[House Report 108-484]
[From the U.S. Government Publishing Office]



108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     108-484

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

 
PROVIDING FOR CONSIDERATION OF H.R. 4279, TO AMEND THE INTERNAL REVENUE 
 CODE OF 1986 TO PROVIDE FOR THE DISPOSITION OF UNUSED HEALTH BENEFITS 
IN CAFETERIA PLANS AND FLEXIBLE SPENDING ARRANGEMENTS, H.R. 4280, HELP 
  EFFICIENT, ACCESSIBLE, LOW-COST, TIMELY HEALTHCARE (HEALTH) ACT OF 
    2004, AND H.R. 4281, SMALL BUSINESS HEALTH FAIRNESS ACT OF 2004

                                _______
                                

May 11, 2004.--Referred to the House Calendar and ordered to be printed

                                _______
                                

Ms. Pryce of Ohio, from the Committee on Rules, submitted the following

                              R E P O R T

                       [To accompany H. Res. 638]

    The Committee on Rules, having had under consideration 
House Resolution 638, by a nonrecord vote, report the same to 
the House with the recommendation that the resolution be 
adopted.

                SUMMARY OF PROVISIONS OF THE RESOLUTION

    The resolution provides for consideration in the House of 
H.R. 4279, To amend the Internal Revenue Code of 1986 to 
provide for the disposition of unused health benefits in 
cafeteria plans and flexible spending arrangements, and H.R. 
4280, Help Efficient, Accessible, Low-Cost, Timely Healthcare 
(HEALTH) Act of 2004, and H.R. 4281, Small Business Health 
Fairness Act of 2004.
    The rule provides for consideration of H.R. 4279, under a 
modified closed rule, providing one hour of debate in the House 
equally divided and controlled by the chairman and ranking 
minority member of the Committee on Ways and Means. The rule 
provides for consideration of the amendment in the nature of a 
substitute printed in part A of this report, if offered by 
Representative Rangel of New York or his designee, which shall 
be considered as read and shall be separately debatable for one 
hour equally divided and controlled by the proponent and an 
opponent. The rule waives all points of order against the 
amendment printed in part A of this report. The rule provides 
one motion to recommit H.R. 4279 with or without instructions.
    The rule further provides for consideration of H.R. 4280, 
under a closed rule, providing one hour of debate in the House 
with 40 minutes equally divided and controlled by the chairman 
and ranking minority member of the Committee on the Judiciary 
and 20 minutes equally divided and controlled by the chairman 
and ranking minority member of the Committee on Energy and 
Commerce. The rule provides one motion to recommit H.R. 4280.
    The rule further provides for consideration of H.R. 4281, 
under a modified closed rule, providing one hour of debate in 
the House equally divided and controlled by the chairman and 
ranking minority member of the Committee on Education and the 
Workforce. The rule provides for consideration of the amendment 
in the nature of a substitute printed in part B of this report, 
if offered by Representative Kind of Wisconsin or his designee, 
which shall be considered as read and shall be separately 
debatable for one hour equally divided and controlled by the 
proponent and an opponent. The rule waives all points of order 
against the amendment printed in part B of this report. The 
rule provides one motion to recommit H.R. 4281 with or without 
instructions.
    The rule further provides that in the engrossment of H.R. 
4279 the clerk shall add the texts of H.R. 4280 and H.R. 4281 
as passed by the House, as new matter at the end of H.R. 4279, 
and then lay on the table H.R. 4280 and H.R. 4281.
    Finally, the rule provides that if H.R. 4279 is disposed of 
without reaching the stage of engrossment, H.R. 4280 shall be 
treated in the manner specified for H.R. 4279 and only H.R. 
4281 shall be laid on the table.

                            COMMITTEE VOTES

    Pursuant to clause 3(b) of House rule XIII the results of 
each record vote on an amendment or motion to report, together 
with the names of those voting for and against, are printed 
below:

Rules Committee Record Vote No. 251

    Date: May 11, 2004.
    Measure: H.R. 4280, Help Efficient, Accessible, Low-Cost, 
Timely Healthcare (HEALTH) Act of 2004.
    Motion by: Mr. Frost.
    Summary of motion: To make in order and grant the 
appropriate waivers to the amendment offered by Representative 
Conyers, which requires that both an attorney and health care 
specialist submit an affidavit that the claim is warranted 
before a malpractice action can be brought, and imposes strict 
sanctions for attorneys who make any frivolous pleadings. 
Provides for mandatory mediation; a uniform statute of 
limitations; narrowing the requirements for punitive damage 
claims; and requires insurers to dedicate at least 50% of any 
savings resulting from the litigation reforms to reduce the 
insurance premiums that medical professionals pay. The 
substitute is limited to licensed physicians and health 
professionals for malpractice cases only. It does not include 
lawsuits against HMAS, insurance companies, nursing homes, and 
drug and device manufacturers. Establishes a national 
commission to evaluate the causes of rising insurance premiums. 
The commission will be instructed to consider whether the 
McCarran-Ferguson Antitrust exemption for Medical Malpractice 
insurers should be repealed and study the potential benefits of 
providing a Federal medical malpractice insurance program where 
insurance was unavailable or unaffordable.
    Results: Defeated 4 to 8.
    Vote by Members: Goss--Nay; Linder--Nay; Pryce--Nay; Diaz-
Balart--Nay; Hastings (WA)--Nay; Myrick--Nay; Reynolds--Nay; 
Frost--Yea; Slaughter--Yea; McGovern--Yea; Hastings (FL)--Yea; 
Dreier--Nay.

