[Congressional Record (Bound Edition), Volume 145 (1999), Part 21]
[House]
[Pages 30068-30118]
[From the U.S. Government Publishing Office, www.gpo.gov]




       TICKET TO WORK AND WORK INCENTIVES IMPROVEMENT ACT OF 1999

  Mr. ARMEY submitted the following conference report and statement on 
the bill (H.R. 1180) to amend the Social Security Act to expand the 
availability of health care coverage for working individuals with 
disabilities, to establish a Ticket to Work and Self-Sufficiency 
Program in the Social Security Administration to provide such 
individuals with meaningful opportunities to work, and for other 
purposes:

                  CONFERENCE REPORT (H. Rept. 106-478)

       The committee of conference on the disagreeing votes of the 
     two Houses on the amendmentof the Senate to the bill (H.R. 
     1180), to amend the Social Security Act to expand the 
     availability of health care coverage for working individuals 
     with disabilities, to establish a Ticket to Work and Self-
     Sufficiency Program in the Social Security Administration to 
     provide such individuals with meaningful opportunities to 
     work, and for other purposes, having met, after full and free 
     conference, have agreed to recommend and do recommend to 
     their respective Houses as follows:
       That the House recede from its disagreement to the 
     amendment of the Senate and agree to the same with an 
     amendment as follows:
       In lieu of the matter proposed to be inserted by the Senate 
     amendment, insert the following:

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Ticket to 
     Work and Work Incentives Improvement Act of 1999''.
       (b) Table of Contents.--The table of contents is as 
     follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings and purposes.

  TITLE I--TICKET TO WORK AND SELF-SUFFICIENCY AND RELATED PROVISIONS

            Subtitle A--Ticket to Work and Self-Sufficiency

Sec. 101. Establishment of the Ticket to Work and Self-Sufficiency 
              Program.

             Subtitle B--Elimination of Work Disincentives

Sec. 111. Work activity standard as a basis for review of an 
              individual's disabled status.
Sec. 112. Expedited reinstatement of disability benefits.

[[Page 30069]]

     Subtitle C--Work Incentives Planning, Assistance, and Outreach

Sec. 121. Work incentives outreach program.
Sec. 122. State grants for work incentives assistance to disabled 
              beneficiaries.

        TITLE II--EXPANDED AVAILABILITY OF HEALTH CARE SERVICES

Sec. 201. Expanding State options under the medicaid program for 
              workers with disabilities.
Sec. 202. Extending medicare coverage for OASDI disability benefit 
              recipients.
Sec. 203. Grants to develop and establish State infrastructures to 
              support working individuals with disabilities.
Sec. 204. Demonstration of coverage under the medicaid program of 
              workers with potentially severe disabilities.
Sec. 205. Election by disabled beneficiaries to suspend medigap 
              insurance when covered under a group health plan.

             TITLE III--DEMONSTRATION PROJECTS AND STUDIES

Sec. 301. Extension of disability insurance program demonstration 
              project authority.
Sec. 302. Demonstration projects providing for reductions in disability 
              insurance benefits based on earnings.
Sec. 303. Studies and reports.

            TITLE IV--MISCELLANEOUS AND TECHNICAL AMENDMENTS

Sec. 401. Technical amendments relating to drug addicts and alcoholics.
Sec. 402. Treatment of prisoners.
Sec. 403. Revocation by members of the clergy of exemption from social 
              security coverage.
Sec. 404. Additional technical amendment relating to cooperative 
              research or demonstration projects under titles II and 
              XVI.
Sec. 405. Authorization for State to permit annual wage reports.
Sec. 406. Assessment on attorneys who receive their fees via the Social 
              Security Administration.
Sec. 407. Extension of authority of State medicaid fraud control units.
Sec. 408. Climate database modernization.
Sec. 409. Special allowance adjustment for student loans.
Sec. 410. Schedule for payments under SSI state supplementation 
              agreements.
Sec. 411. Bonus commodities.
Sec. 412. Simplification of definition of foster child under EIC.
Sec. 413. Delay of effective date of organ procurement and 
              transplantation network final rule.

               TITLE V--TAX RELIEF EXTENSION ACT OF 1999

Sec. 500. Short title of title.

                         Subtitle A--Extensions

Sec. 501. Allowance of nonrefundable personal credits against regular 
              and minimum tax liability.
Sec. 502. Research credit.
Sec. 503. Subpart F exemption for active financing income.
Sec. 504. Taxable income limit on percentage depletion for marginal 
              production.
Sec. 505. Work opportunity credit and welfare-to-work credit.
Sec. 506. Employer-provided educational assistance.
Sec. 507. Extension and modification of credit for producing 
              electricity from certain renewable resources.
Sec. 508. Extension of duty-free treatment under Generalized System of 
              Preferences.
Sec. 509. Extension of credit for holders of qualified zone academy 
              bonds.
Sec. 510. Extension of first-time homebuyer credit for District of 
              Columbia.
Sec. 511. Extension of expensing of environmental remediation costs.
Sec. 512. Temporary increase in amount of rum excise tax covered over 
              to Puerto Rico and Virgin Islands.

              Subtitle B--Other Time-Sensitive Provisions

Sec. 521. Advance pricing agreements treated as confidential taxpayer 
              information.
Sec. 522. Authority to postpone certain tax-related deadlines by reason 
              of Y2K failures.
Sec. 523. Inclusion of certain vaccines against streptococcus 
              pneumoniae to list of taxable vaccines.
Sec. 524. Delay in effective date of requirement for approved diesel or 
              kerosene terminals.
Sec. 525. Production flexibility contract payments.

                      Subtitle C--Revenue Offsets

                       Part I--General Provisions

Sec. 531. Modification of estimated tax safe harbor.
Sec. 532. Clarification of tax treatment of income and loss on 
              derivatives.
Sec. 533. Expansion of reporting of cancellation of indebtedness 
              income.
Sec. 534. Limitation on conversion of character of income from 
              constructive ownership transactions.
Sec. 535. Treatment of excess pension assets used for retiree health 
              benefits.
Sec. 536. Modification of installment method and repeal of installment 
              method for accrual method taxpayers.
Sec. 537. Denial of charitable contribution deduction for transfers 
              associated with split-dollar insurance arrangements.
Sec. 538. Distributions by a partnership to a corporate partner of 
              stock in another corporation.

     Part II--Provisions Relating to Real Estate Investment Trusts


  SUBPART A--TREATMENT OF INCOME AND SERVICES PROVIDED BY TAXABLE REIT 
                              SUBSIDIARIES

Sec. 541. Modifications to asset diversification test.
Sec. 542. Treatment of income and services provided by taxable REIT 
              subsidiaries.
Sec. 543. Taxable REIT subsidiary.
Sec. 544. Limitation on earnings stripping.
Sec. 545. 100 percent tax on improperly allocated amounts.
Sec. 546. Effective date.
Sec. 547. Study relating to taxable REIT subsidiaries.


                       SUBPART B--HEALTH CARE REITS

Sec. 551. Health care REITs.


      SUBPART C--CONFORMITY WITH REGULATED INVESTMENT COMPANY RULES

Sec. 556. Conformity with regulated investment company rules.


     SUBPART D--CLARIFICATION OF EXCEPTION FROM IMPERMISSIBLE TENANT 
                             SERVICE INCOME

Sec. 561. Clarification of exception for independent operators.


          SUBPART E--MODIFICATION OF EARNINGS AND PROFITS RULES

Sec. 566. Modification of earnings and profits rules.


              SUBPART F--MODIFICATION OF ESTIMATED TAX RULES

Sec. 571. Modification of estimated tax rules for closely held real 
              estate investment trusts.

     SEC. 2. FINDINGS AND PURPOSES.

       (a) Findings.--The Congress makes the following findings:
       (1) It is the policy of the United States to provide 
     assistance to individuals with disabilities to lead 
     productive work lives.
       (2) Health care is important to all Americans.
       (3) Health care is particularly important to individuals 
     with disabilities and special health care needs who often 
     cannot afford the insurance available to them through the 
     private market, are uninsurable by the plans available in the 
     private sector, and are at great risk of incurring very high 
     and economically devastating health care costs.
       (4) Americans with significant disabilities often are 
     unable to obtain health care insurance that provides coverage 
     of the services and supports that enable them to live 
     independently and enter or rejoin the workforce. Personal 
     assistance services (such as attendant services, personal 
     assistance with transportation to and from work, reader 
     services, job coaches, and related assistance) remove many of 
     the barriers between significant disability and work. 
     Coverage for such services, as well as for prescription 
     drugs, durable medical equipment, and basic health care are 
     powerful and proven tools for individuals with significant 
     disabilities to obtain and retain employment.
       (5) For individuals with disabilities, the fear of losing 
     health care and related services is one of the greatest 
     barriers keeping the individuals from maximizing their 
     employment, earning potential, and independence.
       (6) Social Security Disability Insurance and Supplemental 
     Security Income beneficiaries risk losing medicare or 
     medicaid coverage that is linked to their cash benefits, a 
     risk that is an equal, or greater, work disincentive than the 
     loss of cash benefits associated with working.
       (7) Individuals with disabilities have greater 
     opportunities for employment than ever before, aided by 
     important public policy initiatives such as the Americans 
     with Disabilities Act of 1990 (42 U.S.C. 12101 et seq.), 
     advancements in public understanding of disability, and 
     innovations in assistive technology, medical treatment, and 
     rehabilitation.
       (8) Despite such historic opportunities and the desire of 
     millions of disability recipients to work and support 
     themselves, fewer than one-half of one percent of Social 
     Security Disability Insurance and Supplemental Security 
     Income beneficiaries leave the disability rolls and return to 
     work.
       (9) In addition to the fear of loss of health care 
     coverage, beneficiaries cite financial disincentives to work 
     and earn income and lack of adequate employment training and 
     placement services as barriers to employment.
       (10) Eliminating such barriers to work by creating 
     financial incentives to work and by providing individuals 
     with disabilities real choice in obtaining the services and 
     technology they need to find, enter, and maintain employment 
     can greatly improve their short and long-term financial 
     independence and personal well-being.
       (11) In addition to the enormous advantages such changes 
     promise for individuals with disabilities, redesigning 
     government programs to help individuals with disabilities 
     return to work may result in significant savings and extend 
     the life of the Social Security Disability Insurance Trust 
     Fund.
       (12) If only an additional one-half of one percent of the 
     current Social Security Disability Insurance and Supplemental 
     Security Income recipients were to cease receiving benefits 
     as a result of employment, the savings to the Social Security 
     Trust Funds and to the Treasury in cash assistance would 
     total $3,500,000,000 over the worklife of such individuals, 
     far exceeding the cost of providing incentives and services 
     needed

[[Page 30070]]

     to assist them in entering work and achieving financial 
     independence to the best of their abilities.
       (b) Purposes.--The purposes of this Act are as follows:
       (1) To provide health care and employment preparation and 
     placement services to individuals with disabilities that will 
     enable those individuals to reduce their dependency on cash 
     benefit programs.
       (2) To encourage States to adopt the option of allowing 
     individuals with disabilities to purchase medicaid coverage 
     that is necessary to enable such individuals to maintain 
     employment.
       (3) To provide individuals with disabilities the option of 
     maintaining medicare coverage while working.
       (4) To establish a return to work ticket program that will 
     allow individuals with disabilities to seek the services 
     necessary to obtain and retain employment and reduce their 
     dependency on cash benefit programs.

  TITLE I--TICKET TO WORK AND SELF-SUFFICIENCY AND RELATED PROVISIONS

            Subtitle A--Ticket to Work and Self-Sufficiency

     SEC. 101. ESTABLISHMENT OF THE TICKET TO WORK AND SELF-
                   SUFFICIENCY PROGRAM.

       (a) In General.--Part A of title XI of the Social Security 
     Act (42 U.S.C. 1301 et seq.) is amended by adding at the end 
     the following new section:


           ``the ticket to work and self-sufficiency program

       ``Sec. 1148. (a) In General.--The Commissioner shall 
     establish a Ticket to Work and Self-Sufficiency Program, 
     under which a disabled beneficiary may use a ticket to work 
     and self-sufficiency issued by the Commissioner in accordance 
     with this section to obtain employment services, vocational 
     rehabilitation services, or other support services from an 
     employment network which is of the beneficiary's choice and 
     which is willing to provide such services to such 
     beneficiary.
       ``(b) Ticket System.--
       ``(1) Distribution of tickets.--The Commissioner may issue 
     a ticket to work and self-sufficiency to disabled 
     beneficiaries for participation in the Program.
       ``(2) Assignment of tickets.--A disabled beneficiary 
     holding a ticket to work and self-sufficiency may assign the 
     ticket to any employment network of the beneficiary's choice 
     which is serving under the Program and is willing to accept 
     the assignment.
       ``(3) Ticket terms.--A ticket issued under paragraph (1) 
     shall consist of a document which evidences the 
     Commissioner's agreement to pay (as provided in paragraph 
     (4)) an employment network, which is serving under the 
     Program and to which such ticket is assigned by the 
     beneficiary, for such employment services, vocational 
     rehabilitation services, and other support services as the 
     employment network may provide to the beneficiary.
       ``(4) Payments to employment networks.--The Commissioner 
     shall pay an employment network under the Program in 
     accordance with the outcome payment system under subsection 
     (h)(2) or under the outcome-milestone payment system under 
     subsection (h)(3) (whichever is elected pursuant to 
     subsection (h)(1)). An employment network may not request or 
     receive compensation for such services from the beneficiary.
       ``(c) State Participation.--
       ``(1) In general.--Each State agency administering or 
     supervising the administration of the State plan approved 
     under title I of the Rehabilitation Act of 1973 (29 U.S.C. 
     720 et seq.) may elect to participate in the Program as an 
     employment network with respect to a disabled beneficiary. If 
     the State agency does elect to participate in the Program, 
     the State agency also shall elect to be paid under the 
     outcome payment system or the outcome-milestone payment 
     system in accordance with subsection (h)(1). With respect to 
     a disabled beneficiary that the State agency does not elect 
     to have participate in the Program, the State agency shall be 
     paid for services provided to that beneficiary under the 
     system for payment applicable under section 222(d) and 
     subsections (d) and (e) of section 1615. The Commissioner 
     shall provide for periodic opportunities for exercising such 
     elections.
       ``(2) Effect of participation by state agency.--
       ``(A) State agencies participating.--In any case in which a 
     State agency described in paragraph (1) elects under that 
     paragraph to participate in the Program, the employment 
     services, vocational rehabilitation services, and other 
     support services which, upon assignment of tickets to work 
     and self-sufficiency, are provided to disabled beneficiaries 
     by the State agency acting as an employment network shall be 
     governed by plans for vocational rehabilitation services 
     approved under title I of the Rehabilitation Act of 1973 (29 
     U.S.C. 720 et seq.).
       ``(B) State agencies administering maternal and child 
     health services programs.--Subparagraph (A) shall not apply 
     with respect to any State agency administering a program 
     under title V of this Act.
       ``(3) Agreements between state agencies and employment 
     networks.--State agencies and employment networks shall enter 
     into agreements regarding the conditions under which services 
     will be provided when an individual is referred by an 
     employment network to a State agency for services. The 
     Commissioner shall establish by regulations the timeframe 
     within which such agreements must be entered into and the 
     mechanisms for dispute resolution between State agencies and 
     employment networks with respect to such agreements.
       ``(d) Responsibilities of the Commissioner.--
       ``(1) Selection and qualifications of program managers.--
     The Commissioner shall enter into agreements with 1 or more 
     organizations in the private or public sector for service as 
     a program manager to assist the Commissioner in administering 
     the Program. Any such program manager shall be selected by 
     means of a competitive bidding process, from among 
     organizations in the private or public sector with available 
     expertise and experience in the field of vocational 
     rehabilitation or employment services.
       ``(2) Tenure, renewal, and early termination.--Each 
     agreement entered into under paragraph (1) shall provide for 
     early termination upon failure to meet performance standards 
     which shall be specified in the agreement and which shall be 
     weighted to take into account any performance in prior terms. 
     Such performance standards shall include--
       ``(A) measures for ease of access by beneficiaries to 
     services; and
       ``(B) measures for determining the extent to which failures 
     in obtaining services for beneficiaries fall within 
     acceptable parameters, as determined by the Commissioner.
       ``(3) Preclusion from direct participation in delivery of 
     services in own service area.--Agreements under paragraph (1) 
     shall preclude--
       ``(A) direct participation by a program manager in the 
     delivery of employment services, vocational rehabilitation 
     services, or other support services to beneficiaries in the 
     service area covered by the program manager's agreement; and
       ``(B) the holding by a program manager of a financial 
     interest in an employment network or service provider which 
     provides services in a geographic area covered under the 
     program manager's agreement.
       ``(4) Selection of employment networks.--
       ``(A) In general.--The Commissioner shall select and enter 
     into agreements with employment networks for service under 
     the Program. Such employment networks shall be in addition to 
     State agencies serving as employment networks pursuant to 
     elections under subsection (c).
       ``(B) Alternate participants.--In any State where the 
     Program is being implemented, the Commissioner shall enter 
     into an agreement with any alternate participant that is 
     operating under the authority of section 222(d)(2) in the 
     State as of the date of the enactment of this section and 
     chooses to serve as an employment network under the Program.
       ``(5) Termination of agreements with employment networks.--
     The Commissioner shall terminate agreements with employment 
     networks for inadequate performance, as determined by the 
     Commissioner.
       ``(6) Quality assurance.--The Commissioner shall provide 
     for such periodic reviews as are necessary to provide for 
     effective quality assurance in the provision of services by 
     employment networks. The Commissioner shall solicit and 
     consider the views of consumers and the program manager under 
     which the employment networks serve and shall consult with 
     providers of services to develop performance measurements. 
     The Commissioner shall ensure that the results of the 
     periodic reviews are made available to beneficiaries who are 
     prospective service recipients as they select employment 
     networks. The Commissioner shall ensure that the periodic 
     surveys of beneficiaries receiving services under the Program 
     are designed to measure customer service satisfaction.
       ``(7) Dispute resolution.--The Commissioner shall provide 
     for a mechanism for resolving disputes between beneficiaries 
     and employment networks, between program managers and 
     employment networks, and between program managers and 
     providers of services. The Commissioner shall afford a party 
     to such a dispute a reasonable opportunity for a full and 
     fair review of the matter in dispute.
       ``(e) Program Managers.--
       ``(1) In general.--A program manager shall conduct tasks 
     appropriate to assist the Commissioner in carrying out the 
     Commissioner's duties in administering the Program.
       ``(2) Recruitment of employment networks.--A program 
     manager shall recruit, and recommend for selection by the 
     Commissioner, employment networks for service under the 
     Program. The program manager shall carry out such recruitment 
     and provide such recommendations, and shall monitor all 
     employment networks serving in the Program in the geographic 
     area covered under the program manager's agreement, to the 
     extent necessary and appropriate to ensure that adequate 
     choices of services are made available to beneficiaries. 
     Employment networks may serve under the Program only pursuant 
     to an agreement entered into with the Commissioner under the 
     Program incorporating the applicable provisions of this 
     section and regulations thereunder, and the program manager 
     shall provide and maintain assurances to the Commissioner 
     that payment by the Commissioner to employment networks 
     pursuant to this section is warranted based on compliance by 
     such employment networks with the terms of such agreement and 
     this section. The program manager shall not impose numerical 
     limits on the number of employment networks to be recommended 
     pursuant to this paragraph.
       ``(3) Facilitation of access by beneficiaries to employment 
     networks.--A program manager shall facilitate access by 
     beneficiaries to employment networks. The program manager 
     shall ensure that each beneficiary is allowed changes in 
     employment networks without being deemed to have rejected 
     services under

[[Page 30071]]

     the Program. When such a change occurs, the program manager 
     shall reassign the ticket based on the choice of the 
     beneficiary. Upon the request of the employment network, the 
     program manager shall make a determination of the allocation 
     of the outcome or milestone-outcome payments based on the 
     services provided by each employment network. The program 
     manager shall establish and maintain lists of employment 
     networks available to beneficiaries and shall make such lists 
     generally available to the public. The program manager shall 
     ensure that all information provided to disabled 
     beneficiaries pursuant to this paragraph is provided in 
     accessible formats.
       ``(4) Ensuring availability of adequate services.--The 
     program manager shall ensure that employment services, 
     vocational rehabilitation services, and other support 
     services are provided to beneficiaries throughout the 
     geographic area covered under the program manager's 
     agreement, including rural areas.
       ``(5) Reasonable access to services.--The program manager 
     shall take such measures as are necessary to ensure that 
     sufficient employment networks are available and that each 
     beneficiary receiving services under the Program has 
     reasonable access to employment services, vocational 
     rehabilitation services, and other support services. Services 
     provided under the Program may include case management, work 
     incentives planning, supported employment, career planning, 
     career plan development, vocational assessment, job training, 
     placement, follow-up services, and such other services as may 
     be specified by the Commissioner under the Program. The 
     program manager shall ensure that such services are available 
     in each service area.
       ``(f) Employment Networks.--
       ``(1) Qualifications for employment networks.--
       ``(A) In general.--Each employment network serving under 
     the Program shall consist of an agency or instrumentality of 
     a State (or a political subdivision thereof) or a private 
     entity, that assumes responsibility for the coordination and 
     delivery of services under the Program to individuals 
     assigning to the employment network tickets to work and self-
     sufficiency issued under subsection (b).
       ``(B) One-stop delivery systems.--An employment network 
     serving under the Program may consist of a one-stop delivery 
     system established under subtitle B of title I of the 
     Workforce Investment Act of 1998 (29 U.S.C. 2811 et seq.).
       ``(C) Compliance with selection criteria.--No employment 
     network may serve under the Program unless it meets and 
     maintains compliance with both general selection criteria 
     (such as professional and educational qualifications, where 
     applicable) and specific selection criteria (such as 
     substantial expertise and experience in providing relevant 
     employment services and supports).
       ``(D) Single or associated providers allowed.--An 
     employment network shall consist of either a single provider 
     of such services or of an association of such providers 
     organized so as to combine their resources into a single 
     entity. An employment network may meet the requirements of 
     subsection (e)(4) by providing services directly, or by 
     entering into agreements with other individuals or entities 
     providing appropriate employment services, vocational 
     rehabilitation services, or other support services.
       ``(2) Requirements relating to provision of services.--Each 
     employment network serving under the Program shall be 
     required under the terms of its agreement with the 
     Commissioner to--
       ``(A) serve prescribed service areas; and
       ``(B) take such measures as are necessary to ensure that 
     employment services, vocational rehabilitation services, and 
     other support services provided under the Program by, or 
     under agreements entered into with, the employment network 
     are provided under appropriate individual work plans that 
     meet the requirements of subsection (g).
       ``(3) Annual financial reporting.--Each employment network 
     shall meet financial reporting requirements as prescribed by 
     the Commissioner.
       ``(4) Periodic outcomes reporting.--Each employment network 
     shall prepare periodic reports, on at least an annual basis, 
     itemizing for the covered period specific outcomes achieved 
     with respect to specific services provided by the employment 
     network. Such reports shall conform to a national model 
     prescribed under this section. Each employment network shall 
     provide a copy of the latest report issued by the employment 
     network pursuant to this paragraph to each beneficiary upon 
     enrollment under the Program for services to be received 
     through such employment network. Upon issuance of each report 
     to each beneficiary, a copy of the report shall be maintained 
     in the files of the employment network. The program manager 
     shall ensure that copies of all such reports issued under 
     this paragraph are made available to the public under 
     reasonable terms.
       ``(g) Individual Work Plans.--
       ``(1) Requirements.--Each employment network shall--
       ``(A) take such measures as are necessary to ensure that 
     employment services, vocational rehabilitation services, and 
     other support services provided under the Program by, or 
     under agreements entered into with, the employment network 
     are provided under appropriate individual work plans that 
     meet the requirements of subparagraph (C);
       ``(B) develop and implement each such individual work plan, 
     in partnership with each beneficiary receiving such services, 
     in a manner that affords such beneficiary the opportunity to 
     exercise informed choice in selecting an employment goal and 
     specific services needed to achieve that employment goal;
       ``(C) ensure that each individual work plan includes at 
     least--
       ``(i) a statement of the vocational goal developed with the 
     beneficiary, including, as appropriate, goals for earnings 
     and job advancement;
       ``(ii) a statement of the services and supports that have 
     been deemed necessary for the beneficiary to accomplish that 
     goal;
       ``(iii) a statement of any terms and conditions related to 
     the provision of such services and supports; and
       ``(iv) a statement of understanding regarding the 
     beneficiary's rights under the Program (such as the right to 
     retrieve the ticket to work and self-sufficiency if the 
     beneficiary is dissatisfied with the services being provided 
     by the employment network) and remedies available to the 
     individual, including information on the availability of 
     advocacy services and assistance in resolving disputes 
     through the State grant program authorized under section 
     1150;
       ``(D) provide a beneficiary the opportunity to amend the 
     individual work plan if a change in circumstances 
     necessitates a change in the plan; and
       ``(E) make each beneficiary's individual work plan 
     available to the beneficiary in, as appropriate, an 
     accessible format chosen by the beneficiary.
       ``(2) Effective upon written approval.--A beneficiary's 
     individual work plan shall take effect upon written approval 
     by the beneficiary or a representative of the beneficiary and 
     a representative of the employment network that, in providing 
     such written approval, acknowledges assignment of the 
     beneficiary's ticket to work and self-sufficiency.
       ``(h) Employment Network Payment Systems.--
       ``(1) Election of payment system by employment networks.--
       ``(A) In general.--The Program shall provide for payment 
     authorized by the Commissioner to employment networks under 
     either an outcome payment system or an outcome-milestone 
     payment system. Each employment network shall elect which 
     payment system will be utilized by the employment network, 
     and, for such period of time as such election remains in 
     effect, the payment system so elected shall be utilized 
     exclusively in connection with such employment network 
     (except as provided in subparagraph (B)).
       ``(B) No change in method of payment for beneficiaries with 
     tickets already assigned to the employment networks.--Any 
     election of a payment system by an employment network that 
     would result in a change in the method of payment to the 
     employment network for services provided to a beneficiary who 
     is receiving services from the employment network at the time 
     of the election shall not be effective with respect to 
     payment for services provided to that beneficiary and the 
     method of payment previously selected shall continue to apply 
     with respect to such services.
       ``(2) Outcome payment system.--
       ``(A) In general.--The outcome payment system shall consist 
     of a payment structure governing employment networks electing 
     such system under paragraph (1)(A) which meets the 
     requirements of this paragraph.
       ``(B) Payments made during outcome payment period.--The 
     outcome payment system shall provide for a schedule of 
     payments to an employment network, in connection with each 
     individual who is a beneficiary, for each month, during the 
     individual's outcome payment period, for which benefits 
     (described in paragraphs (3) and (4) of subsection (k)) are 
     not payable to such individual because of work or earnings.
       ``(C) Computation of payments to employment network.--The 
     payment schedule of the outcome payment system shall be 
     designed so that--
       ``(i) the payment for each month during the outcome payment 
     period for which benefits (described in paragraphs (3) and 
     (4) of subsection (k)) are not payable is equal to a fixed 
     percentage of the payment calculation base for the calendar 
     year in which such month occurs; and
       ``(ii) such fixed percentage is set at a percentage which 
     does not exceed 40 percent.
       ``(3) Outcome-milestone payment system.--
       ``(A) In general.--The outcome-milestone payment system 
     shall consist of a payment structure governing employment 
     networks electing such system under paragraph (1)(A) which 
     meets the requirements of this paragraph.
       ``(B) Early payments upon attainment of milestones in 
     advance of outcome payment periods.--The outcome-milestone 
     payment system shall provide for 1 or more milestones, with 
     respect to beneficiaries receiving services from an 
     employment network under the Program, that are directed 
     toward the goal of permanent employment. Such milestones 
     shall form a part of a payment structure that provides, in 
     addition to payments made during outcome payment periods, 
     payments made prior to outcome payment periods in amounts 
     based on the attainment of such milestones.
       ``(C) Limitation on total payments to employment network.--
     The payment schedule of the outcome milestone payment system 
     shall be designed so that the total of the payments to the 
     employment network with respect to each beneficiary is less 
     than, on a net present value basis (using an interest rate 
     determined by the Commissioner that appropriately reflects 
     the cost of funds faced by providers), the total amount to 
     which payments to the employment network

[[Page 30072]]

     with respect to the beneficiary would be limited if the 
     employment network were paid under the outcome payment 
     system.
       ``(4) Definitions.--In this subsection:
       ``(A) Payment calculation base.--The term `payment 
     calculation base' means, for any calendar year--
       ``(i) in connection with a title II disability beneficiary, 
     the average disability insurance benefit payable under 
     section 223 for all beneficiaries for months during the 
     preceding calendar year; and
       ``(ii) in connection with a title XVI disability 
     beneficiary (who is not concurrently a title II disability 
     beneficiary), the average payment of supplemental security 
     income benefits based on disability payable under title XVI 
     (excluding State supplementation) for months during the 
     preceding calendar year to all beneficiaries who have 
     attained 18 years of age but have not attained 65 years of 
     age.
       ``(B) Outcome payment period.--The term `outcome payment 
     period' means, in connection with any individual who had 
     assigned a ticket to work and self-sufficiency to an 
     employment network under the Program, a period--
       ``(i) beginning with the first month, ending after the date 
     on which such ticket was assigned to the employment network, 
     for which benefits (described in paragraphs (3) and (4) of 
     subsection (k)) are not payable to such individual by reason 
     of engagement in substantial gainful activity or by reason of 
     earnings from work activity; and
       ``(ii) ending with the 60th month (consecutive or 
     otherwise), ending after such date, for which such benefits 
     are not payable to such individual by reason of engagement in 
     substantial gainful activity or by reason of earnings from 
     work activity.
       ``(5) Periodic review and alterations of prescribed 
     schedules.--
       ``(A) Percentages and periods.--The Commissioner shall 
     periodically review the percentage specified in paragraph 
     (2)(C), the total payments permissible under paragraph 
     (3)(C), and the period of time specified in paragraph (4)(B) 
     to determine whether such percentages, such permissible 
     payments, and such period provide an adequate incentive for 
     employment networks to assist beneficiaries to enter the 
     workforce, while providing for appropriate economies. The 
     Commissioner may alter such percentage, such total 
     permissible payments, or such period of time to the extent 
     that the Commissioner determines, on the basis of the 
     Commissioner's review under this paragraph, that such an 
     alteration would better provide the incentive and economies 
     described in the preceding sentence.
       ``(B) Number and amounts of milestone payments.--The 
     Commissioner shall periodically review the number and amounts 
     of milestone payments established by the Commissioner 
     pursuant to this section to determine whether they provide an 
     adequate incentive for employment networks to assist 
     beneficiaries to enter the workforce, taking into account 
     information provided to the Commissioner by program managers, 
     the Ticket to Work and Work Incentives Advisory Panel 
     established by section 101(f) of the Ticket to Work and Work 
     Incentives Improvement Act of 1999, and other reliable 
     sources. The Commissioner may from time to time alter the 
     number and amounts of milestone payments initially 
     established by the Commissioner pursuant to this section to 
     the extent that the Commissioner determines that such an 
     alteration would allow an adequate incentive for employment 
     networks to assist beneficiaries to enter the workforce. Such 
     alteration shall be based on information provided to the 
     Commissioner by program managers, the Ticket to Work and Work 
     Incentives Advisory Panel established by section 101(f) of 
     the Ticket to Work and Work Incentives Improvement Act of 
     1999, or other reliable sources.
       ``(C) Report on the adequacy of incentives.--The 
     Commissioner shall submit to the Congress not later than 36 
     months after the date of the enactment of the Ticket to Work 
     and Work Incentives Improvement Act of 1999 a report with 
     recommendations for a method or methods to adjust payment 
     rates under subparagraphs (A) and (B), that would ensure 
     adequate incentives for the provision of services by 
     employment networks of--
       ``(i) individuals with a need for ongoing support and 
     services;
       ``(ii) individuals with a need for high-cost 
     accommodations;
       ``(iii) individuals who earn a subminimum wage; and
       ``(iv) individuals who work and receive partial cash 
     benefits.
     The Commissioner shall consult with the Ticket to Work and 
     Work Incentives Advisory Panel established under section 
     101(f) of the Ticket to Work and Work Incentives Improvement 
     Act of 1999 during the development and evaluation of the 
     study. The Commissioner shall implement the necessary 
     adjusted payment rates prior to full implementation of the 
     Ticket to Work and Self-Sufficiency Program.
       ``(i) Suspension of Disability Reviews.--During any period 
     for which an individual is using, as defined by the 
     Commissioner, a ticket to work and self-sufficiency issued 
     under this section, the Commissioner (and any applicable 
     State agency) may not initiate a continuing disability review 
     or other review under section 221 of whether the individual 
     is or is not under a disability or a review under title XVI 
     similar to any such review under section 221.
       ``(j) Authorizations.--
       ``(1) Payments to employment networks.--
       ``(A) Title ii disability beneficiaries.--There are 
     authorized to be transferred from the Federal Old-Age and 
     Survivors Insurance Trust Fund and the Federal Disability 
     Insurance Trust Fund each fiscal year such sums as may be 
     necessary to make payments to employment networks under this 
     section. Money paid from the Trust Funds under this section 
     with respect to title II disability beneficiaries who are 
     entitled to benefits under section 223 or who are entitled to 
     benefits under section 202(d) on the basis of the wages and 
     self-employment income of such beneficiaries, shall be 
     charged to the Federal Disability Insurance Trust Fund, and 
     all other money paid from the Trust Funds under this section 
     shall be charged to the Federal Old-Age and Survivors 
     Insurance Trust Fund.
       ``(B) Title xvi disability beneficiaries.--Amounts 
     authorized to be appropriated to the Social Security 
     Administration under section 1601 (as in effect pursuant to 
     the amendments made by section 301 of the Social Security 
     Amendments of 1972) shall include amounts necessary to carry 
     out the provisions of this section with respect to title XVI 
     disability beneficiaries.
       ``(2) Administrative expenses.--The costs of administering 
     this section (other than payments to employment networks) 
     shall be paid from amounts made available for the 
     administration of title II and amounts made available for the 
     administration of title XVI, and shall be allocated among 
     such amounts as appropriate.
       ``(k) Definitions.--In this section:
       ``(1) Commissioner.--The term `Commissioner' means the 
     Commissioner of Social Security.
       ``(2) Disabled beneficiary.--The term `disabled 
     beneficiary' means a title II disability beneficiary or a 
     title XVI disability beneficiary.
       ``(3) Title ii disability beneficiary.--The term `title II 
     disability beneficiary' means an individual entitled to 
     disability insurance benefits under section 223 or to monthly 
     insurance benefits under section 202 based on such 
     individual's disability (as defined in section 223(d)). An 
     individual is a title II disability beneficiary for each 
     month for which such individual is entitled to such benefits.
       ``(4) Title xvi disability beneficiary.--The term `title 
     XVI disability beneficiary' means an individual eligible for 
     supplemental security income benefits under title XVI on the 
     basis of blindness (within the meaning of section 1614(a)(2)) 
     or disability (within the meaning of section 1614(a)(3)). An 
     individual is a title XVI disability beneficiary for each 
     month for which such individual is eligible for such 
     benefits.
       ``(5) Supplemental security income benefit.--The term 
     `supplemental security income benefit under title XVI' means 
     a cash benefit under section 1611 or 1619(a), and does not 
     include a State supplementary payment, administered federally 
     or otherwise.
       ``(l) Regulations.--Not later than 1 year after the date of 
     the enactment of the Ticket to Work and Work Incentives 
     Improvement Act of 1999, the Commissioner shall prescribe 
     such regulations as are necessary to carry out the provisions 
     of this section.''.
       (b) Conforming Amendments.--
       (1) Amendments to title ii.--
       (A) Section 221(i) of the Social Security Act (42 U.S.C. 
     421(i)) is amended by adding at the end the following new 
     paragraph:
       ``(5) For suspension of reviews under this subsection in 
     the case of an individual using a ticket to work and self-
     sufficiency, see section 1148(i).''.
       (B) Section 222(a) of such Act (42 U.S.C. 422(a)) is 
     repealed.
       (C) Section 222(b) of such Act (42 U.S.C. 422(b)) is 
     repealed.
       (D) Section 225(b)(1) of such Act (42 U.S.C. 425(b)(1)) is 
     amended by striking ``a program of vocational rehabilitation 
     services'' and inserting ``a program consisting of the Ticket 
     to Work and Self-Sufficiency Program under section 1148 or 
     another program of vocational rehabilitation services, 
     employment services, or other support services''.
       (2) Amendments to title xvi.--
       (A) Section 1615(a) of such Act (42 U.S.C. 1382d(a)) is 
     amended to read as follows:
       ``Sec. 1615. (a) In the case of any blind or disabled 
     individual who--
       ``(1) has not attained age 16; and
       ``(2) with respect to whom benefits are paid under this 
     title,
     the Commissioner of Social Security shall make provision for 
     referral of such individual to the appropriate State agency 
     administering the State program under title V.''.
       (B) Section 1615(c) of such Act (42 U.S.C. 1382d(c)) is 
     repealed.
       (C) Section 1631(a)(6)(A) of such Act (42 U.S.C. 
     1383(a)(6)(A)) is amended by striking ``a program of 
     vocational rehabilitation services'' and inserting ``a 
     program consisting of the Ticket to Work and Self-Sufficiency 
     Program under section 1148 or another program of vocational 
     rehabilitation services, employment services, or other 
     support services''.
       (D) Section 1633(c) of such Act (42 U.S.C. 1383b(c)) is 
     amended--
       (i) by inserting ``(1)'' after ``(c)''; and
       (ii) by adding at the end the following new paragraph:
       ``(2) For suspension of continuing disability reviews and 
     other reviews under this title similar to reviews under 
     section 221 in the case of an individual using a ticket to 
     work and self-sufficiency, see section 1148(i).''.
       (c) Effective Date.--Subject to subsection (d), the 
     amendments made by subsections (a) and (b) shall take effect 
     with the first month following 1 year after the date of the 
     enactment of this Act.

[[Page 30073]]

       (d) Graduated Implementation of Program.--
       (1) In general.--Not later than 1 year after the date of 
     the enactment of this Act, the Commissioner of Social 
     Security shall commence implementation of the amendments made 
     by this section (other than paragraphs (1)(C) and (2)(B) of 
     subsection (b)) in graduated phases at phase-in sites 
     selected by the Commissioner. Such phase-in sites shall be 
     selected so as to ensure, prior to full implementation of the 
     Ticket to Work and Self-Sufficiency Program, the development 
     and refinement of referral processes, payment systems, 
     computer linkages, management information systems, and 
     administrative processes necessary to provide for full 
     implementation of such amendments. Subsection (c) shall apply 
     with respect to paragraphs (1)(C) and (2)(B) of subsection 
     (b) without regard to this subsection.
       (2) Requirements.--Implementation of the Program at each 
     phase-in site shall be carried out on a wide enough scale to 
     permit a thorough evaluation of the alternative methods under 
     consideration, so as to ensure that the most efficacious 
     methods are determined and in place for full implementation 
     of the Program on a timely basis.
       (3) Full implementation.--The Commissioner shall ensure 
     that ability to provide tickets and services to individuals 
     under the Program exists in every State as soon as 
     practicable on or after the effective date specified in 
     subsection (c) but not later than 3 years after such date.
       (4) Ongoing evaluation of program.--
       (A) In general.--The Commissioner shall provide for 
     independent evaluations to assess the effectiveness of the 
     activities carried out under this section and the amendments 
     made thereby. Such evaluations shall address the cost-
     effectiveness of such activities, as well as the effects of 
     this section and the amendments made thereby on work outcomes 
     for beneficiaries receiving tickets to work and self-
     sufficiency under the Program.
       (B) Consultation.--Evaluations shall be conducted under 
     this paragraph after receiving relevant advice from experts 
     in the fields of disability, vocational rehabilitation, and 
     program evaluation and individuals using tickets to work and 
     self-sufficiency under the Program and in consultation with 
     the Ticket to Work and Work Incentives Advisory Panel 
     established under section 101(f) of this Act, the Comptroller 
     General of the United States, other agencies of the Federal 
     Government, and private organizations with appropriate 
     expertise.
       (C) Methodology.--
       (i) Implementation.--The Commissioner, in consultation with 
     the Ticket to Work and Work Incentives Advisory Panel 
     established under section 101(f) of this Act, shall ensure 
     that plans for evaluations and data collection methods under 
     the Program are appropriately designed to obtain detailed 
     employment information.
       (ii) Specific matters to be addressed.--Each such 
     evaluation shall address (but is not limited to)--

       (I) the annual cost (including net cost) of the Program and 
     the annual cost (including net cost) that would have been 
     incurred in the absence of the Program;
       (II) the determinants of return to work, including the 
     characteristics of beneficiaries in receipt of tickets under 
     the Program;
       (III) the types of employment services, vocational 
     rehabilitation services, and other support services furnished 
     to beneficiaries in receipt of tickets under the Program who 
     return to work and to those who do not return to work;
       (IV) the duration of employment services, vocational 
     rehabilitation services, and other support services furnished 
     to beneficiaries in receipt of tickets under the Program who 
     return to work and the duration of such services furnished to 
     those who do not return to work and the cost to employment 
     networks of furnishing such services;
       (V) the employment outcomes, including wages, occupations, 
     benefits, and hours worked, of beneficiaries who return to 
     work after receiving tickets under the Program and those who 
     return to work without receiving such tickets;
       (VI) the characteristics of individuals in possession of 
     tickets under the Program who are not accepted for services 
     and, to the extent reasonably determinable, the reasons for 
     which such beneficiaries were not accepted for services;
       (VII) the characteristics of providers whose services are 
     provided within an employment network under the Program;
       (VIII) the extent (if any) to which employment networks 
     display a greater willingness to provide services to 
     beneficiaries with a range of disabilities;
       (IX) the characteristics (including employment outcomes) of 
     those beneficiaries who receive services under the outcome 
     payment system and of those beneficiaries who receive 
     services under the outcome-milestone payment system;
       (X) measures of satisfaction among beneficiaries in receipt 
     of tickets under the Program; and
       (XI) reasons for (including comments solicited from 
     beneficiaries regarding) their choice not to use their 
     tickets or their inability to return to work despite the use 
     of their tickets.

       (D) Periodic evaluation reports.--Following the close of 
     the third and fifth fiscal years ending after the effective 
     date under subsection (c), and prior to the close of the 
     seventh fiscal year ending after such date, the Commissioner 
     shall transmit to the Committee on Ways and Means of the 
     House of Representatives and the Committee on Finance of the 
     Senate a report containing the Commissioner's evaluation of 
     the progress of activities conducted under the provisions of 
     this section and the amendments made thereby. Each such 
     report shall set forth the Commissioner's evaluation of the 
     extent to which the Program has been successful and the 
     Commissioner's conclusions on whether or how the Program 
     should be modified. Each such report shall include such data, 
     findings, materials, and recommendations as the Commissioner 
     may consider appropriate.
       (5) Extent of state's right of first refusal in advance of 
     full implementation of amendments in such state.--
       (A) In general.--In the case of any State in which the 
     amendments made by subsection (a) have not been fully 
     implemented pursuant to this subsection, the Commissioner 
     shall determine by regulation the extent to which--
       (i) the requirement under section 222(a) of the Social 
     Security Act (42 U.S.C. 422(a)) for prompt referrals to a 
     State agency; and
       (ii) the authority of the Commissioner under section 
     222(d)(2) of such Act (42 U.S.C. 422(d)(2)) to provide 
     vocational rehabilitation services in such State by agreement 
     or contract with other public or private agencies, 
     organizations, institutions, or individuals,
     shall apply in such State.
       (B) Existing agreements.--Nothing in subparagraph (A) or 
     the amendments made by subsection (a) shall be construed to 
     limit, impede, or otherwise affect any agreement entered into 
     pursuant to section 222(d)(2) of the Social Security Act (42 
     U.S.C. 422(d)(2)) before the date of the enactment of this 
     Act with respect to services provided pursuant to such 
     agreement to beneficiaries receiving services under such 
     agreement as of such date, except with respect to services 
     (if any) to be provided after 3 years after the effective 
     date provided in subsection (c).
       (e) Specific Regulations Required.--
       (1) In general.--The Commissioner of Social Security shall 
     prescribe such regulations as are necessary to implement the 
     amendments made by this section.
       (2) Specific matters to be included in regulations.--The 
     matters which shall be addressed in such regulations shall 
     include--
       (A) the form and manner in which tickets to work and self-
     sufficiency may be distributed to beneficiaries pursuant to 
     section 1148(b)(1) of the Social Security Act;
       (B) the format and wording of such tickets, which shall 
     incorporate by reference any contractual terms governing 
     service by employment networks under the Program;
       (C) the form and manner in which State agencies may elect 
     participation in the Ticket to Work and Self-Sufficiency 
     Program pursuant to section 1148(c)(1) of such Act and 
     provision for periodic opportunities for exercising such 
     elections;
       (D) the status of State agencies under section 1148(c)(1) 
     of such Act at the time that State agencies exercise 
     elections under that section;
       (E) the terms of agreements to be entered into with program 
     managers pursuant to section 1148(d) of such Act, including--
       (i) the terms by which program managers are precluded from 
     direct participation in the delivery of services pursuant to 
     section 1148(d)(3) of such Act;
       (ii) standards which must be met by quality assurance 
     measures referred to in paragraph (6) of section 1148(d) of 
     such Act and methods of recruitment of employment networks 
     utilized pursuant to paragraph (2) of section 1148(e) of such 
     Act; and
       (iii) the format under which dispute resolution will 
     operate under section 1148(d)(7) of such Act;
       (F) the terms of agreements to be entered into with 
     employment networks pursuant to section 1148(d)(4) of such 
     Act, including--
       (i) the manner in which service areas are specified 
     pursuant to section 1148(f)(2)(A) of such Act;
       (ii) the general selection criteria and the specific 
     selection criteria which are applicable to employment 
     networks under section 1148(f)(1)(C) of such Act in selecting 
     service providers;
       (iii) specific requirements relating to annual financial 
     reporting by employment networks pursuant to section 
     1148(f)(3) of such Act; and
       (iv) the national model to which periodic outcomes 
     reporting by employment networks must conform under section 
     1148(f)(4) of such Act;
       (G) standards which must be met by individual work plans 
     pursuant to section 1148(g) of such Act;
       (H) standards which must be met by payment systems required 
     under section 1148(h) of such Act, including--
       (i) the form and manner in which elections by employment 
     networks of payment systems are to be exercised pursuant to 
     section 1148(h)(1)(A) of such Act;
       (ii) the terms which must be met by an outcome payment 
     system under section 1148(h)(2) of such Act;
       (iii) the terms which must be met by an outcome-milestone 
     payment system under section 1148(h)(3) of such Act;
       (iv) any revision of the percentage specified in paragraph 
     (2)(C) of section 1148(h) of such Act or the period of time 
     specified in paragraph (4)(B) of such section 1148(h) of such 
     Act; and
       (v) annual oversight procedures for such systems; and
       (I) procedures for effective oversight of the Program by 
     the Commissioner of Social Security, including periodic 
     reviews and reporting requirements.
       (f) The Ticket to Work and Work Incentives Advisory 
     Panel.--

[[Page 30074]]

       (1) Establishment.--There is established within the Social 
     Security Administration a panel to be known as the ``Ticket 
     to Work and Work Incentives Advisory Panel'' (in this 
     subsection referred to as the ``Panel'').
       (2) Duties of panel.--It shall be the duty of the Panel 
     to--
       (A) advise the President, the Congress, and the 
     Commissioner of Social Security on issues related to work 
     incentives programs, planning, and assistance for individuals 
     with disabilities, including work incentive provisions under 
     titles II, XI, XVI, XVIII, and XIX of the Social Security Act 
     (42 U.S.C. 401 et seq., 1301 et seq., 1381 et seq., 1395 et 
     seq., 1396 et seq.); and
       (B) with respect to the Ticket to Work and Self-Sufficiency 
     Program established under section 1148 of such Act--
       (i) advise the Commissioner of Social Security with respect 
     to establishing phase-in sites for such Program and fully 
     implementing the Program thereafter, the refinement of access 
     of disabled beneficiaries to employment networks, payment 
     systems, and management information systems, and advise the 
     Commissioner whether such measures are being taken to the 
     extent necessary to ensure the success of the Program;
       (ii) advise the Commissioner regarding the most effective 
     designs for research and demonstration projects associated 
     with the Program or conducted pursuant to section 302 of this 
     Act;
       (iii) advise the Commissioner on the development of 
     performance measurements relating to quality assurance under 
     section 1148(d)(6) of the Social Security Act; and
       (iv) furnish progress reports on the Program to the 
     Commissioner and each House of Congress.
       (3) Membership.--
       (A) Number and appointment.--The Panel shall be composed of 
     12 members as follows:
       (i) 4 members appointed by the President, not more than 2 
     of whom may be of the same political party;
       (ii) 2 members appointed by the Speaker of the House of 
     Representatives, in consultation with the Chairman of the 
     Committee on Ways and Means of the House of Representatives;
       (iii) 2 members appointed by the minority leader of the 
     House of Representatives, in consultation with the ranking 
     member of the Committee on Ways and Means of the House of 
     Representatives;
       (iv) 2 members appointed by the majority leader of the 
     Senate, in consultation with the Chairman of the Committee on 
     Finance of the Senate; and
       (v) 2 members appointed by the minority leader of the 
     Senate, in consultation with the ranking member of the 
     Committee on Finance of the Senate.
       (B) Representation.--
       (i) In general.--The members appointed under subparagraph 
     (A) shall have experience or expert knowledge as a recipient, 
     provider, employer, or employee in the fields of, or related 
     to, employment services, vocational rehabilitation services, 
     and other support services.
       (ii) Requirement.--At least one-half of the members 
     appointed under subparagraph (A) shall be individuals with 
     disabilities, or representatives of individuals with 
     disabilities, with consideration given to current or former 
     title II disability beneficiaries or title XVI disability 
     beneficiaries (as such terms are defined in section 1148(k) 
     of the Social Security Act (as added by subsection (a)).
       (C) Terms.--
       (i) In general.--Each member shall be appointed for a term 
     of 4 years (or, if less, for the remaining life of the 
     Panel), except as provided in clauses (ii) and (iii). The 
     initial members shall be appointed not later than 90 days 
     after the date of the enactment of this Act.
       (ii) Terms of initial appointees.--Of the members first 
     appointed under each clause of subparagraph (A), as 
     designated by the appointing authority for each such clause--

       (I) one-half of such members shall be appointed for a term 
     of 2 years; and
       (II) the remaining members shall be appointed for a term of 
     4 years.

       (iii) 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 Panel shall be filled in the manner 
     in which the original appointment was made.
       (D) Basic pay.--Members shall each be paid at a rate, and 
     in a manner, that is consistent with guidelines established 
     under section 7 of the Federal Advisory Committee Act (5 
     U.S.C. App.).
       (E) Travel expenses.--Each member shall receive travel 
     expenses, including per diem in lieu of subsistence, in 
     accordance with sections 5702 and 5703 of title 5, United 
     States Code.
       (F) Quorum.--8 members of the Panel shall constitute a 
     quorum but a lesser number may hold hearings.
       (G) Chairperson.--The Chairperson of the Panel shall be 
     designated by the President. The term of office of the 
     Chairperson shall be 4 years.
       (H) Meetings.--The Panel shall meet at least quarterly and 
     at other times at the call of the Chairperson or a majority 
     of its members.
       (4) Director and staff of panel; experts and consultants.--
       (A) Director.--The Panel shall have a Director who shall be 
     appointed by the Chairperson, and paid at a rate, and in a 
     manner, that is consistent with guidelines established under 
     section 7 of the Federal Advisory Committee Act (5 U.S.C. 
     App.).
       (B) Staff.--Subject to rules prescribed by the Commissioner 
     of Social Security, the Director may appoint and fix the pay 
     of additional personnel as the Director considers 
     appropriate.
       (C) Experts and consultants.--Subject to rules prescribed 
     by the Commissioner of Social Security, the Director may 
     procure temporary and intermittent services under section 
     3109(b) of title 5, United States Code.
       (D) Staff of federal agencies.--Upon request of the Panel, 
     the head of any Federal department or agency may detail, on a 
     reimbursable basis, any of the personnel of that department 
     or agency to the Panel to assist it in carrying out its 
     duties under this Act.
       (5) Powers of panel.--
       (A) Hearings and sessions.--The Panel may, for the purpose 
     of carrying out its duties under this subsection, hold such 
     hearings, sit and act at such times and places, and take such 
     testimony and evidence as the Panel considers appropriate.
       (B) Powers of members and agents.--Any member or agent of 
     the Panel may, if authorized by the Panel, take any action 
     which the Panel is authorized to take by this section.
       (C) Mails.--The Panel may use the United States mails in 
     the same manner and under the same conditions as other 
     departments and agencies of the United States.
       (6) Reports.--
       (A) Interim reports.--The Panel shall submit to the 
     President and the Congress interim reports at least annually.
       (B) Final report.--The Panel shall transmit a final report 
     to the President and the Congress not later than eight years 
     after the date of the enactment of this Act. The final report 
     shall contain a detailed statement of the findings and 
     conclusions of the Panel, together with its recommendations 
     for legislation and administrative actions which the Panel 
     considers appropriate.
       (7) Termination.--The Panel shall terminate 30 days after 
     the date of the submission of its final report under 
     paragraph (6)(B).
       (8) Authorization of appropriations.--There are authorized 
     to be appropriated from the Federal Old-Age and Survivors 
     Insurance Trust Fund, the Federal Disability Insurance Trust 
     Fund, and the general fund of the Treasury, as appropriate, 
     such sums as are necessary to carry out this subsection.

             Subtitle B--Elimination of Work Disincentives

     SEC. 111. WORK ACTIVITY STANDARD AS A BASIS FOR REVIEW OF AN 
                   INDIVIDUAL'S DISABLED STATUS.

       (a) In General.--Section 221 of the Social Security Act (42 
     U.S.C. 421) is amended by adding at the end the following new 
     subsection:
       ``(m)(1) In any case where an individual entitled to 
     disability insurance benefits under section 223 or to monthly 
     insurance benefits under section 202 based on such 
     individual's disability (as defined in section 223(d)) has 
     received such benefits for at least 24 months--
       ``(A) no continuing disability review conducted by the 
     Commissioner may be scheduled for the individual solely as a 
     result of the individual's work activity;
       ``(B) no work activity engaged in by the individual may be 
     used as evidence that the individual is no longer disabled; 
     and
       ``(C) no cessation of work activity by the individual may 
     give rise to a presumption that the individual is unable to 
     engage in work.
       ``(2) An individual to which paragraph (1) applies shall 
     continue to be subject to--
       ``(A) continuing disability reviews on a regularly 
     scheduled basis that is not triggered by work; and
       ``(B) termination of benefits under this title in the event 
     that the individual has earnings that exceed the level of 
     earnings established by the Commissioner to represent 
     substantial gainful activity.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on January 1, 2002.

     SEC. 112. EXPEDITED REINSTATEMENT OF DISABILITY BENEFITS.

