end 
     and inserting ``; and''; and
       (VI) by adding at the end the following:

       ``(F) peas and lentils.''; and
       (ii) by adding at the end the following:
       ``(4) Crop acreage base not eligible for payment.--Any crop 
     or conserving crop that is planted on the acres of a crop 
     acreage base that are not eligible for payments shall be 
     eligible for loans. Haying and grazing on the acres shall not 
     be restricted.'';
       (B) by striking subsection (c) and inserting the following:
       ``(c) Limitations on Acreage and Payments.--
       ``(1) In general.--Except as otherwise provided in this 
     section, the planting of a program crop may exceed 100 
     percent of the crop acreage base of the program crop. The 
     program crop shall be eligible for loans.
       ``(2) Upland cotton and rice.--In the case of upland cotton 
     and rice, any crop other than upland cotton or rice that is 
     planted on an upland cotton or rice crop acreage base shall 
     not be eligible for payments.
       ``(3) Wheat and feed grains.--In the case of wheat and feed 
     grains, except as provided in paragraph (4), any crop planted 
     on a wheat or feed grain crop acreage base shall be eligible 
     for payments that are attributable to the payment acres of 
     the wheat or feed grain crop acreage base.
       ``(4) Exceptions.--
       ``(A) Payments on multiple crop acreage bases.--Producers 
     on a farm with wheat or feed grain crop acreage base and 
     upland cotton or rice crop acreage base may not receive 
     payments with respect to the rice or upland cotton planted on 
     the wheat or feed grain crop acreage base.
       ``(B) Upland cotton or rice payments.--Upland cotton or 
     rice shall not be eligible for payments if planted in excess 
     of the respective crop acreage base, except that--
       ``(i) upland cotton or rice planted on acreage not eligible 
     for payments under subsection (b)(4) shall not affect the 
     eligibility for payments under this subparagraph, but shall 
     be eligible for loans; and
       ``(ii) acreage described in subsection (e)(1) shall be 
     eligible for loans, but not for payments.'';
       (C) by striking subsection (d);
       (D) by redesignating subsection (e) as subsection (d);
       (E) in subsection (d)(2) (as so redesignated)--
       (i) by striking ``the producers--'' and all that follows 
     through ``(A) plant'' and inserting ``the producers plant'';
       (ii) by striking ``25 percent'' and inserting ``100 
     percent''; and
       (iii) by striking ``crop; and'' all that follows through 
     the period at the end and inserting ``crop.''; and
       (F) by adding at the end the following:
       ``(e) Two-Way Flexibility.--Producers of a crop of upland 
     cotton or rice on a farm who are participating in the annual 
     program for upland cotton or rice may plant the crop without 
     losing eligibility for loans with respect to the crop if the 
     acreage planted to the crop on the farm does not exceed the 
     sum of--
       ``(1) 25 percent of the historical soybean acreage on the 
     farm; and
       ``(2) 100 percent of the crop acreage base.'';
       (3) in section 505 (7 U.S.C. 1465)--
       (A) in subsection (a), by striking ``or (c)'';
       (B) in subsection (b)--
       (i) in paragraph (1)--

       (I) by striking ``paragraphs (2) and (3)'' and inserting 
     ``paragraph (2)''; and
       (II) by striking ``1997'' and inserting ``2002'';

       (ii) in paragraph (2), by striking ``1997'' and inserting 
     ``2002''; and
       (iii) by striking paragraphs (3), (4), and (5); and
       (C) by striking subsections (c), (d), and (e); and
       (4) in section 509 (7 U.S.C. 1469), by striking ``1997'' 
     and inserting ``2002''.

     SEC. 1110. EXTENSION OF RELATED PRICE SUPPORT PROVISIONS.

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

     SEC. 1111. REPEAL OF MISCELLANEOUS AUTHORITIES.

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

     SEC. 1112. COMMODITY CREDIT CORPORATION INTEREST RATE.

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

     SEC. 1113. PEANUT PROGRAM.

       (a) Price Support.--Section 108B of the Agricultural Act of 
     1949 (7 U.S.C. 1445c-3) is amended--
       (1) in the section heading, by striking ``1997'' and 
     inserting ``2000'';
       (2) in subsection (a)--
       (A) in paragraph (1), by striking ``1997'' and inserting 
     ``2000''; and
       (B) by striking paragraph (2) and inserting the following:
       ``(2) Support rate.--The national average quota support 
     rate for each of the 1996 through 2000 crops of quota peanuts 
     shall be $628 per ton.'';
       (3) in subsection (b)(1), by striking ``1997'' and 
     inserting ``2000'';
       (4) in the first sentence of subsection (c)(2)(A), by 
     inserting before the period at the end the following: ``and 
     that, in the case of the 1996 and subsequent crops, Valencia 
     peanuts not produced in the State shall not be eligible to 
     participate in the pools of the State'';
       (5) in subsection (g)--
       (A) in paragraphs (1) and (2)(A)(ii)(II), by striking 
     ``1997 crops'' each place it appears and inserting ``2000 
     crops''; and
       (B) by striking ``the 1997 crop'' each place it appears and 
     inserting ``each of the 1997 through 2000 crops''; and
       (6) in subsection (h), by striking ``1997'' and inserting 
     ``2000''.
       (b) Poundage Quotas.--Section 358-1 of the Agricultural 
     Adjustment Act of 1938 (7 U.S.C. 1358-1) is amended--
       (1) in the section heading, by striking ``1997'' and 
     inserting ``2000'';
       (2) in subsection (a)--
       (A) by redesignating paragraphs (2) and (3) as paragraphs 
     (3) and (4), respectively;
       (B) by striking paragraph (1) and inserting the following:
       ``(1) Establishment.--The Secretary shall establish the 
     national poundage quota for peanuts for each of the 1991 
     through 2000 marketing years.
       ``(2) Level.--The Secretary shall establish the national 
     poundage quota at a level that is equal to the quantity of 
     peanuts (in tons) that the Secretary estimates will be 
     devoted in each marketing year to domestic edible and related 
     uses, excluding seed, plus a reasonable quantity of peanuts 
     for carryover to ensure continuity of supply between 
     marketing years. Undermarketings of quota peanuts from the 
     previous year shall not be considered. In establishing the 
     quota, the Secretary shall take into account--
       ``(A) any stocks of peanuts on hand in the inventory of the 
     Commodity Credit Corporation; and
       ``(B) peanuts or products of peanuts imported into the 
     United States;''; and
       (C) in paragraph (4) (as so redesignated), by striking 
     ``established under paragraph (1)'';
       (3) in subsection (b)--
       (A) by striking ``1997'' each place it appears and 
     inserting ``2000'';
       (B) in paragraph (2), by striking subparagraph (B) and 
     inserting the following:
       ``(B) Temporary quota allocation.--
       ``(i) In general.--Subject to clause (iv), temporary 
     allocation of a poundage quota for the marketing year in 
     which a crop of peanuts is planted shall be made to producers 
     for each of the 1991 through 2000 marketing years in 
     accordance with this subparagraph.
       ``(ii) Quantity.--The temporary quota allocation shall be 
     equal to the quantity of seed peanuts (in pounds) planted on 
     a farm, as determined in accordance with regulations issued 
     by the Secretary.

[[Page S 16165]]

       ``(iii) Allocation.--The allocation of quota pounds to 
     producers under this subparagraph shall be performed in such 
     a manner as will not result in a net decrease in quota pounds 
     on a farm in excess of 3 percent, after the temporary seed 
     quota is added, from the basic farm quota for the 1995 
     marketing year. A decrease shall occur only once, and shall 
     be applicable only to the 1996 marketing year.
       ``(iv) No increased costs.--The Secretary may carry out 
     this subparagraph only if this subparagraph does not result 
     in--

       ``(I) an increased cost to the Commodity Credit Corporation 
     through displacement of quota peanuts by additional peanuts 
     in the domestic market;
       ``(II) an increased loss in a loan pool of an area 
     marketing association designated pursuant to section 
     108B(c)(1) of the Agricultural Act of 1949 (7 U.S.C. 1445c-
     3(c)(1)); or
       ``(III) other increased costs.

       ``(v) Use of quota and additional peanuts.--Nothing in this 
     subparagraph affects the requirements of section 358b(b).
       ``(vi) Additional allocation.--The temporary allocation of 
     quota pounds under this subparagraph shall be in addition to 
     the farm poundage quota established under this subsection and 
     shall be credited to the producers of the peanuts on the farm 
     in accordance with regulations issued by the Secretary.''; 
     and
       (C) by striking paragraphs (8) and (9); and
       (4) in subsection (f), by striking ``1997'' and inserting 
     ``2000''.
       (c) Sale, Lease, or Transfer.--Section 358b of the 
     Agricultural Adjustment Act of 1938 (7 U.S.C. 1358b) is 
     amended to read as follows:

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

       ``(a) In General.--
       ``(1) Authority.--
       ``(A) In general.--Subject to such terms, conditions, or 
     limitations as the Secretary may prescribe, the owner, or 
     operator with the permission of the owner, of any farm for 
     which a farm poundage quota has been established under this 
     Act may sell or lease all or any part of the poundage quota 
     to any other owner or operator of a farm within counties of a 
     State for transfer to the farm, except that any such lease of 
     poundage quota may be entered into in the fall or after the 
     normal planting season--
       ``(i) if not less than 90 percent of the basic quota 
     (consisting of the farm quota and temporary quota transfers), 
     plus any poundage quota transferred to the farm under this 
     subsection, has been planted or considered planted on the 
     farm from which the quota is to be leased; and
       ``(ii) under such terms and conditions as the Secretary may 
     prescribe by regulation.
       ``(B) Fall transfers.--
       ``(i) No transfer authorization.--In the case of a fall 
     transfer or a transfer after the normal planting season by a 
     cash lessee, the landowner shall not be required to sign the 
     transfer authorization.
       ``(ii) Time limitation.--A fall transfer or a transfer 
     after the normal planting season may be made not later than 
     72 hours after the peanuts that are the subject of the 
     transfer are inspected and graded.
       ``(iii) Lessees.--In the case of a fall transfer, poundage 
     quota from a farm may be leased to an owner or operator of 
     another farm within the same county or to an owner or 
     operator of another farm in any other county within the 
     State.
       ``(iv) Effect of transfer.--A fall transfer of poundage 
     quota shall not affect the farm quota history for the 
     transferring or receiving farm and shall not result in the 
     reduction of the farm poundage quota on the transferring 
     farm.
       ``(2) Transfers to other self-owned farms.--The owner or 
     operator of a farm may transfer all or any part of the farm 
     poundage quota for the farm to any other farm owned or 
     controlled by the owner or operator that is in the same State 
     and that had a farm poundage quota for the crop of the 
     preceding year, if both the transferring and receiving farms 
     were under the control of the owner or operator for at least 
     3 crop years prior to the crop year in which the farm 
     poundage quota is to be transferred. Any farm poundage quota 
     transferred under this paragraph shall not result in any 
     reduction in the farm poundage quota for the transferring 
     farm if sufficient acreage is planted on the receiving farm 
     to produce the quota pounds transferred.
       ``(3) Transfers in states with small quotas.--In the case 
     of any State for which the poundage quota allocated to the 
     State was less than 10,000 tons for the crop of the preceding 
     year, all or any part of a farm poundage quota may be 
     transferred by sale or lease or otherwise from a farm in 1 
     county to a farm in another county in the State.
       ``(4) Transfers by sale in states having quotas of 10,000 
     tons or more.--
       ``(A) In general.--Subject to the other provisions of this 
     paragraph and such terms and conditions as the Secretary may 
     prescribe, the owner, or operator with the permission of the 
     owner, of any farm for which a farm quota has been 
     established under this Act in a State for which the poundage 
     quota allocated to the State was 10,000 tons or more may sell 
     poundage quota to any other eligible owner or operator of a 
     farm within the State.
       ``(B) Limitations based on total poundage quota.--
       ``(i) 1996 marketing year.--Not more than 15 percent of the 
     total poundage quota within a county as of January 1, 1996, 
     may be sold and transferred under this paragraph during the 
     1996 marketing year.
       ``(ii) 1997-2000 marketing years.--

       ``(I) In general.--Except as provided in subclause (II), 
     not more than 5 percent of the quota pounds remaining in a 
     county as of January 1, 1997, and each January 1 thereafter 
     through January 1, 2000, may be sold and transferred under 
     this paragraph during the applicable marketing year.
       ``(II) Carryover.--Any eligible quota that is not sold or 
     transferred under clause (i) shall be eligible for sale or 
     transfer under subclause (I).

       ``(C) County limitation.--Not more than 35 percent of the 
     total poundage quota within a county may be sold and 
     transferred under this paragraph.
       ``(D) Subsequent leases or sales.--Quota pounds sold and 
     transferred to a farm under this paragraph may not be leased 
     or sold by the farm to another owner or operator of a farm 
     within the same State for a period of 5 years following the 
     date of the original transfer to the farm.
       ``(E) Application.--This paragraph shall not apply to a 
     sale within the same county or to any sale, lease, or 
     transfer described in paragraph (1).
       ``(b) Conditions.--Transfers (including transfer by sale or 
     lease) of farm poundage quotas under this section shall be 
     subject to all of the following conditions:
       ``(1) Lienholders.--No transfer of the farm poundage quota 
     from a farm subject to a mortgage or other lien shall be 
     permitted unless the transfer is agreed to by the 
     lienholders.
       ``(2) Tillable cropland.--No transfer of the farm poundage 
     quota shall be permitted if the county committee established 
     under section 8(b) of the Soil Conservation and Domestic 
     Allotment Act (16 U.S.C. 590h(b)) determines that the 
     receiving farm does not have adequate tillable cropland to 
     produce the farm poundage quota.
       ``(3) Record.--No transfer of the farm poundage quota shall 
     be effective until a record of the transfer is filed with the 
     county committee of each county to, and from, which the 
     transfer is made and each committee determines that the 
     transfer complies with this section.
       ``(4) Other terms.--The Secretary may establish by 
     regulation other terms and conditions.
       ``(c) Crops.--This section shall be effective only for the 
     1991 through 2000 crops of peanuts.''.
       (d) Experimental and Research Programs for Peanuts.--
     Section 358c(d) of the Agricultural Adjustment Act of 1938 (7 
     U.S.C. 1358c(d)) is amended by striking ``1995'' and 
     inserting ``2000''.
       (e) Marketing Penalties and Disposition of Additional 
     Peanuts.--Section 358e of the Agricultural Adjustment Act of 
     1938 (7 U.S.C. 1359a) is amended--
       (1) in the section heading, by striking ``1997'' and 
     inserting ``2000''; and
       (2) in subsection (i), by striking ``1997'' and inserting 
     ``2000''.

     SEC. 1114. CATASTROPHIC CROP INSURANCE COVERAGE.

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

     SEC. 1115. SAVINGS ADJUSTMENT.

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

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

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


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     laws or regulations that facilitate or promote the production, 
     blending, or use of ethanol and ETBE.

     SEC. 1117. EFFECTIVE DATE.

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

     SEC. 1201. CONSERVATION.

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

     ``SEC. 1241. FUNDING.

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

         ``CHAPTER 2--ENVIRONMENTAL QUALITY INCENTIVES PROGRAM

     ``SEC. 1238. DEFINITIONS.

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

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

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

[[Page S 16167]]
     expertise required, quantity of time involved, and other factors as 
     determined appropriate by the Secretary. Funding shall not 
     exceed the projected cost to the Secretary of the technical 
     assistance provided for a fiscal year.
       ``(B) Other authorities.--The receipt of technical 
     assistance under this chapter shall not affect the 
     eligibility of the operator to receive technical assistance 
     under other authorities of law available to the Secretary.
       ``(f) Limitation on Payments.--
       ``(1) In general.--The total amount of cost-sharing and 
     incentive payments paid to a person under this chapter may 
     not exceed--
       ``(A) $10,000 for any fiscal year; or
       ``(B) $50,000 for any multiyear contract.
       ``(2) Regulations.--The Secretary shall issue regulations 
     that are consistent with section 1001 for the purpose of--
       ``(A) defining the term `person' as used in paragraph (1); 
     and
       ``(B) prescribing such rules as the Secretary determines 
     necessary to ensure a fair and reasonable application of the 
     limitations established under this subsection.
       ``(g) Regulations.--Not later than 180 days after the 
     effective date of this subsection, the Secretary shall issue 
     regulations to implement the environmental quality incentives 
     program established under this chapter.

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

       ``(a) Interim Administration.--
       ``(1) In general.--During the period beginning on the date 
     of enactment of the Agricultural Reconciliation Act of 1995 
     and ending on the later of the dates specified in paragraph 
     (2), to ensure that technical assistance, cost-sharing 
     payments, and incentive payments continue to be administered 
     in an orderly manner until such time as assistance can be 
     provided through final regulations issued to implement the 
     environmental quality incentives program established under 
     this chapter, the Secretary shall continue to provide 
     technical assistance, cost-sharing payments, and incentive 
     payments under the terms and conditions of the agricultural 
     conservation program, the Great Plains conservation program, 
     the water quality incentives program, and the Colorado River 
     Basin salinity control program, to the extent that the terms 
     and conditions of the programs are consistent with the 
     environmental quality incentives program.
       ``(2) Expiration of authority.--The authority of the 
     Secretary to carry out paragraph (1) shall terminate on the 
     later of--
       ``(A) the date that is 180 days after the date of enactment 
     of the Agricultural Reconciliation Act of 1995; or
       ``(B) March 31, 1996.
       ``(b) Permanent Administration.--Effective beginning on the 
     later of the dates specified in subsection (a)(2), the 
     Secretary shall provide technical assistance, cost-sharing 
     payments, and incentive payments for structural practices and 
     land management practices related to crop and livestock 
     production in accordance with final regulations issued to 
     carry out the environmental quality incentives program.''.
       (c) Conforming Amendments.--
       (1) Commodity credit corporation charter act.--Section 5(g) 
     of the Commodity Credit Corporation Charter Act (15 U.S.C. 
     714c(g)) is amended to read as follows:
       ``(g) Carry out conservation functions and programs.''.
       (2) Wetlands reserve program.--
       (A) In general.--Section 1237 of the Food Security Act of 
     1985 (16 U.S.C. 3837) is amended--
       (i) in subsection (b)(2)--

       (I) by striking ``not less'' and inserting ``not more''; 
     and
       (II) by striking ``2000'' and inserting ``2002''; and

       (ii) in subsection (c), by striking ``2000'' and inserting 
     ``2002''.
       (B) Length of easement.--Section 1237A(e) of the Food 
     Security Act of 1985 (16 U.S.C. 3837a(e)) is amended by 
     striking paragraph (2) and inserting the following:
       ``(2) shall be for 20 or 30 years, but in no case shall be 
     a permanent easement.''.
       (3) Conservation reserve program.--
       (A) In general.--Section 1231 of the Food Security Act of 
     1985 (16 U.S.C. 3831) is amended--
       (i) in subsections (a) and (b)(3), by striking ``1995'' 
     each place it appears and inserting ``2002''; and
       (ii) in subsection (d), by striking ``total of'' and all 
     that follows through the period at the end of the subsection 
     and inserting ``total of 36,400,000 acres during the 1986 
     through 2002 calendar years (including contracts extended by 
     the Secretary pursuant to section 1437 of the Food, 
     Agriculture, Conservation, and Trade Act of 1990 (Public Law 
     101-624; 16 U.S.C. 3831 note), except that in no case may 
     total spending for the conservation reserve exceed the 
     spending limitations in section 1241(d).''.
       (B) Conforming amendment.--Section 1232(c) of the Food 
     Security Act of 1985 (16 U.S.C. 3832(c)) is amended by 
     striking ``1995'' and inserting ``2002''.
       (d) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), this 
     section and the amendments made by this section shall become 
     effective on the later of--
       (A) the date of enactment of this Act; or
       (B) November 1, 1995.
       (2) Transition provisions.--
       (A) In general.--Section 1238B of the Food Security Act of 
     1985 (as added by subsection (b)) shall become effective on 
     the date of enactment of this Act.
       (B) 1991 through 1995 calendar years.--Notwithstanding any 
     other provision of law, this section and the amendments made 
     by this section shall not affect the authority of the 
     Secretary of Agriculture to carry out a program for any of 
     the 1991 through 1995 calendar years under a provision of law 
     in effect immediately before the effective dates specified in 
     this subsection.
         Subtitle C--Agricultural Promotion and Export Programs

     SEC. 1301. MARKET PROMOTION PROGRAM.

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

     SEC. 1302. EXPORT ENHANCEMENT PROGRAM.

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

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

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

                     CHAPTER 1--FOOD STAMP PROGRAM

     SEC. 1401. TREATMENT OF CHILDREN LIVING AT HOME.

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

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

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

     SEC. 1403. ADJUSTMENT OF THRIFTY FOOD PLAN.

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

     SEC. 1404. DEFINITION OF HOMELESS INDIVIDUAL.

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

     SEC. 1405. STATE OPTIONS IN REGULATIONS.

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

     SEC. 1406. ENERGY ASSISTANCE.

       (a) In General.--Section 5(d) of the Food Stamp Act of 1977 
     (7 U.S.C. 2014(d)) is amended--
       (1) by striking paragraph (11); and
       (2) by redesignating paragraphs (12) through (15) as 
     paragraphs (11) through (14), respectively.
       (b) Conforming Amendments.--
       (1) Section 5(k) of the Act (7 U.S.C. 2014(k)) is amended--
       (A) in paragraph (1)--
       (i) in subparagraph (A), by striking ``plan for aid to 
     families with dependent children approved'' and inserting 
     ``program funded''; and
       (ii) in subparagraph (B), by striking ``, not including 
     energy or utility-cost assistance,'';
       (B) in paragraph (2)--
       (i) by striking subparagraph (C); and
       (ii) by redesignating subparagraphs (D) through (H) as 
     subparagraphs (C) through (G), respectively; and
       (C) by adding at the end the following:
       ``(4) Third party energy assistance payments.--
       ``(A) Energy assistance payments.--For purposes of 
     subsection (d)(1), a payment made under a Federal or State 
     law to provide energy 

[[Page S 16168]]
     assistance to a household shall be considered money payable directly to 
     the household.
       ``(B) Energy assistance expenses.--For purposes of 
     subsection (e), an expense paid on behalf of a household 
     under a Federal or State law to provide energy assistance 
     shall be considered an out-of-pocket expense incurred and 
     paid by the household.''.
       (2) Section 2605(f) of the Low-Income Home Energy 
     Assistance Act of 1981 (42 U.S.C. 8624(f)) is amended--
       (A) by striking ``(f)(1) Notwithstanding'' and inserting 
     ``(f) Notwithstanding'';
       (B) by striking ``food stamps,''; and
       (C) by striking paragraph (2).

     SEC. 1407. DEDUCTIONS FROM INCOME.

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

     SEC. 1408. AMOUNT OF VEHICLE ASSET LIMITATION.

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

     SEC. 1409. BENEFITS FOR ALIENS.

       Section 5(i) of the Food Stamp Act of 1977 (7 U.S.C. 
     2014(i)) is amended--
       (1) in the first sentence of paragraph (1)--
       (A) by inserting ``or who executed such an affidavit or 
     similar agreement to enable the individual to lawfully remain 
     in the United States,'' after ``respect to such 
     individual,''; and
       (B) by striking ``for a period'' and all that follows 
     through the period at the end of the sentence and inserting 
     ``until the end of the period ending on the later of the date 
     agreed to in the affidavit or agreement or the date that is 5 
     years after the date on which the individual was first 
     lawfully admitted into the United States following the 
     execution of the affidavit or agreement.'';
       (2) in paragraph (2)--
       (A) in the first sentence of subparagraph (C)(i), by 
     striking ``of three years after entry into the United 
     States'' and inserting ``determined under paragraph (1)'';
       (B) in the first sentence of subparagraph (D), by striking 
     ``of three years after such alien's entry into the United 
     States'' and inserting ``determined under paragraph (1)''; 
     and
       (C) by adding at the end the following:
       ``(F) Limitation on measurement of attributed income and 
     resources.--
       ``(i) In general.--Notwithstanding any other provision of 
     this subsection, if a determination described in clause (ii) 
     is made, the amount of income and resources of the sponsor or 
     the sponsor's spouse that shall be attributed to the 
     sponsored individual shall not exceed the amount actually 
     provided to the individual, for--

       ``(I) the 12-month period beginning on the date of the 
     determination; or
       ``(II) if the address of the sponsor is unknown to the 
     sponsored individual on the date of the determination, the 
     12-month period beginning on the date the address becomes 
     known to the sponsored individual or to the Secretary (who 
     shall inform the individual of the address not later than 7 
     days after learning the address).

       ``(ii) Determination.--The determination described in this 
     clause shall be a determination by the Secretary that a 
     sponsored individual would, in the absence of the assistance 
     provided by this Act, be unable to obtain food, taking into 
     account the individual's own income, plus any cash, food, 
     housing, or other assistance provided by other individuals, 
     including the sponsor.''; and
       (3) by adding at the end the following:
       ``(3) Treatment of noncitizens.--
       ``(A) In general.--Notwithstanding any other provision of 
     law, a noncitizen who has entered into the United States on 
     or after the date of the enactment of this paragraph shall 
     not, during the 5-year period beginning on the date of the 
     noncitizen's entry into the United States, be eligible to 
     receive any benefits under this Act.
       ``(B) Exceptions.--Subparagraph (A) shall not apply to any 
     individual who is--
       ``(i) a noncitizen granted asylum under section 208 of the 
     Immigration and Nationality Act (8 U.S.C. 1158) or whose 
     deportation has been withheld under section 243(h) of the Act 
     (8 U.S.C. 1253(b)) for a period of not more than 5 years 
     after the date the noncitizen arrived in the United States;
       ``(ii) a noncitizen admitted to the United States as a 
     refugee under section 207 of the Act (8 U.S.C. 1157) for not 
     more than 5 years after the date the noncitizen arrived in 
     the United States; or
       ``(iii) a noncitizen, lawfully present in any State (or any 
     territory or possession of the United States), who is--

       ``(I) a veteran (as defined in section 101 of title 38, 
     United States Code) with a discharge characterized as an 
     honorable discharge and not on account of alienage; or
       ``(II) the spouse or unmarried dependent child of a veteran 
     described in subclause (I).''.

     SEC. 1410. DISQUALIFICATION.

       (a) In General.--Section 6(d) of the Food Stamp Act of 1977 
     (7 U.S.C. 2015(d)) is amended--
       (1) by striking ``(d)(1) Unless otherwise exempted by the 
     provisions'' and all that follows through ``shall be ninety 
     days. The'' and inserting the following:
       ``(d) Conditions of Participation.--
       ``(1) Work requirements.--
       ``(A) In general.--No physically and mentally fit 
     individual over the age of 15 and under the age of 60 shall 
     be eligible to participate in the food stamp program if the 
     individual--
       ``(i) refuses, at the time of application and every 12 
     months thereafter, to register for employment in a manner 
     prescribed by the Secretary;
       ``(ii) refuses without good cause to participate in an 
     employment and training program under paragraph (4), to the 
     extent required by the State agency;
       ``(iii) refuses without good cause to accept an offer of 
     employment, at a site or plant not subject to a strike or 
     lockout at the time of the refusal, at a wage not less than 
     the higher of--

       ``(I) the applicable Federal or State minimum wage; or
       ``(II) 80 percent of the wage that would have governed had 
     the minimum hourly rate under section 6(a)(1) of the Fair 
     Labor Standards Act of 1938 (29 U.S.C. 206(a)(1)) been 
     applicable to the offer of employment;

       ``(iv) refuses without good cause to provide a State agency 
     with sufficient information to allow the State agency to 
     determine the employment status or the job availability of 
     the individual;
       ``(v) voluntarily and without good cause--

       ``(I) quits a job; or
       ``(II) reduces work effort and, after the reduction, the 
     individual is working less than 30 hours per week; or

       ``(vi) fails to comply with section 20.
       ``(B) Household ineligibility.--If an individual who is the 
     head of a household becomes ineligible to participate in the 
     food stamp program under subparagraph (A), the household 
     shall, at the option of the State agency, become ineligible 
     to participate in the food stamp program for a period, 
     determined by the State agency, that does not exceed the 
     lesser of--
       ``(i) the duration of the ineligibility of the individual 
     determined under subparagraph (C); or
       ``(ii) 180 days.
       ``(C) Duration of ineligibility.--
       ``(i) First violation.--The first time that an individual 
     becomes ineligible to participate in the food stamp program 
     under subparagraph (A), the individual shall remain 
     ineligible until the later of--

       ``(I) the date the individual becomes eligible under 
     subparagraph (A);
       ``(II) the date that is 1 month after the date the 
     individual became ineligible; or
       ``(III) a date determined by the State agency that is not 
     later than 3 months after the date the individual became 
     ineligible.

       ``(ii) Second violation.--The second time that an 
     individual becomes ineligible to participate in the food 
     stamp program under subparagraph (A), the individual shall 
     remain ineligible until the later of--

       ``(I) the date the individual becomes eligible under 
     subparagraph (A);
       ``(II) the date that is 3 months after the date the 
     individual became ineligible; or
       ``(III) a date determined by the State agency that is not 
     later than 6 months after the date the individual became 
     ineligible.

       ``(iii) Third or subsequent violation.--The third or 
     subsequent time that an individual becomes ineligible to 
     participate in the food stamp program under subparagraph (A), 
     the individual shall remain ineligible until the later of--

       ``(I) the date the individual becomes eligible under 
     subparagraph (A);
       ``(II) the date that is 6 months after the date the 
     individual became ineligible;
       ``(III) a date determined by the State agency; or
       ``(IV) at the option of the State agency, permanently.

       ``(D) Other conditions.--The''; and
       (2) in paragraph (1), by striking ``Any period of 
     ineligibility'' and all that follows through ``violated.''.

[[Page S 16169]]

       (b) Conforming Amendment.--
       (1) The second sentence of section 17(b)(2) of the Act (7 
     U.S.C. 2026(b)(2)) is amended by striking ``6(d)(1)(i)'' and 
     inserting ``6(d)(1)(A)(i)''.
       (2) Section 20 of the Act (7 U.S.C. 2029) is amended by 
     striking subsection (f) and inserting the following:
       ``(f) Disqualification.--An individual or a household may 
     become ineligible under section 6(d)(1) to participate in the 
     food stamp program for failing to comply with this 
     section.''.

     SEC. 1411. EMPLOYMENT AND TRAINING.

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

     SEC. 1412. INCOME CALCULATION.

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

     SEC. 1413. COMPARABLE TREATMENT FOR DISQUALIFICATION.

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

     SEC. 1414. COOPERATION WITH CHILD SUPPORT AGENCIES.

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

     SEC. 1415. DISQUALIFICATION FOR CHILD SUPPORT ARREARS.

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

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

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

     SEC. 1417. WORK REQUIREMENT.

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

     SEC. 1418. DISQUALIFICATION OF FLEEING FELONS.

       Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015) (as 
     amended by section 1417) is further amended by adding at the 
     end the following:
       ``(n) Disqualification of Fleeing Felons.--No member of a 
     household who is otherwise eligible to participate in the 
     food stamp program shall be eligible to participate in the 
     program as a member of that or any other household during any 
     period during which the individual is--
       ``(1) fleeing to avoid prosecution, or custody or 
     confinement after conviction, under the laws 

[[Page S 16170]]
     of the place from which the individual flees, for a crime, or attempt 
     to commit a crime, which is a felony under the laws of the 
     place from which the individual flees, or which, in the case 
     of the State of New Jersey, is a high misdemeanor under the 
     laws of the State; or
       ``(2) violating a condition of probation or parole imposed 
     under a Federal or State law.''.

     SEC. 1419. ELECTRONIC BENEFIT TRANSFERS.

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

     SEC. 1420. MINIMUM BENEFIT.

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

     SEC. 1421. BENEFITS ON RECERTIFICATION.

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

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

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

     SEC. 1423. ALLOTMENTS FOR HOUSEHOLDS RESIDING IN 
                   INSTITUTIONS.

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

     SEC. 1424. COLLECTION OF OVERISSUANCES.

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

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

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

     SEC. 1426. WORK SUPPLEMENTATION OR SUPPORT PROGRAM.

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

     SEC. 1427. PRIVATE SECTOR EMPLOYMENT INITIATIVES.

       Section 17 of the Food Stamp Act of 1977 (7 U.S.C. 2026) is 
     amended by adding at the end the following:
       ``(m) Private Sector Employment Initiatives.--
       ``(1) Election to participate.--
       ``(A) In general.--Subject to the other provisions of this 
     subsection, a State may elect to carry out a private sector 
     employment initiative program under this subsection.
       ``(B) Requirement.--A State shall be eligible to carry out 
     a private sector employment initiative under this subsection 
     only if not less than 50 percent of the households that 
     received food stamp benefits during the summer of 1993 also 
     received benefits under a State program funded under part A 
     of title IV of the Social Security Act (42 U.S.C. 601 et 
     seq.) during the summer of 1993.
       ``(2) Procedure.--A State that has elected to carry out a 
     private sector employment initiative under paragraph (1) may 
     use amounts equal to the food stamp allotments that would 
     otherwise be allotted to a household under the food stamp 
     program, but for the operation of this subsection, to provide 
     cash benefits in lieu of the food stamp allotments to the 
     household if the household is eligible under paragraph (3).
       ``(3) Eligibility.--A household shall be eligible to 
     receive cash benefits under paragraph (2) if an adult member 
     of the household--
       ``(A) has worked in unsubsidized employment in the private 
     sector for not less than the preceding 90 days;
       ``(B) has earned not less than $350 per month from the 
     employment referred to in subparagraph (A) for not less than 
     the preceding 90 days;

[[Page S 16171]]

       ``(C)(i) is eligible to receive benefits under a State 
     program funded under part A of title IV of the Social 
     Security Act (42 U.S.C. 601 et seq.); or
       ``(ii) was eligible to receive benefits under a State 
     program funded under part A of title IV of the Social 
     Security Act (42 U.S.C. 601 et seq.) at the time the member 
     first received cash benefits under this subsection and is no 
     longer eligible for the State program because of earned 
     income;
       ``(D) is continuing to earn not less than $350 per month 
     from the employment referred to in subparagraph (A); and
       ``(E) elects to receive cash benefits in lieu of food stamp 
     benefits under this subsection.''.

     SEC. 1428. REAUTHORIZATION OF APPROPRIATIONS.

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

     SEC. 1429. OPTIONAL STATE FOOD ASSISTANCE BLOCK GRANT.

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

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

       ``(a) Establishment.--The Secretary shall establish a 
     program to make grants to States in accordance with this 
     section to provide--
       ``(1) food assistance to needy individuals and families 
     residing in the State;
       ``(2) at the option of a State, wage subsidies and payments 
     in return for work for needy individuals under the program;
       ``(3) funds to operate an employment and training program 
     under subsection (g)(2) for needy individuals under the 
     program; and
       ``(4) funds for administrative costs incurred in providing 
     the assistance.
       ``(b) Election.--
       ``(1) In general.--A State may elect to participate in the 
     program established under subsection (a).
       ``(2) Election revocable.--A State that elects to 
     participate in the program established under subsection (a) 
     may subsequently reverse the election of the State only once 
     thereafter. Following the reversal, the State shall only be 
     eligible to participate in the food stamp program in 
     accordance with the other sections of this Act and shall not 
     receive a block grant under this section.
       ``(3) Program exclusive.--A State that is participating in 
     the program established under subsection (a) shall not be 
     subject to, or receive any benefit under, this Act except as 
     provided in this section.
       ``(c) Lead Agency.--
       ``(1) Designation.--A State desiring to participate in the 
     program established under this section shall designate, in an 
     application submitted to the Secretary under subsection 
     (d)(1), an appropriate State agency that complies with 
     paragraph (2) to act as the lead agency for the State.
       ``(2) Duties.--The lead agency shall--
       ``(A) administer, either directly, through other State 
     agencies, or through local agencies, the assistance received 
     under this section by the State;
       ``(B) develop the State plan to be submitted to the 
     Secretary under subsection (d)(1); and
       ``(C) coordinate the provision of food assistance under 
     this section with other Federal, State, and local programs.
       ``(d) Application and Plan.--
       ``(1) Application.--To be eligible to receive assistance 
     under this section, a State shall prepare and submit to the 
     Secretary an application at such time, in such manner, and 
     containing such information as the Secretary shall by 
     regulation require, including--
       ``(A) an assurance that the State will comply with the 
     requirements of this section;
       ``(B) a State plan that meets the requirements of paragraph 
     (3); and
       ``(C) an assurance that the State will comply with the 
     requirements of the State plan under paragraph (3).
       ``(2) Annual plan.--The State plan contained in the 
     application under paragraph (1) shall be submitted for 
     approval annually.
       ``(3) Requirements of plan.--
       ``(A) Lead agency.--The State plan shall identify the lead 
     agency.
       ``(B) Use of block grant funds.--The State plan shall 
     provide that the State shall use the amounts provided to the 
     State for each fiscal year under this section--
       ``(i) to provide food assistance to needy individuals and 
     families residing in the State, other than residents of 
     institutions who are ineligible for food stamps under section 
     3(i);
       ``(ii) at the option of a State, to provide wage subsidies 
     or workfare under section 20(a) (except that any reference in 
     section 20(a) to an allotment shall be considered a reference 
     to the food assistance or benefits in lieu of food assistance 
     received by an individual or family during a month under this 
     section) for needy individuals and families participating in 
     the program;
       ``(iii) to administer an employment and training program 
     under subsection (g)(2) for needy individuals under the 
     program and to provide reimbursements to needy individuals 
     and families as would be allowed under section 16(h)(3); and
       ``(iv) to pay administrative costs incurred in providing 
     the assistance.
       ``(C) Assistance for entire state.--The State plan shall 
     provide that benefits under this section shall be available 
     throughout the entire State.
       ``(D) Notice and hearings.--The State plan shall provide 
     that an individual or family who applies for, or receives, 
     assistance under this section shall be provided with notice 
     of, and an opportunity for a hearing on, any action under 
     this section that adversely affects the individual or family.
       ``(E) Other assistance.--
       ``(i) Coordination.--The State plan may coordinate 
     assistance received under this section with assistance 
     provided under the State program funded under part A of title 
     IV of the Social Security Act (42 U.S.C. 601 et seq.).
       ``(ii) Penalties.--If an individual or family is penalized 
     for violating part A of title IV of the Act, the State plan 
     may reduce the amount of assistance provided under this 
     section or otherwise penalize the individual or family.
       ``(F) Eligibility limitations.--The State plan shall 
     describe the income and resource eligibility limitations that 
     are established for the receipt of assistance under this 
     section.
       ``(G) Receiving benefits in more than 1 jurisdiction.--The 
     State plan shall establish a system to verify and otherwise 
     ensure that no individual or family shall receive benefits 
     under this section in more than 1 jurisdiction within the 
     State.
       ``(H) Privacy.--The State plan shall provide for 
     safeguarding and restricting the use and disclosure of 
     information about any individual or family receiving 
     assistance under this section.
       ``(I) Other information.--The State plan shall contain such 
     other information as may be required by the Secretary.
       ``(4) Approval of application and plan.--The Secretary 
     shall approve an application and State plan that satisfies 
     the requirements of this section.
       ``(e) Limitations on State Allotments.--
       ``(1) No individual or family entitlement to assistance.--
     Nothing in this section--
       ``(A) entitles any individual or family to assistance under 
     this section; or
       ``(B) limits the right of a State to impose additional 
     limitations or conditions on assistance under this section.
       ``(2) Construction of facilities.--No funds made available 
     under this section shall be expended for the purchase or 
     improvement of land, or for the purchase, construction, or 
     permanent improvement of any building or facility.
       ``(f) Benefits for Aliens.--
       ``(1) Eligibility.--No individual shall be eligible to 
     receive benefits under a State plan approved under subsection 
     (d)(4) if the individual is not eligible to participate in 
     the food stamp program under section 6(f).
       ``(2) Income.--The State plan shall provide that the income 
     of an alien shall be determined in accordance with section 
     5(i).
       ``(g) Employment and Training.--
       ``(1) Work requirements.--No individual or member of a 
     family shall be eligible to receive benefits under a State 
     plan funded under this section if the individual is not 
     eligible to participate in the food stamp program under 
     subsection (d) or (m) of section 6.
       ``(2) Work programs.--Each State shall implement an 
     employment and training program described in section 6(d)(4) 
     for needy individuals under the program.
       ``(h) Enforcement.--
       ``(1) Review of compliance with state plan.--The Secretary 
     shall review and monitor State compliance with this section 
     and the State plan approved under subsection (d)(4).
       ``(2) Noncompliance.--
       ``(A) In general.--If the Secretary, after reasonable 
     notice to a State and opportunity for a hearing, finds that--
       ``(i) there has been a failure by the State to comply 
     substantially with any provision or requirement set forth in 
     the State plan approved under subsection (d)(4); or
       ``(ii) in the operation of any program or activity for 
     which assistance is provided under this section, there is a 
     failure by the State to comply substantially with any 
     provision of this section;
     the Secretary shall notify the State of the finding and that 
     no further payments will be made to the State under this 
     section (or, in the case of noncompliance in the operation of 
     a program or activity, that no further payments to the State 
     will be made with respect to the program or activity) until 
     the Secretary is satisfied that there is no longer any 
     failure to comply or that the noncompliance will be promptly 
     corrected.
       ``(B) Other sanctions.--In the case of a finding of 
     noncompliance made pursuant to subparagraph (A), the 
     Secretary may, in addition to, or in lieu of, imposing the 
     sanctions described in subparagraph (A), impose other 
     appropriate sanctions, including recoupment of money 
     improperly expended for purposes prohibited or not authorized 
     by this section and disqualification from the receipt of 
     financial assistance under this section.
       ``(C) Notice.--The notice required under subparagraph (A) 
     shall include a specific identification of any additional 
     sanction being imposed under subparagraph (B).
       ``(3) Issuance of regulations.--The Secretary shall 
     establish by regulation procedures for--
       ``(A) receiving, processing, and determining the validity 
     of complaints concerning any failure of a State to comply 
     with the State plan or any requirement of this section; and
       ``(B) imposing sanctions under this section.
       ``(4) Income and eligibility verification system.--The 
     Secretary may withhold not more than 5 percent of the amount 
     allotted to a State under subsection (l)(2) if the State does 
     not use an income and eligibility verification system 
     established under section 1137 of the Social Security Act (42 
     U.S.C. 1320b-7).
       ``(i) Payments.--
       ``(1) In general.--For each fiscal year, the Secretary 
     shall pay to a State that has an application approved by the 
     Secretary under subsection (d)(4) an amount that is equal to 
     the allotment of the State under subsection (l)(2) for the 
     fiscal year.
       ``(2) Method of payment.--The Secretary shall make payments 
     to a State for a fiscal year under this section by issuing 1 
     or more letters of credit for the fiscal year, with necessary 
     adjustments on account of overpayments or underpayments, as 
     determined by the Secretary.

[[Page S 16172]]

       ``(3) Spending of funds by state.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     payments to a State from an allotment under subsection (l)(2) 
     for a fiscal year may be expended by the State only in the 
     fiscal year.
       ``(B) Carryover.--The State may reserve up to 10 percent of 
     an allotment under subsection (l)(2) for a fiscal year to 
     provide assistance under this section in subsequent fiscal 
     years, except that the reserved funds may not exceed 30 
     percent of the total allotment received under this section 
     for a fiscal year.
       ``(4) Food assistance and administrative expenditures.--In 
     each fiscal year, of the Federal funds expended by a State 
     under this section--
       ``(A) not less than 80 percent shall be for food 
     assistance; and
       ``(B) not more than 6 percent shall be for administrative 
     expenses.
       ``(5) Provision of food assistance.--A State may provide 
     food assistance under this section in any manner determined 
     appropriate by the State to provide food assistance to needy 
     individuals and families in the State, such as electronic 
     benefits transfer limited to food purchases, coupons limited 
     to food purchases, or direct provision of commodities.
       ``(6) Definition of food assistance.--In this section, the 
     term `food assistance' means assistance that may be used only 
     to obtain food, as defined in section 3(g).
       ``(j) Audits.--
       ``(1) Requirement.--After the close of each fiscal year, a 
     State shall arrange for an audit of the expenditures of the 
     State during the program period from amounts received under 
     this section.
       ``(2) Independent auditor.--An audit under this section 
     shall be conducted by an entity that is independent of any 
     agency administering activities that receive assistance under 
     this section and be in accordance with generally accepted 
     auditing principles.
       ``(3) Payment accuracy.--Each annual audit under this 
     section shall include an audit of payment accuracy under this 
     section that shall be based on a statistically valid sample 
     of the caseload in the State.
       ``(4) Submission.--Not later than 30 days after the 
     completion of an audit under this section, the State shall 
     submit a copy of the audit to the legislature of the State 
     and to the Secretary.
       ``(5) Repayment of amounts.--Each State shall repay to the 
     United States any amounts determined through an audit under 
     this section to have not been expended in accordance with 
     this section or to have not been expended in accordance with 
     the State plan, or the Secretary may offset the amounts 
     against any other amount paid to the State under this 
     section.
       ``(k) Nondiscrimination.--
       ``(1) In general.--The Secretary shall not provide 
     financial assistance for any program, project, or activity 
     under this section if any person with responsibilities for 
     the operation of the program, project, or activity 
     discriminates with respect to the program, project, or 
     activity because of race, religion, color, national origin, 
     sex, or disability.
       ``(2) Enforcement.--The powers, remedies, and procedures 
     set forth in title VI of the Civil Rights Act of 1964 (42 
     U.S.C. 2000d et seq.) may be used by the Secretary to enforce 
     paragraph (1).
       ``(l) Allotments.--
       ``(1) Definition of state.--In this section, the term 
     `State' means each of the 50 States, the District of 
     Columbia, Guam, and the Virgin Islands of the United States.
       ``(2) State allotment.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     from the amounts made available under section 18 of this Act 
     for each fiscal year, the Secretary shall allot to each State 
     participating in the program established under this section 
     an amount that is equal to the sum of--
       ``(i) the greater of, as determined by the Secretary--

       ``(I) the total dollar value of all benefits issued under 
     the food stamp program established under this Act by the 
     State during fiscal year 1994; or
       ``(II) the average per fiscal year of the total dollar 
     value of all benefits issued under the food stamp program by 
     the State during each of fiscal years 1992 through 1994; and

       ``(ii) the greater of, as determined by the Secretary--

       ``(I) the total amount received by the State for 
     administrative costs and the employment and training program 
     under subsections (a) and (h), respectively, of section 16 of 
     this Act for fiscal year 1994; or
       ``(II) the average per fiscal year of the total amount 
     received by the State for administrative costs and the 
     employment and training program under subsections (a) and 
     (h), respectively, of section 16 of this Act for each of 
     fiscal years 1992 through 1994.

       ``(B) Insufficient funds.--If the Secretary finds that the 
     total amount of allotments to which States would otherwise be 
     entitled for a fiscal year under subparagraph (A) will exceed 
     the amount of funds that will be made available to provide 
     the allotments for the fiscal year, the Secretary shall 
     reduce the allotments made to States under this subsection, 
     on a pro rata basis, to the extent necessary to allot under 
     this subsection a total amount that is equal to the funds 
     that will be made available.''.

     SEC. 1430. EFFECTIVE DATE.

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

                  CHAPTER 2--CHILD NUTRITION PROGRAMS

                      PART I--REIMBURSEMENT RATES

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

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

     SEC. 1442. LUNCHES, BREAKFASTS, AND SUPPLEMENTS.

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

       ``(I) paid lunches and paid breakfasts on the amount of the 
     unrounded adjustment for paid lunches for the school year 
     beginning July 1, 1995; and
       ``(II) paid supplements on the amount of the unrounded 
     adjustment for paid supplements for the school year beginning 
     July 1, 1995;

       ``(ii) adjust each resulting amount in accordance with 
     subparagraph (C); and
       ``(iii) round each result to the nearest lower cent 
     increment.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall become effective on January 1, 1996.

     SEC. 1443. FREE AND REDUCED PRICE BREAKFASTS.

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

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

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

                        PART II--GRANT PROGRAMS

     SEC. 1451. SCHOOL BREAKFAST STARTUP GRANTS.

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

                       PART III--OTHER AMENDMENTS

     SEC. 1461. CHILD AND ADULT CARE FOOD PROGRAM.

       (a) Improved Targeting of Day Care Home Reimbursements.--
       (1) Restructured day care home reimbursements.--Section 
     17(f)(3) of the National School Lunch Act (42 U.S.C. 
     1766(f)(3)) is amended by striking ``(3)(A) Institutions'' 
     and all that follows through the end of subparagraph (A) and 
     inserting the following:
       ``(3) Reimbursement of family or group day care home 
     sponsoring organizations.--
       ``(A) Reimbursement factor.--
       ``(i) In general.--An institution that participates in the 
     program under this section as a family or group day care home 
     sponsoring organization shall be provided, for payment to a 

[[Page S 16173]]
     home sponsored by the organization, reimbursement factors in accordance 
     with this subparagraph for the cost of obtaining and 
     preparing food and prescribed labor costs involved in 
     providing meals under this section.
       ``(ii) Tier i family or group day care homes.--

       ``(I) Definition.--In this paragraph, the term `tier I 
     family or group day care home' means--

       ``(aa) a family or group day care home that is located in a 
     geographic area, as defined by the Secretary based on census 
     data, in which at least 50 percent of the children residing 
     in the area are members of households whose incomes meet the 
     income eligibility guidelines for free or reduced price meals 
     under section 9;
       ``(bb) a family or group day care home that is located in 
     an area served by a school enrolling elementary students in 
     which at least 50 percent of the total number of children 
     enrolled are certified as eligible to receive free or reduced 
     price school meals under this Act or the Child Nutrition Act 
     of 1966 (42 U.S.C. 1771 et seq.); or
       ``(cc) a family or group day care home that is operated by 
     a provider whose household meets the income eligibility 
     guidelines for free or reduced price meals under section 9 
     and whose income is verified by the sponsoring organization 
     of the home under regulations established by the Secretary.

       ``(II) Reimbursement.--Except as provided in subclause 
     (III), a tier I family or group day care home shall be 
     provided reimbursement factors under this clause without a 
     requirement for documentation of the costs described in 
     clause (i), except that reimbursement shall not be provided 
     under this subclause for meals or supplements served to the 
     children of a person acting as a family or group day care 
     home provider unless the children meet the income eligibility 
     guidelines for free or reduced price meals under section 9.
       ``(III) Factors.--Except as provided in subclause (IV), the 
     reimbursement factors applied to a home referred to in 
     subclause (II) shall be the factors in effect on the date of 
     enactment of this subclause.
       ``(IV) Adjustments.--The reimbursement factors under this 
     subparagraph shall be adjusted on August 1, 1996, July 1, 
     1997, and each July 1 thereafter, to reflect changes in the 
     Consumer Price Index for food at home for the most recent 12-
     month period for which the data are available. The 
     reimbursement factors under this subparagraph shall be 
     rounded to the nearest lower cent increment and based on the 
     unrounded adjustment in effect on June 30 of the preceding 
     school year.

       ``(iii) Tier ii family or group day care homes.--

       ``(I) In general.--

       ``(aa) Factors.--Except as provided in subclause (II), with 
     respect to meals or supplements served under this clause by a 
     family or group day care home that does not meet the criteria 
     set forth in clause (ii)(I), the reimbursement factors shall 
     be $1 for lunches and suppers, 30 cents for breakfasts, and 
     15 cents for supplements.
       ``(bb) Adjustments.--The factors shall be adjusted on July 
     1, 1997, and each July 1 thereafter, to reflect changes in 
     the Consumer Price Index for food at home for the most recent 
     12-month period for which the data are available. The 
     reimbursement factors under this item shall be rounded down 
     to the nearest lower cent increment and based on the 
     unrounded adjustment for the preceding 12-month period.
       ``(cc) Reimbursement.--A family or group day care home 
     shall be provided reimbursement factors under this subclause 
     without a requirement for documentation of the costs 
     described in clause (i), except that reimbursement shall not 
     be provided under this subclause for meals or supplements 
     served to the children of a person acting as a family or 
     group day care home provider unless the children meet the 
     income eligibility guidelines for free or reduced price meals 
     under section 9.

       ``(II) Other factors.--A family or group day care home that 
     does not meet the criteria set forth in clause (ii)(I) may 
     elect to be provided reimbursement factors determined in 
     accordance with the following requirements:

       ``(aa) Children eligible for free or reduced price meals.--
     In the case of meals or supplements served under this 
     subsection to children who are members of households whose 
     incomes meet the income eligibility guidelines for free or 
     reduced price meals under section 9, the family or group day 
     care home shall be provided reimbursement factors set by the 
     Secretary in accordance with clause (ii)(III).
       ``(bb) Ineligible children.--In the case of meals or 
     supplements served under this subsection to children who are 
     members of households whose incomes do not meet the income 
     eligibility guidelines, the family or group day care home 
     shall be provided reimbursement factors in accordance with 
     subclause (I).

       ``(III) Information and determinations.--

       ``(aa) In general.--If a family or group day care home 
     elects to claim the factors described in subclause (II), the 
     family or group day care home sponsoring organization serving 
     the home shall collect the necessary income information, as 
     determined by the Secretary, from any parent or other 
     caretaker to make the determinations specified in subclause 
     (II) and shall make the determinations in accordance with 
     rules prescribed by the Secretary.
       ``(bb) Categorical eligibility.--In making a determination 
     under item (aa), a family or group day care home sponsoring 
     organization may consider a child participating in or 
     subsidized under, or a child with a parent participating in 
     or subsidized under, a federally or State supported child 
     care or other benefit program with an income eligibility 
     limit that does not exceed the eligibility standard for free 
     or reduced price meals under section 9 to be a child who is a 
     member of a household whose income meets the income 
     eligibility guidelines under section 9.
       ``(cc) Factors for children only.--A family or group day 
     care home may elect to receive the reimbursement factors 
     prescribed under clause (ii)(III) solely for the children 
     participating in a program referred to in item (bb) if the 
     home elects not to have income statements collected from 
     parents or other caretakers.

       ``(IV) Simplified meal counting and reporting procedures.--
     The Secretary shall prescribe simplified meal counting and 
     reporting procedures for use by a family or group day care 
     home that elects to claim the factors under subclause (II) 
     and by a family or group day care home sponsoring 
     organization that sponsors the home. The procedures the 
     Secretary prescribes may include 1 or more of the following:

       ``(aa) Setting an annual percentage for each home of the 
     number of meals served that are to be reimbursed in 
     accordance with the reimbursement factors prescribed under 
     clause (ii)(III) and an annual percentage of the number of 
     meals served that are to be reimbursed in accordance with the 
     reimbursement factors prescribed under subclause (I), based 
     on the family income of children enrolled in the home in a 
     specified month or other period.
       ``(bb) Placing a home into 1 of 2 or more reimbursement 
     categories annually based on the percentage of children in 
     the home whose households have incomes that meet the income 
     eligibility guidelines under section 9, with each such 
     reimbursement category carrying a set of reimbursement 
     factors such as the factors prescribed under clause (ii)(III) 
     or subclause (I) or factors established within the range of 
     factors prescribed under clause (ii)(III) and subclause (I).
       ``(cc) Such other simplified procedures as the Secretary 
     may prescribe.

       ``(V) Minimum verification requirements.--The Secretary may 
     establish any necessary minimum verification requirements.''.

       (2) Grants to states to provide assistance to family or 
     group day care homes.--Section 17(f)(3) of the Act is amended 
     by adding at the end the following:
       ``(D) Grants to states to provide assistance to family or 
     group day care homes.--
       ``(i) In general.--

       ``(I) Reservation.--From amounts made available to carry 
     out this section, the Secretary shall reserve $5,000,000 of 
     the amount made available for fiscal year 1996.
       ``(II) Purpose.--The Secretary shall use the funds made 
     available under subclause (I) to provide grants to States for 
     the purpose of providing--

       ``(aa) assistance, including grants, to family and day care 
     home sponsoring organizations and other appropriate 
     organizations, in securing and providing training, materials, 
     automated data processing assistance, and other assistance 
     for the staff of the sponsoring organizations; and
       ``(bb) training and other assistance to family and group 
     day care homes in the implementation of the amendments to 
     subparagraph (A) made by section 1461(a)(1) of the 
     Agricultural Reconciliation Act of 1995.
       ``(ii) Allocation.--The Secretary shall allocate from the 
     funds reserved under clause (i)(I)--

       ``(I) $30,000 in base funding to each State; and
       ``(II) any remaining amount among the States, based on the 
     number of family day care homes participating in the program 
     in a State during fiscal year 1994 as a percentage of the 
     number of all family day care homes participating in the 
     program during fiscal year 1994.

       ``(iii) Retention of funds.--Of the amount of funds made 
     available to a State for fiscal year 1996 under clause (i), 
     the State may retain not to exceed 30 percent of the amount 
     to carry out this subparagraph.
       ``(iv) Additional payments.--Any payments received under 
     this subparagraph shall be in addition to payments that a 
     State receives under subparagraph (A) (as amended by section 
     1461(a)(1) of the Agricultural Reconciliation Act of 
     1995).''.
       (3) Provision of data.--Section 17(f)(3) of the Act (as 
     amended by paragraph (2)) is further amended by adding at the 
     end the following:
       ``(E) Provision of data to family or group day care home 
     sponsoring organizations.--
       ``(i) Census data.--The Secretary shall provide to each 
     State agency administering a child and adult care food 
     program under this section data from the most recent 
     decennial census survey or other appropriate census survey 
     for which the data are available showing which areas in the 
     State meet the requirements of subparagraph (A)(ii)(I)(aa). 
     The State agency shall provide the data to family or group 
     day care home sponsoring organizations located in the State.
       ``(ii) School data.--

       ``(I) In general.--A State agency administering the school 
     lunch program under this Act or the school breakfast program 
     under the Child Nutrition Act of 1966 (42 U.S.C. 1771 et 
     seq.) shall provide to approved family or group day care home 
     sponsoring organizations a list of schools serving elementary 
     school children in the State in which not less than \1/2\ of 
     the children enrolled are certified to receive free or 
     reduced price meals. The State agency shall collect the data 
     necessary to create the list annually and provide the list on 
     a timely basis to any approved family or group day care home 
     sponsoring organization that requests the list.
       ``(II) Use of data from preceding school year.--In 
     determining for a fiscal year or other annual period whether 
     a home qualifies as a tier I family or group day care home 
     under subparagraph (A)(ii)(I), the State agency administering 
     the program under this section, and a family or group day 
     care home sponsoring organization, shall use the most current 
     available data at the time of the determination.

       ``(iii) Duration of determination.--For purposes of this 
     section, a determination that a 

[[Page S 16174]]
     family or group day care home is located in an area that qualifies the 
     home as a tier I family or group day care home (as the term 
     is defined in subparagraph (A)(ii)(I)), shall be in effect 
     for 3 years (unless the determination is made on the basis of 
     census data, in which case the determination shall remain in 
     effect until more recent census data are available) unless 
     the State agency determines that the area in which the home 
     is located no longer qualifies the home as a tier I family or 
     group day care home.''.
       (4) Conforming amendments.--Section 17(c) of the Act is 
     amended by inserting ``except as provided in subsection 
     (f)(3),'' after ``For purposes of this section,'' each place 
     it appears in paragraphs (1), (2), and (3).
       (b) Elimination of State Paperwork and Outreach Burden.--
     Section 17 of the Act is amended by striking subsection (k) 
     and inserting the following:
       ``(k) Training and Technical Assistance.--A State 
     participating in the program established under this section 
     shall provide sufficient training, technical assistance, and 
     monitoring to facilitate effective operation of the program. 
     The Secretary shall assist the State in developing plans to 
     fulfill the requirements of this subsection.''.
       (c) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall become effective on the 
     date of enactment of this Act.
       (2) Improved targeting of day care home reimbursements.--
     The amendments made by paragraphs (1), (3), and (4) of 
     subsection (a) shall become effective on August 1, 1996.

                     CHAPTER 3--ADDITIONAL SAVINGS

     SEC. 1471. EARNINGS OF STUDENTS.

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

     SEC. 1472. STANDARD DEDUCTION.

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

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

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

     SEC. 1474. EXTENDING CLAIMS RETENTION RATES.

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

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

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

     SEC. 1476. VALUE OF FOOD ASSISTANCE.

       (a) In General.--Section 6(e)(1) of the National School 
     Lunch Act (42 U.S.C. 1755(e)(1)) is amended by striking 
     subparagraph (B) and inserting the following:
       ``(B) Adjustments.--
       ``(i) In general.--The value of food assistance for each 
     meal shall be adjusted each July 1 by the annual percentage 
     change in a 3-month average value of the Price Index for 
     Foods Used in Schools and Institutions for March, April, and 
     May each year.
       ``(ii) Adjustments.--Except as otherwise provided in this 
     subparagraph, in the case of each school year, the Secretary 
     shall--

       ``(I) base the adjustment made under clause (i) on the 
     amount of the unrounded adjustment for the preceding school 
     year;
       ``(II) adjust the resulting amount in accordance with 
     clause (i); and
       ``(III) round the result to the nearest lower cent 
     increment.

       ``(iii) Adjustment on january 1, 1996.--On January 1, 1996, 
     the Secretary shall adjust the value of food assistance for 
     the remainder of the school year by rounding the previously 
     established value of food assistance to the nearest lower 
     cent increment.
       ``(iv) Adjustment for 24-month period beginning july 1, 
     1996.--In the case of the 24-month period beginning July 1, 
     1996, the value of food assistance shall be the same as the 
     value of food assistance in effect on June 30, 1996.
       ``(v) Adjustment for school year beginning july 1, 1998.--
     In the case of the school year beginning July 1, 1998, the 
     Secretary shall--

       ``(I) base the adjustment made under clause (i) on the 
     amount of the unrounded adjustment for the value of food 
     assistance for the school year beginning July 1, 1995;
       ``(II) adjust the resulting amount to reflect the annual 
     percentage change in a 3-month average value of the Price 
     Index for Foods Used in Schools and Institutions for March, 
     April, and May for the most recent 12-month period for which 
     the data are available; and
       ``(III) round the result to the nearest lower cent 
     increment.''.

       (b) Effective Date.--The amendment made by subsection (a) 
     shall become effective on January 1, 1996.

     SEC. 1477. COMMODITY ASSISTANCE.

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

     SEC. 1478. SUMMER FOOD SERVICE PROGRAM FOR CHILDREN.

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

     SEC. 1479. SPECIAL MILK PROGRAM.

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

     SEC. 1480. NUTRITION EDUCATION AND TRAINING PROGRAMS.

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

     SEC. 1481. EFFECTIVE DATE.

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

                       CHAPTER 4--EFFECTIVE DATE

     SEC. 1491. EFFECTIVE DATE.

       Notwithstanding any other provision of this subtitle, if 
     the Act entitled ``An Act to restore the American family, 
     reduce illegitimacy, control welfare spending and reduce 
     welfare dependence'' is enacted on or before December 31, 
     1996, the amendments made by chapters 1 and 2 of this 
     subtitle shall be effective only during the period prior to 
     the date of enactment of such Act.
     
[[Page S 16175]]

                 TITLE II--COMMITTEE ON ARMED SERVICES

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

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

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

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

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

       (a) Special Assessment To Capitalize SAIF.--
       (1) In general.--Except as provided in paragraph (6), the 
     Board of Directors shall impose a special assessment on the 
     SAIF-assessable deposits of each insured depository 
     institution at a rate that the Board of Directors, in its 
     sole discretion, determines will cause the Savings 
     Association Insurance Fund to achieve the designated reserve 
     ratio on the first business day of January 1996.
       (2) Factors to be considered.--In carrying out paragraph 
     (1), the Board of Directors shall base its determination on--
       (A) the monthly Savings Association Insurance Fund balance 
     most recently calculated;
       (B) data on insured deposits reported in the most recent 
     reports of condition filed not later than 70 days before the 
     date of enactment of this Act by insured depository 
     institutions; and
       (C) any other factors that the Board of Directors deems 
     appropriate.
       (3) Date of determination.--For purposes of paragraph (1), 
     the amount of the SAIF-assessable deposits of an insured 
     depository institution shall be determined as of March 31, 
     1995.
       (4) Date payment due.--The special assessment imposed under 
     this section shall be--
       (A) due on the first business day of January 1996; and
       (B) paid to the Corporation on the later of--
       (i) the first business day of January 1996; or
       (ii) such other date as the Corporation shall prescribe, 
     but not later than 60 days after the date of enactment of 
     this Act.
       (5) Assessment deposited in saif.--Notwithstanding any 
     other provision of law, the proceeds of the special 
     assessment imposed under this subsection shall be deposited 
     in the Savings Association Insurance Fund.
       (6) Discretion to exempt weak institutions.--
       (A) In general.--The Board of Directors may, by order, in 
     its sole discretion, exempt any insured depository 
     institution that the Board of Directors determines to be weak 
     from paying the special assessment imposed under this 
     subsection if the Board of Directors determines that the 
     exemption would reduce risk to the Savings Association 
     Insurance Fund.
       (B) Guidelines required.--Not later than 30 days after the 
     date of enactment of this Act, the Board of Directors shall 
     prescribe guidelines setting forth the criteria that the 
     Board of Directors will use in exempting institutions under 
     subparagraph (A). Such guidelines shall be published in the 
     Federal Register.
       (C) Exemption for certain newly chartered institutions.--
       (i) In general.--In addition to the institutions exempted 
     from paying the special assessment under subparagraph (A), 
     the Board of Directors shall, by order, exempt any insured 
     depository institution from payment of the special assessment 
     if the institution was in existence on October 1, 1995, and 
     held no Savings Association Insurance Fund insured deposits 
     prior to January 1, 1993.
       (ii) Definition.--For purposes of this subparagraph, an 
     institution shall be deemed to have held Savings Association 
     Insurance Fund insured deposits prior to January 1, 1993, if 
     it directly held Savings Association Insurance Fund insured 
     deposits prior to that date, or it succeeded to, acquired, 
     purchased, or otherwise holds any Savings Association 
     Insurance Fund insured deposits as of the date of enactment 
     of this Act that were Savings Association Insurance Fund 
     insured prior to January 1, 1993.
       (D) Exempt institutions required to pay assessments at 
     former rates.--
       (i) Payments to saif and dif.--Any insured depository 
     institution that the Board of Directors exempts under this 
     paragraph from paying the special assessment imposed under 
     this subsection shall pay semiannual assessments--

       (I) into the Savings Association Insurance Fund during 
     calendar years 1996 and 1997, based on SAIF-assessable 
     deposits of that institution, at assessment rates calculated 
     under the schedule in effect for Savings Association 
     Insurance Fund members on June 30, 1995; and
       (II) into the Deposit Insurance Fund during the period 
     beginning on January 1, 1998 and ending on December 31, 1999, 
     based on SAIF-assessable deposits of that institution, at 
     assessment rates calculated under the schedule in effect for 
     Savings Association Insurance Fund members on June 30, 1995, 
     except that subclause (I) shall continue to apply if and only 
     so long as the Bank Insurance Fund and the Savings 
     Association Insurance Fund are not merged into the Deposit 
     Insurance Fund.

       (ii) Optional pro rata payment of special assessment.--This 
     subparagraph shall not apply with respect to any insured 
     depository institution (or successor insured depository 
     institution) that has paid, during any calendar year from 
     1997 through 1999, upon such terms as the Corporation may 
     announce, an amount equal to the product of--

       (I) 12.5 percent of the special assessment that the 
     institution would have been required to pay under paragraph 
     (1), if the Board of Directors had not exempted the 
     institution; and
       (II) the number of full semiannual periods remaining 
     between the date of the payment and December 31, 1999.

       (7) Adjustment of special assessment for certain bank 
     insurance fund member banks.--
       (A) In general.--For purposes of computing the special 
     assessment imposed under this subsection with respect to a 
     Bank Insurance Fund member bank, the amount of any deposits 
     which section 5(d)(3) of the Federal Deposit Insurance Act 
     treats as insured by the Savings Association Insurance Fund 
     shall be reduced by 5 percent, 

[[Page S 16176]]
     if the adjusted attributable deposit amount of the Bank Insurance Fund 
     member bank is less than 50 percent of the total deposits of 
     that member bank as of June 30, 1995.
       (B) Adjusted attributable deposit amount.--For purposes of 
     this paragraph, the ``adjusted attributable deposit amount'' 
     shall be determined in accordance with section 5(d)(3)(C) of 
     the Federal Deposit Insurance Act.
       (8) Adjustment to the adjusted attributable deposit amount 
     for certain bank insurance fund member banks.--Section 
     5(d)(3) of the Federal Deposit Insurance Act (12 U.S.C. 
     1815(d)(3)) is amended--
       (A) in subparagraph (C), by striking ``The adjusted 
     attributable deposit amount'' and inserting ``Except as 
     provided in subparagraph (K), the adjusted attributable 
     deposit amount''; and
       (B) by adding at the end the following new subparagraph:
       ``(K) Adjustment of adjusted attributable deposit amount.--
     The amount determined under subparagraph (C)(i) for deposits 
     acquired by March 31, 1995, shall be reduced by 10 percent 
     for purposes of computing the adjusted attributable deposit 
     amount for the payment of any assessment for any semiannual 
     period after December 31, 1995 (other than the special 
     assessment imposed under section 3001(a) of the Balanced 
     Budged Reconciliation Act of 1995), for a Bank Insurance Fund 
     member bank that had an adjusted attributable deposit amount 
     that was less than 50 percent of the total deposits of that 
     member bank as of June 30, 1995.''.
       (9) Adjustment of special assessment for certain savings 
     associations.--
       (A) Special assessment reduction.--For purposes of 
     computing the special assessment imposed under this 
     subsection, in the case of any converted association, the 
     amount of any deposits of such association which were insured 
     by the Savings Association Insurance Fund as of March 31, 
     1995, shall be reduced by 10 percent.
       (B) Converted association.--For purposes of this paragraph, 
     the term ``converted association'' means--
       (i) any Federal savings association that is a member of the 
     Savings Association Insurance Fund and that had been, or has 
     acquired by merger, consolidation, or otherwise the deposits 
     of an institution that had been, a State savings bank, the 
     deposits of which were insured under the Federal Deposit 
     Insurance Act prior to August 9, 1989; and
       (ii) a State depository institution that is a member of the 
     Savings Association Insurance Fund that had been a State 
     savings bank prior to October 1, 1992, and was a Federal 
     savings association on August 9, 1989.
       (b) Financing Corporation Assessments Shared Proportionally 
     by All Insured Depository Institutions.--
       (1) In general.--Section 21 of the Federal Home Loan Bank 
     Act (12 U.S.C. 1441) is amended--
       (A) in subsection (f)(2)--
       (i) in the matter immediately preceding subparagraph (A)--

       (I) by striking ``Savings Association Insurance Fund 
     member'' and inserting ``insured depository institution''; 
     and
       (II) by striking ``members'' and inserting 
     ``institutions''; and

       (ii) in subparagraph (A), by striking ``against Savings 
     Association Insurance Fund members'' and inserting ``against 
     insured depository institutions'';
       (B) in subsection (k)--
       (i) by striking ``section--'' and inserting ``section, the 
     following definitions shall apply:'';
       (ii) by striking paragraph (1);
       (iii) by redesignating paragraphs (2) and (3) as paragraphs 
     (1) and (2), respectively; and
       (iv) by adding at the end the following new paragraph:
       ``(3) Insured depository institution.--The term `insured 
     depository institution' has the same meaning as in section 3 
     of the Federal Deposit Insurance Act.''.
       (2) Conforming amendment.--Section 7(b)(2)(D) of the 
     Federal Deposit Insurance Act (12 U.S.C. 1817(b)(2)(D)) is 
     amended by striking ``against Savings Association Insurance 
     Fund members'' and inserting ``against insured depository 
     institutions''.
       (3) Effective date.--This subsection and the amendments 
     made by this subsection shall become effective on January 1, 
     1996.
       (c) Insurance Premiums for Capitalized Insurance Funds.--
       (1) Rebates for capitalized fund.--Section 7 of the Federal 
     Deposit Insurance Act (12 U.S.C. 1817) is amended--
       (A) by redesignating subsections (d) through (n) as 
     subsections (e) through (o), respectively; and
       (B) by inserting after subsection (c) the following new 
     subsection:
       ``(d) Bank Insurance Fund Assessment Credits.--
       ``(1) Credit amount.--
       ``(A) In general.--Notwithstanding any other provision of 
     law, if the Corporation determines, after considering the 
     operating costs and expenses, case resolution expenditures, 
     investment income, and assessment income of the Bank 
     Insurance Fund, that the reserve ratio of the Bank Insurance 
     Fund is expected to exceed the designated reserve ratio 
     during the succeeding semiannual period, the Board of 
     Directors may, in its sole discretion, provide an assessment 
     credit with respect to Bank Insurance Fund assessments (for 
     that succeeding semiannual period)--
       ``(i) in an amount that the Corporation determines will 
     reduce the reserve ratio of the Bank Insurance Fund to the 
     designated reserve ratio; or
       ``(ii) in a lesser amount, as determined by the 
     Corporation.
       ``(B) Limit.--The amount of assessment credit under 
     subparagraph (A) shall not exceed 100 percent of the net 
     assessment income to be received with respect to the Bank 
     Insurance Fund in the succeeding semiannual period.
       ``(2) Definitions.--For purposes of this subsection, the 
     terms `net assessment income', `operating costs and 
     expenses', `insurance costs', and `investment income' shall 
     have the same meanings as in paragraphs (4) and (5) of 
     section 7(d) of the Federal Deposit Insurance Act, as in 
     effect on the day before the date of enactment of the Federal 
     Deposit Insurance Corporation Improvement Act of 1991, except 
     that the term `semiannual period' shall be substituted for 
     the term `calendar year' wherever that term appears.''.
       (2) Stabilizing premiums for bif and saif.--Section 7(b) of 
     the Federal Deposit Insurance Act (12 U.S.C. 1817(b)) is 
     amended by adding at the end the following new paragraph:
       ``(8) Rate comparability.--Notwithstanding any other 
     provision of law, assessment rates for members of the Savings 
     Association Insurance Fund shall not be lower than assessment 
     rates for members of the Bank Insurance Fund of comparable 
     risk until the first full semiannual period following the 
     last maturity date of all obligations issued by the Financing 
     Corporation pursuant to section 21(c) of the Federal Home 
     Loan Bank Act.''.
       (d) Merger of BIF and SAIF.--
       (1) In general.--Effective as provided in paragraph (4)--
       (A) the Bank Insurance Fund and the Savings Association 
     Insurance Fund shall be merged into the Deposit Insurance 
     Fund established by section 11(a)(4) of the Federal Deposit 
     Insurance Act, as amended by this subsection;
       (B) all assets and liabilities of the Bank Insurance Fund 
     and the Savings Association Insurance Fund shall be 
     transferred to the Deposit Insurance Fund; and
       (C) the separate existence of the Bank Insurance Fund and 
     the Savings Association Insurance Fund shall cease.
       (2) Special reserve of the deposit insurance fund.--
     Effective as provided in paragraph (4), if, immediately 
     before the merger of the Bank Insurance Fund and the Savings 
     Association Insurance Fund, the reserve ratio of the Savings 
     Association Insurance Fund exceeds the designated reserve 
     ratio, the amount by which that reserve ratio exceeds the 
     designated reserve ratio shall be placed in the Special 
     Reserve of the Deposit Insurance Fund, established under 
     section 11(a)(5) of the Federal Deposit Insurance Act, as 
     amended by this subsection.
       (3) Conforming amendments.--
       (A) Deposit insurance fund.--Section 11(a)(4) of the 
     Federal Deposit Insurance Act (12 U.S.C. 1821(a)(4)) is 
     amended--
       (i) by redesignating subparagraph (B) as subparagraph (C);
       (ii) by striking subparagraph (A) and inserting the 
     following:
       ``(A) Establishment.--There is established the Deposit 
     Insurance Fund, which the Corporation shall--
       ``(i) maintain and administer;
       ``(ii) use to carry out its insurance purposes in the 
     manner provided by this subsection; and
       ``(iii) invest in accordance with section 13(a).
       ``(B) Uses.--The Deposit Insurance Fund shall be available 
     to the Corporation for use with respect to Deposit Insurance 
     Fund members.''; and
       (iii) by striking ``(4) General provisions relating to 
     funds.--'' and inserting the following:
       ``(4) Deposit insurance fund.--''.
       (B) Other references.--Section 11(a)(4)(C) of the Federal 
     Deposit Insurance Act (12 U.S.C. 1821(a)(4)(C) (as 
     redesignated by subparagraph (A) of this paragraph)) is 
     amended by striking ``Bank Insurance Fund and the Savings 
     Association Insurance Fund'' and inserting ``Deposit 
     Insurance Fund''.
       (C) Deposits into fund.--Section 11(a)(4) of the Federal 
     Deposit Insurance Act (12 U.S.C. 1821(a)(4)) is amended by 
     adding at the end the following new subparagraph:
       ``(D) Deposits.--All amounts assessed against insured 
     depository institutions by the Corporation shall be deposited 
     in the Deposit Insurance Fund.''.
       (D) Special reserve of deposits.--Section 11(a)(5) of the 
     Federal Deposit Insurance Act (12 U.S.C. 1821(a)(5)) is 
     amended to read as follows:
       ``(5) Special reserve of deposit insurance fund.--
       ``(A) Special reserve of deposit insurance fund 
     established.--
       ``(i) Establishment.--There is established a Special 
     Reserve of the Deposit Insurance Fund, which shall be 
     administered by the Corporation and shall be invested in 
     accordance with section 13(a).
       ``(ii) Limitation.--The Corporation shall not provide any 
     assessment credit, refund, or other payment from any amount 
     in the Special Reserve.
       ``(B) Emergency use of special reserve.--Notwithstanding 
     subparagraph (A)(ii), the Corporation may, in its sole 
     discretion, transfer amounts from the Special Reserve to the 
     Deposit Insurance Fund, for the purposes set forth in 
     paragraph (4), only if--
       ``(i) the reserve ratio of the Deposit Insurance Fund is 
     less than 50 percent of the designated reserve ratio; and
       ``(ii) the Corporation expects the reserve ratio of the 
     Deposit Insurance Fund to remain less than 50 percent of the 
     designated reserve ratio for each of the next 4 calendar 
     quarters.
       ``(C) Exclusion of special reserve in calculating reserve 
     ratio.--Notwithstanding any other provision of law, any 
     amounts in the Special Reserve shall be excluded in 
     calculating the reserve ratio of the Deposit Insurance Fund 
     under section 7.''.
       (E) Federal home loan bank act.--Section 21B(f)(2)(C)(ii) 
     of the Federal Home Loan Bank Act (12 U.S.C. 
     1441b(f)(2)(C)(ii)) is amended--

[[Page S 16177]]

       (i) in subclause (I), by striking ``to Savings Associations 
     Insurance Fund members'' and inserting ``to insured 
     depository institutions, and their successors, which were 
     Savings Association Insurance Fund members on September 1, 
     1995''; and
       (ii) in subclause (II), by striking ``to Savings 
     Associations Insurance Fund members'' and inserting ``to 
     insured depository institutions, and their successors, which 
     were Savings Association Insurance Fund members on September 
     1, 1995''.
       (F) Repeals.--
       (i) Section 3.--Section 3 of the Federal Deposit Insurance 
     Act (12 U.S.C. 1813) is amended--

       (I) by striking subsection (y); and
       (II) by redesignating subsection (z) as subsection (y).

       (ii) Section 7.--Section 7 of the Federal Deposit Insurance 
     Act (12 U.S.C. 1817) is amended--

       (I) by striking subsection (l);
       (II) by redesignating subsections (m) and (n) as 
     subsections (l) and (m), respectively;
       (III) in subsection (b)(2), by striking subparagraph (B); 
     and
       (IV) in subsection (b)(2), by redesignating subparagraphs 
     (C) through (H) as subparagraphs (B) through (G), 
     respectively.

       (iii) Section 11.--Section 11(a) of the Federal Deposit 
     Insurance Act (12 U.S.C. 1121(a)) is amended--

       (I) by striking paragraphs (6) and (7); and
       (II) by redesignating paragraph (8) as paragraph (6).

       (iv) Rate comparability.--Section 7(b) of the Federal 
     Deposit Insurance Act (12 U.S.C. 1817(b)) is amended by 
     striking paragraph (8) (as added by subsection (c) of this 
     section).
       (4) Effective date.--This subsection and the amendments 
     made by this subsection and subsection (e) shall become 
     effective on January 1, 1998, if no insured depository 
     institution is a savings association on that date.
       (e) Other Technical and Conforming Amendments.--
       (1) Section 5136 of the revised statutes.--Paragraph 
     Eleventh of section 5136 of the Revised Statutes (12 U.S.C. 
     24) is amended in the fifth sentence by striking ``affected 
     deposit insurance fund'' and inserting ``Deposit Insurance 
     Fund''.
       (2) Investments promoting public welfare; limitations on 
     aggregate investments.--The 23d undesignated paragraph of 
     section 9 of the Federal Reserve Act (12 U.S.C. 338a) is 
     amended in the fourth sentence, by striking ``affected 
     deposit insurance fund'' and inserting ``Deposit Insurance 
     Fund''.
       (3) Advances to critically undercapitalized depository 
     institutions.--Section 10B(b)(3)(A)(ii) of the Federal 
     Reserve Act (12 U.S.C. 347b(b)(3)(A)(ii)) is amended by 
     striking ``any deposit insurance fund in'' and inserting 
     ``the Deposit Insurance Fund of''.
       (4) Amendments to the balanced budget and emergency deficit 
     control act of 1985.--Section 255(g)(1)(A) of the Balanced 
     Budget and Emergency Deficit Control Act of 1985 (2 U.S.C. 
     905(g)(1)(A)) is amended--
       (A) by striking ``Bank Insurance Fund'' and inserting 
     ``Deposit Insurance Fund''; and
       (B) by striking ``Federal Deposit Insurance Corporation, 
     Savings Association Insurance Fund;''.
       (5) Amendments to the federal home loan bank act.--The 
     Federal Home Loan Bank Act (12 U.S.C. 1421 et seq.) is 
     amended--
       (A) in section 11(k) (12 U.S.C. 1431(k))--
       (i) in the subsection heading, by striking ``SAIF'' and 
     inserting ``the Deposit Insurance Fund''; and
       (ii) by striking ``Savings Association Insurance Fund'' 
     each place such term appears and inserting ``Deposit 
     Insurance Fund'';
       (B) in section 21A(b)(4)(B) (12 U.S.C. 1441a(b)(4)(B)), by 
     striking ``affected deposit insurance fund'' and inserting 
     ``Deposit Insurance Fund'';
       (C) in section 21A(b)(6)(B) (12 U.S.C. 1441a(b)(6)(B))--
       (i) in the subparagraph heading, by striking ``SAIF-insured 
     banks'' and inserting ``Charter conversions''; and
       (ii) by striking ``Savings Association Insurance Fund 
     member'' and inserting ``savings association'';
       (D) in section 21A(b)(10)(A)(iv)(II) (12 U.S.C. 
     1441a(b)(10)(A)(iv)(II)), by striking ``Savings Association 
     Insurance Fund'' and inserting ``Deposit Insurance Fund'';
       (E) in section 21B(e) (12 U.S.C. 1441b(e))--
       (i) in paragraph (5), by inserting ``as of the date of 
     funding'' after ``Savings Association Insurance Fund 
     members'' each place such term appears;
       (ii) by striking paragraph (7); and
       (iii) by redesignating paragraph (8) as paragraph (7); and
       (F) in section 21B(k) (12 U.S.C. 1441b(k))--
       (i) by striking paragraph (8); and
       (ii) by redesignating paragraphs (9) and (10) as paragraphs 
     (8) and (9), respectively.
       (6) Amendments to the home owners' loan act.--The Home 
     Owners' Loan Act (12 U.S.C. 1461 et seq.) is amended--
       (A) in section 5 (12 U.S.C. 1464)--
       (i) in subsection (c)(5)(A), by striking ``that is a member 
     of the Bank Insurance Fund'';
       (ii) in subsection (c)(6), by striking ``As used in this 
     subsection--'' and inserting ``For purposes of this 
     subsection, the following definitions shall apply:'';
       (iii) in subsection (o)(1), by striking ``that is a Bank 
     Insurance Fund member'';
       (iv) in subsection (o)(2)(A), by striking ``a Bank 
     Insurance Fund member until such time as it changes its 
     status to a Savings Association Insurance Fund member'' and 
     inserting ``insured by the Deposit Insurance Fund'';
       (v) in subsection (t)(5)(D)(iii)(II), by striking 
     ``affected deposit insurance fund'' and inserting ``Deposit 
     Insurance Fund'';
       (vi) in subsection (t)(7)(C)(i)(I), by striking ``affected 
     deposit insurance fund'' and inserting ``Deposit Insurance 
     Fund''; and
       (vii) in subsection (v)(2)(A)(i), by striking ``, the 
     Savings Association Insurance Fund'' and inserting ``or the 
     Deposit Insurance Fund''; and
       (B) in section 10 (12 U.S.C. 1467a)--
       (i) in subsection (e)(1)(A)(iii)(VII), by adding ``or'' at 
     the end;
       (ii) in subsection (e)(1)(A)(iv), by adding ``and'' at the 
     end;
       (iii) in subsection (e)(1)(B), by striking ``Savings 
     Association Insurance Fund or Bank Insurance Fund'' and 
     inserting ``Deposit Insurance Fund'';
       (iv) in subsection (e)(2), by striking ``Savings 
     Association Insurance Fund or the Bank Insurance Fund'' and 
     inserting ``Deposit Insurance Fund''; and
       (v) in subsection (m)(3), by striking subparagraph (E), and 
     by redesignating subparagraphs (F), (G), and (H) as 
     subparagraphs (E), (F), and (G), respectively.
       (7) Amendments to the national housing act.--The National 
     Housing Act (12 U.S.C. 1701 et seq.) is amended--
       (A) in section 317(b)(1)(B) (12 U.S.C. 1723i(b)(1)(B)), by 
     striking ``Bank Insurance Fund for banks or through the 
     Savings Association Insurance Fund for savings associations'' 
     and inserting ``Deposit Insurance Fund''; and
       (B) in section 526(b)(1)(B)(ii) (12 U.S.C. 1735f-
     14(b)(1)(B)(ii)), by striking ``Bank Insurance Fund for banks 
     and through the Savings Association Insurance Fund for 
     savings associations'' and inserting ``Deposit Insurance 
     Fund''.
       (8) Amendments to the federal deposit insurance act.--The 
     Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is 
     amended--
       (A) in section 3(a)(1) (12 U.S.C. 1813(a)(1)), by striking 
     subparagraph (B) and inserting the following:
       ``(B) includes any former savings association.'';
       (B) in section 5(b)(5) (12 U.S.C. 1815(b)(5)), by striking 
     ``the Bank Insurance Fund or the Savings Association 
     Insurance Fund;'' and inserting ``Deposit Insurance Fund,'';
       (C) in section 5(d) (12 U.S.C. 1815(d)), by striking 
     paragraphs (2) and (3);
       (D) in section 5(d)(1) (12 U.S.C. 1815(d)(1))--
       (i) in subparagraph (A), by striking ``reserve ratios in 
     the Bank Insurance Fund and the Savings Association Insurance 
     Fund'' and inserting ``the reserve ratio of the Deposit 
     Insurance Fund'';
       (ii) by striking subparagraph (B) and inserting the 
     following:
       ``(2) Fee credited to the deposit insurance fund.--The fee 
     paid by the depository institution under paragraph (1) shall 
     be credited to the Deposit Insurance Fund.'';
       (iii) by striking ``(1) Uninsured institutions.--''; and
       (iv) by redesignating subparagraphs (A) and (C) as 
     paragraphs (1) and (3), respectively and moving the margins 2 
     ems to the left;
       (E) in section 5(e) (12 U.S.C. 1815(e))--
       (i) in paragraph (5)(A), by striking ``Bank Insurance Fund 
     or the Savings Association Insurance Fund'' and inserting 
     ``Deposit Insurance Fund'';
       (ii) by striking paragraph (6); and
       (iii) by redesignating paragraphs (7), (8), and (9) as 
     paragraphs (6), (7), and (8), respectively;
       (F) in section 6(5) (12 U.S.C. 1816(5)), by striking ``Bank 
     Insurance Fund or the Savings Association Insurance Fund'' 
     and inserting ``Deposit Insurance Fund'';
       (G) in section 7(b) (12 U.S.C. 1817(b))--
       (i) in paragraph (1)(D), by striking ``each deposit 
     insurance fund'' and inserting ``the Deposit Insurance 
     Fund'';
       (ii) in clauses (i)(I) and (iv) of paragraph (2)(A), by 
     striking ``each deposit insurance fund'' each place such term 
     appears and inserting ``the Deposit Insurance Fund'';
       (iii) in paragraph (2)(A)(iii), by striking ``a deposit 
     insurance fund'' and inserting ``the Deposit Insurance 
     Fund'';
       (iv) in paragraph (2)(D) (as redesignated by section 
     3001(d)(3)(F)(ii)(IV) of this Act)--

       (I) by striking ``any deposit insurance fund'' and 
     inserting ``the Deposit Insurance Fund''; and
       (II) by striking ``that fund'' each place such term appears 
     and inserting ``the Deposit Insurance Fund'';

       (v) by striking paragraph (2)(E) (as redesignated by 
     section 3001(d)(3)(F)(ii)(IV) of this Act);
       (vi) in paragraph (2)(F) (as redesignated by section 
     3001(d)(3)(F)(ii)(IV) of this Act)--

       (I) in the subparagraph heading, by striking ``funds 
     achieve'' and inserting ``fund achieves''; and
       (II) by striking ``a deposit insurance fund'' and inserting 
     ``the Deposit Insurance Fund'';

       (vii) in paragraph (3)--

       (I) in the paragraph heading, by striking ``funds'' and 
     inserting ``fund'';
       (II) by striking ``that fund'' each place such term appears 
     and inserting ``the Deposit Insurance Fund'';
       (III) in subparagraph (A), by striking ``Except as provided 
     in paragraph (2)(F), if'' and inserting ``If'';
       (IV) in subparagraph (A), by striking ``any deposit 
     insurance fund'' and inserting ``the Deposit Insurance 
     Fund''; and
       (V) by striking subparagraphs (C) and (D) and inserting the 
     following:

       ``(C) Amending schedule.--The Corporation may, by 
     regulation, amend a schedule promulgated under subparagraph 
     (B).''; and
       (viii) in paragraph (6)--

       (I) by striking ``any such assessment'' and inserting ``any 
     such assessment is necessary'';
       (II) by striking ``(A) is necessary--'';
       (III) by striking subparagraph (B);

[[Page S 16178]]

       (IV) by redesignating clauses (i), (ii), and (iii) as 
     subparagraphs (A), (B), and (C), respectively, and moving the 
     margins 2 ems to the left; and
       (V) in subparagraph (C) (as redesignated), by striking ``; 
     and'' and inserting a period;

       (H) in section 7(d) (12 U.S.C. 1817(d)) (as added by 
     section 3001(c)(1) of this Act)--
       (i) in the subsection heading, by striking ``Bank'' and 
     inserting ``Deposit''; and
       (ii) by striking ``Bank Insurance Fund'' each place such 
     term appears and inserting ``Deposit Insurance Fund'';
       (I) in section 11(f)(1) (12 U.S.C. 1821(f)(1)), by striking 
     ``, except that--'' and all that follows through the end of 
     the paragraph and inserting a period;
       (J) in section 11(i)(3) (12 U.S.C. 1821(i)(3))--
       (i) by striking subparagraph (B);
       (ii) by redesignating subparagraph (C) as subparagraph (B); 
     and
       (iii) in subparagraph (B) (as redesignated), by striking 
     ``subparagraphs (A) and (B)'' and inserting ``subparagraph 
     (A)'';
       (K) in section 11A(a) (12 U.S.C. 1821a(a))--
       (i) in paragraph (2), by striking ``liabilities.--'' and 
     all that follows through ``Except'' and inserting 
     ``liabilities.--Except'';
       (ii) by striking paragraph (2)(B); and
       (iii) in paragraph (3), by striking ``the Bank Insurance 
     Fund, the Savings Association Insurance Fund,'' and inserting 
     ``the Deposit Insurance Fund'';
       (L) in section 11A(b) (12 U.S.C. 1821a(b)), by striking 
     paragraph (4);
       (M) in section 11A(f) (12 U.S.C. 1821a(f)), by striking 
     ``Savings Association Insurance Fund'' and inserting 
     ``Deposit Insurance Fund'';
       (N) in section 13 (12 U.S.C. 1823)--
       (i) in subsection (a)(1), by striking ``Bank Insurance 
     Fund, the Savings Association Insurance Fund,'' and inserting 
     ``Deposit Insurance Fund, the Special Reserve of the Deposit 
     Insurance Fund,'';
       (ii) in subsection (c)(4)(E)--

       (I) in the subparagraph heading, by striking ``funds'' and 
     inserting ``fund''; and
       (II) in clause (i), by striking ``any insurance fund'' and 
     inserting ``the Deposit Insurance Fund'';

       (iii) in subsection (c)(4)(G)(ii)--

       (I) by striking ``appropriate insurance fund'' and 
     inserting ``Deposit Insurance Fund'';
       (II) by striking ``the members of the insurance fund (of 
     which such institution is a member)'' and inserting ``insured 
     depository institutions'';
       (III) by striking ``each member's'' and inserting ``each 
     insured depository institution's''; and
       (IV) by striking ``the member's'' each place such term 
     appears and inserting ``the institution's'';

       (iv) in subsection (c), by striking paragraph (11);
       (v) in subsection (h), by striking ``Bank Insurance Fund'' 
     and inserting ``Deposit Insurance Fund'';
       (vi) in subsection (k)(4)(B)(i), by striking ``Savings 
     Association Insurance Fund'' and inserting ``Deposit 
     Insurance Fund''; and
       (vii) in subsection (k)(5)(A), by striking ``Savings 
     Association Insurance Fund'' and inserting ``Deposit 
     Insurance Fund'';
       (O) in section 14(a) (12 U.S.C. 1824(a)) in the fifth 
     sentence--
       (i) by striking ``Bank Insurance Fund or the Savings 
     Association Insurance Fund'' and inserting ``Deposit 
     Insurance Fund''; and
       (ii) by striking ``each such fund'' and inserting ``the 
     Deposit Insurance Fund'';
       (P) in section 14(b) (12 U.S.C. 1824(b)), by striking 
     ``Bank Insurance Fund or Savings Association Insurance Fund'' 
     and inserting ``Deposit Insurance Fund'';
       (Q) in section 14(c) (12 U.S.C. 1824(c)), by striking 
     paragraph (3);
       (R) in section 14(d) (12 U.S.C. 1824(d))--
       (i) by striking ``BIF'' each place such term appears and 
     inserting ``DIF''; and
       (ii) by striking ``Bank Insurance Fund'' each place such 
     term appears and inserting ``Deposit Insurance Fund'';
       (S) in section 15(c)(5) (12 U.S.C. 1825(c)(5))--
       (i) by striking ``the Bank Insurance Fund or Savings 
     Association Insurance Fund, respectively'' each place such 
     term appears and inserting ``the Deposit Insurance Fund''; 
     and
       (ii) in subparagraph (B), by striking ``the Bank Insurance 
     Fund or the Savings Association Insurance Fund, 
     respectively'' and inserting ``the Deposit Insurance Fund'';
       (T) in section 17(a) (12 U.S.C. 1827(a))--
       (i) in the subsection heading, by striking ``BIF, SAIF,'' 
     and inserting ``the Deposit Insurance Fund''; and
       (ii) in paragraph (1), by striking ``the Bank Insurance 
     Fund, the Savings Association Insurance Fund,'' each place 
     such term appears and inserting ``the Deposit Insurance 
     Fund'';
       (U) in section 17(d) (12 U.S.C. 1827(d)), by striking ``the 
     Bank Insurance Fund, the Savings Association Insurance 
     Fund,'' each place such term appears and inserting ``the 
     Deposit Insurance Fund'';
       (V) in section 18(m)(3) (12 U.S.C. 1828(m)(3))--
       (i) by striking ``Savings Association Insurance Fund'' each 
     place such term appears and inserting ``Deposit Insurance 
     Fund''; and
       (ii) in subparagraph (C), by striking ``or the Bank 
     Insurance Fund'';
       (W) in section 18(p) (12 U.S.C. 1828(p)), by striking 
     ``deposit insurance funds'' and inserting ``Deposit Insurance 
     Fund'';
       (X) in section 24 (12 U.S.C. 1831a) in subsections (a)(1) 
     and (d)(1)(A), by striking ``appropriate deposit insurance 
     fund'' each place such term appears and inserting ``Deposit 
     Insurance Fund'';
       (Y) in section 28 (12 U.S.C. 1831e), by striking ``affected 
     deposit insurance fund'' each place such term appears and 
     inserting ``Deposit Insurance Fund'';
       (Z) by striking section 31 (12 U.S.C. 1831h);
       (AA) in section 36(i)(3) (12 U.S.C. 1831m(i)(3)) by 
     striking ``affected deposit insurance fund'' and inserting 
     ``Deposit Insurance Fund'';
       (BB) in section 38(a) (12 U.S.C. 1831o(a)) in the 
     subsection heading, by striking ``Funds'' and inserting 
     ``Fund'';
       (CC) in section 38(k) (12 U.S.C. 1831o(k))--
       (i) in paragraph (1), by striking ``a deposit insurance 
     fund'' and inserting ``the Deposit Insurance Fund''; and
       (ii) in paragraph (2)(A)--

       (I) by striking ``A deposit insurance fund'' and inserting 
     ``The Deposit Insurance Fund''; and
       (II) by striking ``the deposit insurance fund's outlays'' 
     and inserting ``the outlays of the Deposit Insurance Fund''; 
     and

       (DD) in section 38(o) (12 U.S.C. 1831o(o))--
       (i) by striking ``Associations.--'' and all that follows 
     through ``Subsections (e)(2)'' and inserting 
     ``Associations.--Subsections (e)(2)'';
       (ii) by redesignating subparagraphs (A), (B), and (C) as 
     paragraphs (1), (2), and (3), respectively; and
       (iii) in paragraph (1) (as redesignated), by redesignating 
     clauses (i) and (ii) as subparagraphs (A) and (B), 
     respectively.
       (9) Amendments to the financial institutions reform, 
     recovery, and enforcement act of 1989.--The Financial 
     Institutions Reform, Recovery, and Enforcement Act (Public 
     Law 101-73; 103 Stat. 183) is amended--
       (A) in section 951(b)(3)(B) (12 U.S.C. 1833a(b)(3)(B)), by 
     striking ``Bank Insurance Fund, the Savings Association 
     Insurance Fund,'' and inserting ``Deposit Insurance Fund''; 
     and
       (B) in section 1112(c)(1)(B) (12 U.S.C. 3341(c)(1)(B)), by 
     striking ``Bank Insurance Fund, the Savings Association 
     Insurance Fund,'' and inserting ``Deposit Insurance Fund''.
       (10) Amendment to the bank enterprise act of 1991.--Section 
     232(a)(1) of the Bank Enterprise Act of 1991 (12 U.S.C. 
     1834(a)(1)) is amended by striking ``section 7(b)(2)(H)'' and 
     inserting ``section 7(b)(2)(G)''.
       (11) Amendment to the bank holding company act.--Section 
     2(j)(2) of the Bank Holding Company Act (12 U.S.C. 
     1841(j)(2)) is amended by striking ``Savings Association 
     Insurance Fund'' and inserting ``Deposit Insurance Fund''.
       (f) Definitions.--For purposes of this section--
       (1) the term ``Bank Insurance Fund'' means the fund 
     established pursuant to section (11)(a)(5)(A) of the Federal 
     Deposit Insurance Act, as that section existed on the day 
     before the date of enactment of this Act;
       (2) the terms ``Board of Directors'', ``Corporation'', 
     ``insured depository institution'', ``Federal savings 
     association'', ``savings association'', ``State savings 
     bank'', and ``State depository institution'' have the same 
     meanings as in section 3 of the Federal Deposit Insurance 
     Act;
       (3) the term ``Deposit Insurance Fund'' means the fund 
     established under section 11(a)(4) of the Federal Deposit 
     Insurance Act, as amended by subsection (d) of this section;
       (4) the term ``designated reserve ratio'' has the same 
     meaning as in section 7(b)(2)(A)(iv) of the Federal Deposit 
     Insurance Act;
       (5) the term ``Savings Association Insurance Fund'' means 
     the fund established pursuant to section 11(a)(6)(A) of the 
     Federal Deposit Insurance Act, as that section existed on the 
     day before the date of enactment of this Act; and
       (6) the term ``SAIF-assessable deposit'' means--
       (A) a deposit that is subject to assessment for purposes of 
     the Savings Association Insurance Fund under the Federal 
     Deposit Insurance Act; and
       (B) a deposit that section 5(d)(3) of the Federal Deposit 
     Insurance Act treats as insured by the Savings Association 
     Insurance Fund.

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

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

[[Page S 16179]]
     new construction or substantial rehabilitation projects under which 
     rents are adjusted under section 8(c)(2)(A) of the United 
     States Housing Act of 1937, by applying an annual adjustment 
     factor.
       (d) Effective Date.--The amendments made by subsections (a) 
     and (b) shall become effective on October 1, 1996.

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

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

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

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

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

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

     SEC. 4001. SPECTRUM AUCTIONS.

       (a) Extension and Expansion of Auction Authority.--
       (1) Amendments.--Section 309(j) of the Communications Act 
     of 1934 (47 U.S.C. 309(j)) is amended--
       (A) by striking paragraphs (1) and (2) and inserting the 
     following:
       ``(1) General authority.--If, consistent with the 
     obligations described in paragraph (6)(E), mutually exclusive 
     applications are accepted for any initial license or 
     construction permit which will involve an exclusive use of 
     the electromagnetic spectrum, then the Commission shall grant 
     such license or permit to a qualified applicant through a 
     system of competitive bidding that meets the requirements of 
     this subsection.
       ``(2) Exceptions.--The competitive bidding authority 
     granted by this subsection shall not apply to licenses or 
     construction permits issued by the Commission--
       ``(A) that, as the result of the Commission carrying out 
     the obligations described in paragraph (6)(E), are not 
     mutually exclusive;
       ``(B) for public safety radio services, including non-
     Government uses that protect the safety of life, health, and 
     property and that are not made commercially available to the 
     public; or
       ``(C) for initial licenses or construction permits for new 
     terrestrial digital television services assigned by the 
     Commission to existing terrestrial broadcast licensees to 
     replace their existing television licenses, unless the 
     Commission--
       ``(i) not later than 180 days after the date of enactment 
     of the Omnibus Budget Reconciliation Act of 1995, after 
     notice and public comment, submits to Congress a proposal to 
     use the authority provided in this subsection for the 
     assignment of initial licenses or construction permits for 
     use of the electromagnetic spectrum allocated but not 
     assigned as of the date of enactment of that Act for 
     television broadcast services; and
       ``(ii) the Congress takes action to approve the plan or to 
     authorize the use of the authority provided by this 
     subsection for such licenses or permits.

     Except as provided in this subparagraph, the Commission may 
     not assign initial licenses or construction permits under 
     this title to terrestrial commercial television broadcast 
     licensees to replace their existing broadcast licenses before 
     January 1, 1998.''; and
       (B) by striking ``1998'' in paragraph (11) and inserting 
     ``2002''.
       (2) Conforming amendment.--Subsection (i) of section 309 of 
     such Act is repealed.
       (b) Commission Obligation To Make Additional Spectrum 
     Available by Auction.--
       (1) In general.--The Federal Communications Commission 
     shall complete all actions necessary to permit the 
     assignment, by September 30, 2002, by competitive bidding 
     pursuant to section 309(j) of the Communications Act of 1934 
     (47 U.S.C. 309(j)) of licenses for the use of bands of 
     frequencies that--
       (A) individually span not less than 25 megahertz, unless a 
     combination of smaller bands can, notwithstanding the 
     provisions of paragraph (7) of such section, reasonably be 
     expected to produce greater receipts;
       (B) in the aggregate span not less than 100 megahertz;
       (C) are located below 3 gigahertz; and
       (D) have not, as of the date of enactment of this Act--
       (i) been assigned or designated by Commission regulation 
     for assignment pursuant to such section;
       (ii) been identified by the Secretary of Commerce pursuant 
     to section 113 of the National Telecommunications and 
     Information Administration Organization Act (47 U.S.C. 923); 
     or
       (iii) reserved for Federal Government use pursuant to 
     section 305 of the Communications Act of 1934 (47 U.S.C. 
     305).

     The Commission shall conduct the competitive bidding for not 
     less than one-half of such aggregate spectrum by September 
     30, 2000.
       (2) Criteria for reassignment.--In making available bands 
     of frequencies for competitive bidding pursuant to paragraph 
     (1), the Commission shall--
       (A) seek to promote the most efficient use of the spectrum;
       (B) take into account the cost to incumbent licensees of 
     relocating existing uses to other bands of frequencies or 
     other means of communication;
       (C) take into account the needs of public safety radio 
     services;
       (D) comply with the requirements of international 
     agreements concerning spectrum allocations; and
       (E) take into account the costs to satellite service 
     providers that could result from multiple auctions of like 
     spectrum internationally for global satellite systems.
       (3) Notification to ntia.--The Commission shall notify the 
     Secretary of Commerce if--
       (A) the Commission is not able to provide for the effective 
     relocation of incumbent licensees to bands of frequencies 
     that are available to the Commission for assignment; and
       (B) the Commission has identified bands of frequencies that 
     are--
       (i) suitable for the relocation of such licensees; and
       (ii) allocated for Federal Government use, but that could 
     be reallocated pursuant to part B of the National 
     Telecommunications and Information Administration 
     Organization Act (47 U.S.C. 921 et seq.), as amended by this 
     Act.
       (c) Identification and Reallocation of Frequencies; 
     Relocation of Federal Government Stations.--The National 
     Telecommunications and Information Administration 
     Organization Act (47 U.S.C. 901 et seq.) is amended--
       (1) by adding at the end of section 113 the following:
       ``(f) Additional Reallocation Report.--If the Secretary 
     receives a notice from the Commission pursuant to section 
     4001(b)(3) of the Omnibus Budget Reconciliation Act of 1995, 
     the Secretary shall prepare and submit to the President and 
     the Congress a report recommending for reallocation for use 
     other than by Federal Government stations under section 305 
     of the 1934 Act (47 U.S.C. 305), bands of frequencies that 
     are suitable for the uses identified in the Commission's 
     notice.
       ``(g) Relocation of Federal Government Stations.--
       ``(1) In general.--In order to expedite the efficient use 
     of the electromagnetic spectrum and notwithstanding section 
     3302(b) of title 31, United States Code, any Federal entity 
     which operates a Federal Government station may accept 
     payment in advance or in-kind reimbursement of costs, or a 
     combination of payment in advance and in-kind reimbursement, 
     from any person to defray entirely the expenses of relocating 
     the Federal entity's operations from one or more radio 
     spectrum frequencies to any other frequency or frequencies, 
     including, without limitation, the costs of any modification, 
     replacement, or reissuance of equipment, facilities, 
     operating manuals, regulations, or other expenses incurred by 
     that entity. Any such payment shall be deposited in the 
     account of such Federal entity in the Treasury of the United 
     States. Funds deposited according to this section shall be 
     available, without appropriation or fiscal year limitation, 
     only for the operations of the Federal entity for which such 
     funds were deposited under this section.
       ``(2) Process for relocation.--Any person seeking to 
     relocate a Federal Government station that has been assigned 
     a frequency within a band allocated for mixed Federal and 
     non-Federal use may submit a petition for such relocation to 
     NTIA. The NTIA shall limit the Federal Government station's 
     operating license to secondary status when the following 
     requirements are met--
       ``(A) the person seeking relocation of the Federal 
     Government station has guaranteed to defray entirely, through 
     payment in advance, in-kind reimbursement of costs, or a 
     combination thereof, all relocation costs incurred by the 
     Federal entity, including all engineering, equipment, site 
     acquisition and construction, and regulatory fee costs;

[[Page S 16180]]

       ``(B) the person seeking relocation completes all 
     activities necessary for implementing the relocation, 
     including construction of replacement facilities (if 
     necessary and appropriate) and identifying and obtaining on 
     the Federal entity's behalf new frequencies for use by the 
     relocated Federal Government station (where such station is 
     not relocating to spectrum reserved exclusively for Federal 
     use);
       ``(C) any necessary replacement facilities, equipment 
     modifications, or other changes have been implemented and 
     tested to ensure that the Federal Government station is able 
     to successfully accomplish its purposes; and
       ``(D) NTIA has determined that the proposed use of the 
     spectrum frequency band to which the Federal entity will 
     relocate its operations is--
       ``(i) consistent with obligations undertaken by the United 
     States in international agreements and with United States 
     national security and public safety interests; and
       ``(ii) suitable for the technical characteristics of the 
     band and consistent with other uses of the band.

     In exercising its authority under subparagraph (D) with 
     respect to issues that could have national security or 
     foreign relations implications, NTIA shall consult with the 
     Secretary of Defense or the Secretary of State, or both, as 
     appropriate.
       ``(3) Right to reclaim.--If within one year after the 
     relocation the Federal Government station demonstrates to the 
     Commission that the new facilities or spectrum are not 
     comparable to the facilities or spectrum from which the 
     Federal Government station was relocated, the person seeking 
     such relocation must take reasonable steps to remedy any 
     defects or pay the Federal entity for the costs of returning 
     the Federal Government station to the spectrum from which 
     such station was relocated.
       ``(h) Federal Action To Expedite Spectrum Transfer.--Any 
     Federal Government station which operates on electromagnetic 
     spectrum that has been identified for reallocation for mixed 
     Federal and non-Federal use in the Spectrum Reallocation 
     Final Report shall, to the maximum extent practicable through 
     the use of the authority granted under subsection (g) and any 
     other applicable provision of law, take action to relocate 
     its spectrum use to other frequencies that are reserved for 
     Federal use or to consolidate its spectrum use with other 
     Federal Government stations in a manner that maximizes the 
     spectrum available for non-Federal use. Subsection (c)(4) of 
     this section shall not apply to the extent that a non-Federal 
     user seeks to relocate or relocates a Federal power agency 
     under subsection (g).
       ``(i) Definitions.--For purposes of this section--
       ``(1) Federal entity.--The term `Federal entity' means any 
     Department, agency, or other element of the Federal 
     Government that utilizes radio frequency spectrum in the 
     conduct of its authorized activities, including a Federal 
     power agency.
       ``(2) Spectrum reallocation final report.--The term 
     `Spectrum Reallocation Final Report' means the report 
     submitted by the Secretary to the President and Congress in 
     compliance with the requirements of subsection (a).''; and
       (2) by striking ``(a) or (d)(1)'' in section 114(a)(1) and 
     inserting ``(a), (d)(1), or (f)''.
       (d) Identification and Reallocation of Auctionable 
     Frequencies.--The National Telecommunications and Information 
     Administration Organization Act (47 U.S.C. 901 et seq.), as 
     amended by this Act, is amended--
       (1) by striking the heading of paragraph (1) of section 
     113(b) and inserting ``Initial reallocation report.--'';
       (2) by inserting ``in the first report required by 
     subsection (a)'' after ``recommend for reallocation'' in such 
     paragraph;
       (3) by inserting ``or (3)'' after ``paragraph (1)'' each 
     place it appears in paragraph (2) of section 113(b);
       (4) by adding at the end of section 113(b) the following:
       ``(3) Second reallocation report.--In accordance with the 
     provisions of this section, the Secretary shall recommend for 
     reallocation for use other than by Federal Government 
     stations under section 305 of the 1934 Act (47 U.S.C. 305), a 
     single frequency band that spans not less than an additional 
     20 megahertz, that is located below 3 gigahertz, and that 
     meets the criteria specified in paragraphs (1) through (5) of 
     subsection (a).'';
       (5) by striking ``the report required by section 113(a)'' 
     in section 115(b) and inserting ``the initial reallocation 
     report required by section 113(a)''; and
       (6) by adding at the end of section 115 the following:
       ``(c) Allocation and Assignment of Frequencies Identified 
     in the Second Reallocation Report.--With respect to the 
     frequencies made available for reallocation pursuant to 
     section 113(b)(3), the Commission shall, not later than 1 
     year after receipt of the second reallocation report required 
     by such section, prepare, submit to the President and the 
     Congress, and implement, a plan for the allocation and 
     assignment under the 1934 Act of such frequencies. Such plan 
     shall propose the immediate allocation and assignment of all 
     such frequencies in accordance with section 309(j) of the 
     1934 Act (47 U.S.C. 309(j)).''.
                    Subtitle B--Oceans and Fisheries

     SEC. 4021. LIMITS ON COAST GUARD USER FEES.

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

     SEC. 4022. OIL SPILL RECOVERY INSTITUTE.

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

     SEC. 4031. RAILROAD REHABILITATION AND IMPROVEMENT PROGRAM.

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

     SEC. 4032. LOCAL RAIL FREIGHT ASSISTANCE.

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

     SEC. 4033. DISASTER FUNDING FOR RAILROADS.

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

     SEC. 4034. GRADE-CROSSING ELIGIBILITY.

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

     SEC. 5001. SHORT TITLE.

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

     SEC. 5002. PURPOSE.

       The purpose of this subtitle is to transfer the interest of 
     the United States in the United States Enrichment Corporation 
     to the private sector in a manner that provides for the long-
     term viability of the Corporation, provides for the 
     continuation by the Corporation of the operation of the 
     Department of Energy's gaseous diffusion plants, provides for 
     the protection of the 

[[Page S 16181]]
     public interest in maintaining a reliable and economical domestic 
     source of uranium mining and enrichment services, and, to the 
     extent not inconsistent with such purposes, secures the 
     maximum proceeds to the United States.

     SEC. 5003. DEFINITIONS.

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

     SEC. 5004. SALE OF THE CORPORATION.

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

     SEC. 5005. ESTABLISHMENT OF PRIVATE CORPORATION.

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

     SEC. 5006. TRANSFERS TO THE PRIVATE CORPORATION.

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

     SEC. 5007. LEASING OF GASEOUS DIFFUSION FACILITIES.

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

     SEC. 5008. TRANSFER OF CONTRACTS.

       (a) Transfer of Contracts.--Concurrent with privatization, 
     the Corporation shall transfer to the private corporation all 
     contracts, agreements, and leases, including all uranium 
     enrichment contracts, that were--
       (1) transferred by the Secretary to the Corporation 
     pursuant to section 1401(b) of the Atomic Energy Act of 1954 
     (42 U.S.C. 2297c(b)), or
       (2) entered into by the Corporation before the 
     privatization date.
       (b) Nontransferable Power Contracts.--The Corporation shall 
     transfer to the private corporation the right to purchase 
     power from the Secretary under the power purchase contracts 
     for the gaseous diffusion plants executed by the Secretary 
     before July 1, 1993. The Secretary shall continue to receive 
     power for the gaseous diffusion plants under such contracts 
     and shall continue to resell such power to the private 
     corporation at cost during the term of such contracts.
       (c) Effect of Transfer.--(1) Notwithstanding subsection 
     (a), the United States shall remain obligated to the parties 
     to the contracts, agreements, and leases transferred under 
     subsection (a) for the performance of its obligations under 
     such contracts, agreements, or leases during their terms. 
     Performance of such obligations by the private corporation 
     shall be considered performance by the United States.

[[Page S 16182]]

       (2) If a contract, agreement, or lease transferred under 
     subsection (a) is terminated, extended, or materially amended 
     after the privatization date--
       (A) the private corporation shall be responsible for any 
     obligation arising under such contract, agreement, or lease 
     after any extension or material amendment, and
       (B) the United States shall be responsible for any 
     obligation arising under the contract, agreement, or lease 
     before the termination, extension, or material amendment.
       (3) The private corporation shall reimburse the United 
     States for any amount paid by the United States under a 
     settlement agreement entered into with the consent of the 
     private corporation or under a judgment, if the settlement or 
     judgment--
       (A) arises out of an obligation under a contract, 
     agreement, or lease transferred under subsection (a), and
       (B) arises out of actions of the private corporation 
     between the privatization date and the date of a termination, 
     extension, or material amendment of such contract, agreement, 
     or lease.
       (d) Pricing.--The Corporation may establish prices for its 
     products, materials, and services provided to customers on a 
     basis that will allow it to attain the normal business 
     objectives of a profit making corporation.

     SEC. 5009. LIABILITIES.

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

     SEC. 5010. EMPLOYEE PROTECTIONS.

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

[[Page S 16183]]
     employees of the Corporation who die after the privatization date 
     (which amounts shall be available to the Office of Personnel 
     Management as provided in section 8348(a)(1)(B) of title 5, 
     United States Code).
       (3) The Corporation shall pay to the Thrift Savings Fund 
     such employee and agency contributions as are required by 
     section 8432 of title 5, United States Code, for those 
     employees who elect to retain their coverage under FERS 
     pursuant to paragraph (1).
       (4) Any employee of the Corporation who was subject to the 
     Federal Employee Health Benefits Program (FEHBP) on the day 
     immediately preceding the privatization date and who elects 
     to retain coverage under either CSRS or FERS pursuant to 
     paragraph (1) shall have the option to receive health 
     benefits from a health benefit plan established by the 
     Corporation or to continue without interruption coverage 
     under the FEHBP, in lieu of coverage by the Corporation's 
     health benefit system.
       (5) The Corporation shall pay to the Employees Health 
     Benefits Fund--
       (A) such employee deductions and agency contributions as 
     are required by section 8906(a)-(f) of title 5, United States 
     Code, for those employees who elect to retain their coverage 
     under FEHBP pursuant to paragraph (4); and
       (B) such amounts as are determined necessary by the Office 
     of Personnel Management under paragraph (6) to reimburse the 
     Office of Personnel Management for contributions under 
     section 8906(g)(1) of title 5, United States Code, for those 
     employees who elect to retain their coverage under FEHBP 
     pursuant to paragraph (4).
       (6) The amounts required under paragraph (5)(B) shall pay 
     the Government contributions for retired employees who retire 
     from the Corporation after the privatization date under 
     either CSRS or FERS, for survivors of such retired employees, 
     and for survivors of employees of the Corporation who die 
     after the privatization date, with said amounts prorated to 
     reflect only that portion of the total service of such 
     employees and retired persons that was performed for the 
     Corporation after the privatization date.

     SEC. 5011. OWNERSHIP LIMITATIONS.

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

     SEC. 5012. URANIUM TRANSFERS AND SALES.

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

                                 Annual maximum deliveries to end users
Year:                                   (millions lbs. U3O8 equivalent)
  1998...........................................................2 ....

  1999...........................................................4 ....

  2000...........................................................6 ....

  2001...........................................................8 ....

  2002..........................................................10 ....

  2003..........................................................12 ....

  2004..........................................................14 ....

  2005..........................................................16 ....

  2006..........................................................17 ....

  2007..........................................................18 ....

  2008..........................................................19 ....

  2009 and each year thereafter.................................20.....

       (6) Uranium hexafluoride delivered to the Russian Executive 
     Agent under paragraph (3) or auctioned pursuant to paragraph 
     (4) may be sold at any time as Russian-origin natural uranium 
     in a matched sale pursuant to the Suspension Agreement, and 
     in such case shall not be counted against the annual maximum 
     deliveries set forth in paragraph (5).
       (7) Uranium hexafluoride delivered to the Russian Executive 
     Agent under paragraph (3) or auctioned pursuant to paragraph 
     (4) may be sold at any time for use in the United States for 
     the purpose of overfeeding in the operations of enrichment 
     facilities.
       (8) Nothing in this subsection (b) shall restrict the sale 
     of the conversion component of such uranium hexafluroide. 
     Material sold pursuant to paragraph 5 shall not be swapped, 
     exchanged or loaned.
       (9) The Secretary of Commerce shall have responsibility for 
     the administration and enforcement of the limitations set 
     forth in this subsection. The Secretary of Commerce may 
     require any person to provide any certifications, 
     information, or take any action that may be necessary to 
     enforce these limitations. The U.S. Customs Service shall 
     maintain and provide any information required by the 
     Secretary of Commerce and shall take any action requested by 
     the Secretary of Commerce which is necessary for the 
     administration and enforcement of the uranium delivery 
     limitations set forth in this section.
       (10) The President shall monitor the actions of the United 
     States Executive Agent under the Russian HEU Agreement and 
     shall report to the Congress not later than December 31 of 
     each year on the effect the low-enriched uranium delivered 
     under the Russian HEU Agreement is having on the domestic 
     uranium mining, conversion, and enrichment industries, and 
     the operation of the gaseous diffusion plants. Such report 
     shall include a description of actions taken or proposed to 
     be taken by the President to prevent or mitigate any material 
     adverse impact on such industries or any loss of employment 
     at the gaseous diffusion plants as a result of the Russian 
     HEU Agreement.
       (c) Transfers to the Corporation.--(1) The Secretary shall 
     transfer to the Corporation without charge up to 50 metric 
     tons of enriched uranium and up to 7,000 metric tons of 
     natural uranium from the Department of Energy's stockpile, 
     subject to the restrictions in subsection (c)(2).
       (2) The Corporation shall not deliver for commercial end 
     use in the United States--
       (A) any of the uranium transferred under this subsection 
     before January 1, 1998;
       (B) more than 10 percent of the uranium (by uranium 
     hexafluoride equivalent content) transferred under this 
     subsection or more than 4 million pounds, whichever is less, 
     in any calendar year after 1997; or
       (C) more than 800,000 separative work units contained in 
     low-enriched uranium transferred under this subsection in any 
     calendar year.
       (d) Inventory Sales.--(1) In addition to the transfers 
     authorized under subsections (c) and (e), the Secretary may, 
     from time to time, sell natural and low-enriched uranium 
     (including low-enriched uranium derived from highly enriched 
     uranium) from the Department of Energy's stockpile.

[[Page S 16184]]

       (2) Except as provided in subsections (b), (c), and (e) no 
     sale or transfer of natural or low-enriched uranium shall be 
     made unless--
       (A) the President determines that the material is not 
     necessary to national security needs,
       (B) the Secretary determines that the sale of the material 
     will not have an adverse material impact on the domestic 
     uranium mining, conversion, or enrichment industry, taking 
     into account the sales of uranium under the Russian HEU 
     Agreement and the Suspension Agreement, and
       (C) the price paid to the Secretary will not be less than 
     the fair market value of the material.
       (e) Government Transfers.--Notwithstanding subsection 
     (d)(2), the Secretary may transfer or sell enriched uranium--
       (1) to a Federal agency if the material is transferred for 
     the use of the receiving agency without any resale or 
     transfer to another entity and the material does not meet 
     commercial specifications;
       (2) to any person for national security purposes, as 
     determined by the Secretary; or
       (3) to any State or local agency or nonprofit, charitable, 
     or educational institution for use other than the generation 
     of electricity for commercial use.
       (f) Savings Provision.--Nothing in this subtitle shall be 
     read to modify the terms of the Russian HEU Agreement.

     SEC. 5013. LOW-LEVEL WASTE.

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

     SEC. 5014. AVLIS.

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

     SEC. 5015. GASEOUS DIFFUSION TECHNOLOGY.

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

     SEC. 5016. APPLICATION OF CERTAIN LAWS.

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

     SEC. 5017. AMENDMENTS TO THE ATOMIC ENERGY ACT.

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

[[Page S 16185]]
     corporation established under the USEC Privatization Act.
       ``(4) Any final determination relating to whether the 
     gaseous diffusion plants, including any such facilities 
     leased to a corporation established under the USEC 
     Privatization Act, are in compliance with the Commission's 
     standards governing the gaseous diffusion plants and all 
     applicable laws.''.
       (d) Civil Penalties.--Section 234 a. of the Atomic Energy 
     Act of 1954 (42 U.S.C. 2282(a)) is amended by--
       (1) striking ``any licensing provision of section 53, 57, 
     62, 63, 81, 82, 101, 103, 104, 107, or 109'' and inserting: 
     ``any licensing or certification provision of section 53, 57, 
     62, 63, 81, 82, 101, 103, 104, 107, 109, or 1701''; and
       (2) by striking ``any license issued thereunder'' and 
     inserting: ``any license or certification issued 
     thereunder''.
       (e) References to the Corporation.--Following the 
     privatization date, all references in the Atomic Energy Act 
     of 1954 to the United States Enrichment Corporation shall be 
     deemed to be references to the private corporation.

     SEC. 5018. AMENDMENTS TO OTHER LAWS.

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

     SEC. 5101. SHORT TITLE.

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

     SEC. 5102. AMENDMENT OF HELIUM ACT.

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

     SEC. 5103. AUTHORITY OF SECRETARY.

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

     ``SEC. 3. AUTHORITY OF SECRETARY.

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

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

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

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

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

     SEC. 5104. SALE OF CRUDE HELIUM.

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

     SEC. 5105. ELIMINATION OF STOCKPILE.

       Section 8 is amended to read as follows:

     ``SEC. 8. ELIMINATION OF STOCKPILE.

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

     SEC. 5106. REPEAL OF AUTHORITY TO BORROW.

       Sections 12 and 15 are repealed.
        Subtitle C--Arctic Coastal Plain Leasing and Revenue Act

     SEC. 5201. SHORT TITLE.

       This subtitle may be cited as the ``Arctic Coastal Plain 
     Leasing and Revenue Act of 1995''.
     
[[Page S 16186]]


     SEC. 5202. PURPOSE AND POLICY.

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

     SEC. 5203. DEFINITIONS.

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

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

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

     SEC. 5205. RULES AND REGULATIONS.

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

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

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

     SEC. 5207. LEASE SALES.

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

     SEC. 5208. GRANT OF LEASES BY THE SECRETARY.

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

     SEC. 5209. LEASE TERMS AND CONDITIONS.

       An oil or gas lease issued pursuant to this subtitle 
     shall--
       (1) be for a tract consisting of a compact area not to 
     exceed five thousand seven hundred sixty acres, or nine 
     surveyed or protracted sections which shall be as compact in 
     form as possible;
       (2) be for an initial period of ten years and shall be 
     extended for so long thereafter as oil or gas is produced in 
     paying quantities from the lease or unit area to which the 
     lease is committed or for so long as drilling or reworking 
     operations, as approved by the Secretary, are conducted on 
     the lease or unit area;
       (3) require the payment of royalty as provided for in 
     section 5208 of this subtitle;
       (4) require that exploration activities pursuant to any 
     lease issued or maintained under this subtitle shall be 
     conducted in accordance with an exploration plan or a 
     revision of such plan approved by the Secretary;
       (5) require that all development and production pursuant to 
     a lease issued or maintained pursuant to this subtitle shall 
     be conducted in accordance with a development and production 
     plan approved by the Secretary;
       (6) require posting of bond as required by section 5210 of 
     this subtitle;
       (7) forbid the flaring of natural gas from any well unless 
     the Secretary finds that such flaring is necessary to 
     alleviate a temporary emergency situation or to conduct 
     testing or work-over operations;
       (8) contain such rental and other provisions as the 
     Secretary may prescribe at the time of offering the area for 
     lease;
       (9) provide that the Secretary may direct or assent to the 
     suspension of operations and production under any lease 
     granted under the terms of this subtitle in the interest of 
     conservation of the resource or where there is no available 
     system to transport the resource. If such a suspension is 
     directed or assented to by the Secretary, any payment of 
     rental prescribed by such lease shall be suspended during 
     such period of suspension of operations and production, and 
     the term of the lease shall be extended by adding any such 
     suspension period thereto;
       (10) provide that whenever the owner of a nonproducing 
     lease fails to comply with any of the provisions of this 
     subtitle, or of any applicable provision of Federal or State 
     environmental law, or of the lease, or of any regulation 
     issued under this subtitle, such lease may be canceled 

[[Page S 16187]]
     by the Secretary if such default continues for more than thirty days 
     after mailing of notice by registered letter to the lease 
     owner at the lease owner's record post office address of 
     record;
       (11) provide that whenever the owner of any producing lease 
     fails to comply with any of the provisions of this subtitle, 
     or of any applicable provision of Federal or State 
     environmental law, or of the lease, or of any regulation 
     issued under this subtitle, such lease may be forfeited and 
     canceled by any appropriate proceeding brought by the 
     Secretary in any United States district court having 
     jurisdiction under the provisions of this subtitle;
       (12) provide that cancellation of a lease under this 
     subtitle shall in no way release the owner of the lease from 
     the obligation to provide for reclamation of the lease site;
       (13) require that no lease issued under the authority of 
     this subtitle shall be assigned or sublet, except with the 
     consent of the Secretary;
       (14) allow the lessee, at the discretion of the Secretary, 
     to make written relinquishment of all rights under any lease 
     issued pursuant to this subtitle, and the Secretary shall 
     accept the relinquishment by the lessee of any lease issued 
     under this subtitle where there has not been surface 
     disturbance on the lands covered by the lease;
       (15) provide that for the purpose of conserving the natural 
     resources of any oil or gas pool, field, or like area, or any 
     part thereof, and in order to avoid the unnecessary 
     duplication of facilities, to protect the environment of the 
     Coastal Plain, and to protect correlative rights, the 
     Secretary shall require that, to the greatest extent 
     practicable, lessees unite with each other in collectively 
     adopting and operating under a cooperative or unit plan of 
     development for operation of such pool, field, or like area, 
     or any part thereof, and the Secretary is also authorized and 
     directed to enter into such agreements as are necessary or 
     appropriate for the protection of the United States against 
     drainage;
       (16) require that the holder of a lease or leases on lands 
     within the Coastal Plain shall be fully responsible and 
     liable for the reclamation of lands within the Coastal Plain 
     and any other Federal lands adversely affected in connection 
     with exploration, development, production or transportation 
     activities on a lease within the Coastal Plain by the holder 
     of a lease or as a result of activities conducted on the 
     lease by any of the leaseholder's subcontractors or agents;
       (17) provide that the holder of a lease may not delegate or 
     convey, by contract or otherwise, the reclamation 
     responsibility and liability to another party without the 
     express written approval of the Secretary;
       (18) provide that the standard of reclamation for lands 
     required to be reclaimed under this subtitle be, as nearly as 
     practicable, a condition capable of supporting the uses which 
     the lands were capable of supporting prior to any 
     exploration, development, or production activities, or upon 
     application by the lessee, to a higher or better use as 
     approved by the Secretary;
       (19) contain the terms and conditions relating to 
     protection of fish and wildlife, their habitat, and the 
     environment, as required by section 5204 (a) of this 
     subtitle; and
       (20) contain such other provisions as the Secretary 
     determines necessary to ensure compliance with the provisions 
     of this subtitle and the regulations issued thereunder.

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

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

     SEC. 5211. OIL AND GAS INFORMATION.

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

     SEC. 5212. EXPEDITED JUDICIAL REVIEW.

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

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

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

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

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

     SEC. 5215. NEW REVENUES.

       (a) Distribution of Revenues.--Notwithstanding any other 
     provision of law, all revenues received by the Federal 
     Government from 

[[Page S 16188]]
     competitive bids, sales, bonuses, royalties, rents, fees, interest or 
     other income derived from the leasing of oil and gas 
     resources within the Coastal Plain shall be deposited into 
     the Treasury of the United States: Provided, That 50 per 
     centum of all such revenues shall be paid by the Secretary of 
     the Treasury semiannually, on March 30th and on September 
     30th of each year, to the State of Alaska: Provided further, 
     That the Secretary of the Treasury shall monitor the total 
     amount of bonus bid revenue deposited into the Treasury from 
     oil and gas leases issued under the authority of this 
     subtitle. All bonus bid revenue deposited in the Treasury in 
     excess of $2,600,000,000 shall be distributed as follows: 50 
     per centum to the State of Alaska in the manner provided in 
     this subsection and 50 per centum into a special fund 
     established in the Treasury of the United States known as the 
     ``National Park and Wildlife Refuge Renewal Fund'' (Renewal 
     Fund).
       (b) Use of Renewal Fund.--Funds from the Renewal Fund shall 
     be made available to the Secretary of the Interior, without 
     further appropriation, at the beginning of each fiscal year 
     in which funds are available, and may be expended by the 
     Secretary for infrastructure needs at units of the National 
     Park and Wildlife Refuge Systems, including but not limited 
     to facility refurbishment, repair and replacement, 
     interpretive media and exhibit repair and replacement and 
     infrastructure projects associated with park and wildlife 
     refuge resource protection: Provided, That such amounts shall 
     remain available until expended, and that the Secretary shall 
     develop procedures for the use of the Renewal Fund that 
     ensure accountability and demonstrated results. Such 
     procedures shall not take effect until 90 days after 
     transmittal to the Committees on Energy and Natural Resources 
     and Environment and Public Works of the Senate and the 
     appropriate Committees of the House of Representatives: 
     Provided further, That beginning the first full fiscal year 
     after funds are deposited in the Renewal Fund, the Secretary 
     shall submit an annual report to the Congress, on a unit-by-
     unit basis, detailing the expenditures of such receipts, and 
     that any revenues made available pursuant to this section 
     shall be in addition to funds appropriated in the preceding 
     fiscal year for the Park Service and Fish and Wildlife 
     Service and shall not result in a reduction or offset of such 
     appropriated funds.
                     Subtitle D--Park Entrance Fees

     SEC. 5300. FEES.

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

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       (8) Section 204 of Public Law 96-287 (94 Stat. 601) is 
     amended by striking the last sentence.
       (9) Section 5 of Public Law 96-428 (94 Stat. 1843; 16 
     U.S.C. 461 note) is repealed.
       (10) Public Law 100-55 (101 Stat. 371; U.S.C. 460l-6a note) 
     is repealed.

     SEC. 5301. CHALLENGE COST-SHARE AGREEMENTS.

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

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

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

     SEC. 5303. SPECIAL ACCOUNT.

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

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

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

     SEC. 5305. ALLOCATION AND USE OF FEES.

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

     SEC. 5400. AUTHORIZATION FOR PREPAYMENT OF CONSTRUCTION 
                   CHARGES.

       Subsection 213(a) of the Reclamation Reform Act of 1982 (96 
     Stat.1269, 43 U.S.C. 390mm(a)) is amended:
       (a) By adding at the beginning:

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

     SEC. 5401. CONFORMING AMENDMENT.

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

     SEC. 5410. HETCH HETCHY DAM.

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

     SEC. 5420. COLLBRAN PROJECT.

       (a) Short Title.--This section may be cited as the 
     ``Collbran Project Unit Conveyance Act''.
       (b) Definitions.--For purposes of this section:
       (1) Districts.--The term ``Districts'' means the Ute Water 
     Conservancy District and the Collbran Conservancy District 
     (including their successors and assigns).
       (2) Federal reclamation laws.--The term ``Federal 
     reclamation laws'' means the Act of June 17, 1902, and Acts 
     amendatory thereof or supplementary thereto (32 Stat. 388, 
     chapter 1093; 43 U.S.C. 371 et seq.) (including regulations 
     adopted pursuant to those Acts).
       (3) Project.--The term ``Project'' means the Collbran 
     Reclamation Project, as constructed and operated under the 
     Act of July 3, 1952 (66 Stat. 325, chapter 565), including 
     all property, equipment, and assets of or relating to the 
     Project that are owned by the United States, including--
       (A) Vega Dam and Reservoir (but not including recreation 
     facilities owned by the United States or the State of 
     Colorado);
       (B) Leon-Park Dams and Feeder Canal;
       (C) Southside Canal;
       (D) East Fork Diversion Dam and Feeder Canal;
       (E) Bonham-Cottonwood Pipeline;
       (F) Snowcat Shed and Diesel Storage;
       (G) Upper Molina Penstock and Power Plant;
       (H) Lower Molina Penstock and Power Plant;
       (I) the diversion structure in the tailrace of the Lower 
     Molina Power Plant;
       (J) all substations and switchyards;
       (K) a perpetual, non-exclusive easement for the use of 
     easements or rights-of-way owned by the United States on or 
     across non-Federal lands which are necessary for access to 
     Project facilities;
       (L) a perpetual, non-exclusive easement on and across 
     National Forest lands for access to existing Project 
     facilities and access to and the operation, use repair, and 
     replacement of the existing storage reservoirs on the Grand 
     Mesa which are operated as a part of the Project;
       (M) title to lands reasonably necessary for all Project 
     facilities except for those described in subparagraphs (3)(K) 
     and (3)(L);
       (N) all permits and contract rights;
       (O) all equipment, parts inventories, and tools;
       (P) all additions, replacements, betterments, and 
     appurtenances to any of the above; and
       (Q) a copy of all data, plans designs, reports, records, or 
     other materials, whether in writing or in any form of 
     electronic storage relating specifically to the Project.
       (4) Secretary.--The term ``Secretary'' means the Secretary 
     of the Interior.
       (c) Conveyance of the Collbran Project.--
       (1) In general.--The Secretary shall convey to the 
     Districts all right, title, and interest of the United States 
     in and to the Project, as described in this section, by 
     quitclaim deed and bill of sale, without warranties, during 
     the last quarter of fiscal year 2000, subject only to the 
     requirements of this section: Provided, That such conveyance 
     shall reserve to the United States all minerals, including 
     hydrocarbons, and a perpetual right of public access over, 
     across, under, and to the portions of the Project which on 
     the date of enactment of this Act were open to public use for 
     purposes such as grazing, mineral development and logging: 
     Provided further, That the United States may allow for the 
     continued public use and enjoyment of such portions of the 
     Project for recreational activities and other public uses 
     conducted as of the date of enactment of this Act.
       (2) Payment.--
       (A) In general.--At the time of transfer, the Districts 
     shall pay to the United States 

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     $12,900,000 ($12,300,000 of which represents the net present value of 
     the outstanding repayment obligations of the Districts), of 
     which--
       (i) $12,300,000 shall be deposited in the general fund of 
     the United States Treasury; and
       (ii) $600,000 shall be deposited in a special account in 
     the United States Treasury and shall be available to the 
     United States Fish and Wildlife Service, region 6, without 
     further appropriation, for use in funding Colorado operations 
     and capital expenditures associated with the Recovery 
     Implementation Program for Endangered Fish Species in the 
     Upper Colorado River Basin.
       (B) Source of funds.--Funds for the payment to the extent 
     of the amount specified in the paragraph (1)(A) shall not be 
     derived from the issuance or sale, prior to the conveyance, 
     of State or local bonds the interest on which is exempt from 
     taxation under section 103 of the Internal Revenue Code of 
     1986 (26 U.S.C. 103).
       (3) Operation of project.--
       (A) In general.--The Project shall be operated and used by 
     the Districts for a period of 40 years after the date of 
     enactment of this section for the purposes for which the 
     Project was authorized under the Act of July 3, 1952 (66 
     Stat. 325, chapter 565).
       (B) Requirements.--During the 40-year period described in 
     paragraph (1)--
       (i) the Districts shall annually submit to the Secretary a 
     plan for operation of the Project, which plan shall--

       (I) report on Project operations for the previous year;
       (II) provide a description of the manner of Project 
     operations anticipated for the forthcoming year; and
       (III) certify that the Districts have operated and will 
     operate and maintain the Project facilities in accordance 
     with sound engineering practices; and

       (ii) provide that, subject to subsection (d), all electric 
     power generated by operation of the Project shall be made 
     available to and be marketed by the Western Area Power 
     Administration (including its successors and assigns).
       (4) Agreements.--Conveyance of the Project shall be subject 
     to the agreements between the United States and the State of 
     Colorado dated August 22, 1994, and September 23, 1994, 
     relating to the construction and operation of recreational 
     facilities at Vega Reservoir, which agreements shall continue 
     to be performed by the parties thereto according to the terms 
     of the agreements.
       (d) Operation.--
       (1) Conformity to historic operations.--The power component 
     and facilities of the Project shall be operated in 
     substantial conformity with the historic operations of the 
     power component and facilities (including recent operations 
     in a peaking mode).
       (2) Power marketing.--
       (A) Under existing agreements.--The Districts shall be 
     bound by the agreements between the Bureau of Reclamation and 
     the Western Area Power Administration in existence on the 
     date of enactment of this section, which provide for the 
     marketing of power generated by the power component of the 
     Project as part of the output of the Salt Lake City Area 
     Integrated Projects under the Post 1989 Operating Criteria, 
     until those agreements expire or are terminated.
       (B) After expiration of existing agreement.--
       (i) After the agreements described in paragraph (1) expire 
     or are terminated, the Districts shall offer all power 
     produced by the power component of the Project to the Western 
     Area Power Administration or its successors or assigns 
     (``Western''), which, in consultation with its affected 
     preference customers, shall have the first right to purchase 
     such power at the rates established in accordance with 
     Subparagraph (ii) of this paragraph. If Western declines to 
     purchase the power after consultation with its affected 
     preference customers, such power shall then be offered at the 
     same rates first to Western's preference customers located in 
     the Salt Lake City Area Integrated Projects marketing area 
     (``SLCAIP preference customers''). Thereafter, such power may 
     be sold to any other party: Provided, however, That no such 
     sale may occur at rates less than established in accordance 
     with subparagraph (ii) of this paragraph unless such power is 
     first offered at such lesser rate first to Western and then 
     to its SLCAIP preference customers.
       (ii) The rate for power initially offered to Western and 
     its SLCAIP preference customers under this paragraph shall 
     not exceed that required to produce revenues sufficient to 
     provide for

       (I) annual debt service and/or recoupment of the cost of 
     capital for the amount specified in subsection (c)(2) of this 
     section, less the sum of $220,000 (which is the net present 
     value of the outstanding repayment obligation of the Collbran 
     Conservancy District), and
       (II) the cost of operation, maintenance and replacement of 
     the power component of the Project.

       (iii) Such costs and rate shall be determined in a manner 
     consistent with the current principles followed by the 
     Secretary of the Interior and by Western in its annual power 
     and repayment study.
       (3) License.--The Districts are by this section granted a 
     license under the Federal Power Act (16 U.S.C. 791a et seq.) 
     for the operation of the Project in accordance with the 
     requirement of subsection (c)(3) of this section, for a 
     period of 40 years after the date of conveyance of the 
     Project, after which period the license may be renewed in 
     accordance with applicable law.
       (e) Inapplicability of NEPA.--The conveyance of the Project 
     does not constitute a major Federal action within the meaning 
     of the National Environmental Policy Act of 1969 (42 U.S.C. 
     4321 et seq.), including any regulations issued under such 
     Act.
       (f) Inapplicability of Prior Agreements and of Federal 
     Reclamation Laws.--On conveyance of the Project to the 
     Districts--
       (1) the Repayment Contract dated May 27, 1957, as amended 
     April 12, 1962, between the Collbran Conservancy District and 
     the United States, and the Contract for use of Project 
     facilities for Diversion of Water dated January 11, 1962, as 
     amended November 10, 1977, between the Ute Water Conservancy 
     District and the United States, shall be terminated and of no 
     further force or effect; and
       (2) the Project shall no longer be subject to or governed 
     by the Federal reclamation laws.
       (g) Districts' Liability.--The Districts shall be liable 
     for all acts or omissions relating to the operation and use 
     of the Project that occur subsequent to the conveyance.
               Subtitle F--Federal Oil and Gas Royalties

     SEC. 5500. SHORT TITLE.

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

     SEC. 5501. DEFINITIONS.

       Section 3 of the Federal Oil and Gas Royalty Management Act 
     of 1982 (30 U.S.C. 1701 et seq.) is amended by striking 
     ``and'' at the end of paragraph (15), by striking the period 
     at the end of paragraph (16) and inserting a semicolon, and 
     by adding at the end the following:
       ``(17) `adjustment' means an amendment to a previously 
     filed report on an obligation, and any additional payment or 
     credit, if any, applicable thereto, to rectify an 
     underpayment or overpayment on a lease;
       ``(18) `administrative proceeding' means any agency process 
     in which a demand, decision or order issued by the Secretary 
     is subject to appeal or has been appealed;
       ``(19) `assessment' means any fee or charge levied or 
     imposed by the Secretary or the United States other than--
       ``(A) the principal amount of any royalty, minimum royalty, 
     rental, bonus, Net profit share or proceed of sale;
       ``(B) any interest; or
       ``(C) any civil or criminal penalty;
       ``(20) `commence' means--
       ``(A) with respect to a judicial proceeding, the service of 
     a complaint, petition, counterclaim, crossclaim, or other 
     pleading seeking affirmative relief or seeking credit or 
     recoupment; or
       ``(B) with respect to a demand, the receipt by the 
     Secretary or a lessee of the demand;
       ``(21) `credit' means the application of an overpayment (in 
     whole or in part) against an obligation which has become due 
     to discharge, cancel or reduce the obligation;
       ``(22) `demand' means--
       ``(A) an order to pay issued by the Secretary; or
       ``(B) a separate written request by a lessee which asserts 
     an obligation due the lessee, but does not mean any royalty 
     or production report, or any information contained therein, 
     required by the Secretary;
       ``(23) `obligation' means--
       ``(A) any duty of the Secretary or the United States--
       ``(i) to take oil or gas royalty in kind; or
       ``(ii) to pay, refund, offset, or credit monies including 
     but not limited to--

       ``(I) the principal amount of any royalty, minimum royalty, 
     rental, bonus, net profit share or proceed of sale; or
       ``(II) any interest;

       ``(B) any duty of a lessee--
       ``(i) to deliver oil or gas royalty in kind; or
       ``(ii) to pay, offset or credit monies including but not 
     limited to--

       ``(I) the principal amount of any royalty, minimum royalty, 
     rental, bonus, net profit share or proceed of sale;
       ``(II) any interest;
       ``(III) any penalty; or
       ``(IV) any assessment,

     which arises from or relates to any lease administered by the 
     Secretary for, or any mineral leasing law related to, the 
     exploration, production and development of oil or gas on 
     Federal lands or the Outer Continental Shelf;
       ``(24) `order to pay' means a written order issued by the 
     Secretary or the United States which--
       ``(A) asserts a definite and quantified obligation due the 
     Secretary or the United States; and
       ``(B) specifically identifies the obligation by lease, 
     production month and amount of such obligation ordered to be 
     paid, as well as the reason or reasons such obligation is 
     claimed to be due, but such term does not include any other 
     communication or action by or on behalf of the Secretary or 
     the United States;
       ``(25) `order to perform a restructured accounting' means a 
     written order issued by the Secretary during a full and 
     complete audit of a lessee to recalculate royalty due on an 
     obligation based upon the Secretary's finding that the lessee 
     has made identified underpayments or overpayments which are 
     demonstrated by the Secretary to be based upon repeated, 
     systemic reporting errors for a significant number of leases 
     for a significant number of reporting months with the same 
     type of error which constitutes a pattern of violations and 
     which are likely to result in either a significant 
     underpayment or overpayment. The term `order to perform a 
     restructured accounting' shall not include any other 
     communication or action by or on behalf of the Secretary or 
     the United States;
       ``(26) `overpayment' means any payment by a lessee in 
     excess of an amount legally required to be paid on an 
     obligation and includes the portion of any estimated payment 
     for a production month that is in excess of the royalties due 
     for that month;
       ``(27) `payment' means satisfaction, in whole or in part, 
     of an obligation due the Secretary or the United States;
       ``(28) `penalty' means a statutorily authorized civil fine 
     levied or imposed by the Secretary or 

[[Page S 16191]]
     the United States for a violation of this Act, any mineral leasing law, 
     or a term or provision of a lease administered by the 
     Secretary;
       ``(29) `refund' means the return of an overpayment by the 
     Secretary or the United States by the drawing of funds from 
     the United States Treasury;
       ``(30) `State concerned' means, with respect to a lease, a 
     State which receives a portion of royalties under this Act 
     from such lease;
       ``(31) `underpayment' means any payment or nonpayment by a 
     lessee that is less than the amount legally required to be 
     paid on an obligation; and
       ``(32) `United States' means the United States Government 
     and any department, agency, or instrumentality thereof, and 
     the several States, the District of Columbia, Puerto Rico, 
     and the territories and possessions of the United States.''.