Rules Committee Record Vote No. 252

    Date: May 11, 2004.
    Measure: H.R. 4280, Help Efficient, Accessible, Low-Cost, 
Timely Healthcare (HEALTH) Act of 2004.
    Motion by: Mrs. Slaughter.
    Summary of motion: To make in order and grant the 
appropriate waivers to the amendment offered by Representative 
Baird, which removes all references in the bill to 
pharmaceuticals and medical devices.
    Results: Defeated 4 to 9.
    Vote by Members: Goss--Nay; Linder--Nay; Pryce--Nay; Diaz-
Balart--Nay; Hastings (WA)--Nay; Myrick--Nay; Sessions--Nay; 
Reynolds--Nay; Frost--Yea; Slaughter--Yea; McGovern--Yea; 
Hastings (FL)--Yea; Dreier--Nay.

Rules Committee Record Vote No. 253

    Date: May 11, 2004.
    Measure: H.R. 4280, Help Efficient, Accessible, Low-Cost, 
Timely Healthcare (HEALTH) Act of 2004.
    Motion by: Mr. McGovern.
    Summary of motion: To make in order and grant the 
appropriate waivers to the amendments en bloc: #1, 2, 3, 5, 7, 
8, 9, 10, 11, and 13.
    Results: Defeated 4 to 9.
    Vote by Members: Goss--Nay; Linder--Nay; Pryce--Nay; Diaz-
Balart--Nay; Hastings (WA)--Nay; Myrick--Nay; Sessions--Nay; 
Reynolds--Nay; Frost--Yea; Slaughter--Yea; McGovern--Yea; 
Hastings (FL)--Yea; Dreier--Nay.

Rules Committee Record Vote No. 254

    Date: May 11, 2004.
    Measure: H.R. 4281, Small Business Health Fairness Act of 
2004.
    Motion by: Mr. McGovern.
    Summary of motion: To make in order and grant the 
appropriate waivers to the amendment offered by Representative 
Cardin, which allows small businesses to form health insurance 
purchasing pools that would purchase coverage through 
association health plans. The coverage offered by these plans 
would be exempt from state regulations affecting benefits and 
solvency requirements. Permits the governors of states, in 
which small group market reforms guarantee the availability of 
comprehensive coverage for small employers, to receive from the 
Department of Labor an exemption from laws permitting the 
establishment of Association Health Plans.
    Results: Defeated 4 to 9.
    Vote by Members: Goss--Nay; Linder--Nay; Pryce--Nay; Diaz-
Balart--Nay; Hastings (WA)--Nay; Myrick--Nay; Sessions--Nay; 
Reynolds--Nay; Frost--Yea; Slaughter--Yea; McGovern--Yea; 
Hastings (FL)--Yea; Dreier--Nay.

Rules Committee Record Vote No. 255

    Date: May 11, 2004.
    Measure: H.R. 4281, Small Business Health Fairness Act of 
2004.
    Motion by: Mr. McGovern.
    Summary of motion: To make in order and grant the 
appropriate waivers to the amendment offered by Representative 
Tierney, which requires Association Health Plans to comply with 
state Patients Bill of Rights consumer protections. 
Specifically all AHPs must comply with state consumer 
protection laws that: require right to independent external 
review of coverage decisions; require direct access to OB/GYN 
and pediatricians without a referral; require prudent layperson 
decision making standards; require coverage of non-formulary 
prescription drugs in certain situations; require access to 
hospital emergency room treatment; and prohibit provider gag 
rules.
    Results: Defeated 4 to 9.
    Vote by Members: Goss--Nay; Linder--Nay; Pryce--Nay; Diaz-
Balart--Nay; Hastings (WA)--Nay; Myrick--Nay; Sessions--Nay; 
Reynolds--Nay; Frost--Yea; Slaughter--Yea; McGovern--Yea; 
Hastings (FL)--Yea; Dreier--Nay.

Rules Committee Record Vote No. 256

    Date: May 11, 2004.
    Measure: H.R. 4280, Help Efficient, Accessible, Low-Cost, 
Timely Healthcare (HEALTH) Act of 2004.
    Motion by: Mr. Hastings of Florida.
    Summary of motion: To make in order and grant the 
appropriate waivers to the amendment offered by Representative 
Sandlin, which would require medical liability insurance 
carriers to reduce premiums to a rate that does not exceed 90 
percent of the amount of the premium charged for a policy of 
identical coverage during calendar year 2002, in effect 
obliging at 10 percent premium rate reduction. In order to 
ensure that the mandated rollback does not compromise the 
carriers ability to realize a reasonable rate of return, the 
amendment would authorize the Secretary of Health and Human 
Services-in accordance with regulations promulgated pursuant to 
the amendment-to adjust the rate reduction in order to ensure 
that the carrier is able to realize a reasonable rate of 
return.
    Results: Defeated 4 to 9.
    Vote by Members: Goss--Nay; Linder--Nay; Pryce--Nay; Diaz-
Balart--Nay; Hastings (WA)--Nay; Myrick--Nay; Sessions--Nay; 
Reynolds--Nay; Frost--Yea; Slaughter--Yea; McGovern--Yea; 
Hastings (FL)--Yea; Dreier--Nay.