       (a) OASDI Benefits.--Section 223 of the Social Security Act 
     (42 U.S.C. 423) is amended--
       (1) by redesignating subsection (i) as subsection (j); and
       (2) by inserting after subsection (h) the following new 
     subsection:

                     ``Reinstatement of Entitlement

       ``(i)(1)(A) Entitlement to benefits described in 
     subparagraph (B)(i)(I) shall be reinstated in any case where 
     the Commissioner determines that an individual described in 
     subparagraph (B) has filed a request for reinstatement 
     meeting the requirements of paragraph (2)(A) during the 
     period prescribed in subparagraph (C). Reinstatement of such 
     entitlement shall be in accordance with the terms of this 
     subsection.
       ``(B) An individual is described in this subparagraph if--
       ``(i) prior to the month in which the individual files a 
     request for reinstatement--
       ``(I) the individual was entitled to benefits under this 
     section or section 202 on the basis of disability pursuant to 
     an application filed therefor; and
       ``(II) such entitlement terminated due to the performance 
     of substantial gainful activity;
       ``(ii) the individual is under a disability and the 
     physical or mental impairment that is the basis for the 
     finding of disability is the same as (or related to) the 
     physical or mental impairment that was the basis for the 
     finding of disability that gave rise to the entitlement 
     described in clause (i); and

[[Page 30075]]

       ``(iii) the individual's disability renders the individual 
     unable to perform substantial gainful activity.
       ``(C)(i) Except as provided in clause (ii), the period 
     prescribed in this subparagraph with respect to an individual 
     is 60 consecutive months beginning with the month following 
     the most recent month for which the individual was entitled 
     to a benefit described in subparagraph (B)(i)(I) prior to the 
     entitlement termination described in subparagraph (B)(i)(II).
       ``(ii) In the case of an individual who fails to file a 
     reinstatement request within the period prescribed in clause 
     (i), the Commissioner may extend the period if the 
     Commissioner determines that the individual had good cause 
     for the failure to so file.
       ``(2)(A)(i) A request for reinstatement shall be filed in 
     such form, and containing such information, as the 
     Commissioner may prescribe.
       ``(ii) A request for reinstatement shall include express 
     declarations by the individual that the individual meets the 
     requirements specified in clauses (ii) and (iii) of paragraph 
     (1)(B).
       ``(B) A request for reinstatement filed in accordance with 
     subparagraph (A) may constitute an application for benefits 
     in the case of any individual who the Commissioner determines 
     is not entitled to reinstated benefits under this subsection.
       ``(3) In determining whether an individual meets the 
     requirements of paragraph (1)(B)(ii), the provisions of 
     subsection (f) shall apply.
       ``(4)(A)(i) Subject to clause (ii), entitlement to benefits 
     reinstated under this subsection shall commence with the 
     benefit payable for the month in which a request for 
     reinstatement is filed.
       ``(ii) An individual whose entitlement to a benefit for any 
     month would have been reinstated under this subsection had 
     the individual filed a request for reinstatement before the 
     end of such month shall be entitled to such benefit for such 
     month if such request for reinstatement is filed before the 
     end of the twelfth month immediately succeeding such month.
       ``(B)(i) Subject to clauses (ii) and (iii), the amount of 
     the benefit payable for any month pursuant to the 
     reinstatement of entitlement under this subsection shall be 
     determined in accordance with the provisions of this title.
       ``(ii) For purposes of computing the primary insurance 
     amount of an individual whose entitlement to benefits under 
     this section is reinstated under this subsection, the date of 
     onset of the individual's disability shall be the date of 
     onset used in determining the individual's most recent period 
     of disability arising in connection with such benefits 
     payable on the basis of an application.
       ``(iii) Benefits under this section or section 202 payable 
     for any month pursuant to a request for reinstatement filed 
     in accordance with paragraph (2) shall be reduced by the 
     amount of any provisional benefit paid to such individual for 
     such month under paragraph (7).
       ``(C) No benefit shall be payable pursuant to an 
     entitlement reinstated under this subsection to an individual 
     for any month in which the individual engages in substantial 
     gainful activity.
       ``(D) The entitlement of any individual that is reinstated 
     under this subsection shall end with the benefits payable for 
     the month preceding whichever of the following months is the 
     earliest:
       ``(i) The month in which the individual dies.
       ``(ii) The month in which the individual attains retirement 
     age.
       ``(iii) The third month following the month in which the 
     individual's disability ceases.
       ``(5) Whenever an individual's entitlement to benefits 
     under this section is reinstated under this subsection, 
     entitlement to benefits payable on the basis of such 
     individual's wages and self-employment income may be 
     reinstated with respect to any person previously entitled to 
     such benefits on the basis of an application if the 
     Commissioner determines that such person satisfies all the 
     requirements for entitlement to such benefits except 
     requirements related to the filing of an application. The 
     provisions of paragraph (4) shall apply to the reinstated 
     entitlement of any such person to the same extent that they 
     apply to the reinstated entitlement of such individual.
       ``(6) An individual to whom benefits are payable under this 
     section or section 202 pursuant to a reinstatement of 
     entitlement under this subsection for 24 months (whether or 
     not consecutive) shall, with respect to benefits so payable 
     after such twenty-fourth month, be deemed for purposes of 
     paragraph (1)(B)(i)(I) and the determination, if appropriate, 
     of the termination month in accordance with subsection (a)(1) 
     of this section, or subsection (d)(1), (e)(1), or (f)(1) of 
     section 202, to be entitled to such benefits on the basis of 
     an application filed therefor.
       ``(7)(A) An individual described in paragraph (1)(B) who 
     files a request for reinstatement in accordance with the 
     provisions of paragraph (2)(A) shall be entitled to 
     provisional benefits payable in accordance with this 
     paragraph, unless the Commissioner determines that the 
     individual does not meet the requirements of paragraph 
     (1)(B)(i) or that the individual's declaration under 
     paragraph (2)(A)(ii) is false. Any such determination by the 
     Commissioner shall be final and not subject to review under 
     subsection (b) or (g) of section 205.
       ``(B) The amount of a provisional benefit for a month shall 
     equal the amount of the last monthly benefit payable to the 
     individual under this title on the basis of an application 
     increased by an amount equal to the amount, if any, by which 
     such last monthly benefit would have been increased as a 
     result of the operation of section 215(i).
       ``(C)(i) Provisional benefits shall begin with the month in 
     which a request for reinstatement is filed in accordance with 
     paragraph (2)(A).
       ``(ii) Provisional benefits shall end with the earliest 
     of--
       ``(I) the month in which the Commissioner makes a 
     determination regarding the individual's entitlement to 
     reinstated benefits;
       ``(II) the fifth month following the month described in 
     clause (i);
       ``(III) the month in which the individual performs 
     substantial gainful activity; or
       ``(IV) the month in which the Commissioner determines that 
     the individual does not meet the requirements of paragraph 
     (1)(B)(i) or that the individual's declaration made in 
     accordance with paragraph (2)(A)(ii) is false.
       ``(D) In any case in which the Commissioner determines that 
     an individual is not entitled to reinstated benefits, any 
     provisional benefits paid to the individual under this 
     paragraph shall not be subject to recovery as an overpayment 
     unless the Commissioner determines that the individual knew 
     or should have known that the individual did not meet the 
     requirements of paragraph (1)(B).''.
       (b) SSI Benefits.--
       (1) In general.--Section 1631 of the Social Security Act 
     (42 U.S.C. 1383) is amended by adding at the end the 
     following new subsection:

 ``Reinstatement of Eligibility on the Basis of Blindness or Disability

       ``(p)(1)(A) Eligibility for benefits under this title shall 
     be reinstated in any case where the Commissioner determines 
     that an individual described in subparagraph (B) has filed a 
     request for reinstatement meeting the requirements of 
     paragraph (2)(A) during the period prescribed in subparagraph 
     (C). Reinstatement of eligibility shall be in accordance with 
     the terms of this subsection.
       ``(B) An individual is described in this subparagraph if--
       ``(i) prior to the month in which the individual files a 
     request for reinstatement--
       ``(I) the individual was eligible for benefits under this 
     title on the basis of blindness or disability pursuant to an 
     application filed therefor; and
       ``(II) the individual thereafter was ineligible for such 
     benefits due to earned income (or earned and unearned income) 
     for a period of 12 or more consecutive months;
       ``(ii) the individual is blind or disabled and the physical 
     or mental impairment that is the basis for the finding of 
     blindness or disability is the same as (or related to) the 
     physical or mental impairment that was the basis for the 
     finding of blindness or disability that gave rise to the 
     eligibility described in clause (i);
       ``(iii) the individual's blindness or disability renders 
     the individual unable to perform substantial gainful 
     activity; and
       ``(iv) the individual satisfies the nonmedical requirements 
     for eligibility for benefits under this title.
       ``(C)(i) Except as provided in clause (ii), the period 
     prescribed in this subparagraph with respect to an individual 
     is 60 consecutive months beginning with the month following 
     the most recent month for which the individual was eligible 
     for a benefit under this title (including section 1619) prior 
     to the period of ineligibility described in subparagraph 
     (B)(i)(II).
       ``(ii) In the case of an individual who fails to file a 
     reinstatement request within the period prescribed in clause 
     (i), the Commissioner may extend the period if the 
     Commissioner determines that the individual had good cause 
     for the failure to so file.
       ``(2)(A)(i) A request for reinstatement shall be filed in 
     such form, and containing such information, as the 
     Commissioner may prescribe.
       ``(ii) A request for reinstatement shall include express 
     declarations by the individual that the individual meets the 
     requirements specified in clauses (ii) through (iv) of 
     paragraph (1)(B).
       ``(B) A request for reinstatement filed in accordance with 
     subparagraph (A) may constitute an application for benefits 
     in the case of any individual who the Commissioner determines 
     is not eligible for reinstated benefits under this 
     subsection.
       ``(3) In determining whether an individual meets the 
     requirements of paragraph (1)(B)(ii), the provisions of 
     section 1614(a)(4) shall apply.
       ``(4)(A) Eligibility for benefits reinstated under this 
     subsection shall commence with the benefit payable for the 
     month following the month in which a request for 
     reinstatement is filed.
       ``(B)(i) Subject to clause (ii), the amount of the benefit 
     payable for any month pursuant to the reinstatement of 
     eligibility under this subsection shall be determined in 
     accordance with the provisions of this title.
       ``(ii) The benefit under this title payable for any month 
     pursuant to a request for reinstatement filed in accordance 
     with paragraph (2) shall be reduced by the amount of any 
     provisional benefit paid to such individual for such month 
     under paragraph (7).
       ``(C) Except as otherwise provided in this subsection, 
     eligibility for benefits under this title reinstated pursuant 
     to a request filed under paragraph (2) shall be subject to 
     the same terms and conditions as eligibility established 
     pursuant to an application filed therefor.
       ``(5) Whenever an individual's eligibility for benefits 
     under this title is reinstated under this subsection, 
     eligibility for such benefits shall be reinstated with 
     respect to the individual's spouse if such spouse was 
     previously an eligible spouse of the individual under this 
     title and the Commissioner determines that such spouse 
     satisfies all the requirements for eligibility for such

[[Page 30076]]

     benefits except requirements related to the filing of an 
     application. The provisions of paragraph (4) shall apply to 
     the reinstated eligibility of the spouse to the same extent 
     that they apply to the reinstated eligibility of such 
     individual.
       ``(6) An individual to whom benefits are payable under this 
     title pursuant to a reinstatement of eligibility under this 
     subsection for twenty-four months (whether or not 
     consecutive) shall, with respect to benefits so payable after 
     such twenty-fourth month, be deemed for purposes of paragraph 
     (1)(B)(i)(I) to be eligible for such benefits on the basis of 
     an application filed therefor.
       ``(7)(A) An individual described in paragraph (1)(B) who 
     files a request for reinstatement in accordance with the 
     provisions of paragraph (2)(A) shall be eligible for 
     provisional benefits payable in accordance with this 
     paragraph, unless the Commissioner determines that the 
     individual does not meet the requirements of paragraph 
     (1)(B)(i) or that the individual's declaration under 
     paragraph (2)(A)(ii) is false. Any such determination by the 
     Commissioner shall be final and not subject to review under 
     paragraph (1) or (3) of subsection (c).
       ``(B)(i) Except as otherwise provided in clause (ii), the 
     amount of a provisional benefit for a month shall equal the 
     amount of the monthly benefit that would be payable to an 
     eligible individual under this title with the same kind and 
     amount of income.
       ``(ii) If the individual has a spouse who was previously an 
     eligible spouse of the individual under this title and the 
     Commissioner determines that such spouse satisfies all the 
     requirements of section 1614(b) except requirements related 
     to the filing of an application, the amount of a provisional 
     benefit for a month shall equal the amount of the monthly 
     benefit that would be payable to an eligible individual and 
     eligible spouse under this title with the same kind and 
     amount of income.
       ``(C)(i) Provisional benefits shall begin with the month 
     following the month in which a request for reinstatement is 
     filed in accordance with paragraph (2)(A).
       ``(ii) Provisional benefits shall end with the earliest 
     of--
       ``(I) the month in which the Commissioner makes a 
     determination regarding the individual's eligibility for 
     reinstated benefits;
       ``(II) the fifth month following the month for which 
     provisional benefits are first payable under clause (i); or
       ``(III) the month in which the Commissioner determines that 
     the individual does not meet the requirements of paragraph 
     (1)(B)(i) or that the individual's declaration made in 
     accordance with paragraph (2)(A)(ii) is false.
       ``(D) In any case in which the Commissioner determines that 
     an individual is not eligible for reinstated benefits, any 
     provisional benefits paid to the individual under this 
     paragraph shall not be subject to recovery as an overpayment 
     unless the Commissioner determines that the individual knew 
     or should have known that the individual did not meet the 
     requirements of paragraph (1)(B).
       ``(8) For purposes of this subsection other than paragraph 
     (7), the term `benefits under this title' includes State 
     supplementary payments made pursuant to an agreement under 
     section 1616(a) of this Act or section 212(b) of Public Law 
     93-66.''.
       (2) Conforming amendments.--
       (A) Section 1631(j)(1) of such Act (42 U.S.C. 1383(j)(1)) 
     is amended by striking the period and inserting ``, or has 
     filed a request for reinstatement of eligibility under 
     subsection (p)(2) and been determined to be eligible for 
     reinstatement.''.
       (B) Section 1631(j)(2)(A)(i)(I) of such Act (42 U.S.C. 
     1383(j)(2)(A)(i)(I)) is amended by inserting ``(other than 
     pursuant to a request for reinstatement under subsection 
     (p))'' after ``eligible''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     take effect on the first day of the thirteenth month 
     beginning after the date of the enactment of this Act.
       (2) Limitation.--No benefit shall be payable under title II 
     or XVI on the basis of a request for reinstatement filed 
     under section 223(i) or 1631(p) of the Social Security Act 
     (42 U.S.C. 423(i), 1383(p)) before the effective date 
     described in paragraph (1).

     Subtitle C--Work Incentives Planning, Assistance, and Outreach

     SEC. 121. WORK INCENTIVES OUTREACH PROGRAM.

       Part A of title XI of the Social Security Act (42 U.S.C. 
     1301 et seq.), as amended by section 101 of this Act, is 
     amended by adding after section 1148 the following new 
     section:


                   ``work incentives outreach program

       ``Sec. 1149. (a) Establishment.--
       ``(1) In general.--The Commissioner, in consultation with 
     the Ticket to Work and Work Incentives Advisory Panel 
     established under section 101(f) of the Ticket to Work and 
     Work Incentives Improvement Act of 1999, shall establish a 
     community-based work incentives planning and assistance 
     program for the purpose of disseminating accurate information 
     to disabled beneficiaries on work incentives programs and 
     issues related to such programs.
       ``(2) Grants, cooperative agreements, contracts, and 
     outreach.--Under the program established under this section, 
     the Commissioner shall--
       ``(A) establish a competitive program of grants, 
     cooperative agreements, or contracts to provide benefits 
     planning and assistance, including information on the 
     availability of protection and advocacy services, to disabled 
     beneficiaries, including individuals participating in the 
     Ticket to Work and Self-Sufficiency Program established under 
     section 1148, the program established under section 1619, and 
     other programs that are designed to encourage disabled 
     beneficiaries to work;
       ``(B) conduct directly, or through grants, cooperative 
     agreements, or contracts, ongoing outreach efforts to 
     disabled beneficiaries (and to the families of such 
     beneficiaries) who are potentially eligible to participate in 
     Federal or State work incentive programs that are designed to 
     assist disabled beneficiaries to work, including--
       ``(i) preparing and disseminating information explaining 
     such programs; and
       ``(ii) working in cooperation with other Federal, State, 
     and private agencies and nonprofit organizations that serve 
     disabled beneficiaries, and with agencies and organizations 
     that focus on vocational rehabilitation and work-related 
     training and counseling;
       ``(C) establish a corps of trained, accessible, and 
     responsive work incentives specialists within the Social 
     Security Administration who will specialize in disability 
     work incentives under titles II and XVI for the purpose of 
     disseminating accurate information with respect to inquiries 
     and issues relating to work incentives to--
       ``(i) disabled beneficiaries;
       ``(ii) benefit applicants under titles II and XVI; and
       ``(iii) individuals or entities awarded grants under 
     subparagraphs (A) or (B); and
       ``(D) provide--
       ``(i) training for work incentives specialists and 
     individuals providing planning assistance described in 
     subparagraph (C); and
       ``(ii) technical assistance to organizations and entities 
     that are designed to encourage disabled beneficiaries to 
     return to work.
       ``(3) Coordination with other programs.--The 
     responsibilities of the Commissioner established under this 
     section shall be coordinated with other public and private 
     programs that provide information and assistance regarding 
     rehabilitation services and independent living supports and 
     benefits planning for disabled beneficiaries including the 
     program under section 1619, the plans for achieving self-
     support program (PASS), and any other Federal or State work 
     incentives programs that are designed to assist disabled 
     beneficiaries, including educational agencies that provide 
     information and assistance regarding rehabilitation, school-
     to-work programs, transition services (as defined in, and 
     provided in accordance with, the Individuals with 
     Disabilities Education Act (20 U.S.C. 1400 et seq.)), a one-
     stop delivery system established under subtitle B of title I 
     of the Workforce Investment Act of 1998 (29 U.S.C. 2811 et 
     seq.), and other services.
       ``(b) Conditions.--
       ``(1) Selection of entities.--
       ``(A) Application.--An entity shall submit an application 
     for a grant, cooperative agreement, or contract to provide 
     benefits planning and assistance to the Commissioner at such 
     time, in such manner, and containing such information as the 
     Commissioner may determine is necessary to meet the 
     requirements of this section.
       ``(B) Statewideness.--The Commissioner shall ensure that 
     the planning, assistance, and information described in 
     paragraph (2) shall be available on a statewide basis.
       ``(C) Eligibility of states and private organizations.--
       ``(i) In general.--The Commissioner may award a grant, 
     cooperative agreement, or contract under this section to a 
     State or a private agency or organization (other than Social 
     Security Administration Field Offices and the State agency 
     administering the State medicaid program under title XIX, 
     including any agency or entity described in clause (ii), that 
     the Commissioner determines is qualified to provide the 
     planning, assistance, and information described in paragraph 
     (2)).
       ``(ii) Agencies and entities described.--The agencies and 
     entities described in this clause are the following:

       ``(I) Any public or private agency or organization 
     (including Centers for Independent Living established under 
     title VII of the Rehabilitation Act of 1973 (29 U.S.C. 796 et 
     seq.), protection and advocacy organizations, client 
     assistance programs established in accordance with section 
     112 of the Rehabilitation Act of 1973 (29 U.S.C. 732), and 
     State Developmental Disabilities Councils established in 
     accordance with section 124 of the Developmental Disabilities 
     Assistance and Bill of Rights Act (42 U.S.C. 6024)) that the 
     Commissioner determines satisfies the requirements of this 
     section.
       ``(II) The State agency administering the State program 
     funded under part A of title IV.

       ``(D) Exclusion for conflict of interest.--The Commissioner 
     may not award a grant, cooperative agreement, or contract 
     under this section to any entity that the Commissioner 
     determines would have a conflict of interest if the entity 
     were to receive a grant, cooperative agreement, or contract 
     under this section.
       ``(2) Services provided.--A recipient of a grant, 
     cooperative agreement, or contract to provide benefits 
     planning and assistance shall select individuals who will act 
     as planners and provide information, guidance, and planning 
     to disabled beneficiaries on the--
       ``(A) availability and interrelation of any Federal or 
     State work incentives programs designed to assist disabled 
     beneficiaries that the individual may be eligible to 
     participate in;
       ``(B) adequacy of any health benefits coverage that may be 
     offered by an employer of the individual and the extent to 
     which other health

[[Page 30077]]

     benefits coverage may be available to the individual; and
       ``(C) availability of protection and advocacy services for 
     disabled beneficiaries and how to access such services.
       ``(3) Amount of grants, cooperative agreements, or 
     contracts.--
       ``(A) Based on population of disabled beneficiaries.--
     Subject to subparagraph (B), the Commissioner shall award a 
     grant, cooperative agreement, or contract under this section 
     to an entity based on the percentage of the population of the 
     State where the entity is located who are disabled 
     beneficiaries.
       ``(B) Limitations.--
       ``(i) Per grant.--No entity shall receive a grant, 
     cooperative agreement, or contract under this section for a 
     fiscal year that is less than $50,000 or more than $300,000.
       ``(ii) Total amount for all grants, cooperative agreements, 
     and contracts.--The total amount of all grants, cooperative 
     agreements, and contracts awarded under this section for a 
     fiscal year may not exceed $23,000,000.
       ``(4) Allocation of costs.--The costs of carrying out this 
     section shall be paid from amounts made available for the 
     administration of title II and amounts made available for the 
     administration of title XVI, and shall be allocated among 
     those amounts as appropriate.
       ``(c) Definitions.--In this section:
       ``(1) Commissioner.--The term `Commissioner' means the 
     Commissioner of Social Security.
       ``(2) Disabled beneficiary.--The term `disabled 
     beneficiary' has the meaning given that term in section 
     1148(k)(2).
       ``(d) Authorization of Appropriations.--There are 
     authorized to be appropriated to carry out this section 
     $23,000,000 for each of the fiscal years 2000 through 
     2004.''.

     SEC. 122. STATE GRANTS FOR WORK INCENTIVES ASSISTANCE TO 
                   DISABLED BENEFICIARIES.

       Part A of title XI of the Social Security Act (42 U.S.C. 
     1301 et seq.), as amended by section 121 of this Act, is 
     amended by adding after section 1149 the following new 
     section:


``state grants for work incentives assistance to disabled beneficiaries

       ``Sec. 1150. (a) In General.--Subject to subsection (c), 
     the Commissioner may make payments in each State to the 
     protection and advocacy system established pursuant to part C 
     of title I of the Developmental Disabilities Assistance and 
     Bill of Rights Act (42 U.S.C. 6041 et seq.) for the purpose 
     of providing services to disabled beneficiaries.
       ``(b) Services Provided.--Services provided to disabled 
     beneficiaries pursuant to a payment made under this section 
     may include--
       ``(1) information and advice about obtaining vocational 
     rehabilitation and employment services; and
       ``(2) advocacy or other services that a disabled 
     beneficiary may need to secure or regain gainful employment.
       ``(c) Application.--In order to receive payments under this 
     section, a protection and advocacy system shall submit an 
     application to the Commissioner, at such time, in such form 
     and manner, and accompanied by such information and 
     assurances as the Commissioner may require.
       ``(d) Amount of Payments.--
       ``(1) In general.--Subject to the amount appropriated for a 
     fiscal year for making payments under this section, a 
     protection and advocacy system shall not be paid an amount 
     that is less than--
       ``(A) in the case of a protection and advocacy system 
     located in a State (including the District of Columbia and 
     Puerto Rico) other than Guam, American Samoa, the United 
     States Virgin Islands, and the Commonwealth of the Northern 
     Mariana Islands, the greater of--
       ``(i) $100,000; or
       ``(ii) \1/3\ of 1 percent of the amount available for 
     payments under this section; and
       ``(B) in the case of a protection and advocacy system 
     located in Guam, American Samoa, the United States Virgin 
     Islands, and the Commonwealth of the Northern Mariana 
     Islands, $50,000.
       ``(2) Inflation adjustment.--For each fiscal year in which 
     the total amount appropriated to carry out this section 
     exceeds the total amount appropriated to carry out this 
     section in the preceding fiscal year, the Commissioner shall 
     increase each minimum payment under subparagraphs (A) and (B) 
     of paragraph (1) by a percentage equal to the percentage 
     increase in the total amount so appropriated to carry out 
     this section.
       ``(e) Annual Report.--Each protection and advocacy system 
     that receives a payment under this section shall submit an 
     annual report to the Commissioner and the Ticket to Work and 
     Work Incentives Advisory Panel established under section 
     101(f) of the Ticket to Work and Work Incentives Improvement 
     Act of 1999 on the services provided to individuals by the 
     system.
       ``(f) Funding.--
       ``(1) Allocation of payments.--Payments under this section 
     shall be made from amounts made available for the 
     administration of title II and amounts made available for the 
     administration of title XVI, and shall be allocated among 
     those amounts as appropriate.
       ``(2) Carryover.--Any amounts allotted for payment to a 
     protection and advocacy system under this section for a 
     fiscal year shall remain available for payment to or on 
     behalf of the protection and advocacy system until the end of 
     the succeeding fiscal year.
       ``(g) Definitions.--In this section:
       ``(1) Commissioner.--The term `Commissioner' means the 
     Commissioner of Social Security.
       ``(2) Disabled beneficiary.--The term `disabled 
     beneficiary' has the meaning given that term in section 
     1148(k)(2).
       ``(3) Protection and advocacy system.--The term `protection 
     and advocacy system' means a protection and advocacy system 
     established pursuant to part C of title I of the 
     Developmental Disabilities Assistance and Bill of Rights Act 
     (42 U.S.C. 6041 et seq.).
       ``(h) Authorization of Appropriations.--There are 
     authorized to be appropriated to carry out this section 
     $7,000,000 for each of the fiscal years 2000 through 2004.''.

        TITLE II--EXPANDED AVAILABILITY OF HEALTH CARE SERVICES

     SEC. 201. EXPANDING STATE OPTIONS UNDER THE MEDICAID PROGRAM 
                   FOR WORKERS WITH DISABILITIES.

       (a) In General.--
       (1) State option to eliminate income, assets, and resource 
     limitations for workers with disabilities buying into 
     medicaid.--Section 1902(a)(10)(A)(ii) of the Social Security 
     Act (42 U.S.C. 1396a(a)(10)(A)(ii)) is amended--
       (A) in subclause (XIII), by striking ``or'' at the end;
       (B) in subclause (XIV), by adding ``or'' at the end; and
       (C) by adding at the end the following new subclause:

       ``(XV) who, but for earnings in excess of the limit 
     established under section 1905(q)(2)(B), would be considered 
     to be receiving supplemental security income, who is at least 
     16, but less than 65, years of age, and whose assets, 
     resources, and earned or unearned income (or both) do not 
     exceed such limitations (if any) as the State may 
     establish;''.

       (2) State option to provide opportunity for employed 
     individuals with a medically improved disability to buy into 
     medicaid.--
       (A) Eligibility.--Section 1902(a)(10) (A)(ii) of the Social 
     Security Act (42 U.S.C. 1396a(a)(10)(A)(ii)), as amended by 
     paragraph (1), is amended--
       (i) in subclause (XIV), by striking ``or'' at the end;
       (ii) in subclause (XV), by adding ``or'' at the end; and
       (iii) by adding at the end the following new subclause:

       ``(XVI) who are employed individuals with a medically 
     improved disability described in section 1905(v)(1) and whose 
     assets, resources, and earned or unearned income (or both) do 
     not exceed such limitations (if any) as the State may 
     establish, but only if the State provides medical assistance 
     to individuals described in subclause (XV);''.

       (B) Definition of employed individuals with a medically 
     improved disability.--Section 1905 of the Social Security Act 
     (42 U.S.C. 1396d) is amended by adding at the end the 
     following new subsection:
       ``(v)(1) The term `employed individual with a medically 
     improved disability' means an individual who--
       ``(A) is at least 16, but less than 65, years of age;
       ``(B) is employed (as defined in paragraph (2));
       ``(C) ceases to be eligible for medical assistance under 
     section 1902(a)(10)(A)(ii)(XV) because the individual, by 
     reason of medical improvement, is determined at the time of a 
     regularly scheduled continuing disability review to no longer 
     be eligible for benefits under section 223(d) or 1614(a)(3); 
     and
       ``(D) continues to have a severe medically determinable 
     impairment, as determined under regulations of the Secretary.
       ``(2) For purposes of paragraph (1), an individual is 
     considered to be `employed' if the individual--
       ``(A) is earning at least the applicable minimum wage 
     requirement under section 6 of the Fair Labor Standards Act 
     (29 U.S.C. 206) and working at least 40 hours per month; or
       ``(B) is engaged in a work effort that meets substantial 
     and reasonable threshold criteria for hours of work, wages, 
     or other measures, as defined by the State and approved by 
     the Secretary.''.
       (C) Conforming amendment.--Section 1905(a) of such Act (42 
     U.S.C. 1396d(a)) is amended in the matter preceding paragraph 
     (1)--
       (i) in clause (x), by striking ``or'' at the end;
       (ii) in clause (xi), by adding ``or'' at the end; and
       (iii) by inserting after clause (xi), the following new 
     clause:
       ``(xii) employed individuals with a medically improved 
     disability (as defined in subsection (v)),''.
       (3) State authority to impose income-related premiums and 
     cost-sharing.--Section 1916 of such Act (42 U.S.C. 1396o) is 
     amended--
       (A) in subsection (a), by striking ``The State plan'' and 
     inserting ``Subject to subsection (g), the State plan''; and
       (B) by adding at the end the following new subsection:
       ``(g) With respect to individuals provided medical 
     assistance only under subclause (XV) or (XVI) of section 
     1902(a)(10)(A)(ii)--
       ``(1) a State may (in a uniform manner for individuals 
     described in either such subclause)--
       ``(A) require such individuals to pay premiums or other 
     cost-sharing charges set on a sliding scale based on income 
     that the State may determine; and
       ``(B) require payment of 100 percent of such premiums for 
     such year in the case of such an individual who has income 
     for a year that exceeds 250 percent of the income official 
     poverty line (referred to in subsection (c)(1)) applicable

[[Page 30078]]

     to a family of the size involved, except that in the case of 
     such an individual who has income for a year that does not 
     exceed 450 percent of such poverty line, such requirement may 
     only apply to the extent such premiums do not exceed 7.5 
     percent of such income; and
       ``(2) such State shall require payment of 100 percent of 
     such premiums for a year by such an individual whose adjusted 
     gross income (as defined in section 62 of the Internal 
     Revenue Code of 1986) for such year exceeds $75,000, except 
     that a State may choose to subsidize such premiums by using 
     State funds which may not be federally matched under this 
     title.
     In the case of any calendar year beginning after 2000, the 
     dollar amount specified in paragraph (2) shall be increased 
     in accordance with the provisions of section 
     215(i)(2)(A)(ii).''.
       (4) Prohibition against supplantation of state funds and 
     state failure to maintain effort.--Section 1903(i) of such 
     Act (42 U.S.C. 1396b(i)) is amended--
       (A) by striking the period at the end of paragraph (19) and 
     inserting ``; or''; and
       (B) by inserting after such paragraph the following new 
     paragraph:
       ``(20) with respect to amounts expended for medical 
     assistance provided to an individual described in subclause 
     (XV) or (XVI) of section 1902(a)(10)(A)(ii) for a fiscal year 
     unless the State demonstrates to the satisfaction of the 
     Secretary that the level of State funds expended for such 
     fiscal year for programs to enable working individuals with 
     disabilities to work (other than for such medical assistance) 
     is not less than the level expended for such programs during 
     the most recent State fiscal year ending before the date of 
     the enactment of this paragraph.''.
       (b) Conforming Amendments.--Section 1903(f)(4) of the 
     Social Security Act (42 U.S.C. 1396b(f)(4) is amended in the 
     matter preceding subparagraph (A) by inserting 
     ``1902(a)(10)(A)(ii)(XV), 1902(a)(10)(A)(ii)(XVI),'' before 
     ``1905(p)(1)''.
       (c) GAO Report.--Not later than 3 years after the date of 
     the enactment of this Act, the Comptroller General of the 
     United States shall submit a report to the Congress regarding 
     the amendments made by this section that examines--
       (1) the extent to which higher health care costs for 
     individuals with disabilities at higher income levels deter 
     employment or progress in employment;
       (2) whether such individuals have health insurance coverage 
     or could benefit from the State option established under such 
     amendments to provide a medicaid buy-in; and
       (3) how the States are exercising such option, including--
       (A) how such States are exercising the flexibility afforded 
     them with regard to income disregards;
       (B) what income and premium levels have been set;
       (C) the degree to which States are subsidizing premiums 
     above the dollar amount specified in section 1916(g)(2) of 
     the Social Security Act (42 U.S.C. 1396o(g)(2)); and
       (D) the extent to which there exists any crowd-out effect.
       (d) Effective Date.--The amendments made by this section 
     apply to medical assistance for items and services furnished 
     on or after October 1, 2000.

     SEC. 202. EXTENDING MEDICARE COVERAGE FOR OASDI DISABILITY 
                   BENEFIT RECIPIENTS.

       (a) In General.--The next to last sentence of section 
     226(b) of the Social Security Act (42 U.S.C. 426) is amended 
     by striking ``24'' and inserting ``78''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall be effective on and after October 1, 2000.
       (c) GAO Report.--Not later than 5 years after the date of 
     the enactment of this Act, the Comptroller General of the 
     United States shall submit a report to the Congress that--
       (1) examines the effectiveness and cost of the amendment 
     made by subsection (a);
       (2) examines the necessity and effectiveness of providing 
     continuation of medicare coverage under section 226(b) of the 
     Social Security Act (42 U.S.C. 426(b)) to individuals whose 
     annual income exceeds the contribution and benefit base (as 
     determined under section 230 of such Act (42 U.S.C. 430));
       (3) examines the viability of providing the continuation of 
     medicare coverage under such section 226(b) based on a 
     sliding scale premium for individuals whose annual income 
     exceeds such contribution and benefit base;
       (4) examines the viability of providing the continuation of 
     medicare coverage under such section 226(b) based on a 
     premium buy-in by the beneficiary's employer in lieu of 
     coverage under private health insurance;
       (5) examines the interrelation between the use of the 
     continuation of medicare coverage under such section 226(b) 
     and the use of private health insurance coverage by 
     individuals during the extended period; and
       (6) recommends such legislative or administrative changes 
     relating to the continuation of medicare coverage for 
     recipients of social security disability benefits as the 
     Comptroller General determines are appropriate.

     SEC. 203. GRANTS TO DEVELOP AND ESTABLISH STATE 
                   INFRASTRUCTURES TO SUPPORT WORKING INDIVIDUALS 
                   WITH DISABILITIES.

       (a) Establishment.--
       (1) In general.--The Secretary of Health and Human Services 
     (in this section referred to as the ``Secretary'') shall 
     award grants described in subsection (b) to States to support 
     the design, establishment, and operation of State 
     infrastructures that provide items and services to support 
     working individuals with disabilities.
       (2) Application.--In order to be eligible for an award of a 
     grant under this section, a State shall submit an application 
     to the Secretary at such time, in such manner, and containing 
     such information as the Secretary shall require.
       (3) Definition of state.--In this section, the term 
     ``State'' means each of the 50 States, the District of 
     Columbia, Puerto Rico, Guam, the United States Virgin 
     Islands, American Samoa, and the Commonwealth of the Northern 
     Mariana Islands.
       (b) Grants for Infrastructure and Outreach.--
       (1) In general.--Out of the funds appropriated under 
     subsection (e), the Secretary shall award grants to States 
     to--
       (A) support the establishment, implementation, and 
     operation of the State infrastructures described in 
     subsection (a); and
       (B) conduct outreach campaigns regarding the existence of 
     such infrastructures.
       (2) Eligibility for grants.--
       (A) In general.--No State may receive a grant under this 
     subsection unless the State demonstrates to the satisfaction 
     of the Secretary that the State makes personal assistance 
     services available under the State plan under title XIX of 
     the Social Security Act (42 U.S.C. 1396 et seq.) to the 
     extent necessary to enable individuals with disabilities to 
     remain employed, including individuals described in section 
     1902(a)(10)(A)(ii)(XIII) of such Act (42 U.S.C. 
     1396a(a)(10)(A)(ii)(XIII)) if the State has elected to 
     provide medical assistance under such plan to such 
     individuals.
       (B) Definitions.--In this section:
       (i) Employed.--The term ``employed'' means--

       (I) earning at least the applicable minimum wage 
     requirement under section 6 of the Fair Labor Standards Act 
     (29 U.S.C. 206) and working at least 40 hours per month; or
       (II) being engaged in a work effort that meets substantial 
     and reasonable threshold criteria for hours of work, wages, 
     or other measures, as defined and approved by the Secretary.

       (ii) Personal assistance services.--The term ``personal 
     assistance services'' means a range of services, provided by 
     1 or more persons, designed to assist an individual with a 
     disability to perform daily activities on and off the job 
     that the individual would typically perform if the individual 
     did not have a disability. Such services shall be designed to 
     increase the individual's control in life and ability to 
     perform everyday activities on or off the job.
       (3) Determination of awards.--
       (A) In general.--Subject to subparagraph (B), the Secretary 
     shall develop a methodology for awarding grants to States 
     under this section for a fiscal year in a manner that--
        (i) rewards States for their efforts in encouraging 
     individuals described in paragraph (2)(A) to be employed; and
       (ii) does not provide a State that has not elected to 
     provide medical assistance under title XIX of the Social 
     Security Act to individuals described in section 
     1902(a)(10)(A)(ii)(XIII) of that Act (42 U.S.C. 
     1396a(a)(10)(A)(ii)(XIII)) with proportionally more funds for 
     a fiscal year than a State that has exercised such election.
       (B) Award limits.--
       (i) Minimum awards.--

       (I) In general.--Subject to subclause (II), no State with 
     an approved application under this section shall receive a 
     grant for a fiscal year that is less than $500,000.
       (II) Pro rata reductions.--If the funds appropriated under 
     subsection (e) for a fiscal year are not sufficient to pay 
     each State with an application approved under this section 
     the minimum amount described in subclause (I), the Secretary 
     shall pay each such State an amount equal to the pro rata 
     share of the amount made available.

       (ii) Maximum awards.--

       (I) States that elected optional medicaid eligibility.--No 
     State that has an application that has been approved under 
     this section and that has elected to provide medical 
     assistance under title XIX of the Social Security Act to 
     individuals described in section 1902(a)(10)(A)(ii)(XIII) of 
     such Act (42 U.S.C. 1396a(a)(10)(A)(ii)(XIII)) shall receive 
     a grant for a fiscal year that exceeds 10 percent of the 
     total expenditures by the State (including the reimbursed 
     Federal share of such expenditures) for medical assistance 
     provided under such title for such individuals, as estimated 
     by the State and approved by the Secretary.

       (II) Other states.--The Secretary shall determine, 
     consistent with the limit described in subclause (I), a 
     maximum award limit for a grant for a fiscal year for a State 
     that has an application that has been approved under this 
     section but that has not elected to provide medical 
     assistance under title XIX of the Social Security Act to 
     individuals described in section 1902(a)(10)(A)(ii)(XIII) of 
     that Act (42 U.S.C. 1396a(a)(10)(A)(ii)(XIII)).

       (c) Availability of Funds.--
       (1) Funds awarded to states.--Funds awarded to a State 
     under a grant made under this section for a fiscal year shall 
     remain available until expended.
       (2) Funds not awarded to states.--Funds not awarded to 
     States in the fiscal year for which they are appropriated 
     shall remain available in succeeding fiscal years for 
     awarding by the Secretary.
       (d) Annual Report.--A State that is awarded a grant under 
     this section shall submit an annual report to the Secretary 
     on the use of funds provided under the grant. Each report 
     shall include the percentage increase in the number of

[[Page 30079]]

     title II disability beneficiaries, as defined in section 
     1148(k)(3) of the Social Security Act (as added by section 
     101(a) of this Act) in the State, and title XVI disability 
     beneficiaries, as defined in section 1148(k)(4) of the Social 
     Security Act (as so added) in the State who return to work.
       (e) Appropriation.--
       (1) In general.--Out of any funds in the Treasury not 
     otherwise appropriated, there is appropriated to make grants 
     under this section--
       (A) for fiscal year 2001, $20,000,000;
       (B) for fiscal year 2002, $25,000,000;
       (C) for fiscal year 2003, $30,000,000;
       (D) for fiscal year 2004, $35,000,000;
       (E) for fiscal year 2005, $40,000,000; and
       (F) for each of fiscal years 2006 through 2011, the amount 
     appropriated for the preceding fiscal year increased by the 
     percentage increase (if any) in the Consumer Price Index for 
     All Urban Consumers (United States city average) for the 
     preceding fiscal year.
       (2) Budget authority.--This subsection constitutes budget 
     authority in advance of appropriations Acts and represents 
     the obligation of the Federal Government to provide for the 
     payment of the amounts appropriated under paragraph (1).
       (f) Recommendation.--Not later than October 1, 2010, the 
     Secretary, in consultation with the Ticket to Work and Work 
     Incentives Advisory Panel established by section 101(f) of 
     this Act, shall submit a recommendation to the Committee on 
     Commerce of the House of Representatives and the Committee on 
     Finance of the Senate regarding whether the grant program 
     established under this section should be continued after 
     fiscal year 2011.

     SEC. 204. DEMONSTRATION OF COVERAGE UNDER THE MEDICAID 
                   PROGRAM OF WORKERS WITH POTENTIALLY SEVERE 
                   DISABILITIES.

       (a) State Application.--A State may apply to the Secretary 
     of Health and Human Services (in this section referred to as 
     the ``Secretary'') for approval of a demonstration project 
     (in this section referred to as a ``demonstration project'') 
     under which up to a specified maximum number of individuals 
     who are workers with a potentially severe disability (as 
     defined in subsection (b)(1)) are provided medical assistance 
     equal to--
       (1) that provided under section 1905(a) of the Social 
     Security Act (42 U.S.C. 1396d(a)) to individuals described in 
     section 1902(a)(10)(A)(ii)(XIII) of that Act (42 U.S.C. 
     1396a(a)(10)(A)(ii)(XIII)); or
       (2) in the case of a State that has not elected to provide 
     medical assistance under that section to such individuals, 
     such medical assistance as the Secretary determines is an 
     appropriate equivalent to the medical assistance described in 
     paragraph (1).
       (b) Worker With a Potentially Severe Disability Defined.--
     For purposes of this section--
       (1) In general.--The term ``worker with a potentially 
     severe disability'' means, with respect to a demonstration 
     project, an individual who--
       (A) is at least 16, but less than 65, years of age;
       (B) has a specific physical or mental impairment that, as 
     defined by the State under the demonstration project, is 
     reasonably expected, but for the receipt of items and 
     services described in section 1905(a) of the Social Security 
     Act (42 U.S.C. 1396d(a)), to become blind or disabled (as 
     defined under section 1614(a) of the Social Security Act (42 
     U.S.C. 1382c(a))); and
       (C) is employed (as defined in paragraph (2)).
       (2) Definition of employed.--An individual is considered to 
     be ``employed'' if the individual--
       (A) is earning at least the applicable minimum wage 
     requirement under section 6 of the Fair Labor Standards Act 
     (29 U.S.C. 206) and working at least 40 hours per month; or
       (B) is engaged in a work effort that meets substantial and 
     reasonable threshold criteria for hours of work, wages, or 
     other measures, as defined under the demonstration project 
     and approved by the Secretary.
       (c) Approval of Demonstration Projects.--
       (1) In general.--Subject to paragraph (3), the Secretary 
     shall approve applications under subsection (a) that meet the 
     requirements of paragraph (2) and such additional terms and 
     conditions as the Secretary may require. The Secretary may 
     waive the requirement of section 1902(a)(1) of the Social 
     Security Act (42 U.S.C. 1396a(a)(1)) to allow for sub-State 
     demonstrations.
       (2) Terms and conditions of demonstration projects.--The 
     Secretary may not approve a demonstration project under this 
     section unless the State provides assurances satisfactory to 
     the Secretary that the following conditions are or will be 
     met:
       (A) Maintenance of state effort.--Federal funds paid to a 
     State pursuant to this section must be used to supplement, 
     but not supplant, the level of State funds expended for 
     workers with potentially severe disabilities under programs 
     in effect for such individuals at the time the demonstration 
     project is approved under this section.
       (B) Independent evaluation.--The State provides for an 
     independent evaluation of the project.
       (3) Limitations on federal funding.--
       (A) Appropriation.--
       (i) In general.--Out of any funds in the Treasury not 
     otherwise appropriated, there is appropriated to carry out 
     this section--

       (I) $42,000,000 for each of fiscal years 2001 through 2004, 
     and
       (II) $41,000,000 for each of fiscal years 2005 and 2006.

       (ii) Budget authority.--Clause (i) constitutes budget 
     authority in advance of appropriations Acts and represents 
     the obligation of the Federal Government to provide for the 
     payment of the amounts appropriated under clause (i).
       (B) Limitation on payments.--In no case may--
       (i) the aggregate amount of payments made by the Secretary 
     to States under this section exceed $250,000,000;
       (ii) the aggregate amount of payments made by the Secretary 
     to States for administrative expenses relating to annual 
     reports required under subsection (d) exceed $2,000,000 of 
     such $250,000,000; or
       (iii) payments be provided by the Secretary for a fiscal 
     year after fiscal year 2009.
       (C) Funds allocated to states.--The Secretary shall 
     allocate funds to States based on their applications and the 
     availability of funds. Funds allocated to a State under a 
     grant made under this section for a fiscal year shall remain 
     available until expended.
       (D) Funds not allocated to states.--Funds not allocated to 
     States in the fiscal year for which they are appropriated 
     shall remain available in succeeding fiscal years for 
     allocation by the Secretary using the allocation formula 
     established under this section.
       (E) Payments to states.--The Secretary shall pay to each 
     State with a demonstration project approved under this 
     section, from its allocation under subparagraph (C), an 
     amount for each quarter equal to the Federal medical 
     assistance percentage (as defined in section 1905(b) of the 
     Social Security Act (42 U.S.C. 1395d(b)) of expenditures in 
     the quarter for medical assistance provided to workers with a 
     potentially severe disability.
       (d) Annual Report.--A State with a demonstration project 
     approved under this section shall submit an annual report to 
     the Secretary on the use of funds provided under the grant. 
     Each report shall include enrollment and financial statistics 
     on--
       (1) the total population of workers with potentially severe 
     disabilities served by the demonstration project; and
       (2) each population of such workers with a specific 
     physical or mental impairment described in subsection 
     (b)(1)(B) served by such project.
       (e) Recommendation.--Not later than October 1, 2004, the 
     Secretary shall submit a recommendation to the Committee on 
     Commerce of the House of Representatives and the Committee on 
     Finance of the Senate regarding whether the demonstration 
     project established under this section should be continued 
     after fiscal year 2006.
       (f) State Defined.--In this section, the term ``State'' has 
     the meaning given such term for purposes of title XIX of the 
     Social Security Act (42 U.S.C. 1396 et seq.).

     SEC. 205. ELECTION BY DISABLED BENEFICIARIES TO SUSPEND 
                   MEDIGAP INSURANCE WHEN COVERED UNDER A GROUP 
                   HEALTH PLAN.

       (a) In General.--Section 1882(q) of the Social Security Act 
     (42 U.S.C. 1395ss(q)) is amended--
       (1) in paragraph (5)(C), by inserting ``or paragraph (6)'' 
     after ``this paragraph''; and
       (2) by adding at the end the following new paragraph:
       ``(6) Each medicare supplemental policy shall provide that 
     benefits and premiums under the policy shall be suspended at 
     the request of the policyholder if the policyholder is 
     entitled to benefits under section 226(b) and is covered 
     under a group health plan (as defined in section 
     1862(b)(1)(A)(v)). If such suspension occurs and if the 
     policyholder or certificate holder loses coverage under the 
     group health plan, such policy shall be automatically 
     reinstituted (effective as of the date of such loss of 
     coverage) under terms described in subsection (n)(6)(A)(ii) 
     as of the loss of such coverage if the policyholder provides 
     notice of loss of such coverage within 90 days after the date 
     of such loss.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     apply with respect to requests made after the date of the 
     enactment of this Act.

             TITLE III--DEMONSTRATION PROJECTS AND STUDIES

     SEC. 301. EXTENSION OF DISABILITY INSURANCE PROGRAM 
                   DEMONSTRATION PROJECT AUTHORITY.

       (a) Extension of Authority.--Title II of the Social 
     Security Act (42 U.S.C. 401 et seq.) is amended by adding at 
     the end the following new section:


                   ``DEMONSTRATION PROJECT AUTHORITY

       ``Sec. 234. (a) Authority.--
       ``(1) In general.--The Commissioner of Social Security (in 
     this section referred to as the `Commissioner') shall develop 
     and carry out experiments and demonstration projects designed 
     to determine the relative advantages and disadvantages of--
       ``(A) various alternative methods of treating the work 
     activity of individuals entitled to disability insurance 
     benefits under section 223 or to monthly insurance benefits 
     under section 202 based on such individual's disability (as 
     defined in section 223(d)), including such methods as a 
     reduction in benefits based on earnings, designed to 
     encourage the return to work of such individuals;
       ``(B) altering other limitations and conditions applicable 
     to such individuals (including lengthening the trial work 
     period (as defined in section 222(c)), altering the 24-month 
     waiting period for hospital insurance benefits under section 
     226, altering the manner in which the program under this 
     title is administered, earlier referral of such individuals 
     for rehabilitation, and

[[Page 30080]]

     greater use of employers and others to develop, perform, and 
     otherwise stimulate new forms of rehabilitation); and
       ``(C) implementing sliding scale benefit offsets using 
     variations in--
       ``(i) the amount of the offset as a proportion of earned 
     income;
       ``(ii) the duration of the offset period; and
       ``(iii) the method of determining the amount of income 
     earned by such individuals,
     to the end that savings will accrue to the Trust Funds, or to 
     otherwise promote the objectives or facilitate the 
     administration of this title.
       ``(2) Authority for expansion of scope.--The Commissioner 
     may expand the scope of any such experiment or demonstration 
     project to include any group of applicants for benefits under 
     the program established under this title with impairments 
     that reasonably may be presumed to be disabling for purposes 
     of such demonstration project, and may limit any such 
     demonstration project to any such group of applicants, 
     subject to the terms of such demonstration project which 
     shall define the extent of any such presumption.
       ``(b) Requirements.--The experiments and demonstration 
     projects developed under subsection (a) shall be of 
     sufficient scope and shall be carried out on a wide enough 
     scale to permit a thorough evaluation of the alternative 
     methods under consideration while giving assurance that the 
     results derived from the experiments and projects will obtain 
     generally in the operation of the disability insurance 
     program under this title without committing such program to 
     the adoption of any particular system either locally or 
     nationally.
       ``(c) Authority To Waive Compliance With Benefits 
     Requirements.--In the case of any experiment or demonstration 
     project conducted under subsection (a), the Commissioner may 
     waive compliance with the benefit requirements of this title 
     and the requirements of section 1148 as they relate to the 
     program established under this title, and the Secretary may 
     (upon the request of the Commissioner) waive compliance with 
     the benefits requirements of title XVIII, insofar as is 
     necessary for a thorough evaluation of the alternative 
     methods under consideration. No such experiment or project 
     shall be actually placed in operation unless at least 90 days 
     prior thereto a written report, prepared for purposes of 
     notification and information only and containing a full and 
     complete description thereof, has been transmitted by the 
     Commissioner to the Committee on Ways and Means of the House 
     of Representatives and to the Committee on Finance of the 
     Senate. Periodic reports on the progress of such experiments 
     and demonstration projects shall be submitted by the 
     Commissioner to such committees. When appropriate, such 
     reports shall include detailed recommendations for changes in 
     administration or law, or both, to carry out the objectives 
     stated in subsection (a).
       ``(d) Reports.--
       ``(1) Interim reports.--On or before June 9 of each year, 
     the Commissioner shall submit to the Committee on Ways and 
     Means of the House of Representatives and to the Committee on 
     Finance of the Senate an annual interim report on the 
     progress of the experiments and demonstration projects 
     carried out under this subsection together with any related 
     data and materials that the Commissioner may consider 
     appropriate.
       ``(2) Termination and final report.--The authority under 
     the preceding provisions of this section (including any 
     waiver granted pursuant to subsection (c)) shall terminate 5 
     years after the date of the enactment of this Act. Not later 
     than 90 days after the termination of any experiment or 
     demonstration project carried out under this section, the 
     Commissioner shall submit to the Committee on Ways and Means 
     of the House of Representatives and to the Committee on 
     Finance of the Senate a final report with respect to that 
     experiment or demonstration project.''.
       (b) Conforming Amendments; Transfer of Prior Authority.--
       (1) Conforming amendments.--
       (A) Repeal of prior authority.--Paragraphs (1) through (4) 
     of subsection (a) and subsection (c) of section 505 of the 
     Social Security Disability Amendments of 1980 (42 U.S.C. 1310 
     note) are repealed.
       (B) Conforming amendment regarding funding.--Section 201(k) 
     of the Social Security Act (42 U.S.C. 401(k)) is amended by 
     striking ``section 505(a) of the Social Security Disability 
     Amendments of 1980'' and inserting ``section 234''.
       (2) Transfer of prior authority.--With respect to any 
     experiment or demonstration project being conducted under 
     section 505(a) of the Social Security Disability Amendments 
     of 1980 (42 U.S.C. 1310 note) as of the date of the enactment 
     of this Act, the authority to conduct such experiment or 
     demonstration project (including the terms and conditions 
     applicable to the experiment or demonstration project) shall 
     be treated as if that authority (and such terms and 
     conditions) had been established under section 234 of the 
     Social Security Act, as added by subsection (a).

     SEC. 302. DEMONSTRATION PROJECTS PROVIDING FOR REDUCTIONS IN 
                   DISABILITY INSURANCE BENEFITS BASED ON 
                   EARNINGS.

       (a) Authority.--The Commissioner of Social Security shall 
     conduct demonstration projects for the purpose of evaluating, 
     through the collection of data, a program for title II 
     disability beneficiaries (as defined in section 1148(k)(3) of 
     the Social Security Act) under which benefits payable under 
     section 223 of such Act, or under section 202 of such Act 
     based on the beneficiary's disability, are reduced by $1 for 
     each $2 of the beneficiary's earnings that is above a level 
     to be determined by the Commissioner. Such projects shall be 
     conducted at a number of localities which the Commissioner 
     shall determine is sufficient to adequately evaluate the 
     appropriateness of national implementation of such a program. 
     Such projects shall identify reductions in Federal 
     expenditures that may result from the permanent 
     implementation of such a program.
       (b) Scope and Scale and Matters To Be Determined.--
       (1) In general.--The demonstration projects developed under 
     subsection (a) shall be of sufficient duration, shall be of 
     sufficient scope, and shall be carried out on a wide enough 
     scale to permit a thorough evaluation of the project to 
     determine--
       (A) the effects, if any, of induced entry into the project 
     and reduced exit from the project;
       (B) the extent, if any, to which the project being tested 
     is affected by whether it is in operation in a locality 
     within an area under the administration of the Ticket to Work 
     and Self-Sufficiency Program established under section 1148 
     of the Social Security Act; and
       (C) the savings that accrue to the Federal Old-Age and 
     Survivors Insurance Trust Fund, the Federal Disability 
     Insurance Trust Fund, and other Federal programs under the 
     project being tested.
     The Commissioner shall take into account advice provided by 
     the Ticket to Work and Work Incentives Advisory Panel 
     pursuant to section 101(f)(2)(B)(ii) of this Act.
       (2) Additional matters.--The Commissioner shall also 
     determine with respect to each project--
       (A) the annual cost (including net cost) of the project and 
     the annual cost (including net cost) that would have been 
     incurred in the absence of the project;
       (B) the determinants of return to work, including the 
     characteristics of the beneficiaries who participate in the 
     project; and
       (C) the employment outcomes, including wages, occupations, 
     benefits, and hours worked, of beneficiaries who return to 
     work as a result of participation in the project.
     The Commissioner may include within the matters evaluated 
     under the project the merits of trial work periods and 
     periods of extended eligibility.
       (c) Waivers.--The Commissioner may waive compliance with 
     the benefit provisions of title II of the Social Security Act 
     (42 U.S.C. 401 et seq.), and the Secretary of Health and 
     Human Services may waive compliance with the benefit 
     requirements of title XVIII of such Act (42 U.S.C. 1395 et 
     seq.), insofar as is necessary for a thorough evaluation of 
     the alternative methods under consideration. No such project 
     shall be actually placed in operation unless at least 90 days 
     prior thereto a written report, prepared for purposes of 
     notification and information only and containing a full and 
     complete description thereof, has been transmitted by the 
     Commissioner to the Committee on Ways and Means of the House 
     of Representatives and to the Committee on Finance of the 
     Senate. Periodic reports on the progress of such projects 
     shall be submitted by the Commissioner to such committees. 
     When appropriate, such reports shall include detailed 
     recommendations for changes in administration or law, or 
     both, to carry out the objectives stated in subsection (a).
       (d) Interim Reports.--Not later than 2 years after the date 
     of the enactment of this Act, and annually thereafter, the 
     Commissioner of Social Security shall submit to the Congress 
     an interim report on the progress of the demonstration 
     projects carried out under this subsection together with any 
     related data and materials that the Commissioner of Social 
     Security may consider appropriate.
       (e) Final Report.--The Commissioner of Social Security 
     shall submit to the Congress a final report with respect to 
     all demonstration projects carried out under this section not 
     later than 1 year after their completion.
       (f) Expenditures.--Expenditures made for demonstration 
     projects under this section shall be made from the Federal 
     Disability Insurance Trust Fund and the Federal Old-Age and 
     Survivors Insurance Trust Fund, as determined appropriate by 
     the Commissioner of Social Security, and from the Federal 
     Hospital Insurance Trust Fund and the Federal Supplementary 
     Medical Insurance Trust Fund, as determined appropriate by 
     the Secretary of Health and Human Services, to the extent 
     provided in advance in appropriation Acts.

     SEC. 303. STUDIES AND REPORTS.

