[Congressional Record Volume 141, Number 186 (Monday, November 20, 1995)]
[House]
[Pages H13379-H13629]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




CONCURRING IN SENATE AMENDMENT TO H.R. 2491, SEVEN-YEAR BALANCED BUDGET 
                       RECONCILIATION ACT OF 1995

  Mr. HOBSON. Mr. Speaker, pursuant to House Resolution 279, I call up 
from the Speaker's table the bill (H.R. 2491), to provide for 
reconciliation pursuant to section 105 of the concurrent resolution on 
the budget for fiscal year 1996, with a Senate amendment thereto, and I 
offer a motion.
  The Clerk read the title of the bill.
  The SPEAKER pro tempore. The Clerk will designate the Senate 
amendment.
  The text of the Senate amendment is as follows:

       Strike out all after the enacting clause and insert:
       Senate amendment:

     SECTION 1. SHORT TITLE.

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

     SEC. 2. TABLE OF TITLES.

       This Act is organized into titles as follows:

Title I--Agriculture and Related Provisions
Title II--Banking, Housing, and Related Provisions
Title III--Communication and Spectrum Allocation Provisions
Title IV--Education and Related Provisions
Title V--Energy and Natural Resources Provisions
Title VI--Federal Retirement and Related Provisions
Title VII--Medicaid
Title VIII--Medicare
Title IX--Transportation and Related Provisions
Title X--Veterans and Related Provisions
Title XI--Revenues
Title XII--Teaching hospitals and graduate medical education; asset 
              sales; welfare; and other provisions
              TITLE I--AGRICULTURE AND RELATED PROVISIONS

     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--Agricultural Market Transition Program

Sec. 1101. Short title.
Sec. 1102. Definitions.
Sec. 1103. Production flexibility contracts.
Sec. 1104. Nonrecourse marketing assistance loans and loan deficiency 
              payments.
Sec. 1105. Payment limitations.
Sec. 1106. Peanut program.
Sec. 1107. Sugar program.
Sec. 1108. Administration.
Sec. 1109. Elimination of permanent price support authority.
Sec. 1110. Effect of amendments.

                        Subtitle B--Conservation

Sec. 1201. Conservation.

         Subtitle C--Agricultural Promotion and Export Programs

Sec. 1301. Market promotion program.
Sec. 1302. Export enhancement program.

                       Subtitle D--Miscellaneous

Sec. 1401. Crop insurance.
Sec. 1402. Collection and use of agricultural quarantine and inspection 
              fees.
Sec. 1403. Commodity Credit Corporation interest rate.
           Subtitle A--Agricultural Market Transition Program

     SEC. 1101. SHORT TITLE.

       This subtitle may be cited as the ``Agricultural Market 
     Transition Act''.

     SEC. 1102. DEFINITIONS.

       In this subtitle:
       (1) Considered planted.--The term ``considered planted'' 
     means acreage that is considered planted under title V of the 
     Agricultural Act of 1949 (7 U.S.C. 1461 et seq.) (as in 
     effect prior to the amendment made by section 1109(b)(2)).
       (2) Contract.--The term ``contract'' means a production 
     flexibility contract entered into under section 1103.
       (3) Contract acreage.--The term ``contract acreage'' means 
     1 or more crop acreage bases established for contract 
     commodities under title V of the Agricultural Act of 1949 (as 
     in effect prior to the amendment made by section 1109(b)(2)). 
     If a crop acreage base was not enrolled in an annual program 
     for the 1995 crop in order to increase crop acreage base, the 
     contract acreage for the 1996 crop shall reflect the 
     increased base acreage that would have been established under 
     title V of the Act (as so in effect).
       (4) Contract commodity.--The term `contract commodity' 
     means wheat, corn, grain sorghum, barley, oats, upland 
     cotton, and rice.
       (5) Contract payment.--The term ``contract payment'' means 
     a payment made under section 1103 pursuant to a contract.
       (6) Farm program payment yield.--The term ``farm program 
     payment yield'' means the farm program payment yield 
     established for the 1995 crop of a contract commodity under 
     title V of the Agricultural Act of 1949 (as in effect prior 
     to the amendment made by section 1109(b)(2)).
       (7) Loan commodity.--The term `loan commodity' means each 
     contract commodity, extra long staple cotton, and oilseeds.
       (8) Oilseed.--The term ``oilseed'' means a crop of 
     soybeans, sunflower seed, rapeseed, canola, safflower, 
     flaxseed, mustard seed, or, if designated by the Secretary, 
     other oilseeds.
       (9) Program.--The term ``program'' means the agricultural 
     market transition program established under this subtitle.
       (10) Secretary.--The term ``Secretary'' means the Secretary 
     of Agriculture.

     SEC. 1103. PRODUCTION FLEXIBILITY CONTRACTS.

       (a) Contracts Authorized.--
       (1) Offer and terms.--Beginning as soon as practicable 
     after the date of the enactment of this subtitle, the 
     Secretary shall offer to enter into a contract with an 
     eligible owner or operator described in paragraph (2) on a 
     farm containing eligible farmland. Under the terms of a 
     contract, the owner or operator shall agree, in exchange for 
     annual contract payments, to comply with--
       (A) the conservation plan for the farm prepared in 
     accordance with section 1212 of the Food Security Act of 1985 
     (16 U.S.C. 3812);
       (B) wetland protection requirements applicable to the farm 
     under subtitle C of title XII of the Act (16 U.S.C. 3821 et 
     seq.); and
       (C) the planting flexibility requirements of subsection 
     (j).
       (2) Eligible owners and operators described.--The following 
     persons shall be considered to be an owner or operator 
     eligible to enter into a contract:
       (A) An owner of eligible farmland who assumes all of the 
     risk of producing a crop.
       (B) An owner of eligible farmland who shares in the risk of 
     producing a crop.
       (C) An operator of eligible farmland with a share-rent 
     lease of the eligible farmland, regardless of the length of 
     the lease, if the owner enters into the same contract.
       (D) An operator of eligible farmland who cash rents the 
     eligible farmland under a lease expiring on or after 
     September 30, 2002, in which case the consent of the owner is 
     not required.
       (E) An operator of eligible farmland who cash rents the 
     eligible farmland under a lease expiring before September 30, 
     2002, if the owner consents to the contract.
       (F) An owner of eligible farmland who cash rents the 
     eligible farmland and the lease term expires before September 
     30, 2002, but only if the actual operator of the farm 
     declines to enter into a contract. In the case of an owner 
     covered by this subparagraph, contract payments shall not 
     begin under a contract until the fiscal year following the 
     fiscal year in which the lease held by the nonparticipating 
     operator expires.
       (G) An owner or operator described in a preceding 
     subparagraph regardless of whether the owner or operator 
     purchased catastrophic risk protection for a fall-planted 
     1996 crop under section 508(b) of the Federal Crop Insurance 
     Act (7 U.S.C. 1508(b)).
       (3) Tenants and sharecroppers.--In carrying out this 
     section, the Secretary shall provide adequate safeguards to 
     protect the interests of operators who are tenants and 
     sharecroppers.
       (b) Elements.--
       (1) Time for contracting.--
       (A) Deadline.--Except as provided in subparagraph (B), the 
     Secretary may not enter into a contract after April 15, 1996.
       (B) Conservation reserve lands.--
       (i) In general.--At the beginning of each fiscal year, the 
     Secretary shall allow an eligible owner or operator on a farm 
     covered by a conservation reserve contract entered into under 
     section 1231 of the Food Security Act of 1985 (16 U.S.C. 
     3831) that terminates after the date specified in 
     subparagraph (A) to enter into or expand a production 
     flexibility contract to cover the contract acreage of the 
     farm that was subject to the former conservation reserve 
     contract.
       (ii) Amount.--Contract payments made for contract acreage 
     under this subparagraph shall be made at the rate and amount 
     applicable to the annual contract payment level for the 
     applicable crop.
       (2) Duration of contract.--
       (A) Beginning date.--A contract shall begin with--
       (i) the 1996 crop of a contract commodity; or
       (ii) in the case of acreage that was subject to a 
     conservation reserve contract described in paragraph (1)(B), 
     the date the production flexibility contract was entered into 
     or expanded to cover the acreage.
       (B) Ending date.--A contract shall extend through the 2002 
     crop.
       (3) Estimation of contract payments.--At the time the 
     Secretary enters into a contract, the Secretary shall provide 
     an estimate of the minimum contract payments anticipated to 
     be made during at least the first fiscal year for which 
     contract payments will be made.
       (c) Eligible Farmland Described.--Land shall be considered 
     to be farmland eligible for coverage under a contract only if 
     the land has contract acreage attributable to the land and--
       (1) for at least 1 of the 1991 through 1995 crops, at least 
     a portion of the land was enrolled in the acreage reduction 
     program authorized for a crop of a contract commodity under 
     section 101B, 103B, 105B, or 107B of the Agricultural Act of 
     1949 (as in effect prior to the amendment made by section 
     1109(b)(2)) or was considered planted;
       (2) was subject to a conservation reserve contract under 
     section 1231 of the Food Security Act of 1985 (16 U.S.C. 
     3831) whose term expired, or was voluntarily terminated, on 
     or after January 1, 1995; or
       (3) is released from coverage under a conservation reserve 
     contract by the Secretary during the period beginning on 
     January 1, 1995, and ending on the date specified in 
     subsection (b)(1)(A).
       (d) Time for Payment.--
       (1) In general.--An annual contract payment shall be made 
     not later than September 30 of each of fiscal years 1996 
     through 2002.

[[Page H 13380]]

       (2) Advance payments.--
       (A) Fiscal year 1996.--At the option of the owner or 
     operator, 50 percent of the contract payment for fiscal year 
     1996 shall be made not later than 60 days after the date on 
     which the owner or operator enters into a contract.
       (B) Subsequent fiscal years.--At the option of the owner or 
     operator for fiscal year 1997 and each subsequent fiscal 
     year, 50 percent of the annual contract payment shall be made 
     on December 15.
       (e) Amounts Available for Contract Payments for Each Fiscal 
     Year.--
       (1) In general.--The Secretary shall expend on a fiscal 
     year basis the following amounts to satisfy the obligations 
     of the Secretary under all contracts:
       (A) For fiscal year 1996, $5,570,000,000.
       (B) For fiscal year 1997, $5,385,000,000.
       (C) For fiscal year 1998, $5,800,000,000.
       (D) For fiscal year 1999, $5,603,000,000.
       (E) For fiscal year 2000, $5,130,000,000.
       (F) For fiscal year 2001, $4,130,000,000.
       (G) For fiscal year 2002, $4,008,000,000.
       (2) Allocation.--The amount made available for a fiscal 
     year under paragraph (1) shall be allocated as follows:
       (A) For wheat, 26.26 percent.
       (B) For corn, 46.22 percent.
       (C) For grain sorghum, 5.11 percent.
       (D) For barley, 2.16 percent.
       (E) For oats, 0.15 percent.
       (F) For upland cotton, 11.63 percent.
       (G) For rice, 8.47 percent.
       (3) Adjustment.--The Secretary shall adjust the amounts 
     allocated for each contract commodity under paragraph (2) for 
     a particular fiscal year by--
       (A) subtracting an amount equal to the amount, if any, 
     necessary to satisfy payment requirements under sections 
     101B, 103B, 105B, and 107B of the Agricultural Act of 1949 
     (as in effect prior to the amendment made by section 
     1109(b)(2)) for the 1994 and 1995 crops of the commodity;
       (B) adding an amount equal to the sum of all producer 
     repayments of deficiency payments received under section 
     114(a)(2) of the Act (as so in effect) for the commodity;
       (C) adding an amount equal to the sum of all contract 
     payments withheld by the Secretary, at the request of 
     producers, during the preceding fiscal year as an offset 
     against producer repayments of deficiency payments otherwise 
     required under section 114(a)(2) of the Act (as so in effect) 
     for the commodity; and
       (D) adding an amount equal to the sum of all refunds of 
     contract payments received during the preceding fiscal year 
     under subsection (h) for the commodity.
       (f) Determination of Contract Payments.--
       (1) Individual payment quantity of contract commodities.--
     For each contract, the payment quantity of a contract 
     commodity for each fiscal year shall be equal to the product 
     of--
       (A) 85 percent of the contract acreage; and
       (B) the farm program payment yield.
       (2) Annual payment quantity of contract commodities.--The 
     payment quantity of each contract commodity covered by all 
     contracts for each fiscal year shall equal the sum of the 
     amounts calculated under paragraph (1) for each individual 
     contract.
       (3) Annual payment rate.--The payment rate for a contract 
     commodity for each fiscal year shall be equal to--
       (A) the amount made available under subsection (e) for the 
     contract commodity for the fiscal year; divided by
       (B) the amount determined under paragraph (2) for the 
     fiscal year.
       (4) Annual payment amount.--The amount to be paid under a 
     contract in effect for each fiscal year with respect to a 
     contract commodity shall be equal to the product of--
       (A) the payment quantity determined under paragraph (1) 
     with respect to the contract; and
       (B) the payment rate in effect under paragraph (3).
       (5) Assignment of contract payments.--The provisions of 
     section 8(g) of the Soil Conservation and Domestic Allotment 
     Act (16 U.S.C. 590h(g)) (relating to assignment of payments) 
     shall apply to contract payments under this subsection. The 
     owner or operator making the assignment, or the assignee, 
     shall provide the Secretary with notice, in such manner as 
     the Secretary may require in the contract, of any assignment 
     made under this paragraph.
       (6) Sharing of contract payments.--The Secretary shall 
     provide for the sharing of contract payments among the owners 
     and operators subject to the contract on a fair and equitable 
     basis.
       (g) Payment Limitation.--The total amount of contract 
     payments made to a person under a contract during any fiscal 
     year may not exceed the payment limitations established under 
     section 1105.
       (h) Effect of Violation.--
       (1) Termination of contract.--Except as provided in 
     paragraph (2), if an owner or operator subject to a contract 
     violates the conservation plan for the farm containing 
     eligible farmland under the contract, wetland protection 
     requirements applicable to the farm, or the planting 
     flexibility requirements of subsection (j), the Secretary 
     shall terminate the contract with respect to the owner or 
     operator. On the termination, the owner or operator shall 
     forfeit all rights to receive future contract payments and 
     shall refund to the Secretary all contract payments received 
     by the owner or operator during the period of the violation, 
     together with interest on the contract payments as determined 
     by the Secretary.
       (2) Refund or adjustment.--If the Secretary determines that 
     a violation does not warrant termination of the contract 
     under paragraph (1), the Secretary may require the owner or 
     operator subject to the contract--
       (A) to refund to the Secretary that part of the contract 
     payments received by the owner or operator during the period 
     of the violation, together with interest on the contract 
     payments as determined by the Secretary; or
       (B) to accept a reduction in the amount of future contract 
     payments that is proportionate to the severity of the 
     violation, as determined by the Secretary.
       (3) Foreclosure.--An owner or operator subject to a 
     contract may not be required to make repayments to the 
     Secretary of amounts received under the contract if the 
     contract acreage has been foreclosed on and the Secretary 
     determines that forgiving the repayments is appropriate in 
     order to provide fair and equitable treatment. This paragraph 
     shall not void the responsibilities of such an owner or 
     operator under the contract if the owner or operator 
     continues or resumes operation, or control, of the contract 
     acreage. On the resumption of operation or control over the 
     contract acreage by the owner or operator, the provisions of 
     the contract in effect on the date of the foreclosure shall 
     apply.
       (4) Review.--A determination of the Secretary under this 
     subsection shall be considered to be an adverse decision for 
     purposes of the availability of administrative review of the 
     determination.
       (i) Transfer of Interest in Lands Subject to Contract.--
       (1) Effect of transfer.--Except as provided in paragraph 
     (2), the transfer by an owner or operator subject to a 
     contract of the right and interest of the owner or operator 
     in the contract acreage shall result in the termination of 
     the contract with respect to the acreage, effective on the 
     date of the transfer, unless the transferee of the acreage 
     agrees with the Secretary to assume all obligations of the 
     contract. At the request of the transferee, the Secretary may 
     modify the contract if the modifications are consistent with 
     the objectives of this section as determined by the 
     Secretary.
       (2) Exception.--If an owner or operator who is entitled to 
     a contract payment dies, becomes incompetent, or is otherwise 
     unable to receive the contract payment, the Secretary shall 
     make the payment, in accordance with regulations prescribed 
     by the Secretary.
       (j) Planting Flexibility.--
       (1) Permitted crops.--Subject to paragraph (2)(A), any 
     commodity or crop may be planted on contract acreage.
       (2) Limitations.--
       (A) In general.--Except as provided in subparagraph (B), 
     the planting of any fruit or vegetable, and unlimited haying 
     and grazing, shall be permitted on not more than 15 percent 
     of the contract acreage.
       (B) Exception.--Subparagraph (A) shall not apply to the 
     planting of contract commodities, lentils, mung beans, and 
     dry peas on contract acreage.
       (3) Alfalfa.--The planting of alfalfa on contract acreage 
     is unlimited, except that the quantity of acreage on which 
     the contract payment of the owner or operator would otherwise 
     be based shall be reduced for each acre planted to alfalfa in 
     excess of the limitation in effect under paragraph (2)(A) for 
     the contract.
       (4) Haying and grazing.--Subject to paragraphs (2) and (3), 
     haying and grazing of contract acreage 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. In the case of a natural disaster, the 
     Secretary may permit unlimited haying and grazing on the 
     contract acreage.

     SEC. 1104. NONRECOURSE MARKETING ASSISTANCE LOANS AND LOAN 
                   DEFICIENCY PAYMENTS.

       (a) Availability of Nonrecourse Loans.--
       (1) Availability.--For each of the 1996 through 2002 crops 
     of each loan commodity, the Secretary shall make available to 
     producers on a farm nonrecourse marketing assistance loans 
     for loan commodities produced on the farm. The loans shall be 
     made under terms and conditions that are prescribed by the 
     Secretary and at the loan rate established under subsection 
     (b) for the loan commodity.
       (2) Eligible production.--The following production shall be 
     eligible for a marketing assistance loan under this section:
       (A) In the case of a marketing assistance loan for a 
     contract commodity, any production by a producer who has 
     entered into a production flexibility contract.
       (B) In the case of a marketing assistance loan for extra 
     long staple cotton and oilseeds, any production.
       (b) Loan Rates.--
       (1) Wheat.--
       (A) Loan rate.--Subject to subparagraph (B), the loan rate 
     for a marketing assistance loan for wheat shall be--
       (i) not less than 85 percent of the simple average price 
     received by producers of wheat, as determined by the 
     Secretary, during the marketing years for the immediately 
     preceding 5 crops of wheat, excluding the year in which the 
     average price was the highest and the year in which the 
     average price was the lowest in the period; but
       (ii) not more than $2.58 per bushel.
       (B) Stocks to use ratio adjustment.--If the Secretary 
     estimates for any marketing year that the ratio of ending 
     stocks of wheat to total use for the marketing year will be--
       (i) equal to or greater than 30 percent, the Secretary may 
     reduce the loan rate for wheat for the corresponding crop by 
     an amount not to exceed 10 percent in any year;
       (ii) less than 30 percent but not less than 15 percent, the 
     Secretary may reduce the loan rate for wheat for the 
     corresponding crop by an amount not to exceed 5 percent in 
     any year; or
       (iii) less than 15 percent, the Secretary may not reduce 
     the loan rate for wheat for the corresponding crop. 

[[Page H 13381]]

       (C) No effect on future years.--Any reduction in the loan 
     rate for wheat under subparagraph (B) shall not be considered 
     in determining the loan rate for wheat for subsequent years.
       (2) Feed grains.--
       (A) Loan rate for corn.--Subject to subparagraph (B), the 
     loan rate for a marketing assistance loan for corn shall be--
       (i) not less than 85 percent of the simple average price 
     received by producers of corn, as determined by the 
     Secretary, during the marketing years for the immediately 
     preceding 5 crops of corn, excluding the year in which the 
     average price was the highest and the year in which the 
     average price was the lowest in the period; but
       (ii) not more than $1.89 per bushel.
       (B) Stocks to use ratio adjustment.--If the Secretary 
     estimates for any marketing year that the ratio of ending 
     stocks of corn to total use for the marketing year will be--
       (i) equal to or greater than 25 percent, the Secretary may 
     reduce the loan rate for corn for the corresponding crop by 
     an amount not to exceed 10 percent in any year;
       (ii) less than 25 percent but not less than 12.5 percent, 
     the Secretary may reduce the loan rate for corn for the 
     corresponding crop by an amount not to exceed 5 percent in 
     any year; or
       (iii) less than 12.5 percent the Secretary may not reduce 
     the loan rate for corn for the corresponding crop.
       (C) No effect on future years.--Any reduction in the loan 
     rate for corn under subparagraph (B) shall not be considered 
     in determining the loan rate for corn for subsequent years.
       (D) Other feed grains.--The loan rate for a marketing 
     assistance loan for grain sorghum, barley, and oats, 
     respectively, shall be established at such level as the 
     Secretary determines is fair and reasonable in relation to 
     the rate that loans are made available for corn, taking into 
     consideration the feeding value of the commodity in relation 
     to corn.
       (3) Upland cotton.--
       (A) Loan rate.--Subject to subparagraph (B), the loan rate 
     for a marketing assistance loan for upland cotton shall be 
     established by the Secretary at such loan rate, per pound, as 
     will reflect for the base quality of upland cotton, as 
     determined by the Secretary, at average locations in the 
     United States a rate that is not less than the smaller of--
       (i) 85 percent of the average price (weighted by market and 
     month) of the base quality of cotton as quoted in the 
     designated United States spot markets during 3 years of the 
     5-year period ending July 31 in the year in which the loan 
     rate is announced, excluding the year in which the average 
     price was the highest and the year in which the average price 
     was the lowest in the period; or
       (ii) 90 percent of the average, for the 15-week period 
     beginning July 1 of the year in which the loan rate is 
     announced, of the 5 lowest-priced growths of the growths 
     quoted for Middling 1\3/32\-inch cotton C.I.F. Northern 
     Europe (adjusted downward by the average difference during 
     the period April 15 through October 15 of the year in which 
     the loan is announced between the average Northern European 
     price quotation of such quality of cotton and the market 
     quotations in the designated United States spot markets for 
     the base quality of upland cotton), as determined by the 
     Secretary.
       (B) Limitations.--The loan rate for a marketing assistance 
     loan for upland cotton shall not be less than $0.50 per pound 
     or more than $0.5192 per pound.
       (4) Extra long staple cotton.--The loan rate for a 
     marketing assistance loan for extra long staple cotton shall 
     be--
       (A) not less than 85 percent of the simple average price 
     received by producers of extra long staple cotton, as 
     determined by the Secretary, during 3 years of the 5 previous 
     marketing years, excluding the year in which the average 
     price was the highest and the year in which the average price 
     was the lowest in the period; but
       (B) not more than $0.7965 per pound.
       (5) Rice.--The loan rate for a marketing assistance loan 
     for rice shall be $6.50 per hundredweight.
       (6) Oilseeds.--
       (A) Soybeans.--The loan rate for a marketing assistance 
     loan for soybeans shall be $4.92 per bushel.
       (B) Sunflower seed, canola, rapeseed, safflower, mustard 
     seed, and flaxseed.--The loan rates for a marketing 
     assistance loan for sunflower seed, canola, rapeseed, 
     safflower, mustard seed, and flaxseed, individually, shall be 
     $0.087 per pound.
       (C) Other oilseeds.--The loan rates for a marketing 
     assistance loan for other oilseeds shall be established at 
     such level as the Secretary determines is fair and reasonable 
     in relation to the loan rate available for soybeans, except 
     in no event shall the rate for the oilseeds (other than 
     cottonseed) be less than the rate established for soybeans on 
     a per-pound basis for the same crop.
       (c) Term of Loan.--In the case of each loan commodity 
     (other than upland cotton or extra long staple cotton), a 
     marketing assistance loan under subsection (a) shall have a 
     term of 9 months beginning on the first day of the first 
     month after the month in which the loan is made. A marketing 
     assistance loan for upland cotton or extra long staple cotton 
     shall have a term of 10 months. The Secretary may not extend 
     the term of a marketing assistance loan for any loan 
     commodity.
       (d) Repayment.--
       (1) Repayment rates generally.--The Secretary shall permit 
     producers to repay a marketing assistance loan under 
     subsection (a) for a loan commodity (other than extra long 
     staple cotton) at a level that is the lesser of--
       (A) the loan rate established for the commodity under 
     subsection (b); or
       (B) the prevailing world market price for the commodity 
     (adjusted to United States quality and location), as 
     determined by the Secretary.
       (2) Repayment rates for extra long staple cotton.--
     Repayment of a marketing assistance loan for extra long 
     staple cotton shall be at the loan rate established for the 
     commodity under subsection (b).
       (3) Prevailing world market price.--For purposes of 
     paragraph (1)(B) and subsection (f), the Secretary shall 
     prescribe by regulation--
       (A) a formula to determine the prevailing world market 
     price for each loan commodity, adjusted to United States 
     quality and location; and
       (B) a mechanism by which the Secretary shall announce 
     periodically the prevailing world market price for each loan 
     commodity.
       (4) Adjustment of prevailing world market price for upland 
     cotton.--
       (A) In general.--During the period ending July 31, 2003, 
     the prevailing world market price for upland cotton (adjusted 
     to United States quality and location) established under 
     paragraph (3) shall be further adjusted if--
       (i) the adjusted prevailing world market price is less than 
     115 percent of the loan rate for upland cotton established 
     under subsection (b), as determined by the Secretary; and
       (ii) the Friday through Thursday average price quotation 
     for the lowest-priced United States growth as quoted for 
     Middling (M) 1\3/32\-inch cotton delivered C.I.F. Northern 
     Europe is greater than the Friday through Thursday average 
     price of the 5 lowest-priced growths of upland cotton, as 
     quoted for Middling (M) 1\3/32\-inch cotton, delivered C.I.F. 
     Northern Europe (referred to in this subsection as the 
     ``Northern Europe price'').
       (B) Further adjustment.--Except as provided in subparagraph 
     (C), the adjusted prevailing world market price for upland 
     cotton shall be further adjusted on the basis of some or all 
     of the following data, as available:
       (i) The United States share of world exports.
       (ii) The current level of cotton export sales and cotton 
     export shipments.
       (iii) Other data determined by the Secretary to be relevant 
     in establishing an accurate prevailing world market price for 
     upland cotton (adjusted to United States quality and 
     location).
       (C) Limitation on further adjustment.--The adjustment under 
     subparagraph (B) may not exceed the difference between--
       (i) the Friday through Thursday average price for the 
     lowest-priced United States growth as quoted for Middling 
     1\3/32\-inch cotton delivered C.I.F. Northern Europe; and
       (ii) the Northern Europe price.
       (e) Loan Deficiency Payments.--
       (1) Availability.--Except as provided in paragraph (4), the 
     Secretary may make loan deficiency payments available to 
     producers who, although eligible to obtain a marketing 
     assistance loan under subsection (a) with respect to a loan 
     commodity, agree to forgo obtaining the loan for the 
     commodity in return for payments under this subsection.
       (2) Computation.--A loan deficiency payment under this 
     subsection shall be computed by multiplying--
       (A) the loan payment rate determined under paragraph (3) 
     for the loan commodity; by
       (B) the quantity of the loan commodity that the producers 
     on a farm are eligible to place under loan but for which the 
     producers forgo obtaining the loan in return for payments 
     under this subsection.
       (3) Loan payment rate.--For purposes of this subsection, 
     the loan payment rate shall be the amount by which--
       (A) the loan rate established under subsection (b) for the 
     loan commodity; exceeds
       (B) the rate at which a loan for the commodity may be 
     repaid under subsection (d).
       (4) Exception for extra long staple cotton.--This 
     subsection shall not apply with respect to extra long staple 
     cotton.
       (f) Special Marketing Loan Provisions for Upland Cotton.--
       (1) First handler marketing certificates.--
       (A) In general.--During the period ending on July 31, 2003, 
     if the repayment rates provided in subsection (d) for upland 
     cotton or the availability of loan deficiency payments for 
     upland cotton under subsection (e) fails to make United 
     States upland cotton fully competitive in world markets and 
     the prevailing world market price of upland cotton (adjusted 
     to United States quality and location) is below the current 
     loan repayment rate for upland cotton, to make United States 
     upland cotton competitive in world markets and to maintain 
     and expand domestic consumption and exports of upland cotton 
     produced in the United States, the Secretary shall provide 
     for the issuance of marketing certificates or cash payments 
     in accordance with this paragraph.
       (B) Payments.--The Commodity Credit Corporation, under such 
     regulations as the Secretary may prescribe, shall make 
     payments, through the issuance of marketing certificates or 
     cash payments, to first handlers of upland cotton (persons 
     regularly engaged in buying or selling upland cotton) who 
     have entered into an agreement with the Commodity Credit 
     Corporation to participate in the program established under 
     this paragraph. The payments shall be made in such amounts 
     and subject to such terms and conditions as the Secretary 
     determines will make upland cotton produced in the United 
     States available at competitive prices, consistent with the 
     purposes of this paragraph.
       (C) Value.--The value of each certificate or cash payment 
     issued under subparagraph (B) shall be based on the 
     difference between--
       (i) the loan repayment rate for upland cotton; and
       (ii) the prevailing world market price of upland cotton 
     (adjusted to United States quality and location), as 
     determined by the Secretary.
       (D) Redemption, marketing, or exchange.--The Commodity 
     Credit Corporation, under regulations prescribed by the 
     Secretary, may assist 

[[Page H 13382]]
     any person receiving marketing certificates under this paragraph in the 
     redemption of certificates for cash, or marketing or exchange 
     of the certificates for agricultural commodities or products 
     owned by the Commodity Credit Corporation, at such times, in 
     such manner, and at such price levels as the Secretary 
     determines will best effectuate the purposes of the program 
     established under this paragraph. Any price restrictions that 
     may otherwise apply to the disposition of agricultural 
     commodities by the Commodity Credit Corporation shall not 
     apply to the redemption of certificates under this paragraph.
       (E) Designation of commodities and products; charges.--
     Insofar as practicable, the Secretary shall permit owners of 
     certificates to designate the commodities and products, 
     including storage sites, the owners would prefer to receive 
     in exchange for certificates. If any certificate is not 
     presented for redemption, marketing, or exchange within a 
     reasonable number of days after the issuance of the 
     certificate (as determined by the Secretary), reasonable 
     costs of storage and other carrying charges, as determined by 
     the Secretary, shall be deducted from the value of the 
     certificate for the period beginning after the reasonable 
     number of days and ending with the date of the presentation 
     of the certificate to the Commodity Credit Corporation.
       (F) Displacement.--The Secretary shall take such measures 
     as may be necessary to prevent the marketing or exchange of 
     agricultural commodities and products for certificates under 
     this subsection from adversely affecting the income of 
     producers of the commodities or products.
       (G) Transfers.--Under regulations prescribed by the 
     Secretary, certificates issued to cotton handlers under this 
     paragraph may be transferred to other handlers and persons 
     approved by the Secretary.
       (2) Cotton user marketing certificates.--
       (A) Issuance.--Subject to subparagraph (D), during the 
     period ending July 31, 2003, the Secretary shall issue 
     marketing certificates or cash payments to domestic users and 
     exporters for documented purchases by domestic users and 
     sales for export by exporters made in the week following a 
     consecutive 4-week period in which--
       (i) the Friday through Thursday average price quotation for 
     the lowest-priced United States growth, as quoted for 
     Middling (M) 1\3/32\-inch cotton, delivered C.I.F. Northern 
     Europe exceeds the Northern Europe price by more than 1.25 
     cents per pound; and
       (ii) the prevailing world market price for upland cotton 
     (adjusted to United States quality and location) does not 
     exceed 130 percent of the loan rate for upland cotton 
     established under subsection (b).
       (B) Value of certificates or payments.--The value of the 
     marketing certificates or cash payments shall be based on the 
     amount of the difference (reduced by 1.25 cents per pound) in 
     the prices during the 4th week of the consecutive 4-week 
     period multiplied by the quantity of upland cotton included 
     in the documented sales.
       (C) Administration.--Subparagraphs (D) through (G) of 
     paragraph (1) shall apply to marketing certificates issued 
     under this paragraph. Any such certificates may be 
     transferred to other persons in accordance with regulations 
     issued by the Secretary.
       (D) Exception.--The Secretary shall not issue marketing 
     certificates or cash payments under subparagraph (A) if, for 
     the immediately preceding consecutive 10-week period, the 
     Friday through Thursday average price quotation for the 
     lowest priced United States growth, as quoted for Middling 
     (M) 1\3/32\-inch cotton, delivered C.I.F. Northern Europe, 
     adjusted for the value of any certificate issued under this 
     paragraph, exceeds the Northern Europe price by more than 
     1.25 cents per pound.
       (E) Limitation on expenditures.--Total expenditures under 
     this paragraph shall not exceed $701,000,000 during fiscal 
     years 1996 through 2002.
       (3) Special import quota.--
       (A) Establishment.--The President shall carry out an import 
     quota program that provides that, during the period ending 
     July 31, 2003, whenever the Secretary determines and 
     announces that for any consecutive 10-week period, the Friday 
     through Thursday average price quotation for the lowest-
     priced United States growth, as quoted for Middling (M) 1\3/
     32\-inch cotton, delivered C.I.F. Northern Europe, adjusted 
     for the value of any certificates issued under paragraph (2), 
     exceeds the Northern Europe price by more than 1.25 cents per 
     pound, there shall immediately be in effect a special import 
     quota.
       (B) Quantity.--The quota shall be equal to 1 week's 
     consumption of upland cotton by domestic mills at the 
     seasonally adjusted average rate of the most recent 3 months 
     for which data are available.
       (C) Application.--The quota shall apply to upland cotton 
     purchased not later than 90 days after the date of the 
     Secretary's announcement under subparagraph (A) and entered 
     into the United States not later than 180 days after the 
     date.
       (D) Overlap.--A special quota period may be established 
     that overlaps any existing quota period if required by 
     subparagraph (A), except that a special quota period may not 
     be established under this paragraph if a quota period has 
     been established under subsection (g).
       (E) Preferential tariff treatment.--The quantity under a 
     special import quota shall be considered to be an in-quota 
     quantity for purposes of--
       (i) section 213(d) of the Caribbean Basin Economic Recovery 
     Act (19 U.S.C. 2703(d));
       (ii) section 204 of the Andean Trade Preference Act (19 
     U.S.C. 3203);
       (iii) section 503(d) of the Trade Act of 1974 (19 U.S.C. 
     2463(d)); and
       (iv) General Note 3(a)(iv) to the Harmonized Tariff 
     Schedule.
       (F) Definition.--In this paragraph, the term ``special 
     import quota'' means a quantity of imports that is not 
     subject to the over-quota tariff rate of a tariff-rate quota.
       (g) Limited Global Import Quota For Upland Cotton.--
       (1) In general.--The President shall carry out an import 
     quota program that provides that whenever the Secretary 
     determines and announces that the average price of the base 
     quality of upland cotton, as determined by the Secretary, in 
     the designated spot markets for a month exceeded 130 percent 
     of the average price of such quality of cotton in the markets 
     for the preceding 36 months, notwithstanding any other 
     provision of law, there shall immediately be in effect a 
     limited global import quota subject to the following 
     conditions:
       (A) Quantity.--The quantity of the quota shall be equal to 
     21 days of domestic mill consumption of upland cotton at the 
     seasonally adjusted average rate of the most recent 3 months 
     for which data are available.
       (B) Quantity if prior quota.--If a quota has been 
     established under this subsection during the preceding 12 
     months, the quantity of the quota next established under this 
     subsection shall be the smaller of 21 days of domestic mill 
     consumption calculated under subparagraph (A) or the quantity 
     required to increase the supply to 130 percent of the demand.
       (C) Preferential tariff treatment.--The quantity under a 
     limited global import quota shall be considered to be an in-
     quota quantity for purposes of--
       (i) section 213(d) of the Caribbean Basin Economic Recovery 
     Act (19 U.S.C. 2703(d));
       (ii) section 204 of the Andean Trade Preference Act (19 
     U.S.C. 3203);
       (iii) section 503(d) of the Trade Act of 1974 (19 U.S.C. 
     2463(d)); and
       (iv) General Note 3(a)(iv) to the Harmonized Tariff 
     Schedule.
       (D) Definitions.--In this subsection:
       (i) Supply.--The term ``supply'' means, using the latest 
     official data of the Bureau of the Census, the Department of 
     Agriculture, and the Department of the Treasury--

       (I) the carry-over of upland cotton at the beginning of the 
     marketing year (adjusted to 480-pound bales) in which the 
     quota is established;
       (II) production of the current crop; and
       (III) imports to the latest date available during the 
     marketing year.

       (ii) Demand.--The term ``demand'' means--

       (I) the average seasonally adjusted annual rate of domestic 
     mill consumption in the most recent 3 months for which data 
     are available; and
       (II) the larger of--

       (aa) average exports of upland cotton during the preceding 
     6 marketing years; or
       (bb) cumulative exports of upland cotton plus outstanding 
     export sales for the marketing year in which the quota is 
     established.
       (iii) Limited global import quota.--The term ``limited 
     global import quota'' means a quantity of imports that is not 
     subject to the over-quota tariff rate of a tariff-rate quota.
       (D) Quota entry period.--When a quota is established under 
     this subsection, cotton may be entered under the quota during 
     the 90-day period beginning on the date the quota is 
     established by the Secretary.
       (2) No overlap.--Notwithstanding paragraph (1), a quota 
     period may not be established that overlaps an existing quota 
     period or a special quota period established under subsection 
     (f)(3).

     SEC. 1105. PAYMENT LIMITATIONS.

       (a) Limitation on Payments Under Production Flexibility 
     Contracts.--The total amount of contract payments made to a 
     person under 1 or more production flexibility contracts 
     during any fiscal year may not exceed $40,000.
       (b) Limitation on Marketing Loan Gains and Loan Deficiency 
     Payments.--
       (1) Limitation.--The total amount of payments specified in 
     paragraph (2) that a person shall be entitled to receive 
     under section 1104 for contract commodities and oilseeds 
     during any fiscal year may not exceed $75,000.
       (2) Description of payments.--The payments referred to in 
     paragraph (1) are the following:
       (A) Any gain realized by a producer from repaying a 
     marketing assistance loan for a crop of any loan commodity at 
     a lower level than the original loan rate established for the 
     commodity under section 1104(b).
       (B) Any loan deficiency payment received for a loan 
     commodity under section 1104(e).
       (c) Applicability of Other Provisions Regarding Payment 
     Limitations.--Paragraphs (5), (6), and (7) of section 1001 
     and sections 1001A through 1001C of the Food Security Act of 
     1985 (7 U.S.C. 1308 et seq.) shall apply with respect to the 
     application of payment limitations under this section.
       (d) Conforming Amendments.--Section 1001 of the Food 
     Security Act of 1985 (7 U.S.C. 1308) is amended by striking 
     ``1997'' each place it appears in paragraphs (1)(A), (1)(B), 
     and (2)(A) and inserting ``1995''.

     SEC. 1106. PEANUT PROGRAM.

       (a) Quota Peanuts.--
       (1) Availability of loans.--The Secretary shall make 
     nonrecourse loans available to producers of quota peanuts.
       (2) Loan rate.--The national average quota loan rate for 
     quota peanuts shall be $610 per ton.
       (3) Inspection, handling, or storage.--The loan amount may 
     not be reduced by the Secretary by any deductions for 
     inspection, handling, or storage.
       (4) Location and other factors.--The Secretary may make 
     adjustments in the loan rate for quota peanuts for location 
     of peanuts and such other factors as are authorized by 
     section 411 of the Agricultural Adjustment Act of 1938.
       (b) Additional Peanuts.--
       (1) In general.--The Secretary shall make nonrecourse loans 
     available to producers of additional peanuts at such rates as 
     the Secretary 

[[Page H 13383]]
     finds appropriate, taking into consideration the demand for peanut oil 
     and peanut meal, expected prices of other vegetable oils and 
     protein meals, and the demand for peanuts in foreign markets.
       (2) Announcement.--The Secretary shall announce the loan 
     rate for additional peanuts of each crop not later than 
     February 15 preceding the marketing year for the crop for 
     which the loan rate is being determined.
       (c) Area Marketing Associations.--
       (1) Warehouse storage loans.--
       (A) In general.--In carrying out subsections (a) and (b), 
     the Secretary shall make warehouse storage loans available in 
     each of the producing areas (described in section 1446.95 of 
     title 7 of the Code of Federal Regulations (January 1, 1989)) 
     to a designated area marketing association of peanut 
     producers that is selected and approved by the Secretary and 
     that is operated primarily for the purpose of conducting the 
     loan activities. The Secretary may not make warehouse storage 
     loans available to any cooperative that is engaged in 
     operations or activities concerning peanuts other than those 
     operations and activities specified in this section and 
     section 358e of the Agricultural Adjustment Act of 1938 (7 
     U.S.C. 1359a).
       (B) Administrative and supervisory activities.--An area 
     marketing association shall be used in administrative and 
     supervisory activities relating to loans and marketing 
     activities under this section and section 358e of the 
     Agricultural Adjustment Act of 1938 (7 U.S.C. 1359a).
       (C) Association costs.--Loans made to the association under 
     this paragraph shall include such costs as the area marketing 
     association reasonably may incur in carrying out the 
     responsibilities, operations, and activities of the 
     association under this section and section 358e of the 
     Agricultural Adjustment Act of 1938 (7 U.S.C. 1359a).
       (2) Pools for quota and additional peanuts.--
       (A) In general.--The Secretary shall require that each area 
     marketing association establish pools and maintain complete 
     and accurate records by area and segregation for quota 
     peanuts handled under loan and for additional peanuts placed 
     under loan, except that separate pools shall be established 
     for Valencia peanuts produced in New Mexico. Bright hull and 
     dark hull Valencia peanuts shall be considered as separate 
     types for the purpose of establishing the pools.
       (B) Net gains.--Net gains on peanuts in each pool, unless 
     otherwise approved by the Secretary, shall be distributed 
     only to producers who placed peanuts in the pool and shall be 
     distributed in proportion to the value of the peanuts placed 
     in the pool by each producer. Net gains for peanuts in each 
     pool shall consist of the following:
       (i) Quota peanuts.--For quota peanuts, the net gains over 
     and above the loan indebtedness and other costs or losses 
     incurred on peanuts placed in the pool.
       (ii) Additional peanuts.--For additional peanuts, the net 
     gains over and above the loan indebtedness and other costs or 
     losses incurred on peanuts placed in the pool for additional 
     peanuts.
       (d) Losses.--Losses in quota area pools shall be covered 
     using the following sources in the following order of 
     priority:
       (1) Transfers from additional loan pools.--The proceeds due 
     any producer from any pool shall be reduced by the amount of 
     any loss that is incurred with respect to peanuts transferred 
     from an additional loan pool to a quota loan pool by the 
     producer under section 358-1(b)(8) of the Agricultural 
     Adjustment Act of 1938 (7 U.S.C. 1358-1(b)(8)).
       (2) Other producers in same pool.--Further losses in an 
     area quota pool shall be offset by reducing the gain of any 
     producer in the pool by the amount of pool gains attributed 
     to the same producer from the sale of additional peanuts for 
     domestic and export edible use.
       (3) Use of marketing assessments.--The Secretary shall use 
     funds collected under subsection (g) (except funds 
     attributable to handlers) to offset further losses in area 
     quota pools. The Secretary shall transfer to the Treasury 
     those funds collected under subsection (g) and available for 
     use under this subsection that the Secretary determines are 
     not required to cover losses in area quota pools.
       (4) Cross compliance.--Further losses in area quota pools, 
     other than losses incurred as a result of transfers from 
     additional loan pools to quota loan pools under section 358-
     1(b)(8) of the Agricultural Adjustment Act of 1938 (7 U.S.C. 
     1358-1(b)(8)), shall be offset by any gains or profits from 
     quota pools in other production areas (other than separate 
     type pools established under subsection (c)(2)(A) for 
     Valencia peanuts produced in New Mexico) in such manner as 
     the Secretary shall by regulation prescribe.
       (5) Increased assessments.--If use of the authorities 
     provided in the preceding paragraphs is not sufficient to 
     cover losses in an area quota pool, the Secretary shall 
     increase the marketing assessment established under 
     subsection (g) by such an amount as the Secretary considers 
     necessary to cover the losses. The increased assessment shall 
     apply only to quota peanuts in the production area covered by 
     the pool. Amounts collected under subsection (g) as a result 
     of the increased assessment shall be retained by the 
     Secretary to cover losses in that pool.
       (e) Disapproval of Quotas.--Notwithstanding any other 
     provision of law, no loan for quota peanuts may be made 
     available by the Secretary for any crop of peanuts with 
     respect to which poundage quotas have been disapproved by 
     producers, as provided for in section 358-1(d) of the 
     Agricultural Adjustment Act of 1938 (7 U.S.C. 1358-1(d)).
       (f) Quality Improvement.--
       (1) In general.--With respect to peanuts under loan, the 
     Secretary shall--
       (A) promote the crushing of peanuts at a greater risk of 
     deterioration before peanuts of a lesser risk of 
     deterioration;
       (B) ensure that all Commodity Credit Corporation 
     inventories of peanuts sold for domestic edible use must be 
     shown to have been officially inspected by licensed 
     Department of Agriculture inspectors both as farmer stock and 
     shelled or cleaned in-shell peanuts;
       (C) continue to endeavor to operate the peanut program so 
     as to improve the quality of domestic peanuts and ensure the 
     coordination of activities under the Peanut Administrative 
     Committee established under Marketing Agreement No. 146, 
     regulating the quality of domestically produced peanuts 
     (under the Agricultural Adjustment Act (7 U.S.C. 601 et 
     seq.), reenacted with amendments by the Agricultural 
     Marketing Agreement Act of 1937); and
       (D) ensure that any changes made in the peanut program as a 
     result of this subsection requiring additional production or 
     handling at the farm level shall be reflected as an upward 
     adjustment in the Department of Agriculture loan schedule.
       (2) Exports and other peanuts.--The Secretary shall require 
     that all peanuts in the domestic and export markets fully 
     comply with all quality standards under Marketing Agreement 
     No. 146.
       (g) Marketing Assessment.--
       (1) In general.--The Secretary shall provide for a 
     nonrefundable marketing assessment. The assessment shall be 
     made on a per pound basis in an amount equal to 1.1 percent 
     for each of the 1994 and 1995 crops, 1.15 percent for the 
     1996 crop, and 1.2 percent for each of the 1997 through 2002 
     crops, of the national average quota or additional peanut 
     loan rate for the applicable crop.
       (2) First purchasers.--
       (A) In general.--Except as provided under paragraphs (3) 
     and (4), the first purchaser of peanuts shall--
       (i) collect from the producer a marketing assessment equal 
     to the quantity of peanuts acquired multiplied by--

       (I) in the case of each of the 1994 and 1995 crops, .55 
     percent of the applicable national average loan rate;
       (II) in the case of the 1996 crop, .6 percent of the 
     applicable national average loan rate; and
       (III) in the case of each of the 1997 through 2002 crops, 
     .65 percent of the applicable national average loan rate;

       (ii) pay, in addition to the amount collected under clause 
     (i), a marketing assessment in an amount equal to the 
     quantity of peanuts acquired multiplied by .55 percent of the 
     applicable national average loan rate; and
       (iii) remit the amounts required under clauses (i) and (ii) 
     to the Commodity Credit Corporation in a manner specified by 
     the Secretary.
       (B) Definition of first purchaser.--In this subsection, the 
     term ``first purchaser'' means a person acquiring peanuts 
     from a producer except that in the case of peanuts forfeited 
     by a producer to the Commodity Credit Corporation, the term 
     means the person acquiring the peanuts from the Commodity 
     Credit Corporation.
       (3) Other private marketings.--In the case of a private 
     marketing by a producer directly to a consumer through a 
     retail or wholesale outlet or in the case of a marketing by 
     the producer outside of the continental United States, the 
     producer shall be responsible for the full amount of the 
     assessment and shall remit the assessment by such time as is 
     specified by the Secretary.
       (4) Loan peanuts.--In the case of peanuts that are pledged 
     as collateral for a loan made under this section, \1/2\ of 
     the assessment shall be deducted from the proceeds of the 
     loan. The remainder of the assessment shall be paid by the 
     first purchaser of the peanuts. For purposes of computing net 
     gains on peanuts under this section, the reduction in loan 
     proceeds shall be treated as having been paid to the 
     producer.
       (5) Penalties.--If any person fails to collect or remit the 
     reduction required by this subsection or fails to comply with 
     the requirements for recordkeeping or otherwise as are 
     required by the Secretary to carry out this subsection, the 
     person shall be liable to the Secretary for a civil penalty 
     up to an amount determined by multiplying--
       (A) the quantity of peanuts involved in the violation; by
       (B) the national average quota peanut rate for the 
     applicable crop year.
       (6) Enforcement.--The Secretary may enforce this subsection 
     in the courts of the United States.
       (h) Crops.--Subsections (a) through (f) shall be effective 
     only for the 1996 through 2002 crops of peanuts.
       (i) Marketing Quotas.--
       (1) In general.--Part VI of subtitle B of title III of the 
     Agricultural Adjustment Act of 1938 is amended--
       (A) in section 358-1 (7 U.S.C. 1358-1)--
       (i) in the section heading, by striking ``1991 through 1997 
     crops of'';
       (ii) in subsections (a)(1), (b)(1)(B), (b)(2)(A), 
     (b)(2)(C), and (b)(3)(A), by striking ``of the 1991 through 
     1997 marketing years'' each place it appears and inserting 
     ``marketing year'';
       (iii) in subsection (a)(3), by striking ``1990'' and 
     inserting ``1990, for the 1991 through 1995 marketing years, 
     and 1995, for the 1996 through 2002 marketing years'';
       (iv) in subsection (b)(1)(A)--

       (I) by striking ``each of the 1991 through 1997 marketing 
     years'' and inserting ``each marketing year''; and
       (II) in clause (i), by inserting before the semicolon the 
     following: ``, in the case of the 1991 through 1995 marketing 
     years, and the 1995 marketing year, in the case of the 1996 
     through 2002 marketing years''; and

       (v) in subsection (f), by striking ``1997'' and inserting 
     ``2002'';
       (B) in section 358b (7 U.S.C. 1358b)--

[[Page H 13384]]

       (i) in the section heading, by striking ``1991 through 1995 
     crops of''; and
       (ii) in subsection (c), by striking ``1995'' and inserting 
     ``2002'';
       (C) in section 358c(d) (7 U.S.C. 1358c(d)), by striking 
     ``1995'' and inserting ``2002''; and
       (D) in section 358e (7 U.S.C. 1359a)--
       (i) in the section heading, by striking ``for 1991 through 
     1997 crops of peanuts''; and
       (ii) in subsection (i), by striking ``1997'' and inserting 
     ``2002''.
       (2) Elimination of quota floor.--Section 358-1(a)(1) of the 
     Act (7 U.S.C. 1358-1(a)(1)) is amended by striking the second 
     sentence.
       (3) Temporary quota allocation.--Section 358-1 of the Act 
     (7 U.S.C. 1358-1) is amended--
       (A) in subsection (a)(1), by striking ``domestic edible, 
     seed,'' and inserting ``domestic edible use''; and
       (B) in subsection (b)(2)--
       (i) in subparagraph (A), by striking ``subparagraph (B) and 
     subject to''; and
       (ii) by striking subparagraph (B) and inserting the 
     following:
       ``(B) Temporary quota allocation.--
       ``(i) Allocation related to seed peanuts.--Temporary 
     allocation of quota pounds for the marketing year only in 
     which the crop is planted shall be made to producers for each 
     of the 1996 through 2002 marketing years as provided in this 
     subparagraph.
       ``(ii) Quantity.--The temporary quota allocation shall be 
     equal to the pounds of seed peanuts planted on the farm, as 
     may be adjusted under regulations prescribed by the 
     Secretary.
       ``(iii) Additional quota.--The temporary allocation of 
     quota pounds under this paragraph shall be in addition to the 
     farm poundage quota otherwise established under this 
     subsection and shall be credited, for the applicable 
     marketing year only, in total to the producer of the peanuts 
     on the farm in a manner prescribed by the Secretary.
       ``(iv) Effect of other requirements.--Nothing in this 
     section alters or changes the requirements regarding the use 
     of quota and additional peanuts established by section 
     358e(b).''.
       (4) Undermarketings.--Part VI of subtitle B of title III of 
     the Act is amended--
       (A) in section 358-1(b) (7 U.S.C. 1358-1(b))--
       (i) in paragraph (1)(B), by striking ``including--'' and 
     clauses (i) and (ii) and inserting ``including any increases 
     resulting from the allocation of quotas voluntarily released 
     for 1 year under paragraph (7).'';
       (ii) in paragraph (3)(B), by striking ``include--'' and 
     clauses (i) and (ii) and inserting ``include any increase 
     resulting from the allocation of quotas voluntarily released 
     for 1 year under paragraph (7).''; and
       (iii) by striking paragraphs (8) and (9); and
       (B) in section 358b(a) (7 U.S.C. 1358b(a))--
       (i) in paragraph (1), by striking ``(including any 
     applicable under marketings)'' both places it appears;
       (ii) in paragraph (1)(A), by striking ``of undermarketings 
     and'';
       (iii) in paragraph (2), by striking ``(including any 
     applicable under marketings)''; and
       (iv) in paragraph (3), by striking ``(including any 
     applicable undermarketings)''.
       (5) Disaster transfers.--Section 358-1(b) of the Act (7 
     U.S.C. 1358-1(b)), as amended by paragraph (4)(A)(iii), is 
     further amended by adding at the end the following:
       ``(8) Disaster transfers.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     additional peanuts produced on a farm from which the quota 
     poundage was not harvested and marketed because of drought, 
     flood, or any other natural disaster, or any other condition 
     beyond the control of the producer, may be transferred to the 
     quota loan pool for pricing purposes on such basis as the 
     Secretary shall by regulation provide.
       ``(B) Limitation.--The poundage of peanuts transferred 
     under subparagraph (A) shall not exceed the difference 
     between--
       ``(i) the total quantity of peanuts meeting quality 
     requirements for domestic edible use, as determined by the 
     Secretary, marketed from the farm; and
       ``(ii) the total farm poundage quota, excluding quota 
     pounds transferred to the farm in the fall.
       ``(C) Support rate.--Peanuts transferred under this 
     paragraph shall be supported at not more than 70 percent of 
     the quota support rate for the marketing years in which the 
     transfers occur. The transfers for a farm shall not exceed 25 
     percent of the total farm quota pounds, excluding pounds 
     transferred in the fall.''.

     SEC. 1107. SUGAR PROGRAM.

       (a) Sugarcane.--The Secretary shall make loans available to 
     processors of domestically grown sugarcane at a rate equal to 
     18 cents per pound for raw cane sugar.
       (b) Sugar Beets.--The Secretary shall make loans available 
     to processors of domestically grown sugar beets at a rate 
     equal to 22.9 cents per pound for refined beet sugar.
       (c) Term of Loans.--
       (1) In general.--Loans under this section during any fiscal 
     year shall be made available not earlier than the beginning 
     of the fiscal year and shall mature at the earlier of--
       (A) the end of 9 months; or
       (B) the end of the fiscal year.
       (2) Supplemental loans.--In the case of loans made under 
     this section in the last 3 months of a fiscal year, the 
     processor may repledge the sugar as collateral for a second 
     loan in the subsequent fiscal year, except that the second 
     loan shall--
       (A) be made at the loan rate in effect at the time the 
     second loan is made; and
       (B) mature in 9 months less the quantity of time that the 
     first loan was in effect.
       (d) Loan Type; Processor Assurances.--
       (1) Recourse loans.--Subject to paragraph (2), the 
     Secretary shall carry out this section through the use of 
     recourse loans.
       (2) Nonrecourse loans.--During any fiscal year in which the 
     tariff rate quota for imports of sugar into the United States 
     is established at, or is increased to, a level in excess of 
     1,500,000 short tons raw value, the Secretary shall carry out 
     this section by making available nonrecourse loans. Any 
     recourse loan previously made available by the Secretary 
     under this section during the fiscal year shall be changed by 
     the Secretary into a nonrecourse loan.
       (3) Processor assurances.--If the Secretary is required 
     under paragraph (2) to make nonrecourse loans available 
     during a fiscal year or to change recourse loans into 
     nonrecourse loans, the Secretary shall obtain from each 
     processor that receives a loan under this section such 
     assurances as the Secretary considers adequate to ensure that 
     the processor will provide payments to producers that are 
     proportional to the value of the loan received by the 
     processor for sugar beets and sugarcane delivered by 
     producers served by the processor. The Secretary may 
     establish appropriate minimum payments for purposes of this 
     paragraph.
       (e) Marketing Assessment.--
       (1) Sugarcane.--Effective for marketings of raw cane sugar 
     during the 1996 through 2003 fiscal years, the first 
     processor of sugarcane shall remit to the Commodity Credit 
     Corporation a nonrefundable marketing assessment in an amount 
     equal to--
       (A) in the case of marketings during fiscal year 1996, 1.1 
     percent of the loan rate established under subsection (a) per 
     pound of raw cane sugar, processed by the processor from 
     domestically produced sugarcane or sugarcane molasses, that 
     has been marketed (including the transfer or delivery of the 
     sugar to a refinery for further processing or marketing); and
       (B) in the case of marketings during each of fiscal years 
     1997 through 2003, 1.375 percent of the loan rate established 
     under subsection (a) per pound of raw cane sugar, processed 
     by the processor from domestically produced sugarcane or 
     sugarcane molasses, that has been marketed (including the 
     transfer or delivery of the sugar to a refinery for further 
     processing or marketing).
       (2) Sugar beets.--Effective for marketings of beet sugar 
     during the 1996 through 2003 fiscal years, the first 
     processor of sugar beets shall remit to the Commodity Credit 
     Corporation a nonrefundable marketing assessment in an amount 
     equal to--
       (A) in the case of marketings during fiscal year 1996, 
     1.1794 percent of the loan rate established under subsection 
     (a) per pound of beet sugar, processed by the processor from 
     domestically produced sugar beets or sugar beet molasses, 
     that has been marketed; and
       (B) in the case of marketings during each of fiscal years 
     1997 through 2003, 1.47425 percent of the loan rate 
     established under subsection (a) per pound of beet sugar, 
     processed by the processor from domestically produced sugar 
     beets or sugar beet molasses, that has been marketed.
       (3) Collection.--
       (A) Timing.--A marketing assessment required under this 
     subsection shall be collected on a monthly basis and shall be 
     remitted to the Commodity Credit Corporation not later than 
     30 days after the end of each month. Any cane sugar or beet 
     sugar processed during a fiscal year that has not been 
     marketed by September 30 of the year shall be subject to 
     assessment on that date. The sugar shall not be subject to a 
     second assessment at the time that it is marketed.
       (B) Manner.--Subject to subparagraph (A), marketing 
     assessments shall be collected under this subsection in the 
     manner prescribed by the Secretary and shall be 
     nonrefundable.
       (4) Penalties.--If any person fails to remit the assessment 
     required by this subsection or fails to comply with such 
     requirements for recordkeeping or otherwise as are required 
     by the Secretary to carry out this subsection, the person 
     shall be liable to the Secretary for a civil penalty up to an 
     amount determined by multiplying--
       (A) the quantity of cane sugar or beet sugar involved in 
     the violation; by
       (B) the loan rate for the applicable crop of sugarcane or 
     sugar beets.
       (5) Enforcement.--The Secretary may enforce this subsection 
     in a court of the United States.
       (f) Forfeiture Penalty.--
       (1) In general.--A penalty shall be assessed on the 
     forfeiture of any sugar pledged as collateral for a 
     nonrecourse loan under this section.
       (2) Sugarcane.--The penalty for sugarcane shall be 1 cent 
     per pound.
       (3) Sugar beets.--The penalty for sugar beets shall bear 
     the same relation to the penalty for sugarcane as the 
     marketing assessment for sugar beets bears to the marketing 
     assessment for sugarcane.
       (4) Effect of forfeiture.--Any payments owed producers by a 
     processor that forfeits of any sugar pledged as collateral 
     for a nonrecourse loan shall be reduced in proportion to the 
     loan forfeiture penalty incurred by the processor.
       (g) Information Reporting.--
       (1) Duty of processors and refiners to report.--A sugarcane 
     processor, cane sugar refiner, and sugar beet processor shall 
     furnish the Secretary, on a monthly basis, such information 
     as the Secretary may require to administer sugar programs, 
     including the quantity of purchases of sugarcane, sugar 
     beets, and sugar, and production, importation, distribution, 
     and stock levels of sugar.
       (2) Penalty.--Any person willfully failing or refusing to 
     furnish the information, or furnishing willfully any false 
     information, shall be subject to a civil penalty of not more 
     than $10,000 for each such violation.
       (3) Monthly reports.--Taking into consideration the 
     information received under paragraph (1), the Secretary shall 
     publish on a monthly 

[[Page H 13385]]
     basis composite data on production, imports, distribution, and stock 
     levels of sugar.
       (h) 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.
       (i) Crops.--This section (other than subsection (h)) shall 
     be effective only for the 1996 through 2002 crops of sugar 
     beets and sugarcane.

     SEC. 1108. ADMINISTRATION.

       (a) Commodity Credit Corporation.--
       (1) Use of corporation.--The Secretary shall carry out this 
     subtitle through the Commodity Credit Corporation.
       (2) Salaries and expenses.--No funds of the Corporation 
     shall be used for any salary or expense of any officer or 
     employee of the Department of Agriculture in connection with 
     the administration of payments or loans under this subtitle.
       (b) Administration.--Title IV of the Agricultural 
     Adjustment Act of 1938 (as added by section 1109) shall apply 
     to the administration of this subtitle.
       (c) Regulations.--The Secretary may issue such regulations 
     as the Secretary determines necessary to carry out this 
     subtitle.

     SEC. 1109. ELIMINATION OF PERMANENT PRICE SUPPORT AUTHORITY.

       (a) Agricultural Adjustment Act of 1938.--The Agricultural 
     Adjustment Act of 1938 is amended--
       (1) in title III--
       (A) in subtitle B--
       (i) by striking parts II through V (7 U.S.C. 1326-1351); 
     and
       (ii) in part VI, by striking sections 358, 358a, and 358d 
     (7 U.S.C. 1358, 1358a, and 1359); and
       (B) by striking subtitle D (7 U.S.C. 1379a-1379j); and
       (2) by striking title IV (7 U.S.C. 1401-1407).
       (b) Agricultural Act of 1949.--
       (1) Transfer of certain sections.--The Agricultural Act of 
     1949 is amended--
       (A) by transferring sections 106, 106A, and 106B (7 U.S.C. 
     1445, 1445-1, 1445-2) to appear after section 314A of the 
     Agricultural Adjustment Act of 1938 (7 U.S.C. 1314-1) and 
     redesignating the transferred sections as sections 315, 315A, 
     and 315B, respectively;
       (B) by transferring sections 111, 201(c), and 204 (7 U.S.C. 
     1445f, 1446(c), 1446e) to appear after section 304 of the 
     Agricultural Adjustment Act of 1938 (7 U.S.C. 1304) and 
     redesignating the transferred sections as sections 305, 306, 
     and 307, respectively;
       (C) by transferring sections 403, 405, 407, 412, and 422 (7 
     U.S.C. 1423, 1425, 1427, 1429, 1431a) to appear after section 
     393 (7 U.S.C. 1393) and redesignating the transferred 
     sections as sections 411, 412, 413, 414, and 415, 
     respectively; and
       (D) by transferring section 416 (7 U.S.C. 1431) to appear 
     after section 415 of the Agricultural Adjustment Act of 1938 
     (as transferred and redesignated by subparagraph (C)).
       (2) Repeal.--The Agricultural Act of 1949 (7 U.S.C. 1421 et 
     seq.) (as amended by paragraph (1)) is repealed.
       (c) Conforming Amendments.--The Agricultural Adjustment Act 
     of 1938 is amended--
       (1) in section 306 (as transferred and redesignated by 
     subsection (b)(1)(B)), by striking ``204'' and inserting 
     ``307''; and
       (2) by striking section 411 (as transferred and 
     redesignated by subsection (b)(1)(C)) and inserting the 
     following:
                  ``TITLE IV--ADMINISTRATION OF LOANS

     ``SEC. 411. ADJUSTMENTS FOR GRADE, TYPE, QUALITY, LOCATION, 
                   AND OTHER FACTORS.

       ``The Secretary may make such adjustments in the announced 
     loan rate for a commodity as the Secretary considers 
     appropriate to reflect differences in grade, type, quality, 
     location, and other factors.''.

     SEC. 1110. EFFECT OF AMENDMENTS.

       (a) Effect on Prior Crops.--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 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 date of the enactment of this Act.
       (b) 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 date of the enactment of this Act.
                        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 4 of subtitle D.
       ``(b) Livestock Environmental Assistance 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 livestock environmental assistance 
     program under chapter 4 of subtitle D.''.
       (b) Livestock Environmental Assistance 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 adding at 
     the end the following:

        ``CHAPTER 4--LIVESTOCK ENVIRONMENTAL ASSISTANCE PROGRAM

     ``SEC. 1240. DEFINITIONS.

       ``In this chapter:
       ``(1) Land management practice.--The term `land management 
     practice' means a site-specific nutrient or manure 
     management, irrigation management, tillage or residue 
     management, grazing management, or other land management 
     practice that the Secretary determines is needed to protect, 
     in the most cost effective manner, water, soil, or related 
     resources from degradation due to livestock production.
       ``(2) Large confined livestock operation.--The term `large 
     confined livestock operation' means an operation that--
       ``(A) is a confined animal feeding operation; and
       ``(B) has more than--
       ``(i) 55 mature dairy cattle;
       ``(ii) 10,000 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) 15,000 swine; or
       ``(vii) 10,000 sheep or lambs.
       ``(3) Livestock.--The term `livestock' means dairy cows, 
     beef cattle, laying hens, broilers, turkeys, swine, sheep, 
     lambs, and such other animals as determined by the Secretary.
       ``(4) Operator.--The term `operator' means a person who is 
     engaged in 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, or other structural practice that the Secretary 
     determines is needed to protect, in the most cost effective 
     manner, water, soil, or related resources from degradation 
     due to livestock production.

     ``SEC. 1240A. ESTABLISHMENT AND ADMINISTRATION OF LIVESTOCK 
                   ENVIRONMENTAL ASSISTANCE 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 a 
     livestock environmental assistance 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 land.--Assistance under this chapter may be 
     provided with respect to land that is used for livestock 
     production and on which a serious threat to water, soil, or 
     related resources exists, as determined by the Secretary, by 
     reason of the soil types, terrain, climatic, soil, 
     topographic, flood, or saline characteristics, or other 
     factors or natural hazards.
       ``(4) Selection criteria.--In providing 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, the 
     Secretary shall consider--
       ``(A) the significance of the water, soil, and related 
     natural resource problems; and
       ``(B) the 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 selection 
     criteria established under 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.--

[[Page H 13386]]

       ``(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, 2, 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 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 livestock environmental 
     assistance program established under this chapter.''.
       (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 15 years, but in no case shall be a 
     permanent easement.''.
       (3) Conservation reserve program.--
       (A) In general.--Section 1231(d) of the Food Security Act 
     of 1985 (16 U.S.C. 3831(d)) is amended 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.''.
       (B) Optional contract termination by producers.--Section 
     1235 of the Food Security Act of 1985 (16 U.S.C. 3835) is 
     amended by adding at the end the following:
       ``(e) Termination by Owner or Operator.--
       ``(1) Notice of termination.--An owner or operator of land 
     subject to a contract entered into under this subchapter may 
     terminate the contract by submitting to the Secretary written 
     notice of the intention of the owner or operator to terminate 
     the contract.
       ``(2) Effective date.--The contract termination shall take 
     effect 60 days after the date on which the owner or operator 
     submits the written notice under paragraph (1).
       ``(3) Prorated rental payment.--If a contract entered into 
     under this subchapter is terminated under this subsection 
     before the end of the fiscal year for which a rental payment 
     is due, the Secretary shall provide a prorated rental payment 
     covering the portion of the fiscal year during which the 
     contract was in effect.
       ``(4) Renewed enrollment.--The termination of a contract 
     entered into under this subchapter shall not affect the 
     ability of the owner or operator who requested the 
     termination to submit a subsequent bid to enroll the land 
     that was subject to the contract into the conservation 
     reserve.
       ``(5) Conservation requirements.--If land that was subject 
     to a contract is returned to production of an agricultural 
     commodity, the conservation requirements under subtitles B 
     and C shall apply to the use of the land to the extent that 
     the requirements are similar to those requirements imposed on 
     other similar lands in the area, except that the requirements 
     may not be more onerous that the requirements imposed on 
     other lands.
       ``(6) Repayment of cost share.--A person who terminates a 
     contract entered into under this subchapter within less than 
     3 years after entering into the contract shall reimburse the 
     Secretary for any cost share assistance provided under the 
     contract.''.
       (C) Limitation.--Notwithstanding any other provision of 
     law, no new acres shall be enrolled in the conservation 
     reserve program established under subchapter B of chapter 1 
     of subtitle D of title XII of the Food Security Act of 1985 
     (16 U.S.C. 3831 et seq.) in calendar year 1997.
         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 $100,000,000 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) $350,000,000 for fiscal year 1996;
       ``(B) $350,000,000 for fiscal year 1997;
       ``(C) $500,000,000 for fiscal year 1998;
       ``(D) $550,000,000 for fiscal year 1999;
       ``(E) $579,000,000 for fiscal year 2000;
       ``(F) $478,000,000 for fiscal year 2001; and
       ``(G) $478,000,000 for fiscal year 2002.''.
                       Subtitle D--Miscellaneous

     SEC. 1401. CROP INSURANCE.

       (a) Catastrophic Risk Protection.--Section 508(b) of the 
     Federal Crop Insurance Act (7 U.S.C. 1508(b)) is amended--
       (1) in paragraph (4), by adding at the end the following:
       ``(C) Delivery of coverage.--
       ``(i) In general.--In full consultation with approved 
     insurance providers, the Secretary may continue to offer 
     catastrophic risk protection in a State (or a portion of a 
     State) through local offices of the Department if the 
     Secretary determines that there is an insufficient number of 
     approved insurance providers operating in the State or 
     portion to adequately provide catastrophic risk protection 
     coverage to producers.
       ``(ii) Coverage by approved insurance providers.--To the 
     extent that catastrophic risk protection coverage by approved 
     insurance providers is sufficiently available in a State as 
     determined by the Secretary, only approved insurance 
     providers may provide the coverage in the State.
       ``(iii) Current policies.--Subject to clause (ii), all 
     catastrophic risk protection policies written by local 
     offices of the Department shall be transferred (including all 
     fees collected for the crop year in which the approved 
     insurance provider will assume the policies) to the approved 
     insurance provider for performance of all sales, service, and 
     loss adjustment functions.''; and
       (2) in paragraph (7), by striking subparagraph (A) and 
     inserting the following:
       ``(A) In general.--Effective for the spring-planted 1996 
     and subsequent crops, to be eligible for any payment or loan 
     under the Agricultural Market Transition Act, the 
     conservation reserve program, or any benefit described in 
     section 371 of the Consolidated Farm and Rural Development 
     Act (7 U.S.C. 2008f), a person shall--
       ``(i) obtain at least the catastrophic level of insurance 
     for each crop of economic significance in which the person 
     has an interest; or
       ``(ii) provide a written waiver to the Secretary that 
     waives any eligibility for emergency crop loss assistance in 
     connection with the crop.''.
       (b) Coverage of Seed Crops.--Section 519(a)(2)(B) of the 
     Act (7 U.S.C. 1519(a)(2)(B) is amended by inserting ``seed 
     crops,'' after ``turfgrass sod,''.

     SEC. 1402. COLLECTION AND USE OF AGRICULTURAL QUARANTINE AND 
                   INSPECTION FEES.

       Subsection (a) of section 2509 of the Food, Agriculture, 
     Conservation, and Trade Act of 1990 (21 U.S.C. 136a) is 
     amended to read as follows:
       ``(a) Quarantine and Inspection Fees.--
       ``(1) Fees authorized.--The Secretary of Agriculture may 
     prescribe and collect fees sufficient--
       ``(A) to cover the cost of providing agricultural 
     quarantine and inspection services in connection with the 
     arrival at a port in the customs territory of the United 
     States, or the preclearance or preinspection at a site 
     outside the customs territory of the United States, of an 
     international passenger, commercial vessel, commercial 
     aircraft, commercial truck, or railroad car;
       ``(B) to cover the cost of administering this subsection; 
     and
       ``(C) through fiscal year 2002, to maintain a reasonable 
     balance in the Agricultural Quarantine Inspection User Fee 
     Account established under paragraph (5).
       ``(2) Limitation.--In setting the fees under paragraph (1), 
     the Secretary shall ensure that the amount of the fees are 
     commensurate with the costs of agricultural quarantine and 
     inspection services with respect to the class of persons or 
     entities paying the fees. The costs of the services with 
     respect to passengers as a class includes the costs of 
     related inspections of the aircraft or other vehicle.
       ``(3) Status of fees.--Fees collected under this subsection 
     by any person on behalf of the Secretary are held in trust 
     for the United States and shall be remitted to the Secretary 
     in such manner and at such times as the Secretary may 
     prescribe.
       ``(4) Late payment penalties.--If a person subject to a fee 
     under this subsection fails to pay the fee when due, the 
     Secretary shall assess a late payment penalty, and the 
     overdue fees 

[[Page H 13387]]
     shall accrue interest, as required by section 3717 of title 31, United 
     States Code.
       ``(5) Agricultural quarantine inspection user fee 
     account.--
       ``(A) Establishment.--There is established in the Treasury 
     of the United States a no-year fund, to be known as the 
     `Agricultural Quarantine Inspection User Fee Account', which 
     shall contain all of the fees collected under this subsection 
     and late payment penalties and interest charges collected 
     under paragraph (4) through fiscal year 2002.
       ``(B) Use of account.--For each of the fiscal years 1996 
     through 2002, funds in the Agricultural Quarantine Inspection 
     User Fee Account shall be available, in such amounts as are 
     provided in advance in appropriations Acts, to cover the 
     costs associated with the provision of agricultural 
     quarantine and inspection services and the administration of 
     this subsection. Amounts made available under this 
     subparagraph shall be available until expended.
       ``(C) Excess fees.--Fees and other amounts collected under 
     this subsection in any of the fiscal years 1996 through 2002 
     in excess of $100,000,000 shall be available for the purposes 
     specified in subparagraph (B) until expended, without further 
     appropriation.
       ``(6) Use of amounts collected after fiscal year 2002.--
     After September 30, 2002, the unobligated balance in the 
     Agricultural Quarantine Inspection User Fee Account and fees 
     and other amounts collected under this subsection shall be 
     credited to the Department of Agriculture accounts that incur 
     the costs associated with the provision of agricultural 
     quarantine and inspection services and the administration of 
     this subsection. The fees and other amounts shall remain 
     available to the Secretary until expended without fiscal year 
     limitation.
       ``(7) Staff years.--The number of full-time equivalent 
     positions in the Department of Agriculture attributable to 
     the provision of agricultural quarantine and inspection 
     services and the administration of this subsection shall not 
     be counted toward the limitation on the total number of full-
     time equivalent positions in all agencies specified in 
     section 5(b) of the Federal Workforce Restructuring Act of 
     1994 (Public Law 103-226; 5 U.S.C. 3101 note) or other 
     limitation on the total number of full-time equivalent 
     positions.''.

     SEC. 1403. 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.
           TITLE II--BANKING, HOUSING, AND RELATED PROVISIONS

     SEC. 2001. TABLE OF CONTENTS.

       The table of contents for this title is as follows:

           TITLE II--BANKING, HOUSING, AND RELATED PROVISIONS

Sec. 2001. Table of contents.

           TITLE II--BANKING, HOUSING, AND RELATED PROVISIONS

                   Subtitle A--Financial Institutions

Sec. 2011. Special assessment to capitalize SAIF.
Sec. 2012. Financing Corporation assessments shared proportionally by 
              all insured depository institutions.
Sec. 2013. Merger of BIF and SAIF.
Sec. 2014. Creation of SAIF Special Reserve.
Sec. 2015. Refund of amounts in deposit insurance fund in excess of 
              designated reserve amount.
Sec. 2016. Assessment rates for SAIF members may not be less than 
              assessment rates for BIF members.
Sec. 2017. Assessments authorized only if needed to maintain the 
              reserve ratio of a deposit insurance fund.
Sec. 2018. Limitation on authority of Oversight Board to continue to 
              employ more than 18 officers and employees.
Sec. 2019. Definitions.

                          Subtitle B--Housing

Sec. 2051. Annual adjustment factors for operating costs only; 
              restraint on rent increases.
Sec. 2052. Foreclosure avoidance and borrower assistance.
           TITLE II--BANKING, HOUSING, AND RELATED PROVISIONS
                   Subtitle A--Financial Institutions

     SEC. 2011. SPECIAL ASSESSMENT TO CAPITALIZE SAIF.

       (a) In General.--Except as provided in subsection (f), the 
     Board of Directors shall impose a special assessment on the 
     SAIF-assessable deposits of each insured depository 
     institution at a rate applicable to all such institutions 
     that the Board of Directors, in its sole discretion, 
     determines (after taking into account the adjustments 
     described in subsections (g) through (j)) will cause the 
     Savings Association Insurance Fund to achieve the designated 
     reserve ratio on the first business day of January 1996.
       (b) Factors To Be Considered.--In carrying out subsection 
     (a), the Board of Directors shall base its determination on--
       (1) the monthly Savings Association Insurance Fund balance 
     most recently calculated;
       (2) data on insured deposits reported in the most recent 
     reports of condition filed not later than 70 days before the 
     date of enactment of this Act by insured depository 
     institutions; and
       (3) any other factors that the Board of Directors deems 
     appropriate.
       (c) Date of Determination.--For purposes of subsection (a), 
     the amount of the SAIF-assessable deposits of an insured 
     depository institution shall be determined as of March 31, 
     1995.
       (d) Date Payment Due.--The special assessment imposed under 
     this section shall be--
       (1) due on the first business day of January 1996; and
       (2) paid to the Corporation on the later of--
       (A) the first business day of January 1996; or
       (B) such other date as the Corporation shall prescribe, but 
     not later than 60 days after the date of enactment of this 
     Act.
       (e) Assessment Deposited in SAIF.--Notwithstanding any 
     other provision of law, the proceeds of the special 
     assessment imposed under this section shall be deposited in 
     the Savings Association Insurance Fund.
       (f) Exemptions for Certain Institutions.--
       (1) Exemption for weak institutions.--The Board of 
     Directors may, by order, in its sole discretion, exempt any 
     insured depository institution that the Board of Directors 
     determines to be weak, from paying the special assessment 
     imposed under this section if the Board of Directors 
     determines that the exemption would reduce risk to the 
     Savings Association Insurance Fund.
       (2) Guidelines required.--Not later than 30 days after the 
     date of enactment of this Act, the Board of Directors shall 
     prescribe guidelines setting forth the criteria that the 
     Board of Directors will use in exempting institutions under 
     paragraph (1). Such guidelines shall be published in the 
     Federal Register.
       (3) Exemption for certain newly chartered and other defined 
     institutions.--
       (A) In general.--In addition to the institutions exempted 
     from paying the special assessment under paragraph (1), the 
     Board of Directors shall exempt any insured depository 
     institution from payment of the special assessment if the 
     institution--
       (i) was in existence on October 1, 1995, and held no SAIF-
     assessable deposits prior to January 1, 1993;
       (ii) is a Federal savings bank which--

       (I) was established de novo in April 1994 in order to 
     acquire the deposits of a savings association which was in 
     default or in danger of default; and
       (II) received minority interim capital assistance from the 
     Resolution Trust Corporation under section 21A(w) of the 
     Federal Home Loan Bank Act in connection with the acquisition 
     of any such savings association; or

       (iii) is a savings association, the deposits of which are 
     insured by the Savings Association Insurance Fund, which--

       (I) prior to January 1, 1987, was chartered as a Federal 
     savings bank insured by the Federal Savings and Loan 
     Insurance Corporation for the purpose of acquiring all or 
     substantially all of the assets and assuming all or 
     substantially all of the deposit liabilities of a national 
     bank in a transaction consummated after July 1, 1986; and
       (II) as of the date of that transaction, had assets of less 
     than $150,000,000.

       (B) Definition.--For purposes of this paragraph, an 
     institution shall be deemed to have held SAIF-assessable 
     deposits prior to January 1, 1993, if--
       (i) it directly held SAIF-assessable insured deposits prior 
     to that date; or
       (ii) it succeeded to, acquired, purchased, or otherwise 
     holds any SAIF-assessable deposits as of the date of 
     enactment of this Act that were SAIF-assessable deposits 
     prior to January 1, 1993.
       (4) Exempt institutions required to pay assessments at 
     former rates.--
       (A) Payments to saif and dif.--Any insured depository 
     institution that the Board of Directors exempts under this 
     subsection from paying the special assessment imposed under 
     this section shall pay semiannual assessments--
       (i) during calendar years 1996 and 1997, into the Savings 
     Association Insurance Fund, based on SAIF-assessable deposits 
     of that institution, at assessment rates calculated under the 
     schedule in effect for Savings Association Insurance Fund 
     members on June 30, 1995; and
       (ii) during calendar years 1998 and 1999--

       (I) into the Deposit Insurance Fund, based on SAIF-
     assessable deposits of that institution as of December 31, 
     1997, at assessment rates calculated under the schedule in 
     effect for Savings Association Insurance Fund members on June 
     30, 1995; or
       (II) in accordance with clause (i), if the Bank Insurance 
     Fund and the Savings Association Insurance Fund are not 
     merged into the Deposit Insurance Fund.

       (B) Optional pro rata payment of special assessment.--This 
     paragraph shall not apply with respect to any insured 
     depository institution (or successor insured depository 
     institution) that has paid, during any calendar year from 
     1997 through 1999, upon such terms as the Corporation may 
     announce, an amount equal to the product of--
       (i) 12.5 percent of the special assessment that the 
     institution would have been required to pay under subsection 
     (a), if the Board of Directors had not exempted the 
     institution; and
       (ii) the number of full semiannual periods remaining 
     between the date of the payment and December 31, 1999.
       (g) Special Election for Certain Institutions Facing 
     Hardship as a Result of the Special Assessment.--
       (1) Election authorized.--If--
       (A) an insured depository institution, or any depository 
     institution holding company which, directly or indirectly, 
     controls such institution, is subject to terms or covenants 
     in any debt obligation or preferred stock outstanding on 
     September 13, 1995; and
       (B) the payment of the special assessment under subsection 
     (a) would pose a significant risk of causing such depository 
     institution or holding company to default or violate any such 
     term or covenant,

     the depository institution may elect, with the approval of 
     the Corporation, to pay such special assessment in accordance 
     with paragraphs (2) and (3) in lieu of paying such assessment 
     in the manner required under subsection (a).

[[Page H 13388]]

       (2) 1st assessment.--An insured depository institution 
     which makes an election under paragraph (1) shall pay an 
     assessment of 50 percent of the amount of the special 
     assessment that would otherwise apply under subsection (a), 
     by the date on which such special assessment is otherwise due 
     under subsection (d).
       (3) 2d assessment.--An insured depository institution which 
     makes an election under paragraph (1) shall pay a 2d 
     assessment, by the date established by the Board of Directors 
     in accordance with paragraph (4), in an amount equal to the 
     product of 51 percent of the rate determined by the Board of 
     Directors under subsection (a) for determining the amount of 
     the special assessment and the SAIF-assessable deposits of 
     the institution on March 31, 1996, or such other date in 
     calendar year 1996 as the Board of Directors determines to be 
     appropriate.
       (4) Due date of 2d assessment.--The date established by the 
     Board of Directors for the payment of the assessment under 
     paragraph (3) by a depository institution shall be the 
     earliest practicable date which the Board of Directors 
     determines to be appropriate, which is at least 15 days after 
     the date used by the Board of Directors under paragraph (3).
       (5) Supplemental special assessment.--An insured depository 
     institution which makes an election under paragraph (1) shall 
     pay a supplemental special assessment, at the same time the 
     payment under paragraph (3) is made, in an amount equal to 
     the product of--
       (A) 50 percent of the rate determined by the Board of 
     Directors under subsection (a) for determining the amount of 
     the special assessment; and
       (B) 95 percent of the amount by which the SAIF-assessable 
     deposits used by the Board of Directors for determining the 
     amount of the 1st assessment under paragraph (2) exceeds, if 
     any, the SAIF-assessable deposits used by the Board for 
     determining the amount of the 2d assessment under paragraph 
     (3).
       (h) Adjustment of Special Assessment for Certain Bank 
     Insurance Fund Member Banks.--
       (1) In general.--For purposes of computing the special 
     assessment imposed under this section with respect to a Bank 
     Insurance Fund member bank, the amount of any deposits of any 
     insured depository institution which section 5(d)(3) of the 
     Federal Deposit Insurance Act treats as insured by the 
     Savings Association Insurance Fund shall be reduced by 20 
     percent--
       (A) if the adjusted attributable deposit amount of the Bank 
     Insurance Fund member bank is less than 50 percent of the 
     total domestic deposits of that member bank as of June 30, 
     1995; or
       (B) if, as of June 30, 1995, the Bank Insurance Fund 
     member--
       (i) had an adjusted attributable deposit amount equal to 
     less than 75 percent of the total assessable deposits of that 
     member bank;
       (ii) had total assessable deposits greater than 
     $5,000,000,000; and
       (iii) was owned or controlled by a bank holding company 
     that owned or controlled insured depository institutions 
     having an aggregate amount of deposits insured or treated as 
     insured by the Bank Insurance Fund greater than the aggregate 
     amount of deposits insured or treated as insured by the 
     Savings Association Insurance Fund.
       (2) Adjusted attributable deposit amount.--For purposes of 
     this subsection, the ``adjusted attributable deposit amount'' 
     shall be determined in accordance with section 5(d)(3)(C) of 
     the Federal Deposit Insurance Act.
       (i) Adjustment to the Adjusted Attributable Deposit Amount 
     for Certain Bank Insurance Fund Member Banks.--Section 
     5(d)(3) of the Federal Deposit Insurance Act (12 U.S.C. 
     1815(d)(3)) is amended--
       (1) in subparagraph (C), by striking ``The adjusted 
     attributable deposit amount'' and inserting ``Except as 
     provided in subparagraph (K), the adjusted attributable 
     deposit amount''; and
       (2) by adding at the end the following new subparagraph:
       ``(K) Adjustment of adjusted attributable deposit amount.--
     The amount determined under subparagraph (C)(i) for deposits 
     acquired by March 31, 1995, shall be reduced by 20 percent 
     for purposes of computing the adjusted attributable deposit 
     amount for the payment of any assessment for any semiannual 
     period after December 31, 1995 (other than the special 
     assessment imposed under section 2011(a) of the Balanced 
     Budget Act of 1995), for a Bank Insurance Fund member bank 
     that, as of June 30, 1995--
       ``(i) had an adjusted attributable deposit amount that was 
     less than 50 percent of the total deposits of that member 
     bank; or
       ``(ii)(I) had an adjusted attributable deposit amount equal 
     to less than 75 percent of the total assessable deposits of 
     that member bank;
       ``(II) had total assessable deposits greater than 
     $5,000,000,000; and
       ``(III) was owned or controlled by a bank holding company 
     that owned or controlled insured depository institutions 
     having an aggregate amount of deposits insured or treated as 
     insured by the Bank Insurance Fund greater than the aggregate 
     amount of deposits insured or treated as insured by the 
     Savings Association Insurance Fund.''.
       (j) Adjustment of Special Assessment for Certain Savings 
     Associations.--
       (1) Special assessment reduction.--For purposes of 
     computing the special assessment imposed under this section, 
     in the case of any converted association, the amount of any 
     deposits of such association which were insured by the 
     Savings Association Insurance Fund as of March 31, 1995, 
     shall be reduced by 20 percent.
       (2) Converted association.--For purposes of this 
     subsection, the term ``converted association'' means--
       (A) any Federal savings association--
       (i) that is a member of the Savings Association Insurance 
     Fund and that has deposits subject to assessment by that fund 
     which did not exceed $4,000,000,000, as of March 31, 1995; 
     and
       (ii) that had been, or is a successor by merger, 
     acquisition, or otherwise to an institution that had been, a 
     State savings bank, the deposits of which were insured by the 
     Federal Deposit Insurance Corporation prior to August 9, 
     1989, that converted to a Federal savings association 
     pursuant to section 5(i) of the Home Owners' Loan Act prior 
     to January 1, 1985;
       (B) a State depository institution that is a member of the 
     Savings Association Insurance Fund that had been a State 
     savings bank prior to October 15, 1982, and was a Federal 
     savings association on August 9, 1989;
       (C) an insured bank that--
       (i) was established de novo in order to acquire the 
     deposits of a savings association in default or in danger of 
     default;
       (ii) did not open for business before acquiring the 
     deposits of such savings association; and
       (iii) was a Savings Association Insurance Fund member as of 
     the date of enactment of this Act; and
       (D) an insured bank that--
       (i) resulted from a savings association before December 19, 
     1991, in accordance with section 5(d)(2)(G) of the Federal 
     Deposit Insurance Act; and
       (ii) had an increase in its capital in conjunction with the 
     conversion in an amount equal to more than 75 percent of the 
     capital of the institution on the day before the date of the 
     conversion.

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

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

     SEC. 2013. MERGER OF BIF AND SAIF.

       (a) In General.--
       (1) Merger.--The Bank Insurance Fund and the Savings 
     Association Insurance Fund shall be merged into the Deposit 
     Insurance Fund established by section 11(a)(4) of the Federal 
     Deposit Insurance Act, as amended by this section.
       (2) Disposition of assets and liabilities.--All assets and 
     liabilities of the Bank Insurance Fund and the Savings 
     Association Insurance Fund shall be transferred to the 
     Deposit Insurance Fund.
       (3) No separate existence.--The separate existence of the 
     Bank Insurance Fund and the Savings Association Insurance 
     Fund shall cease.
       (b) Special Reserve of the Deposit Insurance Fund.--
       (1) In general.--Immediately before the merger of the Bank 
     Insurance Fund and the Savings Association Insurance Fund, if 
     the reserve ratio of the Savings Association Insurance Fund 
     exceeds the designated reserve ratio, the amount by which 
     that reserve ratio exceeds the designated reserve ratio shall 
     be placed in the Special Reserve of the Deposit Insurance 
     Fund, established under section 11(a)(5) of the Federal 
     Deposit Insurance Act, as amended by this section.
       (2) Definition.--For purposes of this subsection, the term 
     ``reserve ratio'' means the ratio of the net worth of the 
     Savings Association Insurance Fund to aggregate estimated 
     insured deposits held in all Savings Association Insurance 
     Fund members.
       (c) Effective Date.--This section and the amendments made 
     by this section shall become effective on January 1, 1998, if 
     no insured depository institution is a savings association on 
     that date.
       (d) Technical and Conforming Amendments.--
       (1) Deposit insurance fund.--Section 11(a)(4) of the 
     Federal Deposit Insurance Act (12 U.S.C. 1821(a)(4)) is 
     amended--
       (A) by redesignating subparagraph (B) as subparagraph (C);
       (B) by striking subparagraph (A) and inserting the 
     following:
       ``(A) Establishment.--There is established the Deposit 
     Insurance Fund, which the Corporation shall--
       ``(i) maintain and administer;
       ``(ii) use to carry out its insurance purposes in the 
     manner provided by this subsection; and

[[Page H 13389]]

       ``(iii) invest in accordance with section 13(a).
       ``(B) Uses.--The Deposit Insurance Fund shall be available 
     to the Corporation for use with respect to Deposit Insurance 
     Fund members.''; and
       (C) by striking ``(4) General provisions relating to 
     funds.--'' and inserting the following:
       ``(4) Establishment of the deposit insurance fund.--''.
       (2) Other references.--Section 11(a)(4)(C) of the Federal 
     Deposit Insurance Act (12 U.S.C. 1821(a)(4)(C), as 
     redesignated by paragraph (1) of this subsection) is amended 
     by striking ``Bank Insurance Fund and the Savings Association 
     Insurance Fund'' and inserting ``Deposit Insurance Fund''.
       (3) Deposits into fund.--Section 11(a)(4) of the Federal 
     Deposit Insurance Act (12 U.S.C. 1821(a)(4)) is amended by 
     adding at the end the following new subparagraph:
       ``(D) Deposits.--All amounts assessed against insured 
     depository institutions by the Corporation shall be deposited 
     in the Deposit Insurance Fund.''.
       (4) Special reserve of deposits.--Section 11(a)(5) of the 
     Federal Deposit Insurance Act (12 U.S.C. 1821(a)(5)) is 
     amended to read as follows:
       ``(5) Special reserve of deposit insurance fund.--
       ``(A) Establishment.--
       ``(i) In general.--There is established a Special Reserve 
     of the Deposit Insurance Fund, which shall be administered by 
     the Corporation and shall be invested in accordance with 
     section 13(a).
       ``(ii) Limitation.--The Corporation shall not provide any 
     assessment credit, refund, or other payment from any amount 
     in the Special Reserve.
       ``(B) Emergency use of special reserve.--Notwithstanding 
     subparagraph (A)(ii), the Corporation may, in its sole 
     discretion, transfer amounts from the Special Reserve to the 
     Deposit Insurance Fund, for the purposes set forth in 
     paragraph (4), only if--
       ``(i) the reserve ratio of the Deposit Insurance Fund is 
     less than 50 percent of the designated reserve ratio; and
       ``(ii) the Corporation expects the reserve ratio of the 
     Deposit Insurance Fund to remain at less than 50 percent of 
     the designated reserve ratio for each of the next 4 calendar 
     quarters.
       ``(C) Exclusion of special reserve in calculating reserve 
     ratio.--Notwithstanding any other provision of law, any 
     amounts in the Special Reserve shall be excluded in 
     calculating the reserve ratio of the Deposit Insurance Fund 
     under section 7.''.
       (5) Federal home loan bank act.--Section 21B(f)(2)(C)(ii) 
     of the Federal Home Loan Bank Act (12 U.S.C. 
     1441b(f)(2)(C)(ii)) is amended--
       (A) in subclause (I), by striking ``to Savings Associations 
     Insurance Fund members'' and inserting ``to insured 
     depository institutions, and their successors, which were 
     Savings Association Insurance Fund members on September 1, 
     1995''; and
       (B) in subclause (II), by striking ``to Savings 
     Associations Insurance Fund members'' and inserting ``to 
     insured depository institutions, and their successors, which 
     were Savings Association Insurance Fund members on September 
     1, 1995''.
       (6) Repeals.--
       (A) Section 3.--Section 3(y) of the Federal Deposit 
     Insurance Act (12 U.S.C. 1813(y)) is amended to read as 
     follows:
       ``(y) Definitions Relating to the Deposit Insurance Fund.--
     The term
       ``(1) Deposit insurance fund.--The term `Deposit Insurance 
     Fund' means the fund established under section 11(a)(4).
       ``(2) Reserve ratio.--The term `reserve ratio' means the 
     ratio of the net worth of the Deposit Insurance Fund to 
     aggregate estimated insured deposits held in all insured 
     depository institutions.
       ``(3) Designated reserve ratio.--The designated reserve 
     ratio of the Deposit Insurance Fund for each year shall be--
       ``(A) 1.25 percent of estimated insured deposits; or
       ``(B) a higher percentage of estimated insured deposits 
     that the Board of Directors determines to be justified for 
     that year by circumstances raising a significant risk of 
     substantial future losses to the fund.
       (B) Section 7.--Section 7 of the Federal Deposit Insurance 
     Act (12 U.S.C. 1817) is amended--
       (i) by striking subsection (l);
       (ii) by redesignating subsections (m) and (n) as 
     subsections (l) and (m), respectively;
       (iii) in subsection (b)(2), by striking subparagraphs (B) 
     and (F), and by redesignating subparagraphs (C), (E), (G), 
     and (H) as subparagraphs (B) through (E), respectively.
       (C) Section 11.--Section 11(a) of the Federal Deposit 
     Insurance Act (12 U.S.C. 1821(a)) is amended--
       (i) by striking paragraphs (6) and (7); and
       (ii) by redesignating paragraph (8) as paragraph (6).
       (7) Section 5136 of the revised statutes.--Paragraph 
     Eleventh of section 5136 of the Revised Statutes (12 U.S.C. 
     24) is amended in the fifth sentence, by striking ``affected 
     deposit insurance fund'' and inserting ``Deposit Insurance 
     Fund''.
       (8) Investments promoting public welfare; limitations on 
     aggregate investments.--The 23d undesignated paragraph of 
     section 9 of the Federal Reserve Act (12 U.S.C. 338a) is 
     amended in the fourth sentence, by striking ``affected 
     deposit insurance fund'' and inserting ``Deposit Insurance 
     Fund''.
       (9) Advances to critically undercapitalized depository 
     institutions.--Section 10B(b)(3)(A)(ii) of the Federal 
     Reserve Act (12 U.S.C. 347b(b)(3)(A)(ii)) is amended by 
     striking ``any deposit insurance fund in'' and inserting 
     ``the Deposit Insurance Fund of''.
       (10) Amendments to the balanced budget and emergency 
     deficit control act of 1985.--Section 255(g)(1)(A) of the 
     Balanced Budget and Emergency Deficit Control Act of 1985 (2 
     U.S.C. 905(g)(1)(A)) is amended--
       (A) by striking ``Bank Insurance Fund'' and inserting 
     ``Deposit Insurance Fund''; and
       (B) by striking ``Federal Deposit Insurance Corporation, 
     Savings Association Insurance Fund;''.
       (11) Further amendments to the federal home loan bank 
     act.--The Federal Home Loan Bank Act (12 U.S.C. 1421 et seq.) 
     is amended--
       (A) in section 11(k) (12 U.S.C. 1431(k))--
       (i) in the subsection heading, by striking ``SAIF'' and 
     inserting ``the Deposit Insurance Fund''; and
       (ii) by striking ``Savings Association Insurance Fund'' 
     each place such term appears and inserting ``Deposit 
     Insurance Fund'';
       (B) in section 21A(b)(4)(B) (12 U.S.C. 1441a(b)(4)(B)), by 
     striking ``affected deposit insurance fund'' and inserting 
     ``Deposit Insurance Fund'';
       (C) in section 21A(b)(6)(B) (12 U.S.C. 1441a(b)(6)(B))--
       (i) in the subparagraph heading, by striking ``SAIF-insured 
     banks'' and inserting ``Charter conversions''; and
       (ii) by striking ``Savings Association Insurance Fund 
     member'' and inserting ``savings association'';
       (D) in section 21A(b)(10)(A)(iv)(II) (12 U.S.C. 
     1441a(b)(10)(A)(iv)(II)), by striking ``Savings Association 
     Insurance Fund'' and inserting ``Deposit Insurance Fund'';
       (E) in section 21B(e) (12 U.S.C. 1441b(e))--
       (i) in paragraph (5), by inserting ``as of the date of 
     funding'' after ``Savings Association Insurance Fund 
     members'' each place such term appears;
       (ii) by striking paragraph (7); and
       (iii) by redesignating paragraph (8) as paragraph (7); and
       (F) in section 21B(k) (12 U.S.C. 1441b(k))--
       (i) by striking paragraph (8); and
       (ii) by redesignating paragraphs (9) and (10) as paragraphs 
     (8) and (9), respectively.
       (12) Amendments to the home owners' loan act.--The Home 
     Owners' Loan Act (12 U.S.C. 1461 et seq.) is amended--
       (A) in section 5 (12 U.S.C. 1464)--
       (i) in subsection (c)(5)(A), by striking ``that is a member 
     of the Bank Insurance Fund'';
       (ii) in subsection (c)(6), by striking ``As used in this 
     subsection--'' and inserting ``For purposes of this 
     subsection, the following definitions shall apply:'';
       (iii) in subsection (o)(1), by striking ``that is a Bank 
     Insurance Fund member'';
       (iv) in subsection (o)(2)(A), by striking ``a Bank 
     Insurance Fund member until such time as it changes its 
     status to a Savings Association Insurance Fund member'' and 
     inserting ``insured by the Deposit Insurance Fund'';
       (v) in subsection (t)(5)(D)(iii)(II), by striking 
     ``affected deposit insurance fund'' and inserting ``Deposit 
     Insurance Fund'';
       (vi) in subsection (t)(7)(C)(i)(I), by striking ``affected 
     deposit insurance fund'' and inserting ``Deposit Insurance 
     Fund''; and
       (vii) in subsection (v)(2)(A)(i), by striking ``, the 
     Savings Association Insurance Fund'' and inserting ``or the 
     Deposit Insurance Fund''; and
       (B) in section 10 (12 U.S.C. 1467a)--
       (i) in subsection (e)(1)(A)(iii)(VII), by adding ``or'' at 
     the end;
       (ii) in subsection (e)(1)(A)(iv), by adding ``and'' at the 
     end;
       (iii) in subsection (e)(1)(B), by striking ``Savings 
     Association Insurance Fund or Bank Insurance Fund'' and 
     inserting ``Deposit Insurance Fund'';
       (iv) in subsection (e)(2), by striking ``Savings 
     Association Insurance Fund or the Bank Insurance Fund'' and 
     inserting ``Deposit Insurance Fund''; and
       (v) in subsection (m)(3), by striking subparagraph (E), and 
     by redesignating subparagraphs (F), (G), and (H) as 
     subparagraphs (E), (F), and (G), respectively.
       (13) Amendments to the national housing act.--The National 
     Housing Act (12 U.S.C. 1701 et seq.) is amended--
       (A) in section 317(b)(1)(B) (12 U.S.C. 1723i(b)(1)(B)), by 
     striking ``Bank Insurance Fund for banks or through the 
     Savings Association Insurance Fund for savings associations'' 
     and inserting ``Deposit Insurance Fund''; and
       (B) in section 526(b)(1)(B)(ii) (12 U.S.C. 1735f-
     14(b)(1)(B)(ii)), by striking ``Bank Insurance Fund for banks 
     and through the Savings Association Insurance Fund for 
     savings associations'' and inserting ``Deposit Insurance 
     Fund''.
       (14) Further amendments to the federal deposit insurance 
     act.--The Federal Deposit Insurance Act (12 U.S.C. 1811 et 
     seq.) is amended--
       (A) in section 3(a)(1) (12 U.S.C. 1813(a)(1)), by striking 
     subparagraph (B) and inserting the following:
       ``(B) includes any former savings association.'';
       (B) in section 5(b)(5) (12 U.S.C. 1815(b)(5)), by striking 
     ``the Bank Insurance Fund or the Savings Association 
     Insurance Fund;'' and inserting ``Deposit Insurance Fund,'';
       (C) in section 5(d) (12 U.S.C. 1815(d)), by striking 
     paragraphs (2) and (3);
       (D) in section 5(d)(1) (12 U.S.C. 1815(d)(1))--
       (i) in subparagraph (A), by striking ``reserve ratios in 
     the Bank Insurance Fund and the Savings Association Insurance 
     Fund'' and inserting ``the reserve ratio of the Deposit 
     Insurance Fund'';
       (ii) by striking subparagraph (B) and inserting the 
     following:
       ``(2) Fee credited to the deposit insurance fund.--The fee 
     paid by the depository institution under paragraph (1) shall 
     be credited to the Deposit Insurance Fund.'';
       (iii) by striking ``(1) Uninsured institutions.--''; and

[[Page H 13390]]

       (iv) by redesignating subparagraphs (A) and (C) as 
     paragraphs (1) and (3), respectively, and moving the margins 
     2 ems to the left;
       (E) in section 5(e) (12 U.S.C. 1815(e))--
       (i) in paragraph (5)(A), by striking ``Bank Insurance Fund 
     or the Savings Association Insurance Fund'' and inserting 
     ``Deposit Insurance Fund'';
       (ii) by striking paragraph (6); and
       (iii) by redesignating paragraphs (7), (8), and (9) as 
     paragraphs (6), (7), and (8), respectively;
       (F) in section 6(5) (12 U.S.C. 1816(5)), by striking ``Bank 
     Insurance Fund or the Savings Association Insurance Fund'' 
     and inserting ``Deposit Insurance Fund'';
       (G) in section 7(b) (12 U.S.C. 1817(b))--
       (i) in paragraph (1)(D), by striking ``each deposit 
     insurance fund'' and inserting ``the Deposit Insurance 
     Fund'';
       (ii) in clauses (i)(I) and (iv) of paragraph (2)(A), by 
     striking ``each deposit insurance fund'' each place such term 
     appears and inserting ``the Deposit Insurance Fund'';
       (iii) in paragraph (2)(A)(iii), by striking ``a deposit 
     insurance fund'' and inserting ``the Deposit Insurance 
     Fund'';
       (iv) by striking clause (iv) of paragagraph (2)(A);
       (v) in paragraph (2)(C) (as redesignated by paragraph 
     (6)(B) of this subsection)--

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

       (vi) in paragraph (2)(D) (as redesignated by paragraph 
     (6)(B) of this subsection)--

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

       (vii) in paragraph (3)--

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

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

       (I) by striking ``any such assessment'' and inserting ``any 
     such assessment is necessary'';
       (II) by striking ``(A) is necessary--'';
       (III) by striking subparagraph (B);
       (IV) by redesignating clauses (i), (ii), and (iii) as 
     subparagraphs (A), (B), and (C), respectively, and moving the 
     margins 2 ems to the left; and
       (V) in subparagraph (C) (as redesignated), by striking ``; 
     and'' and inserting a period;

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

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

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

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

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

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

       (CC) in section 38(o) (12 U.S.C. 1831o(o))--
       (i) by striking ``Associations.--'' and all that follows 
     through ``Subsections (e)(2)'' and inserting 
     ``Associations.--Subsections (e)(2)'';
       (ii) by redesignating subparagraphs (A), (B), and (C) as 
     paragraphs (1), (2), and (3), respectively, and moving the 
     margins 2 ems to the left; and
       (iii) in paragraph (1) (as redesignated), by redesignating 
     clauses (i) and (ii) as subparagraphs (A) and (B), 
     respectively, and moving the margins 2 ems to the left.
       (15) Amendments to the financial institutions reform, 
     recovery, and enforcement act of 1989.--The Financial 
     Institutions Reform, Recovery, and Enforcement Act (Public 
     Law 101-73; 103 Stat. 183) is amended--
       (A) in section 951(b)(3)(B) (12 U.S.C. 1833a(b)(3)(B)), by 
     striking ``Bank Insurance Fund, the Savings Association 
     Insurance Fund,'' and inserting ``Deposit Insurance Fund''; 
     and
       (B) in section 1112(c)(1)(B) (12 U.S.C. 3341(c)(1)(B)), by 
     striking ``Bank Insurance Fund, the Savings Association 
     Insurance Fund,'' and inserting ``Deposit Insurance Fund''.
       (16) Amendment to the bank enterprise act of 1991.--Section 
     232(a)(1) of the Bank Enterprise Act of 1991 (12 U.S.C. 
     1834(a)(1)) is amended by striking ``section 7(b)(2)(H)'' and 
     inserting ``section 7(b)(2)(G)''.
       (17) Amendment to the bank holding company act.--Section 
     2(j)(2) of the Bank Holding Company Act of 1956 (12 U.S.C. 
     1841(j)(2)) is amended by striking ``Savings Association 
     Insurance Fund'' and inserting ``Deposit Insurance Fund''.

     SEC. 2014. CREATION OF SAIF SPECIAL RESERVE.

       Section 11(a)(6) of the Federal Deposit Insurance Act (12 
     U.S.C. 1821(a)(6)) is amended by adding at the end the 
     following new subparagraph:
       ``(L) Establishment of saif special reserve.--
       ``(i) Establishment.--If, on January 1, 1998, the reserve 
     ratio of the Savings Association Insurance Fund exceeds the 
     designated reserve ratio, there is established a Special 
     Reserve of the Savings Association Insurance Fund, which 
     shall be administered by the Corporation and shall be 
     invested in accordance with section 13(a).
       ``(ii) Amounts in special reserve.--If, on January 1, 1998, 
     the reserve ratio of the Savings Association Insurance Fund 
     exceeds the designated reserve ratio, the amount by which the 


[[Page H 13391]]
     reserve ratio exceeds the designated reserve ratio shall be placed in 
     the Special Reserve of the Savings Association Insurance Fund 
     established by clause (i).
       ``(iii) Limitation.--The Corporation shall not provide any 
     assessment credit, refund, or other payment from any amount 
     in the Special Reserve of the Savings Association Insurance 
     Fund.
       ``(iv) Emergency use of special reserve.--Notwithstanding 
     clause (iii), the Corporation may, in its sole discretion, 
     transfer amounts from the Special Reserve of the Savings 
     Association Insurance Fund to the Savings Association 
     Insurance Fund for the purposes set forth in paragraph (4), 
     only if--
       ``(I) the reserve ratio of the Savings Association 
     Insurance Fund is less than 50 percent of the designated 
     reserve ratio; and
       ``(II) the Corporation expects the reserve ratio of the 
     Savings Association Insurance Fund to remain at less than 50 
     percent of the designated reserve ratio for each of the next 
     4 calendar quarters.
       ``(v) Exclusion of special reserve in calculating reserve 
     ratio.--Notwithstanding any other provision of law, any 
     amounts in the Special Reserve of the Savings Association 
     Insurance Fund shall be excluded in calculating the reserve 
     ratio of the Savings Association Insurance Fund.''.

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

       Subsection (e) of section 7 of the Federal Deposit 
     Insurance Act (12 U.S.C. 1817(e)) is amended to read as 
     follows:
       ``(e) Refunds.--
       ``(1) Overpayments.--In the case of any payment of an 
     assessment by an insured depository institution in excess of 
     the amount due to the Corporation, the Corporation may--
       ``(A) refund the amount of the excess payment to the 
     insured depository institution; or
       ``(B) credit such excess amount toward the payment of 
     subsequent semiannual assessments until such credit is 
     exhausted.
       ``(2) Balance in insurance fund in excess of designated 
     reserve.--
       ``(A) In general.--Subject to subparagraphs (B) and (C), 
     if, as of the end of any semiannual assessment period, the 
     amount of the actual reserves in--
       ``(i) the Bank Insurance Fund (until the merger of such 
     fund into the Deposit Insurance Fund pursuant to section 2013 
     of the Balanced Budget Act of 1995); or
       ``(ii) the Deposit Insurance Fund (after the establishment 
     of such fund),

     exceeds the balance required to meet the designated reserve 
     ratio applicable with respect to such fund, such excess 
     amount shall be refunded to insured depository institutions 
     by the Corporation on such basis as the Board of Directors 
     determines to be appropriate, taking into account the factors 
     considered under the risk-based assessment system.
       ``(B) Refund not to exceed previous semiannual 
     assessment.--The amount of any refund under this paragraph to 
     any member of a deposit insurance fund for any semiannual 
     assessment period may not exceed the total amount of 
     assessments paid by such member to the insurance fund with 
     respect to such period.
       ``(C) Refund limitation for certain institutions.--No 
     refund may be made under this paragraph with respect to the 
     amount of any assessment paid for any semiannual assessment 
     period by any insured depository institution described in 
     clause (v) of subsection (b)(2)(A).''.

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

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

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

       (a) In General.--Section 7(b)(2)(A)(i) of the Federal 
     Deposit Insurance Act (12 U.S.C. 1817(b)(2)(A)(i)) is amended 
     in the matter preceding subclause (I) by inserting ``when 
     necessary, and only to the extent necessary'' after ``insured 
     depository institutions''.
       (b) Limitation on Assessment.--Section 7(b)(2)(A)(iii) of 
     the Federal Deposit Insurance Act (12 U.S.C. 
     1817(b)(2)(A)(iii)) is amended to read as follows:
       ``(iii) Limitation on assessment.--Except as provided in 
     clause (v), the Board of Directors shall not set semiannual 
     assessments with respect to a deposit insurance fund in 
     excess of the amount needed--

       ``(I) to maintain the reserve ratio of the fund at the 
     designated reserve ratio; or
       ``(II) if the reserve ratio is less than the designated 
     reserve ratio, to increase the reserve ratio to the 
     designated reserve ratio.''.

       (c) Exception to Limitation on Assessments.--Section 
     7(b)(2)(A) of the Federal Deposit Insurance Act (12 U.S.C. 
     1817(b)(2)(A)) is amended by adding at the end the following 
     new clause:
       ``(v) Exception to limitation on assessments.--The Board of 
     Directors may set semiannual assessments in excess of the 
     amount permitted under clauses (i) and (iii) with respect to 
     insured depository institutions that exhibit financial, 
     operational, or compliance weaknesses ranging from moderately 
     severe to unsatisfactory, or are not well capitalized, as 
     that term is defined in section 38.''.

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

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

     SEC. 2019. DEFINITIONS.

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

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

       (a) Annual Adjustment Factors for Operating Costs Only.--
     Section 8(c)(2)(A) of the United States Housing Act of 1937 
     (42 U.S.C. 1437f(c)(2)(A)) is amended--
       (1) by striking ``(2)(A)'' and inserting ``(2)(A)(i)'';
       (2) by striking the second sentence and all that follows 
     through the end of the subparagraph; and
       (3) by adding at the end the following new clause:
       ``(ii) Each assistance contract under this section shall 
     provide that--
       ``(I) if the maximum monthly rent for a unit in a new 
     construction or substantial rehabilitation project to be 
     adjusted using an annual adjustment factor exceeds 100 
     percent of the fair market rent for an existing dwelling unit 
     in the market area, the Secretary shall adjust the rent using 
     an operating costs factor that increases the rent to reflect 
     increases in operating costs in the market area; and
       ``(II) if the owner of a unit in a project described in 
     subclause (I) demonstrates that the adjusted rent determined 
     under subclause (I) would not exceed the rent for an 
     unassisted unit of similar quality, type, and age in the same 
     market area, as determined by the Secretary, the Secretary 
     shall use the otherwise applicable annual adjustment 
     factor.''.

[[Page H 13392]]

       (b) Restraint on Section 8 Rent Increases.--Section 
     8(c)(2)(A) of the United States Housing Act of 1937 (42 
     U.S.C. 1437f(c)(2)(A)), as amended by subsection (a), is 
     amended by adding at the end the following new clause:
       ``(iii)(I) Subject to subclause (II), with respect to any 
     unit assisted under this section that is occupied by the same 
     family at the time of the most recent annual rental 
     adjustment, if the assistance contract provides for the 
     adjustment of the maximum monthly rent by applying an annual 
     adjustment factor, and if the rent for the unit is otherwise 
     eligible for an adjustment based on the full amount of the 
     annual adjustment factor, 0.01 shall be subtracted from the 
     amount of the annual adjustment factor, except that the 
     annual adjustment factor shall not be reduced to less than 
     1.0.
       ``(II) With respect to any unit described in subclause (I) 
     that is assisted under the certificate program, the adjusted 
     rent shall not exceed the rent for a comparable unassisted 
     unit of similar quality, type, and age in the market area in 
     which the unit is located.''.
       (c) Effective Date.--The amendments made by this section 
     shall become effective on October 1, 1995.

     SEC. 2052. FORECLOSURE AVOIDANCE AND BORROWER ASSISTANCE.

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


              ``authority to assist mortgagors in default

       ``Sec. 230. (a) Payment of Partial Claim.--The Secretary 
     may establish a program for payment of a partial insurance 
     claim to a mortgagee that agrees to apply the claim amount to 
     payment of a mortgage on a 1- to 4-family residence that is 
     in default. Any such payment under such program to the 
     mortgagee shall be made in the Secretary's sole discretion 
     and on terms and conditions acceptable to the Secretary, 
     except that--
       ``(1) the amount of the payment shall be in an amount 
     determined by the Secretary, which shall not exceed an amount 
     equivalent to 12 monthly mortgage payments and any costs 
     related to the default that are approved by the Secretary; 
     and
       ``(2) the mortgagor shall agree to repay the amount of the 
     insurance claim to the Secretary upon terms and conditions 
     acceptable to the Secretary.

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

     SEC. 3001. SPECTRUM AUCTIONS.

       (a) Extension and Expansion of Auction Authority.--
       (1) Amendments.--Section 309(j) of the Communications Act 
     of 1934 (47 U.S.C. 309(j)) is amended--
       (A) by striking paragraphs (1) and (2) and inserting the 
     following:
       ``(1) General authority.--If, consistent with the 
     obligations described in paragraph (6)(E), mutually exclusive 
     applications are accepted for any initial license or 
     construction permit, then the Commission shall grant such 
     license or permit to a qualified applicant through a system 
     of competitive bidding that meets the requirements of this 
     subsection.
       ``(2) Exemptions.--The competitive bidding authority 
     granted by this subsection shall not apply to licenses or 
     construction permits issued by the Commission--
       ``(A) that, as the result of the Commission carrying out 
     the obligations described in paragraph (6)(E), are not 
     mutually exclusive;
       ``(B) for public safety radio services, including non-
     Government uses the sole or principal purpose of which is to 
     protect the safety of life, health, and property and which 
     are not made commercially available to the public; or
       ``(C) for initial licenses or construction permits for new 
     terrestrial digital television services assigned by the 
     Commission to existing terrestrial broadcast licensees to 
     replace their current television licenses, unless--
       ``(i) the Commission, not later than 180 days after the 
     date of enactment of the Balanced Budget Act of 1995, after 
     notice and public comment, submits to Congress a report on 
     the use of the authority provided in this subsection for the 
     assignment of initial licenses or construction permits for 
     use of the electromagnetic spectrum allocated but not 
     assigned as of the date of enactment of that Act for 
     television broadcast services; and
       ``(ii) the Congress amends this subsection to authorize the 
     use of the authority provided by this subsection for such 
     licenses or permits.
     Except as provided in this subparagraph, the Commission may 
     not assign initial licenses or construction permits under 
     this title to terrestrial commercial television broadcast 
     licensees to replace their existing broadcast licenses before 
     November 15, 1996.''; and
       (B) by striking ``1998'' in paragraph (11) and inserting 
     ``2002''.
       (2) Conforming amendment.--Subsection (i) of section 309 of 
     such Act is repealed.
       (3) Effective date.--The amendment made by paragraph (1)(A) 
     shall not apply with respect to any license or permit for a 
     terrestrial radio or television broadcast station for which 
     the Federal Communications Commission has accepted mutually 
     exclusive applications on or before the date of enactment of 
     this Act.
       (b) Commission Obligation To Make Additional Spectrum 
     Available by Auction.--
       (1) In general.--The Federal Communications Commission 
     shall complete all actions necessary to permit the 
     assignment, by September 30, 2002, by competitive bidding 
     pursuant to 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 designated by Commission regulation for assignment 
     pursuant to such section;
       (ii) been identified by the Secretary of Commerce pursuant 
     to section 113 of the National Telecommunications and 
     Information Administration Organization Act; or
       (iii) been reserved for Federal Government use pursuant to 
     section 305 of the Communications Act of 1934 (47 U.S.C. 
     305).
     The Commission shall conduct the competitive bidding for not 
     less than one-half of such aggregate spectrum by September 
     30, 2000.
       (2) Criteria for reassignment.--In making available bands 
     of frequencies for competitive bidding pursuant to paragraph 
     (1), the Commission shall--

[[Page H 13393]]

       (A) seek to promote the most efficient use of the spectrum;
       (B) take into account the cost to incumbent licensees of 
     relocating existing uses to other bands of frequencies or 
     other means of communication;
       (C) take into account the needs of public safety radio 
     services;
       (D) comply with the requirements of international 
     agreements concerning spectrum allocations; and
       (E) take into account the costs to satellite service 
     providers that could result from multiple auctions of like 
     spectrum internationally for global satellite systems.
       (3) Notification to ntia.--The Commission shall notify the 
     Secretary of Commerce if--
       (A) the Commission is not able to provide for the effective 
     relocation of incumbent licensees to bands of frequencies 
     that are available to the Commission for assignment; and
       (B) the Commission has identified bands of frequencies that 
     are--
       (i) suitable for the relocation of such licensees; and
       (ii) allocated for Federal Government use, but that could 
     be reallocated pursuant to part B of the National 
     Telecommunications and Information Administration 
     Organization Act (as amended by this section).
       (c) Identification and Reallocation of Frequencies.--The 
     National Telecommunications and Information Administration 
     Organization Act (47 U.S.C. 901 et seq.) is amended--
       (1) in section 113, by adding at the end the following new 
     subsections:
       ``(f) Additional Reallocation Report.--If the Secretary 
     receives a notice from the Commission pursuant to section 
     3001(b)(3) of the Balanced Budget Act of 1995, the Secretary 
     shall prepare and submit to the President and the Congress a 
     report recommending for reallocation for use other than by 
     Federal Government stations under section 305 of the 1934 Act 
     (47 U.S.C. 305), bands of frequencies that are suitable for 
     the uses identified in the Commission's notice.
       ``(g) Relocation of Federal Government Stations.--
       ``(1) In general.--In order to expedite the efficient use 
     of the electromagnetic spectrum and notwithstanding section 
     3302(b) of title 31, United States Code, any Federal entity 
     which operates a Federal Government station may accept 
     payment in advance or in-kind reimbursement of costs, or a 
     combination of payment in advance and in-kind reimbursement, 
     from any person to defray entirely the expenses of relocating 
     the Federal entity's operations from one or more radio 
     spectrum frequencies to another frequency or frequencies, 
     including, without limitation, the costs of any modification, 
     replacement, 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 paragraph shall be 
     available, without appropriation or fiscal year limitation, 
     only for the operations of the Federal entity for which such 
     funds were deposited under this paragraph.
       ``(2) Process for relocation.--Any person seeking to 
     relocate a Federal Government station that has been assigned 
     a frequency within a band allocated for mixed Federal and 
     non-Federal use may submit a petition for such relocation to 
     NTIA. The NTIA shall limit or terminate the Federal 
     Government station's operating license when the following 
     requirements are met:
       ``(A) the person seeking relocation of the Federal 
     Government station has guaranteed to defray entirely, through 
     payment in advance, in-kind reimbursement of costs, or a 
     combination thereof, all relocation costs incurred by the 
     Federal entity, including all engineering, equipment, site 
     acquisition and construction, and regulatory fee costs;
       ``(B) the person seeking relocation completes all 
     activities necessary for implementing the relocation, 
     including construction of replacement facilities (if 
     necessary and appropriate) and identifying and obtaining on 
     the Federal entity's behalf new frequencies for use by the 
     relocated Federal Government station (where such station is 
     not relocating to spectrum reserved exclusively for Federal 
     use);
       ``(C) any necessary replacement facilities, equipment 
     modifications, or other changes have been implemented and 
     tested to ensure that the Federal Government station is able 
     to successfully accomplish its purposes; and
       ``(D) NTIA has determined that the proposed use of the 
     spectrum frequency band to which the Federal entity will 
     relocate its operations is--
       ``(i) consistent with obligations undertaken by the United 
     States in international agreements and with United States 
     national security and public safety interests; and
       ``(ii) suitable for the technical characteristics of the 
     band and consistent with other uses of the band.
     In exercising its authority under subparagraph (D)(i), NTIA 
     shall consult with the Secretary of Defense, the Secretary of 
     State, or other appropriate officers of the Federal 
     Government.
       ``(3) Right to reclaim.--If within one year after the 
     relocation the Federal Government station demonstrates to the 
     Commission that the new facilities or spectrum are not 
     comparable to the facilities or spectrum from which the 
     Federal Government station was relocated, the person seeking 
     such relocation must take reasonable steps to remedy any 
     defects or pay the Federal entity for the costs of returning 
     the Federal Government station to the spectrum from which 
     such station was relocated.
       ``(h) Federal Action To Expedite Spectrum Transfer.--Any 
     Federal Government station which operates on electromagnetic 
     spectrum that has been identified for reallocation for mixed 
     Federal and non-Federal use in any reallocation report under 
     subsection (a) shall, to the maximum extent practicable 
     through the use of the authority granted under subsection (g) 
     and any other applicable provision of law, take action to 
     relocate its spectrum use to other frequencies that are 
     reserved for Federal use or to consolidate its spectrum use 
     with other Federal Government stations in a manner that 
     maximizes the spectrum available for non-Federal use. 
     Subsection (c)(4) of this section shall not apply to the 
     extent that a non-Federal user seeks to relocate or relocates 
     a Federal power agency under subsection (g).
       ``(i) Definition.--For purposes of this section, the term 
     `Federal entity' means any department, agency, or other 
     instrumentality of the Federal Government that utilizes a 
     Government station license obtained under section 305 of the 
     1934 Act (47 U.S.C. 305).''; and
       (2) in section 114(a)(1), by striking ``(a) or (d)(1)'' and 
     inserting ``(a), (d)(1), or (f)''.
       (d) Identification and Reallocation of Auctionable 
     Frequencies.--The National Telecommunications and Information 
     Administration Organization Act (47 U.S.C. 901 et seq.) is 
     amended--
       (1) in section 113(b)--
       (A) by striking the heading of paragraph (1) and inserting 
     ``Initial reallocation report.--'';
       (B) by inserting ``in the first report required by 
     subsection (a)'' after ``recommend for reallocation'' in 
     paragraph (1);
       (C) by inserting ``or (3)'' after ``paragraph (1)'' each 
     place it appears in paragraph (2); and
       (D) by inserting after paragraph (2) the following new 
     paragraph:
       ``(3) Second reallocation report.--In accordance with the 
     provisions of this section, the Secretary shall recommend for 
     reallocation in the second report required by subsection (a), 
     for use other than by Federal Government stations under 
     section 305 of the 1934 Act (47 U.S.C. 305), a single 
     frequency band that spans not less than an additional 20 
     megahertz, that is located below 3 gigahertz, and that meets 
     the criteria specified in paragraphs (1) through (5) of 
     subsection (a).''; and
       (2) in section 115--
       (A) in subsection (b), by striking ``the report required by 
     section 113(a)'' and inserting ``the initial reallocation 
     report required by section 113(a)''; and
       (B) by adding at the end the following new subsection:
       ``(c) Allocation and Assignment of Frequencies Identified 
     in the Second Reallocation Report.--With respect to the 
     frequencies made available for reallocation pursuant to 
     section 113(b)(3), the Commission shall, not later than 1 
     year after receipt of the second reallocation report required 
     by such section, prepare, submit to the President and the 
     Congress, and implement, a plan for the allocation and 
     assignment under the 1934 Act of such frequencies. Such plan 
     shall propose the immediate allocation and assignment of all 
     such frequencies in accordance with section 309(j) of the 
     1934 Act (47 U.S.C. 309(j)).''.
               TITLE IV--EDUCATION AND RELATED PROVISIONS

     SEC. 4000. TABLE OF CONTENTS.

       The table of contents for this title is as follows:

               TITLE IV--EDUCATION AND RELATED PROVISIONS

Sec. 4000. Table of contents.

                      Subtitle A--Higher Education

Sec. 4001. Short title; references; and general effective date.
Sec. 4002. Participation of institutions and administration of loan 
              programs.
Sec. 4003. Loan terms and conditions.
Sec. 4004. Amendments affecting guaranty agencies.
Sec. 4005. Amendments affecting FFELP lenders and loan holders.
Sec. 4006. Connie Lee privatization.
Sec. 4007. Extension of program duration.

   Subtitle B--Provisions Relating to the Employee Retirement Income 
                          Security Act of 1974

Sec. 4101. Waiver of minimum period for joint and survivor annuity 
              explanation before annuity starting date.
                      Subtitle A--Higher Education

     SEC. 4001. SHORT TITLE; REFERENCES; AND GENERAL EFFECTIVE 
                   DATE.

       (a) Short Title.--This subtitle may be cited as the 
     ``Student Loan Reform Act of 1995''.
       (b) References.--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 Higher Education Act of 
     1965 (20 U.S.C. 1001 et seq.).
       (c) General Effective Date.--Unless otherwise specified in 
     this subtitle, the amendments made by this subtitle shall 
     take effect on January 1, 1996.

     SEC. 4002. 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.--
     Notwithstanding any other provision of law, 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 

[[Page H 13394]]
     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 10 
     percent of the new student loan volume for such year, except 
     that only the 102 eligible institutions that participated in 
     the direct loan program under this part for academic year 
     1994-1995 shall be eligible to participate in such program 
     for academic year 1996-1997 and for each succeeding academic 
     year.'';
       (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) in clause (ii)--
       (i) by striking ``beginning''; and
       (ii) by striking ``clause (i); and'' and inserting 
     ``subparagraph (A).'';
       (B) by redesignating clause (ii) (as amended by 
     subparagraph (A)) as subparagraph (B); and
       (C) by striking ``(i) categorizing'' and inserting 
     ``categorizing''.
       (c) Control of Administrative Expenses.--Section 458 (20 
     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 for the William D. Ford 
     Federal Direct Loan Program. 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.
       ``(2) Direct and indirect administrative expenses.--
       ``(A) Direct administrative expenses.--
       ``(i) In general.--For purposes of this subsection the term 
     `direct administrative expenses' means the cost under the 
     William D. Ford Federal Direct Loan Program of--

       ``(I) activities related to credit extension, loan 
     origination, loan servicing, management of contractors, and 
     payments to contractors, other government entities, and 
     program participants, under this part;
       ``(II) collection of delinquent loans under this part; and
       ``(III) write-off and closeout of loans under this part.

       ``(ii) Clarification with respect to certain expenses.--
     Such term does not include the costs to the Department of 
     personnel, training, rent, printing, or other administrative 
     costs, associated with the activities described in subclause 
     (I), (II), or (III) of clause (i).
       ``(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.
       ``(3) Subsidy cost.--The term `subsidy cost' means the 
     estimated long-term cost to the Federal Government of direct 
     administrative expenses calculated on a net present value 
     basis.''; 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) Default rates and income contingent repayment.--Section 
     435(m) (20 U.S.C. 1085(m)) is amended by adding at the end 
     the following new paragraph:
       ``(5) Default rate and income contingent repayment.--The 
     Secretary shall prescribe regulations for the calculation of 
     default rates for loans that are repaid pursuant to income 
     contingent repayment under this part, which regulations shall 
     be comparable to regulations for the calculation of default 
     rates for loans that are repaid pursuant to income contingent 
     repayment under part D.''.
       (4) 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.--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) 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.
       ``(3) Promulgation.--The methodology, criteria, procedures 
     and standards required by paragraphs (1) and (2) shall be 
     promulgated in final form not later than 120 days after the 
     date of enactment of this paragraph.''.
       (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 422(g)(1) (20 U.S.C. 1072(g)(1))--
       (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'';
       (3) 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'';
       (4) in section 428(c)(9)(F)(vii) (20 U.S.C. 
     1078(c)(9)(F)(vii))--
       (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;
       (5) 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'';
       (6) 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'';
       (7) in section 428(e)(3) (20 U.S.C. 1078(e)(3)), by 
     striking ``costs of transition'' and inserting ``indirect 
     administrative expenses'';
       (8) 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'';
       (9) in the heading for paragraph (2) of section 453(c) (20 
     U.S.C. 1087c(c)), by striking ``Transition'' and inserting 
     ``Institutional'';
       (10) in the heading for paragraph (3) of section 453(c) (20 
     U.S.C. 1087c(c)), by striking ``after transition''; and
       (11) 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); and
       (D) in paragraph (4) (as redesignated by subparagraph (C)), 
     by striking ``successful operation'' and inserting 
     ``integrity and efficiency''.
       (f) Fees for Origination Services.--Section 452 (20 U.S.C. 
     1087b) is amended--
       (1) by striking subsection (b); and
       (2) by redesignating subsections (c) and (d) as subsections 
     (b) and (c), respectively.
       (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'.''.
       (h) Technical Amendment.--Section 428(b)(1)(X) (20 U.S.C. 
     1078(b)(1)(X)) is amended by striking ``section 428(c)(10)'' 
     and inserting ``section 428(c)(9)''.

     SEC. 4003. LOAN TERMS AND CONDITIONS.

       (a) Comparability Provisions.--
       (1) In general.--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 

[[Page H 13395]]
     shall have the same terms, conditions, deferments, forbearances, 
     eligibility requirements, and benefits, be subject to the 
     same administrative requirements for origination, payment and 
     processing of applications, be available in the same amounts, 
     be subject to the same interest rates and same amount of 
     fees, and have the same repayment plans, 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 Student Loan Reform Act of 1995.''.
       (2) Conforming amendments.--Section 428(b)(1) (20 U.S.C. 
     1078(b)(1)) is amended--
       (A) in subparagraph (D)(ii), by inserting ``(except 
     pursuant to a graduated, income-sensitive, or income 
     contingent repayment schedule)'' after ``10 years''; and
       (B) in subparagraph (E)(ii), by inserting ``(except 
     pursuant to a graduated, income-sensitive, or income 
     contingent repayment schedule)'' after ``10 years''.
       (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 subparagraphs (B) and (C) of section 
     453(a)(2), the Secretary may offer a borrower a Federal 
     Direct Consolidation loan if such borrower is otherwise 
     eligible for a consolidation loan pursuant to this section 
     and such borrower is--
       ``(i) unable to obtain a consolidation loan from a lender 
     with an agreement under subsection (a)(1) that holds one of 
     such borrower's loans under this part; 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 or an income-sensitive repayment 
     schedule, and may, at the discretion of the lender, offer the 
     borrower the option of repaying the loan in accordance with 
     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 or income-sensitive repayment schedules, and may 
     include, at the discretion of the lender, the establishment 
     of 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 subsection (b)(1)(E)(i) and section 
     428C(c)(2)(A) shall have terms and conditions comparable to 
     the terms and conditions established by the Secretary 
     pursuant to section 455(e)(4). The Secretary shall discharge 
     or cancel the indebtedness of borrowers that repay pursuant 
     to income contingent repayment under this part to the same 
     extent, and under the same circumstances, as the Secretary 
     discharges or cancels the indebtedness of borrowers that 
     repay pursuant to income contingent repayment under part 
     D.''.
       (e) Plus Program Reductions.--Section 428B(b) (20 U.S.C. 
     1078-2(b)) is amended--
       (1) by striking ``(b) Limitation based on need.--'' and 
     inserting the following:
       ``(b) Annual Limits.--
       ``(1) Limitation based on need.--'';
       (2) by inserting before the last sentence thereof the 
     following:
       ``(3) Limitation computed on basis of actual payments.--''; 
     and
       (3) by inserting before paragraph (3) (as designated by the 
     amendment made by paragraph (2) of this section) the 
     following new paragraph:
       ``(2) Dollar limitation.--Subject to paragraph (1), the 
     maximum amount parents may borrow for one student in any 
     academic year or its equivalent (as defined by regulations of 
     the Secretary) is $15,000.''.

     SEC. 4004. 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 225 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 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 the period beginning January 1, 1996 and ending 
     September 30, 1996, and for each fiscal year thereafter, each 
     guaranty agency shall receive an administrative cost 
     allowance, payable quarterly, for such fiscal year calculated 
     on the basis of 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.
       ``(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.

[[Page H 13396]]

       ``(iv) Notwithstanding clauses (ii) and (iii)--
       ``(I) for each of the fiscal years 1996 through 1998, the 
     Secretary shall pay an aggregate amount for such year of not 
     more than $220,000,000 to all guaranty agencies receiving 
     administrative cost allowances under this subparagraph; and
       ``(II) for each of the fiscal years 1999 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, 18.5 percent of 
     the balance of the principal, accrued interest, and 
     collection costs, 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 (9)(C)(ii), by striking ``80 percent'' and 
     inserting ``76 percent''; and
       (B) in paragraph (9)(E)--
       (i) in the matter preceding clause (i), by striking ``The 
     Secretary may terminate a'' and inserting ``After providing a 
     guaranty agency notice and opportunity for a hearing on the 
     record, the Secretary may terminate such'';
       (ii) in clause (iv), by inserting ``or'' after the 
     semicolon;
       (iii) by striking clause (vi); and
       (iv) in clause (v), by striking ``; or'' and inserting a 
     period.
       (2) 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 the following:
       ``(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.
       (g) Reserve Ratios.--Section 428(c)(9)(A) (20 U.S.C. 
     1078(c)(9)(A)) is amended--
       (1) in clause (i), by inserting ``and'' after the 
     semicolon;
       (2) in clause (ii), by striking ``; and'' and inserting a 
     period; and
       (3) by striking clause (iii).
       (h) Guaranty Agency Reimbursement.--
       (1) In general.--Section 428(c)(1) (20 U.S.C. 1078(c)(1)) 
     is amended--
       (A) in subparagraph (A), by striking ``98 percent'' and 
     inserting ``96 percent''; and
       (B) in subparagraph (B)--
       (i) in clause (i), by striking ``88 percent'' and inserting 
     ``86 percent''; and
       (ii) in clause (ii), by striking ``78 percent'' and 
     inserting ``76 percent''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply with respect to loans for which the first 
     disbursement is made on or after January 1, 1996.

     SEC. 4005. 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 ``not less than 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) Lenders-of-Last-Resort.--Section 428(j)(2) (20 U.S.C. 
     1078(j)(2)) is amended--
       (1) in subparagraph (A), by striking ``60 days'' and 
     inserting ``15 days''; and
       (2) in subparagraph (B), by striking ``two rejections from 
     eligible lenders'' and inserting ``one rejection from an 
     eligible lender''.
       (c) 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'' and inserting ``95 percent 
     (or 100 percent in the case of a lender-of-last-resort)''.
       (d) 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 ``0.80 
     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.
       (e) 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 and PLUS Loans.--
       ``(1) Rebate.--Each holder of a subsidized or unsubsidized 
     Federal Stafford Loan under this part, or a Federal PLUS loan 
     under section 428B, shall pay to the Secretary, on June 30 
     and December 31 of each year, a subsidy rebate in an amount 
     equal to 0.035 percent of the unpaid principal amount of each 
     such loan that such holder holds during the repayment period 
     described in section 428(b)(7), except that, notwithstanding 
     subparagraphs (A), (B), and (C) of section 428(b)(7), such 
     holder shall pay a subsidy rebate under this paragraph with 
     respect to such loan during any period of authorized 
     forbearance.
       ``(2) Payment of rebate.--The subsidy rebate shall be paid, 
     to the extent possible, by subtracting from amounts owed such 
     holder under section 438(b) (after deducting from such 
     amounts any amount owed by such holder under section 438(d) 
     for the quarters ending June 30 and December 31, as 
     appropriate) the amount of subsidy rebates owed by such 
     holder. To the extent the amounts owed such holder under 
     section 438(b) (after making the deduction described in the 
     preceding sentence) are insufficient to pay in full the 
     subsidy rebates due from such holder, such holder shall pay 
     the insufficiency by check or wire transfer of funds, in a 
     manner determined by the Secretary.
       ``(3) Deposit.--The Secretary shall deposit all subsidy 
     rebates collected under the second sentence of paragraph (2) 
     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.
       (f) 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) in subclause (I), by inserting ``such'' before ``lender 
     at least once'';
       (3) in subclause (II), by inserting ``such'' before ``a 
     lender that is audited''; and
       (4) by striking ``if the lender'' and inserting ``if such 
     lender''.

     SEC. 4006. CONNIE LEE PRIVATIZATION.

       (a) Status of the Corporation and Corporate Powers; 
     Obligations Not Federally Guaranteed.--
       (1) Status of the corporation.--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.
       (C) Prohibition.--Until such time as the Secretary of the 
     Treasury sells the stock of the Corporation owned by the 
     Secretary of Education pursuant to subsection (c), the 
     Student Loan Marketing Association shall not provide 
     financial support or guarantees to the Corporation.
       (D) Financial support or guarantees.--After the Secretary 
     of the Treasury sells the stock of the Corporation owned by 
     the Secretary 

[[Page H 13397]]
     of Education pursuant to subsection (c), the Student Loan Marketing 
     Association may provide financial support or guarantees to 
     the Corporation, if such support or guarantees are subject to 
     terms and conditions that are no more advantageous to the 
     Corporation than the terms and conditions the Student Loan 
     Marketing Association provides to other entities, including, 
     where applicable, other monoline financial guaranty 
     corporations in which the Student Loan Marketing Association 
     has no ownership interest.
       (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.
       (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 means the College Construction Loan Insurance 
     Association as in existence on 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) Articles of incorporation.--The Corporation shall amend 
     its articles of incorporation without delay to reflect that 
     one of the purposes of the Corporation shall be to guarantee, 
     insure, and reinsure bonds, leases, and other evidences of 
     debt of educational institutions, including Historically 
     Black Colleges and Universities and other academic 
     institutions which are ranked in the lower investment grade 
     category using a nationally recognized credit rating system.
       (5) 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. 1132f-3 and 
     1132f-9), as such sections were in effect 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.
       (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 6 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.
       (d) 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.

     SEC. 4007. EXTENSION OF PROGRAM DURATION.

       Part B of title IV (20 U.S.C. 1071 et seq.) is amended--
       (1) in section 424(a) (20 U.S.C. 1074(a)), by striking 
     ``1998'' and inserting ``2002'';
       (2) in section 428(a)(5) (20 U.S.C. 1078(a)(5))--
       (A) by striking ``1998'' and inserting ``2002''; and
       (B) by striking ``2002'' and inserting ``2006''; and
       (3) in section 428C(e) (20 U.S.C. 1078-3(e)), by amending 
     the first sentence to read as follows: ``The authority to 
     make loans under this section expires at the close of 
     September 30, 2002.''.
   Subtitle B--Provisions Relating to the Employee Retirement Income 
                          Security Act of 1974

     SEC. 4101. WAIVER OF MINIMUM PERIOD FOR JOINT AND SURVIVOR 
                   ANNUITY EXPLANATION BEFORE ANNUTIY STARTING 
                   DATE.

       (a) General Rule.--For purposes of section 205(c)(3)(A) of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1055(c)(3)(A)), the minimum period prescribed by the 
     Secretary of the Treasury between the date that the 
     explanation referred to in such section is provided and the 
     annuity starting date shall not apply if waived by the 
     participant and, if applicable, the participant's spouse.
       (b) Effective Date,--Subsection (a) shall apply to plan 
     years beginning after December 31, 1995.
            TITLE V--ENERGY AND NATURAL RESOURCES PROVISIONS
        Subtitle A--Nuclear Regulatory Commission Annual Charges

     SEC. 5001. NUCLEAR REGULATORY COMMISSION ANNUAL CHARGES.

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

            CHAPTER 1--UNITED STATES ENRICHMENT CORPORATION

     SEC. 5201. SHORT TITLE.

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

     SEC. 5202. DEFINITIONS.

       For purposes of this chapter:
       (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 5205.
       (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 5204.
       (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. 5203. SALE OF THE CORPORATION.

       (a) Authorization.--The Board of Directors of the 
     Corporation, with the approval of the Secretary of the 
     Treasury, shall transfer the interest of the United States in 
     the United States Enrichment Corporation to the private 
     sector in a manner that provides for the long-term viability 
     of the Corporation, provides for the continuation by the 
     Corporation of the operation of the Department of Energy's 
     gaseous diffusion plants, provides for the protection of the 
     public interest in maintaining a reliable and economical 
     domestic source of uranium mining, enrichment and conversion 
     services, and, to the extent not inconsistent with such 
     purposes, secures the maximum proceeds to the United States.

[[Page H 13398]]

       (b) Proceeds.--Proceeds from the sale of the United States' 
     interest in the Corporation shall be deposited in the general 
     fund of the Treasury.

     SEC. 5204. METHOD OF SALE.

       (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 5205 (which may be consummated 
     through a merger or consolidation effected in accordance 
     with, and having the effects provided under, the law 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 reliable and economical domestic uranium mining 
     and enrichment industries.
       (c) Adequate Proceeds.--The Secretary of the Treasury shall 
     not allow the privatization of the Corporation unless before 
     the sale date the Secretary of Treasury determines that the 
     method of transfer will provide the maximum proceeds to the 
     Treasury consistent with the principles set forth in section 
     5203(a).
       (d) 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.

     SEC. 5205. 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 chapter.
       (3) Employees and officers of the Corporation (including 
     members of the Board of Directors) acting in accordance with 
     this section on behalf of the private corporation shall be 
     deemed to be acting in their official capacities as employees 
     or officers of the Corporation for purposes of section 205 of 
     title 18, United States Code.
       (b) Status of the Private Corporation.--(1) The private 
     corporation shall not be an agency, instrumentality, or 
     establishment of the United States, a Government corporation, 
     or a Government-controlled corporation.
       (2) Except as otherwise provided by this chapter, 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 stated in section 207 (a), (b), (c), and (d) of 
     title 18, United States Code, shall not apply to the acts of 
     an individual done in carrying out official duties as a 
     director, officer, or employee of the private corporation, if 
     the individual was an officer or employee of the Corporation 
     (including a director) continuously during the 45 days prior 
     to the privatization date.
       (d) Dissolution.--In the event that the privatization does 
     not occur, the Corporation will provide for the dissolution 
     of the private corporation within 1 year of the private 
     corporation's incorporation unless the Secretary of the 
     Treasury or his delegate, upon the Corporation's request, 
     agrees to delay any such dissolution for an additional year.

     SEC. 5206. 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 5207,
       (2) all personal property and inventories of the 
     Corporation,
       (3) all contracts, agreements, and leases under section 
     5208(a),
       (4) the Corporation's right to purchase power from the 
     Secretary under section 5208(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. 5207. 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. 5208. 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.
       (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. 5209. LIABILITIES.

       (a) Liability of the United States.--(1) Except as 
     otherwise provided in this chapter, 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 from any action taken by any agent or 
     officer of the United States in connection with the 
     privatization of the Corporation is hereby withdrawn.

[[Page H 13399]]

       (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 5208 or any other action the Corporation is required 
     to take under this chapter.
       (c) Liability of the Private Corporation.--Except as 
     provided in this chapter, 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. 5210. EMPLOYEE PROTECTIONS.

       (a) Contractor Employees.--(1) Privatization shall not 
     diminish the accrued, vested pension benefits of employees of 
     the Corporation's operating contractor at the two gaseous 
     diffusion plants.
       (2) In the event that the private corporation terminates or 
     changes the contractor at either or both of the gaseous 
     diffusion plants, the plan sponsor or other appropriate 
     fiduciary of the pension plan covering employees of the prior 
     operating contractor shall arrange for the transfer of all 
     plan assets and liabilities relating to accrued pension 
     benefits of such plan's participants and beneficiaries from 
     such plant to a pension plan sponsored by the new contractor 
     or the private corporation or a joint-labor management plan, 
     as the case may be.
       (3) In addition to any obligations arising under the 
     National Labor Relations Act (29 U.S.C. 151 et seq.), 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 eligible 
     persons, as described under subparagraph (B), 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; and
       (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 on or 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 over 
     the parties, without regard to the amount in controversy or 
     the citizenship of the parties.
       (b) Former Federal Employees.--(1)(A) An employee of the 
     Corporation that was subject to either the Civil Service 
     Retirement System (referred to in this section as ``CSRS'') 
     or the Federal Employees' Retirement System (referred to in 
     this section as ``FERS'') on the day immediately preceding 
     the privatization date shall elect--
       (i) to retain the employee's 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) An employee that makes an election under subparagraph 
     (A)(ii) shall have the option to transfer the balance in the 
     employee's Thrift Savings Plan account to a defined 
     contribution plan under the Corporation's retirement system, 
     consistent with applicable law and the terms of the 
     Corporation's defined contribution plan.
       (2) The Corporation shall pay to the Civil Service 
     Retirement and Disability Fund--
       (A) such employee deductions and agency contributions as 
     are required by sections 8334, 8422, and 8423 of title 5, 
     United States Code, for those employees who elect to retain 
     their coverage under either CSRS or FERS pursuant to 
     paragraph (1);
       (B) such additional agency contributions as are determined 
     necessary by the Office of Personnel Management to pay, in 
     combination with the sums under subparagraph (A), the 
     ``normal cost'' (determined using dynamic assumptions) of 
     retirement benefits for those employees who elect to retain 
     their coverage under CSRS pursuant to paragraph (1), with the 
     concept of ``normal cost'' being used consistent with 
     generally accepted actuarial standards and principles; and
       (C) such additional amounts, not to exceed two percent of 
     the amounts under subparagraphs (A) and (B), as are 
     determined necessary by the Office of Personnel Management to 
     pay the cost of administering retirement benefits for 
     employees who retire from the Corporation after the 
     privatization date under either CSRS or FERS, for their 
     survivors, and for survivors of employees of the Corporation 
     who die after the privatization date (which amounts shall be 
     available to the Office of Personnel Management as provided 
     in section 8348(a)(1)(B) of title 5, United States Code).
       (3) The Corporation shall pay to the Thrift Savings Fund 
     such employee and agency contributions as are required by 
     section 8432 of title 5, United States Code, for those 
     employees who elect to retain their coverage under FERS 
     pursuant to paragraph (1).
       (4) Any employee of the Corporation who was subject to the 
     Federal Employee Health Benefits Program (referred to in this 
     section as ``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. 5211. OWNERSHIP LIMITATIONS.

       (a) Securities 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 

[[Page H 13400]]
     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.
       (b) Ownership Limitation.--Immediately following the 
     consummation of the transaction or series of transactions 
     pursuant to which 100 percent of the ownership of the 
     Corporation is transferred to private investors, and for a 
     period of three years thereafter, no person may acquire, 
     directly or indirectly, beneficial ownership of securities 
     representing more than 10 percent of the total votes of all 
     outstanding voting securities of the Corporation. The 
     foregoing limitation shall not apply to--
       (1) any employee stock ownership plan of the Corporation,
       (2) members of the underwriting syndicate purchasing shares 
     in stabilization transactions in connection with the 
     privatization, or
       (3) in the case of shares beneficially held in the ordinary 
     course of business for others, any commercial bank, broker-
     dealer, or clearing agency.

     SEC. 5212. 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 U\235\. Uranium hexafluoride transferred to the 
     Secretary pursuant to this paragraph shall be deemed under 
     United States law for all purposes to be of Russian origin.
       (2) Within 7 years of the date of enactment of this Act, 
     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;
       (C) in 1995 and 1996 to the Russian Executive Agent at the 
     purchase price for use in matched sales pursuant to the 
     Suspension Agreement; or,
       (D) in calendar year 2001 for consumption by end users in 
     the United States not prior to January 1, 2002, in volumes 
     not to exceed 3,000,000 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 U\235\. 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, or upon request of the Russian 
     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. 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. 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 United 
     States 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 hexafluoride.
       (9) The Secretary of Commerce shall have responsibility for 
     the administration and enforcement of the limitations set 
     forth in this subsection. The Secretary of Commerce may 
     require any person to provide any certifications, 
     information, or take any action that may be necessary to 
     enforce these limitations. The United States 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 4,000,000 pounds, whichever is less, 
     in any calendar year after 1997; or
       (C) more than 800,000 separative work units contained in 
     low-enriched uranium transferred under this subsection in any 
     calendar year.
       (d) Inventory Sales.--(1) In addition to the transfers 
     authorized under subsections (c) and (e), the Secretary may, 
     from time to time, sell natural and low-enriched uranium 
     (including low-enriched uranium derived from highly enriched 
     uranium) from the Department of Energy's stockpile.
       (2) Except as provided in subsections (b), (c), and (e), no 
     sale or transfer of natural or low-enriched uranium shall be 
     made unless--
       (A) the President determines that the material is not 
     necessary to national security needs,
       (B) the Secretary determines that the sale of the material 
     will not have an adverse material impact on the domestic 
     uranium mining, conversion, or enrichment industry, taking 
     into account the sales of uranium under the Russian HEU 
     Agreement and the Suspension Agreement, and
       (C) the price paid to the Secretary will not be less than 
     the fair market value of the material.
       (e) Government Transfers.--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.

[[Page H 13401]]

       (f) Savings Provision.--Nothing in this chapter shall be 
     read to modify the terms of the Russian HEU Agreement.

     SEC. 5213. 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 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 a gaseous diffusion 
     plant. The terms and conditions for such service shall be no 
     more favorable than those the Secretary offers any other 
     generator of such wastes generated by uranium enrichment 
     plants licensed by the Nuclear Regulatory Commission.
       (2) The Secretary shall recover the cost of providing the 
     service in paragraph (1), including a pro rata share of any 
     capital costs, by charging the Corporation a fee for such 
     service in an amount equal to the price charged uranium 
     enrichment plants licensed by the Nuclear Regulatory 
     Commission, but in no event shall the Secretary charge any 
     generator more than an amount equal to that which would be 
     charged by commercial, state, regional, or interstate compact 
     entities for disposal of such waste.
       (b) Agreements With Other Persons.--The Corporation or any 
     other 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, but shall have no authority under this or any 
     other law to require a State or interstate compact to treat, 
     store, or dispose of such waste in a State or interstate 
     compact facility without the State or compact's consent.

     SEC. 5214. 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 (42 U.S.C. 2011 et seq.), 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. 5215. 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 date of enactment of this Act, 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 and subcontractors 
     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. 5216. AMENDMENTS TO THE ATOMIC ENERGY ACT.

       (a) Repeal.--(1) Chapters 22 through 26 of the Atomic 
     Energy Act of 1954 (42 U.S.C. 2297-2297e-7) 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 this section or sections 53, 63, or 1701, 
     if the Commission determines that--
       ``(1) the Corporation is owned, controlled, or dominated by 
     an alien, a foreign corporation, or a foreign government; or
       ``(2) the issuance of such a license or certificate of 
     compliance would be inimical to--
       ``(A) the common defense and security of the United States; 
     or
       ``(B) the maintenance of a reliable and economical domestic 
     source of enrichment services.''.
       (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 corporation established under the USEC 
     Privatization Act.
       ``(4) Any final determination under section 1701(c) 
     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. 5217. 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) as added 
     by section 902(b) of Public Law 102-486.
       (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 
     inserting ``or its successor'' before the period.

                    CHAPTER 2--DEPARTMENT OF ENERGY

     SEC. 5221. SALE OF DOE ASSETS

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

[[Page H 13402]]
     this section not to exceed $7,000,000 per year, the remainder of the 
     proceeds from dispositions under this subpart shall be 
     returned to the Treasury as miscellaneous receipts. There 
     shall be established a new receipt account in the Treasury 
     for proceeds of asset sales under this section.

     SEC. 5222. SALE OF WEEKS ISLAND OIL.

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

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

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


                   ``USE OF UNDERUTILIZED FACILITIES

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

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

                     Subtitle C--Natural Resources

           CHAPTER 1--DEPARTMENT OF THE INTERIOR CONVEYANCES

              Subchapter A--California Directed Land Sale

     SEC. 5301. CONVEYANCE OF PROPERTY.

       All right, title and interest of the United States in the 
     property depicted on a map designated USGS 7.5 minute 
     quadrangle, west of Flattop Mtn, CA 1984, entitled ``Location 
     Map for Ward Valley Site'', located in San Bernardino 
     Meridian, Township 9 North, Range 19 East, and improvements 
     thereon, together with all necessary easements for utilities 
     and ingress and egress to such property, including, but not 
     limited to, the right to improve those easements, are 
     conveyed to the Department of Health Services of the State of 
     California upon the tendering of $500,100 on behalf of the 
     State of California and the release of the United States by 
     the State of California from any liability for claims 
     relating to the property described in this section and, as 
     part of the consideration paid for such property, such 
     conveyance is declared to meet and fully comply with any 
     otherwise applicable provisions of section 7 of Endangered 
     Species Act of 1973 (16 U.S.C. 1536) and the National 
     Environmental Policy Act of 1969 (42 U.S.C. 4332). The 
     Secretary of the Interior shall issue evidence of title 
     pursuant to this Act notwithstanding any other provision of 
     law.

                     Subchapter B--Helium Reserves

     SEC. 5311. SHORT TITLE.

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

     SEC. 5312. AMENDMENT OF HELIUM ACT.

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

     SEC. 5313. AUTHORITY OF SECRETARY.

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

     ``SEC. 3. AUTHORITY OF SECRETARY.

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

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

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

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

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

     SEC. 5314. SALE OF CRUDE HELIUM.

       (a) Subsection 6(a) is amended by striking ``from the 
     Secretary'' and inserting ``from persons who have entered 
     into enforceable contracts to purchase an equivalent amount 
     of crude helium from the Secretary''.
       (b) Subsection 6(b) is amended--
       (1) by inserting ``crude'' before ``helium''; and
       (2) by adding the following at the end: ``Except as may be 
     required by reason of subsection (a), sales of crude helium 
     under this section shall be in amounts as the Secretary 
     determines, in consultation with the helium industry, 
     necessary to carry out this subsection with minimum market 
     disruption.''.
       (c) Subsection 6(c) is amended--
       (1) by inserting ``crude'' after ``Sales of''; and
       (2) by striking ``together with interest as provided in 
     this subsection'' and all that follows through the end of the 
     subsection and inserting ``all funds required to be repaid to 
     the United States as of October 1, 1995 under this section 
     (referred to in this subsection as `repayable amounts'). The 
     price at which crude helium is sold by the Secretary shall 
     not be less than the amount determined by the Secretary by--
       ``(1) dividing the outstanding amount of such repayable 
     amounts by the volume (in million cubic feet) of crude helium 
     owned by the United States and stored in the Bureau of Mines 
     Cliffside Field at the time of the sale concerned, and

[[Page H 13403]]

       ``(2) adjusting the amount determined under paragraph (1) 
     by the Consumer Price Index for years beginning after 
     December 31, 1995.''.
       (d) Subsection 6(d) is amended to read as follows:
       ``(d) Extraction of Helium From Deposits on Federal 
     Lands.--All moneys received by the Secretary from the sale or 
     disposition of helium on Federal lands shall be paid to the 
     Treasury and credited against the amounts required to be 
     repaid to the Treasury under subsection (c).''.
       (e) Subsection 6(e) is repealed.
       (f) Subsection 6(f) is amended--
       (1) by striking ``(f)'' and inserting ``(e)(1)''; and
       (2) by adding the following at the end:
       ``(2)(A) Within 7 days after the commencement of each 
     fiscal year after the disposal of the facilities referred to 
     in section 4(c), all amounts in such fund in excess of 
     $2,000,000 (or such lesser sum as the Secretary deems 
     necessary to carry out this Act during such fiscal year) 
     shall be paid to the Treasury and credited as provided in 
     paragraph (1).
       ``(B) On repayment of all amounts referred to in subsection 
     (c), the fund established under this section shall be 
     terminated and all moneys received under this Act shall be 
     deposited in the general fund of the Treasury.''.

     SEC. 5315. ELIMINATION OF STOCKPILE.

       Section 8 is amended to read as follows:

     ``SEC. 8. ELIMINATION OF STOCKPILE.

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

     SEC. 5316. REPEAL OF AUTHORITY TO BORROW.

       Sections 12 and 15 are repealed.

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

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

        CHAPTER 2--ARCTIC COASTAL PLAIN LEASING AND REVENUE ACT

     SEC. 5312. SHORT TITLE.

       This chapter may be cited as the 'Arctic Coastal Plain 
     Leasing and Revenue Act of 1995''.

     SEC. 5322. DEFINITIONS.

       When used in this chapter 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; and
       (2) ``Secretary'' except as otherwise provided, means the 
     Secretary of the Interior or the Secretary's designee.

     SEC. 5333. LEASING PROGRAM FOR LANDS WITHIN THE COASTAL 
                   PLAIN.

       (a) Authorization.--The Congress hereby authorizes and 
     directs the Secretary, acting through the Bureau of Land 
     Management in consultation with the Fish and Wildlife Service 
     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 to administer the provisions of this 
     chapter 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, subsistence resources, 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) Compatibility.--Congress hereby determines that the oil 
     and gas leasing program and activities authorized by this 
     section in the Coastal Plain are compatible with the purposes 
     for which the Arctic National Wildlife Refuge was 
     established, and that no further findings or decisions are 
     required to implement this determination.
       (d) Sole Authority.--This chapter shall be the sole 
     authority for leasing on the Coastal Plain. Provided, That 
     nothing in this chapter shall be deemed to expand or limit 
     state and local regulatory authority.
       (e) Federal Land.--The Coastal Plain shall be considered 
     ``Federal land'' for the purposes of the Federal Oil and Gas 
     Royalty Management Act of 1982 .
       (f) 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 45,000 
     acres of the Coastal Plain as Special Areas and close such 
     areas to leasing if the Secretary determines that these 
     Special Areas are of such unique character and interest so as 
     to require special management and regulatory protection. The 
     Secretary may, however, permit leasing of all or portions of 
     any Special Areas within the Coastal Plain 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.
       (g) Limitation on Closed Areas.--The Secretary's sole 
     authority to close lands within the Coastal Plain to oil and 
     gas leasing and to exploration, development, and production 
     is that set forth in this subtitle.
       (h) Conveyance.--In order to maximize federal revenues by 
     removing clouds on title of lands and clarifying land 
     ownership patterns within the Coastal Plain, the Secretary, 
     notwithstanding the provisions of section 1302(h)(2) of the 
     Alaska National Interest Lands Conservation Act (16 U.S.C. 
     3192(h)(2)), is authorized and directed to convey (1) to the 
     Kaktovik Inupiat Corporation the surface estate of the lands 
     described in paragraph 2 of Public Land Order 6959, to the 
     extent necessary to fulfill the corporation's entitlement 
     under section 12 of the Alaska Native Claims Settlement Act 
     (43 U.S.C. 1611), and (2) to the Arctic Slope Regional 
     Corporation the subsurface estate beneath such surface estate 
     pursuant to the August 9, 1983, agreement between the Arctic 
     Slope Regional Corporation and the United States of America.

     SEC. 5334. 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 chapter, including rules and 
     regulations relating to protection of the fish and wildlife, 
     their habitat, subsistence resources, and the environment of 
     the Coastal Plain. Such rules and regulations shall be 
     promulgated no later than fourteen months after the date of 
     enactment of this chapter and shall, as of their effective 
     date, apply to all operations conducted under a lease issued 
     or maintained under the provisions of this chapter 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. 5335. 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 

[[Page H 13404]]
     U.S.C. 4332(2)(C)) is hereby found by the Congress to be adequate to 
     satisfy the legal and procedural requirements of 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 the 
     leasing program authorized by this chapter, to conduct the 
     first lease sale and any subsequent lease sale authorized by 
     this chapter, and to grant rights-of-way and easements to 
     carry out the purposes of this chapter.

     SEC. 5336. LEASE SALES.

       (a) Lease Sales.--Lands may be leased pursuant to the 
     provisions of this chapter 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 (c)) from, a lease sale; and
       (2) public notice of and comment on designation of areas to 
     be included in, or excluded 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 no less than two hundred thousand 
     acres and no more than three hundred thousand acres shall be 
     offered. If the total acreage nominated is less than two 
     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. With respect to subsequent lease sales, the 
     Secretary shall offer for lease no less than two hundred 
     thousand acres of the Coastal Plain. The initial lease sale 
     shall be held within twenty months of the date of enactment 
     of this chapter. The second lease sale shall be held no later 
     than twenty-four months after the initial sale, with 
     additional sales conducted no later than twelve months 
     thereafter so long as sufficient interest in development 
     exists to warrant, in the Secretary's judgment, the conduct 
     of such sales.

     SEC. 5337. 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 the Attorney 
     General 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 
     chapter may be sold, exchanged, assigned, sublet, 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 chapter 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. 5338. LEASE TERMS AND CONDITIONS.

       An oil or gas lease issued pursuant to this chapter 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 5337 of this chapter;
       (4) require that exploration activities pursuant to any 
     lease issued or maintained under this chapter 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 chapter shall 
     be conducted in accordance with development and production 
     plans approved by the Secretary;
       (6) require posting of bond as required by section 5339 of 
     this chapter;
       (7) provide that the Secretary may close, on a seasonal 
     basis, portions of the Coastal Plain to exploratory drilling 
     activities as necessary to protect caribou calving areas and 
     other species of fish and wildlife;
       (8) contain such provisions relating to rental and other 
     fees 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 chapter 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 
     chapter, or of any applicable provision of Federal or State 
     environmental law, or of the lease, or of any regulation 
     issued under this chapter, such lease may be canceled 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 chapter, 
     or of any applicable provision of Federal or State 
     environmental law, or of the lease, or of any regulation 
     issued under this chapter, 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 chapter;
       (12) provide that cancellation of a lease under this 
     chapter shall in no way release the owner of the lease from 
     the obligation to provide for reclamation of the lease site;
       (13) allow the lessee, at the discretion of the Secretary, 
     to make written relinquishment of all rights under any lease 
     issued pursuant to this chapter. The Secretary shall accept 
     such relinquishment by the lessee of any lease issued under 
     this chapter where there has not been surface disturbance on 
     the lands covered by the lease;
       (14) 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;
       (15) 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;
       (16) 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;
       (17) provide that the standard of reclamation for lands 
     required to be reclaimed under this chapter 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;
       (18) contain the terms and conditions relating to 
     protection of fish and wildlife, their habitat, and the 
     environment, as required by section 5333(a) of this chapter;
       (19) provide that the holder of a lease, its agents, and 
     contractors use best efforts to provide a fair share, as 
     determined by the level of obligation previously agreed to in 
     the 1974 agreement implementing Section 29 of the Federal 
     Agreement and Grant of Right of Way for the Operation of the 
     Trans-Alaska Pipeline, of employment and contracting for 
     Alaska Natives and Alaska Native Corporations from throughout 
     the State; and
       (20) contain such other provisions as the Secretary 
     determines necessary to ensure compliance with the provisions 
     of this chapter and the regulations issued under this 
     chapter.

     SEC. 5339. 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) set by the Secretary consistent with the type of 
     operations proposed, to provide the 

[[Page H 13405]]
     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. 5340. 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 chapter shall provide the Secretary access 
     to all data and information from any lease granted pursuant 
     to this chapter (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) 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)--
       (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. 5341. EXPEDITED JUDICIAL REVIEW.

       (a) Any complaint seeking judicial review of any provision 
     in this chapter, or any other action of the Secretary under 
     this chapter 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: Provided, That any complaint seeking judicial 
     review of an action of the Secretary in promulgating any 
     regulation under this chapter may be filed only in the United 
     States Court of Appeals for the District of Columbia.
       (b) 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. 5342. 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, 
     subsistence resources, 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 as required by section 5334 of this 
     chapter shall include provisions granting rights-of-way and 
     easements across the Coastal Plain.

     SEC. 5343. 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 chapter.
       (b) Responsibility of Holders of Lease.--It shall be the 
     responsibility of any holder of a lease under this chapter 
     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, 
     subsistence resources, and the environment of, the Coastal 
     Plain; and
       (2) allow prompt access at the site of any operations 
     subject to regulation under this chapter 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 chapter or conditions contained in any lease 
     issued pursuant to this chapter 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. 5344. NEW REVENUES.

       (a) Distribution of Revenues.--(1) Notwithstanding any 
     other provision of law, all revenues received by the Federal 
     Government from competitive bids, sales, bonuses, royalties, 
     rents, fees, or interest derived from the leasing of oil and 
     gas within the Coastal Plain shall be deposited into the 
     Treasury of the United States, solely as provided in this 
     subsection.
       (2) Fifty percent of all revenues referred to in paragraph 
     (1) shall be paid by the Secretary of the Treasury 
     semiannually to the State of Alaska, on March 30 and 
     September 30 of each year.
       (3)(A) The Secretary of the Treasury is directed to monitor 
     the revenues deposited into the Treasury from oil and gas 
     leases issued under the authority of this chapter. Except as 
     provided in subparagraph (B), all monies deposited into the 
     Treasury from such oil and gas leases in excess of 
     $2,600,000,000 shall be distributed as follows:
       (i) Fifty percent shall be paid to the State of Alaska in 
     the manner provided in this subsection; and
       (ii) Fifty percent shall be deposited into a special fund 
     established in the Treasury of the United States known as the 
     ``National Park, Refuge, and Fish and Wildlife Renewal and 
     Protection Fund (hereinafter in this section referred to as 
     the ``renewal fund'').
       (B) Deposits into the renewal fund shall not exceed 
     $250,000,000 over the life of the renewal fund. Monies in 
     excess of such amount shall be deposited as miscellaneous 
     receipts in the Treasury of the United States.
       (C) Deposits into the renewal fund shall remain available 
     until expended. The Secretary of the Treasury is directed to 
     develop procedures for use of the renewal fund to ensure 
     accountability and demonstrated results.
       (b) Use of Renewal Fund.--Monies 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 shall be 
     expended by the Secretary as follows:
       (1) Twenty-five percent shall be used for infrastructure 
     needs at units of the National Park System, including but not 
     limited to, facility refurbishment, repair and replacement, 
     interpretive media and exhibit repair and replacement, and 
     Infrastructure projects associated with park resource 
     protection;
       (2) Twenty-five percent shall be used for infrastructure 
     needs at units of the National Wildlife Refuge System, 
     including but not limited to, facility refurbishment, repair 
     and replacement, interpretive media and exhibit repair and 
     replacement, and infrastructure projects associated with 
     refuge resource protection;
       (3) Twenty-five percent shall be used for acquisition of 
     important habitat lands for threatened or endangered species 
     from owners of private property. Such lands shall be acquired 
     solely on a willing seller basis and shall be managed by the 
     Secretary for the conservation of such species pursuant to 
     the terms of section 5 of the Endangered Species Act of 1973 
     (16 U.S.C. 1534); and
       (4) Twenty-five percent shall be available for wetlands 
     projects in accordance with the applicable provision of the 
     North American Wetlands Conservation Act (16 U.S.C. 4401 et 
     seq.).
       (c) Community Assistance.--There is hereby established a 
     Community Assistance Fund in the Treasury into which shall be 
     deposited $30,000,000 from revenues derived from the federal 
     share of the first lease sale authorized under this chapter. 
     The Secretary of the Treasury shall invest the funds in the 
     Community Assistance Fund in interest bearing government 
     securities. No more than $5,000,000 per year from the 
     Community Assistance Fund, shall be available to the 
     Secretary for distribution, upon application and without 
     further appropriation, to organized boroughs, other municipal 
     subdivisions of the State of Alaska, and recognized Indian 
     Reorganization Act entities which are directly impacted by 
     the exploration and production of oil and gas on the Coastal 
     Plain authorized by this chapter to provide public and social 
     services and facilities required in connection with such 
     activities.

                       CHAPTER 3--WATER PROJECTS

                  Subchapter A--Irrigation Prepayment

     SEC. 5351. 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:
       (1) 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 

[[Page H 13406]]
     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.'';
       (2) by striking ``lands in a district'' and inserting: 
     ``lands in a district, or lands owned or leased by a 
     person'';
       (3) by striking ``obligation of a district'' and inserting: 
     ``obligation of a district or a person'';
       (4) by striking ``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. 5352. CONFORMING AMENDMENT.

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

                       Subchapter B--Hetch Hetchy

     SEC. 5353. HETCH HETCHY DAM.

       Section 7 of the Act of December 19, 1913 (38 Stat. 242, 
     chapter 4), is amended--
       (1) by striking ``$30,000'' in the first sentence and 
     inserting ``$2,000,000''; and
       (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 the 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.''.

                     Subchapter C--Collbran Project

     SEC. 5355. COLLBRAN PROJECT.

       (a) Short Title.--This subchapter may be cited as the 
     ``Collbran Project Unit Conveyance Act''.
       (b) Definitions.--For purposes of this subchapter:
       (1) Districts.--The term ``Districts'' means the Ute Water 
     Conservancy District and the Collbran Conservancy District 
     (including their successors and assigns), which are political 
     subdivisions of the State of Colorado.
       (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 The Vega 
     Recreation Facilities);
       (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 non-exclusive easement for the use of existing 
     easements or rights-of-way owned by the United States on or 
     across nonfederal lands which are necessary for access to 
     Project facilities;
       (L) title to lands reasonably necessary for all Project 
     facilities except for land described in subparagraph (K) or 
     subsection (c)(1)(B) or (C);
       (M) all permits and contract rights held by the Bureau of 
     Reclamation, including, without limitation, contract or other 
     rights relating to the operation, use, maintenance, repair, 
     or replacement of the water storage reservoirs located on the 
     Grand Mesa which are operated as a part of the Project;
       (N) all equipment, parts inventories, and tools;
       (O) all additions, replacements, betterments, and 
     appurtenances to any of the above; and
       (P) 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) Vega recreation facilities.--The term ``Vega Recreation 
     Facilities'' includes, but is not limited to, buildings, 
     campgrounds, picnic areas, parking lots, fences, boat docks 
     and ramps, electrical lines, water and sewer systems, trash 
     and toilet facilities, roads and trails, and other structures 
     and equipment used for State park purposes at and near Vega 
     Reservoir such as recreation, maintenance and daily and 
     overnight visitor use, and lands above the high water level 
     of Vega Reservoir within the area previously defined by the 
     Department of the Interior as the ``Reservoir Area Boundary'' 
     which have not historically been utilized for Collbran 
     Project water storage and delivery facilities, together with 
     an easement for public access for recreational purposes to 
     Vega Reservoir and the water surface thereof, and 
     construction, operation, maintenance and replacement of such 
     recreation facilities below the high water line. Such 
     facilities shall also include improvements constructed or 
     added as a result of the agreements referred to in section 
     (c)(6).
       (c) Conveyance of the Collbran Project.--
       (1) In general.--
       (A) Conveyance to districts.--The Secretary of the Interior 
     shall convey to the Districts all right, title, and interest 
     of the United States in and to the Project, as described in 
     subsection (b)(3), by quitclaim deed and bill of sale, 
     without warranties, in the last quarter of fiscal year 2000, 
     subject only to the requirements of this section. Until such 
     conveyance occurs, the Bureau of Reclamation shall continue 
     to provide for the operation, maintenance, repair, and 
     replacement of Project facilities and the storage reservoirs 
     on the Grand Mesa to the extent such responsibilities are the 
     responsibility of the Bureau of Reclamation and have not been 
     delegated to the Districts prior to the date of enactment of 
     this Act or are delegated or transferred to the Districts by 
     agreement thereafter, so that at the time of conveyance such 
     facilities are in the same condition as, or better condition 
     than, the condition of the facilities on the date of 
     enactment of this Act.
       (B) Easements on national forest system lands.--The 
     Secretary of Agriculture shall grant, in the last quarter of 
     fiscal year 2000, subject only to the requirements of this 
     section; (i) a non-exclusive easement on and across National 
     Forest System lands to the Districts for ingress and egress 
     on existing access routes to each existing component of the 
     Project and to the existing storage reservoirs on the Grand 
     Mesa which are operated as a part of the Project; (ii) a non-
     exclusive easement on National Forest System lands for the 
     operation, use, maintenance, repair, and replacement, but not 
     enlargement, of the existing storage reservoirs on the Grand 
     Mesa to the owners and operators of such reservoirs which are 
     operated as a part of the Project; which easement may be 
     exercised in the event that the existing land use 
     authorizations for such storage reservoirs are restricted, 
     terminated, relinquished, or abandoned, and which easement 
     shall not be subject to conditions or requirements that 
     interfere with or limit the use of such reservoirs for water 
     supply or power purposes; and (iii) a non-exclusive easement 
     to the Districts for the operation, use, maintenance, repair, 
     and replacement, but not enlargement, of those components of 
     Project facilities which are located on National Forest 
     System lands, subject to the requirement that the Districts 
     shall provide reasonable notice to and the opportunity for 
     consultation with the designated representative of the 
     Secretary of Agriculture for non-routine, non-emergency 
     activities that occur on such easements.
       (C) Easements to districts for southside canal.--The 
     Secretary of the Interior shall grant to the Districts, in 
     the last quarter of fiscal year 2000, subject only to the 
     requirements of this section, (i) a non-exclusive easement on 
     and across lands administered by agencies within the 
     Department of the Interior for ingress and egress on existing 
     access routes to and along the Southside Canal, and (ii) a 
     non-exclusive easement for the operation, use, maintenance, 
     repair, and replacement of the Southside Canal, subject to 
     the requirement that the Districts shall provide reasonable 
     notice to and the opportunity for consultation with the 
     designated representative of the Secretary of the Interior 
     for non-routine, non-emergency activities that occur on such 
     easements.
       (2) Reservation.--The transfer of rights and interests 
     pursuant to paragraphs (1)(A), (B), and (C) 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 fishing, boating, 
     hunting, and other outdoor recreation purposes and other 
     public uses such as grazing, mineral development and logging: 
     Provided, That the United States may allow for 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.
       (3) Conveyance to state of colorado.--All right, title, and 
     interest in the Vega Recreation Facilities shall remain in 
     the United States until the terms of the agreements referred 
     to in paragraph (6) have been fulfilled by the United States. 
     At such time, all right, title, and interest in the Vega 
     Recreation Facilities shall be conveyed by the Secretary of 
     the Interior to the State of Colorado, Division of Parks and 
     Outdoor Recreation.
       (4) Payment.--
       (A) In general.--At the time of transfer, the Districts 
     shall pay to the United States $12,900,000 ($12,300,000 of 
     which represents the net present value of the outstanding 
     repayment obligations for the Project), 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 Grand Valley 
     Water Management Project for the purpose of recovering 
     endangered fish in the Upper Colorado River Basin, as 
     identified in the Recovery Implementation Program for 
     Endangered Fish Species in the Upper Colorado River Basin, or 
     such other component of the Recovery Implementation Program 
     within Colorado that is selected with the concurrence of the 
     Governor of the State of Colorado.
       (B) Source of funds.--Funds for the payment to the extent 
     of the amount specified in subparagraph (A) shall not be 
     derived from the issuance or sale, prior to the conveyance, 
     of 

[[Page H 13407]]
     State or local bonds the interest on which is exempt from taxation 
     under section 103 of the Internal Revenue Code of 1986.
       (5) Operation of project.--
       (A) In general.--The Project was authorized and constructed 
     to place water to beneficial use for authorized purposes 
     within the State of Colorado. The Project shall be operated 
     and used by the Districts for a period of 40 years after the 
     date of enactment of this Act for the purposes for which the 
     Project was authorized under the Act of July 3, 1952 (66 
     Stat. 325, chapter 565). The Districts shall attempt to the 
     extent practicable, taking into consideration historic 
     Project operations, to notify the State of Colorado of 
     changes in historic Project operations which may adversely 
     affect State park operations.
       (B) Requirements.--During the 40-year period described in 
     subparagraph (A)--
       (i) the Districts shall annually submit to the Secretary of 
     Agriculture and the Colorado Department of Natural Resources 
     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, which shall 
     be prepared after consultation with the designated 
     representatives of the Secretary of Agriculture, the Board of 
     County Commissioners of Mesa County, Colorado, and the 
     Colorado Department of Natural Resources; and
       (III) certify that the Districts have operated and will 
     operate and maintain the Project facilities in accordance 
     with sound engineering practices; and

       (ii) 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 or assigns).
       (6) 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 of the Power Component.--
       (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) Existing marketing arrangement.--The Post-1989 
     Marketing Criteria, 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, 
     shall no longer be binding on the Project upon conveyance of 
     the Project under subsection (c)(1).
       (B) After termination of existing marketing arrangement.--
       (i) In general.--After the conveyance, 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 (referred to in this section as 
     ``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 clause 
     (ii). 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 (referred to in this 
     section as the ``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 rates 
     established in accordance with clause (ii) 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)(4)(A)(i) 
     of this section, less the sum of $310,000 (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.

     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.
       (e) License.--
       (1) Prior to the conveyance of the Project to the 
     Districts, the Commission shall issue to the Districts a 
     license or licenses as appropriate under part I of the 
     Federal Power Act, as amended, (16 U.S.C. 791 et seq.), 
     authorizing for a term of 40 years the continued operation 
     and maintenance of the power component of the Project.
       (2) The license issued pursuant to subsection (1):
       (A) shall be for the purpose of operating, using, 
     maintaining, repairing, and replacing the power component of 
     the Project as authorized by the Act of July 3, 1952 (66 
     Stat. 325, chapter 565);
       (B) shall be conditioned upon the requirement that the 
     power component of the project continue to be operated and 
     maintained in accordance with the authorized purposes of the 
     project;
       (C) shall be subject only to the provisions of Part I of 
     the Federal Power Act, except the word ``constructed'' in 
     section 3(10); the four provisos of section 4(e); section 6 
     to the extent it requires the licensee's acceptance of those 
     terms and conditions of the Act that this subsection waives; 
     section 10(e) as concerns annual charges for the use and 
     occupancy of federal lands and facilities; section 10(f); 
     section 10(j); section 18; section 19; section 20; and 
     section 22 of the Federal Power Act, 16 U.S.C. 796(10), 
     797(e), 799, 803(e), 803(f), 803(j), 811, 812, 813, and 815; 
     and shall not be subject to the standard ``L-Form'' license 
     conditions, published at 54 FPC 1792-1928 (1975), the Federal 
     Land Policy and Management Act (43 U.S.C. 1701 et seq.), as 
     amended, section 2402 of the Energy Policy Act of 1992 (16 
     U.S.C. 797c), the National Environmental Policy Act of 1969 
     (42 U.S.C. 4321 et seq.), the Endangered Species Act of 1973 
     (16 U.S.C. 1531 et seq.), the Wild and Scenic Rivers Act (16 
     U.S.C. 1271 et seq.), the Federal Water Pollution Control Act 
     (commonly known as the ``Clean Water Act'') (33 U.S.C. 1251 
     et seq.), the National Historic Preservation Act (16 U.S.C. 
     470 et seq.), the Coastal Zone Management Act of 1972 (16 
     U.S.C. 1451 et seq.), the Fish and Wildlife Coordination Act 
     (16 U.S.C. 661 et seq.), or any other Act otherwise 
     applicable to the licensing of the project.
       (3) The license issued under paragraph (1) is deemed to 
     meet the licensing standards of the Federal Power Act, 
     including section 10(a) and the last sentence of section 
     4(e), 16 U.S.C. 797(e).
       (4) Any power site reservation established by the 
     President, the Secretary of the Interior, or pursuant to 
     section 24 of the Federal Power Act (16 U.S.C. 818) or any 
     other law, which exists on any lands, whether federally or 
     privately owned, that are included within the boundaries of 
     the project shall be vacated by operation of law upon 
     issuance of the license for the project.
       (5) All requirements of Part I of the Federal Power Act and 
     of any other Act applicable to the licensing of a 
     hydroelectric project shall apply to the project upon 
     expiration of the license issued under this section.
       (6) For purposes of this section, ``Commission'' means the 
     Federal Energy Regulatory Commission.
       (7) The operation of the Project shall be subject to all 
     applicable state and federal laws subsequent to the issuance 
     of the license pursuant to paragraph (1).
       (f) Inapplicability of NEPA.--Neither the conveyance of the 
     Project nor the issuance of easements pursuant to this 
     section constitutes 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.
       (g) 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.
       (h) Districts' Liability.--The Districts shall be liable, 
     to the extent allowed under State law, for all acts or 
     omissions relating to the operation and use of the Project by 
     the Districts that occur subsequent to the conveyance under 
     section (c), including damages to Federal lands or facilities 
     which result from the failure of Project facilities.
       (i) Effect on State Law.--Nothing in this section shall be 
     construed to impair the effectiveness of any State or local 
     law (including regulations) relating to land use.
       (j) Treatment of Sales for Purposes of Certain Laws.--The 
     sales of assets under this subchapter shall not be considered 
     a disposal of Federal surplus property under the following 
     provisions of law:
       (1) Section 203 of the Federal Property and Administrative 
     Services Act of 1949 (40 U.S.C. 484).
       (2) Section 13 of the Surplus Property Act of 1944 (50 
     U.S.C. App. 1622).

                         Subchapter D--Sly Park

     SEC. 5356. SLY PARK.

       (a) Short Title.--This subchapter may be cited as the ``Sly 
     Park Unit Conveyance Act''.
       (b) Definitions.--For purposes of this subchapter:
       (1) The term ``El Dorado Irrigation District'' or 
     ``District'' means a political subdivision of the State of 
     California duly organized, existing, and acting pursuant to 
     the laws thereof with its principal place of business in the 
     city of Placerville, El Dorado County, California.
       (2) The term ``Secretary'' means the Secretary of the 
     Interior.
       (3) The term ``Sly Park Unit'' means the Sly Park Dam and 
     Reservoir, Camp Creek Diversion Dam and Tunnel and conduits 
     and canals as authorized under the Act entitled ``An Act to 
     authorize the American River Basin development, California, 
     for irrigation and reclamation, and for other purposes'', 
     approved October 14, 1949 (63 Stat. 852 chapter 690), 
     together with all other facilities owned by the United States 
     including those used to convey and store water delivered from 
     Sly Park, as well as all recreation facilities associated 
     thereto.
       (c) Sale of the Sly Park Unit.--
       (1) In general.--The Secretary shall, on or before December 
     31, 1997, and upon receipt of the payment for the original 
     construction debt described in paragraph (2), sell and convey 
     to the El Dorado Irrigation District all right, title, and 
     interest of the United States in and to the Sly Park Unit. At 
     the time the Sly Park Unit is 

[[Page H 13408]]
     conveyed, the Secretary shall also transfer and assign to the District 
     the water rights relating to the Sly Park Unit held in trust 
     by the Secretary for diversion and storage under California 
     State permits numbered 2631, 5645A, 10473, and 10474.
       (2) Sale price.--The sale price for the Sly Park Unit shall 
     be $3,993,982, which is the outstanding balance for the 
     original construction of the Sly Park Unit payable to the 
     United States. Payment shall be deposited as miscellaneous 
     receipts in the Treasury and credited to the Central Valley 
     Project Restoration Fund. Payment of such price shall 
     extinguish all payment obligations under contract numbered 
     14-06-200-949 between the District and the Secretary.
       (d) No Additional Environmental Impact.--The Congress 
     specifically finds that (A) the sale, conveyance and 
     assignment of the Sly Park Unit and water rights under this 
     section involves the transfer of the ownership and operation 
     of an existing ongoing water project, (B) the Sly Park Unit 
     operation, facilities, and water rights have been, and after 
     the sale and transfer will continue to be, committed to 
     maximum reasonable and beneficial use for existing services, 
     and (C) the sale, conveyance and assignment of the Sly Park 
     Unit and water rights does not involve any additional growth 
     or expansion of the project or other environmental impacts. 
     Consequently, the sale, conveyance and assignment of the Sly 
     Park Unit and water rights shall not be subject to 
     environmental review pursuant to the National Environmental 
     Policy Act of 1969 (42 U.S.C. 4332) or endangered species 
     review or consultation pursuant to section 7 of the 
     Endangered Species Act of 1973 (16 U.S.C. 1536).
       (e) Certain Contract Obligations not Affected.--The sale of 
     the Sly Park Unit under this section shall not affect the 
     payment obligations of the District under the contract 
     between the District and the Secretary numbered 14-06-200-
     7734, as amended by contracts numbered 14-06-200-4282A and 
     14-06-200-8536A.
       (f) Treatment of Sales for Purposes of Certain Laws.--The 
     sales of assets under this subchapter part shall not be 
     considered a disposal of Federal surplus property under the 
     following provisions of law:
       (1) Section 203 of the Federal Property and Administrative 
     Services Act of 1949 (40 U.S.C. 484).
       (2) Section 13 of the Surplus Property Act of 1944 (50 
     U.S.C. App. 1622).

                   Subchapter E--Central Utah Project

     SEC. 5357. PREPAYMENT OF CERTAIN REPAYMENT CONTRACTS BETWEEN 
                   THE UNITED STATES AND THE CENTRAL UTAH WATER 
                   CONSERVANCY DISTRICT.

       The second sentence of section 210 of the Central Utah 
     Project Completion Act (106 Stat. 4624) is amended to read as 
     follows: ``The Secretary shall allow for prepayment of the 
     repayment contract between the United States and the Central 
     Utah Water Conservancy District dated December 28, 1965, and 
     supplemented on November 26, 1985, providing for repayment of 
     municipal and industrial water delivery facilities for which 
     repayment is provided pursuant to such contract, under terms 
     and conditions similar to those contained in the supplemental 
     contract that provided for the prepayment of the Jordan 
     Aqueduct dated October 28, 1993. The prepayment may be 
     provided in several installments to reflect substantial 
     completion of the delivery facilities being prepaid and may 
     not be adjusted on the basis of the type of prepayment 
     financing utilized by the District: Provided That the 
     District shall complete all payments authorized pursuant to 
     this section by the end of fiscal year 2002.''.

                CHAPTER 4--FEDERAL OIL AND GAS ROYALTIES

     SEC. 5361. DEFINITIONS.

       Section 3 of the Federal Oil and Gas Royalty Management Act 
     of 1982 (30 U.S.C. 1701 et seq.) is amended--
       (1) by amending paragraph (7) to read as follows:
       ``(7) `lessee' means any person to whom the United States 
     issues an oil and gas lease or any person to whom operating 
     rights in a lease have been assigned;''; and
       (2) 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 Department of 
     the Interior agency process in which a demand, decision or 
     order issued by the Secretary or a delegated State is subject 
     to appeal or has been appealed;
       ``(19) `assessment' means any fee or charge levied or 
     imposed by the Secretary or a delegated State 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 delegated State 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) `delegated State' means a State which, pursuant to 
     an agreement or agreements under section 205, performs 
     authorities, duties, responsibilities, or activities of the 
     Secretary which may be performed by a State under the 
     Constitution of the United States for all lands within the 
     State, including, but not limited to--
       ``(A) activities under sections 111 and 115;
       ``(B) collection, audit, lease and post-lease management 
     activities, and applicable enforcement activities;
       ``(C) inspections (including activities described in 
     section 108;
       ``(D) approval of pooling, unitization, and communitization 
     agreements; and
       ``(E) investigations;
       ``(23) `demand' means--
       ``(A) an order to pay issued by the Secretary or the 
     applicable delegated State that has a reasonable basis to 
     conclude that the obligation in the amount of the demand is 
     due and owing; or
       ``(B) a separate written request by a lessee which asserts 
     an obligation due the lessee that has a reasonable basis to 
     conclude that the obligation in the amount of the demand is 
     due and owing, but does not mean any royalty or production 
     report, or any information contained therein, required by the 
     Secretary or a delegated State;
       ``(24) `obligation' means--
       ``(A) any duty of the Secretary or, if applicable, a 
     delegated State--
       ``(i) to take oil or gas royalty in kind at or near the 
     lease (unless the lease expressly provides for delivery at a 
     different location); 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 at or near the 
     lease (unless the lease expressly provides for delivery at a 
     different location); 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;

       ``(25) `order to pay' means a written order issued by the 
     Secretary or the applicable delegated State which--
       ``(A) asserts a specific, definite, and quantified 
     obligation claimed to be due, and
       ``(B) specifically identifies the obligation by lease, 
     production month and monetary amount of such obligation 
     claimed to be due and 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 a delegated State;
       ``(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;
       ``(28) `penalty' means a statutorily authorized civil fine 
     levied or imposed 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;
       ``(30) `State concerned' means, with respect to a lease, a 
     State which receives a portion of royalties or other payments 
     under the mineral leasing laws 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, the 
     several States, the District of Columbia, and the territories 
     of the United States.''.