     SEC. 5502. LIMITATION PERIODS.

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

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

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


[[Page S 16192]]
     Any party ordered by the Secretary to pay an assessment shall be 
     entitled to a stay without bond or other surety instrument.
       ``(k) Inapplicability of the Other Statutes of 
     Limitation.--The limitations set forth in sections 2401, 
     2415, 2416, and 2462 of title 28, United States Code, and 
     section 42 of the Mineral Leasing Act (30 U.S.C. 226-2) shall 
     not apply to any obligation to which this Act applies.''.
       (b) Subpoena.--Section 107 of the Federal Oil and Gas 
     Royalty Management Act of 1982 (30 U.S.C. 1717) is amended by 
     adding at the end the following:
       ``(c) Rules Regarding Issuance of Subpoena Relating to 
     Reporting and Payment of an Obligation Due.--
       ``(1) In general.--A subpoena which requires a lessee to 
     produce records necessary to determine the proper reporting 
     and payment of an obligation due the Secretary may be issued 
     under this section only by the Solicitor, an Assistant 
     Secretary of the Interior, or an acting Assistant Secretary 
     of the Interior who is a schedule C employee (as defined by 
     section 213.3301 of title 5, Code of Federal Regulations) and 
     may not be delegated.
       ``(2) Prior written request required.--A subpoena described 
     in paragraph (1) may only be issued against a lessee during 
     the limitation period provided in section 115 and only after 
     the Secretary has in writing requested the records from the 
     lessee related to the obligation which is the subject of the 
     subpoena and has determined that--
       ``(A) the lessee has failed to respond within a reasonable 
     period of time to the Secretary's written request for such 
     records necessary for an audit, investigation or other 
     inquiry made in accordance with the Secretary's 
     responsibilities under this Act;
       ``(B) the lessee has in writing denied the Secretary's 
     written request to produce such records in the lessee's 
     possession or control necessary for an audit, investigation 
     or other inquiry made in accordance with the Secretary's 
     responsibilities under this Act; or
       ``(C) the lessee has unreasonably delayed in producing 
     records necessary for an audit, investigation or other 
     inquiry made in accordance with the Secretary's 
     responsibilities under this Act after the Secretary's written 
     request.
       ``(3) Reasonable period for compliance with written 
     request.--In seeking records, the Secretary shall afford the 
     lessee a reasonable period of time after a written request by 
     the Secretary in which to provide such records prior to the 
     issuance of any subpoena.''.
       (c) Clerical Amendment.--The table of contents in section 1 
     of such Act (30 U.S.C. 1701) is amended by adding after the 
     item relating to section 114 the following new item:

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

     SEC. 5503. ADJUSTMENT AND REFUNDS.

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

     ``SEC. 111A. ADJUSTMENTS AND REFUNDS.

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

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

     SEC. 5504. REQUIRED RECORDKEEPING.

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

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

       (a) Period.--Section 111(f) of the Federal Oil and Gas 
     Royalty Management Act of 1982 (30 U.S.C. 1721(f)) is amended 
     to read as follows:
       ``(f) The Secretary may waive or forego such interest in 
     whole or in part. Interest shall be charged under this 
     section only for the number of days a payment is late.''.
       (b) Lessee Interest.--Section 111 of the Federal Oil and 
     Gas Royalty Management Act of 1982 (30 U.S.C. 1721) is 
     amended by adding after subsection (g) the following:
       ``(h) Interest shall be allowed and the Secretary shall pay 
     or credit such interest on any overpayment, with such 
     interest to accrue from the date such overpayment was made, 
     at the rate applicable under section 6621(a)(2) of the 
     Internal Revenue Code of 1986. Interest which has accrued on 
     any overpayment may be applied to reduce an underpayment. 
     This subsection applies to overpayments made later than six 
     months after the date of enactment of this subsection or 
     September 1, 1996, whichever is later. Such interest shall be 
     paid from amounts received as current receipts from sales, 
     bonuses, royalties (including interest charges collected 
     under this section) and rentals of the public lands and the 
     Outer Continental Shelf under the provisions of the Mineral 
     Leasing Act, and the Outer Continental Shelf Lands Act, which 
     are not payable to a State or the Reclamation Fund. The 
     portion of any such interest payment attributable to any 
     amounts previously disbursed to a State, the Reclamation 
     Fund, or any other recipient designated by law shall be 
     deducted from the next disbursements to that recipient made 
     under the applicable law. Such amounts deducted from 
     subsequent disbursements shall be credited to miscellaneous 
     receipts in the Treasury.''.
       (c) Limitation on Interest.--Section 111 of the Federal Oil 
     and Gas Royalty Management Act, as amended by subsection (b) 
     of this Act, is further amended by adding at the end the 
     following:
       ``(i) Upon a determination by the Secretary that an 
     excessive overpayment (based upon all obligations of a lessee 
     for a given reporting month) was made for the sole purpose of 
     receiving interest, interest shall not be paid on the 
     excessive amount of such overpayment. For purposes of this 
     Act, an `excessive overpayment' shall be the amount that any 
     overpayment a lessee pays for a given reporting month 
     (excluding payments for demands for obligations as a result 
     of judicial or administrative proceedings for settlement 
     agreements and for other similar payments) for the aggregate 
     of all of its Federal leases exceeds 25 percent of the total 
     royalties paid that month for those leases.''.
       (d) Estimated Payment.--Section 111 of the Federal Oil and 
     Gas Royalty Management Act, as amended by subsections (b) and 
     (c) of this Act, is further amended by adding at the end the 
     following:
       ``(j) A lessee may make a payment for the approximate 
     amount of royalties (hereinafter in this subsection 
     ``estimated payment') that would otherwise be due to the 
     Secretary for such lease to avoid underpayment or nonpayment 
     interest charges. When an estimated payment is made, actual 
     royalties become due at the end of the month following the 
     period covered by the estimated payment. If the lessee makes 
     a payment for such actual royalties, the lessee may apply 

[[Page S 16193]]

     the estimated payment to future royalties. Any estimated 
     payment may be adjusted, recouped, or reinstated at any time 
     by the lessee.''.
       (e) Volume Allocation of Oil and Gas Production.--Section 
     111 of the Federal Oil and Gas Royalty Management Act (30 
     U.S.C. 1721), as amended by subsections (b) through (d) of 
     this Act, is amended by adding at the end the following:
       ``(k)(1) Except as otherwise provided by this subsection--
       ``(A) a lessee of a lease in a unit or communitization 
     agreement which contains only Federal leases with the same 
     royalty rate and funds distribution must report and pay 
     royalties on oil and gas production for each production month 
     based on the actual volume of production sold by or on behalf 
     of that lessee;
       ``(B) a lessee of a lease in any other unit or 
     communitization agreement must report and pay royalties on 
     oil and gas production for each production month based on the 
     volume of oil and gas produced from such agreement and 
     allocated to the lease in accordance with the terms of the 
     agreement; and
       ``(C) a lessee of a lease that is not contained in a unit 
     or communitization agreement must report and pay royalties on 
     oil and gas production for each production month based on the 
     actual volume of production sold by or on behalf of that 
     lessee.
       ``(2) This subsection applies only to requirements for 
     reporting and paying royalties. Nothing in this subsection is 
     intended to alter a lessee's liability for royalties on oil 
     or gas production based on the share of production allocated 
     to the lease in accordance with the terms of the lease, a 
     unit or communitization agreement, or any other agreement.
       ``(3) For any unit or communitization agreement, if all 
     lessees contractually agree to an alternative method of 
     royalty reporting and payment, the lessees may submit such 
     alternative method to the Secretary for approval and make 
     payments in accordance with such approved alternative method 
     so long as such alternative method does not reduce the amount 
     of the royalty obligation.
       ``(4) The Secretary shall grant an exception from the 
     reporting and payment requirements for marginal properties by 
     allowing for any calendar year or portion thereof royalties 
     to be paid each month based on the volume of production sold. 
     Interest shall not accrue on the difference for the entire 
     calendar year or portion thereof between the amount of oil 
     and gas actually sold and the share of production allocated 
     to the lease until the beginning of the month following 
     calendar year or portion thereof. Any additional royalties 
     due or overpaid royalties and associated interest shall be 
     paid, refunded, or credited within six months after the end 
     of each calendar year in which royalties are paid based on 
     volumes of production sold. For the purpose of this 
     subsection, the term ``marginal property' means a lease that 
     produces on average the combined equivalent of less than 15 
     barrels of oil per day or 90 thousand cubic feet of gas per 
     day, or a combination thereof, determined by dividing the 
     average daily production of domestic crude oil and domestic 
     natural gas from producing wells on such lease by the number 
     of such wells, unless the Secretary, together with the State 
     concerned, determines that an amount which is a 
     nonsubstantive variation thereof is more appropriate.
       ``(5) Not later than two years after the date of the 
     enactment of this subsection, the Secretary shall issue any 
     appropriate demand for all outstanding royalty payment 
     disputes regarding who is required to report and pay 
     royalties on production from units and communitization 
     agreements outstanding on the date of the enactment of this 
     subsection, and collect royalty amounts owed on such 
     production.''.
       (f) Production Allocation.--Section 111 of the Federal Oil 
     and Gas Royalty Management Act (30 U.S.C. 1721), as amended 
     by subsections (b) through (e) of this Act, is further 
     amended by adding at the end the following:
       ``(l) The Secretary shall issue all determinations of 
     allocations of production for units and communitization 
     agreements within 120 days of a request for determination. If 
     the Secretary fails to issue a determination within such 120-
     day period, the Secretary shall waive interest due on 
     obligations subject to the determination until the end of the 
     month following the month in which the determination is 
     made.''.

     SEC. 5506. LIMITATION ON ASSESSMENTS.

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

     SEC. 5507. ALTERNATIVES FOR MARGINAL PROPERTIES.

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

     ``SEC. 116. ALTERNATIVES FOR MARGINAL PROPERTIES.

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

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

     SEC. 5508. NOTICE REQUIREMENT.

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

     SEC. 5509. REPEALS.

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

     SEC. 5510. PERFORMANCE STANDARD.

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

     SEC. 5511. INDIAN LANDS.

       The amendments made by this subtitle shall not apply with 
     respect to Indian lands, and the provisions of the Federal 
     Oil and Gas Royalty Management Act of 1982 as in effect on 
     the day 

[[Page S 16194]]

     before the date of enactment of this Act shall continue to 
     apply after such date with respect to Indian lands. The 
     provisions of the Federal Oil and Gas Royalty Management Act 
     of 1982, as amended by this subtitle, shall apply as of the 
     date of enactment with respect to Federal lands and the Outer 
     Continental Shelf.

     SEC. 5512. PRIVATE LANDS.

       This subtitle shall not apply to any privately owned 
     minerals.

     SEC. 5513. EFFECTIVE DATE.

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

     SEC. 5600. SALE OF DOE ASSETS.

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

     SEC. 5651. WEEKS ISLAND.

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

     SEC. 5652. LEASE OF EXCESS SPRO CAPACITY.

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

     ``SEC. 168. USE OF UNDERUTILIZED FACILITIES.

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

     SEC. 5700. SHORT TITLE.

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

     SEC. 5701. DEFINITIONS.

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

     SEC. 5702. CLAIM MAINTENANCE REQUIREMENTS.

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

[[Page S 16195]]
     Policy and Management Act of 1976 (43 U.S.C. 1744 (a)) is hereby 
     repealed.

     SEC. 5703. WAIVER AND EXEMPTION.

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

     SEC. 5704. PATENTS.

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

     SEC. 5705. ROYALTY.

       (a) Reservation of Royalty.--
       (1) In general.--Production of locatable minerals 
     (including associated minerals) from any unpatented mining 
     claim (other than those from Federal lands to which 
     subsection 5704(c) applies) or any mining claim patented 
     under subsection 5704(a), including mineral concentrates and 
     products derived from locatable minerals, shall be subject to 
     the payment of a royalty of 2.5 percent on the Net Smelter 
     Return of all ores, minerals, metals, and materials mined and 
     removed and sold.
       (2) Waiver.--If the Secretary determines that the 
     Secretary's cost of accounting for and collecting a royalty 
     for any mineral exceeds or is likely to exceed the amount of 
     royalty to be collected, the Secretary shall waive such 
     royalty. The obligation to pay royalties hereunder shall 
     accrue only upon the sale of locatable minerals or mineral 
     products produced from a mining claim subject to such 
     royalty, and not upon the stockpiling of the same for future 
     processing.
       (3) Exemption.--Any mine with an annual Revenues Received 
     of less than $500,000 shall be exempt from the requirement to 
     pay a royalty under this section.
       (4) Definition.--
       (A) ``Net Smelter Return'' means the ``Revenues Received'' 
     for such ores, minerals, metals or materials, less the 
     ``Allowable Deductions'' for any calendar year.
       (B) ``Revenues Received'' means the proceeds from the sale 
     of ores mined from the claims or patents before subtracting 
     the ``Allowable Deductions'', or, in the case of sales of 
     beneficiated products from locatable minerals such as 
     cathode, anode or copper rod or wire, or other products 
     fabricated from the locatable minerals, the gross income from 
     mining derived from the first commercially marketable product 
     determined in the same manner as under Section 613 of the 
     Internal Revenue Code, before subtracting the ``Allowable 
     Deductions.'' Sales or transfers of ores to affiliates shall 
     be valued at the fair market value of the products sold or 
     transferred. Without limiting the foregoing, the profits or 
     losses incurred in connection with forward sales, futures or 
     commodity options trading, metal loans, or any other price 
     hedging or speculative activity or arrangement shall not be 
     included in Revenues Received.
       (C) ``Allowable Deductions'' means the following costs and 
     expenses actually incurred or paid to third parties by the 
     royalty payor: processing and treatment cost, costs for all 
     transportation and insurance for ores or products produced 
     from ores mined from the claim, group of claims or patents 
     comprising an operation, between the mine and processing 
     facilities, from one processing facility to another, and from 
     processing facilities to the point of delivery of said ores 
     or products; assaying charges, umpire charges, independent 
     representative charges; all charges by purchasers of said 
     ores or products; all taxes (except income taxes) measured by 
     or valued upon production.
       (5) Revenues received.--All Revenues Received and Allowable 
     Deductions shall be determined in accordance with generally 
     accepted accounting principles and practices consistently 
     applied. Revenues Received and Allowable Deductions shall be 
     determined by the accrual method.
       (6) Allowable deductions.--Where any Allowable Deductions 
     are incurred in conjunction with like costs for mineral 
     products from other properties controlled by the payor such 
     costs shall be fairly allocated and apportioned in accordance 
     with generally accepted practices in the mining industry.
       (7) Commingling.--The payor shall have the right to 
     commingle ore and minerals from the claim, group of claims, 
     or patent comprising an operation, with ore from other lands 
     and properties: Provided, however, That the payor shall 
     calculate from representative samples the average grade of 
     the ore before commingling. If concentrates are produced from 
     the commingled ores, the payor shall calculate from 
     representative samples calculating the average grade of the 
     ore, and calculating average recovery percentages the payor 
     shall use procedures accepted in the mining and metallurgical 
     industry suitable for the type of mining and processing 
     activity being conducted.
       (8) Effective date.--
       (A) In general.--The royalty required under this section 
     shall take effect with respect to production on or after the 
     first day of the first month following the date of enactment 
     of this subtitle.
       (B) Phase-in.--The royalty payments required under this 
     section shall be reduced--
       (i) by 66 2/3 percent for the first 12 months following the 
     date of enactment of this subtitle for which royalties are 
     due on production pursuant to this subtitle; and
       (ii) by 33 1/3 percent for the second 12 months that 
     royalties are due on production pursuant to this subtitle.
       (C) Time for payment.--Any royalty payment attributable to 
     production during the first 15 calendar months after the date 
     of enactment of this subtitle, after any reduction under 
     paragraph (B), shall be due on the date that is 12 months 
     after the date of enactment of this subtitle.
       (D) No marketable quantity prior to date of enactment.--For 
     a claim, group of claims, or patents comprising an operation 
     that has not produced a marketable quantity prior to the date 
     of enactment of this subtitle, the royalty payments required 
     pursuant to this section shall be reduced--
       (i) by 66 2/3 percent for the first 12 months following the 
     date of enactment of this subtitle for which royalties are 
     due on production pursuant to this subtitle; and
       (ii) by 33 1/3 percent for the second 12 months that 
     royalties are due on production pursuant to this subtitle.
       (9) Royalty reduction for marginal operations.--
       (A) Application.--A person that is required to make a 
     royalty payment under this section may file for a reduction 
     or waiver of the royalty by demonstrating that payment of the 
     royalty would preclude recovery of costs of production, 
     including invested capital, for a claim, group of claims or 
     patents comprising an operation for the remaining reasonable 
     life of the operation: Provided, That the Secretary shall not 
     consider royalty reduction effective during the phase-in 
     periods under paragraph (8). For purposes of this initial 
     application, ``Projected Revenues'' shall be calculated using 
     the operator's current and projected rates of production at 
     the average price for the preceding 12 months.
       (B) Definition.--For purposes of an application under 
     subparagraph (A)--
       (i) ``Projected Revenues'' shall be the net present value 
     of the expected revenues for the 

[[Page S 16196]]
     remaining reasonable life of the operation calculated using the average 
     mineral price received for the preceding 12 month calendar 
     year.
       (ii) ``Costs of Production'' shall mean the net present 
     value of the following costs based on the expected rate of 
     production for the remaining reasonable life of the 
     operation--

       (I) the projected cost of extracting the locatable mineral;
       (II) the projected cost of transporting the locatable 
     mineral to the place or places of reduction, beneficiation, 
     refining and sale;
       (III) the projected cost of reduction, beneficiation, 
     refining and sale of the locatable mineral;
       (IV) the projected cost of marketing and delivering the 
     locatable mineral and the conversion of the locatable mineral 
     into money;
       (V) the projected cost of maintenance and repairs of all 
     machinery, equipment, apparatus, and facilities used in the 
     mine; all crushing, milling, leaching, refining, smelting, 
     and reduction works, plants, and facilities; and all 
     facilities and equipment for transportation;
       (VI) the projected cost for support personnel and support 
     services at the mine site, including without limitation, 
     accounting, assaying, drafting, and mapping, computer 
     services, surveying, housing, camp and office expenses, 
     safety and security;
       (VII) the projected cost of engineering, sampling, and 
     assaying pertaining to development and production;
       (VIII) the projected cost of permitting, reclamation, 
     environmental compliance and monitoring;
       (IX) the projected cost of fire and other insurance on the 
     machinery, equipment, apparatus, works, plants and facilities 
     mentioned in subclause (B)(ii)(V);
       (X) depreciation of the original capitalized cost of the 
     machinery, equipment, apparatus, works, plants, and 
     facilities listed in subclause (B)(ii)(V), considering the 
     probable life of the property in computing the annual 
     depreciation charge;
       (XI) all money expended for premiums for industrial 
     insurance, and the owner-paid cost of hospital and medical 
     attention and accident benefits and group insurance for all 
     employees engaged in the production or processing of 
     locatable minerals;
       (XII) all money paid as contributions or payments under 
     State unemployment compensation law, all money paid as 
     contributions under the Federal Social Security Act, and all 
     money paid to State government in real property taxes 
     measured or levied on production, or Federal excise tax 
     payments and payments as fees or charges for use of the 
     Federal lands from which the locatable minerals are produced; 
     and
       (XIII) the projected cost of developmental work in or about 
     the mine or upon a group of mines when operated as a unit.

       (C) For purposes of the annual depreciation charge under 
     paragraph (B)(ii)X)--
       (i) Any expenditure not otherwise described in this clause 
     which is not deductible in the year paid or incurred pursuant 
     to the Internal Revenue Code of 1986, and which is:

       (I) attributable to the direct acquisition of mining claims 
     purchased separately or as part of a group of assets, or
       (II) attributable to the indirect acquisition of mining 
     property or mining claims by reason of being a portion of the 
     consideration for an interest in a corporation, partnership 
     or trust (in connection with an ownership change of such 
     entity determined under the principles of Section 382(g) of 
     the Internal Revenue Code of 1986) allocable to such property 
     or claims of such entity, shall be allowable as a 
     depreciation deduction to the purchaser in the case of an 
     expenditure described in (I) or to the acquired corporation, 
     partnership or trust in the case of an expenditure described 
     in (II), ratably over a period based on the probable life of 
     the property, beginning with the taxable year in which such 
     expenditure was made.

       (ii) The deduction allowed for costs attributable to mining 
     property or claims is available only at the election of the 
     purchaser in the case of expenditures described in (i)(I), or 
     at the election of both the purchaser and acquired 
     corporation, partnership or trust in the case of expenditures 
     described in (i)(II), and is in lieu of any other deduction 
     otherwise allowable under this section with respect to such 
     expenditure.
       (D) If the Costs of Production for the operation exceed the 
     Projected Revenues, the Secretary shall waive in full the 
     royalty obligation. If the Projected Revenues exceed the 
     Costs of Production by less than the full royalty obligation 
     under subsection (a), the Secretary shall reduce the royalty 
     rate to a level allowing the recovery of the Costs of 
     Production, including invested capital, over the remaining 
     reasonable life of the operation.
       (10) Split estates.--For circumstances where a claim, group 
     of claims or patent is subject to this section but does not 
     comprise the entirety of a mine, the Annual Revenues and 
     Costs of Production shall be allocated for royalty purposes 
     in proportion to the value of production recovered from the 
     claim, group of claims or patent.
       (11) Judicial review.--A determination by the Secretary 
     under paragraph (9) shall be judicially reviewable under 
     section 702 of title 5, United States Code, only for actions 
     filed within 180 days of the Secretary's determination.
       (12) Annual filing of data.--If a reduction in royalty is 
     provided under this paragraph, the royalty payor shall file 
     cost and revenue data with the Secretary annually during the 
     period of royalty waiver or reduction.
       (b) Duties of Claim Holders, Operators and Transporters.--A 
     person that is required to make a royalty payment under this 
     section shall make quarterly estimates of the royalty 
     obligation and shall make the payment to the United States 
     annually in such manner as the Secretary of the Interior may 
     by rule prescribe. The owner or co-owners of a mining claim 
     shall be liable for royalty on locatable minerals produced 
     and sold during the period of ownership to the extent of the 
     interest in such claim owned. As used in this subsection, 
     ``owner'' or ``co-owner'' shall mean the person or persons 
     owning the right to mine locatable minerals from such claim 
     and receiving the revenues of sale. Any person who makes any 
     royalty payment attributable to the interest of the owner or 
     co-owners liable therefor shall not become liable to the 
     United States for such royalty as a result.
       (c) Manner of Payment.--
       (1) Each royalty payment or adjustment shall be accompanied 
     by a statement containing:
       (A) the name and Bureau of Land Management serial number of 
     the mining claim or claims from which ores, concentrates, 
     solutions or beneficiated products of locatable minerals 
     subject to the royalty required in this section were produced 
     and sold for the period covered by such payment or 
     adjustment;
       (B) the estimated (or actual, if determined) quantity of 
     such ore, concentrates, solutions or beneficiated or 
     fabricated products produced and sold from such mining claim 
     or claims for such period;
       (C) the estimated (or actual, if determined) Gross Yield 
     from the production and sale of such ore, concentrates, 
     solutions or beneficiated products for such period;
       (D) the estimated (or actual, if determined) Net Smelter 
     Return from the production and sale of such ores, 
     concentrates, solutions or beneficiated products for such 
     period, including an itemization of the applicable deductions 
     described in paragraph 20(a)(4)(A); and
       (E) the estimated (or actual, if determined) royalty due to 
     the United States, or adjustment due to the United States or 
     such owner or co-owners, for such period.
       (2) In lieu of receiving a refund under subsection (e), the 
     owner or co-owners may elect to apply any adjustment due to 
     such owner or co-owners as an offset against royalties due 
     from such owner or co-owners to the United States under this 
     Subtitle, regardless of whether such royalties are due for 
     production and sale from the same mining claim or claims.
       (d) Recordkeeping and Reporting Requirements.--
       (1) An owner, operator, or other person directly involved 
     in the conduct of mineral activities, transportation, 
     purchase, or sale of locatable minerals, concentrates, or 
     products derived therefrom, subject to the royalty required 
     in this section, through the point of royalty computation, 
     shall establish and maintain any records, make any reports, 
     and provide any information that the Secretary may reasonably 
     require for the purposes of implementing this section or 
     determining compliance with regulations or orders under this 
     section. Upon the request of the Secretary when conducting an 
     audit or investigation pursuant to subsection (f), the 
     appropriate records, reports, or information which may be 
     required by this section shall be made available for 
     inspection and duplication by the Secretary.
       (2) Records required by the Secretary under this section 
     shall be maintained for three years after the records are 
     generated unless the Secretary notifies the record holder 
     that he or she has initiated an audit or investigation 
     specifically identifying and involving such records and that 
     such records must be maintained for a longer period. When an 
     audit or investigation is under way, such records shall be 
     maintained until the earlier of the date that the Secretary 
     releases the record holder of the obligation to maintain such 
     records or the date that the limitations period applicable to 
     such audit or investigation under subsection (f) expires.
       (e) Interest Assessments.--In any case in which royalty 
     payments are not received by the Secretary on the date that 
     such payments are due, or when such payments are less than 
     the amount due, the Secretary shall charge interest on such 
     late payments computed at the rate published by the 
     Department of the Treasury as the ``Treasury Current Value of 
     Funds Rate.'' In the case of an underpayment or partial 
     payment, interest shall be computed and charged only on the 
     amount of the deficiency and not on the total amount, and 
     only for the number of days such payment is late. No other 
     late payment or underpayment charge or penalty shall be 
     charged. In any case in which royalty payments are made in 
     excess of the amount due, or amounts are held by the 
     Secretary pending the outcome of any appeal in which the 
     Secretary does not prevail, the Secretary shall promptly 
     refund such overpayments or pay such amounts to the person or 
     persons entitled thereto, together with interest thereon for 
     the number of days such overpayment or amounts were held by 
     the Secretary, with the addition of interest charged against 
     the United States computed at the rate published by the 
     Department of the Treasury as the ``Treasury Current Value of 
     Funds Rate''.
       (f) Audits, Payment Demands and Limitations.--
       (1) The Secretary may conduct, after notice, any audit 
     reasonably necessary and appropriate to verify the payments 
     required under this section.
       (2) Any billing or demand letter for royalty due on 
     locatable minerals produced and sold from any mining claim 
     subject to royalty required by this section must be sent or 
     issued not later than three years after the date such royalty 
     was due and must specifically identify the production 
     involved, the royalty allegedly due and the basis for the 
     claim. No action, proceeding or claim for royalty due on 
     locatable minerals produced and sold, or relating to such 
     production, may be brought by the United States, including 
     but not limited to any claim for additional royalties or 
     claim of the right to offset the amount of such additional 
     royalties against amounts owed to any person by the United 
     States, unless judicial suit or administrative 

[[Page S 16197]]
     proceedings are commenced to recover specific amounts claimed to be due 
     prior to the expiration of three years from the date such 
     royalty is alleged to have been due.
       (g) Penalties.--Any person who withholds payment of 
     royalties under this section after a final, nonappealable 
     determination of liability may be liable for civil penalties 
     of up to $5,000 per day that payment is withheld after 
     becoming due.
       (h) Disbursement of Revenues.--The receipts from royalties 
     collected under this section shall be disbursed as follows:
       (1) One-half of such receipts shall be paid into the 
     Treasury of the United States and deposited as miscellaneous 
     receipts; and
       (2) One-half of such receipts shall be paid into a State 
     Fund or the Federal Fund in accordance with section 5706; 
     until termination as provided in section 5710.

     SEC. 5706. ABANDONED LOCATABLE MINERALS MINE RECLAMATION 
                   FUND.

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

     SEC. 5707. ALLOCATION AND PAYMENTS.

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

     SEC. 5708. ELIGIBLE AREA.

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

     SEC. 5709. USES AND OBJECTIVES OF FUNDS.

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

     SEC. 5710. SUNSET PROVISIONS.

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

     SEC. 5711. EFFECT ON THE GENERAL MINING LAWS.

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

     SEC. 5712. SEVERABILITY.

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

     SEC. 5800. AIRCRAFT SERVICES.

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

          PART I--BONNEVILLE POWER ADMINISTRATION REFINANCING

     SEC. 5900. DEFINITIONS.

       For the purposes of this subtitle--
       (1) ``Administrator'' means the Administrator of the 
     Bonneville Power Administration;
       (2) ``capital investment'' means a capitalized cost funded 
     by Federal appropriations that--
       (A) is for a project, facility, or separable unit or 
     feature of a project or facility;
       (B) is a cost for which the Administrator is required by 
     law to establish rates to repay to the United States Treasury 
     through the sale of electric power, transmission, or other 
     services;
       (C) excludes a Federal irrigation investment; and
       (D) excludes an investment financed by the current revenues 
     of the Administrator or by bonds issued and sold, or 
     authorized to be issued and sold, by the Administrator under 
     section 13 of the Federal Columbia River Transmission System 
     Act (16 U.S.C.838(k));
       (3) ``new capital investment'' means a capital investment 
     for a project, facility, or separable unit or feature of a 
     project, facility, or separable unit or feature of a project 
     or facility, placed in service after September 30, 1995;
       (4) ``old capital investment'' means a capital investment 
     whose capitalized cost--
       (A) was incurred, but not repaid, before October 1, 1995, 
     and

[[Page S 16198]]

       (B) was for a project, facility, or separable unit or 
     feature of a project or facility, placed in service before 
     October 1, 1995;
       (5) ``repayment date'' means the end of the period within 
     which the Administrator's rates are to assure the repayment 
     of the principal amount of a capital investment; and
       (6) ``Treasury rate'' means--
       (A) for an old capital investment, a rate determined by the 
     Secretary of the Treasury, taking into consideration 
     prevailing market yields, during the month preceding October 
     1, 1995, on outstanding interest-bearing obligations of the 
     United States with periods to maturity comparable to the 
     period between October 1, 1995, and the repayment date for 
     the old capital investment; and
       (B) for a new capital investment, a rate determined by the 
     Secretary of the Treasury, taking into consideration 
     prevailing market yields, during the month preceding the 
     beginning of the fiscal year in which the related project, 
     facility, or separable unit or feature is placed in service, 
     on outstanding interest-bearing obligations of the United 
     States with periods to maturity comparable to the period 
     between the beginning of the fiscal year and the repayment 
     date for the new capital investment.

     SEC. 5901. NEW PRINCIPAL AMOUNTS.

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

     SEC. 5902. INTEREST RATE FOR NEW PRINCIPAL AMOUNTS.

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

     SEC. 5903. REPAYMENT DATES.

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

     SEC. 5904. PREPAYMENT LIMITATIONS.

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

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

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

     SEC. 5906. INTEREST RATES FOR NEW CAPITAL INVESTMENTS.

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

     SEC. 5907. APPROPRIATED AMOUNTS.

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

     ``SEC. 6. APPROPRIATED AMOUNTS.

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

     SEC. 5908. CONTRACT PROVISIONS.

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

     SEC. 5909. SAVINGS PROVISIONS.

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

          PART II--ALASKA POWER MARKETING ADMINISTRATION SALE

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

       (a) Sale of Snettisham.--The Secretary of Energy is 
     authorized and directed to sell the Snettisham Hydroelectric 
     Project (referred to in this part as ``Snettisham'') to the 
     State of Alaska in accordance with the terms of this part and 
     the February 10, 1989, Snettisham Purchase 

[[Page S 16199]]
     Agreement, as amended, between the Alaska Power Administration of the 
     United States Department of Energy and the Alaska Power 
     Authority and the Authority's successors.
       (b) Sale of Eklutna.--The Secretary of Energy is authorized 
     and directed to sell the Eklutna Hydroelectric Project 
     (referred to in this part as ``Eklutna'') to the Municipality 
     of Anchorage doing business as Municipal Light and Power, the 
     Chugach Electric Association, Inc., and the Matanuska 
     Electric Association, Inc. (referred to in this part as 
     ``Eklutna Purchasers''), in accordance with the terms of this 
     part and the August 2, 1989, Eklutna Purchase Agreement, as 
     amended, between the Alaska Power Administration of the 
     United States Department of Energy and the Eklutna 
     Purchasers.
       (c) Federal Sale Assistance.--The heads of other Federal 
     departments and agencies, including the Secretary of the 
     Interior, shall assist the Secretary of Energy in 
     implementing the sales authorized and directed by this part.
       (d) Disposition of Proceeds.--Proceeds from the sales 
     required by this part shall be deposited in the Treasury of 
     the United States to the credit of miscellaneous receipts.
       (e) Preparation of Eklutna and Snettisham for Sale.--The 
     Secretary of Energy is authorized and directed to use such 
     funds from the sale of electric power by the Alaska Power 
     Administration as may be necessary to prepare, survey and 
     acquire Eklutna and Snettisham assets for sale and 
     conveyance. Such preparations and acquisitions shall provide 
     sufficient title to ensure the beneficial use, enjoyment, and 
     occupancy by the purchaser.

     SEC. 5911. EXEMPTION AND OTHER PROVISIONS.

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

     SEC. 5920. RADIO AND TELEVISION COMMUNICATION SITE FEES.

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

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

       Section 8(a) of the Outer Continental Shelf Lands Act, (43 
     U.S.C. 1337(a)(3)), is amended by 

[[Page S 16200]]
     striking paragraph (3) in its entirety and inserting the following:
       ``(3)(A) The Secretary may through primary, secondary, or 
     tertiary recovery means, reduce or eliminate any royalty or 
     net profit share set forth in the lease(s). With the lessee's 
     consent, the Secretary may make other modifications to the 
     royalty or net profit share terms of the lease in order to--
       ``(i) promote development or increased production on 
     producing or non-producing leases; or
       ``(ii) encourage production of marginal resources on 
     producing or non-producing leases;
       ``(B)(i) Notwithstanding any other provision of this Act, 
     with respect to any lease or unit in existence on the date of 
     enactment of the Outer Continental Shelf Deep Water Royalty 
     Relief Act meeting the requirements of this subparagraph, no 
     royalty payments shall be due on new production, as defined 
     in clause (iv) of this subparagraph, from any lease or unit 
     located in water depths of 200 meters or greater in the 
     Western and Central Planning Areas of the Gulf of Mexico, 
     including that portion of the Eastern Planning Area of the 
     Gulf of Mexico encompassing whole lease blocks lying west of 
     87 degrees, 30 minutes West longitude, until such volume of 
     production as determined pursuant to clause (ii) has been 
     produced by the lessee.
       ``(ii) Upon submission of a complete application by the 
     lessee, the Secretary shall determine within 180 days of such 
     application whether new production from such lease or unit 
     would be economic in the absence of the relief from the 
     requirement to pay royalties provided for by clause (i) of 
     this subparagraph. In making such determination, the 
     Secretary shall consider the increased technological and 
     financial risk of deep water development and all costs 
     associated with exploring, developing, and producing from the 
     lease. The lessee shall provide information required for a 
     complete application to the Secretary prior to such 
     determination. The Secretary shall clearly define the 
     information required for a complete application under this 
     section. Such application may be made on the basis of an 
     individual lease or unit. If the Secretary determines that 
     such new production would be economic in the absence of the 
     relief from the requirement to pay royalties provided for by 
     clause (i) of this subparagraph, the provisions of clause (i) 
     shall not apply to such production. If the Secretary 
     determines that such new production would not be economic in 
     the absence of the relief from the requirement to pay 
     royalties provided for by clause (i), the Secretary must 
     determine the volume of production from the lease or unit on 
     which no royalties would be due in order to make such new 
     production economically viable; except that for new 
     production as defined in clause (iv)(aa), in no case will 
     that volume be less than 17.5 million barrels of oil 
     equivalent in water depths of 200 to 400 meters, 52.5 million 
     barrels of oil equivalent in 400-800 meters of water, and 
     87.5 million barrels of oil equivalent in water depths 
     greater than 800 meters. Redetermination of the applicability 
     of clause (i) shall be undertaken by the Secretary when 
     requested by the lessee prior to the commencement of the new 
     production and upon significant change in the factors upon 
     which the original determination was made. The Secretary 
     shall make such redetermination within 120 days of submission 
     of a complete application. The Secretary may extend the time 
     period for making any determination or redetermination under 
     this clause for 30 days, or longer if agreed to by the 
     applicant, if circumstances so warrant. The lessee shall be 
     notified in writing of any determination or redetermination 
     and the reasons for and assumptions used for such 
     determination. Any determination or redetermination under 
     this clause shall be a final agency action. The Secretary's 
     determination or redetermination shall be judicially 
     reviewable under section 10 (a) of the Administrative 
     Procedures Act, 5 U.S.C. Sec. 702, only for actions filed 
     within 30 days of the Secretary's determination or 
     redetermination.
       ``(iii) In the event that the Secretary fails to make the 
     determination or redetermination called for in clause (ii) 
     upon application by the lessee within the time period, 
     together with any extension thereof, provided for by clause 
     (ii), no royalty payments shall be due on new production as 
     follows:
       ``(I) For new production, as defined in clause (iv)(aa) of 
     this subparagraph, no royalty shall be due on such production 
     according to the schedule of minimum volumes specified in 
     clause (ii) of this subparagraph.
       ``(II) For new production, as defined in clause (iv)(bb) of 
     this subparagraph, no royalty shall be due on such production 
     for one year following the start of such production.
       ``(iv) For purposes of this subparagraph, the term `new 
     production' is--
       ``(I) any production from a lease from which no royalties 
     are due on production, other than test production, prior to 
     the date of enactment of the Outer Continental Shelf Deep 
     Water Royalty Relief Act; or
       ``(II) any production resulting from lease development 
     activities pursuant to a Development Operations Coordination 
     Document, or supplement thereto that would expand production 
     significantly beyond the level anticipated in the Development 
     Operations Coordination Document, approved by the Secretary 
     after the date of enactment of the Outer Continental Shelf 
     Deep Water Royalty Relief Act.
       ``(v) During the production of volumes determined pursuant 
     to clause (ii) or (iii) of this subparagraph, in any year 
     during which the arithmetic average of the closing prices on 
     the New York Mercantile Exchange for Light Sweet crude oil 
     exceeds $28.00 per barrel, any production of oil will be 
     subject to royalties at the lease stipulated royalty rate. 
     Any production subject to this clause shall be counted toward 
     the production volume determined pursuant to clause (ii) or 
     (iii). Estimated royalty payments will be made if such 
     average of the closing prices for the previous year exceeds 
     $28.00. After the end of the calendar year, when the new 
     average price can be calculated, lessees will pay any 
     royalties due, with interest but without penalty, or can 
     apply for a refund, with interest, of any overpayment.
       ``(vi) During the production of volumes determined pursuant 
     to clause (ii) or (iii) of this subparagraph, in any year 
     during which the arithmetic average of the closing prices on 
     the New York Mercantile Exchange for natural gas exceeds 
     $3.50 per million British thermal units, any production of 
     natural gas will be subject to royalties at the lease 
     stipulated royalty rate. Any production subject to this 
     clause shall be counted toward the production volume 
     determined pursuant to clauses (ii) or (iii). Estimated 
     royalty payments will be made if such average of the closing 
     prices for the previous year exceeds $3.50. After the end of 
     the calendar year, when the new average price can be 
     calculated, lessees will pay any royalties due, with interest 
     but without penalty, or can apply for a refund, with 
     interest, of any overpayment.
       ``(vii) The prices referred to in clauses (v) and (vi) of 
     this subparagraph shall be changed during any calendar year 
     after 1994 by the percentage, if any, by which the implicit 
     price deflator for the gross domestic product changed during 
     the preceding calendar year.''.

     SEC. 5931. NEW LEASES.

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

     SEC. 5932. REGULATIONS.

       The Secretary shall promulgate such rules and regulations 
     as are necessary to implement the provisions of this Act 
     within 180 days after the enactment of this Act.
          TITLE VI--COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

     SEC. 6001. SHORT TITLE; TABLE OF CONTENTS.

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

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

     SEC. 6002. HIGHWAY DEMONSTRATION PROJECTS.

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


[[Page S 16201]]
     Transportation Efficiency Act of 1991 (Public Law 102-240; 105 Stat. 
     1921).

     SEC. 6003. TECHNICAL CORRECTION CONCERNING MINIMUM 
                   ALLOCATION.

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

     as a result of the termination of the Interstate construction 
     program; and
       (B) as a result of the reduced number of States that may 
     require an apportionment under section 157(a)(4) of the 
     title, and the decrease in the amount of funds some States 
     will require under section 157(a)(4) of the title, the amount 
     apportioned under section 157(a)(4) of the title shall be 
     reduced from the amount apportioned for fiscal year 1995 by 
     60.4 percent.
       (2) Effect on certain calculations.--The correction made by 
     paragraph (1) shall not be taken into account in making the 
     calculations required under sections 1003(c), 1013(c), and 
     1015 of the Intermodal Surface Transportation Efficiency Act 
     of 1991 (Public Law 102-240; 105 Stat. 1921, 1940, and 1943).

     SEC. 6004. NUCLEAR REGULATORY COMMISSION ANNUAL CHARGES.

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

     SEC. 6005. RADIOLOGICAL EMERGENCY PREPAREDNESS FEES.

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

     SEC. 7000. REFERENCES; TABLE OF CONTENTS.

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

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

Sec. 7000. References; table of contents.

                          Subtitle A--Medicare

                    Chapter 1--Medicare Choice Plans


           SUBCHAPTER A--ESTABLISHMENT OF MEDICARE CHOICE PLANS

Sec. 7001. Medicare choice plans.
Sec. 7002. Treatment of 1876 organizations.
Sec. 7003. Special rule for calculation of payment rates for 1996.


      SUBCHAPTER B--TAX PROVISIONS RELATING TO MEDICARE CHOICE PLANS

Sec. 7006. Medicare Choice Accounts.
Sec. 7007. Certain rebates included in gross income.

                Chapter 2--Provisions Relating to Part A


           SUBCHAPTER A--GENERAL PROVISIONS RELATING TO PART A

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


           SUBCHAPTER B--PAYMENTS TO SKILLED NURSING FACILITIES

                   Part I--Prospective Payment System

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

                    Part II--Interim Payment System

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

                Chapter 3--Provisions Relating to Part B

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

            Chapter 4--Provisions Relating to Parts A and B


        SUBCHAPTER A--GENERAL PROVISIONS RELATING TO PARTS A AND B

Sec. 7055. Secondary payor provisions.
Sec. 7056. Treatment of assisted suicide.
Sec. 7057. Administrative provisions.
Sec. 7058. Sense of Senate regarding coverage for treatment of breast 
              and prostate cancer under medicare.


             SUBCHAPTER B--PAYMENTS FOR HOME HEALTH SERVICES

Sec. 7061. Payment for home health services.
Sec. 7062. Maintaining savings resulting from temporary freeze on 
              payment increases for home health services.
Sec. 7063. Extension of waiver of presumption of lack of knowledge of 
              exclusion from coverage for home health agencies.

                         Chapter 5--Rural Areas

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

           Chapter 6--Health Care Fraud and Abuse Prevention

Sec. 7100. Short title.


              SUBCHAPTER A--FRAUD AND ABUSE CONTROL PROGRAM

Sec. 7101. Fraud and abuse control program.
Sec. 7102. Application of certain health anti-fraud and abuse sanctions 
              to fraud and abuse against Federal health programs.
Sec. 7103. Health care fraud and abuse guidance.


     SUBCHAPTER B--REVISIONS TO CURRENT SANCTIONS FOR FRAUD AND ABUSE

Sec. 7111. Mandatory exclusion from participation in medicare and State 
              health care programs.
Sec. 7112. Establishment of minimum period of exclusion for certain 
              individuals and entities subject to permissive exclusion 
              from medicare and State health care programs.
Sec. 7113. Permissive exclusion of individuals with ownership or 
              control interest in sanctioned entities.
Sec. 7114. Sanctions against practitioners and persons for failure to 
              comply with statutory obligations.
Sec. 7115. Intermediate sanctions for medicare health maintenance 
              organizations.
Sec. 7116. Clarification of and additions to exceptions to anti-
              kickback penalties.
Sec. 7117. Effective date.

[[Page S 16202]]



        SUBCHAPTER C--ADMINISTRATIVE AND MISCELLANEOUS PROVISIONS

Sec. 7121. Establishment of the health care fraud and abuse data 
              collection program.
Sec. 7122. Elimination of reasonable cost reimbursement for certain 
              legal fees.


                  SUBCHAPTER D--CIVIL MONETARY PENALTIES

Sec. 7131. Social Security Act civil monetary penalties.


                 SUBCHAPTER E--AMENDMENTS TO CRIMINAL LAW

Sec. 7141. Health care fraud.
Sec. 7142. Forfeitures for Federal health care offenses.
Sec. 7143. Injunctive relief relating to Federal health care offenses.
Sec. 7144. Grand jury disclosure.
Sec. 7145. False statements.
Sec. 7146. Obstruction of criminal investigations of Federal health 
              care offenses.
Sec. 7147. Theft or embezzlement.
Sec. 7148. Laundering of monetary instruments.
Sec. 7149. Authorized investigative demand procedures.


           SUBCHAPTER F--STATE HEALTH CARE FRAUD CONTROL UNITS

Sec. 7151. State health care fraud control units.

          Chapter 7--Other Provisions for Trust Fund Solvency

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

           Subtitle B--Transformation of the Medicaid Program

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

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

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

                Subtitle D--Supplemental Security Income

                  Chapter 1--Eligibility Restrictions

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

               Chapter 2--Benefits for Disabled Children

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

   Chapter 3--Studies Regarding Supplemental Security Income Program

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

       Chapter 4--National Commission on the Future of Disability

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

                       Subtitle E--Child Support

     Chapter 1--Eligibility for Services; Distribution of Payments

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

                  Chapter 2--Locate and Case Tracking

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

          Chapter 3--Streamlining and Uniformity of Procedures

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

                   Chapter 4--Paternity Establishment

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

             Chapter 5--Program Administration and Funding

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

      Chapter 6--Establishment and Modification of Support Orders

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

                Chapter 7--Enforcement of Support Orders

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

                       Chapter 8--Medical Support

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

Chapter 9--Enhancing Responsibility and Opportunity for Nonresidential 
                                Parents

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

                    Chapter 10--Effect of Enactment

Sec. 7391. Effective dates.

                        Subtitle F--Noncitizens

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

[[Page S 16203]]


      Subtitle G--Additional Provisions Relating To Welfare Reform

         Chapter 1--Reductions in Federal Government Positions

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

              Chapter 2--Block Grant for Social Services.

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

          Chapter 3--Foster Care Maintenance Payments Program

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

                  Chapter 4--Miscellaneous Provisions

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

           Subtitle H--Reform of the Earned Income Tax Credit

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

               Subtitle I--Increase in Public Debt Limit

Sec. 7471. Increase in public debt limit.
                          Subtitle A--Medicare

                    CHAPTER 1--MEDICARE CHOICE PLANS

          Subchapter A--Establishment of Medicare Choice Plans

     SEC. 7001. MEDICARE CHOICE PLANS.

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

                    ``PART D--MEDICARE CHOICE PLANS


                         ``SUBPART 1--DEFINITIONS

``Sec. 1895A. Definitions.


   ``SUBPART 2--ENTITLEMENT OF MEDICARE CHOICE ELIGIBLE INDIVIDUALS TO 
                          HEALTH CARE CHOICES

``Sec. 1895B. Entitlement to medicare choices.
``Sec. 1895C. Enrollment procedures.
``Sec. 1895D. Effect of enrollment.


              ``SUBPART 3--MEDICARE CHOICE PLAN REQUIREMENTS

``Sec. 1895G. Availability and enrollment.
``Sec. 1895H. Benefits provided to individuals.
``Sec. 1895I. Licensing and financial requirements.
``Sec. 1895J. Health plan standards.


    ``SUBPART 4--DETERMINATION OF MEDICARE PAYMENT AMOUNTS AND REBATES

``Sec. 1895M. Medicare payment amounts.
``Sec. 1895N. Premiums and rebates.
``Sec. 1895O. Payments to plan sponsors.


      ``SUBPART 5--CONTRACTUAL AUTHORITY; TEMPORARY CERTIFICATION; 
                              REGULATIONS

``Sec. 1895P. General permission to contract.
``Sec. 1895Q. Renewal and termination of contract.
``Sec. 1895R. Temporary certification process for coordinated care 
              plans.
``Sec. 1895S. Regulations.

                        ``Subpart 1--Definitions

     ``SEC. 1895A. DEFINITIONS.

       ``(a) Medicare Choice Plan.--In this part--
       ``(1) In general.--The term `medicare choice plan' means an 
     eligible health plan with respect to which there is a 
     contract in effect under this part to provide health benefits 
     coverage to medicare choice eligible individuals.
       ``(2) Medicare choice plan sponsor.--The terms `medicare 
     choice plan sponsor' and `plan sponsor' mean a public or 
     private entity which establishes or maintains a medicare 
     choice plan.
       ``(b) Terms Relating to Health Plans.--In this part:
       ``(1) Eligible health plan.--
       ``(A) In general.--The term `eligible health plan' means a 
     policy, contract, or plan which is capable of providing 
     health benefits coverage of items and services provided under 
     the traditional medicare program to medicare choice eligible 
     individuals.
       ``(B) Types of insurance.--The term `eligible health plan' 
     shall include any of the following types of plans of health 
     insurance:
       ``(i) Indemnity or fee-for-service plans.--Private 
     indemnity plans that reimburse hospitals, physicians, and 
     other providers on the basis of a privately determined fee 
     schedule.
       ``(ii) Coordinated care plans.--Private managed or 
     coordinated care plans which provide health care services 
     through an integrated network of providers, including--

       ``(I) qualified health maintenance organizations as defined 
     in section 1310(d) of the Public Health Service Act; and
       ``(II) preferred provider organization plans, point of 
     service plans, provider-sponsored network plans, or other 
     coordinated care plans.

       ``(iii) Other health care plans.--Any other private plan 
     for the delivery of health care items and services that is 
     not described in clause (i), or (ii).
       ``(2) Union or association plan.--
       ``(A) In general.--The term `union or association plan' 
     means an eligible health plan with a union sponsor, a Taft-
     Hartley sponsor, or a qualified association sponsor that--
       ``(i) is organized for purposes other than to market a 
     health plan;
       ``(ii) may not condition its membership on health status, 
     health claims experience, receipt of health care, medical 
     history, or lack of evidence of insurability of a potential 
     member;
       ``(iii) may not exclude a member or spouse of a member from 
     health plan coverage based on factors described in clause 
     (ii);
       ``(iv) is a permanent entity which receives a substantial 
     majority of its financial support from active members; and
       ``(v) may not be owned or controlled by an insurance 
     company.
       ``(B) Union sponsor.--The term `union sponsor' means an 
     employee organization that establishes or maintains an 
     eligible health plan other than pursuant to a collective 
     bargaining agreement.
       ``(C) Taft-hartley sponsor.--The term `Taft-Hartley 
     sponsor' means, with respect to a group health plan 
     established or maintained by 2 or more employees or jointly 
     by 1 or more employees and 1 or more employee organizations, 
     the association, committee, joint board of trustees, or other 
     similar group of representatives of parties who establish or 
     maintain the plan.
       ``(D) Qualified association sponsor.--The term `qualified 
     association sponsor' means an association, religious 
     fraternal organization, or other organization (which may be a 
     trade, industry, or professional association, a chamber of 
     commerce, or a public entity association) which establishes 
     or maintains an eligible health plan.
       ``(E) Terms.--In this paragraph, the terms `employee', 
     `employee organization', and `group health plan' have the 
     meanings given such terms for purposes of part 6 of subtitle 
     B of title I of the Employee Retirement Income Security Act 
     of 1974.
       ``(c) Other Definitions.--In this part:
       ``(1) Areas.--
       ``(A) Medicare payment area.--
       ``(i) In general.--Except as provided in clause (ii), the 
     term `medicare payment area' means--

       ``(I) a metropolitan statistical area (whether or not such 
     area is in a single State) or in the case of a consolidated 
     metropolitan statistical area, each primary metropolitan 
     statistical area within the consolidated area; or
       ``(II) one area within each State composed of all areas 
     that do not fall within a metropolitan statistical area.

       ``(ii) Geographic adjustment.--Upon request of a State, the 
     Secretary may make a geographic adjustment to a medicare 
     payment area otherwise determined under clause (i).
       ``(iii) Areas.--In this subparagraph, the terms 
     `metropolitan statistical area', `consolidated metropolitan 
     statistical area', and `primary metropolitan statistical 
     area' mean any area designated as such by the Secretary of 
     Commerce.
       ``(B) Medicare service area.--
       ``(i) In general.--Except as provided in clause (ii), the 
     term `medicare service area' means a medicare payment area.
       ``(ii) Geographic adjustment.--The Secretary may designate 
     a medicare service area other than a medicare payment area 
     for a medicare choice plan if the Secretary determines that 
     such designation would not result in the enrollment of 
     enrollees in the plan in such area which are substantially 
     nonrepresentative, as determined in accordance with 
     regulations of the Secretary, of the population in the 
     medicare payment area.
       ``(2) Medicare choice eligible individual.--
       ``(A) In general.--The term `medicare choice eligible 
     individual' means an individual who is entitled to benefits 
     under part A and enrolled under part B.
       ``(B) Special rule for end-stage renal disease.--Such term 
     shall not include an individual medically determined to have 
     end-stage renal disease, except that an individual who 
     develops end-stage renal disease while enrolled in a medicare 
     choice plan may continue to be enrolled in that plan. Not 
     later than December 31, 1999, the Secretary shall submit to 
     the Congress recommendations on expanding the definition of 
     `medicare choice eligible individual' to include individuals 
     with end-stage renal disease and the enrollment of such 
     individuals in medicare choice plans.
       ``(3) Traditional medicare program.--The term `traditional 
     medicare program' means the program of benefits available to 
     individuals entitled to benefits under part A and enrolled 
     under part B of this title, other than enrollment in a 
     medicare choice plan under this part.

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

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

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

     ``SEC. 1895C. ENROLLMENT PROCEDURES.

       ``(a) In General.--Except as provided in section 
     1895G(a)(2), each medicare choice eligible individual shall 
     be entitled to enroll in any medicare choice plan with a 
     medicare service area including the geographic area in which 
     the individual resides during--
       ``(1) the annual open enrollment period described in 
     section 1895G(b)(1); or
       ``(2) any other enrollment period described in section 
     1895G(b)(2) applicable to the individual.

[[Page S 16204]]

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

     ``SEC. 1895D. EFFECT OF ENROLLMENT.

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

             ``Subpart 3--Medicare Choice Plan Requirements

     ``SEC. 1895G. AVAILABILITY AND ENROLLMENT.

       ``(a) General Availability.--
       ``(1) In general.--Except as provided in paragraph (2), 
     each medicare choice plan sponsor shall provide that each 
     medicare choice eligible individual shall be eligible to 
     enroll under this part in a medicare choice plan of the 
     sponsor during an enrollment period applicable to such 
     individual if the plan's medicare service area includes the 
     geographic area in which the individual resides.
       ``(2) Exceptions.--
       ``(A) Acceptance to limits of capacity.--Each medicare 
     choice plan sponsor shall provide that, at any time during 
     which enrollments are accepted, the plan sponsor will accept 
     medicare choice eligible individuals in the order in which 
     they apply for enrollment up to the limits of the medicare 
     choice plan's capacity (as determined by the Secretary) and 
     without restrictions, except as may be authorized in 
     regulations. The preceding sentence shall not apply if it 
     would result in the enrollment of enrollees substantially 
     nonrepresentative, as determined in accordance with 
     regulations of the Secretary, of the medicare population in 
     the medicare service area of the plan.
       ``(B) Union, taft-hartley, or association health plan.--A 
     medicare choice plan sponsor of a union or association plan 
     described in section 1895A(b)(2) shall limit its enrollment 
     to members of the sponsoring group who are entitled to all 
     rights and privileges of any other members of the group and 
     spouses of such members. An association plan which is 
     sponsored by a religious fraternal benefit society may limit 
     membership to individuals who share the same religious 
     convictions as the society.

[[Page S 16205]]

       ``(3) Point-of-service coverage.--If a Medicare Choice 
     sponsor offers a Medicare Choice plan that limits benefits to 
     items and services furnished only by providers in a network 
     of providers which have entered into a contract with the 
     sponsor, the sponsor must also offer at the time of 
     enrollment, a Medicare Choice plan that permits payment to be 
     made under the plan for covered items and services when 
     obtained out-of-network by the individual.
       ``(b) Enrollment Periods.--
       ``(1) Annual open enrollment period.--Each medicare choice 
     plan sponsor shall offer an annual open enrollment period in 
     November of each year for the enrollment and termination of 
     enrollment of medicare choice eligible individuals for the 
     next year.
       ``(2) Additional periods.--Each medicare choice plan 
     sponsor shall accept the enrollment of an individual in the 
     medicare choice plan--
       ``(A) during the initial medicare enrollment period 
     specified by section 1837 that applies to the individual 
     (effective as specified by section 1838), and
       ``(B) during the period specified by the Secretary 
     following any termination of the enrollment of the individual 
     in a medicare choice plan under subparagraph (B), (C), or (D) 
     of section 1895D(b)(3).
       ``(c) Plan Participation in Enrollment Process.--
       ``(1) In general.--In addition to any informational 
     materials distributed by the Secretary under section 
     1895C(c), a medicare choice plan sponsor may develop and 
     distribute marketing materials and engage in marketing 
     strategies in accordance with this subsection.
       ``(2) Plan marketing and advertising standards.--Any 
     marketing material developed or distributed by a medicare 
     choice plan sponsor and any marketing strategy developed by 
     such plan sponsor--
       ``(A) shall accurately describe differences between health 
     care coverage available under the plan and the health care 
     coverage available under the traditional medicare program,
       ``(B) shall be pursued in a manner not intended to violate 
     the nondiscrimination requirement of section 1895J(e)(1), and
       ``(C) shall not contain false or materially misleading 
     information, and shall conform to any other fair marketing 
     and advertising standards and requirements applicable to such 
     plans under law.
       ``(3) Prior approval by secretary.--
       ``(A) In general.--No marketing materials may be 
     distributed by a medicare choice plan sponsor to (or for the 
     use of) individuals eligible to enroll with the plan under 
     this part unless--
       ``(i) at least 45 days before its distribution, the plan 
     has submitted the material to the Secretary for review, and
       ``(ii) the Secretary has not disapproved the distribution 
     of the material.
       ``(B) Review.--The Secretary shall review all marketing 
     materials submitted under guidelines established by the 
     Secretary and shall disapprove such material if the Secretary 
     determines, in the Secretary's discretion, that the material 
     is materially inaccurate or misleading or otherwise makes a 
     material misrepresentation.
       ``(C) Deemed approval.--If marketing material has been 
     submitted under subparagraph (A) to the Secretary or a 
     regional office of the Department of Health and Human 
     Services and the Secretary or the office has not disapproved 
     the distribution of the materials under subparagraph (B) with 
     respect to an area, the Secretary is deemed not to have 
     disapproved such distribution in all areas covered by the 
     plan.

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

       ``(a) Basic Benefits.--Each medicare choice plan shall 
     provide to members enrolled under this part, through 
     providers and other persons that meet the applicable 
     requirements of this title and part A of title XI--
       ``(1) those items and services covered under parts A and B 
     of this title which are available to individuals residing in 
     the medicare service area of the plan, and
       ``(2) additional health services as the Secretary may 
     approve.

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

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

       ``(a) Licensing Requirement.--
       ``(1) In general.--A medicare choice plan sponsor shall be 
     organized and licensed under applicable State law as a risk-
     bearing entity eligible to offer health insurance or health 
     benefits coverage in each State in which the medicare choice 
     plan enrolls individuals under this part.
       ``(2) Exception for union, taft-hartley, or association 
     plans.--Paragraph (1) shall not apply to a union or 
     association plan described in section 1895A(b)(2) if such 
     plan is exempt from such requirements under the Employee 
     Retirement Income Security Act of 1974.
       ``(3) Coordinated care plans.--Paragraph (1) shall apply to 
     a coordinated care plan except to the extent provided in 
     section 1895R.
       ``(b) Assumption of Full Financial Risk.--A medicare choice 
     plan sponsor shall assume full financial risk on a 
     prospective basis for the provision of health care services 
     for which benefits are required to be provided under section 
     1895H(a)(1), except that such plan sponsor may--
       ``(1) obtain insurance or make other arrangements for the 
     cost of such health care services the aggregate value of 
     which exceeds $5,000 in any year,
       ``(2) obtain insurance or make other arrangements for the 
     cost of such health care services provided to its enrolled 
     members other than through the plan sponsor because medical 
     necessity required their provision before they could be 
     secured through the plan sponsor,
       ``(3) obtain insurance or make other arrangements for not 
     more than 90 percent of the amount by which its costs for any 
     of its fiscal years exceed 115 percent of its income for such 
     fiscal year, and
       ``(4) make arrangements with physicians or other health 
     professionals, health care institutions, or any combination 
     of such individuals or institutions to assume all or part of 
     the financial risk on a prospective basis for the provision 
     of basic health services by the physicians or other health 
     professionals or through the institutions.
       ``(c) Protection Against Risk of Insolvency.--
       ``(1) In general.--A medicare choice plan sponsor shall 
     make adequate provision against 

[[Page S 16206]]
     the risk of insolvency (including provision to prevent enrollees from 
     being held liable to any person or entity for the plan 
     sponsor's debts in the event of the plan sponsor's 
     insolvency)--
       ``(A) as determined by the Secretary, or
       ``(B) as determined by a State which the Secretary 
     determines requires solvency standards at least as stringent 
     as the standards under subparagraph (A).
       ``(2) Factors to consider.--In establishing standards under 
     paragraph (1) for coordinated care plans described in section 
     1895A(b)(1)(B)(ii), the Secretary shall consult with 
     interested parties and shall take into account--
       ``(A) a coordinated care plan sponsor's delivery system 
     assets and its ability to provide services directly to 
     enrollees through affiliated providers, and
       ``(B) alternative means of protecting against insolvency, 
     including reinsurance, unrestricted surplus, letters of 
     credit, guarantees, organizational insurance coverage, and 
     partnerships with other licensed entities.

     The Secretary is not required to include alternative means 
     described in subparagraph (B) in the standards but may 
     consider such alternatives where consistent with the 
     standards.
       ``(d) Payments to the Plan.--
       ``(1) Prepaid payment.--A medicare choice plan sponsor 
     shall be compensated (except for deductibles, coinsurance, 
     and copayments) for the provision of health care services to 
     individuals enrolled under this part by a payment by the 
     Secretary (and if applicable, the individual) which is paid 
     on a periodic basis without regard to the date the health 
     care services are provided and which is fixed without regard 
     to the frequency, extent, or kind of health care service 
     actually provided to a member.
       ``(2) Sole payments.--Subject to subsections (d)(2) and (e) 
     of section 1895H, if an individual is enrolled under this 
     part with a medicare choice plan, only the plan sponsor shall 
     be entitled to receive payments from the Secretary under this 
     title for services furnished to the individual.

     ``SEC. 1895J. HEALTH PLAN STANDARDS.

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

[[Page S 16207]]
     and services (other than emergency services) that a treating physician 
     or other emergency department personnel identify, pursuant to 
     a screening evaluation required under section 1867(a), as 
     being needed promptly by an individual enrolled with the 
     organization under this part.
       ``(2) Deemed approval.--A medicare choice plan sponsor is 
     deemed to have approved a request for such promptly needed 
     items and services if the physician or other emergency 
     department personnel involved--
       ``(A) has made a reasonable effort to contact such a person 
     for authorization to provide an appropriate referral for such 
     items and services or to provide the items and services to 
     the individual and access to the person has not been provided 
     (as required in paragraph (1)), or
       ``(B) has requested such authorization from the person and 
     the person has not denied the authorization within 30 minutes 
     after the time the request is made.
       ``(3) Effect of approval.--Approval of a request for a 
     prior authorization determination (including a deemed 
     approval under paragraph (2)) shall be treated as approval of 
     a request for any items and services that are required to 
     treat the medical condition identified pursuant to the 
     required screening evaluation.
       ``(4) Definition of emergency services.--In this 
     subsection, the term `emergency services' means--
       ``(A) health care items and services furnished in the 
     emergency department of a hospital (including a trauma 
     center), and
       ``(B) ancillary services routinely available to such 
     department,

     to the extent they are required to evaluate and treat an 
     emergency medical condition (as defined in paragraph (5)) 
     until the condition is stabilized.
       ``(5) Emergency medical condition.--In paragraph (4), the 
     term `emergency medical condition' means a medical condition, 
     the onset of which is sudden, that manifests itself by 
     symptoms of sufficient severity, including severe pain, that 
     a prudent layperson, who possesses an average knowledge of 
     health and medicine, could reasonably expect the absence of 
     immediate medical attention to result in--
       ``(A) placing the person's health in serious jeopardy,
       ``(B) serious impairment to bodily functions, or
       ``(C) serious dysfunction of any bodily organ or part.

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

     ``SEC. 1895M. MEDICARE PAYMENT AMOUNTS.

       ``(a) In General.--Not later than July 31 of each calendar 
     year (beginning with 1996), the Secretary shall determine, 
     and announce in a manner intended to provide notice to 
     interested parties, a standardized medicare payment amount 
     determined in accordance with this section for the following 
     calendar year for each medicare payment area.
       ``(b) Calculation of Standardized Medicare Payment 
     Amounts.--For purposes of this part--
       ``(1) 1997.--
       ``(A) In general.--The standardized medicare payment amount 
     for calendar year 1997 for a medicare payment area shall be 
     equal to the sum of--
       ``(i) 50 percent of the modified per capita rate for 
     calendar year 1996, and
       ``(ii) 50 percent of the adjusted average national per 
     capita rate for calendar year 1996,
     increased by the percentage increase in the gross domestic 
     product per capita for the 12-month period ending on June 30, 
     1996.
       ``(B) Modified per capita rate.--For purposes of 
     subparagraph (A)(i), the modified per capita rate for 
     calendar year 1996 for a medicare payment area shall be equal 
     to the per capita rate which would have been determined 
     (without regard to class) under section 1876(a)(1)(C) for 
     1995 if--
       ``(i) the applicable geographic area were the medicare 
     payment area, and
       ``(ii) 50 percent of any payments attributable to sections 
     1886(d)(5)(B), 1886(h), and 1886(d)(5)(F) (relating to IME, 
     GME, and DSH payments) were not taken into account,

     increased by the percentage increase which the Secretary 
     estimates will occur in medicare expenditures per capita for 
     1996 over medicare expenditures per capita for 1995.
       ``(C) Adjusted average national per capita rate.--
       ``(i) In general.--For purposes of subparagraph (A)(ii), 
     the adjusted average national per capita rate for a medicare 
     payment area for calendar year 1996 shall be equal to the 
     sum, for all types of medicare services (as classified by the 
     Secretary), of the product for each such type of--

       ``(I) the average national per capita rate for 1996,
       ``(II) the proportion of such rate for the year which is 
     attributable to such type of services, and
       ``(III) an index that reflects for 1996 and that type of 
     service the relative input price of such services in the 
     medicare payment area as compared to the national average 
     input price of such services.

     In applying subclause (III), the Secretary shall apply those 
     indices that are used in applying (or updating) medicare 
     payment rates for specific areas and localities.
       ``(ii) Average national per capita rate.--For purposes of 
     clause (i), the average national per capita rate for 1996 is 
     the weighted average of the modified per capita rates 
     determined under subparagraph (B) for all medicare payment 
     areas for 1996.
       ``(2) Succeeding years.--
       ``(A) In general.--The standardized medicare payment amount 
     for any calendar year after 1997 in a medicare payment area 
     shall be an amount equal to the standardized medicare payment 
     amount determined for such area for the preceding year, 
     increased by the percentage increase in the gross domestic 
     product per capita for the 12-month period ending on June 30 
     of the preceding calendar year.
       ``(B) Special rule for 1998.--In applying subparagraph (A) 
     for 1998, the standardized medicare payment amount for the 
     preceding calendar year shall be the amount which would have 
     been determined if clause (ii) of paragraph (1)(B) had been 
     applied by substituting `100 percent' for `50 percent'.
       ``(3) Special rule for individuals with end-stage renal 
     disease.--In computing the standardized medicare payment 
     amount for any medicare payment area, there shall not be 
     taken into account any individuals with end-stage renal 
     disease or any medicare expenditures for such individuals.
       ``(c) Adjustments for Payments to Plan Sponsors.--
       ``(1) In general.--The rate of payment under section 1895O 
     to a medicare choice plan sponsor with respect to any 
     individual enrolled in a medicare choice plan of the sponsor 
     shall be equal to the standardized medicare payment amount 
     for the medicare payment area, adjusted for such risk factors 
     as age, disability status, gender, institutional status, 
     health status, and such other factors as the Secretary 
     determines to be appropriate, so as to ensure actuarial 
     equivalence. The Secretary may add to, modify, or substitute 
     for such classes, if such changes will improve the 
     determination of actuarial equivalence.
       ``(2) Special rule for end-stage renal disease.--The 
     Secretary shall establish a separate rate of payment under 
     section 1895O to a medicare choice plan sponsor with respect 
     to any individual with end-stage renal disease enrolled in a 
     medicare choice plan of the sponsor. Such rate of payment 
     shall be actuarially equivalent to rates paid to other 
     enrollees in the medicare payment area (or such other area as 
     specified by the Secretary).
       ``(d) Geographical Adjustments.--
       ``(1) Annual adjustments.--
       ``(A) In general.--Unless Congress provides otherwise, 
     beginning with calendar years after 1999, the Secretary 
     shall, based on the analysis under paragraph (2) and to the 
     extent the Secretary determines necessary, make annual 
     differential adjustments to the standardized medicare payment 
     amounts determined under subsection (b)(2) for calendar years 
     2000 and 2001 in a manner designed to achieve appropriate and 
     equitable variation in standardized medicare payment amounts 
     across medicare payment areas by calendar year 2002. Such 
     variation shall be reasonably related to measurable 
     geographic differences in medicare payment areas.
       ``(B) Budget neutrality.--The Secretary shall adjust the 
     standardized medicare payment amounts under subsection (b) in 
     a manner that ensures that total payments under this section 
     for a year are not greater or less than total payments under 
     this section would have been but for the application of 
     subparagraph (A).
       ``(2) Analysis.--The Secretary, in consultation with 
     interested parties, shall conduct an analysis of the 
     measurable input cost differences across medicare payment 
     areas, including wage differentials, and other measurable 
     variables identified by the Secretary. The Secretary shall 
     also determine the degree to which medicare beneficiaries, 
     including beneficiaries in rural and underserved areas, have 
     access to more health plan choices by calendar year 2000 
     under this part, and the extent to which standardized 
     medicare payment amounts have limited or enhanced such 
     choices.
       ``(3) Report to congress.--Not later than March 1, 1999, 
     the Secretary shall submit a report to the appropriate 
     committees of Congress that includes the results of the 
     analysis described in paragraph (2) and the annual 
     differential adjustments that the Secretary intends to 
     implement under paragraph (1) for calendar years 2000 and 
     2001.
       ``(e) Notice in Changes to Benefit Assumptions.--
       ``(1) In general.--At least 45 days before making the 
     announcement under subsection (a) for a year (beginning with 
     the announcement for 1998), the Secretary shall provide for 
     notice to medicare choice plans of proposed changes to be 
     made in the methodology or benefit coverage assumptions from 
     the methodology and assumptions used in the previous 
     announcement and shall provide such plans an opportunity to 
     comment on such proposed changes.
       ``(2) Explanation.--In each announcement made under 
     subsection (a) for a year (beginning with the announcement 
     for 1998), the Secretary shall include an explanation of the 
     assumptions (including any benefit coverage assumptions) and 
     changes in methodology used in the announcement in sufficient 
     detail so that medicare choice plans can compute medicare 
     payment rates under subsection (d) for classes of individuals 
     located in each medicare payment area which is in whole or in 
     part within the medicare service area of such a plan.
       ``(f) Demonstration Project on Market-Based Reimbursement 
     and Competitive Pricing.--The Secretary shall establish 1 or 
     more demonstration projects to determine the standardized 
     medicare payment amounts described in subsection (b) through 
     competitive bidding by medicare choice plans in a medicare 
     payment area. Not later than December 31, 2001, the Secretary 
     shall submit a report to the Congress on the success of such 
     projects in determining standardized medicare payment amounts 
     that are reflective of market price.

     ``SEC. 1895N. PREMIUMS AND REBATES.

       ``(a) Submission and Charging of Premiums.--

[[Page S 16208]]

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

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

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

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

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

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

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

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

     the Secretary may provide, in addition to any other remedies 
     authorized by law, for any of the remedies described in 
     paragraph (2).
       ``(2) Remedies.--The remedies described in this paragraph 
     are--
       ``(A) civil money penalties of not more than $25,000 for 
     each determination under paragraph (1) or, with respect to a 
     determination under subparagraph (D) or (E)(i) of such 
     paragraph, of not more than $100,000 for each such 
     determination, plus, with respect to a determination 

[[Page S 16209]]
     under paragraph (1)(B), double the excess amount charged in violation 
     of such subparagraph (and the excess amount charged shall be 
     deducted from the penalty and returned to the individual 
     concerned), and plus, with respect to a determination under 
     paragraph (1)(D), $15,000 for each individual not enrolled as 
     a result of the practice involved,
       ``(B) suspension of enrollment of individuals under this 
     section after the date the Secretary notifies the plan 
     sponsor of a determination under paragraph (1) and until the 
     Secretary is satisfied that the basis for such determination 
     has been corrected and is not likely to recur, or
       ``(C) suspension of payment to the plan sponsor under this 
     section for individuals enrolled after the date the Secretary 
     notifies the plan sponsor of a determination under paragraph 
     (1) and until the Secretary is satisfied that the basis for 
     such determination has been corrected and is not likely to 
     recur.
       ``(3) Intermediate sanctions.--In the case of a medicare 
     choice plan sponsor for which the Secretary makes a 
     determination under subsection (b)(1) the basis of which is 
     not described in subparagraph (A) thereof, the Secretary may 
     apply the following intermediate sanctions:
       ``(A) Civil money penalties of not more than $25,000 for 
     each determination under subsection (b)(1) if the deficiency 
     that is the basis of the determination has directly adversely 
     affected (or has the substantial likelihood of adversely 
     affecting) an individual covered under the plan's contract.
       ``(B) Civil money penalties of not more than $10,000 for 
     each week beginning after the initiation of procedures by the 
     Secretary under subsection (b)(2) during which the deficiency 
     that is the basis of a determination under subsection (b)(1) 
     exists.
       ``(C) Suspension of enrollment of individuals under this 
     section after the date the Secretary notifies the plan 
     sponsor of a determination under subsection (b)(1) and until 
     the Secretary is satisfied that the deficiency that is the 
     basis for the determination has been corrected and is not 
     likely to recur.
       ``(4) Proceedings.--The provisions of section 1128A (other 
     than subsections (a) and (b)) shall apply to a civil money 
     penalty under paragraph (2)(A) or (3)(A) in the same manner 
     as they apply to a civil money penalty or proceeding under 
     section 1128A(a).

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

       ``(a) Federal Action on Certification.--
       ``(1) In general.--If--
       ``(A) a State fails to substantially complete action on a 
     licensing application of a coordinated care plan sponsor 
     within 90 days of receipt of the completed application, or
       ``(B) a State denies a licensing application and the 
     Secretary determines that the State's licensing standards or 
     review process create an unreasonable barrier to market 
     entry,

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

     shall be treated as meeting the Federal standards in effect 
     under this section for any contract year beginning before 
     January 1, 2000.
       ``(f) Partial Capitation Demonstration.--The Secretary 
     shall conduct a demonstration on alternative partial risk-
     sharing arrangements between the Secretary and health care 
     providers. The Secretary shall report to Congress no later 
     than December 31, 1998, on the administrative feasibility of 
     such partial capitation methods and the information necessary 
     to implement such arrangements.

     ``SEC. 1895S. REGULATIONS.

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

     SEC. 7002. TREATMENT OF 1876 ORGANIZATIONS.

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

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

       (a) In General.--Notwithstanding any other provision of 
     law, the per capita rate under section 1876 of the Social 
     Security Act for 1996 for any class for a geographic area 
     shall be equal to the sum of--
       (1) 75 percent of the updated per capita rate for such 
     class for such area, and
       (2) 25 percent of the weighted average of the updated per 
     capita rates for such class for all geographic areas, 
     adjusted in the same manner as under section 
     1895M(b)(1)(C)(i) of the Social Security Act (as added by 
     section 7001 of this Act) to reflect differences in input 
     prices in the geographic area as compared to the national 
     average input prices.

     In no event shall any average per capita rate in a geographic 
     area determined under the preceding sentence be less than 
     such rate determined under section 1876 of such Act for 1995.
       (b) Updated Per Capita Rates.--For purposes of subsection 
     (a), the updated per capita rate for any class is the per 
     capita rate of payment for 1995 determined under section 
     1876(a)(1)(C) of the Social Security Act for a county (or 
     equivalent area), increased by the 

[[Page S 16210]]
     percentage increase which the Secretary estimates will occur in 
     medicare expenditures per capita for 1996 over medicare 
     expenditures per capita for 1995.
       (c) Publication.--The Secretary shall publish the rates 
     determined under subsection (a) no later than 30 days after 
     the date of the enactment of this Act.

     Subchapter B--Tax Provisions Relating to Medicare Choice Plans

     SEC. 7006. MEDICARE CHOICE ACCOUNTS.

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

     ``SEC. 137. MEDICARE CHOICE ACCOUNTS.

       ``(a) Exclusion.--
       ``(1) In general.--Gross income shall not include any 
     payment to the medicare choice account of an individual by 
     the Secretary of Health and Human Services under section 
     1895N(b)(1) of the Social Security Act.
       ``(2) No constructive receipt.--No amount shall be included 
     in the gross income of an individual solely because the 
     individual may choose between--
       ``(A) the payment described in paragraph (1) or a rebate 
     under section 1895N(b) of the Social Security Act, or
       ``(B) the payment of the individual's premium for 
     supplemental benefits described in section 1895H(b) of such 
     Act or such a rebate.
       ``(b) Definitions.--For purposes of this section--
       ``(1) Medicare choice account.--The term `medicare choice 
     account' means a trust created or organized in the United 
     States exclusively for the purpose of paying qualified 
     medical expenses, but only if the written governing 
     instrument creating the trust meets the following 
     requirements:
       ``(A) Except in the case of a trustee-to-trustee transfer 
     described in subsection (d)(4), no contribution will be 
     accepted unless it is made by the Secretary of Health and 
     Human Services under section 1895N(b)(1) of the Social 
     Security Act.
       ``(B) The trustee is a bank (as defined in section 408(n)), 
     an insurance company (as defined in section 816), or another 
     person who demonstrates to the satisfaction of the Secretary 
     that the manner in which such person will administer the 
     trust will be consistent with the requirements of this 
     section.
       ``(C) No part of the trust assets will be invested in life 
     insurance contracts.
       ``(D) The assets of the trust will not be commingled with 
     other property except in a common trust fund or common 
     investment fund.
       ``(E) The interest of an individual in the balance in his 
     account is nonforfeitable.
       ``(F) Trustee-to-trustee transfers described in subsection 
     (d)(4) may be made to and from the trust.
       ``(2) Qualified medical expenses.--
       ``(A) In general.--The term `qualified medical expenses' 
     means, with respect to an account beneficiary, amounts paid 
     by such beneficiary--
       ``(i) for medical care (as defined in section 213(d)) for--

       ``(I) the account beneficiary, or
       ``(II) the spouse of the account beneficiary if the spouse 
     is entitled to benefits under part A of title XVIII of the 
     Social Security Act and enrolled under part B of such title,

     but only to the extent such amounts are not compensated for 
     by insurance or otherwise, or
       ``(ii) for qualified long-term care services for the 
     account beneficiary or such spouse.
       ``(B) Health insurance may not be purchased from account.--
     Subparagraph (A) shall not apply to any payment for insurance 
     other than insurance providing coverage for qualified long-
     term care services.
       ``(C) Qualified long-term care services.--The term 
     `qualified long-term care services' means necessary 
     diagnostic, preventive, therapeutic, rehabilitative, and 
     maintenance (including personal care) services which are 
     required by an individual during any period during which such 
     individual is a functionally impaired individual (as 
     determined in the manner prescribed by the Secretary).
       ``(3) Account beneficiary.--
       ``(A) In general.--The term `account beneficiary' means the 
     individual on whose behalf the medicare choice account is 
     maintained.
       ``(B) Joint accounts.--If married individuals are both 
     enrolled in a medicare choice plan, they may establish a 
     joint account and each spouse shall be treated as an account 
     beneficiary.
       ``(4) Medicare choice plan.--The term `medicare choice 
     plan' has the meaning given such term by section 1895A(a) of 
     the Social Security Act.
       ``(5) Certain rules to apply.--Rules similar to the rules 
     of subsections (g) and (h) of section 408 shall apply for 
     purposes of this section.
       ``(c) Tax Treatment of Accounts.--
       ``(1) In general.--A medicare choice account is exempt from 
     taxation under this subtitle unless such account has ceased 
     to be a medicare choice account by reason of paragraph (2). 
     Notwithstanding the preceding sentence, any such account is 
     subject to the taxes imposed by section 511 (relating to 
     imposition of tax on unrelated business income of charitable, 
     etc. organizations).
       ``(2) Account assets treated as distributed in the case of 
     prohibited transactions or account pledged as security for 
     loan.--Rules similar to the rules of paragraphs (2) and (4) 
     of section 408(e) shall apply to medicare choice accounts, 
     and any amount treated as distributed under such rules shall 
     be treated as not used to pay qualified medical expenses.
       ``(d) Tax Treatment of Distributions.--
       ``(1) In general.--Any amount paid or distributed out of a 
     medicare choice account to an account beneficiary which is 
     used exclusively to pay qualified medical expenses shall not 
     be includible in gross income. Any amount paid or distributed 
     out of a medicare choice account to an account beneficiary 
     which is not used exclusively to pay qualified medical 
     expenses shall be included in the gross income of the account 
     beneficiary.
       ``(2) Penalty for distributions not used for qualified 
     medical expenses.--
       ``(A) In general.--The tax imposed by this chapter on an 
     account beneficiary for any taxable year in which there is a 
     payment or distribution to the account beneficiary from a 
     medicare choice account which is not used exclusively to pay 
     the qualified medical expenses shall be increased by 10 
     percent of the amount of such payment or distribution.
       ``(B) Exceptions.--Subparagraph (A) shall not apply if the 
     payment or distribution is made on or after the date the 
     account beneficiary--
       ``(i) becomes disabled within the meaning of section 
     72(m)(7), or
       ``(ii) dies.
       ``(C) Special rules.--For purposes of subparagraph (A)--
       ``(i) all medicare choice accounts of the account 
     beneficiary shall be treated as 1 account,
       ``(ii) all payments and distributions not used exclusively 
     to pay qualified medical expenses during any taxable year 
     shall be treated as 1 distribution, and
       ``(iii) any distribution of property shall be taken into 
     account at its fair market value on the date of the 
     distribution.
       ``(3) Withdrawal of erroneous contributions.--Paragraphs 
     (1) and (2) shall not apply to any payment or distribution 
     from a medicare choice account to the Secretary of Health and 
     Human Services of an erroneous contribution to such account 
     and of the net income attributable to such contribution.
       ``(4) Trustee-to-trustee transfers.--Paragraphs (1) and (2) 
     shall not apply to any trustee-to-trustee transfer from a 
     medicare choice account of an account beneficiary to another 
     medicare choice account of such account beneficiary.
       ``(5) Coordination with medical expense deduction.--For 
     purposes of section 213, any payment or distribution out of a 
     medicare choice account for qualified medical expenses shall 
     not be treated as an expense paid for medical care.
       ``(e) Treatment of Account After Death of Account 
     Beneficiary.--
       ``(1) Treatment if designated beneficiary is spouse.--
       ``(A) In general.--In the case of an account beneficiary's 
     interest in a medicare choice account which is payable to (or 
     for the benefit of) such beneficiary's spouse upon the death 
     of such beneficiary, such account shall be treated as a 
     medicare choice account of such spouse as of the date of such 
     death.
       ``(B) Special rules if spouse not medicare eligible.--If, 
     as of the date of such death, such spouse is not entitled to 
     benefits under title XVIII of the Social Security Act, then 
     after the date of such death--
       ``(i) the Secretary of Health and Human Services may not 
     make any payments to such account, other than payments 
     attributable to periods before such date, and
       ``(ii) in applying subsection (b)(2) with respect to such 
     account, references to the account beneficiary shall be 
     treated as including references to any dependent (as defined 
     in section 152) of such spouse and any subsequent spouse of 
     such spouse.
       ``(2) Treatment if designated beneficiary is not spouse.--
     In the case of an account beneficiary's interest in a 
     medicare choice account which is payable to (or for the 
     benefit of) any person other than such beneficiary's spouse 
     upon the death of such beneficiary--
       ``(A) such account shall cease to be a medicare choice 
     account as of the date of death, and
       ``(B) an amount equal to the fair market value of the 
     assets in such account on such date shall be includible--
       ``(i) if such person is not the estate of such beneficiary, 
     in such person's gross income for the taxable year which 
     includes such date, or
       ``(ii) if such person is the estate of such beneficiary, in 
     such beneficiary's gross income for last taxable year of such 
     beneficiary.
       ``(f) Reports.--
       ``(1) In general.--The trustee of a medicare choice account 
     shall make such reports regarding such account to the 
     Secretary and to the account beneficiary with respect to--
       ``(A) the fair market value of the assets in such account 
     as of the close of each calendar year, and
       ``(B) contributions, distributions, and other matters,

     as the Secretary may require by regulations.
       ``(2) Time and manner of reports.--The reports required by 
     this subsection--
       ``(A) shall be filed at such time and in such manner as the 
     Secretary prescribes in such regulations, and
       ``(B) shall be furnished to the account beneficiary--
       ``(i) not later than January 31 of the calendar year 
     following the calendar year to which such reports relate, and
       ``(ii) in such manner as the Secretary prescribes in such 
     regulations.''.
       (b) Exclusion of Medicare Choice Accounts From Estate 
     Tax.--Part IV of subchapter A of chapter 11 of such Code is 
     amended by adding at the end the following new section:

     ``SEC. 2057. MEDICARE CHOICE ACCOUNTS.

       ``For purposes of the tax imposed by section 2001, the 
     value of the taxable estate shall be determined by deducting 
     from the value of the gross estate an amount equal to the 
     value of any medicare choice account (as defined in section 
     137(b)) included in the gross estate.''.
       (c) Tax on Prohibited Transactions.--

[[Page S 16211]]

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

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

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

``Sec. 137. Medicare choice accounts.
``Sec. 138. Cross references to other Acts.''.

       (2) The table of sections for subchapter B of chapter 68 of 
     such Code is amended by striking the item relating to section 
     6693 and inserting the following new item:

``Sec. 6693. Failure to file reports on individual retirement plans and 
              certain other tax-favored accounts; penalties relating to 
              designated nondeductible contributions.''.

       (3) The table of sections for part IV of subchapter A of 
     chapter 11 of such Code is amended by adding at the end the 
     following new item:

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

     SEC. 7007. CERTAIN REBATES INCLUDED IN GROSS INCOME.

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

                CHAPTER 2--PROVISIONS RELATING TO PART A

          Subchapter A--General Provisions Relating to Part A

     SEC. 7011. PPS HOSPITAL PAYMENT UPDATE.

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

     SEC. 7012. PPS-EXEMPT HOSPITAL PAYMENTS.

       (a) Update.--
       (1) In general.--Section 1886(b)(3)(B)(ii) (42 U.S.C. 
     1395ww(b)(3)(B)(ii)) is amended--
       (A) in subclause (V)--
       (i) by striking ``1997'' and inserting ``1995'', and
       (ii) by striking ``and'' at the end,
       (B) by redesignating subclause (VI) as subclause (VII); and
       (C) by inserting after subclause (V), the following 
     subclause:
       ``(VI) for fiscal years 1996 through 2002--
       ``(aa) the market basket percentage increase minus the 
     applicable reduction (as defined in clause (vi)(II)),
       ``(bb) in the case of a hospital for a fiscal year for 
     which the hospital's update adjustment percentage (as defined 
     in clause (vi)(I)) is at least 10 percent, the market basket 
     percentage increase, or
       ``(cc) in the case of a hospital for which 150 percent of 
     the hospital's allowable operating costs of inpatient 
     hospital services recognized under this title for the most 
     recent cost reporting period for which information is 
     available is less than the hospital's target amount (as 
     determined under subparagraph (A)) for such cost reporting 
     period, 0 percent,

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

[[Page S 16212]]
     recommendations on a prospective payment system for rehabilitation 
     hospitals (and units thereof) and hospitals which have an 
     average inpatient length of stay of greater than 25 days.
       (B) Matters included.--The report submitted under 
     subparagraph (A) shall include--
       (i) the available and preferred systems of classifying 
     rehabilitation patients relative to duration and intensity of 
     inpatient services;
       (ii) the means of calculating medicare program payments to 
     reflect such patient requirements;
       (iii) other adjustments deemed appropriate such as 
     geographic variations in wages and other costs and outliers;
       (iv) a schedule upon which it is deemed feasible to 
     introduce a prospective payment system for such providers and 
     whether any such system should be applied to other types of 
     providers of rehabilitation services; and
       (v) any other matters the Secretary determines are relevant 
     including recommendations for other types of hospitals that 
     are not subsection (d) hospitals (as defined in section 
     1886(d)(1)(B) of the Social Security Act).
       (d) Capital Payments for PPS-Exempt Hospitals.--Section 
     1886(g) (42 U.S.C. 1395ww(g)) is amended by adding at the end 
     the following new paragraph:
       ``(4) In determining the amount of the payments that may be 
     made under this title with respect to all the capital-related 
     costs of inpatient hospital services furnished during fiscal 
     years 1996 through 2002 of a hospital which is not a 
     subsection (d) hospital or a subsection (d) Puerto Rico 
     hospital, the Secretary shall reduce the amounts of such 
     payments otherwise determined under this title by 15 
     percent.''.

     SEC. 7013. CAPITAL PAYMENTS FOR PPS HOSPITALS.

       (a) In General.--Section 1886(g)(1)(A) (42 U.S.C. 
     1395ww(g)(1)(A)) is amended by adding at the end the 
     following new sentence: ``In addition to the reduction 
     described in the preceding sentence, for discharges occurring 
     after September 30, 1995, the Secretary shall reduce by 7.47 
     percent the unadjusted standard Federal capital payment rate 
     (as described in 42 CFR 412.308(c), as in effect on the date 
     of the enactment of the Balanced Budget Reconciliation Act of 
     1995) and shall reduce by 8.27 percent the unadjusted 
     hospital-specific rate (as described in 42 CFR 412.328(e)(1), 
     as in effect on the date of the enactment of such Act).''.
       (b) Budget Neutrality Adjustment.--
       (1) In general.--The second sentence of section 
     1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A)) is amended--
       (A) by striking ``fiscal years 1992 through 1995'' and 
     inserting ``fiscal years 1996 through 2002''; and
       (B) by striking ``10 percent'' and inserting ``15 
     percent''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply on and after October 1, 1995.
       (c) Hospital-Specific Adjustment for Capital-Related Tax 
     Costs.--Section 1886(g)(1) (42 U.S.C. 1395ww(g)(1)) is 
     amended--
       (1) by redesignating subparagraph (C) as subparagraph (D), 
     and
       (2) by inserting after subparagraph (B) the following 
     subparagraph:
       ``(C)(i) For discharges occurring after September 30, 1995, 
     such system shall provide for an adjustment in an amount 
     equal to the amount determined under clause (iv) for capital-
     related tax costs for each hospital that is eligible for such 
     adjustment.
       ``(ii) Subject to clause (iii), a hospital is eligible for 
     an adjustment under this subparagraph, with respect to 
     discharges occurring in a fiscal year, if the hospital--
       ``(I) is a hospital that may otherwise receive payments 
     under this subsection,
       ``(II) is not a public hospital, and
       ``(III) incurs capital-related tax costs for the fiscal 
     year.
       ``(iii)(I) In the case of a hospital that first incurs 
     capital-related tax costs in a fiscal year after fiscal year 
     1992 because of a change from nonproprietary to proprietary 
     status or because the hospital commenced operation after such 
     fiscal year, the first fiscal year for which the hospital 
     shall be eligible for such adjustment is the second full 
     fiscal year following the fiscal year in which the hospital 
     first incurs such costs.
       ``(II) In the case of a hospital that first incurs capital-
     related tax costs in a fiscal year after fiscal year 1992 
     because of a change in State or local tax laws, the first 
     fiscal year for which the hospital shall be eligible for such 
     adjustment is the fourth full fiscal year following the 
     fiscal year in which the hospital first incurs such costs.
       ``(iv) The per discharge adjustment under this clause shall 
     be equal to the hospital-specific capital-related tax costs 
     per discharge of a hospital for fiscal year 1992 (or, in the 
     case of a hospital that first incurs capital-related tax 
     costs for a fiscal year after fiscal year 1992, for the first 
     full fiscal year for which such costs are incurred), updated 
     to the fiscal year to which the adjustment applies. Such per 
     discharge adjustment shall be added to the Federal capital 
     rate, after such rate has been adjusted as described in 42 
     CFR 412.312 (as in effect on the date of the enactment of the 
     Balanced Budget Reconciliation Act of 1995), and before such 
     rate is multiplied by the applicable Federal rate percentage.
       ``(v) For purposes of this subparagraph, capital-related 
     tax costs include--
       ``(I) the costs of taxes on land and depreciable assets 
     owned by a hospital and used for patient care,
       ``(II) payments in lieu of such taxes (made by hospitals 
     that are exempt from taxation), and
       ``(III) the costs of taxes paid by a hospital as lessee of 
     land, buildings, or fixed equipment from a lessor that is 
     unrelated to the hospital under the terms of a lease that 
     requires the lessee to pay all expenses (including mortgage, 
     interest, and amortization) and leaves the lessor with an 
     amount free of all claims (sometimes referred to as a `net 
     net net' or `triple net' lease).

     In determining the adjustment required under clause (i), the 
     Secretary shall not take into account any capital-related tax 
     costs of a hospital to the extent that such costs are based 
     on tax rates and assessments that exceed those for similar 
     commercial properties.
       ``(vi) The system shall provide that the Federal capital 
     rate for any fiscal year after September 30, 1995, shall be 
     reduced by a percentage sufficient to ensure that the 
     adjustments required to be paid under clause (i) for a fiscal 
     year neither increase nor decrease the total amount that 
     would have been paid under this system but for the payment of 
     such adjustments for such fiscal year.''.
       (d) Revision of Exceptions Process Under Prospective 
     Payment System for Certain Projects.--
       (1) In general.--Section 1886(g)(1) (42 U.S.C. 
     1395ww(g)(1)), as amended by subsection (c), is amended--
       (A) by redesignating subparagraph (D) as subparagraph (E), 
     and
       (B) by inserting after subparagraph (C) the following 
     subparagraph:
       ``(D) The exceptions under the system provided by the 
     Secretary under subparagraph (B)(iii) shall include the 
     provision of exception payments under the special exceptions 
     process provided under 42 CFR 412.348(g) (as in effect on 
     September 1, 1995), except that the Secretary shall revise 
     such process as follows:
       ``(i) A hospital with at least 100 beds which is located in 
     an urban area shall be eligible under such process without 
     regard to its disproportionate patient percentage under 
     subsection (d)(5)(F) or whether it qualifies for additional 
     payment amounts under such subsection.
       ``(ii) The minimum payment level for qualifying hospitals 
     shall be 80 percent.
       ``(iii) A hospital shall be considered to meet the 
     requirement that it completes the project involved no later 
     than the end of the hospital's last cost reporting period 
     beginning after October 1, 2001, if--
       ``(I) the hospital has obtained a certificate of need for 
     the project approved by the State or a local planning 
     authority by September 1, 1995, and
       ``(II) by September 1, 1995, the hospital has expended on 
     the project at least $750,000 or 10 percent of the estimated 
     cost of the project.
       ``(iv) Offsetting amounts, as described in 42 CFR 
     412.348(g)(8)(ii), shall apply except that subparagraph (B) 
     of such section shall be revised to require that the 
     additional payment that would otherwise be payable for the 
     cost reporting period shall be reduced by the amount (if any) 
     by which the hospital's current year medicare capital 
     payments (excluding, if applicable, 75 percent of the 
     hospital's capital-related disproportionate share payments) 
     exceeds its medicare capital costs for such year.''.
       (2) Limit to additional payments.--The amendment made by 
     subsection (a) shall not result in aggregate additional 
     payments under the special exception process described in 
     section 1886(b)(1)(D) for fiscal years 1996 through 2000 in 
     excess of an amount equal to the sum of $50,000,000 per year 
     more than would have been paid in such fiscal years if such 
     amendment had not been enacted.
       (3) Conforming amendment.--Section 1886(g)(1)(B) (42 U.S.C. 
     1395ww(g)(1)(B)) is amended by striking ``may provide'' and 
     inserting ``shall provide (in accordance with subparagraph 
     (D)''.

     SEC. 7014. DISPROPORTIONATE SHARE HOSPITAL PAYMENTS.

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

     SEC. 7015. INDIRECT MEDICAL EDUCATION PAYMENTS.

       (a) In General.--Section 1886(d)(5)(B)(ii) (42 U.S.C. 
     1395ww(d)(5)(B)(ii)) is amended to read as follows:
       ``(ii) For purposes of clause (i)(II), the indirect 
     teaching adjustment factor is equal to c (((1+r) 

[[Page S 16213]]
     to the nth power) - 1), where `r' is the ratio of the hospital's full-
     time equivalent interns and residents to beds and `n' equals 
     .405. For discharges occurring on or after--
       ``(I) May 1, 1986, and before October 1, 1995, `c' is equal 
     to 1.89;
       ``(II) October 1, 1995, and before October 1, 1996, `c' is 
     equal to 1.65;
       ``(III) October 1, 1996, and before October 1, 1997, `c' is 
     equal to 1.48;
       ``(IV) October 1, 1997, and before October 1, 1998, `c' is 
     equal to 1.33; and
       ``(V) October 1, 1998, and before October 1, 2002, `c' is 
     equal to 1.23.''.
       (b) No Restandardization of Payment Amounts Required.--
     Section 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is 
     amended by striking ``of 1985'' and inserting ``of 1985, but 
     not taking into account the amendments made by section 
     7015(a) of the Balanced Budget Reconciliation Act of 1995''.

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

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

     SEC. 7017. PAYMENTS FOR HOSPICE SERVICES.

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

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

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

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

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

          Subchapter B--Payments to Skilled Nursing Facilities

                   PART I--PROSPECTIVE PAYMENT SYSTEM

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

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


      ``prospective payment system for skilled nursing facilities

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

                    PART II--INTERIM PAYMENT SYSTEM

     SEC. 7031. PAYMENTS FOR ROUTINE SERVICE COSTS.

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

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

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


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

       ``Sec. 1888A. (a) Definitions.--For purposes of this 
     section:
       ``(1) Covered non-routine services.--The term `covered non-
     routine services' means post-hospital extended care services 
     consisting of any of the following:

[[Page S 16214]]

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

[[Page S 16215]]

       (b) Conforming Amendment.--Section 1814(b) (42 U.S.C. 
     1395f(b)) is amended in the matter preceding paragraph (1) by 
     striking ``1813 and 1886'' and inserting ``1813, 1886, 1888, 
     1888A, and 1889''.

     SEC. 7033. PAYMENTS FOR ROUTINE SERVICE COSTS.

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

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

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

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

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

     SEC. 7036. MEDICAL REVIEW PROCESS.

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

     SEC. 7037. REVISED SALARY EQUIVALENCE LIMITS.

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

     SEC. 7038. REPORT BY PROSPECTIVE PAYMENT ASSESSMENT 
                   COMMISSION.

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

     SEC. 7039. EFFECTIVE DATE.

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

                CHAPTER 3--PROVISIONS RELATING TO PART B

     SEC. 7041. PAYMENTS FOR PHYSICIANS' SERVICES.

       (a) Establishing Update to Conversion Factor To Match 
     Spending Under Sustainable Growth Rate.--
       (1) Section 1848(d)(2) (42 U.S.C. 1395ww(d)(2)) is amended 
     to read as follows:
       ``(2) Recommendation of update.--
       ``(A) In general.--Not later than April 15 of each year 
     (beginning with 1996), the Secretary shall transmit to the 
     Congress a report that includes a recommendation on the 
     appropriate update in the conversion factor for all 
     physicians' services (as defined in subsection (f)(3)(A)) in 
     the following year. In making the recommendation, the 
     Secretary shall consider--
       ``(i) the percentage change in the medicare economic index 
     (described in the fourth sentence of section 1842(b)(3)) for 
     that year;

[[Page S 16216]]

       ``(ii) such factors as enter into the calculation of the 
     update adjustment factor as described in paragraph (3)(B); 
     and
       ``(iii) access to services.
       ``(B) Additional considerations.--In making recommendations 
     under subparagraph (A), the Secretary may also consider--
       ``(i) unexpected changes by physicians in response to the 
     implementation of the fee schedule;
       ``(ii) unexpected changes in outlay projections;
       ``(iii) changes in the quality or appropriateness of care;
       ``(iv) any other relevant factors not measured in the 
     resource-based payment methodology; and
       ``(v) changes in volume or intensity of services.
       ``(C) Commission review.--The Physician Payment Review 
     Commission shall review the report submitted under 
     subparagraph (A) in a year and shall submit to the Congress, 
     by not later than May 15 of the year, a report including its 
     recommendations respecting the update in the conversion 
     factor for the following year.''.
       (2) Update.--Section 1848(d)(3) (42 U.S.C. 1395w-4(d)(3)) 
     is amended to read as follows:
       ``(3) Update.--
       ``(A) In general.--Unless Congress otherwise provides, 
     subject to subparagraph (E), for purposes of this section the 
     update for a year (beginning with 1997) is equal to the 
     product of--
       ``(i) 1 plus the Secretary's estimate of the percentage 
     increase in the medicare economic index (described in the 
     fourth sentence of section 1842(b)(3)) for the year (divided 
     by 100), and
       ``(ii) 1 plus the Secretary's estimate of the update 
     adjustment factor for the year (divided by 100),

     minus 1 and multiplied by 100.
       ``(B) Update adjustment factor.--The `update adjustment 
     factor' for a year is equal to the quotient of--
       ``(i) the difference between (I) the sum of the allowed 
     expenditures for physicians' services furnished during each 
     of the years 1995 through the year involved and (II) the sum 
     of the amount of actual expenditures for physicians' services 
     furnished during each of the years 1995 through the previous 
     year; divided by
       ``(ii) the Secretary's estimate of allowed expenditures for 
     physicians' services furnished during the year.
       ``(C) Determination of allowed expenditures.--For purposes 
     of subparagraph (B), allowed expenditures for physicians' 
     services shall be determined as follows (as estimated by the 
     Secretary):
       ``(i) In the case of allowed expenditures for 1995, such 
     expenditures shall be equal to actual expenditures for 
     services furnished during the 12-month period ending with 
     June 30, 1995.
       ``(ii) In the case of allowed expenditures for 1996 and 
     each subsequent year, such expenditures shall be equal to 
     allowed expenditures for the previous year, increased by the 
     sustainable growth rate under subsection (f) for the fiscal 
     year which begins during the year.
       ``(D) Determination of actual expenditures.--For purposes 
     of subparagraph (B), the amount of actual expenditures for 
     physicians' services furnished during a year shall be equal 
     to the amount of expenditures for such services during the 
     12-month period ending with June of the previous year.
       ``(E) Restriction on variation from medicare economic 
     index.--Notwithstanding the amount of the update adjustment 
     factor determined under subparagraph (B) for a year, the 
     update in the conversion factor under this paragraph for the 
     year may not be--
       ``(i) greater than 103 percent of 1 plus the Secretary's 
     estimate of the percentage increase in the medicare economic 
     index (described in the fourth sentence of section 
     1842(b)(3)) for the year (divided by 100), minus 1 and 
     multiplied by 100; or
       ``(ii) less than 93 percent of 1 plus the Secretary's 
     estimate of the percentage increase in the medicare economic 
     index (described in the fourth sentence of section 
     1842(b)(3)) for the year (divided by 100), minus 1 and 
     multiplied by 100.''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to physicians' services furnished on or after 
     January 1, 1997.
       (b) Replacement of Volume Performance Standard With 
     Sustainable Growth Rate.--Section 1848(f) (42 U.S.C. 1395w-
     4(f)) is amended to read as follows:
       ``(f) Sustainable Growth Rate.--
       ``(1) Process for establishing sustainable growth rate of 
     increase.--
       ``(A) Secretary's recommendation.--By not later than April 
     15 of each year (beginning with 1996), the Secretary shall 
     transmit to the Congress a recommendation on the sustainable 
     growth rate for the fiscal year beginning in such year. In 
     making the recommendation, the Secretary shall confer with 
     organizations representing physicians and shall consider--
       ``(i) inflation,
       ``(ii) changes in numbers of enrollees (other than private 
     plan enrollees) under this part,
       ``(iii) changes in the age composition of enrollees (other 
     than private plan enrollees) under this part,
       ``(iv) changes in technology,
       ``(v) evidence of inappropriate utilization of services,
       ``(vi) evidence of lack of access to necessary physicians' 
     services, and
       ``(vii) such other factors as the Secretary considers 
     appropriate.
       ``(B) Commission review.--The Physician Payment Review 
     Commission shall review the recommendation transmitted during 
     a year under subparagraph (A) and shall make its 
     recommendation to Congress, by not later than May 15 of the 
     year, respecting the sustainable growth rate for the fiscal 
     year beginning in that year.
       ``(C) Publication of sustainable growth rate.--The 
     Secretary shall cause to have the sustainable growth rate 
     published in the Federal Register, in the last 15 days of 
     October of each calendar year (beginning with 1997), for the 
     fiscal year beginning in that year. The Secretary shall cause 
     to have published in the Federal Register, by not later than 
     January 1, 1997, the paragraph (2) for fiscal year 1997.
       ``(2) Specification of growth rate.--
       ``(A) Fiscal year 1996.--The sustainable growth rate for 
     all physicians' services for fiscal year 1996 shall be equal 
     to the product of--
       ``(i) 1 plus the Secretary's estimate of the percentage 
     change in the medicare economic index for 1996 (described in 
     the fourth sentence of section 1842(b)(3)) (divided by 100),
       ``(ii) 1 plus the Secretary's estimate of the percentage 
     change (divided by 100) in the average number of individuals 
     enrolled under this part (other than private plan enrollees) 
     from fiscal year 1995 to fiscal year 1996,
       ``(iii) 1 plus the Secretary's estimate of the projected 
     percentage growth in real gross domestic product per capita 
     (divided by 100) from fiscal year 1995 to fiscal year 1996, 
     plus 2 percentage points, and
       ``(iv) 1 plus the Secretary's estimate of the percentage 
     change (divided by 100) in expenditures for all physicians' 
     services in fiscal year 1996 (compared with fiscal year 1995) 
     which will result from changes in law (including the Balanced 
     Budget Reconciliation Act of 1995), determined without taking 
     into account estimated changes in expenditures due to changes 
     in the volume and intensity of physicians' services or 
     changes in expenditures resulting from changes in the update 
     to the conversion factor under subsection (d),

     minus 1 and multiplied by 100.
       ``(B) Subsequent fiscal years.--The sustainable growth rate 
     for all physicians' services for fiscal year 1997 and each 
     subsequent fiscal year shall be equal to the product of--
       ``(i) 1 plus the Secretary's estimate of the percentage 
     change in the medicare economic index for the fiscal year 
     involved (described in the fourth sentence of section 
     1842(b)(3)) (divided by 100),
       ``(ii) 1 plus the Secretary's estimate of the percentage 
     change (divided by 100) in the average number of individuals 
     enrolled under this part (other than private plan enrollees) 
     from the previous fiscal year to the fiscal year involved,
       ``(iii) 1 plus the Secretary's estimate of the projected 
     percentage growth in real gross domestic product per capita 
     (divided by 100) from the previous fiscal year to the fiscal 
     year involved, plus 2 percentage points, and
       ``(iv) 1 plus the Secretary's estimate of the percentage 
     change (divided by 100) in expenditures for all physicians' 
     services in the fiscal year (compared with the previous 
     fiscal year) which will result from changes in law, 
     determined without taking into account estimated changes in 
     expenditures due to changes in the volume and intensity of 
     physicians' services or changes in expenditures resulting 
     from changes in the update to the conversion factor under 
     subsection (d)(3),

     minus 1 and multiplied by 100.
       ``(3) Definitions.--In this subsection:
       ``(A) Services included in physicians' services.--The term 
     `physicians' services' includes other items and services 
     (such as clinical diagnostic laboratory tests and radiology 
     services), specified by the Secretary, that are commonly 
     performed or furnished by a physician or in a physician's 
     office, but does not include services furnished to a private 
     plan enrollee.
       ``(B) Private plan enrollee.--The term `private plan 
     enrollee' means, with respect to a fiscal year, an individual 
     enrolled under this part who has elected to receive benefits 
     under this title for the fiscal year through a medicare 
     choice plan offered under part D or through enrollment with 
     an eligible organization with a risk-sharing contract under 
     section 1876.''.
       (c) Establishment of Single Conversion Factor for 1996.--
       (1) In general.--Section 1848(d)(1) (42 U.S.C. 1395w-
     4(d)(1)) is amended--
       (A) by redesignating subparagraph (C) as subparagraph (D); 
     and
       (B) by inserting after subparagraph (B) the following new 
     subparagraph:
       ``(C) Special rule for 1996.--For 1996, the conversion 
     factor under this subsection shall be $35.42 for all 
     physicians' services.''.
       (2) Conforming amendments.--Section 1848 (42 U.S.C. 1395w-
     4) is amended--
       (A) by striking ``(or factors)'' each place it appears in 
     subsection (d)(1)(A) and (d)(1)(C)(ii);
       (B) in subsection (d)(1)(A), by striking ``or updates'';
       (C) in subsection (d)(1)(C)(ii), by striking ``(or 
     updates)''; and
       (D) in subsection (i)(1)(C), by striking ``conversion 
     factors'' and inserting ``the conversion factor''.

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

       (a) Ambulatory Surgical Center Procedures.--Section 
     1833(i)(3)(B)(i)(II) (42 U.S.C. 1395l(i)(3)(B)(i)(II)) is 
     amended--
       (1) by striking ``of 80 percent''; and
       (2) by striking the period at the end and inserting the 
     following: ``, less the amount a provider may charge as 
     described in clause (ii) of section 1866(a)(2)(A).''.
       (b) Radiology Services and Diagnostic Procedures.--Section 
     1833(n)(1)(B)(i)(II) (42 U.S.C. 1395l(n)(1)(B)(i)(II)) is 
     amended--
       (1) by striking ``of 80 percent''; and
       (2) by striking the period at the end and inserting the 
     following: ``, less the amount a provider may charge as 
     described in clause (ii) of section 1866(a)(2)(A).''.

[[Page S 16217]]

       (c) Effective Date.--The amendments made by this section 
     shall apply to services furnished during portions of cost 
     reporting periods occurring on or after October 1, 1995.

     SEC. 7043. PAYMENTS FOR CLINICAL LABORATORY DIAGNOSTIC 
                   SERVICES.

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

     SEC. 7044. DURABLE MEDICAL EQUIPMENT.

       (a) Freeze in Updates.--Section 1834(a)(14) (42 U.S.C. 
     1395m(a)(14)) is amended--
       (1) in subparagraph (A), by striking ``and'' at the end;
       (2) by redesignating subparagraph (B) as subparagraph (C); 
     and
       (3) by inserting after subparagraph (A), the following 
     subparagraph:
       ``(B) for 1996 through 2002, the percentage increase is 0 
     percent; and''.
       (b) Oxygen Equipment.--
       (1) In general.--Section 1834(a)(5)(A) (42 U.S.C. 
     1395m(a)(5)(A)) is amended to read as follows:
       ``(A) In general.--Subject to subparagraphs (B), (C), and 
     (E), payment for--
       ``(i) oxygen shall be made on a monthly basis in the 
     monthly payment amount recognized under paragraph (9) for 
     oxygen; and
       ``(ii) oxygen equipment (other than portable oxygen 
     equipment) shall be made on a monthly basis in an amount 
     equal to 60 percent of the monthly payment amount recognized 
     under paragraph (9) for oxygen equipment.''.
       (2) Portable oxygen equipment.--Section 1834(a)(5)(B) (42 
     U.S.C. 1395m(a)(5)(B)) is amended by inserting ``60 percent 
     of'' after ``increased by''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to items and services furnished on or after 
     January 1, 1996.
       (c) Upgraded Durable Medical Equipment.--Section 1834(a) 
     (42 U.S.C. 1395m(a)) is amended by inserting after paragraph 
     (15) the following new paragraph:
       ``(16) Certain upgraded items.--
       ``(A) Individual's right to choose upgraded item.--
     Notwithstanding any other provision of law, effective on the 
     date on which the Secretary issues regulations under 
     subparagraph (C), an individual may purchase or rent from a 
     supplier an item of upgraded durable medical equipment for 
     which payment would be made under this subsection if the item 
     were a standard item.
       ``(B) Payments to supplier.--In the case of the purchase or 
     rental of an upgraded item under subparagraph (A)--
       ``(i) the supplier shall receive payment under this 
     subsection with respect to such item as if such item were a 
     standard item; and
       ``(ii) the individual purchasing or renting the item shall 
     pay the supplier an amount equal to the difference between 
     the supplier's charge and the amount under clause (i).

     In no event may the supplier's charge for an upgraded item 
     exceed the applicable fee schedule amount (if any) for such 
     item.
       ``(C) Consumer protection safeguards.--The Secretary shall 
     issue regulations providing for consumer protection standards 
     with respect to the furnishing of upgraded equipment under 
     subparagraph (A). Such regulations shall provide for--
       ``(i) determination of fair market prices with respect to 
     an upgraded item;
       ``(ii) full disclosure of the availability and price of 
     standard items and proof of receipt of such disclosure 
     information by the beneficiary before the furnishing of the 
     upgraded item;
       ``(iii) conditions of participation for suppliers in the 
     simplified billing arrangement;
       ``(iv) sanctions of suppliers who are determined to engage 
     in coercive or abusive practices, including exclusion; and
       ``(v) such other safeguards as the Secretary determines are 
     necessary.''.

     SEC. 7045. UPDATES FOR ORTHOTICS AND PROSTHETICS.

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

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

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

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

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

     SEC. 7048. UPDATES FOR AMBULATORY SURGICAL SERVICES.

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

     SEC. 7049. PAYMENTS FOR AMBULANCE SERVICES.

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

     SEC. 7050. PHYSICIAN SUPERVISION OF NURSE ANESTHETISTS.

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

     SEC. 7051. PART B DEDUCTIBLE.

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

     SEC. 7052. PART B PREMIUM.

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

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

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


           ``increase in premium for high-income individuals

       ``Sec. 1839A. (a) Increase in Premium.--
       ``(1) In general.--If this section applies to an individual 
     for any calendar year, the monthly premium otherwise 
     applicable under section 1839 for each month during the 
     calendar year shall be increased by an amount equal to the 
     supplemental Medicare part B premium.
       ``(2) Individuals to whom section applies.--This section 
     shall apply to any individual for a calendar year if--
       ``(A) the individual is covered under this part for any 
     month during the calendar year, and
       ``(B) the modified adjusted gross income of the taxpayer 
     for the taxable year beginning in the calendar year exceeds 
     the threshold amount.
       ``(b) Premiums To Be Deducted Based on Estimated Amounts.--
       ``(1) In general.--Each individual shall--
       ``(A) during the medicare open enrollment period under 
     section 1895G(b)(1), or
       ``(B) during any other medicare enrollment period 
     applicable to the individual under section 1895G(b)(2),

     include with the medicare enrollment an estimate of the 
     taxpayer's modified adjusted gross income for the following 
     calendar year.

[[Page S 16218]]

       ``(2) Individuals not filing enrollment form.--If an 
     individual does not file a medicare enrollment form for any 
     enrollment period applicable to the individual and the 
     individual's coverage under this part continues without 
     modification by reason of the failure to file, the 
     individual's modified adjusted gross income shall be 
     determined on the basis of the most recent information 
     available to the Secretary from prior enrollment forms, the 
     Secretary of the Treasury under section 6103(l)(15), or 
     otherwise.
       ``(3) Individuals filing incorrect enrollment forms.--If, 
     on the basis of information obtained from the Secretary of 
     the Treasury under section 6103(l)(15), the Secretary 
     determines that the information included with a medicare 
     enrollment form under paragraph (1) is incorrect, the 
     individual's modified adjusted gross income shall be 
     determined on the basis of the information obtained from the 
     Secretary of the Treasury.
       ``(4) Transfer of information.--The Secretary shall notify 
     the applicable agency under section 1840 of--
       ``(A) the estimates received under paragraph (1) or the 
     determinations under paragraph (2) or (3), and
       ``(B) the amount of the premiums to be deducted under 
     section 1840.

     The premiums under subparagraph (B) shall be effective with 
     respect to months beginning with the later of the month for 
     which the enrollment is effective or the month following the 
     month in which the notice is received. Such premium shall 
     remain in effect until another premium takes effect under 
     this subsection or there is an increase in the premium 
     determined without regard to this section.
       ``(c) Supplemental Medicare Part B Premium.--For purposes 
     of subsection (a)--
       ``(1) In general.--The supplemental Medicare part B premium 
     for any month is an amount equal to the excess of--
       ``(A) 200 percent of the monthly actuarial rate for 
     enrollees age 65 and over determined under subsection 
     1839(a)(1) for such month, over
       ``(B) the total monthly premium under section 1839 
     (determined without regard to subsections (b) and (f) of 
     section 1839).
       ``(2) Phasein of supplemental premium.--
       ``(A) In general.--If the modified adjusted gross income of 
     the taxpayer for any taxable year exceeds the threshold 
     amount by less than $50,000, the supplemental Medicare part B 
     premium under this section for months in the calendar year in 
     which the taxable year begins shall be an amount which bears 
     the same ratio to the amount of the premium (without regard 
     to this paragraph) as such excess bears to $50,000. The 
     preceding sentence shall not apply to any individual whose 
     threshold amount is zero.
       ``(B) Phasein range for joint returns.--In the case of a 
     joint return under section 6013 of the Internal Revenue Code 
     of 1986, subparagraph (A) shall be applied by substituting 
     `$75,000' for `$50,000' each place it appears.
       ``(d) Verification and Adjustments of Supplemental 
     Premiums.--
       ``(1) Verification.--Each individual to whom this section 
     applies shall, on the basis of information shown on the 
     return of tax imposed by chapter 1 of the Internal Revenue 
     Code of 1986 for any taxable year, determine the difference 
     (if any) between--
       ``(A) the aggregate supplemental Medicare part B premiums 
     imposed by this section for months during the calendar year 
     in which the taxable year begins, and
       ``(B) the aggregate amount of premiums deducted and paid 
     under section 1840 for such months with respect to the 
     individual.

     Such determination shall be included on a form prescribed by 
     the Secretary and the form shall be submitted to the 
     Secretary at such time and in such manner as the Secretary 
     shall prescribe.
       ``(2) Deficiency adjustments.--
       ``(A) In general.--If the amount under paragraph (1)(A) 
     exceeds the amount under paragraph (1)(B), the individual 
     shall include with the form required to be filed under 
     paragraph (1) a separate check made payable to the Secretary 
     in an amount equal to such excess plus interest determined 
     under subparagraph (B).
       ``(B) Interest on underpayments.--For purposes of 
     subparagraph (A)--
       ``(i) In general.--The amount of interest taken into 
     account shall be the sum of the amounts determined under 
     clause (ii) for each of the months in the taxable year.
       ``(ii) Monthly interest.--Interest shall be computed for 
     any month in an amount determined by applying the 
     underpayment rate established under section 6621 of the 
     Internal Revenue Code of 1986 to any portion of the 
     underpayment for the period beginning on the first day of the 
     following month and ending on the date the portion is paid. 
     For purposes of this clause, payments shall be applied to 
     months in order, beginning with the earliest.
       ``(iii) Safe-harbor exception.--No interest shall be 
     imposed for any month if the individual's estimate of 
     modified adjusted gross income under subsection (b) on which 
     the supplemental Medicare part B premium for the month was 
     based was not less than the individual's modified adjusted 
     gross income determined on the basis of information shown on 
     the return of tax imposed by chapter 1 of such Code for the 
     taxable year ending with or within the calendar year 
     preceding the calendar year in which the estimate was made.
       ``(3) Overpayment adjustments.--If the amount under 
     paragraph (1)(B) exceeds the amount under paragraph (1)(A), 
     the Secretary shall, at the Secretary's discretion--
       ``(A) credit such excess against any supplemental premium 
     required under this section, or
       ``(B) make a payment to the individual in the amount of 
     such excess.
       ``(4) Adjustments by secretary.--If the Secretary 
     determines, on the basis of information received from the 
     Secretary of the Treasury under section 6103(l)(15), that 
     there was an underpayment or overpayment of the aggregate 
     supplemental Medicare part B premiums for months during any 
     taxable year (after any other adjustment under this 
     subsection), the Secretary shall--
       ``(A) notify the individual of such underpayment or 
     overpayment,
       ``(B) in the case of an underpayment, give such individual 
     an opportunity for a hearing with respect to such 
     underpayment and a reasonable time for payment of such 
     underpayment and interest determined under paragraph (2)(B), 
     and
       ``(C)(i) collect the amount of any underpayment and 
     interest not paid under subparagraph (B) in such manner as 
     the Secretary may prescribe, and
       ``(ii) take the actions described in paragraph (3) with 
     respect to any overpayment.
       ``(5) Transfers to trust fund.--Amounts equal to amounts 
     paid under paragraphs (2)(A), (4)(B), and (4)(C)(i) shall be 
     deposited into the Federal Supplementary Medical Insurance 
     Trust Fund.
       ``(e) Other Definitions and Special Rules.--For purposes of 
     this section--
       ``(1) Threshold amount.--The term `threshold amount' 
     means--
       ``(A) except as otherwise provided in this paragraph, 
     $50,000,
       ``(B) $75,000 in the case of a joint return, and
       ``(C) zero in the case of a taxpayer who--
       ``(i) is married at the close of the taxable year but does 
     not file a joint return for such year, and
       ``(ii) does not live apart from his spouse at all times 
     during the taxable year.
       ``(2) Modified adjusted gross income.--The term `modified 
     adjusted gross income' means adjusted gross income determined 
     under section 62 of the Internal Revenue Code of 1986--
       ``(A) determined without regard to sections 135, 911, 931, 
     and 933 of such Code, and
       ``(B) increased by the amount of interest received or 
     accrued by the taxpayer during the taxable year which is 
     exempt from tax.
       ``(3) Joint returns.--In the case of a joint return under 
     section 6013 of such Code, this section shall be applied by 
     taking into account the combined modified adjusted gross 
     income of the spouses.
       ``(4) Married individual.--The determination of whether an 
     individual is married shall be made in accordance with 
     section 7703 of such Code.
       ``(5) Agreements.--In order to promote the efficient 
     administration of this section, the Secretary may enter into 
     agreements with the Commissioner of the Social Security 
     Administration or the head of any other appropriate Federal 
     agency under which such agency performs administrative 
     responsibilities under this section.''.
       (b) Disclosure of Information.--Section 6103(l) of the 
     Internal Revenue Code of 1986 is amended by adding at the end 
     the following new paragraph:
       ``(15) Disclosure of taxpayer return information to social 
     security administration for purposes of collecting 
     supplemental part b premiums.--
       ``(A) In general.--The Secretary shall, upon written 
     request from the Secretary of Health and Human Services, 
     disclose to the Secretary with respect to any medicare 
     beneficiary (as defined in paragraph (12)(E)(i)) identified 
     in the request whether or not (and the amount by which) the 
     individual's modified adjusted gross income for any taxable 
     year specified in the request exceeded the threshold amount.
       ``(B) Restriction on use.--Return information disclosed 
     under subparagraph (A) may be used by officers and employees 
     of the Department of Health and Human Services (or of any 
     other Federal agency if an agreement under section 
     1839A(e)(5) of the Social Security Act is in effect) only for 
     the purposes of, and to the extent necessary in, establishing 
     an individual's correct supplemental Medicare part B premium 
     under section 1839A of the such Act.
       ``(C) Definitions.--For purposes of this paragraph, any 
     term used which is also used in section 1839A of the Social 
     Security Act shall have the meaning given such term by such 
     section.''.
       (c) Conforming Amendments.--
       (1) Paragraph (2) of section 1839(a) (42 U.S.C. 
     1395r(a)(2)) is amended by inserting ``or section 1839A'' 
     after ``subsections (b) and (e)''.
       (2) Paragraph (3) of section 1839(a) (42 U.S.C. 
     1395r(a)(3)) is amended by inserting ``or section 1839A'' 
     after ``subsection (e)''.
       (3) Section 1839(b) (42 U.S.C. 1395r(b)) is amended by 
     inserting ``(and as increased under section 1839A)'' after 
     ``subsection (a) or (e)''.
       (4) Section 1839(f) (42 U.S.C. 1395r(f)) is amended by 
     adding at the end the following new sentence: ``This 
     subsection shall not apply to the portion of the premium 
     attributable to the supplemental premium under section 
     1839A.''.
       (5) Section 1840(c) (42 U.S.C. 1395r(c)) is amended by 
     inserting ``or an individual determines that the estimate of 
     modified adjusted gross income used in determining the 
     supplemental premium under section 1839A is too low and 
     results in a portion of the premium not being deducted,'' 
     before ``he may''.
       (d) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to months after December 1996.
       (2) Information for prior years.--The Secretary of Health 
     and Human Services may request information under section 
     6013(l)(15) of the Social Security Act (as added by 
     subsection (b)) for taxable years beginning after December 
     31, 1993.
     
[[Page S 16219]]


            CHAPTER 4--PROVISIONS RELATING TO PARTS A AND B

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

     SEC. 7055. SECONDARY PAYOR PROVISIONS.

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

     SEC. 7056. TREATMENT OF ASSISTED SUICIDE.

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

     SEC. 7057. ADMINISTRATIVE PROVISIONS.

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

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

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

            Subchapter B--Payments for Home Health Services

     SEC. 7061. PAYMENT FOR HOME HEALTH SERVICES.

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


                   ``payment for home health services

       ``Sec. 1893. (a) In General.--
       ``(1) Per visit payments.--Subject to subsection (c), the 
     Secretary shall make per visit payments beginning with fiscal 
     year 1997 to a home health agency in accordance with this 
     section for each type of home health service described in 
     paragraph (2) furnished to an individual who at the time the 
     service is furnished is under a plan of care by the home 
     health agency under this title (without regard to whether or 
     not the item or service was furnished by the agency or by 
     others under arrangement with them made by the agency, under 
     any other contracting or consulting arrangement, or 
     otherwise).
       ``(2) Types of services.--The types of home health services 
     described in this paragraph are the following:
       ``(A) Part-time or intermittent nursing care provided by or 
     under the supervision of a registered professional nurse.
       ``(B) Physical therapy.
       ``(C) Occupational therapy.
       ``(D) Speech-language pathology services.
       ``(E) Medical social services under the direction of a 
     physician.
       ``(F) To the extent permitted in regulations, part-time or 
     intermittent services of a home health aide who has 
     successfully completed a training program approved by the 
     Secretary.
       ``(b) Establishment of Per Visit Rate for Each Type of 
     Services.--
       ``(1) In general.--The Secretary shall, subject to 
     paragraph (3), establish a per visit payment rate for a home 
     health agency in an area (which shall be the same area used 
     to determine the area wage index applicable to hospitals 
     under section 1886(d)(3)(E)) for each type of home health 
     service described in subsection (a)(2). Such rate shall be 
     equal to the national per visit payment rate determined under 
     paragraph (2) for each such type, except that the labor-
     related portion of such rate shall be adjusted by the area 
     wage index applicable under section 1886(d)(3)(E) for the 
     area in which the agency is located.
       ``(2) National per visit payment rate.--The national per 
     visit payment rate for each type of service described in 
     subsection (a)(2)--
       ``(A) for fiscal year 1997, is an amount equal to the 
     national average amount paid per visit under this title to 
     home health agencies for such type of service during the most 
     recent 12-month cost reporting period ending on or before 
     June 30, 1994; and
       ``(B) for each subsequent fiscal year, is an amount equal 
     to the national per visit payment rate in effect for the 
     preceding fiscal year, increased by the greater of--
       ``(i) the home health market basket percentage increase for 
     such subsequent fiscal year minus 2.5 percentage points; or
       ``(ii) 1.1 percent (1.2 percent in fiscal year 1997).
       ``(3) Rebasing of rates.--The Secretary shall adjust the 
     national per visit payment rates under this subsection for 
     cost reporting periods beginning on or after October 1, 1999, 
     and every 2 years thereafter, to reflect the most recent 
     available data.
       ``(4) Home health market basket percentage increase.--For 
     purposes of this subsection, the term `home health market 
     basket percentage increase' means, with respect to a fiscal 
     year, a percentage (estimated by the Secretary before the 
     beginning of the fiscal year) determined and applied with 
     respect to the types of home health services described in 
     subsection (a)(2) in the same manner as the market basket 
     percentage increase under section 1886(b)(3)(B)(iii) is 
     determined and applied to inpatient hospital services for the 
     fiscal year.
       ``(c) Per Episode Limit.--
       ``(1) Aggregate limit.--
       ``(A) In general.--Except as provided in paragraph (2), a 
     home health agency may not receive aggregate per visit 
     payments under subsection (a) for a fiscal year in excess of 
     an amount equal to the sum of the following products 
     determined for each case-mix category for which the agency 
     receives payments:

[[Page S 16220]]

       ``(i) The number of episodes of each such case-mix category 
     during the fiscal year; multiplied by
       ``(ii) the per episode limit determined for such case-mix 
     category for such fiscal year.
       ``(B) Establishment of per episode limits.--
       ``(i) In general.--The per episode limit for a fiscal year 
     for any case-mix category for the area in which a home health 
     agency is located (which shall be the same area used to 
     determine the area wage index applicable to hospitals under 
     section 1886(d)(3)(E)) is equal to--

       ``(I) the mean number of visits for each type of home 
     health service described in subsection (a)(2) furnished 
     during an episode of such case-mix category in such area 
     during fiscal year 1994, adjusted by the case-mix adjustment 
     factor determined in clause (ii) for the fiscal year 
     involved; multiplied by
       ``(II) the per visit payment rate established under 
     subsection (b) for such type of home health service for the 
     fiscal year for which the determination is being made.

       ``(ii) Case-mix adjustment factor.--For purposes of clause 
     (i), the case-mix adjustment factor for--

       ``(I) each of fiscal years 1997 through 2000 is the factor 
     determined by the Secretary to assure that aggregate payments 
     for home health services under this section during the year 
     will not exceed the payment for such services during the 
     previous year as a result of changes in the number and type 
     of home health visits within case-mix categories over the 
     previous year; and
       ``(II) each subsequent fiscal year, is the factor 
     determined by the Secretary to necessary remove the effects 
     of case-mix increases due to reporting improvements instead 
     of real changes in patients' resource usage.

       ``(iii) Rebasing of per episode limits.--Beginning with 
     fiscal year 1999 and every 2 years thereafter, the Secretary 
     shall revise the mean number of home health visits determined 
     under clause (i)(I) for each type of home health service 
     visit described in subsection (a)(2) furnished during an 
     episode in a case-mix category to reflect the most recently 
     available data on the number of visits.
       ``(iv) Determination of area.--In the case of an area which 
     the Secretary determines has insufficient number of home 
     health agencies to establish an appropriate per episode 
     limit, the Secretary may establish an area other than the 
     area used to determine the area wage under section 
     1886(d)(3)(E)) for purposes of establishing an appropriate 
     per episode limit.
       ``(C) Case-mix category.--For purposes of this paragraph, 
     the term `case-mix category' means each of the 18 case-mix 
     categories established under the Home Health Agency 
     Prospective Payment Demonstration Project conducted by the 
     Health Care Financing Administration. The Secretary may 
     develop an alternate methodology for determining case-mix 
     categories.
       ``(D) Episode.--For purposes of this paragraph, the term 
     `episode' means, with respect to a cost reporting period, the 
     continuous 120-day period that--
       ``(i) begins on the date of an individual's first visit for 
     a type of home health service described in subsection (a)(2) 
     for a case-mix category, and
       ``(ii) is immediately preceded by a 60-day period in which 
     the individual did not receive visits for a type of home 
     health service described in subsection (a)(2).
       ``(E) Exemptions and exceptions.--The Secretary may provide 
     for exemptions and exceptions to the limits established under 
     this paragraph for a fiscal year as the Secretary deems 
     appropriate, to the extent such exemptions and exceptions do 
     not result in greater payments under this section than the 
     exemptions and exceptions provided under section 
     1861(v)(1)(L)(ii) in fiscal year 1994, increased by the home 
     health market basket percentage increase for the fiscal year 
     involved (as defined in subsection (b)(4)).
       ``(2) Reconciliation of amounts.--
       ``(A) Payments in excess of limits.--Subject to 
     subparagraph (B), if a home health agency has received 
     aggregate per visit payments under subsection (a) for a 
     fiscal year in excess of the amount determined under 
     paragraph (1) with respect to such home health agency for 
     such fiscal year, the Secretary shall, in such manner as the 
     Secretary considers appropriate, reduce the payments under 
     this section to the home health agency in the following 
     fiscal year by the amount of such excess.
       ``(B) Exception for home health services furnished over a 
     period greater than 165 days.--
       ``(i) In general.--For purposes of subparagraph (A), the 
     amount of aggregate per visit payments determined under 
     subsection (a) shall not include payments for home health 
     visits furnished to an individual on or after a continuous 
     period of more than 165 days after an individual begins an 
     episode described in subsection (c)(1)(D) (if such period is 
     not interrupted by the beginning of a new episode).
       ``(ii) Requirement of certification.--Clause (i) shall not 
     apply if the agency has not obtained a physician's 
     certification with respect to the individual requiring such 
     visits that includes a statement that the individual requires 
     such continued visits, the reason for the need for such 
     visits, and a description of such services furnished during 
     such visits.
       ``(C) Share of savings.--
       ``(i) Bonus payments.--If a home health agency has received 
     aggregate per visit payments under subsection (a) for a 
     fiscal year in an amount less than the amount determined 
     under paragraph (1) with respect to such home health agency 
     for such fiscal year, the Secretary shall pay such home 
     health agency a bonus payment equal to 50 percent of the 
     difference between such amounts in the following fiscal year, 
     except that the bonus payment may not exceed 5 percent of the 
     aggregate per visit payments made to the agency for the prior 
     year without regard to clause (ii).
       ``(ii) Installment bonus payments.--The Secretary may make 
     installment payments during a fiscal year to a home health 
     agency based on the estimated bonus payment that the agency 
     would be eligible to receive with respect to such fiscal 
     year.
       ``(d) Medical Review Process.--
       ``(1) In general.--The Secretary shall implement a medical 
     review process (with a particular emphasis on fiscal years 
     1997 and 1998) for the system of payments described in this 
     section that shall provide an assessment of the pattern of 
     care furnished to individuals receiving home health services 
     for which payments are made under this section to ensure that 
     such individuals receive appropriate home health services. 
     Such review process shall focus on low-cost cases described 
     in subsection (e)(3) and cases described in subsection 
     (c)(2)(B) and shall require recertification by intermediaries 
     at 30, 60, 90, 120, and 165 days into an episode described in 
     subsection (c)(1)(D).
       ``(2) Using of organizations to conduct reviews.--The 
     Secretary may use public or private organizations to conduct 
     medical reviews in accordance with this subsection.
       ``(e) Adjustment of Payments to Avoid Circumvention of 
     Limits.--
       ``(1) In general.--The Secretary shall provide for 
     appropriate adjustments to payments to home health agencies 
     under this section to ensure that agencies do not circumvent 
     the purpose of this section by--
       ``(A) discharging patients to another home health agency or 
     similar provider;
       ``(B) altering corporate structure or name to avoid being 
     subject to this section or for the purpose of increasing 
     payments under this title; or
       ``(C) undertaking other actions considered unnecessary for 
     effective patient care and intended to achieve maximum 
     payments under this title.
       ``(2) Tracking of patients that switch home health agencies 
     during episode.--
       ``(A) Development of system.--The Secretary shall develop a 
     system that tracks home health patients that receive home 
     health services described in subsection (a)(2) from more than 
     1 home health agency during an episode described in 
     subsection (c)(1)(D).
       ``(B) Adjustment of payments.--The Secretary shall adjust 
     payments under this section to each home health agency that 
     furnishes an individual with a type of home health service 
     described in subsection (a)(2) to ensure that aggregate 
     payments on behalf of such individual during such episode do 
     not exceed the amount that would be paid under this section 
     if the individual received such services from a single home 
     health agency.
       ``(3) Low-cost cases.--
       ``(A) In general.--The Secretary shall develop and 
     implement a system designed to adjust payments to a home 
     health agency for a fiscal year to eliminate any increase in 
     growth of the percentage distribution of low-cost episodes 
     for which home health services are furnished by the agency 
     over such percentage distribution determined for the agency 
     under subparagraph (B).
       ``(B) Distribution.--The Secretary shall profile each home 
     health agency to determine the distribution of all episodes 
     by length of stay for each agency during the agency's first 
     12-month cost reporting period beginning during fiscal year 
     1994. The Secretary shall calculate the 25th percentile 
     distribution for each agency for low-cost episodes.
       ``(C) Low-cost episode.--For purposes of this paragraph, 
     the Secretary shall define a low-cost episode in a manner 
     that provides that a home health agency has an incentive to 
     be cost efficient in delivering home health services and that 
     the volume of such services does not increase as a result of 
     factors other than patient needs.
       ``(f) Report by Prospective Payment Assessment 
     Commission.--During the first 3 years in which payments are 
     made under this section, the Prospective Payment Assessment 
     Commission shall annually submit a report to Congress on the 
     effectiveness of the payment methodology established under 
     this section that shall include recommendations regarding the 
     following:
       ``(1) Case-mix and volume increases.
       ``(2) Quality monitoring of home health agency practices.
       ``(3) Whether a capitated payment for home care patients 
     receiving care during a continuous period exceeding 165 days 
     is warranted.
       ``(4) Whether public providers of service are adequately 
     reimbursed.
       ``(5) On the adequacy of the exemptions and exceptions to 
     the limits provided under subsection (c)(1)(E).
       ``(6) The appropriateness of the methods provided under 
     this section to adjust the per episode limits and annual 
     payment updates to reflect changes in the mix of services, 
     number of visits, and assignment to case categories to 
     reflect changing patterns of home health care.
       ``(7) The geographic areas used to determine the per 
     episode limits.''.
       (b) Payment for Prosthetics and Orthotics Under Part A.--
     Section 1814(k) (42 U.S.C. 1395f(k)) is amended--
       (1) by inserting ``and prosthetics and orthotics'' after 
     ``durable medical equipment''; and
       (2) by inserting ``and 1834(h), respectively'' after 
     ``1834(a)(1)''.
       (c) Conforming Amendments.--
       (1) Payments under part a.--Section 1814(b) (42 U.S.C. 
     1395f(b)), as amended by section 7032(b), is amended in the 
     matter preceding paragraph (1) by striking ``1888 and 1888A'' 
     and inserting ``1888, 1888A, and 1893''.
       (2) Treatment of items and services paid under part b.--
       (A) Payments under part b.--Section 1833(a)(2) (42 U.S.C. 
     1395l(a)(2)) is amended--
       (i) by amending subparagraph (A) to read as follows:
       ``(A) with respect to home health services-- 

[[Page S 16221]]

       ``(i) that are a type of home health service described in 
     section 1893(a)(2), and which are furnished to an individual 
     who (at the time the item or service is furnished) is under a 
     plan of care of a home health agency, the amount determined 
     under section 1893;
       ``(ii) that are not described in clause (i) (other than a 
     covered osteoporosis drug) (as defined in section 1861(kk)), 
     the lesser of--

       ``(I) the reasonable cost of such services, as determined 
     under section 1861(v), or
       ``(II) the customary charges with respect to such 
     services;''.

       (ii) by striking ``and'' at the end of subparagraph (E);
       (iii) by adding ``and'' at the end of subparagraph (F); and
       (iv) by adding at the end the following new subparagraph:
       ``(G) with respect to items and services described in 
     section 1861(s)(10)(A), the lesser of--
       ``(i) the reasonable cost of such services, as determined 
     under section 1861(v), or
       ``(ii) the customary charges with respect to such services,

     or, if such services are furnished by a public provider of 
     services, or by another provider which demonstrates to the 
     satisfaction of the Secretary that a significant portion of 
     its patients are low-income (and requests that payment be 
     made under this provision), free of charge or at nominal 
     charges to the public, the amount determined in accordance 
     with section 1814(b)(2);''.
       (B) Requiring payment for all items and services to be made 
     to agency.--
       (i) In general.--The first sentence of section 1842(b)(6), 
     as amended by section 7035(a)(1), (42 U.S.C. 1395u(b)(6)) is 
     amended--

       (I) by striking ``and (E)'' and inserting ``(E)''; and
       (II) by striking the period at the end and inserting the 
     following: ``, and (F) in the case of types of home health 
     services described in section 1893(a)(2) furnished to an 
     individual who (at the time the item or service is furnished) 
     is under a plan of care of a home health agency, payment 
     shall be made to the agency (without regard to whether or not 
     the item or service was furnished by the agency, by others 
     under arrangement with them made by the agency, or when any 
     other contracting or consulting arrangement, or 
     otherwise).''.

       (ii) Conforming amendment.--Section 1832(a)(1) (42 U.S.C. 
     1395k(a)(1)) is amended by striking ``(2);'' and inserting 
     ``(2) and section 1842(b)(6)(F);''.
       (C) Exclusions from coverage.--Section 1862(a) (42 U.S.C. 
     1395y(a)), as amended by section 7035(a)(2)(C), is amended--
       (i) by striking ``or'' at the end of paragraph (15);
       (ii) by striking the period at the end of paragraph (16) 
     and inserting ``or''; and
       (iii) by adding at the end the following new paragraph:
       ``(17) where such expenses are for home health services 
     furnished to an individual who is under a plan of care of the 
     home health agency if the claim for payment for such services 
     is not submitted by the agency.''.
       (3) Sunset of reasonable cost limitations.--Section 
     1861(v)(1)(L) (42 U.S.C. 1395x(v)(1)(L)) is amended by adding 
     at the end the following new clause:
       ``(iv) This subparagraph shall apply only to services 
     furnished by home health agencies during cost reporting 
     periods ending on or before September 30, 1996.''.
       (d) Effective Date.--The amendments made by subsections 
     (a), (b), and (c) shall apply to cost reporting periods 
     beginning on or after October 1, 1996.

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

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

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

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

                         CHAPTER 5--RURAL AREAS

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

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

     SEC. 7072. MEDICARE RURAL HOSPITAL FLEXIBILITY PROGRAM.