       (a) Study by General Accounting Office of Existing 
     Disability-Related Employment Incentives.--
       (1) Study.--As soon as practicable after the date of the 
     enactment of this Act, the Comptroller General of the United 
     States shall undertake a study to assess existing tax credits 
     and other disability-related employment incentives under the 
     Americans with Disabilities Act of 1990 (42 U.S.C. 12101 et 
     seq.) and other Federal laws. In such study, the Comptroller 
     General shall specifically address the extent to which such 
     credits and other incentives would encourage employers to 
     hire and retain individuals with disabilities.
       (2) Report.--Not later than 3 years after the date of the 
     enactment of this Act, the Comptroller General shall transmit 
     to the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate a 
     written report presenting the results of the Comptroller 
     General's study conducted pursuant to this subsection, 
     together with such recommendations for legislative or 
     administrative

[[Page 30081]]

     changes as the Comptroller General determines are 
     appropriate.
       (b) Study by General Accounting Office of Existing 
     Coordination of the DI and SSI Programs as They Relate to 
     Individuals Entering or Leaving Concurrent Entitlement.--
       (1) Study.--As soon as practicable after the date of the 
     enactment of this Act, the Comptroller General of the United 
     States shall undertake a study to evaluate the coordination 
     under current law of the disability insurance program under 
     title II of the Social Security Act (42 U.S.C. 401 et seq.) 
     and the supplemental security income program under title XVI 
     of such Act (42 U.S.C. 1381 et seq.), as such programs relate 
     to individuals entering or leaving concurrent entitlement 
     under such programs. In such study, the Comptroller General 
     shall specifically address the effectiveness of work 
     incentives under such programs with respect to such 
     individuals and the effectiveness of coverage of such 
     individuals under titles XVIII and XIX of such Act (42 U.S.C. 
     1395 et seq., 1396 et seq.).
       (2) Report.--Not later than 3 years after the date of the 
     enactment of this Act, the Comptroller General shall transmit 
     to the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate a 
     written report presenting the results of the Comptroller 
     General's study conducted pursuant to this subsection, 
     together with such recommendations for legislative or 
     administrative changes as the Comptroller General determines 
     are appropriate.
       (c) Study by General Accounting Office of the Impact of the 
     Substantial Gainful Activity Limit on Return to Work.--
       (1) Study.--As soon as practicable after the date of the 
     enactment of this Act, the Comptroller General of the United 
     States shall undertake a study of the substantial gainful 
     activity level applicable as of that date to recipients of 
     benefits under section 223 of the Social Security Act (42 
     U.S.C. 423) and under section 202 of such Act (42 U.S.C. 402) 
     on the basis of a recipient having a disability, and the 
     effect of such level as a disincentive for those recipients 
     to return to work. In the study, the Comptroller General also 
     shall address the merits of increasing the substantial 
     gainful activity level applicable to such recipients of 
     benefits and the rationale for not yearly indexing that level 
     to inflation.
       (2) Report.--Not later than 2 years after the date of the 
     enactment of this Act, the Comptroller General shall transmit 
     to the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate a 
     written report presenting the results of the Comptroller 
     General's study conducted pursuant to this subsection, 
     together with such recommendations for legislative or 
     administrative changes as the Comptroller General determines 
     are appropriate.
       (d) Report on Disregards Under the DI and SSI Programs.--
     Not later than 90 days after the date of the enactment of 
     this Act, the Commissioner of Social Security shall submit to 
     the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate a 
     report that--
       (1) identifies all income, assets, and resource disregards 
     (imposed under statutory or regulatory authority) that are 
     applicable to individuals receiving benefits under title II 
     or XVI of the Social Security Act (42 U.S.C. 401 et seq., 
     1381 et seq.);
       (2) with respect to each such disregard--
       (A) specifies the most recent statutory or regulatory 
     modification of the disregard; and
       (B) recommends whether further statutory or regulatory 
     modification of the disregard would be appropriate; and
       (3) with respect to the disregard described in section 
     1612(b)(7) of such Act (42 U.S.C. 1382a(b)(7)) (relating to 
     grants, scholarships, or fellowships received for use in 
     paying the cost of tuition and fees at any educational 
     (including technical or vocational education) institution)--
       (A) identifies the number of individuals receiving benefits 
     under title XVI of such Act (42 U.S.C. 1381 et seq.) who have 
     attained age 22 and have not had any portion of any grant, 
     scholarship, or fellowship received for use in paying the 
     cost of tuition and fees at any educational (including 
     technical or vocational education) institution excluded from 
     their income in accordance with that section;
       (B) recommends whether the age at which such grants, 
     scholarships, or fellowships are excluded from income for 
     purposes of determining eligibility under title XVI of such 
     Act (42 U.S.C. 1381 et seq.) should be increased to age 25; 
     and
       (C) recommends whether such disregard should be expanded to 
     include any such grant, scholarship, or fellowship received 
     for use in paying the cost of room and board at any such 
     institution.
       (e) Study by the General Accounting Office of Social 
     Security Administration's Disability Insurance Program 
     Demonstration Authority.--
       (1) Study.--As soon as practicable after the date of the 
     enactment of this Act, the Comptroller General of the United 
     States shall undertake a study to assess the results of the 
     Social Security Administration's efforts to conduct 
     disability demonstrations authorized under prior law as well 
     as under section 234 of the Social Security Act (as added by 
     section 301 of this Act).
       (2) Report.--Not later than 5 years after the date of the 
     enactment of this Act, the Comptroller General shall transmit 
     to the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate a 
     written report presenting the results of the Comptroller 
     General's study conducted pursuant to this section, together 
     with a recommendation as to whether the demonstration 
     authority authorized under section 234 of the Social Security 
     Act (as added by section 301 of this Act) should be made 
     permanent.

            TITLE IV--MISCELLANEOUS AND TECHNICAL AMENDMENTS

     SEC. 401. TECHNICAL AMENDMENTS RELATING TO DRUG ADDICTS AND 
                   ALCOHOLICS.

       (a) Clarification Relating to the Effective Date of the 
     Denial of Social Security Disability Benefits to Drug Addicts 
     and Alcoholics.--Section 105(a)(5) of the Contract with 
     America Advancement Act of 1996 (42 U.S.C. 405 note) is 
     amended--
       (1) in subparagraph (A), by striking ``by the Commissioner 
     of Social Security'' and ``by the Commissioner''; and
       (2) by adding at the end the following new subparagraph:
       ``(D) For purposes of this paragraph, an individual's 
     claim, with respect to benefits under title II based on 
     disability, which has been denied in whole before the date of 
     the enactment of this Act, may not be considered to be 
     finally adjudicated before such date if, on or after such 
     date--
       ``(i) there is pending a request for either administrative 
     or judicial review with respect to such claim; or
       ``(ii) there is pending, with respect to such claim, a 
     readjudication by the Commissioner of Social Security 
     pursuant to relief in a class action or implementation by the 
     Commissioner of a court remand order.
       ``(E) Notwithstanding the provisions of this paragraph, 
     with respect to any individual for whom the Commissioner of 
     Social Security does not perform the entitlement 
     redetermination before the date prescribed in subparagraph 
     (C), the Commissioner shall perform such entitlement 
     redetermination in lieu of a continuing disability review 
     whenever the Commissioner determines that the individual's 
     entitlement is subject to redetermination based on the 
     preceding provisions of this paragraph, and the provisions of 
     section 223(f) shall not apply to such redetermination.''.
       (b) Correction to Effective Date of Provisions Concerning 
     Representative Payees and Treatment Referrals of Social 
     Security Beneficiaries Who Are Drug Addicts and Alcoholics.--
     Section 105(a)(5)(B) of the Contract with America Advancement 
     Act of 1996 (42 U.S.C. 405 note) is amended to read as 
     follows:
       ``(B) The amendments made by paragraphs (2) and (3) shall 
     take effect on July 1, 1996, with respect to any individual--
       ``(i) whose claim for benefits is finally adjudicated on or 
     after the date of the enactment of this Act; or
       ``(ii) whose entitlement to benefits is based upon an 
     entitlement redetermination made pursuant to subparagraph 
     (C).''.
       (c) Effective Dates.--The amendments made by this section 
     shall take effect as if included in the enactment of section 
     105 of the Contract with America Advancement Act of 1996 
     (Public Law 104-121; 110 Stat. 852 et seq.).

     SEC. 402. TREATMENT OF PRISONERS.

       (a) Implementation of Prohibition Against Payment of Title 
     II Benefits to Prisoners.--
       (1) In general.--Section 202(x)(3) of the Social Security 
     Act (42 U.S.C. 402(x)(3)) is amended--
       (A) by inserting ``(A)'' after ``(3)''; and
       (B) by adding at the end the following new subparagraph:
       ``(B)(i) The Commissioner shall enter into an agreement 
     under this subparagraph with any interested State or local 
     institution comprising a jail, prison, penal institution, or 
     correctional facility, or comprising any other institution a 
     purpose of which is to confine individuals as described in 
     paragraph (1)(A)(ii). Under such agreement--
       ``(I) the institution shall provide to the Commissioner, on 
     a monthly basis and in a manner specified by the 
     Commissioner, the names, Social Security account numbers, 
     dates of birth, confinement commencement dates, and, to the 
     extent available to the institution, such other identifying 
     information concerning the individuals confined in the 
     institution as the Commissioner may require for the purpose 
     of carrying out paragraph (1) and other provisions of this 
     title; and
       ``(II) the Commissioner shall pay to the institution, with 
     respect to information described in subclause (I) concerning 
     each individual who is confined therein as described in 
     paragraph (1)(A), who receives a benefit under this title for 
     the month preceding the first month of such confinement, and 
     whose benefit under this title is determined by the 
     Commissioner to be not payable by reason of confinement based 
     on the information provided by the institution, $400 (subject 
     to reduction under clause (ii)) if the institution furnishes 
     the information to the Commissioner within 30 days after the 
     date such individual's confinement in such institution 
     begins, or $200 (subject to reduction under clause (ii)) if 
     the institution furnishes the information after 30 days after 
     such date but within 90 days after such date.
       ``(ii) The dollar amounts specified in clause (i)(II) shall 
     be reduced by 50 percent if the Commissioner is also required 
     to make a payment to the institution with respect to the same 
     individual under an agreement entered into under section 
     1611(e)(1)(I).
       ``(iii) There are authorized to be transferred from the 
     Federal Old-Age and Survivors Insurance Trust Fund and the 
     Federal Disability Insurance Trust Fund, as appropriate, such 
     sums

[[Page 30082]]

     as may be necessary to enable the Commissioner to make 
     payments to institutions required by clause (i)(II).
       ``(iv) The Commissioner shall maintain, and shall provide 
     on a reimbursable basis, information obtained pursuant to 
     agreements entered into under this paragraph to any agency 
     administering a Federal or federally-assisted cash, food, or 
     medical assistance program for eligibility and other 
     administrative purposes under such program.''.
       (2) Conforming amendments to the privacy act.--Section 
     552a(a)(8)(B) of title 5, United States Code, is amended--
       (A) in clause (vi), by striking ``or'' at the end;
       (B) in clause (vii), by adding ``or'' at the end; and
       (C) by adding at the end the following new clause:
       ``(viii) matches performed pursuant to section 202(x)(3) or 
     1611(e)(1) of the Social Security Act (42 U.S.C. 402(x)(3), 
     1382(e)(1));''.
       (3) Conforming amendments to title xvi.--
       (A) Section 1611(e)(1)(I)(i)(I) of the Social Security Act 
     (42 U.S.C. 1382(e)(1)(I)(i)(I)) is amended by striking ``; 
     and'' and inserting ``and the other provisions of this title; 
     and''.
       (B) Section 1611(e)(1)(I)(ii)(II) of such Act (42 U.S.C. 
     1382(e)(1)(I)(ii)(II)) is amended by striking ``is authorized 
     to provide, on a reimbursable basis,'' and inserting ``shall 
     maintain, and shall provide on a reimbursable basis,''.
       (4) Effective date.--The amendments made by this subsection 
     shall apply to individuals whose period of confinement in an 
     institution commences on or after the first day of the fourth 
     month beginning after the month in which this Act is enacted.
       (b) Elimination of Title II Requirement That Confinement 
     Stem From Crime Punishable by Imprisonment for More Than 1 
     Year.--
       (1) In general.--Section 202(x)(1)(A) of the Social 
     Security Act (42 U.S.C. 402(x)(1)(A)) is amended--
       (A) in the matter preceding clause (i), by striking 
     ``during which'' and inserting ``ending with or during or 
     beginning with or during a period of more than 30 days 
     throughout all of which'';
       (B) in clause (i), by striking ``an offense punishable by 
     imprisonment for more than 1 year (regardless of the actual 
     sentence imposed)'' and inserting ``a criminal offense''; and
       (C) in clause (ii)(I), by striking ``an offense punishable 
     by imprisonment for more than 1 year'' and inserting ``a 
     criminal offense''.
       (2) Effective date.--The amendments made by this subsection 
     shall apply to individuals whose period of confinement in an 
     institution commences on or after the first day of the fourth 
     month beginning after the month in which this Act is enacted.
       (c) Conforming Title XVI Amendments.--
       (1) 50 percent reduction in title xvi payment in case 
     involving comparable title ii payment.--Section 1611(e)(1)(I) 
     of the Social Security Act (42 U.S.C. 1382(e)(1)(I)) is 
     amended--
       (A) in clause (i)(II), by inserting ``(subject to reduction 
     under clause (ii))'' after ``$400'' and after ``$200'';
       (B) by redesignating clauses (ii) and (iii) as clauses 
     (iii) and (iv) respectively; and
       (C) by inserting after clause (i) the following new clause:
       ``(ii) The dollar amounts specified in clause (i)(II) shall 
     be reduced by 50 percent if the Commissioner is also required 
     to make a payment to the institution with respect to the same 
     individual under an agreement entered into under section 
     202(x)(3)(B).''.
       (2) Expansion of categories of institutions eligible to 
     enter into agreements with the commissioner.--Section 
     1611(e)(1)(I)(i) of such Act (42 U.S.C. 1382(e)(1)(I)(i)) is 
     amended in the matter preceding subclause (I) by striking 
     ``institution'' and all that follows through ``section 
     202(x)(1)(A),'' and inserting ``institution comprising a 
     jail, prison, penal institution, or correctional facility, or 
     with any other interested State or local institution a 
     purpose of which is to confine individuals as described in 
     section 202(x)(1)(A)(ii),''.
       (3) Elimination of overly broad exemption.--Section 
     1611(e)(1)(I)(iii) of such Act (42 U.S.C. 1382(e)(1)(I)(iii)) 
     (as redesignated by paragraph (1)(B)) is amended further--
       (A) by striking ``(I) The provisions'' and all that follows 
     through ``(II)''; and
       (B) by striking ``eligibility purposes'' and inserting 
     ``eligibility and other administrative purposes under such 
     program''.
       (4) Effective date.--The amendments made by this subsection 
     shall take effect as if included in the enactment of section 
     203(a) of the Personal Responsibility and Work Opportunity 
     Reconciliation Act of 1996 (Public Law 104-193; 110 Stat. 
     2186). The reference to section 202(x)(1)(A)(ii) of the 
     Social Security Act in section 1611(e)(1)(I)(i) of the Social 
     Security Act, as amended by paragraph (2) of this subsection, 
     shall be deemed a reference to such section 202(x)(1)(A)(ii) 
     of such Act as amended by subsection (b)(1)(C) of this 
     section.
       (d) Continued Denial of Benefits to Sex Offenders Remaining 
     Confined to Public Institutions Upon Completion of Prison 
     Term.--
       (1) In general.--Section 202(x)(1)(A) of the Social 
     Security Act (42 U.S.C. 402(x)(1)(A)) is amended--
       (A) in clause (i), by striking ``or'' at the end;
       (B) in clause (ii)(IV), by striking the period and 
     inserting ``, or''; and
       (C) by adding at the end the following new clause:
       ``(iii) immediately upon completion of confinement as 
     described in clause (i) pursuant to conviction of a criminal 
     offense an element of which is sexual activity, is confined 
     by court order in an institution at public expense pursuant 
     to a finding that the individual is a sexually dangerous 
     person or a sexual predator or a similar finding.''.
       (2) Conforming amendment.--Section 202(x)(1)(B)(ii) of such 
     Act (42 U.S.C. 402(x)(1)(B)(ii)) is amended by striking 
     ``clause (ii)'' and inserting ``clauses (ii) and (iii)''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply with respect to benefits for months ending after 
     the date of the enactment of this Act.

     SEC. 403. REVOCATION BY MEMBERS OF THE CLERGY OF EXEMPTION 
                   FROM SOCIAL SECURITY COVERAGE.

       (a) In General.--Notwithstanding section 1402(e)(4) of the 
     Internal Revenue Code of 1986, any exemption which has been 
     received under section 1402(e)(1) of such Code by a duly 
     ordained, commissioned, or licensed minister of a church, a 
     member of a religious order, or a Christian Science 
     practitioner, and which is effective for the taxable year in 
     which this Act is enacted, may be revoked by filing an 
     application therefor (in such form and manner, and with such 
     official, as may be prescribed by the Commissioner of 
     Internal Revenue), if such application is filed no later than 
     the due date of the Federal income tax return (including any 
     extension thereof) for the applicant's second taxable year 
     beginning after December 31, 1999. Any such revocation shall 
     be effective (for purposes of chapter 2 of the Internal 
     Revenue Code of 1986 and title II of the Social Security Act 
     (42 U.S.C. 401 et seq.)), as specified in the application, 
     either with respect to the applicant's first taxable year 
     beginning after December 31, 1999, or with respect to the 
     applicant's second taxable year beginning after such date, 
     and for all succeeding taxable years; and the applicant for 
     any such revocation may not thereafter again file application 
     for an exemption under such section 1402(e)(1). If the 
     application is filed after the due date of the applicant's 
     Federal income tax return for a taxable year and is effective 
     with respect to that taxable year, it shall include or be 
     accompanied by payment in full of an amount equal to the 
     total of the taxes that would have been imposed by section 
     1401 of the Internal Revenue Code of 1986 with respect to all 
     of the applicant's income derived in that taxable year which 
     would have constituted net earnings from self-employment for 
     purposes of chapter 2 of such Code (notwithstanding 
     paragraphs (4) and (5) of section 1402(c)) except for the 
     exemption under section 1402(e)(1) of such Code.
       (b) Effective Date.--Subsection (a) shall apply with 
     respect to service performed (to the extent specified in such 
     subsection) in taxable years beginning after December 31, 
     1999, and with respect to monthly insurance benefits payable 
     under title II on the basis of the wages and self-employment 
     income of any individual for months in or after the calendar 
     year in which such individual's application for revocation 
     (as described in such subsection) is effective (and lump-sum 
     death payments payable under such title on the basis of such 
     wages and self-employment income in the case of deaths 
     occurring in or after such calendar year).

     SEC. 404. ADDITIONAL TECHNICAL AMENDMENT RELATING TO 
                   COOPERATIVE RESEARCH OR DEMONSTRATION PROJECTS 
                   UNDER TITLES II AND XVI.

       (a) In General.--Section 1110(a)(3) of the Social Security 
     Act (42 U.S.C. 1310(a)(3)) is amended by striking ``title 
     XVI'' and inserting ``title II or XVI''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect as if included in the enactment of the 
     Social Security Independence and Program Improvements Act of 
     1994 (Public Law 103-296; 108 Stat. 1464).

     SEC. 405. AUTHORIZATION FOR STATE TO PERMIT ANNUAL WAGE 
                   REPORTS.

       (a) In General.--Section 1137(a)(3) of the Social Security 
     Act (42 U.S.C. 1320b-7(a)(3)) is amended by inserting before 
     the semicolon the following: ``, and except that in the case 
     of wage reports with respect to domestic service employment, 
     a State may permit employers (as so defined) that make 
     returns with respect to such employment on a calendar year 
     basis pursuant to section 3510 of the Internal Revenue Code 
     of 1986 to make such reports on an annual basis''.
       (b) Technical Amendments.--Section 1137(a)(3) of the Social 
     Security Act (42 U.S.C. 1320b-7(a)(3)) is amended--
       (1) by striking ``(as defined in section 
     453A(a)(2)(B)(iii))''; and
       (2) by inserting ``(as defined in section 453A(a)(2)(B))'' 
     after ``employers'' .
       (c) Effective Date.--The amendments made by this section 
     shall apply to wage reports required to be submitted on and 
     after the date of the enactment of this Act.

     SEC. 406. ASSESSMENT ON ATTORNEYS WHO RECEIVE THEIR FEES VIA 
                   THE SOCIAL SECURITY ADMINISTRATION.

       (a) Assessment on Attorneys.--
       (1) In General.--Section 206 of the Social Security Act (42 
     U.S.C. 406) is amended by adding at the end the following new 
     subsection:
       ``(d) Assessment on Attorneys.--
       ``(1) In general.--Whenever a fee for services is required 
     to be certified for payment to an attorney from a claimant's 
     past-due benefits pursuant to subsection (a)(4) or (b)(1), 
     the Commissioner shall impose on the attorney an assessment 
     calculated in accordance with paragraph (2).

[[Page 30083]]

       ``(2) Amount.--
       ``(A) The amount of an assessment under paragraph (1) shall 
     be equal to the product obtained by multiplying the amount of 
     the representative's fee that would be required to be so 
     certified by subsection (a)(4) or (b)(1) before the 
     application of this subsection, by the percentage specified 
     in subparagraph (B).
       ``(B) The percentage specified in this subparagraph is--
       ``(i) for calendar years before 2001, 6.3 percent, and
       ``(ii) for calendar years after 2000, such percentage rate 
     as the Commissioner determines is necessary in order to 
     achieve full recovery of the costs of determining and 
     certifying fees to attorneys from the past-due benefits of 
     claimants, but not in excess of 6.3 percent.
       ``(3) Collection.--The Commissioner may collect the 
     assessment imposed on an attorney under paragraph (1) by 
     offset from the amount of the fee otherwise required by 
     subsection (a)(4) or (b)(1) to be certified for payment to 
     the attorney from a claimant's past-due benefits.
       ``(4) Prohibition on claimant reimbursement.--An attorney 
     subject to an assessment under paragraph (1) may not, 
     directly or indirectly, request or otherwise obtain 
     reimbursement for such assessment from the claimant whose 
     claim gave rise to the assessment.
       ``(5) Disposition of assessments.--Assessments on attorneys 
     collected under this subsection shall be credited to the 
     Federal Old-Age and Survivors Insurance Trust Fund and the 
     Federal Disability Insurance Trust Fund, as appropriate.
       ``(6) Authorization of appropriations.--The assessments 
     authorized under this section shall be collected and 
     available for obligation only to the extent and in the amount 
     provided in advance in appropriations Acts. Amounts so 
     appropriated are authorized to remain available until 
     expended, for administrative expenses in carrying out this 
     title and related laws.''.
       (2) Conforming amendments.--
       (A) Section 206(a)(4)(A) of such Act (42 U.S.C. 
     406(a)(4)(A)) is amended by inserting ``and subsection (d)'' 
     after ``subparagraph (B)''.
       (B) Section 206(b)(1)(A) of such Act (42 U.S.C. 
     406(b)(1)(A)) is amended by inserting ``, but subject to 
     subsection (d) of this section'' after ``section 205(i)''.
       (b) Elimination of 15-Day Waiting Period for Payment of 
     Fees.--Section 206(a)(4) of such Act (42 U.S.C. 406(a)(4)), 
     as amended by subsection (a)(2)(A) of this section, is 
     amended--
       (1) by striking ``(4)(A)'' and inserting ``(4)'';
       (2) by striking ``subparagraph (B) and''; and
       (3) by striking subparagraph (B).
       (c) GAO Study and Report.--
       (1) Study.--The Comptroller General of the United States 
     shall conduct a study that--
       (A) examines the costs incurred by the Social Security 
     Administration in administering the provisions of subsection 
     (a)(4) and (b)(1) of section 206 of the Social Security Act 
     (42 U.S.C. 406) and itemizes the components of such costs, 
     including the costs of determining fees to attorneys from the 
     past-due benefits of claimants before the Commissioner of 
     Social Security and of certifying such fees;
       (B) identifies efficiencies that the Social Security 
     Administration could implement to reduce such costs;
       (C) examines the feasibility and advisability of linking 
     the payment of, or the amount of, the assessment under 
     section 206(d) of the Social Security Act (42 U.S.C. 406(d)) 
     to the timeliness of the payment of the fee to the attorney 
     as certified by the Commissioner of Social Security pursuant 
     to subsection (a)(4) or (b)(1) of section 206 of such Act (42 
     U.S.C. 406);
       (D) determines whether the provisions of subsection (a)(4) 
     and (b)(1) of section 206 of such Act (42 U.S.C. 406) should 
     be applied to claimants under title XVI of such Act (42 U.S.C 
     1381 et seq.);
       (E) determines the feasibility and advisability of stating 
     fees under section 206(d) of such Act (42 U.S.C. 406(d)) in 
     terms of a fixed dollar amount as opposed to a percentage;
       (F) determines whether the dollar limit specified in 
     section 206(a)(2)(A)(ii)(II) of such Act (42 U.S.C. 
     406(a)(2)(A)(ii)(II)) should be raised; and
       (G) determines whether the assessment on attorneys required 
     under section 206(d) of such Act (42 U.S.C. 406(d)) (as added 
     by subsection (a)(1) of this section) impairs access to legal 
     representation for claimants.
       (2) Report.--Not later than 1 year after the date of the 
     enactment of this Act, the Comptroller General of the United 
     States shall submit a report to the Committee on Ways and 
     Means of the House of Representatives and the Committee on 
     Finance of the Senate on the study conducted under paragraph 
     (1), together with any recommendations for legislation that 
     the Comptroller General determines to be appropriate as a 
     result of such study.
       (d) Effective Date.--The amendments made by this section 
     shall apply in the case of any attorney with respect to whom 
     a fee for services is required to be certified for payment 
     from a claimant's past-due benefits pursuant to subsection 
     (a)(4) or (b)(1) of section 206 of the Social Security Act 
     after the later of--
       (1) December 31, 1999, or
       (2) the last day of the first month beginning after the 
     month in which this Act is enacted.

     SEC. 407. EXTENSION OF AUTHORITY OF STATE MEDICAID FRAUD 
                   CONTROL UNITS.

       (a) Extension of Authority To Investigate and Prosecute 
     Fraud in Other Federal Health Care Programs.--Section 
     1903(q)(3) of the Social Security Act (42 U.S.C. 1396b(q)(3)) 
     is amended--
       (1) by inserting ``(A)'' after ``in connection with''; and
       (2) by striking ``title.'' and inserting ``title; and (B) 
     upon the approval of the Inspector General of the relevant 
     Federal agency, any aspect of the provision of health care 
     services and activities of providers of such services under 
     any Federal health care program (as defined in section 
     1128B(f)(1)), if the suspected fraud or violation of law in 
     such case or investigation is primarily related to the State 
     plan under this title.''.
       (b) Recoupment of Funds.--Section 1903(q)(5) of such Act 
     (42 U.S.C. 1396b(q)(5)) is amended--
       (1) by inserting ``or under any Federal health care program 
     (as so defined)'' after ``plan''; and
       (2) by adding at the end the following: ``All funds 
     collected in accordance with this paragraph shall be credited 
     exclusively to, and available for expenditure under, the 
     Federal health care program (including the State plan under 
     this title) that was subject to the activity that was the 
     basis for the collection.''.
       (c) Extension of Authority To Investigate and Prosecute 
     Resident Abuse in Non-Medicaid Board and Care Facilities.--
     Section 1903(q)(4) of such Act (42 U.S.C. 1396b(q)(4)) is 
     amended to read as follows:
       ``(4)(A) The entity has--
       ``(i) procedures for reviewing complaints of abuse or 
     neglect of patients in health care facilities which receive 
     payments under the State plan under this title;
       ``(ii) at the option of the entity, procedures for 
     reviewing complaints of abuse or neglect of patients residing 
     in board and care facilities; and
       ``(iii) procedures for acting upon such complaints under 
     the criminal laws of the State or for referring such 
     complaints to other State agencies for action.
       ``(B) For purposes of this paragraph, the term `board and 
     care facility' means a residential setting which receives 
     payment (regardless of whether such payment is made under the 
     State plan under this title) 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) A substantial amount of 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.''.
       (d) Effective Date.--The amendments made by this section 
     take effect on the date of the enactment of this Act.

     SEC. 408. CLIMATE DATABASE MODERNIZATION.

       Notwithstanding any other provision of law, the National 
     Oceanic and Atmospheric Administration (NOAA) shall contract 
     for its multi-year program for climate database modernization 
     and utilization in accordance with NIH Image World Contract 
     #263-96-D-0323 and Task Order #56-DKNE-9-98303 which were 
     awarded as a result of fair and open competition conducted in 
     response to NOAA's solicitation IW SOW 1082.

     SEC. 409. SPECIAL ALLOWANCE ADJUSTMENT FOR STUDENT LOANS.

       (a) Amendment.--Section 438(b)(2) of the Higher Education 
     Act of 1965 (20 U.S.C. 1087-1(b)(2)) is amended--
       (1) in subparagraph (A), by striking ``(G), and (H)'' and 
     inserting ``(G), (H), and (I)'';
       (2) in subparagraph (B)(iv), by striking ``(G), or (H)'' 
     and inserting ``(G), (H), or (I)'';
       (3) in subparagraph (C)(ii), by striking ``(G) and (H)'' 
     and inserting ``(G), (H), and (I)'';
       (4) in the heading of subparagraph (H), by striking ``july 
     1, 2003'' and inserting ``january 1, 2000'';
       (5) in subparagraph (H), by striking ``July 1, 2003,'' each 
     place it appears and inserting ``January 1, 2000,''; and
       (6) by inserting after subparagraph (H) the following new 
     subparagraph:
       ``(I) Loans disbursed on or after january 1, 2000, and 
     before july 1, 2003.--
       ``(i) In general.--Notwithstanding subparagraphs (G) and 
     (H), but subject to paragraph (4) and clauses (ii), (iii), 
     and (iv) of this subparagraph, and except as provided in 
     subparagraph (B), the special allowance paid pursuant to this 
     subsection on loans for which the first disbursement is made 
     on or after January 1, 2000, and before July 1, 2003, shall 
     be computed--

       ``(I) by determining the average of the bond equivalent 
     rates of the quotes of the 3-month commercial paper 
     (financial) rates in effect for each of the days in such 
     quarter as reported by the Federal Reserve in Publication H-
     15 (or its successor) for such 3-month period;
       ``(II) by subtracting the applicable interest rates on such 
     loans from such average bond equivalent rate;
       ``(III) by adding 2.34 percent to the resultant percent; 
     and
       ``(IV) by dividing the resultant percent by 4.

       ``(ii) In school and grace period.--In the case of any loan 
     for which the first disbursement is made on or after January 
     1, 2000, and before July 1, 2003, and for which the 
     applicable rate of interest is described in section 
     427A(k)(2), clause (i)(III) of this subparagraph shall be 
     applied by substituting `1.74 percent' for `2.34 percent'.
       ``(iii) PLUS loans.--In the case of any loan for which the 
     first disbursement is made on or after January 1, 2000, and 
     before July 1, 2003, and for which the applicable rate of 
     interest is described in section 427A(k)(3), clause (i)(III) 
     of

[[Page 30084]]

     this subparagraph shall be applied by substituting `2.64 
     percent' for `2.34 percent', subject to clause (v) of this 
     subparagraph.
       ``(iv) Consolidation loans.--In the case of any 
     consolidation loan for which the application is received by 
     an eligible lender on or after January 1, 2000, and before 
     July 1, 2003, and for which the applicable interest rate is 
     determined under section 427A(k)(4), clause (i)(III) of this 
     subparagraph shall be applied by substituting `2.64 percent' 
     for `2.34 percent', subject to clause (vi) of this 
     subparagraph.
       ``(v) Limitation on special allowances for plus loans.--In 
     the case of PLUS loans made under section 428B and first 
     disbursed on or after January 1, 2000, and before July 1, 
     2003, for which the interest rate is determined under section 
     427A(k)(3), a special allowance shall not be paid for such 
     loan during any 12-month period beginning on July 1 and 
     ending on June 30 unless, on the June 1 preceding such July 
     1--

       ``(I) the bond equivalent rate of 91-day Treasury bills 
     auctioned at the final auction held prior to such June 1 (as 
     determined by the Secretary for purposes of such section); 
     plus
       ``(II) 3.1 percent,

     exceeds 9.0 percent.
       ``(vi) Limitation on special allowances for consolidation 
     loans.--In the case of consolidation loans made under section 
     428C and for which the application is received on or after 
     January 1, 2000, and before July 1, 2003, for which the 
     interest rate is determined under section 427A(k)(4), a 
     special allowance shall not be paid for such loan during any 
     3-month period ending March 31, June 30, September 30, or 
     December 31 unless--

       ``(I) the average of the bond equivalent rates of the 
     quotes of the 3-month commercial paper (financial) rates in 
     effect for each of the days in such quarter as reported by 
     the Federal Reserve in Publication H-15 (or its successor) 
     for such 3-month period; plus
       ``(II) 2.64 percent,

     exceeds the rate determined under section 427A(k)(4).''.
       (b) Effective Date.--Subparagraph (I) of section 438(b)(2) 
     of the Higher Education Act of 1965 (20 U.S.C. 1087-1(b)(2)) 
     as added by subsection (a) of this section shall apply with 
     respect to any payment pursuant to such section with respect 
     to any 3-month period beginning on or after January 1, 2000, 
     for loans for which the first disbursement is made after such 
     date.

     SEC. 410. SCHEDULE FOR PAYMENTS UNDER SSI STATE 
                   SUPPLEMENTATION AGREEMENTS.

       (a) Schedule for SSI Supplementation Payments.--
       (1) In general.--Section 1616(d) of the Social Security Act 
     (42 U.S.C. 1382e(d)) is amended--
       (A) in paragraph (1), by striking ``at such times and in 
     such installments as may be agreed upon between the 
     Commissioner of Social Security and such State'' and 
     inserting ``in accordance with paragraph (5)''; and
       (B) by adding at the end the following new paragraph:
       ``(5)(A)(i) Any State which has entered into an agreement 
     with the Commissioner of Social Security under this section 
     shall remit the payments and fees required under this 
     subsection with respect to monthly benefits paid to 
     individuals under this title no later than--
       ``(I) the business day preceding the date that the 
     Commissioner pays such monthly benefits; or
       ``(II) with respect to such monthly benefits paid for the 
     month that is the last month of the State's fiscal year, the 
     fifth business day following such date.
       ``(ii) The Commissioner may charge States a penalty in an 
     amount equal to 5 percent of the payment and the fees due if 
     the remittance is received after the date required by clause 
     (i).
       ``(B) The Cash Management Improvement Act of 1990 shall not 
     apply to any payments or fees required under this subsection 
     that are paid by a State before the date required by 
     subparagraph (A)(i).
       ``(C) Notwithstanding subparagraph (A)(i), the Commissioner 
     may make supplementary payments on behalf of a State with 
     funds appropriated for payment of benefits under this title, 
     and subsequently to be reimbursed for such payments by the 
     State at such times as the Commissioner and State may agree. 
     Such authority may be exercised only if extraordinary 
     circumstances affecting a State's ability to make payment 
     when required by subparagraph (A)(i) are determined by the 
     Commissioner to exist.''.
       (2) Amendment to section 212.--Section 212 of Public Law 
     93-66 (42 U.S.C. 1382 note) is amended--
       (A) in subsection (b)(3)(A), by striking ``at such times 
     and in such installments as may be agreed upon between the 
     Secretary and the State'' and inserting ``in accordance with 
     subparagraph (E)'';
       (B) by adding at the end of subsection (b)(3) the following 
     new subparagraph:
       ``(E)(i) Any State which has entered into an agreement with 
     the Commissioner of Social Security under this section shall 
     remit the payments and fees required under this paragraph 
     with respect to monthly benefits paid to individuals under 
     title XVI of the Social Security Act no later than--
       ``(I) the business day preceding the date that the 
     Commissioner pays such monthly benefits; or
       ``(II) with respect to such monthly benefits paid for the 
     month that is the last month of the State's fiscal year, the 
     fifth business day following such date.
       ``(ii) The Cash Management Improvement Act of 1990 shall 
     not apply to any payments or fees required under this 
     paragraph that are paid by a State before the date required 
     by clause (i).
       ``(iii) Notwithstanding clause (i), the Commissioner may 
     make supplementary payments on behalf of a State with funds 
     appropriated for payment of supplemental security income 
     benefits under title XVI of the Social Security Act, and 
     subsequently to be reimbursed for such payments by the State 
     at such times as the Commissioner and State may agree. Such 
     authority may be exercised only if extraordinary 
     circumstances affecting a State's ability to make payment 
     when required by clause (i) are determined by the 
     Commissioner to exist.''; and
       (C) by striking ``Secretary of Health, Education, and 
     Welfare'' and ``Secretary'' each place such term appear and 
     inserting ``Commissioner of Social Security''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to payments and fees arising under an agreement 
     between a State and the Commissioner of Social Security under 
     section 1616 of the Social Security Act (42 U.S.C. 1382e) or 
     under section 212 of Public Law 93-66 (42 U.S.C. 1382 note) 
     with respect to monthly benefits paid to individuals under 
     title XVI of the Social Security Act for months after 
     September 2009 (October 2009 in the case of a State with a 
     fiscal year that coincides with the Federal fiscal year), 
     without regard to whether the agreement has been modified to 
     reflect such amendments or the Commissioner has promulgated 
     regulations implementing such amendments.

     SEC. 411. BONUS COMMODITIES.

       Section 6(e)(1) of the Richard B. Russell National School 
     Lunch Act (42 U.S.C. 1755(e)(1)) is amended--
       (1) by striking ``in the form of commodity assistance'' and 
     inserting ``in the form of--
       ``(A) commodity assistance'';
       (2) by striking the period at the end and inserting ``; 
     or''; and
       (3) by adding at the end the following:
       ``(B) during the period beginning October 1, 2000, and 
     ending September 30, 2009, commodities provided by the 
     Secretary under any provision of law.''.

     SEC. 412. SIMPLIFICATION OF DEFINITION OF FOSTER CHILD UNDER 
                   EIC.

       (a) In General.--Section 32(c)(3)(B)(iii) of the Internal 
     Revenue Code of 1986 (defining eligible foster child) is 
     amended by redesignating subclauses (I) and (II) as 
     subclauses (II) and (III), respectively, and by inserting 
     before subclause (II), as so redesignated, the following:

       ``(I) is a brother, sister, stepbrother, or stepsister of 
     the taxpayer (or a descendant of any such relative) or is 
     placed with the taxpayer by an authorized placement 
     agency,''.

       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 413. DELAY OF EFFECTIVE DATE OF ORGAN PROCUREMENT AND 
                   TRANSPLANTATION NETWORK FINAL RULE.

       (a) In General.--The final rule entitled ``Organ 
     Procurement and Transplantation Network'', promulgated by the 
     Secretary of Health and Human Services on April 2, 1998 (63 
     Fed. Reg. 16295 et seq.) (relating to part 121 of title 42, 
     Code of Federal Regulations), together with the amendments to 
     such rules promulgated on October 20, 1999 (64 Fed. Reg. 
     56649 et seq.) shall not become effective before the 
     expiration of the 90-day period beginning on the date of the 
     enactment of this Act.
       (b) Notice and Review.--For purposes of subsection (a):
       (1) Not later than 3 days after the date of the enactment 
     of this Act, the Secretary of Health and Human Services 
     (referred to in this subsection as the ``Secretary'') shall 
     publish in the Federal Register a notice providing that the 
     period within which comments on the final rule may be 
     submitted to the Secretary is 60 days after the date of such 
     publication of the notice.
       (2) Not later than 21 days after the expiration of such 60-
     day period, the Secretary shall complete the review of the 
     comments submitted pursuant to paragraph (1) and shall amend 
     the final rule with any revisions appropriate according to 
     the review by the Secretary of such comments. The final rule 
     may be in the form of amendments to the rule referred to in 
     subsection (a) that was promulgated on April 2, 1998, and in 
     the form of amendments to the rule referred to in such 
     subsection that was promulgated on October 20, 1999.

               TITLE V--TAX RELIEF EXTENSION ACT OF 1999

     SEC. 500. SHORT TITLE OF TITLE.

       This title may be cited as the ``Tax Relief Extension Act 
     of 1999''.

                         Subtitle A--Extensions

     SEC. 501. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS AGAINST 
                   REGULAR AND MINIMUM TAX LIABILITY.

       (a) In General.--Subsection (a) of section 26 of the 
     Internal Revenue Code of 1986 (relating to limitation based 
     on amount of tax) is amended to read as follows:
       ``(a) Limitation Based on Amount of Tax.--
       ``(1) In general.--The aggregate amount of credits allowed 
     by this subpart for the taxable year shall not exceed the 
     excess (if any) of--
       ``(A) the taxpayer's regular tax liability for the taxable 
     year, over
       ``(B) the tentative minimum tax for the taxable year 
     (determined without regard to the alternative minimum tax 
     foreign tax credit).
     For purposes of subparagraph (B), the taxpayer's tentative 
     minimum tax for any taxable year beginning during 1999 shall 
     be treated as being zero.''.
       ``(2) Special rule for 2000 and 2001.--For purposes of any 
     taxable year beginning during

[[Page 30085]]

     2000 or 2001, the aggregate amount of credits allowed by this 
     subpart for the taxable year shall not exceed the sum of--
       ``(A) the taxpayer's regular tax liability for the taxable 
     year reduced by the foreign tax credit allowable under 
     section 27(a), and
       ``(B) the tax imposed by section 55(a) for the taxable 
     year.''.
       (b) Conforming Amendments.--
       (1) Section 24(d)(2) of such Code is amended by striking 
     ``1998'' and inserting ``2001''.
       (2) Section 904(h) of such Code is amended by adding at the 
     end the following: ``This subsection shall not apply to 
     taxable years beginning during 2000 or 2001.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1998.

     SEC. 502. RESEARCH CREDIT.

       (a) Extension.--
       (1) In general.--Paragraph (1) of section 41(h) of the 
     Internal Revenue Code of 1986 (relating to termination) is 
     amended--
       (A) by striking ``June 30, 1999'' and inserting ``June 30, 
     2004'', and
       (B) by striking the material following subparagraph (B).
       (2) Technical amendment.--Subparagraph (D) of section 
     45C(b)(1) of such Code is amended by striking ``June 30, 
     1999'' and inserting ``June 30, 2004''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to amounts paid or incurred after June 30, 1999.
       (b) Increase in Percentages Under Alternative Incremental 
     Credit.--
       (1) In general.--Subparagraph (A) of section 41(c)(4) of 
     such Code is amended--
       (A) by striking ``1.65 percent'' and inserting ``2.65 
     percent'',
       (B) by striking ``2.2 percent'' and inserting ``3.2 
     percent'', and
       (C) by striking ``2.75 percent'' and inserting ``3.75 
     percent''.
       (2) Effective date.--The amendments made by this subsection 
     shall apply to taxable years beginning after June 30, 1999.
       (c) Extension of Research Credit to Research in Puerto Rico 
     and the possessions of the United States.--
       (1) In general.--Subsections (c)(6) and (d)(4)(F) of 
     section 41 of such Code (relating to foreign research) are 
     each amended by inserting ``, the Commonwealth of Puerto 
     Rico, or any possession of the United States'' after ``United 
     States''.
       (2) Denial of double benefit.--Section 280C(c)(1) of such 
     Code is amended by inserting ``or credit'' after 
     ``deduction'' each place it appears.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to amounts paid or incurred after June 30, 1999.
       (d) Special Rule.--
       (1) In general.--For purposes of the Internal Revenue Code 
     of 1986, the credit determined under section 41 of such Code 
     which is otherwise allowable under such Code--
       (A) shall not be taken into account prior to October 1, 
     2000, to the extent such credit is attributable to the first 
     suspension period, and
       (B) shall not be taken into account prior to October 1, 
     2001, to the extent such credit is attributable to the second 
     suspension period.
     On or after the earliest date that an amount of credit may be 
     taken into account, such amount may be taken into account 
     through the filing of an amended return, an application for 
     expedited refund, an adjustment of estimated taxes, or other 
     means allowed by such Code.
       (2) Suspension periods.--For purposes of this subsection--
       (A) the first suspension period is the period beginning on 
     July 1, 1999, and ending on September 30, 2000, and
       (B) the second suspension period is the period beginning on 
     October 1, 2000, and ending on September 30, 2001.
       (3) Expedited refunds.--
       (A) In general.--If there is an overpayment of tax with 
     respect to a taxable year by reason of paragraph (1), the 
     taxpayer may file an application for a tentative refund of 
     such overpayment. Such application shall be in such manner 
     and form, and contain such information, as the Secretary may 
     prescribe.
       (B) Deadline for applications.--Subparagraph (A) shall 
     apply only to an application filed before the date which is 1 
     year after the close of the suspension period to which the 
     application relates.
       (C) Allowance of adjustments.--Not later than 90 days after 
     the date on which an application is filed under this 
     paragraph, the Secretary shall--
       (i) review the application,
       (ii) determine the amount of the overpayment, and
       (iii) apply, credit, or refund such overpayment,
     in a manner similar to the manner provided in section 6411(b) 
     of such Code.
       (D) Consolidated returns.--The provisions of section 
     6411(c) of such Code shall apply to an adjustment under this 
     paragraph in such manner as the Secretary may provide.
       (4) Credit attributable to suspension period.--
       (A) In general.--For purposes of this subsection, in the 
     case of a taxable year which includes a portion of the 
     suspension period, the amount of credit determined under 
     section 41 of such Code for such taxable year which is 
     attributable to such period is the amount which bears the 
     same ratio to the amount of credit determined under such 
     section 41 for such taxable year as the number of months in 
     the suspension period which are during such taxable year 
     bears to the number of months in such taxable year.
       (B) Waiver of estimated tax penalties.--No addition to tax 
     shall be made under section 6654 or 6655 of such Code for any 
     period before July 1, 1999, with respect to any underpayment 
     of tax imposed by such Code to the extent such underpayment 
     was created or increased by reason of subparagraph (A).
       (5) Secretary.--For purposes of this subsection, the term 
     ``Secretary'' means the Secretary of the Treasury (or such 
     Secretary's delegate).

     SEC. 503. SUBPART F EXEMPTION FOR ACTIVE FINANCING INCOME.

       (a) In General.--Sections 953(e)(10) and 954(h)(9) of the 
     Internal Revenue Code of 1986 (relating to application) are 
     each amended--
       (1) by striking ``the first taxable year'' and inserting 
     ``taxable years'',
       (2) by striking ``January 1, 2000'' and inserting ``January 
     1, 2002'', and
       (3) by striking ``within which such'' and inserting 
     ``within which any such''.
       (b) Technical Amendment.--Paragraph (10) of section 953(e) 
     of such Code is amended by adding at the end the following 
     new sentence: ``If this subsection does not apply to a 
     taxable year of a foreign corporation beginning after 
     December 31, 2001 (and taxable years of United States 
     shareholders ending with or within such taxable year), then, 
     notwithstanding the preceding sentence, subsection (a) shall 
     be applied to such taxable years in the same manner as it 
     would if the taxable year of the foreign corporation began in 
     1998.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 504. TAXABLE INCOME LIMIT ON PERCENTAGE DEPLETION FOR 
                   MARGINAL PRODUCTION.

       (a) In General.--Subparagraph (H) of section 613A(c)(6) of 
     the Internal Revenue Code of 1986 (relating to temporary 
     suspension of taxable limit with respect to marginal 
     production) is amended by striking ``January 1, 2000'' and 
     inserting ``January 1, 2002''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 505. WORK OPPORTUNITY CREDIT AND WELFARE-TO-WORK CREDIT.

       (a) Temporary Extension.--Sections 51(c)(4)(B) and 51A(f) 
     of the Internal Revenue Code of 1986 (relating to 
     termination) are each amended by striking ``June 30, 1999'' 
     and inserting ``December 31, 2001''.
       (b) Clarification of First Year of Employment.--Paragraph 
     (2) of section 51(i) of such Code is amended by striking 
     ``during which he was not a member of a targeted group''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to individuals who begin work for the employer 
     after June 30, 1999.

     SEC. 506. EMPLOYER-PROVIDED EDUCATIONAL ASSISTANCE.

       (a) In General.--Subsection (d) of section 127 of the 
     Internal Revenue Code of 1986 (relating to termination) is 
     amended by striking ``May 31, 2000'' and inserting ``December 
     31, 2001''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to courses beginning after May 31, 2000.

     SEC. 507. EXTENSION AND MODIFICATION OF CREDIT FOR PRODUCING 
                   ELECTRICITY FROM CERTAIN RENEWABLE RESOURCES.

       (a) Extension and Modification of Placed-in-Service 
     Rules.--Paragraph (3) of section 45(c) of the Internal 
     Revenue Code of 1986 is amended to read as follows:
       ``(3) Qualified facility.--
       ``(A) Wind facility.--In the case of a facility using wind 
     to produce electricity, the term `qualified facility' means 
     any facility owned by the taxpayer which is originally placed 
     in service after December 31, 1993, and before January 1, 
     2002.
       ``(B) Closed-loop biomass facility.--In the case of a 
     facility using closed-loop biomass to produce electricity, 
     the term `qualified facility' means any facility owned by the 
     taxpayer which is originally placed in service after December 
     31, 1992, and before January 1, 2002.
       ``(C) Poultry waste facility.--In the case of a facility 
     using poultry waste to produce electricity, the term 
     `qualified facility' means any facility of the taxpayer which 
     is originally placed in service after December 31, 1999, and 
     before January 1, 2002.''.
       (b) Expansion of Qualified Energy Resources.--
       (1) In general.--Section 45(c)(1) of such Code (defining 
     qualified energy resources) is amended by striking ``and'' at 
     the end of subparagraph (A), by striking the period at the 
     end of subparagraph (B) and inserting ``, and'', and by 
     adding at the end the following new subparagraph:
       ``(C) poultry waste.''.
       (2) Definition.--Section 45(c) of such Code is amended by 
     adding at the end the following new paragraph:
       ``(4) Poultry waste.--The term `poultry waste' means 
     poultry manure and litter, including wood shavings, straw, 
     rice hulls, and other bedding material for the disposition of 
     manure.''.
       (c) Special Rules.--Section 45(d) of such Code (relating to 
     definitions and special rules) is amended by adding at the 
     end the following new paragraphs:
       ``(6) Credit eligibility in the case of government-owned 
     facilities using poultry waste.--In the case of a facility 
     using poultry waste to produce electricity and owned by a 
     governmental unit, the person eligible for the

[[Page 30086]]

     credit under subsection (a) is the lessee or the operator of 
     such facility.
       ``(7) Credit not to apply to electricity sold to utilities 
     under certain contracts.--
       ``(A) In general.--The credit determined under subsection 
     (a) shall not apply to electricity--
       ``(i) produced at a qualified facility described in 
     paragraph (3)(A) which is placed in service by the taxpayer 
     after June 30, 1999, and
       ``(ii) sold to a utility pursuant to a contract originally 
     entered into before January 1, 1987 (whether or not amended 
     or restated after that date).
       ``(B) Exception.--Subparagraph (A) shall not apply if--
       ``(i) the prices for energy and capacity from such facility 
     are established pursuant to an amendment to the contract 
     referred to in subparagraph (A)(ii),
       ``(ii) such amendment provides that the prices set forth in 
     the contract which exceed avoided cost prices determined at 
     the time of delivery shall apply only to annual quantities of 
     electricity (prorated for partial years) which do not exceed 
     the greater of--

       ``(I) the average annual quantity of electricity sold to 
     the utility under the contract during calendar years 1994, 
     1995, 1996, 1997, and 1998, or
       ``(II) the estimate of the annual electricity production 
     set forth in the contract, or, if there is no such estimate, 
     the greatest annual quantity of electricity sold to the 
     utility under the contract in any of the calendar years 1996, 
     1997, or 1998, and

       ``(iii) such amendment provides that energy and capacity in 
     excess of the limitation in clause (ii) may be--

       ``(I) sold to the utility only at prices that do not exceed 
     avoided cost prices determined at the time of delivery, or
       ``(II) sold to a third party subject to a mutually agreed 
     upon advance notice to the utility.

     For purposes of this subparagraph, avoided cost prices shall 
     be determined as provided for in 18 CFR 292.304(d)(1) or any 
     successor regulation.''.
       (d) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 508. EXTENSION OF DUTY-FREE TREATMENT UNDER GENERALIZED 
                   SYSTEM OF PREFERENCES.

       (a) In General.--Section 505 of the Trade Act of 1974 (19 
     U.S.C. 2465) is amended by striking ``June 30, 1999'' and 
     inserting ``September 30, 2001''.
       (b) Effective Date.--
       (1) In general.--The amendment made by this section applies 
     to articles entered on or after the date of the enactment of 
     this Act.
       (2) Retroactive application for certain liquidations and 
     reliquidations.--
       (A) General rule.--Notwithstanding section 514 of the 
     Tariff Act of 1930 or any other provision of law, and subject 
     to paragraph (3), any entry--
       (i) of an article to which duty-free treatment under title 
     V of the Trade Act of 1974 would have applied if such entry 
     had been made on July 1, 1999, and such title had been in 
     effect on July 1, 1999, and
       (ii) that was made--

       (I) after June 30, 1999, and
       (II) before the date of 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.
       (B) Entry.--As used in this paragraph, the term ``entry'' 
     includes a withdrawal from warehouse for consumption.
       (3) Requests.--Liquidation or reliquidation may be made 
     under paragraph (2) with respect to an entry only if a 
     request therefore is filed with the Customs Service, within 
     180 days after the date of enactment of this Act, that 
     contains sufficient information to enable the Customs 
     Service--
       (A) to locate the entry, or
       (B) to reconstruct the entry if it cannot be located.

     SEC. 509. EXTENSION OF CREDIT FOR HOLDERS OF QUALIFIED ZONE 
                   ACADEMY BONDS.

       (a) In General.--Section 1397E(e)(1) of the Internal 
     Revenue Code of 1986 (relating to national limitation) is 
     amended by striking ``and 1999'' and inserting ``, 1999, 
     2000, and 2001''.
       (b) Limitation on Carryover Periods.--Paragraph (4) of 
     section 1397E(e) of such Code is amended by adding at the end 
     the following flush sentences:
     ``Any carryforward of a limitation amount may be carried only 
     to the first 2 years (3 years for carryforwards from 1998 or 
     1999) following the unused limitation year. For purposes of 
     the preceding sentence, a limitation amount shall be treated 
     as used on a first-in first-out basis.''

     SEC. 510. EXTENSION OF FIRST-TIME HOMEBUYER CREDIT FOR 
                   DISTRICT OF COLUMBIA.

       Section 1400C(i) of the Internal Revenue Code of 1986 is 
     amended by striking ``2001'' and inserting ``2002''.

     SEC. 511. EXTENSION OF EXPENSING OF ENVIRONMENTAL REMEDIATION 
                   COSTS.

       Section 198(h) of the Internal Revenue Code of 1986 is 
     amended by striking ``2000'' and inserting ``2001''.

     SEC. 512. TEMPORARY INCREASE IN AMOUNT OF RUM EXCISE TAX 
                   COVERED OVER TO PUERTO RICO AND VIRGIN ISLANDS.

       (a) In General.--Section 7652(f)(1) of the Internal Revenue 
     Code of 1986 (relating to limitation on cover over of tax on 
     distilled spirits) is amended to read as follows:
       ``(1) $10.50 ($13.25 in the case of distilled spirits 
     brought into the United States after June 30, 1999, and 
     before January 1, 2002), or''.
       (b) Special Cover Over Transfer Rules.--Notwithstanding 
     section 7652 of the Internal Revenue Code of 1986, the 
     following rules shall apply with respect to any transfer 
     before October 1, 2000, of amounts relating to the increase 
     in the cover over of taxes by reason of the amendment made by 
     subsection (a):
       (1) Initial transfer of incremental increase in cover 
     over.--The Secretary of the Treasury shall, within 15 days 
     after the date of the enactment of this Act, transfer an 
     amount equal to the lesser of--
       (A) the amount of such increase otherwise required to be 
     covered over after June 30, 1999, and before the date of the 
     enactment of this Act, or
       (B) $20,000,000.
       (2) Transfer of incremental increase for fiscal year 
     2001.--The Secretary of the Treasury shall on October 1, 
     2000, transfer an amount equal to the excess of--
       (A) the amount of such increase otherwise required to be 
     covered over after June 30, 1999, and before October 1, 2000, 
     over
       (B) the amount of the transfer described in paragraph (1).
       (c) Effective Date.--The amendment made by subsection (a) 
     shall take effect on July 1, 1999.

              Subtitle B--Other Time-Sensitive Provisions

     SEC. 521. ADVANCE PRICING AGREEMENTS TREATED AS CONFIDENTIAL 
                   TAXPAYER INFORMATION.