     PART A--SUMMARY OF AMENDMENT TO BE MADE IN ORDER TO H.R. 4279

    (Summary derived from information provided by the amendment 
sponsor.)
    Rangel: Amendment in the Nature of a Substitute. Allows 
participants in an FSA to roll over up to $500 in unused 
benefits from one year to the next. Would not allow 
participants to transfer up to $500 in unused benefits from an 
FSA to a Health Savings Account (HSA). Offset by including tax 
provisions designed to eliminate abusive transactions engaged 
in by Enron as recommended by the Joint Committee on Taxation 
and to prevent the avoidance of corporate tax by American 
corporations reincorporating overseas.

     PART B--SUMMARY OF AMENDMENT TO BE MADE IN ORDER TO H.R. 4281

    (Summary derived from information provided by the amendment 
sponsor.)
    Kind/Andrews: Amendment in the Nature of a Substitute. 
Requires the Department of Labor to establish a small Employer 
Health Benefits Plan (SEHB) similar to the Federal Employees 
Health Benefits Plan (FEHB). Requires the Secretary to widely 
disseminate information about SEHB through the media, internet, 
public service announcements and other employer and employee 
directed communications. All employers with fewer than 100 
employees during the previous calendar year shall be eligible 
to apply for coverage under SEHB. Requires employers to offer 
coverage to all employees who have completed three months of 
service. Employees working fewer than thirty hours a week are 
eligible for prorate coverage. Requires the Secretary to 
establish an initial open enrollment period and thereafter an 
annual enrollment period. Requires the Department to annually 
contract with state licensed health insurers to offer health 
insurance coverage in a state. Participating insurers shall 
remain subject to state laws applicable to the states in which 
they cover residents. All participating insurers must offer 
benefits equivalent to or greater than the options offered to 
federal employees. Employers joining SEHB must contribute at 
least 50% of premium costs. Employers with fewer than 25 
employees shall be eligible for a coverage incentive discount 
of 5% to employers joining SEHB. In addition, small employers 
with fewer than 50 employees shall be eligible for a sliding 
scale premium subsidy for employees earning less than 200% of 
the poverty level (50% for firms under 10 employees, 35% for 
firms under 25 and 25% for firms under 50). Employee premiums 
for employees earning under 200% of poverty, adjusted for 
family size, shall be eligible for 100% subsidies for premium 
contribution over 5% of salary if not covered by another 
federal or state health insurance program. Up to $50 billion is 
authorized for appropriation to the Department to provide small 
employer health coverage subsidies in fiscal years 2004-2014 
(in accordance with the FY2004 Budget Resolution).

          PART A--TEXT OF AMENDMENT MADE IN ORDER TO H.R. 4279

  Strike all after the enacting clause and insert the 
following:

 TITLE I--DISPOSITION OF UNUSED HEALTH BENEFITS IN CAFETERIA PLANS AND 
                     FLEXIBLE SPENDING ARRANGEMENTS

SEC. 101. DISPOSITION OF UNUSED HEALTH BENEFITS IN CAFETERIA PLANS AND 
                    FLEXIBLE SPENDING ARRANGEMENTS.

  (a) In General.--Section 125 of the Internal Revenue Code of 
1986 (relating to cafeteria plans) is amended by redesignating 
subsections (h) and (i) as subsections (i) and (j), 
respectively, and by inserting after subsection (g) the 
following:
  ``(h) Contributions of Certain Unused Health Benefits.--
          ``(1) In general.--For purposes of this title, a plan 
        or other arrangement shall not fail to be treated as a 
        cafeteria plan solely because qualified benefits under 
        such plan include a health flexible spending 
        arrangement under which not more than $500 of unused 
        health benefits may be carried forward to the 
        succeeding plan year of such health flexible spending 
        arrangement.
          ``(2) Health flexible spending arrangement.--For 
        purposes of this subsection, the term `health flexible 
        spending arrangement' means a flexible spending 
        arrangement (as defined in section 106(c)) that is a 
        qualified benefit and only permits reimbursement for 
        expenses for medical care (as defined in section 
        213(d)(1), without regard to subparagraphs (C) and (D) 
        thereof).
          ``(3) Unused health benefits.--For purposes of this 
        subsection, with respect to an employee, the term 
        `unused health benefits' means the excess of--
                  ``(A) the maximum amount of reimbursement 
                allowable to the employee for a plan year under 
                a health flexible spending arrangement, over
                  ``(B) the actual amount of reimbursement for 
                such year under such arrangement.''.
  (b) Effective Date.--The amendments made by subsection (a) 
shall apply to taxable years beginning after December 31, 2003.

             TITLE II--ENRON-RELATED TAX SHELTER PROVISIONS

SEC. 201. LIMITATION ON TRANSFER OR IMPORTATION OF BUILT-IN LOSSES.