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


             ``medicare rural hospital flexibility program

       ``Sec. 1820. (a) Purpose.--The purpose of this section is 
     to--
       ``(1) ensure access to health care services for rural 
     communities by allowing hospitals to be designated as 
     critical access hospitals if such hospitals limit the scope 
     of available inpatient acute care services;
       ``(2) provide more appropriate and flexible staffing and 
     licensure standards;
       ``(3) enhance the financial security of critical access 
     hospitals by requiring that medicare reimburse such 
     facilities on a reasonable cost basis; and
       ``(4) promote linkages between critical access hospitals 
     designated by the State under this section and broader 
     programs supporting the development of and transition to 
     integrated provider networks.
       ``(b) Establishment.--Any State that submits an application 
     in accordance with subsection (c) may establish a medicare 
     rural hospital flexibility program described in subsection 
     (d).
       ``(c) Application.--A State may establish a medicare rural 
     hospital flexibility program described in subsection (d) if 
     the State submits to the Secretary at such time and in such 
     form as the Secretary may require an application containing--
       ``(1) assurances that the State--
       ``(A) has developed, or is in the process of developing, a 
     State rural health care plan that--
       ``(i) provides for the creation of one or more rural health 
     networks (as defined in subsection (e)) in the State,
       ``(ii) promotes regionalization of rural health services in 
     the State, and
       ``(iii) improves access to hospital and other health 
     services for rural residents of the State;
       ``(B) has developed the rural health care plan described in 
     subparagraph (A) in consultation with the hospital 
     association of the State, rural hospitals located in the 
     State, and the State Office of Rural Health (or, in the case 
     of a State in the process of developing such plan, that 
     assures the Secretary that the State will consult with its 
     State hospital association, rural hospitals located in the 
     State, and the State Office of Rural Health in developing 
     such plan);
       ``(2) assurances that the State has designated (consistent 
     with the rural health care plan described in paragraph 
     (1)(A)), or is in the process of so designating, rural 
     nonprofit or public hospitals or facilities located in the 
     State as critical access hospitals; and
       ``(3) such other information and assurances as the 
     Secretary may require.
       ``(d) Medicare Rural Hospital Flexibility Program 
     Described.--
       ``(1) In general.--A State that has submitted an 
     application in accordance with subsection (c), may establish 
     a medicare rural hospital flexibility program that provides 
     that--
       ``(A) the State shall develop at least one rural health 
     network (as defined in subsection (e)) in the State; and
       ``(B) at least one facility in the State shall be 
     designated as a critical access hospital in accordance with 
     paragraph (2).
       ``(2) State designation of facilities.--
       ``(A) In general.--A State may designate one or more 
     facilities as a critical access hospital in accordance with 
     subparagraph (B).
       ``(B) Criteria for designation as critical access 
     hospital.--A State may designate a facility as a critical 
     access hospital if the facility--
       ``(i) is located in a county (or equivalent unit of local 
     government) in a rural area (as defined in section 
     1886(d)(2)(D)) that--

       ``(I) is located more than a 35-mile drive from a hospital, 
     or another facility described in this subsection, or
       ``(II) is certified by the State as being a necessary 
     provider of health care services to residents in the area;

       ``(ii) makes available 24-hour emergency care services that 
     a State determines are necessary for ensuring access to 
     emergency care services in each area served by a critical 
     access hospital;
       ``(iii) provides not more than 6 acute care inpatient beds 
     (meeting such standards as the Secretary may establish) for 
     providing inpatient care for a period not to exceed 72 hours 
     (unless a longer period is required because transfer to a 
     hospital is precluded because of inclement 

[[Page S 16222]]
     weather or other emergency conditions), except that a peer review 
     organization or equivalent entity may, on request, waive the 
     72-hour restriction on a case-by-case basis;
       ``(iv) meets such staffing requirements as would apply 
     under section 1861(e) to a hospital located in a rural area, 
     except that--

       ``(I) the facility need not meet hospital standards 
     relating to the number of hours during a day, or days during 
     a week, in which the facility must be open and fully staffed, 
     except insofar as the facility is required to make available 
     emergency care services as determined under clause (ii) and 
     must have nursing services available on a 24-hour basis, but 
     need not otherwise staff the facility except when an 
     inpatient is present,
       ``(II) the facility may provide any services otherwise 
     required to be provided by a full-time, on-site dietitian, 
     pharmacist, laboratory technician, medical technologist, and 
     radiological technologist on a part-time, off-site basis 
     under arrangements as defined in section 1861(w)(1), and
       ``(III) the inpatient care described in clause (iii) may be 
     provided by a physician's assistant, nurse practitioner, or 
     clinical nurse specialist subject to the oversight of a 
     physician who need not be present in the facility; and

       ``(v) meets the requirements of subparagraph (I) of 
     paragraph (2) of section 1861(aa).
       ``(e) Rural Health Network Defined.--
       ``(1) In general.--For purposes of this section, the term 
     `rural health network' means, with respect to a State, an 
     organization consisting of--
       ``(A) at least 1 facility that the State has designated or 
     plans to designate as a critical access hospital, and
       ``(B) at least 1 hospital that furnishes acute care 
     services.
       ``(2) Agreements.--
       ``(A) In general.--Each critical access hospital that is a 
     member of a rural health network shall have an agreement with 
     respect to each item described in subparagraph (B) with at 
     least 1 hospital that is a member of the network.
       ``(B) Items described.--The items described in this 
     subparagraph are the following:
       ``(i) Patient referral and transfer.
       ``(ii) The development and use of communications systems 
     including (where feasible)--

       ``(I) telemetry systems, and
       ``(II) systems for electronic sharing of patient data.

       ``(iii) The provision of emergency and non-emergency 
     transportation among the facility and the hospital.
       ``(C) Credentialing and quality assurance.--Each critical 
     access hospital that is a member of a rural health network 
     shall have an agreement with respect to credentialing and 
     quality assurance with at least 1--
       ``(i) hospital that is a member of the network;
       ``(ii) peer review organization or equivalent entity; or
       ``(iii) other appropriate and qualified entity identified 
     in the State rural health care plan.
       ``(f) Certification by the Secretary.--The Secretary shall 
     certify a facility as a critical access hospital if the 
     facility--
       ``(1) is located in a State that has established a medicare 
     rural hospital flexibility program in accordance with 
     subsection (d);
       ``(2) is designated as a critical access hospital by the 
     State in which it is located; and
       ``(3) meets such other criteria as the Secretary may 
     require.
       ``(g) Permitting Maintenance of Swing Beds.--Nothing in 
     this section shall be construed to prohibit a State from 
     designating or the Secretary from certifying a facility as a 
     critical access hospital solely because, at the time the 
     facility applies to the State for designation as a critical 
     access hospital, there is in effect an agreement between the 
     facility and the Secretary under section 1883 under which the 
     facility's inpatient hospital facilities are used for the 
     furnishing of extended care services, except that the number 
     of beds used for the furnishing of such services may not 
     exceed 12 beds (minus the number of inpatient beds used for 
     providing inpatient care in the facility pursuant to 
     subsection (d)(2)(B)(iii)). For purposes of the previous 
     sentence, the number of beds of the facility used for the 
     furnishing of extended care services shall not include any 
     beds of a unit of the facility that is licensed as a 
     distinct-part skilled nursing facility at the time the 
     facility applies to the State for designation as a critical 
     access hospital.
       ``(h) Grants.--
       ``(1) Medicare rural hospital flexibility program.--The 
     Secretary may award grants to States that have submitted 
     applications in accordance with subsection (c) for--
       ``(A) engaging in activities relating to planning and 
     implementing a rural health care plan;
       ``(B) engaging in activities relating to planning and 
     implementing rural health networks; and
       ``(C) designating facilities as critical access hospitals.
       ``(2) Rural emergency medical services.--
       ``(A) In general.--The Secretary may award grants to States 
     that have submitted applications in accordance with 
     subparagraph (B) for the establishment or expansion of a 
     program for the provision of rural emergency medical 
     services.
       ``(B) Application.--An application is in accordance with 
     this subparagraph if the State submits to the Secretary at 
     such time and in such form as the Secretary may require an 
     application containing the assurances described in 
     subparagraphs (A)(ii), (A)(iii), and (B) of subsection (c)(1) 
     and paragraph (3) of such subsection.
       ``(i) Treatment of Rural Primary Care Hospitals.--A rural 
     primary care hospital designated by the Secretary under this 
     section prior to the date of the enactment of the Balanced 
     Budget Reconciliation Act of 1995 shall receive payment under 
     this title in the same manner and amount as critical access 
     hospital certified by the Secretary under subsection (f) 
     receives payment for such services.
       ``(j) Waiver of Conflicting Part A Provisions.--The 
     Secretary is authorized to waive such provisions of this part 
     and part C as are necessary to conduct the program 
     established under this section.
       ``(k) Authorization of Appropriations.--There are 
     authorized to be appropriated from the Federal Hospital 
     Insurance Trust Fund for making grants to all States under 
     subsection (h), $25,000,000 in each of the fiscal years 1996 
     through 2000.''.
       (b) Report on Alternative to 72-Hour Rule.--Not later than 
     January 1, 1996, the Administrator of the Health Care 
     Financing Administration shall submit to the Congress a 
     report on the feasibility of, and administrative requirements 
     necessary to establish an alternative for certain medical 
     diagnoses (as determined by the Administrator) to the 72-hour 
     limitation for inpatient care in critical access hospitals 
     required by section 1820(d)(2)(B)(iii).
       (c) Continuation of MAF's.--Notwithstanding any other 
     provision of law, the Secretary of Health and Human Services 
     shall extend the Montana Medical Assistance Facility 
     Demonstration Project until December 31, 2002. The 
     demonstration project shall provide that new medical 
     assistance facilities may be designated and that all medical 
     assistance facilities shall receive reasonable cost 
     reimbursement under title XVIII of the Social Security Act 
     (42 U.S.C. 1395 et seq.) for services provided to medicare 
     beneficiaries.
       (d) Part A Amendments Relating to Rural Primary Care 
     Hospitals and Critical Access Hospitals.--
       (1) Definitions.--Section 1861(mm) (42 U.S.C. 1395x(mm)) is 
     amended to read as follows:


     ``critical access hospital; critical access hospital services

       ``(mm)(1) The term `critical access hospital' means a 
     facility certified by the Secretary as a critical access 
     hospital under section 1820(f).
       ``(2) The term `inpatient critical access hospital 
     services' means items and services, furnished to an inpatient 
     of a critical access hospital by such facility, that would be 
     inpatient hospital services if furnished to an inpatient of a 
     hospital by a hospital.''.
       (2) Coverage and payment.--(A) Section 1812(a)(1) (42 
     U.S.C. 1395d(a)(1)) is amended by striking ``or inpatient 
     rural primary care hospital services'' and inserting ``or 
     inpatient critical access hospital services''.
       (B) Sections 1813(a) and section 1813(b)(3)(A) (42 U.S.C. 
     1395e(a), 1395e(b)(3)(A)) are each amended by striking 
     ``inpatient rural primary care hospital services'' each place 
     it appears, and inserting ``inpatient critical access 
     hospital services''.
       (C) Section 1813(b)(3)(B) (42 U.S.C. 1395e(b)(3)(B)) is 
     amended by striking ``inpatient rural primary care hospital 
     services'' and inserting ``inpatient critical access hospital 
     services''.
       (D) Section 1814 (42 U.S.C. 1395f) is amended--
       (i) in subsection (a)(8) by striking ``rural primary care 
     hospital'' each place it appears and inserting ``critical 
     access hospital''; and
       (ii) in subsection (b), by striking ``other than a rural 
     primary care hospital providing inpatient rural primary care 
     hospital services,'' and inserting ``other than a critical 
     access hospital providing inpatient critical access hospital 
     services,''; and
       (iii) by amending subsection (l) to read as follows:
       ``(l) Payment for Inpatient Critical Access Hospital 
     Services.--The amount of payment under this part for 
     inpatient critical access hospital services is the reasonable 
     costs of the critical access hospital in providing such 
     services.''.
       (3) Treatment of critical access hospitals as providers of 
     services.--(A) Section 1861(u) (42 U.S.C. 1395x(u)) is 
     amended by striking ``rural primary care hospital'' and 
     inserting ``critical access hospital''.
       (B) The first sentence of section 1864(a) (42 U.S.C. 
     1395aa(a)) is amended by striking ``a rural primary care 
     hospital'' and inserting ``a critical access hospital''.
       (4) Conforming amendments.--(A) Section 1128A(b)(1) (42 
     U.S.C. 1320a-7a(b)(1)) is amended by striking ``rural primary 
     care hospital'' each place it appears and inserting 
     ``critical access hospital''.
       (B) Section 1128B(c) (42 U.S.C. 1320a-7b(c)) is amended by 
     striking ``rural primary care hospital'' and inserting 
     ``critical access hospital''.
       (C) Section 1134 (42 U.S.C. 1320b-4) is amended by striking 
     ``rural primary care hospitals'' each place it appears and 
     inserting ``critical access hospitals''.
       (D) Section 1138(a)(1) (42 U.S.C. 1320b-8(a)(1)) is 
     amended--
       (i) in the matter preceding subparagraph (A), by striking 
     ``rural primary care hospital'' and inserting ``critical 
     access hospital''; and
       (ii) in the matter preceding clause (i) of subparagraph 
     (A), by striking ``rural primary care hospital'' and 
     inserting ``critical access hospital''.
       (E) Section 1816(c)(2)(C) (42 U.S.C. 1395h(c)(2)(C)) is 
     amended by striking ``rural primary care hospital'' and 
     inserting ``critical access hospital''.
       (F) Section 1833 (42 U.S.C. 1395l) is amended--
       (i) in subsection (h)(5)(A)(iii), by striking ``rural 
     primary care hospital'' and inserting ``critical access 
     hospital'';
       (ii) in subsection (i)(1)(A), by striking ``rural primary 
     care hospital'' and inserting ``critical access hospital'';
       (iii) in subsection (i)(3)(A), by striking ``rural primary 
     care hospital services'' and inserting ``critical access 
     hospital services'';

[[Page S 16223]]

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

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

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

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

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

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

       (a) Increase in Amount of Additional Payment.--Section 
     1833(m) (42 U.S.C. 1395l(m)) is amended by striking ``10 
     percent'' and inserting ``20 percent''.
       (b) Restriction to Primary Care Services.--Section 1833(m) 
     (42 U.S.C. 1395l(m)) is amended by inserting after 
     ``physicians' services'' the following: ``consisting of 
     primary care services (as defined in section 1842(i)(4))''.
       (c) Extension of Payment for Former Shortage Areas.--
       (1) In general.--Section 1833(m) (42 U.S.C. 1395l(m)) is 
     amended by striking ``area,'' and inserting ``area (or, in 
     the case of an area for which the designation as a health 
     professional shortage area under such section is withdrawn, 
     in the case of physicians' services furnished to such an 
     individual during the 3-year period beginning on the 
     effective date of the withdrawal of such designation),''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to physicians' 

[[Page S 16224]]
     services furnished in an area for which the designation as a health 
     professional shortage area under section 332(a)(1)(A) of the 
     Public Health Service Act is withdrawn on or after January 1, 
     1996.
       (d) Requiring Carriers to Report on Services Provided.--
     Section 1842(b)(3) (42 U.S.C. 1395u(b)(3)) is amended--
       (1) by striking ``and'' at the end of subparagraph (I); and
       (2) by inserting after subparagraph (I) the following new 
     subparagraph:
       ``(J) will provide information to the Secretary (on such 
     periodic basis as the Secretary may require) on the types of 
     providers to whom the carrier makes additional payments for 
     certain physicians' services pursuant to section 1833(m), 
     together with a description of the services furnished by such 
     providers; and''.
       (e) Study.--
       (1) In general.--The Physician Payment Review Commission 
     shall conduct a study analyzing the effectiveness of the 
     provision of additional payments under part B of the medicare 
     program for physicians' services provided in health 
     professional shortage areas in recruiting physicians to 
     provide services in such areas.
       (2) Report.--Not later than 1 year after the date of the 
     enactment of this Act, the Secretary shall submit to Congress 
     a report on the study conducted under paragraph (1), and 
     shall include in the report such recommendations as the 
     Secretary considers appropriate.
       (f) Effective Date.--The amendments made by subsections 
     (a), (b), and (d) shall apply to physicians' services 
     furnished on or after October 1, 1995.

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

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

     SEC. 7076. DEMONSTRATION PROJECTS TO PROMOTE TELEMEDICINE.

       (a) Definitions.--For purposes of this section:
       (1) Rural health care provider.--The term ``rural health 
     care provider'' means any public or private health care 
     provider located in a rural area.
       (2) Nonhealth care entity.--The term ``nonhealth care 
     entity'' means any entity that is not involved in the 
     provision of health care, including a business, educational 
     institution, library, and prison.
       (b) Establishment.--The Secretary, acting through the 
     Office of Rural Health, shall award grants to eligible 
     entities to establish demonstration projects under which an 
     eligible entity establishes a rural-based consortium that 
     enables members of the consortium to utilize the 
     telecommunications network--
       (1) to strengthen the delivery of health care services in 
     the rural area through the use of telemedicine;
       (2) to provide for consultations involving transmissions of 
     detailed data about the patient that serves as a reasonable 
     substitute for face-to-face interaction between the patient 
     and consultant; and
       (3) to make outside resources or business interaction more 
     available to the rural area.
       (c) Eligible Entity.--To be eligible to receive a grant 
     under this section an applicant entity shall propose a 
     consortium that includes as members at least--
       (1) one rural health care provider; and
       (2) one nonhealth care entity located in the same rural 
     area as the rural health care provider described in paragraph 
     (1).

     The Secretary may waive the membership requirement under 
     paragraph (2) if the members described in paragraph (1) are 
     unable to locate a nonhealth care entity located in the same 
     rural area to participate in the demonstration project.
       (d) Application.--To be eligible to receive a grant under 
     this section, an eligible entity described in subsection (c) 
     shall prepare and submit to the Secretary an application at 
     such time, in such manner, and containing such information as 
     the Secretary may require, including a description of the use 
     to which the eligible entity would apply any amounts received 
     under such grant, the source and amount of non-Federal funds 
     the entity would pledge for the project, and a showing of the 
     long-term sustainability of the project.
       (e) Grants.--Grants under this section shall be distributed 
     in accordance with the following requirements:
       (1) Grant limit.--The Secretary may not make a grant to an 
     eligible entity under this section in excess of $500,000 for 
     each fiscal year in which an eligible entity conducts a 
     project under this section.
       (2) Matching funds.--
       (A) In general.--The Secretary may not make a grant to an 
     eligible entity under this section unless the eligible entity 
     agrees to provide non-Federal funds in an amount equal to not 
     less than 20 percent of the total amount to be expended by 
     the eligible entity in any fiscal year for the purpose of 
     conducting the project under this section.
       (B) Adjustments.--The Secretary shall make necessary 
     adjustments to the amount that an eligible entity may receive 
     in a subsequent fiscal year if the eligible entity does not 
     meet the requirements of subparagraph (A) in the preceding 
     fiscal year.
       (f) Use of Grant Amounts.--
       (1) In general.--Amounts received under a grant awarded 
     under this section shall be utilized for the development and 
     operation of telemedicine systems that serve rural areas. All 
     such grant funds must be used to further the provision of 
     health services to rural areas.
       (2) Rules of use.--
       (A) Permissible usages.--Grant funds awarded under this 
     section--
       (i) shall primarily be used to support the costs of 
     establishing and operating a telemedicine system that 
     provides specialty consultations to rural communities;
       (ii) may be used to demonstrate the application of 
     telemedicine for preceptorship of medical students, 
     residents, and other health professions students in rural 
     training sites;
       (iii) may be used for transmission costs, salaries, 
     maintenance of equipment, and compensation of specialists and 
     referring practitioners;
       (iv) may be used to pay the fees of consultants, but only 
     to the extent that the total of such fees does not exceed 5 
     percent of the amount of the grant;
       (v) may be used to demonstrate the use of telemedicine to 
     facilitate collaboration between nonphysician primary care 
     practitioners (including physician assistants, nurse 
     practitioners, certified nurse-midwives, and clinical nurse 
     specialists) and physicians; and
       (vi) may be used to test reimbursement methodologies under 
     the medicare program under title XVIII of the Social Security 
     Act for practitioners participating in telemedicine 
     activities.
       (B) Prohibited use of funds.--Grant funds shall not be used 
     by members of a rural-based consortium for any of the 
     following:
       (i) Expenditures to purchase or lease equipment.
       (ii) In the case of a member of a consortium that is an 
     isolated rural facility, purchase of high-cost 
     telecommunications technologies for the furnishing of 
     telemedicine services that--

       (I) incur high cost per minute of usage charges; or
       (II) require consultants to be available at the same time 
     as the patient and the referring physician.

       (iii) Purchase or installation of transmission equipment or 
     establishment or operation of a telecommunications common 
     carrier network.
       (iv) Expenditures for indirect costs (as determined by the 
     Secretary) to the extent the expenditures would exceed more 
     than 20 percent of the total grant funds.
       (v) Construction (except for minor renovations related to 
     the installation of equipment), or the acquisition or 
     building of real property.
       (g) Maintenance of Effort.--Any funds available for the 
     activities covered by a demonstration project conducted under 
     this section shall supplement, and shall not supplant, funds 
     that are expended for similar purposes under any State, 
     regional, or local program.
       (h) Evaluations.--Each eligible entity that conducts a 
     demonstration project under this section shall submit to the 
     Secretary such information and interim evaluations as the 
     Secretary may require. 

[[Page S 16225]]

       (i) Authorization of Appropriations.--There are authorized 
     to be appropriated to carry out this section, $10,000,000 for 
     each of the fiscal years 1996 through 1998.

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

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

           CHAPTER 6--HEALTH CARE FRAUD AND ABUSE PREVENTION

     SEC. 7100. SHORT TITLE.

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

             Subchapter A--Fraud and Abuse Control Program

     SEC. 7101. FRAUD AND ABUSE CONTROL PROGRAM.

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


                   ``FRAUD AND ABUSE CONTROL PROGRAM

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

       ``(I) for fiscal year 1996, $110,000,000,
       ``(II) for fiscal year 1997, $140,000,000,
       ``(III) for fiscal year 1998, $160,000,000,
       ``(IV) for fiscal year 1999, $185,000,000,
       ``(V) for fiscal year 2000, $215,000,000,
       ``(VI) for fiscal year 2001, $240,000,000, and
       ``(VII) for fiscal year 2002, $270,000,000; and

       ``(ii) with respect to all activities (including the 
     activities described in clause (i)) in carrying out such 
     purposes, not more than--

       ``(I) for fiscal year 1996, $200,000,000, and
       ``(II) for each of the fiscal years 1997 through 2002, the 
     limit for the preceding fiscal year, increased by 15 percent; 
     and

       ``(iii) for each fiscal year after fiscal year 2002, within 
     the limits for fiscal year 2002 as determined under clauses 
     (i) and (ii).
       ``(B) Use of funds.--The purposes described in this 
     subparagraph are as follows:
       ``(i) General use.--To cover the costs (including 
     equipment, salaries and benefits, and travel and training) of 
     the administration and operation of the health care fraud and 
     abuse control program established under section 1128C(a), 
     including the costs of--

       ``(I) prosecuting health care matters (through criminal, 
     civil, and administrative proceedings);
       ``(II) investigations;
       ``(III) financial and performance audits of health care 
     programs and operations;
       ``(IV) inspections and other evaluations; and
       ``(V) provider and consumer education regarding compliance 
     with the provisions of title XI.

       ``(ii) Use by state medicaid fraud control units for 
     investigation reimbursements.--To reimburse the various State 
     medicaid fraud control units upon request to the Secretary 
     for the costs of the activities authorized under section 
     2134(b).
       ``(4) Annual report.--The Secretary and the Attorney 
     General shall submit jointly an annual report to Congress on 
     the amount of revenue which is generated and disbursed, and 
     the justification for such disbursements, by the Account in 
     each fiscal year.''.

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

       (a) Crimes.--
       (1) Social security act.--Section 1128B (42 U.S.C. 1320a-
     7b) is amended as follows:
       (A) In the heading, by striking ``medicare or state health 
     care programs'' and inserting ``federal health care 
     programs''.
       (B) In subsection (a)(1), by striking ``a program under 
     title XVIII or a State health care program (as defined in 
     section 1128(h))'' and inserting ``a Federal health care 
     program''.
       (C) In subsection (a)(5), by striking ``a program under 
     title XVIII or a State health care program'' and inserting 
     ``a Federal health care program''.

[[Page S 16226]]

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

     SEC. 7103. HEALTH CARE FRAUD AND ABUSE GUIDANCE.

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


                 ``HEALTH CARE FRAUD AND ABUSE GUIDANCE

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

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

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

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

[[Page S 16227]]
     than a health care program) operated by or financed in whole or in part 
     by any Federal, State, or local government agency.''.
       (b) Individual Convicted of Felony Relating to Controlled 
     Substance.--
       (1) In general.--Section 1128(a) (42 U.S.C. 1320a-7(a)), as 
     amended by subsection (a), is amended by adding at the end 
     the following new paragraph:
       ``(4) Felony conviction relating to controlled substance.--
     Any individual or entity that has been convicted after the 
     date of the enactment of the Health Care Fraud and Abuse 
     Prevention Act of 1995, under Federal or State law, of a 
     criminal offense consisting of a felony relating to the 
     unlawful manufacture, distribution, prescription, or 
     dispensing of a controlled substance.''.
       (2) Conforming amendment.--Section 1128(b)(3) (42 U.S.C. 
     1320a-7(b)(3)) is amended--
       (A) in the heading, by striking ``Conviction'' and 
     inserting ``Misdemeanor conviction''; and
       (B) by striking ``criminal offense'' and inserting 
     ``criminal offense consisting of a misdemeanor''.

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

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

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

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

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

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

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

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

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

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

     SEC. 7117. EFFECTIVE DATE.

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

       Subchapter C--Administrative and Miscellaneous Provisions

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

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


         ``HEALTH CARE FRAUD AND ABUSE DATA COLLECTION PROGRAM

       ``Sec. 1128E. (a) General Purpose.--Not later than January 
     1, 1996, the Secretary shall establish a national health care 
     fraud and abuse data collection program for the reporting of 
     final adverse actions (not including settlements in which no 
     findings of liability have been made) against health care 
     providers, suppliers, or practitioners as required by 
     subsection (b), with access as set forth in subsection (c).
       ``(b) Reporting of Information.--
       ``(1) In general.--Each government agency and health plan 
     shall report any final adverse action (not including 
     settlements in which no findings of liability have been made) 
     taken 

[[Page S 16228]]
     against a health care provider, supplier, or practitioner.
       ``(2) Information to be reported.--The information to be 
     reported under paragraph (1) includes:
       ``(A) The name and TIN (as defined in section 7701(a)(41) 
     of the Internal Revenue Code of 1986) of any health care 
     provider, supplier, or practitioner who is the subject of a 
     final adverse action.
       ``(B) The name (if known) of any health care entity with 
     which a health care provider, supplier, or practitioner is 
     affiliated or associated.
       ``(C) The nature of the final adverse action and whether 
     such action is on appeal.
       ``(D) A description of the acts or omissions and injuries 
     upon which the final adverse action was based, and such other 
     information as the Secretary determines by regulation is 
     required for appropriate interpretation of information 
     reported under this section.
       ``(3) Confidentiality.--In determining what information is 
     required, the Secretary shall include procedures to assure 
     that the privacy of individuals receiving health care 
     services is appropriately protected.
       ``(4) Timing and form of reporting.--The information 
     required to be reported under this subsection shall be 
     reported regularly (but not less often than monthly) and in 
     such form and manner as the Secretary prescribes. Such 
     information shall first be required to be reported on a date 
     specified by the Secretary.
       ``(5) To whom reported.--The information required to be 
     reported under this subsection shall be reported to the 
     Secretary.
       ``(c) Disclosure and Correction of Information.--
       ``(1) Disclosure.--With respect to the information about 
     final adverse actions (not including settlements in which no 
     findings of liability have been made) reported to the 
     Secretary under this section respecting a health care 
     provider, supplier, or practitioner, the Secretary shall, by 
     regulation, provide for--
       ``(A) disclosure of the information, upon request, to the 
     health care provider, supplier, or licensed practitioner, and
       ``(B) procedures in the case of disputed accuracy of the 
     information.
       ``(2) Corrections.--Each Government agency and health plan 
     shall report corrections of information already reported 
     about any final adverse action taken against a health care 
     provider, supplier, or practitioner, in such form and manner 
     that the Secretary prescribes by regulation.
       ``(d) Access to Reported Information.--
       ``(1) Availability.--The information in this database shall 
     be available to Federal and State government agencies and 
     health plans pursuant to procedures that the Secretary shall 
     provide by regulation.
       ``(2) Fees for disclosure.--The Secretary may establish or 
     approve reasonable fees for the disclosure of information in 
     this database (other than with respect to requests by Federal 
     agencies). The amount of such a fee shall be sufficient to 
     recover the full costs of operating the database. Such fees 
     shall be available to the Secretary or, in the Secretary's 
     discretion to the agency designated under this section to 
     cover such costs.
       ``(e) Protection From Liability for Reporting.--No person 
     or entity, including the agency designated by the Secretary 
     in subsection (b)(5) shall be held liable in any civil action 
     with respect to any report made as required by this section, 
     without knowledge of the falsity of the information contained 
     in the report.
       ``(f) Definitions and Special Rules.--For purposes of this 
     section:
       ``(1) Final adverse action.--
       ``(A) In general.--The term `final adverse action' 
     includes:
       ``(i) Civil judgments against a health care provider, 
     supplier, or practitioner in Federal or State court related 
     to the delivery of a health care item or service.
       ``(ii) Federal or State criminal convictions related to the 
     delivery of a health care item or service.
       ``(iii) Actions by Federal or State agencies responsible 
     for the licensing and certification of health care providers, 
     suppliers, and licensed health care practitioners, 
     including--

       ``(I) formal or official actions, such as revocation or 
     suspension of a license (and the length of any such 
     suspension), reprimand, censure or probation,
       ``(II) any other loss of license or the right to apply for, 
     or renew, a license of the provider, supplier, or 
     practitioner, whether by operation of law, voluntary 
     surrender, non-renewability, or otherwise, or
       ``(III) any other negative action or finding by such 
     Federal or State agency that is publicly available 
     information.

       ``(iv) Exclusion from participation in Federal or State 
     health care programs.
       ``(v) Any other adjudicated actions or decisions that the 
     Secretary shall establish by regulation.
       ``(B) Exception.--The term does not include any action with 
     respect to a malpractice claim.
       ``(2) Practitioner.--The terms `licensed health care 
     practitioner', `licensed practitioner', and `practitioner' 
     mean, with respect to a State, an individual who is licensed 
     or otherwise authorized by the State to provide health care 
     services (or any individual who, without authority holds 
     himself or herself out to be so licensed or authorized).
       ``(3) Health care provider.--The term `health care 
     provider' means a provider of services as defined in section 
     1861(u), and any entity, including a health maintenance 
     organization, group medical practice, or any other individual 
     or entity listed by the Secretary in regulation, that 
     provides health care services.
       ``(4) Supplier.--The term `supplier' means a supplier of 
     health care items and services described in subsections (a) 
     and (b) of section 1819 and section 1861.
       ``(5) Government agency.--The term `Government agency' 
     shall include:
       ``(A) The Department of Justice.
       ``(B) The Department of Health and Human Services.
       ``(C) Any other Federal agency that either administers or 
     provides payment for the delivery of health care services, 
     including, but not limited to the Department of Defense and 
     the Veterans' Administration.
       ``(D) State law enforcement agencies.
       ``(E) State medicaid fraud control units.
       ``(F) Federal or State agencies responsible for the 
     licensing and certification of health care providers and 
     licensed health care practitioners.
       ``(6) Health plan.--The term `health plan' has the meaning 
     given such term by section 1128C(c).
       ``(7) Determination of conviction.--For purposes of 
     paragraph (1), the existence of a conviction shall be 
     determined under paragraph (4) of section 1128(j).''.
       (b) Improved Prevention in Issuance of Medicare Provider 
     Numbers.--Section 1842(r) (42 U.S.C. 1395u(r)) is amended by 
     adding at the end the following new sentence: ``Under such 
     system, the Secretary may impose appropriate fees on such 
     physicians to cover the costs of investigation and 
     recertification activities with respect to the issuance of 
     the identifiers.''.

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

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

                 Subchapter D--Civil Monetary Penalties

     SEC. 7131. SOCIAL SECURITY ACT CIVIL MONETARY PENALTIES.

       (a) General Civil Monetary Penalties.--Section 1128A (42 
     U.S.C. 1320a-7a) is amended as follows:
       (1) In the third sentence of subsection (a), by striking 
     ``programs under title XVIII'' and inserting ``Federal health 
     care programs (as defined in section 1128B(f)(1))''.
       (2) In subsection (f)--
       (A) by redesignating paragraph (3) as paragraph (4); and
       (B) by inserting after paragraph (2) the following new 
     paragraph:
       ``(3) With respect to amounts recovered arising out of a 
     claim under a Federal health care program (as defined in 
     section 1128B(f)), the portion of such amounts as is 
     determined to have been paid by the program shall be repaid 
     to the program, and the portion of such amounts attributable 
     to the amounts recovered under this section by reason of the 
     amendments made by the Health Care Fraud and Abuse Prevention 
     Act of 1995 (as estimated by the Secretary) shall be 
     deposited into the Federal Hospital Insurance Trust Fund 
     pursuant to section 1817(k)(2)(C).''.
       (3) In subsection (i)--
       (A) in paragraph (2), by striking ``title V, XVIII, XIX, or 
     XX of this Act'' and inserting ``a Federal health care 
     program (as defined in section 1128B(f))'',
       (B) in paragraph (4), by striking ``a health insurance or 
     medical services program under title XVIII or XIX of this 
     Act'' and inserting ``a Federal health care program (as so 
     defined)'', and
       (C) in paragraph (5), by striking ``title V, XVIII, XIX, or 
     XX'' and inserting ``a Federal health care program (as so 
     defined)''.
       (4) By adding at the end the following new subsection:
       ``(m)(1) For purposes of this section, with respect to a 
     Federal health care program not contained in this Act, 
     references to the Secretary in this section shall be deemed 
     to be references to the Secretary or Administrator of the 
     department or agency with jurisdiction over such program and 
     references to the Inspector General of the Department of 
     Health and Human Services in this section shall be deemed to 
     be references to the Inspector General of the applicable 
     department or agency.
       ``(2)(A) The Secretary and Administrator of the departments 
     and agencies referred to in paragraph (1) may include in any 
     action pursuant to this section, claims within the 
     jurisdiction of other Federal departments or agencies as long 
     as the following conditions are satisfied:
       ``(i) The case involves primarily claims submitted to the 
     Federal health care programs of the department or agency 
     initiating the action.
       ``(ii) The Secretary or Administrator of the department or 
     agency initiating the action gives notice and an opportunity 
     to participate in the investigation to the Inspector General 
     of the department or agency with primary jurisdiction over 
     the Federal health care programs to which the claims were 
     submitted.
       ``(B) If the conditions specified in subparagraph (A) are 
     fulfilled, the Inspector General of the department or agency 
     initiating the action is authorized to exercise all powers 
     granted under the Inspector General Act of 1978 with respect 
     to the claims submitted to the other departments or agencies 
     to the same manner and extent as provided in that Act with 
     respect to claims submitted to such departments or 
     agencies.''.
       (b) Excluded Individual Retaining Ownership or Control 
     Interest in Participating Entity.--Section 1128A(a) (42 
     U.S.C. 1320a-7a(a)) is amended--
       (1) by striking ``or'' at the end of paragraph (1)(D);
       (2) by striking ``, or'' at the end of paragraph (2) and 
     inserting a semicolon;
       (3) by striking the semicolon at the end of paragraph (3) 
     and inserting ``; or''; and
       (4) by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) in the case of a person who is not an organization, 
     agency, or other entity, is excluded from participating in a 
     program under title XVIII or a State health care program in 
     accordance with this subsection or under section 1128 

[[Page S 16229]]
     and who, at the time of a violation of this subsection, retains a 
     direct or indirect ownership or control interest of 5 percent 
     or more, or an ownership or control interest (as defined in 
     section 1124(a)(3)) in, or who is an officer or managing 
     employee (as defined in section 1126(b)) of, an entity that 
     is participating in a program under title XVIII or a State 
     health care program;''.
       (c) Modifications of Amounts of Penalties and 
     Assessments.--Section 1128A(a) (42 U.S.C. 1320a-7a(a)), as 
     amended by subsection (b), is amended in the matter following 
     paragraph (4)--
       (1) by striking ``$2,000'' and inserting ``$10,000'';
       (2) by inserting ``; in cases under paragraph (4), $10,000 
     for each day the prohibited relationship occurs'' after 
     ``false or misleading information was given''; and
       (3) by striking ``twice the amount'' and inserting ``3 
     times the amount''.
       (d) Claim for Item or Service Based on Incorrect Coding or 
     Medically Unnecessary Services.--Section 1128A(a)(1) (42 
     U.S.C. 1320a-7a(a)(1)) is amended--
       (1) in subparagraph (A) by striking ``claimed,'' and 
     inserting ``claimed, including any person who engages in a 
     pattern or practice of presenting or causing to be presented 
     a claim for an item or service that is based on a code that 
     the person knows or has reason to know will result in a 
     greater payment to the person than the code the person knows 
     or has reason to know is applicable to the item or service 
     actually provided,'';
       (2) in subparagraph (C), by striking ``or'' at the end;
       (3) in subparagraph (D), by striking ``; or'' and inserting 
     ``, or''; and
       (4) by inserting after subparagraph (D) the following new 
     subparagraph:
       ``(E) is for a medical or other item or service that a 
     person knows or has reason to know is not medically 
     necessary; or''.
       (e) Permitting Secretary To Impose Civil Monetary 
     Penalty.--Section 1128A(b) (42 U.S.C. 1320a-7a(a)) is amended 
     by adding the following new paragraph:
       ``(3) Any person (including any organization, agency, or 
     other entity, but excluding a beneficiary as defined in 
     subsection (i)(5)) who the Secretary determines has violated 
     section 1128B(b) of this title shall be subject to a civil 
     monetary penalty of not more than $10,000 for each such 
     violation. In addition, such person shall be subject to an 
     assessment of not more than twice the total amount of the 
     remuneration offered, paid, solicited, or received in 
     violation of section 1128B(b). The total amount of 
     remuneration subject to an assessment shall be calculated 
     without regard to whether some portion thereof also may have 
     been intended to serve a purpose other than one proscribed by 
     section 1128B(b).''.
       (f) Sanctions Against Practitioners and Persons for Failure 
     To Comply With Statutory Obligations.--Section 1156(b)(3) (42 
     U.S.C. 1320c-5(b)(3)) is amended by striking ``the actual or 
     estimated cost'' and inserting ``up to $10,000 for each 
     instance''.
       (g) Procedural Provisions.--Section 1876(i)(6) (42 U.S.C. 
     1395mm(i)(6)), as amended by section 7115(a)(2), is amended 
     by adding at the end the following new subparagraph:
       ``(D) The provisions of section 1128A (other than 
     subsections (a) and (b)) shall apply to a civil money penalty 
     under subparagraph (B)(i) or (C)(i) in the same manner as 
     such provisions apply to a civil money penalty or proceeding 
     under section 1128A(a).''.
       (h) Prohibition Against Offering Inducements to Individuals 
     Enrolled Under Programs or Plans.--
       (1) Offer of remuneration.--Section 1128A(a) (42 U.S.C. 
     1320a-7a(a)) is amended--
       (A) by striking ``or'' at the end of paragraph (1)(D);
       (B) by striking ``, or'' at the end of paragraph (2) and 
     inserting a semicolon;
       (C) by striking the semicolon at the end of paragraph (3) 
     and inserting ``; or''; and
       (D) by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) offers to or transfers remuneration to any individual 
     eligible for benefits under title XVIII of this Act, or under 
     a State health care program (as defined in section 1128(h)) 
     that such person knows or should know is likely to influence 
     such individual to order or receive from a particular 
     provider, practitioner, or supplier any item or service for 
     which payment may be made, in whole or in part, under title 
     XVIII, or a State health care program;''.
       (2) Remuneration defined.--Section 1128A(i) (42 U.S.C. 
     1320a-7a(i)) is amended by adding the following new 
     paragraph:
       ``(6) The term `remuneration' includes the waiver of 
     coinsurance and deductible amounts (or any part thereof), and 
     transfers of items or services for free or for other than 
     fair market value. The term `remuneration' does not include--
       ``(A) the waiver of coinsurance and deductible amounts by a 
     person, if--
       ``(i) the waiver is not offered as part of any 
     advertisement or solicitation;
       ``(ii) the person does not routinely waive coinsurance or 
     deductible amounts; and
       ``(iii) the person--

       ``(I) waives the coinsurance and deductible amounts after 
     determining in good faith that the individual is in financial 
     need;
       ``(II) fails to collect coinsurance or deductible amounts 
     after making reasonable collection efforts; or
       ``(III) provides for any permissible waiver as specified in 
     section 1128B(b)(3) or in regulations issued by the 
     Secretary;

       ``(B) differentials in coinsurance and deductible amounts 
     as part of a benefit plan design as long as the differentials 
     have been disclosed in writing to all beneficiaries, third 
     party payers, and providers, to whom claims are presented and 
     as long as the differentials meet the standards as defined in 
     regulations promulgated by the Secretary not later than 180 
     days after the date of the enactment of the Health Care Fraud 
     and Abuse Prevention Act of 1995; or
       ``(C) incentives given to individuals to promote the 
     delivery of preventive care as determined by the Secretary in 
     regulations so promulgated.''.
       (i) Effective Date.--The amendments made by this section 
     shall take effect January 1, 1996.

                Subchapter E--Amendments to Criminal Law

     SEC. 7141. HEALTH CARE FRAUD.

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

     ``Sec. 1347. Health care fraud

       ``(a) Whoever knowingly and willfully executes, or attempts 
     to execute, a scheme or artifice--
       ``(1) to defraud any health plan or other person, in 
     connection with the delivery of or payment for health care 
     benefits, items, or services; or
       ``(2) to obtain, by means of false or fraudulent pretenses, 
     representations, or promises, any of the money or property 
     owned by, or under the custody or control of, any health 
     plan, or person in connection with the delivery of or payment 
     for health care benefits, items, or services;

     shall be fined under this title or imprisoned not more than 
     10 years, or both. If the violation results in serious bodily 
     injury (as defined in section 1365(g)(3) of this title), such 
     person may be imprisoned for any term of years.
       ``(b) For purposes of this section, the term `health plan' 
     has the same meaning given such term in section 1128C(c) of 
     the Social Security Act.''.
       (2) Clerical amendment.--The table of sections at the 
     beginning of chapter 63 of title 18, United States Code, is 
     amended by adding at the end the following:

``1347. Health care fraud.''.

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

     SEC. 7142. FORFEITURES FOR FEDERAL HEALTH CARE OFFENSES.

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

[[Page S 16230]]

       (E) the payment of State and local property taxes on 
     forfeited real property that accrued between the date of the 
     violation giving rise to the forfeiture and the date of the 
     forfeiture order.

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

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

     SEC. 7144. GRAND JURY DISCLOSURE.

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

     SEC. 7145. FALSE STATEMENTS.

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

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

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

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

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

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

     ``Sec. 1518. Obstruction of criminal investigations of 
       Federal health care offenses

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

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

     SEC. 7147. THEFT OR EMBEZZLEMENT.

       (a) In General.--Chapter 31 of title 18, United States 
     Code, is amended by adding at the end the following new 
     section:

     ``Sec. 669. Theft or embezzlement in connection with health 
       care

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

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

     SEC. 7148. LAUNDERING OF MONETARY INSTRUMENTS.

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

     SEC. 7149. AUTHORIZED INVESTIGATIVE DEMAND PROCEDURES.

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

     ``Sec. 3486. Authorized investigative demand procedures

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

     ``Sec. 3486. Authorized investigative demand procedures''.

       (c) Conforming Amendment.--Section 1510(b)(3)(B) of title 
     18, United States Code, is amended by inserting ``or a 
     Department of Justice subpoena (issued under section 3486),'' 
     after ``subpoena''.
     
[[Page S 16231]]


          Subchapter F--State Health Care Fraud Control Units

     SEC. 7151. STATE HEALTH CARE FRAUD CONTROL UNITS.

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

     SEC. 7152. BENEFICIARY INCENTIVE PROGRAMS.

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

          CHAPTER 7--OTHER PROVISIONS FOR TRUST FUND SOLVENCY

     SEC. 7171. NONDISCHARGEABILITY OF CERTAIN MEDICARE DEBTS.

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

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

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

     SEC. 7190. SHORT TITLE.

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

     SEC. 7191. TRANSFORMATION OF MEDICAID PROGRAM.

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

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


                      ``table of contents of title

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

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

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

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

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

                      ``Part C--Payments to States

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

                ``Part D--Program Integrity and Quality

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

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

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

                      ``Part F--General Provisions

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

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

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

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

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

       ``(a) Description.--A medicaid plan shall include a 
     description of the strategic objectives 

[[Page S 16232]]
     and performance goals the State has established for providing health 
     care services to low-income populations under this title, 
     including a general description of the manner in which the 
     plan is designed to meet these objectives and goals.
       ``(b) Certain Objectives and Goals Required.--A medicaid 
     plan shall include strategic objectives and performance goals 
     relating to--
       ``(1) rates of childhood immunizations;
       ``(2) reductions in infant mortality and morbidity; and
       ``(3) standards of care and access to services for children 
     with special health care needs as defined by the State.
       ``(c) Considerations.--In specifying these objectives and 
     goals the State may consider factors such as the following:
       ``(1) The State's priorities with respect to providing 
     assistance to low-income populations.
       ``(2) The State's priorities with respect to the general 
     public health and the health status of individuals eligible 
     for assistance under the medicaid plan.
       ``(3) The State's financial resources, the particular 
     economic conditions in the State, and relative adequacy of 
     the health care infrastructure in different regions of the 
     State.
       ``(d) Performance Measures.--To the extent practicable--
       ``(1) one or more performance goals shall be established by 
     the State for each strategic objective identified in the 
     medicaid plan; and
       ``(2) the medicaid plan shall describe how program 
     performance will be--
       ``(A) measured through objective, independently verifiable 
     means, and
       ``(B) compared against performance goals, in order to 
     determine the State's performance under this title.
       ``(e) Period Covered.--
       ``(1) Strategic objectives.--The strategic objectives shall 
     cover a period of not less than 5 years and shall be updated 
     and revised at least every 3 years.
       ``(2) Performance goals.--The performance goals shall be 
     established for dates that are not more than 3 years apart.

     ``SEC. 2102. ANNUAL REPORTS.

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

     ``SEC. 2103. PERIODIC, INDEPENDENT EVALUATIONS.

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

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

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

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

       ``(a) Public Process.--
       ``(1) In general.--Before submitting a medicaid plan or a 
     plan amendment described in paragraph (3) to the Secretary 
     under part E, a State shall provide--
       ``(A) public notice respecting the submittal of the 
     proposed plan or amendment, including a general description 
     of the plan or amendment;
       ``(B) a means for the public to inspect or obtain a copy 
     (at reasonable charge) of the proposed plan or amendment; and
       ``(C) an opportunity for submittal and consideration of 
     public comments on the proposed plan or amendment.

     The previous sentence shall not apply to a revision of a 
     medicaid plan (or revision of an amendment to a plan) made by 
     a State under section 2153(c)(1) or to a plan amendment 
     withdrawal described in section 2153(c)(4).
       ``(2) Contents of notice.--A notice under paragraph (1)(A) 
     for a proposed plan or amendment shall include a description 
     of--
       ``(A) the general purpose of the proposed plan or 
     amendment, including applicable effective dates;
       ``(B) where the public may inspect the proposed plan or 
     amendment;
       ``(C) how the public may obtain a copy of the proposed plan 
     or amendment and the applicable charge (if any) for the copy; 
     and
       ``(D) how the public may submit comments on the proposed 
     plan or amendment, including any deadlines applicable to 
     consideration of such comments.
       ``(3) Amendments described.--An amendment to a medicaid 
     plan described in this paragraph is an amendment which makes 
     a material and substantial change in eligibility under the 
     medicaid plan or the benefits provided under the plan.
       ``(4) Publication.--Notices under this subsection may be 
     published (as selected by the 

[[Page S 16233]]
     State) in one or more daily newspapers of general circulation in the 
     State or in any publication used by the State to publish 
     State statutes or rules.
       ``(5) Comparable process.--A separate notice, or notices, 
     shall not be required under this subsection for a State if 
     notice of the medicaid plan or an amendment to the plan will 
     be provided under a process specified in State law that is 
     substantially equivalent to the notice process specified in 
     this subsection.
       ``(b) Advisory Committee.--
       ``(1) In general.--Each State with a medicaid plan shall 
     establish and maintain an advisory committee.
       ``(2) Consultation.--The State shall periodically consult 
     with the advisory committee in the development, revision, and 
     monitoring the performance of the medicaid plan, including--
       ``(A) the development of strategic objectives and 
     performance goals under section 2101;
       ``(B) the annual report under section 2102; and
       ``(C) the research design under section 2103(c).
       ``(3) Geographic diversity.--The composition of the 
     advisory committee shall be chosen in a manner that assures 
     some representation on the advisory committee of the 
     different general geographic regions of the State. Nothing in 
     the previous sentence shall be construed as requiring 
     proportional representation of geographic areas in a State.
       ``(4) Construction.--Nothing in this title shall be 
     construed as preventing a State from establishing more than 1 
     advisory committee, including specialized advisory committees 
     that focus on specific population groups, provider groups, or 
     geographic areas.

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

     ``SEC. 2111. ELIGIBILITY AND BENEFITS.

       ``(a) In General.--Each medicaid plan shall--
       ``(1) be designed to serve all political subdivisions in 
     the State;
       ``(2) provide for making medical assistance available 
     (subject to the State flexibility described in section 2115) 
     to any pregnant woman or child under the age of 13 whose 
     family income does not exceed 100 percent of the poverty line 
     applicable to a family of the size involved;
       ``(3) provide for making medical assistance available to 
     any individual receiving cash benefits under title XVI by 
     reason of disability (including blindness) or receiving 
     medical assistance under section 1902(f) (as in effect on the 
     day before the date of enactment of this Act); and
       ``(4) describe how the State will provide medical 
     assistance to any other population group.
       ``(b) Description of General Elements.--Each medicaid plan 
     shall include a description (consistent with this title) of 
     the following:
       ``(1) Elements relating to eligibility.--The general 
     eligibility standards of the plan, including--
       ``(A) any limitations as to the duration of eligibility;
       ``(B) any eligibility standards relating to age, income and 
     resources (including any standards relating to spenddowns), 
     residency, disability status, immigration status, or 
     employment status of individuals;
       ``(C) methods of establishing and continuing eligibility 
     and enrollment, including the methodology for computing 
     family income;
       ``(D) the eligibility standards in the plan that protect 
     the income and resources of a married individual who is 
     living in the community and whose spouse is residing in an 
     institution in order to prevent the impoverishment of the 
     community spouse; and
       ``(E) any other standards relating to eligibility for 
     medical assistance under the plan.
       ``(2) Scope of assistance.--The amount, duration, and scope 
     of health care services and items covered under the plan, 
     including differences among different eligible population 
     groups.
       ``(3) Delivery method.--The State's approach to delivery of 
     medical assistance, including a general description of--
       ``(A) the use (or intended use) of vouchers, fee-for-
     service, or managed care arrangements (such as capitated 
     health care plans, case management, and case coordination); 
     and
       ``(B) utilization control systems.
       ``(4) Fee-for-service benefits.--To the extent that medical 
     assistance is furnished on a fee-for-service basis--
       ``(A) how the State determines the qualifications of health 
     care providers eligible to provide such assistance; and
       ``(B) how the State determines rates of reimbursement for 
     providing such assistance.
       ``(5) Cost-sharing.--Beneficiary cost-sharing (if any), 
     including variations in such cost-sharing by population group 
     or type of service and financial responsibilities of parents 
     of recipients under 19 years of age and the spouses of 
     recipients.
       ``(6) Utilization incentives.--Incentives or requirements 
     (if any) to encourage the appropriate utilization of 
     services.
       ``(7) Support for certain hospitals.--
       ``(A) In general.--With respect to hospitals described in 
     subparagraph (B) located in the State, as reported to the 
     State by the Secretary, the medicaid plan shall include a 
     description of the extent to which provisions have been made 
     for expenditures for items and services furnished by such 
     hospitals and covered under the plan.
       ``(B) Hospitals described.--
       ``(i) In general.--Except as provided in clause (iii), a 
     hospital described in this subparagraph is a hospital 
     determined to be eligible for purposes of this title in 
     accordance with the criteria described in clause (ii) and 
     such procedures as the Secretary may require, including such 
     reporting requirements as the Secretary determines necessary 
     to ensure continuing eligibility.
       ``(ii) Criteria for eligibility.--A hospital meets the 
     criteria described in this clause if the hospital is a short-
     term acute care general hospital or a children's hospital and 
     the hospital's low-income utilization rate exceeds the lesser 
     of--

       ``(I) 1 standard deviation above the mean low-income 
     utilization rate for hospitals receiving payments under a 
     medicaid plan in the State in which such hospital is located; 
     or
       ``(II) 1\1/4\ standard deviation above the mean low-income 
     utilization rate for hospitals receiving such payments in all 
     States.

       ``(iii) Special eligibility.--A hospital not described in 
     clause (i) may be eligible for purposes of this title, if 
     upon application to the Secretary, such hospital is 
     determined by the Secretary to be a hospital which provides 
     essential access to vulnerable populations, offers special 
     services to such populations, or meets other criteria 
     consistent with this title as determined by the Secretary.
       ``(iv) Low-income utilization rate.--For purposes of clause 
     (i), the term `low-income utilization rate' means, for a 
     hospital, a fraction (expressed as a percentage), the 
     numerator of which is the hospital's number of patient days 
     attributable to patients who (for such days) were eligible 
     for medical assistance under a medicaid plan or were 
     uninsured in a period, and the denominator of which is the 
     total number of the hospital's patient days in that period.
       ``(v) Patient days.--For purposes of clause (iv), the term 
     `patient day' includes each day in which--

       ``(I) an individual, including a newborn, is an inpatient 
     in the hospital, whether or not the individual is in a 
     specialized ward and whether or not the individual remains in 
     the hospital for lack of suitable placement elsewhere; or
       ``(II) an individual makes one or more outpatient visits to 
     the hospital.

       ``(c) Immunizations for Children.--The medicaid plan shall 
     provide medical assistance for immunizations for children 
     eligible for any medical assistance under the medicaid plan, 
     in accordance with a schedule for immunizations established 
     by the Health Department of the State in consultation with 
     the individuals and entities in the State responsible for the 
     administration of the plan.
       ``(d) Family Planning Services.--The medicaid plan shall 
     provide prepregnancy planning services and supplies as 
     specified by the State.
       ``(e) Preexisting Condition Exclusions.--Notwithstanding 
     any other provision of this title--
       ``(1) a medicaid plan may not deny or exclude coverage of 
     any item or service for an eligible individual for benefits 
     under the medicaid plan for such item or service on the basis 
     of a preexisting condition; and
       ``(2) if a State contracts or makes other arrangements 
     (through the eligible individual or through another entity) 
     with a capitated health care organization, insurer, or other 
     entity, for the provision of items or services to eligible 
     individuals under the medicaid plan and the State permits 
     such organization, insurer, or other entity to exclude 
     coverage of a covered item or service on the basis of a 
     preexisting condition, the State shall provide, through its 
     medicaid plan, for such coverage (through direct payment or 
     otherwise) for any such covered item or service denied or 
     excluded on the basis of a preexisting condition.
       ``(f) Mental Health Services.--A medicaid plan shall not 
     impose treatment limits or financial requirements on mental 
     illness services which are not imposed on services for other 
     illnesses or diseases. The plan may require pre-admission 
     screening, prior authorization of services, or other 
     mechanisms limiting coverage of mental illness services to 
     services that are medically necessary.
       ``(g) Solvency Standards.--A medicaid plan shall provide 
     that any State law solvency requirements that apply to 
     private sector health plans and providers shall apply to the 
     State medicaid plan and providers under such plan.

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

       ``(a) For Targeted Low-Income Families.--
       ``(1) In general.--Subject to subsection (e), a medicaid 
     plan shall provide that the amount of funds expended under 
     the plan for medical assistance for targeted low-income 
     families (as defined in paragraph (3)) for a fiscal year 
     shall be not less than the minimum low-income-family amount 
     specified in paragraph (2).
       ``(2) Minimum low-income-family amount.--The minimum low-
     income-family amount specified in this paragraph for a State 
     is equal to 85 percent of the expenditures under title XIX 
     for medical assistance in the State during Federal fiscal 
     year 1995 which were attributable to expenditures for medical 
     assistance for mandated benefits (as defined in subsection 
     (h)) furnished to individuals--
       ``(A) who (at the time of furnishing the assistance) were 
     under 65 years of age;
       ``(B) whose coverage (at such time) under a State plan 
     under title XIX was required under Federal law; and
       ``(C) whose eligibility for such coverage (at such time) 
     was not on a basis directly related to disability status, 
     including being blind.
       ``(3) Targeted low-income family defined.--For purposes of 
     this subsection, the term `targeted low-income family' means 
     a family (which may be an individual)--
       ``(A) which includes a child or a pregnant woman; and
       ``(B) the income of which does not exceed 185 percent of 
     the poverty line applicable to a family of the size involved.
       ``(b) For Low-Income Elderly.--
       ``(1) Set-asides.--Subject to subsection (e)--
       ``(A) General set-aside.--A medicaid plan shall provide 
     that the amount of funds expended under the plan for medical 
     assistance for eligible low-income individuals who have 
     attained retirement age for a fiscal year shall be 

[[Page S 16234]]
     not less than the minimum low-income-elderly percentage specified in 
     paragraph (2)(A) of the total funds expended under the plan 
     for all medical assistance for the fiscal year.
       ``(B) Set-aside for medicare premium assistance.--A 
     medicaid plan shall provide that the amount of funds expended 
     under the plan for medical assistance for medicare cost-
     sharing described in section 2171(c)(1) for a fiscal year 
     shall be not less than the minimum medicare premium 
     assistance percentage specified in paragraph (2)(B) of the 
     total funds expended under the plan for all medical 
     assistance for the fiscal year. The medicaid plan shall 
     provide priority for making such assistance available for 
     targeted low-income elderly individuals (as defined in 
     paragraph (3)).
       ``(2) Minimum percentages.--
       ``(A) For general set-aside.--The minimum low-income-
     elderly percentage specified in this subparagraph for a State 
     is equal to 85 percent of the expenditures under title XIX 
     for medical assistance in the State during Federal fiscal 
     year 1995 (not including expenditures for such fiscal year 
     taken into account under subparagraph (B)) which was 
     attributable to expenditures for medical assistance for 
     mandated benefits furnished to individuals--
       ``(i) whose eligibility for such assistance was based on 
     their being 65 years of age or older; and
       ``(ii)(I) whose coverage (at such time) under a State plan 
     under title XIX was required under Federal law, or (II) who 
     (at such time) were residents of a nursing facility.
       ``(B) For set-aside for medicare premium assistance.--The 
     minimum medicare premium assistance percentage specified in 
     this subparagraph for a State is equal to 90 percent of the 
     average percentage of the expenditures under title XIX for 
     medical assistance in the State during Federal fiscal years 
     1993 through 1995 which was attributable to expenditures for 
     medical assistance for medicare premiums described in section 
     1905(p)(3)(A) for individuals whose coverage (at such time) 
     for such assistance for such premiums under a State plan 
     under title XIX was required under Federal law.
       ``(3) Targeted low-income elderly individual defined.--For 
     purposes of this subsection, the term `targeted low-income 
     elderly individual' means an individual who has attained 
     retirement age and whose income does not exceed 100 percent 
     of the poverty line applicable to a family of the size 
     involved.
       ``(c) For Low-Income Disabled Persons.--
       ``(1) In general.--Subject to subsection (e), a medicaid 
     plan shall provide that the amount of funds expended under 
     the plan for medical assistance for eligible low-income 
     individuals who have not attained retirement age and are 
     eligible for such assistance on the basis of a disability, 
     including being blind, for a fiscal year is not less than the 
     minimum low-income-disabled amount specified in paragraph 
     (2).
       ``(2) Minimum low-income-disabled amount.--The minimum low-
     income-disabled amount specified in this paragraph for a 
     State is equal to 85 percent of the expenditures under title 
     XIX for medical assistance in the State during Federal fiscal 
     year 1995 which were attributable to expenditures for medical 
     assistance for mandated benefits furnished to individuals--
       ``(A) whose coverage (at such time) under a State plan 
     under title XIX was required under Federal law; and
       ``(B) whose coverage (at such time) was on a basis directly 
     related to disability status, including being blind, and not 
     to age status.
       ``(d) Use of Residual Funds.--
       ``(1) In general.--Subject to limitations on payment under 
     section 2123, any funds not required to be expended under the 
     set-asides under the previous subsections may only be 
     expended under the medicaid plan for any of the following:
       ``(A) Additional medical assistance.--Medical assistance 
     for eligible low-income individuals (as defined in section 
     2171(b)), in addition to any medical assistance made 
     available under a previous subsection.
       ``(B) Medically-related services.--Payment for medically-
     related services (as defined in paragraph (2)).
       ``(C) Administration.--Payment for the administration of 
     the medicaid plan.
       ``(2) Medically-related services defined.--For purposes of 
     this title, the term `medically-related services' means 
     services reasonably related to, or in direct support of, the 
     State's attainment of one or more of the strategic objectives 
     and performance goals established under section 2101, but 
     does not include items and services included on the list 
     under section 2171(a)(1) (relating to the definition of 
     medical assistance).
       ``(e) Computations.--
       ``(1) Minimum amounts.--States shall calculate the minimum 
     amounts under subsections (a)(2), (b)(2), and (c)(2) in a 
     reasonable manner consistent with reports submitted to the 
     Secretary for the fiscal years involved.
       ``(2) Exclusion of payments for certain aliens.--For 
     purposes of this section, medical assistance attributable to 
     the exception provided under section 1903(v)(2) shall not be 
     considered to be expenditures for medical assistance.
       ``(f) Benefits Included for Purposes of Computing Set 
     Asides.--For purposes of this section, the term `mandated 
     benefits'--
       ``(1) means medical assistance for items and services 
     described in section 1905(a) to the extent such assistance 
     with respect to such items and services was required to be 
     provided under title XIX; and
       ``(2) does not include expenditures attributable to 
     disproportionate share payment adjustments described in 
     section 1923.

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

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

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

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

     unless such information is designated as proprietary and not 
     subject to public disclosure under State law; and
       ``(2) an opportunity for receiving public comment on the 
     amounts and information for which notice is provided under 
     paragraph (1).
       ``(c) Definitions.--For purposes of this title:
       ``(1) Capitated health care organization.--The term 
     `capitated health care organization' means a health 
     maintenance organization or any other entity (including a 
     health insuring organization, managed care organization, 
     prepaid health plan, integrated service network, or similar 
     entity) which under State law is permitted to accept 
     capitation payments for providing (or arranging for the 
     provision of) a group of items and services including at 
     least inpatient hospital services and physicians' services.

[[Page S 16235]]

       ``(2) Capitation payment.--The term `capitation payment' 
     means, with respect to payment, payment on a prepaid 
     capitation basis or any other risk basis to an entity for the 
     entity's provision (or arranging for the provision) of a 
     group of items and services, including at least inpatient 
     hospital services and physicians' services.

     ``SEC. 2115. CONSTRUCTION.

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

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

       ``(a) Special Treatment for Institutionalized Spouses.--
       ``(1) Supersedes other provisions.--In determining the 
     eligibility for medical assistance of an institutionalized 
     spouse (as defined in subsection (h)(1)), the provisions of 
     this section supersede any other provision of this title 
     which is inconsistent with them.
       ``(2) No comparable treatment required.--Any different 
     treatment provided under this section for institutionalized 
     spouses shall not require such treatment for other 
     individuals.
       ``(3) Does not affect certain determinations.--Except as 
     this section specifically provides, this section does not 
     apply to--
       ``(A) the determination of what constitutes income or 
     resources; or
       ``(B) the methodology and standards for determining and 
     evaluating income and resources.
       ``(b) Rules for Treatment of Income.--
       ``(1) Separate treatment of income.--During any month in 
     which an institutionalized spouse is in the institution, 
     except as provided in paragraph (2), no income of the 
     community spouse shall be deemed available to the 
     institutionalized spouse.
       ``(2) Attribution of income.--In determining the income of 
     an institutionalized spouse or community spouse for purposes 
     of the post-eligibility income determination described in 
     subsection (d), except as otherwise provided in this section 
     and regardless of any State laws relating to community 
     property or the division of marital property, the following 
     rules apply:
       ``(A) Non-trust property.--Subject to subparagraphs (C) and 
     (D), in the case of income not from a trust, unless the 
     instrument providing the income otherwise specifically 
     provides--
       ``(i) if payment of income is made solely in the name of 
     the institutionalized spouse or the community spouse, the 
     income shall be considered available only to that respective 
     spouse;
       ``(ii) if payment of income is made in the names of the 
     institutionalized spouse and the community spouse, \1/2\ of 
     the income shall be considered available to each of them; and
       ``(iii) if payment of income is made in the names of the 
     institutionalized spouse or the community spouse, or both, 
     and to another person or persons, the income shall be 
     considered available to each spouse in proportion to the 
     spouse's interest (or, if payment is made with respect to 
     both spouses and no such interest is specified, \1/2\ of the 
     joint interest shall be considered available to each spouse).
       ``(B) Trust property.--In the case of a trust--
       ``(i) except as provided in clause (ii), income shall be 
     attributed in accordance with the provisions of this title; 
     and
       ``(ii) income shall be considered available to each spouse 
     as provided in the trust, or, in the absence of a specific 
     provision in the trust--

       ``(I) if payment of income is made solely to the 
     institutionalized spouse or the community spouse, the income 
     shall be considered available only to that respective spouse,
       ``(II) if payment of income is made to both the 
     institutionalized spouse and the community spouse, \1/2\ of 
     the income shall be considered available to each of them, and
       ``(III) if payment of income is made to the 
     institutionalized spouse or the community spouse, or both, 
     and to another person or persons, the income shall be 
     considered available to each spouse in proportion to the 
     spouse's interest (or, if payment is made with respect to 
     both spouses and no such interest is specified, \1/2\ of the 
     joint interest shall be considered available to each spouse).

       ``(C) Property with no instrument.--In the case of income 
     not from a trust in which there is no instrument establishing 
     ownership, subject to subparagraph (D), \1/2\ of the income 
     shall be considered to be available to the institutionalized 
     spouse and \1/2\ to the community spouse.
       ``(D) Rebutting ownership.--The rules of subparagraphs (A) 
     and (C) are superseded to the extent that an 
     institutionalized spouse can establish, by a preponderance of 
     the evidence, that the ownership interests in income are 
     other than as provided under such subparagraphs.
       ``(c) Rules for Treatment of Resources.--
       ``(1) Computation of spousal share at time of 
     institutionalization.--
       ``(A) Total joint resources.--There shall be computed (as 
     of the beginning of the first continuous period of 
     institutionalization (beginning on or after September 30, 
     1989) of the institutionalized spouse)--
       ``(i) the total value of the resources to the extent either 
     the institutionalized spouse or the community spouse has an 
     ownership interest; and
       ``(ii) a spousal share which is equal to \1/2\ of such 
     total value.
       ``(B) Assessment.--At the request of an institutionalized 
     spouse or community spouse, at the beginning of the first 
     continuous period of institutionalization (beginning on or 
     after September 30, 1989) of the institutionalized spouse and 
     upon the receipt of relevant documentation of resources, the 
     State shall promptly assess and document the total value 
     described in subparagraph (A)(i) and shall provide a copy of 
     such assessment and documentation to each spouse and shall 
     retain a copy of the assessment for use under this section. 
     If the request is not part of an application for medical 
     assistance under a medicaid plan approved under this title, 
     the State may, at its option as a condition of providing the 
     assessment, require payment of a fee not exceeding the 
     reasonable expenses of providing and documenting the 
     assessment. At the time of providing the copy of the 
     assessment, the State shall include a notice indicating that 
     the spouse will have a right to a fair hearing under 
     subsection (e)(2).
       ``(2) Attribution of resources at time of initial 
     eligibility determination.--In determining the resources of 
     an institutionalized spouse at the time of application for 
     benefits under a medicaid plan approved under this title, 
     regardless of any State laws relating to community property 
     or the division of marital property--
       ``(A) except as provided in subparagraph (B), all the 
     resources held by either the institutionalized spouse, 
     community spouse, or both, shall be considered to be 
     available to the institutionalized spouse; and
       ``(B) resources shall be considered to be available to an 
     institutionalized spouse, but only to the extent that the 
     amount of such resources exceeds the amount computed under 
     subsection (f)(2)(A) (as of the time of application for 
     benefits).
       ``(3) Assignment of support rights.--The institutionalized 
     spouse shall not be ineligible by reason of resources 
     determined under paragraph (2) to be available for the cost 
     of care where--
       ``(A) the institutionalized spouse has assigned to the 
     State any rights to support from the community spouse;
       ``(B) the institutionalized spouse lacks the ability to 
     execute an assignment due to physical or mental impairment 
     but the State has the right to bring a support proceeding 
     against a community spouse without such assignment; or
       ``(C) the State determines that denial of eligibility would 
     work an undue hardship.
       ``(4) Separate treatment of resources after eligibility for 
     benefits established.--During the continuous period in which 
     an institutionalized spouse is in an institution and after 
     the month in which an institutionalized spouse is determined 
     to be eligible for benefits under a medicaid plan approved 
     under this title, no resources of the community spouse shall 
     be deemed available to the institutionalized spouse.
       ``(5) Resources defined.--For purposes of this section, the 
     term `resources' does not include--
       ``(A) resources excluded under subsection (a) or (d) of 
     section 1613; and
       ``(B) resources that would be excluded under section 
     1613(a)(2)(A) but for the limitation on total value described 
     in such section.
       ``(d) Protecting Income for Community Spouse.--
       ``(1) Allowances to be offset from income of 
     institutionalized spouse.--After an institutionalized spouse 
     is determined or redetermined to be eligible for medical 
     assistance under a medicaid plan approved under this title, 
     in determining the amount of the spouse's income that is to 
     be applied monthly to payment for the costs of care in the 
     institution, there shall be deducted from the spouse's 
     monthly income the following amounts in the following order:
       ``(A) A personal needs allowance (described in paragraph 
     (2)(A)), in an amount not less than the amount specified in 
     paragraph (2)(B).
       ``(B) A community spouse monthly income allowance (as 
     defined in subparagraph (3)), but only to the extent income 
     of the institutionalized spouse is made available to, or for 
     the benefit of, the community spouse.
       ``(C) A family allowance, for each family member, equal to 
     at least \1/3\ of the amount by which the amount described in 
     paragraph (4)(A)(i) exceeds the amount of the monthly income 
     of that family member.
       ``(D) Amounts for incurred expenses for medical or remedial 
     care for the institutionalized spouse as provided under 
     paragraph (6).

     For purposes of subparagraph (C), the term `family member' 
     only includes minor or dependent children, dependent parents, 
     or dependent siblings of the institutionalized or community 
     spouse who are residing with the community spouse.

[[Page S 16236]]

       ``(2) Personal needs allowance.--
       ``(A) In general.--For purposes of this section, the term 
     `personal needs allowance' means an allowance--
       ``(i) which is reasonable in amount for clothing and other 
     personal needs of the individual (or couple) while in an 
     institution; and
       ``(ii) which is not less (and may be greater) than the 
     minimum monthly personal needs allowance described in 
     subparagraph (B).
       ``(B) Minimum monthly personal needs allowance.--The 
     minimum monthly personal needs allowance described in this 
     subparagraph is $30 for an institutionalized individual and 
     $60 for an institutionalized couple (if both are aged, blind, 
     or disabled, and their incomes are considered available to 
     each other in determining eligibility).
       ``(3) Community spouse monthly income allowance defined.--
       ``(A) In general.--For purposes of this section (except as 
     provided in subparagraph (B)), the community spouse monthly 
     income allowance for a community spouse is an amount by 
     which--
       ``(i) except as provided in subsection (e), the minimum 
     monthly maintenance needs allowance (established under and in 
     accordance with paragraph (4)) for the spouse; exceeds
       ``(ii) the amount of monthly income otherwise available to 
     the community spouse (determined without regard to such an 
     allowance).
       ``(B) Court ordered support.--If a court has entered an 
     order against an institutionalized spouse for monthly income 
     for the support of the community spouse, the community spouse 
     monthly income allowance for the spouse shall be not less 
     than the amount of the monthly income so ordered.
       ``(4) Establishment of minimum monthly maintenance needs 
     allowance.--
       ``(A) In general.--Each State shall establish a minimum 
     monthly maintenance needs allowance for each community spouse 
     which, subject to subparagraph (C), is equal to or exceeds--
       ``(i) the applicable percent (described in subparagraph 
     (B)) of \1/12\ of the poverty line applicable to a family 
     unit of 2 members); plus
       ``(ii) an excess shelter allowance (as defined in paragraph 
     (5)).

     A revision of the poverty line referred to in clause (i) 
     shall apply to medical assistance furnished during and after 
     the second calendar quarter that begins after the date of 
     publication of the revision.
       ``(B) Applicable percent.--For purposes of subparagraph 
     (A)(i), the applicable percent described in this paragraph, 
     effective as of July 1, 1992, is 150 percent.
       ``(C) Cap on minimum monthly maintenance needs allowance.--
     The minimum monthly maintenance needs allowance established 
     under subparagraph (A) may not exceed $1,500 (subject to 
     adjustment under subsections (e) and (g)).
       ``(5) Excess shelter allowance defined.--For purposes of 
     paragraph (4)(A)(ii), the term `excess shelter allowance' 
     means, for a community spouse, the amount by which the sum 
     of--
       ``(A) the spouse's expenses for rent or mortgage payment 
     (including principal and interest), taxes and insurance and, 
     in the case of a condominium or cooperative, required 
     maintenance charge, for the community spouse's principal 
     residence; and
       ``(B) the standard utility allowance (used by the State 
     under section 5(e) of the Food Stamp Act of 1977) or, if the 
     State does not use such an allowance, the spouse's actual 
     utility expenses,

     exceeds 30 percent of the amount described in paragraph 
     (4)(A)(i), except that, in the case of a condominium or 
     cooperative, for which a maintenance charge is included under 
     subparagraph (A), any allowance under subparagraph (B) shall 
     be reduced to the extent the maintenance charge includes 
     utility expenses.
       ``(6) Incurred expenses.--For purposes of this section, 
     with respect to the post-eligibility treatment of income of 
     individuals who are institutionalized or who would otherwise 
     require institutionalization but for the provision of home or 
     community-based services, there shall be disregarded 
     reparation payments made by the Federal Republic of Germany 
     and, there shall be taken into account amounts for incurred 
     expenses for medical or remedial care that are not subject to 
     payment by a third party, including--
       ``(A) medicare and other health insurance premiums, 
     deductibles, or coinsurance; and
       ``(B) necessary medical or remedial care recognized under 
     State law but not covered under the medicaid plan approved 
     under this title, subject to reasonable limits the State may 
     establish on the amount of these expenses.
       ``(e) Notice and Fair Hearing.--
       ``(1) Notice.--Upon--
       ``(A) a determination of eligibility for medical assistance 
     under a medicaid plan approved under this title of an 
     institutionalized spouse; or
       ``(B) a request by either the institutionalized spouse, or 
     the community spouse, or a representative acting on behalf of 
     either spouse;

     each State shall notify both spouses (in the case described 
     in subparagraph (A)) or the spouse making the request (in the 
     case described in subparagraph (B)) of the amount of the 
     community spouse monthly income allowance (described in 
     subsection (d)(1)(B)), of the amount of any family allowances 
     (described in subsection (d)(1)(C)), of the method for 
     computing the amount of the community spouse resources 
     allowance permitted under subsection (f), and of the spouse's 
     right to a fair hearing under this subsection respecting 
     ownership or availability of income or resources, and the 
     determination of the community spouse monthly income or 
     resource allowance.
       ``(2) Fair hearing.--
       ``(A) In general.--If either the institutionalized spouse 
     or the community spouse is dissatisfied with a determination 
     of--
       ``(i) the community spouse monthly income allowance;
       ``(ii) the amount of monthly income otherwise available to 
     the community spouse (as applied under subsection (d)(2)(B));
       ``(iii) the computation of the spousal share of resources 
     under subsection (c)(1);
       ``(iv) the attribution of resources under subsection 
     (c)(2); or
       ``(v) the determination of the community spouse resource 
     allowance (as determined under subsection (f)(2));

     such spouse is entitled to a fair hearing with respect to 
     such determination if an application for benefits under a 
     medicaid plan approved under this title has been made on 
     behalf of the institutionalized spouse. Any such hearing 
     respecting the determination of the community spouse resource 
     allowance shall be held within 30 days of the date of the 
     request for the hearing.
       ``(B) Revision of minimum monthly maintenance needs 
     allowance.--If either such spouse establishes that the 
     community spouse needs income, above the level otherwise 
     provided by the minimum monthly maintenance needs allowance, 
     due to exceptional circumstances resulting in significant 
     financial duress, there shall be substituted, for the minimum 
     monthly maintenance needs allowance in subsection (d)(2)(A), 
     an amount adequate to provide such additional income as is 
     necessary.
       ``(C) Revision of community spouse resource allowance.--If 
     either such spouse establishes that the community spouse 
     resource allowance (in relation to the amount of income 
     generated by such an allowance) is inadequate to raise the 
     community spouse's income to the minimum monthly maintenance 
     needs allowance, there shall be substituted, for the 
     community spouse resource allowance under subsection (f)(2), 
     an amount adequate to provide such a minimum monthly 
     maintenance needs allowance.
       ``(f) Permitting Transfer of Resources to Community 
     Spouse.--
       ``(1) In general.--An institutionalized spouse may transfer 
     an amount equal to the community spouse resource allowance 
     (as determined under paragraph (2)), but only to the extent 
     the resources of the institutionalized spouse are transferred 
     to, or for the sole benefit of, the community spouse. The 
     transfer under the preceding sentence shall be made as soon 
     as practicable after the date of the initial determination of 
     eligibility, taking into account such time as may be 
     necessary to obtain a court order under paragraph (3).
       ``(2) Community spouse resource allowance determined.--For 
     purposes of paragraph (1), the community spouse resource 
     allowance for a community spouse is an amount (if any) by 
     which--
       ``(A) the greatest of--
       ``(i) $12,000 (subject to adjustment under subsection (g)), 
     or, if greater (but not to exceed the amount specified in 
     clause (ii)(II)) an amount specified under the State plan,
       ``(ii) the lesser of (I) the spousal share computed under 
     subsection (c)(1), or (II) $60,000 (subject to adjustment 
     under subsection (g)),
       ``(iii) the amount established under subsection (e)(2); or
       ``(iv) the amount transferred under a court order under 
     paragraph (3);
     exceeds
       ``(B) the amount of the resources otherwise available to 
     the community spouse (determined without regard to such an 
     allowance).
       ``(g) Indexing Dollar Amounts.--For services furnished 
     during a calendar year after 1989, the dollar amounts 
     specified in subsections (d)(3)(C), (f)(2)(A)(i), and 
     (f)(2)(A)(ii)(II) shall be increased by the same percentage 
     as the percentage increase in the consumer price index for 
     all urban consumers (all items; U.S. city average) between 
     September 1988 and the September before the calendar year 
     involved.
       ``(h) Definitions.--For purposes of this section:
       ``(1) Institutionalized spouse.--The term 
     `institutionalized spouse' means an individual who is in a 
     medical institution or nursing facility and is married to a 
     spouse who is not in a medical institution or nursing 
     facility. The term does not include any such individual who 
     is not likely to meet the requirements of the preceding 
     sentence for at least 30 consecutive days.
       ``(2) Community spouse.--The term `community spouse' means 
     the spouse of an institutionalized spouse.

                      ``Part C--Payments to States

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

       ``(a) Allotments.--
       ``(1) Computation.--The Secretary shall provide for the 
     computation of State obligation and outlay allotments in 
     accordance with this section for each fiscal year beginning 
     with fiscal year 1996.
       ``(2) Limitation on obligations.--
       ``(A) In general.--Subject to subparagraph (B), the 
     Secretary shall not enter into obligations with any State 
     under this title for a fiscal year in excess of the 
     obligation allotment for that State for the fiscal year under 
     paragraph (4). The sum of such obligation allotments for all 
     States in any fiscal year (excluding amounts carried over 
     under subparagraph (B) and excluding changes in allotments 
     effected under paragraph (4)(D)) shall not exceed the 
     aggregate limit on new obligation authority specified in 
     paragraph (3) for that fiscal year.
       ``(B) Adjustments.--
       ``(i) Carryover of allotment permitted.--If the amount of 
     obligations entered into under this part with a State for 
     quarters in a fiscal year is less than the amount of the 
     obligation allotment under this section to the State for the 
     fiscal year, the amount of the difference shall be added to 
     the amount of the State obligation allotment otherwise 
     provided under this section for the succeeding fiscal year.

[[Page S 16237]]

       ``(ii) Reduction for post-enactment new obligations under 
     title xix in fiscal year 1996.--The amount of the obligation 
     allotment otherwise provided under this section for fiscal 
     year 1996 for a State shall be reduced by the amount of the 
     obligations entered into with respect to the State under 
     section 1903(a) after the date of the enactment of this 
     title.
       ``(3) Aggregate limit on new obligation authority.--
       ``(A) In general.--For purposes of this subsection, subject 
     to subparagraph (C), the aggregate limit on new obligation 
     authority, for a fiscal year, is the pool amount under 
     subsection (b) for the fiscal year, divided by the payout 
     adjustment factor (described in subparagraph (B)) for the 
     fiscal year.
       ``(B) Payout adjustment factor.--For purposes of this 
     subsection, the payout adjustment factor--
       ``(i) for fiscal year 1996 is .950;
       ``(ii) for fiscal year 1997 is .986; and
       ``(iii) for a subsequent fiscal year is .998.
       ``(C) Transitional adjustment for pre-enactment-obligation 
     outlays.--In order to account for pre-enactment-obligation 
     outlays described in paragraph (4)(C)(iv), in determining the 
     aggregate limit on new obligation authority under 
     subparagraph (A) for fiscal year 1996, the pool amount for 
     such fiscal year is equal to--
       ``(i) the pool amount for such year; reduced by
       ``(ii) $24.624 billion.
       ``(4) Obligation allotments.--
       ``(A) General rule for 50 states and the district of 
     columbia.--Except as provided in this paragraph, the 
     obligation allotment for any of the 50 States or the District 
     of Columbia for a fiscal year (beginning with fiscal year 
     1997) is an amount that bears the same ratio to the outlay 
     allotment under subsection (c)(2) for such State or District 
     (not taking into account any adjustment due to an election 
     under paragraph (4)) for the fiscal year as the ratio of--
       ``(i) the aggregate limit on new obligation authority (less 
     the total of the obligation allotments under subparagraph 
     (B)) for the fiscal year; to
       ``(ii) the pool amount (less the sum of the outlay 
     allotments for the territories) for such fiscal year.
       ``(B) Territories.--The obligation allotment for each of 
     the Commonwealths and territories for a fiscal year is the 
     outlay allotment for such Commonwealth or territory (as 
     determined under subsection (c)(5)) for the fiscal year 
     divided by the payout adjustment factor for the fiscal year 
     (as defined in paragraph (3)(B)).
       ``(C) Transitional rule for fiscal year 1996.--
       ``(i) In general.--The obligation amount for fiscal year 
     1996 for any State, including the District of Columbia, a 
     Commonwealth, or territory, is determined according to the 
     formula: A=(B-C)/D, where--

       ``(I) `A' is the obligation amount for such State;
       ``(II) `B' is the outlay allotment of such State for fiscal 
     year 1996 (as determined under subsection (c));
       ``(III) `C' is the amount of the pre-enactment-obligation 
     outlays (as established for such State under clause (ii)); 
     and
       ``(IV) `D' is the payout adjustment factor for such fiscal 
     year (as defined in paragraph (3)(B)).

       ``(ii) Pre-enactment-obligation outlay amounts.--Within 30 
     days after the date of the enactment of this title, the 
     Secretary shall estimate (based on the best data available) 
     and publish in the Federal Register the amount of the pre-
     enactment-obligation outlays (as defined in clause (iv)) for 
     each State, including the District of Columbia, 
     Commonwealths, and territories. The total of such amounts 
     shall equal the dollar amount specified in paragraph 
     (3)(C)(ii).
       ``(iii) Agreement.--The submission of a medicaid plan by a 
     State under this title is deemed to constitute the State's 
     acceptance of the obligation allotment limitations under this 
     subsection, including the formula for computing the amount of 
     such obligation allotment.
       ``(iv) Pre-enactment-obligation outlays defined.--For 
     purposes of this subsection, the term `pre-enactment-
     obligation outlays' means, for a State, the outlays of the 
     Federal Government that result from obligations that have 
     been incurred under title XIX with respect to the State 
     before the date of the enactment of this title, but for which 
     payments to States have not been made as of such date of 
     enactment.
       ``(D) Adjustment to reflect adoption of alternative growth 
     formula.--Any State that has elected an alternative growth 
     formula under subsection (c)(4) which increases or decreases 
     the dollar amount of an outlay allotment for a fiscal year is 
     deemed to have increased or decreased, respectively, its 
     obligation amount for such fiscal year by the amount of such 
     increase or decrease.
       ``(b) Pool of Available Funds.--
       ``(1) In general.--For purposes of this section and subject 
     to section 2124, the pool amount under this subsection for--
       ``(A) fiscal year 1996 is $97,245,440,000;
       ``(B) fiscal year 1997 is $102,607,730,702;
       ``(C) fiscal year 1998 is $106,712,039,930;
       ``(D) fiscal year 1999 is $110,980,521,527;
       ``(E) fiscal year 2000 is $115,419,742,389;
       ``(F) fiscal year 2001 is $120,036,532,084;
       ``(G) fiscal year 2002 is $124,837,993,367; and
       ``(H) each subsequent fiscal year is the pool amount under 
     this paragraph for the previous fiscal year increased by the 
     lesser of 4 percent or the annual percentage increase in the 
     gross domestic product for the 12-month period ending in June 
     before the beginning of that subsequent fiscal year.
       ``(2) National medicaid growth percentage.--For purposes of 
     this section for a fiscal year (beginning with fiscal year 
     1997), the national medicaid growth percentage is the 
     percentage by which--
       ``(A) the pool amount under paragraph (1) for the fiscal 
     year; exceeds
       ``(B) such pool amount for the previous fiscal year.
       ``(c) State Outlay Allotments.--
       ``(1) Fiscal year 1996.--
       ``(A) In general.--Except as provided in paragraph (6), for 
     each of the 50 States and the District of Columbia, the 
     amount of the State outlay allotment under this subsection 
     for fiscal year 1996, subject to paragraph (4), is 109 
     percent of--
       ``(i) the greatest of--

       ``(I) the total amount of Federal expenditures (minus the 
     amount paid under section 1923) made to such State or 
     District under title XIX for the 4 quarters in fiscal year 
     1995,
       ``(II) 103.379859 percent of the total amount of Federal 
     expenditures made to such State or District under title XIX 
     for the 4 quarters in fiscal year 1994, or
       ``(III) 95 percent of the total amount of Federal 
     expenditures (minus the amount paid under section 1923) made 
     to such State or District under title XIX for the 4 quarters 
     in fiscal year 1993; multiplied by

       ``(ii) the scalar factor described in subparagraph (D).
       ``(B) Computation of expenditures.--The amount of Federal 
     expenditures described in subparagraph (A)(i) shall be 
     computed, using data reported for the appropriate fiscal year 
     on line 11 of the HCFA Form 64.
       ``(C) Limitation on adjustment.--The amount computed under 
     subparagraph (B) shall not be subject to adjustment (based on 
     any subsequent disallowances or otherwise).
       ``(D) Scalar factor.--The scalar factor under this 
     subparagraph for fiscal year 1996 is the ratio of 
     $89,216,000,000 to the total amount of Federal expenditures 
     (minus the amount paid under section 1923) made to all States 
     and the District of Columbia for the 4 quarters in fiscal 
     year 1995.
       ``(2) Computation of state outlay allotments.--
       ``(A) In general.--Subject to the succeeding provisions of 
     this subsection, the amount of the State outlay allotment 
     under this subsection for each of the 50 States and the 
     District of Columbia for a fiscal year (beginning with fiscal 
     year 1997) is equal to the product of--
       ``(i) the needs-based amount determined under subparagraph 
     (B) for such State or District for the fiscal year; and
       ``(ii) the scalar factor described in subparagraph (C) for 
     the fiscal year.
       ``(B) Needs-based amount.--The needs-based amount under 
     this subparagraph for a State or the District of Columbia for 
     a fiscal year is equal to the product of--
       ``(i) the State's or District's aggregate expenditure need 
     for the fiscal year (as determined under subsection (d)); and
       ``(ii) the State's or District's Federal medical assistance 
     percentage (as determined under section 2122(c) (without 
     regard to paragraph (3)(A)(i) thereof)) for the previous 
     fiscal year (or, in the case of fiscal year 1997, the Federal 
     medical assistance percentage determined under section 
     1905(b) for fiscal year 1996).
       ``(C) Scalar factor.--The scalar factor under this 
     subparagraph for a fiscal year is such proportion so that, 
     when it is applied under subparagraph (A)(ii) for the fiscal 
     year (taking into account the floors and ceilings under 
     paragraph (3)), the total of the outlay allotments under this 
     subsection for all the 50 States and the District of Columbia 
     for the fiscal year (not taking into account any increase or 
     decrease in an outlay allotment for a fiscal year 
     attributable to the election of an alternative growth formula 
     under paragraph (4)) is equal to the amount by which (i) the 
     pool amount for the fiscal year (as determined under 
     subsection (b)), exceeds (ii) the sum of the outlay 
     allotments provided under paragraph (5) for the Commonwealths 
     and territories for the fiscal year.
       ``(3) Floors and ceilings.--
       ``(A) Floor.--
       ``(i) In general.--In no case shall the amount of the State 
     outlay allotment under paragraph (2) for a fiscal year be 
     less than the greatest of--

       ``(I) 102 percent of the amount of the State outlay 
     allotment under this subsection for the preceding fiscal 
     year;
       ``(II) .26 percent of the pool amount for such fiscal year; 
     or
       ``(III) in the case of a State or District with an outlay 
     allotment under this subsection for fiscal year 1998 that 
     exceeds 103.8 percent of such State's or District's outlay 
     allotment for 1997, the applicable percentage, as determined 
     under clause (ii), of the amount of the State outlay 
     allotment under this subsection for the preceding fiscal 
     year.

       ``(ii) Applicable percentage.--The applicable percentage 
     determined under this clause is as follows:

       ``(I) For fiscal year 1999, 104.25 percent.
       ``(II) For fiscal years 2000 and 2001, 104 percent.
       ``(III) For fiscal year 2002, 103.4 percent.

       ``(B) Ceiling.--
       ``(i) In general.--In no case shall the amount of the State 
     outlay allotment under paragraph (2) for a fiscal year be 
     greater than the product of--

       ``(I) the State outlay allotment under this subsection for 
     the State or the District of Columbia for the preceding 
     fiscal year; and
       ``(II) the applicable percentage of the national medicaid 
     growth percentage (as determined under subsection (b)(2)) for 
     the fiscal year involved.

       ``(ii) Applicable percentage.--For purposes of clause 
     (i)(II), the applicable percentage is--

       ``(I) for fiscal year 1997, 125.5 percent;
       ``(II) for fiscal year 1998, 132 percent;
       ``(III) for fiscal year 1999, 151 percent;
       ``(IV) for fiscal year 2000, 156 percent;
       ``(V) for fiscal year 2001, 144 percent;

[[Page S 16238]]

       ``(VI) for fiscal year 2002, 146 percent.

       ``(4) Election of alternative growth formula.--
       ``(A) Election.--In order to reduce variations in increases 
     or decreases in outlay allotments over time, any of the 50 
     States or the District of Columbia may elect (by notice 
     provided to the Secretary by not later than April 1, 1996) to 
     adopt an alternative growth rate formula under this paragraph 
     for the determination of such State's or District's outlay 
     allotment in fiscal year 1996 and for the increase or 
     decrease in the amount of such allotment in subsequent fiscal 
     years.
       ``(B) Formula.--The alternative growth formula under this 
     paragraph may be any formula under which--
       ``(i) a portion of the State outlay allotment for fiscal 
     year 1996 under paragraph (1) is deferred and applied to 
     increase the amount of its outlay allotment for one or more 
     subsequent fiscal years, so long as the total amount of such 
     increases for all such subsequent fiscal years does not 
     exceed the amount of the outlay allotment deferred from 
     fiscal year 1996; or
       ``(ii) a portion of the State outlay allotment for one or 
     more of the 3 fiscal years immediately following fiscal year 
     1996 under paragraph (2) is applied to increase the amount of 
     its outlay allotment for fiscal year 1996, so long as the 
     total amount of such increase does not exceed 25 percent of 
     the amount of the outlay allotment for fiscal year 1996 
     otherwise determined under paragraph (1).
       ``(5) Commonwealths and territories.--The outlay allotment 
     for each of the Commonwealths and territories for a fiscal 
     year is the maximum amount that could have been certified 
     under section 1108(c) with respect to the Commonwealth or 
     territory for the fiscal year with respect to title XIX, if 
     the national medicaid growth percentage (as determined under 
     subsection (b)(2)) for the fiscal year had been substituted 
     (beginning with fiscal year 1997) for the percentage increase 
     referred to in section 1108(c)(1)(B).
       ``(6) Special rule.--
       ``(A) In general.--Notwithstanding the preceding paragraphs 
     of this subsection, the State outlay allotment for--
       ``(i) New Hampshire for each of the fiscal years 1996 
     through 2000, is $360,000,000; and
       ``(ii) Louisiana for each of the fiscal years 1996 through 
     2000, is $2.622 billion.
       ``(B) Exception.--A State described in subparagraph (A) may 
     apply to the Secretary for use of the State outlay allotment 
     otherwise determined under this subsection for any fiscal 
     year, if such State notifies the Secretary not later than 
     March 1 preceding such fiscal year that such State will be 
     able to expend sufficient State funds in such fiscal year to 
     qualify for such allotment.
       ``(d) Aggregate Expenditure Need Determined.--
       ``(1) In general.--For purposes of subsection (c), the 
     aggregate expenditure need for a State or the District of 
     Columbia for a fiscal year is equal to the product of the 
     following 4 factors:
       ``(A) Residents in poverty.--The average annual number of 
     residents in poverty of such State or District with respect 
     to the fiscal year (as determined under paragraph (2)).
       ``(B) Case mix index.--The average of the case mix indexes 
     for such State or District (as determined under paragraph 
     (3)) for the 3 most recent fiscal years for which data are 
     available.
       ``(C) Input cost index.--The average of the input cost 
     indexes for such State or District (as determined under 
     paragraph (4)) for the 3 most recent fiscal years for which 
     data are available.
       ``(D) National average spending per resident in poverty.--
     The national average spending per resident in poverty (as 
     determined under paragraph (5)).
       ``(2) Residents in poverty.--For purposes of this section:
       ``(A) In general.--The term `average annual number of 
     residents in poverty' means, with respect to a State or the 
     District of Columbia and a fiscal year, the average annual 
     number of residents in poverty (as defined in subparagraph 
     (B)) in such State or District (based on data made generally 
     available by the Bureau of the Census from the Current 
     Population Survey) for the most recent 3-calendar-year period 
     (ending before the fiscal year) for which such data are 
     available.
       ``(B) Resident in poverty defined.--The term `resident in 
     poverty' means an individual described in section 
     1614(a)(1)(B)(i) whose family income does not exceed 100 
     percent of the poverty line for the year involved applicable 
     to a family of the size involved threshold.
       ``(3) Case mix index.--
       ``(A) In general.--For purposes of this subsection, the 
     case mix index for a State or the District of Columbia for a 
     fiscal year is equal to--
       ``(i) the sum of--

       ``(I) the per recipient expenditures with respect to 
     elderly individuals in such State or District for the fiscal 
     year (determined under subparagraph (B)),
       ``(II) the per recipient expenditures with respect to the 
     blind and disabled individuals in such State or District for 
     the fiscal year (determined under subparagraph (C)), and
       ``(III) the per recipient expenditures with respect to 
     other individuals in such State or District (determined under 
     subparagraph (D));

     divided by--
       ``(ii) the national average spending per recipient 
     determined under subparagraph (E) for the fiscal year 
     involved.
       ``(B) Per recipient expenditures for the elderly.--For 
     purposes of subparagraph (A)(I)(i), the per recipient 
     expenditures with respect to elderly individuals in a State 
     or the District of Columbia for a fiscal year is equal to the 
     product of--
       ``(i) the national average per recipient expenditures under 
     this title in the 50 States and the District of Columbia for 
     the most recent fiscal year for which data are available for 
     individuals who have attained retirement age; and
       ``(ii) the proportion, of all individuals who received 
     medical assistance under this title in such State or District 
     in the most recent fiscal year referred to in clause (i), 
     that were individuals described in such clause.
       ``(C) Per recipient expenditures for the blind and 
     disabled.--For purposes of subparagraph (A)(i)(II), the per 
     recipient expenditures with respect to blind and disabled 
     individuals in a State or the District of Columbia for a 
     fiscal year is equal to the product of--
       ``(i) the national average per recipient expenditures under 
     this title in the 50 States and the District of Columbia for 
     the most recent fiscal year for which data are available for 
     individuals who are eligible for medical assistance because 
     such individuals are blind or disabled and under retirement 
     age; and
       ``(ii) the proportion, of all individuals who received 
     medical assistance under this title in such State or District 
     in the most recent fiscal year referred to in clause (i), 
     that were individuals described in such clause.
       ``(D) Per recipient expenditures for other individuals.--
     For purposes of subparagraph (A)(i)(III), the per recipient 
     expenditures with respect to other individuals in a State or 
     the District of Columbia for a fiscal year is equal to the 
     product of--
       ``(i) the national average per recipient expenditures under 
     this title in the 50 States and the District of Columbia for 
     the most recent fiscal year for which data are available for 
     individuals who are not described in subparagraph (B)(i) or 
     (C)(i); and
       ``(ii) the proportion, of all individuals who received 
     medical assistance under this title in such State or District 
     in the most recent fiscal year referred to in clause (i), 
     that were individuals described in such clause.
       ``(E) National average spending per recipient.--For 
     purposes of this paragraph, the national average expenditures 
     per recipient for a fiscal year is equal to the sum of--
       ``(i) the product of (I) the national average described in 
     subparagraph (B)(i), and (II) the proportion, of all 
     individuals who received medical assistance under this title 
     in any of the 50 States or the District of Columbia in the 
     fiscal year referred to in such subparagraph, who are 
     described in such subparagraph;
       ``(ii) the product of (I) the national average described in 
     subparagraph (C)(i), and (II) the proportion, of all 
     individuals who received medical assistance under this title 
     in any of the 50 States or the District of Columbia in the 
     fiscal year referred to in such subparagraph, who are 
     described in such subparagraph; and
       ``(iii) the product of (I) the national average described 
     in subparagraph (D)(i), and (II) the proportion, of all 
     individuals who received medical assistance under this title 
     in any of the 50 States or the District of Columbia in the 
     fiscal year referred to in such subparagraph, who are 
     described in such subparagraph.
       ``(F) Determination of national averages and proportions.--
       ``(i) In general.--The national averages per recipient and 
     the proportions referred to in clauses (i) and (ii), 
     respectively, of subparagraphs (B), (C), and (D) and 
     subparagraph (E) shall be determined by the Secretary using 
     the most recent data available.
       ``(ii) Use of medicaid data.--If for a fiscal year there is 
     inadequate data to compute such averages and proportions 
     based on expenditures and numbers of individuals receiving 
     medical assistance under this title, the Secretary may 
     compute such averages based on expenditures and numbers of 
     such individuals under title XIX for the most recent fiscal 
     year for which data are available and, for this purpose--

       ``(I) any reference in subparagraph (B)(i) to `individuals 
     who have attained retirement age' is deemed a reference to 
     `individuals whose eligibility for medical assistance is 
     based on having attained retirement age';
       ``(II) the reference in subparagraph (C)(i) to `and under 
     retirement age' shall be considered to be deleted; and
       ``(III) individuals whose basis for eligibility for medical 
     assistance was reported as unknown shall not be counted as 
     individuals under subparagraph (D)(i).

       ``(iii) Expenditure defined.--For purposes of this 
     paragraph, the term `expenditure' means expenditures for 
     medical assistance under the medicaid plan, other than 
     medical assistance attributable to disproportionate share 
     payment adjustments described in section 2111(b)(7) (or 
     section 1923, in the case of fiscal year 1995).
       ``(4) Input cost index.--
       ``(A) In general.--For purposes of this section, the input 
     cost index for a State or the District of Columbia for a 
     fiscal year is the sum of--
       ``(i) 0.15; and
       ``(ii) 0.85 multiplied by the ratio of (I) the annual 
     average wages for hospital employees in such State or 
     District for the fiscal year (as determined under 
     subparagraph (B)), to (II) the annual average wages for 
     hospital employees in the 50 States and the District of 
     Columbia for such year (as determined under such 
     subparagraph).
       ``(B) Determination of annual average wages of hospital 
     employees.--The Secretary shall provide for the determination 
     of annual average wages for hospital employees in a State or 
     the District of Columbia and, collectively, in the 50 States 
     and the District of Columbia for a fiscal year based on the 
     area wage data applicable to hospitals under 1886(d)(2)(E) 
     (or, if such data no longer exists, comparable data of 
     hospital wages) for the fiscal year involved.
       ``(5) National average spending per resident in poverty.--
     For purposes of this subsection, the national average 
     spending per resident in poverty--
       ``(A) for fiscal year 1997 is equal to--

[[Page S 16239]]

       ``(i) the sum (for each of the 50 States and the District 
     of Columbia) of the total of the Federal and State 
     expenditures under title XIX for medical assistance for 
     calendar quarters in fiscal year 1995 (other than such 
     expenditures under section 1923), increased by the percentage 
     specified in subsection (c)(1)(A)(ii), divided by
       ``(ii) the average of the sum of the number of residents in 
     poverty (as defined in paragraph (2)(A)) for all of the 50 
     States and the District of Columbia for the 3 most recent 
     fiscal years for which data are available, and increased by
       ``(iii) the national medicaid growth percentage (as defined 
     in subsection (b)(2)) for fiscal year 1997;
       ``(B) for a succeeding fiscal year is equal to the national 
     average spending per resident in poverty under this paragraph 
     for the preceding fiscal year increased by the national 
     medicaid growth percentage (as so defined) for the fiscal 
     year involved.
       ``(e) Publication of Obligation and Outlay Allotments.--
       ``(1) Notice of preliminary allotments.--Not later than 
     April 1 before the beginning of each fiscal year (beginning 
     with fiscal year 1997), the Secretary shall initially compute 
     and publish in the Federal Register notice of the proposed 
     obligation and outlay allotments for each State and the 
     District of Columbia under this section (not taking into 
     account subsection (a)(2)(B)) for the fiscal year. The 
     Secretary shall include in the notice a description of the 
     methodology and data used in deriving such allotments for the 
     year.
       ``(2) Review by gao.--The Comptroller General shall submit 
     to Congress by not later than May 15 of each such fiscal 
     year, a report analyzing such allotments and the extent to 
     which such allotments comply with the precise requirements of 
     this section.
       ``(3) Notice of final allotments.--Not later than July 1 
     before the beginning of each such fiscal year, the Secretary, 
     taking into consideration the analysis contained in the 
     report of the Comptroller General under paragraph (2), shall 
     compute and publish in the Federal Register notice of the 
     final allotments under this section (both taking into account 
     and not taking into account subsection (a)(2)(B)) for the 
     fiscal year. The Secretary shall include in the notice a 
     description of any changes in such allotments from the 
     initial allotments published under paragraph (1) for the 
     fiscal year and the reasons for such changes. Once published 
     under this paragraph, the Secretary is not authorized to 
     change such allotments.
       ``(4) GAO report on final allotments.--The Comptroller 
     General shall submit to Congress by not later than August 1 
     of each such fiscal year, a report analyzing the final 
     allotments under paragraph (3) and the extent to which such 
     allotments comply with the precise requirements of this 
     section.

     ``SEC. 2122. PAYMENTS TO STATES.

       ``(a) Amount of Payment.--From the allotment of a State 
     under section 2121, plus any additional amount available to 
     such State under subsection (g) or (h), for a fiscal year, 
     subject to the succeeding provisions of this title, the 
     Secretary shall pay to each State which has a medicaid plan 
     approved under part E, for each quarter in the fiscal year--
       ``(1) an amount equal to the Federal medical assistance 
     percentage (as defined in subsection (c)) of the total amount 
     expended during such quarter as medical assistance under the 
     plan; plus
       ``(2) an amount equal to the Federal medical assistance 
     percentage of the total amount expended during such quarter 
     for medically-related services (as defined in section 
     2112(d)(2)); plus
       ``(3) an amount equal to--
       ``(A) 90 percent of the amounts expended during such 
     quarter for the design, development, and installation of 
     information systems and for providing incentives to promote 
     the enforcement of medical support orders, plus
       ``(B) 75 percent of the amounts expended during such 
     quarter for medical personnel, administrative support of 
     medical personnel, operation and maintenance of information 
     systems, modification of information systems, quality 
     assurance activities, utilization review, medical and peer 
     review, anti-fraud activities, independent evaluations, 
     coordination of benefits, and meeting reporting requirements 
     under this title, plus
       ``(C) 50 percent of so much of the remainder of the amounts 
     expended during such quarter as are expended by the State in 
     the administration of the State plan.
       ``(b) Payment Process.--
       ``(1) Quarterly estimates.--Prior to the beginning of each 
     quarter, the Secretary shall estimate the amount to which a 
     State will be entitled under subsection (a) for such quarter, 
     such estimates to be based on (A) a report filed by the State 
     containing its estimate of the total sum to be expended in 
     such quarter in accordance with the provisions of such 
     subsections, and stating the amount appropriated or made 
     available by the State and its political subdivisions for 
     such expenditures in such quarter, and if such amount is less 
     than the State's proportionate share of the total sum of such 
     estimated expenditures, the source or sources from which the 
     difference is expected to be derived, and (B) such other 
     investigation as the Secretary may find necessary.
       ``(2) Payment.--
       ``(A) In general.--The Secretary shall then pay to the 
     State, in such installments as the Secretary may determine 
     and in accordance with section 6503(a) of title 31, United 
     States Code, the amount so estimated, reduced or increased to 
     the extent of any overpayment or underpayment which the 
     Secretary determines was made under this section (or section 
     1903) to such State for any prior quarter and with respect to 
     which adjustment has not already been made under this 
     subsection (or under section 1903(d)).
       ``(B) Treatment as overpayments.--Expenditures for which 
     payments were made to the State under subsection (a) shall be 
     treated as an overpayment to the extent that the State or 
     local agency administering such plan has been reimbursed for 
     such expenditures by a third party pursuant to the provisions 
     of its plan in compliance with section 2135.
       ``(C) Recovery of overpayments.--For purposes of this 
     subsection, when an overpayment is discovered, which was made 
     by a State to a person or other entity, the State shall have 
     a period of 60 days in which to recover or attempt to recover 
     such overpayment before adjustment is made in the Federal 
     payment to such State on account of such overpayment. Except 
     as otherwise provided in subparagraph (D), the adjustment in 
     the Federal payment shall be made at the end of the 60 days, 
     whether or not recovery was made.
       ``(D) No adjustment for uncollectables.--In any case where 
     the State is unable to recover a debt which represents an 
     overpayment (or any portion thereof) made to a person or 
     other entity on account of such debt having been discharged 
     in bankruptcy or otherwise being uncollectable, no adjustment 
     shall be made in the Federal payment to such State on account 
     of such overpayment (or portion thereof).
       ``(3) Federal share of recoveries.--The pro rata share to 
     which the United States is equitably entitled, as determined 
     by the Secretary, of the net amount recovered during any 
     quarter by the State or any political subdivision thereof 
     with respect to medical assistance furnished under the State 
     plan shall be considered an overpayment to be adjusted under 
     this subsection.
       ``(4) Timing of obligation of funds.--Upon the making of 
     any estimate by the Secretary under this subsection, any 
     appropriations available for payments under this section 
     shall be deemed obligated.
       ``(5) Disallowances.--In any case in which the Secretary 
     estimates that there has been an overpayment under this 
     section to a State on the basis of a claim by such State that 
     has been disallowed by the Secretary under section 1116(d), 
     and such State disputes such disallowance, the amount of the 
     Federal payment in controversy shall, at the option of the 
     State, be retained by such State or recovered by the 
     Secretary pending a final determination with respect to such 
     payment amount. If such final determination is to the effect 
     that any amount was properly disallowed, and the State chose 
     to retain payment of the amount in controversy, the Secretary 
     shall offset, from any subsequent payments made to such State 
     under this title, an amount equal to the proper amount of the 
     disallowance plus interest on such amount disallowed for the 
     period beginning on the date such amount was disallowed and 
     ending on the date of such final determination at a rate 
     (determined by the Secretary) based on the average of the 
     bond equivalent of the weekly 90-day treasury bill auction 
     rates during such period.
       ``(c) Federal Medical Assistance Percentage Defined.--
       ``(1) In general.--For purposes of this section, except as 
     provided in subsection (f), the Federal medical assistance 
     percentage, with respect to each of the 50 States or the 
     District of Columbia, is 100 percent less the State 
     percentage.
       ``(2) State percentage.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the State percentage is that percentage which bears the same 
     ratio to 45 percent as the square of the per capita income of 
     such State bears to the square of the per capita income of 
     the continental United States (including Alaska) and Hawaii.
       ``(B) Exception.--For purposes of this title only, for 
     Alaska, the State percentage is that percentage which bears 
     the same ratio to 45 percent as the square of the adjusted 
     per capita income of such State bears to the square of the 
     per capita income of the continental United States. For 
     purposes of the preceding sentence, the adjusted per capita 
     income for Alaska shall be determined by dividing the State's 
     most recent 3-year average per capita by the input cost index 
     for such State (as determined in section 2121(d)(4)).
       ``(3) Limitation on range.--In no case shall the Federal 
     medical assistance percentage be--
       ``(A) less than--
       ``(i) 60 percent, or
       ``(ii) 50 percent, in the case of any other provision of 
     law other than this title; or
       ``(B) more than 83 percent.
       ``(4) Promulgation.--The Federal medical assistance 
     percentage for any State shall be determined and promulgated 
     in accordance with the provisions of section 1101(a)(8)(B).
       ``(d) Provider-Related Donations and Health Care Related 
     Taxes.--
       ``(1) General limitations.--
       ``(A) Reduction in medical assistance expenditures.--
     Notwithstanding the previous provisions of this section, for 
     purposes of determining the amount to be paid to a State (as 
     defined in paragraph (5)(D)) under this section for quarters 
     in any fiscal year, the total amount expended during such 
     fiscal year as medical assistance under the medicaid plan (as 
     determined without regard to this subsection) shall be 
     reduced by the sum of any revenues received by the State (or 
     by a unit of local government in the State) during the fiscal 
     year--
       ``(i) from provider-related donations (as defined in 
     paragraph (2)(A)), other than--

       ``(I) bona fide provider-related donations (as defined in 
     paragraph (2)(B)), and
       ``(II) donations described in paragraph (2)(C);

       ``(ii) from health care related taxes (as defined in 
     paragraph (3)(A)), other than broad-based health care related 
     taxes (as defined in paragraph (3)(B)); or 

[[Page S 16240]]

       ``(iii) from a broad-based health care related tax, if 
     there is in effect a hold harmless provision (described in 
     paragraph (4)) with respect to the tax.
       ``(B) Reduction in administrative expenditures.--
     Notwithstanding the previous provisions of this section, for 
     purposes of determining the amount to be paid to a State 
     under this section for all quarters in a Federal fiscal year 
     (beginning with fiscal year 1996), the total amount expended 
     during the fiscal year for administrative expenditures under 
     the medicaid plan (as determined without regard to this 
     subsection) shall be reduced by the sum of any revenues 
     received by the State (or by a unit of local government in 
     the State) during such quarters from donations described in 
     paragraph (2)(C), to the extent the amount of such donations 
     exceeds 10 percent of the amounts expended under the medicaid 
     plan approved under this title during the fiscal year for 
     purposes described in subsection (a)(3).
       ``(2) Provider-related donations.--
       ``(A) In general.--For purposes of this subsection, the 
     term `provider-related donation' means any donation or other 
     voluntary payment (whether in cash or in kind) made (directly 
     or indirectly) to a State or unit of local government by--
       ``(i) a health care provider (as defined in paragraph 
     (5)(B));
       ``(ii) an entity related to a health care provider (as 
     defined in paragraph (5)(C)); or
       ``(iii) an entity providing goods or services under the 
     State plan for which payment is made to the State under 
     subsection (a)(3).
       ``(B) Bona fide provider-related donations.--For purposes 
     of paragraph (1)(A)(i)(I), the term `bona fide provider-
     related donation' means a provider-related donation that has 
     no direct or indirect relationship (as determined by the 
     Secretary) to payments made under this title to that 
     provider, to providers furnishing the same class of items and 
     services as that provider, or to any related entity, as 
     established by the State to the satisfaction of the 
     Secretary. The Secretary may by regulation specify types of 
     provider-related donations described in the previous sentence 
     that will be considered to be bona fide provider-related 
     donations.
       ``(C) Donations described.--For purposes of paragraph 
     (1)(A)(i)(II), donations described in this subparagraph are 
     funds expended by a hospital, clinic, or similar entity for 
     the direct cost (including costs of training and of preparing 
     and distributing outreach materials) of State or local agency 
     personnel who are stationed at the hospital, clinic, or 
     entity to determine the eligibility of individuals for 
     medical assistance under a medicaid plan approved under this 
     title and to provide outreach services to eligible or 
     potentially eligible individuals.
       ``(3) Health care related taxes.--
       ``(A) In general.--For purposes of this subsection, the 
     term `health care related tax' means a tax (as defined in 
     paragraph (5)(F)) that--
       ``(i) is related to health care items or services, or to 
     the provision of, the authority to provide, or payment for, 
     such items or services; or
       ``(ii) is not limited to such items or services but 
     provides for treatment of individuals or entities that are 
     providing or paying for such items or services that is 
     different from the treatment provided to other individuals or 
     entities.

     In applying clause (i), a tax is considered to relate to 
     health care items or services if at least 85 percent of the 
     burden of such tax falls on health care providers.
       ``(B) Broad-based health care related tax.--For purposes of 
     this subsection, the term `broad-based health care related 
     tax' means a health care related tax which is imposed with 
     respect to a class of health care items or services (as 
     described in paragraph (5)(A)) or with respect to providers 
     of such items or services and which, except as provided in 
     subparagraphs (D) and (E)--
       ``(i) is imposed at least with respect to all items or 
     services in the class furnished by all non-Federal, nonpublic 
     providers in the State (or, in the case of a tax imposed by a 
     unit of local government, the area over which the unit has 
     jurisdiction) or is imposed with respect to all non-Federal, 
     nonpublic providers in the class; and
       ``(ii) is imposed uniformly (in accordance with 
     subparagraph (C)).
       ``(C) Uniform imposition of tax.--
       ``(i) In general.--Subject to clause (ii), for purposes of 
     subparagraph (B)(ii), a tax is considered to be imposed 
     uniformly if--

       ``(I) in the case of a tax consisting of a licensing fee or 
     similar tax on a class of health care items or services (or 
     providers of such items or services), the amount of the tax 
     imposed is the same for every provider providing items or 
     services within the class;
       ``(II) in the case of a tax consisting of a licensing fee 
     or similar tax imposed on a class of health care items or 
     services (or providers of such services) on the basis of the 
     number of beds (licensed or otherwise) of the provider, or 
     the number of patient days or other unit of service, the 
     amount of the tax is the same for each bed, or each unit of 
     service, of each provider of such items or services in the 
     class;
       ``(III) in the case of a tax based on revenues or receipts 
     with respect to a class of items or services (or providers of 
     items or services) the tax is imposed at a uniform rate for 
     all items and services (or providers of such items of 
     services) in the class on all the gross revenues or receipts, 
     or net operating revenues, relating to the provision of all 
     such items or services (or all such providers) in the State 
     (or, in the case of a tax imposed by a unit of local 
     government within the State, in the area over which the unit 
     has jurisdiction); or
       ``(IV) in the case of any other tax, the State establishes 
     to the satisfaction of the Secretary that the tax is imposed 
     uniformly.

       ``(ii) Determination of nonuniformity.--Subject to 
     subparagraphs (D) and (E), a tax imposed with respect to a 
     class of health care items and services is not considered to 
     be imposed uniformly if the tax provides for any credits, 
     exclusions, or deductions which have as their purpose or 
     effect the return to providers of all or a portion of the tax 
     paid in a manner that is inconsistent with subclauses (I) and 
     (II) of subparagraph (E)(ii) or provides for a hold harmless 
     provision described in paragraph (4).
       ``(D) Exceptions to nonuniformity determinations.--A tax 
     imposed with respect to a class of health care items and 
     services is considered to be imposed uniformly--
       ``(i) notwithstanding that the tax is not imposed with 
     respect to items or services (or the providers thereof) for 
     which payment is made under a medicaid plan approved under 
     this title or title XVIII; or
       ``(ii) in the case of a tax described in subparagraph 
     (C)(i)(III), notwithstanding that the tax provides for 
     exclusion (in whole or in part) of revenues or receipts from 
     a medicaid plan approved under this title or title XVIII.
       ``(E) Waiver application for treatments as broad-based 
     tax.--
       ``(i) In general.--A State may submit an application to the 
     Secretary requesting that the Secretary treat a tax as a 
     broad-based health care related tax, notwithstanding that the 
     tax does not apply to all health care items or services in 
     class (or all providers of such items and services), provides 
     for a credit, deduction, or exclusion, is not applied 
     uniformly, or otherwise does not meet the requirements of 
     subparagraph (B) or (C). Permissible waivers may include 
     exemptions for rural or sole-community providers.
       ``(ii) Waiver approval requirements.--The Secretary shall 
     approve such an application if the State establishes to the 
     satisfaction of the Secretary that--

       ``(I) the net impact of the tax and associated expenditures 
     under the medicaid plan approved under this title as proposed 
     by the State is generally redistributive in nature; and
       ``(II) the amount of the tax is not directly correlated to 
     payments under such plan for items or services with respect 
     to which the tax is imposed.

       ``(iii) Determination of redistributive nature.--In 
     determining whether a tax for which a waiver is sought is 
     generally redistributive in nature, the Secretary shall, if 
     requested by the State--

       ``(I) compare the tax to a tax that meets any of the 
     uniformity requirements of subparagraphs (C) or (D); and
       ``(II) consider in the aggregate all classes (or providers) 
     of health care items or services that are subject to the same 
     tax.

       ``(iv) Term of waiver.--A tax for which the Secretary has 
     approved an application for waiver shall not be subject to 
     the requirements of a further waiver application solely 
     because a change in the rate of tax.
       ``(F) Treatment of managed care premiums.--No tax on the 
     payment or receipt of premiums or similar periodic payments 
     to health maintenance organizations or health care insurers 
     shall be treated as a health care related tax unless and 
     until the Secretary, after consultation with the States 
     pursuant to section 5(c) of the Medicaid Voluntary 
     Contribution and Provider-Specific Tax Amendments of 1991, 
     adopts a final regulation specifically subjecting such taxes, 
     or any of such taxes, to the provisions of this subsection.
       ``(4) Hold harmless determination.--For purposes of 
     paragraph (1)(A)(iii), there is in effect a hold harmless 
     provision with respect to a broad-based health care related 
     tax imposed with respect to a class of items or services if 
     the Secretary determines that any of the following applies:
       ``(A) The State or other unit of government imposing the 
     tax provides (directly or indirectly) for a payment (other 
     than under a medicaid plan approved under this title) to 
     taxpayers and the amount of such payment is positively 
     correlated either to the amount of such tax or to the 
     difference between the amount of the tax and the amount of 
     payment under the medicaid plan.
       ``(B) All or any portion of the payment made under this 
     title to the taxpayer varies based only upon the amount of 
     the total tax paid.
       ``(C) The State or other unit of government imposing the 
     tax provides (directly or indirectly) for any payment, 
     offset, or waiver that guarantees to hold taxpayers harmless 
     for any portion of the costs of the tax.

     Notwithstanding the provisions of this paragraph, no hold 
     harmless shall be found to be in effect with respect to a tax 
     enacted or extended prior to October 1, 1995, because of the 
     existence in the State of a program of financial aid or of 
     tax credits for recipients of health care items or services 
     from providers that are subject to an otherwise valid health 
     care related tax.
       ``(5) Definitions and special rules.--For purposes of this 
     subsection:
       ``(A) Classes of health care items and services.--Each of 
     the following shall be considered a separate class of health 
     care items and services:
       ``(i) Inpatient hospital services.
       ``(ii) Outpatient hospital services.
       ``(iii) Nursing facility services (other than services of 
     intermediate care facilities for the mentally retarded).
       ``(iv) Services of intermediate care facilities for the 
     mentally retarded.
       ``(v) Physicians' services.
       ``(vi) Home health care services.
       ``(vii) Outpatient prescription drugs.
       ``(viii) Services of health maintenance organizations (and 
     other organizations with contracts under section 2114) not 
     otherwise subject to a tax described in this subsection.
       ``(ix) Such other classification of health care items and 
     services consistent with this subparagraph as the Secretary 
     may establish by regulation.

[[Page S 16241]]

       ``(B) Health care provider.--The term `health care 
     provider' means an individual or person that receives 
     payments for the provision of health care items or services.
       ``(C) Related entities.--An entity is considered to be 
     `related' to a health care provider if the entity--
       ``(i) is an organization, association, corporation or 
     partnership formed by or on behalf of health care providers;
       ``(ii) is a person with an ownership or control interest 
     (as defined in section 1124(a)(3)) in the provider;
       ``(iii) is the employee, spouse, parent, child, or sibling 
     of the provider (or of a person described in clause (ii)); or
       ``(iv) has a similar, close relationship (as defined in 
     regulations) to the provider.
       ``(D) State.--The term `State' means only the 50 States and 
     the District of Columbia.
       ``(E) State fiscal year.--The `State fiscal year' means, 
     with respect to a specified year, a State fiscal year ending 
     in that specified year.
       ``(F) Tax.--The term `tax' includes any licensing fee, 
     assessment, or other mandatory payment, but does not include 
     any fee or charge associated with a State regulatory, 
     authorizing, financial assistance, or other program in which 
     health care providers are eligible to participate, or payment 
     of a criminal or civil fine or penalty (other than a fine or 
     penalty imposed in lieu of or instead of a fee, assessment, 
     or other mandatory payment).
       ``(G) Unit of local government.--The term `unit of local 
     government' means, with respect to a State, a city, county, 
     special purpose district, or other governmental unit in the 
     State.
       ``(6) Certain imposition of health care related taxes 
     prohibited.--No payment may be made to a State under this 
     section with respect to State expenditures attributable to 
     health care related taxes or broad-based health care related 
     taxes imposed on hospitals described in section 501(c)(3) of 
     the Internal Revenue Code of 1986 which do not accept 
     reimbursement under a medicaid plan.
       ``(e) Treatment of State Expenditures.--
       ``(1) In general.--No payment may be made to a State under 
     this section unless such State provides not less than 40 
     percent of the non-Federal share of the expenditures under 
     the medicaid plan.
       ``(2) Treatment of certain expenditures.--In determining 
     State expenditures under this section:
       ``(A) Transfers from other state and local programs.--Such 
     expenditures shall not include funding supplanted by 
     transfers from other State and local programs.
       ``(B) Exclusion of federal amounts.--Such expenditures 
     shall not include amounts made available by the Federal 
     Government and any State funds which are used to match 
     Federal funds or are expended as a condition of receiving 
     Federal funds under Federal programs other than under this 
     title.
       ``(f) Special Rules.--For purposes of this title:
       ``(1) Commonwealths and territories.--In the case of Puerto 
     Rico, the Virgin Islands, Guam, the Northern Mariana Islands, 
     and American Samoa, the Federal medical assistance 
     percentages are 50 percent.
       ``(2) Indian health programs.--The Federal medical 
     assistance percentages shall be 100 percent with respect to 
     the amounts expended as medical assistance for services which 
     are provided by--
       ``(A) the Indian Health Service;
       ``(B) an Indian health program operated by an Indian tribe 
     or tribal organization pursuant to a contract, grant, 
     cooperative agreement, or compact with the Indian Health 
     Service under authority of the Indian Self-Determination Act 
     (25 U.S.C. 450 et seq.); or
       ``(C) an urban Indian health program operated by an urban 
     Indian organization pursuant to a grant or contract with the 
     Indian Health Service under authority of title V of the 
     Indian Health Care Improvement Act (25 U.S.C. 1601 et seq.).
       ``(3) No state matching required for certain 
     expenditures.--In applying subsection (a)(1) with respect to 
     medical assistance provided to unlawful aliens pursuant to 
     the exception specified in section 2123(f)(2), payment shall 
     be made for the amount of such assistance without regard to 
     any need for a State match.
       ``(4) Special rule.--
       ``(A) In general.--Notwithstanding subsection (a), in order 
     to receive the full State outlay allotment described in 
     section 2121(c)(6), a State shall expend State funds in a 
     fiscal year under a medicaid plan approved under this title 
     in an amount not less than the adjusted base year State 
     expenditures, plus an applicable percentage of the difference 
     between such expenditures and the amount necessary to qualify 
     for the full State outlay allotment so described in such 
     fiscal year as determined under this section without regard 
     to this paragraph.
       ``(B) Reduction in allotment if expenditure limit not 
     met.--In the event a State fails to expend State funds in an 
     amount required by subparagraph (A) for a fiscal year, the 
     outlay allotment described in section 2121(c)(6) for such 
     year shall be reduced by an amount which bears the same ratio 
     to such outlay allotment as the State funds expended in such 
     fiscal year bears to the amount required by subparagraph (A).
       ``(C) Adjusted base year state expenditures.--For purposes 
     of this paragraph, the term `adjusted base year State 
     expenditures' means--
       ``(i) for New Hampshire, $203,000,000; and
       ``(ii) for Louisiana, $355,000,000.
       ``(D) Applicable percentage.--For purposes of this 
     paragraph, the applicable percentage for any fiscal year is 
     specified in the following table:

                                                             Applicable
``Fiscal year:                                              Percentage:
  1996..........................................................20 ....

  1997..........................................................40 ....

  1998..........................................................60 ....

  1999..........................................................80 ....

  2000.........................................................100.....

       ``(g) Carryover Amounts Available for Payment.--
       ``(1) Carryover of allotment permitted.--
       ``(A) In general.--If the amount of the payment to a State 
     under this section for a fiscal year does not exceed--
       ``(i) the amount of the allotment provided to such State 
     under section 2121 for such fiscal year, plus
       ``(ii) subject to subparagraph (B), the amount available to 
     the State for such fiscal year (other than amounts available 
     under paragraph (2)) resulting from the application of this 
     subparagraph in the preceding fiscal year,

     then the amount of the difference shall be added to the 
     amount of the allotment otherwise provided under section 2121 
     for the succeeding fiscal year.
       ``(B) Maximum carryover amount.--With respect to each 
     fiscal year, the maximum amount of the difference described 
     in subparagraph (A) which may be added to the allotment 
     otherwise provided under section 2121 to a State may not 
     exceed the total amount for the 2 immediately preceding 
     fiscal years of the difference in each such fiscal year 
     between the payment to a State under this section and the 
     amount of the allotment provided under section 2121.
       ``(2) Excess amounts reallocated.--
       ``(A) In general.--The sum of the amounts in excess of the 
     maximum carryover amounts determined under paragraph (1)(B) 
     for any fiscal year for all of the 50 States and the District 
     of Columbia shall be available for payment in such fiscal 
     year to qualified States on a quarterly basis as otherwise 
     determined under this section.
       ``(B) Qualified state.--For purposes of subparagraph (A), 
     in the case of any fiscal year, a qualified State is a 
     State--
       ``(i) with a State outlay allotment under section 2121 
     which is--

       ``(I) subject to the ceiling determined under section 
     2121(c)(3)(B) for the fiscal year,
       ``(II) not subject to such ceiling or to the floor 
     determined under section 2121(c)(3)(A), or
       ``(III) subject to such floor;

       ``(ii) which has no amount of difference as determined 
     under paragraph (1) for any preceding fiscal year which may 
     be added to the amount of the allotment provided under 
     section 2121 for the fiscal year; and
       ``(iii) which applies for payments under subparagraph (A) 
     in such manner as the Secretary determines.
       ``(C) Allocation rules.--For any fiscal year, in the event 
     the total amount of payments applied for by all qualified 
     States under subparagraph (B) exceeds the excess amount 
     available for such fiscal year under subparagraph (A), the 
     Secretary shall allocate such payments among groups of 
     qualified States in the following order:
       ``(i) All qualified States described in subparagraph 
     (B)(i)(I).
       ``(ii) All qualified States described in subparagraph 
     (B)(i)(II).
       ``(iii) All qualified States described in subparagraph 
     (B)(i)(III).

     If such excess amount is not sufficient with respect to any 
     group of qualified States, the Secretary shall allocate such 
     payments proportionately among the qualified States in such 
     group.
       ``(h) Additional Amounts Available for Payment.--
       ``(1) Appropriation.--There is hereby authorized to be 
     appropriated and there are appropriated additional amounts 
     described in paragraph (2) which shall be paid to the States 
     described in such paragraph and may be used without fiscal 
     year limitation.
       ``(2) Additional amounts described.--The additional amounts 
     described in this paragraph are as follows:
       ``(A) For Arizona, $63,000,000.
       ``(B) For Florida, $250,000,000.
       ``(C) For Georgia, $34,000,000.
       ``(D) For Kentucky, $76,500,000.
       ``(E) For South Carolina, $181,000,000.
       ``(F) For Washington, $250,000,000.
       ``(G) For Vermont, $50,000,000.

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

       ``(a) In General.--Funds provided to a State under this 
     title shall only be used to carry out the purposes of this 
     title.
       ``(b) Disallowances for Excluded Providers.--
       ``(1) In general.--No payment shall be made to a State 
     under this part for expenditures for items and services 
     furnished--
       ``(A) by a provider who was excluded from participation 
     under title V, XVIII, or XX or under this title pursuant to 
     section 1128, 1128A, 1156, or 1842(j)(2); or
       ``(B) under the medical direction or on the prescription of 
     a physician who was so excluded, if the provider of the 
     services knew or had reason to know of the exclusion.
       ``(2) Exception for emergency services.--Paragraph (1) 
     shall not apply to emergency items or services, not including 
     hospital emergency room services.
       ``(c) Limitation.--No Federal financial assistance is 
     available for expenditures under the medicaid plan for 
     medically-related services for a quarter to the extent such 
     expenditures exceed 5 percent of the total expenditures under 
     the plan for the quarter.
       ``(d) Treatment of Third Party Liability.--No payment shall 
     be made to a State under this part for expenditures for 
     medical assistance provided for an individual under its 
     medicaid plan to the extent that a private insurer (as 
     defined by the Secretary by regulation and including a group 
     health plan (as defined in section 607(1) of the Employee 
     Retirement Income Security Act of 1974), a service benefit 

[[Page S 16242]]
     plan, and a health maintenance organization) would have been obligated 
     to provide such assistance but for a provision of its 
     insurance contract which has the effect of limiting or 
     excluding such obligation because the individual is eligible 
     for or is provided medical assistance under the plan.
       ``(e) Medicaid as Secondary Payer.--Except as otherwise 
     provided by law, no payment shall be made to a State under 
     this part for expenditures for medical assistance provided 
     for an individual under its medicaid plan to the extent that 
     payment has been made or can reasonably be expected to be 
     made promptly (as determined in accordance with regulations) 
     under any other federally operated or financed health care 
     program, other than a program operated or financed by the 
     Indian Health Service, as identified by the Secretary. For 
     purposes of this subsection, rules similar to the rules for 
     overpayments under section 2122(b) shall apply.
       ``(f) Limitation on Payments to Emergency Services for 
     Nonlawful Aliens.--
       ``(1) In general.--Notwithstanding the preceding provisions 
     of this section, except as provided in paragraph (2), no 
     payment shall be made to a State under this part for medical 
     assistance furnished to an alien who is not lawfully admitted 
     for permanent residence or otherwise permanently residing in 
     the United States under color of law.
       ``(2) Exception for emergency services.--Payment may be 
     made under this section for care and services that are 
     furnished to an alien described in paragraph (1) only if--
       ``(A) such care and services are necessary for the 
     treatment of an emergency medical condition of the alien;
       ``(B) such alien otherwise meets the eligibility 
     requirements for medical assistance under the medicaid plan 
     (other than a requirement of the receipt of aid or assistance 
     under title IV, supplemental security income benefits under 
     title XVI, or a State supplementary payment); and
       ``(C) such care and services are not related to an organ 
     transplant procedure.
       ``(3) Emergency medical condition defined.--For purposes of 
     this subsection, the term `emergency medical condition' means 
     a medical condition (including emergency labor and delivery) 
     manifesting itself by acute symptoms of sufficient severity 
     (including severe pain) such that the absence of immediate 
     medical attention could reasonably be expected to result in--
       ``(A) placing the patient's health in serious jeopardy;
       ``(B) serious impairment to bodily functions; or
       ``(C) serious dysfunction of any bodily organ or part.
       ``(g) Unauthorized Use of Funds.--No payment shall be made 
     to a State under this part with respect to State 
     expenditures--
       ``(1) to purchase or improve land or construct or remodel 
     buildings;
       ``(2) to pay basic room and board costs, except when 
     provided as part of a temporary, respite care service in a 
     facility approved by the State which is not a private 
     residence;
       ``(3) to provide educational services which the State makes 
     generally available to its residents without cost and without 
     regard to income; or
       ``(4) to provide vocational rehabilitation or other 
     employment training and related services which are available 
     to eligible individuals through other Federal, State or local 
     programs and funding sources.

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

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

                ``Part D--Program Integrity and Quality

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

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

     ``SEC. 2132. FRAUD PREVENTION PROGRAM.

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

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

       ``(a) Information Reporting Requirement.--The requirement 
     referred to in section 2132(b)(5) is that the State must 
     provide for the following:
       ``(1) Information reporting system.--The State must have in 
     effect a system of reporting the following information with 
     respect to formal proceedings (as defined by the Secretary in 
     regulations) concluded against a health care practitioner or 
     entity by any authority of the State (or of a political 
     subdivision thereof) responsible for the licensing of health 
     care practitioners (or any peer review organization or 
     private accreditation entity reviewing the services provided 
     by health care practitioners) or entities:
       ``(A) Any adverse action taken by such licensing authority 
     as a result of the proceeding, including any revocation or 
     suspension of a license (and the length of any such 
     suspension), reprimand, censure, or probation.
       ``(B) Any dismissal or closure of the proceedings by reason 
     of the practitioner or entity surrendering the license or 
     leaving the State or jurisdiction.
       ``(C) Any other loss of the license of the practitioner or 
     entity, whether by operation of law, voluntary surrender, or 
     otherwise.
       ``(D) Any negative action or finding by such authority, 
     organization, or entity regarding the practitioner or entity.
       ``(2) Access to documents.--The State must provide the 
     Secretary (or an entity designated by the Secretary) with 
     access to such documents of the authority described in 
     paragraph (1) as may be necessary for the Secretary to 
     determine the facts and circumstances concerning the actions 
     and determinations described in such paragraph for the 
     purpose of carrying out this Act.
       ``(b) Form of Information.--The information described in 
     subsection (a)(1) shall be provided to the Secretary (or to 
     an appropriate private or public agency, under suitable 
     arrangements made by the Secretary with respect to receipt, 
     storage, protection of confidentiality, and dissemination of 
     information) in such a form and manner as the Secretary 
     determines to be appropriate in order to provide for 
     activities of the Secretary under this Act and in order to 
     provide, directly or through suitable arrangements made by 
     the Secretary, information--
       ``(1) to agencies administering Federal health care 
     programs, including private entities administering such 
     programs under contract;
       ``(2) to licensing authorities described in subsection 
     (a)(1);

[[Page S 16243]]

       ``(3) to State agencies administering or supervising the 
     administration of State health care programs (as defined in 
     section 1128(h));
       ``(4) to utilization and quality control peer review 
     organizations described in part B of title XI and to 
     appropriate entities with contracts under section 
     1154(a)(4)(C) with respect to eligible organizations reviewed 
     under the contracts;
       ``(5) to State medicaid fraud control units (as defined in 
     section 2134(b));
       ``(6) to hospitals and other health care entities (as 
     defined in section 431 of the Health Care Quality Improvement 
     Act of 1986), with respect to physicians or other licensed 
     health care practitioners that have entered (or may be 
     entering) into an employment or affiliation relationship 
     with, or have applied for clinical privileges or appointments 
     to the medical staff of, such hospitals or other health care 
     entities (and such information shall be deemed to be 
     disclosed pursuant to section 427 of, and be subject to the 
     provisions of, that Act);
       ``(7) to the Attorney General and such other law 
     enforcement officials as the Secretary deems appropriate; and
       ``(8) upon request, to the Comptroller General,
     in order for such authorities to determine the fitness of 
     individuals to provide health care services, to protect the 
     health and safety of individuals receiving health care 
     through such programs, and to protect the fiscal integrity of 
     such programs.
       ``(c) Confidentiality of Information Provided.--The 
     Secretary shall provide for suitable safeguards for the 
     confidentiality of the information furnished under subsection 
     (a). Nothing in this subsection shall prevent the disclosure 
     of such information by a party which is otherwise authorized, 
     under applicable State law, to make such disclosure.
       ``(d) Appropriate Coordination.--The Secretary shall 
     provide for the maximum appropriate coordination in the 
     implementation of subsection (a) of this section and section 
     422 of the Health Care Quality Improvement Act of 1986 and 
     section 1128E.

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

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

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

       ``(a) Third Party Liability.--Each medicaid plan shall 
     provide for reasonable steps--
       ``(1) to ascertain the legal liability of third parties to 
     pay for care and services available under the plan, including 
     the collection of sufficient information to enable States to 
     pursue claims against third parties; and
       ``(2) to seek reimbursement for medical assistance provided 
     to the extent legal liability is established if the amount 
     expected to be recovered exceeds the costs of the recovery.
       ``(b) Beneficiary Protection.--
       ``(1) In general.--Each medicaid plan shall provide that in 
     the case of a person furnishing services under the plan for 
     which a third party may be liable for payment--
       ``(A) the person may not seek to collect from the 
     individual (or financially responsible relative) payment of 
     an amount for the service more than could be collected under 
     the plan in the absence of such third party liability; and
       ``(B) may not refuse to furnish services to such an 
     individual because of a third party's potential liability for 
     payment for the service.
       ``(2) Penalty.--A medicaid plan may provide for a reduction 
     of any payment amount otherwise due with respect to a person 
     who furnishes services under the plan in an amount equal to 
     up to 3 times the amount of any payment sought to be 
     collected by that person in violation of paragraph (1)(A).
       ``(c) General Liability.--The State shall prohibit any 
     health insurer, including a group health plan as defined in 
     section 607 of the Employee Retirement Income Security Act of 
     1974, a service benefit plan, or a health maintenance 
     organization, in enrolling an individual or in making any 
     payments for benefits to the individual or on the 
     individual's behalf, from taking into account that the 
     individual is eligible for or is provided medical assistance 
     under a medicaid plan for any State.
       ``(d) Acquisition of Rights of Beneficiaries.--To the 
     extent that payment has been made under a medicaid plan in 
     any case where a third party has a legal liability to make 
     payment for such assistance, the State shall have in effect 
     laws under which, to the extent that payment has been made 
     under the plan for health care items or services furnished to 
     an individual, the State is considered to have acquired the 
     rights of such individual to payment by any other party for 
     such health care items or services.
       ``(e) Assignment of Medical Support Rights.--The medicaid 
     plan shall provide for mandatory assignment of rights of 
     payment for medical support and other medical care owed to 
     recipients in accordance with section 2136.
       ``(f) Required Laws Relating to Medical Child Support.--
       ``(1) In general.-- Each State with a medicaid plan shall 
     have in effect the following laws:
       ``(A) A law that prohibits an insurer from denying 
     enrollment of a child under the health coverage of the 
     child's parent on the ground that--
       ``(i) the child was born out of wedlock;
       ``(ii) the child is not claimed as a dependent on the 
     parent's Federal income tax return; or
       ``(iii) the child does not reside with the parent or in the 
     insurer's service area.
       ``(B) In any case in which a parent is required by a court 
     or administrative order to provide health coverage for a 
     child and the parent is eligible for family health coverage 
     through an insurer, a law that requires such insurer--
       ``(i) to permit such parent to enroll under such family 
     coverage any such child who is otherwise eligible for such 
     coverage (without regard to any enrollment season 
     restrictions);
       ``(ii) if such a parent is enrolled but fails to make 
     application to obtain coverage of such child, to enroll such 
     child under such family coverage upon application by the 
     child's other parent or by the State agency administering the 
     program under this title or part D of title IV; and
       ``(iii) not to disenroll, or eliminate coverage of, such a 
     child unless the insurer is provided satisfactory written 
     evidence that--

       ``(I) such court or administrative order is no longer in 
     effect, or
       ``(II) the child is or will be enrolled in comparable 
     health coverage through another insurer which will take 
     effect not later than the effective date of such 
     disenrollment.

       ``(C) In any case in which a parent is required by a court 
     or administrative order to provide health coverage for a 
     child and the parent is eligible for family health coverage 
     through an employer doing business in the State, a law that 
     requires such employer--
       ``(i) to permit such parent to enroll under such family 
     coverage any such child who is otherwise eligible for such 
     coverage (without regard to any enrollment season 
     restrictions);
       ``(ii) if such a parent is enrolled but fails to make 
     application to obtain coverage of such child, to enroll such 
     child under such family coverage upon application by the 
     child's other parent or by the State agency administering the 
     program under this title or part D of title IV; and
       ``(iii) not to disenroll, or eliminate coverage of, any 
     such child unless--

       ``(I) the employer is provided satisfactory written 
     evidence that such court or administrative order is no longer 
     in effect, or the child is or will be enrolled in comparable 
     health coverage which will take effect not later than the 
     effective date of such disenrollment, or
       ``(II) the employer has eliminated family health coverage 
     for all of its employees; and

       ``(iv) to withhold from such employee's compensation the 
     employee's share (if any) of premiums for health coverage 
     (except that the 

[[Page S 16244]]
     amount so withheld may not exceed the maximum amount permitted to be 
     withheld under section 303(b) of the Consumer Credit 
     Protection Act), and to pay such share of premiums to the 
     insurer, except that the Secretary may provide by regulation 
     for appropriate circumstances under which an employer may 
     withhold less than such employee's share of such premiums.
       ``(D) A law that prohibits an insurer from imposing 
     requirements on a State agency, which has been assigned the 
     rights of an individual eligible for medical assistance under 
     a medicaid plan approved under this title and covered for 
     health benefits from the insurer, that are different from 
     requirements applicable to an agent or assignee of any other 
     individual so covered.
       ``(E) A law that requires an insurer, in any case in which 
     a child has health coverage through the insurer of a 
     noncustodial parent--
       ``(i) to provide such information to the custodial parent 
     as may be necessary for the child to obtain benefits through 
     such coverage;
       ``(ii) to permit the custodial parent (or provider, with 
     the custodial parent's approval) to submit claims for covered 
     services without the approval of the noncustodial parent; and
       ``(iii) to make payment on claims submitted in accordance 
     with clause (ii) directly to such custodial parent, the 
     provider, or the State agency.
       ``(F) A law that permits the State agency under the 
     medicaid plan approved under this title to garnish the wages, 
     salary, or other employment income of, and requires 
     withholding amounts from State tax refunds to, any person 
     who--
       ``(i) is required by court or administrative order to 
     provide coverage of the costs of health services to a child 
     who is eligible for medical assistance under a medicaid plan 
     approved under this title;
       ``(ii) has received payment from a third party for the 
     costs of such services to such child; but
       ``(iii) has not used such payments to reimburse, as 
     appropriate, either the other parent or guardian of such 
     child or the provider of such services,

     to the extent necessary to reimburse the State agency for 
     expenditures for such costs under its plan under this title, 
     but any claims for current or past-due child support shall 
     take priority over any such claims for the costs of such 
     services.
       ``(2) Definition.--For purposes of this subsection, the 
     term `insurer' includes a group health plan, as defined in 
     section 607(1) of the Employee Retirement Income Security Act 
     of 1974, a health maintenance organization, and an entity 
     offering a service benefit plan.
       ``(g) Estate Recoveries and Liens Permitted.--
       ``(1) In general.--Except as provided in paragraph (2), a 
     State may take such actions as it considers appropriate to 
     adjust or recover from the individual or the individual's 
     estate any amounts paid as medical assistance to or on behalf 
     of the individual under the medicaid plan, including through 
     the imposition of liens against the property or estate of the 
     individual.
       ``(2) No lien on homes or family farms.--For purposes of 
     paragraph (1), a State may not impose a lien on the principal 
     residence (within the meaning of section 1034 of the Internal 
     Revenue Code of 1986) of moderate value or the family farm 
     owned by the individual as a condition of the spouse of the 
     individual receiving nursing facility or other long term care 
     benefits under its medicaid plan.

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

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

     ``SEC. 2137. REQUIREMENTS FOR NURSING FACILITIES.