       (a) In General.--
       (1) Treatment as return information.--Paragraph (2) of 
     section 6103(b) of the Internal Revenue Code of 1986 
     (defining return information) is amended by striking ``and'' 
     at the end of subparagraph (A), by inserting ``and'' at the 
     end of subparagraph (B), and by inserting after subparagraph 
     (B) the following new subparagraph:
       ``(C) any advance pricing agreement entered into by a 
     taxpayer and the Secretary and any background information 
     related to such agreement or any application for an advance 
     pricing agreement,''.
       (2) Exception from public inspection as written 
     determination.--Paragraph (1) of section 6110(b) of such Code 
     (defining written determination) is amended by adding at the 
     end the following new sentence: ``Such term shall not include 
     any advance pricing agreement entered into by a taxpayer and 
     the Secretary and any background information related to such 
     agreement or any application for an advance pricing 
     agreement.''.
       (3) Effective date.--The amendments made by this subsection 
     shall take effect on the date of the enactment of this Act.
       (b) Annual Report Regarding Advance Pricing Agreements.--
       (1) In general.--Not later than 90 days after the end of 
     each calendar year, the Secretary of the Treasury shall 
     prepare and publish a report regarding advance pricing 
     agreements.
       (2) Contents of report.--The report shall include the 
     following for the calendar year to which such report relates:
       (A) Information about the structure, composition, and 
     operation of the advance pricing agreement program office.
       (B) A copy of each model advance pricing agreement.
       (C) The number of--
       (i) applications filed during such calendar year for 
     advance pricing agreements;
       (ii) advance pricing agreements executed cumulatively to 
     date and during such calendar year;
       (iii) renewals of advance pricing agreements issued;
       (iv) pending requests for advance pricing agreements;
       (v) pending renewals of advance pricing agreements;
       (vi) for each of the items in clauses (ii) through (v), the 
     number that are unilateral, bilateral, and multilateral, 
     respectively;
       (vii) advance pricing agreements revoked or canceled, and 
     the number of withdrawals from the advance pricing agreement 
     program; and
       (viii) advance pricing agreements finalized or renewed by 
     industry.
       (D) General descriptions of--
       (i) the nature of the relationships between the related 
     organizations, trades, or businesses covered by advance 
     pricing agreements;
       (ii) the covered transactions and the business functions 
     performed and risks assumed by such organizations, trades, or 
     businesses;
       (iii) the related organizations, trades, or businesses 
     whose prices or results are tested to determine compliance 
     with transfer pricing methodologies prescribed in advance 
     pricing agreements;
       (iv) methodologies used to evaluate tested parties and 
     transactions and the circumstances leading to the use of 
     those methodologies;
       (v) critical assumptions made and sources of comparables 
     used;
       (vi) comparable selection criteria and the rationale used 
     in determining such criteria;
       (vii) the nature of adjustments to comparables or tested 
     parties;
       (viii) the nature of any ranges agreed to, including 
     information regarding when no range was used and why, when 
     interquartile ranges were used, and when there was a 
     statistical narrowing of the comparables;
       (ix) adjustment mechanisms provided to rectify results that 
     fall outside of the agreed upon advance pricing agreement 
     range;

[[Page 30087]]

       (x) the various term lengths for advance pricing 
     agreements, including rollback years, and the number of 
     advance pricing agreements with each such term length;
       (xi) the nature of documentation required; and
       (xii) approaches for sharing of currency or other risks.
       (E) Statistics regarding the amount of time taken to 
     complete new and renewal advance pricing agreements.
       (F) A detailed description of the Secretary of the 
     Treasury's efforts to ensure compliance with existing advance 
     pricing agreements.
       (3) Confidentiality.--The reports required by this 
     subsection shall be treated as authorized by the Internal 
     Revenue Code of 1986 for purposes of section 6103 of such 
     Code, but the reports shall not include information--
       (A) which would not be permitted to be disclosed under 
     section 6110(c) of such Code if such report were a written 
     determination as defined in section 6110 of such Code, or
       (B) which can be associated with, or otherwise identify, 
     directly or indirectly, a particular taxpayer.
       (4) First report.--The report for calendar year 1999 shall 
     include prior calendar years after 1990.
       (c) Regulations.--The Secretary of the Treasury or the 
     Secretary's delegate shall prescribe such regulations as may 
     be necessary or appropriate to carry out the purposes of 
     section 6103(b)(2)(C), and the last sentence of section 
     6110(b)(1), of the Internal Revenue Code of 1986, as added by 
     this section.

     SEC. 522. AUTHORITY TO POSTPONE CERTAIN TAX-RELATED DEADLINES 
                   BY REASON OF Y2K FAILURES.

       (a) In General.--In the case of a taxpayer determined by 
     the Secretary of the Treasury (or the Secretary's delegate) 
     to be affected by a Y2K failure, the Secretary may disregard 
     a period of up to 90 days in determining, under the internal 
     revenue laws, in respect of any tax liability (including any 
     interest, penalty, additional amount, or addition to the tax) 
     of such taxpayer--
       (1) whether any of the acts described in paragraph (1) of 
     section 7508(a) of the Internal Revenue Code of 1986 (without 
     regard to the exceptions in parentheses in subparagraphs (A) 
     and (B)) were performed within the time prescribed therefor, 
     and
       (2) the amount of any credit or refund.
       (b) Applicability of Certain Rules.--For purposes of this 
     section, rules similar to the rules of subsections (b) and 
     (e) of section 7508 of the Internal Revenue Code of 1986 
     shall apply.

     SEC. 523. INCLUSION OF CERTAIN VACCINES AGAINST STREPTOCOCCUS 
                   PNEUMONIAE TO LIST OF TAXABLE VACCINES.

       (a) Inclusion of Vaccines.--
       (1) In general.--Section 4132(a)(1) of the Internal Revenue 
     Code of 1986 (defining taxable vaccine) is amended by adding 
     at the end the following new subparagraph:
       ``(L) Any conjugate vaccine against streptococcus 
     pneumoniae.''.
       (2) Effective date.--
       (A) Sales.--The amendment made by this subsection shall 
     apply to vaccine sales after the date of the enactment of 
     this Act, but shall not take effect if subsection (b) does 
     not take effect.
       (B) Deliveries.--For purposes of subparagraph (A), in the 
     case of sales on or before the date described in such 
     subparagraph for which delivery is made after such date, the 
     delivery date shall be considered the sale date.
       (b) Vaccine Tax and Trust Fund Amendments.--
       (1) Sections 1503 and 1504 of the Vaccine Injury 
     Compensation Program Modification Act (and the amendments 
     made by such sections) are hereby repealed.
       (2) Subparagraph (A) of section 9510(c)(1) of such Code is 
     amended by striking ``August 5, 1997'' and inserting 
     ``December 31, 1999''.
       (3) The amendments made by this subsection shall take 
     effect as if included in the provisions of the Omnibus 
     Consolidated and Emergency Supplemental Appropriations Act, 
     1999 to which they relate.
       (c) Report.--Not later than January 31, 2000, the 
     Comptroller General of the United States shall prepare and 
     submit a report to the Committee on Ways and Means of the 
     House of Representatives and the Committee on Finance of the 
     Senate on the operation of the Vaccine Injury Compensation 
     Trust Fund and on the adequacy of such Fund to meet future 
     claims made under the Vaccine Injury Compensation Program.

     SEC. 524. DELAY IN EFFECTIVE DATE OF REQUIREMENT FOR APPROVED 
                   DIESEL OR KEROSENE TERMINALS.

       Paragraph (2) of section 1032(f) of the Taxpayer Relief Act 
     of 1997 is amended by striking ``July 1, 2000'' and inserting 
     ``January 1, 2002''.

     SEC. 525. PRODUCTION FLEXIBILITY CONTRACT PAYMENTS.

       Any option to accelerate the receipt of any payment under a 
     production flexibility contract which is payable under the 
     Federal Agriculture Improvement and Reform Act of 1996 (7 
     U.S.C. 7200 et seq.), as in effect on the date of the 
     enactment of this Act, shall be disregarded in determining 
     the taxable year for which such payment is properly 
     includible in gross income for purposes of the Internal 
     Revenue Code of 1986.

                      Subtitle C--Revenue Offsets

                       PART I--GENERAL PROVISIONS

     SEC. 531. MODIFICATION OF ESTIMATED TAX SAFE HARBOR.

         (a) In General.--The table contained in clause (i) of 
     section 6654(d)(1)(C) of the Internal Revenue Code of 1986 
     (relating to limitation on use of preceding year's tax) is 
     amended by striking the items relating to 1999 and 2000 and 
     inserting the following new items:

  ``1999.....................................................108.6 ....

  2000.......................................................110''.....

       (b) Effective Date.--The amendment made by this section 
     shall apply with respect to any installment payment for 
     taxable years beginning after December 31, 1999.

     SEC. 532. CLARIFICATION OF TAX TREATMENT OF INCOME AND LOSS 
                   ON DERIVATIVES.

       (a) In General.--Section 1221 of the Internal Revenue Code 
     of 1986 (defining capital assets) is amended--
       (1) by striking ``For purposes'' and inserting the 
     following:
       ``(a) In General.--For purposes'',
       (2) by striking the period at the end of paragraph (5) and 
     inserting a semicolon, and
       (3) by adding at the end the following:
       ``(6) any commodities derivative financial instrument held 
     by a commodities derivatives dealer, unless--
       ``(A) it is established to the satisfaction of the 
     Secretary that such instrument has no connection to the 
     activities of such dealer as a dealer, and
       ``(B) such instrument is clearly identified in such 
     dealer's records as being described in subparagraph (A) 
     before the close of the day on which it was acquired, 
     originated, or entered into (or such other time as the 
     Secretary may by regulations prescribe);
       ``(7) any hedging transaction which is clearly identified 
     as such before the close of the day on which it was acquired, 
     originated, or entered into (or such other time as the 
     Secretary may by regulations prescribe); or
       ``(8) supplies of a type regularly used or consumed by the 
     taxpayer in the ordinary course of a trade or business of the 
     taxpayer.
       ``(b) Definitions and Special Rules.--
       ``(1) Commodities derivative financial instruments.--For 
     purposes of subsection (a)(6)--
       ``(A) Commodities derivatives dealer.--The term 
     `commodities derivatives dealer' means a person which 
     regularly offers to enter into, assume, offset, assign, or 
     terminate positions in commodities derivative financial 
     instruments with customers in the ordinary course of a trade 
     or business.
       ``(B) Commodities derivative financial instrument.--
       ``(i) In general.--The term `commodities derivative 
     financial instrument' means any contract or financial 
     instrument with respect to commodities (other than a share of 
     stock in a corporation, a beneficial interest in a 
     partnership or trust, a note, bond, debenture, or other 
     evidence of indebtedness, or a section 1256 contract (as 
     defined in section 1256(b)), the value or settlement price of 
     which is calculated by or determined by reference to a 
     specified index.
       ``(ii) Specified index.--The term `specified index' means 
     any one or more or any combination of--

       ``(I) a fixed rate, price, or amount, or
       ``(II) a variable rate, price, or amount,

     which is based on any current, objectively determinable 
     financial or economic information with respect to commodities 
     which is not within the control of any of the parties to the 
     contract or instrument and is not unique to any of the 
     parties' circumstances.
       ``(2) Hedging transaction.--
       ``(A) In general.--For purposes of this section, the term 
     `hedging transaction' means any transaction entered into by 
     the taxpayer in the normal course of the taxpayer's trade or 
     business primarily--
       ``(i) to manage risk of price changes or currency 
     fluctuations with respect to ordinary property which is held 
     or to be held by the taxpayer,
       ``(ii) to manage risk of interest rate or price changes or 
     currency fluctuations with respect to borrowings made or to 
     be made, or ordinary obligations incurred or to be incurred, 
     by the taxpayer, or
       ``(iii) to manage such other risks as the Secretary may 
     prescribe in regulations.
       ``(B) Treatment of nonidentification or improper 
     identification of hedging transactions.--Notwithstanding 
     subsection (a)(7), the Secretary shall prescribe regulations 
     to properly characterize any income, gain, expense, or loss 
     arising from a transaction--
       ``(i) which is a hedging transaction but which was not 
     identified as such in accordance with subsection (a)(7), or
       ``(ii) which was so identified but is not a hedging 
     transaction.
       ``(3) Regulations.--The Secretary shall prescribe such 
     regulations as are appropriate to carry out the purposes of 
     paragraph (6) and (7) of subsection (a) in the case of 
     transactions involving related parties.''.
       (b) Management of Risk.--
       (1) Section 475(c)(3) of such Code is amended by striking 
     ``reduces'' and inserting ``manages''.
       (2) Section 871(h)(4)(C)(iv) of such Code is amended by 
     striking ``to reduce'' and inserting ``to manage''.
       (3) Clauses (i) and (ii) of section 988(d)(2)(A) of such 
     Code are each amended by striking ``to reduce'' and inserting 
     ``to manage''.
       (4) Paragraph (2) of section 1256(e) of such Code is 
     amended to read as follows:
       ``(2) Definition of hedging transaction.--For purposes of 
     this subsection, the term `hedging transaction' means any 
     hedging transaction (as defined in section 1221(b)(2)(A)) if, 
     before the close of the day on which such transaction was 
     entered into (or such earlier time as the Secretary may 
     prescribe by regulations), the taxpayer clearly identifies 
     such transaction as being a hedging transaction.''.

[[Page 30088]]

       (c) Conforming Amendments.--
       (1) Each of the following sections of such Code are amended 
     by striking ``section 1221'' and inserting ``section 
     1221(a)'':
       (A) Section 170(e)(3)(A).
       (B) Section 170(e)(4)(B).
       (C) Section 367(a)(3)(B)(i).
       (D) Section 818(c)(3).
       (E) Section 865(i)(1).
       (F) Section 1092(a)(3)(B)(ii)(II).
       (G) Subparagraphs (C) and (D) of section 1231(b)(1).
       (H) Section 1234(a)(3)(A).
       (2) Each of the following sections of such Code are amended 
     by striking ``section 1221(1)'' and inserting ``section 
     1221(a)(1)'':
       (A) Section 198(c)(1)(A)(i).
       (B) Section 263A(b)(2)(A).
       (C) Clauses (i) and (iii) of section 267(f)(3)(B).
       (D) Section 341(d)(3).
       (E) Section 543(a)(1)(D)(i).
       (F) Section 751(d)(1).
       (G) Section 775(c).
       (H) Section 856(c)(2)(D).
       (I) Section 856(c)(3)(C).
       (J) Section 856(e)(1).
       (K) Section 856( j)(2)(B).
       (L) Section 857(b)(4)(B)(i).
       (M) Section 857(b)(6)(B)(iii).
       (N) Section 864(c)(4)(B)(iii).
       (O) Section 864(d)(3)(A).
       (P) Section 864(d)(6)(A).
       (Q) Section 954(c)(1)(B)(iii).
       (R) Section 995(b)(1)(C).
       (S) Section 1017(b)(3)(E)(i).
       (T) Section 1362(d)(3)(C)(ii).
       (U) Section 4662(c)(2)(C).
       (V) Section 7704(c)(3).
       (W) Section 7704(d)(1)(D).
       (X) Section 7704(d)(1)(G).
       (Y) Section 7704(d)(5).
       (3) Section 818(b)(2) of such Code is amended by striking 
     ``section 1221(2)'' and inserting ``section 1221(a)(2)''.
       (4) Section 1397B(e)(2) of such Code is amended by striking 
     ``section 1221(4)'' and inserting ``section 1221(a)(4)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to any instrument held, acquired, or entered 
     into, any transaction entered into, and supplies held or 
     acquired on or after the date of the enactment of this Act.

     SEC. 533. EXPANSION OF REPORTING OF CANCELLATION OF 
                   INDEBTEDNESS INCOME.

       (a) In General.--Paragraph (2) of section 6050P(c) of the 
     Internal Revenue Code of 1986 (relating to definitions and 
     special rules) 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 inserting 
     after subparagraph (C) the following new subparagraph:
       ``(D) any organization a significant trade or business of 
     which is the lending of money.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to discharges of indebtedness after December 31, 
     1999.

     SEC. 534. LIMITATION ON CONVERSION OF CHARACTER OF INCOME 
                   FROM CONSTRUCTIVE OWNERSHIP TRANSACTIONS.

       (a) In General.--Part IV of subchapter P of chapter 1 of 
     the Internal Revenue Code of 1986 (relating to special rules 
     for determining capital gains and losses) is amended by 
     inserting after section 1259 the following new section:

     ``SEC. 1260. GAINS FROM CONSTRUCTIVE OWNERSHIP TRANSACTIONS.

       ``(a) In General.--If the taxpayer has gain from a 
     constructive ownership transaction with respect to any 
     financial asset and such gain would (without regard to this 
     section) be treated as a long-term capital gain--
       ``(1) such gain shall be treated as ordinary income to the 
     extent that such gain exceeds the net underlying long-term 
     capital gain, and
       ``(2) to the extent such gain is treated as a long-term 
     capital gain after the application of paragraph (1), the 
     determination of the capital gain rate (or rates) applicable 
     to such gain under section 1(h) shall be determined on the 
     basis of the respective rate (or rates) that would have been 
     applicable to the net underlying long-term capital gain.
       ``(b) Interest Charge on Deferral of Gain Recognition.--
       ``(1) In general.--If any gain is treated as ordinary 
     income for any taxable year by reason of subsection (a)(1), 
     the tax imposed by this chapter for such taxable year shall 
     be increased by the amount of interest determined under 
     paragraph (2) with respect to each prior taxable year during 
     any portion of which the constructive ownership transaction 
     was open. Any amount payable under this paragraph shall be 
     taken into account in computing the amount of any deduction 
     allowable to the taxpayer for interest paid or accrued during 
     such taxable year.
       ``(2) Amount of interest.--The amount of interest 
     determined under this paragraph with respect to a prior 
     taxable year is the amount of interest which would have been 
     imposed under section 6601 on the underpayment of tax for 
     such year which would have resulted if the gain (which is 
     treated as ordinary income by reason of subsection (a)(1)) 
     had been included in gross income in the taxable years in 
     which it accrued (determined by treating the income as 
     accruing at a constant rate equal to the applicable Federal 
     rate as in effect on the day the transaction closed). The 
     period during which such interest shall accrue shall end on 
     the due date (without extensions) for the return of tax 
     imposed by this chapter for the taxable year in which such 
     transaction closed.
       ``(3) Applicable federal rate.--For purposes of paragraph 
     (2), the applicable Federal rate is the applicable Federal 
     rate determined under section 1274(d) (compounded 
     semiannually) which would apply to a debt instrument with a 
     term equal to the period the transaction was open.
       ``(4) No credits against increase in tax.--Any increase in 
     tax under paragraph (1) shall not be treated as tax imposed 
     by this chapter for purposes of determining--
       ``(A) the amount of any credit allowable under this 
     chapter, or
       ``(B) the amount of the tax imposed by section 55.
       ``(c) Financial Asset.--For purposes of this section--
       ``(1) In general.--The term `financial asset' means--
       ``(A) any equity interest in any pass-thru entity, and
       ``(B) to the extent provided in regulations--
       ``(i) any debt instrument, and
       ``(ii) any stock in a corporation which is not a pass-thru 
     entity.
       ``(2) Pass-thru entity.--For purposes of paragraph (1), the 
     term `pass-thru entity' means--
       ``(A) a regulated investment company,
       ``(B) a real estate investment trust,
       ``(C) an S corporation,
       ``(D) a partnership,
       ``(E) a trust,
       ``(F) a common trust fund,
       ``(G) a passive foreign investment company (as defined in 
     section 1297 without regard to subsection (e) thereof),
       ``(H) a foreign personal holding company,
       ``(I) a foreign investment company (as defined in section 
     1246(b)), and
       ``(J) a REMIC.
       ``(d) Constructive Ownership Transaction.--For purposes of 
     this section--
       ``(1) In general.--The taxpayer shall be treated as having 
     entered into a constructive ownership transaction with 
     respect to any financial asset if the taxpayer--
       ``(A) holds a long position under a notional principal 
     contract with respect to the financial asset,
       ``(B) enters into a forward or futures contract to acquire 
     the financial asset,
       ``(C) is the holder of a call option, and is the grantor of 
     a put option, with respect to the financial asset and such 
     options have substantially equal strike prices and 
     substantially contemporaneous maturity dates, or
       ``(D) to the extent provided in regulations prescribed by 
     the Secretary, enters into one or more other transactions (or 
     acquires one or more positions) that have substantially the 
     same effect as a transaction described in any of the 
     preceding subparagraphs.
       ``(2) Exception for positions which are marked to market.--
     This section shall not apply to any constructive ownership 
     transaction if all of the positions which are part of such 
     transaction are marked to market under any provision of this 
     title or the regulations thereunder.
       ``(3) Long position under notional principal contract.--A 
     person shall be treated as holding a long position under a 
     notional principal contract with respect to any financial 
     asset if such person--
       ``(A) has the right to be paid (or receive credit for) all 
     or substantially all of the investment yield (including 
     appreciation) on such financial asset for a specified period, 
     and
       ``(B) is obligated to reimburse (or provide credit for) all 
     or substantially all of any decline in the value of such 
     financial asset.
       ``(4) Forward contract.--The term `forward contract' means 
     any contract to acquire in the future (or provide or receive 
     credit for the future value of) any financial asset.
       ``(e) Net Underlying Long-Term Capital Gain.--For purposes 
     of this section, in the case of any constructive ownership 
     transaction with respect to any financial asset, the term 
     `net underlying long-term capital gain' means the aggregate 
     net capital gain that the taxpayer would have had if--
       ``(1) the financial asset had been acquired for fair market 
     value on the date such transaction was opened and sold for 
     fair market value on the date such transaction was closed, 
     and
       ``(2) only gains and losses that would have resulted from 
     the deemed ownership under paragraph (1) were taken into 
     account.
     The amount of the net underlying long-term capital gain with 
     respect to any financial asset shall be treated as zero 
     unless the amount thereof is established by clear and 
     convincing evidence.
       ``(f ) Special Rule Where Taxpayer Takes Delivery.--Except 
     as provided in regulations prescribed by the Secretary, if a 
     constructive ownership transaction is closed by reason of 
     taking delivery, this section shall be applied as if the 
     taxpayer had sold all the contracts, options, or other 
     positions which are part of such transaction for fair market 
     value on the closing date. The amount of gain recognized 
     under the preceding sentence shall not exceed the amount of 
     gain treated as ordinary income under subsection (a). Proper 
     adjustments shall be made in the amount of any gain or loss 
     subsequently realized for gain recognized and treated as 
     ordinary income under this subsection.
       ``(g) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section, including regulations--
       ``(1) to permit taxpayers to mark to market constructive 
     ownership transactions in lieu of applying this section, and

[[Page 30089]]

       ``(2) to exclude certain forward contracts which do not 
     convey substantially all of the economic return with respect 
     to a financial asset.''.
       (b) Clerical Amendment.--The table of sections for part IV 
     of subchapter P of chapter 1 of such Code is amended by 
     adding at the end the following new item:

``Sec. 1260. Gains from constructive ownership transactions.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to transactions entered into after July 11, 1999.

     SEC. 535. TREATMENT OF EXCESS PENSION ASSETS USED FOR RETIREE 
                   HEALTH BENEFITS.

       (a) Extension.--
       (1) In general.--Paragraph (5) of section 420(b) of the 
     Internal Revenue Code of 1986 (relating to expiration) is 
     amended by striking ``in any taxable year beginning after 
     December 31, 2000'' and inserting ``made after December 31, 
     2005''.
       (2) Conforming amendments.--
       (A) Section 101(e)(3) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1021(e)(3)) is amended by 
     striking ``January 1, 1995'' and inserting ``the date of the 
     enactment of the Tax Relief Extension Act of 1999''.
       (B) Section 403(c)(1) 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 Tax Relief Extension Act of 
     1999''.
       (C) Paragraph (13) of section 408(b) of such Act (29 U.S.C. 
     1108(b)(13)) is amended--
       (i) by striking ``in a taxable year beginning before 
     January 1, 2001'' and inserting ``made before January 1, 
     2006'', and
       (ii) by striking ``January 1, 1995'' and inserting ``the 
     date of the enactment of the Tax Relief Extension Act of 
     1999''.
       (b) Application of Minimum Cost Requirements.--
       (1) In general.--Paragraph (3) of section 420(c) of the 
     Internal Revenue Code of 1986 is amended to read as follows:
       ``(3) Minimum cost requirements.--
       ``(A) In general.--The requirements of this paragraph are 
     met if each group health plan or arrangement under which 
     applicable health benefits are provided provides that the 
     applicable employer cost for each taxable year during the 
     cost maintenance period shall not be less than the higher of 
     the applicable employer costs for each of the 2 taxable years 
     immediately preceding the taxable year of the qualified 
     transfer.
       ``(B) Applicable employer cost.--For purposes of this 
     paragraph, the term `applicable employer cost' means, with 
     respect to any taxable year, the amount determined by 
     dividing--
       ``(i) the qualified current retiree health liabilities of 
     the employer for such taxable year determined--

       ``(I) without regard to any reduction under subsection 
     (e)(1)(B), and
       ``(II) in the case of a taxable year in which there was no 
     qualified transfer, in the same manner as if there had been 
     such a transfer at the end of the taxable year, by

       ``(ii) the number of individuals to whom coverage for 
     applicable health benefits was provided during such taxable 
     year.
       ``(C) Election to compute cost separately.--An employer may 
     elect to have this paragraph applied separately with respect 
     to individuals eligible for benefits under title XVIII of the 
     Social Security Act at any time during the taxable year and 
     with respect to individuals not so eligible.
       ``(D) Cost maintenance period.--For purposes of this 
     paragraph, the term `cost maintenance period' means the 
     period of 5 taxable years beginning with the taxable year in 
     which the qualified transfer occurs. If a taxable year is in 
     two or more overlapping cost maintenance periods, this 
     paragraph shall be applied by taking into account the highest 
     applicable employer cost required to be provided under 
     subparagraph (A) for such taxable year.
       ``(E) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to prevent an employer who 
     significantly reduces retiree health coverage during the cost 
     maintenance period from being treated as satisfying the 
     minimum cost requirement of this subsection.''.
       (2) Conforming amendments.--
       (A) Clause (iii) of section 420(b)(1)(C) of such Code is 
     amended by striking ``benefits'' and inserting ``cost''.
       (B) Subparagraph (D) of section 420(e)(1) of such Code is 
     amended by striking ``and shall not be subject to the minimum 
     benefit requirements of subsection (c)(3)'' and inserting 
     ``or in calculating applicable employer cost under subsection 
     (c)(3)(B)''.
       (c) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to qualified transfers occurring after the date of the 
     enactment of this Act.
       (2) Transition rule.--If the cost maintenance period for 
     any qualified transfer after the date of the enactment of 
     this Act includes any portion of a benefit maintenance period 
     for any qualified transfer on or before such date, the 
     amendments made by subsection (b) shall not apply to such 
     portion of the cost maintenance period (and such portion 
     shall be treated as a benefit maintenance period).

     SEC. 536. MODIFICATION OF INSTALLMENT METHOD AND REPEAL OF 
                   INSTALLMENT METHOD FOR ACCRUAL METHOD 
                   TAXPAYERS.

       (a) Repeal of Installment Method for Accrual Basis 
     Taxpayers.--
       (1) In general.--Subsection (a) of section 453 of the 
     Internal Revenue Code of 1986 (relating to installment 
     method) is amended to read as follows:
       ``(a) Use of Installment Method.--
       ``(1) In general.--Except as otherwise provided in this 
     section, income from an installment sale shall be taken into 
     account for purposes of this title under the installment 
     method.
       ``(2) Accrual method taxpayer.--The installment method 
     shall not apply to income from an installment sale if such 
     income would be reported under an accrual method of 
     accounting without regard to this section. The preceding 
     sentence shall not apply to a disposition described in 
     subparagraph (A) or (B) of subsection (l)(2).''.
       (2) Conforming amendments.--Sections 453(d)(1), 453(i)(1), 
     and 453(k) of such Code are each amended by striking ``(a)'' 
     each place it appears and inserting ``(a)(1)''.
       (b) Modification of Pledge Rules.--Paragraph (4) of section 
     453A(d) of such Code (relating to pledges, etc., of 
     installment obligations) is amended by adding at the end the 
     following: ``A payment shall be treated as directly secured 
     by an interest in an installment obligation to the extent an 
     arrangement allows the taxpayer to satisfy all or a portion 
     of the indebtedness with the installment obligation.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to sales or other dispositions occurring on or 
     after the date of the enactment of this Act.

     SEC. 537. DENIAL OF CHARITABLE CONTRIBUTION DEDUCTION FOR 
                   TRANSFERS ASSOCIATED WITH SPLIT-DOLLAR 
                   INSURANCE ARRANGEMENTS.

       (a) In General.--Subsection (f ) of section 170 of the 
     Internal Revenue Code of 1986 (relating to disallowance of 
     deduction in certain cases and special rules) is amended by 
     adding at the end the following new paragraph:
       ``(10) Split-dollar life insurance, annuity, and endowment 
     contracts.--
       ``(A) In general.--Nothing in this section or in section 
     545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), or 2522 shall 
     be construed to allow a deduction, and no deduction shall be 
     allowed, for any transfer to or for the use of an 
     organization described in subsection (c) if in connection 
     with such transfer--
       ``(i) the organization directly or indirectly pays, or has 
     previously paid, any premium on any personal benefit contract 
     with respect to the transferor, or
       ``(ii) there is an understanding or expectation that any 
     person will directly or indirectly pay any premium on any 
     personal benefit contract with respect to the transferor.
       ``(B) Personal benefit contract.--For purposes of 
     subparagraph (A), the term `personal benefit contract' means, 
     with respect to the transferor, any life insurance, annuity, 
     or endowment contract if any direct or indirect beneficiary 
     under such contract is the transferor, any member of the 
     transferor's family, or any other person (other than an 
     organization described in subsection (c)) designated by the 
     transferor.
       ``(C) Application to charitable remainder trusts.--In the 
     case of a transfer to a trust referred to in subparagraph 
     (E), references in subparagraphs (A) and (F) to an 
     organization described in subsection (c) shall be treated as 
     a reference to such trust.
       ``(D) Exception for certain annuity contracts.--If, in 
     connection with a transfer to or for the use of an 
     organization described in subsection (c), such organization 
     incurs an obligation to pay a charitable gift annuity (as 
     defined in section 501(m)) and such organization purchases 
     any annuity contract to fund such obligation, persons 
     receiving payments under the charitable gift annuity shall 
     not be treated for purposes of subparagraph (B) as indirect 
     beneficiaries under such contract if--
       ``(i) such organization possesses all of the incidents of 
     ownership under such contract,
       ``(ii) such organization is entitled to all the payments 
     under such contract, and
       ``(iii) the timing and amount of payments under such 
     contract are substantially the same as the timing and amount 
     of payments to each such person under such obligation (as 
     such obligation is in effect at the time of such transfer).
       ``(E) Exception for certain contracts held by charitable 
     remainder trusts.--A person shall not be treated for purposes 
     of subparagraph (B) as an indirect beneficiary under any life 
     insurance, annuity, or endowment contract held by a 
     charitable remainder annuity trust or a charitable remainder 
     unitrust (as defined in section 664(d)) solely by reason of 
     being entitled to any payment referred to in paragraph (1)(A) 
     or (2)(A) of section 664(d) if--
       ``(i) such trust possesses all of the incidents of 
     ownership under such contract, and
       ``(ii) such trust is entitled to all the payments under 
     such contract.
       ``(F) Excise tax on premiums paid.--
       ``(i) In general.--There is hereby imposed on any 
     organization described in subsection (c) an excise tax equal 
     to the premiums paid by such organization on any life 
     insurance, annuity, or endowment contract if the payment of 
     premiums on such contract is in connection with a transfer 
     for which a deduction is not allowable under subparagraph 
     (A), determined without regard to when such transfer is made.
       ``(ii) Payments by other persons.--For purposes of clause 
     (i), payments made by any other person pursuant to an 
     understanding or expectation referred to in subparagraph (A) 
     shall be treated as made by the organization.
       ``(iii) Reporting.--Any organization on which tax is 
     imposed by clause (i) with respect

[[Page 30090]]

     to any premium shall file an annual return which includes--

       ``(I) the amount of such premiums paid during the year and 
     the name and TIN of each beneficiary under the contract to 
     which the premium relates, and
       ``(II) such other information as the Secretary may require.

     The penalties applicable to returns required under section 
     6033 shall apply to returns required under this clause. 
     Returns required under this clause shall be furnished at such 
     time and in such manner as the Secretary shall by forms or 
     regulations require.
       ``(iv) Certain rules to apply.--The tax imposed by this 
     subparagraph shall be treated as imposed by chapter 42 for 
     purposes of this title other than subchapter B of chapter 42.
       ``(G) Special rule where state requires specification of 
     charitable gift annuitant in contract.--In the case of an 
     obligation to pay a charitable gift annuity referred to in 
     subparagraph (D) which is entered into under the laws of a 
     State which requires, in order for the charitable gift 
     annuity to be exempt from insurance regulation by such State, 
     that each beneficiary under the charitable gift annuity be 
     named as a beneficiary under an annuity contract issued by an 
     insurance company authorized to transact business in such 
     State, the requirements of clauses (i) and (ii) of 
     subparagraph (D) shall be treated as met if--
       ``(i) such State law requirement was in effect on February 
     8, 1999,
       ``(ii) each such beneficiary under the charitable gift 
     annuity is a bona fide resident of such State at the time the 
     obligation to pay a charitable gift annuity is entered into, 
     and
       ``(iii) the only persons entitled to payments under such 
     contract are persons entitled to payments as beneficiaries 
     under such obligation on the date such obligation is entered 
     into.
       ``(H) Member of family.--For purposes of this paragraph, an 
     individual's family consists of the individual's 
     grandparents, the grandparents of such individual's spouse, 
     the lineal descendants of such grandparents, and any spouse 
     of such a lineal descendant.
       ``(I) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this paragraph, including regulations to 
     prevent the avoidance of such purposes.''.
       (b) Effective Dates.--
       (1) In general.--Except as otherwise provided in this 
     section, the amendment made by this section shall apply to 
     transfers made after February 8, 1999.
       (2) Excise tax.--Except as provided in paragraph (3) of 
     this subsection, section 170(f )(10)(F) of the Internal 
     Revenue Code of 1986 (as added by this section) shall apply 
     to premiums paid after the date of the enactment of this Act.
       (3) Reporting.--Clause (iii) of such section 170(f )(10)(F) 
     shall apply to premiums paid after February 8, 1999 
     (determined as if the tax imposed by such section applies to 
     premiums paid after such date).

     SEC. 538. DISTRIBUTIONS BY A PARTNERSHIP TO A CORPORATE 
                   PARTNER OF STOCK IN ANOTHER CORPORATION.

       (a) In General.--Section 732 of the Internal Revenue Code 
     of 1986 (relating to basis of distributed property other than 
     money) is amended by adding at the end the following new 
     subsection:
       ``(f) Corresponding Adjustment to Basis of Assets of a 
     Distributed Corporation Controlled by a Corporate Partner.--
       ``(1) In general.--If--
       ``(A) a corporation (hereafter in this subsection referred 
     to as the `corporate partner') receives a distribution from a 
     partnership of stock in another corporation (hereafter in 
     this subsection referred to as the `distributed 
     corporation'),
       ``(B) the corporate partner has control of the distributed 
     corporation immediately after the distribution or at any time 
     thereafter, and
       ``(C) the partnership's adjusted basis in such stock 
     immediately before the distribution exceeded the corporate 
     partner's adjusted basis in such stock immediately after the 
     distribution,
     then an amount equal to such excess shall be applied to 
     reduce (in accordance with subsection (c)) the basis of 
     property held by the distributed corporation at such time 
     (or, if the corporate partner does not control the 
     distributed corporation at such time, at the time the 
     corporate partner first has such control).
       ``(2) Exception for certain distributions before control 
     acquired.--Paragraph (1) shall not apply to any distribution 
     of stock in the distributed corporation if--
       ``(A) the corporate partner does not have control of such 
     corporation immediately after such distribution, and
       ``(B) the corporate partner establishes to the satisfaction 
     of the Secretary that such distribution was not part of a 
     plan or arrangement to acquire control of the distributed 
     corporation.
       ``(3) Limitations on basis reduction.--
       ``(A) In general.--The amount of the reduction under 
     paragraph (1) shall not exceed the amount by which the sum of 
     the aggregate adjusted bases of the property and the amount 
     of money of the distributed corporation exceeds the corporate 
     partner's adjusted basis in the stock of the distributed 
     corporation.
       ``(B) Reduction not to exceed adjusted basis of property.--
     No reduction under paragraph (1) in the basis of any property 
     shall exceed the adjusted basis of such property (determined 
     without regard to such reduction).
       ``(4) Gain recognition where reduction limited.--If the 
     amount of any reduction under paragraph (1) (determined after 
     the application of paragraph (3)(A)) exceeds the aggregate 
     adjusted bases of the property of the distributed 
     corporation--
       ``(A) such excess shall be recognized by the corporate 
     partner as long-term capital gain, and
       ``(B) the corporate partner's adjusted basis in the stock 
     of the distributed corporation shall be increased by such 
     excess.
       ``(5) Control.--For purposes of this subsection, the term 
     `control' means ownership of stock meeting the requirements 
     of section 1504(a)(2).
       ``(6) Indirect distributions.--For purposes of paragraph 
     (1), if a corporation acquires (other than in a distribution 
     from a partnership) stock the basis of which is determined 
     (by reason of being distributed from a partnership) in whole 
     or in part by reference to subsection (a)(2) or (b), the 
     corporation shall be treated as receiving a distribution of 
     such stock from a partnership.
       ``(7) Special rule for stock in controlled corporation.--If 
     the property held by a distributed corporation is stock in a 
     corporation which the distributed corporation controls, this 
     subsection shall be applied to reduce the basis of the 
     property of such controlled corporation. This subsection 
     shall be reapplied to any property of any controlled 
     corporation which is stock in a corporation which it 
     controls.
       ``(8) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the purposes of 
     this subsection, including regulations to avoid double 
     counting and to prevent the abuse of such purposes.''.
       (b) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendment made by this section shall apply to distributions 
     made after July 14, 1999.
       (2) Partnerships in existence on July 14, 1999.--In the 
     case of a corporation which is a partner in a partnership as 
     of July 14, 1999, the amendment made by this section shall 
     apply to any distribution made (or treated as made) to such 
     partner from such partnership after June 30, 2001, except 
     that this paragraph shall not apply to any distribution after 
     the date of the enactment of this Act unless the partner 
     makes an election to have this paragraph apply to such 
     distribution on the partner's return of Federal income tax 
     for the taxable year in which such distribution occurs.

     PART II--PROVISIONS RELATING TO REAL ESTATE INVESTMENT TRUSTS

 Subpart A--Treatment of Income and Services Provided by Taxable REIT 
                              Subsidiaries

     SEC. 541. MODIFICATIONS TO ASSET DIVERSIFICATION TEST.

       (a) In General.--Subparagraph (B) of section 856(c)(4) of 
     the Internal Revenue Code of 1986 is amended to read as 
     follows:
       ``(B)(i) not more than 25 percent of the value of its total 
     assets is represented by securities (other than those 
     includible under subparagraph (A)),
       ``(ii) not more than 20 percent of the value of its total 
     assets is represented by securities of 1 or more taxable REIT 
     subsidiaries, and
       ``(iii) except with respect to a taxable REIT subsidiary 
     and securities includible under subparagraph (A)--
       ``(I) not more than 5 percent of the value of its total 
     assets is represented by securities of any one issuer,
       ``(II) the trust does not hold securities possessing more 
     than 10 percent of the total voting power of the outstanding 
     securities of any one issuer, and
       ``(III) the trust does not hold securities having a value 
     of more than 10 percent of the total value of the outstanding 
     securities of any one issuer.''.
       (b) Exception for Straight Debt Securities.--Subsection (c) 
     of section 856 of such Code is amended by adding at the end 
     the following new paragraph:
       ``(7) Straight debt safe harbor in applying paragraph 
     (4).--Securities of an issuer which are straight debt (as 
     defined in section 1361(c)(5) without regard to subparagraph 
     (B)(iii) thereof) shall not be taken into account in applying 
     paragraph (4)(B)(ii)(III) if--
       ``(A) the issuer is an individual, or
       ``(B) the only securities of such issuer which are held by 
     the trust or a taxable REIT subsidiary of the trust are 
     straight debt (as so defined), or
       ``(C) the issuer is a partnership and the trust holds at 
     least a 20 percent profits interest in the partnership.''.

     SEC. 542. TREATMENT OF INCOME AND SERVICES PROVIDED BY 
                   TAXABLE REIT SUBSIDIARIES.

       (a) Income From Taxable REIT Subsidiaries Not Treated as 
     Impermissible Tenant Service Income.--Clause (i) of section 
     856(d)(7)(C) of the Internal Revenue Code of 1986 (relating 
     to exceptions to impermissible tenant service income) is 
     amended by inserting ``or through a taxable REIT subsidiary 
     of such trust'' after ``income''.
       (b) Certain Income From Taxable REIT Subsidiaries Not 
     Excluded From Rents From Real Property.--
       (1) In general.--Subsection (d) of section 856 of such Code 
     (relating to rents from real property defined) is amended by 
     adding at the end the following new paragraphs:
       ``(8) Special rule for taxable reit subsidiaries.--For 
     purposes of this subsection, amounts paid to a real estate 
     investment trust by a taxable REIT subsidiary of such trust 
     shall not be excluded from rents from real property by reason 
     of paragraph (2)(B) if the requirements of either of the 
     following subparagraphs are met:

[[Page 30091]]

       ``(A) Limited rental exception.--The requirements of this 
     subparagraph are met with respect to any property if at least 
     90 percent of the leased space of the property is rented to 
     persons other than taxable REIT subsidiaries of such trust 
     and other than persons described in section 856(d)(2)(B). The 
     preceding sentence shall apply only to the extent that the 
     amounts paid to the trust as rents from real property (as 
     defined in paragraph (1) without regard to paragraph (2)(B)) 
     from such property are substantially comparable to such rents 
     made by the other tenants of the trust's property for 
     comparable space.
       ``(B) Exception for certain lodging facilities.--The 
     requirements of this subparagraph are met with respect to an 
     interest in real property which is a qualified lodging 
     facility leased by the trust to a taxable REIT subsidiary of 
     the trust if the property is operated on behalf of such 
     subsidiary by a person who is an eligible independent 
     contractor.
       ``(9) Eligible independent contractor.--For purposes of 
     paragraph (8)(B)--
       ``(A) In general.--The term `eligible independent 
     contractor' means, with respect to any qualified lodging 
     facility, any independent contractor if, at the time such 
     contractor enters into a management agreement or other 
     similar service contract with the taxable REIT subsidiary to 
     operate the facility, such contractor (or any related person) 
     is actively engaged in the trade or business of operating 
     qualified lodging facilities for any person who is not a 
     related person with respect to the real estate investment 
     trust or the taxable REIT subsidiary.
       ``(B) Special rules.--Solely for purposes of this paragraph 
     and paragraph (8)(B), a person shall not fail to be treated 
     as an independent contractor with respect to any qualified 
     lodging facility by reason of any of the following:
       ``(i) The taxable REIT subsidiary bears the expenses for 
     the operation of the facility pursuant to the management 
     agreement or other similar service contract.
       ``(ii) The taxable REIT subsidiary receives the revenues 
     from the operation of such facility, net of expenses for such 
     operation and fees payable to the operator pursuant to such 
     agreement or contract.
       ``(iii) The real estate investment trust receives income 
     from such person with respect to another property that is 
     attributable to a lease of such other property to such person 
     that was in effect as of the later of--

       ``(I) January 1, 1999, or
       ``(II) the earliest date that any taxable REIT subsidiary 
     of such trust entered into a management agreement or other 
     similar service contract with such person with respect to 
     such qualified lodging facility.

       ``(C) Renewals, etc., of existing leases.--For purposes of 
     subparagraph (B)(iii)--
       ``(i) a lease shall be treated as in effect on January 1, 
     1999, without regard to its renewal after such date, so long 
     as such renewal is pursuant to the terms of such lease as in 
     effect on whichever of the dates under subparagraph (B)(iii) 
     is the latest, and
       ``(ii) a lease of a property entered into after whichever 
     of the dates under subparagraph (B)(iii) is the latest shall 
     be treated as in effect on such date if--

       ``(I) on such date, a lease of such property from the trust 
     was in effect, and
       ``(II) under the terms of the new lease, such trust 
     receives a substantially similar or lesser benefit in 
     comparison to the lease referred to in subclause (I).

       ``(D) Qualified lodging facility.--For purposes of this 
     paragraph--
       ``(i) In general.--The term `qualified lodging facility' 
     means any lodging facility unless wagering activities are 
     conducted at or in connection with such facility by any 
     person who is engaged in the business of accepting wagers and 
     who is legally authorized to engage in such business at or in 
     connection with such facility.
       ``(ii) Lodging facility.--The term `lodging facility' means 
     a hotel, motel, or other establishment more than one-half of 
     the dwelling units in which are used on a transient basis.
       ``(iii) Customary amenities and facilities.--The term 
     `lodging facility' includes customary amenities and 
     facilities operated as part of, or associated with, the 
     lodging facility so long as such amenities and facilities are 
     customary for other properties of a comparable size and class 
     owned by other owners unrelated to such real estate 
     investment trust.
       ``(E) Operate includes manage.--References in this 
     paragraph to operating a property shall be treated as 
     including a reference to managing the property.
       ``(F) Related person.--Persons shall be treated as related 
     to each other if such persons are treated as a single 
     employer under subsection (a) or (b) of section 52.''.
       (2) Conforming amendment.--Subparagraph (B) of section 
     856(d)(2) of such Code is amended by inserting ``except as 
     provided in paragraph (8),'' after ``(B)''.
       (3) Determining rents from real property.--
       (A)(i) Paragraph (1) of section 856(d) of such Code is 
     amended by striking ``adjusted bases'' each place it occurs 
     and inserting ``fair market values''.
       (ii) The amendment made by this subparagraph shall apply to 
     taxable years beginning after December 31, 2000.
       (B)(i) Clause (i) of section 856(d)(2)(B) of such Code is 
     amended by striking ``number'' and inserting ``value''.
       (ii) The amendment made by this subparagraph shall apply to 
     amounts received or accrued in taxable years beginning after 
     December 31, 2000, except for amounts paid pursuant to leases 
     in effect on July 12, 1999, or pursuant to a binding contract 
     in effect on such date and at all times thereafter.

     SEC. 543. TAXABLE REIT SUBSIDIARY.

       (a) In General.--Section 856 of the Internal Revenue Code 
     of 1986 is amended by adding at the end the following new 
     subsection:
       ``(l) Taxable REIT Subsidiary.--For purposes of this part--
       ``(1) In general.--The term `taxable REIT subsidiary' 
     means, with respect to a real estate investment trust, a 
     corporation (other than a real estate investment trust) if--
       ``(A) such trust directly or indirectly owns stock in such 
     corporation, and
       ``(B) such trust and such corporation jointly elect that 
     such corporation shall be treated as a taxable REIT 
     subsidiary of such trust for purposes of this part.
     Such an election, once made, shall be irrevocable unless both 
     such trust and corporation consent to its revocation. Such 
     election, and any revocation thereof, may be made without the 
     consent of the Secretary.
       ``(2) 35 Percent ownership in another taxable reit 
     subsidiary.--The term `taxable REIT subsidiary' includes, 
     with respect to any real estate investment trust, any 
     corporation (other than a real estate investment trust) with 
     respect to which a taxable REIT subsidiary of such trust owns 
     directly or indirectly--
       ``(A) securities possessing more than 35 percent of the 
     total voting power of the outstanding securities of such 
     corporation, or
       ``(B) securities having a value of more than 35 percent of 
     the total value of the outstanding securities of such 
     corporation.
     The preceding sentence shall not apply to a qualified REIT 
     subsidiary (as defined in subsection (i)(2)). The rule of 
     section 856(c)(7) shall apply for purposes of subparagraph 
     (B).
       ``(3) Exceptions.--The term `taxable REIT subsidiary' shall 
     not include--
       ``(A) any corporation which directly or indirectly operates 
     or manages a lodging facility or a health care facility, and
       ``(B) any corporation which directly or indirectly provides 
     to any other person (under a franchise, license, or 
     otherwise) rights to any brand name under which any lodging 
     facility or health care facility is operated.
     Subparagraph (B) shall not apply to rights provided to an 
     eligible independent contractor to operate or manage a 
     lodging facility if such rights are held by such corporation 
     as a franchisee, licensee, or in a similar capacity and such 
     lodging facility is either owned by such corporation or is 
     leased to such corporation from the real estate investment 
     trust.
       ``(4) Definitions.--For purposes of paragraph (3)--
       ``(A) Lodging facility.--The term `lodging facility' has 
     the meaning given to such term by paragraph (9)(D)(ii).
       ``(B) Health care facility.--The term `health care 
     facility' has the meaning given to such term by subsection 
     (e)(6)(D)(ii).''.
       (b) Conforming Amendment.--Paragraph (2) of section 856(i) 
     of such Code is amended by adding at the end the following 
     new sentence: ``Such term shall not include a taxable REIT 
     subsidiary.''.

     SEC. 544. LIMITATION ON EARNINGS STRIPPING.

       Paragraph (3) of section 163( j) of the Internal Revenue 
     Code of 1986 (relating to limitation on deduction for 
     interest on certain indebtedness) is amended by striking 
     ``and'' at the end of subparagraph (A), by striking the 
     period at the end of subparagraph (B) and inserting ``, 
     and'', and by adding at the end the following new 
     subparagraph:
       ``(C) any interest paid or accrued (directly or indirectly) 
     by a taxable REIT subsidiary (as defined in section 856(l)) 
     of a real estate investment trust to such trust.''.

     SEC. 545. 100 PERCENT TAX ON IMPROPERLY ALLOCATED AMOUNTS.

       (a) In General.--Subsection (b) of section 857 of the 
     Internal Revenue Code of 1986 (relating to method of taxation 
     of real estate investment trusts and holders of shares or 
     certificates of beneficial interest) is amended by 
     redesignating paragraphs (7) and (8) as paragraphs (8) and 
     (9), respectively, and by inserting after paragraph (6) the 
     following new paragraph:
       ``(7) Income from redetermined rents, redetermined 
     deductions, and excess interest.--
       ``(A) Imposition of tax.--There is hereby imposed for each 
     taxable year of the real estate investment trust a tax equal 
     to 100 percent of redetermined rents, redetermined 
     deductions, and excess interest.
       ``(B) Redetermined rents.--
       ``(i) In general.--The term `redetermined rents' means 
     rents from real property (as defined in subsection 856(d)) 
     the amount of which would (but for subparagraph (E)) be 
     reduced on distribution, apportionment, or allocation under 
     section 482 to clearly reflect income as a result of services 
     furnished or rendered by a taxable REIT subsidiary of the 
     real estate investment trust to a tenant of such trust.
       ``(ii) Exception for certain services.--Clause (i) shall 
     not apply to amounts received directly or indirectly by a 
     real estate investment trust for services described in 
     paragraph (1)(B) or (7)(C)(i) of section 856(d).
       ``(iii) Exception for de minimis amounts.--Clause (i) shall 
     not apply to amounts described in section 856(d)(7)(A) with 
     respect to a property to the extent such amounts do not 
     exceed the one percent threshold described in section 
     856(d)(7)(B) with respect to such property.
       ``(iv) Exception for comparably priced services.--Clause 
     (i) shall not apply to any

[[Page 30092]]

     service rendered by a taxable REIT subsidiary of a real 
     estate investment trust to a tenant of such trust if--

       ``(I) such subsidiary renders a significant amount of 
     similar services to persons other than such trust and tenants 
     of such trust who are unrelated (within the meaning of 
     section 856(d)(8)(F)) to such subsidiary, trust, and tenants, 
     but
       ``(II) only to the extent the charge for such service so 
     rendered is substantially comparable to the charge for the 
     similar services rendered to persons referred to in subclause 
     (I).

       ``(v) Exception for certain separately charged services.--
     Clause (i) shall not apply to any service rendered by a 
     taxable REIT subsidiary of a real estate investment trust to 
     a tenant of such trust if--

       ``(I) the rents paid to the trust by tenants (leasing at 
     least 25 percent of the net leasable space in the trust's 
     property) who are not receiving such service from such 
     subsidiary are substantially comparable to the rents paid by 
     tenants leasing comparable space who are receiving such 
     service from such subsidiary, and
       ``(II) the charge for such service from such subsidiary is 
     separately stated.

       ``(vi) Exception for certain services based on subsidiary's 
     income from the services.--Clause (i) shall not apply to any 
     service rendered by a taxable REIT subsidiary of a real 
     estate investment trust to a tenant of such trust if the 
     gross income of such subsidiary from such service is not less 
     than 150 percent of such subsidiary's direct cost in 
     furnishing or rendering the service.
       ``(vii) Exceptions granted by secretary.--The Secretary may 
     waive the tax otherwise imposed by subparagraph (A) if the 
     trust establishes to the satisfaction of the Secretary that 
     rents charged to tenants were established on an arms' length 
     basis even though a taxable REIT subsidiary of the trust 
     provided services to such tenants.
       ``(C) Redetermined deductions.--The term `redetermined 
     deductions' means deductions (other than redetermined rents) 
     of a taxable REIT subsidiary of a real estate investment 
     trust if the amount of such deductions would (but for 
     subparagraph (E)) be decreased on distribution, 
     apportionment, or allocation under section 482 to clearly 
     reflect income as between such subsidiary and such trust.
       ``(D) Excess interest.--The term `excess interest' means 
     any deductions for interest payments by a taxable REIT 
     subsidiary of a real estate investment trust to such trust to 
     the extent that the interest payments are in excess of a rate 
     that is commercially reasonable.
       ``(E) Coordination with section 482.--The imposition of tax 
     under subparagraph (A) shall be in lieu of any distribution, 
     apportionment, or allocation under section 482.
       ``(F) Regulatory authority.--The Secretary shall prescribe 
     such regulations as may be necessary or appropriate to carry 
     out the purposes of this paragraph. Until the Secretary 
     prescribes such regulations, real estate investment trusts 
     and their taxable REIT subsidiaries may base their 
     allocations on any reasonable method.''.
       (b) Amount Subject to Tax Not Required To Be Distributed.--
     Subparagraph (E) of section 857(b)(2) of such Code (relating 
     to real estate investment trust taxable income) is amended by 
     striking ``paragraph (5)'' and inserting ``paragraphs (5) and 
     (7)''.

     SEC. 546. EFFECTIVE DATE.

       (a) In General.--The amendments made by this subpart shall 
     apply to taxable years beginning after December 31, 2000.
       (b) Transitional Rules Related to Section 541.--
       (1) Existing arrangements.--
       (A) In general.--Except as otherwise provided in this 
     paragraph, the amendment made by section 541 shall not apply 
     to a real estate investment trust with respect to--
       (i) securities of a corporation held directly or indirectly 
     by such trust on July 12, 1999,
       (ii) securities of a corporation held by an entity on July 
     12, 1999, if such trust acquires control of such entity 
     pursuant to a written binding contract in effect on such date 
     and at all times thereafter before such acquisition,
       (iii) securities received by such trust (or a successor) in 
     exchange for, or with respect to, securities described in 
     clause (i) or (ii) in a transaction in which gain or loss is 
     not recognized, and
       (iv) securities acquired directly or indirectly by such 
     trust as part of a reorganization (as defined in section 
     368(a)(1) of the Internal Revenue Code of 1986) with respect 
     to such trust if such securities are described in clause (i), 
     (ii), or (iii) with respect to any other real estate 
     investment trust.
       (B) New trade or business or substantial new assets.--
     Subparagraph (A) shall cease to apply to securities of a 
     corporation as of the first day after July 12, 1999, on which 
     such corporation engages in a substantial new line of 
     business, or acquires any substantial asset, other than--
       (i) pursuant to a binding contract in effect on such date 
     and at all times thereafter before the acquisition of such 
     asset,
       (ii) in a transaction in which gain or loss is not 
     recognized by reason of section 1031 or 1033 of the Internal 
     Revenue Code of 1986, or
       (iii) in a reorganization (as so defined) with another 
     corporation the securities of which are described in 
     paragraph (1)(A) of this subsection.
       (C) Limitation on transition rules.--Subparagraph (A) shall 
     cease to apply to securities of a corporation held, acquired, 
     or received, directly or indirectly, by a real estate 
     investment trust as of the first day after July 12, 1999, on 
     which such trust acquires any additional securities of such 
     corporation other than--
       (i) pursuant to a binding contract in effect on July 12, 
     1999, and at all times thereafter, or
       (ii) in a reorganization (as so defined) with another 
     corporation the securities of which are described in 
     paragraph (1)(A) of this subsection.
       (2) Tax-free conversion.--If--
       (A) at the time of an election for a corporation to become 
     a taxable REIT subsidiary, the amendment made by section 541 
     does not apply to such corporation by reason of paragraph 
     (1), and
       (B) such election first takes effect before January 1, 
     2004,
     such election shall be treated as a reorganization qualifying 
     under section 368(a)(1)(A) of such Code.