  (a) In General.--Section 362 of the Internal Revenue Code of 
1986 (relating to basis to corporations) is amended by adding 
at the end the following new subsection:
  ``(e) Limitations on Built-In Losses.--
          ``(1) Limitation on importation of built-in losses.--
                  ``(A) In general.--If in any transaction 
                described in subsection (a) or (b) there would 
                (but for this subsection) be an importation of 
                a net built-in loss, the basis of each property 
                described in subparagraph (B) which is acquired 
                in such transaction shall (notwithstanding 
                subsections (a) and (b)) be its fair market 
                value immediately after such transaction.
                  ``(B) Property described.--For purposes of 
                subparagraph (A), property is described in this 
                subparagraph if--
                          ``(i) gain or loss with respect to 
                        such property is not subject to tax 
                        under this subtitle in the hands of the 
                        transferor immediately before the 
                        transfer, and
                          ``(ii) gain or loss with respect to 
                        such property is subject to such tax in 
                        the hands of the transferee immediately 
                        after such transfer.
                In any case in which the transferor is a 
                partnership, the preceding sentence shall be 
                applied by treating each partner in such 
                partnership as holding such partner's 
                proportionate share of the property of such 
                partnership.
                  ``(C) Importation of net built-in loss.--For 
                purposes of subparagraph (A), there is an 
                importation of a net built-in loss in a 
                transaction if the transferee's aggregate 
                adjusted bases of property described in 
                subparagraph (B) which is transferred in such 
                transaction would (but for this paragraph) 
                exceed the fair market value of such property 
                immediately after such transaction.
          ``(2) Limitation on transfer of built-in losses in 
        section 351 transactions.--
                  ``(A) In general.--If--
                          ``(i) property is transferred by a 
                        transferor in any transaction which is 
                        described in subsection (a) and which 
                        is not described in paragraph (1) of 
                        this subsection, and
                          ``(ii) the transferee's aggregate 
                        adjusted bases of such property so 
                        transferred would (but for this 
                        paragraph) exceed the fair market value 
                        of such property immediately after such 
                        transaction,
                then, notwithstanding subsection (a), the 
                transferee's aggregate adjusted bases of the 
                property so transferred shall not exceed the 
                fair market value of such property immediately 
                after such transaction.
                  ``(B) Allocation of basis reduction.--The 
                aggregate reduction in basis by reason of 
                subparagraph (A) shall be allocated among the 
                property so transferred in proportion to their 
                respective built-in losses immediately before 
                the transaction.
                  ``(C) Exception for transfers within 
                affiliated group.--Subparagraph (A) shall not 
                apply to any transaction if the transferor owns 
                stock in the transferee meeting the 
                requirements of section 1504(a)(2). In the case 
                of property to which subparagraph (A) does not 
                apply by reason of the preceding sentence, the 
                transferor's basis in the stock received for 
                such property shall not exceed its fair market 
                value immediately after the transfer.''.
  (b) Comparable Treatment Where Liquidation.--Paragraph (1) of 
section 334(b) of such Code (relating to liquidation of 
subsidiary) is amended to read as follows:
          ``(1) In general.--If property is received by a 
        corporate distributee in a distribution in a complete 
        liquidation to which section 332 applies (or in a 
        transfer described in section 337(b)(1)), the basis of 
        such property in the hands of such distributee shall be 
        the same as it would be in the hands of the transferor; 
        except that the basis of such property in the hands of 
        such distributee shall be the fair market value of the 
        property at the time of the distribution--
                  ``(A) in any case in which gain or loss is 
                recognized by the liquidating corporation with 
                respect to such property, or
                  ``(B) in any case in which the liquidating 
                corporation is a foreign corporation, the 
                corporate distributee is a domestic 
                corporation, and the corporate distributee's 
                aggregate adjusted bases of property described 
                in section 362(e)(1)(B) which is distributed in 
                such liquidation would (but for this 
                subparagraph) exceed the fair market value of 
                such property immediately after such 
                liquidation.''.
  (c) Effective Dates.--
          (1) In general.--The amendment made by subsection (a) 
        shall apply to transactions after the date of the 
        enactment of this Act.
          (2) Liquidations.--The amendment made by subsection 
        (b) shall apply to liquidations after the date of the 
        enactment of this Act.

SEC. 202. NO REDUCTION OF BASIS UNDER SECTION 734 IN STOCK HELD BY 
                    PARTNERSHIP IN CORPORATE PARTNER.

  (a) In General.--Section 755 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new 
subsection:
  ``(c) No Allocation of Basis Decrease to Stock of Corporate 
Partner.--In making an allocation under subsection (a) of any 
decrease in the adjusted basis of partnership property under 
section 734(b)--
          ``(1) no allocation may be made to stock in a 
        corporation (or any person which is related (within the 
        meaning of section 267(b) or 707(b)(1)) to such 
        corporation) which is a partner in the partnership, and
          ``(2) any amount not allocable to stock by reason of 
        paragraph (1) shall be allocated under subsection (a) 
        to other partnership property in such manner as the 
        Secretary may prescribe.
Gain shall be recognized to the partnership to the extent that 
the amount required to be allocated under paragraph (2) to 
other partnership property exceeds the aggregate adjusted basis 
of such other property immediately before the allocation 
required by paragraph (2).''.
  (b) Effective Date.--The amendment made by this section shall 
apply to distributions after the date of the enactment of this 
Act.

SEC. 203. EXPANDED DISALLOWANCE OF DEDUCTION FOR INTEREST ON 
                    CONVERTIBLE DEBT.