       ``(a) Requirements for Nursing Facilities.--
       ``(1) In general.--Subject to paragraph (2), the provisions 
     of section 1919, as in effect on the day after the date of 
     the enactment of this title shall apply to nursing facilities 
     which furnish services under the State plan.
       ``(2) Waiver for states with stricter requirements.--
       ``(A) Authority to seek waiver.--Any State with State law 
     requirements for nursing facilities that, as determined by 
     the Secretary--
       ``(i) are equivalent to or stricter than the requirements 
     imposed under paragraph (1); and
       ``(ii) contain State oversight and enforcement authority 
     over nursing facilities, including penalty provisions, that 
     are equivalent to or stricter than such oversight and 
     enforcement authority in section 1919, as so in effect,

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

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

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

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

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

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

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

       ``(a) Submittal of Amendments.--A State may amend, in whole 
     or in part, its medicaid plan at any time through transmittal 
     of a plan amendment under this section.
       ``(b) Approval.--Except as the Secretary may provide under 
     section 2153, an amendment to a medicaid plan submitted under 
     subsection (a)--
       ``(1) shall be approved for purposes of this title; and
       ``(2) shall be effective as provided in subsection (c).
       ``(c) Effective Dates for Amendments.--
       ``(1) In general.--Subject to the succeeding provisions of 
     this subsection, an amendment to medicaid plan shall take 
     effect on one or more effective dates specified in the 
     amendment.
       ``(2) Amendments relating to eligibility or benefits.--
     Except as provided in paragraph (4):
       ``(A) Notice requirement.--Any plan amendment that 
     eliminates or restricts eligibility 

[[Page S 16245]]
     or benefits under the plan may not take effect unless the State 
     certifies that it has provided prior or contemporaneous 
     public notice of the change, in a form and manner provided 
     under applicable State law.
       ``(B) Timely transmittal.--Any plan amendment that 
     eliminates or restricts eligibility or benefits under the 
     plan shall not be effective for longer than a 60-day period 
     unless the amendment has been transmitted to the Secretary 
     before the end of such period.
       ``(3) Other amendments.--Subject to paragraph (4), any plan 
     amendment that is not described in paragraph (2) that becomes 
     effective in a State fiscal year may not remain in effect 
     after the end of such fiscal year (or, if later, the end of 
     the 90-day period on which it becomes effective) unless the 
     amendment has been transmitted to the Secretary.
       ``(4) Exception.--The requirements of paragraphs (2) and 
     (3) shall not apply to a plan amendment that is submitted on 
     a timely basis pursuant to a court order or an order of the 
     Secretary.

     ``SEC. 2153. SANCTIONS FOR SUBSTANTIAL NONCOMPLIANCE.

       ``(a) Prompt Review of Plan Submittals.--The Secretary 
     shall promptly review medicaid plans and plan amendments 
     submitted under this part to determine if they substantially 
     comply with the requirements of this title.
       ``(b) Determinations of Substantial Noncompliance.--
       ``(1) At time of plan or amendment submittal.--
       ``(A) In general.--If the Secretary, during the 30-day 
     period beginning on the date of submittal of a medicaid plan 
     or plan amendment--
       ``(i) determines that the plan or amendment substantially 
     violates (within the meaning of subsection (c)) a requirement 
     of this title; and
       ``(ii) provides written notice of such determination to the 
     State,

     the Secretary shall issue an order specifying that the plan 
     or amendment, insofar as it is in substantial violation of 
     such a requirement, shall not be effective, except as 
     provided in subsection (c), beginning at the end of a period 
     of not less than 30 days (or 120 days in the case of the 
     initial submission of the medicaid plan) specified in the 
     order beginning on the date of the notice of the 
     determination.
       ``(B) Extension of time periods.--The time periods 
     specified in subparagraph (A) may be extended by written 
     agreement of the Secretary and the State involved.
       ``(2) Violations in administration of plan.--
       ``(A) In general.--If the Secretary determines, after 
     reasonable notice and opportunity for a hearing for the 
     State, that in the administration of a medicaid plan there is 
     a substantial violation of a requirement of this title, the 
     Secretary shall provide the State with written notice of the 
     determination and with an order to remedy such violation. 
     Such an order shall become effective prospectively, as 
     specified in the order, after the date of receipt of such 
     written notice. Such an order may include the withholding of 
     funds, consistent with subsection (f), for parts of the 
     medicaid plan affected by such violation, until the Secretary 
     is satisfied that the violation has been corrected.
       ``(B) Effectiveness.--If the Secretary issues an order 
     under paragraph (1), the order shall become effective, except 
     as provided in subsection (c), beginning at the end of a 
     period (of not less than 30 days) specified in the order 
     beginning on the date of the notice of the determination to 
     the State.
       ``(C) Timeliness of determinations relating to report-based 
     compliance.--The Secretary shall make determinations under 
     this paragraph respecting violations relating to information 
     contained in an annual report under section 2102, an 
     independent evaluation under section 2103, or an audit report 
     under section 2131 not later than 30 days after the date of 
     transmittal of the report or evaluation to the Secretary.
       ``(3) Consultation with state.--Before making a 
     determination adverse to a State under this section, the 
     Secretary shall (within any time periods provided under this 
     section)--
       ``(A) reasonably consult with the State involved;
       ``(B) offer the State a reasonable opportunity to clarify 
     the submission and submit further information to substantiate 
     compliance with the requirements of this title; and
       ``(C) reasonably consider any such clarifications and 
     information submitted.
       ``(4) Justification of any inconsistencies in 
     determinations.--If the Secretary makes a determination under 
     this section that is, in whole or in part, inconsistent with 
     any previous determination issued by the Secretary under this 
     title, the Secretary shall include in the determination a 
     detailed explanation and justification for any such 
     difference.
       ``(5) Substantial violation defined.--For purposes of this 
     title, a medicaid plan (or amendment to such a plan) or the 
     administration of the medicaid plan is considered to 
     `substantially violate' a requirement of this title if a 
     provision of the plan or amendment (or an omission from the 
     plan or amendment) or the administration of the plan--
       ``(A) is material and substantial in nature and effect; and
       ``(B) is inconsistent with an express requirement of this 
     title.
     A failure to meet a strategic objective or performance goal 
     (as described in section 2101) shall not be considered to 
     substantially violate a requirement of this title.
       ``(c) State Response to Orders.--
       ``(1) State response by revising plan.--
       ``(A) In general.--Insofar as an order under subsection 
     (b)(1) relates to a substantial violation by a medicaid plan 
     or plan amendment, a State may respond (before the date the 
     order becomes effective) to such an order by submitting a 
     written revision of the plan or plan amendment to 
     substantially comply with the requirements of this part.
       ``(B) Review of revision.--In the case of submission of 
     such a revision, the Secretary shall promptly review the 
     submission and shall withhold any action on the order during 
     the period of such review.
       ``(C) Secretarial response.--The revision shall be 
     considered to have corrected the deficiency (and the order 
     rescinded insofar as it relates to such deficiency) unless 
     the Secretary determines and notifies the State in writing, 
     within 15 days after the date the Secretary receives the 
     revision, that the plan or amendment, as proposed to be 
     revised, still substantially violates a requirement of this 
     title. In such case the State may respond by seeking 
     reconsideration or a hearing under paragraph (2).
       ``(D) Revision retroactive.--If the revision provides for 
     substantial compliance, the revision may be treated, at the 
     option of the State, as being effective either as of the 
     effective date of the provision to which it relates or such 
     later date as the State and Secretary may agree.
       ``(2) State response by seeking reconsideration or an 
     administrative hearing.--A State may respond to an order 
     under subsection (b) by filing a request with the Secretary 
     for--
       ``(A) a reconsideration of the determination, pursuant to 
     subsection (d)(1); or
       ``(B) a review of the determination through an 
     administrative hearing, pursuant to subsection (d)(2).

     In such case, the order shall not take effect before the 
     completion of the reconsideration or hearing.
       ``(3) State response by corrective action plan.--
       ``(A) In general.--In the case of an order described in 
     subsection (b)(2) that relates to a substantial violation in 
     the administration of the medicaid plan, a State may respond 
     to such an order by submitting a corrective action plan with 
     the Secretary to correct deficiencies in the administration 
     of the plan which are the subject of the order.
       ``(B) Review of corrective action plan.--In such case, the 
     Secretary shall withhold any action on the order for a period 
     (not to exceed 30 days) during which the Secretary reviews 
     the corrective action plan.
       ``(C) Secretarial response.--The corrective action plan 
     shall be considered to have corrected the deficiency (and the 
     order rescinded insofar as it relates to such deficiency) 
     unless the Secretary determines and notifies the State in 
     writing, within 15 days after the date the Secretary receives 
     the corrective action plan, that the State's administration 
     of the medicaid plan, as proposed to be corrected in the 
     plan, will still substantially violate a requirement of this 
     title. In such case the State may respond by seeking 
     reconsideration or a hearing under paragraph (2).
       ``(4) State response by withdrawal of plan amendment; 
     failure to respond.--Insofar as an order relates to a 
     substantial violation in a plan amendment submitted, a State 
     may respond to such an order by withdrawing the plan 
     amendment and the medicaid plan shall be treated as though 
     the amendment had not been made.
       ``(d) Administrative Review and Hearing.--
       ``(1) Reconsideration.--Within 30 days after the date of 
     receipt of a request under subsection (b)(2)(A), the 
     Secretary shall notify the State of the time and place at 
     which a hearing will be held for the purpose of reconsidering 
     the Secretary's determination. The hearing shall be held not 
     less than 20 days nor more than 60 days after the date notice 
     of the hearing is furnished to the State, unless the 
     Secretary and the State agree in writing to holding the 
     hearing at another time. The Secretary shall affirm, modify, 
     or reverse the original determination within 60 days of the 
     conclusion of the hearing.
       ``(2) Administrative hearing.--Within 30 days after the 
     date of receipt of a request under subsection (b)(2)(B), an 
     administrative law judge shall schedule a hearing for the 
     purpose of reviewing the Secretary's determination. The 
     hearing shall be held not less than 20 days nor more than 60 
     days after the date notice of the hearing is furnished to the 
     State, unless the Secretary and the State agree in writing to 
     holding the hearing at another time. The administrative law 
     judge shall affirm, modify, or reverse the determination 
     within 60 days of the conclusion of the hearing.
       ``(e) Judicial Review.--
       ``(1) In general.--A State which is dissatisfied with a 
     final determination made by the Secretary under subsection 
     (d)(1) or a final determination of an administrative law 
     judge under subsection (d)(2) may, within 60 days after it 
     has been notified of such determination, file with the United 
     States court of appeals for the circuit in which the State is 
     located a petition for review of such determination. A copy 
     of the petition shall be forthwith transmitted by the clerk 
     of the court to the Secretary and, in the case of a 
     determination under subsection (d)(2), to the administrative 
     law judge involved. The Secretary (or judge involved) 
     thereupon shall file in the court the record of the 
     proceedings on which the final determination was based, as 
     provided in section 2112 of title 28, United States Code.
       ``(2) Standard for review.--The findings of fact by the 
     Secretary or administrative law judge, if supported by 
     substantial evidence, shall be conclusive, but the court, for 
     good cause shown, may remand the case to the Secretary or 
     judge to take further evidence, and the Secretary or judge 
     may thereupon make new or modified findings of fact and may 
     modify a previous determination, and shall certify to the 
     court the transcript and record of the further 

[[Page S 16246]]
     proceedings. Such new or modified findings of fact shall likewise be 
     conclusive if supported by substantial evidence.
       ``(3) Jurisdiction of appellate court.--The court shall 
     have jurisdiction to affirm the action of the Secretary or 
     judge or to set it aside, in whole or in part. The judgment 
     of the court shall be subject to review by the Supreme Court 
     of the United States upon certiorari or certification as 
     provided in section 1254 of title 28, United States Code.
       ``(f) Withholding of Funds.--
       ``(1) In general.--Any order under this section relating to 
     the withholding of funds shall be effective not earlier than 
     the effective date of the order and shall only relate to the 
     portions of a medicaid plan or administration thereof which 
     substantially violate a requirement of this title. In the 
     case of a failure to meet a set-aside requirement under 
     section 2112, any withholding shall only apply to the extent 
     of such failure.
       ``(2) Suspension of withholding.--The Secretary may suspend 
     withholding of funds under paragraph (1) during the period 
     reconsideration or administrative and judicial review is 
     pending under subsection (d) or (e).
       ``(3) Restoration of funds.--Any funds withheld under this 
     subsection under an order shall be immediately restored to a 
     State--
       ``(A) to the extent and at the time the order is--
       ``(i) modified or withdrawn by the Secretary upon 
     reconsideration,
       ``(ii) modified or reversed by an administrative law judge, 
     or
       ``(iii) set aside (in whole or in part) by an appellate 
     court; or
       ``(B) when the Secretary determines that the deficiency 
     which was the basis for the order is corrected;
       ``(C) when the Secretary determines that violation which 
     was the basis for the order is resolved or the amendment 
     which was the basis for the order is withdrawn; or
       ``(D) at any time upon the initiative of the Secretary.

     ``SEC. 2154. SECRETARIAL AUTHORITY.

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

                      ``Part F--General Provisions

     ``SEC. 2171. DEFINITIONS.

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

     ``SEC. 2172. TREATMENT OF TERRITORIES.

       ``Notwithstanding any other requirement of this title, the 
     Secretary may waive or modify any requirement of this title 
     with respect to the medical assistance program for a State 
     other than the 50 States and the District of Columbia, other 
     than a waiver of--

[[Page S 16247]]

       ``(1) the Federal medical assistance percentage;
       ``(2) the limitation on total payments in a fiscal year to 
     the amount of the allotment under section 2121(c); or
       ``(3) the requirement that payment may be made for medical 
     assistance only with respect to amounts expended by the State 
     for care and services described in paragraph (1) of section 
     2171(a) and medically-related services (as defined in section 
     2112(d)(2)).

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

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

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

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


    ``termination of program; limitation on new obligation authority

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

     SEC. 7192. MEDICAID DRUG REBATE PROGRAM.

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

     ``SEC. 2175. MEDICAID DRUG REBATE AGREEMENTS.

       ``(a) Requirement for Rebate Agreement.--
       ``(1) In general.--Pursuant to section 2123(j), in order 
     for payment to be made to a State under part C for medical 
     assistance for covered outpatient drugs of a manufacturer, 
     the manufacturer must have entered into and have in effect a 
     rebate agreement described in subsection (b) with the 
     Secretary, on behalf of States (except that, the Secretary 
     may authorize a State to enter directly into agreements with 
     a manufacturer), and must meet the requirements of paragraph 
     (5) (with respect to drugs purchased by a covered entity on 
     or after the first day of the first month that begins after 
     the date of the enactment of title VI of the Veterans Health 
     Care Act of 1992 and paragraph (6). Any such agreement 
     entered into prior to May 1, 1991, shall be deemed to have 
     been entered into on January 1, 1991, and the amount of the 
     rebate to be paid by the manufacturer under such agreement 
     shall be calculated as if the agreement had been entered into 
     on January 1, 1991. If a manufacturer has not entered into 
     such an agreement before May 1, 1991, such an agreement, 
     subsequently entered into, shall not be effective until 

[[Page S 16248]]
     the first day of the calendar quarter that begins more than 60 days 
     after the date the agreement is entered into.
       ``(2) Effective date.--Paragraph (1) shall apply to drugs 
     dispensed under this title on or after January 1, 1991, 
     except that such paragraph shall not apply to drugs dispensed 
     before May 1, 1991, if the Secretary determines that there 
     were extenuating circumstances with respect to the first 
     calendar quarter of 1991.
       ``(3) Authorizing payment for drugs not covered under 
     rebate agreements.--Paragraph (1) shall not apply to the 
     dispensing of a covered outpatient drug if--
       ``(A) the State has made a determination that the 
     availability of such drug is essential to the health of 
     beneficiaries under the medicaid plan;
       ``(B) the drug has been given a rating of 1-A or 1-P by the 
     Food and Drug Administration; and
       ``(C)(i) the physician has obtained approval for the use of 
     the drug in advance of dispensing such drug in accordance 
     with a prior authorization program described in subsection 
     (d)(5), or
       ``(ii) the Secretary has reviewed and approved the State's 
     determination under subparagraph (A).
       ``(3) Authorizing payment for drugs not covered under 
     rebate agreements.--Paragraph (1) shall not apply to the 
     dispensing of a covered outpatient drug if (A)(i) the State 
     has made a determination that the availability of the drug is 
     essential to the health of beneficiaries under the medicaid 
     plan for medical assistance; (ii) such drug has been given a 
     rating of 1-A by the Food and Drug Administration; and 
     (iii)(I) the physician has obtained approval for use of the 
     drug in advance of its dispensing in accordance with a prior 
     authorization program described in subsection (d), or (II) 
     the Secretary has reviewed and approved the State's 
     determination under subparagraph (A); or (B) the Secretary 
     determines that in the first calendar quarter of 1991, there 
     were extenuating circumstances.
       ``(4) Effect on existing agreements.--
       ``(A) In general.--In the case of a rebate agreement in 
     effect between a State and a manufacturer on the date of the 
     enactment of title IV of the Omnibus Budget Reconciliation 
     Act of 1990, such agreement, for the initial agreement period 
     specified therein, shall be considered to be a rebate 
     agreement in effect under this section with respect to that 
     State, if the State agrees to report to the Secretary any 
     rebates paid pursuant to the agreement and such agreement 
     provides for a minimum aggregate rebate of 10 percent of the 
     sum of the amounts determined under subparagraph (B) for all 
     of the manufacturer's drugs paid for by the State under the 
     agreement. If, after the initial agreement period, the State 
     establishes to the satisfaction of the Secretary that an 
     agreement in effect on the date of the enactment of title IV 
     of the Omnibus Budget Reconciliation Act of 1990 provides for 
     rebates that are at least as large as the rebates otherwise 
     required under this section, and the State agrees to report 
     any rebates under the agreement to the Secretary, the 
     agreement shall be considered to be a rebate agreement in 
     compliance with the section for the renewal periods of such 
     agreement.
       ``(B) Amount determined.--The amount determined under this 
     subparagraph with respect to a manufacturer's drug paid for 
     by a State under an agreement described in the first sentence 
     of subparagraph (A) is an amount equal to the product of--
       ``(i) the average manufacturer's price for such drug; and
       ``(ii) the number of dosage units of such drug paid for by 
     the State under such agreement.
       ``(5) Limitation on prices of drugs purchased by covered 
     entities.--
       ``(A) Agreement with secretary.--A manufacturer meets the 
     requirements of this paragraph if the manufacturer has 
     entered into an agreement with the Secretary that meets the 
     requirements of section 340B of the Public Health Service Act 
     with respect to covered outpatient drugs purchased by a 
     covered entity on or after the first day of the first month 
     that begins after the date of the enactment of title VI of 
     the Veterans Health Care Act of 1992.
       ``(B) Covered entity defined.--In this subsection, the term 
     `covered entity' means an entity described in section 
     340B(a)(4) of the Public Health Service Act.
       ``(C) Establishment of alternative mechanism to ensure 
     against duplicate discounts or rebates.--If the Secretary 
     does not establish a mechanism under section 340B(a)(5)(A) of 
     the Public Health Service Act within 12 months of the date of 
     the enactment of such section, the following requirements 
     shall apply:
       ``(i) Each covered entity shall inform the single State 
     agency under this title when it is seeking reimbursement from 
     the medicaid plan for medical assistance with respect to a 
     unit of any covered outpatient drug which is subject to an 
     agreement under section 340B(a) of such Act.
       ``(ii) Each such single State agency shall provide a means 
     by which a covered entity shall indicate on any drug 
     reimbursement claims form (or format, where electronic claims 
     management is used) that a unit of the drug that is the 
     subject of the form is subject to an agreement under section 
     340B of such Act, and not submit to any manufacturer a claim 
     for a rebate payment under subsection (b) with respect to 
     such a drug.
       ``(D) Effect of subsequent amendments.--In determining 
     whether an agreement under subparagraph (A) meets the 
     requirements of section 340B of the Public Health Service 
     Act, the Secretary shall not take into account any amendments 
     to such section that are enacted after the enactment of title 
     VI of the Veterans Health Care Act of 1992.
       ``(E) Determination of compliance.--A manufacturer is 
     deemed to meet the requirements of this paragraph if the 
     manufacturer establishes to the satisfaction of the Secretary 
     that the manufacturer would comply (and has offered to 
     comply) with the provisions of section 340B of the Public 
     Health Service Act (as in effect immediately after the 
     enactment title VI of the Veterans Health Care Act of 1992, 
     and would have entered into an agreement under such section 
     (as such section was in effect at such time), but for a 
     legislative change in such section after such enactment.
       ``(6) Requirements relating to master agreements for drugs 
     procured by department of veterans affairs and certain other 
     federal agencies.--
       ``(A) In general.--A manufacturer meets the requirements of 
     this paragraph if the manufacturer complies with the 
     provisions of section 8126 of title 38, United States Code, 
     including the requirement of entering into a master agreement 
     with the Secretary of Veterans Affairs under such section.
       ``(B) Effect of subsequent amendments.--In determining 
     whether a master agreement described in subparagraph (A) 
     meets the requirements of section 8126 of title 38, United 
     States Code, the Secretary shall not take into account any 
     amendments to such section that are enacted after the 
     enactment of title VI of the Veterans Health Care Act of 
     1992.
       ``(C) Determination of compliance.--A manufacturer is 
     deemed to meet the requirements of this paragraph if the 
     manufacturer establishes to the satisfaction of the Secretary 
     that the manufacturer would comply (and has offered to 
     comply) with the provisions of section 8126 of title 38, 
     United States Code (as in effect immediately after the 
     enactment of title VI of the Veterans Health Care Act of 
     1992) and would have entered into an agreement under such 
     section (as such section was in effect at such time), but for 
     a legislative change in such section after such enactment.
       ``(b) Terms of Rebate Agreement.--
       ``(1) Periodic rebates.--
       ``(A) In general.--A rebate agreement under this subsection 
     shall require the manufacturer to provide, to each medicaid 
     plan approved under this title, a rebate for a rebate period 
     in an amount specified in subsection (c) for covered 
     outpatient drugs of the manufacturer dispensed after December 
     31, 1990, for which payment was made under the medicaid plan 
     for such period. Such rebate shall be paid by the 
     manufacturer not later than 30 days after the date of receipt 
     of the information described in paragraph (2) for the period 
     involved.
       ``(B) Offset against medical assistance.--Amounts received 
     by a State under this section (or under an agreement 
     authorized by the Secretary under subsection (a)(1) or an 
     agreement described in subsection (a)(4)) in any quarter 
     shall be considered to be a reduction in the amount expended 
     under the medicaid plan in the quarter for medical assistance 
     for purposes of this title.
       ``(2) State provision of information.--
       ``(A) State responsibility.--Each State agency under this 
     title shall report to each manufacturer not later than 60 
     days after the end of each rebate period and in a form 
     consistent with a standard reporting format established by 
     the Secretary, information on the total number of units of 
     each dosage form and strength and package size of each 
     covered outpatient drug dispensed after December 31, 1990, 
     for which payment was made under the plan for the period, and 
     shall promptly transmit a copy of such report to the 
     Secretary.
       ``(B) Audits.--A manufacturer may audit the information 
     provided (or required to be provided) under subparagraph (A). 
     Adjustments to rebates shall be made to the extent that 
     information indicates that utilization was greater or less 
     than the amount previously specified.
       ``(3) Manufacturer provision of price information.--
       ``(A) In general.--Each manufacturer with an agreement in 
     effect under this section shall report to the Secretary--
       ``(i) not later than 30 days after the last day of each 
     rebate period under the agreement (beginning on or after 
     January 1, 1991), on the average manufacturer price (as 
     defined in subsection (j)(1)) and, for single source drugs 
     and innovator multiple source drugs, the manufacturer's best 
     price (as defined in subsection (c)(1)(C)) for each covered 
     outpatient drug for the rebate period under the agreement; 
     and
       ``(ii) not later than 30 days after the date of entering 
     into an agreement under this section on the average 
     manufacturer price (as defined in subsection (j)(1)) as of 
     October 1, 1990, for each of the manufacturer's covered 
     outpatient drugs.
       ``(B) Verification surveys of average manufacturer price.--
     The Secretary may survey wholesalers and manufacturers that 
     directly distribute their covered outpatient drugs, when 
     necessary, to verify manufacturer prices reported under 
     subparagraph (A). The Secretary may impose a civil monetary 
     penalty in an amount not to exceed $10,000 on a wholesaler, 
     manufacturer, or direct seller, if the wholesaler, 
     manufacturer, or direct seller of a covered outpatient drug 
     refuses a request for information by the Secretary in 
     connection with a survey under this subparagraph. The 
     provisions of section 1128A (other than subsections (a) (with 
     respect to amounts of penalties or additional assessments) 
     and (b)) shall apply to a civil money penalty under this 
     subparagraph in the same manner as such provisions apply to a 
     penalty or proceeding under section 1128A(a).
       ``(C) Penalties.--
       ``(i) Failure to provide timely information.--In the case 
     of a manufacturer with an agreement under this section that 
     fails to provide information required under subparagraph (A) 
     on a timely basis, the amount of the penalty shall be $10,000 
     for each day in which such information has not been provided 
     and such amount shall be paid to the Treasury. If such 
     information is not reported within 90 days of the 

[[Page S 16249]]
     deadline imposed, the agreement shall be suspended for services 
     furnished after the end of such 90-day period and until the 
     date such information is reported (but in no case shall such 
     suspension be for a period of less than 30 days).
       ``(ii) False information.--Any manufacturer with an 
     agreement under this section, or a wholesaler or direct 
     seller, that knowingly provides false information under 
     subparagraph (A) or (B) is subject to a civil money penalty 
     in an amount not to exceed $100,000 for each item of false 
     information. Any such civil money penalty shall be in 
     addition to other penalties as may be prescribed by law. The 
     provisions of section 1128A (other than subsections (a) and 
     (b)) shall apply to a civil money penalty under this 
     subparagraph in the same manner as such provisions apply to a 
     penalty or proceeding under section 1128A(a).
       ``(D) Confidentiality of information.--Notwithstanding any 
     other provision of law, information disclosed by 
     manufacturers or wholesalers under this paragraph or under an 
     agreement with the Secretary of Veterans Affairs described in 
     subsection (a)(6)(A)(ii) is confidential and shall not be 
     disclosed by the Secretary or the Secretary of Veterans 
     Affairs or a State agency (or contractor therewith) in a form 
     which discloses the identity of a specific manufacturer or 
     wholesaler or the prices charged for drugs by such 
     manufacturer or wholesaler, except--
       ``(i) as the Secretary determines to be necessary to carry 
     out this section;
       ``(ii) to permit the Comptroller General to review the 
     information provided; and
       ``(iii) to permit the Director of the Congressional Budget 
     Office to review the information provided.
       ``(4) Length of agreement.--
       ``(A) In general.--A rebate agreement shall be effective 
     for an initial period of not less than 1 year and shall be 
     automatically renewed for a period of not less than 1 year 
     unless terminated under subparagraph (B).
       ``(B) Termination.--
       ``(i) By the secretary.--The Secretary may provide for 
     termination of a rebate agreement for violation of the 
     requirements of the agreement or other good cause shown. Such 
     termination shall not be effective earlier than 60 days after 
     the date of notice of such termination. The Secretary shall 
     provide, upon request, a manufacturer with a hearing 
     concerning such a termination, but such hearing shall not 
     delay the effective date of the termination. Failure of a 
     State to provide any advance notice of such a termination as 
     required by regulation shall not affect the State's right to 
     terminate coverage of the drugs affected by such termination 
     as of the effective date of such termination.
       ``(ii) By a manufacturer.--A manufacturer may terminate a 
     rebate agreement under this section for any reason. Any such 
     termination shall not be effective until the calendar quarter 
     beginning at least 60 days after the date the manufacturer 
     provides notice to the Secretary.
       ``(iii) Effectiveness of termination.--Any termination 
     under this subparagraph shall not affect rebates due under 
     the agreement before the effective date of its termination.
       ``(iv) Notice to states.--In the case of a termination 
     under this subparagraph, the Secretary shall provide notice 
     of such termination to the States within not less than 30 
     days before the effective date of such termination.
       ``(v) Application to terminations of other agreements.--The 
     provisions of this subparagraph shall apply to the 
     terminations of agreements described in section 340B(a)(1) of 
     the Public Health Service Act and master agreements described 
     in section 8126(a) of title 38, United States Code.
       ``(C) Delay before reentry.--In the case of any rebate 
     agreement with a manufacturer under this section which is 
     terminated, another such agreement with the manufacturer (or 
     a successor manufacturer) may not be entered into until a 
     period of 1 calendar quarter has elapsed since the date of 
     the termination, unless the Secretary finds good cause for an 
     earlier reinstatement of such an agreement.
       ``(5) Settlement of disputes.--
       ``(A) Secretary.--The Secretary shall have the authority to 
     resolve, settle, and compromise disputes regarding the 
     amounts of rebates owed under this section.
       ``(B) State.--Each State, with respect to covered 
     outpatient drugs paid for under the State's medicaid plan, 
     shall have authority, independent of the Secretary' authority 
     under subparagraph (A), to resolve, settle, and compromise 
     disputes regarding the amounts of rebates owed under this 
     section. Any such action shall be deemed to comply with the 
     requirements of this title, and such covered outpatient drugs 
     shall be eligible for payment under the medicaid plan 
     approved under this title.
       ``(C) Amount of rebate.--The Secretary shall limit the 
     amount of the rebate payable in any case in which the 
     Secretary determines that, because of unusual circumstances 
     or questionable data, the provisions of subsection (c) result 
     in a rebate amount that is inequitable or otherwise 
     inconsistent with the purposes of this section.
       ``(c) Determination of Amount of Rebate.--
       ``(1) Basic rebate for single source drugs and innovator 
     multiple source drugs.--
       ``(A) In general.--Except as provided in paragraph (2), the 
     amount of the rebate specified in this subsection for a 
     rebate period (as defined in subsection (j)(8)) with respect 
     to each dosage form and strength of a single source drug or 
     an innovator multiple source drug shall be equal to the 
     product of--
       ``(i) the total number of units of each dosage form and 
     strength paid for under the medicaid plan in the rebate 
     period (as reported by the State); and
       ``(ii) subject to subparagraph (B)(ii), the greater of--

       ``(I) the difference between the average manufacturer price 
     and the best price (as defined in subparagraph (C)) for the 
     dosage form and strength of the drug, or
       ``(II) the minimum rebate percentage (specified in 
     subparagraph (B)(i)) of such average manufacturer price,

     of or the rebate period.
       ``(B) Minimum rebate percentage.--For purposes of 
     subparagraph (A)(ii)(II), the minimum rebate percentage for 
     rebate periods beginning after December 31, 1995, is 15.1 
     percent.
       ``(C) Best price defined.--For purposes of this section:
       ``(i) In general.--The term `best price' means, with 
     respect to a single source drug or innovator multiple source 
     drug of a manufacturer, the lowest price available from the 
     manufacturer during the rebate period to any wholesaler, 
     retailer, provider, health maintenance organization, 
     nonprofit entity, or governmental entity within the United 
     States, excluding--

       ``(I) any prices charged on or after October 1, 1992, to 
     the Indian Health Service, the Department of Veterans 
     Affairs, a State home receiving funds under section 1741 of 
     title 38, United States Code, the Department of Defense, the 
     Public Health Service, or a covered entity described in 
     subsection (a)(5)(B);
       ``(II) any prices charged under the Federal Supply Schedule 
     of the General Services Administration;
       ``(III) any prices used under a State pharmaceutical 
     assistance program; and
       ``(IV) any depot prices and single award contract prices, 
     as defined by the Secretary, of any agency of the Federal 
     Government.

       ``(ii) Special rules.--The term `best price'--

       ``(I) shall be inclusive of cash discounts, free goods that 
     are contingent on any purchase requirement, volume discounts, 
     and rebates (other than rebates under this section);
       ``(II) shall be determined without regard to special 
     packaging, labeling, or identifiers on the dosage form or 
     product or package; and
       ``(III) shall not take into account prices that are merely 
     nominal in amount.

       ``(2) Additional rebate for single source and innovator 
     multiple source drugs.--
       ``(A) In general.--The amount of the rebate specified in 
     this subsection for a rebate period, with respect to each 
     dosage form and strength of a single source drug or an 
     innovator multiple source drug, shall be increased by an 
     amount equal to the product of--
       ``(i) the total number of units of such dosage form and 
     strength dispensed after December 31, 1990, for which payment 
     was made under the medicaid plan for the rebate period; and
       ``(ii) the amount (if any) by which--

       ``(I) the average manufacturer price for the dosage form 
     and strength of the drug for the period, exceeds
       ``(II) the average manufacturer price for such dosage form 
     and strength for the calendar quarter beginning July 1, 1990 
     (without regard to whether or not the drug has been sold or 
     transferred to an entity, including a division or subsidiary 
     of the manufacturer, after the first day of such quarter), 
     increased by the percentage by which the consumer price index 
     for all urban consumers (United States city average) for the 
     month before the month in which the rebate period begins 
     exceeds such index for September 1990.

       ``(B) Treatment of subsequently approved drugs.--In the 
     case of a covered outpatient drug approved by the Food and 
     Drug Administration after October 1, 1990, clause (ii)(II) of 
     subparagraph (A) shall be applied by substituting `the first 
     full calendar quarter after the day on which the drug was 
     first marketed' for `the calendar quarter beginning July 1, 
     1990' and `the month prior to the first month of the first 
     full calendar quarter after the day on which the drug was 
     first marketed' for `September 1990'.
       ``(3) Rebate for other drugs.--
       ``(A) In general.--The amount of the rebate paid to a State 
     for a rebate period with respect to each dosage form and 
     strength of covered outpatient drugs (other than single 
     source drugs and innovator multiple source drugs) shall be 
     equal to the product of--
       ``(i) the applicable percentage (as described in 
     subparagraph (B)) of the average manufacturer price for the 
     dosage form and strength for the rebate period; and
       ``(ii) the total number of units of such dosage form and 
     strength dispensed after December 31, 1990, for which payment 
     was made under the medicaid plan for the rebate period.
       ``(B) Applicable percentage defined.--For purposes of 
     subparagraph (A)(i), the `applicable percentage' is 11 
     percent.
       ``(4) Rebate limited to amount of state payment if drug 
     primarily dispensed to nursing facility patients.--
       ``(A) In general.--Upon request of the manufacturer of a 
     covered outpatient drug, the Secretary shall limit, in 
     accordance with subparagraph (B), the amount of the rebate 
     under this subsection with respect to a dosage form and 
     strength of such drug if the majority of the estimated number 
     of units of such dosage form and strength that are subject to 
     rebates under this section were dispensed to inpatients of 
     nursing facilities.
       ``(B) Amount of rebate.--In the case of a covered 
     outpatient drug subject to subparagraph (A), the amount of 
     the rebate specified in this subsection for a rebate period, 
     with respect to each dosage form and strength of such drug, 
     shall not exceed the amount paid under the medicaid plan with 
     respect to such dosage form and strength of the drug in the 
     rebate period (without consideration of any dispensing fees 
     paid).
       ``(5) Supplemental rebates prohibited.--No rebates shall be 
     required to be paid by manufacturers with respect to covered 
     outpatient drugs furnished to individuals in any State that 
     provides for the collection of such rebates in excess of the 
     rebate amount payable under this section. 

[[Page S 16250]]

       ``(d) Limitations on Coverage of Drugs.--
       ``(1) Permissible restrictions.--
       ``(A) In general.--A State may subject to prior 
     authorization any covered outpatient drug. Any such prior 
     authorization program shall comply with the requirements of 
     paragraph (5).
       ``(B) Additional restrictions.--A State may exclude or 
     otherwise restrict coverage of a covered outpatient drug if--
       ``(i) the drug is contained in the list referred to in 
     paragraph (2);
       ``(ii) the drug is subject to such restrictions pursuant to 
     an agreement between a manufacturer and a State authorized by 
     the Secretary under subsection (a)(1) or in effect pursuant 
     to subsection (a)(4); or
       ``(iii) the State has excluded coverage of the drug from 
     its formulary established in accordance with paragraph (4).
       ``(2) List of drugs subject to restriction.--The following 
     drugs or classes of drugs, or their medical uses, may be 
     excluded from coverage or otherwise restricted:
       ``(A) Agents when used for anorexia, weight loss, or weight 
     gain.
       ``(B) Agents when used to promote fertility.
       ``(C) Agents when used for cosmetic purposes or hair 
     growth.
       ``(D) Agents when used for the symptomatic relief of cough 
     and colds.
       ``(E) Agents when used to promote smoking cessation.
       ``(F) Prescription vitamins and mineral products, except 
     prenatal vitamins and fluoride preparations.
       ``(G) Nonprescription drugs.
       ``(H) Covered outpatient drugs which the manufacturer seeks 
     to require as a condition of sale that associated tests or 
     monitoring services be purchased exclusively from the 
     manufacturer or its designee.
       ``(I) Barbiturates.
       ``(J) Benzodiazepines.
       ``(3) Additions to drug listings.--The Secretary shall, by 
     regulation, periodically add to the list of drugs or classes 
     of drugs described in paragraph (2), or their medical uses, 
     which the Secretary has determined to be subject to clinical 
     abuse or inappropriate use.
       ``(4) Requirements for formularies.--A State may establish 
     a formulary if the formulary meets the following 
     requirements:
       ``(A) The formulary is developed by a committee consisting 
     of physicians, pharmacists, and other appropriate individuals 
     appointed by the Governor of the State (or, at the option of 
     the State, the State's drug use review board established 
     under subsection (f)(3)).
       ``(B) Except as provided in subparagraph (C), the formulary 
     includes the covered outpatient drugs of any manufacturer 
     which has entered into and complies with an agreement under 
     subsection (a) (other than any drug excluded from coverage or 
     otherwise restricted under paragraph (2)).
       ``(C) A covered outpatient drug may be excluded with 
     respect to the treatment of a specific disease or condition 
     for an identified population (if any) only if, based on the 
     drug's labeling (or, in the case of a drug the prescribed use 
     of which is not approved under the Federal Food, Drug, and 
     Cosmetic Act but is a medically accepted indication, based on 
     information from the appropriate compendia described in 
     subsection (j)(6)), the excluded drug does not have a 
     significant, clinically meaningful therapeutic advantage in 
     terms of safety, effectiveness, or clinical outcome of such 
     treatment for such population over other drugs included in 
     the formulary and there is a written explanation (available 
     to the public) of the basis for the exclusion.
       ``(D) The medicaid plan permits coverage of a drug excluded 
     from the formulary (other than any drug excluded from 
     coverage or otherwise restricted under paragraph (2)) 
     pursuant to a prior authorization program that is consistent 
     with paragraph (5).
       ``(E) The formulary meets such other requirements as the 
     Secretary may impose in order to achieve program savings 
     consistent with protecting the health of program 
     beneficiaries.
     A prior authorization program established by a State under 
     paragraph (5) is not a formulary subject to the requirements 
     of this paragraph.
       ``(5) Requirements of prior authorization programs.--A 
     medicaid plan approved under this title may require, as a 
     condition of coverage or payment for a covered outpatient 
     drug for which Federal financial participation is available 
     in accordance with this section, with respect to drugs 
     dispensed on or after July 1, 1991, the approval of the drug 
     before its dispensing for any medically accepted indication 
     (as defined in subsection (j)(6)) only if the system 
     providing for such approval--
       ``(A) provides response by telephone or other 
     telecommunication device within 24 hours of a request for 
     prior authorization; and
       ``(B) except with respect to the drugs on the list referred 
     to in paragraph (2), provides for the dispensing of at least 
     72-hour supply of a covered outpatient prescription drug in 
     an emergency situation (as defined by the Secretary).
       ``(6) Other permissible restrictions.--A State may impose 
     limitations, with respect to all such drugs in a therapeutic 
     class, on the minimum or maximum quantities per prescription 
     or on the number of refills, if such limitations are 
     necessary to discourage waste, and may address instances of 
     fraud or abuse by individuals in any manner authorized under 
     this Act.
       ``(e) Establishment of Upper Payment Limits.--The Health 
     Care Financing Administration shall establish a Federal upper 
     reimbursement limit for each multiple source drug for which 
     the FDA has rated three or more products therapeutically and 
     pharmaceutically equivalent, regardless of whether all such 
     additional formulations are rated as such and shall use only 
     such formulations when determining any such upper limit.
       ``(f) Drug Use Review.--
       ``(1) In general.--A State participating in the medicaid 
     rebate agreement may provide for a drug use review program to 
     educate physicians and pharmacists to identify and reduce the 
     frequency of patterns of fraud, abuse, gross overuse, or 
     inappropriate or medically unnecessary care, among 
     physicians, pharmacists, and patients, or associated with 
     specific drugs or groups of drugs, as well as potential and 
     actual severe adverse reactions to drugs.
       ``(2) Application of state standards.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     a State with a drug use review program under this subsection 
     shall establish and operate the program under such standards 
     as it may establish.
       ``(B) Data on drug use.--The program shall assess data on 
     drug use against predetermined standards, consistent with--
       ``(i) compendia which shall consist of--

       ``(I) American Hospital Formulary Service Drug Information,
       ``(II) United States Pharmacopeia-Drug Information,
       ``(III) the DRUGDEX Information System, and
       ``(IV) American Medical Association Drug Evaluations; and

       ``(ii) the peer-reviewed medical literature.
       ``(g) Electronic Claims Management.--In accordance with 
     chapter 35 of title 44, United States Code (relating to 
     coordination of Federal information policy), the Secretary 
     shall encourage each State to establish, as its principal 
     means of processing claims for covered outpatient drugs under 
     its medicaid plan, a point-of-sale electronic claims 
     management system, for the purpose of performing on-line, 
     real time eligibility verifications, claims data capture, 
     adjudication of claims, and assisting pharmacists (and other 
     authorized persons) in applying for and receiving payment.
       ``(h) Annual Report.--
       ``(1) In general.--Not later than May 1 of each year, the 
     Secretary shall transmit to the Committee on Finance of the 
     Senate and the Committee on Commerce of the House of 
     Representatives a report on the operation of this section in 
     the preceding fiscal year.
       ``(2) Details.--Each report shall include information on--
       ``(A) ingredient costs paid under this title for single 
     source drugs, multiple source drugs, and nonprescription 
     covered outpatient drugs;
       ``(B) the total value of rebates received and number of 
     manufacturers providing such rebates;
       ``(C) the effect of inflation on the value of rebates 
     required under this section;
       ``(D) trends in prices paid under this title for covered 
     outpatient drugs; and
       ``(E) Federal and State administrative costs associated 
     with compliance with the provisions of this title.
       ``(i) Exemption for Capitated Health Care Organizations, 
     Hospitals, and Nursing Facilities.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     requirements of the medicaid rebate agreement under this 
     section shall not apply with respect to covered outpatient 
     drugs dispensed by or through--
       ``(A) a capitated health care organization (as defined in 
     section 2114(c)(1)); or
       ``(B) a hospital or nursing facility that dispenses covered 
     outpatient drugs using a drug formulary system and bills the 
     State no more than the hospital's purchasing costs for 
     covered outpatient drugs.
       ``(2) Construction in determining best price.--Nothing in 
     paragraph (1) shall be construed as excluding amounts paid by 
     the entities described in such paragraph for covered 
     outpatient drugs from the determination of the best price (as 
     defined in subsection (c)(1)(C)) for such drugs.
       ``(j) Definitions.--For purposes of this section:
       ``(1) Average manufacturer price.--The term `average 
     manufacturer price' means, with respect to a covered 
     outpatient drug of a manufacturer for a rebate period, the 
     average price paid to the manufacturer for the drug in the 
     United States by wholesalers for drugs distributed to the 
     retail pharmacy class of trade, after deducting customary 
     prompt pay discounts.
       ``(2) Covered outpatient drug.--Subject to the exceptions 
     in paragraph (3), the term `covered outpatient drug' means--
       ``(A) of those drugs which are treated as prescribed drugs 
     for purposes of this title, a drug which may be dispensed 
     only upon prescription (except as provided in subparagraph 
     (D)); and--
       ``(i) which is approved as a prescription drug under 
     section 505 or 507 of the Federal Food, Drug, and Cosmetic 
     Act,
       ``(ii)(I) which was commercially used or sold in the United 
     States before the date of the enactment of the Drug 
     Amendments of 1962 or which is identical, similar, or related 
     (within the meaning of section 310.6(b)(1) of title 21 of the 
     Code of Federal Regulations) to such a drug, and (II) which 
     has not been the subject of a final determination by the 
     Secretary that it is a `new drug' (within the meaning of 
     section 201(p) of the Federal Food, Drug, and Cosmetic Act) 
     or an action brought by the Secretary under section 301, 
     302(a), or 304(a) of such Act to enforce section 502(f) or 
     505(a) of such Act, or
       ``(iii)(I) which is described in section 107(c)(3) of the 
     Drug Amendments of 1962 and for which the Secretary has 
     determined there is a compelling justification for its 
     medical need, or is identical, similar, or related (within 
     the meaning of section 310.6(b)(1) of title 21 of the Code of 
     Federal Regulations) to such a drug, and (II) for which the 
     Secretary has not issued a notice of an opportunity for a 
     hearing under section 505(e) of the Federal Food, Drug, and 
     Cosmetic Act on a proposed order of the Secretary to withdraw 
     approval of an application for such 

[[Page S 16251]]
     drug under such section because the Secretary has determined that the 
     drug is less than effective for some or all conditions of use 
     prescribed, recommended, or suggested in its labeling;
       ``(B) a biological product, other than a vaccine which--
       ``(i) may only be dispensed upon prescription,
       ``(ii) is licensed under section 351 of the Public Health 
     Service Act, and
       ``(iii) is produced at an establishment licensed under such 
     section to produce such product;
       ``(C) insulin certified under section 506 of the Federal 
     Food, Drug, and Cosmetic Act; and
       ``(D) a drug which may be sold without a prescription 
     (commonly referred to as an `over-the-counter drug'), if the 
     drug is prescribed by a physician (or other person authorized 
     to prescribe under State law).
       ``(3) Limiting definition.--The term `covered outpatient 
     drug' does not include any drug, biological product, or 
     insulin provided as part of, or as incident to and in the 
     same setting as, any of the following (and for which payment 
     may be made under this title as part of payment for the 
     following and not as direct reimbursement for the drug):
       ``(A) Inpatient hospital services.
       ``(B) Hospice services.
       ``(C) Dental services, except that drugs for which the 
     medicaid plan authorizes direct reimbursement to the 
     dispensing dentist are covered outpatient drugs.
       ``(D) Physicians' services.
       ``(E) Outpatient hospital services.
       ``(F) Nursing facility services and services provided by an 
     intermediate care facility for the mentally retarded.
       ``(G) Other laboratory and x-ray services.
       ``(H) Renal dialysis services.

     Such term also does not include any such drug or product for 
     which a National Drug Code number is not required by the Food 
     and Drug Administration or a drug or biological used for a 
     medical indication which is not a medically accepted 
     indication. Any drug, biological product, or insulin excluded 
     from the definition of such term as a result of this 
     paragraph shall be treated as a covered outpatient drug for 
     purposes of determining the best price (as defined in 
     subsection (c)(1)(C)) for such drug, biological product, or 
     insulin.
       ``(4) Over-the-counter drug.--The term `over-the-counter 
     drug' means a drug that may be sold without a prescription.
       ``(5) Manufacturer.--The term `manufacturer' means, with 
     respect to a covered outpatient drug, the entity holding 
     legal title to or possession of the National Drug Code number 
     for such drug.
       ``(6) Medically accepted indication.--The term `medically 
     accepted indication' means any use for a covered outpatient 
     drug which is approved under the Federal Food, Drug, and 
     Cosmetic Act, or the use of which is supported by one or more 
     citations included or approved for inclusion in any of the 
     compendia described in subsection (f)(2)(B)(i).
       ``(7) Multiple source drug; innovator multiple source drug; 
     noninnovator multiple source drug; single source drug.--
       ``(A) Defined.--
       ``(i) Multiple source drug.--The term `multiple source 
     drug' means, with respect to a rebate period, a covered 
     outpatient drug (not including any drug described in 
     paragraph (2)(D)) for which there are 2 or more drug products 
     which--

       ``(I) are rated as therapeutically equivalent (under the 
     Food and Drug Administration's most recent publication of 
     `Approved Drug Products with Therapeutic Equivalence 
     Evaluations');
       ``(II) except as provided in subparagraph (B), are 
     pharmaceutically equivalent and bioequivalent, as defined in 
     subparagraph (C) and as determined by the Food and Drug 
     Administration; and
       ``(III) are sold or marketed in the State during the 
     period.

       ``(ii) Innovator multiple source drug.--The term `innovator 
     multiple source drug' means a multiple source drug that was 
     originally marketed under a new drug application or product 
     licensing application approved by the Food and Drug 
     Administration.
       ``(iii) Noninnovator multiple source drug.--The term 
     `noninnovator multiple source drug' means a multiple source 
     drug that is not an innovator multiple source drug.
       ``(iv) Single source drug.--The term `single source drug' 
     means a covered outpatient drug (not including any drug 
     described in paragraph (2)(D)) which is produced or 
     distributed under a new drug application or product licensing 
     application approved by the Food and Drug Administration, 
     including a drug product marketed by any cross-licensed 
     producers or distributors operating under the new drug 
     application or product licensing application.
       ``(B) Exception.--Subparagraph (A)(i)(II) shall not apply 
     if the Food and Drug Administration changes by regulation the 
     requirement that, for purposes of the publication described 
     in subparagraph (A)(i)(I), in order for drug products to be 
     rated as therapeutically equivalent, they must be 
     pharmaceutically equivalent and bioequivalent, as defined in 
     subparagraph (C).
       ``(C) Special rules.--For purposes of this paragraph--
       ``(i) drug products are pharmaceutically equivalent if the 
     products contain identical amounts of the same active drug 
     ingredient in the same dosage form and meet compendial or 
     other applicable standards of strength, quality, purity, and 
     identity;
       ``(ii) drugs are bioequivalent if they do not present a 
     known or potential bioequivalence problem, or, if they do 
     present such a problem, they are shown to meet an appropriate 
     standard of bioequivalence; and
       ``(iii) a drug product is considered to be sold or marketed 
     in a State if it appears in a published national listing of 
     average wholesale prices selected by the Secretary, if the 
     listed product is generally available to the public through 
     retail pharmacies in that State.
       ``(8) Rebate period.--The term `rebate period' means, with 
     respect to an agreement under subsection (a), a calendar 
     quarter or other period specified by the Secretary with 
     respect to the payment of rebates under such agreement.
       ``(9) State agency.--The term `State agency' means the 
     agency designated under this title to administer or supervise 
     the administration of the medicaid plan for medical 
     assistance.''.
       (b) Medicaid Drug Rebate Program Task Force.--
       (1) In general.--Not later than June 1, 1998, the Secretary 
     of Health and Human Services (in this subsection referred to 
     as the ``Secretary'') shall provide for the establishment of 
     a Medicaid Drug Rebate Program Task Force (in this subsection 
     referred to as the ``Task Force'').
       (2) Composition.--The Task Force shall consist of volunteer 
     representatives appointed by--
       (A) the chair and vice chair of the National Governors 
     Association (NGA);
       (B) the National Association of State Medicaid Directors;
       (C) associations representing the prescription and generic 
     drug industries;
       (D) an association representing pharmacies; and
       (E) an association representing the interests of medicaid 
     recipients.
       (3) Duties.--The Task Force shall study whether the 
     medicaid drug rebate program under section 2175 of the Social 
     Security Act, as added by this section, should be retained or 
     repealed. The study shall assess--
       (A) the extent to which State medicaid programs rely on the 
     drug rebate program to manage prescription drug expenditures;
       (B) the impact of repealing the program on recipient access 
     to prescription drugs and pharmacy services;
       (C) the impact of retaining the program on the prescription 
     and generic drug industries; and
       (D) the likely actions States would take to manage 
     prescription drug expenditures in the absence of drug rebate 
     revenue.
       (4) Administrative assistance.--Administrative support for 
     the Task Force shall be provided by the Agency for Health 
     Care Policy and Research (or, in the absence of such Agency, 
     the Secretary).
       (5) Report.--Not later than October 1, 1998, the Task Force 
     shall report the results of the study to the Secretary. The 
     report shall be transmitted to the Committee on Finance and 
     Special Committee on Aging of the Senate and the Committee on 
     Commerce of the House of Representatives.
       (c) Clerical Amendment.--The table of sections for title 
     XXI, as added by section 7191(a), is amended by adding at the 
     end the following new item:

``Sec. 2175. Medicaid drug rebate agreements.''.

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

     SEC. 7193. WAIVERS.

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

     SEC. 7194. CHILDREN WITH SPECIAL HEALTH CARE NEEDS.

       (a) Classification System To Identify Children With Special 
     Health Care Needs.--
       (1) In general.--Not later than 18 months after the date of 
     the enactment of this Act, the 

[[Page S 16252]]
     Secretary of Health and Human Services (in this section referred to as 
     the ``Secretary'') shall, through the Health Care Financing 
     Administration, develop a national, quantifiable 
     classification system to identify children with special 
     health care needs.
       (2) Children with special health care needs.--For purposes 
     of this section, children with special health care needs are 
     children--
       (A) with conditions which are, or can be anticipated to be, 
     of at least a year's duration, and
       (B) who require services significantly greater than well 
     children.
       (3) Requirements of classification system.--The 
     classification system developed in accordance with this 
     section--
       (A) shall be based on commonly recognized diagnostic codes;
       (B) shall be compatible with State and health plan data 
     systems;
       (C) shall be capable of serving as a basis for identifying 
     such children and their medical expenditures and monitoring 
     the quality of care received; and
       (D) shall incorporate the consideration of the severity 
     status, prognosis, and desired outcome for each such child, 
     including tertiary prevention, maintenance of function, or 
     improvement of function.
       (b) Demonstration Projects To Use Classification System and 
     To Provide Methods of Assuring Quality Care for Children With 
     Special Health Care Needs.--
       (1) In general.--Upon completion of the development of the 
     classification system under subsection (a), the Secretary 
     shall make grants to not more than 5 States to conduct 5-year 
     demonstration projects in accordance with this subsection for 
     the purpose of--
       (A) testing the reliability and validity of such 
     classification system;
       (B) developing methods of assuring quality care for 
     children with special health care needs; and
       (C) providing for initial methods for identifying children 
     with special health care needs based on diagnoses accounting 
     for the majority of the chronic conditions affecting children 
     in the State which are likely to require significant medical 
     interventions whether in number of interventions or costs.
     Each State grant may be used without fiscal year limitation.
       (2) Requirements of project.--
       (A) In general.--A project conducted in accordance with 
     this subsection shall provide that the State in developing 
     methods described in paragraph (1)(B), shall develop--
       (i) adequate capitation rates specific to children with 
     special health care needs; and
       (ii) quality indicators, including system performance 
     standards, care guidelines for specific populations, outcomes 
     measures, and patient and parent satisfaction.
       (B) Appropriate representatives.--The design and 
     implementation of such a project shall include 
     representatives of providers of services to such children and 
     appropriate State agencies and programs.
       (3) Applications.--Each State desiring to conduct a 
     demonstration project under this subsection, including 
     projects which are statewide, substate, or regional in 
     cooperation with a contiguous State or States, shall prepare 
     and submit to the Secretary an application at such time, in 
     such manner, and containing such information as the Secretary 
     may require.
       (4) Reports.--A State that conducts a demonstration project 
     under this section shall prepare and submit to the Secretary 
     annual and final reports in such form and containing such 
     information as the Secretary may require.
       (5) Authorization of appropriations.--There are authorized 
     to be appropriated $2,000,000 for each of fiscal years 1997, 
     1998, 1999, 2000, and 2001 for the purpose of conducting 
     demonstration projects in accordance with this subsection.

     SEC. 7195. CBO REPORTS.

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

     SEC. 7196. ADJUSTMENTS OF POOL AMOUNTS.

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

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

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

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

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

     SEC. 7199. MEDICARE/MEDICAID INTEGRATION DEMONSTRATION 
                   PROJECT.

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

[[Page S 16253]]

       (2) Termination.--The Secretary may, with 90 days' notice, 
     terminate any demonstration project conducted under this 
     section that is not in substantial compliance with the terms 
     of the application approved by the Secretary under this 
     section.
       (f) Oversight.--The Secretary shall establish quality 
     standards for evaluating and monitoring the demonstration 
     projects conducted under this section.
       (g) Reports.--Not later than 90 days after the conclusion 
     of a demonstration project conducted under this section, the 
     Secretary shall submit to the Congress a report containing 
     the following:
       (1) A description of the demonstration project.
       (2) An analysis of beneficiary satisfaction under such 
     project.
       (3) An analysis of the quality of the services delivered 
     under the project.
       (4) A description of the savings to the medicaid and 
     medicare programs as a result of the demonstration project.
  Subtitle C--Block Grants for Temporary Assistance for Needy Families

     SEC. 7200. SHORT TITLE.

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

     SEC. 7201. BLOCK GRANTS TO STATES.

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

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

     ``SEC. 400. NO INDIVIDUAL ENTITLEMENT.

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

     ``SEC. 401. PURPOSE.

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

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

       ``(a) In General.--As used in this part, the term `eligible 
     State' means, with respect to a fiscal year, a State that has 
     submitted to the Secretary a plan that includes the 
     following:
       ``(1) Outline of family assistance program.--A written 
     document that outlines how the State intends to do the 
     following:
       ``(A) Conduct a program designed to serve all political 
     subdivisions in the State to--
       ``(i) provide assistance to needy families with not less 
     than 1 minor child (or any expectant family); and
       ``(ii) provide a parent or caretaker in such families with 
     work experience, assistance in finding employment, and other 
     work preparation activities and support services that the 
     State considers appropriate to enable such families to leave 
     the program and become self-sufficient.
       ``(B) Require a parent or caretaker receiving assistance 
     under the program to engage in work (as defined by the State) 
     when the State determines the parent or caretaker is ready to 
     engage in work, or after 24 months (whether or not 
     consecutive) of receiving assistance under the program, 
     whichever is earlier.
       ``(C) Satisfy the minimum participation rates specified in 
     section 404.
       ``(D) Treat--
       ``(i) families with minor children moving into the State 
     from another State; and
       ``(ii) noncitizens of the United States.
       ``(E) Safeguard and restrict the use and disclosure of 
     information about individuals and families receiving 
     assistance under the program.
       ``(F) Establish goals and take action to prevent and reduce 
     the incidence of out-of-wedlock pregnancies, with special 
     emphasis on teenage pregnancies.
       ``(G) Community service.--Not later than 2 years after the 
     date of the enactment of this Act, consistent with the 
     exception provided in section 404(d), require participation 
     by, and offer to, unless the State opts out of this provision 
     by notifying the Secretary, a parent or caretaker receiving 
     assistance under the program, after receiving such assistance 
     for 3 months--
       ``(i) is not exempt from work requirements; and
       ``(ii) is not engaged in work as determined under section 
     404(c),

     in community service employment, with minimum hours per week 
     and tasks to be determined by the State.
       ``(2) Family assistance program strategic plan.--
       ``(A) In general.--A single comprehensive State Family 
     Assistance Program Strategic Plan (hereafter referred to in 
     this section as the `State Plan') describing a 3-year 
     strategic plan for the statewide program designed to meet the 
     State goals and reach the State benchmarks for program 
     activities of the family assistance program.
       ``(B) Contents of the state plan.--The State plan shall 
     include:
       ``(i) State goals.--A description of the goals of the 3-
     year plan, including outcome related goals of and benchmarks 
     for program activities of the family assistance program.
       ``(ii) Current year plan.--A description of how the goals 
     and benchmarks described in clause (i) will be achieved, or 
     how progress toward the goals and benchmarks will be 
     achieved, during the fiscal year in which the plan has been 
     submitted.
       ``(iii) Performance indicators.--A description of 
     performance indicators to be used in measuring or assessing 
     the relevant output service levels and outcomes of relevant 
     program activities.
       ``(iv) External factors.--Information on those key factors 
     external to the program and beyond the control of the State 
     that could significantly affect the attainment of the goals 
     and benchmarks.
       ``(v) Evaluation mechanisms.--Information on a mechanism 
     for conducting program evaluation, to be used to compare 
     actual results with the goals and benchmarks and designate 
     the results on a scale ranging from highly successful to 
     failing to reach the goals and benchmarks of the program.
       ``(vi) Minimum participation rates.--Information on how the 
     minimum participation rates specified in section 404 will be 
     satisfied.
       ``(vii) Estimate of expenditures.--An estimate of the total 
     amount of State or local expenditures under the program for 
     the fiscal year in which the plan is submitted.
       ``(3) Certification that the state will operate a child 
     support enforcement program.--A certification by the chief 
     executive officer of the State that, during the fiscal year, 
     the State will operate a child support enforcement program 
     under the State plan approved under part D.
       ``(4) Certification that the state will operate a child 
     protection program.--A certification by the chief executive 
     officer of the State that, during the fiscal year, the State 
     will operate a child protection program under the State plan 
     approved under part B.
       ``(5) Certification that the state will operate a foster 
     care and adoption assistance program.--A certification by the 
     chief executive officer of the State that, during the fiscal 
     year, the State will operate a foster care and adoption 
     assistance program under the State plan approved under part 
     E.
       ``(6) Certification that the state will participate in the 
     income and eligibility verification system.--A certification 
     by the chief executive officer of the State that, during the 
     fiscal year, the State will participate in the income and 
     eligibility verification system required by section 1137.
       ``(7) Certification of the administration of the program.--
     A certification by the chief executive officer of the State 
     specifying which State agency or agencies are responsible for 
     the administration and supervision of the State program for 
     the fiscal year and ensuring that local governments and 
     private sector organizations have been consulted regarding 
     the plan and design of welfare services in the State so that 
     services are provided in a manner appropriate to local 
     populations.
       ``(8) Certification that required reports will be 
     submitted.--A certification by the chief executive officer of 
     the State that the State shall provide the Secretary with any 
     reports required under this part.
       ``(b) Certification That the State Will Provide Access to 
     Indians.--
       ``(1) In general.--In recognition of the Federal 
     Government's trust responsibility to, and government-to-
     government relationship with, Indian tribes, the Secretary 
     shall ensure that Indians receive at least their equitable 
     share of services under the State program, by requiring a 
     certification by the chief executive officer of each State 
     described in paragraph (2) that, during the fiscal year, the 
     State shall provide Indians in each Indian tribe that does 
     not have a tribal family assistance plan approved under 
     section 414 for a fiscal year with equitable access to 
     assistance under the State program funded under this part.
       ``(2) State described.--For purposes of paragraph (1), a 
     State described in this paragraph is a State in which there 
     is an Indian tribe that does not have a tribal family 
     assistance plan approved under section 414 for a fiscal year.
       ``(c) Distribution of State Plan.--
       ``(1) Public availability of summary.--The State shall make 
     available to the public a summary of the State plan submitted 
     under this section.
       ``(2) Copy to auditor.--The State shall provide the 
     approved entity conducting the audit under section 408 with a 
     copy of the State plan submitted under this section.
       ``(d) Definitions.--For purposes of this part, the 
     following definitions shall apply:
       ``(1) Adult.--The term `adult' means an individual who is 
     not a minor child.
       ``(2) Minor child.--The term `minor child' means an 
     individual--
       ``(A) who--
       ``(i) has not attained 18 years of age; or
       ``(ii) has not attained 19 years of age and is a full-time 
     student in a secondary school (or in the equivalent level of 
     vocational or technical training); and
       ``(B) who resides with such individual's custodial parent 
     or other caretaker relative.
       ``(3) Fiscal year.--The term `fiscal year' means any 12-
     month period ending on September 30 of a calendar year.
       ``(4) Indian, indian tribe, and tribal organization.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the terms `Indian', `Indian tribe', and `tribal organization' 
     have the meaning given such terms by section 4 of the Indian 

[[Page S 16254]]
     Self-Determination and Education Assistance Act (25 U.S.C. 450b).
       ``(B) In alaska.--For purposes of making tribal family 
     assistance grants under section 414 on behalf of Indians in 
     Alaska, the term `Indian tribe' shall mean only the following 
     Alaska Native regional nonprofit corporations:
       ``(i) Arctic Slope Native Association.
       ``(ii) Kawerak, Inc.
       ``(iii) Maniilaq Association.
       ``(iv) Association of Village Council Presidents.
       ``(v) Tanana Chiefs Conference.
       ``(vi) Cook Inlet Tribal Council.
       ``(vii) Bristol Bay Native Association.
       ``(viii) Aleutian and Pribilof Island Association.
       ``(ix) Chugachmuit.
       ``(x) Tlingit Haida Central Council.
       ``(xi) Kodiak Area Native Association.
       ``(xii) Copper River Native Association.
       ``(5) State.--Except as otherwise specifically provided, 
     the term `State' includes the several States, the District of 
     Columbia, the Commonwealth of Puerto Rico, the United States 
     Virgin Islands, Guam, and American Samoa.

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

       ``(a) Grant Amount.--
       ``(1) In general.--Subject to the provisions of paragraphs 
     (3) and (5), section 407 (relating to penalties), and section 
     414(g), for each of fiscal years 1996, 1997, 1998, 1999, and 
     2000, the Secretary shall pay--
       ``(A) each eligible State a grant in an amount equal to the 
     State family assistance grant for the fiscal year, for each 
     of fiscal years 1998 and 1999, the amount of the State's job 
     placement performance bonus determined under subsection 
     (f)(1) for the fiscal year, and for fiscal year 2000, the 
     amount of the State's share of the performance bonus and high 
     performance bonus determined under section 418 for such 
     fiscal year; and
       ``(B) each Indian tribe with an approved tribal family 
     assistance plan a tribal family assistance grant in 
     accordance with section 414.
       ``(2) State family assistance grant.--
       ``(A) In general.--
       ``(i) Basic amount.--For purposes of paragraph (1)(A), a 
     State family assistance grant for any State for a fiscal year 
     is an amount equal to the sum of--

       ``(I) the total amount of the Federal payments to the State 
     under section 403 (other than Federal payments to the State 
     described in subparagraphs (A), (B) and (C) of section 
     418(a)(2)) for fiscal year 1994 (as such section 403 was in 
     effect during such fiscal year), plus
       ``(II) the total amount of the Federal payments to the 
     State under subparagraphs (A), (B) and (C) of section 
     418(a)(2),

     as such payments were reported by the State on February 14, 
     1995, and as adjusted under clause (ii).
       ``(ii) Adjustments.--The payments described in clause (i) 
     shall be--

       ``(I) reduced by the amount, if any, determined under 
     subparagraph (B);
       ``(II) reduced by the amount determined under subsection 
     (f)(2)(B);
       ``(III) reduced by the amount, if any, determined under 
     subsection (i)(3)(C)(iii);
       ``(IV) for fiscal year 2000, reduced by the amount 
     determined under section 418(a)(3); and
       ``(V) increased by the amount, if any, determined under 
     subparagraph (D).

       ``(B) Amount attributable to certain indian families served 
     by indian tribes.--
       ``(i) In general.--For purposes of subparagraph (A), the 
     amount determined under this subparagraph is an amount equal 
     to the Federal payments to the State under this section for 
     fiscal year 1994 (as in effect during such fiscal year) 
     attributable to expenditures by the State under parts A and F 
     of this title (as so in effect) for Indian families described 
     in clause (ii).
       ``(ii) Indian families described.--For purposes of clause 
     (i), Indian families described in this clause are Indian 
     families who reside in a service area or areas of an Indian 
     tribe receiving a tribal family assistance grant under 
     section 414.
       ``(C) Notification.--Not later than 3 months prior to the 
     payment of each quarterly installment of a State grant under 
     subsection (a)(1), the Secretary shall notify the State of 
     the amount of the reduction determined under subparagraph (B) 
     with respect to the State.
       ``(D) Amount attributable to state plan amendments.--
       ``(i) In general.--For purposes of subparagraph (A) and 
     subject to the limitation in clause (ii), the amount 
     determined under this subparagraph is an amount equal to the 
     Federal payment under section 403(a)(5) to the State for 
     emergency assistance in fiscal year 1995 under any State plan 
     amendment made under section 402 during fiscal year 1994 (as 
     such sections were in effect before the date of the enactment 
     of the Work Opportunity Act of 1995).
       ``(ii) Limitation.--Amounts made available under clause (i) 
     to all States shall not exceed $800,000,000 for the 5-fiscal 
     year period beginning in fiscal year 1996. If amounts 
     available under this subparagraph are less than the total 
     amount of emergency assistance payments referred to in clause 
     (i), the amount payable to a State shall be equal to an 
     amount which bears the same relationship to the total amount 
     available under this clause as the State emergency assistance 
     payment bears to the total amount of such payments.
       ``(iii) Budget scoring.--Notwithstanding section 257(b)(2) 
     of the Balanced Budget and Emergency Deficit Control Act of 
     1985, the baseline shall assume that no grant shall be made 
     under this subparagraph after fiscal year 2000.
       ``(3) Appropriation.--
       ``(A) States.--There are authorized to be appropriated and 
     there are appropriated $16,803,769,000 for each fiscal year 
     described in paragraph (1) for the purpose of paying--
       ``(i) grants to States under paragraph (1)(A); and
       ``(ii) tribal family assistance grants under paragraph 
     (1)(B).
       ``(B) Adjustment for qualifying states.--For the purpose of 
     increasing the amount of the grant payable to a State under 
     paragraph (1) in accordance with paragraph (3), there are 
     authorized to be appropriated and there are appropriated--
       ``(i) for fiscal year 1997, $85,860,000;
       ``(ii) for fiscal year 1998, $173,276,000;
       ``(iii) for fiscal year 1999, $263,468,000; and
       ``(iv) for fiscal year 2000, $355,310,000.
       ``(4) Welfare partnership.--
       ``(A) In general.--The amount of the grant otherwise 
     determined under paragraph (1) for fiscal year 1997, 1998, 
     1999, or 2000 shall be reduced by the amount by which State 
     expenditures under the State program funded under this part 
     for the preceding fiscal year is less than 80 percent of 
     historic State expenditures.
       ``(B) Historic state expenditures.--For purposes of this 
     paragraph--
       ``(i) In general.--The term `historic State expenditures' 
     means expenditures by a State under parts A and F of title IV 
     for fiscal year 1994, as in effect during such fiscal year.
       ``(ii) Hold harmless.--In no event shall the historic State 
     expenditures applicable to any fiscal year exceed the amount 
     which bears the same ratio to the amount determined under 
     clause (i) as--

       ``(I) the grant amount otherwise determined under paragraph 
     (1) for the preceding fiscal year (without regard to section 
     407), bears to
       ``(II) the total amount of Federal payments to the State 
     under section 403 for fiscal year 1994 (as in effect during 
     such fiscal year).

       ``(C) Determination of state expenditures for preceding 
     fiscal year.--
       ``(i) In general.--For purposes of this paragraph, the 
     expenditures of a State under the State program funded under 
     this part for a preceding fiscal year shall be equal to the 
     sum of the State's expenditures under the program in the 
     preceding fiscal year for--

       ``(I) cash assistance;
       ``(II) child care assistance;
       ``(III) education, job training, and work;
       ``(IV) administrative costs; and
       ``(V) any other use of funds allowable under section 
     403(b)(1).

       ``(ii) Transfers from other state and local programs.--In 
     determining State expenditures under clause (i), such 
     expenditures shall not include funding supplanted by 
     transfers from other State and local programs.
       ``(D) Exclusion of federal amounts.--For purposes of this 
     paragraph, State expenditures shall not include any 
     expenditures from amounts made available by the Federal 
     Government, State funds expended for the medicaid program 
     under title XIX of this Act or any successor to such program, 
     and any State funds which are used to match Federal funds or 
     are expended as a condition of receiving Federal funds under 
     Federal programs other than under this part.
       ``(b) Use of Grant.--
       ``(1) In general.--Subject to this part, a State to which a 
     grant is made under this section may use the grant--
       ``(A) in any manner that is reasonably calculated to 
     accomplish the purpose of this part; or
       ``(B) in any manner that such State used amounts received 
     under part A or F of this title, as such parts were in effect 
     before October 1, 1995;

     except that not more than 15 percent of the grant may be used 
     for administrative purposes.
       ``(2) Authority to reserve certain amounts for 
     assistance.--A State may reserve amounts paid to the State 
     under this part for any fiscal year for the purpose of 
     providing, without fiscal year limitation, assistance under 
     the State program operated under this part. In the case of 
     amounts paid to the State that are set aside in accordance 
     with section 418(a), the State may reserve such amounts for 
     any fiscal year only for the purpose of providing without 
     fiscal year limitation child care assistance under this part.
       ``(3) Authority to operate employment placement program.--A 
     State to which a grant is made under this section may use a 
     portion of the grant to make payments (or provide job 
     placement vouchers) to State-approved public and private job 
     placement agencies that provide employment placement services 
     to individuals who receive assistance under the State program 
     funded under this part.
       ``(4) Transferability of grant amounts.--A State may use up 
     to 30 percent of amounts received from a grant under this 
     part for a fiscal year to carry out State activities under 
     the Child Care and Development Block Grant Act of 1990 (42 
     U.S.C. 9858 et seq.) (relating to child care block grants).
       ``(c) Timing of Payments.--The Secretary shall pay each 
     grant payable to a State under this section in quarterly 
     installments.
       ``(d) Federal Loan Fund for State Welfare Programs.--
       ``(1) Establishment.--There is hereby established in the 
     Treasury of the United States a revolving loan fund which 
     shall be known as the `Federal Loan Fund for State Welfare 
     Programs' (hereafter for purposes of this section referred to 
     as the `fund').
       ``(2) Deposits into fund.--
       ``(A) Appropriation.--Out of any money in the Treasury of 
     the United States not otherwise appropriated, $1,700,000,000 
     are hereby appropriated for fiscal year 1996 for payment to 
     the fund.
       ``(B) Loan repayments.--The Secretary shall deposit into 
     the fund any principal or interest payment received with 
     respect to a loan made under this subsection.

[[Page S 16255]]

       ``(3) Availability.--Amounts in the fund are authorized to 
     remain available without fiscal year limitation for the 
     purpose of making loans and receiving payments of principal 
     and interest on such loans, in accordance with this 
     subsection.
       ``(4) Use of fund.--
       ``(A) Loans to states.--The Secretary shall make loans from 
     the fund to any loan-eligible State, as defined in 
     subparagraph (D), for a period to maturity of not more than 3 
     years.
       ``(B) Rate of interest.--The Secretary shall charge and 
     collect interest on any loan made under subparagraph (A) at a 
     rate equal to the current average market yield on outstanding 
     marketable obligations of the United States with remaining 
     periods to maturity comparable to the period to maturity of 
     the loan.
       ``(C) Maximum loan.--The cumulative amount of any loans 
     made to a State under subparagraph (A) during fiscal years 
     1996 through 2000 shall not exceed 10 percent of the State 
     family assistance grant under subsection (a)(2) for a fiscal 
     year.
       ``(D) Loan-eligible state.--For purposes of subparagraph 
     (A), a loan-eligible State is a State which has not had a 
     penalty described in section 407(a)(1) imposed against it at 
     any time prior to the loan being made.
       ``(5) Limitation on use of loan.--A State shall use a loan 
     received under this subsection only for any purpose for which 
     grant amounts received by the State under subsection (a) may 
     be used including--
       ``(A) welfare anti-fraud activities; and
       ``(B) the provision of assistance under the State program 
     to Indian families that have moved from the service area of 
     an Indian tribe with a tribal family assistance plan approved 
     under section 414.
       ``(e) Special Rule for Indian Tribes That Received JOBS 
     Funds.--
       ``(1) In general.--The Secretary shall pay to each eligible 
     Indian tribe for each of fiscal years 1996, 1997, 1998, 1999, 
     and 2000 a grant in an amount equal to the amount received by 
     such Indian tribe in fiscal year 1994 under section 482(i) 
     (as in effect during such fiscal year) for the purpose of 
     operating a program to make work activities available to 
     members of the Indian tribe.
       ``(2) Eligible indian tribe.--For purposes of paragraph 
     (1), the term `eligible Indian tribe' means an Indian tribe 
     or Alaska Native organization that conducted a job 
     opportunities and basic skills training program in fiscal 
     year 1995 under section 482(i) (as in effect during such 
     fiscal year).
       ``(3) Appropriation.--There are authorized to be 
     appropriated and there are hereby appropriated $7,638,474 for 
     each fiscal year described in paragraph (1) for the purpose 
     of paying grants in accordance with such paragraph.
       ``(f) Job Placement Performance Bonus.--
       ``(1) In general.--The job placement performance bonus 
     determined with respect to a State and a fiscal year is an 
     amount equal to the amount of the State's allocation of the 
     job placement performance fund determined in accordance with 
     the formula developed under paragraph (2).
       ``(2) Allocation formula; bonus fund.--
       ``(A) Allocation formula.--
       ``(i) In general.--Not later than September 30, 1996, the 
     Secretary of Health and Human Services shall develop and 
     publish in the Federal Register a formula for allocating 
     amounts in the job placement performance bonus fund to States 
     based on the number of families that received assistance 
     under a State program funded under this part in the preceding 
     fiscal year that became ineligible for assistance under the 
     State program as a result of unsubsidized employment during 
     such year.
       ``(ii) Factors to consider.--In developing the allocation 
     formula under clause (i), the Secretary shall--

       ``(I) provide a greater financial bonus for individuals in 
     families described in clause (i) who remain employed for 
     greater periods of time or are at greater risk of long-term 
     welfare dependency; and
       ``(II) take into account the unemployment conditions of 
     each State or geographic area.

       ``(B) Job placement performance bonus fund.--
       ``(i) In general.--The amount in the job placement 
     performance bonus fund for a fiscal year shall be an amount 
     equal to the applicable percentage of the amount appropriated 
     under section 403(a)(2)(A)(i) for such fiscal year.
       ``(ii) Applicable percentage.--For purposes of clause 
     (i)(I), the applicable percentage shall be determined in 
     accordance with the following table:

                                                         The applicable
``For fiscal year:                                       percentage is:
  1998...........................................................3 ....

  1999...........................................................4.....

       ``(g) Secretary.--For purposes of this section, the term 
     `Secretary' means the Secretary of the Treasury.
       ``(h) Contingency Fund.--
       ``(1) Establishment.--There is hereby established in the 
     Treasury of the United States a fund which shall be known as 
     the `Contingency Fund for State Welfare Programs' (hereafter 
     in this section referred to as the `Fund').
       ``(2) Deposits into fund.--Out of any money in the Treasury 
     of the United States not otherwise appropriated, there are 
     hereby appropriated for fiscal years 1996, 1997, 1998, 1999, 
     2000, 2001, and 2002 such sums as are necessary for payment 
     to the Fund in a total amount not to exceed $1,000,000,000.
       ``(3) Computation of grant.--
       ``(A) In general.--Subject to subparagraph (B), the 
     Secretary of the Treasury shall pay to each eligible State in 
     a fiscal year an amount equal to the Federal medical 
     assistance percentage for such State for such fiscal year (as 
     defined in section 2122(c)) of so much of the expenditures by 
     the State in such year under the State program funded under 
     this part as exceed the historic State expenditures for such 
     State.
       ``(B) Limitation.--The total amount paid to a State under 
     subparagraph (A) for any fiscal year shall not exceed an 
     amount equal to 20 percent of the annual amount determined 
     for such State under the State program funded under this part 
     (without regard to this subsection) for such fiscal year.
       ``(C) Method of computation, payment, and reconciliation.--
       ``(i) Method of computation.--The method of computing and 
     paying such amounts shall be as follows:

       ``(I) The Secretary of Health and Human Services shall 
     estimate the amount to be paid to the State for each quarter 
     under the provisions of subparagraph (A), such estimate to be 
     based on a report filed by the State containing its estimate 
     of the total sum to be expended in such quarter and such 
     other information as the Secretary may find necessary.
       ``(II) The Secretary of Health and Human Services shall 
     then certify to the Secretary of the Treasury the amount so 
     estimated by the Secretary of Health and Human Services.

       ``(ii) Method of payment.--The Secretary of the Treasury 
     shall thereupon, through the Fiscal Service of the Department 
     of the Treasury and prior to audit or settlement by the 
     General Accounting Office, pay to the State, at the time or 
     times fixed by the Secretary of Health and Human Services, 
     the amount so certified.
       ``(iii) Method of reconciliation.--If at the end of each 
     fiscal year, the Secretary of Health and Human Services finds 
     that a State which received amounts from the Fund in such 
     fiscal year did not meet the maintenance of effort 
     requirement under paragraph (5)(B) for such fiscal year, the 
     Secretary shall reduce the State family assistance grant for 
     such State for the succeeding fiscal year by such amounts.
       ``(4) Use of grant.--
       ``(A) In general.--An eligible State may use the grant--
       ``(i) in any manner that is reasonably calculated to 
     accomplish the purpose of this part; or
       ``(ii) in any manner that such State used amounts received 
     under part A or F of this title, as such parts were in effect 
     before October 1, 1995.
       ``(B) Refund of unused portion.--Any amount of a grant 
     under this subsection not used during the fiscal year shall 
     be returned to the Fund.
       ``(5) Eligible state.--
       ``(A) In general.--For purposes of this subsection, a State 
     is an eligible State with respect to a fiscal year, if--
       ``(i)(I) the average rate of total unemployment in such 
     State (seasonally adjusted) for the period consisting of the 
     most recent 3 months for which data for all States are 
     published equals or exceeds 6.5 percent, and
       ``(II) the average rate of total unemployment in such State 
     (seasonally adjusted) for the 3-month period equals or 
     exceeds 110 percent of such average rate for either (or both) 
     of the corresponding 3-month periods ending in the 2 
     preceding calendar years; and
       ``(ii) has met the maintenance of effort requirement under 
     subparagraph (B) for the State program funded under this part 
     for the fiscal year.
       ``(B) Maintenance of effort.--The maintenance of effort 
     requirement for any State under this subparagraph for any 
     fiscal year is the expenditure of an amount at least equal to 
     100 percent of the level of historic State expenditures for 
     such State (as determined under subsection (a)(5)).
       ``(6) Annual reports.--The Secretary of the Treasury shall 
     annually report to the Congress on the status of the Fund.

     ``SEC. 404. MANDATORY WORK REQUIREMENTS.

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

                                                            The minimum
                                                          participation
                                                           rate for all
  ``If the fiscal year is:                                 families is:
        1996......................................................25   
        1997......................................................30   
        1998......................................................35   
        1999......................................................40   
        2000 or thereafter........................................50;  

     and
       ``(2) with respect to 2-parent families receiving such 
     assistance:

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

       ``(b) Calculation of Participation Rates.--
       ``(1) For all families.--
       ``(A) Average monthly rate.--For purposes of subsection 
     (a)(1), the participation rate for all families of a State 
     for a fiscal year is the average of the participation rates 
     for all families of the State for each month in the fiscal 
     year.
       ``(B) Monthly participation rates.--The participation rate 
     of a State for all families of the State for a month, 
     expressed as a percentage, is--
       ``(i) the sum of--

       ``(I) the number of all families receiving assistance under 
     the State program funded under this part that include an 
     adult who is engaged in work for the month;
       ``(II) the number of all families receiving assistance 
     under the State program funded under this part that are 
     subject in such month to a 

[[Page S 16256]]


     penalty described in paragraph (1)(A) or (2)(A) of subsection 
     (d) but have not been subject to such penalty for more than 3 
     months within the preceding 12-month period (whether or not 
     consecutive); and

       ``(III) the number of all families that received assistance 
     under the State program under this part during the previous 
     6-month period that have become ineligible to receive 
     assistance during such period because of employment and which 
     include an adult who is employed for the month; divided by

       ``(ii) the total number of all families receiving 
     assistance under the State program funded under this part 
     during the month that include an adult receiving assistance.
       ``(2) 2-parent families.--
       ``(A) Average monthly rate.--For purposes of subsection 
     (a)(2), the participation rate for 2-parent families of a 
     State for a fiscal year is the average of the participation 
     rates for 2-parent families of the State for each month in 
     the fiscal year.
       ``(B) Monthly participation rates.--The participation rate 
     of a State for 2-parent families of the State for a month, 
     expressed as a percentage, is--
       ``(i) the total number of 2-parent families described in 
     paragraph (1)(B)(i); divided by
       ``(ii) the total number of 2-parent families receiving 
     assistance under the State program funded under this part 
     during the month that include an adult.
       ``(3) Pro rata reduction of participation rate due to 
     caseload reductions not required by federal law.--
       ``(A) In general.--The Secretary shall prescribe 
     regulations for reducing the minimum participation rate 
     otherwise required by this section for a fiscal year by the 
     number of percentage points equal to the number of percentage 
     points (if any) by which--
       ``(i) the number of families receiving assistance during 
     the fiscal year under the State program funded under this 
     part is less than
       ``(ii) the number of families that received aid under the 
     State plan approved under part A of this title (as in effect 
     before October 1, 1995) during the fiscal year immediately 
     preceding such effective date.

     The minimum participation rate shall not be reduced to the 
     extent that the Secretary determines that the reduction in 
     the number of families receiving such assistance is required 
     by Federal law.
       ``(B) Eligibility changes not counted.--The regulations 
     described in subparagraph (A) shall not take into account 
     families that are diverted from a State program funded under 
     this part as a result of differences in eligibility criteria 
     under a State program funded under this part and eligibility 
     criteria under such State's plan under the aid to families 
     with dependent children program, as such plan was in effect 
     on the day before the date of the enactment of the Work 
     Opportunity Act of 1995.
       ``(4) State option to include individuals receiving 
     assistance under a tribal family assistance plan.--For 
     purposes of paragraphs (1)(B) and (2)(B), a State may, at its 
     option, include families receiving assistance under a tribal 
     family assistance plan approved under section 414. For 
     purposes of the previous sentence, an individual who receives 
     assistance under a tribal family assistance plan approved 
     under section 414 shall be treated as being engaged in work 
     if the individual is participating in work under standards 
     that are comparable to State standards for being engaged in 
     work.
       ``(5) State option for participation requirement 
     exemptions.--For any fiscal year, a State may, at its option, 
     not require an individual who is the parent or caretaker 
     relative of a minor child who is less than 12 months of age 
     to engage in work and may exclude such an individual from the 
     determination of the minimum participation rate specified for 
     such fiscal year in subsection (a).
       ``(c) Engaged in Work.--
       ``(1) All families.--For purposes of subsection 
     (b)(1)(B)(i)(I), an adult is engaged in work for a month in a 
     fiscal year if the adult is participating in work for at 
     least the minimum average number of hours per week specified 
     in the following table during the month, not fewer than 20 
     hours per week of which are attributable to a work activity:

                                                            The minimum
         ``If the month is                            average number of
           in fiscal year:                           hours per week is:
           1996...................................................20   
           1997...................................................20   
           1998...................................................20   
           1999...............................................25   

           2000...................................................30   
           2001...................................................30   
           2002...................................................35   
           2003 or thereafter.....................................35.  

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

     ``SEC. 405. REQUIREMENTS AND LIMITATIONS.

       ``(a) State Required To Enter Into a Personal 
     Responsibility Contract With Each Family Receiving 
     Assistance.--
       ``(1) In general.--Each State to which a grant is made 
     under section 403 shall require each family receiving 
     assistance under the State program funded under this part to 
     enter into--
       ``(A) a personal responsibility contract (as developed by 
     the State) with the State; or
       ``(B) a limited benefit plan.
       ``(2) Personal responsibility contract.--For purposes of 
     this subsection, the term `personal responsibility contract' 
     means a binding contract between the State and each family 
     receiving assistance under the State program funded under 
     this part that--
       ``(A) outlines the steps each family and the State will 
     take to get the family off of welfare and to become self-
     sufficient;
       ``(B) specifies a negotiated time-limited period of 
     eligibility for receipt of assistance that is consistent with 
     unique family circumstances and is based on a reasonable plan 
     to facilitate the transition of the family to self-
     sufficiency;
       ``(C) provides that the family will automatically enter 
     into a limited benefit plan if the family is out of 
     compliance with the personal responsibility contract; and
       ``(D) provides that the contract shall be invalid if the 
     State agency fails to comply with the contract.
       ``(3) Limited benefit plan.--For purposes of this 
     subsection, the term `limited benefit plan' means a plan 
     which provides for a reduced level of assistance and later 
     termination of assistance to a family that has entered into 
     the plan in accordance with a schedule to be determined by 
     the State.
       ``(4) Assessment.--The State agency shall provide, through 
     a case manager, an initial and thorough assessment of the 
     skills, prior work experience, and employability of each 
     parent for use in developing and negotiating a personal 
     responsibility contract.
       ``(5) Dispute resolution.--The State agency described in 
     section 402(a)(7) shall establish a dispute resolution 
     procedure for disputes related to participation in the 
     personal responsibility contract that provides the 
     opportunity for a hearing.
       ``(b) No Assistance for More Than 5 Years.--
       ``(1) Minor child exception.--If an individual received 
     assistance under the State program 

[[Page S 16257]]
     operated under this part as a minor child in a needy family, any period 
     during which such individual's family received assistance 
     shall not be counted for purposes of applying the limitation 
     described in paragraph (1) to an application for assistance 
     under such program by such individual as the head of a 
     household of a needy family with minor children.
       ``(2) Hardship exception.--
       ``(A) In general.--The State may exempt a family from the 
     application of paragraph (1) by reason of hardship.
       ``(B) Limitation.--The number of families with respect to 
     which an exemption made by a State under subparagraph (A) is 
     in effect for a fiscal year shall not exceed 20 percent of 
     the average monthly number of families to which the State is 
     providing assistance under the program operated under this 
     part.
       ``(c) Denial of Assistance for 10 Years to a Person Found 
     To Have Fraudulently Misrepresented Residence in Order To 
     Obtain Assistance in 2 or More States.--An individual shall 
     not be considered an eligible individual for the purposes of 
     this part during the 10-year period that begins on the date 
     the individual is convicted in Federal or State court of 
     having made a fraudulent statement or representation with 
     respect to the place of residence of the individual in order 
     to receive assistance simultaneously from 2 or more States 
     under programs that are funded under this title, title XXI, 
     or the Food Stamp Act of 1977, or benefits in 2 or more 
     States under the supplemental security income program under 
     title XVI.
       ``(d) Denial of Assistance for Fugitive Felons and 
     Probation and Parole Violators.--
       ``(1) In general.--An individual shall not be considered an 
     eligible individual for the purposes of this part if such 
     individual is--
       ``(A) fleeing to avoid prosecution, or custody or 
     confinement after conviction, under the laws of the place 
     from which the individual flees, for a crime, or an attempt 
     to commit a crime, which is a felony under the laws of the 
     place from which the individual flees, or which, in the case 
     of the State of New Jersey, is a high misdemeanor under the 
     laws of such State; or
       ``(B) violating a condition of probation or parole imposed 
     under Federal or State law.
       ``(2) Exchange of information with law enforcement 
     agencies.--Notwithstanding any other provision of law, a 
     State shall furnish any Federal, State, or local law 
     enforcement officer, upon the request of the officer, with 
     the current address, Social Security number, and photograph 
     (if applicable) of any recipient of assistance under this 
     part, if the officer furnishes the agency with the name of 
     the recipient and notifies the agency that--
       ``(A) such recipient--
       ``(i) is described in subparagraph (A) or (B) of paragraph 
     (1); or
       ``(ii) has information that is necessary for the officer to 
     conduct the officer's official duties; and
       ``(B) the location or apprehension of the recipient is 
     within such officer's official duties.
       ``(e) State Option to Require Assignment of Support.--At 
     the option of the State, a State to which a grant is made 
     under section 403 may provide that an individual applying for 
     or receiving assistance under the State program funded under 
     this part shall be required to assign to the State any rights 
     to support from any other person the individual may have in 
     such individual's own behalf or in behalf of any other family 
     member for whom the individual is applying for or receiving 
     assistance.
       ``(f) Denial of Assistance for Absent Child.--Each State to 
     which a grant is made under section 403--
       ``(1) may not use any part of the grant to provide 
     assistance to a family with respect to any minor child who 
     has been, or is expected by the caretaker relative in the 
     family to be, absent from the home for a period of 45 
     consecutive days or, at the option of the State, such period 
     of not less than 30 and not more than 90 consecutive days as 
     the State may provide for in the State plan;
       ``(2) at the option of the State, may establish such good 
     cause exceptions to paragraph (1) as the State considers 
     appropriate if such exceptions are provided for in the State 
     plan; and
       ``(3) shall provide that a caretaker relative shall not be 
     considered an eligible individual for purposes of this part 
     if the caretaker relative fails to notify the State agency of 
     an absence of a minor child from the home for the period 
     specified in or provided for under paragraph (1), by the end 
     of the 5-day period that begins on the date that it becomes 
     clear to the caretaker relative that the minor child will be 
     absent for the period so specified or provided for in 
     paragraph (1).

     ``SEC. 406. PROMOTING RESPONSIBLE PARENTING.

       ``(a) Findings.--The Congress makes the following findings:
       ``(1) Marriage is the foundation of a successful society.
       ``(2) Marriage is an essential institution of a successful 
     society which promotes the interests of children.
       ``(3) Promotion of responsible fatherhood and motherhood is 
     integral to successful child rearing and the wellbeing of 
     children.
       ``(4) In 1992, only 54 percent of single-parent families 
     with children had a child support order established and, of 
     that 54 percent, only about one half received the full amount 
     due. Of the cases enforced through the public child support 
     enforcement system, only 18 percent of the caseload has a 
     collection.
       ``(5) The number of individuals receiving aid to families 
     with dependent children (hereafter in this subsection 
     referred to as `AFDC') has more than tripled since 1965. More 
     than two-thirds of these recipients are children. Eighty-nine 
     percent of children receiving AFDC benefits now live in homes 
     in which no father is present.
       ``(A)(i) The average monthly number of children receiving 
     AFDC benefits--
       ``(I) was 3,300,000 in 1965;
       ``(II) was 6,200,000 in 1970;
       ``(III) was 7,400,000 in 1980; and
       ``(IV) was 9,300,000 in 1992.
       ``(ii) While the number of children receiving AFDC benefits 
     increased nearly threefold between 1965 and 1992, the total 
     number of children in the United States aged 0 to 18 has 
     declined by 5.5 percent.
       ``(B) The Department of Health and Human Services has 
     estimated that 12,000,000 children will receive AFDC benefits 
     within 10 years.
       ``(C) The increase in the number of children receiving 
     public assistance is closely related to the increase in 
     births to unmarried women. Between 1970 and 1991, the 
     percentage of live births to unmarried women increased nearly 
     threefold, from 10.7 percent to 29.5 percent.
       ``(6) The increase of out-of-wedlock pregnancies and births 
     is well documented as follows:
       ``(A) It is estimated that the rate of nonmarital teen 
     pregnancy rose 23 percent from 54 pregnancies per 1,000 
     unmarried teenagers in 1976 to 66.7 pregnancies in 1991. The 
     overall rate of nonmarital pregnancy rose 14 percent from 
     90.8 pregnancies per 1,000 unmarried women in 1980 to 103 in 
     both 1991 and 1992. In contrast, the overall pregnancy rate 
     for married couples decreased 7.3 percent between 1980 and 
     1991, from 126.9 pregnancies per 1,000 married women in 1980 
     to 117.6 pregnancies in 1991.
       ``(B) The total of all out-of-wedlock births between 1970 
     and 1991 has risen from 10.7 percent to 29.5 percent and if 
     the current trend continues, 50 percent of all births by the 
     year 2015 will be out-of-wedlock.
       ``(7) The negative consequences of an out-of-wedlock birth 
     on the mother, the child, the family, and society are well 
     documented as follows:
       ``(A) Young women 17 and under who give birth outside of 
     marriage are more likely to go on public assistance and to 
     spend more years on welfare once enrolled. These combined 
     effects of `younger and longer' increase total AFDC costs per 
     household by 25 percent to 30 percent for 17-year olds.
       ``(B) Children born out-of-wedlock have a substantially 
     higher risk of being born at a very low or moderately low 
     birth weight.
       ``(C) Children born out-of-wedlock are more likely to 
     experience low verbal cognitive attainment, as well as more 
     child abuse, and neglect.
       ``(D) Children born out-of-wedlock were more likely to have 
     lower cognitive scores, lower educational aspirations, and a 
     greater likelihood of becoming teenage parents themselves.
       ``(E) Being born out-of-wedlock significantly reduces the 
     chances of the child growing up to have an intact marriage.
       ``(F) Children born out-of-wedlock are 3 more times likely 
     to be on welfare when they grow up.
       ``(8) Currently 35 percent of children in single-parent 
     homes were born out-of-wedlock, nearly the same percentage as 
     that of children in single-parent homes whose parents are 
     divorced (37 percent). While many parents find themselves, 
     through divorce or tragic circumstances beyond their control, 
     facing the difficult task of raising children alone, 
     nevertheless, the negative consequences of raising children 
     in single-parent homes are well documented as follows:
       ``(A) Only 9 percent of married-couple families with 
     children under 18 years of age have income below the national 
     poverty level. In contrast, 46 percent of female-headed 
     households with children under 18 years of age are below the 
     national poverty level.
       ``(B) Among single-parent families, nearly \1/2\ of the 
     mothers who never married received AFDC while only \1/5\ of 
     divorced mothers received AFDC.
       ``(C) Children born into families receiving welfare 
     assistance are 3 times more likely to be on welfare when they 
     reach adulthood than children not born into families 
     receiving welfare.
       ``(D) Mothers under 20 years of age are at the greatest 
     risk of bearing low birth-weight babies.
       ``(E) The younger the single parent mother, the less likely 
     she is to finish high school.
       ``(F) Young women who have children before finishing high 
     school are more likely to receive welfare assistance for a 
     longer period of time.
       ``(G) Between 1985 and 1990, the public cost of births to 
     teenage mothers under the aid to families with dependent 
     children program, the food stamp program, and the medicaid 
     program has been estimated at $120,000,000,000.
       ``(H) The absence of a father in the life of a child has a 
     negative effect on school performance and peer adjustment.
       ``(I) Children of teenage single parents have lower 
     cognitive scores, lower educational aspirations, and a 
     greater likelihood of becoming teenage parents themselves.
       ``(J) Children of single-parent homes are 3 times more 
     likely to fail and repeat a year in grade school than are 
     children from intact two-parent families.
       ``(K) Children from single-parent homes are almost 4 times 
     more likely to be expelled or suspended from school.
       ``(L) Neighborhoods with larger percentages of youth aged 
     12 through 20 and areas with higher percentages of single-
     parent households have higher rates of violent crime.
       ``(M) Of those youth held for criminal offenses within the 
     State juvenile justice system, only 29.8 percent lived 
     primarily in a home with both parents. In contrast to these 
     incarcerated youth, 73.9 percent of the 62,800,000 children 
     in the Nation's resident population were living with both 
     parents.
       ``(9) Therefore, in light of this demonstration of the 
     crisis in our Nation, it is the sense of the Congress that 
     prevention of out-of-wedlock pregnancy and reduction in out-
     of-wedlock birth are very important Government interests and 
     the policy contained in provisions of this title is intended 
     to address the crisis.

[[Page S 16258]]

       ``(b) Requirement That Teenage Parents Live in Adult-
     supervised Settings.--
       ``(1) In general.--
       ``(A) Requirement.--Except as provided in paragraph (2), if 
     a State provides assistance under the State program funded 
     under this part to an individual described in subparagraph 
     (B), such individual may only receive assistance under the 
     program if such individual and the child of the individual 
     reside in a place of residence maintained by a parent, legal 
     guardian, or other adult relative of such individual as such 
     parent's, guardian's, or adult relative's own home.
       ``(B) Individual described.-- For purposes of subparagraph 
     (A), an individual described in this subparagraph is an 
     individual who is--
       ``(i) under the age of 18; and
       ``(ii) not married and has a minor child in his or her 
     care.
       ``(2) Exception.--
       ``(A) Provision of, or assistance in locating, adult-
     supervised living arrangement.--In the case of an individual 
     who is described in subparagraph (B), the State agency shall 
     provide, or assist such individual in locating, a second 
     chance home, maternity home, or other appropriate adult-
     supervised supportive living arrangement, taking into 
     consideration the needs and concerns of such individual, 
     unless the State agency determines that the individual's 
     current living arrangement is appropriate, and thereafter 
     shall require that such parent and the child of such parent 
     reside in such living arrangement as a condition of the 
     continued receipt of assistance under the plan (or in an 
     alternative appropriate arrangement, should circumstances 
     change and the current arrangement cease to be appropriate).
       ``(B) Individual described.--For purposes of subparagraph 
     (A), an individual is described in this subparagraph if the 
     individual is described in paragraph (1)(B) and--
       ``(i) such individual has no parent, legal guardian or 
     other appropriate adult relative as described in (ii) of his 
     or her own who is living or whose whereabouts are known;
       ``(ii) no living parent, legal guardian, or other 
     appropriate adult relative who would otherwise meet 
     applicable State criteria to act as such individual's legal 
     guardian, of such individual allows the individual to live in 
     the home of such parent, guardian, or relative;
       ``(iii) the State agency determines that--

       ``(I) the individual or the individual's custodial minor 
     child is being or has been subjected to serious physical or 
     emotional harm, sexual abuse, or exploitation in the 
     residence of such individual's own parent or legal guardian; 
     or
       ``(II) substantial evidence exists of an act or failure to 
     act that presents an imminent or serious harm if such 
     individual and such individual's minor child lived in the 
     same residence with such individual's own parent or legal 
     guardian; or

       ``(iv) the State agency otherwise determines that it is in 
     the best interest of the minor child to waive the requirement 
     of paragraph (1) with respect to such individual or minor 
     child.
       ``(C) Second-chance home.--For purposes of this paragraph, 
     the term `second-chance home' means an entity that provides 
     individuals described in subparagraph (B) with a supportive 
     and supervised living arrangement in which such individuals 
     are required to learn parenting skills, including child 
     development, family budgeting, health and nutrition, and 
     other skills to promote their long-term economic independence 
     and the well-being of their children.
       ``(3) Assistance to states in providing or locating adult-
     supervised supportive living arrangements for unmarried 
     teenage parents.--
       ``(A) In general.--For each of fiscal years 1996 through 
     2002, each State that provides assistance under the State 
     program to individuals described in paragraph (1)(B) shall be 
     entitled to receive a grant in an amount determined under 
     subparagraph (B) for the purpose of providing or locating 
     adult-supervised supportive living arrangements for 
     individuals described in paragraph (1)(B) in accordance with 
     this subsection.
       ``(B) Amount determined.--
       ``(i) In general.--The amount determined under this 
     subparagraph is an amount that bears the same ratio to the 
     amount specified under clause (ii) as the amount of the State 
     family assistance grant for the State for such fiscal year 
     (described in section 403(a)(2)) bears to the amount 
     appropriated for such fiscal year in accordance with section 
     403(a)(4)(A).
       ``(ii) Amount specified.--The amount specified in this 
     subparagraph is--

       ``(I) for fiscal year 1996, $25,000,000;
       ``(II) for fiscal year 1997, $25,000,000; and
       ``(III) for each of fiscal years 1998, 1999, 2000, 2001, 
     and 2002, $20,000,000.

       ``(C) Assistance to states in providing or locating adult-
     supervised supportive living arrangements for unmarried 
     teenage parents.--There are authorized to be appropriated and 
     there are appropriated for fiscal years 1996, 1997, 1998, 
     1999, 2000, 2001, and 2002 such sums specified in 
     subparagraph (B)(ii) for the purpose of paying grants to 
     States in accordance with the provisions of this paragraph.
       ``(c) Requirement That Teenage Parents Attend High School 
     or Other Equivalent Training Program.--If a State provides 
     assistance under the State program funded under this part to 
     an individual described in subsection (b)(1)(B) who has not 
     successfully completed a high-school education (or its 
     equivalent) and whose minor child is at least 12 weeks of 
     age, the State shall not provide such individual with 
     assistance under the program (or, at the option of the State, 
     shall provide a reduced level of such assistance) if the 
     individual does not participate in--
       ``(1) educational activities directed toward the attainment 
     of a high school diploma or its equivalent; or
       ``(2) an alternative educational or training program that 
     has been approved by the State.
       ``(d) State Option To Deny Assistance in Certain 
     Situations.--Nothing in this subsection shall be construed to 
     restrict the authority of a State to exercise its option to 
     limit assistance under this part to individuals if such 
     limitation is not inconsistent with the provisions of this 
     part.

     ``SEC. 407. STATE PENALTIES.

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

[[Page S 16259]]
     on a State under subsection (a) if the Secretary determines that the 
     State has reasonable cause for failing to comply with a 
     requirement for which a penalty is imposed under such 
     subsection.
       ``(c) Certification of Amount of Penalties.--If the 
     Secretary is required to reduce the amount of any grant under 
     this section, the Secretary shall certify the amount of such 
     reduction to the Secretary of the Treasury and the Secretary 
     of the Treasury shall reduce the amount paid to the State 
     under section 403 by such amount.
       ``(d) Effective Dates.--
       ``(1) In general.--The penalties described in paragraphs 
     (2) through (6) of subsection (a) shall apply--
       ``(A) with respect to periods beginning 6 months after the 
     Secretary issues final rules with respect to such penalties; 
     or
       ``(B) with respect to fiscal years beginning on or after 
     October 1, 1996;

     whichever is later.
       ``(2) Misuse of funds.--The penalties described in 
     subsection (a)(1) shall apply with respect to fiscal years 
     beginning on or after October 1, 1995.

     ``SEC. 408. AUDITS.

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

     ``SEC. 409. DATA COLLECTION AND REPORTING.

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

[[Page S 16260]]

       ``(4) the characteristics of each State program funded 
     under this part; and
       ``(5) the trends in employment and earnings of needy 
     families with minor children.

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

       ``(a) Research.--The Secretary shall conduct research on 
     the benefits, effects, and costs of operating different State 
     programs funded under this part, including time limits 
     relating to eligibility for assistance. The research shall 
     include studies on the effects of different programs and the 
     operation of such programs on welfare dependency, 
     illegitimacy, teen pregnancy, employment rates, child well-
     being, and any other area the Secretary deems appropriate.
       ``(b) Development and Evaluation of Innovative Approaches 
     To Reducing Welfare Dependency and Increasing Child Well-
     Being.--
       ``(1) In general.--The Secretary may assist States in 
     developing, and shall evaluate, innovative approaches for 
     reducing welfare dependency and increasing the well-being of 
     minor children with respect to recipients of assistance under 
     programs funded under this part. The Secretary may provide 
     funds for training and technical assistance to carry out the 
     approaches developed pursuant to this paragraph.
       ``(2) Evaluations.--In performing the evaluations under 
     paragraph (1), the Secretary shall, to the maximum extent 
     feasible, use random assignment as an evaluation methodology.
       ``(c) Dissemination of Information.--The Secretary shall 
     develop innovative methods of disseminating information on 
     any research, evaluations, and studies conducted under this 
     section, including the facilitation of the sharing of 
     information and best practices among States and localities 
     through the use of computers and other technologies.
       ``(d) Annual Ranking of States and Review of Most and Least 
     Successful Work Programs.--
       ``(1) Annual ranking of states.--The Secretary shall rank 
     annually the States to which grants are paid under section 
     403 in the order of their success in placing recipients of 
     assistance under the State program funded under this part 
     into long-term private sector jobs, reducing the overall 
     welfare caseload, and, when a practicable method for 
     calculating this information becomes available, diverting 
     individuals from formally applying to the State program and 
     receiving assistance. In ranking States under this 
     subsection, the Secretary shall take into account the average 
     number of minor children in families in the State that have 
     incomes below the poverty line and the amount of funding 
     provided each State for such families.
       ``(2) Annual review of most and least successful work 
     programs.--The Secretary shall review the programs of the 3 
     States most recently ranked highest under paragraph (1) and 
     the 3 States most recently ranked lowest under paragraph (1) 
     that provide parents with work experience, assistance in 
     finding employment, and other work preparation activities and 
     support services to enable the families of such parents to 
     leave the program and become self-sufficient.
       ``(e) Annual ranking of States and Review of Issues 
     Relating to Out-of-Wedlock Births.--
       ``(1) Annual ranking of states.--
       ``(A) In general.--The Secretary shall annually rank States 
     to which grants are paid under section 403 based on the 
     following ranking factors (developed with information 
     reported by the State under section 406(f)):
       ``(i) Absolute out-of-wedlock ratios.--The ratio 
     represented by--

       ``(I) the total number of out-of-wedlock births in families 
     receiving assistance under the State program under this part 
     in the State for the most recent fiscal year for which 
     information is available; over
       ``(II) the total number of births in families receiving 
     assistance under the State program under this part in the 
     State for such year.

       ``(ii) Net changes in the out-of-wedlock ratio.--The 
     difference between the ratio described in subparagraph (A)(i) 
     for the most recent fiscal year for which information is 
     available and such State's ratio determined for the preceding 
     year.
       ``(2) Annual review.--The Secretary shall review the 
     programs of the 5 States most recently ranked highest under 
     paragraph (1) and the 5 States most recently ranked the 
     lowest under paragraph (1).
       ``(f) Study on Alternative Outcomes Measures.--
       ``(1) Study.--The Secretary shall, in cooperation with the 
     States, study and analyze outcomes measures for evaluating 
     the success of a State in moving individuals out of the 
     welfare system through employment as an alternative to the 
     minimum participation rates described in section 404. The 
     study shall include a determination as to whether such 
     alternative outcomes measures should be applied on a national 
     or a State-by-State basis and a preliminary assessment of the 
     job placement performance bonus established under section 
     403(f).
       ``(2) Report.--Not later than September 30, 1998, the 
     Secretary shall submit to the Committee on Finance of the 
     Senate and the Committee on Ways and Means of the House of 
     Representatives a report containing the findings of the study 
     described in paragraph (1).
       ``(g) State-Initiated Studies.--A State shall be eligible 
     to receive funding to evaluate the State's family assistance 
     program funded under this part if--
       ``(1) the State submits a proposal to the Secretary for 
     such evaluation,
       ``(2) the Secretary determines that the design and approach 
     of the evaluation is rigorous and is likely to yield 
     information that is credible and will be useful to other 
     States, and
       ``(3) unless otherwise waived by the Secretary, the State 
     provides a non-Federal share of at least 10 percent of the 
     cost of such study.
       ``(h) Additional Amount for Studies and Demonstrations.--
       ``(1) In general.--There are authorized to be appropriated 
     and there are appropriated for each fiscal year described in 
     section 403(a)(1) an additional $20,000,000 for the purpose 
     of paying--
       ``(A) the Federal share of any State-initiated study 
     approved under subsection (g);
       ``(B) an amount determined by the Secretary to be necessary 
     to operate and evaluate demonstration projects, relating to 
     part A of title IV of this Act, that are in effect or 
     approved under section 1115 as of October 1, 1995, and are 
     continued after such date;
       ``(C) the cost of conducting the research described in 
     subsection (a); and
       ``(D) the cost of developing and evaluating innovative 
     approaches for reducing welfare dependency and increasing the 
     well-being of minor children under subsection (b).
       ``(2) Allocation.--Of the amount appropriated under 
     paragraph (1) for a fiscal year--
       ``(A) 50 percent shall be allocated for the purposes 
     described in subparagraphs (A) and (B) of paragraph (1), and
       ``(B) 50 percent shall be allocated for the purposes 
     described in subparagraphs (C) and (D) of paragraph (1).

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

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

     ``SEC. 412. WAIVERS.

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

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

       ``(a) No Limitation of State Demonstration Projects.--
     Nothing in this part shall be construed as limiting a State's 
     ability to conduct demonstration projects for the purpose of 
     identifying innovative or effective program designs in 1 or 
     more political subdivisions of the State: Provided, That such 
     State contains more than one county with a population of 
     greater than 500,000.
       ``(b) County Welfare Demonstration Project.--
       ``(1) In general.--The Secretary of Health and Human 
     Services and the Secretary of Agriculture shall jointly enter 
     into negotiations with all counties having a population 
     greater than 500,000 desiring to conduct a demonstration 
     project described in paragraph (2) for the purpose of 
     establishing appropriate rules to govern the establishment 
     and operation of such project.

[[Page S 16261]]

       ``(2) Demonstration project described.--The demonstration 
     project described in this paragraph shall provide that--
       ``(A) a county participating in the demonstration project 
     shall have the authority and duty to administer the operation 
     of the program described under this part as if the county 
     were considered a State for the purpose of this part;
       ``(B) the State in which the county participating in the 
     demonstration project is located shall pass through directly 
     to the county the portion of the grant received by the State 
     under section 403 which the State determines is attributable 
     to the residents of such county; and
       ``(C) the duration of the project shall be for 5 years.
       ``(3) Commencement of project.--After the conclusion of the 
     negotiations described in paragraph (2), the Secretary of 
     Health and Human Services and the Secretary of Agriculture 
     may authorize a county to conduct the demonstration project 
     described in paragraph (2) in accordance with the rules 
     established during the negotiations.
       ``(4) Report.--Not later then 6 months after the 
     termination of a demonstration project operated under this 
     subsection, the Secretary of Health and Human Services and 
     the Secretary of Agriculture shall submit to the Congress a 
     report that includes--
       ``(A) a description of the demonstration project;
       ``(B) the rules negotiated with respect to the project; and
       ``(C) the innovations (if any) that the county was able to 
     initiate under the project.
       ``(5) Eligible county.--A county may participate in a 
     demonstration project under this subsection if the county 
     is--
       ``(A) a county that is already administering the welfare 
     program under this part;
       ``(B) represents less than 25 percent of the State's total 
     welfare caseload.

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

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

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

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

     ``SEC. 416. LIMITATION ON FEDERAL AUTHORITY.

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

     ``SEC. 417. APPEAL OF ADVERSE DECISION.

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

     ``SEC. 418. AMOUNTS FOR CHILD CARE.

       ``(a) Child Care Allocation.--

[[Page S 16262]]

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

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

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

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

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

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

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

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

       (a) In General.--Not later than 90 days after the date of 
     the enactment of this Act, the Secretary of Commerce 
     (hereafter in this section referred to as the ``Secretary''), 
     in carrying out the provisions of section 141 of title 13, 
     United States Code, shall expand the data collection efforts 
     of the Bureau of the Census (hereafter in this section 
     referred to as the ``Bureau'') to enable the Bureau to 
     collect statistically significant data, in connection with 
     its decennial census and its mid-decade census, concerning 
     the growing trend of grandparents who are the primary 
     caregivers for their grandchildren.
       (b) Expanded Census Question.--In carrying out the 
     provisions of subsection (a), the Secretary shall expand the 
     Bureau's census question that details households which 
     include both grandparents and their grandchildren. The 
     expanded question shall be formulated to distinguish between 
     the following households:
       (1) A household in which a grandparent temporarily provides 
     a home for a grandchild for a period of weeks or months 
     during periods of parental distress.
       (2) A household in which a grandparent provides a home for 
     a grandchild and serves as the primary caregiver for the 
     grandchild.
     
[[Page S 16263]]


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

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

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

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

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

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

     SEC. 7207. DEMONSTRATION PROJECTS FOR SCHOOL UTILIZATION.

       (a) Findings.--It is the goal of the United States that 
     children grow to be self-sufficient citizens, that parents 
     equip themselves to provide the best parental care and 
     guidance to their children, and that welfare dependency, 
     crime, and the deterioration of neighborhoods be eliminated. 
     It will contribute to these goals to increase the level of 
     parents' involvement in their children's school and other 
     activities, to increase the amount of time parents spend with 
     or in close proximity to their children, to increase the 
     portion of the day and night when children are in a safe and 
     healthy environment and not exposed to unfavorable 
     influences, to increase the opportunities for children to 
     participate in safe, healthy, and enjoyable extra-curricular 
     and organized developmental and recreational activities, and 
     to make more accessible the opportunities for parents, 
     especially those dependent on public assistance, to increase 
     and enhance their parenting and living skills. All of these 
     contributions can be facilitated by establishing the 
     neighborhood public school as a focal point for such 
     activities and by extending the hours of the day in which its 
     facilities are available for such activities.
       (b) Grants.--The Secretary of Education (hereafter in this 
     section referred to as the ``Secretary'') shall make 
     demonstration grants as provided in subsection (c) to States 
     to enable them to increase the number of hours during each 
     day when existing public school facilities are available for 
     use for the purposes set forth in subsection (d).
       (c) Selection of States.--The Secretary shall make grants 
     to not more than 5 States for demonstration projects in 
     accordance with this section. Each State shall select the 
     number and location of schools based on the amount of funds 
     it deems necessary for a school properly to achieve the goals 
     of this program. The schools selected must have a significant 
     percentage of students receiving benefits under part A of 
     title IV of the Social Security Act. No more than 2 percent 
     of the grant to any State shall be used for administrative 
     expenses of any kind by any entity (except that none of the 
     activities set forth in paragraphs (1) and (2) of subsection 
     (d) shall be considered an administrative activity the 
     expenses for which are limited by this subsection).
       (d) Use of Funds.--The grants made under subsection (b), in 
     order that school facilities can be more fully utilized, 
     shall be used to provide funding for, among other things--
       (1) extending the length of the school day, expanding the 
     scope of student programs offered before and after pre-
     existing school hours, enabling volunteers and parents or 
     professionals paid from other sources to teach, tutor, coach, 
     organize, advise, or monitor students before and after pre-
     existing school hours, and providing security, supplies, 
     utilities, and janitorial services before and after pre-
     existing school hours for these programs,
       (2) making the school facilities available for community 
     and neighborhood clubs, civic associations and organizations, 
     Boy and Girl Scouts and similar organizations, adult 
     education classes, organized sports, parental education 
     classes, and other educational, recreational, and social 
     activities.

     None of the funds provided under this section can be used to 
     supplant funds already provided to a school facility for 
     services, equipment, personnel, or utilities nor can funds be 
     used to pay costs associated with operating school facilities 
     during hours those facilities are already available for 
     student or community use.
       (e) Applications.--
       (1) In general.--The Governor of each State desiring to 
     conduct a demonstration project under this section shall 
     prepare and submit to the Secretary an application in such 
     manner and containing such information as the Secretary may 
     require. The Secretary shall actively encourage States to 
     submit such applications.
       (2) Approval.--The Secretary shall consider all 
     applications received from States desiring to conduct 
     demonstration projects under this section and shall approve 
     such applications in a number of States to be determined by 
     the Secretary (not to exceed 5), taking into account the 
     overall funding levels available under this section.
       (f) Duration.--A demonstration project under this section 
     shall be conducted for not more than 4 years plus an 
     additional time period of up to 12 months for final 
     evaluation and reporting. The Secretary may terminate a 
     project if the Secretary determines that the State conducting 
     the project is not in substantial compliance with the terms 
     of the application approved by the Secretary under this 
     section.
       (g) Evaluation Plan.--
       (1) Standards.--Not later than 3 months after the date of 
     the enactment of this section, the Secretary shall develop 
     standards for evaluating the effectiveness of each 
     demonstration project in contributing toward meeting the 
     objectives set forth in subsection (a), which shall include 
     the requirement that an independent expert entity selected by 
     the Secretary provide an evaluation of all demonstration 
     projects, which evaluations shall be included in the 
     appropriate State's annual and final reports to the Secretary 
     under subsection (h)(1).
       (2) Submission of plan.--Each State conducting a 
     demonstration project under this section shall submit an 
     evaluation plan (meeting the standards developed by the 
     Secretary under paragraph (1)) to the Secretary not later 
     than 90 days after the State is notified of the Secretary's 
     approval for such project. A State shall not receive any 
     Federal funds for the operation of the demonstration project 
     until the Secretary approves such evaluation plan.
       (h) Reports.--
       (1) State.--A State that conducts a demonstration project 
     under this section shall prepare and submit to the Secretary 
     annual and final reports in accordance with the State's 
     evaluation plan under subsection (g)(2) for such 
     demonstration project.
       (2) Secretary.--The Secretary shall prepare and submit to 
     the Congress annual reports concerning each demonstration 
     project under this section.

[[Page S 16264]]

       (i) Authorizations.--
       (1) Grants.--There are authorized to be appropriated for 
     grants under subsection (b) for each of fiscal years 1996, 
     1997, 1998, 1999, and 2000, $10,000,000.
       (2) Administration.--There are authorized to be 
     appropriated $1,000,000 for each of fiscal years 1996, 1997, 
     1998, 1999, and 2000 for the administration of this section 
     by the Secretary, including development of standards and 
     evaluation of all demonstration projects by an independent 
     expert entity under subsection (g)(1).

     SEC. 7208. CORRECTIVE COMPLIANCE PLAN.

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

     SEC. 7209. PARENTAL RESPONSIBILITY CONTRACTS.

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

       (I) the 1st act of noncompliance, 1 month,
       (II) the 2nd act of noncompliance, 3 months, or
       (III) the 3rd or subsequent act of noncompliance, 6 months; 
     or

       (ii) the period ending with the cessation of such act of 
     noncompliance.
       (D) Denial of assistance to adults refusing to accept a 
     bona fide offer of employment.--The State plan shall provide 
     that if an unemployed individual who has attained 18 years of 
     age refuses to accept a bona fide offer of employment without 
     good cause, such act of noncompliance shall be considered a 
     3rd or subsequent act of noncompliance.
       (2) State flexibility.--The State plan may provide for 
     different penalties than those specified in paragraph (1).

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

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

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

       (a) Amendments to Title II.--
       (1) Section 205(c)(2)(C)(vi) (42 U.S.C. 405(c)(2)(C)(vi)), 
     as so redesignated by section 321(a)(9)(B) of the Social 
     Security Independence and Program Improvements Act of 1994, 
     is amended--
       (A) by inserting ``an agency administering a program funded 
     under part A of title IV or'' before ``an agency operating''; 
     and
       (B) by striking ``A or D of title IV of this Act'' and 
     inserting ``D of such title''.
       (2) Section 228(d)(1) (42 U.S.C. 428(d)(1)) is amended by 
     inserting ``under a State program funded under'' before 
     ``part A of title IV''.
       (b) Amendment to Part B of Title IV.--Section 422(b)(2) (42 
     U.S.C. 622(b)(2)) is amended by striking ``under the State 
     plan approved'' and inserting ``under the State program 
     funded.''.
       (c) Amendments to Part D of Title IV.--
       (1) Section 451 (42 U.S.C. 651) is amended by striking 
     ``aid'' and inserting ``assistance under a State program 
     funded''.
       (2) Section 452(a)(10)(C) (42 U.S.C. 652(a)(10)(C)) is 
     amended--
       (A) by striking ``aid to families with dependent children'' 
     and inserting ``assistance under a State program funded under 
     part A'';
       (B) by striking ``such aid'' and inserting ``such 
     assistance''; and
       (C) by striking ``402(a)(26) or''.
       (3) Section 452(a)(10)(F) (42 U.S.C. 652(a)(10)(F)) is 
     amended--
       (A) by striking ``aid under a State plan approved'' and 
     inserting ``assistance under a State program funded''; and
       (B) by striking ``in accordance with the standards referred 
     to in section 402(a)(26)(B)(ii)'' and inserting ``by the 
     State''.
       (4) Section 452(b) (42 U.S.C. 652(b)) is amended in the 
     first sentence by striking ``aid under the State plan 
     approved under part A'' and inserting ``assistance under a 
     State program funded under part A''.
       (5) Section 452(d)(3)(B)(i) (42 U.S.C. 652(d)(3)(B)(i)) is 
     amended by striking ``1115(c)'' and inserting ``1115(b)''.
       (6) Section 452(g)(2)(A)(ii)(I) (42 U.S.C. 
     652(g)(2)(A)(ii)(I)) is amended by striking ``aid is being 
     paid under the State's plan approved under part A or E'' and 
     inserting ``assistance is being provided under the State 
     program funded under part A or aid is being paid under the 
     State's plan approved under part E''.
       (7) Section 452(g)(2)(A) (42 U.S.C. 652(g)(2)(A)) is 
     amended in the matter following clause (iii) by striking 
     ``aid was being paid under the State's plan approved under 
     part A or E'' and inserting ``assistance was being provided 
     under the State program funded under part A or aid was being 
     paid under the State's plan approved under part E''.
       (8) Section 452(g)(2) (42 U.S.C. 652(g)(2)) is amended in 
     the matter following subparagraph (B)--
       (A) by striking ``who is a dependent child'' and inserting 
     ``with respect to whom assistance is being provided under the 
     State program funded under part A'';
       (B) by inserting ``by the State agency administering the 
     State plan approved under this part'' after ``found''; and
       (C) by striking ``under section 402(a)(26)'' and inserting 
     ``with the State in establishing paternity''.
       (9) Section 452(h) (42 U.S.C. 652(h)) is amended by 
     striking ``under section 402(a)(26)''.
       (10) Section 453(c)(3) (42 U.S.C. 653(c)(3)) is amended by 
     striking ``aid'' and inserting ``assistance under a State 
     program funded''.
       (11) Section 454 (42 U.S.C. 654)) is amended--
       (A) in paragraph (5)(A)--
       (i) by striking ``under section 402(a)(26)''; and
       (ii) by striking ``except that this paragraph shall not 
     apply to such payments for any month following the first 
     month in which the amount collected is sufficient to make 
     such family ineligible for assistance under the State plan 
     approved under part A;''; and
       (B) in paragraph (6)(D), by striking ``aid under a State 
     plan approved'' and inserting ``assistance under a State 
     program funded''.

[[Page S 16265]]

       (12) Section 456 (42 U.S.C. 656) is amended--
       (A) in subsection (a)(1), by striking ``under section 
     402(a)(26)''; and
       (B) by striking subsection (b) and inserting the following:
       ``(b) A debt which is a support obligation enforceable 
     under this title is not released by a discharge in bankruptcy 
     under title 11, United States Code.''.
       (13) Section 466(a)(3)(B) (42 U.S.C. 666(a)(3)(B)) is 
     amended by striking ``402(a)(26) or''.
       (14) Section 466(b)(2) (42 U.S.C. 666(b)(2)) is amended by 
     striking ``aid'' and inserting ``assistance under a State 
     program funded''.
       (15) Section 469(a) (42 U.S.C. 669(a)) is amended--
       (A) by striking ``aid under plans approved'' and inserting 
     ``assistance under State programs funded''; and
       (B) by striking ``such aid'' and inserting ``such 
     assistance''.
       (d) Amendments to Part E of Title IV.--
       (1) Section 470 (42 U.S.C. 670) is amended--
       (A) by striking ``would be'' and inserting ``would have 
     been''; and
       (B) by inserting ``(as such plan was in effect on June 1, 
     1995)'' after ``part A''.
       (2) Section 471(17) (42 U.S.C. 671(17)) is amended by 
     striking ``plans approved under parts A and D'' and inserting 
     ``program funded under part A and plan approved under part 
     D''.
       (3) Section 472(a) (42 U.S.C. 672(a)) is amended--
       (A) in the matter preceding paragraph (1)--
       (i) by striking ``would meet'' and inserting ``would have 
     met'';
       (ii) by inserting ``(as such sections were in effect on 
     June 1, 1995)'' after ``407''; and
       (iii) by inserting ``(as so in effect)'' after ``406(a)''; 
     and
       (B) in paragraph (4)--
       (i) in subparagraph (A)--

       (I) by inserting ``would have'' after ``(A)''; and
       (II) by inserting ``(as in effect on June 1, 1995)'' after 
     ``section 402''; and

       (ii) in subparagraph (B)(ii), by inserting ``(as in effect 
     on June 1, 1995)'' after ``406(a)''.
       (4) Section 472(h) (42 U.S.C. 672(h)) is amended to read as 
     follows:
       ``(h)(1) For purposes of the medicaid program under title 
     XIX of this Act or any successor to such program, any child 
     with respect to whom foster care maintenance payments are 
     made under this section shall be deemed to be a dependent 
     child as defined in section 406 (as in effect as of June 1, 
     1995) and shall be deemed to be a recipient of aid to 
     families with dependent children under part A of this title 
     (as so in effect). For purposes of title XX, any child with 
     respect to whom foster care maintenance payments are made 
     under this section shall be deemed to be a minor child in a 
     needy family under a State program funded under part A and 
     shall be deemed to be a recipient of assistance under such 
     part.
       ``(2) For purposes of paragraph (1), a child whose costs in 
     a foster family home or child care institution are covered by 
     the foster care maintenance payments being made with respect 
     to the child's minor parent, as provided in section 
     475(4)(B), shall be considered a child with respect to whom 
     foster care maintenance payments are made under this 
     section.''.
       (5) Section 473(a)(2) (42 U.S.C. 673(a)(2)) is amended--
       (A) in subparagraph (A)(i)--
       (i) by inserting ``(as such sections were in effect on June 
     1, 1995)'' after ``407'';
       (ii) by inserting ``(as so in effect)'' after ``specified 
     in section 406(a)''; and
       (iii) by inserting ``(as such section was in effect on June 
     1, 1995)'' after ``403'';
       (B) in subparagraph (B)(i)--
       (i) by inserting ``would have'' after ``(B)(i)''; and
       (ii) by inserting ``(as in effect on June 1, 1995)'' after 
     ``section 402''; and
       (C) in subparagraph (B)(ii)(II), by inserting ``(as in 
     effect on June 1, 1995)'' after ``406(a)''.
       (6) Section 473(b) (42 U.S.C. 673(b)) is amended to read as 
     follows:
       ``(b)(1) For purposes of the medicaid program under title 
     XIX of this Act or any successor to such program, any child 
     who is described in paragraph (3) shall be deemed to be a 
     dependent child as defined in section 406 (as in effect as of 
     June 1, 1995) and shall be deemed to be a recipient of aid to 
     families with dependent children under part A of this title 
     (as so in effect) in the State where such child resides.
       ``(2) For purposes of title XX, any child who is described 
     in paragraph (3) shall be deemed to be a minor child in a 
     needy family under a State program funded under part A and 
     shall be deemed to be a recipient of assistance under such 
     part.
       ``(3) A child described in this paragraph is any child--
       ``(A)(i) who is a child described in subsection (a)(2), and
       ``(ii) with respect to whom an adoption assistance 
     agreement is in effect under this section (whether or nor 
     adoption assistance payments are provided under the agreement 
     or are being made under this section), including any such 
     child who has been placed for adoption in accordance with 
     applicable State and local law (whether or not an 
     interlocutory or other judicial decree of adoption has been 
     issued), or
       ``(B) with respect to whom foster care maintenance payments 
     are being made under section 472.
       ``(4) For purposes of paragraphs (1) and (2), a child whose 
     costs in a foster family home or child-care institution are 
     covered by the foster care maintenance payments being made 
     with respect to the child's minor parent, as provided in 
     section 475(4)(B), shall be considered a child with respect 
     to whom foster care maintenance payments are being made under 
     section 472.''.
       (e) Amendment to Title X.--Section 1002(a)(7) (42 U.S.C. 
     1202(a)(7)) is amended by striking ``aid to families with 
     dependent children under the State plan approved under 
     section 402 of this Act'' and inserting ``assistance under a 
     State program funded under part A of title IV''.
       (f) Amendments to Title XI.--
       (1) Section 1109 (42 U.S.C. 1309) is amended by striking 
     ``or part A of title IV,''.
       (2) Section 1115 (42 U.S.C. 1315) is amended--
       (A) in subsection (a)(2)--
       (i) by inserting ``(A)'' after ``(2)'';
       (ii) by striking ``403,'';
       (iii) by striking the period at the end and inserting ``, 
     and''; and
       (iv) by adding at the end the following new subparagraph:
       ``(B) costs of such project which would not otherwise be a 
     permissible use of funds under part A of title IV and which 
     are not included as part of the costs of projects under 
     section 1110, shall to the extent and for the period 
     prescribed by the Secretary, be regarded as a permissible use 
     of funds under such part.''; and
       (B) in subsection (c)(3), by striking ``under the program 
     of aid to families with dependent children'' and inserting 
     ``part A of such title''.
       (3) Section 1116 (42 U.S.C. 1316) is amended--
       (A) in each of subsections (a)(1), (b), and (d), by 
     striking ``or part A of title IV,''; and
       (B) in subsection (a)(3), by striking ``404,''.
       (4) Section 1118 (42 U.S.C. 1318) is amended--
       (A) by striking ``403(a),'';
       (B) by striking ``and part A of title IV,''; and
       (C) by striking ``, and shall, in the case of American 
     Samoa, mean 75 per centum with respect to part A of title 
     IV''.
       (5) Section 1119 (42 U.S.C. 1319) is amended--
       (A) by striking ``or part A of title IV''; and
       (B) by striking ``403(a),''.
       (6) Section 1133(a) (42 U.S.C. 1320b-3(a)) is amended by 
     striking ``or part A of title IV,''.
       (7) Section 1136 (42 U.S.C. 1320b-6) is repealed.
       (8) Section 1137 (42 U.S.C. 1320b-7) is amended--
       (A) in subsection (b), by striking paragraph (1) and 
     inserting the following:
       ``(1) any State program funded under part A of title IV of 
     this Act;''; and
       (B) in subsection (d)(1)(B)--
       (i) by striking ``In this subsection--'' and all that 
     follows through ``(ii) in'' and inserting ``In this 
     subsection, in'';
       (ii) by redesignating subclauses (I), (II), and (III) as 
     clauses (i), (ii), and (iii); and
       (iii) by moving such redesignated material 2 ems to the 
     left.
       (9) Section 1108 (42 U.S.C. 1308) is amended--
       (A) in subsection (a)--
       (i) in the matter preceding paragraph (1)--

       (I) by inserting ``(or paid, in the case of part A of title 
     IV)'' after ``certified''; and
       (II) by striking ``or, in the case of'' and all that 
     follows through ``section 403(k)'';

       (ii) in paragraph (1)--

       (I) in subparagraph (F), by striking ``or'';
       (II) in subparagraph (G), by striking ``the fiscal year 
     1989 and each fiscal year thereafter;'' and inserting ``each 
     of the fiscal years 1989 through 1995, or''; and
       (III) by inserting after subparagraph (G), the following 
     new subparagraph:

       ``(H) $100,039,000 with respect to fiscal year 1996 and 
     each fiscal year thereafter;'';
       (iii) in paragraph (2)--

       (I) in subparagraph (F), by striking ``or'';
       (II) in subparagraph (G), by striking ``the fiscal year 
     1989 and each fiscal year thereafter;'' and inserting ``each 
     of the fiscal years 1989 through 1995, or''; and
       (III) by inserting after subparagraph (G), the following 
     new subparagraph:

       ``(H) $3,489,000 with respect to fiscal year 1996 and each 
     fiscal year thereafter;''; and
       (iv) in paragraph (3)--

       (I) in subparagraph (F), by striking ``or'';
       (II) in subparagraph (G), by striking ``the fiscal year 
     1989 and each fiscal year thereafter.'' and inserting ``each 
     of the fiscal years 1989 through 1995, or''; and
       (III) by inserting after subparagraph (G), the following 
     new subparagraph:

       ``(H) $4,593,000 with respect to fiscal year 1996 and each 
     fiscal year thereafter.''; and
       (B) in subsection (d), by striking ``(exclusive of any 
     amounts'' and all that follows through ``section 403(k) 
     applies)''.
       (g) Amendment to Title XIV.--Section 1402(a)(7) (42 U.S.C. 
     1352(a)(7)) is amended by striking ``aid to families with 
     dependent children under the State plan approved under 
     section 402 of this Act'' and inserting ``assistance under a 
     State program funded under part A of title IV''.
       (h) Amendment to Title XVI as in Effect With Respect to the 
     Territories.--Section 1602(a)(11), as in effect without 
     regard to the amendment made by section 301 of the Social 
     Security Amendments of 1972 (42 U.S.C. 1382 note), is amended 
     by striking ``aid under the State plan approved'' and 
     inserting ``assistance under a State program funded''.
       (i) Amendment to Title XVI as in Effect With Respect to the 
     States.--Section 1611(c)(5)(A) (42 U.S.C. 1382(c)(5)(A)) is 
     amended to read as follows: ``(A) a State program funded 
     under part A of title IV,''.

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

       (a) Section 5 of the Food Stamp Act of 1977 (7 U.S.C. 2014) 
     is amended--
       (1) in the second sentence of subsection (a), by striking 
     ``plan approved'' and all that follows through ``title IV of 
     the Social Security Act'' and inserting ``program funded 
     under part A of title IV of the Social Security Act (42 
     U.S.C. 601 et seq.) that the Secretary determines complies 
     with standards established by the Secretary that ensure that 
     the standards under the State program are comparable to or 
     more restrictive than those in effect on June 1, 1995'';
       (2) in subsection (d)(5)--

[[Page S 16266]]

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

       (I) by striking ``an AFDC assistance unit (under the aid to 
     families with dependent children program authorized'' and 
     inserting ``a family (under the State program funded''; and
       (II) by striking ``, in a State'' and all that follows 
     through ``9902(2)))'' and inserting ``that the Secretary 
     determines complies with standards established by the 
     Secretary that ensure that the standards under the State 
     program are comparable to or more restrictive than those in 
     effect on June 1, 1995''; and

       (ii) in subparagraph (B), by striking ``aid to families 
     with dependent children'' and inserting ``assistance under 
     the State program funded under part A of title IV of the 
     Social Security Act (42 U.S.C. 601 et seq.) that the 
     Secretary determines complies with standards established by 
     the Secretary that ensure that the standards under the State 
     program are comparable to or more restrictive than those in 
     effect on June 1, 1995''; and
       (2) in subsection (d)(2)(C)--
       (A) by striking ``program for aid to families with 
     dependent children'' and inserting ``State program funded''; 
     and
       (B) by inserting before the period at the end the 
     following: ``that the Secretary determines complies with 
     standards established by the Secretary that ensure that the 
     standards under the State program are comparable to or more 
     restrictive than those in effect on June 1, 1995''.
       (h) Section 17 of the Child Nutrition Act of 1966 (42 
     U.S.C. 1786) is amended--
       (1) in subsection (d)(2)(A)(ii)(II)--
       (A) by striking ``program for aid to families with 
     dependent children established'' and inserting ``State 
     program funded''; and
       (B) by inserting before the semicolon the following: ``that 
     the Secretary determines complies with standards established 
     by the Secretary that ensure that the standards under the 
     State program are comparable to or more restrictive than 
     those in effect on June 1, 1995'';
       (2) in subsection (e)(4)(A), by striking ``program for aid 
     to families with dependent children'' and inserting ``State 
     program funded''; and
       (3) in subsection (f)(1)(C)(iii), by striking ``aid to 
     families with dependent children,'' and inserting ``State 
     program funded under part A of title IV of the Social 
     Security Act (42 U.S.C. 601 et seq.) and with the''.

     SEC. 7213. CONFORMING AMENDMENTS TO OTHER LAWS.

       (a) Subsection (b) of section 508 of the Unemployment 
     Compensation Amendments of 1976 (Public Law 94-566; 90 Stat. 
     2689) is amended to read as follows:
       ``(b) Provision for Reimbursement of Expenses.--For 
     purposes of section 455 of the Social Security Act, expenses 
     incurred to reimburse State employment offices for furnishing 
     information requested of such offices--
       ``(1) pursuant to the third sentence of section 3(a) of the 
     Act entitled `An Act to provide for the establishment of a 
     national employment system and for cooperation with the 
     States in the promotion of such system, and for other 
     purposes', approved June 6, 1933 (29 U.S.C. 49b(a)), or
       ``(2) by a State or local agency charged with the duty of 
     carrying a State plan for child support approved under part D 
     of title IV of the Social Security Act,

     shall be considered to constitute expenses incurred in the 
     administration of such State plan.''.
       (b) Section 9121 of the Omnibus Budget Reconciliation Act 
     of 1987 (42 U.S.C. 602 note) is repealed.
       (c) Section 9122 of the Omnibus Budget Reconciliation Act 
     of 1987 (42 U.S.C. 602 note) is repealed.
       (d) Section 221 of the Housing and Urban-Rural Recovery Act 
     of 1983 (42 U.S.C. 602 note), relating to treatment under 
     AFDC of certain rental payments for federally assisted 
     housing, is repealed.
       (e) Section 159 of the Tax Equity and Fiscal Responsibility 
     Act of 1982 (42 U.S.C. 602 note) is repealed.
       (f) Section 202(d) of the Social Security Amendments of 
     1967 (81 Stat. 882; 42 U.S.C. 602 note) is repealed.
       (g) Section 903 of the Stewart B. McKinney Homeless 
     Assistance Amendments Act of 1988 (42 U.S.C. 11381 note), 
     relating to demonstration projects to reduce number of AFDC 
     families in welfare hotels, is amended--
       (1) in subsection (a), by striking ``aid to families with 
     dependent children under a State plan approved'' and 
     inserting ``assistance under a State program funded''; and
       (2) in subsection (c), by striking ``aid to families with 
     dependent children in the State under a State plan approved'' 
     and inserting ``assistance in the State under a State program 
     funded''.
       (h) The Higher Education Act of 1965 (20 U.S.C. 1001 et 
     seq.) is amended--
       (1) in section 404C(c)(3) (20 U.S.C. 1070a-23(c)(3)), by 
     striking ``(Aid to Families with Dependent Children)''; and
       (2) in section 480(b)(2) (20 U.S.C. 1087vv(b)(2)), by 
     striking ``aid to families with dependent children under a 
     State plan approved'' and inserting ``assistance under a 
     State program funded''.
       (i) The Carl D. Perkins Vocational and Applied Technology 
     Education Act (20 U.S.C. 2301 et seq.) is amended--
       (1) in section 231(d)(3)(A)(ii) (20 U.S.C. 
     2341(d)(3)(A)(ii)), by striking ``the program for aid to 
     dependent children'' and inserting ``the State program 
     funded'';
       (2) in section 232(b)(2)(B) (20 U.S.C. 2341a(b)(2)(B)), by 
     striking ``the program for aid to families with dependent 
     children'' and inserting ``the State program funded''; and
       (3) in section 521(14)(B)(iii) (20 U.S.C. 
     2471(14)(B)(iii)), by striking ``the program for aid to 
     families with dependent children'' and inserting ``the State 
     program funded''.
       (j) The Elementary and Secondary Education Act of 1965 (20 
     U.S.C. 2701 et seq.) is amended--
       (1) in section 1113(a)(5) (20 U.S.C. 6313(a)(5)), by 
     striking ``Aid to Families with Dependent Children Program'' 
     and inserting ``State program funded under part A of title IV 
     of the Social Security Act'';
       (2) in section 1124(c)(5) (20 U.S.C. 6333(c)(5)), by 
     striking ``the program of aid to families with dependent 
     children under a State plan approved under'' and inserting 
     ``a State program funded under part A of''; and
       (3) in section 5203(b)(2) (20 U.S.C. 7233(b)(2))--
       (A) in subparagraph (A)(xi), by striking ``Aid to Families 
     with Dependent Children benefits'' and inserting ``assistance 
     under a State program funded under part A of title IV of the 
     Social Security Act''; and
       (B) in subparagraph (B)(viii), by striking ``Aid to 
     Families with Dependent Children'' and inserting ``assistance 
     under the State program funded under part A of title IV of 
     the Social Security Act''.
       (k) Chapter VII of title I of Public Law 99-88 (25 U.S.C. 
     13d-1) is amended to read as follows: ``Provided further, 
     That general assistance payments made by the Bureau of Indian 
     Affairs shall be made--
       ``(1) after April 29, 1985, and before October 1, 1995, on 
     the basis of Aid to Families with Dependent Children (AFDC) 
     standards of need; and
       ``(2) on and after October 1, 1995, on the basis of 
     standards of need established under the State 

[[Page S 16267]]
     program funded under part A of title IV of the Social Security Act,

     except that where a State ratably reduces its AFDC or State 
     program payments, the Bureau shall reduce general assistance 
     payments in such State by the same percentage as the State 
     has reduced the AFDC or State program payment.''.
       (l) The Internal Revenue Code of 1986 is amended--
       (1) in section 51(d)(9), by striking all that follows 
     ``agency as'' and inserting ``being eligible for financial 
     assistance under part A of title IV of the Social Security 
     Act and as having continually received such financial 
     assistance during the 90-day period which immediately 
     precedes the date on which such individual is hired by the 
     employer.'';
       (2) in section 3304(a)(16), by striking ``eligibility for 
     aid or services,'' and all that follows through ``children 
     approved'' and inserting ``eligibility for assistance, or the 
     amount of such assistance, under a State program funded'';
       (3) in section 6103(l)(7)(D)(i), by striking ``aid to 
     families with dependent children provided under a State plan 
     approved'' and inserting ``a State program funded'';
       (4) in section 6334(a)(11)(A), by striking ``(relating to 
     aid to families with dependent children)''; and
       (5) in section 7523(b)(3)(C), by striking ``aid to families 
     with dependent children'' and inserting ``assistance under a 
     State program funded under part A of title IV of the Social 
     Security Act''.
       (m) Section 3(b) of the Wagner-Peyser Act (29 U.S.C. 
     49b(b)) is amended by striking ``State plan approved under 
     part A of title IV'' and inserting ``State program funded 
     under part A of title IV''.
       (n) The Job Training Partnership Act (29 U.S.C. 1501 et 
     seq.) is amended--
       (1) in section 4(29)(A)(i) (29 U.S.C. 1503(29)(A)(i)), by 
     striking ``(42 U.S.C. 601 et seq.)'';
       (2) in section 106(b)(6)(C) (29 U.S.C. 1516(b)(6)(C)), by 
     striking ``State aid to families with dependent children 
     records,'' and inserting ``records collected under the State 
     program funded under part A of title IV of the Social 
     Security Act,'';
       (3) in section 121(b)(2) (29 U.S.C. 1531(b)(2))--
       (A) by striking ``the JOBS program'' and inserting ``the 
     work activities required under title IV of the Social 
     Security Act''; and
       (B) by striking the second sentence;
       (4) in section 123(c) (29 U.S.C. 1533(c))--
       (A) in paragraph (1)(E), by repealing clause (vi); and
       (B) in paragraph (2)(D), by repealing clause (v);
       (5) in section 203(b)(3) (29 U.S.C. 1603(b)(3)), by 
     striking ``, including recipients under the JOBS program'';
       (6) in subparagraphs (A) and (B) of section 204(a)(1) (29 
     U.S.C. 1604(a)(1) (A) and (B)), by striking ``(such as the 
     JOBS program)'' each place it appears;
       (7) in section 205(a) (29 U.S.C. 1605(a)), by striking 
     paragraph (4) and inserting the following:
       ``(4) the portions of title IV of the Social Security Act 
     relating to work activities;'';
       (8) in section 253 (29 U.S.C. 1632)--
       (A) in subsection (b)(2), by repealing subparagraph (C); 
     and
       (B) in paragraphs (1)(B) and (2)(B) of subsection (c), by 
     striking ``the JOBS program or'' each place it appears;
       (9) in section 264 (29 U.S.C. 1644)--
       (A) in subparagraphs (A) and (B) of subsection (b)(1), by 
     striking ``(such as the JOBS program)'' each place it 
     appears; and
       (B) in subparagraphs (A) and (B) of subsection (d)(3), by 
     striking ``and the JOBS program'' each place it appears;
       (10) in section 265(b) (29 U.S.C. 1645(b)), by striking 
     paragraph (6) and inserting the following:
       ``(6) the portion of title IV of the Social Security Act 
     relating to work activities;'';
       (11) in the second sentence of section 429(e) (29 U.S.C. 
     1699(e)), by striking ``and shall be in an amount that does 
     not exceed the maximum amount that may be provided by the 
     State pursuant to section 402(g)(1)(C) of the Social Security 
     Act (42 U.S.C. 602(g)(1)(C))'';
       (12) in section 454(c) (29 U.S.C. 1734(c)), by striking 
     ``JOBS and'';
       (13) in section 455(b) (29 U.S.C. 1735(b)), by striking 
     ``the JOBS program,'';
       (14) in section 501(1) (29 U.S.C. 1791(1)), by striking 
     ``aid to families with dependent children under part A of 
     title IV of the Social Security Act (42 U.S.C. 601 et seq.)'' 
     and inserting ``assistance under the State program funded 
     under part A of title IV of the Social Security Act'';
       (15) in section 506(1)(A) (29 U.S.C. 1791e(1)(A)), by 
     striking ``aid to families with dependent children'' and 
     inserting ``assistance under the State program funded'';
       (16) in section 508(a)(2)(A) (29 U.S.C. 1791g(a)(2)(A)), by 
     striking ``aid to families with dependent children'' and 
     inserting ``assistance under the State program funded''; and
       (17) in section 701(b)(2)(A) (29 U.S.C. 1792(b)(2)(A))--
       (A) in clause (v), by striking the semicolon and inserting 
     ``; and''; and
       (B) by striking clause (vi).
       (o) Section 3803(c)(2)(C)(iv) of title 31, United States 
     Code, is amended to read as follows:
       ``(iv) assistance under a State program funded under part A 
     of title IV of the Social Security Act''.
       (p) Section 2605(b)(2)(A)(i) of the Low-Income Home Energy 
     Assistance Act of 1981 (42 U.S.C. 8624(b)(2)(A)(i)) is 
     amended to read as follows:
       ``(i) assistance under the State program funded under part 
     A of title IV of the Social Security Act;''.
       (q) Section 303(f)(2) of the Family Support Act of 1988 (42 
     U.S.C. 602 note) is amended--
       (1) by striking ``(A)''; and
       (2) by striking subparagraphs (B) and (C).
       (r) The Balanced Budget and Emergency Deficit Control Act 
     of 1985 (2 U.S.C. 900 et seq.)) is amended--
       (1) in section 255(h) (2 U.S.C. 905(h), by striking ``Aid 
     to families with dependent children (75-0412-0-1-609);'' and 
     inserting ``Block grants to States for temporary assistance 
     for needy families;''; and
       (2) in section 256 (2 U.S.C. 906)--
       (A) by striking subsection (k); and
       (B) by redesignating subsection (l) as subsection (k).
       (s) The Immigration and Nationality Act (8 U.S.C. 1101 et 
     seq.) is amended--
       (1) in section 210(f) (8 U.S.C. 1160(f)), by striking ``aid 
     under a State plan approved under'' each place it appears and 
     inserting ``assistance under a State program funded under'';
       (2) in section 245A(h) (8 U.S.C. 1255a(h))--
       (A) in paragraph (1)(A)(i), by striking ``program of aid to 
     families with dependent children'' and inserting ``State 
     program of assistance''; and
       (B) in paragraph (2)(B), by striking ``aid to families with 
     dependent children'' and inserting ``assistance under a State 
     program funded under part A of title IV of the Social 
     Security Act''; and
       (3) in section 412(e)(4) (8 U.S.C. 1522(e)(4)), by striking 
     ``State plan approved'' and inserting ``State program 
     funded''.
       (t) Section 640(a)(4)(B)(i) of the Head Start Act (42 
     U.S.C. 9835(a)(4)(B)(i)) is amended by striking ``program of 
     aid to families with dependent children under a State plan 
     approved'' and inserting ``State program of assistance 
     funded''.
       (u) Section 9 of the Act of April 19, 1950 (64 Stat. 47, 
     chapter 92; 25 U.S.C. 639) is repealed.
       (v) Subparagraph (E) of section 213(d)(6) of the School-To-
     Work Opportunities Act of 1994 (20 U.S.C. 6143(d)(6)) is 
     amended to read as follows:
       ``(E) part A of title IV of the Social Security Act (42 
     U.S.C. 601 et seq.) relating to work activities;''.