     SEC. 547. STUDY RELATING TO TAXABLE REIT SUBSIDIARIES.

       The Secretary of the Treasury shall conduct a study to 
     determine how many taxable REIT subsidiaries are in existence 
     and the aggregate amount of taxes paid by such subsidiaries. 
     The Secretary shall submit a report to the Congress 
     describing the results of such study.

                      Subpart B--Health Care REITs

     SEC. 551. HEALTH CARE REITS.

       (a) Special Foreclosure Rule for Health Care Properties.--
     Subsection (e) of section 856 of the Internal Revenue Code of 
     1986 (relating to special rules for foreclosure property) is 
     amended by adding at the end the following new paragraph:
       ``(6) Special rule for qualified health care properties.--
     For purposes of this subsection--
       ``(A) Acquisition at expiration of lease.--The term 
     `foreclosure property' shall include any qualified health 
     care property acquired by a real estate investment trust as 
     the result of the termination of a lease of such property 
     (other than a termination by reason of a default, or the 
     imminence of a default, on the lease).
       ``(B) Grace period.--In the case of a qualified health care 
     property which is foreclosure property solely by reason of 
     subparagraph (A), in lieu of applying paragraphs (2) and 
     (3)--
       ``(i) the qualified health care property shall cease to be 
     foreclosure property as of the close of the second taxable 
     year after the taxable year in which such trust acquired such 
     property, and
       ``(ii) if the real estate investment trust establishes to 
     the satisfaction of the Secretary that an extension of the 
     grace period in clause (i) is necessary to the orderly 
     leasing or liquidation of the trust's interest in such 
     qualified health care property, the Secretary may grant one 
     or more extensions of the grace period for such qualified 
     health care property.
     Any such extension shall not extend the grace period beyond 
     the close of the 6th year after the taxable year in which 
     such trust acquired such qualified health care property.
       ``(C) Income from independent contractors.--For purposes of 
     applying paragraph (4)(C) with respect to qualified health 
     care property which is foreclosure property by reason of 
     subparagraph (A) or paragraph (1), income derived or received 
     by the trust from an independent contractor shall be 
     disregarded to the extent such income is attributable to--
       ``(i) any lease of property in effect on the date the real 
     estate investment trust acquired the qualified health care 
     property (without regard to its renewal after such date so 
     long as such renewal is pursuant to the terms of such lease 
     as in effect on such date), or
       ``(ii) any lease of property entered into after such date 
     if--

       ``(I) on such date, a lease of such property from the trust 
     was in effect, and
       ``(II) under the terms of the new lease, such trust 
     receives a substantially similar or lesser benefit in 
     comparison to the lease referred to in subclause (I).

       ``(D) Qualified health care property.--
       ``(i) In general.--The term `qualified health care 
     property' means any real property (including interests 
     therein), and any personal property incident to such real 
     property, which--

       ``(I) is a health care facility, or
       ``(II) is necessary or incidental to the use of a health 
     care facility.

       ``(ii) Health care facility.--For purposes of clause (i), 
     the term `health care facility' means a hospital, nursing 
     facility, assisted living facility, congregate care facility, 
     qualified continuing care facility (as defined in section 
     7872(g)(4)), or other licensed facility which extends medical 
     or nursing or ancillary services to patients and which, 
     immediately before the termination, expiration, default, or 
     breach of the lease of or mortgage secured by such facility, 
     was operated by a provider of such services which was 
     eligible for participation in the medicare program under 
     title XVIII of the Social Security Act with respect to such 
     facility.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     Subpart C--Conformity With Regulated Investment Company Rules

     SEC. 556. CONFORMITY WITH REGULATED INVESTMENT COMPANY RULES.

       (a) Distribution Requirement.--Clauses (i) and (ii) of 
     section 857(a)(1)(A) of the Internal Revenue Code of 1986 
     (relating to requirements applicable to real estate 
     investment trusts) are each amended by striking ``95 percent 
     (90 percent for taxable years beginning before January 1, 
     1980)'' and inserting ``90 percent''.
       (b) Imposition of Tax.--Clause (i) of section 857(b)(5)(A) 
     of such Code (relating to imposition of tax in case of 
     failure to meet certain requirements) is amended by striking 
     ``95 percent (90

[[Page 30093]]

     percent in the case of taxable years beginning before January 
     1, 1980)'' and inserting ``90 percent''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

Subpart D--Clarification of Exception From Impermissible Tenant Service 
                                 Income

     SEC. 561. CLARIFICATION OF EXCEPTION FOR INDEPENDENT 
                   OPERATORS.

       (a) In General.--Paragraph (3) of section 856(d) of the 
     Internal Revenue Code of 1986 (relating to independent 
     contractor defined) is amended by adding at the end the 
     following flush sentence:
     ``In the event that any class of stock of either the real 
     estate investment trust or such person is regularly traded on 
     an established securities market, only persons who own, 
     directly or indirectly, more than 5 percent of such class of 
     stock shall be taken into account as owning any of the stock 
     of such class for purposes of applying the 35 percent 
     limitation set forth in subparagraph (B) (but all of the 
     outstanding stock of such class shall be considered 
     outstanding in order to compute the denominator for purpose 
     of determining the applicable percentage of ownership).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

         Subpart E--Modification of Earnings and Profits Rules

     SEC. 566. MODIFICATION OF EARNINGS AND PROFITS RULES.

       (a) Rules for Determining Whether Regulated Investment 
     Company Has Earnings and Profits From Non-RIC Year.--
       (1) In general.--Subsection (c) of section 852 of the 
     Internal Revenue Code of 1986 is amended by adding at the end 
     the following new paragraph:
       ``(3) Distributions to meet requirements of subsection 
     (a)(2)(B).--Any distribution which is made in order to comply 
     with the requirements of subsection (a)(2)(B)--
       ``(A) shall be treated for purposes of this subsection and 
     subsection (a)(2)(B) as made from earnings and profits which, 
     but for the distribution, would result in a failure to meet 
     such requirements (and allocated to such earnings on a first-
     in, first-out basis), and
       ``(B) to the extent treated under subparagraph (A) as made 
     from accumulated earnings and profits, shall not be treated 
     as a distribution for purposes of subsection (b)(2)(D) and 
     section 855.''.
       (2) Conforming amendment.--Subparagraph (A) of section 
     857(d)(3) of such Code is amended to read as follows:
       ``(A) shall be treated for purposes of this subsection and 
     subsection (a)(2)(B) as made from earnings and profits which, 
     but for the distribution, would result in a failure to meet 
     such requirements (and allocated to such earnings on a first-
     in, first-out basis), and''.
       (b) Clarification of Application of REIT Spillover Dividend 
     Rules to Distributions To Meet Qualification Requirement.--
     Subparagraph (B) of section 857(d)(3) of such Code is amended 
     by inserting before the period ``and section 858''.
       (c) Application of Deficiency Dividend Procedures.--
     Paragraph (1) of section 852(e) of such Code is amended by 
     adding at the end the following new sentence: ``If the 
     determination under subparagraph (A) is solely as a result of 
     the failure to meet the requirements of subsection (a)(2), 
     the preceding sentence shall also apply for purposes of 
     applying subsection (a)(2) to the non-RIC year and the amount 
     referred to in paragraph (2)(A)(i) shall be the portion of 
     the accumulated earnings and profits which resulted in such 
     failure.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2000.

             Subpart F--Modification of Estimated Tax Rules

     SEC. 571. MODIFICATION OF ESTIMATED TAX RULES FOR CLOSELY 
                   HELD REAL ESTATE INVESTMENT TRUSTS.

       (a) In General.--Subsection (e) of section 6655 of the 
     Internal Revenue Code of 1986 (relating to estimated tax by 
     corporations) is amended by adding at the end the following 
     new paragraph:
       ``(5) Treatment of certain reit dividends.--
       ``(A) In general.--Any dividend received from a closely 
     held real estate investment trust by any person which owns 
     (after application of subsections (d)(5) and (l)(3)(B) of 
     section 856) 10 percent or more (by vote or value) of the 
     stock or beneficial interests in the trust shall be taken 
     into account in computing annualized income installments 
     under paragraph (2) in a manner similar to the manner under 
     which partnership income inclusions are taken into account.
       ``(B) Closely held reit.--For purposes of subparagraph (A), 
     the term `closely held real estate investment trust' means a 
     real estate investment trust with respect to which 5 or fewer 
     persons own (after application of subsections (d)(5) and 
     (l)(3)(B) of section 856) 50 percent or more (by vote or 
     value) of the stock or beneficial interests in the trust.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to estimated tax payments due on or after 
     December 15, 1999.
       And the Senate agree to the same.
     Bill Archer,
     Tom Bliley,
     Dick Armey,
                                Managers on the Part of the House.

     W.V. Roth, Jr.,
     Trent Lott,
                               Managers on the Part of the Senate.

       JOINT EXPLANATION STATEMENT OF THE COMMITTEE OF CONFERENCE

       The managers on the part of the House and the Senate at the 
     conference on the disagreeing votes of the two Houses on the 
     amendment of the Senate to the bill (H.R. 1180) to amend the 
     Social Security Act to expand the availability of health care 
     coverage for working individuals with disabilities, to 
     establish a Ticket to Work and Self-Sufficiency Program in 
     the Social Security Administration to provide such 
     individuals with meaningful opportunities to work, and for 
     other purposes, submit the following joint statement to the 
     House and the Senate in explanation of the effect of the 
     action agreed upon by the managers and recommended in the 
     accompanying conference report:
       The Senate amendment struck all of the House bill after the 
     enacting clause and inserted a substitute text.
       The House recedes from its disagreement to the amendment of 
     the Senate with an amendment that is a substitute for the 
     House bill and the Senate amendment. The differences between 
     the House bill, the Senate amendment, and the substitute 
     agreed to in conference are noted below, except for clerical 
     corrections, conforming changes made necessary by agreements 
     reached by the conferees, and minor drafting and clerical 
     changes.

     THE TICKET TO WORK AND WORK INCENTIVES IMPROVEMENT ACT OF 1999

                EXPLANATION OF THE CONFERENCE AGREEMENT

                              Short Title

     Present law
       No provision.
     House bill
       The ``Ticket to Work and Work Incentives Improvement Act of 
     1999''
     Senate amendment
       The ``Work Incentives Improvement Act of 1999''
     Conference agreement
       The Senate recedes to the House.

                               Long Title

     Present law
       No provision.
     House bill
       To amend the Social Security Act to expand the availability 
     of health care coverage for working individuals with 
     disabilities, to establish a Ticket to Work and Self-
     Sufficiency Program in the Social Security Administration to 
     provide such individuals with meaningful opportunities to 
     work, and for other purposes.
     Senate amendment
       Identical provision.
     Conference agreement
       The conference agreement follows the House bill and the 
     Senate amendment.

                         Findings and Purposes

     Present law
       No provision.
     House bill
       No provision.
     Senate amendment
       Makes a number of findings related to the importance of 
     health care for especially individuals with disabilities, the 
     difficulties they often experience in obtaining proper health 
     care coverage under current program rules, the resulting 
     limited departures from benefit rolls due to recipients' 
     fears of losing coverage, and the potential program savings 
     from providing them better access to coverage if they return 
     to work.
       The Senate amendment describes as its purposes to provide 
     individuals with disabilities: (1) health care and employment 
     preparation and placement services to reduce their dependency 
     on cash benefits; (2) Medicaid coverage (through incentives 
     to States to allow them to purchase it) needed to maintain 
     employment; (3) the option of maintaining Medicare coverage 
     while working; and (4) return to work tickets allowing them 
     access to services needed to obtain and retain employment and 
     reduce dependence on cash benefits.
     Conference agreement
       The House recedes to the Senate with the modification that 
     additional findings are added that address employment 
     opportunities and financial disincentives.

  Title I. Ticket to Work and Self-Sufficiency and Related Provisions

     Establishment of the Ticket to Work and Self-Sufficiency 
         Program

     1. Ticket System

     Present law
       The Commissioner is required to promptly refer individuals 
     applying for Social Security disability insurance (SSDI) or 
     Supplemental Security Income (SSI) benefits for necessary 
     vocational rehabilitation (VR) services to State vocational 
     rehabilitation (VR) agencies. State VR agencies are 
     established pursuant to Title I of the Rehabilitation Act of 
     1973, as amended. A State VR agency is reimbursed for the 
     costs of VR services to SSDI and SSI beneficiaries with a 
     single payment after the beneficiary performs ``substantial 
     gainful activity'' (i.e.,

[[Page 30094]]

     had earnings in excess of $700 per month) for a continuous 
     period of at least nine months. The Social Security 
     Administration (SSA) has also established an ``alternate 
     participant program'' in regulation where private or other 
     public agencies are eligible to receive reimbursement from 
     SSA for providing VR and related services to SSDI and SSI 
     beneficiaries. To participate in the alternate participant 
     program, a beneficiary must first be referred to, and 
     declined by, a State VR agency. Such private and public 
     agencies are reimbursed according to the same procedures as 
     State VR agencies.
     House bill
       The House bill creates a Ticket to Work and Self-
     Sufficiency program. Under the program, the Commissioner of 
     Social Security is authorized to provide SSDI and disabled 
     SSI beneficiaries with a ``ticket'' which they may use to 
     obtain employment services, VR services, and other support 
     services (e.g., assistive technology) from an employment 
     network (that is, provider of services) of their choice to 
     enable them to enter the workforce.
       Employment networks may include both State VR agencies and 
     private and other public providers. Employment networks would 
     be prohibited from seeking additional compensation from 
     beneficiaries. The bill provides State VR agencies with the 
     option of participating in the program as an employment 
     network or remaining in the current law reimbursement system, 
     including the option to elect either payment method on a 
     case-by-case basis. Services provided by State VR agencies 
     participating in the program would be governed by plans for 
     VR services approved under Title I of the Rehabilitation Act. 
     The Commissioner would issue regulations regarding the 
     relationship between State VR agencies and other employment 
     networks. It is intended that the agreements would be broad-
     based, rather than case-by-case agreements. The Commissioner 
     is also required to issue regulations to address other 
     implementation issues, including distribution of tickets to 
     beneficiaries.
       The bill requires the program to be phased in at sites 
     selected by the Commissioner beginning no later than 1 year 
     after enactment. The program would be fully implemented as 
     soon as practicable, but not later than 3 years after the 
     program begins.
     Senate amendment
       Similar provision, except adds a section on special 
     requirements applicable to cross-referral of ticket holders 
     to certain State agencies.
     Conference agreement
       The Senate recedes to the House.
     2. Program Managers

     Present law
       No provision. (See description of present law under ``1. 
     Ticket System'' above.)
     House bill
       The Commissioner is required to contract with ``program 
     managers,'' i.e., one or more organizations in the private or 
     public sector with expertise and experience in the field of 
     vocational rehabilitation or employment services through a 
     competitive bidding process, to assist the Social Security 
     Administration to administer the program. Agreements between 
     SSA and program managers shall include performance standards, 
     including measures of access of beneficiaries to services. 
     Program managers would be precluded from providing services 
     in their own service area.
       Program managers would recruit and recommend employment 
     networks to the Commissioner, ensure adequate availability of 
     services to beneficiaries and provide assurances to SSA that 
     employment networks are complying with terms of their 
     agreement. In addition, program managers would provide for 
     changes in employment networks by beneficiaries.
     Senate amendment
       Similar provision, except the Senate amendment places an 
     additional restriction on changes in employment networks by 
     specifying that ticket holders may elect such changes only 
     ``for good cause, as determined by the Commissioner.'' In 
     addition, the Senate amendment does not specify that when 
     changes in employment networks occur the program manager is 
     to (1) reassign the ticket based on the choice of the 
     beneficiary and (2) make a determination regarding the 
     allocation of payments to each employment network.
     Conference agreement
       The Senate recedes to the House.
     3. Employment Networks

     Present law
       No provision. (See description of present law under ``1. 
     Ticket System'' above.)
     House bill
       Employment networks consist of a single provider (public or 
     private) or an association of providers which would assume 
     responsibility for the coordination and delivery of services. 
     Employment networks may include a one-stop delivery system 
     established under Title I of the Workforce Investment Act of 
     1998. Employment networks are required to demonstrate 
     specific expertise and experience and provide an array of 
     services under the program. The Commissioner would select and 
     enter into agreements with employment networks, provide 
     periodic quality assurance reviews of employment networks, 
     and establish a method for resolving disputes between 
     beneficiaries and employment networks. Employment networks 
     would meet financial reporting requirements as prescribed by 
     the Commissioner, and prepare periodic performance reports 
     which would be provided to beneficiaries holding a ticket and 
     made available to the public.
       Employment networks and beneficiaries would together 
     develop an individual employment plan for each beneficiary 
     that provides for informed choice in selecting an employment 
     goal and specific services needed to achieve that goal. A 
     beneficiary's written plan would take effect upon written 
     approval by the beneficiary or beneficiary's representative.
     Senate amendment
       Identical provision regarding qualification, requirements, 
     and reporting involving employment networks. Similar 
     provision regarding individual employment plans, except that 
     the Senate amendment does not require the statement of 
     vocational goals to include ``as appropriate, goals for 
     earnings and job advancement.''
     Conference agreement
       The Senate recedes to the House.
     4. Payment to Employment Networks

     Present law
       No provision. (See description of present law under ``1. 
     Ticket System'' above.)
     House bill
       The bill authorizes payment to employment networks for 
     outcomes and long-term results through one of two payment 
     systems, each designed to encourage maximum participation by 
     providers to serve beneficiaries:
       The outcome payment system would provide payment to 
     employment networks up to 40 percent of the average monthly 
     disability benefit for each month benefits are not be payable 
     to the beneficiary due to work, not to exceed 60 months.
       The outcome-milestone payment system is similar to the 
     outcome payment system, except it would provide for early 
     payment(s) based on the achievement of one or more milestones 
     directed towards the goal of permanent employment. To ensure 
     the cost-effectiveness of the program, the total amount 
     payable to a service provider under the outcome-milestone 
     payment system must be less than the total amount that would 
     have been payable under the outcome payment system.
       The Commissioner is required to periodically review both 
     payment systems and may alter the percentages, milestones, or 
     payment periods to ensure that employment networks have 
     adequate incentive to assist beneficiaries in entering the 
     workforce. In addition, the Commissioner is required to 
     submit a report to Congress with recommendations for methods 
     to adjust payment rates to ensure adequate incentives for the 
     provision of services to individuals with special needs.
       The bill requires the Commissioner to report to Congress 
     within 3 years on the adequacy of program incentives for 
     employment networks to provide services to ``high risk'' 
     beneficiaries.
       The bill authorizes transfers from the Social Security 
     Trust Funds to carry out these provisions for Social Security 
     beneficiaries, and authorizes appropriations to the Social 
     Security Administration to carry out these provisions for SSI 
     recipients.
     Senate amendment
       Similar provision, except that the Senate amendment:
       Does not require the Commissioner to report to Congress 
     within 3 years on the adequacy of program incentives for 
     employment networks to provide services to ``high risk'' 
     beneficiaries;
       Provides for ``Allocation of Costs'' to employment networks 
     from the Trust Funds for services rendered (rather than 
     authorizing such amounts be transferred as in the House 
     bill); and
       Provides for specific treatment of the costs associated 
     with dually-entitled individuals (that is, individuals 
     receiving both SSI and SSDI benefits).
     Conference agreement
       The Senate recedes to the House.
     5. Evaluation

     Present law
       No provision. (See description of present law under ``1. 
     Ticket System'' above.)
     House bill
       The Commissioner is required to design and conduct a series 
     of evaluations to assess the cost-effectiveness and outcomes 
     of the program. The Commissioner is required to periodically 
     provide to the Congress a detailed report of the program's 
     progress, success, and any modifications needed.
     Senate amendment
       Similar provision, except the Senate amendment does not 
     require evaluations to address the characteristics of ticket 
     holders who are not accepted for services and reasons they 
     were not accepted.
     Conference agreement
       The conference agreement follows the House bill and the 
     Senate amendment with

[[Page 30095]]

     the modification that the Commissioner is required to provide 
     for independent evaluations of program effectiveness.
     6. Advisory Panel

     Present law
       No provision. (See description of present law under ``1. 
     Ticket System'' above.)
     House bill
       The bill establishes a Ticket to Work and Work Incentives 
     Advisory Panel consisting of experts representing consumers, 
     providers of services, employers, and employees, at least 
     one-half of whom are individuals with disabilities or 
     representatives of individuals with disabilities. The 
     Advisory Panel is to be composed of twelve members appointed 
     as follows:
       Four by the President, not more than two of whom may be of 
     the same political party;
       Two by the Speaker of the House of Representatives, in 
     consultation with the Chairman of the Committee on Ways and 
     Means;
       Two by the Minority Leader of the House of Representatives, 
     in consultation with ranking minority member of the Committee 
     on Ways and Means;
       Two by the Majority Leader of the Senate, in consultation 
     with the Chairman of the Committee on Finance; and
       Two members would be appointed by the Minority Leader of 
     the Senate, in consultation with the ranking minority member 
     of the Committee on Finance.
       The Panel is to advise the Commissioner and report to the 
     Congress on program implementation including such issues as 
     the establishment of pilot sites, refinements to the program, 
     and the design of program evaluations.
     Senate amendment
       Similar provision, except the Senate amendment:
       Names the panel the Work Incentives Advisory Panel;
       Does not specify that, of the 4 members of the panel 
     appointed by the President, ``not more than 2 . . . may be of 
     the same political party'';
       Provides that the Commissioner, as opposed to the President 
     under the House bill, is to designate whether panel members' 
     initial terms will be 2 or 4 years;
       Specifies that ``all members appointed to the panel shall 
     have experience or expert knowledge of'' several work and 
     disability-related fields, whereas the House bill requires 
     that ``at least 8'' shall have such experience or knowledge, 
     with at least 2 ``representing the interests of'' each of the 
     following groups: service recipients, service providers, 
     employers, and employees;
       Provides that the Director of the Advisory Panel is to be 
     appointed by the Commissioner in the Senate amendment 
     (compared with by the Advisory Panel in the House bill); and
       Provides that the costs of the Panel ``shall be paid from 
     amounts made available'' for administration of the Title II 
     and Title XVI programs under the Senate amendment (compared 
     with the House bill, which authorizes such amounts from the 
     OASI and DI trust funds and from the general fund of the 
     Treasury for this purpose.
     Conference agreement
       The conference agreement follows the House bill, except 
     that all 12 Panel members would be required to have 
     experience or expert knowledge as a recipient, provider, 
     employer, or employee. The agreement is based on the 
     expectation that individuals with disabilities, as opposed to 
     representatives of individuals with disabilities, would be 
     appointed as Panel members whenever possible. In addition, 
     the terms of initial appointment would be set by the 
     individual making the appointment, with each individual 
     making appointments designating one-half of appointees for a 
     term of 4 years and the other half for a term of 2 years. The 
     conference agreement also provides that the Director of the 
     Panel would be appointed by the Chairperson of the Advisory 
     Panel.
     Work Activity Standard as a Basis for Review of an 
         Individual's Disabled Status

     Present law
       Eligibility for Social Security disability insurance (SSDI) 
     cash benefits requires an applicant to meet certain criteria, 
     including the presence of a disability that renders the 
     individual unable to engage in substantial gainful activity. 
     Substantial gainful activity is defined as work that results 
     in earnings exceeding an amount set in regulations ($700 per 
     month, as of July 1, 1999). Continuing disability reviews 
     (CDRs) are conducted by the Social Security Administration 
     (SSA) to determine whether an individual remains disabled and 
     thus eligible for continued benefits. CDRs may be triggered 
     by evidence of recovery from disability, including return to 
     work. SSA is also required to conduct periodic CDRs every 3 
     years for beneficiaries with a nonpermanent disability, and 
     at times determined by the Commissioner for beneficiaries 
     with a permanent disability.
     House bill
       The bill establishes the standard that CDRs for long-term 
     SSDI beneficiaries (i.e., those receiving disability benefits 
     for at least 24 months) be limited to periodic CDRs. SSA 
     would continue to evaluate work activity to determine whether 
     eligibility for cash benefits continued, but a return to work 
     would not trigger a review of the beneficiary's impairment to 
     determine whether it continued to be disabling. This 
     provision is effective January 1, 2003.
     Senate amendment
       Similar provision, except Senate amendment is effective 
     upon enactment.
     Conference agreement
       The conference agreement follows the House bill and the 
     Senate amendment, except that the provision would be 
     effective January 1, 2002.
     Expedited Reinstatement of Disability Benefits

     Present law
       Individuals entitled to Social Security disability 
     insurance (SSDI) benefits may receive expedited reinstatement 
     of benefits following termination of benefits because of work 
     activity any time during a 36-month extended period of 
     eligibility. That is, benefits may be reinstated without the 
     need for a new application and disability determination. 
     Otherwise, the Commissioner of Social Security must make a 
     new determination of disability before a claimant can 
     reestablish reentitlement to disability benefits.
     House bill
       The bill establishes that an individual: (1) whose 
     entitlement to SSDI benefits had been terminated on the basis 
     of work activity following completion of an extended period 
     of eligibility; or (2) whose eligibility for SSI benefits 
     (including special SSI eligibility status under section 
     1619(b) of the Social Security Act) had been terminated 
     following suspension of those benefits for 12 consecutive 
     months on account of excess income resulting from work 
     activity, may request reinstatement of those benefits without 
     filing a new application. The individual must have become 
     unable to continue working due to his or her medical 
     condition and must file a reinstatement request within the 
     60-month period following the month of such termination.
       While the Commissioner is making a determination pertaining 
     to a reinstatement request, the individual would be eligible 
     for provisional benefits (cash benefits and Medicare or 
     Medicaid, as appropriate) for a period of not more than 6 
     months. If the Commissioner makes a favorable determination, 
     such individual's prior entitlement to benefits would be 
     reinstated, as would be the prior benefits of his or her 
     dependents who continue to meet the entitlement criteria. If 
     the Commissioner makes an unfavorable determination, 
     provisional benefits would end, but the provisional benefits 
     already paid would not be considered an overpayment. This 
     provision is effective one year after enactment.
     Senate amendment
       Identical provision.
     Conference agreement
       The conference agreement follows the House bill and the 
     Senate amendment.
     Work Incentives Outreach Program

     Present law
       The Social Security Administration prepares and distributes 
     educational materials on work incentives for individuals 
     receiving Social Security Disability Insurance (SSDI) and 
     Supplemental Security Income (SSI) benefits, including on the 
     Internet. Social Security personnel in its 1,300 field 
     offices are available to answer questions about work 
     incentives. Work incentives currently include: exclusions for 
     impairment-related work expenses; trial work periods during 
     which an individual may continue to receive cash benefits; a 
     36-month extended period of eligibility during which cash 
     benefits can be reinstated at any time; continued eligibility 
     for Medicaid and/or Medicare; continued payment of benefits 
     while a beneficiary is enrolled in a vocational 
     rehabilitation program; and plans for achieving self-support 
     (PASS).
     House bill
       The Commissioner of Social Security is required to 
     establish a community-based work incentives planning and 
     assistance program for the purpose of disseminating accurate 
     information to individuals on work incentives. Under this 
     program, the Commissioner is required to:
       Establish a program of grants, cooperative agreements, or 
     contracts to provide benefits planning and assistance 
     (including protection and advocacy services) to individuals 
     with disabilities and outreach to individuals with 
     disabilities who are potentially eligible for work incentive 
     programs; and
       Establish a corps of work incentive specialists located 
     within the Social Security Administration.
       The Commissioner is required to determine the 
     qualifications of agencies eligible for grants, cooperative 
     agreements, or contracts. Social Security Administration 
     field offices and State Medicaid agencies are deemed 
     ineligible. Eligible organizations may include Centers for 
     Independent Living, protection and advocacy organizations, 
     and client assistance programs (established in accordance 
     with the Rehabilitation Act of 1973, as amended); State 
     Developmental Disabilities Councils (established in 
     accordance

[[Page 30096]]

     with the Developmental Disabilities Assistance and Bill of 
     Rights Act); and State welfare agencies (funded under Title 
     IV-A of the Social Security Act).
       Annual appropriations would not exceed $23 million for 
     fiscal years 2000-2004. The provision would be effective on 
     enactment. The grant amount in each State would be based on 
     the number of beneficiaries in the State, subject to certain 
     limits.
     Senate amendment
       Identical provision.
     Conference agreement
       The conference agreement follows the House bill and the 
     Senate amendment.
     State Grants for Work Incentives Assistance to Disabled 
         Beneficiaries

     Present law
       Grants to States to provide assistance to individuals with 
     disabilities are authorized under the Developmental 
     Disabilities Assistance and Bill of Rights Act (42 U.S.C. 
     6041 et seq.). Such assistance includes information on and 
     referral to programs and services and legal, administrative, 
     and other appropriate remedies to ensure access to services.
     House bill
       The Commissioner of Social Security is authorized to make 
     grants to existing protection and advocacy programs 
     authorized by the States under the Developmental Disabilities 
     Assistance and Bill of Rights Act. Services would include 
     information and advice about obtaining vocational 
     rehabilitation, employment services, advocacy, and other 
     services a Social Security Disability Insurance (SSDI) or 
     Supplemental Security Income (SSI) beneficiary may need to 
     secure or regain gainful employment, including applying for 
     and receiving work incentives.
       Appropriation would not exceed $7 million for each of the 
     fiscal years 2000-2004. The provision would be effective upon 
     enactment.
     Senate amendment
       Identical provision.
     Conference agreement
       The conference agreement follows the House bill and the 
     Senate amendment.

        Title II. Expanded Availability of Health Care Services

     Expanding State Options Under the Medicaid Program for 
         Workers with Disabilities

     Present law
       Most States are required to provide Medicaid coverage for 
     disabled individuals who are eligible for Supplemental 
     Security Income (SSI). Individuals are considered disabled if 
     they are unable to engage in substantial gainful activity 
     (defined in Federal regulations as earnings of $700 per 
     month) due to a medically determinable physical or mental 
     impairment which is expected to result in death, or which has 
     lasted or can be expected to last for at least 12 months. 
     Eleven States link Medicaid eligibility to disability 
     definitions which may be more restrictive than SSI criteria.
       Eligibility for SSI is determined by certain federally-
     established income and resource standards. Individuals are 
     eligible for SSI if their ``countable'' income falls below 
     the Federal maximum monthly SSI benefit ($500 for an 
     individual, and $751 for couples in 1999). Not all income is 
     counted for SSI purposes. Excluded from income are the first 
     $20 of any monthly income (i.e., either unearned, such as 
     social security and other pension benefits, or earned) and 
     the first $65 of monthly earned income plus one-half of the 
     remaining earnings. The Federal limit on resources is $2,000 
     for an individual, and $3,000 for couples. Certain resources 
     are not counted, including an individual's home, and the 
     first $4,500 of the current market value of an automobile.
       In addition, States must provide Medicaid coverage for 
     certain individuals under 65 who are working. These persons 
     are referred to as ``qualified severely impaired 
     individuals'' under age 65. These are disabled and blind 
     individuals whose earnings reach or exceed the basic SSI 
     benefit standard, with disregards as determined by the 
     States. (The current threshold for earnings is $1,085 per 
     month.) This special eligibility status applies as long as 
     the individual:
       Continues to be blind or have a disabling impairment;
       Except for earnings, continues to meet all the other 
     requirements for SSI eligibility;
       Would be seriously inhibited from continuing or obtaining 
     employment if Medicaid eligibility were to end; and
       Has earnings that are not sufficient to provide a 
     reasonable equivalent of benefits from SSI, State 
     supplemental payments (if provided by the State), Medicaid, 
     and publicly funded attendant care that would have been 
     available in the absence of those earnings.
       A recent change in law allowed States to increase the 
     income limit for Medicaid coverage of disabled individuals. 
     The Balanced Budget Act of 1997 (P.L.105-33) allowed States 
     to elect to provide Medicaid coverage to disabled persons who 
     otherwise meet SSI eligibility criteria but have income up to 
     250 percent of the Federal poverty guidelines. Beneficiaries 
     under the more liberal income limit may ``buy into'' Medicaid 
     by paying premium costs. Premiums are set on a sliding scale 
     based on an individual's income, as established by the State.
     House bill
       The bill allows States to establish one new optional 
     Medicaid eligibility category: they may provide coverage to 
     individuals with disabilities, aged 16 through 64, who are 
     employed, and who cease to be eligible for Medicaid because 
     their medical condition has improved, and are therefore 
     determined to no longer be eligible for SSI and/or SSDI, but 
     who continue to have a severe medically determinable 
     impairment as defined by regulations of the Secretary of HHS. 
     In addition, States could establish limits on assets, 
     resources, and earned or unearned income for this group that 
     differ from the federal requirements. In order to opt to 
     cover this group, states must provide Medicaid coverage to 
     individuals with disabilities whose income is no more than 
     250 percent of the federal poverty level, and who would be 
     eligible for SSI, except for earnings.
       Individuals would be considered to be employed if they earn 
     at least the Federal minimum wage and work at least 40 hours 
     per month, or are engaged in work that meets criteria for 
     work hours, wages, or other measures established by the State 
     and approved by the Secretary of Health and Human Services 
     (HHS).
       Individuals covered under this new option could ``buy 
     into'' Medicaid coverage by paying premiums or other cost-
     sharing charges on a sliding fee scale based on their income, 
     as established by the State.
       The bill requires that in order to receive federal funds, 
     States must maintain the level of expenditures they expended 
     in the most recent fiscal year prior to enactment of this 
     provision to enable working individuals with disabilities to 
     work.
     Senate amendment
       Allows States to establish one or two new optional Medicaid 
     eligibility categories:
       States would have the option to cover individuals with 
     disabilities (aged 16-64) who, except for earnings, would be 
     eligible for SSI. In addition, States could establish limits 
     on assets, resources and earned or unearned income that 
     differ from the federal requirements.
       If States provide Medicaid coverage to individuals 
     described in (1) above, they may also provide coverage to the 
     following: Employed persons with disabilities whose medical 
     condition has improved, as described above in the House bill.
       Individuals covered under these options could ``buy in'' to 
     Medicaid coverage by paying premiums or other cost-sharing 
     charges on a sliding-fee scale based on income. The State 
     would be required to make premium or other cost-sharing 
     charges the same for both these two new eligibility groups. 
     States may require individuals with incomes above 250 percent 
     of the federal poverty level to pay the full premium cost. In 
     the case of individuals with incomes between 250 percent and 
     450 percent of the poverty level, premiums may not exceed 7.5 
     percent of income. States must require individuals with 
     incomes above $75,000 per year to pay all of the premium 
     costs. States may choose to subsidize premium costs for such 
     individuals, but they may not use federal matching funds to 
     do so.
     Conference agreement
       House recedes to Senate to include the Senate-passed 
     Medicaid buy-in option, allowing States to permit working 
     individuals with incomes above 250 percent of the Federal 
     poverty level to buy-in to the Medicaid program. The 
     conference agreement provides for an effective date of 
     October 1, 2000.
     Extending Medicare Coverage for OASDI Disability Benefit 
         Recipients

     Present law
       Social Security Disability Insurance (SSDI) beneficiaries 
     are allowed to test their ability to work for at least nine 
     months without affecting their disability or Medicare 
     benefits. Disability payments stop when a beneficiary has 
     monthly earnings at or above the substantial gainful activity 
     level ($700) after the 9-month period. If the beneficiary 
     remains disabled but continues working, Medicare can continue 
     for an additional 39 months, for a total of 48 months of 
     coverage.
     House bill
       Effective October 1, 2000, the bill provides for continued 
     Medicare Part A coverage for 6 years beyond the current 
     limit.
       The bill requires the General Accounting Office (GAO) to 
     submit a report to Congress (no later than 5 years after 
     enactment) that examines the effectiveness and cost of 
     extending Medicare Part A coverage to working disabled 
     persons without charging them a premium; the necessity and 
     effectiveness of providing the continuation of Medicare 
     coverage to disabled individuals with incomes above the 
     Social Security taxable wage base ($72,600); the use of a 
     sliding-scale premium for high-income disabled individuals; 
     the viability of an employer buy-in to Medicare; the 
     interrelation between the use of continuation of Medicare 
     coverage and private health insurance coverage; and that 
     recommends whether the Medicare coverage extension should 
     continue beyond the extended period provided under the bill.
     Senate amendment
       The amendment provides that during the 6-year period 
     following enactment of the bill, disabled Social Security 
     beneficiaries who engage in substantial gainful activity

[[Page 30097]]

     would be eligible for Medicare Part A coverage. Medicare Part 
     A coverage could continue indefinitely after the termination 
     of the 6-year period following enactment of the bill for any 
     individual who is enrolled in the Medicare Part A program for 
     the month that ends the 6-year period, without requiring the 
     beneficiaries to pay premiums. It also provides for 
     conforming amendments to facilitate this change.
       The Senate amendment does not require GAO to examine the 
     viability of an employer buy-in to Medicare.
     Conference agreement
       The Senate recedes to the House, but instead of the 6-year 
     extension beyond current law in the House bill, the agreement 
     includes a 4\1/2\ year extension.
     Grants to Develop and Establish State Infrastructures to 
         Support Working Individuals with Disabilities

     Present law
       No provision.
     House bill
       The bill requires the Secretary of HHS to award grants to 
     States to design, establish and operate infrastructures that 
     provide items and services to support working individuals 
     with disabilities, and to conduct outreach campaigns to 
     inform them about the infrastructures. States would be 
     eligible for these grants under the following conditions:
       They must provide Medicaid coverage to employed individuals 
     with disabilities whose income does not exceed 250 percent of 
     the Federal poverty level and who would be eligible for 
     Supplemental Security Income (SSI), except for earnings; and
       They must provide personal assistance services to assist 
     individuals eligible under the bill to remain employed (that 
     is, earn at least the Federal minimum wage and work at least 
     40 hours per month, or engage in work that meets criteria for 
     work hours, wages, or other measures established by the State 
     and approved by the Secretary of HHS).
       Personal assistance services refers to a range of services 
     provided by one or more persons to assist individuals with 
     disabilities to perform daily activities on and off the job. 
     These services would be designed to increase individuals' 
     control in life.
       The Secretary of HHS is required to develop a formula for 
     the award of infrastructure grants. The formula must provide 
     special consideration to States that extend Medicaid coverage 
     to persons who cease to be eligible for SSDI and SSI because 
     of an improvement in their medical condition, but who still 
     have a severe medically determinable impairment and are 
     employed.
       Grant amounts to States must be a minimum of $500,000 per 
     year, and may be up to a maximum of 15 percent of Federal and 
     State Medicaid expenditures for individuals with disabilities 
     whose income does not exceed 250 percent of the Federal 
     poverty level and who would be eligible for SSI, except for 
     earnings; and for individuals who cease to be eligible for 
     Medicaid because of medical improvement.
       States would be required to submit an annual report to the 
     Secretary on the use of grant funds. In addition, the report 
     must indicate the percent increase in the number of SSDI and 
     SSI beneficiaries who return to work.
       For developing State infrastructure grants, the bill 
     authorizes the following amount for: FY2000, $20 million; 
     FY2001, $25 million; FY2002, $30 million; FY2003, $35 
     million; FY2004, $40 million; and FY2005-10, the amount of 
     appropriations for the preceding fiscal year plus the percent 
     increase in the CPI for All Urban Consumers for the preceding 
     fiscal year. The bill stipulates budget authority in advance 
     of appropriations.
       The Secretary of HHS, in consultation with the Ticket to 
     Work and Work Incentives Advisory Panel established by the 
     bill, is required to make a recommendation by October 1, 
     2009, to the Committee on Commerce in the House and the 
     Committee on Finance in the Senate regarding whether the 
     grant program should be continued after FY 2010.
     Senate amendment
       Similar provision, except for the following:
       States would be eligible for infrastructure grants if they 
     provide Medicaid coverage to individuals with disabilities 
     whose income except for earnings, would make them eligible 
     for SSI, and who meet State-established limits on assets, 
     resources and earned or unearned income;
       Special consideration for developing the formula for 
     distribution of infrastructure grants is to be given to 
     States that provide Medicaid benefits to individuals who 
     cease to be eligible for SSDI and SSI because of an 
     improvement in their medical condition, but who have a severe 
     medically determinable impairment and are employed; and The 
     name of the advisory panel is the Work Incentives Advisory 
     Panel.
     Conference agreement
       State participation in the grant programs would be de-
     linked from adoption of Medicaid optional eligibility 
     categories. Furthermore, the maximum award section would be 
     amended to reflect that delinking. States that do not choose 
     to take up the optional Medicaid eligibility category 
     permitting expansion to individuals with disabilities with 
     incomes up to 250 percent of poverty would be subject to a 
     maximum grant award established by a methodology developed by 
     the Secretary consistent with the limit applied to states 
     that do take up the option. For those states who do take up 
     the option, the maximum will be 10 percent, rather than the 
     15 percent included in the House and Senate passed bills. 
     These provisions would be effective October 1, 2000, with 
     funding of: FY2001, $20 million; FY2002, $25 million; FY2003, 
     $30 million; FY2004, $35 million; FY2005, $40 million; and 
     FY2006-11, the amount of appropriations for the preceding 
     fiscal year plus the percent increase in the CPI for All 
     Urban Consumers for the preceding fiscal year.
       The conferees encourage states to exercise the option to 
     permit disabled workers to buy into Medicaid. Providing a 
     Medicaid buy-in option will encourage disabled individuals to 
     return to work without fear of losing their existing health 
     coverage. While election of the Medicaid buy-in option is not 
     a condition of eligibility for infrastructure grants under 
     this section, the conferees urge the Secretary to award such 
     grants with preference for states exercising the buy-in 
     option. Such grants may be used to help finance other State 
     programs facilitating a return to work by disabled 
     individuals, thereby supplementing the Medicaid buy-in 
     benefit as well as other work incentives provided by this 
     Act.
     Demonstration of Coverage under the Medicaid Program of 
         Workers with Potentially Severe Disabilities

     Present law
       No provision.
     House bill
       The Secretary of HHS is required to approve applications 
     from States to establish demonstration programs that would 
     provide medical assistance equal to that provided under 
     Medicaid for disabled persons age 16-64 who are ``workers 
     with a potentially severe disability.'' These are individuals 
     who meet a State's definition of physical or mental 
     impairment, who are employed, and who are reasonably expected 
     to meet SSI's definition of blindness or disability if they 
     did not receive Medicaid services.
       The Secretary is required to approve demonstration programs 
     if the State meets the following requirements:
        The State has elected to provide Medicaid coverage to 
     individuals with disabilities whose income does not exceed 
     250 percent of the Federal poverty level and who would be 
     eligible for SSI, except for their earnings;
       Federal funds are used to supplement State funds used for 
     workers with potentially severe disabilities at the time the 
     demonstration is approved; and
       The State conducts an independent evaluation of the 
     demonstration program.
       The bill allows the Secretary to approve demonstration 
     programs that operate on a sub-State basis.
       For purposes of the demonstration, individuals would be 
     considered to be employed if they earn at least the Federal 
     minimum wage and work at least 40 hours per month, or are 
     engaged in work that meets threshold criteria for work hours, 
     wages, or other measures as defined by the demonstration 
     project and approved by the Secretary.
       The bill authorizes $56 million for the 5-year period 
     beginning FY2000. The bill prohibits any further payments to 
     States beginning in FY2006.
       Unexpended funds from previous years may be spent in 
     subsequent years, but only through FY2005. The Secretary is 
     required to allocate funds to States based on their 
     applications and the availability of funds. Funds awarded to 
     States would equal their Federal medical assistance 
     percentage (FMAP) of expenditures for medical assistance to 
     workers with a potentially severe disability.
       The Secretary of HHS is required to make a recommendation 
     by October 1, 2002, to the Committee on Commerce in the House 
     and the Committee on Finance in the Senate regarding whether 
     the grant program should be continued after FY2003.
     Senate amendment
       Similar provision, except for the following:
       requires States to provide Medicaid coverage to individuals 
     with disabilities whose income except for earnings, would 
     make them eligible for SSI, and who meet State-established 
     limits on assets, resources and earned or unearned income;
       authorizes $72 million for FY 2000, $74 million for FY 
     2001, $78 million for FY2002, and $81 million for FY 2003;
       limits payments to States to no more than $300 million and 
     prohibits payments beginning in FY2006;
       requires States with an approved demonstration to submit an 
     annual report to the Secretary, including data on the total 
     number of persons served by the project, and the number who 
     are ``workers with a potentially severe disability.'' The 
     aggregate amount of payments to States for administrative 
     expenses related to annual reports may not exceed $5 million.
     Conference agreement
       The conference agreement would authorize the demonstration 
     at $250 million over 6 years, and eligibility for 
     demonstration funds would be delinked from adoption of 
     Medicaid optional eligibility categories.

[[Page 30098]]

     These provisions would be effective October 1, 2000. In 
     addition, the House recedes to the Senate on the inclusion on 
     the annual report. The limitation on administrative expenses 
     is reduced to $2 million. States' definitions of workers with 
     potentially severe disabilities can include individuals with 
     a potentially severe disability that can be traced to 
     congenital birth defects as well as diseases or injuries 
     developed or incurred through illness or accident in 
     childhood or adulthood.
     Election by Disabled Beneficiaries to Suspend Medigap 
         Insurance when Covered under a Group Health Plan

     Present law
       No provision.
     House bill
       The bill requires Medigap supplemental insurance plans to 
     provide that benefits and premiums of such plans be suspended 
     at the policyholder's request if the policyholder is entitled 
     to Medicare Part A benefits as a disabled individual and is 
     covered under a group health plan (offered by an employer 
     with 20 or more employees). If suspension occurs and the 
     policyholder loses coverage under the group health plan, the 
     Medigap policy is required to be automatically reinstituted 
     (as of the date of loss of group coverage) if the 
     policyholder provides notice of the loss of such coverage 
     within 90 days of the date of losing group coverage.
     Senate amendment
       Identical provision.
     Conference agreement
       The conference agreement follows the House bill and the 
     Senate amendment.

             Title III. Demonstration Projects and Studies

     Extension of Disability Insurance Program Demonstration 
         Project Authority

     Present law
       Section 505 of the Social Security Disability Amendments of 
     1980, as amended, (42 U.S.C. 1310) provides the Commissioner 
     of Social Security authority to conduct certain demonstration 
     projects. The Commissioner may initiate experiments and 
     demonstration projects to test ways to encourage Social 
     Security Disability Insurance (SSDI) beneficiaries to return 
     to work, and may waive compliance with certain benefit 
     requirements in connection with these projects. This 
     demonstration authority expired on June 9, 1996.
     House bill
       Effective as of the date of enactment, the bill extends the 
     demonstration authority for 5 years, and includes authority 
     for demonstration projects involving applicants as well as 
     beneficiaries.
     Senate amendment
       The Senate amendment provides for permanent demonstration 
     authority.
     Conference agreement
       The Senate recedes to the House.
     Demonstration Projects Providing for Reductions in Disability 
         Insurance Benefits Based on Earnings
     Present law
       No provision.
     House bill
       The bill would require the Commissioner of Social Security 
     to conduct a demonstration project under which payments to 
     Social Security disability insurance (SSDI) beneficiaries 
     would be reduced $1 for every $2 of beneficiary earnings. The 
     Commissioner would be required to annually report to the 
     Congress on the progress of this demonstration project.
     Senate amendment
       Identical provision.
     Conference agreement
       The conference agreement follows the House bill and the 
     Senate amendment.
     Studies and Reports

     Present law
       No provision
     House bill

     1. GAO Report of Existing Disability-Related Employment 
         Incentives
       The bill would direct the General Accounting Office (GAO) 
     to assess the value of existing tax credits and disability-
     related employment initiatives under the Americans with 
     Disabilities Act and other Federal laws. The report is to be 
     submitted within 3 years to the Senate Committee on Finance 
     and the House Committee on Ways & Means.
     2. GAO Report of Existing Coordination of the DI and SSI 
         Programs as They Relate to Individuals Entering or 
         Leaving Concurrent Entitlement
       The bill would direct the General Accounting Office (GAO) 
     to evaluate the coordination under current law of work 
     incentives for individuals eligible for both Social Security 
     disability insurance (SSDI) and Supplemental Security Income 
     (SSI). The report is to be submitted within 3 years to the 
     Senate Committee on Finance and the House Committee on Ways & 
     Means.
     3. GAO Report on the Impact of the Substantial Gainful 
         Activity Limit on Return to Work
       The bill would direct the General Accounting Office (GAO) 
     to examine substantial gainful activity limit as a 
     disincentive for return to work. The report is to be 
     submitted within 2 years to the Senate Committee on Finance 
     and the House Committee on Ways & Means.
     4. Report on Disregards Under the DI and SSI Programs
       The bill would direct the Commissioner of Social Security 
     to identify all income disregards under the Social Security 
     disability insurance (SSDI) and Supplemental Security Income 
     (SSI) programs; to specify the most recent statutory or 
     regulatory change in each disregard; the current value of any 
     disregard if the disregard had been indexed for inflation; 
     recommend any further changes; and to report certain 
     additional information and recommendations on disregards 
     related to grants, scholarships, or fellowships used in 
     attending any educational institution. The report is to be 
     submitted within 90 days to the Senate Committee on Finance 
     and the House Committee on Ways & Means.
     5. GAO Report on SSA's Demonstration Authority
       The bill would direct GAO to assess the Social Security 
     Administration's (SSA) efforts to conduct disability 
     demonstrations and to make a recommendation as to whether 
     SSA's disability demonstration authority should be made 
     permanent. The report is to be submitted within 5 years to 
     the Senate Committee on Finance and the House Committee on 
     Ways and Means.
     Senate amendment
       Similar provision, but does not include the GAO report on 
     SSA's demonstration authority.
     Conference agreement
       The Senate recedes to the House.

