[106th Congress Public Law 170]
[From the U.S. Government Printing Office]


<DOC>
[DOCID: f:publ170.106]


[[Page 1859]]

       TICKET TO WORK AND WORK INCENTIVES IMPROVEMENT ACT OF 1999

[[Page 113 STAT. 1860]]

Public Law 106-170
106th Congress

                                 An Act


 
 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. <<NOTE: Dec. 17, 1999 -  [H.R. 1180]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in <<NOTE: Ticket to Work and Work Incentives 
Improvement Act of 1999.>>  Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) <<NOTE: 42 USC 1305 note.>>  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.

[[Page 113 STAT. 1861]]

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.

[[Page 113 STAT. 1862]]

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. <<NOTE: 42 USC 1320b-19 note.>>  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

[[Page 113 STAT. 1863]]

        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:

[[Page 113 STAT. 1864]]

            ``the ticket to work and self-sufficiency program

    ``Sec. 1148. (a) In General. <<NOTE: Establishment. 42 USC 1320b-
19.>> --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

[[Page 113 STAT. 1865]]

                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

[[Page 113 STAT. 1866]]

                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.

[[Page 113 STAT. 1867]]

            ``(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).

[[Page 113 STAT. 1868]]

                    ``(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. <<NOTE: Public information.>>  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--

[[Page 113 STAT. 1869]]

                          ``(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.--

[[Page 113 STAT. 1870]]

                    ``(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

[[Page 113 STAT. 1871]]

                      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

[[Page 113 STAT. 1872]]

                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. <<NOTE: Deadline.>> --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

[[Page 113 STAT. 1873]]

                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. <<NOTE: Deadline.>> --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

[[Page 113 STAT. 1874]]

                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) <<NOTE: 42 USC 1320b-19 note.>>  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) <<NOTE: 42 USC 1320b-19 note.>>  Graduated Implementation of 
Program.--
            (1) In general. <<NOTE: Deadline.>> --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.

[[Page 113 STAT. 1875]]

            (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

[[Page 113 STAT. 1876]]

                                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.

[[Page 113 STAT. 1877]]

                    (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) <<NOTE: 42 USC 1320b-19 note.>>  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

[[Page 113 STAT. 1878]]

                          (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 ) <<NOTE: 42 USC 1320b-19 note.>>  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;

[[Page 113 STAT. 1879]]

                          (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) four members appointed by the President, 
                      not more than two of whom may be of the same 
                      political party;
                          (ii) two 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) two 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) two members appointed by the majority 
                      leader of the Senate, in consultation with the 
                      Chairman of the Committee on Finance of the 
                      Senate; and
                          (v) two 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.

[[Page 113 STAT. 1880]]

                          (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.--Eight 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.

[[Page 113 STAT. 1881]]

            (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) <<NOTE: 42 USC 421 note.>>  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--

[[Page 113 STAT. 1882]]

            (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

[[Page 113 STAT. 1883]]

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

[[Page 113 STAT. 1884]]

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);

[[Page 113 STAT. 1885]]

            ``(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

[[Page 113 STAT. 1886]]

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) <<NOTE: 42 USC 423 note.>>  Effective Date.--

[[Page 113 STAT. 1887]]

            (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. <<NOTE: 42 USC 1320b-20.>>  (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

[[Page 113 STAT. 1888]]

                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)).

[[Page 113 STAT. 1889]]

                          ``(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.

[[Page 113 STAT. 1890]]

            ``(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. <<NOTE: 42 USC 1320b-21.>>  (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.

[[Page 113 STAT. 1891]]

            ``(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

[[Page 113 STAT. 1892]]

                                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)),''.

[[Page 113 STAT. 1893]]

            (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. <<NOTE: Deadline. 42 USC 1396a note.>> --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--

[[Page 113 STAT. 1894]]

            (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) <<NOTE: 42 USC 1396a note.>>  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) <<NOTE: 42 USC 426 note.>>  Effective Date.--The amendment made 
by subsection (a) shall be effective on and after October 1, 2000.

    (c) <<NOTE: 42 USC 426 note.>>  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. <<NOTE: 42 USC 1320b-22.>>  GRANTS TO DEVELOP AND ESTABLISH 
            STATE INFRASTRUCTURES TO SUPPORT WORKING INDIVIDUALS WITH 
            DISABILITIES.

    (a) Establishment.--

[[Page 113 STAT. 1895]]

            (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

[[Page 113 STAT. 1896]]

                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.