     SEC. 5362. MAXIMIZING RECEIPTS THROUGH STATE EFFORTS.

       (a) General Authority.--Section 205(a) of the Federal Oil 
     and Gas Royalty Management Act of 1982 (30 U.S.C. 1735(a)) is 
     amended to read as follows:
       ``(a) In order to provide incentives to States to maximize 
     the amount of oil and gas receipts collected on lease 
     obligations within the six-year period of limitations, and 
     consequently to maximize the Federal share of such receipts 
     to the United States Treasury, upon written request of a 
     State, the State, pursuant to an agreement or agreements and 
     consistent with subsection (c), may perform all or part of 
     the authorities, duties, responsibilities, and activities of 
     the Secretary under this Act which may be delegated to a 
     State under the Constitution of the United States for all 
     Federal lands within the State. The delegated State shall 
     assume and perform the authorities, duties, responsibilities, 
     or activities delegated under this section. To avoid 
     duplication of effort, any authority, duty, responsibility, 
     or activity delegated to a State under this Act with respect 
     to all Federal lands within the State may not be carried out 
     by the Secretary. Under any such agreement, the Secretary 
     shall share oil or gas royalty management information.''.
       (b) Determination.--Section 205(b) of the Federal Oil and 
     Gas Royalty Management Act of 1982 (30 U.S.C. 1735(b)) is 
     amended by striking ``is authorized to'' and inserting 
     ``shall''.
       (c) Federal-State Royalty Collection Efforts.--Subsection 
     (c) section 205 of the Federal Oil and Gas Royalty Management 
     Act of 1982 (30 U.S.C. 1735) is amended by striking ``which 
     define'' and all that follows and inserting ``within 18 
     months after the date of enactment of section 115, under 
     which States may perform 

[[Page H 13409]]
     the authorities, duties, responsibilities, and activities under this 
     title which are subject to delegation, based on the 
     recommendations of the States concerned following 
     consultation with affected persons. If the Secretary decides 
     not to follow any recommendations supported by all States 
     concerned, the Secretary shall justify such decision within 
     30 days after making such decision. In carrying out this 
     section the Secretary shall provide for reasonable 
     flexibility to a State to perform any authority, duty, 
     responsibility or activity delegated hereunder in a more 
     efficient and cost-effective manner and provide the States 
     concerned a direct role in determining such requirements, 
     procedures and policies. To ensure efficient and timely 
     collections of royalties pursuant to this Act, the delegated 
     States shall provide--
       ``(1) for the effective and efficient performance of any 
     authority, duty, responsibility or activity delegated under 
     this Act;
       ``(2) for the consistent and uniform performance among the 
     delegated States of any authority, duty, responsibility or 
     activity delegated under this Act;
       ``(3) for valuation under the terms of the leases and 
     applicable Federal statutes; and
       ``(4) for uniform reporting form and reporting requirements 
     for all Federal lessees, unless the State and all affected 
     parties otherwise agree.''.
       (d) Performance.--Subsection (d) of section 205 of the 
     Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 
     1735) is amended by striking ``, pertaining'' and all that 
     follows and inserting the following: ``for requirements 
     pertaining to records and accounts to be maintained and 
     reporting procedures to be required by delegated States under 
     this section. The records and accounts under such reporting 
     procedures shall be sufficient to allow the Secretary to 
     monitor the performance of any delegated State under this 
     section. The applicable delegated State and the Secretary 
     shall agree to terms and conditions for inclusion into an 
     agreement to perform all or part of the authorities, duties, 
     responsibilities, and activities under this title consistent 
     with subsection (c).''.
       (e) State Actions.--Section 204 of the Federal Oil and Gas 
     Royalty Management Act of 1982 (30 U.S.C. 1734) is amended by 
     adding at the end the following:
       ``(d) With respect to enforcement of an obligation under 
     this Act, a State bringing an action under this section shall 
     enjoy no greater rights than the Secretary enjoys under this 
     Act.''.
       (f) Savings Provision.--Nothing in the amendments made by 
     this section shall impair any agreement, or any extension 
     thereof, existing under section 205 as in effect on the day 
     before the date of enactment of this Act. Following enactment 
     of this Act, any State which is a party to an existing 
     agreement under such section under which the State has been 
     delegated audit or inspection responsibility, may issue 
     orders to pay, subpoenas, or notices to perform restructured 
     accounting and may continue to perform audits or inspections 
     under terms and conditions consistent with the Federal Oil 
     and Gas Royalty Management Act of 1982 (30 U.S.C. 1701 et 
     seq.), as amended by this chapter.
       (g) Receipts.--Section 205(f) of the Federal Oil and Gas 
     Royalty Management Act of 1982 (30 U.S.C. 1735(f)) is amended 
     by adding at the end the following: ``Such costs shall be 
     allocable for the purposes of section 35(b) of the Act 
     entitled ``An Act to promote the mining of coal, phosphate, 
     oil, oil shale, gas, and sodium on the public domain'', 
     approved February 25, 1920 (commonly known as the ``Mineral 
     Leasing Act'') (30 U.S.C. 191(b)) to the administration and 
     enforcement of laws providing for the leasing of any onshore 
     lands or interests in land owned by the United States. The 
     Secretary shall compensate any State in the next succeeding 
     fiscal year for the aggregate amount of such costs incurred 
     but not compensated due to such allocation for the current 
     fiscal year. All money received from sales, bonuses, 
     royalties, and interest, including money claimed to be due 
     and owing pursuant to a delegation under this section, shall 
     be payable and paid to the Treasury of the United States.''.

     SEC. 5363. SECRETARIAL AND DELEGATED STATES' ACTIONS AND 
                   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. SECRETARIAL AND DELEGATED STATES' ACTIONS AND 
                   LIMITATION PERIODS.

       ``(a) In General.--All duties, responsibilities, and 
     activities with respect to a lease shall be performed by the 
     Secretary, delegated States, and lessees in a timely manner.
       ``(b) Limitation Period.--
       ``(1) 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. The Secretary, a delegated 
     State, or a lessee (A) shall 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; and (B) shall not pursue any other equitable 
     or legal remedy, whether under statute or common law, with 
     respect to an action on or an enforcement of said obligation.
       ``(2) 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. Section 3716 of 
     title 31, United States Code, may be applied to an obligation 
     the enforcement of which is not barred by this Act, but may 
     not be applied to any obligation the enforcement of which is 
     barred by this Act.
       ``(c) 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 any 
     royalty obligation for any given 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.
       ``(d) Tolling of Limitation Period.--The running of the 
     limitation period under subsection (b) shall not be 
     suspended, tolled, extended, or enlarged for any obligation 
     for any reason by any action, including an action by the 
     Secretary or a delegated State, other than the following:
       ``(1) Tolling agreement.--A written agreement executed 
     during the limitation period between the Secretary or a 
     delegated State 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 to a lessee in accordance 
     with the provisions of subsection (B)(i) 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 or a delegated 
     State 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)(i) A subpoena for the purposes of this section which 
     requires a lessee to produce records necessary to determine 
     the proper reporting and payment of an obligation due the 
     Secretary may be issued only by 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 to any other person. If a State has been delegated 
     authority pursuant to section 205, the State, acting through 
     the highest elected State official having ultimate authority 
     over the collection of royalties from leases on Federal lands 
     within the state, may issue such subpoena, but may not 
     delegate such authority to any other person.
       ``(ii) A subpoena described in clause (i) may only be 
     issued against a lessee during the limitation period provided 
     in this section and only after the Secretary or a delegated 
     State has in writing requested the records from the lessee 
     related to the obligation which is the subject of the 
     subpoena and has determined that--
       ``(I) the lessee has failed to respond within a reasonable 
     period of time to the Secretary's or the applicable delegated 
     State's written request for such records necessary for an 
     audit, investigation or other inquiry made in accordance with 
     the Secretary's or such delegated State's responsibilities 
     under this Act; or
       ``(II) the lessee has in writing denied the Secretary's or 
     the applicable delegated State'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 or such delegated State's 
     responsibilities under this Act; or
       ``(III) the lessee has unreasonably delayed in producing 
     records necessary for an audit, investigation or other 
     inquiry made in accordance with the Secretary's or the 
     applicable delegated State's responsibilities under this Act 
     after the Secretary's or such delegated State's written 
     request.
       ``(C) In seeking records, the Secretary or the applicable 
     delegated State shall afford the lessee a reasonable period 
     of time after a written request by the Secretary or such 
     delegated State in which to provide such records prior to the 
     issuance of any subpoena.
       ``(3) Misrepresentation or concealment.--The intentional 
     misrepresentation or concealment of a material fact for the 
     purpose of evading the payment of an obligation in which case 
     the limitation period shall be tolled for the period of such 
     misrepresentation or such concealment.
       ``(4) Order to perform a restructured accounting.--(A) The 
     issuance of a notice under subsection (D) that the lessee has 
     not adequately performed a restructured accounting shall toll 
     the limitation period with respect to the obligation which is 
     the subject of the notice only for the period beginning on 
     the date the lessee receives the notice and ending 120 days 
     after the date on which (i) the Secretary or the applicable 
     delegated State receives written notice the accounting or 
     other requirement has been performed, or (ii) a court has 
     determined in a final decision that the lessee is not 
     required to perform the accounting, whichever occurs first.
       ``(B)(i) The Secretary or the applicable delegated State 
     may issue an order to perform a restructured accounting to a 
     lessee when the Secretary or such delegated State determines 
     during an in-depth audit of a lessee that the lessee should 
     recalculate royalty due on an obligation based upon the 
     Secretary's or the delegated State's finding that the lessee 
     has made identified underpayments or overpayments which are 
     demonstrated by the Secretary or the delegated State to be 
     based upon repeated, systemic reporting errors for a 
     significant number of leases or a single 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 significant underpayments or 
     overpayments.
       ``(ii) The power of the Secretary to issue an order to 
     perform a restructured accounting may 

[[Page H 13410]]
     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', and may not be delegated to 
     any other person. If a State has been delegated authority 
     pursuant to section 205, the State, acting through the 
     highest ranking State official having ultimate authority over 
     the collection of royalties from leases on Federal lands 
     within the state, may issue such order to perform, which may 
     not be delegated to any other person. 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'.
       ``(C) An order to perform a restructured accounting shall 
     not mean or be construed to include any other communication 
     or action by or on behalf of the Secretary or a delegated 
     State.
       ``(D) If a lessee fails to adequately perform a 
     restructured accounting pursuant to this subsection, a notice 
     shall be issued to the lessee that the restructured 
     accounting has not been adequately performed. A lessee shall 
     be given a reasonable time within which to perform the 
     restructured accounting. Such notice may be issued under this 
     section only by 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 to any other 
     person. If a State has been delegated authority pursuant to 
     section 205, the State, acting through the highest elected 
     State official having ultimate authority over the collection 
     of royalties from leases on Federal lands within the state, 
     may issue such notice, which may not be delegated to any 
     other person.
       ``(e) Termination of Limitations Period.--An action or an 
     enforcement of an obligation by the Secretary or delegated 
     State or a lessee shall be barred under this section prior to 
     the running of the six-year period provided in subsection (b) 
     in the event--
       ``(1) the Secretary or a delegated State has notified the 
     lessee in writing that a time period is closed to further 
     audit; or
       ``(2) the Secretary or a delegated State and a lessee have 
     so agreed in writing.
       ``(f) Records Required for Determining Collections.--
     Records required pursuant to section 103 by the Secretary or 
     any delegated State for the purpose of determining 
     obligations due and 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 subsection (b). 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 or the applicable delegated 
     State 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 this section. Records 
     required for administrative actions and investigations 
     (including, but not limited to, accounting collection and 
     audits) under this Act involving obligations shall not be 
     duplicated pursuant to section 3518(c)(1)(B) of title 44, 
     United States Code.
       ``(g) Timely Collections.--In order to most effectively 
     utilize resources available to the Secretary to maximize the 
     collection of oil and gas receipts from lease obligations to 
     the Treasury within the six-year period of limitations, and 
     consequently to maximize the State share of such receipts, 
     the Secretary shall not perform or require accounting, 
     reporting, or audit activities if the Secretary and the State 
     concerned determines that the cost of conducting or requiring 
     the activity exceeds the expected amount to be collected by 
     the activity, based on the most current 12 months of 
     activity. To the maximum extent possible, the Secretary and 
     delegated States shall reduce costs to the United States 
     Treasury and the States by discontinuing requirements for 
     unnecessary or duplicative data and other information, such 
     as separate allowances and payor information, relating to 
     obligations due. If the Secretary and the State concerned 
     determine that collection will result sooner, the Secretary 
     or the applicable delegated State may waive or forego 
     interest in whole or in part.
       ``(h) Appeals and Final Agency Action.--
       ``(1) 30-month period.--All orders issued by the Secretary 
     or a delegated State are subject to appeal to the Secretary. 
     No State shall impose any conditions which would hinder a 
     lessee's immediate appeal of an order to the Secretary or the 
     Secretary's designee. The Secretary shall issue a final 
     decision in any administrative proceeding, including any 
     administrative proceedings pending on the date of enactment 
     of this section, within 30 months from the date such 
     proceeding was commenced or 30 months from the date of such 
     enactment, whichever is later. The 30-month 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.--If no such 
     decision has been issued by the Secretary within the 30-month 
     period referred to in paragraph (1)--
       ``(A) 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
       ``(B) 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.
       ``(i) Collections of Disputed Amounts Due.--To expedite 
     collections relating to disputed obligations due within the 
     six-year period beginning on the date the obligation became 
     due, the parties shall hold not less than one settlement 
     consultation and the Secretary and the State concerned may 
     take such action as is appropriate to compromise and settle a 
     disputed obligation, including waiving or reducing interest 
     and allowing offsetting of obligations among leases.
       ``(j) Enforcement of a Claim for Judicial Review.--In the 
     event a demand subject to this section is properly and timely 
     issued, the obligation which is the subject of the demand may 
     be enforced beyond the six year limitations period without 
     being barred by this statute of limitations. In the event a 
     demand subject to this section is properly and 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.
       ``(k) 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.
       ``(l) Stay of Payment Obligation Pending Review.--Any party 
     ordered by the Secretary or a delegated State 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. 
     Any party ordered by the Secretary or a delegated State to 
     pay an assessment shall be entitled to a stay without bond or 
     other surety instrument.''.
       (b) Clerical Amendment.--The table of contents in section 1 
     of the Federal Oil and Gas Royalty Management Act of 1982 (30 
     U.S.C. 1701) is amended by inserting after the item relating 
     to section 114 the following new item:

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

     SEC. 5364. 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 inserting 
     after section 111 the following:

     ``SEC. 111A. ADJUSTMENTS AND REFUNDS.

       ``(a) Adjustments to Royalties Paid to the Secretary or a 
     Delegated State.--
       ``(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. The filing of a royalty report which reflects the 
     underpayment or overpayment of an obligation shall constitute 
     prior written notice to the Secretary or the applicable 
     delegated State of an adjustment.
       ``(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 who determines that 
     subparagraph (A) would impose a hardship, the Secretary or 
     such delegated State 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 or the 
     applicable delegated State, as appropriate, 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 or the applicable 
     delegated State, as appropriate, 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 

[[Page H 13411]]
     overpayment for which such refund is sought; and
       ``(D) provides the reasons why the payment was an 
     overpayment.
       ``(2) Notice.--The Secretary shall promptly notify each 
     State concerned of a request for refund.
       ``(3) 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.
       ``(4) 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 or the applicable 
     delegated State and subject to the provisions of this Act.
       ``(5) Prohibition against reduction of refunds or 
     credits.--In no event shall the Secretary or any delegated 
     State directly or indirectly claim or offset 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 the Federal Oil and Gas Royalty Management Act of 1982 (30 
     U.S.C. 1701) is amended by inserting after the item relating 
     to section 111 the following new item:

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

     SEC. 5365. ROYALTY TERMS AND CONDITIONS, INTEREST, AND 
                   PENALTIES.

       (a) 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 paid or credited on any 
     overpayment, with such interest to accrue from the date such 
     overpayment was made, at the rate obtained by applying the 
     provisions of subparagraphs (A) and (B) of section 6621(a)(1) 
     of the Internal Revenue Code of 1986, but determined without 
     regard to the matter following subparagraph (B) of section 
     6621(a)(1). 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.''.
       (b) Limitation on Interest.--Section 111 of the Federal Oil 
     and Gas Royalty Management Act of 1982, as amended by 
     subsection (a), 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 determined to 
     be due as a result of judicial or administrative proceedings 
     or agreed to be paid pursuant to settlement agreements) for 
     the aggregate of all of its Federal leases exceeds 10 percent 
     of the total royalties paid that month for those leases.''.
       (c) Estimated Payment.--Section 111 of the Federal Oil and 
     Gas Royalty Management Act of 1982 (30 U.S.C. 1721), as 
     amended by subsections (a) and (b), 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 for such 
     lease to avoid underpayment or nonpayment interest charges. 
     When an estimated payment is made, actual royalties are due 
     and payable at the end of the month following the month in 
     which the estimated payment is made. If the lessee makes a 
     payment for such actual royalties, the lessee may apply the 
     estimated payment to future royalties. Any estimated payment 
     may be adjusted, recouped, or reinstated at any time by the 
     lessee.''.
       (d) Volume Allocation of Oil and Gas Production.--Section 
     111 of the Federal Oil and Gas Royalty Management Act of 1982 
     (30 U.S.C. 1721), as amended by subsections (a) through (c), 
     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 shall 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 shall 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 shall 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 or the delegated State 
     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 or the delegated State 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 crude oil and 
     natural gas from producing wells on such lease by the number 
     of such wells, unless the Secretary, together with the State 
     concerned, determines that a different production 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.''.
       ``(e) Production Allocation.--Section 111 of the Federal 
     Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1721), 
     as amended by subsections (a) through (d), is amended by 
     adding at the end the following:
       ``(l) The Secretary or the delegated State shall issue all 
     determinations of allocations of production for units and 
     communitization agreements within 120 days of a request for 
     determination. If the Secretary or the delegated State 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.''.
       (f) New Assessment to Encourage Proper Royalty Payments.--
       (1) In general.--The Federal Oil and Gas Royalty Management 
     Act of 1982 (30 U.S.C. 1721), as amended by this section, is 
     further amended by adding at the end the following:

     ``SEC. 116. ASSESSMENTS.

       ``Beginning eighteen months after the date of enactment of 
     this section, to encourage proper royalty payment the 
     Secretary or the delegated State shall impose assessments on 
     lessees who chronically submit erroneous reports under this 
     Act. Assessments under this Act may only be issued as 
     provided for in this section.''.
       (2) 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 115 the following new item:

``Sec. 116. Assessments.''.

       (g) Liability for Royalty Payments.--Section 102(a) of the 
     Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 
     1712(a)) is amended to read as follows:
       ``(a) In order to increase receipts and achieve effective 
     collections of royalty and other payments, a lessee who is 
     required to make any royalty or other payment under a lease 
     or under the mineral leasing laws, shall make such payments 
     in the time and manner as may be specified by the Secretary 
     or the applicable delegated State. A lessee may designate a 
     person to make all or part of the payments due under a lease 
     on the lessee's behalf and shall notify the Secretary or the 
     applicable delegated State in writing of such designation, in 
     which event said designated person may, in its own name, pay, 
     offset or credit monies, make adjustments, request and 
     receive refunds and submit reports with respect to payments 
     required by the lessee. The person owning operating rights in 
     a lease shall be primarily liable for its pro rata share of 
     payment obligations under the lease. If the person 

[[Page H 13412]]
     owning the legal record title in a lease is other than the operating 
     rights owner, the person owning the legal record title shall 
     be secondarily liable for its pro rata share of such payment 
     obligations under the lease.''.
       (h) Clerical Amendment.--The heading of section 111 of the 
     Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 
     1721) is amended to read as follows:


       ``royalty terms and conditions, interest, and penalties''.

     SEC. 5366. 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 
     5365 of this chapter, is further amended by adding at the end 
     the following:

     ``SEC. 117. ALTERNATIVES FOR MARGINAL PROPERTIES.

       ``(a) Determination of Best Interests of State Concerned 
     and the United States.--The Secretary and the State 
     concerned, acting in the best interests of the United States 
     and the State concerned to promote production, reduce 
     administrative costs, and increase net receipts to the United 
     States and the States, shall jointly determine, on a case by 
     case basis, the amount of what marginal production from a 
     lease or leases or well or wells, or parts thereof, shall be 
     subject to a prepayment under subsection (b) or regulatory 
     relief under subsection (c). If the State concerned does not 
     consent, such prepayments or regulatory relief shall not be 
     made available under this section for such marginal 
     production, provided that if royalty payments from a lease or 
     leases, or well or wells is not shared with any State, such 
     determination shall be made solely by the Secretary.
       ``(b) Prepayment of Royalty.--
       ``(1) I general.--Notwithstanding the provisions of any 
     lease to the contrary, for any lease or leases or well or 
     wells identified by the Secretary and the State concerned 
     pursuant to subsection (a), the Secretary is authorized to 
     accept a prepayment for royalties in lieu of monthly royalty 
     payments under the lease for the remainder of the lease term 
     if the affected lessee so agrees. Any prepayment agreed to by 
     the Secretary, State concerned and lessee which is less than 
     an average $500 per month in total royalties shall be 
     effectuated under this section not earlier than two years 
     after the date of enactment of this section and, any 
     prepayment which is greater than an average $500 per month in 
     total royalties shall be effectuated under this section not 
     earlier than three years after the date of enactment of this 
     section. The Secretary and the State concerned may condition 
     their acceptance of the prepayment authorized under this 
     section on the lessee's agreeing to such terms and conditions 
     as the Secretary and the State concerned deem appropriate and 
     consistent with the purposes of this Act. Such terms may--
       ``(A) provide for prepayment that does not result in a loss 
     of revenue to the United States in present value terms;
       ``(B) include provisions for receiving additional 
     prepayments or royalties for developments in the lease or 
     leases or well or wells that deviate significantly from the 
     assumptions and facts on which the valuation is determined; 
     and
       ``(C) require the lessee to provide such periodic 
     production reports as may be necessary to allow the Secretary 
     and the State concerned to monitor production for the 
     purposes of subparagraph (B).
       ``(2) State share.--A prepayment under this section shall 
     be shared by the Secretary with any State or other recipient 
     to the same extent as any royalty payment for such lease.
       ``(3) Satisfaction of obligation.--Except as may be 
     provided in the terms and conditions established by the 
     Secretary under subsection (b), a lessee who makes a 
     prepayment under this section shall have satisfied in full 
     its obligation to pay royalty on the production stream sold 
     from the lease or leases or well or wells.
       ``(c) Alternative Accounting and Auditing Requirements.--
       ``(1) In general.--Within one year after the date of the 
     enactment of this section, the Secretary or the delegated 
     State shall provide accounting, reporting, and auditing 
     relief that will encourage lessees to continue to produce and 
     develop properties subject to subsection (a); provided, that 
     such relief will only be available to lessees in a State that 
     concurs, which concurrence is not required if royalty from 
     the lease or leases or well or wells is not shared with any 
     State. Prior to granting such relief, the Secretary and, if 
     appropriate, the State concerned shall agree that the type of 
     marginal wells and relief provided under this paragraph is in 
     the best interest of the United States and, if appropriate, 
     the State concerned.''.
       (b) 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 115 the following new item:

``Sec. 117. Alternatives for marginal properties.''.

     SEC. 5367. REPEALS.

       (a) FOGRMA.--As applicable to Federal lands, sections 202 
     and 307 of the Federal Oil and Gas Royalty Management Act of 
     1982 (30 U.S.C. 1732 and 1755), are repealed. Such repeal 
     shall not affect cooperative agreements involving Indian 
     tribes or Indian lands. Section 1 of such Act (relating to 
     the table of contents) is amended by striking out the items 
     relating to sections 202 and 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. 5368. INDIAN LANDS.

       The amendments and repeals made by this chapter 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 before the date of enactment of this Act 
     shall continue to apply after such date with respect to 
     Indian lands.

     SEC. 5369. PRIVATE LANDS.

       This chapter shall not apply to any privately owned 
     minerals.

     SEC. 5369A. EFFECTIVE DATE.

       Except as provided by section 115(f), section 111(h), 
     section 111(k)(5), and section 117 of the Federal Oil and Gas 
     Royalty Management Act of 1982 (as added by this chapter), 
     this chapter, and the amendments made by this chapter, 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.

                           CHAPTER 5--MINING

     SEC. 5371. SHORT TITLE.

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

     SEC. 5372. DEFINITIONS.

       When used in this chapter--
       (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 chapter, 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 related to, 
     or incidental to, exploration for or development, mining, 
     production, beneficiation, or processing of any locatable 
     mineral or mineral that would be locatable if it were subject 
     to disposition under the general mining laws, 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 chapter.
       (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) ``Secretary'' means the Secretary of the Interior.

     SEC. 5373. RENTAL PAYMENT REQUIREMENTS.

       (a) Rental Payments.--(1) After the date of enactment of 
     this Act, 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 Act, shall pay to the 
     Secretary prior to September 1 of each year, until a patent 
     has been issued therefor, an annual rental payment for each 
     unpatented mining claim or site.
       (2) Location payment.--The owner of each unpatented mining 
     claim or site located after the date of enactment of this Act 
     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)), a $25.00 location 
     payment, in lieu of the annual rental payment of $100 per 
     mining claim or site for the assessment year which includes 
     the date of location of such mining claim or site.
       (3) Exemption and waiver.--(A) The owner of any mining 
     claim or site who demonstrates to the Secretary on or before 
     the first day of any assessment year that access to such 
     mining claim or site was denied during the prior assessment 
     year by the action or inaction of any State or Federal 
     governmental officer, agency, or court, or by any Indian 
     tribal authority, shall be exempt from the annual rental 
     payment requirements of paragraph (1) for the assessment year 
     following the filing of the certification.
       (B) The rental payment provided for in subsection 5373(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 ten 
     unpatented mining claims or sites. Any owner of a mining 
     claim or site that is not required to pay a rental payment 
     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 

[[Page H 13413]]
     the assessment year following the filing of the certification required 
     by this subsection.
       (4) Amount of annual rental payment.--For each assessment 
     year the annual rental payment payable for a claim or site 
     referred to in paragraph (1) shall be in the amount specified 
     in Table 1.

                                Table 1

Amount of Payment Per Site or Claim:
$100 per year..........................................................
$200 per yeareafter....................................................

       (5) Effect of forfeiture.--No owner or co-owner of a mining 
     claim or site which has been forfeited because the rental 
     payment has not been paid and no person who is a related 
     person of any such owner or co-owner may relocate a new claim 
     on any part of lands located within the forfeited claim for a 
     period of 12 months after the date of forfeiture.
       (b) Annual Labor.--(1) Beginning in 1999, amounts expended 
     on activities that qualify as annual labor under the general 
     mining laws may be credited on a dollar for dollar basis 
     towards up to 50 percent of the annual rental payment payable 
     under this section for the following assessment year. During 
     the assessment year in 1999, annual labor performed in 1998 
     may be credited toward the annual rental payment due in 1999.
       (2) In order to receive credit under this subsection for 
     annual labor work, the description and value of the work must 
     be included in the statement required in subsection (e) and 
     the statement must be timely filed.
       (3) Annual labor performed on an individual mining claim or 
     site within a group of contiguous claims may be credited 
     towards the aggregate amount of rental payments due on all of 
     the contiguous claims within that group.
       (c) Work Qualifying as Annual Labor.--(1) Only work which 
     directly benefits or develops a mining claim or facilitates 
     the extraction of ore qualifies as annual labor or other 
     activities as determined by the Secretary. Acceptable labor 
     and improvements include, but are not limited to, any of the 
     following:
       (A) Drilling or excavating, including ore extraction.
       (B) Mining costs directly associated with the production of 
     ore.
       (C) Prospecting work which benefits the claim or a 
     contiguous claim.
       (D) Development work toward an actual mine, such as shafts, 
     tunnels, crosscuts and drifts, settling ponds and dams.
       (E) Activities covered under section 1 of the Act of 
     September 2, 1958 (30 U.S.C. 281), as amended.
       (F) Reclamation conducted pursuant to State or Federal 
     surface management laws or regulations.
       (2) The following activities do not qualify as annual 
     labor:
       (A) Work involved in maintaining the location such as 
     brushing and marking boundaries or replacing corner posts and 
     location notices.
       (B) Transportation of workers to or from the location.
       (C) Prospecting or exploration work not conducted within 
     the location or a contiguous location.
       (d) Amendments of Public Law 85-876.--The Act of September 
     2, 1958 (Public Law 85-876; 30 U.S.C. 281), is amended as 
     follows:
       (1) Section 1 is amended by inserting ``mineral activities, 
     environmental baseline monitoring, and'' after ``without 
     being limited to'' and before ``geological, geochemical and 
     geophysical surveys'' and by striking ``Such'' at the 
     beginning of the last sentence and inserting ``Airborne''.
       (2) Section 2(d) is amended by inserting ``environmental 
     baseline monitoring or'' after ``experience to conduct'' and 
     before ``geological, geochemical or geophysical surveys''.
       (3) Section 2 is amended by adding the following new 
     subsection at the end thereof:
       ``(e) The term `environmental baseline monitoring' means 
     activities for collecting, reviewing and analyzing 
     information concerning soil, vegetation, wildlife, mineral, 
     air, water, cultural, historical, archaeological or other 
     resources related to planning for or complying with Federal 
     and State environmental or permitting requirements applicable 
     to potential or proposed mineral activities on the 
     claim(s).''.
       (e) Rental Payment 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 rental payment 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.
       (f) Annual Labor Statement.--When the value of annual labor 
     is credited towards part or all of the rental payment, 
     subject to the 50-percent limit set forth in subsection 
     (b)(1), the following shall apply:
       (1) The rental payment statement required in subsection (e) 
     must also state the dates of performance of the labor, 
     describe the character and total value of the improvements 
     made or the labor performed, and the amount of labor used as 
     a credit toward the rental payment for the current year.
       (2) The annual labor statements must include a summary of 
     the quantity, value and location of work done. This includes 
     a listing of the physical work done, to include drilling, 
     trenching, sampling and underground excavation, and the 
     location of any environmental, geologic, geochemical, and 
     geophysical surveys. The claim holder shall maintain 
     sufficient records which document the value of the work 
     claimed.
       (3) All supporting material filed pursuant to paragraph (2) 
     shall remain confidential in accordance with section 552 of 
     title 5 of the United States Code as long as the location is 
     maintained and for a period of one year after the location is 
     abandoned, after which all data filed shall be considered 
     public information.
       (4) To the extent that labor credited against the rental 
     payment payable under this section is determined by a final 
     action not to qualify as labor under the general mining laws, 
     the claimant shall pay the insufficiency by making payment to 
     the Secretary of an amount equal to the amount of the rental 
     payment against which the insufficient labor was credited. If 
     such payment is made within 30 days of the claimant's receipt 
     of a notice of a final decision making such determination, 
     the claim concerned shall not be forfeited or null or void, 
     and the rental payment applicable to such claim shall be 
     deemed timely paid.
       (g) Credit Against Royalty.--The annual claim rental 
     payment payable in advance of the assessment year for any 
     unpatented mining claim or site, or the aggregate rental 
     payments from a group of contiguous claims or sites, shall be 
     credited against the amount of royalty obligation accruing 
     for that year for such claims or sites under section 5375.
       (h) Failure to Comply.--The failure of the owner to pay any 
     claim rental payment for a mining claim or site by the date 
     such payment is due under 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, That if such rental 
     payment is paid on or before the 30th day after such payment 
     was due under this section, such mining claim or site shall 
     not be forfeited or null or void.
       (i) Amendment of FLPMA Filing Requirements.--Section 314(a) 
     of the Federal Land Policy and Management Act of 1976 (43 
     U.S.C. 1744(a)) is hereby repealed.
       (j) Related Persons.--As used in this section, 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.
       (k) Repeal.--Sections 10101 through 10106 of the Omnibus 
     Budget Reconciliation Act of 1993 (107 Stat. 406; 30 U.S.C. 
     28g) are repealed.
     SEC. 5374. 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 chapter 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 5375.
       (b) Right of Re-entry.--
       (1) Except as provided in subsection 5374(c), and 
     notwithstanding any other provision of law, the United States 
     shall retain a right of re-entry in lands patented under 
     section 5374.
       (2) Such right of re-entry of the United States shall ripen 
     if--
       (A) the land is used by the patentee, or any subsequent 
     owners, for any purpose other than conducting mineral 
     activities in good faith;
       (B) such use is not discontinued within a time period 
     specified by the Secretary (but not earlier than 90 days 
     after the Secretary provides the owner of the land with 
     written notice pursuant to paragraph (2) to discontinue such 
     use); and
       (C) the Secretary elects to assert the right of re-entry in 
     accordance with paragraph (3).
       (3) The ripened right of re-entry retained by the United 
     States pursuant to subparagraph (2) shall vest and all right, 
     title and interest in such patented estate shall revert to 
     the United States only if--
       (A) the Secretary files a declaration of re-entry within 6 
     months of the requisite occurrences under paragraph (2) with 
     the Office of the Bureau of Land Management in the state 
     where the land subject to such right of re-entry is situated; 
     and
       (B) the Secretary records such declaration in the office of 
     the county recorder of the county in which the lands subject 
     to a reversion are situated within 30 days of filing under 
     subparagraph (A).
       (4) One year after the patent holder provides written 
     notice to the Secretary that all mineral activities are 
     completed and applicable reclamation is completed, the right 
     of re-entry held by the United States and created under the 
     subsection (b) shall expire unless within such period the 
     Secretary notifies the patent holder in writing that he is 
     exercising the right of re-entry held by the United States. 
     At such time, ownership of the patented lands shall 
     automatically revert to the United States, notwithstanding 
     subparagraphs (A), (B) and (C) of subsection (b)(2). The 
     Secretary may decline to exercise the right of re-entry and 
     such rights shall continue if--
       (a) solid waste or hazardous substances released on or from 
     the patented estate may pose a threat to public safety or the 
     environment; or
       (b) acceptance of title would expose the United States to 
     liability for past mineral activities on the patented estate.
       (c) Protection of Valid Existing Rights.--Notwithstanding 
     any other provision of law, the requirements of this chapter 
     (except with respect to rental payments in accordance with 
     section 5373)--
       (1) shall not apply to the mining claims and sites 
     contained within those mineral patent applications pending at 
     the Department as of September 30, 1995, which shall be 
     processed under the general mining laws in effect immediately 
     prior to the date of enactment of this chapter; and

[[Page H 13414]]

       (2) likewise shall not apply to the mining claims or sites 
     for which there is on the date of enactment of this chapter a 
     vested possessory property right against the Government under 
     the general mining laws in effect immediately prior to the 
     date of enactment of this chapter.

     SEC. 5375. ROYALTY.

       (a) In General.--The production and sale of locatable 
     minerals (including associated minerals) from any unpatented 
     mining claim (other than those from Federal lands to which 
     subsection 5374(c) applies) or any mining claim patented 
     under subsection 5374(a) shall be subject to a royalty of 5.0 
     percent on the net proceeds from such production mined and 
     sold from such claim.
       (b) Royalty Exclusion.--
       (1) The royalty payable under this section shall be waived 
     for any person with annual net proceeds from mineral 
     production subject to subsection (a) of less than $50,000.
       (2) The obligation to pay royalties hereunder shall accrue 
     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) Where mining operations subject to this section are 
     conducted in two or more places by the same person, the 
     operations shall be considered a single operation the 
     aggregate net proceeds from which shall be subject to the 
     $50,000 limitation set forth in this subsection.
       (4) No royalty shall be payable under this section with 
     respect to minerals processed at a facility by the same 
     person or entity which extracted the minerals if an urban 
     development action grant has been made under section 119 of 
     the Housing and Community Development Act of 1974 with 
     respect to any portion of such facility.
       (c) Definitions.--For the purposes of this chapter:
       (1) The term ``net proceeds'' shall mean gross yield, less 
     the sum of the following deductions for costs incurred prior 
     to sale or value determination, and none other:
       (A) The actual cost of extracting the locatable mineral.
       (B) The actual cost of transporting the locatable mineral 
     from the claim to the place or places of reduction, 
     beneficiation, refining, and sale.
       (C) The actual cost of reduction, beneficiation, refining, 
     and sale of the locatable mineral.
       (D) The actual cost of marketing and delivering the 
     locatable mineral and the conversion of the locatable mineral 
     into money.
       (E) The actual cost of maintenance and repairs of--
       (i) all machinery, equipment, apparatus, and facilities 
     used in the mine;
       (ii) all crushing, milling, leaching, refining, smelting, 
     and reduction works, plants, and facilities; and
       (iii) all facilities and equipment for transportation.
       (F) The actual 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.
       (G) The actual cost of engineering, sampling, and assaying 
     pertaining to development and production.
       (H) The actual cost of permitting, reclamation, 
     environmental compliance and monitoring.
       (I) The actual cost of fire and other insurance on the 
     machinery, equipment, apparatus, works, plants, and 
     facilities mentioned in subparagraph (E).
       (J) Depreciation of the original capitalized cost of the 
     machinery, equipment, apparatus, works, plants, and 
     facilities listed in subparagraph (E). The annual 
     depreciation charge shall consist of amortization of the 
     original cost in the manner consistent with the Internal 
     Revenue Code of 1986, as amended from time to time. The 
     probable life of the property represented by the original 
     cost must be considered in computing the depreciation charge.
       (K) 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.
       (L) 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 and 
     severance or other 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.
       (M) The actual cost of the developmental work in or about 
     the mine or upon a group of mines when operated as a unit.
       (2) The term ``gross yield'' shall having the following 
     meaning:
       (A) In the case of sales of gold and silver ore, 
     concentrates or bullion, or the sales of other locatable 
     minerals in the form of ore or concentrates, the term ``gross 
     yield'' means the actual proceeds of sale of such ore, 
     concentrates or bullion.
       (B) In the case of sales of beneficiated products from 
     locatable minerals other than those subject to subparagraph 
     (A) (including cathode, anode or copper rod or wire, or other 
     products fabricated from the locatable minerals), the term 
     ``gross yield'' means 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 of 1986.
       (C) If ore, concentrates, beneficiated or fabricated 
     products, or locatable minerals are used or consumed and are 
     not sold in an arms length transaction, the term ``gross 
     yield'' means the reasonable fair market value of the ore, 
     concentrates, beneficiated or fabricated products at the mine 
     or wellhead determined from the first applicable of the 
     following:
       (i) Published or other competitive selling prices of 
     locatable minerals of like kind and grade.
       (ii) Any proceeds of sale.
       (iii) Value received in exchange for any thing or service.
       (iv) The value of any locatable minerals in kind or used or 
     consumed in a manufacturing process or in providing a 
     service.
     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 gross yield.
       (d) Limitations and Allocations of Net Proceeds, Gross 
     Yield, and Allowable Deductions.--
       (1) The deductions listed in subsection (c)(1) are intended 
     to allow a reasonable allowance for overhead. Such deductions 
     shall not include any expenditures for salaries, or any 
     portion of salaries, of any person not actually engaged in--
       (A) the working of the mine;
       (B) the operating of the leach pads, ponds, plants, mills, 
     smelters, or reduction works;
       (C) the operating of the facilities or equipment for 
     transportation; or
       (D) superintending the management of any of those 
     operations described in subparagraphs (A) through (C).
       (2) Ores or solutions of locatable minerals subject to the 
     royalty requirements of this section may be extracted from 
     mines comprised of mining claims and lands other than mining 
     claims and ore or solutions of locatable minerals subject to 
     the royalty requirements of this section may be commingled 
     with ores or solutions from lands other than mining claims. 
     In any such case, for purposes of determining the amount of 
     royalties payable under this section--
       (A) the operator shall first sample, weigh or measure, and 
     assay the same in accordance with accepted industry 
     standards; and
       (B) gross yield, allowable costs and net proceeds for 
     royalty purposes shall be allocated in proportion to mineral 
     products recovered from the mining claims in accordance with 
     accepted industry standards.
       (e) Liability for Royalty Payments.--The owner or co-owners 
     of a mining claim subject to a royalty under this section 
     shall be liable for such royalty to the extent of the 
     interest in such claim owned. As used in this subsection, the 
     terms ``owner'' and ``co-owner'' mean the person or persons 
     owning the right to mine locatable minerals from such claim 
     and receiving the net proceeds of such sale. No person who 
     makes any royalty payment attributable to the interest of the 
     owner or co-owners liable therefor shall become liable to the 
     United States for such royalty as a result of making such 
     payment on behalf of such owner or co-owners.
       (f) Time and Manner of Payment.--
       (1) Royalty payments for production from any mining claim 
     subject to the royalty payable under this section shall be 
     due to the United States at the end of the month following 
     the end of the calendar quarter in which the net proceeds 
     from the sale of such production are received by the owner or 
     co-owners. Royalty payments may be made based upon good faith 
     estimates of the gross yield, net proceeds and the quantity 
     of ore, concentrates, or other beneficiated or fabricated 
     products of locatable minerals, subject to adjustment when 
     the actual annual gross yield, net proceeds and quantity are 
     determined by the owner of the mining claim or site or co-
     owners.
       (2) Each royalty payment or adjustment shall be accompanied 
     by a statement containing each of the following:
       (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 proceeds 
     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 
     subsection (c)(1).
       (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.
       (3) In lieu of receiving a refund under subsection (h), 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 
     Act, regardless of whether such royalties are due for 
     production and sale from the same mining claim or claims.
       (g) 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 under this 
     section, through the point of royalty computation, shall 
     establish and maintain any 

[[Page H 13415]]
     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 (i), the appropriate records, reports, 
     or information required by this subsection shall be made 
     available for inspection and duplication by the Secretary.
       (2) Records required by the Secretary under this section 
     shall be maintained for 3 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 (i) expires.
       (h) Interest Assessments.--
       (1) If royalty payments under this section are not received 
     by the Secretary on the date that such payments are due, or 
     if such payments are less than the amount due, the Secretary 
     shall charge interest on such unpaid amount. Interest under 
     this subsection shall be 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 with respect to royalties under this section.
       (2) 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.''
       (i) 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) The Secretary shall send or issue 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 not later than 3 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 proceedings 
     are commenced to recover specific amounts claimed to be due 
     prior to the expiration of 3 years from the date such royalty 
     is alleged to have been due.
       (j) Transitional Rules.--Any mining claim for which a 
     patent is issued pursuant to section 5374(c) shall not be 
     subject to the obligation to pay the royalty pursuant to this 
     section. Royalty payments for any claim processed under 
     section 5374(c) shall be suspended pending final 
     determination of the right to patent. For any such claim that 
     is determined not to qualify for the issuance of a patent 
     under section 5374(c), royalties shall be payable under this 
     section on production after the date of enactment of this 
     Act, plus interest computed at the rate published by the 
     Department of the Treasury as the ``Treasury Current Value of 
     Funds Rate'' on production after such date of enactment and 
     before the date of such determination.
       (k) Penalties.--Any person who withholds payment or 
     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.
       (l) Disbursement of Revenues.--The receipts from royalties 
     collected under this section shall be disbursed as follows:
       (1) Fifty percent of such receipts shall be paid into the 
     Treasury of the United States and deposited as miscellaneous 
     receipts.
       (2) Forty percent of such receipts shall be paid into a 
     State Fund or Federal Fund in accordance with section 5376; 
     until termination as provided in section 5379.
       (3) Ten percent of such receipts shall be paid by the 
     Secretary of the Treasury to the State in which the mining 
     claim from which production occurred is located.

     SEC. 5376. ABANDONED LOCATABLE MINERALS MINE RECLAMATION 
                   FUND.

       (a) State Fund.--Any State within which royalties are 
     collected pursuant to section 5375 from a mining claim and 
     which wishes to become eligible to receive such proceeds 
     allocated by paragraph 5375(l)(2) shall establish and 
     maintain an interest-bearing abandoned locatable mineral mine 
     reclamation fund (hereinafter referred to in this chapter as 
     ``State Fund'') to accomplish the purposes of this chapter. 
     States with existing abandoned locatable mineral reclamation 
     programs shall qualify to receive proceeds allocated by 
     section 5375(l)(2).
       (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 chapter as ``Federal 
     Fund'') which shall consist of royalty proceeds allocated by 
     paragraph 5375(l)(2) from mining claims in a State where a 
     State Fund has not been established or maintained under 
     subsection (a).

     SEC. 5377. ALLOCATION AND PAYMENTS.

       (a) State Fund.--Royalties collected pursuant to section 
     5375 and allocated by section 5375(l)(2) shall be paid by the 
     Secretary of the Treasury to the State Fund established 
     pursuant to subsection 5376(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 
     5375, and allocated by paragraph 5375(l)(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 5379(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 5376(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 
     5376(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 
     chapter, 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 5376(a), 
     and for which the Secretary of the Treasury's authority has 
     not expired under subsection 5379(a).

     SEC. 5378. ELIGIBLE AREA.

       (a) In General.--Subject to subsection (b), lands and water 
     eligible for reclamation under this chapter shall be Federal 
     lands 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 chapter; 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 
     chapter 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); and
       (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 chapter, or where the 
     Environmental Protection Agency has initiated or caused to be 
     initiated a response action pursuant to that Act.

     SEC. 5379. SUNSET PROVISIONS.

       (a) Termination of Authority.--The Secretary of the 
     Treasury's authority to allocate funds to a State Fund under 
     section 5377 shall expire on the date that the State submits 
     a report to the Congress which states that there are no areas 
     in the State eligible under subsection 5378(a) 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 distributed to the States as provided for in Section 
     5375(l)(3).

     SEC. 5380. EFFECT ON THE GENERAL MINING LAWS.

       The provisions of this chapter shall supersede the general 
     mining laws only to the extent such laws conflict with the 
     requirements of this chapter. 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. 5381. SEVERABILITY.

       If any provision of this chapter or the applicability 
     thereof to any person or circumstances 

[[Page H 13416]]
     is held invalid, the remainder of this chapter and the application of 
     such provision to other persons or circumstances shall not be 
     affected thereby.

     SEC. 5382. MINERAL MATERIALS.

       (a) Determinations.--Section 3 of the Act of July 23, 1955 
     (30 U.S.C. 611), is amended as follows:
       (1) Insert ``(a)'' before the first sentence.
       (2) Add the following new subsection at the end thereof:
       (b)(1) Subject to valid existing rights, after the date of 
     enactment of this subsection, notwithstanding the reference 
     to common varieties in subsection (a) and to the exception to 
     such term relating to a deposit of materials with some 
     property giving it distinct and special value, all deposits 
     of mineral materials referred to in such subsection, 
     including the block pumice referred to in such subsection, 
     shall be subject to disposal only under the terms and 
     conditions of the Materials Act of 1947.
       (2) For purposes of paragraph (1), the term `valid existing 
     rights' means that a mining claim located for any such 
     mineral material had some property giving it the distinct and 
     special value referred to in subsection (a), or as the case 
     may be, met the definition of block pumice referred to in 
     such subsection, was properly located and maintained under 
     the general mining laws prior to the date of the enactment of 
     this subsection, and was supported by a discovery of a 
     valuable mineral deposit within the meaning of the general 
     mining laws as in effect immediately prior to such date of 
     enactment and that such claim continues to be valid under 
     this Act.''.
       (b) Identified Deposits.--The Act entitled ``An Act to 
     provide for the disposal of materials on the public lands of 
     the United States'', approved July 31, 1947 (30 U.S.C. 602), 
     is amended by adding at the end the following:
       ``(b) Identified Deposits.--
       ``(1) Lands known to contain valuable deposits of mineral 
     materials subject to this Act and subsequent amendments and 
     not covered by any contract, permit, or lease, for uncommon 
     varieties of mineral materials under this section or by a 
     valid mining claim for an uncommon variety of a mineral 
     material under the general mining laws shall be subject to 
     disposition by lease under this Act by the Secretary through 
     advertisement, competitive bidding, or such other methods as 
     he may by general regulations adopt, and in such reasonably 
     compact areas as he shall fix.
       ``(2) All leases will be conditioned upon--
       ``(A) the payment by the lessee of such royalty as may be 
     fixed in the lease, not less than two percent of the quantity 
     or gross value of the output of mineral materials, and
       ``(B) the payment in advance of a rental of 25 cents per 
     acre for the first calendar year or fraction thereof; 50 
     cents per acre for the second, third, fourth, and fifth 
     years, respectively; and $1 per acre per annum thereafter 
     during the continuance of the lease, such rental for that 
     year being credited against royalties accruing for that year.
       ``(3)(A) Any lease issued under this subsection shall be 
     for a term of 20 years and so long thereafter as the lessee 
     complies with the terms and conditions of the lease and upon 
     the further condition that at the end of each 20-year period 
     succeeding the date of the lease such reasonable adjustment 
     of the terms and conditions thereof may be made therein as 
     may be prescribed by the Secretary unless otherwise provided 
     by law at the expiration of such periods.
       ``(B) Leases shall be conditioned upon a minimum annual 
     production or the payment of a minimum royalty in lieu 
     thereof, except when production is interrupted by strikes, 
     the elements, or casualties not attributable to the lessee.
       ``(C) The Secretary may permit suspension of operations 
     under any such leases when marketing conditions are such that 
     the leases cannot be operated except at a loss.
       ``(D) The Secretary upon application by the lessee prior to 
     the expiration of any existing lease in good standing shall 
     amend such lease to provide for the same tenure and to 
     contain the same conditions, including adjustment at the end 
     of each 20-year period succeeding the date of said lease, as 
     provided for in this subsection.
       ``(c) Other Lands.--
       ``(1) The Secretary is hereby authorized, under such rules 
     and regulations as he may prescribe, to grant to any 
     qualified applicant a prospecting permit which shall give the 
     exclusive right to prospect for mineral materials in lands 
     belonging to the United States which are not subject to 
     subsection (b), and are not covered by a contract, permit, or 
     lease under this Act, except that a prospecting permit shall 
     not exceed a period of 2 years and the area to be included in 
     such a permit shall not exceed 2,560 acres of land in 
     reasonably compact form.
       ``(2) The Secretary shall reserve and may exercise the 
     authority to cancel any prospecting permit upon failure by 
     the permittee to exercise due diligence in the prosecution of 
     the prospecting work in accordance with the terms and 
     conditions stated in the permit, and shall insert in every 
     such permit issued under the provisions of this Act 
     appropriate provisions for its cancellation by him.
       ``(3)(A) Upon showing to the satisfaction of the Secretary 
     that valuable deposits of one of the mineral materials 
     subject to the Materials Act of 1947 have been discovered by 
     the permittee within the area covered by his permit, and that 
     such land is valuable therefor, the permittee shall be 
     entitled to a lease for any or all of the land embraced in 
     the prospecting permit, at a royalty of not less than two 
     percent of the quantity or gross value of the output of the 
     mineral materials at the point of shipment to market, such 
     lease to be taken in compact form by legal subdivisions of 
     the public land surveys, or if the land be not surveyed, by 
     survey executed at the cost of the permittee in accordance 
     with regulations prescribed by the Secretary.''.
       ``(B) ``Persons holding valid mining claims for uncommon 
     varieties of mineral materials shall be entitled to receive a 
     lease under this subsection.''
       (D) Mineral Materials Disposal Clarification.--Section 4 
     July 23, 1955 (30 U.S.C. 612), is amended as follows:
       (1) In subsection (b) insert ``and mineral material'' after 
     ``vegetative''.
       (2) In subsection (c) insert ``and mineral material'' after 
     ``vegetative''.
       (e) Authorization for Disposal of Mineral Materials by 
     Contract.--Section 2(a) of the Act entitled ``An Act to 
     provide for the disposal of materials on the public lands of 
     the United States'', approved July 31, 1947 (30 U.S.C. 
     602(a)), is amended--
       (1) by striking the period at the end of paragraph (3) and 
     inserting ``or, if''; and
       (2) by adding after paragraph (3) the following:
       ``(4) the material is a mineral material.''.

                 CHAPTER 6--DEPARTMENT OF THE INTERIOR

     SEC. 5391. 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.

               CHAPTER 7--POWER MARKETING ADMINISTRATIONS

       Subchapter A--Bonneville Power Administration Refinancing

     SEC. 5401. DEFINITIONS.

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

     SEC. 5402. NEW PRINCIPAL AMOUNTS.

       (a) Principal Amount.--Effective October 1, 1995, an old 
     capital investment has a new principal amount that is the sum 
     of--
       (1) the present value of the old payment amounts for the 
     old capital investment, calculated using a discount rate 
     equal to the Treasury rate for the old capital investment; 
     and
       (2) an amount equal to $100,000,000 multiplied by a 
     fraction the numerator of which is the principal amount of 
     the old payment amounts for the old capital investment and 
     the denominator of which is the sum of the principal amounts 
     of the old payment amounts for all old capital investments.
       (b) Determination.--With the approval of the Secretary of 
     the Treasury, based solely on 

[[Page H 13417]]
     consistency with this subchapter, the Administrator shall determine the 
     new principal amounts under this section and the assignment 
     of interest rates to the new principal amounts under section 
     5403.
       (c) Old Payment Amount.--For the purposes of this section, 
     ``old payment amounts'' means, for an old capital investment, 
     the annual interest and principal that the Administrator 
     would have paid to the United States Treasury from October 1, 
     1995, if this subchapter had not been enacted, assuming 
     that--
       (1) the principal were repaid--
       (A) on the repayment date the Administrator assigned before 
     October 1, 1993, to the old capital investment, or
       (B) with respect to an old capital investment for which the 
     Administrator has not assigned a repayment date before 
     October 1, 1993, on a repayment date the Administrator shall 
     assign to the old capital investment in accordance with 
     paragraph 10(d)(1) of the version of Department of Energy 
     Order RA 6120.2 in effect on October 1, 1993; and
       (2) interest were paid--
       (A) at the interest rate the Administrator assigned before 
     October 1, 1993, to the old capital investment, or
       (B) with respect to an old capital investment for which the 
     Administrator has not assigned an interest rate before 
     October 1, 1993, at a rate determined by the Secretary of the 
     Treasury, taking into consideration prevailing market yields, 
     during the month preceding the beginning of the fiscal year 
     in which the related project, facility, or separable unit or 
     feature is placed in service, on outstanding interest-bearing 
     obligations of the United States with periods to maturity 
     comparable to the period between the beginning of the fiscal 
     year and the repayment date for the old capital investment.

     SEC. 5403. INTEREST RATE FOR NEW PRINCIPAL AMOUNTS.

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

     SEC. 5404. REPAYMENT DATES.

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

     SEC. 5405. PREPAYMENT LIMITATIONS.

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

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

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

     SEC. 5407. INTEREST RATES FOR NEW CAPITAL INVESTMENTS.

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

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

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

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

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

     SEC. 5409. CONTRACT PROVISIONS.

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

     SEC. 5410. SAVINGS PROVISIONS.

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

     SEC. 5411. SHORT TITLE.

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

     SEC. 5412. DEFINITIONS.

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

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

       (a) Sale of Eklutna.--The Secretary of Energy is authorized 
     and directed to sell Eklutna to the Eklutna Purchasers in 
     accordance with the terms of this subchapter and the Eklutna 
     Purchase Agreement.
       (b) Sale of Snettisham.--The Secretary of Energy is 
     authorized and directed to sell Snettisham to the Snettisham 
     Purchaser in accordance with the terms of this subchapter and 
     the Snettisham Purchase Agreement.
       (c) Cooperation of Other Agencies.--The heads of other 
     Federal departments, agencies, and instrumentalities of the 
     United States shall assist the Secretary of Energy in 
     implementing the sales and conveyances authorized and 
     directed by this subchapter.
       (d) Proceeds.--Proceeds from the sales required by this 
     subchapter 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 

[[Page H 13418]]
     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.
       (f) Contributed Funds.--Notwithstanding any other provision 
     of law, the Alaska Power Administration is authorized to 
     receive, administer, and expend such contributed funds as may 
     be provided by the Eklutna Purchasers or customers or the 
     Snettisham Purchaser or customers for the purposes of 
     upgrading, improving, maintaining, or administering Eklutna 
     or Snettisham. Upon the termination of the Alaska Power 
     Administration under section 5414(f), the Secretary of Energy 
     shall administer and expend any remaining balances of such 
     contributed funds for the purposes intended by the 
     contributors.

     SEC. 5414. EXEMPTION AND OTHER PROVISIONS.

       (a) Federal Power Act.--
       (1) After the sales authorized by this subchapter occur, 
     Eklutna and Snettisham, including future modifications, shall 
     continue to be exempt from the requirements of part I of the 
     Federal Power Act (16 U.S.C. 791a et seq.), except as 
     provided in subsection (b).
       (2) The exemption provided by paragraph (1) shall 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 subchapter or the Federal Power Act (16 
     U.S.C. 791 et seq.) preempts the State of Alaska from 
     carrying out the responsibilities and authorities of the 
     Memorandum of Agreement.
       (b) Subsequent Transfers.--Except for subsequent assignment 
     of interest in Eklutna by the Eklutna Purchasers to the 
     Alaska Electric Generation and Transmission Cooperative Inc. 
     pursuant to section 19 of the Eklutna Purchase Agreement, 
     upon any subsequent sale or transfer of any portion of 
     Eklutna or Snettisham from the Eklutna Purchasers or the 
     Snettisham Purchaser to any other person, the exemption set 
     forth in paragraph (1) of subsection (a) of this section 
     shall cease to apply to such portion.
       (c) 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 90 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 90 days after the 
     challenged act implementing the Program, or be barred.
       (d) Eklutna Lands.--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) 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.
       (3) 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 known as the Alaska Statehood Act, Public Law 
     85-508; 72 Stat. 339), 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).
       (e) Snettisham Lands.--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 known as the Alaska Statehood Act, Public Law 
     85-508; 72 Stat. 339).
       (f) Termination of Alaska Power Administration.--Not later 
     than one year after both of the sales authorized in section 
     5413 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.
       (g) Repeals.--
       (1) The Act of July 31, 1950 (64 Stat. 382) is repealed 
     effective on the date that Eklutna is conveyed to the Eklutna 
     Purchasers.
       (2) Section 204 of the Flood Control Act of 1962 (76 Stat. 
     1193) is repealed effective on the date that Snettisham is 
     conveyed to the Snettisham Purchaser.
       (3) The Act of August 9, 1955, concerning water resources 
     investigation in Alaska (69 Stat. 618), is repealed.
       (h) DOE Organization Act.--As of the later of the two dates 
     determined in paragraphs (1) and (2) of subsection (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) Disposal.--The sales of Eklutna and Snettisham under 
     this subchapter 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 known as the ``Surplus 
     Property Act of 1944'' (50 U.S.C. App. 1622).

     SEC. 5415. OTHER FEDERAL HYDROELECTRIC PROJECTS.

       The provisions of this subchapter regarding the sale of the 
     Alaska Power Administration's hydroelectric projects under 
     section 5413 and the exemption of these projects from part I 
     of the Federal Power Act under section 5414 do not apply to 
     other Federal hydroelectric projects.

      CHAPTER 8--OUTER CONTINENTAL SHELF DEEP WATER ROYALTY RELIEF

     SEC. 5421. SHORT TITLE.

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

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

       Section 8(a)(3) of the Outer Continental Shelf Lands Act 
     (43 U.S.C. 1337(a)(3)), is amended--
       (1) by designating the provisions of paragraph (3) as 
     subparagraph (A) of such paragraph (3); and
       (2) by inserting after subparagraph (A), as so designated, 
     the following:
       ``(B) In the Western and Central Planning Areas of the Gulf 
     of Mexico and the portion of the Eastern Planning Area of the 
     Gulf of Mexico encompassing whole lease blocks lying west of 
     87 degrees, 30 minutes West longitude, the Secretary may, in 
     order to--
       ``(i) promote development or increased production on 
     producing or non-producing leases; or
       ``(ii) encourage production of marginal resources on 
     producing or non-producing leases;
     through primary, secondary, or tertiary recovery means, 
     reduce or eliminate any royalty or net profit share set forth 
     in the lease(s). With the lessee's consent, the Secretary may 
     make other modifications to the royalty or net profit share 
     terms of the lease in order to achieve these purposes.
       ``(C)(i) Notwithstanding the provisions of this Act other 
     than this subparagraph, with respect to any lease or unit in 
     existence on the date of enactment of the Outer Continental 
     Shelf Deep Water Royalty Relief Act meeting the requirements 
     of this subparagraph, no royalty payments shall be due on new 
     production, as defined in clause (iv) of this subparagraph, 
     from any lease or unit located in water depths of 200 meters 
     or greater in the Western and Central Planning Areas of the 
     Gulf of Mexico, including that portion of the Eastern 
     Planning Area of the Gulf of Mexico encompassing whole lease 
     blocks lying west of 87 degrees, 30 minutes West longitude, 
     until such volume of production as determined pursuant to 
     clause (ii) has been produced by the lessee.
       ``(ii) Upon submission of a complete application by the 
     lessee, the Secretary shall determine within 180 days of such 
     application whether new production from such lease or unit 
     would be economic in the absence of the relief from the 
     requirement to pay royalties provided for by clause (i) of 
     this subparagraph. In making such determination, the 
     Secretary shall consider the increased technological and 
     financial risk of deep water development and all costs 
     associated with exploring, developing, and producing from the 
     lease. The lessee shall provide information required for a 
     complete application to the Secretary prior to such 
     determination. The Secretary shall clearly define the 
     information required for a complete application under this 
     section. Such application may be made on the basis of an 
     individual lease or unit. If the Secretary determines that 
     such new production would be economic in the absence of the 
     relief from the requirement to pay royalties provided for by 
     clause (i) of this subparagraph, the provisions of clause (i) 
     shall not apply to such production. If the Secretary 
     determines that such new production would not be economic in 
     the absence of the relief from the requirement to pay 
     royalties provided for by clause (i), the Secretary must 
     determine the volume of production from the lease or unit on 
     which no royalties would be due in order to make such new 
     production economically viable; except that for new 
     production as defined in clause (iv)(I), in no case will that 
     volume be less than 17.5 million barrels of oil equivalent in 
     water depths of 200 to 400 meters, 52.5 million barrels of 
     oil equivalent in 400 to 800 meters of water, and 87.5 
     million barrels of oil equivalent in water depths greater 
     than 800 meters. Redetermination of the applicability of 
     clause (i) shall be undertaken by the Secretary when 
     requested by the lessee prior to the commencement of the new 
     production and upon significant change in the factors upon 
     which the original determination was made. The Secretary 
     shall make such redetermination within 120 days of submission 
     of a complete application. 

[[Page H 13419]]
     The Secretary may extend the time period for making any determination 
     or redetermination under this clause for 30 days, or longer 
     if agreed to by the applicant, if circumstances so warrant. 
     The lessee shall be notified in writing of any determination 
     or redetermination and the reasons for and assumptions used 
     for such determination. Any determination or redetermination 
     under this clause shall be a final agency action. The 
     Secretary's determination or redetermination shall be 
     judicially reviewable under section 10(a) of the 
     Administrative Procedure Act (5 U.S.C. 702), only for actions 
     filed within 30 days of the Secretary's determination or 
     redetermination.
       ``(iii) In the event that the Secretary fails to make the 
     determination or redetermination called for in clause (ii) 
     upon application by the lessee within the time period, 
     together with any extension thereof, provided for by clause 
     (ii), no royalty payments shall be due on new production as 
     follows:
       ``(I) For new production, as defined in clause (iv) (I) of 
     this subparagraph, no royalty shall be due on such production 
     according to the schedule of minimum volumes specified in 
     clause (ii) of this subparagraph.
       ``(II) For new production, as defined in clause (iv) (II) 
     of this subparagraph, no royalty shall be due on such 
     production for one year following the start of such 
     production.
       ``(iv) For purposes of this subparagraph, the term `new 
     production' is--
       ``(I) any production from a lease from which no royalties 
     are due on production, other than test production, prior to 
     the date of enactment of the Outer Continental Shelf Deep 
     Water Royalty Relief Act; or
       ``(II) any production resulting from lease development 
     activities pursuant to a Development Operations Coordination 
     Document, or supplement thereto that would expand production 
     significantly beyond the level anticipated in the Development 
     Operations Coordination Document, approved by the Secretary 
     after the date of enactment of the Outer Continental Shelf 
     Deep Water Royalty Relief Act.
       ``(v) During the production of volumes determined pursuant 
     to clauses (ii) or (iii) of this subparagraph, in any year 
     during which the arithmetic average of the closing prices on 
     the New York Mercantile Exchange for light sweet crude oil 
     exceeds $28.00 per barrel, any production of oil will be 
     subject to royalties at the lease stipulated royalty rate. 
     Any production subject to this clause shall be counted toward 
     the production volume determined pursuant to 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. 5423. NEW LEASES.

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

     SEC. 5424. LEASE SALES.

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

     SEC. 5425. REGULATIONS.

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

     SEC. 5426. SAVINGS CLAUSE.

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

              CHAPTER 9--EXPORTS OF ALASKA NORTH SLOPE OIL

     SEC. 5431. EXPORTS OF ALASKAN NORTH SLOPE OIL.

       Section 28 of the Mineral Leasing Act (30 U.S.C. 185) is 
     amended by amending subsection (s) to read as follows:


                  ``exports of Alaskan north slope oil

       ``(s)(1) Subject to paragraphs (2) through (6) of this 
     subsection and notwithstanding any other provision of this 
     Act or any other provision of law (including any regulation) 
     applicable to the export of oil transported by pipeline over 
     right-of-way granted pursuant to section 203 of the Trans-
     Alaska Pipeline Authorization Act (43 U.S.C. 1652), such oil 
     may be exported unless the President finds that exportation 
     of this oil is not in the national interest. The President 
     shall make his national interest determination within five 
     months of the date of enactment of this subsection. In 
     evaluating whether exports of this oil are in the national 
     interest, the President shall at a minimum consider--
       ``(A) whether exports of this oil would diminish the total 
     quantity or quality of petroleum available to the United 
     States;
       ``(B) the results of an appropriate environmental review, 
     including consideration of appropriate measures to mitigate 
     any potential adverse effects of exports of this oil on the 
     environment, which shall be completed within four months of 
     the date of the enactment of this subsection; and
       ``(C) whether exports of this oil are likely to cause 
     sustained material oil supply shortages or sustained oil 
     prices significantly above world market levels that would 
     cause sustained material adverse employment effects in the 
     United States or that would cause substantial harm to 
     consumers, including noncontiguous States and Pacific 
     territories. If the President determines that exports of this 
     oil are in the national interest, he may impose such terms 
     and conditions (other than a volume limitation) as are 
     necessary or appropriate to ensure that such exports are 
     consistent with the national interest.
       ``(2) Except in the case of oil exported to a country with 
     which the United States entered into a bilateral 
     international oil supply agreement before November 26, 1979, 
     or to a country pursuant to the International Emergency Oil 
     Sharing Plan of the International Energy Agency, any oil 
     transported by pipeline over right-of-way granted pursuant to 
     section 203 of the Trans-Alaska Pipeline Authorization Act 
     (43 U.S.C. 1652) shall, when exported, be transported by a 
     vessel documented under the laws of the United States and 
     owned by a citizen of the United States (as determined in 
     accordance with section 2 of the Shipping Act, 1916 (46 
     U.S.C. App. 802)).
       ``(3) Nothing in this subsection shall restrict the 
     authority of the President under the Constitution, the 
     International Emergency Economic Powers Act (50 U.S.C. 1701 
     et seq.), the National Emergencies Act (50 U.S.C. 1601 et 
     seq.), or part B of title II of the Energy Policy and 
     Conservation Act (42 U.S.C. 6271-76) to prohibit exports.
       ``(4) The Secretary of Commerce shall issue any rules 
     necessary for implementation of the President's national 
     interest determination, including any licensing requirements 
     and conditions, within 30 days of the date of such 
     determination by the President. The Secretary of Commerce 
     shall consult with the Secretary of Energy in administering 
     the provisions of this subsection.
       ``(5) If the Secretary of Commerce finds that exporting oil 
     under authority of this subsection has caused sustained 
     material oil supply shortages or sustained oil prices 
     significantly above world market levels and further finds 
     that these supply shortages or price increases have caused or 
     are likely to cause sustained material adverse employment 
     effects in the United States, the Secretary of Commerce, in 
     consultation with the Secretary of Energy, shall recommend, 
     and the President may take, appropriate action concerning 
     exports of this oil, which may include modifying or revoking 
     authority to export such oil.
       ``(6) Administrative action under this subsection is not 
     subject to sections 551 and 553 through 559 of title 5, 
     United States Code.''.

 CHAPTER 10--SKI AREA PERMIT RENTAL CHARGES ON NATIONAL FOREST SYSTEM 
                                 LANDS

     SEC. 5441. SKI AREA PERMIT RENTAL CHARGE.

       (a) The Secretary of Agriculture shall charge a rental 
     charge for all ski area permits issued pursuant to section 3 
     of the National Forest Ski Area Permit Act of 1986 (16 U.S.C. 
     497b), the Act of March 4, 1915 (38 Stat. 1101, chapter 144; 
     16 U.S.C. 497), or the 9th through 20th paragraphs under the 
     heading ``Surveying the public lands'' under the heading 
     ``under the department of the interior'' in the Act of June 
     4, 1897 (30 Stat. 34, chapter 2), on National Forest System 
     lands. Permit rental charges for permits issued pursuant to 
     the National Forest Ski Area Permit Act of 1986 shall be 
     calculated as set forth in subsection (b). Permit rental 
     charges for existing ski area permits issued pursuant to the 
     Act of March 4, 1915, and the Act of June 4, 1897, shall be 
     calculated in accordance with those existing permits: 
     Provided, That a permittee may, at the permittee's option, 
     use the calculation method set forth in subsection (b).
       (b)(1) The ski area permit rental charge (SAPRC) shall be 
     calculated by adding the permittee's gross revenues from lift 
     ticket/year-round ski area use pass sales plus revenue from 
     ski school operations (LT+SS) and multiplying 

[[Page H 13420]]
     such total by the slope transport feet percentage (STFP) on National 
     Forest System land. That amount shall be increased by the 
     gross year-round revenue from ancillary facilities (GRAF) 
     physically located on national forest land, including all 
     permittee or subpermittee lodging, food service, rental 
     shops, parking and other ancillary operations, to determine 
     the adjusted gross revenue (AGR) subject to the permit rental 
     charge. The final rental charge shall be calculated by 
     multiplying the AGR by the following percentages for each 
     revenue bracket and adding the total for each revenue 
     bracket:
       (A) 1.5 percent of all adjusted gross revenue below 
     $3,000,000;
       (B) 2.5 percent for adjusted gross revenue between 
     $3,000,000 and $15,000,000;
       (C) 2.75 percent for adjusted gross revenue between 
     $15,000,000 and $50,000,000; and
       (D) 4.0 percent for the amount of adjusted gross revenue 
     that exceeds $50,000,000.
       (2) In cases where ski areas are only partially located on 
     national forest lands, the slope transport feet percentage on 
     national forest land referred to in subsection (b) shall be 
     calculated as generally described in the Forest Service 
     Manual in effect as of January 1, 1992. Revenues from Nordic 
     ski operations shall be included or excluded from the rental 
     charge calculation according to the percentage of trails 
     physically located on national forest land.
       (3) In order to ensure that the rental charge remains fair 
     and equitable to both the United States and ski area 
     permittees, the adjusted gross revenue figures for each 
     revenue bracket in paragraph (1) shall be adjusted annually 
     by the percent increase or decrease in the national Consumer 
     Price Index for the preceding calendar year.
       (c) The rental charge set forth in subsection (b) shall be 
     due on June 1 of each year and shall be paid or pre-paid by 
     the permittee on a monthly, quarterly, annual or other 
     schedule as determined appropriate by the Secretary in 
     consultation with the permittee. Unless mutually agreed 
     otherwise by the Secretary of Agriculture and the permittee, 
     the payment or prepayment schedule shall conform to the 
     permittee's schedule in effect prior to the date of enactment 
     of this Act. To reduce costs to the permittee and the Forest 
     Service, the Secretary shall each year provide the permittee 
     with a standardized form and worksheets (including annual 
     rental charge calculation brackets and rates) to be used for 
     rental charge calculation and submitted with the rental 
     charge payment.
       (d) The ski area permit rental charge set forth in this 
     section shall become effective on June 1, 1996 and cover 
     receipts retroactive to June 1, 1995: Provided, however, That 
     if a permittee has paid rental charges for the period June 1, 
     1995, to June 1, 1996, under the graduated rate rental charge 
     system formula in effect prior to the date of enactment of 
     this Act, such rental charges shall be credited toward the 
     new rental charge due on June 1, 1996. In order to ensure 
     increasing rental charge receipt levels to the United States 
     during transition from the graduated rate rental charge 
     system formula to the formula of this Act, the rental charge 
     paid by any individual permittee shall be--
       (1) for the 1995-1996 permit year, shall be either the 
     rental charge paid for the preceding 1994-1995 base year or 
     the rental charge calculated pursuant to this Act, whichever 
     is higher;
       (2) for the 1996-1997 permit year, the rental charge paid 
     shall be either the rental charge paid for the 1994-1995 base 
     year or the rental charge calculated pursuant to this Act, 
     whichever is higher; and
       (3) for the 1997-1998 permit year, the rental charge for 
     the 1994-1995 base year or the rental charge calculated 
     pursuant to this Act, whichever is higher.
     If an individual permittee's adjusted gross revenue for the 
     1995-1996, 1996-1997, or 1997-1998 permit years falls more 
     than 10 percent below the 1994-1995 base year, the rental 
     charge paid shall be the rental charge calculated pursuant to 
     this Act.
       (e) Under no circumstances shall revenue, or subpermittee 
     revenue (other than lift ticket, area use pass, or ski school 
     sales) obtained from operations physically located on non-
     national forest land be included in the ski area permit 
     rental charge calculation.
       (f) To reduce administrative costs on ski area permittees 
     and the Forest Service the terms ``revenue'' and ``sales'', 
     as used in this section, shall mean actual income from sales 
     and shall not include sales of operating equipment, refunds, 
     rent paid to the permittee by sublessees, sponsor 
     contributions to special events or any amounts attributable 
     to employee gratuities or employee lift tickets, discounts, 
     or other goods or services (except for bartered goods and 
     complimentary lift tickets) for which the permittee does not 
     receive money.
       (g) In cases where an area of national forest land is under 
     a ski area permit but the permittee does not have revenue or 
     sales qualifying for rental charge payment pursuant to 
     subsection (a), the permittee shall pay an annual minimum 
     rental charge of $2 for each national forest acre under 
     permit or a percentage of appraised land value, as determined 
     to be appropriate by the Secretary.
       (h) Where the new rental charge provided for in subsection 
     (b)(1) results in an increase in permit rental charge greater 
     than one half of one percent of the permittee's adjusted 
     gross revenue (as determined under subsection (b)(1)), the 
     new rental charge shall be phased in over a 5-year period in 
     a manner providing for increases of approximately equal 
     increments.

                     CHAPTER 11--PARK ENTRANCE FEES

     SEC. 5451. FEES.

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

[[Page H 13421]]
     tour operators 12 months in advance of implementation.''.
       (i) Conforming Amendments.--
       (1) Title I of the Department of the Interior and Related 
     Agencies Appropriations Act, 1994, is amended by striking the 
     second proviso under the heading ``Administrative 
     Provisions'' under the heading ``National Park Service'' 
     (related to recovery of costs associated with special use 
     permits).
       (2) Section 3 of the Act entitled ``An Act creating the 
     Mount Rushmore National Memorial Commission and defining its 
     purposes and powers'', approved February 25, 1929 (45 Stat. 
     1300, chapter 315), is amended by striking the last sentence.
       (3) Section 5 of Public Law 87-657 (16 U.S.C. 459c-5), is 
     amended by striking subsection (e).
       (4) Section 3 of Public Law 87-750 (16 U.S.C. 398e) is 
     amended by striking subsection (b).
       (5) Section 4(e) of Public Law 92-589 (16 U.S.C. 460bb-3) 
     is amended by striking the first sentence.
       (6) Section 6 of Public Law 95-348 (16 U.S.C. 410dd) is 
     amended by striking subsection (j).
       (7) Section 207 of Public Law 96-199 (16 U.S.C. 410ff-6) is 
     repealed.
       (8) Section 106 of Public Law 96-287 (16 U.S.C. 410gg-5) is 
     amended by striking the last sentence.
       (9) Section 204 of Public Law 96-287 (94 Stat. 601) is 
     amended by striking the last sentence.
       (10) Section 5 of Public Law 96-428 (94 Stat. 1842; 16 
     U.S.C. 461 note) is repealed.
       (11) Public Law 100-55 (101 Stat. 371; U.S.C. 460l-6a note) 
     is repealed.

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

       Of the funds deposited in special accounts in the Treasury 
     for the National Park Service, Bureau of Land Management, and 
     Forest Service as set forth in section 4(i) of the Land and 
     Water Conservation Fund Act of 1965 (16 U.S.C. 460l-6a(i)), 
     beginning in fiscal year 1997, 80 percent of all receipts 
     earned in the previous year in excess of the following 
     amounts for each covered agency shall be made available to 
     that agency without further appropriation:
       (1) National Park System:
       (A) $82,000,000 for fiscal year 1997.
       (B) $85,000,000 for fiscal year 1998.
       (C) $88,000,000 for fiscal year 1999.
       (D) $91,000,000 for fiscal year 2000.
       (E) $94,000,000 for fiscal year 2001.
       (F) $97,000,000 for fiscal year 2002.
       (G) $100,000,000 for fiscal year 2003.
       (H) $112,000,000 for fiscal year 2004.
       (I) $106,000,000 for fiscal year 2005.
       (2) Bureau of Land Management:
       (A) $4,500,000 for fiscal year 1997.
       (B) $5,000,000 for fiscal year 1998.
       (C) $5,000,000 for fiscal year 1999.
       (D) $5,000,000 for fiscal year 2000.
       (E) $5,000,000 for fiscal year 2001.
       (F) $5,000,000 for fiscal year 2002.
       (G) $5,000,000 /for fiscal year 2003.
       (H) $5,000,000 /for fiscal year 2004.
       (I) $5,000,000 /for fiscal year 2005.
       (3) Forest Service:
       (A) $20,000,000 for fiscal year 1997.
       (B) $20,600,000 for fiscal year 1998.
       (C) $21,200,000 for fiscal year 1999.
       (D) $21,900,000 for fiscal year 2000.
       (E) $22,500,000 for fiscal year 2001.
       (F) $23,600,000 for fiscal year 2002.
       (G) $24,300,000 for fiscal year 2003.
       (H) $25,000,000 for fiscal year 2004.
       (I) $25,800,000 for fiscal year 2005.
     Beginning in fiscal year 2006, and in each fiscal year 
     thereafter, the amounts set forth in this section for each 
     covered agency in fiscal year 2005 shall be increased by 4 
     percent per year, and 80 percent of all receipts earned in 
     excess of such amounts for each covered agency shall be made 
     available to that agency without further appropriation.

     SEC. 5453. ALLOCATION AND USE OF FEES.

       (a) Allocation.--Beginning in fiscal year 1997, receipts 
     above the amounts stated in section 5452 in each covered 
     agency's special account from the previous fiscal year shall 
     be allocated as follows:
       (1) Seventy-five percent shall be allocated among the units 
     or areas of each affected agency in the same proportion as 
     fees collected pursuant to section 4 of the Land and Water 
     Conservation Fund Act of 1965 (16 U.S.C. 460l-6a) from a 
     specific unit or area bear to the total amount of such fees 
     collected from all units or areas of the same covered agency 
     for each fiscal year.
       (2) Twenty-five percent shall be allocated among each 
     covered agency's units or areas on the basis of need, as 
     determined by the Secretary.
       (b) Use.--Expenditures from the special accounts shall be 
     used solely for infrastructure related to visitor use and 
     annual operating expenses related to visitor services at 
     units or areas of the covered agencies.

                     CHAPTER 12--CONCESSION REFORM

     SEC. 5461. SHORT TITLE.

       This chapter may be cited as the ``Visitor Facilities and 
     Services Enhancement Act of 1995''.

     SEC. 5462. DEFINITIONS.

       In this chapter:
       (1) ``adjusted gross receipts'' means gross receipts less 
     revenue derived from goods and services provided on other 
     than Federal lands or conveyed to units of Government for 
     hunting or fishing licenses or for entrance or recreation 
     fees, or from such other exclusions as the Secretary 
     concerned might apply.
       (2) ``agency head'' means the head of an agency or his or 
     her designated representative.
       (3) ``bidder'' means a person who has submitted, or may 
     submit, a proposal respecting the facilities or services, 
     whether or not such bidder is the current concessioner.
       (4) ``concessioner'' means a person or other entity acting 
     under a concession authorization which provides public 
     services, facilities, or activities on Federal lands pursuant 
     to a concession service agreement or concession license.
       (5) ``concession authorization'' means a concession service 
     agreement or concession license as applicable.
       (6) ``concession license'' means a written contract between 
     the agency head and the concessioner which sets forth the 
     terms and conditions under which the concessioner is 
     authorized to provide recreation services or activities on a 
     limited basis as well as the rights and obligations of the 
     Federal Government.
       (7) ``concession service agreement'' means a written 
     contract between the agency head and the concessioner which 
     sets forth the terms and conditions under which the 
     concessioner is authorized to provide visitor services, 
     facilities, or activities as well as the rights and 
     obligations of the Federal Government.
       (8) ``Consumer Price Index'' means the Consumer Price 
     Index-All Urban Consumers published by the Bureau of Labor 
     Statistics of the Department of Labor, and from and after 
     such time as such index is no longer published, the Consumer 
     Price Index or other regularly-published cost-of-living index 
     chosen by the Secretary concerned which reasonably 
     approximates the Consumer Price Index specified above.
       (9) ``gross receipts'' means revenue from goods or services 
     provided by concession services, facilities, or activities on 
     Federal lands and waters.
       (10) ``performance incentive'' means a credit based on past 
     performance toward the score awarded by the Secretary 
     concerned to an incumbent concessioner's proposal submitted 
     in response to a solicitation for the reissuance of such 
     incumbent concessioner's contract.
       (11) ``proposal'' means the complete submission for a 
     concession service agreement offered in response to the 
     solicitation for such concession service agreement.
       (12) ``prospectus'' means a document or documents issued by 
     the Secretary concerned and included with a solicitation 
     which sets forth the minimum requirements for the award of a 
     concession service agreement.
       (13) ``Secretary concerned'' means --
       (A) the Secretary of the Interior with respect to all 
     concession authorizations issued by the National Park 
     Service, and all concession authorizations for river runner, 
     outfitter, or guide concessions issued by the United States 
     Fish and Wildlife Service and the Bureau of Land Management; 
     and
       (B) the Secretary of Agriculture with respect to all river 
     runner, outfitter, or guide concessions issued by the Forest 
     Service.
       (14) ``selected bidder'' means the bidder selected by the 
     Secretary concerned for the award of a concession service 
     agreement until such bidder becomes the concessioner.
       (15) ``solicitation'' means a request by the Secretary 
     concerned for proposals in response to a prospectus.

     SEC. 5463. NATURE AND TYPES OF CONCESSION AUTHORIZATIONS.

       (a) In General.--The Secretary concerned may enter into 
     concession authorizations as follows:
       (1) Concession service agreement.--A concession service 
     agreement shall be entered into for all concessions where the 
     Secretary concerned determines that the provision of 
     concession services is in the interest of the Federal 
     Government and issues either a competitive offering for 
     concession services, facilities or activities or a 
     noncompetitive offering for such services, facilities, or 
     activities based on a finding that due to special 
     circumstances it is not in the public interest of the United 
     States to award a concession service agreement on a 
     competitive basis.
       (2) Concession license.--Whenever the Secretary concerned 
     makes a determination that public enjoyment of Federal lands 
     would be enhanced through the provision of concession 
     services for one-time, intermittent, or infrequently 
     scheduled activities and that there exists no need to limit 
     the number of concessionaires providing such services, the 
     Secretary shall enter into a concession license with a 
     qualified concessioner. The Secretary concerned may not limit 
     the number of concession licenses issued for the same types 
     of activities in a particular geographic area.
       (3) Lands under multiple jurisdictions.--In order to reduce 
     administrative costs the Secretaries of the Departments 
     concerned shall designate an agency to be the lead agency 
     concerning concessions which conduct a single operation on 
     lands or waters under the jurisdiction of more than one 
     agency. Unless otherwise agreed to by each such Secretary 
     concerned, the lead agency shall be that agency under whose 
     jurisdiction the concessioner generates the greatest amount 
     of gross receipts. The agency so designated shall issue a 
     single concession authorization and collect a single fee 
     under paragraphs (1) and (2) for such operation.

     SEC. 5464. COMPETITIVE SELECTION PROCESS FOR CONCESSION 
                   SERVICE AGREEMENTS.

       (a) Award to Best Proposal.--The Secretary concerned shall 
     enter into, and reissue, a concession service agreement with 
     the person whom the Secretary determines in accordance with 
     this section submits the best proposal through a competitive 
     process as defined in this section.
       (b) Solicitation and Prospectus.--Prior to making a 
     solicitation for a concession service agreement, the 
     Secretary concerned shall prepare a prospectus for such 
     solicitation, shall publish notice of its availability at 
     least once in such local or national newspapers or trade 
     publications as the Secretary determines appropriate, and 
     shall make such prospectus available upon request to all 
     interested parties. The prospectus shall specify the minimum 
     requirements for such concession service agreement, including 
     but not limited to:

[[Page H 13422]]

       (1) a description of the services and facilities to be 
     provided by the concessioner.
       (2) the level of capital investment required by the 
     concessioner (if any).
       (3) terms and conditions of the concession service 
     agreement.
       (4) minimum facilities and services to be provided by the 
     Secretary concerned to the concessioner, if any, including 
     but not limited to public access, utilities, buildings, and 
     minimum public services.
       (5) such other information related to the concession 
     operation available to the Secretary concerned as is not 
     privileged or otherwise exempt from disclosure under Federal 
     law, as the Secretary determines is necessary to allow for 
     the submission of competitive proposals; and
       (6) Local hiring preferences provisions, if applicable, and 
     notwithstanding any other provision of law, to increase 
     revenue to the United States by avoiding additional 
     transportation and related costs associated with non-resident 
     labor, each contract awarded by the Department of the 
     Interior for concessioner or commercial use contractor-
     provided visitor services performed in whole or in part of a 
     State which is not contiguous with another State and has an 
     unemployment rate in excess of the national average rate of 
     unemployment, as determined by the Secretary of Labor shall 
     include a provision requiring the concessioner or commercial 
     use contractor to employ individuals who are residents of 
     such State, and who, in the case of any craft or trade, 
     possess or would be able to acquire promptly the necessary 
     skills for the purpose of performing that portion of the 
     contract in such State.
       (7) Minimum fees to the United States.
       (c) Factors and Minimum Standards in Determining Best 
     Proposal.--The prospectus shall assign a weight to each 
     factor identified therein related to the importance of such 
     factor in the selection process. Points shall be awarded for 
     each such factor, based on the relative strength of the 
     proposal concerning that factor. In selecting the best 
     proposal, the Secretary concerned shall take into 
     consideration (but shall not be limited to) the following, 
     including whether the proposal meets the minimum requirements 
     (if any) of the Secretary for each of the following:
       (1) Responsiveness to the prospectus.
       (2) Quality of visitor services to be provided taking into 
     account the nature of equipment and facilities to be 
     provided.
       (3) Experience and performance in providing the same or 
     similar accommodations, facilities, or services. This factor 
     shall account for not less than 20 percent of the maximum 
     points available under any prospectus. Where the Secretary 
     concerned determines it to be warranted to provide for a high 
     quality visitor experience, the prospectus for a concession 
     service agreement shall provide greater weight to this factor 
     based on such aspects of the concession service agreement as 
     scope or size, complexity, nature of technical skills 
     required, and site-specific knowledge of the area. The 
     similarity of the qualifying experience outlined in the 
     proposal to the nature of the services required under the 
     concession service agreement and the length of such 
     qualifying experience shall be the basis for awarding points 
     for this factor.
       (4) Record of resource protection (as appropriate for 
     services and activities with potential to impact natural or 
     cultural resources).
       (5) Financial capability.
       (6) Fees to the United States.
       (d) Selection Process.--The process for selecting the best 
     proposal shall consist of the following:
       (1) First, the Secretary concerned shall identify those 
     proposals which meet the minimum standards (if any) for the 
     factors identified under subsection (c).
       (2) Second, the Secretary concerned shall evaluate all 
     proposals identified under paragraph (1), considering all 
     factors identified under subsection (c), as well as 
     performance incentives earned under subsection (e) and 
     renewal penalties incurred under subsection (f).
       (3) Third, the Secretary concerned shall offer the 
     concession service agreement to the best qualified applicant 
     as determined by the evaluation under paragraph (2). Prior to 
     any such offer, the Secretary shall certify that such 
     applicant has adequate funds to purchase any investment 
     interest.
       (e) Performance Incentives.--
       (1) In evaluating the proposal of an incumbent concessioner 
     when the Secretary concerned issues a prospectus for the 
     renewal of the concession service agreement, such 
     concessioner is entitled to a performance incentive of--
       (A) one percent of the maximum points available under such 
     prospectus for each year in which the concessioner's annual 
     performance is rated as exceeding the requirements outlined 
     in the prospectus or ``good'', and
       (B) a one-time 3-year merit term extension upon a finding 
     that a concessioner has been rated as ``good'' in each annual 
     performance evaluation through the term of the concession 
     service agreement.
       (2) A performance incentive awarded under paragraph (1)(A) 
     may not exceed 10 percent of the maximum points available 
     under such prospectus.
       (3) The performance incentive specified under paragraph 
     (1)(A) may only be awarded to a concessioner which meets the 
     monetary definition of a small business under section 3 of 
     the Small Business Act (15 U.S.C. 632). The Board of Contract 
     Appeals within each Department shall adjudicate disputes 
     between the Federal Government and concessionaires regarding 
     performance evaluations.
       (f) Renewal Penalty.--In evaluating the proposal of an 
     incumbent concessioner when the Secretary concerned issues a 
     prospectus for the renewal of the concession service 
     agreement, the incumbent concessioner shall be penalized one 
     percent of the maximum points available under such prospectus 
     for each year in which the concessioner's annual performance 
     is found to be unsatisfactory.
       (g) Inapplicability of NEPA to Temporary Extensions and 
     Similar Reissuance of Concessions Agreements.--The temporary 
     extension of a concession authorization, or reissuance of a 
     concession authorization to provide concession services 
     similar in nature and amount to concession services provided 
     under the previous authorization, is hereby determined not to 
     be a major Federal action for the purposes of the National 
     Environmental Policy Act of 1969 (42 U.S.C. 4331 et. seq.).
       (h) Provision for Additional Related Services.--The 
     Secretary concerned may modify the concession service 
     agreement to allow concessionaires to provide services 
     closely related to such agreement only if the Secretary 
     concerned determines that such changes would enhance the 
     safety or enjoyment of visitors and would not unduly restrict 
     the award of future concession service agreements.

     SEC. 5465. CAPITAL IMPROVEMENTS.

       (a) In General.--Concessionaires may construct or finance 
     construction under terms of section 5470 only such public 
     facilities on Federal lands as are to be used by the 
     concessioner under the terms of its concession service 
     agreement or facilities which are necessary for the 
     concessioner to administer such public facilities on Federal 
     lands.
       (b) Investment Interest.--
       (1) In general.--A concessioner that is required or 
     authorized under a concession service agreement pursuant to 
     this subchapter to acquire or construct any structure, 
     improvement, or fixture pursuant to such agreement on Federal 
     lands shall have an investment interest therein, as defined 
     in this subchapter. Any such investment interest shall 
     consist of all incidents of ownership, except legal title 
     which shall be vested in the Federal Government. Such 
     investment interest shall not be extinguished by the 
     expiration of such agreement. Such investment interest may be 
     assigned, transferred, encumbered or relinquished.
       (2) Limitation.--Such investment interest shall not be 
     construed to include or imply any authority, privilege, or 
     right to operate or engage in any business or other activity, 
     and the use of any improvement in which the concessioner has 
     an investment interest shall be wholly subject to the 
     applicable provisions of the concession service agreement and 
     of laws and regulations relating to the area.
       (3) Federal property.--Notwithstanding paragraph (1), a 
     concession service agreement may specify that certain new 
     structures, improvements, or fixtures required to be 
     constructed under terms of the concession service agreement 
     shall be property of the Federal Government subject only to 
     the right of the concessioner to use such improvements during 
     the term of such agreement and that the concessioner shall 
     not be accorded an investment interest therein. Concession 
     service agreements shall not, to the extent practicable, 
     provide for a concessioner to obtain an investment interest 
     in any building or facilities wholly owned by the Federal 
     Government.
       (c) Sale of Assets.--If the existing concessioner is not 
     the selected bidder at the time of reissuance of a concession 
     service agreement, the Secretary concerned shall require the 
     new concessioner to buy the investment interest of the 
     existing concession. In the event that the successor 
     concessioner is unable to fully pay such investment interest, 
     any deficiency shall be paid by the Federal Government.
       (d) Closure of Concessioner Facilities.--If the Secretary 
     concerned determines that the public interest, by reason of 
     public and safety considerations or for other reasons beyond 
     the control of the concessioner, requires the discontinuation 
     or closure of facilities in which the concessioner has an 
     investment interest, the Federal Government shall compensate 
     the concessioner in the amount equal to the value of the 
     investment interest.
       (e) Determination of Value of Investment Interest.--For 
     purposes of this subchapter, the investment interest of any 
     capital improvement at the end of the concession service 
     agreement period shall be an amount equal to the actual cost 
     of construction or purchase of such investment interest or 
     such capital improvement adjusted from the time of completion 
     of such construction by changes in the Consumer Price Index 
     less depreciation evidenced by the condition and prospective 
     serviceability in comparison with a new unit of like kind. 
     The Secretary concerned shall include the value to be paid by 
     the selected bidder for any existing investment interest in 
     the prospectus for the related concession service agreement.

     SEC. 5466. DURATION OF CONCESSION AUTHORIZATION.

       (a) Concession Service Agreement.--The standard term of a 
     concession service agreement shall be 10 years. The Secretary 
     concerned may issue a concession service agreement for less 
     than 10 years if the Secretary determines that the average 
     annual gross receipts over the life of the concession service 
     agreement would be less than $100,000. The Secretary 
     concerned may not issue a concession service agreement for 
     less than 5 years. The Secretary concerned shall issue a 
     concession service agreement for longer than 10 years if the 
     Secretary determines that such longer term is in the public 
     interest or necessary due to the extent of investment and 
     associated financing requirements and to meet the obligations 
     assumed. The term for a concession service agreement may not 
     exceed 30 years.
       (b) Concession License.--The term for a concession license 
     may not exceed 2 years.
       (c) Temporary Extension.--The Secretary concerned may agree 
     to temporary extensions of concession service agreements for 
     up to 2 years 

[[Page H 13423]]
     on a noncompetitive basis to avoid interruption of services to the 
     public.

     SEC. 5467. RATES AND CHARGES TO THE PUBLIC.

       In general, rates and charges to the public shall be set by 
     the concessioner. For concession service agreements only, a 
     concessioner's rates and charges to the public shall be 
     subject to the approval of the Secretary concerned in those 
     instances where the Secretary determines that sufficient 
     competition for such facilities and services does not exist 
     within or in close proximity to the area in which the 
     concessioner operates. In those instances, the concession 
     service agreement shall state that the reasonableness of the 
     concessioner's rates and charges to the public shall be 
     reviewed and approved by the Secretary concerned primarily by 
     comparison with those rates and charges for facilities and 
     services of comparable character under similar conditions, 
     with due consideration for length of season, seasonal 
     variations, average percentage of occupancy, accessibility, 
     availability and costs of labor and materials, type of 
     patronage, and other factors deemed significant by the 
     Secretary concerned. Such review shall be completed within 90 
     days of receipt of all necessary information, or the 
     requirement for the Secretary's approval shall be waived and 
     such rates and charges as proposed by the concessioner 
     considered to be approved for immediate use.

     SEC. 5468. TRANSFERABILITY OF CONCESSION AUTHORIZATIONS.

       (a) Concession Service Agreements.--
       (1) Approval required.--A concession service agreement is 
     transferable or assignable only with the approval of the 
     Secretary concerned, which approval may not be unreasonably 
     withheld or delayed. The Secretary may not approve any such 
     transfer or assignment if the Secretary determines that the 
     prospective concessioner is or is likely to be unable to 
     completely satisfy all of the material requirements, term, 
     and conditions of the agreement or that the terms of the 
     transfer or assignment would preclude providing appropriate 
     facilities or services to the public at reasonable rates.
       (2) Consideration period.--If the Secretary concerned fails 
     to approve or disapprove a transfer or assignment under 
     paragraph (1) within 90 days after the date on which the 
     Secretary receives all necessary information requested by the 
     Secretary with respect to such transfer, the transfer or 
     assignment shall be deemed to have been approved.
       (3) No modification of terms and conditions.--The terms and 
     conditions of the concessions service agreement shall not be 
     subject to modification by reason of any transfer or 
     assignment under this section.
       (b) Concession License.--A concession license may not be 
     transferred.

     SEC. 5469. FEES CHARGED BY THE UNITED STATES FOR CONCESSION 
                   AUTHORIZATIONS.

       (a) In General.--The Secretary concerned shall charge a fee 
     for the privilege of providing concession services pursuant 
     to this subchapter. The fee for any concession service 
     agreement may include any of the following:
       (1) An annual cash payment for the privilege of providing 
     concession services.
       (2) The amount required for capital improvements required 
     pursuant to section 5465 (a).
       (3) Fees for rental or lease of Government-owned facilities 
     or lands occupied by the concessioner.
       (4) Expenditures for maintenance of or improvements to 
     Government-owned facilities occupied by the concessioner.
       (b) Establishment of Amount.--
       (1) Minimum acceptable fee.--The Secretary concerned shall 
     establish a minimum fee for each applicable category 
     specified in paragraphs (1) through (4) of subsection (a) 
     which is acceptable to the Secretary under this section and 
     shall include the minimum fee in the prospectus under section 
     5464. This fee shall be based on historical data, where 
     available, as well as industry-specific and other market data 
     available to the Secretary concerned.
       (2) Final fee.--Except as provided in paragraph (3), the 
     final fee shall be the amount bid by the selected applicant 
     under section 5464.
       (3) Substantially similar services in a specific geographic 
     area.--When the Secretary concerned simultaneously offers 
     authorizations for more than one river runner, outfitter, or 
     guide concession operation to provide substantially similar 
     services in a defined geographic area, the concession fee for 
     all such concessionaires shall be specified by the Secretary 
     concerned in the prospectus. The Secretary concerned shall 
     base the fee on historical data, where available, as well as 
     on industry-specific and other market data available to the 
     Secretary concerned or may establish a charge per user day.
       (c) Adjustment of Fees.--The amount of any fee for the term 
     of the concession service agreement shall be set at the 
     beginning of the concession authorization and may only be 
     modified if stated in the contract on the basis of inflation, 
     when the annual payment is not determined by a percentage of 
     adjusted gross receipts (as measured by changes in the 
     Consumer Price Index), to reflect substantial changes from 
     the conditions specified in the prospectus, or in the event 
     of an unforseen disaster.
       (d) Concession License Fee.--The fee for a concession 
     license shall at least cover the program administrative costs 
     and may not be changed over the term of the license.

     SEC. 5470. DISPOSITION OF FEES.

       (a) Concession Improvement Account.--
       (1) In general.--The Secretary concerned shall, whenever 
     the concession service agreement requires or authorizes the 
     concessioner to perform maintenance or make improvements to 
     Government-owned facilities occupied by the concessioner, 
     require the concessioner to establish a concession 
     improvement account. The concessioner shall deposit into this 
     account all funds for maintenance of or improvements to 
     Government-owned facilities occupied by the concessioner;
       (2) Terms and conditions.--The account shall be maintained 
     by the concessioner in an interest bearing account in a 
     Federally insured financial institution. The concessioner 
     shall maintain the account separately from any other funds or 
     accounts and shall not commingle the money in the account 
     with any other money.
       (3) Disbursements.--The concessioner shall make 
     disbursements from the account for improvements and other 
     activities, only for capital improvements or maintenance of 
     improvements to Government-owned facilities occupied by the 
     concessioner as specified in the concession service 
     agreement.
       (4) Transfer of remaining balance.--On the termination of a 
     concession authorization, or on the transfer of a concession 
     service agreement, any remaining balance in the account shall 
     be transferred by the concessioner to the successor 
     concessioner, to be used solely as set forth in this 
     subsection. In the event there is no successor concessioner, 
     the account balance shall be deposited in the Treasury as 
     miscellaneous receipts.
       (b) When the concessioner is required to make capital 
     improvements to other than Government-owned facilities 
     occupied by the concessioner in accordance with a concession 
     service agreement, the concessioner shall have the option to 
     control and expend such funds directly.
       (c) Amounts Received Relating to Privilege of Providing 
     Concession Services and Rental of Government-Owned 
     Facilities.--
       (1) Deposit into treasury.--The Secretary concerned shall 
     deposit in the Treasury of the United States as miscellaneous 
     receipts all funds not deposited in concession improvement 
     accounts or funds for capital improvements specified in (b) 
     above, including specifically amounts received for a fiscal 
     year for the privilege of providing concession services and 
     the rental of Government-owned facilities, except that of the 
     amount of fees paid by vessel operators for the privilege of 
     entering into Glacier Bay, Alaska, 50 percent of such fees 
     for the 5-year period beginning on the first full fiscal year 
     following the date of enactment of this subchapter shall be 
     deposited into a special account and that such funds shall be 
     available without further appropriation and may only be used 
     to conduct research to quantify any effect of such vessel 
     activity on wildlife and other natural resource values of 
     Glacier Bay National Park. For the National Park Service such 
     deposits into the Treasury shall total not less than the 
     amounts specified in the table in paragraph (2). For the 
     other agencies covered under this subchapter, the Secretary 
     concerned shall develop a schedule of anticipated receipts to 
     be deposited to the Treasury and submit such schedule to the 
     appropriate Congressional committees not later than 18 months 
     after the date of enactment of this Act. Nothing in this 
     chapter shall be construed to modify any provision of law 
     relating to sharing of Federal receipts with any other level 
     of Government.
       (2) Deposit into concession improvement accounts.--The 
     table referred to in paragraph (1), expressed by fiscal year, 
     is as follows:

                         National Park Service

``Fiscal year:                                                  Amount:
  1997......................................................$15,800,000
  1998......................................................$21,100,000
  1999......................................................$26,700,000
  2000......................................................$32,300,000
  2001......................................................$38,200,000
  2002.....................................................$44,400,000.

       (d) Beginning in fiscal year 1998, the Inspector General of 
     the Department concerned shall conduct a biennial audit of 
     concession fees generated pursuant to this chapter. The 
     Inspector General shall make a determination as to whether 
     concession fees are being collected and expended in 
     accordance with this chapter and shall submit copies of each 
     audit to the Committee on Resources of the House of 
     Representatives and the Committee on Energy and Natural 
     Resources of the Senate.

     SEC. 5471. REGULATIONS.

       The Secretary concerned shall promulgate regulations to 
     implement this chapter no later than 2 years after the date 
     of enactment of this Act. Subsequent to the date of enactment 
     of this chapter, no new concession authorization may be 
     issued, nor may any existing concession authorization be 
     amended or extended, unless such authorization, amendment, or 
     extension is fully consistent with sections 5465, 5469(c), 
     and 5470.

     SEC. 5472. RELATIONSHIP TO OTHER LAWS.

       (a) Repeals.--
       (1) The Act entitled ``An Act relating to the establishment 
     of concession policies in the areas administered by the 
     National Park Service and for other purposes'' (16 U.S.C. 20-
     20g) approved October 9, 1965, is repealed.
       (b) Savings.--
       (1) In general.--The repeal of any provision, the 
     superseding of any provision, and the amendment of any 
     provision, of an Act referred to in subsection (a) shall not 
     affect the validity of any authorizations entered into under 
     any such Act. The provisions of this chapter shall apply to 
     any such authorizations, except to the extent such provisions 
     are inconsistent with the express terms and conditions of 
     such authorizations.
       (2) Right of renewal.--The right of renewal explicitly 
     provided for by any concession contract under any such 
     provision shall be preserved for a single renewal of a 
     contract following the enactment of, or concession 
     authorization under, this chapter.
       (3) Value of capital improvements or possessory interest.--
     Nothing in this chapter shall be construed to change the 
     value as of the 

[[Page H 13424]]
     date of enactment of this chapter for existing capital improvements or 
     possessory interest as identified in concession contracts 
     entered into before the date of enactment of this Act. 
     Subsequent to enactment of this chapter, the increase in 
     value for any possessory interest established under any 
     concession contract in effect on the date of enactment of 
     this chapter shall be as provided for in this chapter unless 
     otherwise specifically provided in the contract.
       (4) Anilca.--Nothing in this chapter shall be construed to 
     amend, supersede or otherwise affect any provision of the 
     Alaska National Interest Lands Conservation Act (16 U.S.C. 
     3101 et seq.) relating to revenue-producing visitor services.
       (5) Procedures for considering existing concessionaires in 
     reissuance of contracts.--In the case of a concession 
     contract which has expired prior to the date of the enactment 
     of this Act, or within 5 years after the date of the 
     enactment of this Act, an incumbent concessioner shall be 
     entitled to a one-time bonus of five percent of the maximum 
     points available in the reissuance of a previous concession 
     authorization. For any concession contract entered into prior 
     to the date of enactment of this Act, which is projected to 
     terminate 5 years or later after the date of enactment of 
     this Act, any concessioner shall be entitled to a performance 
     incentive in accordance with this chapter. The concessioner 
     shall be entitled to an evaluation of ``good'' for each year 
     in which the Secretary concerned does not complete an 
     evaluation as provided for in this chapter.
          TITLE VI--FEDERAL RETIREMENT AND RELATED PROVISIONS
        Subtitle A--Civil Service and Postal Service Provisions

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

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

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

       (a) Civil Service Retirement System.--
       (1) Deductions.--The first sentence of section 8334(a)(1) 
     of title 5, United States Code, is amended to read as 
     follows: ``The employing agency shall deduct and withhold 
     from the basic pay of an employee, Member, Congressional 
     employee, law enforcement officer, firefighter, bankruptcy 
     judge, judge of the United States Court of Appeals for the 
     Armed Forces, United States magistrate, or Claims Court 
     judge, as the case may be, the percentage of basic pay 
     applicable under subsection (c).''.
       (2) Agency contributions.--
       (A) Increase in agency 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 or the Washington Metropolitan Airport 
     Authority) shall be 8.51 percent of the basic pay of an 
     employee, Congressional employee, and a Member of Congress, 
     9.01 percent of the basic pay of a law enforcement officer, a 
     member of the Capitol Police, and a firefighter, and 8.51 
     percent of the basic pay of a Claims Court judge, a United 
     States magistrate, a judge of the United States Court of 
     Appeals for the Armed Services, and a bankruptcy judge, as 
     the case may be; and
       ``(II) for the United States Postal Service and the 
     Washington Metropolitan Airport Authority shall be 7 percent 
     of the basic pay of an employee and 7.5 percent of the basic 
     pay of a law enforcement officer or firefighter.''.
       (B) No reduction in agency contributions by the postal 
     service.--Agency contributions by the United States Postal 
     Service under section 8348(h) of title 5, United States 
     Code--
       (i) shall not be reduced as a result of the amendments made 
     under paragraph (3) of this subsection; and
       (ii) shall be computed as 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.       
                                  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.'';                 
                                                                        

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


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

     and inserting in lieu thereof the following:


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

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


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

     and inserting in lieu thereof the following:


                                                                        

[[Page H 13425]]
                                 ``8........  October 1, 1987, to       
                                               December 31, 1995.       
                                  7.25......  January 1, 1996, to       
                                               December 31, 1996.       
                                  7.4.......  January 1, 1997, to       
                                               December 31, 1997.       
                                  7.5.......  January 1, 1998, to       
                                               December 31, 2002.       
                                  7.........  After December 31,        
                                               2002.'';                 
                                                                        


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



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

     and inserting in lieu thereof the following:


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

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


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

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


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

       (B) Military service.--Section 8422(e) of title 5, United 
     States Code, is amended--
       (i) in paragraph (1)(A) by inserting ``and subject to 
     paragraph (6),'' after ``Except as provided in subparagraph 
     (B),''; and
       (ii) by adding at the end thereof the following:
       ``(6) The percentage of basic pay under section 204 of 
     title 37 payable under paragraph (1), with respect to any 
     period of military service performed during--
       ``(A) January 1, 1996, through December 31, 1996, shall be 
     3.25 percent;
       ``(B) January 1, 1997, through December 31, 1997, shall be 
     3.4 percent; and
       ``(C) January 1, 1998, through December 31, 2002, shall be 
     3.5 percent.''.
       (C) Volunteer service.--Section 8422(f) of title 5, United 
     States Code, is amended--
       (i) in paragraph (1) by adding at the end thereof the 
     following: ``This paragraph shall be subject to paragraph 
     (4).''; and
       (ii) by adding at the end the following:
       ``(4) The percentage of the readjustment allowance or 
     stipend (as the case may be) payable under paragraph (1), 
     with respect to any period of volunteer service performed 
     during--
       ``(A) January 1, 1996, through December 31, 1996, shall be 
     3.25 percent;
       ``(B) January 1, 1997, through December 31, 1997, shall 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. 6003. FEDERAL RETIREMENT PROVISIONS RELATING TO MEMBERS 
                   OF CONGRESS AND CONGRESSIONAL EMPLOYEES.

       (a) Relating to the Years of Service as a Member of 
     Congress and Congressional Employees for Purposes of 
     Computing an Annuity.--
       (1) CSRS.--Section 8339 of title 5, United States Code, is 
     amended--
       (A) in subsection (a) 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) Accrual Rate for Member and Congressional Employee 
     Service Performed but not Vested Before Effective Date.--
       (1) Application.--This subsection shall apply to an 
     individual who--
       (A) is a Member of Congress or Congressional employee on 
     December 31, 1995;
       (B) has performed less than 5 years of service as a Member 
     of Congress or Congressional employee on December 31, 1995; 
     and
       (C) after December 31, 1995, completes 5 years of service 
     as a Member of Congress or Congressional employee, that 
     includes a period of service performed as a Member of 
     Congress or Congressional employee before January 1, 1996.
       (2) Computation of annuity.-- In computing the annuity of 
     an individual described under paragraph (1)--
       (A) any period of service as a Member of Congress or 
     Congressional employee performed before January 1, 1996, 
     shall be computed under section 8339 or 8415 of title 5, 
     United States Code (as though the amendments under subsection 
     (a) of this section were not enacted); and
       (B) the 5 year service requirement under subsections (b) 
     and (c) of section 8339 or 8415 of 

[[Page H 13426]]
     such title (as in effect before the date of enactment of this Act) 
     shall be deemed fulfilled.
       (c) Capitol Police.--Section 8339(q) of title 5, United 
     States Code, is amended by striking out ``with subsection 
     (b), except that, in the case of a member who retires under 
     section 8335(d) or 8336(m), and who meets the requirements of 
     subsection (b)(2),'' and inserting in lieu thereof ``with 
     subsection (a), except that in the case of a member who 
     retires under section 8335(d) or 8336(m), and who has 
     deductions withheld from his pay or has made deposit covering 
     his last 5 years of civilian service,''.
       (d) Administrative Regulations.--The Office of Personnel 
     Management, in consultation with the Secretary of the Senate 
     and the Clerk of the House of Representatives, may prescribe 
     regulations to carry out the provisions of this section and 
     the amendments made by this section for applicable employees 
     and Members of Congress.
       (e) Effective Dates.--
       (1) Years of service; annuity computation.--
       (A) Service after effective date.--The amendments made by 
     subsection (a) shall take effect on January 1, 1996, and 
     shall apply only with respect to the computation of an 
     annuity relating to--
       (i) the service of a Member of Congress as a Member or as a 
     Congressional employee performed on or after January 1, 1996; 
     and
       (ii) the service of a Congressional employee as a 
     Congressional employee performed on or after January 1, 1996.
       (B) Service before effective date.--An annuity shall be 
     computed as though the amendments made under subsection (a) 
     had not been enacted with respect to--
       (i) the service of a Member of Congress as a Member or a 
     Congressional employee or military service performed before 
     January 1, 1996; and
       (ii) the service of a Congressional employee as a 
     Congressional employee or military service performed before 
     January 1, 1996.
       (C) Alternative effective date relating to members of 
     congress.--If a court of competent jurisdiction makes a final 
     determination that a provision of this paragraph violates the 
     27th amendment of the United States Constitution, the 
     effective date and application dates relating to Members of 
     Congress shall be January 1, 1997.
       (2) Administrative provisions.--The provisions of 
     subsections (b), (c), and (d) shall take effect on the date 
     of the enactment of this Act.

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

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

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

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

     SEC. 6011. PATENT AND TRADEMARK FEES.

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

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

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

     SEC. 6022. SALE OF AIR RIGHTS.

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

     SEC. 6023. AVAILABILITY OF SURPLUS PROPERTY FOR HOMELESS 
                   ASSISTANCE.

       (a) Repeal.--(1) Title V of the Stewart B. McKinney 
     Homeless Assistance Act (42 U.S.C. 11411 et seq.) is 
     repealed.
       (2) The table of contents in section 101(b) of that Act is 
     amended by striking the items relating to title V.
       (3) This subsection shall be effective October 1, 1995.
       (b) Authority To Transfer Surplus Real Property for Housing 
     Use.--Section 203 of the Federal Property and Administrative 
     Services Act of 1949 (40 U.S.C. 484) is amended by adding at 
     the end the following:
       ``(r) Under such regulations as the Administrator may 
     prescribe, and in consultation with appropriate local 
     governmental authorities, the Administrator may transfer to 
     any nonprofit organization which exists for the primary 
     purpose of providing housing or housing assistance for 
     homeless individuals or families, such surplus real property, 
     including buildings, fixtures, and equipment situated 
     thereon, as is needed for housing use.
       ``(s)(1) Under such regulations as the Administrator may 
     prescribe, and in consultation with appropriate local 
     governmental authorities, the Administrator may transfer to 
     any non-profit organization which exists for the primary 
     purpose of providing housing or housing assistance for low-
     income individuals or families such surplus real property, 
     including buildings, fixtures, and equipment situated 
     thereon, as is needed for housing use.
       ``(2) In making transfers under this subsection, the 
     Administrator shall take such actions, which may include 
     grant agreements with an organization receiving a grant, as 
     may be necessary to ensure that--
       ``(A) assistance provided under this subsection is used to 
     facilitate and encourage homeownership opportunities through 
     the construction of self-help housing, under terms which 
     require that the person receiving the assistance contribute a 
     significant amount of labor toward the construction; and
       ``(B) the dwellings constructed with property transferred 
     under this subsection shall be quality dwellings that comply 
     with local building and safety codes and standards and shall 
     be available at prices below the prevailing market prices.''.
           TITLE VII--TRANSFORMATION OF THE MEDICAID PROGRAM

     SEC. 7000. SHORT TITLE OF TITLE; TABLE OF CONTENTS OF TITLE.

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

Sec. 7000. Short title of title; table of contents of title.
Sec. 7001. Transformation of medicaid program.
Sec. 7002. Termination of current program and transition.
Sec. 7003. Medicare/MediGrant integration demonstration project.

[[Page H 13427]]


     SEC. 7001. TRANSFORMATION OF MEDICAID PROGRAM.

       The Social Security Act is amended by adding at the end the 
     following new title:

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


                      ``table of contents of title

``Sec. 2100. Purpose; State MediGrant 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 MediGrant plan development.
``Sec. 2105. Consultation in MediGrant plan development.

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

``Sec. 2111. Eligibility and benefits.
``Sec. 2112. Set-asides of funds.
``Sec. 2113. Premiums and cost-sharing.
``Sec. 2114. Description of process for developing capitation payment 
              rates.
``Sec. 2115. Preventing spousal impoverishment.
``Sec. 2116. State flexibility.

                      ``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.

                ``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 MediGrant fraud control units.
``Sec. 2135. Recoveries from third parties and others.
``Sec. 2136. Assignment of rights of payment.
``Sec. 2137. Quality assurance requirements for nursing facilities.
``Sec. 2138. Other provisions promoting program integrity.

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

``Sec. 2151. Submittal and approval of MediGrant plans.
``Sec. 2152. Submittal and approval of plan amendments.
``Sec. 2153. Process for State withdrawal from program.
``Sec. 2154. Sanctions for noncompliance.
``Sec. 2155. Secretarial authority.

                      ``Part F--General Provisions

``Sec. 2171. Definitions.
``Sec. 2172. Treatment of territories.
``Sec. 2173. Description of treatment of Indian Health Service 
              facilities.
``Sec. 2174. Application of certain general provisions.
``Sec. 2175. MediGrant master drug rebate agreements.

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

       ``(a) Purpose.--The purpose of this title is to provide 
     block grants 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 `MediGrant 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 MediGrant 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 
     under section 2153, or
       ``(3) the Secretary finds substantial noncompliance of the 
     plan with the requirements of this title under section 2154.
       ``(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 MediGrant plan shall include a 
     description of the strategic objectives 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 MediGrant 
     plan shall include strategic objectives and performance goals 
     relating to rates of childhood immunizations and reductions 
     in infant mortality and morbidity.
       ``(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 MediGrant 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 
     MediGrant plan; and
       ``(2) the MediGrant 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 MediGrant 
     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 MediGrant plan during the fiscal year 
     (and during any portions of fiscal year 1996 during which the 
     MediGrant 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 
     (d) 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 MediGrant 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 MediGrant 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 MediGrant plan, and
       ``(ii) the total and average number of eligible individuals 
     under the MediGrant 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 MediGrant 
     plan during the year (and during any portions of fiscal year 
     1996 during which the MediGrant 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 MediGrant 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 MediGrant plan.
       ``(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) A brief description of each interstate compact (if 
     any) the State has entered into with other States with 
     respect to activities under this title.

[[Page H 13428]]

       ``(D) General citations to the State statutes and 
     administrative rules governing the State's activities under 
     this title.
       ``(c) Description of Categories.--In this section:
       ``(1) General categories of eligible individuals.--Each of 
     the following is a general category of eligible individuals:
       ``(A) Pregnant women.
       ``(B) Children.
       ``(C) Blind or disabled adults who are not elderly 
     individuals.
       ``(D) Elderly individuals.
       ``(E) Other adults.
       ``(2) Categories of health care items and services.--The 
     health care items and services described in each paragraph of 
     section 2171(a) 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 MediGrant plan under this 
     title.
       ``(b) Independent.--Each such evaluation with respect to an 
     activity under the MediGrant plan shall be conducted by an 
     entity that is neither responsible under State law for the 
     submission of the State MediGrant 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 MEDIGRANT PLAN 
                   DEVELOPMENT.

       ``Each MediGrant 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 MEDIGRANT PLAN DEVELOPMENT.

       ``(a) Public Notice Process.--Before submitting a MediGrant 
     plan or a plan amendment described in subsection (c) to the 
     Secretary under part E, a State shall provide--
       ``(1) public notice respecting the submittal of the 
     proposed plan or amendment, including a general description 
     of the plan or amendment,
       ``(2) a means for the public to inspect or obtain a copy 
     (at reasonable charge) of the proposed plan or amendment,
       ``(3) an opportunity for submittal and consideration of 
     public comments on the proposed plan or amendment, and
       ``(4) for consultation with one or more advisory committees 
     established and maintained by the State.
     The previous sentence shall not apply to a revision of a 
     MediGrant plan (or revision of an amendment to a plan) made 
     by a State under section 2154(c)(1) or to a plan amendment 
     withdrawal described in section 2154(c)(4).
       ``(b) Contents of Notice.--A notice under subsection (a)(1) 
     for a proposed plan or amendment shall include a description 
     of--
       ``(1) the general purpose of the proposed plan or amendment 
     (including applicable effective dates),
       ``(2) where the public may inspect the proposed plan or 
     amendment,
       ``(3) how the public may obtain a copy of the proposed plan 
     or amendment and the applicable charge (if any) for the copy, 
     and
       ``(4) how the public may submit comments on the proposed 
     plan or amendment, including any deadlines applicable to 
     consideration of such comments.
       ``(c) Amendments Described.--An amendment to a MediGrant 
     plan described in this subsection is an amendment which makes 
     a material and substantial change in eligibility under the 
     MediGrant plan or the benefits provided under the plan.
       ``(d) Publication.--Notices under this section may be 
     published (as selected by the 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.
       ``(e) Comparable Process.--A separate notice, or notices, 
     shall not be required under this section for a State if 
     notice of the MediGrant 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 section.

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

     ``SEC. 2111. ELIGIBILITY AND BENEFITS.

       ``(a) Description of General Eligibility and Benefits.--
     Each MediGrant plan shall include a description (consistent 
     with this title) of the following:
       ``(1) General eligibility standards.--The general 
     eligibility standards of the plan for eligible low-income 
     individuals (including individuals described in subsection 
     (b)), 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 and 
     disposition of resources), 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 who are children 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, a description of the 
     extent to which provisions are made for expenditures for 
     items and services furnished by such hospitals and covered 
     under the MediGrant plan.
       ``(B) Hospitals described.--A hospital described in this 
     subparagraph is a short-term acute care general hospital or a 
     children's hospital, the low-income utilization rate of which 
     exceeds the lesser of--
       ``(i) 1 standard deviation above the mean low-income 
     utilization rate for hospitals receiving payments under a 
     MediGrant plan in the State in which such hospital is 
     located, or
       ``(ii) 1\1/4\ standard deviations above the mean low-income 
     utilization rate for hospitals receiving such payments in the 
     50 States and the District of Columbia.
       ``(C) Low-income utilization rate.--For purposes of 
     subparagraph (B), 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 MediGrant 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.
       ``(D) Patient days.--For purposes of subparagraph (C), 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.
       ``(b) Mandatory Coverage.--Each MediGrant plan shall 
     provide for making medical assistance available (subject to 
     the eligibility standards described under the plan pursuant 
     to subsection (a)(1) and State flexibility of benefits under 
     section 2116) to--
       ``(1) any pregnant woman or child under the age of 13 whose 
     family income does not exceed the poverty line applicable to 
     a family of the size involved, and
       ``(2) any individual who is disabled, as defined by the 
     State.
       ``(c) Immunizations for Children.--The MediGrant plan shall 
     provide medical assistance for immunizations for children 
     eligible for any medical assistance under the MediGrant 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 MediGrant 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 MediGrant plan may not deny or exclude coverage of 
     any item or service for an eligible individual for benefits 
     under the MediGrant 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 MediGrant 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 
     MediGrant 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) Family Responsibility.--A MediGrant plan may not 
     require an adult child with a family income below the State 
     median income (as determined by the State) applicable to a 
     family of the size involved to contribute to the cost of 
     covered nursing facility services and other long-term care 
     services for the child's parent under the plan.
       ``(g) Solvency Standards for Capitated Health Care 
     Organizations.--
       ``(1) In general.--A State may not contract with a 
     capitated health care organization, as defined in section 
     2114(c)(1), for the provision of medical assistance under a 
     MediGrant plan under which the organization is--

[[Page H 13429]]

       ``(A) at full financial risk, as defined by the State, 
     unless the organization meets solvency standards established 
     by the State for private health maintenance organizations, or
       ``(B) is not at such risk, unless the organization meets 
     solvency standards that are established under the MediGrant 
     plan.
       ``(2) Treatment of public entities.--Paragraph (1) shall 
     not apply to an organization that is a public entity or if 
     the solvency of such organization is guaranteed by the State.
       ``(3) Transition.--In the case of a capitated health care 
     organization that as of the date of the enactment of this 
     title has entered into a contract with a State for the 
     provision of medical assistance under title XIX under which 
     the organization assumes full financial risk and is receiving 
     capitation payments, paragraph (1) shall not apply to such 
     organization until 3 years after the date of the enactment of 
     this title.

     ``SEC. 2112. SET-ASIDES OF FUNDS.

       ``(a) For Targeted Low-Income Families.--
       ``(1) In general.--Subject to subsection (f), a MediGrant 
     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 
     percentage specified in paragraph (2) of the total funds 
     expended under the plan for all medical assistance for the 
     fiscal year.
       ``(2) Minimum low-income-family percentage.--The minimum 
     low-income-family percentage specified in this paragraph for 
     a State is equal to 85 percent of the average percentage of 
     the expenditures under title XIX for medical assistance in 
     the State during Federal fiscal years 1992 through 1994 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.--In 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 (f)--
       ``(A) General set-aside.--A MediGrant plan shall provide 
     that the amount of funds expended under the plan for medical 
     assistance for eligible low-income elderly individuals for a 
     fiscal year shall be 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 
     MediGrant 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 MediGrant plan shall 
     provide priority for such 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 average percentage of the 
     expenditures under title XIX for medical assistance in the 
     State during Federal fiscal years 1992 through 1994 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.--In 
     this subsection, the term `targeted low-income elderly 
     individual' means an elderly individual whose family 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 (f), a MediGrant 
     plan shall provide that the percentage of funds expended 
     under the plan for medical assistance for eligible low-income 
     individuals who are not elderly individuals and who 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 percentage specified in paragraph 
     (2) of the total funds expended under the plan for medical 
     assistance for the fiscal year.
       ``(2) Minimum low-income-disabled percentage.--The minimum 
     low-income-disabled percentage specified in this paragraph 
     for a State is equal to 85 percent of the average percentage 
     of the expenditures under title XIX for medical assistance in 
     the State during Federal fiscal years 1992 through 1994 which 
     was 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.
       ``(d) For Services Provided at Federally-Qualified Health 
     Centers and Rural Health Clinics.--Subject to subsection (f), 
     a MediGrant plan shall provide that the amount of funds 
     expended under the plan for medical assistance for services 
     provided at rural health clinics (as defined in section 
     1861(aa)(2)) and Federally-qualified health centers (as 
     defined in section 1861(aa)(4)), for eligible low-income 
     individuals for a fiscal year is not less than 85 percent of 
     the average annual expenditures under title XIX for medical 
     assistance in the State during Federal fiscal years 1992 
     through 1994 which were attributable to expenditures for 
     medical assistance for rural health clinic services and 
     Federally-qualified health center services (as defined in 
     section 1905(l)).
       ``(e) 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 be expended 
     under the MediGrant 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 MediGrant plan.
       ``(2) Medically-related services defined.--In 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) (relating to the definition of medical 
     assistance).
       ``(f) Exceptions to Minimum Set-Asides.--
       ``(1) Alternative minimum set-asides.--
       ``(A) In general.--A State may provide in its MediGrant 
     plan (through an amendment to the plan) for a lower 
     percentage of expenditures than the minimum percentages 
     specified in any (or all) of paragraphs (2) of subsections 
     (a), (b), (c), and (d) if the State determines (and certifies 
     to the Secretary) that--
       ``(i) the health care needs of the low-income populations 
     described in paragraph (1) of the subsections (a), (b), (c), 
     or (d) who are eligible for medical assistance under the plan 
     during the previous fiscal year (or medicare premium 
     assistance needs described in subsection (b)(1)(B)) can be 
     reasonably met without the expenditure of the percentages 
     otherwise required to be expended,
       ``(ii) the performance goals established under section 2101 
     relating to the respective population can reasonably be met 
     with the expenditure of such lower percentage of funds, and
       ``(iii) in the case of subsection (d) with respect to rural 
     health clinic services and Federally-qualified health center 
     services, the health care needs of eligible low-income 
     individuals residing in medically underserved rural areas can 
     reasonably be met without the level of expenditure for such 
     services otherwise required and the performance goals 
     established under section 2101 relating to such individuals 
     can reasonably be met with such lower level of expenditures.
       ``(B) Period of application.--The determination and 
     certification under subparagraph (A) shall be made for such 
     period as a State may request, but may not be made for a 
     period of more than 3 consecutive Federal fiscal years 
     (beginning with the first fiscal year for which the lower 
     percentage is sought). A new determination and certification 
     must be made under such clause for any subsequent period.
       ``(C) No exception permitted before fiscal year 1998.--This 
     paragraph may not apply with respect to the percentages 
     described in paragraphs (2) of subsections (a), (b), and (c) 
     for a fiscal year before fiscal year 1998.
       ``(2) Independent certification of compliance with goals.--
       ``(A) In general.--For purposes of section 2151(c), a 
     MediGrant plan shall not be considered to be in substantial 
     violation of the requirements of this section if the amount 
     of actual State expenditures specified in any (or all) of 
     paragraphs (1) of subsections (a), (b), (c), and (d) is lower 
     than the minimum percentages specified in any (or all) of 
     paragraphs (2) of such subsections if an independent actuary 
     determines and certifies to the State that the MediGrant plan 
     is reasonably designed to result in a level of expenditures 
     which is consistent with the requirements of such 
     subsections.
       ``(B) Limit on variation.--Subparagraph (A) shall not apply 
     in the case of a MediGrant plan for which the actual State 
     expenditures described in any (or all) of paragraphs (1) of 
     subsections (a), (b), (c), and (d) are less than 95 percent 
     of the expenditures which would be made if the amount of 
     State expenditures specified in any (or all) of such 
     paragraphs was equal to the applicable minimum percentage 
     specified in any (or all) of paragraphs (2) of such 
     subsections.
       ``(g) Computations.--States shall calculate the minimum 
     percentages under paragraphs (2) 

[[Page H 13430]]
     of subsections (a), (b), (c), and (d) in a reasonable manner consistent 
     with reports submitted to the Secretary for the fiscal years 
     involved and medical assistance attributable to the exception 
     provided under section 1903(v)(2) shall not be considered to 
     be expenditures for medical assistance.
       ``(h) Benefits Included for Purposes of Computing Set-
     Asides.--In 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,
       ``(2) includes medical assistance for medicare cost-sharing 
     only to the extent such assistance was required to be 
     provided under section 1902(a)(10)(E), and
       ``(3) does not include medical assistance 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 MediGrant 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 pregnant woman or a 
     child who is a member 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 MediGrant 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 
     MediGrant 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 MediGrant 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 programs, drug or alcohol abuse 
     treatment, counseling programs, or other programs promoting 
     personal responsibility.
       ``(d) Cost-Sharing Defined.--In 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 MediGrant 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 MediGrant 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 MediGrant 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).
       ``(b) Public Notice and Comment.--Under the MediGrant 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) 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.--In 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.
       ``(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. PREVENTING SPOUSAL IMPOVERISHMENT.

       ``(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) 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.
       ``(3) No application in commonwealths and territories.--
     This section shall only apply to a State that is one of the 
     50 States or the District of Columbia.
       ``(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 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

[[Page H 13431]]

       ``(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 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 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 
     medical assistance 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 
     medical assistance).
       ``(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 
     medical assistance 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 medical assistance under this 
     title, no resources of the community spouse shall be deemed 
     available to the institutionalized spouse.
       ``(5) Resources defined.--In 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, 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)(C).
       ``(B) A community spouse monthly income allowance (as 
     defined in paragraph (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).
     In 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.
       ``(2) Personal needs allowance.--
       ``(A) In general.--The MediGrant plan must provide that, in 
     the case of an institutionalized individual or couple 
     described in subparagraph (B), in determining the amount of 
     the individual's or couple's income to be applied monthly to 
     payment for the cost of care in an institution, there shall 
     be deducted from the monthly income (in addition to other 
     allowances otherwise provided under the plan) a monthly 
     personal needs 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 (C).
       ``(B) Institutionalized individual or couple defined.--In 
     this paragraph, the term `institutionalized individual or 
     couple' means an individual or married couple--
       ``(i) who is an inpatient (or who are inpatients) in a 
     medical institution or nursing facility for which payments 
     are made under this title throughout a month, and
       ``(ii) who is or are determined to be eligible for medical 
     assistance under the State MediGrant plan.
       ``(C) Minimum allowance.--The minimum monthly personal 
     needs allowance described in this subparagraph is $40 for an 
     institutionalized individual and $80 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.--In 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 (B), is equal to or exceeds--
       ``(i) 150 percent 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 
     (4)).
     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) 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.--In 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) Treatment of incurred expenses.--With respect to the 
     post-eligibility treatment of income under this section, 
     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 State MediGrant plan 
     under this title, subject to reasonable limits the State may 
     establish on the amount of these expenses.
       ``(e) Notice and Hearing.--
       ``(1) Notice.--Upon--
       ``(A) a determination of eligibility for medical assistance 
     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 hearing under the MediGrant plan respecting 
     ownership or availability of income or resources, and the 
     determination of the community spouse monthly income or 
     resource allowance.
       ``(2) Results of hearing.--
       ``(A) Revision of minimum monthly maintenance needs 
     allowance.--If either such spouse establishes in a hearing 
     under this subsection 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.
       ``(B) Revision of community spouse resource allowance.--If 
     either such spouse establishes in such a hearing 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, without 
     regard to any other provision of the MediGrant plan to the 
     contrary, transfer an 

[[Page H 13432]]
     amount equal to the community spouse resource allowance (as defined in 
     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 defined.--In 
     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 
     MediGrant plan,
       ``(ii) the lesser of (I) the spousal share computed under 
     subsection (c)(1), or (II) $60,000 (subject to adjustment 
     under subsection (g)), or
       ``(iii) the amount established under subsection (e)(2);
     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.--In this section:
       ``(1) Institutionalized spouse.--The term 
     `institutionalized spouse' means an individual--
       ``(A)(i) who is in a medical institution or nursing 
     facility, or
       ``(ii) at the option of the State (I) who would be eligible 
     under the MediGrant plan under this title if such individual 
     was in a medical institution, (II) with respect to whom there 
     has been a determination that but for the provision of home 
     or community-based services such individual would require the 
     level of care provided in a hospital, nursing facility or 
     intermediate care facility for the mentally retarded the cost 
     of which could be reimbursed under the plan, and (III) who 
     will receive home or community-based services pursuant the 
     plan; and
       ``(B) is married to a spouse who is not in a medical 
     institution or nursing facility;
     but does not include any such individual who is not likely to 
     meet the requirements of subparagraph (A) for at least 30 
     consecutive days.
       ``(2) Community spouse.--The term `community spouse' means 
     the spouse of an institutionalized spouse.

     ``SEC. 2116. STATE FLEXIBILITY.

       ``(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, so 
     long as medical assistance is made available in all such 
     areas or subdivisions,
       ``(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.

                      ``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. 
     This clause shall be applied separately with respect to the 
     portion of the obligation allotment that is attributable to 
     the supplemental outlay allotment under subsection (f).
       ``(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.
       ``(C) No effect on prior year obligations.--Subparagraph 
     (A) shall not apply to or affect obligations for a fiscal 
     year prior to fiscal year 1996.
       ``(D) Obligation.--For purposes of this section, the 
     Secretary's establishment of an estimate under section 
     2123(b) of the amount a State is entitled to receive for a 
     quarter (taking into account any adjustments described in 
     such subsection) shall be treated as the obligation of such 
     amount for the State as of the first day of the quarter.
       ``(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 0.950,
       ``(ii) for fiscal year 1997 is 0.986, and
       ``(iii) for a subsequent fiscal year is 0.998.
       ``(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) $24,624,000,000.
       ``(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 MediGrant 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.--In 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.

[[Page H 13433]]

       ``(E) Transitional correction for fiscal year 1997.--
       ``(i) In general.--The obligation amount for fiscal year 
     1997 for any State described in clause (ii) shall be 
     increased by 90 percent of the amount by which 90 percent of 
     the amount described in clause (ii)(I) exceeds the amount 
     described in clause (ii)(II), divided by the payout 
     adjustment factor specified in paragraph (3)(B) for fiscal 
     year 1996. The increase under this clause shall be paid to a 
     State in the first quarter of fiscal year 1997.
       ``(ii) States described.--A State described in this clause 
     is a State for which--

       ``(I) the amount of the pre-enactment-obligation outlays 
     (as established for such State under subparagraph (C)(ii)), 
     exceeded
       ``(II) the outlays of the Federal Government during fiscal 
     year 1996 that are attributable to obligations that were 
     incurred under title XIX with respect to the State before the 
     date of the enactment of this title, but for which payments 
     to States had not been made as of such date of enactment,

     by at least 10 percent of the amount described in subclause 
     (I).
       ``(b) Pool of Available Funds.--
       ``(1) In general.--For purposes of this section, the `pool 
     amount' under this subsection for--
       ``(A) fiscal year 1996 is $96,386,037,894,
       ``(B) fiscal year 1997 is $103,233,603,164,
       ``(C) fiscal year 1998 is $107,907,625,827,
       ``(D) fiscal year 1999 is $112,644,040,408,
       ``(E) fiscal year 2000 is $117,359,685,046,
       ``(F) fiscal year 2001 is $122,284,072,525,
       ``(G) fiscal year 2002 is $127,418,239,580, and
       ``(H) each subsequent fiscal year is the pool amount under 
     this paragraph for the previous fiscal year increased by the 
     lesser of 4.2 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 medigrant growth percentage.--For purposes 
     of this section for a fiscal year (beginning with fiscal year 
     1997), the `national MediGrant 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.--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 is, 
     subject to paragraph (4), determined in accordance with the 
     following table:

Outlay allotment (in dollars):
1,517,652,207..........................................................
204,933,213............................................................
1,370,781,297..........................................................
1,011,457,933..........................................................
8,946,838,461..........................................................
757,492,679............................................................
1,463,011,635..........................................................
212,327,763............................................................
501,412,091 Columbia...................................................
3,715,624,180..........................................................
2,426,320,602..........................................................
323,124,375............................................................
278,329,686............................................................
3,467,274,342..........................................................
1,952,467,267..........................................................
835,235,895............................................................
713,700,869............................................................
1,577,828,832..........................................................
2,622,000,000..........................................................
694,220,790............................................................
1,369,699,847..........................................................
2,870,346,862..........................................................
3,465,182,886..........................................................
1,793,776,356..........................................................
1,261,781,330..........................................................
1,849,248,945..........................................................
312,212,472............................................................
463,900,417............................................................
257,896,453............................................................
360,000,000re..........................................................
2,854,621,241..........................................................
634,756,945............................................................
12,901,793,038.........................................................
2,587,883,809a.........................................................
241,168,563a...........................................................
4,034,049,690..........................................................
911,198,775............................................................
1,088,670,440..........................................................
4,454,423,400..........................................................
545,686,262d...........................................................
1,621,021,815a.........................................................
262,804,959a...........................................................
2,519,934,251..........................................................
6,351,909,343..........................................................
484,274,254............................................................
248,158,729............................................................
1,144,962,509..........................................................
1,763,460,996..........................................................
1,156,813,157..........................................................
1,709,500,642..........................................................
132,925,390............................................................
       ``(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 one 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 old Federal medical 
     assistance percentage (as defined in section 2122(d)) for the 
     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 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) Floors.--Subject to the ceiling established under 
     subparagraph (B), in no case shall the amount of the State 
     outlay allotment under paragraph (2) for a fiscal year be 
     less than the greatest of the following:
       ``(i) In general.--Beginning with fiscal year 1998, 0.24 
     percent of the pool amount for the fiscal year.
       ``(ii) Floor based on previous year's outlay allotment.--
     Subject to clause (iii)--

       ``(I) Fiscal year 1997.--For fiscal year 1997, 103.5 
     percent of the amount of the State outlay allotment under 
     this subsection for fiscal year 1996.
       ``(II) Fiscal year 1998.--For fiscal year 1998, 103 percent 
     of the amount of the State outlay allotment under this 
     subsection for fiscal year 1997.
       ``(III) Subsequent fiscal years.--For a fiscal year after 
     1998, 102 percent of the amount of the State outlay allotment 
     under this subsection for the previous fiscal year.

       ``(iii) Floor based on outlay allotment growth rate in 
     first year.--Beginning with fiscal year 1998, in the case of 
     a State for which the outlay allotment under this subsection 
     for fiscal year 1997 exceeded its outlay allotment under this 
     subsection for the previous fiscal year by more than the 
     national MediGrant growth percentage for fiscal year 1997, 
     104 percent of the amount of the State outlay allotment under 
     this subsection for the previous fiscal year (or, if less, 
     beginning with fiscal year 2003, 95 percent of the national 
     MediGrant growth percentage for the year).
       ``(B) Ceilings.--
       ``(i) In general.--Subject to clause (ii), 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 for the preceding fiscal year, and
       ``(II) the applicable percent (specified in clause (ii) or 
     (iii)) for the fiscal year involved.

       ``(ii) General rule for applicable percent.--For purposes 
     of clause (i), subject to clause (iii), the `applicable 
     percent'--

       ``(I) for fiscal year 1997 is 109 percent, and
       ``(II) for a subsequent fiscal year is 105.33 percent.

       ``(iii) Special rule.--For a fiscal year after fiscal year 
     1997, in the case of a State (among the 50 States and the 
     District of Columbia) that is one of the 10 States with the 
     lowest Federal MediGrant spending per resident-in-poverty 
     rates (as determined under clause (iv)) for the fiscal year, 
     the `applicable percent' is 107 percent.
       ``(iv) Determination of federal medigrant spending per 
     resident-in-poverty rate.--For purposes of clause (iii), the 
     `Federal MediGrant spending per resident-in-poverty rate' for 
     a State for a fiscal year is equal to--

       ``(I) the State's outlay allotment under this subsection 
     for the previous fiscal year (determined without regard to 
     paragraph (4)), divided by
       ``(II) the average annual number of residents of the State 
     in poverty (as defined in subsection (d)(2)) with respect to 
     the fiscal year.

       ``(C) Special rule.--
       ``(i) In general.--Notwithstanding the preceding 
     subparagraphs of this paragraph, the State outlay allotment 
     for--

       ``(I) New Hampshire for each of the fiscal years 1997 
     through 2000, is $360,000,000,
       ``(II) Louisiana, subject to subclause (III), for each of 
     the fiscal years 1997 through 2000, is $2,622,000,000, and
       ``(III) Louisiana and Nebraska for fiscal year 1997, as 
     otherwise determined, shall be increased by $37,048,207 and 
     $106,132,408, respectively.
       ``(IV) Nevada for each of fiscal years 1996, 1997, and 
     1998, as otherwise determined, shall be increased by 
     $90,000,000.

       ``(ii) Exception.--A State described in subclause (I) or 
     (II) of clause (i) 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.
       ``(iii) Treatment of increase as supplemental allotment.--
     Any increase in an outlay allotment under clause (i)(III) or 
     (i)(IV) shall not be taken into account for purposes of 
     determining the scalar factor under paragraph (2) for fiscal 
     year 1997, any State outlay allotment for a fiscal year after 
     fiscal year 1997, the pool amount for a fiscal year after 
     fiscal year 1997, or determination of the national MediGrant 
     growth percentage for any fiscal year.
       ``(4) Election of alternative growth formula.--
       ``(A) Election.--In order to reduce variations in increases 
     in outlay allotments over time, any of the 50 States or the 
     District of Columbia may 

[[Page H 13434]]
     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 the State's outlay 
     allotment in fiscal year 1996 and for the increase 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 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.
       ``(5) Commonwealths and territories.--
       ``(A) In general.--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) (as in effect on the day before the date of the 
     enactment of this title) with respect to the Commonwealth or 
     territory for the fiscal year with respect to title XIX, if 
     the national MediGrant 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) (as so in effect).
       ``(B) Disregard of rounding requirements.--For purposes of 
     subparagraph (A), the rounding requirements under section 
     1108(c) shall not apply.
       ``(C) Limitation on total amount for fiscal year 1996.--
     Notwithstanding the provisions of subparagraph (A), the total 
     amount of the outlay allotments for the Commonwealths and 
     territories for fiscal year 1996 may not exceed $139,950,000.
       ``(d) State Aggregate Expenditure Need Determined.--
       ``(1) In general.--For purposes of subsection (c), the 
     `State 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 case mix index for such State or 
     District (as determined under paragraph (3)) for the most 
     recent fiscal year for which data are available, but in no 
     case less than 0.9 or greater than 1.15.
       ``(C) Input cost index.--The input cost index for the State 
     (as determined under paragraph (4)) for the most recent 
     fiscal year 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.--In 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 whose family income does not 
     exceed the poverty threshold (as such terms are defined by 
     the Office of Management and Budget and are generally 
     interpreted and applied by the Bureau of the Census for the 
     year involved).
       ``(3) Case mix index.--
       ``(A) In general.--In 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 projected per recipient expenditures with respect 
     to elderly individuals in such State or District for the 
     fiscal year (determined under subparagraph (B)),
       ``(II) the projected 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 projected 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) Projected per recipient expenditures for the 
     elderly.--For purposes of subparagraph (A)(i)(I), the 
     `projected 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 
     elderly individuals, 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) Projected per recipient expenditures for the blind 
     and disabled.--For purposes of subparagraph (A)(i)(II), the 
     `projected 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 are not elderly 
     individuals, and
       ``(ii) the proportion, of all individuals who received 
     medical assistance under this title in the State in the most 
     recent fiscal year referred to in clause (i), that were 
     individuals described in such clause.
       ``(D) Projected per recipient expenditures for other 
     individuals.--For purposes of subparagraph (A)(i)(III), the 
     `projected 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 `elderly 
     individuals' is deemed a reference to `individuals whose 
     eligibility for medical assistance is based on being 65 years 
     of age or older',
       ``(II) the reference in subparagraph (C)(i) to `and are not 
     elderly individuals' 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 medical vendor 
     payments by basis of eligibility as reported by HCFA Form 
     2082.
       ``(4) Input cost index.--
       ``(A) In general.--In 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 section 
     1886(d)(2)(E) (or, if such data no longer exists, comparable 
     data of hospital wages) for discharges occurring during 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--
       ``(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 calendar quarters in fiscal 
     year 1994, increased by the percentage by which (I) the pool 
     amount for fiscal year 1997, exceeds (II) $83,213,431,458 
     (which represents Federal medicaid expenditures for such 
     States and District for fiscal year 1994); divided by
       ``(ii) 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 fiscal year 1994; and
       ``(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 
     MediGrant growth percentage (as defined in subsection (b)(2)) 
     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 

[[Page H 13435]]
     each fiscal year (beginning with fiscal year 1997), the Secretary shall 
     initially compute, after consultation with the Comptroller 
     General, and publish in the Federal Register notice of the 
     proposed obligation and outlay allotments for each State 
     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 they 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 they 
     comply with the precise requirements of this section.
       ``(f) Supplemental Allotment for Emergency Health Care 
     Services to Certain Aliens.--
       ``(1) In general.--Notwithstanding the previous provisions 
     of this section, the amount of the State outlay allotment for 
     each of fiscal years 1996 through 2000 for each supplemental 
     allotment eligible State shall be increased by the amount of 
     the supplemental outlay allotment provided under paragraph 
     (2) for the State for that year. The amount of such increased 
     allotment may only be used for the purpose of providing 
     medical assistance for care and services for aliens described 
     in paragraph (1) of section 2123(e) and for which the 
     exception described in paragraph (2) of such section applies. 
     Section 2122(f)(3) shall apply to such assistance in the same 
     manner as it applies to medical assistance described in such 
     section.
       ``(2) Supplemental outlay allotment.--
       ``(A) In general.--For purposes of paragraph (1), the 
     amount of the supplemental outlay allotment for a 
     supplemental allotment eligible State for a fiscal year is 
     equal to the supplemental allotment ratio (as defined in 
     subparagraph (C)) multiplied by the supplemental pool amount 
     (specified in subparagraph (D)) for the fiscal year.
       ``(B) Supplemental allotment eligible state.--In this 
     subsection, the term `supplemental allotment eligible State' 
     means one of the 15 States with the highest number of 
     undocumented alien residents of all the States.
       ``(C) Supplemental allotment ratio.--In this paragraph, the 
     `supplemental allotment ratio' for a State is the ratio of--
       ``(i) the number of undocumented aliens residing in the 
     State, to
       ``(ii) the sum of such numbers for all supplemental 
     allotment eligible States.
       ``(D) Supplemental pool amount.--In this paragraph, the 
     `supplemental pool amount'--
       ``(i) for fiscal year 1996 is $627,325,551,
       ``(ii) for fiscal year 1997 is $673,388,855,
       ``(iii) for fiscal year 1998 is $702,313,450,
       ``(iv) for fiscal year 1999 is $733,140,258, and
       ``(v) for fiscal year 2000 is $763,831,886.
       ``(E) Determination of number.--
       ``(i) In general.--The number of undocumented aliens 
     residing in a State under this paragraph--

       ``(I) for fiscal year 1996 shall be determined based on 
     estimates of the resident illegal alien population residing 
     in each State prepared by the Statistics Division of the 
     Immigration and Naturalization Service as of October 1992, 
     and
       ``(II) for a subsequent fiscal year shall be determined 
     based on the most recent updated estimate made under clause 
     (ii).

       ``(ii) Updating estimate.--For each fiscal year beginning 
     with fiscal year 1997, the Secretary, in consultation with 
     the Commission of the Immigration and Naturalization Service, 
     States, and outside experts, shall estimate the number of 
     undocumented aliens residing in each of the 50 States and the 
     District of Columbia.
       ``(3) Treatment for obligation purposes.--For purposes of 
     computing obligation allotments under subsection (a)--
       ``(A) the amount of the supplemental pool amount for a 
     fiscal year shall be added to the pool amount under 
     subsection (b) for that fiscal year, and
       ``(B) the amount of the supplemental allotment to a State 
     provided under paragraph (1) shall be added to the outlay 
     allotment of the State for that fiscal year.
       ``(4) Sequence of obligations.--For purposes of carrying 
     out this title, payments to a supplemental allotment eligible 
     State under section 2122 that are attributable to 
     expenditures for medical assistance described in the second 
     sentence of paragraph (1) shall first be counted toward the 
     supplemental outlay allotment provided under this subsection, 
     rather than toward the outlay allotment otherwise provided 
     under this section.

     ``SEC. 2122. PAYMENTS TO STATES.

       ``(a) Amount of Payment.--From the allotment of a State 
     under section 2121 for a fiscal year, subject to the 
     succeeding provisions of this title, the Secretary shall pay 
     to each State which has a MediGrant plan approved under part 
     E, for each quarter in the fiscal year--
       ``(1) an amount equal to the applicable 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 applicable Federal medical 
     assistance percentage of the total amount expended during 
     such quarter for medically-related services (as defined in 
     section 2112(e)(2)); plus
       ``(3) subject to section 2123(c)--
       ``(A) an amount equal to 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) an amount equal to 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) an amount equal to 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 
     MediGrant 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 
     MediGrant 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.

[[Page H 13436]]

       ``(c) Applicable Federal Medical Assistance Percentage 
     Defined.--In this section, except as provided in subsection 
     (f), the term `applicable Federal medical assistance 
     percentage' means, with respect to one of the 50 States or 
     the District of Columbia, at the State's or District's 
     option--
       ``(1) the old Federal medical assistance percentage (as 
     determined in subsection (d));
       ``(2) the lesser of--
       ``(A) new Federal medical assistance percentage (as 
     determined under subsection (e)) or
       ``(B) the old Federal medical assistance percentage plus 10 
     percentage points; or
       ``(3) 60 percent.
       ``(d) Old Federal Medical Assistance Percentage.--
       ``(1) In general.--Except as provided in paragraph (2) and 
     subsection (f), the term `old Federal medical assistance 
     percentage' for any State is 100 percent less the State 
     percentage; and 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.
       ``(2) Limitation on range.--In no case shall the old 
     Federal medical assistance percentage be less than 50 percent 
     or more than 83 percent.
       ``(3) Promulgation.--The old Federal medical assistance 
     percentage for any State shall be determined and promulgated 
     in accordance with the provisions of section 1101(a)(8)(B).
       ``(e) New Federal Medical Assistance Percentage Defined.--
       ``(1) In general.--
       ``(A) Term defined.--Except as provided in paragraph (3) 
     and subsection (f), the term `new Federal medical assistance 
     percentage' means, for each of the 50 States and the District 
     of Columbia, 100 percent reduced by the product 0.39 and the 
     ratio of--
       ``(i)(I) for each of the 50 States, the total taxable 
     resources (TTR) ratio of the State specified in subparagraph 
     (B), or
       ``(II) for the District of Columbia, the per capita income 
     ratio specified in subparagraph (C),
     to--
       ``(ii) the aggregate expenditure need ratio of the State or 
     District, as described in subparagraph (D).
       ``(B) Total taxable resources (ttr) ratio.--For purposes of 
     subparagraph (A)(i)(I), the total taxable resources (TTR) 
     ratio for each of the 50 States is--
       ``(i) an amount equal to the most recent 3-year average of 
     the total taxable resources (TTR) of the State, as determined 
     by the Secretary of the Treasury, divided by
       ``(ii) an amount equal to the sum of the 3-year averages 
     determined under clause (i) for each of the 50 States.
       ``(C) Per capita income ratio.--For purposes of 
     subparagraph (A)(i)(II), the per capita income ratio of the 
     District of Columbia is--
       ``(i) an amount equal to the most recent 3-year average of 
     the total personal income of the District of Columbia, as 
     determined in accordance with the provisions of section 
     1101(a)(8)(B), divided by
       ``(ii) an amount equal to the total personal income of the 
     continental United States (including Alaska) and Hawaii, as 
     determined under section 1101(a)(8)(B).
       ``(D) Aggregate expenditure need ratio.--For purposes of 
     subparagraph (A), with respect to each of the 50 States and 
     the District of Columbia for a fiscal year, the aggregate 
     expenditure need ratio is--
       ``(i) the State aggregate expenditure need (as defined in 
     section 2121(d)) for the State for the fiscal year, divided 
     by
       ``(ii) the such of such State aggregate expenditure needs 
     for the 50 States and the District of Columbia for the fiscal 
     year.
       ``(2) Limitation on range.--Except as provided in 
     subsection (f), the new Federal medical assistance percentage 
     shall in no case be less than 40 percent or greater than 83 
     percent.
       ``(3) Promulgation.--The new Federal medical assistance 
     percentage for any State shall be promulgated in a timely 
     manner consistent with the promulgation of the old Federal 
     medical assistance percentage under section 1101(a)(8)(B).
       ``(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 old and new Federal medical 
     assistance percentages are 50 percent.
       ``(2) Alaska.--In the case of Alaska, the old Federal 
     medical assistance 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 under section 2121(d)(4)).
       ``(3) Indian health service facilities.--
       ``(A) In general.--The old and new Federal medical 
     assistance percentages shall be 100 percent with respect to 
     the amounts expended as medical assistance for services which 
     are received through a facility described in subparagraph (B) 
     of an Indian tribe or tribal organization or through an 
     Indian Health Service facility whether operated by the Indian 
     Health Service or by an Indian tribe or tribal organization 
     (as defined in section 4 of the Indian Health Care 
     Improvement Act).
       ``(B) Facility described.--For purposes of subparagraph 
     (A), a facility described in this subparagraph is a facility 
     of an Indian tribe if--
       ``(i) the facility is located in a State which, as of the 
     date of the enactment of this title, was not operating its 
     State plan under title XIX pursuant to a Statewide waiver 
     approved under section 1115,
       ``(ii) the facility is not an Indian Health Service 
     facility,
       ``(iii) the tribe owns at least 2 such facilities, and
       ``(iv) the tribe has at least 50,000 members (as of the 
     date of the enactment of this title).
       ``(4) 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.
       ``(5) Special transitional rule.--
       ``(A) In general.--Notwithstanding subsections (a) and (f), 
     in order to receive the full State outlay allotment described 
     in section 2121(c)(3)(C)(i), a State described in 
     subparagraph (C) shall expend State funds in a fiscal year 
     (before fiscal year 2000) under a MediGrant plan under this 
     title in an amount not less than the adjusted base year State 
     expenditures, plus the 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 not met.--In 
     the event a State described in subparagraph (C) fails to 
     expend State funds in an amount required by subparagraph (A) 
     for a fiscal year, the outlay allotment described in section 
     2121(c)(3)(C)(i) for such year for such State 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 a fiscal year is 
     specified in the following table:

                                                             Applicable
``Fiscal year:                                              Percentage:
  1996..........................................................20 ....

  1997..........................................................40 ....

  1998..........................................................60 ....

  1999..........................................................80.....

       ``(g) State Financial Participation.--Each MediGrant plan 
     shall provide for financial participation by the State equal 
     to not less than 40 percent of the non-Federal share of the 
     expenditures under the plan with respect to which payments 
     may be made under this section.

     ``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.--Payment shall not 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) Limitations.--
       ``(1) In general.--No Federal financial assistance is 
     available for expenditures under the MediGrant plan for--
       ``(A) medically-related services for a quarter to the 
     extent such expenditures exceed 5 percent of the total 
     expenditures under the plan for the quarter, or
       ``(B) total administrative expenses (other than expenses 
     described in paragraph (2) during the first 8 quarters in 
     which the plan is in effect under this title) for quarters in 
     a fiscal year to the extent such expenditures exceed the sum 
     of $20,000,000 plus 10 percent of the total expenditures 
     under the plan for the year.
       ``(2) Administrative expenses not subject to limitation.--
     The administrative expenses referred to in this paragraph are 
     expenditures under the MediGrant plan for the following 
     activities:
       ``(A) Quality assurance.
       ``(B) The development and operation of the certification 
     program for nursing facilities and intermediate care 
     facilities for the mentally retarded under section 2137.
       ``(C) Utilization review activities, including medical 
     activities and activities of peer review organizations.
       ``(D) Inspection and oversight of providers and capitated 
     health care organizations.
       ``(E) Anti-fraud activities.
       ``(F) Independent evaluations.
       ``(G) Activities required to meet reporting requirements 
     under this title.
       ``(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 
     MediGrant 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 
     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.

[[Page H 13437]]

       ``(e) MediGrant 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 MediGrant 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 may 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 MediGrant 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) Limitation on Payment for Certain Outpatient 
     Prescription Drugs.--
       ``(1) In general.--No payment may be made to a State under 
     this part for medical assistance for covered outpatient drugs 
     (as defined in section 2175(i)(2)) of a manufacturer provided 
     under the MediGrant plan unless the manufacturer (as defined 
     in section 2175(i)(4)) of the drug--
       ``(A) has entered into a MediGrant master rebate agreement 
     with the Secretary under section 2175,
       ``(B) is otherwise complying with the provisions of such 
     section,
       ``(C) is complying 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, and
       ``(D) subject to paragraph (4), is complying with the 
     provisions of section 340B of the Public Health Service Act, 
     including the requirement of entering into an agreement with 
     the Secretary under such section.
       ``(2) Construction.--Nothing in this subsection shall be 
     construed as requiring a State to participate in the 
     MediGrant master rebate agreement under section 2175.
       ``(3) Effect of subsequent amendments.--For purposes of 
     subparagraphs (C) and (D), in determining whether a 
     manufacturer is in compliance with the requirements of 
     section 8126 of title 38, United States Code, or section 340B 
     of the Public Health Service Act--
       ``(A) the Secretary shall not take into account any 
     amendments to such sections that are enacted after the 
     enactment of title VI of the Veterans Health Care Act of 
     1992, and
       ``(B) a manufacturer is deemed to meet such requirements if 
     the manufacturer establishes to the satisfaction of the 
     Secretary that the manufacturer would comply (and has offered 
     to comply) with the provisions of such sections (as in effect 
     immediately after the enactment 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 the date 
     of the enactment of the Veterans Health Care Act of 1992.
       ``(4) Effect of establishment of alternative mechanism 
     under public health service act.--If the Secretary does not 
     establish a mechanism to ensure against duplicate discounts 
     or rebates 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:
       ``(A) Each covered entity under such section shall inform 
     the State when it is seeking reimbursement from the MediGrant 
     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.
       ``(B) Each such State shall provide a means by which such 
     an 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 
     with respect to such a drug.

                ``Part D--Program Integrity and Quality

     ``SEC. 2131. USE OF AUDITS TO ACHIEVE FISCAL INTEGRITY.

       ``(a) Financial Audits of Program.--
       ``(1) In general.--Each MediGrant 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 MediGrant 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 MediGrant 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 MediGrant 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 
     MediGrant 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 MediGrant 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 MediGrant 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 MediGrant 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 MediGrant 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 MediGrant 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.

[[Page H 13438]]

       ``(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),
       ``(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 MediGrant fraud control units (as defined in 
     section 2134),
       ``(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 MEDIGRANT FRAUD CONTROL UNITS.

       ``(a) In General.--Each MediGrant plan shall provide for a 
     State MediGrant fraud control unit described in subsection 
     (b) 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 MediGrant 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 
     MediGrant 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 MediGrant 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 
     MediGrant plan 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 MediGrant 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 prior 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 MediGrant 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 where the amount 
     expected to be recovered exceeds the costs of the recovery.
       ``(b) Beneficiary Protection.--
       ``(1) In general.--Each MediGrant 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 MediGrant 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 MediGrant plan for any State.
       ``(d) Acquisition of Rights of Beneficiaries.--To the 
     extent that payment has been made under a MediGrant 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 MediGrant 
     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 MediGrant 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--

[[Page H 13439]]


       ``(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 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 
     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 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 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.--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 MediGrant plan, including through the 
     imposition of liens against the property or estate of the 
     individual.

     ``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 MediGrant plan, each MediGrant 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.

     ``SEC. 2137. QUALITY ASSURANCE REQUIREMENTS FOR NURSING 
                   FACILITIES.

       ``(a) Nursing Facility Defined.--In this title, the term 
     `nursing facility' means an institution (or a distinct part 
     of an institution) which--
       ``(1) is primarily engaged in providing to residents--
       ``(A) skilled nursing care and related services for 
     residents who require medical or nursing care,
       ``(B) rehabilitation services for the rehabilitation of 
     injured, disabled, or sick persons, or
       ``(C) on a regular basis, health-related care and services 
     to individuals who because of their mental or physical 
     condition require care and services (above the level of room 
     and board) which can be made available to them only through 
     institutional facilities,

     and is not primarily for the care and treatment of mental 
     diseases;
       ``(2) has in effect a transfer agreement (meeting the 
     requirements of section 1861(l)) with one or more hospitals 
     having agreements in effect under section 1866; and
       ``(3) meets the requirements for a nursing facility 
     described in subsections (b), (c), and (d) of this section.

     Such term also includes any facility which is located in a 
     State on an Indian reservation and is certified by the 
     Secretary as meeting the requirements of paragraph (1) and 
     subsections (b), (c), and (d).
       ``(b) Requirements Relating to Provision of Services.--
       ``(1) Quality of life.--
       ``(A) In general.--A nursing facility must care for its 
     residents in such a manner and in such an environment as will 
     reasonably promote maintenance or enhancement of the quality 
     of life of each resident.
       ``(B) Quality assessment and assurance.--A nursing facility 
     must maintain a quality assessment and assurance committee, 
     consisting of the director of nursing services, a physician 
     designated by the facility, and at least 3 other members of 
     the facility's staff, which (i) meets at least quarterly to 
     identify issues with respect to which quality assessment and 
     assurance activities are necessary and (ii) develops and 
     implements appropriate plans of action to correct identified 
     quality deficiencies. A State or the Secretary may not 
     require disclosure of the records of such committee except 
     insofar as such disclosure is related to the compliance of 
     such committee with the requirements of this subparagraph.
       ``(2) Scope of services and activities under plan of 
     care.--A nursing facility must provide services and 
     activities in accordance with a written plan of care which--
       ``(A) describes the medical, nursing, and psychosocial 
     needs of the resident and how such needs will be met;
       ``(B) is initially prepared, with the participation to the 
     extent practicable of the resident or the resident's family 
     or legal representative, by a team which includes the 
     resident's attending physician and a registered professional 
     nurse with responsibility for the resident; and
       ``(C) is periodically reviewed and revised by such team 
     after each assessment under paragraph (3).
       ``(3) Residents' assessment.--
       ``(A) Requirement.--A nursing facility must conduct a 
     comprehensive, accurate, standardized, reproducible 
     assessment of each resident's functional capacity, which 
     assessment--
       ``(i) describes the resident's capability to perform daily 
     life functions and significant impairments in functional 
     capacity;
       ``(ii) uses an instrument which is specified by the State 
     under subsection (e)(5); and
       ``(iii) includes the identification of medical problems.
       ``(B) Certification.--
       ``(i) In general.--Each such assessment must be conducted 
     or coordinated (with the appropriate participation of health 
     professionals) by a registered professional nurse who signs 
     and certifies the completion of the assessment. Each 
     individual who completes a portion of such an assessment 
     shall sign and certify as to the accuracy of that portion of 
     the assessment.
       ``(ii) Penalty for falsification.--

       ``(I) An individual who willfully and knowingly certifies 
     under clause (i) a material and false statement in a resident 
     assessment is subject to a civil money penalty of not more 
     than $1,000 with respect to each assessment.

[[Page H 13440]]

       ``(II) An individual who willfully and knowingly causes 
     another individual to certify under clause (i) a material and 
     false statement in a resident assessment is subject to a 
     civil money penalty of not more than $5,000 with respect to 
     each assessment.
       ``(III) The provisions of section 1128A (other than 
     subsections (a) and (b)) shall apply to a civil money penalty 
     under this clause in the same manner as such provisions apply 
     to a penalty or proceeding under section 1128A(a).

       ``(iii) Use of independent assessors.--If a State 
     determines, under a survey under subsection (g) or otherwise, 
     that there has been a knowing and willful certification of 
     false assessments under this paragraph, the State may require 
     (for a period specified by the State) that resident 
     assessments under this paragraph be conducted and certified 
     by individuals who are independent of the facility and who 
     are approved by the State.
       ``(C) Frequency.--
       ``(i) In general.--Such an assessment must be conducted--

       ``(I) promptly upon (but no later than 14 days after the 
     date of) admission for each individual admitted;
       ``(II) promptly after a significant change in the 
     resident's physical or mental condition; and
       ``(III) in no case less often than once every 12 months.

       ``(ii) Resident review.--The nursing facility must examine 
     each resident no less frequently than once every 3 months 
     and, as appropriate, revise the resident's assessment to 
     assure the continuing accuracy of the assessment.
       ``(D) Use.--The results of such an assessment shall be used 
     in developing, reviewing, and revising the resident's plan of 
     care under paragraph (2).
       ``(E) Coordination.--Such assessments shall be coordinated 
     with any State-required preadmission screening program to the 
     maximum extent practicable in order to avoid duplicative 
     testing and effort. 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.
       ``(4) Provision of services and activities.--
       ``(A) In general.--To the extent needed to fulfill all 
     plans of care described in paragraph (2), a nursing facility 
     must provide (or arrange for the provision of)--
       ``(i) nursing and related services and specialized 
     rehabilitative services;
       ``(ii) medically-related social services to attain or 
     maintain the highest practicable physical, mental, and 
     psychosocial well-being of residents;
       ``(iii) pharmaceutical services (including procedures that 
     assure the accurate acquiring, receiving, dispensing, and 
     administering of all drugs and biologicals) to meet the needs 
     of residents;
       ``(iv) dietary services that assure that the meals meet the 
     daily nutritional and special dietary needs of residents;
       ``(v) an on-going program, directed by a qualified 
     professional, of activities designed to meet the interests 
     and the physical, mental, and psychosocial well-being of 
     residents; and
       ``(vi) routine dental services (to the extent covered under 
     the State MediGrant plan) and emergency dental services to 
     meet the needs of residents.

     The services provided or arranged by the facility must meet 
     professional standards of quality.
       ``(B) Qualified persons providing services.--Services 
     described in clauses (i), (ii), (iii), (iv), and (vi) of 
     subparagraph (A) must be provided by qualified persons in 
     accordance with each resident's written plan of care.
       ``(C) Required nursing care; facility waivers.--
       ``(i) General requirements.--A nursing facility--

       ``(I) except as provided in clause (ii), must provide 24-
     hour licensed nursing services which are sufficient to meet 
     the nursing needs of its residents, and
       ``(II) except as provided in clause (ii), must use the 
     services of a registered professional nurse for at least 8 
     consecutive hours a day, 7 days a week.

       ``(ii) Waiver by state.--To the extent that a facility is 
     unable to meet the requirements of clause (i), a State may 
     waive such requirements with respect to the facility if--

       ``(I) the facility demonstrates to the satisfaction of the 
     State that the facility has been unable, despite diligent 
     efforts (including offering wages at the community prevailing 
     rate for nursing facilities), to recruit appropriate 
     personnel,
       ``(II) the State determines that a waiver of the 
     requirement will not endanger the health or safety of 
     individuals staying in the facility,
       ``(III) the State finds that, for any such periods in which 
     licensed nursing services are not available, a registered 
     professional nurse or a physician is obligated to respond 
     immediately to telephone calls from the facility,
       ``(IV) the State agency granting a waiver of such 
     requirements provides notice of the waiver to the State long-
     term care ombudsman (established under section 307(a)(12) of 
     the Older Americans Act of 1965) and the protection and 
     advocacy system in the State for the mentally ill and the 
     mentally retarded, and
       ``(V) the nursing facility that is granted such a waiver by 
     a State notifies residents of the facility (or, where 
     appropriate, the guardians or legal representatives of such 
     residents) and members of their immediate families of the 
     waiver.

     A waiver under this clause shall be subject to annual review 
     and to the review of the Secretary and subject to clause 
     (iii) shall be accepted by the Secretary for purposes of this 
     title to the same extent as is the State's certification of 
     the facility. In granting or renewing a waiver, a State may 
     require the facility to use other qualified, licensed 
     personnel.
       ``(iii) Assumption of waiver authority by secretary.--If 
     the Secretary determines that a State has shown a clear 
     pattern and practice of allowing waivers in the absence of 
     diligent efforts by facilities to meet the staffing 
     requirements, the Secretary shall assume and exercise the 
     authority of the State to grant waivers.
       ``(5) Required training of nurse aides.--
       ``(A) In general.--(i) Except as provided in clause (ii), a 
     nursing facility must not use on a full-time basis any 
     individual as a nurse aide in the facility, for more than 4 
     months unless the individual--
       ``(I) has completed a training and competency evaluation 
     program, or a competency evaluation program, approved by the 
     State under subsection (e)(1)(A), and
       ``(II) is competent to provide nursing or nursing-related 
     services.
       ``(ii) A nursing facility must not use on a temporary, per 
     diem, leased, or on any other basis other than as a permanent 
     employee any individual as a nurse aide in the facility, 
     unless the individual meets the requirements described in 
     clause (i).
       ``(B) Offering competency evaluation programs for current 
     employees.--A nursing facility must provide, for individuals 
     used as a nurse aide by the facility, for a competency 
     evaluation program approved by the State under subsection 
     (e)(1) and such preparation as may be necessary for the 
     individual to complete such a program.
       ``(C) Competency.--The nursing facility must not permit an 
     individual, other than in a training and competency 
     evaluation program approved by the State, to serve as a nurse 
     aide or provide services of a type for which the individual 
     has not demonstrated competency and must not use such an 
     individual as a nurse aide unless the facility has inquired 
     of any State registry established under subsection (e)(2)(A) 
     that the facility believes will include information 
     concerning the individual.
       ``(D) Re-training required.--For purposes of subparagraph 
     (A), if, since an individual's most recent completion of a 
     training and competency evaluation program, there has been a 
     continuous period of 24 consecutive months during none of 
     which the individual performed nursing or nursing-related 
     services for monetary compensation, such individual shall 
     complete a new training and competency evaluation program, or 
     a new competency evaluation program.
       ``(E) Regular in-service education.--The nursing facility 
     must provide such regular performance review and regular in-
     service education as assures that individuals used as nurse 
     aides are competent to perform services as nurse aides, 
     including training for individuals providing nursing and 
     nursing-related services to residents with cognitive 
     impairments.
       ``(F) Nurse aide defined.--In this paragraph, the term 
     `nurse aide' means any individual providing nursing or 
     nursing-related services to residents in a nursing facility, 
     but does not include an individual--
       ``(i) who is a licensed health professional (as defined in 
     subparagraph (G)) or a registered dietician,
       ``(ii) who volunteers to provide such services without 
     monetary compensation, or
       ``(iii) who is trained, whether compensated or not, to 
     perform a task-specific function which assists residents in 
     their daily activities.
       ``(G) Licensed health professional defined.--In this 
     paragraph, the term `licensed health professional' means a 
     physician, physician assistant, nurse practitioner, physical, 
     speech, or occupational therapist, physical or occupational 
     therapy assistant, registered professional nurse, licensed 
     practical nurse, or licensed or certified social worker.
       ``(6) Physician supervision and clinical records.--A 
     nursing facility must--
       ``(A) require that the health care of every resident be 
     provided under the supervision of a physician (or, at the 
     option of a State, under the supervision of a nurse 
     practitioner, clinical nurse specialist, or physician 
     assistant who is not an employee of the facility but who is 
     working in collaboration with a physician);
       ``(B) provide for having a physician available to furnish 
     necessary medical care in case of emergency; and
       ``(C) maintain clinical records on all residents, which 
     records include the plans of care (described in paragraph 
     (2)) and the residents' assessments (described in paragraph 
     (3)).
       ``(c) Requirements Relating to Residents' Rights.--
       ``(1) General rights.--
       ``(A) Specified rights.--A nursing facility must protect 
     and promote the rights of each resident, including each of 
     the following rights:
       ``(i) Free choice.--The right to choose a personal 
     attending physician, to be fully informed in advance about 
     care and treatment, to be fully informed in advance of any 
     changes in care or treatment that may affect the resident's 
     well-being, and (except with respect to a resident adjudged 
     incompetent) to participate in planning care and treatment or 
     changes in care and treatment.
       ``(ii) Free from restraints.--The right to be free from 
     physical or mental abuse, corporal punishment, involuntary 
     seclusion, and any physical or chemical restraints imposed 
     for purposes of discipline or convenience and not required to 
     treat the resident's medical symptoms. Restraints may only be 
     imposed--

       ``(I) to ensure the physical safety of the resident or 
     other residents, and
       ``(II) only upon the written order of a physician that 
     specifies the duration and circumstances under which the 
     restraints are to be 

[[Page H 13441]]
     used (except in emergency circumstances specified by the Secretary 
     until such an order could reasonably be obtained).

       ``(iii) Privacy.--The right to privacy with regard to 
     accommodations, medical treatment, written and telephonic 
     communications, visits, and meetings of family and of 
     resident groups.
       ``(iv) Confidentiality.--The right to confidentiality of 
     personal and clinical records and to access to current 
     clinical records of the resident upon request by the resident 
     or the resident's legal representative, within 24 hours 
     (excluding hours occurring during a weekend or holiday) after 
     making such a request.
       ``(v) Accommodation of needs.--The right--

       ``(I) to reside and receive services with reasonable 
     accommodation of individual needs and preferences, except 
     where the health or safety of the individual or other 
     residents would be endangered, and
       ``(II) to receive notice before the room or roommate of the 
     resident in the facility is changed unless a delay in 
     changing the room or roommate while notice is given would 
     endanger the resident or others.

       ``(vi) Grievances.--The right to voice grievances with 
     respect to treatment or care that is (or fails to be) 
     furnished, without discrimination or reprisal for voicing the 
     grievances and the right to prompt efforts by the facility to 
     resolve grievances the resident may have, including those 
     with respect to the behavior of other residents.
       ``(vii) Participation in resident and family groups.--The 
     right of the resident to organize and participate in resident 
     groups in the facility and the right of the resident's family 
     to meet in the facility with the families of other residents 
     in the facility.
       ``(viii) Participation in other activities.--The right of 
     the resident to participate in social, religious, and 
     community activities that do not interfere with the rights of 
     other residents in the facility.
       ``(ix) Examination of survey results.--The right to 
     examine, upon reasonable request, the results of the most 
     recent survey of the facility conducted by the Secretary or a 
     State with respect to the facility and any plan of correction 
     in effect with respect to the facility.
       ``(x) Other rights.--Any other right established by the 
     Secretary.

     Clause (iii) shall not be construed as requiring the 
     provision of a private room.
       ``(B) Notice of rights.--A nursing facility must--
       ``(i) inform each resident, orally and in writing at the 
     time of admission to the facility, of the resident's legal 
     rights during the stay at the facility and of the 
     requirements and procedures for establishing eligibility for 
     medical assistance under this title, including the right to 
     request an assessment under section 2115(c)(1)(B);
       ``(ii) make available to each resident, upon reasonable 
     request, a written statement of such rights (which statement 
     is updated upon changes in such rights) including the notice 
     (if any) of the State developed under subsection (e)(6);
       ``(iii) inform each resident who is entitled to medical 
     assistance under this title--

       ``(I) at the time of admission to the facility or, if 
     later, at the time the resident becomes eligible for such 
     assistance, of the items and services that are included in 
     nursing facility services under the State MediGrant plan and 
     for which the resident may not be charged, and of those other 
     items and services that the facility offers and for which the 
     resident may be charged and the amount of the charges for 
     such items and services, and
       ``(II) of changes in the items and services described in 
     subclause (I) and of changes in the charges imposed for items 
     and services described in that subclause; and

       ``(iv) inform each other resident, in writing before or at 
     the time of admission and periodically during the resident's 
     stay, of services available in the facility and of related 
     charges for such services, including any charges for services 
     not covered under title XVIII or by the facility's basic per 
     diem charge.

     The written description of legal rights under this 
     subparagraph shall include a description of the protection of 
     personal funds under paragraph (6) and a statement that a 
     resident may file a complaint with a State survey and 
     certification agency respecting resident abuse and neglect 
     and misappropriation of resident property in the facility.
       ``(C) Rights of incompetent residents.--In the case of a 
     resident adjudged incompetent under the laws of a State, the 
     rights of the resident under this title shall devolve upon, 
     and, to the extent judged necessary by a court of competent 
     jurisdiction, be exercised by, the person appointed under 
     State law to act on the resident's behalf.
       ``(D) Use of psychopharmacologic drugs.--
     Psychopharmacologic drugs may be administered only on the 
     orders of a physician and only as part of a plan (included in 
     the written plan of care described in paragraph (2)) designed 
     to eliminate or modify the symptoms for which the drugs are 
     prescribed and only if, at least annually an independent, 
     external consultant reviews the appropriateness of the drug 
     plan of each resident receiving such drugs.
       ``(2) Transfer and discharge rights.--
       ``(A) In general.--A nursing facility must permit each 
     resident to remain in the facility and must not transfer or 
     discharge the resident from the facility unless--
       ``(i) the transfer or discharge is necessary to meet the 
     resident's welfare and the resident's welfare cannot be met 
     in the facility;
       ``(ii) the transfer or discharge is appropriate because the 
     resident's health has improved sufficiently so the resident 
     no longer needs the services provided by the facility;
       ``(iii) the safety of individuals in the facility is 
     endangered;
       ``(iv) the health of individuals in the facility would 
     otherwise be endangered;
       ``(v) the resident has failed, after reasonable and 
     appropriate notice, to pay (or to have paid under this title 
     or title XVIII on the resident's behalf) for a stay at the 
     facility; or
       ``(vi) the facility ceases to operate.

     In each of the cases described in clauses (i) through (iv), 
     the basis for the transfer or discharge must be documented in 
     the resident's clinical record. In the cases described in 
     clauses (i) and (ii), the documentation must be made by the 
     resident's physician, and in the case described in clause 
     (iv) the documentation must be made by a physician. For 
     purposes of clause (v), in the case of a resident who becomes 
     eligible for assistance under this title after admission to 
     the facility, only charges which may be imposed under this 
     title shall be considered to be allowable.
       ``(B) Pre-transfer and pre-discharge notice.--
       ``(i) In general.--Before effecting a transfer or discharge 
     of a resident, a nursing facility must--

       ``(I) notify the resident (and, if known, an immediate 
     family member of the resident or legal representative) of the 
     transfer or discharge and the reasons therefor,
       ``(II) record the reasons in the resident's clinical record 
     (including any documentation required under subparagraph 
     (A)), and
       ``(III) include in the notice the items described in clause 
     (iii).

       ``(ii) Timing of notice.--The notice under clause (i)(I) 
     must be made at least 30 days in advance of the resident's 
     transfer or discharge except--

       ``(I) in a case described in clause (iii) or (iv) of 
     subparagraph (A);
       ``(II) in a case described in clause (ii) of subparagraph 
     (A), where the resident's health improves sufficiently to 
     allow a more immediate transfer or discharge;
       ``(III) in a case described in clause (i) of subparagraph 
     (A), where a more immediate transfer or discharge is 
     necessitated by the resident's urgent medical needs;
       ``(IV) in a case where a resident has not resided in the 
     facility for 30 days; or
       ``(V) in a case where the provision of a 30-day notice 
     would be impossible or impracticable.

     In the case of such exceptions, notice must be given as many 
     days before the date of the transfer or discharge as is 
     practicable.
       ``(iii) Items included in notice.--Each notice under clause 
     (i) must include--

       ``(I) notice of the resident's right to appeal the transfer 
     or discharge under the State process established under 
     subsection (e)(3);
       ``(II) the name, mailing address, and telephone number of 
     the State long-term care ombudsman (established under title 
     III or VII of the Older Americans Act of 1965);
       ``(III) in the case of residents with developmental 
     disabilities, the mailing address and telephone number of the 
     agency responsible for the protection and advocacy system for 
     developmentally disabled individuals established under part C 
     of the Developmental Disabilities Assistance and Bill of 
     Rights Act; and
       ``(IV) in the case of mentally ill residents (as defined in 
     subsection (e)(7)(G)(i)), the mailing address and telephone 
     number of the agency responsible for the protection and 
     advocacy system for mentally ill individuals established 
     under the Protection and Advocacy for Mentally Ill 
     Individuals Act.

       ``(iv) Exception.--This subparagraph shall not apply to a 
     voluntary transfer or discharge or a transfer or discharge 
     necessitated by a medical emergency.
       ``(C) Orientation.--A nursing facility must provide 
     reasonable preparation and orientation to residents to 
     promote safe and orderly transfer or discharge from the 
     facility.
       ``(D) Notice on bed-hold policy and readmission.--
       ``(i) Notice before transfer.--Before a resident of a 
     nursing facility is transferred for hospitalization or 
     therapeutic leave, a nursing facility must provide written 
     information to the resident and an immediate family member or 
     legal representative concerning--

       ``(I) the provisions of the State MediGrant plan under this 
     title regarding the period (if any) during which the resident 
     will be permitted under the State MediGrant plan to return 
     and resume residence in the facility, and
       ``(II) the policies of the facility regarding such a 
     period, which policies must be consistent with clause (iii).