            Title IV. Miscellaneous and Technical Amendments

     Technical Amendments Relating to Drug Addicts and Alcoholics

     Present law
       Public Law 104-121 included amendments to the SSDI and SSI 
     disability programs providing that no individual could be 
     considered to be disabled if alcoholism or drug addiction 
     would otherwise be a contributing factor material to the 
     determination of disability. The effective date for all new 
     and pending applications was the date of enactment (March 29, 
     1996). For those whose claim had been finally adjudicated 
     before the date of enactment, the amendments would apply 
     commencing with benefits for months beginning on or after 
     January 1, 1997. Individuals receiving benefits due to drug 
     addiction or alcoholism can reapply for benefits based on 
     another impairment. If the individual applied within 120 days 
     after the date of enactment, the Commissioner is required to 
     complete the entitlement redetermination by January 1, 1997.
       Public Law 104-121 provided for the appointment of 
     representative payees for recipients allowed benefits due to 
     another impairment who also have drug addiction or alcoholism 
     conditions, and the referral of those individuals for 
     treatment.
     House bill
       The bill clarifies that the meaning of the term ``final 
     adjudication'' includes a pending request for administrative 
     or judicial review or a pending readjudication pursuant to 
     class action or court remand. The bill also clarifies that if 
     the Commissioner does not perform the entitlement 
     redetermination before January 1, 1997, that entitlement 
     redetermination must be performed in lieu of a continuing 
     disability review.
       The provision also corrects an anomaly that currently 
     excludes all those allowed benefits (due to another 
     impairment) before March 29, 1996, and redetermined before 
     July 1, 1996, from the requirement that a representative 
     payee be appointed and that the beneficiary be referred for 
     treatment.
       The amendments are effective as though they had been 
     included in the enactment of Section 105 of Public Law 104-
     121 on March 29, 1996.
     Senate amendment
       Identical provision.
     Conference agreement
       The conference agreement follows the House bill and the 
     Senate amendment.
     Treatment of Prisoners

     1. Implementation of Prohibition Against Payment of Title II 
         Benefits to Prisoners

     Present law
       Current law prohibits prisoners from receiving Old Age, 
     Survivors and Disability (OASDI) benefits while incarcerated 
     if they are convicted of any crime punishable by imprisonment 
     of more than 1 year. Federal, State, county or local prisons 
     are required to make available, upon written request, the 
     name and Social Security account number of any individual so 
     convicted who is confined in a penal institution or 
     correctional facility.
       The Personal Responsibility and Work Opportunity 
     Reconciliation Act of 1996, commonly referred to as the 
     welfare reform law, requires the Commissioner to make 
     agreements with any interested State or local institution to 
     provide monthly the names, Social Security account numbers, 
     confinement dates, dates of birth, and other identifying 
     information of residents who are SSI recipients. The 
     Commissioner is required to pay

[[Page 30099]]

     the institution $400 for each SSI recipient who becomes 
     ineligible as a result if the information is provided within 
     30 days of incarceration, and $200 if the information is 
     furnished after 30 days but within 90 days. P.L. 104-193 
     requires the Commissioner to study the desirability, 
     feasibility, and cost of establishing a system for courts to 
     directly furnish SSA with information regarding court orders 
     affecting SSI recipients, and requiring that State and local 
     jails, prisons, and other institutions that enter into 
     contracts with the Commissioner to furnish the information by 
     means of an electronic or similar data exchange system.
       The Commissioner is authorized to provide, on a 
     reimbursable basis, information obtained pursuant to these 
     agreements to any Federal or federally-assisted cash, food, 
     or medical assistance program for the purpose of determining 
     program eligibility.
     House bill
       The House bill amends prisoner provisions in the welfare 
     reform law to include recipients of OASDI benefits in the 
     prisoner reporting system.
       The bill requires the Commissioner to enter into an 
     agreement with any interested State or local correctional 
     institution to provide monthly the names, Social Security 
     account numbers, confinement dates, dates of birth, and other 
     identifying information regarding prisoners who receive OASDI 
     benefits. Certain requirements for computer matching 
     agreements would not apply. For each eligible individual who 
     becomes ineligible as a result, the Commissioner would pay 
     the institution an amount up to $400 if the information is 
     provided within 30 days of incarceration, and up to $200 if 
     provided after 30 days but within 90 days.
       Payments to correctional institutions would be reduced by 
     50 percent for multiple reports on the same individual who 
     receives both SSI and OASDI benefits. Payments made to the 
     correctional institution would be made from OASI or DI Trust 
     Funds, as appropriate.
       The Commissioner is required to provide on a reimbursable 
     basis information obtained pursuant to these agreements to 
     any Federal or federally-assisted cash, food, or medical 
     assistance program for the purpose of determining program 
     eligibility.
       These amendments are effective for prisoners whose 
     confinement begins on or after the first day of the fourth 
     month after the month of enactment.
     Senate amendment
       Similar provision, except the Senate amendment:
      Authorizes, rather than requires, the Commissioner to 
     provide information obtained under this provision to be 
     shared with other Federal and federally-assisted agencies;
      Limits the uses of this information to ``eligibility 
     purposes'' not including ``other administrative purposes'' as 
     provided in the House bill; and
      Does not include conforming amendments.
     Conference agreement
       The Senate recedes to the House.
     2. Elimination of Title II Requirement That Confinement Stem 
         From Crime Punishable by Imprisonment For More Than 1 
         Year

     Present law
       The Social Security Act bars payment of OASDI benefits to 
     prisoners convicted of any crime punishable by imprisonment 
     of more than one year and to those who are institutionalized 
     because they are found guilty but insane. In addition, the 
     law stipulates that no monthly benefits shall be paid to any 
     person for any month during which the person is an inmate.
     House bill
       This House bill broadens the prohibition of OASDI benefits 
     to prisoners to be identical to those that apply to SSI 
     benefits. In addition, it replaces ``an offense punishable by 
     imprisonment for more than 1 year'' with ``a criminal 
     offense,'' and includes benefits payable to persons confined 
     to: (1) a penal institution; or (2) other institution if 
     found guilty but insane, regardless of the total duration of 
     the confinement. An exception would be made for prisoners 
     incarcerated for less than 30 days. The provision is 
     effective for prisoners whose confinement begins on or after 
     the first day of the fourth month after the month of 
     enactment.
     Senate amendment
       Similar provision, except restrictions would apply during 
     months throughout which the criminal was incarcerated, rather 
     than in any month during which the criminal was incarcerated 
     as in the House bill. In addition, does not exempt prisoners 
     convicted of crimes punishable by imprisonment of less 30 
     days.
     Conference agreement
       The Senate recedes to the House.
     3. Conforming Title XVI Amendments

     Present law
       The Personal Responsibility and Work Opportunity 
     Reconciliation Act of 1996 required the Commissioner of 
     Social Security to enter into an agreement with any 
     interested State or local institution (defined as a jail, 
     prison, other correctional facility, or institution where the 
     individual is confined due to a court order) under which the 
     institution shall provide monthly the names, Social Security 
     numbers, dates of birth, confinement dates, and other 
     identifying information of prisoners. The Commissioner must 
     pay to the institution for each eligible individual who 
     becomes ineligible for SSI $400 if the information is 
     provided within 30 days of the individual's becoming an 
     inmate. The payment is $200 if the information is furnished 
     after 30 days but within 90 days.
     House bill
       The amendment is designed to clarify the provision in the 
     Personal Responsibility and Work Opportunity Reconciliation 
     Act of 1996 that, in cases in which an inmate receives 
     benefits under both the SSI and Social Security programs, 
     payments to correctional facilities would be restricted to 
     $400 or $200, depending on when the report is furnished. The 
     amendment also expands the categories of institutions 
     eligible to report incarceration of prisoners. This provision 
     is effective as of the enactment of the Personal 
     Responsibility and Work Opportunity Reconciliation Act of 
     1996 on August 22, 1996.
     Senate amendment
       Similar provision, but limits the uses of this information 
     to ``eligibility purposes'' not including ``other 
     administrative purposes'' as provided in the House bill.
     Conference agreement
       The Senate recedes to the House.
     4. Continued Denial of Benefits to Sex Offenders Remaining 
         Confined to Public Institutions Upon Completion of Prison 
         Terms
     Present Law
       No provision.
     House bill
       The bill prohibits OASDI payments to sex offenders who, on 
     completion of a prison term, remain confined in a public 
     institution pursuant to a court finding that they continue to 
     be sexually dangerous to others. The provision applies to 
     benefits for months ending after the date of enactment.
     Senate amendment
       Identical provision.
     Conference agreement
       The conference agreement follows the House bill and the 
     Senate amendment.
     Revocation by Members of the Clergy of Exemption From Social 
         Security Coverage

     Present law
       Practicing members of the clergy are automatically covered 
     by Social Security as self-employed workers unless they file 
     for an exemption from Social Security coverage within a 
     period ending with the due date of the tax return for the 
     second taxable year (not necessarily consecutive) in which 
     they begin performing their ministerial services. Members of 
     the clergy seeking the exemption must file statements with 
     their church, order, or licensing or ordaining body stating 
     their opposition to the acceptance of Social Security 
     benefits on religious principles. If elected, this exemption 
     is irrevocable.
     House bill
       The House bill provides a 2-year ``open season,'' beginning 
     January 1, 2000, for members of the clergy who want to revoke 
     their exemption from Social Security. This decision to join 
     Social Security would be irrevocable. A member of the clergy 
     choosing such coverage would become subject to self-
     employment taxes and his or her subsequent earnings would be 
     credited for Social Security (and Medicare) benefit purposes. 
     The provision is effective January 1, 2000, for a period of 2 
     years.
     Senate amendment
       Identical provision.
     Conference agreement
       The conference agreement follows the House bill and the 
     Senate amendment.
     Additional Technical Amendment Relating to Cooperative 
         Research or Demonstration Projects Under Titles II and 
         XVI

     Present law
       Current law authorizes Title XVI funding for making grants 
     to States and public and other organizations for paying part 
     of the cost of cooperative research or demonstration 
     projects.
     House bill
       The provision clarifies current law to include agreements 
     or grants concerning Title II of the Social Security Act and 
     is effective as of August 15, 1994.
     Senate amendment
       Identical provision.
     Conference agreement
       The conference agreement follows the House bill and the 
     Senate amendment.
     Authorization for States to Permit Annual Wage Reports

     Present law
       The Social Security Domestic Employment Reform Act of 1994 
     (P.L. 103-387) changed certain Social Security and Medicare 
     tax rules. Specifically, the Act provided that domestic 
     service employers (that is, individuals employing maids, 
     gardeners, babysitters, and the like) would no longer owe 
     taxes for any domestic employee who earned less than $1,000 
     per year from the employer. In addition, the Act simplified 
     certain reporting requirements. Domestic employers

[[Page 30100]]

     were no longer required to file quarterly returns regarding 
     Social Security and Medicare taxes, nor the annual Federal 
     Unemployment Tax Act (FUTA) return. Instead, all Federal 
     reporting was consolidated on an annual Schedule H filed at 
     the same time as the employer's personal income tax return.
     House bill
       The provision allows States the option of permitting 
     domestic service employers to file annual rather than 
     quarterly wage reports pursuant to section 1137 of the Social 
     Security Act, which provides for an income and eligibility 
     verification system (IEVS) for certain public benefits. This 
     provision is effective as of the date of enactment.
     Senate amendment
       Identical provision.
     Conference agreement
       The conference agreement follows the House bill and the 
     Senate amendment.
     Assessment on Attorneys Who Receive Fees Via the Social 
         Security Administration

     Present law
       The Commissioner of Social Security, using one of two 
     processes, authorizes the fee that may be charged by an 
     attorney or non-attorney to represent a claimant in 
     administrative proceedings for Social Security, SSI, or Part 
     B Black Lung benefits.
       Under the fee agreement process, the representative and 
     claimant submit a signed agreement reflecting the amount of 
     the fee before the date of a favorable decision, and the 
     agreement usually will be approved by the Commissioner if the 
     specified fee does not exceed the lesser of 25 percent of the 
     claimant's past-due benefits or $4,000. The Commissioner then 
     issues a notice of the maximum fee the representative can 
     charge based on the approved agreement.
       Under the fee petition process, the representative submits 
     an itemized list of services and fees after a decision has 
     been issued. The Commissioner will issue a notice of the fees 
     that are approved or disapproved after reviewing the extent 
     and types of services performed, the complexity of the case, 
     and the amount of time spent by the representative on the 
     case.
       The Social Security Act and Social Security regulations 
     provide that a representative may not charge or collect, 
     directly or indirectly, a fee in any amount not approved by 
     the Social Security Administration (SSA) or a Federal court. 
     The statute and regulations further provide that SSA may 
     suspend or disqualify from further practice before SSA a 
     representative who breaks the rules governing 
     representatives.
       Under programs authorized under title II of the Social 
     Security Act, in favorable decisions in which the claimant is 
     represented by an attorney, the Commissioner must withhold 
     and certify direct payment to the attorney, out of the 
     claimant's past-due benefits, an amount equal to the smaller 
     of: (1) 25 percent of the past-due benefits, or (2) the fee 
     authorized by the Commissioner under either the fee petition 
     or fee agreement process. This payment provision does not 
     apply to SSI benefits and an attorney must look to the SSI 
     beneficiary for payment of the fee. In addition, it does not 
     apply to fees requested by non-attorney representatives.
       The costs associated with approving, determining, 
     processing, withholding, and certifying direct payment of 
     attorney fees are currently absorbed in SSA's administrative 
     budget.
     House bill
       The bill requires the Commissioner of Social Security to 
     recover from attorneys' fees the cost of administering the 
     process used to certify payment of attorneys fees. The 
     assessment would be withheld from the amount payable to the 
     attorney and the attorney would be prohibited from recovering 
     the assessment from the beneficiary. The provision specifies 
     an assessment of 6.3 percent of the approved attorney's fee 
     for FY2000. After FY2000, the percentage would be adjusted by 
     the Commissioner as necessary to achieve full recovery of the 
     costs associated with certifying fees to attorneys.
       The provision is applicable to fees required to be 
     certified for payment after December 31, 1999, or the last 
     day of the first month beginning after the month of 
     enactment, whichever is later.
     Senate amendment
       No provision.
     Conference agreement
       The conference agreement follows the House bill with the 
     modification that, for calendar years after 2000, the 
     assessment would be set at a rate to achieve full recovery of 
     the costs of determining, processing, withholding, and 
     distributing payment of fees to attorneys, but shall not 
     exceed 6.3 percent of the attorney's fee. The Conferees 
     expect that the Commissioner of Social Security will take 
     into account in determining the cost to the Social Security 
     Administration the processing, withholding, and distributing 
     of payments of fees to attorneys. The agreement contemplates 
     ongoing Congressional oversight of the attorney fee 
     assessment process through hearings and requires a study by 
     the General Accounting Office (GAO) to examine the costs of 
     administering the attorney fee provisions with specific 
     estimates of the costs of processing, withholding, and 
     distributing of payment of fees. GAO would also explore the 
     feasibility and advisability of a fixed fee as opposed to an 
     assessment based on a percentage of the attorney's fee and 
     would determine whether the assessment impairs access to 
     representation for applicants. GAO would be required to make 
     recommendations regarding efficiencies that the Commissioner 
     could implement to reduce the cost of determining and 
     certifying fees, the feasibility of linking the collection of 
     the assessment to the timeliness of the payment of fees to 
     attorneys, and the advisability of extending attorney fee 
     disbursement to the Supplemental Security Income program. The 
     agreement also eliminates the requirement that the 
     Commissioner may not certify a fee before the end of the 15-
     day waiting period, but does not affect any beneficiary's 
     right of appeal.
       The authority is provided to the SSA to decrease the user 
     fee assessment, and accordingly it should be decreased to 
     take into account any administrative savings associated with 
     technological improvements or administrative efficiencies 
     implemented by the SSA or if the GAO finds that actual 
     administrative expenses are less than reported by the SSA. 
     The SSA should devote special attention to GAO 
     recommendations related to program improvements or 
     administrative efficiencies.
       In addition, the Congress and the Committees of 
     jurisdiction should reconsider the assessment promptly if the 
     GAO finds that such a fee in any way impairs or impacts 
     beneficiaries' ability to obtain and secure legal 
     representation.
     Prevention of Fraud and Abuse Associated with Certain 
         Payments Under the Medicaid Program

     Present law
       Under the Individuals with Disabilities Education Act 
     (IDEA), public schools must provide children with 
     disabilities with a free and appropriate public education in 
     the least restrictive educational setting, including special 
     education and health-related services according to their 
     individualized education program (IEP). In order to assist 
     schools in meeting this obligation, under certain 
     circumstances States may turn to Medicaid as a payer for 
     health-related services such as occupational therapy, speech 
     therapy, and physical therapy. Under certain conditions, 
     school districts may directly bill their State Medicaid 
     program for health-related services provided to disabled 
     children enrolled in Medicaid. In addition, a school district 
     may utilize a community-based organization to provide health-
     related services to disabled children enrolled in Medicaid.
       In May of 1999, the Health Care Financing Administration 
     (HCFA) clarified federal policies with respect to 
     reimbursement for school-based health services under Medicaid 
     in three areas: (1) bundled rates for medical services 
     provided to Medicaid-eligible children in schools; (2) 
     Federal matching payments for school health-related 
     transportation services; and (3) school health-related 
     administrative activities.
     House bill
       The bill stipulates that Medicaid payments for school-based 
     services and related administrative costs are not to be made 
     unless certain conditions are met. First, individual items 
     and services may not be bundled unless payment is made under 
     a methodology approved by the Secretary of Health and Human 
     Services (HHS). Similarly, fee-for-service payment for 
     individual items and services and administrative expenses is 
     permitted only when payment does not exceed amounts paid to 
     other entities for the same items, services, or 
     administrative expenses, or is made in accordance with an 
     alternative arrangement approved by the Secretary. This 
     provision also codifies HCFA's policies on transportation 
     services in effect as of May 1999. Finally, the provision 
     delineates specific conditions under which payments for 
     Medicaid covered items, services and administrative expenses 
     can be made when a public agency such as a school district 
     contracts with an entity to conduct claims processing 
     functions.
       The bill requires coordination between states, managed care 
     entities and schools related to provision of and payment for 
     Medicaid services provided in school settings. The provision 
     would ensure that local school agencies are able to recoup an 
     appropriate amount of federal financial match when they make 
     expenditures for services for these Medicaid eligible 
     children. Finally, the provision specifies that the 
     Administrator of HCFA, in consultation with State Medicaid 
     and education agencies and local school systems, will develop 
     and implement a uniform methodology for administrative claims 
     made by schools.
     Senate amendment
       No provision.
     Conference agreement
       The House recedes to the Senate.
     Extension of Authority of State Medicaid Fraud Control Units

     Present law
       Medicaid Fraud Control Units established by State 
     governments as entities separate from the State's Medicaid 
     agency are authorized to investigate and refer for 
     prosecution Medicaid fraud as well as patient abuse in 
     facilities that participate in the Medicaid program.

[[Page 30101]]


     House bill
       The bill permits State Medicaid Fraud Control Units to 
     investigate fraud related to any Federal health care program, 
     subject to the approval of the appropriate Inspector General, 
     if the suspected fraud is related to Medicaid fraud. Funds 
     that are recovered would be returned to the relevant Federal 
     health care program or the Medicaid program. Fraud control 
     units would be permitted to investigate patient abuse in non-
     Medicaid residential health care facilities.
     Senate amendment
       No provision.
     Conference agreement
       The Senate recedes to the House.
     Climate Database Modernization

     Present law
       No provision.
     House bill
       No provision.
     Senate amendment
       No provision.
     Conference agreement
       Notwithstanding any other provision of law, the National 
     Oceanic and Atmospheric Administration (NOAA) shall contract 
     for its multi-year program for climate database modernization 
     and utilization in accordance with NIH Image World Contract 
     #263-96-D-0323 and Task Order #56-DKNE-9-98303 which were 
     awarded as a result of fair and open competition conducted in 
     response to NOAA's solicitation IW SOW 1082.
     Special Allowance Adjustment for Student Loans

     Present law
       Under the Higher Education Act of 1965, the special 
     allowance paid to lenders for participation in the Federal 
     Family Education Loan Program is pegged to the rate for 91-
     day Treasury bills.
     House bill
       The bill changes the index for the special allowance from 
     91-day Treasury bills to that for 3-month commercial paper 
     and would be applicable for payment with respect to any 3-
     month period beginning on or after January 1, 2000, for loans 
     for which the first disbursement is made after such date.
     Senate amendment
       No provision.
     Conference agreement
       The Senate recedes to the House. In receding to the House 
     on the provision, the conferees wish to note that the Higher 
     Education Act reauthorization (P.L. 105-244) required the 
     establishment of a study group to design and conduct a study 
     to identify and evaluate means of establishing a market 
     mechanism for the delivery of Title IV loans. Not fewer than 
     three different mechanisms were to be identified and 
     evaluated by this group which was to report to the Congress 
     no later than May 15, 2001. The conferees wish to note that 
     the Chairman and Ranking Member of the Committee on Education 
     and the Workforce and the Chairman and Ranking Member of the 
     House Subcommittee on Postsecondary Education, Training and 
     Life Long Learning have endorsed the change to the lender 
     yield calculation on student loans contained in the bill. The 
     proposal would change lender yields from January 1, 2000 
     through June 30, 2003 at which time the House Education and 
     the Workforce Committee and the Senate Health, Education, 
     Labor, and Pension Committee can appropriately review this 
     item during the consideration of the Higher Education Act 
     reauthorization.
     Schedule for Payments Under SSI State Supplementation 
         Agreements

     Present law
       States may supplement the federal Supplemental Security 
     Income (SSI) payment. The Social Security Administration 
     (SSA) administers this state supplement payment for 26 
     States. Under current regulations, States must reimburse SSA 
     within 5 business days after the monthly supplement payment 
     has been made by SSA.
     House bill
       No provision.
     Senate amendment
       No provision.
     Conference agreement
       The conference agreement would change the date for 
     remitting reimbursement by the States to no later than the 
     business day preceding the date SSA pays the monthly benefit. 
     For the payment for the last month of the State's fiscal 
     year, States shall remit the reimbursement by the fifth 
     business day following the date SSA pays the monthly benefit. 
     The agreement also provides for a penalty of 5 percent of the 
     payment and fees due if the payment is received after the 
     specified dates. This provision is effective for monthly 
     benefits paid for months after September 2009 (October 2009 
     for States with fiscal years that coincide with the Federal 
     fiscal year).
     Bonus Commodities Related to the National School Lunch Act

     Present law
       In the School Lunch program, schools are entitled to 
     federal food commodity assistance for each meal they serve. 
     Commodity assistance must equal a specific amount per meal, 
     about 15 cents a meal in the 1999-2000 school year. In 
     addition, when all school lunch program aid (cash and 
     commodities) are added together, the value of commodities 
     purchased to meet the per-meal (15-cent) entitlement--so-
     called entitlement commodities--must equal 12 percent of the 
     total cash and commodity aid provided. If not, the 
     Agriculture Department is required to buy additional 
     commodities to meet the 12 percent requirement.
       The Agriculture Department appropriations laws for fiscal 
     years 1999 and 2000 changed this 12 percent rule temporarily. 
     They require that any commodities acquired by the Agriculture 
     Department for farm support reasons, and then donated to 
     schools in the school lunch program (so-called bonus 
     commodities), be counted when judging whether the 12 percent 
     requirement has been met.
     House bill
       No provision.
     Senate amendment
       No provision.
     Conference agreement
       The conference agreement would apply the provisions 
     incorporated in the Agriculture Department appropriations 
     laws for fiscal years 1999 and 2000 to fiscal years 2001 
     through 2009.
     Simplification of Foster Child Definition Under Earned Income 
         Credit

     Present law
       For purposes of the earned income credit (``EIC''), 
     qualifying children may include foster children who reside 
     with the taxpayer for a full year, if the taxpayer cares for 
     the foster children as the taxpayer's own children. (Code 
     sec. 32(c)(3)(B)(iii)). All EIC qualifying children 
     (including foster children) must either be under the age of 
     19 (24 if a full-time student) or permanently and totally 
     disabled. There is no requirement that the foster child 
     either be (1) placed in the household by a foster care agency 
     or (2) a relative of the taxpayer.
     House bill

                             No provision.

                            Senate amendment

     No provision.

                          Conference agreement

       For purposes of the EIC, a foster child is defined as a 
     child who (1) is cared for by the taxpayer as if he or she 
     were the taxpayer's own child, (2) has the same principal 
     place of abode as the taxpayer for the taxpayer's entire 
     taxable year, and (3) either is the taxpayer's brother, 
     sister, stepbrother, stepsister, or descendant (including an 
     adopted child) of any such relative, or was placed in the 
     taxpayer's home by an agency of a State or one of its 
     political subdivisions or by a tax-exempt child placement 
     agency licensed by a State.
     Delay of Effective Date of Organ Procurement and 
         Transplantation Network Final Rule

     Present law
       No provision.
     House bill
       No provision.
     Senate amendment
       No provision.
     Conference agreement
       The final rule entitled ``Organ Procurement and 
     Transplantation Network'', promulgated by the Secretary of 
     Health and Human Services on April 2, 1998, together with the 
     amendments to such rules promulgated on October 20, 1999 
     shall not become effective before the expiration of the 90-
     day period beginning on the date of enactment of this Act.

                         LEGISLATIVE BACKGROUND

       H.R. 1180, the ``Ticket to Work and Work Incentives 
     Improvement Act of 1999,'' was passed by the House on October 
     19, 1999. In the Senate, the provisions of S. 331 (the ``Work 
     Incentives Improvement Act of 1999''), with an amendment, 
     were substituted, and the bill, as amended, passed the Senate 
     on October 21, 1999. The conference agreement to H.R. 1180 
     contains provisions to amend the Social Security Act to 
     expand the availability of health care coverage for working 
     individuals with disabilities. Provisions of H.R. 2923 
     (``Extension of Expiring Provisions''),\1\ as approved by the 
     Ways and Means Committee on September 28, 1999, and S. 1792, 
     (the ``Tax Relief Extension Act of 1999''),\2\ as passed by 
     the Senate on October 29, 1999, are included in the 
     conference agreement to H.R. 1180.
---------------------------------------------------------------------------
     \1\ The provisions of H.R. 2923 were reported by the House 
     Committee on Ways and Means on September 28, 1999 (H. Rept. 
     106-344).
     \2\ The provisions of S. 1792 were reported by the Senate 
     Committee on Finance on October 26, 1999 (S. Rept. 106-201).
---------------------------------------------------------------------------

          I. EXTENSION OF EXPIRED AND EXPIRING TAX PROVISIONS

 A. Extend Minimum Tax Relief for Individuals (secs. 24 and 26 of the 
                                 Code)

                              Present Law

       Present law provides for certain nonrefundable personal tax 
     credits (i.e., the dependent care credit, the credit for the 
     elderly

[[Page 30102]]

     and disabled, the adoption credit, the child tax credit, the 
     credit for interest on certain home mortgages, the HOPE 
     Scholarship and Lifetime Learning credits, and the D.C. 
     homebuyer's credit). Except for taxable years beginning 
     during 1998, these credits are allowed only to the extent 
     that the individual's regular income tax liability exceeds 
     the individual's tentative minimum tax, determined without 
     regard to the minimum tax foreign tax credit. For taxable 
     years beginning during 1998, these credits are allowed to the 
     extent of the full amount of the individual's regular tax 
     (without regard to the tentative minimum tax).
       An individual's tentative minimum tax is an amount equal to 
     (1) 26 percent of the first $175,000 ($87,500 in the case of 
     a married individual filing a separate return) of alternative 
     minimum taxable income (``AMTI'') in excess of a phased-out 
     exemption amount and (2) 28 percent of the remaining AMTI. 
     The maximum tax rates on net capital gain used in computing 
     the tentative minimum tax are the same as under the regular 
     tax. AMTI is the individual's taxable income adjusted to take 
     account of specified preferences and adjustments. The 
     exemption amounts are: (1) $45,000 in the case of married 
     individuals filing a joint return and surviving spouses; (2) 
     $33,750 in the case of other unmarried individuals; and (3) 
     $22,500 in the case of married individuals filing a separate 
     return, estates and trusts. The exemption amounts are phased 
     out by an amount equal to 25 percent of the amount by which 
     the individual's AMTI exceeds (1) $150,000 in the case of 
     married individuals filing a joint return and surviving 
     spouses, (2) $112,500 in the case of other unmarried 
     individuals, and (3) $75,000 in the case of married 
     individuals filing separate returns or an estate or a trust. 
     These amounts are not indexed for inflation.
       For families with three or more qualifying children, a 
     refundable child credit is provided, up to the amount by 
     which the liability for social security taxes exceeds the 
     amount of the earned income credit (sec. 24(d)). For taxable 
     years beginning after 1998, the refundable child credit is 
     reduced by the amount of the individual's minimum tax 
     liability (i.e., the amount by which the tentative minimum 
     tax exceeds the regular tax liability).

                               House Bill

       No provision. H.R. 2923, as approved by the Committee on 
     Ways and Means, makes permanent the provision that allows an 
     individual to offset the entire regular tax liability 
     (without regard to the minimum tax) by the personal 
     nonrefundable credits.
       H.R. 2923 repeals the present-law provision that reduces 
     the refundable child credit by the amount of an individual's 
     minimum tax.
       Effective date.--The provisions of H.R. 2923 are effective 
     for taxable years beginning after December 31, 1998.

                            Senate Amendment

       No provision. S. 1792, as passed by the Senate, contains 
     the same provisions as H.R. 2923, except that the provisions 
     apply only to taxable years beginning in 1999 and 2000.

                          Conference Agreement

       The conference agreement extends the provision that allows 
     the nonrefundable credits to offset the individual's regular 
     tax liability in full (as opposed to only the amount by which 
     the regular tax exceeds the tentative minimum tax) to taxable 
     years beginning in 1999. For taxable years beginning in 2000 
     and 2001 the personal nonrefundable credits may offset both 
     the regular tax and the minimum tax.\3\
---------------------------------------------------------------------------
     \3\ The foreign tax credit will be allowed before the 
     personal credits in computing the regular tax for these 
     years.
---------------------------------------------------------------------------
       Under the conference agreement, the refundable child credit 
     will not be reduced by the amount of an individual's minimum 
     tax in taxable years beginning in 1999, 2000, and 2001.

 B. Extend Research and Experimentation Tax Credit and Increase Rates 
 for the Alternative Incremental Research Credit (sec. 41 of the Code)

                              Present Law

       Section 41 provides for a research tax credit equal to 20 
     percent of the amount by which a taxpayer's qualified 
     research expenditures for a taxable year exceeded its base 
     amount for that year. The research tax credit expired and 
     generally does not apply to amounts paid or incurred after 
     June 30, 1999.
       Except for certain university basic research payments made 
     by corporations, the research tax credit applies only to the 
     extent that the taxpayer's qualified research expenditures 
     for the current taxable year exceed its base amount. The base 
     amount for the current year generally is computed by 
     multiplying the taxpayer's ``fixed-base percentage'' by the 
     average amount of the taxpayer's gross receipts for the four 
     preceding years. If a taxpayer both incurred qualified 
     research expenditures and had gross receipts during each of 
     at least three years from 1984 through 1988, then its 
     ``fixed-base percentage'' is the ratio that its total 
     qualified research expenditures for the 1984-1988 period 
     bears to its total gross receipts for that period (subject to 
     a maximum ratio of .16). All other taxpayers (so-called 
     ``start-up firms'') are assigned a fixed-base percentage of 3 
     percent. Expenditures attributable to research that is 
     conducted outside the United States do not enter into the 
     credit computation.
       Taxpayers are allowed to elect an alternative incremental 
     research credit regime. If a taxpayer elects to be subject to 
     this alternative regime, the taxpayer is assigned a three-
     tiered fixed-base percentage (that is lower than the fixed-
     base percentage otherwise applicable under present law) and 
     the credit rate likewise is reduced. Under the alternative 
     credit regime, a credit rate of 1.65 percent applies to the 
     extent that a taxpayer's current-year research expenses 
     exceed a base amount computed by using a fixed-base 
     percentage of 1 percent (i.e., the base amount equals 1 
     percent of the taxpayer's average gross receipts for the four 
     preceding years) but do not exceed a base amount computed by 
     using a fixed-base percentage of 1.5 percent. A credit rate 
     of 2.2 percent applies to the extent that a taxpayer's 
     current-year research expenses exceed a base amount computed 
     by using a fixed-base percentage of 1.5 percent but do not 
     exceed a base amount computed by using a fixed-base 
     percentage of 2 percent. A credit rate of 2.75 percent 
     applies to the extent that a taxpayer's current-year research 
     expenses exceed a base amount computed by using a fixed-base 
     percentage of 2 percent. An election to be subject to this 
     alternative incremental credit regime may be made for any 
     taxable year beginning after June 30, 1996, and such an 
     election applies to that taxable year and all subsequent 
     years (in the event that the credit subsequently is extended 
     by Congress) unless revoked with the consent of the Secretary 
     of the Treasury.

                               House Bill

       No provision. However, H.R. 2923, as approved by the 
     Committee on Ways and Means, extends the research tax credit 
     for five years--i.e., generally, for the period July 1, 1999, 
     through June 30, 2004.
       In addition, the provision increases the credit rate 
     applicable under the alternative incremental research credit 
     one percentage point per step, that is from 1.65 percent to 
     2.65 percent when a taxpayer's current-year research expenses 
     exceed a base amount of 1 percent but do not exceed a base 
     amount of 1.5 percent; from 2.2 percent to 3.2 percent when a 
     taxpayer's current-year research expenses exceed a base 
     amount of 1.5 percent but do not exceed a base amount of 2 
     percent; and from 2.75 percent to 3.75 percent when a 
     taxpayer's current-year research expenses exceed a base 
     amount of 2 percent.
       Research tax credits that are attributable to the period 
     beginning on July 1, 1999, and ending on September 30, 2000, 
     may not be taken into account in determining any amount 
     required to be paid for any purpose under the Internal 
     Revenue Code prior to October 1, 2000. On or after October 1, 
     2000, such credits may be taken into account through the 
     filing of an amended return, an application for expedited 
     refund, an adjustment of estimated taxes, or other means that 
     is allowed by the Code.
       Effective date.--The extension of the research credit is 
     effective for qualified research expenditures paid or 
     incurred during the period July 1, 1999, through June 30, 
     2004. The increase in the credit rate under the alternative 
     incremental research credit is effective for taxable years 
     beginning after June 30, 1999. Estimated tax penalties will 
     be waived for the period before July 1, 1999, with respect to 
     any underpayment that is created by reason of the rule 
     allocating research credits to a period based on the ratio of 
     months in such period to the months in the taxable year.

                            Senate Amendment

       No provision. However, S. 1792, as passed by the Senate, 
     extends the research tax credit for 18 months--i.e., 
     generally, for the period July 1, 1999, through December 31, 
     2000.
       In addition, S. 1792 increases the credit rate applicable 
     under the alternative incremental research credit one 
     percentage point per step, that is, identical to the H.R. 
     2923.
       Lastly, S. 1792 expands the definition of qualified 
     research to include research undertaken in Puerto Rico and 
     possessions of the United States. However, any employee 
     compensation or other expense claimed for computation of the 
     research credit may not also be claimed for the purpose of 
     any credit allowable under sec. 30A (``Puerto Rico economic 
     activity credit'') or under sec. 936 (``Puerto Rico and 
     possession tax credit'').
       Effective date.--The extension of the research credit is 
     effective for qualified research expenditures paid or 
     incurred during the period July 1, 1999, through December 31, 
     2000. The increase in the credit rate under the alternative 
     incremental research credit is effective for taxable years 
     beginning after June 30, 1999. The expansion of qualified 
     research to include research undertaken in any possession of 
     the United States is effective for qualified research 
     expenditures paid or incurred beginning after June 30, 1999.

                          Conference Agreement

       The conference agreement includes the provision of H.R. 
     2923 by extending the research credit through June 30, 2004.
       In addition, the conference agreement follows H.R. 2923 and 
     S. 1792 by increasing the

[[Page 30103]]

     credit rate applicable under the alternative incremental 
     research credit by one percentage point per step.
       The conference agreement follows S. 1792 by expanding the 
     definition of qualified research to include research 
     undertaken in Puerto Rico and possessions of the United 
     States.
       Research tax credits that are attributable to the period 
     beginning on July 1, 1999, and ending on September 30, 2000, 
     may not be taken into account in determining any amount 
     required to be paid for any purpose under the Internal 
     Revenue Code prior to October 1, 2000. On or after October 1, 
     2000, such credits may be taken into account through the 
     filing of an amended return, an application for expedited 
     refund, an adjustment of estimated taxes, or other means that 
     are allowed by the Code. The prohibition on taking credits 
     attributable to the period beginning on July 1, 1999, and 
     ending on September 30, 2000, into account as payments prior 
     to October 1, 2000, extends to the determination of any 
     penalty or interest under the Code. For example, the amount 
     of tax required to be shown on a return that is due prior to 
     October 1, 2000 (excluding extensions) may not be reduced by 
     any such credits. In addition, the conferees clarify that 
     deductions under section 174 are reduced by credits allowable 
     under section 41 as under present law, not withstanding the 
     delay in taking the credit into account created by this 
     provision.
       Similarly, research tax credits that are attributable to 
     the period beginning October 1, 2000, and ending on September 
     30, 2001, may not be taken into account in determining any 
     amount required to be paid for any purpose under the Internal 
     Revenue Code prior to October 1, 2001. On or after October 1, 
     2001, such credits may be taken into account through the 
     filing of an amended return, an application for expedited 
     refund, an adjustment of estimated taxes, or other means that 
     are allowed by the Code. Likewise, the prohibition on taking 
     credits attributable to the period beginning on October 1, 
     2000, and ending on September 30, 2001, into account as 
     payments prior to October 1, 2001, extends to the 
     determination of any penalty or interest under the Code.
       In extending the research credit, the conferees are 
     concerned that the definition of qualified research be 
     administered in a manner that is consistent with the intent 
     Congress has expressed in enacting and extending the research 
     credit. The conferees urge the Secretary to consider 
     carefully the comments he has and may receive regarding the 
     proposed regulations relating to the computation of the 
     credit under section 41(c) and the definition of qualified 
     research under section 41(d), particularly regarding the 
     ``common knowledge'' standard. The conferees further note the 
     rapid pace of technological advance, especially in service-
     related industries, and urge the Secretary to consider 
     carefully the comments he has and may receive in promulgating 
     regulations in connection with what constitutes ``internal 
     use'' with regard to software expenditures. The conferees 
     also observe that software research, that otherwise satisfies 
     the requirements of section 41, which is undertaken to 
     support the provision of a service, should not be deemed 
     ``internal use'' solely because the business component 
     involves the provision of a service.
       The conferees wish to reaffirm that qualified research is 
     research undertaken for the purpose of discovering new 
     information which is technological in nature. For purposes of 
     applying this definition, new information is information that 
     is new to the taxpayer, is not freely available to the 
     general public, and otherwise satisfies the requirements of 
     section 41. Employing existing technologies in a particular 
     field or relying on existing principles of engineering or 
     science is qualified research, if such activities are 
     otherwise undertaken for purposes of discovering information 
     and satisfy the other requirements under section 41.
       The conferees also are concerned about unnecessary and 
     costly taxpayer record keeping burdens and reaffirm that 
     eligibility for the credit is not intended to be contingent 
     on meeting unreasonable record keeping requirements.
       Effective date.--The extension of the research credit is 
     effective for qualified research expenditures paid or 
     incurred during the period July 1, 1999, through June 30, 
     2004. The increase in the credit rate under the alternative 
     incremental research credit is effective for taxable years 
     beginning after June 30, 1999.

C. Extend Exceptions under Subpart F for Active Financing Income (secs. 
                        953 and 954 of the Code)

                              Present Law

       Under the subpart F rules, 10-percent U.S. shareholders of 
     a controlled foreign corporation (``CFC'') are subject to 
     U.S. tax currently on certain income earned by the CFC, 
     whether or not such income is distributed to the 
     shareholders. The income subject to current inclusion under 
     the subpart F rules includes, among other things, foreign 
     personal holding company income and insurance income. In 
     addition, 10-percent U.S. shareholders of a CFC are subject 
     to current inclusion with respect to their shares of the 
     CFC's foreign base company services income (i.e., income 
     derived from services performed for a related person outside 
     the country in which the CFC is organized).
       Foreign personal holding company income generally consists 
     of the following: (1) dividends, interest, royalties, rents, 
     and annuities; (2) net gains from the sale or exchange of (a) 
     property that gives rise to the preceding types of income, 
     (b) property that does not give rise to income, and (c) 
     interests in trusts, partnerships, and REMICs; (3) net gains 
     from commodities transactions; (4) net gains from foreign 
     currency transactions; (5) income that is equivalent to 
     interest; (6) income from notional principal contracts; and 
     (7) payments in lieu of dividends.
       Insurance income subject to current inclusion under the 
     subpart F rules includes any income of a CFC attributable to 
     the issuing or reinsuring of any insurance or annuity 
     contract in connection with risks located in a country other 
     than the CFC's country of organization. Subpart F insurance 
     income also includes income attributable to an insurance 
     contract in connection with risks located within the CFC's 
     country of organization, as the result of an arrangement 
     under which another corporation receives a substantially 
     equal amount of consideration for insurance of other-country 
     risks. Investment income of a CFC that is allocable to any 
     insurance or annuity contract related to risks located 
     outside the CFC's country of organization is taxable as 
     subpart F insurance income (Prop. Treas. Reg. sec. 1.953-
     1(a)).
       Temporary exceptions from foreign personal holding company 
     income, foreign base company services income, and insurance 
     income apply for subpart F purposes for certain income that 
     is derived in the active conduct of a banking, financing, or 
     similar business, or in the conduct of an insurance business 
     (so-called ``active financing income''). These exceptions are 
     applicable only for taxable years beginning in 1999.\4\
---------------------------------------------------------------------------
     \4\ Temporary exceptions from the subpart F provisions for 
     certain active financing income applied only for taxable 
     years beginning in 1998. Those exceptions were extended and 
     modified as part of the present-law provision.
---------------------------------------------------------------------------
       With respect to income derived in the active conduct of a 
     banking, financing, or similar business, a CFC is required to 
     be predominantly engaged in such business and to conduct 
     substantial activity with respect to such business in order 
     to qualify for the exceptions. In addition, certain nexus 
     requirements apply, which provide that income derived by a 
     CFC or a qualified business unit (``QBU'') of a CFC from 
     transactions with customers is eligible for the exceptions 
     if, among other things, substantially all of the activities 
     in connection with such transactions are conducted directly 
     by the CFC or QBU in its home country, and such income is 
     treated as earned by the CFC or QBU in its home country for 
     purposes of such country's tax laws. Moreover, the exceptions 
     apply to income derived from certain cross border 
     transactions, provided that certain requirements are met. 
     Additional exceptions from foreign personal holding company 
     income apply for certain income derived by a securities 
     dealer within the meaning of section 475 and for gain from 
     the sale of active financing assets.
       In the case of insurance, in addition to a temporary 
     exception from foreign personal holding company income for 
     certain income of a qualifying insurance company with respect 
     to risks located within the CFC's country of creation or 
     organization, certain temporary exceptions from insurance 
     income and from foreign personal holding company income apply 
     for certain income of a qualifying branch of a qualifying 
     insurance company with respect to risks located within the 
     home country of the branch, provided certain requirements are 
     met under each of the exceptions. Further, additional 
     temporary exceptions from insurance income and from foreign 
     personal holding company income apply for certain income of 
     certain CFCs or branches with respect to risks located in a 
     country other than the United States, provided that the 
     requirements for these exceptions are met.

                               House Bill

       No provision, but H.R. 2923, as approved by the Committee 
     on Ways and Means, extends for five years the present-law 
     temporary exceptions from subpart F foreign personal holding 
     company income, foreign base company services income, and 
     insurance income for certain income that is derived in the 
     active conduct of a banking, financing, or similar business, 
     or in the conduct of an insurance business.
       Effective date.--The provision is effective for taxable 
     years of foreign corporations beginning after December 31, 
     1999, and before January 1, 2005, and for taxable years of 
     U.S. shareholders with or within which such taxable years of 
     such foreign corporations end.

                            Senate Amendment

       No provision, but S. 1792, as passed by the Senate, extends 
     for one year the present-law temporary exceptions from 
     subpart F foreign personal holding company income, foreign 
     base company services income, and insurance income for 
     certain income that is derived in the active conduct of a 
     banking, financing, or similar business, or in the conduct of 
     an insurance business.

[[Page 30104]]

       Effective date.--The provision is effective only for 
     taxable years of foreign corporations beginning in 2000, and 
     for taxable years of U.S. shareholders with or within which 
     such taxable years of such foreign corporations end.

                          Conference Agreement

       The conference agreement includes the provision in H.R. 
     2923 and S. 1792, with a modification to the effective date. 
     The provision in the conference agreement extends for two 
     years the present-law temporary exceptions from subpart F 
     foreign personal holding company income, foreign base company 
     services income, and insurance income for certain income that 
     is derived in the active conduct of a banking, financing, or 
     similar business, or in the conduct of an insurance business.
       The conference agreement clarifies that if the temporary 
     exception from subpart F insurance income does not apply for 
     a taxable year beginning after December 31, 2001, section 
     953(a) is to be applied to such taxable year in the same 
     manner as it would for a taxable year beginning in 1998 
     (i.e., under the law in effect before amendments to section 
     953(a) were made in 1998).\5\ Thus, for future periods in 
     which the temporary exception relating to insurance income is 
     not in effect, the same-country exception from subpart F 
     insurance income applies as under prior law.
---------------------------------------------------------------------------
     \5\ For the 1998 amendments, see the Tax and Trade Relief 
     Extension Act of 1998, Division J, Making Omnibus 
     Consolidated and Emergency Supplemental Appropriations for 
     Fiscal Year 1999, Pub. L. No. 105-277, sec. 1005(b), 112 
     Stat. 2681 (1998).
---------------------------------------------------------------------------
       Effective date.--The provision is effective for taxable 
     years of foreign corporations beginning after December 31, 
     1999, and before January 1, 2002, and for taxable years of 
     U.S. shareholders with or within which such taxable years of 
     such foreign corporations end.

 D. Extend Suspension of Net Income Limitation on Percentage Depletion 
        from Marginal Oil and Gas Wells (sec. 613A of the Code)

                              Present Law

       The Code permits taxpayers to recover their investments in 
     oil and gas wells through depletion deductions. In the case 
     of certain properties, the deductions may be determined using 
     the percentage depletion method. Among the limitations that 
     apply in calculating percentage depletion deductions is a 
     restriction that, for oil and gas properties, the amount 
     deducted may not exceed 100 percent of the net income from 
     that property in any year (sec. 613(a)).
       Special percentage depletion rules apply to oil and gas 
     production from ``marginal'' properties (sec. 613A(c)(6)). 
     Marginal production is defined as domestic crude oil and 
     natural gas production from stripper well property or from 
     property substantially all of the production from which 
     during the calendar year is heavy oil. Stripper well property 
     is property from which the average daily production is 15 
     barrel equivalents or less, determined by dividing the 
     average daily production of domestic crude oil and domestic 
     natural gas from producing wells on the property for the 
     calendar year by the number of wells. Heavy oil is domestic 
     crude oil with a weighted average gravity of 20 degrees API 
     or less (corrected to 60 degrees Farenheit). Under one such 
     special rule, the 100-percent-of-net-income limitation does 
     not apply to domestic oil and gas production from marginal 
     properties during taxable years beginning after December 31, 
     1997, and before January 1, 2000.

                               House Bill

       No provision, but H.R. 2923, as approved by the Committee 
     on Ways and Means, extends the present-law suspension of the 
     100-percent-of-net-income limitation with respect to oil and 
     gas production from marginal wells to include taxable years 
     beginning after December 31, 1999, and before January 1, 
     2005.

                            Senate Amendment

       No provision, but S. 1792, as passed by the Senate, extends 
     the present-law suspension of the 100-percent-of-net-income 
     limitation with respect to oil and gas production from 
     marginal wells to include taxable years beginning after 
     December 31, 1999, and before January 1, 2001.

                          Conference Agreement

       The conference agreement includes H.R. 2923 and S. 1792, 
     with a modification providing an extension period through 
     taxable years beginning before January 1, 2002.

    E. Extend the Work Opportunity Tax Credit (sec. 51 of the Code)

                              Present Law

     In general
       The work opportunity tax credit (``WOTC''), which expired 
     on June 30, 1999, was available on an elective basis for 
     employers hiring individuals from one or more of eight 
     targeted groups. The credit equals 40 percent (25 percent for 
     employment of 400 hours or less) of qualified wages. 
     Generally, qualified wages are wages attributable to service 
     rendered by a member of a targeted group during the one-year 
     period beginning with the day the individual began work for 
     the employer.
       The maximum credit per employee is $2,400 (40% of the first 
     $6,000 of qualified first-year wages). With respect to 
     qualified summer youth employees, the maximum credit is 
     $1,200 (40 percent of the first $3,000 of qualified first-
     year wages).
       The employer's deduction for wages is reduced by the amount 
     of the credit.
     Targeted groups eligible for the credit
       The eight targeted groups are: (1) families eligible to 
     receive benefits under the Temporary Assistance for Needy 
     Families (TANF) Program; (2) high-risk youth; (3) qualified 
     ex-felons; (4) vocational rehabilitation referrals; (5) 
     qualified summer youth employees; (6) qualified veterans; (7) 
     families receiving food stamps; and (8) persons receiving 
     certain Supplemental Security Income (SSI) benefits.
     Minimum employment period
       No credit is allowed for wages paid to employees who work 
     less than 120 hours in the first year of employment.
     Expiration date
       The credit is effective for wages paid or incurred to a 
     qualified individual who began work for an employer before 
     July 1, 1999.

                               House Bill

       No provision. However, H.R. 2923, as approved by the 
     Committee on Ways and Means, extends the work opportunity tax 
     credit for 30 months (through December 31, 2001) and 
     clarifies the definition of first year of employment for 
     purposes of the WOTC. H.R. 2923 also directs the Secretary of 
     the Treasury to expedite procedures to allow taxpayers to 
     satisfy their WOTC filing requirements (e.g., Form 8850) by 
     electronic means.
       Effective date.--The provision is effective for wages paid 
     or incurred to qualified individuals who begin work for the 
     employer on or after July 1, 1999, and before January 1, 
     2002.

                            Senate Amendment

       No provision. However, S. 1792, as passed by the Senate, 
     extends the work opportunity tax credit for 18 months 
     (through December 31, 2000) and clarifies the definition of 
     first year of employment for purposes of the WOTC.
       Effective date.--The provision is effective for wages paid 
     or incurred to qualified individuals who begin work for the 
     employer on or after July 1, 1999, and before January 1, 
     2001.

                          Conference Agreement

       The conference agreement provides for a 30-month extension 
     of the work opportunity tax credit. The conference agreement 
     also includes the clarification of the definition of first 
     year of employment for purposes of the WOTC that is included 
     in H.R. 2923 and S. 1792. Finally, the conferees also direct 
     the Secretary of the Treasury to expedite the use of 
     electronic filing of requests for certification under the 
     credit. They believe that participation in the program by 
     businesses should not be discouraged by the requirement that 
     such forms (i.e., the Form 8850) be submitted in paper form.
       Effective date.--The provision is effective for wages paid 
     or incurred to qualified individuals who begin work for the 
     employer on or after July 1, 1999, and before January 1, 
     2002.

    F. Extend the Welfare-To-Work Tax Credit (sec. 51A of the Code)

                              Present Law

       The Code provides to employers a tax credit on the first 
     $20,000 of eligible wages paid to qualified long-term family 
     assistance (AFDC or its successor program) recipients during 
     the first two years of employment. The credit is 35 percent 
     of the first $10,000 of eligible wages in the first year of 
     employment and 50 percent of the first $10,000 of eligible 
     wages in the second year of employment. The maximum credit is 
     $8,500 per qualified employee.
       Qualified long-term family assistance recipients are: (1) 
     members of a family that has received family assistance for 
     at least 18 consecutive months ending on the hiring date; (2) 
     members of a family that has received family assistance for a 
     total of at least 18 months (whether or not consecutive) 
     after the date of enactment of this credit if they are hired 
     within 2 years after the date that the 18-month total is 
     reached; and (3) members of a family who are no longer 
     eligible for family assistance because of either Federal or 
     State time limits, if they are hired within 2 years after the 
     Federal or State time limits made the family ineligible for 
     family assistance.
       Eligible wages include cash wages paid to an employee plus 
     amounts paid by the employer for the following: (1) 
     educational assistance excludable under a section 127 program 
     (or that would be excludable but for the expiration of sec. 
     127); (2) health plan coverage for the employee, but not more 
     than the applicable premium defined under section 
     4980B(f)(4); and (3) dependent care assistance excludable 
     under section 129.
       The welfare to work credit is effective for wages paid or 
     incurred to a qualified individual who begins work for an 
     employer on or after January 1, 1998, and before July 1, 
     1999.

                               House Bill

       No provision. However, H.R. 2923, as approved by the 
     Committee on Ways and Means, extends the welfare-to-work tax 
     credit for 30 months.

[[Page 30105]]

       Effective date.--The provision extends the welfare-to-work 
     credit effective for wages paid or incurred to a qualified 
     individual who begins work for an employer on or after July 
     1, 1999, and before January 1, 2002.

                            Senate Amendment

       No provision. However, S. 1792, as passed by the Senate, 
     extends the welfare-to-work tax credit for 18 months.
       Effective date.--The provision extends the welfare-to-work 
     credit effective for wages paid or incurred to a qualified 
     individual who begins work for an employer on or after July 
     1, 1999, and before January 1, 2001.

                          Conference Agreement

       The conference agreement provides for a 30-month extension 
     of the welfare-to-work tax credit.
       Effective date.--The provision is effective for wages paid 
     or incurred to a qualified individual who begins work for an 
     employer on or after July 1, 1999, and before January 1, 
     2002.

G. Extend Exclusion for Employer-Provided Educational Assistance (sec. 
                            127 of the Code)

                              Present Law

       Educational expenses paid by an employer for the employer's 
     employees are generally deductible to the employer.
       Employer-paid educational expenses are excludable from the 
     gross income and wages of an employee if provided under a 
     section 127 educational assistance plan or if the expenses 
     qualify as a working condition fringe benefit under section 
     132. Section 127 provides an exclusion of $5,250 annually for 
     employer-provided educational assistance. The exclusion 
     expired with respect to graduate courses June 30, 1996. With 
     respect to undergraduate courses, the exclusion for employer-
     provided educational assistance expires with respect to 
     courses beginning on or after June 1, 2000.
       In order for the exclusion to apply, certain requirements 
     must be satisfied. The educational assistance must be 
     provided pursuant to a separate written plan of the employer. 
     The educational assistance program must no discriminate in 
     favor of highly compensated employees. In addition, not more 
     than 5 percent of the amounts paid or incurred by the 
     employer during the year for educational assistance under a 
     qualified educational assistance plan can be provided for the 
     class of individuals consisting of more than 5-percent owners 
     of the employer (and their spouses and dependents).
       Educational expenses that do not qualify for the section 
     127 exclusion may be excludable from income as a working 
     condition fringe benefit.\6\ In general, education qualifies 
     as a working condition fringe benefit if the employee could 
     have deducted the education expenses under section 162 if the 
     employee paid for the education. In general, education 
     expenses are deductible by an individual under section 162 if 
     the education (1) maintains or improves a skill required in a 
     trade or business currently engaged in by the taxpayer, or 
     (2) meets the express requirements of the taxpayer's 
     employer, applicable law or regulations imposed as a 
     condition of continued employment. However, education 
     expenses are generally not deductible if they relate to 
     certain minimum educational requirements or to education or 
     training that enables a taxpayer to begin working in a new 
     trade or business.\7\
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     \6\ These rules also apply in the event that section 127 
     expires and is not reinstated.
     \7\ In the case of an employee, education expenses (if not 
     reimbursed by the employer) may be claimed as an itemized 
     deduction only if such expenses, along with other 
     miscellaneous deductions, exceed 2 percent of the taxpayer's 
     AGI. The 2-percent floor limitation is disregarded in 
     determining whether an item is excludable as a working 
     condition fringe benefit.
---------------------------------------------------------------------------

                               House Bill

       No provision.

                            Senate Amendment

       No provision. However, S. 1792 as passed by the Senate 
     reinstates the exclusion for employer-provided educational 
     assistance for graduate-level courses, and extends the 
     exclusion, as applied to both undergraduate and graduate-
     level courses, through 2000. The provision in S. 1792 is 
     effective with respect to undergraduate courses beginning 
     after May 31, 2000, and before January 1, 2001. The provision 
     is effective with respect to graduate-level courses beginning 
     after December 31, 1999, and before January 1, 2001.

                          Conference Agreement

       The conference agreement provides that the present-law 
     exclusion for employer-provided educational assistance is 
     extended through December 31, 2001.
       Effective date.--The provision is effective with respect to 
     courses beginning after May 31, 2000, and before January 1, 
     2002.

 H. Extend and Modify Tax Credit for Electricity Produced by Wind and 
          Closed-Loop Biomass Facilities (sec. 45 of the Code)

                              Present Law

       An income tax credit is allowed for the production of 
     electricity from either qualified wind energy or qualified 
     ``closed-loop'' biomass facilities (sec. 45). The credit 
     applies to electricity produced by a qualified wind energy 
     facility placed in service after December 31, 1993, and 
     before July 1, 1999, and to electricity produced by a 
     qualified closed-loop biomass facility placed in service 
     after December 31, 1992, and before July 1, 1999. The credit 
     is allowable for production during the 10-year period after a 
     facility is originally placed in service.
       Closed-loop biomass is the use of plant matter, where the 
     plants are grown for the sole purpose of being used to 
     generate electricity. It does not include the use of waste 
     materials (including, but not limited to, scrap wood, manure, 
     and municipal or agricultural waste). The credit also is not 
     available to taxpayers who use standing timber to produce 
     electricity. In order to claim the credit, a taxpayer must 
     own the facility and sell the electricity produced by the 
     facility to an unrelated party.

                               House Bill

       No provision.

                            Senate Amendment

       No provision, but S. 1792, as passed by the Senate, extends 
     the present-law tax credit for electricity produced by wind 
     and closed-loop biomass for facilities placed in service 
     after June 30, 1999, and before December 31, 2000. S. 1792 
     also modifies the tax credit to include electricity produced 
     from poultry litter, for facilities placed in service after 
     December 31, 1999, and before December 31, 2000. The credit 
     further is expanded to include electricity produced from 
     landfill gas, for electricity produced from facilities placed 
     in service after December 31, 1999, and before December 31, 
     2000.
       Finally, the credit is expanded to include electricity 
     produced from certain other biomass (in addition to closed-
     loop biomass and poultry waste). This additional biomass is 
     defined as solid, nonhazardous, cellulose waste material 
     which is segregated from other waste materials and which is 
     derived from forest resources, but not including old-growth 
     timber. The term also includes urban sources such as waste 
     pallets, crates, manufacturing and construction wood waste, 
     and tree trimmings, or agricultural sources (including grain, 
     orchard tree crops, vineyard legumes, sugar, and other crop 
     by-products or residues. The term does not include 
     unsegregated municipal solid waste or paper that commonly is 
     recycled.
       In the case of both closed-loop biomass and this additional 
     biomass, the credit applies to electricity produced after 
     December 31, 1999, from facilities that are placed in service 
     before January 1, 2003 (including facilities placed in 
     service before the date of enactment of this provision), and 
     the credit is allowed for production attributable to biomass 
     produced at facilities that are co-fired with coal.

                          Conference Agreement

       The conference agreement includes S. 1792, with 
     modifications. First, the extension is limited to electricity 
     from facilities using present-law qualified sources (wind and 
     closed-loop biomass) and from poultry waste facilities 
     (placed in service after December 31, 1999). Second, in the 
     case of all three fuel sources, the extension is limited to 
     facilities placed in service before January 1, 2002. Third, 
     the conference agreement does not include the provisions of 
     the Senate amendment allowing co-firing of closed-loop 
     biomass facilities. Fourth, the conference agreement includes 
     the provisions of the Senate amendment clarifying wind 
     facilities eligible for the credit.

 I. Extend Duty-Free Treatment Under Generalized System of Preferences 
                                 (GSP)

       Title V of the Trade Act of 1974, as amended, grants 
     authority to the President to provide duty-free treatment on 
     imports of eligible articles from designated beneficiary 
     developing countries (BDCs), subject to certain conditions 
     and limitations. To qualify for GSP privileges, each 
     beneficiary country is subject to various mandatory and 
     discretionary eligibility criteria. Import sensitive products 
     are ineligible for GSP. Section 505 (a) of the Trade Act of 
     1974, as amended, provides that no duty-free treatment under 
     Title V shall remain in effect after June 30, 1999.

                               House Bill

       No provision.

                            Senate Amendment

       No provision. The Senate amendment to H.R. 434, which 
     passed the Senate on November 3, 1999, reauthorizes GSP 
     retroactively for five years to terminate on June 30, 2004. 
     It also provides that, notwithstanding section 514 of the 
     Tariff Act of 1930 or any other provision of law, the entry 
     (a) of any article to which duty-free treatment under Title V 
     of the Trade Act of 1974 would have applied if such entry had 
     been made on June 30, 1999, and (b) that was made after June 
     30, 1999, and before the date of enactment of this Act, shall 
     be liquidated or reliquidated as free of duty and the 
     Secretary of the Treasury shall refund any duty paid, upon 
     proper request filed with the appropriate customs officer, 
     within 180 days after the date of enactment of this Act.

                          Conference Agreement

       The conference agreement would reauthorize the GSP program 
     for 27 months, to expire on September 30, 2001. The proposal 
     provides for refunds, upon request of the importer, of any 
     duty paid between June 30, 1999 and the effective date of 
     this Act. All entries between the effective date of this Act 
     and September 30, 2001 would enter duty-free.

[[Page 30106]]



 J. Extend Authority to Issue Qualified Zone Academy Bonds (sec. 1397E 
                              of the Code)

                              Present Law

     Tax-exempt bonds
       Interest on State and local governmental bonds generally is 
     excluded from gross income for Federal income tax purposes if 
     the proceeds of the bonds are used to finance direct 
     activities of these governmental units, including the 
     financing of public schools (sec. 103).
     Qualified zone academy bonds
       As an alternative to traditional tax-exempt bonds, certain 
     States and local governments are given the authority to issue 
     ``qualified zone academy bonds.'' A total of $400 million of 
     qualified zone academy bonds is authorized to be issued in 
     each of 1998 and 1999. The $400 million aggregate bond cap is 
     allocated each year to the States according to their 
     respective populations of individuals below the poverty line. 
     Each State, in turn, allocates the credit to qualified zone 
     academies within such State. A State may carry over any 
     unused allocation into subsequent years.
       Certain financial institutions that hold qualified zone 
     academy bonds are entitled to a nonrefundable tax credit in 
     an amount equal to a credit rate multiplied by the face 
     amount of the bond (sec. 1397E). A taxpayer holding a 
     qualified zone academy bond on the credit allowance date is 
     entitled to a credit. The credit is includable in gross 
     income (as if it were a taxable interest payment on the 
     bond), and may be claimed against regular income tax and AMT 
     liability.
       The Treasury Department sets the credit rate at a rate 
     estimated to allow issuance of qualified zone academy bonds 
     without discount and without interest cost to the issuer. The 
     maximum term of the bond is determined by the Treasury 
     Department, so that the present value of the obligation to 
     repay the bond is 50 percent of the face value of the bond.
       ``Qualified zone academy bonds'' are defined as any bond 
     issued by a State or local government, provided that (1) at 
     least 95 percent of the proceeds are used for the purpose of 
     renovating, providing equipment to, developing course 
     materials for use at, or training teachers and other school 
     personnel in a ``qualified zone academy'' and (2) private 
     entities have promised to contribute to the qualified zone 
     academy certain equipment, technical assistance or training, 
     employee services, or other property or services with a value 
     equal to at least 10 percent of the bond proceeds.
       A school is a ``qualified zone academy'' if (1) the school 
     is a public school that provides education and training below 
     the college level, (2) the school operates a special academic 
     program in cooperation with businesses to enhance the 
     academic curriculum and increase graduation and employment 
     rates, and (3) either (a) the school is located in one of the 
     31 designated empowerment zones or one of the 95 enterprise 
     communities designated under Code section 1391, or (b) it is 
     reasonably expected that at least 35 percent of the students 
     at the school will be eligible for free or reduced-cost 
     lunches under the school lunch program established under the 
     National School Lunch Act.