[[Page 113 STAT. 1897]]

    (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. <<NOTE: Deadline.>> --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. <<NOTE: 42 USC 1396a note.>>  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--

[[Page 113 STAT. 1898]]

            (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).

[[Page 113 STAT. 1899]]

                    (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. <<NOTE: Deadline.>> --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

[[Page 113 STAT. 1900]]

        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) <<NOTE: 42 USC 1395ss note.>>  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. <<NOTE: 42 USC 434.>>  (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.

[[Page 113 STAT. 1901]]

            ``(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. <<NOTE: Deadline.>> --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.''.

[[Page 113 STAT. 1902]]

    (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) <<NOTE: 42 USC 1310 note.>>  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. <<NOTE: 42 USC 434 note.>>  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.

[[Page 113 STAT. 1903]]

        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. <<NOTE: Reports.>>  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. <<NOTE: Deadline.>> --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. <<NOTE: Deadline.>> --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. <<NOTE: 42 USC 1201 note.>>  STUDIES AND REPORTS.

    (a) Study by General Accounting Office of Existing 
Disability-Related Employment Incentives.--

[[Page 113 STAT. 1904]]

            (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. <<NOTE: Deadline.>> --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) <<NOTE: 42 USC 401 note.>>  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) <<NOTE: 42 USC 434 note.>>  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

[[Page 113 STAT. 1905]]

        applicable to such recipients of benefits and the rationale for 
        not yearly indexing that level to inflation.
            (2) Report. <<NOTE: Deadline.>> --Not later than 2 years 
        after the date of the enactment of this Act, the Comptroller 
        General shall transmit to the Committee on Ways and Means of the 
        House of Representatives and the Committee on Finance of the 
        Senate a written report presenting the results of the 
        Comptroller General's study conducted pursuant to this 
        subsection, together with such recommendations for legislative 
        or administrative changes as the Comptroller General determines 
        are appropriate.

    (d) Report on Disregards Under the DI and SSI 
Programs. <<NOTE: Deadline.>> --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) <<NOTE: 42 USC 434 note.>>  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

[[Page 113 STAT. 1906]]

        section 234 of the Social Security Act (as added by section 301 
        of this Act).
            (2) Report. <<NOTE: Deadline.>> --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--

[[Page 113 STAT. 1907]]

                          ``(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) <<NOTE: 42 USC 405 note.>>  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).

[[Page 113 STAT. 1908]]

    ``(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) <<NOTE: 42 USC 402 note.>>  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) <<NOTE: 42 USC 402 note.>>  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) Fifty 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'';

[[Page 113 STAT. 1909]]

                    (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) <<NOTE: 42 USC 1382 note.>>  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) <<NOTE: 42 USC 402 note.>>  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.

[[Page 113 STAT. 1910]]

SEC. 403. <<NOTE: 26 USC 1402 note.>>  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) <<NOTE: 42 USC 1310 note.>>  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).

[[Page 113 STAT. 1911]]

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) <<NOTE: 42 USC 1320b-7 note.>>  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

[[Page 113 STAT. 1912]]

        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) <<NOTE: 42 USC 406 note.>>  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))

[[Page 113 STAT. 1913]]

                (as added by subsection (a)(1) of this section) impairs 
                access to legal representation for claimants.
            (2) Report. <<NOTE: Deadline.>> --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) <<NOTE: 42 USC 406 note.>>  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.

[[Page 113 STAT. 1914]]

            ``(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) <<NOTE: 42 USC 1396b note.>>  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 shall initiate a new competitive contract 
procurement for its multi-year program for key entry of valuable climate 
records, archive services, and database development in accordance with 
existing Federal procurement laws and regulations.

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;

[[Page 113 STAT. 1915]]

                                    ``(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

[[Page 113 STAT. 1916]]

                                    ``(II) 2.64 percent,
                      exceeds the rate determined under section 
                      427A(k)(4).''.

    (b) <<NOTE: Applicability. 20 USC 1087-1 note.>>  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) <<NOTE: Deadlines.>>  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--

[[Page 113 STAT. 1917]]

            ``(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) <<NOTE: Applicability. 42 USC 1382e note.>>  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 <<NOTE: 26 USC 32.>>  (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) <<NOTE: Applicability. 26 USC 32 note.>>  Effective Date.--The 
amendments made by this section shall apply to taxable years beginning 
after December 31, 1999.