  (a) In General.--Paragraph (2) of section 163(l) of the 
Internal Revenue Code of 1986 is amended by inserting ``or 
equity held by the issuer (or any related party) in any other 
person'' after ``or a related party''.
  (b) Capitalization Allowed With Respect to Equity of Persons 
Other Than Issuer and Related Parties.--Section 163(l) of such 
Code is amended by redesignating paragraphs (4) and (5) as 
paragraphs (5) and (6) and by inserting after paragraph (3) the 
following new paragraph:
          ``(4) Capitalization allowed with respect to equity 
        of persons other than issuer and related parties.--If 
        the disqualified debt instrument of a corporation is 
        payable in equity held by the issuer (or any related 
        party) in any other person (other than a related 
        party), the basis of such equity shall be increased by 
        the amount not allowed as a deduction by reason of 
        paragraph (1) with respect to the instrument.''.
  (c) Exception for Certain Instruments Issued by Dealers in 
Securities.--Section 163(l) of such Code, as amended by 
subsection (b), is amended by redesignating paragraphs (5) and 
(6) as paragraphs (6) and (7) and by inserting after paragraph 
(4) the following new paragraph:
          ``(5) Exception for certain instruments issued by 
        dealers in securities.--For purposes of this 
        subsection, the term `disqualified debt instrument' 
        does not include indebtedness issued by a dealer in 
        securities (or a related party) which is payable in, or 
        by reference to, equity (other than equity of the 
        issuer or a related party) held by such dealer in its 
        capacity as a dealer in securities. For purposes of 
        this paragraph, the term `dealer in securities' has the 
        meaning given such term by section 475.''.
  (d) Conforming Amendments.--Paragraph (3) of section 163(l) 
of such Code is amended--
          (1) by striking ``or a related party'' in the 
        material preceding subparagraph (A) and inserting ``or 
        any other person'', and
          (2) by striking ``or interest'' each place it 
        appears.
  (e) Effective Date.--The amendments made by this section 
shall apply to debt instruments issued after the date of the 
enactment of this Act.

SEC. 204. EXPANDED AUTHORITY TO DISALLOW TAX BENEFITS UNDER SECTION 
                    269.

  (a) In General.--Subsection (a) of section 269 of the 
Internal Revenue Code of 1986 (relating to acquisitions made to 
evade or avoid income tax) is amended to read as follows:
  ``(a) In General.--If--
          ``(1)(A) any person or persons acquire, directly or 
        indirectly, control of a corporation, or
          ``(B) any corporation acquires, directly or 
        indirectly, property of another corporation and the 
        basis of such property, in the hands of the acquiring 
        corporation, is determined by reference to the basis in 
        the hands of the transferor corporation, and
          ``(2) the principal purpose for which such 
        acquisition was made is evasion or avoidance of Federal 
        income tax,
then the Secretary may disallow such deduction, credit, or 
other allowance. For purposes of paragraph (1)(A), control 
means the ownership of stock possessing at least 50 percent of 
the total combined voting power of all classes of stock 
entitled to vote or at least 50 percent of the total value of 
all shares of all classes of stock of the corporation.''.
  (b) Effective Date.--The amendment made by this section shall 
apply to stock and property acquired after the date of the 
enactment of this Act.

SEC. 205. MODIFICATION OF INTERACTION BETWEEN SUBPART F AND PASSIVE 
                    FOREIGN INVESTMENT COMPANY RULES.

  (a) Limitation on Exception From PFIC Rules for United States 
Shareholders of Controlled Foreign Corporations.--Paragraph (2) 
of section 1297(e) of the Internal Revenue Code of 1986 
(relating to passive foreign investment company) is amended by 
adding at the end the following flush sentence:
                ``Such term shall not include any period if the 
                earning of subpart F income by such corporation 
                during such period would result in only a 
                remote likelihood of an inclusion in gross 
                income under section 951(a)(1)(A)(i).''.
  (b) Effective Date.--The amendment made by this section shall 
apply to taxable years of controlled foreign corporations 
beginning after the date of the enactment of this Act, and to 
taxable years of United States shareholders with or within 
which such taxable years of controlled foreign corporations 
end.

TITLE III--PREVENTION OF CORPORATE EXPATRIATION TO AVOID UNITED STATES 
                               INCOME TAX

SEC. 301. PREVENTION OF CORPORATE EXPATRIATION TO AVOID UNITED STATES 
                    INCOME TAX.