                               House Bill

       No provision.

                            Senate Amendment

       No provision.

                          Conference Agreement

       The conference agreement authorizes up to $400 million of 
     qualified zone academy bonds to be issued in each of calendar 
     years 2000 and 2001. Unusued QZAB authority arising in 1998 
     and 1999 may be carried forward by the State or local 
     government entity to which it is (or was) allocated for up to 
     three years after the year in which the authority originally 
     arose. Unused QZAB authority arising in 2000 and 2001 may be 
     carried forward for two years after the year in which it 
     arises. Each issuer is deemed to used the oldest QZAB 
     authority which has been allocated to it first when new bonds 
     are issued.
       Effective date.--The provision is effective on the date of 
     enactment.

K. Extend the Tax Credit for First-Time D.C. Homebuyers (sec. 1400C of 
                               the Code)

                              Present Law

     In general
       First-time homebuyers of a principal residence in the 
     District of Columbia are eligible for a nonrefundable tax 
     credit of up to $5,000 of the amount of the purchase price. 
     The $5,000 maximum credit applies both to individuals and 
     married couples. Married individuals filing separately can 
     claim a maximum credit of $2,500 each. The credit phases out 
     for individual taxpayers with adjusted gross income between 
     $70,000 and $90,000 ($110,000-$130,000 for joint filers). For 
     purposes of eligibility, ``first-time homebuyer'' means any 
     individual if such individual did not have a present 
     ownership interest in a principal residence in the District 
     of Columbia in the one year period ending on the date of the 
     purchase of the residence to which the credit applies.
     Expiration date
       The credit is scheduled to expire for residences purchased 
     after December 31, 2000.

                               House Bill

       No provision.

                            Senate Amendment

       No provision.

                          Conference Agreement

       The conference agreement provides for a one-year extension 
     of the tax credit for first-time D.C. homebuyers, so that it 
     applies to residences purchased on or before December 31, 
     2001.
       Effective date.--The provision is effective for residences 
     purchased after December 31, 2000 and before January 1, 2002.

L. Extend Expensing of Environmental Remediation Expenditures (sec. 198 
                              of the Code)

                              Present Law

       Taxpayers can elect to treat certain environmental 
     remediation expenditures that would otherwise be chargeable 
     to capital account as deductible in the year paid or incurred 
     (sec. 198). The deduction applies for both regular and 
     alternative minimum tax purposes. The expenditure must be 
     incurred in connection with the abatement or control of 
     hazardous substances at a qualified contaminated site.
       A ``qualified contaminated site'' generally is any property 
     that (1) is held for use in a trade or business, for the 
     production of income, or as inventory; (2) is certified by 
     the appropriate State environmental agency to be located 
     within a targeted area; and (3) contains (or potentially 
     contains) a hazardous substance (so-called ``brownfields''). 
     Targeted areas are defined as: (1) empowerment zones and 
     enterprise communities as designated under present law; (2) 
     sites announced before February, 1997, as being subject to 
     one of the 76 Environmental Protection Agency (``EPA'') 
     Brownfields Pilots; (3) any population census tract with a 
     poverty rate of 20 percent or more; and (4) certain 
     industrial and commercial areas that are adjacent to tracts 
     described in (3) above. However, sites that are identified on 
     the national priorities list under the Comprehensive 
     Environmental Response, Compensation, and Liability Act of 
     1980 cannot qualify as targeted areas.
       Eligible expenditures are those paid or incurred before 
     January 1, 2001.

                               House Bill

       No provision.

                            Senate Amendment

       No provision. However, S. 1792, as passed by the Senate, 
     eliminates the targeted area requirement, thereby, expanding 
     eligible sites to include any site containing (or potentially 
     containing) a hazardous substance that is certified by the 
     appropriate State environmental agency, but not those sites 
     that are identified on the national priorities list under the 
     Comprehensive Environmental Response, Compensation, and 
     Liability Act of 1980.
       Effective date.--The provision to expand the class of 
     eligible sites is effective for expenditures paid or incurred 
     after December 31, 1999.

                          Conference Agreement

       The conference agreement extends present-law expiration 
     date for sec. 198 to include those expenditures paid or 
     incurred before January 1, 2002.
       Effective date.--The provision to extend the expiration 
     date is effective upon the date of enactment.

M. Temporary Increase in Amount of Rum Excise Tax that is Covered Over 
   to Puerto Rico and the U.S. Virgin Islands (sec. 7652 of the Code)

                              Present Law

       A $13.50 per proof gallon \8\ excise tax is imposed on 
     distilled spirits produced in or imported (or brought) into 
     the United States. The excise tax does not apply to distilled 
     spirits that are exported from the United States or to 
     distilled spirits that are consumed in U.S. possessions 
     (e.g., Puerto Rico and the Virgin Islands).
---------------------------------------------------------------------------
     \8\ A proof gallon is a liquid gallon consisting of 50 
     percent alcohol.
---------------------------------------------------------------------------
       The Internal Revenue Code provides for coverover (payment) 
     of $10.50 per proof gallon of the excise tax imposed on rum 
     imported (or brought) into the United States (without regard 
     to the country of origin) to Puerto Rico and the Virgin 
     Islands. During the five-year period ending on September 30, 
     1998, the amount covered over was $11.30 per proof gallon. 
     This temporary increase was enacted in 1993 as transitional 
     relief accompanying a reduction in certain tax benefits for 
     corporations operating in Puerto Rico and the Virgin Islands.
       Amounts covered over to Puerto Rico and the Virgin Islands 
     are deposited into the treasuries of the two possessions for 
     use as those possessions determine.

                               House Bill

       No provision, but H.R. 984, as approved by the Committee on 
     Ways and Means, increases from $10.50 to $13.50 per proof 
     gallon the amount of excise taxes collected on rum brought 
     into the United States that is covered over to Puerto Rico 
     and the U.S. Virgin Islands. H.R. 984 further provides that 
     $0.50 per proof gallon of the amount covered over to Puerto 
     Rico will be transferred to the Puerto Rico Conservation 
     Trust, a private, non-profit section 501(c)(3) organization 
     operating in Puerto Rico.
       Effective date.--The provision is effective for excise 
     taxes collected on rum imported or

[[Page 30107]]

     brought into the United States after June 30, 1999 and before 
     October 1, 1999.

                            Senate Amendment

       No provision, but H.R. 434, as passed by the Senate, is the 
     same as the House bill.

                          Conference Agreement

       The conference agreement reinstates the rum excise tax 
     coverover at a rate of $13.25 per proof gallon during the 
     period from July 1, 1999, through December 31, 2001.
       The conference agreement includes a special rule for 
     payment of the $2.75 per proof gallon increase in the 
     coverover rate for Puerto Rico and the Virgin Islands. The 
     special rule applies to payments that otherwise would be made 
     in Fiscal Year 2000. Under this special payment rule, amounts 
     attributable to the increase in the coverover rate that would 
     have been transferred to Puerto Rico and the Virgin Islands 
     after June 30, 1999 and before the date of enactment, will be 
     paid on the date which is 15 days after the date of 
     enactment. However, the total amount of this initial payment 
     (aggregated for both possessions) may not exceed $20 million.
       The next payment to Puerto Rico and the Virgin Islands with 
     respect to the $2.75 increase in the coverover rate will be 
     made on October 1, 2000. This payment will equal the total 
     amount attributable to the increase that otherwise would have 
     been transferred to Puerto Rico and the Virgin Islands before 
     October 1, 2000 (less the payment of up to $20 million made 
     15 days after the date of enactment).
       Payments for the remainder of the period through December 
     31, 2001 will be paid as provided under the present-law rules 
     for the $10.50 per proof gallon coverover rate.
       The special payment rule does not affect payments to Puerto 
     Rico and the Virgin Islands with respect to the present-law 
     $10.50 per proof gallon coverover rate.
       Finally, the conferees note that H.R. 984 and H.R. 434, 
     described above, will be considered by the Congress next 
     year. The conferees intend that the special payment rule for 
     Fiscal Year 2000 will be reviewed when that legislation is 
     considered, and that to the extent possible, the delayed 
     payments will be accelerated, or interest on delayed amounts 
     will be provided.
       Effective date.--The provision is effective on July 1, 
     1999.

                  II. OTHER TIME-SENSITIVE PROVISIONS

A. Prohibit Disclosure of APAs and APA Background Files (secs. 6103 and 
                           6110 of the Code)

                              Present Law

     Section 6103
       Under section 6103, returns and return information are 
     confidential and cannot be disclosed unless authorized by the 
     Internal Revenue Code.
       The Code defines return information broadly. Return 
     information includes:
       A taxpayer's identity, the nature, source or amount of 
     income, payments, receipts, deductions, exemptions, credits, 
     assets, liabilities, net worth, tax liability, tax withheld, 
     deficiencies, overassessments, or tax payments;
       Whether the taxpayer's return was, is being, or will be 
     examined or subject to other investigation or processing; or
       Any other data, received by, recorded by, prepared by, 
     furnished to, or collected by the Secretary with respect to a 
     return or with respect to the determination of the existence, 
     or possible existence, of liability (or the amount thereof) 
     of any person under this title for any tax, penalty, 
     interest, fine, forfeiture, or other imposition, or 
     offense.\9\
---------------------------------------------------------------------------
     \9\ Sec. 6103(b)(2)(A).
---------------------------------------------------------------------------
     Section 6110 and the Freedom of Information Act
       With certain exceptions, section 6110 makes the text of any 
     written determination the IRS issues available for public 
     inspection. A written determination is any ruling, 
     determination letter, technical advice memorandum, or Chief 
     Counsel advice. Once the IRS makes the written determination 
     publicly available, the background file documents associated 
     with such written determination are available for public 
     inspection upon written request. The Code defines 
     ``background file documents'' as any written material 
     submitted in support of the request. Background file 
     documents also include any communications between the IRS and 
     persons outside the IRS concerning such written determination 
     that occur before the IRS issues the determination.
       Before making them available for public inspection, section 
     6110 requires the IRS to delete specific categories of 
     sensitive information from the written determination and 
     background file documents.\10\ It also provides judicial and 
     administrative procedures to resolve disputes over the scope 
     of the information the IRS will disclose. In addition, 
     Congress has also wholly exempted certain matters from 
     section 6110's public disclosure requirements.\11\ Any part 
     of a written determination or background file that is not 
     disclosed under section 6110 constitutes ``return 
     information.'' \12\
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     \10\ Sec. 6110(c) provides for the deletion of identifying 
     information, trade secrets, confidential commercial and 
     financial information and other material.
     \11\ Sec. 6110(l).
     \12\ Sec. 6103(b)(2)(B) (``The term 'return information' 
     means . . . any part of any written determination or any 
     background file document relating to such written 
     determination (as such terms are defined in section 6110(b)) 
     which is not open to public inspection under section 6110'').
---------------------------------------------------------------------------
       The Freedom of Information Act (FOIA) lists categories of 
     information that a federal agency must make available for 
     public inspection.13 It establishes a presumption 
     that agency records are accessible to the public. The FOIA, 
     however, also provides nine exemptions from public 
     disclosure. One of those exemptions is for matters 
     specifically exempted from disclosure by a statute other than 
     the FOIA if the exempting statute meets certain 
     requirements.14 Section 6103 qualifies as an 
     exempting statute under this FOIA provision. Thus, returns 
     and return information that section 6103 deems confidential 
     are exempt from disclosure under the FOIA.
---------------------------------------------------------------------------
     \13\ Unless published promptly and offered for sale, an 
     agency must provide for public inspection and copying: (1) 
     final opinions as well as orders made in the adjudication of 
     cases; (2) statements of policy and interpretations not 
     published in the Federal Register; (3) administrative staff 
     manuals and instructions to staff that affect a member of the 
     public; and (4) agency records which have been or the agency 
     expects to be, the subject of repetitive FOIA requests. 5 
     U.S.C. sec. 552(a)(2). An agency must also publish in the 
     Federal Register: the organizational structure of the agency 
     and procedures for obtaining information under the FOIA; 
     statements describing the functions of the agency and all 
     formal and informal procedures; rules of procedure, 
     descriptions of forms and statements describing all papers, 
     reports and examinations; rules of general applicability and 
     statements of general policy; and amendments, revisions and 
     repeals of the foregoing. 5 U.S.C. sec. 552(a)(1). All other 
     agency records can be sought by FOIA request; however, some 
     records may be exempt from disclosure.
     \14\ 14. Exemption 3 of the FOIA provides that an agency is 
     not required to disclose matters that are: (3) specifically 
     exempted from disclosure by statute (other than section 552b 
     of this title) provided that such statute (A) requires that 
     the matters be withheld from the public in such a manner as 
     to leave no discretion on the issue, or (B) establishes 
     particular criteria for withholding or refers to particular 
     types of matters to be withheld; * * * 5 U.S.C. 
     Sec. 552(b)(3).
---------------------------------------------------------------------------
       Section 6110 is the exclusive means for the public to view 
     IRS written determinations.15 If section 6110 
     covers the written determination, then the public cannot use 
     the FOIA to obtain that determination.
---------------------------------------------------------------------------
     \15\ Sec. 6110(m).
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     Advance Pricing Agreements
       The Advanced Pricing Agreement (``APA'') program is an 
     alternative dispute resolution program conducted by the IRS, 
     which resolves international transfer pricing issues prior to 
     the filing of the corporate tax return. Specifically, an APA 
     is an advance agreement establishing an approved transfer 
     pricing methodology entered into among the taxpayer, the IRS, 
     and a foreign tax authority. The IRS and the foreign tax 
     authority generally agree to accept the results of such 
     approved methodology. Alternatively, an APA also may be 
     negotiated between just the taxpayer and the IRS; such an APA 
     establishes an approved transfer pricing methodology for U.S. 
     tax purposes. The APA program focuses on identifying the 
     appropriate transfer pricing methodology; it does not 
     determine a taxpayer's tax liability. Taxpayers voluntarily 
     participate in the program.
       To resolve the transfer pricing issues, the taxpayer 
     submits detailed and confidential financial information, 
     business plans and projections to the IRS for consideration. 
     Resolution involves an extensive analysis of the taxpayer's 
     functions and risks. Since its inception in 1991, the APA 
     program has resolved more than 180 APAs, and approximately 
     195 APA requests are pending.
       Currently pending in the U.S. District Court for the 
     District of Columbia are three consolidated lawsuits 
     asserting that APAs are subject to public disclosure under 
     either section 6110 or the FOIA.16 Prior to this 
     litigation and since the inception of the APA program, the 
     IRS held the position that APAs were confidential return 
     information protected from disclosure by section 
     6103.17 On January 11, 1999, the IRS conceded that 
     APAs are ``rulings'' and therefore are ``written 
     determinations'' for purposes of section 6110.18 
     Although the court has not yet issued a ruling in the case, 
     the IRS announced its plan to publicly release both existing 
     and future APAs. The IRS then transmitted existing APAs to 
     the respective taxpayers with proposed deletions. It has 
     received comments from some of the affected taxpayers. Where 
     appropriate, foreign tax authorities have also received 
     copies of the relevant APAs for comment on the proposed 
     deletions. No APAs have yet been released to the public.
---------------------------------------------------------------------------
     \16\ BNA v. IRS, Nos. 96-376, 96-2820, and 96-1473 (D.D.C.). 
     The Bureau of National Affairs, Inc. (BNA) publishes matters 
     of interest for use by its subscribers. BNA contends that 
     APAs are not return information as they are prospective in 
     application. Thus at the time they are entered into they do 
     not relate to ``the determination of the existence, or 
     possible existence, of liability or amount thereof * * *''
     \17\ The IRS contended that information received or generated 
     as part of the APA process pertains to a taxpayer's liability 
     and therefore was return information as defined in sec. 
     6103(b)(2)(A). Thus, the information was subject to section 
     6103's restrictions on the dissemination of returns and 
     return information. Rev. Proc. 91-22, sec. 11, 1991-1 C.B. 
     526, 534 and Rev. Proc. 96-53, sec. 12, 1996-2 C.B. 375, 386.
     \18\ IR 1999-05.
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       Some taxpayers assert that the IRS erred in adopting the 
     position that APAs are subject to section 6110 public 
     disclosure. Several

[[Page 30108]]

     have sought to participate as amici in the lawsuit to block 
     the release of APAs. They are concerned that release under 
     section 6110 could expose them to expensive litigation to 
     defend the deletion of the confidential information from 
     their APAs. They are also concerned that the section 6110 
     procedures are insufficient to protect the confidentiality of 
     their trade secrets and other financial and commercial 
     information.
     House Bill
       No provision, but H.R. 2923, as approved by the Committee 
     on Ways and Means, amends section 6103 to provide that APAs 
     and related background information are confidential return 
     information under section 6103. Related background 
     information is meant to include: the request for an APA, any 
     material submitted in support of the request, and any 
     communication (written or otherwise) prepared or received by 
     the Secretary in connection with an APA, regardless of when 
     such communication is prepared or received. Protection is not 
     limited to agreements actually executed; it includes material 
     received and generated in the APA process that does not 
     result in an executed agreement.
       Further, APAs and related background information are not 
     ``written determinations'' as that term is defined in section 
     6110. Therefore, the public inspection requirements of 
     section 6110 do not apply to APAs and related background 
     information. A document's incorporation in a background file, 
     however, is not intended to be grounds for not disclosing an 
     otherwise disclosable document from a source other than a 
     background file.
       H.R. 2923 requires that the Treasury Department prepare and 
     publish an annual report on the status of APAs. The annual 
     report is to contain the following information:
       Information about the structure, composition, and operation 
     of the APA program office;
       A copy of each current model APA;
       Statistics regarding the amount of time to complete new and 
     renewal APAs;
       The number of APA applications filed during such year;
       The number of APAs executed to date and for the year;
       The number of APA renewals issued to date and for the year;
       The number of pending APA requests;
       The number of pending APA renewals;
       The number of APAs executed and pending (including renewals 
     and renewal requests) that are unilateral, bilateral and 
     multilateral, respectively;
       The number of APAs revoked or canceled, and the number of 
     withdrawals from the APA program, to date and for the year;
       The number of finalized new APAs and renewals by industry; 
     19 and
---------------------------------------------------------------------------
     \19\ This information was previously released in IRS 
     Publication 3218, ``IRS Report on Application and 
     Administration of I.R.C. Section 482.''
---------------------------------------------------------------------------
       General descriptions of:
       the nature of the relationships between the related 
     organizations, trades, or businesses covered by APAs;
       the related organizations, trades, or businesses whose 
     prices or results are tested to determine compliance with the 
     transfer pricing methodology prescribed in the APA;
       the covered transactions and the functions performed and 
     risks assumed by the related organizations, trades or 
     businesses involved;
       methodologies used to evaluate tested parties and 
     transactions and the circumstances leading to the use of 
     those methodologies;
       critical assumptions;
       sources of comparables;
       comparable selection criteria and the rationale used in 
     determining such criteria;
       the nature of adjustments to comparables and/or tested 
     parties;
       the nature of any range agreed to, including information 
     such as whether no range was used and why, whether an inter-
     quartile range was used, or whether there was a statistical 
     narrowing of the comparables;
       adjustment mechanisms provided to rectify results that fall 
     outside of the agreed upon APA range;
       the various term lengths for APAs, including rollback 
     years, and the number of APAs with each such term length;
       the nature of documentation required; and
       approaches for sharing of currency or other risks.
       In addition, H.R. 2923 requires the IRS to describe, in 
     each annual report, its efforts to ensure compliance with 
     existing APA agreements. The first report is to cover the 
     period January 1, 1991, through the calendar year including 
     the date of enactment. The Treasury Department cannot include 
     any information in the report which would have been deleted 
     under section 6110(c) if the report were a written 
     determination as defined in section 6110. Additionally, the 
     report cannot include any information which can be associated 
     with or otherwise identify, directly or indirectly, a 
     particular taxpayer. The Secretary is expected to obtain 
     input from taxpayers to ensure proper protection of taxpayer 
     information and, if necessary, utilize its regulatory 
     authority to implement appropriate processes for obtaining 
     this input. For purposes of section 6103, the report 
     requirement is treated as part of Title 26.
       While H.R. 2923 statutorily requires an annual report, it 
     is not intended to discourage the Treasury Department from 
     issuing other forms of guidance, such as regulations or 
     revenue rulings, consistent with the confidentiality 
     provisions of the Code.
       Effective date.--The provision is effective on the date of 
     enactment; accordingly, no APAs, regardless of whether 
     executed before or after enactment, or related background 
     file documents, can be released to the public after the date 
     of enactment. It requires the Treasury Department to publish 
     the first annual report no later than March 30, 2000.
     Senate Amendment
       No provision.
     Conference Agreement
       The conference agreement includes H.R. 2923.

  B. Authority to Postpone Certain Tax-Related Deadlines by Reason of 
                           Year 2000 Failures

     Present Law
       There are no specific provisions in present law that would 
     permit the Secretary of the Treasury to postpone tax-related 
     deadlines by reason of Year 2000 (also known as ``Y2K'') 
     failures. The Secretary is, however, permitted to postpone 
     tax-related deadlines for other reasons. For example, the 
     Secretary may specify that certain deadlines are postponed 
     for a period of up to 90 days in the case of a taxpayer 
     determined to be affected by a Presidentially declared 
     disaster. The deadlines that may be postponed are the same as 
     are postponed by reason of service in a combat zone. The 
     provision does not apply for purposes of determining interest 
     on any overpayment or underpayment.
       The suspension of time applies to the following acts: (1) 
     filing any return of income, estate, or gift tax (except 
     employment and withholding taxes); (2) payment of any income, 
     estate, or gift tax (except employment and withholding 
     taxes); (3) filing a petition with the Tax Court for a 
     redetermination of deficiency, or for review of a decision 
     rendered by the Tax Court; (4) allowance of a credit or 
     refund of any tax; (5) filing a claim for credit or refund of 
     any tax; (6) bringing suit upon any such claim for credit or 
     refund; (7) assessment of any tax; (8) giving or making any 
     notice or demand for payment of any tax, or with respect to 
     any liability to the United States in respect of any tax; (9) 
     collection of the amount of any liability in respect of any 
     tax; (10) bringing suit by the United States in respect of 
     any liability in respect of any tax; and (11) any other act 
     required or permitted under the internal revenue laws 
     specified in regulations prescribed under section 7508 by the 
     Secretary.

                               House Bill

       No provision, but H.R. 2923, as approved by the Committee 
     on Ways and Means, contains a provision permitting the 
     Secretary to postpone, on a taxpayer-by-taxpayer basis, 
     certain tax-related deadlines for a period of up to 90 days 
     in the case of a taxpayer that the Secretary determines to 
     have been affected by an actual Y2K related failure. In order 
     to be eligible for relief, taxpayers must have made good 
     faith, reasonable efforts to avoid any Y2K related failures. 
     The relief will be similar to that granted under the 
     Presidentially declared disaster and combat zone provisions, 
     except that employment and withholding taxes also are 
     eligible for relief. The relief will permit the abatement of 
     both penalties and interest.
       The relief may apply to the following acts: (1) filing of 
     any return of income, estate, or gift tax, including 
     employment and withholding taxes; (2) payment of any income, 
     estate, or gift tax, including employment and withholding 
     taxes; (3) filing a petition with the Tax Court; (4) 
     allowance of a credit or refund of any tax; (5) filing a 
     claim for credit or refund of any tax; (6) bringing suit upon 
     any such claim for credit or refund; (7) assessment of any 
     tax; (8) giving or making any notice or demand for payment of 
     any tax, or with respect to any liability to the United 
     States in respect of any tax; (9) collection of the amount of 
     any liability in respect of any tax; (10) bringing suit by 
     the United States in respect of any liability in respect of 
     any tax; and (11) any other act required or permitted under 
     the internal revenue laws specified or prescribed by the 
     Secretary. The provision is effective on the date of 
     enactment.

                            Senate Amendment

       No provision.

                          Conference Agreement

       The conference agreement includes the provision in H.R. 
     2923.

C. Add Certain Vaccines Against Streptococcus Pneumoniae to the List of 
           Taxable Vaccines (secs. 4131 and 4132 of the Code)

                              Present Law

       A manufacturer's excise tax is imposed at the rate of 75 
     cents per dose (sec. 4131) on the following vaccines 
     recommended for routine administration to children: 
     diphtheria, pertussis, tetanus, measles, mumps, rubella, 
     polio, HIB (haemophilus influenza type B), hepatitis B, 
     varicella (chicken pox), and rotavirus gastroenteritis. The 
     tax applied to any vaccine that is a combination of vaccine 
     components equals 75 cents times the number of components in 
     the combined vaccine.
       Amounts equal to net revenues from this excise tax are 
     deposited in the Vaccine Injury Compensation Trust Fund 
     (``Vaccine Trust Fund'') to finance compensation

[[Page 30109]]

     awards under the Federal Vaccine Injury Compensation Program 
     for individuals who suffer certain injuries following 
     administration of the taxable vaccines. This program provides 
     a substitute Federal, ``no fault'' insurance system for the 
     State-law tort and private liability insurance systems 
     otherwise applicable to vaccine manufacturers and physicians. 
     All persons immunized after September 30, 1988, with covered 
     vaccines must pursue compensation under this Federal program 
     before bringing civil tort actions under State law.

                               House Bill

       No provision. However, H.R. 2923, as approved by the 
     Committee on Ways and Means, adds any conjugate vaccine 
     against streptococcus pneumoniae to the list of taxable 
     vaccines. The bill also changes an incorrect effective date 
     enacted in Public Law 105-277 and makes certain other 
     conforming amendments to expenditure purposes to enable 
     certain payments to be made from the Trust Fund.
       In addition, the bill directs the General Accounting Office 
     (``GAO'') to report to the House Committee on Ways and Means 
     and the Senate Committee on Finance on the operation and 
     management of expenditures from the Vaccine Trust Fund and to 
     advise the Committees on the adequacy of the Vaccine Trust 
     Fund to meet future claims under the Federal Vaccine Injury 
     Compensation Program. The GAO is directed to report its 
     findings to the House Committee on Ways and Means and the 
     Senate Committee on Finance not later than December 31, 1999.
       Effective date.--The provision is effective for vaccine 
     purchases beginning on the day after the date on which the 
     Centers for Disease Control make final recommendation for 
     routine administration of conjugated streptococcus pneumoniae 
     vaccines to children.

                            Senate Amendment

       No provision. However, S. 1792, as passed by the Senate, 
     contains a provision identical to that of H.R. 2923 except 
     that S. 1792 directs the GAO to report its findings to the 
     House Committee on Ways and Means and the Senate Committee on 
     Finance by January 31, 2000.
       Effective date.--The provision is effective for vaccine 
     purchases beginning on the day after the date on which the 
     Centers for Disease Control make final recommendation for 
     routine administration of conjugated streptococcus pneumoniae 
     vaccines to children. The addition of conjugate streptococcus 
     pneumoniae vaccines to the list of taxable vaccines is 
     contingent upon the inclusion in this legislation of the 
     modifications to Public Law 105-277.

                          Conference Agreement

       The conference agreement includes the provision of H.R. 
     2923 and S. 1792 in adding any conjugate vaccine against 
     streptococcus pneumoniae to the list of taxable vaccines. In 
     addition, the conference agreement follows H.R. 2923 and S. 
     1792 by changing the effective date enacted in Public Law 
     105-277 and certain other conforming amendments to 
     expenditure purposes to enable certain payments to be made 
     from the Trust Fund.
       The conference report follows S. 1792 by directing that the 
     GAO report its findings to the House Committee on Ways and 
     Means and the Senate Committee on Finance not later than 
     January 31, 2000.
       Effective date.--The provision is effective for vaccine 
     sales beginning on the day after the date of enactment. No 
     floor stocks tax is to be collected for amounts held for sale 
     on that date. For sales on or before that date for which 
     delivery is made after such date, the delivery date is deemed 
     to be the sale date. The addition of conjugate streptococcus 
     pneumoniae vaccines to the list of taxable vaccines is 
     contingent upon the inclusion in this legislation of the 
     modifications to Public Law 105-277.

 D. Delay Requirement that Registered Motor Fuels Terminals Offer Dyed 
      Fuel as a Condition of Registration (sec. 4121 of the Code)

                              Present Law

       Excise taxes are imposed on highway motor fuels, including 
     gasoline, diesel fuel, and kerosene, to finance the Highway 
     Trust Fund programs. Subject to limited exceptions, these 
     taxes are imposed on all such fuels when they are removed 
     from registered pipeline or barge terminal facilities, with 
     any tax-exemptions being accomplished by means of refunds to 
     consumers of the fuel.20 One such exception allows 
     removal of diesel fuel without payment of tax if the fuel is 
     destined for a nontaxable use (e.g., use as heating oil) and 
     is indelibly dyed.
---------------------------------------------------------------------------
     \20\ Tax is imposed before that point if the motor fuel is 
     transferred (other than in bulk) from a refinery or if the 
     fuel is sold to an unregistered party while still held in the 
     refinery or bulk distribution system (e.g., in a pipeline or 
     terminal facility).
---------------------------------------------------------------------------
       Terminal facilities are not permitted to receive and store 
     non-tax-paid motor fuels unless they are registered with the 
     Internal Revenue Service. Under present law, a prerequisite 
     to registration is that if the terminal offers for sale 
     diesel fuel, it must offer both dyed and undyed diesel fuel. 
     Similarly, if the terminal offers for sale kerosene, it must 
     offer both dyed and undyed kerosene. This ``dyed-fuel 
     mandate'' was enacted in 1997, to be effective on July 1, 
     1998. Subsequently, the effective date was delayed until July 
     1, 2000.

                               House Bill

       No provision.

                            Senate Amendment

       No provision, but S. 1792, as passed by the Senate, delays 
     the effective date of the dyed-fuel mandate for an additional 
     six months, through December 31, 2000. No other changes are 
     made to the present highway motor fuels excise tax rules.

                          Conference Agreement

       The conference agreement includes S. 1792 with a 
     modification delaying the effective date of the dyeing 
     mandate until January 1, 2002.

 E. Provide That Federal Production Payments to Farmers Are Taxable in 
                           the Year Received

                              Present Law

       A taxpayer generally is required to include an item in 
     income no later than the time of its actual or constructive 
     receipt, unless such amount properly is accounted for in a 
     different period under the taxpayer's method of accounting. 
     If a taxpayer has an unrestricted right to demand the payment 
     of an amount, the taxpayer is in constructive receipt of that 
     amount whether or not the taxpayer makes the demand and 
     actually receives the payment.
       The Federal Agriculture Improvement and Reform Act of 1996 
     (the ``FAIR Act'') provides for production flexibility 
     contracts between certain eligible owners and producers and 
     the Secretary of Agriculture. These contracts generally cover 
     crop years from 1996 through 2002. Annual payments are made 
     under such contracts at specific times during the Federal 
     government's fiscal year. Section 112(d)(2) of the FAIR Act 
     provides that one-half of each annual payment is to be made 
     on either December 15 or January 15 of the fiscal year, at 
     the option of the recipient.21 The remaining one-
     half of the annual payment must be made no later than 
     September 30 of the fiscal year. The Emergency Farm Financial 
     Relief Act of 1998 added section 112(d)(3) to the FAIR Act 
     which provides that all payments for fiscal year 1999 are to 
     be paid at such time or times during fiscal year 1999 as the 
     recipient may specify. Thus, the one-half of the annual 
     amount that would otherwise be required to be paid no later 
     than September 30, 1999 can be specified for payment in 
     calendar year 1998.
---------------------------------------------------------------------------
     \21\ This rule applies to fiscal years after 1996. For fiscal 
     year 1996, this payment was to be made not later than 30 days 
     after the production flexibility contract was entered into.
---------------------------------------------------------------------------
       These options potentially would have resulted in the 
     constructive receipt (and thus inclusion in income) of the 
     payments to which they relate at the time they could have 
     been exercised, whether or not they were in fact exercised. 
     However, section 2012 of the Tax and Trade Relief Extension 
     Act of 1998 provided that the time a production flexibility 
     contract payment under the FAIR Act properly is includible in 
     income is to be determined without regard to either option, 
     effective for production flexibility contract payments made 
     under the FAIR Act in taxable years ending after December 31, 
     1995.

                               House Bill

       No provision. However, the conference agreement to H.R. 
     2488 includes a provision to disregard any unexercised option 
     to accelerate the receipt of any payment under a production 
     flexibility contract which is payable under the FAIR Act, as 
     in effect on the date of enactment of the provision, in 
     determining the taxable year in which such payment is 
     properly included in gross income. Options to accelerate 
     payments that are enacted in the future are covered by this 
     rule, providing the payment to which they relate is mandated 
     by the FAIR Act as in effect on the date of enactment of this 
     Act.
       The provision in H.R. 2488 does not delay the inclusion of 
     any amount in gross income beyond the taxable period in which 
     the amount is received.
       Effective date.--The provision in H.R. 2488 is effective on 
     the date of enactment.

                            Senate Amendment

       No provision.

                          Conference Agreement

       The conference agreement includes the provision in the 
     conference agreement to H.R. 2488.

                     III. REVENUE OFFSET PROVISIONS

 A. Modification of Individual Estimated Tax Safe Harbor (sec. 6654 of 
                               the Code)

                              Present Law

       Under present law, an individual taxpayer generally is 
     subject to an addition to tax for any underpayment of 
     estimated tax. An individual generally does not have an 
     underpayment of estimated tax if he or she makes timely 
     estimated tax payments at least equal to: (1) 90 percent of 
     the tax shown on the current year's return or (2) 100 percent 
     of the prior year's tax. For taxpayers with a prior year's 
     AGI above $150,000,22 however, the rule that 
     allows payment of 100 percent of prior year's tax is 
     modified. Those taxpayers with AGI above $150,000 generally 
     must make estimated payments based on either (1) 90 percent 
     of the tax shown on the

[[Page 30110]]

     current year's return or (2) 110 percent of the prior year's 
     tax.
---------------------------------------------------------------------------
     \22\ $75,000 for married taxpayers filing separately.
---------------------------------------------------------------------------
       For taxpayers with a prior year's AGI above $150,000, the 
     prior year's tax safe harbor is modified for estimated tax 
     payments made for taxable years through 2002. For such 
     taxpayers making estimated tax payments based on prior year's 
     tax, payments must be made based on 105 percent of prior 
     year's tax for taxable years beginning in 1999, 106 percent 
     of prior year's tax for taxable years beginning in 2000 and 
     2001, and 112 percent of prior year's tax for taxable years 
     beginning in 2002.

                               House Bill

       No provision, however H.R. 2923, as approved by the 
     Committee on Ways and Means, provides that taxpayers with 
     prior year's AGI above $150,000 who make estimated tax 
     payments based on prior year's tax must do so based on 108.5 
     percent of prior year's tax for estimated tax payments made 
     for taxable year 2000.
       Effective date.--The provision is effective for estimated 
     payments made for taxable years beginning after December 31, 
     1999, and before January 1, 2001.

                            Senate Amendment

       No provision, however, S. 1792, as passed by the Senate, 
     provides that for taxable years taxpayers with prior year's 
     AGI above $150,000 who make estimated tax payments based on 
     prior year's tax must do so based on 110.5 percent of prior 
     year's tax for estimated tax payments based on prior year's 
     tax must do so based on 112 percent of prior year's tax for 
     estimated tax payments made for taxable year 2004.
       Effective date.--The provision is effective for estimated 
     payments made for taxable years beginning after December 31, 
     1999, and before January 1, 2001.

                          Conference Agreement

       The conference agreement includes the provision in H.R. 
     2923 and the provision in S. 1792 with modifications. 
     Taxpayers with prior year's AGI above $150,000 who make 
     estimated tax payments based on prior year's tax must do so 
     based on 108.6 percent of prior year's tax for estimated tax 
     payments made for taxable year 2000. Taxpayers with prior 
     year's AGI above $150,000 who make estimated tax payments 
     based on prior year's tax must do so based on 110 percent of 
     prior year's tax for estimated tax payments made for taxable 
     year 2001. The modified safe harbor percentage is not changed 
     for estimated tax payments made for any taxable years other 
     than 2000 and 2001.
       Effective date.--The provision is effective for estimated 
     tax payments made for taxable years beginning after December 
     31, 1999, and before January 1, 2002.

B. Clarify the Tax Treatment of Income and Losses on Derivatives (sec. 
                           1221 of the Code)

                              Present Law

       Capital gain treatment applies to gain on the sale or 
     exchange of a capital asset. Capital assets include property 
     other than (1) stock in trade or other types of assets 
     includible in inventory, (2) property used in a trade or 
     business that is real property or property subject to 
     depreciation, (3) accounts or notes receivable acquired in 
     the ordinary course of a trade or business, (4) certain 
     copyrights (or similar property), and (5) U.S. government 
     publications. Gain or loss on such assets generally is 
     treated as ordinary, rather than capital, gain or loss. 
     Certain other Code sections also treat gains or losses as 
     ordinary. For example, the gains or losses of securities 
     dealers or certain electing commodities dealers or electing 
     traders in securities or commodities that are subject to 
     ``mark-to-market'' accounting are treated as ordinary (sec. 
     475).
       Treasury regulations (which were finalized in 1994) require 
     ordinary character treatment for most business hedges and 
     provide timing rules requiring that gains or losses on 
     hedging transactions be taken into account in a manner that 
     matches the income or loss from the hedged item or items. The 
     regulations apply to hedges that meet a standard of ``risk 
     reduction'' with respect to ordinary property held (or to be 
     held) or certain liabilities incurred (or to be incurred) by 
     the taxpayer and that meet certain identification and other 
     requirements (Treas. Reg. sec. 1.1221-2).

                               House Bill

       No provision.

                            Senate Amendment

       No provision, but S. 1792, as passed by the Senate, adds 
     three categories to the list of assets the gain or loss on 
     which is treated as ordinary (sec. 1221). The new categories 
     are: (1) commodities derivative financial instruments held by 
     commodities derivatives dealers; (2) hedging transactions; 
     and (3) supplies of a type regularly consumed by the taxpayer 
     in the ordinary course of a taxpayer's trade or business. In 
     defining a hedging transaction, S. 1792 generally codifies 
     the approach taken by the Treasury regulations, but modifies 
     the rules. The ``risk reduction'' standard of the regulations 
     is broadened to ``risk management'' with respect to ordinary 
     property held (or to be held) or certain liabilities incurred 
     (or to be incurred), and S. 1792 provides that the definition 
     of a hedging transaction includes a transaction entered into 
     primarily to manage such other risks as the Secretary may 
     prescribe in regulations.
       Effective date.--The provision in S. 1792 is effective for 
     any instrument held, acquired or entered into, any 
     transaction entered into, and supplies held or acquired on or 
     after the date of enactment.

                          Conference Agreement

       The conference agreement includes the provision in S. 1792.

C. Expand Reporting of Cancellation of Indebtedness Income (sec. 6050P 
                              of the Code)

                              Present Law

       Under section 61(a)(12), a taxpayer's gross income includes 
     income from the discharge of indebtedness. Section 6050P 
     requires ``applicable entities'' to file information returns 
     with the Internal Revenue Service (IRS) regarding any 
     discharge of indebtedness of $600 or more.
       The information return must set forth the name, address, 
     and taxpayer identification number of the person whose debt 
     was discharged, the amount of debt discharged, the date on 
     which the debt was discharged, and any other information that 
     the IRS requires to be provided. The information return must 
     be filed in the manner and at the time specified by the IRS. 
     The same information also must be provided to the person 
     whose debt is discharged by January 31 of the year following 
     the discharge.
       ``Applicable entities'' include: (1) the Federal Deposit 
     Insurance Corporation (FDIC), the Resolution Trust 
     Corporation (RTC), the National Credit Union Administration, 
     and any successor or subunit of any of them; (2) any 
     financial institution (as described in sec. 581 (relating to 
     banks) or sec. 591(a) (relating to savings institutions)); 
     (3) any credit union; (4) any corporation that is a direct or 
     indirect subsidiary of an entity described in (2) or (3) 
     which, by virtue of being affiliated with such entity, is 
     subject to supervision and examination by a Federal or State 
     agency regulating such entities; and (5) an executive, 
     judicial, or legislative agency (as defined in 31 U.S.C. sec. 
     3701(a)(4)).
       Failures to file correct information returns with the IRS 
     or to furnish statements to taxpayers with respect to these 
     discharges of indebtedness are subject to the same general 
     penalty that is imposed with respect to failures to provide 
     other types of information returns. Accordingly, the penalty 
     for failure to furnish statements to taxpayers is generally 
     $50 per failure, subject to a maximum of $100,000 for any 
     calendar year. These penalties are not applicable if the 
     failure is due to reasonable cause and not to willful 
     neglect.

                               House Bill

       No provision.

                            Senate Amendment

       No provision, but S.1792, as passed by the Senate, requires 
     information reporting on indebtedness discharged by any 
     organization a significant trade or business of which is the 
     lending of money (such as finance companies and credit card 
     companies whether or not affiliated with financial 
     institutions).
       Effective date.--The provision is effective with respect to 
     discharges of indebtedness after December 31, 1999.

                          Conference Agreement

       The conference agreement includes the provision in S. 1792.

D. Limit Conversion of Character of Income From Constructive Ownership 
                Transactions (new sec. 1260 of the Code)

                              Present Law

       The maximum individual income tax rate on ordinary income 
     and short-term capital gain is 39.6 percent, while the 
     maximum individual income tax rate on long-term capital gain 
     generally is 20 percent. Long-term capital gain means gain 
     from the sale or exchange of a capital asset held more than 
     one year. For this purpose, gain from the termination of a 
     right with respect to property which would be a capital asset 
     in the hands of the taxpayer is treated as capital gain.\23\
---------------------------------------------------------------------------
     \23\ Section 1234A, as amended by the Taxpayer Relief Act of 
     1997.
---------------------------------------------------------------------------
       A pass-thru entity (such as a partnership) generally is not 
     subject to Federal income tax. Rather, each owner includes 
     its share of a pass-thru entity's income, gain, loss, 
     deduction or credit in its taxable income. Generally, the 
     character of the item is determined at the entity level and 
     flows through to the owners. Thus, for example, the treatment 
     of an item of income by a partnership as ordinary income, 
     short-term capital gain, or long-term capital gain retains 
     its character when reported by each of the partners.
       Investors may enter into forward contracts, notional 
     principal contracts, and other similar arrangements with 
     respect to property that provides the investor with the same 
     or similar economic benefits as owning the property directly 
     but with potentially different tax consequences (as to the 
     character and timing of any gain).

                               House Bill

       No provision.

                            Senate Amendment

       No provision, but S. 1792, as passed by the Senate, 
     includes a provision that limits the amount of long-term 
     capital gain a taxpayer could recognize from certain 
     derivative contracts (``constructive ownership 
     transactions'') with respect to certain financial

[[Page 30111]]

     assets. The amount of long-term capital gain is limited to 
     the amount of such gain the taxpayer would have recognized if 
     the taxpayer held the financial asset directly during the 
     term of the derivative contract. Any gain in excess of this 
     amount is treated as ordinary income. An interest charge is 
     imposed on the amount of gain that is treated as ordinary 
     income. The provision does not alter the tax treatment of the 
     long-term capital gain that is not treated as ordinary 
     income.
       A taxpayer is treated as having entered into a constructive 
     ownership transaction if the taxpayer (1) holds a long 
     position under a notional principal contract with respect to 
     the financial asset, (2) enters into a forward contract to 
     acquire the financial asset, (3) is the holder of a call 
     option, and the grantor of a put option, with respect to a 
     financial asset, and the options have substantially equal 
     strike prices and substantially contemporaneous maturity 
     dates, or (4) to the extent provided in regulations, enters 
     into one or more transactions, or acquires one or more other 
     positions, that have substantially the same effect of 
     replicating the economic benefits of direct ownership of a 
     financial asset without a significant change in the risk-
     reward profile with respect to the underlying 
     transaction.\24\
---------------------------------------------------------------------------
     \24\ It is not expected that leverage in a constructive 
     ownership transaction would change the risk-reward profile 
     with respect to the underlying transaction.
---------------------------------------------------------------------------
       A ``financial asset'' is defined as (1) any equity interest 
     in a pass-thru entity, and (2) to the extent provided in 
     regulations, any debt instrument and any stock in a 
     corporation that is not a pass-thru entity. A ``pass-thru 
     entity'' refers to (1) a regulated investment company, (2) a 
     real estate investment trust, (3) a real estate mortgage 
     investment conduit, (4) an S corporation, (5) a partnership, 
     (6) a trust, (7) a common trust fund, (8) a passive foreign 
     investment company,\25\ (9) a foreign personal holding 
     company, and (10) a foreign investment company.
---------------------------------------------------------------------------
     \25\ For this purpose, a passive foreign investment company 
     includes an investment company that is also a controlled 
     foreign corporation.
---------------------------------------------------------------------------
       The amount of recharacterized gain is calculated as the 
     excess of the amount of long-term capital gain the taxpayer 
     would have had absent this provision over the ``net 
     underlying long-term capital gain'' attributable to the 
     financial asset. The net underlying long-term capital gain is 
     the amount of net capital gain the taxpayer would have 
     realized if it had acquired the financial asset for its fair 
     market value on the date the constructive ownership 
     transaction was opened and sold the financial asset on the 
     date the transaction was closed (only taking into account 
     gains and losses that would have resulted from a deemed 
     ownership of the financial asset).\26\ The long-term capital 
     gains rate on the net underlying long-term capital gain is 
     determined by reference to the individual capital gains rates 
     in section 1(h).
---------------------------------------------------------------------------
     \26\ A taxpayer must establish the amount of the net 
     underlying long-term capital gain with clear and convincing 
     evidence; otherwise, the amount is deemed to be zero. To the 
     extent that the economic positions of the taxpayer and the 
     counterparty do not equally offset each other, the amount of 
     the net underlying long-term capital gain may be difficult to 
     establish.
---------------------------------------------------------------------------
       Example 1: On January 1, 2000, Taxpayer enters into a 
     three-year notional principal contract (a constructive 
     ownership transaction) with a securities dealer whereby, on 
     the settlement date, the dealer agrees to pay Taxpayer the 
     amount of any increase in the notional value of an interest 
     in an investment partnership (the financial asset). After 
     three years, the value of the notional principal contract 
     increased by $200,000, of which $150,000 is attributable to 
     ordinary income and net short-term capital gain ($50,000 is 
     attributable to net long-term capital gains). The amount of 
     the net underlying long-term capital gains is $50,000, and 
     the amount of gain that is recharacterized as ordinary income 
     is $150,000 (the excess of $200,000 of long-term gain over 
     the $50,000 of net underlying long-term capital gain).
       An interest charge is imposed on the underpayment of tax 
     for each year that the constructive ownership transaction was 
     open. The interest charge is the amount of interest that 
     would be imposed under section 6601 had the recharacterized 
     gain been included in the taxpayer's gross income during the 
     term of the constructive ownership transaction. The 
     recharacterized gain is treated as having accrued such that 
     the gain in each successive year is equal to the gain in the 
     prior year increased by a constant growth rate \27\ during 
     the term of the constructive ownership transaction.
---------------------------------------------------------------------------
     \27\ The accrual rate is the applicable Federal rate on the 
     day the transaction closed.
---------------------------------------------------------------------------
       Example 2: Same facts as in example 1, and assume the 
     applicable Federal rate on December 31, 2002, is six percent. 
     For purposes of calculating the interest charge, Taxpayer 
     must allocate the $150,000 of recharacterized ordinary income 
     to the three year-term of the constructive ownership 
     transaction as follows: $47,116.47 is allocated to year 2000, 
     $49,943.46 is allocated to year 2001, and $52,940.07 is 
     allocated to year 2002.
       A taxpayer is treated as holding a long position under a 
     notional principal contract with respect to a financial asset 
     if the person (1) has the right to be paid (or receive credit 
     for) all or substantially all of the investment yield 
     (including appreciation) on the financial asset for a 
     specified period, and (2) is obligated to reimburse (or 
     provide credit) for all or substantially all of any decline 
     in the value of the financial asset. A forward contract is a 
     contract to acquire in the future (or provide or receive 
     credit for the future value of) any financial asset.
       If the constructive ownership transaction is closed by 
     reason of taking delivery of the underlying financial asset, 
     the taxpayer is treated as having sold the contract, option, 
     or other position that is part of the transaction for its 
     fair market value on the closing date. However, the amount of 
     gain that is recognized as a result of having taken delivery 
     is limited to the amount of gain that is treated as ordinary 
     income by reason of this provision (with appropriate basis 
     adjustments for such gain).
       The provision does not apply to any constructive ownership 
     transaction if all of the positions that are part of the 
     transaction are marked to market under the Code or 
     regulations. The Treasury Department is authorized to 
     prescribe regulations as necessary to carry out the purposes 
     of the provision, including to (1) permit taxpayers to mark 
     to market constructive ownership transactions in lieu of the 
     provision, and (2) exclude certain forward contracts that do 
     not convey substantially all of the economic return with 
     respect to a financial asset.
       No inference is intended as to the proper treatment of a 
     constructive ownership transaction entered into prior to the 
     effective date of this provision.
       Effective date.--The provision applies to transactions 
     entered into on or after July 12, 1999. For this purpose, a 
     contract, option or any other arrangement that is entered 
     into or exercised on or after July 12, 1999, which extends or 
     otherwise modifies the terms of a transaction entered into 
     prior to such date is treated as a transaction entered into 
     on or after July 12, 1999.

                          Conference Agreement

       The conference agreement includes the provision in S. 1792 
     with a clarification regarding the effective date. The 
     provision applies to transactions entered into on or after 
     July 12, 1999. For this purpose, it is expected that a 
     contract, option or any other arrangement that is entered 
     into or exercised on or after July 12, 1999, which extends or 
     otherwise modifies the terms of a transaction entered into 
     prior to such date will be treated as a transaction entered 
     into on or after July 12, 1999, unless a party to the 
     transaction other than the taxpayer has, as of July 12, 1999, 
     the exclusive right to extend the terms of the transaction, 
     and the length of such extension does not exceed the first 
     business day following a period of five years from the 
     original termination date under the transaction.

E. Treatment of Excess Pension Assets Used for Retiree Health Benefits 
      (sec. 420 of the Code, and secs. 101, 403, and 408 of ERISA)

                              Present Law

       Defined benefit pension plan assets generally may not 
     revert to an employer prior to the termination of the plan 
     and the satisfaction of all plan liabilities. A reversion 
     prior to plan termination may constitute a prohibited 
     transaction and may result in disqualification of the plan. 
     Certain limitations and procedural requirements apply to a 
     reversion upon plan termination. Any assets that revert to 
     the employer upon plan termination are includible in the 
     gross income of the employer and subject to an excise tax. 
     The excise tax rate, which may be as high as 50 percent of 
     the reversion, varies depending upon whether or not the 
     employer maintains a replacement plan or makes certain 
     benefit increases. Upon plan termination, the accrued 
     benefits of all plan participants are required to be 100-
     percent vested.
       A pension plan may provide medical benefits to retired 
     employees through a section 401(h) account that is a part of 
     such plan. A qualified transfer of excess assets of a defined 
     benefit pension plan (other than a multiemployer plan) into a 
     section 401(h) account that is a part of such plan does not 
     result in plan disqualification and is not treated as a 
     reversion to the employer or a prohibited transaction. 
     Therefore, the transferred assets are not includible in the 
     gross income of the employer and are not subject to the 
     excise tax on reversions.
       Qualified transfers are subject to amount and frequency 
     limitations, use requirements, deduction limitations, vesting 
     requirements and minimum benefit requirements. Excess assets 
     transferred in a qualified transfer may not exceed the amount 
     reasonably estimated to be the amount that the employer will 
     pay out of such account during the taxable year of the 
     transfer for qualified current retiree health liabilities. No 
     more than one qualified transfer with respect to any plan may 
     occur in any taxable year.
       The transferred assets (and any income thereon) must be 
     used to pay qualified current retiree health liabilities 
     (either directly or through reimbursement) for the taxable 
     year of the transfer. Transferred amounts generally must 
     benefit all pension plan participants, other than key 
     employees, who are entitled upon retirement to receive 
     retiree medical benefits through the section 401(h) account. 
     Retiree health benefits of key employees may not be paid 
     (directly or indirectly) out of transferred assets. Amounts

[[Page 30112]]

     not used to pay qualified current retiree health liabilities 
     for the taxable year of the transfer are to be returned at 
     the end of the taxable year to the general assets of the 
     plan. These amounts are not includible in the gross income of 
     the employer, but are treated as an employer reversion and 
     are subject to a 20-percent excise tax.
       No deduction is allowed for (1) a qualified transfer of 
     excess pension assets into a section 401(h) account, (2) the 
     payment of qualified current retiree health liabilities out 
     of transferred assets (and any income thereon) or (3) a 
     return of amounts not used to pay qualified current retiree 
     health liabilities to the general assets of the pension plan.
       In order for the transfer to be qualified, accrued 
     retirement benefits under the pension plan generally must be 
     100-percent vested as if the plan terminated immediately 
     before the transfer.
       The minimum benefit requirement requires each group health 
     plan under which applicable health benefits are provided to 
     provide substantially the same level of applicable health 
     benefits for the taxable year of the transfer and the 
     following 4 taxable years. The level of benefits that must be 
     maintained is based on benefits provided in the year 
     immediately preceding the taxable year of the transfer. 
     Applicable health benefits are health benefits or coverage 
     that are provided to (1) retirees who, immediately before the 
     transfer, are entitled to receive such benefits upon 
     retirement and who are entitled to pension benefits under the 
     plan and (2) the spouses and dependents of such retirees.
       The provision permitting a qualified transfer of excess 
     pension assets to pay qualified current retiree health 
     liabilities expires for taxable years beginning after 
     December 31, 2000.\28\
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     \28\ Title I of the Employee Retirement Income Security Act 
     of 1974, as amended (``ERISA''), provides that plan 
     participants, the Secretaries of Treasury and the Department 
     of Labor, the plan administrator, and each employee 
     organization representing plan participants must be notified 
     60 days before a qualified transfer of excess assets to a 
     retiree health benefits account occurs (ERISA sec. 103(e)). 
     ERISA also provides that a qualified transfer is not a 
     prohibited transaction under ERISA (ERISA sec. 408(b)(13)) or 
     a prohibited reversion of assets to the employer (ERISA sec. 
     403(c)(1)). For purposes of these provisions, a qualified 
     transfer is generally defined as a transfer pursuant to 
     section 420 of the Internal Revenue Code, as in effect on 
     January 1, 1995.
---------------------------------------------------------------------------

                               House Bill

       No provision.

                            Senate Amendment

       No provision. However, S. 1792, as passed by the Senate, 
     extends the present-law provision permitting qualified 
     transfers of excess defined benefit pension plan assets to 
     provide retiree health benefits under a section 401(h) 
     account through September 30, 2009.\29\ In addition, the 
     present-law minimum benefit requirement is replaced by the 
     minimum cost requirement that applied to qualified transfers 
     before December 9, 1994, to section 401(h) accounts. 
     Therefore, each group health plan or arrangement under which 
     applicable health benefits are provided is required to 
     provide a minimum dollar level of retiree health expenditures 
     for the taxable year of the transfer and the following 4 
     taxable years. The minimum dollar level is the higher of the 
     applicable employer costs for each of the 2 taxable years 
     immediately preceding the taxable year of the transfer. The 
     applicable employer cost for a taxable year is determined by 
     dividing the employer's qualified current retiree health 
     liabilities by the number of individuals to whom coverage for 
     applicable health benefits was provided during the taxable 
     year.
---------------------------------------------------------------------------
     \29\ S. 1792 modifies the corresponding provisions of ERISA.
---------------------------------------------------------------------------
       Effective date.--S. 1792, as passed by the Senate, is 
     effective with respect to qualified transfers of excess 
     defined benefit pension plan assets to section 401(h) 
     accounts after December 31, 2000, and before October 1, 2009. 
     The modification of the minimum benefit requirement is 
     effective with respect to transfers after the date of 
     enactment. In addition, S. 1792 contains a transition rule 
     regarding the minimum cost requirement. Under this rule, an 
     employer must satisfy the minimum benefit requirement with 
     respect to a qualified transfer that occurs after the date of 
     enactment during the portion of the cost maintenance period 
     of such transfer that overlaps the benefit maintenance period 
     of a qualified transfer that occurs on or before the date of 
     enactment. For example, suppose an employer (with a calendar 
     year taxable year) made a qualified transfer in 1998. The 
     minimum benefit requirement must be satisfied for calendar 
     years 1998, 1999, 2000, 2001, and 2002. Suppose the employer 
     also makes a qualified transfer in 2000. Then, the employer 
     is required to satisfy the minimum benefit requirement in 
     2000, 2001, and 2002, and is required to satisfy the minimum 
     cost requirement in 2003 and 2004.