       ``(ii) Notice upon transfer.--At the time of transfer of a 
     resident to a hospital or for therapeutic leave, a nursing 
     facility must provide written notice to the resident and an 
     immediate family member or legal representative of the 
     duration of any period described in clause (i).
       ``(iii) Permitting resident to return.--A nursing facility 
     must establish and follow a written policy under which a 
     resident--

       ``(I) who is eligible for medical assistance for nursing 
     facility services under a State MediGrant plan,
       ``(II) who is transferred from the facility for 
     hospitalization or therapeutic leave, and
       ``(III) whose hospitalization or therapeutic leave exceeds 
     a period paid for under the State MediGrant plan for the 
     holding of a bed in the facility for the resident,

     will be permitted to be readmitted to the facility 
     immediately upon the first availability of a bed in a room 
     (not including a private room) in the facility if, at the 
     time of readmission, the resident requires the services 
     provided by the facility.
       ``(3) Access and visitation rights.--A nursing facility 
     must--
       ``(A) permit immediate access to any resident by any 
     representative of the Secretary, by any 

[[Page H 13442]]
     representative of the State, by an ombudsman or agency described in 
     subclause (II), (III), or (IV) of paragraph (2)(B)(iii), or 
     by the resident's individual physician;
       ``(B) permit immediate access to a resident, subject to the 
     resident's right to deny or withdraw consent at any time, by 
     immediate family or other relatives of the resident;
       ``(C) permit immediate access to a resident, subject to 
     reasonable restrictions and the resident's right to deny or 
     withdraw consent at any time, by others who are visiting with 
     the consent of the resident, unless such access would 
     endanger the health or safety of the resident or others in 
     the facility;
       ``(D) permit reasonable access to a resident by any entity 
     or individual that provides health, social, legal, or other 
     services to the resident, subject to the resident's right to 
     deny or withdraw consent at any time; and
       ``(E) permit representatives of the State ombudsman 
     (described in paragraph (2)(B)(iii)(II)), with the permission 
     of the resident (or the resident's legal representative) and 
     consistent with State law, to examine a resident's clinical 
     records.
       ``(4) Equal access to quality care.--
       ``(A) In general.--A nursing facility must establish and 
     maintain identical policies and practices regarding transfer, 
     discharge, and the provision of services required under the 
     State MediGrant plan for all individuals regardless of source 
     of payment.
       ``(B) Construction.--
       ``(i) Nothing prohibiting any charges for non-medigrant 
     patients.--Subparagraph (A) shall not be construed as 
     prohibiting a nursing facility from charging any amount for 
     services furnished, consistent with the notice in paragraph 
     (1)(B) describing such charges.
       ``(ii) No additional services required.--Subparagraph (A) 
     shall not be construed as requiring a State to offer 
     additional services on behalf of a resident than are 
     otherwise provided under the State MediGrant plan.
       ``(5) Protection of resident funds.--
       ``(A) In general.--The nursing facility--
       ``(i) may not require residents to deposit their personal 
     funds with the facility, and
       ``(ii) upon the written authorization of the resident, must 
     hold, safeguard, and account for such personal funds under a 
     system established and maintained by the facility in 
     accordance with this paragraph.
       ``(B) Management of personal funds.--Upon written 
     authorization of a resident under subparagraph (A)(ii), the 
     facility must manage and account for the personal funds of 
     the resident deposited with the facility as follows:
       ``(i) Deposit.--The facility must deposit any amount of 
     personal funds in excess of $250 with respect to a resident 
     in an interest bearing account (or accounts) that is separate 
     from any of the facility's operating accounts and credits all 
     interest earned on such separate account to such account. 
     With respect to any other personal funds, the facility must 
     maintain such funds in a non-interest bearing account or 
     petty cash fund.
       ``(ii) Accounting and records.--The facility must assure a 
     full and complete accounting of each such resident's personal 
     funds, maintain a written record of all financial 
     transactions involving the personal funds of a resident 
     deposited with the facility, and afford the resident (or a 
     legal representative of the resident) reasonable access to 
     such record.
       ``(iii) Conveyance upon death.--Upon the death of a 
     resident with such an account, the facility must convey 
     promptly the resident's personal funds (and a final 
     accounting of such funds) to the individual administering the 
     resident's estate. All other personal property, including 
     medical records, shall be considered part of the resident's 
     estate and shall only be released to the administrator of the 
     estate.
       ``(C) Assurance of financial security.--The facility must 
     purchase a surety bond, or otherwise provide assurance 
     satisfactory to the State, to assure the security of all 
     personal funds of residents deposited with the facility.
       ``(D) Limitation on charges to personal funds.--The 
     facility may not impose a charge against the personal funds 
     of a resident for any item or service for which payment is 
     made under this title or title XVIII.
       ``(6) Limitation on charges in case of medigrant-eligible 
     individuals.--A nursing facility may not impose charges, for 
     certain MediGrant-eligible individuals for nursing facility 
     services covered by the State under its plan under this 
     title, that exceed the payment amounts established by the 
     State for such services under this title.
       ``(7) Posting of survey results.--A nursing facility must 
     post in a place readily accessible to residents, and family 
     members and legal representatives of residents, the results 
     of the most recent survey of the facility conducted under 
     subsection (g).
       ``(d) Requirements Relating to Administration and Other 
     Matters.--
       ``(1) Administration.--
       ``(A) In general.--A nursing facility must be administered 
     in a manner that enables it to use its resources effectively 
     and efficiently to attain or maintain the highest practicable 
     physical, mental, and psychosocial well-being of each 
     resident (consistent with requirements established under 
     subsection (f)(5)).
       ``(B) Required notices.--If a change occurs in--
       ``(i) the persons with an ownership or control interest (as 
     defined in section 1124(a)(3)) in the facility,
       ``(ii) the persons who are officers, directors, agents, or 
     managing employees (as defined in section 1126(b)) of the 
     facility,
       ``(iii) the corporation, association, or other company 
     responsible for the management of the facility, or
       ``(iv) the individual who is the administrator or director 
     of nursing of the facility,

     the nursing facility must provide notice to the State agency 
     responsible for the licensing of the facility, at the time of 
     the change, of the change and of the identity of each new 
     person, company, or individual described in the respective 
     clause.
       ``(C) Nursing facility administrator.--The administrator of 
     a nursing facility, whether freestanding or hospital-based, 
     must meet such standards as are established by the Secretary.
       ``(2) Licensing and life safety code.--
       ``(A) Licensing.--A nursing facility must be licensed under 
     applicable State and local law.
       ``(B) Life safety code.--A nursing facility must meet such 
     provisions of such edition (as specified by the Secretary in 
     regulation) of the Life Safety Code of the National Fire 
     Protection Association as are applicable to nursing homes; 
     except that--
       ``(i) the Secretary may waive, for such periods as he deems 
     appropriate, specific provisions of such Code which if 
     rigidly applied would result in unreasonable hardship upon a 
     facility, but only if such waiver would not adversely affect 
     the health and safety of residents or personnel, and
       ``(ii) the provisions of such Code shall not apply in any 
     State if the Secretary finds that in such State there is in 
     effect a fire and safety code, imposed by State law, which 
     adequately protects residents of and personnel in nursing 
     facilities.
       ``(3) Sanitary and infection control and physical 
     environment.--A nursing facility must--
       ``(A) establish and maintain an infection control program 
     designed to provide a safe, sanitary, and comfortable 
     environment in which residents reside and to help prevent the 
     development and transmission of disease and infection, and
       ``(B) be designed, constructed, equipped, and maintained in 
     a manner to protect the health and safety of residents, 
     personnel, and the general public.
       ``(4) Miscellaneous.--
       ``(A) Compliance with federal, state, and local laws and 
     professional standards.--A nursing facility, whether 
     freestanding or hospital-based, must operate and provide 
     services in compliance with all applicable Federal, State, 
     and local laws and regulations (including the requirements of 
     section 1124) and with accepted professional standards and 
     principles which apply to professionals providing services in 
     such a facility.
       ``(B) Other.--A nursing facility must meet such other 
     requirements relating to the health and safety of residents 
     or relating to the physical facilities thereof as the 
     Secretary may find necessary.
       ``(e) State Requirements Relating to Nursing Facility 
     Requirements.--A State with a MediGrant plan shall provide 
     for the following:
       ``(1) Specification and review of nurse aide training and 
     competency evaluation programs and of nurse aide competency 
     evaluation programs.--The State must--
       ``(A) specify those training and competency evaluation 
     programs, and those competency evaluation programs, that the 
     State approves for purposes of subsection (b)(5) and that 
     meet the requirements established under subsection (f)(2), 
     and
       ``(B) provide for the review and reapproval of such 
     programs, at a frequency and using a methodology consistent 
     with the requirements established under subsection 
     (f)(2)(A)(iii).
       ``(2) Nurse aide registry.--
       ``(A) In general.--The State shall establish and maintain a 
     registry of all individuals who have satisfactorily completed 
     a nurse aide training and competency evaluation program, or a 
     nurse aide competency evaluation program, approved under 
     paragraph (1) in the State, or any individual described in 
     subsection (f)(2)(B)(ii) or in subparagraph (B), (C), or (D) 
     of section 6901(b)(4) of the Omnibus Budget Reconciliation 
     Act of 1989.
       ``(B) Information in registry.--The registry under 
     subparagraph (A) shall provide for the inclusion of specific 
     documented findings by a State under subsection (g)(1)(C) of 
     resident neglect or abuse or misappropriation of resident 
     property involving an individual listed in the registry, as 
     well as any brief statement of the individual disputing the 
     findings. The State shall make available to the public 
     information in the registry. In the case of inquiries to the 
     registry concerning an individual listed in the registry, any 
     information disclosed concerning such a finding shall also 
     include disclosure of any such statement in the registry 
     relating to the finding or a clear and accurate summary of 
     such a statement.
       ``(C) Prohibition against charges.--A State may not impose 
     any charges on a nurse aide relating to the registry 
     established and maintained under subparagraph (A).
       ``(3) State appeals process for transfers and discharges.--
     The State must provide for a fair mechanism, meeting the 
     guidelines established under subsection (f)(3), for hearing 
     appeals on transfers and discharges of residents of such 
     facilities.
       ``(4) Nursing facility administrator standards.--The State 
     must implement and enforce the nursing facility administrator 
     standards developed under subsection (f)(4) respecting the 
     qualification of administrators of nursing facilities. Any 
     such standards promulgated shall apply to administrators of 
     hospital-based facilities as well as administrators of 
     freestanding facilities.
       ``(5) Specification of resident assessment instrument.--The 
     State shall specify the instrument to be used by nursing 
     facilities in the State in complying with the requirement of 
     subsection (b)(3)(A)(iii).
       ``(6) Notice of medigrant rights.--Each State shall develop 
     (and periodically update) a 

[[Page H 13443]]
     written notice of the rights and obligations of residents of nursing 
     facilities (and spouses of such residents) under this title.
       ``(7) State requirements for preadmission screening and 
     resident review.--
       ``(A) Preadmission screening.--
       ``(i) In general.--The State must have in effect a 
     preadmission screening program, for identifying mentally ill 
     and mentally retarded individuals (as defined in subparagraph 
     (B)) who are admitted to nursing facilities.
       ``(ii) State requirement for resident review.--The State 
     shall notify the State mental health authority or the State 
     mental retardation or developmental disability authority, as 
     appropriate, of the individuals so identified.
       ``(B) Definitions.--In this paragraph:
       ``(i) An individual is considered to be `mentally ill' if 
     the individual has a serious mental illness (as defined by 
     the Secretary in consultation with the National Institute of 
     Mental Health) and does not have a primary diagnosis of 
     dementia (including Alzheimer's disease or a related 
     disorder) or a diagnosis (other than a primary diagnosis) of 
     dementia and a primary diagnosis that is not a serious mental 
     illness.
       ``(ii) An individual is considered to be `mentally 
     retarded' if the individual is mentally retarded or a person 
     with a related condition.
       ``(f) Responsibilities Relating to Nursing Facility 
     Requirements.--
       ``(1) General responsibility.--It is the duty and 
     responsibility of a State with a MediGrant plan under this 
     title to assure that requirements which govern the provision 
     of care in nursing facilities under the plan, and the 
     enforcement of such requirements, are adequate to protect the 
     health, safety, welfare, and rights of residents and to 
     promote the effective and efficient use of public moneys.
       ``(2) Requirements for nurse aide training and competency 
     evaluation programs and for nurse aide competency evaluation 
     programs.--For purposes of subsections (b)(5) and (e)(1)(A), 
     the State shall establish--
       ``(A) requirements for the approval of nurse aide training 
     and competency evaluation programs, including requirements 
     relating to (i) the areas to be covered in such a program 
     (including at least basic nursing skills, personal care 
     skills, recognition of mental health and social service 
     needs, care of cognitively impaired residents, basic 
     restorative services, and residents' rights) and content of 
     the curriculum, (ii) minimum hours of initial and ongoing 
     training and retraining, (iii) qualifications of instructors, 
     and (iv) procedures for determination of competency;
       ``(B) requirements for the approval of nurse aide 
     competency evaluation programs, including requirement 
     relating to the areas to be covered in such a program, 
     including at least basic nursing skills, personal care 
     skills, recognition of mental health and social service 
     needs, care of cognitively impaired residents, basic 
     restorative services, and residents' rights, and procedures 
     for determination of competency;
       ``(C) requirements respecting the minimum frequency and 
     methodology to be used by a State in reviewing such programs' 
     compliance with the requirements for such programs; and
       ``(D) requirements, under both such programs, that--
       ``(i) provide procedures for determining competency that 
     permit a nurse aide, at the nurse aide's option, to establish 
     competency through procedures or methods other than the 
     passing of a written examination and to have the competency 
     evaluation conducted at the nursing facility at which the 
     aide is (or will be) employed, and
       ``(ii) prohibit the imposition on a nurse aide who is 
     employed by (or who has received an offer of employment from) 
     a facility on the date on which the aide begins either such 
     program of any charges (including any charges for textbooks 
     and other required course materials and any charges for the 
     competency evaluation) for either such program.
       ``(3) Qualification of administrators.--For purposes of 
     subsections (d)(1)(C) and (e)(4), the State shall develop 
     standards to be applied in assuring the qualifications of 
     administrators of nursing facilities. Any such standards must 
     apply to administrators of hospital-based facilities as well 
     as administrators of freestanding facilities.
       ``(g) Survey and Certification Process.--
       ``(1) State and federal responsibility.--
       ``(A) In general.--Under each State MediGrant plan under 
     this title, the State shall be responsible for certifying, in 
     accordance with surveys conducted under paragraph (2), the 
     compliance of nursing facilities with the requirements of 
     subsections (b), (c), and (d). The Secretary shall be 
     responsible for certifying, in accordance with surveys 
     conducted under paragraph (2), the compliance of State 
     nursing facilities with the requirements of such subsections.
       ``(B) Investigation of allegations of resident neglect and 
     abuse and misappropriation of resident property.--The State 
     shall provide, through the agency responsible for surveys and 
     certification of nursing facilities under this subsection, 
     for a process for the receipt and timely review and 
     investigation of allegations of neglect and abuse and 
     misappropriation of resident property by a nurse aide of a 
     resident in a nursing facility or by another individual used 
     by the facility in providing services to such a resident. The 
     State shall, after notice to the individual involved and a 
     reasonable opportunity for a hearing for the individual to 
     rebut allegations, make a finding as to the accuracy of the 
     allegations. If the State finds that a nurse aide has 
     neglected or abused a resident or misappropriated resident 
     property in a facility, the State shall notify the nurse aide 
     and the registry of such finding. If the State finds that any 
     other individual used by the facility has neglected or abused 
     a resident or misappropriated resident property in a 
     facility, the State shall notify the appropriate licensure 
     authority. A State shall not make a finding that an 
     individual has neglected a resident if the individual 
     demonstrates that such neglect was caused by factors beyond 
     the control of the individual.
       ``(2) Surveys.--
       ``(A) Annual standard survey.--
       ``(i) In general.--Each nursing facility shall be subject 
     to a standard survey, to be conducted without any prior 
     notice to the facility. Any individual who notifies (or 
     causes to be notified) a nursing facility of the time or date 
     on which such a survey is scheduled to be conducted is 
     subject to a civil money penalty of not to exceed $2,000. The 
     provisions of section 1128A (other than subsections (a) and 
     (b)) shall apply to a civil money penalty under the previous 
     sentence in the same manner as such provisions apply to a 
     penalty or proceeding under section 1128A(a). The State shall 
     take all reasonable steps to avoid giving notice of such a 
     survey through the scheduling procedures and the conduct of 
     the surveys themselves.
       ``(ii) Contents.--Each standard survey shall include, for a 
     case-mix stratified sample of residents--

       ``(I) a survey of the quality of care furnished, as 
     measured by indicators of medical, nursing, and 
     rehabilitative care, dietary and nutrition services, 
     activities and social participation, and sanitation, 
     infection control, and the physical environment,
       ``(II) written plans of care provided under subsection 
     (b)(2) and an audit of the residents' assessments under 
     subsection (b)(3) to determine the accuracy of such 
     assessments and the adequacy of such plans of care, and
       ``(III) a review of compliance with residents' rights under 
     subsection (c).

       ``(iii) Frequency.--

       ``(I) In general.--Each nursing facility shall be subject 
     to a standard survey not later than 24 months after the date 
     of the previous standard survey conducted under this 
     subparagraph, except that in the case of a facility which has 
     been subjected to an extended survey under subparagraph (B), 
     a standard survey shall be conducted not later than 12 months 
     after the date of the preceding extended survey.
       ``(II) Special surveys.--If not otherwise conducted under 
     subclause (I), a standard survey (or an abbreviated standard 
     survey) may be conducted within 4 months of any change of 
     ownership, administration, management of a nursing facility, 
     or director of nursing in order to determine whether the 
     change has resulted in any decline in the quality of care 
     furnished in the facility.

       ``(B) Extended surveys.--
       ``(i) In general.--Each nursing facility which is found, 
     under a standard survey, to have provided substandard quality 
     of care shall be subject to an extended survey. Any other 
     facility may, at the State's discretion, be subject to such 
     an extended survey (or a partial extended survey).
       ``(ii) Timing.--The extended survey shall be conducted 
     immediately after the standard survey (or, if not 
     practicable, not later than 2 weeks after the date of 
     completion of the standard survey).
       ``(iii) Contents.--In such an extended survey, the survey 
     team shall review and identify the policies and procedures 
     which produced such substandard quality of care and shall 
     determine whether the facility has complied with all the 
     requirements described in subsections (b), (c), and (d). Such 
     review shall include an expansion of the size of the sample 
     of residents' assessments reviewed and a review of the 
     staffing, of in-service training, and, if appropriate, of 
     contracts with consultants.
       ``(iv) Construction.--Nothing in this paragraph shall be 
     construed as requiring an extended or partial extended survey 
     as a prerequisite to imposing a sanction against a facility 
     under subsection (h) on the basis of findings in a standard 
     survey.
       ``(C) Survey protocol.--Standard and extended surveys shall 
     be conducted--
       ``(i) based upon the protocol which the Secretary has 
     developed, tested, and validated, as of the date of the 
     enactment of this title, and
       ``(ii) by individuals, of a survey team, who meet such 
     minimum qualifications as the State establishes.
       ``(D) Consistency of surveys.--Each State shall implement 
     programs to measure and reduce inconsistency in the 
     application of survey results among surveyors.
       ``(E) Survey teams.--
       ``(i) In general.--Surveys under this subsection shall be 
     conducted by a multidisciplinary team of professionals 
     (including a registered professional nurse).
       ``(ii) Prohibition of conflicts of interest.--A State may 
     not use as a member of a survey team under this subsection an 
     individual who is serving (or has served within the previous 
     2 years) as a member of the staff of, or as a consultant to, 
     the facility surveyed respecting compliance with the 
     requirements of subsections (b), (c), and (d), or who has a 
     personal or familial financial interest in the facility being 
     surveyed.
       ``(3) Validation surveys.--
       ``(A) In general.--The Secretary shall conduct onsite 
     surveys of a representative sample of nursing facilities in 
     each State, within 4 months of the date of surveys conducted 
     under paragraph (2) by the State, in a sufficient number to 
     allow inferences about the adequacies of each State's surveys 
     conducted under paragraph (2). In conducting such surveys, 
     the Secretary shall use the same survey protocols as the 
     State is required to use under paragraph (2). If the State 
     has determined that an individual nursing facility meets the 
     requirements of subsections (b), (c), and (d), but the 
     Secretary determines that the facility does not meet such 
     requirements, the Secretary's determination as to the 
     facility's noncompliance with such requirements is binding 
     and supersedes that of the State survey.

[[Page H 13444]]

       ``(B) Scope.--With respect to each State, the Secretary 
     shall conduct surveys under subparagraph (A) at least every 
     third year with respect to at least 5 percent of the number 
     of nursing facilities surveyed by the State in the year, but 
     in no case less than 5 nursing facilities in the State.
       ``(C) Special surveys of compliance.--Where the Secretary 
     has found substantial evidence of a pattern of noncompliance 
     by a nursing facility with any of the requirements of 
     subsections (b), (c), and (d), the Secretary may conduct a 
     survey of the facility and, on the basis of that survey, make 
     determinations concerning the extent to which the nursing 
     facility meets such requirements.
       ``(4) Investigation of complaints and monitoring nursing 
     facility compliance.--Each State shall maintain procedures 
     and adequate staff to--
       ``(A) investigate complaints of violations of requirements 
     by nursing facilities, and
       ``(B) monitor, on-site, on a regular, as needed basis, a 
     nursing facility's compliance with the requirements of 
     subsections (b), (c), and (d), if--
       ``(i) the facility has been found not to be in compliance 
     with such requirements and is in the process of correcting 
     deficiencies to achieve such compliance;
       ``(ii) the facility was previously found not to be in 
     compliance with such requirements, has corrected deficiencies 
     to achieve such compliance, and verification of continued 
     compliance is indicated; or
       ``(iii) the State has reason to question the compliance of 
     the facility with such requirements.
       ``(5) Disclosure of results of inspections and 
     activities.--
       ``(A) Public information.--Each State, and the Secretary, 
     shall make available to the public--
       ``(i) information respecting all surveys and certifications 
     made respecting nursing facilities, including statements of 
     deficiencies, within a reasonable time after such information 
     is made available to those facilities, and approved plans of 
     correction,
       ``(ii) copies of cost reports of such facilities filed 
     under this title or under title XVIII,
       ``(iii) copies of statements of ownership under section 
     1124, and
       ``(iv) information disclosed under section 1126.
       ``(B) Notice to ombudsman.--Each State shall notify the 
     State long-term care ombudsman (established under title III 
     or VII of the Older Americans Act of 1965 in accordance with 
     section 712 of the Act) of the State's findings of 
     noncompliance with any of the requirements of subsections 
     (b), (c), and (d), or of any adverse action taken against a 
     nursing facility under paragraphs (1), (2), or (3) of 
     subsection (h), with respect to a nursing facility in the 
     State.
       ``(C) Notice to physicians and nursing facility 
     administrator licensing board.--If a State finds that a 
     nursing facility has provided substandard quality of care, 
     the State shall notify--
       ``(i) the attending physician of each resident with respect 
     to which such finding is made, and
       ``(ii) any State board responsible for the licensing of the 
     nursing facility administrator of the facility.
       ``(D) Access to fraud control units.--Each State shall 
     provide its State MediGrant fraud and abuse control unit 
     (established under section 2134) with access to all 
     information of the State agency responsible for surveys and 
     certifications under this subsection.
       ``(h) Enforcement Process.--
       ``(1) In general.--If a State finds, on the basis of a 
     standard, extended, or partial extended survey under 
     subsection (g)(2) or otherwise, that a nursing facility no 
     longer meets a requirement of subsection (b), (c), or (d)--
       ``(A) the State shall require the facility to correct the 
     deficiency involved;
       ``(B) if the State finds that the facility's deficiencies 
     immediately jeopardize the health or safety of its residents, 
     the State shall take immediate action to remove the jeopardy 
     and correct the deficiencies through the remedy specified in 
     paragraph (2)(A)(iii), or terminate the facility's 
     participation under the State MediGrant plan and may provide, 
     in addition, for one or more of the other remedies described 
     in paragraph (2); and
       ``(C) if the State finds that the facility's deficiencies 
     do not immediately jeopardize the health or safety of its 
     residents, the State may--
       ``(i) terminate the facility's participation under the 
     State MediGrant plan,
       ``(ii) provide for one or more of the remedies described in 
     paragraph (2), or
       ``(iii) do both.
       ``(2) Specified remedies.--
       ``(A) Listing.--Except as provided in subparagraph (B), 
     each State shall establish by law (whether statute or 
     regulation) at least the following remedies:
       ``(i) Denial of payment under the State MediGrant plan with 
     respect to any individual admitted to the nursing facility 
     involved after such notice to the public and to the facility 
     as may be provided for by the State.
       ``(ii) A civil money penalty assessed and collected, with 
     interest, for each day in which the facility is or was out of 
     compliance with a requirement of subsection (b), (c), or (d).
       ``(iii) The appointment of temporary management to oversee 
     the operation of the facility and to assure the health and 
     safety of the facility's residents, where there is a need for 
     temporary management while--

       ``(I) there is an orderly closure of the facility, or
       ``(II) improvements are made in order to bring the facility 
     into compliance with all the requirements of subsections (b), 
     (c), and (d).

     The temporary management under this clause shall not be 
     terminated under subclause (II) until the State has 
     determined that the facility has the management capability to 
     ensure continued compliance with all the requirements of 
     subsections (b), (c), and (d).
       ``(iv) The authority, in the case of an emergency, to close 
     the facility, to transfer residents in that facility to other 
     facilities, or both.

     The State also shall specify criteria, as to when and how 
     each of such remedies is to be applied, the amounts of any 
     fines, and the severity of each of these remedies, to be used 
     in the imposition of such remedies.
       ``(B) Alternative remedies.--A State may establish 
     alternative remedies to the remedies described in 
     subparagraph (A), if the State demonstrates to the 
     Secretary's satisfaction that the alternative remedies are as 
     effective in deterring noncompliance and correcting 
     deficiencies as those described in such subparagraph.
       ``(C) Assuring prompt compliance.--If a nursing facility 
     has not complied with any of the requirements of subsections 
     (b), (c), and (d), within 3 months after the date the 
     facility is found to be out of compliance with such 
     requirements, the State may impose the remedy described in 
     subparagraph (A)(i) for all individuals who are admitted to 
     the facility after such date.
       ``(D) Repeated noncompliance.--In the case of a nursing 
     facility which, on 3 consecutive standard surveys conducted 
     under subsection (g)(2), has been found to have provided 
     substandard quality of care, the State shall (regardless of 
     what other remedies are provided)--
       ``(i) impose the remedy described in subparagraph (A)(i), 
     and
       ``(ii) monitor the facility under subsection (g)(4)(B),

     until the facility has demonstrated, to the satisfaction of 
     the State, that it is in compliance with the requirements of 
     subsections (b), (c), and (d), and that it will remain in 
     compliance with such requirements.
       ``(3) Secretarial authority.--
       ``(A) For state nursing facilities.--With respect to a 
     State nursing facility, the Secretary shall have the 
     authority and duties of a State under this subsection. 
     Nothing in this subparagraph shall be construed as 
     restricting the remedies available to the Secretary to remedy 
     a nursing facility's deficiencies.
       ``(B) Other nursing facilities.--With respect to any other 
     nursing facility in a State, if the Secretary finds that a 
     nursing facility no longer meets a requirement of subsection 
     (b), (c), or (d), the Secretary shall notify the State of 
     such deficiency. If, after a reasonable period of time after 
     such notification is given, the Secretary finds that the 
     State has failed to carry out the requirements of paragraph 
     (1)(A) or paragraph (1)(B) (if appropriate) with respect to 
     the deficiency involved, or that the deficiency remains 
     uncorrected--
       ``(i) the Secretary shall require the facility to correct 
     the deficiency involved;
       ``(ii) if the Secretary finds that the deficiency involved 
     immediately jeopardizes the health or safety of its 
     residents, the Secretary shall, in consultation with the 
     State, take action to remove the jeopardy and correct the 
     deficiencies through the remedy specified in subparagraph 
     (C)(iii), or terminate the facility's participation under the 
     State MediGrant plan and may provide, in addition, for one or 
     more of the other remedies described in subparagraph (C); and
       ``(iii) in the case of a deficiency that remains 
     uncorrected, if the Secretary finds that the deficiency 
     involved does not immediately jeopardize the health or safety 
     of its residents, the Secretary may impose any of the 
     remedies described in subparagraph (C).
       ``(C) Specified remedies.--The remedies specified in this 
     subparagraph are as follows:
       ``(i) Denial of payment.--Denial of any further payments to 
     the State in accordance with section 2154(f) for medical 
     assistance furnished by the facility to all individuals in 
     the facility or to individuals admitted to the facility after 
     the effective date of the finding.
       ``(ii) Authority with respect to civil money penalties.--
     Imposition of a civil money penalty against the facility in 
     an amount not to exceed $5,000 for each day of noncompliance. 
     The provisions of section 1128A (other than subsections (a) 
     and (b)) shall apply to a civil money penalty under the 
     previous sentence in the same manner as such provisions apply 
     to a penalty or proceeding under section 1128A(a).
       ``(iii) Appointment of temporary management.--Appointment 
     of temporary management (in consultation with the State) to 
     oversee the operation of the facility and to assure the 
     health and safety of the facility's residents, where there is 
     a need for temporary management while--

       ``(I) there is an orderly closure of the facility, or
       ``(II) improvements are made in order to bring the facility 
     into compliance with all the requirements of subsections (b), 
     (c), and (d).

     The temporary management under this clause shall not be 
     terminated under subclause (II) until the Secretary has 
     determined that the facility has the management capability to 
     ensure continued compliance with all the requirements of 
     subsections (b), (c), and (d).
     The Secretary shall specify criteria, as to when and how each 
     of such remedies is to be applied, the amounts of any fines, 
     and the severity of each of these remedies, to be used in the 
     imposition of such remedies.
       ``(4) Special rules regarding payments to facilities.--
       ``(A) Continuation of payments pending remediation.--The 
     State or the Secretary, as appropriate, may continue 
     payments, over a period of not longer than 6 months after the 
     effective date of the findings, under this title with respect 
     to a nursing facility not in compliance with a requirement of 
     subsection (b), (c), or (d).
       ``(B) Effective period of denial of payment.--A finding to 
     deny payment under this subsection shall terminate when the 
     State or 

[[Page H 13445]]
     Secretary (as the case may be) finds that the facility is in 
     substantial compliance with all the requirements of 
     subsections (b), (c), and (d).
       ``(5) Construction.--The remedies provided under this 
     subsection are in addition to those otherwise available under 
     Federal or State law and shall not be construed as limiting 
     such other remedies, including any remedy available to an 
     individual at common law. The provisions of this subsection 
     shall apply to a nursing facility (or portion thereof) 
     notwithstanding that the facility (or portion thereof) also 
     is a skilled nursing facility for purposes of title XVIII or 
     is accredited by an entity pursuant to subsection (i)(2).
       ``(6) Sharing of information.--Notwithstanding any other 
     provision of law, all information concerning nursing 
     facilities required by this section to be filed with the 
     Secretary or a State agency shall be made available by such 
     facilities to Federal or State employees for purposes 
     consistent with the effective administration of programs 
     established under this title and title XVIII, including 
     investigations by State MediGrant fraud control units.
       ``(i) Construction.--
       ``(1) Medicare requirements.--Where requirements or 
     obligations under this section are identical to those 
     provided under section 1819 of this Act, the fulfillment of 
     those requirements or obligations under section 1819 shall be 
     considered to be the fulfillment of the corresponding 
     requirements or obligations under this section.
       ``(2) Effect of accreditation.--
       ``(A) In general.--At the option of a State, or the 
     Secretary, as appropriate, if a nursing facility in the State 
     is accredited by a national accrediting entity meeting such 
     standards as the State or the Secretary may impose, such 
     facility shall be deemed to have met the requirements of this 
     section and the State shall be deemed to have met the survey 
     and certification requirements under subsection (g).
       ``(B) Requirement for accrediting entity.--A State or the 
     Secretary, as appropriate, may not find that an accrediting 
     entity meets standards under subparagraph (A) unless such 
     entity applies standards for accreditation for facilities 
     that meet or exceed the requirements of this section.

     ``SEC. 2138. OTHER PROVISIONS PROMOTING PROGRAM INTEGRITY.

       ``(a) Public Access to Survey Results.--Each MediGrant 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 MediGrant 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.
       ``(c) Quality Assurance.--Each MediGrant plan shall provide 
     a program to assure the quality of services provided under 
     the plan, including such services provided to individuals 
     with chronic mental or physical illness.

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

     ``SEC. 2151. SUBMITTAL AND APPROVAL OF MEDIGRANT PLANS.

       ``(a) Submittal.--As a condition of receiving funding under 
     part C, each State shall submit to the Secretary a MediGrant 
     plan that meets the applicable requirements of this title.
       ``(b) Approval.--Except as the Secretary may provide under 
     section 2154, a MediGrant 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 MediGrant plan at any time through 
     transmittal of a plan amendment under this section.
       ``(b) Approval.--Except as the Secretary may provide under 
     section 2154, an amendment to a MediGrant 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 a MediGrant 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 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) 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. PROCESS FOR STATE WITHDRAWAL FROM PROGRAM.

       ``(a) In General.--A State may rescind its MediGrant plan 
     and discontinue participation in the program under this title 
     at any time after providing--
       ``(1) the public with 90 days prior notice in a publication 
     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, and
       ``(2) the Secretary with 90 days prior written notice.
       ``(b) Effective Date.--Such discontinuation shall not apply 
     to payments under part C for expenditures made for items and 
     services furnished under the MediGrant plan before the 
     effective date of the discontinuation.
       ``(c) Proration of Allotments.--In the case of any 
     withdrawal under this section other than at the end of a 
     Federal fiscal year, notwithstanding any provision of section 
     2121 to the contrary, the Secretary shall provide for such 
     appropriate proration of the application of allotments under 
     section 2121 as is appropriate.

     ``SEC. 2154. SANCTIONS FOR NONCOMPLIANCE.

       ``(a) Prompt Review of Plan Submittals.--The Secretary 
     shall promptly review MediGrant 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 MediGrant 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 MediGrant 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 MediGrant 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 
     MediGrant 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 MediGrant plan (or amendment to such a plan) or the 
     administration of the MediGrant plan is considered to 
     `substantially violate' a requirement of this title if a 
     provision of the plan or amendment (or an 

[[Page H 13446]]
     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 MediGrant 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 MediGrant 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 MediGrant 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 MediGrant 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 MediGrant 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 MediGrant 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. 
     Only the Secretary, in accordance with this title, may compel 
     a State under Federal law to comply with the provisions of 
     this title or a MediGrant plan, or otherwise enforce a 
     provision of this title against a State, and no action may be 
     filed under Federal law against a State in relation to the 
     State's compliance, or failure to comply, with the provisions 
     of this title or of a MediGrant plan except by the Secretary 
     as provided under this subsection.
       ``(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 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 MediGrant 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.
       ``(g) Individual Complaint Process.--The Secretary shall 
     provide for a process under which an individual may notify 
     the Secretary concerning a State's failure to provide medical 
     assistance as required under the State MediGrant plan or 
     otherwise comply with the requirements of this title or such 
     plan. If the Secretary finds that there is a pattern of 
     complaints with respect to a State or that a particular 
     failure or finding of noncompliance is egregious, the 
     Secretary shall notify the chief executive officer of the 
     State of such finding and shall notify the Congress if the 
     State fails to respond to such notification within a 
     reasonable period of time.

     ``SEC. 2155. 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 MediGrant plan (or amendments to 
     a MediGrant plan) or the compliance of a MediGrant 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 2154.
       ``(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 MediGrant plans (or amendments to 
     such plans) or the compliance of a MediGrant 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 rulemaking, 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.--For purposes of this title, the 
     term `medical assistance' means payment of part or all of the 
     cost of any of the following, or assistance in the purchase, 
     in whole or in part, of health benefit coverage that includes 
     any of the following, for eligible low-

[[Page H 13447]]
     income individuals (as defined in subsection (b)) as specified under 
     the MediGrant plan:
       ``(1) Inpatient hospital services.
       ``(2) Outpatient hospital services.
       ``(3) Physician services.
       ``(4) Surgical services.
       ``(5) Clinic services and other ambulatory health care 
     services.
       ``(6) Nursing facility services.
       ``(7) Intermediate care facility services for the mentally 
     retarded.
       ``(8) Prescription drugs and biologicals and the 
     administration of such drugs and biologicals, only if such 
     drugs and biologicals are not furnished for the purpose of 
     causing, or assisting in causing, the death, suicide, 
     euthanasia, or mercy killing of a person.
       ``(9) Over-the-counter medications.
       ``(10) Laboratory and radiological services.
       ``(11) Family planning services and supplies.
       ``(12) 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.
       ``(13) Outpatient mental health services, including 
     services furnished in a State-operated mental hospital and 
     including community-based services in the case of a child.
       ``(14) Durable medical equipment and other medically-
     related or remedial devices (such as prosthetic devices, 
     implants, eyeglasses, hearing aids, dental devices, and 
     adaptive devices).
       ``(15) Disposable medical supplies.
       ``(16) Home and community-based health care 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).
       ``(17) Community supported living arrangements.
       ``(18) 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.
       ``(19) Abortion only if necessary to save the life of the 
     mother or if the pregnancy is the result of an act of rape or 
     incest.
       ``(20) Dental services.
       ``(21) Inpatient substance abuse treatment services and 
     residential substance abuse treatment services.
       ``(22) Outpatient substance abuse treatment services.
       ``(23) Case management services.
       ``(24) Care coordination services.
       ``(25) Physical therapy, occupational therapy, and services 
     for individuals with speech, hearing, and language disorders.
       ``(26) Hospice care.
       ``(27) 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 only if the 
     service is--
       ``(A) prescribed by or furnished by a physician or other 
     licensed or registered practitioner within the scope of 
     practice as defined by State law,
       ``(B) performed under the general supervision or at the 
     direction of a physician, or
       ``(C) 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.
       ``(28) Premiums for private health care insurance coverage, 
     including private long-term care insurance coverage.
       ``(29) Medical transportation.
       ``(30) Medicare cost-sharing (as defined in subsection 
     (c)).
       ``(31) Enabling services (such as transportation, 
     translation, and outreach services) only if designed to 
     increase the accessibility of primary and preventive health 
     care services for eligible low-income individuals.
       ``(32) Any other health care services or items specified by 
     the Secretary and not excluded under this section.
       ``(b) Eligible Low-Income Individual.--
       ``(1) In general.--The term `eligible low-income 
     individual' means an individual--
       ``(A) who has been determined eligible by the State for 
     medical assistance under the MediGrant plan and is not an 
     inmate of a public institution (except as a patient in a 
     State psychiatric hospital), and
       ``(B) whose family income (as determined under the plan) 
     does not exceed a percentage (specified in the MediGrant plan 
     and not to exceed 275 percent) of the poverty line for a 
     family of the size involved.
       ``(2) Amount of income.--In determining the amount of 
     income under paragraph (1)(B), a State may exclude costs 
     incurred for medical care or other types of remedial care 
     recognized by the State.
       ``(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 sections 1813 and 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 
     MedicarePlus organization under part C 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) Elderly individual.--The term `elderly individual' 
     means an individual who has attained retirement age, as 
     defined under section 216(l)(1).
       ``(3) 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).
       ``(4) Pregnant woman.--The term `pregnant woman' includes a 
     woman during the 60-day period beginning on the last day of 
     the pregnancy.

     ``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--
       ``(1) the applicable 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 section 2171(a) and 
     medically-related services (as defined in section 
     2112(e)(2)).

     ``SEC. 2173. DESCRIPTION OF TREATMENT OF INDIAN HEALTH 
                   SERVICE FACILITIES.

       ``In the case of a State in which one or more facilities of 
     the Indian Health Service are located, the MediGrant plan 
     shall include a description of--
       ``(1) what provision (if any) has been made for payment for 
     items and services furnished by such facilities, 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 1128B(d) (relating to criminal penalties for 
     certain additional charges).
       ``(6) Section 1132 (relating to periods within which claims 
     must be filed).

     ``SEC. 2175. MEDIGRANT MASTER DRUG REBATE AGREEMENTS.

       ``(a) Requirement for Manufacturer To Enter Into 
     Agreement.--
       ``(1) In general.--Pursuant to section 2123(f), 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 shall enter into and have in effect a 
     MediGrant master rebate agreement described in subsection (b) 
     with the Secretary on behalf of States electing to 
     participate in the agreement.
       ``(2) Coverage of drugs not covered under rebate 
     agreements.--Nothing in this section shall be construed to 
     prohibit a State in its discretion from providing coverage 
     under its MediGrant plan of a covered outpatient drug for 
     which no rebate agreement is in effect under this section.
       ``(3) Effect on existing agreements.--If a State has a 
     rebate agreement in effect with a manufacturer on the date of 
     the enactment of this section which provides for a minimum 
     aggregate rebate equal to or greater than the minimum 
     aggregate rebate which would otherwise be paid under the 
     MediGrant master agreement under this section, at the option 
     of the State--
       ``(A) such agreement shall be considered to meet the 
     requirements of the MediGrant master rebate agreement, and
       ``(B) the State shall be considered to have elected to 
     participate in the MediGrant master rebate agreement.
       ``(4) 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 provided that--
       ``(i) an entity is licensed by the State to purchase and 
     take possession of covered outpatient drugs and furnishes the 
     drugs to patients at a cost no greater than acquisition plus 
     such dispensing fee as may be allowable under a State 
     pharmaceutical assistance program, and
       ``(ii) such entity is certified pursuant to section 
     340B(a)(7) of such 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 

[[Page H 13448]]
     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.
       ``(b) Terms of Rebate Agreement.--
       ``(1) Periodic rebates.--The MediGrant master rebate 
     agreement under this section shall require the manufacturer 
     to provide, to the MediGrant plan of each State participating 
     in the agreement, a rebate for a rebate period in an amount 
     specified in subsection (c) for covered outpatient drugs of 
     the manufacturer dispensed after the effective date of the 
     agreement, for which payment was made under the 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.
       ``(2) State provision of information.--
       ``(A) State responsibility.--Each State participating in 
     the MediGrant master rebate agreement 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, for which 
     payment was made under the MediGrant 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 which is subject to 
     the MediGrant master rebate agreement 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, on the average 
     manufacturer price (as defined in subsection (i)(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 (i)(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 which is subject to the MediGrant master 
     rebate agreement 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 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 which is 
     subject to the MediGrant master rebate agreement, 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 
     section 2123(f) 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.--The MediGrant master rebate agreement 
     under this section 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 one year unless terminated 
     under subparagraph (B).
       ``(B) Termination.--
       ``(i) By the secretary.--The Secretary may provide for 
     termination of the MediGrant master rebate agreement with 
     respect to a manufacturer 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 its 
     participation in the MediGrant master 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 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 and section 1927.
       ``(B) State.--Each State, with respect to covered 
     outpatient drugs paid for under the State's MediGrant 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 MediGrant plan 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 with 
     respect to a State participating in the MediGrant master 
     rebate agreement for a rebate period (as defined in 
     subsection (i)(7)) 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 State MediGrant plan in the 
     rebate period (as reported by the State); and
       ``(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)) of such average manufacturer price,

     for the rebate period.
       ``(B) Minimum rebate percentage.--For purposes of 
     subparagraph (A)(ii)(II), the `minimum rebate percentage' is 
     15 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 

[[Page H 13449]]
     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 
     section 340B(a)(4) of the Public Health Service Act,
       ``(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,
       ``(III) shall not take into account prices that are merely 
     nominal in amount, and
       ``(IV) shall exclude rebates paid under this section or any 
     other rebates paid to a State participating in the MediGrant 
     master rebate agreement.

       ``(2) Additional rebate for single source and innovator 
     multiple source drugs.--
       ``(A) In general.--The amount of the rebate specified in 
     this subsection with respect to a State participating in the 
     MediGrant master rebate agreement 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 MediGrant 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 
     participating in the MediGrant master rebate agreement 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 MediGrant plan for the rebate period.
       ``(B) Applicable percentage defined.--For purposes of 
     subparagraph (A)(i), the `applicable percentage' is 11 
     percent.
       ``(4) Limitation on amount of rebate to amounts paid for 
     certain drugs.--
       ``(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 MediGrant 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.
       ``(d) Limitations on Coverage of Drugs by States 
     Participating in Master Agreement.--
       ``(1) Permissible restrictions.--A State participating in 
     the MediGrant master rebate agreement under this section 
     may--
       ``(A) subject to prior authorization under its MediGrant 
     plan any covered outpatient drug so long as any such prior 
     authorization program complies with the requirements of 
     paragraph (5); and
       ``(B) exclude or otherwise restrict coverage under its plan 
     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 
     the MediGrant master rebate agreement or any agreement 
     described in 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 by a State 
     participating in the MediGrant master rebate agreement:
       ``(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 update 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 participating 
     in the MediGrant master rebate agreement 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.
       ``(B) Except as provided in subparagraph (C), the formulary 
     includes the covered outpatient drugs of any manufacturer 
     which has entered into and complies with the 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 (i)(5)), 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 State MediGrant 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.--The 
     MediGrant plan of a State participating in the MediGrant 
     master rebate agreement 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, the approval of the drug before its 
     dispensing for any medically accepted indication (as defined 
     in subsection (i)(5)) 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 
     a 72-hour supply of a covered outpatient prescription drug in 
     an emergency situation (as defined by the Secretary).
       ``(6) Other permissible restrictions.--A State 
     participating in the MediGrant master rebate agreement 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) Drug Use Review.--
       ``(1) In general.--A State participating in the MediGrant 
     master 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.--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.

[[Page H 13450]]

       ``(f) 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 MediGrant 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.
       ``(g) 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.
       ``(h) Exemption for Capitated Health Care Organizations, 
     Hospitals, and Nursing Facilities.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     requirements of the MediGrant master 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 or facility'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.
       ``(i) Definitions.--In the 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 section 2171(a)(8), 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 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 a MediGrant plan 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 
     MediGrant 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) 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.
       ``(5) 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 
     following compendia:
       ``(A) American Hospital Formulary Service Drug Information.
       ``(B) United States Pharmacopeia-Drug Information.
       ``(C) American Medical Association Drug Evaluations.
       ``(D) The DRUGDEX Information System.
       ``(E) The peer-reviewed medical literature.
       ``(6) 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 an original 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 which is produced or 
     distributed under an original new drug 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) Definitions.--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.
       ``(7) 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.''.

     SEC. 7002. TERMINATION OF CURRENT PROGRAM AND TRANSITION.

       (a) Termination of Current Program; Limitation on Medicaid 
     Payments in Fiscal Year 1996.--
       (1) Repeal of title.--Title XIX of the Social Security Act 
     is repealed effective October 1, 1996, except that the repeal 
     of section 1928 of such Act is effective on the date of the 
     enactment of this Act and the succeeding two sections of such 
     title shall be effective during fiscal year 1996 in the same 
     manner and to the same extent as such sections were effective 
     during fiscal year 1995.
       (2) Limitation on obligation authority.--Notwithstanding 
     any other provision of such title--
       (A) Post-enactment, pre-medigrant.--Subject to subparagraph 
     (B), the Secretary of 

[[Page H 13451]]
     Health and Human Services (in this section referred to as the 
     ``Secretary'') may enter into obligations under such title 
     with any State (as defined for purposes of such title) for 
     expenses incurred after the date of the enactment of this Act 
     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) of the Social Security Act (as added 
     by section 7001).
       (B) None after medigrant.--The Secretary is not authorized 
     to enter into any obligation with any State under title XIX 
     of such Act for expenses incurred on or after the earlier 
     of--
       (i) October 1, 1996, or
       (ii) the first day of the first quarter on which the State 
     MediGrant plan under title XXI of such Act (as added by 
     section 7001) is first effective.
       (C) Agreement.--A State's submission of claims for payment 
     under section 1903 of such Act after the date of the 
     enactment of this Act with respect to which the limitation 
     described in subparagraph (A) applies is deemed to constitute 
     the State's acceptance of the obligation limitation under 
     such subparagraph (including the formula for computing the 
     amount of such obligation limitation).
       (D) Effect on medical assistance.--Effective on the date of 
     the enactment of this section--
       (i) except as provided in this paragraph, the Federal 
     Government has no obligation to provide payment with respect 
     to items and services provided under title XIX of the Social 
     Security Act, and
       (ii) such title and title XXI of such Act shall not be 
     construed as providing for an entitlement, under Federal law 
     in relation to the Federal Government, in an individual or 
     person (including any provider) at the time of provision or 
     receipt of services.
       (3) Requirement for timely submittal of claims.--No payment 
     shall be made to a State under title XIX of such Act with 
     respect to an obligation incurred before the date of the 
     enactment of this Act, 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 paragraph 
     (2) shall be construed as affecting the obligation of the 
     Federal Government to pay claims described in the previous 
     sentence.
       (b) Medicaid-to-MediGrant Transition Provisions.--
       (1) 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.
       (2) The repeal under subsection (a)(1) of section 1928 of 
     the Social Security Act shall not affect the distribution of 
     vaccines purchased and delivered to the States before the 
     date of the enactment of this Act. No vaccine may be 
     purchased after such date by the Federal Government or any 
     State under any contract under section 1928(d) of the Social 
     Security Act.
       (3) 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 MediGrant plan of the State title under 
     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.
       (4) 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 such title and which has not become 
     final as of such date shall be brought or continued.
       (5) 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) and section 2 of Public 
     Law 102-276 (as amended by section 13644 of the Omnibus 
     Budget Reconciliation Act of 1993) are each amended by 
     striking ``December 31, 1995'' and inserting ``October 1, 
     1996''.
       (c) Anti-Fraud Provisions.--Section 1128(h)(1) of the 
     Social Security Act (42 U.S.C. 1320a-7(h)(1)) is amended by 
     inserting ``or a MediGrant plan under title XXI'' after 
     ``title XIX''.
       (d) 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 heads of other Federal 
     agencies and the States (as defined in section 1101(a)(8) of 
     the Social Security Act for purposes of title XIX of such 
     Act), 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, this title.
       (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. 7003. MEDICARE/MEDIGRANT 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 MediGrant program under title XXI of such Act (in 
     this section referred to as the ``medicare and MediGrant 
     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 MediGrant programs to make the payments 
     required under subsection (d)(1).
       (2) Option to participate.--A State may not require an 
     individual eligible to receive items and services under the 
     medicare and MediGrant programs to participate in a 
     demonstration project under this section.
       (b) Establishment.--The Secretary shall make payments in 
     accordance with subsection (d) for the conduct of 
     demonstration projects that provide for integrated systems of 
     care in accordance with subsection (a). Not more than 10 
     demonstration projects shall be conducted under this section.
       (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 calendar 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 MediGrant programs and who have elected 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 MediGrant 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) an amount equal to the product 
     of (A) 100 percent minus the applicable Federal medical 
     assistance percentage (as defined in section 2122(e) of the 
     Social Security Act) for the State, and (B) the expenditures 
     under the project attributable to the MediGrant program for 
     items and services provided to chronically-ill elderly and 
     disabled beneficiaries who have elected to participate in the 
     demonstration.
       (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 MediGrant 
     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.
       (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. Such quality standards 
     shall include reporting requirements which contain 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 MediGrant and 
     medicare programs as a result of the demonstration project.
                          TITLE VIII--MEDICARE

     SEC. 8000. SHORT TITLE OF TITLE; AMENDMENTS AND REFERENCES TO 
                   OBRA; TABLE OF CONTENTS OF TITLE.

       (a) Short Title.--This title may be cited as the ``Medicare 
     Preservation Act of 1995''.
       (b) Amendments to Social Security Act.--Except as otherwise 
     specifically provided, whenever in this title an amendment is 
     expressed in terms of an amendment to or repeal of a section 
     or other provision, the reference shall be considered to be 
     made to that section or other provision of the Social 
     Security Act.

[[Page H 13452]]

       (c) References to OBRA.--In this title, the terms ``OBRA-
     1986'', ``OBRA-1987'', ``OBRA-1989'', ``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.
       (d) Table of Contents of Title.--The table of contents of 
     this title is as follows:

Sec. 8000. Short title of title; amendments and references to OBRA; 
              table of contents of title.

                    Subtitle A--MedicarePlus Program

                     ``Part C--MedicarePlus Program

                    Chapter 1--MedicarePlus Program

Sec. 8001. Establishment of MedicarePlus program.

                     ``Part C--MedicarePlus Program

``Sec. 1851. Eligibility, election, and enrollment.
``Sec. 1852. Benefits and beneficiary protections.
``Sec. 1853. Organizational and financial requirements for MedicarePlus 
              organizations; provider-sponsored organizations.
``Sec. 1854. Payments to MedicarePlus organizations.
``Sec. 1855. Premiums and rebates.
``Sec. 1856. Establishment of standards; certification of organizations 
              and plans.
``Sec. 1857. Contracts with MedicarePlus organizations.
``Sec. 1858. Standards for MedicarePlus and medicare information 
              transactions and data elements.
``Sec. 1859. Definitions; miscellaneous provisions.
Sec. 8002. Duplication and coordination of medicare-related plans.
Sec. 8003. Transitional rules for current medicare HMO program.

   Chapter 2--Special Rules for MedicarePlus Medical Savings Accounts

Sec. 8011. MedicarePlus MSA.
Sec. 8012. Certain rebates excluded from gross income.

             Chapter 3--Medicare Payment Review Commission

Sec. 8021. Medicare Payment Review Commission.

    Chapter 4--Treatment Of Hospitals Which Participate in Provider-
                        Sponsored Organizations

Sec. 8031. Treatment of hospitals which participate in provider-
              sponsored organizations.

           Subtitle B--Health Care Fraud and Abuse Prevention

               Chapter 1--Fraud And Abuse Control Program

Sec. 8101. Fraud and abuse control program.
Sec. 8102. Medicare integrity program.
Sec. 8103. Beneficiary incentive programs.
Sec. 8104. Application of certain health anti-fraud and abuse sanctions 
              to fraud and abuse against Federal health care programs.
Sec. 8105. Guidance regarding application of health care fraud and 
              abuse sanctions.

     Chapter 2--Revisions To Current Sanctions for Fraud and Abuse

Sec. 8111. Mandatory exclusion from participation in medicare and State 
              health care programs.
Sec. 8112. Establishment of minimum period of exclusion for certain 
              individuals and entities subject to permissive exclusion 
              from medicare and State health care programs.
Sec. 8113. Permissive exclusion of individuals with ownership or 
              control interest in sanctioned entities.
Sec. 8114. Sanctions against practitioners and persons for failure to 
              comply with statutory obligations.
Sec. 8115. Intermediate sanctions for medicare health maintenance 
              organizations.
Sec. 8116. Additional exception to anti-kickback penalties for 
              discounting and managed care arrangements.
Sec. 8117. Penalties for the fraudulent conversion of assets in order 
              to obtain State health care program benefits.
Sec. 8118. Effective date.

         Chapter 3--Administrative And Miscellaneous Provisions

Sec. 8121. Establishment of the health care fraud and abuse data 
              collection program.

                  Chapter 4--Civil Monetary Penalties

Sec. 8131. Social Security Act civil monetary penalties.
Sec. 8132. Clarification of level of intent required for imposition of 
              sanctions.
Sec. 8133. Penalty for false certification for home health services.

                 Chapter 5--Amendments To Criminal Law

Sec. 8141. Health care fraud.
Sec. 8142. Forfeitures for Federal health care offenses.
Sec. 8143. Injunctive relief relating to Federal health care offenses.
Sec. 8144. False Statements.
Sec. 8145. Obstruction of criminal investigations of Federal health 
              care offenses.
Sec. 8146. Theft or embezzlement.
Sec. 8147. Laundering of monetary instruments.
Sec. 8148. Authorized investigative demand procedures.

            Chapter 6--State Health Care Fraud Control Units

Sec. 8151. State health care fraud control units.

                     Subtitle C--Regulatory Relief

Sec. 8201. Repeal of physician ownership referral prohibitions based on 
              compensation arrangements.
Sec. 8202. Revision of designated health services subject to ownership 
              referral prohibition.
Sec. 8203. Delay in implementation of 1993 ownership referral changes 
              until promulgation of regulations.
Sec. 8204. Exceptions to ownership referral prohibitions.
Sec. 8205. Effective date.

Subtitle D--Modification in Payment Policies Regarding Graduate Medical 
                               Education

Sec. 8301. Indirect medical education payments.
Sec. 8302. Direct graduate medical education.

               Subtitle E--Provisions Relating to Part A

            Chapter 1--General Provisions Relating to Part A

Sec. 8401. PPS hospital payment update.
Sec. 8402. PPS-exempt hospital payments.
Sec. 8403. Reductions in disproportionate share payment adjustments.
Sec. 8404. Capital payments for PPS hospitals.
Sec. 8405. Reduction in payments to hospitals for enrollees' bad debts.
Sec. 8406. Increase in update for certain hospitals with a high 
              proportion of medicare patients.

           Chapter 2--Payments To Skilled Nursing Facilities


                 SUBCHAPTER A--PROSPECTIVE PAYMENT SYSTEM

Sec. 8410. Prospective payment system for skilled nursing facilities.


                   SUBCHAPTER B--INTERIM PAYMENT SYSTEM

Sec. 8411. Payments for routine service costs.
Sec. 8412. Cost-effective management of covered non-routine services.
Sec. 8413. Payments for routine service costs.
Sec. 8414. Reductions in payment for capital-related costs.
Sec. 8415. Treatment of items and services paid for under part B.
Sec. 8416. Medical review process.
Sec. 8417. Report by medicare payment review commission.
Sec. 8418. Effective date.

             Chapter 3--Other Provisions Relating to Part A

Sec. 8421. Payments for hospice services.
Sec. 8422. Permanent extension of hemophilia pass-through.

               Subtitle F--Provisions Relating to Part B

                       Chapter 1--Payment Reforms

Sec. 8501. Payments for physicians' services.
Sec. 8502. Elimination of formula-driven overpayments for certain 
              outpatient hospital services.
Sec. 8503. Extension of reductions in payments for costs of hospital 
              outpatient services.
Sec. 8504. Reduction in updates to payment amounts for clinical 
              diagnostic laboratory tests.
Sec. 8505. Payments for durable medical equipment.
Sec. 8506. Updates for ambulatory surgical services.
Sec. 8507. Payments for ambulance services.
Sec. 8508. Ensuring payment for physician and nurse for jointly 
              furnished anesthesia services.

                       Chapter 2--Part B Premium

Sec. 8511. Promoting solvency of part a trust fund through part b 
              premium.
Sec. 8512. Income-related reduction in medicare subsidy.

            Subtitle G--Provisions Relating to Parts A and B

              Chapter 1--Payments For Home Health Services

Sec. 8601. Payment for home health services.
Sec. 8602. Maintaining savings resulting from temporary freeze on 
              payment increases for home health services.
Sec. 8603. Extension of waiver of presumption of lack of knowledge of 
              exclusion from coverage for home health agencies.
Sec. 8604. Extension of period of home health agency certification.

             Part 2--Medicare Secondary Payer Improvements

Sec. 8611. Extension and expansion of existing requirements.
Sec. 8612. Improvements in recovery of payments.

        Chapter 3--Other Items and Services Under Parts A and B

Sec. 8621. Medicare coverage of certain anti-cancer drug treatments.
Sec. 8622. Administrative provisions.

                          Chapter 4--Failsafe

Sec. 8631. Failsafe budget mechanism.

                        Subtitle H--Rural Areas

Sec. 8701. Medicare-dependent, small, rural hospital payment extension.
Sec. 8702. Medicare rural hospital flexibility program.
Sec. 8703. Establishment of rural emergency access care hospitals.
Sec. 8704. Classification of rural referral centers.
Sec. 8705. Floor on area wage index.
Sec. 8706. Additional payments for physicians' services furnished in 
              shortage areas.
Sec. 8707. Payments to physician assistants and nurse practitioners for 
              services furnished in outpatient or home settings.
Sec. 8708. Expanding access to nurse aide training in underserved 
              areas.

[[Page H 13453]]

                    Subtitle A--MedicarePlus Program

                    CHAPTER 1--MEDICAREPLUS PROGRAM

     SEC. 8001. ESTABLISHMENT OF MEDICAREPLUS PROGRAM.

       (a) In General.--Title XVIII is amended by redesignating 
     part C as part D and by inserting after part B the following 
     new part:

                     ``Part C--MedicarePlus Program


                ``eligibility, election, and enrollment

       ``Sec. 1851. (a) Choice of Medicare Benefits Through 
     MedicarePlus Plans.--
       ``(1) In general.--Subject to the provisions of this 
     section, every MedicarePlus eligible individual (as defined 
     in paragraph (3)) is entitled to elect to receive benefits 
     under this title--
       ``(A) through the Medicare fee-for-service program under 
     parts A and B, or
       ``(B) through enrollment in a MedicarePlus plan under this 
     part.
       ``(2) Types of medicareplus plans that may be available.--A 
     MedicarePlus plan may be any of the following types of plans 
     of health insurance:
       ``(A) Coordinated care plans.--Private coordinated care 
     plans which provide health care services, including health 
     maintenance organization plans and preferred provider 
     organization plans.
       ``(B) Combination of high deductible plan and contributions 
     to high deductible medicare msa.--A high deductible plan, as 
     defined in section 1859(b)(2), and a contribution into a High 
     Deductible MedicarePlus medical savings account (MSA).
       ``(C) Plans offered by provider-sponsored organization.--A 
     MedicarePlus plan offered by a provider-sponsored 
     organization, as defined in section 1853(i).
       ``(D) Union, taft-hartley, and association plans.--A 
     MedicarePlus organization plan offered by a MedicarePlus 
     organization that is a union sponsor, Taft-Hartley sponsor, 
     or qualified association sponsor, as defined in section 
     1859(a).
       ``(E) Fee-for-service plans.--Plans that reimburse 
     hospitals, physicians, and other providers on the basis of a 
     privately determined fee schedule or other basis.
       ``(F) Other health care plans.--Any other private plan for 
     the delivery of health care items and services that is not 
     described in a previous subparagraph.
       ``(3) MedicarePlus eligible individual.--
       ``(A) In general.--In this title, subject to subparagraph 
     (B), the term `MedicarePlus 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 
     MedicarePlus plan may continue to be enrolled in that plan.
       ``(b) Special Rules.--
       ``(1) Residence requirement.--
       ``(A) In general.--Except as the Secretary may otherwise 
     provide, an individual is eligible to elect a MedicarePlus 
     plan offered by a MedicarePlus organization only if the 
     organization serves the geographic area in which the 
     individual resides under the plan.
       ``(B) Continuation of enrollment permitted.--Pursuant to 
     rules specified by the Secretary, the Secretary shall provide 
     that an individual may continue enrollment in a plan, 
     notwithstanding that the individual no longer resides in the 
     service area of the plan, so long as the plan provides 
     benefits for providers located in the area in which the 
     individual resides.
       ``(2) Affiliation requirements for certain plans.--
       ``(A) In general.--Subject to subparagraph (B), an 
     individual is eligible to elect a MedicarePlus plan offered 
     by--
       ``(i) a union sponsor only if (I) the individual is a 
     member of the sponsor and affiliated with the sponsor through 
     an employment relationship with any employer or is the spouse 
     of such a member, and (II) the individual elected under this 
     section a MedicarePlus plan offered by the sponsor during the 
     first enrollment period in which the individual was eligible 
     to make such election with respect to such sponsor;
       ``(ii) a Taft-Hartley sponsor only if (I) the individual is 
     entitled to obtain benefits through such plans under the 
     terms of an applicable collective bargaining agreement, and 
     (II) the individual elected under this section a MedicarePlus 
     plan offered by the sponsor during the first enrollment 
     period in which the individual was eligible to make such 
     election with respect to such sponsor; and
       ``(iii) a qualified association sponsor only if the 
     individual is a member of the association (or is a spouse of 
     such a member).
       ``(B) Limitation on enrollment.--Subject to subparagraph 
     (C)--
       ``(i) a union sponsor may not enroll an individual under 
     this part unless the individual is described in subparagraph 
     (A)(i)(I),
       ``(ii) a Taft-Hartley sponsor may not enroll an individual 
     under this part unless the individual is described in 
     subparagraph (A)(ii)(I), and
       ``(iii) a qualified association sponsor may not enroll an 
     individual under this part unless the individual is described 
     in subparagraph (A)(iii).
       ``(C) Limitation on termination of coverage.--A qualified 
     association sponsor offering a MedicarePlus plan to an 
     individual may not terminate coverage of the individual on 
     the basis that the individual is no longer a member of the 
     association except pursuant to a change of election during an 
     open election period occurring on or after the date of the 
     termination of membership.
       ``(3) Special rules for union, taft-hartley, and qualified 
     association sponsors.--
       ``(A) Unions.--Subject to subparagraph (D), a union sponsor 
     (as defined in section 1859(a)(5)) shall limit eligibility of 
     enrollees under this part for MedicarePlus plans it offers to 
     individuals who are members of the sponsor and affiliated 
     with the sponsor through an employment relationship with any 
     employer or are the spouses of such members.
       ``(B) Taft-hartley sponsors.--Subject to subparagraph (D), 
     a MedicarePlus organization that is a Taft-Hartley sponsor 
     (as defined in section 1859(a)(4)) shall limit eligibility of 
     enrollees under this part for MedicarePlus plans it offers to 
     individuals who are entitled to obtain benefits through such 
     plans under the terms of an applicable collective bargaining 
     agreement.
       ``(C) Qualified association sponsors.--
       ``(i) In general.--Subject to subparagraph (D), a 
     MedicarePlus organization that is a qualified association 
     sponsor (as defined in section 1859(a)(3)) shall limit 
     eligibility of individuals under this part for plans it 
     offers to individuals who are members of the association (or 
     who are spouses of such individuals).
       ``(ii) Limitation on termination of coverage.--Such a 
     qualifying association sponsor offering a MedicarePlus plan 
     to an individual may not terminate coverage of the individual 
     on the basis that the individual is no longer a member of the 
     association except pursuant to a change of election during an 
     open election period occurring on or after the date of the 
     termination of membership.
       ``(D) Limitation.--Rules of eligibility to carry out the 
     previous subparagraphs of this paragraph shall not have the 
     effect of denying eligibility to individuals on the basis of 
     health status, claims experience, receipt of health care, 
     medical history, or lack of evidence of insurability.
       ``(E) No reelection after disenrollment for certain 
     plans.--An individual is not eligible to elect a MedicarePlus 
     plan offered by a MedicarePlus organization that is a union 
     sponsor or a Taft-Hartley sponsor if the individual 
     previously had elected a MedicarePlus plan offered by the 
     organization and had subsequently discontinued election of 
     such a plan offered by the organization.
       ``(4) Special rule for certain individuals covered under 
     fehbp.--An individual who is enrolled in a health benefit 
     plan under chapter 89 of title 5, United States Code, is not 
     eligible to enroll in a high deductible plan until such time 
     as the Director of the Office of Management and Budget 
     certifies to the Secretary 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) Process for Exercising Choice.--
       ``(1) In general.--The Secretary shall establish a process 
     through which elections described in subsection (a) are made 
     and changed, including the form and manner in which such 
     elections are made and changed. Such elections shall be made 
     or changed only during coverage election periods specified 
     under subsection (e) and shall become effective as provided 
     in subsection (f).
       ``(2) Expedited implementation.--The Secretary shall 
     establish the process of electing coverage under this section 
     during the transition period (as defined in subsection 
     (e)(1)(B)) in such an expedited manner as will permit such an 
     election for MedicarePlus plans in an area as soon as such 
     plans become available in that area.
       ``(3) Coordination through medicareplus organizations.--
       ``(A) Enrollment.--Such process shall permit an individual 
     who wishes to elect a MedicarePlus plan offered by a 
     MedicarePlus organization to make such election through the 
     filing of an appropriate election form with the organization.
       ``(B) Disenrollment.--Such process shall permit an 
     individual, who has elected a MedicarePlus plan offered by a 
     MedicarePlus organization and who wishes to terminate such 
     election, to terminate such election through the filing of an 
     appropriate election form with the organization.
       ``(4) Default.--
       ``(A) Initial election.--
       ``(i) In general.--Subject to clause (ii), an individual 
     who fails to make an election during an initial election 
     period under subsection (e)(1) is deemed to have chosen the 
     Medicare fee-for-service program option.
       ``(ii) Seamless continuation of coverage.--The Secretary 
     shall establish procedures under which individuals who are 
     enrolled with a MedicarePlus organization at the time of the 
     initial election period and who fail to elect to receive 
     coverage other than through the organization are deemed to 
     have elected the MedicarePlus plan offered by the 
     organization (or, if the organization offers more than one 
     such plan, the MedicarePlus plan offered by the organization 
     with the lowest net monthly premium).
       ``(B) Continuing periods.--An individual who has made (or 
     is deemed to have made) an election under this section is 
     considered to have continued to make such election until such 
     time as--
       ``(i) the individual changes the election under this 
     section, or
       ``(ii) a MedicarePlus plan is discontinued, if the 
     individual had elected such plan at the time of the 
     discontinuation.
       ``(d) Providing Information To Promote Informed Choice.--
       ``(1) In general.--The Secretary shall provide for 
     activities under this subsection to broadly disseminate 
     information to medicare beneficiaries (and prospective 
     medicare beneficiaries) on the coverage options provided 
     under this section in order to promote an active, informed 
     selection among such options.
       ``(2) Provision of notice.--

[[Page H 13454]]

       ``(A) Open season notification.--At least 15 days before 
     the beginning of each annual, coordinated election period, 
     the Secretary shall mail to each MedicarePlus eligible 
     individual residing in an area the following:
       ``(i) General election information and information about 
     medicare fee-for-service program.--The general information 
     regarding election, benefits coverage, and procedures 
     described in paragraph (3).
       ``(ii) List of plans and comparison of plan options.--A 
     list identifying the MedicarePlus plans that are (or will be) 
     available to residents of the area (and their service areas) 
     and information, described in paragraph (4) and in 
     comparative form, concerning such plans.
       ``(iii) Medicareplus monthly capitation rate.--The amount 
     of the monthly MedicarePlus capitation rate for the area.
       ``(iv) Additional information.--Any other information that 
     the Secretary determines will assist the individual in making 
     the election under this section.
     The mailing of such information shall be coordinated with the 
     mailing of any annual notice under section 1804.
       ``(B) Notification to newly medicareplus eligible 
     individuals.--To the extent practicable, the Secretary shall, 
     not later than 2 months before the beginning of the initial 
     MedicarePlus enrollment period for an individual described in 
     subsection (e)(1)(A), mail to the individual the information 
     described in subparagraph (A).
       ``(C) Form.--The information disseminated under this 
     paragraph shall be written and formatted in the most easily 
     understandable manner possible.
       ``(D) Periodic updating.--The information described in 
     subparagraph (A) shall be updated on at least an annual basis 
     to reflect changes in the availability of MedicarePlus plans 
     and the benefits and monthly premiums (and net monthly 
     premiums) for such plans.
       ``(3) General election information and information about 
     medicare fee-for-service program.--General information under 
     this paragraph, with respect to coverage under this part 
     during a year, shall include the following:
       ``(A) Benefits.--A general description of the benefits 
     covered (and not covered) under the medicare fee-for-service 
     program under parts A and B, including--
       ``(i) covered items and services, and
       ``(ii) beneficiary cost sharing, such as deductibles, 
     coinsurance, and copayment amounts, and the beneficiary 
     liability for balance billing.
       ``(B) Part b premium.--The part B premium rates that will 
     be charged for part B coverage.
       ``(C) Election procedures.--Information and instructions on 
     how to exercise election options under this section.
       ``(D) Procedural rights.--The general description of 
     procedural rights (including grievance procedures) of 
     beneficiaries under the medicare fee-for-service program and 
     the MedicarePlus program.
       ``(E) Right of organization to terminate contract.--The 
     right of each MedicarePlus organization 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 MedicarePlus plan under this 
     part.
       ``(F) Use of 911 emergency number.--A statement that the 
     use of the 911 emergency telephone number is appropriate in 
     emergency situations and an explanation of what constitutes 
     an emergency situation.
       ``(4) Information comparing plan options.--Information 
     under this paragraph, with respect to a MedicarePlus plan for 
     a year, shall include the following:
       ``(A) Benefits.--The benefits covered under the plan, 
     including covered items and services beyond those provided 
     under the medicare fee-for-service program, any reductions in 
     beneficiary cost sharing, and any maximum limitations on out-
     of-pocket losses.
       ``(B) Premiums.--The monthly premium (and net monthly 
     premium, including any rebate) for the plan.
       ``(C) Quality.--(i) To the extent available, quality 
     indicators for the benefits under the plan (in comparison 
     with quality indicators under the Medicare fee-for-service 
     program under parts A and B in the area involved), 
     including--
       ``(I) disenrollment rates for medicare enrollees electing 
     to receive benefits through the plan for the previous 2 years 
     (excluding disenrollment due to death or moving outside the 
     plan's service area),
       ``(II) information on medicare enrollee satisfaction and 
     health outcomes, and
       ``(III) whether the plan is out of compliance with any 
     requirements of this part (as determined by the Secretary).
       ``(D) Supplemental coverage options.--Whether the 
     organization offering the plan offers optional supplemental 
     coverage.
       ``(5) Maintaining a toll-free number.--The Secretary shall 
     maintain a toll-free number for inquiries regarding 
     MedicarePlus options and the operation of part C in all areas 
     in which MedicarePlus plans are offered.
       ``(6) Use of nonfederal entities.--The Secretary shall, to 
     the maximum extent feasible, enter into contracts with 
     appropriate non-Federal entities to carry out activities 
     under this subsection.
       ``(7) Provision of information.--A MedicarePlus 
     organization shall provide the Secretary with such 
     information on the organization and each MedicarePlus plan it 
     offers as may be required for the preparation of the 
     information referred to in paragraph (2)(A).
       ``(e) Coverage Election Periods.--
       ``(1) Initial choice upon eligibility to make election.--
       ``(A) In general.--In the case of an individual who first 
     becomes entitled to benefits under part A and enrolled under 
     part B after the beginning of the transition period (as 
     defined in subparagraph (B)), the individual shall make the 
     election under this section during a period (of a duration 
     and beginning at a time specified by the Secretary) at the 
     first time the individual both is entitled to benefits under 
     part A and enrolled under part B. Such period shall be 
     specified in a manner so that, in the case of an individual 
     who elects a MedicarePlus plan during the period, coverage 
     under the plan becomes effective as of the first date on 
     which the individual may receive such coverage.
       ``(B) Transition period defined.--In this subsection, the 
     term `transition period' means, with respect to an individual 
     in an area, the period beginning on the first day of the 
     first month in which a MedicarePlus plan is first made 
     available to individuals in the area and ending with the 
     month preceding the beginning of the first annual, 
     coordinated election period under paragraph (3).
       ``(2) During transition period.--Subject to paragraph (6)--
       ``(A) Continuous open enrollment into a medicareplus 
     option.--During the transition period, a MedicarePlus 
     eligible individual who has elected the Medicare fee-for-
     service program option described in subsection (a)(1)(A) may 
     change such election to a MedicarePlus option described in 
     subsection (a)(1)(B) at any time.
       ``(B) Open disenrollment before end of transition period.--
       ``(i) In general.--During the transition period, an 
     individual who has elected a MedicarePlus option described in 
     subsection (a)(1)(B) for a MedicarePlus plan may change such 
     election to another MedicarePlus plan or to the Medicare fee-
     for-service program option described in subsection (a)(1)(A).
       ``(ii) Special rule.--During the transition period, an 
     individual who has elected a high deductible plan may not 
     change such election to a MedicarePlus plan that is not a 
     high deductible plan unless the individual has had such 
     election in effect for 12 consecutive months.
       ``(3) Annual, coordinated election period.--
       ``(A) In general.--Subject to paragraph (5), each 
     individual who is eligible to make an election under this 
     section may change such election during an annual, 
     coordinated election period.
       ``(B) Annual, coordinated election period.--For purposes of 
     this section, the term `annual, coordinated election period' 
     means, with respect to a calendar year (beginning with 1998), 
     the month of October before such year.
       ``(C) Medicareplus health fair during october, 1996.--In 
     the month of October, 1996, the Secretary shall provide for a 
     nationally coordinated educational and publicity campaign to 
     inform MedicarePlus eligible individuals about such plans and 
     the election process provided under this section (including 
     the annual, coordinated election periods that occur in 
     subsequent years).
       ``(4) Special 90-day disenrollment option.--
       ``(A) In general.--In the case of the first time an 
     individual elects any MedicarePlus plan (other than a high 
     deductible plan) offered by a particular MedicarePlus 
     organization under this section, the individual may change 
     such election through the filing of an appropriate notice 
     during the 90-day period beginning on the first day on which 
     the individual's coverage under the MedicarePlus plan under 
     such option becomes effective.
       ``(B) Limitation.--Subparagraph (A)--
       ``(i) shall only apply once for an individual with respect 
     to any particular organization, and
       ``(ii) may not apply more than twice for any individual in 
     a calendar year.
       ``(C) Effect of discontinuation of election.--An individual 
     who discontinues an election under subparagraph (A) may, 
     during the period specified by the Secretary, make a new 
     election under this subsection (a) (or, in the absence of 
     such an election, is deemed at the time of such 
     discontinuation to have elected the Medicare fee-for-service 
     program option described in subsection (a)(1)(A)).
       ``(5) Special election periods.--An individual may 
     discontinue an election of a MedicarePlus plan offered by a 
     MedicarePlus organization other than during an annual, 
     coordinated election period and make a new election under 
     this section if--
       ``(A) the organization's or plan's certification under part 
     C has been terminated or the organization has terminated or 
     otherwise discontinued providing the plan;
       ``(B) the individual is no longer eligible to elect the 
     plan because of a change in the individual's place of 
     residence or other change in circumstances (specified by the 
     Secretary, but not including termination of membership in a 
     qualified association in the case of a plan offered by a 
     qualified association sponsor or termination of the 
     individual's enrollment on the basis described in clause (i) 
     or (ii) section 1851(g)(3)(B));
       ``(C) the individual demonstrates (in accordance with 
     guidelines established by the Secretary) that--
       ``(i) the organization offering the plan substantially 
     violated a material provision of the organization's contract 
     under part C in relation to the individual and the plan; or
       ``(ii) the organization (or an agent or other entity acting 
     on the organization's behalf) materially misrepresented the 
     plan's provisions in marketing the plan to the individual; or
       ``(D) the individual meets such other conditions as the 
     Secretary may provide.
       ``(6) Special rule for high deductible plans.--
     Notwithstanding the previous provisions of this subsection, 
     an individual may elect a high deductible plan only during an 
     annual, coordinated election period described in paragraph 
     (3)(B) or during the month of October, 1996.

[[Page H 13455]]

       ``(f) Effectiveness of Elections.--
       ``(1) During initial coverage election period.--An election 
     of coverage made during the initial coverage election period 
     under subsection (e)(1)(A) shall take effect upon the date 
     the individual becomes entitled to benefits under part A and 
     enrolled under part B, except as the Secretary may provide 
     (consistent with section 1838) in order to prevent 
     retroactive coverage.
       ``(2) During transition; 90-day disenrollment option.--An 
     election of coverage made under subsection (e)(2) and an 
     election to discontinue a MedicarePlus option under 
     subsection (e)(4) at any time shall take effect with the 
     first calendar month following the date on which the election 
     is made.
       ``(3) Annual, coordinated election period and high 
     deductible plan election.--An election of coverage made 
     during an annual, coordinated election period (as defined in 
     subsection (e)(3)(B)) in a year or for a high deductible plan 
     shall take effect as of the first day of the following year.
       ``(4) Other periods.--An election of coverage made during 
     any other period under subsection (e)(5) shall take effect in 
     such manner as the Secretary provides in a manner consistent 
     (to the extent practicable) with protecting continuity of 
     health benefit coverage.
       ``(g) Guaranteed Issue and Renewal.--
       ``(1) In general.--Except as provided in this subsection, a 
     MedicarePlus organization shall provide that at any time 
     during which elections are accepted under this section with 
     respect to a MedicarePlus plan offered by the organization, 
     the organization will accept without restrictions individuals 
     who are eligible to make such election.
       ``(2) Priority.--If the Secretary determines that a 
     MedicarePlus organization, in relation to a MedicarePlus plan 
     it offers, has a capacity limit and the number of 
     MedicarePlus eligible individuals who elect the plan under 
     this section exceeds the capacity limit, the organization may 
     limit the election of individuals of the plan under this 
     section but only if priority in election is provided--
       ``(A) first to such individuals as have elected the plan at 
     the time of the determination, and
       ``(B) then to other such individuals in such a manner that 
     does not discriminate among the individuals (who seek to 
     elect the plan) on a basis described in section 1852(b).
     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 service area of 
     the plan.
       ``(3) Limitation on termination of election.--
       ``(A) In general.--Subject to subparagraph (B), a 
     MedicarePlus organization may not for any reason terminate 
     the election of any individual under this section for a 
     MedicarePlus plan it offers.
       ``(B) Basis for termination of election.--A MedicarePlus 
     organization may terminate an individual's election under 
     this section with respect to a MedicarePlus plan it offers 
     if--
       ``(i) any net monthly premiums required with respect to 
     such plan are not paid on a timely basis (consistent with 
     standards under section 1856 that provide for a grace period 
     for late payment of net monthly premiums),
       ``(ii) the individual has engaged in disruptive behavior 
     (as specified in such standards), or
       ``(iii) the plan is terminated with respect to all 
     individuals under this part.
     Any individual whose election is so terminated is deemed to 
     have elected the Medicare fee-for-service program option 
     described in subsection (a)(1)(A).
       ``(C) Limitation on termination of coverage.--A qualified 
     association sponsor offering a MedicarePlus plan to an 
     individual may not terminate coverage of the individual on 
     the basis that the individual is no longer a member of the 
     association except pursuant to a change of election during an 
     open election period occurring on or after the date of the 
     termination of membership.
       ``(D) Organization obligation with respect to election 
     forms.--Pursuant to a contract under section 1857, each 
     MedicarePlus organization receiving an election form under 
     subsection (c)(3) shall transmit to the Secretary (at such 
     time and in such manner as the Secretary may specify) a copy 
     of such form or such other information respecting the 
     election as the Secretary may specify.
       ``(h) Approval of Marketing Materials.--
       ``(1) Submission.--No marketing materials may be 
     distributed by a MedicarePlus organization to (or for the use 
     of) MedicarePlus eligible individuals unless--
       ``(A) at least 45 days before the date of distribution the 
     organization has submitted the material to the Secretary for 
     review, and
       ``(B) the Secretary has not disapproved the distribution of 
     such material.
       ``(2) Review.--The standards established under section 1856 
     shall include guidelines for the review of all such material 
     submitted and under such guidelines the Secretary shall 
     disapprove such material if the material is materially 
     inaccurate or misleading or otherwise makes a material 
     misrepresentation.
       ``(3) Deemed approval (1-stop shopping).--In the case of 
     material that is submitted under paragraph (1)(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 marketing materials under 
     paragraph (1)(B) with respect to a MedicarePlus plan in an 
     area, the Secretary is deemed not to have disapproved such 
     distribution in all other areas covered by the plan and 
     organization.
       ``(4) Prohibition of certain marketing practices.--Each 
     MedicarePlus organization shall conform to fair marketing 
     standards in relation to MedicarePlus plans offered under 
     this part, included in the standards established under 
     section 1856. Such standards shall include a prohibition 
     against an organization (or agent of such an organization) 
     completing any portion of any election form used to carry out 
     elections under this section on behalf of any individual.
       ``(i) Effect of Election of MedicarePlus Plan Option.--
     Subject to section 1852(a)(5)--
       ``(1) payments under a contract with a MedicarePlus 
     organization under section 1854(a) with respect to an 
     individual electing a MedicarePlus plan offered by the 
     organization shall be instead of the amounts which (in the 
     absence of the contract) would otherwise be payable under 
     parts A and B for items and services furnished to the 
     individual, and
       ``(2) subject to subsections (e) and (f) of section 1854, 
     only the MedicarePlus organization shall be entitled to 
     receive payments from the Secretary under this title for 
     services furnished to the individual.
       ``(j) Administration.--
       ``(1) In general.--This part and section 1876 shall be 
     administered through an operating division (A) that is 
     established or identified by the Secretary and is in the 
     Department of Health and Human Services, (B) that is separate 
     from the Health Care Financing Administration, and (C) the 
     primary function of which is the administration of this part 
     and such section. The director of such division shall be of 
     equal pay and rank to that of the individual responsible for 
     overall administration of parts A and B.
       ``(2) Transfer authority.--The Secretary shall transfer 
     such personnel, administrative support systems, assets, 
     records, funds, and other resources in the Health Care 
     Financing Administration to the operating division referred 
     to in paragraph (1) as are used in the administration of 
     section 1876 and as may be required to implement the 
     provisions of this part promptly and efficiently.


                 ``benefits and beneficiary protections

       ``Sec. 1852. (a) Basic Benefits.--
       ``(1) In general.--Except as provided in section 1859(b)(2) 
     for high deductible plans, each MedicarePlus 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--
       ``(A) those items and services for which benefits are 
     available under parts A and B to individuals residing in the 
     area served by the plan, and
       ``(B) 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 MedicarePlus eligible individuals with the plan.
       ``(2) Satisfaction of requirement.--A MedicarePlus plan 
     (other than a high deductible plan) offered by a MedicarePlus 
     organization satisfies paragraph (1)(A) with respect to 
     benefits for items and services if the following requirements 
     are met:
       ``(A) Fee for service providers.--In the case of benefits 
     furnished through a provider that does not have a contract 
     with the organization, the plan provides for at least the 
     dollar amount of payment for such items and services as would 
     otherwise be provided under parts A and B.
       ``(B) Participating providers.--In the case of benefits 
     furnished through a provider that has such a contract, the 
     individual's liability for payment for such items and 
     services does not exceed (after taking into account any 
     deductible, which does not exceed any deductible under parts 
     A and B) the lesser of the following:
       ``(i) Individual's liability under medicare fee-for-service 
     program.--The amount of the liability that the individual 
     would have had (based on the provider being a participating 
     provider) if the individual had not elected coverage under a 
     MedicarePlus plan.
       ``(ii) Medicare coinsurance applied to plan payment 
     rates.--The applicable coinsurance or copayment rate (that 
     would have applied under the Medicare fee-for-service program 
     option described in section 1851(a)(1)(A)) of the payment 
     rate provided under the contract.
       ``(3) Supplemental optional benefits.--Each MedicarePlus 
     organization may offer under a MedicarePlus plan 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 MedicarePlus payment area. Such benefits 
     may be marketed and sold by the MedicarePlus organization 
     outside of the enrollment process described in section 
     1851(c).
       ``(4) Organization as secondary payer.--Notwithstanding any 
     other provision of law, a MedicarePlus organization may (in 
     the case of the provision of items and services to an 
     individual under a MedicarePlus plan under circumstances in 
     which payment under this title 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 such a law, plan, or policy--
       ``(A) the insurance carrier, employer, or other entity 
     which under such law, plan, or policy is to pay for the 
     provision of such services, or
       ``(B) such individual to the extent that the individual has 
     been paid under such law, plan, or policy for such services.
       ``(5) National coverage determinations.--If there is a 
     national coverage determination made in the period beginning 
     on the date of an announcement under section 1854(b) 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 a 
     MedicarePlus organization of 

[[Page H 13456]]
     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 annual MedicarePlus 
     capitation rate under section 1854 included in the 
     announcement made at the beginning of such period--
       ``(A) such determination shall not apply to contracts under 
     this part until the first contract year that begins after the 
     end of such period, and
       ``(B) if such coverage determination provides for coverage 
     of additional benefits or coverage under additional 
     circumstances, section 1851(i) 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.
       ``(b) Antidiscrimination.--A MedicarePlus organization may 
     not deny, limit, or condition the coverage or provision of 
     benefits under this part based on the health status, claims 
     experience, receipt of health care, medical history, or lack 
     of evidence of insurability, of an individual. A MedicarePlus 
     organization shall notify each enrollee under this part of 
     provisions of this subsection at the time of the individual's 
     enrollment.
       ``(c) Detailed Description of Plan Provisions.--A 
     MedicarePlus organization shall disclose, in clear, accurate, 
     and standardized form to each enrollee with a MedicarePlus 
     plan offered by the organization under this part at the time 
     of enrollment and at least annually thereafter, the following 
     information regarding such plan:
       ``(1) Service area.--The plan's service area.
       ``(2) Benefits.--Benefits under the plan offered, including 
     information described in section 1851(d)(3)(A) and exclusions 
     from coverage and, if it is a high deductible plan, a 
     comparison of benefits under such a plan with benefits under 
     other MedicarePlus plans.
       ``(3) Access.--The number, mix, and distribution of 
     participating providers.
       ``(4) Out-of-area coverage.-- Out-of-area coverage provided 
     by the plan.
       ``(5) Emergency coverage.--Coverage of emergency services 
     and urgently needed care.
       ``(6) Optional supplemental coverage.-- Optional 
     supplemental coverage available from the organization 
     offering the plan, including--
       ``(A) supplemental items and services covered, and
       ``(B) the premium price for the optional supplemental 
     benefits.
       ``(7) Prior authorization rules.--Rules regarding prior 
     authorization or other review requirements that could result 
     in nonpayment.
       ``(8) Plan grievance procedures.-- Any plan-specific appeal 
     or grievance rights and procedures.
       ``(9) Quality assurance program.--A description of the 
     organization's quality assurance program under subsection 
     (e).
       ``(d) Access to Services.--
       ``(1) In general.--A MedicarePlus organization offering a 
     MedicarePlus plan may restrict the providers from whom the 
     benefits under the plan are provided so long as--
       ``(A) the organization makes such benefits available and 
     accessible to each individual electing the plan within the 
     plan service area with reasonable promptness and in a manner 
     which assures continuity in the provision of benefits;
       ``(B) when medically necessary the organization makes such 
     benefits available and accessible 24 hours a day and 7 days a 
     week;
       ``(C) the plan provides for reimbursement with respect to 
     services which are covered under subparagraphs (A) and (B) 
     and which are provided to such an individual other than 
     through the organization, if--
       ``(i) the services were medically necessary and immediately 
     required because of an unforeseen illness, injury, or 
     condition, and
       ``(ii) it was not reasonable given the circumstances to 
     obtain the services through the organization;
       ``(D) the organization provides access to appropriate 
     providers, including credentialed specialists, for medically 
     necessary treatment and services, and
       ``(E) coverage is provided for emergency services (as 
     defined in paragraph (3)) without regard to prior 
     authorization or the emergency care provider's contractual 
     relationship with the organization.
       ``(2) Protection of enrollees for certain emergency 
     services.--
       ``(A) Participating providers.--In the case of emergency 
     services described in subparagraph (C) which are furnished by 
     a participating physician or provider of services to an 
     individual enrolled with a MedicarePlus organization under 
     this section, the applicable participation agreement is 
     deemed to provide that the physician or provider of services 
     will accept as payment in full from the organization for such 
     emergency services described in subparagraph (C) the amount 
     that would be payable to the physician or provider of 
     services under part B and from the individual under such 
     part, if the individual were not enrolled with such an 
     organization under this part.
       ``(B) Nonparticipating providers.--In the case of emergency 
     services described in subparagraph (C) which are furnished by 
     a nonparticipating physician, the limitations on actual 
     charges for such services otherwise applicable under part B 
     (to services furnished by individuals not enrolled with a 
     MedicarePlus organization under this section) shall apply in 
     the same manner as such limitations apply to services 
     furnished to individuals not enrolled with such an 
     organization.
       ``(C) Emergency services described.--The emergency services 
     described in this subparagraph are emergency services which 
     are furnished to an enrollee of a MedicarePlus organization 
     under this part by a physician or provider of services that 
     is not under a contract with the organization.
       ``(D) Exception for unrestricted fee-for-service plans.--
     The previous provisions of this paragraph shall not apply in 
     the case of a MedicarePlus organization in relation to a 
     MedicarePlus unrestricted fee-for-service plan (as defined in 
     section 1859(b)(3)).
       ``(3) Definition of emergency services.--In this 
     subsection, the term `emergency services' means, with respect 
     to an individual enrolled with an organization, covered 
     inpatient and outpatient services that--
       ``(A) are furnished by an appropriate source other than the 
     organization,
       ``(B) are needed immediately because of an injury or sudden 
     illness, and
       ``(C) are needed because the time required to reach the 
     organization's providers or suppliers would have meant risk 
     of serious damage to the patient's health.
       ``(e) Quality Assurance Program.--
       ``(1) In general.--Each MedicarePlus organization must have 
     arrangements, established in accordance with regulations of 
     the Secretary, for an ongoing quality assurance program for 
     health care services it provides to individuals enrolled with 
     MedicarePlus plans of the organization.
       ``(2) Elements of program.--The quality assurance program 
     shall--
       ``(A) stress health outcomes;
       ``(B) provide for the establishment of written protocols 
     for utilization review, based on current standards of medical 
     practice;
       ``(C) provide review by physicians and other health care 
     professionals of the process followed in the provision of 
     such health care services;
       ``(D) monitor and evaluate high volume and high risk 
     services and the care of acute and chronic conditions;
       ``(E) evaluate the continuity and coordination of care that 
     enrollees receive;
       ``(F) have mechanisms to detect both underutilization and 
     overutilization of services;
       ``(G) after identifying areas for improvement, establish or 
     alter practice parameters;
       ``(H) take action to improve quality and assesses the 
     effectiveness of such action through systematic follow-up;
       ``(I) 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
       ``(J) be evaluated on an ongoing basis as to its 
     effectiveness.
       ``(3) External review.--Each MedicarePlus organization 
     shall, for each MedicarePlus plan it operates, have an 
     agreement with an independent quality review and improvement 
     organization approved by the Secretary.
       ``(4) Exception for unrestricted fee-for-service plans.--
     Paragraphs (1) and (3) and subsection (h)(2) (relating to 
     maintaining medical records) shall not apply in the case of a 
     MedicarePlus organization in relation to a MedicarePlus 
     unrestricted fee-for-service plan.
       ``(5) Treatment of accreditation.--The Secretary shall 
     provide that a MedicarePlus organization is deemed to meet 
     the requirements of paragraphs (1) through (3) of this 
     subsection and subsection (h) (relating to confidentiality 
     and accuracy of medical records) if the organization is 
     accredited (and periodically reaccredited) by a private 
     organization under a process that the Secretary has 
     determined assures that the organization meets standards that 
     are no less stringent than the standards established under 
     section 1856 to carry out this subsection and such 
     subsection.
       ``(f) Coverage Determinations.--
       ``(1) Decisions on nonemergency care.--A MedicarePlus 
     organization shall make determinations regarding 
     authorization requests for nonemergency care on a timely 
     basis, depending on the urgency of the situation.
       ``(2) Appeals.--
       ``(A) In general.--Appeals from a determination of an 
     organization denying coverage shall be decided within 30 days 
     of the date of receipt of medical information, but not later 
     than 60 days after the date of the decision.
       ``(B) Physician decision on certain appeals.--Appeal 
     decisions relating to a determination to deny coverage based 
     on a lack of medical necessity shall be made only by a 
     physician.
       ``(C) Emergency cases.--Appeals from such a determination 
     involving a life-threatening or emergency situation shall be 
     decided on an expedited asis.
       ``(g) Grievances and Appeals.--
       ``(1) Grievance mechanism.--Each MedicarePlus organization 
     must provide meaningful procedures for hearing and resolving 
     grievances between the organization (including any entity or 
     individual through which the organization provides health 
     care services) and enrollees with MedicarePlus plans of the 
     organization under this part.
       ``(2) Appeals.--An enrollee with a MedicarePlus plan of a 
     MedicarePlus organization under this part who is dissatisfied 
     by reason of the enrollee's failure to receive any health 
     service to which the enrollee believes the enrollee is 
     entitled and at no greater charge than the enrollee believes 
     the enrollee 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 
     organization a party. If the amount in controversy is $1,000 
     or more, the individual or organization shall, upon notifying 
     the other party, be entitled to judicial review of the 
     Secretary's final decision as provided in section 205(g), and 
     both the individual and the organization shall be entitled to 
     be parties to that judicial review. In applying sections 
     205(b) and 

[[Page H 13457]]
     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.
       ``(3) Independent review of certain coverage denials.--The 
     Secretary shall contract with an independent, outside entity 
     to review and resolve appeals of denials of coverage related 
     to urgent or emergency services with respect to MedicarePlus 
     plans.
       ``(4) Coordination with secretary of labor.--The Secretary 
     shall consult with the Secretary of Labor so as to ensure 
     that the requirements of this subsection, as they apply in 
     the case of grievances referred to in paragraph (1) to which 
     section 503 of the Employee Retirement Income Security Act of 
     1974 applies, are applied in a manner consistent with the 
     requirements of such section 503, so long as such 
     requirements provide at least as much protection for 
     beneficiaries as would apply if this paragraph did not apply.
       ``(h) Confidentiality and Accuracy of Enrollee Records.--
     Each MedicarePlus organization shall establish procedures--
       ``(1) to safeguard the privacy of individually identifiable 
     enrollee information, and
       ``(2) to maintain accurate and timely medical records for 
     enrollees.
       ``(i) Information on Advance Directives.--Each MedicarePlus 
     organization shall meet the requirement of section 1866(f) 
     (relating to maintaining written policies and procedures 
     respecting advance directives).
       ``(j) Rules Regarding Physician Participation.--
       ``(1) Procedures.--Each MedicarePlus organization shall 
     establish reasonable procedures relating to the participation 
     (under an agreement etween a physician and the organization) 
     of physicians under MedicarePlus plans offered by the 
     organization under this part. Such procedures shall include--
       ``(A) providing notice of the rules regarding 
     participation,
       ``(B) providing written notice of participation decisions 
     that are adverse to physicians, and
       ``(C) providing a process within the organization for 
     appealing adverse decisions, including the presentation of 
     information and views of the physician regarding such 
     decision.
       ``(2) Consultation in medical policies.--A MedicarePlus 
     organization shall consult with physicians who have entered 
     into participation agreements with the organization regarding 
     the organization's medical policy, quality, and medical 
     management procedures.
       ``(3) Limitations on physician incentive plans.--
       ``(A) In general.--No MedicarePlus organization may operate 
     any physician incentive plan (as defined in subparagraph (B)) 
     unless the following requirements are met:
       ``(i) No specific payment is made directly or indirectly 
     under the plan to a physician or physician group as an 
     inducement to reduce or limit medically necessary services 
     provided with respect to a specific individual enrolled with 
     the organization.I26  ``(ii) If the plan places a physician 
     or physician group at substantial financial risk (as 
     determined by the Secretary) for services not provided by the 
     physician or physician group, the organization--

       ``(I) provides stop-loss protection for the physician or 
     group that is adequate and appropriate, based on standards 
     developed by the Secretary that take into account the number 
     of physicians placed at such substantial financial risk in 
     the group or under the plan and the number of individuals 
     enrolled with the organization who receive services from the 
     physician or the physician group, and
       ``(II) conducts periodic surveys of both individuals 
     enrolled and individuals previously enrolled with the 
     organization to determine the degree of access of such 
     individuals to services provided by the organization and 
     satisfaction with the quality of such services.

       ``(iii) The organization provides the Secretary with 
     descriptive information regarding the plan, sufficient to 
     permit the Secretary to determine whether the plan is in 
     compliance with the requirements of this subparagraph.
       ``(B) Physician incentive plan defined.--In this paragraph, 
     the term `physician incentive plan' means any compensation 
     arrangement between a MedicarePlus organization and a 
     physician or physician group that may directly or indirectly 
     have the effect of reducing or limiting services provided 
     with respect to individuals enrolled with the organization 
     under this part.
       ``(4) Limitation on provider indemnification.--A 
     MedicarePlus organization may not provide (directly or 
     indirectly) for a provider (or group of providers) to 
     indemnify the organization against any liability resulting 
     from a civil action brought by or on behalf of an enrollee 
     under this part for any damage caused to an enrollee with a 
     MedicarePlus plan of the organization by the organization's 
     denial of medically necessary care.
       ``(5) Exception for unrestricted fee-for-service plans.--
     The previous provisions of this subsection shall not apply in 
     the case of a MedicarePlus organization in relation to a 
     MedicarePlus unrestricted fee-for-service plan.


     ``organizational and financial requirements for medicareplus 
            organizations; provider-sponsored organizations

       ``Sec. 1853. (a) Organized and Licensed Under State Law.--
       ``(1) In general.--A MedicarePlus organization shall be 
     organized and licensed under State law as a risk-bearing 
     entity eligible to offer health insurance or health benefits 
     coverage in each State in which it offers a MedicarePlus 
     plan.
       ``(2) Exception for certain union sponsors and taft-hartley 
     sponsors.--Paragraph (1) shall not apply to a MedicarePlus 
     organization that is a union sponsor or Taft-Hartley sponsor.
       ``(3) Exception for qualified associations sponsor.--
     Paragraph (1) shall not apply to a MedicarePlus organization 
     that is a qualified association sponsor.
       ``(4) Special rules for provider-sponsored organizations.--
       ``(A) In general.--A provider-sponsored organization that 
     seeks to offer a MedicarePlus plan in a State may apply for a 
     waiver of the requirement of paragraph (1) for that 
     organization operating in that State.
       ``(B) Standard.--The Secretary shall act on such an 
     application within 60 days after the date it is filed and 
     shall grant such a waiver for an organization with respect to 
     a State if the Secretary determines that--
       ``(i) the State has failed to complete action on a 
     licensing application of the organization within 90 days of 
     the date of the State's receipt of the completed application; 
     or
       ``(ii) the State denied such a licensing application and--

       ``(I) the State's licensing standards or review process 
     imposes any requirements, procedures, or other standards to 
     such organizations that are not generally applicable to any 
     other entities engaged in substantially similar business,
       ``(II) such standards or review process applies solvency 
     standards for the organization and the State is not approved 
     under subsection (e)(2)(B), or
       ``(III) the State has used solvency standards to deny or 
     discriminate against such an organization that has been 
     provided a certificate of solvency under subsection (e)(2).

     No period before the date of the enactment of this section 
     shall be included in determining the 90-day period described 
     in clause (i).
       ``(C) Treatment of waiver.--In the case of a waiver granted 
     under this paragraph for a provider-sponsored organization--
       ``(i) the waiver shall be effective for a 36-month period, 
     except it may be renewed based on a subsequent application 
     filed during the last 6 months of such period,
       ``(ii) the waiver is conditioned upon the pendency of the 
     licensure application during the period the waiver is in 
     effect, and
       ``(iii) any provisions of State law which relate to the 
     licensing of the organization and which prohibit the 
     organization from providing coverage pursuant to a contract 
     under this part shall be superseded.
     Nothing in this subparagraph shall be construed as limiting 
     the number of times such a waiver may be renewed.
       ``(D) Construction.--Nothing in this paragraph shall be 
     construed as affecting the operation of section 514 of the 
     Employee Retirement Income Security Act of 1974.
       ``(5) Exception if required to offer more than medicareplus 
     plans.--Paragraph (1) shall not apply to a MedicarePlus 
     organization in a State if the State requires the 
     organization, as a condition of licensure, to offer any 
     product or plan other than a MedicarePlus plan.
       ``(6) Exception in cases of unreasonable barriers to market 
     entry.--
       ``(A) In general.--A MedicarePlus organization that seeks 
     to offer a MedicarePlus plan in a State may apply for a 
     waiver of the requirement of paragraph (1) for that 
     organization operating in that State.
       ``(B) Standard.--The Secretary shall act on such an 
     application within 60 days after the date it is filed and 
     shall grant such a waiver for an organization with respect to 
     a State if the Secretary determines that--
       ``(i) the State (I) denied such a licensing application or 
     (II) unreasonably delayed in acting upon the application, and
       ``(ii) the State's licensing standards or review process 
     imposes unreasonable barriers to market entry, including 
     through the imposition of any requirements, procedures, or 
     other standards to such organizations that are not generally 
     applicable to any other entities engaged in substantially 
     similar business.
       ``(C) Application of certain rules.--The provisions of 
     subparagraphs (C) and (D) of paragraph (4) shall apply to 
     this paragraph in the same manner as they apply under such 
     paragraph, except that for this purpose any reference in 
     paragraph (4)(C)(i) to 36-month period is deemed a reference 
     to a 24-month period.
       ``(b) Prepaid Payment.--A MedicarePlus organization shall 
     be compensated (except for deductibles, coinsurance, and 
     copayments) for the provision of health care services to 
     enrolled members by a payment which is paid on a periodic 
     basis without regard to the date the health care services are 
     provided and which is fixed without regard to the frequency, 
     extent, or kind of health care service actually provided to a 
     member.
       ``(c) Assumption of Full Financial Risk.--The MedicarePlus 
     organization shall assume full financial risk on a 
     prospective basis for the provision of the health care 
     services (except, at the election of the organization, 
     hospice care) for which benefits are required to be provided 
     under section 1852(a)(1), except that the organization--
       ``(1) may obtain insurance or make other arrangements for 
     the cost of providing to any enrolled member such services 
     the aggregate value of which exceeds $5,000 in any year,
       ``(2) may obtain insurance or make other arrangements for 
     the cost of such services provided to its enrolled members 
     other than through the organization because medical necessity 
     required their provision before they could be secured through 
     the organization,
       ``(3) may 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

[[Page H 13458]]

       ``(4) may 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.
     In the case of a MedicarePlus organization that is a union 
     sponsor, Taft-Hartley sponsor, or a qualified association 
     sponsor, this subsection shall not apply with respect to 
     MedicarePlus plans offered by such organization and issued by 
     an organization to which subsection (b)(1) applies or by a 
     provider-sponsored organization (as defined in section 
     1854(a)).
       ``(d) Provision Against Risk of Insolvency.--
       ``(1) In general.--Each MedicarePlus organization shall 
     meet standards under section 1856 relating to the financial 
     solvency and capital adequacy of the organization and 
     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. Such standards 
     shall take into account the nature and type of MedicarePlus 
     plans offered by the organization.
       ``(2) Treatment of provider-sponsored organizations.--
       ``(A) In general.--In the case of an entity that is a 
     provider-sponsored organization that is operating--
       ``(i) in a State approved under subparagraph (B), the 
     organization shall meet the standards described in paragraph 
     (1) through licensure by the State, or
       ``(ii) in a State that is not so approved, the organization 
     shall meet the standards described in paragraph (1) through 
     application and certification licensure by the Secretary.
       ``(B) Approved states.--
       ``(i) Application process.--For purposes of subparagraph 
     (A), the Secretary shall establish a process under which a 
     State may apply to the Secretary for a determination that the 
     State is applying to provider-sponsored organizations, 
     through its process for licensing provider-sponsored 
     organizations, solvency standards that are identical with the 
     solvency standards established under section 1856(c) for such 
     organizations.
       ``(ii) Determination.--The Secretary shall approve such a 
     State if the Secretary determines that the State is so 
     applying such standards. If the Secretary denies such an 
     approval, the State may reapply for such a determination.
       ``(iii) Publication.--The Secretary shall publish a list of 
     States that are approved under this subparagraph.
       ``(3) Treatment of union and taft-hartley sponsors.--An 
     entity that is a union sponsor or a Taft-Hartley sponsor is 
     deemed to meet the requirement of paragraph (1).
       ``(4) Treatment of certain qualified association 
     sponsors.--An entity that is a qualified association sponsor 
     is deemed to meet the requirement of paragraph (1) with 
     respect to MedicarePlus plans offered by such association and 
     issued by an organization to which subsection (b)(1) applies 
     or by a provider-sponsored organization.
       ``(e) Provider-Sponsored Organization Defined.--
       ``(1) In general.--In this part, the term `provider-
     sponsored organization' means a public or private entity--
       ``(A) that is established or organized by a health care 
     provider, or group of affiliated health care providers,
       ``(B) that provides a substantial proportion (as defined by 
     the Secretary) of the health care items and services under 
     the contract under this part directly through the provider or 
     affiliated group of providers, and
       ``(C) with respect to which those affiliated providers that 
     share, directly or indirectly, substantial financial risk 
     with respect to the provision of such items and services have 
     at least a majority financial interest in the entity.
       ``(2) Substantial proportion.--In defining what is a 
     `substantial proportion' for purposes of paragraph (1)(A), 
     the Secretary--
       ``(A) shall take into account the need for such an 
     organization to assume responsibility for a substantial 
     proportion of services in order to assure financial stability 
     and the practical difficulties in such an organization 
     integrating a very wide range of service providers; and
       ``(B) may vary such proportion based upon relevant 
     differences among organizations, such as their location in an 
     urban or rural area.
       ``(3) Affiliation.--For purposes of this subsection, a 
     provider is `affiliated' with another provider if, through 
     contract, ownership, or otherwise--
       ``(A) one provider, directly or indirectly, controls, is 
     controlled by, or is under common control with the other,
       ``(B) both providers are part of a controlled group of 
     corporations under section 1563 of the Internal Revenue Code 
     of 1986, or
       ``(C) both providers are part of an affiliated service 
     group under section 414 of such Code.
       ``(4) Control.--For purposes of paragraph (3), control is 
     presumed to exist if one party, directly or indirectly, owns, 
     controls, or holds the power to vote, or proxies for, not 
     less than 51 percent of the voting rights or governance 
     rights of another.
       ``(5) Health care provider defined.--In this subsection and 
     subsection (f), the term `health care provider' means--
       ``(A) any individual who is engaged in the delivery of 
     health care services in a State and who is required by State 
     law or regulation to be licensed or certified by the State to 
     engage in the delivery of such services in the State, and
       ``(B) any entity that is engaged in the delivery of health 
     care services in a State and that, if it is required by State 
     law or regulation to be licensed or certified by the State to 
     engage in the delivery of such services in the State, is so 
     licensed.
       ``(6) Regulations.--The Secretary shall issue regulations 
     to carry out this subsection.
       ``(f) Organizations Treated as MedicarePlus Organizations 
     During Transition.--Any of the following organizations shall 
     be considered to qualify as a MedicarePlus organization for 
     contract years beginning before January 1, 1998:
       ``(1) Health maintenance organizations.--An organization 
     that is organized under the laws of any State and that is a 
     qualified health maintenance organization (as defined in 
     section 1310(d) of the Public Health Service Act), an 
     organization recognized under State law as a health 
     maintenance organization, or a similar organization regulated 
     under State law for solvency in the same manner and to the 
     same extent as such a health maintenance organization.
       ``(2) Licensed insurers.--An organization that is organized 
     under the laws of any State and--
       ``(A) is licensed by a State agency as an insurer for the 
     offering of health benefit coverage, or
       ``(B) is licensed by a State agency as a service benefit 
     plan,
     but only for individuals residing in an area in which the 
     organization is licensed to offer health insurance coverage.
       ``(3) Current risk-contractors.--An organization that is an 
     eligible organization (as defined in section 1876(b)) and 
     that has a risk-sharing contract in effect under section 1876 
     as of the date of the enactment of this section.


                ``payments to medicareplus organizations

       ``Sec. 1854. (a) Payments to Organizations.--
       ``(1) Monthly payments.--
       ``(A) In general.--Under a contract under section 1857 and 
     subject to subsections (e) and (f), the Secretary shall make 
     monthly payments under this section in advance to each 
     MedicarePlus organization, with respect to coverage of an 
     individual under this part in a MedicarePlus payment area for 
     a month, in an amount equal to \1/12\ of the annual 
     MedicarePlus capitation rate (as calculated under subsection 
     (c)) with respect to that individual for that area, adjusted 
     for such risk factors as age, disability status, gender, 
     institutional status, and such other factors as the Secretary 
     determines to be appropriate, so as to ensure actuarial 
     equivalence. The Secretary may add to, modify, or substitute 
     for such factors, if such changes will improve the 
     determination of actuarial equivalence.
       ``(B) Special rule for end-stage renal disease.--The 
     Secretary shall establish a separate rate of payment to a 
     MedicarePlus organization with respect to any individual 
     determined to have end-stage renal disease and enrolled in a 
     MedicarePlus plan of the organization. Such rate of payment 
     shall be actuarially equivalent to rates paid to other 
     enrollees in the MedicarePlus payment area (or such other 
     area as specified by the Secretary).
       ``(2) Adjustment to reflect number of enrollees.--
       ``(A) In general.--The amount of payment under this 
     subsection may be retroactively adjusted to take into account 
     any difference between the actual number of individuals 
     enrolled with an organization under this part and the number 
     of such individuals estimated to be so enrolled in 
     determining the amount of the advance payment.
       ``(B) Special rule for certain enrollees.--
       ``(i) In general.--Subject to clause (ii), the Secretary 
     may make retroactive adjustments under subparagraph (A) to 
     take into account individuals enrolled during the period 
     beginning on the date on which the individual enrolls with a 
     MedicarePlus organization under a plan operated, sponsored, 
     or contributed to by the individual's employer or former 
     employer (or the employer or former employer of the 
     individual's spouse) and ending on the date on which the 
     individual is enrolled in the organization under this part, 
     except that for purposes of making such retroactive 
     adjustments under this subparagraph, such period may not 
     exceed 90 days.
       ``(ii) Exception.--No adjustment may be made under clause 
     (i) with respect to any individual who does not certify that 
     the organization provided the individual with the disclosure 
     statement described in section 1852(c) at the time the 
     individual enrolled with the organization.
       ``(b) Annual Announcement of Payment Rates.--
       ``(1) Annual announcement.--The Secretary shall annually 
     determine, and shall announce (in a manner intended to 
     provide notice to interested parties) not later than August 1 
     before the calendar year concerned--
       ``(A) the annual MedicarePlus capitation rate for each 
     MedicarePlus payment area for the year, and
       ``(B) the risk and other factors to be used in adjusting 
     such rates under subsection (a)(1)(A) for payments for months 
     in that year.
       ``(2) Advance notice of methodological changes.--At least 
     45 days before making the announcement under paragraph (2) 
     for a year, the Secretary shall provide for notice to 
     MedicarePlus organizations of proposed changes to be made in 
     the methodology from the methodology and assumptions used in 
     the previous announcement and shall provide such 
     organizations an opportunity to comment on such proposed 
     changes.
       ``(3) Explanation of assumptions.--In each announcement 
     made under paragraph (1) for a year, the Secretary shall 
     include an explanation of the assumptions and changes in 
     methodology used in the announcement in sufficient detail so 
     that MedicarePlus organizations can compute monthly adjusted 
     MedicarePlus capitation rates for individuals in each 
     MedicarePlus payment area which is in whole or in part within 
     the service area of such an organization.

[[Page H 13459]]

       ``(c) Calculation of Annual MedicarePlus Capitation 
     Rates.--
       ``(1) In General.--For purposes of this part, the annual 
     MedicarePlus capitation rate, for a MedicarePlus payment area 
     for a contract year consisting of a calendar year, is equal 
     to the greatest of the following:
       ``(A) Blended capitation rate.--The sum of--
       ``(i) area-specific percentage for the year (as specified 
     under paragraph (2) for the year) of the annual area-specific 
     MedicarePlus capitation rate for the year for the 
     MedicarePlus payment area, as determined under paragraph (3), 
     and
       ``(ii) national percentage (as specified under paragraph 
     (2) for the year) of the input-price-adjusted annual national 
     MedicarePlus capitation rate for the year, as determined 
     under paragraph (4),
     multiplied by a budget neutrality adjustment factor 
     determined under paragraph (5).
       ``(B) Minimum amount.--
       ``(i) For 1996, $300.
       ``(ii) For 1997, $350.
       ``(iii) For a succeeding year, is the minimum amount 
     specified in this subparagraph for the preceding year 
     increased by national average per capita growth percentage, 
     specified under paragraph (6) for that succeeding year.
       ``(C) Minimum increase of 2 percent over previous year's 
     rate.--
       ``(i) For 1996, 102 percent of the annual per capita rate 
     of payment for 1995 determined under section 1876(a)(1)(C) 
     for the MedicarePlus payment area.
       ``(ii) For a subsequent year, 102 percent of the annual 
     MedicarePlus capitation rate under this subsection for the 
     area for the previous year.
       ``(2) Area-specific and national percentages.--For purposes 
     of paragraph (1)(A)--
       ``(A) for 1996 and 1997, the `area-specific percentage' is 
     90 percent and the `national percentage' is 10 percent,
       ``(B) for 1998, the `area-specific percentage' is 85 
     percent and the `national percentage' is 15 percent,
       ``(C) for 1999, the `area-specific percentage' is 80 
     percent and the `national percentage' is 20 percent,
       ``(D) for 2000, the `area-specific percentage' is 75 
     percent and the `national percentage' is 25 percent, and
       ``(E) for a year after 2000, the `area-specific percentage' 
     is 70 percent and the `national percentage' is 30 percent.
       ``(3) Annual area-specific medicareplus capitation rate.--
     For purposes of paragraph (1)(A), the annual area-specific 
     MedicarePlus capitation rate for a MedicarePlus payment 
     area--
       ``(A) for 1996 is the annual per capita rate of payment for 
     1995 determined under section 1876(a)(1)(C) for the 
     MedicarePlus payment area, increased by the national average 
     per capita growth percentage for 1996 (as defined in 
     paragraph (6)); or
       ``(B) for a subsequent year is the annual area-specific 
     MedicarePlus capitation rate for the previous year determined 
     under this paragraph for the MedicarePlus payment area, 
     increased by the national average per capita growth 
     percentage for such subsequent year.
       ``(4) Input-price-adjusted annual national MedicarePlus 
     capitation rate.--
       ``(A) In general.--For purposes of paragraph (1)(A), the 
     input-price-adjusted annual national MedicarePlus capitation 
     rate for a MedicarePlus payment area for a year is equal to 
     the sum, for all the types of medicare services (as 
     classified by the Secretary), of the plan (for each such 
     type) of--
       ``(i) the national standardized annual MedicarePlus 
     capitation rate (determined under subparagraph (B)) for the 
     year,
       ``(ii) the proportion of such rate for the year which is 
     attributable to such type of services, and
       ``(iii) an index that reflects (for that year and that type 
     of services) the relative input price of such services in the 
     area compared to the national average input price of such 
     services.
     In applying clause (iii), the Secretary shall, subject to 
     subparagraph (C), apply those indices under this title that 
     are used in applying (or updating) national payment rates for 
     specific areas and localities.
       ``(B) National standardized annual medicareplus capitation 
     rate.--In subparagraph (A)(i), the `national standardized 
     annual MedicarePlus capitation rate' for a year is equal to--
       ``(i) the sum (for all MedicarePlus payment areas) of the 
     product of (I) the annual area-specific MedicarePlus 
     capitation rate for that year for the area under paragraph 
     (3), and (II) the average number of medicare beneficiaries 
     residing in that area in the year; divided by
       ``(ii) the total average number of medicare beneficiaries 
     residing in all the MedicarePlus payment areas for that year.
       ``(C) Special rules for 1996.--In applying this paragraph 
     for 1996--
       ``(i) medicare services shall be divided into 2 types of 
     services: part A services and part B services;
       ``(ii) the proportions described in subparagraph (A)(ii) 
     for such types of services shall be--

       ``(I) for part A services, the ratio (expressed as a 
     percentage) of the average annual per capita rate of payment 
     for the area for part A for 1995 to the total average annual 
     per capita rate of payment for the area for parts A and B for 
     1995, and
       ``(II) for part B services, 100 percent minus the ratio 
     described in subclause (I);

       ``(iii) for the part A services, 70 percent of payments 
     attributable to such services shall be adjusted by the index 
     used under section 1886(d)(3)(E) to adjust payment rates for 
     relative hospital wage levels for hospitals located in the 
     payment area involved;
       ``(iv) for part B services--

       ``(I) 66 percent of payments attributable to such services 
     shall be adjusted by the index of the geographic area factors 
     under section 1848(e) used to adjust payment rates for 
     physicians' services furnished in the payment area, and
       ``(II) of the remaining 34 percent of the amount of such 
     payments, 70 percent shall be adjusted by the index described 
     in clause (iii);

       ``(v) the index values shall be computed based only on the 
     beneficiary population who are 65 years of age or older who 
     are not determined to have end stage renal disease.
     The Secretary may continue to apply the rules described in 
     this subparagraph (or similar rules) for 1997.
       ``(5) Budget neutrality adjustment factor.--For each year, 
     the Secretary shall compute a budget neutrality adjustment 
     factor so that the aggregate of the payments under this part 
     shall not exceed the aggregate payments that would have been 
     made under this part if the area-specific percentage for the 
     year had been 100 percent and the national percentage had 
     been 0 percent.
       ``(6) National average per capita growth percentage 
     defined.--In this part, the `national average per capita 
     growth percentage' for--
       ``(A) 1996 is 8.0 percent,
       ``(B) 1997 is 3.8 percent,
       ``(C) 1998 is 4.6 percent,
       ``(D) 1999 is 4.3 percent,
       ``(E) 2000 is 3.8 percent,
       ``(F) 2001 is 5.5 percent,
       ``(G) 2002 is 5.6 percent, and
       ``(H) each subsequent year is 5.0 percent.
       ``(d) Medicareplus Payment Area Defined.--
       ``(1) In general.--In this part, except as provided in 
     paragraph (3), the term `MedicarePlus payment area' means a 
     county, or equivalent area specified by the Secretary.
       ``(2) Rule for esrd beneficiaries.--In the case of 
     individuals who are determined to have end stage renal 
     disease, the MedicarePlus payment area shall be each State.
       ``(3) Geographic adjustment.--
       ``(A) In general.--Upon request of a State for a contract 
     year (beginning after 1996) made at least 7 months before the 
     beginning of the year, the Secretary shall make a geographic 
     adjustment to a MedicarePlus payment areas in the State 
     otherwise determined under paragraph (1)--
       ``(i) to a single statewide MedicarePlus payment area,
       ``(ii) to the metropolitan based system described in 
     subparagraph (C), or
       ``(iii) to consolidating into a single MedicarePlus payment 
     area noncontinuous counties (or equivalent areas described in 
     paragraph (1)) within a State.
     Such adjustment shall be effective for payments for months 
     beginning with January of the year following the year in 
     which the request is received.
       ``(B) Budget neutrality adjustment.--In the case of a State 
     requesting an adjustment under this paragraph, the Secretary 
     shall adjust the payment rates otherwise established under 
     this paragraph for MedicarePlus payment areas in the State in 
     a manner so that the aggregate of the payments under this 
     section in the State shall not exceed the aggregate payments 
     that would have been made under this section for MedicarePlus 
     payment areas in the State in the absence of the adjustment 
     under this paragraph.
       ``(C) Metropolitan based system.--The metropolitan based 
     system described in this subparagraph is one in which--
       ``(i) all the portions of each metropolitan statistical 
     area in the State or in the case of a consolidated 
     metropolitan statistical area, all of the portions of each 
     primary metropolitan statistical area within the consolidated 
     area within the State, are treated as a single MedicarePlus 
     payment area, and
       ``(ii) all areas in the State that do not fall within a 
     metropolitan statistical area are treated as a single 
     MedicarePlus payment area.
       ``(D) Areas.--In subparagraph (C), 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.
       ``(e) Special Rules for Individuals Electing High 
     Deductible Plans.--
       ``(1) In general.--In the case of an individual who has 
     elected a high deductible plan, notwithstanding the preceding 
     provisions of this section--
       ``(A) the amount of the monthly payment to the MedicarePlus 
     organization offering the high deductible plan shall not 
     exceed the monthly premium for the plan, and
       ``(B) subject to paragraph (2), the difference between the 
     amount of payment that would otherwise be made and the amount 
     of payment to such organization shall be made directly into a 
     High Deductible MedicarePlus MSA established (and, if 
     applicable, designated) by the individual under paragraph 
     (2).
       ``(2) Establishment and designation of medicareplus medical 
     savings account as requirement for payment of contribution.--
     In the case of an individual who has elected coverage under a 
     high deductible plan, no payment shall be made under 
     paragraph (1)(B) on behalf of an individual for a month 
     unless the individual--
       ``(A) has established before the beginning of the month (or 
     by such other deadline as the Secretary may specify) a High 
     Deductible MedicarePlus MSA (as defined in section 137(b)(2) 
     of the Internal Revenue Code of 1986), and
       ``(B) if the individual has established more than one High 
     Deductible MedicarePlus MSA, 

[[Page H 13460]]
     has designated one of such accounts as the individual's High Deductible 
     MedicarePlus MSA for purposes of this part.
     Under rules under this section, such an individual may change 
     the designation of such account under subparagraph (B) for 
     purposes of this part.
       ``(3) Lump sum deposit of medical savings account 
     contribution.--In the case of an individual electing a high 
     deductible plan effective beginning with a month in a year, 
     the amount of the contribution to the High Deductible 
     MedicarePlus MSA on behalf of the individual for that month 
     and all successive months in the year shall be deposited 
     during that first month. In the case of a termination of such 
     an election as of a month before the end of a year, the 
     Secretary shall provide for a procedure for the recovery of 
     deposits attributable to the remaining months in the year.
       ``(4) Permitting contributions into medicareplus msa.--
     Effective January 1, 1997, if a member of a Federally-
     qualified health maintenance organization certifies that a 
     Rebate MedicarePlus MSA (as defined in section 137(c) of the 
     Internal Revenue Code of 1986) has been established for the 
     benefit of such member, the health maintenance organization 
     may reduce the basic health services payment otherwise 
     determined under otherwise applicable law by requiring the 
     payment of a deductible by the member for basic health 
     services.
       ``(f) Payments of Rebates.--
       ``(1) In general.--If the amount of the monthly premium for 
     a MedicarePlus plan (other than a high deductible plan) for 
     an MedicarePlus payment area for a year is less than \1/12\ 
     of the annual MedicarePlus capitation rate applied under this 
     section 1854 for the area and year involved, at the election 
     of an individual enrolled under the plan the Secretary shall 
     either--
       ``(A) in the case of an individual who has a Rebate 
     MedicarePlus MSA account (as defined in section 137(b)(3) of 
     the Internal Revenue Code of 1986), to deposit 100 percent of 
     such difference in such an account specified by the 
     individual; or
       ``(B)(i) pay to the MedicarePlus organization on behalf of 
     such individual the monthly amount equal to 100 percent of 
     such difference 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 difference, and
       ``(iii) deposit any remainder of such difference in the 
     Federal Hospital Insurance Trust Fund.
       ``(2) Time for payment.--
       ``(A) In general.--Subject to subparagraph (B), payments 
     and deposits described in paragraph (1) shall be made on a 
     monthly basis.
       ``(B) Cash rebates.--A rebate under paragraph (1)(B)(ii) 
     shall be paid as of the close of the calendar year to which 
     the enrollment applied.
       ``(g) Payments From Trust Fund.--The payment to a 
     MedicarePlus organization under this section for individuals 
     enrolled under this part with the organization, and payments 
     to a High Deductible or Rebate MedicarePlus MSA under 
     subsection (e)(1)(B) or subsection (f), 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 part A and under part B represents of the 
     actuarial value of the total benefits under this title.
       ``(h) Special Rule for Certain Inpatient Hospital Stays.--
     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) election under this part of a MedicarePlus plan 
     offered by a MedicarePlus organization--
       ``(A) payment for such services until the date of the 
     individual's discharge shall be made under this title through 
     the MedicarePlus plan or the Medicare fee-for-service program 
     option described in section 1851(a)(1)(A) (as the case may 
     be) elected before the election with such organization,
       ``(B) the elected organization shall not be financially 
     responsible for payment for such services until the date 
     after the date of the individual's discharge, and
       ``(C) the organization shall nonetheless be paid the full 
     amount otherwise payable to the organization under this part; 
     or
       ``(2) termination of election with respect to a 
     MedicarePlus organization under this part--
       ``(A) the organization 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) or by any succeeding 
     MedicarePlus organization, and
       ``(C) the terminated organization shall not receive any 
     payment with respect to the individual under this part during 
     the period the individual is not enrolled.


                         ``premiums and rebates

       ``Sec. 1855. (a) Submission and Charging of Premiums.--
       ``(1) In general.--Subject to paragraph (3), each 
     MedicarePlus organization shall file with the Secretary each 
     year, in a form and manner and at a time specified by the 
     Secretary--
       ``(A) the amount of the monthly premium for coverage for 
     services under section 1852(a) under each MedicarePlus plan 
     it offers under this part in each MedicarePlus payment area 
     (as defined in section 1854(d)) in which the plan is being 
     offered; and
       ``(B) the enrollment capacity in relation to the plan in 
     each such area.
       ``(2) Terminology.--In this part--
       ``(A) the term `monthly premium' means, with respect to a 
     MedicarePlus plan offered by a MedicarePlus organization, the 
     monthly premium filed under paragraph (1), not taking into 
     account the amount of any payment made toward the premium 
     under section 1854; and
       ``(B) the term `net monthly premium' means, with respect to 
     such a plan and an individual enrolled with the plan, the 
     premium (as defined in subparagraph (A)) for the plan reduced 
     by the amount of payment made toward such premium under 
     section 1854.
       ``(3) Limitation on portion of monthly premium attributable 
     to required coverage.--In no case may the portion of the 
     monthly premium for a MedicarePlus plan for an area and year 
     attributable to required services under section 1852(a)(1) 
     exceed the adjusted community rate for the plan (as defined 
     in subsection (f)(5)).
       ``(b) Net Monthly Premium.--The amount of the net monthly 
     premium charged by a MedicarePlus organization for a 
     MedicarePlus plan offered in a MedicarePlus payment area to 
     an individual under this part shall be equal to the amount 
     (if any) by which--
       ``(1) the amount of the monthly premium for the plan for 
     the period involved, exceeds
       ``(2) \1/12\ of the annual MedicarePlus capitation rate 
     applied under section 1854 for the area and year involved.
       ``(c) Uniform Premium.--The monthly premium and net monthly 
     premium (including rebates offered) by a MedicarePlus 
     organization under this part may not vary among individuals 
     who reside in the same MedicarePlus payment area.
       ``(d) Terms and Conditions of Imposing Premiums.--Each 
     MedicarePlus organization shall permit the payment of net 
     monthly premiums on a monthly basis and may terminate 
     election of individuals for a MedicarePlus plan for failure 
     to make premium payments only in accordance with section 
     1851(g)(3)(B)(i).
       ``(e) Relation of Premiums and Cost-sharing to Benefits.--
     In no case may the portion of a MedicarePlus organization's 
     monthly premium and the actuarial value of its deductibles, 
     coinsurance, and copayments charged for (to the extent 
     attributable to the required benefits described in section 
     1852(a)(1) and not counting any amount attributable to 
     balance billing) to individuals who are enrolled under this 
     part with the organization exceed the actuarial value of the 
     coinsurance and deductibles that would be applicable on the 
     average to individuals enrolled under this part with the 
     organization (or, if the Secretary finds that adequate data 
     are not available to determine that actuarial value, the 
     actuarial value of the coinsurance and deductibles applicable 
     on the average to individuals in the area, in the State, or 
     in the United States, eligible to enroll under this part with 
     the organization, or other appropriate data) and entitled to 
     benefits under part A and enrolled under part B if they were 
     not members of a MedicarePlus organization.
       ``(f) Requirement for Additional Benefits, Rebates, or 
     Both.--
       ``(1) Requirement.--
       ``(A) In general.--Each MedicarePlus organization (in 
     relation to a MedicarePlus plan it offers) shall provide that 
     if there is an excess amount (as defined in subparagraph (B)) 
     for the plan for a contract year, subject to the succeeding 
     provisions of this subsection, the organization shall provide 
     to individuals such additional benefits (as the organization 
     may specify), a monetary rebate (paid on a monthly basis), or 
     a combination thereof, in a total value which is at least 
     equal to the adjusted excess amount (as defined in 
     subparagraph (C)).
       ``(B) Excess amount.--For purposes of this paragraph, the 
     `excess amount', for an organization for a plan, is the 
     amount (if any) by which--
       ``(i) the average of the capitation payments made to the 
     organization under section 1854 for the plan at the beginning 
     of contract year, exceeds
       ``(ii) the actuarial value of the required benefits 
     described in section 1852(a)(1) under the plan for 
     individuals under this part, as determined based upon an 
     adjusted community rate described in paragraph (5) (as 
     reduced for the actuarial value of the coinsurance and 
     deductibles under parts A and B).
       ``(C) Adjusted excess amount.--For purposes of this 
     paragraph, the `adjusted excess amount', for an organization 
     for a plan, is the excess amount reduced to reflect any 
     amount withheld and reserved for the organization for the 
     year under paragraph (3).
       ``(D) No application to high deductible plans.--
     Subparagraph (A) shall not apply to a high deductible plan.
       ``(E) Uniform application.--This paragraph shall be applied 
     uniformly for all enrollees for a plan in a MedicarePlus 
     payment area.
       ``(F) Construction.--Nothing in this subsection shall be 
     construed as preventing a MedicarePlus organization from 
     providing health care benefits that are in addition to the 
     benefits otherwise required to be provided under this 
     paragraph and from imposing a premium for such additional 
     benefits.
       ``(2) Rules in relation to rebates.--To the extent that the 
     adjusted excess amount for a plan exceeds the value of 
     additional benefits provided under subparagraph (A) by the 
     MedicarePlus organization in relation to the plan for a 
     month, then the organization shall provide for payment of the 
     amount of such excess as follows:
       ``(A) Rebate medicareplus msa.--If the individual has a 
     Rebate MedicarePlus MSA and elects treatment under this 
     subparagraph, the organization shall provide for payment of 
     such excess into such MSA.
       ``(B) Additional amount.--The organization shall provide 
     for payment of the amount of any additional excess as 
     follows:

[[Page H 13461]]

       ``(i) 75 percent of such excess to the individual.
       ``(ii) 25 percent to the Federal Hospital Insurance Trust 
     Fund.
       ``(3) Stabilization fund.--A MedicarePlus organization may 
     provide that a part of the value of an excess actuarial 
     amount described in paragraph (1) be withheld and reserved in 
     the Federal Hospital Insurance Trust Fund and in the Federal 
     Supplementary Medical Insurance Trust Fund (in such 
     proportions as the Secretary determines to be appropriate) by 
     the Secretary for subsequent annual contract periods, to the 
     extent required to stabilize and prevent undue fluctuations 
     in the additional benefits and rebates offered in those 
     subsequent periods by the organization in accordance with 
     such paragraph. Any of such value of the amount reserved 
     which is not provided as additional benefits described in 
     paragraph (1)(A) to individuals electing the MedicarePlus 
     plan of the organization in accordance with such paragraph 
     prior to the end of such periods, shall revert for the use of 
     such trust funds.
       ``(4) Determination based on insufficient data.--For 
     purposes of this subsection, if the Secretary finds that 
     there is insufficient enrollment experience (including no 
     enrollment experience in the case of a provider-sponsored 
     organization) to determine an average of the capitation 
     payments to be made under this part at the beginning of a 
     contract period, the Secretary may determine such an average 
     based on the enrollment experience of other contracts entered 
     into under this part.
       ``(5) Adjusted community rate.--
       ``(A) In general.--For purposes of this subsection, subject 
     to subparagraph (B), the term `adjusted community rate' for a 
     service or services means, at the election of a MedicarePlus 
     organization, either--
       ``(i) the rate of payment for that service or services 
     which the Secretary annually determines would apply to an 
     individual electing a MedicarePlus plan under this part if 
     the rate of payment were determined under a `community rating 
     system' (as defined in section 1302(8) of the Public Health 
     Service Act, other than subparagraph (C)), or
       ``(ii) such portion of the weighted aggregate premium, 
     which the Secretary annually estimates would apply to such an 
     individual, as the Secretary annually estimates is 
     attributable to that service or services,
     but adjusted for differences between the utilization 
     characteristics of the individuals electing coverage under 
     this part and the utilization characteristics of the other 
     enrollees with the organization (or, if the Secretary finds 
     that adequate data are not available to adjust for those 
     differences, the differences between the utilization 
     characteristics of individuals selecting other MedicarePlus 
     coverage, or MedicarePlus eligible individuals in the area, 
     in the State, or in the United States, eligible to elect 
     MedicarePlus coverage under this part and the utilization 
     characteristics of the rest of the population in the area, in 
     the State, or in the United States, respectively).
       ``(B) Special rule for provider-sponsored organizations.--
     In the case of a MedicarePlus organization that is a 
     provider-sponsored organization, the adjusted community rate 
     under subparagraph (A) for a MedicarePlus plan of the 
     organization may be computed (in a manner specified by the 
     Secretary) using data in the general commercial marketplace 
     or (during a transition period) based on the costs incurred 
     by the organization in providing such a plan.
       ``(g) Transitional File and Use for Certain Requirements.--
       ``(1) In general.--In the case of a MedicarePlus plan 
     proposed to be offered before the end of the transition 
     period (as defined in section 1851(e)(1)(B)) by a 
     MedicarePlus organization described in section 1853(f)(3) or 
     by a MedicarePlus organization with a contract in effect 
     under section 1857, if the organization submits complete 
     information to the Secretary regarding the plan demonstrating 
     that the plan meets the requirements and standards under 
     section 1852(a) and subsections (a) through (f) of this 
     section (relating to benefits and premiums), the plan shall 
     be deemed as meeting such requirements and standards under 
     such provisions unless the Secretary disapproves the plan 
     within 60 days after the date of submission of the complete 
     information.
       ``(2) Construction.--Nothing in paragraph (1) shall be 
     construed as waiving the requirement of a contract under 
     section 1857 or waiving requirements and standards not 
     referred to in paragraph (1).


 ``establishment of standards; certification of organizations and plans

       ``Sec. 1856. (a) Establishment of Standards.--
       ``(1)  Standards applicable to state-regulated 
     organizations and plans and non-solvency standards for 
     provider-Sponsored organizations.--
       ``(A) Recommendations of naic.--The Secretary shall request 
     the National Association of Insurance Commissioners to 
     develop and submit to the Secretary, not later than 12 months 
     after the date of the enactment of the Medicare Preservation 
     Act of 1995, proposed standards consistent with the 
     requirements of this part for MedicarePlus organizations 
     (other than union sponsors and Taft-Hartley sponsors, and 
     other than solvency standards described in subsection (b) for 
     provider-sponsored organizations) and MedicarePlus plans 
     offered by such organizations, except that such proposed 
     standards may relate to MedicarePlus organizations that are 
     qualified association sponsors only with respect to 
     MedicarePlus plans offered by them and only if such plans are 
     issued by organizations to which section 1853(a)(1) applies.
       ``(B) Review.--If the Association submits such standards on 
     a timely basis, the Secretary shall review such standards to 
     determine if the standards meet the requirements of this 
     part. The Secretary shall complete the review of the 
     standards not later than 90 days after the date of their 
     submission. The Secretary shall promulgate such proposed 
     standards to apply to organizations and plans described in 
     subparagraph (A) except to the extent that the Secretary 
     modifies such proposed standards because they do not meet 
     such requirements.
       ``(C) Failure to submit.--If the Association does not 
     submit such standards on a timely basis, the Secretary shall 
     promulgate such standards by not later than the date the 
     Secretary would otherwise have been required to promulgate 
     standards under subparagraph (B).
       ``(D) Use of interim rules.--For the period in which this 
     part is in effect and standards are being developed and 
     established under the preceding provisions of this 
     subsection, the Secretary shall provide by not later than 
     June 1, 1996, for the application of such interim standards 
     (without regard to any requirements for notice and public 
     comment) as may be appropriate to provide for the expedited 
     implementation of this part. Such interim standards shall not 
     apply after the date standards are established under the 
     preceding provisions of this paragraph.
       ``(2) Establishment of standards for union and taft-hartley 
     sponsors, qualified association sponsors, and plans.--
       ``(A) In general.--The Secretary shall develop and 
     promulgate by regulation standards consistent with the 
     requirements of this part for union and Taft-Hartley 
     sponsors, for qualified association sponsors, and for 
     MedicarePlus plans offered by such organizations (other than 
     MedicarePlus plans offered by qualified association sponsors 
     that are issued by organizations to which section 1853(a)(1) 
     applies).
       ``(B) Consultation with secretary of labor.--The Secretary 
     shall consult with the Secretary of Labor with respect to 
     such standards for such sponsors and plans.
       ``(C) Timing.--Standards under this paragraph shall be 
     promulgated at or about the time standards are promulgated 
     under paragraph (1).
       ``(3) Coordination among final standards.--In establishing 
     standards (other than on an interim basis) under this 
     subsection and subsection (b), the Secretary shall seek to 
     provide for consistency (as appropriate) across the different 
     types of MedicarePlus organizations, in order to promote 
     equitable treatment of different types of organizations and 
     consistent protection for individuals who elect plans offered 
     by the different types of MedicarePlus organizations.
       ``(4) Use of current standards for interim standards.--To 
     the extent practicable and consistent with the requirements 
     of this part, standards established on an interim basis to 
     carry out requirements of this part may be based on currently 
     applicable standards, such as the rules established under 
     section 1876 (as in effect as of the date of the enactment of 
     this section) to carry out analogous provisions of such 
     section or standards established or developed for application 
     in the private health insurance market.
       ``(5) Application of new standards to entities with a 
     contract.--In the case of a MedicarePlus organization with a 
     contract in effect under this part at the time standards 
     applicable to the organization under this section are 
     changed, the organization may elect not to have such changes 
     apply to the organization until the end of the current 
     contract year (or, if there is less than 6 months remaining 
     in the contract year, until 1 year after the end of the 
     current contract year).
       ``(6) Relation to state laws.--The standards established 
     under this subsection shall supersede any State law or 
     regulation with respect to MedicarePlus plans which are 
     offered by MedicarePlus organizations under this part and are 
     issued by organizations to which section 1853(a)(1) applies, 
     to the extent such law or regulation is inconsistent with 
     such standards.
       ``(b) Establishment of Solvency Standards for Provider-
     Sponsored Organizations.--
       ``(1) Establishment.--
       ``(A) In general.--The Secretary shall establish, on an 
     expedited basis and using a negotiated rulemaking process 
     under subchapter 3 of chapter 5 of title 5, United States 
     Code, standards described in section 1853(e) (relating to the 
     financial solvency and capital adequacy of the organization) 
     that entities must meet to qualify as provider-sponsored 
     organizations under this part.
       ``(B) Factors to consider.--In establishing solvency 
     standards under subparagraph (A) for provider-sponsored 
     organizations, the Secretary shall consult with interested 
     parties and shall take into account--
       ``(i) the delivery system assets of such an organization 
     and ability of such an organization to provide services 
     directly to enrollees through affiliated providers, and
       ``(ii) alternative means of protecting against insolvency, 
     including reinsurance, unrestricted surplus, letters of 
     credit, guarantees, organizational insurance coverage, 
     partnerships with other licensed entities, and valuation 
     attributable to the ability of such an organization to meet 
     its service obligations through direct delivery of care.
       ``(2) Publication of notice.--In carrying out the 
     rulemaking process under this subsection, the Secretary, 
     after consultation with the National Association of Insurance 
     Commissioners, the American Academy of Actuaries, 
     organizations representative of medicare beneficiaries, and 
     other interested parties, shall publish the notice provided 
     for under section 564(a) of title 5, United States Code, by 
     not later than 45 days after the date of the enactment of 
     Medicare Preservation Act of 1995.
       ``(3) Target date for publication of rule.--As part of the 
     notice under paragraph (2), and for purposes of this 
     subsection, the `target date for publication' (referred to in 
     section 564(a)(5) of such title) shall be September 1, 1996.

[[Page H 13462]]

       ``(4) Abbreviated period for submission of comments.--In 
     applying section 564(c) of such title under this subsection, 
     `15 days' shall be substituted for `30 days'.
       ``(5) Appointment of negotiated rulemaking committee and 
     facilitator.--The Secretary shall provide for--
       ``(A) the appointment of a negotiated rulemaking committee 
     under section 565(a) of such title by not later than 30 days 
     after the end of the comment period provided for under 
     section 564(c) of such title (as shortened under paragraph 
     (4)), and
       ``(B) the nomination of a facilitator under section 566(c) 
     of such title by not later than 10 days after the date of 
     appointment of the committee.
       ``(6) Preliminary committee report.--The negotiated 
     rulemaking committee appointed under paragraph (5) shall 
     report to the Secretary, by not later than June 1, 1996, 
     regarding the committee's progress on achieving a consensus 
     with regard to the rulemaking proceeding and whether such 
     consensus is likely to occur before one month before the 
     target date for publication of the rule. If the committee 
     reports that the committee has failed to make significant 
     progress towards such consensus or is unlikely to reach such 
     consensus by the target date, the Secretary may terminate 
     such process and provide for the publication of a rule under 
     this subsection through such other methods as the Secretary 
     may provide.
       ``(7) Final committee report.--If the committee is not 
     terminated under paragraph (6), the rulemaking committee 
     shall submit a report containing a proposed rule by not later 
     than one month before the target publication date.
       ``(8) Interim, final effect.--The Secretary shall publish a 
     rule under this subsection in the Federal Register by not 
     later than the target publication date. Such rule shall be 
     effective and final immediately on an interim basis, but is 
     subject to change and revision after public notice and 
     opportunity for a period (of not less than 60 days) for 
     public comment. In connection with such rule, the Secretary 
     shall specify the process for the timely review and approval 
     of applications of entities to be certified as provider-
     sponsored organizations pursuant to such rules and consistent 
     with this subsection.
       ``(9) Publication of rule after public comment.--The 
     Secretary shall provide for consideration of such comments 
     and republication of such rule by not later than 1 year after 
     the target publication date.
       ``(10) Process for approval of applications for 
     certification of solvency.--
       ``(A) In general.--The Secretary shall establish a process 
     for the receipt and approval of applications of entities for 
     certification of solvency of provider-sponsored organizations 
     under this part. Under such process, the Secretary shall act 
     upon a complete application submitted within 60 days after 
     the date it is received.
       ``(B) Circulation of proposed application form.--By March 
     1, 1996, the Secretary, after consultation with the 
     negotiated rulemaking committee, shall circulate a proposed 
     application form that could be used by entities considering 
     being certified for solvency under this part.
       ``(c) Certification Process.--
       ``(1) State certification process for state-regulated 
     organizations and non-solvency standards for provider-
     sponsored organizations.--
       ``(A) Approval of state process.--The Secretary shall 
     approve a MedicarePlus certification and enforcement program 
     established by a State for applying the standards established 
     under this section to MedicarePlus organizations (other than 
     union sponsors and Taft-Hartley sponsors and other than 
     solvency standards for provider-sponsored organizations) and 
     MedicarePlus plans offered by such organizations if the 
     Secretary determines that the program effectively provides 
     for the application and enforcement of such standards in the 
     State with respect to such organizations and plans and does 
     not discriminate in its application by type of organization 
     or plan. Such program shall provide for certification of 
     compliance of MedicarePlus organizations and plans with the 
     applicable requirements of this part not less often than once 
     every 3 years.
       ``(B) Effect of certification under state process.--A 
     MedicarePlus organization and MedicarePlus plan offered by 
     such an organization that is certified under such program is 
     considered to have been certified under this paragraph with 
     respect to the offering of the plan to individuals residing 
     in the State.
       ``(C) User fees.--The State may impose user fees on 
     organizations seeking certification under this paragraph in 
     such amounts as the State deems sufficient to finance the 
     costs of such certification. Nothing in this subparagraph 
     shall be construed as restricting a State's authority to 
     impose premium taxes, other taxes, or other levies.
       ``(D) Review.--The Secretary periodically shall review 
     State programs approved under subparagraph (A) to determine 
     if they continue to provide for certification and enforcement 
     described in such paragraph. If the Secretary finds that a 
     State program no longer so provides, before making a final 
     determination, the Secretary shall provide the State an 
     opportunity to adopt such a plan of correction as would 
     permit the State program to meet the requirements of 
     paragraph (1). If the Secretary makes a final determination 
     that the State program, after such an opportunity, fails to 
     meet such requirements, the provisions of subsection (b) 
     shall apply to MedicarePlus organizations and plans in the 
     State.
       ``(E) Effect of no state program.--Beginning on the date 
     standards are established under section 1856, in the case of 
     organizations and plans in States in which a certification 
     program has not been approved and in operation under 
     subparagraph (A), the Secretary shall establish a process for 
     the certification of MedicarePlus organizations (other than 
     union sponsors and Taft-Hartley sponsors and other than 
     solvency standards for provider-sponsored organizations) and 
     plans of such organizations as meeting such standards.
       ``(F) Publication of list of approved state programs.--The 
     Secretary shall publish (and periodically update) a list of 
     those State programs which are approved for purposes of this 
     paragraph.
       ``(2) Federal certification process for union sponsors and 
     taft-hartley sponsors.--
       ``(A) Establishment.--The Secretary shall establish a 
     process for the certification of union sponsors and Taft-
     Hartley sponsors and MedicarePlus plans offered by such 
     sponsors and organizations as meeting the applicable 
     standards established under this section.
       ``(B) Involvement of secretary of labor.--Such process 
     shall be established and operated in cooperation with the 
     Secretary of Labor with respect to union sponsors and Taft-
     Hartley sponsors.
       ``(C) Use of state licensing and private accreditation 
     processes.--
       ``(i) In general.--The process under this paragraph shall, 
     to the maximum extent practicable, provide that MedicarePlus 
     organizations and plans that are licensed or certified 
     through a qualified private accreditation process that the 
     Secretary finds applies standards that are no less stringent 
     than the requirements of this part are deemed to meet the 
     corresponding requirements of this part for such an 
     organization or plan.
       ``(ii) Periodic accreditation.--The use of an accreditation 
     under clause (i) shall be valid only for such period as the 
     Secretary specifies.
       ``(D) User fees.--The Secretary may impose user fees on 
     entities seeking certification under this paragraph in such 
     amounts as the Secretary deems sufficient to finance the 
     costs of such certification.
       ``(3) Notice to enrollees in case of decertification.--If a 
     MedicarePlus organization or plan is decertified under this 
     subsection, the organization shall notify each enrollee with 
     the organization and plan under this part of such 
     decertification.
       ``(4) Qualified association sponsors.--In the case of 
     MedicarePlus plans offered by a MedicarePlus organization 
     that is a qualified association sponsor and issued by an 
     organization to which section 1853(a)(1) applies or by a 
     provider-sponsored organization, nothing in this subsection 
     shall be construed as limiting the authority of States to 
     regulate such plans.


              ``contracts with medicareplus organizations

       ``Sec. 1857. (a) In General.--The Secretary shall not 
     permit the election under section 1851 of a MedicarePlus plan 
     offered by a MedicarePlus organization under this part, and 
     no payment shall be made under section 1854 to an 
     organization, unless the Secretary has entered into a 
     contract under this section with an organization with respect 
     to the offering of such plan. Such a contract with an 
     organization may cover more than one MedicarePlus plan. Such 
     contract shall provide that the organization agrees to comply 
     with the applicable requirements and standards of this part 
     and the terms and conditions of payment as provided for in 
     this part.
       ``(b) Minimum Enrollment Requirements.--
       ``(1) In general.--Subject to paragraphs (2) and (3), the 
     Secretary may not enter into a contract under this section 
     with a MedicarePlus organization (other than a union sponsor 
     or Taft-Hartley sponsor) unless the organization has at least 
     5,000 individuals (or 1,500 individuals in the case of an 
     organization that is a provider-sponsored organization) who 
     are receiving health benefits through the organization, 
     except that the standards under section 1856 may permit the 
     organization to have a lesser number of beneficiaries (but 
     not less than 500 in the case of an organization that is a 
     provider-sponsored organization) if the organization 
     primarily serves individuals residing outside of urbanized 
     areas.
       ``(2) Exception for high deductible plan.--Paragraph (1) 
     shall not apply with respect to a contract that relates only 
     to a high deductible plan.
       ``(3) Allowing transition.--The Secretary may waive the 
     requirement of paragraph (1) during the first 3 contract 
     years with respect to an organization.
       ``(c) Contract Period and Effectiveness.--
       ``(1) Period.--Each contract under this section shall be 
     for a term of at least one year, as determined by the 
     Secretary, and 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.
       ``(2) Termination authority.--In accordance with procedures 
     established under subsection (h), the Secretary may at any 
     time terminate any such contract or may impose the 
     intermediate sanctions described in an applicable paragraph 
     of subsection (g) on the MedicarePlus 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 inconsistent 
     with the efficient and effective administration of this part; 
     and
       ``(C) no longer substantially meets the applicable 
     conditions of this part.
       ``(3) Effective date of contracts.--The effective date of 
     any contract executed pursuant to this section shall be 
     specified in the contract, except that in no case shall a 
     contract under this section which provides for coverage under 
     a high deductible account be effective before January 1997 
     with respect to such coverage.
       ``(4) Previous terminations.--The Secretary may not enter 
     into a contract with a MedicarePlus organization if a 
     previous contract with that organization under this section 

[[Page H 13463]]
     was terminated at the request of the organization within the preceding 
     five-year period, except in circumstances which warrant 
     special consideration, as determined by the Secretary.
       ``(5) No contracting authority.--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.
       ``(d) Protections Against Fraud and Beneficiary 
     Protections.--
       ``(1) Inspection and audit.--Each contract under this 
     section 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 
     organization when there is reasonable evidence of some need 
     for such inspection, and
       ``(B) shall have the right to audit and inspect any books 
     and records of the MedicarePlus organization that pertain (i) 
     to the ability of the organization to bear the risk of 
     potential financial losses, or (ii) to services performed or 
     determinations of amounts payable under the contract.
       ``(2) Enrollee notice at time of termination.--Each 
     contract under this section shall require the organization 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 with the organization under this part.
       ``(3) Disclosure.--
       ``(A) In general.--Each MedicarePlus organization shall, in 
     accordance with regulations of the Secretary, report to the 
     Secretary financial information which shall include the 
     following:
       ``(i) Such information as the Secretary may require 
     demonstrating that the organization has a fiscally sound 
     operation.
       ``(ii) A copy of the report, if any, filed with the Health 
     Care Financing Administration containing the information 
     required to be reported under section 1124 by disclosing 
     entities.
       ``(iii) A description of transactions, as specified by the 
     Secretary, between the organization and a party in interest. 
     Such transactions shall include--

       ``(I) any sale or exchange, or leasing of any property 
     between the organization and a party in interest;
       ``(II) any furnishing for consideration of goods, services 
     (including management services), or facilities between the 
     organization and a party in interest, but not including 
     salaries paid to employees for services provided in the 
     normal course of their employment and health services 
     provided to members by hospitals and other providers and by 
     staff, medical group (or groups), individual practice 
     association (or associations), or any combination thereof; 
     and
       ``(III) any lending of money or other extension of credit 
     between an organization and a party in interest.

     The Secretary may require that information reported 
     respecting an organization which controls, is controlled by, 
     or is under common control with, another entity be in the 
     form of a consolidated financial statement for the 
     organization and such entity.
       ``(B) Party in interest defined.--For the purposes of this 
     paragraph, the term `party in interest' means--
       ``(i) any director, officer, partner, or employee 
     responsible for management or administration of a 
     MedicarePlus organization, any person who is directly or 
     indirectly the beneficial owner of more than 5 percent of the 
     equity of the organization, any person who is the beneficial 
     owner of a mortgage, deed of trust, note, or other interest 
     secured by, and valuing more than 5 percent of the 
     organization, and, in the case of a MedicarePlus organization 
     organized as a nonprofit corporation, an incorporator or 
     member of such corporation under applicable State corporation 
     law;
       ``(ii) any entity in which a person described in clause 
     (i)--

       ``(I) is an officer or director;
       ``(II) is a partner (if such entity is organized as a 
     partnership);
       ``(III) has directly or indirectly a beneficial interest of 
     more than 5 percent of the equity; or
       ``(IV) has a mortgage, deed of trust, note, or other 
     interest valuing more than 5 percent of the assets of such 
     entity;

       ``(iii) any person directly or indirectly controlling, 
     controlled by, or under common control with an organization; 
     and
       ``(iv) any spouse, child, or parent of an individual 
     described in clause (i).
       ``(C) Access to information.--Each MedicarePlus 
     organization shall make the information reported pursuant to 
     subparagraph (A) available to its enrollees upon reasonable 
     request.
       ``(4) Loan information.--The contract shall require the 
     organization to notify the Secretary of loans and other 
     special financial arrangements which are made between the 
     organization and subcontractors, affiliates, and related 
     parties.
       ``(e) Additional Contract Terms.--The contract shall 
     contain such other terms and conditions not inconsistent with 
     this part (including requiring the organization to provide 
     the Secretary with such information) as the Secretary may 
     find necessary and appropriate.
       ``(f) Intermediate Sanctions.--
       ``(1) In general.--If the Secretary determines that a 
     MedicarePlus organization with a contract under this 
     section--
       ``(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, if the failure has adversely affected (or has 
     substantial likelihood of adversely affecting) the 
     individual;
       ``(B) imposes net monthly premiums on individuals enrolled 
     under this part in excess of the net monthly premiums 
     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 organization 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 part, or
       ``(ii) to an individual or to any other entity under this 
     part;
       ``(F) fails to comply with the requirements of section 
     1852(j)(3); 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 under 
     paragraph (1)(B), double the excess amount charged in 
     violation of such paragraph (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 
     part after the date the Secretary notifies the organization 
     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 organization under this 
     part for individuals enrolled after the date the Secretary 
     notifies the organization 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) Other intermediate sanctions.--In the case of a 
     MedicarePlus organization for which the Secretary makes a 
     determination under subsection (c)(2) the basis of which is 
     not described in paragraph (1), the Secretary may apply the 
     following intermediate sanctions:
       ``(A) civil money penalties of not more than $25,000 for 
     each determination under subsection (c)(2) 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;
       ``(B) civil money penalties of not more than $10,000 for 
     each week beginning after the initiation of procedures by the 
     Secretary under subsection (h) during which the deficiency 
     that is the basis of a determination under subsection (c)(2) 
     exists; and
       ``(C) suspension of enrollment of individuals under this 
     part after the date the Secretary notifies the organization 
     of a determination under subsection (c)(2) 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 (1) or (2) in the same manner as they 
     apply to a civil money penalty or proceeding under section 
     1128A(a).
       ``(g) Procedures for Imposing Sanctions.--The Secretary may 
     terminate a contract with a MedicarePlus organization under 
     this section or may impose the intermediate sanctions 
     described in subsection (f) on the organization in accordance 
     with formal investigation and compliance procedures 
     established by the Secretary under which--
       ``(1) the Secretary 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 subsection (c)(2);
       ``(2) the Secretary shall impose more severe sanctions on 
     organizations that have a history of deficiencies or that 
     have not taken steps to correct deficiencies the Secretary 
     has brought to their attention;
       ``(3) there are no unreasonable or unnecessary delays 
     between the finding of a deficiency and the imposition of 
     sanctions; and
       ``(4) 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.


``standards for medicareplus and medicare information transactions and 
                             data elements

       ``Sec. 1858. (a) Adoption of Standards for Data Elements.--
       ``(1) In general.--Pursuant to subsection (b), the 
     Secretary shall adopt standards for information transactions 
     and data elements of MedicarePlus and medicare information 
     and 

[[Page H 13464]]
     modifications to the standards under this section that are--
       ``(A) consistent with the objective of reducing the 
     administrative costs of providing and paying for health care; 
     and
       ``(B) developed or modified by a standard setting 
     organization (as defined in subsection (h)(8)).
       ``(2) Special rule relating to data elements.--The 
     Secretary may adopt or modify a standard relating to data 
     elements that is different from the standard developed by a 
     standard setting organization, if--
       ``(A) the different standard or modification will 
     substantially reduce administrative costs to health care 
     providers and health plans compared to the alternative; and
       ``(B) the standard or modification is promulgated in 
     accordance with the rulemaking procedures of subchapter III 
     of chapter 5 of title 5, United States Code.
       ``(3) Security standards for health information network.--
       ``(A) In general.--Each person, who maintains or transmits 
     MedicarePlus and medicare information or data elements of 
     MedicarePlus and medicare information and is subject to this 
     section, shall maintain reasonable and appropriate 
     administrative, technical, and physical safeguards--
       ``(i) to ensure the integrity and confidentiality of the 
     information;
       ``(ii) to protect against any reasonably anticipated--

       ``(I) threats or hazards to the security or integrity of 
     the information; and
       ``(II) unauthorized uses or disclosures of the information; 
     and

       ``(iii) to otherwise ensure compliance with this section by 
     the officers and employees of such person.
       ``(B) Security standards.--The Secretary shall establish 
     security standards and modifications to such standards with 
     respect to MedicarePlus and medicare information network 
     services, health plans, and health care providers that--
       ``(i) take into account--

       ``(I) the technical capabilities of record systems used to 
     maintain MedicarePlus and medicare information;
       ``(II) the costs of security measures;
       ``(III) the need for training persons who have access to 
     MedicarePlus and medicare information; and
       ``(IV) the value of audit trails in computerized record 
     systems; and

       ``(ii) ensure that a MedicarePlus and medicare information 
     network service, if it is part of a larger organization, has 
     policies and security procedures which isolate the activities 
     of such service with respect to processing information in a 
     manner that prevents unauthorized access to such information 
     by such larger organization.
     The security standards established by the Secretary shall be 
     based on the standards developed or modified by standard 
     setting organizations. If such standards do not exist, the 
     Secretary shall rely on the recommendations of the 
     MedicarePlus and Medicare Information Advisory Committee 
     (established under subsection (g)) and shall consult with 
     appropriate government agencies and private organizations in 
     accordance with paragraph (5).
       ``(4) Implementation specifications.--The Secretary shall 
     establish specifications for implementing each of the 
     standards and the modifications to the standards adopted 
     pursuant to paragraph (1) or (3).
       ``(5) Assistance to the secretary.--In complying with the 
     requirements of this section, the Secretary shall rely on 
     recommendations of the MedicarePlus and Medicare Information 
     Advisory Committee established under subsection (g) and shall 
     consult with appropriate Federal and State agencies and 
     private organizations. The Secretary shall publish in the 
     Federal Register the recommendations of the MedicarePlus and 
     Medicare Information Advisory Committee regarding the 
     adoption of a standard under this section.
       ``(b) Standards for Information Transactions and Data 
     Elements.--
       ``(1) In general.--The Secretary shall adopt standards for 
     transactions and data elements to make MedicarePlus and 
     medicare information uniformly available to be exchanged 
     electronically, that is--
       ``(A) appropriate for the following financial and 
     administrative transactions: claims (including coordination 
     of benefits) or equivalent encounter information, enrollment 
     and disenrollment, eligibility, premium payments, and 
     referral certification and authorization; and
       ``(B) related to other financial and administrative 
     transactions determined appropriate by the Secretary 
     consistent with the goals of improving the operation of the 
     health care system and reducing administrative costs.
       ``(2) Unique health identifiers.--
       ``(A) Adoption of standards.--The Secretary shall adopt 
     standards providing for a standard unique health identifier 
     for each individual, employer, health plan, and health care 
     provider for use in the MedicarePlus and medicare information 
     system. In developing unique health identifiers for each 
     health plan and health care provider, the Secretary shall 
     take into account multiple uses for identifiers and multiple 
     locations and specialty classifications for health care 
     providers.
       ``(B) Penalty for improper disclosure.--A person who 
     knowingly uses or causes to be used a unique health 
     identifier under subparagraph (A) for a purpose that is not 
     authorized by the Secretary shall--
       ``(i) be fined not more than $50,000, imprisoned not more 
     than 1 year, or both; or
       ``(ii) if the offense is committed under false pretenses, 
     be fined not more than $100,000, imprisoned not more than 5 
     years, or both.
       ``(3) Code sets.--
       ``(A) In general.--The Secretary, in consultation with the 
     MedicarePlus and Medicare Information Advisory Committee, 
     experts from the private sector, and Federal and State 
     agencies, shall--
       ``(i) select code sets for appropriate data elements from 
     among the code sets that have been developed by private and 
     public entities; or
       ``(ii) establish code sets for such data elements if no 
     code sets for the data elements have been developed.
       ``(B) Distribution.--The Secretary shall establish 
     efficient and low-cost procedures for distribution (including 
     electronic distribution) of code sets and modifications made 
     to such code sets under subsection (c)(2).
       ``(4) Electronic signature.--
       ``(A) In general.--The Secretary, after consultation with 
     the MedicarePlus and Medicare Information Advisory Committee, 
     shall promulgate regulations specifying procedures for the 
     electronic transmission and authentication of signatures, 
     compliance with which will be deemed to satisfy Federal and 
     State statutory requirements for written signatures with 
     respect to information transactions required by this section 
     and written signatures on enrollment and disenrollment forms.
       ``(B) Payments for services and premiums.--Nothing in this 
     section shall be construed to prohibit the payment of health 
     care services or health plan premiums by debit, credit, 
     payment card or numbers, or other electronic means.
       ``(5) Transfer of information between health plans.--The 
     Secretary shall develop rules and procedures--
       ``(A) for determining the financial liability of health 
     plans when health care benefits are payable under two or more 
     health plans; and
       ``(B) for transferring among health plans appropriate 
     standard data elements needed for the coordination of 
     benefits, the sequential processing of claims, and other data 
     elements for individuals who have more than one health plan.
       ``(6) Coordination of benefits.--If, at the end of the 5-
     year period beginning on the date of the enactment of this 
     section, the Secretary determines that additional transaction 
     standards for coordinating benefits are necessary to reduce 
     administrative costs or duplicative (or inappropriate) 
     payment of claims, the Secretary shall establish further 
     transaction standards for the coordination of benefits 
     between health plans.
       ``(7) Protection of trade secrets.--Except as otherwise 
     required by law, the standards adopted under this section 
     shall not require disclosure of trade secrets or confidential 
     commercial information by an entity operating a MedicarePlus 
     and medicare information network.
       ``(c) Timetables for Adoption of Standards.--
       ``(1) Initial standards.--Not later than 18 months after 
     the date of the enactment of this section, the Secretary 
     shall adopt standards relating to the information 
     transactions, data elements of MedicarePlus and medicare 
     information and security described in subsections (a) and 
     (b).
       ``(2) Additions and modifications to standards.--
       ``(A) In general.--The Secretary shall review the standards 
     adopted under this section and shall adopt additional or 
     modified standards, that have been developed or modified by a 
     standard setting organization, as determined appropriate, but 
     not more frequently than once every 12 months. Any addition 
     or modification to such standards shall be completed in a 
     manner which minimizes the disruption and cost of compliance.
       ``(B) Additions and modifications to code sets.--
       ``(i) In general.--The Secretary shall ensure that 
     procedures exist for the routine maintenance, testing, 
     enhancement, and expansion of code sets.
       ``(ii) Additional rules.--If a code set is modified under 
     this paragraph, the modified code set shall include 
     instructions on how data elements of MedicarePlus and 
     medicare information that were encoded prior to the 
     modification may be converted or translated so as to preserve 
     the informational value of the data elements that existed 
     before the modification. Any modification to a code set under 
     this paragraph shall be implemented in a manner that 
     minimizes the disruption and cost of complying with such 
     modification.
       ``(d) Requirements for Health Plans.--
       ``(1) In general.--If a person desires to conduct any of 
     the information transactions described in subsection (b)(1) 
     with a health plan as a standard transaction, the health plan 
     shall conduct such standard transaction in a timely manner 
     and the information transmitted or received in connection 
     with such transaction shall be in the form of standard data 
     elements of MedicarePlus and medicare information.
       ``(2) Satisfaction of requirements.--A health plan may 
     satisfy the requirement imposed on such plan under paragraph 
     (1) by directly transmitting standard data elements of 
     MedicarePlus and medicare information or submitting 
     nonstandard data elements to a MedicarePlus and medicare 
     information network service for processing into standard data 
     elements and transmission.
       ``(3) Timetables for compliance with requirements.--Not 
     later than 24 months after the date on which standards are 
     adopted under subsections (a) and (b) with respect to any 
     type of information transaction or data element of 
     MedicarePlus and medicare information or with respect to 
     security, a health plan shall comply with the requirements of 
     this section with respect to such transaction or data 
     element.
       ``(4) Compliance with modified standards.--If the Secretary 
     adopts a modified standard under subsection (a) or (b), a 
     health plan 

[[Page H 13465]]
     shall be required to comply with the modified standard at such time as 
     the Secretary determines appropriate taking into account the 
     time needed to comply due to the nature and extent of the 
     modification. However, the time determined appropriate under 
     the preceding sentence shall be not earlier than the last day 
     of the 180-day period beginning on the date such modified 
     standard is adopted. The Secretary may extend the time for 
     compliance for small health plans, if the Secretary 
     determines such extension is appropriate.
       ``(e) General Penalty for Failure To Comply With 
     Requirements and Standards.--
       ``(1) General penalty.--
       ``(A) In general.--Except as provided in paragraph (2), the 
     Secretary shall impose on any person that violates a 
     requirement or standard--
       ``(i) with respect to MedicarePlus and medicare information 
     transactions, data elements of MedicarePlus and medicare 
     information, or security imposed under subsection (a) or (b); 
     or
       ``(ii) with respect to health plans imposed under 
     subsection (d);
     a penalty of not more than $100 for each such violation of a 
     specific standard or requirement, but the total amount 
     imposed for all such violations of a specific standard or 
     requirement during the calendar year shall not exceed 
     $25,000.
       ``(B) Procedures.--The provisions of section 1128A (other 
     than subsections (a) and (b) and the second sentence of 
     subsection (f)) shall apply to the imposition of a civil 
     money penalty under this paragraph in the same manner as such 
     provisions apply to the imposition of a penalty under such 
     section 1128A.
       ``(C) Denial of payment.--Except as provided in paragraph 
     (2), the Secretary may deny payment under this title for an 
     item or service furnished by a person if the person fails to 
     comply with an applicable requirement or standard for 
     MedicarePlus and medicare information relating to that item 
     or service.
       ``(2) Limitations.--
       ``(A) Noncompliance not discovered.--A penalty may not be 
     imposed under paragraph (1) if it is established to the 
     satisfaction of the Secretary that the person liable for the 
     penalty did not know, and by exercising reasonable diligence 
     would not have known, that such person failed to comply with 
     the requirement or standard described in paragraph (1).
       ``(B) Failures due to reasonable cause.--
       ``(i) In general.--Except as provided in clause (ii), a 
     penalty may not be imposed under paragraph (1) if--

       ``(I) the failure to comply was due to reasonable cause and 
     not to willful neglect; and
       ``(II) the failure to comply is corrected during the 30-day 
     period beginning on the first date the person liable for the 
     penalty knew, or by exercising reasonable diligence would 
     have known, that the failure to comply occurred.

       ``(ii) Extension of period.--

       ``(I) No penalty.--The period referred to in clause (i)(II) 
     may be extended as determined appropriate by the Secretary 
     based on the nature and extent of the failure to comply.
       ``(II) Assistance.--If the Secretary determines that a 
     health plan failed to comply because such plan was unable to 
     comply, the Secretary may provide technical assistance to 
     such plan during the period described in clause (i)(II). Such 
     assistance shall be provided in any manner determined 
     appropriate by the Secretary.

       ``(C) Reduction.--In the case of a failure to comply which 
     is due to reasonable cause and not to willful neglect, any 
     penalty under paragraph (1) that is not entirely waived under 
     subparagraph (B) may be waived to the extent that the payment 
     of such penalty would be excessive relative to the compliance 
     failure involved.
       ``(f) Effect on State Law.--
       ``(1) General effect.--
       ``(A) General rule.--Except as provided in subparagraph 
     (B), a provision, requirement, or standard under this section 
     shall supersede any contrary provision of State law, 
     including a provision of State law that requires medical or 
     health plan records (including billing information) to be 
     maintained or transmitted in written rather than electronic 
     form.
       ``(B) Exceptions.--A provision, requirement, or standard 
     under this section shall not supersede a contrary provision 
     of State law if the Secretary determines that the provision 
     of State law should be continued for any reason, including 
     for reasons relating to prevention of fraud and abuse or 
     regulation of controlled substances.
       ``(2) Public health reporting.--Nothing in this section 
     shall be construed to invalidate or limit the authority, 
     power, or procedures established under any law providing for 
     the reporting of disease or injury, child abuse, birth, or 
     death, public health surveillance, or public health 
     investigation or intervention.
       ``(g) MedicarePlus and Medicare Information Advisory 
     Committee.--
       ``(1) Establishment.--There is established a committee to 
     be known as the MedicarePlus and Medicare Information 
     Advisory Committee (in this subsection referred to as the 
     `committee').
       ``(2) Duties.--The committee shall--
       ``(A) advise the Secretary in the development of standards 
     under this section; and
       ``(B) be generally responsible for advising the Secretary 
     and the Congress on the status and the future of the 
     MedicarePlus and medicare information network.
       ``(3) Membership.--
       ``(A) In general.--The committee shall consist of 9 members 
     of whom--
       ``(i) 3 shall be appointed by the President;
       ``(ii) 3 shall be appointed by the Speaker of the House of 
     Representatives after consultation with the minority leader 
     of the House of Representatives; and
       ``(iii) 3 shall be appointed by the President pro tempore 
     of the Senate after consultation with the minority leader of 
     the Senate.
     The appointments of the members shall be made not later than 
     60 days after the date of the enactment of this section. The 
     President shall designate 1 member as the Chair.
       ``(B) Expertise.--The membership of the committee shall 
     consist of individuals who are of recognized standing and 
     distinction in the areas of information systems, information 
     networking and integration, consumer health, or health care 
     financial management, and who possess the demonstrated 
     capacity to discharge the duties imposed on the committee.
       ``(C) Terms.--Each member of the committee shall be 
     appointed for a term of 5 years, except that the members 
     first appointed shall serve staggered terms such that the 
     terms of not more than 3 members expire at one time.
       ``(D) Initial meeting.--Not later than 30 days after the 
     date on which a majority of the members have been appointed, 
     the committee shall hold its first meeting.
       ``(4) Reports.--Not later than 1 year after the date of the 
     enactment of this section, and annually thereafter, the 
     committee shall submit to Congress and the Secretary a report 
     regarding--
       ``(A) the extent to which entities using the MedicarePlus 
     and medicare information network are meeting the standards 
     adopted under this section and working together to form an 
     integrated network that meets the needs of its users;
       ``(B) the extent to which such entities are meeting the 
     security standards established pursuant to this section and 
     the types of penalties assessed for noncompliance with such 
     standards;
       ``(C) any problems that exist with respect to 
     implementation of the MedicarePlus and medicare information 
     network; and
       ``(D) the extent to which timetables under this section are 
     being met.
     Reports made under this subsection shall be made available to 
     health care providers, health plans, and other entities that 
     use the MedicarePlus and medicare information network to 
     exchange MedicarePlus and medicare information.
       ``(h) Definitions.--For purposes of this section:
       ``(1) Code set.--The term `code set' means any set of codes 
     used for encoding data elements, such as tables of terms, 
     enrollment information, and encounter data.
       ``(2) Coordination of benefits.--The term `coordination of 
     benefits' means determining and coordinating the financial 
     obligations of health plans when health care benefits are 
     payable under such a plan and under this title (including 
     under a MedicarePlus plan).
       ``(3) MedicarePlus and medicare information.--The term 
     `MedicarePlus and medicare information' means any information 
     that relates to the enrollment of individuals under this 
     title (including information relating to elections of 
     MedicarePlus plans under section 1851) and the provision of 
     health benefits (including benefits provided under such 
     plans) under this title.
       ``(4) MedicarePlus and medicare information network.--The 
     term `MedicarePlus and medicare information network' means 
     the MedicarePlus and medicare information system that is 
     formed through the application of the requirements and 
     standards established under this section.
       ``(5) MedicarePlus and medicare information network 
     service.--The term `MedicarePlus and medicare information 
     network service' means a public or private entity that--
       ``(A) processes or facilitates the processing of 
     nonstandard data elements of MedicarePlus and medicare 
     information into standard data elements;
       ``(B) provides the means by which persons may meet the 
     requirements of this section; or
       ``(C) provides specific information processing services.
       ``(6) Health plan.--The term `health plan' means a plan 
     which provides, or pays the cost of, health benefits. Such 
     term includes the following, or any combination thereof:
       ``(A) Part A or part B of this title, and includes a 
     MedicarePlus plan.
       ``(B) The medicaid program under title XIX and the 
     MediGrant program under title XXI.
       ``(C) A medicare supplemental policy (as defined in section 
     1882(g)(1)).
       ``(D) Worker's compensation or similar insurance.
       ``(E) Automobile or automobile medical-payment insurance.
       ``(F) A long-term care policy, other than a fixed indemnity 
     policy.
       ``(G) The Federal Employees Health Benefit Plan under 
     chapter 89 of title 5, United States Code.
       ``(H) An employee welfare benefit plan, as defined in 
     section 3(1) of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1002(1)), but only to the extent the plan 
     is established or maintained for the purpose of providing 
     health benefits.
       ``(7) Individually identifiable MedicarePlus and medicare 
     information.--The term `individually identifiable 
     MedicarePlus and medicare information' means MedicarePlus and 
     medicare enrollment information, including demographic 
     information collected from an individual, that--
       ``(A) is created or received by a health care provider, 
     health plan, employer, or MedicarePlus and medicare 
     information network service, and
       ``(B) identifies an individual.
       ``(8) Standard setting organization.--The term `standard 
     setting organization' means a standard setting organization 
     accredited by the American National Standards Institute and 
     includes the National Council for Prescription Drug Program.
       ``(9) Standard transaction.--The term `standard 
     transaction' means, when referring to an information 
     transaction or to data elements 

[[Page H 13466]]
     of MedicarePlus and medicare information, any transaction that meets 
     the requirements and implementation specifications adopted by 
     the Secretary under subsections (a) and (b).


                ``definitions; miscellaneous provisions

       ``Sec. 1859. (a) Definitions Relating to MedicarePlus 
     Organizations.--In this part--
       ``(1) MedicarePlus organization.--The term `MedicarePlus 
     organization' means a public or private entity that is 
     certified under section 1857 as meeting the requirements and 
     standards of this part for such an organization.
       ``(2) Provider-sponsored organization.--The term `provider-
     sponsored organization' is defined in section 1853(e).
       ``(3) 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) that the Secretary 
     finds--
       ``(A) is organized for purposes other than to market a 
     health plan,
       ``(B) 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,
       ``(C) may not exclude a member or spouse of a member from 
     health plan coverage based on factors described in clause 
     (ii);
       ``(D) does not exist solely or principally for the purpose 
     of selling insurance,
       ``(E) has at least 1,000 individual members or 200 employer 
     members,
       ``(F) is a permanent entity which receives a substantial 
     proportion of its financial support from active members; and
       ``(G) is not owned or controlled by an insurance company.
     Such term includes a subsidiary or corporation that is wholly 
     owned by one or more qualified organizations.
       ``(4) Taft-hartley sponsor.--The term `Taft-Hartley 
     sponsor' means, in relation to a group health plan that is 
     established or maintained by two or more employers or jointly 
     by one or more employers and one 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.
       ``(5) Union sponsor.--The term `union sponsor' means an 
     employee organization in relation to a group health plan that 
     is established or maintained by the organization other than 
     pursuant to a collective bargaining agreement.
       ``(6) Employer, etc.--In this subsection and section 
     1851(b), the terms `employer', `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.
       ``(b) Definitions Relating to MedicarePlus Plans.--
       ``(1) MedicarePlus plan.--The term `MedicarePlus plan' 
     means health benefits coverage offered under a policy, 
     contract, or plan by a MedicarePlus organization pursuant to 
     and in accordance with a contract under section 1857.
       ``(2) High deductible plan.--
       ``(A) In general.--The term `high deductible plan' means a 
     MedicarePlus plan that--
       ``(i) provides reimbursement for at least the items and 
     services described in section 1852(a)(1) in a year but only 
     after the enrollee incurs countable expenses (as specified 
     under the plan) equal to the amount of a deductible 
     (described in subparagraph (B));
       ``(ii) counts as such expenses (for purposes of such 
     deductible) at least all amounts that would have been payable 
     under parts A and B or by the enrollee if the enrollee had 
     elected to receive benefits through the provisions of such 
     parts; and
       ``(iii) provides, after such deductible is met for a year 
     and for all subsequent expenses for benefits referred to in 
     clause (i) in the year, for a level of reimbursement that is 
     not less than--

       ``(I) 100 percent of such expenses, or
       ``(II) 100 percent of the amounts that would have been paid 
     (without regard to any deductibles or coinsurance) under 
     parts A and B with respect to such expenses,

     whichever is less.
       ``(B) Deductible.--The amount of deductible under a high 
     deductible plan--
       ``(i) for contract year 1997 shall be not more than $6,000; 
     and
       ``(ii) for a subsequent contract year shall be not more 
     than the maximum amount of such deductible for the previous 
     contract year under this subparagraph increased by the 
     national average per capita growth percentage under section 
     1854(c)(6) for the year.
     If the amount of the deductible under clause (ii) is not a 
     multiple of $50, the amount shall be rounded to the nearest 
     multiple of $50.
       ``(3) MedicarePlus unrestricted fee-for-service plan.--The 
     term `MedicarePlus unrestricted fee-for-service plan' means a 
     MedicarePlus plan that provides for coverage of benefits 
     without restrictions relating to utilization and without 
     regard to whether the provider has a contract or other 
     arrangement with the organization offering the plan for the 
     provision of such benefits.
       ``(c) Other References to Other Terms.--
       ``(1) MedicarePlus eligible individual.--The term 
     `MedicarePlus eligible individual' is defined in section 
     1851(a)(3).
       ``(2) MedicarePlus payment area.--The term `MedicarePlus 
     payment area' is defined in section 1854(d).
       ``(3) National average per capita growth percentage.--The 
     `national average per capita growth percentage' is defined in 
     section 1854(c)(6).
       ``(4) Monthly premium; net monthly premium.--The terms 
     `monthly premium' and `net monthly premium' are defined in 
     section 1855(a)(2).
       ``(d) Coordinated Acute and Long-term Care Benefits Under a 
     MedicarePlus Plan.--Nothing in this part shall be construed 
     as preventing a State from coordinating benefits under its 
     MediGrant program under title XXI with those provided under a 
     MedicarePlus plan in a manner that assures continuity of a 
     full-range of acute care and long-term care services to poor 
     elderly or disabled individuals eligible for benefits under 
     this title and under such program.''.
       (b) Conforming References to Previous Part C.--Any 
     reference in law (in effect before the date of the enactment 
     of this Act) to part C of title XVIII of the Social Security 
     Act is deemed a reference to part D of such title (as in 
     effect after such date).
       (c) Use of Interim, Final Regulations.--In order to carry 
     out the amendment made by subsection (a) in a timely manner, 
     the Secretary of Health and Human Services may promulgate 
     regulations that take effect on an interim basis, after 
     notice and pending opportunity for public comment.
       (d) Advance Directives.--Section 1866(f)(1) (42 U.S.C. 
     1395cc(f)(1)) is amended--
       (1) by inserting ``1853(g),'' after ``1833(s),'', and
       (2) by inserting ``, MedicarePlus organization,'' after 
     ``provider of services''.
       (e) Conforming Amendment.--Section 1866(a)(1)(O) (42 U.S.C. 
     1395cc(a)(1)(O)) is amended by inserting before the semicolon 
     at the end the following: ``and in the case of hospitals to 
     accept as payment in full for inpatient hospital services 
     that are emergency services (as defined in section 
     1853(b)(4)) that are covered under this title and are 
     furnished to any individual enrolled under part C with a 
     MedicarePlus organization which does not have a contract 
     establishing payment amounts for services furnished to 
     members of the organization the amounts that would be made as 
     a payment in full under this title if the individuals were 
     not so enrolled''.
       (f) 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 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.

     SEC. 8002. DUPLICATION AND COORDINATION OF MEDICARE-RELATED 
                   PLANS.

       (a) Treatment of Certain Health Insurance Policies as 
     Nonduplicative.--
       (1) In general.--Section 1882(d)(3)(A) (42 U.S.C. 
     1395ss(d)(3)(A)) is amended--
       (A) by amending clause (i) to read as follows:
       ``(i) It is unlawful for a person to sell or issue to an 
     individual entitled to benefits under part A or enrolled 
     under part B of this title or electing a MedicarePlus plan 
     under section 1851--
       ``(I) a health insurance policy (other than a medicare 
     supplemental policy) with knowledge that the policy 
     duplicates health benefits to which the individual is 
     otherwise entitled under this title or title XIX,
       ``(II) in the case of an individual not electing a 
     MedicarePlus plan, a medicare supplemental policy with 
     knowledge that the individual is entitled to benefits under 
     another medicare supplemental policy, or
       ``(III) in the case of an individual electing a 
     MedicarePlus plan, a medicare supplemental policy with 
     knowledge that the policy duplicates health benefits to which 
     the individual is otherwise entitled under this title or 
     under another medicare supplemental policy.'';
       (B) in clause (iii), by striking ``clause (i)'' and 
     inserting ``clause (i)(II)''; and
       (C) by adding at the end the following new clauses:
       ``(iv) For purposes of this subparagraph a health insurance 
     policy shall be considered to `duplicate' benefits under this 
     title only when, under its terms, the policy provides 
     specific reimbursement for identical items and services to 
     the extent paid for under this title, and a health insurance 
     policy providing for benefits which are payable to or on 
     behalf of an individual without regard to other health 
     benefit coverage of such individual is not considered to 
     `duplicate' any health benefits under this title.
       ``(v) For purposes of this subparagraph, a health insurance 
     policy (or a rider to an insurance contract which is not a 
     health insurance policy), including a policy (such as a 
     qualified long-term care insurance contract described in 
     section 7702B(b) of the Internal Revenue Code of 1986, as 
     added by the Revenue Reconciliation Act of 1995) providing 
     benefits for long-term care, nursing home care, home health 
     care, or community-based care, that coordinates against or 
     excludes items and services available or paid for under this 
     title and (for policies sold or issued after January 1, 1996) 
     that discloses such coordination or exclusion in the policy's 
     outline of coverage, is not considered to `duplicate' health 
     benefits under this title. For purposes of this clause, the 
     terms `coordinates' and `coordination' mean, with respect to 
     a policy in relation to health benefits under this title, 
     that the policy under its terms is secondary to, or excludes 
     from payment, items and services to the extent available or 
     paid for under this title.
       ``(vi) A State may not impose, with respect to the sale or 
     issuance of a policy (or rider) that meets the requirements 
     of this title pursuant to clause (iv) or (v) to an individual 
     entitled to benefits under part A or enrolled under part B or 
     enrolled under a MedicarePlus plan under part C, any 
     requirement based on the premise that such a policy or rider 
     duplicates health benefits to which the individual is 
     otherwise entitled under this title.''.
       (2) Conforming amendments.--Section 1882(d)(3) (42 U.S.C. 
     1395ss(d)(3)) is amended--
       (A) in subparagraph (B), by inserting ``(including any 
     MedicarePlus plan)'' after ``health insurance policies'';

[[Page H 13467]]

       (B) in subparagraph (C)--
       (i) by striking ``with respect to (i)'' and inserting 
     ``with respect to'', and
       (ii) by striking ``, (ii) the sale'' and all that follows 
     up to the period at the end; and
       (C) by striking subparagraph (D).
       (3) Medicareplus plans not treated as medicare 
     supplementary policies.--Section 1882(g)(1) (42 U.S.C. 
     1395ss(g)(1)) is amended by inserting ``a MedicarePlus plan 
     or'' after ``and does not include''.
       (b) Additional Rules Relating to Individuals Enrolled in 
     MedicarePlus Plans.--Section 1882 (42 U.S.C. 1395ss) is 
     further amended by adding at the end the following new 
     subsection:
       ``(u)(1) Notwithstanding the previous provisions of this 
     section, this section shall not apply to the sale or issuance 
     of a medicare supplemental policy to an individual who has 
     elected to enroll in a MedicarePlus plan under section 1851.
       ``(2)(A) It is unlawful for a person to sell or issue a 
     policy described in subparagraph (B) to an individual with 
     knowledge that the individual has in effect under section 
     1851 an election of a high deductible plan.
       ``(B) A policy described in this subparagraph is a health 
     insurance policy that provides for coverage of expenses that 
     are otherwise required to be counted toward meeting the 
     annual deductible amount provided under the high deductible 
     plan.''.

     SEC. 8003. TRANSITIONAL RULES FOR CURRENT MEDICARE HMO 
                   PROGRAM.

       (a) In General.--Section 1876 (42 U.S.C. 1395mm) is 
     amended--
       (1) in subsection (c)(3)(A)(i), by striking ``would result 
     in failure to meet the requirements of subsection (f) or'';
       (2) by amending subsection (f) to read as follows:
       ``(f)(1) Except as provided in paragraph (3), the Secretary 
     shall not enter into, renew, or continue any risk-sharing 
     contract under this section with an eligible organization for 
     any contract year beginning on or after--
       ``(A) the date standards for MedicarePlus organizations and 
     plans are first established under section 1856(a) with 
     respect to MedicarePlus organizations that are insurers or 
     health maintenance organizations, or
       ``(B) in the case of in the case of such an organization 
     with such a contract in effect as of the date such standards 
     were first established, 1 year after such date.
       ``(2) The Secretary shall not enter into, renew, or 
     continue any risk-sharing contract under this section with an 
     eligible organization for any contract year beginning on or 
     after January 1, 2000.
       ``(3) 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.
       ``(4) Notwithstanding subsection (a), the Secretary shall 
     provide that payment amounts under risk-sharing contracts 
     under this section for months in a year (beginning with 
     January 1996) shall be computed--
       ``(A) with respect to individuals entitled to benefits 
     under both parts A and B, by substituting payment rates under 
     section 1854(a) for the payment rates otherwise established 
     under subsection 1876(a), and
       ``(B) with respect to individuals only entitled to benefits 
     under part B, by substituting an appropriate proportion of 
     such rates (reflecting the relative proportion of payments 
     under this title attributable to such part) for the payment 
     rates otherwise established under subsection (a).
     For purposes of carrying out this paragraph for payments for 
     months in 1996, the Secretary shall compute, announce, and 
     apply the payment rates under section 1854(a) 
     (notwithstanding any deadlines specified in such section) in 
     as timely a manner as possible and may (to the extent 
     necessary) provide for retroactive adjustment in payments 
     made under this section not in accordance with such rates.''; 
     and
       (3) in subsection (i)(1)(C), by striking ``(e), and (f)'' 
     and inserting ``and (e)''.

   CHAPTER 2--SPECIAL RULES FOR MEDICAREPLUS MEDICAL SAVINGS ACCOUNTS

     SEC. 8011. MEDICAREPLUS MSA.

       (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. MEDICAREPLUS MSA.

       ``(a) Exclusion.--Gross income shall not include any 
     payment to the MedicarePlus MSA of an individual by the 
     Secretary of Health and Human Services under part C of title 
     XVIII of the Social Security Act.
       ``(b) MedicarePlus MSA.--For purposes of this section--
       ``(1) Medicareplus msa.--The term `MedicarePlus MSA' means 
     a medical savings account (as defined in section 222(d))--
       ``(A) which is designated as a MedicarePlus MSA,
       ``(B) notwithstanding section 222(f)(5), with respect to 
     which no contribution may be made other than--
       ``(i) a contribution made by the Secretary of Health and 
     Human Services pursuant to part C of title XVIII of the 
     Social Security Act, or
       ``(ii) a trustee-to-trustee transfer described in 
     subsection (c)(4), and
       ``(C) the governing instrument of which provides that 
     trustee-to-trustee transfers described in subsection (c)(4) 
     may be made to and from such account.
       ``(2) High deductible msa.--The term `High Deductible 
     MedicarePlus MSA' means a MedicarePlus MSA which is 
     established in connection with a high deductible plan 
     described in section 1859(b)(2) of the Social Security Act.
       ``(3) Rebate medicareplus msa.--The term `Rebate 
     MedicarePlus MSA' means a MedicarePlus MSA other than a High 
     Deductible MedicarePlus MSA.
       ``(c) Special Rules for Distributions.--
       ``(1) Distributions for qualified medical expenses.--In 
     applying section 222--
       ``(A) to a High Deductible MedicarePlus MSA, qualified 
     medical expenses shall include only expenses for medical care 
     of the account holder, and
       ``(B) to a Rebate MedicarePlus MSA, qualified medical 
     expenses shall include only expenses for medical care of the 
     account holder and of the spouse of the account holder if 
     such spouse is entitled to benefits under part A of title 
     XVIII of the Social Security Act and is enrolled under part B 
     of such title.
       ``(2) Penalty for distributions from high deductible msa 
     not used for qualified medical expenses if minimum balance 
     not maintained.--
       ``(A) In general.--The tax imposed by this chapter for any 
     taxable year in which there is a payment or distribution from 
     a High Deductible MedicarePlus MSA which is not used 
     exclusively to pay the qualified medical expenses of the 
     account holder shall be increased by 50 percent of the excess 
     (if any) of--
       ``(i) the amount of such payment or distribution, over
       ``(ii) the excess (if any) of--

       ``(I) the fair market value of the assets in such MSA as of 
     the close of the calendar year preceding the calendar year in 
     which the taxable year begins, over
       ``(II) an amount equal to 60 percent of the deductible 
     under the high deductible plan covering the account holder as 
     of January 1 of the calendar year in which the taxable year 
     begins.

     Section 222(f)(2) shall not apply to any payment or 
     distribution from a High Deductible MedicarePlus MSA.
       ``(B) Exceptions.--Subparagraph (A) shall not apply if the 
     payment or distribution is made on or after the date the 
     account holder--
       ``(i) becomes disabled within the meaning of section 
     72(m)(7), or
       ``(ii) dies.
       ``(C) Special rules.--For purposes of subparagraph (A)--
       ``(i) all High Deductible MedicarePlus MSAs of the account 
     holder shall be treated as 1 account,
       ``(ii) all payments and distributions not used exclusively 
     to pay the qualified medical expenses of the account holder 
     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.--Section 
     222(f)(2) and paragraph (2) of this subsection shall not 
     apply to any payment or distribution from a MedicarePlus MSA 
     to the Secretary of Health and Human Services of an erroneous 
     contribution to such MSA and of the net income attributable 
     to such contribution.
       ``(4) Trustee-to-trustee transfers.--Section 222(f)(2) and 
     paragraph (2) of this subsection shall not apply to--
       ``(A) any trustee-to-trustee transfer from a High 
     Deductible MedicarePlus MSA of an account holder to another 
     High Deductible MedicarePlus MSA of such account holder, and
       ``(B) any trustee-to-trustee transfer from a Rebate 
     MedicarePlus MSA of an account holder to another Rebate 
     MedicarePlus MSA of such account holder.
       ``(d) Special Rules for Treatment of Account After Death of 
     Account Holder.--Notwithstanding section 222(f)(1)(B), if, as 
     of the date of the death of the account holder, the spouse of 
     such holder is not entitled to benefits under title XVIII of 
     the Social Security Act, then after the date of such death--
       ``(1) the Secretary of Health and Human Services may not 
     make any payments to such MedicarePlus MSA, other than 
     payments attributable to periods before such date, and
       ``(2) such MSA shall be treated as medical savings account 
     which is not a MedicarePlus MSA.
       ``(e) Reports.--In the case of a MedicarePlus MSA, the 
     report under section 222(h)--
       ``(1) shall include the fair market value of the assets in 
     such MedicarePlus MSA as of the close of each calendar year, 
     and
       ``(2) shall be furnished to the account holder--
       ``(A) not later than January 31 of the calendar year 
     following the calendar year to which such reports relate, and
       ``(B) in such manner as the Secretary prescribes in such 
     regulations.''
       (b) Conforming Amendments.--
       (1) The last sentence of section 4973(d) of such Code, as 
     added by section 11066(f)(4), is amended by ``or section 
     137(c)(3)'' after ``section 222(f)(3)''.
       (2) 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. MedicarePlus MSA.
``Sec. 138. Cross references to other Acts.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1996.

     SEC. 8012. CERTAIN REBATES EXCLUDED FROM GROSS INCOME.

       (a) In General.--Section 105 of the Internal Revenue Code 
     of 1986 (relating to amounts received under accident and 
     health plans) is amended by adding at the end the following 
     new subsection:

[[Page H 13468]]

       ``(j) Certain Rebates Under Social Security Act.--Gross 
     income does not include any rebate received under part C of 
     title XVIII of the Social Security Act during the taxable 
     year.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to amounts received after the date of the 
     enactment of this Act.

             CHAPTER 3--MEDICARE PAYMENT REVIEW COMMISSION

     SEC. 8021. MEDICARE PAYMENT REVIEW COMMISSION.

