[House Report 106-478]
[From the U.S. Government Publishing Office]





106th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    106-478

=======================================================================



 
       TICKET TO WORK AND WORK INCENTIVES IMPROVEMENT ACT OF 1999

                                _______
                                

               November 17, 1999.--Ordered to be printed

                                _______
                                

 Mr. Archer, from the committee on conference, submitted the following

                           CONFERENCE REPORT

                        [To accompany H.R. 1180]

    The committee of 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, 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.

     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 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 
        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 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.
    (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.--
            (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
            ``(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 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 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 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 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 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 
        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 studyconducted 
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 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).
            ``(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 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 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 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;
                            (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.''.
    (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
            ``(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 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:
                    ``(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 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 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 especially for 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. StateVR 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., 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 ofproviders 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 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 ofappointees 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 avocational 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 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) andthe 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 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. 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, (42U.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 yearsto 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 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 
benefitsunder 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 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 ofdetermining, 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 fromthe 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.
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 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 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 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 basecompany 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.
      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 afterthe 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.
      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\
---------------------------------------------------------------------------
    \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.

 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 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'').
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      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.
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    \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).
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      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.
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    \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.
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    \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 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
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    \19\ This information was previously released in IRS Publication 
3218, ``IRS Report on Application and Administration of I.R.C. Section 
482.''
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      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 acombat 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 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.
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    \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).
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      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 
theSecretary 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.
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    \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.
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      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 current 
year's return or (2) 110 percent of the prior year's tax.
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    \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 payment made for taxable year 2000. 
Taxpayers with prior year's AGI above $150,000 who made 
estimated taxpayments 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 and for estimated tax payments 
made for taxable years beginning after December 31, 2003, and 
before January 1, 2005.

                          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 
anysuccessor 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 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 as any of the 
transactions described. Treasury regulations, when issued, are 
expected to provide specific standards for determining when 
other types of financial transactions, like those specified in 
the provision, have substantiallythe 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 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\
---------------------------------------------------------------------------
    \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 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 
transferredover 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 personunder 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 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\
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    \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, 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 
sharesof 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 
or 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 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 
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 theassets 
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).
    B. Research Tax Credit,   (3)...............  ..........      -1,661      -4,082      -2,541      -2,242      -1,343        -708        -386        -150         -26     -10,526     -13,139
     and 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)         (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.
    B.  Authority to          DOE...............                                                             Negligible Revenue Effect
     Postpone Certain Tax-
     Related Deadlines by
     Reason of Year 2000
     Failures.
    C.  Add the               sbda DOE..........           4           7           9          10          10          10          10          10          10          11          39          91
     Streptococcus
     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; 2000-4--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.

                                

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