[[Page 113 STAT. 1918]]

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) <<NOTE: Deadline.>>  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) <<NOTE: Deadline.>>  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 <<NOTE: Tax Relief Extension Act of 1999.>> --TAX RELIEF 
EXTENSION ACT OF 1999

SEC. 500. <<NOTE: 26 USC 1 note.>>  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 <<NOTE: 26 USC 26.>>  (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.''.

[[Page 113 STAT. 1919]]

            ``(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 <<NOTE: 26 USC 24.>>  is 
        amended by striking ``1998'' and inserting ``2001''.
            (2) Section 904(h) of such Code <<NOTE: 26 USC 904.>>  is 
        amended by adding at the end the following: ``This subsection 
        shall not apply to taxable years beginning during 2000 or 
        2001.''.

    (c) <<NOTE: Applicability. 26 USC 24 note.>>  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 <<NOTE: 26 USC 41.>>  (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 <<NOTE: 26 USC 45C.>>  is amended by 
        striking ``June 30, 1999'' and inserting ``June 30, 2004''.
            (3) <<NOTE: Applicability. 26 USC 41 note.>>  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) <<NOTE: Applicability. 26 USC 41 note.>>  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) <<NOTE: 26 USC 280C.>>  Denial of double benefit.--
        Section 280C(c)(1) of such Code is amended by inserting ``or 
        credit'' after ``deduction'' each place it appears.

[[Page 113 STAT. 1920]]

            (3) <<NOTE: Applicability. 26 USC 41 note.>>  Effective 
        date.--The amendments made by this subsection shall apply to 
        amounts paid or incurred after June 30, 1999.

    (d) <<NOTE: 26 USC 41 note.>>  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. <<NOTE: Deadline.>> --
                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

[[Page 113 STAT. 1921]]

                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 <<NOTE: 26 USC 953, 954.>>  (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) <<NOTE: Applicability. 26 USC 953 note.>>  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 <<NOTE: 26 USC 613A.>>  (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) <<NOTE: 26 USC 613A note.>>  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 <<NOTE: 26 USC 51, 51A.>>  (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) <<NOTE: Applicability. 26 USC 51 note.>>  Effective Date.--The 
amendments made by this section shall apply to individuals who begin 
work for the employer after June 30, 1999.

[[Page 113 STAT. 1922]]

SEC. 506. EMPLOYER-PROVIDED EDUCATIONAL ASSISTANCE.

    (a) In General.--Subsection (d) of section 127 of the Internal 
Revenue Code of 1986 <<NOTE: 26 USC 127.>>  (relating to termination) is 
amended by striking ``May 31, 2000'' and inserting ``December 31, 
2001''.

    (b) <<NOTE: Applicability. 26 USC 127 note.>>  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 <<NOTE: 26 USC 45.>>  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

[[Page 113 STAT. 1923]]

                          ``(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) <<NOTE: 26 USC 45 note.>>  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) <<NOTE: 19 USC 2465 note.>>  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

[[Page 113 STAT. 1924]]

                                    (II) before the date of the 
                                enactment of this Act,
                shall be liquidated or reliquidated as free of duty, and 
                the Secretary of the Treasury shall refund any duty paid 
                with respect to such entry.
                    (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 the 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 <<NOTE: 26 USC 1397E.>>  (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 <<NOTE: 26 USC 
1400C.>>  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 <<NOTE: 26 USC 
198.>>  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 <<NOTE: 26 USC 7652.>>  (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) <<NOTE: Applicability. 26 USC 7652 note.>>  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--

[[Page 113 STAT. 1925]]

                    (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) <<NOTE: 26 USC 7652 note.>>  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) <<NOTE: 26 USC 6103.>>  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) <<NOTE: 26 USC 
        6110.>>  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) <<NOTE: 26 USC 6103 note.>>  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. <<NOTE: Deadline.>> --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;

[[Page 113 STAT. 1926]]

                          (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

[[Page 113 STAT. 1927]]

        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) <<NOTE: 26 USC 6103.>>  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. <<NOTE: 26 USC 7508A note.>>  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 <<NOTE: 26 USC 4132.>>  (defining taxable vaccine) 
        is amended by adding at the end the following new subparagraph:
                    ``(L) Any conjugate vaccine against streptococcus 
                pneumoniae.''.
            (2) <<NOTE: 26 USC 4132 note.>>  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 <<NOTE: 26 USC 4132 and 
        note, 9510 and note.>>  (and the amendments made by such 
        sections) are hereby repealed.
            (2) Subparagraph (A) of section 9510(c)(1) <<NOTE: 26 USC 
        9510.>>  of such Code is amended by striking ``August 5, 1997'' 
        and inserting ``December 31, 1999''.