       (a) In General.--Title XVIII is amended by inserting after 
     section 1804 the following new section:


                  ``medicare payment review commission

       ``Sec. 1805. (a) Establishment.--There is hereby 
     established the Medicare Payment Review Commission (in this 
     section referred to as the `Commission').
       ``(b) Duties.--
       ``(1) General duties and reports.--
       ``(A) In general.--The Commission shall review, and make 
     recommendations to Congress concerning, payment policies 
     under this title.
       ``(B) Annual reports.--By not later than June 1 of each 
     year, the Commission shall submit a report to Congress 
     containing an examination of issues affecting the medicare 
     program, including the implications of changes in health care 
     delivery in the United States and in the market for health 
     care services on the medicare program.
       ``(C) Additional reports.--The Commission may submit to 
     Congress from time to time such other reports as the 
     Commission deems appropriate. By not later than May 1, 1997, 
     the Commission shall submit to Congress a report on the 
     matter described in paragraph (2)(G).
       ``(D) Availability of reports.--The Commission shall 
     transmit to the Secretary a copy of each report submitted to 
     Congress under this subsection and shall make such reports 
     available to the public.
       ``(2) Specific duties relating to medicareplus program.--
     Specifically, the Commission shall review, with respect to 
     the MedicarePlus program under part C--
       ``(A) the methodology for making payment to plans under 
     such program, including the making of differential payments 
     and the distribution of differential updates among different 
     payment areas);
       ``(B) the mechanisms used to adjust payments for risk and 
     the need to adjust such mechanisms to take into account 
     health status of beneficiaries;
       ``(C) the implications of risk selection both among 
     MedicarePlus organizations and between the MedicarePlus 
     option and the Medicare fee-for-service option;
       ``(D) in relation to payment under part C, the development 
     and implementation of mechanisms to assure the quality of 
     care for those enrolled with MedicarePlus organizations;
       ``(E) the impact of the MedicarePlus program on access to 
     care for medicare beneficiaries;
       ``(F) the feasibility and desirability of extending the 
     rules for open enrollment that apply during the transition 
     period to apply in each county during the first 2 years in 
     which MedicarePlus plans are made available to individuals 
     residing in the county; and
       ``(G) other major issues in implementation and further 
     development of the MedicarePlus program.
       ``(3) Specific duties relating to the fee-for-service 
     system.--Specifically, the Commission shall review payment 
     policies under parts A and B, including--
       ``(A) the factors affecting expenditures for services in 
     different sectors, including the process for updating 
     hospital, physician, and other fees,
       ``(B) payment methodologies; and
       ``(C) the impact of payment policies on access and quality 
     of care for medicare beneficiaries.
       ``(4) Specific duties relating to interaction of payment 
     policies with health care delivery generally.--Specifically 
     the Commission shall review the effect of payment policies 
     under this title on the delivery of health care services 
     under this title and assess the implications of changes in 
     the health services market on the medicare program.
       ``(c) Membership.--
       ``(1) Number and appointment.--The Commission shall be 
     composed of 15 members appointed by the Comptroller General.
       ``(2) Qualifications.--The membership of the Commission 
     shall include individuals with national recognition for their 
     expertise in health finance and economics, actuarial science, 
     health facility management, health plans and integrated 
     delivery systems, reimbursement of health facilities, 
     allopathic and osteopathic physicians, and other providers of 
     services, and other related fields, who provide a mix of 
     different professionals, broad geographic representation, and 
     a balance between urban and rural representatives, including 
     physicians and other health professionals, employers, third 
     party payors, individuals skilled in the conduct and 
     interpretation of biomedical, health services, and health 
     economics research and expertise in outcomes and 
     effectiveness research and technology assessment. Such 
     membership shall also include representatives of consumers 
     and the elderly.
       ``(3) Terms.--
       ``(A) In general.--The terms of members of the Commission 
     shall be for 3 years except that the Comptroller General 
     shall designate staggered terms for the members first 
     appointed.
       ``(B) Vacancies.--Any member appointed to fill a vacancy 
     occurring before the expiration of the term for which the 
     member's predecessor was appointed shall be appointed only 
     for the remainder of that term. A member may serve after the 
     expiration of that member's term until a successor has taken 
     office. A vacancy in the Commission shall be filled in the 
     manner in which the original appointment was made.
       ``(4) Compensation.--While serving on the business of the 
     Commission (including traveltime), a member of the Commission 
     shall be entitled to compensation at the per diem equivalent 
     of the rate provided for level IV of the Executive Schedule 
     under section 5315 of title 5, United States Code; and while 
     so serving away from home and member's regular place of 
     business, a member may be allowed travel expenses, as 
     authorized by the Chairman of the Commission. Physicians 
     serving as personnel of the Commission may be provided a 
     physician comparability allowance by the Commission in the 
     same manner as Government physicians may be provided such an 
     allowance by an agency under section 5948 of title 5, United 
     States Code, and for such purpose subsection (i) of such 
     section shall apply to the Commission in the same manner as 
     it applies to the Tennessee Valley Authority. For purposes of 
     pay (other than pay of members of the Commission) and 
     employment benefits, rights, and privileges, all personnel of 
     the Commission shall be treated as if they were employees of 
     the United States Senate.
       ``(5) Chairman; vice chairman.--The Comptroller General 
     shall designate a member of the Commission, at the time of 
     appointment of the member, as Chairman and a member as Vice 
     Chairman for that term of appointment.
       ``(6) Meetings.--The Commission shall meet at the call of 
     the Chairman.
       ``(d) Director and Staff; Experts and Consultants.--Subject 
     to such review as the Comptroller General deems necessary to 
     assure the efficient administration of the Commission, the 
     Commission may--
       ``(1) employ and fix the compensation of an Executive 
     Director (subject to the approval of the Comptroller General) 
     and such other personnel as may be necessary to carry out its 
     duties (without regard to the provisions of title 5, United 
     States Code, governing appointments in the competitive 
     service);
       ``(2) seek such assistance and support as may be required 
     in the performance of its duties from appropriate Federal 
     departments and agencies;
       ``(3) enter into contracts or make other arrangements, as 
     may be necessary for the conduct of the work of the 
     Commission (without regard to section 3709 of the Revised 
     Statutes (41 U.S.C. 5));
       ``(4) make advance, progress, and other payments which 
     relate to the work of the Commission;
       ``(5) provide transportation and subsistence for persons 
     serving without compensation; and
       ``(6) prescribe such rules and regulations as it deems 
     necessary with respect to the internal organization and 
     operation of the Commission.
       ``(e) Powers.--
       ``(1) Obtaining official data.--The Commission may secure 
     directly from any department or agency of the United States 
     information necessary to enable it to carry out this section. 
     Upon request of the Chairman, the head of that department or 
     agency shall furnish that information to the Commission on an 
     agreed upon schedule.
       ``(2) Data collection.--In order to carry out its 
     functions, the Commission shall collect and assess 
     information to--
       ``(A) utilize existing information, both published and 
     unpublished, where possible, collected and assessed either by 
     its own staff or under other arrangements made in accordance 
     with this section,
       ``(B) carry out, or award grants or contracts for, original 
     research and experimentation, where existing information is 
     inadequate, and
       ``(C) adopt procedures allowing any interested party to 
     submit information for the Commission's use in making reports 
     and recommendations.
       ``(3) Access of gao to information.--The Comptroller 
     General shall have unrestricted access to all deliberations, 
     records, and data of the Commission, immediately upon 
     request.
       ``(4) Periodic audit.--The Commission shall be subject to 
     periodic audit by the General Accounting Office.
       ``(5) Open meetings, etc..--Pursuant to regulations of the 
     Comptroller General, rules based upon the requirements of 
     section 10 of the Federal Advisory Committee Act shall apply 
     with respect to the Commission.
       ``(f) Authorization of Appropriations.--
       ``(1) Request for appropriations.--The Commission shall 
     submit requests for appropriations in the same manner as the 
     Comptroller General submits requests for appropriations, but 
     amounts appropriated for the Commission shall be separate 
     from amounts appropriated for the Comptroller General.
       ``(2) Authorization.--There are authorized to be 
     appropriated such sums as may be necessary to carry out the 
     provisions of this section. 60 percent of such appropriation 
     shall be payable from the Federal Hospital Insurance Trust 
     Fund, and 40 percent of such appropriation shall be payable 
     from the Federal Supplementary Medical Insurance Trust 
     Fund.''.
       (b) Abolition of ProPAC and PPRC.--
       (1) Propac.--
       (A) In general.--Section 1886(e) (42 U.S.C. 1395ww(e)) is 
     amended--
       (i) by striking paragraphs (2) and (6); and
       (ii) in paragraph (3), by striking ``(A) The Commission'' 
     and all that follows through ``(B)''.
       (B) Conforming amendment.--Section 1862 (42 U.S.C. 1395y) 
     is amended by striking ``Prospective Payment Assessment 
     Commission'' each place it appears in subsection (a)(1)(D) 
     and subsection (i) and inserting ``Medicare Payment Review 
     Commission''.
       (2) PPRC.--
       (A) In general.--Title XVIII is amended by striking section 
     1845 (42 U.S.C. 1395w-1).
       (B) Conforming amendments.--
       (i) Section 1834(b)(2) (42 U.S.C. 1395m(b)(2)) is amended 
     by striking ``Physician Payment Review Commission'' and 
     inserting ``Medicare Payment Review Commission''.

[[Page H 13469]]

       (ii) Section 1842(b) (42 U.S.C. 1395u(b)) is amended by 
     striking ``Physician Payment Review Commission'' each place 
     it appears in paragraphs (9)(D) and (14)(C)(i) and inserting 
     ``Medicare Payment Review Commission''.
       (iii) Section 1848 (42 U.S.C. 1395w-4) is amended by 
     striking ``Physician Payment Review Commission'' and 
     inserting ``Medicare Payment Review Commission'' each place 
     it appears in paragraph (2)(A)(ii), (2)(B)(iii), and (5) of 
     subsection (c), subsection (d)(2)(F), paragraphs (1)(B), (3), 
     and (4)(A) of subsection (f), and paragraphs (6)(C) and 
     (7)(C) of subsection (g).
       (c) Effective Date; Transition.--
       (1) In general.--The Comptroller General shall first 
     provide for appointment of members to the Medicare Payment 
     Review Commission (in this subsection referred to as 
     ``MPRC'') by not later than September 30, 1996.
       (2) Transition.--Effective January 1, 1997, the Prospective 
     Payment Assessment Commission (in this subsection referred to 
     as ``ProPAC'') and the Physician Payment Review Commission 
     (in this subsection referred to as ``PPRC'') are terminated 
     and amendments made by subsection (b) shall become effective. 
     The Comptroller General, to the maximum extent feasible, 
     shall provide for the transfer to the MPRC of assets and 
     staff of ProPAC and PPRC, without any loss of benefits or 
     seniority by virtue of such transfers. Fund balances 
     available to the ProPAC or PPRC for any period shall be 
     available to the MPRC for such period for like purposes.
       (3) Continuing responsibility for reports.--The MPRC shall 
     be responsible for the preparation and submission of reports 
     required by law to be submitted (and which have not been 
     submitted by the date of establishment of the MPRC) by the 
     ProPAC and PPRC, and, for this purpose, any reference in law 
     to either such Commission is deemed, after the appointment of 
     the MPRC, to refer to the MPRC.

    CHAPTER 4--TREATMENT OF HOSPITALS WHICH PARTICIPATE IN PROVIDER-
                        SPONSORED ORGANIZATIONS

     SEC. 8031. TREATMENT OF HOSPITALS WHICH PARTICIPATE IN 
                   PROVIDER-SPONSORED ORGANIZATIONS.

       (a) In General.--Section 501 of the Internal Revenue Code 
     of 1986 (relating to exemption from tax on corporations, 
     certain trusts, etc.), as amended by title XI, is amended by 
     redesignating subsection (o) as subsection (p) and by 
     inserting after subsection (n) the following new subsection:
       ``(o) Treatment of Hospitals Participating in Provider-
     Sponsored Organizations.--An organization shall not fail to 
     be treated as organized and operated exclusively for a 
     charitable purpose for purposes of subsection (c)(3) solely 
     because a hospital which is owned and operated by such 
     organization participates in a provider-sponsored 
     organization (as defined in section 1853 of the Social 
     Security Act), whether or not the provider-sponsored 
     organization is exempt from tax. For purposes of subsection 
     (c)(3), any person with a material financial interest in such 
     a provider-sponsored organization shall be treated as a 
     private shareholder or individual with respect to the 
     hospital.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the date of the enactment of this Act.
           Subtitle B--Health Care Fraud and Abuse Prevention

               CHAPTER 1--FRAUD AND ABUSE CONTROL PROGRAM

     SEC. 8101. 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 health plans,
       ``(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,
       ``(D) to provide for the modification and establishment of 
     safe harbors and to issue interpretative rulings and special 
     fraud alerts pursuant to section 1128D, and
       ``(E) to provide for the reporting and disclosure of 
     certain final adverse actions against health care providers, 
     suppliers, or practitioners pursuant to the data collection 
     system established under section 1128E.
       ``(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 8141(b) and 8142(c) of the Medicare 
     Preservation 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 for fraud and abuse 
     control program, etc.--
       ``(A) Departments of health and human services and 
     justice.--
       ``(i) 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 (C), to be available 
     without further appropriation, in an amount not to exceed--

       ``(I) for fiscal year 1996, $104,000,000, 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, the 
     limit for fiscal year 2002.

       ``(ii) Medicare and medigrant activities.--For each fiscal 
     year, of the amount appropriated in clause (i), the following 
     amounts 

[[Page H 13470]]
     shall be available only for the purposes of the activities of the 
     Office of the Inspector General of the Department of Health 
     and Human Services with respect to the medicare and MediGrant 
     programs--

       ``(I) for fiscal year 1996, not less than $60,000,000 and 
     not more than $70,000,000;
       ``(II) for fiscal year 1997, not less than $80,000,000 and 
     not more than $90,000,000;
       ``(III) for fiscal year 1998, not less than $90,000,000 and 
     not more than $100,000,000;
       ``(IV) for fiscal year 1999, not less than $110,000,000 and 
     not more than $120,000,000;
       ``(V) for fiscal year 2000, not less than $120,000,000 and 
     not more than $130,000,000;
       ``(VI) for fiscal year 2001, not less than $140,000,000 and 
     not more than $150,000,000; and
       ``(VII) for each fiscal year after fiscal year 2001, not 
     less than $150,000,000 and not more than $160,000,000.

       ``(B) Federal bureau of investigations.--There are hereby 
     appropriated from the general fund of the United States 
     Treasury and hereby appropriated to the Account for transfer 
     to the Federal Bureau of Investigations to carry out the 
     purposes described in subparagraph (C)(i), to be available 
     without further appropriation--
       ``(i) for fiscal year 1996, $47,000,000;
       ``(ii) for fiscal year 1997, $56,000,000;
       ``(iii) for fiscal year 1998, $66,000,000;
       ``(iv) for fiscal year 1999, $76,000,000;
       ``(v) for fiscal year 2000, $88,000,000;
       ``(vi) for fiscal year 2001, $101,000,000; and
       ``(vii) for each fiscal year after fiscal year 2001, 
     $114,000,000.
       ``(C) 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 medigrant fraud control units for 
     investigation reimbursements.--To reimburse the various State 
     MediGrant fraud control units established under section 
     2134(a) upon request to the Secretary for the costs of the 
     activities authorized under section 2134(b).
       ``(4) Appropriated amounts to account for medicare 
     integrity program.--
       ``(A) In general.--There are hereby appropriated to the 
     Account from the Trust Fund for each fiscal year such amounts 
     as are necessary to carry out the Medicare Integrity Program 
     under section 1893, subject to subparagraph (B) and to be 
     available without further appropriation.
       ``(B) Amounts specified.--The amount appropriated under 
     subparagraph (A) for a fiscal year is as follows:
       ``(i) For fiscal year 1996, such amount shall be not less 
     than $430,000,000 and not more than $440,000,000.
       ``(ii) For fiscal year 1997, such amount shall be not less 
     than $490,000,000 and not more than $500,000,000.
       ``(iii) For fiscal year 1998, such amount shall be not less 
     than $550,000,000 and not more than $560,000,000.
       ``(iv) For fiscal year 1999, such amount shall be not less 
     than $620,000,000 and not more than $630,000,000.
       ``(v) For fiscal year 2000, such amount shall be not less 
     than $670,000,000 and not more than $680,000,000.
       ``(vi) For fiscal year 2001, such amount shall be not less 
     than $690,000,000 and not more than $700,000,000.
       ``(vii) For each fiscal year after fiscal year 2001, such 
     amount shall be not less than $710,000,000 and not more than 
     $720,000,000.
       ``(5) 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. 8102. MEDICARE INTEGRITY PROGRAM.

       (a) Establishment of Medicare Integrity Program.--Title 
     XVIII is amended by adding at the end the following new 
     section:


                      ``MEDICARE INTEGRITY PROGRAM

       ``Sec. 1893. (a) Establishment of Program.--There is hereby 
     established the Medicare Integrity Program (in this section 
     referred to as the `Program') under which the Secretary shall 
     promote the integrity of the medicare program by entering 
     into contracts in accordance with this section with eligible 
     private entities to carry out the activities described in 
     subsection (b).
       ``(b) Activities Described.--The activities described in 
     this subsection are as follows:
       ``(1) Review of activities of providers of services or 
     other individuals and entities furnishing items and services 
     for which payment may be made under this title (including 
     skilled nursing facilities and home health agencies), 
     including medical and utilization review and fraud review 
     (employing similar standards, processes, and technologies 
     used by private health plans, including equipment and 
     software technologies which surpass the capability of the 
     equipment and technologies used in the review of claims under 
     this title as of the date of the enactment of this section).
       ``(2) Audit of cost reports.
       ``(3) Determinations as to whether payment should not be, 
     or should not have been, made under this title by reason of 
     section 1862(b), and recovery of payments that should not 
     have been made.
       ``(4) Education of providers of services, beneficiaries, 
     and other persons with respect to payment integrity and 
     benefit quality assurance issues.
       ``(5) Developing (and periodically updating) a list of 
     items of durable medical equipment in accordance with section 
     1834(a)(15) which are subject to prior authorization under 
     such section.
       ``(c) Eligibility of Entities.--An entity is eligible to 
     enter into a contract under the Program to carry out any of 
     the activities described in subsection (b) if--
       ``(1) the entity has demonstrated capability to carry out 
     such activities;
       ``(2) in carrying out such activities, the entity agrees to 
     cooperate with the Inspector General of the Department of 
     Health and Human Services, the Attorney General of the United 
     States, and other law enforcement agencies, as appropriate, 
     in the investigation and deterrence of fraud and abuse in 
     relation to this title and in other cases arising out of such 
     activities;
       ``(3) the entity demonstrates to the Secretary that the 
     entity's financial holdings, interests, or relationships will 
     not interfere with its ability to perform the functions to be 
     required by the contract in an effective and impartial 
     manner; and
       ``(4) the entity meets such other requirements as the 
     Secretary may impose.
     In the case of the activity described in subsection (b)(5), 
     an entity shall be deemed to be eligible to enter into a 
     contract under the Program to carry out the activity if the 
     entity is a carrier with a contract in effect under section 
     1842.
       ``(d) Process for Entering Into Contracts.--The Secretary 
     shall enter into contracts under the Program in accordance 
     with such procedures as the Secretary shall by regulation 
     establish, except that such procedures shall include the 
     following:
       ``(1) The Secretary shall determine the appropriate number 
     of separate contracts which are necessary to carry out the 
     Program and the appropriate times at which the Secretary 
     shall enter into such contracts.
       ``(2)(A) Except as provided in subparagraph (B), the 
     provisions of section 1153(e)(1) shall apply to contracts and 
     contracting authority under this section.
       ``(B) Competitive procedures must be used when entering 
     into new contracts under this section, or at any other time 
     considered appropriate by the Secretary, except that the 
     Secretary may contract with entities that are carrying out 
     the activities described in this section pursuant to 
     agreements under section 1816 or contracts under section 1842 
     in effect on the date of the enactment of this section.
       ``(3) A contract under this section may be renewed without 
     regard to any provision of law requiring competition if the 
     contractor has met or exceeded the performance requirements 
     established in the current contract.
       ``(e) Limitation on Contractor Liability.--The Secretary 
     shall by regulation provide for the limitation of a 
     contractor's liability for actions taken to carry out a 
     contract under the Program, and such regulation shall, to the 
     extent the Secretary finds appropriate, employ the same or 
     comparable standards and other substantive and procedural 
     provisions as are contained in section 1157.''.
       (b) Elimination of FI and Carrier Responsibility for 
     Carrying Out Activities Subject to Program.--
       (1) Responsibilities of fiscal intermediaries under part 
     a.--Section 1816 (42 U.S.C. 1395h) is amended by adding at 
     the end the following new subsection:
       ``(l) No agency or organization may carry out (or receive 
     payment for carrying out) any activity pursuant to an 
     agreement under this section to the extent that the activity 
     is carried out pursuant to a contract under the Medicare 
     Integrity Program under section 1893.''.
       (2) Responsibilities of carriers under part b.--Section 
     1842(c) (42 U.S.C. 1395u(c)) is amended by adding at the end 
     the following new paragraph:
       ``(6) No carrier may carry out (or receive payment for 
     carrying out) any activity pursuant to a contract under this 
     subsection to the extent that the activity is carried out 
     pursuant to a contract under the Medicare Integrity Program 
     under section 1893. The previous sentence shall not apply 
     with respect to the activity described in section 1893(b)(5) 
     (relating to prior authorization of certain items of durable 
     medical equipment under section 1834(a)(15)).''.

     SEC. 8103. BENEFICIARY INCENTIVE PROGRAMS.

       (a) Clarification of Requirement to Provide Explanation of 
     Medicare Benefits.--The Secretary of Health and Human 
     Services (in this section referred to as the ``Secretary'') 
     shall provide an explanation of benefits under the medicare 
     program under title XVIII of the Social Security Act with 
     respect to each item or service for which payment may be made 
     under the program which is furnished to an individual, 
     without regard to whether or not a deductible or coinsurance 
     may be imposed against the individual with respect to the 
     item or service.
       (b) 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 
     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 

[[Page H 13471]]
     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).
       (c) 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.

     SEC. 8104. APPLICATION OF CERTAIN HEALTH ANTI-FRAUD AND ABUSE 
                   SANCTIONS TO FRAUD AND ABUSE AGAINST FEDERAL 
                   HEALTH CARE PROGRAMS.

       (a) In General.--Section 1128B (42 U.S.C. 1320a-7b) is 
     amended as follows:
       (1) In the heading, by striking ``medicare or state health 
     care programs'' and inserting ``federal health care 
     programs''.
       (2) 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''.
       (3) In subsection (a)(5), by striking ``a program under 
     title XVIII or a State health care program'' and inserting 
     ``a Federal health care program''.
       (4) In the second sentence of subsection (a)--
       (A) by striking ``a State plan approved under title XIX'' 
     and inserting ``a Federal health care program'', and
       (B) 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)''.
       (5) In subsection (b), by striking ``title XVIII or a State 
     health care program'' each place it appears and inserting ``a 
     Federal health care program''.
       (6) In subsection (c), by inserting ``(as defined in 
     section 1128(h))'' after ``a State health care program''.
       (7) 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 directly, in whole or in part, by the United States 
     Government; or
       ``(2) any State health care program, as defined in section 
     1128(h).''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 1996.

     SEC. 8105. GUIDANCE REGARDING APPLICATION OF HEALTH CARE 
                   FRAUD AND ABUSE SANCTIONS.

       Title XI (42 U.S.C. 1301 et seq.), as amended by section 
     8101, is amended by inserting after section 1128C the 
     following new section:


    ``GUIDANCE REGARDING APPLICATION OF HEALTH CARE FRAUD AND ABUSE 
                               SANCTIONS

       ``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 the medicare program or a State health care 
     program, as defined in section 1128(h) (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.''.

     CHAPTER 2--REVISIONS TO CURRENT SANCTIONS FOR FRAUD AND ABUSE

     SEC. 8111. MANDATORY EXCLUSION FROM PARTICIPATION IN MEDICARE 
                   AND STATE HEALTH CARE PROGRAMS.

       (a) Individual Convicted of Felony Relating to Health Care 
     Fraud.--

[[Page H 13472]]

       (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 Medicare Preservation 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 Medicare Preservation 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 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 Medicare Preservation 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. 8112. 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. 8113. 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.--(A) 
     Any individual--
       ``(i) who has a direct or indirect ownership or control 
     interest in a sanctioned entity and who knows or should know 
     (as defined in section 1128A(i)(6)) of the action 
     constituting the basis for the conviction or exclusion 
     described in subparagraph (B); or
       ``(ii) who is an officer or managing employee (as defined 
     in section 1126(b)) of such an entity.
       ``(B) For purposes of subparagraph (A), the term 
     `sanctioned entity' means an entity--
       ``(i) that has been convicted of any offense described in 
     subsection (a) or in paragraph (1), (2), or (3) of this 
     subsection; or
       ``(ii) that has been excluded from participation under a 
     program under title XVIII or under a State health care 
     program.''.

     SEC. 8114. 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. 8115. 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. 8116. ADDITIONAL EXCEPTION TO ANTI-KICKBACK PENALTIES 
                   FOR DISCOUNTING AND MANAGED CARE ARRANGEMENTS.

       (a) In General.--Section 1128B(b)(3) (42 U.S.C. 1320a-
     7b(b)(3)) is amended--
       (1) by striking ``and'' at the end of subparagraph (D);
       (2) by striking the period at the end of subparagraph (E) 
     and inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(F) any remuneration between an organization and an 
     individual or entity providing items or services, or a 
     combination thereof, pursuant to a written agreement between 
     the organization and the individual or entity if the 
     organization is a MedicarePlus organization under part C of 
     title XVIII or if the written agreement places the individual 
     or entity at substantial financial risk for the cost or 
     utilization of the items or services, or a combination 
     thereof, which the individual or entity is obligated to 
     provide, whether through a withhold, capitation, incentive 
     pool, per diem payment, or any other similar risk arrangement 
     which places the individual or entity at substantial 
     financial risk.''.

[[Page H 13473]]

       (b) Effective Date.--The amendments made by this section 
     shall apply to written agreements entered into on or after 
     January 1, 1996.

     SEC. 8117. PENALTIES FOR THE FRAUDULENT CONVERSION OF ASSETS 
                   IN ORDER TO OBTAIN STATE HEALTH CARE PROGRAM 
                   BENEFITS.

       Section 1128B(a) (42 U.S.C. 1320a-7b(a)) 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,''.

     SEC. 8118. EFFECTIVE DATE.

       Except as otherwise provided, the amendments made by this 
     chapter shall take effect January 1, 1996.

         CHAPTER 3--ADMINISTRATIVE AND MISCELLANEOUS PROVISIONS

     SEC. 8121. 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 8101 and 8105, 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 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) 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 MediGrant fraud control units.
       ``(F) Federal or State agencies responsible for the 
     licensing and certification of health care providers and 
     licensed health care practitioners.
       ``(4) Health plan.--The term `health plan' has the meaning 
     given such term by section 1128C(c).
       ``(5) Determination of conviction.--For purposes of 
     paragraph (1), the existence of a conviction shall be 
     determined under paragraph (4) of section 1128(i).''.
       (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.''.

                  CHAPTER 4--CIVIL MONETARY PENALTIES

     SEC. 8131. 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 Medicare Preservation 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 

[[Page H 13474]]
     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 and 
     who, at the time of a violation of this subsection--
       ``(i) retains a direct or indirect ownership or control 
     interest in an entity that is participating in a program 
     under title XVIII or a State health care program, and who 
     knows or should know of the action constituting the basis for 
     the exclusion; or
       ``(ii) is an officer or managing employee (as defined in 
     section 1126(b)) of such an entity;''.
       (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 should know will result in a greater 
     payment to the person than the code the person knows or 
     should 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 should know is not medically necessary; or''.
       (e) 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''.
       (f) Procedural Provisions.--Section 1876(i)(6) (42 U.S.C. 
     1395mm(i)(6)), as amended by section 8115(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).''.
       (g) 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 (as so defined);''.
       (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 Medicare 
     Preservation 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.''.
       (h) Effective Date.--The amendments made by this section 
     shall take effect January 1, 1996.

     SEC. 8132. CLARIFICATION OF LEVEL OF INTENT REQUIRED FOR 
                   IMPOSITION OF SANCTIONS.

       (a) Clarification of Level of Knowledge Required for 
     Imposition of Civil Monetary Penalties.--
       (1) In general.--Section 1128A(a) (42 U.S.C. 1320a-7a(a)) 
     is amended--
       (A) in paragraphs (1) and (2), by inserting ``knowingly'' 
     before ``presents'' each place it appears; and
       (B) in paragraph (3), by striking ``gives'' and inserting 
     ``knowingly gives or causes to be given''.
       (2) Definition of standard.--Section 1128A(i) (42 U.S.C. 
     1320a-7a(i)) is amended by adding at the end the following 
     new paragraph:
       ``(6) The term `should know' means that a person, with 
     respect to information--
       ``(A) acts in deliberate ignorance of the truth or falsity 
     of the information; or
       ``(B) acts in reckless disregard of the truth or falsity of 
     the information,
     and no proof of specific intent to defraud is required.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to acts or omissions occurring on or after 
     January 1, 1996.

     SEC. 8133. PENALTY FOR FALSE CERTIFICATION FOR HOME HEALTH 
                   SERVICES.

       (a) In General.--Section 1128A(b) (42 U.S.C. 1320a-7a(b)) 
     is amended by adding at the end the following new paragraph:
       ``(3)(A) Any physician who executes a document described in 
     subparagraph (B) with respect to an individual knowing that 
     all of the requirements referred to in such subparagraph are 
     not met with respect to the individual shall be subject to a 
     civil monetary penalty of not more than the greater of--
       ``(i) $5,000, or
       ``(ii) three times the amount of the payments under title 
     XVIII for home health services which are made pursuant to 
     such certification.
       ``(B) A document described in this subparagraph is any 
     document that certifies, for purposes of title XVIII, that an 
     individual meets the requirements of section 1814(a)(2)(C) or 
     1835(a)(2)(A) in the case of home health services furnished 
     to the individual.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to certifications made on or after the date of 
     the enactment of this Act.

                 CHAPTER 5--AMENDMENTS TO CRIMINAL LAW

     SEC. 8141. 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 Federal health care program, 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 Federal 
     health care program 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 `Federal 
     health care program' has the same meaning given such term in 
     section 1128B(f) 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 
     8101(b), an amount equal to the criminal fines imposed under 
     section 1347 of title 18, United States Code (relating to 
     health care fraud).

     SEC. 8142. 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, 

[[Page H 13475]]
     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 8101(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
       (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. 8143. 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. 8144. 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 Federal health 
     care program, knowingly and willfully--
       ``(1) falsifies, conceals, or covers up by any trick, 
     scheme, or device a material fact, or
       ``(2) makes any materially false, fictitious, or fraudulent 
     statement or representation, or makes or uses any materially 
     false writing or document knowing the same to contain any 
     materially 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 `Federal 
     health care program' has the same meaning given such term in 
     section 1128B(f) 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. 8145. 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. 8146. 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 Federal health care program, 
     shall be fined under this title or imprisoned not more than 
     10 years, or both.
       ``(b) As used in this section the term `Federal health care 
     program' has the same meaning given such term in section 
     1128B(f) 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. 8147. 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. 8148. 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 Federal health care program, 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 Federal 
     health care program 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, 

[[Page H 13476]]
     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 `Federal health care 
     program' has the same meaning given such term in section 
     1128B(f) 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''.

            CHAPTER 6--STATE HEALTH CARE FRAUD CONTROL UNITS

     SEC. 8151. 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 7001 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 and the 
     chief executive officer of the State or such officer's 
     designee, 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-MediGrant Board and Care Facilities.--
     Paragraph (4) of section 2134(b), as added by section 7001 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 MediGrant plan funded 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.''.
                     Subtitle C--Regulatory Relief

     SEC. 8201. REPEAL OF PHYSICIAN OWNERSHIP REFERRAL 
                   PROHIBITIONS BASED ON COMPENSATION 
                   ARRANGEMENTS.

       (a) In General.--Section 1877(a)(2) (42 U.S.C. 
     1395nn(a)(2)) is amended by striking ``is--'' and all that 
     follows through ``equity,'' and inserting the following: ``is 
     (except as provided in subsection (c)) an ownership or 
     investment interest in the entity through equity,''.
       (b) Conforming Amendments.--Section 1877 (42 U.S.C. 1395nn) 
     is amended as follows:
       (1) In subsection (b)--
       (A) in the heading, by striking ``to Both Ownership and 
     Compensation Arrangement Prohibitions'' and inserting ``Where 
     Financial Relationship Exists''; and
       (B) by redesignating paragraph (4) as paragraph (7).
       (2) In subsection (c)--
       (A) by amending the heading to read as follows: ``Exception 
     for Ownership or Investment Interest in Publicly Traded 
     Securities and Mutual Funds''; and
       (B) in the matter preceding paragraph (1), by striking 
     ``subsection (a)(2)(A)'' and inserting ``subsection (a)(2)''.
       (3) In subsection (d)--
       (A) by striking the matter preceding paragraph (1);
       (B) in paragraph (3), by striking ``paragraph (1)'' and 
     inserting ``paragraph (4)''; and
       (C) by redesignating paragraphs (1), (2), and (3) as 
     paragraphs (4), (5), and (6), and by transferring and 
     inserting such paragraphs after paragraph (3) of subsection 
     (b).
       (4) By striking subsection (e).
       (5) In subsection (f)(2)--
       (A) in the matter preceding paragraph (1), by striking 
     ``ownership, investment, and compensation'' and inserting 
     ``ownership and investment'';
       (B) in paragraph (2), by striking ``subsection (a)(2)(A)'' 
     and all that follows through ``subsection (a)(2)(B)),'' and 
     inserting ``subsection (a)(2),''; and
       (C) in paragraph (2), by striking ``or who have such a 
     compensation relationship with the entity''.
       (6) In subsection (h)--
       (A) by striking paragraphs (1), (2), and (3);
       (B) in paragraph (4)(A), by striking clauses (iv) and (vi);
       (C) in paragraph (4)(B), by striking ``rules.--'' and all 
     that follows through ``(ii) Faculty'' and inserting ``rules 
     for faculty''; and
       (D) by adding at the end of paragraph (4) the following new 
     subparagraph:
       ``(C) Member of a group.--A physician is a `member' of a 
     group if the physician is an owner or a bona fide employee, 
     or both, of the group.''.

     SEC. 8202. REVISION OF DESIGNATED HEALTH SERVICES SUBJECT TO 
                   OWNERSHIP REFERRAL PROHIBITION.

       (a) In General.--Section 1877(h)(6) (42 U.S.C. 
     1395nn(h)(6)) is amended by striking subparagraphs (B) 
     through (K) and inserting the following:
       ``(B) Parenteral and enteral nutrients, equipment, and 
     supplies.
       ``(C) Radiology services, including magnetic resonance 
     imaging, computerized tomography, and ultrasound services.
       ``(D) Outpatient physical or occupational therapy 
     services.''.
       (b) Conforming Amendments.--
       (1) Section 1877(b)(2) (42 U.S.C. 1395nn(b)(2)) is amended 
     in the matter preceding subparagraph (A) by striking 
     ``services'' and all that follows through ``supplies)--'' and 
     inserting ``services--''.
       (2) Section 1877(h)(5)(C) (42 U.S.C. 1395nn(h)(5)(C)) is 
     amended--
       (A) by striking ``, a request by a radiologist for 
     diagnostic radiology services, and a request by a radiation 
     oncologist for radiation therapy,'' and inserting ``and a 
     request by a radiologist for magnetic resonance imaging or 
     for computerized tomography'', and
       (B) by striking ``radiologist, or radiation oncologist'' 
     and inserting ``or radiologist''.

     SEC. 8203. DELAY IN IMPLEMENTATION OF 1993 OWNERSHIP REFERRAL 
                   CHANGES UNTIL PROMULGATION OF REGULATIONS.

       (a) In General.--Section 13562(b) of OBRA-1993 (42 U.S.C. 
     1395nn note) is amended--
       (1) in paragraph (1), by striking ``paragraph (2)'' and 
     inserting ``paragraphs (2) and (3)''; and
       (2) by adding at the end the following new paragraph:
       ``(3) Promulgation of regulations.--Notwithstanding 
     paragraphs (1) and (2), the amendments made by this section 
     shall not apply to any referrals made before the effective 
     date of final regulations promulgated by the Secretary of 
     Health and Human Services to carry out such amendments.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall take effect as if included in the enactment of OBRA-
     1993.

     SEC. 8204. EXCEPTIONS TO OWNERSHIP REFERRAL PROHIBITIONS.

       (a) Revisions to Exception for In-office Ancillary 
     Services.--
       (1) Repeal of site-of-service requirement.--Section 1877 
     (42 U.S.C. 1395nn) is amended--
       (A) by amending subparagraph (A) of subsection (b)(2) to 
     read as follows:
       ``(A) that are furnished personally by the referring 
     physician, personally by a physician who is a member of the 
     same group practice as the referring physician, or personally 
     by individuals who are under the general supervision of the 
     physician or of another physician in the group practice, 
     and'', and
       (B) by adding at the end of subsection (h) the following 
     new paragraph:
       ``(7) General supervision.--An individual is considered to 
     be under the `general supervision' of a physician if the 
     physician (or group practice of which the physician is a 
     member) is legally responsible for the services performed by 
     the individual and for ensuring that the individual meets 
     licensure and certification requirements, if any, applicable 
     under other provisions of law, regardless of whether or not 
     the physician is physically present when the individual 
     furnishes an item or service.''.
       (2) Clarification of treatment of physician owners of group 
     practice.--Section 1877(b)(2)(B) (42 U.S.C. 1395nn(b)(2)(B)) 
     is amended by striking ``physician or such group practice'' 
     and inserting ``physician, such group practice, or the 
     physician owners of such group practice''.
       (3) Conforming amendment.--Section 1877(b)(2) (42 U.S.C. 
     1395nn(b)(2)) is amended by amending the heading to read as 
     follows: ``Ancillary services furnished personally or through 
     group practice.--''.
       (b) Clarification of Exception for Services Furnished in a 
     Rural Area.--Paragraph 

[[Page H 13477]]
     (5) of section 1877(b) (42 U.S.C. 1395nn(b)), as transferred by section 
     8201(b)(3)(C), is amended by striking ``substantially all'' 
     and inserting ``not less than 75 percent''.
       (c) Revision of Exception for Certain Managed Care 
     Arrangements.--Section 1877(b)(3) (42 U.S.C. 1395nn(b)(3)) is 
     amended--
       (1) in the heading by inserting ``managed care 
     arrangements'' after ``Prepaid plans'';
       (2) in the matter preceding subparagraph (A), by striking 
     ``organization--'' and inserting ``organization, directly or 
     through contractual arrangements with other entities, to 
     individuals enrolled with the organization--'';
       (3) in subparagraph (A), by inserting ``or part C'' after 
     ``section 1876'';
       (4) by striking ``or'' at the end of subparagraph (C);
       (5) by striking the period at the end of subparagraph (D) 
     and inserting a comma; and
       (6) by adding at the end the following new subparagraphs:
       ``(E) with a contract with a State to provide services 
     under the State plan under title XIX (in accordance with 
     section 1903(m)) or a State MediGrant plan under title XXI; 
     or
       ``(F) which is a MedicarePlus organization under part C or 
     which provides or arranges for the provision of health care 
     items or services pursuant to a written agreement between the 
     organization and an individual or entity if the written 
     agreement places the individual or entity at substantial 
     financial risk for the cost or utilization of the items or 
     services which the individual or entity is obligated to 
     provide, whether through a withhold, capitation, incentive 
     pool, per diem payment, or any other similar risk arrangement 
     which places the individual or entity at substantial 
     financial risk.''.
       (d) New Exception for Shared Facility Services.--
       (1) In general.--Section 1877(b) (42 U.S.C. 1395nn(b)), as 
     amended by section 8201(b)(3)(C), is amended--
       (A) by redesignating paragraphs (4) through (7) as 
     paragraphs (5) through (8); and
       (B) by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) Shared facility services.--In the case of a 
     designated health service consisting of a shared facility 
     service of a shared facility--
       ``(A) that is furnished--
       ``(i) personally by the referring physician who is a shared 
     facility physician or personally by an individual directly 
     employed or under the general supervision of such a 
     physician,
       ``(ii) by a shared facility in a building in which the 
     referring physician furnishes substantially all of the 
     services of the physician that are unrelated to the 
     furnishing of shared facility services, and
       ``(iii) to a patient of a shared facility physician; and
       ``(B) that is billed by the referring physician or a group 
     practice of which the physician is a member.''.
       (2) Definitions.--Section 1877(h) (42 U.S.C. 1395nn(h)), as 
     amended by section 8201(b)(6), is amended by inserting before 
     paragraph (4) the following new paragraph:
       ``(1) Shared facility related definitions.--
       ``(A) Shared facility service.--The term `shared facility 
     service' means, with respect to a shared facility, a 
     designated health service furnished by the facility to 
     patients of shared facility physicians.
       ``(B) Shared facility.--The term `shared facility' means an 
     entity that furnishes shared facility services under a shared 
     facility arrangement.
       ``(C) Shared facility physician.--The term `shared facility 
     physician' means, with respect to a shared facility, a 
     physician (or a group practice of which the physician is a 
     member) who has a financial relationship under a shared 
     facility arrangement with the facility.
       ``(D) Shared facility arrangement.--The term `shared 
     facility arrangement' means, with respect to the provision of 
     shared facility services in a building, a financial 
     arrangement--
       ``(i) which is only between physicians who are providing 
     services (unrelated to shared facility services) in the same 
     building,
       ``(ii) in which the overhead expenses of the facility are 
     shared, in accordance with methods previously determined by 
     the physicians in the arrangement, among the physicians in 
     the arrangement, and
       ``(iii) which, in the case of a corporation, is wholly 
     owned and controlled by shared facility physicians.''.
       (e) New Exception for Services Furnished in Communities 
     With No Alternative Providers.--Section 1877(b) (42 U.S.C. 
     1395nn(b)), as amended by section 8201(b)(3)(C) and 
     subsection (d)(1), is amended--
       (1) by redesignating paragraphs (5) through (8) as 
     paragraphs (6) through (9); and
       (2) by inserting after paragraph (4) the following new 
     paragraph:
       ``(5) No alternative providers in area.--In the case of a 
     designated health service furnished in any area with respect 
     to which the Secretary determines that individuals residing 
     in the area do not have reasonable access to such a 
     designated health service for which subsection (a)(1) does 
     not apply.''.
       (f) New Exception for Services Furnished in Ambulatory 
     Surgical Centers.--Section 1877(b) (42 U.S.C. 1395nn(b)), as 
     amended by section 8201(b)(3)(C), subsection (d)(1), and 
     subsection (e)(1), is amended--
       (1) by redesignating paragraphs (6) through (9) as 
     paragraphs (7) through (10); and
       (2) by inserting after paragraph (5) the following new 
     paragraph:
       ``(6) Services furnished in ambulatory surgical centers.--
     In the case of a designated health service furnished in an 
     ambulatory surgical center described in section 
     1832(a)(2)(F)(i).''.
       (g) New Exception for Services Furnished in Renal Dialysis 
     Facilities.--Section 1877(b) (42 U.S.C. 1395nn(b)), as 
     amended by section 8201(b)(3)(C), subsection (d)(1), 
     subsection (e)(1), and subsection (f), is amended--
       (1) by redesignating paragraphs (7) through (10) as 
     paragraphs (8) through (11); and
       (2) by inserting after paragraph (6) the following new 
     paragraph:
       ``(7) Services furnished in renal dialysis facilities.--In 
     the case of a designated health service furnished in a renal 
     dialysis facility under section 1881.''.
       (h) New Exception for Services Furnished in a Hospice.--
     Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by section 
     8201(b)(3)(C), subsection (d)(1), subsection (e)(1), 
     subsection (f), and subsection (g), is amended--
       (1) by redesignating paragraphs (8) through (11) as 
     paragraphs (9) through (12); and
       (2) by inserting after paragraph (7) the following new 
     paragraph:
       ``(8) Services furnished by a hospice program.--In the case 
     of a designated health service furnished by a hospice program 
     under section 1861(dd)(2).''.
       (i) New Exception for Services Furnished in a Comprehensive 
     Outpatient Rehabilitation Facility.--Section 1877(b) (42 
     U.S.C. 1395nn(b)), as amended by section 8201(b)(3)(C), 
     subsection (d)(1), subsection (e)(1), subsection (f), 
     subsection (g), and subsection (h), is amended--
       (1) by redesignating paragraphs (9) through (12) as 
     paragraphs (10) through (13); and
       (2) by inserting after paragraph (8) the following new 
     paragraph:
       ``(9) Services furnished in a comprehensive outpatient 
     rehabilitation facility.--In the case of a designated health 
     service furnished in a comprehensive outpatient 
     rehabilitation facility (as defined in section 
     1861(cc)(2)).''.
       (j) Definition of Referral.--Section 1877(h)(5)(A) (42 
     U.S.C. 1395nn(h)(5)(A)) is amended--
       (1) by striking ``an item or service'' and inserting ``a 
     designated health service'', and
       (2) by striking ``the item or service'' and inserting ``the 
     designated health service''.

     SEC. 8205. EFFECTIVE DATE.

       Except as provided in section 8203(b), the amendments made 
     by this subtitle shall apply to referrals made on or after 
     the date of the enactment of this Act, regardless of whether 
     or not regulations are promulgated to carry out such 
     amendments.
Subtitle D--Modification in Payment Policies Regarding Graduate Medical 
                               Education

     SEC. 8301. INDIRECT MEDICAL EDUCATION PAYMENTS.

       (a) Multiyear Transition Regarding Percentages; 6.7 for 
     1996 to 5.0 for 2001 and Afterwards.--Section 
     1886(D)(5)(B)(ii) (42 U.S.C. 1395ww(d)(5)(B)(ii)) us amended 
     to read as follows:
       ``(ii) For purposes of clause (i)(II), the indirect 
     teaching adjustment factor is equal to c (((1+r) to the nth 
     power)-1), where `r' is the ratio of the hospital's full-time 
     equivalent interns and residents to beds and `n' equal .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 1.654;
       ``(III) October 1, 1996, and before October 1, 1998, `c' is 
     equal to 1.481;
       ``(IV) October 1, 1998, and before October 1, 1999, `c' is 
     equal to 1.383;
       ``(V) October 1, 1999, and before October 1, 2000, `c' is 
     equal to 1.309; and
       ``(VI) October 1, 2000, `c' is equal to 1.235.''.
       (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 
     8301(a) of Medicate Preservation Act of 1995''.

     SEC. 8302. DIRECT GRADUATE MEDICAL EDUCATION.

       (a) Weighting Factors For Residents.--
       (1) In general.--Section 1886(h)(4)(C)(iv) (42 U.S.C. 
     1395ww(h)(4)(C)(iv)) is amended by striking ``50'' and 
     inserting ``0.25''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply with respect to cost reporting periods beginning 
     on or after October 1, 1997.
       (b) Limitation on Aggregate Number of Full-Time 
     Residents.--
       Section 1886(h)(4) (42 U.S.C. 1395ww(h)(4)) is amended by 
     adding at the end the following new subparagraph:
       ``(F) Adjustments for certain fiscal years in payments for 
     programs in allopathic and osteopathic medicine.--
       ``(i) In general.--With respect to a cost reporting period, 
     the Secretary shall in accordance with clause (ii) adjust the 
     payments for approved medical residency training programs in 
     the fields of allopathic medicine and osteopathic medicine 
     if, in the fiscal year in which such cost reporting period 
     begins, the number of full-time-equivalent residents 
     determined under this paragraph with respect to all such 
     programs exceeds the number of full-time-equivalent residents 
     determined with respect to all such programs as of August 1, 
     1995.
       ``(ii) Adjustment described.--Adjustments under clause (i) 
     shall be made with respect to cost reporting periods such 
     that the total amount of payments under this subsection for 
     the fiscal year involved does not exceed the amount that 
     would have been paid under this subsection for such year if 
     the number of full-time-equivalent residents determined under 
     clause (i) for the year had not exceeded the number of full-
     time-equivalent residents with respect to all such programs 
     as of August 1, 1995.
       ``(iii) Hold harmless.--The Secretary may provide that 
     approved medical residency training programs that reduced or 
     did not expand the 

[[Page H 13478]]
     number of full-time-equivalent residents determined under this 
     paragraphs for a cost reporting period shall not be subject 
     to the adjustment described in clause (i).
       ``(iv) Effective date.--The adjustment described in clause 
     (i) shall apply with respect to cost reporting periods 
     beginning on or after October 1, 1995, and on or before 
     September 30, 2002.''.
               Subtitle E--Provisions Relating to Part A

            CHAPTER 1--GENERAL PROVISIONS RELATING TO PART A

     SEC. 8401. 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 year 1996 for hospitals in all areas, the 
     market basket percentage increase minus 2.5 percentage 
     points,
       ``(XII) for fiscal years 1997 through 2002 for hospitals in 
     all areas, the market basket percentage increase minus 2.0 
     percentage points, and
       ``(XIII) for fiscal year 2003 and each subsequent fiscal 
     year for hospitals in all areas, the market basket percentage 
     increase.''.

     SEC. 8402. 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) except as provided in clause (vi), for fiscal years 
     1996 through 2002, the market basket percentage increase 
     minus the applicable reduction (as defined in clause 
     (vii)(II)); and''.
       (2) Special rules for certain hospitals.--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), the `applicable 
     percentage increase' for a hospital--
       ``(I) for a fiscal year for which the hospital's update 
     adjustment percentage (as defined in clause (vii)(I)) is at 
     least 10 percent, is the market basket percentage increase, 
     and
       ``(II) 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, is 0 percent.''.
       (3) Definitions.--Section 1886(b)(3)(B) (42 U.S.C. 
     1395ww(b)(3)(B)), as amended by paragraph (2), is amended by 
     adding at the end the following new clause:
       ``(vii) For purposes of clauses (ii)(VI) and (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 Rehabilitation Hospitals and Long-
     Term Care Hospitals.--Section 1886(b)(3) (42 U.S.C. 
     1395ww(b)(3)) is amended--
       (1) in subparagraph (A), in the matter preceding clause 
     (i), by striking ``and (E)'' and inserting ``(E), (F), and 
     (G)''; and
       (2) by adding at the end the following new subparagraphs:
       ``(F) In the case of a rehabilitation hospital (or unit 
     thereof) (as described in clause (ii) of subsection 
     (d)(1)(B)), for cost reporting periods beginning on or after 
     October 1, 1995,--
       ``(i) in the case of a hospital which first receives 
     payments under this section before October 1, 1995, the 
     target amount determined under subparagraph (A) 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 such hospitals for cost reporting periods 
     beginning during such fiscal year (determined without regard 
     to this subparagraph); and
       ``(ii) in the case of a hospital which first receives 
     payments under this section 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.
       ``(G) In the case of a hospital which has an average 
     inpatient length of stay of greater than 25 days (as 
     described in clause (iv) of subsection (d)(1)(B)), for cost 
     reporting periods beginning on or after October 1, 1995--
       ``(i) in the case of a hospital which first receives 
     payments under this section as a hospital that is not a 
     subsection (d) hospital or a subsection (d) Puerto Rico 
     hospital before October 1, 1995, the target amount determined 
     under subparagraph (A) 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 such subparagraph for all such hospitals for 
     cost reporting periods beginning during such fiscal year 
     (determined without regard to this subparagraph); and
       ``(ii) in the case of any other hospital which first 
     receives payment under this section as a hospital described 
     in clause (i) on or after October 1, 1995, such target amount 
     may not be greater than 130 percent (or, if the Secretary 
     determines it is appropriate, such alternative percentage 
     based on case-mix and DRG category) of such national mean of 
     the target amounts for such hospitals for cost reporting 
     periods beginning during fiscal year 1991.''.
       (c) Rebasing for Certain Long-Term Care Hospitals.--
       (1) In general.--Section 1886(b)(3) (42 U.S.C. 
     1395ww(b)(3)), as amended by subsection (b), is amended--
       (A) in subparagraph (A) in the matter preceding clause (i), 
     by striking ``and (G)'' and inserting ``(G), and (H)'';
       (B) in subparagraph (B)(ii), by striking ``(A) and (E)'' 
     and inserting ``(A), (E), and (G)''; and
       (C) by adding at the end the following new subparagraph:
       ``(H)(i) In the case of a qualified long-term care hospital 
     (as defined in clause (ii)), the term `target amount' means--
       ``(I) with respect to the first 12-month cost reporting 
     period in which this subparagraph is applied to the hospital, 
     the allowable operating costs of inpatient hospital services 
     (as defined in subsection (a)(4)) recognized under this title 
     for the hospital for the 12-month cost reporting period 
     beginning during fiscal year 1994; or
       ``(II) with respect to a later cost reporting period, the 
     target amount for the preceding cost reporting period, 
     increased by the applicable percentage increase under 
     subparagraph (B)(ii) for that later cost reporting period.
       ``(ii) In clause (i), a `qualified long-term care hospital' 
     means, with respect to a cost reporting period, a hospital 
     described in clause (iv) of subsection (d)(1)(B) during 
     fiscal year 1995 for which the hospital's allowable operating 
     costs of inpatient hospital services recognized under this 
     title for each of the two most recent previous 12-month cost 
     reporting periods exceeded 115 percent of the hospital's 
     target amount determined under this paragraph for such cost 
     reporting periods, if the hospital has a disproportionate 
     patient percentage during such cost reporting period (as 
     determined by the Secretary under subsection (d)(5)(F)(vi) as 
     if the hospital were a subsection (d) hospital) of at least 
     70 percent.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to discharges occurring during cost reporting 
     periods beginning on or after October 1, 1995.
       (d) Treatment of Certain Long-Term Care Hospitals Located 
     Within Other Hospitals.--
       (1) In general.--Section 1886(d)(1)(B) (42 U.S.C. 
     1395ww(d)(1)(B)) is amended in the matter following clause 
     (v) by striking the period and inserting the following: ``, 
     or a hospital classified by the Secretary as a long-term care 
     hospital on or before September 30, 1995, and located in the 
     same building as, or on the same campus as, another 
     hospital.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to discharges occurring on or after October 1, 
     1995.
       (e) 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 10 
     percent.''.

     SEC. 8403. REDUCTIONS IN DISPROPORTIONATE SHARE PAYMENT 
                   ADJUSTMENTS.

       (a) In General.--Section 1886(d)(5)(F) (42 U.S.C. 
     1395ww(d)(5)(F)) is amended--
       (1) in clause (ii), by striking ``The amount'' and 
     inserting ``Subject to clause (ix), the amount''; and
       (2) by adding at the end the following new clause:
       ``(ix) In the case of discharges occurring on or after 
     October 1, 1995, the additional payment amount otherwise 
     determined under clause (ii) shall be reduced as follows:
       ``(I) For discharges occurring on or after October 1, 1995, 
     and on or before September 30, 1996, by 5 percent.
       ``(II) For discharges occurring on or after October 1, 
     1996, and on or before September 30, 1997, by 10 percent.
       ``(III) For discharges occurring on or after October 1, 
     1997, and on or before September 30, 1998, by 17.5 percent.
       ``(IV) For discharges occurring on or after October 1, 
     1998, and on or before September 30, 1999, by 25 percent.
       ``(V) For discharges occurring on or after October 1, 1999, 
     and on or before September 30, 2002, by 30 percent.
       (b) Conforming Amendment Relating to Determination of 
     Standardized Amounts.--Section 1886(d)(2)(C)(iv) (42 U.S.C. 
     1395ww(d)(2)(C)(iv)) is amended by striking the period at the 
     end and inserting the following: ``, and the Secretary shall 
     not take into account any reductions in the amount of such 
     additional payments resulting from the amendments made by 
     section 8403(a) of the Medicare Preservation 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. 8404. CAPITAL PAYMENTS FOR PPS HOSPITALS.

       (a) Reduction in Payments.--

[[Page H 13479]]

       (1) Continuation of current reductions.--Section 
     1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A)) is amended in the 
     second sentence--
       (A) by striking ``through 1995'' and inserting ``through 
     2002''; and
       (B) by inserting after ``10 percent reduction'' the 
     following: ``(or a 15 percent reduction in the case of 
     payments during fiscal years 1996 through 2002)''.
       (2) Reduction in base payment rates.--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 Medicare Preservation 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 such date of enactment).''.
       (b) 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 
     Medicare Preservation 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 85 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 
     paragraph (1) 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)(iii) (42 
     U.S.C. 1395ww(g)(1)(B)(iii)) is amended by striking ``may 
     provide'' and inserting ``shall provide (in accordance with 
     subparagraph (D)''.

     SEC. 8405. REDUCTION IN PAYMENTS TO HOSPITALS FOR ENROLLEES' 
                   BAD DEBTS.

       (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)(i) In determining such reasonable costs for 
     hospitals, the amount of bad debts otherwise treated as 
     allowable costs which are attributable to the deductibles and 
     coinsurance amounts under this title shall be reduced by--
       ``(I) 75 percent for cost reporting periods beginning 
     during fiscal year 1996,
       ``(II) 60 percent for cost reporting periods beginning 
     during fiscal year 1997, and
       ``(III) 50 percent for subsequent cost reporting periods.
       ``(ii) Clause (i) shall not apply with respect to bad debt 
     of a hospital described in section 1886(d)(1)(B)(iv) if the 
     debt is attributable to uncollectable deductible and 
     coinsurance payments owed by individuals enrolled in a State 
     plan under title XIX or under the MediGrant program under 
     title XXI.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to hospital cost reporting periods beginning on 
     or after October 1, 1995.

     SEC. 8406. INCREASE IN UPDATE FOR CERTAIN HOSPITALS WITH A 
                   HIGH PROPORTION OF MEDICARE PATIENTS.

       Section 1886(b)(3) (42 U.S.C. 1395ww(b)(3)), as amended by 
     subsections (b) and (c)(1) of section 8402, is amended by 
     adding at the end the following new subparagraph:
       ``(I)(i) For purposes of subsection (d), in the case of a 
     medicare-dependent hospital described in clause (ii), the 
     applicable percentage increase otherwise determined under 
     subparagraph (B)(i) shall be increased by--
       ``(I) 0.5 percentage points for discharges occurring during 
     cost reporting periods beginning during fiscal year 1996, and
       ``(II) 0.3 percentage points for discharges occurring 
     during cost reporting periods beginning during fiscal year 
     1997.
       ``(ii) A hospital described in this clause with respect to 
     a cost reporting period is a subsection (d) hospital meeting 
     the following requirements:
       ``(I) Not less than 60 percent of the hospital's inpatient 
     days during the most recent cost reporting period for which 
     data is available were attributable to inpatients entitled to 
     benefits under part A.
       ``(II) The hospital does not receive any additional payment 
     amount under subsection (d)(5)(F) (relating to payments for 
     hospitals serving a disproportionate number of low-income 
     patients) with respect to discharges occurring during the 
     fiscal year.
       ``(III) The hospital does not receive any additional 
     payment amount under subsection (d)(5)(B) (relating to 
     payment for the indirect costs of medical education) or 
     subsection (h) (relating to payment for direct medical 
     education costs).
       ``(IV) In the case of a hospital located in a rural area, 
     the hospital has more than 100 beds.''.

           CHAPTER 2--PAYMENTS TO SKILLED NURSING FACILITIES

                Subchapter A--PROSPECTIVE PAYMENT SYSTEM

     SEC. 8410. 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-

[[Page H 13480]]
     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).''.

                  Subchapter B--Interim Payment System

     SEC. 8411. 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. 8412. COST-EFFECTIVE MANAGEMENT OF COVERED NON-ROUTINE 
                   SERVICES.

       (a) In General.--Title XVIII (42 U.S.C. 1395 et seq.) 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:
       ``(A) Physical or occupational therapy or speech-language 
     pathology services, or respiratory therapy, including 
     supplies and support services directly related to such 
     services and 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 other than a portable X-ray or portable 
     electrocardiogram treated as a physician's service for 
     purposes of section 1848(j)(3)) 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). This subparagraph shall not apply to physician's 
     services furnished by a physician (as defined in section 
     1861(r)(1)) to a resident of a skilled nursing facility if 
     such services are not covered non-routine services (as 
     defined in section 1888A(a)(1)) or services for which routine 
     service costs (as defined in section 1888(e)) are determined.
       ``(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 or B (including a portable X-ray or 
     portable electrocardiogram treated as a physician's service 
     for purposes of section 1848(j)(3)) 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 December 31, 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 December 31, 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 SNF market basket percentage 
     increase for such subsequent fiscal year minus 2.0 percentage 
     points.
       ``(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 

[[Page H 13481]]
     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 receiving extended care 
     services furnished during the benefit period established 
     under section 1812(a)(2).
       ``(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.--Upon 
     the implementation of the payment method established under 
     this section, the Secretary, after consultation with the 
     Medicare Payment Review 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) Special Rule for X-Ray Services.--Before furnishing a 
     covered non-routine service consisting of an X-ray service 
     for which payment may be made under part A or part B to a 
     resident, a skilled nursing facility shall consider whether 
     furnishing the service through a provider of portable X-ray 
     service services would be appropriate, taking into account 
     the cost effectiveness of the service and the convenience to 
     the resident.
       ``(j) 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.''.
       (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. 8413. 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 8411, 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 8410, shall 
     reflect the routine per diem cost limits under section 
     1888(a) of such Act.

     SEC. 8414. REDUCTIONS IN PAYMENT FOR CAPITAL-RELATED COSTS.

       (a) In General.--Section 1861(v)(1) (42 U.S.C. 
     1395x(v)(1)), as amended by section 8405(a), is amended by 
     adding at the end the following new subparagraph:
       ``(U) 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 10 
     percent for payments attributable to portions of cost 
     reporting periods occurring beginning in fiscal years 1996 
     through 2002.''.
       (b) Maintaining Savings Resulting From 10 Percent Capital 
     Reduction.--The prospective payment system established under 
     section 1889 of the Social Security Act, as added by section 
     8410 of this Act, shall reflect the 10 percent reduction in 
     payments for capital-related costs of skilled nursing 
     facilities as such reduction is in effect under section 
     1861(v)(1)(U) of the Social Security Act, as added by 
     subsection (a).

     SEC. 8415. 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 
     (other than a portable X-ray or portable electrocardiogram 
     treated as a physician's service for purposes of section 
     1848(j)(3)) 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 (as defined in 
     section 1861(r)(1)) from receiving payment for physician's 
     services provided to a resident of a skilled nursing facility 
     if such services are not covered non-routine services (as 
     defined in section 1888A(a)(1)) or services for which routine 
     service costs (as defined in section 1888(e)) are 
     determined.''.
       (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)) (other than a 
     portable X-ray or portable electrocardiogram treated as a 
     physician's service for purposes of section 1848(j)(3)) 
     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 8405(a) and 
     section 8414(a), is amended by adding at the end the 
     following new subparagraph:
       ``(V) 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 

[[Page H 13482]]
     of cost reporting periods occurring during fiscal years 1996 through 
     2002.''.

     SEC. 8416. 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. 8417. REPORT BY MEDICARE PAYMENT REVIEW COMMISSION.

       Not later than October 1, 1997, the Medicare Payment Review 
     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 8412) 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 8410) 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. 8418. EFFECTIVE DATE.

       Except as otherwise provided in this subchapter, the 
     amendments made by this subchapter shall apply to services 
     furnished during cost reporting periods (or portions of cost 
     reporting periods) beginning on or after October 1, 1995.

             CHAPTER 3--OTHER PROVISIONS RELATING TO PART A

     SEC. 8421. 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 fiscal years 1996 through 2002, the market 
     basket percentage increase for the fiscal year minus 2.0 
     percentage points; and
       ``(V) for a subsequent fiscal year, the market basket 
     percentage increase for the fiscal year.''.

     SEC. 8422. PERMANENT EXTENSION OF HEMOPHILIA PASS-THROUGH.

       Effective as if included in the enactment of OBRA-1989, 
     section 6011(d) of such Act (as amended by section 13505 of 
     OBRA-1993) is amended by striking ``and shall expire 
     September 30, 1994''.
               Subtitle F--Provisions Relating to Part B

                       CHAPTER 1--PAYMENT REFORMS

     SEC. 8501. PAYMENTS FOR PHYSICIANS' SERVICES.

       (a) Establishing Update to Conversion Factor To Match 
     Spending Under Sustainable Growth Rate.--
       (1) Update.--
       (A) In general.--Section 1848(d)(3) (42 U.S.C. 1395w-
     4(d)(3)) is amended to read as follows:
       ``(3) Update.--
       ``(A) In general.--Unless Congress otherwise provides, 
     subject to subparagraph (E), for purposes of this section the 
     update for a year (beginning with 1997) is equal to the 
     product of--
       ``(i) 1 plus the Secretary's estimate of the percentage 
     increase in the 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.''.
       (B) Effective date.--The amendments made by subparagraph 
     (A) shall apply to physicians' services furnished on or after 
     January 1, 1997.
       (2) Conforming amendments.--(A) Section 1848(d)(2)(A) (42 
     U.S.C. 1395w-4(d)(2)(A)) is amended--
       (i) in the matter preceding clause (i)--
       (I) by striking ``(or updates) in the conversion factor (or 
     factors)'' and inserting ``in the conversion factor'';
       (II) by striking ``(beginning with 1991)'' and inserting 
     ``(beginning with 1996)''; and
       (III) by striking the second sentence;
       (ii) by amending clause (ii) to read as follows:
       ``(ii) such factors as enter into the calculation of the 
     update adjustment factor as described in paragraph (3)(B); 
     and'';
       (iii) by amending clause (iii) to read as follows:
       ``(iii) access to services.'';
       (iv) by striking clauses (iv), (v), and (vi); and
       (v) by striking the last sentence.
       (B) Section 1848(d)(2)(B) (42 U.S.C. 1395w-4(d)(2)(B)) is 
     amended--
       (i) by striking ``and'' at the end of clause (iii);
       (ii) by striking the period at the end of clause (iv) and 
     inserting ``; and''; and
       (iii) by adding at the end the following new clause:
       ``(v) changes in volume or intensity of services.''.
       (C) Section 1848(d)(2) (42 U.S.C. 1395w4-(d)(2)) is further 
     amended--
       (i) by striking subparagraphs (C), (D), and (E);
       (ii) by redesignating subparagraph (F) as subparagraph (C); 
     and
       (iii) in subparagraph (C), as redesignated, by striking 
     ``(or updates) in the conversion factor (or factors)'' and 
     inserting ``in the conversion factor''.
       (b) Replacement of Volume Performance Standard With 
     Sustainable Growth Rate.--
       (1) In general.--Section 1848(f) (42 U.S.C. 1395w-4(f)) is 
     amended by striking paragraphs (2) through (5) and inserting 
     the following:
       ``(2) Specification of growth rate.--
       ``(A) Fiscal year 1996.--The sustainable growth rate for 
     all physicians' services for fiscal year 1996 shall be equal 
     to the product of--
       ``(i) 1 plus the Secretary's estimate of the percentage 
     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 Medicare 
     Preservation 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 (including 
     changes made by the Secretary in response to section 1895), 
     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),

[[Page H 13483]]

     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 MedicarePlus 
     plan offered under part C or through enrollment with an 
     eligible organization with a risk-sharing contract under 
     section 1876.''.
       (2) Conforming amendments.--Section 1848(f) (42 U.S.C. 
     1395w-4(f)) is amended--
       (A) in the heading, by striking ``Volume Performance 
     Standard Rates of Increase'' and inserting ``Sustainable 
     Growth Rate'';
       (B) in paragraph (1)--
       (i) in the heading, by striking ``volume performance 
     standard rates of increase'' and inserting ``Sustainable 
     Growth Rate'';
       (ii) in subparagraph (A), in the matter preceding clause 
     (i), by striking ``performance standard rates of increase'' 
     and inserting ``sustainable growth rate''; and
       (iii) in subparagraph (A), by striking ``HMO enrollees'' 
     each place such term appears and inserting ``private plan 
     enrollees'';
       (C) in subparagraph (B), by striking ``performance standard 
     rates of increase'' and inserting ``sustainable growth 
     rate''; and
       (D) in subparagraph (C)--
       (i) in the heading, by striking ``performance standard 
     rates of increase'' and inserting ``sustainable growth 
     rate'';
       (ii) in the first sentence, by striking ``with 1991), the 
     performance standard rates of increase'' and all that follows 
     through the first period and inserting ``with 1997), the 
     sustainable growth rate for the fiscal year beginning in that 
     year.''; and
       (iii) in the second sentence, by striking ``January 1, 
     1990, the performance standard rate of increase under 
     subparagraph (D) for fiscal year 1990'' and inserting 
     ``January 1, 1997, the sustainable growth rate for fiscal 
     year 1997''.
       (c) Establishment of Single Conversion Factor for 1996.--
       (1) In general.--Section 1848(d)(1) (42 U.S.C. 1395w-
     4(d)(1)) is amended--
       (A) by redesignating subparagraph (C) as subparagraph (D); 
     and
       (B) by inserting after subparagraph (B) the following 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)(D)(ii) (as redesignated by 
     paragraph (1)(a));
       (B) in subsection (d)(1)(A), by striking ``or updates'';
       (C) in subsection (d)(1)(D)(ii) (as redesignated by 
     paragraph (1)(a)), by striking ``(or updates)''; and
       (D) in subsection (i)(1)(C), by striking ``conversion 
     factors'' and inserting ``the conversion factor''.

     SEC. 8502. 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).''.
       (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. 8503. EXTENSION OF REDUCTIONS IN PAYMENTS FOR COSTS OF 
                   HOSPITAL OUTPATIENT SERVICES.

       (a) Reduction in Payments for Capital-Related Costs.--
     Section 1861(v)(1)(S)(ii)(I) (42 U.S.C. 
     1395x(v)(1)(S)(ii)(I)) is amended by striking ``through 
     1998'' and inserting ``through 2002''.
       (b) Reduction in Payments for Other Costs.--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. 8504. REDUCTION IN UPDATES TO PAYMENT AMOUNTS FOR 
                   CLINICAL DIAGNOSTIC LABORATORY TESTS.

       (a) Change in Update.--Section 1833(h)(2)(A)(ii)(IV) (42 
     U.S.C. 1395l(h)(2)(A)(ii)(IV)) is amended by striking ``1994 
     and 1995'' and inserting ``1994 through 2002''.
       (b) Lowering Cap on Payment Amounts.--Section 1833(h)(4)(B) 
     (42 U.S.C. 1395l(h)(4)(B)) is amended--
       (1) in clause (vi), by striking ``and'' at the end;
       (2) in clause (vii)--
       (A) by inserting ``and before January 1, 1997,'' after 
     ``1995,'', and
       (B) by striking the period at the end 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.''.

     SEC. 8505. PAYMENTS FOR DURABLE MEDICAL EQUIPMENT.

       (a) Reduction in Payment Amounts for Items of Durable 
     Medical Equipment.--
       (1) Freeze in update for covered items.--Section 
     1834(a)(14) (42 U.S.C. 1395m(a)(14)) is amended--
       (A) by striking ``and'' at the end of subparagraph (A);
       (B) in subparagraph (B)--
       (i) by striking ``a subsequent year'' and inserting ``1993, 
     1994, and 1995'', and
       (ii) by striking the period at the end and inserting a 
     semicolon; and
       (C) by adding at the end the following:
       ``(C) for each of the years 1996 through 2002, 0 percentage 
     points; and
       ``(D) for a subsequent year, the percentage increase in the 
     consumer price index for all urban consumers (U.S. urban 
     average) for the 12-month period ending with June of the 
     previous year.''.
       (2) Update for orthotics and prosthetics.--Section 
     1834(h)(4)(A) (42 U.S.C. 1395m(h)(4)(A)) is amended--
       (A) by striking ``and'' at the end of clause (iii);
       (B) by redesignating clause (iv) as clause (v); and
       (C) by inserting after clause (iii) the following new 
     clause:
       ``(iv) for each of the years 1996 through 2002, 1 percent, 
     and''.
       (b) Oxygen and Oxygen Equipment.--
       (1) In general.--Section 1834(a)(9)(C) (42 U.S.C. 
     1395m(a)(9)(C)) is amended--
       (A) by striking ``and'' at the end of clause (iii);
       (B) in clause (iv)--
       (i) by striking ``a subsequent year'' and inserting ``1993, 
     1994, and 1995'', and
       (ii) by striking the period at the end and inserting a 
     semicolon; and
       (C) by adding at the end the following new clauses:
       ``(v) in each of the years 1996 through 2002, is the 
     national limited monthly payment rate computed under 
     subparagraph (B) for the item for the year reduced by the 
     applicable percentage described in subparagraph (D) (but in 
     no case may the amount determined under this clause be less 
     than 70 percent of such national limited payment rate); and
       ``(vi) in a subsequent year, is the national limited 
     monthly payment rate computed under subparagraph (B) for the 
     item for the year.''.
       (2) Applicable percentage described.--Section 1834(a)(9) 
     (42 1395m(a)(9)) is amended by adding at the end the 
     following new subparagraph:
       ``(D) Applicable percentage described.--In clause (v) of 
     subparagraph (C), the `applicable percentage' with respect to 
     a year described in such clause is--
       ``(i) for 1996, 20 percent,
       ``(ii) for 1997, 21\2/3\ percent,
       ``(iii) for 1998, 23\1/3\ percent,
       ``(iv) for 1999, 25 percent,
       ``(v) for 2000, 26\2/3\ percent,
       ``(vi) for 2001, 28\1/3\ percent, and
       ``(vii) for 2002, 30 percent.''.
       (c) Payment Freeze for 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 each of the years 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 1993.

     SEC. 8506. 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. 8507. PAYMENTS FOR AMBULANCE SERVICES.

       Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)), as amended by 
     section 8405(a), section 8414(a), and section 8415(b), is 
     amended by adding at the end the following new subparagraph:
       ``(W) In determining the reasonable cost or charge of 
     ambulance services for fiscal years 1996 through 2002, the 
     Secretary shall not recognize any costs in excess of costs 
     recognized as reasonable for fiscal year 1995.''.

     SEC. 8508. ENSURING PAYMENT FOR PHYSICIAN AND NURSE FOR 
                   JOINTLY FURNISHED ANESTHESIA SERVICES.

       (a) Payment for Jointly Furnished Single Case.--
       (1) Payment to physician.--Section 1848(a)(4) (42 U.S.C. 
     1395w-4(a)(4)) is amended by adding at the end the following 
     new subparagraph:
       ``(C) Payment for single case.--Notwithstanding section 
     1862(a)(1)(A), with respect to physicians' services 
     consisting of the furnishing of anesthesia services for a 
     single case that are furnished jointly with a certified 
     registered nurse anesthetist, if the carrier determines that 
     the use of both the physician and the nurse anesthetist to 
     furnish the anesthesia service was not medically necessary, 
     the fee schedule amount for the physicians' services shall be 
     equal to 50 percent (or 55 percent, in the case of services 
     furnished during 1996 or 1997) of the fee schedule amount 
     applicable under this section for anesthesia services 
     personally performed by the physician alone (without regard 
     to this subparagraph). Nothing in this subparagraph may be 
     construed to affect the application of any provision of law 
     regarding balance billing.''.

[[Page H13484]]

       (2) Payment to crna.--Section 1833(l)(4)(B) (42 U.S.C. 
     1395l(l)(4)(B)) is amended by adding at the end the following 
     new clause:
       ``(iv) Notwithstanding section 1862(a)(1)(A), in the case 
     of services of a certified registered nurse anesthetist 
     consisting of the furnishing of anesthesia services for a 
     single case that are furnished jointly with a physician, if 
     the carrier determines that the use of both the physician and 
     the nurse anesthetist to furnish the anesthesia service was 
     not medically necessary, the fee schedule amount for the 
     services furnished by the certified registered nurse 
     anesthetist shall be equal to 50 percent (or 40 percent, in 
     the case of services furnished during 1996 or 1997) of the 
     fee schedule amount applicable under section 1848 for 
     anesthesia services personally performed by the physician 
     alone (without regard to this clause).''.
       (b) Effective Date.--The amendments made by subsections (a) 
     shall apply to services furnished on or after July 1, 1996.

                       CHAPTER 2--PART B PREMIUM

     SEC. 8511. PROMOTING SOLVENCY OF PART A TRUST FUND THROUGH 
                   PART B PREMIUM.

       (a) In General.--Section 1839(e)(1) (42 U.S.C. 1395r(e)(1)) 
     is amended--
       (1) in subparagraph (A), by striking ``1999'' and inserting 
     ``2003'', and
       (2) by adding at the end the following new subparagraph:
       ``(C)(i) For each month beginning with January 1996 through 
     December 2002, the amount of the monthly premium under this 
     part shall be increased by an amount equal to 13 percent of 
     the monthly actuarial rate for enrollees age 65 and over, as 
     determined under subsection (a)(1) and applicable to such 
     month.
       ``(ii) The Secretary shall transfer amounts received 
     pursuant to clause (i) to the Federal Hospital Insurance 
     Trust Fund.
       ``(iii) In applying section 1844(a), amounts attributable 
     to clause (i) shall not be counted in determining the dollar 
     amount of the premium per enrollee under paragraph (1)(A) or 
     (1)(B).''.
       (b) Effective Date.--The amendments made by subsection (a) 
     apply to premiums for months beginning with January 1996.

     SEC. 8512. INCOME-RELATED REDUCTION IN MEDICARE SUBSIDY.

       (a) In General.--Section 1839 (42 U.S.C. 1395r) is amended 
     by adding at the end the following:
       ``(h)(1) Notwithstanding the previous subsections of this 
     section, in the case of an individual whose modified adjusted 
     gross income for a taxable year ending with or within a 
     calendar year (as initially determined by the Secretary in 
     accordance with paragraph (3)) exceeds the threshold amount 
     described in paragraph (5)(B), the Secretary shall increase 
     the amount of the monthly premium for months in the calendar 
     year by an amount equal to the difference between--
       ``(A) 200 percent of the monthly actuarial rate for 
     enrollees age 65 and over as determined under subsection 
     (a)(1) for that calendar year; and
       ``(B) the total of the monthly premiums paid by the 
     individual under this section (determined without regard to 
     subsection (b)) during such calendar year.
       ``(2) In the case of an individual described in paragraph 
     (1) whose modified adjusted gross income exceeds the 
     threshold amount by less than $50,000, the amount of the 
     increase in the monthly premium applicable under paragraph 
     (1) shall be an amount which bears the same ratio to the 
     amount of the increase described in paragraph (1) (determined 
     without regard to this paragraph) as such excess bears to 
     $50,000. In the case of a joint return filed under section 
     6013 of the Internal Revenue Code of 1986 by spouses both of 
     whom are enrolled under this part, the previous sentence 
     shall be applied by substituting `$60,000' for `$50,000'. The 
     preceding provisions of this paragraph shall not apply to any 
     individual whose threshold amount is zero.
       ``(3) The Secretary shall make an initial determination of 
     the amount of an individual's modified adjusted gross income 
     for a taxable year ending with or within a calendar year for 
     purposes of this subsection as follows:
       ``(A) Not later than September 1 of the year preceding the 
     year, the Secretary shall provide notice to each individual 
     whom the Secretary finds (on the basis of the individual's 
     actual modified adjusted gross income for the most recent 
     taxable year for which such information is available or other 
     information provided to the Secretary by the Secretary of the 
     Treasury) will be subject to an increase under this 
     subsection that the individual will be subject to such an 
     increase, and shall include in such notice the Secretary's 
     estimate of the individual's modified adjusted gross income 
     for the year.
       ``(B) If, during the 30-day period beginning on the date 
     notice is provided to an individual under subparagraph (A), 
     the individual provides the Secretary with information on the 
     individual's anticipated modified adjusted gross income for 
     the year, the amount initially determined by the Secretary 
     under this paragraph with respect to the individual shall be 
     based on the information provided by the individual.
       ``(C) If an individual does not provide the Secretary with 
     information under subparagraph (B), the amount initially 
     determined by the Secretary under this paragraph with respect 
     to the individual shall be the amount included in the notice 
     provided to the individual under subparagraph (A).
       ``(4)(A) If the Secretary determines (on the basis of final 
     information provided by the Secretary of the Treasury) that 
     the amount of an individual's actual modified adjusted gross 
     income for a taxable year ending with or within a calendar 
     year is less than or greater than the amount initially 
     determined by the Secretary under paragraph (3), the 
     Secretary shall increase or decrease the amount of the 
     individual's monthly premium under this section (as the case 
     may be) for months during the following calendar year by an 
     amount equal to \1/12\ of the difference between--
       ``(i) the total amount of all monthly premiums paid by the 
     individual under this section during the previous calendar 
     year; and
       ``(ii) the total amount of all such premiums which would 
     have been paid by the individual during the previous calendar 
     year if the amount of the individual's modified adjusted 
     gross income initially determined under paragraph (3) were 
     equal to the actual amount of the individual's modified 
     adjusted gross income determined under this paragraph.
       ``(B)(i) In the case of an individual for whom the amount 
     initially determined by the Secretary under paragraph (3) is 
     based on information provided by the individual under 
     subparagraph (B) of such paragraph, if the Secretary 
     determines under subparagraph (A) that the amount of the 
     individual's actual modified adjusted gross income for a 
     taxable year is greater than the amount initially determined 
     under paragraph (3), the Secretary shall increase the amount 
     otherwise determined for the year under subparagraph (A) by 
     interest in an amount equal to the sum of the amounts 
     determined under clause (ii) for each of the months described 
     in clause (ii).
       ``(ii) 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 (compounded daily) to any portion of the difference 
     between the amount initially determined under paragraph (3) 
     and the amount determined under subparagraph (A) for the 
     period beginning on the first day of the month beginning 
     after the individual provided information to the Secretary 
     under subparagraph (B) of paragraph (3) and ending 30 days 
     before the first month for which the individual's monthly 
     premium is increased under this paragraph.
       ``(iii) Interest shall not be imposed under this 
     subparagraph if the amount of the individual's modified 
     adjusted gross income provided by the individual under 
     subparagraph (B) of paragraph (3) 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 the Internal Revenue Code of 1986 for the 
     taxable year involved.
       ``(C) In the case of an individual who is not enrolled 
     under this part for any calendar year for which the 
     individual's monthly premium under this section for months 
     during the year would be increased pursuant to subparagraph 
     (A) if the individual were enrolled under this part for the 
     year, the Secretary may take such steps as the Secretary 
     considers appropriate to recover from the individual the 
     total amount by which the individual's monthly premium for 
     months during the year would have been increased under 
     subparagraph (A) if the individual were enrolled under this 
     part for the year.
       ``(D) In the case of a deceased individual for whom the 
     amount of the monthly premium under this section for months 
     in a year would have been decreased pursuant to subparagraph 
     (A) if the individual were not deceased, the Secretary shall 
     make a payment to the individual's surviving spouse (or, in 
     the case of an individual who does not have a surviving 
     spouse, to the individual's estate) in an amount equal to the 
     difference between--
       ``(i) the total amount by which the individual's premium 
     would have been decreased for all months during the year 
     pursuant to subparagraph (A); and
       ``(ii) the amount (if any) by which the individual's 
     premium was decreased for months during the year pursuant to 
     subparagraph (A).
       ``(5) In this subsection, the following definitions apply:
       ``(A) The term `modified adjusted gross income' means 
     adjusted gross income (as defined in section 62 of the 
     Internal Revenue Code of 1986)--
       ``(i) determined without regard to sections 135, 911, 931, 
     and 933 of such Code, and
       ``(ii) increased by the amount of interest received or 
     accrued by the taxpayer during the taxable year which is 
     exempt from tax under such Code.
       ``(B) The term `threshold amount' means--
       ``(i) except as otherwise provided in this paragraph, 
     $60,000,
       ``(ii) $90,000, in the case of a joint return (as defined 
     in section 7701(a)(38) of such Code), and
       ``(iii) 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 (as so defined) for such year, and
       ``(II) does not live apart from his spouse at all times 
     during the taxable year.
       ``(6)(A) The Secretary shall transfer amounts received 
     pursuant to this subsection to the Federal Hospital Insurance 
     Trust Fund.
       ``(B) In applying section 1844(a), amounts attributable to 
     clause (i) shall not be counted in determining the dollar 
     amount of the premium per enrollee under paragraph (1)(A) or 
     (1)(B).''.
       (b) Conforming Amendments.--(1) Section 1839 (42 U.S.C. 
     1395r) is amended--
       (A) in subsection (a)(2), by inserting ``or section 1839A'' 
     after ``subsections (b) and (e)'';
       (B) in subsection (a)(3) of section 1839(a), by inserting 
     ``or section 1839A'' after ``subsection (e)'';
       (C) in subsection (b), inserting ``(and as increased under 
     section 1839A)'' after ``subsection (a) or (e)''; and
       (D) in subsection (f), by striking ``if an individual'' and 
     inserting the following: ``if an individual (other than an 
     individual subject to an increase in the monthly premium 
     under this section pursuant to subsection (h))''.
       (2) 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 whether 
     the 

[[Page H 13485]]
     individual is subject to an increase in the monthly premium under 
     section 1839 pursuant to subsection (h) of such section (or 
     in determining the amount of such increase) is too low and 
     results in a portion of the premium not being deducted,'' 
     before ``he may''.
       (c) Reporting Requirements for Secretary of the Treasury.--
       (1) In general.--Subsection (l) of section 6103 of the 
     Internal Revenue Code of 1986 (relating to confidentiality 
     and disclosure of returns and return information) is amended 
     by adding at the end the following new paragraph:
       ``(15) Disclosure of return information to carry out 
     income-related reduction in medicare part b premium.--
       ``(A) In general.--The Secretary may, upon written request 
     from the Secretary of Health and Human Services, disclose to 
     officers and employees of the Health Care Financing 
     Administration return information with respect to a taxpayer 
     who is required to pay a monthly premium under section 1839 
     of the Social Security Act. Such return information shall be 
     limited to--
       ``(i) taxpayer identity information with respect to such 
     taxpayer,
       ``(ii) the filing status of such taxpayer,
       ``(iii) the adjusted gross income of such taxpayer,
       ``(iv) the amounts excluded from such taxpayer's gross 
     income under sections 135 and 911,
       ``(v) the interest received or accrued during the taxable 
     year which is exempt from the tax imposed by chapter 1 to the 
     extent such information is available, and
       ``(vi) the amounts excluded from such taxpayer's gross 
     income by sections 931 and 933 to the extent such information 
     is available.
       ``(B) Restriction on use of disclosed information.--Return 
     information disclosed under subparagraph (A) may be used by 
     officers and employees of the Health Care Financing 
     Administration only for the purposes of, and to the extent 
     necessary in, establishing the appropriate monthly premium 
     under section 1839 of the Social Security Act.''
       (2) Conforming amendment.--Paragraphs (3)(A) and (4) of 
     section 6103(p) of such Code are each amended by striking 
     ``or (14)'' each place it appears and inserting ``(14), or 
     (15)''.
       (d) Effective Date.--
       (1) In general.--The amendments made by subsections (a) and 
     (b) shall apply to the monthly premium under section 1839 of 
     the Social Security Act for months beginning with January 
     1997.
       (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 (c)) for taxable years beginning after December 
     31, 1993.
            Subtitle G--Provisions Relating to Parts A and B

              CHAPTER 1--PAYMENTS FOR HOME HEALTH SERVICES

     SEC. 8601. PAYMENT FOR HOME HEALTH SERVICES.

       (a) In General.--Title XVIII (42 U.S.C. 1395x et seq.), as 
     amended by section 8102, is amended by adding at the end the 
     following new section:


                   ``payment for home health services

       ``Sec. 1894. (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 (as determined without 
     regard to any reclassification of the area under section 
     1886(d)(8)(B) or a decision of the Medicare Geographic 
     Classification Review Board or the Secretary under section 
     1886(d)(10) for cost reporting periods beginning after 
     October 1, 1995).
       ``(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 home health market 
     basket percentage increase for such subsequent fiscal year 
     minus 2.0 percentage points.
       ``(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 5 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:
       ``(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 a year 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 necessary to 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 5 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 an 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.--
       ``(i) In general.--For purposes of this paragraph, the term 
     `episode' means 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).

       ``(ii) Treatment of episodes spanning cost reporting 
     periods.--The Secretary shall provide for such rules as the 
     Secretary considers appropriate regarding the treatment of 
     episodes under this paragraph which begin during a cost 
     reporting period and end in a subsequent cost reporting 
     period.
       ``(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 

[[Page H 13486]]
     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 reduce payments 
     under this section to the home health agency in the following 
     fiscal year in such manner as the Secretary considers 
     appropriate (including on an installment basis) to recapture 
     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 year.
       ``(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.--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 episodes (as defined by the Secretary under 
     section (e)(3)(C)) and cases described in subsection 
     (c)(2)(B) and shall require recertification by intermediaries 
     at 60 and 165 days into an episode described in subsection 
     (c)(1)(D).
       ``(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.
       ``(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) Special Rule for Christian Science Providers.--
       ``(1) Payment permitted for services.--Notwithstanding any 
     other provision of this title, payment shall be made under 
     this title for home health services furnished by Christian 
     Science providers who meet applicable requirements of the 
     First Church of Christ, Scientist, Boston, Massachusetts, and 
     are certified for purposes of this title under criteria 
     established by the Secretary, in accordance with a payment 
     methodology established by the Secretary.
       ``(2) Effective date.--Paragraph (1) shall apply to 
     services furnished during cost reporting periods which begin 
     after the earlier of--
       ``(A) the date on which the Secretary establishes the 
     payment methodology and the certification criteria described 
     in paragraph (1), or
       ``(B) July 1, 1996.
       ``(g) Report by Medicare Payment Review Commission.--During 
     the first 3 years in which payments are made under this 
     section, the Medicare Payment Review 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 8412(b), is amended in the 
     matter preceding paragraph (1) by striking ``1888 and 1888A'' 
     and inserting ``1888, 1888A, and 1894''.
       (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--
       ``(i) that are a type of home health service described in 
     section 1894(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 1894;
       ``(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) 
     (42 U.S.C. 1395u(b)(6)), as amended by section 8415(a)(1), 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 1894(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 8415(a)(2), 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.''.

[[Page H 13487]]

       (d) Effective Date.--The amendments made by this section 
     shall apply to cost reporting periods beginning on or after 
     October 1, 1996.

     SEC. 8602. 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. 8603. 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.''.

     SEC. 8604. EXTENSION OF PERIOD OF HOME HEALTH AGENCY 
                   CERTIFICATION.

       Section 1891(c)(2)(A) (42 U.S.C. 1395bbb(c)(2)(A)) is 
     amended--
       (1) by striking ``15 months'' and inserting ``36 months''; 
     and
       (2) by striking the second sentence and inserting the 
     following: ``The Secretary shall establish a frequency for 
     surveys of home health agencies within this 36-month interval 
     commensurate with the need to assure the delivery of quality 
     home health services.''.

             PART 2--MEDICARE SECONDARY PAYER IMPROVEMENTS

     SEC. 8611. EXTENSION AND EXPANSION OF EXISTING REQUIREMENTS.

       (a) Data Match.--
       (1) Section 1862(b)(5)(C) (42 U.S.C. 1395y(b)(5)(C)) is 
     amended by striking clause (iii).
       (2) Section 6103(l)(12) of the Internal Revenue Code of 
     1986 is amended by striking subparagraph (F).
       (b) Application to Disabled Individuals in Large Group 
     Health Plans.--
       (1) In general.--Section 1862(b)(1)(B) (42 U.S.C. 
     1395y(b)(1)(B)) is amended--
       (A) in clause (i), by striking ``clause (iv)'' and 
     inserting ``clause (iii)'',
       (B) by striking clause (iii), and
       (C) by redesignating clause (iv) as clause (iii).
       (2) Conforming amendments.--Paragraphs (1) through (3) of 
     section 1837(i) (42 U.S.C. 1395p(i)) and the second sentence 
     of section 1839(b) (42 U.S.C. 1395r(b)) are each amended by 
     striking ``1862(b)(1)(B)(iv)'' each place it appears and 
     inserting ``1862(b)(1)(B)(iii)''.
       (c) 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 Medicare 
     Preservation 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 Medicare Preservation 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.''.

     SEC. 8612. IMPROVEMENTS IN RECOVERY OF PAYMENTS.

       (a) Permitting Recovery Against Third Party Administrators 
     of Primary Plans.--Section 1862(b)(2)(B)(ii) (42 U.S.C. 
     1395y(b)(2)(B)(ii)) is amended--
       (1) by striking ``under this subsection to pay'' and 
     inserting ``(directly, as a third-party administrator, or 
     otherwise) to make payment'', and
       (2) by adding at the end the following: ``The United States 
     may not recover from a third-party administrator under this 
     clause in cases where the third-party administrator would not 
     be able to recover the amount at issue from the employer or 
     group health plan for whom it provides administrative 
     services due to the insolvency or bankruptcy of the employer 
     or plan.''.
       (b) Extension of Claims Filing Period.--Section 
     1862(b)(2)(B) (42 U.S.C. 1395y(b)(2)(B)) is amended by adding 
     at the end the following new clause:
       ``(v) Claims-filing period.--Notwithstanding any other time 
     limits that may exist for filing a claim under an employer 
     group health plan, the United States may seek to recover 
     conditional payments in accordance with this subparagraph 
     where the request for payment is submitted to the entity 
     required or responsible under this subsection to pay with 
     respect to the item or service (or any portion thereof) under 
     a primary plan within the 3-year period beginning on the date 
     on which the item or service was furnished.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished on or after the 
     date of the enactment of this Act.

        CHAPTER 3--OTHER ITEMS AND SERVICES UNDER PARTS A AND B

     SEC. 8621. MEDICARE COVERAGE OF CERTAIN ANTI-CANCER DRUG 
                   TREATMENTS.

       (a) Coverage of Certain Self-Administered Anticancer 
     Drugs.--Section 1861(s)(2)(Q) (42 U.S.C. 1395x(s)(2)(Q)) is 
     amended--
       (1) by striking ``(Q)'' and inserting ``(Q)(i)''; and
       (2) by striking the semicolon at the end and inserting ``, 
     and''; and
       (3) by adding at the end the following:
       ``(ii) an oral drug (which is approved by the Federal Food 
     and Drug Administration) prescribed for use as an anticancer 
     nonsteroidal antiestrogen for the treatment of breast cancer, 
     but only if the manufacturer of such drug has in effect a 
     rebate agreement with the Secretary with respect to such drug 
     which has substantially similar terms and conditions to the 
     terms and conditions for such agreements under section 1927 
     (as such section is in effect on the date of the enactment of 
     this clause);''.
       (b) Uniform Coverage of Anticancer Drugs in All Settings.--
     Section 1861(t)(2)(A) (42 U.S.C. 1395x(t)(2)(A)) is amended 
     by inserting ``(including a nonsteroidal antiestrogen 
     regimen)'' after ``regimen''.
       (c) Conforming Amendment.--Section 1834(j)(5)(F)(iv) (42 
     U.S.C. 1395m(j)(5)(F)(iv)) is amended by striking 
     ``prescribed for use'' and all that follows through 
     ``1861(s)(2)(Q))'' and inserting ``described in section 
     1861(s)(2)(Q)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to drugs furnished on or after January 1, 1996.

     SEC. 8622. 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.

                          CHAPTER 4--FAILSAFE

     SEC. 8631. FAILSAFE BUDGET MECHANISM

       (a) In General.--Title XVIII, as amended by sections 
     8102(a) and 8601(a), is amended by adding at the end the 
     following new section:


                      ``failsafe budget mechanism

       ``Sec. 1895. (a) Requirement of Payment Adjustments To 
     Achieve Medicare Budget Targets.--
       ``(1) In general.--If the Secretary determines under 
     subsection (e)(3)(C) before a fiscal year (beginning with 
     fiscal year 1998) that--
       ``(A) the fee-for-service expenditures (as defined in 
     subsection (f) for all sectors of medicare services (as 
     defined in subsection (b)) for the fiscal year, will exceed
       ``(B) the sum of the allotments specified under subsection 
     (c)(2) for such fiscal year (taking into account any 
     adjustment in the allotment under subsection (g) for that 
     fiscal year) for all sectors,

     then, notwithstanding any other provisions of this title, 
     there shall be an adjustment (consistent with subsection (d)) 
     in applicable payment rates or payments for items and 
     services included in each excess spending sector in the 
     fiscal year. In this section, the term `aggregate excess 
     spending' means, for a fiscal year, the amount by which the 
     amount described in subparagraph (A) (for the fiscal year) 
     exceeds the amount described in subparagraph (B) for such 
     year.
       ``(2) Excess spending sector.--In this section, the term 
     `excess spending sector' means, for a fiscal year, a sector 
     of medicare services for which the Secretary determines under 
     subsection (e)(3)(C)--
       ``(A) the fee-for-service expenditures (as defined in 
     subsection (f)) for all the fiscal year, will exceed
       ``(B) the allotment specified under subsection (c)(2) for 
     such fiscal year (taking into account any adjustment in the 
     allotment under subsection (g) for that fiscal year).
     In this section, the term `excess spending means, for a 
     fiscal year with respect to such a sector, the amount by 
     which the amount described in subparagraph (A) (for the 
     fiscal year and sector) exceeds the amount described in 
     subparagraph (B) for such year and sector.
       ``(b) Sectors of Medicare Services Described--

[[Page H 13488]]

       ``(1) In general.--For purposes of this section, items and 
     services included under each of the following subparagraphs 
     shall be considered to be a separate `sector' of medicare 
     services:
       ``(A) Inpatient hospital services.
       ``(B) Home health services.
       ``(C) Extended care services (for inpatients of skilled 
     nursing facilities).
       ``(D) Hospice care.
       ``(E) Physicians' services (including services and supplies 
     described in section 1861(s)(2)(A)) and services of other 
     health care professionals (including certified registered 
     nurse anesthetists, nurse practitioners, physician 
     assistants, and clinical psychologists) for which separate 
     payment is made under this title.
       ``(F) Outpatient hospital services and ambulatory facility 
     services.
       ``(G) Durable medical equipment and supplies, including 
     prosthetic devices and orthotics.
       ``(H) Diagnostic tests (including clinical laboratory 
     services and x-ray services).
       ``(I) Other items and services.
       ``(2) Classification of items and services.--The Secretary 
     shall classify each type of items and services covered and 
     paid for separately under this title into one of the sectors 
     specified in paragraph (1). After publication of such 
     classification under subsection (e)(1), the Secretary is not 
     authorized to make substantive changes in such 
     classification.
       ``(c) Allotment.--
       ``(1) Allotments for each sector.--For purposes of this 
     section, subject to subsection (g)(1), the allotment for a 
     sector of medicare services for a fiscal year is equal to the 
     product of--
       ``(A) the total allotment for the fiscal year established 
     under paragraph (2), and
       ``(B) the allotment proportion (specified under paragraph 
     (3)) for the sector and fiscal year involved.
       ``(2) Total allotment.--
       ``(A) In general.--For purposes of this section, the total 
     allotment for a fiscal year is equal to--
       ``(i) the medicare benefit budget for the fiscal year (as 
     specified under subparagraph (B)), reduced by
       ``(ii) the amount of payments the Secretary estimates will 
     be made in the fiscal year under the MedicarePlus program 
     under part C.
     In making the estimate under clause (ii), the Secretary shall 
     take into account estimated enrollment and demographic 
     profile of individuals electing MedicarePlus products.
       ``(B) Medicare benefit budget.--For purposes of this 
     subsection, subject to subparagraph (C), the `medicare 
     benefit budget'--
       ``(i) for fiscal year 1996 is $194.2 billion;
       ``(i) for fiscal year 1997 is $206.3 billion;
       ``(ii) for fiscal year 1998 is $217.8 billion;
       ``(iii) for fiscal year 1999 is $229.2 billion;
       ``(iv) for fiscal year 2000 is $247.2 billion;
       ``(v) for fiscal year 2001 is $266.4 billion;
       ``(vi) for fiscal year 2002 is $289.0 billion; and
       ``(vii) for a subsequent fiscal year is equal to the 
     medicare benefit budget under this subparagraph for the 
     preceding fiscal year multiplied by the product of (I) 1.05, 
     and (II) 1 plus the annual percentage increase in the average 
     number of medicare beneficiaries from the previous fiscal 
     year to the fiscal year involved.
       ``(3) Medicare allotment proportions defined.--
       ``(A) In general.--For purposes of this section and with 
     respect to a sector of medicare services for a fiscal year, 
     the term `medicare allotment proportion' means the ratio of--
       ``(i) the baseline-projected medicare expenditures (as 
     determined under subparagraph (B)) for the sector for the 
     fiscal year, to
       ``(ii) the sum of such baseline expenditures for all such 
     sectors for the fiscal year.
       ``(B) Baseline-projected medicare expenditures.--In this 
     paragraph, the `baseline, projected medicare expenditures' 
     for a sector of medicare services--
       ``(i) for fiscal year 1996 is equal to fee-for-service 
     expenditures for such sector during fiscal year 1995, 
     increased by the baseline annual growth rate for such sector 
     of medicare services for fiscal year 1996 (as specified in 
     table in subparagraph (C)); and
       ``(ii) for a subsequent fiscal year is equal to the 
     baseline-projected medicare expenditures under this 
     subparagraph for the sector for the previous fiscal year 
     increased by the baseline annual growth rate for such sector 
     for the fiscal year involved (as specified in such table).
       ``(C) Baseline annual growth rates.--The following table 
     specifies the baseline annual growth rates for each of the 
     sectors for different fiscal years:

----------------------------------------------------------------------------------------------------------------
                                                               Baseline annual growth rates for fiscal year--   
                                                           -----------------------------------------------------
               ``For the following sector--                                                            2002 and 
                                                             1996   1997   1998   1999   2000   2001  thereafter
----------------------------------------------------------------------------------------------------------------
(A) Inpatient hospital services...........................    5.7    5.6    6.0    6.1    5.7    5.5       5.2  
(B) Home health services..................................   17.2   15.1   11.7    9.1    8.4    8.1       7.9  
(C) Extended care services................................   19.7   12.3    9.3    8.7    8.6    8.4       8.0  
(D) Hospice care..........................................   32.0   24.0   18.0   15.0   12.0   10.0       9.0  
(E) Physicians' services..................................   12.4    9.7    8.7    9.0    9.3    9.6      10.1  
(F) Outpatient hospital services..........................   14.7   13.9   14.5   15.0   14.1   13.9      14.0  
(G) Durable medical equipment and supplies................   16.1   15.5   13.7   12.4   13.2   13.9      14.5  
(H) Diagnostic tests......................................   13.1   11.3   11.0   11.4   11.4   11.5      11.9  
(I) Other items and services..............................   11.2   10.2   10.9   12.0   11.6   11.6      11.8  
----------------------------------------------------------------------------------------------------------------

       ``(d) Manner of Payment Adjustment.--
       (1) Payment reductions.--
       ``(A) In general.--Subject to the succeeding provisions of 
     this subsection, the Secretary shall apply a payment 
     reduction for each excess spending sector for a fiscal year 
     in such a manner as to--
       ``(i) make a change in payment rates (to the maximum extent 
     practicable) at the time payment rates are otherwise changed 
     or subject to change for that fiscal year; and
       ``(ii) provide for the full appropriate adjustments so that 
     the fee-for-service expenditures for the sector for the 
     fiscal year will be reduced by 133\1/3\ percent of the amount 
     of the sector reduction target for that sector.
       ``(B) Sector reduction target.--In paragraph (1), the 
     `sector reduction target' for an excess spending sector for a 
     fiscal year is equal to the product of--
       ``(i) the amount of the excess spending for such sector and 
     year (as defined in subsection (a)(2)); and
       ``(ii) the ratio of--

       ``(I) the aggregate excess spending for the year (as 
     defined in subsection (a)(1), to
       ``(II) the sum of the amounts of the excess spending for 
     all excess spending sectors.

       ``(2) Taking into account volume and cash flow.--In 
     providing for an adjustment in payments under this subsection 
     for a sector for a fiscal year, the Secretary shall take into 
     account (in a manner consistent with actuarial projections)--
       ``(A) the impact of such an adjustment on the volume or 
     type of services provided in such sector (and other sectors), 
     and
       ``(B) the fact that an adjustment may apply to items and 
     services furnished in a fiscal year (payment for which may 
     occur in a subsequent fiscal year),
     in a manner that is consistent with assuring that total fee-
     for-services expenditures for each sector for the fiscal year 
     will not exceed the allotment under subsection (c)(1) for 
     such sector for such year.
       ``(3) Proportionality of reductions within a sector.--In 
     making adjustments under this subsection in payment for items 
     and services included within a sector of medicare services 
     for a fiscal year, the Secretary shall provide for such an 
     adjustment that results (to the maximum extent feasible) in 
     the same percentage reductions in aggregate Federal payments 
     under parts A and B for the different classes of items and 
     services included within the sector for the fiscal year.
       ``(4) Application to payments made based on prospective 
     payment rates determined on a fiscal year basis.--
       ``(A) In general.--In applying subsection (a) with respect 
     to items and services for which payment is made under part A 
     or B on the basis of rates that are established on a 
     prospective basis for (and in advance of) a fiscal year, the 
     Secretary shall provide for the payment adjustment under such 
     subsection through an appropriate reduction in such rates 
     established for items and services furnished (or, in the case 
     of payment for operating costs of inpatient hospital services 
     of subsection (d) hospitals and subsection (d) Puerto Rico 
     hospitals (as defined in paragraphs (1)(B) and (9)(A) of 
     section 1886(d)), discharges occurring) during such year.
       ``(B) Description of application to specific services.--The 
     payment adjustment described in subparagraph (A) applies for 
     a fiscal year to at least the following:
       ``(i) Update factor for payment for operating costs of 
     inpatient hospital services of pps hospitals.--To the 
     computation of the applicable percentage increase specified 
     in section 1886(d)(3)(B)(i) for discharges occurring in the 
     fiscal year.
       ``(ii) Home health services.--To the extent payment amounts 
     for home health services are based on per visit payment rates 
     under section 1894, to the computation of the increase in the 
     national per visit payment rates established for the year 
     under section 1894(b)(2)(B).
       ``(iii) Hospice care.--To the update of payment rates for 
     hospice care under section 1814(i) for services furnished 
     during the fiscal year.
       ``(iv) Update factor for payment of operating costs of 
     inpatient hospital services of pps-exempt hospitals.--To the 
     computation of the target amount under section 1886(b)(3) for 
     discharges occurring during the fiscal year.
       ``(v) Covered non-routine services of skilled nursing 
     facilities.--To the computation of the facility per stay 
     limits for the year 

[[Page H 13489]]
     under section 1888A(d) for covered non-routine services of a skilled 
     nursing facility (as described in such section).
       ``(5) Application to payments made based on prospective 
     payment rates determined on a calendar year basis.--
       ``(A) In general.--In applying subsection (a) for a fiscal 
     year with respect to items and services for which payment is 
     made under part A or B on the basis of rates that are 
     established on a prospective basis for (and in advance of) a 
     calendar year, the Secretary shall provide for the payment 
     adjustment under such subsection through an appropriate 
     reduction in such rates established for items and services 
     furnished at any time during such calendar year as follows:
       ``(i) For fiscal year 1997, the reduction shall be made for 
     payment rates during calendar year 1997 in a manner so as to 
     achieve the necessary payment reductions for such fiscal year 
     for items and services furnished during the first 3 quarters 
     of calendar year 1997.
       ``(ii) For a subsequent fiscal year, the reduction shall be 
     made for payment rates during the calendar year in which the 
     fiscal year ends in a manner so as to achieve the necessary 
     payment reductions for such fiscal year for items and 
     services furnished during the first 3 quarters of the 
     calendar year, but also taking into account the payment 
     reductions made in the first quarter of the fiscal year 
     resulting from payment reductions made under this paragraph 
     for the previous calendar year.
       ``(iii) Payment rate reductions effected under this 
     subparagraph for a calendar year and applicable to the last 3 
     quarters of the fiscal year in which the calendar year ends 
     shall continue to apply during the first quarter of the 
     succeeding fiscal year.
       ``(B) Application in specific cases.--The payment 
     adjustment described in subparagraph (A) applies for a fiscal 
     year to at least the following:
       ``(i) Update in conversion factor for physicians' 
     services.--To the computation of the conversion factor under 
     subsection (d) of section 1848 used in the fee schedule 
     established under subsection (b) of such section for items 
     and services furnished during the calendar year in which the 
     fiscal year ends.
       ``(ii) Payment rates for other health care professionals.--
     To the computation of payments for professional services, 
     furnished during the calendar year in which the fiscal year 
     ends, of certified registered nurse anesthetists under 
     section 1833(l), nurse midwives, physician assistants, nurse 
     practitioners and clinical nurse specialists under section 
     1833(r), clinical psychologists, clinical social workers, 
     physical or occupational therapists, and any other health 
     professionals for which payment rates are based (in whole or 
     in part) on payments for physicians' services.
       ``(iii) Update in lab fee schedule.--To the computation of 
     the fee schedule amount under section 1833(h)(2) for clinical 
     diagnostic laboratory services furnished during the calendar 
     year in which the fiscal year ends.
       ``(iv) UPdate in reasonable charges for vaccines.--To the 
     computation of the reasonable charge for vaccines described 
     in section 1861(s)(10) for vaccines furnished during the 
     calendar year in which the fiscal year ends.
       ``(v) DUrable medical equipment-related items.--To the 
     computation of the payment basis under section 1834(a)(1)(B) 
     for covered items described in section 1834(a)(13), for 
     services furnished during the calendar year in which the 
     fiscal year ends.
       ``(vi) Radiologist services.--To the computation of 
     conversion factors for radiologist services under section 
     1834(b), for services furnished during the calendar year in 
     which the fiscal year ends.
       ``(vii) Screening mammography.--To the computation of 
     payment rates for screening mammography under section 
     1834(c)(1)(C)(ii), for screening mammography performed during 
     the calendar year in which the fiscal year ends.
       ``(viii) Prosthetics and orthotics..--To the computation of 
     the amount to be recognized under section 1834(h) for payment 
     for prosthetic devices and orthotics and prosthetics, for 
     items furnished during the calendar year in which the fiscal 
     year ends.
       ``(ix) Surgical dressings.--To the computation of the 
     payment amount referred to in section 1834(i)(1)(B) for 
     surgical dressings, for items furnished during the calendar 
     year in which the fiscal year ends.
       ``(x) Parenteral and enteral nutrition.--To the computation 
     of reasonable charge screens for payment for parenteral and 
     enteral nutrition under section 1834(h), for nutrients 
     furnished during the calendar year in which the fiscal year 
     ends.
       ``(xi) Ambulance services.--To the computation of limits on 
     reasonable charges for ambulance services, for services 
     furnished during the calendar year in which the fiscal year 
     ends.
       ``(6) Application to payments made based on costs during a 
     cost reporting period.--
       ``(A) In general.--In applying subsection (a) for a fiscal 
     year with respect to items and services for which payment is 
     made under part A or B on the basis of costs incurred for 
     items and services in a cost reporting period, the Secretary 
     shall provide for the payment adjustment under such 
     subsection for a fiscal year through an appropriate 
     proportional reduction in the payment for costs for such 
     items and services incurred at any time during each cost 
     reporting period any part of which occurs during the fiscal 
     year involved, but only (for each such cost reporting period) 
     in the same proportion as the fraction of the cost reporting 
     period that occurs during the fiscal year involved.
       ``(B) Application in specific cases.--The payment 
     adjustment described in subparagraph (A) applies for a fiscal 
     year to at least the following:
       ``(i) Capital-related costs of hospital services.--To the 
     computation of payment amounts for inpatient and outpatient 
     hospital services under sections 1886(g) and 1861(v) for 
     portions of cost reporting periods occurring during the 
     fiscal year.
       ``(ii) Operating costs for pps-exempt hospitals.--To the 
     computation of payment amounts under section 1886(b) for 
     operating costs of inpatient hospital services of PPS-exempt 
     hospitals for portions of cost reporting periods occurring 
     during the fiscal year.
       ``(iii) Direct graduate medical education.--To the 
     computation of payment amounts under section 1886(h) for 
     reasonable costs of direct graduate medical education costs 
     for portions of cost reporting periods occurring during the 
     fiscal year.
       ``(iv) Inpatient rural primary care hospital services.--To 
     the computation of payment amounts under section 1814(j) for 
     inpatient rural primary care hospital services for portions 
     of cost reporting periods occurring during the fiscal year.
       ``(v) Extended care services of a skilled nursing 
     facility.--To the computation of payment amounts under 
     section 1861(v) for post-hospital extended care services of a 
     skilled nursing facility (other than covered non-routine 
     services subject to section 1888A) for portions of cost 
     reporting periods occurring during the fiscal year.
       ``(vi) Reasonable cost contracts.--To the computation of 
     payment amounts under section 1833(a)(1)(A) for organizations 
     for portions of cost reporting periods occurring during the 
     fiscal year.
       ``(vii) Home health services.--Subject to paragraph 
     (4)(B)(ii), for payment amounts for home health services, for 
     portions of cost reporting periods occurring during such 
     fiscal year.
       ``(7) Other.--In applying subsection (a) for a fiscal year 
     with respect to items and services for which payment is made 
     under part A or B on a basis not described in a previous 
     paragraph of this subsection, the Secretary shall provide for 
     the payment adjustment under such subsection through an 
     appropriate proportional reduction in the payments (or 
     payment bases for items and services furnished) during the 
     fiscal year.
       ``(8) Adjustment of payment limits.--The Secretary shall 
     provide for such proportional adjustment in any limits on 
     payment established under part A or B for items and services 
     within a sector as may be appropriate based on (and in order 
     to properly carry out) the adjustment to the amount of 
     payment under this subsection in the sector.
       ``(9) References to payment rates.--Except as the Secretary 
     may provide, any reference in this title (other than this 
     section) to a payment rate is deemed a reference to such a 
     rate as adjusted under this subsection.
       ``(e) Publication of Determinations; Judicial Review.--
       ``(1) One-time publication of sectors and general payment 
     adjustment methodology.--Not later than October 1, 1996, the 
     Secretary shall publish in the Federal Register the 
     classification of medicare items and services into the 
     sectors of medicare services under subsection (b) and the 
     general methodology to be used in applying payment 
     adjustments to the different classes of items and services 
     within the sectors.
       ``(2) Inclusion of information in president's budget.--
       ``(A) In general.--With respect to fiscal years beginning 
     with fiscal year 1999, the President shall include in the 
     budget submitted under section 1105 of title 31, United 
     States Code, information on--
       ``(i) the fee-for-service expenditures, within each sector, 
     for the second previous fiscal year, and how such 
     expenditures compare to the adjusted sector allotment for 
     that sector for that fiscal year, and
       ``(ii) actual annual growth rates for fee-for-service 
     expenditures in the different sectors in the second previous 
     fiscal year.
       ``(B) Recommendation regarding growth factors.--The 
     President may include in such budget for a fiscal year 
     (beginning with fiscal year 1998) recommendations regarding 
     percentages that should be applied (for one or more fiscal 
     years beginning with that fiscal year) instead of the 
     baseline annual growth rates under subsection (c)(3)(C). Such 
     recommendations shall take into account medically appropriate 
     practice patterns.
       ``(3) Determinations concerning payment adjustments.--
       ``(A) Recommendations of commission.--By not later than 
     March 1 of each year (beginning with 1997), the Medicare 
     Payment Review Commission shall submit to the Secretary and 
     the Congress a report that analyzes the previous operation 
     (if any) of this section and that includes recommendations 
     concerning the manner in which this section should be applied 
     for the following fiscal year:
       ``(B) Preliminary notice by secretary.--Not later than May 
     15 preceding the beginning of each fiscal year (beginning 
     with fiscal year 1998), the Secretary shall publish in the 
     Federal Register a notice containing the Secretary's 
     preliminary determination, for each sector of medicare 
     services, concerning the following:
       ``(i) the projected allotment under subsection (c) for such 
     sector for the fiscal year.
       ``(ii) Whether there will be a payment adjustment for items 
     and services included in such sector for the fiscal year 
     under subsection (a).
       ``(iii) If there will be such an adjustment, the size of 
     such adjustment and the methodology to be used in making such 
     a payment adjustment for classes of items and services 
     included in such sector.
       ``(iv) Beginning with fiscal year 1999, the fee-for-service 
     expenditures for such sector for the second preceding fiscal 
     year.
     Such notice shall include an explanation of the basis for 
     such determination. Determinations under this subparagraph 
     and subparagraph (C) 

[[Page H 13490]]
     shall be based on the best data available at the time of such 
     determinations.
       ``(C) Final determination.--Not later than September 1 
     preceding the beginning of each fiscal year (beginning with 
     fiscal year 1998), the Secretary shall publish in the Federal 
     Register a final determination, for each, sector of medicare 
     services, concerning the matters described in subparagraph 
     (B) and an explanation of the reasons for any differences 
     between such determination and the preliminary determination 
     for such fiscal year published under subparagraph (B).
       ``(4) Limitation on administrative or judicial review.--
     There shall be no administrative or judicial review under 
     section 1878 or otherwise of--
       ``(A) the classification of items and services among the 
     sectors of medicare services under subsection (b),
       ``(B) the determination of the amounts of allotments for 
     the different sectors of medicare services under subsection 
     (c),
       ``(C) the determination of the amount (or method of 
     application) of any payment adjustment under subsection (d), 
     or
       ``(D) any adjustment in an allotment effected under 
     subsection (g).
       ``(f) Fee-for-Service Expenditures Defined.--In this 
     section, the term ``fee-for-service expenditures', for items 
     and services within a sector of medicare services in a fiscal 
     year, means amounts payable for such items and services which 
     are furnished during the fiscal year, and--
       ``(1) includes types of expenses otherwise reimbursable 
     under parts A and B (including administrative costs incurred 
     by organizations described in sections 1816 and 1842) with 
     respect to such items and services, and
       ``(2) does not include amounts paid under part C.
       ``(g) Look-Back Adjustment in Allotments to Reflect Actual 
     Expenditures.--
       ``(1) Determinations.--
       ``(A) In general.--If the Secretary estimates under 
     subsection (e)(3)(B) with respect to a particular fiscal year 
     (beginning with fiscal year 1998) that--
       ``(i) the fee-for-service expenditures for all sectors of 
     medicare services for the second preceding fiscal year, 
     exceeded
       ``(ii) the sum of the adjusted allotments for all sectors 
     for such year (as defined in paragraph (2)), then the 
     allotment for each final excess spending sector (as defined 
     in subparagraph (B)(i)) for the particular fiscal year shall 
     be reduced by the look-back sector reduction amount 
     determined under subparagraph (B)(ii) for such sector and 
     year.
       ``(B) Final excess spending sectors.--
       ``(i) In general.--In this paragraph, the term final excess 
     spending sector' means, for a fiscal year, a sector of 
     medicare services for which the Secretary determines under 
     subsection (e)(B) that--

       ``(I) the fee-for-service expenditures (as defined in 
     subsection (f) for the fiscal year, exceeded

       ``(II) the adjusted allotment for such fiscal year.

     For purposes of clause (ii), the term `final excess spending' 
     means, for a fiscal year with respect to such a sector, the 
     amount by which the amount described in subclause (I) (for 
     the fiscal year and sector) exceeds the amount described in 
     subclause (II) for such year and sector.
       ``(ii) Look back sector reduction amount.--In subparagraph 
     (A)(i), the `look back sector reduction amount' for a final 
     excess spending sector for a fiscal year is equal to the 
     product of--

       ``(I) the amount of the final excess spending for such 
     sector and year (as defined in clause (i)); and
       ``(II) the ratio of--

       ``(a) the aggregate final excess spending for the year 
     (described in subparagraph (A)(i)), to
       ``(b) the sum of the amounts of the final excess spending 
     for all final excess spending sectors.
       ``(2) Adjusted allotment.--The adjusted allotment under 
     this paragraph for a sector for a fiscal year is--
       ``(A) the amount that would be computed as the allotment 
     under subsection (c) for the sector for the fiscal year if 
     the actual amount of payments made in the fiscal year under 
     the MedicarePlus program under part C in the fiscal year were 
     substituted for the amount described in subsection 
     (c)(2)(A)(ii) for that fiscal year,
       ``(B) adjusted to take into account the amount of any 
     adjustment under paragraph (1) for that fiscal year (based on 
     expenditures in the second preceding fiscal year).''.
       (b) Report of Trustees on Growth Rate in Part A 
     Expenditures.--Section 1817 (42 U.S.C. 1395i) is amended by 
     adding at the end the following new subsection:
       ``(k) Each annual report provided in subsection (b)(2) 
     shall include information regarding the annual rate of growth 
     in program expenditures that would be required to maintain 
     the financial solvency of the Trust Fund and the extent to 
     which the provisions of section 1895 restrain the rate of 
     growth of expenditures under this part in order to achieve 
     such solvency.''.
                        Subtitle H--Rural Areas

     SEC. 8701. MEDICARE-DEPENDENT, SMALL, RURAL HOSPITAL PAYMENT 
                   EXTENSION.

       (a) Special Treatment Extended.--
       (1) Payment methodology.--Section 1886(d)(5)(G) (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''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply with respect to discharges occurring on or after 
     September 1, 1995.

     SEC. 8702. 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) Establishment.--Any State that submits an 
     application in accordance with subsection (b) may establish a 
     medicare rural hospital flexibility program described in 
     subsection (c).
       ``(b) Application.--A State may establish a medicare rural 
     hospital flexibility program described in subsection (c) 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 (d)) 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.
       ``(c) Medicare Rural Hospital Flexibility Program 
     Described.--
       ``(1) In general.--A State that has submitted an 
     application in accordance with subsection (b), 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 (d)) 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 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,

[[Page H 13491]]

       ``(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).
       ``(d) 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.
       ``(e) 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 (c);
       ``(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.
       ``(f) 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 (c)(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.
       ``(g) 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.''.
       (b) 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(e).
       ``(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'';
       (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''.
       (c) 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)''.

[[Page H 13492]]

       (d) 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.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to services furnished on or after October 1, 
     1995.

     SEC. 8703. 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 8702(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 8702(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. 8704. CLASSIFICATION OF RURAL REFERRAL CENTERS.

       (a) Prohibiting Denial of Request for Reclassification on 
     Basis of Comparability of Wages.--
       (1) In general.--Section 1886(d)(10)(D) (42 U.S.C. 
     1395ww(d)(10)(D)) is amended--
       (A) by redesignating clause (iii) as clause (iv); and
       (B) by inserting after clause (ii) the following new 
     clause:
       ``(iii) Under the guidelines published by the Secretary 
     under clause (i), in the case of a hospital which is 
     classified by the Secretary as a rural referral center under 
     paragraph (5)(C), the Board may not reject the application of 
     the hospital under this paragraph on the basis of any 
     comparison between the average hourly wage of the hospital 
     and the average hourly wage of hospitals in the area in which 
     it is located.''.
       (2) Effective date.--Notwithstanding section 
     1886(d)(10)(C)(ii) of the Social Security Act, a hospital may 
     submit an application to the Medicare Geographic 
     Classification Review Board during the 30-day period 
     beginning on the date of the enactment of this Act requesting 
     a change in its classification for purposes of determining 
     the area wage index applicable to the hospital under section 
     1886(d)(3)(D) of such Act for fiscal year 1997, if the 
     hospital would be eligible for such a change in its 
     classification under the standards described in section 
     1886(d)(10)(D) (as amended by paragraph (1)) but for its 
     failure to meet the deadline for applications under section 
     1886(d)(10)(C)(ii).
       (b) Continuing Treatment of Previously Designated 
     Centers.--Any hospital classified as a rural referral center 
     by the Secretary of Health and Human Services under section 
     1886(d)(5)(C) of the Social Security Act for fiscal year 1994 
     shall be classified as such a rural referral center for 
     fiscal year 1996 and each subsequent fiscal year.

     SEC. 8705. FLOOR ON AREA WAGE INDEX.

       (a) In General.--For purposes of section 1886(d)(3)(E) of 
     the Social Security Act for discharges occurring on or after 
     October 1, 1995, the area wage index applicable under such 
     section to any hospital which is not located in a rural area 
     (as defined in section 1886(d)(2)(D) of such Act) may not be 
     less than the average of the area wage indices applicable 
     under such section to hospitals located in rural areas in the 
     State in which the hospital is located.
       (b) Implementation.--The Secretary of Health and Human 
     Services shall adjust the area wage indices referred to in 
     subsection (a) for hospitals not described in such subsection 
     in a manner which assures that the aggregate payments made 
     under section 1886(d) of the Social Security Act in a fiscal 
     year for the operating costs of inpatient hospital services 
     are not greater or less than those which would have been made 
     in the year if this section did not apply.

     SEC. 8706. 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' 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''.

[[Page H 13493]]

       (e) Effective Date.--The amendments made by subsections 
     (a), (b), and (d) shall apply to physicians' services 
     furnished on or after October 1, 1995.

     SEC. 8707. 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. 8708. EXPANDING ACCESS TO NURSE AIDE TRAINING IN 
                   UNDERSERVED AREAS.

       (a) In General.--Section 1819(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)''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to nurse aide training and competency evaluation 
     programs under section 1819 of the Social Security Act which 
     are offered on or after October 1, 1995.
            TITLE IX--TRANSPORTATION AND RELATED PROVISIONS

     SEC. 9001. MINIMUM ALLOCATION FOR HIGHWAY PROGRAMS.

       (a) Technical Correction.--With respect to fiscal year 
     1996--
       (1) the Secretary of Transportation shall determine, in 
     accordance with the policies established by the Intermodal 
     Surface Transportation Efficiency Act of 1991 (105 Stat. 
     1914)--
       (A) which of the States will no longer require an 
     apportionment under section 157(a)(4) of title 23, United 
     States Code; and
       (B) which of the States will require decreased funding 
     under such section 157(a)(4);
     as a result of the termination of the Interstate construction 
     program; and
       (2) as a result of the reduced number of States that may 
     require an apportionment under such section 157(a)(4), and 
     the decrease in the amount of funds some States will require 
     under such section 157(a)(4), the maximum amount available 
     for apportionment under such section 157(a)(4) shall be 
     reduced from the amount apportioned under such section 
     157(a)(4) for fiscal year 1995 by 60.4 percent.
       (b) Effect on Certain Calculations.--The correction made by 
     subsection (a) shall be made after the reduction required 
     under section 1003(c) of the Intermodal Surface 
     Transportation Efficiency Act of 1991 (105 Stat. 1921) and 
     shall not be taken into account in making the calculations 
     under sections 1003(c), 1013(c), and 1015 of such Act (105 
     Stat. 1921, 1940, and 1943).

     SEC. 9002. EXTENSION OF HIGHER VESSEL TONNAGE DUTIES.

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

     SEC. 9003. FEMA RADIOLOGICAL EMERGENCY PREPAREDNESS FEES.

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

     SEC. 10001. SHORT TITLE; TABLE OF CONTENTS.

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

Sec. 10001. Short title; table of contents.

             Subtitle A--Extension of Temporary Authorities

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

                       Subtitle B--Other Matters

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

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

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

     SEC. 10012. MEDICAL CARE COST RECOVERY AUTHORITY.

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

     SEC. 10013. INCOME VERIFICATION AUTHORITY.

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

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

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

     SEC. 10015. HOME LOAN FEES.

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

[[Page H 13494]]


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

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

     SEC. 10017. ENHANCED LOAN ASSET SALE AUTHORITY.

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

     SEC. 10021. REVISION TO PRESCRIPTION DRUG COPAYMENT.

       (a) Increase in Amount of Copayment.--Section 1722A(a) of 
     title 38, United States Code, is amended--
       (1) in paragraph (1), by striking out ``$2'' and inserting 
     in lieu thereof ``$4'';
       (2) by striking out paragraph (2); and
       (3) by redesignating paragraph (3) as paragraph (2) and in 
     that paragraph--
       (A) striking out ``or'' at the end of subparagraph (A);
       (B) striking out the period at the end of subparagraph (B) 
     and inserting in lieu thereof ``; or''; and
       (C) adding at the end the following new subparagraph:
       ``(C) to a veteran who is a former prisoner of war.''.
       (b) Recovery of Indebtedness.--(1) Section 5302 of such 
     title is amended by adding at the end the following new 
     subsection:
       ``(f) The Secretary may not waive under this section the 
     recovery of any payment or the collection of any indebtedness 
     owed under section 1722A of this title.''.
       (2) The amendment made by paragraph (1) shall apply with 
     respect to amounts that become due to the United States under 
     section 1722A of title 38, United States Code, on or after 
     the date of the enactment of this Act.

     SEC. 10022. ROUNDING DOWN OF COST-OF-LIVING ADJUSTMENTS IN 
                   COMPENSATION AND DIC RATES.

       (a) Fiscal Year 1996 COLA.--(1) Effective as of December 1, 
     1995, the Secretary of Veterans Affairs shall recompute any 
     increase in an adjustment that is otherwise provided by law 
     to be effective during fiscal year 1996 in the rates of 
     disability compensation and dependency and indemnity 
     compensation paid by the Secretary as such rates were in 
     effect on November 30, 1995. The recomputation shall provide 
     for the same percentage increase as provided under such law, 
     but with amounts so recomputed (if not a whole dollar amount) 
     rounded down to the next lower whole dollar amount (rather 
     than to the nearest whole dollar amount) and with each old-
     law DIC rate increased by the amount by which the new-law DIC 
     rate is increased (rather than by a uniform percentage).
       (2) For purposes of paragraph (1):
       (A) The term ``old-law DIC rate'' means a dollar amount in 
     effect under section 1311(a)(3) of title 38, United States 
     Code.
       (B) The term ``new-law DIC rate'' means the dollar amount 
     in effect under section 1311(a)(1) of title 38, United States 
     Code.
       (b) Out-Year Compensation COLAs.--(1) Chapter 11 of title 
     38, United States Code, is amended by inserting after section 
     1102 the following new section:

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

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

``1103. Cost-of-living adjustments.''.
       (c) Out-Year DIC COLAs.--(1) Chapter 13 of title 38, United 
     States Code, is amended by inserting after section 1302 the 
     following new section:

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

       ``(a) In the computation of cost-of-living adjustments for 
     fiscal years 1997 through 2002 in the rates of dependency and 
     indemnity compensation payable under this chapter, such 
     adjustments (except as provided in subsection (b)) shall be 
     made by a uniform percentage that is no more than the 
     percentage equal to the social security increase for that 
     fiscal year, with all increased monthly rates (other than 
     increased rates equal to a whole dollar amount) rounded down 
     to the next lower whole dollar amount.
       ``(b)(1) Cost-of-living adjustments for each of fiscal 
     years 1997 through 2002 in old-law DIC rates shall be in a 
     whole dollar amount that is no greater than the amount by 
     which the new-law DIC rate is increased for that fiscal year 
     as determined under subsection (a).
       ``(2) For purposes of paragraph (1):
       ``(A) The term `old-law DIC rates' means the dollar amounts 
     in effect under section 1311(a)(3) of this title.
       ``(B) The term `new-law DIC rate' means the dollar amount 
     in effect under section 1311(a)(1) of this title.
       ``(c) For purposes of this section, the term `social 
     security increase' means the percentage by which benefit 
     amounts payable under title II of the Social Security Act (42 
     U.S.C. 401 et seq.) are increased for any fiscal year as a 
     result of a determination under section 215(i) of such Act 
     (42 U.S.C. 415(i)).''.
       (2) The table of sections at the beginning of such chapter 
     is amended by inserting after the item relating to section 
     1302 the following new item:

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

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

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

     SEC. 10024. WITHHOLDING OF PAYMENTS AND BENEFITS.

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

     SEC. 11000. SHORT TITLES; AMENDMENT OF 1986 CODE; TABLE OF 
                   CONTENTS.

       (a) Revenue Reconciliation Act.--This title may be cited as 
     the ``Revenue Reconciliation Act of 1995''.
       (b) Contract With America.--Subtitles A, B, C, and D of 
     this title may be cited as the ``Contract With America Tax 
     Relief Act of 1995''.
       (c) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this title 

[[Page H 13495]]
     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.
       (d) Table of Contents.--The table of contents for this 
     title is as follows:


                      TITLE XI--REVENUE PROVISIONS

Sec. 11000. Short titles; amendment of 1986 Code; table of contents.

                     Subtitle A--Family Tax Relief

Sec. 11001. Child tax credit.
Sec. 11002. Reduction in marriage penalty.
Sec. 11003. Credit for adoption expenses.
Sec. 11004. Deduction for interest on education loans.
Sec. 11005. Deduction for taxpayers with certain persons requiring 
              custodial care in their households.

             Subtitle B--Savings and Investment Incentives

                Chapter 1--Retirement Savings Incentives


                SUBCHAPTER A--INDIVIDUAL RETIREMENT PLANS

                  Part I--Restoration of IRA Deduction

Sec. 11011. Restoration of IRA deduction.
Sec. 11012. Inflation adjustment for deductible amount.
Sec. 11013. Homemakers eligible for full IRA deduction.

                  Part II--Nondeductible Tax-Free IRAs

Sec. 11015. Establishment of American Dream IRA.


                 SUBCHAPTER B--PENALTY-FREE DISTRIBUTIONS

Sec. 11016. 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. 11018. Establishment of savings incentive match plans for 
              employees of small employers.
Sec. 11019. Extension of simple plan to 401(k) arrangements.

                    Chapter 2--Capital Gains Reform


             SUBCHAPTER A--TAXPAYERS OTHER THAN CORPORATIONS

Sec. 11021. Capital gains deduction.
Sec. 11022. Indexing of certain assets acquired after December 31, 
              2000, for purposes of determining gain.
Sec. 11023. Modifications to exclusion of gain on certain small 
              business stock.


                  SUBCHAPTER B--CORPORATE CAPITAL GAINS

Sec. 11025. Reduction of alternative capital gain tax for corporations.


  SUBCHAPTER C--CAPITAL LOSS DEDUCTION ALLOWED WITH RESPECT TO SALE OR 
                    EXCHANGE OF PRINCIPAL RESIDENCE

Sec. 11026. Capital loss deduction allowed with respect to sale or 
              exchange of principal residence.

          Chapter 3--Corporate Alternative Minimum Tax Reform

Sec. 11031. Modification of depreciation rules under minimum tax.
Sec. 11032. Long-term unused credits allowed against minimum tax.

                  Chapter 4--Cost Recovery Provisions

Sec. 11035. Treatment of abandonment of lessor improvements at 
              termination of lease.
Sec. 11036. Increase in expense treatment for small businesses.

                 Subtitle C--Health Related Provisions

                  Chapter 1--Long-Term Care Provisions


           SUBCHAPTER A--LONG-TERM CARE SERVICES AND CONTRACTS

                       Part I--General Provisions

Sec. 11041. Treatment of long-term care insurance.
Sec. 11042. Qualified long-term care services treated as medical care.
Sec. 11043. Certain exchanges of life insurance contracts for qualified 
              long-term care insurance contracts not taxable.
Sec. 11044. Exception from penalty tax for amounts withdrawn from 
              certain retirement plans for qualified long-term care 
              insurance.
Sec. 11045. Reporting requirements.

                Part II--Consumer Protection Provisions

Sec. 11051. Policy requirements.
Sec. 11052. Requirements for issuers of long-term care insurance 
              policies.
Sec. 11053. Coordination with State requirements.
Sec. 11054. Effective dates.


          SUBCHAPTER B--TREATMENT OF ACCELERATED DEATH BENEFITS

Sec. 11061. Treatment of accelerated death benefits by recipient.
Sec. 11062. Tax treatment of companies issuing qualified accelerated 
              death benefit riders.

                  Chapter 2--Medical Savings Accounts

Sec. 11066. Medical savings accounts.

  Chapter 3--Increase in Deduction for Health Insurance Costs of Self-
                          Employed Individuals

Sec. 11068. Increase in deduction for health insurance costs of self-
              employed individuals.

                 Subtitle D--Estate and Gift Provisions

Sec. 11071. Cost-of-living adjustments relating to estate and gift tax 
              provisions.
Sec. 11072. Family-owned business exclusion.
Sec. 11073. Treatment of land subject to a qualified conservation 
              easement.
Sec. 11074. Expansion of exception from generation-skipping transfer 
              tax for transfers to individuals with deceased parents.
Sec. 11075. Extension of treatment of certain rents under section 2032A 
              to lineal descendants.

              Subtitle E--Extension of Expiring Provisions

                    Chapter 1--Temporary Extensions

Sec. 11111. Work opportunity tax credit.
Sec. 11112. Employer-provided educational assistance programs.
Sec. 11113. Research credit.
Sec. 11114. Orphan drug tax credit.
Sec. 11115. Contributions of stock to private foundations.
Sec. 11116. Delay of tax on fuel used in commercial aviation.
Sec. 11117. Extension of airport and airway trust fund excise taxes.
Sec. 11118. Extension of Internal Revenue Service user fees.

             Chapter 2--Sunset of Low-Income Housing Credit

Sec. 11121. Sunset of low-income housing credit.

    Chapter 3--Extensions of Superfund and Oil Spill Liability Taxes

Sec. 11131. Extension of Hazardous Substance Superfund taxes.
Sec. 11132. Extension of oil spill liability tax.

              Chapter 4--Extensions Relating to Fuel Taxes

Sec. 11141. Ethanol blender refunds.
Sec. 11142. Extension of binding contract date for biomass and coal 
              facilities.
Sec. 11143. Exemption from diesel fuel dyeing requirements with respect 
              to certain States.
Sec. 11144. Moratorium for excise tax on diesel fuel sold for use or 
              used in diesel-powered motorboats.

Chapter 5--Permanent Extension of FUTA Exemption for Alien Agricultural 
                                Workers

Sec. 11151. FUTA exemption for alien agricultural workers.

   Chapter 6--Disclosure of Return Information for Administration of 
                       Certain Veterans Programs

Sec. 11161. Disclosure of return information for administration of 
              certain veterans programs.

            Subtitle F--Taxpayer Bill of Rights 2 Provisions

Sec. 11201. Expansion of authority to abate interest.
Sec. 11202. Extension of interest-free period for payment of tax after 
              notice and demand.
Sec. 11203. Joint return may be made after separate returns without 
              full payment of tax.
Sec. 11204. Modifications to certain levy exemption amounts.
Sec. 11205. Offers-in-compromise.
Sec. 11206. Increased limit on attorney fees.
Sec. 11207. Award of litigation costs permitted in declaratory judgment 
              proceedings.
Sec. 11208. Increase in limit on recovery of civil damages for 
              unauthorized collection actions.
Sec. 11209. Enrolled agents included as third-party recordkeepers.
Sec. 11210. Annual reminders to taxpayers with outstanding delinquent 
              accounts.

       Subtitle G--Casualty and Involuntary Conversion Provisions

Sec. 11251. Basis adjustment to property held by corporation where 
              stock in corporation is replacement property under 
              involuntary conversion rules.
Sec. 11252. Expansion of requirement that involuntarily converted 
              property be replaced with property acquired from an 
              unrelated person.
Sec. 11253. Special rule for crop insurance proceeds and disaster 
              payments.
Sec. 11254. Application of involuntary exclusion rules to 
              presidentially declared disasters.

        Subtitle H--Exempt Organizations and Charitable Reforms

      Chapter 1--Excise Tax on Amounts of Private Excess Benefits

Sec. 11271. Excise taxes for failure by certain charitable 
              organizations to meet certain qualification requirements.
Sec. 11272. Reporting of certain excise taxes and other information.
Sec. 11273. Increase in penalties on exempt organizations for failure 
              to file complete and timely annual returns.

                      Chapter 2--Other Provisions

Sec. 11276. Cooperative service organizations for certain foundations.
Sec. 11277. Exclusion from unrelated business taxable income for 
              certain sponsorship payments.
Sec. 11278. Treatment of dues paid to agricultural or horticultural 
              organizations.
Sec. 11279. Repeal of credit for contributions to community development 
              corporations.

              Subtitle I--Tax Reform and Other Provisions

              Chapter 1--Provisions Relating to Businesses

Sec. 11301. Tax treatment of certain extraordinary dividends.
Sec. 11302. Registration of confidential corporate tax shelters.
Sec. 11303. Denial of deduction for interest on loans with respect to 
              company-owned insurance.
Sec. 11304. Termination of suspense accounts for family corporations 
              required to use accrual method of accounting.

[[Page H 13496]]

Sec. 11305. Termination of Puerto Rico and possession tax credit.
Sec. 11306. Depreciation under income forecast method.
Sec. 11307. Transfers of excess pension assets.
Sec. 11308. Repeal of exclusion for interest on loans used to acquire 
              employer securities.

                        Chapter 2--Legal Reforms

Sec. 11311. Repeal of exclusion for punitive damages and for damages 
              not attributable to physical injuries or sickness.
Sec. 11312. Reporting of certain payments made to attorneys.

        Chapter 3--Reforms Relating to Nonrecognition Provisions

Sec. 11321. No rollover or exclusion of gain on sale of principal 
              residence which is attributable to depreciation 
              deductions.
Sec. 11322. 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. 11331. Repeal of diesel fuel tax rebate to purchasers of diesel-
              powered automobiles and light trucks.
Sec. 11332. Modifications to excise tax on ozone-depleting chemicals.
Sec. 11333. Election to avoid tax-exempt bond penalties for local 
              furnishers of electricity and gas.
Sec. 11334. Tax-exempt bonds for sale of Alaska Power Administration 
              Facility.

                Chapter 5--Foreign Trust Tax Compliance

Sec. 11341. Improved information reporting on foreign trusts.
Sec. 11342. Modifications of rules relating to foreign trusts having 
              one or more United States beneficiaries.
Sec. 11343. Foreign persons not to be treated as owners under grantor 
              trust rules.
Sec. 11344. Information reporting regarding foreign gifts.
Sec. 11345. Modification of rules relating to foreign trusts which are 
              not grantor trusts.
Sec. 11346. Residence of estates and trusts, etc.

 Chapter 6--Treatment of Individuals Who Lose United States Citizenship

Sec. 11348. Revision of income, estate, and gift taxes on individuals 
              who lose United States citizenship.
Sec. 11349. Information on individuals losing United States 
              citizenship.

         Chapter 7--Financial Asset Securitization Investments

Sec. 11351. Financial Asset Securitization Investment Trusts.

                   Chapter 8--Depreciation Provisions

Sec. 11361. Treatment of contributions in aid of construction.
Sec. 11362. Deduction for certain operating authority.
Sec. 11363. Class life for gas station convenience stores and similar 
              structures.

                      Chapter 9--Other Provisions

Sec. 11371. Application of failure-to-pay penalty to substitute 
              returns.
Sec. 11372. Extension of withholding to certain gambling winnings.
Sec. 11373. Losses from foreclosure property.
Sec. 11374. Nonrecognition treatment for certain transfers by common 
              trust funds to regulated investment companies.
Sec. 11375. Exclusion for energy conservation subsidies limited to 
              subsidies with respect to dwelling units.
Sec. 11376. Election to cease status as qualified scholarship funding 
              corporation.
Sec. 11377. Certain amounts derived from foreign corporations treated 
              as unrelated business taxable income.
Sec. 11378. Repeal of financial institution transition rule to interest 
              allocation rules.
Sec. 11379. Repeal of bad debt reserve method for thrift savings 
              associations.
Sec. 11380. Newspaper distributors treated as direct sellers.

                     Subtitle J--Tax Simplification

             Chapter 1--Provisions Relating to Individuals


    SUBCHAPTER A--PROVISIONS RELATING TO ROLLOVER OF GAIN ON SALE OF 
                          PRINCIPAL RESIDENCE

Sec. 11401. Multiple sales within rollover period.
Sec. 11402. Special rules in case of divorce.
Sec. 11403. One-time exclusion of gain from sale of principal residence 
              for certain spouses.


                      SUBCHAPTER B--OTHER PROVISIONS

Sec. 11411. Treatment of certain reimbursed expenses of rural mail 
              carriers.
Sec. 11412. Treatment of traveling expenses of certain Federal 
              employees engaged in criminal investigations.

                   Chapter 2--Pension Simplification


               SUBCHAPTER A--SIMPLIFIED DISTRIBUTION RULES

Sec. 11421. Repeal of 5-year income averaging for lump-sum 
              distributions.
Sec. 11422. Repeal of $5,000 exclusion of employees' death benefits.
Sec. 11423. Simplified method for taxing annuity distributions under 
              certain employer plans.
Sec. 11424. Required distributions.


             SUBCHAPTER B--INCREASED ACCESS TO PENSION PLANS

Sec. 11431. Tax-exempt organizations eligible under section 401(k).


                SUBCHAPTER C--NONDISCRIMINATION PROVISIONS

Sec. 11441. Definition of highly compensated employees; repeal of 
              family aggregation.
Sec. 11442. Modification of additional participation requirements.
Sec. 11443. Nondiscrimination rules for qualified cash or deferred 
              arrangements and matching contributions.
Sec. 11444. Definition of compensation for section 415 purposes.


                  SUBCHAPTER D--MISCELLANEOUS PROVISIONS

Sec. 11451. Plans covering self-employed individuals.
Sec. 11452. Elimination of special vesting rule for multiemployer 
              plans.
Sec. 11453. Distributions under rural cooperative plans.
Sec. 11454. Treatment of governmental plans under section 415.
Sec. 11455. Uniform retirement age.
Sec. 11456. Contributions on behalf of disabled employees.
Sec. 11457. Treatment of deferred compensation plans of State and local 
              governments and tax-exempt organizations.
Sec. 11458. Trust requirement for deferred compensation plans of State 
              and local governments.
Sec. 11459. Transition rule for computing maximum benefits under 
              section 415 limitations.
Sec. 11460. Modifications of section 403(b).
Sec. 11461. Waiver of minimum period for joint and survivor annuity 
              explanation before annuity starting date.
Sec. 11462. Repeal of limitation in case of defined benefit plan and 
              defined contribution plan for same employee; excess 
              distributions.
Sec. 11463. Tax on prohibited transactions.
Sec. 11464. Treatment of leased employees.

               Chapter 3--Treatment Of Large Partnerships

Sec. 11471. Simplified flow-through for electing large partnerships.
Sec. 11472. Returns may be required on magnetic media.

                     Chapter 4--Foreign Provisions


       SUBCHAPTER A--MODIFICATIONS TO TREATMENT OF PASSIVE FOREIGN 
                          INVESTMENT COMPANIES

Sec. 11481. United States shareholders of controlled foreign 
              corporations not subject to PFIC inclusion.
Sec. 11482. Election of mark to market for marketable stock in passive 
              foreign investment company.
Sec. 11483. Modifications to definition of passive income.
Sec. 11484. Effective date.


        SUBCHAPTER B--TREATMENT OF CONTROLLED FOREIGN CORPORATIONS

Sec. 11486. Gain on certain stock sales by controlled foreign 
              corporations treated as dividends.
Sec. 11487. Miscellaneous modifications to subpart F.
Sec. 11488. Indirect foreign tax credit allowed for certain lower tier 
              companies.
Sec. 11489. Repeal of inclusion of certain earnings invested in excess 
              passive assets.

                 Chapter 5--Other Income Tax Provisions


           SUBCHAPTER A--PROVISIONS RELATING TO S CORPORATIONS

Sec. 11501. S corporations permitted to have 75 shareholders.
Sec. 11502. Electing small business trusts.
Sec. 11503. Expansion of post-death qualification for certain trusts.
Sec. 11504. Financial institutions permitted to hold safe harbor debt.
Sec. 11505. Rules relating to inadvertent terminations and invalid 
              elections.
Sec. 11506. Agreement to terminate year.
Sec. 11507. Expansion of post-termination transition period.
Sec. 11508. S corporations permitted to hold subsidiaries.
Sec. 11509. Treatment of distributions during loss years.
Sec. 11510. Treatment of S corporations under subchapter C.
Sec. 11511. Elimination of certain earnings and profits.
Sec. 11512. Carryover of disallowed losses and deductions under at-risk 
              rules allowed.
Sec. 11513. Adjustments to basis of inherited S stock to reflect 
              certain items of income.
Sec. 11514. S corporations eligible for rules applicable to real 
              property subdivided for sale by noncorporate taxpayers.
Sec. 11515. Effective date.


      SUBCHAPTER B--REPEAL OF 30-PERCENT GROSS INCOME LIMITATION ON 
                     REGULATED INVESTMENT COMPANIES

Sec. 11521. Repeal of 30-percent gross income limitation.


                   SUBCHAPTER C--ACCOUNTING PROVISIONS

Sec. 11551. Modifications to look-back method for long-term contracts.
Sec. 11552. Application of mark to market accounting method to traders 
              in securities.
Sec. 11553. Modification of ruling amounts for nuclear decommissioning 
              costs.


                 SUBCHAPTER D--TAX-EXEMPT BOND PROVISION

Sec. 11561. Repeal of debt service-based limitation on investment in 
              certain nonpurpose investments.


                    SUBCHAPTER E--INSURANCE PROVISIONS

Sec. 11571. Treatment of certain insurance contracts on retired lives.
Sec. 11572. Treatment of modified guaranteed contracts.

[[Page H 13497]]



                      SUBCHAPTER F--OTHER PROVISIONS

Sec. 11581. Closing of partnership taxable year with respect to 
              deceased partner, etc.
Sec. 11582. Credit for social security taxes paid with respect to 
              employee cash tips.
Sec. 11583. Due date for first quarter estimated tax payments by 
              private foundations.

                     Chapter 6--Estates and Trusts


                   SUBCHAPTER A--INCOME TAX PROVISIONS

Sec. 11601. Certain revocable trusts treated as part of estate.
Sec. 11602. Distributions during first 65 days of taxable year of 
              estate.
Sec. 11603. Separate share rules available to estates.
Sec. 11604. Executor of estate and beneficiaries treated as related 
              persons for disallowance of losses, etc.
Sec. 11605. Limitation on taxable year of estates.
Sec. 11606. Treatment of funeral trusts.


               SUBCHAPTER B--ESTATE AND GIFT TAX PROVISIONS

Sec. 11611. Clarification of waiver of certain rights of recovery.
Sec. 11612. Adjustments for gifts within 3 years of decedent's death.
Sec. 11613. Clarification of qualified terminable interest rules.
Sec. 11614. Transitional rule under section 2056A.
Sec. 11615. Opportunity to correct certain failures under section 
              2032A.
Sec. 11616. Gifts may not be revalued for estate tax purposes after 
              expiration of statute of limitations.
Sec. 11617. Clarifications relating to disclaimers.
Sec. 11618. Clarification of treatment of survivor annuities under 
              qualified terminable interest rules.
Sec. 11619. Treatment under qualified domestic trust rules of forms of 
              ownership which are not trusts.


             SUBCHAPTER C--GENERATION-SKIPPING TAX PROVISIONS

Sec. 11631. Taxable termination not to include direct skips.

                  Chapter 7--Excise Tax Simplification


    SUBCHAPTER A--PROVISIONS RELATED TO DISTILLED SPIRITS, WINES, AND 
                                  BEER

Sec. 11641. Credit or refund for imported bottled distilled spirits 
              returned to distilled spirits plant.
Sec. 11642. Fermented material from any brewery may be received at a 
              distilled spirits plant.
Sec. 11643. Refund of tax on wine returned to bond not limited to 
              unmerchantable wine.
Sec. 11644. Beer may be withdrawn free of tax for destruction.
Sec. 11645. Transfer to brewery of beer imported in bulk without 
              payment of tax.


        SUBCHAPTER B--CONSOLIDATION OF TAXES ON AVIATION GASOLINE

Sec. 11651. Consolidation of taxes on aviation gasoline.


                SUBCHAPTER C--OTHER EXCISE TAX PROVISIONS

Sec. 11661. Certain combinations not treated as manufacture under 
              retail sales tax on heavy trucks.

                  Chapter 8--Administrative Provision

Sec. 11671. Certain notices disregarded under provision increasing 
              interest rate on large corporate underpayments.

                  Subtitle K--Miscellaneous Provisions

Sec. 11701. Treatment of storage of product samples.
Sec. 11702. Adjustment of death benefit limits for certain policies.
Sec. 11703. Organizations subject to section 833.
Sec. 11704. Correction of inflation adjustment in luxury excise tax on 
              automobiles.
Sec. 11705. Extension and phasedown of luxury passenger automobile tax.

             Subtitle L--Generalized System of Preferences

Sec. 11801. Short title.
Sec. 11802. Generalized System of Preferences.
Sec. 11803. Retroactive application for certain liquidations and 
              reliquidations.
Sec. 11804. Conforming amendments.

               Subtitle M--Increase in Public Debt Limit

Sec. 11901. Increase in public debt limit.
                     Subtitle A--Family Tax Relief

     SEC. 11001. 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) Taxable Year Must Be Full Taxable Year.--Except in 
     the case of a taxable year closed by reason of the death of 
     the taxpayer, no credit shall be allowable under this section 
     in the case of a taxable year covering a period of less than 
     12 months.''.
       (b) Notice of Credit.--The Secretary of the Treasury shall 
     transmit to all individual taxpayers by a separate mailing 
     made on or before February 1, 1996, a notice which states 
     only the following: ``The Balanced Budget Act of 1995 was 
     recently passed by the Congress. The Act's child tax credit 
     allows taxpayers to reduce their taxes by $500 per child. The 
     credit is effective October 1, 1995. You may wish to check 
     with your employer about changing your tax withholding to 
     take immediate advantage of the credit to which you are 
     entitled for the current tax year. In addition, the Internal 
     Revenue Service will be sending you a form in June of this 
     year which you may use to claim the credit to which you are 
     entitled for the period from October 1 through December 31, 
     1995 ($125 per child for 1995). In order to obtain your 1995 
     credit, you should file this form by August 15, 1996. Your 
     refund will be sent to you sometime after October 1, 1996.''
       (c) 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.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.
       (e) Payment of 1995 Child Credit Amount.--
       (1) In general.--The Secretary shall take such actions as 
     are necessary to ensure that the 1995 child credit amount is 
     paid to taxpayers entitled to payment of such credit amount.
       (2) Payments generally during october 1996.--In the case of 
     taxpayers submitting the form referred to in paragraph (4) 
     before August 16, 1996, the Secretary shall take such actions 
     as are necessary to ensure that payments required by 
     paragraph (1) are mailed after September 30, 1996, and before 
     October 16, 1996.
       (3) 1995 child credit amount.--For purposes of paragraph 
     (1), the 1995 child credit amount is an amount equal to 25 
     percent of the amount of the credit which would be allowed to 
     the taxpayer under section 23 of the Internal Revenue Code of 
     1986 (as added by this section) if such section were in 
     effect for the taxpayer's taxable year beginning in 1995.
       (4) Entitlement to credit.--A taxpayer shall be entitled to 
     a 1995 child credit amount if (and only if) the taxpayer 
     submits to the Secretary a form which the Secretary shall 
     prescribe for purposes of determining such amount. The 
     Secretary shall mail such form to taxpayers on or before June 
     1, 1996.
       (5) Payment treated as overpayment.--The 1995 child credit 
     amount shall be treated for purposes of subtitle F of such 
     Code as a payment of tax for the taxpayer's taxable year 
     beginning in 1995 which was made on August 15, 1996, or, if 
     later, the date the form referred to in paragraph (4) is 
     filed, and shall be refunded or credited in the same manner 
     as if it were an overpayment of tax for such taxable year. No 
     interest shall be paid under section 6611 of such Code on 
     amounts paid under paragraph (1) before October 16, 1996.
       (6) Secretary.--For purposes of this subsection, the term 
     ``Secretary'' means the Secretary of the Treasury or his 
     delegate.

     SEC. 11002. 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 for any taxable year shall 
     be the product of the dollar amount in effect under paragraph 
     (2)(C) for such year multiplied by the applicable factor 
     determined under the following table:

``For taxable years beginning in calendar year--         The applicable
                                                            factor is--
  1996........................................................1.68 ....

  1997........................................................1.71 ....

  1998........................................................1.72 ....

  1999........................................................1.73 ....

  2000........................................................1.75 ....

  2001........................................................1.77 ....

  2002........................................................1.78 ....

  2003........................................................1.88 ....

  2004........................................................1.91 ....

  2005 and thereafter.........................................2.00.....

     If the amount determined under the preceding sentence is not 
     a multiple of $50, such amount shall be rounded to the 
     nearest multiple of $50.''

[[Page H 13498]]

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

     SEC. 11003. 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 11001, 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 chapter 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 adjusted 
     gross income (determined without regard to sections 911, 931, 
     and 933) exceeds $75,000, 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. The 
     preceding sentence shall not apply to expenses for the 
     adoption of a child with special needs.
       ``(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 138.
       ``(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. For purposes of the 
     preceding sentence, credits shall be treated as used on a 
     first-in first-out basis.
       ``(d) Definitions.--For purposes of this section--
       ``(1) Qualified adoption expenses.--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 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.
     Such term shall not include expenses for a foreign adoption 
     unless the child is actually adopted.
       ``(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.
       ``(4) Child with special needs.--The term `child with 
     special needs' means any child if--
       ``(A) a State has determined that the child cannot or 
     should not be returned to the home of his parents, and
       ``(B) such State has determined that there exists with 
     respect to the child a specific factor or condition (such as 
     his ethnic background, age, or membership in a minority or 
     sibling group, or the presence of factors such as medical 
     conditions or physical, mental, or emotional handicaps) 
     because of which it is reasonable to conclude that such child 
     cannot be placed with adoptive parents without providing 
     adoption assistance.
       ``(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), 
     as amended by title VIII, is amended by redesignating section 
     138 as section 139 and by inserting after section 137 the 
     following new section:

     ``SEC. 138. 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 adjusted 
     gross income (determined without regard to this section and 
     sections 911, 931, and 933) exceeds $75,000, 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).''.
       (c) Conforming Amendments.--
       (1) The table of sections for subpart A of part IV of 
     subchapter A of chapter 1, as amended by section 11001, 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 
     138 and inserting the following:

``Sec. 138. Adoption assistance programs.
``Sec. 139. 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. 11004. DEDUCTION FOR INTEREST ON EDUCATION LOANS.

       (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. INTEREST ON EDUCATION LOANS.

       ``(a) Allowance of Deduction.--In the case of an 
     individual, there shall be allowed as a deduction for the 
     taxable year an amount equal to the interest paid by the 
     taxpayer during the taxable year on any qualified education 
     loan.
       ``(b) Maximum Deduction.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     deduction allowed by subsection (a) for the taxable year 
     shall not exceed $2,500.
       ``(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 $45,000 ($65,000 in 
     the case of a joint return), the amount which would (but for 
     this paragraph) be allowable as a deduction 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 $20,000.
       ``(B) Modified adjusted gross income.--The term `modified 
     adjusted gross income' means adjusted gross income 
     determined--
       ``(i) without regard to this section and sections 135, 911, 
     931, and 933, and
       ``(ii) after application of sections 86, 219, and 469.
     For purposes of sections 86, 135, 219, and 469, adjusted 
     gross income shall be determined without regard to the 
     deduction allowed under this section.
       ``(C) Inflation adjustment.--In the case of any taxable 
     year beginning after 1996, the $45,000 and $65,000 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) Dependents Not Eligible for Deduction.--No deduction 
     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 Deduction Allowed.--A deduction 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.
       ``(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 or the 
     taxpayer's spouse,
       ``(B) which are paid or incurred within a reasonable period 
     of time before or after the indebtedness is incurred, and

[[Page H 13499]]

       ``(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 or the 
     taxpayer's spouse 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 deduction 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 
     deduction 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) Deduction Allowed Whether or Not Taxpayer Itemizes 
     Other Deductions.--Subsection (a) of section 62 is amended by 
     inserting after paragraph (15) the following new paragraph:
       ``(16) Interest on education loans.--The deduction allowed 
     by section 220.''
       (c) 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 220(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),''.
       (d) 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 items:

``Sec. 220. Interest on education loans.
``Sec. 221. Cross reference.''.

       (e) Effective Date.--The amendments made by this section 
     shall apply to any qualified education loan (as defined in 
     section 220(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.

     SEC. 11005. DEDUCTION FOR TAXPAYERS WITH CERTAIN PERSONS 
                   REQUIRING CUSTODIAL CARE IN THEIR HOUSEHOLDS.

       (a) In General.--Part VII of subchapter B of chapter 1 is 
     amended by redesignating section 221 as section 222 and by 
     inserting after section 220 the following new section:

     ``SEC. 221. TAXPAYERS WITH CERTAIN PERSONS REQUIRING 
                   CUSTODIAL CARE IN THEIR HOUSEHOLDS.

       ``(a) Allowance of Deduction.--In the case of an individual 
     who maintains a household which includes as a member one or 
     more qualified persons, there shall be allowed as a deduction 
     for the taxable year an amount equal to $1,000 for each such 
     person.
       ``(b) Qualified Person.--For purposes of this section, the 
     term `qualified person' means any individual--
       ``(1) who is a father or mother of the taxpayer, his 
     spouse, or his former spouse or who is an ancestor of such a 
     father or mother,
       ``(2) who is physically or mentally incapable of caring for 
     himself,
       ``(3) who has as his principal place of abode for more than 
     half of the taxable year the home of the taxpayer,
       ``(4) over half of whose support, for the calendar year in 
     which the taxable year of the taxpayer begins, was received 
     from the taxpayer, and
       ``(5) whose name and TIN are included on the taxpayer's 
     return for the taxable year.
     For purposes of paragraph (1), a stepfather or stepmother 
     shall be treated as a father or mother.
       ``(c) Special Rules.--For purposes of this section, rules 
     similar to the rules of paragraphs (1), (2), (3), and (4) of 
     section 21(e) shall apply.''
       (b) Deduction Allowed Whether or Not Taxpayer Itemizes 
     Other Deductions.--Subsection (a) of section 62 is amended by 
     inserting after paragraph (16) the following new paragraph:
       ``(17) Taxpayers with certain persons requiring custodial 
     care in their households.--The deduction allowed by section 
     221.''
       (c) 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 items:

``Sec. 221. Taxpayers with certain persons requiring custodial care in 
              their households.
``Sec. 222. Cross reference.''

       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning 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. 11011. 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:

``For taxable years                                      The applicable
  beginning in:                                       dollar amount is:
  1996.........................................................$45,000 
  1997.........................................................$50,000 
  1998.........................................................$55,000 
  1999.........................................................$60,000 
  2000.........................................................$65,000 
  2001.........................................................$70,000 

[[Page H 13500]]

  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):

``For taxable years                                      The applicable
  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 phaseout range for joint returns.--
       (A) In general.--Clause (ii) of section 219(g)(2)(A) is 
     amended by inserting ``(the phaseout amount in the case of a 
     joint return)'' after ``$10,000''.
       (B) Phaseout amount.--Paragraph (3) of section 219(g) is 
     amended--
       (i) by adding at the end the following new subparagraph:
       ``(C) Phaseout amount.--The phaseout amount is:

``For taxable years                                      The applicable
  beginning in:                                       dollar amount is:
  1996......................................................$12,500....

  1997......................................................$15,000....

  1998......................................................$17,500....

  1999 and thereafter.......................................$20,000....

     and
       (ii) by inserting ``; phaseout amount'' after ``amount'' in 
     the heading.
       (3) Cost-of-living adjustments.--Section 219(h), as added 
     by section 11012(a), is amended--
       (A) by adding at the end the following new paragraph:
       ``(2) Phase-out ranges.--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 subsection 
     (g)(3)(B) shall each be increased by an amount equal to the 
     product of such dollar amount and the cost-of-living 
     adjustment determined under section 1(f)(3) for the calendar 
     year, except that subparagraph (B) thereof shall be applied 
     by substituting `2006' for `1992'. If any amount to which 
     either such amount is increased is not a multiple of $1,000, 
     such amount shall be rounded to the next lower multiple of 
     $1,000.'', and
       (B) by striking ``In the case'' and inserting:
       ``(1) Deductible amount.--In the case''.
       (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) Reporting Requirements.--Section 408(i) is amended by 
     striking ``under regulations'' and ``in such regulations'' 
     each place such terms appear.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 11012. 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.--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 determined under section 1(f)(3) for the 
     calendar year in which the taxable year begins, except that 
     subparagraph (B) thereof shall be applied by substituting 
     `1995' for `1992'. If the amount to which $2,000 would be 
     increased under the preceding sentence is not a multiple of 
     $500, such amount shall be rounded to the next lower multiple 
     of $500.''
       (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. 11013. 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 allowed 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 AD IRA 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. 11015. ESTABLISHMENT OF AMERICAN DREAM IRA.

       (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. AMERICAN DREAM IRA.

       ``(a) General Rule.--Except as provided in this section, an 
     American Dream IRA shall be treated for purposes of this 
     title in the same manner as an individual retirement plan.
       ``(b) American Dream IRA.--For purposes of this title, the 
     term `American Dream IRA' or `AD IRA' means an individual 
     retirement plan (as defined in section 7701(a)(37)) which is 
     designated at the time of the establishment of the plan as an 
     American Dream IRA. Such designation shall be made in such 
     manner as the Secretary may prescribe.
       ``(c) Treatment of Contributions.--
       ``(1) No deduction allowed.--No deduction shall be allowed 
     under section 219 for a contribution to an AD IRA.
       ``(2) Contribution limit.--The aggregate amount of 
     contributions for any taxable year to all AD IRAs 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) Contributions permitted after age 70\1/2\.--
     Contributions to an AD IRA may be made even after the 
     individual for whom the account is maintained has attained 
     age 70\1/2\.
       ``(4) Mandatory distribution rules not to apply, etc.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     subsections (a)(6) and (b)(3) of section 408 (relating to 
     required distributions) and section 4974 (relating to excise 
     tax on certain accumulations in qualified retirement plans) 
     shall not apply to any AD IRA.
       ``(B) Post-death distributions.--Rules similar to the rules 
     of section 401(a)(9) (other than subparagraph (A) thereof) 
     shall apply for purposes of this section.
       ``(5) Rules relating to rollover contributions.--
       ``(A) In general.--No rollover contribution may be made to 
     an AD IRA 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).
       ``(6) Time when contributions made.--For purposes of this 
     section, the rule of section 219(f)(3) shall apply.
       ``(d) Distribution Rules.--For purposes of this title--
       ``(1) General rules.--
       ``(A) Exclusions from gross income.--Any qualified 
     distribution from an AD IRA shall not be includible in gross 
     income.
       ``(B) Nonqualified distributions.--In applying section 72 
     to any distribution from an AD IRA which is not a qualified 
     distribution, such distribution shall be treated as made from 
     contributions to the AD IRA to the extent that such 
     distribution, when added to all previous distributions from 
     the AD IRA, does not exceed the aggregate amount of 
     contributions to the AD IRA. For purposes of the preceding 
     sentence, all AD IRAs maintained for the benefit of an 
     individual shall be treated as 1 account.
       ``(C) Exception from penalty tax.--Section 72(t) shall not 
     apply to--
       ``(i) any qualified distribution from an AD IRA, and
       ``(ii) any qualified special purpose distribution (whether 
     or not a qualified distribution) from an AD IRA.
       ``(2) Qualified distribution.--For purposes of this 
     subsection--
       ``(A) In general.--The term `qualified distribution' means 
     any payment or distribution--
       ``(i) made on or after the date on which the individual 
     attains age 59\1/2\,
       ``(ii) made to a beneficiary (or to the estate of the 
     individual) on or after the death of the individual,

[[Page H 13501]]

       ``(iii) attributable to the individual's being disabled 
     (within the meaning of section 72(m)(7)), or
       ``(iv) which is a qualified special purpose distribution.
       ``(B) Distributions within 5 years.--No payment or 
     distribution shall be treated as a qualified distribution 
     if--
       ``(i) it is made within the 5-taxable year period beginning 
     with the 1st taxable year for which the individual made a 
     contribution to an AD IRA (or such individual's spouse made a 
     contribution to an AD IRA) established for such individual, 
     or
       ``(ii) in the case of a payment or distribution properly 
     allocable (as determined in the manner prescribed by the 
     Secretary) to a qualified rollover contribution (or income 
     allocable thereto), it is made within the 5-taxable year 
     period beginning with the taxable year in which the rollover 
     contribution was made.
     Clause (ii) shall not apply to a qualified rollover 
     contribution from an AD IRA.
       ``(3) Rollovers.--
       ``(A) In general.--Paragraph (1) shall not apply to any 
     distribution which is transferred in a qualified rollover 
     contribution to an AD IRA.
       ``(B) Income inclusion for rollovers from non-ad iras.--In 
     the case of any qualified rollover contribution from an 
     individual retirement plan (other than an AD IRA) to an AD 
     IRA established for the benefit of the payee or distributee, 
     as the case may be--
       ``(i) sections 72(t) and 408(d)(3) shall not apply, and
       ``(ii) in any case where such contribution is made before 
     January 1, 1998, any amount required to be included in gross 
     income by reason of this paragraph shall be so included 
     ratably over the 4-taxable year period beginning with the 
     taxable year in which the payment or distribution is made.
       ``(C) Additional reporting requirements.--The Secretary 
     shall require that trustees of AD IRAs, trustees of 
     individual retirement plans, or both, whichever is 
     appropriate, shall include such additional information in 
     reports required under section 408(i) as is necessary to 
     ensure that amounts required to be included in gross income 
     under subparagraph (B) are so included.
       ``(4) Qualified special purpose distribution.--For purposes 
     of this section, the term `qualified special purpose 
     distribution' means any distribution to which subparagraph 
     (B), (D), or (E) of section 72(t)(2) applies.
       ``(e) Qualified Rollover Contribution.--For purposes of 
     this section--
       ``(1) In general.--The term `qualified rollover 
     contribution' means a rollover contribution to an AD IRA 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 AD IRA.
       ``(2) Conversions.--The conversion of an individual 
     retirement plan to an AD IRA shall be treated as if it were a 
     qualified rollover contribution.''
       (b) 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.
       (c) Excess Distributions Tax Not To Apply.--Subparagraph 
     (B) of section 4980A(e)(1) is amended by inserting ``other 
     than an AD IRA (as defined in section 408A(b))'' after 
     ``retirement plan''.
       (d) Excess Contributions.--Section 4973(b) is amended to 
     read as follows:
       ``(b) Excess Contributions.--For purposes of this section--
       ``(1) In general.--In the case of individual retirement 
     accounts or individual retirement annuities, the term `excess 
     contributions' means the sum of--
       ``(A) the amount determined under paragraph (2) for the 
     taxable year, plus
       ``(B) the carryover amount determined under paragraph (3) 
     for the taxable year.
       ``(2) Current year.--The amount determined under this 
     paragraph for any taxable year is an amount equal to the sum 
     of--
       ``(A) the excess (if any) of--
       ``(i) the amount contributed for the taxable year to the 
     accounts or for the annuities or bonds (other than AD IRAs), 
     over
       ``(ii) the amount allowable as a deduction under section 
     219 for the taxable year, plus
       ``(B) the excess (if any) of--
       ``(i) the amount described in clause (i) (taking into 
     account contributions to AD IRAs) contributed for the taxable 
     year, over
       ``(ii) the amount allowable as a deduction under section 
     219 for the taxable year (computed without regard to section 
     219(g)).
       ``(3) Carryover amount.--The carryover amount determined 
     under this paragraph for any taxable year is the amount 
     determined under paragraph (2) for the preceding taxable 
     year, reduced by the sum of--
       ``(A) the distributions out of the account for the taxable 
     year which were included in the gross income of the payee 
     under section 408(d)(1),
       ``(B) the distributions out of the account for the taxable 
     year to which section 408(d)(5) applies, and
       ``(C) the excess (if any) of the amount determined under 
     paragraph (2)(B)(ii) over the amount determined under 
     paragraph (2)(B)(i).
       ``(4) Special rules.--For purposes of this subsection--
       ``(A) Rollover contributions.--Rollover distributions 
     described in sections 402(c), 403(a)(4), 403(b)(8), 
     408(d)(3), and 408A(e) shall not be taken into account.
       ``(B) Contributions returned before due date.--Any 
     contribution which is distributed from an individual 
     retirement plan in a distribution to which section 408(d)(4) 
     applies shall not be taken into account.
       ``(C) Excess contributions treated as contributions.--In 
     applying paragraph (3)(C), the determination as to amounts 
     contributed for a taxable year shall be made without regard 
     to section 219(f)(6).''
       (e) Clerical 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. American Dream IRA.''

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

                Subchapter B--Penalty-Free Distributions

     SEC. 11016. 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-time homebuyers 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) 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 

[[Page H 13502]]
     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 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. 11018. 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 (as defined in section 7701(a)(37))--
       ``(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 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 prior 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) 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, 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 any 2 preceding years, and
       ``(ii) 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), the term `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:

[[Page H 13503]]

       ``(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--
       ``(i) it is paid into another simple retirement account, or
       ``(ii) in the case of any payment or distribution to which 
     section 72(t)(8) does not apply, it is paid into an 
     individual retirement plan.''
       (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 this 
     Act, is amended by adding at the end the following new 
     paragraph:
       ``(8) 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'.''
       (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 
     (including rollovers) 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''.
       (5) Reporting requirements.--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) Repeal of Simplified Employee Pensions.--Section 408(k) 
     is amended by adding at the end the following new paragraph:
       ``(10) Termination.--This subsection shall not apply to any 
     years beginning after December 31, 1995. This paragraph shall 
     not apply to a simplified employee pension established before 
     January 1, 1996.''
       (d) Modifications of ERISA.--
       (1) Reporting requirements.--Section 101 of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1021) is 
     amended by redesignating subsection (g) as subsection (h) and 
     by inserting after subsection (f) the following new 
     subsection:
       ``(g) Simple Retirement Accounts.--
       ``(1) No employer reports.--Except as provided in this 
     subsection, no report shall be required under this section by 
     an employer maintaining a qualified salary reduction 
     arrangement under section 408(p) of the Internal Revenue Code 
     of 1986.
       ``(2) Summary description.--The trustee of any simple 
     retirement account established pursuant to a qualified salary 
     reduction arrangement under section 408(p) of such Code shall 
     provide to the employer maintaining the arrangement each year 
     a description containing the following information:
       ``(A) The name and address of the employer and the trustee.
       ``(B) The requirements for eligibility for participation.
       ``(C) The benefits provided with respect to the 
     arrangement.
       ``(D) The time and method of making elections with respect 
     to the arrangement.
       ``(E) The procedures for, and effects of, withdrawals 
     (including rollovers) from the arrangement.
       ``(3) Employee notification.--The employer shall notify 
     each employee immediately before the period for which an 
     election described in section 408 (p)(5)(C) of such Code may 
     be made of the employee's opportunity to make such election. 
     Such notice shall include a copy of the description described 
     in paragraph (2).''
       (2) Fiduciary duties.--Section 404 (c) of such Act (29 
     U.S.C. 1104(c)) is amended by inserting ``(1)'' after 
     ``(c)'', by redesignating paragraphs (1) and (2) as 
     subparagraphs (A) and (B), respectively, and by adding at the 
     end the following new paragraph:
       ``(2) In the case of a simple retirement account 
     established pursuant to a qualified salary reduction 
     arrangement under section 408(p) of the Internal Revenue Code 
     of 1986, a participant or beneficiary shall, for purposes of 
     paragraph (1), be treated as exercising control over the 
     assets in the account upon the earliest of--
       ``(A) an affirmative election with respect to the initial 
     investment of any contribution,
       ``(B) a rollover to any other simple retirement account or 
     individual retirement plan, or
       ``(C) one year after the simple retirement account is 
     established.
     No reports, other than those required under section 101(g), 
     shall be required with respect to a simple retirement account 
     established pursuant to such a qualified salary reduction 
     arrangement.''
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 11019. 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 

[[Page H 13504]]
     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. 11021. 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.--
       ``(1) In general.--The rate of tax imposed by section 1 on 
     the excess of--
       ``(A) the net capital gain for the taxable year determined 
     as if section 1222(12) had not applied to any collectible 
     which is sold or exchanged during the taxable year and the 
     basis of which was not adjusted under section 1022(a), over
       ``(B) the net capital gain for the taxable year,
     shall not exceed 28 percent.
       ``(2) Election.--A taxpayer may elect to treat any 
     collectible specified in such election as not being an 
     indexed asset for purposes of section 1022. Any such 
     election, and any specification therein, once made, shall be 
     irrevocable.
       ``(e) Transitional Rule.--
       ``(1) In general.--In the case of a taxable year which 
     includes January 1, 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 January 1, 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 subparagraph (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, as amended by sections 
     11004 and 11005, is amended by inserting after paragraph (17) 
     the following new paragraph:
       ``(18) Long-term capital gains.--The deduction allowed by 
     section 1202.''.
       (c) 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)''.
       (d) 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 (80 percent 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 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 (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, proper adjustment shall be made for any 
     deduction allowable to the estate or trust under section 1202 
     (relating to capital gains deduction). 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 capital gains deduction) 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) shall not be taken 
     into account''.
       (8)(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)''.
       (9) The last sentence of section 1044(d) is amended by 
     striking ``1202'' and inserting ``1203''.
       (10)(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.''.

[[Page H 13505]]


       (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.''.
       (11) Paragraph (1) of section 1402(i) is amended by 
     inserting ``, and the deduction provided by section 1202 
     shall not apply'' before the period at the end thereof.
       (12) 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''.
       (13)(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''.
       (e) 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. Small business stock eligible for preferential rates.''.

       (f) 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 December 31, 1994.
       (2) Collectibles.--The amendments made by subsection (c) 
     shall apply to sales and exchanges after December 31, 1994.
       (3) Repeal of section 1(h).--The amendment made by 
     subsection (d)(1) shall apply to taxable years beginning 
     after January 1, 1995.
       (4) Contributions.--The amendment made by subsection (d)(2) 
     shall apply to contributions after December 31, 1994.
       (5) Use of long-term losses.--The amendments made by 
     subsection (d)(10) shall apply to taxable years beginning 
     after December 31, 1995.
       (6) Withholding.--The amendment made by subsection (d)(12) 
     shall apply only to amounts paid after the date of the 
     enactment of this Act.

     SEC. 11022. INDEXING OF CERTAIN ASSETS ACQUIRED AFTER 
                   DECEMBER 31, 2000, FOR PURPOSES OF DETERMINING 
                   GAIN.

       (a) In General.--Part II of subchapter O of chapter 1 
     (relating to basis rules of general application) is amended 
     by inserting after section 1021 the following new section:

     ``SEC. 1022. INDEXING OF CERTAIN ASSETS ACQUIRED AFTER 
                   DECEMBER 31, 2000, FOR PURPOSES OF DETERMINING 
                   GAIN.

       ``(a) General Rule.--
       ``(1) Indexed basis substituted for adjusted basis.--Solely 
     for purposes of determining gain on the sale or other 
     disposition by a taxpayer (other than a corporation) of an 
     indexed asset which has been held for more than 3 years, the 
     indexed basis of the asset shall be substituted for its 
     adjusted basis.
       ``(2) Exception for depreciation, etc.--The deductions for 
     depreciation, depletion, and amortization shall be determined 
     without regard to the application of paragraph (1) to the 
     taxpayer or any other person.
       ``(b) Indexed Asset.--
       ``(1) In general.--For purposes of this section, the term 
     `indexed asset' means--
       ``(A) common stock in a C corporation (other than a foreign 
     corporation), and
       ``(B) tangible property,
     which is a capital asset or property used in the trade or 
     business (as defined in section 1231(b)).
       ``(2) Stock in certain foreign corporations included.--For 
     purposes of this section--
       ``(A) In general.--The term `indexed asset' includes common 
     stock in a foreign corporation which is regularly traded on 
     an established securities market.
       ``(B) Exception.--Subparagraph (A) shall not apply to--
       ``(i) stock of a foreign investment company (within the 
     meaning of section 1246(b)),
       ``(ii) stock in a passive foreign investment company (as 
     defined in section 1296),
       ``(iii) stock in a foreign corporation held by a United 
     States person who meets the requirements of section 
     1248(a)(2), and
       ``(iv) stock in a foreign personal holding company (as 
     defined in section 552).
       ``(C) Treatment of american depository receipts.--An 
     American depository receipt for common stock in a foreign 
     corporation shall be treated as common stock in such 
     corporation.
       ``(c) Indexed Basis.--For purposes of this section--
       ``(1) General rule.--The indexed basis for any asset is--
       ``(A) the adjusted basis of the asset, increased by
       ``(B) the applicable inflation adjustment.
       ``(2) Applicable inflation adjustment.--The applicable 
     inflation adjustment for any asset is an amount equal to--
       ``(A) the adjusted basis of the asset, multiplied by
       ``(B) the percentage (if any) by which--
       ``(i) the gross domestic product deflator for the last 
     calendar quarter ending before the asset is disposed of, 
     exceeds
       ``(ii) the gross domestic product deflator for the last 
     calendar quarter ending before the asset was acquired by the 
     taxpayer.
     The percentage under subparagraph (B) shall be rounded to the 
     nearest \1/10\ of 1 percentage point.
       ``(3) Gross domestic product deflator.--The gross domestic 
     product deflator for any calendar quarter is the implicit 
     price deflator for the gross domestic product for such 
     quarter (as shown in the last revision thereof released by 
     the Secretary of Commerce before the close of the following 
     calendar quarter).
       ``(d) Suspension of Holding Period Where Diminished Risk of 
     Loss; Treatment of Short Sales.--
       ``(1) In general.--If the taxpayer (or a related person) 
     enters into any transaction which substantially reduces the 
     risk of loss from holding any asset, such asset shall not be 
     treated as an indexed asset for the period of such reduced 
     risk.
       ``(2) Short sales.--
       ``(A) In general.--In the case of a short sale of an 
     indexed asset with a short sale period in excess of 3 years, 
     for purposes of this title, the amount realized shall be an 
     amount equal to the amount realized (determined without 
     regard to this paragraph) increased by the applicable 
     inflation adjustment. In applying subsection (c)(2) for 
     purposes of the preceding sentence, the date on which the 
     property is sold short shall be treated as the date of 
     acquisition and the closing date for the sale shall be 
     treated as the date of disposition.
       ``(B) Short sale period.--For purposes of subparagraph (A), 
     the short sale period begins on the day that the property is 
     sold and ends on the closing date for the sale.
       ``(e) Treatment of Regulated Investment Companies and Real 
     Estate Investment Trusts.--
       ``(1) Adjustments at entity level.--
       ``(A) In general.--Except as otherwise provided in this 
     paragraph, the adjustment under subsection (a) shall be 
     allowed to any qualified investment entity (including for 
     purposes of determining the earnings and profits of such 
     entity).
       ``(B) Exception for corporate shareholders.--Under 
     regulations--
       ``(i) in the case of a distribution by a qualified 
     investment entity (directly or indirectly) to a corporation--

       ``(I) the determination of whether such distribution is a 
     dividend shall be made without regard to this section, and
       ``(II) the amount treated as gain by reason of the receipt 
     of any capital gain dividend shall be increased by the 
     percentage by which the entity's net capital gain for the 
     taxable year (determined without regard to this section) 
     exceeds the entity's net capital gain for such year 
     determined with regard to this section, and

       ``(ii) there shall be other appropriate adjustments 
     (including deemed distributions) so as to ensure that the 
     benefits of this section are not allowed (directly or 
     indirectly) to corporate shareholders of qualified investment 
     entities.

     For purposes of the preceding sentence, any amount includible 
     in gross income under section 852(b)(3)(D) shall be treated 
     as a capital gain dividend and an S corporation shall not be 
     treated as a corporation.
       ``(C) Exception for qualification purposes.--This section 
     shall not apply for purposes of sections 851(b) and 856(c).
       ``(D) Exception for certain taxes imposed at entity 
     level.--
       ``(i) Tax on failure to distribute entire gain.--If any 
     amount is subject to tax under section 852(b)(3)(A) for any 
     taxable year, the amount on which tax is imposed under such 
     section shall be increased by the percentage determined under 
     subparagraph (B)(i)(II). A similar rule shall apply in the 
     case of any amount subject to tax under paragraph (2) or (3) 
     of section 857(b) to the extent attributable to the excess of 
     the net capital gain over the deduction for dividends paid 
     determined with reference to capital gain dividends only. The 
     first sentence of this clause shall not apply to so much of 
     the amount subject to tax under section 852(b)(3)(A) as is 
     designated by the company under section 852(b)(3)(D).
       ``(ii) Other taxes.--This section shall not apply for 
     purposes of determining the amount of any tax imposed by 
     paragraph (4), (5), or (6) of section 857(b).
       ``(2) Adjustments to interests held in entity.--
       ``(A) Regulated investment companies.--Stock in a regulated 
     investment company (within the meaning of section 851) shall 
     be an indexed asset for any calendar quarter in the same 
     ratio as--
       ``(i) the average of the fair market values of the indexed 
     assets held by such company at the close of each month during 
     such quarter, bears to
       ``(ii) the average of the fair market values of all assets 
     held by such company at the close of each such month.
       ``(B) Real estate investment trusts.--Stock in a real 
     estate investment trust (within the meaning of section 856) 
     shall be an indexed asset for any calendar quarter in the 
     same ratio as--
       ``(i) the fair market value of the indexed assets held by 
     such trust at the close of such quarter, bears to
       ``(ii) the fair market value of all assets held by such 
     trust at the close of such quarter.

[[Page H 13506]]

       ``(C) Ratio of 80 percent or more.--If the ratio for any 
     calendar quarter determined under subparagraph (A) or (B) 
     would (but for this subparagraph) be 80 percent or more, such 
     ratio for such quarter shall be 100 percent.
       ``(D) Ratio of 20 percent or less.--If the ratio for any 
     calendar quarter determined under subparagraph (A) or (B) 
     would (but for this subparagraph) be 20 percent or less, such 
     ratio for such quarter shall be zero.
       ``(E) Look-thru of partnerships.--For purposes of this 
     paragraph, a qualified investment entity which holds a 
     partnership interest shall be treated (in lieu of holding a 
     partnership interest) as holding its proportionate share of 
     the assets held by the partnership.
       ``(3) Treatment of return of capital distributions.--Except 
     as otherwise provided by the Secretary, a distribution with 
     respect to stock in a qualified investment entity which is 
     not a dividend and which results in a reduction in the 
     adjusted basis of such stock shall be treated as allocable to 
     stock acquired by the taxpayer in the order in which such 
     stock was acquired.
       ``(4) Qualified investment entity.--For purposes of this 
     subsection, the term `qualified investment entity' means--
       ``(A) a regulated investment company (within the meaning of 
     section 851), and
       ``(B) a real estate investment trust (within the meaning of 
     section 856).
       ``(f) Other Pass-Thru Entities.--
       ``(1) Partnerships.--
       ``(A) In general.--In the case of a partnership, the 
     adjustment made under subsection (a) at the partnership level 
     shall be passed through to the partners.
       ``(B) Special rule in the case of section 754 elections.--
     In the case of a transfer of an interest in a partnership 
     with respect to which the election provided in section 754 is 
     in effect--
       ``(i) the adjustment under section 743(b)(1) shall, with 
     respect to the transferor partner, be treated as a sale of 
     the partnership assets for purposes of applying this section, 
     and
       ``(ii) with respect to the transferee partner, the 
     partnership's holding period for purposes of this section in 
     such assets shall be treated as beginning on the date of such 
     adjustment.
       ``(2) S corporations.--In the case of an S corporation, the 
     adjustment made under subsection (a) at the corporate level 
     shall be passed through to the shareholders. This section 
     shall not apply for purposes of determining the amount of any 
     tax imposed by section 1374 or 1375.
       ``(3) Common trust funds.--In the case of a common trust 
     fund, the adjustment made under subsection (a) at the trust 
     level shall be passed through to the participants.
       ``(4) Indexing adjustment disregarded in determining loss 
     on sale of interest in entity.--Notwithstanding the preceding 
     provisions of this subsection, for purposes of determining 
     the amount of any loss on a sale or exchange of an interest 
     in a partnership, S corporation, or common trust fund, the 
     adjustment made under subsection (a) shall not be taken into 
     account in determining the adjusted basis of such interest.
       ``(g) Dispositions Between Related Persons.--
       ``(1) In general.--This section shall not apply to any sale 
     or other disposition of property between related persons 
     except to the extent that the basis of such property in the 
     hands of the transferee is a substituted basis.
       ``(2) Related persons defined.--For purposes of this 
     section, the term `related persons' means--
       ``(A) persons bearing a relationship set forth in section 
     267(b), and
       ``(B) persons treated as single employer under subsection 
     (b) or (c) of section 414.
       ``(h) Transfers To Increase Indexing Adjustment.--If any 
     person transfers cash, debt, or any other property to another 
     person and the principal purpose of such transfer is to 
     secure or increase an adjustment under subsection (a), the 
     Secretary may disallow part or all of such adjustment or 
     increase.
       ``(i) Special Rules.--For purposes of this section--
       ``(1) Treatment of improvements, etc.--If there is an 
     addition to the adjusted basis of any tangible property or of 
     any stock in a corporation during the taxable year by reason 
     of an improvement to such property or a contribution to 
     capital of such corporation--
       ``(A) such addition shall never be taken into account under 
     subsection (c)(1)(A) if the aggregate amount thereof during 
     the taxable year with respect to such property or stock is 
     less than $1,000, and
       ``(B) such addition shall be treated as a separate asset 
     acquired at the close of such taxable year if the aggregate 
     amount thereof during the taxable year with respect to such 
     property or stock is $1,000 or more.
     A rule similar to the rule of the preceding sentence shall 
     apply to any other portion of an asset to the extent that 
     separate treatment of such portion is appropriate to carry 
     out the purposes of this section.
       ``(2) Assets which are not indexed assets throughout 
     holding period.--The applicable inflation adjustment shall be 
     appropriately reduced for periods during which the asset was 
     not an indexed asset.
       ``(3) Treatment of certain distributions.--A distribution 
     with respect to stock in a corporation which is not a 
     dividend shall be treated as a disposition.
       ``(4) Acquisition date where there has been prior 
     application of subsection (a)(1) with respect to the 
     taxpayer.--If there has been a prior application of 
     subsection (a)(1) to an asset while such asset was held by 
     the taxpayer, the date of acquisition of such asset by the 
     taxpayer shall be treated as not earlier than the date of the 
     most recent such prior application.
       ``(5) Collapsible corporations.--The application of section 
     341(a) (relating to collapsible corporations) shall be 
     determined without regard to this section.
       ``(j) 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 part II 
     of subchapter O of chapter 1 is amended by inserting after 
     the item relating to section 1021 the following new item:

``Sec. 1022. Indexing of certain assets acquired after December 31, 
              2000, for purposes of determining gain.''