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

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

     SEC. 7215. EFFECTIVE DATE; TRANSITION RULE.

       (a) In General.--Except as otherwise provided in this 
     subtitle, this subtitle and the amendments made by this 
     subtitle shall take effect on October 1, 1995.
       (b) Transition Rule.--
       (1) State option to continue afdc program.--
       (A) 9-month extension.--A State may continue a State 
     program under parts A and F of title IV of the Social 
     Security Act, as in effect on September 30, 1995 (for 
     purposes of this paragraph, the ``State AFDC program'') until 
     June 30, 1996.
       (B) Reduction of fiscal year 1996 grant.--In the case of 
     any State opting to continue the State AFDC program pursuant 
     to subparagraph (A), the State family assistance grant paid 
     to such State under section 403(a) of the Social Security Act 
     (as added by section 7201 and as in effect on and after 
     October 1, 1995) for fiscal year 1996 (after the termination 
     of the State AFDC program) shall be reduced by an amount 
     equal to the total Federal payment to such State under 
     section 403 of the Social Security Act (as in effect on 
     September 30, 1995) for such fiscal year.
       (2) Claims, actions, and proceedings.--The amendments made 
     by this subtitle shall not apply with respect to--
       (A) powers, duties, functions, rights, claims, penalties, 
     or obligations applicable to aid, assistance, or services 
     provided before the effective date of this subtitle under the 
     provisions amended; and
       (B) administrative actions and proceedings commenced before 
     such date, or authorized before such date to be commenced, 
     under such provisions.
       (3) Closing out account for those programs terminated or 
     substantially modified by this subtitle.--In closing out 
     accounts, Federal and State officials may use scientifically 
     acceptable statistical sampling techniques. Claims made under 
     programs which are repealed or substantially amended in this 
     subtitle and which involve State expenditures in cases where 
     assistance or services were provided during a prior fiscal 
     year, shall be treated as expenditures during fiscal year 
     1995 for purposes of reimbursement even if payment was made 
     by a State on or after October 1, 1995. States shall complete 
     the filing of all claims no later than September 30, 1997. 
     Federal department heads shall--
       (A) use the single audit procedure to review and resolve 
     any claims in connection with the close out of programs, and
       (B) reimburse States for any payments made for assistance 
     or services provided during a prior fiscal year from funds 
     for fiscal year 1995, rather than the funds authorized by 
     this subtitle.
       (c) Sunset.--The amendment made by section 7201(b) shall be 
     effective only during the 5-year period beginning on October 
     1, 1995.
     
[[Page S 16268]]

                Subtitle D--Supplemental Security Income

                  CHAPTER 1--ELIGIBILITY RESTRICTIONS

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

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


 ``TREATMENT SERVICES FOR INDIVIDUALS WITH A SUBSTANCE ABUSE CONDITION

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

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

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

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

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

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

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

               CHAPTER 2--BENEFITS FOR DISABLED CHILDREN

     SEC. 7261. DEFINITION AND ELIGIBILITY RULES.

       (a) Definition of Childhood Disability.--Section 1614(a)(3) 
     (42 U.S.C. 1382c(a)(3)), as amended by section 7251(a), is 
     amended--
       (1) in subparagraph (A), by striking ``An individual'' and 
     inserting ``Except as provided in subparagraph (C), an 
     individual'';
       (2) in subparagraph (A), by striking ``(or, in the case of 
     an individual under the age of 18, if 

[[Page S 16269]]
     he suffers from any medically determinable physical or mental 
     impairment of comparable severity)'';
       (3) by redesignating subparagraphs (C) through (I) as 
     subparagraphs (D) through (J), respectively;
       (4) by inserting after subparagraph (B) the following new 
     subparagraph:
       ``(C) An individual under the age of 18 shall be considered 
     disabled for the purposes of this title if that individual 
     has a medically determinable physical or mental impairment, 
     which results in marked and severe functional limitations, 
     and which can be expected to result in death or which has 
     lasted or can be expected to last for a continuous period of 
     not less than 12 months.''; and
       (5) in subparagraph (F), as redesignated by paragraph (3), 
     by striking ``(D)'' and inserting ``(E)''.
       (b) Changes to Childhood SSI Regulations.--
       (1) Modification to medical criteria for evaluation of 
     mental and emotional disorders.--The Commissioner of Social 
     Security shall modify sections 112.00C.2. and 112.02B.2.c.(2) 
     of appendix 1 to subpart P of part 404 of title 20, Code of 
     Federal Regulations, to eliminate references to maladaptive 
     behavior in the domain of personal/behavorial function.
       (2) Discontinuance of individualized functional 
     assessment.--The Commissioner of Social Security shall 
     discontinue the individualized functional assessment for 
     children set forth in sections 416.924d and 416.924e of title 
     20, Code of Federal Regulations.
       (c) Effective Date; Regulations; Application to Current 
     Recipients.--
       (1) In general.--The amendments made by subsections (a) and 
     (b) shall apply to applicants for benefits for months 
     beginning on or after the date of the enactment of this Act, 
     without regard to whether regulations have been issued to 
     implement such amendments.
       (2) Regulations.--The Commissioner of Social Security shall 
     issue such regulations as the Commissioner determines to be 
     necessary to implement the amendments made by subsections (a) 
     and (b) not later than 60 days after the date of the 
     enactment of this Act.
       (3) Application to current recipients.--
       (A) Eligibility determinations.--Not later than 1 year 
     after the date of the enactment of this Act, the Commissioner 
     of Social Security shall redetermine the eligibility of any 
     individual under age 18 who is receiving supplemental 
     security income benefits based on a disability under title 
     XVI of the Social Security Act as of the date of the 
     enactment of this Act and whose eligibility for such benefits 
     may terminate by reason of the amendments made by subsection 
     (a) or (b). With respect to any redetermination under this 
     subparagraph--
       (i) section 1614(a)(4) of the Social Security Act (42 
     U.S.C. 1382c(a)(4)) shall not apply;
       (ii) the Commissioner of Social Security shall apply the 
     eligibility criteria for new applicants for benefits under 
     title XVI of such Act;
       (iii) the Commissioner shall give such redetermination 
     priority over all continuing eligibility reviews and other 
     reviews under such title; and
       (iv) such redetermination shall be counted as a review or 
     redetermination otherwise required to be made under section 
     208 of the Social Security Independence and Program 
     Improvements Act of 1994 or any other provision of title XVI 
     of the Social Security Act.
       (B) Grandfather provision.--The amendments made by 
     subsections (a) and (b), and the redetermination under 
     subparagraph (A), shall only apply with respect to the 
     benefits of an individual described in subparagraph (A) for 
     months beginning on or after January 1, 1997.
       (C) Notice.--Not later than 90 days after the date of the 
     enactment of this Act, the Commissioner of Social Security 
     shall notify an individual described in subparagraph (A) of 
     the provisions of this paragraph.

     SEC. 7262. ELIGIBILITY REDETERMINATIONS AND CONTINUING 
                   DISABILITY REVIEWS.

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

     SEC. 7263. ADDITIONAL ACCOUNTABILITY REQUIREMENTS.

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

   CHAPTER 3--STUDIES REGARDING SUPPLEMENTAL SECURITY INCOME PROGRAM

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

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

     ``SEC. 1636. ANNUAL REPORT ON PROGRAM.

       ``(a) Description of Report.--Not later than May 30 of each 
     year, the Commissioner of Social Security shall prepare and 
     deliver a report annually to the President and the Congress 
     regarding the program under this title, including--

[[Page S 16270]]

       ``(1) a comprehensive description of the program;
       ``(2) historical and current data on allowances and 
     denials, including number of applications and allowance rates 
     at initial determinations, reconsiderations, administrative 
     law judge hearings, council of appeals hearings, and Federal 
     court appeal hearings;
       ``(3) historical and current data on characteristics of 
     recipients and program costs, by recipient group (aged, 
     blind, work disabled adults, and children);
       ``(4) projections of future number of recipients and 
     program costs, through at least 25 years;
       ``(5) number of redeterminations and continuing disability 
     reviews, and the outcomes of such redeterminations and 
     reviews;
       ``(6) data on the utilization of work incentives;
       ``(7) detailed information on administrative and other 
     program operation costs;
       ``(8) summaries of relevant research undertaken by the 
     Social Security Administration, or by other researchers;
       ``(9) State supplementation program operations;
       ``(10) a historical summary of statutory changes to this 
     title; and
       ``(11) such other information as the Commissioner deems 
     useful.
       ``(b) Views of Members of the Social Security Advisory 
     Council.--Each member of the Social Security Advisory Council 
     shall be permitted to provide an individual report, or a 
     joint report if agreed, of views of the program under this 
     title, to be included in the annual report under this 
     section.''.

     SEC. 7272. IMPROVEMENTS TO DISABILITY EVALUATION.

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

     SEC. 7273. STUDY OF DISABILITY DETERMINATION PROCESS.

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

     SEC. 7274. STUDY BY GENERAL ACCOUNTING OFFICE.

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

       CHAPTER 4--NATIONAL COMMISSION ON THE FUTURE OF DISABILITY

     SEC. 7281. ESTABLISHMENT.

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

     SEC. 7282. DUTIES OF THE COMMISSION.

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

     SEC. 7283. MEMBERSHIP.

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

     SEC. 7284. STAFF AND SUPPORT SERVICES.

       (a) Director.--
       (1) Appointment.--Upon consultation with the members of the 
     Commission, the Chairperson shall appoint a Director of the 
     Commission.

[[Page S 16271]]

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

     SEC. 7285. POWERS OF COMMISSION.

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

     SEC. 7286. REPORTS.

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

     SEC. 7287. TERMINATION.

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

     CHAPTER 1--ELIGIBILITY FOR SERVICES; DISTRIBUTION OF PAYMENTS

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

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

     SEC. 7302. DISTRIBUTION OF CHILD SUPPORT COLLECTIONS.

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

     ``SEC. 457. DISTRIBUTION OF COLLECTED SUPPORT.

       ``(a) In General.--An amount collected on behalf of a 
     family as support by a State pursuant to a plan approved 
     under this part shall be distributed as follows:
       ``(1) Families receiving assistance.--In the case of a 
     family receiving assistance from the State, the State shall--
       ``(A) retain, or distribute to the family, the State share 
     of the amount so collected; and
       ``(B) pay to the Federal Government the Federal share of 
     the amount so collected.
       ``(2) Families that formerly received assistance.--In the 
     case of a family that formerly received assistance from the 
     State:
       ``(A) Current support payments.--The State shall, with 
     regard to amounts collected which represent amounts owed for 
     the current month, distribute the amounts so collected to the 
     family.
       ``(B) Payment of arrearages.--The State shall, with regard 
     to amounts collected which exceed amounts owed for the 
     current month, distribute the amounts so collected as 
     follows:
       ``(i) Distribution to the family to satisfy arrearages that 
     accrued after the family received assistance.--The State 
     shall distribute the amount so collected to the family to the 
     extent necessary to satisfy any support arrearages with 
     respect to the family that accrued after the family stopped 
     receiving assistance from the State.
       ``(ii) Distribution to the family to satisfy arrearages 
     that accrued before or while the family received assistance 
     to the extent payments exceed assistance received.--In the 
     case of arrearages of support obligations with respect to the 
     family that were assigned to the State making or receiving 
     the collection, as a condition of receiving assistance from 
     the State, and which accrued before or while the family 
     received such assistance, the State may retain all or a part 
     of the State share and if the State does so retain, shall 
     retain and pay to the Federal Government the Federal share of 
     amounts so collected, to the extent the amount so retained 
     does not exceed the amount of assistance provided to the 
     family by the State.
       ``(iii) Distribution of the remainder to the family.--To 
     the extent that neither clause (i) nor clause (ii) applies to 
     the amount so collected, the State shall distribute the 
     amount to the family.
       ``(3) Families that never received assistance.--In the case 
     of any other family, the State shall distribute the amount so 
     collected to the family.
       ``(4) Families under certain agreements.--In the case of a 
     family receiving assistance from an Indian tribe, distribute 
     the amount so collected pursuant to an agreement entered into 
     pursuant to a State plan under section 454(32).
       ``(b) Transition Rule.--Any rights to support obligations 
     which were assigned to a State as a condition of receiving 
     assistance from the State 

[[Page S 16272]]
     under part A before the effective date of the Balanced Budget 
     Reconciliation Act of 1995 shall remain assigned after such 
     date.
       ``(c) Definitions.--As used in subsection (a):
       ``(1) Assistance.--The term `assistance from the State' 
     means--
       ``(A) assistance under the State program funded under part 
     A or under the State plan approved under part A of this title 
     (as in effect before October 1, 1995); or
       ``(B) benefits under the State plan approved under part E 
     of this title.
       ``(2) Federal share.--The term `Federal share' means, with 
     respect to an amount collected by the State to satisfy a 
     support obligation owed to a family for a time period--
       ``(A) the greatest Federal medical assistance percentage in 
     effect for the State for fiscal year 1995 or any succeeding 
     fiscal year; or
       ``(B) if support is not owed to the family for any month 
     for which the family received aid to families with dependent 
     children under the State plan approved under part A of this 
     title (as in effect before October 1, 1995), the Federal 
     reimbursement percentage for the fiscal year in which the 
     time period occurs.
       ``(3) Federal medical assistance percentage.--The term 
     `Federal medical assistance percentage' means--
       ``(A) the Federal medical assistance percentage (as defined 
     in section 2122(c)) in the case of any State for which 
     subparagraph (B) does not apply; or
       ``(B) the Federal medical assistance percentage (as defined 
     in section 1118), in the case of Puerto Rico, the Virgin 
     Islands, Guam, and American Samoa.
       ``(4) Federal reimbursement percentage.--The term `Federal 
     reimbursement percentage' means, with respect to a fiscal 
     year--
       ``(A) the total amount paid to the State under section 403 
     for the fiscal year; divided by
       ``(B) the total amount expended by the State to carry out 
     the State program under part A during the fiscal year.
       ``(5) State share.--The term `State share' means 100 
     percent minus the Federal share.''.
       (b) Conforming Amendment.--Section 464(a)(1) (42 U.S.C. 
     664(a)(1)) is amended by striking ``section 457(b)(4) or 
     (d)(3)'' and inserting ``section 457''.
       (c) Clerical Amendments.--Section 454 (42 U.S.C. 654) is 
     amended--
       (1) in paragraph (11)--
       (A) by striking ``(11)'' and inserting ``(11)(A)''; and
       (B) by inserting after the semicolon ``and''; and
       (2) by redesignating paragraph (12) as subparagraph (B) of 
     paragraph (11).
       (d) Effective Date.--
       (1) General rule.--Except as provided in paragraphs (2) and 
     (3), the amendment made by subsection (a) shall become 
     effective on October 1, 1999.
       (2) Earlier effective date for rules relating to 
     distribution of support collected for families receiving 
     assistance.--Section 457(a)(1) of the Social Security Act, as 
     added by the amendment made by subsection (a), shall become 
     effective on October 1, 1995.
       (3) Special rule.--A State may elect to have the amendment 
     made by subsection (a) become effective on a date earlier 
     than October 1, 1999, which date shall coincide with the 
     operation of the single statewide automated data processing 
     and information retrieval system required by section 454A of 
     the Social Security Act (as added by section 7344(a)(2)) and 
     the State disbursement unit required by section 454B of the 
     Social Security Act (as added by section 7312(b)), and the 
     existence of State requirements for assignment of support as 
     a condition of eligibility for assistance under part A of the 
     Social Security Act (as added by subtitle C).
       (4) Clerical amendments.--The amendments made by subsection 
     (b) shall become effective on October 1, 1995.

     SEC. 7303. RIGHTS TO NOTIFICATION AND HEARINGS.

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

     SEC. 7304. PRIVACY SAFEGUARDS.

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

                  CHAPTER 2--LOCATE AND CASE TRACKING

     SEC. 7311. STATE CASE REGISTRY.

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

     SEC. 7312. COLLECTION AND DISBURSEMENT OF SUPPORT PAYMENTS.

       (a) State Plan Requirement.--Section 454 (42 U.S.C. 654), 
     as amended by sections 7301(b) and 7304(a), is amended--

[[Page S 16273]]

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

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

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

     SEC. 7313. STATE DIRECTORY OF NEW HIRES.

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

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

       ``(a) Establishment.--
       ``(1) In general.--Not later than October 1, 1997, each 
     State shall establish an automated directory (to be known as 
     the `State Directory of New Hires') which shall contain 
     information supplied in accordance with subsection (b) by 
     employers on each newly hired employee.
       ``(2) Definitions.--As used in this section:
       ``(A) Employee.--The term `employee'--
       ``(i) means an individual who is an employee within the 
     meaning of chapter 24 of the Internal Revenue Code of 1986; 
     and
       ``(ii) does not include an employee of a Federal or State 
     agency performing intelligence or counterintelligence 
     functions, if the head of such agency has determined that 
     reporting pursuant to paragraph (1) with respect to the 
     employee could endanger the safety of the employee or 
     compromise an ongoing investigation or intelligence mission.
       ``(B) Employer.--The term `employer' includes--
       ``(i) any governmental entity, and
       ``(ii) any labor organization.
       ``(C) Labor organization.--The term `labor organization' 
     shall have the meaning given such term in section 2(5) of the 
     National Labor Relations Act, and includes any entity (also 
     known as a `hiring hall') which is used by the organization 
     and an employer to carry out requirements described in 
     section 8(f)(3) of such Act of an agreement between the 
     organization and the employer.
       ``(b) Employer Information.--
       ``(1) Reporting requirement.--
       ``(A) In general.--Except as provided in subparagraphs (B) 
     and (C), each employer shall furnish to the Directory of New 
     Hires of the State in which a newly hired employee works, a 
     report that contains the name, address, and social security 
     number of the employee, and the name of, and identifying 
     number assigned under section 6109 of the Internal Revenue 
     Code of 1986 to, the employer.
       ``(B) Multistate employers.--An employer that has employees 
     who are employed in 2 or more States and that transmits 
     reports magnetically or electronically may comply with 
     subparagraph (A) by designating 1 State in which such 
     employer has employees to which it will transmit the report 
     described in subparagraph (A), and transmitting such report 
     to such State. Any employer that transmits reports pursuant 
     to this subparagraph shall notify the Secretary in writing as 
     to which State such employer designates for the purpose of 
     sending reports.
       ``(C) Federal government employers.--Any department, 
     agency, or instrumentality of the United States shall comply 
     with subparagraph (A) by transmitting the report described in 
     subparagraph (A) to the National Directory of New Hires 
     established pursuant to section 453.
       ``(2) Timing of report.--The report required by paragraph 
     (1) with respect to an employee shall be made not later than 
     the later of--
       ``(A) 30 days after the date the employer hires the 
     employee; or
       ``(B) in the case of an employer that reports by magnetic 
     or electronic means, the 1st business day of the week 
     following the date on which the employee 1st receives wages 
     or other compensation from the employer.
       ``(c) Reporting Format and Method.--Each report required by 
     subsection (b) shall be made on a W-4 form and may be 
     transmitted by 1st class mail, magnetically, or 
     electronically.
       ``(d) Civil Money Penalties on Noncomplying Employers.--The 
     State shall have the option to set a State civil money 
     penalty which shall be less than--
       ``(1) $25; or
       ``(2) $500 if, under State law, the failure is the result 
     of a conspiracy between the employer and the employee to not 
     supply the required report or to supply a false or incomplete 
     report.
       ``(e) Entry of Employer Information.--Information shall be 
     entered into the data base maintained by the State Directory 
     of New Hires within 5 business days of receipt from an 
     employer pursuant to subsection (b).
       ``(f) Information Comparisons.--
       ``(1) In general.--Not later than October 1, 1998, an 
     agency designated by the State shall, directly or by 
     contract, conduct automated comparisons of the social 
     security numbers reported by employers pursuant to subsection 
     (b) and the social security numbers appearing in the records 
     of the State case registry for cases being enforced under the 
     State plan.
       ``(2) Notice of match.--When an information comparison 
     conducted under paragraph (1) reveals a match with respect to 
     the social security number of an individual required to 
     provide support under a support order, the State Directory of 
     New Hires shall provide the agency administering the State 
     plan approved under this part of the appropriate State with 
     the name, address, and social security number of the employee 
     to whom the social security number is assigned, and the name 
     of, and identifying number assigned under section 6109 of the 
     Internal Revenue Code of 1986 to, the employer.
       ``(g) Transmission of Information.--
       ``(1) Transmission of wage withholding notices to 
     employers.--Within 2 business days after the date information 
     regarding a newly hired employee is entered into the State 
     Directory of New Hires, the State agency enforcing 

[[Page S 16274]]
     the employee's child support obligation shall transmit a notice to the 
     employer of the employee directing the employer to withhold 
     from the wages of the employee an amount equal to the monthly 
     (or other periodic) child support obligation of the employee, 
     unless the employee's wages are not subject to withholding 
     pursuant to section 466(b)(3).
       ``(2) Transmissions to the national directory of new 
     hires.--
       ``(A) New hire information.--Within 2 business days after 
     the date information regarding a newly hired employee is 
     entered into the State Directory of New Hires, the State 
     Directory of New Hires shall furnish the information to the 
     National Directory of New Hires.
       ``(B) Wage and unemployment compensation information.--The 
     State Directory of New Hires shall, on a quarterly basis, 
     furnish to the National Directory of New Hires extracts of 
     the reports required under section 303(a)(6) to be made to 
     the Secretary of Labor concerning the wages and unemployment 
     compensation paid to individuals, by such dates, in such 
     format, and containing such information as the Secretary of 
     Health and Human Services shall specify in regulations.
       ``(3) Business day defined.--As used in this subsection, 
     the term `business day' means a day on which State offices 
     are open for regular business.
       ``(h) Other Uses of New Hire Information.--
       ``(1) Location of child support obligors.--The agency 
     administering the State plan approved under this part shall 
     use information received pursuant to subsection (f)(2) to 
     locate individuals for purposes of establishing paternity and 
     establishing, modifying, and enforcing child support 
     obligations.
       ``(2) Verification of eligibility for certain programs.--A 
     State agency responsible for administering a program 
     specified in section 1137(b) shall have access to information 
     reported by employers pursuant to subsection (b) of this 
     section for purposes of verifying eligibility for the 
     program.
       ``(3) Administration of employment security and workers' 
     compensation.--State agencies operating employment security 
     and workers' compensation programs shall have access to 
     information reported by employers pursuant to subsection (b) 
     for the purposes of administering such programs.''.
       (c) Quarterly Wage Reporting.--Section 1137(a)(3) (42 
     U.S.C. 1320b-7(a)(3)) is amended--
       (1) by inserting ``(including State and local governmental 
     entities)'' after ``employers''; and
       (2) by inserting ``, and except that no report shall be 
     filed with respect to an employee of a State agency 
     performing intelligence or counterintelligence functions, if 
     the head of such agency has determined that filing such a 
     report could endanger the safety of the employee or 
     compromise an ongoing investigation or intelligence mission'' 
     after ``paragraph (2)''.

     SEC. 7314. AMENDMENTS CONCERNING INCOME WITHHOLDING.

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

     SEC. 7315. LOCATOR INFORMATION FROM INTERSTATE NETWORKS.

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

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

       (a) Expanded Authority To Locate Individuals and Assets.--
     Section 453 (42 U.S.C. 653) is amended--
       (1) in subsection (a), by striking all that follows 
     ``subsection (c))'' and inserting ``, for the purpose of 
     establishing parentage, establishing, setting the amount of, 
     modifying, or enforcing child support obligations, or 
     enforcing child visitation orders--
       ``(1) information on, or facilitating the discovery of, the 
     location of any individual--
       ``(A) who is under an obligation to pay child support or 
     provide child visitation rights;
       ``(B) against whom such an obligation is sought;
       ``(C) to whom such an obligation is owed,
     including the individual's social security number (or 
     numbers), most recent address, and the name, address, and 
     employer identification number of the individual's employer;
       ``(2) information on the individual's wages (or other 
     income) from, and benefits of, employment (including rights 
     to or enrollment in group health care coverage); and
       ``(3) information on the type, status, location, and amount 
     of any assets of, or debts owed by or to, any such 
     individual.''; and
       (2) in subsection (b), in the matter preceding paragraph 
     (1), by striking ``social security'' and all that follows 
     through ``absent parent'' and inserting ``information 
     described in subsection (a)''.
       (b) Authorized Person for Information Regarding Visitation 
     Rights.--Section 453(c) (42 U.S.C. 653(c)) is amended--
       (1) in paragraph (1), by striking ``support'' and inserting 
     ``support or to seek to enforce orders providing child 
     visitation rights'';
       (2) in paragraph (2), by striking ``, or any agent of such 
     court; and'' and inserting ``or to issue an order against a 
     resident parent for visitation rights, or any agent of such 
     court;'';
       (3) by striking the period at the end of paragraph (3) and 
     inserting ``; and''; and
       (4) by adding at the end the following new paragraph:
       ``(4) the absent parent, only with regard to a court order 
     against a resident parent for child visitation rights.''.
       (c) Reimbursement for Information From Federal Agencies.--
     Section 453(e)(2) (42 U.S.C. 653(e)(2)) is amended in the 4th 
     sentence by inserting ``in an amount which the Secretary 
     determines to be reasonable payment for the information 
     exchange (which amount shall not include payment for the 
     costs of obtaining, compiling, or maintaining the 
     information)'' before the period.
       (d) Reimbursement for Reports by State Agencies.--Section 
     453 (42 U.S.C. 653) is amended by adding at the end the 
     following new subsection:
       ``(g) The Secretary may reimburse Federal and State 
     agencies for the costs incurred by such entities in 
     furnishing information requested by the Secretary under this 
     section in an amount which the Secretary determines to be 
     reasonable payment for the information exchange (which amount 
     shall not include payment for the costs of obtaining, 
     compiling, or maintaining the information).''.
       (e) Technical Amendments.--
       (1) Sections 452(a)(9), 453(a), 453(b), 463(a), 463(e), and 
     463(f) (42 U.S.C. 652(a)(9), 653(a), 653(b), 663(a), 663(e), 
     and 663(f)) are each amended by inserting ``Federal'' before 
     ``Parent'' each place such term appears.
       (2) Section 453 (42 U.S.C. 653) is amended in the heading 
     by adding ``federal'' before ``parent''.
       (f) New Components.--Section 453 (42 U.S.C. 653), as 
     amended by subsection (d) of this section, is amended by 
     adding at the end the following new subsection:
       ``(h)(1) Not later than October 1, 1998, in order to assist 
     States in administering programs under State plans approved 
     under this part and programs funded under part A, and for the 
     other purposes specified in this section, the Secretary shall 
     establish and maintain in the Federal Parent Locator Service 
     an automated registry (which shall be known as the `Federal 
     Case Registry of Child Support Orders'), which shall contain 
     abstracts of support orders and other information described 
     in paragraph (2) with respect to each case in each State case 
     registry maintained pursuant to section 454A(e), as furnished 
     (and regularly updated), pursuant to section 454A(f), by 
     State agencies administering programs under this part.
       ``(2) The information referred to in paragraph (1) with 
     respect to a case shall be such information as the Secretary 
     may specify in regulations 

[[Page S 16275]]
     (including the names, social security numbers or other uniform 
     identification numbers, and State case identification 
     numbers) to identify the individuals who owe or are owed 
     support (or with respect to or on behalf of whom support 
     obligations are sought to be established), and the State or 
     States which have the case.
       ``(i)(1) In order to assist States in administering 
     programs under State plans approved under this part and 
     programs funded under part A, and for the other purposes 
     specified in this section, the Secretary shall, not later 
     than October 1, 1996, establish and maintain in the Federal 
     Parent Locator Service an automated directory to be known as 
     the National Directory of New Hires, which shall contain the 
     information supplied pursuant to section 453A(g)(2).
       ``(2) Information shall be entered into the data base 
     maintained by the National Directory of New Hires within 2 
     business days of receipt pursuant to section 453A(g)(2).
       ``(3) The Secretary of the Treasury shall have access to 
     the information in the National Directory of New Hires for 
     purposes of administering section 32 of the Internal Revenue 
     Code of 1986, or the advance payment of the earned income tax 
     credit under section 3507 of such Code, and verifying a claim 
     with respect to employment in a tax return.
       ``(4) The Secretary shall maintain within the National 
     Directory of New Hires a list of multistate employers that 
     report information regarding newly hired employees pursuant 
     to section 453A(b)(1)(B), and the State which each such 
     employer has designated to receive such information.
       ``(j)(1)(A) The Secretary shall transmit information on 
     individuals and employers maintained under this section to 
     the Social Security Administration to the extent necessary 
     for verification in accordance with subparagraph (B).
       ``(B) The Social Security Administration shall verify the 
     accuracy of, correct, or supply to the extent possible, and 
     report to the Secretary, the following information supplied 
     by the Secretary pursuant to subparagraph (A):
       ``(i) The name, social security number, and birth date of 
     each such individual.
       ``(ii) The employer identification number of each such 
     employer.
       ``(2) For the purpose of locating individuals in a 
     paternity establishment case or a case involving the 
     establishment, modification, or enforcement of a support 
     order, the Secretary shall--
       ``(A) compare information in the National Directory of New 
     Hires against information in the support case abstracts in 
     the Federal Case Registry of Child Support Orders not less 
     often than every 2 business days; and
       ``(B) within 2 such days after such a comparison reveals a 
     match with respect to an individual, report the information 
     to the State agency responsible for the case.
       ``(3) To the extent and with the frequency that the 
     Secretary determines to be effective in assisting States to 
     carry out their responsibilities under programs operated 
     under this part and programs funded under part A, the 
     Secretary shall--
       ``(A) compare the information in each component of the 
     Federal Parent Locator Service maintained under this section 
     against the information in each other such component (other 
     than the comparison required by paragraph (2)), and report 
     instances in which such a comparison reveals a match with 
     respect to an individual to State agencies operating such 
     programs; and
       ``(B) disclose information in such registries to such State 
     agencies.
       ``(4) The National Directory of New Hires shall provide the 
     Commissioner of Social Security with all information in the 
     National Directory, which shall be used to determine the 
     accuracy of payments under the supplemental security income 
     program under title XVI and in connection with benefits under 
     title II.
       ``(5) The Secretary may provide access to information 
     reported by employers pursuant to section 453A(b) for 
     research purposes found by the Secretary to be likely to 
     contribute to achieving the purposes of part A or this part, 
     but without personal identifiers.
       ``(k)(1) The Secretary shall reimburse the Commissioner of 
     Social Security, at a rate negotiated between the Secretary 
     and the Commissioner, for the costs incurred by the 
     Commissioner in performing the verification services 
     described in subsection (j).
       ``(2) The Secretary shall reimburse costs incurred by State 
     directories of new hires in furnishing information as 
     required by subsection (j)(3), at rates which the Secretary 
     determines to be reasonable (which rates shall not include 
     payment for the costs of obtaining, compiling, or maintaining 
     such information).
       ``(3) A State or Federal agency that receives information 
     from the Secretary pursuant to this section shall reimburse 
     the Secretary for costs incurred by the Secretary in 
     furnishing the information, at rates which the Secretary 
     determines to be reasonable (which rates shall include 
     payment for the costs of obtaining, verifying, maintaining, 
     and comparing the information).
       ``(l) Information in the Federal Parent Locator Service, 
     and information resulting from comparisons using such 
     information, shall not be used or disclosed except as 
     expressly provided in this section, subject to section 6103 
     of the Internal Revenue Code of 1986.
       ``(m) The Secretary shall establish and implement 
     safeguards with respect to the entities established under 
     this section designed to--
       ``(1) ensure the accuracy and completeness of information 
     in the Federal Parent Locator Service; and
       ``(2) restrict access to confidential information in the 
     Federal Parent Locator Service to authorized persons, and 
     restrict use of such information to authorized purposes.
       ``(n) Each department, agency, and instrumentality of the 
     United States shall on a quarterly basis report to the 
     Federal Parent Locator Service the name and social security 
     number of each employee and the wages paid to the employee 
     during the previous quarter, except that no report shall be 
     filed with respect to an employee of a department, agency, or 
     instrumentality performing intelligence or 
     counterintelligence functions, if the head of such 
     department, agency, or instrumentality has determined that 
     filing such a report could endanger the safety of the 
     employee or compromise an ongoing investigation or 
     intelligence mission.''.
       (f) Conforming Amendments.--
       (1) To part d of title iv of the social security act.--
     Section 454(8)(B) (42 U.S.C. 654(8)(B)) is amended to read as 
     follows:
       ``(B) the Federal Parent Locator Service established under 
     section 453;''.
       (2) To federal unemployment tax act.--Section 3304(a)(16) 
     of the Internal Revenue Code of 1986 is amended--
       (A) by striking ``Secretary of Health, Education, and 
     Welfare'' each place such term appears and inserting 
     ``Secretary of Health and Human Services'';
       (B) in subparagraph (B), by striking ``such information'' 
     and all that follows and inserting ``information furnished 
     under subparagraph (A) or (B) is used only for the purposes 
     authorized under such subparagraph;'';
       (C) by striking ``and'' at the end of subparagraph (A);
       (D) by redesignating subparagraph (B) as subparagraph (C); 
     and
       (E) by inserting after subparagraph (A) the following new 
     subparagraph:
       ``(B) wage and unemployment compensation information 
     contained in the records of such agency shall be furnished to 
     the Secretary of Health and Human Services (in accordance 
     with regulations promulgated by such Secretary) as necessary 
     for the purposes of the National Directory of New Hires 
     established under section 453(i) of the Social Security Act, 
     and''.
       (3) To state grant program under title iii of the social 
     security act.--Subsection (h) of section 303 (42 U.S.C. 503) 
     is amended to read as follows:
       ``(h)(1) The State agency charged with the administration 
     of the State law shall, on a reimbursable basis--
       ``(A) disclose quarterly, to the Secretary of Health and 
     Human Services wage and claim information, as required 
     pursuant to section 453(i)(1), contained in the records of 
     such agency;
       ``(B) ensure that information provided pursuant to 
     subparagraph (A) meets such standards relating to correctness 
     and verification as the Secretary of Health and Human 
     Services, with the concurrence of the Secretary of Labor, may 
     find necessary; and
       ``(C) establish such safeguards as the Secretary of Labor 
     determines are necessary to insure that information disclosed 
     under subparagraph (A) is used only for purposes of section 
     453(i)(1) in carrying out the child support enforcement 
     program under title IV.
       ``(2) Whenever the Secretary of Labor, after reasonable 
     notice and opportunity for hearing to the State agency 
     charged with the administration of the State law, finds that 
     there is a failure to comply substantially with the 
     requirements of paragraph (1), the Secretary of Labor shall 
     notify such State agency that further payments will not be 
     made to the State until the Secretary of Labor is satisfied 
     that there is no longer any such failure. Until the Secretary 
     of Labor is so satisfied, the Secretary shall make no future 
     certification to the Secretary of the Treasury with respect 
     to the State.
       ``(3) For purposes of this subsection--
       ``(A) the term `wage information' means information 
     regarding wages paid to an individual, the social security 
     account number of such individual, and the name, address, 
     State, and the Federal employer identification number of the 
     employer paying such wages to such individual; and
       ``(B) the term `claim information' means information 
     regarding whether an individual is receiving, has received, 
     or has made application for, unemployment compensation, the 
     amount of any such compensation being received (or to be 
     received by such individual), and the individual's current 
     (or most recent) home address.''.

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

       (a) State Law Requirement.--Section 466(a) (42 U.S.C. 
     666(a)), as amended by section 7315, is amended by adding at 
     the end the following new paragraph:
       ``(13) Procedures requiring that the social security number 
     of--
       ``(A) any applicant for a professional license, commercial 
     driver's license, occupational license, or marriage license 
     be recorded on the application;
       ``(B) any individual who is subject to a divorce decree, 
     support order, or paternity determination or acknowledgment 
     be placed in the records relating to the matter; and
       ``(C) any individual who has died be placed in the records 
     relating to the death and be recorded on the death 
     certificate.

     For purposes of subparagraph (A), if a State allows the use 
     of a number other than the social security number, the State 
     shall so advise any applicants.''.
       (b) Conforming Amendments.--Section 205(c)(2)(C) (42 U.S.C. 
     405(c)(2)(C)), as amended by section 321(a)(9) of the Social 
     Security Independence and Program Improvements Act of 1994, 
     is amended--
       (1) in clause (i), by striking ``may require'' and 
     inserting ``shall require'';
       (2) in clause (ii), by inserting after the 1st sentence the 
     following: ``In the administration of any law involving the 
     issuance of a marriage certificate or license, each State 
     shall require 

[[Page S 16276]]
     each party named in the certificate or license to furnish to the State 
     (or political subdivision thereof), or any State agency 
     having administrative responsibility for the law involved, 
     the social security number of the party.'';
       (3) in clause (ii), by inserting ``or marriage 
     certificate'' after ``Such numbers shall not be recorded on 
     the birth certificate'';
       (4) in clause (vi), by striking ``may'' and inserting 
     ``shall''; and
       (5) by adding at the end the following new clauses:
       ``(x) An agency of a State (or a political subdivision 
     thereof) charged with the administration of any law 
     concerning the issuance or renewal of a license, certificate, 
     permit, or other authorization to engage in a profession, an 
     occupation, or a commercial activity shall require all 
     applicants for issuance or renewal of the license, 
     certificate, permit, or other authorization to provide the 
     applicant's social security number to the agency for the 
     purpose of administering such laws, and for the purpose of 
     responding to requests for information from an agency 
     operating pursuant to part D of title IV.
       ``(xi) All divorce decrees, support orders, and paternity 
     determinations issued, and all paternity acknowledgments 
     made, in each State shall include the social security number 
     of each party to the decree, order, determination, or 
     acknowledgement in the records relating to the matter, for 
     the purpose of responding to requests for information from an 
     agency operating pursuant to part D of title IV.''.

          CHAPTER 3--STREAMLINING AND UNIFORMITY OF PROCEDURES

     SEC. 7321. ADOPTION OF UNIFORM STATE LAWS.

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

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

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

     SEC. 7323. ADMINISTRATIVE ENFORCEMENT IN INTERSTATE CASES.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     7315 and 7317(a), is amended by adding at the end the 
     following new paragraph:
       ``(14) Procedures under which--
       ``(A)(i) the State shall respond within 5 business days to 
     a request made by another State to enforce a support order; 
     and
       ``(ii) the term `business day' means a day on which State 
     offices are open for regular business;
       ``(B) the State may, by electronic or other means, transmit 
     to another State a request for assistance in a case involving 
     the enforcement of a support order, which request--
       ``(i) shall include such information as will enable the 
     State to which the request is transmitted to compare the 
     information about the case to the information in the data 
     bases of the State; and
       ``(ii) shall constitute a certification by the requesting 
     State--

       ``(I) of the amount of support under the order the payment 
     of which is in arrears; and
       ``(II) that the requesting State has complied with all 
     procedural due process requirements applicable to the case;

       ``(C) if the State provides assistance to another State 
     pursuant to this paragraph with respect to a case, neither 
     State shall consider the case to be transferred to the 
     caseload of such other State; and
       ``(D) the State shall maintain records of--
       ``(i) the number of such requests for assistance received 
     by the State;
       ``(ii) the number of cases for which the State collected 
     support in response to such a request; and
       ``(iii) the amount of such collected support.''.

     SEC. 7324. USE OF FORMS IN INTERSTATE ENFORCEMENT.

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

     SEC. 7325. STATE LAWS PROVIDING EXPEDITED PROCEDURES.

       (a) State Law Requirements.--Section 466 (42 U.S.C. 666), 
     as amended by section 7314, is amended--
       (1) in subsection (a)(2), by striking the 1st sentence and 
     inserting the following: ``Expedited administrative and 
     judicial procedures (including the procedures specified in 
     subsection (c)) for establishing paternity and for 
     establishing, modifying, and enforcing support 
     obligations.''; and
       (2) by inserting after subsection (b) the following new 
     subsection:

[[Page S 16277]]

       ``(c) The procedures specified in this subsection are the 
     following:
       ``(1) Procedures which give the State agency the authority 
     to take the following actions relating to establishment or 
     enforcement of support orders, without the necessity of 
     obtaining an order from any other judicial or administrative 
     tribunal, and to recognize and enforce the authority of State 
     agencies of other States) to take the following actions:
       ``(A) To order genetic testing for the purpose of paternity 
     establishment as provided in section 466(a)(5).
       ``(B) To subpoena any financial or other information needed 
     to establish, modify, or enforce a support order, and to 
     impose penalties for failure to respond to such a subpoena.
       ``(C) To require all entities in the State (including for-
     profit, nonprofit, and governmental employers) to provide 
     promptly, in response to a request by the State agency of 
     that or any other State administering a program under this 
     part, information on the employment, compensation, and 
     benefits of any individual employed by such entity as an 
     employee or contractor, and to sanction failure to respond to 
     any such request.
       ``(D) To obtain access, subject to safeguards on privacy 
     and information security, to the following records (including 
     automated access, in the case of records maintained in 
     automated data bases):
       ``(i) Records of other State and local government agencies, 
     including--

       ``(I) vital statistics (including records of marriage, 
     birth, and divorce);
       ``(II) State and local tax and revenue records (including 
     information on residence address, employer, income and 
     assets);
       ``(III) records concerning real and titled personal 
     property;
       ``(IV) records of occupational and professional licenses, 
     and records concerning the ownership and control of 
     corporations, partnerships, and other business entities;
       ``(V) employment security records;
       ``(VI) records of agencies administering public assistance 
     programs;
       ``(VII) records of the motor vehicle department; and
       ``(VIII) corrections records.

       ``(ii) Certain records held by private entities, 
     including--

       ``(I) customer records of public utilities and cable 
     television companies; and
       ``(II) information (including information on assets and 
     liabilities) on individuals who owe or are owed support (or 
     against or with respect to whom a support obligation is 
     sought) held by financial institutions (subject to 
     limitations on liability of such entities arising from 
     affording such access), as provided pursuant to agreements 
     described in subsection (a)(18).

       ``(E) In cases where support is subject to an assignment in 
     order to comply with a requirement imposed pursuant to part A 
     or section 2136, or to a requirement to pay through the State 
     disbursement unit established pursuant to section 454B, upon 
     providing notice to obligor and obligee, to direct the 
     obligor or other payor to change the payee to the appropriate 
     government entity.
       ``(F) To order income withholding in accordance with 
     subsections (a)(1) and (b) of section 466.
       ``(G) In cases in which there is a support arrearage, to 
     secure assets to satisfy the arrearage by--
       ``(i) intercepting or seizing periodic or lump-sum payments 
     from--

       ``(I) a State or local agency, including unemployment 
     compensation, workers' compensation, and other benefits; and
       ``(II) judgments, settlements, and lotteries;

       ``(ii) attaching and seizing assets of the obligor held in 
     financial institutions;
       ``(iii) attaching public and private retirement funds; and
       ``(iv) imposing liens in accordance with subsection (a)(4) 
     and, in appropriate cases, to force sale of property and 
     distribution of proceeds.
       ``(H) For the purpose of securing overdue support, to 
     increase the amount of monthly support payments to include 
     amounts for arrearages, subject to such conditions or 
     limitations as the State may provide.

     Such procedures shall be subject to due process safeguards, 
     including (as appropriate) requirements for notice, 
     opportunity to contest the action, and opportunity for an 
     appeal on the record to an independent administrative or 
     judicial tribunal.
       ``(2) The expedited procedures required under subsection 
     (a)(2) shall include the following rules and authority, 
     applicable with respect to all proceedings to establish 
     paternity or to establish, modify, or enforce support orders:
       ``(A) Procedures under which--
       ``(i) each party to any paternity or child support 
     proceeding is required (subject to privacy safeguards) to 
     file with the tribunal and the State case registry upon entry 
     of an order, and to update as appropriate, information on 
     location and identity of the party, including social security 
     number, residential and mailing addresses, telephone number, 
     driver's license number, and name, address, and name and 
     telephone number of employer; and
       ``(ii) in any subsequent child support enforcement action 
     between the parties, upon sufficient showing that diligent 
     effort has been made to ascertain the location of such a 
     party, the tribunal may deem State due process requirements 
     for notice and service of process to be met with respect to 
     the party, upon delivery of written notice to the most recent 
     residential or employer address filed with the tribunal 
     pursuant to clause (i).
       ``(B) Procedures under which--
       ``(i) the State agency and any administrative or judicial 
     tribunal with authority to hear child support and paternity 
     cases exerts statewide jurisdiction over the parties; and
       ``(ii) in a State in which orders are issued by courts or 
     administrative tribunals, a case may be transferred between 
     local jurisdictions in the State without need for any 
     additional filing by the petitioner, or service of process 
     upon the respondent, to retain jurisdiction over the 
     parties.''.
       (b) Automation of State Agency Functions.--Section 454A, as 
     added by section 7344(a)(2) and as amended by sections 7311 
     and 7312(c), is amended by adding at the end the following 
     new subsection:
       ``(h) Expedited Administrative Procedures.--The automated 
     system required by this section shall be used, to the maximum 
     extent feasible, to implement the expedited administrative 
     procedures required by section 466(c).''.

                   CHAPTER 4--PATERNITY ESTABLISHMENT

     SEC. 7331. STATE LAWS CONCERNING PATERNITY ESTABLISHMENT.

       (a) State Laws Required.--Section 466(a)(5) (42 U.S.C. 
     666(a)(5)) is amended to read as follows:
       ``(5)(A)(i) Procedures which permit the establishment of 
     the paternity of a child at any time before the child attains 
     21 years of age.
       ``(ii) As of August 16, 1984, clause (i) shall also apply 
     to a child for whom paternity has not been established or for 
     whom a paternity action was brought but dismissed because a 
     statute of limitations of less than 21 years was then in 
     effect in the State.
       ``(B)(i) Procedures under which the State is required, in a 
     contested paternity case, unless otherwise barred by State 
     law, to require the child and all other parties (other than 
     individuals found under section 454(29) to have good cause 
     for refusing to cooperate) to submit to genetic tests upon 
     the request of any such party if the request is supported by 
     a sworn statement by the party--
       ``(I) alleging paternity, and setting forth facts 
     establishing a reasonable possibility of the requisite sexual 
     contact between the parties; or
       ``(II) denying paternity, and setting forth facts 
     establishing a reasonable possibility of the nonexistence of 
     sexual contact between the parties.
       ``(ii) Procedures which require the State agency in any 
     case in which the agency orders genetic testing--
       ``(I) to pay costs of such tests, subject to recoupment 
     (where the State so elects) from the alleged father if 
     paternity is established; and
       ``(II) to obtain additional testing in any case where an 
     original test result is contested, upon request and advance 
     payment by the contestant.
       ``(C)(i) Procedures for a simple civil process for 
     voluntarily acknowledging paternity under which the State 
     must provide that, before a mother and a putative father can 
     sign an acknowledgment of paternity, the mother and the 
     putative father must be given notice, orally and in writing, 
     of the alternatives to, the legal consequences of, and the 
     rights (including, if 1 parent is a minor, any rights 
     afforded due to minority status) and responsibilities that 
     arise from, signing the acknowledgment.
       ``(ii) Such procedures must include a hospital-based 
     program for the voluntary acknowledgment of paternity 
     focusing on the period immediately before or after the birth 
     of a child, subject to such good cause and other exceptions 
     as the State shall establish and taking into account the best 
     interests of the child.
       ``(iii)(I) Such procedures must require the State agency 
     responsible for maintaining birth records to offer voluntary 
     paternity establishment services.
       ``(II)(aa) The Secretary shall prescribe regulations 
     governing voluntary paternity establishment services offered 
     by hospitals and birth record agencies.
       ``(bb) The Secretary shall prescribe regulations specifying 
     the types of other entities that may offer voluntary 
     paternity establishment services, and governing the provision 
     of such services, which shall include a requirement that such 
     an entity must use the same notice provisions used by, use 
     the same materials used by, provide the personnel providing 
     such services with the same training provided by, and 
     evaluate the provision of such services in the same manner as 
     the provision of such services is evaluated by, voluntary 
     paternity establishment programs of hospitals and birth 
     record agencies.
       ``(iv) Such procedures must require the State to develop 
     and use an affidavit for the voluntary acknowledgment of 
     paternity which includes the minimum requirements of the 
     affidavit developed by the Secretary under section 452(a)(7) 
     for the voluntary acknowledgment of paternity, and to give 
     full faith and credit to such an affidavit signed in any 
     other State according to its procedures.
       ``(D)(i) Procedures under which the name of the father 
     shall be included on the record of birth of the child only--
       ``(I) if the father and mother have signed a voluntary 
     acknowledgment of paternity; or
       ``(II) pursuant to an order issued in a judicial or 
     administrative proceeding.

     Nothing in this clause shall preclude a State agency from 
     obtaining an admission of paternity from the father for 
     submission in a judicial or administrative proceeding, or 
     prohibit an order issued in a judicial or administrative 
     proceeding which bases a legal finding of paternity on an 
     admission of paternity by the father and any other additional 
     showing required by State law.
       ``(ii) Procedures under which--
       ``(I) a voluntary acknowledgment of paternity is considered 
     a legal finding of paternity, subject to the right of any 
     signatory to rescind the acknowledgment within 60 days;
       ``(II) after the 60-day period referred to in subclause 
     (I), a signed voluntary acknowledgment of paternity may be 
     challenged in court only on the basis of fraud, duress, or 
     material mistake of fact, with the burden of proof upon 

[[Page S 16278]]
     the challenger, and under which the legal responsibilities (including 
     child support obligations) of any signatory arising from the 
     acknowledgment may not be suspended during the challenge, 
     except for good cause shown; and
       ``(III) judicial or administrative proceedings are not 
     required or permitted to ratify an unchallenged 
     acknowledgment of paternity.
       ``(E) Procedures under which judicial or administrative 
     proceedings are not required or permitted to ratify an 
     unchallenged acknowledgment of paternity.
       ``(F) Procedures--
       ``(i) requiring the admission into evidence, for purposes 
     of establishing paternity, of the results of any genetic test 
     that is--
       ``(I) of a type generally acknowledged as reliable by 
     accreditation bodies designated by the Secretary; and
       ``(II) performed by a laboratory approved by such an 
     accreditation body;
       ``(ii) requiring an objection to genetic testing results to 
     be made in writing not later than a specified number of days 
     before any hearing at which the results may be introduced 
     into evidence (or, at State option, not later than a 
     specified number of days after receipt of the results); and
       ``(iii) making the test results admissible as evidence of 
     paternity without the need for foundation testimony or other 
     proof of authenticity or accuracy, unless objection is made.
       ``(G) Procedures which create a rebuttable or, at the 
     option of the State, conclusive presumption of paternity upon 
     genetic testing results indicating a threshold probability 
     that the alleged father is the father of the child.
       ``(H) Procedures requiring a default order to be entered in 
     a paternity case upon a showing of service of process on the 
     defendant and any additional showing required by State law.
       ``(I) Procedures providing that the parties to an action to 
     establish paternity are not entitled to a trial by jury.
       ``(J) Procedures which require that a temporary order be 
     issued, upon motion by a party, requiring the provision of 
     child support pending an administrative or judicial 
     determination of parentage, where there is clear and 
     convincing evidence of paternity (on the basis of genetic 
     tests or other evidence).
       ``(K) Procedures under which bills for pregnancy, 
     childbirth, and genetic testing are admissible as evidence 
     without requiring third-party foundation testimony, and shall 
     constitute prima facie evidence of amounts incurred for such 
     services or for testing on behalf of the child.
       ``(L) Procedures ensuring that the putative father has a 
     reasonable opportunity to initiate a paternity action.
       ``(M) Procedures under which voluntary acknowledgments and 
     adjudications of paternity by judicial or administrative 
     processes are filed with the State registry of birth records 
     for comparison with information in the State case 
     registry.''.
       (b) National Paternity Acknowledgment Affidavit.--Section 
     452(a)(7) (42 U.S.C. 652(a)(7)) is amended by inserting ``, 
     and develop an affidavit to be used for the voluntary 
     acknowledgment of paternity which shall include the social 
     security number of each parent'' before the semicolon.
       (c) Technical Amendment.--Section 468 (42 U.S.C. 668) is 
     amended by striking ``a simple civil process for voluntarily 
     acknowledging paternity and''.

     SEC. 7332. OUTREACH FOR VOLUNTARY PATERNITY ESTABLISHMENT.

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

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

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

             CHAPTER 5--PROGRAM ADMINISTRATION AND FUNDING

     SEC. 7341. PERFORMANCE-BASED INCENTIVES AND PENALTIES.

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

[[Page S 16279]]

       (B) by striking ``(or all States, as the case may be)''.
       (3) Section 452(g)(3) (42 U.S.C. 652(g)(3)) is amended--
       (A) by striking subparagraph (A) and redesignating 
     subparagraphs (B) and (C) as subparagraphs (A) and (B), 
     respectively;
       (B) in subparagraph (A) (as so redesignated), by striking 
     ``the percentage of children born out-of-wedlock in a State'' 
     and inserting ``the percentage of children in a State who are 
     born out of wedlock or for whom support has not been 
     established''; and
       (C) in subparagraph (B) (as so redesignated)--
       (i) by inserting ``and overall performance in child support 
     enforcement'' after ``paternity establishment percentages''; 
     and
       (ii) by inserting ``and securing support'' before the 
     period.
       (d) Effective Dates.--
       (1) Incentive adjustments.--
       (A) In general.--The amendments made by subsections (a) and 
     (b) shall become effective on the date of the enactment of 
     this Act, except to the extent provided in subparagraph (B).
       (B) Exception.--Section 458 of the Social Security Act, as 
     in effect before the date of the enactment of this section, 
     shall be effective for purposes of incentive payments to 
     States for fiscal years before fiscal year 2000.
       (2) Penalty reductions.--The amendments made by subsection 
     (c) shall become effective with respect to calendar quarters 
     beginning on and after the date of the enactment of this Act.

     SEC. 7342. FEDERAL AND STATE REVIEWS AND AUDITS.

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

     SEC. 7343. REQUIRED REPORTING PROCEDURES.

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

     SEC. 7344. AUTOMATED DATA PROCESSING REQUIREMENTS.

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

     ``SEC. 454A. AUTOMATED DATA PROCESSING.

       ``(a) In General.--In order for a State to meet the 
     requirements of this section, the State agency administering 
     the State program under this part shall have in operation a 
     single statewide automated data processing and information 
     retrieval system which has the capability to perform the 
     tasks specified in this section with the frequency and in the 
     manner required by or under this part.
       ``(b) Program Management.--The automated system required by 
     this section shall perform such functions as the Secretary 
     may specify relating to management of the State program under 
     this part, including--
       ``(1) controlling and accounting for use of Federal, State, 
     and local funds in carrying out the program; and
       ``(2) maintaining the data necessary to meet Federal 
     reporting requirements under this part on a timely basis.
       ``(c) Calculation of Performance Indicators.--In order to 
     enable the Secretary to determine the incentive and penalty 
     adjustments required by sections 452(g) and 458, the State 
     agency shall--
       ``(1) use the automated system--
       ``(A) to maintain the requisite data on State performance 
     with respect to paternity establishment and child support 
     enforcement in the State; and
       ``(B) to calculate the IV-D paternity establishment 
     percentage and overall performance in child support 
     enforcement for the State for each fiscal year; and
       ``(2) have in place systems controls to ensure the 
     completeness and reliability of, and ready access to, the 
     data described in paragraph (1)(A), and the accuracy of the 
     calculations described in paragraph (1)(B).
       ``(d) Information Integrity and Security.--The State agency 
     shall have in effect safeguards on the integrity, accuracy, 
     and completeness of, access to, and use of data in the 
     automated system required by this section, which shall 
     include the following (in addition to such other safeguards 
     as the Secretary may specify in regulations):
       ``(1) Policies restricting access.--Written policies 
     concerning access to data by State agency personnel, and 
     sharing of data with other persons, which--
       ``(A) permit access to and use of data only to the extent 
     necessary to carry out the State program under this part; and
       ``(B) specify the data which may be used for particular 
     program purposes, and the personnel permitted access to such 
     data.
       ``(2) Systems controls.--Systems controls (such as 
     passwords or blocking of fields) to ensure strict adherence 
     to the policies described in paragraph (1).
       ``(3) Monitoring of access.--Routine monitoring of access 
     to and use of the automated system, through methods such as 
     audit trails and feedback mechanisms, to guard against and 
     promptly identify unauthorized access or use.
       ``(4) Training and information.--Procedures to ensure that 
     all personnel (including State and local agency staff and 
     contractors) who may have access to or be required to use 
     confidential program data are informed of applicable 
     requirements and penalties (including those in section 6103 
     of the Internal Revenue Code of 1986), and are adequately 
     trained in security procedures.
       ``(5) Penalties.--Administrative penalties (up to and 
     including dismissal from employment) for unauthorized access 
     to, or disclosure or use of, confidential data.''.
       (3) Regulations.--The Secretary of Health and Human 
     Services shall prescribe final regulations for implementation 
     of section 454A of the Social Security Act not later than 2 
     years after the date of the enactment of this Act.
       (4) Implementation timetable.--Section 454(24) (42 U.S.C. 
     654(24)), as amended by sections 7304(a)(2) and 7312(a)(1), 
     is amended to read as follows:
       ``(24) provide that the State will have in effect an 
     automated data processing and information retrieval system--
       ``(A) by October 1, 1997, which meets all requirements of 
     this part which were enacted on or before the date of 
     enactment of the Family Support Act of 1988; and
       ``(B) by October 1, 1999, which meets all requirements of 
     this part enacted on or before the date of the enactment of 
     the Balanced Budget Reconciliation Act of 1995, except that 
     such deadline shall be extended by 1 day for each day (if 
     any) by which the Secretary fails to meet the deadline 
     imposed by section 7344(a)(3) of the Balanced Budget 
     Reconciliation Act of 1995.''.
       (b) Special Federal Matching Rate for Development Costs of 
     Automated Systems.--
       (1) In general.--Section 455(a) (42 U.S.C. 655(a)) is 
     amended--
       (A) in paragraph (1)(B)--
       (i) by striking ``90 percent'' and inserting ``the percent 
     specified in paragraph (3)'';
       (ii) by striking ``so much of''; and
       (iii) by striking ``which the Secretary'' and all that 
     follows and inserting ``, and''; and

[[Page S 16280]]

       (B) by adding at the end the following new paragraph:
       ``(3)(A) The Secretary shall pay to each State, for each 
     quarter in fiscal years 1996 and 1997, 90 percent of so much 
     of the State expenditures described in paragraph (1)(B) as 
     the Secretary finds are for a system meeting the requirements 
     specified in section 454(16) (as in effect on the day before 
     the date of the enactment of the Balanced Budget 
     Reconciliation Act of 1995), but limited to the amount 
     approved for States in the advance planning documents of such 
     States submitted on or before May 1, 1995.
       ``(B)(i) The Secretary shall pay to each State, for each 
     quarter in fiscal years 1997 through 2001, the percentage 
     specified in clause (ii) of so much of the State expenditures 
     described in paragraph (1)(B) as the Secretary finds are for 
     a system meeting the requirements of sections 454(16) and 
     454A.
       ``(ii) The percentage specified in this clause is the 
     greater of--
       ``(I) 80 percent; or
       ``(II) the percentage otherwise applicable to Federal 
     payments to the State under subparagraph (A) (as adjusted 
     pursuant to section 458).''.
       (2) Temporary limitation on payments under special federal 
     matching rate.--
       (A) In general.--The Secretary of Health and Human Services 
     may not pay more than $260,000,000 in the aggregate under 
     section 455(a)(3) of the Social Security Act for fiscal years 
     1996, 1997, 1998, 1999, and 2000.
       (B) Allocation of limitation among states.--The total 
     amount payable to a State under section 455(a)(3) of such Act 
     for fiscal years 1996, 1997, 1998, 1999, and 2000 shall not 
     exceed the limitation determined for the State by the 
     Secretary of Health and Human Services in regulations.
       (C) Allocation formula.--The regulations referred to in 
     subparagraph (B) shall prescribe a formula for allocating the 
     amount specified in subparagraph (A) among States with plans 
     approved under part D of title IV of the Social Security Act, 
     which shall take into account--
       (i) the relative size of State caseloads under such part; 
     and
       (ii) the level of automation needed to meet the automated 
     data processing requirements of such part.
       (c) Conforming Amendment.--Section 123(c) of the Family 
     Support Act of 1988 (102 Stat. 2352; Public Law 100-485) is 
     repealed.

     SEC. 7345. TECHNICAL ASSISTANCE.

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

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

       (a) Annual Report to Congress.--
       (1) Section 452(a)(10)(A) (42 U.S.C. 652(a)(10)(A)) is 
     amended--
       (A) by striking ``this part;'' and inserting ``this part, 
     including--''; and
       (B) by adding at the end the following new clauses:
       ``(i) the total amount of child support payments collected 
     as a result of services furnished during the fiscal year to 
     individuals receiving services under this part;
       ``(ii) the cost to the States and to the Federal Government 
     of so furnishing the services; and
       ``(iii) the number of cases involving families--

       ``(I) who became ineligible for assistance under State 
     programs funded under part A during a month in the fiscal 
     year; and
       ``(II) with respect to whom a child support payment was 
     received in the month;''.

       (2) Section 452(a)(10)(C) (42 U.S.C. 652(a)(10)(C)) is 
     amended--
       (A) in the matter preceding clause (i)--
       (i) by striking ``with the data required under each clause 
     being separately stated for cases'' and inserting 
     ``separately stated for (1) cases'';
       (ii) by striking ``cases where the child was formerly 
     receiving'' and inserting ``or formerly received'';
       (iii) by inserting ``or 2136'' after ``471(a)(17)''; and
       (iv) by inserting ``(2)'' before ``all other'';
       (B) in each of clauses (i) and (ii), by striking ``, and 
     the total amount of such obligations'';
       (C) in clause (iii), by striking ``described in'' and all 
     that follows and inserting ``in which support was collected 
     during the fiscal year;'';
       (D) by striking clause (iv); and
       (E) by redesignating clause (v) as clause (vii), and 
     inserting after clause (iii) the following new clauses:
       ``(iv) the total amount of support collected during such 
     fiscal year and distributed as current support;
       ``(v) the total amount of support collected during such 
     fiscal year and distributed as arrearages;
       ``(vi) the total amount of support due and unpaid for all 
     fiscal years; and''.
       (3) Section 452(a)(10)(G) (42 U.S.C. 652(a)(10)(G)) is 
     amended by striking ``on the use of Federal courts and''.
       (4) Section 452(a)(10) (42 U.S.C. 652(a)(10)) is amended--
       (A) in subparagraph (H), by striking ``and'';
       (B) in subparagraph (I), by striking the period and 
     inserting ``; and''; and
       (C) by inserting after subparagraph (I) the following new 
     subparagraph:
       ``(J) compliance, by State, with the standards established 
     pursuant to subsections (h) and (i).''.
       (5) Section 452(a)(10) (42 U.S.C. 652(a)(10)) is amended by 
     striking all that follows subparagraph (J), as added by 
     paragraph (4).
       (b) Effective Date.--The amendments made by subsection (a) 
     shall be effective with respect to fiscal year 1996 and 
     succeeding fiscal years.

      CHAPTER 6--ESTABLISHMENT AND MODIFICATION OF SUPPORT ORDERS

     SEC. 7351. NATIONAL CHILD SUPPORT GUIDELINES COMMISSION.

       (a) Establishment.--There is hereby established a 
     commission to be known as the National Child Support 
     Guidelines Commission (in this section referred to as the 
     ``Commission'').
       (b) General Duties.--
       (1) In general.--The Commission shall determine--
       (A) whether it is appropriate to develop a national child 
     support guideline for consideration by the Congress or for 
     adoption by individual States; or
       (B) based on a study of various guideline models, the 
     benefits and deficiencies of such models, and any needed 
     improvements.
       (2) Development of models.--If the Commission determines 
     under paragraph (1)(A) that a national child support 
     guideline is needed or under paragraph (1)(B) that 
     improvements to guideline models are needed, the Commission 
     shall develop such national guideline or improvements.
       (c) Matters for Consideration by the Commission.--In making 
     the recommendations concerning guidelines required under 
     subsection (b), the Commission shall consider--
       (1) the adequacy of State child support guidelines 
     established pursuant to section 467;
       (2) matters generally applicable to all support orders, 
     including--
       (A) the feasibility of adopting uniform terms in all child 
     support orders;
       (B) how to define income and under what circumstances 
     income should be imputed; and
       (C) tax treatment of child support payments;
       (3) the appropriate treatment of cases in which either or 
     both parents have financial obligations to more than 1 
     family, including the effect (if any) to be given to--
       (A) the income of either parent's spouse; and
       (B) the financial responsibilities of either parent for 
     other children or stepchildren;
       (4) the appropriate treatment of expenses for child care 
     (including care of the children of either parent, and work-
     related or job-training-related child care);
       (5) the appropriate treatment of expenses for health care 
     (including uninsured health care) and other extraordinary 
     expenses for children with special needs;
       (6) the appropriate duration of support by 1 or both 
     parents, including--
       (A) support (including shared support) for postsecondary or 
     vocational education; and
       (B) support for disabled adult children;
       (7) procedures to automatically adjust child support orders 
     periodically to address changed economic circumstances, 
     including changes in the Consumer Price Index or either 
     parent's income and expenses in particular cases;
       (8) procedures to help noncustodial parents address 
     grievances regarding visitation and custody orders to prevent 
     such parents from withholding child support payments until 
     such grievances are resolved; and
       (9) whether, or to what extent, support levels should be 
     adjusted in cases in which custody is shared or in which the 
     noncustodial parent has extended visitation rights.
       (d) Membership.--
       (1) Number; appointment.--
       (A) In general.--The Commission shall be composed of 12 
     individuals appointed not later than January 15, 1997, of 
     which--
       (i) 2 shall be appointed by the Chairman of the Committee 
     on Finance of the Senate, and 1 shall be appointed by the 
     ranking minority member of the Committee;
       (ii) 2 shall be appointed by the Chairman of the Committee 
     on Ways and Means of the House of Representatives, and 1 
     shall be appointed by the ranking minority member of the 
     Committee; and
       (iii) 6 shall be appointed by the Secretary of Health and 
     Human Services.
       (B) Qualifications of members.--Members of the Commission 
     shall have expertise and experience in the evaluation and 
     development of child support guidelines. At least 1 member 
     shall represent advocacy groups for custodial parents, at 
     least 1 member shall represent advocacy 

[[Page S 16281]]
     groups for noncustodial parents, and at least 1 member shall be the 
     director of a State program under part D of title IV of the 
     Social Security Act.
       (2) Terms of office.--Each member shall be appointed for a 
     term of 2 years. A vacancy in the Commission shall be filled 
     in the manner in which the original appointment was made.
       (e) Commission Powers, Compensation, Access to Information, 
     and Supervision.--The 1st sentence of subparagraph (C), the 
     1st and 3rd sentences of subparagraph (D), subparagraph (F) 
     (except with respect to the conduct of medical studies), 
     clauses (ii) and (iii) of subparagraph (G), and subparagraph 
     (H) of section 1886(e)(6) of the Social Security Act shall 
     apply to the Commission in the same manner in which such 
     provisions apply to the Prospective Payment Assessment 
     Commission.
       (f) Report.--Not later than 2 years after the appointment 
     of members, the Commission shall submit to the President, the 
     Committee on Ways and Means of the House of Representatives, 
     and the Committee on Finance of the Senate, a recommended 
     national child support guideline and a final assessment of 
     issues relating to such a proposed national child support 
     guideline.
       (g) Termination.--The Commission shall terminate 6 months 
     after the submission of the report described in subsection 
     (e).

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

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

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

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

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

       (a) In General.--Notwithstanding any other provision of 
     Federal or State law, a depository institution shall not be 
     liable under any Federal or State law to any person for 
     disclosing any financial record of an individual to a State 
     child support enforcement agency attempting to establish, 
     modify, or enforce a child support obligation of such 
     individual.
       (b) Prohibition of Disclosure of Financial Record Obtained 
     by State Child Support Enforcement Agency.--A State child 
     support enforcement agency which obtains a financial record 
     of an individual from a financial institution pursuant to 
     subsection (a) may disclose such financial record only for 
     the purpose of, and to the extent necessary in, establishing, 
     modifying, or enforcing a child support obligation of such 
     individual.
       (c) Civil Damages for Unauthorized Disclosure.--
       (1) Disclosure by state officer or employee.--If any person 
     knowingly, or by reason of negligence, discloses a financial 
     record of an individual in violation of subsection (b), such 
     individual may bring a civil action for damages against such 
     person in a district court of the United States.
       (2) No liability for good faith but erroneous 
     interpretation.--No liability shall arise under this 
     subsection with respect to any disclosure which results from 
     a good faith, but erroneous, interpretation of subsection 
     (b).
       (3) Damages.--In any action brought under paragraph (1), 
     upon a finding of liability on the part of the defendant, the 
     defendant shall be liable to the plaintiff in an amount equal 
     to the sum of--
       (A) the greater of--
       (i) $1,000 for each act of unauthorized disclosure of a 
     financial record with respect to which such defendant is 
     found liable; or
       (ii) the sum of--

       (I) the actual damages sustained by the plaintiff as a 
     result of such unauthorized disclosure; plus
       (II) in the case of a willful disclosure or a disclosure 
     which is the result of gross negligence, punitive damages; 
     plus

       (B) the costs (including attorney's fees) of the action.
       (d) Definitions.--For purposes of this section:
       (1) The term ``depository institution'' means--
       (A) a depository institution, as defined in section 3(c) of 
     the Federal Deposit Insurance Act (12 U.S.C. 1813(c));
       (B) an institution-affiliated party, as defined in section 
     3(u) of such Act (12 U.S.C. 1813(v)); and
       (C) any Federal credit union or State credit union, as 
     defined in section 101 of the Federal Credit Union Act (12 
     U.S.C. 1752), including an institution-affiliated party of 
     such a credit union, as defined in section 206(r) of such Act 
     (12 U.S.C. 1786(r)).
       (2) The term ``financial record'' has the meaning given 
     such term in section 1101 of the Right to Financial Privacy 
     Act of 1978 (12 U.S.C. 3401).
       (3) The term ``State child support enforcement agency'' 
     means a State agency which administers a State program for 
     establishing and enforcing child support obligations.

                CHAPTER 7--ENFORCEMENT OF SUPPORT ORDERS

     SEC. 7361. INTERNAL REVENUE SERVICE COLLECTION OF ARREARAGES.

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

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

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

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

       ``(a) Consent To Support Enforcement.--Notwithstanding any 
     other provision of law (including section 207 of this Act and 
     section 5301 of title 38, United States Code), effective 
     January 1, 1975, moneys (the entitlement to which is based 
     upon remuneration for employment) due from, or payable by, 
     the United States or the District of Columbia (including any 
     agency, subdivision, or instrumentality thereof) to any 
     individual, including members of the Armed Forces of the 
     United States, shall be subject, in like manner and to the 
     same extent as if the United States or the District of 
     Columbia were a private person, to withholding in accordance 
     with State law enacted pursuant to subsections (a)(1) and (b) 
     of section 466 and regulations of the Secretary under such 
     subsections, and to any other legal process brought, by a 
     State agency administering a program under a State plan 
     approved under this part or by an individual obligee, to 
     enforce the legal obligation of the individual to provide 
     child support or alimony.
       ``(b) Consent to Requirements Applicable to Private 
     Person.--With respect to notice to withhold income pursuant 
     to subsection (a)(1) or (b) of section 466, or any other 
     order or process to enforce support obligations against an 
     individual (if the order or process contains or is 

[[Page S 16282]]
     accompanied by sufficient data to permit prompt identification of the 
     individual and the moneys involved), each governmental entity 
     specified in subsection (a) shall be subject to the same 
     requirements as would apply if the entity were a private 
     person, except as otherwise provided in this section.
       ``(c) Designation of Agent; Response to Notice or Process--
       ``(1) Designation of agent.--The head of each agency 
     subject to this section shall--
       ``(A) designate an agent or agents to receive orders and 
     accept service of process in matters relating to child 
     support or alimony; and
       ``(B) annually publish in the Federal Register the 
     designation of the agent or agents, identified by title or 
     position, mailing address, and telephone number.
       ``(2) Response to notice or process.--If an agent 
     designated pursuant to paragraph (1) of this subsection 
     receives notice pursuant to State procedures in effect 
     pursuant to subsection (a)(1) or (b) of section 466, or is 
     effectively served with any order, process, or interrogatory, 
     with respect to an individual's child support or alimony 
     payment obligations, the agent shall--
       ``(A) as soon as possible (but not later than 15 days) 
     thereafter, send written notice of the notice or service 
     (together with a copy of the notice or service) to the 
     individual at the duty station or last-known home address of 
     the individual;
       ``(B) within 30 days (or such longer period as may be 
     prescribed by applicable State law) after receipt of a notice 
     pursuant to such State procedures, comply with all applicable 
     provisions of section 466; and
       ``(C) within 30 days (or such longer period as may be 
     prescribed by applicable State law) after effective service 
     of any other such order, process, or interrogatory, respond 
     to the order, process, or interrogatory.
       ``(d) Priority of Claims.--If a governmental entity 
     specified in subsection (a) receives notice or is served with 
     process, as provided in this section, concerning amounts owed 
     by an individual to more than 1 person--
       ``(1) support collection under section 466(b) must be given 
     priority over any other process, as provided in section 
     466(b)(7);
       ``(2) allocation of moneys due or payable to an individual 
     among claimants under section 466(b) shall be governed by 
     section 466(b) and the regulations prescribed under such 
     section; and
       ``(3) such moneys as remain after compliance with 
     paragraphs (1) and (2) shall be available to satisfy any 
     other such processes on a 1st-come, 1st-served basis, with 
     any such process being satisfied out of such moneys as remain 
     after the satisfaction of all such processes which have been 
     previously served.
       ``(e) No Requirement To Vary Pay Cycles.--A governmental 
     entity that is affected by legal process served for the 
     enforcement of an individual's child support or alimony 
     payment obligations shall not be required to vary its normal 
     pay and disbursement cycle in order to comply with the legal 
     process.
       ``(f) Relief From Liability.--
       ``(1) Neither the United States, nor the government of the 
     District of Columbia, nor any disbursing officer shall be 
     liable with respect to any payment made from moneys due or 
     payable from the United States to any individual pursuant to 
     legal process regular on its face, if the payment is made in 
     accordance with this section and the regulations issued to 
     carry out this section.
       ``(2) No Federal employee whose duties include taking 
     actions necessary to comply with the requirements of 
     subsection (a) with regard to any individual shall be subject 
     under any law to any disciplinary action or civil or criminal 
     liability or penalty for, or on account of, any disclosure of 
     information made by the employee in connection with the 
     carrying out of such actions.
       ``(g) Regulations.--Authority to promulgate regulations for 
     the implementation of this section shall, insofar as this 
     section applies to moneys due from (or payable by)--
       ``(1) the United States (other than the legislative or 
     judicial branches of the Federal Government) or the 
     government of the District of Columbia, be vested in the 
     President (or the designee of the President);
       ``(2) the legislative branch of the Federal Government, be 
     vested jointly in the President pro tempore of the Senate and 
     the Speaker of the House of Representatives (or their 
     designees), and
       ``(3) the judicial branch of the Federal Government, be 
     vested in the Chief Justice of the United States (or the 
     designee of the Chief Justice).
       ``(h) Moneys Subject To Process.--
       ``(1) In general.--Subject to paragraph (2), moneys paid or 
     payable to an individual which are considered to be based 
     upon remuneration for employment, for purposes of this 
     section--
       ``(A) consist of--
       ``(i) compensation paid or payable for personal services of 
     the individual, whether the compensation is denominated as 
     wages, salary, commission, bonus, pay, allowances, or 
     otherwise (including severance pay, sick pay, and incentive 
     pay);
       ``(ii) periodic benefits (including a periodic benefit as 
     defined in section 228(h)(3)) or other payments--

       ``(I) under the insurance system established by title II;
       ``(II) under any other system or fund established by the 
     United States which provides for the payment of pensions, 
     retirement or retired pay, annuities, dependents' or 
     survivors' benefits, or similar amounts payable on account of 
     personal services performed by the individual or any other 
     individual;
       ``(III) as compensation for death under any Federal 
     program;
       ``(IV) under any Federal program established to provide 
     `black lung' benefits; or
       ``(V) by the Secretary of Veterans Affairs as pension, or 
     as compensation for a service-connected disability or death 
     (except any compensation paid by the Secretary to a member of 
     the Armed Forces who is in receipt of retired or retainer pay 
     if the member has waived a portion of the retired pay of the 
     member in order to receive the compensation); and

       ``(iii) workers' compensation benefits paid under Federal 
     or State law; but
       ``(B) do not include any payment--
       ``(i) by way of reimbursement or otherwise, to defray 
     expenses incurred by the individual in carrying out duties 
     associated with the employment of the individual; or
       ``(ii) as allowances for members of the uniformed services 
     payable pursuant to chapter 7 of title 37, United States 
     Code, as prescribed by the Secretaries concerned (defined by 
     section 101(5) of such title) as necessary for the efficient 
     performance of duty.
       ``(2) Certain amounts excluded.--In determining the amount 
     of any moneys due from, or payable by, the United States to 
     any individual, there shall be excluded amounts which--
       ``(A) are owed by the individual to the United States;
       ``(B) are required by law to be, and are, deducted from the 
     remuneration or other payment involved, including Federal 
     employment taxes, and fines and forfeitures ordered by court-
     martial;
       ``(C) are properly withheld for Federal, State, or local 
     income tax purposes, if the withholding of the amounts is 
     authorized or required by law and if amounts withheld are not 
     greater than would be the case if the individual claimed all 
     dependents to which he was entitled (the withholding of 
     additional amounts pursuant to section 3402(i) of the 
     Internal Revenue Code of 1986 may be permitted only when the 
     individual presents evidence of a tax obligation which 
     supports the additional withholding);
       ``(D) are deducted as health insurance premiums;
       ``(E) are deducted as normal retirement contributions (not 
     including amounts deducted for supplementary coverage); or
       ``(F) are deducted as normal life insurance premiums from 
     salary or other remuneration for employment (not including 
     amounts deducted for supplementary coverage).
       ``(i) Definitions.--As used in this section:
       ``(1) United states.--The term `United States' includes any 
     department, agency, or instrumentality of the legislative, 
     judicial, or executive branch of the Federal Government, the 
     United States Postal Service, the Postal Rate Commission, any 
     Federal corporation created by an Act of Congress that is 
     wholly owned by the Federal Government, and the governments 
     of the territories and possessions of the United States.
       ``(2) Child support.--The term `child support', when used 
     in reference to the legal obligations of an individual to 
     provide such support, means periodic payments of funds for 
     the support and maintenance of a child or children with 
     respect to which the individual has such an obligation, and 
     (subject to and in accordance with State law) includes 
     payments to provide for health care, education, recreation, 
     clothing, or to meet other specific needs of such a child or 
     children, and includes attorney's fees, interest, and court 
     costs, when and to the extent that the same are expressly 
     made recoverable as such pursuant to a decree, order, or 
     judgment issued in accordance with applicable State law by a 
     court of competent jurisdiction.
       ``(3) Alimony.--The term `alimony', when used in reference 
     to the legal obligations of an individual to provide the 
     same, means periodic payments of funds for the support and 
     maintenance of the spouse (or former spouse) of the 
     individual, and (subject to and in accordance with State law) 
     includes separate maintenance, alimony pendente lite, 
     maintenance, and spousal support, and includes attorney's 
     fees, interest, and court costs when and to the extent that 
     the same are expressly made recoverable as such pursuant to a 
     decree, order, or judgment issued in accordance with 
     applicable State law by a court of competent jurisdiction. 
     Such term does not include any payment or transfer of 
     property or its value by an individual to the spouse or a 
     former spouse of the individual in compliance with any 
     community property settlement, equitable distribution of 
     property, or other division of property between spouses or 
     former spouses.
       ``(4) Private person.--The term `private person' means a 
     person who does not have sovereign or other special immunity 
     or privilege which causes the person not to be subject to 
     legal process.
       ``(5) Legal process.--The term `legal process' means any 
     writ, order, summons, or other similar process in the nature 
     of garnishment--
       ``(A) which is issued by--
       ``(i) a court of competent jurisdiction in any State, 
     territory, or possession of the United States;
       ``(ii) a court of competent jurisdiction in any foreign 
     country with which the United States has entered into an 
     agreement which requires the United States to honor the 
     process; or
       ``(iii) an authorized official pursuant to an order of such 
     a court of competent jurisdiction or pursuant to State or 
     local law; and
       ``(B) which is directed to, and the purpose of which is to 
     compel, a governmental entity which holds moneys which are 
     otherwise payable to an individual to make a payment from the 
     moneys to another party in order to satisfy a legal 
     obligation of the individual to provide child support or make 
     alimony payments.''.
       (b) Conforming Amendments.--
       (1) To part d of title iv.--Sections 461 and 462 (42 U.S.C. 
     661 and 662) are repealed.
       (2) To title 5, united states code.--Section 5520a of title 
     5, United States Code, is amended, in subsections (h)(2) and 
     (i), by striking ``sections 459, 461, and 462 of the Social 
     Security Act (42 U.S.C. 659, 661, and 662)'' and inserting 
     ``section 459 of the Social Security Act (42 U.S.C. 659)''. 

[[Page S 16283]]

       (c) Military Retired and Retainer Pay.--
       (1) Definition of court.--Section 1408(a)(1) of title 10, 
     United States Code, is amended--
       (A) by striking ``and'' at the end of subparagraph (B);
       (B) by striking the period at the end of subparagraph (C) 
     and inserting ``; and''; and
       (C) by adding after subparagraph (C) the following new 
     subparagraph:
       ``(D) any administrative or judicial tribunal of a State 
     competent to enter orders for support or maintenance 
     (including a State agency administering a program under a 
     State plan approved under part D of title IV of the Social 
     Security Act), and, for purposes of this subparagraph, the 
     term `State' includes the District of Columbia, the 
     Commonwealth of Puerto Rico, the Virgin Islands, Guam, and 
     American Samoa.''.
       (2) Definition of court order.--Section 1408(a)(2) of such 
     title is amended by inserting ``or a court order for the 
     payment of child support not included in or accompanied by 
     such a decree or settlement,'' before ``which--''.
       (3) Public payee.--Section 1408(d) of such title is 
     amended--
       (A) in the heading, by inserting ``(or for Benefit of)'' 
     before ``Spouse or''; and
       (B) in paragraph (1), in the 1st sentence, by inserting 
     ``(or for the benefit of such spouse or former spouse to a 
     State disbursement unit established pursuant to section 454B 
     of the Social Security Act or other public payee designated 
     by a State, in accordance with part D of title IV of the 
     Social Security Act, as directed by court order, or as 
     otherwise directed in accordance with such part D)'' before 
     ``in an amount sufficient''.
       (4) Relationship to part d of title iv.--Section 1408 of 
     such title is amended by adding at the end the following new 
     subsection:
       ``(j) Relationship to Other Laws.--In any case involving an 
     order providing for payment of child support (as defined in 
     section 459(i)(2) of the Social Security Act) by a member who 
     has never been married to the other parent of the child, the 
     provisions of this section shall not apply, and the case 
     shall be subject to the provisions of section 459 of such 
     Act.''.
       (d) Effective Date.--The amendments made by this section 
     shall become effective 6 months after the date of the 
     enactment of this Act.

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

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

     SEC. 7364. VOIDING OF FRAUDULENT TRANSFERS.

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

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

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

     SEC. 7366. DEFINITION OF SUPPORT ORDER.

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

     SEC. 7367. REPORTING ARREARAGES TO CREDIT BUREAUS.

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

     SEC. 7368. LIENS.

       Section 466(a)(4) (42 U.S.C. 666(a)(4)) is amended to read 
     as follows:

[[Page S 16284]]

       ``(4) Procedures under which--
       ``(A) liens arise by operation of law against real and 
     personal property for amounts of overdue support owed by an 
     absent parent who resides or owns property in the State; and
       ``(B) the State accords full faith and credit to liens 
     described in subparagraph (A) arising in another State, 
     without registration of the underlying order.''.

     SEC. 7369. STATE LAW AUTHORIZING SUSPENSION OF LICENSES.

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

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

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

     SEC. 7371. INTERNATIONAL CHILD SUPPORT ENFORCEMENT.

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

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

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

     SEC. 7373. CHILD SUPPORT ENFORCEMENT FOR INDIAN TRIBES.

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

     SEC. 7374. FINANCIAL INSTITUTION DATA MATCHES.

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

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

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

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

       It is the sense of the Senate that--
       (a) States should diligently continue their efforts to 
     enforce child support payments by the non-custodial parent to 
     the custodial parent, regardless of the employment status or 
     location of the non-custodial parent; and
       (b) States are encouraged to pursue pilot programs in which 
     the parents of a non-adult, non-custodial parent who refuses 
     to or is unable to pay child support must--
       (1) pay or contribute to the child support owed by the non-
     custodial parent; or
       (2) otherwise fulfill all financial obligations and meet 
     all conditions imposed on the non-custodial parent, such as 
     participation in a work program or other related activity.
     
[[Page S 16285]]


                       CHAPTER 8--MEDICAL SUPPORT

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

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

     A plan shall not be treated as failing to be operated in 
     accordance with the provisions of the plan merely because it 
     operates in accordance with this paragraph.

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

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

CHAPTER 9--ENHANCING RESPONSIBILITY AND OPPORTUNITY FOR NONRESIDENTIAL 
                                PARENTS

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

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

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

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

                    CHAPTER 10--EFFECT OF ENACTMENT

     SEC. 7391. EFFECTIVE DATES.

       (a) In General.--Except as otherwise specifically provided 
     (but subject to subsections (b) and (c))--
       (1) the provisions of this subtitle requiring the enactment 
     or amendment of State laws under section 466 of the Social 
     Security Act, or revision of State plans under section 454 of 
     such Act, shall be effective with respect to periods 
     beginning on and after October 1, 1996; and
       (2) all other provisions of this subtitle shall become 
     effective upon the date of the enactment of this Act.
       (b) Grace Period for State Law Changes.--The provisions of 
     this subtitle shall become effective with respect to a State 
     on the later of--
       (1) the date specified in this subtitle, or
       (2) the effective date of laws enacted by the legislature 
     of such State implementing such provisions,

     but in no event later than the 1st day of the 1st calendar 
     quarter beginning after the close of the 1st regular session 
     of the State legislature that begins after the date of the 
     enactment of this Act. For purposes of the previous sentence, 
     in the case of a State that has a 2-year legislative session, 
     each year of such session shall be deemed to be a separate 
     regular session of the State legislature.
       (c) Grace Period for State Constitutional Amendment.--A 
     State shall not be found out of compliance with any 
     requirement enacted by this subtitle if the State is unable 
     to so comply without amending the State constitution until 
     the earlier of--
       (1) 1 year after the effective date of the necessary State 
     constitutional amendment; or
       (2) 5 years after the date of the enactment of this 
     subtitle.
                        Subtitle F--Noncitizens

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

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

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

       (a) Deeming Requirement for Federal and Federally Funded 
     Programs.--Subject to subsection (d), for purposes of 
     determining the eligibility of an individual (whether a 
     citizen or national of the United States or an alien) for 
     assistance and the amount of assistance, under any Federal 
     program of assistance provided or funded, in whole or in 
     part, by the Federal Government for which eligibility is 
     based on need, the income and resources described in 
     subsection (b) shall, notwithstanding any other provision of 
     law, be deemed to be the income and resources of such 
     individual.
       (b) Deemed Income and Resources.--The income and resources 
     described in this subsection include the following:
       (1) The income and resources of any person who, as a 
     sponsor of such individual's entry into the United States, or 
     in order to enable such individual lawfully to remain in the 
     United States, executed an affidavit of support or similar 
     agreement with respect to such individual.
       (2) The income and resources of the sponsor's spouse.
       (c) Length of Deeming Period.--The requirement of 
     subsection (a) shall apply for the period for which the 
     sponsor has agreed, in such affidavit or agreement, to 
     provide support for such individual, or for a period of 5 
     years beginning on the date such individual was first 
     lawfully in the United States after the execution of such 
     affidavit or agreement, whichever period is longer.
       (d) Limitation on Measurement of Deemed Income and 
     Resources.--
       (1) In general.--If a determination described in paragraph 
     (2) is made, the amount of income and resources of the 
     sponsor or the sponsor's spouse which shall be attributed to 
     the sponsored individual shall not exceed the amount actually 
     provided, for a period beginning on the date of such 
     determination and lasting 12 months or, if the address of the 
     sponsor is unknown to the sponsored individual on the date of 
     such determination, for 12 months after the address becomes 
     known to the sponsored individual or to the agency (which 
     shall inform such individual within 7 days).
       (2) Determination.--The determination described in this 
     paragraph is a determination by an agency that a sponsored 
     individual would, in the absence of the assistance provided 
     by the agency, be unable to obtain food and shelter, taking 
     into account the individual's own income, plus any cash, 
     food, housing, or other assistance provided by other 
     individuals, including the sponsor.
       (e) Deeming Authority to State and Local Agencies.--
       (1) In general.--Notwithstanding any other provision of 
     law, but subject to an exception equivalent to that in 
     subsection (d), the State or local government may, for 
     purposes of determining the eligibility of an individual 
     (whether a citizen or national of the United States or an 
     alien) for assistance, and the amount of assistance, under 
     any State or local program of assistance for which 
     eligibility is based on need, or any need-based program of 
     assistance administered by a State or local government other 
     than a program described in subsection (a), require that the 
     income and resources described in paragraph (2) be deemed to 
     be the income and resources of such individual.
       (2) Deemed income and resources.--The income and resources 
     described in this paragraph include the following:
       (A) The income and resources of any person who, as a 
     sponsor of such individual's entry 

[[Page S 16286]]

     into the United States, or in order to enable such individual 
     lawfully to remain in the United States, executed an 
     affidavit of support or similar agreement with respect to 
     such individual.
       (B) The income and resources of the sponsor's spouse.
       (3) Length of deemed income period.--Subject to an 
     exception equivalent to subsection (d), a State or local 
     government may impose a requirement described in paragraph 
     (1) for the period for which the sponsor has agreed, in such 
     affidavit or agreement, to provide support for such 
     individual, or for a period of 5 years beginning on the date 
     such individual was first lawfully in the United States after 
     the execution of such affidavit or agreement, whichever 
     period is longer.
       (f) Applicability of Section.--
       (1) Individuals.--The provisions of this section shall not 
     apply to the eligibility of any individual who is described 
     in subclause (II), (III), or (IV) of section 1614(a)(1)(B)(i) 
     of the Social Security Act (42 U.S.C. 1382c(a)(1)(B)(i)).
       (2) Programs.--The provisions of this section shall not 
     apply to eligibility for--
       (A) emergency medical services under title XXI of the 
     Social Security Act;
       (B) short-term emergency disaster relief;
       (C) assistance or benefits under the National School Lunch 
     Act;
       (D) assistance or benefits under the Child Nutrition Act of 
     1966;
       (E) public health assistance for immunizations with respect 
     to immunizable diseases and for testing and treatment for 
     communicable diseases if the Secretary of Health and Human 
     Services determines that such testing and treatment is 
     necessary;
       (F) the Head Start program (42 U.S.C. 9801); and
       (G) programs specified by the Attorney General, in the 
     Attorney General's sole and unreviewable discretion after 
     consultation with appropriate Federal agencies and 
     departments, which (i) deliver services at the community 
     level, including through public or private nonprofit 
     agencies; (ii) do not condition the provision of assistance, 
     the amount of assistance provided, or the cost of assistance 
     provided on the individual recipient's income or resources; 
     and (iii) are necessary for the protection of life, safety, 
     or public health.
       (g) Conforming Amendments.--
       (1) Section 1621 (42 U.S.C. 1382j) is repealed.
       (2) Section 1614(f)(3) (42 U.S.C. 1382c(f)(3)) is amended 
     by striking ``section 1621'' and inserting ``section 7402 of 
     the Balanced Budget Reconciliation Act of 1995''.

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

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

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

       (a) In General.--Paragraph (1) of section 1614(a) (42 
     U.S.C. 1382c(a)) is amended--
       (1) in subparagraph (B)(i), by striking ``either'' and all 
     that follows through ``, or'' and inserting ``(I) a citizen; 
     (II) a noncitizen who is granted asylum under section 208 of 
     the Immigration and Nationality Act or whose deportation has 
     been withheld under section 243(h) of such Act for a period 
     of not more than 5 years after the date of arrival into the 
     United States; (III) a noncitizen who is admitted to the 
     United States as a refugee under section 207 of such Act for 
     not more than such 5-year period; (IV) a noncitizen, lawfully 
     present in any State (or any territory or possession of the 
     United States), who is a veteran (as defined in section 101 
     of title 38, United States Code) with a discharge 
     characterized as an honorable discharge and not on account of 
     alienage or who is the spouse or unmarried dependent child of 
     such veteran; or (V) a noncitizen who has worked sufficient 
     calendar quarters of coverage to be a fully insured 
     individual for benefits under title II, or''; and
       (2) by adding at the end the following new flush sentence:

     ``For purposes of subparagraph (B)(i)(IV), the determination 
     of whether a noncitizen is lawfully present in the United 
     States shall be made in accordance with regulations of the 
     Attorney General. A noncitizen shall not be considered to be 
     lawfully present in the United States for purposes of this 
     title merely because the noncitizen may be considered to be 
     permanently residing in the United States under color of law 
     for purposes of any particular program.''.
       (b) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by subsection (a) shall apply to applicants 
     for benefits for months beginning on or after the date of the 
     enactment of this Act, without regard to whether regulations 
     have been issued to implement such amendments.
       (2) Application to current recipients.--
       (A) Application and notice.--Notwithstanding any other 
     provision of law, in the case of an individual who is 
     receiving supplemental security income benefits under title 
     XVI of the Social Security Act as of the date of the 
     enactment of this Act and whose eligibility for such benefits 
     would terminate by reason of the amendments made by 
     subsection (a), such amendments shall apply with respect to 
     the benefits of such individual for months beginning on or 
     after January 1, 1997, and the Commissioner of Social 
     Security shall so notify the individual not later than 90 
     days after the date of the enactment of this Act.

[[Page S 16287]]

       (B) Reapplication.--
       (i) In general.--Not later than 120 days after the date of 
     the enactment of this Act, each individual notified pursuant 
     to subparagraph (A) who desires to reapply for benefits under 
     title XVI of the Social Security Act shall reapply to the 
     Commissioner of Social Security.
       (ii) Determination of eligibility.--Not later than 1 year 
     after the date of the enactment of this Act, the Commissioner 
     of Social Security shall determine the eligibility of each 
     individual who reapplies for benefits under clause (i) 
     pursuant to the procedures of such title XVI.

     SEC. 7405. TREATMENT OF NONCITIZENS.

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

     SEC. 7406. INFORMATION REPORTING.

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

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

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

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

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

         CHAPTER 1--REDUCTIONS IN FEDERAL GOVERNMENT POSITIONS

     SEC. 7411. REDUCTIONS.

       (a) Definitions.--As used in this section:
       (1) Appropriate effective date.--The term ``appropriate 
     effective date'', used with respect to a Department referred 
     to in this section, means the date on which all provisions of 
     subtitle D of title I, this subtitle, or subtitles C, D, E, 
     and F of this title that the Department is required to carry 
     out, and amendments and repeals made by such titles and 
     subtitles to provisions of Federal law that the Department is 
     required to carry out, are effective.
       (2) Covered activity.--The term ``covered activity'', used 
     with respect to a Department referred to in this section, 
     means an activity that the Department is required to carry 
     out under--
       (A) a provision of subtitle D of title I, this subtitle, or 
     subtitle C, D, E, or F of this title; or
       (B) a provision of Federal law that is amended or repealed 
     by any such title or subtitles.
       (b) Reports.--
       (1) Contents.--Not later than December 31, 1995, each 
     Secretary referred to in paragraph (2) shall prepare and 
     submit to the relevant committees described in paragraph (3) 
     a report containing--
       (A) the determinations described in subsection (c);
       (B) appropriate documentation in support of such 
     determinations; and
       (C) a description of the methodology used in making such 
     determinations.
       (2) Secretary.--The Secretaries referred to in this 
     paragraph are--
       (A) the Secretary of Agriculture;
       (B) the Secretary of Education;
       (C) the Secretary of Labor;
       (D) the Secretary of Housing and Urban Development; and
       (E) the Secretary of Health and Human Services.
       (3) Relevant committees.--The relevant Committees described 
     in this paragraph are the following:
       (A) With respect to each Secretary described in paragraph 
     (2), the Committee on Government Reform and Oversight of the 
     House of Representatives and the Committee on Governmental 
     Affairs of the Senate.
       (B) With respect to the Secretary of Agriculture, the 
     Committee on Agriculture and the Committee on Economic and 
     Educational Opportunities of the House of Representatives and 
     the Committee on Agriculture, Nutrition, and Forestry of the 
     Senate.
       (C) With respect to the Secretary of Education, the 
     Committee on Economic and Educational Opportunities of the 
     House of Representatives and the Committee on Labor and Human 
     Resources of the Senate.
       (D) With respect to the Secretary of Labor, the Committee 
     on Economic and Educational Opportunities of the House of 
     Representatives and 

[[Page S 16288]]
     the Committee on Labor and Human Resources of the Senate.
       (E) With respect to the Secretary of Housing and Urban 
     Development, the Committee on Banking and Financial Services 
     of the House of Representatives and the Committee on Banking, 
     Housing, and Urban Affairs of the Senate.
       (F) With respect to the Secretary of Health and Human 
     Services, the Committee on Economic and Educational 
     Opportunities of the House of Representatives, the Committee 
     on Labor and Human Resources of the Senate, the Committee on 
     Ways and Means of the House of Representatives, and the 
     Committee on Finance of the Senate.
       (4) Report on changes.--Not later than December 31, 1996, 
     and each December 31 thereafter, each Secretary referred to 
     in paragraph (2) shall prepare and submit to the relevant 
     Committees described in paragraph (3), a report concerning 
     any changes with respect to the determinations made under 
     subsection (c) for the year in which the report is being 
     submitted.
       (c) Determinations.--Not later than December 31, 1995, each 
     Secretary referred to in subsection (b)(2) shall determine--
       (1) the number of full-time equivalent positions required 
     by the Department headed by such Secretary to carry out the 
     covered activities of the Department, as of the day before 
     the date of enactment of this Act;
       (2) the number of such positions required by the Department 
     to carry out the activities, as of the appropriate effective 
     date for the Department; and
       (3) the difference obtained by subtracting the number 
     referred to in paragraph (2) from the number referred to in 
     paragraph (1).
       (d) Actions.--Not later than 30 days after the appropriate 
     effective date for the Department involved, each Secretary 
     referred to in subsection (b)(2) shall take such actions as 
     may be necessary, including reduction in force actions, 
     consistent with sections 3502 and 3595 of title 5, United 
     States Code, to reduce the number of positions of personnel 
     of the Department by at least the difference referred to in 
     subsection (c)(3).
       (e) Consistency.--
       (1) Education.--The Secretary of Education shall carry out 
     this section in a manner that enables the Secretary to meet 
     the requirements of this section.
       (2) Labor.--The Secretary of Labor shall carry out this 
     section in a manner that enables the Secretary to meet the 
     requirements of this section.
       (3) Health and human services.--The Secretary of Health and 
     Human Services shall carry out this section in a manner that 
     enables the Secretary to meet the requirements of this 
     section and section 7412.
       (f) Calculation.--In determining, under subsection (c), the 
     number of full-time equivalent positions required by a 
     Department to carry out a covered activity, a Secretary 
     referred to in subsection (b)(2), shall include the number of 
     such positions occupied by personnel carrying out program 
     functions or other functions (including budgetary, 
     legislative, administrative, planning, evaluation, and legal 
     functions) related to the activity.
       (g) General Accounting Office Report.--Not later than July 
     1, 1996, the Comptroller General of the United States shall 
     prepare and submit to the committees described in subsection 
     (b)(3), a report concerning the determinations made by each 
     Secretary under subsection (c). Such report shall contain an 
     analysis of the determinations made by each Secretary under 
     subsection (c) and a determination as to whether further 
     reductions in full-time equivalent positions are appropriate.

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

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

              CHAPTER 2--BLOCK GRANTS FOR SOCIAL SERVICES

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

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

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

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

          CHAPTER 3--FOSTER CARE MAINTENANCE PAYMENTS PROGRAM

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

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

                  CHAPTER 4--MISCELLANEOUS PROVISIONS

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

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

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

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

[[Page S 16289]]

       (C) the amount of any additional revenue needed by the 
     States to meet the work requirements in the conference 
     report, beyond resources available as defined under 
     subparagraph (B);
       (2) an estimate, based on the analysis in paragraph (1), of 
     how many States would opt to pay any penalty provided for by 
     the conference report rather than raise the additional 
     revenue needed to meet the work requirements in the 
     conference report; and
       (3) estimates, over each of the next 7 fiscal years, of the 
     costs to States of any other requirements imposed on them by 
     such legislation.

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

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

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

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

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

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

     SEC. 7460. AMENDMENT OF 1986 CODE.

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

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

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

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

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

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

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

``In the case of an                                                    
  eligible individual                                        The credit
  with:                                                  percentage is:

  1 qualifying child............................................34 ....

  2 or more qualifying children.................................36 ....

       ``(2) Amounts.--The earned income amount and the phaseout 
     amount shall be determined as follows:


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

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

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

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

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

       (a) In General.--Subsections (a)(2), (c)(1)(C), and 
     (f)(2)(B) of section 32 are each amended by striking 
     ``adjusted gross income'' and inserting ``modified adjusted 
     gross income''.
       (b) Modified Adjusted Gross Income Defined.--Section 32(c) 
     (relating to definitions and special rules) is amended by 
     adding at the end the following new paragraph:
       ``(5) Modified adjusted gross income.--
       ``(A) In general.--The term `modified adjusted gross 
     income' means adjusted gross income--
       ``(i) increased by the sum of the amounts described in 
     subparagraph (B), and
       ``(ii) determined without regard to--

       ``(I) the amounts described in subparagraph (C), or
       ``(II) the deduction allowed under section 172.

       ``(B) Nontaxable income taken into account.--Amounts 
     described in this subparagraph are--
       ``(i) social security benefits (as defined in section 
     86(d)) received by the taxpayer during the taxable year to 
     the extent not included in gross income,
       ``(ii) amounts which--

       ``(I) are received during the taxable year by (or on behalf 
     of) a spouse pursuant to a divorce or separation instrument 
     (as defined in section 71(b)(2)), and
       ``(II) under the terms of the instrument are fixed as 
     payable for the support of the children of the payor spouse 
     (as determined under section 71(c)),

     but only to the extent such amounts exceed $6,000,
       ``(iii) interest received or accrued during the taxable 
     year which is exempt from tax imposed by this chapter, and
       ``(iv) amounts received as a pension or annuity, and any 
     distributions or payments received from an individual 
     retirement plan, by the taxpayer during the taxable year to 
     the extent not included in gross income.

     Clause (iv) shall not include any amount which is not 
     includible in gross income by reason of 

[[Page S 16290]]

     section 402(c), 403(a)(4), 403(b)(8), 408(d) (3), (4), or 
     (5), or 457(e)(10).
       ``(C) Certain amounts disregarded.--An amount is described 
     in this subparagraph if it is--
       ``(i) the amount of losses from sales or exchanges of 
     capital assets in excess of gains from such sales or 
     exchanges to the extent such amount does not exceed the 
     amount under section 1211(b)(1),
       ``(ii) the net loss from the carrying on of trades or 
     businesses, computed separately with respect to--

       ``(I) trades or businesses (other than farming) conducted 
     as sole proprietorships,
       ``(II) trades or businesses of farming conducted as sole 
     proprietorships, and
       ``(III) other trades or business,

       ``(iii) the net loss from estates and trusts, and
       ``(iv) the excess (if any) of amounts described in 
     subsection (i)(2)(C)(ii) over the amounts described in 
     subsection (i)(2)(C)(i) (relating to nonbusiness rents and 
     royalties).

     For purposes of clause (ii), there shall not be taken into 
     account items which are attributable to a trade or business 
     which consists of the performance of services by the taxpayer 
     as an employee.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 7466. PROVISIONS TO IMPROVE TAX COMPLIANCE.

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

     SEC. 7471. INCREASE IN PUBLIC DEBT.

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

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

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

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

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


                    ``7             After December 31, 1969.''          
                                                                        

     and inserting in lieu thereof the following:


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

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


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

     and inserting in lieu thereof the following:


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

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


                    ``8             After December 31, 1969.''          
                                                                        

     and inserting in lieu thereof the following:


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

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


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

     and inserting in lieu thereof the following:


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

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


                    ``8             After December 31, 1983.''          
                                                                        

     and inserting in lieu thereof the following:


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

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


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

     and inserting in lieu thereof the following:


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

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


                    ``8             After September 30, 1987.''         
                                                                        

     and inserting in lieu thereof the following:


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

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


                                                                        

[[Page S 16291]]
                    ``8             After September 30, 1988.''         
                                                                        



     and inserting in lieu thereof the following:


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

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

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     7.5 Before January 1, 1996.         
                   employee                                             
                    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   7.5 Before January 1, 1996.         
                   officer,                                             
                   firefighter, or                                      
                   air traffic                                          
                   controller                                           
                    7.75            January 1, 1996, to December 31,    
                                     1996.                              
                    7.9             January 1, 1997, to December 31,    
                                     1997.                              
                    8               January 1, 1998, to December 31,    
                                     2002.                              
                    7.5             After December 31, 2002.            
                                                                        

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

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

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

     SEC. 9001. PATENT AND TRADEMARK FEES.

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

     SECTION 10001. REFERENCES; GENERAL EFFECTIVE DATE.

       (a) References.--Except as otherwise expressly provided, 
     whenever in this title an amendment or repeal is expressed in 
     terms of an amendment to, or repeal of, a section or other 
     provision, the reference shall be considered to be made to a 
     section or other provision of the Higher Education Act of 
     1965 (20 U.S.C. 1001 et seq.).
       (b) General Effective Date.--Unless otherwise specified in 
     this title, the amendments made by this title shall take 
     effect on January 1, 1996.

[[Page S 16292]]


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

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

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       (11) in paragraph (1) of section 422(g)--
       (A) in the first sentence, by striking ``or the program 
     authorized by part D of this title''; and
       (B) in the second sentence, by striking ``or the program 
     authorized by part D of this title''.
       (f) Fees for Origination Services.--Subsection (b) of 
     section 452 (20 U.S.C. 1087b) is repealed.
       (g) Risk Sharing.--Section 428(n) (20 U.S.C. 1078(n)) is 
     amended by adding at the end the following new paragraph:
       ``(5) Applicability to part d loans.--The provisions of 
     this subsection shall apply to institutions of higher 
     education participating in direct lending under part D with 
     respect to loans made under such part, and for the purposes 
     of this paragraph, paragraph (4) shall be applied by 
     inserting `or part D' after `this part'.''.

     SEC. 10003. LOAN TERMS AND CONDITIONS.

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

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

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

     SEC. 10005. AMENDMENTS AFFECTING GUARANTY AGENCIES.

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

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

       ``(a) Loans Subject to Extended Holding Period.--Except as 
     provided in subsection (b), a guaranty agency shall file a 
     claim for reimbursement with respect to losses (resulting 
     from the default of a borrower) subject to reimbursement by 
     the Secretary pursuant to section 428(c)(1) not less than 180 
     days nor more than 225 days after the guaranty agency 
     discharges such agency's insurance obligation on a loan 
     insured under this part. Such claim shall include losses on 
     the unpaid principal and accrued interest of any such loan, 
     including interest accrued from the date of such discharge to 
     the date such agency files the claim for reimbursement from 
     the Secretary.
       ``(b) Loans Excluded From Extended Holding.--A guaranty 
     agency may file a claim with respect to losses subject to 
     reimbursement by the Secretary pursuant to section 428(c)(1) 
     prior to 180 days after the date the guaranty agency 
     discharges such agency's insurance obligation on a loan 
     insured under this part, if--
       ``(1) such agency used 50 percent or more of such agency's 
     reserve funds to purchase or hold loans in accordance with 
     section 422(h);
       ``(2) such claim is based on an inability to locate the 
     borrower and the guaranty agency certifies to the Secretary 
     that--
       ``(A) diligent attempts were made to locate the borrower 
     through the use of reasonable skip-tracing techniques in 
     accordance with section 428(c)(2)(G); and
       ``(B) such skip-tracing attempts to locate the borrower 
     were unsuccessful; or
       ``(3) the guaranty agency determines that the borrower is 
     unlikely to possess the financial resources to begin repaying 
     the loan prior to 180 days after default by the borrower.
       ``(c) Guaranty Agency Efforts During Extended Holding 
     Period.--A guaranty agency shall attempt to bring a loan 
     described in subsection (a) into repayment status during the 
     period prior to 180 days after the date the guaranty agency 
     discharges its insurance obligation on such loan, so that no 
     claim for reimbursement by the Secretary is necessary. Upon 
     securing payments satisfactory to the guaranty agency during 
     such period, such agency shall, if practicable, sell such 
     loan to an eligible lender. Such loan shall not be sold to an 
     eligible lender 

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     that the guaranty agency determines has substantially failed to 
     exercise the due diligence required of lenders under this 
     part.
       ``(d) Regulation Prohibited.--The Secretary shall not 
     promulgate regulations regarding the collection activity of a 
     guaranty agency with respect to a loan described in 
     subsection (a) for which reinsurance has not been paid under 
     section 428(c)(1).''.
       (B) Effective date.--The amendment made by this paragraph 
     shall apply with respect to loans for which claims for 
     insurance are filed by eligible lenders on or after January 
     1, 1996.
       (c) Administrative Cost Allowance.--Section 428(f)(1) (20 
     U.S.C. 1078(f)(1)) is amended--
       (1) in the matter preceding clause (i) of subparagraph (A), 
     by striking ``For a fiscal year prior to fiscal year 1994, 
     the'' and inserting ``The''; and
       (2) by amending subparagraph (B) to read as follows:
       ``(B)(i) The total amount of payments for any fiscal year 
     prior to fiscal year 1994 made under this paragraph shall be 
     equal to 1 percent of the total principal amount of the loans 
     upon which insurance was issued under this part during such 
     fiscal year by such guaranty agency.
       ``(ii) For fiscal year 1996 and each succeeding fiscal 
     year, each guaranty agency shall elect to receive an 
     administrative cost allowance, payable quarterly, for such 
     fiscal year calculated on the basis of either of the 
     following:
       ``(I) 0.85 percent of the total principal amount of the 
     loans upon which insurance was issued under this part during 
     such fiscal year by such guaranty agency; or
       ``(II) 0.08 percent of the original principal amount of 
     loans under this part guaranteed by the guaranty agency that 
     was outstanding at the end of the previous fiscal year.
       ``(iii) The guaranty agency shall be deemed to have a 
     contractual right against the United States to receive 
     payments according to the provisions of this subparagraph. 
     Payments shall be made promptly and without administrative 
     delay to any guaranty agency submitting an accurate and 
     complete application therefor under this subparagraph.
       ``(iv) Notwithstanding clauses (ii) and (iii), for each of 
     the fiscal years 1996 through 2002, the Secretary shall pay 
     an aggregate amount for such year of not more than 
     $180,000,000 to all guaranty agencies receiving 
     administrative cost allowances under this subparagraph.
       (d) Secretary's Equitable Share of Collections on 
     Consolidated Defaulted Loans.--Section 428(c)(6)(A) (20 
     U.S.C. 1078(C)(6)(A) is amended--
       (1) in the matter preceding clause (i)--
       (A) by inserting ``or on behalf of'' after ``made by''; and
       (B) by inserting ``, including payments made to discharge 
     loans made under this title to obtain a consolidation loan 
     pursuant to this part or part D,'' after ``borrower''; and
       (2) in clause (ii), by inserting after ``an amount equal 
     to'' the following: ``--

       ``(I) for defaulted loans consolidated pursuant to this 
     part or part D on or after January 1, 1996, 25 percent of the 
     amount of the balance of the principal and accrued interest 
     outstanding at the time of such consolidation; or
       ``(II) for all other loans,''.

       (e) Reserve Fund Reforms.--
       (1) Strengthening and stabilizing guaranty agencies.--
     Section 428(c) (20 U.S.C. 1078(c)) is amended--
       (A) in paragraph (8) (as amended by section 10002(e)(2)), 
     by adding at the end the following new sentences: ``Prior to 
     making such determination for guaranty agencies, the 
     Secretary shall, in consultation with guaranty agencies, 
     develop criteria to determine whether such agencies have made 
     adequate collection efforts. Such criteria shall be 
     prescribed by regulations that are developed through 
     negotiated rulemaking and that include procedures for 
     administrative due process. In determining whether a guaranty 
     agency's collection efforts have met such criteria, the 
     Secretary shall consider such agency's record of success in 
     collecting on defaulted loans, the age of the loans, and the 
     amount of recent payments received on the loans.'';
       (B) in subparagraph (9)(C), by striking ``80 percent'' and 
     inserting ``78 percent'';
       (C) by amending subparagraph (9)(E) to read as follows:
       ``(E) After providing a guaranty agency notice and 
     opportunity for a hearing on the record, the Secretary may 
     terminate a guaranty agency's agreement in accordance with 
     subparagraph (F) if--
       ``(i) such guaranty agency is required to submit a 
     management plan under this paragraph and fails to submit a 
     plan that is acceptable to the Secretary;
       ``(ii) the Secretary determines that such guaranty agency 
     has failed to improve substantially its administrative and 
     financial condition and that such guaranty agency is in 
     danger of financial collapse; or
       ``(iii) the Secretary determines that such action is 
     necessary to ensure the continued availability of loans to 
     student or parent borrowers.''; and
       (D) in paragraph (9)(F)--
       (i) in clause (i), by inserting ``in accordance with any 
     recommendation, submitted by a State, for a successor agency 
     if such successor agency is not subject to an outstanding 
     limitation, suspension, or termination action'' before the 
     semicolon;
       (ii) in clause (ii), by inserting ``in accordance with any 
     recommendation, submitted by a State, for a successor agency 
     if such successor agency is not subject to an outstanding 
     limitation, suspension, or termination action'' before the 
     semicolon;
       (iii) in clause (iii), by inserting ``and if no guaranty 
     agency is willing to act as a successor guaranty agency under 
     clause (i) or (ii)'' before the semicolon; and
       (iv) in clause (vi), by inserting ``dedicated to the 
     functions of the guaranty agency under the loan insurance 
     program under this part'' after ``assets of the guaranty 
     agency''.
       (2) Strengthening guaranty agency reserves.--Section 422(g) 
     (20 U.S.C. 1072(g)) is amended--
       (A) in paragraph (1)--
       (i) in the sentence preceding subparagraph (A), by 
     inserting ``current and future'' before ``program expenses''; 
     and
       (ii) in subparagraph (D)--

       (I) by striking ``(A) or'' and inserting ``(A),''; and
       (II) by inserting ``or (C)'' before ``shall be based''; and

       (B) in paragraph (2)--
       (i) in subparagraph (A), by inserting ``, after notice and 
     an opportunity for a hearing,'' after ``Secretary 
     determines''; and
       (ii) in subparagraph (B), by inserting ``, after notice and 
     an opportunity for a hearing,'' after ``direct a guaranty 
     agency''.
       (3) Additional amendments.--Section 422 (20 U.S.C. 1072) is 
     further amended--
       (A) in the last sentence of subsection (a)(2), by striking 
     ``Except as provided in section 428(c)(10) (E) or (F), such'' 
     and inserting ``Except as provided in subparagraph (E) or (F) 
     of section 428(c)(9), such''; and
       (B) in subsection (g), by amending paragraph (4) to read as 
     follows:
       ``(4) Disposition of funds returned to or recovered by the 
     secretary.--Any funds that are returned to or otherwise 
     recovered by the Secretary pursuant to this subsection shall 
     be returned to the Treasury of the United States for purposes 
     of reducing the Federal debt and shall be deposited into the 
     special account under section 3113(d) of title 31, United 
     States Code.''.
       (f) Elimination of Supplemental Preclaims Assistance.--
       (1) Amendment.--Section 428(l) (20 U.S.C. 1078(l)) is 
     amended--
       (A) by striking paragraph (2); and
       (B) by striking ``(l) Preclaims'' and all that follows 
     through ``Upon receipt'' and inserting ``(l) Preclaims 
     Assistance and Supplemental Preclaims Assistance.--Upon 
     receipt''.
       (2) Effective date.--The amendment made by this subsection 
     shall apply to loans for which the first delinquency occurs 
     on or after January 1, 1996.

     SEC. 10006. REAUTHORIZATION.

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

     SEC. 10007. CONNIE LEE PRIVATIZATION.

       (a) Status of the Corporation and Corporate Powers; 
     Obligations Not Federally Guaranteed.--
       (1) Status of the corporation.--The College Construction 
     Loan Insurance Association (hereafter in this section 
     referred to as the ``Corporation'') shall not be an agency, 
     instrumentality, or establishment of the United States 
     Government, nor a Government corporation nor a Government 
     controlled corporation as such terms are defined in section 
     103 of title 5, United States Code. No action under section 
     1491 of title 28, United States Code (commonly known as the 
     Tucker Act) shall be allowable against the United States 
     based on the actions of the Corporation.
       (2) Corporate powers.--The Corporation shall be subject to 
     the provisions of this section, and, to the extent not 
     inconsistent with this section, to the District of Columbia 
     Business Corporation Act (or the comparable law of another 
     State, if applicable). The Corporation shall have the powers 
     conferred upon a corporation by the District of Columbia 
     Business Corporation Act (or such other applicable State law) 
     as from time to time in effect in order to conduct its 
     affairs as a private, for-profit corporation and to carry out 
     its purposes and activities incidental thereto. The 
     Corporation shall have the power to enter into contracts, to 
     execute instruments, to incur liabilities, to provide 
     products and services, and to do all things as are necessary 
     or incidental to the proper management of its affairs and the 
     efficient operation of a private, for-profit business.
       (3) Limitation on ownership of stock.--
       (A) Secretary of the treasury.--The Secretary of the 
     Treasury, in completing the sale of stock pursuant to 
     subsection (c), may not sell or issue the stock held by the 
     Secretary of Education to an agency, instrumentality, or 
     establishment of the United States Government, or to a 
     Government corporation or a Government controlled corporation 
     as such terms are defined in section 103 of title 5, United 
     States Code, or to a government-sponsored enterprise as such 
     term is defined in section 622 of title 2, United States 
     Code.
       (B) Student loan marketing association.--The Student Loan 
     Marketing Association shall not increase its share of the 
     ownership of the Corporation in excess of 42 percent of the 
     shares of stock of the Corporation outstanding on the date of 
     enactment of this Act. The Student Loan Marketing Association 
     shall not control the operation of the Corporation, except 
     that the Student Loan Marketing Association may participate 
     in the election of directors as a shareholder, and may 
     continue to exercise its right to appoint directors under 
     section 754 of the Higher Education Act of 1965 (20 U.S.C. 
     1132f-3) as long as that section is in effect.
       (4) No federal guarantee.--
       (A) Obligations insured by the corporation.--
       (i) Full faith and credit of the united states.--No 
     obligation that is insured, guaranteed, or otherwise backed 
     by the Corporation shall be deemed to be an obligation that 
     is guaranteed by the full faith and credit of the United 
     States.

[[Page S 16295]]

       (ii) Student loan marketing association.--No obligation 
     that is insured, guaranteed, or otherwise backed by the 
     Corporation shall be deemed to be an obligation that is 
     guaranteed by the Student Loan Marketing Association.
       (iii) Special rule.--This paragraph shall not affect the 
     determination of whether such obligation is guaranteed for 
     purposes of Federal income taxes.
       (B) Securities offered by the corporation.--No debt or 
     equity securities of the Corporation shall be deemed to be 
     guaranteed by the full faith and credit of the United States.
       (5) Definition.--The term ``Corporation'' as used in this 
     section shall refer to the College Construction Loan 
     Insurance Association as in existence as of the day before 
     the date of enactment of this Act, and to any successor 
     corporation.
       (b) Related Privatization Requirements.--
       (1) Notice requirements.--
       (A) In general.--During the six-year period following the 
     date of enactment of this Act, the Corporation shall include, 
     in each of the Corporation's contracts for the insurance, 
     guarantee, or reinsurance of obligations, and in each 
     document offering debt or equity securities of the 
     Corporation a prominent statement providing notice that--
       (i) such obligations or such securities, as the case may 
     be, are not obligations of the United States, nor are such 
     obligations guaranteed in any way by the full faith and 
     credit of the United States; and
       (ii) the Corporation is not an instrumentality of the 
     United States.
       (B) Additional notice.--During the five-year period 
     following the sale of stock pursuant to subsection (c)(1), in 
     addition to the notice requirements in subparagraph (A), the 
     Corporation shall include, in each of the contracts and 
     documents referred to in such subparagraph, a prominent 
     statement providing notice that the United States is not an 
     investor in the Corporation.
       (2) Corporate charter.--The Corporation's charter shall be 
     amended as necessary and without delay to conform to the 
     requirements of this section.
       (3) Corporate name.--The name of the Corporation, or of any 
     direct or indirect subsidiary thereof, may not contain the 
     term ``College Construction Loan Insurance Association'', or 
     any substantially similar variation thereof.
       (4) Transitional requirements.--
       (A) Requirements until stock sale.--Notwithstanding 
     subsection (d), the requirements of sections 754 and 760 of 
     the Higher Education Act of 1965 (20 U.S.C. 1001 et seq.), as 
     such Act was in existence on the day before the date of 
     enactment of this Act, shall continue to be effective until 
     the day immediately following the date of closing of the 
     purchase of the Secretary of Education's stock (or the date 
     of closing of the final purchase, in the case of multiple 
     transactions) pursuant to subsection (c)(1) of this Act.
       (B) Reports after stock sale.--The Corporation shall, not 
     later than March 30 of the first full calendar year 
     immediately following the sale pursuant to subsection (c)(1), 
     and each of the two succeeding years, submit to the Secretary 
     of Education a report describing the Corporation's efforts to 
     assist in the financing of education facilities projects, 
     including projects for elementary, secondary, and 
     postsecondary educational institution infrastructure, and 
     detailing, on a project-by-project basis, the Corporation's 
     business dealings with educational institutions that are 
     rated by a nationally recognized statistical rating 
     organization at or below the organization's third highest 
     rating.
       (c) Sale of Federally Owned Stock.--
       (1) Sale of stock required.--The Secretary of the Treasury 
     shall sell, pursuant to section 324 of title 31, United 
     States Code, the stock of the Corporation owned by the 
     Secretary of Education as soon as possible after the date of 
     enactment of this Act, but not later than six months after 
     such date.
       (2) Purchase by the corporation.--In the event that the 
     Secretary of the Treasury is unable to sell the stock, or any 
     portion thereof, at a price acceptable to the Secretary of 
     Education and the Secretary of the Treasury, the Corporation 
     shall purchase, within 9 months after the date of enactment 
     of this Act, such stock at a price determined by the 
     Secretary of the Treasury and acceptable to the Corporation 
     based on the independent appraisal of one or more nationally 
     recognized financial firms, except that such price shall not 
     exceed the value of the Secretary of Education's stock as 
     determined by the Congressional Budget Office in House Report 
     104-153, dated June 22, 1995.
       (3) Reimbursement of costs of sale.--The Secretary of the 
     Treasury shall be reimbursed from the proceeds of the sale of 
     the stock under this subsection for all reasonable costs 
     related to such sale, including all reasonable expenses 
     relating to one or more independent appraisals under this 
     subsection.
       (4) Assistance by the corporation.--The Corporation shall 
     provide such assistance as the Secretary of the Treasury and 
     the Secretary of Education may require to facilitate the sale 
     of the stock under this subsection.
       (e) Repeal of Statutory Restrictions and Related 
     Provisions.--Part D of title VII of the Higher Education Act 
     of 1965 (20 U.S.C. 1001 et seq.) is repealed.
                TITLE XI--COMMITTEE ON VETERANS' AFFAIRS

     SEC. 11001. SHORT TITLE.

       This title may be cited as the ``Veterans Reconciliation 
     Act of 1995''.
              Subtitle A--Extension of Certain Authorities

     SEC. 11011. EXTENSION OF AUTHORITY TO REQUIRE THAT CERTAIN 
                   VETERANS MAKE COPAYMENTS IN EXCHANGE FOR 
                   RECEIVING OUTPATIENT MEDICATIONS.

       Section 1722A(c) of title 38, United States Code, is 
     amended by striking out ``September 30, 1998'' and inserting 
     in lieu thereof ``September 30, 2002''.

     SEC. 11012. EXTENSION OF AUTHORITY FOR MEDICAL CARE COST 
                   RECOVERY.

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

     SEC. 11013. LOAN FEES.

       (a) Increase in Home Loan Fees.--Paragraph (4) of section 
     3729(a) of title 38, United States Code, is amended by 
     striking out ``before October 1, 1998,'' and inserting in 
     lieu thereof ``before October 1, 2002,''
       (b) Fee for Multiple Use of Housing Assistance.--Paragraph 
     (5)(C) of such section is amended by striking out ``before 
     October 1, 1998'' and inserting in lieu thereof ``before 
     October 1, 2002''.

     SEC. 11014. EXTENSION OF CERTAIN INCOME VERIFICATION 
                   AUTHORITY.

       (a) Extension.--Section 5317(g) of title 38, United States 
     Code, is amended by striking out ``September 30, 1998'' and 
     inserting in lieu thereof ``September 30, 2002''.
       (b) Conforming Amendment.--Section 6103(l)(7)(D) of the 
     Internal Revenue Code of 1986 (26 U.S.C. 6103(l)(7)(D)) is 
     amended in the second sentence of the flush matter after 
     clause (ix) by striking out ``September 30, 1998'' and 
     inserting in lieu thereof ``September 30, 2002''.

     SEC. 11015. EXTENSION OF LIMITATION ON PENSION FOR CERTAIN 
                   RECIPIENTS OF MEDICAID-COVERED NURSING HOME 
                   CARE.

       Section 5503(f)(7) of title 38, United States Code, is 
     amended by striking out ``September 30, 1998'' and inserting 
     in lieu thereof ``September 30, 2002''.
      Subtitle B--Cost-of-Living Adjustments in Compensation Rates

     SEC. 11021. POLICY REGARDING COST-OF-LIVING ADJUSTMENT IN 
                   COMPENSATION RATES.

       In each of fiscal years 1996 through 2002, the cost-of-
     living adjustments in the rates and limitations for 
     compensation payable under chapter 11 of title 38, United 
     States Code, and of dependency and indemnity compensation 
     payable under chapter 13 of such title will be no more than a 
     percentage equal to the percentage by which benefit amounts 
     payable under title II of the Social Security Act (42 U.S.C. 
     401 et seq.) are increased as of December 1 of the fiscal 
     year concerned as a result of a determination under section 
     215(i) of such Act (42 U.S.C. 415(i)), with all increased 
     monthly rates and limitations (other than increased rates or 
     limitations equal to a whole dollar amount) rounded down to 
     the next lower dollar.
                    Subtitle C--Educational Benefits

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

       With respect to each of fiscal years 1996 through 2002, the 
     cost-of-living adjustments in the rates of educational 
     assistance payable under chapter 30 of title 38, United 
     States Code, shall be the percentage equal to 50 percent of 
     the percentage by which such assistance would be increased 
     under section 3015(g) of such title with respect to such 
     fiscal year but for this section.

     SEC. 11032. INCREASE IN AMOUNT OF CONTRIBUTION FOR 
                   PARTICIPATION IN MONTGOMERY GI BILL PROGRAM.

       (a) Active Duty Service.--Section 3011(b) of title 38, 
     United States Code, is amended to read as follows:
       ``(b)(1) The basic pay of any individual described in 
     subsection (a)(1)(A) of this section who first becomes a 
     member of the Armed Forces or enters on active duty during 
     the period beginning on October 1, 1995, and ending on 
     September 30, 1996, and who does not make an election under 
     subsection (c)(1) of this section shall be reduced by $134.96 
     for each of the first 12 months that such individual is 
     entitled to such pay.
       ``(2) The basic pay of any individual described in 
     subsection (a)(1)(A) of this section who first becomes a 
     member of the Armed Forces or enters on active duty during 
     any fiscal year beginning on or after October 1, 1996, and 
     before September 30, 2002, and who does not make an election 
     under subsection (c)(1) of this section, shall be reduced, 
     for each of the first 12 months that such individual is 
     entitled to such pay, by an amount equal to the amount of the 
     reduction required under this subsection during the preceding 
     fiscal year increased by the percentage, if any, by which 
     rates payable for educational assistance are increased under 
     section 3015(g) of this title with respect to the fiscal year 
     during which the individual first becomes a member of the 
     Armed Forces or enters on active duty.
       ``(3) Any amount by which the basic pay of an individual is 
     reduced under this chapter shall revert to the Treasury and 
     shall not, for purposes of any Federal law, be considered to 
     have been received by or to be within the control of such 
     individual.''.
       (b) Service in the Selected Reserve.--Section 3012(c) of 
     such title is amended to read as follows:
       ``(c)(1) The basic pay of any individual described in 
     subsection (a)(1)(A) of this section who first becomes a 
     member of the Armed Forces or enters on active duty during 
     the period beginning on October 1, 1995, and ending on 
     September 30, 1996, and who does not make an election under 
     subsection (d)(1) of this section shall be reduced by $134.96 
     for each of the first 12 months that such individual is 
     entitled to such pay.
       ``(2) The basic pay of any individual described in 
     subsection (a)(1)(A) of this section who first 

[[Page S 16296]]
     becomes a member of the Armed Forces or enters on active duty during 
     any fiscal year beginning on or after October 1, 1996, and 
     before September 30, 2002, and who does not make an election 
     under subsection (d)(1) of this section, shall be reduced, 
     for each of the first 12 months that such individual is 
     entitled to such pay, by an amount equal to the amount of the 
     reduction required under this subsection during the preceding 
     fiscal year increased by the percentage, if any, by which 
     rates payable for educational assistance are increased under 
     section 3015(g) of this title with respect to the fiscal year 
     during which the individual first becomes a member of the 
     Armed Forces or enters on active duty.
       ``(3) Any amount by which the basic pay of an individual is 
     reduced under this chapter shall revert to the Treasury and 
     shall not, for purposes of any Federal law, be considered to 
     have been received by or to be within the control of such 
     individual.''.
                       Subtitle D--Miscellaneous

     SEC. 11041. CLARIFICATION OF ENTITLEMENT FOR BENEFITS FOR 
                   DISABILITY RESULTING FROM TREATMENT OR 
                   VOCATIONAL SERVICES PROVIDED BY DEPARTMENT OF 
                   VETERANS AFFAIRS.

       (a) Clarification.--The text of section 1151 of title 38, 
     United States Code, is amended to read as follows:
       ``(a)(1) Disability or death compensation shall be awarded 
     under this chapter, and dependency and indemnity compensation 
     shall be awarded under chapter 13 of this title, for 
     additional disability or death of a veteran in the same 
     manner as if such additional disability or death, as the case 
     may be, were service-connected if such additional disability 
     or death--
       ``(A) is not the result of the veteran's willful 
     misconduct; and
       ``(B) results from--
       ``(i) carelessness, negligence, lack of proper skill, error 
     in judgment, or similar instance of fault in any hospital 
     care, medical or surgical treatment, or examination furnished 
     either by a Department employee or in a Department facility 
     under any of the laws administered by the Secretary;
       ``(ii) an event in such hospital care, medical or surgical 
     treatment, or examination that is not reasonably foreseeable; 
     or
       ``(iii) the provision of training and rehabilitative 
     services by the Secretary (or by a service-provider used by 
     the Secretary for such provision under section 3115 of this 
     title) as part of an approved rehabilitation program under 
     chapter 31 of this title.
       ``(2) For purposes of paragraph (1), the term `Department 
     facility' means a facility over which the Secretary has 
     direct jurisdiction.
       ``(b) Where an individual is, on or after December 1, 1962, 
     awarded a judgment against the United States in a civil 
     action brought pursuant to section 1346(b) of title 28 or, on 
     or after December 1, 1962, enters into a settlement or 
     compromise under section 2672 or 2677 of title 28 by reason 
     of a disability or death treated pursuant to this section as 
     if it were service-connected, then no benefits shall be paid 
     to such individual for any month beginning after the date 
     such judgment, settlement, or compromise on account of such 
     disability or death becomes final until the aggregate amount 
     of benefits which would be paid but for this subsection 
     equals the total amount included in such judgment, 
     settlement, or compromise.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the date of the enactment of this Act 
     and apply to claims filed (including original claims and 
     applications to reopen, revise, reconsider, or otherwise 
     readjudicate claims previously filed) for disability or death 
     compensation, or dependency and indemnity compensation, on or 
     after that date, regardless of the date of the occurrence of 
     the additional disability or death upon which the claims are 
     based.

     SEC. 11042. AUTHORITY TO PAY PLOT OR INTERMENT ALLOWANCE FOR 
                   VETERANS BURIED IN STATE CEMETERIES.

       Section 2303 of title 38, United States Code, is amended by 
     adding at the end the following:
       ``(c) Subject to the availability of funds appropriated, in 
     addition to the benefits provided for under section 2302 of 
     this title, section 2307 of this title, and subsection (a) of 
     this section, in the case of a veteran who--
       ``(1) is eligible for burial in a national cemetery under 
     section 2402 of this title, and
       ``(2) is buried (without charge for the cost of a plot or 
     interment) in a cemetery, or a section of a cemetery, that 
     (A) is used solely for the interment of persons eligible for 
     burial in a national cemetery, and (B) is owned by a State or 
     by an agency or political subdivision of a State,

     the Secretary may pay to such State, agency, or political 
     subdivision the sum of $150 as a plot or interment allowance 
     for such veteran, provided that payment was not made under 
     clause (1) of subsection (b) of this section.''.
          TITLE XII--COMMITTEE ON FINANCE--REVENUE PROVISIONS

     SEC. 12000. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.

       (a) Short Title.--This title may be cited as the ``Revenue 
     Reconciliation Act of 1995''.
       (b) Amendments to Internal Revenue Code of 1986.--Except as 
     otherwise specifically provided, wherever in this title an 
     amendment is expressed in terms of an amendment to or repeal 
     of a section or other provision, the reference shall be 
     considered to be made to that section or other provision of 
     the Internal Revenue Code of 1986.
       (c) Table of Contents.--The table of contents of this title 
     is as follows:

          TITLE XII--COMMITTEE ON FINANCE--REVENUE PROVISIONS

Sec. 12000. Short title; references; table of contents.

                     Subtitle A--Family Tax Relief

Sec. 12001. Child tax credit.
Sec. 12002. Reduction in marriage penalty.
Sec. 12003. Credit for adoption expenses.
Sec. 12004. Credit for interest on education loans.

             Subtitle B--Savings And Investment Incentives

                Chapter 1--Retirement Savings Incentives


                SUBCHAPTER A--INDIVIDUAL RETIREMENT PLANS

                  Part I--Restoration of IRA Deduction

Sec. 12101. Restoration of IRA deduction.
Sec. 12102. Inflation adjustment for deductible amount.
Sec. 12103. Homemakers eligible for full IRA deduction.

                  Part II--Nondeductible Tax-Free IRAs

Sec. 12111. Establishment of nondeductible tax-free individual 
              retirement accounts.


                 SUBCHAPTER B--PENALTY-FREE DISTRIBUTIONS

Sec. 12121. Distributions from certain plans may be used without 
              penalty to purchase first homes or to pay higher 
              education or financially devastating medical expenses.


                    SUBCHAPTER C--SIMPLE SAVINGS PLANS

Sec. 12131. Establishment of savings incentive match plans for 
              employees of small employers.
Sec. 12132. Extension of simple plan to 401(k) arrangements.

                    Chapter 2--Capital Gains Reform


             SUBCHAPTER A--TAXPAYERS OTHER THAN CORPORATIONS

Sec. 12141. Capital gains deduction.
Sec. 12142. Modifications to exclusion of gain on certain small 
              business stock.
Sec. 12143. Rollover of gain from sale of qualified stock.


                  SUBCHAPTER B--CORPORATE CAPITAL GAINS

Sec. 12151. Reduction of alternative capital gain tax for corporations.

          Chapter 3--Corporate Alternative Minimum Tax Reform

Sec. 12161. Modification of depreciation rules under minimum tax.
Sec. 12162. Long-term unused credits allowed against minimum tax.

                 Subtitle C-- Health Related Provisions

                  Chapter 1--Long-Term Care Provisions


           SUBCHAPTER A--LONG-TERM CARE SERVICES AND CONTRACTS

                       Part I--General Provisions

Sec. 12201. Qualified long-term care services treated as medical care.
Sec. 12202. Treatment of long-term care insurance or plans.
Sec. 12203. Reporting requirements.
Sec. 12204. Effective dates.

                Part II--Consumer Protection Provisions

Sec. 12211. Policy requirements.
Sec. 12212. Requirements for issuers of long-term care insurance 
              policies.
Sec. 12213. Coordination with State requirements.
Sec. 12214. Effective dates.


          SUBCHAPTER B--TREATMENT OF ACCELERATED DEATH BENEFITS

Sec. 12221. Treatment of accelerated death benefits under life 
              insurance contracts.
Sec. 12222. Treatment of companies issuing qualified accelerated death 
              benefit riders.


                  SUBCHAPTER C--MEDICAL SAVINGS ACCOUNTS

Sec. 12231. Deduction for contributions to medical savings accounts.
Sec. 12232. Exclusion from income of employer contributions to medical 
              savings accounts.
Sec. 12233. Medical savings accounts.


                      SUBCHAPTER D--OTHER PROVISIONS

Sec. 12241. Increase in deduction for health insurance costs of self-
              employed individuals.
Sec. 12242. Adjustment of death benefit limits for certain policies.
Sec. 12243. Organizations subject to section 833.

                     Subtitle D--Estate Tax Reform

Sec. 12301. Family-owned business exclusion.
Sec. 12302. Increase in unified estate and gift tax credit.
Sec. 12303. Treatment of land subject to a qualified conservation 
              easement.
Sec. 12304. Expansion of exception from generation-skipping transfer 
              tax for transfers to individuals with deceased parents.
Sec. 12305. Extension of treatment of certain rents under section 2032A 
              to lineal descendants.

              Subtitle E--Extension Of Expiring Provisions

            Chapter 1--Extensions Through February 28, 1997

Sec. 12401. Employer-provided educational assistance programs.
Sec. 12402. Research credit.
Sec. 12403. Employer-provided group legal services.
Sec. 12404. Orphan drug tax credit.
Sec. 12405. Contributions of stock to private foundations.
Sec. 12406. Delay of scheduled increase in tax on fuel used in 
              commercial aviation.

    Chapter 2--Extensions of Superfund and Oil Spill Liability Taxes

Sec. 12411. Extension of hazardous substance superfund.
Sec. 12412. Extension of oil spill liability tax.

              Chapter 3--Extensions Relating to Fuel Taxes

Sec. 12421. Ethanol blender refunds.
Sec. 12422. Extension of binding contract date for biomass and coal 
              facilities.

[[Page S 16297]]


                  Chapter 4--Diesel Dyeing Provisions

Sec. 12431. Moratorium for excise tax on diesel fuel sold for use or 
              used in diesel-powered motorboats.

           Chapter 5--Treatment of Individuals Who Expatriate

Sec. 12441. Revision of tax rules on expatriation.
Sec. 12442. Information on individuals expatriating.

            Subtitle F--Taxpayer Bill of Rights 2 Provisions

Sec. 12501. Expansion of authority to abate interest.
Sec. 12502. Review of IRS failure to abate interest.
Sec. 12503. Joint return may be made after separate returns without 
              full payment of tax.
Sec. 12504. Modifications to certain levy exemption amounts.
Sec. 12505. Offers-in-compromise.
Sec. 12506. Award of litigation costs permitted in declaratory judgment 
              proceedings.
Sec. 12507. Court discretion to reduce award for litigation costs for 
              failure to exhaust administrative remedies.
Sec. 12508. Enrolled agents included as third-party recordkeepers.
Sec. 12509. Safeguards relating to designated summonses.
Sec. 12510. Annual reminders to taxpayers with outstanding delinquent 
              accounts.

       Subtitle G--Casualty And Involuntary Conversion Provisions

Sec. 12601. Basis adjustment to property held by corporation where 
              stock in corporation is replacement property under 
              involuntary conversion rules.
Sec. 12602. Expansion of requirement that involuntarily converted 
              property be replaced with property acquired from an 
              unrelated person.
Sec. 12603. Special rule for crop insurance proceeds and disaster 
              payments.
Sec. 12604. Application of involuntary exclusion rules to 
              presidentially declared disasters.

        Subtitle H--Exempt Organizations and Charitable Reforms

Sec. 12701. Cooperative service organizations for certain foundations.
Sec. 12702. Exclusion from unrelated business taxable income for 
              certain sponsorship payments.
Sec. 12703. Treatment of dues paid to agricultural or horticultural 
              organizations.
Sec. 12704. Repeal of credit for contributions to community development 
              corporations.
Sec. 12705. Clarification of treatment of qualified football coaches 
              plans.