[[Page 113 STAT. 1928]]

            (3) <<NOTE: 26 USC 4132 note.>>  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. <<NOTE: Deadline.>> --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 <<NOTE: 26 USC 4041 note.>>  is amended by striking ``July 1, 
2000'' and inserting ``January 1, 2002''.

SEC. 525. <<NOTE: 7 USC 7212 note.>>  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 <<NOTE: 26 USC 
6654.>>  (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) <<NOTE: Applicability. 26 USC 6654.>>  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 <<NOTE: 26 USC 1221.>>  (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

[[Page 113 STAT. 1929]]

                    ``(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.

[[Page 113 STAT. 1930]]

                    ``(B) Treatment of nonidentification or improper 
                identification of hedging 
                transactions. <<NOTE: Regulations.>> --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 <<NOTE: 26 USC 475.>>  is 
        amended by striking ``reduces'' and inserting ``manages''.
            (2) Section 871(h)(4)(C)(iv) of such Code <<NOTE: 26 USC 
        871.>>  is amended by striking ``to reduce'' and inserting ``to 
        manage''.
            (3) Clauses (i) and (ii) of section 988(d)(2)(A) of such 
        Code <<NOTE: 26 USC 988.>>  are each amended by striking ``to 
        reduce'' and inserting ``to manage''.
            (4) Paragraph (2) of section 1256(e) of such Code <<NOTE: 26 
        USC 1256.>>  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). <<NOTE: 26 USC 170.>> 
                    (B) Section 170(e)(4)(B).
                    (C) Section 367(a)(3)(B)(i). <<NOTE: 26 USC 367.>> 
                    (D) Section 818(c)(3). <<NOTE: 26 USC 818.>> 
                    (E) Section 865(i)(1). <<NOTE: 26 USC 865.>> 
                    (F) Section 1092(a)(3)(B)(ii)(II). <<NOTE: 26 USC 
                1092.>> 
                    (G) Subparagraphs (C) and (D) of section 
                1231(b)(1). <<NOTE: 26 USC 1231.>> 
                    (H) Section 1234(a)(3)(A). <<NOTE: 26 USC 1234.>> 
            (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). <<NOTE: 26 USC 198.>> 
                    (B) Section 263A(b)(2)(A). <<NOTE: 26 USC 263.>> 
                    (C) Clauses (i) and (iii) of section 267(f 
                )(3)(B). <<NOTE: 26 USC 267.>> 
                    (D) Section 341(d)(3). <<NOTE: 26 USC 341.>> 
                    (E) Section 543(a)(1)(D)(i). <<NOTE: 26 USC 543.>> 
                    (F) Section 751(d)(1). <<NOTE: 26 USC 751.>> 
                    (G) Section 775(c). <<NOTE: 26 USC 775.>> 
                    (H) Section 856(c)(2)(D). <<NOTE: 26 USC 856.>> 
                    (I) Section 856(c)(3)(C).
                    (J) Section 856(e)(1).
                    (K) Section 856( j)(2)(B).
                    (L) Section 857(b)(4)(B)(i). <<NOTE: 26 USC 857.>> 
                    (M) Section 857(b)(6)(B)(iii).

[[Page 113 STAT. 1931]]

                    (N) Section 864(c)(4)(B)(iii). <<NOTE: 26 USC 
                864.>> 
                    (O) Section 864(d)(3)(A).
                    (P) Section 864(d)(6)(A).
                    (Q) Section 954(c)(1)(B)(iii). <<NOTE: 26 USC 
                954.>> 
                    (R) Section 995(b)(1)(C). <<NOTE: 26 USC 995.>> 
                    (S) Section 1017(b)(3)(E)(i). <<NOTE: 26 USC 
                1017.>> 
                    (T) Section 1362(d)(3)(C)(ii). <<NOTE: 26 USC 
                1362.>> 
                    (U) Section 4662(c)(2)(C). <<NOTE: 26 USC 4662.>> 
                    (V) Section 7704(c)(3). <<NOTE: 26 USC 7704.>> 
                    (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 <<NOTE: 26 USC 818.>>  is 
        amended by striking ``section 1221(2)'' and inserting ``section 
        1221(a)(2)''.
            (4) Section 1397B(e)(2) of such Code <<NOTE: 26 USC 1397B 
        note.>>  is amended by striking ``section 1221(4)'' and 
        inserting ``section 1221(a)(4)''.