       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to the disposition of any property the holding period 
     of which begins after December 31, 2000.
       (2) Certain transactions between related persons.--The 
     amendments made by this section shall not apply to the 
     disposition of any property acquired after December 31, 2000, 
     from a related person (as defined in section 1022(g)(2) of 
     the Internal Revenue Code of 1986, as added by this section) 
     if--
       (A) such property was so acquired for a price less than the 
     property's fair market value, and
       (B) the amendments made by this section did not apply to 
     such property in the hands of such related person.
       (d) Election To Recognize Gain on Assets Held on January 1, 
     2001.--For purposes of the Internal Revenue Code of 1986--
       (1) In general.--A taxpayer other than a corporation may 
     elect to treat--
       (A) any readily tradable stock (which is an indexed asset) 
     held by such taxpayer on January 1, 2001, and not sold before 
     the next business day after such date, as having been sold on 
     such next business day for an amount equal to its closing 
     market price on such next business day (and as having been 
     reacquired on such next business day for an amount equal to 
     such closing market price), and
       (B) any other indexed asset held by the taxpayer on January 
     1, 2001, as having been sold on such date for an amount equal 
     to its fair market value on such date (and as having been 
     reacquired on such date for an amount equal to such fair 
     market value).
       (2) Treatment of gain or loss.--
       (A) Any gain resulting from an election under paragraph (1) 
     shall be treated as received or accrued on the date the asset 
     is treated as sold under paragraph (1) and shall be 
     recognized notwithstanding any provision of the Internal 
     Revenue Code of 1986.
       (B) Any loss resulting from an election under paragraph (1) 
     shall not be allowed for any taxable year.
       (3) Election.--An election under paragraph (1) shall be 
     made in such manner as the Secretary of the Treasury or his 
     delegate may prescribe and shall specify the assets for which 
     such election is made. Such an election, once made with 
     respect to any asset, shall be irrevocable.
       (4) Readily tradable stock.--For purposes of this 
     subsection, the term ``readily tradable stock'' means any 
     stock which, as of January 1, 2001, is readily tradable on an 
     established securities market or otherwise.
       (e) Treatment of Principal Residences.--Property held and 
     used by the taxpayer on January 1, 2001, as his principal 
     residence (within the meaning of section 1034 of the Internal 
     Revenue Code of 1986) shall be treated--
       (1) for purposes of subsection (c)(1) of this section and 
     section 1022 of such Code, as having a holding period which 
     begins on January 1, 2001, and
       (2) for purposes of section 1022(c)(2)(B)(ii) of such Code, 
     as having been acquired on January 1, 2001.

     Subsection (d) shall not apply to property to which this 
     subsection applies.

     SEC. 11023. MODIFICATIONS TO EXCLUSION OF GAIN ON CERTAIN 
                   SMALL BUSINESS STOCK.

       (a) Reduced Rate In Lieu of Exclusion.--
       (1) Section 1, as amended by section 11021, is amended by 
     adding at the end the following new subsection:
       ``(h) Maximum Capital Gains Rate for Certain Small Business 
     Stock.--
       ``(1) In general.--If for any taxable year a taxpayer has 
     gain from the sale or exchange of any qualified small 
     business stock held for more than 5 years, then the tax 
     imposed by this section shall not exceed the sum of--
       ``(A) a tax computed on the taxable income reduced by \1/2\ 
     the amount of the small business gain, at the rates and in 
     the manner as if this subsection had not been enacted, plus
       ``(B) a tax of 14 percent of the small business gain.
       ``(2) Small business gain.--For purposes of paragraph (1), 
     the term `small business gain' means the lesser of--
       ``(A) gain from the sale or exchange of any qualified small 
     business stock held for more than 5 years, or
       ``(B) the net capital gain taken into account under section 
     1202(a).
       ``(3) Qualified small business stock.--The term `qualified 
     small business stock' has the meaning given such term by 
     section 1203(c).''
       (2) Subsection (a) of section 1203, as redesignated by 
     section 11021, is amended to read as follows:
       ``(a) Application of Reduced Rates to Qualified Small 
     Business Stock Gains.--

  ``For treatment of gain on qualified small business stock held for 
more than 5 years, see sections 1(h) and 1201(b).''.


[[Page H 13507]]

       (b) Repeal of Minimum Tax Preference.--
       (1) Subsection (a) of section 57 is amended by striking 
     paragraph (7).
       (2) Subclause (II) of section 53(d)(1)(B)(ii) is amended by 
     striking ``, (5), and (7)'' and inserting ``and (5)''.
       (c) Stock of Larger Businesses Eligible for Reduced 
     Rates.--Paragraph (1) of section 1203(d), as redesignated by 
     section 11021, is amended by striking ``$50,000,000'' each 
     place it appears and inserting ``$100,000,000''.
       (d) Repeal of Per-Issuer Limitation.--Section 1203, as so 
     redesignated, is amended by striking subsection (b).
       (e) 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.''.
       (f) Clerical Amendment.--The section heading for section 
     1203, as redesignated by section 11021, is amended to read as 
     follows:

     ``SEC. 1203. SMALL BUSINESS STOCK ELIGIBLE FOR PREFERENTIAL 
                   RATES.''

       (g) Effective Dates.--
       (1) Reduced rates.--The amendments made by subsections (a) 
     and (b) shall apply to taxable years beginning after the date 
     of the enactment of this Act.
       (2) Increase in size.--The amendment made by subsection (c) 
     shall apply to stock issued after the date of the enactment 
     of this Act.
       (3) Other rules.--The amendments made by subsections (d) 
     and (e) shall apply to stock issued after August 10, 1993.

                 Subchapter B--Corporate Capital Gains

     SEC. 11025. 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 the parent-
     subsidiary controlled group (as defined in section 
     1203(d)(3)) which includes the qualified small business.
       ``(c) Transitional Rule.--
       ``(1) In general.--In applying this section, net capital 
     gain for any taxable year shall not exceed the net capital 
     gain determined by taking into account only gains and losses 
     properly taken into account for the portion of the taxable 
     year after December 31, 1994.
       ``(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 December 31, 1994.
       (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.

 Subchapter C--Capital Loss Deduction Allowed With Respect to Sale or 
                    Exchange of Principal Residence

     SEC. 11026. CAPITAL LOSS DEDUCTION ALLOWED WITH RESPECT TO 
                   SALE OR EXCHANGE OF PRINCIPAL RESIDENCE.

       (a) In General.--Subsection (c) of section 165 (relating to 
     limitation on losses of individuals) is amended by striking 
     ``and'' at the end of paragraph (2), by striking the period 
     at the end of paragraph (3) and inserting ``; and'', and by 
     adding at the end the following new paragraph:
       ``(4) losses arising from the sale or exchange of the 
     principal residence (within the meaning of section 1034) of 
     the taxpayer.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to sales and exchanges after December 31, 1994, 
     in taxable years ending after such date.

          CHAPTER 3--CORPORATE ALTERNATIVE MINIMUM TAX REFORM

     SEC. 11031. MODIFICATION OF DEPRECIATION RULES UNDER MINIMUM 
                   TAX.

       (a) In General.--Clause (i) of section 56(a)(1)(A) is 
     amended by inserting ``and before January 1, 1996,'' after 
     ``December 31, 1986,''.
       (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. 11032. 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 7th 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.

                  CHAPTER 4--COST RECOVERY PROVISIONS

     SEC. 11035. TREATMENT OF ABANDONMENT OF LESSOR IMPROVEMENTS 
                   AT TERMINATION OF LEASE.

       (a) In General.--Paragraph (8) of section 168(i) is amended 
     to read as follows:
       ``(8) Treatment of leasehold improvements.--
       ``(A) In general.--In the case of any building erected (or 
     improvements made) on leased property, if such building or 
     improvement is property to which this section applies, the 
     depreciation deduction shall be determined under the 
     provisions of this section.
       ``(B) Treatment of lessor improvements which are abandoned 
     at termination of lease.--An improvement--
       ``(i) which is made by the lessor of leased property for 
     the lessee of such property, and
       ``(ii) which is irrevocably disposed of or abandoned by the 
     lessor at the termination of the lease by such lessee,
     shall be treated for purposes of determining gain or loss 
     under this title as disposed of by the lessor when so 
     disposed of or abandoned.''
       (b) Effective Date.--Subparagraph (B) of section 168(i)(8) 
     of the Internal Revenue Code of 1986, as added by the 
     amendment made by subsection (a), shall apply to improvements 
     disposed of or abandoned after March 13, 1995.

     SEC. 11036. INCREASE IN EXPENSE TREATMENT FOR SMALL 
                   BUSINESSES.

       (a) General Rule.--Paragraph (1) of section 179(b) 
     (relating to dollar limitation) is amended to read as 
     follows:
       ``(1) Dollar limitation.--The aggregate cost which may be 
     taken into account under subsection (a) for any taxable year 
     shall not exceed the following applicable amount:

                                                  ``If thThe applicable
                                                             amount is:
      1996.....................................................$19,000 
      1997..................................................... 20,000 
      1998..................................................... 21,000 
      1999..................................................... 22,000 
      2000..................................................... 23,000 
      2001..................................................... 24,000 
      2002 or thereafter..................................... 25,000.''


[[Page H 13508]]

       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     1995.
                 Subtitle C--Health Related Provisions

                  CHAPTER 1--LONG-TERM CARE PROVISIONS

          Subchapter A--Long-Term Care Services and Contracts

                       PART I--GENERAL PROVISIONS

     SEC. 11041. TREATMENT OF LONG-TERM CARE INSURANCE.

       (a) General Rule.--Chapter 79 (relating to definitions) is 
     amended by inserting after section 7702A the following new 
     section:

     ``SEC. 7702B. TREATMENT OF QUALIFIED LONG-TERM CARE 
                   INSURANCE.

       ``(a) In General.--For purposes of this title--
       ``(1) a qualified long-term care insurance contract shall 
     be treated as an accident and health insurance contract,
       ``(2) amounts (other than policyholder dividends, as 
     defined in section 808, or premium refunds) received under a 
     qualified long-term care insurance contract shall be treated 
     as amounts received for personal injuries and sickness and 
     shall be treated as reimbursement for expenses actually 
     incurred for medical care (as defined in section 213(d)),
       ``(3) any plan of an employer providing coverage under a 
     qualified long-term care insurance contract shall be treated 
     as an accident and health plan with respect to such coverage,
       ``(4) except as provided in subsection (d)(3), amounts paid 
     for a qualified long-term care insurance contract providing 
     the benefits described in subsection (b)(2)(A) shall be 
     treated as payments made for insurance for purposes of 
     section 213(d)(1)(D), 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.--For 
     purposes of this title--
       ``(1) In general.--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,
       ``(B) such contract does not pay or reimburse expenses 
     incurred for services or items 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,
       ``(C) such contract is guaranteed renewable,
       ``(D) such contract does not provide for a cash surrender 
     value or other money that can be--
       ``(i) paid, assigned, or pledged as collateral for a loan, 
     or
       ``(ii) borrowed,

     other than as provided in subparagraph (E) or paragraph 
     (2)(C),
       ``(E) 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, and
       ``(F) such contract meets the requirements of subsection 
     (f).
       ``(2) Special rules.--
       ``(A) Per diem, etc. payments permitted.--A contract shall 
     not fail to be described in subparagraph (A) or (B) of 
     paragraph (1) by reason of payments being made on a per diem 
     or other periodic basis without regard to the expenses 
     incurred during the period to which the payments relate.
       ``(B) Special rules relating to medicare.--
       ``(i) Paragraph (1)(B) shall not apply to expenses which 
     are reimbursable under title XVIII of the Social Security Act 
     only as a secondary payor.
       ``(ii) 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 the contract coordinates 
     its benefits with those provided under such title.
       ``(C) Refunds of premiums.--Paragraph (1)(E) shall not 
     apply to any refund on the death of the insured, or on a 
     complete surrender or cancellation of the contract, which 
     cannot exceed the aggregate premiums paid under the contract. 
     Any refund on a complete surrender or cancellation of the 
     contract shall be includible in gross income to the extent 
     that any deduction or exclusion was allowable with respect to 
     the premiums.
       ``(c) 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, and rehabilitative 
     services, and maintenance or personal care services, which--
       ``(A) are required by a chronically ill individual, and
       ``(B) are provided pursuant to a plan of care prescribed by 
     a licensed health care practitioner.
       ``(2) Chronically ill individual.--
       ``(A) In general.--The term `chronically ill individual' 
     means any individual who has been certified by a licensed 
     health care practitioner as--
       ``(i) being unable to perform (without substantial 
     assistance from another individual) at least 2 activities of 
     daily living for a period of at least 90 days due to a loss 
     of functional capacity or to cognitive impairment, or
       ``(ii) having a level of disability similar (as determined 
     by the Secretary in consultation with the Secretary of Health 
     and Human Services) to the level of disability described in 
     clause (i).
     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.
       ``(B) Activities of daily living.--For purposes of 
     subparagraph (A), each of the following is an activity of 
     daily living:
       ``(i) Eating.
       ``(ii) Toileting.
       ``(iii) Transferring.
       ``(iv) Bathing.
       ``(v) Dressing.
       ``(vi) Continence.
     Nothing in this section shall be construed to require a 
     contract to take into account all of the preceding activities 
     of daily living.
       ``(3) Maintenance or personal care services.--The term 
     `maintenance or personal care services' means any care the 
     primary purpose of which is the provision of needed 
     assistance with any of the disabilities as a result of which 
     the individual is a chronically ill individual (including the 
     protection from threats to health and safety due to severe 
     cognitive impairment).
       ``(4) Licensed health care practitioner.--The term 
     `licensed health care practitioner' means any physician (as 
     defined in section 1861(r)(1) of the Social Security Act) and 
     any registered professional nurse, licensed social worker, or 
     other individual who meets such requirements as may be 
     prescribed by the Secretary.
       ``(d) Special Rules for Treatment of Insureds.--
       ``(1) Aggregate payments in excess of limits.--
       ``(A) In general.--If the aggregate amount of periodic 
     payments under all qualified long-term care insurance 
     contracts with respect to an insured for any period exceed 
     the dollar amount in effect for such period under 
     subparagraph (C), such excess payments shall be treated as 
     made for qualified long-term care services only to the extent 
     of the costs incurred by the payee (not otherwise compensated 
     for by insurance or otherwise) for qualified long-term care 
     services provided during such period for such insured.
       ``(B) Periodic payments.--For purposes of subparagraph (A), 
     the term `periodic payment' means any payment (whether on a 
     periodic basis or otherwise) made without regard to the 
     extent of the costs incurred by the payee for qualified long-
     term care services.
       ``(C) Dollar amount.--The dollar amount in effect under 
     this paragraph shall be $175 per day (or the equivalent 
     amount in the case of payments on another periodic basis).
       ``(D) Inflation adjustment.--In the case of a calendar year 
     after 1996, the dollar amount contained in subparagraph (C) 
     shall be increased at the same time and in the same manner as 
     amounts are increased pursuant to section 213(d)(11).
       ``(e) 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 (whether or not qualified) 
     provided by a rider on 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 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 any charges (but not premium payments) 
     against the life insurance 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 defined.--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 
     under a qualified long-term care insurance contract.''
       (b) Reserve Method.--Clause (iii) of section 807(d)(3)(A) 
     is amended by inserting ``(other than a qualified long-term 
     care insurance contract, as defined in section 7702B(b))'' 
     after ``insurance contract''.
       (c) 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 long-term care insurance contract (as defined in 
     section 4980C).''
       (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(c)) 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--

[[Page H 13509]]

       ``(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.''
       (d) Continuation Coverage Excise Tax Not To Apply.--
     Subsection (f) of section 4980B is amended by adding at the 
     end the following new paragraph:
       ``(9) Continuation of long-term care coverage not 
     required.--A group health plan shall not be treated as 
     failing to meet the requirements of this subsection solely by 
     reason of failing to provide coverage under any qualified 
     long-term care insurance contract (as defined in section 
     7702B(b)).''
       (e) Amounts Paid to Relatives Treated as Not Paid for 
     Medical Care.--Section 213(d) is amended by adding at the end 
     the following new paragraph:
       ``(10) Certain payments to relatives treated as not paid 
     for medical care.--An amount paid for a qualified long-term 
     care service (as defined in section 7702B(c)) provided to an 
     individual shall be treated as not paid for medical care if 
     such service is provided--
       ``(A) by a relative (directly or through a partnership, 
     corporation, or other entity) unless the relative is a 
     licensed professional with respect to such services, or
       ``(B) by a corporation or partnership which is related 
     (within the meaning of section 267(b) or 707(b)) to the 
     individual.

     For purposes of this paragraph, the term `relative' means an 
     individual bearing a relationship to the individual which is 
     described in any of paragraphs (1) through (8) of section 
     152(a). This paragraph shall not apply for purposes of 
     section 105(b) with respect to reimbursements through 
     insurance.''
       (f) 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 qualified long-term care insurance.''.

       (g) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to contracts issued after December 31, 1995.
       (2) Continuation of existing policies.--In the case of any 
     contract issued before January 1, 1996, which met the long-
     term care insurance requirements of the State in which the 
     contract was sitused at the time the contract was issued--
       (A) such contract shall be treated for purposes of the 
     Internal Revenue Code of 1986 as a qualified long-term care 
     insurance contract (as defined in section 7702B(b) of such 
     Code), and
       (B) services provided under, or reimbursed by, such 
     contract shall be treated for such purposes as qualified 
     long-term care services (as defined in section 7702B(c) of 
     such Code).
       (3) Exchanges of existing policies.--If, after the date of 
     enactment of this Act and before January 1, 1997, a contract 
     providing for long-term care insurance coverage is exchanged 
     solely for a qualified long-term care insurance contract (as 
     defined in section 7702B(b) of such Code), no gain or loss 
     shall be recognized on the exchange. If, in addition to a 
     qualified long-term care insurance contract, money or other 
     property is received in the exchange, then any gain shall be 
     recognized to the extent of the sum of the money and the fair 
     market value of the other property received. For purposes of 
     this paragraph, the cancellation of a contract providing for 
     long-term care insurance coverage and reinvestment of the 
     cancellation proceeds in a qualified long-term care insurance 
     contract within 60 days thereafter shall be treated as an 
     exchange.
       (4) Issuance of certain riders permitted.--For purposes of 
     applying sections 101(f), 7702, and 7702A of the Internal 
     Revenue Code of 1986 to any contract--
       (A) the issuance of a rider which is treated as a qualified 
     long-term care insurance contract under section 7702B, and
       (B) the addition of any provision required to conform any 
     other long-term care rider to be so treated,
     shall not be treated as a modification or material change of 
     such contract.

     SEC. 11042. 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(c)), or''.
       (b) Technical Amendments.--
       (1) Subparagraph (D) of section 213(d)(1) (as redesignated 
     by subsection (a)) is amended by striking ``subparagraphs (A) 
     and (B)'' and inserting ``subparagraphs (A), (B), and (C)''.
       (2)(A) Paragraph (1) of section 213(d) is amended by adding 
     at the end the following new flush sentence:

     ``In the case of a qualified long-term care insurance 
     contract (as defined in section 7702B(b)), only eligible 
     long-term care premiums (as defined in paragraph (11)) shall 
     be taken into account under subparagraph (D).''
       (B) Subsection (d) of section 213 is amended by adding at 
     the end the following new paragraph:
       ``(11) Eligible long-term care premiums.--
       ``(A) In general.--For purposes of this section, the term 
     `eligible long-term care premiums' means the amount paid 
     during a taxable year for any qualified long-term care 
     insurance contract (as defined in section 7702B(b)) covering 
     an individual, to the extent such amount does not exceed the 
     limitation determined under the following table:

      ``In the case of an individual                                   
        with an attained age before the                  The limitation
        close of the taxable year of:                           is:    
        40 or less..............................................$200   
        More than 40 but not more than 50........................375   
        More than 50 but not more than 60........................750   
        More than 60 but not more than 70......................2,000   
        More than 70...........................................2,500.  

       ``(B) Indexing.--
       ``(i) In general.--In the case of any taxable year 
     beginning in a calendar year after 1996, each dollar amount 
     contained in subparagraph (A) shall be increased by the 
     medical care cost adjustment of such amount for such calendar 
     year. If any increase determined under the preceding sentence 
     is not a multiple of $10, such increase shall be rounded to 
     the nearest multiple of $10.
       ``(ii) Medical care cost adjustment.--For purposes of 
     clause (i), the medical care cost adjustment for any calendar 
     year is the percentage (if any) by which--

       ``(I) the medical care component of the Consumer Price 
     Index (as defined in section 1(f)(5)) for August of the 
     preceding calendar year, exceeds
       ``(II) such component for August of 1995.

     The Secretary shall, in consultation with the Secretary of 
     Health and Human Services, prescribe an adjustment which the 
     Secretary determines is more appropriate for purposes of this 
     paragraph than the adjustment described in the preceding 
     sentence, and the adjustment so prescribed shall apply in 
     lieu of the adjustment described in the preceding sentence.''
       (3) Paragraph (6) of section 213(d) is amended--
       (A) by striking ``subparagraphs (A) and (B)'' and inserting 
     ``subparagraphs (A), (B), and (C)'', and
       (B) by striking ``paragraph (1)(C)'' in subparagraph (A) 
     and inserting ``paragraph (1)(D)''.
       (4) Paragraph (7) of section 213(d) is amended by striking 
     ``subparagraphs (A) and (B)'' and inserting ``subparagraphs 
     (A), (B), and (C)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 11043. CERTAIN EXCHANGES OF LIFE INSURANCE CONTRACTS FOR 
                   QUALIFIED LONG-TERM CARE INSURANCE CONTRACTS 
                   NOT TAXABLE.

       (a) In General.--Subsection (a) of section 1035 (relating 
     to certain exchanges of insurance contracts) is amended by 
     striking the period at the end of paragraph (3) and inserting 
     ``; or'', and by adding at the end the following new 
     paragraph:
       ``(4) a contract of life insurance or an endowment or 
     annuity contract for a qualified long-term care insurance 
     contract (as defined in section 7702B(b)).''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 11044. EXCEPTION FROM PENALTY TAX FOR AMOUNTS WITHDRAWN 
                   FROM CERTAIN RETIREMENT PLANS FOR QUALIFIED 
                   LONG-TERM CARE INSURANCE.

       (a) In General.--Paragraph (2) of section 72(t) is amended 
     by adding at the end the following new subparagraph:
       ``(F) Premiums for qualified long-term care insurance 
     contracts.--Distributions to an individual from an individual 
     retirement plan, or from amounts attributable to employer 
     contributions made pursuant to elective deferrals described 
     in subparagraph (A) or (C) of section 402(g)(3), to the 
     extent such distributions do not exceed the premiums for a 
     qualified long-term care insurance contract (as defined in 
     section 7702B(b)) for such individual or the spouse of such 
     individual. In applying subparagraph (B), such premiums shall 
     be treated as amounts not paid for medical care.''
       (b) Distributions Permitted From Certain Plans To Pay Long-
     term Care Premiums.--
       (1) Section 401(k)(2)(B)(i) is amended by striking ``or'' 
     at the end of subclause (III), by striking ``and'' at the end 
     of subclause (IV) and inserting ``or'', and by inserting 
     after subclause (IV) the following new subclause:

       ``(V) the date distributions for premiums for a long-term 
     care insurance contract (as defined in section 7702B(b)) for 
     coverage of such individual or the spouse of such individual 
     are made, and''.

       (2) Section 403(b)(11) 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) for the payment of premiums for a long-term care 
     insurance contract (as defined in section 7702B(b)) for 
     coverage of the employee or the spouse of the employee.''
       (3) Subparagraph (A) of section 457(d)(1) is amended by 
     striking ``or'' at the end of clause (ii), by striking 
     ``and'' at the end of clause (iii) and inserting ``or'', and 
     by inserting after clause (iii) the following new clause:
       ``(iv) the date distributions for premiums for a long-term 
     care insurance contract (as defined in section 7702B(b)) for 
     coverage of such individual or the spouse of such individual 
     are made, and''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to payments and distributions after December 31, 
     1995.

[[Page H 13510]]


     SEC. 11045. REPORTING REQUIREMENTS.

       (a) In General.--Subpart B of part III of subchapter A of 
     chapter 61, as amended by section 11004, 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 11004, 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 amended by section 
     11004, is amended by redesignating subparagraphs (R) through 
     (U) as subparagraphs (S) through (V), respectively, and by 
     inserting after subparagraph (P) 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.''

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

                PART II--CONSUMER PROTECTION PROVISIONS

     SEC. 11051. POLICY REQUIREMENTS.

       Section 7702B (as added by section 11041) is amended by 
     adding at the end the following new subsection:
       ``(f) 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).
       ``(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).''.

     SEC. 11052. 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(f)(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

[[Page H 13511]]

       ``(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).
       ``(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. 11053. 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. 11054. 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 11041(g) of this Act 
     (relating to transition rule) shall apply to such contracts.
       (b) Issuers.--The amendments made by section 11052 shall 
     apply to actions taken after December 31, 1995.

         Subchapter B--Treatment of Accelerated Death Benefits

     SEC. 11061. TREATMENT OF ACCELERATED DEATH BENEFITS BY 
                   RECIPIENT.

       (a) In General.--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, the 
     following amounts shall be treated as an amount paid by 
     reason of the death of an insured:
       ``(A) Any amount received under a life insurance contract 
     on the life of an insured who is a terminally ill individual.
       ``(B) Any amount received under a life insurance contract 
     on the life of an insured who is a chronically ill individual 
     (as determined in such manner as the Secretary may prescribe) 
     but only if such amount is received under a rider or other 
     provision of such contract which is treated as a qualified 
     long-term care insurance contract under section 7702B.
       ``(2) 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--

       ``(I) such person 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.

       ``(3) Definitions.--For purposes of this subsection--
       ``(A) Terminally ill individual.--The term `terminally ill 
     individual' means an individual who has been certified by a 
     physician as having an illness or physical condition which 
     can reasonably be expected to result in death in 24 months or 
     less after the date of the certification.
       ``(B) Physician.--The term `physician' has the meaning 
     given to such term by section 1861(r)(1) of the Social 
     Security Act (42 U.S.C. 1395x(r)(1)).
       ``(4) 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 being financially 
     interested in any trade or business carried on by the 
     taxpayer.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to amounts received after December 31, 1995.

     SEC. 11062. TAX 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 if the only payments under the rider are payments 
     meeting the requirements of section 101(g).
       ``(3) Exception for long-term care riders.--Paragraph (1) 
     shall not apply to any rider which is treated as a long-term 
     care insurance contract under section 7702B.''
       (b) Effective Date.--
       (1) In general.--The amendment made by this section shall 
     take effect on January 1, 1996.
       (2) Issuance of rider not treated as material change.--For 
     purposes of applying sections 101(f), 7702, and 7702A of the 
     Internal Revenue Code of 1986 to any contract--
       (A) the issuance of a qualified accelerated death benefit 
     rider (as defined in section 818(g) of such Code (as added by 
     this Act)), and
       (B) the addition of any provision required to conform an 
     accelerated death benefit rider to the requirements of such 
     section 818(g),
     shall not be treated as a modification or material change of 
     such contract.

                  CHAPTER 2--MEDICAL SAVINGS ACCOUNTS

     SEC. 11066. 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 222 as section 223 and by 
     inserting after section 221 the following new section:

     ``SEC. 222. MEDICAL SAVINGS ACCOUNTS.

       ``(a) Deduction Allowed.--In the case of an individual who 
     is an eligible individual for any month during the taxable 
     year, there shall be allowed as a deduction for the taxable 
     year an amount equal to the aggregate amount paid in cash 
     during such taxable year by such individual to a medical 
     savings account of such individual.
       ``(b) Limitations.--
       ``(1) In general.--Except as otherwise provided in this 
     subsection, the amount allowable as a deduction under 
     subsection (a) to an individual for the taxable year shall 
     not exceed--
       ``(A) except as provided in subparagraph (B), the lesser 
     of--
       ``(i) $2,000, or
       ``(ii) the annual deductible limit for any individual 
     covered under the high deductible health plan, or
       ``(B) in the case of a high deductible health plan covering 
     the taxpayer and any other eligible individual who is the 
     spouse or any dependent (as defined in section 152) of the 
     taxpayer, the lesser of--
       ``(i) $4,000, or
       ``(ii) the annual limit under the plan on the aggregate 
     amount of deductibles required to be paid by all individuals.
     The preceding sentence shall not apply if the spouse of such 
     individual is covered under any other high deductible health 
     plan.
       ``(2) Special rule for married individuals.--
       ``(A) In general.--This subsection shall be applied 
     separately for each married individual.
       ``(B) Special rule.--If individuals who are married to each 
     other are covered under the same high deductible health plan, 
     then the amounts applicable under paragraph (1)(B) shall be 
     divided equally between them unless they agree on a different 
     division.
       ``(3) Coordination with exclusion for employer 
     contributions.--No deduction shall be allowed under this 
     section for any amount paid for any taxable year to a medical 
     savings account of an individual if--
       ``(A) any amount is paid to any medical savings account of 
     such individual which is excludable from gross income under 
     section 106(b) for such year, or
       ``(B) in a case described in paragraph (2), any amount is 
     paid to any medical savings account of either spouse which is 
     so excludable for such year.
       ``(4) Proration of limitation.--
       ``(A) In general.--The limitation under paragraph (1) 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 
     (1)(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 and paragraph (3)) be 
     determined under paragraph (1) 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.
       ``(5) Denial of deduction to dependents.--No deduction 
     shall be allowed under this section to any individual with 
     respect to whom a deduction under section 151 is allowable to 
     another taxpayer for a taxable year beginning in the calendar 
     year in which such individual's taxable year begins.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Eligible individual.--
       ``(A) In general.--The term `eligible individual' means, 
     with respect to any month, any individual--
       ``(i) who is covered under a high deductible health plan as 
     of the 1st day of such month, and

[[Page H 13512]]

       ``(ii) who is not, while covered under a high deductible 
     health plan, covered under any health plan--

       ``(I) which is not a high deductible health plan, and
       ``(II) which provides coverage for any benefit which is 
     covered under the high deductible health plan.

       ``(B) Certain coverage disregarded.--Subparagraph (A)(ii) 
     shall be applied without regard to--
       ``(i) coverage for any benefit provided by permitted 
     insurance, and
       ``(ii) coverage (whether through insurance or otherwise) 
     for accidents, disability, dental care, vision care, or long-
     term care.
       ``(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.

     Such term does not include a health plan if substantially all 
     of its coverage is coverage described in paragraph (1)(B).
       ``(3) Permitted insurance.--The term `permitted insurance' 
     means--
       ``(A) Medicare supplemental insurance,
       ``(B) insurance if substantially all of the coverage 
     provided under such insurance relates to--
       ``(i) liabilities incurred under workers' compensation 
     laws,
       ``(ii) tort liabilities,
       ``(iii) liabilities relating to ownership or use of 
     property, or
       ``(iv) such other similar liabilities as the Secretary may 
     specify by regulations,
       ``(C) insurance for a specified disease or illness, and
       ``(D) insurance paying a fixed amount per day (or other 
     period) of hospitalization.
       ``(d) Medical Savings Account.--For purposes of this 
     section--
       ``(1) Medical savings account.--The term `medical savings 
     account' means a trust created or organized in the United 
     States exclusively for the purpose of paying the qualified 
     medical expenses of the account holder, but only if the 
     written governing instrument creating the trust meets the 
     following requirements:
       ``(A) Except in the case of a rollover contribution 
     described in subsection (f)(5), no contribution will be 
     accepted--
       ``(i) unless it is in cash, or
       ``(ii) to the extent such contribution, when added to 
     previous contributions to the trust for the calendar year, 
     exceeds $4,000.
       ``(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.
       ``(2) Qualified medical expenses.--
       ``(A) In general.--The term `qualified medical expenses' 
     means, with respect to an account holder, amounts paid by 
     such holder for medical care (as defined in section 213(d)) 
     for such individual, the spouse of such individual, and any 
     dependent (as defined in section 152) of such individual, but 
     only to the extent such amounts are not compensated for by 
     insurance or otherwise.
       ``(B) Health insurance may not be purchased from account.--
       ``(i) In general.--Subparagraph (A) shall not apply to any 
     payment for insurance.
       ``(ii) Exceptions.--Clause (i) shall not apply to any 
     expense for coverage under--

       ``(I) a health plan during any period of continuation 
     coverage required under any Federal law,
       ``(II) a qualified long-term care contract (as defined in 
     section 7702B), or
       ``(III) a health plan during a period in which the 
     individual is receiving unemployment compensation under any 
     Federal or State law.

       ``(3) Account holder.--The term `account holder' means the 
     individual on whose behalf the medical savings account was 
     established.
       ``(4) Certain rules to apply.--Rules similar to the 
     following rules shall apply for purposes of this section:
       ``(A) Section 219(d)(2) (relating to no deduction for 
     rollovers).
       ``(B) Section 219(f)(3) (relating to time when 
     contributions deemed made).
       ``(C) Except as provided in section 106(b), section 
     219(f)(5) (relating to employer payments).
       ``(D) Section 408(g) (relating to community property laws).
       ``(E) Section 408(h) (relating to custodial accounts).
       ``(e) 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.
       ``(f) 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 holder (or any 
     spouse or dependent of the holder) shall not be includible in 
     gross income.
       ``(B) Treatment after death of account holder.--
       ``(i) Treatment if holder is spouse.--If, after the death 
     of the account holder, the account holder's interest is 
     payable to (or for the benefit of) the holder's spouse, the 
     medical savings account shall be treated as if the spouse 
     were the account holder.
       ``(ii) Treatment if designated holder is not spouse.--In 
     the case of an account holder's interest in a medical savings 
     account which is payable to (or for the benefit of) any 
     person other than such holder's spouse upon the death of such 
     holder--

       ``(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 holder, in such 
     person's gross income for the taxable year which includes 
     such date, or if such person is the estate of such holder, in 
     such holder's gross income for the last taxable year of such 
     holder.

       ``(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 holder or of 
     the spouse or dependents of such holder shall be included in 
     the gross income of such holder.
       ``(B) Special rules.--For purposes of subparagraph (A)--
       ``(i) all medical savings accounts of the account holder 
     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 (d)(1)(A)(ii) 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 this chapter on the 
     account holder for any taxable year in which there is a 
     payment or distribution from a medical savings account of 
     such holder 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 holder 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 holder 
     attains age 59\1/2\.
       ``(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 holder to the extent the amount received is paid 
     into a medical savings account for the benefit of such holder 
     not later than the 60th day after the day on which the holder 
     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 holder.
       ``(g) Cost-of-Living Adjustment.--
       ``(1) In general.--In the case of any taxable year 
     beginning in a calendar year after 1996, each dollar amount 
     in subsection (b)(1), (c)(2), or (d)(1)(A) shall be increased 
     by an amount equal to--

[[Page H 13513]]

       ``(A) such dollar amount, multiplied by
       ``(B) the medical care cost adjustment for such calendar 
     year.

     If any increase under the preceding sentence is not a 
     multiple of $50, such increase shall be rounded to the 
     nearest multiple of $50.
       ``(2) Medical care cost adjustment.--For purposes of 
     paragraph (1), the medical care cost adjustment for any 
     calendar year is the percentage (if any) by which--
       ``(A) the medical care component of the Consumer Price 
     Index (as defined in section 1(f)(5)) for August of the 
     preceding calendar year, exceeds
       ``(B) such component for August of 1995.
       ``(h) Reports.--The Secretary may require the trustee of a 
     medical savings account to make such reports regarding such 
     account to the Secretary and to the account holder with 
     respect to contributions, distributions, and such other 
     matters as the Secretary determines appropriate. 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) Deduction Allowed Whether or Not Individual Itemizes 
     Other Deductions.--Subsection (a) of section 62 is amended by 
     inserting after paragraph (18) the following new paragraph:
       ``(19) Medical savings accounts.--The deduction allowed by 
     section 222.''
       (c) Exclusions for Employer Contributions to Medical 
     Savings Accounts.--
       (1) Exclusion from income tax.--Section 106 (relating to 
     contributions by employer to accident and health plans), as 
     amended by this Act, is amended--
       (A) by adding at the end the following new subsection:
       ``(c) Contributions to Medical Savings Accounts.--
       ``(1) In general.--In the case of an employee who is an 
     eligible individual, gross income does not include amounts 
     contributed by such employee's employer to any medical 
     savings account of such employee.
       ``(2) Coordination with deduction limitation.--The amount 
     excluded from the gross income of an employee under this 
     subsection for any taxable year shall not exceed the 
     limitation under section 222(b)(1) (determined without regard 
     to this subsection) which is applicable to such employee for 
     such taxable year.
       ``(3) No constructive receipt.--No amount shall be included 
     in the gross income of any employee solely because the 
     employee may choose between the contributions referred to in 
     paragraph (1) and employer contributions to another health 
     plan of the employer.
       ``(4) 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.
       ``(5) Definitions.--For purposes of this subsection, the 
     terms `eligible individual' and `medical savings account' 
     have the respective meanings given to such terms by section 
     222'', and
       (B) by striking ``subsection (b)'' in subsection (a) and 
     inserting ``this subsection''.
       (2) Exclusion from 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(b).''
       (d) Medical Savings Account Contributions Not Available 
     Under Cafeteria Plans.--Subsection (f) of section 125 is 
     amended by inserting ``106(b),'' before ``117''.
       (e) Exclusion of Medical Savings Accounts From Estate 
     Tax.--Part IV of subchapter A of chapter 11 is amended by 
     adding at the end the following new section:

     ``SEC. 2057. MEDICAL SAVINGS 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 medical savings account (as defined in section 
     222(d)) included in the gross estate.''
       (f) 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 222(d)), 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 222(d)), the 
     term `excess contributions' means the sum of--
       ``(1) 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 222(d)(1)(B)(ii) for 
     such taxable year, and
       ``(2) the amount determined under this subsection for the 
     preceding taxable year, reduced by the sum of distributions 
     out of the account included in gross income under section 
     222(f) (2) or (3) and the excess (if any) of the maximum 
     amount allowable as a deduction under section 222 for the 
     taxable year over the amount contributed.

     For purposes of this subsection, any contribution which is 
     distributed out of the medical savings account in a 
     distribution to which section 222(f)(3) applies shall be 
     treated as an amount not contributed.''
       (g) Tax on Prohibited Transactions.--
       (1) Section 4975 (relating to tax on prohibited 
     transactions) is amended by adding at the end of subsection 
     (c) the following new paragraph:
       ``(4) Special rule for medical savings accounts.--An 
     individual for whose benefit a medical savings account 
     (within the meaning of section 222(d)) 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 222(e)(2) to 
     such account.''
       (2) Paragraph (1) of section 4975(e) 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 medical savings account described in section 
     220(d), 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.''
       (h) Failure To Provide Reports on MedicarePlus MSA's.--
       (1) Subsection (a) of section 6693 (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 222(h) (relating to medical savings 
     accounts).''
       (i) Exception From Capitalization of Policy Acquisition 
     Expenses.--Subparagraph (B) of section 848(e)(1) (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 medical savings account (as 
     defined in section 222(d)).''.
       (j) 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:

``Sec. 222. Medical savings accounts.
``Sec. 223. Cross reference.''

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

  CHAPTER 3--INCREASE IN DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-
                          EMPLOYED INDIVIDUALS

     SEC. 11068. INCREASE IN DEDUCTION FOR HEALTH INSURANCE COSTS 
                   OF SELF-EMPLOYED INDIVIDUALS.

       (a) In General.--Paragraph (1) of section 162(l) is amended 
     to read as follows:
       ``(1) Allowance of deduction.--
       ``(A) In general.--In the case of an individual who is an 
     employee within the meaning of section 401(c)(1), there shall 
     be allowed as a deduction under this section an amount equal 
     to the applicable percentage of the amount paid during the 
     taxable year for insurance which constitutes medical care for 
     the taxpayer, his spouse, and dependents.
       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A), the applicable percentage shall be determined under the 
     following table:

                                                         The applicable
``For taxable years beginning in calendar year--        percentage is--
  1996 or 1997..................................................30 ....

  1998 or 1999..................................................35 ....

  2000 or 2001..................................................40 ....

  2002 or thereafter..........................................50.''....

       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.
                 Subtitle D--Estate and Gift Provisions

     SEC. 11071. COST-OF-LIVING ADJUSTMENTS RELATING TO ESTATE AND 
                   GIFT TAX PROVISIONS.

       (a) Increase in Unified Estate and Gift Tax Credit.--
       (1) Estate tax credit.--
       (A) Subsection (a) of section 2010 (relating to unified 
     credit against estate tax) is amended by striking 
     ``$192,800'' and inserting ``the applicable credit amount''.
       (B) Section 2010 is amended by redesignating subsection (c) 
     as subsection (d) and by inserting after subsection (b) the 
     following new subsection:
       ``(c) Applicable Credit Amount.--For purposes of this 
     section--
       ``(1) In general.--The applicable credit amount is the 
     amount of the tentative tax which 

[[Page H 13514]]
     would be determined under the rate schedule set forth in section 
     2001(c) if the amount with respect to which such tentative 
     tax is to be computed were the applicable exclusion amount 
     determined in accordance with the following table:

``In the case of estates of decedentThe applicable exclusion amount is:
      1996....................................................$625,000 
      1997....................................................$650,000 
      1998....................................................$675,000 
      1999....................................................$700,000 
      2000....................................................$725,000 
      2001 or thereafter......................................$750,000.

       ``(2) Cost-of-living adjustments.--In the case of any 
     decedent dying, and gift made, in a calendar year after 2001, 
     the $750,000 amount set forth in paragraph (1) shall be 
     increased by an amount equal to--
       ``(A) $750,000, multiplied by
       ``(B) the cost-of-living adjustment determined under 
     section 1(f)(3) for such calendar year by substituting 
     `calendar year 2000' for `calendar year 1992' in subparagraph 
     (B) thereof.

     If any amount as adjusted under the preceding sentence is not 
     a multiple of $10,000, such amount shall be rounded to the 
     nearest multiple of $10,000.''
       (C) Paragraph (1) of section 6018(a) is amended by striking 
     ``$600,000'' and inserting ``the applicable exclusion amount 
     in effect under section 2010(c) (as adjusted under paragraph 
     (2) thereof) for the calendar year which includes the date of 
     death''.
       (D) Paragraph (2) of section 2001(c) is amended by striking 
     ``$21,040,000'' and inserting ``the amount at which the 
     average tax rate under this section is 55 percent''.
       (E) Subparagraph (A) of section 2102(c)(3) is amended by 
     striking ``$192,800'' and inserting ``the applicable credit 
     amount in effect under section 2010(c) for the calendar year 
     which includes the date of death''.
       (2) Unified gift tax credit.--Paragraph (1) of section 
     2505(a) is amended by striking ``$192,800'' and inserting 
     ``the applicable credit amount in effect under section 
     2010(c) for such calendar year''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to the estates of decedents dying, and gifts 
     made, after December 31, 1995.
       (b) Alternate Valuation of Certain Farm, Etc., Real 
     Property.--Subsection (a) of section 2032A is amended by 
     adding at the end the following new paragraph:
       ``(3) Inflation adjustment.--In the case of estates of 
     decedents dying in a calendar year after 2000, the $750,000 
     amount contained in paragraph (2) shall be increased by an 
     amount equal to--
       ``(A) $750,000, multiplied by
       ``(B) the cost-of-living adjustment determined under 
     section 1(f)(3) for such calendar year by substituting 
     `calendar year 1999' for `calendar year 1992' in subparagraph 
     (B) thereof.

     If any amount as adjusted under the preceding sentence is not 
     a multiple of $10,000, such amount shall be rounded to the 
     nearest multiple of $10,000.''
       (c) Annual Gift Tax Exclusion.--Subsection (b) of section 
     2503 is amended--
       (1) by striking the subsection heading and inserting the 
     following:
       ``(b) Exclusions From Gifts.--
       ``(1) In general.--'',
       (2) by moving the text 2 ems to the right, and
       (3) by adding at the end the following new paragraph:
       ``(2) Inflation adjustment.--In the case of gifts made in a 
     calendar year after 2000, the $10,000 amount contained in 
     paragraph (1) shall be increased by an amount equal to--
       ``(A) $10,000, multiplied by
       ``(B) the cost-of-living adjustment determined under 
     section 1(f)(3) for such calendar year by substituting 
     `calendar year 1999' for `calendar year 1992' in subparagraph 
     (B) thereof.

     If any amount as adjusted under the preceding sentence is not 
     a multiple of $1,000, such amount shall be rounded to the 
     nearest multiple of $1,000.''
       (d) Exemption From Generation-Skipping Tax.--Section 2631 
     (relating to GST exemption) is amended by adding at the end 
     the following new subsection:
       ``(c) Inflation Adjustment.--In the case of an individual 
     who dies in any calendar year after 2000, the $1,000,000 
     amount contained in subsection (a) shall be increased by an 
     amount equal to--
       ``(1) $1,000,000, multiplied by
       ``(2) the cost-of-living adjustment determined under 
     section 1(f)(3) for such calendar year by substituting 
     `calendar year 1999' for `calendar year 1992' in subparagraph 
     (B) thereof.

     If any amount as adjusted under the preceding sentence is not 
     a multiple of $10,000, such amount shall be rounded to the 
     nearest multiple of $10,000.''
       (e) Amount of Tax Eligible For 4 Percent Interest Rate on 
     Extension of Time for Payment of Estate Tax on Closely Held 
     Business.--
       (1) Subparagraph (A) of section 6601(j)(2) is amended by 
     striking ``$345,800'' and inserting ``the applicable 
     limitation amount''.
       (2) Subsection (j) of section 6601 is amended by 
     redesignating paragraph (3) as paragraph (4) and by inserting 
     after paragraph (2) the following new paragraph:
       ``(3) Applicable limitation amount.--
       ``(A) In general.--For purposes of paragraph (2), the 
     applicable limitation amount is the amount of the tentative 
     tax which would be determined under the rate schedule set 
     forth in section 2001(c) if the amount with respect to which 
     such tentative tax is to be computed were $1,000,000.
       ``(B) Inflation adjustment.--In the case of estates of 
     decedents dying in a calendar year after 2000, the $1,000,000 
     amount contained in subparagraph (A) shall be increased by an 
     amount equal to--
       ``(i) $1,000,000, multiplied by
       ``(ii) the cost-of-living adjustment determined under 
     section 1(f)(3) for such calendar year by substituting 
     `calendar year 1999' for `calendar year 1992' in subparagraph 
     (B) thereof.

     If any amount as adjusted under the preceding sentence is not 
     a multiple of $10,000, such amount shall be rounded to the 
     nearest multiple of $10,000.''

     SEC. 11072. 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
       ``(2) the sum of--
       ``(A) $1,000,000, plus
       ``(B) 50 percent of the excess (if any) of the adjusted 
     value of such interests over $1,000,000, but not over 
     $2,500,000.
       ``(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 such 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 (if more than de minimis) 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, 

[[Page H 13515]]
     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 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, any member of the decedent's family, 
     any qualified heir, or any member of any qualified heir'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 877) or with respect to whom 
     an event described in subparagraph (A) or (B) of section 
     877(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             The applicable percentage
  material participation:                                           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 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) except as otherwise provided in regulations, 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).
       ``(4) Coordination with other estate tax benefits.--If 
     there is a reduction in the value of the gross estate under 
     this section--
       ``(A) the dollar limitation applicable under section 
     2032A(a)(2), and
       ``(B) the $1,000,000 amount under section 6601(j)(3) (as 
     adjusted),

     shall each be reduced (but not below zero) by the amount of 
     such reduction.''.
       (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. 11073. 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 (4), 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 

[[Page H 13516]]
     of any deduction under section 2055(f) with respect to such land, or
       ``(B) the excess (if any) of $5,000,000 over the lesser 
     of--
       ``(i) $2,500,000, or
       ``(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 40 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--
       ``(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)).
       ``(4) 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.
       ``(5) Calculation of estate tax due.--An executor making 
     the election described in paragraph (4) shall, for purposes 
     of calculating the amount of tax imposed by section 2001, 
     include the value of any development right (as defined in 
     paragraph (3)) 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.
       ``(6) 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--

       ``(I) in or within 25 miles of an area which, on the date 
     of the decedent's death, is a metropolitan area (as defined 
     by the Office of Management and Budget),
       ``(II) in or within 25 miles of an area which, on the date 
     of the decedent's death, is 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), or
       ``(III) in or within 10 miles of an area which, on the date 
     of the decedent's death, is an Urban National Forest (as 
     designated by the Forest Service),

       ``(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 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.
       ``(7) 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. 11074. 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 an interest of such individual 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. 11075. 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--TEMPORARY EXTENSIONS

     SEC. 11111. WORK OPPORTUNITY TAX CREDIT.

       (a) Amount of Credit.--Subsection (a) of section 51 
     (relating to amount of credit) is amended by striking ``40 
     percent'' and inserting ``35 percent''.
       (b) Members of Targeted Groups.--Subsection (d) of section 
     51 is amended to read as follows:

[[Page H 13517]]

       ``(d) Members of Targeted Groups.--For purposes of this 
     subpart--
       ``(1) In general.--An individual is a member of a targeted 
     group if such individual is--
       ``(A) a qualified IV-A recipient,
       ``(B) a qualified veteran,
       ``(C) a qualified ex-felon,
       ``(D) a high-risk youth,
       ``(E) a vocational rehabilitation referral, or
       ``(F) a qualified summer youth employee.
       ``(2) Qualified IV-A recipient.--
       ``(A) In general.--The term `qualified IV-A recipient' 
     means any individual who is certified by the designated local 
     agency as being a member of a family receiving assistance 
     under a IV-A program for at least a 9-month period ending 
     during the 9-month period ending on the hiring date.
       ``(B) IV-A program.--For purposes of this paragraph, the 
     term `IV-A program' means any program providing assistance 
     under a State plan approved under part A of title IV of the 
     Social Security Act (relating to assistance for needy 
     families with minor children) and any successor of such 
     program.
       ``(3) Qualified veteran.--
       ``(A) In general.--The term `qualified veteran' means any 
     veteran who is certified by the designated local agency as 
     being--
       ``(i) a member of a family receiving assistance under a IV-
     A program (as defined in paragraph (2)(B)) for at least a 9-
     month period ending during the 12-month period ending on the 
     hiring date, or
       ``(ii) a member of a family receiving assistance under a 
     food stamp program under the Food Stamp Act of 1977 for at 
     least a 3-month period ending during the 12-month period 
     ending on the hiring date.
       ``(B) Veteran.--For purposes of subparagraph (A), the term 
     `veteran' means any individual who is certified by the 
     designated local agency as--
       ``(i)(I) having served on active duty (other than active 
     duty for training) in the Armed Forces of the United States 
     for a period of more than 180 days, or
       ``(II) having been discharged or released from active duty 
     in the Armed Forces of the United States for a service-
     connected disability, and
       ``(ii) not having any day during the 60-day period ending 
     on the hiring date which was a day of extended active duty in 
     the Armed Forces of the United States.

     For purposes of clause (ii), the term `extended active duty' 
     means a period of more than 90 days during which the 
     individual was on active duty (other than active duty for 
     training).
       ``(4) Qualified ex-felon.--The term `qualified ex-felon' 
     means any individual who is certified by the designated local 
     agency--
       ``(A) as having been convicted of a felony under any 
     statute of the United States or any State,
       ``(B) as having a hiring date which is not more than 1 year 
     after the last date on which such individual was so convicted 
     or was released from prison, and
       ``(C) as being a member of a family which had an income 
     during the 6 months immediately preceding the earlier of the 
     month in which such income determination occurs or the month 
     in which the hiring date occurs, which, on an annual basis, 
     would be 70 percent or less of the Bureau of Labor Statistics 
     lower living standard.

     Any determination under subparagraph (C) shall be valid for 
     the 45-day period beginning on the date such determination is 
     made.
       ``(5) High-risk youth.--
       ``(A) In general.--The term `high-risk youth' means any 
     individual who is certified by the designated local agency--
       ``(i) as having attained age 18 but not age 25 on the 
     hiring date, and
       ``(ii) as having his principal place of abode within an 
     empowerment zone or enterprise community.
       ``(B) Youth must continue to reside in zone.--In the case 
     of a high-risk youth, the term `qualified wages' shall not 
     include wages paid or incurred for services performed while 
     such youth's principal place of abode is outside an 
     empowerment zone or enterprise community.
       ``(6) Vocational rehabilitation referral.--The term 
     `vocational rehabilitation referral' means any individual who 
     is certified by the designated local agency as--
       ``(A) having a physical or mental disability which, for 
     such individual, constitutes or results in a substantial 
     handicap to employment, and
       ``(B) having been referred to the employer upon completion 
     of (or while receiving) rehabilitative services pursuant to--
       ``(i) an individualized written rehabilitation plan under a 
     State plan for vocational rehabilitation services approved 
     under the Rehabilitation Act of 1973, or
       ``(ii) a program of vocational rehabilitation carried out 
     under chapter 31 of title 38, United States Code.
       ``(7) Qualified summer youth employee.--
       ``(A) In general.--The term `qualified summer youth 
     employee' means any individual--
       ``(i) who performs services for the employer between May 1 
     and September 15,
       ``(ii) who is certified by the designated local agency as 
     having attained age 16 but not 18 on the hiring date (or if 
     later, on May 1 of the calendar year involved),
       ``(iii) who has not been an employee of the employer during 
     any period prior to the 90-day period described in 
     subparagraph (B)(i), and
       ``(iv) who is certified by the designated local agency as 
     having his principal place of abode within an empowerment 
     zone or enterprise community.
       ``(B) Special rules for determining amount of credit.--For 
     purposes of applying this subpart to wages paid or incurred 
     to any qualified summer youth employee--
       ``(i) subsection (b)(2) shall be applied by substituting 
     `any 90-day period between May 1 and September 15' for `the 
     1-year period beginning with the day the individual begins 
     work for the employer', and
       ``(ii) subsection (b)(3) shall be applied by substituting 
     `$3,000' for `$6,000'.
     The preceding sentence shall not apply to an individual who, 
     with respect to the same employer, is certified as a member 
     of another targeted group after such individual has been a 
     qualified summer youth employee.
       ``(C) Youth must continue to reside in zone.--Paragraph 
     (5)(B) shall apply for purposes of this paragraph.
       ``(8) Hiring date.--The term `hiring date' means the day 
     the individual is hired by the employer.
       ``(9) Designated local agency.--The term `designated local 
     agency' means a State employment security agency established 
     in accordance with the Act of June 6, 1933, as amended (29 
     U.S.C. 49-49n).
       ``(10) Special rules for certifications.--
       ``(A) In general.--An individual shall not be treated as a 
     member of a targeted group unless--
       ``(i) on or before the day on which such individual begins 
     work for the employer, the employer has received a 
     certification from a designated local agency that such 
     individual is a member of a targeted group, or
       ``(ii)(I) on or before the day the individual is offered 
     employment with the employer, a pre-screening notice is 
     completed by the employer with respect to such individual, 
     and
       ``(II) not later than the 14th day after the individual 
     begins work for the employer, the employer submits such 
     notice, signed by the employer and the individual under 
     penalties of perjury, to the designated local agency as part 
     of a written request for such a certification from such 
     agency.
     For purposes of this paragraph, the term `pre-screening 
     notice' means a document (in such form as the Secretary shall 
     prescribe) which contains information provided by the 
     individual on the basis of which the employer believes that 
     the individual is a member of a targeted group.
       ``(B) Incorrect certifications.--If--
       ``(i) an individual has been certified by a designated 
     local agency as a member of a targeted group, and
       ``(ii) such certification is incorrect because it was based 
     on false information provided by such individual,

     the certification shall be revoked and wages paid by the 
     employer after the date on which notice of revocation is 
     received by the employer shall not be treated as qualified 
     wages.
       ``(C) Explanation of denial of request.--If a designated 
     local agency denies a request for certification of membership 
     in a targeted group, such agency shall provide to the person 
     making such request a written explanation of the reasons for 
     such denial.''
       (c) Minimum Employment Period.--Paragraph (3) of section 
     51(i) (relating to certain individuals ineligible) is amended 
     to read as follows:
       ``(3) Individuals not meeting minimum employment period.--
     No wages shall be taken into account under subsection (a) 
     with respect to any individual unless such individual 
     either--
       ``(A) is employed by the employer at least 180 days (20 
     days in the case of a qualified summer youth employee), or
       ``(B) has completed at least 500 hours (120 hours in the 
     case of a qualified summer youth employee) of services 
     performed for the employer.''
       (d) Termination.--Paragraph (4) of section 51(c) (relating 
     to wages defined) is amended to read as follows:
       ``(4) Termination.--The term `wages' shall not include any 
     amount paid or incurred to an individual who begins work for 
     the employer--
       ``(A) after December 31, 1994, and before January 1, 1996, 
     or
       ``(B) after December 31, 1996.''
       (e) Redesignation of Credit.--
       (1) Sections 38(b)(2) and 51(a) are each amended by 
     striking ``targeted jobs credit'' and inserting ``work 
     opportunity credit''.
       (2) The subpart heading for subpart F of part IV of 
     subchapter A of chapter 1 is amended by striking ``Targeted 
     Jobs Credit'' and inserting ``Work Opportunity Credit''.
       (3) The table of subparts for such part IV is amended by 
     striking ``targeted jobs credit'' and inserting ``work 
     opportunity credit''.
       (4) The heading for paragraph (3) of section 1396(c) is 
     amended by striking ``targeted jobs credit'' and inserting 
     ``work opportunity credit''.
       (f) Technical Amendments.--
       (1) Paragraph (1) of section 51(c) is amended by striking 
     ``, subsection (d)(8)(D),''.
       (2) Paragraph (3) of section 51(i) is amended by striking 
     ``(d)(12)'' each place it appears and inserting ``(d)(6)''.
       (g) Effective Date.--The amendments made by this section 
     shall apply to individuals who begin work for the employer 
     after December 31, 1995.

     SEC. 11112. 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 ``December 31, 1996''.
       (b) Limitation to Education Below Graduate Level.--The last 
     sentence of section 127(c)(1) is amended by inserting before 
     the period ``or at the graduate level''.
       (c) Effective Dates.--
       (1) Extension.--The amendment made by subsection (a) shall 
     apply to taxable years beginning after December 31, 1994.
       (2) Limitation.--The amendment made by subsection (b) shall 
     apply to taxable years beginning after December 31, 1995.

[[Page H 13518]]


     SEC. 11113. 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 ``December 31, 1996'', and
       (2) by striking ``July 1, 1995'' each place it appears and 
     inserting ``January 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) Election of Alternative Incremental Credit.--Subsection 
     (c) of section 41 is amended by redesignating paragraphs (4) 
     and (5) as paragraphs (5) and (6), respectively, and by 
     inserting after paragraph (3) the following new paragraph:
       ``(4) Election of alternative incremental credit.--
       ``(A) In general.--At the election of the taxpayer, the 
     credit determined under subsection (a)(1) shall be equal to 
     the sum of--
       ``(i) 1.65 percent of so much of the qualified research 
     expenses for the taxable year as exceeds 1 percent of the 
     average described in subsection (c)(1)(B) but does not exceed 
     1.5 percent of such average,
       ``(ii) 2.2 percent of so much of such expenses as exceeds 
     1.5 percent of such average but does not exceed 2 percent of 
     such average, and
       ``(iii) 2.75 percent of so much of such expenses as exceeds 
     2 percent of such average.
       ``(B) Election.--An election under this paragraph may be 
     made only for the first taxable year of the taxpayer 
     beginning after June 30, 1995. Such an election shall apply 
     to the taxable year for which made and all succeeding taxable 
     years unless revoked with the consent of the Secretary.''
       (d) Increased Credit for Contract Research Expenses With 
     Respect to Certain Research Consortia.--Paragraph (3) of 
     section 41(b) is amended by adding at the end the following 
     new subparagraph:
       ``(C) Amounts paid to certain research consortia.--
       ``(i) In general.--Subparagraph (A) shall be applied by 
     substituting `75 percent' for `65 percent' with respect to 
     amounts paid or incurred by the taxpayer to a qualified 
     research consortium for qualified research.
       ``(ii) Qualified research consortium.--The term `qualified 
     research consortium' means any organization described in 
     subsection (e)(6)(B) if--

       ``(I) at least 15 unrelated taxpayers paid (during the 
     calendar year in which the taxable year of the taxpayer 
     begins) amounts to such organization for qualified research,
       ``(II) no 3 persons paid during such calendar year more 
     than 50 percent of the total amounts paid during such 
     calendar year for qualified research, and
       ``(III) no person contributed more than 20 percent of such 
     total amounts.

     For purposes of subclause (I), all persons treated as a 
     single employer under subsection (a) or (b) of section 52 
     shall be treated as related taxpayers.''
       (e)  Conforming amendment.--Subparagraph (D) of section 
     28(b)(1) is amended by striking ``June 30, 1995'' and 
     inserting ``December 31, 1996''.
       (f) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     ending after June 30, 1995.
       (2) Subsections (c) and (d).--The amendments made by 
     subsections (c) and (d) shall apply to taxable years 
     beginning after June 30, 1995.

     SEC. 11114. 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.
       (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 ``December 31, 1996''.
       (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. 11115. 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 ``December 31, 
     1996''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to contributions made after December 31, 1994.

     SEC. 11116. DELAY OF 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 ``September 30, 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, but shall not take 
     effect if section 11117 does not take effect.
       (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 October 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 
     October 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 April 30, 1998.
       (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 October 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 October 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.

[[Page H 13519]]

       (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.

     SEC. 11117. EXTENSION OF AIRPORT AND AIRWAY TRUST FUND EXCISE 
                   TAXES.

       (a) Fuel Tax.--
       (1) Subparagraph (A) of section 4091(b)(3) is amended by 
     striking ``January 1, 1996'' and inserting ``October 1, 
     1996''.
       (2) Paragraph (2) of section 4081(d), as amended by section 
     11651 of this Act, is amended by striking ``January 1, 1996'' 
     and inserting ``October 1, 1996''.
       (b) Ticket Taxes.--Sections 4261(g) and 4271(d) are each 
     amended by striking ``January 1, 1996'' and inserting 
     ``October 1, 1996''.
       (c) Transfer to Airport and Airway Trust Fund.--
       (1) Subsection (b) of section 9502 is amended by striking 
     ``January 1, 1996'' each place it appears and inserting 
     ``October 1, 1996''.
       (2) Paragraph (3) of section 9502(f) is amended by striking 
     ``December 31, 1995'' and inserting ``September 30, 1996''.

     SEC. 11118. 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''.

             CHAPTER 2--SUNSET OF LOW-INCOME HOUSING CREDIT

     SEC. 11121. SUNSET OF LOW-INCOME HOUSING CREDIT.

       (a) Repeal of Reallocation of Unused Credits Among 
     States.--Subparagraph (D) of section 42(h)(3) is amended by 
     adding at the end the following new clause:
       ``(v) Termination.--No amount may be allocated under this 
     paragraph for any calendar year after 1995.''
       (b) Termination.--Section 42 is amended by adding at the 
     end the following new subsection:
       ``(o) Termination.--
       ``(1) In general.--Except as provided in paragraph (2)--
       ``(A) clause (i) of subsection (h)(3)(C) shall not apply to 
     any amount allocated after December 31, 1997, and
       ``(B) subsection (h)(4) shall not apply to any building 
     placed in service after such date.
       ``(2) Exception for bond-financed buildings in progress.--
     For purposes of paragraph (1)(B), a building shall be treated 
     as placed in service before January 1, 1998, if--
       ``(A) the bonds with respect to such building are issued 
     before such date,
       ``(B) the taxpayer's basis in the project (of which the 
     building is a part) as of December 31, 1997, is more than 10 
     percent of the taxpayer's reasonably expected basis in such 
     project as of December 31, 1999, and
       ``(C) such building is placed in service before January 1, 
     2000.''

    CHAPTER 3--EXTENSIONS OF SUPERFUND AND OIL SPILL LIABILITY TAXES

     SEC. 11131. EXTENSION OF HAZARDOUS SUBSTANCE SUPERFUND TAXES.

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

     SEC. 11132. 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 4--EXTENSIONS RELATING TO FUEL TAXES

     SEC. 11141. 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. 11142. 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 
     ``July 1, 1996''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 11143. EXEMPTION FROM DIESEL FUEL DYEING REQUIREMENTS 
                   WITH RESPECT TO CERTAIN STATES.

       (a) In General.--Section 4082 (relating to exemptions for 
     diesel fuel) is amended by redesignating subsections (c) and 
     (d) as subsections (d) and (e), respectively, and by 
     inserting after subsection (b) the following new subsection:
       ``(c) Exception to Dyeing Requirements.--Paragraph (2) of 
     subsection (a) shall not apply with respect to any diesel 
     fuel--
       ``(1) removed, entered, or sold in a State for ultimate 
     sale or use in an area of such State on or after the date on 
     which such area is exempted from the fuel dyeing requirements 
     under subsection (i) of section 211 of the Clean Air Act (as 
     in effect on the date of the enactment of this subsection) by 
     the Administrator of the Environmental Protection Agency 
     under paragraph (4) of such subsection (i) (as so in effect), 
     and
       ``(2) the use of which is certified pursuant to regulations 
     issued by the Secretary.''
       (b) Effective Date.--The amendments made by this section 
     shall take effect on the first day of the first calendar 
     quarter beginning after the date of the enactment of this 
     Act.

     SEC. 11144. 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.--
       ``(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 July 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--PERMANENT EXTENSION OF FUTA EXEMPTION FOR ALIEN AGRICULTURAL 
                                WORKERS

     SEC. 11151. FUTA EXEMPTION FOR ALIEN AGRICULTURAL WORKERS.

       (a) In General.--Subparagraph (B) of section 3306(c)(1) 
     (defining employment) is amended by striking ``before January 
     1, 1995,''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to services performed after December 31, 1994.

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

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

       (a) General Rule.--Subparagraph (D) of section 6103(l)(7) 
     (relating to disclosure of return information to Federal, 
     State, and local agencies administering certain programs) is 
     amended by striking ``Clause (viii) shall not apply after 
     September 30, 1998.'' and inserting ``Clause (viii) shall not 
     apply after September 30, 2002.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the date of the enactment of this Act.
            Subtitle F--Taxpayer Bill of Rights 2 Provisions

     SEC. 11201. EXPANSION OF AUTHORITY TO ABATE INTEREST.

       (a) General Rule.--Paragraph (1) of section 6404(e) 
     (relating to abatement of interest in certain cases) is 
     amended--
       (1) by inserting ``unreasonable'' before ``error'' each 
     place it appears in subparagraphs (A) and (B), and
       (2) by striking ``in performing a ministerial act'' each 
     place it appears and inserting ``in performing a ministerial 
     or managerial act''.
       (b) Clerical Amendment.--The subsection heading for 
     subsection (e) of section 6404 is amended--
       (1) by striking ``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. 11202. EXTENSION OF INTEREST-FREE PERIOD FOR PAYMENT OF 
                   TAX AFTER NOTICE AND DEMAND.

       (a) General Rule.--Paragraph (3) of section 6601(e) 
     (relating to payments made within 10 

[[Page H 13520]]
     days after notice and demand) is amended to read as follows:
       ``(3) Payments made within specified period after notice 
     and demand.--If notice and demand is made for payment of any 
     amount and if such amount is paid within 21 calendar days (10 
     business days if the amount for which such notice and demand 
     is made equals or exceeds $100,000) after the date of such 
     notice and demand, interest under this section on the amount 
     so paid shall not be imposed for the period after the date of 
     such notice and demand.''
       (b) Conforming Amendments.--
       (1) Subparagraph (A) of section 6601(e)(2) is amended by 
     striking ``10 days from the date of notice and demand 
     therefor'' and inserting ``21 calendar days from the date of 
     notice and demand therefor (10 business days if the amount 
     for which such notice and demand is made equals or exceeds 
     $100,000)''.
       (2) Paragraph (3) of section 6651(a) is amended by striking 
     ``10 days of the date of the notice and demand therefor'' and 
     inserting ``21 calendar days from the date of notice and 
     demand therefor (10 business days if the amount for which 
     such notice and demand is made equals or exceeds $100,000)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply in the case of any notice and demand given after 
     June 30, 1996.

     SEC. 11203. 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 redesignating the following subparagraphs 
     accordingly.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 11204. 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. 11205. 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. 11206. INCREASED LIMIT ON ATTORNEY FEES.

       (a) In General.--Paragraph (1) of section 7430(c) (defining 
     reasonable litigation costs) is amended--
       (1) by striking ``$75'' in clause (iii) of subparagraph (B) 
     and inserting ``$110'',
       (2) by striking ``an increase in the cost of living or'' in 
     clause (iii) of subparagraph (B), and
       (3) by adding after clause (iii) the following:
     ``In the case of any calendar year beginning after 1996, the 
     dollar amount referred to in clause (iii) 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 `calendar year 1995' 
     for `calendar year 1992' in subparagraph (B) thereof. If any 
     dollar amount after being increased under the preceding 
     sentence is not a multiple of $10, such dollar amount shall 
     be rounded to the nearest multiple of $10.''
       (b) Effective Date.--The amendment made by this section 
     shall apply in the case of proceedings commenced after the 
     date of the enactment of this Act.

     SEC. 11207. 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 amendment made by this section 
     shall apply in the case of proceedings commenced after the 
     date of the enactment of this Act.

     SEC. 11208. INCREASE IN LIMIT ON RECOVERY OF CIVIL DAMAGES 
                   FOR UNAUTHORIZED COLLECTION ACTIONS.

       (a) General Rule.--Subsection (b) of section 7433 (relating 
     to damages) is amended by striking ``$100,000'' and inserting 
     ``$1,000,000''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to actions by officers or employees of the 
     Internal Revenue Service after the date of the enactment of 
     this Act.

     SEC. 11209. 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 the 
     subparagraph:
       ``(I) any enrolled agent.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to summonses issued after the date of the 
     enactment of this Act.

     SEC. 11210. 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. 11251. 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. 11252. 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 H 13521]]

       ``(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. 11253. 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. 11254. 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

      CHAPTER 1--EXCISE TAX ON AMOUNTS OF PRIVATE EXCESS BENEFITS

     SEC. 11271. EXCISE TAXES FOR FAILURE BY CERTAIN CHARITABLE 
                   ORGANIZATIONS TO MEET CERTAIN QUALIFICATION 
                   REQUIREMENTS.

       (a) In General.--Chapter 42 (relating to private 
     foundations and certain other tax-exempt organizations) is 
     amended by redesignating subchapter D as subchapter E and by 
     inserting after subchapter C the following new subchapter:
  ``Subchapter D--Failure By Certain Charitable Organizations To Meet 
                   Certain Qualification Requirements

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

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

       ``(a) Initial Taxes.--
       ``(1) On the disqualified person.--There is hereby imposed 
     on each excess benefit transaction a tax equal to 25 percent 
     of the excess benefit. The tax imposed by this paragraph 
     shall be paid by any disqualified person referred to in 
     subsection (f)(1) with respect to such transaction.
       ``(2) On the management.--In any case in which a tax is 
     imposed by paragraph (1), there is hereby imposed on the 
     participation of any organization manager in the excess 
     benefit transaction, knowing that it is such a transaction, a 
     tax equal to 10 percent of the excess benefit, unless such 
     participation is not willful and is due to reasonable cause. 
     The tax imposed by this paragraph shall be paid by any 
     organization manager who participated in the excess benefit 
     transaction.
       ``(b) Additional Tax On the Disqualified Person.--In any 
     case in which an initial tax is imposed by subsection (a)(1) 
     on an excess benefit transaction and the excess benefit 
     involved in such transaction is not corrected within the 
     taxable period, there is hereby imposed a tax equal to 200 
     percent of the excess benefit involved. The tax imposed by 
     this subsection shall be paid by any disqualified person 
     referred to in subsection (f)(1) with respect to such 
     transaction.
       ``(c) Excess Benefit Transaction; Excess Benefit.--For 
     purposes of this section--
       ``(1) Excess benefit transaction.--
       ``(A) In general.--The term `excess benefit transaction' 
     means any transaction in which an economic benefit is 
     provided by an applicable tax-exempt organization directly or 
     indirectly to or for the use of any disqualified person if 
     the value of the economic benefit provided exceeds the value 
     of the consideration (including the performance of services) 
     received for providing such benefit. For purposes of the 
     preceding sentence, an economic benefit shall not be treated 
     as consideration for the performance of services unless such 
     organization clearly indicated its intent to so treat such 
     benefit.
       ``(B) Excess benefit.--The term `excess benefit' means the 
     excess referred to in subparagraph (A).
       ``(2) Authority to include certain other private 
     inurement.--To the extent provided in regulations prescribed 
     by the Secretary, the term `excess benefit transaction' 
     includes any transaction in which the amount of any economic 
     benefit provided to or for the use of a disqualified person 
     is determined in whole or in part by the revenues of 1 or 
     more activities of the organization but only if such 
     transaction results in inurement not permitted under 
     paragraph (3) or (4) of section 501(c), as the case may be. 
     In the case of any such transaction, the excess benefit shall 
     be the amount of the inurement not so permitted.
       ``(d) Special Rules.--For purposes of this section--
       ``(1) Joint and several liability.--If more than 1 person 
     is liable for any tax imposed by subsection (a) or subsection 
     (b), all such persons shall be jointly and severally liable 
     for such tax.
       ``(2) Limit for management.--With respect to any 1 excess 
     benefit transaction, the maximum amount of the tax imposed by 
     subsection (a)(2) shall not exceed $10,000.
       ``(e) Applicable Tax-Exempt Organization.--For purposes of 
     this subchapter, the term `applicable tax-exempt 
     organization' means--
       ``(1) any organization which (without regard to any excess 
     benefit) would be described in paragraph (3) or (4) of 
     section 501(c) and exempt from tax under section 501(a), and
       ``(2) any organization which was described in paragraph (1) 
     at any time during the 2-year period ending on the date of 
     the transaction.
     Such term shall not include a private foundation (as defined 
     in section 509(a)).
       ``(f) Other Definitions.--For purposes of this section--
       ``(1) Disqualified person.--The term `disqualified person' 
     means, with respect to any transaction--
       ``(A) any person who was, at any time during the 5-year 
     period ending on the date of such transaction, in a position 
     to exercise substantial influence over the affairs of the 
     organization,
       ``(B) a member of the family of an individual described in 
     subparagraph (A), and
       ``(C) a 35-percent controlled entity.
       ``(2) Organization manager.--The term `organization 
     manager' means, with respect to any applicable tax-exempt 
     organization, any officer, director, or trustee of such 
     organization (or any individual having powers or 
     responsibilities similar to those of officers, directors, or 
     trustees of the organization).
       ``(3) 35-percent controlled entity.--
       ``(A) In general.--The term `35-percent controlled entity' 
     means--
       ``(i) a corporation in which persons described in 
     subparagraph (A) or (B) of paragraph (1) own more than 35 
     percent of the total combined voting power,
       ``(ii) a partnership in which such persons own more than 35 
     percent of the profits interest, and
       ``(iii) a trust or estate in which such persons own more 
     than 35 percent of the beneficial interest.
       ``(B) Constructive ownership rules.--Rules similar to the 
     rules of paragraphs (3) and (4) of section 4946(a) shall 
     apply for purposes of this paragraph.
       ``(4) Family members.--The members of an individual's 
     family shall be determined under section 4946(d); except that 
     such members also shall include the brothers and sisters 
     (whether by the whole or half blood) of the individual and 
     their spouses.
       ``(5) Taxable period.--The term `taxable period' means, 
     with respect to any excess benefit transaction, the period 
     beginning with the date on which the transaction occurs and 
     ending on the earliest of--

[[Page H 13522]]

       ``(A) the date of mailing a notice of deficiency under 
     section 6212 with respect to the tax imposed by subsection 
     (a)(1), or
       ``(B) the date on which the tax imposed by subsection 
     (a)(1) is assessed.
       ``(6) Correction.--The terms `correction' and `correct' 
     mean, with respect to any excess benefit transaction, undoing 
     the excess benefit to the extent possible, and where fully 
     undoing the excess benefit is not possible, such additional 
     corrective action as is prescribed by the Secretary by 
     regulations.''
       (b) Application of Private Inurement Rule to Tax-Exempt 
     Organizations Described in Section 501(c)(4).--
       (1) Paragraph (4) of section 501(c) is amended by inserting 
     ``(A)'' after ``(4)'' and by adding at the end the following:
       ``(B) Subparagraph (A) shall not apply to an entity unless 
     no part of the net earnings of such entity inures to the 
     benefit of any private shareholder or individual.''
       (2) In the case of an organization operating on a 
     cooperative basis which, before the date of the enactment of 
     this Act, was determined by the Secretary of the Treasury or 
     his delegate, to be described in section 501(c)(4) of the 
     Internal Revenue Code of 1986 and exempt from tax under 
     section 501(a) of such Code, the allocation or return of net 
     margins or capital to the members of such organization in 
     accordance with its incorporating statute and bylaws shall 
     not be treated for purposes of such Code as the inurement of 
     the net earnings of such organization to the benefit of any 
     private shareholder or individual. The preceding sentence 
     shall apply only if such statute and bylaws are substantially 
     as such statute and bylaws were in existence on the date of 
     the enactment of this Act.
       (c) Technical and Conforming Amendments.--
       (1) Subsection (e) of section 4955 is amended--
       (A) by striking ``Section 4945'' in the heading and 
     inserting ``Sections 4945 and 4958'', and
       (B) by inserting before the period ``or an excess benefit 
     for purposes of section 4958''.
       (2) Subsections (a), (b), and (c) of section 4963 are each 
     amended by inserting ``4958,'' after ``4955,''.
       (3) Subsection (e) of section 6213 is amended by inserting 
     ``4958 (relating to private excess benefit),'' before 
     ``4971''.
       (4) Paragraphs (2) and (3) of section 7422(g) are each 
     amended by inserting ``4958,'' after ``4955,''.
       (5) Subsection (b) of section 7454 is amended by inserting 
     ``or whether an organization manager (as defined in section 
     4958(f)(2)) has `knowingly' participated in an excess benefit 
     transaction (as defined in section 4958(c)),'' after 
     ``section 4912(b),''.
       (6) The table of subchapters for chapter 42 is amended by 
     striking the last item and inserting the following:

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

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

     SEC. 11272. REPORTING OF CERTAIN EXCISE TAXES AND OTHER 
                   INFORMATION.

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

     SEC. 11273. INCREASE IN PENALTIES ON EXEMPT ORGANIZATIONS FOR 
                   FAILURE TO FILE COMPLETE AND TIMELY ANNUAL 
                   RETURNS.

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

                      CHAPTER 2--OTHER PROVISIONS

     SEC. 11276. 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. 11277. 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 

[[Page H 13523]]
     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 
     published by or on behalf of the payee organization 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. 11278. 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.
       ``(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. 11279. 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).
              Subtitle I--Tax Reform and Other Provisions

              CHAPTER 1--PROVISIONS RELATING TO BUSINESSES

     SEC. 11301. TAX TREATMENT OF CERTAIN EXTRAORDINARY DIVIDENDS.

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

     SEC. 11302. REGISTRATION OF CONFIDENTIAL CORPORATE TAX 
                   SHELTERS.

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

[[Page H 13524]]

       (2) Subparagraph (A) of section 6707(a)(1) is amended by 
     striking ``paragraph (2)'' and inserting ``paragraph (2) or 
     (3), as the case may be''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to any tax shelter (as defined in section 6111(d) 
     of the Internal Revenue Code of 1986, as amended by this 
     section) interests in which are offered to potential 
     participants after the Secretary of the Treasury prescribes 
     guidance with respect to meeting requirements added by such 
     amendments.

     SEC. 11303. DENIAL OF DEDUCTION FOR INTEREST ON LOANS WITH 
                   RESPECT TO COMPANY-OWNED INSURANCE.

       (a) In General.--Paragraph (4) of section 264(a) is 
     amended--
       (1) by inserting ``, or any endowment or annuity contracts 
     owned by the taxpayer covering any individual,'' after ``the 
     life of any individual'', and
       (2) by striking all that follows ``carried on by the 
     taxpayer'' and inserting a period.
       (b) Exception for Contracts Relating to Key Persons; 
     Permissible Interest Rates.--Section 264 is amended--
       (1) by striking ``Any'' in subsection (a)(4) and inserting 
     ``Except as provided in subsection (d), any'', and
       (2) by adding at the end the following new subsection:
       ``(d) Special Rules For Application of Subsection (a)(4).--
       ``(1) Exception for key persons.--Subsection (a)(4) shall 
     not apply to any interest paid or accrued on any indebtedness 
     with respect to policies or contracts covering an individual 
     who is a key person to the extent that the aggregate amount 
     of such indebtedness with respect to policies and contracts 
     covering such individual does not exceed $50,000.
       ``(2) Interest rate cap on key persons and pre-1986 
     contracts.--
       ``(A) In general.--No deduction shall be allowed by reason 
     of paragraph (1) or the last sentence of subsection (a) with 
     respect to interest paid or accrued for any month to the 
     extent the amount of such interest exceeds the amount which 
     would have been determined if the applicable rate of interest 
     were used for such month.
       ``(B) Applicable rate of interest.--For purposes of 
     subparagraph (A)--
       ``(i) In general.--The applicable rate of interest for any 
     month is the rate of interest described as Moody's Corporate 
     Bond Yield Average-Monthly Average Corporates as published by 
     Moody's Investors Service, Inc., or any successor thereto, 
     for such month.
       ``(ii) Pre-1986 contract.--In the case of indebtedness on a 
     contract to which the last sentence of subsection (a) 
     applies--

       ``(I) which is a contract providing a fixed rate of 
     interest, the applicable rate of interest for any month shall 
     be the Moody's rate described in clause (i) for the month in 
     which the contract was purchased, or
       ``(II) which is a contract providing a variable rate of 
     interest, the applicable rate of interest for any month in an 
     applicable period shall be such Moody's rate for the last 
     month preceding such period.

     For purposes of subclause (II), the taxpayer shall elect an 
     applicable period for such contract on its return of tax 
     imposed by this chapter for its first taxable year ending on 
     or after October 13, 1995. Such applicable period shall be 
     for any number of months (not greater than 12) specified in 
     the election and may not be changed by the taxpayer without 
     the consent of the Secretary.
       ``(3) Key person.--For purposes of paragraph (1), the term 
     `key person' means an officer or 20-percent owner, except 
     that the number of individuals who may be treated as key 
     persons with respect to any taxpayer shall not exceed the 
     greater of--
       ``(A) 5 individuals, or
       ``(B) the lesser of 5 percent of the total officers and 
     employees of the taxpayer or 10 individuals.
       ``(4) 20-percent owner.--For purposes of this subsection, 
     the term `20-percent owner' means--
       ``(A) if the taxpayer is a corporation, any person who owns 
     directly 20 percent or more of the outstanding stock of the 
     corporation or stock possessing 20 percent or more of the 
     total combined voting power of all stock of the corporation, 
     or
       ``(B) if the taxpayer is not a corporation, any person who 
     owns 20 percent or more of the capital or profits interest in 
     the employer.
       ``(5) Aggregation rules.--
       ``(A) In general.--For purposes of paragraph (4)(A) and 
     applying the $50,000 limitation in paragraph (1)--
       ``(i) all members of a controlled group shall be treated as 
     1 taxpayer, and
       ``(ii) such limitation shall be allocated among the members 
     of such group in such manner as the Secretary may prescribe.
       ``(B) Controlled group.--For purposes of this paragraph, 
     all persons treated as a single employer under subsection (a) 
     or (b) of section 52 or subsection (m) or (o) of section 414 
     shall be treated as members of a controlled group.''.
       (c) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to interest paid or accrued after December 31, 1995.
       (2) Transition rule for existing indebtedness.--
       (A) In general.--In the case of--
       (i) indebtedness incurred before January 1, 1996, or
       (ii) indebtedness incurred before January 1, 1997 with 
     respect to any contract or policy entered into in 1994 or 
     1995,
     the amendments made by this section shall not apply to 
     qualified interest paid or accrued on such indebtedness after 
     October 13, 1995, and before January 1, 1999.
       (B) Qualified interest.--For purposes of subparagraph (A), 
     the qualified interest with respect to any indebtedness for 
     any month is the amount of interest which would be paid or 
     accrued for such month on such indebtedness if--
       (i) in the case of any interest paid or accrued after 
     December 31, 1995, indebtedness with respect to no more than 
     20,000 insured individuals were taken into account, and
       (ii) the lesser of the following rates of interest were 
     used for such month:

       (I) The rate of interest specified under the terms of the 
     indebtedness as in effect on October 13, 1995 (and without 
     regard to modification of such terms after such date).
       (II) The 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.

     For purposes of clause (i), all persons treated as a single 
     employer under subsection (a) or (b) of section 52 of the 
     Internal Revenue Code of 1986 or subsection (m) or (o) of 
     section 414 of such Code shall be treated as one person.
       (C) Applicable percentage.--For purposes of subparagraph 
     (B), the applicable percentage is as follows:

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

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

     SEC. 11304. 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. 11305. TERMINATION OF PUERTO RICO AND POSSESSION TAX 
                   CREDIT.

       (a) In General.--Section 936 is amended by adding at the 
     end the following new subsection:

[[Page H 13525]]

       ``(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.--
     Except as provided in paragraph (3)--
       ``(A) In general.--In the case of an existing credit 
     claimant to which subsection (a)(4)(B) does not apply, the 
     credit determined under subsection (a)(1)(A) shall be allowed 
     for taxable years beginning after December 31, 1995, and 
     before January 1, 2002.
       ``(B) Special rule for reduced credit.--
       ``(i) In general.--In the case of an existing credit 
     claimant to which subsection (a)(4)(B) applies, the credit 
     determined under subsection (a)(1)(A) shall be allowed for 
     taxable years beginning after December 31, 1995, and before 
     January 1, 1998.
       ``(ii) 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) Additional restricted credit.--
       ``(A) In general.--In the case of an existing credit 
     claimant--
       ``(i) the credit under subsection (a)(1)(A) shall be 
     allowed for the period beginning with the first taxable year 
     after the last taxable year to which subparagraph (A) or (B) 
     of paragraph (2), whichever is appropriate, applied and 
     ending with the last taxable year beginning before January 1, 
     2006, except that
       ``(ii) the aggregate amount of taxable income taken into 
     account under subsection (a)(1)(A) for any such taxable year 
     shall not exceed the adjusted base period income of such 
     claimant.
       ``(B) Coordination with subsection (a)(4).--The amount of 
     income described in subsection (a)(1)(A) which is taken into 
     account in applying subsection (a)(4) shall be such income as 
     reduced under this paragraph.
       ``(4) Adjusted base period income.--For purposes of 
     paragraph (3)--
       ``(A) In general.--The term `adjusted base period income' 
     means the average of the inflation-adjusted possession 
     incomes of the corporation for each base period year.
       ``(B) Inflation-adjusted possession income.--For purposes 
     of subparagraph (A), the inflation-adjusted possession income 
     of any corporation for any base period year shall be an 
     amount equal to the sum of--
       ``(i) the possession income of such corporation for such 
     base period year, plus
       ``(ii) such possession income multiplied by the inflation 
     adjustment percentage for such base period year.
       ``(C) Inflation adjustment percentage.--For purposes of 
     subparagraph (B), the inflation adjustment percentage for any 
     base period year means the percentage (if any) by which--
       ``(i) the CPI for 1995, exceeds
       ``(ii) the CPI for the calendar year in which the base 
     period year for which the determination is being made ends.
     For purposes of the preceding sentence, the CPI for any 
     calendar year is the CPI (as defined in section 1(f)(5)) for 
     such year under section 1(f)(4).
       ``(D) Increase in inflation adjustment percentage for 
     growth during base years.--The inflation adjustment 
     percentage (determined under subparagraph (C) without regard 
     to this subparagraph) for each of the 5 taxable years 
     referred to in paragraph (5)(A) shall be increased by--
       ``(i) 5 percentage points in the case of a taxable year 
     ending during the 1-year period ending on October 13, 1995;
       ``(ii) 10.25 percentage points in the case of a taxable 
     year ending during the 1-year period ending on October 13, 
     1994;
       ``(iii) 15.76 percentage points in the case of a taxable 
     year ending during the 1-year period ending on October 13, 
     1993;
       ``(iv) 21.55 percentage points in the case of a taxable 
     year ending during the 1-year period ending on October 13, 
     1992; and
       ``(v) 27.63 percentage points in the case of a taxable year 
     ending during the 1-year period ending on October 13, 1991.
       ``(5) Base period year.--For purposes of this subsection--
       ``(A) In general.--The term `base period year' means each 
     of 3 taxable years which are among the 5 most recent taxable 
     years of the corporation ending before October 14, 1995, 
     determined by disregarding--
       ``(i) one taxable year for which the corporation had the 
     largest inflation-adjusted possession income, and
       ``(ii) one taxable year for which the corporation had the 
     smallest inflation-adjusted possession income.
       ``(B) Corporations not having significant possession income 
     throughout 5-year period.--
       ``(i) In general.--If a corporation does not have 
     significant possession income for each of the most recent 5 
     taxable years ending before October 14, 1995, then, in lieu 
     of applying subparagraph (A), the term `base period year' 
     means only those taxable years (of such 5 taxable years) for 
     which the corporation has significant possession income; 
     except that, if such corporation has significant possession 
     income for 4 of such 5 taxable years, the rule of 
     subparagraph (A)(ii) shall apply.
       ``(ii) Special rule.--If there is no year (of such 5 
     taxable years) for which a corporation has significant 
     possession income--

       ``(I) the term `base period year' means the first taxable 
     year ending on or after October 14, 1995, but
       ``(II) the amount of possession income for such year which 
     is taken into account under paragraph (4) shall be the amount 
     which would be determined if such year were a short taxable 
     year ending on September 30, 1995.

       ``(iii) Significant possession income.--For purposes of 
     this subparagraph, the term `significant possession income' 
     means possession income which exceeds 2 percent of the 
     possession income of the taxpayer for the taxable year (of 
     the period of 6 taxable years ending with the first taxable 
     year ending on or after October 14, 1995) having the greatest 
     possession income.
       ``(C) Election to use one base period year.--
       ``(i) In general.--At the election of the taxpayer, the 
     term `base period year' means--

       ``(I) only the last taxable year of the corporation ending 
     in calendar year 1992, or
       ``(II) a deemed taxable year which includes the first ten 
     months of calendar year 1995.

       ``(ii) Base period income for 1995.--In determining the 
     adjusted base period income of the corporation for the deemed 
     taxable year under clause (i)(II), the possession income 
     shall be annualized and shall be determined without regard to 
     any extraordinary item.
       ``(iii) Election.--An election under this subparagraph by 
     any possession corporation may be made only for the 
     corporation's first taxable year beginning after December 31, 
     1995, for which it is a possession corporation. The rules of 
     subclauses (II) and (III) of subsection (a)(4)(B)(iii) shall 
     apply to the election under this subparagraph.
       ``(D) Acquisitions and dispositions.--Rules similar to the 
     rules of subparagraphs (A) and (B) of section 41(f)(3) shall 
     apply for purposes of this subsection.
       ``(6) Possession income.--For purposes of this subsection, 
     the term `possession income' means the income referred to in 
     subsection (a)(1)(A), except that there shall not be taken 
     into account any such income from an applicable possession 
     (as defined in paragraph (8)(B)). In no event shall 
     possession income be treated as being less than zero.
       ``(7) Short years.--If the current year or a base period 
     year is a short taxable year, the application of this 
     subsection shall be made with such annualizations as the 
     Secretary shall prescribe.
       ``(8) 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.
       ``(9) Existing credit claimant.--For purposes of this 
     subsection--
       ``(A) In general.--The term `existing credit claimant' 
     means a corporation--
       ``(i) which was actively conducting a trade or business in 
     a possession on October 13, 1995, and
       ``(ii) with respect to which an election under this section 
     is 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 adds a 
     substantial new line of business, such corporation shall 
     cease to be treated as an existing credit claimant 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, 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.
       ``(D) Special rule for applicable possessions.--In 
     determining under paragraph (8) whether a taxpayer is an 
     existing credit claimant with respect to an applicable 
     possession, this paragraph shall be applied separately with 
     respect to such possession.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 11306. 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 before the close of 
     the 10th taxable year following the taxable year in which the 
     property was placed in service in connection with the 
     ultimate use of the property by, or the ultimate sale of 
     merchandise to, persons who are not related persons (within 
     the meaning of section 267(b)) to the taxpayer,
       ``(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

[[Page H 13526]]

       ``(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 paragraph (2), 
     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. 11307. TRANSFERS OF EXCESS PENSION ASSETS.

       (a) In General.--Section 420 (relating to transfers of 
     excess pension assets to retiree health accounts) is amended 
     by adding at the end the following new subsection:
       ``(f) Similar Rules To Apply to Other Transfers of Excess 
     Plan Assets.--
       ``(1) In general.--If there is a qualified employee benefit 
     transfer of any excess pension assets of a defined benefit 
     plan (other than a multiemployer plan) to an employer--
       ``(A) a trust which is part of such plan shall not be 
     treated as failing to meet the requirements of section 401(a) 
     solely by reason of such transfer (or any other action 
     authorized under this section), and
       ``(B) such transfer shall not be treated as--
       ``(i) an employer reversion for purposes of section 4980, 
     or
       ``(ii) a prohibited transaction for purposes of section 
     4975.
     The gross income of the employer shall include the amount of 
     any qualified employee benefit transfer made during the 
     taxable year.
       ``(2) Qualified employee benefit transfer.--For purposes of 
     this section--
       ``(A) In general.--The term `qualified employee benefit 
     transfer' means a transfer--
       ``(i) of excess pension assets of a defined benefit plan to 
     the employer, and
       ``(ii) with respect to which--

       ``(I) the use requirements of paragraph (3) are met, and
       ``(II) the requirements of subsection (c)(2)(A) are met 
     (determined by treating such transfer as a qualified 
     transfer).

       ``(B) Limitation on amounts transferred.--The amount of 
     excess pension assets which may be transferred in qualified 
     employee benefit transfers during any taxable year shall not 
     exceed the amount which is reasonably estimated to be the 
     amount the employer maintaining the plan will pay (whether 
     directly or through reimbursement) during the taxable year 
     for qualified current employee benefit liabilities.
       ``(C) Coordination with transfers to retiree health 
     accounts.--Such term shall not include any qualified transfer 
     (as defined in subsection (b)).
       ``(D) Expiration.--No transfer in any taxable year 
     beginning after December 31, 2001, shall be treated as a 
     qualified employee benefit transfer.
       ``(3) Restrictions on use of transferred assets.--
       ``(A) In general.--Any assets transferred to an employer in 
     a qualified employee benefit transfer shall be used only to 
     pay qualified current employee benefit liabilities for the 
     taxable year of the transfer (whether directly or through 
     reimbursement).
       ``(B) Amounts not used to pay benefits.--An employer shall 
     transfer to a plan an amount equal to any assets transferred 
     out of the plan in a qualified employee benefit transfer 
     which are not used as provided in subparagraph (A). Such 
     amount shall be treated in the same manner as amounts are 
     treated under subsection (c)(1)(B), except that allocable 
     income shall be determined by using the Federal short-term 
     rate under section 1274(d).
       ``(C) Qualified current employee benefit liabilities.--For 
     purposes of this subsection--
       ``(i) In general.--The term `qualified current employee 
     benefit liabilities' means, with respect to any taxable year, 
     the aggregate amounts (including administrative expenses) for 
     which a deduction is allowable to the employer for such 
     taxable year with respect to applicable employee benefits.
       ``(ii) Applicable employee benefits.--The term `applicable 
     employee benefits' means--

       ``(I) contributions to a trust described in section 401(a) 
     which is exempt from tax under section 501(a),
       ``(II) benefits under an accident or health plan (within 
     the meaning of section 105),
       ``(III) disability benefits,
       ``(IV) benefits under an educational assistance program of 
     the employer described in section 127(b), and
       ``(V) benefits under a dependent care assistance program of 
     the employer described in section 129(d).

       ``(4) Definition and special rules.--For purposes of this 
     subsection--
       ``(A) Excess pension assets.--The term `excess pension 
     assets' has the meaning given such term by subsection (e)(2).
       ``(B) Coordination with section 412.--In the case of a 
     qualified employee benefit transfer--
       ``(i) any assets transferred in a plan year on or before 
     the valuation date for such year (and any income allocable 
     thereto) shall, for purposes of section 412, be treated as 
     assets in the plan as of the valuation date for such year, 
     and
       ``(ii) the plan shall be treated as having a net experience 
     loss under section 412(b)(2)(B)(iv) in an amount equal to the 
     amount of such transfer and for which amortization charges 
     begin for the first plan year after the plan year in which 
     such transfer occurs, except that such section shall be 
     applied to such amount by substituting `10 plan years' for `5 
     plan years'.''
       (b) Excess Assets.--Section 420(e)(2) is amended to read as 
     follows:
       ``(2) Excess pension assets.--The term `excess pension 
     assets' means the excess (if any) of--
       ``(A) the amount determined under section 412(c)(7)(A)(ii), 
     over
       ``(B) the greater of--
       ``(i) the amount determined under section 
     412(c)(7)(A)(i)(II), or
       ``(ii) 125 percent of termination liability determined 
     under section 414(l), except that the actuarial assumptions 
     used in making such determinations shall be the assumptions 
     used by the Pension Benefit Guaranty Corporation for single-
     employer plan termination purposes under regulations under 
     title IV of the Employee Retirement Income Security Act of 
     1974.
     The determination under the preceding sentence with respect 
     to any transfer shall be made as of the date of the transfer. 
     No substantial changes in the regulations described in clause 
     (ii) which are made after the date of the enactment of the 
     Revenue Reconciliation Act of 1995 shall be taken into 
     account for purposes of such clause.''
       (c) Taxpayers in Bankruptcy May Not Make Transfers.--
     Section 420(e) is amended by adding at the end the following 
     new paragraph:
       ``(5) Exclusion of taxpayers in bankruptcy.--No qualified 
     transfer or qualified employee benefit transfer may be made 
     under this section by a taxpayer if--
       ``(A) the taxpayer has filed, or has had filed against it, 
     a petition in a title 11 or similar case (within the meaning 
     of section 368(a)(3)), and
       ``(B) such case is still pending.''
       (d) Conforming Amendments to ERISA.--
       (1) Notice.--Section 101(e) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1021(e)) is amended--

[[Page H 13527]]

       (A) by inserting ``or a qualified employee benefit 
     transfer,'' after ``to a health benefits account,'' in 
     paragraphs (1) and (2)(A),
       (B) by inserting ``or qualified employee benefits'' after 
     ``the amount of health benefits liabilities'' in paragraph 
     (1),
       (C) in paragraph (3)--
       (i) by striking ``January 1, 1995'' and inserting ``the 
     date of the enactment of the Revenue Reconciliation Act of 
     1995'', and
       (ii) by striking ``paragraph (1)'' and inserting ``this 
     subsection'', and
       (D) by striking ``to Health Benefits Accounts'' in the 
     heading.
       (2) Exclusive benefit.--Paragraph (1) of section 403(c) of 
     such Act (29 U.S.C. 1103(c)(1)) is amended by striking 
     ``January 1, 1995'' and inserting ``the date of the enactment 
     of the Revenue Reconciliation Act of 1995''.
       (3) Exemption from prohibited transaction.--Paragraph (13) 
     of section 408(b) of such Act (29 U.S.C. 1108(b)(13)) is 
     amended--
       (A) by striking ``retiree health account'' and inserting 
     ``health benefits account'',
       (B) by inserting before the period at the end ``, or any 
     transfer of such assets in a taxable year beginning before 
     January 1, 2002, in a qualified employee benefit transfer 
     permitted under such section 420'', and
       (C) by striking ``January 1, 1995'' and inserting ``the 
     date of the enactment of the Revenue Reconciliation Act of 
     1995''.
       (e) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to transfers on and after the date of the enactment of 
     this Act.
       (2) Qualified transfers.--To the extent the amendments made 
     by subsections (b), (c), and (d) apply to qualified transfers 
     under section 420 of the Internal Revenue Code of 1986 (as in 
     effect on the day before the date of the enactment of this 
     Act), such amendments shall apply to transfers occurring 
     after December 31, 1995.

     SEC. 11308. 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--
       (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. 11311. 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 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 which--
       ``(1) are awarded in a civil action--
       ``(A) which is a wrongful death action, and
       ``(B) with respect to which applicable State law (as in 
     effect on February 1, 1996, 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 February 1, 1996, that only 
     punitive damages may be awarded in such an action, and
       ``(2) would have been excludable from gross income under 
     subsection (a)(2) as in effect for amounts received on 
     December 31, 1995.
     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. 11312. 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, 1996.

        CHAPTER 3--REFORMS RELATING TO NONRECOGNITION PROVISIONS

     SEC. 11321. 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. 11322. 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 11321) 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--

[[Page H 13528]]

       ``(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. 11331. 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. 11332. MODIFICATIONS TO EXCISE TAX ON OZONE-DEPLETING 
                   CHEMICALS.

       (a) In General.--Section 4682(d)(1) (relating to recycling) 
     is amended by inserting ``, or on any recycled halon imported 
     from any country which is a signatory to the Montreal 
     Protocol on Substances that Deplete the Ozone Layer'' before 
     the period at the end.
       (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. 11333. 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) a person engaged in the local furnishing of electric 
     energy or gas, directly or indirectly financed facilities for 
     such furnishing in whole or in part with exempt facility 
     bonds described in subsection (a)(8) issued before the date 
     of the enactment of this paragraph,
       ``(ii) such bonds would (but for this paragraph) cease to 
     be tax-exempt by reason of such person failing to meet the 
     local furnishing requirement of such section as a result of a 
     service area expansion by such person, and
       ``(iii) an election described in subparagraph (B) is made 
     by such person with respect to all such facilities of the 
     person,
     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 person agrees that--
       ``(i) no bond exempt from tax under section 103 and 
     described in subsection (a)(8) may be issued on or after the 
     date of the enactment of this paragraph with respect to the 
     facilities for the local furnishing of electric energy or 
     gas, or both of such person, other than such a bond issued to 
     refund another bond if the amount of such bond does not 
     exceed the outstanding amount of the refunded bond and the 
     maturity date of the refunding bond is not later than the 
     average maturity date of the refunded bonds to be refunded by 
     the issue of which the refunding bond is a part,
       ``(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 for such person 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 election.

       ``(C) Related persons.--For purposes of this paragraph, the 
     term `person' includes 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 on or after the date of the 
     enactment of this paragraph for tax-exempt bond financing for 
     the local furnishing of electric energy or gas unless such 
     person is engaged on such date in the local furnishing of the 
     energy source for which facilities are financed.''.

     SEC. 11334. TAX-EXEMPT BONDS FOR SALE OF ALASKA POWER 
                   ADMINISTRATION FACILITY.

       Sections 142(f)(4) (as added by section 11333(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. 11341. 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) Deferred compensation and charitable trusts.--
     Subparagraph (A) shall not apply with respect to a trust 
     which is--

       ``(I) described in section 402(b), 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.
       ``(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 

[[Page H 13529]]
     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.--
       ``(A) In general.--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).
       ``(B) Application of accumulation distribution rules.--For 
     purposes of applying section 668 in a case to which 
     subparagraph (A) applies, the applicable number of years for 
     purposes of section 668(a) shall be \1/2\ of the number of 
     years the trust has been in existence.
       ``(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 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 
     sections 11004 and 11045, 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. 11342. 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 

[[Page H 13530]]
     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 paragraph:
       ``(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.''.
       (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. 11343. 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.--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.
       ``(B) Compensatory trusts.--Except as provided in 
     regulations, paragraph (1) shall not apply to any portion of 
     a trust distributions from which are taxable as compensation 
     for services rendered.
       ``(3) Special rules.--Except as otherwise provided in 
     regulations prescribed by the Secretary--
       ``(A) a controlled foreign corporation (as defined in 
     section 957) shall be treated as a domestic corporation for 
     purposes of paragraph (1), and
       ``(B) paragraph (1) shall not apply for purposes of 
     applying section 1296.
       ``(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) Special rule where grantor is foreign person.--If
       ``(A) but for this subsection, a foreign person would be 
     treated as the owner of any portion of a trust, and
       ``(B) such trust has a beneficiary who is a United States 
     person,
     such beneficiary shall be treated as the grantor of such 
     portion to the extent such beneficiary has made transfers of 
     property by gift (directly or indirectly) to such foreign 
     person. For purposes of the preceding sentence, any gift 
     shall not be taken into account to the extent such gift would 
     be excluded from taxable gifts under section 2503(b).
       ``(6) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this subsection, including regulations 
     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. 11344. INFORMATION REPORTING REGARDING FOREIGN GIFTS.

       (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. 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) Cost-of-Living Adjustment.--In the case of any 
     taxable year beginning after December 31, 1996, the $10,000 
     amount under subsection (a) shall be increased by an amount 
     equal to the product of such amount and the cost-of-living 
     adjustment for such taxable year under section 1(f)(3), 
     except that subparagraph (B) thereof shall be applied by 
     substituting `1995' for `1992'.
       ``(e) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section.''.
       (b) Clerical Amendment.--The table of sections for such 
     subpart is amended by inserting after the item relating to 
     section 6039E the following new item:

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

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

     SEC. 11345. 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)--

[[Page H 13531]]

       ``(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 Trusts.--
       (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.--Except as provided in regulations, 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.--If any person described in paragraph 
     (1)(B) is related to more than one person, the grantor or 
     beneficiary to whom the treatment under this subsection 
     applies shall be determined under regulations prescribed by 
     the Secretary.
       ``(C) Exclusion of tax-exempts.--The term `United States 
     person' does not include any entity exempt from tax under 
     this chapter.
       ``(D) Trust not treated as simple trust.--Any trust which 
     is treated under this subsection as making a distribution 
     shall be treated as not described in section 651.
       ``(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) Loans from trusts.--The amendment made by subsection 
     (c) shall apply to loans of cash or marketable securities 
     after September 19, 1995.

     SEC. 11346. 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--TREATMENT OF INDIVIDUALS WHO LOSE UNITED STATES CITIZENSHIP

     SEC. 11348. REVISION OF INCOME, ESTATE, AND GIFT TAXES ON 
                   INDIVIDUALS WHO LOSE UNITED STATES CITIZENSHIP.

       (a) In General.--Subsection (a) of section 877 is amended 
     to read as follows:
       ``(a) Treatment of Expatriates.--
       ``(1) In general.--Every nonresident alien individual who, 
     within the 10-year period immediately preceding the close of 
     the taxable year, lost United States citizenship, unless such 
     loss did not have for 1 of its principal purposes the 
     avoidance of taxes under this subtitle or subtitle B, shall 
     be taxable for such taxable year in the manner provided in 
     subsection (b) if the tax imposed pursuant to such subsection 
     exceeds the tax which, without regard to this section, is 
     imposed pursuant to section 871.
       ``(2) Certain individuals treated as having tax avoidance 
     purpose.--For purposes of paragraph (1), an individual shall 
     be treated as having a principal purpose to avoid such taxes 
     if--
       ``(A) the average annual net income tax (as defined in 
     section 38(c)(1)) of such individual for the period of 5 
     taxable years ending before the date of the loss of United 
     States citizenship is greater than $100,000, or
       ``(B) the net worth of the individual as of such date is 
     $500,000 or more.
     In the case of the loss of United States citizenship in any 
     calendar year 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 `1994' 
     for `1992' in subparagraph (B) thereof. Any increase under 
     the preceding sentence shall be rounded to the nearest 
     multiple of $1,000.''
       (b) Exceptions.--
       (1) In general.--Section 877 is amended by striking 
     subsection (d), by redesignating subsection (c) as subsection 
     (d), and by inserting after subsection (b) the following new 
     subsection:
       ``(c) Tax Avoidance Not Presumed in Certain Cases.--
       ``(1) In general.--Subsection (a)(2) shall not apply to an 
     individual if--
       ``(A) such individual is described in a subparagraph of 
     paragraph (2) of this subsection, and
       ``(B) within the 1-year period beginning on the date of the 
     loss of United States citizenship, such individual submits a 
     ruling request for the Secretary's determination as to 
     whether such loss has for 1 of its principal purposes the 
     avoidance of taxes under this subtitle or subtitle B.
       ``(2) Individuals described.--
       ``(A) Dual citizenship, etc.--An individual is described in 
     this subparagraph if--
       ``(i) the individual became at birth a citizen of the 
     United States and a citizen of another country and continues 
     to be a citizen of such other country, or
       ``(ii) the individual becomes (not later than the close of 
     a reasonable period after loss of United States citizenship) 
     a citizen of the country in which--

       ``(I) such individual was born,
       ``(II) if such individual is married, such individual's 
     spouse was born, or
       ``(III) either of such individual's parents were born.

[[Page H 13532]]


       ``(B) Long-term foreign residents.--An individual is 
     described in this subparagraph if, for each year in the 10-
     year period ending on the date of loss of United States 
     citizenship, the individual was present in the United States 
     for 30 days or less. The rule of section 7701(b)(3)(D)(ii) 
     shall apply for purposes of this subparagraph.
       ``(C) Renunciation upon reaching age of majority.--An 
     individual is described in this subparagraph if the 
     individual's loss of United States citizenship occurs before 
     such individual attains age 18\1/2\.
       ``(D) Individuals specified in regulations.--An individual 
     is described in this subparagraph if the individual is 
     described in a category of individuals prescribed by 
     regulation by the Secretary.''
       (2) Technical amendment.--Paragraph (1) of section 877(b) 
     of such Code is amended by striking ``subsection (c)'' and 
     inserting ``subsection (d)''.
       (c) Treatment of Property Disposed of in Nonrecognition 
     Transactions; Treatment of Distributions From Certain 
     Controlled Foreign Corporations.--Subsection (d) of section 
     877, as redesignated by subsection (b), is amended to read as 
     follows:
       ``(d) Special Rules for Source, Etc.--For purposes of 
     subsection (b)--
       ``(1) Source rules.--The following items of gross income 
     shall be treated as income from sources within the United 
     States:
       ``(A) Sale of property.--Gains on the sale or exchange of 
     property (other than stock or debt obligations) located in 
     the United States.
       ``(B) Stock or debt obligations.--Gains on the sale or 
     exchange of stock issued by a domestic corporation or debt 
     obligations of United States persons or of the United States, 
     a State or political subdivision thereof, or the District of 
     Columbia.
       ``(C) Income or gain derived from controlled foreign 
     corporation.--Any income or gain derived from stock in a 
     foreign corporation but only--
       ``(i) if the individual losing United States citizenship 
     owned (within the meaning of section 958(a)), or is 
     considered as owning (by applying the ownership rules of 
     section 958(b)), at any time during the 2-year period ending 
     on the date of the loss of United States citizenship, more 
     than 50 percent of--

       ``(I) the total combined voting power of all classes of 
     stock entitled to vote of such corporation, or
       ``(II) the total value of the stock of such corporation, 
     and

       ``(ii) to the extent such income or gain does not exceed 
     the earnings and profits attributable to such stock which 
     were earned or accumulated before the loss of citizenship and 
     during periods that the ownership requirements of clause (i) 
     are met.
       ``(2) Gain recognition on certain exchanges.--
       ``(A) In general.--In the case of any exchange of property 
     to which this paragraph applies, notwithstanding any other 
     provision of this title, such property shall be treated as 
     sold for its fair market value on the date of such exchange, 
     and any gain shall be recognized for the taxable year which 
     includes such date.
       ``(B) Exchanges to which paragraph applies.--This paragraph 
     shall apply to any exchange during the 10-year period 
     described in subsection (a) if--
       ``(i) gain would not (but for this paragraph) be recognized 
     on such exchange in whole or in part for purposes of this 
     subtitle,
       ``(ii) income derived from such property was from sources 
     within the United States (or, if no income was so derived, 
     would have been from such sources), and
       ``(iii) income derived from the property acquired in the 
     exchange would be from sources outside the United States.
       ``(C) Exception.--Subparagraph (A) shall not apply if the 
     individual enters into an agreement with the Secretary which 
     specifies that any income or gain derived from the property 
     acquired in the exchange (or any other property which has a 
     basis determined in whole or part by reference to such 
     property) during such 10-year period shall be treated as from 
     sources within the United States. If the property transferred 
     in the exchange is disposed of by the person acquiring such 
     property, such agreement shall terminate and any gain which 
     was not recognized by reason of such agreement shall be 
     recognized as of the date of such disposition.
       ``(D) Secretary may extend period.--To the extent provided 
     in regulations prescribed by the Secretary, subparagraph (B) 
     shall be applied by substituting the 15-year period beginning 
     5 years before the loss of United States citizenship for the 
     10-year period referred to therein.
       ``(E) Secretary may require recognition of gain in certain 
     cases.--To the extent provided in regulations prescribed by 
     the Secretary--
       ``(i) the removal of appreciated tangible personal property 
     from the United States, and
       ``(ii) any other occurrence which (without recognition of 
     gain) results in a change in the source of the income or gain 
     from property from sources within the United States to 
     sources outside the United States,
     shall be treated as an exchange to which this paragraph 
     applies.
       ``(3) Substantial diminishing of risks of ownership.--For 
     purposes of determining whether this section applies to any 
     gain on the sale or exchange of any property, the running of 
     the 10-year period described in subsection (a) shall be 
     suspended for any period during which the individual's risk 
     of loss with respect to the property is substantially 
     diminished by--
       ``(A) the holding of a put with respect to such property 
     (or similar property),
       ``(B) the holding by another person of a right to acquire 
     the property, or
       ``(C) a short sale or any other transaction.''
       (d) Credit for Foreign Taxes Imposed on United States 
     Source Income.--
       (1) Subsection (b) of section 877 is amended by adding at 
     the end the following new sentence: ``The tax imposed solely 
     by reason of this section shall be reduced (but not below 
     zero) by the amount of any income, war profits, and excess 
     profits taxes (within the meaning of section 903) paid to any 
     foreign country or possession of the United States on any 
     income of the taxpayer on which tax is imposed solely by 
     reason of this section.''
       (2) Subsection (a) of section 877, as amended by subsection 
     (a), is amended by inserting ``(after any reduction in such 
     tax under the last sentence of such subsection)'' after 
     ``such subsection''.
       (e) Comparable Estate and Gift Tax Treatment.--
       (1) Estate tax.--
       (A) In general.--Subsection (a) of section 2107 is amended 
     to read as follows:
       ``(a) Treatment of Expatriates.--
       ``(1) Rate of tax.--A tax computed in accordance with the 
     table contained in section 2001 is hereby imposed on the 
     transfer of the taxable estate, determined as provided in 
     section 2106, of every decedent nonresident not a citizen of 
     the United States if, within the 10-year period ending with 
     the date of death, such decedent lost United States 
     citizenship, unless such loss did not have for 1 of its 
     principal purposes the avoidance of taxes under this subtitle 
     or subtitle A.
       ``(2) Certain individuals treated as having tax avoidance 
     purpose.--
       ``(A) In general.--For purposes of paragraph (1), an 
     individual shall be treated as having a principal purpose to 
     avoid such taxes if such individual is so treated under 
     section 877(a)(2).
       ``(B) Exception.--Subparagraph (A) shall not apply to a 
     decedent meeting the requirements of section 877(c)(1).''
       (B) Credit for foreign death taxes.--Subsection (c) of 
     section 2107 is amended by redesignating paragraph (2) as 
     paragraph (3) and by inserting after paragraph (1) the 
     following new paragraph:
       ``(2) Credit for foreign death taxes.--
       ``(A) In general.--The tax imposed by subsection (a) shall 
     be credited with the amount of any estate, inheritance, 
     legacy, or succession taxes actually paid to any foreign 
     country in respect of any property which is included in the 
     gross estate solely by reason of subsection (b).
       ``(B) Limitation on credit.--The credit allowed by 
     subparagraph (A) for such taxes paid to a foreign country 
     shall not exceed the lesser of--
       ``(i) the amount which bears the same ratio to the amount 
     of such taxes actually paid to such foreign country in 
     respect of property included in the gross estate as the value 
     of the property included in the gross estate solely by reason 
     of subsection (b) bears to the value of all property 
     subjected to such taxes by such foreign country, or
       ``(ii) such property's proportionate share of the excess 
     of--

       ``(I) the tax imposed by subsection (a), over
       ``(II) the tax which would be imposed by section 2101 but 
     for this section.

       ``(C) Proportionate share.--For purposes of subparagraph 
     (B), a property's proportionate share is the percentage which 
     the value of the property which is included in the gross 
     estate solely by reason of subsection (b) bears to the total 
     value of the gross estate.''
       (C) Expansion of inclusion in gross estate of stock of 
     foreign corporations.--Paragraph (2) of section 2107(b) is 
     amended by striking ``more than 50 percent of'' and all that 
     follows and inserting ``more than 50 percent of--
       ``(A) the total combined voting power of all classes of 
     stock entitled to vote of such corporation, or
       ``(B) the total value of the stock of such corporation,''.
       (2) Gift tax.--
       (A) In general.--Paragraph (3) of section 2501(a) is 
     amended to read as follows:
       ``(3) Exception.--
       ``(A) Certain individuals.--Paragraph (2) shall not apply 
     in the case of a donor who, within the 10-year period ending 
     with the date of transfer, lost United States citizenship, 
     unless such loss did not have for 1 of its principal purposes 
     the avoidance of taxes under this subtitle or subtitle A.
       ``(B) Certain individuals treated as having tax avoidance 
     purpose.--For purposes of subparagraph (A), an individual 
     shall be treated as having a principal purpose to avoid such 
     taxes if such individual is so treated under section 
     877(a)(2).
       ``(C) Exception for certain individuals.--Subparagraph (B) 
     shall not apply to a decedent meeting the requirements of 
     section 877(c)(1).
       ``(D) Credit for foreign gift taxes.--The tax imposed by 
     this section solely by reason of this paragraph shall be 
     credited with the amount of any gift tax actually paid to any 
     foreign country in respect of any gift which is taxable under 
     this section solely by reason of this paragraph.''
       (f) Comparable Treatment of Lawful Permanent Residents Who 
     Cease To Be Taxed as Residents.--
       (1) In general.--Section 877 is amended by redesignating 
     subsection (e) as subsection (f) and by inserting after 
     subsection (d) the following new subsection:
       ``(e) Comparable Treatment of Lawful Permanent Residents 
     Who Cease To Be Taxed as Residents.--
       ``(1) In general.--Any long-term resident of the United 
     States who--
       ``(A) ceases to be a lawful permanent resident of the 
     United States (within the meaning of section 7701(b)(6)), or
       ``(B) commences to be treated as a resident of a foreign 
     country under the provisions of a 

[[Page H 13533]]
     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,
     shall be treated for purposes of this section and sections 
     2107, 2501, and 6039F in the same manner as if such resident 
     were a citizen of the United States who lost United States 
     citizenship on the date of such cessation or commencement.
       ``(2) Long-term resident.--For purposes of this subsection, 
     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 event described in subparagraph 
     (A) or (B) of paragraph (1) 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.
       ``(3) Special rules.--
       ``(A) Exceptions not to apply.--Subsection (c) shall not 
     apply to an individual who is treated as provided in 
     paragraph (1).
       ``(B) Step-up in basis.--Solely for purposes of determining 
     any tax imposed by reason of this subsection, property which 
     was held by the long-term resident on the date the individual 
     first became a resident of the United States shall be treated 
     as having a basis on such date of not less than the fair 
     market value of such property on such date. The preceding 
     sentence shall not apply if the individual elects not to have 
     such sentence apply. Such an election, once made, shall be 
     irrevocable.
       ``(4) Authority to exempt individuals.--This subsection 
     shall not apply to an individual who is described in a 
     category of individuals prescribed by regulation by the 
     Secretary.
       ``(5) Regulations.--The Secretary shall prescribe such 
     regulations as may be appropriate to carry out this 
     subsection, including regulations providing for the 
     application of this subsection in cases where an alien 
     individual becomes a resident of the United States during the 
     10-year period after being treated as provided in paragraph 
     (1).''
       (2) Conforming amendments.--
       (A) Section 2107 is amended by striking subsection (d), by 
     redesignating subsection (e) as subsection (d), and by 
     inserting after subsection (d) (as so redesignated) the 
     following new subsection:
       ``(e) Cross Reference.--
       ``For comparable treatment of long-term lawful permanent 
     residents who ceased to be taxed as residents, see section 
     877(e).''
       (B) Paragraph (3) of section 2501(a) (as amended by 
     subsection (e)) is amended by adding at the end the following 
     new subparagraph:
       ``(E) Cross reference.--
       ``For comparable treatment of long-term lawful permanent 
     residents who ceased to be taxed as residents, see section 
     877(e).''
       (g) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to--
       (A) individuals losing United States citizenship (within 
     the meaning of section 877 of the Internal Revenue Code of 
     1986) on or after February 6, 1995, and
       (B) long-term residents of the United States with respect 
     to whom an event described in subparagraph (A) or (B) of 
     section 877(e)(1) of such Code occurs on or after February 6, 
     1995.
       (2) Special rule.--
       (A) In general.--In the case of an individual who performed 
     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 
     who did not, on or before such date, furnish to the United 
     States Department of State a signed statement of voluntary 
     relinquishment of United States nationality confirming the 
     performance of such act, the amendments made by this section 
     and section 11349 shall apply to such individual except 
     that--
       (i) the 10-year period described in section 877(a) of such 
     Code shall not expire before the end of the 10-year period 
     beginning on the date such statement is so furnished, and
       (ii) the 1-year period referred to in section 877(c) of 
     such Code, as amended by this section, shall not expire 
     before the date which is 1 year after the date of the 
     enactment of this Act.
       (B) Exception.--Subparagraph (A) shall not apply if the 
     individual establishes to the satisfaction of the Secretary 
     of the Treasury that such loss of United States citizenship 
     occurred before February 6, 1994.

     SEC. 11349. INFORMATION ON INDIVIDUALS LOSING UNITED STATES 
                   CITIZENSHIP.

       (a) In General.--Subpart A of part III of subchapter A of 
     chapter 61, as amended by section 11344, is amended by 
     inserting after section 6039F the following new section:

     ``SEC. 6039G. INFORMATION ON INDIVIDUALS LOSING UNITED STATES 
                   CITIZENSHIP.

       ``(a) In General.--Notwithstanding any other provision of 
     law, any individual who loses United States citizenship 
     (within the meaning of section 877(a)) shall provide a 
     statement which includes the information described in 
     subsection (b). Such statement shall be--
       ``(1) provided not later than the earliest date of any act 
     referred to in subsection (c), and
       ``(2) provided to the person or court referred to in 
     subsection (c) with respect to such act.
       ``(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 
     877(a)(2)(B), information detailing the assets and 
     liabilities of such individual, and
       ``(6) such other information as the Secretary may 
     prescribe.
       ``(c) Acts Described.--For purposes of this section, the 
     acts referred to in this subsection are--
       ``(1) the individual's renunciation of 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)),
       ``(2) the individual's furnishing 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)),
       ``(3) the issuance by the United States Department of State 
     of a certificate of loss of nationality to the individual, or
       ``(4) the cancellation by a court of the United States of a 
     naturalized citizen's certificate of naturalization.
       ``(d) Penalty.--Any individual failing to provide a 
     statement required under subsection (a) shall be subject to a 
     penalty for each year (of the 10-year period beginning on the 
     date of loss of United States citizenship) during any portion 
     of which such failure continues in an amount equal to the 
     greater of--
       ``(1) 5 percent of the tax required to be paid under 
     section 877 for the taxable year ending during such year, or
       ``(2) $1,000,
     unless it is shown that such failure is due to reasonable 
     cause and not to willful neglect.
       ``(e) 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.
       ``(f) Reporting by Long-Term Lawful Permanent Residents Who 
     Cease To Be Taxed as Residents.--In lieu of applying the last 
     sentence of subsection (a), any individual who is required to 
     provide a statement under this section by reason of section 
     877(e)(1) shall provide such statement with the return of tax 
     imposed by chapter 1 for the taxable year during which the 
     event described in such section occurs.
       ``(g) Exemption.--The Secretary may by regulations exempt 
     any class of individuals from the requirements of this 
     section if he 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 6039F the following new item:
     ``Sec. 6039G. Information on individuals losing United States 
                                                    citizenship.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to--
       (1) individuals losing United States citizenship (within 
     the meaning of section 877 of the Internal Revenue Code of 
     1986) on or after February 6, 1995, and
       (2) long-term residents of the United States with respect 
     to whom an event described in subparagraph (A) or (B) of 
     section 877(e)(1) of such Code occurs on or after such date.
     In no event shall any statement required by such amendments 
     be due before the 90th day after the date of the enactment of 
     this Act.

         CHAPTER 7--FINANCIAL ASSET SECURITIZATION INVESTMENTS

     SEC. 11351. 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 a FASIT; other general rules.
``Sec. 860I. Gain recognition on contributions to and distributions 
              from a FASIT and in other cases.
``Sec. 860J. Non-FASIT losses not to offset certain FASIT inclusions.
``Sec. 860K. Treatment of transfers of high-yield interests to 
              disqualified holders.
``Sec. 860L. Definitions and other special rules.

     ``SEC. 860H. TAXATION OF A FASIT; OTHER GENERAL RULES.

       ``(a) Taxation of FASIT.--A FASIT as such shall not be 
     subject to taxation under this subtitle (and shall not be 
     treated as a trust, partnership, corporation, or taxable 
     mortgage pool).
       ``(b) Taxation of Holder of Ownership Interest.--In 
     determining the taxable income of the holder of the ownership 
     interest in a FASIT--

[[Page H 13534]]

       ``(1) all assets, liabilities, and items of income, gain, 
     deduction, loss, and credit of a FASIT shall be treated as 
     assets, liabilities, and such items (as the case may be) of 
     such holder,
       ``(2) the constant yield method (including the rules of 
     section 1272(a)(6)) shall be applied under an accrual method 
     of accounting in determining all interest, acquisition 
     discount, original issue discount, and market discount and 
     all premium deductions or adjustments with respect to all 
     debt instruments of the FASIT,
       ``(3) the amount of the tax imposed by section 860L(e) 
     (relating to tax on income from foreclosure property) shall 
     be allowed as a deduction,
       ``(4) there shall not be taken into account any item of 
     income, gain, loss, or deduction allocable to prohibited 
     income, and
       ``(5) interest accrued by the FASIT which is exempt from 
     tax imposed by this subtitle shall, when taken into account 
     by such holder, be treated as ordinary income.
     For purposes of this subtitle, securities treated as held by 
     such holder under paragraph (1) shall be treated as held for 
     investment.
       ``(c) Treatment of Regular Interests.--For purposes of this 
     title--
       ``(1) a regular interest in a FASIT, if not otherwise a 
     debt instrument, shall be treated as a debt instrument,
       ``(2) section 163(e)(5) shall not apply to such an 
     interest, and
       ``(3) amounts includible in gross income with respect to 
     such an interest shall be determined under an accrual method 
     of accounting.

     ``SEC. 860I. GAIN RECOGNITION ON CONTRIBUTIONS TO AND 
                   DISTRIBUTIONS FROM A FASIT AND IN OTHER CASES.

       ``(a) Contributions to FASIT.--
       ``(1) In general.--If property is contributed to a FASIT by 
     the holder of the ownership interest in such FASIT, gain (if 
     any) shall be recognized to such holder in an amount equal to 
     the excess (if any) of such property's value under subsection 
     (e) on the date of such contribution over its adjusted basis 
     on such date.
       ``(2) Debt instruments acquired other than by contribution 
     by holder of ownership interest.--For purposes of this part, 
     any debt instrument which is acquired by a FASIT other than 
     in a contribution by the holder of the ownership interest in 
     the FASIT shall be treated--
       ``(A) as having been acquired by such holder at its fair 
     market value on the date of its acquisition by the FASIT, and
       ``(B) as having been contributed by such holder to the 
     FASIT at its value under subsection (e) on such date.
       ``(3) Deferral of gain recognition.--The Secretary may 
     prescribe regulations which--
       ``(A) provide that gain otherwise recognized under 
     paragraph (1) shall not be recognized 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 of any person related to such holder), and
       ``(B) provide such adjustments to the other provisions of 
     this part to the extent appropriate in the context of the 
     treatment provided under subparagraph (A).
       ``(b) Certain Distributions.--If a FASIT makes a 
     distribution of property with respect to the ownership 
     interest in the FASIT, gain (if any) 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 value 
     under subsection (e) on the date of such distribution.
       ``(c) Gain Recognition on Property Outside FASIT Which 
     Supports Regular Interests.--If property held by the holder 
     of the ownership interest in a FASIT (or by any person 
     related to such holder) supports any regular interest in such 
     FASIT--
       ``(1) gain shall be recognized to such holder in the same 
     manner as if such holder had sold such property at its value 
     under subsection (e) on the earliest date such property 
     supports such an interest, and
       ``(2) such property shall be treated as held by such FASIT 
     for purposes of this part.
       ``(d) Gain Recognition on Retained Interests.--If--
       ``(1) any interest in a debt instrument is contributed to a 
     FASIT, and
       ``(2) the contributor (or any person related to such 
     contributor) retains any interest in such instrument 
     (including a right to receive excessive servicing fees with 
     respect to such instrument),
     then gain shall be recognized to such contributor (or person) 
     in the same manner as if the contributor (or person) had sold 
     the retained interest at its value under subsection (e) on 
     the date of such contribution.
       ``(e) Valuation.--For purposes of this section--
       ``(1) In general.--The value of any property under this 
     subsection shall be--
       ``(A) in the case of property other than a debt instrument, 
     its fair market value, and
       ``(B) in the case of a debt instrument, the sum of the 
     present values of the reasonably expected payments under such 
     instrument determined (in the manner provided by regulations 
     prescribed by the Secretary)--
       ``(i) as of the date of the event resulting in the gain 
     recognition under this section, and
       ``(ii) by using a discount rate equal to 120 percent of the 
     applicable Federal rate (as defined in section 1274(d)), or 
     such other discount rate specified in such regulations, 
     compounded semiannually.
       ``(2) Special rule for revolving loan accounts.--For 
     purposes of paragraph (1)--
       ``(A) each extension of credit (other than the accrual of 
     interest) on a revolving loan account shall be treated as a 
     separate debt instrument, and
       ``(B) payments on such extensions of credit having 
     substantially the same terms shall be applied to such 
     extensions beginning with the earliest such extension.
       ``(f) Special Rules.--
       ``(1) Nonrecognition rules not to apply.--Gain required to 
     be recognized under this section shall be recognized 
     notwithstanding any other provision of this subtitle.
       ``(2) Basis adjustments.--The basis of any property on 
     which gain is recognized under this section shall be 
     increased by the amount of gain so recognized.

     ``SEC. 860J. NON-FASIT LOSSES NOT TO OFFSET CERTAIN FASIT 
                   INCLUSIONS.

       ``(a) In General.--The taxable income of the holder of the 
     ownership interest or any 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 the ownership interest or a 
     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--
       ``(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 a 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. 860K. 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 860L(a)(2)).
       ``(d) Treatment of Interests Held By Securities Dealers.--
       ``(1) In general.--Subsection (a) shall not apply to any 
     high-yield interest held by a disqualified holder if 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 in securities 
     which is not an eligible corporation (as defined in section 
     860L(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.
       ``(e) Treatment of High-Yield Interests in Pass-Thru 
     Entities.--If a pass-thru entity (as defined in section 
     860E(e)(6)) issues a debt or equity interest--
       ``(1) which is supported by any regular interest in a 
     FASIT, and
       ``(2) which has an original yield to maturity which is 
     greater than each of--
       ``(A) the sum determined under clauses (i) and (ii) of 
     section 163(i)(1)(B) with respect to such debt or equity 
     interest, and
       ``(B) the yield to maturity on such regular interest,
     there is hereby imposed on the pass-thru entity a tax (in 
     addition to other taxes) equal to the product of the highest 
     rate of tax specified in section 11(b)(1) and the income of 
     the holder of such debt or equity interest which is properly 
     attributable to such regular interest. For purposes of the 
     preceding sentence, the yield to maturity of any equity 
     interest shall be determined under regulations prescribed by 
     the Secretary.

     ``SEC. 860L. DEFINITIONS AND OTHER SPECIAL 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,
       ``(B) all of the interests in which are regular interests 
     or the ownership interest,
       ``(C) which has 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 

[[Page H 13535]]
     times thereafter, substantially all of the assets of which (including 
     assets treated as held by the entity under section 
     860I(c)(2)) consist of permitted assets, and
       ``(E) 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, or is not subject 
     to, tax under this chapter,
       ``(B) an entity described in section 851(a) or 856(a),
       ``(C) a REMIC, and
       ``(D) an organization to which part I of subchapter T 
     applies.
       ``(3) Election.--
       ``(A) In general.--An entity (otherwise meeting the 
     requirements of paragraph (1)) may elect to be treated as a 
     FASIT. Except as provided in paragraph (5), such an election 
     shall apply to the taxable year for which made and all 
     subsequent taxable years unless revoked with the consent of 
     the Secretary.
       ``(B) Elections made after 1st taxable year of entity.--If 
     the election under subparagraph (A) is made after the first 
     taxable year of the entity, all property held (or treated as 
     held under section 860I(c)(2)) by such entity as of the first 
     day of the first taxable year for which such election is made 
     shall be treated as contributed to such entity on such first 
     day by the holder of the ownership interest in such entity.
       ``(4) 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.
       ``(5) 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 part--
       ``(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 are determined using a current rate which is 
     reasonably expected to measure contemporaneous variations in 
     the cost of newly borrowed funds in the currency in which the 
     regular interest is denominated,

       ``(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) cash or cash equivalents,
       ``(B) any debt instrument (as defined in section 
     1275(a)(1)) under which interest payments (or other similar 
     amounts), if any, at or before maturity meet the requirements 
     applicable under clause (i) or (ii) of section 860G(a)(1)(B),
       ``(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, and
       ``(E) 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. The preceding sentence shall not apply to cash 
     equivalents and to any other investment specified in 
     regulations prescribed by the Secretary.
       ``(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,
       ``(B) except as provided in paragraph (3), the disposition 
     of any permitted asset,
       ``(C) the receipt of any income derived from any loan 
     originated by 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 a 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 
     subparagraphs:
       ``(O) section 860K (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''.

[[Page H 13536]]

       (4) Paragraph (1) of section 582(c) is amended by inserting 
     ``, and any regular or ownership interest in a FASIT,'' after 
     ``REMIC''.
       (5) 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.''.
       (6) Subparagraph (C) of section 1202(e)(4) is amended by 
     striking ``or REMIC'' and inserting ``REMIC, or FASIT''.
       (7) 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.''.
       (8) 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 8--DEPRECIATION PROVISIONS

     SEC. 11361. 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 Sewerage 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 credits; 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.
       (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. 11362. 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. 11363. 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) Conforming Amendment.--Subparagraph (B) of section 
     168(g)(3) is amended by inserting after the item relating to 
     subparagraph (E)(ii) in the table contained therein the 
     following new item:
                ``(E)(iii) . . . . . . . . . . . . . . . . . 20''.
       (c) 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 9--OTHER PROVISIONS

     SEC. 11371. 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. 11372. 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--

[[Page H 13537]]

       (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. 11373. 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.--The amortizable portion of any loss 
     arising from the sale or exchange of foreclosure property 
     which (without regard to this paragraph) is treated as a 
     capital loss 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) Amortizable portion.--For purposes of this 
     paragraph--
       ``(i) In general.--The amortizable portion of a loss 
     referred to in subparagraph (A) is the percentage (not 
     greater than 20 percent) of such loss to which the taxpayer 
     elects to have this paragraph apply.
       ``(ii) Subsequent modifications of amount.--The taxpayer 
     may elect for any of the taxable years in the change period 
     to change (subject to the limitation under clause (i)) the 
     percentage of a loss referred to in subparagraph (A) which is 
     treated as the amortizable portion of such loss. If the 
     taxpayer so elects, each such changed percentage shall be 
     treated as if it were the percentage specified in the 
     election made under clause (i), and proper adjustments shall 
     be made for all taxable years to reflect each such change.
       ``(iii) Statute of limitations.-- For purposes of section 
     6501(h) and 6511(d)(2), any change by reason of an election 
     under clause (ii) shall be treated as a capital loss 
     carryback from the year such change is made.
       ``(iv) Change period.--For purposes of clause (ii), the 
     change period is the 3-taxable year period following the 
     taxable year in which the sale or exchange of the foreclosure 
     property occurred.
       ``(C) Election to treat unamortized ordinary losses as 
     capital losses.--
       ``(i) In general.--The taxpayer may elect to treat any 
     unused amount of any ordinary loss described in subparagraph 
     (A) as a capital loss arising in the taxable year for which 
     the election under this subparagraph is made.
       ``(ii) Limitation on election.--An election may be made 
     under clause (i) with respect to any loss only for any 
     taxable year in the 5-taxable year period following the 
     taxable year referred to in subparagraph (A).
       ``(iii) Unused amount of ordinary loss.--For purposes of 
     clause (i), the unused amount of an ordinary loss is the 
     amount of the amortizable portion of any loss which has not 
     been recognized as of the close of the preceding taxable 
     year.
       ``(iv) Ordering rule.--Any unused amount of an ordinary 
     loss with respect to which an election was made under clause 
     (i) shall be treated as coming first from the last taxable 
     year in the 10-taxable year period referred to in 
     subparagraph (A) and then from each preceding taxable year in 
     reverse chronological order.
       ``(D) 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.
       ``(E) Time for making elections.--Any election under this 
     paragraph for any taxable year shall be made on or before the 
     due date (including extensions) for the return of tax for 
     such taxable year.''
       (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 this section 
     shall apply to taxable years beginning after December 31, 
     1994.

     SEC. 11374. 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.
       ``(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. 11375. EXCLUSION FOR ENERGY CONSERVATION SUBSIDIES 
                   LIMITED TO SUBSIDIES WITH RESPECT TO DWELLING 
                   UNITS.

       (a) In General.--Paragraph (1) of section 136(c) (defining 
     energy conservation measure) is amended by striking ``energy 
     demand--'' and all that follows and inserting ``energy demand 
     with respect to a dwelling unit.''
       (b) Conforming Amendments.--
       (1) Subsection (a) of section 136 is amended to read as 
     follows:
       ``(a) Exclusion.--Gross income shall not include the value 
     of any subsidy provided (directly or indirectly) by a public 
     utility to a customer for the purchase or installation of any 
     energy conservation measure.''
       (2) Paragraph (2) of section 136(c) is amended--
       (A) by striking subparagraph (A) and by redesignating 
     subparagraphs (B) and (C) as subparagraphs (A) and (B), 
     respectively, and
       (B) by striking ``and special rules'' in the paragraph 
     heading.
       (c) Effective Date.--The amendments made by this section 
     shall apply to amounts received after December 31, 1995, 
     unless received pursuant to a written binding contract in 
     effect on September 13, 1995, and at all times thereafter.

     SEC. 11376. ELECTION TO CEASE STATUS AS QUALIFIED SCHOLARSHIP 
                   FUNDING CORPORATION.

       (a) In General.--Subsection (d) of section 150 (relating to 
     definitions and special rules) is amended by adding at the 
     end thereof the following new paragraph:
       ``(3) Election to cease status as qualified scholarship 
     funding corporation.--
       ``(A) In general.--Any qualified scholarship funding bond, 
     and qualified student loan bond, outstanding on the date of 
     the issuer's election under this paragraph (and any bond (or 
     series of bonds) issued to refund such a bond) shall not fail 
     to be a tax-exempt bond solely because the issuer ceases to 
     be described in subparagraphs (A) and (B) of paragraph (2) if 
     the issuer meets the requirements of subparagraphs (B) and 
     (C) of this paragraph.
       ``(B) Assets and liabilities of issuer transferred to 
     taxable subsidiary.--The requirements of this subparagraph 
     are met by an issuer if--

[[Page H 13538]]

       ``(i) all of the student loan notes of the issuer and other 
     assets pledged to secure the repayment of qualified 
     scholarship funding bond indebtedness of the issuer are 
     transferred to another corporation within a reasonable period 
     after the election is made under this paragraph;
       ``(ii) such transferee corporation assumes or otherwise 
     provides for the payment of all of the qualified scholarship 
     funding bond indebtedness of the issuer within a reasonable 
     period after the election is made under this paragraph;
       ``(iii) to the extent permitted by law, such transferee 
     corporation assumes all of the responsibilities, and succeeds 
     to all of the rights, of the issuer under the issuer's 
     agreements with the Secretary of Education in respect of 
     student loans;
       ``(iv) immediately after such transfer, the issuer, 
     together with any other issuer which has made an election 
     under this paragraph in respect of such transferee, hold all 
     of the senior stock in such transferee corporation; and
       ``(v) such transferee corporation is not exempt from tax 
     under this chapter.
       ``(C) Issuer to operate as independent organization 
     described in section 501(c)(3).--The requirements of this 
     subparagraph are met by an issuer if, within a reasonable 
     period after the transfer referred to in subparagraph (B)--
       ``(i) the issuer is described in section 501(c)(3) and 
     exempt from tax under section 501(a);
       ``(ii) the issuer no longer is described in subparagraphs 
     (A) and (B) of paragraph (2); and
       ``(iii) at least 80 percent of the members of the board of 
     directors of the issuer are independent members.
       ``(D) Senior stock.--For purposes of this paragraph, the 
     term `senior stock' means stock--
       ``(i) which participates pro rata and fully in the equity 
     value of the corporation with all other common stock of the 
     corporation but which has the right to payment of liquidation 
     proceeds prior to payment of liquidation proceeds in respect 
     of other common stock of the corporation;
       ``(ii) which has a fixed right upon liquidation and upon 
     redemption to an amount equal to the greater of--

       ``(I) the fair market value of such stock on the date of 
     liquidation or redemption (whichever is applicable); or
       ``(II) the fair market value of all assets transferred in 
     exchange for such stock and reduced by the amount of all 
     liabilities of the corporation which has made an election 
     under this paragraph assumed by the transferee corporation in 
     such transfer;

       ``(iii) the holder of which has the right to require the 
     transferee corporation to redeem on a date that is not later 
     than 10 years after the date on which an election under this 
     paragraph was made and pursuant to such election such stock 
     was issued; and
       ``(iv) in respect of which, during the time such stock is 
     outstanding, there is not outstanding any equity interest in 
     the corporation having any liquidation, redemption or 
     dividend rights in the corporation which are superior to 
     those of such stock.
       ``(E) Independent member.--The term `independent member' 
     means a member of the board of directors of the issuer who 
     (except for services as a member of such board) receives no 
     compensation directly or indirectly--
       ``(i) for services performed in connection with such 
     transferee corporation, or
       ``(ii) for services as a member of the board of directors 
     or as an officer of such transferee corporation.
     For purposes of clause (ii), the term `officer' includes any 
     individual having powers or responsibilities similar to those 
     of officers.
       ``(F) Coordination with certain private foundation taxes.--
     For purposes of sections 4942 (relating to the excise tax on 
     a failure to distribute income) and 4943 (relating to the 
     excise tax on excess business holdings), the transferee 
     corporation referred to in subparagraph (B) shall be treated 
     as a functionally related business (within the meaning of 
     section 4942(j)(4)) with respect to the issuer during the 
     period commencing with the date on which an election is made 
     under this paragraph and ending on the date that is the 
     earlier of--
       ``(i) the last day of the last taxable year for which more 
     than 50 percent of the gross income of such transferee 
     corporation is derived from, or more than 50 percent of the 
     assets (by value) of such transferee corporation consists of, 
     student loan notes incurred under the Higher Education Act of 
     1965; or
       ``(ii) the last day of the taxable year of the issuer 
     during which occurs the date which is 10 years after the date 
     on which the election under this paragraph is made.
       ``(G) Election.--An election under this paragraph may be 
     revoked only with the consent of the Secretary.''
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 11377. CERTAIN AMOUNTS DERIVED FROM FOREIGN CORPORATIONS 
                   TREATED AS UNRELATED BUSINESS TAXABLE INCOME.

       (a) General Rule.--Subsection (b) of section 512 (relating 
     to modifications) is amended by adding at the end thereof the 
     following new paragraph:
       ``(18) Treatment of certain amounts derived from foreign 
     corporations.--
       ``(A) In general.--Notwithstanding paragraph (1), any 
     amount included in gross income under section 951(a)(1)(A) 
     shall be included as an item of gross income derived from an 
     unrelated trade or business to the extent the amount so 
     included is attributable to insurance income (as defined in 
     section 953) which, if derived directly by the organization, 
     would be treated as gross income from an unrelated trade or 
     business. There shall be allowed all deductions directly 
     connected with amounts included in gross income under the 
     preceding sentence.
       ``(B) Exception.--Subparagraph (A) shall not apply to 
     income attributable to a policy of insurance or reinsurance 
     with respect to which the person (directly or indirectly) 
     insured is--
       ``(i) such organization,
       ``(ii) an affiliate of such organization which is exempt 
     from tax under section 501(a), or
       ``(iii) a director or officer of, or an individual who 
     performs services for, such organization or affiliate but 
     only if the insurance covers primarily risks associated with 
     the performance of services for the benefit of such 
     organization or affiliate.
     For purposes of this subparagraph, the determination as to 
     whether an entity is an affiliate of an organization shall be 
     made under rules similar to the rules of section 
     168(h)(4)(B).
       ``(C) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this paragraph, including regulations for the 
     application of this paragraph in the case of income paid 
     through 1 or more entities or between 2 or more chains of 
     entities.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to amounts included in gross income in any 
     taxable year beginning after December 31, 1995.

     SEC. 11378. REPEAL OF FINANCIAL INSTITUTION TRANSITION RULE 
                   TO INTEREST ALLOCATION RULES.

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

     SEC. 11379. REPEAL OF BAD DEBT RESERVE METHOD FOR THRIFT 
                   SAVINGS ASSOCIATIONS.

       (a) In General.--Section 593 (relating to reserves for 
     losses on loans) is hereby repealed.
       (b) Conforming Amendments.--
       (1) Subsection (d) of section 50 is amended by adding at 
     the end the following new sentence:
     ``Paragraphs (1)(A), (2)(A), and (4) of section 46(e) 
     referred to in paragraph (1) of this subsection shall not 
     apply to any taxable year beginning after December 31, 
     1995.''
       (2) Subsection (e) of section 52 is amended by striking 
     paragraph (1) and by redesignating paragraphs (2) and (3) as 
     paragraphs (1) and (2), respectively.
       (3) Subsection (a) of section 57 is amended by striking 
     paragraph (4).
       (4) Section 246 is amended by striking subsection (f).
       (5) Clause (i) of section 291(e)(1)(B) is amended by 
     striking ``or to which section 593 applies''.
       (6) Subparagraph (A) of section 585(a)(2) is amended by 
     striking ``other than an organization to which section 593 
     applies''.
       (7) Sections 595 and 596 are hereby repealed.
       (8) Subsection (a) of section 860E is amended--
       (A) by striking ``Except as provided in paragraph (2), 
     the'' in paragraph (1) and inserting ``The'',
       (B) by striking paragraphs (2) and (4) and redesignating 
     paragraphs (3) and (5) as paragraphs (2) and (3), 
     respectively, and
       (C) by striking in paragraph (2) (as so redesignated) all 
     that follows ``subsection'' and inserting a period.
       (9) Paragraph (3) of section 992(d) is amended by striking 
     ``or 593''.
       (10) Section 1038 is amended by striking subsection (f).
       (11) Clause (ii) of section 1042(c)(4)(B) is amended by 
     striking ``or 593''.
       (12) Subsection (c) of section 1277 is amended by striking 
     ``or to which section 593 applies''.
       (13) Subparagraph (B) of section 1361(b)(2) is amended by 
     striking ``or to which section 593 applies''.
       (14) The table of sections for part II of subchapter H of 
     chapter 1 is amended by striking the items relating to 
     sections 593, 595, and 596.
       (c) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     beginning after December 31, 1995.
       (2) Repeal of section 595.--The repeal of section 595 under 
     subsection (b)(7) shall apply to property acquired in taxable 
     years beginning after December 31, 1995.
       (d) 6-Year Spread of Adjustments.--
       (1) In general.--In the case of any taxpayer who is 
     required by reason of the amendments made by this section to 
     change its method of computing reserves for bad debts--
       (A) such change shall be treated as a change in a method of 
     accounting,
       (B) such change shall be treated as initiated by the 
     taxpayer and as having been made with the consent of the 
     Secretary, and
       (C) the net amount of the adjustments required to be taken 
     into account by the taxpayer under section 481(a)--
       (i) shall be determined by taking into account only 
     applicable excess reserves, and
       (ii) as so determined, shall be taken into account ratably 
     over the 6-taxable year period beginning with the first 
     taxable year beginning after December 31, 1995.
       (2) Applicable excess reserves.--
       (A) In general.--For purposes of paragraph (1), the term 
     `applicable excess reserves' means the excess (if any) of--
       (i) the balance of the reserves described in section 
     593(c)(1) of such Code (as in effect on the day before the 
     date of the enactment of this Act) as of the close of the 
     taxpayer's last taxable year beginning before January 1, 
     1996, over
       (ii) the lesser of--

       (I) the balance of such reserves as of the close of the 
     taxpayer's last taxable year beginning before January 1, 
     1988, or
       (II) the balance of the reserves described in subclause 
     (I), reduce by an amount determined in the same manner as 
     under section 

[[Page H 13539]]
     585(b)(2)(B)(ii) on the basis of the taxable years described in clause 
     (i) and this clause.

       (B) Special rule for thrifts which become small banks.--In 
     the case of a bank (as defined in section 581 of such Code) 
     which is not a large bank (as defined in section 585(c)(2) of 
     such Code) for its first taxable year beginning after 
     December 31, 1995--
       (i) the balance taken into account under subparagraph 
     (A)(ii) shall not be less than the amount which would be the 
     balance of such reserve as of the close of its last taxable 
     year beginning before January 1, 1996, if the additions to 
     such reserve for all taxable years had been determined under 
     section 585(b)(2)(A), and
       (ii) the opening balance of the reserve for bad debts as of 
     the beginning of such first taxable year shall be the balance 
     taken into account under subparagraph (A)(ii) (determined 
     after the application of clause (i) of this subparagraph).
     The preceding sentence shall not apply for purposes of 
     paragraphs (5), (6), and (7).
       (3) Recapture of pre-1988 reserves where taxpayer ceases to 
     be bank.--If during any taxable year beginning after December 
     31, 1995, a taxpayer to which paragraph (1) applied is not a 
     bank (as defined in section 581), paragraph (1) shall apply 
     to the reserves described in subparagraph (A)(ii) except that 
     such reserves shall be taken into account ratably over the 6-
     taxable year period beginning with such taxable year.
       (4) Suspension of recapture if residential loan requirement 
     met.--
       (A) In general.--In the case of a bank which meets the 
     residential loan requirement of subparagraph (B) for a 
     taxable year beginning after December 31, 1995, and before 
     January 1, 1998--
       (i) no adjustment shall be taken into account under 
     paragraph (1) for such taxable year, and
       (ii) such taxable year shall be disregarded in 
     determining--

       (I) whether any other taxable year is a taxable year for 
     which an adjustment is required to be taken into account 
     under paragraph (1), and
       (II) the amount of such adjustment.

       (B) Residential loan requirement.--A taxpayer meets the 
     residential loan requirement of this subparagraph for any 
     taxable year if the principal amount of the residential loans 
     made by the taxpayer during such year is not less than the 
     base amount for such year.
       (C) Residential loan.--For purposes of this paragraph, the 
     term ``residential loan'' means any loan described in clause 
     (v) of section 7701(a)(19)(C) of such Code but only if such 
     loan is incurred in acquiring, constructing, or improving the 
     property described in such clause.
       (D) Base amount.--For purposes of subparagraph (B), the 
     base amount is the average of the principal amounts of the 
     residential loans made by the taxpayer during the 6 most 
     recent taxable years beginning before January 1, 1996. At the 
     election of the taxpayer who made such loans during each of 
     such 6 taxable years, the preceding sentence shall be applied 
     without regard to the taxable year in which such principal 
     amount was the highest and the taxable year in such principal 
     amount was the lowest. Such an election may be made only for 
     the first taxable year beginning after December 31, 1995, 
     and, if made for such taxable year, shall apply to the 
     succeeding taxable year unless revoked with the consent of 
     the Secretary of the Treasury or his delegate.
       (E) Controlled groups.--In the case of a taxpayer which is 
     a member of any controlled group of corporations described in 
     section 1563(a)(1) of such Code, subparagraph (B) shall be 
     applied with respect to such group.
       (5) Continued application of fresh start under section 585 
     transitional rules.--In the case of a taxpayer to which 
     paragraph (1) applied and which was not a large bank (as 
     defined in section 585(c)(2) of such Code) for its first 
     taxable year beginning after December 31, 1995:
       (A) In general.--For purposes of determining the net amount 
     of adjustments referred to in section 585(c)(3)(A)(iii) of 
     such Code, there shall be taken into account only the excess 
     of the reserve for bad debts as of the close of the last 
     taxable year before the disqualification year over the 
     balance taken into account by such taxpayer under paragraph 
     (2)(A)(ii) of this subsection.
       (B) Treatment under elective cut-off method.--For purposes 
     of applying section 585(c)(4) of such Code--
       (i) the balance of the reserve taken into account under 
     subparagraph (B) thereof shall be reduced by the balance 
     taken into account by such taxpayer under paragraph 
     (2)(A)(ii) of this subsection, and
       (ii) no amount shall be includible in gross income by 
     reason of such reduction.
       (6) Continued application of section 593(e).--
     Notwithstanding the amendments made by this section, in the 
     case of a taxpayer to which paragraph (1) of this subsection 
     applies, section 593(e) of such Code (as in effect on the day 
     before the date of the enactment of this Act) shall continue 
     to apply to such taxpayer as if such taxpayer were a domestic 
     building and loan association but the amount of the reserves 
     taken into account under subparagraphs (B) and (C) of section 
     593(e)(1) (as so in effect) shall be the balance taken into 
     account by such taxpayer under paragraph (2)(A)(ii) of this 
     subsection.
       (7) Certain items included as section 381(c) items.--The 
     balance of the applicable excess reserves, and the balance 
     taken into account by a taxpayer under paragraph (2)(A)(ii) 
     of this subsection, shall be treated as items described in 
     section 381(c) of such Code.
       (8) Conversions to credit unions.--In the case of a 
     taxpayer to which paragraph (1) applied which becomes a 
     credit union described in section 501(c)(14)(A)--
       (A) any amount required to be included in the gross income 
     of the credit union by reason of this subsection shall be 
     treated as derived from an unrelated trade or business (as 
     defined in section 513), and
       (B) for purposes of paragraph (3), the credit union shall 
     not be treated as if it were a bank.
       (9) Regulations.--The Secretary of the Treasury or his 
     delegate shall prescribe such regulations as may be necessary 
     to carry out this subsection, including regulations providing 
     for the application of paragraphs (4) and (6) in the case of 
     acquisitions, mergers, spin-offs, and other reorganizations.

     SEC. 11380. 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.
                     Subtitle J--Tax Simplification

             CHAPTER 1--PROVISIONS RELATING TO INDIVIDUALS

   Subchapter A--Provisions Relating To Rollover of Gain on Sale of 
                          Principal Residence

     SEC. 11401. MULTIPLE SALES WITHIN ROLLOVER PERIOD.

       (a) General Rule.--
       (1) Section 1034(d) (relating to limitation on rollover of 
     gain on sale of principal residence), as amended by sections 
     11321 and 11322, is amended by striking paragraphs (1) and 
     (2) and by redesignating paragraphs (3) and (4) as paragraphs 
     (1) and (2), respectively.
       (2) Paragraph (4) of section 1034(c) is amended to read as 
     follows:
       ``(4) If the taxpayer, during the period described in 
     subsection (a), purchases more than 1 residence which is used 
     by him as his principal residence at some time within 2 years 
     after the date of the sale of the old residence, only the 
     first of such residences so used by him after the date of 
     such sale shall constitute the new residence.''
       (3) Subsections (h)(1) and (k) of section 1034 are each 
     amended by striking ``(other than the 2 years referred to in 
     subsection (c)(4))''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to sales of old residences (within the meaning of 
     section 1034 of the Internal Revenue Code of 1986) after the 
     date of the enactment of this Act.

     SEC. 11402. SPECIAL RULES IN CASE OF DIVORCE.

       (a) In General.--Subsection (c) of section 1034 is amended 
     by adding at the end the following new paragraph:
       ``(5) If--
       ``(A) a residence is sold by an individual pursuant to a 
     divorce or marital separation, and
       ``(B) the taxpayer used such residence as his principal 
     residence at any time during the 2-year period ending on the 
     date of such sale,
     for purposes of this section, such residence shall be treated 
     as the taxpayer's principal residence at the time of such 
     sale.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to sales of old residences (within the meaning of 
     section 1034 of the Internal Revenue Code of 1986) after the 
     date of the enactment of this Act.

     SEC. 11403. ONE-TIME EXCLUSION OF GAIN FROM SALE OF PRINCIPAL 
                   RESIDENCE FOR CERTAIN SPOUSES.

       (a) In General.--Paragraph (2) of section 121(b) (relating 
     to one-time exclusion of gain from sale of principal 
     residence by individual who has attained age 55) is amended 
     by adding at the end the following new sentence: ``For 
     purposes of applying the preceding sentence to individuals 
     who are married to each other, an election by one individual 
     with respect to a sale or exchange occurring before the 
     marriage shall be disregarded for purposes of permitting an 
     election with respect to property owned and used by the other 
     individual as his principal residence throughout the 3-year 
     period ending on the date of the marriage.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply for purposes of determining whether an election 
     may be made under section 121 of the Internal Revenue Code of 
     1986 with respect to a sale or exchange occurring after 
     September 13, 1995.

                     Subchapter B--Other Provisions

     SEC. 11411. TREATMENT OF CERTAIN REIMBURSED EXPENSES OF RURAL 
                   MAIL CARRIERS.

       (a) In General.--Section 162 (relating to trade or business 
     expenses) is amended by redesignating subsection (o) as 
     subsection (p) and by inserting after subsection (n) the 
     following new subsection:
       ``(o) Treatment of Certain Reimbursed Expenses of Rural 
     Mail Carriers.--
       ``(1) General rule.--In the case of any employee of the 
     United States Postal Service who performs services involving 
     the collection and delivery of mail on a rural route and who 
     receives qualified reimbursements for the expenses incurred 
     by such employee for the use of a vehicle in performing such 
     services--
       ``(A) the amount allowable as a deduction under this 
     chapter for the use of a vehicle in performing such services 
     shall be equal to the amount of such qualified 
     reimbursements; and
       ``(B) such qualified reimbursements shall be treated as 
     paid under a reimbursement or other expense allowance 
     arrangement for purposes of section 62(a)(2)(A) (and section 
     62(c) shall not apply to such qualified reimbursements).
       ``(2) Definition of qualified reimbursements.--For purposes 
     of this subsection, the term `qualified reimbursements' means 
     the 

[[Page H 13540]]
     amounts paid by the United States Postal Service to employees as an 
     equipment maintenance allowance under the 1991 collective 
     bargaining agreement between the United States Postal Service 
     and the National Rural Letter Carriers' Association. Amounts 
     paid as an equipment maintenance allowance by such Postal 
     Service under later collective bargaining agreements that 
     supersede the 1991 agreement shall be considered qualified 
     reimbursements if such amounts do not exceed the amounts that 
     would have been paid under the 1991 agreement, adjusted for 
     changes in the Consumer Price Index (as defined in section 
     1(f)(5)) since 1991.''
       (b) Technical Amendment.--Section 6008 of the Technical and 
     Miscellaneous Revenue Act of 1988 is hereby repealed.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 11412. TREATMENT OF TRAVELING EXPENSES OF CERTAIN 
                   FEDERAL EMPLOYEES ENGAGED IN CRIMINAL 
                   INVESTIGATIONS.

       (a) In General.--Subsection (a) of section 162 is amended 
     by adding at the end the following new sentence: ``The 
     preceding sentence shall not apply to any Federal employee 
     during any period for which such employee is certified by the 
     Attorney General (or the designee thereof) as traveling on 
     behalf of the United States in temporary duty status to 
     investigate, or provide support services for the 
     investigation of, a Federal crime.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.

                   CHAPTER 2--PENSION SIMPLIFICATION

              Subchapter A--Simplified Distribution Rules

     SEC. 11421. 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)),

     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. 11422. REPEAL OF $5,000 EXCLUSION OF EMPLOYEES' DEATH 
                   BENEFITS.

       (a) In General.--Subsection (b) of section 101 is hereby 
     repealed.
       (b) Conforming Amendments.--
       (1) Subsection (c) of section 101 is amended by striking 
     ``subsection (a) or (b)'' and inserting ``subsection (a)''.
       (2) Sections 406(e) and 407(e) are each amended by striking 
     paragraph (2) and by redesignating paragraph (3) as paragraph 
     (2).
       (3) Section 7701(a)(20) is amended by striking ``, for the 
     purposes of applying the provisions of section 101(b) with 
     respect to employees' death benefits''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 11423. 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.--


[[Page H 13541]]

         ``If the age of the                                           
           primary annuitant on                              The number
           the annuity starting                          of anticipated
           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. 11424. 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).

       ``(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.

            Subchapter B--Increased Access to Pension Plans

     SEC. 11431. TAX-EXEMPT ORGANIZATIONS ELIGIBLE UNDER SECTION 
                   401(k).

       (a) In General.--Subparagraph (B) of section 401(k)(4) is 
     amended to read as follows:
       ``(B) Eligibility of state and local governments and tax-
     exempt organizations.--
       ``(i) Governments ineligible.--A cash or deferred 
     arrangement shall not be treated as a qualified cash or 
     deferred arrangement if it is part of a plan maintained by a 
     State or local government or political subdivision thereof, 
     or any agency or instrumentality thereof. This clause shall 
     not apply to a rural cooperative plan.
       ``(ii) Tax-exempts eligible.--

       ``(I) In general.--Any organization exempt from tax under 
     this subtitle may include a qualified cash or deferred 
     arrangement as part of a plan maintained by it.
       ``(II) Treatment of indian tribal governments.--An employer 
     which is an Indian tribal government (as defined in section 
     7701(a)(40)), a subdivision of an Indian tribal government 
     (determined in accordance with section 7871(d)), 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 shall be treated as an organization exempt from tax 
     under this subtitle for purposes of subclause (I).

       (b) Effective Date.--The amendment made by this section 
     shall apply to plan years beginning after December 31, 1996, 
     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 C--Nondiscrimination Provisions

     SEC. 11441. 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, or
       ``(B) for the preceding year had compensation from the 
     employer in excess of $80,000 and was in the top-paid group 
     of the employer.
     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) 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.
       (c) Conforming Amendments.--
       (1)(A) Subsection (q) of section 414 is amended by striking 
     paragraphs (2), (5), (8), and (12) and by redesignating 
     paragraphs (3), (4), (7), (9), (10), and (11) as paragraphs 
     (2) through (7), respectively.
       (B) Sections 129(d)(8)(B), 401(a)(5)(D)(ii), 408(k)(2)(C), 
     and 416(i)(1)(D) are each amended by striking ``section 
     414(q)(7)'' and inserting ``section 414(q)(4)''.
       (C) Section 416(i)(1)(A) is amended by striking ``section 
     414(q)(8)'' and inserting ``section 414(r)(9)''.
       (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 on the 
     day before the date of the enactment of the Revenue 
     Reconciliation Act of 1995.''.
       (d) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to years beginning after December 31, 1995, except that 
     in determining whether an employee is a highly compensated 
     employee for years beginning in 1996, such amendments shall 
     be treated as having been in effect for years beginning in 
     1995.
       (2) Family aggregation.--The amendments made by subsection 
     (b) shall apply to years beginning after December 31, 1995.

     SEC. 11442. 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. 11443. 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--

[[Page H 13542]]

       ``(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 the following: ``Rules similar to the rules of 
     subsection (k)(3)(E) shall apply for purposes of this 
     subsection.''.
       (e) Distribution of Excess Contributions.--
       (1) Subparagraph (C) of section 401(k)(8) (relating to 
     arrangement not disqualified if excess contributions 
     distributed) is amended by striking ``on the basis of the 
     respective portions of the excess contributions attributable 
     to each of such employees'' and inserting ``on the basis of 
     the amount of contributions by, or on behalf of, each of such 
     employees''.
       (2) Subparagraph (C) of section 401(m)(6) (relating to 
     method of distributing excess aggregate contributions) is 
     amended by striking ``on the basis of the respective portions 
     of such amounts attributable to each of such employees'' and 
     inserting ``on the basis of the amount of contributions on 
     behalf of, or by, each such employee''.
       (f) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to years beginning after December 31, 1998.
       (2) Excess contributions.--The amendments made by 
     subsection (e) shall apply to years beginning after December 
     31, 1995.

     SEC. 11444. 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
       ``(ii) any amount which is contributed by the employer at 
     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)(4), as redesignated by section 11441, 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.

                 Subchapter D--Miscellaneous Provisions

     SEC. 11451. 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. 11452. 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 

[[Page H 13543]]
     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. 11453. 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 limitation of its application to profit-sharing 
     or stock bonus plans).''.
       (b) 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).''

       (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. 11454. TREATMENT OF GOVERNMENTAL PLANS UNDER SECTION 
                   415.

       (a) Compensation Limit.--Subsection (b) of section 415 is 
     amended by adding immediately after paragraph (10) the 
     following new paragraph:
       ``(11) Special limitation rule for governmental plans.--In 
     the case of a governmental plan (as defined in section 
     414(d)), subparagraph (B) of paragraph (1) shall not apply.''
       (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:
       ``(15) 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 ``and'' at the end of subparagraph 
     (C), by striking the period at the end of subparagraph (D) 
     and inserting ``, and'', and by inserting immediately 
     thereafter 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 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)) 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 a governmental 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, 1994. 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.

     SEC. 11455. 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 amendment made by this section 
     shall apply to years beginning after December 31, 1995.

     SEC. 11456. 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 amendment made by this section 
     shall apply to years beginning after December 31, 1995.

     SEC. 11457. 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

[[Page H 13544]]

       ``(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 
     11454(b)(2) (relating to governmental plans), is amended by 
     adding at the end the following new paragraph:
       ``(16) 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, and any increase under this paragraph 
     which is not a multiple of $500 shall be rounded to the next 
     lowest multiple of $500.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 11458. TRUST REQUIREMENT FOR DEFERRED COMPENSATION PLANS 
                   OF STATE AND LOCAL GOVERNMENTS.

       (a) In General.--Section 457 is amended by adding at the 
     end the following new subsection:
       ``(g) Governmental Plans Must Maintain Set Asides for 
     Exclusive Benefit of Participants.--
       ``(1) In general.--A plan maintained by an eligible 
     employer described in subsection (e)(1)(A) shall not be 
     treated as an eligible deferred compensation plan unless all 
     assets and income of the plan described in subsection (b)(6) 
     are held in trust for the exclusive benefit of participants 
     and their beneficiaries.
       ``(2) Taxability of trusts and participants.--For purposes 
     of this title--
       ``(A) a trust described in paragraph (1) shall be treated 
     as an organization exempt from taxation under section 501(a), 
     and
       ``(B) notwithstanding any other provision of this title, 
     amounts in the trust shall be includible in the gross income 
     of participants and beneficiaries only to the extent, and at 
     the time, provided in this section.
       ``(3) Custodial accounts and contracts.--For purposes of 
     this subsection, custodial accounts and contracts described 
     in section 401(f) shall be treated as trusts under rules 
     similar to the rules under section 401(f).''
       (b) Conforming Amendment.--Paragraph (6) of section 457(b) 
     is amended by inserting ``except as provided in subsection 
     (g),'' before ``which provides that''.
       (c) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to assets and 
     income described in section 457(b)(6) of the Internal Revenue 
     Code of 1986 held by a plan on and after the date of the 
     enactment of this Act.
       (2) Transition rule.--In the case of assets and income 
     described in paragraph (1) held by a plan before the first 
     day of the first calendar quarter beginning after the close 
     of the first regular session of the State legislature of the 
     State in which the governmental entity maintaining the plan 
     is located beginning after the date of the enactment of this 
     Act, a trust need not be established by reason of the 
     amendments made by this section before such first day. For 
     purposes of the preceding 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.

     SEC. 11459. TRANSITION RULE FOR COMPUTING MAXIMUM BENEFITS 
                   UNDER SECTION 415 LIMITATIONS.

       (a) In General.--Subparagraph (A) of section 767(d)(3) of 
     the Uruguay Round Agreements Act is amended to read as 
     follows:
       ``(A) Exception.--A plan that was adopted and in effect 
     before December 8, 1994, shall not be required to apply the 
     amendments made by subsection (b) with respect to benefits 
     accrued before the earlier of--
       ``(i) the later of the date a plan amendment applying such 
     amendment is adopted or made effective, or
       ``(ii) the first day of the first limitation year beginning 
     after December 31, 1999.
     Determinations under section 415(b)(2)(E) of the Internal 
     Revenue Code of 1986 shall be made with respect to such 
     benefits on the basis of such section as in effect on 
     December 7, 1994 (except that the modification made by 
     subsection (b) shall be taken into account), and the 
     provisions of the plan as in effect on December 7, 1994, but 
     only if such provisions of the plan meet the requirements of 
     such section (as so in effect).''
       (b) Modification of Certain Assumptions for Adjusting 
     Benefits of Defined Benefit Plans for Early Retirees.--
     Subparagraph (E) of section 415(b)(2) (relating to limitation 
     on certain assumptions) is amended--
       (1) by striking ``Except as provided in clause (ii), for 
     purposes of adjusting any benefit or limitation under 
     subparagraph (B) or (C),'' in clause (i) and inserting ``For 
     purposes of adjusting any limitation under subparagraph (C) 
     and, except as provided in clause (ii), for purposes of 
     adjusting any benefit under subparagraph (B),'', and
       (2) by striking ``For purposes of adjusting the benefit or 
     limitation of any form of benefit subject to section 
     417(e)(3),'' in clause (ii) and inserting ``For purposes of 
     adjusting any benefit under subparagraph (B) for any form of 
     benefit subject to section 417(e)(3),''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect as if included in the provisions of section 
     767 of the Uruguay Round Agreements Act.
       (d) Transitional Rule.--In the case of a plan that was 
     adopted and in effect before December 8, 1994, if--
       (1) a plan amendment was adopted or made effective on or 
     before the date of the enactment of this Act applying the 
     amendments made by section 767(b) of the Uruguay Round 
     Agreements Act, and
       (2) within 1 year after the date of the enactment of this 
     Act, a plan amendment is adopted which repeals the amendment 
     referred to in paragraph (1),
     the amendment referred to in paragraph (1) shall not be taken 
     into account in applying section 767(d)(3)(A) of the Uruguay 
     Round Agreements Act, as amended by subsection (a).

     SEC. 11460. 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.--
       (1) In general.--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.
       (2) Rollovers.--Solely for purposes of applying section 
     403(b)(8) of such Code to a contract to which paragraph (1) 
     applies, a qualified cash or deferred arrangement under 
     section 401(k) of such Code shall be treated as if it were a 
     plan or contract described in clause (ii) of section 
     403(b)(8)(A) of such Code.
       (c) Elective Deferrals.--
       (1) In general.--Subparagraph (E) of section 403(b)(1) is 
     amended to read as follows:
       ``(E) in the case of a contract purchased under a salary 
     reduction agreement, the contract meets the requirements of 
     section 401(a)(30),''.
       (2) Effective date.--The amendment made by this subsection 
     shall apply to years beginning after December 31, 1995.

     SEC. 11461. WAIVER OF MINIMUM PERIOD FOR JOINT AND SURVIVOR 
                   ANNUITY EXPLANATION BEFORE ANNUITY STARTING 
                   DATE.

       (a) General Rule.--For purposes of section 417(a)(3)(A) of 
     the Internal Revenue Code of 1986 (relating to plan to 
     provide written explanations), the minimum period prescribed 
     by the Secretary of the Treasury between the date that the 
     explanation referred to in such section is provided and the 
     annuity starting date shall not apply if waived by the 
     participant and, if applicable, the participant's spouse.
       (b) Effective Date.--Subsection (a) shall apply to plan 
     years beginning after December 31, 1995.

     SEC. 11462. REPEAL OF LIMITATION IN CASE OF DEFINED BENEFIT 
                   PLAN AND DEFINED CONTRIBUTION PLAN FOR SAME 
                   EMPLOYEE; EXCESS DISTRIBUTIONS.

       (a) In General.--Section 415(e) is repealed.
       (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) Conforming Amendments.--
       (1) Subparagraph (B) of section 415(b)(5) is amended by 
     striking ``and subsection (e)''.
       (2) Paragraph (1) of section 415(f) is amended by striking 
     ``subsections (b), (c), and (e)'' and inserting ``subsections 
     (b) and (c)''.
       (3) Subsection (g) of section 415 is amended by striking 
     ``subsections (e) and (f)'' in the last sentence and 
     inserting ``subsection (f)''.
       (4) Clause (i) of section 415(k)(2)(A) is amended to read 
     as follows:
       ``(i) any contribution made directly by an employee under 
     such an arrangement shall not be treated as an annual 
     addition for purposes of subsection (c), and''.
       (5) Clause (ii) of section 415(k)(2)(A) is amended by 
     striking ``subsections (c) and (e)'' and inserting 
     ``subsection (c)''.
       (6) Section 416 is amended by striking subsection (h).
       (d) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to limitation 
     years beginning after December 31, 1998.
       (2) Excess distributions.--The amendment made by subsection 
     (b) shall apply to years beginning after December 31, 1995.

     SEC. 11463. 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. 11464. 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 

[[Page H 13545]]
     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.

               CHAPTER 3--TREATMENT OF LARGE PARTNERSHIPS

     SEC. 11471. SIMPLIFIED FLOW-THROUGH FOR ELECTING LARGE 
                   PARTNERSHIPS.

       (a) General Rule.--Subchapter K (relating to partners and 
     partnerships) is amended by adding at the end the following 
     new part:

        ``PART IV--SPECIAL RULES FOR ELECTING LARGE PARTNERSHIPS

``Sec. 771. Application of subchapter to electing large partnerships.
``Sec. 772. Simplified flow-through.
``Sec. 773. Computations at partnership level.
``Sec. 774. Other modifications.
``Sec. 775. Electing large partnership defined.
``Sec. 776. Special rules for partnerships holding oil and gas 
              properties.
``Sec. 777. Regulations.

     ``SEC. 771. APPLICATION OF SUBCHAPTER TO ELECTING LARGE 
                   PARTNERSHIPS.

       ``The preceding provisions of this subchapter to the extent 
     inconsistent with the provisions of this part shall not apply 
     to an electing large partnership and its partners.

     ``SEC. 772. SIMPLIFIED FLOW-THROUGH.

       ``(a) General Rule.--In determining the income tax of a 
     partner of an electing large partnership, such partner shall 
     take into account separately such partner's distributive 
     share of the partnership's--
       ``(1) taxable income or loss from passive loss limitation 
     activities,
       ``(2) taxable income or loss from other activities,
       ``(3) net capital gain (or net capital loss)--
       ``(A) to the extent allocable to passive loss limitation 
     activities, and
       ``(B) to the extent allocable to other activities,
       ``(4) tax-exempt interest,
       ``(5) applicable net AMT adjustment separately computed 
     for--
       ``(A) passive loss limitation activities, and
       ``(B) other activities,
       ``(6) general credits,
       ``(7) low-income housing credit determined under section 
     42,
       ``(8) rehabilitation credit determined under section 47,
       ``(9) foreign income taxes,
       ``(10) the credit allowable under section 29, and
       ``(11) other items to the extent that the Secretary 
     determines that the separate treatment of such items is 
     appropriate.
       ``(b) Separate Computations.--In determining the amounts 
     required under subsection (a) to be separately taken into 
     account by any partner, this section and section 773 shall be 
     applied separately with respect to such partner by taking 
     into account such partner's distributive share of the items 
     of income, gain, loss, deduction, or credit of the 
     partnership.
       ``(c) Treatment at Partner Level.--
       ``(1) In general.--Except as provided in this subsection, 
     rules similar to the rules of section 702(b) shall apply to 
     any partner's distributive share of the amounts referred to 
     in subsection (a).
       ``(2) Income or loss from passive loss limitation 
     activities.--For purposes of this chapter, any partner's 
     distributive share of any income or loss described in 
     subsection (a)(1) shall be treated as an item of income or 
     loss (as the case may be) from the conduct of a trade or 
     business which is a single passive activity (as defined in 
     section 469). A similar rule shall apply to a partner's 
     distributive share of amounts referred to in paragraphs 
     (3)(A) and (5)(A) of subsection (a).
       ``(3) Income or loss from other activities.--
       ``(A) In general.--For purposes of this chapter, any 
     partner's distributive share of any income or loss described 
     in subsection (a)(2) shall be treated as an item of income or 
     expense (as the case may be) with respect to property held 
     for investment.
       ``(B) Deductions for loss not subject to section 67.--The 
     deduction under section 212 for any loss described in 
     subparagraph (A) shall not be treated as a miscellaneous 
     itemized deduction for purposes of section 67.
       ``(4) Treatment of net capital gain or loss.--For purposes 
     of this chapter, any partner's distributive share of any gain 
     or loss described in subsection (a)(3) shall be treated as a 
     long-term capital gain or loss, as the case may be.
       ``(5) Minimum tax treatment.--In determining the 
     alternative minimum taxable income of any partner, such 
     partner's distributive share of any applicable net AMT 
     adjustment shall be taken into account in lieu of making the 
     separate adjustments provided in sections 56, 57, and 58 with 
     respect to the items of the partnership. Except as provided 
     in regulations, the applicable net AMT adjustment shall be 
     treated, for purposes of section 53, as an adjustment or item 
     of tax preference not specified in section 53(d)(1)(B)(ii).
       ``(6) General credits.--A partner's distributive share of 
     the amount referred to in paragraph (6) of subsection (a) 
     shall be taken into account as a current year business 
     credit.
       ``(d) Operating Rules.--For purposes of this section--
       ``(1) Passive loss limitation activity.--The term `passive 
     loss limitation activity' means--
       ``(A) any activity which involves the conduct of a trade or 
     business, and
       ``(B) any rental activity.
     For purposes of the preceding sentence, the term `trade or 
     business' includes any activity treated as a trade or 
     business under paragraph (5) or (6) of section 469(c).
       ``(2) Tax-exempt interest.--The term `tax-exempt interest' 
     means interest excludable from gross income under section 
     103.
       ``(3) Applicable net amt adjustment.--
       ``(A) In general.--The applicable net AMT adjustment is--
       ``(i) with respect to taxpayers other than corporations, 
     the net adjustment determined by using the adjustments 
     applicable to individuals, and
       ``(ii) with respect to corporations, the net adjustment 
     determined by using the adjustments applicable to 
     corporations.
       ``(B) Net adjustment.--The term `net adjustment' means the 
     net adjustment in the items attributable to passive loss 
     activities or other activities (as the case may be) which 
     would result if such items were determined with the 
     adjustments of sections 56, 57, and 58.
       ``(4) Treatment of certain separately stated items.--
       ``(A) Exclusion for certain purposes.--In determining the 
     amounts referred to in paragraphs (1) and (2) of subsection 
     (a), any net capital gain or net capital loss (as the case 
     may be), and any item referred to in subsection (a)(11), 
     shall be excluded.
       ``(B) Allocation rules.--The net capital gain shall be 
     treated--
       ``(i) as allocable to passive loss limitation activities to 
     the extent the net capital gain does not exceed the net 
     capital gain determined by only taking into account gains and 
     losses from sales and exchanges of property used in 
     connection with such activities, and
       ``(ii) as allocable to other activities to the extent such 
     gain exceeds the amount allocated under clause (i).
     A similar rule shall apply for purposes of allocating any net 
     capital loss.
       ``(C) Net capital loss.--The term `net capital loss' means 
     the excess of the losses from sales or exchanges of capital 
     assets over the gains from sales or exchange of capital 
     assets.
       ``(5) General credits.--The term `general credits' means 
     any credit other than the low-income housing credit, the 
     rehabilitation credit, the foreign tax credit, and the credit 
     allowable under section 29.
       ``(6) Foreign income taxes.--The term `foreign income 
     taxes' means taxes described in section 901 which are paid or 
     accrued to foreign countries and to possessions of the United 
     States.
       ``(e) Special Rule for Unrelated Business Tax.--In the case 
     of a partner which is an organization subject to tax under 
     section 511, such partner's distributive share of any items 
     shall be taken into account separately to the extent 
     necessary to comply with the provisions of section 512(c)(1).
       ``(f) Special Rules for Applying Passive Loss 
     Limitations.--If any person holds an interest in an electing 
     large partnership other than as a limited partner--
       ``(1) paragraph (2) of subsection (c) shall not apply to 
     such partner, and
       ``(2) such partner's distributive share of the partnership 
     items allocable to passive loss limitation activities shall 
     be taken into account separately to the extent necessary to 
     comply with the provisions of section 469.
     The preceding sentence shall not apply to any items allocable 
     to an interest held as a limited partner.

     ``SEC. 773. COMPUTATIONS AT PARTNERSHIP LEVEL.

       ``(a) General Rule.--
       ``(1) Taxable income.--The taxable income of an electing 
     large partnership shall be computed in the same manner as in 
     the case of an individual except that--
       ``(A) the items described in section 772(a) shall be 
     separately stated, and
       ``(B) the modifications of subsection (b) shall apply.
       ``(2) Elections.--All elections affecting the computation 
     of the taxable income of an electing large partnership or the 
     computation of any credit of an electing large partnership 
     shall be made by the partnership; except that the election 
     under section 901, and any election under section 108, shall 
     be made by each partner separately.
       ``(3) Limitations, etc.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     all limitations and other provisions affecting the 
     computation of the taxable income of an electing large 
     partnership or the computation of any credit of an electing 
     large partnership shall be applied at the partnership level 
     (and not at the partner level).
       ``(B) Certain limitations applied at partner level.--The 
     following provisions shall be applied at the partner level 
     (and not at the partnership level):
       ``(i) Section 68 (relating to overall limitation on 
     itemized deductions).
       ``(ii) Sections 49 and 465 (relating to at risk 
     limitations).
       ``(iii) Section 469 (relating to limitation on passive 
     activity losses and credits).
       ``(iv) Any other provision specified in regulations.
       ``(4) Coordination with other provisions.--Paragraphs (2) 
     and (3) shall apply notwithstanding any other provision of 
     this chapter other than this part.
       ``(b) Modifications to Determination of Taxable Income.--In 
     determining the taxable income of an electing large 
     partnership--
       ``(1) Certain deductions not allowed.--The following 
     deductions shall not be allowed:
       ``(A) The deduction for personal exemptions provided in 
     section 151.
       ``(B) The net operating loss deduction provided in section 
     172.
       ``(C) The additional itemized deductions for individuals 
     provided in part VII of subchapter B (other than section 212 
     thereof).

[[Page H 13546]]

       ``(2) Charitable deductions.--In determining the amount 
     allowable under section 170, the limitation of section 
     170(b)(2) shall apply.
       ``(3) Coordination with section 67.--In lieu of applying 
     section 67, 70 percent of the amount of the miscellaneous 
     itemized deductions shall be disallowed.
       ``(c) Special Rules for Income From Discharge of 
     Indebtedness.--If an electing large partnership has income 
     from the discharge of any indebtedness--
       ``(1) such income shall be excluded in determining the 
     amounts referred to in section 772(a), and
       ``(2) in determining the income tax of any partner of such 
     partnership--
       ``(A) such income shall be treated as an item required to 
     be separately taken into account under section 772(a), and
       ``(B) the provisions of section 108 shall be applied 
     without regard to this part.

     ``SEC. 774. OTHER MODIFICATIONS.

       ``(a) Treatment of Certain Optional Adjustments, Etc.--In 
     the case of an electing large partnership--
       ``(1) computations under section 773 shall be made without 
     regard to any adjustment under section 743(b) or 108(b), but
       ``(2) a partner's distributive share of any amount referred 
     to in section 772(a) shall be appropriately adjusted to take 
     into account any adjustment under section 743(b) or 108(b) 
     with respect to such partner.
       ``(b) Credit Recapture Determined at Partnership Level.--
       ``(1) In general.--In the case of an electing large 
     partnership--
       ``(A) any credit recapture shall be taken into account by 
     the partnership, and
       ``(B) the amount of such recapture shall be determined as 
     if the credit with respect to which the recapture is made had 
     been fully utilized to reduce tax.
       ``(2) Method of taking recapture into account.--An electing 
     large partnership shall take into account a credit recapture 
     by reducing the amount of the appropriate current year credit 
     to the extent thereof, and if such recapture exceeds the 
     amount of such current year credit, the partnership shall be 
     liable to pay such excess.
       ``(3) Dispositions not to trigger recapture.--No credit 
     recapture shall be required by reason of any transfer of an 
     interest in an electing large partnership.
       ``(4) Credit recapture.--For purposes of this subsection, 
     the term `credit recapture' means any increase in tax under 
     section 42(j) or 50(a).
       ``(c) Partnership Not Terminated by Reason of Change in 
     Ownership.--Subparagraph (B) of section 708(b)(1) shall not 
     apply to an electing large partnership.
       ``(d) Partnership Entitled to Certain Credits.--The 
     following shall be allowed to an electing large partnership 
     and shall not be taken into account by the partners of such 
     partnership:
       ``(1) The credit provided by section 34.
       ``(2) Any credit or refund under section 852(b)(3)(D).
       ``(e) Treatment of REMIC Residuals.--For purposes of 
     applying section 860E(e)(6) to any electing large 
     partnership--
       ``(1) all interests in such partnership shall be treated as 
     held by disqualified organizations,
       ``(2) in lieu of applying subparagraph (C) of section 
     860E(e)(6), the amount subject to tax under section 
     860E(e)(6) shall be excluded from the gross income of such 
     partnership, and
       ``(3) subparagraph (D) of section 860E(e)(6) shall not 
     apply.
       ``(f) Special Rules for Applying Certain Installment Sale 
     Rules.--In the case of an electing large partnership--
       ``(1) the provisions of sections 453(l)(3) and 453A shall 
     be applied at the partnership level, and
       ``(2) in determining the amount of interest payable under 
     such sections, such partnership shall be treated as subject 
     to tax under this chapter at the highest rate of tax in 
     effect under section 1 or 11.

     ``SEC. 775. ELECTING LARGE PARTNERSHIP DEFINED.

       ``(a) General Rule.--For purposes of this part--
       ``(1) In general.--The term `electing large partnership' 
     means, with respect to any partnership taxable year, any 
     partnership if--
       ``(A) the number of persons who were partners in such 
     partnership in the preceding partnership taxable year equaled 
     or exceeded 100, and
       ``(B) such partnership elects the application of this part.
     To the extent provided in regulations, a partnership shall 
     cease to be treated as an electing large partnership for any 
     partnership taxable year if in such taxable year fewer than 
     100 persons were partners in such partnership.
       ``(2) Election.--The election under this subsection shall 
     apply to the taxable year for which made and all subsequent 
     taxable years unless revoked with the consent of the 
     Secretary.
       ``(b) Special Rules for Certain Service Partnerships.--
       ``(1) Certain partners not counted.--For purposes of this 
     section, the term `partner' does not include any individual 
     performing substantial services in connection with the 
     activities of the partnership and holding an interest in such 
     partnership, or an individual who formerly performed 
     substantial services in connection with such activities and 
     who held an interest in such partnership at the time the 
     individual performed such services.
       ``(2) Exclusion.--For purposes of this part, an election 
     under subsection (a) shall not be effective with respect to 
     any partnership if substantially all the partners of such 
     partnership--
       ``(A) are individuals performing substantial services in 
     connection with the activities of such partnership or are 
     personal service corporations (as defined in section 269A(b)) 
     the owner-employees (as defined in section 269A(b)) of which 
     perform such substantial services,
       ``(B) are retired partners who had performed such 
     substantial services, or
       ``(C) are spouses of partners who are performing (or had 
     previously performed) such substantial services.
       ``(3) Special rule for lower tier partnerships.--For 
     purposes of this subsection, the activities of a partnership 
     shall include the activities of any other partnership in 
     which the partnership owns directly an interest in the 
     capital and profits of at least 80 percent.
       ``(c) Exclusion of Commodity Pools.--For purposes of this 
     part, an election under subsection (a) shall not be effective 
     with respect to any partnership the principal activity of 
     which is the buying and selling of commodities (not described 
     in section 1221(1)), or options, futures, or forwards with 
     respect to such commodities.
       ``(d) Secretary May Rely on Treatment on Return.--If, on 
     the partnership return of any partnership, such partnership 
     is treated as an electing large partnership, such treatment 
     shall be binding on such partnership and all partners of such 
     partnership but not on the Secretary.

     ``SEC. 776. SPECIAL RULES FOR PARTNERSHIPS HOLDING OIL AND 
                   GAS PROPERTIES.

       ``(a) Exception for Partnerships Holding Significant Oil 
     and Gas Properties.--
       ``(1) In general.--For purposes of this part, an election 
     under section 775(a) shall not be effective with respect to 
     any partnership if the average percentage of assets (by 
     value) held by such partnership during the taxable year which 
     are oil or gas properties is at least 25 percent. For 
     purposes of the preceding sentence, any interest held by a 
     partnership in another partnership shall be disregarded, 
     except that the partnership shall be treated as holding its 
     proportionate share of the assets of such other partnership.
       ``(2) Election to waive exception.--Any partnership may 
     elect to have paragraph (1) not apply. Such an election shall 
     apply to the partnership taxable year for which made and all 
     subsequent partnership taxable years unless revoked with the 
     consent of the Secretary.
       ``(b) Special Rules Where Part Applies.--
       ``(1) Computation of percentage depletion.--In the case of 
     an electing large partnership, except as provided in 
     paragraph (2)--
       ``(A) the allowance for depletion under section 611 with 
     respect to any partnership oil or gas property shall be 
     computed at the partnership level without regard to any 
     provision of section 613A requiring such allowance to be 
     computed separately by each partner,
       ``(B) such allowance shall be determined without regard to 
     the provisions of section 613A(c) limiting the amount of 
     production for which percentage depletion is allowable and 
     without regard to paragraph (1) of section 613A(d), and
       ``(C) paragraph (3) of section 705(a) shall not apply.
       ``(2) Treatment of certain partners.--
       ``(A) In general.--In the case of a disqualified person, 
     the treatment under this chapter of such person's 
     distributive share of any item of income, gain, loss, 
     deduction, or credit attributable to any partnership oil or 
     gas property shall be determined without regard to this part. 
     Such person's distributive share of any such items shall be 
     excluded for purposes of making determinations under sections 
     772 and 773.
       ``(B) Disqualified person.--For purposes of subparagraph 
     (A), the term `disqualified person' means, with respect to 
     any partnership taxable year--
       ``(i) any person referred to in paragraph (2) or (4) of 
     section 613A(d) for such person's taxable year in which such 
     partnership taxable year ends, and
       ``(ii) any other person if such person's average daily 
     production of domestic crude oil and natural gas for such 
     person's taxable year in which such partnership taxable year 
     ends exceeds 500 barrels.
       ``(C) Average daily production.--For purposes of 
     subparagraph (B), a person's average daily production of 
     domestic crude oil and natural gas for any taxable year shall 
     be computed as provided in section 613A(c)(2)--
       ``(i) by taking into account all production of domestic 
     crude oil and natural gas (including such person's 
     proportionate share of any production of a partnership),
       ``(ii) by treating 6,000 cubic feet of natural gas as a 
     barrel of crude oil, and
       ``(iii) by treating as 1 person all persons treated as 1 
     taxpayer under section 613A(c)(8) or among whom allocations 
     are required under such section.