              Subtitle I--Tax Reform and Other Provisions

              Chapter 1--Provisions Relating to Businesses

Sec. 12801. Tax treatment of certain extraordinary dividends.
Sec. 12802. Registration of confidential corporate tax shelters.
Sec. 12803. Denial of deduction for interest on loans with respect to 
              company-owned insurance.
Sec. 12804. Termination of suspense accounts for family corporations 
              required to use accrual method of accounting.
Sec. 12805. Termination of Puerto Rico and possession tax credit.
Sec. 12806. Depreciation under income forecast method.
Sec. 12807. Repeal of exclusion for interest on loans used to acquire 
              employer securities.

                        Chapter 2--Legal Reforms

Sec. 12811. Repeal of exclusion for punitive damages and for damages 
              not attributable to physical injuries or sickness.
Sec. 12812. Reporting of certain payments made to attorneys.

        Chapter 3--Reforms Relating to Nonrecognition Provisions

Sec. 12821. No rollover or exclusion of gain on sale of principal 
              residence which is attributable to depreciation 
              deductions.
Sec. 12822. Nonrecognition of gain on sale of principal residence by 
              noncitizens limited to new residences located in the 
              United States.

          Chapter 4--Excise Tax and Tax-Exempt Bond Provisions

Sec. 12831. Repeal of diesel fuel tax rebate to purchasers of diesel-
              powered automobiles and light trucks.
Sec. 12832. Repeal of wine and flavors content credit.
Sec. 12833. Modifications to excise tax on ozone-depleting chemicals.
Sec. 12834. Election to avoid tax-exempt bond penalties for local 
              furnishers of electricity and gas.
Sec. 12835. Tax-exempt bonds for sale of Alaska Power Administration 
              facility.

                Chapter 5--Foreign Trust Tax Compliance

Sec. 12841. Improved information reporting on foreign trusts.
Sec. 12842. Modifications of rules relating to foreign trusts having 
              one or more United States beneficiaries.
Sec. 12843. Foreign persons not to be treated as owners under grantor 
              trust rules.
Sec. 12844. Information reporting regarding foreign gifts.
Sec. 12845. Modification of rules relating to foreign trusts which are 
              not grantor trusts.
Sec. 12846. Residence of estates and trusts, etc.

         Chapter 6--Financial Asset Securitization Investments

Sec. 12851. Financial asset securitization investment trusts.

                   Chapter 7--Depreciation Provisions

Sec. 12861. Treatment of contributions in aid of construction.
Sec. 12862. Deduction for certain operating authority.
Sec. 12863. Class life for gas station convenience stores and similar 
              structures.

                      Chapter 8--Other Provisions

Sec. 12871. Application of failure-to-pay penalty to substitute 
              returns.
Sec. 12872. Extension of withholding to certain gambling winnings.
Sec. 12873. Losses from foreclosure property.
Sec. 12874. Newspaper distributors treated as direct sellers.
Sec. 12875. Nonrecognition treatment for certain transfers by common 
              trust funds to regulated investment companies.
Sec. 12876. Treatment of certain insurance contracts on retired lives.
Sec. 12877. Treatment of modified guaranteed contracts.
Sec. 12878. $1,000,000 compensation deduction limit extended to all 
              employees of all corporations.
Sec. 12879. Sense of the Senate.
Sec. 12880. Increased deductibility of business meal expenses for 
              individuals subject to Federal limitations on hours of 
              service.
Sec. 12881. Rollover of gain from sale of farm assets to individual 
              retirement plans.
Sec. 12882. Disposition of stock in domestic corporations by 10-percent 
              foreign shareholders.
Sec. 12883. Limitation on treaty benefits.
Sec. 12884. Sense of the Senate regarding tax treatment of conversions 
              of thrift charters to bank charters.

                   Subtitle J--Pension Simplification

                     Chapter 1--General Provisions


       SUBCHAPTER A--SIMPLIFICATION OF NONDISCRIMINATION PROVISIONS

Sec. 12901. Definition of highly compensated employees; repeal of 
              family aggregation.
Sec. 12902. Definition of compensation for section 415 purposes.
Sec. 12903. Modification of additional participation requirements.
Sec. 12904. Nondiscrimination rules for qualified cash or deferred 
              arrangements and matching contributions.


               SUBCHAPTER B--SIMPLIFIED DISTRIBUTION RULES

Sec. 12911. Repeal of 5-year income averaging for lump-sum 
              distributions.
Sec. 12912. Repeal of $5,000 exclusion of employees' death benefits.
Sec. 12913. Simplified method for taxing annuity distributions under 
              certain employer plans.
Sec. 12914. Required distributions.


    SUBCHAPTER C--TARGETED ACCESS TO PENSION PLANS FOR SMALL EMPLOYERS

Sec. 12916. Credit for pension plan start-up costs of small employers.
Sec. 12917. Tax-exempt organizations eligible under section 401(k).


                    SUBCHAPTER D--PAPERWORK REDUCTION

Sec. 12921. Limitation on combined section 415 limit.


                SUBCHAPTER E--MISCELLANEOUS SIMPLIFICATION

Sec. 12931. Treatment of leased employees.
Sec. 12932. Plans covering self-employed individuals.
Sec. 12933. Elimination of special vesting rule for multiemployer 
              plans.
Sec. 12934. Full-funding limitation of multiemployer plans.
Sec. 12935. Treatment of governmental and multiemployer plans under 
              section 415.
Sec. 12936. Treatment of deferred compensation plans of State and local 
              governments and tax-exempt organizations.
Sec. 12937. Contributions on behalf of disabled employees.
Sec. 12938. Distributions under rural cooperative plans.
Sec. 12939. Tenured faculty.
Sec. 12940. Uniform retirement age.
Sec. 12941. Modifications of section 403(b).
Sec. 12942. Tax on prohibited transactions.
Sec. 12943. Extension of Internal Revenue Service user fees.
Sec. 12944. Limitation on State income taxation of certain pension 
              income.

                        Chapter 2--Church Plans

Sec. 12951. New qualification provision for church plans.
Sec. 12952. Retirement income accounts of churches.
Sec. 12953. Contracts purchased by a church.
Sec. 12954. Change in distribution requirement for retirement income 
              accounts.
Sec. 12955. Required beginning date for distributions under church 
              plans.
Sec. 12956. Participation of ministers in church plans.
Sec. 12957. Certain rules aggregating employees not to apply to 
              churches, etc.
Sec. 12958. Self-employed ministers treated as employees for purposes 
              of certain welfare benefit plans and retirement income 
              accounts.
Sec. 12959. Deductions for contributions by certain ministers to 
              retirement income accounts.

[[Page S 16298]]

Sec. 12960. Modification for church plans of rules for plans maintained 
              by more than one employer.
Sec. 12961. Section 457 not to apply to deferred compensation of a 
              church.
Sec. 12962. Church plan modification to separate account requirement of 
              section 401(h).
Sec. 12963. Rule relating to investment in contract not to apply to 
              foreign missionaries.
Sec. 12964. Repeal of elective deferral catch-up limitation for 
              retirement income accounts.
Sec. 12965. Church plans may annuitize benefits.
Sec. 12966. Church plans may increase benefit payments.
Sec. 12967. Rules applicable to self-insured medical reimbursement 
              plans not to apply to plans of churches.
Sec. 12968. Retirement benefits of ministers not subject to tax on net 
              earnings from self-employment.
                     Subtitle A--Family Tax Relief

     SEC. 12001. CHILD TAX CREDIT.

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

     ``SEC. 23. CHILD TAX CREDIT.

       ``(a) Allowance of Credit.--There shall be allowed as a 
     credit against the tax imposed by this chapter for the 
     taxable year an amount equal to $500 multiplied by the number 
     of qualifying children of the taxpayer.
       ``(b) Limitation.--
       ``(1) In general.--The amount of the credit which would 
     (but for this subsection) be allowed by subsection (a) shall 
     be reduced (but not below zero) by $25 for each $1,000 (or 
     fraction thereof) by which the taxpayer's adjusted gross 
     income exceeds the threshold amount.
       ``(2) Threshold amount.--For purposes of paragraph (1), the 
     term `threshold amount' means--
       ``(A) $110,000 in the case of a joint return,
       ``(B) $75,000 in the case of an individual who is not 
     married, and
       ``(C) $55,000 in the case of a married individual filing a 
     separate return.

     For purposes of this paragraph, marital status shall be 
     determined under section 7703.
       ``(c) Qualifying Child.--For purposes of this section--
       ``(1) In general.--The term `qualifying child' means any 
     individual if--
       ``(A) the taxpayer is allowed a deduction under section 151 
     with respect to such individual for such taxable year,
       ``(B) such individual has not attained the age of 18 as of 
     the close of the calendar year in which the taxable year of 
     the taxpayer begins, and
       ``(C) such individual bears a relationship to the taxpayer 
     described in section 32(c)(3)(B) (determined without regard 
     to clause (ii) thereof).
       ``(2) Exception for certain noncitizens.--The term 
     `qualifying child' shall not include any individual who would 
     not be a dependent if the first sentence of section 152(b)(3) 
     were applied without regard to all that follows `resident of 
     the United States'.
       ``(d) Certain Other Rules Apply.--Rules similar to the 
     rules of subsections (d) and (e) of section 32 shall apply 
     for purposes of this section.''.
       (b) Clerical Amendment.--The table of sections for subpart 
     A of part IV of subchapter A of chapter 1 is amended by 
     inserting after the item relating to section 22 the following 
     new item:

``Sec. 23. Child tax credit.''.

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

     SEC. 12002. REDUCTION IN MARRIAGE PENALTY.

       (a) Increase in Basic Standard Deduction for Married 
     Individuals.--Section 63(c) (relating to standard deduction) 
     is amended--
       (1) by striking ``$5,000'' in paragraph (2)(A) and 
     inserting ``the applicable dollar amount'',
       (2) by striking ``$2,500'' in paragraph (2)(D) and 
     inserting ``\1/2\ of the applicable dollar amount'', and
       (3) by inserting after paragraph (6) the following new 
     paragraph:
       ``(7) Applicable dollar amount.--For purposes of paragraph 
     (2), the applicable dollar amount shall be determined under 
     the following table:

``For taxable years                                                    
  beginning in                                           The applicable
  calendar year--                                    dollar amount is--
  1996......................................................$6,800 ....

  1997.......................................................7,150 ....

  1998.......................................................7,500 ....

  1999.......................................................7,950 ....

  2000.......................................................8,200 ....

  2001.......................................................8,600 ....

  2002.......................................................9,100 ....

  2003.......................................................9,500 ....

  2004.......................................................9,950 ....

  2005 and thereafter.......................................10,800 ....

       (b) Cost-of-Living Adjustments.--Section 63(c)(4) (relating 
     to adjustments for inflation) is amended by adding at the end 
     the following new flush sentence:
     ``This paragraph shall also apply to the $10,800 amount in 
     paragraph (7) for taxable years beginning after 2005, except 
     that subparagraph (B) shall be applied by substituting `2004' 
     for `1987'.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 12003. CREDIT FOR ADOPTION EXPENSES.

       (a) In General.--Subpart A of part IV of subchapter A of 
     chapter 1 (relating to nonrefundable personal credits), as 
     amended by section 12001, is amended by inserting after 
     section 23 the following new section:

     ``SEC. 24. ADOPTION EXPENSES.

       ``(a) Allowance of Credit.--In the case of an individual, 
     there shall be allowed as a credit against the tax imposed by 
     this subtitle for the taxable year the amount of the 
     qualified adoption expenses paid or incurred by the taxpayer 
     during such taxable year.
       ``(b) Limitations.--
       ``(1) Dollar limitation.--The aggregate amount of qualified 
     adoption expenses which may be taken into account under 
     subsection (a) with respect to the adoption of a child shall 
     not exceed $5,000.
       ``(2) Income limitation.--The amount allowable as a credit 
     under subsection (a) for any taxable year shall be reduced 
     (but not below zero) by an amount which bears the same ratio 
     to the amount so allowable (determined without regard to this 
     paragraph but with regard to paragraph (1)) as--
       ``(A) the amount (if any) by which the taxpayer's taxable 
     income exceeds $60,000, bears to
       ``(B) $40,000.
       ``(3) Denial of double benefit.--
       ``(A) In general.--No credit shall be allowed under 
     subsection (a) for any expense for which a deduction or 
     credit is allowable under any other provision of this 
     chapter.
       ``(B) Grants.--No credit shall be allowed under subsection 
     (a) for any expense to the extent that funds for such expense 
     are received under any Federal, State, or local program.
       ``(C) Reimbursement.--No credit shall be allowed under 
     subsection (a) for any expense to the extent that such 
     expense is reimbursed and the reimbursement is excluded from 
     gross income under section 137.
       ``(c) Carryforwards of Unused Credit.--If the credit 
     allowable under subsection (a) for any taxable year exceeds 
     the limitation imposed by section 26(a) for such taxable year 
     reduced by the sum of the credits allowable under this 
     subpart (other than this section), such excess shall be 
     carried to the succeeding taxable year and added to the 
     credit allowable under subsection (a) for such taxable year. 
     No credit may be carried forward under this subsection to any 
     taxable year following the fifth taxable year after the 
     taxable year in which the credit arose.
       ``(d) Qualified Adoption Expenses.--
       ``(1) In general.--The term `qualified adoption expenses' 
     means reasonable and necessary adoption fees, court costs, 
     attorney fees, and other expenses--
       ``(A) which are directly related to, and the principal 
     purpose of which is for, the legal and final adoption of an 
     eligible child by the taxpayer, and
       ``(B) which are not incurred in violation of State or 
     Federal law or in carrying out any surrogate parenting 
     arrangement.
       ``(2) Expenses for adoption of spouse's child not 
     eligible.--The term `qualified adoption expenses' shall not 
     include any expenses in connection with the adoption by an 
     individual of a child who is the child of such individual's 
     spouse.
       ``(3) Eligible child.--The term `eligible child' means any 
     individual--
       ``(A) who has not attained age 18 as of the time of the 
     adoption, or
       ``(B) who is physically or mentally incapable of caring for 
     himself.
       ``(e) Married Couples Must File Joint Returns.--Rules 
     similar to the rules of paragraphs (2), (3), and (4) of 
     section 21(e) shall apply for purposes of this section.''.
       (b) Exclusion of Amounts Received Under Employer's Adoption 
     Assistance Programs.--Part III of subchapter B of chapter 1 
     (relating to items specifically excluded from gross income) 
     is amended by redesignating section 137 as section 138 and by 
     inserting after section 136 the following new section:

     ``SEC. 137. ADOPTION ASSISTANCE PROGRAMS.

       ``(a) In General.--Gross income of an employee does not 
     include amounts paid or expenses incurred by the employer for 
     qualified adoption expenses in connection with the adoption 
     of a child by an employee if such amounts are furnished 
     pursuant to an adoption assistance program.
       ``(b) Limitations.--
       ``(1) Dollar limitation.--The aggregate amount excludable 
     from gross income under subsection (a) for all taxable years 
     with respect to the adoption of any single child by the 
     taxpayer shall not exceed $5,000.
       ``(2) Income limitation.--The amount excludable from gross 
     income under subsection (a) for any taxable year shall be 
     reduced (but not below zero) by an amount which bears the 
     same ratio to the amount so excludable (determined without 
     regard to this paragraph but with regard to paragraph (1)) 
     as--
       ``(A) the amount (if any) by which the taxpayer's taxable 
     income (determined without regard to this section) exceeds 
     $60,000, bears to
       ``(B) $40,000.
       ``(c) Adoption Assistance Program.--For purposes of this 
     section, an adoption assistance program is a plan of an 
     employer--
       ``(1) under which the employer provides employees with 
     adoption assistance, and
       ``(2) which meets requirements similar to the requirements 
     of paragraphs (2), (3), and (5) of section 127(b).

     An adoption reimbursement program operated under section 1052 
     of title 10, United States Code (relating to armed forces) or 
     section 514 of title 14, United States Code (relating to 
     members of the Coast Guard) shall be treated as an adoption 
     assistance program for purposes of this section.
       ``(d) Qualified Adoption Expenses.--For purposes of this 
     section, the term `qualified adoption expenses' has the 
     meaning given such term by section 24(d).''.

[[Page S 16299]]

       (c) Conforming Amendments.--
       (1) The table of sections for subpart A of part IV of 
     subchapter A of chapter 1, as amended by section 12001, is 
     amended by inserting after the item relating to section 23 
     the following new item:

``Sec. 24. Adoption expenses.''.

       (2) The table of sections for part III of subchapter B of 
     chapter 1 is amended by striking the item relating to section 
     137 and inserting the following:

``Sec. 137. Adoption assistance programs.
``Sec. 138. Cross reference to other Acts.''.

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

     SEC. 12004. CREDIT FOR INTEREST ON EDUCATION LOANS.

       (a) In General.--Subpart A of part IV of subchapter A of 
     chapter 1 (relating to nonrefundable personal credits), as 
     amended by sections 12001 and 12003, is amended by inserting 
     after section 24 the following new section:

     ``SEC. 24A. INTEREST ON EDUCATION LOANS.

       ``(a) Allowance of Credit.--In the case of an individual, 
     there shall be allowed as a credit against the tax imposed by 
     this chapter for the taxable year an amount equal to 20 
     percent of the interest paid by the taxpayer during the 
     taxable year on any qualified education loan.
       ``(b) Maximum Credit.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     credit allowed by subsection (a) for the taxable year shall 
     not exceed $500 ($1,000 if the taxpayer has 1 or more 
     qualified education loans covering the qualified higher 
     education expenses of more than 1 individual).
       ``(2) Limitation based on modified adjusted gross income.--
       ``(A) In general.--If the modified adjusted gross income of 
     the taxpayer for the taxable year exceeds $40,000 ($60,000 in 
     the case of a joint return), the amount which would (but for 
     this paragraph) be allowable as a credit under this section 
     shall be reduced (but not below zero) by the amount which 
     bears the same ratio to the amount which would be so 
     allowable as such excess bears to $15,000.
       ``(B) Modified adjusted gross income.--The term `modified 
     adjusted gross income' means adjusted gross income 
     determined--
       ``(i) without regard to sections 135, 911, 931, and 933, 
     and
       ``(ii) after application of sections 86, 219, and 469.
       ``(C) Inflation adjustment.--In the case of any taxable 
     year beginning after 1996, the $40,000 and $60,000 amounts 
     referred to in subparagraph (A) shall be increased by an 
     amount equal to--
       ``(i) such dollar amount, multiplied by
       ``(ii) the cost-of-living adjustment determined under 
     section (1)(f)(3) for the calendar year in which the taxable 
     year begins, by substituting `1995' for `1992'.
       ``(D) Rounding.--If any amount as adjusted under 
     subparagraph (C) is not a multiple of $50, such amount shall 
     be rounded to the nearest multiple of $50.
       ``(c) Limitation on Taxpayers Eligible for Credit.--No 
     credit shall be allowed by this section to an individual for 
     the taxable year if a deduction under section 151 with 
     respect to such individual is allowed to another taxpayer for 
     the taxable year beginning in the calendar year in which such 
     individual's taxable year begins.
       ``(d) Limit on Period Credit Allowed.--
       ``(1) In general.--Except as provided in paragraph (2), a 
     credit shall be allowed under this section only with respect 
     to interest paid on any qualified education loan during the 
     first 60 months (whether or not consecutive) in which 
     interest payments are required. For purposes of this 
     paragraph, any loan and all refinancings of such loan shall 
     be treated as 1 loan.
       ``(2) Dependent.--If the qualified education loan was used 
     to pay qualified higher education expenses of an individual 
     other than the taxpayer or the taxpayer's spouse, a credit 
     shall be allowed under this section for any taxable year with 
     respect to such loan only if--
       ``(A) a deduction under section 151 with respect to such 
     individual is allowed to the taxpayer for such taxable year, 
     and
       ``(B) such individual is at least a half-time student with 
     respect to such taxable year.
       ``(e) Definitions.--For purposes of this section--
       ``(1) Qualified education loan.--The term `qualified 
     education loan' means any indebtedness incurred to pay 
     qualified higher education expenses--
       ``(A) which are incurred on behalf of the taxpayer, the 
     taxpayer's spouse, or a dependent of the taxpayer,
       ``(B) which are paid or incurred within a reasonable period 
     of time before or after the indebtedness is incurred, and
       ``(C) which are attributable to education furnished during 
     a period during which the recipient was at least a half-time 
     student.

     Such term includes indebtedness used to refinance 
     indebtedness which qualifies as a qualified education loan. 
     The term `qualified education loan' shall not include any 
     indebtedness owed to a person who is related (within the 
     meaning of section 267(b) or 707(b)(1)) to the taxpayer.
       ``(2) Qualified higher education expenses.--The term 
     `qualified higher education expenses' means the cost of 
     attendance (as defined in section 472 of the Higher Education 
     Act of 1965, 20 U.S.C. 1087ll, as in effect on the day before 
     the date of the enactment of this Act) of the taxpayer, the 
     taxpayer's spouse, or a dependent of the taxpayer at an 
     eligible educational institution, reduced by the sum of--
       ``(A) the amount excluded from gross income under section 
     135 by reason of such expenses, and
       ``(B) the amount of the reduction described in section 
     135(d)(1).

     For purposes of the preceding sentence, the term `eligible 
     educational institution' has the same meaning given such term 
     by section 135(c)(3), except that such term shall also 
     include an institution conducting an internship or residency 
     program leading to a degree or certificate awarded by an 
     institution of higher education, a hospital, or a health care 
     facility which offers postgraduate training.
       ``(3) Half-time student.--The term `half-time student' 
     means any individual who would be a student as defined in 
     section 151(c)(4) if `half-time' were substituted for `full-
     time' each place it appears in such section.
       ``(4) Dependent.--The term `dependent' has the meaning 
     given such term by section 152.
       ``(f) Special Rules.--
       ``(1) Denial of double benefit.--No credit shall be allowed 
     under this section for any amount for which a deduction is 
     allowable under any other provision of this chapter.
       ``(2) Married couples must file joint return.--If the 
     taxpayer is married at the close of the taxable year, the 
     credit shall be allowed under subsection (a) only if the 
     taxpayer and the taxpayer's spouse file a joint return for 
     the taxable year.
       ``(3) Marital status.--Marital status shall be determined 
     in accordance with section 7703.''.
       (b) Reporting Requirement.--
       (1) In general.--Subpart B of part III of subchapter A of 
     chapter 61 (relating to information concerning transactions 
     with other persons) is amended by inserting after section 
     6050P the following new section:

     ``SEC. 6050Q. RETURNS RELATING TO EDUCATION LOAN INTEREST 
                   RECEIVED IN TRADE OR BUSINESS FROM INDIVIDUALS.

       ``(a) Education Loan Interest of $600 or More.--Any 
     person--
       ``(1) who is engaged in a trade or business, and
       ``(2) who, in the course of such trade or business, 
     receives from any individual interest aggregating $600 or 
     more for any calendar year on 1 or more qualified education 
     loans,

     shall make the return described in subsection (b) with 
     respect to each individual from whom such interest was 
     received at such time as the Secretary may by regulations 
     prescribe.
       ``(b) Form and Manner of Returns.--A return is described in 
     this subsection if such return--
       ``(1) is in such form as the Secretary may prescribe,
       ``(2) contains--
       ``(A) the name, address, and TIN of the individual from 
     whom the interest described in subsection (a)(2) was 
     received,
       ``(B) the amount of such interest received for the calendar 
     year, and
       ``(C) such other information as the Secretary may 
     prescribe.
       ``(c) Application to Governmental Units.--For purposes of 
     subsection (a)--
       ``(1) Treated as persons.--The term `person' includes any 
     governmental unit (and any agency or instrumentality 
     thereof).
       ``(2) Special rules.--In the case of a governmental unit or 
     any agency or instrumentality thereof--
       ``(A) subsection (a) shall be applied without regard to the 
     trade or business requirement contained therein, and
       ``(B) any return required under subsection (a) shall be 
     made by the officer or employee appropriately designated for 
     the purpose of making such return.
       ``(d) Statements To Be Furnished to Individuals With 
     Respect to Whom Information Is Required.--Every person 
     required to make a return under subsection (a) shall furnish 
     to each individual whose name is required to be set forth in 
     such return a written statement showing--
       ``(1) the name and address of the person required to make 
     such return, and
       ``(2) the aggregate amount of interest described in 
     subsection (a)(2) received by the person required to make 
     such return from the individual to whom the statement is 
     required to be furnished.

     The written statement required under the preceding sentence 
     shall be furnished on or before January 31 of the year 
     following the calendar year for which the return under 
     subsection (a) was required to be made.
       ``(e) Qualified Education Loan Defined.--For purposes of 
     this section, except as provided in regulations prescribed by 
     the Secretary, the term `qualified education loan' has the 
     meaning given such term by section 24A(e)(1).
       ``(f) Returns Which Would Be Required To Be Made by 2 or 
     More Persons.--Except to the extent provided in regulations 
     prescribed by the Secretary, in the case of interest received 
     by any person on behalf of another person, only the person 
     first receiving such interest shall be required to make the 
     return under subsection (a).''.
       (2) Assessable penalties.--Section 6724(d) (relating to 
     definitions) is amended--
       (A) by redesignating clauses (ix) through (xiv) as clauses 
     (x) through (xv), respectively, in paragraph (1)(B) and by 
     inserting after clause (viii) of such paragraph the following 
     new clause:
       ``(ix) section 6050Q (relating to returns relating to 
     education loan interest received in trade or business from 
     individuals),'', and
       (B) by redesignating subparagraphs (Q) through (T) as 
     subparagraphs (R) through (U), respectively, in paragraph (2) 
     and by inserting after subparagraph (P) of such paragraph the 
     following new subparagraph:
       ``(Q) section 6050Q (relating to returns relating to 
     education loan interest received in trade or business from 
     individuals),''.
       (c) Clerical Amendments.--

[[Page S 16300]]

       (1) The table of sections for subpart A of part IV of 
     subchapter A of chapter 1, as amended by sections 12001 and 
     12003, is amended by inserting after the item relating to 
     section 24 the following new item:

``Sec. 24A. Interest on education loans.''.

       (2) The table of sections for subpart B of part III of 
     subchapter A of chapter 61 is amended by inserting after the 
     item relating to section 6050P the following new item:

``Sec. 6050Q. Returns relating to education loan interest received in 
              trade or business from individuals.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to any qualified education loan (as defined in 
     section 24A(e)(1) of the Internal Revenue Code of 1986, as 
     added by this section) incurred on, before, or after the date 
     of the enactment of this Act, but only with respect to any 
     loan interest payment due after December 31, 1995.
             Subtitle B--Savings and Investment Incentives

                CHAPTER 1--RETIREMENT SAVINGS INCENTIVES

               Subchapter A--Individual Retirement Plans

                  PART I--RESTORATION OF IRA DEDUCTION

     SEC. 12101. RESTORATION OF IRA DEDUCTION.

       (a) Increase in Income Limits for Active Participants.--
       (1) In general.--Subparagraph (B) of section 219(g)(3) 
     (relating to applicable dollar amount) is amended to read as 
     follows:
       ``(B) Applicable dollar amount.--The term `applicable 
     dollar amount' means the following:
       ``(i) In the case of a taxpayer filing a joint return:

                                                         The applicable
``For taxable years beginning in:                     dollar amount is:
  1996.....................................................$45,000 ....

  1997......................................................50,000 ....

  1998......................................................55,000 ....

  1999......................................................60,000 ....

  2000......................................................65,000 ....

  2001......................................................70,000 ....

  2002......................................................75,000 ....

  2003......................................................80,000 ....

  2004......................................................85,000 ....

  2005......................................................90,000 ....

  2006......................................................95,000 ....

  2007 and thereafter......................................100,000.....

       ``(ii) In the case of any other taxpayer (other than a 
     married individual filing a separate return):

                                                         The applicable
``For taxable years beginning in:                     dollar amount is:
  1996.....................................................$30,000 ....

  1997......................................................35,000 ....

  1998......................................................40,000 ....

  1999......................................................45,000 ....

  2000......................................................50,000 ....

  2001......................................................55,000 ....

  2002......................................................60,000 ....

  2003......................................................65,000 ....

  2004......................................................70,000 ....

  2005......................................................75,000 ....

  2006......................................................80,000 ....

  2007 and thereafter.......................................85,000.....

       ``(iii) In the case of a married individual filing a 
     separate return, zero.''.
       (2) Increase in phase-out range for joint returns.--Clause 
     (ii) of section 219(g)(2)(A) is amended by inserting 
     ``($20,000 in the case of a joint return)'' after 
     ``$10,000''.
       (3) Cost-of-living adjustments.--Section 219(g)(3) is 
     amended by adding at the end the following new subparagraph:
       ``(C) Cost-of-living adjustments.--In the case of any 
     taxable year beginning in a calendar year after 2007, the 
     $100,000 and $85,000 amounts in clauses (i) and (ii) of 
     subparagraph (B) shall each be increased by an amount equal 
     to the product of such dollar amount and the cost-of-living 
     adjustment for the calendar year determined under subsection 
     (h)(3), except that subsection (h)(3)(A)(ii) shall be applied 
     by substituting `2006' for `1994'. If any amount to which 
     either such amount is increased is not a multiple of $5,000, 
     such amount shall be rounded to the next lower multiple of 
     $5,000.''.
       (b) Individual Not Disqualified by Spouse's 
     Participation.--Paragraph (1) of section 219(g) (relating to 
     limitation on deduction for active participants in certain 
     pension plans) is amended by striking ``or the individual's 
     spouse''.
       (c) Repeal of Nondeductible Contributions.--
       (1) Subsection (f) of section 219 is amended by striking 
     paragraph (7).
       (2) Paragraph (5) of section 408(d) is amended by striking 
     the last sentence.
       (3) Section 408(o) is amended by adding at the end the 
     following new paragraph.
       ``(5) Termination.--This subsection shall not apply to any 
     designated nondeductible contribution for any taxable year 
     beginning after December 31, 1995.''.
       (4) Subsection (b) of section 4973 is amended by striking 
     the last sentence.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 12102. INFLATION ADJUSTMENT FOR DEDUCTIBLE AMOUNT.

       (a) In General.--Section 219 is amended by redesignating 
     subsection (h) as subsection (i) and by inserting after 
     subsection (g) the following new subsection:
       ``(h) Cost-of-Living Adjustments.--
       ``(1) Deduction amount.--
       ``(A) In general.--In the case of any taxable year 
     beginning in a calendar year after 1996, the $2,000 amount 
     under subsection (b)(1)(A) shall be increased by an amount 
     equal to the product of $2,000 and the cost-of-living 
     adjustment for the calendar year.
       ``(B) Rounding to next lower $500.--If the amount to which 
     $2,000 would be increased under subparagraph (A) is not a 
     multiple of $500, such amount shall be rounded to the next 
     lower multiple of $500.
       ``(2) Cost-of-living adjustment.--For purposes of this 
     subsection--
       ``(A) In general.--The cost-of-living adjustment for any 
     calendar year is the percentage (if any) by which--
       ``(i) the CPI for such calendar year, exceeds
       ``(ii) the CPI for 1995.
       ``(B) CPI for any calendar year.--The CPI for any calendar 
     year shall be determined in the same manner as under section 
     1(f)(4).''.
       (b) Conforming Amendments.--
       (1) Section 408(a)(1) is amended by striking ``in excess of 
     $2,000 on behalf of any individual'' and inserting ``on 
     behalf of any individual in excess of the amount in effect 
     for such taxable year under section 219(b)(1)(A)''.
       (2) Section 408(b)(2)(B) is amended by striking ``$2,000'' 
     and inserting ``the dollar amount in effect under section 
     219(b)(1)(A)''.
       (3) Section 408(j) is amended by striking ``$2,000''.

     SEC. 12103. HOMEMAKERS ELIGIBLE FOR FULL IRA DEDUCTION.

       (a) Spousal IRA Computed on Basis of Compensation of Both 
     Spouses.--Subsection (c) of section 219 (relating to special 
     rules for certain married individuals) is amended to read as 
     follows:
       ``(c) Special Rules for Certain Married Individuals.--
       ``(1) In general.--In the case of an individual to whom 
     this paragraph applies for the taxable year, the limitation 
     of paragraph (1) of subsection (b) shall be equal to the 
     lesser of--
       ``(A) the dollar amount in effect under subsection 
     (b)(1)(A) for the taxable year, or
       ``(B) the sum of--
       ``(i) the compensation includible in such individual's 
     gross income for the taxable year, plus
       ``(ii) the compensation includible in the gross income of 
     such individual's spouse for the taxable year reduced by--

       ``(I) the amount allowable as a deduction under subsection 
     (a) to such spouse for such taxable year, and
       ``(II) the amount of any contribution on behalf of such 
     spouse to an IRA Plus account under section 408A for such 
     taxable year.

       ``(2) Individuals to whom paragraph (1) applies.--Paragraph 
     (1) shall apply to any individual if--
       ``(A) such individual files a joint return for the taxable 
     year, and
       ``(B) the amount of compensation (if any) includible in 
     such individual's gross income for the taxable year is less 
     than the compensation includible in the gross income of such 
     individual's spouse for the taxable year.''.
       (b) Conforming Amendments.--
       (1) Paragraph (2) of section 219(f) (relating to other 
     definitions and special rules) is amended by striking 
     ``subsections (b) and (c)'' and inserting ``subsection (b)''.
       (2) Section 408(d)(5) is amended by striking ``$2,250'' and 
     inserting ``the dollar amount in effect under section 
     219(b)(1)(A)''.
       (3) Section 219(g)(1) is amended by striking ``(c)(2)'' and 
     inserting ``(c)(1)(A)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

                  PART II--NONDEDUCTIBLE TAX-FREE IRAS

     SEC. 12111. ESTABLISHMENT OF NONDEDUCTIBLE TAX-FREE 
                   INDIVIDUAL RETIREMENT ACCOUNTS.

       (a) In General.--Subpart A of part I of subchapter D of 
     chapter 1 (relating to pension, profit-sharing, stock bonus 
     plans, etc.) is amended by inserting after section 408 the 
     following new section:

     ``SEC. 408A. IRA PLUS ACCOUNTS.

       ``(a) General Rule.--Except as provided in this section, an 
     IRA Plus account shall be treated for purposes of this title 
     in the same manner as an individual retirement plan.
       ``(b) IRA Plus Account.--For purposes of this title, the 
     term `IRA Plus account' means an individual retirement plan 
     which is designated at the time of establishment of the plan 
     as an IRA Plus account.
       ``(c) Treatment of Contributions.--
       ``(1) No deduction allowed.--No deduction shall be allowed 
     under section 219 for a contribution to an IRA Plus account.
       ``(2) Contribution limit.--The aggregate amount of 
     contributions for any taxable year to all IRA Plus accounts 
     maintained for the benefit of an individual shall not exceed 
     the excess (if any) of--
       ``(A) the maximum amount allowable as a deduction under 
     section 219 with respect to such individual for such taxable 
     year (computed without regard to subsection (g) of such 
     section), over
       ``(B) the amount so allowed.
       ``(3) Rollover contributions.--
       ``(A) In general.--No rollover contribution may be made to 
     an IRA Plus account unless it is a qualified rollover 
     contribution.
       ``(B) Coordination with limit.--A qualified rollover 
     contribution shall not be taken into account for purposes of 
     paragraph (2).
       ``(d) Tax Treatment of Distributions.--
       ``(1) In general.--Except as provided in this subsection, 
     any amount paid or distributed out of an IRA Plus account 
     shall not be included in the gross income of the distributee.
       ``(2) Exception for earnings on contributions.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     any amount distributed out of an IRA Plus account which 
     consists of earnings shall be included in the gross income of 
     the distributee for the taxable year in which the 
     distribution occurs.

[[Page S 16301]]

       ``(B) Exceptions for earnings on contributions held at 
     least 5 years.--Subparagraph (A) shall not apply to earnings 
     allocable to contributions held in an IRA Plus account for at 
     least 5 years as of the date of the distribution but only 
     if--
       ``(i) such distribution occurs on or after the date on 
     which the individual for whom the account was established 
     attains age 59\1/2\, or
       ``(ii) in any case where such distribution occurs before 
     such date, the distribution is described in any subparagraph 
     of section 72(t)(2) (other than subparagraph (A)(i) thereof).
       ``(C) Ordering rule.--
       ``(i) First-in, first-out rule.--Distributions from an IRA 
     Plus account shall be treated as having been made--

       ``(I) first from the earliest contribution (and earnings 
     allocable thereto) remaining in the account at the time of 
     the distribution, and
       ``(II) then from other contributions (and earnings 
     allocable thereto) in the order in which made.

       ``(ii) Allocations between contributions and earnings.--Any 
     portion of a distribution allocated to a contribution (and 
     earnings allocable thereto) shall be treated as allocated 
     first to the earnings and then to the contribution.
       ``(iii) Allocation of earnings.--Earnings shall be 
     allocated to a contribution in such manner as the Secretary 
     may by regulations prescribe.
       ``(iv) Contributions in same year.--For purposes of this 
     subparagraph and section 72(t)(8), all contributions made for 
     the same taxable year shall be treated as 1 contribution made 
     on the first day of the taxable year.
       ``(D) Cross reference.--

  ``For additional tax for early withdrawal, see section 72(t).

       ``(3) Rollovers.--
       ``(A) In general.--Paragraph (2) shall not apply to any 
     distribution which is transferred in a qualified rollover 
     contribution to another IRA Plus account.
       ``(B) Contribution period.--For purposes of paragraph (2), 
     the IRA Plus account to which any contributions are 
     transferred from another IRA Plus account shall be treated as 
     having held such contributions during any period such 
     contributions were held (or are treated as held under this 
     subparagraph) by the account from which transferred.
       ``(4) Special rules relating to qualified rollovers.--
       ``(A) In general.--Notwithstanding any other provision of 
     law, in the case of a qualified rollover contribution to an 
     IRA Plus account from an individual retirement plan which is 
     not an IRA Plus account--
       ``(i) there shall be included in gross income any amount 
     which, but for the qualified rollover contribution, would be 
     includible in gross income, but
       ``(ii) section 72(t) shall not apply to such amount.
       ``(B) Time for inclusion.--In the case of any qualified 
     rollover contribution which occurs before January 1, 1998, 
     any amount includible in gross income under subparagraph (A) 
     with respect to such contribution shall be includible ratably 
     over the 4-taxable year period beginning in the taxable year 
     in which the amount was paid or distributed out of the 
     individual retirement plan.
       ``(e) Qualified Rollover Contribution.--For purposes of 
     this section, the term `qualified rollover contribution' 
     means a rollover contribution to an IRA Plus account from 
     another such account, or from an individual retirement plan 
     but only if such rollover contribution meets the requirements 
     of section 408(d)(3). For purposes of section 408(d)(3)(B), 
     there shall be disregarded any qualified rollover 
     contribution from an individual retirement plan to an IRA 
     plus account.''.
       (b) Early Withdrawal Penalty.--Section 72(t), as amended by 
     section 12121(c), is amended by adding at the end the 
     following new paragraph:
       ``(8) Special rules for distributions from ira plus 
     accounts.--Notwithstanding any other provision of this 
     subsection, paragraph (1) shall apply to any amount received 
     from an IRA Plus account to the extent such amount is 
     required to be included in gross income under section 
     408A(d)(2) unless such amount is part of a distribution 
     required under section 401(a)(9).''.
       (c) Excess Contributions.--Section 4973(b) is amended by 
     adding at the end the following new sentence: ``For purposes 
     of paragraphs (1)(B) and (2)(C), the amount allowable as a 
     deduction under section 219 shall be computed without regard 
     to section 408A.''.
       (d) Conforming Amendment.--The table of sections for 
     subpart A of part I of subchapter D of chapter 1 is amended 
     by inserting after the item relating to section 408 the 
     following new item:

``Sec. 408A. IRA Plus accounts.''.

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

                Subchapter B--Penalty-Free Distributions

     SEC. 12121. DISTRIBUTIONS FROM CERTAIN PLANS MAY BE USED 
                   WITHOUT PENALTY TO PURCHASE FIRST HOMES OR TO 
                   PAY HIGHER EDUCATION OR FINANCIALLY DEVASTATING 
                   MEDICAL EXPENSES.

       (a) In General.--Paragraph (2) of section 72(t) (relating 
     to exceptions to 10-percent additional tax on early 
     distributions from qualified retirement plans) is amended by 
     adding at the end the following new subparagraph:
       ``(D) Distributions from individual retirement plans for 
     first home purchases or educational expenses.--Distributions 
     to an individual from an individual retirement plan--
       ``(i) which are qualified first-time homebuyer 
     distributions (as defined in paragraph (6)), or
       ``(ii) to the extent such distributions do not exceed the 
     qualified higher education expenses (as defined in paragraph 
     (7)) of the taxpayer for the taxable year.''.
       (b) Financially Devastating Medical Expenses.--
       (1) In general.--Section 72(t)(3)(A) is amended by striking 
     ``(B),''.
       (2) Certain lineal descendants and ancestors treated as 
     dependents.--Subparagraph (B) of section 72(t)(2) is amended 
     by striking ``medical care'' and all that follows and 
     inserting ``medical care determined--
       ``(i) without regard to whether the employee itemizes 
     deductions for such taxable year, and
       ``(ii) in the case of an individual retirement plan, by 
     treating such employee's dependents as including--

       ``(I) all children and grandchildren of the employee or 
     such employee's spouse, and
       ``(II) all ancestors of the employee or such employee's 
     spouse.''.

       (3) Conforming amendment.--Subparagraph (B) of section 
     72(t)(2) is amended by striking ``or (C)'' and inserting ``, 
     (C), (D), or (E)''.
       (c) Definitions.--Section 72(t) is amended by adding at the 
     end the following new paragraphs:
       ``(6) Qualified first-time homebuyer distributions.--For 
     purposes of paragraph (2)(D)(i)--
       ``(A) In general.--The term `qualified first-time homebuyer 
     distribution' means any payment or distribution received by 
     an individual to the extent such payment or distribution is 
     used by the individual before the close of the 60th day after 
     the day on which such payment or distribution is received to 
     pay qualified acquisition costs with respect to a principal 
     residence of a first-time homebuyer who is such individual, 
     the spouse of such individual, or any child, grandchild, or 
     ancestor of such individual or the individual's spouse.
       ``(B) Lifetime dollar limitation.--The aggregate amount of 
     payments or distributions received by an individual which may 
     be treated as qualified first-time homebuyer distributions 
     for any taxable year shall not exceed the excess (if any) 
     of--
       ``(i) $10,000, over
       ``(ii) the aggregate amounts treated as qualified first-
     time homebuyer distributions with respect to such individual 
     for all prior taxable years.
       ``(C) Qualified acquisition costs.--For purposes of this 
     paragraph, the term `qualified acquisition costs' means the 
     costs of acquiring, constructing, or reconstructing a 
     residence. Such term includes any usual or reasonable 
     settlement, financing, or other closing costs.
       ``(D) First-time homebuyer; other definitions.--For 
     purposes of this paragraph--
       ``(i) First-time homebuyer.--The term `first-time 
     homebuyer' means any individual if--

       ``(I) such individual (and if married, such individual's 
     spouse) had no present ownership interest in a principal 
     residence during the 2-year period ending on the date of 
     acquisition of the principal residence to which this 
     paragraph applies, and
       ``(II) subsection (h) or (k) of section 1034 did not 
     suspend the running of any period of time specified in 
     section 1034 with respect to such individual on the day 
     before the date the distribution is applied pursuant to 
     subparagraph (A)(ii).

       ``(ii) Principal residence.--The term `principal residence' 
     has the same meaning as when used in section 1034.
       ``(iii) Date of acquisition.--The term `date of 
     acquisition' means the date--

       ``(I) on which a binding contract to acquire the principal 
     residence to which subparagraph (A) applies is entered into, 
     or
       ``(II) on which construction or reconstruction of such a 
     principal residence is commenced.

       ``(E) Special rule where delay in acquisition.--If any 
     distribution from any individual retirement plan fails to 
     meet the requirements of subparagraph (A) solely by reason of 
     a delay or cancellation of the purchase or construction of 
     the residence, the amount of the distribution may be 
     contributed to an individual retirement plan as provided in 
     section 408(d)(3)(A)(i) (determined by substituting `120 
     days' for `60 days' in such section), except that--
       ``(i) section 408(d)(3)(B) shall not be applied to such 
     contribution, and
       ``(ii) such amount shall not be taken into account in 
     determining whether section 408(d)(3)(A)(i) applies to any 
     other amount.
       ``(7) Qualified higher education expenses.--For purposes of 
     paragraph (2)(D)(ii)--
       ``(A) In general.--The term `qualified higher education 
     expenses' means tuition, fees, books, supplies, and equipment 
     required for the enrollment or attendance of--
       ``(i) the taxpayer,
       ``(ii) the taxpayer's spouse, or
       ``(iii) any child (as defined in section 151(c)(3)), 
     grandchild, or ancestor of the taxpayer or the taxpayer's 
     spouse,

     at an eligible educational institution (as defined in section 
     135(c)(3)).
       ``(B) Coordination with savings bond provisions.--The 
     amount of qualified higher education expenses for any taxable 
     year shall be reduced by any amount excludable from gross 
     income under section 135.''.
       (d) Penalty-Free Distributions for Certain Unemployed 
     Individuals.--Paragraph (2) of section 72(t) is amended by 
     adding at the end the following new subparagraph:
       ``(E) Distributions to unemployed individuals.--A 
     distribution from an individual retirement plan to an 
     individual after separation from employment, if--
       ``(i) such individual has received unemployment 
     compensation for 12 consecutive weeks under any Federal or 
     State unemployment compensation law by reason of such 
     separation, and
       ``(ii) such distributions are made during any taxable year 
     during which such unemployment 

[[Page S 16302]]
     compensation is paid or the succeeding taxable year.

     To the extent provided in regulations, a self-employed 
     individual shall be treated as meeting the requirements of 
     clause (i) if, under Federal or State law, the individual 
     would have received unemployment compensation but for the 
     fact the individual was self-employed.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

                   Subchapter C--Simple Savings Plans

     SEC. 12131. ESTABLISHMENT OF SAVINGS INCENTIVE MATCH PLANS 
                   FOR EMPLOYEES OF SMALL EMPLOYERS.

       (a) In General.--Section 408 (relating to individual 
     retirement accounts) is amended by redesignating subsection 
     (p) as subsection (q) and by inserting after subsection (o) 
     the following new subsection:
       ``(p) Simple Retirement Accounts.--
       ``(1) In general.--For purposes of this title, the term 
     `simple retirement account' means an individual retirement 
     plan--
       ``(A) with respect to which the requirements of paragraphs 
     (3), (4), and (5) are met; and
       ``(B) with respect to which the only contributions allowed 
     are contributions under a qualified salary reduction 
     arrangement.
       ``(2) Qualified salary reduction arrangement.--
       ``(A) In general.--For purposes of this subsection, the 
     term `qualified salary reduction arrangement' means a written 
     arrangement of an eligible employer under which--
       ``(i) an employee eligible to participate in the 
     arrangement may elect to have the employer make payments--

       ``(I) as elective employer contributions to a simple 
     retirement account on behalf of the employee, or
       ``(II) to the employee directly in cash,

       ``(ii) the amount which an employee may elect under clause 
     (i) for any year is required to be expressed as a percentage 
     of compensation and may not exceed a total of $6,000 for any 
     year,
       ``(iii) the employer is required to make a matching 
     contribution to the simple retirement account for any year in 
     an amount equal to so much of the amount the employee elects 
     under clause (i)(I) as does not exceed the applicable 
     percentage of compensation for the year, and
       ``(iv) no contributions may be made other than 
     contributions described in clause (i) or (iii).
       ``(B) Definitions.--For purposes of this subsection--
       ``(i) Eligible employer.--The term `eligible employer' 
     means an employer who normally employs 100 or fewer employees 
     on any day during the year.
       ``(ii) Applicable percentage.--

       ``(I) In general.--The term `applicable percentage' means 3 
     percent.
       ``(II) Election of lower percentage.--An employer may elect 
     to apply a lower percentage (not less than 1 percent) for any 
     year for all employees eligible to participate in the plan 
     for such year if the employer notifies the employees of such 
     lower percentage within a reasonable period of time before 
     the 60-day election period for such year under paragraph 
     (5)(C). An employer may not elect a lower percentage under 
     this subclause for any year if that election would result in 
     the applicable percentage being lower than 3 percent in more 
     than 2 of the years in the 5-year period ending with such 
     year.
       ``(III) Special rule for years arrangement not in effect.--
     If any year in the 5-year period described in subclause (II) 
     is a year prior to the first year for which any qualified 
     salary reduction arrangement is in effect with respect to the 
     employer (or any predecessor), the employer shall be treated 
     as if the level of the employer matching contribution was at 
     3 percent of compensation for such year.

       ``(C) Arrangement may be only plan of employer.--
       ``(i) In general.--An arrangement shall not be treated as a 
     qualified salary reduction arrangement for any year if the 
     employer (or any predecessor employer) maintained a qualified 
     plan with respect to which contributions were made, or 
     benefits were accrued, for service in any year in the period 
     beginning with the year such arrangement became effective and 
     ending with the year for which the determination is being 
     made.
       ``(ii) Qualified plan.--For purposes of this subparagraph, 
     the term `qualified plan' means a plan, contract, pension, or 
     trust described in subparagraph (A) or (B) of section 
     219(g)(5).
       ``(D) No fee or penalty on employee's initial investment 
     determination.--An arrangement shall not be treated as a 
     qualified salary reduction arrangement unless it provides 
     that no fee or penalty will be imposed on an employee's 
     initial determination with respect to the investment of any 
     contribution.
       ``(E) Cost-of-living adjustment.--The Secretary shall 
     adjust the $6,000 amount under subparagraph (A)(ii) at the 
     same time and in the same manner as under section 415(d), 
     except that the base period taken into account shall be the 
     calendar quarter ending September 30, 1995, and any increase 
     under this subparagraph which is not a multiple of $500 shall 
     be rounded to the next lower multiple of $500.
       ``(3) Vesting requirements.--The requirements of this 
     paragraph are met with respect to a simple retirement account 
     if the employee's rights to any contribution to the simple 
     retirement account are nonforfeitable. For purposes of this 
     paragraph, the rules similar to the rules of subsection 
     (k)(4) shall apply.
       ``(4) Participation requirements.--
       ``(A) In general.--The requirements of this paragraph are 
     met with respect to any simple retirement account for a year 
     only if, under the qualified salary reduction arrangement, 
     all employees of the employer who--
       ``(i) received at least $5,000 in compensation from the 
     employer during each of the 2 preceding years, and
       ``(ii) who are reasonably expected to receive at least 
     $5,000 in compensation during the year,

     are eligible to make the election under paragraph (2)(A)(i).
       ``(B) Excludable employees.--An employer may elect to 
     exclude from the requirement under subparagraph (A) employees 
     described in section 410(b)(3).
       ``(5) Administrative requirements.--The requirements of 
     this paragraph are met with respect to any simplified 
     retirement account if, under the qualified salary reduction 
     arrangement--
       ``(A) an employer must--
       ``(i) make the elective employer contributions under 
     paragraph (2)(A)(i) not later than the close of the 30-day 
     period following the last day of the month with respect to 
     which the contributions are to be made, and
       ``(ii) make the matching contributions under paragraph 
     (2)(A)(iii) not later than the date described in section 
     404(m)(2)(B),
       ``(B) an employee may elect to terminate participation in 
     such arrangement at any time during the year, except that if 
     an employee so terminates, the arrangement may provide that 
     the employee may not elect to resume participation until the 
     beginning of the next year, and
       ``(C) each employee eligible to participate may elect, 
     during the 60-day period before the beginning of any year, to 
     participate in the arrangement, or to modify the amounts 
     subject to such arrangement, for such year.
       ``(6) Definitions.--For purposes of this subsection--
       ``(A) Compensation.--
       ``(i) In general.--The term `compensation' means amounts 
     described in paragraphs (3) and (8) of section 6051(a).
       ``(ii) Self-employed.--In the case of an employee described 
     in subparagraph (B), compensation means net earnings from 
     self-employment determined under section 1402(a) without 
     regard to any contribution under this subsection.
       ``(B) Employee.--The term `employee' includes an employee 
     as defined in section 401(c)(1).
       ``(C) Year.--The term `year' means the calendar year.''.
       (b) Tax Treatment of Simple Retirement Accounts.--
       (1) Deductibility of contributions by employees.--
       (A) Section 219(b) (relating to maximum amount of 
     deduction) is amended by adding at the end the following new 
     paragraph:
       ``(4) Special rule for simple retirement accounts.--This 
     section shall not apply with respect to any amount 
     contributed to a simple retirement account established under 
     section 408(p).''.
       (B) Section 219(g)(5)(A) (defining active participant) is 
     amended by striking ``or'' at the end of clause (iv) and by 
     adding at the end the following new clause:
       ``(vi) any simple retirement account (within the meaning of 
     section 408(p)), or''.
       (2) Deductibility of employer contributions.--Section 404 
     (relating to deductions for contributions of an employer to 
     pension, etc. plans) is amended by adding at the end the 
     following new subsection:
       ``(m) Special Rules for Simple Retirement Accounts.--
       ``(1) In general.--Employer contributions to a simple 
     retirement account shall be treated as if they are made to a 
     plan subject to the requirements of this section.
       ``(2) Timing.--
       ``(A) Deduction.--Contributions described in paragraph (1) 
     shall be deductible in the taxable year of the employer with 
     or within which the calendar year for which the contributions 
     were made ends.
       ``(B) Contributions after end of year.--For purposes of 
     this subsection, contributions shall be treated as made for a 
     taxable year if they are made on account of the taxable year 
     and are made not later than the time prescribed by law for 
     filing the return for the taxable year (including extensions 
     thereof).''.
       (3) Contributions and distributions.--
       (A) Section 402 (relating to taxability of beneficiary of 
     employees' trust) is amended by adding at the end the 
     following new subsection:
       ``(k) Treatment of Simple Retirement Accounts.--Rules 
     similar to the rules of paragraphs (1) and (3) of subsection 
     (h) shall apply to contributions and distributions with 
     respect to a simple retirement account under section 
     408(p).''.
       (B) Section 408(d)(3) is amended by adding at the end the 
     following new subparagraph:
       ``(G) Simple retirement accounts.--This paragraph shall not 
     apply to any amount paid or distributed out of a simple 
     retirement account (as defined in section 408(p)) unless it 
     is paid into another simple retirement account.''.
       (C) Clause (i) of section 457(c)(2)(B) is amended by 
     striking ``section 402(h)(1)(B)'' and inserting ``section 
     402(h)(1)(B) or (k)''.
       (4) Penalties.--
       (A) Early withdrawals.--Section 72(t) (relating to 
     additional tax in early distributions), as amended by 
     sections 12111(b) and 12121(c), is amended by adding at the 
     end the following new paragraph:
       ``(9) Special rules for simple retirement accounts.--In the 
     case of any amount received from a simple retirement account 
     (within the meaning of section 408(p)) during the 2-year 
     period beginning on the date such individual first 
     participated in any qualified salary reduction arrangement 
     maintained by the individual's employer under section 
     408(p)(2), paragraph (1) shall be applied by substituting `25 
     percent' for `10 percent'.''.

[[Page S 16303]]

       (B) Failure to report.--Section 6693 is amended by 
     redesignating subsection (c) as subsection (d) and by 
     inserting after subsection (b) the following new subsection:
       ``(c) Penalties Relating to Simple Retirement Accounts.--
       ``(1) Employer penalties.--An employer who fails to provide 
     1 or more notices required by section 408(l)(2)(C) shall pay 
     a penalty of $50 for each day on which such failures 
     continue.
       ``(2) Trustee penalties.--A trustee who fails--
       ``(A) to provide 1 or more statements required by the last 
     sentence of section 408(i) shall pay a penalty of $50 for 
     each day on which such failures continue, or
       ``(B) to provide 1 or more summary descriptions required by 
     section 408(l)(2)(B) shall pay a penalty of $50 for each day 
     on which such failures continue.
       ``(3) Reasonable cause exception.--No penalty shall be 
     imposed under this subsection with respect to any failure 
     which the taxpayer shows was due to reasonable cause.''.
       (5) Reporting requirements.--
       (A)(i) Section 408(l) is amended by adding at the end the 
     following new paragraph:
       ``(2) Simple retirement accounts.--
       ``(A) No employer reports.--Except as provided in this 
     paragraph, no report shall be required under this section by 
     an employer maintaining a qualified salary reduction 
     arrangement under subsection (p).
       ``(B) Summary description.--The trustee of any simple 
     retirement account established pursuant to a qualified salary 
     reduction arrangement under subsection (p) shall provide to 
     the employer maintaining the arrangement, each year a 
     description containing the following information:
       ``(i) The name and address of the employer and the trustee.
       ``(ii) The requirements for eligibility for participation.
       ``(iii) The benefits provided with respect to the 
     arrangement.
       ``(iv) The time and method of making elections with respect 
     to the arrangement.
       ``(v) The procedures for, and effects of, withdrawals from 
     the arrangement.
       ``(C) Employee notification.--The employer shall notify 
     each employee immediately before the period for which an 
     election described in subsection (p)(5)(C) may be made of the 
     employee's opportunity to make such election. Such notice 
     shall include a copy of the description described in 
     subparagraph (B).''.
       (ii) Section 408(l) is amended by striking ``An employer'' 
     and inserting--
       ``(1) In general.--An employer''.
       (B) Section 408(i) is amended by adding at the end the 
     following new flush sentence:

     ``In the case of a simple retirement account under subsection 
     (p), only one report under this subsection shall be required 
     to be submitted each calendar year to the Secretary (at the 
     time provided under paragraph (2)) but, in addition to the 
     report under this subsection, there shall be furnished, 
     within 30 days after each calendar year, to the individual on 
     whose behalf the account is maintained a statement with 
     respect to the account balance as of the close of, and the 
     account activity during, such calendar year.''.
       (6) Exemption from top-heavy plan rules.--Section 416(g)(4) 
     (relating to special rules for top-heavy plans) is amended by 
     adding at the end the following new subparagraph:
       ``(G) Simple retirement accounts.--The term `top-heavy 
     plan' shall not include a simple retirement account under 
     section 408(p).''.
       (7) Conforming amendments.--
       (A) Section 280G(b)(6) is amended by striking ``or'' at the 
     end of subparagraph (B), by striking the period at the end of 
     subparagraph (C) and inserting ``, or'' and by adding after 
     subparagraph (C) the following new subparagraph:
       ``(D) a simple retirement account described in section 
     408(p).''.
       (B) Section 402(g)(3) is amended by striking ``and'' at the 
     end of subparagraph (B), by striking the period at the end of 
     subparagraph (C) and inserting ``, and'', and by adding after 
     subparagraph (C) the following new subparagraph:
       ``(D) any elective employer contribution under section 
     408(p)(2)(A)(i).''.
       (C) Subsections (b), (c), (m)(4)(B), and (n)(3)(B) of 
     section 414 are each amended by inserting ``408(p),'' after 
     ``408(k),''.
       (D) Section 4972(d)(1)(A) is amended by striking ``and'' at 
     the end of clause (ii), by striking the period at the end of 
     clause (iii) and inserting ``, and'', and by adding after 
     clause (iii) the following new clause:
       ``(iv) any simple retirement account (within the meaning of 
     section 408(p)).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 12132. EXTENSION OF SIMPLE PLAN TO 401(k) ARRANGEMENTS.

       (a) Alternative Method of Satisfying Section 401(k) 
     Nondiscrimination Tests.--Section 401(k) (relating to cash or 
     deferred arrangements) is amended by adding at the end the 
     following new paragraph:
       ``(11) Adoption of simple plan to meet nondiscrimination 
     tests.--
       ``(A) In general.--A cash or deferred arrangement 
     maintained by an eligible employer shall be treated as 
     meeting the requirements of paragraph (3)(A)(ii) if such 
     arrangement meets--
       ``(i) the contribution requirements of subparagraph (B),
       ``(ii) the exclusive benefit requirements of subparagraph 
     (C), and
       ``(iii) the vesting requirements of section 408(p)(3).
       ``(B) Contribution requirements.--The requirements of this 
     subparagraph are met if, under the arrangement--
       ``(i) an employee may elect to have the employer make 
     elective contributions for the year on behalf of the employee 
     to a trust under the plan in an amount which is expressed as 
     a percentage of compensation of the employee but which in no 
     event exceeds $6,000,
       ``(ii) the employer is required to make a matching 
     contribution to the trust for the year in an amount equal to 
     so much of the amount the employee elects under clause (i) as 
     does not exceed 3 percent of compensation for the year, and
       ``(iii) no other contributions may be made other than 
     contributions described in clause (i) or (ii).
       ``(C) Exclusive benefit.--The requirements of this 
     subparagraph are met for any year to which this paragraph 
     applies if no contributions were made, or benefits were 
     accrued, for services during such year under any qualified 
     plan of the employer on behalf of any employee eligible to 
     participate in the cash or deferred arrangement, other than 
     contributions described in subparagraph (B).
       ``(D) Definitions and special rule.--
       ``(i) Definitions.--For purposes of this paragraph, any 
     term used in this paragraph which is also used in section 
     408(p) shall have the meaning given such term by such 
     section.
       ``(ii) Coordination with top-heavy rules.--A plan meeting 
     the requirements of this paragraph for any year shall not be 
     treated as a top-heavy plan under section 416 for such 
     year.''.
       (b) Alternative Methods of Satisfying Section 401(m) 
     Nondiscrimination Tests.--Section 401(m) (relating to 
     nondiscrimination test for matching contributions and 
     employee contributions) is amended by redesignating paragraph 
     (10) as paragraph (11) and by adding after paragraph (9) the 
     following new paragraph:
       ``(10) Alternative method of satisfying tests.--A defined 
     contribution plan shall be treated as meeting the 
     requirements of paragraph (2) with respect to matching 
     contributions if the plan--
       ``(A) meets the contribution requirements of subparagraph 
     (B) of subsection (k)(11),
       ``(B) meets the exclusive benefit requirements of 
     subsection (k)(11)(C), and
       ``(C) meets the vesting requirements of section 
     408(p)(3).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 1995.

                    CHAPTER 2--CAPITAL GAINS REFORM

            Subchapter A--Taxpayers Other Than Corporations

     SEC. 12141. CAPITAL GAINS DEDUCTION.

       (a) In General.--Part I of subchapter P of chapter 1 
     (relating to treatment of capital gains) is amended by 
     redesignating section 1202 as section 1203 and by inserting 
     after section 1201 the following new section:

     ``SEC. 1202. CAPITAL GAINS DEDUCTION.

       ``(a) General Rule.--If for any taxable year a taxpayer 
     other than a corporation has a net capital gain, 50 percent 
     of such gain shall be a deduction from gross income.
       ``(b) Estates and Trusts.--In the case of an estate or 
     trust, the deduction shall be computed by excluding the 
     portion (if any) of the gains for the taxable year from sales 
     or exchanges of capital assets which, under sections 652 and 
     662 (relating to inclusions of amounts in gross income of 
     beneficiaries of trusts), is includible by the income 
     beneficiaries as gain derived from the sale or exchange of 
     capital assets.
       ``(c) Coordination With Treatment of Capital Gain Under 
     Limitation on Investment Interest.--For purposes of this 
     section, the net capital gain for any taxable year shall be 
     reduced (but not below zero) by the amount which the taxpayer 
     takes into account as investment income under section 
     163(d)(4)(B)(iii).
       ``(d) Special Rule for Collectibles.--The rate of tax 
     imposed by section 1 on the excess of--
       ``(1) the net capital gain for the taxable year determined 
     as if section 1222(12) had not applied to any collectible 
     sold or exchanged during the taxable year, over
       ``(2) the net capital gain for the taxable year,
     shall not exceed 28 percent.
       ``(e) Transitional Rule.--
       ``(1) In general.--In the case of a taxable year which 
     includes October 14, 1995--
       ``(A) the amount taken into account as the net capital gain 
     under subsection (a) shall not exceed the net capital gain 
     determined by only taking into account gains and losses 
     properly taken into account for the portion of the taxable 
     year on or after October 14, 1995, and
       ``(B) the amount of the net capital gain taken into account 
     in applying section 1(h) for such year shall be reduced by 
     the amount taken into account under subsection (a) for such 
     year.
       ``(2) Special rules for pass-thru entities.--
       ``(A) In general.--In applying paragraph (1) with respect 
     to any pass-thru entity, the determination of when gains and 
     losses are properly taken into account shall be made at the 
     entity level.
       ``(B) Pass-thru entity defined.--For purposes of 
     subparagraph (A), the term `pass-thru entity' means--
       ``(i) a regulated investment company,
       ``(ii) a real estate investment trust,
       ``(iii) an S corporation,
       ``(iv) a partnership,
       ``(v) an estate or trust, and
       ``(vi) a common trust fund.''.
       (b) Deduction Allowable in Computing Adjusted Gross 
     Income.--Subsection (a) of section 62 is amended by inserting 
     after paragraph (15) the following new paragraph:
       ``(16) Long-term capital gains.--The deduction allowed by 
     section 1202.''.
       (c) Alternative Minimum Tax.--
       (1) Half of deduction disallowed.--Section 56(b)(1) 
     (relating to limitations on deductions of individuals) is 
     amended by adding at the end the following new subparagraph:

[[Page S 16304]]

       ``(G) Capital gains deduction reduced.--In determining the 
     deduction allowable under section 1202, section 1202(a) shall 
     be applied by substituting `25 percent' for `50 percent' ''.
       (2) Conforming amendment.--Section 57(a)(7) is amended by 
     striking ``1202'' and inserting ``1203''.
       (d) Treatment of Collectibles.--
       (1) In general.--Section 1222 is amended by inserting after 
     paragraph (11) the following new paragraph:
       ``(12) Special rule for collectibles.--
       ``(A) In general.--Any gain or loss from the sale or 
     exchange of a collectible shall be treated as a short-term 
     capital gain or loss (as the case may be), without regard to 
     the period such asset was held. The preceding sentence shall 
     apply only to the extent the gain or loss is taken into 
     account in computing taxable income.
       ``(B) Treatment of certain sales of interest in 
     partnership, etc.--For purposes of subparagraph (A), any gain 
     from the sale or exchange of an interest in a partnership, S 
     corporation, or trust which is attributable to unrealized 
     appreciation in the value of collectibles held by such entity 
     shall be treated as gain from the sale or exchange of a 
     collectible. Rules similar to the rules of section 751(f) 
     shall apply for purposes of the preceding sentence.
       ``(C) Collectible.--For purposes of this paragraph, the 
     term `collectible' means any capital asset which is a 
     collectible (as defined in section 408(m) without regard to 
     paragraph (3) thereof).''.
       (2) Charitable deduction not affected.--
       (A) Paragraph (1) of section 170(e) is amended by adding at 
     the end the following new sentence: ``For purposes of this 
     paragraph, section 1222 shall be applied without regard to 
     paragraph (12) thereof (relating to special rule for 
     collectibles).''.
       (B) Clause (iv) of section 170(b)(1)(C) is amended by 
     inserting before the period at the end the following: ``and 
     section 1222 shall be applied without regard to paragraph 
     (12) thereof (relating to special rule for collectibles)''.
       (e) Technical and Conforming Changes.--
       (1) Section 1 is amended by striking subsection (h).
       (2) Paragraph (1) of section 170(e) is amended by striking 
     ``the amount of gain'' in the material following subparagraph 
     (B)(ii) and inserting ``50 percent (\28/35\ in the case of a 
     corporation) of the amount of gain''.
       (3) Subparagraph (B) of section 172(d)(2) is amended to 
     read as follows:
       ``(B) the deduction under section 1202 and the exclusion 
     under section 1203 shall not be allowed.''.
       (4) The last sentence of section 453A(c)(3) is amended by 
     striking all that follows ``long-term capital gain,'' and 
     inserting ``the maximum rate on net capital gain under 
     section 1201 or the deduction under section 1202 and the 
     exclusion under section 1203 (whichever is appropriate) shall 
     be taken into account.''.
       (5) Paragraph (4) of section 642(c) is amended to read as 
     follows:
       ``(4) Adjustments.--To the extent that the amount otherwise 
     allowable as a deduction under this subsection consists of 
     gain from the sale or exchange of capital assets held for 
     more than 1 year or gain described in section 1203(a), proper 
     adjustment shall be made for any deduction allowable to the 
     estate or trust under section 1202 (relating to deduction for 
     excess of capital gains over capital losses) or for the 
     exclusion allowable to the estate or trust under section 1203 
     (relating to exclusion for gain from certain small business 
     stock). In the case of a trust, the deduction allowed by this 
     subsection shall be subject to section 681 (relating to 
     unrelated business income).''.
       (6) The last sentence of section 643(a)(3) is amended to 
     read as follows: ``The deduction under section 1202 (relating 
     to deduction of excess of capital gains over capital losses) 
     and the exclusion under section 1203 (relating to exclusion 
     for gain from certain small business stock) shall not be 
     taken into account.''.
       (7) Subparagraph (C) of section 643(a)(6) is amended by 
     inserting ``(i)'' before ``there shall'' and by inserting 
     before the period ``, and (ii) the deduction under section 
     1202 (relating to capital gains deduction) and the exclusion 
     under section 1203 (relating to exclusion for gain from 
     certain small business stock) shall not be taken into 
     account''.
       (8) Paragraph (4) of section 691(c) is amended by striking 
     ``sections 1(h), 1201, 1202, and 1211'' and inserting 
     ``sections 1201, 1202, 1203, and 1211''.
       (9) The second sentence of section 871(a)(2) is amended by 
     inserting ``or 1203'' after ``section 1202''.
       (10)(A) Paragraph (2) of section 904(b) is amended by 
     striking subparagraph (A), by redesignating subparagraph (B) 
     as subparagraph (A), and by inserting after subparagraph (A) 
     (as so redesignated) the following new subparagraph:
       ``(B) Other taxpayers.--In the case of a taxpayer other 
     than a corporation, taxable income from sources outside the 
     United States shall include gain from the sale or exchange of 
     capital assets only to the extent of foreign source capital 
     gain net income.''.
       (B) Subparagraph (A) of section 904(b)(2), as so 
     redesignated, is amended--
       (i) by striking all that precedes clause (i) and inserting 
     the following:
       ``(A) Corporations.--In the case of a corporation--'', and
       (ii) by striking in clause (i) ``in lieu of applying 
     subparagraph (A),''.
       (C) Paragraph (3) of section 904(b) is amended by striking 
     subparagraphs (D) and (E) and inserting the following new 
     subparagraph:
       ``(D) Rate differential portion.--The rate differential 
     portion of foreign source net capital gain, net capital gain, 
     or the excess of net capital gain from sources within the 
     United States over net capital gain, as the case may be, is 
     the same proportion of such amount as the excess of the 
     highest rate of tax specified in section 11(b) over the 
     alternative rate of tax under section 1201(a) bears to the 
     highest rate of tax specified in section 11(b).''.
       (D) Clause (v) of section 593(b)(2)(D) is amended--
       (i) by striking ``if there is a capital gain rate 
     differential (as defined in section 904(b)(3)(D)) for the 
     taxable year,'', and
       (ii) by striking ``section 904(b)(3)(E)'' and inserting 
     ``section 904(b)(3)(D)''.
       (11) The last sentence of section 1044(d) is amended by 
     striking ``1202'' and inserting ``1203''.
       (12)(A) Paragraph (2) of section 1211(b) is amended to read 
     as follows:
       ``(2) the sum of--
       ``(A) the excess of the net short-term capital loss over 
     the net long-term capital gain, and
       ``(B) one-half of the excess of the net long-term capital 
     loss over the net short-term capital gain.''.
       (B) So much of paragraph (2) of section 1212(b) as precedes 
     subparagraph (B) thereof is amended to read as follows:
       ``(2) Special rules.--
       ``(A) Adjustments.--
       ``(i) For purposes of determining the excess referred to in 
     paragraph (1)(A), there shall be treated as short-term 
     capital gain in the taxable year an amount equal to the 
     lesser of--

       ``(I) the amount allowed for the taxable year under 
     paragraph (1) or (2) of section 1211(b), or
       ``(II) the adjusted taxable income for such taxable year.

       ``(ii) For purposes of determining the excess referred to 
     in paragraph (1)(B), there shall be treated as short-term 
     capital gain in the taxable year an amount equal to the sum 
     of--

       ``(I) the amount allowed for the taxable year under 
     paragraph (1) or (2) of section 1211(b) or the adjusted 
     taxable income for such taxable year, whichever is the least, 
     plus
       ``(II) the excess of the amount described in subclause (I) 
     over the net short-term capital loss (determined without 
     regard to this subsection) for such year.''.

       (C) Subsection (b) of section 1212 is amended by adding at 
     the end the following new paragraph:
       ``(3) Transitional rule.--In the case of any amount which, 
     under this subsection and section 1211(b) (as in effect for 
     taxable years beginning before January 1, 1996), is treated 
     as a capital loss in the first taxable year beginning after 
     December 31, 1995, paragraph (2) and section 1211(b) (as so 
     in effect) shall apply (and paragraph (2) and section 1211(b) 
     as in effect for taxable years beginning after December 31, 
     1995, shall not apply) to the extent such amount exceeds the 
     total of any capital gain net income (determined without 
     regard to this subsection) for taxable years beginning after 
     December 31, 1995.''.
       (13) Paragraph (1) of section 1402(i) is amended by 
     inserting ``, and the deduction provided by section 1202 and 
     the exclusion provided by section 1203 shall not apply'' 
     before the period at the end thereof.
       (14) Subsection (e) of section 1445 is amended--
       (A) in paragraph (1) by striking ``35 percent (or, to the 
     extent provided in regulations, 28 percent)'' and inserting 
     ``28 percent (or, to the extent provided in regulations, 19.8 
     percent)'', and
       (B) in paragraph (2) by striking ``35 percent'' and 
     inserting ``28 percent''.
       (15)(A) The second sentence of section 7518(g)(6)(A) is 
     amended--
       (i) by striking ``during a taxable year to which section 
     1(h) or 1201(a) applies'', and
       (ii) by striking ``28 percent (34 percent'' and inserting 
     ``19.8 percent (28 percent''.
       (B) The second sentence of section 607(h)(6)(A) of the 
     Merchant Marine Act, 1936 is amended--
       (i) by striking ``during a taxable year to which section 
     1(h) or 1201(a) of such Code applies'', and
       (ii) by striking ``28 percent (34 percent'' and inserting 
     ``19.8 percent (28 percent''.
       (16) Section 1203, as redesignated by subsection (a), is 
     amended by adding at the end the following new subsection:
       ``(l) Cross Reference.--

  ``For treatment of eligible gain not excluded under subsection (a), 
see section 1202.''.

       (f) Clerical Amendment.--The table of sections for part I 
     of subchapter P of chapter 1 is amended by striking the item 
     relating to section 1202 and by inserting after the item 
     relating to section 1201 the following new items:

``Sec. 1202. Capital gains deduction.
``Sec. 1203. 50-percent exclusion for gain from certain small business 
              stock.''.

       (g) Effective Date.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall apply 
     to taxable years ending after October 13, 1995.
       (2) Collectibles.--The amendments made by subsection (d) 
     shall apply to sales and exchanges after October 13, 1995.
       (3) Repeal of section 1(h).--The amendment made by 
     subsection (e)(1) shall apply to taxable years beginning 
     after October 13, 1995.
       (4) Contributions.--The amendment made by subsection (e)(2) 
     shall apply to contributions after October 13, 1995.
       (5) Use of long-term losses.--The amendments made by 
     subsection (e)(12) shall apply to taxable years beginning 
     after December 31, 1995.
       (6) Withholding.--The amendment made by subsection (e)(14) 
     shall apply only to amounts paid after the date of the 
     enactment of this Act.

     SEC. 12142. MODIFICATIONS TO EXCLUSION OF GAIN ON CERTAIN 
                   SMALL BUSINESS STOCK.

       (a) Stock of Larger Businesses Eligible for Exclusion.--
     Paragraph (1) of section 

[[Page S 16305]]
     1203(d), as redesignated by section 12141, is amended by striking 
     ``$50,000,000'' each place it appears and inserting 
     ``$100,000,000''.
       (b) Repeal of Per-Issuer Limitation.--Section 1203, as so 
     redesignated, is amended by striking subsection (b).
       (c) Other Modifications.--
       (1) Repeal of working capital limitation.--Paragraph (6) of 
     section 1203(e), as so redesignated, is amended--
       (A) by striking ``2 years'' in subparagraph (B) and 
     inserting ``5 years'', and
       (B) by striking the last sentence.
       (2) Exception from redemption rules where business 
     purpose.--Paragraph (3) of section 1203(c), as so 
     redesignated, is amended by adding at the end the following 
     new subparagraph:
       ``(D) Waiver where business purpose.--A purchase of stock 
     by the issuing corporation shall be disregarded for purposes 
     of subparagraph (B) if the issuing corporation establishes 
     that there was a business purpose for such purchase and one 
     of the principal purposes of the purchase was not to avoid 
     the limitations of this section.''.
       (d) Effective Dates.--
       (1) Increase in size.--The amendment made by subsection (a) 
     shall apply to stock issued after the date of the enactment 
     of this Act.
       (2) Other rules.--The amendments made by subsections (b) 
     and (c) shall apply to stock issued after August 10, 1993.

     SEC. 12143. ROLLOVER OF GAIN FROM SALE OF QUALIFIED STOCK.

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

     ``SEC. 1045. ROLLOVER OF GAIN FROM QUALIFIED SMALL BUSINESS 
                   STOCK TO ANOTHER QUALIFIED SMALL BUSINESS 
                   STOCK.

       ``(a) Nonrecognition of Gain.--If a taxpayer other than a 
     corporation elects the application of this section to any 
     sale of qualified small business stock, eligible gain from 
     such sale shall be recognized only to the extent that the 
     amount realized on such sale exceeds--
       ``(1) the cost of any qualified small business stock 
     purchased by the taxpayer during the 60-day period beginning 
     on the date of such sale, reduced by
       ``(2) any portion of such cost previously taken into 
     account under this section.
     This section shall not apply to any gain which is treated as 
     ordinary income for purposes of this title.
       ``(b) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Qualified small business stock.--The term `qualified 
     small business stock' has the meaning given such term by 
     section 1203(c).
       ``(2) Eligible gain.--The term `eligible gain' means any 
     gain from the sale or exchange of qualified small business 
     stock held for more than 5 years.
       ``(3) Purchase.--A taxpayer shall be treated as having 
     purchased any property if, but for paragraph (4), the 
     unadjusted basis of such property in the hands of the 
     taxpayer would be its cost (within the meaning of section 
     1012).
       ``(4) Basis adjustments.--If gain from any sale is not 
     recognized by reason of subsection (a), such gain shall be 
     applied to reduce (in the order acquired) the basis for 
     determining gain or loss of any qualified small business 
     stock which is purchased by the taxpayer during the 60-day 
     period described in subsection (a).
       ``(c) Special Rules for Treatment of Replacement Stock.--
       ``(1) Holding period for accrued gain.--For purposes of 
     this chapter, gain from the disposition of any replacement 
     qualified small business stock shall be treated as eligible 
     gain to the extent that the amount of such gain does not 
     exceed the amount of the reduction in the basis of such stock 
     by reason of subsection (b)(4).
       ``(2) Tacking of holding period for purposes of deferral.--
     Solely for purposes of applying this section, if any 
     replacement qualified small business stock is disposed of 
     before the taxpayer has held such stock for more than 5 
     years, gain from such stock shall be treated as eligible gain 
     for purposes of subsection (a).
       ``(3) Replacement qualified small business stock.--For 
     purposes of this subsection, the term `replacement qualified 
     small business stock' means any qualified small business 
     stock the basis of which was reduced under subsection 
     (b)(4).''.
       (b) Conforming Amendments.--
       (1) Section 1016(a)(23) is amended--
       (A) by striking ``or 1044'' and inserting ``, 1044, or 
     1045'', and
       (B) by striking ``or 1044(d)'' and inserting ``, 1044(d), 
     or 1045(b)(4)''.
       (2) The table of sections for part III of subchapter O of 
     chapter 1 is amended by adding at the end the following new 
     item:

``Sec. 1045. Rollover of gain from qualified small business stock to 
              another qualified small business stock.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to stock sold or exchanged after the date of the 
     enactment of this Act.

                 Subchapter B--Corporate Capital Gains

     SEC. 12151. REDUCTION OF ALTERNATIVE CAPITAL GAIN TAX FOR 
                   CORPORATIONS.

       (a) In General.--Section 1201 is amended to read as 
     follows:

     ``SEC. 1201. ALTERNATIVE TAX FOR CORPORATIONS.

       ``(a) General Rule.--If for any taxable year a corporation 
     has a net capital gain, then, in lieu of the tax imposed by 
     sections 11, 511, and 831 (a) and (b) (whichever is 
     applicable), there is hereby imposed a tax (if such tax is 
     less than the tax imposed by such sections) which shall 
     consist of the sum of--
       ``(1) a tax computed on the taxable income reduced by the 
     amount of the net capital gain, at the rates and in the 
     manner as if this subsection had not been enacted, plus
       ``(2) a tax of 28 percent of the net capital gain.
       ``(b) Special Rules for Qualified Small Business Gain.--
       ``(1) In general.--If for any taxable year a corporation 
     has gain from the sale or exchange of any qualified small 
     business stock held for more than 5 years, the amount 
     determined under subsection (a)(2) for such taxable year 
     shall be equal to the sum of--
       ``(A) 21 percent of the lesser of such gain or the 
     corporation's net capital gain, plus
       ``(B) 28 percent of the net capital gain reduced by the 
     gain taken into account under subparagraph (A).
       ``(2) Qualified small business stock.--For purposes of 
     paragraph (1), the term `qualified small business stock' has 
     the meaning given such term by section 1203(c), except that 
     stock shall not be treated as qualified small business stock 
     if such stock was at any time held by a member of a parent-
     subsidiary controlled group (as defined in section 
     1203(d)(3)).
       ``(c) Transitional Rule.--
       ``(1) In general.--In applying this section, net capital 
     gain for any taxable year shall not exceed such net capital 
     gain determined by taking into account only gain or loss 
     properly taken into account for the portion of the taxable 
     year after October 13, 1995.
       ``(2) Special rule for pass-thru entities.--Section 
     1202(e)(2) shall apply for purposes of paragraph (1).
       ``(d) Cross References.--

  ``For computation of the alternative tax--
  ``(1) in the case of life insurance companies, see section 801(a)(2),
  ``(2) in the case of regulated investment companies and their 
shareholders, see section 852(b)(3)(A) and (D), and
  ``(3) in the case of real estate investment trusts, see section 
857(b)(3)(A).''.

       (b) Technical Amendment.--Clause (iii) of section 
     852(b)(3)(D) is amended by striking ``65 percent'' and 
     inserting ``72 percent''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to taxable years ending after October 13, 1995.
       (2) Qualified small business stock.--Section 1201(b) of the 
     Internal Revenue Code of 1986 (as added by subsection (a)) 
     shall apply to gain from qualified small business stock 
     acquired on or after the date of the enactment of this Act.

          CHAPTER 3--CORPORATE ALTERNATIVE MINIMUM TAX REFORM

     SEC. 12161. MODIFICATION OF DEPRECIATION RULES UNDER MINIMUM 
                   TAX.

       (a) In General.--Clause (i) of section 56(a)(1)(A) is 
     amended by striking ``under the alternative system of section 
     168(g)'' and inserting ``under section 168 except that the 
     recovery period used shall be the period determined under 
     section 168(g)''.
       (b) Conforming Amendment.--Clause (ii) of section 
     56(a)(1)(A) is amended by striking ``The method'' and 
     inserting ``In the case of property placed in service before 
     January 1, 1996, the method''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after December 31, 1995.

     SEC. 12162. LONG-TERM UNUSED CREDITS ALLOWED AGAINST MINIMUM 
                   TAX.

       (a) In General.--Section 53(c) (relating to limitation) is 
     amended by adding at the end the following new paragraph:
       ``(2) Special rule for taxpayers with long-term unused 
     credits.--
       ``(A) In general.--If--
       ``(i) a corporation to which section 56(g) applies has a 
     long-term unused minimum tax credit for a taxable year, and
       ``(ii) no credit would be allowable under this section for 
     the taxable year by reason of paragraph (1),
     then there shall be allowed a credit under subsection (a) for 
     the taxable year in the amount determined under subparagraph 
     (B).
       ``(B) Amount of credit.--For purposes of subparagraph (A), 
     the amount of the credit shall be equal to the least of the 
     following for the taxable year:
       ``(i) The long-term unused minimum tax credit.
       ``(ii) 50 percent of the taxpayer's tentative minimum tax.
       ``(iii) The excess (if any) of the amount under paragraph 
     (1)(B) over the amount under paragraph (1)(A).
       ``(C) Long-term unused minimum tax credit.--For purposes of 
     this paragraph--
       ``(i) In general.--The long-term unused minimum tax credit 
     for any taxable year is the portion of the minimum tax credit 
     determined under subsection (b) attributable to the adjusted 
     net minimum tax for taxable years beginning after 1986 and 
     ending before the 5th taxable year immediately preceding the 
     taxable year for which the determination is being made.
       ``(ii) First-in, first-out ordering rule.--For purposes of 
     clause (i), credits shall be treated as allowed under 
     subsection (a) on a first-in, first-out basis.''.
       (b) Conforming Amendments.--(1) Section 53(c) (as in effect 
     before the amendment made by subsection (a)) is amended--
       (A) by striking ``The'' and inserting:
       ``(1) In general.--The'', and
       (B) by redesignating paragraphs (1) and (2) as 
     subparagraphs (A) and (B), respectively.
       (2) Subparagraph (C) of section 108(b)(4) is amended by 
     striking ``and (G)'' in the text and heading thereof and 
     inserting ``, (C), and (G)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.
     
[[Page S 16306]]

                 Subtitle C--Health Related Provisions

                  CHAPTER 1--LONG-TERM CARE PROVISIONS

          Subchapter A--Long-Term Care Services and Contracts

                       PART I--GENERAL PROVISIONS

     SEC. 12201. QUALIFIED LONG-TERM CARE SERVICES TREATED AS 
                   MEDICAL CARE.

       (a) General Rule.--Paragraph (1) of section 213(d) 
     (defining medical care) is amended by striking ``or'' at the 
     end of subparagraph (B), by redesignating subparagraph (C) as 
     subparagraph (D), and by inserting after subparagraph (B) the 
     following new subparagraph:
       ``(C) for qualified long-term care services (as defined in 
     section 7702B(e)), or''.
       (b) Technical Amendments.--
       (1) Subparagraph (D) of section 213(d)(1) (as redesignated 
     by subsection (a)) is amended to read as follows:
       ``(D) for insurance (including amounts paid as premiums 
     under part B of title XVIII of the Social Security Act, 
     relating to supplementary medical insurance for the aged)--
       ``(i) covering medical care referred to in subparagraphs 
     (A) and (B), or
       ``(ii) covering medical care referred to in subparagraph 
     (C), but only if such coverage is provided under a qualified 
     long-term care insurance contract (as defined in section 
     7702B(b)).''.
       (2) Paragraph (6) of section 213(d) is amended--
       (A) by striking ``subparagraphs (A) and (B)'' in the matter 
     preceding subparagraph (A) and inserting ``subparagraphs (A), 
     (B), and (C)'', and
       (B) by striking ``paragraph (1)(C)'' in subparagraph (A) 
     and inserting ``paragraph (1)(D)''.
       (3) Paragraph (7) of section 213(d) is amended by striking 
     ``subparagraphs (A) and (B)'' and inserting ``subparagraphs 
     (A), (B), and (C)''.

     SEC. 12202. TREATMENT OF LONG-TERM CARE INSURANCE OR PLANS.

       (a) General Rule.--Chapter 79 (relating to definitions) is 
     amended by inserting after section 7702A the following new 
     section:

     ``SEC. 7702B. TREATMENT OF LONG-TERM CARE INSURANCE OR PLANS.

       ``(a) General Rule.--For purposes of this title--
       ``(1) a qualified long-term care insurance contract shall 
     be treated as an accident or health insurance contract,
       ``(2) any plan of an employer providing coverage of 
     qualified long-term care services shall be treated as an 
     accident or health plan with respect to such services,
       ``(3) amounts (other than policyholder dividends, as 
     defined in section 808, or premium refunds) received under 
     such a contract or plan shall be treated as amounts received 
     for personal injuries or sickness and shall be treated as 
     reimbursement for expenses actually incurred for medical care 
     (as defined in section 213(d)),
       ``(4) payments described in subsection (b)(5) shall be 
     treated as payments made with respect to qualified long-term 
     care services, and
       ``(5) a qualified long-term care insurance contract shall 
     be treated as a guaranteed renewable contract subject to the 
     rules of section 816(e).
       ``(b) Qualified Long-Term Care Insurance Contract.--
       ``(1) In general.--For purposes of this title, the term 
     `qualified long-term care insurance contract' means any 
     insurance contract if--
       ``(A) the only insurance protection provided under such 
     contract is coverage of qualified long-term care services, 
     and
       ``(B) such contract meets the requirements of paragraphs 
     (2), (3), and (4).
       ``(2) Premium requirements.--
       ``(A) In general.--The requirements of this paragraph are 
     met with respect to a contract if such contract provides 
     that--
       ``(i) premium payments may not be made earlier than the 
     date such payments would have been made if the contract 
     provided for level annual payments over the life of the 
     contract (or, if shorter, 20 years), and
       ``(ii) all refunds of premiums, and all policyholder 
     dividends or similar amounts, under such contract are to be 
     applied as a reduction in future premiums or to increase 
     future benefits.

     A contract shall not be treated as failing to meet the 
     requirements of clause (i) solely by reason of a provision 
     providing for a waiver of premiums if the insured becomes a 
     functionally impaired individual.
       ``(B) Refunds upon death or complete surrender or 
     cancellation.--Subparagraph (A)(ii) shall not apply to any 
     refund on the death of the insured, or on any complete 
     surrender or cancellation of the contract, if, under the 
     contract, the amount refunded may not exceed the amount of 
     the premiums paid under the contract. For purposes of this 
     title, any refund described in the preceding sentence shall 
     be includible in gross income to the extent that any 
     deduction or exclusion was allowed with respect to the 
     refund.
       ``(3) Borrowing, pledging, or assigning prohibited.--The 
     requirements of this paragraph are met with respect to a 
     contract if such contract provides that no money may be 
     borrowed under such contract and that such contract (or any 
     portion thereof) may not be assigned or pledged as collateral 
     for a loan.
       ``(4) Prohibition of duplicate payment.--
       ``(A) In general.--The requirements of this paragraph are 
     met with respect to a contract if such contract does not pay 
     or reimburse expenses incurred to the extent that such 
     expenses are reimbursable under title XVIII of the Social 
     Security Act, or would be so reimbursable but for the 
     application of a deductible or coinsurance amount.
       ``(B) Exception.--Subparagraph (A) shall not apply to 
     expenses which are reimbursable under title XVIII of the 
     Social Security Act only as a secondary payor.
       ``(C) Coordination with other laws.--No provision of law 
     shall be construed or applied so as to prohibit the offering 
     of a qualified long-term care insurance contract on the basis 
     that it coordinates its benefits with those provided under 
     title XVIII of the Social Security Act.
       ``(5) Per diem and other periodic payments permitted.--For 
     purposes of subsection (a)(4), payments are described in this 
     paragraph for any calendar year if, under the contract, such 
     payments are made to (or on behalf of) a functionally 
     impaired individual on a per diem or other periodic basis 
     without regard to the expenses incurred or services rendered 
     during the period to which the payments relate.
       ``(c) Special Rules for Treatment of Insureds.--For 
     purposes of this title, solely with respect to the insured 
     under any qualified long-term care insurance contract--
       ``(1) Aggregate payments in excess of limits.--
       ``(A) In general.--If the aggregate payments under all 
     qualified long-term care insurance contracts with respect to 
     an insured for any period (whether on a periodic basis or 
     otherwise) exceed the dollar amount in effect for such period 
     under subparagraph (B), such excess payments shall be treated 
     as made for qualified long-term care services only if made 
     with respect to such services provided during such period.
       ``(B) Dollar amount.--The dollar amount in effect under 
     this paragraph shall be $150 per day (or the equivalent 
     amount in the case of payments on another periodic basis).
       ``(C) Adjustments for increased costs.--
       ``(i) In general.--In the case of any calendar year after 
     1997, the dollar amount in effect under subparagraph (B) for 
     any period occurring during such calendar year shall be equal 
     to the sum of--

       ``(I) the amount in effect under subparagraph (B) for the 
     preceding calendar year (after application of this 
     subparagraph), plus
       ``(II) the applicable percentage of the amount under 
     subclause (I).

       ``(ii) Applicable percentage.--For purposes of clause (i), 
     the term `applicable percentage' means, with respect to any 
     calendar year, the lesser of--

       ``(I) 5 percent, or
       ``(II) the cost-of-living adjustment for such calendar 
     year.

       ``(iii) Cost-of-living adjustment.--For purposes of clause 
     (ii), the cost-of-living adjustment for any calendar year is 
     the percentage (if any) by which the cost index under clause 
     (iv) for the preceding calendar year exceeds such index for 
     the second preceding calendar year. In the case of any 
     calendar year beginning before 1999, this clause shall be 
     applied by substituting the Consumer Price Index (as defined 
     in section 1(f)(5)) for the cost index under clause (iv).
       ``(iv) Cost index.--The Secretary, in consultation with the 
     Secretary of Health and Human Services, shall before January 
     1, 1999, establish a cost index to measure increases in costs 
     of nursing home and similar facilities. The Secretary may 
     from time to time revise such index to the extent necessary 
     to accurately measure increases or decreases in such costs.
       ``(2) Assignment or pledge.--Such contract shall not be 
     treated as a qualified long-term care insurance contract 
     during any period on or after the date on which the contract 
     (or any portion thereof) is assigned or pledged as collateral 
     for a loan.
       ``(d) Treatment of Coverage Provided as Part of a Life 
     Insurance Contract.--Except as otherwise provided in 
     regulations prescribed by the Secretary, in the case of any 
     long-term care insurance coverage provided under a life 
     insurance contract--
       ``(1) In general.--This section shall apply as if the 
     portion of the contract providing such coverage is a separate 
     contract.
       ``(2) Application of section 7702.--Section 7702(c)(2) 
     (relating to the guideline premium limitation) shall be 
     applied by increasing the guideline premium limitation with 
     respect to a life insurance contract, as of any date--
       ``(A) by the sum of the charges against the contract's cash 
     surrender value (within the meaning of section 7702(f)(2)(A)) 
     for such coverage made to that date under the contract, less
       ``(B) any such charges the imposition of which reduces the 
     premiums paid for the contract (within the meaning of section 
     7702(f)(1)).
       ``(3) Application of section 213.--No deduction shall be 
     allowed under section 213(a) for charges against the life 
     insurance contract's cash surrender value described in 
     paragraph (2), unless such charges are includible in income 
     as a result of the application of section 72(e)(10) and the 
     rider is a qualified long-term care insurance contract under 
     subsection (b).
       ``(4) Portion.--For purposes of this subsection, the term 
     `portion' means only the terms and benefits under a life 
     insurance contract that are in addition to the terms and 
     benefits under the contract without regard to the coverage of 
     qualified long-term care services, except that the payment of 
     benefits shall not result in the benefits failing to be 
     treated as long-term care insurance by reason of a reduction 
     in the contract's death benefit or cash surrender value 
     resulting from any such payment.
       ``(e) Qualified Long-Term Care Services.--For purposes of 
     this section--
       ``(1) In general.--The term `qualified long-term care 
     services' means necessary diagnostic, preventive, 
     therapeutic, curing, treating, mitigating, or rehabilitative 
     services, and maintenance or personal care services, which--
       ``(A) are required by an individual during any period 
     during which such individual is a functionally impaired 
     individual,
       ``(B) have as their primary purpose the provision of--
       ``(i) needed assistance with 1 or more activities of daily 
     living which a functionally impaired individual is certified 
     as being unable to perform under paragraph (2), or

[[Page S 16307]]

       ``(ii) substantial supervision which the individual is 
     certified under paragraph (2) as needing to protect the 
     individual from threats to health and safety due to 
     substantial cognitive impairment, and
       ``(C) are provided pursuant to a continuing plan of care 
     prescribed by a licensed health care practitioner.
       ``(2) Functionally impaired individual.--The term 
     `functionally impaired individual' means any individual who 
     is certified by a licensed health care practitioner as--
       ``(A) being unable to perform, without substantial 
     assistance from another individual (including assistance 
     involving verbal reminding or physical cuing), at least 2 
     activities of daily living described in paragraph (3), or
       ``(B) requiring substantial supervision to protect such 
     individual from threats to health and safety due to 
     substantial cognitive impairment.

     Such term shall not include any individual otherwise meeting 
     the requirements of the preceding sentence unless, within the 
     preceding 12-month period, a licensed health care 
     practitioner has certified that such individual meets such 
     requirements.
       ``(3) Activities of daily living.--Each of the following is 
     an activity of daily living:
       ``(A) Eating.
       ``(B) Transferring.
       ``(C) Toileting.
       ``(D) Dressing.
       ``(E) Bathing.
       ``(F) Continence.
       ``(4) Licensed health care practitioner.--
       ``(A) In general.--The term `licensed health care 
     practitioner' means any individual--
       ``(i) who is--

       ``(I) a physician (as defined in section 1861(r)(1) of the 
     Social Security Act) or registered professional nurse,
       ``(II) a qualified community care case manager (as defined 
     in subparagraph (B)), or
       ``(III) any other individual who meets such requirements as 
     may be prescribed by the Secretary after consultation with 
     the Secretary of Health and Human Services, and

       ``(ii) who is not a relative of the individual receiving 
     care.
       ``(B) Qualified community care case manager.--The term 
     `qualified community care case manager' means an individual 
     or entity which--
       ``(i) has experience or has been trained in providing case 
     management services and in preparing individual care plans;
       ``(ii) has experience in assessing individuals to determine 
     their functional and cognitive impairment; and
       ``(iii) meets such requirements as may be prescribed by the 
     Secretary after consultation with the Secretary of Health and 
     Human Services.
       ``(5) Relative.--The term `relative' means an individual 
     bearing a relationship to another individual which is 
     described in paragraphs (1) through (8) of section 152(a).
       ``(f) Continuation Coverage Treatment Not To Apply.--
     Section 4980B shall not apply to--
       ``(1) qualified long-term care insurance contracts, or
       ``(2) plans described in subsection (a)(2).
       ``(g) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the requirements 
     of this section, including regulations to prevent the 
     avoidance of this section by providing qualified long-term 
     care services under a life insurance contract.''.
       (b) Long-Term Care Insurance Not Permitted Under Cafeteria 
     Plans or Flexible Spending Arrangements.--
       (1) Cafeteria plans.--Section 125(f) is amended by adding 
     at the end the following new sentence: ``Such term shall not 
     include any qualified long-term care insurance contract (as 
     defined in section 7702B(b)).''.
       (2) Flexible spending arrangements.--The text of section 
     106 (relating to contributions by employer to accident and 
     health plans) is amended to read as follows:
       ``(a) General Rule.--Except as provided in subsection (b), 
     gross income of an employee does not include employer-
     provided coverage under an accident or health plan.
       ``(b) Inclusion of Long-Term Care Benefits Provided Through 
     Flexible Spending Arrangements.--
       ``(1) In general.--Effective on and after January 1, 1996, 
     gross income of an employee shall include employer-provided 
     coverage for qualified long-term care services (as defined in 
     section 7702B(e)) to the extent that such coverage is 
     provided through a flexible spending or similar arrangement.
       ``(2) Flexible spending arrangement.--For purposes of this 
     subsection, a flexible spending arrangement is a benefit 
     program which provides employees with coverage under which--
       ``(A) specified incurred expenses may be reimbursed 
     (subject to reimbursement maximums and other reasonable 
     conditions), and
       ``(B) the maximum amount of reimbursement which is 
     reasonably available to a participant for such coverage is 
     less than 500 percent of the value of such coverage.

     In the case of an insured plan, the maximum amount reasonably 
     available shall be determined on the basis of the underlying 
     coverage.''.
       (c) Reserves.--Clause (iii) of section 807(d)(3)(A) is 
     amended by inserting ``(other than a qualified long-term care 
     insurance contract within the meaning of section 7702B)'' 
     after ``contract''.
       (d) Clerical Amendment.--The table of sections for chapter 
     79 is amended by inserting after the item relating to section 
     7702A the following new item:

``Sec. 7702B. Treatment of long-term care insurance or plans.''.

     SEC. 12203. REPORTING REQUIREMENTS.

       (a) In General.--Subpart B of part III of subchapter A of 
     chapter 61, as amended by section 12004(b), is amended by 
     adding at the end the following new section:

     ``SEC. 6050R. CERTAIN LONG-TERM CARE BENEFITS.

       ``(a) Requirement of Reporting.--Any person who pays long-
     term care benefits shall make a return, according to the 
     forms or regulations prescribed by the Secretary, setting 
     forth--
       ``(1) the aggregate amount of such benefits paid by such 
     person to any individual during any calendar year, and
       ``(2) the name, address, and TIN of such individual.
       ``(b) Statements To Be Furnished to Persons With Respect to 
     Whom Information Is Required.--Every person required to make 
     a return under subsection (a) shall furnish to each 
     individual whose name is required to be set forth in such 
     return a written statement showing--
       ``(1) the name of the person making the payments, and
       ``(2) the aggregate amount of long-term care benefits paid 
     to the individual which are required to be shown on such 
     return.

     The written statement required under the preceding sentence 
     shall be furnished to the individual on or before January 31 
     of the year following the calendar year for which the return 
     under subsection (a) was required to be made.
       ``(c) Long-Term Care Benefits.--For purposes of this 
     section, the term `long-term care benefit' means any amount 
     paid under a long-term care insurance policy (within the 
     meaning of section 4980C(e)).''.
       (b) Penalties.--
       (1) Subparagraph (B) of section 6724(d)(1), as amended by 
     section 12004, is amended by redesignating clauses (x) 
     through (xv) as clauses (xi) through (xvi), respectively, and 
     by inserting after clause (ix) the following new clause:
       ``(x) section 6050R (relating to certain long-term care 
     benefits),''.
       (2) Paragraph (2) of section 6724(d), as so amended, is 
     amended by redesignating subparagraphs (R) through (U) as 
     subparagraphs (S) through (V), respectively, and by inserting 
     after subparagraph (Q) the following new subparagraph:
       ``(R) section 6050R(b) (relating to certain long-term care 
     benefits),''.
       (c) Clerical Amendment.--The table of sections for subpart 
     B of part III of subchapter A of chapter 61 is amended by 
     adding at the end the following new item:

``Sec. 6050R. Certain long-term care benefits.''.

     SEC. 12204. EFFECTIVE DATES.

       (a) Section 12201.--The amendments made by section 12201 
     shall apply to taxable years beginning after December 31, 
     1995.
       (b) Section 12202.--The amendments made by section 12202 
     shall apply to contracts issued after December 31, 1995.
       (c) Section 12203.--The amendments made by section 12203 
     shall apply to benefits paid after December 31, 1995.
       (d) Transition Rule.--If, after the date of the enactment 
     of this Act and before January 1, 1997, a contract providing 
     coverage for services which are similar to qualified long-
     term care services (as defined in section 7702B(e) of the 
     Internal Revenue Code of 1986) and issued on or before such 
     date of enactment, is exchanged for a qualified long-term 
     care insurance contract (as defined in section 7702B(b) of 
     such Code), such exchange shall be treated as an exchange to 
     which section 1035 of such Code applies.
       (e) Issuance of Certain Riders Permitted.--For purposes of 
     section 101(f), 7702, or 7702A of the Internal Revenue Code 
     of 1986, the issuance of a rider on a life insurance contract 
     providing coverage of qualified long-term care services, or 
     the conformance of such a rider to the requirements of this 
     Act, shall not be treated as a modification or material 
     change of such contract.
       (f) No Inference.--No inference shall be drawn from the 
     amendments made by this subpart as to how the Internal 
     Revenue Code of 1986 is to be applied before the effective 
     date of such amendments to qualified long-term care services 
     or contracts.

                PART II--CONSUMER PROTECTION PROVISIONS

     SEC. 12211. POLICY REQUIREMENTS.

       (a) In General.--Section 7702B (as added by section 12202) 
     is amended by redesignating subsection (g) as subsection (h) 
     and by inserting after subsection (f) the following new 
     subsection:
       ``(g) Consumer Protection Provisions.--
       ``(1) In general.--The requirements of this subsection are 
     met with respect to any contract if any long-term care 
     insurance policy issued under the contract meets--
       ``(A) the requirements of the model regulation and model 
     Act described in paragraph (2),
       ``(B) the disclosure requirement of paragraph (3), and
       ``(C) the requirements relating to nonforfeitability under 
     paragraph (4).
       ``(2) Requirements of model regulation and act.--
       ``(A) In general.--The requirements of this paragraph are 
     met with respect to any policy if such policy meets--
       ``(i) Model regulation.--The following requirements of the 
     model regulation:

       ``(I) Section 7A (relating to guaranteed renewal or 
     noncancellability), and the requirements of section 6B of the 
     model Act relating to such section 7A.
       ``(II) Section 7B (relating to prohibitions on limitations 
     and exclusions).
       ``(III) Section 7C (relating to extension of benefits).
       ``(IV) Section 7D (relating to continuation or conversion 
     of coverage).
       ``(V) Section 7E (relating to discontinuance and 
     replacement of policies).

[[Page S 16308]]

       ``(VI) Section 8 (relating to unintentional lapse).
       ``(VII) Section 9 (relating to disclosure), other than 
     section 9F thereof.
       ``(VIII) Section 10 (relating to prohibitions against post-
     claims underwriting).
       ``(IX) Section 11 (relating to minimum standards).
       ``(X) Section 12 (relating to requirement to offer 
     inflation protection), except that any requirement for a 
     signature on a rejection of inflation protection shall permit 
     the signature to be on an application or on a separate form.
       ``(XI) Section 23 (relating to prohibition against 
     preexisting conditions and probationary periods in 
     replacement policies or certificates).

       ``(ii) Model act.--The following requirements of the model 
     Act:

       ``(I) Section 6C (relating to preexisting conditions).
       ``(II) Section 6D (relating to prior hospitalization).

       ``(B) Definitions.--For purposes of this paragraph--
       ``(i) Model provisions.--The terms `model regulation' and 
     `model Act' mean the long-term care insurance model 
     regulation, and the long-term care insurance model Act, 
     respectively, promulgated by the National Association of 
     Insurance Commissioners (as adopted as of January 1993).
       ``(ii) Coordination.--Any provision of the model regulation 
     or model Act listed under clause (i) or (ii) of subparagraph 
     (A) shall be treated as including any other provision of such 
     regulation or Act necessary to implement the provision.
       ``(3) Disclosure requirement.--The requirement of this 
     paragraph is met with respect to any policy if such policy 
     meets the requirements of section 4980C(d)(1).
       ``(4) Nonforfeiture requirements.--
       ``(A) In general.--The requirements of this paragraph are 
     met with respect to any level premium long-term care 
     insurance policy, if the issuer of such policy offers to the 
     policyholder, including any group policyholder, a 
     nonforfeiture provision meeting the requirements of 
     subparagraph (B).
       ``(B) Requirements of provision.--The nonforfeiture 
     provision required under subparagraph (A) shall meet the 
     following requirements:
       ``(i) The nonforfeiture provision shall be appropriately 
     captioned.
       ``(ii) The nonforfeiture provision shall provide for a 
     benefit available in the event of a default in the payment of 
     any premiums and the amount of the benefit may be adjusted 
     subsequent to being initially granted only as necessary to 
     reflect changes in claims, persistency, and interest as 
     reflected in changes in rates for premium paying policies 
     approved by the Secretary for the same policy form.
       ``(iii) The nonforfeiture provision shall provide at least 
     one of the following:

       ``(I) Reduced paid-up insurance.
       ``(II) Extended term insurance.
       ``(III) Shortened benefit period.
       ``(IV) Other similar offerings approved by the Secretary.

       ``(5) Long-term care insurance policy defined.--For 
     purposes of this subsection, the term `long-term care 
     insurance policy' has the meaning given such term by section 
     4980C(e).''.
       (b) Conforming Amendment.--Section 7702B(b)(1)(B) (as added 
     by section 12202) is amended by inserting ``and of subsection 
     (g)'' after ``and (4)''.

     SEC. 12212. REQUIREMENTS FOR ISSUERS OF LONG-TERM CARE 
                   INSURANCE POLICIES.

       (a) In General.--Chapter 43 is amended by adding at the end 
     the following new section:

     ``SEC. 4980C. REQUIREMENTS FOR ISSUERS OF LONG-TERM CARE 
                   INSURANCE POLICIES.

       ``(a) General Rule.--There is hereby imposed on any person 
     failing to meet the requirements of subsection (c) or (d) a 
     tax in the amount determined under subsection (b).
       ``(b) Amount.--
       ``(1) In general.--The amount of the tax imposed by 
     subsection (a) shall be $100 per policy for each day any 
     requirements of subsection (c) or (d) are not met with 
     respect to each long-term care insurance policy.
       ``(2) Waiver.--In the case of a failure which is due to 
     reasonable cause and not to willful neglect, the Secretary 
     may waive part or all of the tax imposed by subsection (a) to 
     the extent that payment of the tax would be excessive 
     relative to the failure involved.
       ``(c) Responsibilities.--The requirements of this 
     subsection are as follows:
       ``(1) Requirements of model provisions.--
       ``(A) Model regulation.--The following requirements of the 
     model regulation must be met:
       ``(i) Section 13 (relating to application forms and 
     replacement coverage).
       ``(ii) Section 14 (relating to reporting requirements), 
     except that the issuer shall also report at least annually 
     the number of claims denied during the reporting period for 
     each class of business (expressed as a percentage of claims 
     denied), other than claims denied for failure to meet the 
     waiting period or because of any applicable preexisting 
     condition.
       ``(iii) Section 20 (relating to filing requirements for 
     marketing).
       ``(iv) Section 21 (relating to standards for marketing), 
     including inaccurate completion of medical histories, other 
     than sections 21C(1) and 21C(6) thereof, except that--

       ``(I) in addition to such requirements, no person shall, in 
     selling or offering to sell a long-term care insurance 
     policy, misrepresent a material fact; and
       ``(II) no such requirements shall include a requirement to 
     inquire or identify whether a prospective applicant or 
     enrollee for long-term care insurance has accident and 
     sickness insurance.

       ``(v) Section 22 (relating to appropriateness of 
     recommended purchase).
       ``(vi) Section 24 (relating to standard format outline of 
     coverage).
       ``(vii) Section 25 (relating to requirement to deliver 
     shopper's guide).
       ``(B) Model act.--The following requirements of the model 
     Act must be met:
       ``(i) Section 6F (relating to right to return), except that 
     such section shall also apply to denials of applications and 
     any refund shall be made within 30 days of the return or 
     denial.
       ``(ii) Section 6G (relating to outline of coverage).
       ``(iii) Section 6H (relating to requirements for 
     certificates under group plans).
       ``(iv) Section 6I (relating to policy summary).
       ``(v) Section 6J (relating to monthly reports on 
     accelerated death benefits).
       ``(vi) Section 7 (relating to incontestability period).
       ``(C) Definitions.--For purposes of this paragraph, the 
     terms `model regulation' and `model Act' have the meanings 
     given such terms by section 7702B(g)(2)(B).
       ``(2) Delivery of policy.--If an application for a long-
     term care insurance policy (or for a certificate under a 
     group long-term care insurance policy) is approved, the 
     issuer shall deliver to the applicant (or policyholder or 
     certificateholder) the policy (or certificate) of insurance 
     not later than 30 days after the date of the approval.
       ``(3) Information on denials of claims.--If a claim under a 
     long-term care insurance policy is denied, the issuer shall, 
     within 60 days of the date of a written request by the 
     policyholder or certificateholder (or representative)--
       ``(A) provide a written explanation of the reasons for the 
     denial, and
       ``(B) make available all information directly relating to 
     such denial.
       ``(d) Disclosure.--The requirements of this subsection are 
     met if the issuer of a long-term care insurance policy 
     discloses in such policy and in the outline of coverage 
     required under subsection (c)(1)(B)(ii) that the policy is 
     intended to be a qualified long-term care insurance contract 
     under section 7702B(b) of the Internal Revenue Code of 1986.
       ``(e) Long-Term Care Insurance Policy Defined.--For 
     purposes of this section, the term `long-term care insurance 
     policy' means any product which is advertised, marketed, or 
     offered as long-term care insurance.''.
       (b) Conforming Amendment.--The table of sections for 
     chapter 43 is amended by adding at the end the following new 
     item:

``Sec. 4980C. Requirements for issuers of long-term care insurance 
              policies.''.

     SEC. 12213. COORDINATION WITH STATE REQUIREMENTS.

       Nothing in this part shall prevent a State from 
     establishing, implementing, or continuing in effect standards 
     related to the protection of policyholders of long-term care 
     insurance policies (as defined in section 4980C(e) of the 
     Internal Revenue Code of 1986), if such standards are not in 
     conflict with or inconsistent with the standards established 
     under such Code.

     SEC. 12214. EFFECTIVE DATES.

       (a) In General.--The provisions of, and amendments made by, 
     this part shall apply to contracts issued after December 31, 
     1995. The provisions of section 12204(d) of this Act 
     (relating to transition rule) shall apply to such contracts.
       (b) Issuers.--The amendments made by section 12212 shall 
     apply to actions taken after December 31, 1995.

         Subchapter B--Treatment of Accelerated Death Benefits

     SEC. 12221. TREATMENT OF ACCELERATED DEATH BENEFITS UNDER 
                   LIFE INSURANCE CONTRACTS.

       (a) General Rule.--Section 101 (relating to certain death 
     benefits) is amended by adding at the end the following new 
     subsection:
       ``(g) Treatment of Certain Accelerated Death Benefits.--
       ``(1) In general.--For purposes of this section, any amount 
     received under a life insurance contract on the life of an 
     insured who is a terminally ill individual shall be treated 
     as an amount paid by reason of the death of such insured.
       ``(2) Necessary conditions.--
       ``(A) In general.--Paragraph (1) shall not apply to any 
     amount received unless--
       ``(i) the total amount received is not less than the 
     present value (determined under subparagraph (B)) of the 
     reduction in the death benefit otherwise payable in the event 
     of the death of the insured, and
       ``(ii) the percentage reduction in the cash surrender value 
     of the contract by reason of the distribution does not exceed 
     the percentage reduction in the death benefit payable under 
     the contract by reason of such distribution.
       ``(B) Present value.--The present value of the reduction in 
     the death benefit shall be determined by--
       ``(i) using a discount rate which is based on an interest 
     rate which does not exceed the highest interest rate set 
     forth in subparagraph (C), and
       ``(ii) assuming that the death benefit (or the portion 
     thereof) would have been paid on the date which is 12 months 
     after the date of the certification referred to in paragraph 
     (3).
       ``(C) Rates.--The interest rates set forth in this 
     subparagraph are the following:
       ``(i) The 90-day Treasury bill yield.
       ``(ii) The rate described as Moody's Corporate Bond Yield 
     Average-Monthly Average Corporates as published by Moody's 
     Investors Service, Inc., or any successor thereto, for the 
     calendar month ending 2 months before the date on which the 
     rate is determined.
       ``(iii) The rate used to compute the cash surrender values 
     under the contract during the applicable period plus 1 
     percent per annum.

[[Page S 16309]]

       ``(D) Special rules relating to liens.--If a lien is 
     imposed against a life insurance contract with respect to any 
     amount referred to in paragraph (1)--
       ``(i) for purposes of subparagraph (A), the amount of such 
     lien shall be treated as a reduction (at the time of receipt) 
     in the death benefit or cash surrender value to the extent 
     that such benefit or value, as the case may be, is (or may 
     become) subject to the lien, and
       ``(ii) paragraph (1) shall not apply to the amount received 
     unless any rate of interest with respect to any amount in 
     connection with which such lien is imposed does not exceed 
     the highest rate set forth in subparagraph (C).
       ``(3) Treatment of viatical settlements.--
       ``(A) In general.--In the case of a life insurance contract 
     on the life of an insured described in paragraph (1), if--
       ``(i) any portion of such contract is sold to any viatical 
     settlement provider, or
       ``(ii) any portion of the death benefit is assigned to such 
     a provider,

     the amount paid for such sale or assignment shall be treated 
     as an amount paid under the life insurance contract by reason 
     of the death of such insured.
       ``(B) Viatical settlement provider.--The term `viatical 
     settlement provider' means any person regularly engaged in 
     the trade or business of purchasing, or taking assignments 
     of, life insurance contracts on the lives of insureds 
     described in paragraph (1) if--
       ``(i) such person is licensed for such purposes in the 
     State in which the insured resides, or
       ``(ii) in the case of an insured who resides in a State not 
     requiring the licensing of such persons for such purposes, 
     such person--

       ``(I) meets the requirements of sections 8 and 9 of the 
     Viatical Settlements Model Act of the National Association of 
     Insurance Commissioners, and
       ``(II) meets the requirements of the Model Regulations of 
     the National Association of Insurance Commissioners (relating 
     to standards for evaluation of reasonable payments) in 
     determining amounts paid by such person in connection with 
     such purchases or assignments.

       ``(4) Terminally ill individual.--For purposes of this 
     subsection, the term `terminally ill individual' means an 
     individual who the insurer has determined, after receipt of 
     an acceptable certification by a licensed physician (as 
     defined in section 1861(r)(1) of the Social Security Act), 
     has an illness or physical condition which is reasonably 
     expected to result in death within 12 months after the date 
     of certification.
       ``(5) Exception for business-related policies.--This 
     subsection shall not apply in the case of any amount paid to 
     any taxpayer other than the insured if such taxpayer has an 
     insurable interest with respect to the life of the insured by 
     reason of the insured being a director, officer, or employee 
     of the taxpayer or by reason of the insured having a 
     financial interest in any trade or business carried on by the 
     taxpayer.''.
       (b) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendment made by this section shall apply to amounts 
     received after December 31, 1995.
       (2) Delay in application of discount rules.--Clause (i) of 
     section 101(g)(2)(A) of the Internal Revenue Code of 1986 
     shall not apply to any amount received before July 1, 1996.
       (3) Issuance of rider not treated as material change.--For 
     purposes of applying section 101(f), 7702, or 7702A of the 
     Internal Revenue Code of 1986 to any contract, the issuance 
     of a qualified accelerated death benefit rider (as defined in 
     section 818(g) of such Code (as added by this Act)), or the 
     conformance of such a rider to the requirements of such 
     section, shall not be treated as a modification or material 
     change of such contract.

     SEC. 12222. TREATMENT OF COMPANIES ISSUING QUALIFIED 
                   ACCELERATED DEATH BENEFIT RIDERS.

       (a) Qualified Accelerated Death Benefit Riders Treated as 
     Life Insurance.--Section 818 (relating to other definitions 
     and special rules) is amended by adding at the end the 
     following new subsection:
       ``(g) Qualified Accelerated Death Benefit Riders Treated as 
     Life Insurance.--For purposes of this part--
       ``(1) In general.--Any reference to a life insurance 
     contract shall be treated as including a reference to a 
     qualified accelerated death benefit rider on such contract.
       ``(2) Qualified accelerated death benefit riders.--For 
     purposes of this subsection, the term `qualified accelerated 
     death benefit rider' means any rider on a life insurance 
     contract which provides for a distribution to an individual 
     upon the insured becoming a terminally ill individual (as 
     defined in section 101(g)(3)).''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 1996.

                 Subchapter C--Medical Savings Accounts

     SEC. 12231. DEDUCTION FOR CONTRIBUTIONS TO MEDICAL SAVINGS 
                   ACCOUNTS.

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

     ``SEC. 220. CONTRIBUTIONS TO MEDICAL SAVINGS ACCOUNTS.

       ``(a) Deduction Allowed.--In the case of an eligible 
     individual, the amounts paid in cash during the taxable year 
     by such individual to a medical savings account for the 
     benefit of such individual or for the benefit of such 
     individual and any spouse or dependent of such individual who 
     is an eligible individual shall be treated for purposes of 
     sections 162(l) and 213 as amounts paid for insurance which 
     constitutes medical care.
       ``(b) Limitations.--
       ``(1) Only 1 account per family.--Except as provided in 
     regulations prescribed by the Secretary, no amount shall be 
     treated as paid for insurance by reason of subsection (a) for 
     amounts paid to any medical savings account if the account 
     beneficiary, or such beneficiary's spouse or dependent, is a 
     beneficiary of any other medical savings account.
       ``(2) Dollar limitation.--
       ``(A) In general.--Except as otherwise provided in this 
     subsection, the aggregate amount which may be treated as paid 
     for insurance under subsection (a) with respect to any 
     account beneficiary shall not exceed the lesser of--
       ``(i) $2,000, or
       ``(ii) the deductible under the high deductible health plan 
     covering such individual.
       ``(B) Family account.--If the high deductible health plan 
     covering an eligible individual provides coverage for any 
     other eligible individual who is the spouse or any dependent 
     (as defined in section 152) of the taxpayer, the limitation 
     under subparagraph (A) shall be equal to the lesser of--
       ``(i) $4,000, or
       ``(ii) the annual limit under the high deductible health 
     plan on the aggregate amount of deductibles required to be 
     paid by all individuals.
       ``(3) Proration of limitation.--
       ``(A) In general.--The limitation under paragraph (2) shall 
     be the sum of the monthly limitations for months during the 
     taxable year that the individual is an eligible individual 
     if--
       ``(i) such individual is not an eligible individual for all 
     months of the taxable year,
       ``(ii) the deductible under the high deductible health plan 
     covering such individual is not the same throughout such 
     taxable year, or
       ``(iii) such limitation is determined under paragraph 
     (2)(B) for some but not all months during such taxable year.
       ``(B) Monthly limitation.--The monthly limitation for any 
     month shall be an amount equal to \1/12\ of the limitation 
     which would (but for this paragraph) be determined under 
     paragraph (2) if the facts and circumstances as of the first 
     day of such month that such individual is covered under a 
     high deductible health plan were true for the entire taxable 
     year.
       ``(c) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Eligible individual.--The term `eligible individual' 
     means, with respect to any month, any individual--
       ``(A) who is covered under a high deductible health plan 
     during such month, and
       ``(B) who is not eligible during such month--
       ``(i) to participate in an employer-subsidized health plan 
     maintained by an employer of the individual, the individual's 
     spouse, or any dependent of either, or
       ``(ii) to receive any employer contribution to a medical 
     savings account.

     For purposes of subparagraph (B), a self-employed individual 
     (within the meaning of section 401(c)) shall not be treated 
     as his own employer.
       ``(2) High deductible health plan.--The term `high 
     deductible health plan' means a health plan which--
       ``(A) has an annual deductible limit for each individual 
     covered by the plan which is not less than $1,500, and
       ``(B) has an annual limit on the aggregate amount of 
     deductibles required to be paid with respect to all 
     individuals covered by the plan which is not less than 
     $3,000.
       ``(3) Cost-of-living adjustments.--In the case of taxable 
     years beginning after December 31, 1996, each dollar amount 
     contained in paragraph (2) and subsection (b)(2) shall be 
     increased by an amount equal to the product of--
       ``(A) such dollar amount, and
       ``(B) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, except that such section shall be applied by 
     substituting `the medical component of the CPI' for `the CPI' 
     each place it appears and by substituting `1995' for `1992' 
     in subparagraph (B).

     If any amount under this paragraph is not a multiple of $50, 
     such amount shall be rounded to the next lower multiple of 
     $50.
       ``(4) Medical savings account.--The term `medical savings 
     account' has the meaning given such term by section 7705.
       ``(5) Time when contributions deemed made.--A contribution 
     shall be deemed to be made on the last day of the preceding 
     taxable year if the contribution is made on account of such 
     taxable year and is made not later than the time prescribed 
     by law for filing the return for such taxable year (not 
     including extensions thereof).''.
       (b) Clerical Amendment.--The table of sections for part VII 
     of subchapter B of chapter 1 is amended by striking the last 
     item and inserting the following new item:

``Sec. 220. Contributions to medical savings accounts.''.

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

     SEC. 12232. EXCLUSION FROM INCOME OF EMPLOYER CONTRIBUTIONS 
                   TO MEDICAL SAVINGS ACCOUNTS.

       (a) In General.--Section 106 (relating to contributions by 
     employers to accident and health plans), as amended by 
     section 12202(b), is amended by adding at the end the 
     following new subsection:
       ``(c) Contributions to Medical Savings Accounts.--
       ``(1) Treatment of contributions.--
       ``(A) In general.--Gross income of an employee who is 
     covered by a high deductible health plan of an employer shall 
     not include any employer contribution to a medical savings 

[[Page S 16310]]
     account on behalf of the employee or the employee's spouse or 
     dependents.
       ``(B) No constructive receipt.--No amount shall be included 
     in the gross income of any employee solely because the 
     employee may choose between the contributions described in 
     subparagraph (A) and employer contributions to a health plan 
     of the employer.
       ``(2) Limitations.--
       ``(A) Only 1 account per family.--Except as provided in 
     regulations, no amount may be excluded under subsection (a) 
     for contributions to a medical savings account if the 
     employee, or such employee's spouse or dependent, is a 
     beneficiary of any other medical savings account.
       ``(B) Dollar limitation.--The amount which may be excluded 
     under paragraph (1) for any taxable year shall not exceed the 
     limitation under section 220(b)(2) (without regard to this 
     subsection) which is applicable to such employee for such 
     taxable year.
       ``(3) Special rule for deduction of employer 
     contributions.--Any employer contribution to a medical 
     savings account, if otherwise allowable as a deduction under 
     this chapter, shall be allowed only for the taxable year in 
     which paid.
       ``(4) Definitions.--For purposes of this subsection--
       ``(A) High deductible health plan.--The term `high 
     deductible health plan' has the meaning given such term by 
     section 220(c)(2).
       ``(B) Medical savings account.--The term `medical savings 
     account' has the meaning given such term by section 7705.''.
       (b) Exclusion of Employer Payments.--
       (1) In general.--Notwithstanding any other provision of 
     law, any payment made to or for the benefit of an employee 
     with respect to which, at the time of the payment, it is 
     reasonable to believe that the employee will be able to 
     exclude such payment from income under section 106(c) shall 
     be treated in the same manner as payments to or for the 
     benefit of an employee on account of sickness or accident.
       (2) Railroad retirement tax.--Subsection (e) of section 
     3231 is amended by adding at the end the following new 
     paragraph:
       ``(10) Medical savings account contributions.--The term 
     `compensation' shall not include any payment made to or for 
     the benefit of an employee if at the time of such payment it 
     is reasonable to believe that the employee will be able to 
     exclude such payment from income under section 106(c).''.
       (3) Unemployment tax.--Subsection (b) of section 3306 is 
     amended by striking ``or'' at the end of paragraph (15), by 
     striking the period at the end of paragraph (16) and 
     inserting ``; or'', and by inserting after paragraph (16) the 
     following new paragraph:
       ``(17) any payment made to or for the benefit of an 
     employee if at the time of such payment it is reasonable to 
     believe that the employee will be able to exclude such 
     payment from income under section 106(c).''.
       (4) Withholding tax.--Subsection (a) of section 3401 is 
     amended by striking ``or'' at the end of paragraph (19), by 
     striking the period at the end of paragraph (20) and 
     inserting ``; or'', and by inserting after paragraph (20) the 
     following new paragraph:
       ``(21) any payment made to or for the benefit of an 
     employee if at the time of such payment it is reasonable to 
     believe that the employee will be able to exclude such 
     payment from income under section 106(c).''.
       (c) Medical Savings Accounts Not Permitted Under Cafeteria 
     Plans.--Section 125(f) is amended by adding at the end the 
     following new sentence: ``Such term shall not include any 
     contribution to a medical savings account under section 
     7705.''.
       (d) Conforming Amendment.--Section 106(a), as designated by 
     section 12202(b), is amended by striking ``subsection (b)'' 
     and inserting ``subsection (b) or (c)''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 12233. MEDICAL SAVINGS ACCOUNTS.

       (a) In General.--Chapter 79 is amended by adding at the end 
     the following new section:

     ``SEC. 7705. MEDICAL SAVINGS ACCOUNTS.

       ``(a) General Rule.--The term `medical savings account' 
     means a trust created or organized in the United States for 
     the exclusive benefit of the beneficiaries of the trust, but 
     only if the written governing instrument creating the trust 
     meets the following requirements:
       ``(1) Except in the case of a rollover contribution 
     described in subsection (c)(5)--
       ``(A) no contribution will be accepted unless--
       ``(i) it is in cash, and
       ``(ii) it is made for a period during which the individual 
     on whose behalf it is made is covered under a high deductible 
     health plan, and
       ``(B) contributions will not be accepted for any taxable 
     year in excess of the amount determined under section 
     220(b)(2) for such taxable year.
       ``(2) The trustee is a bank (as defined in section 408(n)), 
     insurance company (as defined in section 816), or another 
     person who demonstrates to the satisfaction of the Secretary 
     that the manner in which such person will administer the 
     trust will be consistent with the requirements of this 
     section.
       ``(3) The assets of the trust will not be commingled with 
     other property except in a common trust fund or common 
     investment fund.
       ``(4) No part of the trust assets will be invested in life 
     insurance contracts.
       ``(5) The interest of an individual in the balance in the 
     individual's account is nonforfeitable.
       ``(b) Tax Treatment of Accounts.--
       ``(1) In general.--A medical savings account is exempt from 
     taxation under this subtitle unless such account has ceased 
     to be a medical savings account by reason of paragraph (2) or 
     (3). Notwithstanding the preceding sentence, any such account 
     is subject to the taxes imposed by section 511 (relating to 
     imposition of tax on unrelated business income of charitable, 
     etc. organizations).
       ``(2) Account terminations.--Rules similar to the rules of 
     paragraphs (2) and (4) of section 408(e) shall apply to 
     medical savings accounts, and any amount treated as 
     distributed under such rules shall be treated as not used to 
     pay qualified medical expenses.
       ``(3) Failure to remain in health plan.--
       ``(A) In general.--If, at any time during the 2-taxable 
     year period beginning with the first taxable year in which an 
     individual was an account beneficiary in a medical savings 
     account, the account beneficiary becomes a participant in a 
     health plan which has a lower individual (or aggregate) 
     deductible limit than the lowest individual (or aggregate) 
     limit permitted under a high deductible health plan, the 
     account shall cease to be a medical savings account as of the 
     first day of the taxable year in which the individual ceases 
     to be so covered.
       ``(B) Exception.--This paragraph shall not apply to any 
     account beneficiary who becomes a participant in a plan 
     described in subparagraph (A) by reason of separation from 
     employment.
       ``(C) Account treated as distributing all its assets.--In 
     any case in which any account ceases to be a medical savings 
     account by reason of subparagraph (A) on the first day of any 
     taxable year, subsection (c) shall be applied as if--
       ``(i) there were a distribution on such first day in an 
     amount equal to the fair market value (on such first day) of 
     all assets in the account (on such first day), and
       ``(ii) no portion of such distribution were used to pay 
     qualified medical expenses.
       ``(c) Tax Treatment of Distributions.--
       ``(1) Amounts used for qualified medical expenses.--
       ``(A) In general.--Any amount paid or distributed out of a 
     medical savings account which is used exclusively to pay 
     qualified medical expenses of any account beneficiary (or any 
     spouse or dependent of the beneficiary) shall not be 
     includible in gross income.
       ``(B) Treatment after death of account beneficiary.--
       ``(i) Treatment if beneficiary is spouse.--If, after the 
     death of the account beneficiary, the account beneficiary's 
     interest is payable to (or for the benefit of) the 
     beneficiary's spouse, the medical savings account shall be 
     treated as if the spouse were the account beneficiary.
       ``(ii) Treatment if designated beneficiary is not spouse.--
     In the case of an account beneficiary's interest in a medical 
     savings account which is payable to (or for the benefit of) 
     any person other than such beneficiary's spouse upon the 
     death of such beneficiary--

       ``(I) such account shall cease to be a medical savings 
     account as of the date of death, and
       ``(II) an amount equal to the fair market value of the 
     assets in such account on such date shall be includible if 
     such person is not the estate of such beneficiary, in such 
     person's gross income for the taxable year which includes 
     such date, or if such person is the estate of such 
     beneficiary, in such beneficiary's gross income for last 
     taxable year of such beneficiary.

       ``(2) Inclusion of amounts not used for qualified medical 
     expenses.--
       ``(A) In general.--Any amount paid or distributed out of a 
     medical savings account which is not used exclusively to pay 
     the qualified medical expenses of the account beneficiary or 
     of the spouse or dependents of such beneficiary shall be 
     included in the gross income of such beneficiary to the 
     extent such amount does not exceed the excess of--
       ``(i) the aggregate contributions to such account which 
     were allowed as a deduction under section 162(l) or 213 or 
     which were excluded under section 106(c), over
       ``(ii) the aggregate prior payments or distributions from 
     such account which were includible in gross income under this 
     paragraph.
       ``(B) Special rules.--For purposes of subparagraph (A)--
       ``(i) all medical savings accounts of the account 
     beneficiary shall be treated as 1 account,
       ``(ii) all payments and distributions during any taxable 
     year shall be treated as 1 distribution, and
       ``(iii) any distribution of property shall be taken into 
     account at its fair market value on the date of the 
     distribution.
       ``(3) Excess contributions returned before due date of 
     return.--Paragraph (2) shall not apply to the distribution of 
     any contribution paid during a taxable year to a medical 
     savings account to the extent that such contribution exceeds 
     the amount under subsection (a)(1)(B) if--
       ``(A) such distribution is received by the individual on or 
     before the last day prescribed by law (including extensions 
     of time) for filing such individual's return for such taxable 
     year, and
       ``(B) such distribution is accompanied by the amount of net 
     income attributable to such excess contribution.

     Any net income described in subparagraph (B) shall be 
     included in the gross income of the individual for the 
     taxable year in which it is received.
       ``(4) Penalty for distributions not used for qualified 
     medical expenses.--
       ``(A) In general.--The tax imposed by chapter 1 on the 
     account beneficiary for any taxable year in which there is a 
     payment or distribution from a medical savings account of 
     such beneficiary which is includible in gross income under 
     paragraph (2) shall be increased by 10 percent of the amount 
     which is so includible.
       ``(B) Exception for disability or death.--Subparagraph (A) 
     shall not apply if the payment or distribution is made after 
     the account beneficiary becomes disabled within the meaning 
     of section 72(m)(7) or dies.
       ``(C) Exception for distributions after age 59\1/2\.--
     Subparagraph (A) shall not apply to any payment or 
     distribution after the date on which the account beneficiary 
     attains age 59\1/2\.

[[Page S 16311]]

       ``(5) Rollover contribution.--An amount is described in 
     this paragraph as a rollover contribution if it meets the 
     requirements of subparagraphs (A) and (B).
       ``(A) In general.--Paragraph (2) shall not apply to any 
     amount paid or distributed from a medical savings account to 
     the account beneficiary to the extent the amount received is 
     paid into a medical savings account for the benefit of such 
     beneficiary not later than the 60th day after the day on 
     which the beneficiary receives the payment or distribution.
       ``(B) Limitation.--This paragraph shall not apply to any 
     amount described in subparagraph (A) received by an 
     individual from a medical savings account if, at any time 
     during the 1-year period ending on the day of such receipt, 
     such individual received any other amount described in 
     subparagraph (A) from a medical savings account which was not 
     includible in the individual's gross income because of the 
     application of this paragraph.
       ``(6) Coordination with medical expense deduction.--For 
     purposes of determining the amount of the deduction under 
     section 213, any payment or distribution out of a medical 
     savings account for qualified medical expenses shall not be 
     treated as an expense paid for medical care.
       ``(7)  Transfer of account incident to divorce.--The 
     transfer of an individual's interest in a medical savings 
     account to an individual's spouse or former spouse under a 
     divorce or separation instrument described in subparagraph 
     (A) of section 71(b)(2) shall not be considered a taxable 
     transfer made by such individual notwithstanding any other 
     provision of this subtitle, and such interest shall, after 
     such transfer, be treated as a medical savings account with 
     respect to which the spouse is the account beneficiary.
       ``(d) Definitions.--For purposes of this section--
       ``(1) Qualified medical expenses.--
       ``(A) In general.--The term `qualified medical expenses' 
     means any expense for medical care (as defined in section 
     213(d)).
       ``(B) Exception for insurance.--
       ``(i) In general.--Such term shall not include any expense 
     for insurance.
       ``(ii) Exceptions.--Clause (i) shall not apply to any 
     expense for--

       ``(I) coverage under a health plan during a period of 
     continuation coverage described in section 4980B(f)(2)(B),
       ``(II) coverage under a qualified long-term care contract 
     (as defined in section 7702B(b)), or
       ``(III) coverage under a health plan during a period in 
     which the individual is receiving unemployment compensation 
     under any Federal or State law.

       ``(2) Account beneficiary.--The term `account beneficiary' 
     means the individual for whose benefit the medical savings 
     account is maintained.
       ``(e) Custodial Accounts.--For purposes of this section, a 
     custodial account shall be treated as a trust if--
       ``(1) the assets of such account are held by a bank (as 
     defined in section 408(n)), insurance company (as defined in 
     section 816), or another person who demonstrates to the 
     satisfaction of the Secretary that the manner in which such 
     person will administer the account will be consistent with 
     the requirements of this section, and
       ``(2) the custodial account would, except for the fact that 
     it is not a trust, constitute a medical savings account 
     described in subsection (a).
     For purposes of this title, in the case of a custodial 
     account treated as a trust by reason of the preceding 
     sentence, the custodian of such account shall be treated as 
     the trustee thereof.
       ``(f) Reports.--The trustee of a medical savings account 
     shall make such reports regarding such account to the 
     Secretary and to the individual for whose benefit the account 
     is maintained with respect to contributions, distributions, 
     and such other matters as the Secretary may require under 
     regulations. The reports required by this subsection shall be 
     filed at such time and in such manner and furnished to such 
     individuals at such time and in such manner as may be 
     required by those regulations.''.
       (b) Exclusion of Accounts From Estate Tax.--
       (1) In general.--Section 2057, as added by section 7006, is 
     amended--
       (A) by inserting ``or medical savings account (as defined 
     in section 7705)'' before ``included'', and
       (B) by inserting ``OR MEDICAL SAVINGS'' after ``CHOICE'' in 
     the heading.
       (2) Conforming amendment.--The table of sections for part 
     IV of subchapter A of chapter 11 is amended by inserting ``or 
     medical savings'' after ``choice''.
       (c) Tax on Excess Contributions.--Section 4973 (relating to 
     tax on excess contributions to individual retirement 
     accounts, certain section 403(b) contracts, and certain 
     individual retirement annuities) is amended--
       (1) by inserting ``MEDICAL SAVINGS ACCOUNTS,'' after 
     ``ACCOUNTS,'' in the heading of such section,
       (2) by striking ``or'' at the end of paragraph (1) of 
     subsection (a),
       (3) by redesignating paragraph (2) of subsection (a) as 
     paragraph (3) and by inserting after paragraph (1) the 
     following:
       ``(2) a medical savings account (within the meaning of 
     section 7705(a)), or'', and
       (4) by adding at the end the following new subsection:
       ``(d) Excess Contributions to Medical Savings Accounts.--
     For purposes of this section, in the case of a medical 
     savings account (within the meaning of section 7705(a)), the 
     term `excess contributions' means the amount by which the 
     amount contributed for the taxable year to the account 
     exceeds the amount which may be contributed to the account 
     under section 7705(a)(1)(B) for such taxable year. For 
     purposes of this subsection, any contribution which is 
     distributed out of the medical savings account in a 
     distribution to which section 7705(c)(3) applies shall be 
     treated as an amount not contributed.''.
       (d) Tax on Prohibited Transactions.--Section 4975 (relating 
     to prohibited transactions), as amended by section 7006(c), 
     is amended--
       (1) by adding at the end of subsection (c) the following 
     new paragraph:
       ``(5) Special rule for medical savings accounts.--An 
     individual for whose benefit a medical savings account 
     (within the meaning of section 7705(a)) is established shall 
     be exempt from the tax imposed by this section with respect 
     to any transaction concerning such account (which would 
     otherwise be taxable under this section) if, with respect to 
     such transaction, the account ceases to be a medical savings 
     account by reason of the application of section 
     7705(b)(2)(A)(i) to such account.'', and
       (2) by striking ``or'' at the end of subparagraph (D), by 
     redesignating subparagraph (E) as subparagraph (F), and by 
     inserting after subparagraph (D) the following new 
     subparagraph:
       ``(E) a medical savings account described in section 
     7705(a), or''.
       (e) Failure To Provide Reports on Medical Savings 
     Accounts.--Section 6693(a)(2) (relating to failure to provide 
     reports on individual retirement accounts or annuities), as 
     amended by section 7006, is amended by striking ``and'' at 
     the end of subparagraph (A), by striking the period at the 
     end of subparagraph (B) and inserting ``, and'', and by 
     adding at the end the following subparagraph:
       ``(C) section 7705(f) (relating to medical savings 
     accounts).''.
       (f) Exception From Capitalization of Policy Acquisition 
     Expenses.--Subparagraph (B) of section 848(e)(1) (defining 
     specified insurance contract), as amended by 7006, is amended 
     by striking ``and'' at the end of clause (iii), by striking 
     the period at the end of clause (iv) and inserting ``, and'', 
     and by adding at the end the following new clause:
       ``(v) any contract which is a medical savings account (as 
     defined in section 7705).''.
       (g) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 1996.

                     Subchapter D--Other Provisions

     SEC. 12241. INCREASE IN DEDUCTION FOR HEALTH INSURANCE COSTS 
                   OF SELF-EMPLOYED INDIVIDUALS.

       (a) Increase in Deduction.--Section 162(l) is amended by 
     striking ``30 percent'' in paragraph (1) and inserting ``55 
     percent''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 12242. ADJUSTMENT OF DEATH BENEFIT LIMITS FOR CERTAIN 
                   POLICIES.

       (a) In General.--Subparagraph (C)(i) of section 7702(e)(2) 
     (relating to limited increases in death benefit permitted) is 
     amended by striking ``$5,000'' and inserting ``$7,000'' and 
     by striking ``$25,000'' and inserting ``$30,000''.
       (b) Inflation Adjustments.--Section 7702(e) (relating to 
     computational rules) is amended by adding at the end the 
     following new paragraph:
       ``(3) Inflation adjustment to death benefit limits for 
     years after 1996.--In the case of any taxable year beginning 
     in a calendar year after 1996, each dollar amount contained 
     in paragraph (2)(C)(i) shall be increased by an amount equal 
     to--
       ``(A) such dollar amount, multiplied by
       ``(B) the cost-of-living adjustment determined under 
     section 1(f)(3), for the calendar year in which the taxable 
     year begins, by substituting `calendar year 1995' for 
     `calendar year 1992' in subparagraph (B) thereof.''.
       (c) Conforming Amendment.--Section 72(e)(10)(B) is amended 
     by striking ``$25,000'' and inserting ``$30,000 (adjusted at 
     the same time and in the same manner as under section 
     7702(e)(3))''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to contracts entered into after December 31, 
     1995.

     SEC. 12243. ORGANIZATIONS SUBJECT TO SECTION 833.

       (a) In General.--Section 833(c) (relating to organization 
     to which section applies) is amended by adding at the end the 
     following new paragraph:
       ``(4) Treatment as existing blue cross or blue shield 
     organization.--
       ``(A) In general.--Paragraph (2) shall be applied to an 
     organization described in subparagraph (B) as if it were a 
     Blue Cross or Blue Shield organization.
       ``(B) Applicable organization.--An organization is 
     described in this subparagraph if it--
       ``(i) is organized under, and governed by, State laws which 
     are specifically and exclusively applicable to not-for-profit 
     health insurance or health service type organizations, and
       ``(ii) is not a Blue Cross or Blue Shield organization or 
     health maintenance organization.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years ending after October 13, 1995.
                     Subtitle D--Estate Tax Reform

     SEC. 12301. FAMILY-OWNED BUSINESS EXCLUSION.

       (a) In General.--Part III of subchapter A of chapter 11 
     (relating to gross estate) is amended by inserting after 
     section 2033 the following new section:

     ``SEC. 2033A. FAMILY-OWNED BUSINESS EXCLUSION.