                          Conference Agreement

       The conference agreement extends the present-law provision 
     permitting qualified transfers of excess defined benefit 
     pension plan assets to provide retiree health benefits under 
     a section 401(h) account through December 31, 2005.\30\ The 
     modification of the minimum benefit requirement is effective 
     with respect to transfers after the date of enactment. The 
     Secretary of the Treasury is directed to prescribe such 
     regulations as may be necessary to prevent an employer who 
     significantly reduces retiree health coverage during the cost 
     maintenance period from being treated as satisfying the 
     minimum cost requirement. In addition, the conference 
     agreement contains a transition rule regarding the minimum 
     cost requirement. Under this rule, an employer must satisfy 
     the minimum benefit requirement with respect to a qualified 
     transfer that occurs after the date of enactment during the 
     portion of the cost maintenance period of such transfer that 
     overlaps the benefit maintenance period of a qualified 
     transfer that occurs on or before the date of enactment. For 
     example, suppose an employer (with a calendar year taxable 
     year) made a qualified transfer in 1998. The minimum benefit 
     requirement must be satisfied for calendar years 1998, 1999, 
     2000, 2001, and 2002. Suppose the employer also makes a 
     qualified transfer in 2000. Then, the employer is required to 
     satisfy the minimum benefit requirement in 2000, 2001, and 
     2002, and is required to satisfy the minimum cost requirement 
     in 2003 and 2004.
---------------------------------------------------------------------------
     \30\ The conference agreement modifies the corresponding 
     provisions of ERISA.
---------------------------------------------------------------------------
       Effective date.--The conference agreement is effective with 
     respect to qualified transfers of excess defined benefit 
     pension plan assets to section 401(h) accounts after December 
     31, 2000, and before January 1, 2006. The modification of the 
     minimum benefit requirement is effective with respect to 
     transfers after the date of enactment. In addition, the 
     conference agreement contains a transition rule regarding the 
     minimum cost requirement. Under this rule, an employer must 
     satisfy the minimum benefit requirement with respect to a 
     qualified transfer that occurs after the date of enactment 
     during the portion of the cost maintenance period of such 
     transfer that overlaps the benefit maintenance period of a 
     qualified transfer that occurs on or before the date of 
     enactment. For example, suppose an employer (with a calendar 
     year taxable year) made a qualified transfer in 1998. The 
     minimum benefit requirement must be satisfied for calendar 
     years 1998, 1999, 2000, 2001, and 2002. Suppose the employer 
     also makes a qualified transfer in 2000. Then, the employer 
     is required to satisfy the minimum benefit requirement in 
     2000, 2001, and 2002, and is required to satisfy the minimum 
     cost requirement in 2003 and 2004.

  F. Modify Installment Method and Prohibit its Use by Accrual Method 
             Taxpayers (sections 453 and 453A of the Code)

                              Present Law

       An accrual method taxpayer is generally required to 
     recognize income when all the events have occurred that fix 
     the right to the receipt of the income and the amount of the 
     income can be determined with reasonable accuracy. The 
     installment method of accounting provides an exception to 
     this general principle of income recognition by allowing a 
     taxpayer to defer the recognition of income from the 
     disposition of certain property until payment is received. 
     Sales to customers in the ordinary course of business are not 
     eligible for the installment method, except for sales of 
     property that is used or produced in the trade or business of 
     farming and sales of timeshares and residential lots if an 
     election to pay interest under section 453(l)(2)(B)) is made.
       A pledge rule provides that if an installment obligation is 
     pledged as security for any indebtedness, the net proceeds 
     \31\ of such indebtedness are treated as a payment on the 
     obligation, triggering the recognition of income. Actual 
     payments received on the installment obligation subsequent to 
     the receipt of the loan proceeds are not taken into account 
     until such subsequent payments exceed the loan proceeds that 
     were treated as payments. The pledge rule does not apply to 
     sales of property used or produced in the trade or business 
     of farming, to sales of timeshares and residential lots where 
     the taxpayer elects to pay interest under section 
     453(l)(2)(B), or to dispositions where the sales price does 
     not exceed $150,000.
---------------------------------------------------------------------------
     \31\ The net proceeds equal the gross loan proceeds less the 
     direct expenses of obtaining the loan.
---------------------------------------------------------------------------
       An additional rule requires the payment of interest on the 
     deferred tax that is attributable to most large installment 
     sales.

                               House Bill

       No provision.

                            Senate Amendment

       No provision, but S. 1792, as passed by the Senate, 
     generally prohibits the use of the installment method of 
     accounting for dispositions of property that would otherwise 
     be reported for Federal income tax purposes using an accrual 
     method of accounting and modifies the installment sale pledge 
     rule to provide that entering into any arrangement that gives 
     the taxpayer the right to satisfy an obligation with an 
     installment note will be treated in the same manner as the 
     direct pledge of the installment note.
     Prohibition on the use of the installment method for accrual 
         method dispositions
       S. 1792 generally prohibits the use of the installment 
     method of accounting for dispositions of property that would 
     otherwise

[[Page 30113]]

     be reported for Federal income tax purposes using an accrual 
     method of accounting. The provision does not change present 
     law regarding the availability of the installment method for 
     dispositions of property used or produced in the trade or 
     business of farming. The provision also does not change 
     present law regarding the availability of the installment 
     method for dispositions of timeshares or residential lots if 
     the taxpayer elects to pay interest under section 453(l).
       The provision does not change the ability of a cash method 
     taxpayer to use the installment method. For example, a cash 
     method individual owns all of the stock of a closely held 
     accrual method corporation. This individual sells his stock 
     for cash, a ten year note, and a percentage of the gross 
     revenues of the company for next ten years. The provision 
     does not change the ability of this individual to use the 
     installment method in reporting the gain on the sale of the 
     stock.
     Modifications to the pledge rule
       S. 1792 modifies the pledge rule to provide that entering 
     into any arrangement that gives the taxpayer the right to 
     satisfy an obligation with an installment note will be 
     treated in the same manner as the direct pledge of the 
     installment note. For example, a taxpayer disposes of 
     property for an installment note. The disposition is properly 
     reported using the installment method. The taxpayer only 
     recognizes gain as it receives the deferred payment. However, 
     were the taxpayer to pledge the installment note as security 
     for a loan, it would be required to treat the proceeds of 
     such loan as a payment on the installment note, and recognize 
     the appropriate amount of gain. Under the provision, the 
     taxpayer would also be required to treat the proceeds of a 
     loan as payment on the installment note to the extent the 
     taxpayer had the right to ``put'' or repay the loan by 
     transferring the installment note to the taxpayer's creditor. 
     Other arrangements that have a similar effect would be 
     treated in the same manner.
       The modification of the pledge rule applies only to 
     installment sales where the pledge rule of present law 
     applies. Accordingly, the provision does not apply to (1) 
     installment method sales made by a dealer in timeshares and 
     residential lots where the taxpayer elects to pay interest 
     under section 453(l)(2)(B), (2) sales of property used or 
     produced in the trade or business of farming, or (3) 
     dispositions where the sales price does not exceed $150,000, 
     since such sales are not subject to the pledge rule under 
     present law.
       Effective date.--The provision is effective for sales or 
     other dispositions entered into on or after the date of 
     enactment.

                          Conference Agreement

       The conference agreement includes the provision in S. 1792.

G. Denial of Charitable Contribution Deduction for Transfers Associated 
                                  with

       Split-dollar Insurance Arrangements (new sec. 501(c)(28) of 
     the Code)

                              Present Law

       Under present law, in computing taxable income, a taxpayer 
     who itemizes deductions generally is allowed to deduct 
     charitable contributions paid during the taxable year. The 
     amount of the deduction allowable for a taxable year with 
     respect to any charitable contribution depends on the type of 
     property contributed, the type of organization to which the 
     property is contributed, and the income of the taxpayer 
     (secs. 170(b) and 170(e)). A charitable contribution is 
     defined to mean a contribution or gift to or for the use of a 
     charitable organization or certain other entities (sec. 
     170(c)). The term ``contribution or gift'' is not defined by 
     statute, but generally is interpreted to mean a voluntary 
     transfer of money or other property without receipt of 
     adequate consideration and with donative intent. If a 
     taxpayer receives or expects to receive a quid pro quo in 
     exchange for a transfer to charity, the taxpayer may be able 
     to deduct the excess of the amount transferred over the fair 
     market value of any benefit received in return, provided the 
     excess payment is made with the intention of making a 
     gift.\32\
---------------------------------------------------------------------------
     \32\ United States v. American Bar Endowment, 477 U.S. 105 
     (1986). Treas. Reg. sec. 1.170A-1(h).
---------------------------------------------------------------------------
       In general, no charitable contribution deduction is allowed 
     for a transfer to charity of less than the taxpayer's entire 
     interest (i.e., a partial interest) in any property (sec. 
     170(f)(3)). In addition, no deduction is allowed for any 
     contribution of $250 or more unless the taxpayer obtains a 
     contemporaneous written acknowledgment from the donee 
     organization that includes a description and good faith 
     estimate of the value of any goods or services provided by 
     the donee organization to the taxpayer in consideration, 
     whole or part, for the taxpayer's contribution (sec. 
     170(f)(8)).

                               House Bill

       No provision.

                            Senate Amendment

     Deduction denial
       No provision. However, S. 1792, as passed by the Senate, 
     contains a provision \33\ that restates present law to 
     provide that no charitable contribution deduction is allowed 
     for purposes of Federal tax, for a transfer to or for the use 
     of an organization described in section 170(c) of the 
     Internal Revenue Code, if in connection with the transfer (1) 
     the organization directly or indirectly pays, or has 
     previously paid, any premium on any ``personal benefit 
     contract'' with respect to the transferor, or (2) there is an 
     understanding or expectation that any person will directly or 
     indirectly pay any premium on any ``personal benefit 
     contract'' with respect to the transferor. It is intended 
     that an organization be considered as indirectly paying 
     premiums if, for example, another person pays premiums on its 
     behalf.
---------------------------------------------------------------------------
     \33\ The provision is similar to H.R. 630, introduced by Mr. 
     Archer and Mr. Rangel (106th Cong., 1st Sess.).
---------------------------------------------------------------------------
       A personal benefit contract with respect to the transferor 
     is any life insurance, annuity, or endowment contract, if any 
     direct or indirect beneficiary under the contract is the 
     transferor, any member of the transferor's family, or any 
     other person (other than a section 170(c) organization) 
     designated by the transferor. For example, such a beneficiary 
     would include a trust having a direct or indirect beneficiary 
     who is the transferor or any member of the transferor's 
     family, and would include an entity that is controlled by the 
     transferor or any member of the transferor's family. It is 
     intended that a beneficiary under the contract include any 
     beneficiary under any side agreement relating to the 
     contract. If a transferor contributes a life insurance 
     contract to a section 170(c) organization and designates one 
     or more section 170(c) organizations as the sole 
     beneficiaries under the contract, generally, it is not 
     intended that the deduction denial rule under the provision 
     apply. If, however, there is an outstanding loan under the 
     contract upon the transfer of the contract, then the 
     transferor is considered as a beneficiary. The fact that a 
     contract also has other direct or indirect beneficiaries 
     (persons who are not the transferor or a family member, or 
     designated by the transferor) does not prevent it from being 
     a personal benefit contract. The provision is not intended to 
     affect situations in which an organization pays premiums 
     under a legitimate fringe benefit plan for employees.
       It is intended that a person be considered as an indirect 
     beneficiary under a contract if, for example, the person 
     receives or will receive any economic benefit as a result of 
     amounts paid under or with respect to the contract. For this 
     purpose, as described below, an indirect beneficiary is not 
     intended to include a person that benefits exclusively under 
     a bona fide charitable gift annuity (within the meaning of 
     sec. 501(m)).
       In the case of a charitable gift annuity, if the charitable 
     organization purchases an annuity contract issued by an 
     insurance company to fund its obligation to pay the 
     charitable gift annuity, a person receiving payments under 
     the charitable gift annuity is not treated as an indirect 
     beneficiary, provided certain requirements are met. The 
     requirements are that (1) the charitable organization possess 
     all of the incidents of ownership (within the meaning of 
     Treas. Reg. sec. 20.2042-1(c)) under the annuity contract 
     purchased by the charitable organization; (2) the charitable 
     organization be entitled to all the payments under the 
     contract; and (3) the timing and amount of payments under the 
     contract be substantially the same as the timing and amount 
     of payments to each person under the organization's 
     obligation under the charitable gift annuity (as in effect at 
     the time of the transfer to the charitable organization).
       Under the provision, an individual's family consists of the 
     individual's grandparents, the grandparents of the 
     individual's spouse, the lineal descendants of such 
     grandparents, and any spouse of such a lineal descendant.
       In the case of a charitable gift annuity obligation that is 
     issued under the laws of a State that requires, in order for 
     the charitable gift annuity to be exempt from insurance 
     regulation by that State, that each beneficiary under the 
     charitable gift annuity be named as a beneficiary under an 
     annuity contract issued by an insurance company authorized to 
     transact business in that State, then the foregoing 
     requirements (1) and (2) are treated as if they are met, 
     provided that certain additional requirements are met. The 
     additional requirements are that the State law requirement 
     was in effect on February 8, 1999, each beneficiary under the 
     charitable gift annuity is a bona fide resident of the State 
     at the time the charitable gift annuity was issued, the only 
     persons entitled to payments under the annuity contract 
     issued by the insurance company are persons entitled to 
     payments under the charitable gift annuity when it was 
     issued, and (as required by clause (iii) of subparagraph (D) 
     of the provision) the timing and amount of payments under the 
     annuity contract to each person are substantially the same as 
     the timing and amount of payments to the person under the 
     charitable gift annuity (as in effect at the time of the 
     transfer to the charitable organization).
       In the case of a charitable remainder annuity trust or 
     charitable remainder unitrust (as defined in section 664(d)) 
     that holds a life insurance, endowment or annuity contract 
     issued by an insurance company, a person is not treated as an 
     indirect beneficiary under the contract held by the trust, 
     solely by reason of being a recipient of an annuity or

[[Page 30114]]

     unitrust amount paid by the trust, provided that the trust 
     possesses all of the incidents of ownership under the 
     contract and is entitled to all the payments under such 
     contract. No inference is intended as to the applicability of 
     other provisions of the Code with respect to the acquisition 
     by the trust of a life insurance, endowment or annuity 
     contract, or the appropriateness of such an investment by a 
     charitable remainder trust.
       Nothing in the provision is intended to suggest that a life 
     insurance, endowment, or annuity contract would be a personal 
     benefit contract, solely because an individual who is a 
     recipient of an annuity or unitrust amount paid by a 
     charitable remainder annuity trust or charitable remainder 
     unitrust uses such a payment to purchase a life insurance, 
     endowment or annuity contract, and a beneficiary under the 
     contract is the recipient, a member of his or her family, or 
     another person he or she designates.
     Excise tax
       The provision imposes on any organization described in 
     section 170(c) of the Code an excise tax, equal to the amount 
     of the premiums paid by the organization on any life 
     insurance, annuity, or endowment contract, if the premiums 
     are paid in connection with a transfer for which a deduction 
     is not allowable under the deduction denial rule of the 
     provision (without regard to when the transfer to the 
     charitable organization was made). The excise tax does not 
     apply if all of the direct and indirect beneficiaries under 
     the contract (including any related side agreement) are 
     organizations described in section 170(c). Under the 
     provision, payments are treated as made by the organization, 
     if they are made by any other person pursuant to an 
     understanding or expectation of payment. The excise tax is to 
     be applied taking into account rules ordinarily applicable to 
     excise taxes in chapter 41 or 42 of the Code (e.g., statute 
     of limitation rules).
     Reporting
       The provision requires that the charitable organization 
     annually report the amount of premiums that is paid during 
     the year and that is subject to the excise tax imposed under 
     the provision, and the name and taxpayer identification 
     number of each beneficiary under the life insurance, annuity 
     or endowment contract to which the premiums relate, as well 
     as other information required by the Secretary of the 
     Treasury. For this purpose, it is intended that a beneficiary 
     include any beneficiary under any side agreement to which the 
     section 170(c) organization is a party (or of which it is 
     otherwise aware). Penalties applicable to returns required 
     under Code section 6033 apply to returns under this reporting 
     requirement. Returns required under this provision are to be 
     furnished at such time and in such manner as the Secretary 
     shall by forms or regulations require.
     Regulations
       The provision provides for the promulgation of regulations 
     necessary or appropriate to carry out the purposes of the 
     provisions, including regulations to prevent the avoidance of 
     the purposes of the provision. For example, it is intended 
     that regulations prevent avoidance of the purposes of the 
     provision by inappropriate or improper reliance on the 
     limited exceptions provided for certain beneficiaries under 
     bona fide charitable gift annuities and for certain 
     noncharitable recipients of an annuity or unitrust amount 
     paid by a charitable remainder trust.
     Effective date
       The deduction denial provision applies to transfers after 
     February 8, 1999 (as provided in H.R. 630). The excise tax 
     provision applies to premiums paid after the date of 
     enactment. The reporting provision applies to premiums paid 
     after February 8, 1999 (determined as if the excise tax 
     imposed under the provision applied to premiums paid after 
     that date).
       No inference is intended that a charitable contribution 
     deduction is allowed under present law with respect to a 
     charitable split-dollar insurance arrangement. The provision 
     does not change the rules with respect to fraud or criminal 
     or civil penalties under present law; thus, actions 
     constituting fraud or that are subject to penalties under 
     present law would still constitute fraud or be subject to the 
     penalties after enactment of the provision.

                          Conference Agrement

       The conference agreement includes the provision in S. 1792.

 H. Distributions by a Partnership to a Corporate Partner of Stock in 
               Another Corporation (sec. 732 of the Code)

                              Present Law

       Present law generally provides that no gain or loss is 
     recognized on the receipt by a corporation of property 
     distributed in complete liquidation of another corporation in 
     which it holds 80 percent of the stock (by vote and value) 
     (sec. 332). The basis of property received by a corporate 
     distributee in the distribution in complete liquidation of 
     the 80-percent-owned subsidiary is a carryover basis, i.e., 
     the same as the basis in the hands of the subsidiary 
     (provided no gain or loss is recognized by the liquidating 
     corporation with respect to the distributed property) (sec. 
     334(b)).
       Present law provides two different rules for determining a 
     partner's basis in distributed property, depending on whether 
     or not the distribution is in liquidation of the partner's 
     interest in the partnership. Generally, a substituted basis 
     rule applies to property distributed to a partner in 
     liquidation. Thus, the basis of property distributed in 
     liquidation of a partner's interest is equal to the partner's 
     adjusted basis in its partnership interest (reduced by any 
     money distributed in the same transaction) (sec. 732(b)).
       By contrast, generally, a carryover basis rule applies to 
     property distributed to a partner other than in liquidation 
     of its partnership interest, subject to a cap (sec. 732(a)). 
     Thus, in a non-liquidating distribution, the distributee 
     partner's basis in the property is equal to the partnership's 
     adjusted basis in the property immediately before the 
     distribution, but not to exceed the partner's adjusted basis 
     in its partnership interest (reduced by any money distributed 
     in the same transaction). In a non-liquidating distribution, 
     the partner's basis in its partnership interest is reduced by 
     the amount of the basis to the distributee partner of the 
     property distributed and is reduced by the amount of any 
     money distributed (sec. 733).
       If corporate stock is distributed by a partnership to a 
     corporate partner with a low basis in its partnership 
     interest, the basis of the stock is reduced in the hands of 
     the partner so that the stock basis equals the distributee 
     partner's adjusted basis in its partnership interest. No 
     comparable reduction is made in the basis of the 
     corporation's assets, however. The effect of reducing the 
     stock basis can be negated by a subsequent liquidation of the 
     corporation under section 332.\34\
---------------------------------------------------------------------------
     \34\ In a similar situation involving the purchase of stock 
     of a subsidiary corporation as replacement property following 
     an involuntary conversion, the Code generally requires the 
     basis of the assets held by the subsidiary to be reduced to 
     the extent that the basis of the stock in the replacement 
     corporation itself is reduced (sec. 1033).
---------------------------------------------------------------------------

                               House Bill

       No provision.

                            Senate Amendment

     In general
       No provision. However, S. 1792, as passed by the Senate, 
     contains a provision that provides for a basis reduction to 
     assets of a corporation, if stock in that corporation is 
     distributed by a partnership to a corporate partner. The 
     reduction applies if, after the distribution, the corporate 
     partner controls the distributed corporation.
     Amount of the basis reduction
       Under the provision, the amount of the reduction in basis 
     of property of the distributed corporation generally equals 
     the amount of the excess of (1) the partnership's adjusted 
     basis in the stock of the distributed corporation immediately 
     before the distribution, over (2) the corporate partner's 
     basis in that stock immediately after the distribution.
       The provision limits the amount of the basis reduction in 
     two respects. First, the amount of the basis reduction may 
     not exceed the amount by which (1) the sum of the aggregate 
     adjusted bases of the property and the amount of money of the 
     distributed corporation exceeds (2) the corporate partner's 
     adjusted basis in the stock of the distributed corporation. 
     Thus, for example, if the distributed corporation has cash of 
     $300 and other property with a basis of $600 and the 
     corporate partner's basis in the stock of the distributed 
     corporation is $400, then the amount of the basis reduction 
     could not exceed $500 (i.e., ($300+$600)--$400 = $500).
       Second, the amount of the basis reduction may not exceed 
     the adjusted basis of the property of the distributed 
     corporation. Thus, the basis of property (other than money) 
     of the distributed corporation could not be reduced below 
     zero under the provision, even though the total amount of the 
     basis reduction would otherwise be greater.
       The provision provides that the corporate partner 
     recognizes long-term capital gain to the extent the amount of 
     the basis reduction exceeds the basis of the property (other 
     than money) of the distributed corporation. In addition, the 
     corporate partner's adjusted basis in the stock of the 
     distribution is increased in the same amount. For example, if 
     the amount of the basis reduction were $400, and the 
     distributed corporation has money of $200 and other property 
     with an adjusted basis of $300, then the corporate partner 
     would recognize a $100 capital gain under the provision. The 
     corporate partner's basis in the stock of the distributed 
     corporation is also increased by $100 in this example, under 
     the provision.
       The basis reduction is allocated among assets of the 
     controlled corporation in accordance with the rules provided 
     under section 732(c).
     Partnership distributions resulting in control
       The basis reduction generally applies with respect to a 
     partnership distribution of stock if the corporate partner 
     controls the distributed corporation immediately after the 
     distribution or at any time thereafter. For this purpose, the 
     term control means ownership of stock meeting the 
     requirements of section 1504(a)(2) (generally, an 80-percent 
     vote and value requirement).
       The provision applies to reduce the basis of any property 
     held by the distributed corporation immediately after the 
     distribution,

[[Page 30115]]

     or, if the corporate partner does not control the distributed 
     corporation at that time, then at the time the corporate 
     partner first has such control. The provision does not apply 
     to any distribution if the corporate partner does not have 
     control of the distributed corporation immediately after the 
     distribution and establishes that the distribution was not 
     part of a plan or arrangement to acquire control.
       For purposes of the provision, if a corporation acquires 
     (other than in a distribution from a partnership) stock the 
     basis of which is determined (by reason of being distributed 
     from a partnership) in whole or in part by reference to 
     section 732(a)(2) or (b), then the corporation is treated as 
     receiving a distribution of stock from a partnership. For 
     example, if a partnership distributes property other than 
     stock (such as real estate) to a corporate partner, and that 
     corporate partner contributes the real estate to another 
     corporation in a section 351 transaction, then the stock 
     received in the section 351 transaction is not treated as 
     distributed by a partnership, and the basis reduction under 
     this provision does not apply. As another example, if a 
     partnership distributes stock to two corporate partners, 
     neither of which have control of the distributed corporation, 
     and the two corporate partners merge and the survivor obtains 
     control of the distributed corporation, the stock of the 
     distributed corporation that is acquired as a result of the 
     merger is treated as received in a partnership distribution; 
     the basis reduction rule of the provision applies.
       In the case of tiered corporations, a special rule provides 
     that if the property held by a distributed corporation is 
     stock in a corporation that the distributed corporation 
     controls, then the provision is applied to reduce the basis 
     of the property of that controlled corporation. The provision 
     is also reapplied to any property of any controlled 
     corporation that is stock in a corporation that it controls. 
     Thus, for example, if stock of a controlled corporation is 
     distributed to a corporate partner, and the controlled 
     corporation has a subsidiary, the amount of the basis 
     reduction allocable to stock of the subsidiary is applied 
     again to reduce the basis of the assets of the subsidiary, 
     under the special rule.
       The provision also provides for regulations, including 
     regulations to avoid double counting and to prevent the abuse 
     of the purposes of the provision. It is intended that 
     regulations prevent the avoidance of the purposes of the 
     provision through the use of tiered partnerships.
     Effective date
       The provision is effective for distributions made after 
     July 14, 1999, except that in the case of a corporation that 
     is a partner in a partnership on July 14, 1999, the provision 
     is effective for distributions by that partnership to the 
     corporation after the date of enactment.

                          Conference Agreement

       The conference agreement includes the provision of S. 1792, 
     with a modification to the effective date.
       Effective date.--The provision is effective generally for 
     distributions made after July 14, 1999. However, in the case 
     of a corporation that is a partner in a partnership as of 
     July 14, 1999, the provision is effective for any 
     distribution made (or treated as made) to that partner from 
     that partnership after June 30, 2001. In the case of any such 
     distribution after the date of enactment and before July 1, 
     2001, the rule of the preceding sentence does not apply 
     unless that partner makes an election to have the rule apply 
     to the distribution on the partner's return of Federal income 
     tax for the taxable year in which the distribution occurs.
       No inference is intended that distributions that are not 
     subject to the provision achieve a particular tax result 
     under present law, and no inference is intended that 
     enactment of the provision limits the application of tax 
     rules or principles under present or prior law.

         I. Treatment of Real Estate Investment Trusts (REITs)

     1. Provisions relating to REITs (secs. 852, 856, and 857 of 
         the Code)

                              Present Law

       A real estate investment trust (``REIT'') is an entity that 
     receives most of its income from passive real-estate related 
     investments and that essentially receives pass-through 
     treatment for income that is distributed to shareholders.
       If an electing entity meets the requirements for REIT 
     status, the portion of its income that is distributed to the 
     investors each year generally is taxed to the investors 
     without being subjected to a tax at the REIT level. In 
     general, a REIT must derive its income from passive sources 
     and not engage in any active trade or business.
       A REIT must satisfy a number of tests on a year by year 
     basis that relate to the entity's (1) organizational 
     structure; (2) source of income; (3) nature of assets; and 
     (4) distribution of income. Under the source-of-income tests, 
     at least 95 percent of its gross income generally must be 
     derived from rents from real property, dividends, interest, 
     and certain other passive sources (the ``95 percent test''). 
     In addition, at least 75 percent of its gross income 
     generally must be from real estate sources, including rents 
     from real property and interest on mortgages secured by real 
     property. For purposes of the 95 and 75 percent tests, 
     qualified income includes amounts received from certain 
     ``foreclosure property,'' treated as such for 3 years after 
     the property is acquired by the REIT in foreclosure after a 
     default (or imminent default) on a lease of such property or 
     on indebtedness which such property secured.
       In general, for purposes of the 95 percent and 75 percent 
     tests, rents from real property do not include amounts for 
     services to tenants or for managing or operating real 
     property. However, there are some exceptions. Qualified rents 
     include amounts received for services that are ``customarily 
     furnished or rendered'' in connection with the rental of real 
     property, so long as the services are furnished through an 
     independent contractor from whom the REIT does not derive any 
     income. Amounts received for services that are not 
     ``customarily furnished or rendered'' are not qualified 
     rents.
       An independent contractor is defined as a person who does 
     not own, directly or indirectly, more than 35 percent of the 
     shares of the REIT. Also, no more than 35 percent of the 
     total shares of stock of an independent contractor (or of the 
     interests in assets or net profits, if not a corporation) can 
     be owned directly or indirectly by persons owning 35 percent 
     or more of the interests in the REIT. In addition, a REIT 
     cannot derive any income from an independent contractor.
       Rents for certain personal property leased in connection 
     with real property are treated as rents from real property if 
     the adjusted basis of the personal property does not exceed 
     15 percent of the aggregate adjusted bases of the real and 
     the personal property.
       Rents from real property do not include amounts received 
     from any corporation if the REIT owns 10 percent or more of 
     the voting power or of the total number of shares of all 
     classes of stock of such corporation. Similarly, in the case 
     of other entities, rents are not qualified if the REIT owns 
     10 percent of more in the assets or net profits of such 
     person.
       At the close of each quarter of the taxable year, at least 
     75 percent of the value of total REIT assets must be 
     represented by real estate assets, cash and cash items, and 
     Government securities. Also, a REIT cannot own securities 
     (other than Government securities and certain real estate 
     assets) in an amount greater than 25 percent of the value of 
     REIT assets. In addition, it cannot own securities of any one 
     issuer representing more than 5 percent of the total value of 
     REIT assets or more than 10 percent of the voting securities 
     of any corporate issuer. Securities for purposes of these 
     rules are defined by reference to the Investment Company Act 
     of 1940.\35\
---------------------------------------------------------------------------
     \35\ 15 U.S.C. 80a-1 and following. See Code section 
     856(c)(5)(F).
---------------------------------------------------------------------------
       Under an exception to the ownership rule, a REIT is 
     permitted to have a wholly owned subsidiary corporation, but 
     the assets and items of income and deduction of such 
     corporation are treated as those of the REIT, and thus can 
     affect the qualification of the REIT under the income and 
     asset tests.
       A REIT generally is required to distribute 95 percent of 
     its income before the end of its taxable year, as deductible 
     dividends paid to shareholders. This rule is similar to a 
     rule for regulated investment companies (``RICs'') that 
     requires distribution of 90 percent of income. Both REITS and 
     RICs can make certain ``deficiency dividends'' after the 
     close of the taxable year, and have these treated as made 
     before the end of the year. The regulations applicable to 
     REITS state that a distribution will be treated as a 
     ``deficiency dividend'' (and, thus, as made before the end of 
     the prior taxable year) only to the extent the earnings and 
     profits for that year exceed the amount of distributions 
     actually made during the taxable year.\36\
---------------------------------------------------------------------------
     \36\ Treas. Reg. sec. 1.858-1(b)(2).
---------------------------------------------------------------------------
       A REIT that has been or has combined with a C corporation 
     \37\ will be disqualified if, as of the end of its taxable 
     year, it has accumulated earnings and profits from a non-REIT 
     year. A similar rule applies to regulated investment 
     companies (``RICs''). In the case of a REIT, any distribution 
     made in order to comply with this requirement is treated as 
     being first from pre-REIT accumulated earnings and profits. 
     RICs do not have a similar ordering rule.
---------------------------------------------------------------------------
     \37\ A ``C corporation'' is a corporation that is subject to 
     taxation under the rules of subchapter C of the Internal 
     Revenue Code, which generally provides for a corporate level 
     tax on corporate income. Thus, a C corporation is not a pass-
     through entity. Earnings and profits of a C corporation, when 
     distributed to shareholders, are taxed to the shareholders as 
     dividends.
---------------------------------------------------------------------------
       In the case of a RIC, any distribution made within a 
     specified period after determination that the investment 
     company did not qualify as a RIC for the taxable year will be 
     treated as applying to the RIC for the non-RIC year, ``for 
     purposes of applying [the earnings and profits rule that 
     forbids a RIC to have non-RIC earnings and profits] to 
     subsequent taxable years.'' The REIT rules do not specify any 
     particular separate treatment of distributions made after the 
     end of the taxable year for purposes of the earnings and 
     profits rule. Treasury regulations under the REIT provisions 
     state that ``distribution procedures similar to those * * * 
     for regulated investment companies apply to non-REIT

[[Page 30116]]

     earnings and profits of a real estate investment trust.'' 
     \38\
---------------------------------------------------------------------------
     \38\ Treas. Reg. sec. 1.857-11(c).
---------------------------------------------------------------------------

                               House Bill

       No provision.

                            Senate Amendment

       No provision, but S. 1792, as passed by the Senate, 
     provides as follows:
     Investment limitations and taxable REIT subsidiaries
       General rule.--Under the provision, a REIT generally cannot 
     own more than 10 percent of the total value of securities of 
     a single issuer, in addition to the present law rule that a 
     REIT cannot own more than 10 percent of the outstanding 
     voting securities of a single issuer. In addition, no more 
     than 20 percent of the value of a REIT's assets can be 
     represented by securities of the taxable REIT subsidiaries 
     that are permitted under the bill.
       Exception for safe-harbor debt.--For purposes of the new 
     10-percent value test, securities are generally defined to 
     exclude safe harbor debt owned by a REIT (as defined for 
     purposes of sec. 1361(c)(5)(B)(i) and (ii)) if the issuer is 
     an individual, or if the REIT (and any taxable REIT 
     subsidiary of such REIT) owns no other securities of the 
     issuer. However, in the case of a REIT that owns securities 
     of a partnership, safe harbor debt is excluded from the 
     definition of securities only if the REIT owns at least 20-
     percent or more of the profits interest in the partnership. 
     The purpose of the partnership rule requiring a 20 percent 
     profits interest is to assure that if the partnership 
     produces income that would be disqualified income to the 
     REIT, the REIT will be treated as receiving a significant 
     portion of that income directly through its partnership 
     interest, even though it also may derive qualified interest 
     income through its safe harbor debt interest.
       Exception for taxable REIT subsidiaries.--An exception to 
     the limitations on ownership of securities of a single issuer 
     applies in the case of a ``taxable REIT subsidiary'' that 
     meets certain requirements. To qualify as a taxable REIT 
     subsidiary, both the REIT and the subsidiary corporation must 
     join in an election. In addition, any corporation (other than 
     a REIT or a qualified REIT subsidiary under section 856(i) 
     that does not properly elect with the REIT to be a taxable 
     REIT subsidiary) of which a taxable REIT subsidiary owns, 
     directly or indirectly, more than 35 percent of the vote or 
     value is automatically treated as a taxable REIT subsidiary.
       Securities (as defined in the Investment Company Act of 
     1940) of taxable REIT subsidiaries could not exceed 20 
     percent of the total value of a REIT's assets.
       A taxable REIT subsidiary can engage in certain business 
     activities that under present law could disqualify the REIT 
     because, but for the proposal, the taxable REIT subsidiary's 
     activities and relationship with the REIT could prevent 
     certain income from qualifying as rents from real property. 
     Specifically, the subsidiary can provide services to tenants 
     of REIT property (even if such services were not considered 
     services customarily furnished in connection with the rental 
     of real property), and can manage or operate properties, 
     generally for third parties, without causing amounts received 
     or accrued directly or indirectly by the REIT for such 
     activities to fail to be treated as rents from real property. 
     However, rents paid to a REIT generally are not qualified 
     rents if the REIT owns more than 10 percent of the value, (as 
     well as of the vote) of a corporation paying the rents. The 
     only exceptions are for rents that are paid by taxable REIT 
     subsidiaries and that also meet a limited rental exception 
     (where 90 percent of space is leased to third parties at 
     comparable rents) and an exception for rents from certain 
     lodging facilities (operated by an independent contractor).
       However, the subsidiary cannot directly or indirectly 
     operate or manage a lodging or healthcare facility. 
     Nevertheless, it can lease a qualified lodging facility 
     (e.g., a hotel) from the REIT (provided no gambling revenues 
     were derived by the hotel or on its premises); and the rents 
     paid are treated as rents from real property so long as the 
     lodging facility was operated by an independent contractor 
     for a fee. The subsidiary can bear all expenses of operating 
     the facility and receive all the net revenues, minus the 
     independent contractor's fee.
       For purposes of the rule that an independent contractor may 
     operate a qualified lodging facility, an independent 
     contractor will qualify so long as, at the time it enters 
     into the management agreement with the taxable REIT 
     subsidiary, it is actively engaged in the trade or business 
     of operating qualified lodging facilities for any person who 
     is not related to the REIT or the taxable REIT subsidiary. 
     The REIT may receive income from such an independent 
     contractor with respect to certain pre-existing leases.
       Also, the subsidiary generally cannot provide to any person 
     rights to any brand name under which hotels or healthcare 
     facilities are operated. An exception applies to rights 
     provided to an independent contractor to operate or manage a 
     lodging facility, if the rights are held by the subsidiary as 
     licensee or franchisee, and the lodging facility is owned by 
     the subsidiary or leased to it by the REIT.
       Interest paid by a taxable REIT subsidiary to the related 
     REIT is subject to the earnings stripping rules of section 
     163(j). Thus the taxable REIT subsidiary cannot deduct 
     interest in any year that would exceed 50 percent of the 
     subsidiary's adjusted gross income.
       If any amount of interest, rent, or other deductions of the 
     taxable REIT subsidiary for amounts paid to the REIT is 
     determined to be other than at arm's length (``redetermined'' 
     items) , an excise tax of 100 percent is imposed on the 
     portion that was excessive. ``Safe harbors'' are provided for 
     certain rental payments where (1) the amounts are de minimis, 
     (2) there is specified evidence that charges to unrelated 
     parties are substantially comparable, (3) certain charges for 
     services from the taxable REIT subsidiary are separately 
     stated, or (4) the subsidiary's gross income from the service 
     is not less than 150 percent of the subsidiary's direct cost 
     in furnishing the service.
       In determining whether rents are arm's length rents, the 
     fact that such rents do not meet the requirements of the 
     specified safe harbors shall not be taken into account. In 
     addition, rent received by a REIT shall not fail to qualify 
     as rents from real property by reason of the fact that all or 
     any portion of such rent is redetermined for purposes of the 
     excise tax.
       The Treasury Department is to conduct a study to determine 
     how many taxable REIT subsidiaries are in existence and the 
     aggregate amount of taxes paid by such subsidiaries and shall 
     submit a report to the Congress describing the results of 
     such study.
     Health Care REITS
       The provision permits a REIT to own and operate a health 
     care facility for at least two years, and treat it as 
     permitted ``foreclosure'' property, if the facility is 
     acquired by the termination or expiration of a lease of the 
     property. Extensions of the 2 year period can be granted.
     Conformity with regulated investment company rules
       Under the provision, the REIT distribution requirements are 
     modified to conform to the rules for regulated investment 
     companies. Specifically, a REIT is required to distribute 
     only 90 percent, rather than 95 percent, of its income.
     Definition of independent contractor
       If any class of stock of the REIT or the person being 
     tested as an independent contractor is regularly traded on an 
     established securities market, only persons who directly or 
     indirectly own 5 percent or more of such class of stock shall 
     be counted in determining whether the 35 percent ownership 
     limitations have been exceeded.
     Modification of earnings and profits rules for RICs and REITS
       The rule allowing a RIC to make a distribution after a 
     determination that it had failed RIC status, and thus meet 
     the requirement of no non-RIC earnings and profits in 
     subsequent years, is modified to clarify that, when the sole 
     reason for the determination is that the RIC had non-RIC 
     earnings and profits in the initial year (i.e. because it was 
     determined not to have distributed all C corporation earnings 
     and profits), the procedure would apply to permit RIC 
     qualification in the initial year to which such determination 
     applied, in addition to subsequent years.
       The RIC earnings and profits rules are also modified to 
     provide an ordering rule similar to the REIT rule, treating a 
     distribution to meet the requirement of no non-RIC earnings 
     and profits as coming first from the earliest earnings and 
     profits accumulated in any year for which the RIC did not 
     qualify as a RIC. In addition, the REIT deficiency dividend 
     rules are modified to take account of this ordering rule.
     Provision regarding rental income from certain personal 
         property
       The provision modifies the present law rule that permits 
     certain rents from personal property to be treated as real 
     estate rental income if such personal property does not 
     exceed 15 percent of the aggregate of real and personal 
     property. The provision replaces the present law comparison 
     of the adjusted bases of properties with a comparison based 
     on fair market values.
       Effective date.--The provision is effective for taxable 
     years beginning after December 31, 2000. The provision with 
     respect to modification of earnings and profits rules is 
     effective for distributions after December 31, 2000.
       In the case of the provisions relating to permitted 
     ownership of securities of an issuer, special transition 
     rules apply. The new rules forbidding a REIT to own more than 
     10 percent of the value of securities of a single issuer do 
     not apply to a REIT with respect to securities held directly 
     or indirectly by such REIT on July 12, 1999, or acquired 
     pursuant to the terms of written binding contract in effect 
     on that date and at all times thereafter until the 
     acquisition.
       Also, securities received in a tax-free exchange or 
     reorganization, with respect to or in exchange for such 
     grandfathered securities would be grandfathered. The grand- 
     fathering of such securities ceases to apply if the REIT 
     acquires additional securities of that issuer after that 
     date, other than pursuant to a binding contract in effect on 
     that

[[Page 30117]]

     date and at all times thereafter, or in a reorganization with 
     another corporation the securities of which are 
     grandfathered.
       This transition also ceases to apply to securities of a 
     corporation as of the first day after July 12, 1999 on which 
     such corporation engages in a substantial new line of 
     business, or acquires any substantial asset, other than 
     pursuant to a binding contract in effect on such date and at 
     all times thereafter, or in a reorganization or transaction 
     in which gain or loss is not recognized by reason of section 
     1031 or 1033 of the Code. If a corporation makes an election 
     to become a taxable REIT subsidiary, effective before January 
     1, 2004 and at a time when the REIT's ownership is 
     grandfathered under these rules, the election is treated as a 
     reorganization under section 368(a)(1)(A) of the Code.
       The new 10 percent of value limitation for purposes of 
     defining qualified rents is effective for taxable years 
     beginning after December 31, 2000. There is an exception for 
     rents paid under a lease or pursuant to a binding contract in 
     effect on July 12, 1999 and at all times thereafter.
     Conference Agreement
       The conference agreement includes the provision in S. 1792. 
     The conference agreement clarifies the RIC and REIT earnings 
     and profits ordering rules in the case of a distribution to 
     meet the requirements that there be no non-RIC or non-REIT 
     earnings and profits in any year.
       Both the RIC and REIT earnings and profits rules are 
     modified to provide a more specific ordering rule, similar to 
     the present-law REIT rule. The new ordering rule treats a 
     distribution to meet the requirement of no non-RIC or non-
     REIT earnings and profits as coming, on a first-in, first-out 
     basis, from earnings and profits which, if not distributed, 
     would result in a failure to meet such requirement. Thus, 
     such earnings and profits are deemed distributed first from 
     earnings and profits that would cause such a failure, 
     starting with the earliest RIC or REIT year for which such 
     failure would occur.
     2.  Modify estimated tax rules for closely held REITs (sec. 
         6655 of the Code)
     Present Law
       If a person has a direct interest or a partnership interest 
     in income-producing assets (such as securities generally, or 
     mortgages) that produce income throughout the year, that 
     person's estimated tax payments must reflect the quarterly 
     amounts expected from the asset.
       However, a dividend distribution of earnings from a REIT is 
     considered for estimated tax purposes when the dividend is 
     paid. Some corporations have established closely held REITS 
     that hold property (e.g. mortgages) that if held directly by 
     the controlling entity would produce income throughout the 
     year. The REIT may make a single distribution for the year, 
     timed such that it need not be taken into account under the 
     estimated tax rules as early as would be the case if the 
     assets were directly held by the controlling entity. The 
     controlling entity thus defers the payment of estimated 
     taxes.

                               House Bill

       No provision.

                            Senate Amendment

       No provision, but S. 1792, as passed by the Senate, 
     provides that in the case of a REIT that is closely held, any 
     person owning at least 10 percent of the vote or value of the 
     REIT is required to accelerate the recognition of year-end 
     dividends attributable to the closely held REIT, for purposes 
     of such person's estimated tax payments. A closely held REIT 
     is defined as one in which at least 50 percent of the vote or 
     value is owed by five or fewer persons. Attribution rules 
     apply to determine ownership.
       No inference is intended regarding the treatment of any 
     transaction prior to the effective date.
       Effective date.--The provision is effective for estimated 
     tax payments due on or after November 15, 1999.

                          Conference Agreement

       The conference agreement includes the provision in S. 1792, 
     effective for estimated tax payments due on or after December 
     15, 1999.

                        TAX COMPLEXITY ANALYSIS

       Section 4022(b) of the Internal Revenue Service Reform and 
     Restructuring Act of 1998 (the ``IRS Reform Act'') requires 
     the Joint Committee on Taxation (in consultation with the 
     Internal Revenue Service and the Department of the Treasury) 
     to provide a tax complexity analysis. The complexity analysis 
     is required for all legislation reported by the House 
     Committee on Ways and Means, the Senate Committee on Finance, 
     or any committee of conference if the legislation includes a 
     provision that directly or indirectly amends the Internal 
     Revenue Code and has widespread applicability to individuals 
     or small businesses.
       The staff of the Joint Committee on Taxation has determined 
     that a complexity analysis is not required under section 
     4022(b) of the IRS Reform Act because the bill contains no 
     provisions that amend the Internal Revenue Code and that have 
     widespread applicability to individuals or small businesses.


                                            ESTIMATED BUDGET EFFECTS OF THE REVENUE PROVISI0NS INCLUDED IN THE CONFERENCE AGREEMENT FOR H.R. 1180 \1\
                                                                        [Fiscal years 2000-2009, in millions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
          Provision                Effective         2000        2001        2002        2003        2004        2005        2006        2007        2008        2009      2000-2004   2000-2009
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 The ``Tax Relief Extension
        Act of 1999''
I. Extension of Expiring
 Provisions
    A. Treatment of           tybi 1999.........        -972        -977        -943  ..........  ..........  ..........  ..........  ..........  ..........  ..........      -2,892      -2,892
     Nonrefundable Personal
     Credits Under the
     Alternative Individual
     Minimum Tax (through 12/
     31/01).
    Research Tax Credit, and  (3)...............  ..........      -1,661      -4,082      -2,541      -2,242      -1,343        -708        -386        -150         -26     -10,526      -2,892
     Increase AIC Rates by 1
     Percentage Point, and
     Expand to Puerto Rico
     and the Other
     Possessions; Delay
     Claiming of Credit \2\
     (through 6/30/04).
    C. Exemption from         tyba 12/31/99.....        -187        -785        -744  ..........  ..........  ..........  ..........  ..........  ..........  ..........      -1,716      -1,716
     Subpart F for Active
     Financing Income
     (through 12/31/01).
    D. Suspension of 100%     tyba 12/31/99.....         -23         -35         -12  ..........  ..........  ..........  ..........  ..........  ..........  ..........         -71         -71
     Net Income Limitation
     for Marginal Properties
     (through 12/31/01/).
    E. Work Opportunity Tax   wpoifibwa 6/30/99.        -229        -321        -293        -151         -58         -19          -3  ..........  ..........  ..........      -1,051      -1,073
     Credit (through 12/31/
     01).
    F. Welfare-to-Work Tax    wpoifibwa 6/20/99.         -49         -77         -79         -47         -19          -7          -2  ..........  ..........  ..........        -272        -281
     Credit (through 12/31/
     01).
    G. Extension of Employer  cba 5/31/00.......        -134        -318        -132  ..........  ..........  ..........  ..........  ..........  ..........  ..........        -584        -584
     Provided Educational
     Assistance for
     Undergraduate Courses
     (through 12/31/01).
    H. Extend and Modify Tax  (4)...............          -9         -25         -33         -33         -34         -35         -36         -37         -38         -38        -135        -318
     Credit for Electricity
     Produced From Wind and
     Closed-Loop Biomass
     Facilities--credit to
     include electricity
     produced from poultry
     waste (through 12/31/
     01).
    I. Reauthorization of     7/1/99............        -438        -360  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........        -798        -798
     Generalized System of
     Preferences (through 9/
     30/01 (5)).
    J. Extend Qualified Zone  tybi 2000.........          -3         -11         -20         -28         -30         -30         -30         -30         -30         -30         -92        -242
     Academy Bond Program (3-
     year carryforward for
     1998 and 1999
     authority; 2-year
     carryforward
     thereafter) (through 12/
     31/01).
    K. Extend the $5,000      1/1/01............  ..........  ..........          -5         -15         (6)         (6)         (6)         (6)         (6)         (6)         -20         -20
     Credit for First-Time
     Homebuyers in the
     District of Columbia
     (through 12/31/01).
    L. Extend Brownfields     DOE...............          11         -43         -59         -20          -2          -1           2           5           6           8        -114         -93
     Environmental
     Remediation (through 12/
     31/01).
    M. Increase Amount of     (8)...............         -20        -115         -15  ..........  ..........  ..........  ..........  ..........  ..........  ..........        -150        -150
     Rum Excise Tax That is
     Covered Over to Puerto
     Rico and the U.S.
     Virgin Islands (from
     $10.50 per proof gallon
     to $13.25 per proof
     gallon) (through 12/31/
     01) (5) (7).
                                                 -----------------------------------------------------------------------------------------------------------------------------------------------
      Total of Extension of   ..................      -2,053      -4,733      -6,427      -2,820      -2,385      -1,435        -777        -448        -212         -86     -18,421        -150
       Expiring Provisions.
                                                 ===============================================================================================================================================
II.  Other Time-Sensitive
 Revenue Provisions
    A.  Prohibit Disclosure   DOE...............                                                                 No Revenue Effect
     of Advance Pricing
     Agreements (APAs) and
     Related Information;
     Require the IRS to
     Submit to Congress an
     Annual Report of Such
     Agreements.

[[Page 30118]]

 
    B.  Authority to          DOE...............                                                             Negligible Revenue Effect
     Postpone Certain Tax-
     Related Deadlines by
     Reason of Year 2000
     Failures.
    C.  Add the Sreptococcus  sbda DOE..........           4           7           9          10          10          10          10          10          10          11          39          91
     Pneumoniae Vaccine to
     the List of Taxable
     Vaccines in the Federal
     Vaccine Insurance
     Program; Study of
     Program.
    D.  Delay the             DOE...............                                                             Negligible Revenue Effect
     Requirement that
     Registered Motor Fuels
     Terminals Offer Dyed
     Kerosene as a Condition
     of Registration
     (through 12/31/01).
    E.  Provide that Federal  DOE...............                                                             Negligible Revenue Effect
     Farm Production
     Payments are Taxable in
     the Year of Receipt.
                                                 -----------------------------------------------------------------------------------------------------------------------------------------------
      Total of Other Time-      ................           4           7           9          10          10          10          10          10          10          11          39          91
       Sensitive Revenue
       Provisions.
                                                 ===============================================================================================================================================
III.  Revenue Offset
 Provisions
    A.  Modify Individual     tyba 12/31/99.....       1,560         840      -2,400
     Estimated Tax Safe
     Harbor to 108.6% for
     Tax Year 2000 and 110%
     for Tax Year 2001.
    B.  Clarify the Tax       DOE...............       (\9\)           1           1           1           1           1           1           1           1           1           4           9
     Treatment of Income and
     Losses from Derivatives.
    C.  Information           coia 12/31/99.....                       7           7           7           7           7           7           7           7           7          28          63
     Reporting on
     Cancellation of
     Indebtedness by Non-
     Bank Financial
     Institutions.
    D.  Prevent the           teio/a 7/12/99....          15          45          47          49          51          54          58          62          66          70         207         517
     Conversion of Ordinary
     Income or Short-Term
     Capital Gains into
     Income Eligible for
     Long-Term Capital Gain
     Rates.
    E.  Allow Employers to    tmi tyba 12/31/00.                      19          38          39          40          43          23                                             136         200
     Transfer Excess Defined
     Benefit Plan Assets to
     a Special Account for
     Health Benefits of
     Retirees (through 12/31/
     05).
    F.  Repeal Installment    iso/a DOE.........         477         677         406         257          72           8          21          35          48          62       1,889       2,063
     Method for Most Accrual
     Basis Taxpayers; Adjust
     Pledge Rules.
    G.  Deny Deduction and    (\10\)............                                                             Negligible Revenue Effect
     Impose Excise Tax With
     Respect to Charitable
     Split-Dollar Life
     Insurance Arrangements.
    H.  Distributions by a    (\11\)............           2           4           7          10          10          10          10          10          10          10          33          83
     Partnership to a
     Corporate Partner of
     Stock in Another
     Corporation.
    I.  Real Estate             ................
     Investment Trust (REIT)
     Provisions.
        1.  Impose 10% vote   tyba 12/31/00.....                       2           8           8           8           9           9           9          10          10          26          73
         or value test.
        2.  Treatment of      tyba 12/31/00.....                      50         131          44          19          -9         -39         -72        -107        -146         244        -129
         income and services
         provided by taxable
         REIT subsidiaries,
         with 20% asset
         limitation.
        3.  Personal          tyba 12/31/00.....                      -1          -1          -1          -1          -1          -1          -1          -1          -1          -3          -7
         property treatment
         for determining
         rents from real
         property for REITs.
        4.  Special           tyba 12/31/00.....                                                             Negligible Revenue Effect
         foreclosure rule
         for health care
         REITs.
        5.  Conformity with   tyba 12/31/00.....                       1           1           1           1           1           1           1           1           1           3           5
         RIC 90%
         distribution rules.
        6.  Clarification of  tyba 12/31/00.....                                                             Negligible Revenue Effect
         definition of
         independent
         operators for REITs.
        7. Modification of    da 12/31/00.......  ..........          -6          -3          -3          -3          -4          -4          -4          -4          -4         -16         -35
         earnings and
         profits rules.
        8. Modify estimated   epdo/a 12/15/99...          40           1           1           1           1           1           1           1           1           1          45          52
         tax rules for
         closely-owned REIT
         dividends.
                                                 -----------------------------------------------------------------------------------------------------------------------------------------------
          Total of Revenue    ..................       2,094       1,640      -1,757         413         206         120          87          49          32          11       2,596       2,894
           Offset Provisions.
                                                 ===============================================================================================================================================
          Net total.........  ..................          45      -3,086      -8,175      -2,397      -2,169      -1,305        -680        -389        -170         -64     -15,786     -18,392
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Another Title of H.R. 1180 contains an additional revenue provision that modifies the definition of an eligible foster child for purposes of the earned income credit: Effective--tyba 12/31/
  99; 2000--2; 2001--36; 2002--38; 2003--38; 2004--39; 2005--40; 2006--41; 2007--42; 2008--43; 2009--43; 2000-04--153; 2000-09--362.
\2\ For expenses incurred after 6/30/99 and before 10/1/00, credit cannot be claimed until after 9/30/00. For expenses incurred after 9/30/00 and before 10/1/01, credit cannot be claimed until
  after 9/30/01.
\3\ Extension of credit effective for expenses incurred after 6/30/99; increase in AIC rates effective for taxable years beginning after 6/30/99; expansion of the credit to include U.S.
  possessions effective for expenditures paid or incurred beginning after 6/30/99.
\4\ For wind and closed-loop biomass, provision applies to production from facilities placed in service after 6/30/99 and before 1/1/02; for poultry waste, provision applies to production from
  facilities placed in service after 12/31/99 and before 1/1/02.
\5\ Estimate provided by the Congressional Budget Office.
\6\ Loss of less than $500,000.
\7\ A special rule applies to the payment of the $2.75 increase in the cover-over rate for periods before 10/1/00.
\8\ Effective for rum imported into the United States after 6/30/99.
\9\ Gain of less than $500,000.
\10\ Effective for transfers made after 2/8/99 and for premiums paid after the date of enactment.
\11\ Effective 7/14/99 (except with respect to partnerships in existence on 7/14/99, the provision is effective 6/30/01).
 
 Legend for ``Effective'' column: cba = courses beginning after; coia = cancellation of indebtedness after; da = distributions after; DOE = date of enactment; epdo/a = estimated payments due
  on or after; iso/a = installment sales on or after; sbda = sales beginning the day after; teio/a = transactions entered into on or after; tmi = transfers made in; tyba = taxable years
  beginning after; tybi = taxable years beginning in; wpoifibwa = wages paid or incurred for individuals beginning work after.
 
 Note.--Details may not add to totals due to rounding.
 
 Source: Joint Committee on Taxation.

     Bill Archer,
     Tom Bliley,
     Dick Armey,
                                Managers on the Part of the House.

     W.V. Roth, Jr.,
     Trent Lott,
     Managers on the Part of the Senate.

                          ____________________