  (a) In General.--Paragraph (4) of section 7701(a) of the 
Internal Revenue Code of 1986 (defining domestic) is amended to 
read as follows:
          ``(4) Domestic.--
                  ``(A) In general.--Except as provided in 
                subparagraph (B), the term `domestic' when 
                applied to a corporation or partnership means 
                created or organized in the United States or 
                under the law of the United States or of any 
                State unless, in the case of a partnership, the 
                Secretary provides otherwise by regulations.
                  ``(B) Certain corporations treated as 
                domestic.--
                          ``(i) In general.--The acquiring 
                        corporation in a corporate expatriation 
                        transaction shall be treated as a 
                        domestic corporation.
                          ``(ii) Corporate expatriation 
                        transaction.--For purposes of this 
                        subparagraph, the term `corporate 
                        expatriation transaction' means any 
                        transaction if--
                                  ``(I) a nominally foreign 
                                corporation (referred to in 
                                this subparagraph as the 
                                `acquiring corporation') 
                                acquires, as a result of such 
                                transaction, directly or 
                                indirectly substantially all of 
                                the properties held directly or 
                                indirectly by a domestic 
                                corporation, and
                                  ``(II) immediately after the 
                                transaction, more than 80 
                                percent of the stock (by vote 
                                or value) of the acquiring 
                                corporation is held by former 
                                shareholders of the domestic 
                                corporation by reason of 
                                holding stock in the domestic 
                                corporation.
                          ``(iii) Lower stock ownership 
                        requirement in certain cases.--
                        Subclause (II) of clause (ii) shall be 
                        applied by substituting `50 percent' 
                        for `80 percent' with respect to any 
                        nominally foreign corporation if--
                                  ``(I) such corporation does 
                                not have substantial business 
                                activities (when compared to 
                                the total business activities 
                                of the expanded affiliated 
                                group) in the foreign country 
                                in which or under the law of 
                                which the corporation is 
                                created or organized, and
                                  ``(II) the stock of the 
                                corporation is publicly traded 
                                and the principal market for 
                                the public trading of such 
                                stock is in the United States.
                          ``(iv) Partnership transactions.--The 
                        term `corporate expatriation 
                        transaction' includes any transaction 
                        if--
                                  ``(I) a nominally foreign 
                                corporation (referred to in 
                                this subparagraph as the 
                                `acquiring corporation') 
                                acquires, as a result of such 
                                transaction, directly or 
                                indirectly properties 
                                constituting a trade or 
                                business of a domestic 
                                partnership,
                                  ``(II) immediately after the 
                                transaction, more than 80 
                                percent of the stock (by vote 
                                or value) of the acquiring 
                                corporation is held by former 
                                partners of the domestic 
                                partnership or related foreign 
                                partnerships (determined 
                                without regard to stock of the 
                                acquiring corporation which is 
                                sold in a public offering 
                                related to the transaction), 
                                and
                                  ``(III) the acquiring 
                                corporation meets the 
                                requirements of subclauses (I) 
                                and (II) of clause (iii).
                          ``(v) Special rules.--For purposes of 
                        this subparagraph--
                                  ``(I) a series of related 
                                transactions shall be treated 
                                as 1 transaction, and
                                  ``(II) stock held by members 
                                of the expanded affiliated 
                                group which includes the 
                                acquiring corporation shall not 
                                be taken into account in 
                                determining ownership.
                          ``(vi) Other definitions.--For 
                        purposes of this subparagraph--
                                  ``(I) Nominally foreign 
                                corporation.--The term 
                                `nominally foreign corporation' 
                                means any corporation which 
                                would (but for this 
                                subparagraph) be treated as a 
                                foreign corporation.
                                  ``(II) Expanded affiliated 
                                group.--The term `expanded 
                                affiliated group' means an 
                                affiliated group (as defined in 
                                section 1504(a) without regard 
                                to section 1504(b)).
                                  ``(III) Related foreign 
                                partnership.--A foreign 
                                partnership is related to a 
                                domestic partnership if they 
                                are under common control 
                                (within the meaning of section 
                                482), or they shared the same 
                                trademark or tradename.''
  (b) Effective Dates.--The amendment made by this section 
shall apply to taxable years beginning after the date of 
enactment of this Act.

          PART B--TEXT OF AMENDMENT MADE IN ORDER TO H.R. 4281

  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Small 
Employer Health Benefits Program Act of 2004''.
  (b) Table of Contents.--The table of contents of this Act is 
as follows:

Sec. 1. Short title.
Sec. 2. Establishment of Small Employer Health Benefits Program (SEHBP).

            ``Part 8--Small Employer Health Benefits Program

``Sec. 801. Establishment of program.
``Sec. 802. Contracts with qualifying insurers.
``Sec. 803. Additional conditions.
``Sec. 804. Dissemination of information.
``Sec. 805. Subsidies.
``Sec. 806. Authorization of appropriations.''.

SEC. 2. ESTABLISHMENT OF SMALL EMPLOYER HEALTH BENEFITS PROGRAM 
                    (SEHBP).

  (a) In General.--Subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 is amended by adding 
after part 7 the following new part:

        ``Part 8--Small Employer Health Benefits Program (SEHBP)


``SEC. 801. ESTABLISHMENT OF PROGRAM.