     ``SEC. 777. REGULATIONS.

       ``The Secretary shall prescribe such regulations as may be 
     appropriate to carry out the purposes of this part.''
       (b) Clerical Amendment.--The table of parts for subchapter 
     K of chapter 1 is amended by adding at the end the following 
     new item:

``Part IV. Special rules for electing large partnerships.''

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

     SEC. 11472. RETURNS MAY BE REQUIRED ON MAGNETIC MEDIA.

       (a) In General.--Paragraph (2) of section 6011(e) (relating 
     to returns on magnetic media) is amended by adding at the end 
     the following new sentence:
     ``Notwithstanding the preceding sentence, the Secretary shall 
     require partnerships having more than 100 partners to file 
     returns on magnetic media.''
       (b) Effective Date.--The amendments made by this section 
     shall apply to partnership taxable years beginning after 
     December 31, 1995.

[[Page H 13547]]


                     CHAPTER 4--FOREIGN PROVISIONS

Subchapter A--Modifications to Treatment of Passive Foreign Investment 
                               Companies

     SEC. 11481. UNITED STATES SHAREHOLDERS OF CONTROLLED FOREIGN 
                   CORPORATIONS NOT SUBJECT TO PFIC INCLUSION.

       Section 1296 is amended by adding at the end the following 
     new subsection:
       ``(e) Exception for United States Shareholders of 
     Controlled Foreign Corporations.--
       ``(1) In general.--For purposes of this part, a corporation 
     shall not be treated with respect to a shareholder as a 
     passive foreign investment company during the qualified 
     portion of such shareholder's holding period with respect to 
     stock in such corporation.
       ``(2) Qualified portion.--For purposes of this subsection, 
     the term `qualified portion' means the portion of the 
     shareholder's holding period--
       ``(A) which is after December 31, 1995, and
       ``(B) during which the shareholder is a United States 
     shareholder (as defined in section 951(b)) of the corporation 
     and the corporation is a controlled foreign corporation.
       ``(3) New holding period if qualified portion ends.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     if the qualified portion of a shareholder's holding period 
     with respect to any stock ends after December 31, 1995, 
     solely for purposes of this part, the shareholder's holding 
     period with respect to such stock shall be treated as 
     beginning as of the first day following such period.
       ``(B) Exception.--Subparagraph (A) shall not apply if such 
     stock was, with respect to such shareholder, stock in a 
     passive foreign investment company at any time before the 
     qualified portion of the shareholder's holding period with 
     respect to such stock and no election under section 
     1298(b)(1) is made.''

     SEC. 11482. ELECTION OF MARK TO MARKET FOR MARKETABLE STOCK 
                   IN PASSIVE FOREIGN INVESTMENT COMPANY.

       (a) In General.--Part VI of subchapter P of chapter 1 is 
     amended by redesignating subpart C as subpart D, by 
     redesignating sections 1296 and 1297 as sections 1297 and 
     1298, respectively, and by inserting after subpart B the 
     following new subpart:

      ``Subpart C--Election of Mark to Market For Marketable Stock

``Sec. 1296. Election of mark to market for marketable stock.

     ``SEC. 1296. ELECTION OF MARK TO MARKET FOR MARKETABLE STOCK.

       ``(a) General Rule.--In the case of marketable stock in a 
     passive foreign investment company which is owned (or treated 
     under subsection (g) as owned) by a United States person at 
     the close of any taxable year of such person, at the election 
     of such person--
       ``(1) If the fair market value of such stock as of the 
     close of such taxable year exceeds its adjusted basis, such 
     United States person shall include in gross income for such 
     taxable year an amount equal to the amount of such excess.
       ``(2) If the adjusted basis of such stock exceeds the fair 
     market value of such stock as of the close of such taxable 
     year, such United States person shall be allowed a deduction 
     for such taxable year equal to the lesser of--
       ``(A) the amount of such excess, or
       ``(B) the unreversed inclusions with respect to such stock.
       ``(b) Basis Adjustments.--
       ``(1) In general.--The adjusted basis of stock in a passive 
     foreign investment company--
       ``(A) shall be increased by the amount included in the 
     gross income of the United States person under subsection 
     (a)(1) with respect to such stock, and
       ``(B) shall be decreased by the amount allowed as a 
     deduction to the United States person under subsection (a)(2) 
     with respect to such stock.
       ``(2) Special rule for stock constructively owned.--In the 
     case of stock in a passive foreign investment company which 
     the United States person is treated as owning under 
     subsection (g)--
       ``(A) the adjustments under paragraph (1) shall apply to 
     such stock in the hands of the person actually holding such 
     stock but only for purposes of determining the subsequent 
     treatment under this chapter of the United States person with 
     respect to such stock, and
       ``(B) similar adjustments shall be made to the adjusted 
     basis of the property by reason of which the United States 
     person is treated as owning such stock.
       ``(c) Character and Source Rules.--
       ``(1) Ordinary treatment.--
       ``(A) Gain.--Any amount included in gross income under 
     subsection (a)(1), and any gain on the sale or other 
     disposition of marketable stock in a passive foreign 
     investment company (with respect to which an election under 
     this section is in effect), shall be treated as ordinary 
     income.
       ``(B) Loss.--Any--
       ``(i) amount allowed as a deduction under subsection 
     (a)(2), and
       ``(ii) loss on the sale or other disposition of marketable 
     stock in a passive foreign investment company (with respect 
     to which an election under this section is in effect) to the 
     extent that the amount of such loss does not exceed the 
     unreversed inclusions with respect to such stock,
     shall be treated as an ordinary loss. The amount so treated 
     shall be treated as a deduction allowable in computing 
     adjusted gross income.
       ``(2) Source.--The source of any amount included in gross 
     income under subsection (a)(1) (or allowed as a deduction 
     under subsection (a)(2)) shall be determined in the same 
     manner as if such amount were gain or loss (as the case may 
     be) from the sale of stock in the passive foreign investment 
     company.
       ``(d) Unreversed Inclusions.--For purposes of this section, 
     the term `unreversed inclusions' means, with respect to any 
     stock in a passive foreign investment company, the excess (if 
     any) of--
       ``(1) the amount included in gross income of the taxpayer 
     under subsection (a)(1) with respect to such stock for prior 
     taxable years, over
       ``(2) the amount allowed as a deduction under subsection 
     (a)(2) with respect to such stock for prior taxable years.
     The amount referred to in paragraph (1) shall include any 
     amount which would have been included in gross income under 
     subsection (a)(1) with respect to such stock for any prior 
     taxable year but for section 1291.
       ``(e) Marketable Stock.--For purposes of this section--
       ``(1) In general.--The term `marketable stock' means--
       ``(A) any stock which is regularly traded on--
       ``(i) a national securities exchange which is registered 
     with the Securities and Exchange Commission or the national 
     market system established pursuant to section 11A of the 
     Securities and Exchange Act of 1934, or
       ``(ii) any exchange or other market which the Secretary 
     determines has rules adequate to carry out the purposes of 
     this part,
       ``(B) to the extent provided in regulations, stock in any 
     foreign corporation which is comparable to a regulated 
     investment company and which offers for sale or has 
     outstanding any stock of which it is the issuer and which is 
     redeemable at its net asset value, and
       ``(C) to the extent provided in regulations, any option on 
     stock described in subparagraph (A) or (B).
       ``(2) Special rule for regulated investment companies.--In 
     the case of any regulated investment company which is 
     offering for sale or has outstanding any stock of which it is 
     the issuer and which is redeemable at its net asset value, 
     all stock in a passive foreign investment company which it 
     owns directly or indirectly shall be treated as marketable 
     stock for purposes of this section. Except as provided in 
     regulations, similar treatment as marketable stock shall 
     apply in the case of any other regulated investment company 
     which publishes net asset valuations at least annually.
       ``(f) Treatment of Controlled Foreign Corporations Which 
     are Shareholders in Passive Foreign Investment Companies.--In 
     the case of a foreign corporation which is a controlled 
     foreign corporation and which owns (or is treated under 
     subsection (g) as owning) stock in a passive foreign 
     investment company--
       ``(1) this section (other than subsection (c)(2)) shall 
     apply to such foreign corporation in the same manner as if 
     such corporation were a United States person, and
       ``(2) for purposes of subpart F of part III of subchapter 
     N--
       ``(A) any amount included in gross income under subsection 
     (a)(1) shall be treated as foreign personal holding company 
     income described in section 954(c)(1)(A), and
       ``(B) any amount allowed as a deduction under subsection 
     (a)(2) shall be treated as a deduction allocable to foreign 
     personal holding company income so described.
       ``(g) Stock Owned Through Certain Foreign Entities.--Except 
     as provided in regulations--
       ``(1) In general.--For purposes of this section, stock 
     owned, directly or indirectly, by or for a foreign 
     partnership or foreign trust or foreign estate shall be 
     considered as being owned proportionately by its partners or 
     beneficiaries. Stock considered to be owned by a person by 
     reason of the application of the preceding sentence shall, 
     for purposes of applying such sentence, be treated as 
     actually owned by such person.
       ``(2) Treatment of certain dispositions.--In any case in 
     which a United States person is treated as owning stock in a 
     passive foreign investment company by reason of paragraph 
     (1)--
       ``(A) any disposition by the United States person or by any 
     other person which results in the United States person being 
     treated as no longer owning such stock, and
       ``(B) any disposition by the person owning such stock,
     shall be treated as a disposition by the United States person 
     of the stock in the passive foreign investment company.
       ``(h) Coordination With Section 851(b).--For purposes of 
     paragraphs (2) and (3) of section 851(b), any amount included 
     in gross income under subsection (a) shall be treated as a 
     dividend.
       ``(i) Stock Acquired From a Decedent.--In the case of stock 
     of a passive foreign investment company which is acquired by 
     bequest, devise, or inheritance (or by the decedent's estate) 
     and with respect to which an election under this section was 
     in effect as of the date of the decedent's death, 
     notwithstanding section 1014, the basis of such stock in the 
     hands of the person so acquiring it shall be the adjusted 
     basis of such stock in the hands of the decedent immediately 
     before his death (or, if lesser, the basis which would have 
     been determined under section 1014 without regard to this 
     subsection).
       ``(j) Coordination With Section 1291 for First Year of 
     Election.--
       ``(1) Taxpayers other than regulated investment 
     companies.--
       ``(A) In general.--If the taxpayer elects the application 
     of this section with respect to any marketable stock in a 
     corporation after the beginning of the taxpayer's holding 
     period in such stock, and if the requirements of subparagraph 
     (B) are not satisfied, section 1291 shall apply to--
       ``(i) any distributions with respect to, or disposition of, 
     such stock in the first taxable year of the taxpayer for 
     which such election is made, and
       ``(ii) any amount which, but for section 1291, would have 
     been included in gross income under 

[[Page H 13548]]
     subsection (a) with respect to such stock for such taxable year in the 
     same manner as if such amount were gain on the disposition of 
     such stock.
       ``(B) Requirements.--The requirements of this subparagraph 
     are met if, with respect to each of such corporation's 
     taxable years for which such corporation was a passive 
     foreign investment company and which begin after December 31, 
     1986, and included any portion of the taxpayer's holding 
     period in such stock, such corporation was treated as a 
     qualified electing fund under this part with respect to the 
     taxpayer.
       ``(2) Special rules for regulated investment companies.--
       ``(A) In general.--If a regulated investment company elects 
     the application of this section with respect to any 
     marketable stock in a corporation after the beginning of the 
     taxpayer's holding period in such stock, then, with respect 
     to such company's first taxable year for which such company 
     elects the application of this section with respect to such 
     stock--
       ``(i) section 1291 shall not apply to such stock with 
     respect to any distribution or disposition during, or amount 
     included in gross income under this section for, such first 
     taxable year, but
       ``(ii) such regulated investment company's tax under this 
     chapter for such first taxable year shall be increased by the 
     aggregate amount of interest which would have been determined 
     under section 1291(c)(3) if section 1291 were applied without 
     regard to this subparagraph.
     Clause (ii) shall not apply if for the preceding taxable year 
     the company elected to mark to market the stock held by such 
     company as of the last day of such preceding taxable year.
       ``(B) Disallowance of deduction.--No deduction shall be 
     allowed to any regulated investment company for the increase 
     in tax under subparagraph (A)(ii).
       ``(k) Election.--This section shall apply to marketable 
     stock in a passive foreign investment company which is held 
     by a United States person only if such person elects to apply 
     this section with respect to such stock. Such an election 
     shall apply to the taxable year for which made and all 
     subsequent taxable years unless--
       ``(1) such stock ceases to be marketable stock, or
       ``(2) the Secretary consents to the revocation of such 
     election.
       ``(l) Transition Rule for Individuals Becoming Subject to 
     United States Tax.--If any individual becomes a United States 
     person in a taxable year beginning after December 31, 1995, 
     solely for purposes of this section, the adjusted basis 
     (before adjustments under subsection (b)) of any marketable 
     stock in a passive foreign investment company owned by such 
     individual on the first day of such taxable year shall be 
     treated as being the greater of its fair market value on such 
     first day or its adjusted basis on such first day.''
       (b) Coordination With Interest Charge, Etc.--
       (1) Paragraph (1) of section 1291(d) is amended by adding 
     at the end the following new flush sentence:
     ``Except as provided in section 1296(j), this section also 
     shall not apply if an election under section 1296(k) is in 
     effect for the taxpayer's taxable year.''
       (2) The subsection heading for subsection (d) of section 
     1291 is amended by striking ``Subpart B'' and inserting 
     ``Subparts B and C''.
       (3) Subparagraph (A) of section 1291(a)(3) is amended to 
     read as follows:
       ``(A) Holding period.--The taxpayer's holding period shall 
     be determined under section 1223; except that--
       ``(i) for purposes of applying this section to an excess 
     distribution, such holding period shall be treated as ending 
     on the date of such distribution, and
       ``(ii) if section 1296 applied to such stock with respect 
     to the taxpayer for any prior taxable year, such holding 
     period shall be treated as beginning on the first day of the 
     first taxable year beginning after the last taxable year for 
     which section 1296 so applied.''
       (c) Conforming Amendments.--
       (1) Sections 532(b)(4) and 542(c)(10) are each amended by 
     striking ``section 1296'' and inserting ``section 1297''.
       (2) Subsection (f) of section 551 is amended by striking 
     ``section 1297(b)(5)'' and inserting ``section 1298(b)(5)''
       (3) Subsections (a)(1) and (d) of section 1293 are each 
     amended by striking ``section 1297(a)'' and inserting 
     ``section 1298(a)''.
       (4) Paragraph (3) of section 1297(b), as redesignated by 
     subsection (a), is hereby repealed.
       (5) The table of sections for subpart D of part VI of 
     subchapter P of chapter 1, as redesignated by subsection (a), 
     is amended to read as follows:
``Sec. 1297. Passive foreign investment company.
``Sec. 1298. Special rules.''
       (6) The table of subparts for part VI of subchapter P of 
     chapter 1 is amended by striking the last item and inserting 
     the following new items:
``Subpart C. Election of mark to market for marketable stock.
``Subpart D. General provisions.''
       (d) Clarification of Gain Recognition Election.--The last 
     sentence of section 1298(b)(1), as so redesignated, is 
     amended by inserting ``(determined without regard to the 
     preceding sentence)'' after ``investment company''.

     SEC. 11483. MODIFICATIONS TO DEFINITION OF PASSIVE INCOME.

       (a) Exception for Same Country Income Not To Apply.--
     Paragraph (1) of section 1297(b) (defining passive income), 
     as redesignated by section 11482, is amended by inserting 
     before the period ``without regard to paragraph (3) 
     thereof''.
       (b) Passive Income Not To Include FSC Income.--Paragraph 
     (2) of section 1297(b), as so redesignated, 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 inserting after subparagraph (C) the following 
     new subparagraph:
       ``(D) any foreign trade income of a FSC.''

     SEC. 11484. EFFECTIVE DATE.

       The amendments made by this subchapter shall apply to--
       (1) taxable years of United States persons beginning after 
     December 31, 1995, and
       (2) taxable years of foreign corporations ending with or 
     within such taxable years of United States persons.

       Subchapter B--Treatment of Controlled Foreign Corporations

     SEC. 11486. GAIN ON CERTAIN STOCK SALES BY CONTROLLED FOREIGN 
                   CORPORATIONS TREATED AS DIVIDENDS.

       (a) General Rule.--Section 964 (relating to miscellaneous 
     provisions) is amended by adding at the end the following new 
     subsection:
       ``(e) Gain on Certain Stock Sales by Controlled Foreign 
     Corporations Treated as Dividends.--
       ``(1) In general.--If a controlled foreign corporation 
     sells or exchanges stock in any other foreign corporation, 
     gain recognized on such sale or exchange shall be included in 
     the gross income of such controlled foreign corporation as a 
     dividend to the same extent that it would have been so 
     included under section 1248(a) if such controlled foreign 
     corporation were a United States person. For purposes of 
     determining the amount which would have been so includible, 
     the determination of whether such other foreign corporation 
     was a controlled foreign corporation shall be made without 
     regard to the preceding sentence.
       ``(2) Same country exception not applicable.--Clause (i) of 
     section 954(c)(3)(A) shall not apply to any amount treated as 
     a dividend by reason of paragraph (1).
       ``(3) Clarification of deemed sales.--For purposes of this 
     subsection, a controlled foreign corporation shall be treated 
     as having sold or exchanged any stock if, under any provision 
     of this subtitle, such controlled foreign corporation is 
     treated as having gain from the sale or exchange of such 
     stock.''
       (b) Amendment of Section 904(d).--Clause (i) of section 
     904(d)(2)(E) is amended by striking ``and except as provided 
     in regulations, the taxpayer was a United States shareholder 
     in such corporation''.
       (c) Effective Dates.--
       (1) The amendment made by subsection (a) shall apply to 
     gain recognized on transactions occurring after the date of 
     the enactment of this Act.
       (2) The amendment made by subsection (b) shall apply to 
     distributions after the date of the enactment of this Act.

     SEC. 11487. MISCELLANEOUS MODIFICATIONS TO SUBPART F.

       (a) Section 1248 Gain Taken Into Account in Determining Pro 
     Rata Share.--
       (1) In general.--Paragraph (2) of section 951(a) (defining 
     pro rata share of subpart F income) is amended by adding at 
     the end the following new sentence: ``For purposes of 
     subparagraph (B), any gain included in the gross income of 
     any person as a dividend under section 1248 shall be treated 
     as a distribution received by such person with respect to the 
     stock involved.''
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to dispositions after the date of the enactment 
     of this Act.
       (b) Basis Adjustments in Stock Held by Foreign 
     Corporation.--
       (1) In general.--Section 961 (relating to adjustments to 
     basis of stock in controlled foreign corporations and of 
     other property) is amended by adding at the end the following 
     new subsection:
       ``(c) Basis Adjustments in Stock Held by Foreign 
     Corporation.--Under regulations prescribed by the Secretary, 
     if a United States shareholder is treated under section 
     958(a)(2) as owning any stock in a controlled foreign 
     corporation which is actually owned by another controlled 
     foreign corporation, adjustments similar to the adjustments 
     provided by subsections (a) and (b) shall be made to the 
     basis of such stock in the hands of such other controlled 
     foreign corporation, but only for the purposes of determining 
     the amount included under section 951 in the gross income of 
     such United States shareholder (or any other United States 
     shareholder who acquires from any person any portion of the 
     interest of such United States shareholder by reason of which 
     such shareholder was treated as owning such stock, but only 
     to the extent of such portion, and subject to such proof of 
     identity of such interest as the Secretary may prescribe by 
     regulations).''
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply for purposes of determining inclusions for 
     taxable years of United States shareholders beginning after 
     December 31, 1995.
       (c) Determination of Previously Taxed Income in Section 304 
     Distributions, Etc.--
       (1) In general.--Section 959 (relating to exclusion from 
     gross income of previously taxed earnings and profits) is 
     amended by adding at the end the following new subsection:
       ``(g) Adjustments for Certain Transactions.--If by reason 
     of--
       ``(1) a transaction to which section 304 applies,
       ``(2) the structure of a United States shareholder's 
     holdings in controlled foreign corporations, or
       ``(3) other circumstances,
     there would be a multiple inclusion of any item in income (or 
     an inclusion or exclusion without an appropriate basis 
     adjustment) by reason of this subpart, the Secretary may 
     prescribe regulations providing such modifications in the 
     application of this subpart as may be necessary to 

[[Page H 13549]]
     eliminate such multiple inclusion or provide such basis adjustment, as 
     the case may be.''
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on the date of the enactment of this Act.
       (d) Clarification of Treatment of Branch Tax Exemptions or 
     Reductions.--
       (1) In general.--Subsection (b) of section 952 is amended 
     by adding at the end the following new sentence: ``For 
     purposes of this subsection, any exemption (or reduction) 
     with respect to the tax imposed by section 884 shall not be 
     taken into account.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to taxable years beginning after December 31, 
     1986.

     SEC. 11488. INDIRECT FOREIGN TAX CREDIT ALLOWED FOR CERTAIN 
                   LOWER TIER COMPANIES.

       (a) Section 902 Credit.--
       (1) In general.--Subsection (b) of section 902 (relating to 
     deemed taxes increased in case of certain 2nd and 3rd tier 
     foreign corporations) is amended to read as follows:
       ``(b) Deemed Taxes Increased in Case of Certain Lower Tier 
     Corporations.--
       ``(1) In general.--If--
       ``(A) any foreign corporation is a member of a qualified 
     group, and
       ``(B) such foreign corporation owns 10 percent or more of 
     the voting stock of another member of such group from which 
     it receives dividends in any taxable year,
     such foreign corporation shall be deemed to have paid the 
     same proportion of such other member's post-1986 foreign 
     income taxes as would be determined under subsection (a) if 
     such foreign corporation were a domestic corporation.
       ``(2) Qualified group.--For purposes of paragraph (1), the 
     term `qualified group' means--
       ``(A) the foreign corporation described in subsection (a), 
     and
       ``(B) any other foreign corporation if--
       ``(i) the domestic corporation owns at least 5 percent of 
     the voting stock of such other foreign corporation indirectly 
     through a chain of foreign corporations connected through 
     stock ownership of at least 10 percent of their voting stock,
       ``(ii) the foreign corporation described in subsection (a) 
     is the first tier corporation in such chain, and
       ``(iii) such other corporation is not below the sixth tier 
     in such chain.
     The term `qualified group' shall not include any foreign 
     corporation below the third tier in the chain referred to in 
     clause (i) unless such foreign corporation is a controlled 
     foreign corporation (as defined in section 957) and the 
     domestic corporation is a United States shareholder (as 
     defined in section 951(b)) in such foreign corporation. 
     Paragraph (1) shall apply to those taxes paid by a member of 
     the qualified group below the third tier only with respect to 
     periods during which it was a controlled foreign 
     corporation.''
       (2) Conforming amendments.--
       (A) Subparagraph (B) of section 902(c)(3) is amended by 
     adding ``or'' at the end of clause (i) and by striking 
     clauses (ii) and (iii) and inserting the following new 
     clause:
       ``(ii) the requirements of subsection (b)(2) are met with 
     respect to such foreign corporation.''
       (B) Subparagraph (B) of section 902(c)(4) is amended by 
     striking ``3rd foreign corporation'' and inserting ``sixth 
     tier foreign corporation''.
       (C) The heading for paragraph (3) of section 902(c) is 
     amended by striking ``where domestic corporation acquires 10 
     percent of foreign corporation'' and inserting ``where 
     foreign corporation first qualifies''.
       (D) Paragraph (3) of section 902(c) is amended by striking 
     ``ownership'' each place it appears.
       (b) Section 960 Credit.--Paragraph (1) of section 960(a) 
     (relating to special rules for foreign tax credits) is 
     amended to read as follows:
       ``(1) Deemed paid credit.--For purposes of subpart A of 
     this part, if there is included under section 951(a) in the 
     gross income of a domestic corporation any amount 
     attributable to earnings and profits of a foreign corporation 
     which is a member of a qualified group (as defined in section 
     902(b)) with respect to the domestic corporation, then, 
     except to the extent provided in regulations, section 902 
     shall be applied as if the amount so included were a dividend 
     paid by such foreign corporation (determined by applying 
     section 902(c) in accordance with section 904(d)(3)(B)).''
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to taxes of foreign corporations for taxable years of 
     such corporations beginning after the date of enactment of 
     this Act.
       (2) Special rule.--In the case of any chain of foreign 
     corporations described in clauses (i) and (ii) of section 
     902(b)(2)(B) of the Internal Revenue Code of 1986 (as amended 
     by this section), no liquidation, reorganization, or similar 
     transaction in a taxable year beginning after the date of the 
     enactment of this Act shall have the effect of permitting 
     taxes to be taken into account under section 902 of the 
     Internal Revenue Code of 1986 which could not have been taken 
     into account under such section but for such transaction.

     SEC. 11489. REPEAL OF INCLUSION OF CERTAIN EARNINGS INVESTED 
                   IN EXCESS PASSIVE ASSETS.

       (a) In General.--
       (1) Repeal of inclusion.--Paragraph (1) of section 951(a) 
     (relating to amounts included in gross income of United 
     States shareholders) is amended by striking subparagraph (C), 
     by striking ``; and'' at the end of subparagraph (B) and 
     inserting a period, and by adding ``and'' at the end of 
     subparagraph (A).
       (2) Repeal of inclusion amount.--Section 956A (relating to 
     earnings invested in excess passive assets) is repealed.
       (b) Conforming Amendments.--
       (1) Paragraph (1) of section 956(b) is amended to read as 
     follows:
       ``(1) Applicable earnings.--For purposes of this section, 
     the term `applicable earnings' means, with respect to any 
     controlled foreign corporation, the sum of--
       ``(A) the amount (not including a deficit) referred to in 
     section 316(a)(1), and
       ``(B) the amount referred to in section 316(a)(2),
     but reduced by distributions made during the taxable year.''
       (2) Paragraph (3) of section 956(b) is amended to read as 
     follows:
       ``(3) Special rule where corporation ceases to be 
     controlled foreign corporation.--If any foreign corporation 
     ceases to be a controlled foreign corporation during any 
     taxable year--
       ``(A) the determination of any United States shareholder's 
     pro rata share shall be made on the basis of stock owned 
     (within the meaning of section 958(a)) by such shareholder on 
     the last day during the taxable year on which the foreign 
     corporation is a controlled foreign corporation,
       ``(B) the average referred to in subsection (a)(1)(A) for 
     such taxable year shall be determined by only taking into 
     account quarters ending on or before such last day, and
       ``(C) in determining applicable earnings, the amount taken 
     into account by reason of being described in paragraph (2) of 
     section 316(a) shall be the portion of the amount so 
     described which is allocable (on a pro rata basis) to the 
     part of such year during which the corporation is a 
     controlled foreign corporation.''
       (3) Subsection (a) of section 959 (relating to exclusion 
     from gross income of previously taxed earnings and profits) 
     is amended by adding ``or'' at the end of paragraph (1), by 
     striking ``or'' at the end of paragraph (2), and by striking 
     paragraph (3).
       (4) Subsection (a) of section 959 is amended by striking 
     ``paragraphs (2) and (3)'' in the last sentence and inserting 
     ``paragraph (2)''.
       (5) Subsection (c) of section 959 is amended by adding at 
     the end the following flush sentence:
     ``References in this subsection to section 951(a)(1)(C) and 
     subsection (a)(3) shall be treated as references to such 
     provisions as in effect on the day before the date of the 
     enactment of the Revenue Reconciliation Act of 1995.''
       (6) Paragraph (1) of section 959(f) is amended to read as 
     follows:
       ``(1) In general.--For purposes of this section, amounts 
     that would be included under subparagraph (B) of section 
     951(a)(1) (determined without regard to this section) shall 
     be treated as attributable first to earnings described in 
     subsection (c)(2), and then to earnings described in 
     subsection (c)(3).''
       (7) Paragraph (2) of section 959(f) is amended by striking 
     ``subparagraphs (B) and (C) of section 951(a)(1)'' and 
     inserting ``section 951(a)(1)(B)''.
       (8) Subsection (b) of section 989 is amended by striking 
     ``subparagraph (B) or (C) of section 951(a)(1)'' and 
     inserting ``section 951(a)(1)(B)''.
       (9) Paragraph (9) of section 1298(b), as redesignated by 
     section 11482, is amended by striking ``subparagraph (B) or 
     (C) of section 951(a)(1)'' and inserting ``section 
     951(a)(1)(B)''.
       (10) Subsections (d)(3)(B) and (e)(2)(B)(ii) of section 
     1298, as redesignated by section 11482, are each amended by 
     striking ``or section 956A''.
       (c) Clerical Amendment.--The table of sections for subpart 
     F of part III of subchapter N of chapter 1 is amended by 
     striking the item relating to section 956A.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years of foreign corporations 
     beginning after September 30, 1995, and to taxable years of 
     United States shareholders within which or with which such 
     taxable years of foreign corporations end.

                 CHAPTER 5--OTHER INCOME TAX PROVISIONS

          Subchapter A--Provisions Relating to S Corporations

     SEC. 11501. S CORPORATIONS PERMITTED TO HAVE 75 SHAREHOLDERS.

       Subparagraph (A) of section 1361(b)(1) (defining small 
     business corporation) is amended by striking ``35 
     shareholders'' and inserting ``75 shareholders''.

     SEC. 11502. ELECTING SMALL BUSINESS TRUSTS.

       (a) General Rule.--Subparagraph (A) of section 1361(c)(2) 
     (relating to certain trusts permitted as shareholders) is 
     amended by inserting after clause (iv) the following new 
     clause:
       ``(v) An electing small business trust.''
       (b) Current Beneficiaries Treated as Shareholders.--
     Subparagraph (B) of section 1361(c)(2) is amended by adding 
     at the end the following new clause:
       ``(v) In the case of a trust described in clause (v) of 
     subparagraph (A), each potential current beneficiary of such 
     trust shall be treated as a shareholder; except that, if for 
     any period there is no potential current beneficiary of such 
     trust, such trust shall be treated as the shareholder during 
     such period.''
       (c) Electing Small Business Trust Defined.--Section 1361 
     (defining S corporation) is amended by adding at the end the 
     following new subsection:
       ``(e) Electing Small Business Trust Defined.--
       ``(1) Electing small business trust.--For purposes of this 
     section--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the term `electing small business trust' means any trust if--
       ``(i) such trust does not have as a beneficiary any person 
     other than (I) an individual, (II) an estate, or (III) an 
     organization described in paragraph (2), (3), (4), or (5) of 
     section 170(c) which holds a contingent interest and is not a 
     potential current beneficiary,

[[Page H 13550]]

       ``(ii) no interest in such trust was acquired by purchase, 
     and
       ``(iii) an election under this subsection applies to such 
     trust.
       ``(B) Certain trusts not eligible.--The term `electing 
     small business trust' shall not include--
       ``(i) any qualified subchapter S trust (as defined in 
     subsection (d)(3)) if an election under subsection (d)(2) 
     applies to any corporation the stock of which is held by such 
     trust, and
       ``(ii) any trust exempt from tax under this subtitle.
       ``(C) Purchase.--For purposes of subparagraph (A), the term 
     `purchase' means any acquisition if the basis of the property 
     acquired is determined under section 1012.
       ``(2) Potential current beneficiary.--For purposes of this 
     section, the term `potential current beneficiary' means, with 
     respect to any period, any person who at any time during such 
     period is entitled to, or at the discretion of any person may 
     receive, a distribution from the principal or income of the 
     trust. If a trust disposes of all of the stock which it holds 
     in an S corporation, then, with respect to such corporation, 
     the term `potential current beneficiary' does not include any 
     person who first met the requirements of the preceding 
     sentence during the 60-day period ending on the date of such 
     disposition.
       ``(3) Election.--An election under this subsection shall be 
     made by the trustee. Any such election shall apply to the 
     taxable year of the trust for which made and all subsequent 
     taxable years of such trust unless revoked with the consent 
     of the Secretary.
       ``(4) Cross reference.--

  ``For special treatment of electing small business trusts, see 
section 641(d).''

       (d) Taxation of Electing Small Business Trusts.--Section 
     641 (relating to imposition of tax on trusts) is amended by 
     adding at the end the following new subsection:
       ``(d) Special Rules for Taxation of Electing Small Business 
     Trusts.--
       ``(1) In general.--For purposes of this chapter--
       ``(A) the portion of any electing small business trust 
     which consists of stock in 1 or more S corporations shall be 
     treated as a separate trust, and
       ``(B) the amount of the tax imposed by this chapter on such 
     separate trust shall be determined with the modifications of 
     paragraph (2).
       ``(2) Modifications.--For purposes of paragraph (1), the 
     modifications of this paragraph are the following:
       ``(A) Except as provided in section 1(h), the amount of the 
     tax imposed by section 1(e) shall be determined by using the 
     highest rate of tax set forth in section 1(e).
       ``(B) The exemption amount under section 55(d) shall be 
     zero.
       ``(C) The only items of income, loss, deduction, or credit 
     to be taken into account are the following:
       ``(i) The items required to be taken into account under 
     section 1366.
       ``(ii) Any gain or loss from the disposition of stock in an 
     S corporation.
       ``(iii) To the extent provided in regulations, State or 
     local income taxes or administrative expenses to the extent 
     allocable to items described in clauses (i) and (ii).
     No deduction or credit shall be allowed for any amount not 
     described in this paragraph, and no item described in this 
     paragraph shall be apportioned to any beneficiary.
       ``(D) No amount shall be allowed under paragraph (1) or (2) 
     of section 1211(b).
       ``(3) Treatment of remainder of trust and distributions.--
     For purposes of determining--
       ``(A) the amount of the tax imposed by this chapter on the 
     portion of any electing small business trust not treated as a 
     separate trust under paragraph (1), and
       ``(B) the distributable net income of the entire trust,
     the items referred to in paragraph (2)(C) shall be excluded. 
     Except as provided in the preceding sentence, this subsection 
     shall not affect the taxation of any distribution from the 
     trust.
       ``(4) Treatment of unused deductions where termination of 
     separate trust.--If a portion of an electing small business 
     trust ceases to be treated as a separate trust under 
     paragraph (1), any carryover or excess deduction of the 
     separate trust which is referred to in section 642(h) shall 
     be taken into account by the entire trust.
       ``(5) Electing small business trust.--For purposes of this 
     subsection, the term `electing small business trust' has the 
     meaning given such term by section 1361(e)(1).''
       (e) Technical Amendment.--Paragraph (1) of section 1366(a) 
     is amended by inserting ``, or of a trust or estate which 
     terminates,'' after ``who dies''.

     SEC. 11503. EXPANSION OF POST-DEATH QUALIFICATION FOR CERTAIN 
                   TRUSTS.

       Subparagraph (A) of section 1361(c)(2) (relating to certain 
     trusts permitted as shareholders) is amended--
       (1) by striking ``60-day period'' each place it appears in 
     clauses (ii) and (iii) and inserting ``2-year period'', and
       (2) by striking the last sentence in clause (ii).

     SEC. 11504. FINANCIAL INSTITUTIONS PERMITTED TO HOLD SAFE 
                   HARBOR DEBT.

       Clause (iii) of section 1361(c)(5)(B) (defining straight 
     debt) is amended by striking ``or a trust described in 
     paragraph (2)'' and inserting ``a trust described in 
     paragraph (2), or a person which is actively and regularly 
     engaged in the business of lending money.''

     SEC. 11505. RULES RELATING TO INADVERTENT TERMINATIONS AND 
                   INVALID ELECTIONS.

       (a) General Rule.--Subsection (f) of section 1362 (relating 
     to inadvertent terminations) is amended to read as follows:
       ``(f) Inadvertent Invalid Elections or Terminations.--If--
       ``(1) an election under subsection (a) by any corporation--
       ``(A) was not effective for the taxable year for which made 
     (determined without regard to subsection (b)(2)) by reason of 
     a failure to meet the requirements of section 1361(b) or to 
     obtain shareholder consents, or
       ``(B) was terminated under paragraph (2) or (3) of 
     subsection (d),
       ``(2) the Secretary determines that the circumstances 
     resulting in such ineffectiveness or termination were 
     inadvertent,
       ``(3) no later than a reasonable period of time after 
     discovery of the circumstances resulting in such 
     ineffectiveness or termination, steps were taken--
       ``(A) so that the corporation is a small business 
     corporation, or
       ``(B) to acquire the required shareholder consents, and
       ``(4) the corporation, and each person who was a 
     shareholder in the corporation at any time during the period 
     specified pursuant to this subsection, agrees to make such 
     adjustments (consistent with the treatment of the corporation 
     as an S corporation) as may be required by the Secretary with 
     respect to such period,
     then, notwithstanding the circumstances resulting in such 
     ineffectiveness or termination, such corporation shall be 
     treated as an S corporation during the period specified by 
     the Secretary.''
       (b) Late Elections.--Subsection (b) of section 1362 is 
     amended by adding at the end the following new paragraph:
       ``(5) Authority to treat late elections as timely.--If--
       ``(A) an election under subsection (a) is made for any 
     taxable year (determined without regard to paragraph (3)) 
     after the date prescribed by this subsection for making such 
     election for such taxable year, and
       ``(B) the Secretary determines that there was reasonable 
     cause for the failure to timely make such election,
     the Secretary may treat such election as timely made for such 
     taxable year (and paragraph (3) shall not apply).''
       (c) Effective Date.--The amendments made by subsection (a) 
     and (b) shall apply with respect to elections for taxable 
     years beginning after December 31, 1982.

     SEC. 11506. AGREEMENT TO TERMINATE YEAR.

       Paragraph (2) of section 1377(a) (relating to pro rata 
     share) is amended to read as follows:
       ``(2) Election to terminate year.--
       ``(A) In general.--If any shareholder terminates the 
     shareholder's interest in the corporation during the taxable 
     year and all affected shareholders and the corporation agree 
     to the application of this paragraph, paragraph (1) shall be 
     applied to the affected shareholders as if the taxable year 
     consisted of 2 taxable years the first of which ends on the 
     date of the termination.
       ``(B) Affected shareholders.--For purposes of subparagraph 
     (A), the term `affected shareholders' means the shareholder 
     whose interest is terminated and all shareholders to whom 
     such shareholder has transferred shares during the taxable 
     year. If such shareholder has transferred shares to the 
     corporation, the term `affected shareholders' shall include 
     all persons who are shareholders during the taxable year.''

     SEC. 11507. EXPANSION OF POST-TERMINATION TRANSITION PERIOD.

       (a) In General.--Paragraph (1) of section 1377(b) (relating 
     to post-termination transition period) is amended by striking 
     ``and'' at the end of subparagraph (A), by redesignating 
     subparagraph (B) as subparagraph (C), and by inserting after 
     subparagraph (A) the following new subparagraph:
       ``(B) the 120-day period beginning on the date of any 
     determination pursuant to an audit of the taxpayer which 
     follows the termination of the corporation's election and 
     which adjusts a subchapter S item of income, loss, or 
     deduction of the corporation arising during the S period (as 
     defined in section 1368(e)(2)), and''.
       (b) Determination Defined.--Paragraph (2) of section 
     1377(b) is amended by striking subparagraphs (A) and (B), by 
     redesignating subparagraph (C) as subparagraph (B), and by 
     inserting before subparagraph (B) (as so redesignated) the 
     following new subparagraph:
       ``(A) a determination as defined in section 1313(a), or''.
       (c) Repeal of Special Audit Provisions for Subchapter S 
     Items.--
       (1) General rule.--Subchapter D of chapter 63 (relating to 
     tax treatment of subchapter S items) is hereby repealed.
       (2) Consistent treatment required.--Section 6037 (relating 
     to return of S corporation) is amended by adding at the end 
     the following new subsection:
       ``(c) Shareholder's Return Must Be Consistent With 
     Corporate Return or Secretary Notified of Inconsistency.--
       ``(1) In general.--A shareholder of an S corporation shall, 
     on such shareholder's return, treat a subchapter S item in a 
     manner which is consistent with the treatment of such item on 
     the corporate return.
       ``(2) Notification of inconsistent treatment.--
       ``(A) In general.--In the case of any subchapter S item, 
     if--
       ``(i)(I) the corporation has filed a return but the 
     shareholder's treatment on his return is (or may be) 
     inconsistent with the treatment of the item on the corporate 
     return, or
       ``(II) the corporation has not filed a return, and
       ``(ii) the shareholder files with the Secretary a statement 
     identifying the inconsistency,

[[Page H 13551]]

     paragraph (1) shall not apply to such item.
       ``(B) Shareholder receiving incorrect information.--A 
     shareholder shall be treated as having complied with clause 
     (ii) of subparagraph (A) with respect to a subchapter S item 
     if the shareholder--
       ``(i) demonstrates to the satisfaction of the Secretary 
     that the treatment of the subchapter S item on the 
     shareholder's return is consistent with the treatment of the 
     item on the schedule furnished to the shareholder by the 
     corporation, and
       ``(ii) elects to have this paragraph apply with respect to 
     that item.
       ``(3) Effect of failure to notify.--In any case--
       ``(A) described in subparagraph (A)(i)(I) of paragraph (2), 
     and
       ``(B) in which the shareholder does not comply with 
     subparagraph (A)(ii) of paragraph (2),
     any adjustment required to make the treatment of the items by 
     such shareholder consistent with the treatment of the items 
     on the corporate return shall be treated as arising out of 
     mathematical or clerical errors and assessed according to 
     section 6213(b)(1). Paragraph (2) of section 6213(b) shall 
     not apply to any assessment referred to in the preceding 
     sentence.
       ``(4) Subchapter s item.--For purposes of this subsection, 
     the term `subchapter S item' means any item of an S 
     corporation to the extent that regulations prescribed by the 
     Secretary provide that, for purposes of this subtitle, such 
     item is more appropriately determined at the corporation 
     level than at the shareholder level.
       ``(5) Addition to tax for failure to comply with section.--
  ``For addition to tax in the case of a shareholder's negligence in 
connection with, or disregard of, the requirements of this section, see 
part II of subchapter A of chapter 68.''
       (3) Conforming amendments.--
       (A) Section 1366 is amended by striking subsection (g).
       (B) Subsection (b) of section 6233 is amended to read as 
     follows:
       ``(b) Similar Rules in Certain Cases.--If a partnership 
     return is filed for any taxable year but it is determined 
     that there is no entity for such taxable year, to the extent 
     provided in regulations, rules similar to the rules of 
     subsection (a) shall apply.''
       (C) The table of subchapters for chapter 63 is amended by 
     striking the item relating to subchapter D.

     SEC. 11508. S CORPORATIONS PERMITTED TO HOLD SUBSIDIARIES.

       (a) In General.--Paragraph (2) of section 1361(b) (defining 
     ineligible corporation) is amended by striking subparagraph 
     (A) and by redesignating subparagraphs (B), (C), (D), and (E) 
     as subparagraphs (A), (B), (C), and (D), respectively.
       (b) Treatment of Certain Wholly Owned S Corporation 
     Subsidiaries.--Section 1361(b) (defining small business 
     corporation) is amended by adding at the end the following 
     new paragraph:
       ``(3) Treatment of certain wholly owned subsidiaries.--
       ``(A) In general.--For purposes of this title--
       ``(i) a corporation which is a qualified subchapter S 
     subsidiary shall not be treated as a separate corporation, 
     and
       ``(ii) all assets, liabilities, and items of income, 
     deduction, and credit of a qualified subchapter S subsidiary 
     shall be treated as assets, liabilities, and such items (as 
     the case may be) of the S corporation.
       ``(B) Qualified subchapter s subsidiary.--For purposes of 
     this paragraph, the term `qualified subchapter S subsidiary' 
     means any domestic corporation which is not an ineligible 
     corporation (as defined in paragraph (2)), if--
       ``(i) 100 percent of the stock of such corporation is held 
     by the S corporation, and
       ``(ii) the S corporation elects to treat such corporation 
     as a qualified subchapter S subsidiary.
       ``(C) Treatment of terminations of qualified subchapter s 
     subsidiary status.--For purposes of this title, if any 
     corporation which was a qualified subchapter S subsidiary 
     ceases to meet the requirements of subparagraph (B), such 
     corporation shall be treated as a new corporation acquiring 
     all of its assets (and assuming all of its liabilities) 
     immediately before such cessation from the S corporation in 
     exchange for its stock.''
       (c) Certain Dividends Not Treated as Passive Investment 
     Income.--Paragraph (3) of section 1362(d) is amended by 
     adding at the end the following new subparagraph:
       ``(F) Treatment of certain dividends.--If an S corporation 
     holds stock in a C corporation meeting the requirements of 
     section 1504(a)(2), the term `passive investment income' 
     shall not include dividends from such C corporation to the 
     extent such dividends are attributable to the earnings and 
     profits of such C corporation derived from the active conduct 
     of a trade or business.''
       (d) Conforming Amendments.--
       (1) Subsection (c) of section 1361 is amended by striking 
     paragraph (6).
       (2) Subsection (b) of section 1504 (defining includible 
     corporation) is amended by adding at the end the following 
     new paragraph:
       ``(8) An S corporation.''

     SEC. 11509. TREATMENT OF DISTRIBUTIONS DURING LOSS YEARS.

       (a) Adjustments for Distributions Taken Into Account Before 
     Losses.--
       (1) Subparagraph (A) of section 1366(d)(1) (relating to 
     losses and deductions cannot exceed shareholder's basis in 
     stock and debt) is amended by striking ``paragraph (1)'' and 
     inserting ``paragraphs (1) and (2)(A)''.
       (2) Subsection (d) of section 1368 (relating to certain 
     adjustments taken into account) is amended by adding at the 
     end the following new sentence:
     ``In the case of any distribution made during any taxable 
     year, the adjusted basis of the stock shall be determined 
     with regard to the adjustments provided in paragraph (1) of 
     section 1367(a) for the taxable year.''
       (b) Accumulated Adjustments Account.--Paragraph (1) of 
     section 1368(e) (relating to accumulated adjustments account) 
     is amended by adding at the end the following new 
     subparagraph:
       ``(C) Net loss for year disregarded.--
       ``(i) In general.--In applying this section to 
     distributions made during any taxable year, the amount in the 
     accumulated adjustments account as of the close of such 
     taxable year shall be determined without regard to any net 
     negative adjustment for such taxable year.
       ``(ii) Net negative adjustment.--For purposes of clause 
     (i), the term `net negative adjustment' means, with respect 
     to any taxable year, the excess (if any) of--
       ``(I) the reductions in the account for the taxable year 
     (other than for distributions), over
       ``(II) the increases in such account for such taxable 
     year.''
       (c) Conforming Amendments.--Subparagraph (A) of section 
     1368(e)(1) is amended--
       (1) by striking ``as provided in subparagraph (B)'' and 
     inserting ``as otherwise provided in this paragraph'', and
       (2) by striking ``section 1367(b)(2)(A)'' and inserting 
     ``section 1367(a)(2)''.

     SEC. 11510. TREATMENT OF S CORPORATIONS UNDER SUBCHAPTER C.

       Subsection (a) of section 1371 (relating to application of 
     subchapter C rules) is amended to read as follows:
       ``(a) Application of Subchapter C Rules.--Except as 
     otherwise provided in this title, and except to the extent 
     inconsistent with this subchapter, subchapter C shall apply 
     to an S corporation and its shareholders.''

     SEC. 11511. ELIMINATION OF CERTAIN EARNINGS AND PROFITS.

       (a) In General.--If--
       (1) a corporation was an electing small business 
     corporation under subchapter S of chapter 1 of the Internal 
     Revenue Code of 1986 for any taxable year beginning before 
     January 1, 1983, and
       (2) such corporation is an S corporation under subchapter S 
     of chapter 1 of such Code for its first taxable year 
     beginning after December 31, 1995,
     the amount of such corporation's accumulated earnings and 
     profits (as of the beginning of such first taxable year) 
     shall be reduced by an amount equal to the portion (if any) 
     of such accumulated earnings and profits which were 
     accumulated in any taxable year beginning before January 1, 
     1983, for which such corporation was an electing small 
     business corporation under such subchapter S.
       (b) Conforming Amendments.--
       (1) Paragraph (3) of section 1362(d) is amended--
       (A) by striking ``Subchapter C'' in the paragraph heading 
     and inserting ``Accumulated'',
       (B) by striking ``subchapter C'' in subparagraph (A)(i)(I) 
     and inserting ``accumulated'', and
       (C) by striking subparagraph (B) and redesignating the 
     following subparagraphs accordingly.
       (2)(A) Subsection (a) of section 1375 is amended by 
     striking ``subchapter C'' in paragraph (1) and inserting 
     ``accumulated''.
       (B) Paragraph (3) of section 1375(b) is amended to read as 
     follows:
       ``(3) Passive investment income, etc.--The terms `passive 
     investment income' and `gross receipts' have the same 
     respective meanings as when used in paragraph (3) of section 
     1362(d).''
       (C) The section heading for section 1375 is amended by 
     striking 
     ``
      '' and inserting 
     ``
     ''.
       (D) The table of sections for part III of subchapter S of 
     chapter 1 is amended by striking ``subchapter C'' in the item 
     relating to section 1375 and inserting ``accumulated''.
       (3) Clause (i) of section 1042(c)(4)(A) is amended by 
     striking ``section 1362(d)(3)(D)'' and inserting ``section 
     1362(d)(3)(C)''.

     SEC. 11512. CARRYOVER OF DISALLOWED LOSSES AND DEDUCTIONS 
                   UNDER AT-RISK RULES ALLOWED.

       Paragraph (3) of section 1366(d) (relating to carryover of 
     disallowed losses and deductions to post-termination 
     transition period) is amended by adding at the end the 
     following new subparagraph:
       ``(D) At-risk limitations.--To the extent that any increase 
     in adjusted basis described in subparagraph (B) would have 
     increased the shareholder's amount at risk under section 465 
     if such increase had occurred on the day preceding the 
     commencement of the post-termination transition period, rules 
     similar to the rules described in subparagraphs (A) through 
     (C) shall apply to any losses disallowed by reason of section 
     465(a).''

     SEC. 11513. ADJUSTMENTS TO BASIS OF INHERITED S STOCK TO 
                   REFLECT CERTAIN ITEMS OF INCOME.

       (a) In General.--Subsection (b) of section 1367 (relating 
     to adjustments to basis of stock of shareholders, etc.) is 
     amended by adding at the end the following new paragraph:
       ``(4) Adjustments in case of inherited stock.--
       ``(A) In general.--If any person acquires stock in an S 
     corporation by reason of the death of a decedent or by 
     bequest, devise, or inheritance, section 691 shall be applied 
     with respect to any item of income of the S corporation in 
     the same manner as if the decedent had held directly his pro 
     rata share of such item.
       ``(B) Adjustments to basis.--The basis determined under 
     section 1014 of any stock in an S corporation shall be 
     reduced by the portion of the value of the stock which is 
     attributable to items constituting income in respect of the 
     decedent.''

[[Page H 13552]]

       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply in the case of decedents dying after the date of 
     the enactment of this Act.

     SEC. 11514. S CORPORATIONS ELIGIBLE FOR RULES APPLICABLE TO 
                   REAL PROPERTY SUBDIVIDED FOR SALE BY 
                   NONCORPORATE TAXPAYERS.

       (a) In General.--Subsection (a) of section 1237 (relating 
     to real property subdivided for sale) is amended by striking 
     ``other than a corporation'' in the material preceding 
     paragraph (1) and inserting ``other than a C corporation''.
       (b) Conforming Amendment.--Subparagraph (A) of section 
     1237(a)(2) is amended by inserting ``an S corporation which 
     included the taxpayer as a shareholder,'' after ``controlled 
     by the taxpayer,''.

     SEC. 11515. EFFECTIVE DATE.

       (a) In General.--Except as otherwise provided in this 
     subchapter, the amendments made by this subchapter shall 
     apply to taxable years beginning after December 31, 1995.
       (b) Treatment of Certain Elections Under Prior Law.--For 
     purposes of section 1362(g) of the Internal Revenue Code of 
     1986 (relating to election after termination), any 
     termination under section 1362(d) of such Code in a taxable 
     year beginning before January 1, 1996, shall not be taken 
     into account.

Subchapter B--Repeal of 30-Percent Gross Income Limitation on Regulated 
                          Investment Companies

     SEC. 11521. REPEAL OF 30-PERCENT GROSS INCOME LIMITATION.

       (a) General Rule.--Subsection (b) of section 851 (relating 
     to limitations) is amended by striking paragraph (3), by 
     adding ``and'' at the end of paragraph (2), and by 
     redesignating paragraph (4) as paragraph (3).
       (b) Technical Amendments.--
       (1) The material following paragraph (3) of section 851(b) 
     (as redesignated by subsection (a)) is amended--
       (A) by striking out ``paragraphs (2) and (3)'' and 
     inserting ``paragraph (2)'', and
       (B) by striking out the last sentence thereof.
       (2) Subsection (c) of section 851 is amended by striking 
     ``subsection (b)(4)'' each place it appears (including the 
     heading) and inserting ``subsection (b)(3)''.
       (3) Subsection (d) of section 851 is amended by striking 
     ``subsections (b)(4)'' and inserting ``subsections (b)(3)''.
       (4) Paragraph (1) of section 851(e) is amended by striking 
     ``subsection (b)(4)'' and inserting ``subsection (b)(3)''.
       (5) Paragraph (4) of section 851(e) is amended by striking 
     ``subsections (b)(4)'' and inserting ``subsections (b)(3)''.
       (6) Section 851 is amended by striking subsection (g) and 
     redesignating subsection (h) as subsection (g).
       (7) Subsection (g) of section 851 (as redesignated by 
     paragraph (6)) is amended by striking paragraph (3).
       (8) Section 817(h)(2) is amended--
       (A) by striking ``851(b)(4)'' in subparagraph (A) and 
     inserting ``851(b)(3)'', and
       (B) by striking ``851(b)(4)(A)(i)'' in subparagraph (B) and 
     inserting ``851(b)(3)(A)(i)''.
       (9) Section 1092(f)(2) is amended by striking ``Except for 
     purposes of section 851(b)(3), the'' and inserting ``The''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.

                  Subchapter C--Accounting Provisions

     SEC. 11551. MODIFICATIONS TO LOOK-BACK METHOD FOR LONG-TERM 
                   CONTRACTS.

       (a) Look-Back Method Not To Apply in Certain Cases.--
     Subsection (b) of section 460 (relating to percentage of 
     completion method) is amended by adding at the end the 
     following new paragraph:
       ``(6) Election to have look-back method not apply in de 
     minimis cases.--
       ``(A) Amounts taken into account after completion of 
     contract.--Paragraph (1)(B) shall not apply with respect to 
     any taxable year (beginning after the taxable year in which 
     the contract is completed) if--
       ``(i) the cumulative taxable income (or loss) under the 
     contract as of the close of such taxable year, is within
       ``(ii) 10 percent of the cumulative look-back taxable 
     income (or loss) under the contract as of the close of the 
     most recent taxable year to which paragraph (1)(B) applied 
     (or would have applied but for subparagraph (B)).
       ``(B) De minimis discrepancies.--Paragraph (1)(B) shall not 
     apply in any case to which it would otherwise apply if--
       ``(i) the cumulative taxable income (or loss) under the 
     contract as of the close of each prior contract year, is 
     within
       ``(ii) 10 percent of the cumulative look-back income (or 
     loss) under the contract as of the close of such prior 
     contract year.
       ``(C) Definitions.--For purposes of this paragraph--
       ``(i) Contract year.--The term `contract year' means any 
     taxable year for which income is taken into account under the 
     contract.
       ``(ii) Look-back income or loss.--The look-back income (or 
     loss) is the amount which would be the taxable income (or 
     loss) under the contract if the allocation method set forth 
     in paragraph (2)(A) were used in determining taxable income.
       ``(iii) Discounting not applicable.--The amounts taken into 
     account after the completion of the contract shall be 
     determined without regard to any discounting under the 2nd 
     sentence of paragraph (2).
       ``(D) Contracts to which paragraph applies.--This paragraph 
     shall only apply if the taxpayer makes an election under this 
     subparagraph. Unless revoked with the consent of the 
     Secretary, such an election shall apply to all long-term 
     contracts completed during the taxable year for which 
     election is made or during any subsequent taxable year.''
       (b) Modification of Interest Rate.--
       (1) In general.--Subparagraph (C) of section 460(b)(2) is 
     amended by striking ``the overpayment rate established by 
     section 6621'' and inserting ``the adjusted overpayment rate 
     (as defined in paragraph (7))''.
       (2) Adjusted overpayment rate.--Subsection (b) of section 
     460 is amended by adding at the end the following new 
     paragraph:
       ``(7) Adjusted overpayment rate.--
       ``(A) In general.--The adjusted overpayment rate for any 
     interest accrual period is the overpayment rate in effect 
     under section 6621 for the calendar quarter in which such 
     interest accrual period begins.
       ``(B) Interest accrual period.--For purposes of 
     subparagraph (A), the term `interest accrual period' means 
     the period--
       ``(i) beginning on the day after the return due date for 
     any taxable year of the taxpayer, and
       ``(ii) ending on the return due date for the following 
     taxable year.
     For purposes of the preceding sentence, the term `return due 
     date' means the date prescribed for filing the return of the 
     tax imposed by this chapter (determined without regard to 
     extensions).''
       (c) Effective Date.--The amendments made by this section 
     shall apply to contracts completed in taxable years ending 
     after the date of the enactment of this Act.

     SEC. 11552. APPLICATION OF MARK TO MARKET ACCOUNTING METHOD 
                   TO TRADERS IN SECURITIES.

       (a) In General.--Section 475 (relating to mark to market 
     accounting method for dealers in securities) is amended by 
     redesignating subsection (e) as subsection (f) and by 
     inserting after subsection (d) the following new subsection:
       ``(e) Authority To Extend Method to Traders in 
     Securities.--
       ``(1) In general.--A trader in securities may elect to have 
     the provisions of this section (other than subsection (d)(3)) 
     apply to securities held by the trader. Such election may be 
     made only with the consent of the Secretary.
       ``(2) Trader in securities.--For purposes of this 
     subsection, the term `trader in securities' means a taxpayer 
     who is regularly engaged in trading securities.''
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending on and after December 31, 
     1995.

     SEC. 11553. MODIFICATION OF RULING AMOUNTS FOR NUCLEAR 
                   DECOMMISSIONING COSTS.

       (a) In General.--Section 468A(d) (relating to ruling 
     amount) is amended by adding at the end the following new 
     paragraph:
       ``(4) Nonsubstantial modifications.--A taxpayer may modify 
     a schedule of ruling amounts under paragraph (1) without a 
     review under paragraph (3) if such modification does not 
     substantially modify the ruling amount. The taxpayer shall 
     notify the Secretary of any such modification.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to modifications after the date of the enactment 
     of this Act.

                Subchapter D--Tax-Exempt Bond Provision

     SEC. 11561. REPEAL OF DEBT SERVICE-BASED LIMITATION ON 
                   INVESTMENT IN CERTAIN NONPURPOSE INVESTMENTS.

       (a) In General.--Subsection (d) of section 148 (relating to 
     special rules for reasonably required reserve or replacement 
     fund) is amended by striking paragraph (3).
       (b) Effective Date.--The amendments made by this part shall 
     apply to bonds issued after the date of the enactment of this 
     Act.

                   Subchapter E--INSURANCE PROVISIONS

     SEC. 11571. 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. 11572. 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 

[[Page H 13553]]
     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.

                     Subchapter F--Other Provisions

     SEC. 11581. CLOSING OF PARTNERSHIP TAXABLE YEAR WITH RESPECT 
                   TO DECEASED PARTNER, ETC.

       (a) General Rule.--Subparagraph (A) of section 706(c)(2) 
     (relating to disposition of entire interest) is amended to 
     read as follows:
       ``(A) Disposition of entire interest.--The taxable year of 
     a partnership shall close with respect to a partner whose 
     entire interest in the partnership terminates (whether by 
     reason of death, liquidation, or otherwise).''
       (b) Clerical Amendment.--The paragraph heading for 
     paragraph (2) of section 706(c) is amended to read as 
     follows:
       ``(2) Treatment of dispositions.--''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to partnership taxable years beginning after 
     December 31, 1995.

     SEC. 11582. CREDIT FOR SOCIAL SECURITY TAXES PAID WITH 
                   RESPECT TO EMPLOYEE CASH TIPS.

       (a) Reporting Requirement Not Considered.--Subparagraph (A) 
     of section 45B(b)(1) (relating to excess employer social 
     security tax) is amended by inserting ``(without regard to 
     whether such tips are reported under section 6053)'' after 
     ``section 3121(q)''.
       (b) Taxes Paid.--Subsection (d) of section 13443 of the 
     Revenue Reconciliation Act of 1993 is amended by inserting 
     ``, with respect to services performed before, on, or after 
     such date'' after ``1993''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect as if included in the amendments made by, 
     and the provisions of, section 13443 of the Revenue 
     Reconciliation Act of 1993.

     SEC. 11583. DUE DATE FOR FIRST QUARTER ESTIMATED TAX PAYMENTS 
                   BY PRIVATE FOUNDATIONS.

       (a) In General.--Paragraph (3) of section 6655(g) is 
     amended by inserting after subparagraph (C) the following new 
     subparagraph:
       ``(D) In the case of any private foundation, subsection 
     (c)(2) shall be applied by substituting `May 15' for `April 
     15 ' ''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     1995.

                     CHAPTER 6--ESTATES AND TRUSTS

                  Subchapter A--Income Tax Provisions

     SEC. 11601. CERTAIN REVOCABLE TRUSTS TREATED AS PART OF 
                   ESTATE.

       (a) In General.--Subpart A of part I of subchapter J 
     (relating to estates, trusts, beneficiaries, and decedents) 
     is amended by adding at the end the following new section:

     ``SEC. 646. CERTAIN REVOCABLE TRUSTS TREATED AS PART OF 
                   ESTATE.

       ``(a) General Rule.--For purposes of this subtitle, if both 
     the executor (if any) of an estate and the trustee of a 
     qualified revocable trust elect the treatment provided in 
     this section, such trust shall be treated and taxed as part 
     of such estate (and not as a separate trust) for all taxable 
     years of the estate ending after the date of the decedent's 
     death and before the applicable date.
       ``(b) Definitions.--For purposes of subsection (a)--
       ``(1) Qualified revocable trust.--The term `qualified 
     revocable trust' means any trust (or portion thereof) which 
     was treated under section 676 as owned by the decedent of the 
     estate referred to in subsection (a) by reason of a power in 
     the grantor (determined without regard to section 672(e)).
       ``(2) Applicable date.--The term `applicable date' means--
       ``(A) if no return of tax imposed by chapter 11 is required 
     to be filed, the date which is 2 years after the date of the 
     decedent's death, and
       ``(B) if such a return is required to be filed, the date 
     which is 6 months after the date of the final determination 
     of the liability for tax imposed by chapter 11.
       ``(c) Election.--The election under subsection (a) shall be 
     made not later than the time prescribed for filing the return 
     of tax imposed by this chapter for the first taxable year of 
     the estate (determined with regard to extensions) and, once 
     made, shall be irrevocable.''
       (b) Comparable Treatment Under Generation-Skipping Tax.--
     Paragraph (1) of section 2652(b) is amended by adding at the 
     end the following new sentence: ``Such term shall not include 
     any trust during any period the trust is treated as part of 
     an estate under section 646.''
       (c) Clerical Amendment.--The table of sections for such 
     subpart A is amended by adding at the end the following new 
     item:

``Sec. 646. Certain revocable trusts treated as part of estate.''

       (d) Effective Date.--The amendments made by this section 
     shall apply with respect to estates of decedents dying after 
     the date of the enactment of this Act.

     SEC. 11602. DISTRIBUTIONS DURING FIRST 65 DAYS OF TAXABLE 
                   YEAR OF ESTATE.

       (a) In General.--Subsection (b) of section 663 (relating to 
     distributions in first 65 days of taxable year) is amended by 
     inserting ``an estate or'' before ``a trust'' each place it 
     appears.
       (b) Conforming Amendment.--Paragraph (2) of section 663(b) 
     is amended by striking ``the fiduciary of such trust'' and 
     inserting ``the executor of such estate or the fiduciary of 
     such trust (as the case may be)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 11603. SEPARATE SHARE RULES AVAILABLE TO ESTATES.

       (a) In General.--Subsection (c) of section 663 (relating to 
     separate shares treated as separate trusts) is amended--
       (1) by inserting before the last sentence the following new 
     sentence: ``Rules similar to the rules of the preceding 
     provisions of this subsection shall apply to treat 
     substantially separate and independent shares of different 
     beneficiaries in an estate having more than 1 beneficiary as 
     separate estates.'', and
       (2) by inserting ``or estates'' after ``trusts'' in the 
     last sentence.
       (b) Conforming Amendment.--The subsection heading of 
     section 663(c) is amended by inserting ``Estates or'' before 
     ``Trusts''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to estates of decedents dying after the date of 
     the enactment of this Act.

     SEC. 11604. EXECUTOR OF ESTATE AND BENEFICIARIES TREATED AS 
                   RELATED PERSONS FOR DISALLOWANCE OF LOSSES, 
                   ETC.

       (a) Disallowance of Losses.--Subsection (b) of section 267 
     (relating to losses, expenses, and interest with respect to 
     transactions between related taxpayers) is amended by 
     striking ``or'' at the end of paragraph (11), by striking the 
     period at the end of paragraph (12) and inserting ``; or'', 
     and by adding at the end the following new paragraph:
       ``(13) Except in the case of a sale or exchange in 
     satisfaction of a pecuniary bequest, an executor of an estate 
     and a beneficiary of such estate.''
       (b) Ordinary Income From Gain From Sale of Depreciable 
     Property.--Subsection (b) of section 1239 is amended by 
     striking the period at the end of paragraph (2) and inserting 
     ``, and'' and by adding at the end the following new 
     paragraph:
       ``(3) except in the case of a sale or exchange in 
     satisfaction of a pecuniary bequest, an executor of an estate 
     and a beneficiary of such estate.''

[[Page H 13554]]

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

     SEC. 11605. LIMITATION ON TAXABLE YEAR OF ESTATES.

       (a) In General.--Section 645 (relating to taxable year of 
     trusts) is amended to read as follows:

     ``SEC. 645. TAXABLE YEAR OF ESTATES AND TRUSTS.

       ``(a) Estates.--For purposes of this subtitle, the taxable 
     year of an estate shall be a year ending on October 31, 
     November 30, or December 31.
       ``(b) Trusts.--
       ``(1) In general.--For purposes of this subtitle, the 
     taxable year of any trust shall be the calendar year.
       ``(2) Exception for trusts exempt from tax and charitable 
     trusts.--Paragraph (1) shall not apply to a trust exempt from 
     taxation under section 501(a) or to a trust described in 
     section 4947(a)(1).''
       (b) Clerical Amendment.--The table of sections for subpart 
     A of part I of subchapter J of chapter 1 is amended by 
     striking the item relating to section 645 and inserting the 
     following new item:

``Sec. 645. Taxable year of estates and trusts.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to estates of decedents dying after the date of 
     the enactment of this Act.

     SEC. 11606. TREATMENT OF FUNERAL TRUSTS.

       (a) In General.--Subpart F of part I of subchapter J of 
     chapter 1 is amended by adding at the end the following new 
     section:

     ``SEC. 684. TREATMENT OF FUNERAL TRUSTS.

       ``(a) In General.--In the case of a qualified funeral 
     trust--
       ``(1) subparts B, C, D, and E shall not apply, and
       ``(2) no deduction shall be allowed by section 642(b).
       ``(b) Qualified Funeral Trust.--For purposes of this 
     subsection, the term `qualified funeral trust' means any 
     trust (other than a foreign trust) if--
       ``(1) the trust arises as a result of a contract with a 
     person engaged in the trade or business of providing funeral 
     or burial services or property necessary to provide such 
     services,
       ``(2) the sole purpose of the trust is to hold, invest, and 
     reinvest funds in the trust and to use such funds solely to 
     make payments for such services or property for the benefit 
     of the beneficiaries of the trust,
       ``(3) the only beneficiaries of such trust are individuals 
     who have entered into contracts described in paragraph (1) to 
     have such services or property provided at their death,
       ``(4) the only contributions to the trust are contributions 
     by or for the benefit of such beneficiaries,
       ``(5) the trustee elects the application of this 
     subsection, and
       ``(6) the trust would (but for the election described in 
     paragraph (5)) be treated as owned by the beneficiaries under 
     subpart E.
       ``(c) Dollar Limitation on Contributions.--
       ``(1) In general.--The term `qualified funeral trust' shall 
     not include any trust which accepts aggregate contributions 
     by or for the benefit of an individual in excess of $7,000.
       ``(2) Related trusts.--For purposes of paragraph (1), all 
     trusts having trustees which are related persons shall be 
     treated as 1 trust. For purposes of the preceding sentence, 
     persons are related if--
       ``(A) the relationship between such persons would result in 
     the disallowance of losses under section 267 or 707(b),
       ``(B) such persons are treated as a single employer under 
     subsection (a) or (b) of section 52, or
       ``(C) the Secretary determines that treating such persons 
     as related is necessary to prevent avoidance of the purposes 
     of this section.
       ``(3) Inflation adjustment.--In the case of any contract 
     referred to in subsection (b)(1) which is entered into during 
     any calendar year after 1996, the dollar amount referred to 
     paragraph (1) 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.
     If any dollar amount after being increased under the 
     preceding sentence is not a multiple of $100, such dollar 
     amount shall be rounded to the nearest multiple of $100.
       ``(d) Application of Rate Schedule.--Section 1(e) shall be 
     applied to each qualified funeral trust by treating each 
     beneficiary's interest in each such trust as a separate 
     trust.
       ``(e) Treatment of Amounts Refunded to Beneficiary on 
     Cancellation.--No gain or loss shall be recognized to a 
     beneficiary described in subsection (b)(3) of any qualified 
     funeral trust by reason of any payment from such trust to 
     such beneficiary by reason of cancellation of a contract 
     referred to in subsection (b)(1). If any payment referred to 
     in the preceding sentence consists of property other than 
     money, the basis of such property in the hands of such 
     beneficiary shall be the same as the trust's basis in such 
     property immediately before the payment.
       ``(f) Simplified Reporting.--The Secretary may prescribe 
     rules for simplified reporting of all trusts having a single 
     trustee.''
       (b) Clerical Amendment.--The table of sections for subpart 
     F of part I of subchapter J of chapter 1 is amended by adding 
     at the end the following new item:

``Sec. 684. Treatment of funeral trusts.''

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

              Subchapter B--Estate and Gift Tax Provisions

     SEC. 11611. CLARIFICATION OF WAIVER OF CERTAIN RIGHTS OF 
                   RECOVERY.

       (a) Amendment to Section 2207A.--Paragraph (2) of section 
     2207A(a) (relating to right of recovery in the case of 
     certain marital deduction property) is amended to read as 
     follows:
       ``(2) Decedent may otherwise direct.--Paragraph (1) shall 
     not apply with respect to any property to the extent that the 
     decedent in his will (or a revocable trust) specifically 
     indicates an intent to waive any right of recovery under this 
     subchapter with respect to such property.''
       (b) Amendment to Section 2207B.--Paragraph (2) of section 
     2207B(a) (relating to right of recovery where decedent 
     retained interest) is amended to read as follows:
       ``(2) Decedent may otherwise direct.--Paragraph (1) shall 
     not apply with respect to any property to the extent that the 
     decedent in his will (or a revocable trust) specifically 
     indicates an intent to waive any right of recovery under this 
     subchapter with respect to such property.''
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to the estates of decedents dying 
     after the date of the enactment of this Act.

     SEC. 11612. ADJUSTMENTS FOR GIFTS WITHIN 3 YEARS OF 
                   DECEDENT'S DEATH.

       (a) General Rule.--Section 2035 is amended to read as 
     follows:

     ``SEC. 2035. ADJUSTMENTS FOR CERTAIN GIFTS MADE WITHIN 3 
                   YEARS OF DECEDENT'S DEATH.

       ``(a) Inclusion of Certain Property in Gross Estate.--If--
       ``(1) the decedent made a transfer (by trust or otherwise) 
     of an interest in any property, or relinquished a power with 
     respect to any property, during the 3-year period ending on 
     the date of the decedent's death, and
       ``(2) the value of such property (or an interest therein) 
     would have been included in the decedent's gross estate under 
     section 2036, 2037, 2038, or 2042 if such transferred 
     interest or relinquished power had been retained by the 
     decedent on the date of his death,
     the value of the gross estate shall include the value of any 
     property (or interest therein) which would have been so 
     included.
       ``(b) Inclusion of Gift Tax on Gifts Made During 3 Years 
     Before Decedent's Death.--The amount of the gross estate 
     (determined without regard to this subsection) shall be 
     increased by the amount of any tax paid under chapter 12 by 
     the decedent or his estate on any gift made by the decedent 
     or his spouse during the 3-year period ending on the date of 
     the decedent's death.
       ``(c) Other Rules Relating to Transfers Within 3 Years of 
     Death.--
       ``(1) In general.--For purposes of--
       ``(A) section 303(b) (relating to distributions in 
     redemption of stock to pay death taxes),
       ``(B) section 2032A (relating to special valuation of 
     certain farms, etc., real property), and
       ``(C) subchapter C of chapter 64 (relating to lien for 
     taxes),
     the value of the gross estate shall include the value of all 
     property to the extent of any interest therein of which the 
     decedent has at any time made a transfer, by trust or 
     otherwise, during the 3-year period ending on the date of the 
     decedent's death.
       ``(2) Coordination with section 6166.--An estate shall be 
     treated as meeting the 35 percent of adjusted gross estate 
     requirement of section 6166(a)(1) only if the estate meets 
     such requirement both with and without the application of 
     paragraph (1).
       ``(3) Marital and small transfers.--Paragraph (1) shall not 
     apply to any transfer (other than a transfer with respect to 
     a life insurance policy) made during a calendar year to any 
     donee if the decedent was not required by section 6019 (other 
     than by reason of section 6019(2)) to file any gift tax 
     return for such year with respect to transfers to such donee.
       ``(d) Exception.--Subsection (a) shall not apply to any 
     bona fide sale for an adequate and full consideration in 
     money or money's worth.
       ``(e) Treatment of Certain Transfers From Revocable 
     Trusts.--For purposes of this section and section 2038, any 
     transfer from any portion of a trust during any period that 
     such portion was treated under section 676 as owned by the 
     decedent by reason of a power in the grantor (determined 
     without regard to section 672(e)) shall be treated as a 
     transfer made directly by the decedent.''
       (b) Clerical Amendment.--The table of sections for part III 
     of subchapter A of chapter 11 is amended by striking 
     ``gifts'' in the item relating to section 2035 and inserting 
     ``certain gifts''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to the estates of decedents dying after the date 
     of the enactment of this Act.

     SEC. 11613. CLARIFICATION OF QUALIFIED TERMINABLE INTEREST 
                   RULES.

       (a) General Rule.--
       (1) Estate tax.--Subparagraph (B) of section 2056(b)(7) 
     (defining qualified terminable interest property) is amended 
     by adding at the end the following new clause:
       ``(vi) Treatment of certain income distributions.--An 
     income interest shall not fail to qualify as a qualified 
     income interest for life solely because income for the period 
     after the last distribution date and on or before the date of 
     the surviving spouse's death is not required to be 
     distributed to the surviving spouse or to the estate of the 
     surviving spouse.''
       (2) Gift tax.--Paragraph (3) of section 2523(f) is amended 
     by striking ``and (iv)'' and inserting ``(iv), and (vi)''.

[[Page H 13555]]

       (b) Clarification of Subsequent Inclusions.--Section 2044 
     is amended by adding at the end the following new subsection:
       ``(d) Clarification of Inclusion of Certain Income.--The 
     amount included in the gross estate under subsection (a) 
     shall include the amount of any income from the property to 
     which this section applies for the period after the last 
     distribution date and on or before the date of the decedent's 
     death if such income is not otherwise included in the 
     decedent's gross estate.''
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply with respect to the estates of decedents dying, and 
     gifts made, after the date of the enactment of this Act.
       (2) Application of section 2044 to transfers before date of 
     enactment.--In the case of the estate of any decedent dying 
     after the date of the enactment of this Act, if there was a 
     transfer of property on or before such date--
       (A) such property shall not be included in the gross estate 
     of the decedent under section 2044 of the Internal Revenue 
     Code of 1986 if no prior marital deduction was allowed with 
     respect to such a transfer of such property to the decedent, 
     but
       (B) such property shall be so included if such a deduction 
     was allowed.

     SEC. 11614. TRANSITIONAL RULE UNDER SECTION 2056A.

       (a) General Rule.--In the case of any trust created under 
     an instrument executed before the date of the enactment of 
     the Revenue Reconciliation Act of 1990, such trust shall be 
     treated as meeting the requirements of paragraph (1) of 
     section 2056A(a) of the Internal Revenue Code of 1986 if the 
     trust instrument requires that all trustees of the trust be 
     individual citizens of the United States or domestic 
     corporations.
       (b) Effective Date.--The provisions of subsection (a) shall 
     take effect as if included in the provisions of section 
     11702(g) of the Revenue Reconciliation Act of 1990.

     SEC. 11615. OPPORTUNITY TO CORRECT CERTAIN FAILURES UNDER 
                   SECTION 2032A.

       (a) General Rule.--Paragraph (3) of section 2032A(d) 
     (relating to modification of election and agreement to be 
     permitted) is amended to read as follows:
       ``(3) Modification of election and agreement to be 
     permitted.--The Secretary shall prescribe procedures which 
     provide that in any case in which the executor makes an 
     election under paragraph (1) (and submits the agreement 
     referred to in paragraph (2)) within the time prescribed 
     therefor, but--
       ``(A) the notice of election, as filed, does not contain 
     all required information, or
       ``(B) signatures of 1 or more persons required to enter 
     into the agreement described in paragraph (2) are not 
     included on the agreement as filed, or the agreement does not 
     contain all required information,
     the executor will have a reasonable period of time (not 
     exceeding 90 days) after notification of such failures to 
     provide such information or signatures.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to the estates of decedents dying after the date 
     of the enactment of this Act.

     SEC. 11616. GIFTS MAY NOT BE REVALUED FOR ESTATE TAX PURPOSES 
                   AFTER EXPIRATION OF STATUTE OF LIMITATIONS.

       (a) In General.--Section 2001 (relating to imposition and 
     rate of estate tax) is amended by adding at the end the 
     following new subsection:
       ``(f) Valuation of Gifts.--If--
       ``(1) the time has expired within which a tax may be 
     assessed under chapter 12 (or under corresponding provisions 
     of prior laws) on the transfer of property by gift made 
     during a preceding calendar period (as defined in section 
     2502(b)), and
       ``(2) the value of such gift is shown on the return for 
     such preceding calendar period or is disclosed in such 
     return, or in a statement attached to the return, in a manner 
     adequate to apprise the Secretary of the nature of such gift,
     the value of such gift shall, for purposes of computing the 
     tax under this chapter, be the value of such gift as finally 
     determined for purposes of chapter 12.''
       (b) Modification of Application of Statute of 
     Limitations.--Paragraph (9) of section 6501(c) is amended to 
     read as follows:
       ``(9) Gift tax on certain gifts not shown on return.--If 
     any gift of property the value of which (or any increase in 
     taxable gifts required under section 2701(d)) is required to 
     be shown on a return of tax imposed by chapter 12 (without 
     regard to section 2503(b)), and is not shown on such return, 
     any tax imposed by chapter 12 on such gift may be assessed, 
     or a proceeding in court for the collection of such tax may 
     be begun without assessment, at any time. The preceding 
     sentence shall not apply to any item which is disclosed in 
     such return, or in a statement attached to the return, in a 
     manner adequate to apprise the Secretary of the nature of 
     such item. The value of any item which is so disclosed may 
     not be redetermined by the Secretary after the expiration of 
     the period under subsection (a).''
       (c) Declaratory Judgment Procedure for Determining Value of 
     Gift.--
       (1) In general.--Part IV of subchapter C of chapter 76 is 
     amended by inserting after section 7476 the following new 
     section:

     ``SEC. 7477. DECLARATORY JUDGMENTS RELATING TO VALUE OF 
                   CERTAIN GIFTS.

       ``(a) Creation of Remedy.--In a case of an actual 
     controversy involving a determination by the Secretary of the 
     value of any gift shown on the return of tax imposed by 
     chapter 12 or disclosed on such return or in any statement 
     attached to such return, upon the filing of an appropriate 
     pleading, the Tax Court may make a declaration of the value 
     of such gift. Any such declaration shall have the force and 
     effect of a decision of the Tax Court and shall be reviewable 
     as such.
       ``(b) Limitations.--
       ``(1) Petitioner.--A pleading may be filed under this 
     section only by the donor.
       ``(2) Exhaustion of administrative remedies.--The court 
     shall not issue a declaratory judgment or decree under this 
     section in any proceeding unless it determines that the 
     petitioner has exhausted all available administrative 
     remedies within the Internal Revenue Service.
       ``(3) Time for bringing action.--If the Secretary sends by 
     certified or registered mail notice of his determination as 
     described in subsection (a) to the petitioner, no proceeding 
     may be initiated under this section unless the pleading is 
     filed before the 91st day after the date of such mailing.''
       (2) Clerical amendment.--The table of sections for such 
     part IV is amended by inserting after the item relating to 
     section 7476 the following new item:

``Sec. 7477. Declaratory judgments relating to value of certain 
              gifts.''

       (d) Conforming Amendment.--Subsection (c) of section 2504 
     is amended by striking ``, and if a tax under this chapter or 
     under corresponding provisions of prior laws has been 
     assessed or paid for such preceding calendar period''.
       (e) Effective Dates.--
       (1) In general.--The amendments made by subsections (a) and 
     (c) shall apply to gifts made after the date of the enactment 
     of this Act.
       (2) Subsection (b).--The amendment made by subsection (b) 
     shall apply to gifts made in calendar years ending after the 
     date of the enactment of this Act.

     SEC. 11617. CLARIFICATIONS RELATING TO DISCLAIMERS.

       (a) Partial Transfer-Type Disclaimers Permitted.--Paragraph 
     (3) of section 2518(c) (relating to certain transfers treated 
     as disclaimers) is amended by inserting ``(or an undivided 
     portion of such interest)'' after ``entire interest in the 
     property''.
       (b) Retention of Interest by Decedent's Spouse Permitted in 
     Transfer-Type Disclaimers.--Paragraph (3) of section 2518(c) 
     is amended by adding at the end the following new flush 
     sentence:
     ``For purposes of the preceding sentence, a written transfer 
     by the spouse of the decedent of property to a trust shall 
     not fail to be treated as a transfer of such spouse's 
     interest in such property by reason of such spouse having an 
     interest in such trust.''
       (c) Disclaimers Are Effective For Income Tax Purposes.--
     Subsection (a) of section 2518 is amended by inserting ``and 
     subtitle A'' after ``this subtitle'' each place it appears.
       (d) Effective Date.--The amendments made by this section 
     shall apply to transfers creating an interest in the person 
     disclaiming, and disclaimers, made after the date of the 
     enactment of this Act.

     SEC. 11618. CLARIFICATION OF TREATMENT OF SURVIVOR ANNUITIES 
                   UNDER QUALIFIED TERMINABLE INTEREST RULES.

       (a) In General.--Subparagraph (C) of section 2056(b)(7) is 
     amended by inserting ``(or, in the case of an interest in an 
     annuity arising under the community property laws of a State, 
     included in the gross estate of the decedent under section 
     2033)'' after ``section 2039''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to estates of decedents dying after the date of 
     the enactment of this Act.

     SEC. 11619. TREATMENT UNDER QUALIFIED DOMESTIC TRUST RULES OF 
                   FORMS OF OWNERSHIP WHICH ARE NOT TRUSTS.

       (a) In General.--Subsection (c) of section 2056A (defining 
     qualified domestic trust) is amended by adding at the end the 
     following new paragraph:
       ``(3) Trust.--To the extent provided in regulations 
     prescribed by the Secretary, the term `trust' includes other 
     arrangements which have substantially the same effect as a 
     trust.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to estates of decedents dying after the date of 
     the enactment of this Act.

            Subchapter C--Generation-Skipping Tax Provisions

     SEC. 11631. TAXABLE TERMINATION NOT TO INCLUDE DIRECT SKIPS.

       (a) In General.--Paragraph (1) of section 2612(a) (defining 
     taxable termination) is amended by adding at the end the 
     following new flush sentence:
     ``Such term shall not include a direct skip.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to generation-skipping transfers (as defined in 
     section 2611 of the Internal Revenue Code of 1986) after the 
     date of the enactment of this Act.

                  CHAPTER 7--EXCISE TAX SIMPLIFICATION

 Subchapter A--Provisions Related to Distilled Spirits, Wines, and Beer

     SEC. 11641. CREDIT OR REFUND FOR IMPORTED BOTTLED DISTILLED 
                   SPIRITS RETURNED TO DISTILLED SPIRITS PLANT.

       (a) In General.--Paragraph (1) of section 5008(c) (relating 
     to distilled spirits returned to bonded premises) is amended 
     by striking ``withdrawn from bonded premises on payment or 
     determination of tax'' and inserting ``on which tax has been 
     determined or paid''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect at the beginning of the first calendar 
     quarter beginning more than 180 days after the date of the 
     enactment of this Act.

[[Page H 13556]]


     SEC. 11642. FERMENTED MATERIAL FROM ANY BREWERY MAY BE 
                   RECEIVED AT A DISTILLED SPIRITS PLANT.

       (a) In General.--Paragraph (2) of section 5222(b) (relating 
     to production, receipt, removal, and use of distilling 
     materials) is amended to read as follows:
       ``(2) beer conveyed without payment of tax from brewery 
     premises, beer which has been lawfully removed from brewery 
     premises upon determination of tax, or''.
       (b) Clarification of Authority To Permit Removal of Beer 
     Without Payment of Tax for Use as Distilling Material.--
     Section 5053 (relating to exemptions) is amended by 
     redesignating subsection (f) as subsection (i) and by 
     inserting after subsection (e) the following new subsection:
       ``(f) Removal for Use as Distilling Material.--Subject to 
     such regulations as the Secretary may prescribe, beer may be 
     removed from a brewery without payment of tax to any 
     distilled spirits plant for use as distilling material.''
       (c) Clarification of Refund and Credit of Tax.--Section 
     5056 (relating to refund and credit of tax, or relief from 
     liability) is amended--
       (1) by redesignating subsection (c) as subsection (d) and 
     by inserting after subsection (b) the following new 
     subsection:
       ``(c) Beer Received at a Distilled Spirits Plant.--Any tax 
     paid by any brewer on beer produced in the United States may 
     be refunded or credited to the brewer, without interest, or 
     if the tax has not been paid, the brewer may be relieved of 
     liability therefor, under regulations as the Secretary may 
     prescribe, if such beer is received on the bonded premises of 
     a distilled spirits plant pursuant to the provisions of 
     section 5222(b)(2), for use in the production of distilled 
     spirits.'', and
       (2) by striking ``or rendering unmerchantable'' in 
     subsection (d) (as so redesignated) and inserting ``rendering 
     unmerchantable, or receipt on the bonded premises of a 
     distilled spirits plant''.
       (d) Effective Date.--The amendments made by this section 
     shall take effect at the beginning of the first calendar 
     quarter beginning more than 180 days after the date of the 
     enactment of this Act.

     SEC. 11643. REFUND OF TAX ON WINE RETURNED TO BOND NOT 
                   LIMITED TO UNMERCHANTABLE WINE.

       (a) In General.--Subsection (a) of section 5044 (relating 
     to refund of tax on unmerchantable wine) is amended by 
     striking ``as unmerchantable''.
       (b) Conforming Amendments.--
       (1) Section 5361 is amended by striking ``unmerchantable''.
       (2) The section heading for section 5044 is amended by 
     striking 
     ``
     
     ''.
       (3) The item relating to section 5044 in the table of 
     sections for subpart C of part I of subchapter A of chapter 
     51 is amended by striking ``unmerchantable''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect at the beginning of the first calendar 
     quarter beginning more than 180 days after the date of the 
     enactment of this Act.

     SEC. 11644. BEER MAY BE WITHDRAWN FREE OF TAX FOR 
                   DESTRUCTION.

       (a) In General.--Section 5053 is amended by inserting after 
     subsection (g) the following new subsection:
       ``(h) Removals for Destruction.--Subject to such 
     regulations as the Secretary may prescribe, beer may be 
     removed from the brewery without payment of tax for 
     destruction.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect at the beginning of the first calendar 
     quarter beginning more than 180 days after the date of the 
     enactment of this Act.

     SEC. 11645. TRANSFER TO BREWERY OF BEER IMPORTED IN BULK 
                   WITHOUT PAYMENT OF TAX.

       (a) In General.--Part II of subchapter G of chapter 51 is 
     amended by adding at the end the following new section:

     ``SEC. 5418. BEER IMPORTED IN BULK.

       ``Beer imported or brought into the United States in bulk 
     containers may, under such regulations as the Secretary may 
     prescribe, be withdrawn from customs custody and transferred 
     in such bulk containers to the premises of a brewery without 
     payment of the internal revenue tax imposed on such beer. The 
     proprietor of a brewery to which such beer is transferred 
     shall become liable for the tax on the beer withdrawn from 
     customs custody under this section upon release of the beer 
     from customs custody, and the importer, or the person 
     bringing such beer into the United States, shall thereupon be 
     relieved of the liability for such tax.''
       (b) Clerical Amendment.--The table of sections for such 
     part II is amended by adding at the end the following new 
     item:

``Sec. 5418. Beer imported in bulk.''

       (c) Effective Date.--The amendments made by this section 
     shall take effect at the beginning of the first calendar 
     quarter beginning more than 180 days after the date of the 
     enactment of this Act.

       Subchapter B--Consolidation of Taxes on Aviation Gasoline

     SEC. 11651. CONSOLIDATION OF TAXES ON AVIATION GASOLINE.

       (a) In General.--Subparagraph (A) of section 4081(a)(2) 
     (relating to imposition of tax on gasoline and diesel fuel) 
     is amended by redesignating clause (ii) as clause (iii) and 
     by striking clause (i) and inserting the following:
       ``(i) in the case of gasoline other than aviation gasoline, 
     18.3 cents per gallon,
       ``(ii) in the case of aviation gasoline, 19.3 cents per 
     gallon, and''.
       (b) Termination.--Subsection (d) of section 4081 is amended 
     by redesignating paragraph (2) as paragraph (3) and by 
     inserting after paragraph (1) the following new paragraph:
       ``(2) Aviation gasoline.--On and after January 1, 1996, the 
     rate specified in subsection (a)(2)(A)(ii) shall be 4.3 cents 
     per gallon.''
       (c) Repeal of Retail Level Tax.--
       (1) Subsection (c) of section 4041 is amended by striking 
     paragraphs (2) and (3) and by redesignating paragraphs (4) 
     and (5) as paragraphs (2) and (3), respectively.
       (2) Paragraph (3) of section 4041(c), as redesignated by 
     paragraph (1), is amended by striking ``paragraphs (1) and 
     (2)'' and inserting ``paragraph (1)''.
       (d) Conforming Amendments.--
       (1) Paragraph (1) of section 4041(k) is amended by adding 
     ``and'' at the end of subparagraph (A), by striking ``, and'' 
     at the end of subparagraph (B) and inserting a period, and by 
     striking subparagraph (C).
       (2) Paragraph (1) of section 4081(d) is amended by striking 
     ``each rate of tax specified in subsection (a)(2)(A)'' and 
     inserting ``the rates of tax specified in clauses (i) and 
     (iii) of subsection (a)(2)(A)''.
       (3) Sections 6421(f)(2)(A) and 9502(f)(1)(A) are each 
     amended by striking ``section 4041(c)(4)'' and inserting 
     ``section 4041(c)(2)''.
       (4) Paragraph (2) of section 9502(b) is amended by striking 
     ``14 cents'' and inserting ``15 cents''.
       (e) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 1996.
       (f) Floor Stocks Tax.--
       (1) Imposition of tax.--In the case of aviation gasoline on 
     which tax was imposed under section 4081 of the Internal 
     Revenue Code of 1986 before January 1, 1996, and which is 
     held on such date by any person, there is hereby imposed a 
     floor stocks tax of 1 cent per gallon of such gasoline.
       (2) Liability for tax and method of payment.--
       (A) Liability for tax.--A person holding aviation gasoline 
     on January 1, 1996, 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 June 30, 1996.
       (3) Definitions.--For purposes of this subsection:
       (A) Held by a person.--Gasoline 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) Secretary.--The term ``Secretary'' means the Secretary 
     of the Treasury or his delegate.
       (4) Exception for exempt uses.--The tax imposed by 
     paragraph (1) shall not apply to gasoline held by any person 
     exclusively for any use to the extent a credit or refund of 
     the tax imposed by section 4081 of such Code is allowable for 
     such use.
       (5) Exception for fuel held in aircraft tank.--No tax shall 
     be imposed by paragraph (1) on aviation gasoline held in the 
     tank of an aircraft.
       (6) Exception for certain amounts of fuel.--
       (A) In general.--No tax shall be imposed by paragraph (1) 
     on aviation gasoline held on January 1, 1996, by any person 
     if the aggregate amount of aviation gasoline held by such 
     person on such date does not exceed 6,000 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) or (5).
       (C) Controlled groups.--
       (i) Corporations.--In the case of a controlled group, the 
     6,000 gallon amount in subparagraph (A) shall be apportioned 
     among the component members of such group in such manner as 
     the Secretary shall by regulations prescribe. For purposes of 
     the preceding sentence, 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 under 
     common control where 1 or more of the members is not a 
     corporation.
       (7) Other laws applicable.--All provisions of law, 
     including penalties, applicable with respect to the taxes 
     imposed by section 4081 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 4081.

               Subchapter C--Other Excise Tax Provisions

     SEC. 11661. CERTAIN COMBINATIONS NOT TREATED AS MANUFACTURE 
                   UNDER RETAIL SALES TAX ON HEAVY TRUCKS.

       (a) In General.--Paragraph (2) of section 4052(c) (relating 
     to certain combinations not treated as manufacture) is 
     amended by striking ``or wood or metal floor'' and inserting 
     ``wood or metal floor, or a power take-off and dump body''.
       (b) Removal of Fifth Wheel.--Paragraph (1) of section 
     4052(c) is amended by inserting before the period ``or the 
     removal of any coupling device (including any fifth wheel)''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

[[Page H 13557]]


                  CHAPTER 8--ADMINISTRATIVE PROVISION

     SEC. 11671. CERTAIN NOTICES DISREGARDED UNDER PROVISION 
                   INCREASING INTEREST RATE ON LARGE CORPORATE 
                   UNDERPAYMENTS.

       (a) General Rule.--Subparagraph (B) of section 6621(c)(2) 
     (defining applicable date) is amended by adding at the end 
     the following new clause:
       ``(iii) Exception for letters or notices involving small 
     amounts.--For purposes of this paragraph, any letter or 
     notice shall be disregarded if the amount of the deficiency 
     or proposed deficiency (or the assessment or proposed 
     assessment) set forth in such letter or notice is not greater 
     than $100,000 (determined by not taking into account any 
     interest, penalties, or additions to tax).''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply for purposes of determining interest for periods 
     after December 31, 1995.
                  Subtitle K--Miscellaneous Provisions

     SEC. 11701. TREATMENT OF STORAGE OF PRODUCT SAMPLES.

       (a) In General.--Paragraph (2) of section 280A(c) is 
     amended by striking ``inventory'' and inserting ``inventory 
     or product samples''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 11702. 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. 11703. 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.

     SEC. 11704. CORRECTION OF INFLATION ADJUSTMENT IN LUXURY 
                   EXCISE TAX ON AUTOMOBILES.

       (a) In General.--Subsection (e) of section 4001 (relating 
     to inflation adjustment) is amended to read as follows:
       ``(e) Inflation Adjustment.--
       ``(1) In general.--The $30,000 amount in subsection (a) and 
     section 4003(a) shall be increased by an amount equal to--
       ``(A) $30,000, multiplied by
       ``(B) the cost-of-living adjustment under section 1(f)(3) 
     for the calendar year in which the vehicle is sold, 
     determined by substituting `calendar year 1990' for `calendar 
     year 1992' in subparagraph (B) thereof.
       ``(2) Rounding.--If any amount as adjusted under paragraph 
     (1) is not a multiple of $2,000, such amount shall be rounded 
     to the next lowest multiple of $2,000.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the date of the enactment of this Act.

     SEC. 11705. EXTENSION AND PHASEDOWN OF LUXURY PASSENGER 
                   AUTOMOBILE TAX.

       (a) Extension.--Subsection (f) of section 4001 is amended 
     by striking ``1999'' and inserting ``2002''.
       (b) Phasedown.--Section 4001 is amended by redesignating 
     subsection (f) (as amended by subsection (a) of this section) 
     as subsection (g) and by inserting after subsection (e) the 
     following new subsection:
       ``(f) Phasedown.--For sales occurring in a calendar year 
     after 1995 and before 2003, subsection (a) shall be applied 
     by substituting for `10 percent' the percentage determined in 
     accordance with the following table:

``If the calendar year is:                           The percentage is:
  1996...................................................9 percent     
  1997...................................................8 percent     
  1998...................................................7 percent     
  1999...................................................6 percent     
  2000...................................................5 percent     
  2001...................................................4 percent     
  2002...................................................3 percent.''  

       (c) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 1996.
             Subtitle L--Generalized System of Preferences

     SEC. 11801. SHORT TITLE.

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

     SEC. 11802. GENERALIZED SYSTEM OF PREFERENCES.

       (a) In General.--Title V of the Trade Act of 1974 is 
     amended to read as follows:
              ``TITLE V--GENERALIZED SYSTEM OF PREFERENCES

     ``SEC. 501. AUTHORITY TO EXTEND PREFERENCES.

       ``The President may provide duty-free treatment for any 
     eligible article from any beneficiary developing country in 
     accordance with the provisions of this title. In taking any 
     such action, the President shall have due regard for--
       ``(1) the effect such action will have on furthering the 
     economic development of developing countries through the 
     expansion of their exports;
       ``(2) the extent to which other major developed countries 
     are undertaking a comparable effort to assist developing 
     countries by granting generalized preferences with respect to 
     imports of products of such countries;
       ``(3) the anticipated impact of such action on United 
     States producers of like or directly competitive products; 
     and
       ``(4) the extent of the beneficiary developing country's 
     competitiveness with respect to eligible articles.

     ``SEC. 502. DESIGNATION OF BENEFICIARY DEVELOPING COUNTRIES.

       ``(a) Authority To Designate Countries.--
       ``(1) Beneficiary developing countries.--The President is 
     authorized to designate countries as beneficiary developing 
     countries for purposes of this title.
       ``(2) Least-developed beneficiary developing countries.--
     The President is authorized to designate any beneficiary 
     developing country as a least-developed beneficiary 
     developing country for purposes of this title, based on the 
     considerations in section 501 and subsection (c) of this 
     section.
       ``(b) Countries Ineligible for Designation.--
       ``(1) Specific countries.--The following countries may not 
     be designated as beneficiary developing countries for 
     purposes of this title:
       ``(A) Australia.
       ``(B) Canada.
       ``(C) European Union member states.
       ``(D) Iceland.
       ``(E) Japan.
       ``(F) Monaco.
       ``(G) New Zealand.
       ``(H) Norway.
       ``(I) Switzerland.
       ``(2) Other bases for ineligibility.--The President shall 
     not designate any country a beneficiary developing country 
     under this title if any of the following applies:
       ``(A) Such country is a Communist country, unless--
       ``(i) the products of such country receive 
     nondiscriminatory treatment,
       ``(ii) such country is a WTO Member (as such term is 
     defined in section 2(10) of the Uruguay Round Agreements Act) 
     (19 U.S.C. 3501(10)) and a member of the International 
     Monetary Fund, and
       ``(iii) such country is not dominated or controlled by 
     international communism.
       ``(B) Such country is a party to an arrangement of 
     countries and participates in any action pursuant to such 
     arrangement, the effect of which is--
       ``(i) to withhold supplies of vital commodity resources 
     from international trade or to raise the price of such 
     commodities to an unreasonable level, and
       ``(ii) to cause serious disruption of the world economy.
       ``(C) Such country affords preferential treatment to the 
     products of a developed country, other than the United 
     States, which has, or is likely to have, a significant 
     adverse effect on United States commerce.
       ``(D)(i) Such country--
       ``(I) has nationalized, expropriated, or otherwise seized 
     ownership or control of property, including patents, 
     trademarks, or copyrights, owned by a United States citizen 
     or by a corporation, partnership, or association which is 50 
     percent or more beneficially owned by United States citizens,
       ``(II) has taken steps to repudiate or nullify an existing 
     contract or agreement with a United States citizen or a 
     corporation, partnership, or association which is 50 percent 
     or more beneficially owned by United States citizens, the 
     effect of which is to nationalize, expropriate, or otherwise 
     seize ownership or control of property, including patents, 
     trademarks, or copyrights, so owned, or
       ``(III) has imposed or enforced taxes or other exactions, 
     restrictive maintenance or operational conditions, or other 
     measures with respect to property, including patents, 
     trademarks, or copyrights, so owned, the effect of which is 
     to nationalize, expropriate, or otherwise seize ownership or 
     control of such property,
     unless clause (ii) applies.
       ``(ii) This clause applies if the President determines 
     that--
       ``(I) prompt, adequate, and effective compensation has been 
     or is being made to the citizen, corporation, partnership, or 
     association referred to in clause (i),
       ``(II) good faith negotiations to provide prompt, adequate, 
     and effective compensation 

[[Page H 13558]]
     under the applicable provisions of international law are in progress, 
     or the country described in clause (i) is otherwise taking 
     steps to discharge its obligations under international law 
     with respect to such citizen, corporation, partnership, or 
     association, or
       ``(III) a dispute involving such citizen, corporation, 
     partnership, or association over compensation for such a 
     seizure has been submitted to arbitration under the 
     provisions of the Convention for the Settlement of Investment 
     Disputes, or in another mutually agreed upon forum,
     and the President promptly furnishes a copy of such 
     determination to the Senate and House of Representatives.
       ``(E) Such country fails to act in good faith in 
     recognizing as binding or in enforcing arbitral awards in 
     favor of United States citizens or a corporation, 
     partnership, or association which is 50 percent or more 
     beneficially owned by United States citizens, which have been 
     made by arbitrators appointed for each case or by permanent 
     arbitral bodies to which the parties involved have submitted 
     their dispute.
       ``(F) Such country aids or abets, by granting sanctuary 
     from prosecution to, any individual or group which has 
     committed an act of international terrorism.
       ``(G) Such country has not taken or is not taking steps to 
     afford internationally recognized worker rights to workers in 
     the country (including any designated zone in that country).
     Subparagraphs (D), (E), (F), and (G) shall not prevent the 
     designation of any country as a beneficiary developing 
     country under this title if the President determines that 
     such designation will be in the national economic interest of 
     the United States and reports such determination to the 
     Congress with the reasons therefor.
       ``(c) Factors Affecting Country Designation.--In 
     determining whether to designate any country as a beneficiary 
     developing country under this title, the President shall take 
     into account--
       ``(1) an expression by such country of its desire to be so 
     designated;
       ``(2) the level of economic development of such country, 
     including its per capita gross national product, the living 
     standards of its inhabitants, and any other economic factors 
     which the President deems appropriate;
       ``(3) whether or not other major developed countries are 
     extending generalized preferential tariff treatment to such 
     country;
       ``(4) the extent to which such country has assured the 
     United States that it will provide equitable and reasonable 
     access to the markets and basic commodity resources of such 
     country and the extent to which such country has assured the 
     United States that it will refrain from engaging in 
     unreasonable export practices;
       ``(5) the extent to which such country is providing 
     adequate and effective protection of intellectual property 
     rights;
       ``(6) the extent to which such country has taken action 
     to--
       ``(A) reduce trade distorting investment practices and 
     policies (including export performance requirements); and
       ``(B) reduce or eliminate barriers to trade in services; 
     and
       ``(7) whether or not such country has taken or is taking 
     steps to afford to workers in that country (including any 
     designated zone in that country) internationally recognized 
     worker rights.
       ``(d) Withdrawal, Suspension, or Limitation of Country 
     Designation.--
       ``(1) In general.--The President may withdraw, suspend, or 
     limit the application of the duty-free treatment accorded 
     under this title with respect to any country. In taking any 
     action under this subsection, the President shall consider 
     the factors set forth in section 501 and subsection (c) of 
     this section.
       ``(2) Changed circumstances.--The President shall, after 
     complying with the requirements of subsection (f)(2), 
     withdraw or suspend the designation of any country as a 
     beneficiary developing country if, after such designation, 
     the President determines that as the result of changed 
     circumstances such country would be barred from designation 
     as a beneficiary developing country under subsection (b)(2). 
     Such country shall cease to be a beneficiary developing 
     country on the day on which the President issues an Executive 
     order or Presidential proclamation revoking the designation 
     of such country under this title.
       ``(3) Advice to congress.--The President shall, as 
     necessary, advise the Congress on the application of section 
     501 and subsection (c) of this section, and the actions the 
     President has taken to withdraw, to suspend, or to limit the 
     application of duty-free treatment with respect to any 
     country which has failed to adequately take the actions 
     described in subsection (c).
       ``(e) Mandatory Graduation of Beneficiary Developing 
     Countries.--If the President determines that a beneficiary 
     developing country has become a `high income' country, as 
     defined by the official statistics of the International Bank 
     for Reconstruction and Development, then the President shall 
     terminate the designation of such country as a beneficiary 
     developing country for purposes of this title, effective on 
     January 1 of the second year following the year in which such 
     determination is made.
       ``(f) Congressional Notification.--
       ``(1) Notification of designation.--
       ``(A) In general.--Before the President designates any 
     country as a beneficiary developing country under this title, 
     the President shall notify the Congress of the President's 
     intention to make such designation, together with the 
     considerations entering into such decision.
       ``(B) Designation as least-developed beneficiary developing 
     country.--At least 60 days before the President designates 
     any country as a least-developed beneficiary developing 
     country, the President shall notify the Congress of the 
     President's intention to make such designation.
       ``(2) Notification of termination.--If the President has 
     designated any country as a beneficiary developing country 
     under this title, the President shall not terminate such 
     designation unless, at least 60 days before such termination, 
     the President has notified the Congress and has notified such 
     country of the President's intention to terminate such 
     designation, together with the considerations entering into 
     such decision.

     ``SEC. 503. DESIGNATION OF ELIGIBLE ARTICLES.

       ``(a) Eligible Articles.--
       ``(1) Designation.--
       ``(A) In general.--Except as provided in subsection (b), 
     the President is authorized to designate articles as eligible 
     articles from all beneficiary developing countries for 
     purposes of this title by Executive order or Presidential 
     proclamation after receiving the advice of the International 
     Trade Commission in accordance with subsection (e).
       ``(B) Least-developed beneficiary developing countries.--
     Except for articles described in subparagraphs (A), (B), and 
     (E) of subsection (b)(1) and articles described in paragraphs 
     (2) and (3) of subsection (b), the President may, in carrying 
     out section 502(d)(1) and subsection (c)(1) of this section, 
     designate articles as eligible articles only for countries 
     designated as least-developed beneficiary developing 
     countries under section 502(a)(2) if, after receiving the 
     advice of the International Trade Commission in accordance 
     with subsection (e) of this section, the President determines 
     that such articles are not import-sensitive in the context of 
     imports from least-developed beneficiary developing 
     countries.
       ``(C) Three-year rule.--If, after receiving the advice of 
     the International Trade Commission under subsection (e), an 
     article has been formally considered for designation as an 
     eligible article under this title and denied such 
     designation, such article may not be reconsidered for such 
     designation for a period of 3 years after such denial.
       ``(2) Rule of origin.--
       ``(A) General rule.--The duty-free treatment provided under 
     this title shall apply to any eligible article which is the 
     growth, product, or manufacture of a beneficiary developing 
     country if--
       ``(i) that article is imported directly from a beneficiary 
     developing country into the customs territory of the United 
     States; and
       ``(ii) the sum of--

       ``(I) the cost or value of the materials produced in the 
     beneficiary developing country or any two or more such 
     countries that are members of the same association of 
     countries and are treated as one country under section 
     507(2), plus
       ``(II) the direct costs of processing operations performed 
     in such beneficiary developing country or such member 
     countries,

     is not less than 35 percent of the appraised value of such 
     article at the time it is entered.
       ``(B) Exclusions.--An article shall not be treated as the 
     growth, product, or manufacture of a beneficiary developing 
     country by virtue of having merely undergone--
       ``(i) simple combining or packaging operations, or
       ``(ii) mere dilution with water or mere dilution with 
     another substance that does not materially alter the 
     characteristics of the article.
       ``(3) Regulations.--The Secretary of the Treasury, after 
     consulting with the United States Trade Representative, shall 
     prescribe such regulations as may be necessary to carry out 
     paragraph (2), including, but not limited to, regulations 
     providing that, in order to be eligible for duty-free 
     treatment under this title, an article--
       ``(A) must be wholly the growth, product, or manufacture of 
     a beneficiary developing country, or
       ``(B) must be a new or different article of commerce which 
     has been grown, produced, or manufactured in the beneficiary 
     developing country.
       ``(b) Articles That May Not Be Designated As Eligible 
     Articles.--
       ``(1) Import sensitive articles.--The President may not 
     designate any article as an eligible article under subsection 
     (a) if such article is within one of the following categories 
     of import-sensitive articles:
       ``(A) Textile and apparel articles which were not eligible 
     articles for purposes of this title on January 1, 1994, as 
     this title was in effect on such date.
       ``(B) Watches, except those watches entered after June 30, 
     1989, that the President specifically determines, after 
     public notice and comment, will not cause material injury to 
     watch or watch band, strap, or bracelet manufacturing and 
     assembly operations in the United States or the United States 
     insular possessions.
       ``(C) Import-sensitive electronic articles.
       ``(D) Import-sensitive steel articles.
       ``(E) Footwear, handbags, luggage, flat goods, work gloves, 
     and leather wearing apparel which were not eligible articles 
     for purposes of this title on January 1, 1995, as this title 
     was in effect on such date.
       ``(F) Import-sensitive semimanufactured and manufactured 
     glass products.
       ``(G) Any other articles which the President determines to 
     be import-sensitive in the context of the Generalized System 
     of Preferences.
       ``(2) Articles against which other actions taken.--An 
     article shall not be an eligible article for purposes of this 
     title for any period during which such article is the subject 
     of any action proclaimed pursuant to section 203 of this Act 
     (19 U.S.C. 2253) or section 232 or 351 of the Trade Expansion 
     Act of 1962 (19 U.S.C. 1862, 1981).
       ``(3) Agricultural products.--No quantity of an 
     agricultural product subject to a tariff-rate quota that 
     exceeds the in-quota quantity 

[[Page H 13559]]
     shall be eligible for duty-free treatment under this title.
       ``(c) Withdrawal, Suspension, or Limitation of Duty-Free 
     Treatment; Competitive Need Limitation.--
       ``(1) In general.--The President may withdraw, suspend, or 
     limit the application of the duty-free treatment accorded 
     under this title with respect to any article, except that no 
     rate of duty may be established with respect to any article 
     pursuant to this subsection other than the rate which would 
     apply but for this title. In taking any action under this 
     subsection, the President shall consider the factors set 
     forth in sections 501 and 502(c).
       ``(2) Competitive need limitation.--
       ``(A) Basis for withdrawal of duty-free treatment.--
       ``(i) In general.--Except as provided in clause (ii) and 
     subject to subsection (d), whenever the President determines 
     that a beneficiary developing country has exported (directly 
     or indirectly) to the United States during any calendar year 
     beginning after December 31, 1995--

       ``(I) a quantity of an eligible article having an appraised 
     value in excess of the applicable amount for the calendar 
     year, or
       ``(II) a quantity of an eligible article equal to or 
     exceeding 50 percent of the appraised value of the total 
     imports of that article into the United States during any 
     calendar year,

     the President shall, not later than July 1 of the next 
     calendar year, terminate the duty-free treatment for that 
     article from that beneficiary developing country.
       ``(ii) Annual adjustment of applicable amount.--For 
     purposes of applying clause (i), the applicable amount is--

       ``(I) for 1996, $75,000,000, and
       ``(II) for each calendar year thereafter, an amount equal 
     to the applicable amount in effect for the preceding calendar 
     year plus $5,000,000.

       ``(B) Country defined.--For purposes of this paragraph, the 
     term `country' does not include an association of countries 
     which is treated as one country under section 507(2), but 
     does include a country which is a member of any such 
     association.
       ``(C) Redesignations.--A country which is no longer treated 
     as a beneficiary developing country with respect to an 
     eligible article by reason of subparagraph (A) may, subject 
     to the considerations set forth in sections 501 and 502, be 
     redesignated a beneficiary developing country with respect to 
     such article if imports of such article from such country did 
     not exceed the limitations in subparagraph (A) during the 
     preceding calendar year.
       ``(D) Least-developed beneficiary developing countries.--
     Subparagraph (A) shall not apply to any least-developed 
     beneficiary developing country.
       ``(E) Articles not produced in the united states 
     excluded.--Subparagraph (A)(i)(II) shall not apply with 
     respect to any eligible article if a like or directly 
     competitive article was not produced in the United States on 
     January 1, 1995.
       ``(F) De minimis waivers.--
       ``(i) In general.--The President may disregard subparagraph 
     (A)(i)(II) with respect to any eligible article from any 
     beneficiary developing country if the aggregate appraised 
     value of the imports of such article into the United States 
     during the preceding calendar year does not exceed the 
     applicable amount for such preceding calendar year.
       ``(ii) Applicable amount.--For purposes applying clause 
     (i), the applicable amount is--

       ``(I) for calendar year 1995, $13,000,000, and
       ``(II) for each calendar year thereafter, an amount equal 
     to the applicable amount in effect for the preceding calendar 
     year plus $500,000.

       ``(d) Waiver of Competitive Need Limitation.--
       ``(1) In general.--The President may waive the application 
     of subsection (c)(2) with respect to any eligible article of 
     any beneficiary developing country if, before July 1 of the 
     calendar year beginning after the calendar year for which a 
     determination described in subsection (c)(2)(A) was made with 
     respect to such eligible article, the President--
       ``(A) receives the advice of the International Trade 
     Commission under section 332 of the Tariff Act of 1930 on 
     whether any industry in the United States is likely to be 
     adversely affected by such waiver,
       ``(B) determines, based on the considerations described in 
     sections 501 and 502(c) and the advice described in 
     subparagraph (A), that such waiver is in the national 
     economic interest of the United States, and
       ``(C) publishes the determination described in subparagraph 
     (B) in the Federal Register.
       ``(2) Considerations by the president.--In making any 
     determination under paragraph (1), the President shall give 
     great weight to--
       ``(A) the extent to which the beneficiary developing 
     country has assured the United States that such country will 
     provide equitable and reasonable access to the markets and 
     basic commodity resources of such country, and
       ``(B) the extent to which such country provides adequate 
     and effective protection of intellectual property rights.
       ``(3) Other bases for waiver.--The President may waive the 
     application of subsection (c)(2) if, before July 1 of the 
     calendar year beginning after the calendar year for which a 
     determination described in subsection (c)(2) was made with 
     respect to a beneficiary developing country, the President 
     determines that--
       ``(A) there has been a historical preferential trade 
     relationship between the United States and such country,
       ``(B) there is a treaty or trade agreement in force 
     covering economic relations between such country and the 
     United States, and
       ``(C) such country does not discriminate against, or impose 
     unjustifiable or unreasonable barriers to, United States 
     commerce,
     and the President publishes that determination in the Federal 
     Register.
       ``(4) Limitations on waivers.--
       ``(A) In general.--The President may not exercise the 
     waiver authority under this subsection with respect to a 
     quantity of an eligible article entered during any calendar 
     year beginning after 1995, the aggregate appraised value of 
     which equals or exceeds 30 percent of the aggregate appraised 
     value of all articles that entered duty-free under this title 
     during the preceding calendar year.
       ``(B) Other waiver limits.--The President may not exercise 
     the waiver authority provided under this subsection with 
     respect to a quantity of an eligible article entered during 
     any calendar year beginning after 1995, the aggregate 
     appraised value of which exceeds 15 percent of the aggregate 
     appraised value of all articles that have entered duty-free 
     under this title during the preceding calendar year from 
     those beneficiary developing countries which for the 
     preceding calendar year--
       ``(i) had a per capita gross national product (calculated 
     on the basis of the best available information, including 
     that of the International Bank for Reconstruction and 
     Development) of $5,000 or more; or
       ``(ii) had exported (either directly or indirectly) to the 
     United States a quantity of articles that was duty-free under 
     this title that had an aggregate appraised value of more than 
     10 percent of the aggregate appraised value of all articles 
     that entered duty-free under this title during that year.
       ``(C) Calculation of limitations.--There shall be counted 
     against the limitations imposed under subparagraphs (A) and 
     (B) for any calendar year only that value of any eligible 
     article of any country that--
       ``(i) entered duty-free under this title during such 
     calendar year; and
       ``(ii) is in excess of the value of that article that would 
     have been so entered during such calendar year if the 
     limitations under subsection (c)(2)(A) applied.
       ``(5) Effective period of waiver.--Any waiver granted under 
     this subsection shall remain in effect until the President 
     determines that such waiver is no longer warranted due to 
     changed circumstances.
       ``(e) International Trade Commission Advice.--Before 
     designating articles as eligible articles under subsection 
     (a)(1), the President shall publish and furnish the 
     International Trade Commission with lists of articles which 
     may be considered for designation as eligible articles for 
     purposes of this title. The provisions of sections 131, 132, 
     133, and 134 shall be complied with as though action under 
     section 501 and this section were action under section 123 to 
     carry out a trade agreement entered into under section 123.
       ``(f) Special Rule Concerning Puerto Rico.--No action under 
     this title may affect any tariff duty imposed by the 
     Legislature of Puerto Rico pursuant to section 319 of the 
     Tariff Act of 1930 on coffee imported into Puerto Rico.

     ``SEC. 504. REVIEW AND REPORTS TO CONGRESS.

       ``The President shall submit an annual report to the 
     Congress on the status of internationally recognized worker 
     rights within each beneficiary developing country.

     ``SEC. 505. DATE OF TERMINATION.

       ``No duty-free treatment provided under this title shall 
     remain in effect after December 31, 1996.

     ``SEC. 506. AGRICULTURAL EXPORTS OF BENEFICIARY DEVELOPING 
                   COUNTRIES.

       ``The appropriate agencies of the United States shall 
     assist beneficiary developing countries to develop and 
     implement measures designed to assure that the agricultural 
     sectors of their economies are not directed to export markets 
     to the detriment of the production of foodstuffs for their 
     citizenry.

     ``SEC. 507. DEFINITIONS.

       ``For purposes of this title:
       ``(1) Beneficiary developing country.--The term 
     `beneficiary developing country' means any country with 
     respect to which there is in effect an Executive order or 
     Presidential proclamation by the President designating such 
     country as a beneficiary developing country for purposes of 
     this title.
       ``(2) Country.--The term `country' means any foreign 
     country or territory, including any overseas dependent 
     territory or possession of a foreign country, or the Trust 
     Territory of the Pacific Islands. In the case of an 
     association of countries which is a free trade area or 
     customs union, or which is contributing to comprehensive 
     regional economic integration among its members through 
     appropriate means, including, but not limited to, the 
     reduction of duties, the President may by Executive order or 
     Presidential proclamation provide that all members of such 
     association other than members which are barred from 
     designation under section 502(b) shall be treated as one 
     country for purposes of this title.
       ``(3) Entered.--The term `entered' means entered, or 
     withdrawn from warehouse for consumption, in the customs 
     territory of the United States.
       ``(4) Internationally recognized worker rights.--The term 
     `internationally recognized worker rights' includes--
       ``(A) the right of association;
       ``(B) the right to organize and bargain collectively;
       ``(C) a prohibition on the use of any form of forced or 
     compulsory labor;
       ``(D) a minimum age for the employment of children; and
       ``(E) acceptable conditions of work with respect to minimum 
     wages, hours of work, and occupational safety and health.
       ``(5) Least-developed beneficiary developing country.--The 
     term `least-developed beneficiary developing country' means a 
     beneficiary 

[[Page H 13560]]
     developing country that is designated as a least-developed beneficiary 
     developing country under section 502(a)(2).''.
       (b) Table of Contents.--The items relating to title V in 
     the table of contents of the Trade Act of 1974 are amended to 
     read as follows:

              ``TITLE V--GENERALIZED SYSTEM OF PREFERENCES

``Sec. 501. Authority to extend preferences.
``Sec. 502. Designation of beneficiary developing countries.
``Sec. 503. Designation of eligible articles.
``Sec. 504. Review and reports to Congress.
``Sec. 505. Date of termination.
``Sec. 506. Agricultural exports of beneficiary developing countries.
``Sec. 507. Definitions.''.

     SEC. 11803. RETROACTIVE APPLICATION FOR CERTAIN LIQUIDATIONS 
                   AND RELIQUIDATIONS.

       (a) In General.--Notwithstanding section 514 of the Tariff 
     Act of 1930 or any other provision of law and subject to 
     subsection (b), the entry--
       (1) of any article to which duty-free treatment under title 
     V of the Trade Act of 1974 would have applied if the entry 
     had been made on July 31, 1995, and
       (2) that was made after July 31, 1995, and before the date 
     of the enactment of this Act,
     shall be liquidated or reliquidated as free of duty, and the 
     Secretary of the Treasury shall refund any duty paid with 
     respect to such entry. As used in this subsection, the term 
     ``entry'' includes a withdrawal from warehouse for 
     consumption.
       (b) Requests.--Liquidation or reliquidation may be made 
     under subsection (a) with respect to an entry only if a 
     request therefor is filed with the Customs Service, within 
     180 days after the date of the enactment of this Act, that 
     contains sufficient information to enable the Customs 
     Service--
       (1) to locate the entry; or
       (2) to reconstruct the entry if it cannot be located.

     SEC. 11804. CONFORMING AMENDMENTS.

       (a) Trade Laws.--
       (1) Section 1211(b) of the Omnibus Trade and 
     Competitiveness Act of 1988 (19 U.S.C. 3011(b)) is amended--
       (A) in paragraph (1), by striking ``(19 U.S.C. 2463(a), 
     2464(c)(3))'' and inserting ``(as in effect on July 31, 
     1995)''; and
       (B) in paragraph (2), by striking ``(19 U.S.C. 
     2464(c)(1))'' and inserting the following: ``(as in effect on 
     July 31, 1995)''.
       (2) Section 203(c)(7) of the Andean Trade Preference Act 
     (19 U.S.C. 3202(c)(7)) is amended by striking ``502(a)(4)'' 
     and inserting ``507(4)''.
       (3) Section 212(b)(7) of the Caribbean Basin Economic 
     Recovery Act (19 U.S.C. 2702(b)(7)) is amended by striking 
     ``502(a)(4)'' and inserting ``507(4)''.
       (4) General note 3(a)(iv)(C) of the Harmonized Tariff 
     Schedule of the United States is amended by striking 
     ``sections 503(b) and 504(c)'' and inserting ``subsections 
     (a), (c), and (d) of section 503''.
       (5) Section 201(a)(2) of the North American Free Trade 
     Agreement Implementation Act (19 U.S.C. 3331(a)(2)) is 
     amended by striking ``502(a)(2) of the Trade Act of 1974 (19 
     U.S.C. 2462(a)(2))'' and inserting ``502(f)(2) of the Trade 
     Act of 1974''.
       (6) Section 131 of the Uruguay Round Agreements Act (19 
     U.S.C. 3551) is amended in subsections (a) and (b)(1) by 
     striking ``502(a)(4)'' and inserting ``507(4)''.
       (b) Other Laws.--
       (1) Section 871(f)(2)(B) of the Internal Revenue Code of 
     1986 is amended by striking ``within the meaning of section 
     502'' and inserting ``under title V''.
       (2) Section 2202(8) of the Export Enhancement Act of 1988 
     (15 U.S.C. 4711(8)) is amended by striking ``502(a)(4)'' and 
     inserting ``507(4)''.
       (3) Section 231A(a) of the Foreign Assistance Act of 1961 
     (22 U.S.C. 2191a(a)) is amended--
       (A) in paragraph (1) by striking ``502(a)(4) of the Trade 
     Act of 1974 (19 U.S.C. 2462(a)(4))'' and inserting ``507(4) 
     of the Trade Act of 1974'';
       (B) in paragraph (2) by striking ``505(c) of the Trade Act 
     of 1974 (19 U.S.C. 2465(c))'' and inserting ``504 of the 
     Trade Act of 1974''; and
       (C) in paragraph (4) by striking ``502(a)(4)'' and 
     inserting ``507(4)''.
       (4) Section 1621(a)(1) of the International Financial 
     Institutions Act (22 U.S.C. 262p-4p(a)(1)) is amended by 
     striking ``502(a)(4)'' and inserting ``507(4)''.
       (5) Section 103B of the Agricultural Act of 1949 (7 U.S.C. 
     1444-2) is amended in subsections (a)(5)(F)(v) and (n)(1)(C) 
     by striking ``503(d) of the Trade Act of 1974 (19 U.S.C. 
     2463(d))'' and inserting ``503(b)(3) of the Trade Act of 
     1974''.
               Subtitle M--Increase in Public Debt LImit

     SEC. 11901. INCREASE IN PUBLIC DEBT LIMIT.

       Subsection (b) of section 3101 of title 31, United States 
     Code, is amended by striking the dollar amount contained in 
     the first sentence and inserting ``$5,500,000,000,000'' and 
     by striking the second sentence (if any).
  TITLE XII--TEACHING HOSPITALS AND GRADUATE MEDICAL EDUCATION; ASSET 
                  SALES; WELFARE; AND OTHER PROVISIONS

     SEC. 12001. SHORT TITLE.

       Subtitles A through K of this title may be cited as the 
     ``Personal Responsibility and Work Opportunity Act of 1995''.

     SEC. 12002. TABLE OF CONTENTS.

       The table of contents of subtitles A through L of this 
     title is as follows:

Sec. 12001. Short title.
Sec. 12002. Table of contents.

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

Sec. 12100. References to the Social Security Act.
Sec. 12101. Block grants to States.
Sec. 12102. Report on data processing.
Sec. 12103. Conforming amendments to the Social Security Act.
Sec. 12104. Conforming amendments to the Food Stamp Act of 1977 and 
              related provisions.
Sec. 12105. Conforming amendments to other laws.
Sec. 12106. Effective date; transition rule.

                Subtitle B--Supplemental Security Income

Sec. 12200. Reference to Social Security Act.

                  Chapter 1--Eligibility Restrictions

Sec. 12201. Denial of supplemental security income benefits by reason 
              of disability to drug addicts and alcoholics.
Sec. 12202. 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. 12203. Denial of SSI benefits for fugitive felons and probation 
              and parole violators.

               Chapter 2--Benefits For Disabled Children

Sec. 12211. Definition and eligibility rules.
Sec. 12212. Eligibility redeterminations and continuing disability 
              reviews.
Sec. 12213. Additional accountability requirements.
Sec. 12214. Reduction in cash benefits payable to institutionalized 
              individuals whose medical costs are covered by private 
              insurance.
Sec. 12215. Regulations.

                       Subtitle C--Child Support

Sec. 12300. Reference to Social Security Act.

     Chapter 1--Eligibility For Services; Distribution of Payments

Sec. 12301. State obligation to provide child support enforcement 
              services.
Sec. 12302. Distribution of child support collections.
Sec. 12303. Privacy safeguards.

                  Chapter 2--Locate And Case Tracking

Sec. 12311. State case registry.
Sec. 12312. Collection and disbursement of support payments.
Sec. 12313. State directory of new hires.
Sec. 12314. Amendments concerning income withholding.
Sec. 12315. Locator information from interstate networks.
Sec. 12316. Expansion of the Federal parent locator service.
Sec. 12317. Collection and use of social security numbers for use in 
              child support enforcement.

          Chapter 3--Streamlining And Uniformity of Procedures

Sec. 12321. Adoption of uniform State laws.
Sec. 12322. Improvements to full faith and credit for child support 
              orders.
Sec. 12323. Administrative enforcement in interstate cases.
Sec. 12324. Use of forms in interstate enforcement.
Sec. 12325. State laws providing expedited procedures.

                   Chapter 4--Paternity Establishment

Sec. 12331. State laws concerning paternity establishment.
Sec. 12332. Outreach for voluntary paternity establishment.
Sec. 12333. Cooperation by applicants for and recipients of temporary 
              family assistance.

             Chapter 5--Program Administration and Funding

Sec. 12341. Performance-based incentives and penalties.
Sec. 12342. Federal and State reviews and audits.
Sec. 12343. Required reporting procedures.
Sec. 12344. Automated data processing requirements.
Sec. 12345. Technical assistance.
Sec. 12346. Reports and data collection by the Secretary.

      Chapter 6--Establishment And Modification of Support Orders

Sec. 12351. Simplified process for review and adjustment of child 
              support orders.
Sec. 12352. Furnishing consumer reports for certain purposes relating 
              to child support.
Sec. 12353. Nonliability for financial institutions providing financial 
              records to State child support enforcement agencies in 
              child support cases.

                Chapter 7--Enforcement Of Support Orders

Sec. 12361. Internal Revenue Service collection of arrearages.
Sec. 12362. Authority to collect support from Federal employees.
Sec. 12363. Enforcement of child support obligations of members of the 
              Armed Forces.
Sec. 12364. Voiding of fraudulent transfers.
Sec. 12365. Work requirement for persons owing past-due child support.
Sec. 12366. Definition of support order.
Sec. 12367. Reporting arrearages to credit bureaus.
Sec. 12368. Liens.
Sec. 12369. State law authorizing suspension of licenses.
Sec. 12370. International child support enforcement.
Sec. 12371. Financial institution data matches.
Sec. 12372. Enforcement of orders against paternal or maternal 
              grandparents in cases of minor parents.

                       Chapter 8--Medical Support

Sec. 12376. Correction to ERISA definition of medical child support 
              order.
Sec. 12377. Enforcement of orders for health care coverage.

[[Page H 13561]]


Chapter 9--Enhancing Responsibility and Opportunity for Non-Residential 
                                Parents

Sec. 12381. Grants to States for access and visitation programs.

                    Chapter 10--Effect of Enactment

Sec. 12391. Effective dates.

     Subtitle D--Restricting Welfare and Public Benefits for Aliens

              Chapter 1--Eligibility For Federal Benefits

Sec. 12401. Aliens who are not qualified aliens ineligible for Federal 
              public benefits.
Sec. 12402. Limited eligibility of certain qualified aliens for certain 
              Federal programs.
Sec. 12403. Five-year limited eligibility of qualified aliens for 
              Federal means-tested public benefit.

       Chapter 2--Attribution Of Income and Affidavits of Support

Sec. 12421. Attribution of sponsor's income and resources to alien.
Sec. 12422. Requirements for sponsor's affidavit of support.
Sec. 12423. Cosignature of alien student loans.

                      Chapter 3-General Provisions

Sec. 12431. Definitions.
Sec. 12432. Reapplication for SSI benefits.
Sec. 12433. Statutory construction.

Subtitle E--Teaching Hospital and Graduate Medical Education Trust Fund

                         Chapter 1--Trust Fund

Sec. 13501. Establishment of Fund; payments to teaching hospitals.

               Chapter 2--Amendments to Medicare Program

Sec. 13511. Transfer of funds.

                 Subtitle F--National Defense Stockpile

Sec. 12601. Disposal of certain materials in national defense stockpile 
              for deficit reduction.

 Subtitle G--Child Protection Block Grant Program And Foster Care and 
                          Adoption Assistance

Sec. 12701. Establishment of program.
Sec. 12702. Conforming amendments.
Sec. 12703. Effective date; transition rule.

                         Subtitle H--Child Care

Sec. 12801. Short title and references.
Sec. 12802. Authorization of appropriations.
Sec. 12803. Lead agency.
Sec. 12804. Application and plan.
Sec. 12805. Limitation on State allotments.
Sec. 12806. Activities to improve the quality of child care.
Sec. 12807. Administration and enforcement.
Sec. 12808. Payments.
Sec. 12809. Annual report and audits.
Sec. 12810. Allotments.
Sec. 12811. Definitions.

                  Subtitle I--Child Nutrition Programs

                  Chapter 1--National School Lunch Act

Sec. 12901. Termination of additional payment for lunches served in 
              high free and reduced price participation schools.
Sec. 12902. Direct Federal expenditures.
Sec. 12903. Value of food assistance.
Sec. 12904. Reduced price lunches.
Sec. 12905. Lunches, breakfasts, and supplements.
Sec. 12906. Summer food service program for children.
Sec. 12907. Child care food program.
Sec. 12908. Pilot projects.
Sec. 12909. Information clearinghouse.

                     Chapter 2--Child Nutrition Act

Sec. 12921. Special milk program.
Sec. 12922. Free and reduced price breakfasts.
Sec. 12923. Conforming reimbursement for paid breakfasts and lunches.
Sec. 12924. School breakfast program authorization.
Sec. 12925. Miscellaneous provisions and definitions.
Sec. 12926. Nutrition education and training.

           Subtitle J--Food Stamps and Commodity Distribution

Sec. 13001. Short title.

                     Chapter 1--Food Stamp Program

Sec. 13011. Definition of certification period.
Sec. 13012. Definition of coupon.
Sec. 13013. Treatment of children living at home.
Sec. 13014. Optional additional criteria for separate household 
              determinations.
Sec. 13015. Adjustment of thrifty food plan.
Sec. 13016. Definition of homeless individual.
Sec. 13017. State option for eligibility standards.
Sec. 13018. Earnings of students.
Sec. 13019. Energy assistance.
Sec. 13020. Deductions from income.
Sec. 13021. Vehicle allowance.
Sec. 13022. Vendor payments for transitional housing counted as income.
Sec. 13023. Doubled penalties for violating food stamp program 
              requirements.
Sec. 13024. Disqualification of convicted individuals.
Sec. 13025. Disqualification.
Sec. 13026. Caretaker exemption.
Sec. 13027. Employment and training.
Sec. 13028. Comparable treatment for disqualification.
Sec. 13029. Disqualification for receipt of multiple food stamp 
              benefits.
Sec. 13030. Disqualification of fleeing felons.
Sec. 13031. Cooperation with child support agencies.
Sec. 13032. Disqualification relating to child support arrears.
Sec. 13033. Work requirement.
Sec. 13034. Encourage electronic benefit transfer systems.
Sec. 13035. Value of minimum allotment.
Sec. 13036. Benefits on recertification.
Sec. 13037. Optional combined allotment for expedited households.
Sec. 13038. Failure to comply with other means-tested public assistance 
              programs.
Sec. 13039. Allotments for households residing in centers.
Sec. 13040. Condition precedent for approval of retail food stores and 
              wholesale food concerns.
Sec. 13041. Authority to establish authorization periods.
Sec. 13042. Information for verifying eligibility for authorization.
Sec. 13043. Waiting period for stores that fail to meet authorization 
              criteria.
Sec. 13044. Expedited coupon service.
Sec. 13045. Withdrawing fair hearing requests.
Sec. 13046. Disqualification of retailers who intentionally submit 
              falsified applications.
Sec. 13047. Disqualification of retailers who are disqualified under 
              the WIC program.
Sec. 13048. Collection of overissuances.
Sec. 13049. Authority to suspend stores violating program requirements 
              pending administrative and judicial review.
Sec. 13050. Limitation of Federal match.
Sec. 13051. Work supplementation or support program.
Sec. 13052. Authorization of pilot projects.
Sec. 13053. Employment initiatives program.
Sec. 13054. Reauthorization of Puerto Rico nutrition assistance 
              program.
Sec. 13055. Simplified food stamp program.
Sec. 13056. State food assistance block grant.
Sec. 13057. American Samoa.
Sec. 13058. Assistance for community food projects.

               Chapter 2--Commodity Distribution Programs

Sec. 13071. Emergency food assistance program.

                       Subtitle K--Miscellaneous

Sec. 13101. Food stamp eligibility.
Sec. 13102. Reduction in block grants for social services.

             Subtitle L--Reform of the Earned Income Credit

Sec. 13200. Amendment of 1986 code.
Sec. 13201. Earned income credit denied to individuals not authorized 
              to be employed in the United States.
Sec. 13202. Repeal of earned income credit for individuals without 
              children.
Sec. 13203. Modification of earned income credit amount and phaseout.
Sec. 13204. Rules relating to denial of earned income credit on basis 
              of disqualified income.
Sec. 13205. Modification of adjusted gross income definition for earned 
              income credit.
Sec. 13206. Provisions to improve tax compliance.

                   Subtitle M--Clinical Laboratories

Sec. 13301. Exemption of physician office laboratories.
  Subtitle A--Block Grants for Temporary Assistance for Needy Families

     SEC. 12100. REFERENCES TO THE SOCIAL SECURITY ACT.

       Except as otherwise specifically provided, wherever in this 
     subtitle 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.

     SEC. 12101. BLOCK GRANTS TO STATES.

       Part A of title IV (42 U.S.C. 601 et seq.) is amended to 
     read as follows:

  ``PART A--BLOCK GRANTS TO STATES FOR TEMPORARY ASSISTANCE FOR NEEDY 
                                FAMILIES

     ``SEC. 401. 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, 
     during the 2-year period immediately preceding the fiscal 
     year, has submitted to the Secretary a plan that includes the 
     following:
       ``(1) Outline of family assistance program.--
       ``(A) General provisions.--A written document that outlines 
     how the State intends to do the following:
       ``(i) Conduct a program, designed to serve all political 
     subdivisions in the State, that provides assistance to needy 
     families with (or expecting) children and provides parents 
     with job preparation, work, and support services to enable 
     them to leave the program and become self-sufficient.
       ``(ii) Require a parent or caretaker receiving assistance 
     under the program to engage in work (as defined by the State) 
     once the State determines the parent or caretaker is ready to 
     engage in work, or once the parent or caretaker has received 
     assistance under the program for 24 months (whether or not 
     consecutive), whichever is earlier.
       ``(iii) Ensure that parents and caretakers receiving 
     assistance under the program engage in work activities in 
     accordance with section 406.
       ``(iv) Take such reasonable steps as the State deems 
     necessary to restrict the use and disclosure of information 
     about individuals and families receiving assistance under the 
     program.
       ``(v) Establish goals and take action to prevent and reduce 
     the incidence of out-of-wedlock pregnancies, with special 
     emphasis on teenage pregnancies, and establish numerical 
     goals for reducing the illegitimacy ratio of the State (as 
     defined in section 402(a)(2)(B)) for calendar years 1996 
     through 2005.
       ``(B) Special provisions.--
       ``(i) The document shall indicate whether the State intends 
     to treat families moving into the State from another State 
     differently than other families under the program, and if so, 
     how the 

[[Page H 13562]]
     State intends to treat such families under the program.
       ``(ii) The document shall indicate whether the State 
     intends to provide assistance under the program to 
     individuals who are not citizens of the United States, and if 
     so, shall include an overview of such assistance.
       ``(2) 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.
       ``(3) 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.
       ``(4) Certification of the administration of the program.--
     A certification by the chief executive officer of the State 
     specifying which State agency or agencies will administer and 
     supervise the program referred to in paragraph (1) for the 
     fiscal year, which shall include assurances that local 
     governments and private sector organizations--
       ``(A) 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; and
       ``(B) have had at least 60 days to submit comments on the 
     plan and the design of such services.
       ``(5) Certification that the state will provide indians 
     with equitable access to assistance.--A certification by the 
     chief executive officer of the State that, during the fiscal 
     year, the State will provide each Indian who is a member of 
     an Indian tribe in the State that does not have a tribal 
     family assistance plan approved under section 411 with 
     equitable access to assistance under the State program funded 
     under this part.
       ``(b) Special Rule for Fiscal Year 1996.--Notwithstanding 
     subsection (a), the term `eligible State' means, with respect 
     to fiscal year 1996, a State that has submitted to the 
     Secretary a plan described in subsection (a) within 3 months 
     after the date of the enactment of this part.
       ``(c) Public Availability of State Plan Summary.--The State 
     shall make available to the public a summary of any plan 
     submitted by the State under this section.

     ``SEC. 402. PAYMENTS TO STATES.

       ``(a) Grants.--
       ``(1) Family assistance grant.--
       ``(A) In general.--Each eligible State shall be entitled to 
     receive from the Secretary, for each of fiscal years 1996, 
     1997, 1998, 1999, and 2000, a grant in an amount equal to the 
     State family assistance grant. The payment of these grants to 
     States shall not be deemed to entitle any individual or 
     family to any assistance under any State program funded under 
     this part.
       ``(B) State family assistance grant defined.--As used in 
     this part, the term `State family assistance grant' means the 
     greatest of--
       ``(i) \1/3\ of the total amount required to be paid to the 
     State under section 403 of this title (as in effect on 
     September 30, 1995) for fiscal years 1992, 1993, and 1994 
     (other than with respect to amounts expended by the State for 
     child care under subsection (g) or (i) of section 402 (as so 
     in effect));
       ``(ii) the total amount required to be paid to the State 
     under such section 403 for fiscal year 1994 (other than with 
     respect to amounts expended by the State for child care under 
     subsection (g) or (i) of section 402 (as so in effect)); or
       ``(iii) \4/3\ of the total amount required to be paid to 
     the State under such section 403 for the 1st 3 quarters of 
     fiscal year 1995 (other than with respect to amounts expended 
     by the State under the State plan approved under part F (as 
     so in effect) or for child care under subsection (g) or (i) 
     of section 402 (as so in effect)), plus the total amount 
     required to be paid to the State for fiscal year 1995 under 
     section 403(l) (as so in effect).
       ``(2) Grant to reward states that reduce out-of-wedlock 
     births.--
       ``(A) In general.--In addition to any grant under paragraph 
     (1), each eligible State shall be entitled to receive from 
     the Secretary for fiscal year 1998 or any succeeding fiscal 
     year, a grant in an amount equal to the State family 
     assistance grant multiplied by--
       ``(i) 5 percent if--

       ``(I) the illegitimacy ratio of the State for the fiscal 
     year is at least 1 percentage point lower than the 
     illegitimacy ratio of the State for fiscal year 1995; and
       ``(II) the rate of induced pregnancy terminations in the 
     State for the fiscal year is less than the rate of induced 
     pregnancy terminations in the State for fiscal year 1995; or

       ``(ii) 10 percent--

       ``(I) if the illegitimacy ratio of the State for the fiscal 
     year is at least 2 percentage points lower than the 
     illegitimacy ratio of the State for fiscal year 1995; and
       ``(II) the rate of induced pregnancy terminations in the 
     State for the fiscal year is less than the rate of induced 
     pregnancy terminations in the State for fiscal year 1995.

       ``(B) Illegitimacy ratio.--As used in this paragraph, the 
     term `illegitimacy ratio' means, with respect to a State and 
     a fiscal year--
       ``(i) the number of out-of-wedlock births that occurred in 
     the State during the most recent fiscal year for which such 
     information is available; divided by
       ``(ii) the number of births that occurred in the State 
     during the most recent fiscal year for which such information 
     is available.
       ``(C) Disregard of changes in data due to changed reporting 
     methods.--For purposes of subparagraph (A), the Secretary 
     shall disregard--
       ``(i) any difference between the illegitimacy ratio of a 
     State for a fiscal year and the illegitimacy ratio of the 
     State for fiscal year 1995 which is attributable to a change 
     in State methods of reporting data used to calculate the 
     illegitimacy ratio; and
       ``(ii) any difference between the rate of induced pregnancy 
     terminations in a State for a fiscal year and such rate for 
     fiscal year 1995 which is attributable to a change in State 
     methods of reporting data used to calculate such rate.
       ``(3) Supplemental grant for population increases in 
     certain states.--
       ``(A) In general.--In addition to any grant under paragraph 
     (1), each qualifying State shall, subject to subparagraph 
     (E), be entitled to receive from the Secretary for each of 
     fiscal years 1997, 1998, 1999, and 2000, a grant in an amount 
     equal to the sum of--
       ``(i) the amount (if any) required to be paid to the State 
     under this paragraph for the immediately preceding fiscal 
     year; and
       ``(ii) 2.5 percent of the sum of--

       ``(I) the total amount required to be paid to the State 
     under part A (as in effect during fiscal year 1994) for 
     fiscal year 1994; and
       ``(II) the amount (if any) required to be paid to the State 
     under this paragraph for the fiscal year preceding the fiscal 
     year specified in the matter preceding clause (i).

       ``(B) Qualifying state.--
       ``(i) In general.--For purposes of this paragraph, a State 
     is a qualifying State for a fiscal year if--

       ``(I) the level of welfare spending per poor person by the 
     State for the immediately preceding fiscal year is less than 
     the national average level of State welfare spending per poor 
     person for such preceding fiscal year; and
       ``(II) the population growth rate of the State (as 
     determined by the Bureau of the Census for the most recent 
     fiscal year for which information is available exceeds the 
     average population growth rate for all States (as so 
     determined) for such most recent fiscal year.

       ``(ii) State must qualify in fiscal year 1997.--
     Notwithstanding clause (i), a State shall not be a qualifying 
     State for any fiscal year after 1997 by reason of clause (i) 
     if the State is not a qualifying State for fiscal year 1997 
     by reason of clause (i).
       ``(iii) Certain states deemed qualifying states.--For 
     purposes of this paragraph, a State is deemed to be a 
     qualifying State for fiscal years 1997, 1998, 1999, and 2000 
     if--

       ``(I) the level of welfare spending per poor person by the 
     State for fiscal year 1996 is less than 35 percent of the 
     national average level of State welfare spending per poor 
     person for fiscal year 1996; or
       ``(II) the population of the State increased by more than 
     10 percent from April 1, 1990 to July 1, 1994, as determined 
     by the Bureau of the Census.

       ``(C) Definitions.--As used in this paragraph:
       ``(i) Level of welfare spending per poor person.--The term 
     `level of State welfare spending per poor person' means, with 
     respect to a State and a fiscal year--

       ``(I) the sum of--

       ``(aa) the total amount required to be paid to the State 
     under part A (as in effect during fiscal year 1994) for 
     fiscal year 1994; and
       ``(bb) the amount (if any) paid to the State under this 
     paragraph for the immediately preceding fiscal year; divided 
     by

       ``(II) the number of individuals, according to the 1990 
     decennial census, who were residents of the State and whose 
     income was below the poverty line.

       ``(ii) National average level of state welfare spending per 
     poor person.--The term `national average level of State 
     welfare spending per poor person' means, with respect to a 
     fiscal year, an amount equal to--

       ``(I) the total amount required to be paid to the States 
     under part A (as in effect during fiscal year 1994) for 
     fiscal year 1994; divided by
       ``(II) the number of individuals, according to the 1990 
     decennial census, who were residents of any State and whose 
     income was below the poverty line.

       ``(iii) State.--The term `State' means each of the 50 
     States of the United States and the District of Columbia.
       ``(D) Appropriation.--Out of any money in the Treasury of 
     the United States not otherwise appropriated, there are 
     appropriated 1996, 1997, 1998, 1999, and 2000 such sums as 
     are necessary for grants under this paragraph, in a total 
     amount not to exceed $800,000,000.
       ``(E) Grants reduced pro rata if insufficient 
     appropriations.--If the amount appropriated pursuant to this 
     paragraph for a fiscal year is less than the total amount of 
     payments otherwise required to be made under this paragraph 
     for the fiscal year, then the amount otherwise payable to 
     each qualifying State for the fiscal year under this 
     paragraph shall be reduced by a percentage equal to the 
     amount so appropriated divided by such total amount.
       ``(b) 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' (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 
     appropriated for fiscal years 1996, 1997, 1998, 1999, and 
     2000 such sums as are necessary for payment to the Fund in a 
     total amount not to exceed $800,000,000.
       ``(3) Computation of grant.--
       ``(A) In general.--Subject to subparagraph (B), the 
     Secretary of the Treasury shall pay to each eligible State 
     for a fiscal year an amount equal to the Federal medical 
     assistance percentage for the State for the fiscal year (as 
     defined 

[[Page H 13563]]
     in section 1905(b), as in effect on the date of the enactment of this 
     part) of so much of the expenditures by the State in the 
     fiscal year under the State program funded under this part as 
     exceed the historic State expenditures (as defined in section 
     408(a)(7)(B)(iii)) for the 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 State family assistance 
     grant for the fiscal year.
       ``(C) Method of reconciliation.--If, at the end of any 
     fiscal year, the Secretary finds that a State to which 
     amounts from the Fund were paid in the fiscal year did not 
     meet the maintenance of effort requirement under paragraph 
     (4)(B) for the fiscal year, the Secretary shall reduce the 
     grant payable to the State under subsection (a)(1) for the 
     immediately succeeding fiscal year by such amounts.
       ``(4) Eligible state.--
       ``(A) In general.--For purposes of this subsection, a State 
     is an eligible State for 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 by the State during the fiscal 
     year of an amount at least equal to 100 percent of the level 
     of historic State expenditures for the State (as determined 
     under section 408(e)).
       ``(5) State.--As used in this subsection, the term `State' 
     means each of the 50 States of the United States and the 
     District of Columbia.
       ``(c) Condition of Grant.--
       ``(1) In general.--Notwithstanding any other provision of 
     this section, as a condition of receiving a grant under this 
     section, a State shall not provide cash assistance to a 
     family that includes an adult who has received assistance 
     under any State program funded under this part for 60 months 
     (whether or not consecutive) after September 30, 1995, except 
     as provided in paragraphs (2) and (3).
       ``(2) Minor child exception.--In determining the number of 
     months for which an individual who is a parent or pregnant, 
     as the case may be, has received assistance under the State 
     program funded under this part, there shall be disregarded 
     any month for which such assistance was provided with respect 
     to the individual and throughout which the individual was--
       ``(A) a minor child; and
       ``(B) not the head of a household or married to the head of 
     a household.
       ``(3) Hardship exception.--
       ``(A) In general.--The State may exempt a family from the 
     application of paragraph (1) by reason of hardship or if the 
     family includes an individual who has been battered or 
     subjected to extreme cruelty.
       ``(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 15 percent of 
     the average monthly number of families to which the State is 
     providing assistance under the program funded under this 
     part.
       ``(C) Battered or subject to extreme cruelty defined.--For 
     purposes of subparagraph (A), an individual has been battered 
     or subjected to extreme cruelty if the individual has been 
     subjected to--
       ``(i) physical acts that resulted in, or threatened to 
     result in, physical injury to the individual;
       ``(ii) sexual abuse;
       ``(iii) sexual activity involving a dependent child;
       ``(iv) being forced as the caretaker relative of a 
     dependent child to engage in nonconsensual sexual acts or 
     activities;
       ``(v) threats of, or attempts at, physical or sexual abuse;
       ``(vi) mental abuse; or
       ``(vii) neglect or deprivation of medical care.
       ``(4) Rule of interpretation.--Paragraph (1) shall not be 
     interpreted to require any State to provide assistance to any 
     individual for any period of time under the State program 
     funded under this part.

     ``SEC. 403. USE OF GRANTS.

       ``(a) General Rules.--Subject to this part, a State to 
     which a grant is made under section 402 may use the grant--
       ``(1) in any manner that is reasonably calculated to 
     increase the flexibility of States in operating a program 
     designed to--
       ``(A) provide assistance to needy families so that children 
     may be cared for in their own homes or in the homes of 
     relatives;
       ``(B) end the dependence of needy parents on government 
     benefits by promoting job preparation, work, and marriage;
       ``(C) prevent and reduce the incidence of out-of-wedlock 
     pregnancies and establish annual numerical goals for 
     preventing and reducing the incidence of these pregnancies; 
     and
       ``(D) encourage the formation and maintenance of two-parent 
     families; and
       ``(2) in any manner that the State was authorized to use 
     amounts received under part A or F of this title, as such 
     parts were in effect on September 30, 1995.
       ``(b) Limitation on Use of Grant for Administrative 
     Purposes.--
       ``(1) Limitation.--A State to which a grant is made under 
     section 402 shall not expend more than 15 percent of the 
     grant for administrative purposes.
       ``(2) Exception.--Paragraph (1) shall not apply to the use 
     of a grant for information technology and computerization 
     needed for tracking or monitoring required by or under this 
     part.
       ``(c) Authority to Use Portion of Grant for Other 
     Purposes.--
       ``(1) In general.--A State may use not more than 30 percent 
     of the amount of the grant made to the State under section 
     402 for a fiscal year to carry out a State program pursuant 
     to any or all of the following provisions of law:
       ``(A) Part B of this title.
       ``(B) Title XX of this Act.
       ``(C) The Child Care and Development Block Grant Act of 
     1990.
       ``(2) Applicable rules.--Any amount paid to the State under 
     this part that is used to carry out a State program pursuant 
     to a provision of law specified in paragraph (1) shall not be 
     subject to the requirements of this part, but shall be 
     subject to the requirements that apply to Federal funds 
     provided directly under the provision of law to carry out the 
     program.
       ``(d) 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 funded under this part.
       ``(e) Authority to Operate Employment Placement Program.--A 
     State to which a grant is made under section 402 may use 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.
       ``(f) Implementation of Electronic Benefit Transfer 
     System.--A State to which a grant is made under section 402 
     is encouraged to implement an electronic benefit transfer 
     system for providing assistance under the State program 
     funded under this part, and may use the grant for such 
     purpose.

     ``SEC. 404. ADMINISTRATIVE PROVISIONS.

       ``(a) Quarterly.--The Secretary shall pay each grant 
     payable to a State under section 402 in quarterly 
     installments.
       ``(b) Notification.--Not later than 3 months before the 
     payment of any such quarterly installment to a State, the 
     Secretary shall notify the State of the amount of any 
     reduction determined under section 411(a)(1)(B) with respect 
     to the State.
       ``(c) Computation and Certification of Payments to 
     States.--
       ``(1) Computation.--The Secretary shall estimate the amount 
     to be paid to each eligible State for each quarter under this 
     part, such estimate to be based on a report filed by the 
     State containing an estimate by the State of the total sum to 
     be expended by the State in the quarter under the State 
     program funded under this part and such other information as 
     the Secretary may find necessary.
       ``(2) Certification.--The Secretary of Health and Human 
     Services shall certify to the Secretary of the Treasury the 
     amount estimated by the Secretary under paragraph (1) with 
     respect to a State.
       ``(d) Payment Method.--Upon receipt of a certification 
     under subsection (c)(2) with respect to a State, the 
     Secretary of the Treasury shall, through the Fiscal Service 
     of the Department of the Treasury and before audit or 
     settlement by the General Accounting Office, pay to the 
     State, at the time or times fixed by the Secretary of Health 
     and Human Services, the amount so certified.

     ``SEC. 405. FEDERAL LOANS FOR STATE WELFARE PROGRAMS.

       ``(a) Loan Authority.--
       ``(1) In general.--The Secretary shall make loans to any 
     loan-eligible State, for a period to maturity of not more 
     than 3 years.
       ``(2) Loan-eligible state.--As used in paragraph (1), the 
     term `loan-eligible State' means a State against which a 
     penalty has not been imposed under section 408(a)(1) at any 
     time before the loan is to be made.
       ``(b) Rate of Interest.--The Secretary shall charge and 
     collect interest on any loan made under this section 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) Use of Loan.--A State shall use a loan made to the 
     State under this section only for any purpose for which grant 
     amounts received by the State under section 402(a) may be 
     used including--
       ``(1) welfare anti-fraud activities; and
       ``(2) 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 411.
       ``(d) Limitation on Total Amount of Loans to a State.--The 
     cumulative dollar amount of all loans made to a State under 
     this section during fiscal years 1996 through 2000 shall not 
     exceed 10 percent of the State family assistance grant.
       ``(e) Limitation on Total Amount of Outstanding Loans.--The 
     total dollar amount of loans outstanding under this section 
     may not exceed $1,700,000,000.
       ``(f) Appropriation.--Out of any money in the Treasury of 
     the United States not otherwise appropriated, there are 
     appropriated such sums as may be necessary for the cost of 
     loans under this section.

     ``SEC. 406. MANDATORY WORK REQUIREMENTS.

       ``(a) Participation Rate Requirements.--
       ``(1) All families.--A State to which a grant is made under 
     section 402 for a fiscal year shall 

[[Page H 13564]]
     achieve the minimum participation rate specified in the following table 
     for the fiscal year with respect to all families receiving 
     assistance under the State program funded under this part:

                                                            The minimum
                                                          participation
      ``If the fiscal year is:                                 rate is:
        1996......................................................15   
        1997......................................................20   
        1998......................................................25   
        1999......................................................30   
        2000......................................................35   
        2001......................................................40   
        2002 or thereafter........................................50.  
       ``(2) 2-parent families.--A State to which a grant is made 
     under section 402 for a fiscal year shall achieve the minimum 
     participation rate specified in the following table for the 
     fiscal year with respect to 2-parent families receiving 
     assistance under the State program funded under this part:

                                                            The minimum
                                                          participation
      ``If the fiscal year is:                                 rate is:
        1996......................................................50   
        1997......................................................75   
        1998......................................................75   
        1999 or thereafter........................................90.  
       ``(b) Calculation of Participation Rates.--
       ``(1) 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 number of families receiving assistance under the 
     State program funded under this part that include an adult 
     who is engaged in work for the month; divided by
       ``(ii) the amount by which--

       ``(I) the number of families receiving such assistance 
     during the month that include an adult receiving such 
     assistance; exceeds
       ``(II) the number of families receiving such assistance 
     that are subject in such month to a reduction or termination 
     of assistance pursuant to section 408(a)(2) but have not been 
     subject to such penalty for more than 3 months within the 
     preceding 12-month period (whether or not consecutive).

       ``(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 
     shall be calculated by use of the formula set forth in 
     paragraph (1)(B), except that in the formula the term `number 
     of 2-parent families' shall be substituted for the term 
     `number of families' each place such latter term appears.
       ``(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 
     on September 30, 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 Personal 
     Responsibility and Work Opportunity Act of 1995. Such 
     regulations shall place the burden on the Secretary to prove 
     that such families were diverted as a direct result of 
     differences in such eligibility criteria.
       ``(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 411.
       ``(c) Engaged in Work.--
       ``(1) All families.--For purposes of subsection 
     (b)(1)(B)(i), a recipient is engaged in work for a month in a 
     fiscal year if the recipient is participating in such 
     activities 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 
     an activity described in paragraph (1), (2), (3), (4), (5), 
     (7), or (8) of subsection (d) (or, in the case of the first 4 
     weeks for which the recipient is required under this section 
     to participate in work activities, an activity described in 
     subsection (d)(6)):

                                                            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)(B)(i), an adult is engaged in work for a month in a 
     fiscal year if the adult is making progress in such 
     activities for at least 35 hours per week during the month, 
     not fewer than 30 hours per week of which are attributable to 
     an activity described in paragraph (1), (2), (3), (4), (5), 
     (7), or (8) of subsection (d) (or, in the case of the first 4 
     weeks for which the recipient is required under this section 
     to participate in work activities, an activity described in 
     subsection (d)(6)).
       ``(3) Limitation on vocational education activities counted 
     as work.--For purposes of determining monthly participation 
     rates under paragraphs (1)(B)(i) and (2)(B)(i) of subsection 
     (b), not more than 20 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) Work Activities Defined.--As used in this section, 
     the term `work activities' means--
       ``(1) unsubsidized employment;
       ``(2) subsidized private sector employment;
       ``(3) subsidized public sector employment;
       ``(4) work experience (including work associated with the 
     refurbishing of publicly assisted housing) if sufficient 
     private sector employment is not available;
       ``(5) on-the-job training;
       ``(6) job search and job readiness assistance;
       ``(7) community service programs;
       ``(8) vocational educational training (not to exceed 12 
     months with respect to any individual);
       ``(9) job skills training directly related to employment;
       ``(10) education directly related to employment, in the 
     case of a recipient who has not attained 20 years of age, and 
     has not received a high school diploma or a certificate of 
     high school equivalency; and
       ``(11) satisfactory attendance at secondary school, in the 
     case of a recipient who--
       ``(A) has not completed secondary school; and
       ``(B) is a dependent child, or a head of household who has 
     not attained 20 years of age.

     ``SEC. 407. PROHIBITIONS.

       ``(a) In General.--
       ``(1) No assistance for families without a minor child.--A 
     State to which a grant is made under section 402 may not use 
     any part of the grant to provide assistance to a family, 
     unless the family includes--
       ``(A) a minor child who resides with a custodial parent or 
     other adult caretaker relative of the child; or
       ``(B) a pregnant individual.
       ``(2) Reduced assistance for family if adult refuses to 
     work.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     a State to which a grant is made under section 402 may not 
     fail to--
       ``(i) reduce the amount of assistance otherwise payable to 
     a family receiving assistance under the State program funded 
     under this part, pro rata (or more, at the option of the 
     State) with respect to any period during a month in which an 
     adult member of the family refuses to engage in work required 
     in accordance with this section; or
       ``(ii) terminate such assistance,
     subject to such good cause and other exceptions as the State 
     may establish.
       ``(B) Exception.--Notwithstanding subparagraph (A), a State 
     may not reduce or terminate assistance under the State 
     program funded under this part based on a refusal of an adult 
     to work if the adult is a single custodial parent caring for 
     a child who has not attained 6 years of age, and the adult 
     proves that the adult has a demonstrated inability (as 
     determined by the State) to obtain needed child care, for 1 
     or more of the following reasons:
       ``(i) Unavailability of appropriate child care within a 
     reasonable distance from the individual's home or work site.
       ``(ii) Unavailability or unsuitability of informal child 
     care by a relative or under other arrangements.
       ``(iii) Unavailability of appropriate and affordable formal 
     child care arrangements.
       ``(3) Reduction or elimination of assistance for 
     noncooperation in child support.--If the agency responsible 
     for administering the State plan approved under part D 
     determines that an individual is not cooperating with the 
     State in establishing, modifying, or enforcing a support 
     order with respect to a child of the individual, then the 
     State--
       ``(A) shall deduct from the assistance that would otherwise 
     be provided to the family of the individual under the State 
     program funded under this part the share of such assistance 
     attributable to the individual; and
       ``(B) may deny the family any assistance under the State 
     program.
       ``(4) No assistance for families not assigning certain 
     support rights to the state.--
       ``(A) In general.--A State to which a grant is made under 
     section 402 may not fail to require, as a condition of 
     providing assistance to a family under the State program 
     funded under this part, that a member of the family assign to 
     the State any rights the family member may have (on behalf of 
     the family member or of any other person for whom the family 
     member has applied for or is receiving such assistance) to 
     support from any other person, not exceeding the total 

[[Page H 13565]]
     amount of assistance so provided to the family, which accrue (or have 
     accrued) before the date the family leaves the program, which 
     assignment, on and after the date the the family leaves the 
     program, shall not apply with respect to--
       ``(i) if the assignment occurs on or after October 1, 1997, 
     and before October 1, 2000, any support (other than support 
     collected pursuant to section 464) which accrued before the 
     family received such assistance and which the State has not 
     collected by September 30, 2000; or
       ``(II) if the assignment occurs on or after October 1, 
     2000, any support (other than support collected pursuant to 
     section 464) which accrued before the family received such 
     assistance and which the State has not collected by the date 
     the family leaves the program.
       ``(B) Limitation.--A State to which a grant is made under 
     section 402 may not require, as a condition of providing 
     assistance to any family under the State program funded under 
     this part, that a member of the family assign to the State 
     any rights to support described in subparagraph (A) which 
     accrue after the date the family leaves the program.
       ``(5) No assistance for teenage parents who do not attend 
     high school or other equivalent training program.--A State to 
     which a grant is made under section 402 may not use any part 
     of the grant to provide assistance to an individual who has 
     not attained 18 years of age, is not married, has a minor 
     child at least 12 weeks of age in his or her care, and has 
     not successfully completed a high-school education (or its 
     equivalent), if the individual does not participate in--
       ``(A) educational activities directed toward the attainment 
     of a high school diploma or its equivalent; or
       ``(B) an alternative educational or training program that 
     has been approved by the State.
       ``(6) No assistance for teenage parents not living in 
     adult-supervised settings.--
       ``(A) In general.--
       ``(i) Requirement.--Except as provided in subparagraph (B), 
     a State to which a grant is made under section 402 may not 
     use any part of the grant to provide assistance to an 
     individual described in clause (ii) of this subparagraph if 
     the individual and the minor child referred to in clause 
     (ii)(II) do not reside in a place of residence maintained by 
     a parent, legal guardian, or other adult relative of the 
     individual as such parent's, guardian's, or adult relative's 
     own home.
       ``(ii) Individual described.-- For purposes of clause (i), 
     an individual described in this clause is an individual who--

       ``(I) has not attained 18 years of age; and
       ``(II) is not married, and has a minor child in his or her 
     care.

       ``(B) Exception.--
       ``(i) Provision of, or assistance in locating, adult-
     supervised living arrangement.--In the case of an individual 
     who is described in clause (ii), the State agency referred to 
     in section 401(a)(4) shall provide, or assist the 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 the 
     individual, unless the State agency determines that the 
     individual's current living arrangement is appropriate, and 
     thereafter shall require that the individual and the minor 
     child referred to in subparagraph (A)(ii)(II) reside in such 
     living arrangement as a condition of the continued receipt of 
     assistance under the State program funded under this part (or 
     in an alternative appropriate arrangement, should 
     circumstances change and the current arrangement cease to be 
     appropriate).
       ``(ii) Individual described.--For purposes of clause (i), 
     an individual is described in this clause if the individual 
     is described in subparagraph (A)(ii), and--

       ``(I) the individual has no parent, legal guardian or other 
     appropriate adult relative described in subclause (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 the 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--

       ``(aa) the individual or the minor child referred to in 
     subparagraph (A)(ii)(II) is being or has been subjected to 
     serious physical or emotional harm, sexual abuse, or 
     exploitation in the residence of the individual's own parent 
     or legal guardian; or
       ``(bb) substantial evidence exists of an act or failure to 
     act that presents an imminent or serious harm if the 
     individual and the minor child lived in the same residence 
     with the 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 subparagraph (A) with respect to the individual or the 
     minor child.

       ``(iii) Second-chance home.--For purposes of this 
     subparagraph, the term `second-chance home' means an entity 
     that provides individuals described in clause (ii) 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.
       ``(7) No medical services.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     a State to which a grant is made under section 402 may not 
     use any part of the grant to provide medical services.
       ``(B) Exception for family planning services.--As used in 
     subparagraph (A), the term `medical services' does not 
     include family planning services.
       ``(8) 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.--a State to which a 
     grant is made under section 402 may not use any part of the 
     grant to provide cash assistance to an individual 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 XIX, or the 
     Food Stamp Act of 1977, or benefits in 2 or more States under 
     the supplemental security income program under title XVI.
       ``(9) Denial of assistance for fugitive felons and 
     probation and parole violators.--
       ``(A) In general.--A State to which a grant is made under 
     section 402 may not use any part of the grant to provide 
     assistance to any individual who is--
       ``(i) fleeing to avoid prosecution, or custody or 
     confinement after conviction, under the laws of the place 
     from which the individual flees, for a crime, or an attempt 
     to commit a crime, which is a felony under the laws of the 
     place from which the individual flees, or which, in the case 
     of the State of New Jersey, is a high misdemeanor under the 
     laws of such State; or
       ``(ii) violating a condition of probation or parole imposed 
     under Federal or State law.
       ``(B) Exchange of information with law enforcement 
     agencies.--If a State to which a grant is made under section 
     402 establishes safeguards against the use or disclosure of 
     information about applicants or recipients of assistance 
     under the State program funded under this part, the 
     safeguards shall not prevent the State agency administering 
     the program from furnishing a Federal, State, or local law 
     enforcement officer, upon the request of the officer, with 
     the current address of any recipient if the officer furnishes 
     the agency with the name of the recipient and notifies the 
     agency that--
       ``(i) such recipient--

       ``(I) is fleeing to avoid prosecution, or custody or 
     confinement after conviction, under the laws of the place 
     from which the recipient flees, for a crime, or an attempt to 
     commit a crime, which is a felony under the laws of the place 
     from which the recipient 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 official duties of the officer; and

       ``(ii) the location or apprehension of the recipient is 
     within such official duties.
       ``(10) Denial of assistance for minor children who are 
     absent from the home for a significant period.--
       ``(A) In general.--A State to which a grant is made under 
     section 402 may not use any part of the grant to provide 
     assistance for a minor child who has been, or is expected by 
     a parent (or other caretaker relative) of the child 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 submitted pursuant to section 
     401.
       ``(B) State authority to establish good cause exceptions.--
     The State may establish such good cause exceptions to 
     subparagraph (A) as the State considers appropriate if such 
     exceptions are provided for in the State plan submitted 
     pursuant to section 401.
       ``(C) Denial of assistance for relative who fails to notify 
     state agency of absence of child.--A State to which a grant 
     is made under section 402 may not use any part of the grant 
     to provide assistance for an individual who is a parent (or 
     other caretaker relative) of a minor child and who fails to 
     notify the agency administering the State program funded 
     under this part, of the absence of the minor child from the 
     home for the period specified in or provided for under 
     subparagraph (A), by the end of the 5-day period that begins 
     with the date that it becomes clear to the parent (or 
     relative) that the minor child will be absent for such period 
     so specified or provided for.
       ``(11) Income security payments not to be disregarded in 
     determining the amount of assistance to be provided to a 
     family.--If a State to which a grant is made under section 
     402 uses any part of the grant to provide assistance for any 
     individual who is receiving a payment under a State plan for 
     old-age assistance approved under section 2, a State program 
     funded under part B that provides cash payments for foster 
     care, or the supplemental security income program under title 
     XVI, then the State may not disregard the payment in 
     determining the amount of assistance to be provided to the 
     family of which the individual is a member under the State 
     program funded under this part.

     ``SEC. 408. PENALTIES.

       ``(a) In General.--Subject to subsections (b), (c), and 
     (d):
       ``(1) For use of grant in violation of this part.--
       ``(A) General penalty.--If an audit conducted under chapter 
     75 of title 31, United States Code, finds that an amount paid 
     to a State under section 402 for a fiscal year has been used 
     in violation of this part, the Secretary shall reduce the 
     grant payable to the State under section 402(a)(1) for the 
     immediately succeeding fiscal year quarter by the amount so 
     used.
       ``(B) Enhanced penalty for intentional violations.--If the 
     State does not prove to the satisfaction of the Secretary 
     that the State did not intend to use the amount in violation 
     of this part, the Secretary shall further reduce the 

[[Page H 13566]]
     grant payable to the State under section 402(a)(1) for the immediately 
     succeeding fiscal year quarter by an amount equal to 5 
     percent of the State family assistance grant.
       ``(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 410 for the fiscal 
     year, the Secretary shall reduce the grant payable to the 
     State under section 402(a)(1) for the immediately succeeding 
     fiscal year by an amount equal to 4 percent of the State 
     family assistance grant.
       ``(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 
     to which a grant is made under section 402 for a fiscal year 
     has failed to comply with section 406(a) for the fiscal year, 
     the Secretary shall reduce the grant payable to the State 
     under section 402(a)(1) for the immediately succeeding fiscal 
     year by an amount equal to not more than 5 percent of the 
     State family assistance grant.
       ``(B) Penalty based on severity of failure.--The Secretary 
     shall impose reductions under subparagraph (A) based on 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 the grant payable to the State under 
     section 402(a)(1) for the immediately succeeding fiscal year 
     by an amount equal to not more than 2 percent of the State 
     family assistance grant.
       ``(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 the grant payable to the 
     State under section 402(a)(1) for the immediately succeeding 
     fiscal year (without regard to this section) by not more than 
     5 percent.
       ``(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 405 within the period of maturity applicable to 
     the loan, plus any interest owed on the loan, the Secretary 
     shall reduce the grant payable to the State under section 
     402(a)(1) for the immediately succeeding fiscal year quarter 
     (without regard to this section) by the outstanding loan 
     amount, plus the interest owed on the outstanding amount. The 
     Secretary may not forgive any outstanding loan amount or 
     interest owed on the outstanding amount.
       ``(7) Maintenance of effort.--
       ``(A) In general.--The Secretary shall reduce the grant 
     payable to the State under section 402(a)(1) for fiscal year 
     1996, 1997, 1998, 1999, or 2000 by the amount (if any) by 
     which State expenditures under the State program funded under 
     this part for the then immediately preceding fiscal year is 
     less than the applicable percentage of historic State 
     expenditures.
       ``(B) Definitions.--As used in this paragraph:
       ``(i) State expenditures under the state program funded 
     under this part.--

       ``(I) In general.--The term `State expenditures under the 
     State program funded under this part' means, with respect to 
     a State and a fiscal year, the sum of the expenditures by the 
     State under the program for the fiscal year for--

       ``(aa) cash assistance;
       ``(bb) child care assistance;
       ``(cc) education, job training, and work;
       ``(dd) administrative costs; and
       ``(ee) any other use of funds allowable under section 
     403(a)(1).

       ``(II) Exclusion of transfers from other state and local 
     programs.--Such term does not include funding supplanted by 
     transfers from other State and local programs.

       ``(ii) Applicable percentage.--The term `applicable 
     percentage' means--

       ``(I) for fiscal year 1996, 75 percent; and
       ``(II) for fiscal years 1997, 1998, 1999, and 2000, 75 
     percent reduced (if appropriate) in accordance with 
     subparagraph (C)(iii).

       ``(iii) Historic state expenditures.--The term `historic 
     State expenditures' means, with respect to a State, the 
     lesser of--

       ``(I) the expenditures by the State under parts A and F of 
     this title (as in effect during fiscal year 1994) for fiscal 
     year 1994; or
       ``(II) the amount which bears the same ratio to the amount 
     described in subclause (I) as--

       ``(aa) the State family assistance grant for the 
     immediately preceding fiscal year; bears to
       ``(bb) the total amount of Federal payments to the State 
     under section 403 (as in effect during fiscal year 1994) for 
     fiscal year 1994.
       ``(iv) Expenditures by the state.--The term `expenditures 
     by the State' does not include any expenditures from amounts 
     made available by the Federal Government, State funds 
     expended for the medicaid program under title XIX or the 
     MediGrant program under title XXI, or 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 title I.
       ``(C) Applicable percentage reduced for states with best or 
     most improved performance in certain areas.--
       ``(i) Scoring of state performance.--Beginning with fiscal 
     year 1997, the Secretary shall assign to each State a score 
     that represents the performance of the State for the fiscal 
     year in each category described in clause (ii).
       ``(ii) Categories.--The categories described in this clause 
     are the following:

       ``(I) Increasing the number of families that received 
     assistance under a State program funded under this part in 
     the fiscal year, and that, during the fiscal year, become 
     ineligible for such assistance as a result of unsubsidized 
     employment.
       ``(II) Reducing the percentage of families that, within 18 
     months after becoming ineligible for assistance under the 
     State program funded under this part, become eligible for 
     such assistance.
       ``(III) Increasing the amount earned by families that 
     receive assistance under this part.
       ``(IV) Reducing the percentage of families in the State 
     that receive assistance under the State program funded under 
     this part.

       ``(iii) Reduction of maintenance of effort threshold.--

       ``(I) Reduction for states with 5 greatest scores in each 
     category of performance.--The applicable percentage for a 
     State for a fiscal year shall be reduced by 2 percentage 
     points, with respect to each category described in clause 
     (ii) for which the score assigned to the State under clause 
     (i) for the fiscal year is 1 of the 5 highest scores so 
     assigned to States.
       ``(II) Reduction for states with 5 greatest improvement in 
     scores in each category of performance.--The applicable 
     percentage for a State for a fiscal year shall be reduced by 
     2 percentage points for a State for a fiscal year, with 
     respect to each category described in clause (ii) for which 
     the difference between the score assigned to the State under 
     clause (i) for the fiscal year and the score so assigned to 
     the State for the immediately preceding fiscal year is 1 of 
     the 5 greatest such differences.
       ``(III) Limitation on reduction.--The applicable percentage 
     for a State for a fiscal year may not be reduced by more than 
     8 percentage points pursuant to this clause.

       ``(8) Penalties for substantial noncompliance of state 
     child support enforcement program with requirements of part 
     d.--
       ``(A) In general.--If a State program operated under part D 
     is found as a result of a review conducted under section 
     452(a)(4) not to have complied substantially with the 
     requirements of such part for any quarter, and the Secretary 
     determines that the program is not complying substantially 
     with such requirements at the time the finding is made, the 
     Secretary shall, subject to paragraph (2), reduce the grant 
     payable to the State under section 402(a)(1) for the quarter 
     and each subsequent quarter that ends before the 1st quarter 
     throughout which the program is found not to be in 
     substantial compliance with such requirements by--
       ``(i) not less than 1 nor more than 2 percent;
       ``(ii) not less than 2 nor more than 3 percent, if the 
     finding is the 2nd consecutive such finding made as a result 
     of such a review; or
       ``(iii) not less than 3 nor more than 5 percent, if the 
     finding is the 3rd or a subsequent consecutive such finding 
     made as a result of such a review.
       ``(B) Disregard of noncompliance which is of a technical 
     nature.--For purposes of subparagraph (A) and section 
     452(a)(4), a State which is not in full compliance with the 
     requirements of this part shall be determined to be in 
     substantial compliance with such requirements only if the 
     Secretary determines that any noncompliance with such 
     requirements is of a technical nature which does not 
     adversely affect the performance of the State's program 
     operated under part D.
       ``(9) For failure to expend additional state funds to 
     replace grant reductions.--If the grant payable to a State 
     under section 402(a)(1) for a fiscal year is reduced by 
     reason of any of the preceding paragraphs of this subsection, 
     the State shall, during the immediately succeeding fiscal 
     year, expend under the State program funded under this part 
     an amount equal to the sum of--
       ``(A) the applicable percentage of the historic State 
     expenditures; and
       ``(B) 105 percent of the total amount of such reductions 
     under such preceding paragraphs.
       ``(b) Reasonable Cause Exception.--The Secretary may not 
     impose a penalty on a State under subsection (a) with respect 
     to a requirement if the Secretary determines that the State 
     has reasonable cause for failing to comply with the 
     requirement.
       ``(c) Corrective Compliance Plan.--
       ``(1) In general.--
       ``(A) Notification of violation.--Notwithstanding any other 
     provision of law, the Federal Government shall, before 
     assessing a penalty against a State under subsection (a), 
     notify the State of the violation of law for which the 
     penalty would be assessed and allow the State the opportunity 
     to enter into a corrective compliance plan in accordance with 
     this subsection which outlines how the State will correct any 
     such violations and how the State will insure continuing 
     compliance with the requirements of this part.
       ``(B) 60-day period to propose a corrective compliance 
     plan.--Any State notified under subparagraph (A) shall have 
     60 days in which to submit to the Federal Government a 
     corrective compliance plan to correct any violations 
     described in subparagraph (A).
       ``(C) 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.

[[Page H 13567]]

       ``(2) 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 paragraph 
     (1) 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.
       ``(d) Limitation on Amount of Penalty.--
       ``(1) 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.
       ``(2) Carryforward of unrecovered penalties.--To the extent 
     that paragraph (1) 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 payable to the State under section 402(a)(1) for 
     the immediately succeeding fiscal year.

     ``SEC. 409. APPEAL OF ADVERSE DECISION.

       ``(a) In General.--Within 5 days after the date any adverse 
     decision is made or action is taken under this part with 
     respect to a State, the Secretary shall notify the chief 
     executive officer of the State of the adverse decision or 
     action, including any decision with respect to the State plan 
     submitted under section 401 or the imposition of a penalty 
     under section 408.
       ``(b) Administrative Review of Adverse Decision.--
       ``(1) In general.--Within 60 days after the date a State 
     receives notice under this section of an adverse decision, 
     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 (in this section referred to 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 of such a decision, 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. 410. DATA COLLECTION AND REPORTING.

       ``(a) General Reporting Requirement.--Beginning July 1, 
     1996, each State shall collect on a monthly basis, and report 
     to the Secretary on a quarterly basis, the following 
     information on the families receiving assistance under the 
     State program funded under this part:
       ``(1) The county of residence of the family.
       ``(2) Whether a child receiving such assistance or an adult 
     in the family is disabled.
       ``(3) The ages of the members of such families.
       ``(4) The number of individuals in the family, and the 
     relation of each family member to the youngest child in the 
     family.
       ``(5) The employment status and earnings of the employed 
     adult in the family.
       ``(6) The marital status of the adults in the family, 
     including whether such adults have never married, are 
     widowed, or are divorced.
       ``(7) The educational status of each adult in the family.
       ``(8) The educational status of each child in the family.
       ``(9) Whether the family received subsidized housing, 
     assistance under the State MediGrant plan approved under 
     title XXI, food stamps, or subsidized child care, and if the 
     latter 2, the amount received.
       ``(10) The number of months that the family has received 
     each type of assistance under the program.
       ``(11) If the adults participated in, and the number of 
     hours per week of participation in, the following activities:
       ``(A) Education.
       ``(B) Subsidized private sector employment.
       ``(C) Unsubsidized employment.
       ``(D) Public sector employment, work experience, or 
     community service.
       ``(E) Job search.
       ``(F) Job skills training or on-the-job training.
       ``(G) Vocational education.
       ``(12) Information necessary to calculate participation 
     rates under section 406.
       ``(13) The type and amount of assistance received under the 
     program, including the amount of and reason for any reduction 
     of assistance (including sanctions).
       ``(14) From a sample of closed cases, whether the family 
     left the program, and if so, whether the family left due to--
       ``(A) employment;
       ``(B) marriage;
       ``(C) the prohibition set forth in section 407(a)(8);
       ``(D) sanction; or
       ``(E) State policy.
       ``(15) Any amount of unearned income received by any member 
     of the family.
       ``(16) The citizenship of the members of the family.
       ``(b) Use of Estimates.--
       ``(1) Authority.--A State may comply with subsection (a) by 
     submitting an estimate which is obtained through the use of 
     scientifically acceptable sampling methods approved by the 
     Secretary.
       ``(2) 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 the performance of 
     State programs funded under this part. The Secretary may 
     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 quarter shall include a statement 
     of the percentage of the funds paid to the State under this 
     part for the quarter that are used to cover administrative 
     costs or overhead.
       ``(d) Report on State Expenditures on Programs for Needy 
     Families.--The report required by subsection (a) for a fiscal 
     quarter shall include a statement of the total amount 
     expended by the State during the quarter on programs for 
     needy families.
       ``(e) Report on Noncustodial Parents Participating in Work 
     Activities.--The report required by subsection (a) for a 
     fiscal quarter shall include the number of noncustodial 
     parents in the State who participated in work activities (as 
     defined in section 406(d)) during the quarter.
       ``(f) Report on Transitional Services.--The report required 
     by subsection (a) for a fiscal quarter shall include the 
     total amount expended by the State during the quarter to 
     provide transitional services to a family that has ceased to 
     receive assistance under this part because of employment, 
     along with a description of such services.
       ``(g) 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 406(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;
       ``(2) the demographic and financial characteristics of 
     families applying for assistance, families receiving 
     assistance, and families that become ineligible to receive 
     assistance;
       ``(3) the characteristics of each State program funded 
     under this part; and
       ``(4) the trends in employment and earnings of needy 
     families with minor children living at home.

     ``SEC. 411. DIRECT FUNDING AND ADMINISTRATION BY INDIAN 
                   TRIBES.

       ``(a) Grants for Indian Tribes.--
       ``(1) Tribal family assistance grant.--
       ``(A) In general.--For each of fiscal years 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 subparagraph (B), and 
     shall reduce the grant payable under section 402(a)(1) to any 
     State in which lies the service area or areas of the Indian 
     tribe by that portion of the amount so determined that is 
     attributable to expenditures by the State.
       ``(B) Amount determined.--
       ``(i) In general.--The amount determined under this 
     subparagraph 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 
     parts A and F of this title (as so in effect) for fiscal year 
     1994 for Indian families residing in the service area or 
     areas identified by the Indian tribe pursuant to subsection 
     (b)(1)(C).
       ``(ii) Use of state submitted data.--

       ``(I) In general.--The Secretary shall use State submitted 
     data to make each determination under clause (i).
       ``(II) Disagreement with determination.--If an Indian tribe 
     or tribal organization disagrees with State submitted data 
     described under subclause (I), the Indian tribe or tribal 
     organization may submit to the Secretary such additional 
     information as may be relevant to making the determination 
     under clause (i) and the Secretary may consider such 
     information before making such determination.

       ``(2) Grants for indian tribes that received jobs funds.--
       ``(A) 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 
     the Indian tribe in fiscal year 1994 under section 482(i) (as 
     in effect during fiscal year 1994).
       ``(B) Eligible indian tribe.--For purposes of subparagraph 
     (A), 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).
       ``(C) Use of grant.--Each Indian tribe to which a grant is 
     made under this paragraph shall use the grant for the purpose 
     of operating a program to make work activities available to 
     members of the Indian tribe.
       ``(D) Appropriation.--Out of any money in the Treasury of 
     the United States not otherwise 

[[Page H 13568]]
     appropriated, there are appropriated $7,638,474 for each fiscal year 
     specified in subparagraph (A) for grants under subparagraph 
     (A).
       ``(b) 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 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 tribal 
     family assistance plan by the participating Indian tribes of 
     an intertribal consortium.
       ``(c) 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 the 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 406(d).
       ``(d) Emergency Assistance.--Nothing in this section shall 
     preclude an Indian tribe from seeking emergency assistance 
     from any Federal loan program or emergency fund.
       ``(e) 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.).
       ``(f) Penalties.--
       ``(1) Subsections (a)(1), (a)(6), and (b) of section 408, 
     shall apply to an Indian tribe with an approved tribal 
     assistance plan in the same manner as such subsections apply 
     to a State.
       ``(2) Section 408(a)(3) shall apply to an Indian tribe with 
     an approved tribal assistance plan by substituting `meet 
     minimum work participation requirements established under 
     section 411(c)' for `comply with section 406(a)'.
       ``(g) Data Collection and Reporting.--Section 410 shall 
     apply to an Indian tribe with an approved tribal family 
     assistance plan.
       ``(h) Special Rule for Indian Tribes in Alaska.--
       ``(1) In general.--Notwithstanding any other provision of 
     this section, and except as provided in paragraph (2), a 
     tribal organization in the State of Alaska that receives a 
     tribal family assistance grant under this section shall use 
     the grant to operate a program in accordance with the 
     requirements comparable to the requirements applicable to the 
     program of the State of Alaska funded under this part. 
     Comparability of programs shall be established on the basis 
     of program criteria developed by the Secretary in 
     consultation with the State of Alaska and the tribal 
     organizations.
       ``(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. 412. 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. 
     The Secretary shall also conduct research on the costs and 
     benefits of State activities under section 406.
       ``(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 living at home 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 
     402 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 living at home 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 made under section 402 based on the 
     following ranking factors:
       ``(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) 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.
       ``(g) Funding of Studies and Demonstrations.--
       ``(1) In general.--Out of any money in the Treasury of the 
     United States not otherwise appropriated, there are 
     appropriated $15,000,000 for each fiscal year specified in 
     section 402(a)(1) for the purpose of paying--
       ``(A) the cost of conducting the research described in 
     subsection (a);
       ``(B) the cost of developing and evaluating innovative 
     approaches for reducing welfare dependency and increasing the 
     well-being of minor children under subsection (b);
       ``(C) the Federal share of any State-initiated study 
     approved under subsection (f); and
       ``(D) an amount determined by the Secretary to be necessary 
     to operate and evaluate demonstration projects, relating to 
     this part, that are in effect or approved under section 1115 
     as of September 30, 1995, and are continued after such date.
       ``(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. 413. 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 subtitle A 
     of the Personal Responsibility and 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 birth, 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, there are 
     appropriated $10,000,000 for each of fiscal years 1996, 1997, 
     1998, 1999, 

[[Page H 13569]]
     and 2000 for payment to the Bureau of the Census to carry out 
     subsection (a).

     ``SEC. 414. 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 the 
     Personal Responsibility and Work Opportunity 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 402, 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 Personal Responsibility and 
     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. 415. ASSISTANT SECRETARY FOR FAMILY SUPPORT.

       ``The programs under this part and part D 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.

       ``No officer or employee of the Federal Government may 
     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. DEFINITIONS.

       ``As used in this part:
       ``(1) Adult.--The term `adult' means an individual who is 
     not a minor child.
       ``(2) Minor child.--The term `minor child' means an 
     individual who--
       ``(A) has not attained 18 years of age; or
       ``(B) 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).
       ``(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 
     Self-Determination and Education Assistance Act (25 U.S.C. 
     450b).
       ``(B) Special rule for indian tribes in alaska.--The term 
     `Indian tribe' means, with respect to the State of Alaska, 
     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.
       ``(xiii) Metlakatla Indian Tribe.
       ``(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. 12102. REPORT ON DATA PROCESSING.

       (a) In General.--Within 6 months after the date of the 
     enactment of this Act, the Secretary of Health and Human 
     Services shall prepare and submit to the Congress a report 
     on--
       (1) the status of the automated data processing systems 
     operated by the States to assist management in the 
     administration of State programs under part A of title IV of 
     the Social Security Act (whether in effect before or after 
     October 1, 1995); and
       (2) what would be required to establish a system capable 
     of--
       (A) tracking participants in public programs over time; and
       (B) checking case records of the States to determine 
     whether individuals are participating in public programs of 2 
     or more States.
       (b) Preferred Contents.--The report required by subsection 
     (a) should include--
       (1) a plan for building on the automated data processing 
     systems of the States to establish a system with the 
     capabilities described in subsection (a)(2); and
       (2) an estimate of the amount of time required to establish 
     such a system and of the cost of establishing such a system.