       ``(a) In General.--In the case of an estate of a decedent 
     to which this section applies, the value of the gross estate 
     shall not include the lesser of--
       ``(1) the adjusted value of the qualified family-owned 
     business interests of the decedent otherwise includible in 
     the estate, or 

[[Page S 16312]]

       ``(2) the sum of--
       ``(A) $1,500,000, plus
       ``(B) 50 percent of the excess (if any) of the adjusted 
     value of such interests over $1,500,000, but not over 
     $5,000,000.
       ``(b) Estates to Which Section Applies.--
       ``(1) In general.--This section shall apply to an estate 
     if--
       ``(A) the decedent was (at the date of the decedent's 
     death) a citizen or resident of the United States,
       ``(B) the sum of--
       ``(i) the adjusted value of the qualified family-owned 
     business interests described in paragraph (2), plus
       ``(ii) the amount of the gifts of such interests determined 
     under paragraph (3),

     exceeds 50 percent of the adjusted gross estate, and
       ``(C) during the 8-year period ending on the date of the 
     decedent's death there have been periods aggregating 5 years 
     or more during which--
       ``(i) such interests were owned by the decedent or a member 
     of the decedent's family, and
       ``(ii) there was material participation (within the meaning 
     of section 2032A(e)(6)) by the decedent or a member of the 
     decedent's family in the operation of the business to which 
     such interests relate.
       ``(2) Includible qualified family-owned business 
     interests.--The qualified family-owned business interests 
     described in this paragraph are the interests which--
       ``(A) are included in determining the value of the gross 
     estate (without regard to this section), and
       ``(B) are acquired by any qualified heir from, or passed to 
     any qualified heir from, the decedent (within the meaning of 
     section 2032A(e)(9)).
       ``(3) Includible gifts of interests.--The amount of the 
     gifts of qualified family-owned business interests determined 
     under this paragraph is the excess of--
       ``(A) the sum of--
       ``(i) the amount of such gifts from the decedent to members 
     of the decedent's family taken into account under subsection 
     2001(b)(1)(B), plus
       ``(ii) the amount of such gifts otherwise excluded under 
     section 2503(b),

     to the extent such interests are continuously held by members 
     of such family (other than the decedent's spouse) between the 
     date of the gift and the date of the decedent's death, over
       ``(B) the amount of gifts from the decedent to members of 
     the decedent's family otherwise included in the gross estate.
       ``(c) Adjusted Gross Estate.--For purposes of this section, 
     the term `adjusted gross estate' means the value of the gross 
     estate (determined without regard to this section)--
       ``(1) reduced by any amount deductible under paragraph (3) 
     or (4) of section 2053(a), and
       ``(2) increased by the excess of--
       ``(A) the sum of--
       ``(i) the amount of gifts determined under subsection 
     (b)(3), plus
       ``(ii) the amount of other transfers from the decedent to 
     the decedent's spouse (at the time of the transfer) within 10 
     years of the date of the decedent's death, plus
       ``(iii) the amount of other gifts (not included under 
     clause (i) or (ii)) from the decedent within 3 years of such 
     date, other than gifts to members of the decedent's family 
     otherwise excluded under section 2503(b), over
       ``(B) the sum of the amounts described in clauses (i), 
     (ii), and (iii) of subparagraph (A) which are otherwise 
     includible in the gross estate.

     For purposes of the preceding sentence, the Secretary may 
     provide that de minimis gifts to persons other than members 
     of the decedent's family shall not be taken into account.
       ``(d) Adjusted value of the qualified family-owned business 
     interests.--For purposes of this section, the adjusted value 
     of any qualified family-owned business interest is the value 
     of such interest for purposes of this chapter (determined 
     without regard to this section), reduced by the excess of--
       ``(1) any amount deductible under paragraph (3) or (4) of 
     section 2053(a), over
       ``(2) the sum of--
       ``(A) any indebtedness on any qualified residence of the 
     decedent the interest on which is deductible under section 
     163(h)(3), plus
       ``(B) any indebtedness to the extent the taxpayer 
     establishes that the proceeds of such indebtedness were used 
     for the payment of educational and medical expenses of the 
     decedent, the decedent's spouse, or the decedent's dependents 
     (within the meaning of section 152), plus
       ``(C) any indebtedness not described in clause (i) or (ii), 
     to the extent such indebtedness does not exceed $10,000.
       ``(e) Qualified Family-Owned Business Interest.--
       ``(1) In general.--For purposes of this section, the term 
     `qualified family-owned business interest' means--
       ``(A) an interest as a proprietor in a trade or business 
     carried on as a proprietorship, or
       ``(B) an interest in an entity carrying on a trade or 
     business, if--
       ``(i) at least--

       ``(I) 50 percent of such entity is owned (directly or 
     indirectly) by the decedent and members of the decedent's 
     family,
       ``(II) 70 percent of such entity is so owned by members of 
     2 families, or
       ``(III) 90 percent of such entity is so owned by members of 
     3 families, and

       ``(ii) for purposes of subclause (II) or (III) of clause 
     (i), at least 30 percent of such entity is so owned by the 
     decedent and members of the decedent's family.
       ``(2) Limitation.--Such term shall not include--
       ``(A) any interest in a trade or business the principal 
     place of business of which is not located in the United 
     States,
       ``(B) any interest in an entity, if the stock or debt of 
     such entity or a controlled group (as defined in section 
     267(f)(1)) of which such entity was a member was readily 
     tradable on an established securities market or secondary 
     market (as defined by the Secretary) at any time within 3 
     years of the date of the decedent's death,
       ``(C) any interest in a trade or business not described in 
     section 542(c)(2), if more than 35 percent of the adjusted 
     ordinary gross income of such trade or business for the 
     taxable year which includes the date of the decedent's death 
     would qualify as personal holding company income (as defined 
     in section 543(a)),
       ``(D) that portion of an interest in a trade or business 
     that is attributable to--
       ``(i) cash or marketable securities, or both, in excess of 
     the reasonably expected day-to-day working capital needs of 
     such trade or business, and
       ``(ii) any other assets of the trade or business (other 
     than assets used in the active conduct of a trade or business 
     described in section 542(c)(2)), the income of which is 
     described in section 543(a) or in subparagraph (B), (C), (D), 
     or (E) of section 954(c)(1) (determined by substituting 
     `trade or business' for `controlled foreign corporation)'.
       ``(3) Rules regarding ownership.--
       ``(A) Ownership of entities.--For purposes of paragraph 
     (1)(B)--
       ``(i) Corporations.--Ownership of a corporation shall be 
     determined by the holding of stock possessing the appropriate 
     percentage of the total combined voting power of all classes 
     of stock entitled to vote and the appropriate percentage of 
     the total value of shares of all classes of stock.
       ``(ii) Partnerships.--Ownership of a partnership shall be 
     determined by the owning of the appropriate percentage of the 
     capital interest or the profits interest in such partnership.
       ``(B) Ownership of tiered entities.--For purposes of this 
     section, if by reason of holding an interest in a trade or 
     business, a decedent or any member of the decedent's family 
     is treated as holding an interest in any other trade or 
     business--
       ``(i) such ownership interest in the other trade or 
     business shall be disregarded in determining if the ownership 
     interest in the first trade or business is a qualified 
     family-owned business interest, and
       ``(ii) this section shall be applied separately in 
     determining if such interest in any other trade or business 
     is a qualified family-owned business interest.
       ``(C) Individual ownership rules.--For purposes of this 
     section, an interest owned, directly or indirectly, by or for 
     an entity described in paragraph (1)(B) shall be considered 
     as being owned proportionately by or for the entity's 
     shareholders, partners, or beneficiaries. A person shall be 
     treated as a beneficiary of any trust only if such person has 
     a present interest in such trust.
       ``(f) Tax Treatment of Failure To Materially Participate in 
     Business or Dispositions of Interests.--
       ``(1) In general.--There is imposed an additional estate 
     tax if, within 10 years after the date of the decedent's 
     death and before the date of the qualified heir's death--
       ``(A) the material participation requirements described in 
     section 2032A(c)(6)(B) are not met with respect to the 
     qualified family-owned business interest which was acquired 
     (or passed) from the decedent,
       ``(B) the qualified heir disposes of any portion of a 
     qualified family-owned business interest (other than by a 
     disposition to a member of the qualified heir's family or 
     through a qualified conservation contribution under section 
     170(h)),
       ``(C) the qualified heir loses United States citizenship 
     (within the meaning of section 877A) or with respect to whom 
     an event described in subparagraph (A) or (B) of section 
     877A(e)(1) occurs, and such heir does not comply with the 
     requirements of subsection (g), or
       ``(D) the principal place of business of a trade or 
     business of the qualified family-owned business interest 
     ceases to be located in the United States.
       ``(2) Additional estate tax.--
       ``(A) In general.--The amount of the additional estate tax 
     imposed by paragraph (1) shall be equal to--
       ``(i) the applicable percentage of the adjusted tax 
     difference attributable to the qualified family-owned 
     business interest (as determined under rules similar to the 
     rules of section 2032A(c)(2)(B)), plus
       ``(ii) interest on the amount determined under clause (i) 
     at the underpayment rate established under section 6621 for 
     the period beginning on the date the estate tax liability was 
     due under this chapter and ending on the date such additional 
     estate tax is due.
       ``(B) Applicable percentage.--For purposes of this 
     paragraph, the applicable percentage shall be determined 
     under the following table:

``If the event described in paragraph (1) occurs in the following year 
  of material participation:              The applicable percentage is:
  1 through 6..................................................100 ....

  7.............................................................80 ....

  8.............................................................60 ....

  9.............................................................40 ....

  10............................................................20.....

       ``(g) Security Requirements for Noncitizen Qualified 
     Heirs.--
       ``(1) In general.--Except upon the application of 
     subparagraph (F) or (M) of subsection (h)(3), if a qualified 
     heir is not a citizen of the United States, any interest 
     under this section passing to or acquired by such heir 
     (including any interest held by such heir at a time described 
     in subsection (f)(1)(C)) shall be treated 

[[Page S 16313]]
     as a qualified family-owned business interest only if the interest 
     passes or is acquired (or is held) in a qualified trust.
       ``(2) Qualified trust.--The term `qualified trust' means a 
     trust--
       ``(A) which is organized under, and governed by, the laws 
     of the United States or a State, and
       ``(B) with respect to which the trust instrument requires 
     that at least 1 trustee of the trust be an individual citizen 
     of the United States or a domestic corporation.
       ``(h) Other Definitions and Applicable Rules.--For purposes 
     of this section--
       ``(1) Qualified heir.--The term `qualified heir'--
       ``(A) has the meaning given to such term by section 
     2032A(e)(1), and
       ``(B) includes any active employee of the trade or business 
     to which the qualified family-owned business interest relates 
     if such employee has been employed by such trade or business 
     for a period of at least 10 years before the date of the 
     decedent's death.
       ``(2) Member of the family.--The term `member of the 
     family' has the meaning given to such term by section 
     2032A(e)(2).
       ``(3) Applicable rules.--Rules similar to the following 
     rules shall apply:
       ``(A) Section 2032A(b)(4) (relating to decedents who are 
     retired or disabled).
       ``(B) Section 2032A(b)(5) (relating to special rules for 
     surviving spouses).
       ``(C) Section 2032A(c)(2)(D) (relating to partial 
     dispositions).
       ``(D) Section 2032A(c)(3) (relating to only 1 additional 
     tax imposed with respect to any 1 portion).
       ``(E) Section 2032A(c)(4) (relating to due date).
       ``(F) Section 2032A(c)(5) (relating to liability for tax; 
     furnishing of bond).
       ``(G) Section 2032A(c)(7) (relating to no tax if use begins 
     within 2 years; active management by eligible qualified heir 
     treated as material participation).
       ``(H) Section 2032A(e)(10) (relating to community 
     property).
       ``(I) Section 2032A(e)(14) (relating to treatment of 
     replacement property acquired in section 1031 or 1033 
     transactions).
       ``(J) Section 2032A(f) (relating to statute of 
     limitations).
       ``(K) Section 6166(b)(3) (relating to farmhouses and 
     certain other structures taken into account).
       ``(L) Subparagraphs (B), (C), and (D) of section 6166(g)(1) 
     (relating to acceleration of payment).
       ``(M) Section 6324B (relating to special lien for 
     additional estate tax).''.
       (b) Clerical Amendment.--The table of sections for part III 
     of subchapter A of chapter 11 is amended by inserting after 
     the item relating to section 2033 the following new item:

``Sec. 2033A. Family-owned business exclusion.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to estates of decedents dying after December 31, 
     1995.

     SEC. 12302. INCREASE IN UNIFIED ESTATE AND GIFT TAX CREDIT.

       (a) Estate Tax Credit.--
       (1) In general.--Section 2010 (relating to unified credit 
     against estate tax) is amended--
       (A) by striking ``$192,800'' in subsection (a) and 
     inserting ``$248,300'', and
       (B) by redesignating subsection (b) as subsection (c) and 
     by inserting after subsection (a) the following new 
     subsection:
       ``(b) Phase-in of Credit.--

``InSubsection (a) shall be applied by substituting for `$248,300' the 
                                                      following amount:
    1996......................................................$202,050 
    1997.......................................................211,300 
    1998.......................................................220,550 
    1999.......................................................229,800 
    2000.......................................................239,050 

       (2) Conforming amendments.--
       (A) Subsection (a) of section 6018 is amended--
       (i) by striking ``$600,000'' in paragraph (1) and inserting 
     ``$750,000'', and
       (ii) by adding at the end the following new paragraph:
       ``(5) Phase-in of filing requirement amount.--

``In Paragraph (1) shall be applied by substituting for `$750,000' the 
                                                      following amount:
    1996......................................................$625,000 
    1997.......................................................650,000 
    1998.......................................................675,000 
    1999.......................................................700,000 
    2000.......................................................725,000 

       (B) Section 2001(c)(2) is amended to read as follows:
       ``(2) Phaseout of graduated rates and unified credit.--
       ``(A) In general.--The tentative tax determined under 
     paragraph (1) shall be increased by an amount equal to 5 
     percent of so much of the amount (with respect to which the 
     tentative is to be computed) as exceeds $10,000,000 but does 
     not exceed $22,150,000.
       ``(B) Phase-in of end point of phaseout range.--

Subparagraph (A) shall be applied by substituting for `$22,150,000' the 
                                                      following amount:
    1996...................................................$21,225,000 
    1997....................................................21,410,000 
    1998....................................................21,595,000 
    1999....................................................21,780,000 
    2000.................................................21,965,000.''.

       (C) Paragraph (3) of section 2102(c) is amended--
       (i) by striking ``$192,800'' in subparagraph (A) and 
     inserting ``$248,300'', and
       (ii) by adding at the end the following new subparagraph:
       ``(C) Phase-in of credit.--

``Subparagraph (A) shall be applied by substituting for `$248,300' the 
                                                      following amount:
    1996......................................................$202,050 
    1997.......................................................211,300 
    1998.......................................................220,550 
    1999.......................................................229,800 
    2000....................................................239,050.''.
       (b) Unified Gift Tax Credit.--Section 2505 (relating to 
     unified credit against gift tax) is amended--
       (1) by striking ``$192,800'' in subsection (a)(1) and 
     inserting ``$248,300'', and
       (2) by redesignating subsection (b) as subsection (c) and 
     by inserting after subsection (a) the following new 
     subsection:
       ``(b) Phase-in of Credit.--

`Subsection (a)(1) shall be applied by substituting for `$248,300' the 
                                                      following amount:
    1996......................................................$202,050 
    1997.......................................................211,300 
    1998.......................................................220,550 
    1999.......................................................229,800 
    2000.......................................................239,050 

       (c) Effective Date.--The amendments made by this section 
     shall apply to the estates of decedents dying, and gifts 
     made, after December 31, 1995.

     SEC. 12303. TREATMENT OF LAND SUBJECT TO A QUALIFIED 
                   CONSERVATION EASEMENT.

       (a) Estate Tax With Respect to Land Subject to a Qualified 
     Conservation Easement.--Section 2031 (relating to the 
     definition of gross estate) is amended by redesignating 
     subsection (c) as subsection (d) and by inserting after 
     subsection (b) the following new subsection:
       ``(c) Estate Tax With Respect to Land Subject to a 
     Qualified Conservation Easement.--
       ``(1) In general.--If the executor makes the election 
     described in paragraph (5), then, except as otherwise 
     provided in this subsection, there shall be excluded from the 
     gross estate the applicable percentage of the lesser of--
       ``(A) the value of land subject to a qualified conservation 
     easement, reduced by the amount of any deduction under 
     section 2055(f) with respect to such land, or
       ``(B) the excess (if any) of--
       ``(i) $5,000,000, over
       ``(ii) the adjusted value of the qualified family-owned 
     business interests of the decedent determined under section 
     2033A.
       ``(2) Applicable percentage.--For purposes of paragraph 
     (1), the term `applicable percentage' means 50 percent 
     reduced (but not below zero) by 2 percentage points for each 
     percentage point (or fraction thereof) by which the value of 
     the qualified conservation easement is less than 30 percent 
     of the value of the land (determined without regard to the 
     value of such easement and reduced by the value of any 
     retained development right (as defined in paragraph (4)).
       ``(3) Treatment of certain indebtedness.--
       ``(A) In general.--The exclusion provided in paragraph (1) 
     shall not apply to the extent that the land is debt-financed 
     property.
       ``(B) Definitions.--For purposes of this paragraph--
       ``(i) Debt-financed property.--The term `debt-financed 
     property' means any property with respect to which there is 
     an acquisition indebtedness (as defined in clause (ii)) on 
     the date of the decedent's death.
       ``(ii) Acquisition indebtedness.--The term `acquisition 
     indebtedness' means, with respect to debt-financed property, 
     the unpaid amount of--

       ``(I) the indebtedness incurred by the donor in acquiring 
     such property,
       ``(II) the indebtedness incurred before the acquisition of 
     such property if such indebtedness would not have been 
     incurred but for such acquisition,
       ``(III) the indebtedness incurred after the acquisition of 
     such property if such indebtedness would not have been 
     incurred but for such acquisition and the incurrence of such 
     indebtedness was reasonably foreseeable at the time of such 
     acquisition, and
       ``(IV) the extension, renewal, or refinancing of an 
     acquisition indebtedness.

       ``(4) Treatment of retained development right.--
       ``(A) In general.--Paragraph (1) shall not apply to the 
     value of any development right retained by the donor in the 
     conveyance of a qualified conservation easement.
       ``(B) Termination of retained development right.--If every 
     person in being who has an interest (whether or not in 
     possession) in the land executes an agreement to extinguish 
     permanently some or all of any development rights (as defined 
     in subparagraph (D)) retained by the donor on or before the 
     date for filing the return of the tax imposed by section 
     2001, then any tax imposed by section 2001 shall be reduced 
     accordingly. Such agreement shall be filed with the return of 
     the tax imposed by section 2001. The agreement shall be in 
     such form as the Secretary shall prescribe.
       ``(C) Additional tax.--Any failure to implement the 
     agreement described in subparagraph (B) not later than the 
     earlier of--

[[Page S 16314]]

       ``(i) the date which is 2 years after the date of the 
     decedent's death, or
       ``(ii) the date of the sale of such land subject to the 
     qualified conservation easement),
     shall result in the imposition of an additional tax in the 
     amount of the tax which would have been due on the retained 
     development rights subject to such agreement. Such additional 
     tax shall be due and payable on the last day of the 6th month 
     following such date.
       ``(D) Development right defined.--For purposes of this 
     paragraph, the term `development right' means any right to 
     use the land subject to the qualified conservation easement 
     in which such right is retained for any commercial purpose 
     which is not subordinate to and directly supportive of the 
     use of such land as a farm for farming purposes (within the 
     meaning of section 6420(c).
       ``(5) Election.--The election under this subsection shall 
     be made on the return of the tax imposed by section 2001. 
     Such an election, once made, shall be irrevocable.
       ``(6) Calculation of estate tax due.--An executor making 
     the election described in paragraph (5) shall, for purposes 
     of calculating the amount of tax imposed by section 2001, 
     include the value of any development right (as defined in 
     paragraph (4)) retained by the donor in the conveyance of 
     such qualified conservation easement. The computation of tax 
     on any retained development right prescribed in this 
     paragraph shall be done in such manner and on such forms as 
     the Secretary shall prescribe.
       ``(7) Definitions.--For purposes of this subsection--
       ``(A) Land subject to a qualified conservation easement.--
     The term `land subject to a qualified conservation easement' 
     means land--
       ``(i) which is located in or within 25 miles of an area 
     which, on the date of the decedent's death, is--

       ``(I) a metropolitan area (as defined by the Office of 
     Management and Budget), or
       ``(II) a national park or wilderness area designated as 
     part of the National Wilderness Preservation System (unless 
     it is determined by the Secretary that land in or within 25 
     miles of such a park or wilderness area is not under 
     significant development pressure),

       ``(ii) which was owned by the decedent or a member of the 
     decedent's family at all times during the 3-year period 
     ending on the date of the decedent's death, and
       ``(iii) with respect to which a qualified conservation 
     easement is or has been made by the decedent or a member of 
     the decedent's family.
       ``(B) Qualified conservation easement.--The term `qualified 
     conservation easement' means a qualified conservation 
     contribution (as defined in section 170(h)(1)) of a qualified 
     real property interest (as defined in section 170(h)(2)(C)), 
     except that clause (iv) of section 170(h)(4)(A) shall not 
     apply, and the restriction on the use of such interest 
     described in section 170(h)(2)(C) shall include a prohibition 
     on commercial recreational activity.
       ``(C) Member of family.--The term `member of the decedent's 
     family' means any member of the family (as defined in section 
     2032A(e)(2)) of the decedent.
       ``(8) Application of this section to interests in 
     partnerships, corporations, and trusts.--This section shall 
     apply to an interest in a partnership, corporation, or trust 
     if at least 30 percent of the entity is owned (directly or 
     indirectly) by the decedent, as determined under the rules 
     described in section 2033A(e)(3).''.
       (b) Carryover Basis.--Section 1014(a) (relating to basis of 
     property acquired from a decedent) is amended by striking the 
     period at the end of paragraph (3) and inserting ``, or'' and 
     by adding after paragraph (3) the following new paragraph:
       ``(4) to the extent of the applicability of the exclusion 
     described in section 2031(c), the basis in the hands of the 
     decedent.''.
       (c) Qualified Conservation Contribution Is Not a 
     Disposition.--Subsection (c) of section 2032A (relating to 
     alternative valuation method) is amended by adding at the end 
     the following new paragraph:
       ``(8) Qualified conservation contribution is not a 
     disposition.--A qualified conservation contribution (as 
     defined in section 170(h)) by gift or otherwise shall not be 
     deemed a disposition under subsection (c)(1)(A).''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to estates of decedents dying after December 31, 
     1995.

     SEC. 12304. EXPANSION OF EXCEPTION FROM GENERATION-SKIPPING 
                   TRANSFER TAX FOR TRANSFERS TO INDIVIDUALS WITH 
                   DECEASED PARENTS.

       (a) In General.--Section 2651 (relating to generation 
     assignment) is amended by redesignating subsection (e) as 
     subsection (f), and by inserting after subsection (d) the 
     following new subsection:
       ``(e) Special Rule for Persons With a Deceased Parent.--
       ``(1) In general.--For purposes of determining whether any 
     transfer is a generation-skipping transfer, if--
       ``(A) an individual is a descendant of a parent of the 
     transferor (or the transferor's spouse or former spouse), and
       ``(B) such individual's parent who is a lineal descendant 
     of the parent of the transferor (or the transferor's spouse 
     or former spouse) is dead at the time the transfer from which 
     such interest is established or derived is subject to a tax 
     imposed by chapter 11 or 12 upon the transferor (and if there 
     shall be more than 1 such time, then at the earliest such 
     time),

     such individual shall be treated as if such individual were a 
     member of the generation which is 1 generation below the 
     lower of the transferor's generation or the generation 
     assignment of the youngest living ancestor of such individual 
     who is also a descendant of the parent of the transferor (or 
     the transferor's spouse or former spouse), and the generation 
     assignment of any descendant of such individual shall be 
     adjusted accordingly.
       ``(2) Limited application of subsection to collateral 
     heirs.--This subsection shall not apply with respect to a 
     transfer to any individual who is not a lineal descendant of 
     the transferor (or the transferor's spouse or former spouse) 
     if, at the time of the transfer, such transferor has any 
     living lineal descendant.''.
       (b) Conforming Amendments.--
       (1) Section 2612(c) (defining direct skip) is amended by 
     striking paragraph (2) and by redesignating paragraph (3) as 
     paragraph (2).
       (2) Section 2612(c)(2) (as so redesignated) is amended by 
     striking ``section 2651(e)(2)'' and inserting ``section 
     2651(f)(2)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to terminations, distributions, and transfers 
     occurring after December 31, 1994.

     SEC. 12305. EXTENSION OF TREATMENT OF CERTAIN RENTS UNDER 
                   SECTION 2032A TO LINEAL DESCENDANTS.

       (a) General Rule.--Paragraph (7) of section 2032A(c) 
     (relating to special rules for tax treatment of dispositions 
     and failures to use for qualified use) is amended by adding 
     at the end the following new subparagraph:
       ``(E) Certain rents treated as qualified use.--For purposes 
     of this subsection, a surviving spouse or lineal descendant 
     of the decedent shall not be treated as failing to use 
     qualified real property in a qualified use solely because 
     such spouse or descendant rents such property to a member of 
     the family of such spouse or descendant on a net cash basis. 
     For purposes of the preceding sentence, a legally adopted 
     child of an individual shall be treated as the child of such 
     individual by blood.''.
       (b) Conforming Amendment.--Section 2032A(b)(5)(A) is 
     amended by striking out the last sentence.
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to leases entered into after 
     December 31, 1995.
              Subtitle E--Extension of Expiring Provisions

            CHAPTER 1--EXTENSIONS THROUGH FEBRUARY 28, 1997

     SEC. 12401. EMPLOYER-PROVIDED EDUCATIONAL ASSISTANCE 
                   PROGRAMS.

       (a) Extension.--Subsection (d) of section 127 (relating to 
     educational assistance programs) is amended by striking 
     ``December 31, 1994'' and inserting ``February 28, 1997''.
       (b) Conforming Amendments.--Paragraph (2) of section 127(a) 
     is amended--
       (1) by inserting ``($875 in calendar year 1997)'' after 
     ``$5,250'' the second and third place it appears, and
       (2) by striking ``$5,250'' in the heading.
       (c) Special Rule.--In the case of any taxable year 
     beginning in 1997, only amounts paid before March 1, 1997, by 
     the employer for educational assistance for the employee 
     shall be taken into account in determining the amount 
     excluded under section 127 of the Internal Revenue Code of 
     1986 with respect to such employee for such taxable year.
       (d) Effective Date.--The amendments made by subsections (a) 
     and (b) shall apply to taxable years beginning after December 
     31, 1994.

     SEC. 12402. RESEARCH CREDIT.

       (a) In General.--Subsection (h) of section 41 (relating to 
     credit for research activities) is amended--
       (1) by striking ``June 30, 1995'' each place it appears and 
     inserting ``February 28, 1997'', and
       (2) by striking ``July 1, 1995'' each place it appears and 
     inserting ``March 1, 1997''.
       (b) Base Amount for Start-up Companies.--Clause (i) of 
     section 41(c)(3)(B) (relating to start-up companies) is 
     amended to read as follows:
       ``(i)  Taxpayers to which subparagraph applies.--The fixed-
     base percentage shall be determined under this subparagraph 
     if--

       ``(I) the first taxable year in which a taxpayer had both 
     gross receipts and qualified research expenses begins after 
     December 31, 1983, or
       ``(II) there are fewer than 3 taxable years beginning after 
     December 31, 1983, and before January 1, 1989, in which the 
     taxpayer had both gross receipts and qualified research 
     expenses.''.

       (c)  Conforming Amendment.--Subparagraph (D) of section 
     28(b)(1) is amended by striking ``June 30, 1995'' and 
     inserting ``February 28, 1997''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after June 30, 1995.

     SEC. 12403. EMPLOYER-PROVIDED GROUP LEGAL SERVICES.

       (a) In General.--Subsection (e) of section 120 (relating to 
     amounts received under qualified group legal services plans) 
     is amended to read as follows:
       ``(e) Application of Sections.--This section and section 
     501(c)(20) shall not apply to any taxable year beginning 
     before January 1, 1996, or after February 28, 1997.''
       (b) Conforming Amendments.--Subsection (a) of section 120 
     is amended by inserting ``($12 in taxable years beginning in 
     1997)'' after ``$70''.
       (c) Special Rule.--In the case of any taxable year 
     beginning in 1997, only amounts paid before March 1, 1997, by 
     the employer for coverage for the employee, the employee's 
     spouse, or the employee's dependents, under a qualified group 
     legal services plan for periods before March 1, 1997, shall 
     be taken into account in determining the amount excluded 
     under section 120 of the Internal Revenue Code of 1986 with 
     respect to such employee for such taxable year.
       (d) Effective Date.--The amendments made by subsections (a) 
     and (b) shall apply to taxable years beginning after December 
     31, 1995.

     SEC. 12404. ORPHAN DRUG TAX CREDIT.

       (a) Recategorized as a Business Credit.--
       (1) In general.--Section 28 (relating to clinical testing 
     expenses for certain drugs for rare diseases or conditions) 
     is transferred to subpart D of part IV of subchapter A of 
     chapter 1, inserted after section 45B, and redesignated as 
     section 45C.

[[Page S 16315]]

       (2) Conforming amendment.--Subsection (b) of section 38 
     (relating to general business credit) is amended by striking 
     ``plus'' at the end of paragraph (10), by striking the period 
     at the end of paragraph (11) and inserting ``, plus'', and by 
     adding at the end the following new paragraph:
       ``(12) the orphan drug credit determined under section 
     45C(a).''.
       (3) Clerical amendments.--
       (A) The table of sections for subpart B of such part IV is 
     amended by striking the item relating to section 28.
       (B) The table of sections for subpart D of such part IV is 
     amended by adding at the end the following new item:

``Sec. 45C. Clinical testing expenses for certain drugs for rare 
              diseases or conditions.''.

       (b) Credit Termination.--Subsection (e) of section 45C, as 
     redesignated by subsection (a)(1), is amended by striking 
     ``December 31, 1994'' and inserting ``February 28, 1997''.
       (c) No Pre-1995 Carrybacks.--Subsection (d) of section 39 
     (relating to carryback and carryforward of unused credits) is 
     amended by adding at the end the following new paragraph:
       ``(7) No carryback of section 45c credit before 1995.--No 
     portion of the unused business credit for any taxable year 
     which is attributable to the orphan drug credit determined 
     under section 45C may be carried back to a taxable year 
     beginning before January 1, 1995.''.
       (d) Additional Conforming Amendments.--
       (1) Section 45C(a), as redesignated by subsection (a)(1), 
     is amended by striking ``There shall be allowed as a credit 
     against the tax imposed by this chapter for the taxable 
     year'' and inserting ``For purposes of section 38, the credit 
     determined under this section for the taxable year is''.
       (2) Section 45C(d), as so redesignated, is amended by 
     striking paragraph (2) and by redesignating paragraphs (3), 
     (4), and (5) as paragraphs (2), (3), and (4).
       (3) Section 29(b)(6)(A) is amended by striking ``sections 
     27 and 28'' and inserting ``section 27''.
       (4) Section 30(b)(3)(A) is amended by striking ``sections 
     27, 28, and 29'' and inserting ``sections 27 and 29''.
       (5) Section 53(d)(1)(B) is amended--
       (A) by striking ``or not allowed under section 28 solely by 
     reason of the application of section 28(d)(2)(B),'' in clause 
     (iii), and
       (B) by striking ``or not allowed under section 28 solely by 
     reason of the application of section 28(d)(2)(B)'' in clause 
     (iv)(II).
       (6) Section 55(c)(2) is amended by striking ``28(d)(2),''.
       (7) Section 280C(b) is amended--
       (A) by striking ``section 28(b)'' in paragraph (1) and 
     inserting ``section 45C(b)'',
       (B) by striking ``section 28'' in paragraphs (1) and (2)(A) 
     and inserting ``section 45C(b)'', and
       (C) by striking ``subsection (d)(2) thereof'' in paragraphs 
     (1) and (2)(A) and inserting ``section 38(c)''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after December 31, 1994.

     SEC. 12405. CONTRIBUTIONS OF STOCK TO PRIVATE FOUNDATIONS.

       (a) In General.--Subparagraph (D) of section 170(e)(5) 
     (relating to special rule for contributions of stock for 
     which market quotations are readily available) is amended by 
     striking ``December 31, 1994'' and inserting ``February 28, 
     1997''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to contributions made after December 31, 1994.

     SEC. 12406. DELAY OF SCHEDULED INCREASE IN TAX ON FUEL USED 
                   IN COMMERCIAL AVIATION.

       (a) In General.--Sections 4092(b)(2), 6421(f)(2)(B), and 
     6427(l)(4)(B) are each amended by striking ``September 30, 
     1995'' and inserting ``February 28, 1997''.
       (b) Conforming Amendment.--Section 13245 of the Omnibus 
     Budget Reconciliation Act of 1993 is hereby repealed.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     take effect after September 30, 1995.
       (2) Cross reference.--

  For refund of tax paid on commercial aviation fuel before the date of 
the enactment of this Act, see section 6427(l) of the Internal Revenue 
Code of 1986.

       (d) Floor Stocks Tax.--
       (1) Imposition of tax.--In the case of commercial aviation 
     fuel which is held by any person on March 1, 1997, there is 
     hereby imposed a floor stocks tax equal to 4.3 cents per 
     gallon.
       (2) Liability for tax and method of payment.--
       (A) Liability for tax.--A person holding aviation fuel on 
     March 1, 1997, to which the tax imposed by paragraph (1) 
     applies shall be liable for such tax.
       (B) Method of payment.--The tax imposed by paragraph (1) 
     shall be paid in such manner as the Secretary shall 
     prescribe.
       (C) Time for payment.--The tax imposed by paragraph (1) 
     shall be paid on or before September 30, 1997.
       (3) Definitions.--For purposes of this subsection--
       (A) Held by a person.--Aviation fuel shall be considered as 
     ``held by a person'' if title thereto has passed to such 
     person (whether or not delivery to the person has been made).
       (B) Commercial aviation fuel.--The term ``commercial 
     aviation fuel'' means aviation fuel (as defined in section 
     4093 of such Code) which is held on March 1, 1997, for sale 
     or use in commercial aviation (as defined in section 4092(b) 
     of such Code).
       (C) Secretary.--The term ``Secretary'' means the Secretary 
     of the Treasury or the Secretary's delegate.
       (4) Exception for exempt uses.--The tax imposed by 
     paragraph (1) shall not apply to aviation fuel held by any 
     person exclusively for any use for which a credit or refund 
     of the entire tax imposed by section 4091 of such Code (other 
     than the rate imposed by section 4091(b)(2) of such Code) is 
     allowable for aviation fuel so used.
       (5) Exception for certain amounts of fuel.--
       (A) In general.--No tax shall be imposed by paragraph (1) 
     on aviation fuel held on March 1, 1997, by any person if the 
     aggregate amount of commercial aviation fuel held by such 
     person on such date does not exceed 2,000 gallons. The 
     preceding sentence shall apply only if such person submits to 
     the Secretary (at the time and in the manner required by the 
     Secretary) such information as the Secretary shall require 
     for purposes of this paragraph.
       (B) Exempt fuel.--For purposes of subparagraph (A), there 
     shall not be taken into account fuel held by any person which 
     is exempt from the tax imposed by paragraph (1) by reason of 
     paragraph (4).
       (C) Controlled groups.--For purposes of this paragraph--
       (i) Corporations.--

       (I) In general.--All persons treated as a controlled group 
     shall be treated as 1 person.
       (II) Controlled group.--The term ``controlled group'' has 
     the meaning given to such term by subsection (a) of section 
     1563 of such Code; except that for such purposes the phrase 
     ``more than 50 percent'' shall be substituted for the phrase 
     ``at least 80 percent'' each place it appears in such 
     subsection.

       (ii) Nonincorporated persons under common control.--Under 
     regulations prescribed by the Secretary, principles similar 
     to the principles of clause (i) shall apply to a group of 
     persons under common control where 1 or more of such persons 
     is not a corporation.
       (6) Other laws applicable.--All provisions of law, 
     including penalties, applicable with respect to the taxes 
     imposed by section 4091 of such Code shall, insofar as 
     applicable and not inconsistent with the provisions of this 
     subsection, apply with respect to the floor stock taxes 
     imposed by paragraph (1) to the same extent as if such taxes 
     were imposed by such section 4091.

    CHAPTER 2--EXTENSIONS OF SUPERFUND AND OIL SPILL LIABILITY TAXES

     SEC. 12411. EXTENSION OF HAZARDOUS SUBSTANCE SUPERFUND.

       (a) Extension of Taxes.--
       (1) Environmental tax.--Section 59A(e) is amended to read 
     as follows:
       ``(e) Application of Tax.--The tax imposed by this section 
     shall apply to taxable years beginning after December 31, 
     1986, and before January 1, 1998.''.
       (2) Excise taxes.--Section 4611(e) is amended to read as 
     follows:
       ``(e) Application of Hazardous Substance Superfund 
     Financing Rate.--The Hazardous Substance Superfund financing 
     rate under this section shall apply after December 31, 1986, 
     and before October 1, 2002.''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 12412. EXTENSION OF OIL SPILL LIABILITY TAX.

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

              CHAPTER 3--EXTENSIONS RELATING TO FUEL TAXES

     SEC. 12421. ETHANOL BLENDER REFUNDS.

       (a) In General.--Paragraph (4) of section 6427(f) (relating 
     to gasoline, diesel fuel, and aviation fuel used to produce 
     certain alcohol fuels) is amended by striking ``1995'' and 
     inserting ``1999''.
       (b) Special Rule.--With respect to refund claims which 
     could have been filed under section 6427(f) of the Internal 
     Revenue Code of 1986 during the period beginning on October 
     8, 1995, and ending on the date of the enactment of this Act, 
     but for the expiration of such section after September 30, 
     1995, interest shall accrue on such claims from the date 
     which is the later of--
       (1) November 1, 1995, or
       (2) 20 days after the claim could have been filed under 
     such section as in effect on September 30, 1995.
       (c) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the date of the enactment of this Act.

     SEC. 12422. EXTENSION OF BINDING CONTRACT DATE FOR BIOMASS 
                   AND COAL FACILITIES.

       (a) In General.--Subparagraph (A) of section 29(g)(1) 
     (relating to extension of certain facilities) is amended by 
     striking ``January 1, 1997'' and inserting ``January 1, 
     1998'' and by striking ``January 1, 1996'' and inserting 
     ``January 1, 1997''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

                  CHAPTER 4--DIESEL DYEING PROVISIONS

     SEC. 12431. MORATORIUM FOR EXCISE TAX ON DIESEL FUEL SOLD FOR 
                   USE OR USED IN DIESEL-POWERED MOTORBOATS.

       (a) In General.--Subparagraph (D) of section 4041(a)(1) 
     (relating to the imposition of tax on diesel fuel and special 
     motor fuels) is amended to read as follows:
       ``(D) Diesel fuel used in motorboats.--

[[Page S 16316]]

       ``(i) Moratorium.--No tax shall be imposed by subsection 
     (a) or (d)(1) on diesel fuel sold for use or used in a 
     diesel-powered motorboat during the period after December 31, 
     1995, and before March 1, 1997.
       ``(ii) Special termination date.--In the case of any sale 
     for use, or use, of fuel in a diesel-powered motorboat--

       ``(I) effective during the period after September 30, 1999, 
     and before January 1, 2000, the rate of tax imposed by this 
     paragraph is 24.3 cents per gallon, and
       ``(II) the termination of the tax under subsection (d) 
     shall not occur before January 1, 2000.''.

       (b) Effective Date.--The amendments made by this section 
     shall take effect after December 31, 1995.

           CHAPTER 5--Treatment of Individuals Who Expatriate

     SEC. 12441. REVISION OF TAX RULES ON EXPATRIATION.

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

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

       ``(a) General Rules.--For purposes of this subtitle--
       ``(1) Mark to market.--Except as provided in subsection 
     (f), all property of a covered expatriate to which this 
     section applies shall be treated as sold on the expatriation 
     date for its fair market value.
       ``(2) Recognition of gain or loss.--In the case of any sale 
     under paragraph (1)--
       ``(A) notwithstanding any other provision of this title, 
     any gain arising from such sale shall be taken into account 
     for the taxable year of the sale unless such gain is excluded 
     from gross income under part III of subchapter B, and
       ``(B) any loss arising from such sale shall be taken into 
     account for the taxable year of the sale to the extent 
     otherwise provided by this title, except that section 1091 
     shall not apply (and section 1092 shall apply) to any such 
     loss.
       ``(3) Exclusion for certain gain.--The amount which would 
     (but for this paragraph) be includible in the gross income of 
     any individual by reason of this section shall be reduced 
     (but not below zero) by $600,000. For purposes of this 
     paragraph, allocable expatriation gain taken into account 
     under subsection (f)(2) shall be treated in the same manner 
     as an amount required to be includible in gross income.
       ``(4) Election to continue to be taxed as united states 
     citizen.--
       ``(A) In general.--If an expatriate elects the application 
     of this paragraph--
       ``(i) this section (other than this paragraph) shall not 
     apply to the expatriate, but
       ``(ii) the expatriate shall be subject to tax under this 
     title, with respect to property to which this section would 
     apply but for such election, in the same manner as if the 
     individual were a United States citizen.
       ``(B) Limitation on amount of estate, gift, and generation-
     skipping transfer taxes.--The aggregate amount of taxes 
     imposed under subtitle B with respect to any transfer of 
     property by reason of an election under subparagraph (A) 
     shall not exceed the amount of income tax which would be due 
     if the property were sold for its fair market value 
     immediately before the time of the transfer or death (taking 
     into account the rules of paragraph (2)).
       ``(C) Requirements.--Subparagraph (A) shall not apply to an 
     individual unless the individual--
       ``(i) provides security for payment of tax in such form and 
     manner, and in such amount, as the Secretary may require,
       ``(ii) consents to the waiver of any right of the 
     individual under any treaty of the United States which would 
     preclude assessment or collection of any tax which may be 
     imposed by reason of this paragraph, and
       ``(iii) complies with such other requirements as the 
     Secretary may prescribe.
       ``(D) Election.--An election under subparagraph (A) shall 
     apply to all property to which this section would apply but 
     for the election and, once made, shall be irrevocable. Such 
     election shall also apply to property the basis of which is 
     determined in whole or in part by reference to the property 
     with respect to which the election was made.
       ``(b) Election To Defer Tax.--
       ``(1) In general.--If the taxpayer elects the application 
     of this subsection with respect to any property--
       ``(A) no amount shall be required to be included in gross 
     income under subsection (a)(1) with respect to the gain from 
     such property for the taxable year of the sale, but
       ``(B) the taxpayer's tax for the taxable year in which such 
     property is disposed of shall be increased by the deferred 
     tax amount with respect to the property.

     Except to the extent provided in regulations, subparagraph 
     (B) shall apply to a disposition whether or not gain or loss 
     is recognized in whole or in part on the disposition.
       ``(2) Deferred tax amount.--
       ``(A) In general.--For purposes of paragraph (1), the term 
     `deferred tax amount' means, with respect to any property, an 
     amount equal to the sum of--
       ``(i) the difference between the amount of tax paid for the 
     taxable year described in paragraph (1)(A) and the amount 
     which would have been paid for such taxable year if the 
     election under paragraph (1) had not applied to such 
     property, plus
       ``(ii) an amount of interest on the amount described in 
     clause (i) determined for the period--

       ``(I) beginning on the 91st day after the expatriation 
     date, and
       ``(II) ending on the due date for the taxable year 
     described in paragraph (1)(B),

     by using the rates and method applicable under section 6621 
     for underpayments of tax for such period.

     For purposes of clause (ii), the due date is the date 
     prescribed by law (determined without regard to extension) 
     for filing the return of the tax imposed by this chapter for 
     the taxable year.
       ``(B) Allocation of losses.--For purposes of subparagraph 
     (A), any losses described in subsection (a)(2)(B) shall be 
     allocated ratably among the gains described in subsection 
     (a)(2)(A).
       ``(3) Security.--
       ``(A) In general.--No election may be made under paragraph 
     (1) with respect to any property unless adequate security is 
     provided with respect to such property.
       ``(B) Adequate security.--For purposes of subparagraph (A), 
     security with respect to any property shall be treated as 
     adequate security if--
       ``(i) it is a bond in an amount equal to the deferred tax 
     amount under paragraph (2)(A) for the property, or
       ``(ii) the taxpayer otherwise establishes to the 
     satisfaction of the Secretary that the security is adequate.
       ``(4) Waiver of certain rights.--No election may be made 
     under paragraph (1) unless the taxpayer consents to the 
     waiver of any right under any treaty of the United States 
     which would preclude assessment or collection of any tax 
     imposed by reason of this section.
       ``(5) Dispositions.--For purposes of this subsection, a 
     taxpayer making an election under this subsection with 
     respect to any property shall be treated as having disposed 
     of such property--
       ``(A) immediately before death if such property is held at 
     such time, and
       ``(B) at any time the security provided with respect to the 
     property fails to meet the requirements of paragraph (3) and 
     the taxpayer does not correct such failure within the time 
     specified by the Secretary.
       ``(6) Elections.--An election under paragraph (1) shall 
     only apply to property described in the election and, once 
     made, is irrevocable. An election may be under paragraph (1) 
     with respect to an interest in a trust with respect to which 
     gain is required to be recognized under subsection (f)(1).
       ``(c) Covered Expatriate.--For purposes of this section--
       ``(1) In general.--The term `covered expatriate' means an 
     expatriate--
       ``(A) whose average annual net income tax (as defined in 
     section 38(c)(1)) for the period of 5 taxable years ending 
     before the expatriation date is greater than $100,000, or
       ``(B) whose net worth as of such date is $500,000 or more.

     If the expatriation date is after 1996, such $100,000 and 
     $500,000 amounts shall be increased by an amount equal to 
     such dollar amount multiplied by the cost-of-living 
     adjustment determined under section 1(f)(3) for such calendar 
     year by substituting `1995' for `1992' in subparagraph (B) 
     thereof. Any increase under the preceding sentence shall be 
     rounded to the nearest multiple of $1,000.
       ``(2) Exceptions.--An individual shall not be treated as a 
     covered expatriate if--
       ``(A) the individual--
       ``(i) became at birth a citizen of the United States and a 
     citizen of another country and, as of the expatriation date, 
     continues to be a citizen of, and is taxed as a resident of, 
     such other country, and
       ``(ii) has been a resident of the United States (as defined 
     in section 7701(b)(1)(A)(ii)) for not more than 8 taxable 
     years during the 15-taxable year period ending with the 
     taxable year during which the expatriation date occurs, or
       ``(B)(i) the individual's relinquishment of United States 
     citizenship occurs before such individual attains age 18\1/
     2\, and
       ``(ii) the individual has been a resident of the United 
     States (as so defined) for not more than 5 taxable years 
     before the date of relinquishment.
       ``(d) Property to Which Section Applies.--For purposes of 
     this section--
       ``(1) In general.--Except as otherwise provided by the 
     Secretary, this section shall apply to--
       ``(A) any interest in property held by a covered expatriate 
     on the expatriation date the gain from which would be 
     includible in the gross income of the expatriate if such 
     interest had been sold for its fair market value on such date 
     in a transaction in which gain is recognized in whole or in 
     part, and
       ``(B) any other interest in a trust to which subsection (f) 
     applies.
       ``(2) Exceptions.--This section shall not apply to the 
     following property:
       ``(A) United states real property interests.--Any United 
     States real property interest (as defined in section 
     897(c)(1)), other than stock of a United States real property 
     holding corporation which does not, on the expatriation date, 
     meet the requirements of section 897(c)(2).
       ``(B) Interest in certain retirement plans.--
       ``(i) In general.--Any interest in a qualified retirement 
     plan (as defined in section 4974(c)), other than any interest 
     attributable to contributions which are in excess of any 
     limitation or which violate any condition for tax-favored 
     treatment.
       ``(ii) Foreign pension plans.--

       ``(I) In general.--Under regulations prescribed by the 
     Secretary, interests in foreign pension plans or similar 
     retirement arrangements or programs.
       ``(II) Limitation.--The value of property which is treated 
     as not sold by reason of this subparagraph shall not exceed 
     $500,000.

       ``(e) Definitions.--For purposes of this section--
       ``(1) Expatriate.--The term `expatriate' means--

[[Page S 16317]]

       ``(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 

[[Page S 16318]]
     amount of tax which would be imposed if the taxable year were a short 
     taxable year ending on the expatriation date.
       ``(2) Due date.--The due date for any tax imposed by 
     paragraph (1) shall be the 90th day after the expatriation 
     date.
       ``(3) Treatment of tax.--Any tax paid under paragraph (1) 
     shall be treated as a payment of the tax imposed by this 
     chapter for the taxable year to which subsection (a) applies.
       ``(4) Deferral of tax.--The provisions of subsection (b) 
     shall apply to the tax imposed by this subsection to the 
     extent attributable to gain includible in gross income by 
     reason of this section.
       ``(i) Coordination With Estate and Gift Taxes.--If 
     subsection (a) applies to property held by an individual for 
     any taxable year and--
       ``(1) such property is includible in the gross estate of 
     such individual solely by reason of section 2107, or
       ``(2) section 2501 applies to a transfer of such property 
     by such individual solely by reason of section 2501(a)(3),

     then there shall be allowed as a credit against the 
     additional tax imposed by section 2101 or 2501, whichever is 
     applicable, solely by reason of section 2107 or 2501(a)(3) an 
     amount equal to the increase in the tax imposed by this 
     chapter for such taxable year by reason of this section.
       ``(j) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section, including regulations--
       ``(1) to prevent double taxation by ensuring that--
       ``(A) appropriate adjustments are made to basis to reflect 
     gain recognized by reason of subsection (a) and the exclusion 
     provided by subsection (a)(3), and
       ``(B) any gain by reason of a deemed sale under subsection 
     (a) of an interest in a corporation, partnership, trust, or 
     estate is reduced to reflect that portion of such gain which 
     is attributable to an interest in a trust which a 
     shareholder, partner, or beneficiary is treated as holding 
     directly under subsection (f)(3)(B)(i), and
       ``(2) which provide for the proper allocation of the 
     exclusion under subsection (a)(3) to property to which this 
     section applies.
       ``(k) Cross Reference.--

  ``For income tax treatment of individuals who terminate United States 
citizenship, see section 7701(a)(47).''.

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

``Sec. 877A. Tax responsibilities of expatriation.''.

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

     SEC. 12442. INFORMATION ON INDIVIDUALS EXPATRIATING.

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

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

       ``(a) Requirement.--
       ``(1) In general.--Notwithstanding any other provision of 
     law, any expatriate (within the meaning of section 
     877A(e)(1)) shall provide a statement which includes the 
     information described in subsection (b).
       ``(2) Timing.--
       ``(A) Citizens.--In the case of an expatriate described in 
     section 877(e)(1)(A), such statement shall be--
       ``(i) provided not later than the expatriation date (within 
     the meaning of section 877A(e)(2)), and
       ``(ii) provided to the person or court referred to in 
     section 877A(e)(3).
       ``(B) Noncitizens.--In the case of an expatriate described 
     in section 877A(e)(1)(B), such statement shall be provided to 
     the Secretary with the return of tax imposed by chapter 1 for 
     the taxable year during which the event described in such 
     section occurs.
       ``(b) Information To Be Provided.--Information required 
     under subsection (a) shall include--
       ``(1) the taxpayer's TIN,
       ``(2) the mailing address of such individual's principal 
     foreign residence,
       ``(3) the foreign country in which such individual is 
     residing,
       ``(4) the foreign country of which such individual is a 
     citizen,
       ``(5) in the case of an individual having a net worth of at 
     least the dollar amount applicable under section 
     877A(c)(1)(B), information detailing the assets and 
     liabilities of such individual, and
       ``(6) such other information as the Secretary may 
     prescribe.
       ``(c) Penalty.--Any individual failing to provide a 
     statement required under subsection (a) shall be subject to a 
     penalty for each year during any portion of which such 
     failure continues in an amount equal to the greater of--
       ``(1) 5 percent of the additional tax required to be paid 
     under section 877A for such year, or
       ``(2) $1,000,
     unless it is shown that such failure is due to reasonable 
     cause and not to willful neglect.
       ``(d) Information To Be Provided to Secretary.--
     Notwithstanding any other provision of law--
       ``(1) any Federal agency or court which collects (or is 
     required to collect) the statement under subsection (a) shall 
     provide to the Secretary--
       ``(A) a copy of any such statement, and
       ``(B) the name (and any other identifying information) of 
     any individual refusing to comply with the provisions of 
     subsection (a),
       ``(2) the Secretary of State shall provide to the Secretary 
     a copy of each certificate as to the loss of American 
     nationality under section 358 of the Immigration and 
     Nationality Act which is approved by the Secretary of State, 
     and
       ``(3) the Federal agency primarily responsible for 
     administering the immigration laws shall provide to the 
     Secretary the name of each lawful permanent resident of the 
     United States (within the meaning of section 7701(b)(6)) 
     whose status as such has been revoked or has been 
     administratively or judicially determined to have been 
     abandoned.

     Notwithstanding any other provision of law, not later than 30 
     days after the close of each calendar quarter, the Secretary 
     shall publish in the Federal Register the name of each 
     individual relinquishing United States citizenship (within 
     the meaning of section 877A(e)(3)) with respect to whom the 
     Secretary receives information under the preceding sentence 
     during such quarter.
       ``(e) Exemption.--The Secretary may by regulations exempt 
     any class of individuals from the requirements of this 
     section if the Secretary determines that applying this 
     section to such individuals is not necessary to carry out the 
     purposes of this section.''.
       (b) Clerical Amendment.--The table of sections for such 
     subpart A is amended by inserting after the item relating to 
     section 6039E the following new item:

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

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

     SEC. 12501. EXPANSION OF AUTHORITY TO ABATE INTEREST.

       (a) General Rule.--Paragraph (1) of section 6404(e) 
     (relating to abatement of interest in certain cases) is 
     amended--
       (1) by inserting ``unreasonable'' before ``error'' each 
     place it appears in subparagraphs (A) and (B), and
       (2) by striking ``in performing a ministerial act'' each 
     place it appears and inserting ``in performing a ministerial 
     or managerial act''.

[[Page S 16319]]

       (b) Clerical Amendment.--The subsection heading for 
     subsection (e) of section 6404 is amended--
       (1) by striking ``Assessments'' and inserting 
     ``Abatement'', and
       (2) by inserting ``Unreasonable'' before ``Errors''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to interest accruing with respect to deficiencies 
     or payments for taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 12502. REVIEW OF IRS FAILURE TO ABATE INTEREST.

       (a) In General.--Section 6404 is amended by adding at the 
     end the following new subsection:
       ``(g) Review of Denial of Request for Abatement of 
     Interest.--The Tax Court shall have jurisdiction over any 
     action brought by a taxpayer who meets the requirements 
     referred to in section 7430(c)(4)(A)(iii) to determine 
     whether the Secretary's failure to abate interest under this 
     section was an abuse of discretion if such action is brought 
     within 6 months after the date of the Secretary's final 
     determination not to abate such interest.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to requests for abatement after the date of the 
     enactment of this Act.

     SEC. 12503. JOINT RETURN MAY BE MADE AFTER SEPARATE RETURNS 
                   WITHOUT FULL PAYMENT OF TAX.

       (a) General Rule.--Paragraph (2) of section 6013(b) 
     (relating to limitations on filing of joint return after 
     filing separate returns) is amended by striking subparagraph 
     (A) and by redesignating subparagraphs (B) through (E) as 
     subparagraphs (A) through (D), respectively.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 12504. MODIFICATIONS TO CERTAIN LEVY EXEMPTION AMOUNTS.

       (a) Fuel, Etc.--Paragraph (2) of section 6334(a) (relating 
     to fuel, provisions, furniture, and personal effects exempt 
     from levy) is amended--
       (1) by striking ``If the taxpayer is the head of a family, 
     so'' and inserting ``So'',
       (2) by striking ``his household'' and inserting ``the 
     taxpayer's household'', and
       (3) by striking ``$1,650 ($1,550 in the case of levies 
     issued during 1989)'' and inserting ``$2,500''.
       (b) Books, Etc.--Paragraph (3) of section 6334(a) (relating 
     to books and tools of a trade, business, or profession) is 
     amended by striking ``$1,100 ($1,050 in the case of levies 
     issued during 1989)'' and inserting ``$1,250''.
       (c) Inflation Adjustment.--Section 6334 (relating to 
     property exempt from levy) is amended by adding at the end 
     the following new subsection:
       ``(f) Inflation Adjustment.--
       ``(1) In general.--In the case of any calendar year 
     beginning after 1996, each dollar amount referred to in 
     paragraphs (2) and (3) of subsection (a) shall be increased 
     by an amount equal to--
       ``(A) such dollar amount, multiplied by
       ``(B) the cost-of-living adjustment determined under 
     section 1(f)(3) for such calendar year, by substituting 
     `calendar year 1995' for `calendar year 1992' in subparagraph 
     (B) thereof.
       ``(2) Rounding.--If any dollar amount after being increased 
     under paragraph (1) is not a multiple of $10, such dollar 
     amount shall be rounded to the nearest multiple of $10.''.
       (d) Effective Date.--The amendments made by this section 
     shall take effect with respect to levies issued after 
     December 31, 1995.

     SEC. 12505. OFFERS-IN-COMPROMISE.

       (a) Review Requirements.--Subsection (b) of section 7122 
     (relating to records) is amended by striking ``$500.'' and 
     inserting ``$50,000. However, such compromise shall be 
     subject to continuing quality review by the Secretary.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 12506. AWARD OF LITIGATION COSTS PERMITTED IN 
                   DECLARATORY JUDGMENT PROCEEDINGS.

       (a) In General.--Subsection (b) of section 7430 is amended 
     by striking paragraph (3) and by redesignating paragraph (4) 
     as paragraph (3).
       (b) Effective Date.--The amendments made by this section 
     shall apply with respect to proceedings commenced after the 
     date of the enactment of this Act.

     SEC. 12507. COURT DISCRETION TO REDUCE AWARD FOR LITIGATION 
                   COSTS FOR FAILURE TO EXHAUST ADMINISTRATIVE 
                   REMEDIES.

       (a) General Rule.--Paragraph (1) of section 7433(d) 
     (relating to civil damages for certain unauthorized 
     collection actions) is amended to read as follows:
       ``(1) Award for damages may be reduced if administrative 
     remedies not exhausted.--The amount of damages awarded under 
     subsection (b) may be reduced if the court determines that 
     the plaintiff has not exhausted the administrative remedies 
     available to such plaintiff within the Internal Revenue 
     Service.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply with respect to proceedings commenced after the 
     date of the enactment of this Act.

     SEC. 12508. ENROLLED AGENTS INCLUDED AS THIRD-PARTY 
                   RECORDKEEPERS.

       (a) In General.--Paragraph (3) of section 7609(a) (relating 
     to third-party recordkeeper defined) is amended by striking 
     ``and'' at the end of subparagraph (G), by striking the 
     period at the end of subparagraph (H) and inserting ``; 
     and'', and by adding at the end the following new 
     subparagraph:
       ``(I) any enrolled agent.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to summonses issued after the date of the 
     enactment of this Act.

     SEC. 12509. SAFEGUARDS RELATING TO DESIGNATED SUMMONSES.

       (a) Limitation on Persons to Whom Designated Summons May Be 
     Issued.--Paragraph (1) of section 6503(k), as added by 
     section 11311(a) of the Omnibus Budget Reconciliation Act of 
     1990, is amended by striking ``with respect to any return of 
     tax by a corporation'' and inserting ``to a corporation (or 
     to any other person to whom the corporation has transferred 
     records) with respect to any return of tax by such 
     corporation for a taxable year (or other period) for which 
     such corporation is being examined under the coordinated 
     examination program (or any successor program) of the 
     Internal Revenue Service''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to summonses issued after the date of the 
     enactment of this Act.

     SEC. 12510. ANNUAL REMINDERS TO TAXPAYERS WITH OUTSTANDING 
                   DELINQUENT ACCOUNTS.

       (a) In General.--Chapter 77 (relating to miscellaneous 
     provisions) is amended by adding at the end the following new 
     section:

     ``SEC. 7524. ANNUAL NOTICE OF TAX DELINQUENCY.

       ``Not less often than annually, the Secretary shall send a 
     written notice to each taxpayer who has a tax delinquent 
     account of the amount of the tax delinquency as of the date 
     of the notice.''.
       (b) Clerical Amendment.--The table of sections for chapter 
     77 is amended by adding at the end the following new item:

``Sec. 7524. Annual notice of tax delinquency.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to calendar years after 1995.
       Subtitle G--Casualty and Involuntary Conversion Provisions

     SEC. 12601. BASIS ADJUSTMENT TO PROPERTY HELD BY CORPORATION 
                   WHERE STOCK IN CORPORATION IS REPLACEMENT 
                   PROPERTY UNDER INVOLUNTARY CONVERSION RULES.

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

     SEC. 12602. EXPANSION OF REQUIREMENT THAT INVOLUNTARILY 
                   CONVERTED PROPERTY BE REPLACED WITH PROPERTY 
                   ACQUIRED FROM AN UNRELATED PERSON.

       (a) In General.--Subsection (i) of section 1033 is amended 
     to read as follows:

[[Page S 16320]]

       ``(i) Replacement Property Must Be Acquired From Unrelated 
     Person in Certain Cases.--
       ``(1) In general.--If the property which is involuntarily 
     converted is held by a taxpayer to which this subsection 
     applies, subsection (a) shall not apply if the replacement 
     property or stock is acquired from a related person. The 
     preceding sentence shall not apply to the extent that the 
     related person acquired the replacement property or stock 
     from an unrelated person during the period applicable under 
     subsection (a)(2)(B).
       ``(2) Taxpayers to which subsection applies.--This 
     subsection shall apply to--
       ``(A) a C corporation,
       ``(B) a partnership in which 1 or more C corporations own, 
     directly or indirectly (determined in accordance with section 
     707(b)(3)), more than 50 percent of the capital interest, or 
     profits interest, in such partnership at the time of the 
     involuntary conversion, and
       ``(C) any other taxpayer if, with respect to property which 
     is involuntarily converted during the taxable year, the 
     aggregate of the amount of realized gain on such property on 
     which there is realized gain exceeds $100,000.

     In the case of a partnership, subparagraph (C) shall apply 
     with respect to the partnership and with respect to each 
     partner. A similar rule shall apply in the case of an S 
     corporation and its shareholders.
       ``(3) Related person.--For purposes of this subsection, a 
     person is related to another person if the person bears a 
     relationship to the other person described in section 267(b) 
     or 707(b)(1).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to involuntary conversions occurring after 
     September 13, 1995.

     SEC. 12603. SPECIAL RULE FOR CROP INSURANCE PROCEEDS AND 
                   DISASTER PAYMENTS.

       (a) In General.--Section 451(d) (relating to special rule 
     for crop insurance proceeds and disaster payments) is amended 
     to read as follows:
       ``(d) Special Rule for Crop Insurance Proceeds and Disaster 
     Payments.--
       ``(1) General rule.--In the case of any payment described 
     in paragraph (2), a taxpayer reporting on the cash receipts 
     and disbursements method of accounting--
       ``(A) may elect to treat any such payment received in the 
     taxable year of destruction or damage of crops as having been 
     received in the following taxable year if the taxpayer 
     establishes that, under the taxpayer's practice, income from 
     such crops involved would have been reported in a following 
     taxable year, or
       ``(B) may elect to treat any such payment received in a 
     taxable year following the taxable year of the destruction or 
     damage of crops as having been received in the taxable year 
     of destruction or damage, if the taxpayer establishes that, 
     under the taxpayer's practice, income from such crops 
     involved would have been reported in the taxable year of 
     destruction or damage.
       ``(2) Payments described.--For purposes of this subsection, 
     a payment is described in this paragraph if such payment--
       ``(A) is insurance proceeds received on account of 
     destruction or damage to crops, or
       ``(B) is disaster assistance received under any Federal law 
     as a result of--
       ``(i) destruction or damage to crops caused by drought, 
     flood, or other natural disaster, or
       ``(ii) inability to plant crops because of such a 
     disaster.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     applies to payments received after December 31, 1992, as a 
     result of destruction or damage occurring after such date.

     SEC. 12604. APPLICATION OF INVOLUNTARY EXCLUSION RULES TO 
                   PRESIDENTIALLY DECLARED DISASTERS.

       (a) In General.--Section 1033(h) is amended by 
     redesignating paragraphs (2) and (3) as paragraphs (3) and 
     (4) and by inserting after paragraph (1) the following new 
     paragraph:
       ``(2) Trade or business and investment property.--If a 
     taxpayer's property held for productive use in a trade or 
     business or for investment is compulsorily or involuntarily 
     converted as a result of a Presidentially declared disaster, 
     tangible property of a type held for productive use in a 
     trade or business shall be treated for purposes of subsection 
     (a) as property similar or related in use to the property so 
     converted.''.
       (b) Conforming Amendments.--Section 1033(h) is amended--
       (1) by striking ``residence'' in paragraph (3) (as 
     redesignated by subsection (a)) and inserting ``property'',
       (2) by striking ``Principal Residences'' in the heading and 
     inserting ``Property'', and
       (3) by striking ``(1) In general.--'' and inserting ``(1) 
     Principal residences.--''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to disasters declared after December 31, 1994, in 
     taxable years ending after such date.
        Subtitle H--Exempt Organizations and Charitable Reforms

     SEC. 12701. COOPERATIVE SERVICE ORGANIZATIONS FOR CERTAIN 
                   FOUNDATIONS.

       (a) In General.--Section 501 (relating to exemption from 
     tax on corporations, certain trusts, etc.) is amended by 
     redesignating subsection (n) as subsection (o) and by 
     inserting after subsection (m) the following new subsection:
       ``(n) Cooperative Service Organizations for Certain 
     Foundations.--
       ``(1) In general.--For purposes of this title, if an 
     organization--
       ``(A) is organized and operated solely for purposes 
     referred to in subsection (f)(1),
       ``(B) is composed solely of members which are exempt from 
     taxation under subsection (a) and are--
       ``(i) private foundations, or
       ``(ii) community foundations as to which section 
     170(b)(1)(A)(vi) applies,
       ``(C) has at least 20 members,
       ``(D) does not at any time after the second taxable year 
     beginning after the date of its organization or, if later, 
     beginning after the date of the enactment of this subsection, 
     have a member which holds more than 10 percent (by value) of 
     the interests in the organization,
       ``(E) is organized and controlled by its members but is not 
     controlled by any one member and does not have a member which 
     controls another member of the organization, and
       ``(F) permits members of the organization to require the 
     dismissal of any of the organization's investment advisers, 
     following reasonable notice, if members holding a majority of 
     interest in the account managed by such adviser vote to 
     remove such adviser,

     then such organization shall be treated as an organization 
     organized and operated exclusively for charitable purposes.
       ``(2) Treatment of income of members.--If any member of an 
     organization described in paragraph (1) is a private 
     foundation (other than an exempt operating foundation, as 
     defined in section 4940(d)), such private foundation's 
     allocable share of the capital gain net income and gross 
     investment income of the organization for any taxable year of 
     the organization shall be treated, for purposes of section 
     4940, as capital gain net income and gross investment income 
     of such private foundation (whether or not distributed to 
     such foundation) for the taxable year of such private 
     foundation with or within which the taxable year of the 
     organization described in paragraph (1) ends (and such 
     private foundation shall take into account its allocable 
     share of the deductions referred to in section 4940(c)(3) of 
     the organization).
       ``(3) Applicable excise taxes.--Subchapter A of chapter 42 
     (other than sections 4940 and 4942) shall apply to any 
     organization described in paragraph (1).''.
       (b) Conforming Amendments.--
       (1) Section 4945(d) is amended by adding at the end the 
     following new flush sentence:

     ``Paragraph (4)(B) shall not apply to a grant to an 
     organization described in section 501(n).''
       (2) Section 4942(g)(1)(A) is amended by inserting ``or an 
     organization described in section 501(n)'' after ``subsection 
     (j)(3))''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after December 31, 1995.

     SEC. 12702. EXCLUSION FROM UNRELATED BUSINESS TAXABLE INCOME 
                   FOR CERTAIN SPONSORSHIP PAYMENTS.

       (a) In General.--Section 513 (relating to unrelated trade 
     or business income) is amended by adding at the end the 
     following new subsection:
       ``(i) Treatment of Certain Sponsorship Payments.--
       ``(1) In general.--The term `unrelated trade or business' 
     does not include the activity of soliciting and receiving 
     qualified sponsorship payments.
       ``(2) Qualified sponsorship payments.--For purposes of this 
     subsection--
       ``(A) In general.--The term `qualified sponsorship payment' 
     means any payment made by any person engaged in a trade or 
     business with respect to which there is no arrangement or 
     expectation that such person will receive any substantial 
     return benefit other than the use or acknowledgement of the 
     name or logo (or product lines) of such person's trade or 
     business in connection with the activities of the 
     organization that receives such payment. Such a use or 
     acknowledgement does not include advertising such person's 
     products or services (including messages containing 
     qualitative or comparative language, price information or 
     other indications of savings or value, an endorsement, or an 
     inducement to purchase, sell, or use such products or 
     services).
       ``(B) Limitations.--
       ``(i) Contingent payments.--The term `qualified sponsorship 
     payment' does not include any payment if the amount of such 
     payment is contingent upon the level of attendance at one or 
     more events, broadcast ratings, or other factors indicating 
     the degree of public exposure to one or more events.
       ``(ii) Acknowledgements or advertising in periodicals.--The 
     term `qualified sponsorship payment' does not include any 
     payment which entitles the payor to an acknowledgement or 
     advertising in regularly scheduled and printed material that 
     is not related to and primarily distributed in connection 
     with a specific event conducted by the payee organization.
       ``(3) Allocation of portions of single payment.--For 
     purposes of this subsection, to the extent that a portion of 
     a payment would (if made as a separate payment) be a 
     qualified sponsorship payment, such portion of such payment 
     and the other portion of such payment shall be treated as 
     separate payments.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to payments solicited or received after December 
     31, 1995.

     SEC. 12703. TREATMENT OF DUES PAID TO AGRICULTURAL OR 
                   HORTICULTURAL ORGANIZATIONS.

       (a) General Rule.--Section 512 (defining unrelated business 
     taxable income) is amended by adding at the end the following 
     new subsection:
       ``(d) Treatment of Dues of Agricultural or Horticultural 
     Organizations.--
       ``(1) In general.--If--
       ``(A) an agricultural or horticultural organization 
     described in section 501(c)(5) requires annual dues to be 
     paid in order to be a member of such organization, and
       ``(B) the amount of such required annual dues does not 
     exceed $100,

     in no event shall any portion of such dues be treated as 
     derived by such organization from an unrelated trade or 
     business by reason of any benefits or privileges to which 
     members of such organization are entitled.

[[Page S 16321]]

       ``(2) Indexation of $100 amount.--In the case of any 
     taxable year beginning in a calendar year after 1995, the 
     $100 amount in paragraph (1) shall be increased by an amount 
     equal to--
       ``(A) $100, multiplied by
       ``(B) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, by substituting `calendar year 1994' for 
     `calendar year 1992' in subparagraph (B) thereof.
       ``(3) Dues.--For purposes of this subsection, the term 
     `dues' means any payment required to be made in order to be 
     recognized by the organization as a member of the 
     organization.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1994.

     SEC. 12704. REPEAL OF CREDIT FOR CONTRIBUTIONS TO COMMUNITY 
                   DEVELOPMENT CORPORATIONS.

       (a) In General.--Section 13311 of the Revenue 
     Reconciliation Act of 1993 (relating to credit for 
     contributions to certain community development corporations) 
     is hereby repealed.
       (b) Effective Date.--The amendment made by this section 
     shall apply to contributions made after the date of the 
     enactment of this Act (other than contributions made pursuant 
     to a legally enforceable agreement which is effect on the 
     date of the enactment of this Act).

     SEC. 12705. CLARIFICATION OF TREATMENT OF QUALIFIED FOOTBALL 
                   COACHES PLANS.

       (a) In General.--Subparagraph (F) of section 3(37) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1002(37)(F)) is amended by redesignating clause (ii) as 
     clause (iii) and by inserting after clause (i) the following 
     new clause:
       ``(ii) For purposes of the Internal Revenue Code of 1986--
       ``(I) clause (i) shall apply, and
       ``(II) a qualified football coaches plan shall be treated 
     as a multiemployer collectively bargained plan.''.
       (b) Imposition of Excise Tax.--
       (1) In general.--For purposes of reinstatement as a 
     qualified football coaches plan under the Internal Revenue 
     Code of 1986, there is hereby imposed on the cash or deferred 
     arrangement maintained by an organization described in 
     section 501(c)(6) of such Code, an excise tax equal to 
     $25,000, to be paid in the first plan year of the arrangement 
     beginning after the date of the enactment of this Act.
       (2) Application of certain rules.--For purposes of the 
     Internal Revenue Code of 1986, the tax imposed under 
     paragraph (1) shall be treated as a tax imposed under 
     subtitle D of such Code.
       (c) Effective Date.--The amendments made by subsection (a) 
     shall apply to years beginning after December 22, 1987.
              Subtitle I--Tax Reform and Other Provisions

              CHAPTER 1--PROVISIONS RELATING TO BUSINESSES

     SEC. 12801. TAX TREATMENT OF CERTAIN EXTRAORDINARY DIVIDENDS.

       (a) Treatment of Extraordinary Dividends in Excess of 
     Basis.--Paragraph (2) of section 1059(a) (relating to 
     corporate shareholder's basis in stock reduced by nontaxed 
     portion of extraordinary dividends) is amended to read as 
     follows:
       ``(2) Amounts in excess of basis.--If the nontaxed portion 
     of such dividends exceeds such basis, such excess shall be 
     treated as gain from the sale or exchange of such stock for 
     the taxable year in which the extraordinary dividend is 
     received.''.
       (b) Treatment of Redemptions Where Options Involved.--
     Paragraph (1) of section 1059(e) (relating to treatment of 
     partial liquidations and non-pro rata redemptions) is amended 
     to read as follows:
       ``(1) Treatment of partial liquidations and certain 
     redemptions.--Except as otherwise provided in regulations--
       ``(A) Redemptions.--In the case of any redemption of 
     stock--
       ``(i) which is part of a partial liquidation (within the 
     meaning of section 302(e)) of the redeeming corporation,
       ``(ii) which is not pro rata as to all shareholders, or
       ``(iii) which would not have been treated (in whole or in 
     part) as a dividend if any options had not been taken into 
     account under section 318(a)(4),

     any amount treated as a dividend with respect to such 
     redemption shall be treated as an extraordinary dividend to 
     which paragraphs (1) and (2) of subsection (a) apply without 
     regard to the period the taxpayer held such stock. In the 
     case of a redemption described in clause (iii), only the 
     basis in the stock redeemed shall be taken into account under 
     subsection (a).
       ``(B) Reorganizations, etc.--An exchange described in 
     section 356(a)(1) which is treated as a dividend under 
     section 356(a)(2) shall be treated as a redemption of stock 
     for purposes of applying subparagraph (A).''.
       (c) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to distributions after May 3, 1995.
       (2) Transition rule.--The amendments made by this section 
     shall not apply to any distribution made pursuant to the 
     terms of a written binding contract in effect on May 3, 1995, 
     and at all times thereafter before such distribution.
       (3) Certain dividends not pursuant to certain 
     redemptions.--In determining whether the amendment made by 
     subsection (a) applies to any extraordinary dividend other 
     than a dividend treated as an extraordinary dividend under 
     section 1059(e)(1) of the Internal Revenue Code of 1986 (as 
     amended by this Act), paragraphs (1) and (2) shall be applied 
     by substituting ``September 13, 1995'' for ``May 3, 1995''.

     SEC. 12802. REGISTRATION OF CONFIDENTIAL CORPORATE TAX 
                   SHELTERS.

       (a) In General.--Section 6111 (relating to registration of 
     tax shelters) is amended by redesignating subsections (d) and 
     (e) as subsections (e) and (f), respectively, and by 
     inserting after subsection (c) the following new subsection:
       ``(d) Certain Confidential Arrangements Treated as Tax 
     Shelters.--
       ``(1) In general.--For purposes of this section, the term 
     `tax shelter' includes any entity, plan, arrangement, or 
     transaction--
       ``(A) a significant purpose of the structure of which is 
     the avoidance or evasion of Federal income tax for a 
     participant which is a corporation,
       ``(B) which is offered to any potential participant under 
     conditions of confidentiality, and
       ``(C) for which the tax shelter promoters may receive fees 
     in excess of $100,000 in the aggregate.
       ``(2) Conditions of confidentiality.--For purposes of 
     paragraph (1)(B), an offer is under conditions of 
     confidentiality if--
       ``(A) the potential participant to whom the offer is made 
     (or any other person acting on behalf of such participant) 
     has an understanding or agreement with or for the benefit of 
     any promoter of the tax shelter that such participant (or 
     other person) will limit disclosure of the tax shelter or any 
     significant tax features of the tax shelter, or
       ``(B) any promoter of the tax shelter--
       ``(i) claims, knows, or has reason to know,
       ``(ii) knows or has reason to know that any other person 
     (other than the potential participant) claims, or
       ``(iii) causes another person to claim,

     that the tax shelter (or any aspect thereof) is proprietary 
     to any person other than the potential participant or is 
     otherwise protected from disclosure to or use by others.

     For purposes of this subsection, the term `promoter' means 
     any person or any related person (within the meaning of 
     section 267 or 707) who participates in the organization, 
     management, or sale of the tax shelter.
       ``(3) Persons other than promoter required to register in 
     certain cases.--
       ``(A) In general.--If--
       ``(i) the requirements of subsection (a) are not met with 
     respect to any tax shelter (as defined in paragraph (1)) by 
     any tax shelter promoter, and
       ``(ii) no tax shelter promoter is a United States person,

     then each United States person who discussed participation in 
     such shelter shall register such shelter under subsection 
     (a).
       ``(B) Exception.--Subparagraph (A) shall not apply to a 
     United States person who discussed participation in a tax 
     shelter if--
       ``(i) such person notified the promoter in writing (not 
     later than the close of the seventh day after the day on 
     which such discussions began) that such person would not 
     participate in such shelter, and
       ``(ii) such person does not participate in such shelter.
       ``(4) Offer to participate treated as offer for sale.--For 
     purposes of subsections (a) and (b), an offer to participate 
     in a tax shelter (as defined in paragraph (1)) shall be 
     treated as an offer for sale.''.
       (b) Penalty.--Subsection (a) of section 6707 (relating to 
     failure to furnish information regarding tax shelters) is 
     amended by adding at the end the following new paragraph:
       ``(3) Confidential arrangements.--
       ``(A) In general.--In the case of a tax shelter (as defined 
     in section 6111(d)), the penalty imposed under paragraph (1) 
     shall be an amount equal to the greater of--
       ``(i) 50 percent of the fees paid to any promoter of the 
     tax shelter with respect to offerings made before the date 
     such shelter is registered under section 6111, or
       ``(ii) $10,000.

     Clause (i) shall be applied by substituting `75 percent' for 
     `50 percent' in the case of an intentional failure or act 
     described in paragraph (1).
       ``(B) Special rule for participants required to register 
     shelter.--In the case of a person required to register such a 
     tax shelter by reason of section 6111(d)(3)--
       ``(i) such person shall be required to pay the penalty 
     under paragraph (1) only if such person actually participated 
     in such shelter,
       ``(ii) the amount of such penalty shall be determined by 
     taking into account under subparagraph (A)(i) only the fees 
     paid by such person, and
       ``(iii) such penalty shall be in addition to the penalty 
     imposed on any other person for failing to register such 
     shelter.''.
       (c) Conforming Amendments.--
       (1) Paragraph (2) of section 6707(a) is amended by striking 
     ``The penalty'' and inserting ``Except as provided in 
     paragraph (3), the penalty''.
       (2) Subparagraph (A) of section 6707(a)(1) is amended by 
     striking ``paragraph (2)'' and inserting ``paragraph (2) or 
     (3), as the case may be''.
       (d) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to any tax shelter (as defined in section 6111(d) of 
     the Internal Revenue Code of 1986, as amended by this 
     section) interests in which are offered to potential 
     participants after the date of the enactment of this Act.
       (2) Due date for registration.--The due date for 
     registering any tax shelter required to be registered by 
     reason of the amendments made by this section shall be not 
     earlier than the close of a reasonable period after the 
     Secretary of the Treasury prescribes guidance with respect to 
     meeting such requirements.

     SEC. 12803. DENIAL OF DEDUCTION FOR INTEREST ON LOANS WITH 
                   RESPECT TO COMPANY-OWNED INSURANCE.

       (a) In General.--Paragraph (4) of section 264(a) is 
     amended--

[[Page S 16322]]

       (1) by inserting ``, or any endowment or annuity contracts 
     owned by the taxpayer covering any individual,'' after ``the 
     life of any individual'', and
       (2) by striking all that follows ``carried on by the 
     taxpayer'' and inserting a period.
       (b) Exception for Contracts Relating to Key Persons; 
     Permissible Interest Rates.--Section 264 is amended--
       (1) by striking ``Any'' in subsection (a)(4) and inserting 
     ``Except as provided in subsection (d), any'', and
       (2) by adding at the end the following new subsection:
       ``(d) Special Rules For Application of Subsection (a)(4).--
       ``(1) Exception for key persons.--Subsection (a)(4) shall 
     not apply to any interest paid or accrued on any indebtedness 
     with respect to policies or contracts covering an individual 
     who is a key person to the extent that the aggregate amount 
     of such indebtedness with respect to policies and contracts 
     covering such individual does not exceed $50,000.
       ``(2) Interest rate cap on key persons and pre-1986 
     contracts.--No deduction shall be allowed by reason of 
     paragraph (1) or the last sentence of subsection (a) with 
     respect to interest paid or accrued for any month to the 
     extent the amount of such interest exceeds the amount which 
     would have been determined if the rate of interest for such 
     month were the rate of interest described as Moody's 
     Corporate Bond Yield Average-Monthly Average Corporates as 
     published by Moody's Investors Service, Inc., or any 
     successor thereto, for such month.
       ``(3) Key person.--For purposes of paragraph (1), the term 
     `key person' means an officer or 20-percent owner, except 
     that the number of individuals who may be treated as key 
     persons with respect to any taxpayer shall not exceed the 
     greater of--
       ``(A) 5 individuals, or
       ``(B) the lesser of 5 percent of the total officers and 
     employees of the taxpayer or 25 individuals.
       ``(4) 20-percent owner.--For purposes of this subsection, 
     the term `20-percent owner' means--
       ``(A) if the taxpayer is a corporation, any person who owns 
     directly 20 percent or more of the outstanding stock of the 
     corporation or stock possessing 20 percent or more of the 
     total combined voting power of all stock of the corporation, 
     or
       ``(B) if the taxpayer is not a corporation, any person who 
     owns 20 percent or more of the capital or profits interest in 
     the employer.
       ``(5) Aggregation rules.--
       ``(A) In general.--For purposes of paragraph (4)(A) and 
     applying the $50,000 limitation in paragraph (1)--
       ``(i) all members of a controlled group shall be treated as 
     1 taxpayer, and
       ``(ii) such limitation shall be allocated among the members 
     of such group in such manner as the Secretary may prescribe.
       ``(B) Controlled group.--For purposes of this paragraph, 
     all persons treated as a single employer under subsection (a) 
     or (b) of section 52 or subsection (m) or (o) of section 414 
     shall be treated as members of a controlled group.''.
       (c) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to interest paid or accrued after December 31, 1995.
       (2) Transition rule for existing indebtedness.--
       (A) In general.--In the case of indebtedness incurred 
     before January 1, 1996, the amendments made by this section 
     shall not apply to qualified interest paid or accrued on such 
     indebtedness after October 13, 1995, and before January 1, 
     2001.
       (B) Qualified interest.--For purposes of subparagraph (A), 
     the qualified interest with respect to any indebtedness for 
     any month is the amount of interest which would be paid or 
     accrued for such month on such indebtedness if the lesser of 
     the following rates of interest were used for such month:
       (i) The rate of interest specified under the terms of the 
     indebtedness as in effect on October 13, 1995 (and without 
     regard to modification of such terms after such date).
       (ii) The applicable percentage rate of interest described 
     as Moody's Corporate Bond Yield Average-Monthly Average 
     Corporates as published by Moody's Investors Service, Inc., 
     or any successor thereto, for such month.
       (C) Applicable percentage.--For purposes of subparagraph 
     (B), the applicable percentage is as follows:

                                                     The percentage is:
    1995 or 1996.........................................100 percent   
    1997..................................................95 percent   
    1998..................................................90 percent   
    1999..................................................85 percent   
    2000................................................80 percent.''  

       (3) Special rule for grandfathered contracts.--This section 
     shall not apply to any contract purchased on or before June 
     20, 1986, except that--
       (A) paragraph (2) shall apply to interest on indebtedness 
     incurred in connection with such contract which is paid or 
     accrued after October 13, 1995, and before January 1, 1996, 
     and
       (B) section 264(d)(2) of the Internal Revenue Code of 1986 
     (as added by subsection (b)) shall apply to such interest 
     paid or accrued after December 31, 1995.
       (d) Spread of Income Inclusion on Surrender, Etc. of 
     Contracts.--
       (1) In general.--If any amount is received under any life 
     insurance policy or endowment or annuity contract described 
     in paragraph (4) of section 264(a) of the Internal Revenue 
     Code of 1986--
       (A) on the complete surrender, redemption, or maturity of 
     such policy or contract during calendar year 1996, 1997, 
     1998, 1999, 2000, or 2001, or
       (B) in full discharge during any such calendar year of the 
     obligation under the policy or contract which is in the 
     nature of a refund of the consideration paid for the policy 
     or contract,

     then (in lieu of any other inclusion in gross income) such 
     amount shall be includible in gross income ratably over the 
     4-taxable year period beginning with the taxable year such 
     amount would (but for this paragraph) be includible. The 
     preceding sentence shall only apply to the extent the amount 
     is includible in gross income for the taxable year in which 
     the event described in subparagraph (A) or (B) occurs.
       (2) Special rules for applying section 264.--A contract 
     shall not be treated as failing--
       (A) to meet the requirement of section 264(c)(1) of the 
     Internal Revenue Code of 1986, or
       (B) to be treated as a single premium contract under 
     section 264(b)(1) of such Code,

     solely by reason of an occurrence described in subparagraph 
     (A) or (B) of paragraph (1) of this subsection or solely by 
     reason of no additional premiums being received under the 
     contract by reason of a lapse occurring after October 13, 
     1995.
       (3) Special rule for deferred acquisition costs.--In the 
     case of the occurrence of any event described in subparagraph 
     (A) or (B) of paragraph (1) of this subsection with respect 
     to any policy or contract--
       (A) section 848 of the Internal Revenue Code of 1986 shall 
     not apply to the unamortized balance (if any) of the 
     specified policy acquisition expenses attributable to such 
     policy or contract immediately before the insurance company's 
     taxable year in which such event occurs, and
       (B) there shall be allowed as a deduction to such company 
     for such taxable year under chapter 1 of such Code an amount 
     equal to such unamortized balance.

     SEC. 12804. TERMINATION OF SUSPENSE ACCOUNTS FOR FAMILY 
                   CORPORATIONS REQUIRED TO USE ACCRUAL METHOD OF 
                   ACCOUNTING.

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

     SEC. 12805. TERMINATION OF PUERTO RICO AND POSSESSION TAX 
                   CREDIT.

       (a) In General.--Section 936 is amended by adding at the 
     end the following new subsection:
       ``(j) Termination.--
       ``(1) In general.--Except as otherwise provided in this 
     subsection, this section shall not apply to any taxable year 
     beginning after December 31, 1995.
       ``(2) Transition rules for active business income credit.--
       ``(A) In general.--In the case of an existing credit 
     claimant with respect to a possession, the credit determined 
     under subsection (a)(1)(A) for that possession shall be 
     allowed for taxable years beginning after December 31, 1995, 
     and before January 1, 2002.
       ``(B) Phasedown of reduced credit.--
       ``(i) In general.--In the case of an existing credit 
     claimant to which subsection (a)(4)(B) applies, the 
     applicable percentage under clause (ii) thereof shall be 
     reduced by--

       ``(I) 10 percentage points for taxable years beginning in 
     1999,
       ``(II) 20 percentage points for taxable years beginning in 
     2000, and
       ``(III) 30 percentage points for taxable years beginning in 
     2001.

       ``(ii) Reduction not taken into account for local tax 
     deduction.--The reduction under clause (i) shall not be taken 
     into account for purposes of the last sentence of subsection 
     (a)(4)(B)(i).
       ``(iii) Election irrevocable after 1997.--An election under 
     subsection (a)(4)(B)(iii) which is in effect for the 
     taxpayer's last taxable year beginning before 1997 may not be 
     revoked unless it is revoked for the taxpayer's first taxable 
     year beginning in 1997 and all subsequent taxable years.
       ``(3) Restrictions on qualified possession source 
     investment income.--
       ``(A) In general.--In the case of an existing credit 
     claimant with respect to a possession, the credit determined 
     under subsection (a)(1)(B) for that possession shall be 
     allowed for taxable years beginning after December 31, 1995, 
     and before January 1, 2001, except that only qualified 
     possession source investment income derived from a qualifying 
     asset may be taken into account in computing the amount of 
     such credit.
       ``(B) Qualifying asset.--For purposes of subparagraph (A)--
       ``(i) In general.--The term `qualifying asset' means--

[[Page S 16323]]


       ``(I) an asset held by the possession corporation on 
     October 13, 1995, or
       ``(II) an asset which was purchased from the proceeds of an 
     asset described in subclause (I) or this subclause.

       ``(ii) Restriction on reinvestment.--An asset shall not be 
     treated as a qualifying asset under clause (i) with respect 
     to income derived from such asset for periods after the date 
     on which the existing credit claimant has held such asset 
     (and all prior assets the proceeds of which have been rolled 
     into such asset) for the shortest period which results in the 
     maximum reduction of possession taxes under the laws of the 
     possession in effect on October 13, 1995.
       ``(4) Special rules for certain possessions.--
       ``(A) In general.--In the case of an existing credit 
     claimant with respect to an applicable possession, this 
     section (other than the preceding paragraphs of this 
     subsection) shall apply to taxable years beginning after 
     December 31, 1995, and before January 1, 2006.
       ``(B) Applicable possession.--For purposes of this 
     paragraph, the term `applicable possession' means Guam, 
     American Samoa, and the Commonwealth of the Northern Mariana 
     Islands.
       ``(5) Existing credit claimant.--For purposes of this 
     subsection--
       ``(A) In general.--The term `existing credit claimant' 
     means, with respect to any possession, a corporation--
       ``(i) which was actively conducting a trade or business in 
     that possession on October 13, 1995, and
       ``(ii) with respect to which an election under this section 
     was in effect for the corporation's taxable year which 
     includes October 13, 1995.
       ``(B) New lines of business prohibited.--If, after October 
     13, 1995, a corporation which would (but for this 
     subparagraph) be an existing credit claimant with respect to 
     a possession adds a substantial new line of business with 
     respect to a trade or business conducted in that possession, 
     such corporation shall cease to be treated as an existing 
     credit claimant with respect to that possession as of the 
     close of the taxable year ending before the date of such 
     addition.
       ``(C) Binding contract exception.--If, on October 13, 1995, 
     and at all times thereafter, there is in effect with respect 
     to a corporation a binding contract for the acquisition of 
     assets to be used in, or for the sale of assets to be 
     produced from, a trade or business within a possession, the 
     corporation shall be treated for purposes of this paragraph 
     as actively conducting such trade or business on October 13, 
     1995. The preceding sentence shall not apply if such trade or 
     business is not actively conducted before January 1, 1996.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 12806. DEPRECIATION UNDER INCOME FORECAST METHOD.

       (a) General Rule.--Section 167 (relating to depreciation) 
     is amended by redesignating subsection (g) as subsection (h) 
     and by inserting after subsection (f) the following new 
     subsection:
       ``(g) Depreciation Under Income Forecast Method.--
       ``(1) In general.--If the depreciation deduction allowable 
     under this section to any taxpayer with respect to any 
     property is determined under the income forecast method or 
     any similar method--
       ``(A) in determining the amount of the depreciation 
     deduction under such method, the estimated income from the 
     property shall include all income earned in connection with 
     the property before the close of the 10th taxable year 
     following the taxable year in which the property was placed 
     in service,
       ``(B) the adjusted basis of the property shall only include 
     amounts with respect to which the requirements of section 
     461(h) are satisfied,
       ``(C) the depreciation deduction under such method for the 
     10th taxable year beginning after the taxable year in which 
     the property was placed in service shall be equal to the 
     adjusted basis of such property as of the beginning of such 
     10th taxable year, and
       ``(D) such taxpayer shall pay (or be entitled to receive) 
     interest computed under the look-back method of paragraph (2) 
     for any recomputation year.
       ``(2) Look-back method.--The interest computed under the 
     look-back method of this paragraph for any recomputation year 
     shall be determined by--
       ``(A) first determining the depreciation deductions under 
     this section with respect to such property which would have 
     been allowable for prior taxable years if the determination 
     of the amounts so allowable had been made on the basis of the 
     sum of the following (instead of the estimated income with 
     respect to such property)--
       ``(i) the actual income from such property for periods 
     before the close of the recomputation year, and
       ``(ii) an estimate of the future income with respect to 
     such property for periods after the recomputation year,
       ``(B) second, determining (solely for purposes of computing 
     such interest) the overpayment or underpayment of tax for 
     each such prior taxable year which would result solely from 
     the application of subparagraph (A), and
       ``(C) then using the adjusted overpayment rate (as defined 
     in section 460(b)(7)), compounded daily, on the overpayment 
     or underpayment determined under subparagraph (B).

     For purposes of the preceding sentence, any cost incurred 
     after the property is placed in service (which is not treated 
     as a separate property under paragraph (5)) shall be taken 
     into account by discounting (using the Federal mid-term rate 
     determined under section 1274(d) as of the time such cost is 
     incurred) such cost to its value as of the date the property 
     is placed in service. The taxpayer may elect with respect to 
     any property to have the preceding sentence not apply to such 
     property.
       ``(3) Exception from look-back method.--Paragraph (1)(D) 
     shall not apply with respect to any property which, when 
     placed in service by the taxpayer, had a basis of $100,000 or 
     less.
       ``(4) Recomputation year.--For purposes of this subsection, 
     except as provided in regulations, the term `recomputation 
     year' means, with respect to any property, the third and the 
     10th taxable years beginning after the taxable year in which 
     the property was placed in service, unless the actual income 
     from the property for the period before the close of such 
     third or 10th taxable year is within 10 percent of the 
     estimated income from the property for such period which was 
     taken into account under paragraph (1)(A).
       ``(5) Special rules.--
       ``(A) Certain costs treated as separate property.--For 
     purposes of this subsection, the following costs shall be 
     treated as separate properties:
       ``(i) Any costs incurred with respect to any property after 
     the 10th taxable year beginning after the taxable year in 
     which the property was placed in service.
       ``(ii) Any costs incurred after the property is placed in 
     service and before the close of such 10th taxable year if 
     such costs are significant and give rise to a significant 
     increase in the income from the property which was not 
     included in the estimated income from the property.
       ``(B) Syndication income from television series.--In the 
     case of property which is an episode in a television series, 
     income from syndicating such series shall not be required to 
     be taken into account under this subsection before the 
     earlier of--
       ``(i) the 4th taxable year beginning after the date the 
     first episode in such series is placed in service, or
       ``(ii) the earliest taxable year in which the taxpayer has 
     an arrangement relating to the future syndication of such 
     series.
       ``(C) Collection of interest.--For purposes of subtitle F 
     (other than sections 6654 and 6655), any interest required to 
     be paid by the taxpayer under paragraph (1) for any 
     recomputation year shall be treated as an increase in the tax 
     imposed by this chapter for such year.
       ``(D) Determinations.--For purposes of this subsection, 
     determinations of the amount of income from any property 
     shall be determined in the same manner as for purposes of 
     applying the income forecast method; except that any income 
     from the disposition of such property shall be taken into 
     account.
       ``(E) Treatment of pass-thru entities.--Rules similar to 
     the rules of section 460(b)(4) shall apply for purposes of 
     this subsection.''.
       (b) Effective Date.--
       (1) In general.--The amendment made by subsection (a) shall 
     apply to property placed in service after September 13, 1995.
       (2) Binding contracts.--The amendment made by subsection 
     (a) shall not apply to any property produced or acquired by 
     the taxpayer pursuant to a written contract which was binding 
     on September 13, 1995, and at all times thereafter before 
     such production or acquisition.

     SEC. 12807. REPEAL OF EXCLUSION FOR INTEREST ON LOANS USED TO 
                   ACQUIRE EMPLOYER SECURITIES.

       (a) In General.--Section 133 (relating to interest on 
     certain loans used to acquire employer securities) is hereby 
     repealed.
       (b) Conforming Amendments.--
       (1) Subparagraph (B) of section 291(e)(1) is amended by 
     striking clause (iv) and by redesignating clause (v) as 
     clause (iv).
       (2) Section 812 is amended by striking subsection (g).
       (3) Paragraph (5) of section 852(b) is amended by striking 
     subparagraph (C).
       (4) Paragraph (2) of section 4978(b) is amended by striking 
     subparagraph (A) and all that follows and inserting the 
     following:
       ``(A) first from qualified securities to which section 1042 
     applied acquired during the 3-year period ending on the date 
     of the disposition, beginning with the securities first so 
     acquired, and
       ``(B) then from any other employer securities.

     If subsection (d) applies to a disposition, the disposition 
     shall be treated as made from employer securities in the 
     opposite order of the preceding sentence.''.
       (5)(A) Section 4978B (relating to tax on disposition of 
     employer securities to which section 133 applied) is hereby 
     repealed.
       (B) The table of sections for chapter 43 is amended by 
     striking the item relating to section 4978B.
       (6) Subsection (e) of section 6047 is amended by striking 
     paragraphs (1), (2), and (3) and inserting the following new 
     paragraphs:
       ``(1) any employer maintaining, or the plan administrator 
     (within the meaning of section 414(g)) of, an employee stock 
     ownership plan which holds stock with respect to which 
     section 404(k) applies to dividends paid on such stock, or
       ``(2) both such employer or plan administrator,''.
       (7) Subsection (f) of section 7872 is amended by striking 
     paragraph (12).
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to loans made after October 13, 1995.
       (2) Refinancings.--The amendments made by this section 
     shall not apply to loans made after October 13, 1995, to 
     refinance securities acquisition loans (determined without 
     regard to section 133(b)(1)(B) of the Internal Revenue Code 
     of 1986, as in effect on the day before the date of the 
     enactment of this Act) made on or before such date or to 
     refinance loans described in this paragraph if--

[[Page S 16324]]

       (A) the refinancing loans meet the requirements of section 
     133 of such Code (as so in effect),
       (B) immediately after the refinancing the principal amount 
     of the loan resulting from the refinancing does not exceed 
     the principal amount of the refinanced loan (immediately 
     before the refinancing), and
       (C) the term of such refinancing loan does not extend 
     beyond the last day of the term of the original securities 
     acquisition loan.

     For purposes of this paragraph, the term ``securities 
     acquisition loan'' includes a loan from a corporation to an 
     employee stock ownership plan described in section 133(b)(3) 
     of such Code (as so in effect).

                        CHAPTER 2--LEGAL REFORMS

     SEC. 12811. REPEAL OF EXCLUSION FOR PUNITIVE DAMAGES AND FOR 
                   DAMAGES NOT ATTRIBUTABLE TO PHYSICAL INJURIES 
                   OR SICKNESS.

       (a) In General.--Paragraph (2) of section 104(a) (relating 
     to compensation for injuries or sickness) is amended to read 
     as follows:
       ``(2) the amount of any damages (other than punitive 
     damages) received (whether by suit or agreement and whether 
     as lump sums or as periodic payments) on account of personal 
     physical injuries or physical sickness;''.
       (b) Emotional Distress as Such Treated as Not Physical 
     Injury or Physical Sickness.--Section 104(a) is amended by 
     striking the last sentence and inserting the following new 
     sentence: ``For purposes of paragraph (2), emotional distress 
     shall not be treated as a physical injury or physical 
     sickness. The preceding sentence shall not apply to an amount 
     of damages not in excess of the amount paid for medical care 
     (described in subparagraph (A) or (B) of section 213(d)(1)) 
     attributable to emotional distress.''.
       (c) Special Rule for States in Which Only Punitive Damages 
     May Be Awarded in Wrongful Death Actions.--Section 104 is 
     amended by redesignating subsection (c) as subsection (d) and 
     by inserting after the subsection (b) the following new 
     subsection:
       ``(c) Restriction on Punitive Damages Not to Apply in 
     Certain Cases.--The restriction on the application of 
     subsection (a)(2) to punitive damages shall not apply to 
     punitive damages awarded in a civil action--
       ``(1) which is a wrongful death action, and
       ``(2) with respect to which applicable State law (as in 
     effect on September 13, 1995 and without regard to any 
     modification after such date) provides, or has been construed 
     to provide by a court of competent jurisdiction pursuant to a 
     decision issued on or before September 13, 1995, that only 
     punitive damages may be awarded in such an action.

     This subsection shall cease to apply to any civil action 
     filed on or after the first date on which the applicable 
     State law ceases to provide (or is no longer construed to 
     provide) the treatment described in paragraph (2).''
       (d) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to amounts 
     received after December 31, 1995, in taxable years ending 
     after such date.
       (2) Exception.--The amendments made by this section shall 
     not apply to any amount received under a written binding 
     agreement, court decree, or mediation award in effect on (or 
     issued on or before) September 13, 1995.

     SEC. 12812. REPORTING OF CERTAIN PAYMENTS MADE TO ATTORNEYS.

       (a) In General.--Section 6045 (relating to returns of 
     brokers) is amended by adding at the end the following new 
     subsection:
       ``(f) Return Required in the Case of Payments to 
     Attorneys.--
       ``(1) In general.--Any person engaged in a trade or 
     business and making a payment (in the course of such trade or 
     business) to which this subsection applies shall file a 
     return under subsection (a) and a statement under subsection 
     (b) with respect to such payment.
       ``(2) Application of subsection.--
       ``(A) In general.--This subsection shall apply to any 
     payment to an attorney in connection with legal services 
     (whether or not such services are performed for the payor).
       ``(B) Exception.--This subsection shall not apply to the 
     portion of any payment which is required to be reported under 
     section 6041(a) (or would be so required but for the dollar 
     limitation contained therein) or section 6051.''.
       (b) Reporting of Attorneys' Fees Payable to Corporations.--
     The regulations providing an exception under section 6041 of 
     the Internal Revenue Code of 1986 for payments made to 
     corporations shall not apply to payments of attorneys' fees.
       (c) Effective Date.--The amendment made by this section 
     shall apply to payments made after December 31, 1995.

        CHAPTER 3--REFORMS RELATING TO NONRECOGNITION PROVISIONS

     SEC. 12821. NO ROLLOVER OR EXCLUSION OF GAIN ON SALE OF 
                   PRINCIPAL RESIDENCE WHICH IS ATTRIBUTABLE TO 
                   DEPRECIATION DEDUCTIONS.

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

     SEC. 12822. NONRECOGNITION OF GAIN ON SALE OF PRINCIPAL 
                   RESIDENCE BY NONCITIZENS LIMITED TO NEW 
                   RESIDENCES LOCATED IN THE UNITED STATES.

       (a) In General.--Subsection (d) of section 1034 (relating 
     to limitations) (as amended by section 12821) is amended by 
     adding at the end the following new paragraph:
       ``(4) New residence must be located in united states in 
     certain cases.--
       ``(A) In general.--In the case of a sale of an old 
     residence by a taxpayer--
       ``(i) who is not a citizen of the United States at the time 
     of sale, and
       ``(ii) who is not a citizen or resident of the United 
     States on the date which is 2 years after the date of the 
     sale of such old residence,

     subsection (a) shall apply only if the new residence is 
     located in the United States or a possession of the United 
     States.
       ``(B) Property held jointly by husband and wife.--
     Subparagraph (A) shall not apply if--
       ``(i) the old residence is held by a husband and wife as 
     joint tenants, tenants by the entirety, or community 
     property,
       ``(ii) such husband and wife make a joint return for the 
     taxable year of the sale or exchange, and
       ``(iii) one spouse is a citizen of the United States at the 
     time of sale.''.
       (b) Effective Date.--
       (1) In general.--The amendment made by this section shall 
     apply to sales of old residences after December 31, 1995.
       (2) Treatment of purchases of new residences.--The 
     amendment made by this section shall not apply to new 
     residences--
       (A) purchased before September 13, 1995, or
       (B) purchased on or after such date pursuant to a binding 
     contract in effect on such date and at all times thereafter 
     before such purchase.
       (3) Certain rules to apply.--For purposes of this 
     subsection, the rules of paragraphs (1), (2), and (3) of 
     section 1034(c) of the Internal Revenue Code of 1986 shall 
     apply.

          CHAPTER 4--EXCISE TAX AND TAX-EXEMPT BOND PROVISIONS

     SEC. 12831. REPEAL OF DIESEL FUEL TAX REBATE TO PURCHASERS OF 
                   DIESEL-POWERED AUTOMOBILES AND LIGHT TRUCKS.

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

     SEC. 12832. REPEAL OF WINE AND FLAVORS CONTENT CREDIT.

       (a) In General.--Section 5010 (relating to credit for wine 
     content and for flavors content) is repealed.
       (b) Effective Date.--The repeal made by this section shall 
     take effect with respect to distilled spirits (as defined in 
     section 5002(a)(8) of the Internal Revenue Code of 1986) 
     removed from bonded premises (as defined in section 
     5002(a)(3) of such Code) after December 31, 1995.

     SEC. 12833. MODIFICATIONS TO EXCISE TAX ON OZONE-DEPLETING 
                   CHEMICALS.

       (a) In General.--Section 4682(d)(1) (relating to recycling) 
     is amended by inserting ``(including any halon imported from 
     any country which is a signatory to the Montreal Protocol on 
     Substances that Deplete the Ozone Layer)'' after ``ozone-
     depleting chemical''.
       (b) Certification System.--The Secretary of the Treasury, 
     after consultation with the Administrator of the 
     Environmental Protection Agency, shall develop a 
     certification system to ensure compliance with the recycling 
     requirement for imported halon under section 4682(d)(1) of 
     the Internal Revenue Code of 1986, as amended by subsection 
     (a).
       (c) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the date of the enactment of this Act.

     SEC. 12834. ELECTION TO AVOID TAX-EXEMPT BOND PENALTIES FOR 
                   LOCAL FURNISHERS OF ELECTRICITY AND GAS.

       Section 142(f) (relating to local furnishing of electric 
     energy or gas) is amended by adding at the end the following 
     new paragraphs:
       ``(3) Election to avoid penalties for certain furnishers.--
       ``(A) In general.--If--
       ``(i) the principal user of facilities for the local 
     furnishing of electric energy or gas financed such facilities 
     in whole or in part with exempt facility bonds described in 
     subsection (a)(8) issued before the date of the enactment of 
     this paragraph,

[[Page S 16325]]

       ``(ii) such bonds would (but for this paragraph) cease to 
     be tax-exempt by reason of such user failing to meet the 
     local furnishing requirement of such section as a result of a 
     service area expansion by such user, and
       ``(iii) an election described in subparagraph (B) is made 
     by such user with respect to all such facilities of the user,

     then such bonds shall not cease to be tax-exempt by reason of 
     such expansion (and section 150(b)(4) shall not apply to 
     interest on such bonds).
       ``(B) Election.--An election is described in this 
     subparagraph if it is an election made in such manner as the 
     Secretary prescribes, and such user agrees that--
       ``(i) no bonds exempt from tax under section 103 may be 
     issued on or after the date of the enactment of this 
     paragraph with respect to the facilities or any other 
     facilities with respect to which such user is a principal 
     user,
       ``(ii) the expansion of the service area--

       ``(I) is not financed with the proceeds of any exempt 
     facility bond described in subsection (a)(8), and
       ``(II) is not treated as a nonqualifying use under the 
     rules of paragraph (2), and

       ``(iii) all outstanding bonds used to finance the 
     facilities are redeemed not later than 6 months after the 
     later of--

       ``(I) the earliest date on which such bonds may be 
     redeemed, or
       ``(II) the date of the agreement.

       ``(C) Principal user.--For purposes of this paragraph, the 
     term `principal user' means any person or a group of related 
     persons (within the meaning of section 144(a)(3)) which 
     includes such person.
       ``(4) Application of section.--For purposes of this 
     section, no person may qualify as a local furnisher of 
     electric energy or gas unless such person is such a local 
     furnisher on the date of the enactment of this paragraph.''.

     SEC. 12835. TAX-EXEMPT BONDS FOR SALE OF ALASKA POWER 
                   ADMINISTRATION FACILITY.

       Sections 142(f)(4) (as added by section 12834(a)) and 
     147(d) of the Internal Revenue Code of 1986 shall not apply 
     with respect to any private activity bond issued after the 
     date of the enactment of this Act and used to finance the 
     acquisition of the Snettisham hydroelectric project from the 
     Alaska Power Administration in determining if such bond is a 
     qualified bond for purposes of such Code.

                CHAPTER 5--FOREIGN TRUST TAX COMPLIANCE

     SEC. 12841. IMPROVED INFORMATION REPORTING ON FOREIGN TRUSTS.

       (a) In General.--Section 6048 (relating to returns as to 
     certain foreign trusts) is amended to read as follows:

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

       ``(a) Notice of Certain Events.--
       ``(1) General rule.--On or before the 90th day (or such 
     later day as the Secretary may prescribe) after any 
     reportable event, the responsible party shall provide written 
     notice of such event to the Secretary in accordance with 
     paragraph (2).
       ``(2) Contents of notice.--The notice required by paragraph 
     (1) shall contain such information as the Secretary may 
     prescribe, including--
       ``(A) the amount of money or other property (if any) 
     transferred to the trust in connection with the reportable 
     event, and
       ``(B) the identity of the trust and of each trustee and 
     beneficiary (or class of beneficiaries) of the trust.
       ``(3) Reportable event.--For purposes of this subsection--
       ``(A) In general.--The term `reportable event' means--
       ``(i) the creation of any foreign trust by a United States 
     person,
       ``(ii) the transfer of any money or property (directly or 
     indirectly) to a foreign trust by a United States person, 
     including a transfer by reason of death, and
       ``(iii) the death of a citizen or resident of the United 
     States if--

       ``(I) the decedent was treated as the owner of any portion 
     of a foreign trust under the rules of subpart E of part I of 
     subchapter J of chapter 1, or
       ``(II) any portion of a foreign trust was included in the 
     gross estate of the decedent.

       ``(B) Exceptions.--
       ``(i) Fair market value sales.--Subparagraph (A)(ii) shall 
     not apply to any transfer of property to a trust in exchange 
     for consideration of at least the fair market value of the 
     transferred property. For purposes of the preceding sentence, 
     consideration other than cash shall be taken into account at 
     its fair market value and the rules of section 679(a)(3) 
     shall apply.
       ``(ii) Pension and charitable trusts.--Subparagraph (A) 
     shall not apply with respect to a trust which is--

       ``(I) described in section 404(a)(4) or 404A, or
       ``(II) determined by the Secretary to be described in 
     section 501(c)(3).

       ``(4) Responsible party.--For purposes of this subsection, 
     the term `responsible party' means--
       ``(A) the grantor in the case of the creation of an inter 
     vivos trust,
       ``(B) the transferor in the case of a reportable event 
     described in paragraph (3)(A)(ii) other than a transfer by 
     reason of death, and
       ``(C) the executor of the decedent's estate in any other 
     case.
       ``(b) United States Grantor of Foreign Trust.--
       ``(1) In general.--If, at any time during any taxable year 
     of a United States person, such person is treated as the 
     owner of any portion of a foreign trust under the rules of 
     subpart E of part I of subchapter J of chapter 1, such person 
     shall be responsible to ensure that--
       ``(A) such trust makes a return for such year which sets 
     forth a full and complete accounting of all trust activities 
     and operations for the year, the name of the United States 
     agent for such trust, and such other information as the 
     Secretary may prescribe, and
       ``(B) such trust furnishes such information as the 
     Secretary may prescribe to each United States person (i) who 
     is treated as the owner of any portion of such trust or (ii) 
     who receives (directly or indirectly) any distribution from 
     the trust.
       ``(2) Trusts not having united states agent.--
       ``(A) In general.--If the rules of this paragraph apply to 
     any foreign trust, the determination of amounts required to 
     be taken into account with respect to such trust by a United 
     States person under the rules of subpart E of part I of 
     subchapter J of chapter 1 shall be determined by the 
     Secretary in the Secretary's sole discretion from the 
     Secretary's own knowledge or from such information as the 
     Secretary may obtain through testimony or otherwise.
       ``(B) United states agent required.--The rules of this 
     paragraph shall apply to any foreign trust to which paragraph 
     (1) applies unless such trust agrees (in such manner, subject 
     to such conditions, and at such time as the Secretary shall 
     prescribe) to authorize a United States person to act as such 
     trust's limited agent solely for purposes of applying 
     sections 7602, 7603, and 7604 with respect to--
       ``(i) any request by the Secretary to examine records or 
     produce testimony related to the proper treatment of amounts 
     required to be taken into account under the rules referred to 
     in subparagraph (A), or
       ``(ii) any summons by the Secretary for such records or 
     testimony.

     The appearance of persons or production of records by reason 
     of a United States person being such an agent shall not 
     subject such persons or records to legal process for any 
     purpose other than determining the correct treatment under 
     this title of the amounts required to be taken into account 
     under the rules referred to in subparagraph (A). A foreign 
     trust which appoints an agent described in this subparagraph 
     shall not be considered to have an office or a permanent 
     establishment in the United States, or to be engaged in a 
     trade or business in the United States, solely because of the 
     activities of such agent pursuant to this subsection.
       ``(C) Other rules to apply.--Rules similar to the rules of 
     paragraphs (2) and (4) of section 6038A(e) shall apply for 
     purposes of this paragraph.
       ``(c) Reporting by United States Beneficiaries of Foreign 
     Trusts.--
       ``(1) In general.--If any United States person receives 
     (directly or indirectly) during any taxable year of such 
     person any distribution from a foreign trust, such person 
     shall make a return with respect to such trust for such year 
     which includes--
       ``(A) the name of such trust,
       ``(B) the aggregate amount of the distributions so received 
     from such trust during such taxable year, and
       ``(C) such other information as the Secretary may 
     prescribe.
       ``(2) Inclusion in income if records not provided.--If 
     adequate records are not provided to the Secretary to 
     determine the proper treatment of any distribution from a 
     foreign trust, such distribution shall be treated as an 
     accumulation distribution includible in the gross income of 
     the distributee under chapter 1. To the extent provided in 
     regulations, the preceding sentence shall not apply if the 
     foreign trust elects to be subject to rules similar to the 
     rules of subsection (b)(2)(B).
       ``(d) Special Rules.--
       ``(1) Determination of whether united states person 
     receives distribution.--For purposes of this section, in 
     determining whether a United States person receives a 
     distribution from a foreign trust, the fact that a portion of 
     such trust is treated as owned by another person under the 
     rules of subpart E of part I of subchapter J of chapter 1 
     shall be disregarded.
       ``(2) Domestic trusts with foreign activities.--To the 
     extent provided in regulations, a trust which is a United 
     States person shall be treated as a foreign trust for 
     purposes of this section and section 6677 if such trust has 
     substantial activities, or holds substantial property, 
     outside the United States.
       ``(3) Time and manner of filing information.--Any notice or 
     return required under this section shall be made at such time 
     and in such manner as the Secretary shall prescribe.
       ``(4) Modification of return requirements.--The Secretary 
     is authorized to suspend or modify any requirement of this 
     section if the Secretary determines that the United States 
     has no significant tax interest in obtaining the required 
     information.''.
       (b) Increased Penalties.--Section 6677 (relating to failure 
     to file information returns with respect to certain foreign 
     trusts) is amended to read as follows:

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

       ``(a) Civil Penalty.--In addition to any criminal penalty 
     provided by law, if any notice or return required to be filed 
     by section 6048--
       ``(1) is not filed on or before the time provided in such 
     section, or
       ``(2) does not include all the information required 
     pursuant to such section or includes incorrect information,

     the person required to file such notice or return shall pay a 
     penalty equal to 35 percent of the gross reportable amount. 
     If any failure described in the preceding sentence continues 
     for more than 90 days after the day on which the 

[[Page S 16326]]
     Secretary mails notice of such failure to the person required to pay 
     such penalty, such person shall pay a penalty (in addition to 
     the amount determined under the preceding sentence) of 
     $10,000 for each 30-day period (or fraction thereof) during 
     which such failure continues after the expiration of such 90-
     day period. In no event shall the penalty under this 
     subsection with respect to any failure exceed the gross 
     reportable amount.
       ``(b) Special Rules for Returns Under Section 6048(b).--In 
     the case of a return required under section 6048(b)--
       ``(1) the United States person referred to in such section 
     shall be liable for the penalty imposed by subsection (a), 
     and
       ``(2) subsection (a) shall be applied by substituting `5 
     percent' for `35 percent'.
       ``(c) Gross Reportable Amount.--For purposes of subsection 
     (a), the term `gross reportable amount' means--
       ``(1) the gross value of the property involved in the event 
     (determined as of the date of the event) in the case of a 
     failure relating to section 6048(a),
       ``(2) the gross value of the portion of the trust's assets 
     at the close of the year treated as owned by the United 
     States person in the case of a failure relating to section 
     6048(b)(1), and
       ``(3) the gross amount of the distributions in the case of 
     a failure relating to section 6048(c).
       ``(d) Reasonable Cause Exception.--No penalty shall be 
     imposed by this section on any failure which is shown to be 
     due to reasonable cause and not due to willful neglect. The 
     fact that a foreign jurisdiction would impose a civil or 
     criminal penalty on the taxpayer (or any other person) for 
     disclosing the required information is not reasonable cause.
       ``(e) Deficiency Procedures Not To Apply.--Subchapter B of 
     chapter 63 (relating to deficiency procedures for income, 
     estate, gift, and certain excise taxes) shall not apply in 
     respect of the assessment or collection of any penalty 
     imposed by subsection (a).''.
       (c) Conforming Amendments.--
       (1) Paragraph (2) of section 6724(d), as amended by section 
     12203, is amended by striking ``or'' at the end of 
     subparagraph (U), by striking the period at the end of 
     subparagraph (V) and inserting ``, or'', and by inserting 
     after subparagraph (V) the following new subparagraph:
       ``(W) section 6048(b)(1)(B) (relating to foreign trust 
     reporting requirements).''.
       (2) The table of sections for subpart B of part III of 
     subchapter A of chapter 61 is amended by striking the item 
     relating to section 6048 and inserting the following new 
     item:

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

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

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

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

     SEC. 12842. MODIFICATIONS OF RULES RELATING TO FOREIGN TRUSTS 
                   HAVING ONE OR MORE UNITED STATES BENEFICIARIES.

       (a) Treatment of Trust Obligations, Etc.--
       (1) Paragraph (2) of section 679(a) is amended by striking 
     subparagraph (B) and inserting the following:
       ``(B) Transfers at fair market value.--To any transfer of 
     property to a trust in exchange for consideration of at least 
     the fair market value of the transferred property. For 
     purposes of the preceding sentence, consideration other than 
     cash shall be taken into account at its fair market value.''.
       (2) Subsection (a) of section 679 (relating to foreign 
     trusts having one or more United States beneficiaries) is 
     amended by adding at the end the following new paragraph:
       ``(3) Certain obligations not taken into account under fair 
     market value exception.--
       ``(A) In general.--In determining whether paragraph (2)(B) 
     applies to any transfer by a person described in clause (ii) 
     or (iii) of subparagraph (C), there shall not be taken into 
     account--
       ``(i) except as provided in regulations, any obligation of 
     a person described in subparagraph (C), and
       ``(ii) to the extent provided in regulations, any 
     obligation which is guaranteed by a person described in 
     subparagraph (C).
       ``(B) Treatment of principal payments on obligation.--
     Principal payments by the trust on any obligation referred to 
     in subparagraph (A) shall be taken into account on and after 
     the date of the payment in determining the portion of the 
     trust attributable to the property transferred.
       ``(C) Persons described.--The persons described in this 
     subparagraph are--
       ``(i) the trust,
       ``(ii) any grantor or beneficiary of the trust, and
       ``(iii) any person who is related (within the meaning of 
     section 643(i)(2)(B)) to any grantor or beneficiary of the 
     trust.''.
       (b) Exemption of Transfers to Charitable Trusts.--
     Subsection (a) of section 679 is amended by striking 
     ``section 404(a)(4) or 404A'' and inserting ``section 
     6048(a)(3)(B)(ii)''.
       (c) Other Modifications.--Subsection (a) of section 679 is 
     amended by adding at the end the following new paragraphs:
       ``(4) Special rules applicable to foreign grantor who later 
     becomes a united states person.--
       ``(A) In general.--If a nonresident alien individual has a 
     residency starting date within 5 years after directly or 
     indirectly transferring property to a foreign trust, this 
     section and section 6048 shall be applied as if such 
     individual transferred to such trust on the residency 
     starting date an amount equal to the portion of such trust 
     attributable to the property transferred by such individual 
     to such trust in such transfer.
       ``(B) Treatment of undistributed income.--For purposes of 
     this section, undistributed net income for periods before 
     such individual's residency starting date shall be taken into 
     account in determining the portion of the trust which is 
     attributable to property transferred by such individual to 
     such trust but shall not otherwise be taken into account.
       ``(C) Residency starting date.--For purposes of this 
     paragraph, an individual's residency starting date is the 
     residency starting date determined under section 
     7701(b)(2)(A).
       ``(5) Outbound trust migrations.--If--
       ``(A) an individual who is a citizen or resident of the 
     United States transferred property to a trust which was not a 
     foreign trust, and
       ``(B) such trust becomes a foreign trust while such 
     individual is alive,

     then this section and section 6048 shall be applied as if 
     such individual transferred to such trust on the date such 
     trust becomes a foreign trust an amount equal to the portion 
     of such trust attributable to the property previously 
     transferred by such individual to such trust. A rule similar 
     to the rule of paragraph (4)(B) shall apply for purposes of 
     this paragraph.''.
       (d) Modifications Relating to Whether Trust Has United 
     States Beneficiaries.--Subsection (c) of section 679 is 
     amended by adding at the end the following new paragraphs:
       ``(3) Certain united states beneficiaries disregarded.--A 
     beneficiary shall not be treated as a United States person in 
     applying this section with respect to any transfer of 
     property to foreign trust if such beneficiary first became a 
     United States person more than 5 years after the date of such 
     transfer.
       ``(4) Treatment of former united states persons.--To the 
     extent provided by the Secretary, for purposes of this 
     subsection, the term `United States person' includes any 
     person who was a United States person at any time during the 
     existence of the trust.''.
       (e) Technical Amendment.--Subparagraph (A) of section 
     679(c)(2) is amended to read as follows:
       ``(A) in the case of a foreign corporation, such 
     corporation is a controlled foreign corporation (as defined 
     in section 957(a)),''.
       (f) Regulations.--Section 679 is amended by adding at the 
     end the following new subsection:
       ``(d) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section.''.
       (g) Effective Date.--The amendments made by this section 
     shall apply to transfers of property after February 6, 1995.

     SEC. 12843. FOREIGN PERSONS NOT TO BE TREATED AS OWNERS UNDER 
                   GRANTOR TRUST RULES.

       (a) General Rule.--
       (1) Subsection (f) of section 672 (relating to special rule 
     where grantor is foreign person) is amended to read as 
     follows:
       ``(f) Subpart Not To Result in Foreign Ownership.--
       ``(1) In general.--Notwithstanding any other provision of 
     this subpart, this subpart shall apply only to the extent 
     such application results in an amount being currently taken 
     into account (directly or through 1 or more entities) under 
     this chapter in computing the income of a citizen or resident 
     of the United States or a domestic corporation.
       ``(2) Exceptions.--
       ``(A) Certain revocable and irrevocable trusts.--
       ``(i) In general.--Except as provided in clause (ii), 
     paragraph (1) shall not apply to any trust if--

       ``(I) the power to revest absolutely in the grantor title 
     to the trust property is exercisable solely by the grantor 
     without the approval or consent of any other person or with 
     the consent of a related or subordinate party who is 
     subservient to the grantor, or
       ``(II) the only amounts distributable from such trust 
     (whether income or corpus) during the lifetime of the grantor 
     are amounts distributable to the grantor or the spouse of the 
     grantor.

       ``(ii) Exception.--Clause (i) shall not apply to any trust 
     which has a beneficiary who is a United States person to the 
     extent such beneficiary has made transfers of property by 
     gift (directly or indirectly) to a foreign person who is the 
     grantor of such trust. For purposes of the preceding 
     sentence, any gift shall not be taken into account to the 
     extent such gift is excluded from taxable gifts under section 
     2503(b).
       ``(B) Compensatory trusts.--Except as provided in 
     regulations, paragraph (1) shall not apply to any portion of 
     a trust distributions from which are taxable as compensation 
     for services rendered.
       ``(3) Special rules.--Except as otherwise provided in 
     regulations prescribed by the Secretary--

[[Page S 16327]]

       ``(A) a controlled foreign corporation (as defined in 
     section 957) shall be treated as a domestic corporation for 
     purposes of paragraph (1), and
       ``(B) paragraph (1) shall not apply for purposes of 
     applying part III of subchapter G (relating to foreign 
     personal holding companies) and part VI of subchapter P 
     (relating to treatment of certain passive foreign investment 
     companies).
       ``(4) Recharacterization of purported gifts.--In the case 
     of any transfer directly or indirectly from a partnership or 
     foreign corporation which the transferee treats as a gift or 
     bequest, the Secretary may recharacterize such transfer in 
     such circumstances as the Secretary determines to be 
     appropriate to prevent the avoidance of the purposes of this 
     subsection.
       ``(5) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this subsection, including regulations 
     providing that paragraph (1) shall not apply in appropriate 
     cases.''.
       (2) The last sentence of subsection (c) of section 672 of 
     such Code is amended by inserting ``subsection (f) and'' 
     before ``sections 674''.
       (b) Credit for Certain Taxes.--Paragraph (2) of section 
     665(d) is amended by adding at the end the following new 
     sentence: ``Under rules or regulations prescribed by the 
     Secretary, in the case of any foreign trust of which the 
     settlor or another person would be treated as owner of any 
     portion of the trust under subpart E but for section 672(f), 
     the term `taxes imposed on the trust' includes the allocable 
     amount of any income, war profits, and excess profits taxes 
     imposed by any foreign country or possession of the United 
     States on the settlor or such other person in respect of 
     trust gross income.''.
       (c) Distributions by Certain Foreign Trusts Through 
     Nominees.--
       (1) Section 643 is amended by adding at the end the 
     following new subsection:
       ``(h) Distributions by Certain Foreign Trusts Through 
     Nominees.--For purposes of this part, any amount paid to a 
     United States person which is derived directly or indirectly 
     from a foreign trust of which the payor is not the grantor 
     shall be deemed in the year of payment to have been directly 
     paid by the foreign trust to such United States person.''.
       (2) Section 665 is amended by striking subsection (c).
       (d) Effective Date.--
       (1) In general.--Except as provided by paragraph (2), the 
     amendments made by this section shall take effect on the date 
     of the enactment of this Act.
       (2) Exception for certain trusts.--The amendments made by 
     this section shall not apply to any trust--
       (A) which is treated as owned by the grantor or another 
     person under section 676 or 677 (other than subsection (a)(3) 
     thereof) of the Internal Revenue Code of 1986, and
       (B) which is in existence on September 19, 1995.

     The preceding sentence shall not apply to the portion of any 
     such trust attributable to any transfer to such trust after 
     September 19, 1995.
       (e) Transitional Rule.--If--
       (1) by reason of the amendments made by this section, any 
     person other than a United States person ceases to be treated 
     as the owner of a portion of a domestic trust, and
       (2) before January 1, 1997, such trust becomes a foreign 
     trust, or the assets of such trust are transferred to a 
     foreign trust,

     no tax shall be imposed by section 1491 of the Internal 
     Revenue Code of 1986 by reason of such trust becoming a 
     foreign trust or the assets of such trust being transferred 
     to a foreign trust.

     SEC. 12844. INFORMATION REPORTING REGARDING FOREIGN GIFTS.

       (a) In General.--Subpart A of part III of subchapter A of 
     chapter 61, as amended by section 12442, is amended by 
     inserting after section 6039F the following new section:

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

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

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

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

     SEC. 12845. MODIFICATION OF RULES RELATING TO FOREIGN TRUSTS 
                   WHICH ARE NOT GRANTOR TRUSTS.

       (a) Modification of Interest Charge on Accumulation 
     Distributions.--Subsection (a) of section 668 (relating to 
     interest charge on accumulation distributions from foreign 
     trusts) is amended to read as follows:
       ``(a) General Rule.--For purposes of the tax determined 
     under section 667(a)--
       ``(1) Interest determined using underpayment rates.--The 
     interest charge determined under this section with respect to 
     any distribution is the amount of interest which would be 
     determined on the partial tax computed under section 667(b) 
     for the period described in paragraph (2) using the rates and 
     the method under section 6621 applicable to underpayments of 
     tax.
       ``(2) Period.--For purposes of paragraph (1), the period 
     described in this paragraph is the period which begins on the 
     date which is the applicable number of years before the date 
     of the distribution and which ends on the date of the 
     distribution.
       ``(3) Applicable number of years.--For purposes of 
     paragraph (2)--
       ``(A) In general.--The applicable number of years with 
     respect to a distribution is the number determined by 
     dividing--
       ``(i) the sum of the products described in subparagraph (B) 
     with respect to each undistributed income year, by
       ``(ii) the aggregate undistributed net income.

     The quotient determined under the preceding sentence shall be 
     rounded under procedures prescribed by the Secretary.
       ``(B) Product described.--For purposes of subparagraph (A), 
     the product described in this subparagraph with respect to 
     any undistributed income year is the product of--
       ``(i) the undistributed net income for such year, and
       ``(ii) the sum of the number of taxable years between such 
     year and the taxable year of the distribution (counting in 
     each case the undistributed income year but not counting the 
     taxable year of the distribution).
       ``(4) Undistributed income year.--For purposes of this 
     subsection, the term `undistributed income year' means any 
     prior taxable year of the trust for which there is 
     undistributed net income, other than a taxable year during 
     all of which the beneficiary receiving the distribution was 
     not a citizen or resident of the United States.
       ``(5) Determination of undistributed net income.--
     Notwithstanding section 666, for purposes of this subsection, 
     an accumulation distribution from the trust shall be treated 
     as reducing proportionately the undistributed net income for 
     undistributed income years.
       ``(6) Periods before 1996.--Interest for the portion of the 
     period described in paragraph (2) which occurs before January 
     1, 1996, shall be determined--
       ``(A) by using an interest rate of 6 percent, and
       ``(B) without compounding until January 1, 1996.''.
       (b) Abusive Transactions.--Section 643(a) is amended by 
     inserting after paragraph (6) the following new paragraph:
       ``(7) Abusive transactions.--The Secretary shall prescribe 
     such regulations as may be necessary or appropriate to carry 
     out the purposes of this part, including regulations to 
     prevent avoidance of such purposes.''.
       (c) Treatment of Loans From Trust Property.--
       (1) In general.--Section 643 (relating to definitions 
     applicable to subparts A, B, C, and D) is amended by adding 
     at the end the following new subsection:
       ``(i) Loans From Foreign Trusts.--For purposes of subparts 
     B, C, and D--
       ``(1) General rule.--If a foreign trust makes a loan of 
     cash or marketable securities directly or indirectly to--
       ``(A) any grantor or beneficiary of such trust who is a 
     United States person, or
       ``(B) any United States person not described in 
     subparagraph (A) who is related to such grantor or 
     beneficiary,

     the amount of such loan shall be treated as a distribution by 
     such trust to such grantor or beneficiary (as the case may 
     be).
       ``(2) Definitions and special rules.--For purposes of this 
     subsection--
       ``(A) Cash.--The term `cash' includes foreign currencies 
     and cash equivalents.
       ``(B) Related person.--
       ``(i) In general.--A person is related to another person if 
     the relationship between such persons would result in a 
     disallowance of losses under section 267 or 707(b). In 
     applying section 267 for purposes of the preceding sentence, 
     section 267(c)(4) shall be applied as if the family of an 
     individual includes the spouses of the members of the family.
       ``(ii) Allocation of use.--If any person described in 
     paragraph (1)(B) is related to more than one person, the 
     grantor or beneficiary to whom the treatment under this 
     subsection applies shall be determined under regulations 
     prescribed by the Secretary.

[[Page S 16328]]

       ``(C) Exclusion of tax-exempts.--The term `United States 
     person' does not include any entity exempt from tax under 
     this chapter.
       ``(D) Trust not treated as simple trust.--Any trust which 
     is treated under this subsection as making a distribution 
     shall be treated as not described in section 651.
       ``(3) Subsequent transactions regarding loan principal.--If 
     any loan is taken into account under paragraph (1), any 
     subsequent transaction between the trust and the original 
     borrower regarding the principal of the loan (by way of 
     complete or partial repayment, satisfaction, cancellation, 
     discharge, or otherwise) shall be disregarded for purposes of 
     this title.''.
       (2) Technical amendment.--Paragraph (8) of section 7872(f) 
     is amended by inserting ``, 643(i),'' before ``or 1274'' each 
     place it appears.
       (d) Effective Dates.--
       (1) Interest charge.--The amendment made by subsection (a) 
     shall apply to distributions after the date of the enactment 
     of this Act.
       (2) Abusive transactions.--The amendment made by subsection 
     (b) shall take effect on the date of the enactment of this 
     Act.
       (3) Use of trust property.--The amendment made by 
     subsection (c) shall apply to loans of cash or marketable 
     securities after September 19, 1995.

     SEC. 12846. RESIDENCE OF ESTATES AND TRUSTS, ETC.

       (a) Treatment as United States Person.--
       (1) In general.--Paragraph (30) of section 7701(a) is 
     amended by striking subparagraph (D) and by inserting after 
     subparagraph (C) the following:
       ``(D) any estate or trust if--
       ``(i) a court within the United States is able to exercise 
     primary supervision over the administration of the estate or 
     trust, and
       ``(ii) in the case of a trust, one or more United States 
     fiduciaries have the authority to control all substantial 
     decisions of the trust.''.
       (2) Conforming amendment.--Paragraph (31) of section 
     7701(a) is amended to read as follows:
       ``(31) Foreign estate or trust.--The term `foreign estate' 
     or `foreign trust' means any estate or trust other than an 
     estate or trust described in section 7701(a)(30)(D).''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply--
       (A) to taxable years beginning after December 31, 1996, or
       (B) at the election of the trustee of a trust, to taxable 
     years ending after the date of the enactment of this Act.

     Such an election, once made, shall be irrevocable.
       (b) Domestic Trusts Which Become Foreign Trusts.--
       (1) In general.--Section 1491 (relating to imposition of 
     tax on transfers to avoid income tax) is amended by adding at 
     the end the following new flush sentence:

     ``If a trust which is not a foreign trust becomes a foreign 
     trust, such trust shall be treated for purposes of this 
     section as having transferred, immediately before becoming a 
     foreign trust, all of its assets to a foreign trust.''.
       (2) Penalty.--Section 1494 is amended by adding at the end 
     the following new subsection:
       ``(c) Penalty.--In the case of any failure to file a return 
     required by the Secretary with respect to any transfer 
     described in section 1491 with respect to a trust, the person 
     required to file such return shall be liable for the 
     penalties provided in section 6677 in the same manner as if 
     such failure were a failure to file a return under section 
     6048(a).''.
       (3) Effective date.--The amendments made by this subsection 
     shall take effect on the date of the enactment of this Act.

         CHAPTER 6--FINANCIAL ASSET SECURITIZATION INVESTMENTS

     SEC. 12851. FINANCIAL ASSET SECURITIZATION INVESTMENT TRUSTS.

       (a) In General.--Subchapter M of chapter 1 is amended by 
     adding at the end the following new part:

       ``PART V--FINANCIAL ASSET SECURITIZATION INVESTMENT TRUSTS

``Sec. 860H. Taxation of FASIT's.
``Sec. 860I. Taxation of holders of regular interests.
``Sec. 860J. Taxation of holder of ownership interest.
``Sec. 860K. Non-FASIT losses not to offset certain FASIT inclusions.
``Sec. 860L. Treatment of transfers of high-yield interests to 
              disqualified holders.
``Sec. 860M. Definitions and other rules.

     ``SEC. 860H. TAXATION OF FASIT'S.

       ``(a) General Rule.--Except as otherwise provided in this 
     part, solely for purposes of this title, a FASIT shall be 
     treated as a partnership and shall not be treated as a 
     taxable mortgage pool.
       ``(b) Income Taxable to Holders.--The income of any FASIT 
     shall be taxable to the holder of the ownership interest in 
     such FASIT as provided in this part.

     ``SEC. 860I. TAXATION OF HOLDERS OF REGULAR INTERESTS.

       ``(a) General Rule.--In determining the tax under this 
     chapter of any holder of a regular interest in a FASIT, such 
     interest shall be treated--
       ``(1) if not otherwise a debt instrument, as a debt 
     instrument, and
       ``(2) for purposes of section 165(g), as issued by a 
     corporation.
       ``(b) Holders Must Use Accrual Method.--The amounts 
     includible in gross income with respect to any regular 
     interest in a FASIT shall be determined under the accrual 
     method of accounting.

     ``SEC. 860J. TAXATION OF HOLDER OF OWNERSHIP INTEREST.

       ``(a) General Rule.--Except as otherwise provided in this 
     subtitle, the tax under this chapter of the holder of the 
     ownership interest in a FASIT shall be determined as if--
       ``(1) such holder were a partner in such FASIT, and
       ``(2) such FASIT had filed an election under section 754.
       ``(b) Certain Provisions of Subchapter K Not To Apply.--The 
     following provisions shall not apply under subsection (a): 
     Section 704 (other than subsection (d)) and sections 708, 
     721, 724, 735, 737, and 751.
       ``(c) Other Rules For Determining Taxable Income of 
     FASIT.--For purposes of this subtitle, the taxable income of 
     a FASIT shall be determined under an accrual method of 
     accounting, and in determining such taxable income--
       ``(1) regular interests in such FASIT (if not otherwise 
     debt instruments) shall be treated as indebtedness of such 
     FASIT,
       ``(2) the constant yield method (including the rules of 
     section 1272(a)(6)) shall be applied in determining all 
     interest, acquisition discount, original issue discount, and 
     market discount and all premium deductions or adjustments 
     with respect to all debt instruments held by the FASIT,
       ``(3) the amount of the tax imposed by section 860M(e) 
     (relating to tax on income from foreclosure property) shall 
     be allowed as a deduction, and
       ``(4) there shall not be taken into account any item of 
     income, gain, loss, or deduction allocable to prohibited 
     income.
       ``(d) Recognition of Gain on Contributions to FASIT.--
       ``(1) In general.--If property is contributed to a FASIT by 
     the holder of the ownership interest in such FASIT--
       ``(A) notwithstanding any other provision of this subtitle, 
     gain shall be recognized to the holder of such interest in 
     the same manner as if such holder had sold such property to 
     the FASIT at its fair market value on the date of such 
     contribution, and
       ``(B) the basis of the FASIT in such property shall be such 
     fair market value.
     To the extent provided in regulations, gain recognized under 
     the preceding sentence shall not be includible in gross 
     income before the earliest date on which such property 
     supports any regular interest in such FASIT or any 
     indebtedness of the holder of the ownership interest (or by 
     any person related to such holder).
       ``(2) Gain recognition on property supporting regular 
     interests.--Solely for purposes of determining gain, property 
     held by the holder of the ownership interest in a FASIT (or 
     by any person related to such holder) which supports any 
     regular interest in such FASIT shall be treated as sold on 
     the earliest date such property supports such an interest at 
     its fair market value on such date and as reacquired by such 
     holder (or person) immediately thereafter.
       ``(3) Valuation of property.--For purposes of this 
     subsection and subsection (e)--
       ``(A) In general.--In the case of any property contributed 
     to a FASIT (other than cash equivalents), the fair market 
     value of such property shall be equal to the sum of the 
     present values of the reasonably expected payments under such 
     property determined in the manner provided by regulations 
     prescribed by the Secretary--
       ``(i) as of the date of the contribution or the earliest 
     date of such support (as the case may be), and
       ``(ii) by using a discount rate equal to 130 percent of the 
     applicable Federal rate (as defined in section 1274(d)), or 
     such other discount rate specified in such regulations, 
     compounded semiannually.
       ``(B) Special rule for revolving loan accounts.--For 
     purposes of subparagraph (A), in the case of extensions of 
     credit on revolving loan accounts having substantially the 
     same terms--
       ``(i) each extension of credit shall be treated as a 
     separate debt instrument, and
       ``(ii) the reasonably expected payments under such an 
     instrument shall be determined using a periodic principal 
     payment rate equal to the reasonably anticipated periodic 
     rate at which principal payments on the accounts will be 
     made, as a proportion of their aggregate outstanding 
     principal balances.
       ``(e) Gain Recognition on Certain Distributions.--If a 
     FASIT makes a distribution of property with respect to any 
     regular or ownership interest--
       ``(1) notwithstanding any other provision of this subtitle, 
     gain shall be recognized to such FASIT on the distribution in 
     the same manner as if the FASIT had sold such property to the 
     distributee at its fair market value on the date of such 
     distribution, and
       ``(2) the basis of the distributee in such property shall 
     be such fair market value.
       ``(f) Tax-exempt Interest Loses Character.--Interest 
     accrued by the FASIT which is exempt from tax imposed by this 
     subtitle shall, when taken into account by the holder of the 
     ownership interest in the FASIT, be treated as ordinary 
     income.

     ``SEC. 860K. NON-FASIT LOSSES NOT TO OFFSET CERTAIN FASIT 
                   INCLUSIONS.

       ``(a) In General.--The taxable income of the holder of the 
     ownership interest or high-yield interest in a FASIT for any 
     taxable year shall in no event be less than such holder's 
     taxable income determined solely with respect to such 
     interests.
       ``(b) Coordination With Section 172.--Any increase in the 
     taxable income of any holder of an ownership interest or 
     high-yield interest in a FASIT for any taxable year by reason 
     of subsection (a) shall be disregarded--
       ``(1) in determining under section 172 the amount of any 
     net operating loss for such taxable year, and
       ``(2) in determining taxable income for such taxable year 
     for purposes of the 2nd sentence of section 172(b)(2).
       ``(c) Coordination With Minimum Tax.--For purposes of part 
     VI of subchapter A of this chapter--

[[Page S 16329]]

       ``(1) the reference in section 55(b)(2) to taxable income 
     shall be treated as a reference to taxable income determined 
     without regard to this section,
       ``(2) the alternative minimum taxable income of any holder 
     of the ownership interest or high-yield interest in a FASIT 
     for any taxable year shall in no event be less than such 
     holder's taxable income determined solely with respect to 
     such interests, and
       ``(3) any increase in taxable income under this section 
     shall be disregarded for purposes of computing the 
     alternative tax net operating loss deduction.

     ``SEC. 860L. TREATMENT OF TRANSFERS OF HIGH-YIELD INTERESTS 
                   TO DISQUALIFIED HOLDERS.

       ``(a) General Rule.--If any high-yield interest is held by 
     a disqualified holder, this chapter shall be applied as if 
     the transferor of such interest to such holder had not 
     transferred such interest.
       ``(b) Exceptions.--Rules similar to the rules of paragraphs 
     (4) and (7) of section 860E(e) shall apply to the tax imposed 
     by reason of subsection (a).
       ``(c) Disqualified Holder.--For purposes of this section, 
     the term `disqualified holder' means any holder other than an 
     eligible corporation (as defined in section 860M(a)(2)).
       ``(d) Treatment of Interests Held By Certain Dealers.--
       ``(1) In general.--Subsection (a) shall not apply to any 
     high-yield interest held by a disqualified holder if--
       ``(A) such holder is a dealer in goods or services and such 
     interest exclusively represents an interest supported by--
       ``(i) loans made by the dealer to finance a customer's 
     acquisition of goods or services from such dealer in the 
     ordinary course of business, and
       ``(ii) assets described in section 860M(c)(1)(D) that are 
     incidental to the securitization of such loans, or
       ``(B) such holder is a dealer in securities who acquired 
     such interest exclusively for sale to customers in the 
     ordinary course of business (and not for investment).
       ``(2) Change in dealer status.--
       ``(A) In general.--In the case of a dealer described in 
     paragraph (1)(B) which is not an eligible corporation (as 
     defined in section 860M(a)(2)), if--
       ``(i) such dealer ceases to be a dealer in securities, or
       ``(ii) such dealer commences holding the high-yield 
     interest for investment,
     there is hereby imposed (in addition to other taxes) an 
     excise tax equal to the product of the highest rate of tax 
     specified in section 11(b)(1) and the income of such dealer 
     attributable to such interest for periods after the date of 
     such cessation or commencement.
       ``(B) Holding for 31 days or less.--For purposes of 
     subparagraph (A)(ii), a dealer shall not be treated as 
     holding an interest for investment before the 32d day after 
     the date such dealer acquired such interest unless such 
     interest is so held as part of a plan to avoid the purposes 
     of this paragraph.
       ``(C) Administrative provisions.--The deficiency procedures 
     of subtitle F shall apply to the tax imposed by this 
     paragraph.

     ``SEC. 860M. DEFINITIONS AND OTHER RULES.