  ``(a) In General.--The Secretary shall establish, in 
accordance with this part, a program under which--
          ``(1) qualifying small employers (as defined in 
        subsection (b)) are provided access to qualifying 
        health insurance coverage (as defined in subsection 
        (c)) for their employees, and
          ``(2) such employees may elect alternative forms of 
        coverage offered by various health insurance issuers.
  ``(b) Qualifying Small Employer Defined; Other Definitions.--
For purposes of this part:
          ``(1) Qualifying small employer.--
                  ``(A) In general.--The term `qualifying small 
                employer' means a small employer (as defined in 
                paragraph (2)) that--
                          ``(i) elects to offer health 
                        insurance coverage provided under this 
                        part to each employee who has been 
                        employed by that employer for 3 months 
                        or longer; and
                          ``(ii) elects, with respect to an 
                        employee electing coverage under 
                        qualified health insurance coverage, to 
                        pay at least 50 percent of the total 
                        premium for qualifying health insurance 
                        coverage provided under this part.
                  ``(B) Elections.--Elections under 
                subparagraph (A) may be filed with the 
                Secretary during the 180-day period beginning 
                with the first enrollment period occurring 
                under section 803 and during open enrollment 
                periods occurring thereafter under such 
                section. Such elections shall be filed in such 
                form and manner as shall be prescribed by the 
                Secretary.
                  ``(C) Part-time employment.--Under 
                regulations of the Secretary, in the case of an 
                employee serving in a position in which service 
                is customarily less than 1,500 hours per year, 
                the reference in subparagraph (A)(ii) to `50 
                percent' shall be deemed a percentage reduced 
                to a percentage that bears the same ratio to 50 
                percent as the number of hours of service per 
                year customarily in such position bears to 
                1,500.
          ``(2) Small employer.--The term `small employer' 
        means, with respect to a year under the program, an 
        employer who employed an average of fewer than 100 
        employees on business days during the preceding 
        calendar year and who employs at least 1 employee on 
        the first day of such year under the program.
          ``(3) SEHBP.--The term `SEHBP' means the small 
        employer health benefits program provided under this 
        part.
          ``(4) Treatment of self-employed individuals as 
        employees.--Except as provided in section 805(c), the 
        term `employee' includes, with respect to a year, a 
        self-employed individual (as defined in section 
        401(c)(1) of the Internal Revenue Code of 1986) in 
        connection with the individual's taxable year ending 
        with or during such year. deg.
  ``(c) Qualifying Health Insurance Coverage.--For purposes of 
this part, the term `qualifying health insurance coverage' 
means health insurance coverage that meets the following 
requirements:
          ``(1) The coverage is offered by a health insurance 
        issuer.
          ``(2) The benefits under such coverage are equivalent 
        to or greater than the lower level of benefits provided 
        under the service benefit plan described in section 
        8903(1) of title 5, United States Code.
          ``(3) The coverage includes, with respect to an 
        employee that elects coverage, coverage of the same 
        dependents that would be covered if the coverage were 
        offered under FEHBP.
          ``(4)(A) Subject to subparagraph (B), there is no 
        underwriting, through a preexisting condition 
        limitation, differential benefits, or different premium 
        levels, or otherwise, with respect to such coverage for 
        covered employees or their dependents.
          ``(B) The premiums charged for such coverage are 
        community-rated for employees within any State and may 
        vary only--
                  ``(i) by individual or family enrollment, and
                  ``(ii) to the extent permitted under the laws 
                of such State relating to health insurance 
                coverage offered in the small group market, on 
                the basis of geography.
  ``(d) Other Terms.--
          ``(1) Health insurance coverage; health insurance 
        issuer; health status-related factor.--The terms 
        `health insurance coverage', `health insurance issuer', 
        `health status-related factor' have the meanings 
        provided such terms in section 733.
          ``(2) Small group market.--The term `small group 
        market' has the meaning provided such term in section 
        2791(e)(5) of the Public Health Service Act (42 U.S.C. 
        300gg-91(e)(5)).
          ``(3) FEHBP.--The term `FEHBP' means the Federal 
        Employees Health Benefits Program under chapter 89 of 
        title 5, United States Code.
  ``(e) Treatment of Partnerships and Self-Employed 
Individuals.--For purposes of this part, and for purposes of 
applying section 3 to this part and to part 5 as it applies to 
this part, in any case in which qualifying health insurance 
coverage is, or is to be, provided under a plan, fund, or 
program to individuals covered thereunder--
          ``(1) if such plan, fund, or program is maintained by 
        a partnership, the term `employer' (as defined in 
        section 3(5)) includes the partnership in relation to 
        the partners, and the term `employee' (as defined in 
        section 3(6)) includes any partner in relation to the 
        partnership; and
          ``(2) if such plan, fund, or program is maintained by 
        a self-employed individual, the term `employer' (as 
        defined in section 3(5)) and the term `employee' (as 
        defined in section 3(6)) shall include such individual.

``SEC. 802. CONTRACTS WITH QUALIFYING INSURERS.

  ``(a) In General.--The Secretary shall enter into contracts 
with health insurance issuers for the offering of qualifying 
health insurance coverage under this part in the States in such 
manner as to offer coverage to employees of employers that 
elect to offer coverage under this part. Nothing in this part 
shall be construed as requiring the Secretary to enter into 
arrangements with all such issuers seeking to offer qualifying 
health insurance coverage in a State.
  ``(b) Continued Regulation.--Nothing in this part shall be 
construed as preempting State laws applicable to health 
insurance issuers that offer coverage under this part in such 
State.
  ``(c) Coordination with State Insurance Commissioners.--The 
Secretary shall coordinate with the insurance commissioners for 
the various States in establishing a process for handling and 
resolving any complaints relating to health insurance coverage 
offered under this part, to the extent necessary to augment 
processes otherwise available under State law.

``SEC. 803. ADDITIONAL CONDITIONS.

  ``(a) Limitation on Enrollment Periods.--The Secretary may 
limit the periods of times during which employees may elect 
coverage offered under this part, but such election shall be 
consistent with the elections permitted for employees under 
FEHBP and shall provide for at least annual open enrollment 
periods and enrollment at the time of initial eligibility to 
enroll and upon appropriate changes in family circumstances.
  ``(b) Authorizing Use of States in Making Arrangements for 
Coverage.--In lieu of the coverage otherwise arranged by the 
Secretary under this part, the Secretary may enter an 
arrangement with a State under which a State arranges for the 
provision of qualifying health insurance coverage to qualifying 
small employers in such manner as the Secretary would otherwise 
arrange for such coverage.
  ``(c) Use of FEHBP Model.--The Secretary shall carry out the 
SEHBP using the model of the FEHBP to the extent practicable 
and consistent with the provisions of this part, and, in 
carrying out such model, the Secretary shall, to the maximum 
extent practicable, negotiate the most affordable and 
comprehensive deg.substantial coverage possible for 
small employers.

``SEC. 804. DISSEMINATION OF INFORMATION.

  ``The Secretary shall widely disseminate information about 
SEHBP through the media, the Internet, public service 
announcements, and other employer and employee directed 
communications.

``SEC. 805. SUBSIDIES.