     SEC. 12103. 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) 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 ``under section 402(a)(26) or 471(a)(17)'' 
     and inserting ``pursuant to section 408(a)(4) or under 
     section 471(a)(17)''.
       (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 the 
     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)'' and inserting 
     ``pursuant to section 408(a)(4)''.
       (10) Section 453(c)(3) (42 U.S.C. 653(c)(3)) is amended by 
     striking ``aid under part A of this title'' and inserting 
     ``assistance under a State program funded under part A''.
       (11) Section 454(5)(A) (42 U.S.C. 654(5)(A))) is amended--
       (A) by striking ``under section 402(a)(26)'' and inserting 
     ``pursuant to section 408(a)(4)''; and
       (B) 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 inserting a comma.
       (12) Section 454(6)(D) (42 U.S.C. 654(6)(D)) is amended by 
     striking ``aid under a State plan approved'' and inserting 
     ``assistance under a State program funded''.
       (13) Section 456(a)(1) (42 U.S.C. 656(a)(1)) is amended by 
     striking ``under section 402(a)(26)''.
       (14) Section 466(a)(3)(B) (42 U.S.C. 666(a)(3)(B)) is 
     amended by striking ``402(a)(26)'' and inserting 
     ``408(a)(4)''.
       (15) Section 466(b)(2) (42 U.S.C. 666(b)(2)) is amended by 
     striking ``aid'' and inserting ``assistance under a State 
     program funded''.
       (16) 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''.
       (c) Repeal of Part F of Title IV.--Part F of title IV (42 
     U.S.C. 681-687) is repealed.
       (d) Amendment to Title X.--Section 1002(a)(7) (42 U.S.C. 
     1202(a)(7)) is amended by 

[[Page H 13570]]
     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''.
       (e) Amendments to Title XI.--
       (1) Section 1108 (42 U.S.C. 1308) is amended to read as 
     follows:

     ``SEC. 1108. LIMITATION ON PAYMENTS TO PUERTO RICO, THE 
                   VIRGIN ISLANDS, GUAM, AND AMERICAN SAMOA.

       ``(a) In General.--Notwithstanding any other provision of 
     this Act, the total amount certified by the Secretary of 
     Health and Human Services under titles I, X, XIV, and XVI, 
     and under parts A and B of title IV for payment to any 
     territory for a fiscal year shall not exceed the ceiling 
     amount for the territory for the fiscal year.
       ``(b) Definitions.--As used in this section:
       ``(1) Territory.--The term `territory' means Puerto Rico, 
     the Virgin Islands, Guam, and American Samoa.
       ``(2) Ceiling amount.--The term `ceiling amount' means, 
     with respect to a territory and a fiscal year, the mandatory 
     ceiling amount with respect to the territory plus the 
     discretionary ceiling amount with respect to the territory, 
     reduced for the fiscal year in accordance with subsection 
     (e).
       ``(3) Mandatory ceiling amount.--The term `mandatory 
     ceiling amount' means--
       ``(A) $103,538,000 with respect to for Puerto Rico;
       ``(B) $4,812,000 with respect to Guam;
       ``(C) $3,677,397 with respect to the Virgin Islands; and
       ``(D) $1,122,095 with respect to American Samoa.
       ``(4) Discretionary ceiling amount.--The term 
     `discretionary ceiling amount' means, with respect to a 
     territory, the dollar amount specified in subsection (c)(2) 
     with respect to the territory.
       ``(c) Discretionary Grants.--
       ``(1) In general.--The Secretary shall make a grant to each 
     territory for any fiscal year in the amount appropriated 
     pursuant to paragraph (2) for the fiscal year for payment to 
     the territory.
       ``(2) Use of grant.--Any territory to which a grant is made 
     under paragraph (1) may expend the amount under any program 
     operated or funded under any provision of law specified in 
     subsection (a).
       ``(3) Limitation on authorization of appropriations.--For 
     grants under paragraph (1), there are authorized to be 
     appropriated to the Secretary for each fiscal year--
       ``(A) $7,951,000 for payment to Puerto Rico;
       ``(B) $345,000 for payment to Guam;
       ``(C) $275,000 for payment to the Virgin Islands; and
       ``(D) $190,000 for payment to American Samoa.
       ``(d) Authority to Transfer Funds Among Programs.--
     Notwithstanding any other provision of this Act, any 
     territory to which an amount is paid under any provision of 
     law specified in subsection (a) may use part or all of the 
     amount to carry out any program operated by the territory, or 
     funded, under any other such provision of law.
       ``(e) Maintenance of Effort.--The ceiling amount with 
     respect to a territory shall be reduced for a fiscal year by 
     an amount equal to the amount (if any) by which--
       ``(1) the total amount expended by the territory under all 
     programs of the territory operated pursuant to the provisions 
     of law specified in subsection (a) (as such provisions were 
     in effect for fiscal year 1995) for fiscal year 1995; exceeds
       ``(2) the total amount expended by the territory under all 
     programs of the territory that are funded under the 
     provisions of law specified in subsection (a) for the fiscal 
     year that immediately precedes the fiscal year referred to in 
     the matter preceding paragraph (1).''.
       (2) Section 1109 (42 U.S.C. 1309) is amended by striking 
     ``or part A of title IV,''.
       (3) 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''.
       (4) 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,''.
       (5) 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''.
       (6) Section 1119 (42 U.S.C. 1319) is amended--
       (A) by striking ``or part A of title IV''; and
       (B) by striking ``403(a),''.
       (7) Section 1133(a) (42 U.S.C. 1320b-3(a)) is amended by 
     striking ``or part A of title IV,''.
       (8) Section 1136 (42 U.S.C. 1320b-6) is repealed.
       (9) 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.
       (f) 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''.
       (g) 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''.
       (h) 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. 12104. 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)--
       (A) in paragraph (5), 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) Eligibility Under Other Law.--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 

[[Page H 13571]]
     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(d)(2)(A)(ii)(II) of the Child Nutrition Act 
     of 1966 (42 U.S.C. 1786(d)(2)(A)(ii)(II)) is amended--
       (1) by striking ``program for aid to families with 
     dependent children established'' and inserting ``State 
     program funded''; and
       (2) 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''.

     SEC. 12105. CONFORMING AMENDMENTS TO OTHER LAWS.

       (a) Subsection (b) of section 508 of the Unemployment 
     Compensation Amendments of 1976 (42 U.S.C. 603a; 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 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 (26 U.S.C. 1 et seq.) 
     is amended--
       (1) in section 51(d)(9) (26 U.S.C. 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) (26 U.S.C. 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) (26 U.S.C. 
     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) (26 U.S.C. 6334(a)(11)(A)), 
     by striking ``(relating to aid to families with dependent 
     children)''; and
       (5) in section 7523(b)(3)(C) (26 U.S.C. 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'';

[[Page H 13572]]

       (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 the first 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. 12106. 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) Penalties.--
       (1) In general.--Paragraphs (2) through (7) and paragraph 
     (9) of section 408(a) of the Social Security Act (as added by 
     section 12101 of this Act) shall apply with respect to fiscal 
     years beginning on or after October 1, 1996.
       (2) Misuse of funds.--Paragraphs (1) and (8) of section 
     408(a) of the Social Security Act (as added by section 12101 
     of this Act, shall apply with respect to fiscal years 
     beginning on or after October 1, 1995.
       (c) Transition Rules.--
       (1) State option to continue afdc program.--
       (A) 9-month extension.--A State may elect to continue the 
     State AFDC program until June 30, 1996.
       (B) No individual or family entitlement under continued 
     state afdc programs.--Notwithstanding any other provision of 
     law or any rule of law, no individual or family is entitled 
     to aid under any State AFDC program on or after the date of 
     the enactment of this Act.
       (C) Limitations on federal obligations.--
       (i) Under afdc program.--If a State elects to continue the 
     State AFDC program pursuant to subparagraph (A), the total 
     obligations of the Federal Government to the State under part 
     A of title IV of the Social Security Act (as in effect on 
     September 30, 1995) after the date of the enactment of this 
     Act shall not exceed an amount equal to--

       (I) the State family assistance grant (as defined in 
     section 402(a)(1)(B) of the Social Security Act (as in effect 
     pursuant to the amendment made by section 12101 of this 
     Act)); minus
       (II) any obligations of the Federal Government to the State 
     under such part (as in effect on September 30, 1995) with 
     respect to expenditures by the State during the period that 
     begins on October 1, 1995, and ends on the day before the 
     date of the enactment of this Act.

       (ii) Under temporary family assistance program.--
     Notwithstanding section 402(a)(1) of the Social Security Act 
     (as in effect pursuant to the amendment made by section 12101 
     of this Act), the total obligations of the Federal Government 
     to the State under such section 402(a)(1) for fiscal year 
     1996 after the termination of the State AFDC program shall 
     not exceed an amount equal to--

       (I) the amount described in clause (i)(I) of this 
     subparagraph; minus
       (II) any obligations of the Federal Government to the State 
     under part A of title IV of the Social Security Act (as in 
     effect on September 30, 1995) with respect to expenditures by 
     the State on or after October 1, 1995.

       (D) Submission of state plan for fiscal year 1996 deemed 
     acceptance of grant limitations and formula.--The submission 
     of a plan by a State under section 401(a) of the Social 
     Security Act (as in effect pursuant to the amendment made by 
     section 12101 of this Act) for fiscal year 1996 is deemed to 
     constitute the State's acceptance of the grant reductions 
     under subparagraph (C)(ii) of this paragraph (including the 
     formula for computing the amount of the reduction).
       (E) State afdc program defined.--As used in this paragraph, 
     the term ``State AFDC program'' means the State program under 
     parts A and F of title IV of the Social Security Act (as in 
     effect on September 30, 1995).
       (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.
       (4) Continuance in office of assistant secretary for family 
     support.--The individual who, on the day before the effective 
     date of this subtitle, is serving as Assistant Secretary for 
     Family Support within the Department of Health and Human 
     Services shall, until a successor is appointed to such 
     position--
       (A) continue to serve in such position; and
       (B) except as otherwise provided by law--
       (i) continue to perform the functions of the Assistant 
     Secretary for Family Support under section 417 of the Social 
     Security Act (as in effect before such effective date); and
       (ii) have the powers and duties of the Assistant Secretary 
     for Family Support under section 415 of the Social Security 
     Act (as in effect pursuant to the amendment made by section 
     12101 of this Act).
       (d) Sunset.--The amendment made by section 12101 shall be 
     effective only during the 6-year period beginning on October 
     1, 1995.
                Subtitle B--Supplemental Security Income

     SEC. 12200. REFERENCE TO SOCIAL SECURITY ACT.

       Except as otherwise specifically provided, where ever in 
     this subtitle 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.

                  CHAPTER 1--ELIGIBILITY RESTRICTIONS

     SEC. 12201. 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, the payment of such 
     benefits shall be made to a representative payee if the 
     Commissioner of Social Security determines that such payment 
     would serve the interest of the individual because the 
     individual also has an alcoholism or drug addiction condition 
     that prevents the individual from managing such benefits.''.
       (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)''.

[[Page H 13573]]

       (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 Referrals for Individuals with an Alcoholism 
     or Drug Addiction Condition.--Title XVI (42 U.S.C. 1381 et 
     seq.) is amended by adding at the end the following new 
     section:


   ``TREATMENT REFERRALS FOR INDIVIDUALS WITH AN ALCOHOLISM OR DRUG 
                          ADDICTION CONDITION

       ``Sec. 1636. In the case of any eligible individual whose 
     benefits under this title by reason of disability are paid to 
     a representative payee pursuant to section 
     1631(a)(2)(A)(ii)(II), the Commissioner of Social Security 
     shall refer 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.).''.
       (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 ``to--'' and all that follows through ``in 
     cases in which'' and inserting ``to individuals who are 
     entitled to disability insurance benefits or child's, 
     widow's, or widower's insurance benefits based on disability 
     under title II of the Social Security Act, in cases in 
     which'';
       (B) by striking ``either subparagraph (A) or subparagraph 
     (B)'' and inserting ``the preceding sentence''; and
       (C) 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.
       (f) Effective dates.--
       (1) In general.--Except as provided in paragraphs (2) and 
     (3), the amendments made by this section 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 this 
     section, 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, may reapply to the Commissioner of Social Security.
       (ii) Determination of eligibility.--Not later than January 
     1, 1997, the Commissioner of Social Security shall complete 
     the eligibility redetermination of each individual who 
     reapplies for benefits under clause (i) pursuant to the 
     procedures of title XVI of such Act.
       (3) Additional application of payee representative and 
     treatment referral requirements.--The amendments made by 
     subsections (b) and (c) 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.

     SEC. 12202. 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.

       (a) In General.--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 the purposes of this title 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 
     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 this title.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 12203. 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 12201(d)(1), is amended by inserting after 
     paragraph (2) the following new paragraph:
       ``(3) A person shall not be considered 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 1611(e) (42 U.S.C. 1382(e)), as amended by 
     section 12201(d)(1) and subsection (a), 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 Commissioner with the 
     name of the recipient and notifies the Commissioner that--
       ``(A) the recipient--
       ``(i) is described in subparagraph (A) or (B) of paragraph 
     (3); 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 the officer's official duties.''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

               CHAPTER 2--BENEFITS FOR DISABLED CHILDREN

     SEC. 12211. 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 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. Notwithstanding the preceding 
     sentence, no individual under the age of 18 who engages in 
     substantial gainful activity (determined in accordance with 
     regulations prescribed pursuant to subparagraph (E)) may be 
     considered to be disabled.''; 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) Medical Improvement Review Standard as it Applies to 
     Individuals Under the Age of 18.--Section 1614(a)(4) (42 
     U.S.C. 1382(a)(4)) is amended--
       (1) by redesignating subclauses (I) and (II) of clauses (i) 
     and (ii) of subparagraph (B) as subclauses (aa) and (bb), 
     respectively;
       (2) by redesignating clauses (i) and (ii) of subparagraphs 
     (A) and (B) as subclauses (I) and (II), respectively;
       (3) by redesignating subparagraphs (A) through (C) as 
     clauses (i) through (iii), respectively, and by moving their 
     left hand margin 2 ems to the right;
       (4) by inserting before clause (i) (as redesignated by 
     paragraph (3)) the following:
       ``(A) in the case of an individual who is age 18 or older--
     '';
       (5) at the end of subparagraph (A)(iii) (as redesignated by 
     paragraphs (3) and (4)), by striking the period and inserting 
     ``; or'';

[[Page H 13574]]

       (6) by inserting after and below subparagraph (A)(iii) (as 
     so redesignated) the following:
       ``(B) in the case of an individual who is under the age of 
     18--
       ``(i) substantial evidence which demonstrates that there 
     has been medical improvement in the individual's impairment 
     or combination of impairments, and that such impairment or 
     combination of impairments no longer results in marked and 
     severe functional limitations; or
       ``(ii) substantial evidence which demonstrates that, as 
     determined on the basis of new or improved diagnostic 
     techniques or evaluations, the individual's impairment or 
     combination of impairments, is not as disabling as it was 
     considered to be at the time of the most recent prior 
     decision that he or she was under a disability or continued 
     to be under a disability, and such impairment or combination 
     of impairments does not result in marked or severe functional 
     limitations; or'';
       (7) by redesignating subparagraph (D) as subparagraph (C) 
     and by inserting in such subparagraph ``in the case of any 
     individual,'' before ``substantial evidence''; and
       (8) in the first sentence following subparagraph (C) (as 
     redesignated by paragraph (7)), by--
       (A) inserting ``(i)'' before ``to restore''; and
       (B) inserting ``, or (ii) in the case of an individual 
     under the age of 18, to eliminate or improve the individual's 
     impairment or combination of impairments so that it no longer 
     results in marked and severe functional limitations'' 
     immediately before the period.
       (d) Amount of Benefits.--Section 1611(b) (42 U.S.C. 
     1382(b)) is amended by adding at the end the following new 
     paragraph:
       ``(3)(i) Except with respect to individuals described in 
     clause (ii), the benefit under this title for an individual 
     described in section 1614(a)(3)(C) shall be payable at a rate 
     equal to 75 percent of the rate otherwise determined under 
     this subsection.
       ``(ii) An individual is described in this clause if such 
     individual is described in section 1614(a)(3)(C), and--
       ``(I) in the case of such an individual under the age of 6, 
     such individual has a medical impairment that severely limits 
     the individual's ability to function in a manner appropriate 
     to individuals of the same age and who without special 
     personal assistance would require specialized care outside 
     the home; or
       ``(II) in the case of such an individual who has attained 
     the age of 6, such individual requires personal care 
     assistance with--
       ``(aa) at least 2 activities of daily living;
       ``(bb) continual 24-hour supervision or monitoring to avoid 
     causing injury or harm to self or others; or
       ``(cc) the administration of medical treatment; and
     who without such assistance would require full-time or part-
     time specialized care outside the home.
       ``(iii)(I) For purposes of clause (ii), the term 
     `specialized care' means medical care beyond routine 
     administration of medication.
       ``(II) For purposes of clause (ii)(II)--
       ``(aa) the term `personal care assistance' means at least 
     hands-on and stand-by assistance, supervision, or cueing; and
       ``(bb) the term `activities of daily living' means eating, 
     toileting, dressing, bathing, and mobility.''.
       (e) Effective Dates, Etc.--
       (1) Effective dates.--
       (A) In general.--The provisions of, and amendments made by, 
     subsections (a), (b), and (c) shall apply to applicants for 
     benefits under title XVI of the Social Security Act 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 provisions and amendments.
       (B) Eligibility rules.--The amendments made by subsection 
     (d) shall apply to--
       (i) applicants for benefits under title XVI of the Social 
     Security Act for months beginning on or after January 1, 
     1997; and
       (ii) with respect to continuing disability reviews of 
     eligibility for benefits under such title occurring on or 
     after such date.
       (2) 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 provisions of, and amendments 
     made by, subsections (a), (b), and (c). 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 provisions of, and 
     amendments made by, subsections (a), (b), and (c), 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.
       (3) Regulations.--The Commissioner of Social Security shall 
     submit for review to the committees of jurisdiction in the 
     Congress any final regulation pertaining to the eligibility 
     of individuals under age 18 for benefits under title XVI of 
     the Social Security Act at least 45 days before the effective 
     date of such regulation. The submission under this paragraph 
     shall include supporting documentation providing a cost 
     analysis, workload impact, and projections as to how the 
     regulation will effect the future number of recipients under 
     such title.
       (4) Appropriations.--
       (A) In general.--Out of any money in the Treasury not 
     otherwise appropriated, there are authorized to be 
     appropriated and are hereby appropriated, to remain available 
     without fiscal year limitation, $200,000,000 for fiscal year 
     1996, $75,000,000 for fiscal year 1997, and $25,000,000 for 
     fiscal year 1998, for the Commissioner of Social Security to 
     utilize only for continuing disability reviews and 
     redeterminations under title XVI of the Social Security Act, 
     with reviews and redeterminations for individuals affected by 
     the provisions of subsection (b) given highest priority.
       (B) Additional funds.--Amounts appropriated under 
     subparagraph (A) shall be in addition to any funds otherwise 
     appropriated for continuing disability reviews and 
     redeterminations under title XVI of the Social Security Act.

     SEC. 12212. 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 12211(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, at the 
     option of the Commissioner, which is unlikely to improve).
       ``(II) A representative payee 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.
       ``(III) If the representative payee refuses to comply 
     without good cause with the requirements of subclause (II), 
     the Commissioner of Social Security shall, if the 
     Commissioner determines it is in the best interest of the 
     individual, promptly terminate payment of benefits to the 
     representative payee, and provide for payment of benefits to 
     an alternative representative payee of the individual or, if 
     the interest of the individual under this title would be 
     served thereby, to the individual.
       ``(IV) Subclause (II) shall not apply to the representative 
     payee of any individual with respect to whom the Commissioner 
     determines such application would be inappropriate or 
     unnecessary. In making such determination, the Commissioner 
     shall take into consideration the nature of the individual's 
     impairment (or combination of impairments). Section 1631(c) 
     shall not apply to a finding by the Commissioner that the 
     requirements of subclause (II) should not apply to an 
     individual's representative payee.''.
       (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 are age 18 or older.
     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 representative payee 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 

[[Page H 13575]]
     medically necessary and available, of the condition which was the basis 
     for providing benefits under this title.
       ``(IV) If the representative payee refuses to comply 
     without good cause with the requirements of subclause (III), 
     the Commissioner of Social Security shall, if the 
     Commissioner determines it is in the best interest of the 
     individual, promptly terminate payment of benefits to the 
     representative payee, and provide for payment of benefits to 
     an alternative representative payee of the individual or, if 
     the interest of the individual under this title would be 
     served thereby, to the individual.
       ``(V) Subclause (III) shall not apply to the representative 
     payee of any individual with respect to whom the Commissioner 
     determines such application would be inappropriate or 
     unnecessary. In making such determination, the Commissioner 
     shall take into consideration the nature of the individual's 
     impairment (or combination of impairments). Section 1631(c) 
     shall not apply to a finding by the Commissioner that the 
     requirements of subclause (III) should not apply to an 
     individual's representative payee.''.
       (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. 12213. ADDITIONAL ACCOUNTABILITY REQUIREMENTS.

       (a) Disposal of Resources for Less Than Fair Market 
     Value.--
       (1) In general.--Section 1613(c) (42 U.S.C. 1382b(c)) is 
     amended to read as follows:
       ``(c) Disposal of Resources for Less Than Fair Market 
     Value.--(1)(A)(i) If an individual who has not attained 18 
     years of age (or any person acting on such individual's 
     behalf) disposes of resources of the individual for less than 
     fair market value on or after the look-back date specified in 
     clause (ii)(I), the individual is ineligible for benefits 
     under this title for months during the period beginning on 
     the date specified in clause (iii) and equal to the number of 
     months specified in clause (iv).
       ``(ii)(I) The look-back date specified in this subclause is 
     a date that is 36 months before the date specified in 
     subclause (II).
       ``(II) The date specified in this subclause is the date on 
     which the individual applies for benefits under this title 
     or, if later, the date on which the disposal of the 
     individual's resources for less than fair market value 
     occurs.
       ``(iii) The date specified in this clause is the first day 
     of the first month that follows the month in which the 
     individual's resources were disposed of for less than fair 
     market value and that does not occur in any other period of 
     ineligibility under this paragraph.
       ``(iv) The number of months of ineligibility under this 
     clause for an individual shall be equal to--
       ``(I) the total, cumulative uncompensated value of all the 
     individual's resources so disposed of on or after the look-
     back date specified in clause (ii)(I), divided by
       ``(II) the amount of the maximum monthly benefit payable 
     under section 1611(b) to an eligible individual for the month 
     in which the date specified in clause (ii)(II) occurs.
       ``(B) An individual shall not be ineligible for benefits 
     under this title by reason of subparagraph (A) if the 
     Commissioner determines that--
       ``(i) the individual intended to dispose of the resources 
     at fair market value;
       ``(ii) the resources were transferred exclusively for a 
     purpose other than to qualify for benefits under this title;
       ``(iii) all resources transferred for less than fair market 
     value have been returned to the individual; or
       ``(iv) the denial of eligibility would work an undue 
     hardship on the individual (as determined on the basis of 
     criteria established by the Commissioner in regulations).
       ``(C) For purposes of this paragraph, in the case of a 
     resource held by an individual in common with another person 
     or persons in a joint tenancy, tenancy in common, or similar 
     arrangement, the resource (or the affected portion of such 
     resource) shall be considered to be disposed of by such 
     individual when any action is taken, either by such 
     individual or by any other person, that reduces or eliminates 
     such individual's ownership or control of such resource.
       ``(D)(i) Notwithstanding subparagraph (A), this subsection 
     shall not apply to a transfer of a resource to a trust if the 
     portion of the trust attributable to such resource is 
     considered a resource available to the individual pursuant to 
     subsection (e)(3) (or would be so considered, but for the 
     application of subsection (e)(4)).
       ``(ii) In the case of a trust established by an individual 
     (within the meaning of paragraph (2)(A) of subsection (e)), 
     if from such portion of the trust (if any) that is considered 
     a resource available to the individual pursuant to paragraph 
     (3) of such subsection (or would be so considered but for the 
     application of paragraph (2) of such subsection) or the 
     residue of such portion upon the termination of the trust--
       ``(I) there is made a payment other than to or for the 
     benefit of the individual, or
       ``(II) no payment could under any circumstance be made to 
     the individual,
     then the payment described in subclause (I) or the 
     foreclosure of payment described in subclause (II) shall be 
     considered a disposal of resources by the individual subject 
     to this subsection, as of the date of such payment or 
     foreclosure, respectively.
       ``(2)(A) At the time an individual (and the individual's 
     eligible spouse, if any) applies for benefits under this 
     title, and at the time the eligibility of an individual (and 
     such spouse, if any) for such benefits is redetermined, the 
     Commissioner of Social Security shall--
       ``(i) inform such individual of the provisions of paragraph 
     (1) providing for a period of ineligibility for benefits 
     under this title for individuals who make certain 
     dispositions of resources for less than fair market value, 
     and inform such individual that information obtained pursuant 
     to clause (ii) will be made available to the State agency 
     administering a State plan under title XXI (as provided in 
     subparagraph (B)); and
       ``(ii) obtain from such individual information which may be 
     used in determining whether or not a period of ineligibility 
     for such benefits would be required by reason of paragraph 
     (1).
       ``(B) The Commissioner of Social Security shall make the 
     information obtained under subparagraph (A)(ii) available, on 
     request, to any State agency administering a State plan 
     approved under title XXI.
       ``(3) For purposes of this subsection--
       ``(A) the term `trust' includes any legal instrument or 
     device that is similar to a trust; and
       ``(B) the term `benefits under this title' includes 
     supplementary payments pursuant to an agreement for Federal 
     administration under section 1616(a), and payments pursuant 
     to an agreement entered into under section 212(b) of Public 
     Law 93-66.''.
       (2) Effective date.--The amendment made by this subsection 
     shall be effective with respect to transfers of resources for 
     less than fair market value that occur at least 90 days after 
     the date of the enactment of this Act.
       (b) Treatment of Assets Held in Trust.--
       (1) Treatment as resource.--Section 1613 (42 U.S.C. 1382) 
     is amended by adding at the end the following new subsection:


                                ``trusts

       ``(e)(1) In determining the resources of an individual who 
     has not attained 18 years of age, the provisions of paragraph 
     (3) shall apply to a trust established by such individual.
       ``(2)(A) For purposes of this subsection, an individual 
     shall be considered to have established a trust if any assets 
     of the individual were transferred to the trust.
       ``(B) In the case of an irrevocable trust to which the 
     assets of an individual and the assets of any other person or 
     persons were transferred, the provisions of this subsection 
     shall apply to the portion of the trust attributable to the 
     assets of the individual.
       ``(C) This subsection shall apply without regard to--
       ``(i) the purposes for which the trust is established;
       ``(ii) whether the trustees have or exercise any discretion 
     under the trust;
       ``(iii) any restrictions on when or whether distributions 
     may be made from the trust; or
       ``(iv) any restrictions on the use of distributions from 
     the trust.
       ``(3)(A) In the case of a revocable trust, the corpus of 
     the trust shall be considered a resource available to the 
     individual.
       ``(B) In the case of an irrevocable trust, if there are any 
     circumstances under which payment from the trust could be 
     made to or for the benefit of the individual, the portion of 
     the corpus from which payment to or for the benefit of the 
     individual could be made shall be considered a resource 
     available to the individual.
       ``(4) The Commissioner may waive the application of this 
     subsection with respect to any individual if the Commissioner 
     determines, on the basis of criteria prescribed in 
     regulations, that such application would work an undue 
     hardship on such individual.
       ``(5) For purposes of this subsection--
       ``(A) the term `trust' includes any legal instrument or 
     device that is similar to a trust;
       ``(B) the term `corpus' means all property and other 
     interests held by the trust, including accumulated earnings 
     and any other addition to such trust after its establishment 
     (except that such term does not include any such earnings or 
     addition in the month in which such earnings or addition is 
     credited or otherwise transferred to the trust);
       ``(C) the term `asset' includes any income or resource of 
     the individual, including--
       ``(i) any income otherwise excluded by section 1612(b);
       ``(ii) any resource otherwise excluded by this section; and
       ``(iii) any other payment or property that the individual 
     is entitled to but does not receive or have access to because 
     of action by--
       ``(I) such individual;
       ``(II) a person or entity (including a court) with legal 
     authority to act in place of, or on behalf of, such 
     individual; or
       ``(III) a person or entity (including a court) acting at 
     the direction of, or upon the request of, such individual; 
     and
       ``(D) the term `benefits under this title' includes 
     supplementary payments pursuant to an agreement for Federal 
     administration under section 1616(a), and payments pursuant 
     to an agreement entered into under section 212(b) of Public 
     Law 93-66.''.
       (2) Treatment as income.--Section 1612(a)(2) (42 U.S.C. 
     1382a(a)(2)) is amended--
       (A) by striking ``and'' at the end of subparagraph (E);
       (B) by striking the period at the end of subparagraph (F) 
     and inserting ``; and''; and
       (C) by adding at the end the following new subparagraph:
       ``(G) any earnings of, and additions to, the corpus of a 
     trust (as defined in section 1613(f)) established by an 
     individual (within the meaning of paragraph (2)(A) of section 
     1613(e)) and of which such individual is a beneficiary (other 
     than a trust to which paragraph (4) of such section applies); 
     except that in the case of an irrevocable trust, there shall 
     exist circumstances under which payment from such earnings or 
     additions could be made to, or for the benefit of, such 
     individual.''.
       (3) Effective date.--The amendments made by this subsection 
     shall take effect on January 1, 1996, and shall apply to 
     trusts established on or after such date.

[[Page H 13576]]

       (c) Requirement To Establish Account.--
       (1) In general.--Section 1631(a)(2) (42 U.S.C. 1383(a)(2)) 
     is amended--
       (A) by redesignating subparagraphs (F) and (G) as 
     subparagraphs (G) and (H), respectively; and
       (B) by inserting after subparagraph (E) the following new 
     subparagraph:
       ``(F)(i)(I) Each representative payee of an eligible 
     individual under the age of 18 who is eligible for the 
     payment of benefits described in subclause (II) shall 
     establish on behalf of such individual an account in a 
     financial institution into which such benefits shall be paid, 
     and shall thereafter maintain such account for use in 
     accordance with clause (ii).
       ``(II) Benefits described in this subclause are past-due 
     monthly benefits under this title (which, for purposes of 
     this subclause, include State supplementary payments made by 
     the Commissioner pursuant to an agreement under section 1616 
     or section 212(b) of Public Law 93-66) in an amount (after 
     any withholding by the Commissioner for reimbursement to a 
     State for interim assistance under subsection (g)) that 
     exceeds the product of--
       ``(aa) 6, and
       ``(bb) the maximum monthly benefit payable under this title 
     to an eligible individual.
       ``(ii)(I) A representative payee may use funds in the 
     account established under clause (i) to pay for allowable 
     expenses described in subclause (II).
       ``(II) An allowable expense described in this subclause is 
     an expense for--
       ``(aa) education or job skills training;
       ``(bb) personal needs assistance;
       ``(cc) special equipment;
       ``(dd) housing modification;
       ``(ee) medical treatment;
       ``(ff) therapy or rehabilitation; or
       ``(gg) any other item or service that the Commissioner 
     determines to be appropriate;
     provided that such expense benefits such individual and, in 
     the case of an expense described in division (cc), (dd), 
     (ff), or (gg), is related to the impairment (or combination 
     of impairments) of such individual.
       ``(III) The use of funds from an account established under 
     clause (i) in any manner not authorized by this clause--
       ``(aa) by a representative payee shall constitute misuse of 
     benefits for all purposes of this paragraph, and any 
     representative payee who knowingly misuses benefits from such 
     an account shall be liable to the Commissioner in an amount 
     equal to the total amount of such misused benefits; and
       ``(bb) by an eligible individual who is his or her own 
     representative payee shall be considered an overpayment 
     subject to recovery under subsection (b).
       ``(IV) This clause shall continue to apply to funds in the 
     account after the child has reached age 18, regardless of 
     whether benefits are paid directly to the beneficiary or 
     through a representative payee.
       ``(iii) The representative payee may deposit into the 
     account established pursuant to clause (i)--
       ``(I) past-due benefits payable to the eligible individual 
     in an amount less than that specified in clause (i)(II), and
       ``(II) any other funds representing an underpayment under 
     this title to such individual, provided that the amount of 
     such underpayment is equal to or exceeds the maximum monthly 
     benefit payable under this title to an eligible individual.
       ``(iv) The Commissioner of Social Security shall establish 
     a system for accountability monitoring whereby such 
     representative payee shall report, at such time and in such 
     manner as the Commissioner shall require, on activity 
     respecting funds in the account established pursuant to 
     clause (i).''.
       (2) Exclusion from resources.--Section 1613(a) (42 U.S.C. 
     1382b(a)) is amended--
       (A) in paragraph (9), by striking ``; and'' and inserting a 
     semicolon;
       (B) in the first paragraph (10), by striking the period and 
     inserting a semicolon;
       (C) by redesignating the second paragraph (10) as paragraph 
     (11), and by striking the period and inserting ``; and''; and
       (D) by adding at the end the following:
       ``(12) the assets and accrued interest or other earnings of 
     any account established and maintained in accordance with 
     section 1631(a)(2)(F).''.
       (3) Exclusion from income.--Section 1612(b) (42 U.S.C. 
     1382a(b)) is amended--
       (A) by striking ``and'' at the end of paragraph (19);
       (B) by striking the period at the end of paragraph (20) and 
     inserting ``; and''; and
       (C) by adding at the end the following new paragraph:
       ``(21) the interest or other earnings on any account 
     established and maintained in accordance with section 
     1631(a)(2)(F).''.
       (4) Effective date.--The amendments made by this subsection 
     shall apply to payments made after the date of the enactment 
     of this Act.

     SEC. 12214. REDUCTION IN CASH BENEFITS PAYABLE TO 
                   INSTITUTIONALIZED INDIVIDUALS WHOSE MEDICAL 
                   COSTS ARE COVERED BY PRIVATE INSURANCE.

       (a) In General.--Section 1611(e)(1)(B) (42 U.S.C. 
     1382(e)(1)(B)) is amended--
       (1) by striking ``title XIX, or'' and inserting ``title 
     XIX,''; and
       (2) by inserting ``or, in the case of an eligible 
     individual under the age of 18 receiving payments (with 
     respect to such individual) under any health insurance policy 
     issued by a private provider of such insurance'' after 
     ``section 1614(f)(2)(B),''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to benefits for months beginning 90 or more days 
     after the date of the enactment of this Act, without regard 
     to whether regulations have been issued to implement such 
     amendments.

     SEC. 12215. REGULATIONS.

       Within 3 months after the date of the enactment of this 
     Act, the Commissioner of Social Security shall prescribe such 
     regulations as may be necessary to implement the amendments 
     made by sections 12211, 12212, 12213, and 12214.
                       Subtitle C--Child Support

     SEC. 12300. REFERENCE TO SOCIAL SECURITY ACT.

       Except as otherwise specifically provided, where ever in 
     this subtitle 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.

     CHAPTER 1--ELIGIBILITY FOR SERVICES; DISTRIBUTION OF PAYMENTS

     SEC. 12301. 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 for foster care maintenance and adoption 
     assistance are provided under the State program funded under 
     part B 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) in paragraph (6)--
       (A) by striking ``provide that'' and inserting ``provide 
     that--'';
       (B) by striking subparagraph (A) and inserting the 
     following new subparagraph:
       ``(A) services under the plan shall be made available to 
     residents of other States on the same terms as to residents 
     of the State submitting the plan;'';
       (C) in subparagraph (B), by inserting ``on individuals not 
     receiving assistance under any State program funded under 
     part A'' after ``such services shall be imposed'';
       (D) in each of subparagraphs (B), (C), (D), and (E)--
       (i) by indenting the subparagraph in the same manner as, 
     and aligning the left margin of the subparagraph with the 
     left margin of, the matter inserted by subparagraph (B) of 
     this paragraph; and
       (ii) by striking the final comma and inserting a semicolon; 
     and
       (E) in subparagraph (E), by indenting each of clauses (i) 
     and (ii) 2 additional ems.
       (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 if 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 other 
     individuals to whom services are furnished under the plan, 
     except that an application or other request to continue 
     services shall not be required of such a family and paragraph 
     (6)(B) shall not apply to the family.''.
       (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. 12302. 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:

[[Page H 13577]]

       ``(A) Current support payments.--To the extent that the 
     amount so collected does not exceed the amount required to be 
     paid to the family for the month in which collected, the 
     State shall distribute the amount so collected to the family.
       ``(B) Payments of arrearages.--To the extent that the 
     amount so collected exceeds the amount required to be paid to 
     the family for the month in which collected, the State shall 
     distribute the amount so collected as follows:
       ``(i) Distribution of arrearages that accrued after the 
     family ceased to receive assistance.--

       ``(I) Pre-October 1997.--The provisions of this section 
     (other than subsection (b)(1)) as in effect on the day before 
     the date of the enactment of section 12302 of the Personal 
     Responsibility and Work Opportunity Act of 1995 shall apply 
     with respect to the distribution of support arrearages that--

       ``(aa) accrued after the family ceased to receive 
     assistance, and
       ``(bb) are collected before October 1, 1997.

       ``(II) Post-September 1997.--With respect to amounts 
     collected on or after October 1, 1997--

       ``(aa) In general.--The State shall distribute any amount 
     collected (other than amounts described in clause (iv)) to 
     the family to the extent necessary to satisfy any support 
     arrearages with respect to the family that accrued after the 
     family ceased to receive assistance from the State.
       ``(bb) Reimbursement of governments for assistance provided 
     to the family.--To the extent that division (aa) does not 
     apply to the amount, the State shall retain the State share 
     of the amount so collected, and pay to the Federal Government 
     the Federal share (as defined in subsection (c)(2)(A)) of the 
     amount so collected, to the extent necessary to reimburse 
     amounts paid to the family as assistance by the State.
       ``(cc) Distribution of the remainder to the family.--To the 
     extent that neither division (aa) nor division (bb) applies 
     to the amount so collected, the State shall distribute the 
     amount to the family.
       ``(ii) Distribution of arrearages that accrued before the 
     family received assistance.--

       ``(I) Pre-October 2000.--The provisions of this section 
     (other than subsection (b)(1)) as in effect on the day before 
     the date of the enactment of section 12302 of the Personal 
     Responsibility and Work Opportunity Act of 1995 shall apply 
     with respect to the distribution of support arrearages that--

       ``(aa) accrued before the family received assistance, and
       ``(bb) are collected before October 1, 2000.

       ``(II) Post-September 2000.--Unless based on the report 
     required by paragraph (4), the Congress determines otherwise, 
     with respect to amounts collected on or after October 1, 
     2000--

       ``(aa) In general.--The State shall first distribute any 
     amount collected (other than amounts described in clause 
     (iv)) to the family to the extent necessary to satisfy any 
     support arrears with respect to the family that accrued 
     before the family received assistance from the State .
       ``(bb) Reimbursement of governments for assistance provided 
     to the family.--The State shall retain the State share of the 
     amounts so collected in excess of those distributed pursuant 
     to division (aa) and pay to the Federal Government the 
     Federal share (as defined in subsection (c)(2)) of the amount 
     so collected, to the extent necessary to reimburse all or 
     part of the amounts paid to the family as assistance by the 
     State.
       ``(cc) Distribution of the remainder to the family.--To the 
     extent that neither division (aa) nor division (bb) applies 
     to the amount so collected, the State shall distribute the 
     amount to the family.
       ``(iii) Distribution of arrearages that accrued while the 
     family received assistance.--In the case of a family 
     described in this subparagraph, the provisions of paragraph 
     (1) shall apply with respect to the distribution of support 
     arrearages that accrued while the family received assistance.
       ``(iv) Amounts collected pursuant to section 464.--
     Notwithstanding any other provision of this section, any 
     amount of support collected pursuant to section 464 shall be 
     retained by the State to the extent necessary to reimburse 
     amounts paid to the family as assistance by the State. The 
     State shall pay to the Federal Government the Federal share 
     of the amounts so retained. To the extent the amount 
     collected pursuant to section 464 exceeds the amount so 
     retained, the State shall distribute the excess to the 
     family.
       ``(v) Ordering rules for distributions.--For purposes of 
     this subparagraph, the State shall treat any support 
     arrearages collected as accruing in the following order:

       ``(I) to the period after the family ceased to receive 
     assistance;
       ``(II) to the period before the family received assistance; 
     and
       ``(III) to the period while the family was receiving 
     assistance.

       ``(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) Study and report.--Not later than October 1, 1998, 
     the Secretary shall report to the Congress the Secretary's 
     findings with respect to--
       ``(A) whether the distribution of post-assistance 
     arrearages to families has been effective in moving people 
     off of welfare and keeping them off of welfare;
       ``(B) whether early implementation of a pre-assistance 
     arrearage program by some states has been effective in moving 
     people off of welfare and keeping them off of welfare;
       ``(C) what the overall impact has been of the amendments 
     made by the Personal Responsibility and Work Opportunity Act 
     of 1995 with respect to child support enforcement in moving 
     people off of welfare and keeping them off of welfare; and
       ``(D) based on the information and data the Secretary has 
     obtained, what changes, if any, should be made in the 
     policies related to the distribution of child support 
     arrearages.
       ``(b) Continuation Of Assignments.--Any rights to support 
     obligations, which were assigned to a State as a condition of 
     receiving assistance from the State under part A and which 
     were in effect on the day before the date of the enactment of 
     the Personal Responsibility and Work Opportunity 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 on the day before the date of the enactment of 
     the Personal Responsibility and Work Opportunity Act of 
     1995); or
       ``(B) benefits under the State plan approved under part E 
     of this title (as in effect on the day before the date of the 
     enactment of the Personal Responsibility and Work Opportunity 
     Act of 1995).
       ``(2) Federal share.--The term `Federal share' means--
       ``(A) if the amounts collected and retained by the State 
     (to the extent necessary to reimburse amounts paid to 
     families as assistance by the State) are equal to or greater 
     than such amounts collected in fiscal year 1995 (reduced by 
     amounts not retained by the State in fiscal year 1995 as a 
     result of the application of subsection (b)(1) of this 
     section as in effect on the day before the date of the 
     enactment of the Personal Responsibility and Work Opportunity 
     Act of 1995), the highest Federal medical assistance 
     percentage in effect for the State in fiscal year 1995 or any 
     succeeding year of the amount so collected; or
       ``(B) if the amounts so collected and retained by the State 
     are less than such amounts collected in fiscal year 1995 
     (reduced by amounts not retained by the State in fiscal year 
     1995 as a result of the application of subsection (b)(1) of 
     this section as in effect on the day before the date of the 
     enactment of the Personal Responsibility and Work Opportunity 
     Act of 1995), the amounts so collected and retained less the 
     State share in fiscal year 1995.
       ``(3) Federal medical assistance percentage.--The term 
     `Federal medical assistance percentage' means--
       ``(A) the Federal medical assistance percentage (as defined 
     in section 1118), in the case of Puerto Rico, the Virgin 
     Islands, Guam, and American Samoa; or
       ``(B) the Federal medical assistance percentage (as defined 
     in section 2122(c)) in the case of any other State.
       ``(4) State share.--The term `State share' means 100 
     percent minus the Federal share.
       ``(d) Continuation of Services for Families Ceasing To 
     Receive Assistance Under the State Program Funded Under Part 
     A.--When a family with respect to which services are provided 
     under a State plan approved under this part 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 section 454, 
     except that an application or other request to continue 
     services shall not be required of such a family and section 
     454(6)(B) shall not apply to the family.''.
       (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) Effective Date.--The amendments made by this section 
     shall be effective on October 1, 1996, or earlier at the 
     State's option.

     SEC. 12303. PRIVACY SAFEGUARDS.

       (a) State Plan Requirement.--Section 454 (42 U.S.C. 654), 
     as amended by section 12301(b) of this Act, is amended--
       (1) by striking ``and'' at the end of paragraph (24);
       (2) by striking the period at the end of paragraph (25) and 
     inserting ``; and''; and
       (3) by adding after paragraph (25) the following 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. 12311. STATE CASE REGISTRY.

       Section 454A, as added by section 12344(a)(2) of this Act, 
     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--

[[Page H 13578]]

       ``(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 MediGrant 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. 12312. COLLECTION AND DISBURSEMENT OF SUPPORT PAYMENTS.

       (a) State Plan Requirement.--Section 454 (42 U.S.C. 654), 
     as amended by sections 12301(b) and 12303(a) of this Act, is 
     amended--
       (1) by striking ``and'' at the end of paragraph (25);
       (2) by striking the period at the end of paragraph (26) and 
     inserting ``; and''; and
       (3) by adding after paragraph (26) the following new 
     paragraph:
       ``(27) provide that, 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) contractors reporting 
     directly to the State agency to--
       ``(i) monitor and enforce 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 
     12344(a)(2) of this Act, 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, if the Secretary agrees 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 12344(a)(2) and as amended by section 12311 of this 
     Act, 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)) if 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. 12313. STATE DIRECTORY OF NEW HIRES.

       (a) State Plan Requirement.--Section 454 (42 U.S.C. 654), 
     as amended by sections 12301(b), 12303(a) and 12312(a) of 
     this Act, 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.--
       ``(A) Requirement for States that have no directory.--
     Except as provided in subparagraph (B), 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.
       ``(B) States with new hire reporting in existence.--A State 
     which has a new hire reporting law in existence on the date 
     of the enactment of this section may continue to operate 
     under the State law, but the State must meet the requirements 
     of this section (other than subsection (f)) not later than 
     October 1, 1997.
       ``(2) Definitions.--As used in this section:

[[Page H 13579]]

       ``(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.--
       ``(i) In general.--The term `employer' has the meaning 
     given such term in section 3401(d) of the Internal Revenue 
     Code of 1996 and includes any governmental entity and any 
     labor organization.
       ``(ii) 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 the employer 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.--Each State may provide the time 
     within which the report required by paragraph (1) shall be 
     made with respect to an employee, but such report shall be 
     made not later than 20 days after the date the employer hires 
     the employee.
       ``(c) Reporting Format and Method.--Each report required by 
     subsection (b) shall be made on a W-4 form or, at the option 
     of the employer, an equivalent 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 May 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 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 
     (including any past due 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 3 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 and labor organizations (as defined in section 
     453A(a)(2)(B)(iii))'' after ``employers''; and
       (2) by inserting ``, and except that no report shall be 
     filed with respect to an employee of a State or local 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. 12314. 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 
     noncustodial parent to whom paragraph (1) applies--
       ``(i) that the withholding has commenced; and
       ``(ii) of the procedures to follow if the noncustodial 
     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) of this paragraph 
     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. The employer shall comply with the procedural 
     rules relating to income withholding of the State in which 
     the employee works, regardless of the State where the notice 
     originates.''.
       (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 noncustodial 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 

[[Page H 13580]]
     part may execute a withholding order without advance notice to the 
     obligor, including issuing the withholding order through 
     electronic means.''.
       (b) Conforming Amendment.--Section 466(c) (42 U.S.C. 
     666(c)) is repealed.

     SEC. 12315. 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) Locator information from interstate networks.--
     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. 12316. 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 custody or 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 custody or 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)--
       (A) in the matter preceding paragraph (1), by striking 
     ``social security'' and all that follows through ``absent 
     parent'' and inserting ``information described in subsection 
     (a)''; and
       (B) in the flush paragraph at the end, by adding the 
     following: ``No information shall be disclosed to any person 
     if the State has notified the Secretary that the State has 
     reasonable evidence of domestic violence or child abuse and 
     the disclosure of such information could be harmful to the 
     custodial parent or the child of such parent. Information 
     received or transmitted pursuant to this section shall be 
     subject to the safeguard provisions contained in section 
     454(26).''.
       (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 
     custody or visitation rights''; and
       (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 child custody or visitation rights, or 
     any agent of such court;''.
       (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) Reimbursement for Reports by State Agencies.--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) Conforming 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 subsections:
       ``(h) Federal Case Registry of Child Support Orders.--
       ``(1) In general.--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) Case information.--The information referred to in 
     paragraph (1) with respect to a case shall be such 
     information as the Secretary may specify in regulations 
     (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) National Directory of New Hires.--
       ``(1) In general.--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) Entry of data.--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) Administration of federal tax laws.--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) List of multistate employers.--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) Information Comparisons and Other Disclosures.--
       ``(1) Verification by social security administration.--
       ``(A) In general.--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) Verification by ssa.--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) Information comparisons.--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) Information comparisons and disclosures of 
     information in all registries for title iv program 
     purposes.--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) Provision of new hire information to the social 
     security administration.--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) Research.--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) Fees.--
       ``(1) For ssa verification.--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) For information from state directories of new 
     hires.--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) For information furnished to state and federal 
     agencies.--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).

[[Page H 13581]]

       ``(l) Restriction on Disclosure and Use.--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) Information Integrity and Security.--The Secretary 
     shall establish and implement safeguards with respect to the 
     entities established under this section designed to--
       ``(1) ensure the accuracy and completeness of information 
     in the Federal Parent Locator Service; and
       ``(2) restrict access to confidential information in the 
     Federal Parent Locator Service to authorized persons, and 
     restrict use of such information to authorized purposes.
       ``(n) Federal Government Reporting.--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 such a report shall not 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.''.
       (g) Conforming Amendments.--
       (1) To part d of title iv of the social security act.--
       (A) 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;''.
       (B) Section 454(13) (42 U.S.C.654(13)) is amended by 
     inserting ``and provide that information requests by parents 
     who are residents of other States be treated with the same 
     priority as requests by parents who are residents of the 
     State submitting the plan'' before the semicolon.
       (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.''.
       (4) Disclosure of certain information to agents of child 
     support enforcement agencies.--
       (A) In general.--Paragraph (6) of section 6103(l) of the 
     Internal Revenue Code of 1986 (relating to disclosure of 
     return information to Federal, State, and local child support 
     enforcement agencies) is amended by redesignating 
     subparagraph (B) as subparagraph (C) and by inserting after 
     subparagraph (A) the following new subparagraph:
       ``(B) Disclosure to certain agents.--The address and social 
     security account number (or numbers) of an individual with 
     respect to any individual with respect to whom child support 
     obligations are sought to be established or enforced may be 
     disclosed by any child support enforcement agency to any 
     agent of such agency which is under contract with such agency 
     to carry out the purposes described in subparagraph (C).''
       (B) Conforming amendments.--
       (i) Paragraph (3) of section 6103(a) of such Code is 
     amended by striking ``(l)(12)'' and inserting ``paragraph (6) 
     or (12) of subsection (l)''.
       (ii) Subparagraph (C) of section 6103(l)(6) of such Code, 
     as redesignated by subsection (a), is amended to read as 
     follows:
       ``(C) Restriction on disclosure.--Information may be 
     disclosed under this paragraph only for purposes of, and to 
     the extent necessary in, establishing and collecting child 
     support obligations from, and locating, individuals owing 
     such obligations.''
       (iii) The material following subparagraph (F) of section 
     6103(p)(4) of such Code is amended by striking ``subsection 
     (l)(12)(B)'' and inserting ``paragraph (6)(A) or (12)(B) of 
     subsection (l)''.

     SEC. 12317. 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 12315 of this Act, is amended 
     by adding at the end the following new paragraph:
       ``(13) Recording of social security numbers in certain 
     family matters.--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 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. 12321. ADOPTION OF UNIFORM STATE LAWS.

       Section 466 (42 U.S.C. 666) is amended by adding at the end 
     the following new subsection:
       ``(f) Uniform Interstate Family Support Act.--
       ``(1) Enactment and use.--In order to satisfy section 
     454(20)(A), on or after January 1, 1998, each State must have 
     in effect the Uniform Interstate Family Support Act, as 
     approved by the American Bar Association on February 9, 1993, 
     together with any amendments officially adopted before 
     January 1, 1998 by the National Conference of Commissioners 
     on Uniform State Laws.
       ``(2) Employers to follow procedural rules of State where 
     employee works.--The State law enacted pursuant to paragraph 
     (1) shall provide that an employer that receives an income 
     withholding order or notice pursuant to section 501 of the 
     Uniform Interstate Family Support Act follow the procedural 
     rules that apply with respect to such order or notice under 
     the laws of the State in which the obligor works.

     SEC. 12322. 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)'';

[[Page H 13582]]

       (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. 12323. ADMINISTRATIVE ENFORCEMENT IN INTERSTATE CASES.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     12315 and 12317(a) of this Act, is amended by adding at the 
     end the following new paragraph:
       ``(14) Administrative enforcement in interstate cases.--
     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. 12324. 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 June 30, 1996, after consulting with 
     the State directors of programs under this part, 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. 12325. STATE LAWS PROVIDING EXPEDITED PROCEDURES.

       (a) State Law Requirements.--Section 466 (42 U.S.C. 666), 
     as amended by section 12314 of this Act, 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:
       ``(c) Expedited Procedures.--The procedures specified in 
     this subsection are the following:
       ``(1) Administrative action by state agency.--Procedures 
     which give the State agency the authority 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) Genetic testing.--To order genetic testing for the 
     purpose of paternity establishment as provided in section 
     466(a)(5).
       ``(B) Financial or other information.--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) Response to state agency request.--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) Access to certain records.--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) Change in payee.--In cases in which support is 
     subject to an assignment in order to comply with a 
     requirement imposed pursuant to part A or section 1912, 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) Income withholding.--To order income withholding in 
     accordance with subsections (a)(1) and (b) of section 466.
       ``(G) Securing assets.--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--

[[Page H 13583]]


       ``(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) Increase monthly payments.--For the purpose of 
     securing overdue support, to increase the amount of monthly 
     support payments to include amounts for arrearages, subject 
     to such conditions or 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) Substantive and procedural rules.--The expedited 
     procedures required under subsection (a)(2) shall include the 
     following rules and authority, applicable with respect to all 
     proceedings to establish paternity or to establish, modify, 
     or enforce support orders:
       ``(A) Locator information; presumptions concerning 
     notice.--Procedures under which--
       ``(i) 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) Statewide jurisdiction.--Procedures under which--
       ``(i) the State agency and any administrative or judicial 
     tribunal with authority to hear child support and paternity 
     cases exerts statewide jurisdiction over the parties; and
       ``(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.
       ``(3) Coordination with erisa.--Notwithstanding subsection 
     (d) of section 514 of the Employee Retirement Income Security 
     Act of 1974 (relating to effect on other laws), nothing in 
     this subsection shall be construed to alter, amend, modify, 
     invalidate, impair, or supersede subsections (a), (b), and 
     (c) of such section 514 as it applies with respect to any 
     procedure referred to in paragraph (1) and any expedited 
     procedure referred to in paragraph (2), except to the extent 
     that such procedure would be consistent with the requirements 
     of section 206(d)(3) of such Act (relating to qualified 
     domestic relations orders) or the requirements of section 
     609(a) of such Act (relating to qualified medical child 
     support orders) if the reference in such section 206(d)(3) to 
     a domestic relations order and the reference in such section 
     609(a) to a medical child support order were a reference to a 
     support order referred to in paragraphs (1) and (2) relating 
     to the same matters, respectively.''.
       (b) Automation of State Agency Functions.--Section 454A, as 
     added by section 12344(a)(2) and as amended by sections 12311 
     and 12312(c) of this Act, 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. 12331. 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) Procedures concerning paternity establishment.--
       ``(A) Establishment process available from birth until age 
     18.--
       ``(i) Procedures which permit the establishment of the 
     paternity of a child at any time before the child attains 18 
     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 18 years was then in 
     effect in the State.
       ``(B) Procedures concerning genetic testing.--
       ``(i) Genetic testing required in certain contested 
     cases.--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) Other requirements.--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 (if 
     the State so elects) from the alleged father if paternity is 
     established; and
       ``(II) to obtain additional testing in any case if an 
     original test result is contested, upon request and advance 
     payment by the contestant.

       ``(C) Voluntary paternity acknowledgment.--
       ``(i) Simple civil process.--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) Hospital-based program.--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 exceptions, taking into account the best 
     interests of the child, as the State may establish.
       ``(iii) Paternity establishment services.--

       ``(I) State-offered services.--Such procedures must require 
     the State agency responsible for maintaining birth records to 
     offer voluntary paternity establishment services.
       ``(II) Regulations.--

       ``(aa) Services offered by hospitals and birth record 
     agencies.--The Secretary shall prescribe regulations 
     governing voluntary paternity establishment services offered 
     by hospitals and birth record agencies.
       ``(bb) Services offered by other entities.--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) Use of paternity acknowledgment affidavit.--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) Status of signed paternity acknowledgment.--
       ``(i) Inclusion in birth records.--Procedures under which 
     the name of the father shall be included on the record of 
     birth of the child only if--

       ``(I) the father and mother have signed a voluntary 
     acknowledgment of paternity; or
       ``(II) a court or an administrative agency of competent 
     jurisdiction has issued an adjudication of paternity.

     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 the issuance of an order 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) Legal finding of paternity.--Procedures under which 
     a signed voluntary acknowledgment of paternity is considered 
     a legal finding of paternity, subject to the right of any 
     signatory to rescind the acknowledgment within the earlier 
     of--

       ``(I) 60 days; or
       ``(II) the date of an administrative or judicial proceeding 
     relating to the child (including a proceeding to establish a 
     support order) in which the signatory is a party.

       ``(iii) Contest.--Procedures under which, after the 60-day 
     period referred to in clause (ii), 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 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.
       ``(E) Bar on acknowledgment ratification proceedings.--
     Procedures under which judicial or administrative proceedings 
     are not required or permitted to ratify an unchallenged 
     acknowledgment of paternity.
       ``(F) Admissibility of genetic testing results.--
     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.

[[Page H 13584]]

       ``(G) Presumption of paternity in certain cases.--
     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) Default orders.--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) No right to jury trial.--Procedures providing that 
     the parties to an action to establish paternity are not 
     entitled to a trial by jury.
       ``(J) Temporary support order based on probable paternity 
     in contested cases.--Procedures which require that a 
     temporary order be issued, upon motion by a party, requiring 
     the provision of child support pending an administrative or 
     judicial determination of parentage, if there is clear and 
     convincing evidence of paternity (on the basis of genetic 
     tests or other evidence).
       ``(K) Proof of certain support and paternity establishment 
     costs.--Procedures under which bills for pregnancy, 
     childbirth, and genetic testing are admissible as evidence 
     without requiring third-party foundation testimony, and shall 
     constitute prima facie evidence of amounts incurred for such 
     services or for testing on behalf of the child.
       ``(L) Standing of putative fathers.--Procedures ensuring 
     that the putative father has a reasonable opportunity to 
     initiate a paternity action.
       ``(M) Filing of acknowledgments and adjudications in state 
     registry of birth records.--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 and, after consultation with 
     the States, other common elements as determined by such 
     designee'' before the semicolon.
       (c) Conforming Amendment.--Section 468 (42 U.S.C. 668) is 
     amended by striking ``a simple civil process for voluntarily 
     acknowledging paternity and''.

     SEC. 12332. 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. 12333. COOPERATION BY APPLICANTS FOR AND RECIPIENTS OF 
                   TEMPORARY FAMILY ASSISTANCE.

       Section 454 (42 U.S.C. 654), as amended by sections 
     12301(b), 12303(a), 12312(a), and 12313(a) of this Act, is 
     amended--
       (1) by striking ``and'' at the end of paragraph (27);
       (2) by striking the period at the end of paragraph (28) and 
     inserting ``; and''; and
       (3) by inserting after paragraph (28) the following 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 exceptions, taking into account the best 
     interests of the child, as the State may establish through 
     the State agency, or at the option of the State, through the 
     State agencies administering the State programs funded under 
     part A and title XXI;
       ``(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;
       ``(D) may request that the individual sign a voluntary 
     acknowledgment of paternity, after notice of the rights and 
     consequences of such an acknowledgment, but may not require 
     the individual to sign an acknowledgment or otherwise 
     relinquish the right to genetic tests as a condition of 
     cooperation and eligibility for assistance under the State 
     program funded under part A or the State program under title 
     XXI; and
       ``(E) 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. 12341. PERFORMANCE-BASED INCENTIVES AND PENALTIES.

       (a) Development of New System.--The Secretary of Health and 
     Human Services, in consultation with State directors of 
     programs under part D of title IV of the Social Security Act, 
     shall develop a new incentive system to replace the system 
     under section 458 of such Act. The new system shall provide 
     additional payments to any State based on such State's 
     performance under such a program.
       (b) Conforming Amendments to Present System.--Section 458 
     (42 U.S.C. 658) is amended--
       (1) in subsection (a), by striking ``aid to families with 
     dependent children under a State plan approved under part A 
     of this title'' and inserting ``assistance under a program 
     funded under part A'';
       (2) in subsection (b)(1)(A), by striking ``section 
     402(a)(26)'' and inserting ``section 407(a)(4)'';
       (3) in subsections (b) and (c)--
       (A) by striking ``AFDC collections'' each place it appears 
     and inserting ``title IV-A collections'', and
       (B) by striking ``non-AFDC collections'' each place it 
     appears and inserting ``non-title IV-A collections''; and
       (4) in subsection (c), by striking ``combined AFDC/non-AFDC 
     administrative costs'' both places it appears and inserting 
     ``combined title IV-A/non-title IV-A administrative costs''.
       (c) Calculation of IV-D Paternity Establishment 
     Percentage.--
       (1) Section 452(g)(1) (42 U.S.C. 652(g)(1)) is amended 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
       (B) by striking ``(or all States, as the case may be)''.
       (3) Section 452(g)(2) (42 U.S.C. 652(g)(2)) is amended by 
     adding at the end the following new sentence: ``In meeting 
     the 90 percent paternity establishment requirement, a State 
     may calculate either the paternity establishment rate of 
     cases in the program funded under this part or the paternity 
     establishment rate of all out-of-wedlock births in the 
     State.''.
       (4) 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) by inserting 
     ``and securing support'' before the period.
       (d) Effective Dates.--
       (1) Incentive adjustments.--
       (A) In general.--The system developed under subsection (a) 
     and the amendments made by subsection (b) shall become 
     effective on October 1, 1997, except to the extent provided 
     in subparagraph (B).
       (B) Application of section 458.--Section 458 of the Social 
     Security Act, as in effect on the day 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 1999.
       (2) Penalty reductions.--The amendments made by subsection 
     (c) shall become effective with respect to calendar quarters 
     beginning on or after the date of the enactment of this Act.

     SEC. 12342. 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 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

[[Page H 13585]]

       ``(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. 12343. 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 12301(b), 12303(a), 12312(a), 
     12313(a), and 12333 of this Act, 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. 12344. 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 payments 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 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 section 12303(a)(1) of this Act, is 
     amended to read as follows:
       ``(24) provide that the State will have in effect an 
     automated data processing and information retrieval system--
       ``(A) by October 1, 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 Personal Responsibility and Work Opportunity 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 12344(a)(3) of the Personal 
     Responsibility and Work Opportunity 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
       (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 September 30, 
     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 80 
     percent.''.
       (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 $400,000,000 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. 12345. 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 12316 of this Act, 
     is amended by adding at the end the following new subsection:
       ``(o) Recovery of Costs.--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 

[[Page H 13586]]
     section, to the extent such costs are not recovered through user 
     fees.''.

     SEC. 12346. 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 1912'' after ``471(a)(17)''; and
       (iv) by inserting ``(2)'' before ``all other'';
       (B) in each of clauses (i) and (ii), by striking ``, and 
     the total amount of such obligations'';
       (C) in clause (iii), by striking ``described in'' and all 
     that follows and inserting ``in which support was collected 
     during the fiscal year;'';
       (D) by striking clause (iv); and
       (E) by redesignating clause (v) as clause (vii), and 
     inserting after clause (iii) the following new clauses:
       ``(iv) the total amount of support collected during such 
     fiscal year and distributed as current support;
       ``(v) the total amount of support collected during such 
     fiscal year and distributed as arrearages;
       ``(vi) the total amount of support due and unpaid for all 
     fiscal years; and''.
       (3) Section 452(a)(10)(G) (42 U.S.C. 652(a)(10)(G)) is 
     amended by striking ``on the use of Federal courts and''.
       (4) Section 452(a)(10) (42 U.S.C. 652(a)(10)) is amended--
       (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. 12351. 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) Review and adjustment of support orders upon 
     request.--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) In general.--
       ``(i) 3-year cycle.--Except as provided in subparagraphs 
     (B) and (C), the State shall review and, as appropriate, 
     adjust the support order every 3 years, taking into account 
     the best interests of the child involved.
       ``(ii) Methods of adjustment.--The State may elect to 
     review and, if appropriate, adjust an order pursuant to 
     clause (i) 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).

       ``(iii) No proof of change in circumstances necessary.--Any 
     adjustment under this subparagraph (A) shall be made without 
     a requirement for proof or showing of a change in 
     circumstances.
       ``(B) Automated method.--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.
       ``(C) Request upon substantial change in circumstances.--
     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.
       ``(D) Notice of right to review.--The State shall provide 
     notice not less than once every 3 years 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 this paragraph. The notice may be included 
     in the order.''.

     SEC. 12352. 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. 12353. NONLIABILITY FOR FINANCIAL 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 financial 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) Financial institution.--The term ``financial 
     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));
       (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)); and
       (D) any benefit association, insurance company, safe 
     deposit company, money-market mutual fund, or similar entity 
     authorized to do business in the State.
       (2) Financial record.--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) State child support enforcement agency.--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. 12361. INTERNAL REVENUE SERVICE COLLECTION OF 
                   ARREARAGES.

       (a) Collection of Fees.--Section 6305(a) of the Internal 
     Revenue Code of 1986 (relating to collection of certain 
     liability) is amended--

[[Page H 13587]]

       (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. 12362. 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 
     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 first-come, first-served basis, 
     with any such process being satisfied out of such moneys as 
     remain after the satisfaction of all such processes which 
     have been previously served.
       ``(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; 
     and

       ``(iii) worker's compensation benefits paid under Federal 
     or State law but
       ``(B) do not include any payment--
       ``(i) by way of reimbursement or otherwise, to defray 
     expenses incurred by 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.--For purposes of 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 amounts required to be paid under 
     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 other 
     related costs and fees, interest and penalties, income 
     withholding, attorney's fees, and other relief.
       ``(3) Alimony.--
       ``(A) In general.--The term `alimony', when used in 
     reference to the legal obligations of an 

[[Page H 13588]]
     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.
       ``(B) Exceptions.--Such term does not include--
       ``(i) any child support; or
       ``(ii) 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 or an administrative agency of competent 
     jurisdiction in any State, territory, or possession of the 
     United States;
       ``(ii) a court or an administrative agency 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 or an administrative agency 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)''.
       (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--
       (A) by inserting ``or a support order, as defined in 
     section 453(p) of the Social Security Act (42 U.S.C. 
     653(p)),'' before ``which--'';
       (B) in subparagraph (B)(i), by striking ``(as defined in 
     section 462(b) of the Social Security Act (42 U.S.C. 
     662(b)))'' and inserting ``(as defined in section 459(i)(2) 
     of the Social Security Act (42 U.S.C. 662(i)(2)))''; and
       (C) in subparagraph (B)(ii), by striking ``(as defined in 
     section 462(c) of the Social Security Act (42 U.S.C. 
     662(c)))'' and inserting ``(as defined in section 459(i)(3) 
     of the Social Security Act (42 U.S.C. 662(i)(3)))''.
       (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. 12363. 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 362(c)(4) 
     of this Act, 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 new sentence: 
     ``In the case of a spouse or former spouse who, pursuant to 
     section 407(a)(4) of the Social Security Act (42 U.S.C. 
     607(a)(4)), 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. 12364. VOIDING OF FRAUDULENT TRANSFERS.

       Section 466 (42 U.S.C. 666), as amended by section 321 of 
     this Act, is amended by adding at the end the following new 
     subsection:
       ``(g) Laws Voiding Fraudulent Transfers.--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 

[[Page H 13589]]
     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. 12365. WORK REQUIREMENT FOR PERSONS OWING PAST-DUE CHILD 
                   SUPPORT.

       (a) In General.--Section 466(a) of the Social Security Act 
     (42 U.S.C. 666(a)), as amended by sections 12315, 12317(a), 
     and 12323 of this Act, is amended by adding at the end the 
     following new paragraph:
       ``(15) Procedures to ensure that persons owing past-due 
     support work or have a plan for payment of such support.--
       ``(A) In general.--Procedures under which the State has the 
     authority, in any case in which an individual owes past-due 
     support with respect to a child receiving assistance under a 
     State program funded under part A, to seek a court order that 
     requires the individual to--
       ``(i) pay such support in accordance with a plan approved 
     by the court, or, at the option of the State, a plan approved 
     by the State agency administering the State program under 
     this part; or
       ``(ii) if the individual is subject to such a plan and is 
     not incapacitated, participate in such work activities (as 
     defined in section 406(d)) as the court, or, at the option of 
     the State, the State agency administering the State program 
     under this part, deems appropriate.
       ``(B) Past-due support defined.--For purposes of 
     subparagraph (A), the term `past-due support' means the 
     amount of a delinquency, determined under a court order, or 
     an order of an administrative process established under State 
     law, for support and maintenance of a child, or of a child 
     and the parent with whom the child is living.''.
       (b) Conforming amendment.--The flush paragraph at the end 
     of section 466(a) (42 U.S.C.666(a)) is amended by striking 
     ``and (7)'' and inserting ``(7), and (15)''.

     SEC. 12366. DEFINITION OF SUPPORT ORDER.

       Section 453 (42 U.S.C. 653) as amended by sections 12316 
     and 12345(b) of this Act, is amended by adding at the end the 
     following new subsection:
       ``(p) Support Order Defined.--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. 12367. REPORTING ARREARAGES TO CREDIT BUREAUS.

       Section 466(a)(7) (42 U.S.C. 666(a)(7)) is amended to read 
     as follows:
       ``(7) Reporting arrearages to credit bureaus.--
       ``(A) In general.--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 noncustodial parent who is 
     delinquent in the payment of support, and the amount of 
     overdue support owed by such parent.
       ``(B) Safeguards.--Procedures ensuring that, in carrying 
     out subparagraph (A), information with respect to a 
     noncustodial 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 (as so defined).''.

     SEC. 12368. LIENS.

       Section 466(a)(4) (42 U.S.C. 666(a)(4)) is amended to read 
     as follows:
       ``(4) Liens.--Procedures under which--
       ``(A) liens arise by operation of law against real and 
     personal property for amounts of overdue support owed by a 
     noncustodial 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. 12369. STATE LAW AUTHORIZING SUSPENSION OF LICENSES.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     12315, 12317(a), 12323, and 12365 of this Act, is amended by 
     adding at the end the following:
       ``(16) Authority to withhold or suspend licenses.--
     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. 12370. INTERNATIONAL CHILD SUPPORT ENFORCEMENT.

       (a) Authority for International Agreements.--Part D of 
     title IV, as amended by section 362(a) of this Act, is 
     amended by adding after section 459 the following new 
     section:

     ``SEC. 459A. INTERNATIONAL CHILD SUPPORT ENFORCEMENT.

       ``(a) Authority for Declarations.--
       ``(1) Declaration.--The Secretary of State, with the 
     concurrence of the Secretary of Health and Human Services, is 
     authorized to declare any foreign country (or a political 
     subdivision thereof) to be a foreign reciprocating country if 
     the foreign country has established, or undertakes to 
     establish, procedures for the establishment and enforcement 
     of duties of support owed to obligees who are residents of 
     the United States, and such procedures are substantially in 
     conformity with the standards prescribed under subsection 
     (b).
       ``(2) Revocation.--A declaration with respect to a foreign 
     country made pursuant to paragraph (1) may be revoked if the 
     Secretaries of State and Health and Human Services determine 
     that--
       ``(A) the procedures established by the foreign nation 
     regarding the establishment and enforcement of duties of 
     support have been so changed, or the foreign nation's 
     implementation of such procedures is so unsatisfactory, that 
     such procedures do not meet the criteria for such a 
     declaration; or
       ``(B) continued operation of the declaration is not 
     consistent with the purposes of this part.
       ``(3) Form of declaration.--A declaration under paragraph 
     (1) may be made in the form of an international agreement, in 
     connection with an international agreement or corresponding 
     foreign declaration, or on a unilateral basis.
       ``(b) Standards for Foreign Support Enforcement 
     Procedures.--
       ``(1) Mandatory elements.--Child support enforcement 
     procedures of a foreign country which may be the subject of a 
     declaration pursuant to subsection (a)(1) shall include the 
     following elements:
       ``(A) The foreign country (or political subdivision 
     thereof) has in effect procedures, available to residents of 
     the United States--
       ``(i) for establishment of paternity, and for establishment 
     of orders of support for children and custodial parents; and
       ``(ii) for enforcement of orders to provide support to 
     children and custodial parents, including procedures for 
     collection and appropriate distribution of support payments 
     under such orders.
       ``(B) The procedures described in subparagraph (A), 
     including legal and administrative assistance, are provided 
     to residents of the United States at no cost.
       ``(C) An agency of the foreign country is designated as a 
     Central Authority responsible for--
       ``(i) facilitating child support enforcement in cases 
     involving residents of the foreign nation and residents of 
     the United States; and
       ``(ii) ensuring compliance with the standards established 
     pursuant to this subsection.
       ``(2) Additional elements.--The Secretary of Health and 
     Human Services and the Secretary of State, in consultation 
     with the States, may establish such additional standards as 
     may be considered necessary to further the purposes of this 
     section.
       ``(c) Designation of United States Central Authority.--It 
     shall be the responsibility of the Secretary of Health and 
     Human Services to facilitate child support enforcement in 
     cases involving residents of the United States and residents 
     of foreign nations that are the subject of a declaration 
     under this section, by activities including--
       ``(1) development of uniform forms and procedures for use 
     in such cases;
       ``(2) notification of foreign reciprocating countries of 
     the State of residence of individuals sought for support 
     enforcement purposes, on the basis of information provided by 
     the Federal Parent Locator Service; and
       ``(3) such other oversight, assistance, and coordination 
     activities as the Secretary may find necessary and 
     appropriate.
       ``(d) Effect on Other Laws.--States may enter into 
     reciprocal arrangements for the establishment and enforcement 
     of child support obligations with foreign countries that are 
     not the subject of a declaration pursuant to subsection (a), 
     to the extent consistent with Federal law.''.
       (b) State Plan Requirement.--Section 454 (42 U.S.C. 654), 
     as amended by sections 12301(b), 12303(a), 12312(b), 
     12313(a), 12333, and 12343(b) of this Act, is amended--
       (1) by striking ``and'' at the end of paragraph (29);
       (2) by striking the period at the end of paragraph (30) and 
     inserting ``; and''; and
       (3) by adding after paragraph (30) the following new 
     paragraph:
       ``(31)(A) provide that any request for services under this 
     part by a foreign reciprocating country or a foreign country 
     with which the State has an arrangement described in section 
     459A(d)(2) shall be treated as a request by a State;
       ``(B) provide, at State option, notwithstanding paragraph 
     (4) or any other provision of this part, for services under 
     the plan for enforcement of a spousal support order not 
     described in paragraph (4)(B) entered by such a country (or 
     subdivision); and
       ``(C) provide that no applications will be required from, 
     and no costs will be assessed for such services against, the 
     foreign reciprocating country or foreign obligee (but costs 
     may at State option be assessed against the obligor).''.

     SEC. 12371. FINANCIAL INSTITUTION DATA MATCHES.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     12315, 12317(a), 12323, 12365, and 12369 of this Act, is 
     amended by adding at the end the following new paragraph:
       ``(17) Financial institution data matches.--
       ``(A) In general.--Procedures under which the State agency 
     shall enter into agreements with financial institutions doing 
     business in the State--
       ``(i) to develop and operate, in coordination with such 
     financial institutions, a data match system, using automated 
     data exchanges to the maximum extent feasible, in which each 
     such financial institution is required to provide for 

[[Page H 13590]]
     each calendar quarter the name, record address, social security number 
     or other taxpayer identification number, and other 
     identifying information for each noncustodial parent who 
     maintains an account at such institution and who owes past-
     due support, as identified by the State by name and social 
     security number or other taxpayer identification number; and
       ``(ii) in response to a notice of lien or levy, encumber or 
     surrender, as the case may be, assets held by such 
     institution on behalf of any noncustodial parent who is 
     subject to a child support lien pursuant to paragraph (4).
       ``(B) Reasonable fees.--The State agency may pay a 
     reasonable fee to a financial institution for conducting the 
     data match provided for in subparagraph (A)(i), not to exceed 
     the actual costs incurred by such financial institution.
       ``(C) Liability.--A financial institution shall not be 
     liable under any Federal or State law to any person--
       ``(i) for any disclosure of information to the State agency 
     under subparagraph (A)(i);
       ``(ii) for encumbering or surrendering any assets held by 
     such financial institution in response to a notice of lien or 
     levy issued by the State agency as provided for in 
     subparagraph (A)(ii); or
       ``(iii) for any other action taken in good faith to comply 
     with the requirements of subparagraph (A).
       ``(D) Definitions.--For purposes of this paragraph--
       ``(i) Financial institution.--The term `financial 
     institution' means any Federal or State commercial savings 
     bank, including savings association or cooperative bank, 
     Federal- or State-chartered credit union, benefit 
     association, insurance company, safe deposit company, money-
     market mutual fund, or any similar entity authorized to do 
     business in the State; and
       ``(ii) Account.--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. 12372. ENFORCEMENT OF ORDERS AGAINST PATERNAL OR 
                   MATERNAL GRANDPARENTS IN CASES OF MINOR 
                   PARENTS.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     12315, 12317(a), 12323, 12365, 12369, and 12371 of this Act, 
     is amended by adding at the end the following new paragraph:
       ``(18) Enforcement of orders against paternal or maternal 
     grandparents.--Procedures under which, at the State's option, 
     any child support order enforced under this part with respect 
     to a child of minor parents, if the custodial parents of such 
     child is receiving assistance under the State program under 
     part A, shall be enforceable, jointly and severally, against 
     the parents of the noncustodial parents of such child.''.

                       CHAPTER 8--MEDICAL SUPPORT

     SEC. 12376. 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. 12377. ENFORCEMENT OF ORDERS FOR HEALTH CARE COVERAGE.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     12315, 12317(a), 12323, 12365, 12369, 12371, and 12372 of 
     this Act, is amended by adding at the end the following new 
     paragraph:
       ``(19) Health care coverage.--Procedures under which all 
     child support orders enforced pursuant to this part shall 
     include a provision for the health care coverage of the 
     child, and in the case in which a noncustodial 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 noncustodial 
     parent's health plan, unless the noncustodial parent contests 
     the notice.''.

CHAPTER 9--ENHANCING RESPONSIBILITY AND OPPORTUNITY FOR NON-RESIDENTIAL 
                                PARENTS

     SEC. 12381. 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:

     ``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 noncustodial 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 non-profit 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. 12391. 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 Act.
     Subtitle D--Restricting Welfare and Public Benefits for Aliens

              CHAPTER 1--ELIGIBILITY FOR FEDERAL BENEFITS

     SEC. 12401. ALIENS WHO ARE NOT QUALIFIED ALIENS INELIGIBLE 
                   FOR FEDERAL PUBLIC BENEFITS.

       (a) In General.--Notwithstanding any other provision of law 
     and except as provided in subsection (b), an alien who is not 
     a qualified alien (as defined section 12431) is not eligible 
     for any Federal public benefit (as defined in subsection 
     (c)).
       (b) Exceptions.--Subsection (a) shall not apply with 
     respect to the following Federal public benefits:
       (1) Emergency medical services under title XIX or XXI of 
     the Social Security Act.
       (2) Short-term, non-cash, in-kind emergency disaster 
     relief.
       (3)(A) Public health assistance for immunizations.
       (B) Public health assistance for testing and treatment of a 
     serious communicable disease if the Secretary of Health and 
     Human Services determines that it is necessary to prevent the 
     spread of such disease.
       (4) Programs, services, or assistance (such as soup 
     kitchens, crisis counseling and intervention, and short-term 
     shelter) specified by the Attorney General, in the Attorney 
     General's sole and unreviewable discretion after consultation 
     with appropriate Federal agencies and departments, which (A) 
     deliver in-kind services at the community level, including 
     through public or 

[[Page H 13591]]
     private nonprofit agencies; (B) 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 (C) are necessary for the protection of life 
     or safety.
       (5) Programs for housing or community development 
     assistance or financial assistance administered by the 
     Secretary of Housing and Urban Development, any program under 
     title V of the Housing Act of 1949, or any assistance under 
     section 306C of the Consolidated Farm and Rural Development 
     Act, to the extent that the alien is receiving such a benefit 
     on the date of the enactment of this Act.
       (c) Federal Public Benefit Defined.--
       (1) Except as provided in paragraph (2), for purposes of 
     this subtitle the term ``Federal public benefit'' means a 
     Federal public benefit providing direct spending for--
       (A) 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, health, disability, public or 
     assisted housing, post-secondary education, food assistance, 
     unemployment benefit, or any other similar benefit for which 
     payments or assistance are provided to an individual, 
     household, or family eligibility unit by an agency of the 
     United States or by appropriated funds of the United States.
       (2) Such term shall not apply--
       (A) to any contract, professional license, or commercial 
     license for a nonimmigrant whose visa for entry is related to 
     such employment in the United States; or
       (B) with respect to benefits for an alien who as a work 
     authorized nonimmigrant or as an alien lawfully admitted for 
     permanent residence under the Immigration and Nationality Act 
     qualified for such benefits and for whom the United States 
     under reciprocal treaty agreements is required to pay 
     benefits, as determined by the Attorney General, after 
     consultation with the Secretary of State.

     SEC. 12402. LIMITED ELIGIBILITY OF CERTAIN QUALIFIED ALIENS 
                   FOR CERTAIN FEDERAL PROGRAMS.

       (a) Limited Eligibility for Specified Federal Programs.--
       (1) In general.--Notwithstanding any other provision of law 
     and except as provided in paragraph (2), an alien who is a 
     qualified alien (as defined in section 12431) is not eligible 
     for any specified Federal program (as defined in paragraph 
     (3)).
       (2) Exceptions.--
       (A) Time-limited exception for refugees and asylees.--
     Paragraph (1) shall not apply to an alien until 5 years after 
     the date--
       (i) an alien is admitted to the United States as a refugee 
     under section 207 of the Immigration and Nationality Act;
       (ii) an alien is granted asylum under section 208 of such 
     Act; or
       (iii) an alien's deportation is withheld under section 
     243(h) of such Act.
       (B) Certain permanent resident aliens.--Paragraph (1) shall 
     not apply to an alien who--
       (i) is lawfully admitted to the United States for permanent 
     residence under the Immigration and Nationality Act; and
       (ii)(I) has worked 40 qualifying quarters of coverage as 
     defined under title II of the Social Security Act, and (II) 
     did not receive any Federal means-tested public benefit (as 
     defined in section 12403(c)) during any such quarter.
       (C) Veteran and active duty exception.--Paragraph (1) shall 
     not apply to an alien who is lawfully residing in any State 
     and 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,
       (ii) on active duty (other than active duty for training) 
     in the Armed Forces of the United States, or
       (iii) the spouse or unmarried dependent child of an 
     individual described in clause (i) or (ii).
       (D) Transition for aliens currently receiving benefits.--
     Paragraph (1) shall apply to the eligibility of an alien for 
     a program for months beginning on or after January 1, 1997, 
     if, on the date of the enactment of this Act, the alien is 
     lawfully residing in any State and is receiving benefits 
     under such program on the date of the enactment of this Act.
       (3) Specified Federal program defined.--For purposes of 
     this subtitle, the term ``specified Federal program'' means 
     any of the following:
       (A) SSI.--The supplemental security income program under 
     title XVI of the Social Security Act.
       (B) Food stamps.--The food stamp program as defined in 
     section 3(h) of the Food Stamp Act of 1977.
       (b) Limited Eligibility for Designated Federal Programs.--
       (1) In general.--Notwithstanding any other provision of law 
     and except as provided in section 12403 and paragraph (2), a 
     State is authorized to determine the eligibility of an alien 
     who is a qualified alien (as defined in section 12431) for 
     any designated Federal program (as defined in paragraph (3)).
       (2) Exceptions.--Qualified aliens under this paragraph 
     shall be eligible for any designated Federal program.
       (A) Time-limited exception for refugees and asylees.--
       (i) An alien who is admitted to the United States as a 
     refugee under section 207 of the Immigration and Nationality 
     Act until 5 years after the date of an alien's entry into the 
     United States.
       (ii) An alien who is granted asylum under section 208 of 
     such Act until 5 years after the date of such grant of 
     asylum.
       (iii) An alien whose deportation is being withheld under 
     section 243(h) of such Act until 5 years after such 
     withholding.
       (B) Certain permanent resident aliens.--An alien who--
       (i) is lawfully admitted to the United States for permanent 
     residence under the Immigration and Nationality Act; and
       (ii)(I) has worked 40 qualifying quarters of coverage to be 
     a fully insured individual for old-age retirement benefits 
     under title II of the Social Security Act, (II) did not 
     receive any Federal means-tested public benefit (as defined 
     in section 12403(c)) during any such quarter, and (III) at 
     the time of application is otherwise eligible for such 
     benefits.
       (C) Veteran and active duty exception.--An alien who is 
     lawfully residing in any State and 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,
       (ii) on active duty (other than active duty for training) 
     in the Armed Forces of the United States, or
       (iii) the spouse or unmarried dependent child of an 
     individual described in clause (i) or (ii).
       (D) Transition for those currently receiving benefits.--An 
     alien who on the date of the enactment of this Act is 
     lawfully residing in any State and is receiving benefits 
     under such program on the date of the enactment of this Act 
     shall continue to be eligible to receive such benefits until 
     January 1, 1997.
       (3) Designated Federal program defined.--For purposes of 
     this subtitle, the term ``designated Federal program'' means 
     any of the following:
       (A) Temporary assistance for needy families.--The program 
     of block grants to States for temporary assistance for needy 
     families under part A of title IV of the Social Security Act.
       (B) Social services block grant.--The program of block 
     grants to States for social services under title XX of the 
     Social Security Act.
       (C) Medicaid and MediGrant.--The program of medical 
     assistance under title XIX and XXI of the Social Security 
     Act.

     SEC. 12403. FIVE-YEAR LIMITED ELIGIBILITY OF QUALIFIED ALIENS 
                   FOR FEDERAL MEANS-TESTED PUBLIC BENEFIT.

       (a) In General.--Notwithstanding any other provision of law 
     and except as provided in subsection (b), an alien who is a 
     qualified alien (as defined in section 12431) and who enters 
     the United States on or after the date of the enactment of 
     this Act is not eligible for any Federal means-tested public 
     benefit (as defined in subsection (c)) for a period of five 
     years beginning on the date of the alien's entry into the 
     United States with a status within the meaning of the term 
     ``qualified alien''.
       (b) Exceptions.--The limitation under subsection (a) shall 
     not apply to the following aliens:
       (1) Exception for refugees and asylees.--
       (A) An alien who is admitted to the United States as a 
     refugee under section 207 of the Immigration and Nationality 
     Act.
       (B) An alien who is granted asylum under section 208 of 
     such Act.
       (C) An alien whose deportation is being withheld under 
     section 243(h) of such Act.
       (2) Veteran and active duty exception.--An alien who is 
     lawfully residing in any State and is--
       (A) 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,
       (B) on active duty (other than active duty for training) in 
     the Armed Forces of the United States, or
       (C) the spouse or unmarried dependent child of an 
     individual described in subparagraph (A) or (B).
       (c) Federal means-tested Public Benefit Defined.--
       (1) Except as provided in paragraph (2), for purposes of 
     this subtitle, the term ``Federal means-tested public 
     benefit'' means a Federal public benefit providing direct 
     spending (including cash, medical, housing, and food 
     assistance and social services) by the Federal Government in 
     which the eligibility of an individual, household, or family 
     eligibility unit for benefits, or the amount of such 
     benefits, or both are determined on the basis of income, 
     resources, or financial need of the individual, household, or 
     unit.
       (2) Such term does not include the following:
       (A) Emergency medical services under title XIX or XXI of 
     the Social Security Act.
       (B) Short-term, non-cash, in-kind 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)(i) Public health assistance for immunizations.
       (ii) Public health assistance for testing and treatment of 
     a serious communicable disease if the Secretary of Health and 
     Human Services determines that it is necessary to prevent the 
     spread of such disease.
       (F) Payments for foster care and adoption assistance under 
     part B of title IV of the Social Security Act for a child who 
     would, in the absence of subsection (a), 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 described under subsection (a).
       (G) Programs, services, or assistance (such as soup 
     kitchens, crisis counseling and intervention, and short-term 
     shelter) 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 in-kind 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 or safety.

[[Page H 13592]]

       (H) Programs of student assistance under titles IV, V, IX, 
     and X of the Higher Education Act of 1965.
       (I) Means-tested programs under the Elementary and 
     Secondary Education Act of 1965.

       CHAPTER 2--ATTRIBUTION OF INCOME AND AFFIDAVITS OF SUPPORT

     SEC. 12421. ATTRIBUTION OF SPONSOR'S INCOME AND RESOURCES TO 
                   ALIEN.

       (a) In General.--Notwithstanding any other provision of law 
     and except as provided in subsection (c), in determining the 
     eligibility and the amount of benefits of an alien for any 
     means-tested public benefits program (as defined in 
     subsection (e)) the income and resources of the alien shall 
     be deemed to include the following:
       (1) The income and resources of any person who executed an 
     affidavit of support pursuant to section 213A of the 
     Immigration and Nationality Act (as added by section 12422) 
     in behalf of such alien.
       (2) The income and resources of the spouse (if any) of the 
     person.
       (b) Application.--Subsection (a) shall apply with respect 
     to an alien until such time as the alien achieves United 
     States citizenship through naturalization pursuant to chapter 
     2 of title III of the Immigration and Nationality Act.
       (c) Exceptions.--Subsection (a) shall not apply with 
     respect to the following Federal public benefits:
       (1) Emergency medical services under title XIX or XXI of 
     the Social Security Act.
       (2) Short-term, non-cash, in-kind 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)(A) Public health assistance for immunizations.
       (B) Public health assistance for testing and treatment of a 
     serious communicable disease if the Secretary of Health and 
     Human Services determines that it is necessary to prevent the 
     spread of such disease.
       (6) Payments for foster care and adoption assistance under 
     part B of title IV of the Social Security Act for a child who 
     would, in the absence of subsection (a), 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 described under subsection (a).
       (7) Programs, services, or assistance (such as soup 
     kitchens, crisis counseling and intervention, and short-term 
     shelter) specified by the Attorney General, in the Attorney 
     General's sole and unreviewable discretion after consultation 
     with appropriate Federal agencies and departments, which (A) 
     deliver in-kind services at the community level, including 
     through public or private nonprofit agencies; (B) 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 (C) are 
     necessary for the protection of life or safety.
       (8) Programs of student assistance under titles IV, V, IX, 
     and X of the Higher Education Act of 1965.
       (d) Review of Income and Resources of Alien Upon 
     Reapplication.--Whenever an alien is required to reapply for 
     benefits under any means-tested public benefits program, the 
     applicable agency shall review the income and resources 
     attributed to the alien under subsection (a).
       (e) Means-Tested Public Benefits Program Defined.--The term 
     ``means-tested public benefits program'' means a program of 
     Federal public benefits providing direct spending (including 
     cash, medical, housing, and food assistance and social 
     services) by the Federal government in which the eligibility 
     of an individual, household, or family eligibility unit for 
     benefits, or the amount of such benefits, or both are 
     determined on the basis of income, resources, or financial 
     need of the individual, household, or unit.
       (f) Application.--
       (1) If on the date of the enactment of this Act, a means-
     tested public benefits program attributes a sponsor's income 
     and resources to an alien in determining the alien's 
     eligibility and the amount of benefits for an alien, this 
     section shall apply to any such determination beginning on 
     the day after the date of the enactment of this Act.
       (2) If on the date of the enactment of this Act, a means-
     tested public benefits program does not attribute a sponsor's 
     income and resources to an alien in determining the alien's 
     eligibility and the amount of benefits for an alien, this 
     section shall apply to any such determination beginning 180 
     days after the date of the enactment of this Act.

     SEC. 12422. REQUIREMENTS FOR SPONSOR'S AFFIDAVIT OF SUPPORT.

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


           ``requirements for sponsor's affidavit of support

       ``Sec. 213A. (a) Enforceability.--(1) No affidavit of 
     support may be accepted 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) unless such 
     affidavit is executed as a contract--
       ``(A) which is legally enforceable against the sponsor by 
     the sponsored alien, the Federal Government, and by any State 
     (or any political subdivision of such State) which provides 
     any means-tested public benefits program, but not later than 
     10 years after the alien last receives any such benefit;
       ``(B) in which the sponsor agrees to financially support 
     the alien, so that the alien will not become a public charge; 
     and
       ``(C) in which the sponsor agrees to submit to the 
     jurisdiction of any Federal or State court for the purpose of 
     actions brought under subsection (e)(2).
       ``(2) A contract under paragraph (1) shall be enforceable 
     with respect to benefits provided to the alien until such 
     time as the alien achieves United States citizenship through 
     naturalization pursuant to chapter 2 of title III.
       ``(b) Forms.--Not later than 90 days after the date of 
     enactment of this section, the Attorney General, in 
     consultation with the Secretary of State and the Secretary of 
     Health and Human Services, shall formulate an affidavit of 
     support consistent with the provisions of this section.
       ``(c) Remedies.--Remedies available to enforce an affidavit 
     of support under this section include any or all of the 
     remedies described in section 3201, 3203, 3204, or 3205 of 
     title 28, United States Code, as well as an order for 
     specific performance and payment of legal fees and other 
     costs of collection, and include corresponding remedies 
     available under State law. A Federal agency may seek to 
     collect amounts owed under this section in accordance with 
     the provisions of subchapter II of chapter 37 of title 31, 
     United States Code.
       ``(d) Notification of Change of Address.--
       (1) In general.--The sponsor shall notify the Attorney 
     General and the State in which the sponsored alien is 
     currently resident within 30 days of any change of address of 
     the sponsor during the period specified in subsection (a)(2).
       (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 alien 
     has received any means-tested public benefit, not less than 
     $2,000 or more than $5,000.
       ``(e) Reimbursement of Government Expenses.--(1)(A) Upon 
     notification that a sponsored alien has received any benefit 
     under any means-tested public benefits program, the 
     appropriate Federal, State, or local official shall request 
     reimbursement by the sponsor in the amount of such 
     assistance.
       ``(B) The Attorney General, in consultation with the 
     Secretary of Health and Human Services, shall prescribe such 
     regulations as may be necessary to carry out subparagraph 
     (A).
       ``(2) If within 45 days after requesting reimbursement, the 
     appropriate Federal, State, or local agency has not received 
     a response from the sponsor indicating a willingness to 
     commence payments, an action may be brought against the 
     sponsor pursuant to the affidavit of support.
       ``(3) If the sponsor fails to abide by the repayment terms 
     established by such agency, the agency may, within 60 days of 
     such failure, bring an action against the sponsor pursuant to 
     the affidavit of support.
       ``(4) No cause of action may be brought under this 
     subsection later than 10 years after the alien last received 
     any benefit under any means-tested public benefits program.
       ``(5) If, pursuant to the terms of this subsection, a 
     Federal, State, or local agency requests reimbursement from 
     the sponsor in the amount of assistance provided, or brings 
     an action against the sponsor pursuant to the affidavit of 
     support, the appropriate agency may appoint or hire an 
     individual or other person to act on behalf of such agency 
     acting under the authority of law for purposes of collecting 
     any moneys owed. Nothing in this subsection shall preclude 
     any appropriate Federal, State, or local agency from directly 
     requesting reimbursement from a sponsor for the amount of 
     assistance provided, or from bringing an action against a 
     sponsor pursuant to an affidavit of support.
       ``(f) Definitions.--For the purposes of this section--
       ``(1) Sponsor.--The term `sponsor' means an individual 
     who--
       ``(A) is a citizen or national of the United States or an 
     alien who is lawfully admitted to the United States for 
     permanent residence;
       ``(B) is 18 years of age or over;
       ``(C) is domiciled in any State; and
       ``(D) is the person petitioning for the admission of the 
     alien under section 204.
       ``(2) Means-tested public benefits program defined.--The 
     term `means-tested public benefits program' means a program 
     of Federal public benefits providing direct spending 
     (including cash, medical, housing, and food assistance and 
     social services) by the Federal Government in which the 
     eligibility of an individual, household, or family 
     eligibility unit for benefits, or the amount of such 
     benefits, or both are determined on the basis of income, 
     resources, or financial need of the individual, household, or 
     unit.''.
       (b) Clerical Amendment.--The table of contents of such Act 
     is amended by inserting after the item relating to section 
     213 the following:
``Sec. 213A. Requirements for sponsor's affidavit of support.''.
       (c) Effective Date.--Subsection (a) of section 213A of the 
     Immigration and Nationality Act, as inserted by subsection 
     (a) of this section, shall apply to affidavits of support 
     executed on or after a date specified by the Attorney 
     General, which date shall be not earlier than 60 days (and 
     not later than 90 days) after the date the Attorney General 
     formulates the form for such affidavits under subsection (b) 
     of such section.
       (d) Benefits Not Subject to Reimbursement.--Requirements 
     for reimbursement by a sponsor for benefits provided to a 
     sponsored alien pursuant to an affidavit of support under 
     section 213A of the Immigration and Nationality Act shall not 
     apply with respect to the following:
       (1) Emergency medical services under title XIX or XXI of 
     the Social Security Act.
       (2) Short-term, non-cash, in-kind emergency disaster 
     relief.

[[Page H 13593]]

       (3) Assistance or benefits under the National School Lunch 
     Act.
       (4) Assistance or benefits under the Child Nutrition Act of 
     1966.
       (5)(A) Public health assistance for immunizations.
       (B) Public health assistance for testing and treatment of a 
     serious communicable disease if the Secretary of Health and 
     Human Services determines that it is necessary to prevent the 
     spread of such disease.
       (6) Payments for foster care and adoption assistance under 
     part B of title IV of the Social Security Act for a child who 
     would, in the absence of subsection (a), 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 described under subsection (a).
       (7) Programs, services, or assistance (such as soup 
     kitchens, crisis counseling and intervention, and short-term 
     shelter) specified by the Attorney General, in the Attorney 
     General's sole and unreviewable discretion after consultation 
     with appropriate Federal agencies and departments, which (A) 
     deliver in-kind services at the community level, including 
     through public or private nonprofit agencies; (B) 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 (C) are 
     necessary for the protection of life or safety.
       (8) Programs of student assistance under titles IV, V, IX, 
     and X of the Higher Education Act of 1965.

     SEC. 12423. COSIGNATURE OF ALIEN STUDENT LOANS.

       Section 484(b) of the Higher Education Act of 1965 (20 
     U.S.C. 1091(b)) is amended by adding at the end the following 
     new paragraph:
       ``(6) Notwithstanding sections 427(a)(2)(C), 428B(a), 
     428C(b)(4)(A), and 464(c)(1)(E), a student who is an alien 
     lawfully admitted for permanent residence under the 
     Immigration and Nationality Act shall not be eligible for a 
     loan under this title unless the loan is endorsed and 
     cosigned by the alien's sponsor under section 213A of the 
     Immigration and Nationality Act or by another individual who 
     is a United States citizen.''.

                     CHAPTER 3--GENERAL PROVISIONS

     SEC. 12431. DEFINITIONS.

       (a) In General.--Except as otherwise provided in this 
     subtitle, the terms used in this subtitle have the same 
     meaning given such terms in section 101(a) of the Immigration 
     and Nationality Act.
       (b) Qualified Alien.--For purposes of this subtitle, the 
     term ``qualified alien'' means an alien who, at the time the 
     alien applies for, receives, or attempts to receive a Federal 
     public benefit, is--
       (1) an alien who is lawfully admitted for permanent 
     residence under the Immigration and Nationality Act,
       (2) an alien who is granted asylum under section 208 of 
     such Act,
       (3) a refugee who is admitted to the United States under 
     section 207 of such Act,
       (4) an alien who is paroled into the United States under 
     section 212(d)(5) of such Act for a period of at least 1 
     year,
       (5) an alien whose deportation is being withheld under 
     section 243(h) of such Act, or
       (6) an alien who is granted conditional entry pursuant to 
     section 203(a)(7) of such Act as in effect prior to April 1, 
     1980.

     SEC. 12432. REAPPLICATION FOR SSI BENEFITS.

       (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 application of section 
     12402(a)(2)(D), 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.--
       (1) In general.--Not later than 120 days after the date of 
     the enactment of this Act, each individual notified pursuant 
     to subsection (a) who desires to reapply for benefits under 
     title XVI of the Social Security Act shall reapply to the 
     Commissioner of Social Security.
       (2) 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 paragraph (1) 
     pursuant to the procedures of such title XVI.

     SEC. 12433. STATUTORY CONSTRUCTION.

       (a) Limitation.--
       (1) Nothing in this subtitle may be construed as an 
     entitlement or a determination of an individual's eligibility 
     or fulfillment of the requisite requirements for any Federal, 
     State, or local governmental program, assistance, or 
     benefits. For purposes of this subtitle, eligibility relates 
     only to the general issue of eligibility or ineligibility on 
     the basis of alienage.
       (2) Nothing in this subtitle may be construed as addressing 
     alien eligibility for a basic public education as determined 
     by the Supreme Court of the United States under Plyler v. Doe 
     (457 U.S. 202)(1982).
       (b) Not Applicable to Foreign Assistance.--This subtitle 
     does not apply to any Federal, State, or local governmental 
     program, assistance, or benefits provided to an alien under 
     any program of foreign assistance as determined by the 
     Secretary of State in consultation with the Attorney General.
       (c) Severability.--If any provision of this subtitle or the 
     application of such provision to any person or circumstance 
     is held to be unconstitutional, the remainder of this 
     subtitle and the application of the provisions of such to any 
     person or circumstance shall not be affected thereby.
Subtitle E--Teaching Hospital and Graduate Medical Education Trust Fund

                         CHAPTER 1--TRUST FUND

     SEC. 12501. ESTABLISHMENT OF FUND; PAYMENTS TO TEACHING 
                   HOSPITALS.

       The Social Security Act (42 U.S.C. 300 et seq.) is amended 
     by adding after title XXI the following title:

 ``TITLE XXII--TEACHING HOSPITAL AND GRADUATE MEDICAL EDUCATION TRUST 
                                  FUND


                      ``table of contents of title

                    ``Part A--Establishment of Fund

``Sec. 2201. Establishment of Fund.

                ``Part B--Payments to Teaching Hospitals

                  ``Subpart 1--Requirement of Payments

``Sec. 2211. Formula payments to teaching hospitals.
``Sec. 2212. Additional provisions regarding annual payment document.

          ``Subpart 2--Amount Relating to MedicarePlus Program

``Sec. 2221. Determination of amount relating to MedicarePlus program.

  ``Subpart 3--Amount Relating to Indirect Costs of Graduate Medical 
                               Education

``Sec. 2231. Determination of amount relating to indirect costs.
``Sec. 2232. Indirect costs; special rules regarding payments from 
              general account.

   ``Subpart 4--Amount Relating to Direct Costs of Graduate Medical 
                               Education

``Sec. 2241. Determination of amount relating to direct costs.
``Sec. 2242. Direct costs; special rules regarding payments from 
              general account.
``Sec. 2243. Direct costs; authority for payments to consortia of 
              providers.

                    ``Part A--Establishment of Fund

     ``SEC. 2201. ESTABLISHMENT OF FUND.

       ``(a) In General.--There is established in the Treasury of 
     the United States a fund to be known as the Teaching Hospital 
     and Graduate Medical Education Trust Fund (in this title 
     referred to as the `Fund'), consisting of amounts 
     appropriated to the Fund in subsections (d), (f)(3), and (g), 
     and amounts transferred to the Fund under section 1886(j). 
     Amounts in the Fund are available until expended.
       ``(b) Expenditures From Fund.--Amounts in the Fund are 
     available to the Secretary for making payments under section 
     2211.
       ``(c) Accounts in Fund.--There are established within the 
     Fund the following accounts:
       ``(1) The General MedicarePlus Incentive Account.
       ``(2) The General Indirect-Costs Medical Education Account.
       ``(3) The General Direct-Costs Medical Education Account.
       ``(4) The Medicare Indirect-Costs Medical Education 
     Account.
       ``(5) The Medicare Direct-Costs Medical Education Account.
       ``(d) General Transfers to Fund.--
       ``(1) In general.--For fiscal year 1997 and each subsequent 
     fiscal year, there are appropriated to the Fund (effective on 
     the date specified in paragraph (2)), out of any money in the 
     Treasury not otherwise appropriated, the following amounts 
     (as applicable to the fiscal year involved):
       ``(A) For fiscal year 1997, $1,100,000,000.
       ``(B) For fiscal year 1998, $1,300,000,000.
       ``(C) For fiscal year 1999, $2,000,000,000.
       ``(D) For fiscal year 2000, $2,600,000,000.
       ``(E) For fiscal year 2001, $3,100,000,000.
       ``(F) For fiscal year 2002, $3,400,000,000.
       ``(G) For fiscal year 2003 and each subsequent fiscal year, 
     the greater of the amount appropriated for the preceding 
     fiscal year or an amount equal to the product of--
       ``(i) the amount appropriated for the preceding fiscal 
     year; and
       ``(ii) 1 plus the percentage increase in the nominal gross 
     domestic product for the one-year period ending upon July 1 
     of such preceding fiscal year.
       ``(2) Effective date for annual appropriation.--For 
     purposes of paragraph (1), the date specified in this 
     paragraph for a fiscal year is the first day of the fiscal 
     year.
       ``(3) Allocation for general medicareplus incentive 
     account.--Of the amount appropriated in paragraph (1) for a 
     fiscal year, there shall be allocated to the General 
     MedicarePlus Incentive Account the following percentage (as 
     applicable to the fiscal year involved):
       ``(A) For fiscal year 1997, 20 percent.
       ``(B) For fiscal year 1998, 30 percent.
       ``(C) For fiscal year 1999, 40 percent.
       ``(D) For fiscal year 2000 and each subsequent fiscal year, 
     50 percent.
       ``(4) Allocations for general medical education accounts.--
       ``(A) In general.--Of the amount appropriated in paragraph 
     (1) for a fiscal year and remaining after the allocation 
     required in paragraph (3) for the year has been made--
       ``(i) there shall be allocated to the General Indirect-
     Costs Medical Education Account the percentage determined 
     under subparagraph (B)(ii); and
       ``(ii) there shall be allocated to the General Direct-Costs 
     Medical Education Account the percentage determined under 
     subparagraph (B)(iii).
       ``(B) Determination of fixed percentages.--The Secretary of 
     Health and Human Services, acting through the Administrator 
     of the Health Care Financing Administration, shall determine 
     the following:
       ``(i) The total amount of payments that were made under 
     subsections (d)(5)(B) and (h) of section 1886 for fiscal year 
     1994.

[[Page H 13594]]

       ``(ii) The percentage of such total that was constituted by 
     payments under subsection (d)(5)(B) of such section.
       ``(iii) The percentage of such total that was constituted 
     by payments under subsection (h) of such section.
       ``(e) Transfers From Medicare Program.--Amounts shall, in 
     accordance with section 1886(j), be transferred to the Fund 
     from the trust funds established under parts A and B of title 
     XVIII.
       ``(f) Investment.--
       ``(1) In general.--The Secretary of the Treasury shall 
     invest such amounts of the Fund as such Secretary determines 
     are not required to meet current withdrawals from the Fund. 
     Such investments may be made only in interest-bearing 
     obligations of the United States. For such purpose, such 
     obligations may be acquired on original issue at the issue 
     price, or by purchase of outstanding obligations at the 
     market price.
       ``(2) Sale of obligations.--Any obligation acquired by the 
     Fund may be sold by the Secretary of the Treasury at the 
     market price.
       ``(3) Availability of income.--Any interest derived from 
     obligations acquired by the Fund, and proceeds from any sale 
     or redemption of such obligations, are hereby appropriated to 
     the Fund.
       ``(g) Monetary Gifts to Fund.--There are appropriated to 
     the Fund such amounts as may be unconditionally donated to 
     the Federal Government as gifts to the Fund.

                ``Part B--Payments to Teaching Hospitals

                  ``Subpart 1--Requirement of Payments

     ``SEC. 2211. FORMULA PAYMENTS TO TEACHING HOSPITALS.

       ``(a) In General.--Subject to subsection (d), in the case 
     of each teaching hospital that in accordance with subsection 
     (b) submits to the Secretary a payment document for fiscal 
     year 1997 or any subsequent fiscal year, the Secretary shall 
     make payments for the year to the teaching hospital for the 
     direct and indirect costs of operating approved medical 
     residency training programs. Such payments shall be made from 
     the Fund, and the total of the payments to the hospital for 
     the fiscal year shall equal the sum of the following:
       ``(1) An amount determined under section 2221 (relating to 
     the MedicarePlus program).
       ``(2) An amount determined under section 2231 (relating to 
     the indirect costs of graduate medical education).
       ``(3) An amount determined under section 2241 (relating to 
     the direct costs of graduate medical education).
       ``(b) Payment Document.--For purposes of subsection (a), a 
     payment document is a document containing such information as 
     may be necessary for the Secretary to make payments under 
     such subsection to a teaching hospital during a fiscal year. 
     The document is submitted in accordance with this subsection 
     if the document is submitted not later than the date 
     specified by the Secretary, and the document is in such form 
     and is made in such manner as the Secretary may require. This 
     subsection is subject to section 2212.
       ``(c) Periodic Payments.--Payments under subsection (a) for 
     a teaching hospital for a fiscal year shall be made 
     periodically, at such intervals and in such amounts as the 
     Secretary determines to be appropriate (subject to applicable 
     Federal law regarding Federal payments).
       ``(d) Special Rules.--
       ``(1) Payments to consortia of providers.--In the case of 
     payments under subsection (a) that are determined under 
     section 2241:
       ``(A) The requirement under such subsection to make the 
     payments to teaching hospitals is subject to the authority of 
     the Secretary under section 2243(a) to make payments to 
     qualifying consortia.
       ``(B) If the Secretary authorizes payments to a consortium 
     under section 2243(a), subsections (a) and (b) of this 
     section (other than subsection (a)(2)) apply to the 
     consortium to the same extent and in the same manner as the 
     subsections apply to teaching hospitals.
       ``(2) Hospitals in states with certain demonstration 
     projects.--Paragraph (2) of subsection (a) is subject to 
     section 2232(d)(1)(B), and paragraph (3) of such subsection 
     is subject to section 2242(d)(1)(B).
       ``(e) Administrator of Programs.--This part, and the 
     subsequent parts of this title, shall be carried out by the 
     Secretary acting through the Administrator of the Health Care 
     Financing Administration.
       ``(f) Approved Medical Residency Training Program .--For 
     purposes of this title, the term `approved medical residency 
     training program' has the meaning given such term in section 
     1886(h)(5)(A).

     ``SEC. 2212. ADDITIONAL PROVISIONS REGARDING ANNUAL PAYMENT 
                   DOCUMENT.

       (a) Periodic Reports.--In collecting information under 
     section 2211(b), the Secretary may require that information 
     be submitted to the Secretary in periodic reports.
       ``(b) Information Relating to Medicare Program.--
     Information collected by the Secretary under section 2211(b) 
     with respect to a teaching hospital for a fiscal year shall 
     include information on the following:
       ``(1) The number of inpatient discharges for the fiscal 
     year attributable to individuals enrolled in the MedicarePlus 
     program under part C of title XVIII.
       ``(2) For each discharge with respect to which payment is 
     received from the Secretary pursuant to part A of title 
     XVIII, the diagnosis-related group within which the discharge 
     is classified (as determined in accordance with section 
     1886(d)(4)(A)).
       ``(3) The medicare patient load of the hospital (as defined 
     in section 1886(h)(3)(C)).

          ``Subpart 2--Amount Relating to MedicarePlus Program

     ``SEC. 2221. DETERMINATION OF AMOUNT RELATING TO MEDICAREPLUS 
                   PROGRAM.

       ``(a) In General.--For purposes of section 2211(a)(1), the 
     amount determined under this section for a teaching hospital 
     for a fiscal year is the product of--
       ``(1) the amount in the General MedicarePlus Incentive 
     Account on the date specified in section 2201(d)(2) (once the 
     appropriation under such section is made); and
       ``(2) the percentage determined for the hospital under 
     subsection (b) for the fiscal year.
       ``(b) Annual Hospital-Specific Percentage.--For purposes of 
     subsection (a)(2), the percentage determined under this 
     subsection for a teaching hospital for a fiscal year is the 
     percentage constituted by the ratio of--
       ``(1) the number of inpatient discharges for the fiscal 
     year attributable to individuals enrolled in the MedicarePlus 
     program under part C of title XVIII; to
       ``(2) the sum of the respective numbers determined under 
     paragraph (1) for the fiscal year for all teaching hospitals.

  ``Subpart 3--Amount Relating to Indirect Costs of Graduate Medical 
                               Education

     ``SEC. 2231. DETERMINATION OF AMOUNT RELATING TO INDIRECT 
                   COSTS.

       ``(a) In General.--For purposes of section 2211(a)(2), the 
     amount determined under this section for a teaching hospital 
     for a fiscal year is the sum of--
       ``(1) the amount determined under subsection (b) (relating 
     to the General Indirect-Costs Medical Education Account); and
       ``(2) the amount determined under subsection (c) (relating 
     to the Medicare Indirect-Costs Medical Education Account), 
     subject to section 2232(d)(1)(B).
       ``(b) Payment From General Account.--
       ``(1) In general.--For purposes of subsection (a)(1), the 
     amount determined under this subsection for a teaching 
     hospital for a fiscal year is the product of--
       ``(A) the amount in the General Indirect-Costs Medical 
     Education Account on the date specified in section 2201(d)(2) 
     (once the appropriation under such section is made); and
       ``(B) the percentage determined for the hospital under 
     paragraph (2).
       ``(2) Fixed hospital-specific percentage.--
       ``(A) In general.--For purposes of paragraph (1)(B), the 
     percentage determined under this paragraph for a teaching 
     hospital is the mean average of the respective percentages 
     determined under subparagraph (C) for each fiscal year of the 
     applicable period (as defined in subparagraph (B)), adjusted 
     by the Secretary (upward or downward, as the case may be) on 
     a pro rata basis to the extent necessary to ensure that the 
     sum of the percentages determined under this paragraph for 
     all teaching hospitals is equal to 100 percent. The preceding 
     sentence is subject to section 2232.
       ``(B) Applicable period regarding relevant data; fiscal 
     years 1992 through 1994.--For purposes of this part, the term 
     `applicable period' means the period beginning on the first 
     day of fiscal year 1992 and continuing through the end of 
     fiscal year 1994.
       ``(C) Respective determinations for fiscal years of 
     applicable period.--For purposes of subparagraph (A), the 
     percentage determined under this subparagraph for a teaching 
     hospital for a fiscal year of the applicable period is the 
     percentage constituted by the ratio of--
       ``(i) the total amount of payments received by the hospital 
     under section 1886(d)(5)(B) for discharges occurring during 
     the fiscal year involved; to
       ``(ii) the sum of the respective amounts determined under 
     clause (i) for the fiscal year for all teaching hospitals.
       ``(3) Availability of data.--If a teaching hospital 
     received the payments specified in paragraph (2)(C)(i) during 
     the applicable period but a complete set of the relevant data 
     is not available to the Secretary for purposes of determining 
     an amount under such paragraph for the fiscal year involved, 
     the Secretary shall for purposes of such subsection make an 
     estimate on the basis of such data as are available to the 
     Secretary for the applicable period.
       ``(c) Payment From Medicare Account.--For purposes of 
     subsection (a)(2), the amount determined under this 
     subsection for a teaching hospital for a fiscal year is an 
     amount determined in accordance with the methodology in 
     effect under section 1886(d)(5)(B) for such year. Payments 
     made under section 2211 pursuant to the preceding sentence 
     shall be made from the Medicare Indirect-Costs Medical 
     Education Account.

     ``SEC. 2232. INDIRECT COSTS; SPECIAL RULES REGARDING PAYMENTS 
                   FROM GENERAL ACCOUNT.

       ``(a) Special Rule Regarding Fiscal Years 1995 and 1996.--
       ``(1) In general.--In the case of a teaching hospital whose 
     first payments under section 1886(d)(5)(B) were for 
     discharges occurring in fiscal year 1995 or in fiscal year 
     1996 (referred to in this subsection individually as a `first 
     payment year'), the percentage determined under paragraph (2) 
     for the hospital is deemed to be the percentage applicable 
     under section 2231(b)(2) to the hospital, subject to 
     paragraph (3).
       ``(2) Determination of fixed percentage.--For purposes of 
     paragraph (1), the percentage determined under this paragraph 
     for a teaching hospital is the percentage constituted by the 
     ratio of the amount determined under subparagraph (A) to the 
     amount determined under subparagraph (B), as follows:
       ``(A)(i) If the first payment year for the hospital is 
     fiscal year 1995, the amount determined under this 
     subparagraph is the total amount of payments received by the 
     hospital under section 1886(d)(5)(B) for discharges occurring 
     during fiscal year 1995.
       ``(ii) If the first payment year for the hospital is fiscal 
     year 1996, the amount determined under 

[[Page H 13595]]
     this subparagraph is an amount equal to an estimate by the Secretary of 
     the total amount of payments that would have been paid to the 
     hospital under section 1886(d)(5)(B) for discharges occurring 
     during fiscal year 1995 if such section, as in effect for 
     fiscal year 1996, had applied to the hospital for discharges 
     occurring during fiscal year 1995.
       ``(B)(i) If the first payment year for the hospital is 
     fiscal year 1995, the amount determined under this 
     subparagraph is the aggregate total of the payments received 
     by teaching hospitals under section 1886(d)(5)(B) for 
     discharges occurring during fiscal year 1995.
       ``(ii) If the first payment year for the hospital is fiscal 
     year 1996--
       ``(I) the Secretary shall make an estimate in accordance 
     with subparagraph (A)(ii) for all teaching hospitals; and
       ``(II) the amount determined under this subparagraph is the 
     sum of the estimates made by the Secretary under subclause 
     (I).
       ``(3) Adjustment of percentage.--The percentage determined 
     under paragraph (2) shall be adjusted by the Secretary in 
     accordance with section 2231(b)(2)(A) to the extent 
     determined by the Secretary to be necessary with respect to a 
     sum that equals 100 percent.
       ``(b) New Teaching Hospitals.--
       ``(1) In general.--In the case of a teaching hospital that 
     did not receive payments under section 1886(d)(5)(B) for any 
     of the fiscal years 1992 through 1996, the percentage 
     determined under paragraph (3) for the hospital is deemed to 
     be the percentage applicable under section 2231(b)(2) to the 
     hospital, subject to paragraphs (4) and (5).
       ``(2) Designated fiscal year regarding data.--The 
     determination under paragraph (3) of a percentage for a 
     teaching hospital described in paragraph (1) shall be made 
     for the most recent fiscal year for which the Secretary has 
     sufficient data to make the determination (referred to in 
     this subsection as the `designated fiscal year').
       ``(3) Determination of fixed percentage.--For purposes of 
     paragraph (1), the percentage determined under this paragraph 
     for the teaching hospital involved is the percentage 
     constituted by the ratio of the amount determined under 
     subparagraph (A) to the amount determined under subparagraph 
     (B), as follows:
       ``(A) The amount determined under this subparagraph is an 
     amount equal to an estimate by the Secretary of the total 
     amount of payments that would have been paid to the hospital 
     under section 1886(d)(5)(B) for the designated fiscal year if 
     such section, as in effect for the first fiscal year for 
     which payments pursuant to this subsection are to be made to 
     the hospital, had applied to the hospital for the designated 
     fiscal year.
       ``(B) The Secretary shall make an estimate in accordance 
     with subparagraph (A) for all teaching hospitals. The amount 
     determined under this subparagraph is the sum of the 
     estimates made by the Secretary under the preceding sentence.
       ``(4) Adjustment of percentage.--The percentage determined 
     under paragraph (3) shall be adjusted by the Secretary in 
     accordance with section 2231(b)(2)(A) to the extent 
     determined by the Secretary to be necessary with respect to a 
     sum that equals 100 percent.
       ``(5) Limitation.--This subsection does not apply to a 
     teaching hospital described in paragraph (1) if the hospital 
     is in a State for which a demonstration project under section 
     1814(b)(3) is in effect.
       ``(c) Consolidations and Mergers.--In the case of two or 
     more teaching hospitals that have each received payments 
     pursuant to section 2231 for one or more fiscal years and 
     that undergo a consolidation or merger, the percentage 
     applicable to the resulting teaching hospital for purposes of 
     section 2231(b)(2) is the sum of the respective percentages 
     that would have applied pursuant to such section if the 
     hospitals had not undergone the consolidation or merger.
       ``(d) States With Certain Demonstration Projects.--
       ``(1) In general.--In the case of a teaching hospital in a 
     State for which a demonstration project under section 
     1814(b)(3) is in effect--
       ``(A) the percentage determined under paragraph (2) for the 
     hospital is deemed to be the percentage applicable under 
     section 2231(b)(2) to the hospital; and
       ``(B) the hospital is not eligible for any payments from 
     the Medicare Indirect-Costs Medical Education Account.
       ``(2) Determination of fixed percentage.--For purposes of 
     paragraph (1)(A):
       ``(A) The Secretary shall make an estimate of the total 
     amount of payments that would have been received under 
     section 1886(d)(5)(b) by the hospital involved with respect 
     to each of the fiscal years of the applicable period if such 
     section (as in effect for such fiscal years) had applied to 
     the hospital for such years.
       ``(B) The percentage determined under this paragraph for 
     the hospital for a fiscal year is a mean average percentage 
     determined for the hospital in accordance with the 
     methodology of section 2231(b)(2), except that the estimate 
     made by the Secretary under subparagraph (A) of this 
     paragraph for a fiscal year of the applicable period is 
     deemed to be the amount that applies for purposes of section 
     2231(b)(2)(C)(i) for such year.

   ``Subpart 4--Amount Relating to Direct Costs of Graduate Medical 
                               Education

     ``SEC. 2241. DETERMINATION OF AMOUNT RELATING TO DIRECT 
                   COSTS.

       ``(a) In General.--For purposes of section 2211(a)(3), the 
     amount determined under this section for a teaching hospital 
     for a fiscal year is the sum of--
       ``(1) the amount determined under subsection (b) (relating 
     to the General Direct-Costs Medical Education Account); and
       ``(2) the amount determined under subsection (c) (relating 
     to the Medicare Direct-Costs Medical Education Account), 
     subject to section 2242(d)(1)(B).
       ``(b) Payment From General Account.--
       ``(1) In general.--For purposes of subsection (a)(1), the 
     amount determined under this subsection for a teaching 
     hospital for a fiscal year is the product of--
       ``(A) the amount in the General Direct-Costs Medical 
     Education Account on the applicable date under section 
     2201(d)(2) (once the appropriation under such section is 
     made); and
       ``(B) the percentage determined for the hospital under 
     paragraph (2).
       ``(2) Fixed hospital-specific percentage.--
       ``(A) In general.--For purposes of paragraph (1)(B), the 
     percentage determined under this paragraph for a teaching 
     hospital is the mean average of the respective percentages 
     determined under subparagraph (B) for each fiscal year of the 
     applicable period (as defined in section 2231(b)(2)(B)), 
     adjusted by the Secretary (upward or downward, as the case 
     may be) on a pro rata basis to the extent necessary to ensure 
     that the sum of the percentages determined under this 
     subparagraph for all teaching hospitals is equal to 100 
     percent. The preceding sentence is subject to section 2242.
       ``(B) Respective determinations for fiscal years of 
     applicable period.--For purposes of subparagraph (A), the 
     percentage determined under this subparagraph for a teaching 
     hospital for a fiscal year of the applicable period is the 
     percentage constituted by the ratio of--
       ``(i) the total amount of payments received by the hospital 
     under section 1886(h) for cost reporting periods beginning 
     during the fiscal year involved; to
       ``(ii) the sum of the respective amounts determined under 
     clause (i) for the fiscal year for all teaching hospitals.
       ``(3) Availability of data.--If a teaching hospital 
     received the payments specified in paragraph (2)(B)(i) during 
     the applicable period but a complete set of the relevant data 
     is not available to the Secretary for purposes of determining 
     an amount under such paragraph for the fiscal year involved, 
     the Secretary shall for purposes of such paragraph make an 
     estimate on the basis of such data as are available to the 
     Secretary for the applicable period.
       ``(c) Payment From Medicare Account.--For purposes of 
     subsection (a)(2), the amount determined under this 
     subsection for a teaching hospital for a fiscal year is an 
     amount determined in accordance with the methodology in 
     effect under section 1886(h) for such year. Payments made 
     under section 2211 pursuant to the preceding sentence shall 
     be made from the Medicare Direct-Costs Medical Education 
     Account.

     ``SEC. 2242. DIRECT COSTS; SPECIAL RULES REGARDING PAYMENTS 
                   FROM GENERAL ACCOUNT.

       ``(a) Special Rule Regarding Fiscal Years 1995 and 1996.--
       ``(1) In general.--In the case of a teaching hospital whose 
     first payments under section 1886(h) were for the cost 
     reporting period beginning in fiscal year 1995 or in fiscal 
     year 1996 (referred to in this subsection individually as a 
     `first payment year'), the percentage determined under 
     paragraph (2) for the hospital is deemed to be the percentage 
     applicable under section 2241(b)(2) to the hospital, subject 
     to paragraph (3).
       ``(2) Determination of fixed percentage.--For purposes of 
     paragraph (1), the percentage determined under this paragraph 
     for a teaching hospital is the percentage constituted by the 
     ratio of the amount determined under subparagraph (A) to the 
     amount determined under subparagraph (B), as follows:
       ``(A)(i) If the first payment year for the hospital is 
     fiscal year 1995, the amount determined under this 
     subparagraph is the total amount of payments received by the 
     hospital under section 1886(h) for cost reporting periods 
     beginning in fiscal year 1995.
       ``(ii) If the first payment year for the hospital is fiscal 
     year 1996, the amount determined under this subparagraph is 
     an amount equal to an estimate by the Secretary of the total 
     amount of payments that would have been paid to the hospital 
     under section 1886(h) for cost reporting periods beginning in 
     fiscal year 1995 if such section, as in effect for fiscal 
     year 1996, had applied to the hospital for fiscal year 1995.
       ``(B)(i) If the first payment year for the hospital is 
     fiscal year 1995, the amount determined under this 
     subparagraph is the aggregate total of the payments received 
     by teaching hospitals under section 1886(h) for cost 
     reporting periods beginning in fiscal year 1995.
       ``(ii) If the first payment year for the hospital is fiscal 
     year 1996--
       ``(I) the Secretary shall make an estimate in accordance 
     with subparagraph (A)(ii) for all teaching hospitals; and
       ``(II) the amount determined under this subparagraph is the 
     sum of the estimates made by the Secretary under subclause 
     (I).
       ``(3) Adjustment of percentage.--The percentage determined 
     under paragraph (2) shall be adjusted by the Secretary in 
     accordance with section 2241(b)(2)(A) to the extent 
     determined by the Secretary to be necessary with respect to a 
     sum that equals 100 percent.
       ``(b) New Teaching Hospitals.--
       ``(1) In general.--In the case of a teaching hospital that 
     did not receive payments under section 1886(h) for any of the 
     fiscal years 1992 through 1996, the percentage determined 
     under paragraph (3) for the hospital is deemed to be the 
     percentage applicable under section 2241(b)(2) to the 
     hospital, subject to paragraphs (4) and (5).
       ``(2) Designated fiscal year regarding data.--The 
     determination under paragraph (3) of a percentage for a 
     teaching hospital described in paragraph (1) shall be made 
     for the most recent fiscal year for which the Secretary has 
     sufficient data to make the determination (referred 

[[Page H 13596]]
     to in this subsection as the `designated fiscal year').
       ``(3) Determination of fixed percentage.--For purposes of 
     paragraph (1), the percentage determined under this paragraph 
     for the teaching hospital involved is the percentage 
     constituted by the ratio of the amount determined under 
     subparagraph (A) to the amount determined under subparagraph 
     (B), as follows:
       ``(A) The amount determined under this subparagraph is an 
     amount equal to an estimate by the Secretary of the total 
     amount of payments that would have been paid to the hospital 
     under section 1886(h) for the designated fiscal year if such 
     section, as in effect for the first fiscal year for which 
     payments pursuant to this subsection are to be made to the 
     hospital, had applied to the hospital for cost reporting 
     periods beginning in the designated fiscal year.
       ``(B) The Secretary shall make an estimate in accordance 
     with subparagraph (A) for all teaching hospitals. The amount 
     determined under this subparagraph is the sum of the 
     estimates made by the Secretary under the preceding sentence.
       ``(4) Adjustment of percentage.--The percentage determined 
     under paragraph (3) shall be adjusted by the Secretary in 
     accordance with section 2223(b)(2)(A) to the extent 
     determined by the Secretary to be necessary with respect to a 
     sum that equals 100 percent.
       ``(5) Limitation.--This subsection does not apply to a 
     teaching hospital described in paragraph (1) if the hospital 
     is in a State for which a demonstration project under section 
     1814(b)(3) is in effect.
       ``(c) Consolidations and Mergers.--In the case of two or 
     more teaching hospitals that have each received payments 
     pursuant to section 2241 for one or more fiscal years and 
     that undergo a consolidation or merger, the percentage 
     applicable to the resulting teaching hospital for purposes of 
     section 2241(b)(2) is the sum of the respective percentages 
     that would have applied pursuant to such section if the 
     hospitals had not undergone the consolidation or merger.
       ``(d) States With Certain Demonstration Projects.--
       ``(1) In general.--In the case of a teaching hospital in a 
     State for which a demonstration project under section 
     1814(b)(3) is in effect--
       ``(A) the percentage determined under paragraph (2) for the 
     hospital is deemed to be the percentage applicable under 
     section 2241(b)(2) to the hospital; and
       ``(B) the hospital is not eligible for any payments from 
     the Medicare Direct-Costs Medical Education Account.
       ``(2) Determination of fixed percentage.--For purposes of 
     paragraph (1)(A):
       ``(A) The Secretary shall make an estimate of the total 
     amount of payments that would have been received under 
     section 1886(h) by the hospital involved with respect to each 
     of the fiscal years of the applicable period if such section 
     (as in effect for such fiscal years) had applied to the 
     hospital for such years.
       ``(B) The percentage determined under this paragraph for 
     the hospital for a fiscal year is a mean average percentage 
     determined for the hospital in accordance with the 
     methodology of section 2241(b)(2), except that the estimate 
     made by the Secretary under subparagraph (A) of this 
     paragraph for a fiscal year of the applicable period is 
     deemed to be the amount that applies for purposes of section 
     2241(b)(2)(B)(i) for such year.

     ``SEC. 2243. DIRECT COSTS; AUTHORITY FOR PAYMENTS TO 
                   CONSORTIA OF PROVIDERS.

       ``(a) In General.--In lieu of making payments to teaching 
     hospitals pursuant to sections 2221 and 2241, the Secretary 
     may make payments under this section to consortia that meet 
     the requirements of subsection (b).
       ``(b) Qualifying Consortium.--For purposes of subsection 
     (a), a consortium meets the requirements of this subsection 
     if the consortium is in compliance with the following:
       ``(1) The consortium consists of a teaching hospital and 
     one or more of the following entities:
       ``(A) Schools of allopathic medicine or osteopathic 
     medicine.
       ``(B) Other teaching hospitals.
       ``(C) Approved medical residency training programs.
       ``(D) Federally qualified health centers.
       ``(E) Medical group practices.
       ``(F) Managed care entities.
       ``(G) Entities furnishing outpatient services.
       ``(H) Such other entities as the Secretary determines to be 
     appropriate.
       ``(2) The members of the consortium have agreed to 
     collaborate in the programs of graduate medical education 
     that are operated by such members.
       ``(3) With respect to the receipt by the consortium of 
     payments made pursuant to this section, the members of the 
     consortium have agreed on a method for allocating the 
     payments among the members.
       ``(4) The consortium meets such additional requirements as 
     the Secretary may establish.
       ``(c) Payments From Accounts.--The total amount of payments 
     to a qualifying consortium for a fiscal year pursuant to 
     subsection (a) shall be the sum of--
       ``(1) the aggregate amount determined for the teaching 
     hospitals of the consortium pursuant to section 2221(a) 
     (relating to the General MedicarePlus Incentive Account);
       ``(2) the aggregate amount determined for the teaching 
     hospitals of the consortium pursuant to section 2241(a)(1) 
     (relating to the General Direct-Costs Account); and
       ``(3) an amount determined for the consortium in accordance 
     with the methodology in effect under section 1886(j)(2)(C)(i) 
     for the fiscal year (relating to the Medicare Direct-Costs 
     Account).
       ``(d) Definition.--For purposes of this title, the term 
     `qualifying consortium' means a consortium that meets the 
     requirements of subsection (b).''.

               CHAPTER 2--AMENDMENTS TO MEDICARE PROGRAM

     SEC. 12511. TRANSFER OF FUNDS.

       Section 1886 (42 U.S.C. 1395ww) is amended--
       (1) in subsection (d)(5)(B), in the matter preceding clause 
     (i), by striking ``The Secretary shall provide'' and 
     inserting the following: ``For discharges occurring on or 
     before September 30, 1996, the Secretary shall provide'';
       (2) in subsection (h)--
       (A) in paragraph (1), in the first sentence, by striking 
     ``the Secretary shall provide'' and inserting ``the Secretary 
     shall, subject to paragraph (6), provide''; and
       (B) by adding at the end the following paragraph:
       ``(6) Limitation.--
       ``(A) In general.--The authority to make payments under 
     this subsection applies only with respect to cost reporting 
     periods ending on or before September 30, 1996, except as 
     provided in subparagraph (B).
       ``(B) Rule regarding portion of last cost reporting 
     period.--In the case of a cost reporting period that extends 
     beyond September 30, 1996, payments under this subsection 
     shall be made with respect to such portion of the period as 
     has lapsed as of such date.
       ``(C) Rule of construction.--This paragraph may not be 
     construed as authorizing any payment under section 1861(v) 
     with respect to graduate medical education.''; and
       (3) by adding at the end the following subsection:
       ``(j) Transfers to Teaching Hospital and Graduate Medical 
     Education Trust Fund.--
       ``(1) Indirect costs of medical education.--
       ``(A) In general.--From the Federal Hospital Insurance 
     Trust Fund, the Secretary shall, for fiscal year 1997 and 
     each subsequent fiscal year, transfer to the Medicare 
     Indirect-Costs Medical Education Account under section 2201 
     an amount determined by the Secretary in accordance with 
     subparagraph (B).
       ``(B) Determination of amounts.--The Secretary shall make 
     an estimate for the fiscal year involved of the nationwide 
     total of the amounts that would have been paid under 
     subsection (d)(5)(B) to hospitals during the fiscal year if 
     such payments had not been terminated for discharges 
     occurring after September 30, 1996. For purposes of 
     subparagraph (A), the amount determined under this 
     subparagraph for the fiscal year is the estimate made by the 
     Secretary under the preceding sentence.
       ``(C) Supplemental transfers.--If the Secretary determines 
     that the amount of a transfer under subparagraph (A) for a 
     fiscal year is insufficient for making payments in the 
     amounts required pursuant to section 2231(a)(2) for the year, 
     the Secretary shall make such additional transfers for the 
     year between the funds and accounts involved as the Secretary 
     determines to be necessary for making the payments.
       ``(2) Direct costs of medical education.--
       ``(A) In general.--From the Federal Hospital Insurance 
     Trust Fund and the Federal Supplementary Medical Insurance 
     Trust Fund, the Secretary shall, for fiscal year 1997 and 
     each subsequent fiscal year, transfer to the Medicare Direct-
     Costs Medical Education Account (under section 2201) the sum 
     of--
       ``(i) an amount determined by the Secretary in accordance 
     with subparagraph (B); and
       ``(ii) as applicable, an amount determined by the Secretary 
     in accordance with subparagraph (C)(ii).
       ``(B) Determination of amounts.--For each hospital (other 
     than a hospital that is a member of a qualifying consortium 
     referred to in subparagraph (C)), the Secretary shall make an 
     estimate for the fiscal year involved of the amount that 
     would have been paid under subsection (h) to the hospital 
     during the fiscal year if such payments had not been 
     terminated for cost reporting periods ending on or before 
     September 30, 1996. For purposes of subparagraph (A)(i), the 
     amount determined under this subparagraph for the fiscal year 
     is the sum of all estimates made by the Secretary under the 
     preceding sentence.
       ``(C) Estimates regarding qualifying consortia.--If the 
     Secretary authorizes payments under section 2243(a) to one or 
     more qualifying consortia, the Secretary shall carry out the 
     following:
       ``(i) The Secretary shall establish a methodology for 
     making payments to qualifying consortia with respect to the 
     reasonable direct costs of such consortia in carrying out 
     programs of graduate medical education. The methodology shall 
     be the methodology established in subsection (h), modified to 
     the extent necessary to take into account the participation 
     in such programs of entities other than hospitals.
       ``(ii) For each qualifying consortium, the Secretary shall 
     make an estimate for the fiscal year involved of the amount 
     that would have been paid to the consortium during the fiscal 
     year if, using the methodology under clause (i), payments had 
     been made to the consortium for the fiscal year as 
     reimbursements with respect to cost reporting periods. For 
     purposes of subparagraph (A)(ii), the amount determined under 
     this clause for the fiscal year is the sum of all estimates 
     made by the Secretary under the preceding sentence.
       ``(D) Allocation between funds.--In providing for a 
     transfer under subparagraph (A) for a fiscal year, the 
     Secretary shall provide for an allocation of the amounts 
     involved between part A and part B (and the trust funds 
     established under the respective parts) as reasonably 
     reflects the proportion of direct graduate medical education 
     costs of hospitals associated with the provision of services 
     under each respective part.
       ``(E) Supplemental transfers.--If the Secretary determines 
     that the amount of a transfer 

[[Page H 13597]]
     under subparagraph (A) for a fiscal year is insufficient for making 
     payments in the amounts required pursuant to sections 
     2241(a)(2) and 2243(c)(3) for the year, the Secretary shall 
     make such additional transfers for the year between the funds 
     and accounts involved as the Secretary determines to be 
     necessary for making the payments.
       ``(3) Applicability of certain amendments.--Amendments made 
     to subsection (d)(5)(B) and subsection (h) that are effective 
     on or after October 1, 1996, apply only for purposes of 
     estimates under paragraphs (1) and (2) and for purposes of 
     determining the amount of payments under 2211. Such 
     amendments do not require any adjustment to amounts paid 
     under subsection (d)(5)(B) or (h) with respect to fiscal year 
     1996 or any prior fiscal year.
       ``(4) Relationship to certain demonstration projects.--In 
     the case of a State for which a demonstration project under 
     section 1814(b)(3) is in effect, the Secretary, in making 
     determinations of the rates of increase under such section, 
     shall include all amounts transferred under this subsection. 
     Such amounts shall be so included to the same extent and in 
     the same manner as amounts determined under subsections 
     (d)(5)(B) and (h) were included in such determination under 
     the provisions of this title in effect on September 30, 
     1996.''.

                      Title XII--Other Provisions

                 Subtitle F--National Defense Stockpile

     SEC. 12601. DISPOSAL OF CERTAIN MATERIALS IN NATIONAL DEFENSE 
                   STOCKPILE FOR DEFICIT REDUCTION.

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


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

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

     SEC. 12701. ESTABLISHMENT OF PROGRAM.

       Title IV of the Social Security Act (42 U.S.C. 601 et seq.) 
     is amended by striking subpart 2 of part B and inserting the 
     following:

``Subpart 2--Block Grants to States for the Protection of Children and 
       Matching Payments for Foster Care and Adoption Assistance

     ``SEC. 430. ELIGIBLE STATES.

       ``(a) In General.--As used in this subpart, the term 
     `eligible State' means a State that has submitted to the 
     Secretary, not later than October 1, 1996, and every 3 years 
     thereafter, a plan which has been signed by the chief 
     executive officer of the State and that includes the 
     following:
       ``(1) Outline of child protection program.--A written 
     document that outlines the activities the State intends to 
     conduct to achieve the child protection goals of the program 
     funded under this subpart, including the procedures to be 
     used for--
       ``(A) receiving and assessing reports of child abuse or 
     neglect;
       ``(B) investigating such reports;
       ``(C) with respect to families in which abuse or neglect 
     has been confirmed, providing services or referral for 
     services for families and children where the State makes a 
     determination that the child may safely remain with the 
     family;
       ``(D) protecting children by removing them from dangerous 
     settings and ensuring their placement in a safe environment;
       ``(E) providing training for individuals mandated to report 
     suspected cases of child abuse or neglect;
       ``(F) protecting children in foster care;
       ``(G) promoting timely adoptions;
       ``(H) protecting the rights of families, using adult 
     relatives as the preferred placement for children separated 
     from their parents where such relatives meet the relevant 
     State child protection standards;
       ``(I) providing services to individuals, families, or 
     communities, either directly or through referral, that are 
     aimed at preventing the occurrence of child abuse and 
     neglect; and
       ``(J) establishing and responding to citizen review panels 
     under section 434.
       ``(2) Certification of state law requiring the reporting of 
     child abuse and neglect.--A certification that the State has 
     in effect laws that require public officials and other 
     professionals to report, in good faith, actual or suspected 
     instances of child abuse or neglect.
       ``(3) Certification of procedures for screening, safety 
     assessment, and prompt investigation.--A certification that 
     the State has in effect procedures for receiving and 
     responding to reports of child abuse or neglect, including 
     the reports described in paragraph (2), and for the immediate 
     screening, safety assessment, and prompt investigation of 
     such reports.
       ``(4) Certification of state procedures for removal and 
     placement of abused or neglected children.--A certification 
     that the State has in effect procedures for the removal from 
     families and placement of abused or neglected children and of 
     any other child in the same household who may also be in 
     danger of abuse or neglect.
       ``(5) Certification of provisions for immunity from 
     prosecution.--A certification that the State has in effect 
     laws requiring immunity from prosecution under State and 
     local laws and regulations for individuals making good faith 
     reports of suspected or known instances of child abuse or 
     neglect.
       ``(6) Certification of provisions and procedures for 
     expungement of certain records.--A certification that the 
     State has in effect laws and procedures requiring the 
     facilitation of the prompt expungement of any records that 
     are accessible to the general public or are used for purposes 
     of employment or other background checks in cases determined 
     to be unsubstantiated or false.
       ``(7) Certification of provisions and procedures relating 
     to appeals.--A certification that not later then 2 years 
     after the date of the enactment of this subpart, the State 
     shall have laws and procedures in effect affording 
     individuals an opportunity to appeal an official finding of 
     abuse or neglect.
       ``(8) Certification of state procedures for developing and 
     reviewing written plans for permanent placement of removed 
     children.--A certification that the State has in effect 
     procedures for ensuring that a written plan is prepared for 
     children who have been removed from their families. Such plan 
     shall specify the goals for achieving a permanent placement 
     for the child in a timely fashion, for ensuring that the 
     written plan is reviewed every 6 months (until such placement 
     is achieved), and for ensuring that information about such 
     children is collected regularly and recorded in case records, 
     and include a description of such procedures.
       ``(9) Certification of state program to provide independent 
     living services.--A certification that the State has in 
     effect a program to provide independent living services, for 
     assistance in making the transition to self-sufficient 
     adulthood, to individuals in the child protection program of 
     the State who are 16, but who are not 20 (or, at the option 
     of the State, 22), years of age, and who do not have a family 
     to which to be returned.
       ``(10) Certification of state procedures to respond to 
     reporting of medical neglect of disabled infants.--
       ``(A) In general.--A certification that the State has in 
     place for the purpose of responding to the reporting of 
     medical neglect of infants (including instances of 
     withholding of medically indicated treatment from disabled 
     infants with life-threatening conditions), procedures or 
     programs, or both (within the State child protective services 
     system), to provide for--
       ``(i) coordination and consultation with individuals 
     designated by and within appropriate health-care facilities;
       ``(ii) prompt notification by individuals designated by and 
     within appropriate health-care facilities of cases of 
     suspected medical neglect (including instances of withholding 
     of medically indicated treatment from disabled infants with 
     life-threatening conditions); and
       ``(iii) authority, under State law, for the State child 
     protective service to pursue any legal remedies, including 
     the authority to initiate legal proceedings in a court of 
     competent jurisdiction, as may be necessary to prevent the 
     withholding of medically indicated treatment from disabled 
     infants with life-threatening conditions.
       ``(B) Withholding of medically indicated treatment.--As 
     used in subparagraph (A), the term `withholding of medically 
     indicated treatment' means the failure to respond to the 
     infant's life-threatening conditions by providing treatment 
     (including appropriate nutrition, hydration, and medication) 
     which, in the treating 

[[Page H 13598]]
     physician's or physicians' reasonable medical judgment, will be most 
     likely to be effective in ameliorating or correcting all such 
     conditions, except that such term does not include the 
     failure to provide treatment (other than appropriate 
     nutrition, hydration, or medication) to an infant when, in 
     the treating physician's or physicians' reasonable medical 
     judgment--
       ``(i) the infant is chronically and irreversibly comatose;
       ``(ii) the provision of such treatment would--

       ``(I) merely prolong dying;
       ``(II) not be effective in ameliorating or correcting all 
     of the infant's life-threatening conditions; or
       ``(III) otherwise be futile in terms of the survival of the 
     infant; or

       ``(iii) the provision of such treatment would be virtually 
     futile in terms of the survival of the infant and the 
     treatment itself under such circumstances would be inhumane.
       ``(11) Identification of child protection goals.--The 
     quantitative goals of the State child protection program.
       ``(12) Certification of child protection standards.--With 
     respect to fiscal years beginning on or after April 1, 1996, 
     a certification that the State--
       ``(A) has completed an inventory of all children who, 
     before the inventory, had been in foster care under the 
     responsibility of the State for 6 months or more, which 
     determined--
       ``(i) the appropriateness of, and necessity for, the foster 
     care placement;
       ``(ii) whether the child could or should be returned to the 
     parents of the child or should be freed for adoption or other 
     permanent placement; and
       ``(iii) the services necessary to facilitate the return of 
     the child or the placement of the child for adoption or legal 
     guardianship;
       ``(B) is operating, to the satisfaction of the Secretary--
       ``(i) a statewide information system from which can be 
     readily determined the status, demographic characteristics, 
     location, and goals for the placement of every child who is 
     (or, within the immediately preceding 12 months, has been) in 
     foster care;
       ``(ii) a case review system for each child receiving foster 
     care under the supervision of the State;
       ``(iii) a service program designed to help children--

       ``(I) where appropriate, return to families from which they 
     have been removed; or
       ``(II) be placed for adoption, with a legal guardian, or if 
     adoption or legal guardianship is determined not to be 
     appropriate for a child, in some other planned, permanent 
     living arrangement; and

       ``(iv) a preplacement preventive services program designed 
     to help children at risk for foster care placement remain 
     with their families; and
       ``(C)(i) has reviewed (or not later than October 1, 1997, 
     will review) State policies and administrative and judicial 
     procedures in effect for children abandoned at or shortly 
     after birth (including policies and procedures providing for 
     legal representation of such children); and
       ``(ii) is implementing (or not later than October 1, 1997, 
     will implement) such policies and procedures as the State 
     determines, on the basis of the review described in clause 
     (i), to be necessary to enable permanent decisions to be made 
     expeditiously with respect to the placement of such children.
       ``(13) Certification of reasonable efforts before placement 
     of children in foster care.--A certification that the State 
     in each case will--
       ``(A) make reasonable efforts prior to the placement of a 
     child in foster care, to prevent or eliminate the need for 
     removal of the child from the child's home, and to make it 
     possible for the child to return home; and
       ``(B) with respect to families in which abuse or neglect 
     has been confirmed, provide services or referral for services 
     for families and children where the State makes a 
     determination that the child may safely remain with the 
     family.
       ``(14) Certification of cooperative efforts.--A 
     certification by the State, where appropriate, that all steps 
     will be taken, including cooperative efforts with the State 
     agencies administering the plans approved under parts A and 
     D, to secure an assignment to the State of any rights to 
     support on behalf of each child receiving foster care 
     maintenance payments under this subpart.
       ``(b) Determinations.--The Secretary shall determine 
     whether a plan submitted pursuant to subsection (a) contains 
     the material required by subsection (a), other than the 
     material described in paragraph (10) of such subsection. The 
     Secretary may not require a State to include in such a plan 
     any material not described in subsection (a).

     ``SEC. 431. GRANTS TO STATES FOR CHILD PROTECTION AND 
                   PAYMENTS FOR FOSTER CARE AND ADOPTION 
                   ASSISTANCE..

       ``(a) Funding of Block Grants.--Each eligible State shall 
     be entitled to receive from the Secretary for each fiscal 
     year specified in subsection (c)(1) a grant in an amount 
     equal to the State share of the child protection amount for 
     the fiscal year.
       ``(b) Maintenance Payments.--
       ``(1) In general.--In addition to the grants described in 
     subsection (a), each eligible State shall be entitled to 
     receive from the Secretary for each quarter of each fiscal 
     year specified in subsection (c)(1) an amount equal to the 
     sum of--
       ``(A) an amount equal to the Federal medical assistance 
     percentage (as defined in section 1905(b) of this Act as in 
     effect on the day before the date of enactment of this 
     subpart) of the total amount expended during such quarter as 
     foster care maintenance payments under the child protection 
     program under this subpart for children in foster family 
     homes or child-care institutions; plus
       ``(B) an amount equal to the Federal medical assistance 
     percentage (as defined in section 1905(b) of this Act (as so 
     in effect)) of the total amount expended during such quarter 
     as adoption assistance payments under the child protection 
     program under this subpart pursuant to adoption assistance 
     agreements.
       ``(2) Estimates by the secretary.--
       ``(A) In general.--The Secretary shall, prior to the 
     beginning of each quarter, estimate the amount to which a 
     State will be entitled to receive under paragraph (1) for 
     such quarter, such estimates to be based on--
       ``(i) a report filed by the State containing its estimate 
     of the total sum to be expended in such quarter in accordance 
     with paragraph (1), 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;
       ``(ii) records showing the number of children in the State 
     receiving assistance under this subpart; and
       ``(iii) such other information as the Secretary may find 
     necessary.
       ``(B) Payments.--The Secretary shall pay to the States the 
     amounts so estimated under subparagraph (A), reduced or 
     increased to the extent of any overpayment or underpayment 
     which the Secretary determines was made under this subsection 
     to such State for any prior quarter and with respect to which 
     adjustment has not already been made under this paragraph.
       ``(C) Pro Rata Share.-- 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 foster care and adoption assistance furnished under this 
     subpart shall be considered an overpayment to be adjusted 
     under this paragraph.
       ``(3) Allowance or disallowance of claim.--
       ``(A) In general.--Within 60 days after receipt of a State 
     claim for expenditures pursuant to paragraph (2)(A), the 
     Secretary shall allow, disallow, or defer such claim.
       ``(B) Notice.--Within 15 days after a decision to defer a 
     State claim, the Secretary shall notify the State of the 
     reasons for the deferral and of the additional information 
     necessary to determine the allowability of the claim.
       ``(C) Decision.--Within 90 days after receiving such 
     necessary information (in readily reviewable form), the 
     Secretary shall--
       ``(i) disallow the claim, if able to complete the review 
     and determine that the claim is not allowable; or
       ``(ii) in any other case, allow the claim, subject to 
     disallowance (as necessary)--

       ``(I) upon completion of the review, if it is determined 
     that the claim is not allowable; or
       ``(II) on the basis of findings of an audit or financial 
     management review.

       ``(c) Definitions.--As used in this section:
       ``(1) Child protection amount.--The term `child protection 
     amount' means--
       ``(A) $1,936,000,000 for fiscal year 1996;
       ``(B) $1,942,000,000 for fiscal year 1997;
       ``(C) $2,063,000,000 for fiscal year 1998;
       ``(D) $2,167,000,000 for fiscal year 1999;
       ``(E) $2,297,000,000 for fiscal year 2000;
       ``(F) $2,432,000,000 for fiscal year 2001; and
       ``(G) $2,593,000,000 for fiscal year 2002;
       ``(2) State share.--
       ``(A) In general.--The term `State share' means the 
     qualified child protection expenses of the State divided by 
     the sum of the qualified child protection expenses of all of 
     the States.
       ``(B) Qualified child protection expenses.--The term 
     `qualified child protection expenses' means, with respect to 
     a State the greater of--
       ``(i) the total amount of--

       ``(I) \1/3\ of the total obligations to the State under the 
     provisions of law specified in clauses (i), (ii), and (iii) 
     of subparagraph (C) for fiscal years 1992, 1993, and 1994; 
     and
       ``(II) \1/3\ of the total claims submitted by the State 
     (without regard to disputed claims) under the provision of 
     law specified in subparagraph (C)(iv) for fiscal years 1992, 
     1993, and 1994; or

       ``(ii) the total amount of--

       ``(I) the total obligations to the State under the 
     provisions of law specified in clauses (i), (ii), and (iii) 
     of subparagraph (C) for fiscal year 1995; and
       ``(II) the total claims submitted by the State (without 
     regard to disputed claims) under the provision of law 
     specified in subparagraph (C)(iv) for fiscal year 1995.

       ``(C) Provisions of law.--The provisions of law specified 
     in this subparagraph are the following (as in effect on the 
     day before the date of enactment of this subpart):
       ``(i) Section 434 of this Act.
       ``(ii) Section 474(a)(4) of this Act.
       ``(iii) Section 474(a)(3) of this Act.
       ``(d) Use of Grant.--
       ``(1) In general.--A State to which a grant is made under 
     this section may use the grant in any manner that the State 
     deems appropriate to accomplish the child protection goals of 
     the State program funded under this subpart.
       ``(2) Timing of expenditures.--A State to which a grant is 
     made under this section for a fiscal year shall expend the 
     total amount of the grant not later than the end of the 
     immediately succeeding fiscal year.
       ``(3) Rule of interpretation.--This subpart shall not be 
     interpreted to prohibit short- and long-term foster care 
     facilities operated for profit from receiving funds provided 
     under this subpart.
       ``(e) Timing of Payments.--The Secretary shall pay each 
     eligible State the amount of the grant payable to the State 
     under this section in quarterly installments.

[[Page H 13599]]

       ``(f) Penalties.--
       ``(1) For use of grant in violation of this subpart.--If an 
     audit conducted pursuant to chapter 75 of title 31, United 
     States Code, finds that an amount paid to a State under this 
     section for a fiscal year has been used in violation of this 
     subpart, then the Secretary shall reduce the amount of the 
     grant that would (in the absence of this paragraph) be 
     payable to the State under this section for the immediately 
     succeeding fiscal year by the amount so used, plus 5 percent 
     of the grant paid under this section to the State for such 
     fiscal year.
       ``(2) For failure to maintain effort.--
       ``(A) In general.--If an audit conducted pursuant to 
     chapter 75 of title 31, United States Code, finds that the 
     amount expended by a State (other than from amounts provided 
     by the Federal Government) during the fiscal years specified 
     in subparagraph (B), to carry out the State program funded 
     under this subpart is less than the applicable percentage 
     specified in such subparagraph of the total amount expended 
     by the State (other than from amounts provided by the Federal 
     Government) during fiscal year 1995 under subpart 2 of part B 
     and part E of this title (as in effect on the day before the 
     date of the enactment of this subpart), then the Secretary 
     shall reduce the amount of the grant that would (in the 
     absence of this paragraph) be payable to the State under this 
     section for the immediately succeeding fiscal year by the 
     amount of the difference, plus 5 percent of the grant paid 
     under this section to the State for such fiscal year.
       ``(B) Specification of fiscal years and applicable 
     percentages.--The fiscal years and applicable percentages 
     specified in this subparagraph are as follows:
       ``(i) For fiscal years 1996 and 1997, 100 percent.
       ``(ii) For fiscal years 1998 through 2002, 75 percent.
       ``(3) For failure to submit required report.--
       ``(A) In general.--The Secretary shall reduce by 3 percent 
     the amount of the grant that would (in the absence of this 
     paragraph) be payable to a State under this section for a 
     fiscal year if the Secretary determines that the State has 
     not submitted the report required by section 436(b) for the 
     immediately preceding fiscal year, within 6 months after the 
     end of the immediately preceding 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.
       ``(4) For failure to comply with sampling methods 
     requirements.--The Secretary may reduce by not more than 1 
     percent the amount of the grant that would (in the absence of 
     this paragraph) be payable to a State under this section for 
     a succeeding fiscal year if the Secretary determines that the 
     State has not complied with the Secretary's sampling methods 
     requirements under section 436(c)(2) during the prior fiscal 
     year.
       ``(5) State funds to replace reductions in grant.--A State 
     which has a penalty imposed against it under this subsection 
     for a fiscal year shall expend additional State funds in an 
     amount equal to the amount of the penalty for the purpose of 
     carrying out the State program under this subpart during the 
     immediately succeeding fiscal year.
       ``(6) Reasonable cause exception.--The Secretary may not 
     impose a penalty on a State under this subsection with 
     respect to a requirement if the Secretary determines that the 
     State has reasonable cause for failing to comply with the 
     requirement.
       ``(7) Corrective compliance plan.--
       ``(A) In general.--
       ``(i) Notification of violation.--Notwithstanding any other 
     provision of law, the Federal Government shall, before 
     assessing a penalty against a State under this subsection, 
     notify the State of the violation of law for which the 
     penalty would be assessed and allow the State the opportunity 
     to enter into a corrective compliance plan in accordance with 
     this subsection which outlines how the State will correct any 
     such violations and how the State will insure continuing 
     compliance with the requirements of this subpart.
       ``(ii) 60-day period to propose a corrective compliance 
     plan.--Any State notified under clause (i) shall have 60 days 
     in which to submit to the Federal Government a corrective 
     compliance plan to correct any violations described in clause 
     (i).
       ``(iii) 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 this 
     subsection 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.
       ``(8) Limitation on amount of penalty.--
       ``(A) In general.--In imposing the penalties described in 
     this subsection, 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 this subsection for a prior fiscal year, the 
     Secretary shall apply any remaining amount of such penalties 
     to the grant payable to the State under section 431(a) for 
     the immediately succeeding fiscal year.
       ``(g) Treatment of Territories.--
       ``(1) In general.--A territory, as defined in section 
     1108(b)(1), shall carry out a child protection program in 
     accordance with the provisions of this subpart.
       ``(2) Payments.--Each territory, as so defined, shall be 
     entitled to receive from the Secretary for any fiscal year an 
     amount, in accordance with section 1108, which shall be used 
     for the purpose of carrying out a child protection program in 
     accordance with the provisions of this subpart.
       ``(h) Limitation on Federal Authority.--Except as expressly 
     provided in this Act, the Secretary may not regulate the 
     conduct of States under this subpart or enforce any provision 
     of this subpart.

     ``SEC. 432. REQUIREMENTS FOR FOSTER CARE MAINTENANCE 
                   PAYMENTS.

       ``(a) In general.--Each State operating a program under 
     this subpart shall make foster care maintenance payments 
     under section 431(b) with respect to a child who would meet 
     the requirements of section 406(a) or of section 407 (as in 
     effect on the day before the date of the enactment of this 
     subpart) but for the removal of the child from the home of a 
     relative (specified in section 406(a)(as so in effect)), if--
       ``(1) the removal from the home occurred pursuant to a 
     voluntary placement agreement entered into by the child's 
     parent or legal guardian, or was the result of a judicial 
     determination to the effect that continuation therein would 
     be contrary to the welfare of such child and that reasonable 
     efforts of the type described in section 430(a)(13) have been 
     made;
       ``(2) such child's placement and care are the 
     responsibility of--
       ``(A) the State; or
       ``(B) any other public agency with whom the State has made 
     an agreement for the administration of the State program 
     under this subpart which is still in effect;
       ``(3) such child has been placed in a foster family home or 
     child-care institution as a result of the voluntary placement 
     agreement or judicial determination referred to in paragraph 
     (1); and
       ``(4) such child--
       ``(A) would have been eligible to receive aid under the 
     eligibility standards under the State plan approved under 
     section 402 (as in effect on the day before the date of the 
     enactment of this subpart and adjusted for inflation, in 
     accordance with regulations issued by the Secretary) in or 
     for the month in which such agreement was entered into or 
     court proceedings leading to the removal of such child from 
     the home were initiated; or
       ``(B) would have received such aid in or for such month if 
     application had been made therefore, or the child had been 
     living with a relative specified in section 406(a) (as so in 
     effect) within 6 months prior to the month in which such 
     agreement was entered into or such proceedings were 
     initiated, and would have received such aid in or for such 
     month if in such month such child had been living with such a 
     relative and application therefore had been made.
       ``(b) Limitation on Foster Care Payments.--Foster care 
     maintenance payments may be made under this subpart only on 
     behalf of a child described in subsection (a) of this section 
     who is--
       ``(1) in the foster family home of an individual, whether 
     the payments therefore are made to such individual or to a 
     public or private child-placement or child-care agency; or
       ``(2) in a child-care institution, whether the payments 
     therefore are made to such institution or to a public or 
     private child-placement or child-care agency, which payments 
     shall be limited so as to include in such payments only those 
     items which are included in the term `foster care maintenance 
     payments' (as defined in section 437(6)).
       ``(c) Voluntary Placements.--
       ``(1) Satisfaction of child protection standards.--
     Notwithstanding any other provision of this section, Federal 
     payments may be made under this subpart with respect to 
     amounts expended by any State as foster care maintenance 
     payments under this subpart, in the case of children removed 
     from their homes pursuant to voluntary placement agreements 
     as described in subsection (a), only if (at the time such 
     amounts were expended) the State has fulfilled all of the 
     requirements of section 435(b) or 430(a)(12).
       ``(2) Removal in excess of 180 days.--No Federal payment 
     may be made under this subpart with respect to amounts 
     expended by any State as foster care maintenance payments, in 
     the case of any child who was removed from such child's home 
     pursuant to a voluntary placement agreement as described in 
     subsection (a) and has remained in voluntary placement for a 
     period in excess of 180 days, unless there has been a 
     judicial determination by a court of competent jurisdiction 
     (within the first 180 days of such placement) to the effect 
     that such placement is in the best interests of the child.
       ``(3) Deemed revocation of agreements.--In any case where--
       ``(A) the placement of a minor child in foster care 
     occurred pursuant to a voluntary placement agreement entered 
     into by the parents or guardians of such child as provided in 
     subsection (a); and
       ``(B) such parents or guardians request (in such manner and 
     form as the Secretary may prescribe) that the child be 
     returned to their home or to the home of a relative,
     the voluntary placement agreement shall be deemed to be 
     revoked unless the State opposes such request and obtains a 
     judicial determination, by a court of competent jurisdiction, 
     that the return of the child to such home would be contrary 
     to the child's best interests.

[[Page H 13600]]


     ``SEC. 433. REQUIREMENTS FOR ADOPTION ASSISTANCE PAYMENTS.

       ``(a) In General.--A State operating a program under this 
     subpart shall enter into adoption assistance agreements with 
     the adoptive parents of children with special needs.
       ``(b) Payments Under Agreements.--Under any adoption 
     assistance agreement entered into by a State with parents who 
     adopt a child with special needs who meets the requirements 
     of subsection (c), the State may make adoption assistance 
     payments to such parents or through another public or 
     nonprofit private agency, in amounts determined under 
     subsection (d).
       ``(c) Children with Special Needs.--For purposes of 
     subsection (b), a child meets the requirements of this 
     subsection if such child--
       ``(1)(A) at the time adoption proceedings were initiated, 
     met the requirements of section 406(a) or section 407 (as in 
     effect on the day before the date of the enactment of this 
     subpart) or would have met such requirements except for such 
     child's removal from the home of a relative (specified in 
     section 406(a) (as so in effect)), either pursuant to a 
     voluntary placement agreement with respect to which Federal 
     payments are provided under section 431(b) (or 403 (as so in 
     effect)) or as a result of a judicial determination to the 
     effect that continuation therein would be contrary to the 
     welfare of such child;
       ``(B) meets all of the requirements of title XVI with 
     respect to eligibility for supplemental security income 
     benefits; or
       ``(C) is 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 his or her 
     minor parent;
       ``(2)(A) would have received aid under the eligibility 
     standards under the State plan approved under section 402 (as 
     in effect on the day before the date of the enactment of this 
     subpart, adjusted for inflation, in accordance with 
     regulations issued by the Secretary) in or for the month in 
     which such agreement was entered into or court proceedings 
     leading to the removal of such child from the home were 
     initiated;
       ``(B) would have received such aid in or for such month if 
     application had been made therefore, or had been living with 
     a relative specified in section 406(a) (as so in effect) 
     within 6 months prior to the month in which such agreement 
     was entered into or such proceedings were initiated, and 
     would have received such aid in or for such month if in such 
     month such child had been living with such a relative and 
     application therefore had been made; or
       ``(C) is a child described in subparagraph (A) or (B); and
       ``(3) has been determined by the State, pursuant to 
     subsection (g) of this section, to be a child with special 
     needs.
       ``(d) Determination of Payments.--The amount of the 
     payments to be made in any case under subsection (b) shall be 
     determined through agreement between the adoptive parents and 
     the State or a public or nonprofit private agency 
     administering the program under this subpart, which shall 
     take into consideration the circumstances of the adopting 
     parents and the needs of the child being adopted, and may be 
     readjusted periodically, with the concurrence of the adopting 
     parents (which may be specified in the adoption assistance 
     agreement), depending upon changes in such circumstances. 
     However, in no case may the amount of the adoption assistance 
     payment exceed the foster care maintenance payment which 
     would have been paid during the period if the child with 
     respect to whom the adoption assistance payment is made had 
     been in a foster family home.
       ``(e) Payment Exception.--Notwithstanding subsection (d), 
     no payment may be made to parents with respect to any child 
     who has attained the age of 18 (or, where the State 
     determines that the child has a mental or physical disability 
     which warrants the continuation of assistance, the age of 
     21), and no payment may be made to parents with respect to 
     any child if the State determines that the parents are no 
     longer legally responsible for the support of the child or if 
     the State determines that the child is no longer receiving 
     any support from such parents. Parents who have been 
     receiving adoption assistance payments under this subpart 
     shall keep the State or public or nonprofit private agency 
     administering the program under this subpart informed of 
     circumstances which would, pursuant to this section, make 
     them ineligible for such assistance payments, or eligible for 
     assistance payments in a different amount.
       ``(f) Pre-adoption Payments.--For purposes of this subpart, 
     individuals with whom a child who has been determined by the 
     State, pursuant to subsection (g), to be a child with special 
     needs is placed for adoption in accordance with applicable 
     State and local law shall be eligible for adoption assistance 
     payments during the period of the placement, on the same 
     terms and subject to the same conditions as if such 
     individuals had adopted such child.
       ``(g) Determination of Child with Special Needs.--For 
     purposes of this section, a child shall not be considered a 
     child with special needs unless--
       ``(1) the State has determined that the child cannot or 
     should not be returned to the home of the child's parents; 
     and
       ``(2) the State had first determined--
       ``(A) that there exists with respect to the child a 
     specific factor or condition such as the child's ethnic 
     background, age, or membership in a minority or sibling 
     group, or the presence of factors such as medical conditions 
     or physical, mental, or emotional handicaps because of which 
     it is reasonable to conclude that such child cannot be placed 
     with adoptive parents without providing adoption assistance 
     under this subpart or medical assistance under title XIX or 
     XXI; and
       ``(B) that, except where it would be against the best 
     interests of the child because of such factors as the 
     existence of significant emotional ties with prospective 
     adoptive parents while in the care of such parents as a 
     foster child, a reasonable, but unsuccessful, effort has been 
     made to place the child with appropriate adoptive parents 
     without providing adoption assistance under this section or 
     medical assistance under title XIX or XXI.

     ``SEC. 434. CITIZEN REVIEW PANELS.

       ``(a) Establishment.--Each State to which a grant is made 
     under section 431(a) shall establish at least 3 citizen 
     review panels.
       ``(b) Composition.--Each panel established under subsection 
     (a) shall be broadly representative of the community from 
     which drawn.
       ``(c) Frequency of Meetings.--Each panel established under 
     subsection (a) shall meet not less frequently than quarterly.
       ``(d) Duties.--
       ``(1) In general.--Each panel established under subsection 
     (a) shall, by examining specific cases, determine the extent 
     to which the State and local agencies responsible for 
     carrying out activities under this subpart are doing so in 
     accordance with the State plan, with the child protection 
     standards set forth in section 430(a)(12) and 435, and with 
     any other criteria that the panel considers important to 
     ensure the protection of children.
       ``(2) Confidentiality.--The members and staff of any panel 
     established under subsection (a) shall not disclose to any 
     person or government any information about any specific child 
     protection case with respect to which the panel is provided 
     information.
       ``(e) State Assistance.--Each State that establishes a 
     panel under subsection (a) shall afford the panel access to 
     any information on any case that the panel desires to review, 
     and shall provide the panel with staff assistance in 
     performing its duties.
       ``(f) Reports.--Each panel established under subsection (a) 
     shall make a public report of its activities after each 
     meeting.

     ``SEC. 435. FOSTER CARE PROTECTION REQUIRED FOR ADDITIONAL 
                   FEDERAL PAYMENTS.

       ``(a) Reduction of Grant.--A State shall not receive a 
     grant under section 431(a) unless such State--
       ``(1) has conducted an inventory of all children who have 
     been in foster care under the responsibility of the State for 
     a period of 6 months preceding the inventory, and determined 
     the appropriateness of, and necessity for, the current foster 
     placement, whether the child can be or should be returned to 
     his parents or should be freed for adoption, and the services 
     necessary to facilitate either the return of the child or the 
     placement of the child for adoption or legal guardianship; 
     and
       ``(2) has implemented and is operating to the satisfaction 
     of the Secretary--
       ``(A) a statewide information system from which the status, 
     demographic characteristics, location, and goals for the 
     placement of every child in foster care or who has been in 
     such care within the preceding 12 months can readily be 
     determined;
       ``(B) a case review system (as defined in section 437(4)) 
     for each child receiving foster care under the supervision of 
     the State; and
       ``(C) a service program designed to help children, where 
     appropriate, return to families from which they have been 
     removed or be placed for adoption or legal guardianship.
       ``(b) Additional Requirements.--A State shall not receive a 
     grant under section 431(a) unless such State--
       ``(1) has completed an inventory of the type specified in 
     subsection (a)(1);
       ``(2) has implemented and is operating the program and 
     systems specified in subsection (a)(2); and
       ``(3) has implemented a preplacement preventive service 
     program designed to help children remain with their families.
       ``(c) Presumption for Expenditures.--Any amounts expended 
     by a State for the purpose of complying with the requirements 
     of subsection (a) or (b) shall be conclusively presumed to 
     have been expended for child welfare services.

     ``SEC. 436. DATA COLLECTION AND REPORTING.

       ``(a) Annual Reports on State Child Welfare Goals.--On the 
     date that is 3 years after the effective date of this subpart 
     and annually thereafter, each State to which a grant is made 
     under section 431(a) shall submit to the Secretary a report 
     that contains quantitative information on the extent to which 
     the State is making progress toward achieving the goals of 
     the State child protection program.
       ``(b) State Data Reports.--
       ``(1) Biannual reports.--Each State to which a grant is 
     made under section 431(a) shall biannually submit to the 
     Secretary a report that includes the following information 
     with respect to each child within the State receiving 
     publicly-supported child welfare services under the State 
     program funded under this subpart:
       ``(A) Whether the child received services under the program 
     funded under this subpart.
       ``(B) The age, gender, and family income of the parents and 
     child.
       ``(C) The county of residence of the child.
       ``(D) Whether the child was removed from the family.
       ``(E) Whether the child entered foster care under the 
     responsibility of the State.
       ``(F) The type of out-of-home care in which the child was 
     placed (including institutional care, group home care, family 
     foster care, or relative placement).
       ``(G) The child's permanency planning goal, such as family 
     reunification, kinship care, adoption, or independent living.
       ``(H) Whether the child was released for adoption.
       ``(I) Whether the child exited from foster care, and, if 
     so, the reason for the exit, such as return to family, 
     placement with relatives, adoption, independent living, or 
     death.

[[Page H 13601]]

       ``(J) Other information as required by the Secretary and 
     agreed to by a majority of the States, including information 
     necessary to ensure a that there is a smooth transition of 
     data from the Adoption and Foster Care Analysis and Reporting 
     Systems and the National Center on Abuse and Neglect Data 
     System to the data reporting system required under this 
     section.
       ``(2) Annual reports.--Each State to which a grant is made 
     under section 431(a) shall annually submit to the Secretary a 
     report that includes the following information:
       ``(A) The number of children reported to the State during 
     the year as alleged victims of abuse or neglect.
       ``(B) The number of children for whom an investigation of 
     alleged maltreatment resulted in a determination of 
     substantiated abuse or neglect, the number for whom a report 
     of maltreatment was unsubstantiated, and the number for whom 
     a report of maltreatment was determined to be false.
       ``(C) The number of families that received preventive 
     services.
       ``(D) The number of infants abandoned during the year, the 
     number of such infants who were adopted, and the length of 
     time between abandonment and adoption.
       ``(E) The number of deaths of children resulting from child 
     abuse or neglect.
       ``(F) The number of deaths occurring while children were in 
     the custody of the State.
       ``(G) The number of children served by the State 
     independent living program.
       ``(H) Quantitative measurements demonstrating whether the 
     State is making progress toward the child protection goals 
     identified by the State.
       ``(I) The types of maltreatment suffered by victims of 
     child abuse and neglect.
       ``(J) The number of abused and neglected children receiving 
     services.
       ``(K) The average length of stay of children in out-of-home 
     care.
       ``(L) The response of the State to the findings and 
     recommendations of the citizen review panels established 
     under section 434.
       ``(M) Other information as required by the Secretary and 
     agreed to by a majority of the States, including information 
     necessary to ensure a that there is a smooth transition of 
     data from the Adoption and Foster Care Analysis and Reporting 
     Systems and the National Center on Abuse and Neglect Data 
     System to the data reporting system required under this 
     section.
       ``(c) Authority of States to Use Estimates.--
       ``(1) In general.--A State may comply with a requirement to 
     provide precise numerical information described in subsection 
     (b) by submitting an estimate which is obtained through the 
     use of scientifically acceptable sampling methods.
       ``(2) Secretarial review of sampling methods.--The 
     Secretary shall periodically review the sampling methods used 
     by a State to comply with a requirement to provide 
     information described in subsection (b). The Secretary may 
     require a State to revise the sampling methods so used if 
     such methods do not meet scientific standards and shall 
     impose the penalty described in section 431(f)(4) upon a 
     State if a State has not complied with such requirements.
       ``(d) Scope of State Program Funded Under This Subpart.--As 
     used in subsection (b), the term `State program funded under 
     this subpart' includes any equivalent State program.

     ``SEC. 437. DEFINITIONS.

       ``For purposes of this subpart, the following definitions 
     shall apply:
       ``(1) Administrative review.--The term `administrative 
     review' means a review open to the participation of the 
     parents of the child, conducted by a panel of appropriate 
     persons at least one of whom is not responsible for the case 
     management of, or the delivery of services to, either the 
     child or the parents who are the subject of the review.
       ``(2) Adoption assistance agreement.--The term `adoption 
     assistance agreement' means a written agreement, binding on 
     the parties to the agreement, between the State, other 
     relevant agencies, and the prospective adoptive parents of a 
     minor child which at a minimum--
       ``(A) specifies the nature and amount of any payments, 
     services, and assistance to be provided under such agreement; 
     and
       ``(B) stipulates that the agreement shall remain in effect 
     regardless of the State of which the adoptive parents are 
     residents at any given time.
     The agreement shall contain provisions for the protection 
     (under an interstate compact approved by the Secretary or 
     otherwise) of the interests of the child in cases where the 
     adoptive parents and child move to another State while the 
     agreement is effective.
       ``(3) Case plan.--The term `case plan' means a written 
     document which includes at least the following:
       ``(A) A description of the type of home or institution in 
     which a child is to be placed, including a discussion of the 
     appropriateness of the placement and how the agency which is 
     responsible for the child plans to carry out the voluntary 
     placement agreement entered into or judicial determination 
     made with respect to the child in accordance with section 
     432(a)(1).
       ``(B) A plan for assuring that the child receives proper 
     care and that services are provided to the parents, child, 
     and foster parents in order to improve the conditions in the 
     parents' home, facilitate return of the child to his or her 
     own home or the permanent placement of the child, and address 
     the needs of the child while in foster care, including a 
     discussion of the appropriateness of the services that have 
     been provided to the child under the plan.
       ``(C) To the extent available and accessible, the health 
     and education records of the child, including--
       ``(i) the names and addresses of the child's health and 
     educational providers;
       ``(ii) the child's grade level performance;
       ``(iii) the child's school record;
       ``(iv) assurances that the child's placement in foster care 
     takes into account proximity to the school in which the child 
     is enrolled at the time of placement;
       ``(v) a record of the child's immunizations;
       ``(vi) the child's known medical problems;
       ``(vii) the child's medications; and
       ``(viii) any other relevant health and education 
     information concerning the child determined to be appropriate 
     by the State.
     Where appropriate, for a child age 16 or over, the case plan 
     must also include a written description of the programs and 
     services which will help such child prepare for the 
     transition from foster care to independent living.
       ``(4) Case review system.--The term `case review system' 
     means a procedure for assuring that--
       ``(A) each child has a case plan designed to achieve 
     placement in the least restrictive (most family like) and 
     most appropriate setting available and in close proximity to 
     the parents' home, consistent with the best interest and 
     special needs of the child, which--
       ``(i) if the child has been placed in a foster family home 
     or child-care institution a substantial distance from the 
     home of the parents of the child, or in a State different 
     from the State in which such home is located, sets forth the 
     reasons why such placement is in the best interests of the 
     child; and
       ``(ii) if the child has been placed in foster care outside 
     the State in which the home of the parents of the child is 
     located, requires that, periodically, but not less frequently 
     than every 12 months, a caseworker on the staff of the State 
     in which the home of the parents of the child is located, or 
     of the State in which the child has been placed, visit such 
     child in such home or institution and submit a report on such 
     visit to the State in which the home of the parents of the 
     child is located;
       ``(B) the status of each child is reviewed periodically but 
     no less frequently than once every 6 months by either a court 
     or by administrative review (as defined in paragraph (1)) in 
     order to determine the continuing necessity for and 
     appropriateness of the placement, the extent of compliance 
     with the case plan, and the extent of progress which has been 
     made toward alleviating or mitigating the causes 
     necessitating placement in foster care, and to project a 
     likely date by which the child may be returned to the home or 
     placed for adoption or legal guardianship;
       ``(C) with respect to each such child, procedural 
     safeguards will be applied, among other things, to assure 
     each child in foster care under the supervision of the State 
     of a dispositional hearing to be held, in a family or 
     juvenile court or another court (including a tribal court) of 
     competent jurisdiction, or by an administrative body 
     appointed or approved by the court, no later than 18 months 
     after the original placement (and not less frequently than 
     every 12 months thereafter during the continuation of foster 
     care), which hearing shall determine the future status of the 
     child (including whether the child should be returned to the 
     parent, should be continued in foster care for a specified 
     period, should be placed for adoption, or should (because of 
     the child's special needs or circumstances) be continued in 
     foster care on a permanent or long-term basis) and, in the 
     case of a child described in subparagraph (A)(ii), whether 
     the out-of-State placement continues to be appropriate and in 
     the best interests of the child, and, in the case of a child 
     who has attained age 16, the services needed to assist the 
     child to make the transition from foster care to independent 
     living; and procedural safeguards shall also be applied with 
     respect to parental rights pertaining to the removal of the 
     child from the home of his parents, to a change in the 
     child's placement, and to any determination affecting 
     visitation privileges of parents; and
       ``(D) a child's health and education record (as described 
     in paragraph (3)(C)) is reviewed and updated, and supplied to 
     the foster parent or foster care provider with whom the child 
     is placed, at the time of each placement of the child in 
     foster care.
       ``(5) Child-care institution.--The term `child-care 
     institution' means a private child-care institution, or a 
     public child-care institution which accommodates no more than 
     25 children, which is licensed by the State in which it is 
     situated or has been approved, by the agency of such State 
     responsible for licensing or approval of institutions of this 
     type, as meeting the standards established for such 
     licensing, but the term shall not include detention 
     facilities, forestry camps, training schools, or any other 
     facility operated primarily for the detention of children who 
     are determined to be delinquent.
       ``(6) Foster care maintenance payments.--
       ``(A) In general.--The term `foster care maintenance 
     payments' means payments to cover the cost of (and the cost 
     of providing) food, clothing, shelter, daily supervision, 
     school supplies, a child's personal incidentals, liability 
     insurance with respect to a child, and reasonable travel to 
     the child's home for visitation. In the case of institutional 
     care, such term shall include the reasonable costs of 
     administration and operation of such institution as are 
     necessarily required to provide the items described in the 
     preceding sentence.
       ``(B) Special rule.--In cases where--
       ``(i) a child placed in a foster family home or child-care 
     institution is the parent of a son or daughter who is in the 
     same home or institution; and
       ``(ii) payments described in subparagraph (A) are being 
     made under this subpart with respect to such child,
     the foster care maintenance payments made with respect to 
     such child as otherwise determined under subparagraph (A) 
     shall also include such amounts as may be necessary to cover 
     the cost of the items described in that subparagraph with 
     respect to such son or daughter. 

[[Page H 13602]]

       ``(7) Foster family home.--The term `foster family home' 
     means a foster family home for children which is licensed by 
     the State in which it is situated or has been approved, by 
     the agency of such State having responsibility for licensing 
     homes of this type, as meeting the standards established for 
     such licensing.
       ``(8) State.--The term `State' means the 50 States and the 
     District of Columbia.
       ``(9) Voluntary placement.--The term `voluntary placement' 
     means an out-of-home placement of a minor, by or with 
     participation of the State, after the parents or guardians of 
     the minor have requested the assistance of the State and 
     signed a voluntary placement agreement.
       ``(10) Voluntary placement agreement.--The term `voluntary 
     placement agreement' means a written agreement, binding on 
     the parties to the agreement, between the State, any other 
     agency acting on its behalf, and the parents or guardians of 
     a minor child which specifies, at a minimum, the legal status 
     of the child and the rights and obligations of the parents or 
     guardians, the child, and the agency while the child is in 
     placement.''.

     SEC. 12702. CONFORMING AMENDMENTS.

       (a) Repeal of Part E of Title IV of the Social Security 
     Act.--Part E of title IV of the Social Security Act (42 
     U.S.C. 671-679) is hereby repealed.
       (b) Repeal of Section 13712 of the Omnibus Budget 
     Reconciliation Act of 1993.--Section 13712 of the Omnibus 
     Budget Reconciliation Act of 1993 (42 U.S.C. 670 note) is 
     hereby repealed.
       (c) Repeal of Section 435.--Section 435 of the Social 
     Security Act, as amended by section 12701, is repealed on 
     April 1, 1996.

     SEC. 12703. 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 as if enacted on October 1, 1995.
       (b) Transition Rule.--
       (1) State option to continue programs.--
       (A) 9-month extension.--A State may continue the State 
     programs under subpart 2 of part B and part E of title IV of 
     the Social Security Act, as in effect on September 30, 1995 
     (for purposes of this paragraph, the ``State programs'') 
     until June 30, 1996.
       (B) No individual or family entitlement under continued 
     state programs.--Notwithstanding any other provision of law 
     or any rule of law, no individual or family is entitled to 
     aid under the State programs of any State on or after the 
     date of the enactment of this Act.
       (C) Limitations on federal obligations.--If a State elects 
     to continue the State programs pursuant to subparagraph (A), 
     the total obligations of the Federal Government to the State 
     under subpart 2 of part B and part E of title IV of the 
     Social Security Act (as such subpart and part are in effect 
     on September 30, 1995) after the date of the enactment of 
     this Act shall not exceed an amount equal to--

       (I) the grant to the State under section 431(a) (as in 
     effect pursuant to the amendment made by section 12701 of 
     this Act)); minus
       (II) any obligations of the Federal Government to the State 
     under such subpart and part (as in effect on September 30, 
     1995) with respect to expenditures by the State during the 
     period that begins on October 1, 1995, and ends on the day 
     before the date of the enactment of this Act.

       (D) Submission of state plan for fiscal year 1996 deemed 
     acceptance of grant limitations and formula.--The submission 
     of a plan by a State under section 430(a) of the Social 
     Security Act (as in effect pursuant to the amendment made by 
     section 12701 of this Act) for fiscal year 1996 is deemed to 
     constitute the State's acceptance of the grant reduction 
     under subparagraph (C) of this paragraph (including the 
     formula for computing the amount of the reduction).
       (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.
                         Subtitle H--Child Care

     SEC. 12801. SHORT TITLE AND REFERENCES.

       (a) Short Title.--This subtitle may be cited as the ``Child 
     Care and Development Block Grant Amendments of 1995''.
       (b) References.--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 Child Care and Development 
     Block Grant Act of 1990 (42 U.S.C. 9858 et seq.).

     SEC. 12802. AUTHORIZATION OF APPROPRIATIONS AND ENTITLEMENT 
                   AUTHORITY.

       (a) In General.--Section 658B (42 U.S.C. 9858) is amended 
     to read as follows:

     ``SEC. 658B. AUTHORIZATION OF APPROPRIATIONS.

       ``There is authorized to be appropriated to carry out this 
     subchapter $1,000,000,000 for each of the fiscal years 1996 
     through 2002.''.
       (b) Social Security Act.--Part A of title IV of the Social 
     Security Act (as amended by section 12101) is amended by 
     adding at the end thereof the following new section:

     ``SEC. 418. FUNDING FOR CHILD CARE.

       ``(a) General Child Care Entitlement.--
       ``(1) General entitlement.--Subject to the amount 
     appropriated under paragraph (3), each State shall, for the 
     purpose of providing child care assistance, be entitled to 
     payments under a grant under this subsection for a fiscal 
     year in an amount equal to--
       ``(A) the sum of the total amounts of Federal payments for 
     fiscal year 1994 to the State under section--
       ``(i) 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;
       ``(ii) 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, in the case of a State with respect 
     to which section 1108 of this Act applies; and
       ``(iii) 403(n) of this Act (as so in effect) for child care 
     services pursuant to section 402(i) of this Act; or
       ``(B) the average of the sum of the total amount of Federal 
     payments for each of the fiscal years 1992 through 1994 to 
     the State under the sections referred to in subparagraph (A);
     whichever is greater.
       ``(2) Remainder.--
       ``(A) Grants.--The Secretary shall use any amounts 
     appropriated for a fiscal year under paragraph (3), and 
     remaining after grants are awarded under paragraph (1), to 
     make grants to States under this paragraph.
       ``(B) Amount.--Subject to subparagraph (C), the amount of a 
     grant awarded to a State for a fiscal year under this 
     paragraph shall be based on the formula used for determining 
     the amount of Federal payments to the State 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 such amount relates to the total amount of 
     such Federal payments to all States for such fiscal year.
       ``(C) Matching requirement.--The Secretary shall pay to 
     each eligible State in a fiscal year an amount, under a grant 
     under subparagraph (A), equal to the Federal medical 
     assistance percentage for such State for fiscal year 1995 (as 
     defined in section 1905(b)) of so much of the expenditures by 
     the State for child care in such year as exceed the State 
     set-aside for such State under subparagraph (A) for such year 
     and the amount of State expenditures in fiscal year 1995 that 
     equal the non-Federal share for the programs described in 
     subparagraphs (A), (B) and (C) of paragraph (1).
       ``(3) Appropriation.--There is authorized to be 
     appropriated, and there is appropriated, to carry out this 
     section--
       ``(A) $1,170,000,000 for fiscal year 1996;
       ``(B) $1,240,000,000 for fiscal year 1997;
       ``(C) $1,320,000,000 for fiscal year 1998;
       ``(D) $1,400,000,000 for fiscal year 1999;
       ``(E) $1,500,000,000 for fiscal year 2000;
       ``(F) $1,625,000,000 for fiscal year 2001; and
       ``(G) $1,745,000,000 for fiscal year 2002.
       ``(4) Redistribution.--With respect to any fiscal year, if 
     the Secretary determines that amounts under any grant awarded 
     to a State under this subsection for such fiscal year will 
     not be used by such State for carrying out the purpose for 
     which the grant is made, the Secretary shall make such 
     amounts available for carrying out such purpose to 1 or more 
     other States which apply for such funds to the extent the 
     Secretary determines that such other States will be able to 
     use such additional amounts for carrying out such purpose. 
     Such available amounts shall be redistributed to a State 
     pursuant to section 402(i) (as such section was in effect 
     before October 1, 1995) by substituting `the number of 
     children residing in all States applying for such funds' for 
     `the number of children residing in the United States in the 
     second preceding fiscal year'. Any amount made available to a 
     State from an appropriation for a fiscal year in accordance 
     with the preceding sentence shall, for purposes of this part, 
     be regarded as part of such State's payment (as determined 
     under this subsection) for such year.
       ``(b) Use of funds.--
       ``(1) In general.--Amounts received by a State under this 
     section shall only be used to provide child care assistance.
       ``(2) Use for certain populations.--A State shall ensure 
     that not less than 70 percent of the total amount of funds 
     received by the State in a fiscal year under this section are 
     used to provide child care assistance to families who are 
     receiving assistance under a State program under this part, 
     families who are attempting through work activities to 
     transition off of such assistance program, and families who 
     are at risk of becoming dependent on such assistance program.
       ``(c) Application of Child Care and Development Block Grant 
     Act.--Notwithstanding any other provision of law, amounts 
     provided to a State under this section shall be transferred 
     to the lead agency under the Child Care and Development Block 
     Grant Act, integrated by the State into the programs 
     established by the State under such Act, and be subject to 
     requirements and limitations of such Act.
       ``(d) Transition Rule.--

[[Page H 13603]]

       ``(1) In general.--Amounts obligated to a State under this 
     section for fiscal year 1996 shall not exceed--
       ``(A) the amount for which a State is eligible under this 
     section for such fiscal year; less
       ``(B) the amounts obligated to the State for such fiscal 
     year under the provisions of law referred to in subsection 
     (a)(1)(A) (as such provisions were in effect on the day 
     before the date of enactment of this section).
       ``(2) Acceptance of limitation.--The submission of a plan 
     by a State under section 401(a) for fiscal year 1996 is 
     deemed to constitute the State's acceptance of the grant 
     reductions under paragraph (1). If amounts are provided to a 
     State under this section prior to the submission of such a 
     State plan, the acceptance of such amounts by the State shall 
     constitute the State's acceptance of such reductions.''.