       ``(a) FASIT.--
       ``(1) In general.--For purposes of this title, the terms 
     `financial asset securitization investment trust' and `FASIT' 
     mean any entity--
       ``(A) for which an election to be treated as a FASIT 
     applies for the taxable year and all prior taxable years,
       ``(B) all of the interests in which are regular interests 
     or the ownership interest,
       ``(C) which has 1 (and only 1) ownership interest and such 
     ownership interest is held directly by an eligible 
     corporation,
       ``(D) as of the close of the 3rd month beginning after the 
     day of its formation and at all times thereafter, 
     substantially all of the assets of which consist of permitted 
     assets,
       ``(E) which has a taxable year which is the taxable year of 
     the holder of the ownership interest in the FASIT, and
       ``(F) which is not described in section 851(a).
     A rule similar to the rule of the last sentence of section 
     860D(a) shall apply for purposes of this paragraph.
       ``(2) Eligible corporation.--For purposes of paragraph 
     (1)(C), the term `eligible corporation' means any domestic C 
     corporation other than--
       ``(A) a corporation which is exempt from tax under this 
     chapter, and
       ``(B) an entity described in section 851(a) or 856(a).
       ``(3) Failure to qualify as fasit if rights to excessive 
     servicing fees held by others.--For purposes of this 
     subtitle, an entity shall not be treated as a FASIT if any 
     person (other than such entity) retains a stripped interest 
     or has a right to receive excessive servicing fees with 
     respect to any debt instrument held by such entity. A right 
     is described in the preceding sentence only if such right was 
     created at the time such instrument was contributed to such 
     entity (or in anticipation of such right being contributed) 
     or is held by the contributor of such instrument or by any 
     person who is related to such contributor.
       ``(4) Election.--An entity (otherwise meeting the 
     requirements of paragraph (1)) may elect to be treated as a 
     FASIT for its 1st taxable year. Such an election shall be 
     made on its return for such 1st taxable year. Except as 
     provided in paragraph (5), such an election shall apply to 
     the taxable year for which made and all subsequent taxable 
     years.
       ``(5) Termination.--If any entity ceases to be a FASIT at 
     any time during the taxable year, such entity shall not be 
     treated as a FASIT for such taxable year or any succeeding 
     taxable year.
       ``(6) Inadvertent terminations, etc.--Rules similar to the 
     rules of section 860D(b)(2)(B) shall apply to inadvertent 
     failures to qualify or remain qualified as a FASIT.
       ``(b) Interests in FASIT.--For purposes of this subpart--
       ``(1) Regular interest.--
       ``(A) In general.--The term `regular interest' means any 
     interest which is issued by a FASIT with fixed terms and 
     which is designated as a regular interest if--
       ``(i) such interest unconditionally entitles the holder to 
     receive a specified principal amount (or other similar 
     amount),
       ``(ii) except as otherwise provided by the Secretary--

       ``(I) in the case of a FASIT which would be treated as a 
     REMIC if an election under section 860D(b) had been made, 
     interest payments (or other similar amounts), if any, with 
     respect to such interest at or before maturity meet the 
     requirements applicable under clause (i) or (ii) of section 
     860G(a)(1)(B), or
       ``(II) in the case of any other FASIT, interest payments 
     (or other similar amounts), if any, with respect to such 
     interest would not be treated as contingent payments (as 
     defined in regulations prescribed by the Secretary under 
     section 1275,

       ``(iii) such interest does not have a stated maturity 
     (including options to renew) greater than 30 years (or such 
     longer period as may be permitted by regulations),
       ``(iv) the issue price of such interest does not exceed 125 
     percent of its stated principal amount, and
       ``(v) the yield to maturity on such interest is less than 
     the sum determined under section 163(i)(1)(B) with respect to 
     such interest.

     Interest shall not fail to meet the requirements of clause 
     (i) merely because the timing (but not the amount) of the 
     principal payments (or other similar amounts) may be 
     contingent on the extent that payments on debt instruments 
     held by the FASIT are made in advance of anticipated payments 
     and on the amount of income from permitted assets.
       ``(B) High-yield interests.--
       ``(i) In general.--The term `regular interest' includes any 
     high-yield interest.
       ``(ii) High-yield interest.--The term `high-yield interest' 
     means any interest which would be described in subparagraph 
     (A) but for failing to meet the requirements of one or more 
     of clauses (i), (iv), or (v) thereof.
       ``(2) Ownership interest.--The term `ownership interest' 
     means the interest issued by a FASIT which is designated as 
     an ownership interest and which is not a regular interest.
       ``(c) Permitted Assets.--For purposes of this part--
       ``(1) In general.--The term `permitted asset' means--
       ``(A) any investment of amounts received under debt 
     instruments described in subparagraph (B) for a temporary 
     period before distribution to holders of interests in the 
     FASIT,
       ``(B) debt instruments (as defined in section 1275(a)(1)) 
     under which interest, if any, is payable--
       ``(i) at a fixed rate,
       ``(ii) at a qualified variable rate (as defined in 
     regulations prescribed by the Secretary under section 
     860G(a)(1)(B)(i), or
       ``(iii) at any other varying rate permitted under 
     regulations prescribed by the Secretary,
       ``(C) foreclosure property,
       ``(D) any asset--
       ``(i) which is an interest rate or foreign currency 
     notional principal contract, letter of credit, insurance, 
     guarantee against payment defaults, or other similar 
     instrument, permitted by the Secretary, and
       ``(ii) which is a reasonably required to guarantee or hedge 
     against the FASIT's risks associated with being the obligor 
     on interests issued by the FASIT,
       ``(E) any interest in a partnership if--
       ``(i) all of the assets of the partnership are debt 
     instruments described in subparagraph (B), and
       ``(ii) such interest is an undivided pro rata interest in 
     such assets, and
       ``(F) contract rights to acquire debt instruments described 
     in subparagraph (B) or assets described in subparagraph (D).
       ``(2) Debt issued by holder of ownership interest not 
     permitted asset.--The term `permitted asset' shall not 
     include any debt instrument issued by the holder of the 
     ownership interest in the FASIT or by any person related to 
     such holder or any direct or indirect interest in such a debt 
     instrument.
       ``(3) Foreclosure property.--The term `foreclosure 
     property' means property--
       ``(A) which would be foreclosure property under section 
     856(e) (determined without regard to paragraph (5) thereof) 
     if acquired by a real estate investment trust, and
       ``(B) which is acquired in connection with the default or 
     imminent default of a debt instrument held by the FASIT 
     unless the security interest in such property was created for 
     the principal purpose of permitting the FASIT to invest in 
     such property.

     Solely for purposes of subsection (a)(1), the determination 
     of whether any property is foreclosure property shall be made 
     without regard to section 856(e)(4).
       ``(d) Tax on Prohibited Transactions.--
       ``(1) In general.--There is hereby imposed for each taxable 
     year of a FASIT a tax equal to 100 percent of the net income 
     derived from prohibited transactions.
       ``(2) Prohibited transactions.--For purposes of this part, 
     the term `prohibited transaction' means--
       ``(A) the receipt of any income derived from any asset that 
     is not a permitted asset,

[[Page S 16330]]

       ``(B) except as provided in paragraph (3), the disposition 
     of any permitted asset,
       ``(C) the receipt of any income derived from any activity 
     other than--
       ``(i) the acquisition of existing debt instruments,
       ``(ii) the holding of existing debt instruments, and
       ``(iii) the processing of payments received on debt 
     instruments held by the FASIT and the distribution of amounts 
     to holders of interests in the FASIT, and
       ``(D) the receipt of any income representing a fee or other 
     compensation for services (other than any fee received as 
     compensation for a waiver, amendment, or consent under 
     permitted assets (other than foreclosure property) held by 
     the FASIT).
       ``(3) Exception for income from certain dispositions.--
       ``(A) In general.--Paragraph (2)(B) shall not apply to a 
     disposition which would not be a prohibited transaction (as 
     defined in section 860F(a)(2)) by reason of--
       ``(i) clause (ii), (iii), or (iv) of section 860F(a)(2)(A), 
     or
       ``(ii) section 860F(a)(5),
     if the FASIT were treated as a REMIC and debt instruments 
     described in subsection (c)(1)(B) were treated as qualified 
     mortgages.
       ``(B) Substitution of debt instruments; reduction of over-
     collateralization.--Paragraph (2)(B) shall not apply to--
       ``(i) the substitution of a debt instrument described in 
     subsection (c)(1)(B) for another debt instrument which is a 
     permitted asset, or
       ``(ii) the distribution of a debt instrument contributed by 
     the holder of the ownership interest to such holder in order 
     to reduce over-collateralization of the FASIT,

     but only if a principal purpose of acquiring the debt 
     instrument which is disposed of was not the recognition of 
     gain (or the reduction of an loss) as a result of an increase 
     in the market value of the debt instrument after its 
     acquisition by the FASIT.
       ``(C) Liquidation of class of regular interests.--Paragraph 
     (2)(B) shall not apply to the complete liquidation of any 
     class of regular interests.
       ``(4) Net income.--For purposes of this subsection, net 
     income shall be determined in accordance with section 
     860F(a)(3).
       ``(e) Tax on Income From Foreclosure Property.--
       ``(1) In general.--A tax is hereby imposed for each taxable 
     year on the net income from foreclosure property of each 
     FASIT. Such tax shall be computed by multiplying the net 
     income from foreclosure property by the highest rate of tax 
     specified in section 11(b).
       ``(2) Net income from foreclosure property.--For purposes 
     of this part, the term `net income from foreclosure property' 
     means the amount which would be the FASIT's net income from 
     foreclosure property under section 857(b)(4)(B) if the FASIT 
     were a real estate investment trust.
       ``(f) Coordination With Wash Sales Rules.--Rules similar to 
     the rules of section 860F(d) shall apply to the ownership 
     interest in a FASIT.
       ``(g) Related Person.--For purposes of this part, a person 
     (hereinafter in this subsection referred to as the `related 
     person') is related to any person if--
       ``(1) the related person bears a relationship to such 
     person specified in section 267(b) or section 707(b)(1), or
       ``(2) the related person and such person are engaged in 
     trades or businesses under common control (within the meaning 
     of subsections (a) and (b) of section 52).

     For purposes of paragraph (1), in applying section 267(b) or 
     707(b)(1), `20 percent' shall be substituted for `50 
     percent'.
       ``(h) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this part, including regulations to prevent 
     the abuse of the purposes of this part through transactions 
     which are not primarily related to securitization of debt 
     instruments by a FASIT.''.
       (b) Technical Amendments.--
       (1) Paragraph (2) of section 26(b) is amended by striking 
     ``and'' at the end of subparagraph (M), by striking the 
     period at the end of subparagraph (N) and inserting ``, 
     and'', and by adding at the end the following new 
     subparagraph:
       ``(O) section 860L (relating to treatment of transfers of 
     high-yield interests to disqualified holders).''.
       (2) Paragraph (6) of section 56(g) is amended by striking 
     ``or REMIC'' and inserting ``REMIC, or FASIT''.
       (3) Clause (ii) of section 382(l)(4)(B) is amended by 
     striking ``or a REMIC to which part IV of subchapter M 
     applies'' and inserting ``a REMIC to which part IV of 
     subchapter M applies, or a FASIT to which part V of 
     subchapter M applies''.
       (4) Paragraph (1) of section 582(c) is amended by inserting 
     ``, and any regular or ownership interest in a FASIT,'' after 
     ``REMIC''.
       (5) Paragraph (4) of section 593(d) is amended--
       (A) by adding at the end the following new sentence: 
     ``References in the preceding provisions of this paragraph to 
     a REMIC shall be treated as including a reference to a 
     FASIT.'', and
       (B) by inserting ``or fasit's'' after ``remic's'' in the 
     heading.
       (6) Subparagraph (E) of section 856(c)(6) is amended by 
     adding at the end the following new sentence: ``References in 
     the preceding provisions of this subparagraph to a REMIC 
     shall be treated as including a reference to a FASIT.''.
       (7) Subparagraph (C) of section 1202(e)(4) is amended by 
     striking ``or REMIC'' and inserting ``REMIC, or FASIT''.
       (8) Clause (xi) of section 7701(a)(19)(C) is amended to 
     read as follows:
       ``(xi) any regular or residual interest in a REMIC, and any 
     regular or ownership interest in a FASIT, but only in the 
     proportion which the assets of such REMIC or FASIT consist of 
     property described in any of the preceding clauses of this 
     subparagraph; except that if 95 percent or more of the assets 
     of such REMIC or FASIT are assets described in clauses (i) 
     through (x), the entire interest in the REMIC or FASIT shall 
     qualify.''.
       (9) Subparagraph (A) of section 7701(i)(2) is amended by 
     inserting ``or a FASIT'' after ``a REMIC''.
       (c) Clerical Amendment.--The table of parts for subchapter 
     M of chapter 1 is amended by adding at the end the following 
     new item:

``Part V. Financial asset securitization investment trusts.''.

       (d) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

                   CHAPTER 7--DEPRECIATION PROVISIONS

     SEC. 12861. TREATMENT OF CONTRIBUTIONS IN AID OF 
                   CONSTRUCTION.

       (a) Treatment of Contributions in Aid of Construction.--
       (1) In general.--Section 118 (relating to contributions to 
     the capital of a corporation) is amended--
       (A) by redesignating subsection (c) as subsection (e), and
       (B) by inserting after subsection (b) the following new 
     subsections:
       ``(c) Special Rules for Water and Sewage Disposal 
     Utilities.--
       ``(1) General rule.--For purposes of this section, the term 
     `contribution to the capital of the taxpayer' includes any 
     amount of money or other property received from any person 
     (whether or not a shareholder) by a regulated public utility 
     which provides water or sewerage disposal services if--
       ``(A) such amount is a contribution in aid of construction,
       ``(B) in the case of contribution of property other than 
     water or sewerage disposal facilities, such amount meets the 
     requirements of the expenditure rule of paragraph (2), and
       ``(C) such amount (or any property acquired or constructed 
     with such amount) is not included in the taxpayer's rate base 
     for ratemaking purposes.
       ``(2) Expenditure rule.--An amount meets the requirements 
     of this paragraph if--
       ``(A) an amount equal to such amount is expended for the 
     acquisition or construction of tangible property described in 
     section 1231(b)--
       ``(i) which is the property for which the contribution was 
     made or is of the same type as such property, and
       ``(ii) which is used predominantly in the trade or business 
     of furnishing water or sewerage disposal services,
       ``(B) the expenditure referred to in subparagraph (A) 
     occurs before the end of the second taxable year after the 
     year in which such amount was received, and
       ``(C) accurate records are kept of the amounts contributed 
     and expenditures made, the expenditures to which 
     contributions are allocated, and the year in which the 
     contributions and expenditures are received and made.
       ``(3) Definitions.--For purposes of this subsection--
       ``(A) Contribution in aid of construction.--The term 
     `contribution in aid of construction' shall be defined by 
     regulations prescribed by the Secretary, except that such 
     term shall not include amounts paid as service charges for 
     starting or stopping services.
       ``(B) Predominantly.--The term `predominantly' means 80 
     percent or more.
       ``(C) Regulated public utility.--The term `regulated public 
     utility' has the meaning given such term by section 
     7701(a)(33), except that such term shall not include any 
     utility which is not required to provide water or sewerage 
     disposal services to members of the general public in its 
     service area.
       ``(4) Disallowance of deductions and credit; adjusted 
     basis.--Notwithstanding any other provision of this subtitle, 
     no deduction or credit shall be allowed for, or by reason of, 
     any expenditure which constitutes a contribution in aid of 
     construction to which this subsection applies. The adjusted 
     basis of any property acquired with contributions in aid of 
     construction to which this subsection applies shall be zero.
       ``(d) Statute of Limitations.--If the taxpayer for any 
     taxable year treats an amount as a contribution to the 
     capital of the taxpayer described in subsection (c), then--
       ``(1) the statutory period for the assessment of any 
     deficiency attributable to any part of such amount shall not 
     expire before the expiration of 3 years from the date the 
     Secretary is notified by the taxpayer (in such manner as the 
     Secretary may prescribe) of--
       ``(A) the amount of the expenditure referred to in 
     subparagraph (A) of subsection (c)(2),
       ``(B) the taxpayer's intention not to make the expenditures 
     referred to in such subparagraph, or
       ``(C) a failure to make such expenditure within the period 
     described in subparagraph (B) of subsection (c)(2); and
       ``(2) such deficiency may be assessed before the expiration 
     of such 3-year period notwithstanding the provisions of any 
     other law or rule of law which would otherwise prevent such 
     assessment.''.
       (2) Conforming amendment.--Section 118(b) is amended by 
     inserting ``except as provided in subsection (c),'' before 
     ``the term''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to amounts received after the date of the 
     enactment of this Act.

[[Page S 16331]]

       (b) Recovery Method and Period for Water Utility 
     Property.--
       (1) Requirement to use straight line method.--Section 
     168(b)(3) is amended by adding at the end the following new 
     subparagraph:
       ``(F) Water utility property described in subsection 
     (e)(5).''.
       (2) 25-year recovery period.--The table contained in 
     section 168(c)(1) is amended by inserting the following item 
     after the item relating to 20-year property:

  ``Water utility property..............................25 years''.....

       (3) Water utility property.--
       (A) In general.--Section 168(e) is amended by adding at the 
     end the following new paragraph:
       ``(5) Water utility property.--The term `water utility 
     property' means property--
       ``(A) which is an integral part of the gathering, 
     treatment, or commercial distribution of water, and which, 
     without regard to this paragraph, would be 20-year property, 
     and
       ``(B) any municipal sewer.''.
       (B) Conforming amendments.--Section 168 is amended--
       (i) by striking subparagraph (F) of subsection (e)(3), and
       (ii) by striking the item relating to subparagraph (F) in 
     the table in subsection (g)(3).
       (4) Alternative system.--Clause (iv) of section 
     168(g)(2)(C) is amended by inserting ``or water utility 
     property'' after ``tunnel bore''.
       (5) Effective date.--The amendments made by this subsection 
     shall apply to property placed in service after the date of 
     the enactment of this Act, other than property placed in 
     service pursuant to a binding contract in effect on such date 
     and at all times thereafter before the property is placed in 
     service.

     SEC. 12862. DEDUCTION FOR CERTAIN OPERATING AUTHORITY.

       (a) General Rule.--For purpose of chapter 1 of the Internal 
     Revenue Code of 1986, in computing the taxable income of a 
     taxpayer who, on January 1, 1995, held one or more operating 
     authorities preempted by section 601 of the Federal Aviation 
     Administration Authorization Act of 1994, the taxpayer shall 
     be entitled to deduct ratably over the 36-month period 
     beginning with January 1995 an amount equal to the aggregate 
     adjusted bases of such operating authorities held by the 
     taxpayer on January 1, 1995.
       (b) Treatment As Depreciation.--Any deduction under 
     subsection (a) shall be treated as a deduction for 
     depreciation for purposes of the Internal Revenue Code of 
     1986.
       (c) Effective Date.--The provisions of this section shall 
     apply to taxable years ending after December 31, 1994.

     SEC. 12863. CLASS LIFE FOR GAS STATION CONVENIENCE STORES AND 
                   SIMILAR STRUCTURES.

       (a) In General.--Section 168(e)(3)(E) (classifying certain 
     property as 15-year property) is amended by striking ``and'' 
     at the end of clause (i), by striking the period at the end 
     of clause (ii) and inserting ``, and'', and by adding at the 
     end the following new clause:
       ``(iii) any section 1250 property which is a retail motor 
     fuels outlet (whether or not food or other convenience items 
     are sold at the outlet).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to property which is placed in service on or 
     after the date of the enactment of this Act and to which 
     section 168 of the Internal Revenue Code of 1986 applies 
     after the amendment made by section 201 of the Tax Reform Act 
     of 1986. A taxpayer may elect to have such amendments apply 
     with respect to any property placed in service before such 
     date and to which such section so applies.

                      CHAPTER 8--OTHER PROVISIONS

     SEC. 12871. APPLICATION OF FAILURE-TO-PAY PENALTY TO 
                   SUBSTITUTE RETURNS.

       (a) General Rule.--Section 6651 (relating to failure to 
     file tax return or to pay tax) is amended by adding at the 
     end the following new subsection:
       ``(g) Treatment of Returns Prepared by Secretary Under 
     Section 6020(b).--In the case of any return made by the 
     Secretary under section 6020(b)--
       ``(1) such return shall be disregarded for purposes of 
     determining the amount of the addition under paragraph (1) of 
     subsection (a), but
       ``(2) such return shall be treated as the return filed by 
     the taxpayer for purposes of determining the amount of the 
     addition under paragraphs (2) and (3) of subsection (a).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply in the case of any return the due date for which 
     (determined without regard to extensions) is after the date 
     of the enactment of this Act.

     SEC. 12872. EXTENSION OF WITHHOLDING TO CERTAIN GAMBLING 
                   WINNINGS.

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

     SEC. 12873. LOSSES FROM FORECLOSURE PROPERTY.

       (a) In General.--Section 818(b) is amended by adding at the 
     end the following new paragraph:
       ``(2) Losses from foreclosure property.--
       ``(A) In general.--In the case of any loss arising from the 
     sale or exchange of foreclosure property which (without 
     regard to this paragraph) is treated as a capital loss--
       ``(i) only 15 percent of the amount of such loss shall be 
     treated as a capital loss, and
       ``(ii) the remainder shall be treated as a loss from the 
     sale or exchange of real property used in carrying on an 
     insurance business which is recognized ratably over the 10-
     taxable year period beginning with the taxable year following 
     the taxable year in which the sale or exchange of the 
     foreclosure property occurred.
       ``(B) Foreclosure property.--For purposes of this 
     paragraph, the term ``foreclosure property'' means any real 
     property used in a trade or businesses (as defined in section 
     1231(b) without regard to this subsection) which is acquired 
     by a life insurance company as the result of--
       ``(i) such company having bid on such property at 
     foreclosure, or
       ``(ii) such company having otherwise reduced such property 
     to ownership or possession by agreement or process of law, 
     after there was a default (or default was imminent) on 
     indebtedness which such property secured.''.
       (b) Conforming Amendments.--Section 818(b) is amended--
       (1) by striking ``In the'' and inserting:
       ``(1) In general.--In the '', and
       (2) by redesignating paragraphs (1) and (2) and 
     subparagraphs (A) and (B) of paragraph (1) as subparagraphs 
     (A) and (B) and clauses (i) and (ii) of subparagraph (A), 
     respectively.
       (c) Effective Date.--The amendments made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     1994.

     SEC. 12874. NEWSPAPER DISTRIBUTORS TREATED AS DIRECT SELLERS.

       (a) In General.--Section 3508(b)(2)(A) in amended by 
     striking ``or'' at the end of clause (i), by inserting ``or'' 
     at the end of clause (ii), and by inserting after clause (ii) 
     the following new clause:
       ``(iii) is engaged in the trade or business of the 
     delivering or distribution of newspapers or shopping news 
     (including any services directly related to such trade or 
     business),''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to services performed after December 31, 1995.

     SEC. 12875. NONRECOGNITION TREATMENT FOR CERTAIN TRANSFERS BY 
                   COMMON TRUST FUNDS TO REGULATED INVESTMENT 
                   COMPANIES.

       (a) General Rule.--Section 584 (relating to common trust 
     funds) is amended by redesignating subsection (h) as 
     subsection (i) and by inserting after subsection (g) the 
     following new subsection:
       ``(h) Nonrecognition Treatment for Certain Transfers to 
     Regulated Investment Companies.--
       ``(1) In general.--If--
       ``(A) pursuant to a single plan, a common trust fund 
     transfers substantially all of its assets to one or more 
     regulated investment companies in exchange solely for stock 
     in the company or companies to which such assets are so 
     transferred, and
       ``(B) such stock is distributed by such common trust fund 
     to participants in such common trust fund in exchange solely 
     for their interests in such common trust fund,

     no gain or loss shall be recognized by such common trust fund 
     by reason of such transfer or distribution, and no gain or 
     loss shall be recognized by any participant in such common 
     trust fund by reason of such exchange.
       ``(2) Basis rules.--
       ``(A) Regulated investment company.--The basis of any asset 
     received by a regulated investment company in a transfer 
     referred to in paragraph (1)(A) shall be the same as it would 
     be in the hands of the common trust fund.
       ``(B) Participants.--The basis of the stock which is 
     received in an exchange referred to in paragraph (1)(B) shall 
     be the same as that of the property exchanged. If stock in 
     more than one regulated investment company is received in 
     such exchange, the basis determined under the preceding 
     sentence shall be allocated among the stock in each such 
     company on the basis of respective fair market values.
       ``(3) Treatment of assumptions of liability.--
       ``(A) In general.--In determining whether the transfer 
     referred to in paragraph (1)(A) is in exchange solely for 
     stock in one or more regulated investment companies, the 
     assumption by any such company of a liability of the common 
     trust fund, and the fact that any property transferred by the 
     common trust fund is subject to a liability, shall be 
     disregarded.
       ``(B) Special rule where assumed liabilities exceed 
     basis.--
       ``(i) In general.--If, in any transfer referred to in 
     paragraph (1)(A), the assumed liabilities exceed the 
     aggregate adjusted bases (in the hands of the common trust 
     fund) of the assets transferred to the regulated investment 
     company or companies--

       ``(I) notwithstanding paragraph (1), gain shall be 
     recognized to the common trust fund on such transfer in an 
     amount equal to such excess,
       ``(II) the basis of the assets received by the regulated 
     investment company or companies in such transfer shall be 
     increased by the amount so recognized, and
       ``(III) any adjustment to the basis of a participant's 
     interest in the common trust fund as a result of the gain so 
     recognized shall be treated as occurring immediately before 
     the exchange referred to in paragraph (1)(B).

     If the transfer referred to in paragraph (1)(A) is to two or 
     more regulated investment companies, the basis increase under 
     subclause (II) shall be allocated among such companies on the 
     basis of the respective fair market values of the assets 
     received by each of such companies.

[[Page S 16332]]

       ``(ii) Assumed liabilities.--For purposes of clause (i), 
     the term `assumed liabilities' means the aggregate of--

       ``(I) any liability of the common trust fund assumed by any 
     regulated investment company in connection with the transfer 
     referred to in paragraph (1)(A), and
       ``(II) any liability to which property so transferred is 
     subject.

       ``(4) Common trust fund must meet diversification rules.--
     This subsection shall not apply to any common trust fund 
     which would not meet the requirements of section 
     368(a)(2)(F)(ii) if it were a corporation. For purposes of 
     the preceding sentence, Government securities shall not be 
     treated as securities of an issuer in applying the 25-percent 
     and 50-percent test and such securities shall not be excluded 
     for purposes of determining total assets under clause (iv) of 
     section 368(a)(2)(F).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to transfers after December 31, 1995.

     SEC. 12876. TREATMENT OF CERTAIN INSURANCE CONTRACTS ON 
                   RETIRED LIVES.

       (a) General Rule.--
       (1) Paragraph (2) of section 817(d) (defining variable 
     contract) is amended by striking ``or'' at the end of 
     subparagraph (A), by striking ``and'' at the end of 
     subparagraph (B) and inserting ``or'', and by inserting after 
     subparagraph (B) the following new subparagraph:
       ``(C) provides for funding of insurance on retired lives as 
     described in section 807(c)(6), and''.
       (2) Paragraph (3) of section 817(d) is amended by striking 
     ``or'' at the end of subparagraph (A), by striking the period 
     at the end of subparagraph (B) and inserting ``, or'', and by 
     inserting after subparagraph (B) the following new 
     subparagraph:
       ``(C) in the case of funds held under a contract described 
     in paragraph (2)(C), the amounts paid in, or the amounts paid 
     out, reflect the investment return and the market value of 
     the segregated asset account.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 12877. TREATMENT OF MODIFIED GUARANTEED CONTRACTS.

       (a) General Rule.--Subpart E of part I of subchapter L of 
     chapter 1 (relating to definitions and special rules) is 
     amended by inserting after section 817 the following new 
     section:

     ``SEC. 817A. SPECIAL RULES FOR MODIFIED GUARANTEED CONTRACTS.

       ``(a) Computation of Reserves.--In the case of a modified 
     guaranteed contract, clause (ii) of section 807(e)(1)(A) 
     shall not apply.
       ``(b) Segregated Assets Under Modified Guaranteed Contracts 
     Marked to Market.--
       ``(1) In general.--In the case of any life insurance 
     company, for purposes of this subtitle--
       ``(A) Any gain or loss with respect to a segregated asset 
     shall be treated as ordinary income or loss, as the case may 
     be.
       ``(B) If any segregated asset is held by such company as of 
     the close of any taxable year--
       ``(i) such company shall recognize gain or loss as if such 
     asset were sold for its fair market value on the last 
     business day of such taxable year, and
       ``(ii) any such gain or loss shall be taken into account 
     for such taxable year.
     Proper adjustment shall be made in the amount of any gain or 
     loss subsequently realized for gain or loss taken into 
     account under the preceding sentence. The Secretary may 
     provide by regulations for the application of this 
     subparagraph at times other than the times provided in this 
     subparagraph.
       ``(2) Segregated asset.--For purposes of paragraph (1), the 
     term `segregated asset' means any asset held as part of a 
     segregated account referred to in subsection (d)(1) under a 
     modified guaranteed contract.
       ``(c) Special Rule in Computing Life Insurance Reserves.--
     For purposes of applying section 816(b)(1)(A) to any modified 
     guaranteed contract, an assumed rate of interest shall 
     include a rate of interest determined, from time to time, 
     with reference to a market rate of interest.
       ``(d) Modified Guaranteed Contract Defined.--For purposes 
     of this section, the term `modified guaranteed contract' 
     means a contract not described in section 817--
       ``(1) all or part of the amounts received under which are 
     allocated to an account which, pursuant to State law or 
     regulation, is segregated from the general asset accounts of 
     the company and is valued from time to time with reference to 
     market values,
       ``(2) which--
       ``(A) provides for the payment of annuities,
       ``(B) is a life insurance contract, or
       ``(C) is a pension plan contract which is not a life, 
     accident, or health, property, casualty, or liability 
     contract,
       ``(3) for which reserves are valued at market for annual 
     statement purposes, and
       ``(4) which provides for a net surrender value or a 
     policyholder's fund (as defined in section 807(e)(1)).

     If only a portion of a contract is not described in section 
     817, such portion shall be treated for purposes of this 
     section as a separate contract.
       ``(e) Regulations.--The Secretary may prescribe 
     regulations--
       ``(1) to provide for the treatment of market value 
     adjustments under sections 72, 7702, 7702A, and 807(e)(1)(B),
       ``(2) to determine the interest rates applicable under 
     sections 807(c)(3), 807(d)(2)(B), and 812 with respect to a 
     modified guaranteed contract annually, in a manner 
     appropriate for modified guaranteed contracts and, to the 
     extent appropriate for such a contract, to modify or waive 
     the applicability of section 811(d),
       ``(3) to provide rules to limit ordinary gain or loss 
     treatment to assets constituting reserves for modified 
     guaranteed contracts (and not other assets) of the company,
       ``(4) to provide appropriate treatment of transfers of 
     assets to and from the segregated account, and
       ``(5) as may be necessary or appropriate to carry out the 
     purposes of this section.''.
       (b) Clerical Amendment.--The table of sections for subpart 
     E of part I of subchapter L of chapter 1 is amended by 
     inserting after the item relating to section 817 the 
     following new item:

``Sec. 817A. Special rules for modified guaranteed contracts.''.

       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to taxable years beginning after December 31, 1995.
       (2) Treatment of net adjustments.--In the case of any 
     taxpayer required by the amendments made by this section to 
     change its calculation of reserves to take into account 
     market value adjustments and to mark segregated assets to 
     market for any taxable year--
       (A) such changes shall be treated as a change in method of 
     accounting initiated by the taxpayer,
       (B) such changes shall be treated as made with the consent 
     of the Secretary, and
       (C) the adjustments required by reason of section 481 of 
     the Internal Revenue Code of 1986 shall be taken into account 
     as ordinary income or loss by the taxpayer for the taxpayer's 
     first taxable year beginning after December 31, 1995.

     SEC. 12878. $1,000,000 COMPENSATION DEDUCTION LIMIT EXTENDED 
                   TO ALL EMPLOYEES OF ALL CORPORATIONS.

       (a) In General.--Section 162(m) is amended--
       (1) by striking ``publicly held corporation'' in paragraph 
     (1) and inserting ``taxpayer (other than personal service 
     corporations)'',
       (2) by striking ``covered employee'' each place it appears 
     in paragraphs (1) and (4) and inserting ``employee'', and
       (3) by striking paragraphs (2) and (3) and redesignating 
     paragraph (4) as paragraph (3).
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995, except that there shall not be taken into account with 
     respect to any employee to whom section 162(m) of the 
     Internal Revenue Code of 1986 applies solely by reason of 
     such amendments remuneration payable under a written binding 
     contract which was in effect on October 25, 1995, and which 
     was not modified thereafter in any material respect before 
     such remuneration is paid.
       (c) Use of Revenues.--Notwithstanding any other provision 
     of law, the Commissioner of Social Security shall increase 
     the earnings limit otherwise determined for each year under 
     section 203 of the Social Security Act (42 U.S.C. 403) by an 
     amount which takes into account the increase in revenues for 
     such year as estimated by the Secretary of the Treasury 
     resulting from the amendment to section 162(m)(3) of the 
     Internal Revenue Code of 1986 made by the Balanced Budget 
     Reconciliation Act of 1995.

     SEC. 12879. SENSE OF THE SENATE.

       The Senate finds that:
       (1) The Senate has held hearings on the social security 
     earnings limit in 1994 and 1995 and the House has held two 
     hearings on the social security earnings limit in 1995;
       (2) The Senate has overwhelmingly passed sense of the 
     Senate language calling for substantial reform of the social 
     security earnings limit;
       (3) The House of Representatives has overwhelmingly passed 
     legislation to raise the exempt amount under the social 
     security earnings limit three times, in 1989, 1992, and 1995;
       (4) Such legislation is a key provision of the Contract 
     with America;
       (5) The President in his 1992 campaign document ``Putting 
     People First'' pledged to lift the social security earnings 
     limit;
       (6) The social security earnings limit is a depression-era 
     relic that unfairly punishes working seniors; therefore,
       (7) It is the intent of the Congress that legislation will 
     be passed before the end of 1995 to raise the social security 
     earnings limit for working seniors aged 65 through 69 in a 
     manner which will ensure the financial integrity of the 
     social security trust funds and will be consistent with the 
     goal of achieving a balanced budget in 7 years.

     SEC. 12880. INCREASED DEDUCTIBILITY OF BUSINESS MEAL EXPENSES 
                   FOR INDIVIDUALS SUBJECT TO FEDERAL LIMITATIONS 
                   ON HOURS OF SERVICE.

       (a) In General.--Section 274(n) (relating to only 50 
     percent of meal and entertainment expenses allowed as 
     deduction) is amended by adding at the end the following new 
     paragraph:
       ``(3) Special rule for individuals subject to federal 
     limitations on hours of service.--In the case of any expenses 
     for food or beverages consumed by an individual during, or 
     incident to, any period of duty which is subject to the hours 
     of service limitations of the Department of Transportation, 
     paragraph (1) shall be applied by substituting `80 percent' 
     for `50 percent''.''
       (b) Repeal of Special Transition Rule to Financial 
     Institution Exception to Interest Allocation Rules.--
     Paragraph (5) of section 1215(c) of the Tax Reform Act of 
     1986 (Public Law 99-514, 100 Stat. 2548) is hereby repealed.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 12881. ROLLOVER OF GAIN FROM SALE OF FARM ASSETS TO 
                   INDIVIDUAL RETIREMENT PLANS.

       (a) In General.--Part III of subchapter O of chapter 1 
     (relating to common nontaxable exchanges) is amended by 
     inserting after section 1034 the following new section:
     
[[Page S 16333]]


     ``SEC. 1034A. ROLLOVER OF GAIN ON SALE OF FARM ASSETS INTO 
                   ASSET ROLLOVER ACCOUNT.

       ``(a) Nonrecognition of Gain.--Subject to the limits of 
     subsection (c), if a taxpayer has a qualified net farm gain 
     from the sale of a qualified farm asset, then, at the 
     election of the taxpayer, gain (if any) from such sale shall 
     be recognized only to the extent such gain exceeds the 
     contributions to 1 or more asset rollover accounts of the 
     taxpayer for the taxable year in which such sale occurs.
       ``(b) Asset Rollover Account.--
       ``(1) General rule.--Except as provided in this section, an 
     asset rollover account shall be treated for purposes of this 
     title in the same manner as an individual retirement plan.
       ``(2) Asset rollover account.--For purposes of this title, 
     the term `asset rollover account' means an individual 
     retirement plan which is designated at the time of the 
     establishment of the plan as an asset rollover account. Such 
     designation shall be made in such manner as the Secretary may 
     prescribe.
       ``(c) Contribution Rules.--
       ``(1) No deduction allowed.--No deduction shall be allowed 
     under section 219 for a contribution to an asset rollover 
     account.
       ``(2) Aggregate contribution limitation.--Except in the 
     case of rollover contributions, the aggregate amount for all 
     taxable years which may be contributed to all asset rollover 
     accounts established on behalf of an individual shall not 
     exceed--
       ``(A) $500,000 ($250,000 in the case of a separate return 
     by a married individual), reduced by
       ``(B) the amount by which the aggregate value of the assets 
     held by the individual (and spouse) in individual retirement 
     plans (other than asset rollover accounts) exceeds $100,000.

     The determination under subparagraph (B) shall be made as of 
     the close of the taxable year for which the determination is 
     being made.
       ``(3) Annual contribution limitations.--
       ``(A) General rule.--The aggregate contribution which may 
     be made in any taxable year to all asset rollover accounts 
     shall not exceed 100 percent of the lesser of--
       ``(i) the qualified net farm gain for the taxable year, or
       ``(ii) an amount determined by multiplying the number of 
     years the taxpayer is a qualified farmer by $10,000.
       ``(B) Spouse.--In the case of a married couple filing a 
     joint return under section 6013 for the taxable year, 
     subparagraph (A) shall be applied by substituting `$20,000' 
     for `$10,000' for each year the taxpayer's spouse is a 
     qualified farmer.
       ``(4) Adjustment to annual contribution limitation.--The 
     Secretary may reduce the percentage limitation in paragraph 
     (3)(A) to such lower percentage as the Secretary determines 
     necessary to assure that the aggregate amount of deductions 
     for all individuals for a taxable year does not exceed the 
     aggregate amount of the increases in receipts for the taxable 
     year by reason of the amendments made by sections 12883 and 
     12884 of the Balanced Budget Reconciliation Act of 1995.
       ``(5) Time when contribution deemed made.--For purposes of 
     this section, a taxpayer shall be deemed to have made a 
     contribution to an asset rollover account on the last day of 
     the preceding taxable year if the contribution is made on 
     account of such taxable year and is made not later than the 
     time prescribed by law for filing the return for such taxable 
     year (not including extensions thereof).
       ``(d) Qualified Net Farm Gain; Etc.--For purposes of this 
     section--
       ``(1) Qualified net farm gain.--The term `qualified net 
     farm gain' means the lesser of--
       ``(A) the net capital gain of the taxpayer for the taxable 
     year, or
       ``(B) the net capital gain for the taxable year determined 
     by only taking into account gain (or loss) in connection with 
     a disposition of a qualified farm asset.
       ``(2) Qualified farm asset.--The term `qualified farm 
     asset' means an asset used by a qualified farmer in the 
     active conduct of the trade or business of farming (as 
     defined in section 2032A(e)).
       ``(3) Qualified farmer.--
       ``(A) In general.--The term `qualified farmer' means a 
     taxpayer who--
       ``(i) during the 5-year period ending on the date of the 
     disposition of a qualified farm asset materially participated 
     in the trade or business of farming, and
       ``(ii) owned (or who with the taxpayer's spouse owned) 50 
     percent or more of such trade or business during such 5-year 
     period.
       ``(B) Material participation.--For purposes of this 
     paragraph, a taxpayer shall be treated as materially 
     participating in a trade or business if the taxpayer meets 
     the requirements of section 2032A(e)(6).
       ``(4) Rollover contributions.--Rollover contributions to an 
     asset rollover account may be made only from other asset 
     rollover accounts.
       ``(e) Distribution Rules.--For purposes of this title, the 
     rules of paragraphs (1) and (2) of section 408(d) shall apply 
     to any distribution from an asset rollover account.
       ``(f) Individual Required To Report Qualified 
     Contributions.--
       ``(1) In general.--Any individual who--
       ``(A) makes a contribution to any asset rollover account 
     for any taxable year, or
       ``(B) receives any amount from any asset rollover account 
     for any taxable year,

     shall include on the return of tax imposed by chapter 1 for 
     such taxable year and any succeeding taxable year (or on such 
     other form as the Secretary may prescribe) information 
     described in paragraph (2).
       ``(2) Information required to be supplied.--The information 
     described in this paragraph is information required by the 
     Secretary which is similar to the information described in 
     section 408(o)(4)(B).
       ``(3) Penalties.--For penalties relating to reports under 
     this paragraph, see section 6693(b).''.
       (b) Contributions Not Deductible.--Section 219(d) (relating 
     to other limitations and restrictions) is amended by adding 
     at the end the following new paragraph:
       ``(5) Contributions to asset rollover accounts.--No 
     deduction shall be allowed under this section with respect to 
     a contribution under section 1034A.''.
       (c) Excess Contributions.--
       (1) In general.--Section 4973 (relating to tax on excess 
     contributions to individual retirement accounts, certain 
     section 403(b) contracts, and certain individual retirement 
     annuities) is amended by adding at the end the following new 
     subsection:
       ``(d) Asset Rollover Accounts.--For purposes of this 
     section, in the case of an asset rollover account referred to 
     in subsection (a)(1), the term `excess contribution' means 
     the excess (if any) of the amount contributed for the taxable 
     year to such account over the amount which may be contributed 
     under section 1034A.''.
       (2) Conforming amendments.--
       (A) Section 4973(a)(1) is amended by striking ``or'' and 
     inserting ``an asset rollover account (within the meaning of 
     section 1034A), or''.
       (B) The heading for section 4973 is amended by inserting 
     ``ASSET ROLLOVER ACCOUNTS,'' after ``CONTRACTS''.
       (C) The table of sections for chapter 43 is amended by 
     inserting ``asset rollover accounts,'' after ``contracts'' in 
     the item relating to section 4973.
       (d) Technical Amendments.--
       (1) Paragraph (1) of section 408(a) (defining individual 
     retirement account) is amended by inserting ``or a qualified 
     contribution under section 1034A,'' before ``no 
     contribution''.
       (2) Subparagraph (A) of section 408(d)(5) is amended by 
     inserting ``or qualified contributions under section 1034A'' 
     after ``rollover contributions''.
       (3)(A) Subparagraph (A) of section 6693(b)(1) is amended by 
     inserting ``or 1034A(f)(1)'' after ``408(o)(4)''.
       (B) Section 6693(b)(2) is amended by inserting ``or 
     1034A(f)(1)'' after ``408(o)(4)''.
       (4) The table of sections for part III of subchapter O of 
     chapter 1 is amended by inserting after the item relating to 
     section 1034 the following new item:

``Sec. 1034A. Rollover of gain on sale of farm assets into asset 
              rollover account.''.

       (e) Effective Date.--The amendments made by this section 
     shall apply to sales and exchanges after the date of the 
     enactment of this Act.

     SEC. 12882. DISPOSITION OF STOCK IN DOMESTIC CORPORATIONS BY 
                   10-PERCENT FOREIGN SHAREHOLDERS.

       (a) General Rule.--Subpart D of part II of subchapter N of 
     chapter 1 (relating to miscellaneous provisions) is amended 
     by adding at the end the following new section:

     ``SEC. 899. DISPOSITION OF STOCK IN DOMESTIC CORPORATIONS BY 
                   10-PERCENT FOREIGN SHAREHOLDERS.

       ``(a) General Rule.--
       ``(1) Treatment as effectively connected with united states 
     trade or business.--For purposes of this title, if any 
     nonresident alien individual or foreign corporation is a 10-
     percent shareholder in any domestic corporation, any gain or 
     loss of such individual or foreign corporation from the 
     disposition of any stock in such domestic corporation shall 
     be taken into account--
       ``(A) in the case of a nonresident alien individual, under 
     section 871(b)(1), or
       ``(B) in the case of a foreign corporation, under section 
     882(a)(1),
     as if the taxpayer were engaged during the taxable year in a 
     trade or business within the United States through a 
     permanent establishment in the United States and as if such 
     gain or loss were effectively connected with such trade or 
     business and attributable to such permanent establishment. 
     Notwithstanding section 865, any such gain or loss shall be 
     treated as from sources in the United States.
       ``(2) 24-percent minimum tax on nonresident alien 
     individuals.--
       ``(A) In general.--In the case of any nonresident alien 
     individual, the amount determined under section 55(b)(1)(A) 
     shall not be less than 24 percent of the lesser of--
       ``(i) the individual's alternative minimum taxable income 
     (as defined in section 55(b)(2)) for the taxable year, or
       ``(ii) the individual's net taxable stock gain for the 
     taxable year.
       ``(B) Net taxable stock gain.--For purposes of subparagraph 
     (A), the term `net taxable stock gain' means the excess of--
       ``(i) the aggregate gains for the taxable year from 
     dispositions of stock in domestic corporations with respect 
     to which such individual is a 10-percent shareholder, over
       ``(ii) the aggregate of the losses for the taxable year 
     from dispositions of such stock.
       ``(C) Coordination with section 897(a)(2).--Section 
     897(a)(2)(A) shall not apply to any nonresident alien 
     individual for any taxable year for which such individual has 
     a net taxable stock gain, but the amount of such net taxable 
     stock gain shall be increased by the amount of such 
     individual's net United States real property gain (as defined 
     in section 897(a)(2)(B)) for such taxable year.
       ``(b) 10-Percent Shareholder.--
       ``(1) In general.--For purposes of this section, the term 
     `10-percent shareholder' means any person who at any time 
     during the shorter of--
       ``(A) the period beginning on January 1, 1996, and ending 
     on the date of the disposition, or
       ``(B) the 5-year period ending on the date of the 
     disposition,

[[Page S 16334]]

     owned 10 percent or more (by vote or value) of the stock in 
     the domestic corporation.
       ``(2) Constructive ownership.--
       ``(A) In general.--Section 318(a) (relating to constructive 
     ownership of stock) shall apply for purposes of paragraph 
     (1).
       ``(B) Modifications.--For purposes of subparagraph (A)--
       ``(i) paragraph (2)(C) of section 318(a) shall be applied 
     by substituting `10 percent' for `50 percent', and
       ``(ii) paragraph (3)(C) of section 318(a) shall be 
     applied--

       ``(I) by substituting `10 percent' for `50 percent', and
       ``(II) in any case where such paragraph would not apply but 
     for subclause (I), by considering a corporation as owning the 
     stock (other than stock in such corporation) owned by or for 
     any shareholder of such corporation in that proportion which 
     the value of the stock which such shareholder owns in such 
     corporation bears to the value of all stock in such 
     corporation.

       ``(3) Treatment of stock held by certain partnerships.--
       ``(A) In general.--For purposes of this section, if--
       ``(i) a partnership is a 10-percent shareholder in any 
     domestic corporation, and
       ``(ii) 10 percent or more of the capital or profits 
     interests in such partnership is held (directly or 
     indirectly) by nonresident alien individuals or foreign 
     corporations,

     each partner in such partnership who is not otherwise a 10-
     percent shareholder in such corporation shall, with respect 
     to the stock in such corporation held by the partnership, be 
     treated as a 10-percent shareholder in such corporation.
       ``(B) Exception.--
       ``(i) In general.--Subparagraph (A) shall not apply with 
     respect to stock in a domestic corporation held by any 
     partnership if, at all times during the 5-year period ending 
     on the date of the disposition involved--

       ``(I) the aggregate bases of the stock and securities in 
     such domestic corporation held by such partnership was less 
     than 25 percent of the partnership's net adjusted asset cost, 
     and
       ``(II) the partnership did not own 50 percent or more (by 
     vote or value) of the stock in such domestic corporation.

     The Secretary may by regulations disregard any failure to 
     meet the requirements of subclause (I) where the partnership 
     normally met such requirements during such 5-year period.
       ``(ii) Net adjusted asset cost.--For purposes of clause 
     (i), the term `net adjusted asset cost' means--

       ``(I) the aggregate bases of all of the assets of the 
     partnership other than cash and cash items, reduced by
       ``(II) the portion of the liabilities of the partnership 
     not allocable (on a proportionate basis) to assets excluded 
     under subclause (I).

       ``(C) Exception not to apply to 50-percent partners.--
     Subparagraph (B) shall not apply in the case of any partner 
     owning (directly or indirectly) more than 50 percent of the 
     capital or profits interests in the partnership at any time 
     during the 5-year period ending on the date of the 
     disposition.
       ``(D) Special rules.--For purposes of subparagraph (B) and 
     (C)--
       ``(i) Treatment of predecessors.--Any reference to a 
     partnership or corporation shall be treated as including a 
     reference to any predecessor thereof.
       ``(ii) Partnership not in existence.--If any partnership 
     was not in existence throughout the entire 5-year period 
     ending on the date of the disposition, only the portion of 
     such period during which the partnership (or any predecessor) 
     was in existence shall be taken into account.
       ``(E) Other pass-thru entities; tiered entities.--Rules 
     similar to the rules of the preceding provisions of this 
     paragraph shall also apply in the case of any pass-thru 
     entity other than a partnership and in the case of tiered 
     partnerships and other entities.
       ``(c) Coordination With Nonrecognition Provisions; Etc.--
       ``(1) Coordination with nonrecognition provisions.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     any nonrecognition provision shall apply for purposes of this 
     section to a transaction only in the case of--
       ``(i) an exchange of stock in a domestic corporation for 
     other property the sale of which would be subject to taxation 
     under this chapter, or
       ``(ii) a distribution with respect to which gain or loss 
     would not be recognized under section 336 if the sale of the 
     distributed property by the distributee would be subject to 
     tax under this chapter.
       ``(B) Regulations.--The Secretary shall prescribe 
     regulations (which are necessary or appropriate to prevent 
     the avoidance of Federal income taxes) providing--
       ``(i) the extent to which nonrecognition provisions shall, 
     and shall not, apply for purposes of this section, and
       ``(ii) the extent to which--

       ``(I) transfers of property in a reorganization, and
       ``(II) changes in interests in, or distributions from, a 
     partnership, trust, or estate,

     shall be treated as sales of property at fair market value.
       ``(C) Nonrecognition provision.--For purposes of this 
     paragraph, the term `nonrecognition provision' means any 
     provision of this title for not recognizing gain or loss.
       ``(2) Certain other rules made applicable.--For purposes of 
     this section, rules similar to the rules of subsections (g) 
     and (j) of section 897 shall apply.
       ``(d) Certain Interest Treated as Stock.--For purposes of 
     this section--
       ``(1) any option or other right to acquire stock in a 
     domestic corporation,
       ``(2) the conversion feature of any debt instrument issued 
     by a domestic corporation, and
       ``(3) to the extent provided in regulations, any other 
     interest in a domestic corporation other than an interest 
     solely as creditor,
     shall be treated as stock in such corporation.
       ``(e) Treatment of Certain Gain as a Dividend.--In the case 
     of any gain which would be subject to tax by reason of this 
     section but for a treaty and which results from any 
     distribution in liquidation or redemption, for purposes of 
     this subtitle, such gain shall be treated as a dividend to 
     the extent of the earnings and profits of the domestic 
     corporation attributable to the stock. Rules similar to the 
     rules of section 1248(c) (determined without regard to 
     paragraph (2)(D) thereof) shall apply for purposes of the 
     preceding sentence.
       ``(f) Regulations.--The Secretary shall prescribe such 
     regulations as may be appropriate to carry out the purposes 
     of this section, including--
       ``(1) regulations coordinating the provisions of this 
     section with the provisions of section 897, and
       ``(2) regulations aggregating stock held by a group of 
     persons acting together.''
       (b) Withholding of Tax.--Subchapter A of chapter 3 is 
     amended by adding at the end the following new section:

     ``SEC. 1447. WITHHOLDING OF TAX ON CERTAIN STOCK 
                   DISPOSITIONS.

       ``(a) General Rule.--Except as otherwise provided in this 
     section, in the case of any disposition of stock in a 
     domestic corporation by a foreign person who is a 10-percent 
     shareholder in such corporation, the withholding agent shall 
     deduct and withhold a tax equal to 10 percent of the amount 
     realized on the disposition.
       ``(b) Exceptions.--
       ``(1) Stock which is not regularly traded.--In the case of 
     a disposition of stock which is not regularly traded, a 
     withholding agent shall not be required to deduct and 
     withhold any amount under subsection (a) if--
       ``(A) the transferor furnishes to such withholding agent an 
     affidavit by such transferor stating, under penalty of 
     perjury, that section 899 does not apply to such disposition 
     because--
       ``(i) the transferor is not a foreign person, or
       ``(ii) the transferor is not a 10-percent shareholder, and
       ``(B) such withholding agent does not know (or have reason 
     to know) that such affidavit is not correct.
       ``(2) Stock which is regularly traded.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     a withholding agent shall not be required to deduct and 
     withhold any amount under subsection (a) with respect to any 
     disposition of regularly traded stock if such withholding 
     agent does not know (or have reason to know) that section 899 
     applies to such disposition.
       ``(B) Special rule where substantial disposition.--If--
       ``(i) there is a disposition of regularly traded stock in a 
     corporation, and
       ``(ii) the amount of stock involved in such disposition 
     constitutes 1 percent or more (by vote or value) of the stock 
     in such corporation,

     subparagraph (A) shall not apply but paragraph (1) shall 
     apply as if the disposition involved stock which was not 
     regularly traded.
       ``(C) Notification by foreign person.--If section 899 
     applies to any disposition by a foreign person of regularly 
     traded stock, such foreign person shall notify the 
     withholding agent that section 899 applies to such 
     disposition.
       ``(3) Nonrecognition transactions.--A withholding agent 
     shall not be required to deduct and withhold any amount under 
     subsection (a) in any case where gain or loss is not 
     recognized by reason of section 899(c) (or the regulations 
     prescribed under such section).
       ``(c) Special Rule Where No Withholding.--If
       ``(1) there is no amount deducted and withheld under this 
     section with respect to any disposition to which section 899 
     applies, and
       ``(2) the foreign person does not pay the tax imposed by 
     this subtitle to the extent attributable to such disposition 
     on the date prescribed therefor,

     for purposes of determining the amount of such tax, the 
     foreign person's basis in the stock disposed of shall be 
     treated as zero or such other amount as the Secretary may 
     determine (and, for purposes of section 6501, the 
     underpayment of such tax shall be treated as due to a willful 
     attempt to evade such tax).
       ``(d) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Withholding agent.--The term `withholding agent' 
     means--
       ``(A) the last United States person to have the control, 
     receipt, custody, disposal, or payment of the amount realized 
     on the disposition, or
       ``(B) if there is no such United States person, the person 
     prescribed in regulations.
       ``(2) Foreign person.--The term `foreign person' means any 
     person other than a United States person.
       ``(3) Regularly traded stock.--The term `regularly traded 
     stock' means any stock of a class which is regularly traded 
     on an established securities market.
       ``(4) Authority to prescribe reduced amount.--At the 
     request of the person making the disposition or the 
     withholding agent, the Secretary may prescribe a reduced 
     amount to be withheld under this section if the Secretary 
     determines that to substitute such reduced amount will not 
     jeopardize the collection of the tax imposed by section 
     871(b)(1) or 882(a)(1).
       ``(5) Other terms.--Except as provided in this section, 
     terms used in this section shall have the same respective 
     meanings as when used in section 899.

[[Page S 16335]]

       ``(6) Certain rules made applicable.--Rules similar to the 
     rules of section 1445(e) shall apply for purposes of this 
     section.
       ``(e) Regulations.--The Secretary shall prescribe such 
     regulations as may be appropriate to carry out the purposes 
     of this section, including regulations coordinating the 
     provisions of this section with the provisions of sections 
     1445 and 1446.''
       (c) Exception From Branch Profits Tax.--Subparagraph (C) of 
     section 884(d)(2) is amended to read as follows:
       ``(C) gain treated as effectively connected with the 
     conduct of a trade or business within the United States 
     under--
       ``(i) section 897 in the case of the disposition of a 
     United States real property interest described in section 
     897(c)(1)(A)(ii), or
       ``(ii) section 899,''.
       (d) Reports With Respect to Certain Distributions.--
     Paragraph (2) of section 6038B(a) (relating to notice of 
     certain transfers to foreign person) is amended by striking 
     ``section 336'' and inserting ``section 302, 331, or 336''.
       (e) Clerical Amendments.--
       (1) The table of sections for subpart D of part II of 
     subchapter N of chapter 1 is amended by adding at the end the 
     following new item:

``Sec. 899. Dispositions of stock in domestic corporations by 10-
              percent foreign shareholders.''

       (2) The table of sections for subchapter A of chapter 3 is 
     amended by adding at the end the following new item:

``Sec. 1447. Withholding of tax on certain stock dispositions.''

       (f) Effective Date.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall apply 
     to dispositions after December 31, 1995, except that section 
     1447 of the Internal Revenue Code of 1986 (as added by this 
     section) shall not apply to any disposition before the date 
     that is 6 months after the date of the enactment of this Act.
       (2) Coordination with treaties.--Sections 899 (other than 
     subsection (e) thereof) and 1447 of the Internal Revenue Code 
     of 1986 (as added by this section) shall not apply to any 
     disposition by any person if the application of such sections 
     to such disposition would be contrary to any treaty between 
     the United States and a foreign country which was in effect 
     on the date of the enactment of this Act, and at the time of 
     such disposition and if the person making such disposition is 
     entitled to the benefits of such treaty determined after the 
     application of section 894(c) of the Internal Revenue Code of 
     1986 (as added by section 12883).

     SEC. 12883. LIMITATION ON TREATY BENEFITS.

       (a) General Rule.--Section 894 (relating to income affected 
     by treaty) is amended by adding at the end the following new 
     subsection:
       ``(c) Limitation on Treaty Benefits.--
       ``(1) Treaty shopping.--No foreign entity shall be entitled 
     to any benefits granted by the United States under any treaty 
     between the United States and a foreign country unless such 
     entity is a qualified resident of such foreign country.
       ``(2) Tax favored income.--No person shall be entitled to 
     any benefits granted by the United States under any treaty 
     between the United States and a foreign country with respect 
     to any income of such person if such income bears a 
     significantly lower tax under the laws of such foreign 
     country than similar income arising from sources within such 
     foreign country derived by residents of such foreign country.
       ``(3) Qualified resident.--For purposes of this 
     subsection--
       ``(A) In general.--Except as otherwise provided in this 
     paragraph, the term `qualified resident' means, with respect 
     to any foreign country, any foreign entity which is a 
     resident of such foreign country unless--
       ``(i) 50 percent or more (by value) of the stock or 
     beneficial interests in such entity are owned (directly or 
     indirectly) by individuals who are not residents of such 
     foreign country and who are not United States citizens or 
     resident aliens, or
       ``(ii) 50 percent or more of its income is used (directly 
     or indirectly) to meet liabilities to persons who are not 
     residents of such foreign country or citizens or residents of 
     the United States.
       ``(B) Special rule for publicly traded entities.--A foreign 
     entity which is a resident of a foreign country shall be 
     treated as a qualified resident of such foreign country if--
       ``(i) interests in such entity are primarily and regularly 
     traded on an established securities market in such country, 
     or
       ``(ii) such entity is not described in subparagraph (A)(ii) 
     and such entity is wholly owned by another foreign entity 
     which is organized in such foreign country and the interests 
     in which are so traded.
       ``(C) Entities owned by publicly traded domestic 
     corporations.--A foreign entity which is a resident of a 
     foreign country shall be treated as a qualified resident of 
     such foreign country if--
       ``(i) such entity is not described in subparagraph (A)(ii) 
     and such entity is wholly owned (directly or indirectly) by a 
     domestic corporation, and
       ``(ii) stock of such domestic corporation is primarily and 
     regularly traded on an established securities market in the 
     United States.
       ``(D) Secretarial authority.--The Secretary may, in his 
     sole discretion, treat a foreign entity as being a qualified 
     resident of a foreign country if such entity establishes to 
     the satisfaction of the Secretary that such entity meets such 
     requirements as the Secretary may establish to ensure that 
     individuals who are not residents of such foreign country do 
     not use the treaty between such foreign country and the 
     United States in a manner consistent with the purposes of 
     this subsection.
       ``(4) Foreign entity.--For purposes of this subsection, the 
     term `foreign entity' means any corporation, partnership, 
     trust, estate, or other entity which is not a United States 
     person.''.
       (b) Conforming Amendment.--Paragraph (4) of section 884(e) 
     is amended to read as follows:
       ``(4) Qualified resident.--For purposes of this subsection, 
     the term `qualified resident' has the meaning given to such 
     term by section 894(c)(3).''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 1996, and shall apply to any 
     treaty whether entered into before, on, or after such date.

     SEC. 12884. SENSE OF THE SENATE REGARDING TAX TREATMENT OF 
                   CONVERSIONS OF THRIFT CHARTERS TO BANK 
                   CHARTERS.

       In order to facilitate sound national banking policy and 
     assist in the conversion of thrift charters to bank charters, 
     it is the sense of the Senate that section 593 of the 
     Internal Revenue Code of 1986 (relating to reserves for 
     losses on loans) should be repealed and appropriate relief 
     should be granted for the pre-1988 portion of any bad debt 
     reserves of a thrift charter.
                   Subtitle J--Pension Simplification

                     CHAPTER 1--GENERAL PROVISIONS

      Subchapter A--Simplification of Nondiscrimination Provisions

     SEC. 12901. DEFINITION OF HIGHLY COMPENSATED EMPLOYEES; 
                   REPEAL OF FAMILY AGGREGATION.

       (a) In General.--Paragraph (1) of section 414(q) (defining 
     highly compensated employee) is amended to read as follows:
       ``(1) In general.--The term `highly compensated employee' 
     means any employee who--
       ``(A) was a 5-percent owner at any time during the year or 
     the preceding year,
       ``(B) had compensation for the preceding year from the 
     employer in excess of $80,000, or
       ``(C) was the most highly compensated officer of the 
     employer for the preceding year.

     The Secretary shall adjust the $80,000 amount under 
     subparagraph (B) at the same time and in the same manner as 
     under section 415(d), except that the base period shall be 
     the calendar quarter ending September 30, 1996.''.
       (b) Special Rule For Tax Exempt and Governmental Plans.--
     Paragraph (2) of section 414(q) is amended to read as 
     follows:
       ``(2) Special rule for tax exempt and governmental plans.--
     Solely for purposes of applying subsections (k) and (m) of 
     section 401, paragraph (1)(C) shall not apply to a plan 
     maintained by--
       ``(A) a State or local government or political subdivision 
     thereof, or any agency or instrumentality thereof, or
       ``(B) any organization exempt from tax under this 
     subtitle.''.
       (c) Repeal of Family Aggregation Rules.--
       (1) In general.--Paragraph (6) of section 414(q) is hereby 
     repealed.
       (2) Compensation limit.--Paragraph (17)(A) of section 
     401(a) is amended by striking the last sentence.
       (3) Deduction.--Subsection (l) of section 404 is amended by 
     striking the last sentence.
       (d) Conforming Amendments.--
       (1) Paragraphs (4), (5), (8), and (12) of section 414(q) 
     are hereby repealed.
       (2)(A) Section 414(r) is amended by adding at the end the 
     following new paragraph:
       ``(9) Excluded employees.--For purposes of this subsection, 
     the following employees shall be excluded:
       ``(A) Employees who have not completed 6 months of service.
       ``(B) Employees who normally work less than 17\1/2\ hours 
     per week.
       ``(C) Employees who normally work not more than 6 months 
     during any year.
       ``(D) Employees who have not attained the age of 21.
       ``(E) Except to the extent provided in regulations, 
     employees who are included in a unit of employees covered by 
     an agreement which the Secretary of Labor finds to be a 
     collective bargaining agreement between employee 
     representatives and the employer.

     Except as provided by the Secretary, the employer may elect 
     to apply subparagraph (A), (B), (C), or (D) by substituting a 
     shorter period of service, smaller number of hours or months, 
     or lower age for the period of service, number of hours or 
     months, or age (as the case may be) specified in such 
     subparagraph.''.
       (B) Subparagraph (A) of section 414(r)(2) is amended by 
     striking ``subsection (q)(8)'' and inserting ``paragraph 
     (9)''.
       (3) Section 1114(c)(4) of the Tax Reform Act of 1986 is 
     amended by adding at the end the following new sentence: 
     ``Any reference in this paragraph to section 414(q) shall be 
     treated as a reference to such section as in effect before 
     the Revenue Reconciliation Act of 1995.''.
       (e) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to years beginning after December 31, 1996, except that 
     in determining whether an employee is a highly compensated 
     employee for years beginning in 1997, such amendments shall 
     be treated as having been in effect for years beginning in 
     1996.
       (2) Family aggregation.--The amendments made by subsection 
     (c) shall apply to years beginning after December 31, 1995.

     SEC. 12902. DEFINITION OF COMPENSATION FOR SECTION 415 
                   PURPOSES.

       (a) General Rule.--Section 415(c)(3) (defining 
     participant's compensation) is amended by adding at the end 
     the following new subparagraph:
       ``(D) Certain deferrals included.--The term `participant's 
     compensation' shall include--
       ``(i) any elective deferral (as defined in section 
     402(g)(3)), and

[[Page S 16336]]

       ``(ii) any amount which is contributed by the employer of 
     the election of the employee and which is not includible in 
     the gross income of the employee under section 125 or 457.''.
       (b) Conforming Amendments.--
       (1) Section 414(q)(7) is amended to read as follows:
       ``(7) Compensation.--For purposes of this subsection, the 
     term `compensation' has the meaning given such term by 
     section 415(c)(3).''.
       (2) Section 414(s)(2) is amended by inserting ``not'' after 
     ``elect'' in the text and heading thereof.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 1997.

     SEC. 12903. MODIFICATION OF ADDITIONAL PARTICIPATION 
                   REQUIREMENTS.

       (a) General Rule.--Section 401(a)(26)(A) (relating to 
     additional participation requirements) is amended to read as 
     follows:
       ``(A) In general.--In the case of a trust which is a part 
     of a defined benefit plan, such trust shall not constitute a 
     qualified trust under this subsection unless on each day of 
     the plan year such trust benefits at least the lesser of--
       ``(i) 50 employees of the employer, or
       ``(ii) the greater of--
       ``(I) 40 percent of all employees of the employer, or
       ``(II) 2 employees (or if there is only 1 employee, such 
     employee).''.
       (b) Separate Line of Business Test.--Section 401(a)(26)(G) 
     (relating to separate line of business) is amended by 
     striking ``paragraph (7)'' and inserting ``paragraph (2)(A) 
     or (7)''.
       (c) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 1995.

     SEC. 12904. NONDISCRIMINATION RULES FOR QUALIFIED CASH OR 
                   DEFERRED ARRANGEMENTS AND MATCHING 
                   CONTRIBUTIONS.

       (a) Alternative Methods of Satisfying Section 401(k) 
     Nondiscrimination Tests.--Section 401(k) (relating to cash or 
     deferred arrangements), as amended by this Act, is amended by 
     adding at the end the following new paragraph:
       ``(12) Alternative methods of meeting nondiscrimination 
     requirements.--
       ``(A) In general.--A cash or deferred arrangement shall be 
     treated as meeting the requirements of paragraph (3)(A)(ii) 
     if such arrangement--
       ``(i) meets the contribution requirements of subparagraph 
     (B) or (C), and
       ``(ii) meets the notice requirements of subparagraph (D).
       ``(B) Matching contributions.--
       ``(i) In general.--The requirements of this subparagraph 
     are met if, under the arrangement, the employer makes 
     matching contributions on behalf of each employee who is not 
     a highly compensated employee in an amount equal to--

       ``(I) 100 percent of the elective contributions of the 
     employee to the extent such elective contributions do not 
     exceed 3 percent of the employee's compensation, and
       ``(II) 50 percent of the elective contributions of the 
     employee to the extent that such elective contributions 
     exceed 3 percent but do not exceed 5 percent of the 
     employee's compensation.

       ``(ii) Rate for highly compensated employees.--The 
     requirements of this subparagraph are not met if, under the 
     arrangement, the matching contribution with respect to any 
     elective contribution of a highly compensated employee at any 
     level of compensation is greater than that with respect to an 
     employee who is not a highly compensated employee.
       ``(iii) Alternative plan designs.--If the matching 
     contribution with respect to any elective contribution at any 
     specific level of compensation is not equal to the percentage 
     required under clause (i), an arrangement shall not be 
     treated as failing to meet the requirements of clause (i) 
     if--

       ``(I) the level of an employer's matching contribution does 
     not increase as an employee's elective contributions 
     increase, and
       ``(II) the aggregate amount of matching contributions with 
     respect to elective contributions not in excess of such level 
     of compensation is at least equal to the amount of matching 
     contributions which would be made if matching contributions 
     were made on the basis of the percentages described in clause 
     (i).

       ``(C) Nonelective contributions.--The requirements of this 
     subparagraph are met if, under the arrangement, the employer 
     is required, without regard to whether the employee makes an 
     elective contribution or employee contribution, to make a 
     contribution to a defined contribution plan on behalf of each 
     employee who is not a highly compensated employee and who is 
     eligible to participate in the arrangement in an amount equal 
     to at least 3 percent of the employee's compensation.
       ``(D) Notice requirement.--An arrangement meets the 
     requirements of this paragraph if, under the arrangement, 
     each employee eligible to participate is, within a reasonable 
     period before any year, given written notice of the 
     employee's rights and obligations under the arrangement 
     which--
       ``(i) is sufficiently accurate and comprehensive to 
     appraise the employee of such rights and obligations, and
       ``(ii) is written in a manner calculated to be understood 
     by the average employee eligible to participate.
       ``(E) Other requirements.--
       ``(i) Withdrawal and vesting restrictions.--An arrangement 
     shall not be treated as meeting the requirements of 
     subparagraph (B) or (C) unless the requirements of 
     subparagraphs (B) and (C) of paragraph (2) are met with 
     respect to all employer contributions (including matching 
     contributions).
       ``(ii) Social security and similar contributions not taken 
     into account.--An arrangement shall not be treated as meeting 
     the requirements of subparagraph (B) or (C) unless such 
     requirements are met without regard to subsection (l), and, 
     for purposes of subsection (l), employer contributions under 
     subparagraph (B) or (C) shall not be taken into account.
       ``(F) Other plans.--An arrangement shall be treated as 
     meeting the requirements under subparagraph (A)(i) if any 
     other plan maintained by the employer meets such requirements 
     with respect to employees eligible under the arrangement.''.
       (b) Alternative Methods of Satisfying Section 401(m) 
     Nondiscrimination Tests.--Section 401(m) (relating to 
     nondiscrimination test for matching contributions and 
     employee contributions), as amended by this Act, is amended 
     by redesignating paragraph (10) as paragraph (11) and by 
     adding after paragraph (9) the following new paragraph:
       ``(11) Alternative method of satisfying tests.--
       ``(A) In general.--A defined contribution plan shall be 
     treated as meeting the requirements of paragraph (2) with 
     respect to matching contributions if the plan--
       ``(i) meets the contribution requirements of subparagraph 
     (B) or (C) of subsection (k)(12),
       ``(ii) meets the notice requirements of subsection 
     (k)(12)(D), and
       ``(iii) meets the requirements of subparagraph (B).
       ``(B) Limitation on matching contributions.--The 
     requirements of this subparagraph are met if--
       ``(i) matching contributions on behalf of any employee may 
     not be made with respect to an employee's contributions or 
     elective deferrals in excess of 6 percent of the employee's 
     compensation,
       ``(ii) the level of an employer's matching contribution 
     does not increase as an employee's contributions or elective 
     deferrals increase, and
       ``(iii) the matching contribution with respect to any 
     highly compensated employee at a specific level of 
     compensation is not greater than that with respect to an 
     employee who is not a highly compensated employee.''.
       (c) Year for Computing Nonhighly Compensated Employee 
     Percentage.--
       (1) Cash or deferred arrangements.--Clause (ii) of section 
     401(k)(3)(A) is amended--
       (A) by striking ``such year'' and inserting ``the plan 
     year'',
       (B) by striking ``for such plan year'' and inserting ``the 
     preceding plan year'', and
       (C) by adding at the end the following new sentence: ``An 
     arrangement may apply this clause by using the plan year 
     rather than the preceding plan year if the employer so 
     elects, except that if such an election is made, it may not 
     be changed except as provided by the Secretary.''.
       (2) Matching and employee contributions.--Section 
     401(m)(2)(A) is amended--
       (A) by inserting ``for such plan year'' after ``highly 
     compensated employee'',
       (B) by inserting ``for the preceding plan year'' after 
     ``eligible employees'' each place it appears in clause (i) 
     and clause (ii), and
       (C) by adding at the end the following flush sentence: 
     ``This subparagraph may be applied by using the plan year 
     rather than the preceding plan year if the employer so 
     elects, except that if such an election is made, it may not 
     be changed except as provided the Secretary.''.
       (d) Special Rule for Determining Average Deferral 
     Percentage for First Plan Year, Etc.--
       (1) Paragraph (3) of section 401(k) is amended by adding at 
     the end the following new subparagraph:
       ``(E) For purposes of this paragraph, in the case of the 
     first plan year of any plan, the amount taken into account as 
     the actual deferral percentage of nonhighly compensated 
     employees for the preceding plan year shall be--
       ``(i) 3 percent, or
       ``(ii) if the employer makes an election under this 
     subclause, the actual deferral percentage of nonhighly 
     compensated employees determined for such first plan year.''.
       (2) Paragraph (3) of section 401(m) is amended by adding at 
     the end thereof the following: ``Rules similar to the rules 
     of subsection (k)(3)(E) shall apply for purposes of this 
     subsection.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 1998.

              Subchapter B--Simplified Distribution Rules

     SEC. 12911. REPEAL OF 5-YEAR INCOME AVERAGING FOR LUMP-SUM 
                   DISTRIBUTIONS.

       (a) In General.--Subsection (d) of section 402 (relating to 
     taxability of beneficiary of employees' trust) is amended to 
     read as follows:
       ``(d) Taxability of Beneficiary of Certain Foreign Situs 
     Trusts.--For purposes of subsections (a), (b), and (c), a 
     stock bonus, pension, or profit-sharing trust which would 
     qualify for exemption from tax under section 501(a) except 
     for the fact that it is a trust created or organized outside 
     the United States shall be treated as if it were a trust 
     exempt from tax under section 501(a).''.
       (b) Conforming Amendments.--
       (1) Subparagraph (D) of section 402(e)(4) (relating to 
     other rules applicable to exempt trusts) is amended to read 
     as follows:
       ``(D) Lump-sum distribution.--For purposes of this 
     paragraph--
       ``(i) In general.--The term `lump sum distribution' means 
     the distribution or payment within one taxable year of the 
     recipient of the balance to the credit of an employee which 
     becomes payable to the recipient--

       ``(I) on account of the employee's death,
       ``(II) after the employee attains age 59\1/2\,
       ``(III) on account of the employee's separation from 
     service, or
       ``(IV) after the employee has become disabled (within the 
     meaning of section 72(m)(7)),

[[Page S 16337]]


     from a trust which forms a part of a plan described in 
     section 401(a) and which is exempt from tax under section 501 
     or from a plan described in section 403(a). Subclause (III) 
     of this clause shall be applied only with respect to an 
     individual who is an employee without regard to section 
     401(c)(1), and subclause (IV) shall be applied only with 
     respect to an employee within the meaning of section 
     401(c)(1). For purposes of this clause, a distribution to two 
     or more trusts shall be treated as a distribution to one 
     recipient. For purposes of this paragraph, the balance to the 
     credit of the employee does not include the accumulated 
     deductible employee contributions under the plan (within the 
     meaning of section 72(o)(5)).
       ``(ii) Aggregation of certain trusts and plans.--For 
     purposes of determining the balance to the credit of an 
     employee under clause (i)--

       ``(I) all trusts which are part of a plan shall be treated 
     as a single trust, all pension plans maintained by the 
     employer shall be treated as a single plan, all profit-
     sharing plans maintained by the employer shall be treated as 
     a single plan, and all stock bonus plans maintained by the 
     employer shall be treated as a single plan, and
       ``(II) trusts which are not qualified trusts under section 
     401(a) and annuity contracts which do not satisfy the 
     requirements of section 404(a)(2) shall not be taken into 
     account.

       ``(iii) Community property laws.--The provisions of this 
     paragraph shall be applied without regard to community 
     property laws.
       ``(iv) Amounts subject to penalty.--This paragraph shall 
     not apply to amounts described in subparagraph (A) of section 
     72(m)(5) to the extent that section 72(m)(5) applies to such 
     amounts.
       ``(v) Balance to credit of employee not to include amounts 
     payable under qualified domestic relations order.--For 
     purposes of this paragraph, the balance to the credit of an 
     employee shall not include any amount payable to an alternate 
     payee under a qualified domestic relations order (within the 
     meaning of section 414(p)).
       ``(vi) Transfers to cost-of-living arrangement not treated 
     as distribution.--For purposes of this paragraph, the balance 
     to the credit of an employee under a defined contribution 
     plan shall not include any amount transferred from such 
     defined contribution plan to a qualified cost-of-living 
     arrangement (within the meaning of section 415(k)(2)) under a 
     defined benefit plan.
       ``(vii) Lump-sum distributions of alternate payees.--If any 
     distribution or payment of the balance to the credit of an 
     employee would be treated as a lump-sum distribution, then, 
     for purposes of this paragraph, the payment under a qualified 
     domestic relations order (within the meaning of section 
     414(p)) of the balance to the credit of an alternate payee 
     who is the spouse or former spouse of the employee shall be 
     treated as a lump-sum distribution. For purposes of this 
     clause, the balance to the credit of the alternate payee 
     shall not include any amount payable to the employee.''.
       (2) Section 402(c) (relating to rules applicable to 
     rollovers from exempt trusts) is amended by striking 
     paragraph (10).
       (3) Paragraph (1) of section 55(c) (defining regular tax) 
     is amended by striking ``shall not include any tax imposed by 
     section 402(d) and''.
       (4) Paragraph (8) of section 62(a) (relating to certain 
     portion of lump-sum distributions from pension plans taxed 
     under section 402(d)) is hereby repealed.
       (5) Section 401(a)(28)(B) (relating to coordination with 
     distribution rules) is amended by striking clause (v).
       (6) Subparagraph (B)(ii) of section 401(k)(10) (relating to 
     distributions that must be lump-sum distributions) is amended 
     to read as follows:
       ``(ii) Lump-sum distribution.--For purposes of this 
     subparagraph, the term `lump-sum distribution' means any 
     distribution of the balance to the credit of an employee 
     immediately before the distribution.''.
       (7) Section 406(c) (relating to termination of status as 
     deemed employee not to be treated as separation from service 
     for purposes of limitation of tax) is hereby repealed.
       (8) Section 407(c) (relating to termination of status as 
     deemed employee not to be treated as separation from service 
     for purposes of limitation of tax) is hereby repealed.
       (9) Section 691(c) (relating to deduction for estate tax) 
     is amended by striking paragraph (5).
       (10) Paragraph (1) of section 871(b) (relating to 
     imposition of tax) is amended by striking ``section 1, 55, or 
     402(d)(1)'' and inserting ``section 1 or 55''.
       (11) Subsection (b) of section 877 (relating to alternative 
     tax) is amended by striking ``section 1, 55, or 402(d)(1)'' 
     and inserting ``section 1 or 55''.
       (12) Section 4980A(c)(4) is amended--
       (A) by striking ``to which an election under section 
     402(d)(4)(B) applies'' and inserting ``(as defined in section 
     402(e)(4)(D)) with respect to which the individual elects to 
     have this paragraph apply'',
       (B) by adding at the end the following new flush sentence:
     ``An individual may elect to have this paragraph apply to 
     only one lump-sum distribution.'', and
       (C) by striking the heading and inserting:
       ``(4) Special one-time election.--''.
       (13) Section 402(e) is amended by striking paragraph (5).
       (c) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to taxable years beginning after December 31, 1998.
       (2) Retention of certain transition rules.--Notwithstanding 
     any other provision of this section, the amendments made by 
     this section shall not apply to any distribution for which 
     the taxpayer elects the benefits of section 1122 (h)(3) or 
     (h)(5) of the Tax Reform Act of 1986. For purposes of the 
     preceding sentence, the rules of sections 402(c)(10) and 
     402(d) of the Internal Revenue Code of 1986 (as in effect 
     before the amendments made by this Act) shall apply.

     SEC. 12912. REPEAL OF $5,000 EXCLUSION OF EMPLOYEES' DEATH 
                   BENEFITS.

       (a) In General.--Subsection (b) of section 101 is hereby 
     repealed.
       (b) Conforming Amendment.--Subsection (c) of section 101 is 
     amended by striking ``subsection (a) or (b)'' and inserting 
     ``subsection (a)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 12913. SIMPLIFIED METHOD FOR TAXING ANNUITY 
                   DISTRIBUTIONS UNDER CERTAIN EMPLOYER PLANS.

       (a) General Rule.--Subsection (d) of section 72 (relating 
     to annuities; certain proceeds of endowment and life 
     insurance contracts) is amended to read as follows:
       ``(d) Special Rules for Qualified Employer Retirement 
     Plans.--
       ``(1) Simplified method of taxing annuity payments.--
       ``(A) In general.--In the case of any amount received as an 
     annuity under a qualified employer retirement plan--
       ``(i) subsection (b) shall not apply, and
       ``(ii) the investment in the contract shall be recovered as 
     provided in this paragraph.
       ``(B) Method of recovering investment in contract.--
       ``(i) In general.--Gross income shall not include so much 
     of any monthly annuity payment under a qualified employer 
     retirement plan as does not exceed the amount obtained by 
     dividing--

       ``(I) the investment in the contract (as of the annuity 
     starting date), by
       ``(II) the number of anticipated payments determined under 
     the table contained in clause (iii) (or, in the case of a 
     contract to which subsection (c)(3)(B) applies, the number of 
     monthly annuity payments under such contract).

       ``(ii) Certain rules made applicable.--Rules similar to the 
     rules of paragraphs (2) and (3) of subsection (b) shall apply 
     for purposes of this paragraph.
       ``(iii) Number of anticipated payments.--

``If the age of the pri-                                               
  mary annuitant on                                       The number of
  the annuity start-                                     of anticipated
  ing date is:                                             payments is:
    Not more than 55..............................................360  
    More than 55 but not more than 60.............................310  
    More than 60 but not more than 65.............................260  
    More than 65 but not more than 70.............................210  
    More than 70..................................................160  

       ``(C) Adjustment for refund feature not applicable.--For 
     purposes of this paragraph, investment in the contract shall 
     be determined under subsection (c)(1) without regard to 
     subsection (c)(2).
       ``(D) Special rule where lump sum paid in connection with 
     commencement of annuity payments.--If, in connection with the 
     commencement of annuity payments under any qualified employer 
     retirement plan, the taxpayer receives a lump sum payment--
       ``(i) such payment shall be taxable under subsection (e) as 
     if received before the annuity starting date, and
       ``(ii) the investment in the contract for purposes of this 
     paragraph shall be determined as if such payment had been so 
     received.
       ``(E) Exception.--This paragraph shall not apply in any 
     case where the primary annuitant has attained age 75 on the 
     annuity starting date unless there are fewer than 5 years of 
     guaranteed payments under the annuity.
       ``(F) Adjustment where annuity payments not on monthly 
     basis.--In any case where the annuity payments are not made 
     on a monthly basis, appropriate adjustments in the 
     application of this paragraph shall be made to take into 
     account the period on the basis of which such payments are 
     made.
       ``(G) Qualified employer retirement plan.--For purposes of 
     this paragraph, the term `qualified employer retirement plan' 
     means any plan or contract described in paragraph (1), (2), 
     or (3) of section 4974(c).
       ``(2) Treatment of employee contributions under defined 
     contribution plans.--For purposes of this section, employee 
     contributions (and any income allocable thereto) under a 
     defined contribution plan may be treated as a separate 
     contract.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply in cases where the annuity starting date is after 
     December 31, 1995.

     SEC. 12914. REQUIRED DISTRIBUTIONS.

       (a) In General.--Section 401(a)(9)(C) (defining required 
     beginning date) is amended to read as follows:
       ``(C) Required beginning date.--For purposes of this 
     paragraph--
       ``(i) In general.--The term `required beginning date' means 
     April 1 of the calendar year following the later of--

       ``(I) the calendar year in which the employee attains age 
     70\1/2\, or
       ``(II) the calendar year in which the employee retires.

       ``(ii) Exception.--Subclause (II) of clause (i) shall not 
     apply--

       ``(I) except as provided in section 409(d), in the case of 
     an employee who is a 5-percent owner (as defined in section 
     416) with respect to the plan year ending in the calendar 
     year in which the employee attains age 70\1/2\, or
       ``(II) for purposes of section 408 (a)(6) or (b)(3).

[[Page S 16338]]


       ``(iii) Actuarial adjustment.--In the case of an employee 
     to whom clause (i)(II) applies who retires in a calendar year 
     after the calendar year in which the employee attains age 
     70\1/2\, the employee's accrued benefit shall be actuarially 
     increased to take into account the period after age 70\1/2\ 
     in which the employee was not receiving any benefits under 
     the plan.
       ``(iv) Exception for governmental and church plans.--
     Clauses (ii) and (iii) shall not apply in the case of a 
     governmental plan or church plan. For purposes of this 
     clause, the term `church plan' means a plan maintained by a 
     church for church employees, and the term `church' means any 
     church (as defined in section 3121(w)(3)(A)) or qualified 
     church-controlled organization (as defined in section 
     3121(w)(3)(B)).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to years beginning after December 31, 1995.
       (c) Date for Adoption of Plan Amendments.--If any amendment 
     made by this section or any other provision of this subtitle 
     requires an amendment to any plan, such plan amendment shall 
     not be required to be made before the first day of the first 
     plan year beginning on or after January 1, 1997, if--
       (1) during the period after such amendment takes effect and 
     before such first plan year, the plan is operated in 
     accordance with the requirements of such amendment, and
       (2) such plan amendment applies retroactively to such 
     period.

     In the case of a governmental plan (as defined in section 
     414(d) of the Internal Revenue Code of 1986), this subsection 
     shall be applied by substituting ``1999'' for ``1997''.

   Subchapter C--Targeted Access to Pension Plans For Small Employers

     SEC. 12916. CREDIT FOR PENSION PLAN START-UP COSTS OF SMALL 
                   EMPLOYERS.

       (a) Allowance of Credit.--Section 38(b) (defining current 
     year business credit), as amended by this Act, is amended by 
     striking ``plus'' at the end of paragraph (11), by striking 
     the period at the end of paragraph (12), and inserting ``, 
     plus'', and by adding at the end the following new paragraph:
       ``(13) the small employer pension plan start-up cost 
     credit.''.
       (b) Small Employer Pension Plan Start-Up Cost Credit.--
     Subpart D of part IV of subchapter A of chapter 1 (relating 
     to business related credits), as amended by this Act, is 
     amended by adding at the end the following new section:

     ``SEC. 45D. SMALL EMPLOYER PENSION PLAN START-UP COST CREDIT.

       ``(a) Amount of Credit.--For purposes of section 38--
       ``(1) In general.--The small employer pension plan start-up 
     cost credit for any taxable year is an amount equal to 50 
     percent of the qualified start-up costs of an eligible 
     employer in establishing a qualified pension plan.
       ``(2) Aggregate limitation.--The amount of the credit under 
     paragraph (1) for any taxable year shall not exceed $500, 
     reduced by the aggregate amount determined under this section 
     for all preceding taxable years of the taxpayer.
       ``(b) Qualified Start-Up Costs; Qualified Pension Plan.--
     For purposes of this section--
       ``(1) Qualified start-up costs.--The term `qualified start-
     up costs' means any ordinary and necessary expenses of an 
     eligible employer which--
       ``(A) are paid or incurred in connection with the 
     establishment of a qualified pension plan, and
       ``(B) are of a nonrecurring nature.
       ``(2) Qualified pension plan.--The term `qualified pension 
     plan' means--
       ``(A) a qualified salary reduction arrangement described in 
     section 408(p) (relating to simple retirement accounts), or
       ``(B) an arrangement described in section 401(k)(11).
       ``(c) Eligible Employer.--For purposes of this section--
       ``(1) In general.--The term `eligible employer' means an 
     employer which did not make any contributions on behalf of 
     any employee to--
       ``(A) a qualified pension plan,
       ``(B) a plan described in section 401(a) which includes a 
     trust exempt from tax under section 501(a), or
       ``(C) a simplified employee pension (as defined in section 
     408(k)),
     during the 2 taxable years immediately preceding the taxable 
     year.
       ``(2) Professional service employers excluded.--Such term 
     shall not include an employer substantially all of the 
     activities of which involve the performance of services in 
     the fields of health, law, engineering, architecture, 
     accounting, actuarial science, performing arts, financial 
     services, or consulting.
       ``(d) Special Rules.--For purposes of this section--
       ``(1) Aggregation rules.--All persons treated as a single 
     employer under subsection (a) or (b) of section 52 or 
     subsection (n) or (o) of section 414 shall be treated as one 
     person.
       ``(2) Disallowance of deduction.--No deduction shall be 
     allowable under this chapter for any qualified start-up costs 
     for which a credit is allowable under subsection (a).''.
       (c) Conforming Amendments.--
       (1) Section 39(d) is amended by adding at the end the 
     following new paragraph:
       ``(8) No carryback of pension credit.--No portion of the 
     unused business credit for any taxable year which is 
     attributable to the small employer pension plan start-up cost 
     credit determined under section 45D may be carried back to a 
     taxable year ending before the date of the enactment of 
     section 45D.''.
       (2) The table of sections for subpart D of part IV of 
     subchapter A of chapter 1 is amended by adding at the end the 
     following new item:

``Sec. 45D. Small employer pension plan start-up cost credit.''.

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

     SEC. 12917. TAX-EXEMPT ORGANIZATIONS ELIGIBLE UNDER SECTION 
                   401(k).

       (a) General Rule.--Clause (ii) of section 401(k)(4)(B) is 
     amended to read as follows:
       ``(ii) any organization described in section 501(c)(3) 
     which is exempt from tax under section 501(a).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to plan years beginning after December 31, 1997, 
     but shall not apply to any cash or deferred arrangement to 
     which clause (i) of section 1116(f)(2)(B) of the Tax Reform 
     Act of 1986 applies.

                   Subchapter D--Paperwork Reduction

     SEC. 12921. LIMITATION ON COMBINED SECTION 415 LIMIT.

       (a) In General.--Section 415(e) (relating to limitation in 
     case of defined benefit plan and defined contribution plan 
     for same employee) is amended by adding at the end the 
     following new paragraph:
       ``(7) Limitation on application of subsection.--In the case 
     of years beginning after December 31, 1998, this subsection 
     shall only apply to plans maintained by an employer described 
     in section 45D(c)(2).''.
       (b) Excess Distributions.--Section 4980A is amended by 
     adding at the end the following new subsection:
       ``(g) Limitation on Application.--This section shall not 
     apply to distributions during years beginning after December 
     31, 1995, and before January 1, 1999, and such distributions 
     shall be treated as made first from amounts not described in 
     subsection (f).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 1995.

               Subchapter E--Miscellaneous Simplification

     SEC. 12931. TREATMENT OF LEASED EMPLOYEES.

       (a) General Rule.--Subparagraph (C) of section 414(n)(2) 
     (defining leased employee) is amended to read as follows:
       ``(C) such services are performed under primary direction 
     or control by the recipient.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to years beginning after December 31, 1995, but 
     shall not apply to any relationship determined under an 
     Internal Revenue Service ruling issued before the date of the 
     enactment of this Act pursuant to section 414(n)(2)(C) of the 
     Internal Revenue Code of 1986 (as in effect on the day before 
     such date) not to involve a leased employee.

     SEC. 12932. PLANS COVERING SELF-EMPLOYED INDIVIDUALS.

       (a) Aggregation Rules.--Section 401(d) (relating to 
     additional requirements for qualification of trusts and plans 
     benefiting owner-employees) is amended to read as follows:
       ``(d) Contribution Limit on Owner-Employees.--A trust 
     forming part of a pension or profit-sharing plan which 
     provides contributions or benefits for employees some or all 
     of whom are owner-employees shall constitute a qualified 
     trust under this section only if, in addition to meeting the 
     requirements of subsection (a), the plan provides that 
     contributions on behalf of any owner-employee may be made 
     only with respect to the earned income of such owner-employee 
     which is derived from the trade or business with respect to 
     which such plan is established.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 1995.

     SEC. 12933. ELIMINATION OF SPECIAL VESTING RULE FOR 
                   MULTIEMPLOYER PLANS.

       (a) In General.--Paragraph (2) of section 411(a) (relating 
     to minimum vesting standards) is amended--
       (1) by striking ``subparagraph (A), (B), or (C)'' and 
     inserting ``subparagraph (A) or (B)''; and
       (2) by striking subparagraph (C).
       (b) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning on or after the earlier 
     of--
       (1) the later of--
       (A) January 1, 1996, or
       (B) the date on which the last of the collective bargaining 
     agreements pursuant to which the plan is maintained 
     terminates (determined without regard to any extension 
     thereof after the date of the enactment of this Act), or
       (2) January 1, 1998.

     Such amendments shall not apply to any individual who does 
     not have more than 1 hour of service under the plan on or 
     after the 1st day of the 1st plan year to which such 
     amendments apply.

     SEC. 12934. FULL-FUNDING LIMITATION OF MULTIEMPLOYER PLANS.

       (a) Full-Funding Limitation.--Section 412(c)(7)(C) 
     (relating to full-funding limitation) is amended--
       (1) by inserting ``or in the case of a multiemployer 
     plan,'' after ``paragraph (6)(B),'', and
       (2) by inserting ``and multiemployer plans'' after 
     ``paragraph (6)(b)'' in the heading thereof.
       (b) Valuation.--Section 412(c)(9) is amended--
       (1) by inserting ``(3 years in the case of a multiemployer 
     plan)'' after ``year'', and
       (2) by striking ``Annual valuation'' in the heading and 
     inserting ``Valuation''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 1997.

     SEC. 12935. TREATMENT OF GOVERNMENTAL AND MULTIEMPLOYER PLANS 
                   UNDER SECTION 415.

       (a) Compensation Limit.--Subsection (b) of section 415 is 
     amended by adding immediately after paragraph (10) the 
     following new paragraph:

[[Page S 16339]]

       ``(11) Special limitation rule for governmental and 
     multiemployer plans.--In the case of a governmental plan (as 
     defined in section 414(d)) or a multiemployer plan, 
     subparagraph (B) of paragraph (1) shall not apply. This 
     paragraph shall not apply to any benefit provided under the 
     plan to a State or local legislator.''.
       (b) Treatment of Certain Excess Benefit Plans.--
       (1) In general.--Section 415 is amended by adding at the 
     end the following new subsection:
       ``(m) Treatment of Qualified Governmental Excess Benefit 
     Arrangements.--
       ``(1) Governmental plan not affected.--In determining 
     whether a governmental plan (as defined in section 414(d)) 
     meets the requirements of this section, benefits provided 
     under a qualified governmental excess benefit arrangement 
     shall not be taken into account. Income accruing to a 
     governmental plan (or to a trust that is maintained solely 
     for the purpose of providing benefits under a qualified 
     governmental excess benefit arrangement) in respect of a 
     qualified governmental excess benefit arrangement shall 
     constitute income derived from the exercise of an essential 
     governmental function upon which such governmental plan (or 
     trust) shall be exempt from tax under section 115.
       ``(2) Taxation of participant.--For purposes of this 
     chapter--
       ``(A) the taxable year or years for which amounts in 
     respect of a qualified governmental excess benefit 
     arrangement are includible in gross income by a participant, 
     and
       ``(B) the treatment of such amounts when so includible by 
     the participant,

     shall be determined as if such qualified governmental excess 
     benefit arrangement were treated as a plan for the deferral 
     of compensation which is maintained by a corporation not 
     exempt from tax under this chapter and which does not meet 
     the requirements for qualification under section 401.
       ``(3) Qualified governmental excess benefit arrangement.--
     For purposes of this subsection, the term `qualified 
     governmental excess benefit arrangement' means a portion of a 
     governmental plan if--
       ``(A) such portion is maintained solely for the purpose of 
     providing to participants in the plan that part of the 
     participant's annual benefit otherwise payable under the 
     terms of the plan that exceeds the limitations on benefits 
     imposed by this section,
       ``(B) under such portion no election is provided at any 
     time to the participant (directly or indirectly) to defer 
     compensation, and
       ``(C) benefits described in subparagraph (A) are not paid 
     from a trust forming a part of such governmental plan unless 
     such trust is maintained solely for the purpose of providing 
     such benefits.''.
       (2) Coordination with section 457.--Subsection (e) of 
     section 457 is amended by adding at the end the following new 
     paragraph:
       ``(14) Treatment of qualified governmental excess benefit 
     arrangements.--Subsections (b)(2) and (c)(1) shall not apply 
     to any qualified governmental excess benefit arrangement (as 
     defined in section 415(m)(3)), and benefits provided under 
     such an arrangement shall not be taken into account in 
     determining whether any other plan is an eligible deferred 
     compensation plan.''.
       (3) Conforming amendment.--Paragraph (2) of section 457(f) 
     is amended by striking the word ``and'' at the end of 
     subparagraph (C), by striking the period after subparagraph 
     (D) and inserting ``, and'', and by adding at the end the 
     following new subparagraph:
       ``(E) a qualified governmental excess benefit arrangement 
     described in section 415(m).''.
       (c) Exemption for Survivor and Disability Benefits.--
     Paragraph (2) of section 415(b) is amended by adding at the 
     end the following new subparagraph:
       ``(I) Exemption for survivor and disability benefits 
     provided under governmental and environmental plans.--
     Subparagraph (B) of paragraph (1), subparagraph (C) of this 
     paragraph, and paragraph (5) shall not apply to--
       ``(i) income received from a governmental plan (as defined 
     in section 414(d)) or a multiemployer plan as a pension, 
     annuity, or similar allowance as the result of the recipient 
     becoming disabled by reason of personal injuries or sickness, 
     or
       ``(ii) amounts received from either such plan by the 
     beneficiaries, survivors, or the estate of an employee as the 
     result of the death of the employee.''
       (d) Revocation of Grandfather Election.--
       (1) In general.--Subparagraph (C) of section 415(b)(10) is 
     amended by adding at the end the following new clause:
       ``(ii) Revocation of election.--An election under clause 
     (i) may be revoked not later than the last day of the third 
     plan year beginning after the date of the enactment of this 
     clause. The revocation shall apply to all plan years to which 
     the election applied and to all subsequent plan years. Any 
     amount paid by a plan in a taxable year ending after the 
     revocation shall be includible in income in such taxable year 
     under the rules of this chapter in effect for such taxable 
     year, except that, for purposes of applying the limitations 
     imposed by this section, any portion of such amount which is 
     attributable to any taxable year during which the election 
     was in effect shall be treated as received in such taxable 
     year.''.
       (2) Conforming amendment.--Subparagraph (C) of section 
     415(b)(10) is amended by striking ``This'' and inserting:
       ``(i) In general.--This''.
       (e) Effective Date.--
       (1) In general.--The amendments made by subsections (a), 
     (b), and (c) shall apply to years beginning after December 
     31, 1995. The amendments made by subsection (d) shall apply 
     with respect to revocations adopted after the date of the 
     enactment of this Act.
       (2) Treatment for years beginning before date of 
     enactment.--Nothing in the amendments made by this section 
     shall be construed to infer that a governmental plan (as 
     defined in section 414(d) of the Internal Revenue Code of 
     1986) fails to satisfy the requirements of section 415 of 
     such Code for any taxable year beginning before the date of 
     the enactment of this Act.
       (3) Multiemployer plans.--In the case of a multiemployer 
     plan, the amendments made by subsections (a) and (c) shall 
     apply to years beginning after December 31, 1995.

     SEC. 12936. TREATMENT OF DEFERRED COMPENSATION PLANS OF STATE 
                   AND LOCAL GOVERNMENTS AND TAX-EXEMPT 
                   ORGANIZATIONS.

       (a) Special Rules for Plan Distributions.--Paragraph (9) of 
     section 457(e) (relating to other definitions and special 
     rules) is amended to read as follows:
       ``(9) Benefits not treated as made available by reason of 
     certain elections, etc.--
       ``(A) Total amount payable is $3,500 or less.--The total 
     amount payable to a participant under the plan shall not be 
     treated as made available merely because the participant may 
     elect to receive such amount (or the plan may distribute such 
     amount without the participant's consent) if--
       ``(i) such amount does not exceed $3,500, and
       ``(ii) such amount may be distributed only if--

       ``(I) no amount has been deferred under the plan with 
     respect to such participant during the 2-year period ending 
     on the date of the distribution, and
       ``(II) there has been no prior distribution under the plan 
     to such participant to which this subparagraph applied.

     A plan shall not be treated as failing to meet the 
     distribution requirements of subsection (d) by reason of a 
     distribution to which this subparagraph applies.
       ``(B) Election to defer commencement of distributions.--The 
     total amount payable to a participant under the plan shall 
     not be treated as made available merely because the 
     participant may elect to defer commencement of distributions 
     under the plan if--
       ``(i) such election is made after amounts may be available 
     under the plan in accordance with subsection (d)(1)(A) and 
     before commencement of such distributions, and
       ``(ii) the participant may make only 1 such election.''.
       (b) Cost-of-Living Adjustment of Maximum Deferral Amount.--
     Subsection (e) of section 457, as amended by section 
     12935(b)(2), is amended by adding at the end the following 
     new paragraph:
       ``(15) Cost-of-living adjustment of maximum deferral 
     amount.--The Secretary shall adjust the $7,500 amount 
     specified in subsections (b)(2) and (c)(1) at the same time 
     and in the same manner as under section 415(d), except that 
     the base period shall be the calendar quarter ending 
     September 30, 1994.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 12937. CONTRIBUTIONS ON BEHALF OF DISABLED EMPLOYEES.

       (a) All Disabled Participants Receiving Contributions.--
     Section 415(c)(3)(C) is amended by adding at the end the 
     following: ``If a defined contribution plan provides for the 
     continuation of contributions on behalf of all participants 
     described in clause (i) for a fixed or determinable period, 
     this subparagraph shall be applied without regard to clauses 
     (ii) and (iii).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 1995.

     SEC. 12938. DISTRIBUTIONS UNDER RURAL COOPERATIVE PLANS.

       (a) Distributions for Hardship or After a Certain Age.--
     Section 401(k)(7) is amended by adding at the end the 
     following new subparagraph:
       ``(C) Special rule for certain distributions.--A rural 
     cooperative plan which includes a qualified cash or deferred 
     arrangement shall not be treated as violating the 
     requirements of section 401(a) or of paragraph (2) merely by 
     reason of a hardship distribution or a distribution to a 
     participant after attainment of age 59\1/2\. For purposes of 
     this section, the term `hardship distribution' means a 
     distribution described in paragraph (2)(B)(i)(IV) (without 
     regard to the limit of its application to profit-sharing or 
     stock bonus plans).''.
       (b) Definition of Rural Cooperative Plans.--
       (1) Public utility districts.--Clause (i) of section 
     401(k)(7)(B) (defining rural cooperative) is amended to read 
     as follows:
       ``(i) any organization which--

       ``(I) is engaged primarily in providing electric service on 
     a mutual or cooperative basis, or
       ``(II) is engaged primarily in providing electric service 
     to the public in its area of service and which is exempt from 
     tax under this subtitle or which is a State or local 
     government (or an agency or instrumentality thereof), other 
     than a municipality (or an agency or instrumentality 
     thereof).''

       (2) Related organizations.--Subparagraph (B) of section 
     401(k)(7), as amended by paragraph (1), is amended by 
     striking clause (iv) and inserting the following new clauses:
       ``(iv) an organization which is a national association of 
     organizations described in any other clause of this 
     subparagraph, or
       ``(v) any other organization which provides services which 
     are related to the activities of an organization described in 
     clause (i), (ii), (iii), or (iv), but only in the case of a 
     plan with respect to which substantially all of the 
     organizations maintaining it are described in clause (i), 
     (ii), (iii), or (iv).''.

[[Page S 16340]]

       (c) Effective Dates.--
       (1) Distributions.--The amendments made by subsection (a) 
     shall apply to distributions after the date of the enactment 
     of this Act.
       (2) Rural cooperative.--The amendments made by subsection 
     (b) shall apply to plan years beginning after December 31, 
     1994.

     SEC. 12939. TENURED FACULTY.

       (a) In General.--Section 457(e)(11) is amended by inserting 
     ``eligible faculty voluntary retirement incentive pay,'' 
     after ``disability pay,''.
       (b) Definition.--Section 457(e), as amended by sections 
     12935(b)(2) and 12936(b), is amended by adding at the end the 
     following new paragraph:
       ``(16) Definition of eligible faculty voluntary retirement 
     incentive pay.--For purposes of this section, the term 
     `eligible faculty voluntary retirement incentive pay' means 
     payments under a plan established for employees serving under 
     contracts of unlimited tenure (or similar arrangements 
     providing for unlimited tenure) at an institution of higher 
     education (as defined in section 1201(a) of the Higher 
     Education Act of 1965 (20 U.S.C. 1141(a))) which--
       ``(A) provides--
       ``(i) payment to employees electing to retire during a 
     specified period of time of limited duration, or
       ``(ii) payment to employees who elect to retire prior to 
     normal retirement age,
       ``(B) provides that the total amount of payments to an 
     employee does not exceed the equivalent of twice the 
     employee's annual compensation (within the meaning of section 
     415(c)(3)) during the year immediately preceding the 
     employee's termination of service, and
       ``(C) provides that all payments to an employee must be 
     completed within 5 years after the employee's termination of 
     service.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 1995.

     SEC. 12940. UNIFORM RETIREMENT AGE.

       (a) Discrimination Testing.--Paragraph (5) of section 
     401(a) (relating to special rules relating to 
     nondiscrimination requirements) is amended by adding at the 
     end the following new subparagraph:
       ``(F) Social security retirement age.--For purposes of 
     testing for discrimination under paragraph (4)--
       ``(i) the social security retirement age (as defined in 
     section 415(b)(8)) shall be treated as a uniform retirement 
     age, and
       ``(ii) subsidized early retirement benefits and joint and 
     survivor annuities shall not be treated as being unavailable 
     to employees on the same terms merely because such benefits 
     or annuities are based in whole or in part on an employee's 
     social security retirement age (as so defined).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 1995.

     SEC. 12941. MODIFICATIONS OF SECTION 403(b).

       (a) Multiple Salary Reduction Agreements Permitted.--
       (1) General rule.--For purposes of section 403(b) of the 
     Internal Revenue Code of 1986, the frequency that an employee 
     is permitted to enter into a salary reduction agreement, the 
     salary to which such an agreement may apply, and the ability 
     to revoke such an agreement shall be determined under the 
     rules applicable to cash or deferred elections under section 
     401(k) of such Code.
       (2) Effective date.--This subsection shall apply to taxable 
     years beginning after December 31, 1995.
       (b) Treatment of Indian Tribal Governments.--In the case of 
     any contract purchased in a plan year beginning before 
     January 1, 1995, section 403(b) of the Internal Revenue Code 
     of 1986 shall be applied as if any reference to an employer 
     described in section 501(c)(3) of the Internal Revenue Code 
     of 1986 which is exempt from tax under section 501 of such 
     Code included a reference to an employer which is an Indian 
     tribal government (as defined by section 7701(a)(40) of such 
     Code), a subdivision of an Indian tribal government 
     (determined in accordance with section 7871(d) of such Code), 
     an agency or instrumentality of an Indian tribal government 
     or subdivision thereof, or a corporation chartered under 
     Federal, State, or tribal law which is owned in whole or in 
     part by any of the foregoing.
       (c) Elective Deferrals.--
       (1) In general.--Section 403(b)(1) is amended by inserting 
     ``and'' at the end of subparagraph (C), by striking ``and'' 
     at the end of subparagraph (D), and by striking subparagraph 
     (E).
       (2) Effective date.--The amendment made by this subsection 
     shall apply to years beginning after December 31, 1995.

     SEC. 12942. TAX ON PROHIBITED TRANSACTIONS.

       (a) In General.--Section 4975(a) is amended by striking ``5 
     percent'' and inserting ``10 percent''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to prohibited transactions occurring after 
     December 31, 1995.

     SEC. 12943. EXTENSION OF INTERNAL REVENUE SERVICE USER FEES.

       Subsection (c) of section 10511 of the Revenue Act of 1987 
     is amended by striking ``October 1, 2000'' and by inserting 
     ``October 1, 2002''.

     SEC. 12944. LIMITATION ON STATE INCOME TAXATION OF CERTAIN 
                   PENSION INCOME.

       (a) In General.--Chapter 4 of title 4, United States Code, 
     is amended by adding at the end the following:

     ``Sec. 114. Limitation on State income taxation of certain 
       pension income

       ``(a) No State may impose an income tax on any retirement 
     income of an individual who is not a resident or domiciliary 
     of such State (as determined under the laws of such State).
       ``(b) For purposes of this section--
       ``(1) The term `retirement income' means any income from--
       ``(A) a qualified trust under section 401(a) of the 
     Internal Revenue Code of 1986 that is exempt under section 
     501(a) from taxation;
       ``(B) a simplified employee pension as defined in section 
     408(k) of such Code;
       ``(C) an annuity plan described in section 403(a) of such 
     Code;
       ``(D) an annuity contract described in section 403(b) of 
     such Code;
       ``(E) an individual retirement plan described in section 
     7701(a)(37) of such Code;
       ``(F) an eligible deferred compensation plan (as defined in 
     section 457 of such Code);
       ``(G) a governmental plan (as defined in section 414(d) of 
     such Code);
       ``(H) a trust described in section 501(c)(18) of such Code; 
     or
       ``(I) any plan, program, or arrangement described in 
     section 3121(v)(2)(C) of such Code, if such income is part of 
     a series of substantially equal periodic payments (not less 
     frequently than annually) made for--
       ``(i) the life or life expectancy of the recipient (or the 
     joint lives or joint life expectancies of the recipient and 
     the designated beneficiary of the recipient), or
       ``(ii) a period of not less than 10 years.

     Such term includes any retired or retainer pay of a member or 
     former member of a uniform service computed under chapter 71 
     of title 10, United States Code.
       ``(2) The term `income tax' has the meaning given such term 
     by section 110(c).
       ``(3) The term `State' includes any political subdivision 
     of a State, the District of Columbia, and the possessions of 
     the United States.
       ``(c) Nothing in this section shall be construed as having 
     any effect on the application of section 514 of the Employee 
     Retirement Income Security Act of 1974.''.
       (b) Conforming Amendment.--The table of sections for 
     chapter 4 of title 4, United States Code, is amended by 
     adding at the end the following:

``114. Limitation on State income taxation of certain pension income''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to amounts received after December 31, 1994.

                        CHAPTER 2--CHURCH PLANS

     SEC. 12951. NEW QUALIFICATION PROVISION FOR CHURCH PLANS.

       (a) In General.--Subpart A of part I of subchapter D of 
     chapter 1 (relating to pension, profit-sharing, stock bonus 
     plans, etc.) is amended by adding after section 401 the 
     following new section:

     ``SEC. 401A. QUALIFIED CHURCH PLAN.

       ``(a) General Rule.--For purposes of all Federal laws, 
     including this title, a qualified church plan shall be 
     treated as satisfying the requirements of section 401(a), and 
     all references in (or pertaining to) this title and such laws 
     to a plan described in section 401(a) shall include a 
     qualified church plan. Except as otherwise provided in this 
     section, no paragraph of section 401(a) shall apply to a 
     qualified church plan.
       ``(b) Definition of Qualified Church Plan.--A plan is a 
     qualified church plan if such plan meets the following 
     requirements:
       ``(1) Church plan requirement.--The plan is a church plan 
     (within the meaning of section 414(e)), and the election 
     provided by section 410(d) has not been made with respect to 
     such plan.
       ``(2) Employee contributions are nonforfeitable.--An 
     employee's rights in the employee's accrued benefit derived 
     from the employee's own contributions are nonforfeitable.
       ``(3) Vesting requirements.--The plan satisfies the 
     requirements of subparagraph (A) or (B).
       ``(A) 10-year vesting.--A plan satisfies the requirements 
     of this paragraph if an employee who has at least 10 years of 
     service has a nonforfeitable right to 100 percent of the 
     employee's accrued benefit derived from employer 
     contributions.
       ``(B) 5- to 15-year vesting.--A plan satisfies the 
     requirements of this paragraph if an employee who has 
     completed at least 5 years of service has a nonforfeitable 
     right to a percentage of the employee's accrued benefit 
     derived from employer contributions which is not less than 
     the percentage determined under the following table:

                                                         Nonforfeitable
      ``Years of service                                     percentage
        5.........................................................25   
        6.........................................................30   
        7.........................................................35   
        8.........................................................40   
        9.........................................................45   
        10........................................................50   
        11........................................................60   
        12........................................................70   
        13........................................................80   
        14........................................................90   
        15 or more...............................................100.  

       ``(C) Years of service.--For purposes of this paragraph, an 
     employee's years of service shall be determined in accordance 
     with any reasonable method selected by the plan 
     administrator.
       ``(4) Funding requirements.--The plan meets the funding 
     requirements of section 401(a)(7) as in effect on September 
     1, 1974.
       ``(5) Additional requirements.--
       ``(A) The plan meets the requirements of paragraphs (1), 
     (2), (8), (9), (16), (17), (25), (27), and (30) of section 
     401(a).
       ``(B) If the plan includes employees of an organization 
     which is not a church, the plan meets the requirements of 
     sections 401(a)(3) and 401(a)(6) (as in effect on September 
     1, 1974) and sections 401(a)(4), 401(a)(5), and 401(m).

     For purposes of subparagraph (B), the plan administrator may 
     elect to treat the portion of the plan maintained by any 
     organization (or organizations) described in subparagraph (B) 
     as a separate plan (or plans).

[[Page S 16341]]

       ``(c) Definitions and Special Rules.--
       ``(1) Church.--For purposes of this section, the term 
     `church' means a church or a convention or association of 
     churches, including an organization described in section 
     414(e)(3)(A) and an organization described in section 
     414(e)(3)(B)(ii), other than--
       ``(A) an organization described in section 170(b)(1)(A)(ii) 
     above the secondary school level (other than a school for 
     religious training), or
       ``(B) an organization described in section 
     170(b)(1)(A)(iii)--
       ``(i) which provides community service for inpatient 
     medical care of the sick or injured (including obstetrical 
     care); and
       ``(ii) not more than 50 percent of the total patient days 
     of which during any year are customarily assignable to the 
     categories of chronic convalescent and rest, drug and 
     alcoholic, epileptic, mentally deficient, mental, nervous and 
     mental, and tuberculosis, and care for the aged.
       ``(2) Satisfaction of trust provision.--A plan shall not 
     fail to be described in this section merely because such plan 
     is funded through an organization described in section 
     414(e)(3)(A) if--
       ``(A) such organization is subject to fiduciary 
     requirements under applicable State law;
       ``(B) such organization is separately incorporated from the 
     church or convention or association of churches which 
     controls it or with which it is associated;
       ``(C) the assets which equitably belong to the plan are 
     separately accounted for; and
       ``(D) under the plan, at any time prior to the satisfaction 
     of all liabilities with respect to participants and their 
     beneficiaries, such assets cannot be used for, or diverted 
     to, purposes other than for the exclusive benefit of 
     participants and their beneficiaries (except that this 
     paragraph shall not be construed to preclude the use of plan 
     assets to defray the reasonable costs associated with 
     administering the plan and informing employees and employers 
     of the availability of the plan).
       ``(3) Certain sections apply.--Section 401 (b), (c), and 
     (h) shall apply to a qualified church plan.
       ``(4) Failure of one organization maintaining plan not to 
     disqualify plan.--If one or more organizations maintaining a 
     church plan fail to satisfy the requirements of subsection 
     (b), such plan shall not be treated as failing to satisfy the 
     requirements of this section with respect to other 
     organizations maintaining such plan.
       ``(5) Certain employees not considered highly compensated 
     and excluded employees.--For purposes of this section, no 
     employee shall be considered an officer, person whose 
     principal duties consist in supervising the work of other 
     employees, or highly compensated employee if such employee 
     during the year or the preceding year received compensation 
     from the employer of less than $50,000. For purposes of this 
     section, there shall be excluded from consideration employees 
     described in section 410(b)(3)(A). The Secretary shall adjust 
     the $50,000 amount under this paragraph at the same time and 
     in the same manner as under section 415(d).
       ``(6) Time for determination of applicable law.--Except 
     where otherwise specified, the determination of whether a 
     plan meets the requirements of subsection (b) shall be made 
     in accordance with the provisions of this title as in effect 
     immediately following enactment of the Revenue Reconciliation 
     Act of 1995.''.
       (b) Effect on Existing Plans.--A church plan (within the 
     meaning of section 414(e) of the Internal Revenue Code of 
     1986) which is otherwise subject to the applicable 
     requirements of section 401(a) of such Code and which has not 
     made the election provided by section 410(d) of such Code 
     shall not be subject to section 401A of such Code, and shall 
     remain subject to the applicable requirements of section 
     401(a) of such Code, unless the board of directors or 
     trustees of an organization described in section 414(e)(3)(A) 
     of such Code, or other appropriate governing body responsible 
     for maintaining the plan, adopts a resolution under which the 
     church plan is made subject to section 401A of such Code.
       (c) Effective Dates.--
       (1) In general.--The amendment made by this section shall 
     be effective for years beginning after December 31, 1994, 
     except that the provisions of section 401A(b)(3) of the 
     Internal Revenue Code of 1986 shall be effective for years 
     beginning after December 31, 1996. No regulation or ruling 
     under section 401(a) of such Code issued after December 31, 
     1994, shall apply to a qualified church plan described in 
     section 401A of such Code unless such regulation or ruling is 
     specifically made applicable by its terms to qualified church 
     plans.
       (2) Prior years.--Nothing in the amendment made by this 
     section shall be construed to infer that a church plan 
     (within the meaning of section 414(e) of such Code) fails to 
     satisfy the applicable requirements of section 401(a) of such 
     Code for any year beginning prior to January 1, 1995.

     SEC. 12952. RETIREMENT INCOME ACCOUNTS OF CHURCHES.

       (a) In General.--Section 403(b)(9) is amended to read as 
     follows:
       ``(9) Retirement income accounts provided by churches, 
     etc.--
       ``(A) Amounts paid treated as contributions.--For purposes 
     of this title--
       ``(i) a retirement income account shall be treated as an 
     annuity contract described in this subsection, and
       ``(ii) amounts paid by an employer described in paragraph 
     (1)(A) or by a church or a convention or association of 
     churches, including an organization described in section 
     414(e)(3)(A) or 414(e)(3)(B)(ii), to a retirement income 
     account shall be treated as amounts contributed by the 
     employer for an annuity contract for the employee on whose 
     behalf such account is maintained.
       ``(B) Retirement income account.--For purposes of this 
     paragraph, the term `retirement income account' means a 
     program established or maintained by a church, a convention 
     or association of churches, including an organization 
     described in section 414(e)(3)(A), to provide benefits under 
     this subsection for an employee described in paragraph (1) or 
     an individual described in paragraph (13)(F), or their 
     beneficiaries.''.
       (b) Effective Dates.--
       (1) In general.--The amendment made by this section shall 
     be effective for years beginning after December 31, 1994.
       (2) Prior years.--Nothing in the amendment made by this 
     section shall be construed to infer that a church plan 
     (within the meaning of section 414(e)) fails to satisfy the 
     applicable requirements of section 403(b) for any year 
     beginning prior to January 1, 1995.

     SEC. 12953. CONTRACTS PURCHASED BY A CHURCH.

       (a) Clarification of Applicable Nondiscrimination 
     Requirements.--Subparagraph (D) of section 403(b)(1) is 
     amended to read as follows:
       ``(D) except in the case of a contract purchased by a 
     church, such contract is purchased under a plan which meets 
     the nondiscrimination requirements of paragraph (12)(A), 
     and''.
       (b) Certain Coverage Rules Apply.--Subparagraph (B) of 
     section 403(b)(12) is amended to read as follows:
       ``(B) Certain requirements.--If a contract purchased by a 
     church is purchased under a church plan (within the meaning 
     of section 414(e)) by--
       ``(i) an organization described in section 170(b)(1)(A)(ii) 
     above the secondary school level (other than a school for 
     religious training), or
       ``(ii) an organization described in section 
     170(b)(1)(A)(iii)--

       ``(I) which provides community service for inpatient 
     medical care of the sick or injured (including obstetrical 
     care), and
       ``(II) no more than 50 percent of the total patient days of 
     which during any year are customarily assignable to the 
     categories of chronic convalescent and rest, drug and 
     alcoholic, epileptic, mentally deficient, mental, nervous and 
     mental, and tuberculosis, and care for the aged,

     the plan meets the requirements of sections 401(a)(3) and 
     401(a)(6), as in effect on September 1, 1974, and sections 
     401(a)(4), 401(a)(5), 401(a)(17), and 401(m).

     For purposes of this subparagraph, the plan administrator may 
     elect to treat the portion of the plan maintained by any 
     organization (or organizations) described in this 
     subparagraph as a separate plan (or plans).''.
       (c) Special Rules for Churches.--Section 403(b) is amended 
     by adding at the end the following new paragraph:
       ``(13) Definitions and special rules.--
       ``(A) Contract purchased by a church.--For purposes of this 
     subsection, the term `contract purchased by a church' 
     includes an annuity described in section 403(b)(1), a 
     custodial account described in section 403(b)(7), and a 
     retirement income account described in section 403(b)(9).
       ``(B) Church.--For purposes of this subsection, the term 
     `church' means a church or a convention or association of 
     churches, including an organization described in section 
     414(e)(3)(A) or section 414(e)(3)(B)(ii).
       ``(C) Vesting.--In the case of a contract purchased by a 
     church under a church plan (within the meaning of section 
     414(e))--
       ``(i) sections 403(b)(1)(C) and 403(b)(6) shall not apply;
       ``(ii) such contract is not described in this subsection 
     unless an employee's rights in the employee's accrued benefit 
     under such contract which is attributable to contributions 
     made pursuant to a salary reduction agreement are 
     nonforfeitable; and
       ``(iii) such contract is not described in this subsection 
     unless the plan satisfies the requirements of either of the 
     following:

       ``(I) The plan provides that an employee who has at least 
     10 years of service has a nonforfeitable right to 100 percent 
     of the employee's accrued benefit derived from employer 
     contributions.
       ``(II) The plan provides that an employee who has completed 
     at least 5 years of service has a nonforfeitable right to a 
     percentage of the employee's accrued benefit derived from 
     employer contributions which percentage is not less than the 
     percentage determined under the following table:

                                                         Nonforfeitable
``Years of service                                           percentage
    5.............................................................25   
    6.............................................................30   
    7.............................................................35   
    8.............................................................40   
    9.............................................................45   
    10............................................................50   
    11............................................................60   
    12............................................................70   
    13............................................................80   
    14............................................................90   
    15 or more...................................................100.  

     For purposes of clause (iii), an employee's years of service 
     shall be determined in accordance with any reasonable method 
     selected by the plan administrator.
       ``(D) Failure of one organization maintaining plan not to 
     disqualify plan.--In the case of a contract purchased by a 
     church under a church plan (within the meaning of section 
     414(e)), if one or more organizations maintaining the church 
     plan fails to satisfy the requirements of this section, such 
     plan shall not be treated as failing to satisfy the 
     requirements of this section with respect to other 
     organizations maintaining such plan. 

[[Page S 16342]]

       ``(E) Certain employees not considered highly compensated 
     and excluded employees.--For purposes of this subsection, no 
     employee for whom a contract is purchased by a church shall 
     be considered an officer, person whose principal duties 
     consist in supervising the work of other employees, or highly 
     compensated employee if such employee during the year or the 
     preceding year received compensation from the employer of 
     less than $50,000. For purposes of this subsection, there 
     shall be excluded employees described in section 
     410(b)(3)(A). The Secretary shall adjust the $50,000 amount 
     under this subparagraph at the same time and in the same 
     manner as under section 415(d).
       ``(F) Certain ministers may participate.--For purposes of 
     this subsection--
       ``(i) In general.--The term `employee' shall include a duly 
     ordained, commissioned, or licensed minister of a church in 
     the exercise of his or her ministry who is a self-employed 
     individual (within the meaning of section 401(c)(1)(B)) or 
     any duly ordained, commissioned, or licensed minister of a 
     church in the exercise of his or her ministry who is employed 
     by an organization other than an organization described in 
     section 501(c)(3).
       ``(ii) Treatment as employer and employee.--A self-employed 
     minister described in clause (i) shall be treated as his or 
     her own employer which is an organization described in 
     section 501(c)(3) and which is exempt from tax under section 
     501(a). Such an employee who is employed by an organization 
     other than an organization described in section 501(c)(3) 
     shall be treated as employed by an organization described in 
     section 501(c)(3) and which is exempt from tax under section 
     501(a).
       ``(iii) Compensation.--In determining the compensation of a 
     self-employed minister described in clause (i), the earned 
     income (within the meaning of section 401(c)(2)) of such 
     minister shall be substituted for `the amount of compensation 
     which is received from the employer' under paragraph (3).

     In determining the years of service of a self-employed 
     minister described in clause (i), the years (and portions of 
     years) in which such minister was a self-employed individual 
     (within the meaning of section 401(c)(1)(B)) shall be 
     included for purposes of paragraph (4).
       ``(G) Time for determination of applicable law.--Except 
     where otherwise specified, the determination of whether a 
     contract purchased by a church meets the requirements of this 
     subsection shall be made in accordance with the provisions of 
     this title as in effect immediately following enactment of 
     the Revenue Reconciliation Act of 1993.''.
       (d) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     be effective for years beginning after December 31, 1994, 
     except that the provisions of section 403(b)(13)(C)(iii) of 
     the Internal Revenue Code of 1986 shall be effective for 
     years beginning after December 31, 1996. No regulation or 
     ruling issued under section 401(a) or 403(b) of such Code 
     after December 31, 1994, shall apply to a contract purchased 
     by a church unless such regulation or ruling is specifically 
     made applicable by its terms to such contracts. For purposes 
     of applying the exclusion allowance of section 403(b)(2) of 
     such Code and the limitations of section 415 of such Code, 
     any contribution made after December 31, 1996, which is 
     forfeitable pursuant to section 403(b)(13)(C) of such Code 
     shall be treated as an amount contributed to the contract in 
     the year for which such contribution is made and not in the 
     year the contribution becomes nonforfeitable.
       (2) Prior years.--Nothing in the amendments made by this 
     section shall be construed to infer that a church plan 
     (within the meaning of section 414(e) of such Code) fails to 
     satisfy the applicable requirements of section 403(b) of such 
     Code for any year beginning prior to January 1, 1995.

     SEC. 12954. CHANGE IN DISTRIBUTION REQUIREMENT FOR RETIREMENT 
                   INCOME ACCOUNTS.

       (a) In General.--Subparagraph (A) of section 403(b)(11) is 
     amended by inserting ``or, in the case of a retirement income 
     account described in paragraph (9), within the meaning of 
     section 401(k)(2)'' after ``section 72(m)(7)''.
       (b) Effective Date.--The amendment made by this section 
     shall be effective for years beginning after December 31, 
     1994.

     SEC. 12955. REQUIRED BEGINNING DATE FOR DISTRIBUTIONS UNDER 
                   CHURCH PLANS.

       (a) In General.--Subparagraph (C) of section 401(a)(9) is 
     amended by striking the last sentence and inserting the 
     following new sentence: ``For purposes of this subparagraph, 
     the term `church plan' has the meaning given such term by 
     section 414(e).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to years after December 31, 1994.

     SEC. 12956. PARTICIPATION OF MINISTERS IN CHURCH PLANS.

       (a) In General.--Section 414 is amended by adding the 
     following new subsection:
       ``(u) Special Rules for Ministers.--Notwithstanding any 
     other provision of this title, if a duly ordained, 
     commissioned, or licensed minister of a church in the 
     exercise of his or her ministry participates in a church plan 
     (within the meaning of section 414(e)), then--
       ``(1) such minister shall be excluded from consideration 
     for purposes of applying sections 401(a)(3), 401(a)(4), and 
     401(a)(5), as in effect on September 1, 1974, and sections 
     401(a)(4), 401(a)(5), 401(a)(26), 401(k)(3), 401(m), 
     403(b)(1)(D) (including section 403(b)(12)), and 410 to any 
     stock bonus, pension, profit-sharing, or annuity plan 
     (including an annuity described in section 403(b) or a 
     retirement income account described in section 403(b)(9)) 
     described in this part. For purposes of this part, the church 
     plan in which such minister participates shall be treated as 
     a plan or contract meeting the requirements of section 
     401(a), 401A, or 403(b) (including section 403(b)(9)) with 
     respect to such minister's participation; and
       ``(2) such minister shall be excluded from consideration 
     for purposes of applying an applicable section to any plan 
     providing benefits described in an applicable section.

     For purposes of paragraph (2), the term `applicable section' 
     means section 79(d), section 105(h), paragraphs (1), (2), and 
     (3) of section 120(c), section 125(b), section 127(b)(2), and 
     paragraphs (2), (3), and (8) of section 129(d).''.
       (b) Effective Date.--The amendment made by this section 
     shall be effective for years beginning after December 31, 
     1995.

     SEC. 12957. CERTAIN RULES AGGREGATING EMPLOYEES NOT TO APPLY 
                   TO CHURCHES, ETC.

       (a) In General.--Section 414 is amended by adding at the 
     end the following new subsection:
       ``(v) Certain Rules Aggregating Employees Not To Apply to 
     Churches, Etc.--
       ``(1) In general.--If the election provided by paragraph 
     (3) is made, for purposes of sections 401(a)(3), 401(a)(4), 
     and 401(a)(5), as in effect on September 1, 1974, and 
     sections 401(a)(4), 401(a)(5), 401(a)(17), 401(a)(26), 
     401(h), 401(m), 410(b), 411(d)(1), and 416, subsections (b), 
     (c), (m), (o), and (t) of this section shall not apply to 
     treat the employees of church-related organizations as 
     employed by a single employer, except in the case of 
     employees of church-related organizations which are not 
     exempt from tax under section 501(a) and which have a common, 
     immediate parent.
       ``(2) Definition of church-related organization.--For 
     purposes of this subsection, the term `church-related 
     organization' means a church or a convention or association 
     of churches, an organization described in section 
     414(e)(3)(A), an organization described in section 
     414(e)(3)(B)(ii), or an organization the employees of which 
     would be aggregated with the employees of such organizations 
     but for the election provided by paragraph (3).
       ``(3) Election to disaggregate.--The provisions of this 
     subsection shall apply if a church-related organization makes 
     an election for itself and other church-related organizations 
     (in such form and manner as the Secretary may by regulations 
     prescribe) on or before the last day of the first plan year 
     beginning on or after January 1, 1998.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 1994.

     SEC. 12958. SELF-EMPLOYED MINISTERS TREATED AS EMPLOYEES FOR 
                   PURPOSES OF CERTAIN WELFARE BENEFIT PLANS AND 
                   RETIREMENT INCOME ACCOUNTS.

       (a) In General.--Section 7701(a)(20) is amended to read as 
     follows:
       ``(20) Employee.--For the purpose of applying the 
     provisions of section 79 with respect to group-term life 
     insurance purchased for employees, for the purpose of 
     applying the provisions of sections 104, 105, and 106 with 
     respect to accident or health insurance or accident or health 
     plans, for the purpose of applying the provisions of section 
     101(b) with respect to employees' death benefits, for the 
     purpose of applying the provisions of subtitle A with respect 
     to contributions to or under a stock bonus, pension, profit-
     sharing, or annuity plan, and with respect to distributions 
     under such a plan, or by a trust forming part of such a plan, 
     and for purposes of applying section 125 with respect to 
     cafeteria plans, the term `employee' shall include a duly 
     ordained, commissioned, or licensed minister of a church in 
     the exercise of his or her ministry who is a self-employed 
     individual (within the meaning of section 401(c)(1)(B)) or a 
     full-time life insurance salesman who is considered an 
     employee for the purpose of chapter 21, or in the case of 
     services performed before January 1, 1951, who would be 
     considered an employee if his services were performed during 
     1951.''.
       (b) Effective Date.--The amendment made by this section 
     shall be effective for years beginning after December 31, 
     1994.

     SEC. 12959. DEDUCTIONS FOR CONTRIBUTIONS BY CERTAIN MINISTERS 
                   TO RETIREMENT INCOME ACCOUNTS.

       (a) In General.--Section 404(a) is amended by adding the 
     following new paragraph:
       ``(10) Contributions by certain ministers to retirement 
     income accounts.--If contributions are made by a minister 
     described in section 403(b)(13)(F) to a retirement income 
     account described in section 403(b)(9) and not by a person 
     other than such minister, such contributions shall be treated 
     as made to a trust which is exempt from tax under section 
     501(a) which is part of a plan which is described in section 
     401(a) and shall be deductible under this subsection to the 
     extent such contributions do not exceed the exclusion 
     allowance of such minister, determined under section 
     403(b)(2).''.
       (b) Effective Date.--The amendment made by this section 
     shall be effective for years beginning after December 31, 
     1994.

     SEC. 12960. MODIFICATION FOR CHURCH PLANS OF RULES FOR PLANS 
                   MAINTAINED BY MORE THAN ONE EMPLOYER.

       (a) In General.--Section 413(c) is amended by adding at the 
     end the following new paragraph:
       ``(8) Church plans maintained by more than one employer.--A 
     church plan (within the meaning of section 414(e)) maintained 
     by more than one employer, and with respect to which the 
     election provided by section 410(d) has not been made, which 
     commingles assets solely for purposes of investment and 
     pooling for mortality experience to provide to participants 
     annuities computed with reference to the balance in the 
     participants' accounts when such accounts become payable 
     shall not be treated as a single plan maintained by more than 
     one employer under this subsection. The rules provided 

[[Page S 16343]]
     by this paragraph shall apply for purposes of applying section 
     403(b)(12) to such church plan.''.
       (b) Effective Date.--The amendment made by this section 
     shall be effective for years beginning after December 31, 
     1994.

     SEC. 12961. SECTION 457 NOT TO APPLY TO DEFERRED COMPENSATION 
                   OF A CHURCH.

       (a) In General.--Paragraph (13) of section 457(e) is 
     amended to read as follows:
       ``(13) Special rule for churches.--The term `eligible 
     employer' shall not include a church (within the meaning of 
     section 401A(c)(1)).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1994.

     SEC. 12962. CHURCH PLAN MODIFICATION TO SEPARATE ACCOUNT 
                   REQUIREMENT OF SECTION 401(h).

       (a) Exception to Separate Account Requirement.--Section 
     401(h) is amended by adding at the end the following new 
     sentence: ``Notwithstanding the preceding sentence, in the 
     case of a pension or annuity plan that is a church plan 
     (within the meaning of section 414(e)) which is maintained by 
     more than one employer, paragraph (6) shall not apply to an 
     employee who is a key employee for purposes of section 416 
     solely because such employee is described in section 
     416(i)(1)(A)(i) (relating to officers having an annual 
     compensation greater than 150 percent of the amount in effect 
     under section 415(c)(1)(A)).''.
       (b) Application of Section 415(l).--Section 415(l)(1) is 
     amended to read as follows:
       ``(1) In general.--For purposes of this section, the 
     following shall be treated as an annual addition to a defined 
     contribution plan for purposes of subsection (c):
       ``(A) Contributions allocated to any individual medical 
     account which is part of a pension or annuity plan.
       ``(B) The actuarially determined amount of prefunding for 
     the insurance value of benefits which are--
       ``(i) described in section 401(h);
       ``(ii) paid under a pension or annuity plan that is a 
     church plan (within the meaning of section 414(e));
       ``(iii) paid under a plan maintained by more than one 
     employer; and
       ``(iv) payable solely to an employee who is a key employee 
     for purposes of section 415 solely because such employee is 
     described in section 416(i)(1)(A)(i) (relating to officers 
     having an annual compensation greater than 150 percent of the 
     amount in effect under section 415(c)(1)(A)), his spouse, or 
     his dependents.

     Subparagraph (B) of section (c)(1) shall not apply to any 
     amount treated as an annual addition under the preceding 
     sentence.''.
       (c) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 1994.

     SEC. 12963. RULE RELATING TO INVESTMENT IN CONTRACT NOT TO 
                   APPLY TO FOREIGN MISSIONARIES.

       (a) In General.--The last sentence of section 72(f) is 
     amended to read as follows: ``The preceding sentence shall 
     not apply to amounts which were contributed by the employer, 
     as determined under regulations prescribed by the Secretary, 
     to provide pension or annuity credits, to the extent such 
     credits are attributable to services performed before January 
     1, 1963, and are provided pursuant to pension or annuity plan 
     provisions in existence on March 12, 1962, and on that date 
     applicable to such services, or to provide pension or annuity 
     credits for foreign missionaries (within the meaning of 
     section 403(b)(2)(D)(iii)).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1994.

     SEC. 12964. REPEAL OF ELECTIVE DEFERRAL CATCH-UP LIMITATION 
                   FOR RETIREMENT INCOME ACCOUNTS.

       (a) In General.--Clause (iii) of section 402(g)(8)(A) is 
     amended to read as follows:
       ``(iii) except in the case of elective deferrals under a 
     retirement income account described in section 403(b)(9), the 
     excess of $5,000 multiplied by the number of years of service 
     of the employee with the qualified organization over the 
     employer contributions described in paragraph (3) made by the 
     organization on behalf of such employee for prior taxable 
     years (determined in the manner prescribed by the 
     Secretary).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 1994.

     SEC. 12965. CHURCH PLANS MAY ANNUITIZE BENEFITS.

       (a) In General.--A retirement income account described in 
     section 403(b)(9) of the Internal Revenue Code of 1986, a 
     church plan (within the meaning of section 414(e) of such 
     Code) that is a plan described in section 401(a) or 401A of 
     such Code, or an account which consists of qualified 
     voluntary employee contributions described in section 
     219(e)(2) of such Code (as in effect before the date of the 
     enactment of the Tax Reform Act of 1986) and earnings 
     thereon, shall not fail to be described in such sections 
     merely because it pays benefits to participants (and their 
     beneficiaries) from a pool of assets administered or funded 
     by an organization described in section 414(e)(3)(A) of such 
     Code, rather than through the purchase of annuities from an 
     insurance company.
       (b) Effective Date.--This provision shall be effective for 
     years beginning after December 31, 1994.

     SEC. 12966. CHURCH PLANS MAY INCREASE BENEFIT PAYMENTS.

       (a) In General.--A retirement income account described in 
     section 403(b)(9) of the Internal Revenue Code of 1986, a 
     church plan (within the meaning of section 414(e) of such 
     Code) that is a plan described in section 401(a) or 401A of 
     such Code, or an account which consists of qualified 
     voluntary employee contributions described in section 
     219(e)(2) of such Code (as in effect before the date of the 
     enactment of the Tax Reform Act of 1986) and earnings 
     thereon, shall not fail to be described in such sections 
     merely because it provides benefit payments to participants 
     (and their beneficiaries)--
       (1) to take into account the investment performance of the 
     underlying assets or favorable interest or mortality 
     experience, or
       (2) that increase in an amount not in excess of 5 percent 
     per year.
       (b) Effective Date.--This provision shall be effective for 
     years beginning after December 31, 1994.

     SEC. 12967. RULES APPLICABLE TO SELF-INSURED MEDICAL 
                   REIMBURSEMENT PLANS NOT TO APPLY TO PLANS OF 
                   CHURCHES.

       (a) In General.--Section 105(h) is amended by adding at the 
     end the following new paragraph:
       ``(11) Plans of churches.--This subsection shall not apply 
     to a plan maintained by a church (within the meaning of 
     section 401A(c)(1)).''.
       (b) Effective Date.--The amendment made by this section 
     shall be effective for years beginning after December 31, 
     1994.

     SEC. 12968. RETIREMENT BENEFITS OF MINISTERS NOT SUBJECT TO 
                   TAX ON NET EARNINGS FROM SELF-EMPLOYMENT.

       (a) In General.--Section 1402(a)(8) (defining net earning 
     from self-employment) is amended by inserting ``, but shall 
     not include in such net earning from self-employment any 
     retirement benefit received by such individual from a church 
     plan (as defined in section 414(e))'' before the semicolon at 
     the end.
       (b) Effective Date.--The amendments made by this section 
     shall apply to years beginning before, on, or after December 
     31, 1994.
                  TITLE XIII--MISCELLANEOUS PROVISIONS

     SEC. 13001. GENERATIONAL ACCOUNTING IN PRESIDENT'S BUDGET.

       Section 1105(a) of title 31, United States Code, is amended 
     by adding at the end thereof the following:
       ``(32) an analysis of the generational accounting 
     consequences of the budget including the projected Federal 
     deficit, at current spending levels, in the fiscal year that 
     is 20 years after the fiscal year for which the budget is 
     submitted and the revenue levels (including the increase 
     required in current levels) required to eliminate the 
     projected Federal deficit.''.

     SEC. 13002. LEASE-PURCHASE OF OVERSEAS PROPERTY.

       (a) Authority for Lease-Purchase.--Subject to subsections 
     (b) and (c), the Secretary is authorized to acquire by lease-
     purchase such properties as are described in subsection (b), 
     if--
       (1) the Secretary of State, and
       (2) the Director of the Office of Management and Budget,

     certify and notify the appropriate committees of Congress 
     that the lease-purchase arrangement will result in a net cost 
     savings to the Federal government when compared to a lease, a 
     direct purchase, or direct construction of comparable 
     property.
       (b) Locations and Limitations.--The authority granted in 
     subsection (a) may be exercised only--
       (1) to acquire appropriate housing for Department of State 
     personnel stationed abroad and for the acquisition of other 
     facilities, in locations in which the United States has a 
     diplomatic mission; and
       (2) during fiscal years 1996 through 1999.
       (c) Authorization of Funding.--Funds for lease-purchase 
     arrangements made pursuant to subsection (a) shall be 
     available from amounts appropriated under the authority of 
     section 111(a)(3) (relating to the Acquisition and 
     Maintenance of Buildings Abroad'' account).

     SEC. 13003. PAY OF MEMBERS OF CONGRESS AND THE PRESIDENT 
                   DURING GOVERNMENT SHUTDOWNS.

       (a) In General.--Members of Congress and the President 
     shall not receive basic pay for any period in which--
       (1) there is more than a 24-hour lapse in appropriations 
     for any Federal agency or department as a result of a failure 
     to enact a regular appropriations bill or continuing 
     resolution; or
       (2) the Federal Government is unable to make payments or 
     meet obligations because the public debt limit under section 
     3101 of title 31, United States Code has been reached.
       (b) Retroactive Pay Prohibited.--No pay forfeited in 
     accordance with subsection (a) may be paid retroactively.

     SEC. 13004. SENSE OF THE SENATE ON CONTINUED HUMAN RIGHTS 
                   VIOLATIONS IN THE FORMER YUGOSLAVIA.

       (a) Findings.--The Senate makes the following findings:
       (1) Human rights violations and atrocities continue 
     unabated in the former Yugoslavia.
       (2) The Assistant Secretary of State for Human Rights 
     recently reported that starting in mid-September and 
     intensifying between October 6 and October 12, 1995 many 
     thousands of Bosnian Muslims and Croats in Northwest Bosnia 
     were systematically forced from their homes by paramilitary 
     units, local police and in some instances, Bosnian Serb Army 
     officials and soldiers.
       (3) Despite the October 12, 1995 cease-fire which went into 
     effect by agreement of the warring parties in the former 
     Yugoslavia, Bosnian Serbs continue to conduct a brutal 
     campaign to expel non-Serb civilians who remain in Northwest 
     Bosnia, and are subjecting non-Serbs to untold horror--
     murder, rape, robbery and other violence.
       (4) Horrible examples of ``ethnic cleansing'' persist in 
     Northwest Bosnia. Some 6,000 refugees 

[[Page S 16344]]
     recently reached Zenica and reported that nearly 2,000 family members 
     from this group are still unaccounted for.
       (5) The United Nations spokesman in Zagreb reported that 
     many refugees have been given only a few minutes to leave 
     their homes and that ``girls as young as 17 are reported to 
     have been taken into wooded areas and raped''. Elderly, sick 
     and very young refugees have been driven to remote areas and 
     forced to walk long distances on unsafe roads and cross 
     rivers without bridges.
       (6) The War Crimes Tribunal for the former Yugoslavia has 
     collected volumes of evidence of atrocities, including the 
     establishment of death camps, mass executions and systematic 
     campaigns of rape and terror. This War Crimes Tribunal has 
     already issued 43 indictments on the basis of this evidence.
       (7) The Assistant Secretary of State for Human Rights has 
     described the eyewitness accounts as ``prima facia evidence 
     of war crimes which, if confirmed, could very well lead to 
     further indictments by the War Crimes Tribunal''.
       (8) The United Nations High Commissioner for Refugees 
     estimates that more than 22,000 Muslims and Croats have been 
     forced from their homes since mid-September in Bosnian Serb 
     controlled areas.
       (9) In opening the Dodd Center Symposium on the topic of 
     ``50 Years After Nuremburg'' on October 16, 1995, President 
     Clinton cited the ``excellent progress'' of the War Crimes 
     Tribunal for the former Yugoslavia and said, ``Those accused 
     of war crimes, crimes against humanity and genocide must be 
     brought to justice. They must be tried and, if found guilty, 
     they must be held accountable.''.
       (10) President Clinton also observed on October 16, 1995, 
     ``some people are concerned that pursuing peace in Bosnia and 
     prosecuting war criminals are incompatible goals. But I 
     believe they are wrong. There must be peace for justice to 
     prevail, but there must be justice when peace prevails''.
       (b) Sense of the Senate.--It is the sense of the Senate 
     that--
       (1) the Senate condemns the systematic human rights abuses 
     against the people of Bosnia and Herzegovena.
       (2) with peace talks scheduled to begin in the United 
     States on October 31, 1995, these new reports of Serbian 
     atrocities are of grave concern to all Americans.
       (3) the Bosnian Serb leadership should immediately halt 
     these atrocities, fully account for the missing, and allow 
     those who have been separated to return to their families.
       (4) the International Red Cross, United Nations agencies 
     and human rights organizations should be granted full and 
     complete access to all locations throughout Bosnia and 
     Herzegovena.
       (5) the Bosnian Serb leadership should fully cooperate to 
     facilitate the complete investigation of the above 
     allegations so that those responsible may be held accountable 
     under international treaties, conventions, obligations and 
     law.
       (6) the United States should continue to support the work 
     of the War Crimes Tribunal for the former Yugoslavia.
       (7) ``ethnic cleansing'' by any faction, group, leader, or 
     government is unjustified, immoral and illegal and all 
     perpetrators of war crimes, crimes against humanity, genocide 
     and other human rights violations in the former Yugoslavia 
     must be held accountable.
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