    (d) <<NOTE: 26 USC 170 note.>>  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 <<NOTE: 26 USC 6050P.>>  (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) <<NOTE: 26 USC 6050P note.>>  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. <<NOTE: 26 USC 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

[[Page 113 STAT. 1932]]

        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--

[[Page 113 STAT. 1933]]

            ``(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

[[Page 113 STAT. 1934]]

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) <<NOTE: 26 USC 1260 note.>>  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 <<NOTE: 26 USC 420.>>  (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

[[Page 113 STAT. 1935]]

                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 <<NOTE: 26 USC 420.>>  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) <<NOTE: 26 USC 420 note.>>  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).

[[Page 113 STAT. 1936]]

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 <<NOTE: 26 USC 453.>>  (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 <<NOTE: 26 USC 453A.>>  (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) <<NOTE: 26 USC 453 note.>>  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 <<NOTE: 26 USC 170.>>  (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,

[[Page 113 STAT. 1937]]

                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.

[[Page 113 STAT. 1938]]

                          ``(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) <<NOTE: 26 USC 170 note.>>  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.

[[Page 113 STAT. 1939]]

            (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 <<NOTE: 26 USC 732.>>  (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

[[Page 113 STAT. 1940]]

                    ``(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) <<NOTE: 26 USC 732 note.>>  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 <<NOTE: 26 USC 856.>>  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 one or more 
                taxable REIT subsidiaries, and
                    ``(iii) except with respect to a taxable REIT 
                subsidiary and securities includible under subparagraph 
                (A)--

[[Page 113 STAT. 1941]]

                          ``(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

[[Page 113 STAT. 1942]]

                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).

[[Page 113 STAT. 1943]]

                    ``(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) <<NOTE: Applicability. Effective date.>>  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) <<NOTE: 26 USC 856 note.>>  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) <<NOTE: 26 USC 856 note.>>  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.

[[Page 113 STAT. 1944]]

        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) Thirty-five 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 <<NOTE: 26 USC 163.>>  (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 <<NOTE: 26 USC 857.>>  (relating to method of 
taxation of real estate

[[Page 113 STAT. 1945]]

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.

[[Page 113 STAT. 1946]]

                          ``(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. <<NOTE: 26 USC 856 note.>>  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;

[[Page 113 STAT. 1947]]

                          (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. <<NOTE: 26 USC 856 note.>>  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.

[[Page 113 STAT. 1948]]

                      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 <<NOTE: 26 USC 
856.>>  (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.--

[[Page 113 STAT. 1949]]

                          ``(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) <<NOTE: 26 USC 856 note.>>  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 <<NOTE: 26 USC 857.>>  
(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) <<NOTE: 26 USC 857 note.>>  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 <<NOTE: 26 USC 856.>>  (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

[[Page 113 STAT. 1950]]

        of such class shall be considered outstanding in order to 
        compute the denominator for purpose of determining the 
        applicable percentage of ownership).''.

    (b) <<NOTE: 26 USC 856 note.>>  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 <<NOTE: 26 USC 852.>>  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 <<NOTE: 26 USC 857.>>  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) <<NOTE: 26 USC 852 note.>>  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 <<NOTE: 26 USC 6655.>>  (relating to estimated tax 
by corporations) is amended by adding at the end the following new 
paragraph:

[[Page 113 STAT. 1951]]

            ``(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) <<NOTE: 26 USC 6655 note.>>  Effective Date.--The amendment made 
by subsection (a) shall apply to estimated tax payments due on or after 
December 15, 1999.

    Approved December 17, 1999.

LEGISLATIVE HISTORY--H.R. 1180 (S. 331):
---------------------------------------------------------------------------

HOUSE REPORTS: Nos. 106-220, Pt. 1 (Comm. on Commerce) and 106-478 
(Comm. of Conference).
SENATE REPORTS: No. 106-37 accompanying S. 331 (Comm. on Finance).
CONGRESSIONAL RECORD, Vol. 145 (1999):
            Oct. 19, considered and passed House.
            Oct. 21, considered and passed Senate, amended, in lieu of 
                S. 331.
            Nov. 18, House agreed to conference report.
            Nov. 19, Senate agreed to conference report.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 35 (1999):
            Dec. 17, Presidential remarks and statement.

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