     SEC. 12803. LEAD AGENCY.

       Section 658D(b) (42 U.S.C. 9858b(b)) is amended--
       (1) in paragraph (1)--
       (A) in subparagraph (A), by striking ``State'' the first 
     place that such appears and inserting ``governmental or 
     nongovernmental''; and
       (B) in subparagraph (C), by inserting ``with sufficient 
     time and Statewide distribution of the notice of such 
     hearing,'' after ``hearing in the State''; and
       (2) in paragraph (2), by striking the second sentence.

     SEC. 12804. APPLICATION AND PLAN.

       Section 658E (42 U.S.C. 9858c) is amended--
       (1) in subsection (b)--
       (A) by striking ``implemented--'' and all that follows 
     through ``(2)'' and inserting ``implemented''; and
       (B) by striking ``for subsequent State plans'';
       (2) in subsection (c)--
       (A) in paragraph (2)--
       (i) in subparagraph (A)--

       (I) in clause (i) by striking ``, other than through 
     assistance provided under paragraph (3)(C),''; and
       (II) by striking ``except'' and all that follows through 
     ``1992'', and inserting ``and provide a detailed description 
     of the procedures the State will implement to carry out the 
     requirements of this subparagraph'';

       (ii) in subparagraph (B)--

       (I) by striking ``Provide assurances'' and inserting 
     ``Certify''; and
       (II) by inserting before the period at the end ``and 
     provide a detailed description of such procedures'';

       (iii) in subparagraph (C)--

       (I) by striking ``Provide assurances'' and inserting 
     ``Certify''; and
       (II) by inserting before the period at the end ``and 
     provide a detailed description of how such record is 
     maintained and is made available'';

       (iv) by amending subparagraph (D) to read as follows:
       ``(D) Consumer education information.--Certify that the 
     State will collect and disseminate to parents of eligible 
     children and the general public, consumer education 
     information that will promote informed child care choices.'';
       (v) in subparagraph (E), to read as follows:
       ``(E) Compliance with state licensing requirements.--
       ``(i) In general.--Certify that the State has in effect 
     licensing requirements applicable to child care services 
     provided within the State, and provide a detailed description 
     of such requirements and of how such requirements are 
     effectively enforced. Nothing in the preceding sentence shall 
     be construed to require that licensing requirements be 
     applied to specific types of providers of child care 
     services.
       ``(ii) Uniform application of requirements.--A 
     certification under clause (i) shall include an assurance by 
     the State that the State shall apply all such licensing 
     requirements in a uniform manner to child care providers of 
     the same type regardless of whether a child care provider is 
     receiving assistance under this subchapter. Nothing in this 
     subchapter shall be construed to require that a State apply, 
     or prohibit a State from applying, licensing requirements 
     with respect to a particular type of child care.
       ``(iii) Indian tribes and tribal organizations.--In lieu of 
     any licensing and regulatory requirements applicable under 
     State and local law, the Secretary, in consultation with 
     Indian tribes and tribal organizations, shall develop minimum 
     child care standards (that appropriately reflect tribal needs 
     and available resources) that shall be applicable to Indian 
     tribes and tribal organization receiving assistance under 
     this subchapter.''; and
       (vi) by striking subparagraphs (F), (G), (H), (I), and (J) 
     and inserting the following:
       ``(F) Meeting the needs of certain populations.--
     Demonstrate the manner in which the State will meet the 
     specific child care needs of families who are receiving 
     assistance under a State program under part A of title IV of 
     the Social Security Act, families who are attempting through 
     work activities to transition off of such assistance program, 
     and families who are at risk of becoming dependent on such 
     assistance program.'';
       (B) in paragraph (3)--
       (i) in subparagraph (A), by striking ``(B) and (C)'' and 
     inserting ``(B) through (D)'';
       (ii) in subparagraph (B)--

       (I) by striking ``.--Subject to the reservation contained 
     in subparagraph (C), the'' and inserting ``and related 
     activities.--The'';
       (II) in clause (i) by striking ``; and'' at the end and 
     inserting a period;
       (III) by striking ``for--'' and all that follows through 
     ``section 658E(c)(2)(A)'' and inserting ``for child care 
     services on sliding fee scale basis, activities that improve 
     the quality or availability of such services, and any other 
     activity that the State deems appropriate''; and
       (IV) by striking clause (ii);

       (iii) by amending subparagraph (C) to read as follows:
       ``(C) Limitation on administrative costs.--Not more than 3 
     percent of the aggregate amount of funds available to the 
     State to carry out this subchapter by a State in each fiscal 
     year may be expended for administrative costs incurred by 
     such State to carry out all of its functions and duties under 
     this subchapter. As used in the preceding sentence, the term 
     `administrative costs' shall not include the costs of 
     providing direct services.''; and
       (iv) by adding at the end thereof the following:
       ``(D) Assistance for certain families.--A State shall 
     ensure that a substantial portion of the amounts available 
     (after the State has complied with the requirement of section 
     419(b)(2) of the Social Security Act) to the State to carry 
     out activities this subchapter in each fiscal year is used to 
     provide assistance to low-income working families other than 
     families described in paragraph (2)(F).''; and 419(b)(2)
       (C) in paragraph (4)(A)--
       (i) by striking ``provide assurances'' and inserting 
     ``certify'';
       (ii) in the first sentence by inserting ``and shall provide 
     a summary of the facts relied on by the State to determine 
     that such rates are sufficient to ensure such access'' before 
     the period; and
       (iii) by striking the last sentence.

     SEC. 12805. LIMITATION ON STATE ALLOTMENTS.

       Section 658F(b) (42 U.S.C. 9858d(b)) is amended--
       (1) in paragraph (1), by striking ``No'' and inserting 
     ``Except as provided for in section 658O(c)(6), no''; and
       (2) in paragraph (2), by striking ``referred to in section 
     658E(c)(2)(F)''.

     SEC. 12806. ACTIVITIES TO IMPROVE THE QUALITY OF CHILD CARE.

       Section 658G (42 U.S.C. 9858e) is amended to read as 
     follows:

     ``SEC. 658G. ACTIVITIES TO IMPROVE THE QUALITY OF CHILD CARE.

       ``A State that receives financial assistance under this 
     subchapter, shall use not less than 3 percent of the total 
     amounts received in each fiscal year for activities that are 
     designed to provide comprehensive consumer education to 
     parents and the public, activities that increase parental 
     choice, and activities designed to improve the quality and 
     availability of child care (such as resource and referral 
     services).''.

     SEC. 12807. ADMINISTRATION AND ENFORCEMENT.

       Section 658I(b) (42 U.S.C. 9858g(b)) is amended--
       (1) in paragraph (1), by striking ``, and shall have'' and 
     all that follows through ``(2)'';
       (2) by striking paragraph (2); and
       (3) by redesignating paragraph (3) as paragraph (2).

     SEC. 12808. PAYMENTS.

       Section 658J(c) (42 U.S.C. 9858h(c)) is amended--
       (1) by striking ``expended'' and inserting ``obligated''; 
     and
       (2) by striking ``3 fiscal years'' and inserting ``fiscal 
     year''.

     SEC. 12809. ANNUAL REPORT AND AUDITS.

       Section 658K (42 U.S.C. 9858i) is amended--
       (1) in the section heading by striking ``annual report'' 
     and inserting ``reports'';
       (2) in subsection (a), to read as follows:
       ``(a) Reports.--
       ``(1) Collection of information by states.--
       ``(A) In general.--A State that receives funds to carry out 
     this subchapter shall collect the information described in 
     subparagraph (B) on a monthly basis.
       ``(B) Required information.--The information required under 
     this subparagraph shall include, with respect to a family 
     unit receiving assistance under this subchapter information 
     concerning--
       ``(i) family income;
       ``(ii) county of residence;
       ``(iii) the gender and age of children receiving such 
     assistance;
       ``(iv) whether the family includes only 1 parent;
       ``(v) the sources of family income, including the amount 
     obtained from (and separately identified)--

       ``(I) employment, including self-employment;
       ``(II) cash or other assistance under part A of title IV of 
     the Social Security Act;
       ``(III) housing assistance;
       ``(IV) assistance under the Food Stamp Act of 1977; and
       ``(V) other assistance programs;

       ``(vi) the number of months the family has received 
     benefits;
       ``(vii) the type of child care in which the child was 
     enrolled (such as family child care, home care, or center-
     based child care);
       ``(viii) whether the child care provider involved was a 
     relative;
       ``(ix) the cost of child care for such families; and
       ``(x) the average hours per week of such care;
     during the period for which such information is required to 
     be submitted.
       ``(C) Submission to secretary.--A State described in 
     subparagraph (A) shall, on a quarterly basis, submit the 
     information required to be collected under subparagraph (B) 
     to the Secretary.
       ``(D) Sampling.--The Secretary may disapprove the 
     information collected by a State under this paragraph if the 
     State uses sampling methods to collect such information.
       ``(2) Biannual reports.--Not later than December 31, 
     following the end of the first fiscal year with respect to 
     which the amendments made by the Child Care and Development 
     Block Grants Amendments of 1995 apply, and every 6 months 
     thereafter, a State described in paragraph (1)(A) shall 
     prepare and submit to the 

[[Page H 13604]]
     Secretary a report that includes aggregate data concerning--
       ``(A) the number of child care providers that received 
     funding under this subchapter as separately identified based 
     on the types of providers listed in section 658Q(5);
       ``(B) the monthly cost of child care services, and the 
     portion of such cost that is paid for with assistance 
     provided under this subchapter, listed by the type of child 
     care services provided;
       ``(C) the number of payments made by the State through 
     vouchers, contracts, cash, and disregards under public 
     benefit programs, listed by the type of child care services 
     provided;
       ``(D) the manner in which consumer education information 
     was provided to parents and the number of parents to whom 
     such information was provided; and
       ``(E) the total number (without duplication) of children 
     and families served under this subchapter;
     during the period for which such report is required to be 
     submitted.''; and
       (2) in subsection (b)--
       (A) in paragraph (1) by striking ``a application'' and 
     inserting ``an application'';
       (B) in paragraph (2) by striking ``any agency administering 
     activities that receive'' and inserting ``the State that 
     receives''; and
       (C) in paragraph (4) by striking ``entitles'' and inserting 
     ``entitled''.

     SEC. 12810. ALLOTMENTS.

       Section 658O (42 U.S.C. 9858m) is amended--
       (1) in subsection (a)--
       (A) in paragraph (1)
       (i) by striking ``Possessions'' and inserting 
     ``possessions'';
       (ii) by inserting ``and'' after ``States,''; and
       (iii) by striking ``, and the Trust Territory of the 
     Pacific Islands''; and
       (B) in paragraph (2), by striking ``3 percent of the amount 
     appropriated under section 658B'' and inserting ``1 percent 
     of the aggregate amount of funds available to the State to 
     carry out this subchapter'';
       (2) in subsection (c)--
       (A) in paragraph (5) by striking ``our'' and inserting 
     ``out''; and
       (B) by adding at the end thereof the following new 
     paragraph:
       ``(6) Construction or Renovation of Facilities.--
       ``(A) Request for use of funds.--An Indian tribe or tribal 
     organization may submit to the Secretary a request to use 
     amounts provided under this subsection for construction or 
     renovation purposes.
       ``(B) Determination.--With respect to a request submitted 
     under subparagraph (A), and except as provided in 
     subparagraph (C), upon a determination by the Secretary that 
     adequate facilities are not otherwise available to an Indian 
     tribe or tribal organization to enable such tribe or 
     organization to carry out child care programs in accordance 
     with this subchapter, and that the lack of such facilities 
     will inhibit the operation of such programs in the future, 
     the Secretary may permit the tribe or organization to use 
     assistance provided under this subsection to make payments 
     for the construction or renovation of facilities that will be 
     used to carry out such programs.
       ``(C) Limitation.--The Secretary may not permit an Indian 
     tribe or tribal organization to use amounts provided under 
     this subsection for construction or renovation if such use 
     will result in a decrease in the level of child care services 
     provided by the tribe or organization as compared to the 
     level of such services provided by the tribe or organization 
     in the fiscal year preceding the year for which the 
     determination under subparagraph (A) is being made.
       ``(D) Uniform procedures.--The Secretary shall develop and 
     implement uniform procedures for the solicitation and 
     consideration of requests under this paragraph.''; and
       (3) in subsection (e), by adding at the end thereof the 
     following new paragraph:
       ``(4) Indian tribes or tribal organizations.--Any portion 
     of a grant or contract made to an Indian tribe or tribal 
     organization under subsection (c) that the Secretary 
     determines is not being used in a manner consistent with the 
     provision of this subchapter in the period for which the 
     grant or contract is made available, shall be allotted by the 
     Secretary to other tribes or organizations that have 
     submitted applications under subsection (c) in accordance 
     with their respective needs.''.

     SEC. 12811. DEFINITIONS.

       Section 658P (42 U.S.C. 9858n) is amended--
       (1) in paragraph (2), in the first sentence by inserting 
     ``or as a deposit for child care services if such a deposit 
     is required of other children being cared for by the 
     provider'' after ``child care services''; and
       (2) by striking paragraph (3);
       (3) in paragraph (4)(B), by striking ``75 percent'' and 
     inserting ``85 percent'';
       (4) in paragraph (5)(B)--
       (A) by inserting ``great grandchild, sibling (if such 
     provider lives in a separate residence),'' after 
     ``grandchild,'';
       (B) by striking ``is registered and''; and
       (C) by striking ``State'' and inserting ``applicable''.
       (5) by striking paragraph (10);
       (6) in paragraph (3)--
       (A) by inserting ``or'' after ``Samoa,''; and
       (B) by striking ``, and the Trust Territory of the Pacific 
     Islands'';
       (7) in paragraph (14)--
       (A) by striking ``The term'' and inserting the following:
       ``(A) In general.--The term''; and
       (B) by adding at the end thereof the following new 
     subparagraph:
       ``(B) Other organizations.--Such term includes a Native 
     Hawaiian Organization, as defined in section 4009(4) of the 
     Augustus F. Hawkins-Robert T. Stafford Elementary and 
     Secondary School Improvement Amendments of 1988 (20 U.S.C. 
     4909(4)) and a private nonprofit organization established for 
     the purpose of serving youth who are Indians or Native 
     Hawaiians.''.
                  Subtitle I--Child Nutrition Programs

                  CHAPTER 1--NATIONAL SCHOOL LUNCH ACT

     SEC. 12901. TERMINATION OF ADDITIONAL PAYMENT FOR LUNCHES 
                   SERVED IN HIGH FREE AND REDUCED PRICE 
                   PARTICIPATION SCHOOLS.

       Section 4(b)(2) of the National School Lunch Act (42 U.S.C. 
     1753(b)(2)) is amended by inserting before the period at the 
     end the following: ``for the 1995 school year and 1 cent more 
     for each of the 1996 and 1997 school years''.

     SEC. 12902. DIRECT FEDERAL EXPENDITURES.

       (a) Administrative Expenses.--Section 6(a) of the National 
     School Lunch Act (42 U.S.C. 1755(a)) is amended by striking 
     the second and fourth sentences.
       (b) Amount of Commodity Assistance.--Section 6(e) of the 
     Act is amended--
       (1) in paragraph (1), by striking subparagraph (E); and
       (2) in paragraph (2), by striking the second sentence and 
     inserting the following: ``Each State agency shall offer and 
     equitably distribute commodities among schools participating 
     in the school lunch program.''.
       (c) Breakfast Commodity Assistance.--Section 6 of the Act 
     is amended--
       (1) by striking subsection (f); and
       (2) by redesignating subsection (g) as subsection (f).
       (d) Commodity Assistance.--
       (1) In general.--Section 6(f) of the Act (as redesignated 
     by subsection (c)) is amended by striking ``12 percent'' and 
     inserting ``8 percent''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall become effective on July 1, 1996.

     SEC. 12903. 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--
       (1) in subparagraph (A)--
       (A) in the first sentence--
       (i) by inserting ``for free and reduced price meals'' after 
     ``thereof,'';
       (ii) by striking ``11 cents'' and inserting ``14.5 cents''; 
     and
       (iii) by striking ``1982'' and inserting ``1998''; and
       (B) by inserting after the first sentence the following: 
     ``The national average value of donated foods, or cash 
     payments in lieu thereof, for paid meals, shall be 12 cents, 
     adjusted on July 1, 2001, and each July 1 thereafter to 
     reflect changes in the Price Index for Food Used in Schools 
     and Institutions.''; and
       (2) by striking subparagraph (B) and inserting the 
     following:
       ``(B) Adjustments.--
       ``(i) In general.--Except as provided in subparagraph (A), 
     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) Method of 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 
     all meals for the remainder of the school year by rounding 
     the previously established value of food assistance to the 
     nearest lower cent increment.''.
       (b) Effective Date.--The amendment made by subsection 
     (a)(1) shall become effective on July 1, 1996.

     SEC. 12904. REDUCED PRICE LUNCHES.

       (a) Maximum Price.--Section 9(b)(3) of the National School 
     Lunch Act (42 U.S.C. 1758(b)(3)) is amended--
       (1) in the last sentence, by striking ``The'' and inserting 
     ``Except as provided in the succeeding 2 sentences, the''; 
     and
       (2) by adding at the end the following: ``In the case of 
     the school year beginning July 1, 2000, the price charged for 
     a reduced price lunch shall not exceed 45 cents. In the case 
     of the school year beginning July 1, 2001, and each school 
     year thereafter, the price charged for a reduced price lunch 
     shall not exceed 50 cents.''.
       (b) Reduced Price Meal Payment.--Section 11(a)(2) of the 
     Act (42 U.S.C. 1759a(a)(2)) is amended--
       (1) by striking ``cents and the'' and inserting ``cents. 
     Except as provided in the succeeding 2 sentences, the''; and
       (2) by adding at the end the following: ``In the case of 
     the school year beginning July 1, 2000, the special 
     assistance factor for reduced price lunches shall be 45 cents 
     less than the special assistance factor for free lunches. In 
     the case of the school year beginning July 1, 2001, and each 
     school year thereafter, the special assistance factor for 
     reduced price lunches shall be 50 cents less than the special 
     assistance factor for free lunches.''.

     SEC. 12905. 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--

[[Page H 13605]]

       ``(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 and july 1, 1996.--The 
     Secretary shall adjust the rates for breakfasts and 
     supplements on January 1, 1996, for the remainder of the 
     school year, and shall adjust the rates for lunches on July 
     1, 1996, by rounding the previously established rates 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. 12906. SUMMER FOOD SERVICE PROGRAM FOR CHILDREN.

       (a) Establishment of Program.--Section 13(a) of the 
     National School Lunch Act (42 U.S.C. 1761(a)) is amended--
       (1) in paragraph (1)--
       (A) in the first sentence, by striking ``initiate, 
     maintain, and expand'' and insert ``initiate and maintain''; 
     and
       (B) in subparagraph (E) of the second sentence, by striking 
     ``the Trust Territory of the Pacific Islands,''; and
       (2) in paragraph (7)(A), by striking ``Except as provided 
     in subparagraph (C), private'' and inserting ``Private''.
       (b) Service Institutions.--Section 13(b) of the Act is 
     amended 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.''.
       (c) Administration of Service Institutions.--Section 
     13(b)(2) of the Act is amended--
       (1) in the first sentence, by striking ``four meals'' and 
     inserting ``3 meals, or 2 meals and 1 supplement,''; and
       (2) by striking the second sentence.
       (d) Reimbursements.--Section 13(c)(2) of the Act is 
     amended--
       (1) by striking subparagraph (A);
       (2) in subparagraph (B)--
       (A) in the first sentence--
       (i) by striking ``, and such higher education 
     institutions,''; and
       (ii) by striking ``without application'' and inserting 
     ``upon showing residence in areas in which poor economic 
     conditions exist''; and
       (B) by adding at the end the following: ``The higher 
     education institutions referred to in the preceding sentence 
     shall be eligible to participate in the program under this 
     paragraph without application.'';
       (3) in subparagraph (C)(ii), by striking ``severe need''; 
     and
       (4) by redesignating subparagraphs (B) through (E), as so 
     amended, as subparagraphs (A) through (D), respectively.
       (e) Permitting Offer Versus Serve.--Section 13(f) of the 
     Act is amended--
       (1) by redesignating the first through seventh sentences as 
     paragraphs (1) through (7), respectively; and
       (2) by adding at the end the following:
       ``(8) Offer versus serve.--A school food authority 
     participating as a service institution may permit a child 
     attending a site on school premises operated directly by the 
     authority to refuse not more than 1 item of a meal that the 
     child does not intend to consume. A refusal of an offered 
     food item shall not affect the amount of payments made under 
     this section to a school for the meal.''.
       (f) Effective Date.--The amendments made by subsection (b) 
     shall become effective on January 1, 1996.

     SEC. 12907. CHILD CARE FOOD PROGRAM.

       (a) Establishment of Program.--Section 17 of the National 
     School Lunch Act (42 U.S.C. 1766) is amended--
       (1) in the section heading, by striking ``and adult''; and
       (2) in the first sentence of subsection (a), by striking 
     ``initiate, maintain, and expand'' and inserting ``initiate 
     and maintain''.
       (b) Payments to Sponsor Employees.--Paragraph (2) of the 
     last sentence of section 17(a) of the Act (42 U.S.C. 1766(a)) 
     is amended--
       (1) by striking ``and'' at the end of subparagraph (B);
       (2) by striking the period at the end of subparagraph (C) 
     and inserting ``; and''; and
       (3) by adding at the end the following:
       ``(D) in the case of a family or group day care home 
     sponsoring organization that employs more than 1 employee, 
     the organization does not base payments to an employee of the 
     organization on the number of family or group day care homes 
     recruited, managed, or monitored.''.
       (c) Technical Assistance.--The last sentence of section 
     17(d)(1) of the Act is amended by striking ``, and shall 
     provide technical assistance'' and all that follows through 
     ``its application''.
       (d) Reimbursement of Child Care Institutions.--Section 
     17(f)(2)(B) of the Act (42 U.S.C. 1766(f)(2)(B)) is amended 
     by striking ``two meals and two supplements or three meals 
     and one supplement'' and inserting ``two meals and one 
     supplement''.
       (e) Improved Targeting of Day Care Home Reimbursements.--
       (1) Restructured day care home reimbursements.--Section 
     17(f)(3) of the Act is amended by striking ``(3)(A) 
     Institutions'' and all that follows through the end of 
     subparagraph (A) and inserting the following:
       ``(3) Reimbursement of family or group day care home 
     sponsoring organizations.--
       ``(A) Reimbursement factor.--
       ``(i) In general.--An institution that participates in the 
     program under this section as a family or group day care home 
     sponsoring organization shall be provided, for payment to a 
     home sponsored by the organization, reimbursement factors in 
     accordance with this subparagraph for the cost of obtaining 
     and preparing food and prescribed labor costs involved in 
     providing meals under this section.
       ``(ii) Tier i family or group day care homes.--

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

       ``(aa) a family or group day care home that is located in a 
     geographic area, as defined by the Secretary based on census 
     data, in which at least 50 percent of the children residing 
     in the area are members of households whose incomes meet the 
     income eligibility guidelines for free or reduced price meals 
     under section 9;
       ``(bb) a family or group day care home that is located in 
     an area served by a school enrolling elementary students in 
     which at least 50 percent of the total number of children 
     enrolled are certified eligible to receive free or reduced 
     price school meals under this Act or the Child Nutrition Act 
     of 1966 (42 U.S.C. 1771 et seq.); or
       ``(cc) a family or group day care home that is operated by 
     a provider whose household meets the 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 90 cents for lunches and suppers, 25 cents for breakfasts, 
     and 10 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 

[[Page H 13606]]
     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 amendment to 
     subparagraph (A) made by section 12907(e)(1) of the Balanced 
     Budget 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).''.
       (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 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 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).
       (f) Reimbursement.--Section 17(f) of the Act is amended--
       (1) in paragraph (3)--
       (A) in subparagraph (B), by striking the third and fourth 
     sentences; and
       (B) in subparagraph (C)--
       (i) in clause (i)--

       (I) by striking ``(i)'';
       (II) in the first sentence, by striking ``and expansion 
     funds'' and all that follows through ``rural areas'';
       (III) by striking the second sentence; and
       (IV) by striking ``and expansion funds'' each place it 
     appears; and

       (ii) by striking clause (ii); and
       (2) by striking paragraph (4).
       (g) 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.''.
       (h) Modification of Adult Care Food Program.--Section 17(o) 
     of the Act is amended--
       (1) in the first sentence of paragraph (1)--
       (A) by striking ``adult day care centers'' and inserting 
     ``day care centers for chronically impaired disabled 
     persons'' ; and
       (B) by striking ``to persons 60 years of age or older or''; 
     and
       (2) in paragraph (2)--
       (A) in subparagraph (A)--
       (i) by striking ``adult day care center'' and inserting 
     ``day care center for chronically impaired disabled 
     persons''; and
       (ii) in clause (i)--

       (I) by striking ``adult'';
       (II) by striking ``adults'' and inserting ``persons''; and
       (III) by striking ``or persons 60 years of age or older''; 
     and

       (B) in subparagraph (B), by striking ``adult day care 
     services'' and inserting ``day care services for chronically 
     impaired disabled persons''.
       (i) Unneeded Provisions.--Section 17 of the Act is 
     amended--
       (1) by striking subsections (b) and (q);
       (2) by redesignating subsections (c) through (p), as so 
     amended, as subsections (b) through (o), respectively; and
       (3) in subsection (e), as redesignated by paragraph (2)--
       (A) in paragraph (2)(A), by striking ``subsection (c)'' and 
     inserting ``subsection (b)''; and
       (B) in paragraph (3)(C), by striking ``subsection (d)'' and 
     inserting ``subsection (c)''.
       (j) Conforming Amendments.--
       (1) Section 11(a)(3)(A)(iv) of the Act (42 U.S.C. 
     1759a(a)(3)(A)(iv)) is amended by striking ``17(c)'' and 
     inserting ``17(b)''.
       (2) Section 17A(c) of the Act (42 U.S.C. 1766a(c)) is 
     amended by striking ``17(c)(3)'' and inserting ``17(b)(3)''.
       (3) Section 17B(f) of the Act (42 U.S.C. 1766b(f)) is 
     amended--

[[Page H 13607]]

       (A) in the subsection heading, by striking ``and Adult''; 
     and
       (B) in paragraph (1), by striking ``and adult''.
       (4) Section 18(e)(3)(B) of the Act (42 U.S.C. 
     1769(e)(3)(B)) is amended by striking ``and adult''.
       (5) Section 25(b)(1)(C) of the Act (42 U.S.C. 
     1769f(b)(1)(C)) is amended by striking ``and adult''.
       (6) Section 3(1) of the Healthy Meals for Healthy Americans 
     Act of 1994 (Public Law 103-448) is amended by striking ``and 
     adult''.
       (k) 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 (e) shall become effective on August 1, 1996.
       (3) Regulations.--
       (A) Interim regulations.--Not later than February 1, 1996, 
     the Secretary shall issue interim regulations to implement--
       (i) the amendments made by paragraphs (1), (3), and (4) of 
     subsection (e); and
       (ii) section 17(f)(3)(C) of the National School Lunch Act 
     (42 U.S.C. 1766(f)(3)(C)).
       (B) Final regulations.--Not later than August 1, 1996, the 
     Secretary shall issue final regulations to implement the 
     provisions of law referred to in subparagraph (A).
       (l) Study of Impact of Amendments on Program Participation 
     and Family Day Care Licensing.--
       (1) In general.--The Secretary of Agriculture, in 
     conjunction with the Secretary of Health and Human Services, 
     shall study the impact of the amendments made by this section 
     on--
       (A) the number of family day care homes participating in 
     the child care food program established under section 17 of 
     the National School Lunch Act (42 U.S.C. 1766);
       (B) the number of day care home sponsoring organizations 
     participating in the program;
       (C) the number of day care homes that are licensed, 
     certified, registered, or approved by each State in 
     accordance with regulations issued by the Secretary;
       (D) the rate of growth of the numbers referred to in 
     subparagraphs (A) through (C);
       (E) the nutritional adequacy and quality of meals served in 
     family day care homes that--
       (i) received reimbursement under the program prior to the 
     amendments made by this section but do not receive 
     reimbursement after the amendments made by this section; or
       (ii) received full reimbursement under the program prior to 
     the amendments made by this section but do not receive full 
     reimbursement after the amendments made by this section; and
       (F) the proportion of low-income children participating in 
     the program prior to the amendments made by this section and 
     the proportion of low-income children participating in the 
     program after the amendments made by this section.
       (2) Required data.--Each State agency participating in the 
     child care food program under section 17 of the National 
     School Lunch Act (42 U.S.C. 1766) shall submit to the 
     Secretary data on--
       (A) the number of family day care homes participating in 
     the program on July 31, 1996, and July 31, 1997;
       (B) the number of family day care homes licensed, 
     certified, registered, or approved for service on July 31, 
     1996, and July 31, 1997; and
       (C) such other data as the Secretary may require to carry 
     out this subsection.

     SEC. 12908. PILOT PROJECTS.

       (a) Universal Free Pilot.--Section 18(d) of the National 
     School Lunch Act (42 U.S.C. 1769(d)) is amended--
       (1) by striking paragraph (3); and
       (2) by redesignating paragraphs (4) and (5) as paragraphs 
     (3) and (4), respectively.
       (b) Demo Project Outside School Hours.--Section 18(e) of 
     the Act is amended--
       (1) in paragraph (1)--
       (A) in subparagraph (A)--
       (i) by striking ``(A)''; and
       (ii) by striking ``shall'' and inserting ``may''; and
       (B) by striking subparagraph (B); and
       (2) by striking paragraph (5) and inserting the following:
       ``(5) Authorization of appropriations.--There are 
     authorized to be appropriated to carry out this subsection 
     such sums as are necessary for each of fiscal years 1997 and 
     1998.''.

     SEC. 12909. INFORMATION CLEARINGHOUSE.

       Section 26 of the National School Lunch Act (42 U.S.C. 
     1769g) is repealed.

                     CHAPTER 2--CHILD NUTRITION ACT

     SEC. 12921. SPECIAL MILK PROGRAM.

       (a) In General.--Section 3(a) of the Child Nutrition Act of 
     1966 (42 U.S.C. 1772(a)) is amended--
       (1) in paragraph (3), by striking ``the Trust Territory of 
     the Pacific Islands'' and inserting ``the Commonwealth of the 
     Northern Mariana Islands''; and
       (2) 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 amendments made by subsection (a) 
     shall become effective on January 1, 1996.

     SEC. 12922. 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 the second sentence of paragraph (1)(B), by striking 
     ``, adjusted to the nearest one-fourth cent'' and inserting 
     ``(as adjusted pursuant to section 11(a) of the National 
     School Lunch Act (42 U.S.C. 1759a(a))''; 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. 12923. 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.

     SEC. 12924. SCHOOL BREAKFAST PROGRAM AUTHORIZATION.

       Section 4 of the Child Nutrition Act of 1966 (42 U.S.C. 
     1773) is amended by striking subsections (f) and (g).

     SEC. 12925. MISCELLANEOUS PROVISIONS AND DEFINITIONS.

       Section 15 of the Child Nutrition Act of 1966 (42 U.S.C. 
     1784) is amended--
       (1) in paragraph (1), by striking ``the Trust Territory of 
     the Pacific Islands'' and inserting ``the Commonwealth of the 
     Northern Mariana Islands''; and
       (2) in the first sentence of paragraph (3)--
       (A) in subparagraph (A), by inserting ``and'' at the end; 
     and
       (B) by striking ``, and (C)'' and all that follows through 
     ``Governor of Puerto Rico''.

     SEC. 12926. NUTRITION EDUCATION AND TRAINING.

       (a) Use of Funds.--Section 19(f) of the Child Nutrition Act 
     of 1966 (42 U.S.C. 1788(f)) is amended--
       (1) in paragraph (1)--
       (A) by striking subparagraph (B); and
       (B) in subparagraph (A)--
       (i) by striking ``(A)'';
       (ii) by striking clauses (ix) through (xix);
       (iii) by redesignating clauses (i) through (viii) and (xx) 
     as subparagraphs (A) through (H) and (I), respectively; and
       (iv) in subparagraph (H), as so redesignated, by inserting 
     ``and'' at the end;
       (2) by striking paragraphs (2) and (4); and
       (3) by redesignating paragraph (3) as paragraph (2).
       (b) Authorization of Appropriations.--Section 19(i) of the 
     Act is amended--
       (1) in the first sentence of paragraph (2)(A), by striking 
     ``and each succeeding fiscal year'';
       (2) by redesignating paragraphs (3) and (4) as paragraphs 
     (4) and (5), respectively; and
       (3) by inserting after paragraph (2) the following:
       ``(2) Fiscal years 1997 through 2002.--
       ``(A) In general.--There are authorized to be appropriated 
     to carry out this section $10,000,000 for each of fiscal 
     years 1997 through 2002.
       ``(B) Grants.--
       ``(i) In general.--Grants to each State from the amounts 
     made available under subparagraph (A) shall be based on a 
     rate of 50 cents for each child enrolled in schools or 
     institutions within the State, except that no State shall 
     receive an amount less than $75,000 per fiscal year.
       ``(ii) Insufficient funds.--If the amount made available 
     for any fiscal year is insufficient to pay the amount to 
     which each State is entitled under clause (i), the amount of 
     each grant shall be ratably reduced.''.
           Subtitle J--Food Stamps and Commodity Distribution

     SEC. 13001. SHORT TITLE.

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

                     CHAPTER 1--FOOD STAMP PROGRAM

     SEC. 13011. DEFINITION OF CERTIFICATION PERIOD.

       Section 3(c) of the Food Stamp Act of 1977 (7 U.S.C. 
     2012(c)) is amended by striking ``Except 

[[Page H 13608]]
     as provided'' and all that follows and inserting the following: ``The 
     certification period shall not exceed 12 months, except that 
     the certification period may be up to 24 months if all adult 
     household members are elderly or disabled. A State agency 
     shall have at least 1 contact with each certified household 
     every 12 months.''.

     SEC. 13012. DEFINITION OF COUPON.

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

     SEC. 13013. 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. 13014. 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. 13015. 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 ``shall (1) make'' and inserting the 
     following: ``shall--
       ``(1) make'';
       (2) by striking ``scale, (2) make'' and inserting ``scale;
       ``(2) make'';
       (3) by striking ``Alaska, (3) make'' and inserting the 
     following: ``Alaska;
       ``(3) make''; and
       (4) by striking ``Columbia, (4) through'' and all that 
     follows through the end of the subsection and inserting the 
     following: ``Columbia; and
       ``(4) on October 1, 1996, 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, 1996, the Secretary may not reduce the cost of 
     the diet in effect on September 30, 1996.''.

     SEC. 13016. 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. 13017. STATE OPTION FOR ELIGIBILITY STANDARDS.

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

     SEC. 13018. 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 
     ``19''.

     SEC. 13019. ENERGY ASSISTANCE.

       (a) In General.--Section 5(d) of the Food Stamp Act of 1977 
     (7 U.S.C. 2014(d)) is amended by striking paragraph (11) and 
     inserting the following: ``(11) a 1-time payment or allowance 
     made under a Federal or State law for the costs of 
     weatherization or emergency repair or replacement of an 
     unsafe or inoperative furnace or other heating or cooling 
     device,''.
       (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), by striking subparagraph (C) and 
     inserting the following:
       ``(C) a payment or allowance described in subsection 
     (d)(11);''; 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 assistance to a household shall be 
     considered money payable directly to the household.
       ``(B) Energy assistance expenses.--For purposes of 
     subsection (e)(7), 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) in paragraph (1), by striking ``food stamps,''; and
       (C) by striking paragraph (2).

     SEC. 13020. DEDUCTIONS FROM INCOME.

       (a) In General.--Section 5 of the Food Stamp Act of 1977 (7 
     U.S.C. 2014) is amended by striking subsection (e) and 
     inserting the following:
       ``(e) Deductions From Income.--
       ``(1) Standard deduction.--The Secretary shall allow a 
     standard deduction for each household in the 48 contiguous 
     States and the District of Columbia, Alaska, Hawaii, Guam, 
     and the Virgin Islands of the United States of $134, $229, 
     $189, $269, and $118, respectively.
       ``(2) Earned income deduction.--
       ``(A) Definition of earned income.--In this paragraph, the 
     term `earned income' does not include income excluded by 
     subsection (d) or any portion of income earned under a work 
     supplementation or support program, as defined under section 
     16(b), that is attributable to public assistance.
       ``(B) Deduction.--Except as provided in subparagraph (C), a 
     household with earned income shall be allowed a deduction of 
     20 percent of all earned income (other than income excluded 
     by subsection (d)) to compensate for taxes, other mandatory 
     deductions from salary, and work expenses.
       ``(C) Exception.--The deduction described in subparagraph 
     (B) shall not be allowed with respect to determining an 
     overissuance due to the failure of a household to report 
     earned income in a timely manner.
       ``(3) Dependent care deduction.--
       ``(A) In general.--A household shall be entitled, with 
     respect to expenses (other than excluded expenses described 
     in subparagraph (B)) for dependent care, to a dependent care 
     deduction, the maximum allowable level of which shall be $200 
     per month for each dependent child under 2 years of age and 
     $175 per month for each other dependent, for the actual cost 
     of payments necessary for the care of a dependent if the care 
     enables a household member to accept or continue employment, 
     or training or education that is preparatory for employment.
       ``(B) Excluded expenses.--The excluded expenses referred to 
     in subparagraph (A) are--
       ``(i) expenses paid on behalf of the household by a third 
     party;
       ``(ii) amounts made available and excluded for the expenses 
     referred to in subparagraph (A) under subsection (d)(3); and
       ``(iii) expenses that are paid under section 6(d)(4).
       ``(4) Deduction for child support payments.--
       ``(A) In general.--A household shall be entitled to a 
     deduction for child support payments made by a household 
     member to or for an individual who is not a member of the 
     household if the household member is legally obligated to 
     make the payments.
       ``(B) Methods for determining amount.--The Secretary may 
     prescribe by regulation the methods, including calculation on 
     a retrospective basis, that a State agency shall use to 
     determine the amount of the deduction for child support 
     payments.
       ``(5) Homeless shelter allowance.--A State agency may 
     develop a standard homeless shelter allowance, 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 allowance may use the allowance in determining 
     eligibility and allotments for the households, except that 
     the State agency may prohibit the use of the allowance for 
     households with extremely low shelter costs.
       ``(6) Excess medical expense deduction.--
       ``(A) In general.--A household containing an elderly or 
     disabled member shall be entitled, with respect to expenses 
     other than expenses paid on behalf of the household by a 
     third party, to an excess medical expense deduction for the 
     portion of the actual costs of allowable medical expenses, 
     incurred by the elderly or disabled member, exclusive of 
     special diets, that exceeds $35 per month.
       ``(B) Method of claiming deduction.--
       ``(i) In general.--A State agency shall offer an eligible 
     household under subparagraph (A) a method of claiming a 
     deduction for recurring medical expenses that are initially 
     verified under the excess medical expense deduction in lieu 
     of submitting information or verification on actual expenses 
     on a monthly basis.
       ``(ii) Method.--The method described in clause (i) shall--

       ``(I) be designed to minimize the burden for the eligible 
     elderly or disabled household member choosing to deduct the 
     recurrent medical expenses of the member pursuant to the 
     method;
       ``(II) rely on reasonable estimates of the expected medical 
     expenses of the member for the certification period 
     (including changes that can be reasonably anticipated based 
     on available information about the medical condition of the 
     member, public or private medical insurance coverage, and the 
     current verified medical expenses incurred by the member); 
     and
       ``(III) not require further reporting or verification of a 
     change in medical expenses if such a change has been 
     anticipated for the certification period.

       ``(7) Excess shelter expense deduction.--
       ``(A) In general.--A household shall be entitled, with 
     respect to expenses other than expenses paid on behalf of the 
     household by a third party, to an excess shelter expense 
     deduction to the extent that the monthly amount expended by a 
     household for shelter exceeds an amount equal to 50 percent 
     of monthly household income after all other applicable 
     deductions have been allowed.
       ``(B) Maximum amount of deduction.--In the case of a 
     household that does not contain an elderly or disabled 
     individual, the excess shelter expense deduction shall not 
     exceed--
       ``(i) in the 48 contiguous States and the District of 
     Columbia, $247 per month; and
       ``(ii) in Alaska, Hawaii, Guam, and the Virgin Islands of 
     the United States, $429, $353, $300, and $182 per month, 
     respectively.
       ``(C) Standard utility allowance.--
       ``(i) In general.--In computing the excess shelter expense 
     deduction, a State agency may use a standard utility 
     allowance in accordance with regulations promulgated by the 
     Secretary, 

[[Page H 13609]]
     except that a State agency may use an allowance that does not fluctuate 
     within a year to reflect seasonal variations.
       ``(ii) Restrictions on heating and cooling expenses.--An 
     allowance for a heating or cooling expense may not be used in 
     the case of a household that--

       ``(I) does not incur a heating or cooling expense, as the 
     case may be;
       ``(II) does incur a heating or cooling expense but is 
     located in a public housing unit that has central utility 
     meters and charges households, with regard to the expense, 
     only for excess utility costs; or
       ``(III) shares the expense with, and lives with, another 
     individual not participating in the food stamp program, 
     another household participating in the food stamp program, or 
     both, unless the allowance is prorated between the household 
     and the other individual, household, or both.

       ``(iii) Mandatory allowance.--

       ``(I) In general.--A State agency may make the use of a 
     standard utility allowance mandatory for all households with 
     qualifying utility costs if--

       ``(aa) 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
       ``(bb) the Secretary finds that the standards will not 
     result in an increased cost to the Secretary.

       ``(II) Household election.--A State agency that has not 
     made the use of a standard utility allowance mandatory under 
     subclause (I) 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.

       ``(iv) Availability of allowance to recipients of energy 
     assistance.--

       ``(I) In general.--Subject to subclause (II), if a State 
     agency elects to use a standard utility allowance that 
     reflects heating or cooling costs, the standard utility 
     allowance shall be made available to households receiving a 
     payment, or on behalf of which a payment is made, under the 
     Low-Income Home Energy Assistance Act of 1981 (42 U.S.C. 8621 
     et seq.) or other similar energy assistance program, if the 
     household still incurs out-of-pocket heating or cooling 
     expenses in excess of any assistance paid on behalf of the 
     household to an energy provider.
       ``(II) Separate allowance.--A State agency may use a 
     separate standard utility allowance for households on behalf 
     of which a payment described in subclause (I) is made, but 
     may not be required to do so.
       ``(III) States not electing to use separate allowance.--A 
     State agency that does not elect to use a separate allowance 
     but makes a single standard utility allowance available to 
     households incurring heating or cooling expenses (other than 
     a household described in subclause (I) or (II) of 
     subparagraph (C)(ii)) may not be required to reduce the 
     allowance due to the provision (directly or indirectly) of 
     assistance under the Low-Income Home Energy Assistance Act of 
     1981 (42 U.S.C. 8621 et seq.).
       ``(IV) Proration of assistance.--For the purpose of the 
     food stamp program, assistance provided under the Low-Income 
     Home Energy Assistance Act of 1981 (42 U.S.C. 8621 et seq.) 
     shall be considered to be prorated over the entire heating or 
     cooling season for which the assistance was provided.''.

       (b) Conforming Amendment.--Section 11(e)(3) of the Act (7 
     U.S.C. 2020(e)(3)) is amended by striking ``. Under rules 
     prescribed'' and all that follows through ``verifies higher 
     expenses''.

     SEC. 13021. VEHICLE ALLOWANCE.

       Section 5(g) of the Food Stamp Act of 1977 (7 U.S.C. 
     2014(g)) is amended by striking paragraph (2) and inserting 
     the following:
       ``(2) Included assets.--
       ``(A) In general.--Subject to the other provisions of this 
     paragraph, the Secretary shall, in prescribing inclusions in, 
     and exclusions from, financial resources, follow the 
     regulations in force as of June 1, 1982 (other than those 
     relating to licensed vehicles and inaccessible resources).
       ``(B) Additional included assets.--The Secretary shall 
     include in financial resources--
       ``(i) any boat, snowmobile, or airplane used for 
     recreational purposes;
       ``(ii) any vacation home;
       ``(iii) any mobile home used primarily for vacation 
     purposes;
       ``(iv) subject to subparagraph (C), any licensed vehicle 
     that is used for household transportation or to obtain or 
     continue employment to the extent that the fair market value 
     of the vehicle exceeds $4,600; and
       ``(v) any savings or retirement account (including an 
     individual account), regardless of whether there is a penalty 
     for early withdrawal.
       ``(C) Excluded vehicles.--A vehicle (and any other 
     property, real or personal, to the extent the property is 
     directly related to the maintenance or use of the vehicle) 
     shall not be included in financial resources under this 
     paragraph if the vehicle is--
       ``(i) used to produce earned income;
       ``(ii) is necessary for the transportation of a physically 
     disabled household member; or
       ``(iii) is depended on by a household to carry fuel for 
     heating or water for home use and provides the primary source 
     of fuel or water, respectively, for the household.''.

     SEC. 13022. 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)) is amended--
       (1) by striking subparagraph (F); and
       (2) by redesignating subparagraphs (G) and (H) as 
     subparagraphs (F) and (G), respectively.

     SEC. 13023. DOUBLED PENALTIES FOR VIOLATING FOOD STAMP 
                   PROGRAM REQUIREMENTS.

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

     SEC. 13024. DISQUALIFICATION OF CONVICTED INDIVIDUALS.

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

     SEC. 13025. DISQUALIFICATION.

       (a) In General.--Section 6(d) of the Food Stamp Act of 1977 
     (7 U.S.C. 2015(d)) is amended by striking ``(d)(1) Unless 
     otherwise exempted by the provisions'' and all that follows 
     through the end of paragraph (1) 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) Administration.--
       ``(i) Good cause.--The Secretary shall determine the 
     meaning of good cause for the purpose of this paragraph.
       ``(ii) Voluntary quit.--The Secretary shall determine the 
     meaning of voluntarily quitting and reducing work effort for 
     the purpose of this paragraph.
       ``(iii) Determination by state agency.--

       ``(I) In general.--Subject to subclause (II) and clauses 
     (i) and (ii), a State agency shall determine--

       ``(aa) the meaning of any term in subparagraph (A);
       ``(bb) the procedures for determining whether an individual 
     is in compliance with a requirement under subparagraph (A); 
     and
       ``(cc) whether an individual is in compliance with a 
     requirement under subparagraph (A).

[[Page H 13610]]


       ``(II) Not less restrictive.--A State agency may not 
     determine a meaning, procedure, or determination under 
     subclause (I) to be less restrictive than a comparable 
     meaning, procedure, or determination under a State program 
     funded under part A of title IV of the Social Security Act 
     (42 U.S.C. 601 et seq.).

       ``(iv) Strike against the government.--For the purpose of 
     subparagraph (A)(v), an employee of the Federal Government, a 
     State, or a political subdivision of a State, who is 
     dismissed for participating in a strike against the Federal 
     Government, the State, or the political subdivision of the 
     State shall be considered to have voluntarily quit without 
     good cause.
       ``(v) Selecting a head of household.--

       ``(I) In general.--For the purpose of this paragraph, the 
     State agency shall allow the household to select any adult 
     parent of a child in the household as the head of the 
     household if all adult household members making application 
     under the food stamp program agree to the selection.
       ``(II) Time for making designation.--A household may 
     designate the head of the household under subclause (I) each 
     time the household is certified for participation in the food 
     stamp program, but may not change the designation during a 
     certification period unless there is a change in the 
     composition of the household.

       ``(vi) Change in head of household.--If the head of a 
     household leaves the household during a period in which the 
     household is ineligible to participate in the food stamp 
     program under subparagraph (B)--

       ``(I) the household shall, if otherwise eligible, become 
     eligible to participate in the food stamp program; and
       ``(II) if the head of the household becomes the head of 
     another household, the household that becomes headed by the 
     individual shall become ineligible to participate in the food 
     stamp program for the remaining period of ineligibility.''.

       (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. 13026. CARETAKER EXEMPTION.

       Section 6(d)(2) of the Food Stamp Act of 1977 (7 U.S.C. 
     2015(d)(2)) is amended by striking subparagraph (B) and 
     inserting the following: ``(B) a parent or other member of a 
     household with responsibility for the care of (i) a dependent 
     child under the age of 6 or any lower age designated by the 
     State agency that is not under the age of 1, or (ii) an 
     incapacitated person;''.

     SEC. 13027. EMPLOYMENT AND TRAINING.

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

     SEC. 13028. COMPARABLE TREATMENT FOR DISQUALIFICATION.

       (a) In General.--Section 6 of the Food Stamp Act of 1977 (7 
     U.S.C. 2015) is amended--
       (1) by redesignating subsection (i), as added by section 
     12104, as subsection (p); and
       (2) by inserting after subsection (h) 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 means-tested public assistance program, the 
     State agency may impose the same disqualification on the 
     member of the household under the food stamp program.
       ``(2) Rules and procedures.--If a disqualification is 
     imposed under paragraph (1) for a failure of an individual to 
     perform an action required under part A of title IV of the 
     Social Security Act (42 U.S.C. 601 et seq.), the State agency 
     may use the rules and procedures that apply under part A of 
     title IV of the Act to impose the same disqualification under 
     the food stamp program.
       ``(3) 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) State Plan Provisions.--Section 11(e) of the Act (7 
     U.S.C. 2020(e)) is amended--
       (1) in paragraph (24), by striking ``and'' at the end;
       (2) in paragraph (25), by striking the period at the end 
     and inserting a semicolon; and
       (3) by adding at the end the following:
       ``(26) the guidelines the State agency uses in carrying out 
     section 6(i); and''.
       (c) 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. 13029. DISQUALIFICATION FOR RECEIPT OF MULTIPLE FOOD 
                   STAMP BENEFITS.

       Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015), as 
     amended by section 13028, is further amended by inserting 
     after subsection (i) the following:
       ``(j) Disqualification for Receipt of Multiple Food Stamp 
     Benefits.--An individual shall be ineligible to participate 
     in the food stamp program as a member of any household for a 
     10-year period if the individual is found by a State agency 
     to have made, or is convicted in a Federal or State court of 
     having made, a fraudulent statement or representation with 
     respect to the identity or place of residence of the 

[[Page H 13611]]
     individual in order to receive multiple benefits simultaneously under 
     the food stamp program.''.

     SEC. 13030. DISQUALIFICATION OF FLEEING FELONS.

       Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015), as 
     amended by section 13029, is further amended by inserting 
     after subsection (j) the following:
       ``(k) Disqualification of Fleeing Felons.--No member of a 
     household who is otherwise eligible to participate in the 
     food stamp program shall be eligible to participate in the 
     program as a member of that or any other household during any 
     period during which the individual is--
       ``(1) fleeing to avoid prosecution, or custody or 
     confinement after conviction, under the law of the place from 
     which the individual is fleeing, for a crime, or attempt to 
     commit a crime, that is a felony under the law of the place 
     from which the individual is fleeing or that, in the case of 
     New Jersey, is a high misdemeanor under the law of New 
     Jersey; or
       ``(2) violating a condition of probation or parole imposed 
     under a Federal or State law.''.

     SEC. 13031. COOPERATION WITH CHILD SUPPORT AGENCIES.

       Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015), as 
     amended by section 13030, is further amended by inserting 
     after subsection (k) the following:
       ``(l) 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.).
       ``(m) Non-Custodial Parent's Cooperation With Child Support 
     Agencies.--
       ``(1) In general.--At the option of a State agency, subject 
     to paragraphs (2) and (3), a putative or identified non-
     custodial parent of a child under the age of 18 (referred to 
     in this subsection as `the individual') shall not be eligible 
     to participate in the food stamp program if the individual 
     refuses to cooperate with the State agency administering the 
     program established under part D of title IV of the Social 
     Security Act (42 U.S.C. 651 et seq.)--
       ``(A) in establishing the paternity of the child (if the 
     child is born out of wedlock); and
       ``(B) in providing support for the child.
       ``(2) Refusal to cooperate.--
       ``(A) Guidelines.--The Secretary, in consultation with the 
     Secretary of Health and Human Services, shall develop 
     guidelines on what constitutes a refusal to cooperate under 
     paragraph (1).
       ``(B) Procedures.--The State agency shall develop 
     procedures, using guidelines developed under subparagraph 
     (A), for determining whether an individual is refusing to 
     cooperate under paragraph (1).
       ``(3) Fees.--Paragraph (1) shall not require the payment of 
     a fee or other cost for services provided under part D of 
     title IV of the Social Security Act (42 U.S.C. 651 et seq.).
       ``(4) Privacy.--The State agency shall provide safeguards 
     to restrict the use of information collected by a State 
     agency administering the program established under part D of 
     title IV of the Social Security Act (42 U.S.C. 651 et seq.) 
     to purposes for which the information is collected.''.

     SEC. 13032. DISQUALIFICATION RELATING TO CHILD SUPPORT 
                   ARREARS.

       Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015), as 
     amended by section 13031, is further amended by inserting 
     after subsection (m) the following:
       ``(n) Disqualification for Child Support Arrears.--
       ``(1) In general.--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. 13033. WORK REQUIREMENT.

       (a) In General.--Section 6 of the Food Stamp Act of 1977 (7 
     U.S.C. 2015), as amended by section 13032, is further amended 
     by inserting after subsection (n) the following:
       ``(o) 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 section 6(d)(4), other than a job 
     search program or a job search training program.
       ``(2) Work requirement.--Subject to the other provisions of 
     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 4 
     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; or
       ``(C) participate in a program under section 20 or a 
     comparable program established by a State or political 
     subdivision of a State.
       ``(3) Exception.--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;
       ``(D) otherwise exempt under section 6(d)(2); or
       ``(E) a pregnant woman.
       ``(4) Waiver.--
       ``(A) In general.--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--
       ``(i) has an unemployment rate of over 10 percent; or
       ``(ii) does not have a sufficient number of jobs to provide 
     employment for the individuals.
       ``(B) Report.--The Secretary shall report the basis for a 
     waiver under subparagraph (A) to the Committee on Agriculture 
     of the House of Representatives and the Committee on 
     Agriculture, Nutrition, and Forestry of the Senate.
       ``(5) Subsequent eligibility.--
       ``(A) In general.--Paragraph (2) shall cease to apply to an 
     individual if, during a 30-day period, the individual--
       ``(i) works 80 or more hours;
       ``(ii) participates in and complies with the requirements 
     of a work program for 80 or more hours, as determined by a 
     State agency; or
       ``(iii) participates in a program under section 20 or a 
     comparable program established by a State or political 
     subdivision of a State.
       ``(B) Limitation.--During the subsequent 12-month period, 
     the individual shall be eligible to participate in the food 
     stamp program for not more than 4 months during which the 
     individual does not--
       ``(i) work 20 hours or more per week, averaged monthly;
       ``(ii) participate in and comply with the requirements of a 
     work program for 20 hours or more per week, as determined by 
     the State agency; or
       ``(iii) participate in a program under section 20 or a 
     comparable program established by a State or political 
     subdivision of a State.''.
       (b) Transition Provision.--Prior to 1 year after the date 
     of enactment of this Act, the term ``preceding 12-month 
     period'' in section 6(o) of the Food Stamp Act of 1977, as 
     amended by subsection (a), means the preceding period that 
     begins on the date of enactment of this Act.

     SEC. 13034. ENCOURAGE ELECTRONIC BENEFIT TRANSFER SYSTEMS.

       Section 7(i) of the Food Stamp Act of 1977 (7 U.S.C. 
     2016(i)) is amended--
       (1) by striking paragraph (1) and inserting the following:
       ``(1) Electronic Benefit Transfers.--
       ``(A) Implementation.--Each State agency shall implement an 
     electronic benefit transfer system in which household 
     benefits determined under section 8(a) or 24 are issued from 
     and stored in a central databank before October 1, 2002, 
     unless the Secretary provides a waiver for a State agency 
     that faces unusual barriers to implementing an electronic 
     benefit transfer system.
       ``(B) Timely implementation.--State agencies are encouraged 
     to implement an electronic benefit transfer system under 
     subparagraph (A) as soon as practicable.
       ``(C) State flexibility.--Subject to paragraph (2), a State 
     agency may procure and implement an electronic benefit 
     transfer system under the terms, conditions, and design that 
     the State agency considers appropriate.
       ``(D) Operation.--An electronic benefit transfer system 
     should take into account generally accepted standard 
     operating rules based on--
       ``(i) commercial electronic funds transfer technology;
       ``(ii) the need to permit interstate operation and law 
     enforcement monitoring; and
       ``(iii) the need to permit monitoring and investigations by 
     authorized law enforcement agencies.'';
       (2) in paragraph (2)--
       (A) by striking ``effective no later than April 1, 1992,'';
       (B) in subparagraph (A)--
       (i) by striking ``, in any 1 year,''; and
       (ii) by striking ``on-line'';
       (C) by striking subparagraph (D) and inserting the 
     following:
       ``(D)(i) measures to maximize the security of a system 
     using the most recent technology available that the State 
     agency considers appropriate 

[[Page H 13612]]
     and cost effective and which may include personal identification 
     numbers, photographic identification on electronic benefit 
     transfer cards, and other measures to protect against fraud 
     and abuse; and
       ``(ii) effective not later than 2 years after the effective 
     date of this clause, to the extent practicable, measures that 
     permit a system to differentiate items of food that may be 
     acquired with an allotment from items of food that may not be 
     acquired with an allotment.'';
       (D) in subparagraph (G), by striking ``and'' at the end;
       (E) in subparagraph (H), by striking the period at the end 
     and inserting ``; and''; and
       (F) by adding at the end the following:
       ``(I) procurement standards.''; and
       (3) by adding at the end the following:
       ``(7) Replacement of benefits.--Regulations issued by the 
     Secretary regarding the replacement of benefits and liability 
     for replacement of benefits under an electronic benefit 
     transfer system shall be similar to the regulations in effect 
     for a paper food stamp issuance system.
       ``(8) Replacement card fee.--A State agency may collect a 
     charge for replacement of an electronic benefit transfer card 
     by reducing the monthly allotment of the household receiving 
     the replacement card.
       ``(9) Optional photographic identification.--
       ``(A) In general.--A State agency may require that an 
     electronic benefit card contain a photograph of 1 or more 
     members of a household.
       ``(B) Other authorized users.--If a State agency requires a 
     photograph on an electronic benefit card under subparagraph 
     (A), the State agency shall establish procedures to ensure 
     that any other appropriate member of the household or any 
     authorized representative of the household may utilize the 
     card.''.

     SEC. 13035. VALUE OF MINIMUM ALLOTMENT.

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

     SEC. 13036. 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. 13037. OPTIONAL COMBINED ALLOTMENT FOR EXPEDITED 
                   HOUSEHOLDS.

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

     SEC. 13038. FAILURE TO COMPLY WITH OTHER MEANS-TESTED PUBLIC 
                   ASSISTANCE PROGRAMS.

       Section 8 of the Food Stamp Act of 1977 (7 U.S.C. 2017) is 
     amended by striking subsection (d) and inserting the 
     following:
       ``(d) Reduction of Public Assistance Benefits.--
       ``(1) In general.--If the benefits of a household are 
     reduced under a Federal, State, or local law relating to a 
     means-tested public assistance program for the failure of a 
     member of the household to perform an action required under 
     the law or program, for the duration of the reduction--
       ``(A) the household may not receive an increased allotment 
     as the result of a decrease in the income of the household to 
     the extent that the decrease is the result of the reduction; 
     and
       ``(B) the State agency may reduce the allotment of the 
     household by not more than 25 percent.
       ``(2) Rules and procedures.--If the allotment of a 
     household is reduced under this subsection for a failure to 
     perform an action required under part A of title IV of the 
     Social Security Act (42 U.S.C. 601 et seq.), the State agency 
     may use the rules and procedures that apply under part A of 
     title IV of the Act to reduce the allotment under the food 
     stamp program.''.

     SEC. 13039. ALLOTMENTS FOR HOUSEHOLDS RESIDING IN CENTERS.

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

     SEC. 13040. CONDITION PRECEDENT FOR APPROVAL OF RETAIL FOOD 
                   STORES AND WHOLESALE FOOD CONCERNS.

       Section 9(a)(1) of the Food Stamp Act of 1977 (7 U.S.C. 
     2018(a)(1)) is amended by adding at the end the following: 
     ``No retail food store or wholesale food concern of a type 
     determined by the Secretary, based on factors that include 
     size, location, and type of items sold, shall be approved to 
     be authorized or reauthorized for participation in the food 
     stamp program unless an authorized employee of the Department 
     of Agriculture, a designee of the Secretary, or, if 
     practicable, an official of the State or local government 
     designated by the Secretary has visited the store or concern 
     for the purpose of determining whether the store or concern 
     should be approved or reauthorized, as appropriate.''.

     SEC. 13041. AUTHORITY TO ESTABLISH AUTHORIZATION PERIODS.

       Section 9(a) of the Food Stamp Act of 1977 (7 U.S.C. 
     2018(a)) is amended by adding at the end the following:
       ``(3) Authorization periods.--The Secretary shall establish 
     specific time periods during which authorization to accept 
     and redeem coupons, or to redeem benefits through an 
     electronic benefit transfer system, shall be valid under the 
     food stamp program.''.

     SEC. 13042. INFORMATION FOR VERIFYING ELIGIBILITY FOR 
                   AUTHORIZATION.

       Section 9(c) of the Food Stamp Act of 1977 (7 U.S.C. 
     2018(c)) is amended--
       (1) in the first sentence, by inserting ``, which may 
     include relevant income and sales tax filing documents,'' 
     after ``submit information''; and
       (2) by inserting after the first sentence the following: 
     ``The regulations may require retail food stores and 
     wholesale food concerns to provide written authorization for 
     the Secretary to verify all relevant tax filings with 
     appropriate agencies and to obtain corroborating 
     documentation from other sources so that the accuracy of 
     information provided by the stores and concerns may be 
     verified.''.

     SEC. 13043. WAITING PERIOD FOR STORES THAT FAIL TO MEET 
                   AUTHORIZATION CRITERIA.

       Section 9(d) of the Food Stamp Act of 1977 (7 U.S.C. 
     2018(d)) is amended by adding at the end the following: ``A 
     retail food store or wholesale food concern that is denied 
     approval to accept and redeem coupons because the store or 
     concern does not meet criteria for approval established by 
     the Secretary may not, for at least 6 months, submit a new 
     application to participate in the program. The Secretary may 
     establish a longer time period under the preceding sentence, 
     including permanent disqualification, that reflects the 
     severity of the basis of the denial.''.

     SEC. 13044. EXPEDITED COUPON SERVICE.

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

     SEC. 13045. WITHDRAWING FAIR HEARING REQUESTS.

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

     SEC. 13046. DISQUALIFICATION OF RETAILERS WHO INTENTIONALLY 
                   SUBMIT FALSIFIED APPLICATIONS.

       Section 12(b) of the Food Stamp Act of 1977 (7 U.S.C. 
     2021(b)) is amended--
       (1) in paragraph (2), by striking ``and'' at the end;
       (2) in paragraph (3), by striking the period at the end and 
     inserting ``; and''; and
       (3) by adding at the end the following:
       ``(4) for a reasonable period of time to be determined by 
     the Secretary, including permanent disqualification, on the 
     knowing submission of an application for the approval or 
     reauthorization to accept and redeem coupons that contains 
     false information about a substantive matter that was a part 
     of the application.''.

     SEC. 13047. DISQUALIFICATION OF RETAILERS WHO ARE 
                   DISQUALIFIED UNDER THE WIC PROGRAM.

       Section 12 of the Food Stamp Act of 1977 (7 U.S.C. 2021) is 
     amended by adding at the end the following:
       ``(g) Disqualification of Retailers Who Are Disqualified 
     Under the WIC Program.--
       ``(1) In general.--The Secretary shall issue regulations 
     providing criteria for the disqualification under this Act of 
     an approved retail food store and a wholesale food concern 
     that is disqualified from accepting benefits under the 
     special supplemental nutrition program for women, infants, 
     and children established under section 17 of the Child 
     Nutrition Act of 1966 (7 U.S.C. 1786).
       ``(2) Terms.--A disqualification under paragraph (1)--
       ``(A) shall be for the same length of time as the 
     disqualification from the program referred to in paragraph 
     (1);
       ``(B) may begin at a later date than the disqualification 
     from the program referred to in paragraph (1); and
       ``(C) notwithstanding section 14, shall not be subject to 
     judicial or administrative review.''.

     SEC. 13048. COLLECTION OF OVERISSUANCES.

       (a) Collection of Overissuances.--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 

[[Page H 13613]]
     collect any overissuance of coupons issued to a household by--
       ``(A) reducing the allotment of the household;
       ``(B) withholding amounts from 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) Maximum reduction absent fraud.--If a household 
     received an overissuance of coupons without any member of the 
     household being found eligible 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 not reduce the monthly allotment of the 
     household under paragraph (1)(A) by an amount in excess of 
     the greater of--
       ``(A) 10 percent of the monthly allotment of the household; 
     or
       ``(B) $10.
       ``(4) Procedures.--A State agency shall collect an 
     overissuance of coupons issued to a household under paragraph 
     (1) in accordance with the 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 Amendments.--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''.
       (c) Retention Rate.--Section 16(a) of the Act (7 U.S.C. 
     2025(a)) is amended by striking ``25 percent during the 
     period beginning October 1, 1990'' and all that follows 
     through ``error of a State agency'' and inserting the 
     following: ``25 percent of the overissuances collected by the 
     State agency under section 13, except those overissuances 
     arising from an error of the State agency''.

     SEC. 13049. AUTHORITY TO SUSPEND STORES VIOLATING PROGRAM 
                   REQUIREMENTS PENDING ADMINISTRATIVE AND 
                   JUDICIAL REVIEW.

       Section 14(a) of the Food Stamp Act of 1977 (7 U.S.C. 
     2023(a)) is amended--
       (1) by redesignating the first through seventeenth 
     sentences as paragraphs (1) through (17), respectively; and
       (2) by adding at the end the following:
       ``(18) Suspension of stores pending review.--
     Notwithstanding any other provision of this subsection, any 
     permanent disqualification of a retail food store or 
     wholesale food concern under paragraph (3) or (4) of section 
     12(b) shall be effective from the date of receipt of the 
     notice of disqualification. If the disqualification is 
     reversed through administrative or judicial review, the 
     Secretary shall not be liable for the value of any sales lost 
     during the disqualification period.''.

     SEC. 13050. LIMITATION OF FEDERAL MATCH.

       Section 16(a)(4) of the Food Stamp Act of 1977 (7 U.S.C. 
     2025(a)(4)) is amended by inserting after the comma at the 
     end the following: ``but not including recruitment 
     activities,''.

     SEC. 13051. 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:
       ``(c) Work Supplementation or Support Program.--
       ``(1) Definition of work supplementation or support 
     program.--In this subsection, the term `work supplementation 
     or support program' means a program under 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 public assistance recipient 
     who was not employed by the employer at the time the public 
     assistance recipient entered the program.
       ``(2) Program.--A State agency may elect to use an amount 
     equal to the allotment that would otherwise be issued to a 
     household under the food stamp program, but for the operation 
     of this subsection, for the purpose of subsidizing or 
     supporting a job 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 received 
     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) Other work requirements.--No individual shall be 
     excused, by reason of the fact that a State has a work 
     supplementation or support program, from any work requirement 
     under section 6(d), except during the periods in which the 
     individual is employed under the work supplementation or 
     support program.
       ``(5) Length of participation.--A State agency shall 
     provide a description of how the public assistance recipients 
     in the program shall, within a specific period of time, be 
     moved from supplemented or supported employment to employment 
     that is not supplemented or supported.
       ``(6) Displacement.--A work supplementation or support 
     program shall not displace the employment of individuals who 
     are not supplemented or supported.''.

     SEC. 13052. AUTHORIZATION OF PILOT PROJECTS.

       The last sentence of section 17(b)(1)(A) of the Food Stamp 
     Act of 1977 (7 U.S.C. 2026(b)(1)(A)) is amended by striking 
     ``1995'' and inserting ``2002''.

     SEC. 13053. EMPLOYMENT INITIATIVES PROGRAM.

       Section 17 of the Food Stamp Act of 1977 (7 U.S.C. 2026) is 
     amended by striking subsection (d) and inserting the 
     following:
       ``(d) Employment Initiatives Program.--
       ``(1) Election to participate.--
       ``(A) In general.--Subject to the other provisions of this 
     subsection, a State may elect to carry out an employment 
     initiatives program under this subsection.
       ``(B) Requirement.--A State shall be eligible to carry out 
     an employment initiatives program 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) In general.--A State that has elected to carry out an 
     employment initiatives program under paragraph (1) may use 
     amounts equal to the food stamp allotments that would 
     otherwise be issued 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).
       ``(B) Payment.--The Secretary shall pay to each State that 
     has elected to carry out an employment initiatives program 
     under paragraph (1) an amount equal to the value of the 
     allotment that each household would be eligible to receive 
     under this Act but for the operation of this subsection.
       ``(C) Other provisions.--For purposes of the food stamp 
     program (other than this subsection)--
       ``(i) cash assistance under this subsection shall be 
     considered to be an allotment; and
       ``(ii) each household receiving cash benefits under this 
     subsection shall not receive any other food stamp benefit for 
     the period for which the cash assistance is provided.
       ``(D) Additional payments.--Each State that has elected to 
     carry out an employment initiatives program under paragraph 
     (1) shall--
       ``(i) increase the cash benefits provided to each household 
     under this subsection to compensate for any State or local 
     sales tax that may be collected on purchases of food by any 
     household receiving cash benefits under this subsection, 
     unless the Secretary determines on the basis of information 
     provided by the State that the increase is unnecessary on the 
     basis of the limited nature of the items subject to the State 
     or local sales tax; and
       ``(ii) pay the cost of any increase in cash benefits 
     required by clause (i).
       ``(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 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;
       ``(C)(i) is 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.); or
       ``(ii) was 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.) 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.
       ``(4) Evaluation.--A State that operates a program under 
     this subsection for 2 years shall provide to the Secretary a 
     written evaluation of the impact of cash assistance under 
     this subsection. The State agency, with the concurrence of 
     the Secretary, shall determine the content of the 
     evaluation.''.

     SEC. 13054. 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, $1,182,000,000 for fiscal year 1997, 

[[Page H 13614]]
     $1,223,000,000 for fiscal year 1998, $1,266,000,000 for fiscal year 
     1999, $1,310,000,000 for fiscal year 2000, $1,357,000,000 for 
     fiscal year 2001, and $1,404,000,000 for fiscal year 2002''.

     SEC. 13055. SIMPLIFIED FOOD STAMP PROGRAM.

       (a) In General.--The Act (7 U.S.C. 2011 et seq.) is amended 
     by adding at the end the following:

     ``SEC. 24. SIMPLIFIED FOOD STAMP PROGRAM.

       ``(a) Definition of Federal Costs.--In this section, the 
     term `Federal costs' does not include any Federal costs 
     incurred under section 17.
       ``(b) Election.--Subject to subsection (d), a State agency 
     may elect to carry out a Simplified Food Stamp Program 
     (referred to in this section as a `Program') in accordance 
     with this section.
       ``(c) Operation of Program.--If a State agency elects to 
     carry out a Program, within the State or a political 
     subdivision of the State--
       ``(1) a household in which all members receive assistance 
     under a State program funded under part A of title IV of the 
     Social Security Act (42 U.S.C. 601 et seq.) shall 
     automatically be eligible to participate in the Program; and
       ``(2) subject to subsection (f), benefits under the Program 
     shall be determined under rules and procedures established by 
     the State under--
       ``(A) a State program funded under part A of title IV of 
     the Social Security Act (42 U.S.C. 601 et seq.);
       ``(B) the food stamp program (other than section 25); or
       ``(C) a combination of a State program funded under part A 
     of title IV of the Social Security Act (42 U.S.C. 601 et 
     seq.) and the food stamp program (other than section 25).
       ``(d) Approval of Program.--
       ``(1) State plan.--A State agency may not operate a Program 
     unless the Secretary approves a State plan for the operation 
     of the Program under paragraph (2).
       ``(2) Approval of plan.--The Secretary shall approve any 
     State plan to carry out a Program if the Secretary determines 
     that the plan--
       ``(A) complies with this section; and
       ``(B) contains sufficient documentation that the plan will 
     not increase Federal costs for any fiscal year.
       ``(e) Increased Federal Costs.--
       ``(1) Determination.--During each fiscal year and not later 
     than 90 days after the end of each fiscal year, the Secretary 
     shall determine whether a Program being carried out by a 
     State agency is increasing Federal costs under this Act above 
     the Federal costs incurred under the food stamp program in 
     operation in the State or political subdivision of the State 
     for the fiscal year prior to the implementation of the 
     Program, adjusted for any changes in--
       ``(A) participation;
       ``(B) the income of participants in the food stamp program 
     that is not attributable to public assistance; and
       ``(C) the thrifty food plan under section 3(o).
       ``(2) Notification.--If the Secretary determines that the 
     Program has increased Federal costs under this Act for any 
     fiscal year or any portion of any fiscal year, the Secretary 
     shall notify the State agency not later than 30 days after 
     the Secretary makes the determination under paragraph (1).
       ``(3) Enforcement.--
       ``(A) Corrective action.--Not later than 90 days after the 
     date of a notification under paragraph (2), the State agency 
     shall submit a plan for approval by the Secretary for prompt 
     corrective action that is designed to prevent the Program 
     from increasing Federal costs under this Act.
       ``(B) Termination.--If the State agency does not submit a 
     plan under subparagraph (A) or carry out a plan approved by 
     the Secretary, the Secretary shall terminate the approval of 
     the State agency to operate a Program and the State agency 
     shall be ineligible to operate a future Program.
       ``(f) Rules and Procedures.--
       ``(1) In general.--In operating a Program, a State or 
     political subdivision of a State may follow the rules and 
     procedures established by the State or political subdivision 
     under a State program funded under part A of title IV of the 
     Social Security Act (42 U.S.C. 601 et seq.) or under the food 
     stamp program.
       ``(2) Standardized deductions.--In operating a Program, a 
     State may standardize the deductions provided under section 
     5(e). In developing the standardized deduction, the State 
     shall consider the work expenses, dependent care costs, and 
     shelter costs of participating households.
       ``(3) Requirements.--In operating a Program, a State or 
     political subdivision shall comply with the requirements of--
       ``(A) subsections (a) through (g) of section 7;
       ``(B) section 8(a) (except that the income of a household 
     may be determined under a State program funded under part A 
     of title IV of the Social Security Act (42 U.S.C. 601 et 
     seq.));
       ``(C) subsection (b) and (d) of section 8;
       ``(D) subsections (a), (c), (d), and (n) of section 11;
       ``(E) paragraphs (8), (12), (17), (19), (21), (26), and 
     (27) of section 11(e);
       ``(F) section 11(e)(10) (or a comparable requirement 
     established by the State under a State program funded under 
     part A of title IV of the Social Security Act (42 U.S.C. 601 
     et seq.)); and
       ``(G) section 16.
       ``(4) Limitation on eligibility.--Notwithstanding any other 
     provision of this section, a household may not receive 
     benefits under this section as a result of the eligibility of 
     the household 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.''.
       (b) State Plan Provisions.--Section 11(e) of the Act (7 
     U.S.C. 2020(e)), as amended by sections 13028(b), is further 
     amended by adding at the end the following:
       ``(27) if a State agency elects to carry out a Simplified 
     Food Stamp Program under section 24, the plans of the State 
     agency for operating the program, including--
       ``(A) the rules and procedures to be followed by the State 
     to determine food stamp benefits;
       ``(B) how the State will address the needs of households 
     that experience high shelter costs in relation to the incomes 
     of the households; and
       ``(C) a description of the method by which the State will 
     carry out a quality control system under section 16(c).''.
       (c) Conforming Amendments.--
       (1) Section 8 of the Act (7 U.S.C. 2017), as amended by 
     section 13039, is further amended--
       (A) by striking subsection (e); and
       (B) by redesignating subsection (f) as subsection (e).
       (2) Section 17 of the Act (7 U.S.C. 2026) is amended--
       (A) by striking subsection (i); and
       (B) by redesignating subsections (j) through (l) as 
     subsections (i) through (k), respectively.

     SEC. 13056. STATE FOOD ASSISTANCE BLOCK GRANT.

       (a) In General.--The Food Stamp Act of 1977 (7 U.S.C. 2011 
     et seq.), as amended by section 13055, is further amended by 
     adding at the end the following:

     ``SEC. 25. STATE FOOD ASSISTANCE BLOCK GRANT.

       ``(a) Definitions.--In this section:
       ``(1) Food assistance.--The term `food assistance' means 
     assistance that may be used only to obtain food, as defined 
     in section 3(g).
       ``(2) State.--The term `State' means each of the 50 States, 
     the District of Columbia, Guam, and the Virgin Islands of the 
     United States.
       ``(b) 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; and
       ``(2) funds for administrative costs incurred in providing 
     the assistance.
       ``(c) Election.--
       ``(1) In general.--A State may annually elect to 
     participate in the program established under subsection (b) 
     if the State--
       ``(A) has fully implemented an electronic benefit transfer 
     system that operates in the entire State;
       ``(B) has a payment error rate under section 16(c) that is 
     not more than 6 percent as announced most recently by the 
     Secretary; or
       ``(C) has a payment error rate in excess of 6 percent and 
     agrees to contribute non-Federal funds for the fiscal year of 
     the grant, for benefits and administration of the State's 
     food assistance program, the amount determined under 
     paragraph (2).
       ``(2) State mandatory contributions.--
       ``(A) In general.--In the case of a State that elects to 
     participate in the program under paragraph (1)(C), the State 
     shall agree to contribute, for a fiscal year, an amount equal 
     to--
       ``(A)(i) the benefits issued in the State; multiplied by
       ``(ii) the payment error rate of the State; minus
       ``(B)(i) the benefits issued in the State; multiplied by
       ``(ii) 6 percent.
       ``(B) Determination.--Notwithstanding sections 13 and 14, 
     the calculation of the contribution shall be based solely on 
     the determination of the Secretary of the payment error rate.
       ``(C) Data.--For purposes of implementing subparagraph (A) 
     for a fiscal year, the Secretary shall use the data for the 
     most recent fiscal year available.
       ``(3) Election limitation.--
       ``(A) Re-entering food stamp program.--A State that elects 
     to participate in the program under paragraph (1) may in a 
     subsequent year decline to elect to participate in the 
     program and instead participate in the food stamp program in 
     accordance with the other sections of this Act.
       ``(B) Limitation.--Subsequent to re-entering the food stamp 
     program under subparagraph (A), 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 
     be eligible to elect to participate in the program 
     established under subsection (b).
       ``(4) Program exclusive.--
       ``(A) In general.--A State that is participating in the 
     program established under subsection (b) shall not be subject 
     to, or receive any benefit under, this Act except as provided 
     in this section.
       ``(B) Contract with federal government.--Nothing in this 
     section shall prohibit a State from contracting with the 
     Federal Government for the provision of services or materials 
     necessary to carry out a program under this section.
       ``(d) Lead Agency.--A State desiring to receive a grant 
     under this section shall designate, in an application 
     submitted to the Secretary under subsection (e)(1), an 
     appropriate State agency responsible for the administration 
     of the program under this section as the lead agency.
       ``(e) 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.

[[Page H 13615]]

       ``(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); and
       ``(ii) to pay administrative costs incurred in providing 
     the assistance.
       ``(C) Groups served.--The State plan shall describe how and 
     to what extent the program will serve specific groups of 
     individuals and families and how the treatment will differ 
     from treatment under the food stamp program under the other 
     sections of this Act of the individuals and families, 
     including--
       ``(i) elderly individuals and families;
       ``(ii) migrants or seasonal farmworkers;
       ``(iii) homeless individuals and families;
       ``(iv) individuals and families who live in institutions 
     eligible under section 3(i);
       ``(v) individuals and families with earnings; and
       ``(vi) members of Indian tribes or tribal organizations.
       ``(D) Assistance for entire state.--The State plan shall 
     provide that benefits under this section shall be available 
     throughout the entire State.
       ``(E) 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.
       ``(F) Assessment of Needs.--The State plan shall assess the 
     food and nutrition needs of needy persons residing in the 
     State.
       ``(G) Eligibility standards.--The State plan shall describe 
     the income, resource, and other eligibility standards that 
     are established for the receipt of assistance under this 
     section.
       ``(H) Receiving benefits in more than 1 jurisdiction.--The 
     State plan shall establish a system for the exchange of 
     information with other States to verify the identity and 
     receipt of benefits by recipients.
       ``(I) 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.
       ``(J) 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.
       ``(f) No individual or family entitlement to assistance.--
     Nothing in this section--
       ``(1) entitles any individual or family to assistance under 
     this section; or
       ``(2) limits the right of a State to impose additional 
     limitations or conditions on assistance under this section.
       ``(g) Benefits for Aliens.--
       ``(1) Eligibility.--No individual who is an alien shall be 
     eligible to receive benefits under a State plan approved 
     under subsection (e)(4) if the individual is not eligible to 
     participate in the food stamp program due to the alien status 
     of the individual.
       ``(2) Income.--The State plan shall provide that the income 
     of an alien shall be determined in accordance with section 
     5(i).
       ``(h) Employment and Training.--
       ``(1) Work requirements.--No individual or household shall 
     be eligible to receive benefits under a State plan funded 
     under this section if the individual or household is not 
     eligible to participate in the food stamp program under 
     subsection (d) or (o) of section 6.
       ``(2) Work programs.--Each State shall implement an 
     employment and training program in accordance with the terms 
     and conditions of section 6(d)(4) for individuals under the 
     program and shall be eligible to receive funding under 
     section 16(h).
       ``(i) 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 (e)(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 (e)(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 grants 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 grants 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 penalties.--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 
     penalties described in subparagraph (A), impose other 
     appropriate penalties, 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 
     penalty 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 made to the Secretary concerning any failure of 
     a State to comply with the State plan or any requirement of 
     this section; and
       ``(B) imposing penalties under this section.
       ``(j) Grant.--
       ``(1) In general.--For each fiscal year, the Secretary 
     shall pay to a State that has an application approved by the 
     Secretary under subsection (e)(4) an amount that is equal to 
     the grant of the State under subsection (m) for the fiscal 
     year, adjusted for any reduction required under subsection 
     (m)(2).
       ``(2) Method of Grant.--The Secretary shall make a grant 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.
       ``(3) Spending of grants by state.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     a grant to a State determined under subsection (m)(1) 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 
     a grant determined under subsection (m)(1) 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 grant received under this section for a 
     fiscal year.
       ``(4) Food assistance and administrative expenditures.--In 
     each fiscal year, not more than 6 percent of the Federal and 
     State funds required to be expended by a State under this 
     section shall be used 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, such as electronic benefit transfer 
     limited to food purchases, coupons limited to food purchases, 
     or direct provision of commodities.
       ``(k) Quality Control.--Each State participating in the 
     program established under this section shall maintain a 
     system in accordance with, and shall be subject to section 
     16(c), including sanctions and eligibility for incentive 
     payment under section 16(c).
       ``(l) 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).
       ``(m) Grant Calculation.--
       ``(1) State grant.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     from the amounts made available under section 18 for each 
     fiscal year, the Secretary shall provide a grant 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 under section 16 for fiscal year 1994; 
     or
       ``(II) the average per fiscal year of the total amount 
     received by the State for administrative costs under section 
     16 for each of fiscal years 1992 through 1994.

       ``(B) Insufficient funds.--If the Secretary finds that the 
     total amount of grants 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 grants for the fiscal year, the Secretary shall reduce 
     the grants made to States under this subsection, on a pro 
     rata basis, to the extent necessary.
       ``(2) Reduction.--The Secretary shall reduce the grant of a 
     State by the amount a State has agreed to contribute under 
     subsection (c)(1)(C).''.
       (b) Employment and Training Funding.--Section 16(h) of the 
     Act (7 U.S.C. 2025(a)), as amended by section 13027(d)(2), is 
     further amended by adding at the end the following:
       ``(6) Block grant states.--Each State electing to operate a 
     program under section 25 shall--
       ``(A) receive the greater of--
       ``(i) the total dollar value of the funds received under 
     paragraph (1) by the State during fiscal year 1994; or
       ``(ii) the average per fiscal year of the total dollar 
     value of all funds received under paragraph (1) by the State 
     during each of fiscal years 1992 through 1994; and
       ``(B) be eligible to receive funds under paragraph (2), 
     within the limitations in section 6(d)(4)(K).''.
       (c) Research On Optional State Food Assistance Block 
     Grant.--Section 17 of the Act (7 U.S.C. 2026), as amended by 
     section 13055(c)(2), is further amended by adding at the end 
     the following:
       ``(l) Research On Optional State Food Assistance Block 
     Grant.--The Secretary may 

[[Page H 13616]]
     conduct research on the effects and costs of a State program carried 
     out under section 25.''.

     SEC. 13057. AMERICAN SAMOA.

       The Food Stamp Act of 1977 (7 U.S.C. 2011 et seq.), as 
     amended by section 13056, is further amended by adding at the 
     end the following:

     ``SEC. 26. TERRITORY OF AMERICAN SAMOA.

       From amounts made available to carry out this Act, the 
     Secretary may pay to the Territory of American Samoa not more 
     than $5,300,000 for each of fiscal years 1996 through 2002 to 
     finance 100 percent of the expenditures for the fiscal year 
     for a nutrition assistance program extended under section 
     601(c) of Public Law 96-597 (48 U.S.C. 1469d(c)).''.

     SEC. 13058. ASSISTANCE FOR COMMUNITY FOOD PROJECTS.

       The Food Stamp Act of 1977 (7 U.S.C. 2011 et seq.), as 
     amended by section 13057, is further amended by adding at the 
     end the following:

     ``SEC. 27. ASSISTANCE FOR COMMUNITY FOOD PROJECTS.

       ``(a) Definition of Community Food Projects.--In this 
     section, the term `community food project' means a community-
     based project that requires a 1-time infusion of Federal 
     assistance to become self-sustaining and that is designed 
     to--
       ``(1) meet the food needs of low-income people;
       ``(2) increase the self-reliance of communities in 
     providing for their own food needs; and
       ``(3) promote comprehensive responses to local food, farm, 
     and nutrition issues.
       ``(b) Authority To Provide Assistance.--
       ``(1) In general.--From amounts made available to carry out 
     this Act, the Secretary may make grants to assist eligible 
     private nonprofit entities to establish and carry out 
     community food projects.
       ``(2) Limitation on grants.--The total amount of funds 
     provided as grants under this section for any fiscal year may 
     not exceed $2,500,000.
       ``(c) Eligible Entities.--To be eligible for a grant under 
     subsection (b), a private nonprofit entity must--
       ``(1) have experience in the area of--
       ``(A) community food work, particularly concerning small 
     and medium-sized farms, including the provision of food to 
     people in low-income communities and the development of new 
     markets in low-income communities for agricultural producers; 
     or
       ``(B) job training and business development activities for 
     food-related activities in low-income communities;
       ``(2) demonstrate competency to implement a project, 
     provide fiscal accountability, collect data, and prepare 
     reports and other necessary documentation; and
       ``(3) demonstrate a willingness to share information with 
     researchers, practitioners, and other interested parties.
       ``(d) Preference for Certain Projects.--In selecting 
     community food projects to receive assistance under 
     subsection (b), the Secretary shall give a preference to 
     projects designed to--
       ``(1) develop linkages between 2 or more sectors of the 
     food system;
       ``(2) support the development of entrepreneurial projects;
       ``(3) develop innovative linkages between the for-profit 
     and nonprofit food sectors; or
       ``(4) encourage long-term planning activities and multi-
     system, interagency approaches.
       ``(e) Matching Funds Requirements.--
       ``(1) Requirements.--The Federal share of the cost of 
     establishing or carrying out a community food project that 
     receives assistance under subsection (b) may not exceed 50 
     percent of the cost of the project during the term of the 
     grant.
       ``(2) Calculation.--In providing for the non-Federal share 
     of the cost of carrying out a community food project, the 
     entity receiving the grant shall provide for the share 
     through a payment in cash or in kind, fairly evaluated, 
     including facilities, equipment, or services.
       ``(3) Sources.--An entity may provide for the non-Federal 
     share through State government, local government, or private 
     sources.
       ``(f) Term of Grant.--
       ``(1) Single grant.--A community food project may be 
     supported by only a single grant under subsection (b).
       ``(2) Term.--The term of a grant under subsection (b) may 
     not exceed 3 years.
       ``(g) Technical Assistance and Related Information.--
       ``(1) Technical assistance.--In carrying out this section, 
     the Secretary may provide technical assistance regarding 
     community food projects, processes, and development to an 
     entity seeking the assistance.
       ``(2) Sharing Information.--
       ``(A) In general.--The Secretary may provide for the 
     sharing of information concerning community food projects and 
     issues among and between government, private for-profit and 
     nonprofit groups, and the public through publications, 
     conferences, and other appropriate forums.
       ``(B) Other interested parties.--The Secretary may share 
     information concerning community food projects with 
     researchers, practitioners, and other interested parties.
       ``(h) Evaluation.--
       ``(1) In general.--The Secretary shall provide for the 
     evaluation of the success of community food projects 
     supported using funds under this section.
       ``(2) Report.--Not later than January 30, 2002, the 
     Secretary shall submit a report to Congress regarding the 
     results of the evaluation.''.

               CHAPTER 2--COMMODITY DISTRIBUTION PROGRAMS

     SEC. 13071. EMERGENCY FOOD ASSISTANCE PROGRAM.

       (a) Definitions.--Section 201A of the Emergency Food 
     Assistance Act of 1983 (Public Law 98-8; 7 U.S.C. 612c note) 
     is amended to read as follows:

     ``SEC. 201A. DEFINITIONS.

       ``In this Act:
       ``(1) Additional commodities.--The term `additional 
     commodities' means commodities made available under section 
     214 in addition to the commodities made available under 
     sections 202 and 203D.
       ``(2) average monthly number of unemployed persons.--The 
     term `average monthly number of unemployed persons' means the 
     average monthly number of unemployed persons in each State in 
     the most recent fiscal year for which information concerning 
     the number of unemployed persons is available, as determined 
     by the Bureau of Labor Statistics of the Department of Labor.
       ``(3) Eligible recipient agency.--The term `eligible 
     recipient agency' means a public or nonprofit organization--
       ``(A) that administers--
       ``(i) an emergency feeding organization;
       ``(ii) a charitable institution (including a hospital and a 
     retirement home, but excluding a penal institution) to the 
     extent that the institution serves needy persons;
       ``(iii) a summer camp for children, or a child nutrition 
     program providing food service;
       ``(iv) a nutrition project operating under the Older 
     Americans Act of 1965 (42 U.S.C. 3001 et seq.), including a 
     project that operates a congregate nutrition site and a 
     project that provides home-delivered meals; or
       ``(v) a disaster relief program;
       ``(B) that has been designated by the appropriate State 
     agency, or by the Secretary; and
       ``(C) that has been approved by the Secretary for 
     participation in the program established under this Act.
       ``(4) Emergency feeding organization.--The term `emergency 
     feeding organization' means a public or nonprofit 
     organization that administers activities and projects 
     (including the activities and projects of a charitable 
     institution, a food bank, a food pantry, a hunger relief 
     center, a soup kitchen, or a similar public or private 
     nonprofit eligible recipient agency) providing nutrition 
     assistance to relieve situations of emergency and distress 
     through the provision of food to needy persons, including 
     low-income and unemployed persons.
       ``(5) Food bank.--The term `food bank' means a public or 
     charitable institution that maintains an established 
     operation involving the provision of food or edible 
     commodities, or the products of food or edible commodities, 
     to food pantries, soup kitchens, hunger relief centers, or 
     other food or feeding centers that, as an integral part of 
     their normal activities, provide meals or food to feed needy 
     persons on a regular basis.
       ``(6) Food pantry.--The term `food pantry' means a public 
     or private nonprofit organization that distributes food to 
     low-income and unemployed households, including food from 
     sources other than the Department of Agriculture, to relieve 
     situations of emergency and distress.
       ``(7) Poverty line.--The term `poverty line' has the same 
     meaning given the term in section 673(2) of the Community 
     Services Block Grant Act (42 U.S.C. 9902(2)).
       ``(8) Soup kitchen.--The term `soup kitchen' means a public 
     or charitable institution that, as integral part of the 
     normal activities of the institution, maintains an 
     established feeding operation to provide food to needy 
     homeless persons on a regular basis.
       ``(9) Total value of additional commodities.--The term 
     `total value of additional commodities' means the actual cost 
     of all additional commodities made available under section 
     214 that are paid by the Secretary (including the 
     distribution and processing costs incurred by the Secretary).
       ``(10) Value of additional commodities allocated to each 
     state.--The term `value of additional commodities allocated 
     to each State' means the actual cost of additional 
     commodities made available under section 214 and allocated to 
     each State that are paid by the Secretary (including the 
     distribution and processing costs incurred by the 
     Secretary).''.
       (b) State Plan.--Section 202A of the Act (7 U.S.C. 612c 
     note) is amended to read as follows:

     ``SEC. 202A. STATE PLAN.

       ``(a) In General.--To receive commodities under this Act, a 
     State shall submit a plan of operation and administration 
     every 4 years to the Secretary for approval. The plan may be 
     amended at any time, with the approval of the Secretary.
       ``(b) Requirements.--Each plan shall--
       ``(1) designate the State agency responsible for 
     distributing the commodities received under this Act;
       ``(2) set forth a plan of operation and administration to 
     expeditiously distribute commodities under this Act;
       ``(3) set forth the standards of eligibility for recipient 
     agencies; and
       ``(4) set forth the standards of eligibility for individual 
     or household recipients of commodities, which shall require--
       ``(A) individuals or households to be comprised of needy 
     persons; and
       ``(B) individual or household members to be residing in the 
     geographic location served by the distributing agency at the 
     time of applying for assistance.
       ``(c) State Advisory Board.--The Secretary shall encourage 
     each State receiving commodities under this Act to establish 
     a State advisory board consisting of representatives of all 
     interested entities, both public and private, in the 
     distribution of commodities received under this Act in the 
     State.''.
       (c) Authorization of Appropriations For Administrative 
     Funds.--Section 204(a)(1) of the Act (7 U.S.C. 612c note) is 
     amended--
       (1) in the first sentence--
       (A) by striking ``1991 through 1995' and inserting ``1996 
     through 2002''; and

[[Page H 13617]]

       (B) by striking ``for State and local'' and all that 
     follows through ``under this title'' and inserting ``to pay 
     for the direct and indirect administrative costs of the State 
     related to the processing, transporting, and distributing to 
     eligible recipient agencies of commodities provided by the 
     Secretary under this Act and commodities secured from other 
     sources''; and
       (2) by striking the fourth sentence.
       (d) Delivery of Commodities.--Section 214 of the Act (7 
     U.S.C. 612c note) is amended--
       (1) by striking subsections (a) through (e) and (j);
       (2) by redesignating subsections (f) through (i) as 
     subsections (a) through (d), respectively;
       (3) in subsection (b), as redesignated by paragraph (2)--
       (A) in the first sentence, by striking ``subsection (f) or 
     subsection (j) if applicable,'' and inserting ``subsection 
     (a)''; and
       (B) in the second sentence, by striking ``subsection (f)'' 
     and inserting ``subsection (a)'';
       (4) by striking subsection (c), as redesignated by 
     paragraph (2), and inserting the following:
       ``(c) Administration.--
       ``(1) In general.--Commodities made available for each 
     fiscal year under this section shall be delivered at 
     reasonable intervals to States based on the grants calculated 
     under subsection (a), or reallocated under subsection (b), 
     before December 31 of the following fiscal year.
       ``(2) Entitlement.--Each State shall be entitled to receive 
     the value of additional commodities determined under 
     subsection (a).''; and
       (5) in subsection (d), as redesignated by paragraph (2), by 
     striking ``or reduce'' and all that follows through ``each 
     fiscal year''.
       (e) Technical Amendments.--The Act (7 U.S.C. 612c note) is 
     amended--
       (1) in the first sentence of section 203B(a), by striking 
     ``203 and 203A of this Act'' and inserting ``203A'';
       (2) in section 204(a), by striking ``title'' each place it 
     appears and inserting ``Act'';
       (3) in the first sentence of section 210(e), by striking 
     ``(except as otherwise provided for in section 214(j))''; and
       (4) by striking section 212.
       (f) Report on EFAP.--Section 1571 of the Food Security Act 
     of 1985 (Public Law 99-198; 7 U.S.C. 612c note) is repealed.
       (g) Availability of Commodities Under the Food Stamp 
     Program.--The Food Stamp Act of 1977 (7 U.S.C. 2011 et seq.), 
     as amended by section 13058, is further amended by adding at 
     the end the following:

     ``SEC. 28. AVAILABILITY OF COMMODITIES FOR THE EMERGENCY FOOD 
                   ASSISTANCE PROGRAM.

       ``(a) Purchase of Commodities.--From amounts appropriated 
     under this Act, for each of fiscal years 1997 through 2002, 
     the Secretary shall purchase $300,000,000 of a variety of 
     nutritious and useful commodities of the types that the 
     Secretary has the authority to acquire through the Commodity 
     Credit Corporation or 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), 
     and distribute the commodities to States for distribution in 
     accordance with section 214 of the Emergency Food Assistance 
     Act of 1983 (Public Law 98-8; 7 U.S.C. 612c note).
       ``(b) Basis for Commodity Purchases.--In purchasing 
     commodities under subsection (a), the Secretary shall, to the 
     extent practicable and appropriate, make purchases based on--
       ``(1) agricultural market conditions;
       ``(2) preferences and needs of States and distributing 
     agencies; and
       ``(3) preferences of recipients.''.
       (h) Effective Date.--The amendments made by subsection (d) 
     shall become effective on October 1, 1996.

                      ``Subtitle K--Miscellaneous

     ``SEC. 13101. FOOD STAMP ELIGIBILITY.

       ``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 shall, at its 
     option, consider either all income and financial resources of 
     the individual rendered ineligible to participate in the food 
     stamp program under this subsection, or such 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 such individual is a 
     member.'

     ``SEC. 13102. REDUCTION IN BLOCK GRANTS FOR SOCIAL SERVICES.

       ``Section 2003(c) of the Social Security Act (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.' ''.

             Subtitle L--Reform of the Earned Income Credit

     SEC. 13200. 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. 13201. EARNED INCOME CREDIT DENIED TO INDIVIDUALS NOT 
                   AUTHORIZED TO BE EMPLOYED IN THE UNITED STATES.

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

     SEC. 13202. 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. 13203. MODIFICATION OF EARNED INCOME CREDIT AMOUNT AND 
                   PHASEOUT.

       (a) Modification of Phaseout.--Subparagraph (B) of section 
     32(a)(2) is amended to read as follows:
       ``(B) the sum of--
       ``(i) the initial phaseout percentage of so much of the 
     adjusted gross income (or, if greater, the earned income) of 
     the taxpayer for the taxable year as exceeds the initial 
     phaseout amount but does not exceed the final phaseout 
     amount, plus
       ``(ii) the final phaseout percentage of so much of the 
     adjusted gross income (or, if greater, the earned income) of 
     the taxpayer for the taxable year as exceeds the final 
     phaseout amount.''
       (b) Percentages and Amounts.--
       (1) In general.--Subsection (b) of section 32, as amended 
     by section 13202(b), is amended to read as follows:
       ``(b) Percentages and Amounts.--
       ``(1) Percentages.--The credit percentage, the initial 
     phaseout percentage, and the final phaseout percentage shall 
     be determined as follows:

------------------------------------------------------------------------
                                                      The               
                                      The credit    initial    The final
    ``In the case of an eligible      percentage   phaseout    phaseout 
          individual with:                is:     percentage  percentage
                                                      is:         is:   
------------------------------------------------------------------------
1 qualifying child..................         34       15.98          20 
2 or more qualifying children.......         36       21.06          25 
------------------------------------------------------------------------

       ``(2) Amounts.--The earned income amount, the initial 
     phaseout amount, and the final phaseout amount shall be 
     determined as follows:

------------------------------------------------------------------------
                                                     The                
    ``In the case of an eligible     The earned    initial    The final 
          individual with:             income     phaseout     phaseout 
                                     amount is:  amount is:   amount is:
------------------------------------------------------------------------
1 qualifying child.................     $6,340     $11,630      $14,850 
2 or more qualifying children......     $8,910     $11,630   $17,750''. 
------------------------------------------------------------------------

       (2) Increase in credit for lower-income families having 2 
     more qualifying children.--Subsection (d) of section 32 is 
     amended to read as follows:
       ``(d) Increase in Credit for Lower-Income Families Having 2 
     or More Qualifying Children.--
       ``(1) In general.--If an eligible individual has 2 or more 
     qualifying children, for purposes of applying paragraphs (1) 
     and (2)(A) of subsection (a)--
       ``(A) the amount of the taxpayer's earned income shall be 
     treated as being equal to \10/9\ of such income (determined 
     without regard to this paragraph), and
       ``(B) the earned income amount shall be treated as being 
     equal to \10/9\ of such amount (determined without regard to 
     this paragraph).
       ``(2) Phaseout of benefit.--If the applicable income of the 
     taxpayer for the taxable year exceeds $14,000 ($17,000 in the 
     case of a joint return), the amount of each increase under 
     paragraph (1) shall be reduced (but not below zero) by an 
     amount which bears the same ratio to such increase 
     (determined without regard to this subparagraph) as such 
     excess bears to $4,000.
       ``(3) Applicable income.--For purposes of this subsection, 
     the term `applicable income' means adjusted gross income or, 
     if greater, earned income.''

[[Page H 13618]]

       (3) Conforming amendments.--
       (A) Subsection (j) of section 32 is amended--
       (i) by striking ``subsection (b)(2)(A)'' and inserting 
     ``subsection (b)(2) or (d)'',
       (ii) by striking ``1994'' and inserting ``1996'', and
       (iii) by striking ``1993'' and inserting ``1995''.
       (B) Subsection (e) of section 32 is amended to read as 
     follows:
       ``(e) Other Special Rules--
       ``(1) Married individuals.--In the case of an individual 
     who is married (within the meaning of section 7703), this 
     section shall apply only if a joint return is filed for the 
     taxable year.
       ``(2) Taxable year must be full taxable year.--Except in 
     the case of a taxable year closed by reason of the death of 
     an individual, no credit shall be allowable under this 
     section in the case of a taxable year covering a period of 
     less than 12 months.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 13204. RULES RELATING TO DENIAL OF EARNED INCOME CREDIT 
                   ON BASIS OF DISQUALIFIED INCOME.

       (a) Definition of Disqualified Income.--Paragraph (2) of 
     section 32(i) (defining disqualified income) is amended by 
     striking ``and'' at the end of subparagraph (B), by striking 
     the period at the end of subparagraph (C) and inserting ``, 
     and'', and by adding at the end the following new 
     subparagraph:
       ``(D) the 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 (D), 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. 13205. MODIFICATION OF ADJUSTED GROSS INCOME DEFINITION 
                   FOR EARNED INCOME CREDIT.

       (a) In General.--Subsections (a)(2), (c)(1)(C), (d), and 
     (f)(2)(B) of section 32, as amended by the preceding sections 
     of this subtitle, are each amended by striking ``adjusted 
     gross income'' each place it appears 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 receive 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 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 form 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. 13206. 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) Effective Date.--The amendments made by this section 
     shall apply to penalties with respect to taxable years 
     beginning after December 31, 1995.


                      motion offered by mr. hobson

  The SPEAKER pro tempore. The Clerk will designate the motion.
  The text of the motion is as follows:

       Mr. Hobson moves that the House concur in the Senate 
     amendment to the bill H.R. 2491.

  The SPEAKER pro tempore (Mr. Ewing). Pursuant to House Resolution 
279, the gentleman from Ohio [Mr. Hobson] will be recognized for 30 
minutes, and the gentleman from Minnesota [Mr. Sabo] will be recognized 
for 30 minutes.
  The Chair recognizes the gentleman from Ohio [Mr. Hobson].
  Mr. HOBSON. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, this is a very historic time. We have fully debated this 
bill back and forth. The Senate made two minor changes as a result of 
the Byrd rule. The antitrust provision for prior-sponsored 
organizations was removed and the clinical laboratories was removed for 
Byrd rule purposes.
  But, Mr. Speaker, I think that with the agreement that we have with 
the President on the CR, we have now reached a very historic point. One 
that we have worked very hard for on both sides of this aisle. We are 
now in agreement that we will balance the budget in 7 years and we will 
use CBO scoring. That, we all believe, is a good move.
  Mr. Speaker, I think we all believe that this is a historic moment as 
we move forward to preserve this country for the future of our children 
and get the spending of this country under control. It will not be 
easy, but I think it is something that everyone has general agreement 
upon that we must do, and we must move forward with it.
  Mr. Speaker, I reserve the balance of my time.
  Mr. SABO. Mr. Speaker, I yield myself 1 minute.
  Mr. Speaker, this was a bad bill when it left the House. It is a bad 
bill when it comes back from the Senate. Now it will be a bad bill when 
it goes to the President. He should veto it.
  Mr. Speaker, let us be clear. We want to balance the budget in 7 
years, but how we do it is immensely important. I believe my Republican 
friends also believe how we do it is immensely important, otherwise I 
would make a simple offer. If only achieving the goal was the only 
thing my Republican colleagues care about, we will do it, and they can 
vote for our product. I do not think they would accept it.
  Mr. Speaker, we will not vote for their product. We need to get 
through our differences, get a plan that is fair and moves this country 
forward, and that is our task in the next several weeks.
  Mr. Speaker, I urge a ``no'' vote on this bill today, and then I and 
many others stand ready to achieve a 7-year balanced budget that is 
fair to the American people.
  Mr. HOBSON. Mr. Speaker, I reserve the balance of my time.
  Mr. SABO. Mr. Speaker, I yield 1 minute to the gentlewoman from 
Florida [Mrs. Meek].
  (Mrs. MEEK of Florida asked and was given permission to revise and 
extend her remarks.)
  Mrs. MEEK of Florida. Mr. Speaker, I urge that every Member of this 
House vote against this resolution.
  Mr. Speaker, I am against this bill because it is flat out unfair, 
especially in the area of health care. The almighty quarter-trillion-
dollar tax cut was spared from the cutting knife, while health care for 
poor, sick people was cut by $163 billion.
  Mr. Speaker, this bill cuts at the expense of poor people who need 
medical care. It favors rich people and holds the 

[[Page H 13619]]
sorry promise of hurting 35 million people.
  These Medicaid cuts could also force as many as 172,000 poor veterans 
to lose Medicaid coverage by the year 2002. Combined with the effects 
of other cuts, many poor veterans could be left without any health care 
at all.
  Mr. Speaker, where are the savings in forcing poor people to get 
their health care at expensive emergency rooms, where the bill must be 
paid by poor local citizens? Just a year ago in this House, we talked 
about helping the 37 million Americans who do not have health care. 
What a difference a year makes.
  Mr. HOBSON. Mr. Speaker, I yield 2 minutes to the gentleman from 
Michigan [Mr. Hoekstra], a member of the Committee on the Budget, until 
recently.
  Mr. HOEKSTRA. Mr. Speaker, I think today is a great day. We have 
reached an agreement with the President that we will work together to 
balance the budget in 7 years. We will use conservative scoring, so 
that we can be assured that we will reach that objective, by using the 
Congressional Budget Office.
  Today, we will be voting on one plan to get there: The Balanced 
Budget Act of 1995, which does get us to a balanced budget by the year 
2002. We may have some differences with the President, but at this 
point in time, we are not sure exactly what they may be. We need a plan 
for the President so that we can compare our differences about how we 
achieve a balanced budget.
  Mr. Speaker, the other thing that we need is we need a pledge from 
all the candidates for President that they will work with Congress over 
the next 7 years to make sure that this becomes a true promise and a 
true commitment that we will actually all be committed to working 
toward getting to that balanced budget over the next 7 years.
  Mr. Speaker, as we take a look at what our plan does, we can see that 
this really gets to be a discussion not about cutting spending but 
actually a discussion about how much money we will spend over the next 
7 years.
  From 1989 to 1995, the last 7 years, we spend $9.5 trillion in 
Washington. This Balanced Budget Act says that over the next 7 years we 
will spend $12 Trillion, which is a little bit less than what some 
people had hoped we would spend, which is about $13.3 trillion.
  Mr. Speaker, in 1995, we spent $1.5 trillion. That is going to grow 
to $1.8 trillion by the year 2002. We are spending plenty of money in 
Washington over the next 7 years. We are actually growing Federal 
spending by about 27 percent over the next 7 years.

                              {time}  1645

  That is a lot of money. There is a lot of benefits to balancing the 
budget. It is estimated that if we balance the budget, the American 
people will realize a 2-percent reduction in interest rates. That is a 
significant cost over what a car loan may cost, over what student loans 
may cost, over what the mortgage that one will pay, the mortgage 
payments that one will make on interest over the next 7 years. So the 
benefits to balancing the budget far outweigh the costs.
  We need to manage growth in spending to about 2.7 percent over each 
of the next 7 years to get a balanced budget. That is not a sacrifice; 
that is just good, sound management. If we manage a 2.7-percent growth, 
there will be a shared benefit by all the American people and a better 
standard of living because Washington will finally have gotten their 
costs under control for the benefit of all the American people.
  Mr. SABO. Mr. Speaker, I yield 1 minute to the distinguished 
gentlewoman from Oregon [Ms. Furse].
  Ms. FURSE. Mr. Speaker, my father always told me, if you see someone 
who acts tough but who picks on defenseless people, that person is a 
bully. This budget picks on defenseless people, kids, pregnant women, 
disabled, seniors. This bill takes away the guaranteed basic health 
care coverage for children in poverty, and guaranteed coverage for 
pregnant women.
  This bill ends the guarantee that we will take care of our disabled 
children and our seniors. The Portland School District has written to 
me and said, please protect guaranteed access to Medicaid for poor and 
disabled children.
  I guarantee that I will work to find a sensible way to balance the 
budget, but not on the backs of children, not on the backs of pregnant 
women, not on the backs of disabled Americans.
  Let us stop the bullies. Reject this really extreme budget.
  Mr. HOBSON. Mr. Speaker, I yield 3 minutes and 30 seconds to the 
distinguished gentleman from Connecticut [Mr. Shays], a member of the 
Committee on the Budget.
  Mr. SHAYS. Mr. Speaker, this truly is an historic moment. I just want 
to thank my colleagues on this side of the aisle who have weighed in 
over the last 9 months to come forward with a truly revolutionary 
budget and to thank my colleagues on this side of the aisle for their 
criticism, constructive at times, and in some cases maybe not. But 
ultimately what is exciting is that we all have agreed that we need to 
balance our budget in the next 7 years and so we have brought forward 
our budget.
  I am looking at the gentleman from New York [Mr. Rangel] as someone 
who I have tremendous respect for who has made valid points about 
concerns that he has as it relates to his urban area. I welcome the 
opportunity for him to come in with his 7-year budget and the changes 
he would make. I bet ultimately we will find a document that may even 
be improved from what is here.
  Why do I like what we have done? We have balanced the budget in 7 
years. We have created an environment in which we can transform this 
social and corporate welfare state into an opportunity society and, in 
the process, also saved our trust funds, particularly Medicare, from 
bankruptcy.
  And I look at the budget, I know there have been incredible 
criticisms of what we are not spending more of. I have not heard of 
comments from the other side of the aisle where we need to cut more 
from. That ultimately will happen now that we have a 7-year budget to 
have a debate about.
  We are spending more on the earned income tax credit. It is going up 
28 percent, from $19 billion basically to $25 billion. We are spending 
more on the school lunch program in the next 5 years. We are going to 
go up from $6.3 to $7.8 billion. We are spending 50 percent more in the 
student loan program. It is going to go from $24.4 to $36 billion, a 
50-percent increase in the next 7 years.
  In the next 5 years students are going to increase from $6.7 to $8.4 
million. Medicaid is going to go from $89.2 to $127 billion. Medicare 
is going to go from $178 to $289 billion. We are going to have, on a 
per-person, per-elderly basis, we are going to have the seniors, the 
amount we spend per senior go from $4,800 to $6,700.
  If we are spending so much more, why do people call it a cut? Well, 
partly because they think in some cases that they want you to think 
that we are cutting when we are spending more and, in part, because we 
are slowing the growth in spending. Bottom line, to balance the budget 
in the next 7 years, we have to eliminate some programs and we do. We 
eliminate the Department of Commerce. We eliminate certain units within 
departments. We cut back and eliminate discretionary spending. In some 
cases, what we are doing is slowing the growth in spending like in 
entitlements. Entitlements are 50 percent of our budget and they are 
doubling every few years. Medicare and Medicaid are 17 percent of the 
budget, and they are doubling every 5 to 7 years depending on which 
years.
  The bottom line is, we are going to get our financial house in order 
and balance the budget compassionately. We are going to save our trust 
funds, particularly Medicaid, from bankruptcy. And we are going to 
transform this caretaking, social and corporate welfare state into a 
care and opportunity society. I believe that we have a wonderful 
document to present the President. I am told he is going to veto it. 
Then in the next few weeks we have the opportunity, working with our 
colleagues on the other side of the aisle, to get their priorities. To 
weigh it with ours and ultimately to present the President a budget he 
can balance and sign.
  Mr. SABO. Mr. Speaker, I yield myself 15 seconds.
  Mr. Speaker, we have in the Republican plan a unique schedule to 
balance the budget. The deficit in 1997 will be $25 billion more than 
it is in 1995. It is a strange path.

[[Page H 13620]]

  Mr. Speaker, I yield 2 minutes to the gentleman from California [Mr. 
Waxman].
  (Mr. WAXMAN asked and was given permission to revise and extend his 
remarks.)
  Mr. WAXMAN. Mr. Speaker, with corporate welfare incredibly off the 
table and with an incomprehensible call for tax cuts in the fact of 
these huge deficits, the Republicans want to savagely cut what will be 
needed to adequately fund Medicare and Medicaid, even though health 
care costs are increasing and our elderly population is growing.
  With the return of this conference report to the House, we have 
another opportunity to do what we should have done in the first place: 
say no to these devastating cuts in Medicare and Medicaid.
  The President has made it clear he will not sign a bill that destroys 
these two programs. Medicaid is not only subject to deep and 
unsustainable cuts in this budget, but the program itself is repealed. 
And this cannot happen.
  We have 18 million kids depending on Medicaid for their health care. 
That is 1 in 4 in this country. It makes no sense to turn our backs on 
them.
  Millions of seniors and disabled people depend on Medicaid for 
nursing home coverage, millions of middle-class families need to know 
that this help will be there for their parents. Severely disabled kids 
and adults have nowhere else to turn, if they cannot depend on 
Medicaid.
  We cannot accept a program that adds millions of America's kids to 
the rolls of the uninsured. We cannot undo the only program we have got 
to help deal with the astronomical cost of long-term care. To take 
hundreds of billions of dollars out of this program is wrong, 
especially when we are not touching corporate welfare. Why are we 
giving tax breaks and paying for it by cutting these two programs?
  Every American should be grateful to the President that he is 
standing up and saying he will not accept the destruction of Medicaid, 
that he will not see damaging cuts in Medicare. We should not accept 
them either. Vote no on this conference report.
  Mr. HOBSON. Mr. Speaker, I yield 30 seconds to the gentleman from 
Connecticut [Mr. Shays].
  Mr. SHAYS. Mr. Speaker, the ranking member of the Committee on the 
Budget rightfully pointed out that the deficit in the second year of 
our budget goes up slightly. I would just point out to the gentleman 
that if we make no change, it goes from 210 to 230 with present CBO 
scoring. With the President's 10-year budget it goes from 189 to 217. 
With new CBO scoring the gentleman is right, it is 157 and it will go 
to 175. And this, to me, is an example of how all of us need to work 
together in the second year budget to make sure that instead of going 
up, it goes down. And I look forward to working with my colleague to 
see that that does in fact go down.
  Mr. HOBSON. Mr. Speaker, I yield 2 minutes to the gentleman from 
Arizona [Mr. Kolbe].
  (Mr. KOLBE asked and was given permission to revise and extend his 
remarks.)
  Mr. KOLBE. Mr. Speaker, we heard a previous speaker on the other side 
describe this budget as being bullying, heard it described as extreme. 
I do not know what is extreme about giving the average American family 
a savings of $2,558, which is what the most conservative projections of 
economists say that you would get of savings of interest costs on a car 
loan, savings of interest costs on a car loan, savings of interests 
costs on a student loan and, of course, tremendous savings of interest 
on a mortgage loan. I do not know anything that is extreme about giving 
American families that kind of savings. I do not know anything that is 
bullying. I think that is helping American families.
  Nor do I find anything extreme about a budget that goes from the 
current amount of $9.5 billion we spent in the last 7 years to $12 
billion. That is an increase, a gigantic increase in spending. The 
difference of course is found in the third column. If we do nothing, if 
we follow what the President would have us do, it would go up even 
more. And that is the difference between balancing the budget and 
saddling American families, saddling children, saddling our next 
generation with even more debt, borrowing from them today to pay for 
more debt tomorrow.
  A child that is born today is going to pay $179,000 in taxes just to 
pay the interest on the national debt over the course of his or her 
lifetime. That is before they pay any of the debt. That is before they 
get anything from student loans or from health care grants or anything 
else. That is just to pay the debt, the interest on the national debt.
  The President's spokesman did get it right when he said one thing, he 
said, this is not about numbers. This is much more philosophical than 
that. This is much more deeper than that. This is about a different 
vision of where America goes. And I agree. it is a different vision.
  We believe it is the vision of America as one where individuals have 
responsibility and have opportunities. The vision of the other side 
seems to be to keep the status quo, keep saddling the American family, 
keep saddling the next generation with more debt. We cannot go on doing 
that.
  The President said he would veto this, but I hope that this President 
will change his mind when he looks at this and not veto this 
legislation.
  Mr. SABO. Mr. Speaker, I yield 2 minutes to the gentleman from 
Michigan [Mr. Dingell], distinguished ranking member of what used to be 
the Committee on Energy and Commerce. I do not know what it is called 
now. The Committee on Commerce.
  (Mr. SABO asked and was given permission to revise and extend his 
remarks.)
  Mr. DINGELL. Mr. Speaker, I have a vision of America, too, and one 
which, I think, is far better justified than anything I have heard 
coming from the other side of the aisle. That is a place where there is 
compassion, where when people are down, there is a hand out to help 
them up, not a handout but a handup. That is what is really important.
  I rise in strong opposition to this misguided bill. It does more 
damage to more programs than I can discuss in the time available.
  I will talk about Medicaid. Let us recognize the simple truth, this 
bill destroys the Medicaid Program. That is a program that provides 
health care coverage for 36 million Americans, including 4 million 
elderly, 6 million disabled, 18 million children, and 8 million 
mothers. Now, under the Gingrich and the Republican majority plan, we 
are no longer concerned with trying to protect health care coverage. 
Instead, we are taking health care coverage away from millions of 
Americans.
  Under the mantra of States rights, Republicans are shredding the 
safety net. The Republican bill arbitrarily cuts $160 billion from 
Medicaid. The Republicans argue this is not a cut, but $160 billion 
equals almost 2 years of total Federal spending under this program. You 
cannot tell me that that is not a cut, when you reduce the program by 2 
years' worth of Federal expenditures.
  Further, the bill abdicates the Federal Government's total 
responsibility in Medicaid. It destroys the guarantee of health care 
for the elderly and for the needy, and it invites abuse by the States. 
In fact, it takes away all guarantees of coverage under current law. 
Families could be forced to sell their family home or the family farm 
to pay for a loved one's nursing home care.
  Families could face costs of as much as $40,000 a year for nursing 
home care for their parents. Families caring for seniors with 
Alzheimer's or strokes would have no guarantees, nor would the 
disabled, the children, or the pregnant women. That is cruel, and it is 
unnecessary.

                              {time}  1700

  Last but not least, this program takes away the current law 
guaranteeing that Medicare premiums of low-income seniors will be paid 
so they can see a doctor.
  The bill walks away from responsible Government to help people in 
favor of lining the pockets of the wealthiest Americans with tax cuts. 
This is wrong. I urge my colleagues to reject it.
  Mr. HOBSON. Mr. Speaker, I yield 2 minutes to the gentleman from 
South Carolina [Mr. Inglis].
  Mr. INGLIS of South Carolina. Mr. Speaker, I suppose we are all prone 
to exaggeration at times, and as my colleagues know, sometimes in the 
political process, when we exaggerate for effect, that is, I suppose, 
the definition of 

[[Page H 13621]]
demagoguery. I suppose we are all guilty of that at some point or 
another, but as my colleagues know, the consequences of demagoguery can 
be different depending on what the issue is.
  In the case of our side, maybe we demagogued a little bit on the 
President's tax increase of 1993, but do my colleagues know what? There 
were no people who really lost sleep about that; there were no people 
who went to bed at night wondering whether they were going to be able 
to make it. But there are people that are losing sleep because of what 
is being said, particularly at this other lectern, about Medicare.
  There are people likely a lady whose name I would not use who met 
with me recently at Wade's Restaurant in Spartenburg, SC, who was very 
worried about Medicare because of some of the things she has heard 
right here. But when I explained to her what is going to happen in 
Medicare and the fact that we are going to increase Medicare spending 
from $4,800 per person to $7,000 per person in the new numbers, she 
was greatly relieved. In fact, she is now convinced that this will work 
all right for her after hearing the full presentation.

  So I would really urge my colleagues to be very careful in this 
debate as we talk about the next several weeks about balancing this 
budget. There are some people that are very scared, and they are scared 
without reason because we are going to increase Medicare spending; and 
in fact, in the rest of the budget, what our colleagues see is we are 
spending more every year over the next 7 years.
  So all of those people out there, the scare groups are trying to 
scare to death, they are having their intended effect, and some people 
really are scared. But when they hear that we are actually going to 
increase spending to $12 trillion over the next 7 years, rather than 
watch it gallop off the cliff at $13.3 trillion, saving about $1.3 
trillion over the next 7 years, we can actually balance the budget, and 
when they see those numbers, they go to sleep at night, and they have a 
good night of rest.
  I hope that we will tell them the truth in this Chamber.
  Mrs. MEEK of Florida. Mr. Speaker, I yield 2 minutes to the gentleman 
from New Jersey [Mr. Pallone].
  Mr. PALLONE. Mr. Speaker, this Republican budget bill should be 
opposed because it repeals Medicaid, the health care program for low-
income people, in order to pay for tax breaks for the rich. In effect, 
this is Robin Hood in reverse, and I cannot believe that our country 
has come to this. Thirty-six million people will no longer be 
guaranteed coverage. They will be dependent upon the States which will 
receive 18 percent less in Federal funds than the Congressional Budget 
Office estimates is necessary to maintain current coverage. That means 
more than 8 million people who would have been covered by Medicaid 
would likely be without insurance because hard-pressed States would be 
forced to keep them off the roles. The States do not have the money; 
where are they going to get it? They are not going to raise taxes, and 
people will be without health insurance.
  The bill, when it came back from conference, also says that States 
are allowed to spend only 40 cents on a dollar in order to get 60 cents 
in Federal dollars. So that means that a lot less money could be coming 
to the States than even is anticipated because States would not have to 
put up their matching funds.
  The bill says it is going to provide protections for women and 
children up to 100 percent of poverty, but allows States to define the 
benefits package. It also purports to protect the disabled, but allows 
the States to define who the disabled are and how they will be treated.

  What does that mean? A lot of disabled would not be covered; a lot of 
pregnant women and children would not be covered; and lastly what it 
does, it also repeals the current law guarantee of payment of Medicare 
part B premiums on behalf of the elderly.
  Speaker Gingrich told us a couple weeks ago that that guarantee would 
be there, that low-income seniors would have their Medicare part B 
premium paid for. There is no such guarantee in this bill. It is up to 
the States like everything else.
  Mr. Speaker, in this continuing resolution that was adopted today for 
the first time President Clinton got into the continuing resolution 
that the budget should provide adequate funding for Medicaid. I hope 
that this bill is defeated and that, when the negotiations start with 
the President and the Republican leadership, that that principle that 
President Clinton has so well articulated, provide adequate funding for 
Medicaid, is finally accomplished. This bill will not accomplish that 
goal. Hopefully, once this bill is defeated and the President vetoes 
it, we will have some negotiations to that effect.
  Mr. HOBSON. Mr. Speaker, I yield 2 minutes to the gentleman from New 
Hampshire [Mr. Bass].
  (Mr. BASS asked and was given permission to revise and extend his 
remarks.)
  Mr. BASS. Mr. Speaker, I thank the gentleman from Ohio [Mr. Hobson] 
for yielding this time to me.
  Quick item: We heard a previous speaker talk about lack of corporate 
welfare, attention in our Balanced Budget Act of 1995. I would suggest 
looking here in the Joint Committee on Taxation report that we have 
here at least three or four pages of corporate and other reforms. The 
total comes to approximately $26 billion. In my book that is not small 
change.
  Like everyone else here, I have listened to the debate all day long 
about the continuing resolution, and I would like to say that there are 
no losers in this battle. The people of this country are the big 
winners as a result of what we have done over the last few days.
  Let us talk for a minute about what the President has agreed to with 
respect to saving Medicare. Well, indeed in our Balanced Budget Act of 
1995 we increase spending in Medicare from $178 to $289 billion. The 
President has said that we must pass tax policies to help working 
families and to stimulate future economic growth. Well, indeed we do 
that in our Balanced Budget Act.
  For example, in capital gains we allow individuals who make less than 
$53,500 to benefit from capital gains preferential treatment. The 
President is agreed that we must provide adequate funding for 
education, the environment, agriculture, Medicaid, national defense, 
and veterans. Well, surely our veterans budget, which goes from, let us 
see, $36.9 to $41.8 billion is an increase and as compared to the 
President's veterans budget which constituted a reduction from the 
baseline of over $17.1 billion. Under the GOP budget, student lobbies 
would increase from $24 billion today to $36 billion by the year 2002.
  In short, Mr. Speaker, what this Balanced Budget Act calls for is 
reasonable increases while we protect and preserve the future of this 
country for our children and our grandchildren. Who could ask for more? 
Certainly not anybody who was watching this debate today.
  Mrs. MEEK of Florida. Mr. Speaker, I yield 1 minute to the gentleman 
from Pennsylvania [Mr. Klink].
  Mr. KLINK. Mr. Speaker, this is a bad bill for a lot of reasons. We 
have heard our colleagues on the other side talk about what really is a 
high goal for all of us, and that is balancing the budget so that we do 
not pass the debt on to the next generation, but that is exactly what 
this bill does.
  If your parents are lucky enough to survive, and they are going to be 
in a nursing home facility, there is nothing in this bill that ensures 
that there is an entitlement in the new Medigrant Program so that they 
will actually have Medicaid that will be paying for their nursing home 
care, and so adult children will quite often find themselves paying 
$35,000 or $40,000 per parent themselves, out of their own pocket, 
taking away from their own families, taking away from their own 
savings, taking away from their own ability to buy a home, from their 
own ability to educate their children. We are really forcing these 
adult children into poverty because the parents are living longer, and 
any parent who lives long enough and sees that they are going to become 
a burden on their children will not want to live, and I say that this 
really sets the plate for Dr. Kevorkian to have more franchises across 
this Nation than McDonald's does.
  It also will put a tremendous burden on the counties that operate 
nursing homes. They will either have to throw out these nursing home 
patients or 

[[Page H 13622]]
they are going to have to raise local taxes to make up the difference.
  This is a bad bill, and it is a bad direction, and I hope Members 
will vote no.
  Mr. HOBSON. Mr. Speaker, I yield 3 minutes to the gentleman from 
Florida [Mr. Miller].
  Mr. MILLER of Florida. Mr. Speaker, I am proud to vote yes on this 
Balanced Budget Act today. This is a good bill. It is good for America, 
and it is good for the future of this country and for our children's 
future.
  There are four major goals we have set as Republicans for this year, 
and this bill incorporates these goals, and the goals are:
  To balance the budget in 7 years without smoke and mirrors but real 
numbers; second, save Medicare; third, welfare reform, real reform 
focusing on families and work; and fourth, tax relief for families and 
for job creation.
  So we have set out our four major goals, and this bill incorporates 
those goals.
  Now the President basically agrees with our goals; at least he has 
been rambling on saying he does, and, finally, yesterday he agreed on 
the 7-year balanced budget. During the campaign in 1992, he said 5 
years, and we have gone to 10 years and 7 and 9. Now we have got the 
President pinned down to 7 years with real numbers.
  Now the President talks like he wants to save Medicare, but we have 
no specifics. We have a specific plan that I think is a good plan. It 
increases the spending on Medicare per person each year for 7 years. It 
is the fastest growing part of the Federal budget. We go from $4,800 
per person to $6,700 over with the new scoring to $7,100 per person. 
Every year there is more money for Medicare recipients. We have a good 
plan because, basically, it just gives choice.
  Now what does the President propose? He has no plan. He has no plan. 
He tried to socialize medicine in his first 2 years in Congress. The 
vote rejected that last year. He has no plan to save Medicare, but he 
says he wants to save it, so at least he agrees with the goal.
  The goal we have is welfare reform. We have a specific plan passed by 
both the Senate and the House. We have a welfare plan that is a good 
plan, passed by both the House and the Senate. The President campaigned 
on welfare reform in 1992 and said let us change it as we know it. So 
he agrees with our goals.
  And then tax relief. We want to give tax relief to families. So does 
the President, and the President is going to support a capital gains 
tax that stimulates jobs in this country.
  So what are we fighting over when the goals are there? It is pure 
politics by the President. They are using fear tactics on Medicare. The 
Governor in Florida used that to perfection during the campaign in 1992 
and now admits it. The President used it, but the previous speaker is 
talking about Kevorkian, using that as a comparison, talking about 
destroying Medicare. The Washington Post was right last week when they 
said, stop scaring seniors.
  The end result is we are going to pass the bill the President is 
going to sign that is going to be remarkably the name as the plan we 
are going to vote and approve today. I urge my colleagues to pass this 
bill today.
  Mrs. MEEK of Florida. Mr. Speaker, I yield 1 minute to the gentleman 
from Florida [Mr. Deutsch].
  Mr. DEUTSCH. Mr. Speaker, I am so tempted to take the 1 minute and 
respond to my colleague and good friend from Florida [Mr. Miller] about 
Medicare because there are just flat-out distortions in what he just 
said, but I think the focus right now is Medicaid, and let us talk 
about Medicaid for the country and for Florida as well.
  Unless there is some part of this bill which I have not seen which 
figures out how to cure illness and old age, the results of this 
proposal will be devastating to the country in the whole, but 
particularly to Florida. Florida will be more adversely effected than 
any State in this country, and I continue to urge my 15 Republican 
colleagues in Florida who could make the difference in stopping this 
bill from becoming law to vote against this proposal. There is an 
opportunity to make history today, this evening, and I urge my 
colleagues [Mr. Miller] as well as my other Republican friends from 
Florida to do that.
  Because, if they do not do it, let us just talk a little bit about 
what will happen. People will still get sick. People will still get 
pregnant. But what will happen is they will be treated in community 
hospitals throughout our State at more cost and less service.
  I urge the defeat.

                              {time}  1715

  Mrs. MEEK of Florida. Mr. Speaker, I yield 1 minute to the gentleman 
from Texas [Mr. Bryant].
  (Mr. BRYANT of Texas asked and was given permission to revise and 
extend his remarks.)
  Mr. BRYANT of Texas. Mr. Speaker, the entire Western world has found 
a way to provide health insurance for its entire population, yet in the 
United States we only provide it for elderly people, people who have 
retired. Yet today under this reconciliation bill, the Republicans are 
now beginning to chip away at even that. Not only the Medicare cuts are 
there, but also Medicaid cuts, which will remove the entitlement that 
currently acts as a safety net for over 65,000 senior citizens in 
nursing facilities just in my State of Texas alone, millions more in 
the United States.
  In other words, now there is nothing that requires States to assist 
impoverished seniors and their families with costly nursing home care 
in the future. Such care averages about $40,000 per year. The 
requirement that that be provided is now gone.
  There is no way to make these numbers add up. While the population of 
our State grows over the next 7 years, this bill and its ridiculous 
formula locks in historical spending patterns that will ensure that 
Texas seniors and their families will be left without medical benefits. 
The fact of the matter is that a grandmother in New York is going to 
get twice as much as a grandmother in Texas. This is an outrageous 
bill. Vote ``no.''
  Mrs. MEEK of Florida. Mr. Speaker, I yield 4 minutes to the gentleman 
from St. Petersburg, FL [Mr. Gibbons], the dean of the Florida 
delegation.
  (Mr. GIBBONS asked and was given permission to revise and extend his 
remarks.)
  Mr. GIBBONS. Mr. Speaker, we all know this bill is going to be 
vetoed. It was terrible when it left here, and it is still terrible 
when it gets back here from the Senate and from conference. This bill 
savages the most vulnerable people in our society.
  Mr. Speaker, let me answer some of the arguments about a balanced 
budget. Everybody wants to balance the budget. Everybody wants to 
balance it as quickly as possible, without hurting the economy and 
without savaging people. The question is, who is going to pay for this? 
Who is going to bear the burden of this balancing of this budget?
  Mr. Speaker, let me say first, we are on the way to a balanced 
budget. Three years ago the budget deficit was about $300 billion a 
year, 3 years ago. We just completed the fiscal year, and the budget 
annual deficit is down to $160 billion. If the economy holds up like it 
has been going for the last 3 years, we may balance this budget in much 
less than 7 years, more like 4 or 5 years. That is possible. But it all 
depends upon the strength of the American economy.
  What we want to do here in Congress is not foul up the American 
economy, to keep it working like it is, and the budget deficit will 
solve itself.
  Second, Mr. Speaker, we have to figure out and present to the 
President a decent way to balance the budget. Who is going to pay the 
cost? The Republican proposal, as it is outlined in this legislation, 
puts the cost on children, on infants, on the working poor, on the 
sick, and on the elderly. Those are not proper priorities for balancing 
the budget.
  One of the things that vastly complicates this budget balancing is 
the Republican desire to pay back some of their wealthy political 
contributors. They give back to them $250 billion, $250 billion that 
they take away from the sick and the aged and the children.
  Let me go over how this $250 billion is distributed. The top 10 
percent of American families will get 40 percent of that $250 billion. 
Let me repeat that. The top 10 percent will get 40 percent of that $250 
billion.

[[Page H 13623]]

  The next wealthiest 20 percent, or wealthiest 20 percent, will get 60 
percent of that $250 billion. Those with family incomes of more than 
$150,000 will get 45 percent of all of this tax cut. The average family 
income in the United States is about $32,000 per year per family. That 
is the average. Everybody below that, all half of the 55 million 
families that are below that, have less than $32,000 a year income. But 
you know how much those 50 percent of the people get? One percent, 1 
percent of all these cuts.
  That is just not fair, Mr. Speaker. The American public knows it is 
not fair. That is why the gentleman from Georgia, Mr. Gingrich's, 
negatives are so high. That is why the Republicans are losing out in 
the polls, because the American public understands the simple facts, 
that this proposal is not fair.
  Mrs. MEEK of Florida. Mr. Speaker, I yield 4 minutes to my colleague, 
the gentleman from New York [Mr. Rangel].
  (Mr. RANGEL asked and was given permission to revise and extend his 
remarks.)
  Mr. RANGEL. Mr. Speaker, I rise in support of the rule and the 
reconciliation bill. I hope that during this Thanksgiving, and God 
knows we have a lot to be thankful for, that when we say our prayers we 
might think of some of the people that are poor, that are sick, that 
are disabled, that are aged, and really do not know what the future 
holds for them.
  There are those on the other side that say that we are scaring these 
people, that they have nothing to worry about, that they are in their 
mothers' arms with the Republicans' reconciliation bill.
  I do not know whether Democrats have the right answer, but when we 
start talking about the lesser of our brothers and sisters, the blind 
and the disabled, those who are working hard, trying to keep their 
pride and their dignity, and you see these programs being reduced, the 
rate of growth being reduced, and people being denied service, you 
wonder where is the outrage. How can Republicans come to us and say 
that they would like to reduce taxes by $250 billion, balance the 
budget, and nobody is going to get hurt? I was just amazed as to how 
you got this far with that type of arrogance and that type of contempt.
  I am pleased today to know that it is not Democrats and liberals 
screaming that say that this is outrageous, but it is our moral 
leaders. And God knows how they are registered; I do not. But is it not 
exciting to see that we now have the National Conference of Catholic 
Bishops, and I know they do not have a political axe to grind, but they 
are saying that in this country, this great Republic, that we should 
have a safety net for our disadvantaged. They are asking that this bill 
be vetoed because it is unfair to the poor. This did not come from the 
DCCC.
  One might say, ``Catholics are not the most popular people that we 
have in this country,'' and lo and behold, we have Christians and 
Jewish groups calling for a veto. ``The very moral fabric of our Nation 
would be torn,'' the leader said in his statement. ``The Government is 
renouncing its 60-year-old promise to be protectors of the last resort 
of its poor, its disabled, and of abused children'' It is the Eastern 
Orthodox denomination, rabbis, ministers, conservative Judaism, the 
Protestant Council.
  I think there is a way out. I think the Republicans really knew that 
there was a difference in ideology and that they have been getting away 
with murder, but they signed an agreement, or at least signed off on an 
agreement with the President. You vowed that you were going to protect 
these programs. But the great thing about this agreement is that you 
show ``* * * adopt tax policies to help working families, to stimulate 
the future economic growth * * *.''
  You also said you were going to protect these programs that made 
America great, that have given opportunity among our poor. Why do we 
not forget the politics, why do we not forget the reconciliation bill, 
why do we not get on with the people's business and say that we do want 
a balanced budget, but you can only do that after you take care of your 
budgetary needs and you do not give the tax breaks to the greedy.
  Mr. HOBSON. Mr. Speaker, I yield 3 minutes to the gentleman from 
Michigan [Mr. Smith], a member of the Committee on the Budget.
  Mr. SMITH of Michigan. Mr. Speaker, I think the good news is that 
there has to be a slowdown of the bomb-throwing from the other side 
now, because some of those bombs might come back to haunt them. Now, 
hopefully, we are going to sit down, we are going to talk about what is 
the best way to achieve a reduction in the increase of spending over 
the next 7 years.
  I just wanted to relate to some of the concerns about the tax breaks 
and who they are going to. The net tax decrease in this bill is $226 
billion. Just for a minute, compare that to what happened in 1990, when 
we had an increased tax of $280 billion. Compare that to what happened 
in 1993, when we had a tax increase spread over 7 years of $350 
billion.
  If you believe the economists when they say that these kinds of tax 
increases are a depressant on the economic and job expansion, is it 
reasonable to give some of those tax breaks back, take away some of 
those tax increases of 1990 and 1993? I say yes, if we want to increase 
job opportunity and the standard of living, we have to look at ways 
that leave some of this hard-earned money in the pockets of the people 
that earned it.
  We have to start looking at the fact that this country, over the last 
10 years, has a lower savings rate than any other industrialized 
country in the world. Guess what our savings rate in this country is; 
about 5 percent. Compare that with South Korea, at 32 percent; compare 
it with Japan, at 21 percent. We have been paying out, enjoying our 
benefits now and pay later. That is what we have been doing in this 
Government. We have been borrowing from our kids to satisfy what we 
think are our today's needs.
  Mr. Speaker, Republicans promised to provide a tax cut that is 
targeted to middle-income Americans. Look at this chart. We have kept 
our word. Our tax plan will help strengthen American families, and it 
is going to give job creation a boost. Sixty-five percent of the relief 
goes to people with incomes below $75,000. If you want to go up to 
$100,000, then 82 percent of these tax cuts go to families that are 
receiving less than $100,000. It is for middle-class families, it is to 
benefit job creation.
  Mr. Speaker, throwing bombs, it is easy to say, ``Well, we think you 
are hurting this group or this group or this group,'' or, ``You are 
disadvantaging this group just for tax cuts to the wealthy.'' Now, if 
we are going to agree to this, and the Democrats and the President have 
said, ``Yet, we will go with a 7-year balaned budget,'' now we have to 
start talking turkey over this Thanksgiving period. We are going to 
have to say, ``Here is where I think you should reduce the spending 
more than you are reducing it today.''
  I would say, Mr. Speaker, that it is so good news for the American 
people that we have agreed to have a 7-year balanced budget. It is what 
we need to do if we are really concerned about our kids and our 
grandchildren.
  Mr. SABO. Mr. Speaker, I yield myself 30 seconds.
  Mr. Speaker, if the gentleman would respond to a quick question, I 
would ask him, which tax increase of 1993 is repealed in this bill?
  Mr. SMITH of Michigan. Mr. Speaker, will the gentleman yield?
  Mr. SABO. Mr. Speaker, I yield to the gentleman from Michigan.
  Mr. SMITH of Michigan. Mr. Speaker, I would tell the gentleman, I do 
not know the specific tax increase, but I can tell you that we are 
putting some of this money back in the American people's pockets. It is 
a $500 tax cut for individuals.
  Mr. SABO. The answer is none.

                              {time}  1730

  Mr. HOBSON. Mr. Speaker, I yield 2 minutes to the gentleman from New 
York [Mr. Solomon], the very distinguished chairman of the Committee on 
Rules.
  Mr. SOLOMON. Mr. Speaker, I could not help but just get up here and 
say a few words, because I heard the gentleman from Florida [Mr. 
Gibbons], my friend, stand up here and talk about giving tax breaks to 
our rich friends; and I heard the gentleman from New York [Mr. Rangel] 
stand up here and talk about giving tax breaks to the greedy.
  Mr. Speaker, let me say to my colleagues, I have friends in my 
district 

[[Page H 13624]]
who live down the street from me. They have been married quite a while 
now; they have five children. They have a total income of $41,000. He 
is a postal worker and his wife works parttime--$41,000.
  Mr. Speaker, to people on the other side of the aisle, that is rich. 
I want them to take this $500 tax credit. We are going to put it in 
their pocket so that they can put it in the bank.
  Another couple lives down the street the other way with an income of 
$47,000. Two of them are working to get that joint income. They are 
married, and they get penalized for it; while two people living singly 
together, not married, do not have to pay this kind of a tax.
  We are going to take care of that. We are going to do away with that 
penalty.
  Then we have the capital gains tax. I have two people that work for 
Sears & Roebuck. They have worked there for 38 years, they have saved 
their money, they have stock options, they have been holding that stock 
all of these years. They have an income of $49,000 between the two of 
them. Is that rich?
  They want to retire next year, sell their $100,000 home. It cost them 
$8,000, now it is worth $100,000; and they want to cash in their stock 
and their house to go to Florida and enjoy the sunshine. Are they 
called rich?
  What is this business about a tax cut for the rich? Republican tax 
proposals are targeted toward working middle American families.
  Vote for this bill. It is good for America.
  Mr. GIBBONS. Mr. Speaker, if the gentleman would yield, I would say 
to the gentleman, what he outlined, they do not pay any taxes. They do 
not pay any taxes.
  Under the facts and circumstances that were outlined here by the 
previous speaker, those people, if they pay any taxes, they are getting 
the wrong tax advice. Their home is, under the circumstances that he 
outlined, completely exempt from taxation.
  Mr. SABO. Mr. Speaker, I yield 2 minutes to the gentlewoman from 
Connecticut [Mrs. Kennelly].
  Mrs. KENNELLY. Mr. Speaker, this body will now clear reconciliation 
for the President and he will correctly veto it, and then we will get 
down to the real negotiations on a balanced budget in 7 years.
  Mr. Speaker, I really hope when we get to those negotiations, very 
serious negotiations, because after what has happened over the last 
week, we cannot afford any more of this nonsense that we have seen, 
that we really deal with the facts and not the chart that the gentleman 
just had on the floor, because if we talk to Treasury, they do not deal 
in charts, they deal in figures.
  Mr. Speaker, that chart ignores the fact that most of the $32 billion 
of the earned income tax credit on incomes of $28,000 and less are not 
involved in that chart. They ignore that tens of billions of dollars in 
tax reductions from a multitude of provisions that primarily benefit 
corporations and shareholders are not in that chart.
  For instance, the particularly bizarre treatment of the alternate 
minimum tax. That chart ignores the fact that $12 billion in tax 
reductions in the estate and gift taxes, no matter whether we agree 
with it or want it or like it, we have to have these things in 
the numbers to come up with the correct chart; and we know that that is 
in there, and it is not in that chart.

  Another press release that I saw recently from the other side has 
asserted that 1996 families with children will either have no net 
change in their earned tax credit or will have a net tax reduction. 
This is absolutely untrue. This analysis manipulates information by 
picking and choosing which parts of the earned income tax credit, which 
is the working, low-income credit for families, are put into the 
numbers to get that chart.
  So even when we consider a combination of the earned income tax 
credit cuts and the family credit, 8 million families credit, 8 million 
families are not losers.
  Call Treasury, ask for the numbers Let us forget the charts, the 
pictures, and the carryings on.
  Mr. HOBSON. Mr. Speaker, I yield 2 minutes to the gentleman from New 
Jersey [Mr. Franks].
  (Mr. FRANKS of New Jersey asked and was given permission to revise 
and extend this remarks.)
  Mr. FRANKS of New Jersey. Mr. Speaker, as I listen to my friends on 
the other side of the aisle, they would seemingly suggest that unless 
the huge bureaucracies of the Federal Government here in Washington 
spend our tax money, we cannot improve the lot of underprivileged 
people; that somehow we cannot improve the lot of our American 
families, unless this huge Washington bureaucracy captures all of the 
available tax money and spends it; that somehow, if communities spend 
it, if families spend it, they will not do it as compassionately, they 
will not do it as thoughtfully. However, the people who look at this 
town and look at the waste inherent in this huge Government know that 
if we can transfer power, money, and responsibility back to communities 
and families, we may be able to make more progress in confronting the 
challenges that await America in the 21st century.
  Mr. Speaker, the greatest threat is for us to do nothing, to merely 
let this Government run on autopilot, because if we do that, a truly 
tragic result will ensue. Just 17 years from now, every single tax 
dollar sent to Washington, DC., will be consumed by just five programs; 
and four of those programs are vitally important, Social Security, 
Medicare, Medicaid, and Federal Employee Retirement Benefits. But the 
fifth program that will consume all of the tax dollars 17 years from 
now is the interest payment on the national debt.
  Mr. Speaker, that is a tragic future awaiting the next generation. We 
have to relieve that burden of debt that our endless credit card 
charging has left to our next generation. The only moral course let to 
us is to make the tough decisions to balance the budget, and that is 
what the measure before us does.
  Mr. SABO. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from Texas [Mr. de la Garza], the ranking member of the 
Committee on Agriculture.
  Mr. de la GARZA: Mr. Speaker, I rise in strong opposition to the 
conference report on H.R. 2491.
  Mr. Speaker, while I support the goal of a balanced budget and voted 
for the Democratic approach to achieving that budget over 7 years, I 
must take great exception to this agreement which sacrifices one of our 
most important national goals--that of preserving the health of our 
rural economy and the adequacy of our Nation's food production system.
  Mr. Speaker, the Gingrich-Armey conference agreement endangers our 
Nation's food security. While the cuts initially ordered to be attained 
in agriculture were irresponsibly drastic, the approach taken by the 
Republican leadership to eliminate the farm safety net altogether 
threatens to wreak havoc on the rural economy. No longer will producers 
be able to count on the Government when its own macroeconomic policies 
destroy their markets, as happened in the mid-1980's.
  Under H.R. 2491, agricultural commodity programs--which have been key 
to our success in ensuring a consistently adequate, safe, and 
affordable food supply--will end with the 2002 crop year. Mr. Speaker, 
the Republican plan not only eliminates our Federal farm safety net, 
but it also makes devastating cuts in programs which allow our 
agricultural sector to compete with the European Union in farm trade. 
The future of our agricultural economy is in foreign trade but the 
Republican plan amounts to unilateral disarmament when our competitors 
are subsidizing heavily to take away markets that our more efficient 
producers would otherwise capture. With the tremendous beneficial 
impact that farm trade has on our economy as a whole, the Republican 
policy of drastically reducing the export enhancement program is 
extremely foolhardy.
  Mr. Speaker, there is substantial agreement now that the budget must 
be balanced. The American people want it balanced and we are working 
toward that goal. The Gingrich plan before the House today takes the 
wrong approach where rural America is concerned. Reductions in 
discretionary spending totals cut deeply into the programs that are 
vital to rural Americans. We have to continue to marshal our resources 
in a way that ensures we do not endanger the future of our rural 
economy on which our Nation so heavily depends.
  And yet, without the benefit of a single hearing, the Gingrich-Armey 
leadership has imposed an entirely new program that eliminates the 
Government role in ensuring the farmer a fair return. Instead, the 
Gingrich plan establishes a program of flat payments to farmers: 
regardless of what they plant; regardless of the level of market 
prices.
  Mr. Speaker, farmers in every region of this country have very grave 
concerns about the agriculture provisions in this bill. They represent 
a sudden and dramatic abandonment by the Government of its role in 
sharing the 

[[Page H 13625]]
farmer's risk. Farmers are particularly concerned that this sudden 
withdrawal of the Federal Government may make the difference in their 
fight to stay on the farm. Yes, they may know that each year they will 
get a cash payment, but if prices collapse next year, will that payment 
be enough? If wheat prices fall to $2.50, how many wheat farmers will 
be out of business in Kansas, in the Dakotas, in Washington? If cotton 
prices fall back down to 45 cents, how many cotton growers--spread out 
all over the south--will survive? If corn prices are under $2, where 
will the corn belt be?
  Agriculture deserves more consideration than has been given by this 
Congress and I am glad that the President has won from Speaker Gingrich 
a commitment to recognize that fact in upcoming negotiations.
  Mr. Speaker, other parts of the Republican plan disregard the special 
needs of the Rural Economy. The cuts it would make in Medicare and 
Medicaid will have devastating and inordinate effects on rural 
hospitals and the provision of health care in rural areas. In block 
granting Medicaid and reducing funding available for low-income health 
care services, support to health care in the State of Texas alone will 
be cut by 20 percent. These cuts will fall heavily in rural areas where 
health care services are sparsely provided to begin with. In a specific 
move, the Republican plan removes current rules designed to prevent 
``spousal impoverishment'' and imposes a new possibility--that a lien 
could actually be placed on a family farm before the owner's spouse 
would be eligible to receive public assistance for catastrophic medical 
services.
  In addition, the Republican plan eliminates any link between Medicaid 
spending and localized economic distress. Currently, an economic 
recession in a heavily rural State would result in increased resources 
being made available under Medicaid. Under the Republican block grants, 
the amount to be available--already severely reduced--would become 
highly inadequate if conditions in the farm economy deteriorated.
  The Republican plan also has tremendous implications for rural 
hospitals. Rural residents are chronically underserved. The plan's cuts 
in payments to hospitals will threaten the viability of many rural 
hospitals and clinics. In the days ahead, we must act to protect the 
ability of rural Americans to improve the availability of health care 
in their areas.
  Mr. Speaker, I strongly oppose H.R. 2491. Make no mistake: my 
colleagues who vote for it are voting to end farm programs. It's a bad 
bill; it is opposed by the American people; and because of that the 
President will veto it. I am encouraged, however, that the President 
and the Congress have now explicitly recognized that we will, in fact, 
agree on a balanced budget. I am encouraged that we can now sit down in 
a bipartisan manner and fashion an agriculture policy that will 
recognize these basics: First, the need to preserve the farm safety 
net; second, Agriculture has contributed heavily in the past to deficit 
reduction; third, continuation of investment in rural America is of 
crucial importance; and fourth, the need to continue to provide the 
resources necessary to maintain a level playing field with our export 
competitors.
  Mr. Speaker, I came here in 1965. The first bill I introduced was a 
balanced budget amendment, so no one can point a finger at me and say I 
have not tried. I have served with Presidents Johnson, Nixon, Ford, 
Carter, Clinton, Bush, Reagan, and I respected them always, I respected 
my colleagues; but when foam comes out of the mouths when they say 
``tax and spend liberal Democrats,'' I resent that.
  As chairman of the Committee on Agriculture, we cut over $50 billion. 
My colleagues have to respect that; my colleagues have to admire that. 
We did. If everybody else had done the same thing, we would not be 
here.
  And then I had to explain to someone, what is this continuing 
resolution? I said, so we can continue running the Government.
  Well, my dear friends, you waited 40 years to get here, and you 
messed it up the first year. You did not pass your appropriation bills. 
The President cannot legislate. It is a legislative failure, and you 
are the majority, and nobody has noted that.
  You are arguing with the President, Bill Clinton. You did not pass 
the appropriation bills. It is a legislative failure, and it is on you 
side of the aisle, and I am sick and tired; and I am not going to abuse 
anyone, I am not going to do rhetoric, I am not demagoging, I am 
telling the truth. You did not pass the appropriation bills. It is a 
legislative failure.
  I have helped cut some $50 billion in 12 years, not from the poor, 
not from those that need it, but in the area where it could be 
judiciously done. So think about that.
  I am coming over and telling your side, you have been a legislative 
failure. You waited for 40 years, and you have messed it up.
  Mr. HOBSON. Mr. Speaker, we just wish the rest of his colleagues 
would have followed him in balancing the budget by cutting so much.
  Mr. Speaker, I yield 1 minute to the gentleman from California [Mr. 
Cunningham].
  Mr. CUNNINGHAM. Mr. Speaker, my colleagues ask what items are not in 
this thing that we are taking back on the taxes. Well, I would tell my 
colleagues that a balanced budget in 7 years, by itself, is a big 
reduction in taxes on the American public. When you increase taxes $270 
billion and you give back $245 billion, that is a lot. When your bill 
increased the marginal tax rate on the middle class and we take it off, 
that is a big tax back to the American public.
  When a $500 deduction is given to people, even my colleagues would 
have to admit, that is not all going to the rich. About 70 to 80 
percent of it is going to people below $100,000, and most of that, down 
below that. So that is being given back. And by not sending billions of 
dollars to Russia and extensions of Somalia and Haiti and sending 
25,000 troops to Bosnia, they are not going to be paying those taxes 
and those dollars at all.
  So I would tell my colleagues, we are doing a lot in the balanced 
budget and giving money back to people that the President did not.
  Mr. HOBSON. Mr. Speaker, I yield 30 seconds to the gentleman from 
Illinois.
  Mr. PORTER. Mr. Speaker, I thank the gentleman from Ohio for 
yielding. I would say to the gentleman from Texas, in regard to the 
remark he just made, the biggest appropriation bill of all, the bill 
funding the Departments of Labor, Health and Human Services, and 
Education amounting to $270 billion is being held up in the Senate, we 
passed it in the House, because the Democrats will not let it come to 
the floor.
  So do not say that it is our fault that all the bills have not 
passed. They are the ones that are preventing it from being heard.
  Mr. SABO. Mr. Speaker, I yield 10 seconds to the gentleman from Texas 
[Mr. de la Garza].
  Mr. de la GARZA. Mr. Speaker, the leader in the Senate is named Dole. 
The majority is Republican. Do not come to me telling me that the 
Democrats are holding it up.
  Mr. HOBSON. Mr. Speaker, I yield 1 minute to the gentleman from 
Florida [Mr. Weldon], and I believe that under the rules of the Senate, 
it takes 60 votes to pass a bill.
  Mr. WELDON of Florida. Mr. Speaker, I rise in strong support of the 
Balanced Budget Act of 1995. One of the biggest reasons why I support 
this bill, and I believe very strongly we need to pass it as a nation, 
is that it will lower interest rates paid by all Americans on all of 
their loans.
  For example, a typical average American family such as many of those 
living in my district, Florida's 15th Congressional District, the space 
coast, can see up to $121 a month in savings on their mortgage 
payments. That amounts to $1,456.
  When decreases in student loans are added in that will occur when the 
Government is not out borrowing money, the decrease in the interest 
rate on student loans, car loans, and add that to our child tax credit 
for those typical hard-working families in my district, they could see 
up to as much as $2,000 of disposable income in their pocket.
  This makes sense. The American public wants the budget balanced. 
Hard-working Americans across the Nation will benefit from it.
  Support the Balanced Budget Act.
  Mr. SABO. Mr. Speaker, I yield 3 minuets to the gentleman from Texas 
[Mr. Stenholm], my good friend.
  (Mr. STENHOLM asked and was given permission to revise and extend his 
remarks.)
  Mr. STENHOLM. Mr. Speaker, I oppose this version of the balanced 
budget amendment for many, many reasons, one of which I will talk 
about, on agriculture. But a second one is that this one that we are 
about to vote on increases the debt of the United States by $41 billion 
more over the next 3 years than the balanced budget amendment that I 
and a large number of 

[[Page H 13626]]
Members on both sides, I believe, will soon end up supporting, and that 
is the so-called coalition budget.

                              {time}  1745

  But I repeat, the balanced budget amendment borrows $41 billion more 
than the better alternative that we could have voted on today.
  Let us talk about agriculture for just a moment. We Democrats learned 
a lesson 2 years ago when we tried to reform our health care system 
partisanly, in closed meetings, behind closed doors, and excluding the 
minority, and we were wrong. We paid the price because nothing good 
happened. Now we have the majority writing farm policy behind closed 
doors in a partisan manner, excluding the minority. You are wrong today 
for doing that, to bring a farm bill as part of this reconciliation 
that destroys the safety net for agriculture, an agriculture community 
that must compete in an international marketplace, an international 
marketplace that is not as free as those who have designed this policy, 
not members of the Committee on Agriculture. This farm part of this 
reconciliation bill was not written by the House Committee on 
Agriculture. It was written in the Speaker's office and by certain 
designated hitters who chose, in fact, to put their philosophical 
beliefs into this reconciliation agricultural portion.
  Another reason I oppose this version of the agriculture component is 
that it does not by any stretch of imagination recognize the unique 
needs of rural health care. The Medicare-Medicaid cuts from rate of 
increase, I readily concur with every chart I have seen, they are 
totally accurate in what they say, but they are immaterial. It is 
immaterial what we are talking about numbers unless we change the 
policy that goes with it.
  The policy directions that are present in the budget we are about to 
vote on do not address the needs of rural America, health care, rural 
housing, water and sewer, conservation needs, research. Research, we 
are continuing to cut in that area.
  These are the things that concern many of us on this side of the 
aisle, that the agricultural component, the policy, the decisions in 
which we are going to see whether or not some future speaker can stand 
in this area right now, as I am standing and talking to you today, and 
saying are we not blessed to live in a country that has the most 
abundant food supply, the best quality of food, the safest food supply 
at the lowest cost of any other country in the world. We do not do that 
by accident. We do not do that by following blind philosophical 
beliefs. We do it by following good policy. Oppose this budget. Support 
one that will have better policy.
  Mr. HOBSON. Mr. Speaker, I yield 1 minute to the gentleman from 
California [Mr. Radanovich].
  Mr. RADANOVICH. Mr. Speaker, thank God we are all in the same arena 
finally with the 7-year balanced budget scored by CBO. For the first 
time we are comparing applies to apples, not apples to oranges. I think 
that is terrific.
  Now that we are doing that, we need to recognize two things. We need 
to ask these two things: First, should the Federal Government be doing 
everything that it is doing right now, and if not, let us figure out 
how to privatize it. If we should be, let us figure out how to localize 
it. From there we can go into the budget, cut what needs to be cut, 
freeze what needs to be frozen, eliminate what needs to be eliminated, 
and slow the rate of growth for certain programs that need a slowed 
rate of growth.
  The reason why I say this is because we have been doing that since 
January. The result of this is contained in the Balanced Budget Act of 
1995. That is why I support it.
  Mr. SABO. Mr. Speaker, I yield the balance of my time to the 
gentleman from Missouri [Mr. Gephardt], the distinguished minority 
leader.
  (Mr. GEPHARDT asked and was given permission to revise and extend his 
remarks.)
  Mr. GEPHARDT. Ladies and gentleman of the House, let me not today 
repeat what I said before about this budget. I think everybody knows my 
criticisms of the budget. Everybody has heard the arguments on the 
other side, and they have been good on both sides.
  I think that yesterday when we reached this agreement, everybody won. 
Everybody got to put into the resolution their beliefs about how this 
will hopefully come out. It was a compromise in the truest sense of the 
word.
  More importantly, yesterday America won and the American people won. 
Our form of Government is one where people with very different beliefs, 
from very different backgrounds, from very different parts of the 
country have to eventually come together and work together to find 
consensus and compromise. That is hard to do, because all of us hold 
our beliefs strongly. Both parties have very strong beliefs that they 
hold dearly.
  John Kasich was right the other night when he said we are doing now 
that people sent us here to do. They sent us to fight for them. They 
sent us to fight for their beliefs, and they sent us to fight for our 
beliefs.
  And kind of the irony of our form of government is that when we 
finally get down to that grand compromise, what we started to do 
yesterday and we are going to have to do a lot more of in the next 3 or 
4 or 5 weeks, people get put off because they think we are 
compromising. People get mad because we are compromising, although it 
is precisely what we all have to try to do to make this great country 
work.
  So I guess I wanted to rise tonight not to argue the budget again. We 
have kind of done that.
  I rise tonight to talk to all of us as human beings, and to say to 
each of us and to myself, in the last days, and it is no one's fault, 
but in the last days things have gotten awfully personal and awfully 
tough in this body, and people, including myself, have said things that 
probably, with better judgment, we would not want to say. I ask all of 
us, Republicans and Democrats alike, in the days ahead, which are going 
to be tough, that we depersonalize this discussion.
  I can disagree with you without being disagreeable. I do not always 
accomplish that myself, but I should do that.
  I can disagree with you vehemently and still respect you and like you 
as a human being, because I believe all of our motives are good. Our 
motive is to help the country. Our motive is to make the country 
better. Our motive is to improve the American society and our people.
  So I just ask, as we go through these next 3 or 4 or 5 very difficult 
weeks, that we continue to respect one another and like one another, 
and admire one another as Americans and as patriots and as well-meaning 
human beings, as we disagree, so that at the end we have the ability to 
stretch and to move to that compromise which the American people want 
us so desperately to achieve.
  We can do this. We can do it. We are smart enough, we are strong 
enough, we are good enough to find that compromise. With God's will and 
help, we will do it.
  Mr. HOBSON. Mr. Speaker, I yield the balance of my time to the 
gentleman from Ohio [Mr. Kasich], our outstanding chairman, a person 
who has worked so hard to get here and so hard over the weekend.
  Mr. KASICH. I appreciate the gentleman yielding me the time.
  Mr. Speaker, let me say right off the bat, I am about all speeched 
out. I think that deserves an ovation.
  I think that we were able to achieve a framework which we thought was 
important, the 7 years counted by CBO. Within that framework, we were 
able to list the priorities that we all feel strongly about. Over the 
next 4 or 5 weeks, we will fight within that framework and I think at 
the end of the day we will reach agreement.
  I do not know how to feel about it today. In some sense maybe we 
overestimate how difficult this will be. I think that the minority 
leader is right. What a great speech he just made. He just said we are 
going to not personalize this stuff and we are going to fight in the 
great American tradition. At the end of the day, we will reach a deal 
and we will move the country forward. I think we will move it forward, 
because when the American people understand we are going to use real 
numbers, we do not have a goal, we do not have a dream, we have a 
reality, we are going to lay down the first down payment towards 
certainly rescuing the next generation.
  I want to say to my colleagues that the negotiations were very 
positive.  

[[Page H 13627]]

The gentleman from Minnesota [Mr. Sabo], the leading Democrat on the 
Committee on the Budget, sat in. Even though we felt strongly, we were 
actually able to have discussions with the President's Chief of Staff 
without anybody yelling and screaming at one another. It is going to be 
tough over the next 4 or 5 weeks, but I think we will get the job done.
  I hope for everybody, we are going home for Thanksgiving tomorrow, we 
sit around the table, we say our prayers, and my prayer for everybody 
is to have a very happy Thanksgiving.
  Mr. Speaker, we are all in a good mood. Let me not say anything that 
gets us in a bad mood here. I think we will come back after 
Thanksgiving rejuvenated. We will sit down and we will go through it.
  But I think the people should know, and Sam Gejdenson just suggested 
to me that it was a good point, that we all have strongly held 
principles.
  I look over on this side of the aisle. I cannot think of a person 
that holds principles stronger than John Lewis. John Lewis took a 
beating over principles, and I am proud to serve with him in the House 
of Representatives.
  We will get this done. We will work it out. We will put the country 
first. We got the framework. Happy Thanksgiving. Let us all come back 
healthy and happy and ready to go to work.
  Mr. EMERSON. Mr. Speaker, I strongly support the Balanced Budget Act 
of 1995, and I fully intend to carry through on the pledge I made to 
the people of southern Missouri by voting to pass this historic budget. 
Over the past several decades the national debt swelled to more than 
$4.5 trillion. This debt will cost taxpayers $234 billion this year and 
will saddle our children with an even larger burden. Enough is enough. 
Conservatives vowed when we took control of Congress to get this great 
Nation's fiscal house in order. The Balanced Budget Act delivers on 
that pledge.
  Mr. Speaker, the stakes in this debate could not be higher. The 
fiscal future of the United States hinges on the ability of this 
Congress to make the tough choices required to balance the budget. It's 
more than debating trillion dollar figures--it's about making our 
economy stronger and providing American families with a better chance 
to make ends meet. A balanced budget enhances our entire economy with 
lower interest rates that will empower families and workers with 
stronger purchasing power. Mortgages, cars, and education become more 
affordable and the American dream moves closer to reality.
  This process has not been an easy one, requiring many tough choices. 
The result is a balanced budget in 7 years, using real budget numbers--
not ``smoke and mirrors.'' The Balanced Budget Act limits Government 
spending increases, provides tax relief for low- and middle-income 
families, ends welfare as we know it, and preserves and strengthens 
Medicare and helps small businesses create jobs. Conservatives in 
Congress and the American people are committed to balancing the budget, 
and we want President Clinton to join in this commitment. The 
obligations we owe to the American people, their children, and our 
Nation's future generations, deserve nothing less than decisive action 
to preserve our future by balancing the budget.
  Mr. KOLBE. Mr. Speaker, I rise in strong support of H.R. 2491, the 
Balanced Budget Act. What we are doing is of enormous significance. We 
look at all this squabbling and ask: Does this make any difference? 
This is the ninth shutdown of Government in 12 years, but you probably 
don't remember any of them. So why is this different?
  Those shutdowns were over how much we were going to grow programs. 
Democrats in Congress would say increase a program by 10 percent and a 
Republican President would say, I can only give you 5 percent. So, 
split the difference at 7\1/2\ percent.
  This is different. We are not talking about the difference between 5 
and 10 percent, but eliminating programs and agencies and reducing 
Government's hold on Americans through its grip on their wallet.
  This is a revolution that is under way. And revolutions are messy. 
The Government shutdown and impasse on the spending bills are just the 
tip of the iceberg. But it is an important tip.
  The President tried to tell the American people he couldn't sign a 
stopgap spending bill because it had extra things on it--Medicare 
premiums for example.
  So we sent him a clean continuing resolution last night. Nothing on 
it. Nothing. Just one provision that commits the President to 
negotiating--not even reaching agreement on a 7-year balanced budget--
just to negotiate. This President has said, as recently as 2 months 
ago, that he favored a balanced budget in 7 years. During the campaign 
he said he could balance the budget in 5 years. In fact, he has 
publicly stated that it could be balanced in 10 years, 9 years, and 8 
years.
  By saying he would veto the continuing resolution, the President has 
said he cannot, will not, agree to a balanced budget now, next year, 7 
years, 10 years--ever.
  This rhetoric has been going on for years. The press reported it 
again yesterday: The President said, ``Yes, I'm for a balanced budget, 
but we can't cut Medicare, we can't savage programs for the poor, we 
can't abandon welfare recipients, and we can't change job training 
programs''. In other words, I'll talk about a balanced budget, but I 
just can't bring myself to doing anything about it.
  Well, this morning, we are going to do something. We have on the 
floor, as I speak, a bill that utterly transforms the way we think 
about government. This Balanced Budget Act preserves Medicare. In fact 
under this proposal it's going up per person from $4,800 to $6,700 in 
2002, or 40 percent. It is a lie to say we are cutting Medicare.
  The Balanced Budget Act gives control of Medicaid to the States--a 
concept that has proven to work with the Arizona Health Care Cost 
Containment System. It gives States the authority to implement welfare 
reform; it eliminates all farm subsidies in 7 years; it abolishes the 
Commerce Department and scales back others; and it eliminates more than 
100 Federal programs.
  Our Balanced Budget Act also gives each family earning less than 
$110,000 per year a $500 per child tax credit. That's hardly a tax 
break for the rich. That's a break from many, many middle-class 
Americans.
  And let's look at the benefits of a balanced budget. Interest rates 
would go down, making it easier for Americans to purchase homes, cars, 
major appliances, and so on. That would spur economic growth, and our 
children and grandchildren would no longer be saddled with this 
enormous deficit.
  More than 80 percent of the American people have said they want a 
balanced budget, and we have delivered one. We have done it for our 
children because we have borrowed long enough from our children. Now 
it's time for the President to stand behind his words with actions and 
join us--not fight us--in this effort.
  I strongly urge my colleagues to support this historic legislation.
  Mr. MINGE. Mr. Speaker, I wish to talk about the farm commodity 
portion of this bill. This body passed the so-called freedom-to-farm 
bill 1\1/2\ months ago. Like most things around here, the title is 
misleading. It had many shortcomings. My farm friends said it could 
more aptly be called the Family Failure Act of 1995. However, Chairman 
Roberts at least identified several of the essential points of a good 
farm program.
  Tragically even these good points have now been compromised:
  Significant payment limitations have been deleted. While we eliminate 
fuel assistance for low income rural folks, industrial scale farmers 
will still receive huge payments. In fact, they will receive an 
extraordinarily unfair share of farm program funds.
  Equity among crops is lost. Corn, wheat, cotton, and rice were all 
treated the same by Chairman Roberts. In the budget reconciliation 
bill, cotton and rice have a program that could not survive if 
considered separately.
  Flexibility is compromised. Conservation-minded farmers who wish to 
reduce erosion and renew the soil by growing hay lose a portion of 
their options. They are forced to cultivate to qualify for benefits.
  The inequities of dairy marketing orders survive. We have a national 
economy, but not for dairy farmers. Upper Midwest dairy farmers are 
being discriminated against by byzantine milk marketing orders. These 
orders should be consolidated or abolished.
  This bill's farm provisions benefit regional interests, and owners, 
and industrial-scale farming. It is politics as usual. We had an 
opportunity to establish a creative farm program; to provide tools that 
farmers could use to manage risk. This bill blows that opportunity. It 
should be defeated.
  Mr. CALVERT. Mr. Speaker, I rise in strong support on the conference 
report on H.R. 2491, Balanced Budget Act of 1995. I wish to take my 
limited time to speak to the importance of the title V, Energy and 
Natural Resources Provisions, chapter 4--Federal Oil and Gas Royalties 
as part of the Balanced Budget Act of 1995.
  This chapter is the only legislative initiative taken during the last 
13 years to cost effectively increase the Nation's third largest source 
of revenue--oil and gas royalties. This chapter establishes a 
comprehensive statutory plan to increase, not decrease, collection of 
royalty receipts due the United States. In short, it reduces the 
deficit. Without this chapter as part of the Seven Year Balanced Budget 
Act of 1995, an ineffective and costly royalty collection system will 
prevail, perpetuating long delays and uncollected royalties.
  To increase royalty collections to reduce the deficit, the chapter:

[[Page H 13628]]

  First, requires the Secretary and delegated States to collect and 
protect all royalty claims within 6 years. To ensure full and complete 
collection of all receipts, extension of the 6-year period is permitted 
and lessees are required to provide records necessary for proper 
collection;
  Second, requires the Secretary to increase the value of disputed 
claims by deciding appeals within 30 months that will result in 
additional royalty collections. Today, over $450 million of disputed 
claims languish in a bureaucratic appeal process and continue to lose 
value;
  Third, allows States which receive one-half of royalties collected to 
protect their interests by performing royalty collection activities in 
partnership with the Secretary. This partnership increases receipts to 
both the U.S. Treasury and the States;
   Fourth, requires more aggressive and cost-effective royalty 
collection by the Secretary and the delegated States which will 
increase the amount of collections within the 6-year period; and,
  Fifth, increases oil and gas production on Federal lands by creating 
economic efficiencies to make Federal leases more competitive with 
private leases.
  The Congressional Budget Office has concluded that these changes 
increase royalty income over 7 years to the U.S. Treasury by $51 
million and another $33 million to the States. Additional royalty 
collections will continue to occur for each fiscal year after the 7-
year period. Collections well in excess of $51 million are likely to 
occur as the Secretary and States more aggressively collect royalties. 
Furthermore, net receipts are maximized through increased efficiencies, 
and production is stimulated under this chapter.
  The truth is, the Federal oil and gas royalty chapter makes money, 
because it makes everybody, lessee and lessor alike, work to collect 
and pay royalties payments right the first time. And, it empowers the 
States to do the job on leases within their boundaries to ensure that 
royalty bills are fully paid on time, and for lower collection costs. 
The Governors of the two States with the most at stake--Wyoming and New 
Mexico--support this legislation because it will allow them to do their 
jobs better, fairer, and less expensively and ensure that this 
significant source of revenue to the U.S. Treasury and Western States 
will increase.
  Some Democrats oppose this chapter because they would rather promote 
the status quo to allow bureaucrats an indefinite period of time to 
pursue money due the taxpayers. In spite of the positive CBO score, 
these same opponents claim royalties will be lost, but in truth, 
royalty collections will increase. States will have a more direct role, 
thereby increasing collections to use to for funding schools, highways, 
and social programs.
  There has been many allegations about chapter four which are false 
and been used in attempt to divert attention from the provisions of 
this chapter which increase royalty collections, eliminate ineffective 
and costly administrative actions and allows States to form a 
partnership with the Secretary to participate in activities that 
directly impact the royalties they received from Federal leases. As 
part of the record, I would like to clarify the intent of various 
provisions of this chapter. This chapter in no way affects Indian lands 
or alters how the Federal Oil and Gas Royalty Management Act of 1982 
applies to Indian lands.
  The intent of specific section of this chapter includes:


                         SEC. 5361. DEFINITIONS

  Definitions are contained in this section to provide guidance and 
clarity. Many of the definitions are critical to the underlying 
concepts. Under the provisions of the chapter, the definitions apply to 
Federal lands and Outer Continental Shelf lands, and in no way shall be 
applied to Indian lands.
  The term ``obligation'' includes all of the duties which arise under 
a lease issued by the Government. A ``lessee'' is the person having a 
contractual relationship with the Federal Government. A ``delegated 
State'' defines activities, unless prohibited by the Constitution, a 
State may chose to perform pursuant to the terms and conditions of an 
agreement between the State and the Secretary to promote production and 
increase royalties received by the State and the U.S. Treasury. A 
``State concerned'' is a State that receives a portion of the Federal 
royalties for Federal lands lying within the boundaries of the State 
and shall have a equal role with the Secretary in deciding the 
applicable provisions of the chapter. The term ``order to pay'' has 
been expressly defined. The committee believes that the information 
contained in this definition is necessary information for the tolling 
of the 6-year period.


          SEC. 5362 maximizing receipts through state efforts

  This entire chapter establishes a partnership between the Secretary 
and the States for the purpose of increasing royalty collections. This 
section is necessary to expand existing authority for States to perform 
all or a part of the activities under this chapter to ensure additional 
collections to the States and the U.S. Treasury within 6-year period. 
By expanding the States' role, States are provided the economic 
incentive to be more aggressive under the net receipts sharing 
provision of the Mineral Lands Leasing Act to collect new receipts to 
the States and U.S. Treasury. States receive 50 percent of all 
royalties received under Federal onshore oil and gas leases.
  States currently may perform certain royalty audit activities if they 
enter into an agreement with the Secretary. This section allows a State 
to enter into a cooperative agreement with the Secretary to perform 
legally delegable royalty and lease management activities. If a Federal 
activity is not deemed to be inherently Federal and can be performed in 
a manner with the efficient and timely collections of royalty 
requirements of this section, an interested State may pursue an 
agreement with the Secretary to perform such activity and funding shall 
be consistent with current delegation of authority agreements. If an 
activity is determined to not be constitutionally delegable to a State, 
it shall not impact any other delegable activity or provision of this 
chapter. A State's compensation to perform delegated activities shall 
be subject to net receipt sharing, and the State shall receive 
compensation for State costs allocated to a State's net receipts during 
the following fiscal year. As of the date of enactment, existing State 
delegation agreements to perform audits or inspections, nothing under 
this chapter shall impair those agreements. All State actions must 
conform with the provisions of this chapter.


  SEC. 5363. SECRETARIAL AND DELEGATED STATES' ACTIONS AND LIMITATION 
                                PERIODS

  This section requires collection of royalties and enforcement of 
royalty claims within 6 years. This 6-year period is the key component 
of this chapter because it is the driving mechanism to increase 
revenues to the U.S. Treasury and the States. To determine the amount 
owing, this section requires companies to provide records during the 6-
year period and provides the Secretary and States a mechanism to toll 
the statute and protect collections if records are not made available. 
To ensure timely collections, the Debt Collection Act applies to 
obligations that are enforced during the 6-year period.
  The Secretary and the delegated States are required to perform cost-
effective collections in order to have sufficient resources to increase 
collections during the 6-year period. The Secretary and the State 
concerned are required to determine what Federal accounting and 
collection activities cannot be performed cost effectively and 
eliminate redundant auditing efforts.
  This section also requires the Secretary to decide and initiate 
collection of royalties from appealed claims within 2\1/2\ years and 
provides a framework for settlement of litigated cases. All appeals 
decided by the Secretary shall be binding on the State. The requirement 
is a necessary part of this section's purpose, which is to ensure 
collection of all disputed royalty amounts due the United States, 
thereby increasing revenues to the U.S. Treasury within the 6-year 
period. It eliminates losses associated with stale and uncollectible 
claims.


                   SEC. 5364. ADJUSTMENT AND REFUNDS

  In order to ensure that additional royalties are collected within the 
6-year period, all adjustments to royalty payments are required to be 
made within 5 years. A key component of additional royalties being 
cost-effectively collected within the 6 years is the requirement that 
interest be calculated and paid at the time of any adjustment.


    SEC. 5365. ROYALTY TERMS AND CONDITIONS, INTEREST, AND PENALTIES

  This section creates an analogous system to the IRS for interest on 
overpaid and underpaid royalties, thereby encouraging royalties to be 
paid accurately the month following the month of production. The 
interest rate for under payments will be short term rate plus three 
points and for overpayments the interest rate will be the short term 
rate plus two points, regardless of the amounts of the underpayment or 
overpayment. Increased receipts to the U.S. Treasury and the States are 
achieved by the establishment of a more efficient and cost-effective 
accounting system which is necessary so that royalties paid can be 
verified within the limitation period. This section also imposes a new 
statutory assessment on lessees who chronically submit erroneous 
reports, thereby encouraging proper payment and increasing revenues. 
These are the only type of assessments that can be imposed by the 
Secretary.
  If the Secretary determines that a lessee has paid in excess of 10 
percent of its total royalty obligation for all of its leases subject 
to this act and further determines that such excessive payment was made 
for the sole purpose of receiving interest, the Secretary shall not pay 
interest on the amounts paid in excess of 10 percent. The committee 
expects lessees to place excess cash in other interest-bearing accounts 
rather than with the Minerals Management Service and hence a 
determination by the Secretary that an overpayment was made for the 
sole purpose of receiving interest shall be the exception.

[[Page H 13629]]

  Lessees will be allowed to submit an appropriate amount of royalties 
to avoid underpayment or nonpayment interest charges. When an estimated 
payment is made, the royalty payment becomes due at the end of the 
month following the period covered by the estimated payment. The 
committee does not intend to restrict the period of time covered by an 
estimate to 30 days.
  This section provides that the lessee clarify who is responsible for 
the payment of royalties and notify the Secretary. The committee 
intends to eliminate the delay in collection of these royalties because 
the Secretary will contact only those parties that are liable, or 
designated to be liable, to remit royalty. The Interior Board of Land 
Appeals Mesa decision demonstrates that the Secretary's current royalty 
collection practices must be altered to comply with the law. This 
section does not reduce the Secretary's ability to accept payment from 
any party or their ability to pursue parties who are secondarily 
liable.
  To ensure proper collections, this provision clarifies which party is 
primarily liable for the underlying royalty obligation, which is 
consistent with lease terms. The provision does not alter or restrict a 
lessee designation of who may report and pay royalties on their behalf.


            SEC. 5366. ALTERNATIVES FOR MARGINAL PROPERTIES

  Regulatory relief and other options to conventional and costly 
royalty accounting are established for marginal wells to increase 
royalties and provide the Secretary and States additional resources to 
aggressively collect royalties from more prolific properties within the 
6-year period. This reform for marginal (low production) properties 
results in additional receipts from oil and gas production that would 
otherwise be abandoned. This section increases oil and gas production 
on Federal lands by creating economic efficiencies to make Federal 
leases more competitive with private leases.
  This section requires the Secretary and the State concerned to 
determine the amount of what marginal production from a lease or leases 
or well or wells will be subject to a prepayment or regulatory relief. 
If a State concerned does not consent, the prepayments or regulatory 
relief cannot be made.
  Mr. Speaker, I urge my colleagues to support the Seven Year Balanced 
Budget Act of 1995. The Federal oil and gas royalty chapter is sound.
  The SPEAKER pro tempore (Mr. Emerson). Pursuant to House Resolution 
279, the previous question is ordered.
  The question is on the motion offered by the gentleman from Ohio [Mr. 
Hobson].
  Pursuant to the provisions of House Resolution 245, the yeas and nays 
are ordered.
  Members will record their votes by electronic device.
  Without objection, the Chair announces that he will reduce to a 
minimum of 5 minutes the period of time within which a vote by 
electronic device may be taken on the motion to concur in the Senate 
amendment to House Joint Resolution 122 on which the Chair has 
postponed further proceedings.
  There was no objection.
  The vote was taken by electronic device, and there were--yeas 235, 
nays 192, not voting 5, as follows:

                             [Roll No. 820]

                               YEAS--235

     Allard
     Archer
     Armey
     Bachus
     Baker (CA)
     Baker (LA)
     Ballenger
     Barr
     Barrett (NE)
     Bartlett
     Barton
     Bass
     Bateman
     Bereuter
     Bilbray
     Bilirakis
     Bliley
     Blute
     Boehlert
     Boehner
     Bonilla
     Bono
     Brownback
     Bunn
     Bunning
     Burr
     Burton
     Buyer
     Callahan
     Calvert
     Camp
     Canady
     Castle
     Chabot
     Chambliss
     Chenoweth
     Christensen
     Chrysler
     Clinger
     Coble
     Coburn
     Collins (GA)
     Combest
     Cooley
     Cox
     Crane
     Crapo
     Cremeans
     Cubin
     Cunningham
     Davis
     Deal
     DeLay
     Diaz-Balart
     Dickey
     Doolittle
     Dornan
     Dreier
     Duncan
     Dunn
     Ehlers
     Ehrlich
     Emerson
     English
     Ensign
     Everett
     Ewing
     Fawell
     Fields (TX)
     Flanagan
     Foley
     Forbes
     Fowler
     Fox
     Franks (CT)
     Franks (NJ)
     Frelinghuysen
     Frisa
     Funderburk
     Gallegly
     Ganske
     Gekas
     Geren
     Gilchrest
     Gillmor
     Gilman
     Goodlatte
     Goodling
     Goss
     Graham
     Greenwood
     Gunderson
     Gutknecht
     Hall (TX)
     Hancock
     Hansen
     Hastert
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Heineman
     Herger
     Hilleary
     Hobson
     Hoekstra
     Hoke
     Horn
     Hostettler
     Houghton
     Hunter
     Hutchinson
     Hyde
     Inglis
     Istook
     Johnson (CT)
     Johnson, Sam
     Jones
     Kasich
     Kelly
     Kim
     King
     Kingston
     Klug
     Knollenberg
     Kolbe
     LaHood
     Largent
     Latham
     LaTourette
     Laughlin
     Lazio
     Leach
     Lewis (CA)
     Lewis (KY)
     Lightfoot
     Linder
     Livingston
     LoBiondo
     Longley
     Lucas
     Manzullo
     Martini
     McCollum
     McCrery
     McDade
     McHugh
     McInnis
     McIntosh
     McKeon
     Metcalf
     Meyers
     Mica
     Miller (FL)
     Molinari
     Montgomery
     Moorhead
     Morella
     Myers
     Myrick
     Nethercutt
     Neumann
     Ney
     Norwood
     Nussle
     Oxley
     Packard
     Parker
     Paxon
     Petri
     Pombo
     Porter
     Portman
     Pryce
     Quillen
     Quinn
     Radanovich
     Ramstad
     Regula
     Riggs
     Roberts
     Rogers
     Rohrabacher
     Ros-Lehtinen
     Roth
     Roukema
     Royce
     Salmon
     Sanford
     Saxton
     Scarborough
     Schaefer
     Schiff
     Seastrand
     Sensenbrenner
     Shadegg
     Shaw
     Shays
     Skeen
     Smith (MI)
     Smith (TX)
     Smith (WA)
     Solomon
     Souder
     Spence
     Stearns
     Stockman
     Stump
     Talent
     Tate
     Tauzin
     Taylor (MS)
     Taylor (NC)
     Thomas
     Thornberry
     Tiahrt
     Torkildsen
     Upton
     Vucanovich
     Waldholtz
     Walker
     Walsh
     Wamp
     Watts (OK)
     Weldon (FL)
     Weldon (PA)
     Weller
     White
     Whitfield
     Wicker
     Wolf
     Young (AK)
     Young (FL)
     Zeliff
     Zimmer

                               NAYS--192

     Abercrombie
     Ackerman
     Andrews
     Baesler
     Baldacci
     Barcia
     Barrett (WI)
     Becerra
     Beilenson
     Bentsen
     Bevill
     Bishop
     Bonior
     Borski
     Boucher
     Brewster
     Browder
     Brown (CA)
     Brown (FL)
     Brown (OH)
     Bryant (TX)
     Cardin
     Chapman
     Clay
     Clayton
     Clement
     Clyburn
     Coleman
     Collins (IL)
     Collins (MI)
     Condit
     Conyers
     Costello
     Coyne
     Cramer
     Danner
     de la Garza
     DeFazio
     DeLauro
     Dellums
     Deutsch
     Dicks
     Dingell
     Dixon
     Doggett
     Dooley
     Doyle
     Durbin
     Edwards
     Engel
     Eshoo
     Evans
     Farr
     Fattah
     Fazio
     Fields (LA)
     Filner
     Flake
     Foglietta
     Ford
     Frank (MA)
     Frost
     Furse
     Gejdenson
     Gephardt
     Gibbons
     Gonzalez
     Gordon
     Green
     Gutierrez
     Hall (OH)
     Hamilton
     Harman
     Hastings (FL)
     Hefner
     Hilliard
     Hinchey
     Holden
     Hoyer
     Jackson-Lee
     Jacobs
     Jefferson
     Johnson (SD)
     Johnson, E. B.
     Johnston
     Kanjorski
     Kaptur
     Kennedy (MA)
     Kennedy (RI)
     Kennelly
     Kildee
     Kleczka
     Klink
     LaFalce
     Lantos
     Levin
     Lewis (GA)
     Lincoln
     Lipinski
     Lofgren
     Lowey
     Luther
     Maloney
     Manton
     Markey
     Martinez
     Mascara
     Matsui
     McCarthy
     McDermott
     McHale
     McKinney
     McNulty
     Meehan
     Meek
     Menendez
     Mfume
     Miller (CA)
     Minge
     Mink
     Moakley
     Mollohan
     Moran
     Murtha
     Nadler
     Neal
     Oberstar
     Obey
     Olver
     Ortiz
     Orton
     Owens
     Pallone
     Pastor
     Payne (NJ)
     Payne (VA)
     Pelosi
     Peterson (FL)
     Peterson (MN)
     Pickett
     Pomeroy
     Poshard
     Rahall
     Rangel
     Reed
     Richardson
     Rivers
     Roemer
     Roybal-Allard
     Rush
     Sabo
     Sanders
     Sawyer
     Schroeder
     Schumer
     Scott
     Serrano
     Sisisky
     Skaggs
     Skelton
     Slaughter
     Smith (NJ)
     Spratt
     Stark
     Stenholm
     Stokes
     Studds
     Stupak
     Tanner
     Tejeda
     Thompson
     Thornton
     Thurman
     Torres
     Torricelli
     Towns
     Traficant
     Velazquez
     Vento
     Visclosky
     Volkmer
     Ward
     Waters
     Watt (NC)
     Waxman
     Williams
     Wilson
     Wise
     Woolsey
     Wyden
     Wynn
     Yates

                             NOT VOTING--5

     Berman
     Bryant (TN)
     Rose
     Shuster
     Tucker

                              {time}  1818

  So the motion was agreed to.
  The result of the vote was announced as above recorded.
  A motion to reconsider was laid on the table.

                          ____________________