  ``(a) Employer Subsidies.--
          ``(1) Enrollment discount.--
                  ``(A) In general.--In the case of a 
                qualifying small employer who is eligible under 
                subparagraph (B), the portion of the total 
                premium for coverage otherwise payable by such 
                employer under this part shall be reduced by 5 
                percent. Such reduction shall not cause an 
                increase in the portion of the total premium 
                payable by employees.
                  ``(B) Employers eligible for discounts.--A 
                qualifying small employer is eligible under 
                this subparagraph if such employer employed an 
                average of fewer than 25 employees on business 
                days during the preceding calendar year.
          ``(2) Employer premium subsidy.--
                  ``(A) In general.--The Secretary shall 
                provide to qualifying small employers who are 
                eligible under subparagraph (C) and who elect 
                to offer health insurance coverage under this 
                part a subsidy for premiums paid by the 
                employer for coverage of employees whose 
                individual income (as determined by the 
                Secretary) is at or below 200 percent of the 
                poverty line (as defined in section 673(2) of 
                the Community Services Block Grant Act (42 
                U.S.C. 9902(2)), including any revision 
                required by such section) for an individual.
                  ``(B) Subsidy scaled according to size of 
                employer.--The subsidy provided under 
                subparagraph (A) shall be designed so that the 
                subsidy equals, for any calendar year--
                          ``(i) 50 percent of the portion of 
                        the premium payable by the employer for 
                        the coverage, in the case of eligible 
                        qualifying small employers who employ 
                        an average of fewer than 11 employees 
                        on business days during the preceding 
                        calendar year;
                          ``(ii) 35 percent of the portion of 
                        the premium payable by the employer for 
                        the coverage, in the case of eligible 
                        qualifying small employers who employ 
                        an average of more than 10 employees 
                        but fewer than 26 employees on business 
                        days during the preceding calendar 
                        year; and
                          ``(iii) 25 percent of the portion of 
                        the premium payable by the employer for 
                        the coverage, in the case of eligible 
                        qualifying small employers who employ 
                        an average of more than 25 employees 
                        but fewer than 51 employees on business 
                        days during the preceding calendar 
                        year.
                  ``(C) Employers eligible for premium 
                subsidy.--A qualifying small employer is 
                eligible under this subparagraph if such 
                employer employed an average of fewer than 50 
                employees on business days during the preceding 
                calendar year.
  ``(b) Employee Subsidies.--
          ``(1) In general.--The Secretary shall provide 
        subsidies to employees of qualifying small employers in 
        any case in which the family income of the employee (as 
        determined by the Secretary) is at or below 200 percent 
        of the poverty line (as defined in section 673(2) of 
        the Community Services Block Grant Act (42 U.S.C. 
        9902(2)), including any revision required by such 
        section) for a family of the size involved.
          ``(2) Amount of subsidy.--Such subsidies shall be in 
        an amount equal to the excess of the portion of the 
        total premium for coverage otherwise payable by the 
        employee under this part for any period, over 5 percent 
        of the family income (as determined under paragraph 
        (1)(A)) of the employee for such period.
          ``(3) Coordination of subsidies.--Notwithstanding 
        paragraph (1), under regulations of the Secretary, an 
        employee may be entitled to subsidies under this 
        subsection for any period only if such employee is not 
        eligible for subsidies for such period under any 
        Federal or State health insurance subsidy program 
        (including a program under title V, XIX, or XXI of the 
        Social Security Act). For purposes of this paragraph, 
        an employee is `eligible' for a subsidy under a program 
        if such employee is entitled to such subsidy or would, 
        upon filing application therefore, be entitled to such 
        subsidy.
          ``(4) Authority to expand eligibility.--The Secretary 
        may, to the extent of available funding, provide for 
        expansion of the subsidy program under this subsection 
        to employees whose family income (as defined by the 
        Secretary) is at or below 300 percent of the poverty 
        line (as determined under paragraph (1)).
  ``(c) Limitations.--For purposes of this section--
          ``(1) Restrictions on treatment of employment 
        relationship.--Section 801(e) shall not apply.
          ``(2) Requirement of multiple employees.--A small 
        employer shall not be treated as a qualifying small 
        employer with respect to an applicable year unless the 
        employer employs at least 2 employees on the first day 
        of such year.
  ``(d) Procedures.--The Secretary shall establish by 
regulation applications, methods, and procedures for carrying 
out this section, including measures to ascertain or confirm 
levels of income.
  [``(d) No Entitlement.--Nothing in this section shall be 
construed as creating an entitlement for any employer or 
employee.] deg.

``SEC. 806. AUTHORIZATION OF APPROPRIATIONS.

  ``There are authorized to be appropriated, for the period 
beginning with fiscal year 2005 and ending with fiscal year 
2014, $50,000,000,000 to carry out this part, including the 
establishment of subsidies under section 805.''.
  (b) Report on Offering National Health Plans.--Not later than 
18 months after the date of the enactment of this Act, the 
Secretary of Labor shall report to Congress the Secretary's 
recommendations regarding the feasibility of offering national 
health plans under part 8 of subtitle B of title I of the 
Employee Retirement Income Security Act of 1974, as added by 
subsection (a).
  (c) Clerical Amendment.--The table of contents in section 1 
of the Employee Retirement Income Security Act of 1974 is 
amended by inserting after the item relating to section 734 the 
following new items:

        ``Part 8--Small Employer Health Benefits Program (SEHBP)

``Sec. 801. Establishment of program.
``Sec. 802. Contracts with qualifying insurers.
``Sec. 803. Additional conditions.
``Sec. 804. Dissemination of information.
``Sec. 805. Subsidies.
``Sec. 806. Authorization of appropriations.''.

  Amend the title so as to read: ``A Bill to provide for the 
establishment in the Department of Labor of a Small Employer 
Health Benefits Program.''.

                                
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